deviation in marine insurance and contracts of carriage
DESCRIPTION
Deviation its effects on Marine Insurance Contracts and Contracts of CarriageTRANSCRIPT
UNIVERSITY OF NOTTINGHAM
DISSERTATION FOR DEGREE OF MASTER OF LAW (LLM)
LLM in MARITIME LAW
DEVIATION IN MARINE INSURANCE
AND CONTRACTS OF CARRIAGE
BY
ROSHNI MANUEL
Student id-4112652
Candidate of the 2010 LLM Programme
School of Law, University of Nottingham
………………………………………………………………
I hereby declare that I have read and understood the
Regulations governing the submission of postgraduate
Dissertations, including those relating to length and
Plagiarism, as contained in the LLM Manual and that this
Dissertation conforms to those regulations.
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DEVIATION IN MARINE INSURANCE AND CONTRACTS OF CARRIAGE
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CONTENTS
INTRODUCTION ………………………………………………………………………………………….1
CHAPTER -1 …………………………………………………………………………………………………2
DEVIATION IN MARINE INSURANCE (ATTACHMENT AND ALTERATION OF RISK)
WHAT MARINE RISK CONVEYS DESCRIPTION OF THE VOYAGE ‘AT AND FROM’ ATTACHMENT OF RISK DELAY IN COMMENCING THE RISK ALTERATION OF RISK (CHANGE OF VOYAGE,DEVIATION,DELAY)
CHAPTER-2…………………………………………………………………………………………11
HELD COVERED CLAUSES AND ICC 2009 HELD COVERED CLAUSES THE ICC PRACTICALITY NOTICE ADDITIONAL PREMIUM UTMOST GOOD FAITH
CHAPTER-3 …………………………………………………………………………………………19
DEVIATION IN CONTRACTS OF CARRIAGE
DEPARTURE FROM DIRECT ROUTE FOR NAVIGATIONAL REASONS DEPARTURE FOR BUNKERING PURPOSES JUSTIFIABLE DEVIATION (COMMON LAW AND HAGUE-VISBY RULES)
o SAVING HUMAN LIFEo AVOIDING DANGER TO SHIP OR CARGOo LIBERTY CLAUSESo EFFECTS OF DEVIATIONo BREACH AND WAIVERo WAIVER IN MARINE INSURANCE
DEVIATION AND GENERAL AVERAGE POST HAIN CASE
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CHAPTER-4……………………………………………………………………………………………….34
COMPATIBILITY BETWEEN CARRIAGE CONTRACTS AND MARINE INSURANCE
WHERE THERE IS ‘EXPRESS AUTHORIZATION BY AGREEMENT’ IMPLIED COVER BY THE POLICY SAVING LIFE INVOLUNTARY DEVIATION UNINSURED PERIL COMPATIBILITY BETWEEN MARINE INSURANCE AND CONTRACTS OF
CARRIAGE CONSEQUENCES OF EXCUSED DEVIATION AND DELAY RESTRICTIVE SCOPE, CESSATION OF EXCUSE AND CONTINUATION
OF THE CONTRACT VOYAGE
CONCLUSION……………………………………………………………………………………………….45
BIBLIOGRAPHY………………………………………………………………………………………………I-II
CASES REFERRED……………………………………………………………………………………………III-VII
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Introduction
‘If a boat captain violated the itinerary to which it was committed and thereby brought
about the loss of the boat, he shall measure out to its owner as much as the boat, and its
hire’- Sumerian tablet, circa 1800 B.C1.
Deviation is a subject of importance in both marine insurance and contracts of
affreightment. Deviation means, any departure from the insured adventure sufficient to
constitute a variation of risk.2The doctrine has its origin in marine insurance law;
whenever a vessel deviated from the route insured, the legal position used to be that she
was uninsured from the time she deviated as the voyage is different from that which was
insured.3 Concept arose from disputes on insurance policies where either the ship or the
cargo or may be both were lost during the voyage and insurance claims were shielded by
the insurers on the fact that the voyage insured for, was never performed. “Where a ship
without lawful excuse, deviates from the voyage contemplated by the policy, the insurer
is discharged from liability as from the time of deviation, and it is immaterial that the
ship may have regained her route before any loss occurs”.4 In common law its origin is
attached with Davis v. Garrett as it applies to contracts of carriage. There is “a duty in
the owner of a vessel whether a general ship or hired for the special purpose of the
voyage, to proceed without unnecessary deviation in the usual and customary course”5
and this should be followed in the absence of a liberty clause.
1 The Deviating ship- by Steven F. Friedell .32 Hastings L.J. 1535 (1980-1981); J. Pritchard, Ancient near eastern texts relating to the Old Testament 525 (3d ed J. Finkelstein trans, 1969). 2Oswell v Vigne (1812) 15 East 70; provides idea on the concept.3 15 (Lord wright) Rendall v. Arcos (1937)43 Com Cas 1 (HL), Hain Steamship Co v Tate & Lyle (1936) 55 Ll LR 159 (HL), 173 (Lord Atkin)4 The Marine Insurance Act 1906, s.46(1)5 Davis v. Garrett (1830) 6 Bing. 716 ,725 per Tindal C.J
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Chapter-1- Deviation in marine insurance (attachment and alteration of risk)
From its inception two factors where vital in deviation, firstly the act which amounts the
breach (geographically deviating from agreed voyage) and secondly the business
competence linking the cargo interests and the shipowners. The geographical deviation
still means the same but the business efficiency linking the cargo interests and ship
owners have evolved tremendously. The carrier inserted clauses which allowed them ‘to
sail, proceed and sky...’ at certain ports and in response to such clauses the cargo
owners tried to confine the significance of these clauses within the frame by insisting
upon the description and rationale behind the departure from the direct route.
What marine risk conveys The assured should have an insurable interest in the
subject matter insured only then he would be indemnified under a marine insurance
policy and the risk attaches from the moment the subject matter insured embarks upon
the voyage contemplated in the policy. If the risk is limited by time, the policy is a time
policy6 and if it is points of locality, then it is a voyage policy.7This discrepancy is
important to note, as the period for which the subject matter is insured depends on
whether it is written on time or voyage basis. ‘Every marine policy must either be a time
policy or a voyage policy or combination of both, and it cannot be something else’8.
There is implied warranty of seaworthiness in voyage policy and unless it is mentioned in
the contract, there is no implied warranty in time policy.9 Some general principles applied
to voyage policies will not apply to time policy; the doctrine of deviation, delay and
change of voyage will affect only policies written on voyage basis. In a voyage policy the
place where the risk commences terminus a quo is usually the port of departure, for the
ship and for goods it is the port of loading; the place where the risk ends terminus ad
quem is the destination port or port where cargo should be discharged.10
Description of the voyage The insured voyage must be described in the voyage policy
i.e. terminus a quo and terminus ad quem should be stated and described in such a way
6Arnould’s Law of Marine Insurance and Average (17THedn). chapter 14 para -027MIA 1906 s.25 (1).8 The Eurysthenes (1977) Q.B 49,73;9 Arnould’s para 13-02; MIA 1906 S. 39.10Ibid Para 14-03.
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that parties should know when exactly the subject insured is within the cover. And if the
vessel is to stop at intermediate ports, the policy should contain a clause providing
conditions in which the ship is allowed to halt. But in time policies, the policy will cover
any voyage the ship pursues and loss resulting from insured perils for the time covered
and once the risk is attached the insurer will have right to the full premium. 11 The
venture begins and ends with the term. But at times, the policy is worded: during the
expiry of the term, if the ship is at sea, the ship will be ‘held covered’ to her port of
destination (continuation clause)12 then in such cases the policy ends at port of
destination. Time policy may be written with local limits and in that case if the vessel
leaves the area specified in the policy there won’t be any cover. If insurance is stated to
have started from one date to another date, then the risk would not attach unless the
first date stipulated has begun and the cover will end on the last date given.13 And the
actual time the risk will attach and terminate depends on the place where contract is
executed, unless a different time is computed.14
‘At and From’ there is an implicit requisite that the adventure would commence within
a reasonable time under a voyage policy and the matter would be insured ‘at and from’
or ‘from’ a specific place and if the voyage has not been commenced the insurer may
avoid the contract15. Under the S.G form, the insured voyage would commence “at and
from” rather than simply “from” the terminus a quo, it’s because when it is simply ‘from’
the terminus a quo the risk would not attach unless it sailed for the insured voyage. But
when it is ‘at and from’, the vessel is deemed to be protected during the time she spends
at the port preparing for the insured voyage16. The MAR 91(commonly used) states
‘voyage’ or ‘period of insurance’. However with the advent of transit clauses even this is
less significant. But, if the hull cover is on voyage basis, it is necessary to define the
particular point ‘at’ which the cover begins and not merely ‘from’ the port of departure.
11Tyrie v Fletcher (1777) 2 Cowp. 666; 12 Institute time clauses (hulls) cl.213 Isaacs v Royal Ins Co (1870) L.R. 5 Ex.296 (fire policy)14 Walker v Protection Ins Co, 29 Maine R. 317 (1849); 1 Phillips, S.949. English courts follow the same.15S.42 MIA 1906; Arnould’s Pg 437.16Motteux v London Ass Co (1739) 1 Atk.545 ; Forbes v Wilson (1800) Marshall, Ins. 206; 1 Park 472.
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Attachment of risk The risk attaches only if the vessel embarks upon the insured
adventure; this applies to both time and voyage policies. Thus, “Where the place of
departure is specified by the policy and the ship instead of sailing from that place sails
from any other place, the risk does not attach”17 And similarly if the ship sails for other
destination than the one covered in the policy risk do not attach.18 And so is
unreasonably delayed commencement of insured voyage.19
A different voyage from what is insured, attaches no risk. In Simon, Israel & Co v
Sedgwick20 the cargo cover for the voyage ‘at and from Mersey, to any port or ports in
Portugal and/or Spain, this side Gibraltar, and/or at or from thence by any inland
conveyance, to any place or places in the interior’, any deviation or change of voyage
covered on an additional premium. The goods where shipped from Bradford to Madrid
and their discharge were anticipated ‘this side’ i.e. west of Gibraltar after the voyage at
Seville. But the shipment was in fact for discharge at Cartagena by error, on other side of
Gibraltar. The vessel was lost before it could reach the west coast and the assured
rendered additional premium for the mistake. The bills of lading (cargo) indicated ‘for
Cartagena’ and this means that, goods were never on the insured voyage and thus the
risk never attached to the lost cargo and the deviation clause could not be invoked. The
insurers refused to accept the additional premium in this case and the court upheld their
right to do so. Herein although the additional premium was paid, the risk did not attach;
hence the assured may be entitled to restitution by reason of a total failure of
consideration under s.84 (1) of MIA. Similarly, in Sellar v M’Vicar21 the insurers were held
not liable as the ship did not engage upon voyage insured. Herein the moment master
undertook to carry cargo from Demerara to Berbice which did not lie in the ordinary
course of voyage from Demerara to London, the vessel is said to have departed from the
insured voyage.
17MIA 1906 s.43.18Wooldridge v Boydell (1778) 1 Doug 16.19Maritime Ins Co v Stearns [1903] 2 KB 912.20(1893) 1 QB 303 (CA)21(1804) 1 Bos & Pul( NR) 23.
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Again, if the vessel does not embark upon the insured adventure, although the route
stipulated in the policy is followed; the underwriters would not be liable. In Way v.
Modigliani22 the policy was ‘from any port in Newfoundland to Falmouth or ports of
discharge in England at and from 20 october’. The vessel did pursue the voyage from
Newfoundland to England. But the insurers were held not liable as the vessel went on a
fishing voyage rather than sailing directly to England. The initial attachment of risk
would be there as the vessel did pursue the voyage from Newfoundland to England; but
the underwriters were not liable because of the deviation from insured adventure.
