Kulukundia v Norwich Union Fire Insurance Society
| Jurisdiction | England & Wales |
| Judgment Date | 15 May 1936 |
| Date | 15 May 1936 |
| Court | Court of Appeal |
Insurance (marine) - Insurance on freight - Commercial loss of vessel - Temporary repairs exceeding repaired value - Loss of freight - Interest on sum recovered.
The plaintiffs took out a policy with the defendants in respect of the freight on the carriage of a grain cargo from the West Coast of South America to United Kingdom ports. The vessel loaded her cargo and started on her voyage in December, 1933, but shortly afterwards went ashore in the Straits of Magellan. She was later taken off by a salvage company on the terms that they should be paid 11,000 l. in the event of success. The hull underwriters and the plaintiffs agreed to abandon the voyage on a payment by the underwriters, and the ship was abandoned to the salvors. The cargo owners were notified that the adventure was at an end and their underwriters paid as on a total loss. On a claim by the plaintiffs under the freight policy it appeared that the cost of temporary repairs to the vessel, sufficient to carry her to her destination, would exceed her repaired value:—
Held, that the plaintiffs were entitled to recover as for a total loss of chartered freight on the ground (per Slesser and Greene L.JJ.) that it was shown that the cost of temporary repairs would exceed the repaired value of the vessel; on the ground (per Scott L.J.) that there was an actual commercial loss of the vessel within the meaning of the charterparty, or, alternatively, on the ground that in the circumstances known at the time to the plaintiffs, their decision to treat it as an actual loss was justified under the charterparty contract and under the policy.
Per Scott L.J.: Under a contract of affreightment transhipment is a privilege or liberty of the shipowner, and not a duty. An insurance policy on chartered freight is concerned only with the named ship, the insurance being against inability to carry the cargo to its destination in that ship.
Held, further, that the plaintiffs were entitled to interest at 4 per cent. on the amount recovered as from March 1, 1934.
APPEAL from a decision of Porter J.
The plaintiffs, the owners of the Mount Taygetus, sued the defendants for a total loss of freight under a policy issued by the defendants for 865 l., part of a total sum insured of 8000 l.
The policy, which was in respect of the freight on a carriage of grain from the West Coast of South America to United Kingdom ports, was subject to the Institute Voyage Clauses — Freight, cl. 5 of which provided that “in ascertaining whether the vessel is a constructive total loss the insured value in the policies on ship [25,000 l.] shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the vessel or wreck shall be taken into account.”
The vessel completed loading her cargo of grain and started on her voyage, but shortly afterwards went ashore in the Straits of Magellan. She was later taken off by a salvage company who agreed with the master, on terms of “no cure no pay,” that they should be paid 11,000 l. in the event of success, a further claim not exceeding 9000 l. to be the subject of arbitration.
The hull underwriters and the plaintiffs agreed to abandon the voyage on the terms that the underwriters should pay the plaintiffs 7500 l., and the ship was abandoned to the salvors. The cargo owners were notified that the adventure was at an end, and some 100 tons of cargo were jettisoned. The cargo owners accepted the notice and their underwriters paid as on total loss of cargo.
Repairs to the vessel were carried out by the salvors to enable her to proceed to a Continental port, and she sailed for Rotterdam with 4250 tons of her original cargo, and there she was sold by the salvors for breaking-up, and she was in fact broken-up.
Originally the plaintiffs based their claim on the grounds (1.) that they had suffered a total or constructive total loss of the freight, because the ship had become a total or a constructive total loss by a peril insured against and was abandoned to the underwriters on cargo, who accepted notice of abandonment, and that the venture was terminated at Magallanes, or (2.) that the venture contemplated by the charterparty was frustrated. In the Court of Appeal, however, the plaintiffs, in view of the decision in Carras v. London & Scottish Assurance CorporationF1, amended their claim, basing it upon the footing that the freight was lost by perils of the sea, inasmuch as, when the agreed figures were considered, no prudent person, if uninsured, would, in the circumstances, incur the expense of repairing the ship so to make it possible to complete the contract voyage and deliver the cargo. The figures were as follows: Cost of temporary repairs, 19,161 l., including release of salvors' lien. As against this the plaintiffs could at most receive 6500 l. for the repaired ship, 5278 l. net freight, if that could properly be included, and 7201 l. as a contribution by the cargo towards the repairs, making 18,979 l. in all — a sum less than the necessary expenditure.
