George Kallis (Manufacturers) Ltd v. Success Insurance Ltd and Another
Read the full judgment text of HCCL 230/1978 on BabelCite. This HCCL judgment.
1. The Plaintiff's claim in this action against the 1st Defendant is for the sum of US$91,364.00 being the value of goods lost and covered by three policies of marine insurance numbered M/116768, M/116972 and M/116973 respectively. There is a similar claim against the 2nd Defendant under a policy of marine insurance number M/32456. The facts are relatively straight forward and in summary are as follows. The Plaintiffs are manufacturers of jeans and carry on business in Cyprus. In early 1976 they
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HCCL000230/1978 IN THE SUPREME COURT OF HONG KONG HIGH COURT ----------------- COMMERCIAL LIST ------------------------ ACTION NO. 230 OF 1978
Coram: Mr Commissioner Mills-Owens, Q.C. Date of Judgment: 10th July, 1980. ----------------- JUDGMENT ----------------- 1. The Plaintiff's claim in this action against the 1st Defendant is for the sum of US$91,364.00 being the value of goods lost and covered by three policies of marine insurance numbered M/116768, M/116972 and M/116973 respectively. There is a similar claim against the 2nd Defendant under a policy of marine insurance number M/32456. The facts are relatively straight forward and in summary are as follows. The Plaintiffs are manufacturers of jeans and carry on business in Cyprus. In early 1976 they entered into contracts with an entity known as "Wantex Traders" for the supply of denim on CIF terms, Wantex being responsible for arranging for the carriage of the goods from Hong Kong to Limassol and for the insurance cover. The precise legal status of Wantex was not established in evidence but it appears to have been an unincorporated firm which was then but is no longer carrying on business in Hong Kong as denim manufacturers. Pursuant to the contracts of sale the plaintiff opened two letters of credit in favour of Wantex. The first L/C was confirmed irrevocable credit number 76/20546 dated 25th May 1976 and called for shipment of APPROX 50,000 YARDS 100% COTTON INDIGO BROKEN TWILL DENIM CIF Limassol in three equal shipments in June, July and August 1976. Amongst the documents required were "FULL SET ..... of Ocean Clean "SHIPPED on BOARD" Bill (s) of LADING ... showing freight prepaid" as well as "INSUPANCE Company's Policy or Certificate of Insurance .... covering the goods from warehouse to buyer's warehouse in Nicosia against Marine and War Risks, all risks as per Institute Cargo clauses including SR & CC clauses". The second was L/C 76/20661 dated 29th June 1976 and covered approx 80,000 yards quality 30001 INDIGO BROKEN TWILL comprising 25,000 yards indigo, 25,000 yards sky blue, 15,000 yards green and 15,000 yards brown all as per sample. The goods were required to be shipped on or before 31st July 1976 from Hong Kong to Limassol or Larnaca and as with L/C 76/20546 the documents required included "SHIPPED on BOARD" Bills of Lading and Insurance Policy or Certificate with the same cover. L/C 76/20661 was amended on 27th of June 1976 to permit the 25,000 yards Indigo to be shipped by way of second shipment on or before 31st August 1976. 2. Apparently the first two shipments under L/C 76/20546 were effected without any problems arising and these proceedings do not concern them in any way. The outstanding shipment under L/C 76/20546 was a quantity of 16,667 yards of Indigo Broken Twill denim. This formed the subject matter of policy M/116973 issued by the 1st Defendant. The 80,000 yards of 30001 Indigo Broken Twill covered by L/C 76/20661 formed the subject matter of the other three policies of marine insurance. The goods were duly manufacturered by Wantex and then delivered to a company by the name of Winsome Company with premises at Kwun Tong, Kowloon in order to be made up into bales for delivery to the godown of the shipping company. The deliveries to Winsome Company were evidenced by four packing lists (Exhibit P5) dated respectively 6th, 23rd, 27th July and 3rd August 1976. A Mr Cheung Yiu Leung who was then employed by Wantex and who apparently arranged for the shipment and insurance of the particular goods in question gave evidence as to the system adopted for preparation of the shipping documents. He said that Wantex typed out Shipping Orders addressed to the shipping company containing a description of the goods to be shipped together with their marks and destination. When the goods had been received by the shipping company the bottom copies would be endorsed as a form of Mate's Receipt, acknowledging receipt of the goods for shipment and this Mate's Receipt would be returned to the shippers. In due course the Mate's Receipts would be exchanged for Bills of Lading. 