The subject matter insured is expected to embark upon the insured voyage and if that
voyage is not pursued the risk would not attach and in the absence of a cover, it would
be a burden for the carrier if the deviation is not justified or else it should be given cover
by payment of additional premium. But what happens if the loss occurs before the
dividing point i.e. whilst in common route. This was discussed in Wooldridge v Boydell23
where insurance cover commenced ‘at and from Maryland to Cadiz’. But the vessel sailed
to Falmouth and was lost in the initial common route. In such cases normally if the loss
had occurred before the deviation when the ship was in fact in the voyage insured, cover
should be given as there was initial attachment of risk. But herein evidence showed that
Cadiz was never considered to be the destination port. Hence no cover and held that
‘there cannot be a deviation from what never existed.’24
In Simon,Israel & Co v Sedgwick, although the insurance policy worded, ‘from the time of
leaving the warehouse in UK’ ;the argument that risk attached from the time the goods
left the warehouse in Bradford and the consequent error of loading for a port beyond
Gibraltar fell within the purview of the clause permitting deviation on the payment of
additional premium was rejected on the ground that, even if cover could be extended to
incidental land or inland water transit, subject matter of the insurance is the designated
sea voyage.25 This reasoning was followed in The Prestrioka26 where a cargo of rice was
22 (1787) 2 TR 3023(1778) 1 Dougl 1724Ibid 18 per Buller J.25 MIA 1906,ss 1-3.26Nima SARL v Deves Insurance plc ( The Prestrioka) (2003) 2 Lloyd’s Rep 327
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insured for an adventure ‘from Kohischang, Thailand to Dakar port, Senegal’ and it
incorporated institute cargo clauses (A). The goods were taken on board of Prestrioka
and bill of lading was issued for Dakar. However ship never reached its destination and
was never known of but strong evidence showed that it was “a ‘Phantom vessel’ destined
before departure for disappearance and/or destruction having carried its cargo to a port
far from that anticipated by the cargo owners”.27The CIF purchasers of rice claimed under
the insurance which under the transit clause would cover risk ‘from the time the goods
leave the warehouse or place of storage for commencement of transit’. But the court on
the basis of s.44 stated that risk would not attach unless the vessel embarks upon the
insured voyage. The evidence in this case shows “no intention to embark upon the
insured adventure”. By following Simon, Israel v Sedgwick it was held that marine
adventure did not commence until the vessel carrying the subject matter insured leave
the named port to pursue the voyage insured.
Moreover, ‘where an insurer invokes s 44,the court will conduct ex post facto exercise to
determine not simply the contractual, but the actual, destination of the ship at the time
of sailing, which exercise depends upon the acts and intentions of the owners/or a
master at the time of its departure. If the court determines that, at the time of sailing,
vessel and cargo were in truth bound for a terminus ad quem other than that identified in
the policy as definitive of the voyage insured, then s 44 will apply and the risk which
prima facie attached when the goods left the warehouse will in the event be held not to
have attached’.28The risk would not attach if the subject matter was never intended to
embark upon the voyage insured. It is clear through these cases that a clause in the
policy cannot change the ‘fundamental nature of the policy’.29This ‘operates on the
assumption that the insured adventure takes place and on that basis addresses the
27Ibid Para 59 Per Potter LJ.28Ibid Per Potter LJ Para 53-54.29 Howard Bennett-The Law of Marine Insurance (2nd edn) 2006; pp 18.12.
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question of the commencement and termination of the risk’30 and if assured varies it the
underwriter is discharged.31 (‘The prestrioka’ and ICC 2009 will be dealt in next chapter)
Delay in commencing the risk The policy will attach at the place of departure and the
vessel won’t be covered there indefinitely. In Chitty v Selwyn32it was held that ‘if all
thoughts of the voyage are laid aside, and the ship lies there five, six or seven years,
with the owners privity, it shall never be said that the insurer is liable; for it would be
absurd to make him suffer for the whim or caprice of the owner, who chooses to let the
ship lie and rot there’33. This approach was followed in Grant v King34 ‘To discharge the
policy there must be a clear imputation of waste of time, mere length of time elapsing
between the sailing of the vessel and the underwriting of the policy, is not of itself
sufficient to avoid the policy; it is capable of explanation’.35 However this kind of delay
whether ‘for the purpose of voyage’, or not should be considered and should be clarified.
Furthermore, the delayed voyage should be in terms with policy agreed for and not
deviate from it36.
Alteration of risk (change of voyage, deviation, delay) - ‘Any departure from the
voyage insured is sufficient to cause a variation of risk’.37Change of voyage is a voluntary
change of the destination from that contemplated by the policy after the commencement
of risk38. To identify change of voyage, identifying the insured voyage, liberty clauses and
the voluntary nature of it is necessary. Here the assured has no intention to complete the
voyage insured i.e. Termini ad quem would be changed. In Simon, Israel & Co v
Sedgwick39 - a ‘held covered’ clause cannot be invoked if the policy does not attach and
this means there can be change of voyage only after the risk has attached.40 In Thames
30 Nima SARL v Deves Insurance plc( ThePrestrioka) (2003) 2 Lloyd’s Rep 327. Per Potter LJ at para 48; Nam Kwong Medicines & Health Products Co Ltd v China Insurance Co Ltd (2002) 2 Ll Rep 591 (Hong Kong High Court)31Per Blackburn J. Company of African Merchants ltd v British & Foreign Marine Insurance Co.Ltd (1873) LR 8 Ex 154,157.32Chitty v Selwyn(1742) 2 Atk 35933Ibid Per Lord Hardwicke.34 Grant v King (1802) 4 Esp 175,176-735 Ibid 176-7 per Lord Ellenborough.36 The law of marine insurance (2nded) Howard Bennett. Pg 521.37 Birrell v Dryer (1884) 9 App Cas 34538MIA 1906,s 45(1).39 (1893) 1 QB 303;40 Law of Marine Insurance- Susan Hodges (1996) Pg 60.
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& Mersey Marine Insurance Co Ltd v HT Van Laun & Co - the test for determining whether
an interruption of voyage amounts to a deviation only or is it a change of voyage, is to
identify whether the ultimate terminus ad quem remains the same’41.But if the master
‘not acting on his own initiative, but on orders which morally as a good subject he ought
not to have resisted’42 is an excepted peril. Under s. 45(2), ‘unless the policy otherwise
provides, where there is change of voyage, the insurer is discharged from liability as
from the time of change of voyage...’. provision stipulates ‘unless a policy otherwise
provides’ and an example of such a policy is Cl-2 IVCH (83) the ‘held covered’ clause
states; “Held covered in case of change of voyage; provided notice be given to the
underwriters immediately after receipt of advices and any amended terms of cover and
any additional premium required by them be agreed”. “When a ship is insured at and
from a given port, the probable continuance of the ship in that port is in the
contemplation of the parties to the contract. If the owners, or persons having authority
from them, change their intention, and the ship is delayed in that port for the purpose of
altering the voyage and taking in a different cargo , the underwriters run an additional
risk if such a change of intention is not to effect the contract”.43
The unlawful departure from the route insured without changing the terminus ad quem
amounts to deviation in Marine insurance and discharges the insurer under the contract.
The risk will not re-attach if the ship rejoins the insured route after the deviation44. In
deviation the vessel departs from her usual and customary route but there is intention to
complete the insured voyage by returning to the course insured. Here the termini ad
quem is not changed. ‘Deviation from the voyage insured arise from after thoughts, after
interest, after temptation; and the party who actually deviates from the voyage
described, means to give up his policy. However, a deviation merely intended but never
carried into effect is no deviation45. In all the cases of that sort, the terminus a quo and
ad quem, were certain and the same’.46
41 Thames & Mersey Marine Insurance Co Ltd v HT Van Laun& Co (1917) 23 Com Cas 104,110 per Lord Davey42Richard v Forest Land, Timber & railway Co ltd (The Minden) [1942] AC 50,109 per Lord Porter.43 Tasker v. Cunninghame (1819) 1 Bligh 87. Per Lord Chancellor44Elliot v Wilson (1776) 4 bro PC 470.MIA 1906 .s 46(1).45 MIA 1906, s.46(3)46 Wooldridge v Boydell (1778) 1 Doug 16, 18
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If the policy doesn’t specify any route the insured route would be the usual and
customary route47. ‘It is the duty of a ship, at any rate when sailing upon an ocean
voyage from one port to another, to take the usual route between those two ports. If no
evidence be given, that route is presumed to be the direct geographical route, but it may
be modified in many cases for navigation or other reasons, and evidence may always to
be given to show what the usual route is, unless a specific route be prescribed by the
(contract)’.48 Clauses are inserted in the contract of carriage which gives ‘liberty to touch
and stay’ at some specific ports and this liberty is to halt at only those ports prescribed in
the clause and those ports must be visited in the order given in the policy and if the
order is not mentioned then geographical order should be followed49. It also abstains
from halting at a port which might be sanctioned by usage in the absence of express
contractual term.50Furthermore such clauses would be construed in a way that the
vessels could touch those ports only in connection to the voyage.51
Once the vessel embarks upon the insured voyage, there is cover for that particular
voyage and cover ceases to exist when there is actual deviation and not merely intention
to deviate.52 From the point the vessel deviates the cover is lost and the insured route
pursued till the deviating point will be covered. However if evidence prove that a
different destination was ventured upon then no cover as the ‘insured adventure’ is the
subject matter of marine insurance. And ‘it is immaterial that the ship may have
regained her route before any loss occurs.’53‘A deviation never puts an end to the
insurance, unless it be the voluntary act of those who have the management of the
ship.’54
Unreasonable delay in conducting the voyage insured might result in the termination of
the policy in the same way as in the case of change of voyage and deviation. S.48
47MIA 1906- s. 46(2).48Reardon Smith Line Ltd v Black sea & Baltic general insurance co ltd (1939) AC 562,584.49Beatson v Haworth (1796) 6 TR 531; Marsden v Reid (1803) 3 East 572; The Dunbeth (1897) P 133; MIA 1906 s. 47(1 &2); Law of Marine Insurance (2ndedn) 2006- Howard Bennett, Pg-528;50Elliot v Wilson (1776) 4 Bro PC 470; Law of Marine Insurance (2ndedn) 2006- Howard Bennett, Pg-528.51Hammond v Ried (1820) 4 B &Ald 72; MIA 1906, Sch 1 , R 6.52MIA 1906, S.46 (3)53 MIA 1906, S.46 (1)54 Scott v Thompson (1805) 1 B & P NR 181, 186 per Sir James Mansfield CJ.
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requires the adventure to be prosecuted with ‘reasonable dispatch’. Whether this
prosecution is with reasonable dispatch is a question of fact.55And reasonableness is to
be determined ‘not by any positive and arbitrary rule, but by the state of things existing
at the time at the port where the ship happens to be’56- Phillips v. Irving. If without lawful
excuse the insured adventure is not prosecuted, the insurer is discharged from liability as
from the time when the delay became unreasonable.57 Delay is considered to be
reasonable if it was a result, to obtain a permit from authorities58 or shortage of tonnage
in wartime and more importantly the delay should be to promote the insured voyage.59
Deviation and delay are considered to be grounds for termination of the policy and it
could be excused in certain circumstances; by referring to s.46 and s.48 it is clear that in
deviation the departure without ‘lawful excuse’ and in delay prosecution of adventure
without ‘reasonable dispatch’ might bring the policy to an end (ICC cl 18 - avoidance of
delay is a reflection of this section) S.49 deals with excuses for deviation or delay
(discussed in chapter -4) .The assured will not lose cover in cases where deviation or
delay was due to ‘necessity’.
Chapter-2 Held covered clauses & ICC 2009
Held covered clauses; The held covered clauses came into existence in the late
nineteenth century.60 These clauses protect the assured by extending the cover within
the limits of the cover agreed and it works on the, discretionary right to demand an
55 S.88 MIA 1906; Bain v Cove (1829) 3 Car & P 496.56 Philips v.Irving [1844] 7 Man & G 325 at 328 Per Tindal CJ57 S.48 MIA 1906.,58 British- American Tobacco Co Ltd v. HG Poland (1921) 7 Lloyd’s law Rep 108.59 Niger Co Ltd v. Guardian Assurance Co (1922) 13 Ll law Rep 75; Law of marine insurance- Howard Bennett (1996) pg 530.60Held covered clauses in marine insurance- Prof. Rhidian Thomas. Pg -1.
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additional premium and/or amended terms of the cover.61 ‘ The whole object of the
clause is to keep the underwriter on risk, notwithstanding that, in the absence of the
clause, he would be discharged from liability or the risk would fall outside the policy’. 62
The departure from the insured adventure agreed to be protected by h/c clause should
be viewed strictly in conjunction with the wording of the clause invoked.
