In the “Ocean Victory” case[1] the Commercial Court in London handed down a judgment on 30 July this year concerning a safe port warranty, but which also addressed questions of whether
the hull and machinery insurers – as assignee of the demise charterers – were entitled to claim indemnity from the time charterers for the demise charterers’ liability towards head owners in respect of their breach of the safe port warranty.

Gard was the hull and machinery insurer of the “Ocean Victory”, which was trading under
a chain of charters: from head owners to demise charterers, further to time charterers and further down to sub time charterers. The demise charterparty was based on Barecon 89, while the time charters were on NYPE. A safe port warranty was pervasive through both the demise and the time charters. 
In October 2006 the vessel was ordered by the time charterers to unload at Kashima port in Japan. Due to deteriorating weather, the time charterers’ agent instructed the vessel to leave port as the mooring lines could potentially fail. At its departure the vessel grounded, broke apart, was abandoned by the crew and was later rendered a total loss.

In a claim brought against by the demise charterers against the time charterers for the loss of the vessel, the court, after an elaborate analysis of the facts and the applicable case law, found that the loss was caused by reason of the port being unsafe, putting time charterers in breach of their safe port warranty.  The court turned next to examine whether Gard, having covered the total loss, could bring an action for damages against the time charterers for their breach of warranty.

Gard, in its claim, was acting as assignee of the rights of both head owners and demise
charterers, who were co-assureds on the hull and machinery policy. Under the demise charter, the Barecon 89 optional clause 13 was deleted (so there was no express waiver of subrogation rights). Instead Barecon 89 clause 12 applied, which provided that the demise charterers were co-assured and were responsible for the vessel’s insurances.

The defendant time charterers argued that since both head owners and demise charterers were co-assured, and clause 12 of the demise charterparty had a complete code for the treatment of insured losses, the parties cannot have intended that the demise charterers would also continue to owe a duty under the safe port warranty to the head owners.

Following from that, demise charterers were not liable for the loss as against head owners and therefore had no loss to claim indemnity against time charterers capable of being assigned to Gard.  The court found that the terms of clause 12 of the demise charter were not so clear as to
exclude the express safe port warranty, as it did not codify all rights and liabilities in respect of the safe port warranty, but simply provided for which of the parties to obtain the insurances and how insurance claims were to be handled. It further reasoned that the fact that there would have been a waiver of subrogation if clause 13 had been chosen, did not make the lack of a waiver
if clause 12 applied un-commercial even though in that instance the demise charterers would have been paying the premium when they would not be paying under clause 13. The difference between the two clauses could be explained as apportioning the risk of having to pay the claim if the insurers defaulted on head owners under clause 13 and on demise charterers under clause 12.

The court went on to confirm that in the absence of an express waiver of the right to subrogation as in the deleted clause 13, the fact that head owners and demise charterers were co-assured did not prevent demise charterers from being liable for breach of the safe port warranty where it was clear from the demise charter that one co-assured could be liable to the other, following Tyco Fire and Integrated Solutions v. Rolls-Royce Motor Cars[2].

Gard was accordingly entitled to claim indemnity for that liability – as assignee of the demise charterers – from the time charterers, in respect of their breach of the safe port warranty in the time charter.  An interesting case no doubt, and one to be watched, as the Commercial
Court has granted leave for appeal of the decision.

[1] Gard Marine & Energy Ltd v China National Charter-ing Co Ltd [2013] EWHC 2199

[2] Tyco Fire and Integrated Solutions v. Rolls-Royce Motor Cars [2008] 2 AER Comm 584