THE COURT OF APPEAL OF THE HAGUE, 11 December 2012, Case no. 200.079.897/01

“VOS SYMPATHY”
Judges: M.M. Olthof, A.A. Rijperman and R. van der Vlist

Dana Petroleum Netherlands B.V. v Vos Sympathy B.V.

Facts and the court of first instance’s decision
Dana Petroleum Netherlands B.V. (“Dana”) had entered into a contract with GB Diving B.V. (“GB Diving”) under which contract GB Diving agreed to carry out maintenance work on a Tanker Mooring and Loading System (“TMLS”). To assist it to carry out its work for Dana, GB Diving chartered in the m.v. Vos Sympathy form the Owners Vos Sympathy B.V. (“Vos”) on a Bimco Supplytime 2005 form.

During the execution of the works by GB Diving a messenger line that was connected to a loading hose that formed part of the TMLS became entangled in the Vos Sympathy’s thrusters. Vos alleged that Dana was liable for this incident as it had not (so said Vos) warned Vos sufficiently about the dangers of the messenger line. Vos filed a claim against Dana at the court of first instance of The Hague for loss of hire and for damage done to the Vessel. At that court, Dana argued that pursuant to clauses 14 (e) (Himalya Clause) and 14 (b) (Knock for Knock clause) of the Supplytime 2005 it was not liable for Vos’ alleged claim. Clauses 14 (e) and 14(b) Suppytime say:

14 (e) Himalaya Clause.-
(i) All exceptions, exemptions, defences, immunities, limitations of liability, indemnities, privileges and conditions granted or provided by this Charter Party or by any applicable statute, rule or regulation for the benefit of the Charterers shall also apply to and be for the benefit of the Charterers’ parent, affiliated, related and subsidiary companies; the Charterers’ contractors, sub-contractors, coventurers and customers (having a contractual relationship with the Charterers, always with respect to the job or project on which the Vessel is employed) ; their respective Employees and their respective underwriters.

(ii) All exceptions, exemptions, defences, immunities, limitations of liability, indemnities, privileges and conditions granted or provided by this Charter Party or by any applicable statute, rule or regulation for the benefit of the Owners shall also apply to and be for the benefit of the Owners’ parent, affiliated, related and subsidiary companies, the Owners’ contractors, sub-contractors, the Vessel, its Master, Officers and Crew, its registered owner, its operator, its demise charterer(s), their respective Employees and their respective underwriters.

(iii) The Owners or the Charterers shall be deemed to be acting as agent or trustee of and for the benefit of all such persons and parties set forth above, but only for the limited purpose of contracting for the extension of such benefits to such persons and parties.

(b) Knock for Knock
(i) Owners. – Notwithstanding anything else contained in this Charter Party excepting Clauses 6(c)(iii), 9(b), 9(e), 9(f), 10(d), 11, 12(f)(iv), 14 (d), 15 (b), 18(c), 26 and 27, the Charterers shall not be responsible for loss of or damage to the property of any member of the Owners’ Group, including the Vessel, or for personal injury or death of any member of the Owners’ Group arising out of or in any way connected with the performance of this Charter Party, even if such loss, damage, injury or death is caused wholly or partially by the act, neglect, or default of the Charterers’ Group, and even if such loss, damage, injury or death is caused wholly or partially by unseaworthiness of any vessel; and the Owners shall indemnify, protect, defend and hold harmless the Charterers from any and against all claims, costs, expenses, actions, proceedings, suits, demands and liabilities whatsoever arising out of or in connection with such loss, damage, personal injury or death.

(ii) Charterers. – Notwithstanding anything else contained in this Charter Party excepting Clause 11, 15(a), 16 and 26, the Owners shall not be responsible for loss of, damage to, or any liability arising out of anything towed by the Vessel, any cargo laden upon or carried by the Vessel or her tow, the property of any member of the Charterers’ Group , whether owned or chartered, including their Offshore Units, or for personal injury or death of any member of the Charterers’ Group or of anyone on board anything towed by the Vessel, arising out of or in any way  connected with the performance of this Charter Party, even if such loss, damage, liability, injury or death is caused wholly or partially by the act, neglect or default of the Owners’ Group, and even if such loss, damage, liability, injury or death is caused wholly or partially by the unseaworthiness of any vessel; and the Charterers shall indemnify, protect, defend and hold harmless the Owners from any and against all claims, costs, expenses, actions, proceedings, suits, demands, and liabilities whatsoever arising out of or in connection with such loss, damage, liability, personal injury or death.
The court of first instance held that, given the facts of this case, art. 6:248 par 2 Dutch Civil Code (“DCC”) prevented Dana from relying on clauses 14 (e) (Himalya Clause) and 14 (b) (Knock for Knock clause) of the Supplytime 2005 and it awarded Dana’s claim.

Art. 6:248 DCC says:

1) A contract does not only have the legal consequences agreed between the parties, but also those that follow from the nature of the contract, the law, custom or the requirements of what is fair and reasonable.

2) A rule that has been agreed between parties in a contract does not apply if, in the given circumstances, standards of reasonableness and fairness would make it unacceptable for that rule to apply.