The institute cargo clauses (a) (b) (c) ICC (examples of h/c clauses)An example of clauses
which lessen the doctrine of ‘alteration of risk’ include ICC (A), (B), (C) Cl 8,9 & 10 and
they should be considered together.
Cl 8.3 states ‘this insurance shall remain in force (subject to termination as provided for
in clauses 8.1.1 to 8.1.4 and to the provisions cl 9 below) during delay beyond the control
of the assured, any deviation, forced discharge, reshipment or transhipment and during
any variation of the adventure arising from the exercise of a liberty granted to carriers
under the contract of carriage’
Under the Institute cargo clauses 1/1/09, the risk attaches the moment goods are ‘first
moved in the warehouse or at the place of storage (at a place named in the contract of
insurance) for the purpose of immediate loading into or unto the carrying vehicle or other
conveyance for the commencement of transit’ and this means the cover begins from the
time its ‘shelf to unloading’.63 And terminates “(Cl 8.1.1) on completion of unloading from
the carrying vehicle or other conveyance in or at the final warehouse or place of storage
at the destination named in the contract of insurance, (same effect as 82’ clause).
(cl 8.1.2) on completion of unloading from the carrying vehicle or other conveyance in or
at any other warehouse or place of storage, whether prior to or at the destination named
in the contract of insurance, which the assured or their employees elect to use either for
storage other than in the ordinary course of transit or for allocation or distribution, or (cl
8.1.3)-when the assured or their employees elect to use any carrying vehicle or other
conveyance or any container for storage other than in the ordinary course of transit,
61Ibid Pg -2; Bennett, The law of marine insurance (2006,OUP,Oxford) pp,308-316; 62Liberian Insurance Agency Inc. v. Mosse(1977) 2 Ll Rep. 560,567; Per Donaldson J.63Insuring cargoes in the new millennium: The Institute Cargo clauses 2009 by John Dunt and William Melbourne, Pg 120.
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(these clauses refer to the election to store in warehouses and also to store in vehicles
or in containers other than in the ordinary course of transit).
(cl 8.1.4) on the expiry of 60days after completion of discharge over side of the subject-
matter insured from the oversea vessel at the final port of discharge, whichever shall first
occur”64 (Termination of cover, on expiry of 60 days after discharge from the vessel). This
revision in cl.8 provides wider cover i.e. policy covers any loss incurred within the
warehouse if stored for immediate loading for commencing the contemplated transit.
However, ‘The policy does not attach if the adventure insured is for carriage by a named
vessel and the goods are never appropriated by a contract of carriage to that insured
voyage but are shipped by some other vessel’.65The insurance will cease to exist if the
goods remain in the carrying vehicle and the assured or its employees elect to use it for
storage other than ‘ordinary course of transit’. And this transit should be pursued with
‘reasonable dispatch’ stipulated in s.48 and cl.18 of ICC. According to cl.9, it would be
considered prudent for an assured to inform the insurers in the happening of a serious
casualty or possible delay, instead of waiting till the notice of termination is received and
under the ‘prompt notice’ referred to in this clause the insurers are entitled to charge an
additional premium but under clause 10.1 referred below, the same term refers to
reasonable market rate and reasonable market terms. There is a difference in the
approach of these two clauses but the similarity is in the fact that they deal with change
of circumstances once the insurance is attached under cl 8.
ICC cl -10.166 –once the destination is changed after the attachment of this insurance, the
assured should provide prompt notice to the insurer so that rates and terms could be
agreed at. But if the loss occurs prior to such agreements, the cover could be obtained
only if it is available on reasonable commercial market rates on reasonable market
terms67. This part of the clause covers ‘held covered’ provision. But after the revision of
64 Institute cargo clauses 200965Arnould’s law of marine insurance and average- (first supplement to the 17thedn by Jonathan Gilman QC, Professor Robert Merkin ) Pg 83; The prestrioka;66 ICC 2009 Cl. 10.1 “Where after attachment of this insurance, the destination is changed by the assured, this must be notified promptly to insurers for rates and terms to be agreed. Should a loss occur prior to such agreement being obtained cover may be provided but only if cover would have been available at a reasonable commercial market rate on reasonable market terms”. 67Clause 10.1 – (voluntary change of voyage) ICC 2009; Held covered clauses in marine insurance- Prof. Rhidian Thomas. Pg -131.
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this clause in 2009, usage of the term ‘held covered’ have been avoided because of
misunderstandings related to the ambit of the term as it was misconstrued as
‘guaranteed cover’ even in situations where cover was not available on reasonable
commercial market rates.68
The revision made the clause ‘understandable’ for the assured with no knowledge about
the operation of held covered clause and MIA 1906. It explains the ambit of the additional
cover available i.e. whenever such cover was commercially available in market and this
avoids the misconception of treating the ‘held covered’ as guaranteed cover, even in
situations where cover is not available at reasonable commercial market rate; the clause
also stipulates the results where loss occur before the rates have been agreed for the
continuation of cover. ‘The assured seeking the benefit of the clause must give prompt
notice to underwriters of his claim to be held covered as soon as he learns of the facts
which render it necessary for him to rely upon the clause and clause only applies if the
premium to be arranged would be such as could properly be described as a reasonable
commercial rate’.69
Clause 10.2 of ICC solves the ‘Phantom ship’70 problem and accordingly “where the
subject matter insured commences the transit contemplated by this insurance
(accordance with cl 8.1), but, without the knowledge of the assured or their employees
the ship sails for another destination, this insurance will nevertheless be deemed to have
attached at the commencement of such transit”. This provision came to being after ‘The
Prestrioka’. In this case S.44 was applied and the assured could not get cover for the
theft of their cargo. The ground on which they were rejected cover was that the risk
never attached (did not embark upon the insured voyage); hence the warehouse to
warehouse cover (transit clause) could not be relied. It was decided that the transit
clause did not displace or avoid s.44. The transit clause is an example of the extension of
a marine insurance policy to a land risk ‘incidental to’ the sea voyage as permitted by s.2
of MIA and it does not alter the fundamental nature of the marine insurance policy. The
68Liberian Insurance agency v. Mosse [1977] 2 Lloyds Rep 560 per Donaldson J at p.568.69 Liberian Insurance Agency Inc v Mosse (1977) 2 Ll Rep 560 per Donaldson J70 ‘A phantom vessel is a ship with no traceable registration, controlled by fraudsters and used to steal cargoes’- Bennett, para. 18.12, fn.17
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clause operates on the assumption that marine adventure takes place and if that
adventure is never embarked upon, the insurer will not be liable under s.44. (cl 10.2)
wording ‘This insurance will nevertheless be deemed to have attached’ will operate to
cancel the effect of s.44. Now if the vessel sails for another destination than the one
prescribed in the policy the risk will attach under cl 8.1 of the transit clause. But this is
conditional to the fact that the vessel should sail for such other destination without the
“knowledge of the assured or their employees.”
Furthermore, in Institute war clauses (cargo) cl 6, Institute strike clauses (cargo) cl 7 the
change in voyage is held covered provided certain conditions are accomplished. Other
examples of h/c clauses include ‘change of voyage clause’ IVCH 83’ & 95’ -Cl.2 “Held
covered in case of deviation or change of voyage or any breach of warranty as to towage
or salvage services, provided notice be given to the underwriters immediately after
receipt of advices and any amended terms of cover and any additional premium required
by them be agreed”. ITCH 83’ & 95’- Cl.3 “Held covered in case of any breach of
warranty as of cargo, trade, locality, towage, salvage services or date of sailing,
provided notice be given to the underwriters immediately after receipt of advices and
any amended terms of cover and any additional premium required by them be agreed”
Practicality - The insurer will indemnify the assured only to the extent specified in the
policy. Even the policy which covers ‘all risks’ is not what it appears to be on its
face.71Firstly, the risk undertaken by the insurer would be limited to the subject matter of
the insurance, say ship, cargo, freight or any other interest. In Overseas Commodities Ltd
v. Style72the cargo did not bear the markings which formed the part of the subject matter
insured and as a result h/c clause which was incorporated in the cargo policy ceased to
operate. It was held that the assured could not correct the ‘wrong marking’ and
considered this a sufficiently valid reason for not applying the clause73and this was also
upheld in Hood v. West End Motor Car Parking Co.74 Furthermore, the subject matter
71British and foreign Marine insurance Co. v. Grant ( 1921) 2 A.C.41; Held covered clauses in marine insurance- Prof. Rhidian Thomas (vol.2) pg 13.72(1958) 1 Lloyd’s Rep .546.73Overseas Commodities Ltd v. Style (1958) 1 Ll Rep .546; ; Held covered clauses in marine insurance- Prof. Rhidian Thomas pg 14;74Hood v. West End Motor Car Parking Co (1916) 2 K.B. 395 (CA); In this case goods which were not intended to be covered by the policy were shipped.
14
insured should be stated in the policy with reasonable certainty75 and the construction of
the words must be in conjunction with MIA, trade, market usage and more importantly
the intention of parties76. Secondly, the insurer would indemnify the assured only against
risks that are insured and in order to recover, the loss should be caused by an insured
peril and it should also appropriate a test of causation. If it is not an insured loss, there is
no right of recovery under the policy.77But a well constructed h/c clause may safeguard
the limitations of the policy. In Greenock Steamship Co. Ltd v. Maritime insurance
Co.Ltd78 the clause stated, ‘held covered in case of.....unprovided incidental risk...at a
premium to be hereafter arranged’ the effect of the clause was an issue and it enabled
the assured to get additional cover for incidental risk not stipulated in the policy.
‘Incidental’ is construed in a restricted sense and would not cover risks which are wholly
independent. But it would ‘cover risks which are incidental to the risks already covered
under the policy’79. In this case the held clause was to apply even when the matter for
which the ship was held covered wasn’t discovered until the loss occurred and the
additional premium the insurer would demand has to be calculated as ‘if the parties had
known of the deviation at the time that it happened’.80 Thirdly, Risks of maritime nature
could be underwritten in time or voyage basis or may be a combination of both.81 In
present times, policies in voyage basis are more in cargo insurance, and in case of hull
and machinery insurance voyage-based risk are taken only in particular circumstances.
S.42-49 of MIA deals with the voyage and the effect of these provisions is to define the
risk taken up by the underwriter when the policy is on voyage basis. In a voyage policy,
place of departure and destination are stipulated and the voyage should be pursued with
reasonable dispatch throughout without delay, deviation unless they are excused. If the
actual voyage performed is not according to the policy then the underwriter would not be
liable. Fourthly, risks underwritten in time basis; in time policy the insurer takes up the
risk for a specific period of time. Earlier it was twelve months and now it depends upon
75S. 26(1) MIA 1906.76MIA 1906, First schedule , Rules for construction of policy, rules 15-17, S.26(3-4).77MIA 1906, s.55 (1).78(1903) 1 K.B. 367.79 Held covered clauses in marine insurance- Prof. Rhidian Thomas (vol.2) pg 15.80(1903) 1 K.B. 367; Law of marine insurance by Susan Hodges p.62(1996)81S.25(1) MIA 1906.
15
the contract; and the time from which cover commences and terminates is dependent on
the construction of words in the policy. Only loss falling within insured period is covered
i.e. pre- or post-date losses will not be covered. Sometimes the attachment of cover
depends on assureds’ duty of utmost good faith in case of ante-dating of the cover. And
when ship is at sea when policy ends there should be h/c continuation clause to give
extended cover. ITC (Hulls) cl 2 provides for h/c in such situations. This h/c clause would
apply, if at the time of the termination of policy the vessel insured is at sea and in
distress or at port and in distress; Furthermore, notice should be served by the assured
before the expiry of the original cover and pro-rata monthly premium should be paid
too.82 Time policies are common in hull and machinery insurance and also in mutual
cover provided by P & I clubs.83 Fifthly, the insurance has territorial limits and its
connection with additional cover is such that by the payment of additional premium and
after giving notice the vessel insured can move out of the territorial limits (eg: Institute
war and strikes clause (cl 6)84) and Finally the subject matter in risk insured might have
certain specific ways through which they should be employed and it would be
contemplated in the policy if the assured employs it in a contradicting manner there
won’t be any cover. But again this could be tackled with the help of a h/c clause ( eg:
Institute clauses hulls cl 1.4).