3. The original intention was to effect the July shipments on board a vessel named "Oceania Maru" operated by N.K.K. Lines. However Mr Cheung stated that they were informed that this vessel was not accepting any further goods for shipment and accordingly they looked for another carrier. There were apparently very few vessels sailing for the required destination namely Limassol, but on a date which is not entirely clear but must have been somewhere around 25th July 1976 contact was made with a Mr Yip of Seawise Shipping Company, which on its notepaper described itself as being fully owned and operated by Seawise Agency Limited. Seawise then carried on business in Hong Kong as ship's agents and in particular they were the agents for a vessel by the name of "TA SHUN". Advertisements placed in the South China Morning Post in July 1976 described Seawise Shipping Company as the general agent for "Seawise Line" and "Blue Line". They stated that Blue Line offered a Mediterranean sea service for Tripoli-Benghazi-Piareus (sic) including "(accept transhipment cargo to Limassol Alexandria)" and the vessel TA SHUN was advertised as arriving and sailing on various dates towards the end of July and in early August. The impression given from reading the advertisements is that the vessel's arrival in Hong Kong was delayed for some unspecified reason but in the event Mr Cheung has told us that they did not in fact check the newspapers to find out if the vessel TA SHUN was in port. 4. Four Shipping Orders were made out by Wantex and two of these are dated 27th July and the other two are dated 28th July 1976. The office copies of the Shipping Orders dated 27th July 1976 are respectively endorsed with acknowledgments of receipt on 27th July 1976 of 58 and 66 bales respectively. The office copies of the remaining two Shipping Orders acknowledged receipt of further deliveries of 41 and 58 bales respectively on 30th July and 4th August 1976. In this case the signature was under the chop of "Seawise Godown" and was the same as that on the two previous Mate's Receipts. These Mate's Receipts were then exchanged for four Bills of Lading numbered HK/LIM-16,17,21 and 23 respectively and the first two of these were dated 28th July 1976 and the latter two 3rd August 1976. Each of the Bills of Lading was a "Blue Sky Shipping Co. Ltd. "Bill of Lading and was signed by Seawise Shipping Company as agents for and on behalf of the master. Each Bill of Lading incorporated the following material particulars. The vessel was named as "TA SHUN"; The shipper was Wantex Trader; The port of loading was Hong Kong and the port of discharge Limassol. In each case the Bill of Lading was a "freight prepaid" Bill of Lading and each bore a superimposed chop stating "SHIPPED ONBOARD" followed by a date. This last statement was clearly untrue because as will be seen the TA SHUN never called at Hong Kong during the material period. I shall return to the terms and conditions of the Bills of Lading in due course. Meanwhile the four marine insurance policies which are the subject matter of these proceedings had been issued by the defendants. It is agreed that there is no material distinction for present purposes between the terms of the policies issued by the 1st defendant and that issued by the 2nd defendant. In each case the Insured was Wantex Trader held to the order of the Cyprus Popular Bank Limited, Nicosia; the vessel named was the "ss TA SHUN" sailing from Hong Kong to Limassol and each of the policies was a valued policy. Under the words "Conditions of Insurance" the Policies stated that they were "including from warehouse to buyer's warehouse in Nicosia" and that they were subject inter alia to the Institute Cargo Clauses (All Risks) 1/1/63. Again I shall refer to the ICC Clauses in more detail later. In the first two policies the carrying vessel had originally been entered as "OCEANIA MARU" but had been amended to "TA SHUN". 5. Having paid the freight and obtained Shipped on-Board Bills of Lading, Wantex presented the documents called for under the two L/Cs to the Hong Kong & Shanghai Bank and obtaining payment thereunder in about the 2nd week of August 1976. Thereafter in the normal course of events Wantex would have dropped out of the picture. 6. However as I have said, the vessel TA SHUN, despite the statements on the face of the Bills of Lading was not in Hong Kong and never came to Hong Kong at the material time. What in fact happened was that Seawise arranged for the goods in question to be carried on the vessel "TA HUNG" from Hong Kong to Keelung where they were discharged into customs warehouses. It is agreed between the parties that the vessel TA HUNG was in the same ultimate beneficial ownership as TA SHUN and a Mr Tse Joy Tim the business manager of Oneness Shipping Company Limited stated that his company were the agents for the TA HUNG. Mr Tse identified Oneness Bill of Lading No. KAO-3 as the Bill of Lading signed by him under which the goods were carried from Hong Kong to Keelung. That Bill of Lading names Seawise Agency Limited as the shipper and Blue Sky Shipping Limited as the consignee. It will be recalled that Blue Sky were the carriers under the four Bills of Lading for carriage Hong Kong/Limassol