Maritime Court Case (Haifa) 73288-06-23 Harel Insurance Company Ltd. v. The Ship Xin Hai Tong 23

Decision

(Applications Nos. 7 and 12)

1. The Ship Xin Hai Tong 23 sailed from China to Israel with many cargoes, including iron cargos purchased by plaintiffs 4-10. On May 25, 2023, while the ship was crossing the Suez Canal on its way to Israel, an engine malfunction occurred, and the ship was swept away until it sank to the bottom.  A few days later, the ship was rescued.  Following the incident, the ship's owner declared "general damage" (General Average).
2. In order to release the cargoes and receive them at the port, the cargo owners and cargo insurers were required to sign a letter of undertaking in which they undertook to share their share of the costs of the general damage as determined by the distribution coordinators.
3. In addition to the claim filed by the plaintiffs, the owners of the cargoes and the cargo insurers, they petitioned for a number of remedies, including a declaration that they are not obligated to participate in the payment of the costs of the general damage, and alternatively to order that the ship and its owner must indemnify them for any payment they are forced to pay.
4. In the motion that is currently pending a decision, the shipowner, appearing on its behalf, petitions for the dismissal of the additional claim in limine and alternatively to order a stay of the proceedings in the action due to a unique jurisdiction stipulation included in the guarantees, according to which all proceedings arising from the demand to participate in the costs of general damage will be heard in the London court.

Background

5. The Ship Xin Hai Tong 23 (Hereinafter: The Ship), is a general cargo ship owned by the Dai Hong Ocean Shipping Company LTD (Hereinafter: Shipowner). The ship set sail in April 2023 from the port of Tianjin, China, with various cargoes on board.  Among other things, there were iron cargoes on board that were loaded on April 9-10, 2023, and were intended for plaintiffs 4-10, which are commercial companies in Israel, that purchased the cargoes from suppliers in China (see supplier invoices and packing lists marked in Appendix 1 to the Claim Addendum) (hereinafter: Cargo Ownership).  The owners of the cargos insured the iron cargos with the insurance companies, they are plaintiffs 1-3 (hereinafter: The Insurers).
6. During its voyage to Israel, the ship passed through the Suez Canal. On May 25, 2024, during the crossing of the canal, the shipowner claimed, an engine malfunction occurred.  As a result of the malfunction, the ship drifted to the point that it sank and "settled" on the bottom of the canal.  Attempts to repair the engine on the spot failed until at the end of the day, with the help of a number of tugs, the ship was rescued and "re-flooded".  After making several temporary repairs at sea, the ship continued to port Damieta in Egypt, where she repaired and returned to her journey (see the description of the incident in Appendix 3 to the supplement to the claim) (hereinafter: The Event).
7. Following the "incident", the ship's owner declared general damage, "General Average", which means a demand for the participation of all the cargo owners who were on board the ship at the time of the incident, in the damages caused and in the expenses incurred for the purpose of rescuing the ship (the declaration was marked as Appendix 3 to the Claim Addendum). The ship's owner appointed coordinators (Average Adjustors) to assess the damages and expenses and to divide them among the interested parties, i.e. the cargo owners and the shipowner.  In order to enable the unloading of the iron cargoes at the port of Ashdod in Israel, the shipowner demanded that the owners of the cargoes and the insurers sign letters of undertaking (Average Guarantee) in which they undertook to participate in part in the general damage payments, as determined by the coordinators (hereinafter: Undertakings).
8. On June 29, 2023, the plaintiffs filed the supplement to the claim in this case, along with a request to arrest the ship. The request for detention was filed in order to allow the plaintiffs' representatives to inspect the ship and take preliminary testimony from the ship's crew.  The inspection of the ship was required because, according to the plaintiffs, the "event" in which the ship drifted and sank in the Suez Canal occurred due to the negligence of the ship and its owner, since the ship embarked on its voyage when the ship's crew was unfit or when the ship was unfit for its voyage.  At the end of the day, the plaintiffs and their representatives were given various documents and it was possible to inspect the ship, and on July 13, 2022, the warrant for her arrest was revoked and the ship set sail.
9. In addition to the claim they filed against the ship, the plaintiffs claimed that the incident occurred due to the liability of the ship's owner and crew, and therefore there was no reason to declare "general damage" and oblige the cargo owners to participate in the expenses and damages caused. It was claimed that the ship and its owners had breached their obligations to the cargo owners, including the terms of the transport agreements to which they had undertaken.
10. The plaintiffs argued that since the responsibility for the incident rests with the ship, its owner and crew, they are exempt from participating in the "general damage" payments. Therefore, they petitioned for declaratory relief instructing that they are exempt from participating in any part of the general damage payments to which they will be charged, if they are charged.

Alternatively, they petitioned to instruct that if they were obligated to participate in the payment of the general damage, the ship and its owner must indemnify them for any payment they incurred.  In this regard, it was argued that any payment that they would have to pay, by virtue of the letters of undertaking that they were forced to sign, should be regarded as "damage" caused to the responsibility of the ship and its crew.