Notice Under h/c clause due notice must be given by the assured on receipt of advice of
a deviation. In Mentz, Decker & Co v. Maritime insurance Co85 Question arose as to
whether a notice given after the loss was effective and following the Greenock steamship
Co v. Maritime insurance, the court held that notice given by the assured, though given
after loss, was sufficient to satisfy the terms of the clause. It was opined that delay
should not prevent the assured from recovering under the policy ‘if nothing practical
could be done on receipt of the notice’.86Moreover ‘it is an implied term of the provision
that reasonable notice should be given that it is not competent to the assured to wait as
82Held covered clauses in marine insurance- Prof. Rhidian Thomas (vol.2) pg 20.83 The insurance runs for 12months from noon GMT on 20th February.84 ‘Held covered subject to prompt notice and a premium to be arranged, in the event of the named storage vessel proceeding outside the limits of the area specified in this insurance’85(1910) 1 KB 132 86Ibid per Hamilton J pg 135.
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long as he pleases before he gives notice and settles with the underwriter what extra
premium can be agreed upon’- Thames and Mersey Marine Insurance Co v. Van Laun.87
But under IVCH(83) the term ‘reasonable notice’ has no implication and rather
’immediately’ stipulated in cl 2 applies and it demands urgency than reasonable time .
Hence once the assured is aware of the happening of the event he will have to give the
notice to the insurer.
Additional premium-The insurer can demand an additional premium for the additional
cover he provides through h/c clauses. The underwriter by adding h/c clauses extends
the purview of the cover and accepts additional risk by accepting additional premium,
here understanding the wording of the clause against which h/c clause provides cover is
important as the extended cover depends on it. Therefore a clause which covers ‘change
of voyage’ and ‘deviation’ will not operate where the risk never attaches.88Depending on
the construction of the clause, it could be understood whether there is a conditional
obligation to the assured, with additional premium payable only when it is demanded by,
the insurers89; and in such cases the phrase ‘if required’ would be used.90 However, some
clauses are drafted in a way which makes it obligatory for the assured to pay additional
premium and this depends on the construction of the words implied in the clause.
Furthermore, h/c clauses show that insurers can either accept or reject the premium
depending upon the risk they have to cover but courts would require strict language
before recognizing that the underwriters had lost their right of election.91At times the
additional premium paid to the insurer would be more than the indemnity assured seeks
to recover; in Greenock steamship Co v. Maritime Insurance Co Ltd the vessel was
unseaworthy (inadequate fuel) and in order to avoid danger, master burned the ship’s
fittings, spars and cargo which resulted in a general average sacrifice which the
insurance covered on the happening of breach of warranty; and the court in this case
holds the opinion that ‘the parties must assume that the breach was known to the parties
87(1917) 23 Com Cas 104 at p 109,HL per Lord Halsbury LC88Wooldridge v. Boydell (1778) 1 Doughl 17; Simon Israel & Co v. Sedgwick [1893] 1 Q B 303; Maritime Insurance Co. v. Stearns [1901] 2 K B 912; Bennett, The law of marine insurance (1996,OUP,Oxford) pg 558. 89The term ‘Insurers’ replaced the term ‘underwriters’ in clause 9 of ICC 2009.90 Examples: Institute cargo clauses (A), (B) and (C), Clause 9.91 Held covered clauses in marine insurance- Prof. Rhidian Thomas. Pg -38.
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at the time it happened, and must ascertain what premium it would then have been
reasonable to charge’92 here the breach was not discovered until the loss occurred.
Accordingly the insurer would reasonably charge the parties a premium worth the value
of the sacrifice and an additional premium for the increased risk of the loss of vessel.
Furthermore, the insurer is expected to charge reasonable additional premium
depending on the extra risk undertaken and may not ‘amend the terms’ of the cover
unreasonably for his benefit under h/c clause.
Utmost Good Faith ‘A condition precedent to the application of the clause’93 and ‘to
obtain the protection of ‘held covered’ clause, the assured must act with the utmost
good faith towards the underwriters, this being an obligation which rests upon them
throughout the currency of the policy’.94However, this duty is limited to the prudent
underwriter’s assumption in extending the cover under the clause.
Chapter-3 Deviation in contracts of Carriage
Deviation from the Latin word De via, ‘from the way’, has two significant meanings (1)
wandering from the way of course or the act of turning aside (English concept mostly
confined to this) and (2) is to err or transgress (U.S concept).95 If the ship deviates, the
entire bill of lading is invalidated, and the warranty that the goods will reach at the
destination securely on time, is substituted. The carrier by making variation in the risk
releases the underwriter. This invalidity of the contract makes the carrier a common
carrier (carrier becomes insurers). Unreasonable delay, in performing the contract is
deviation as it increases the risk of the voyage but the delay should be ‘such as to
substitute an entirely different voyage for that contemplated by the bill of lading’96
Usually, the shipowner undertakes that the vessel will pursue the route contracted for
the performance of the contract; ‘any intentional and unreasonable change in the
92 Per Bingham J. (1903) 1KB 367 at 375;93 (1977) 2 Ll Rep 560 per Donaldson J at 56794 Overseas Commodities Ltd v Style (1958) 1 Ll Rep 546,559 Per McNair J95 11 JILE 147 (1976-77) ‘Deviation in the law of Shipping- U.S, U.K. and Australia a comparative study’.96 Brandt v Liverpool S.N.Co (1924) 1 K.B. 575 Per Atkin LJ at 661
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geographic route of the voyage contracted’97 would amount to deviation. To find
whether a deviation has occurred, the precise route envisaged in the contract of
affreightment should be ascertained. In common law the shipowner is under an
obligation to follow ‘the usual and customary course’.98 And this route is presumed to be
‘the direct geographical route between the port of loading and discharge’99 and the direct
geographical route or customary route should be followed in the absence of an express
provision in the charterparty. ‘Direct geographical route should be followed, but the
shipowner can prove that a different route is the customary one’; 100the voyage pursued
could vary for navigational reasons, such as, the necessity to avoid harsh weather
conditions or the draught restrictions for a particular vessel. The departure for bunkering
is justified101 and so is call at intermediate ports by vessels operating in liner trade;
however, if a vessel deviates from the route because of negligence, it will not be a
deviation and the shipowner will be able to raise the defence of ‘negligence in
navigation”102.The performance of the contracted voyage via the direct geographical
route between two ports is expected; and in order to avoid such an obligation, contracts
of carriage may include clauses to allow other routes other than the direct geographical
route. example: Clause 5 of Conebill 2000.
Departure from direct route for navigational reasons -vessels do not pursue the exact
direct route in practice and are required to follow only ‘the ordinary sea track of such a
voyage according to a reasonable construction of that term’.103 The precise route may
differ for navigational purposes i.e. to avoid hurricanes or ice or to avail favourable
weather conditions. And such departure would not fall under departure from usual and
customary route’.104
97 Tetley p 1812.98 Davis v. Garratt (1830) 6 Bing 716,725;99 Reardon Smith Line v. Black sea and Baltic general Insurance (1939) 64 Ll LR 229 per Lord Porter100 Ibid; Achille Lauro Fu Gioacchino & Co v. Total Societa Italiana Per Azioni (1969) 2 Ll LR 65, 67-668 ( Lord Denning MR)101Ibid 101 102 (1939) 64 Ll LR 229 ;Hague-Visby Rules103 Leduc v. Ward (1888) 20 Q.B.D 475,481 per Lord Esher104 Morrison v. Shaw Savill (1916) 2 K.B 783,797 per , Phillimore L.J; also cited in Reardon Smith v. Black sea Insurance per Lord wright
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Departure for bunkering purpose -Some voyages do have this feature. If calling at ports
for bunkering purpose is a usual practice (provided the bill of lading is consistent with it)
for the vessels in a particular trade or line, then calling at those ports for bunkering
during the course of the voyage will not be deviation and departure of this kind would be
considered as part of usual and customary route105.
Justifiable deviation (a) common law (b) hague visby rules
(a) Common law permits deviation from direct route in few circumstances and they are:
Saving human life or to communicate with a vessel in distress - deviating to
assist and save human life on seas doesn’t invalidate the contract rather it is considered
as a moral duty. ‘Deviation for the purpose of saving life is protected and involves
neither forfeiture of insurance nor liability to the goods owner in respect of loss which
would otherwise be within the exceptions of ‘peril of the seas’. And as a necessary
consequence of the forgoing, deviation for the purpose of communicating with a ship in
distress is allowed, in as much as the state of the vessel in distress may involve danger
to life. However deviation for the sole purpose of saving property is not thus privileged,
but entails all the usual consequences of deviation. If therefore, the lives of the persons
on board of a disabled ship can be saved without saving the ship, as by taking them off,
deviation for the purpose of saving the ship will carry with it all the consequences of an
unauthorised deviation’.106 In this leading case, the vessel not only deviated to save the
crew but also tried to earn salvage. And whilst towing she was lost and grounded with all
her cargo. Such a deviation was held unjustifiable and the charterers (claimants) could
recover the value from the shipowners(defendants). Thus it is established in common law
that deviation for saving life is justified but not saving property. However in cases where
there is more than one reason to deviate, the court should look into the primary motive
and check whether such motive is to save life or to save property.
Furthermore, there is a statutory duty prevalent in several countries, which obligates
saving life at sea principally during distress. An example of the same is S-93 of Merchant
105 Voyage charters (Lloyds shipping law library) chapter 12,pg 236; (1888) 20 Q.B.D 475; (1916) 2 K.B 783.106 Scaramanga v. Stamp (1880) 5 CPD 295 (CA), 304.per Cockburn CJ.
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Shipping Act 1995. This obligation is applicable to masters of UK ships and on the
masters of foreign ships when in UK waters and ‘the breach of this obligation would
result in summary conviction, imprisonment for a term not exceeding six months or a
fine not exceeding the statutory minimum,’or both’.107However, this obligation applies
only in territorial waters and not in high seas.
Avoiding danger to ship or cargo; The danger to ship or cargo should be of a
reasonable permanent nature. The master of the ship may deviate justifiably if the safety
of the ship and its cargo is at jeopardy. In The Teutonia108, war broke out and the master
deviated to make inquiries. It was held that ‘the whole situation should be taken into
account to understand whether or not deviation is in fact justified and it could be even
obligatory in certain situations’ and hence justified. The Anastasia109- it was held that
disobeying the orders of a charterer where the master knew that following it would result
in danger to the vessel would not amount to an unlawful deviation and ‘the master has a
duty to exercise his own judgement and she should not perform his duties merely at the
whim and dictat of the vessel’s owner or charterer’ (apprehension of peril not justified in
MI). In Kish v Taylor, the vessel was overloaded with deck cargo which made it
unseaworthy and she deviated from her contracted route to a port for repairs. It was
decided that ‘deviation would be justified although it resulted from initial
unseaworthiness for according to them justification should be given to the existence of a
danger and not in its cause’ (U.S courts contradictory view- held that deviation not to be
justified where the shipowner was aware of the unseaworthy condition of the vessel
before it sailed110). However compensation in the form of damages would be available for
any loss including delay resulting from the initial unseaworthiness111. The rationale
followed is that, it is the peril and not its cause which determines the character of the
deviation. On the same, Carver112 and Payne & Ivamy113 are of the view that if/when the
ship becomes unseaworthy, and once the shipowner know of the vessel’s poor state on
107 S.93(6) of The Merchant shipping Act 1995.108 Duncan v. Koster ( The Teutonia) (1872) LR 4 PC 171109 The Anastasia (1971) 1 Ll Rep 375110 The Louise (1945) AMC 363111 (1912) AC at pp 618-619112 3 Carver, British Shipping Laws 601 (2 ed. 1963) 113 L. Payne and E.Ivamy, Carriage of goods by sea 19,29 (1972)
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sailing, the master must not be forced to choose between risking the life and property
concerned and changing courses to maximize safety.