aboard the vessel TA SHUN. The Oneness Bill of Lading described the port of loading as Hong Kong and port of discharge as Keelung but incorporated three important endorsements on its face namely:-"TRANSHIPMENT FROM HONG KONG TO MEDITEREAN SEA VIA TAIWAN"; "957 P'KGS GENERAL CARGO (FULL DETAILS AS PER RIDERS ATTACHED)"; and "CARGO TO BE TRANSIT TO MEDITEREAN SEA AT TAIWAN BY CONSIGNEE THEMSELVES AT THEIR OWN RISKS AND EXPENSES". As I understand the evidence of Mr Tse these endorsements would have been copied from the Shipping Order prepared by the shipper namely Seawise Agency Limited. The riders to the Oneness Bill of Lading comprised cargo manifests of Seawise Navigation Panama SA and gave a breakdown of the 957 packages. In particular 633 packages were listed as being cargo laden at the port of Hong Kong on board the "MV TA HUNG ex TA SHUN .... bound for Limassol .... sailing 17th August 1976." They included the goods consigned by Wantex to the Plaintiff. Mr Tse told the Court in cross-examination that Oneness had no particular connection with Seawise and that Seawise was merely a customer. I am satisfied having seen Mr Tse and been taken through the totality of the documentary evidence that the goods were in fact shipped on board TA HUNG and carried to Keelung where they were discharged into customs warehouses on or about the 20th August 1976. 7. The evidence as to what happened to the goods after discharge in Keelung is sparse. In paragraph 5 of the Defence it was originally pleaded that the goods were discharged from TA HUNG and stored until a day between 31.10.76 and 16.11.76 when they were loaded on board the "MV INTELLECT". However this pleading was amended on 9th May 1980 shortly before the trial began and the question of whether the goods were ever loaded onto the INTELLECT was put in issue. In the event I am satisfied from the documentary evidence, on the balance of probabilities, that the cargo ex TA HUNG including the four shipments consigned to the Plaintiff was stored in Customs warehouses from about 20.8.76 to 10.11.76 when it was reshipped aboard the MV INTELLECT which sailed from Keelung on about the 16th November 1976. This appears in particular from the manifest and freight list of Shin Shin Navigation Co. SA who were the owners of the MV INTELLECT and which listed 957 packages the details of which correspond to the goods shipped aboard the TA HUNG from Hong Kong to Keelung. The INTELLECT in fact sailed from Keelung for Hong Kong and after loading at Hong Kong on 19th November 1976 then sailed for Suez and the Mediterranean. Four certificates of transhipment were put in evidence each dated November 25th 1976 certifying that the cargo shipped under the four Blue Sky Bills of Lading consigned to the plaintiff was transhipped on board the MV INTELLECT. The genuiness of these certificates of transhipment is evidenced by the fact that there were 13 similar certificates of transhipment in respect of goods shipped by Cottontex to other consignees in Cyprus as to which shipments there is no dispute and in respect of which insurance claims were settled by the 1st Defendant. 8. During the early hours of 27th November 1976 there was a serious fire on board MV INTELLECT in the Malacca Straits causing very extensive damage. The plaintiff's goods were stowed in number 4 lower hold and although not affected by the fire were so saturated with sea water and fuel oil that on subsequent survey they proved to be unidentifiable and a total loss. However the findings in the survey report of Messrs. Perfect Lambert & Co. are clearly consistent with the plaintiff's goods being stowed in No. 4 lower hold and Mr Bailey in his statement on 28th April 1980 said he had no reason to believe that the manifest was incorrect in showing that these cargos were on board. The confusion as to whether the plaintiff's goods were in fact on board the INTELLECT appears to have arisen because the original manifest made no reference to the goods ex TA HUNG/TA SHUN. This perhaps was because the vessel was on a voyage charter to Messrs. Dongsan Construction and Engineering Co. of Seoul and the bulk of the cargo had been loaded at Busan and comprised various construction materials destined for Cairo. Mr Bailey refers to the fact that the plaintiff's cargos were listed separately in a supplementary manifest a copy of which he attaches to his statement. 9. In the event I am satisfied that the plaintiff's goods were damaged as a result of the fire and consequent firefighting operations on the MV INTELLECT at the end of November 1976 and that they were a total loss. 10. I therefore turn now to consider the issues and defences raised in answer to the Plaintiff's claim in these proceedings. Issues 11. The issues at their simplest may be stated as follows :-
Defences 12. The defences may be summarised as follows :-
13. Before turning to consider each of these defences it is perhaps convenient at this point to deal with some introductory matters. Counsel for the defendants commenced his address by referring the Court to two sections of the Marine Insurance Ordinance Cap. 329. He referred to s.17 which provides:-
