Case Law - A2 Flashcards
Magnus and Others v Buttemer [1852]
Whilst the vessel was waiting for her order in order to discharge her cargo, she moored in the river for some four or five days. When she did go to the wharf to discharge, she floated and grounded with the rise and fall of the tide. The riverbed in the vicinity was hard and every time she grounded, she took on a list and was later found to be damaged. The owners claimed for a loss by a peril of the seas (stranding).
The question before the court was whether the grounding during the normal rise and fall of the tide, constituted a stranding. The court found that it was not a stranding, as there was an absence of fortuity in the incident.
The “Vancouver” [1886]
Upon completion of voyage from Hong Kong to SF, the vessel had foul bottom and therefore had to be dry docked for maintenance. Whilst docked, it was discovered that the stern post was fractured due to a peril of the seas, so therefore damage repairs were recoverable from hull insurers.
If owner’s works (bottom cleaning scrapping painting) had been carried out separately, it would have taken 3 days, whilst the particular average repairs would have required 8 days. The house of lords decided that the dry docking charges for the first 3 days should be apportioned between the routine maintenance and damage repairs.
The “Ruabon” [1897]
The vessel entered dry dock in January 1896 for repairs in consequence of having run aground. Her next scheduled maintenance and classification survey was due in November 1896. The owners therefore took the opportunity to advance the survey and carry it out concurrently with the grounding repairs.
The owners claimed all dry-docking costs on their policies of insurance. The insurers objected; contending that the repairs ought to be equally divided.
The Commercial Court and Court of Appeal followed the decision of the Vancouver case that the costs should be apportioned. However, the House of Lords ruled that the whole of the dry-docking expenses should be paid by the underwriters.
“Knight of St. Michael”, The [1898]
Shortly after sailing, part of cargo onboard heated and half of it had to be discharged at a port of refuge. Only a portion of it was delivered at destination.
The shipowner claimed for the loss of freight. The insurers denied liability.
The court ruled that, although fire did not break out and no damage was suffered by the cargo, the assured could recover the lost freight, since the cargo loss was due to the preventive action of the master. If the voyage had continued, spontaneous combustion would have taken place and the ship and cargo would have been destroyed by fire.
The result is that loss due to action taken to mitigate an existing state of peril, is recoverable under a policy covering that peril.
Agenoria Steamship Co Ltd v Merchants’ Marine Insurance Co Ltd [1903]
On a voyage from Australia to New Zealand, the vessel sustained damage and after being temporarily repaired in Auckland, she proceeded to Australia for permanent repairs.
The owners included a claim for the cost of dispatching a superintendent from England to represent them. The underwriters contended that the repairs could have been done in an equally efficient manner without the additional cost.
The Court decided that the owners were entitled to the cost of a surveyor, but that a local one would have sufficed in the circumstances.
In short: It is well established that surveyor’s fees, provided that they are reasonable, may be included in the cost of repairs. But, in Agenoria Steamship Co Ltd v Merchants’ Marine Insurance Co Ltd, the cost of sending a surveyor from England to Australia for relatively minor repairs was considered unreasonable, and the claim was adjusted accordingly.
Vlassopoulos v British & Foreign “The Makis” [1928]
Whilst loading, the ship’s foremast broke of and fell into one of her holds, where it was damaged beyond repair. Repairs necessary to enable the safe prosecution of the voyage were effected. After that damage had been repaired, the ship proceeded on her voyage but she damaged her propeller blades and was put into a port of refuge.
The owners sought contribution to all the expenditure incurred both at the loading port and at the port of refuge.
1ST CASULATY: the Court held that the lettered Rules prevailed and that the owners could not recover contribution in general average for the expenditure incurred in the loading port, since they could not prove their claim under the lettered Rules.
LESSON: Lettered rules constituted the general rules and the numbered rules were to apply to particular cases. There could be no general average case within the particular rules unless it would also be covered by the provisions of general rules.
2ND CASUALTY: the defendants questioned whether ship cargo and freight were in immediate danger. The Court held that it is not necessary in order to constitute a general average act that the ship should be actually in the grip or even nearly in the grip of the disaster that may arise from a danger. It is sufficient to say that the ship must be in danger, or that the act must be done in order to preserve her from peril. It was also commented that the peril must be real and not imaginary, substantial and not merely slight.
“Eurysthenes”, The [1976]
The vessel grounded on voyage from the US to the Philippines. The cargo interests claimed against the shipowners for the loss sustained by their cargo and the shipowners sought indemnity from their P&I insurers.
The defendant P&I Club alleged that, at the time of her sailing, the Eurysthenes had knowingly be sent to sea in an unseaworthy state with the privity of the ship owners.
The question of what constitutes “privity” within the meaning of s. 39(5)of the Marine Insurance Act 1906 came before the Court. The Court of Appeal found that privity Means ‘knowledge and consent’, and that it is not necessarily the same as wilful misconduct.
Further, ‘Knowledge’ not just positive knowledge, but also the knowledge implied by phrase “turn a blind eye” i.e. if one suspects the truth but turns a blind eye so as to not know it for certain, one should be deemed to know the truth and thus be privy to the unseaworthiness. However, negligence in not knowing the truth at all is not considered to be as equivalent of turning the blind eye.
LESSON: When a ship has a defect that renders it unseaworthy, it is generally accepted that an owner is only disentitled from limiting liability if the owner with knowledge of, or turning a blind eye to, the facts that caused the unseaworthiness but does not remedy the defect.