Furthermore, Carver114 views, that if the safety of the adventure requires the master to
go out of course, then he is not only justified in doing so, but it might become his duty in
performance of the contract made with the owners of the cargo. However, there is
uncertainty in law regarding situations where the risk is to cargo alone. If the
continuation of voyage would result in substantial damage to the cargo, the master
might be under a duty to deviate to protect the interests of the cargo owners- The Rona
(No 2)115 and it was also decided in this case that seaworthiness must exist at the
commencement of the voyage and it is not a breach of condition of seaworthiness if the
ship later falls below standard. Similarly if essential repairs require deviation, the
particular route pursued may be acceptable even though only cargo interests are
protected by the new route taken- Phelps v. Hill.116
But the chaos is in cases where the apprehended damage is slight or effects only part of
the cargo, the popular view is that in such cases ‘there is no requirement for a master to
deviate for the sole purpose of saving a part of cargo’.117 Moreover, such deviation being
justified depends upon the comparison between the gravity of the danger and the
inconvenience and expense of taking the avoiding action118.Again the ship could be taken
into port to discharge dangerous cargo if it was loaded by the charterer without the
knowledge of the shipowner. And if the charterer has breached the contractual duty to
load full cargo, the master may duly be permitted to deviate to acquire more cargo119.
(b) Under the Hague and Hague- Visby Rules The Hague/Visby Rules(Art IV rule 4)120
states ‘deviation in saving or attempting to save property at sea and any reasonable
deviation’. The purpose is to protect the shipowners by adding deviations to save
property and reasonable deviations to the existing list of deviations which are justifiable
114 3 Carver, British Shipping Laws 598 (2 ed. 1963)115The Rona (No 2) (1884) 51 LT 28116Phelps v. Hill (1891) 1 QB 605117 Notara v. Henderson (1870) LR 5 QB 346.118 Wilson-P 19119 Wallem v. Muller (1927) 2 K.B 99; Wilson- P 19120 The Hague Rules are identical on this point.
22
at common law.121 ‘Any reasonable deviation....’ referred herein depends on the facts in
each case. In Stag Line v Foscolo, Mango & Co122, the vessel deviated to land two
engineers who were taken on board for testing the fuel-saving apparatus. On leaving that
port she stranded and cargo was lost. The deviation was not considered as ‘reasonable’
by the House of Lords and the shipowner couldn’t rely on the Hague rules protection. The
question raised was ‘whether a deviation could be reasonable if it was not in the interests
of both ship and cargo’ and Per Lord Atkin- ‘the true test seems to be what departure
from the contract voyage might a prudent person controlling the voyage at the time
make and maintain, having in mind all the relevant circumstances existing at the time,
including the terms of the contract and the interests of all parties concerned, but without
obligation to consider the interests of anyone as conclusive’
There is Uncertainty regarding relation between express liberties to deviate contained in
the contract of carriage and the provisions of Art IV rule 4. The courts considering those
liberties to be ‘ reasonable’ within the meaning of art iv depends on the facts; and If
those liberties do not fall within ‘reasonable deviation’ in Art iv then they might fall under
Art iii r- 8 which renders void any clauses which derogates from the protection offered by
the rules. However the popular view which avoids such conflict is that, ‘the object of the
rules is to define, not the scope of the contract of service, but the terms on which that
service is to be performed’.123
Liberty Clauses Deviation from the contracted route would be justified by inserting
express clauses known as liberty/ deviation clauses. Through these clauses the
shipowners expand their right to deviate and to call at any port during the course of the
voyage without being questioned about its reasonability. Here the shipowners come to
an agreement with shippers, which grants them express liberty to deviate by inserting
the ‘liberty clause’124. Paradoxically, it may so happen that ‘such a liberty clause may
limit the common law rights of the master to deviate if the provisions give the vessel an
express right to deviate in situations not under the cover of the deviation in question and
121 Wilson- p 208.122 (1932) AC 328123 Renton v Palmyra (1956) 1 QB 462 at p 510; Stag Line v Foscolo, Mango & Co (1932) AC 328 ; 124 11 JILE 147 (1976-77) ‘Deviation in the law of Shipping- U.S, U.K. and Australia a comparative study’.
23
in such circumstances the shipowner may be estopped from relying on his implied right
at common law to deviate on the principle expressum facit cessare taciturn i.e. a liberty
which is in conflict with an expressed liberty will not be implied’125.
Nevertheless in present times almost all liberty clauses are worded in such a way as to
include almost all kinds of deviation. In Leduc v. Ward126 the Bill of lading gave ‘Liberty to
call at any port in any order and to deviate for the purpose of saving life or property.’ The
vessel deviated for the shipowners private business and was lost in a storm. The court
held that the shipowner was liable because the clause merely gave right to call at any
ports in the ‘ordinary course of voyage’. But the twist in inserting such a liberty clause is
that it should be in rhythm with the voyage contemplated. ‘The liberty to deviate and the
described voyage must be read together and reconciled, and that a liberty, however
generally worded, could not frustrate but must be subordinate to the described
voyage’.127
For example: Glynn v. Margeston & Co128, a case where liberty clause overlapped with
that of the voyage contemplated. The clause suggested the ‘liberty to proceed to and
stay at any port or ports in any rotation’. The cargo damaged because of the delay
caused by deviation which was duly allowed as per the liberty clause. But by focussing
on the conflict between general printed conditions (liberty clause) and special conditions,
the court upheld that the shipowners were liable for the decayed cargo as it happened as
a consequence to the delay and stated that, ‘the general words must be limited so that
they shall be consistent with and shall not defeat the main object of the contracting
parties’.129 Here the confusion was in the words “in any rotation” and in Leduc v Ward
the words were ‘in any order or any rotation’ and it was held that vessel may take only
those ports which are substantially on the course of the voyage’- Lord Esher.
125 3 Carver, British Shipping Laws at 602; United States Shipping Board v. Bunge y Born (1925) T.L.R. 174.126 (1888) 2. Q.B. 475 127 Frenkel v MacAndrews & Co Ltd (1929) AC 545 per Viscount Sumner.128 (1893) AC 351 (HL).129(1893) AC 351 (HL) Per Fry L.J; (1934) 39 Com. Cas. 259, 268 Per Scrutton L.J, ‘ To call at any ports in any order whether in or out of the route’ should be limited by the purpose of the contract
24
However, this effect of following the geographical routing could be cancelled if the clause
gives clear direction as to the route to be followed. In Connolly Shaw Ltd v. A/S Det
Nordenfjeldske D/S130, the carriage contract was to carry lemons from Palermo to London.
The vessel went to other ports and then steamed for London. The liberty clause allowed
‘to call at any port or ports, whether beyond the route of the port of delivery or not,
which she could call at in the course of her voyage without frustrating the object of the
voyage namely the safe carriage of a perishable cargo’.131 This means the ship could go
wherever she pleased but the purpose of the contract should not be frustrated. The
cargo of Lemons did reach London in good condition but their price fell by the time the
vessel reached London and this frustrated the contract.
No two charterparties or bills of lading are the same; the liberty clause could be worded
in any way as to make provision for any number of eventualities, including the possibility
of strikes.132 In GH Renton & Co Ltd v. Palmyra Trading Corp of Panama (the Caspiana)133
the bill of lading stated, carriage to ‘London or Hull so near thereunto as the vessel may
safely get’. The direct route was not stipulated. Strikes broke out in both London and
Hull; so the shipowners ordered the vessel to proceed to Hamburg and discharge the
cargo. The plaintiffs (the endorsees of Bill of Lading) claimed damages for breach of
contract. Here the liberty clause was applicable and operative only during emergencies
and the court found no conflict between the main object of the contract and liberty
clause. The bill of lading stated ‘to London or Hull’ and it did not specify the direct
contractual route. Moreover, the liberty clause would operate ‘only with the occurrence
of epidemics, quarantine, ice, labour troubles, strikes, or lockouts such that would
prevent the ship from leaving the loading port or reaching the discharge port’ but
discharging the cargo in such situation at the port of loading or any other safe or
convenient port was questionable. The court distinguished this clause from Glynn case by
holding that “there is a material difference between a deviation clause purporting to
enable the shipowner to delay indefinitely the performance of the contract voyage simply
130 (1934) 49 Ll LR 183131 Connolly Shaw Ltd v.A/S Det Nordenfjeldske D/S (1934) 49 Ll LR 183 Per Branson J132 Stephen Girvin – Carriage of goods by sea; Chapter -24 , Pg 315.133 (1956) 1 QB 462 (CA)
25
because they choose to do so as, in Glynn and provisions-such as those contained in
Renton which are applicable and operative only in the event of the occurrence of certain
specified emergencies”.134 It was also elucidated that, in Glynn the material difference
was such that the master had the right to nullify the contract at will, but whereas in
Renton, the clause stated that the rights and obligations of the parties in the event of
obstacles arising beyond their control, which would impede the contract and only then
would the shipowner be freed from liability by the clause. In Leduc, Glynn and Renton the
court stressed on the main purpose of the contract than the liberty clause but in Connolly
the liberty clause was given importance and thus the ship could go wherever she pleased
but the purpose of the contract should not be frustrated. If this approach is not followed
“shipowners may well be able to nullify the contract at will”.135And while interpreting
liberty clauses the court will “take account of the nature of the trade in which the vessel
is known to be engaged”.136 In Theiss v. Australian Steamships,137 a specific liberty to
bunker was included. This does not confer any right to take on bunkers which were not
necessary for the subject voyage and a deviation wouldn’t be reasonable within the
meaning of Art IV, Rule 4 HVR. The liberty clause should be read in conscience with the
basic contract and the trade practices as well. The liberty to deviate ‘for other purposes’,
held to be restricted to purposes connected with the contracted voyage138.
Effects of Deviation The unjustifiable deviation from the usual and customary route has
been traditionally regarded as fundamental breach of the contract of affreightment at
common law. It is considered as an implied undertaking and not a warranty as in marine
insurance (discussed below in the light of Thorley v. Orchis). If a vessel deviates from the
contracted course, the shipowner becomes liable for the delay and would be taken
responsible for any damage or loss that happens to the goods resulting from such delay,
unless the owner of goods have waived the deviation. The cargo owner after knowing
about the deviation may elect to treat the contract as subsisting and once the contracted
is treated as affirmed the cargo owner is entitled to damages for the loss caused by such
134 (1955) 2 Lloyds List L.R 742, Per Jenkins L.J135 W. Poor, Charter Parties and Ocean Bills of Lading 195-207 (1968) ; ibid per Jenkins L.J136 Hadji v. Anglo- Arabian (1906) 11 Com. Cas. 219.137 (1955) 1 Ll Rep. 459138 Stag Line v. Foscolo, Mango (1932) A.C. 328
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deviation. It was held in Hain S.S Co v. Tate & Lyle139 that ‘an obligation not to deviate is
a contract condition and the breach of such a condition entitles the goods owner, if he so
desires to treat the contract as repudiated’. The shipowner wouldn’t be protected by the
exceptions in bills of lading; will have to carry the goods as a common carrier and would
most definitely be liable for the damage and loss resulted by delay/deviation. For
exemption, he will have to prove that such loss or damage was occasioned by either an
act of God, by King’s enemies or by inherent vice of the goods and the loss would have
equally happened even had the ship not deviated.140
Firstly, an unjustified deviation would lead to damages in favour of the aggrieved party.
In Heron II141 the ship had to load sugar and proceed in full speed to the port of
discharge. But there was a delay as the vessel called at several ports en route to the port
of discharge. During this period, price of sugar fell. The delay was admitted to be in
breach of charterparty even though the shipowners did not know that the appellants had
an intention to sell off the sugar as soon as it arrived. It was decided that the shipowners
ought to have foreseen that such delay would possibly result in the price fall of sugar and
they awarded damages. The difference between the price the cargo of sugar ought to
have fetched if it had arrived on time and the price which it in fact fetched was awarded
as damages.
Secondly, Deviation might result in displacement of contract. The moment the vessel
departs from her contracted route, the shipowner loses the benefit of clauses which
exempts from liability. In James Morrison v Shaw, Savill & Albion142 the vessel deviated to
deliver other cargo and during the ‘act’ of deviating she was sunk by enemy submarine
in World War I and the shipowner couldn’t rely on king’s enemies. In Joseph Thorley Ltd v.
