Manifest Shipping Company Ltd v Uni-Polaris Shipping Company Ltd (Star Sea)

JurisdictionUK Non-devolved
Judgment Date18 January 2001
Neutral Citation[2001] UKHL 1
CourtHouse of Lords
Date18 January 2001
Manifest Shipping Company Limited
Uni-Polaris Shipping Company Limited

And Others


[2001] UKHL 1

Lord Steyn

Lord Hoffmann

Lord Clyde

Lord Hobhouse of Wood- borough

Lord Scott of Foscote



My Lords,


I have had the advantage of reading the speeches of Lord Clyde, Lord Hobhouse of Woodborough and Lord Scott of Foscote. For the reasons they give I would also dismiss the appeal.


My Lords,


I have had the advantage of reading in draft the speeches prepared by my noble and learned friends Lord Hobhouse of Woodborough and Lord Scott of Foscote and for the reasons which they give I would dismiss the appeal.


My Lords,


Section 39(5) of the Marine Insurance Act 1906 concerns the case where "with the privity of the assured, the ship is sent to sea in an unseaworthy state." The underwriters argue that the assured had "blind-eye knowledge" of the two particular respects in which the ship was unseaworthy. Blind-eye knowledge in my judgment requires a conscious reason for blinding the eye. There must be at least a suspicion of a truth about which you do not want to know and which you refuse to investigate. The argument on that approach then fails on the facts. I am not able to spell out of the judgment of Tuckey J any finding that the insured, or particularly any of those whose states of mind may be attributed to that of the insured, suspected any incompetence on the part of the master of the Star Sea, let alone any suspicion of his incompetence in the particular respect which mattered. That is sufficient to dispose of this part of the case; but in any event there is no finding of a suspicion on the part of the insured of the defective state of the dampers which contributed to the loss.


As regards the other chapter in the case I consider that it also fails on the facts. Even if the appellants were correct in requiring fair dealing and disclosure at the stage of the litigation I am not persuaded that the evidence supports the proposition that there was in fact any "culpable non-disclosure," as it was termed, on the part of the insured. As regards the obligations in law of an insured at the stage of a disputed claim I take the view that there is no duty upon the insured to make a full disclosure of his own case to the other side in a litigation. I see no practical justification for such an obligation at that stage. Unlike the initial stage when the insurer may rely very substantially upon the openness of the insured in order to decide whether or not to agree to provide insurance cover, and if so at what level of premium, the insurer has open to him means of discovery of any facts which he requires to know for his defence to the claim. Moreover I have found no precedent to support the appellants' proposition; if anything the authority at least of MacGillivray on Insurance Law, 9th ed. (1997), para 19-59 points in the opposite direction. The idea of a requirement for full disclosure superseding the procedural controls for discovery in litigation is curious and unattractive, and one which would require to be soundly based in authority or principle.


What has caused me greater difficulty is the broad provision in section 17 which appears to be unlimited in its scope. The expression "utmost good faith" appears to derive from the idea of uberrimae fidei, words which indeed appear in the sidenote, but whose origin I have not been able to trace. The concept of uberrima fides does not appear to have derived from civil law and it has been regarded as unnecessary in civilian systems (Prof T B Smith, "A Short Commentary on the Law of Scotland" (1962), p 836, quoting MA Millner "Fraudulent Non-Disclosure" (1957) 76 SALJ 177, pp 188-9). Indeed more recently the suggestion has been advanced in the Court of Appeal in South Africa that the concept should be jettisoned ( Mutual and Federal Insurance Co Ltd v Oudtshoorn Municipality 1985 (1) SA 419, 433). Blackstone's Commentaries, 4th ed (1876) vol II, chapter 30 pp 412-413 states that the very essence of contracts of marine insurance "consists in observing the purest good faith and integrity," but in Carter v Boehm (1766), 3 Burr 1905, at p 1910, Lord Mansfield refers simply to "good faith".


