Adelaide Steamship Company v Attorney General (No.2)

Two facts lie at the threshold of this Appeal and must be borne in mind in its determination. The first, that the collision between the "Warilda" and the "Petingaudet" has been declared by this House to be a consequence of warlike operations, and the other that it was due to the negligence of the navigating officer of the "Warilda." It follows from the first that the Admiralty is responsible for the actual damage that the "Warilda" suffered, and from the second that the "Warilda" was responsible to the "Petingaudet" to make good her damage; the main question in this Appeal is whether the damage so paid and the costs of the litigation which determined the "Warilda" to blame can be recovered by the "Warilda" from the Admiralty. The rights of the parties are contractual and arise under a document known as T. 99, upon the terms of which the Admiralty requisitioned the "Warilda" by a letter dated the 3rd August 1915. This document was in the form of a charter party, but it also contained clauses of marine insurance, the nature and extent of which form the subject of the present controversy. By clause 18 the Admiralty was exempt from liability for ordinary sea risks, and by clause 19 they accepted the risks of war in terms which have already been set out. The ordinary English policy of marine insurance contains clauses known as "institute time clauses," the first of which throws upon the insurer the liability to pay, to the extent of three-fourths of the value of the ship, the damages which the insured vessel may be called upon to pay by reason of collision—as well as three-fourths of the costs to which the assured is put in defending proceedings. It is this clause that the appellants say renders the Admiralty liable in the present instance. In my opinion this contention is not well founded. The ordinary marine policy never covered damages paid to third parties owing to negligent navigation ( de Vaux v. Salvador, 4 Ad. and E., p. 420), and the clause as to freedom from capture and seizure which operates to limit risks under such a policy does not exclude such liability, for the subject matter on which this exclusion operates never included it ( Xenos v. Fox, L.R. 3, C.P., p. 630). The introduction of clause 1, which was, in fact, an indemnity as to third party liabilities, was not within the ordinary compass of marine insurance, nor do I think its introduction has extended the meaning of the clause as to freedom from capture or seizure so as to make that warranty include something to which in its original meaning it never related. Even if this view be not accepted, I still think the appellants must fail, since the only risks undertaken by the Admiralty are risks of war, and although this accident arose in the course, and therefore as the consequence, of a warlike operation, yet the risk that materialised was the risk due to negligence and not to the risk of war. In the course of a warlike operation an independent negligent act was committed, and it is the liability consequent thereon for which the "Warilda" has been held liable. Upon the question of hire I have nothing to add to what has already been said.

Each of the learned Lords Justices in the Court of Appeal was of opinion that the words in clause 19 of T. 99, "such risks are taken by the Admiralty on the ascertained value of the steamer, if she be totally lost at the time of such loss or if she be injured on the ascertained value of such injury," excluded the third party risk covered by the collision clause "because," as Lord Justice Bankes said, "the extent of the Admiralty's liability cannot be measured by the scale indicated in this paragraph"—and indeed the same Lord Justice said that but for the paragraph quoted he should have felt considerable doubt as to the construction to be put upon the clauses constituting the contract. My Lords, it is clear that if the effect of this paragraph was as held by the Lords Justices, there would be no need to go further in the discussion of the case and that the claim of the appellants would on the main question be without foundation.

I agree with the noble Viscount on the Woolsack that the purpose of the sentence quoted was not to limit the liability of the Admiralty to the payment of damage done to the "Warilda," but only to define the value which was to be put upon the "Warilda" when the value of that vessel was material. The sections to which we were referred by Counsel for the appellants in the Marine Insurance Act of 1906, under the heading of "Measure of indemnity," showed, in my opinion, the necessity for the limitation in the paragraph quoted, whilst it also seemed to me at least that clause 19 covered risks in which the value of the ship was not involved. I do not think, therefore, that the words in section 19, so much relied upon, offer any answer to the case put forward for the appellants. The main question, however, to be decided is as to whether the owners of the "Warilda" can recover from the Crown the sums' they have been compelled to pay to the owners of the "Petingaudet" for damages caused to that ship by the collision, having regard to the decision in this House that the "Warilda" was engaged in warlike operations, though negligently carried out, and that the collision or damage was a consequence of hostilities or warlike operation.

I do not desire to repeat again at length clauses 18 and 19 of the charter party T. 99, but read together they seem to me to define the risks taken by the owners which may shortly be called as in the margin, "sea risk," and the risks against which the Admiralty became the insurers, viz., as also described in the margin, "war risk damage or loss of ship." Under this division of "risks" it is clear, to my mind, that all the possible risks were intended to be covered. The risks undertaken by the owners under section 18 would or might be insured against by them, and it is admitted that any ordinary English policy of marine insurance would contain the clauses known as "institute time clauses," by the first of which the insurer would be obliged to pay to the extent of three-fourths of the value of the ship, the damages which the insured ship might be called upon to pay by reason of the collision.

The question to be determined is, I think, what is the effect of the f.c. and s. clause upon the liability of the insurer under this clause ? If there was no f.c. and s. clause it is, I think, clear that the insurer would be liable in the events that have happened. But as the f.c. and s. clause applies and as this House has decided that the collision occurred as a consequence of warlike operations, I think the question narrows down to the liability or non-liability of the insurer under these circumstances.

My Lords, I find it is difficult to see how the insurer in such a case could be held liable. If there had been no negligence I apprehend the liability of the Admiralty would be beyond question, but as between owners and the insurer can the negligence make any difference when the f.c. and s. clause applies and you follow to its logical conclusion the decision of this House that the collision or damage "was a consequence of hostilities or warlike operations" ?

In my view it is impossible in such a case by drawing a distinction between the "proximate" and the "remoter" consequences of the warlike operation to take away from the insurer the benefit of the f.c. and s. clause and thus render him liable. For the reasons I have briefly stated, I am of opinion that the appellants are entitled to succeed on this branch of their claim. My Lords, as regards the other branches of claim, viz., the costs incurred by the "Warilda" owners in resisting liability for the consequences of the collision and the claims for loss of time while the "Warilda" was under repair, I am not prepared to dissent from the conclusions come to by the noble Viscount on the Woolsack.

Three sums are claimed here by the appellants, and, as the considerations applicable to each are not identical, it is convenient to deal with them separately.

The first and principal sum represents three-fourths of the amount which the appellants became...