Orchis Steamship Co Ltd143, a conract to carry beans from Limassol to London. The beans
were damaged during unloading. The shipowners relied on the exception clause which
exempted them from liability or loss arising from- ‘Any act, neglect or default
139 (1934) 39 Com Cas 259 Per Scrutton L.J140 11 JILE 147 (1976-77) ‘Deviation in the law of Shipping- U.S, U.K. and Australia a comparative study’141 Koufos v. C Czarnikow Ltd (The Heron II) (1969) 1 AC 350.142 (1916) 1 K.B 783143 Joseph Thorley Ltd v. Orchis S.S. Co.(1907) 1 K.B 660 (CA)
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whatsoever of the pilot, master, officers, engineers, crew, stevedores, servants, or
agents of the owners, in the management, loading, stowing, discharging or navigation of
the ship or otherwise’. On knowing that the vessel had deviated from the proper route
the plaintiffs pleaded deviation. It was held that shipowner couldn’t rely on exception as
‘a deviation is such a serious matter and changes the contemplated voyage so
essentially that a shipowner guilty of deviation cannot be considered as having
performed his part of the bill of lading, but something fundamentally different. He
therefore cannot claim the benefit of stipulations in his favour contained in Bill of
lading’144
Furthermore, it was reasoned: like marine insurance contracts, deviation altered the risk
in a serious manner that the agreed terms of contract could not be applied to the
deviating voyage. “The principle would be that, the undertaking not to deviate has the
effect of a condition, or a warranty in the sense in which the word is used in speaking of
the warranty of seaworthiness, and, if that condition is not complied with, the failure to
comply with it displaces the contract. It goes to the route of the contract and the
shipowner cannot set up the exception clause in the bill of lading contract, which only
exists for his benefit. If he has not performed a condition precedent upon which his right
to rely on that contract depends”- Lord Collins MR. This simply means that once there is
deviation. The contract is displaced and the shipowner will not be able to rely on
exemption clauses which are in his favour, including the exceptions in HVR art iv145
wherever applies. Thus the shipowner becomes strictly liable for the loss incurred as he
is put to the position of insurer. He will be held liable until the cargo-owner treats the
contract as repudiated. But the cargo-owners claim for damages could be defeated if the
shipowner invokes any of these defences: Act of God, the Queen’s enemies, inherent
vice, defective packing or general average sacrifice. However these defences would be
valid only for the shipowner who has performed his contract. If he has broken it by
144 (1907) 1 K.B 660 (CA) at 669 Per Moulton LJ145Chorley & Giles- Shipping law (8th edn) 1988 at pp 276
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deviation they might fail146. But on the contrary if the shipowner proves that ‘such a loss
was likely to occur on the proper route as it did on the deviating one’147, he will succeed.
Thirdly, an unjustified deviation may result in a discharge of contract by breach. In Hain
Case, The vessel had to proceed to two ports but owing to a failure to communicate by
the owner’s agents, the master was not informed of the nominated port; hence he
proceeded to two other ports, loaded sugar and went to Queenstown and awaited further
instructions. Shipowners and charterers found out the error and the master was asked to
return to load the remaining cargo and after leaving the port, the vessel ran aground and
part of cargo was lost and the remainder was transhipped on another vessel for
completion of the voyage to the UK. Tate & Lyle took delivery of the cargo upon the
endorsement of bills of lading covering the cargo without knowing about the deviation. It
was held that ‘deviation constituted “fundamental breach of contract” entitling the cargo
owners to treat the contract as repudiated’148 and the ‘true view is that the departure
from the voyage contracted is a breach by the shipowner of his contract, the breach of
such a serious character that, however slight the deviation, the other party to the
contract is entitled to treat it as going to the root of the contract, and to declare himself
as no longer bound by any of the contract terms’.- Lord Atkin. If this perspective is
followed, then breach by deviation would not cancel the express contract, If not the
shipowner, by his own wrong would be able to get rid of his own contract149. This makes
the effects of unjustifiable deviation in Hain clearly different from those espoused in
Joseph Thorley Ltd v. Orchis Steamship Co Ltd. ‘In particular the innocent party would
have an election as to whether he was to be bound by the contract. He could, if he
desired, treat himself as no longer bound or he could elect to maintain the contract,
reserving his right to damages’.150
Furthermore, the effect remains the same even if the ship regains the contracted course
after deviation. But in cases where the cargo is damaged by an excepted peril before
146 International Guano v. MacAndrew & Co. (1909) 2 K.B 360.147 Ibid 146148 Stephen Girvin- Carriage of goods by sea, at 318; (1936) 55 Ll LR 159 (HL)149 (1936) 55 Ll LR 159 at 173-174.150 Ibid per Lord Wright.
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deviation occurred then the carrier can rely on the exception clause. In Hain case it was
held that the charterer can treat the contract as at an end ‘as from the date of
repudiation’ (i.e. from the moment of deviation) and with regard to the effect on freight it
was decided that he will have to pay full freight if the cargo owner doesn’t consider the
contract as repudiated. However if the contract is treated as repudiated and goods reach
the destination, reasonable freight would be payable on quantum meruit basis.
The effects of waiver In the context of Hain case, the charterers were aware of the facts
and elected to waive the breach i.e. affirmed the contract. Here ‘the cargo owner can
elect to treat the contract as subsisting; and if he does this with full knowledge of his
rights, he must in accordance with the general law of contract be held bound’151 and in
such situations when any claim is made by the charterers, the shipowners shall rely on
the exception clause, including for peril of the sea for protection152. In Hain case the bill
of lading was endorsed to the claimants and it was decided that ‘they were not bound by
any waiver on the part of charterers and, for this reason, the shipowners were unable to
rely on the bill of lading exceptions as a defence to any cargo claim brought by the
consignees’. Moreover, all parties were aware of the mistake in this case. The court held
that, as the charterers without protest sent the vessel back to San Domingo, that very
‘act’ shows that they have waived the deviation. The waiver in ‘this case is like any other
breach of a fundamental condition, which constitutes the repudiation of a contract by one
party, i.e. the other party may elect not to treat the repudiation as being final, but to
treat the contract as subsisting and to that extent may waive the breach with any right
to damages being reserved.’153 The applicability of this doctrine depends upon the
affirmation of the contract by the goods owner and there must be acts by him which
show that he intends to treat the contract as subsisting.154 The waiver should be
“Unequivocal, definite, clear, cogent and complete.”155
151 Ibid per Lord Atkin.152 The carriage of Goods by sea- Stephen Girvin, Para 24.22153 (1936) 55 Ll LR 159 Per Lord Wright154 (1936) 55 Ll LR 159 at 355 per Lord Atkin155 McCormich v. National Motor Ins. (1934) 40 Com.Cas 76, 93 per Slesser L.J.
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Waiver in Marine Insurance A similar view is followed in marine insurance when there is
a breach of warranty. Prima facie breach of warranty discharges the insurer from liability
but the insurer can waive the breach and remain liable.156 In marine insurance contracts
the insurer will gain nothing by continuing the contract after deviation, and this is
because he earns his premium once there is attachment of risk; however marine policies
do make express provision for deviation through an extension clause which would come
into effect on the discharge of the contract and provides for the continuation of cover on
agreed terms. It is uncertain whether an unjustifiable deviation can be excused by
subsequent waiver; there is no declared excuse in the statute. In this context, if waiver
can operate, it must be unequivocal157; In Redman v London158 ‘the insurer agreed to
insure with knowledge that the ship has sailed and had deviated, held- liable for the loss
occurring prior to the deviation and the insurer was not bound by waiver of a post-
deviation loss; this reveals that even if the insurer is notified it would not serve as an
excuse and there must be unequivocal evidence of a waiver for the insurer to be bound’.
However, it is uncertain that in the case of ordinary repudiatory breach of contract the
contract remains operative, subject to the innocent party’s election to terminate; but
that, where a contract has been discharged there is nothing left to affirm by subsequent
waiver. However a breach of warranty can be excused by subsequent waiver MIA 1906
ss. 33(3), 34 (3) and the same should be arguably be true in the case of deviation.159
Deviation and general average- When there is a common danger to the vessel or cargo
and if some part of the vessel or cargo is sacrificed or if an extra expenditure incurred
while averting that danger, the loss and expense thus incurred would fall within general
average contribution and the apportionment would be between the ship and cargo
depending their salved values.160 Furthermore, the ship owner can claim as a common
carrier at common law and should be successful if the loss would have occurred even if
156 MIA 1906 ss 33, 34(3)157 According to F.D Rose158 (1813) 3 Camp 503159 F.D Rose- Law of Marine Insurance.160 L. Payne and E.Ivamy – Carriage of goods by sea; at 161 (1972)
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there had been no deviation161. And if there is waiver for the breach of the contract by
deviation (Hain case) the shipowner can claim general average contribution.
Post Hain Case: ‘Fundamental breach’ developed further in the context of cases falling
within contract law.162. In Suisse Atlantique163, it was held ‘correct approach to
fundamental breach was constructive and that exempting clauses were to be viewed in
the context of the entire contract’. And in Photo production Ltd v. Securicor (Transport)164
the doctrine of fundamental breach was given its ‘formal burial’ but they opined that
‘deviation cases should be considered as a body of authority sui generis with special
rules derived from historical and commercial reasons’.165 In The Antares Nos 1 & 2, a
quasi deviation166 case, where the shipowner relied on the 1 yr time bar, it was decided
that ‘the doctrine of fundamental breach, which displaced exception clauses altogether,
no longer existed’167 and an unauthorised loading of deck cargo could not be considered
as a special case and thus on the true construction, art III r 6 of HVR applies and the
carrier will be discharged from all liability unless a suit is brought within one year.
Similarly in The Kapitan Petko Voivoda168 (quasi deviation) this reasoning was accepted.
Through these cases it was strongly suggested that whenever the court reconsider the
doctrine of deviation, it would not ‘survive as an independent legal concept’.
Furthermore, in Astrazeneca UK Ltd v Albermarle International Corp & Ors.169 “Even if
the breach of its obligation (deliver the product) had been a deliberate repudiatory
breach,the question whether any liability for damages for that breach was limited by the
(exclusion clause) would simply be one of the construing the clause”. Thus the doctrine is
put to snooze.
161 Carver at 614,615162 Treitel (2003),225163 Suisse Atlantique Societe d’Armament Maritime SA v. NV Rotterdamche Kolen Centrale (1967) 1 AC 361164 (1980) AC 827165 Photo production Ltd v. Securicor (Transport) (1980) AC 827 Per Lord Wilberforce at 845166 ‘Cases which did not concern a deviation from geographical route’. Girvin- p320 fn 79167 Kenya Railways v Antares Co Pte Ltd (The Antares Nos 1 & 2) (1987) 1 Ll Rep 424 (CA) Per Lloyd LJ at 430168 (2003) 2 Ll Rep 1169 (2011) EWHC 1574 (Civ)
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CHAPTER-4 (COMPATIBILITY BETWEEN CARRIAGE CONTRACTS AND MARINE
INSURANCE s.49 REASONABLENESS)
s.46 (1) and s.48 declare that only a delay or deviation ‘without lawful excuse’
discharges the insurer from liability. In s.49 justifiable excuses are identified; it refers to
the consequences where there is a deviation or delay (unreasonable) ‘without lawful
excuse’.170 But the examples of lawful excuse prescribed are neither generally nor
mutually171 exclusive172. Moreover, the act does not make any distinction between
excuses which prevent departure from the prima facie method of performance from
becoming a deviation in the first place and those which excuse what is prima facie
unjustifiable conduct;173 and the duty falls on the assured to prove that deviation is
justified.174 Excusable deviations stipulated in S.49 are discussed below:
where there is ‘express authorization by agreement’ - Firstly, the provision deals with
‘authorisation by a special term in the policy’- s.49(1(a); this means, if there is
authorisation and if it is evident from the policy that the vessel can halt or visit a port
apart from the insured route, then such departure would not amount to deviation
requiring excuse and would very much fall within the voyage contemplated by the policy;
it is in principle always permitted rather than excused175.This is the case with liberty
170 MIA 1906 ss 46 (1), s 47 (‘in the absence of any usage or sufficient cause to the contrary’); Marine Insurance law and Practice- F.D Rose (2004)171 Eg: barratry may be excused either generally under s.49 (1) (b) or specifically under s.49(1)(g); and sickness of the crew may be excused specifically under s.49(1)(f) or where the safety of the ship is imperiled, under s.49 (1)(d); Marine Insurance law and Practice- F.D Rose (2004) pp 11.50172 Marine Insurance law and Practice- F.D Rose (2004) pp 11.50 (The act does not link the possibility of ‘lawful excuse’ in s.46(1) and s.48 with the excuse listed in s.49)173 Bennett- s.49 excuses as ones which prevent the relevant conduct becoming an unjustifiable deviation or unreasonable delay174 Woolf v. Claggett (1800) 3 Esp 257175 Marine Insurance law and Practice- F.D Rose (2004) pp 11.23-11.28
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clauses in contracts of carriage and with Institute Cargo Clauses, cl 8.3.176 Any deviation
authorised by policy would not amount to deviation within s.46 or delay (unreasonable)
within s.48 and cl.8.3 is a clause authorising deviation or delay. A deviation in existence
could also be sanctioned by a special agreement, although it is not expressly provided, it
could be done by amendment to the policy.177 The function of these express terms is to
nullify the effect of deviation by authorizing the conduct. In practice cover is given to
unjustified deviation by means of h/c clauses; Arnould’s state that ‘common h/c clauses
do not authorise deviation or delay: they merely protect the assured from consequences
of deviation or delay upon the fulfilment of certain conditions’.