The influence of this article in Dutch Contract law cannot be overemphasized.
The Court of Appeal of The Hague’s decision
Dana appealed at the court of appeal of The Hague against the court of first instance’s decision. The court of appeal said:

The Himalaya clause contained in clause 14 e of the contract that exists between GB Diving and Vos means that Dana can invoke all the limitations of liability (and other clauses) against Vos that GB Diving can invoke against Vos. Pursuant to clause 14 (b) all liability of GB Diving for loss and damage to the property of Vos, including the Vessel, is excluded. Vos does not deny that the Himalaya clause is a clause that has been written for the benefit of the third party, Dana, and that Dana has accepted that clause by invoking it. By the acceptance of this clause Dana is considered to be a party to the contract between GB Diving and Vos (art. 6:254 DCC) and it can obtain the rights that have been described in clause 14 (e), including the exclusion of liability contained in clause 14 (b)

Dana will only not be allowed to rely on a rule that applies between parties if in the circumstances of the case, pursuant to the rules of reasonableness and fairness, that would be unacceptable (art. 6:248 DCC).

When considering whether reliance on the clause would be unacceptable pursuant to the rules of reasonableness and fairness, the following circumstances are relevant.

i) Dana and Vos are commercial parties in the offshore industry.
ii) It is usual in the offshore industry to exclude liabilities in knock for knock clauses.
iii) Himalaya clauses are usual in the offshore industry.
iv) Vos was partially (i.e. for the damage to the Vessel) insured for the damage that it incurred.
v) Dana’s representative on board the Vos Sympathy was not an employee of Dana, but an independent contractor whose supervisory services Dana had retained.
vi) Also the severity of the fault / negligence forms a relevant circumstance.

The court of appeal says inter alia the following regarding this point vi):

Dana knew that the danger existed that the messenger line could become entangled in the screws of vessels because there had been several incidents. Dana had said the following about this in a document named “2006 Diving and ROV Program” in which the work to be carried out had been described:

Vos had failed to take the action described at item 4 of the table.

Dana cannot be blamed of providing insufficient information. It had given a clear instruction in the “2006 Diving and ROV Program” by stating that one of the jobs of the Vessel would be to secure the messenger line in order to prevent it from getting entangled in the Vessel’s screws. GB Diving had given this program to the Vessel’s management. Dana cannot be required to set out how the messenger line should be secured. The court of appeal agrees with Dana that the manner in which that job should be carried out can be left to the Master and his crew, who are more skilled in that area than Dana is (co. 10).

Comments
This is one of the few judgments regarding the construction of the Supplytime under Dutch law. The judgment has many interesting points, the main ones of which are discussed in the summary herein above. The following conclusions can be drawn from this judgment:

1) The Himalaya clause contained in the Supplytime 2005 is valid under Dutch law. It gives third parties the full benefits of the indemnity clauses.

2) The judgment shows the dangers of Art. 6:248 DCC. If that article is applied too easily (as it was done by the court of first instance), it really is an obstacle against making a choice for Dutch law in charter parties and other contracts in the offshore industry. In the offshore industry, a crystal clear division of responsibilities and liabilities is essential because of the potentially huge liabilities that contractors can incur when working offshore. That crystal clear system is given in the knock for knock systems which it is standard industry practice to use in the offshore industry (particularly on the North Sea). These knock for knock systems are supported by a comprehensive system of H&M, P&I/Special Operations, TPL and CAR insurances. The combination of the knock for knock system and the insurance package should lead to a more or less water tight system in which everbody knows exactly where he stands.

It simply creates uncertainty if this comprehensive system can be broken open for reasons of “reasonableness and fairness”. For the same reason, I am opposed to carve outs for gross negligence and wilful misconduct in knock for knock clauses. Courts should be very careful when breaking open contracts which govern huge liabilities and are supported by comprehensive insurance systems. Fortunately, in this case the Court of Appeal reversed the Court of first Instance’s judgment in which the knock for knock system was held not binding because of reasons of reasonableness and fairness.

3) For some years, in the Netherlands, if a contract contained an Entire Agreement clause (as the Supplytime 2005 does in Clause 38), the Entire Agreement clause was held to severely limit the operation of reasonableness and fairness (art. 6:248 DCC) and great importance was attached to the actual words of the contract. Unfortunately, in its judgment of 8 April 2012 (LJN BJ8101) (Lundiform / Mexx), the Supreme Court of the Netherlands has now curtailed the operation of Entire Agreement clauses.

4) Another interesting point of this judgment is that the Court of Appeal held that Charterers were not obliged to set out to Owners the manner in which the Owners had to secure the messenger line as, in the Court of Appeal’s words “the manner in which that job should be carried out can be left to the Master and his crew, who are more skilled in that area than Dana is”. This decision is clearly in accordance with clause 7.d. Supplytime 2005, which says : “The entire operation, navigation, and management of the Vessel shall be in the exclusive control and command of the Owners, their Master, Officers and Crew. The Vessel will be operated and the services hereunder will be rendered as requested by the Charterers, subject always to the exclusive right of the Owners or the Master of the Vessel to determine whether operation of the Vessel may be safely undertaken. In the performance of the Charter Party, the Owners are deemed to be an independent contractor, the Charterers being concerned only with the results of the services performed.”

Nigel Margetson
Hilversum, 26 July 2013

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