PORTER J. in the course of his judgment said: Can one say that the freight is totally lost because the expense of earning it is greater than the freight at risk? A proposition so widely stated could not, of course, be justified. The freight might cost more to earn than its value when earned even though no casualty had occurred; in other words, the shipowner might merely have made a bad bargain. The question should, I think, rather be: Has the freight been totally lost by reason of a casualty insured against? In considering the question so put, I do not think that the expense which the shipowner incurs in earning the freight need be considered. The freight insured is the gross freight. The cost of earning the freight is not the result of a casualty, but is an ordinary incident of every voyage …… I have dealt so far separately with the three contentions that there was a total loss of freight because of the expense (1.) to which the ship would be put; (2.) to which the cargo would be put; and (3.) to which the freight would be put. Individually, in my opinion, no one of these matters causes a total loss of freight, nor do I think that it makes any difference if in considering the loss incurred one has regard to all or any of the three interests in combination. He accordingly held that the claim for total loss of freight failed, and he further held that the claim for a partial loss of freight also failed.
The plaintiffs appealed.
Willink K.C. and Cyril Miller for the appellants. Porter J. was wrong in holding that the claim for loss of freight was not maintainable. There was a loss of the commercial purpose of the adventure by perils of the sea: Jackson v. Union Marine Insurance Co.F2 In that case the question was as to the time for repairs, whereas here the question is as to their cost. By what happened to the vessel by perils of the sea it was impossible in a business sense for her to continue the voyage so as to earn the freight. In Carras v. London & Scottish Assurance CorporationF3 it was held that as, owing to perils of the sea, the ship could not make the cancelling date or be tendered according to contract to the charterers, there was an actual total loss of freight; in the present case the same principle applies, the chartered ship having been damaged so seriously as to be unable to proceed. A shipowner is not bound to forward goods in another ship; his contract is to carry them in the chartered vessel: see Scrutton's Charterparties and Bills of Lading (13th ed.), p. 315; Carver's Carriage by Sea (7th ed.), s. 304.
[SLESSER L.J. It is said in Matthews v. GibbsF4 that when a shipowner finds that by some vis major he is prevented from carrying out his contract in the particular ship, it is open to him to forward the goods in a substituted ship upon the most advantageous terms to himself which the circumstances admit of.]
That is a liberty of which he may, if he choose, avail himself; it is not a duty: De Cuadra v. SwannF5, where it was decided that when a ship is so seriously damaged as to be incapable of repair so as to prosecute the adventure except at an expense exceeding her value together with the freight when repaired, the master is justified in abandoning the voyage, and is not bound to send the goods on in another ship. In Assicurazioni Generali v. Bessie Morris Co.F6 it was held that where a ship which was to proceed to a port of discharge and there deliver the cargo had to put into a port of refuge for repairs, the shipowner was liable in damages for abandoning the voyage at that port without the consent of the charterers, unless the effect of the excepted perils proved to have been such as to make it either physically impossible to complete the voyage, or so clearly unreasonable as to be impossible in a business point of view. See also Rankin v. PotterF7, where Lord Chelmsford said that “the sea damage was such as would have justified an abandonment and claim for a constructive total loss. By this I understand that the amount of damage was such that a prudent uninsured owner would not have incurred the expense of repairing the ship. And this appears clearly from a further admission …. that the cost of repairing the vessel at Calcutta, so as to make her seaworthy for carrying a cargo to England, would have exceeded the value of the ship when repaired, plus the difference between the chartered freight and the current freight …… No prudent man would, in such a state of things, incur the expense of repairing the ship; and the shipowners electing not to repair were entitled to consider the charter at an end, and the chartered freight as totally lost by a peril of the sea.” Those observations apply exactly to the present case. As to the standard of...
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