Implied cover by the policy – Delay in commencing a voyage, ‘to be justifiable, should
have been a delay for the purpose of the voyage, as waiting for a wind, provisions, or the
like’.178 Few illustrations in s.49 (1), regardless of the act, states that deviation/
unreasonable delay would be permissible if there is implied cover by the policy. Firstly,
‘when it is reasonably necessary in order to comply with an express or implied warranty’-
s.49(1)(c). Such a situation arose in Bouillon v. Lupton179 ‘insurance on a voyage from
Lyons to Galatz’ and there was sea voyage and river voyage. The vessel was not
equipped for the sea voyage; so the vessel sailed after the warranted sailing date. The
court held that dividing the voyage into two stages was customary and both river and
sea voyages required different equipment and no seaworthiness warranty have been
infringed as the vessel was ready for each stage and the sailing warranty was fulfilled
when the voyage begun from Lyons on time. Secondly, when it is necessary for the
‘safety of the ship’ or ‘subject matter insured’- s.49(1)(d). First part deals with ‘safety of
the ship’; Deviation for repairs necessary for the ship to facilitate safe voyage is excused
under this provision180. “Deviation occasioned by force, and deviation occasioned by
necessity are the same, for necessity is force. It is the want of repair, or any other
immediate danger, which renders the deviation necessary. When the deviation is
176 ICC 2009 discussed in chap- 2177 Weir v. Aberdeen (1819) 2 B & Ald 320178 Palmer v Fenning (1832) 9 Bing 460179 Bouillon v. Lupton (1863) 15 CB (NS) 113.180 Motteux v London Assurance Co (1739) 1 Atk 545; Smith v Surridge (1801) 4 Esp 25
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necessary and unavoidable, it has no effect on the obligation of the insurer”.181 And
‘reasonable necessity’ refers to the standard of the reasonably competent and skilful
master.182 The second part of the provision deals with the ‘subject matter insured’; and
accordingly if the deviation is for saving the cargo which is not the subject matter
insured, then such deviations would not be excused. However in few cases ‘master’s
duty to care for the cargo’ was successfully invoked (would be discussed under
Compatibility below). Thirdly, s.49 (1) (f) Excuses deviation where reasonably necessary
for the purpose of obtaining medical or surgical aid for any person on board the ship. In
Woolf v Clagett183 it was decided that for successfully invoking this clause ‘it should be
proved that (1) a proportion of the crew are afflicted and the difficulty to navigate the
vessel (2) there should be evidence showing that the vessel had adequate medical
provision fit for the voyage undertaken. In this case the insurer was discharged as there
wasn’t any evidence proving the conditions prescribed. Presently illness to one person
(crew or passenger) would excuse the deviation (s.49(1)(f))’.184 Another important factor
is the extent of warranty of seaworthiness which is implied in voyage policies. In Kish v.
Taylor , despite the fact that an overloaded deck rendered the vessel unseaworthy and
she had to deviate for necessary repairs for safe voyage; such a deviation was held
justified but the shipowner’s right under the charterparty for breach of the terms existed.
(i.e. the charterers failed to provide full cargo). Thus the excuse prevailed. Furthermore,
‘an action necessarily taken to avoid a threat to the adventure is simply a proper method
of carrying out the adventure rather than a deviation’ -Hyderabad (Deccan) Co v
Willoughby185
Another aspect is, as the course of the voyage and reasonable despatch referred to in
the act be defined by usage, such usage should be regarded as an excuse for otherwise
unjustifiable conduct.186 Moreover, as per s. 49(1)(g) it would be excused if deviation is
181 Scott v. Thompson (1805) 1 B & P (NR) 181 at 186 per Sir James Mansfield CJ.182 Phelps, James & Co v Hill (1891) 1 QB 605183 (1800) 3 Esp 257184 Bennett-law of marine insurance pp 536185 (1899) 2 QB 530 per Bingham J.186 Marine Insurance law and Practice- F.D Rose (2004) pp 11.54.
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‘caused by the barratrous conduct of the master or crew,if barratry187 be one of the perils
insured against’. This means, even if there is no authorisation by the contract of
insurance, an assured may recover in spite of the deviation from the voyage
contemplated if that particular deviation falls within perils insured by it and barratry is
also an excuse under s.49(1) (b).
Saving life – Deviation/delay for saving human life or aiding a ship in distress where
human life may be in danger is excused and articulated in s.49(1)(e); Saving human life
and saving property incidental to saving human life is justified at common law and
contracts of carriage governed by HVR sanction ‘any deviation in saving or attempting to
save life or property at sea or any reasonable deviation’.188 However, a licence prescribed
in contract of carriage will not justify conduct under a contract of insurance.189 “To save
human life when in peril is one of the most beneficial instincts of humanity, and is
nowhere more salutary in its results than in bringing help to those who, exposed to
destruction from the fury of the winds and waves….and is a uniform practice of the
mariners of every nation….and there is neither injustice nor hardship in treating both the
merchant and insurer as making their contracts with the shipowner as subject to this
exception to the general rule of not deviating from the appointed course”.190
Saving property as distinct from saving human life would be of interest to insurers,
shipowners and merchants for the law of salvage rewards the successful abundantly.191
Thus it would be ‘most unjust if the shipowner could thus take a chance of highly
remunerative gain at the risk and possible loss of the merchant or the insurer neither of
whom would derive any benefit from the preservation of the property saved’192 Clause
1.1 of IVCH’83 & 95 provides for liberty ‘to assist and tow vessels or craft in distress’ but
these towage services should be consistent to the object of the contract.193 Similarly in
the absence of threat to human life, the underwriters were held liable under this clause;
187 Barratry- ‘In one sense refers to, deviation by the captain for fraudulent purposes of his own’- Ross v Hunter (1790) 4 TR 33 per Buller J188 Carriage of goods by sea act 1971, s.1(2),Sched, art iv, r.4.189 The Goring (1988) AC 831 ; F.D Rose ‘Restitution of the Rescuer’ (1989) 9 OJLS 167.190 Scaramanga & Co v. Stamp (1880) 5 CPD 295, 304-305 per Cockburn CJ.191 Bennett- Law of Marine Insurance pp 535192 Ibid 189193 John Potter & Co v Burrell & Son (1897) 1 QB 97
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Per Pollock B ‘you must not so construe a condition as to make it eat up the contract’. 194
Furthermore under s.93 of The Merchant Shipping Act there is a general duty vested in
the master of the ship to deliver assistance to vessels in distress; it is for the ‘common
advantage of all persons, underwriters and others to give and receive assistance to and
from each other in distress’ -Lawrence v. Sydebotham.195 Some jurists do think that, in
principle there is a wider public policy justification of deviation to save property and
perhaps it is not confined to the narrower statement of licence under s.49(1)(e) to save
life.196 However the Lawrence case justification of deviation for the benefit of the
underwriters, function in favour of the underwriters of salved rather than the salving
interests.197Moreover this traditional perspective on the limited scope of the excuse,
clubbed with the free will of parties to insurance contracts to extend the excuse by
express provision for deviation, makes it improbable for condoning the deviation for
property salvage under marine policies198.
Involuntary deviation –s.49 (1)(b) portrays the principle that, only a voluntary and
unexcused departure from the course of voyage discharges the underwriter from all
subsequent loss199 and this means that deviation is excused if caused by circumstances
beyond the control of the master and his employer for example, compulsion by the
crew200 or force of weather201 and these constitute involuntary deviations. However the
act of a master who deviates simply because of ignorance of the proper route202 is not
involuntary. The rule which is given effect in s. 49(1)(b) and (d) of the act is that ‘a
deviation if necessitated either by moral203 or physical force, or reasonably necessary for
the safety of the ship or of the subject matter insured, will never discharge the insurer’204
194 Stuart v British & African Steam Navigation Co (1875) 32 LT 257195 (1805) 6 East 45,54 per Lawrence J.196 F.D Rose- marine insurance law pp 11.56197 (1805) 6 East 45, 54 per Lawrence J.198 This view referred in- Company of African Merchants v. British and Foreign M I Co Ltd (1873) LR 8 Ex 154199 Arnould’s statement –The provisions of ss 46 and 49 have necessitated a change of language and the act seems to regard even an involuntary departure from the proper course as a deviation, though excusable by reason of s.49(1)(b)200 Elton v. Brogden (1747) 2 Str 1264 – where the crew with the letter of marquee insisted to return to a port with the prize captured); Driscol v. Bovil (1798) 1 B & P 313 ( the crew refused to proceed on the voyage insured for fear of Moorish Cruisers.201 Delany v. Stoddart (1785) 1 TR 22.202 Phyn v Royal Exchange Ass Co (1798) 7 TR 505 (it was held deviation)203 Bennett, 277 ‘ Moral imperative’; Arnould, 494 ‘Moral Force’204 Arnould’s- Law of Marine Insurance; Roccus; nn.52,53 cited 2 Emerigon, cl 13,s.15, p.94
37
; and ‘there is not probably any exception to be met with to the application of the
general rule, that if the vessel departs from the usual course of the voyage from
necessity, and departs no further than that necessity requires, the voyage will still be
protected by the policy’- Robinson v Marine Insurance Co.205
Under s.49, deviations resulting from circumstances within the control of the master and
employee are excused under one or the other heads206. Arnould’s –‘difficult to determine
(1) what degree of force or constraint will amount unavoidable necessity as, on that
ground to justify a departure from the course of the voyage; (2) what circumstances,
short of such unavoidable necessity, will excuse the ship in departure from, or delaying,
the usual course of the voyage.’ Elton v. Brogden207 is an example for a situation that
would amount to unavoidable necessity. Herein the crew sailing with letters of marque
rebelled against the master and insisted to return home with the prize he had taken
rather than continuing the voyage. The master had to submit to this remonstration and
return home; Held- such a deviation by the master did not discharge the insurers.
Whereas in Phelps v Auldjo208 the master without any remonstration and without any
threat or force to another submitted to the captain of the king’s ship by deviating to
examine the strange sail bearing enemy colours. Held- amounts to deviation. Therefore
when a ‘deviation is required to be justified on the ground of unavoidable necessity, it
must be shown that a degree of force was exercised towards the captain, which either
physically he could not resist, or morally as a good subject, he ought not to resist’.209
Uninsured peril Arnould’s –‘The functioning of uninsured peril does not discharge the
insurer’; ‘peril insured is irrelevant to whether it generates a necessity denying
voluntariness’- Bennett . It is excusable ‘if caused by circumstances beyond the control
of the master and his employer’ but expenditure would not be met because ‘incurred for
the purpose of averting or diminishing a loss not covered by the policy’.210 In O’Reilley v.
205 2 Johns. 89 (1806) per Chancellor Kent.206 Kish v Taylor, Sons & Co (1912) AC 604; MIA 1906 s.55(2)(a)207 (1747) 2 Strange 1264.208 (1809) 2 Camp. 350209 Ibid Per Lord Ellenborough at 351210 Expense would not be recoverable under suing and laboring clause. S.49(1)(b), s.78 (3);Duty of assured clauses in Institute clauses- same effect- Arnould’s pp 14-85.
