Marine Brief: latest decisions November 2021

In this briefing, we consider some recent decisions addressing issues including sanctions clauses in LOUs, appropriate time zones when calculating demurrage notice periods and safe navigation duties for ports and ship owners.

MV Pacific Pearl Co Ltd v Osios David Shipping Inc [21.10.21]

This case arose out of collisions in the Suez Canal in July 2018 between three vessels - Panamax Alexander, Sakizaya Kalon and Osios David. In October 2020, the Admiralty Court held that the Panamax Alexander was solely responsible for the collisions.

The parties were required to provide security in a “reasonably satisfactory” form pursuant to the Collision Jurisdiction Agreements (CJAs) in the ASG 2 form. The Panamax Alexander’s sister ship, the Panamax Christina, was arrested in South Africa in order to obtain security. Following the arrest, the P&I club of vessels Panamax Alexander and Panamax Christina offered security by a letter of undertaking (LOU) containing a sanctions clause. It was not suggested that discharging collision payments would be in breach of sanctions simply because the cargo consignee happened to be an Iranian entity on the sanctions list. Instead the circumstance was described as an “Iranian nexus”.

Two issues arose from the claim. Firstly, whether the LOU offered by the claimants was in a “reasonably satisfactory” form to the defendants in light of the sanctions clause. Secondly, if the LOU was indeed in a “reasonably satisfactory” form, were the defendants contractually obliged by the CJA to accept it.

The judge held that the security offered was “reasonably satisfactory”. However it was also held that a true construction of the CJA should not imply an obligation to accept such security. The defendants, therefore, were not obliged to accept it and the claim for expenses incurred as a result of the South African ship arrest was dismissed.

Contact: Eleonore De Montule

Related item: Marine Brief: latest decisions November 2020

Completion of discharge - but at what time (zone)

Euronav NV v Repsol Trading SA (mt MARIA) [24.09.21]

In this case, the High Court had to consider which time zone applied when calculating the expiration of a time limit for notification of a claim for demurrage.

Owners’ notice of their demurrage claim was sent on 24 January 2020. Charterers’ position was that this was out of time – discharge had completed on 24 December 2019 (local time) and so ‘day 30’ was therefore 23 January 2020 (‘day 1’ being 25 December 2019). Owners disagreed. They argued that discharge in fact completed on 25 December 2019 (based on GMT, the time of the law of the contract, or CET where the parties were based), such that the last day to notify the charterers of the claim fell on 24 December.

The High Court held that local time should be applied, with the consequence that the owners’ demurrage claim was time barred. This case serves as salient reminder not to leave notification of a claim or, indeed, commencement of proceedings until the last minute.

Contact: Michael Biltoo

Related item: Completion of discharge - but at what time (zone)

Who is responsible when a ship grounds in a channel - the port or the ship?

The “ARKLOW VALOUR” [17.09.21] Admiralty Court Ireland

Ship owners brought a claim against the Port of Drogheda following the grounding of the ARKLOW VALOUR on a sandbar within the harbour limits. Owners argued that the port was contractually obliged to provide safe navigational and pilotage services as well as owing such duties at common law and pursuant to the Occupiers' Liability Act 1995 (the OLA) and Harbours Act 1996. Owners argued that the harbour master provided negligent advice regarding the sailing draft, which caused the vessel to suffer damage when running aground.

The port successfully defended the claim for the following reasons:

• The port’s responsibility was determined under the OLA 1995.
• Ship owners failed to demonstrate that the OLA imposed a duty on the port that was relevant to the grounding of the vessel.
• Whilst the port did have a duty under the OLA to take reasonable care that users of the harbour may navigate without danger, that duty had not been breached nor was it causative of the grounding.
• Ship owners failed to establish that the vessel was exposed to danger because of advice provided by the harbour master. The evidence available to the court did not prove, on balance, that the estimates provided by the harbour master were wrong. The estimates provided were held to be reasonable and did not expose the vessel to danger. There was no basis on which the court could find that the port ought to have prohibited the vessel from sailing nor that it had caused the grounding of the vessel.

Whilst the case was before the Irish Court, it is a useful reminder to owners and ports of the duties owed under the similar English legislative regime: Occupiers' Liability Act 1957. As was made clear in the Charlotte C [2005] a port is expected to satisfy its statutory duties by having adequate operational requirements and systems in place to avoid exposing vessels to danger whilst using the harbour. In the instant case, the harbour master’s draft estimates of depth loss were reasonably provided and would likely have satisfied the obligations under English law.

Kennedys acted on behalf of the successful defendants in this case.

Contacts: Hugh Kennedy and Freddie Mehlig

Related item: Who is responsible when a ship grounds in a channel - the port or the ship?

Can the lead insurer bring a claim against the insured on behalf of the following market?

Royal & Sun Alliance Insurance plc and others v Textainer Group Holdings and others [26.07.21]

When a number of insurers subscribe to a policy but only some of that market wishes to pursue its rights of subrogation, can one insurer’s reticence to join proceedings prevent the rest of the market from pursuing its rights? This was the issue considered in this case.

The defendant insured its container fleet with a number of insurers through an excess of loss insurance programme.  The insurers indemnified the defendant for its losses arising from the insolvency of Hanjin. The insured made a substantial recovery against Hanjin’s estate and the insurers sought recovery under their rights of subrogation. However, one of the insurers subscribing to the risk did not wish to participate in that action. The first claimant insurer issued proceedings in its own name, alleging that it was entitled to bring such proceedings as lead insurer, representing both its own interests and the interest of all but one of the following market. The defendant disputed that the first claimant was entitled to act on behalf of the following market or enforce its own rights without the participation of the entire market, and that the claim was improperly constituted.

The court concluded that any obligation to indemnify is several, not joint. Therefore, the first claimant was not obliged to join the non-participating insurers to the proceedings and the defendant’s suggestion that the current proceedings were improperly constituted was rejected. This is welcome news – and welcome clarification - for insurers seeking to proceed with subrogated recovery actions.

Contacts: Shaan Burton and Chris Chatfield

Related item: Can the lead insurer bring a claim against the insured on behalf of the following market?

Read other items in Marine Brief - November 2021