“Renos”, The [2019]
A vessel insured under ITCH 1/10/83 caught fire and sustained substantial damage. Owners obtained quotations for the cost of repairs, which suggested that the vessel could be a constructive total loss. Other estimates and quotations were obtained in the following months, which were inconclusive, owing to considerable discrepancies, some suggesting that the vessel was a CTL and others that she was not.
6 months after the casualty, the owners served a notice of abandonment to the underwriters. The insurers acknowledged liability for a partial loss but not for CTL.
The first issue was that the costs incurred before the insured tenders a notice of abandonment (NOA) to
its hull and machinery insurer do count as a matter of law towards the calculation of the constructive
total loss (CTL). The second was that the Special Compensation Protection and Indemnity Clause
(SCOPIC) costs do not form part of the costs of repairs for the CTL purposes and, therefore, do not count towards the CTL calculation.
Jackson v Mumford [1902]
Designers intended to produce machinery to propel a very peculiar type of ship. While on sea trials, the connecting rod broke, resulting in damage to the ship.
The claim failed as the connecting rod is deemed as different from that of a shaft, therefore not a breakage of shaft. Further, the word ‘defect’ was limited to a ‘defect in material’ and that damage caused by a weakness or defect in design was not included within the term ‘latent defect’.
The Dimitrios N. Rallias [1922]
The ship Dimitrios N. Rallios was chartered to carry cargo, but after the voyage began, the ship encountered problems due to a latent defect which caused delays.
The main legal issue was whether the charterer could claim demurrage from the shipowners despite the existence of a latent defect in the ship’s machinery.
The judgment is interesting for the comments made concerning the matter of whether those responsible for checking the vessel acted negligently and whether any such negligence might affect the Court’s conclusion as to whether a defect was “latent” or not. The leading Judge said: I am quite clear that negligence is not a test of latency”.
It emphasized the practical realities of ship maintenance and inspection, acknowledging that not all defects can be detected despite diligent efforts. The case remains a key reference point in discussions of latent defects and due diligence.
Brown v Nitrate Producers [1937]
Issue: latent defects in the context of ship seaworthiness and the obligations of shipowners under the law.
In “Brown v. Nitrate Producers Steamship Co.,” the plaintiffs, who were cargo owners, brought a claim against the shipowners (Nitrate Producers Steamship Co.) after their wheat cargo was damaged during a voyage. The damage was caused by water ingress due to leaky rivets in the ship’s hull.
The plaintiffs argued that the ship was unseaworthy at the start of the voyage, violating the shipowners’ duty to provide a seaworthy vessel under the applicable law. The shipowners defended themselves by asserting that they had exercised due diligence to ensure the vessel was seaworthy before the voyage began.
The court had to determine whether the leaky rivets constituted a “latent defect” and whether the shipowners could be held liable despite their due diligence efforts.
The court ruled that the defect in the rivets was indeed a latent defect. Because the defect was latent and not detectable by reasonable means at the time, the shipowners were not held liable for the damage to the cargo. The decision hinged on the interpretation of “due diligence” and the legal definition of seaworthiness, emphasizing that shipowners are not absolute guarantors of a vessel’s condition but are instead responsible for exercising reasonable care to ensure seaworthiness.
SIGNIFICANCE: The ruling established that latent defects are an exception to the general rule that shipowners must ensure a vessel is seaworthy.
Shipowners are not liable for damages caused by latent defects if they have fulfilled their duty of due diligence.
“Caribbean Sea, The [1979]
In this case, the vessel sank in moderate weather due to mechanical failure. The Owners argued that the loss was caused by a latent defect; the Insurers contended that the loss was due to wear and tear or to a defect in design.
The shipowners’ claim succeeds.
SIGNIFICANCE:
One question left open by the decision in “Jackson v Mumford” was whether a “defect in machinery” was restricted to a “defect of material”, or whether, for example, damage caused by the negligent assembly of materially sound parts would fall under the definition. In this case the Judge approved the notion that the inadequacy of a particular part could constitute a shortcoming of, as opposed to a defect in, the machinery. On the other hand, he departed from the narrowness of the earlier judgment in also approving the suggestion that a defect in machinery did not have to be a material defect and could include incorrect assembly.
“Nukila”, The [1997]
A jack up rig, insured under a marine policy subject to Institute Time Clauses Hulls 1/10/83 including the Additional Perils Clause, sustained damage to one of its legs caused by a faulty weld on the leg which was agreed to be a latent defect. The insurers resisted the claim on the basis that the entire leg and welding was all one part, and therefore latently defective, the recovery of which was excluded.
In the Court of Appeal the lead Judge imposed 3 tests:
1. was there damage to subject matter insured?
2. did it occur during policy?
3. was it caused by a latent defect?
It was held that damage was different from, and over and above the original latent defect even though both were contained in one component.
The court rejected the insurers’ argument that the damage had to affect a separate, non-defective part of the vessel for coverage to apply. Instead, it held that the Inchmaree Clause covered physical damage resulting from a latent defect, even if that damage occurred within the same component where the defect originated, as long as the defect itself was not the sole subject of the claim. The insurers were therefore liable for the repair costs caused by the resulting damage, though not for the cost of repairing the defective welds themselves.
SIGNIFICANCE: The case clarified that the Inchmaree Clause, which covers “loss of or damage to the subject matter insured caused by… a latent defect in the machinery or hull,” extends to physical damage resulting from a latent defect, even if that damage occurs within the same component where the defect is located. This overturned the narrower trial court interpretation that required damage to a separate, non-defective part of the vessel for coverage to apply.