38
Royal Exchange Assurance Co211. The ship was not ready to face capture (expressly
excluded peril). For avoiding seizure the vessel was at sea before she was properly
loaded, and was forced was put to a port out of the course of voyage and she wrecked
held- insurers not liable (warranty of the policy) as the loss was the result of an
undertaking to avoid a risk, which the underwriters had predetermined to be not liable
(contained f.c&s.clause). In O’Reilley v Gonne 212, same ship but claim for freight and
there was no f.c.&s.clause; held, insurers liable and produced a different result from that
of the first. By applying s.49 (1)(d), the insurer would not be discharged for deviation.
However, when a peril is specifically excluded and not included in the policy, the assured
would not be able to recover on that ground.
Compatibility between MI and Carriage of goods-Firstly, under common law, Hague Visby
rules and insurance, saving human life, or aiding a ship in distress where human life may
be in danger is justified (s.49(1)(e)). In Scaramanga v Stamp it was held that such a
liberty will not apply to deviations for the sole purpose of saving property and this rule is
applied in contracts of insurance as well; saving property does not carry the same ‘moral
imperative’213 as that of saving life. Although there is no moral imperative, it is highly
rewarding to save property at sea (successful salvors). Secondly, saving property -The
master has the duty to take ‘reasonable care of the cargo’ and deviation would be
justified if the danger is of a reasonably permanent nature.214 However there is
uncertainty in law, regarding the master’s duty to take reasonable care of the cargo
entrusted to him and extending this obligation to deviate in the interests of preserving
the cargo alone, in the absence of any danger to the vessel. The MIA excuses ‘deviation
or delay in prosecuting the voyage contemplated by the policy, where reasonably
necessary for the safety of the ship or subject matter insured.’ Under common law
‘saving property alone was considered unreasonable but saving ship was justified’ and
under Hague-Visby rules art iv r.4 ‘deviation to save property at sea and any reasonable
deviation was included’. In UK the courts gave a very restricted approach towards the
211 (1815) 4 camp 246212 (1815) 4 camp 249213 Bennett. 18.52214 Hand v. Baynes (1839) 4 Wharton 204
39
term ‘reasonable deviation’ and generally what amounts to ‘reasonable deviation’ is
treated as a question of fact. The house of lords held that the ‘true test would be what
the departure from the contract voyage might a prudent person controlling the voyage at
the time make and maintain, having in mind all the relevant circumstances existing at
the time, including the terms of the contract and the interests of all the parties
concerned, but without obligation to consider the interests of anyone as conclusive’215. So
this means the prudent master should choose by observing all relevant circumstances,
terms of contract and insurance of the parties. This is the same in Marine Insurance as
‘reasonable necessity’ (s.49(1)(d)) refers to the standard of the reasonably competent
and skilful master.216
In The Xantho it was held that the shipowner had an implied obligation to ‘use due care
and skill in navigating the vessel and carrying the goods’217 and such a duty on the
master (who represents the shipowner) extends ‘to take reasonable care of the goods
entrusted to him, not merely in doing what is necessary to preserve them on board the
ship during the ordinary incidents of the voyage, but also in taking reasonable measures
to check and arrest their loss, destruction or deterioration, by reason of accidents and
further a fair allowance ought to be made for the difficulties the master may be involved
i.e. circumstances affecting risk, trouble, delay and inconvenience must be taken into
account.’ 218Another case dealing with the same issue is Nobel’s Explosives Co v. Jenkins
& Co. the carriers agreed to carry the goods which were contraband of war, from London
to Yokohama under a bill of lading containing the exception of ‘restraint of princes’. War
broke out when the vessel reached Hongkong, and had the vessel sailed from Hongkong
with the goods, they would have been seized and confiscated by Chinese warships. So
the master prudently landed the goods in Hongkong to preserve it. This ‘conduct of the
captain was justified by reference to the duty imposed upon him to take reasonable care
of the goods entrusted to him. Whether he had discharged that duty depends upon the
circumstances of each case and here if the goods had been carried forward, there was
215 Stag line v. Foscolo, Mango & Co (1932) AC 328 at 343 Per Lord Atkin216 Phelps,James & Co v. Hill (1891) 1 QB 605217 The Xantho (1887) 12 AC 503 Per Lord Mcnaghten at 515218 Notara v Henderson (1872) LR 7 QB 225.Per Willes J at 235
40
every reason to believe that the ship would be detained and the goods of the plaintiffs
confiscated’.219These cases do prove that deviation would be justified to the extent the
duty exists under the contract of affreightment. But however the master who represents
the shipowner who is presumed to be ‘reasonably competent and skilful220’ is put into a
position to choose between the duty to care and interests of all other parties. There were
attempts to give the true meaning of this concept especially in contracts where HVR are
incorporated; yet only in few cases the carrier was successful to invoke this defence. In
Al Taha221 it was held that ‘reasonable deviation within ‘Art iv, r.4 could be a deviation
planned before the voyage began or the bills of lading were signed’. The boom was
necessary if Al Taha was to be reasonably fit to discharge her cargo at her
destination.And as the boom was not necessary to render the vessel seaworthy at the
commencement of the voyage it was reasonable to plan to deviate to collect the boom
en route rather to wait for the weather conditions to permit delivery; performance was
within the liberty under art iv,r.4.’
Thirdly, problem of compatibility lies in the ‘apprehension of peril’. ‘Commercial men
should not be asked to wait till the end of a long delay to find out from what in fact
happens whether they are bound by a contract or not; they must be entitled to act on
‘reasonable commercial probabilities’ at the time when they are called upon to make up
their minds’ (the Charterers called off the contract, when an excepted peril, restraint of
princes was active and they were held justified; since the restraint was expected to
prevent the shipowner from carrying out the charter for commercially unreasonable
period of time).222 Similarly in Noble Explosive’s case, deviation caused by an
apprehended peril which constituted a restraint, was excused under the traditional war
risks exclusion in contracts of affreightment; for the vessel is not expected to run
towards destruction to operate the defence under this exception to the contract. But, ‘a
mere apprehension of peril, though well founded with successful measures to avoid it, is
not adequate to give rise to a claim against underwriters; and the only circumstance
219 Nobel’s Explosives Co v. Jenkins & Co (1896) 2 QB 326 Per Mathew J220 Phelps,James & Co v. Hill (1891) 1 QB 605221 The Al Taha (1990) 2 Ll Rep 117 Per Mr. Justice Philips at 118222 ‘The Embiricos principle and the law of Anticipatory Breach’- J.W Carter, The Modern Law Review (vol .47, No. 4 1984 pp 422-436) Embiricos v Sydney Reid & Co (1914) 3 KB 45,54 Per Scrutton J
41
where such evasive measures may possibly be said to give rise to a claim on insurance
are those where there is an actual existing state of a peril in the vicinity of the
vessel’.223There is difference in the marine insurance and contracts of carriage approach
towards this matter. In insurance if adventure is lost because the shipowner with
‘reasonable prudence’ orders the vessel to sail, trying to avoid the peril insured against,
then it is not a loss within the terms of the policy224 and the proximate cause of the
consequential loss is attributed to, apprehension of the peril rather than the peril itself225;
but if a ship deviates reasonably to evade hostile warships but incurred loss due to
consequent retardation of the voyage ,then for such losses the carrier will sustain no
liability and such deviation will not discharge any insurance policies; Moreover a non-
performance of a charterparty or bills of lading is uniformly excused under a restraints
clause. But in marine insurance the proximate cause rule applies strictly and recovering
a loss caused by avoiding an apprehended peril is denied. In San Roman- ‘an
apprehension of capture founded on circumstances calculated to affect the mind of a
master of ordinary courage, judgement and experience justified delay’.226 Whereas in MI
the master’s prudence to avoid the apprehended peril would be outside the cover; it is
not a loss within the terms of the policy.227
Consequences of excused deviation or delay Firstly, the insurer will not be discharged
from liability if there excused deviation or delay; but the loss incurred during a justifiable
deviation is not recoverable if it is caused by an uninsured peril (s.49(1)(g)-‘where
caused by the barratrous conduct of the master or crew, if barratry be one of perils
insured against). Secondly, although the excuse would allow the assured with cover
despite the unjustifiable deviation, it does not per se relieve him of other liabilities.
Hence even an authorised deviation to avoid the initial unseaworthiness would still hold
the shipowner liable to the cargo-owner for loss flowing from the initial breach of contract
of carriage.228Thirdly, a vessel may during a justifiable deviation, involve in activities
223 Watts,Watts & Co v. Mitsui & Co Ltd (1917) AC 227224 Hadkinson v. Robinson 3 B & P. 388 (1803); Restraint of Princes- Harvard Law Review (1919) Vol.32 No.7225 The Bamburi (1982) 1 Ll Rep 312,316226 The San Roman (1873) LR 5 PC 301 Per Sir Montague Smith at 305227 Hadkinson v. Robinson 3 B & P. 388 (1803)228 Kish v Taylor, Sons & Co (1912) AC 604
42
other than those for which deviation is justified; ex: to trade while calling at a port to
obtain necessary provisions; but in such cases risk should not be increased229 and while
executing such permissible incidental activities there is a strict obligation to commence
the voyage as soon as possible.230 Fourthly, deviation caused by insured and uninsured231
perils might be excused. But no insurance if the policy specifically excludes peril which
caused the deviation232 and in such situations, it would be unable to recover sue and
labour charge for averting or minimising loss caused by an uninsured peril.233
Restrictive scope, cessation of excuse and continuation of the contract voyage – The
excuses for deviation are authorised restrictively because deviation is prima facie outside
the ambit of the policy. Once the object of justified deviation is satisfied or ceased, the
original adventure as contemplated in the policy must be continued as soon as possible;
s.49(2) states “ when the cause excusing the deviation or delay ceases to operate, the
ship must resume her course and prosecute her voyage, with reasonable dispatch.”
Delany v Stoddart234- ‘the vessel is not obliged to return to the point at which she
deviated from the contract route in order to continue the voyage but may do what is
reasonable to regain the contract route from the place where she is when the excuse for
deviation ceases.’ It should be left to the prudence of the master to choose between
retracing her route back to the point where she deviated or to move to the destination as
soon as possible; subject to the true construction of the policy. ‘Reasonable dispatch’
referred to in the provision, makes it necessary for the deviated ship to proceed towards
destination rather than retracing the route which might again cause ‘delay’.
Conclusion
Deviation is like a dormant volcano, although at repose it still has its effects once awake.
This is still considered serious because an unjustifiable deviation contradicts the
229 Raine v Bell (1808) 9 East 195.230 F.D Rose- Marine Insurance law and practice (2004) pp 11.67231 Scott v Thompson (1805) 1 B & P NR 181232 O’Reilly v Gonne( 1815) 4 Camp 249; O’Reilly v Royal Exchange Ass (1815) 4 Camp 246.233 MIA 1906 S.78(3)234 (1785) 1 TR 22.
43
‘intention of the parties’ by displacing the contract. The MIA provides for loss of
insurance in case of deviation from insured voyage (carrier becomes the insurer). The
held covered clauses were introduced to mitigate this variation in risk. But there might
be disputes over the appropriate additional premium (reasonable market rates) and the
duty to render ‘prompt notice’ if not properly constructed.
The carrier by inserting exclusion clauses was allowed to deviate within the ambit of the
clause. However the exclusion clause should not be contradictory to the main object of
the contract and invoking such clauses depends upon how it is construed. Even a slight
deviation which results in no loss of cargo, in common law is given a strict view as it
displaces the contract-fundamental breach (the hain case is not overruled yet). However
with the series of cases and Astrazeneca UK Ltd v Albermarle International Corp & Ors235
the doctrine is at snooze. Furthermore, wherever Hague-Visby rules apply the carrier can
take ‘reasonable deviation’, insert liberty clauses; without being completely deprived of
all the rights. Presently deviation problems are of less significance as marine insurance
policies contain ‘held covered clauses’ through which the assured will be covered in case
of deviation by payment of additional premium.
But again there might be problems when a particular act is considered justified in
contracts of carriage and unjustified in Marine insurance (ex: Apprehension of peril). “The
subject matter of the marine insurance is the ‘insured voyage’ and it should be
embarked upon with reasonable dispatch” this should be viewed in conjunction with the
policy; But, the policy does not displace the MIA 1906.
235 (2011) EWHC 1574 (Civ)
44
BIBLIOGRAPHY
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i
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ii
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iii
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iv
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v
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vi