3.1 The factual circumstances, the claim and the issue before the court
The Ocean Victory case concerned the grounding of the vessel Ocean Victory in the port of Kashima in Japan in October 2006. The vessel was owned by Ocean Victory Maritime Inc (“OVM”, “the owners” or “A”), who chartered the vessel to Ocean Line Holdings Ltd (“OLH”, “the bare-boat charterer” or “B”), which was a related company, on Barecon 89 as amended.(1) The judgment para 1. The significant feature of bareboat chartering, or chartering by demise, is that during the period of the charter “the vessel comes in the full possession, at the absolute disposal, and under the complete control of the bareboat charterers.” Bareboat chartering is therefore entirely different from ordinary time chartering when it comes to the allocation of costs, liabilities and responsibilities.(2) Judgment para 133 referring BIMCO’s explanatory notes to Barecon 89.
B time chartered the vessel to China National Chartering Co Ltd (“Sinochart” or “S”), who in turn sub-chartered the vessel to Daiichi Chuo Kisen Kaisha (“Daiichi”, “D” or “the charterers”) for a time charter trip.(3) The judgment para 1.
The demise charterparty and both time charterparties contained an undertaking (on materially identical terms) to trade the vessel between safe ports. On 12/13 September 2006, Daiichi (and thus Sinochart) gave the vessel instructions to load a cargo in South Africa and to discharge at Kashima. The vessel discharged the cargo at Kashima 20 October.(4) The judgment para 2.
Upon departure from the port of Kashima during a storm the vessel allided with the side of a specially constructed channel that connected Kashima to the sea and grounded. The vessel eventually broke in two and was lost.(5) The judgment para 4.
According to the bare-boat charter party cl. 12, the bare-boat charterer should effect i.a. hull insurance at their expense and for the benefit of both owners, charterers and mortgagees. The hull insurers compensated the owner for the loss of the vessel. One of the hull insurers, Gard Marine & Energy Ltd (“Gard”), thereafter took assignments of the rights of the owners A and the bare-boat charterer B in respect of the grounding and total loss of the vessel. In its capacity as assignee of those rights, Gard subsequently brought a claim against S (which S passed on to D) for damages for breach of the charterers’ undertaking to trade only between safe ports.(6) The judgment para 5. Gard claimed that i) Kashima was not a safe port, ii) D breached the safe port undertaking in the time sub-charter between D and S, iii) S was in breach of the equivalent undertaking in the time charter between S and B, iv) B was in breach of clause 29 of the demise charter between B and the owners A.(7) Para 137. Gard’s case was that the breach of clause 29 caused the loss of the vessel; therefore B was liable to A for the vessel’s value, and the fact that A was paid that amount by the insurers was “res inter alios acta” as between B and S.(8) Para 138. “Res inter alios acta” means “none of their business”.
The issues for the Supreme Court was i.a.(9) Para 8.
whether there was a breach of the safe port undertaking and
if there was a breach of the safe port undertaking, did the provisions for joint insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterer for breach of an express safe port undertaking.
The second issue was limited to whether B had a liability to A, which in turn enabled B to claim damages down the line.(10) Para 124. Other potential bases on which B might be in a position to claim damages from S or D was not an issue for the Supreme Court.(11) Para 94 cf. para 145: “It does not follow that the demise charterers (or their insurers in their shoes) necessarily had no available remedy against the time charterers”.
The five Supreme Court judges agreed that there was no breach of the safe port undertaking. Even so, they discussed the question concerning the insurer’s right of subrogation against the sub-charter D. A majority of three judges held that the insurer had no such right of subrogation, whereas two judges held that the insurer had such a right.