Nishina Trading Company Ltd v Chiyoda Fire and Marine Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE EDMUND DAVIES,LORD JUSTICE PHILLIMORE |
| Judgment Date | 28 February 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0228-2 |
| Date | 28 February 1969 |
| Court | Court of Appeal (Civil Division) |
[1969] EWCA Civ J0228-2
The Master of the Rolls (Lord Denning),
Lord Justice Edmund Davies and
Lord Justice Phillimore.
In The Supreme Court of Judicature
Court of Appeal
Appeal of defendants from the judgment of Mr. Justice Donaldson on 24th April 1968.
Mr. JOHN HOBHOUSE (instructed by Messrs. Clyde & Co.) appeared on behalf of the Respondent Plaintiffs.
Mr. CHRISTOPHER STAUGHTON (instructed by Messrs. Ince & Co.) appeared on behalf of the Appellant Defendants.
In this case a Japanese trading company claim against a Japanese Insurance company on a policy of insurance on goods which were being carried in the Far East. We much appreciate the confidence thus placed In these Courts and will do our best to deserve it.
The facts are agreed and set out in an agreed statement of facts. In February 1966 the owners of the "Mandarin Star" let out the vessel on a time charter for six months to charterers, the Asia Line Co. Ltd. The charter hire was some £5,000 a month. In July 1966 the vessel took on board at Bangkok 1,140 bags of black matpe beans. The bill of lading was issued by the Master. The freight was prepaid by the cargo owners, the Nishina Trading Co. Ltd. The cargo owners took out an insurance policy with the Chiyoda Fire and Marine Insurance Co. Ltd. of Tokyo. The vessel sailed from Bangkok. It arrived off Kobe on the 7th August, 1966. At that time unfortunately the charterers were more than two months hire in arrear. There was £11,328.16s.Od. unpaid on the time charter. So, on the instructions of the owners, the Master did not take the vessel into Kobe. He refused to proceed into port or discharge the goods, until the charter hire was paid. Negotiations took place. But then, quite unexpectedly, the charterers closed their office. Thereupon, the Master, on the instructions of the shipowners, abruptly caused the vessel to leave Kobe and sail for Hong Kong, It was 1,500 miles and took six days. The cargo was still on board. She sailed from Kobe on the 27th August, and arrived at Hong Kong on the 3rd September. Her cargo was discharged into lighter: and thence into a go down, that is, a warehouse. Then, according to the agreed statement of facts, "the shipowners in collusion with the charterers at the same time purporting to mortgage the entire cargo to a Miss Lok Sau Chun as security for a loan of U.S. 84,000". When the cargo owners got to know of this-and they seem to have got to know of it quite quickly-they claimed the goods. The warehouse company interpleaded in the Hong Kong Courts. On the 3rd December the cargo owners obtained a judgment of the Hong Kong Supreme Court orderingdelivery up of the goods to the true owners, the cargo owners. So the cargo owners got the goods. They leaded them on board another ship and took them to their original destination-Kobe-and delivered them there. But it all cost them a lot of money. They had to pay all the costs of the litigation in Hong Kong. They also had to pay the costs of carrying the goods back from Hong Kong to Kobe. They claimed these moneys from the insurance company on the policy under the "sue and labour" clause. They claimed the expense to which they had been put in saving the goods from the loss which would have resulted if the goods had been disposed of in Hong Kong. It is clear that the cargo owners can recover the costs to which they have been put, providing that the loss, if it has occurred would have come within the policy. So we have to consider the clauses in the policy to see whether the loss would have been covered by it.