On the face of it the comprehensive degree of disclosure which the phrase implies and the absence of any limitation upon the period over which the obligation is to extend gives some support to the appellants' contention. But if the view which I have preferred is correct and the highest degree of openness is not required at the stage of a disputed claim, then the superficial meaning of section 17 cannot be correct. One solution is to impose a limit upon the period of the relationship between the parties to which the statutory provision is meant to apply so that it would only apply to pre-contract negotiations. That can be supported by the fact that the section is placed in a group of provisions dealing with disclosure and representation. The special provisions which immediately follow section 17 may embellish the general rule which applies at the period of formation, but not be exhaustive of it. But that solution now appears to be past praying for. In these circumstances the alternative remains available of adopting a flexible construction of the concept of utmost good faith. The latter course was the one which the respondent has adopted and which I would accept.


Since even after the contract is entered into the relationship between the parties should in any event be coloured by considerations of good faith, the point is in some respects academic. But once it is recognised that in a contract of insurance, and indeed in certain other contracts, an element of good faith is to be observed, and that that element may impose certain duties particularly of disclosure between one party and the other, duties which may vary in their content and substance according to the circumstances, then a question may arise as to the utility of the concept of an utmost good faith or an uberrima fides. In my view the idea of good faith in the context of insurance contracts reflects the degrees of openness required of the parties in the various stages of their relationship. It is not an absolute. The substance of the obligation which is entailed can vary according to the context in which the matter comes to be judged. It is reasonable to expect a very high degree of openness at the stage of the formation of the contract, but there is no justification for requiring that degree necessarily to continue once the contract has been made.


I agree that the appeal should be dismissed.


My Lords,


On 8 November 1989, brokers acting for the Kollakis group of companies renewed with underwriters the marine hull and machinery cover on the 40 or so vessels in their fleet for a further year. One of the vessels was the Cypriot motor vessel Star Sea, built in 1974 and having a gross tonnage 6925 tons. She was a dry cargo vessel having her engine-room and accommodation amidships and 4 refrigerated holds suitable for carrying bananas and this was the trade in which she was primarily employed. The trade is seasonal and it was usual for the Kollakis group to lay up their refer vessels during the late summer and autumn. The Star Sea was laid up in the Piraeus during which time annual maintenance and repairs were done by local contractors. She sailed on her first voyage following lay-up on 28 November 1989 manned by a Maldivian crew with Greek officers. Before she sailed she was inspected by a class surveyor and her cargo ship safety certificate, covering among other things fire safety, was renewed. The renewed insurance cover had attached on 25 November. Her insured value was US$ 3.2 million. The insurance was governed by English law and no specific clauses in the policies have been relied on by either side on this appeal. The provisions of the Marine Insurance Act 1906 ("the Act") apply. Loss by fire is a peril insured against.


Between November 1989 and May 1990, no incident occurred relevant to this appeal. There was a minor engine-room fire in March but this was simply dealt with using fire extinguishers. In January there was also a question of the efficiency of the emergency fire pump drawing water from the forepeak. A temporary fire pump was provided which satisfied the local surveyor but the suction in the forepeak was left in a condition where it would not draw unless the tank was filled; it was normally empty when the vessel was laden. However nothing now turns on these matters; they did not contribute to what was subsequently to occur.


27 May 1990 the Star Sea sailed from Corinto, Nicaragua bound for Zeebrugge laden with a cargo of bananas, mangoes and coffee. Two days out, on the morning of the 29th, a fire was accidentally started in the engine-room workshop where the third engineer was using an oxyacetylene torch and it flashed back to the oxygen gas bottles. Attempts to use extinguishers on the fire were defeated by smoke. After about two and a half hours the master decided to use the CO2 system. The actions then taken were not effective to put out the fire and it continued to burn although for a while the crew thought it had been extinguished.


The vessel had sent out distress calls and these were responded to. The first vessel to arrive departed during the afternoon because the crew thought that the fire was out and that they did not need further assistance. During the early evening it became only to obvious that this was not so. The fire spread to the accommodation. A tug arrived during the early hours of the following day and the fire was unsuccessfully fought for the next day using the tug's monitors. The vessel was towed into Balboa arriving on 1 June with the...

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