The policy, although taken out in Tokyo, uses the words of English form. It goes back to 1560. The words are of such ambiguity that they roust be quite unknown to our Japanese friends. But the policy says that it is subject to English law and usage. So the words must be interpreted according to English law. The first risk which we have to consider is "takings at sea". Has there been in this case a "taking as sea"? There is very little authority indeed, even after four hundred years, on "takings at seat". It includes capture and seizure. But I do not think it is confined to those two. "Takings at sea" is capable of a wider connotation. That is shown by ( Rickards v. Forestal Land, Timber and Railways Co. 1942 A.C. 50), in which, at the outbreak of the last war, a German vessel called the "Minden", instead of proceeding on her normal voyage, put into Rio de Janeiro. On the orders of the German Government, she left Rio and tried to get back to Germany. She was intercepted by a British warship. She was then scuttled by the crew. It was held that the orders of the German Government amounted to "restraint of princes". But Lord Wright used words which import that the goods were "taken", even though they remained on the same ship with the same Master. He said (at pages 79/80): "What happened here was that the Master, being in possession ofthe goods as a carrier for the assured, seized them in the sense that he ceased to hold them as carrier and changed the character of his possesion by takingand controlling them as agent for the German Government with toe intention and effect of holding them adversely to the assured and applying them to the hostile purposes of his Government… …. The Master was actually in possession of the goods throughout. He simply took them from the assured by dealing with them adversely to their interests and throwing off the role of private carrier in which capacity he had held them as bailee for the assured."
So here it seems to me that the Master of the "Mandarin Star", on behalf of the owners, changed the character of their possession. The vessel had been lying off Kobe for three weeks and they had not got payment. Then the Master set sail from Kobe for Hong Kong. That was the decisive moment. Up till that time he, on behalf of the owners, still held the goods as bailees for the cargo owners. But when he set sail from Kobe, he, on behalf of the owners, changed their character as bailees. He, on their behalf, determined to take the goods to Hong Kong and raise money on them, if not to sell them. By so doing, the Master, on behalf of the owners, assumed a dominion over the goods inconsistent with the rights of the cargo owners. In our English language, the shipowners converted the goods to their own use. That was, in my opinion, "taking"; and it was a "taking at sea". It was not in harbour, nor in port, but "at sea", when the vessel was lying outside Kobe.
We were referred to a case in the United States Courts, the "Hai Hsuan", reported in 1957 1 Lloyds List Reports at page 446, and in 1958 1 Lloyds List Reports at page 359 The courts there drew a distinction between the taking of a ship and the taking of goods on board a ship. That is apposite here. The ship was not taken, but the goods were. They were taken by the Master on behalf of the shipowners when they asserted a dominion over them utterly inconsistent with the rights of the cargo owners.
The learned Judge came to a different view. He said: "In the present case the Master remained at all times the servant ofthe vessel's owners and the bailee of the cargo. That he detained the cargo and in due course converted it to his employers' use is not in doubt, but at all times he had possession of it in the same capacity, namely, as the servant of the owners of the vessel." I think the Judge fell into error. He was there considering the position of the Master as an individual, whereas I think he should have considered him as the servant of the shipowners. The shipowners were bailees of the cargo up to the moment when they directed the Master to go off to Hong Kong. Then they ceased to be bailees of the cargo and converted it to their own use. That was a "taking at sea".
Seeing that there was a "taking at sea", there is no need to consider whether it comes within "all other perils, losses and misfortunes".
In case I am wrong on "taking at sea", I go on to consider the Institute theft, pilferage and non-delivery clause, which says: "It is hereby agreed that this Policy covers the risk of Theft and or Pilferage irrespective of percentage". Was there a "theft" of the cargo by the Master? The word "theft" is not used here in the strict sense of the criminal law. It does not bring in all the eccentricities of the law of larceny. It means only what an ordinary commercial man would consider to be theft: and before finding theft, the Court should be satisfied that it is an appropriate description of what took place. The Court need not be satisfied beyond reasonable doubt (as in the criminal law) but it should find on balance that there is sufficient to warrant the serious imputation of "theft", see ( Hornal v. Neuberger Products Ltd. 1957 1 Q.B. 247). For myself, I would hesitate to describe the act of the Master as theft. You must remember that the owners were claiming their charter hire. They had not been paid the two months' hire that was due to them: and they did not sell the goods. They only raised money on mortgage. They may have thought that they, had some sort of lien on the goods for their charter hire. It is true, on reading the charter, that they had no lien. The lien clause simply says: "The owners to havea lien upon all cargoes and sub-freights belonging to the Time-Charterers and any Bill of Lading freight for all claims under this Charter". That clause did not apply because this cargo did not belong to the time charterers. But it is possible in some charters to have a lien on the cargo for charter hire. An instance is given in Scrutton on Charterparties. Article 165 (4), which says that: "there may be liens by express agreement for charterparty freight as against the holder of the bill of lading". It seems to...
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