14. This is of course merely declaratory of the common law applicable to all contracts of insurance. However if I understand his submission correctly Mr Mumford contended that this imposed on the Assured a duty of disclosure at every stage during the subsistence of the Policy regardless of whether or not it was a "held covered" situation and he cited a dictum of Scrutton L.J. in Leon v. Casey 1932 2 K.B. 576 at p. 579 where he said "In consequence ..... of the fact that insurance has always been regarded as a transaction requiring the utmost good faith between the parties in which the assured is bound to communicate to the insurer every material fact within his knowledge not only at the inception of the risk but at every subsequent stage while it continues up to and including the time when he makes his claim, the Common Law Courts invented the order for Ship's papers, an order which is made as soon as the writ is issued in an action on a policy of marine insurance." 15. It will be observed that there Scrutton L.J. was dealing with the history of the Order for Ships papers and not specifically with the particular question of the extent to which an assured must notify underwriters of matters which affect the risk after the insurance policy has been concluded. 16. Under s.18 of Cap. 329 the obligation of the assured is to disclose to the insurer "before the contract is concluded every material circumstance ... etc." Cory v. Patton 1872 L.R. 7 QB 304; Ionides v. Pacific Fire & Marine Insurance 1872 L.R. 7 QB 517 and Lishman v. Northern Maritime Insurance 1875 LR 10 CP 179 are all authority for the proposition that an assured need not communicate to the Underwriters facts which come to his knowledge material to the risk insured against after the contract of insurance has been concluded. In Lishman the Court of Exchequer Chamber comprised no less than 6 judges who concurred in the judgment of Bramwell B. that a failure to disclose material information obtained subsequent to the conclusion of the contract of insurance did not vitiate the policy. 17. Accordingly, in my view the true position is that once the contract of insurance has been concluded there is no continuing duty of disclosure upon the assured to draw to the attention of underwriters details of circumstances which might affect the extent of the risk they face under the contract. So long as the terms of the policy apply the cover continues and there is no specific duty on the Assured to draw to the attention of the underwriters further matters coming to his knowledge. The position is different if a "held covered" situation arises where clearly there is a duty upon the Assured to give prompt notice and if he fails to do so the cover will lapse. 18. Mr Mumford then cited s.50 of Cap. 329 for the proposition that the issues must be approached on the basis that Wantex is the actual Plaintiff and that any defence which would be available to the Defendants against any claim by Wantex must equally be available to them against the Plaintiff who is merely an assignee of Wantex's interest. S.50(2) provides as follows:-
19. The particular significance of this is that whereas the conduct of the Plaintiff as assignee of the four policies in question is not impugned, Mr Mumford has heavily criticized the conduct of Wantex and indeed submits that there may have been a conspiracy between Wantex and Seawise to issue false Bills of Lading when Wantex well knew that the vessel TA SHUN was not in Hong Kong and that the goods would never be shipped by that vessel. If Wantex was the Assured and the Defendants were able to make good these criticisms of Wantex's conduct then clearly they would be entitled to avoid liability by reason of material non-disclosure. Paragraphs 2 and 3 of the Amended Defence put in issue the Plaintiff's interest in the policies of insurance. However I was informed when Counsel for the Plaintiff was opening his case that the Defendants now admit the Plaintiff's interest in the goods and in the policies. This interest can only have arisen by way of assignment since the assured was either "M/S Wantex Trader" (Policy M/116768) or "M/S Wantex Trader held to the order of Cyprus Popular Bank Ltd." No doubt the interest of Wantex was assigned at the time that it drew under the Letters of Credit during the second week of August which presumably was the time when the policies of insurance and other documents were endorsed to the order of the Cyprus Popular Bank Ltd. 20. The position in law seems to be clear. Ivamy on Marine Insurance 2nd Ed. page 335 puts it as follows: -
21. Thus in Pickersgill v. London and Provincial Marine Insurance Company 1912 3 K.B. 614 a claim under a policy on a vessel by an innocent assignee failed because there had been material non-disclosure by the assured who was the assignor. Similarly in Bank of New South Wales v. South British Insurance Co. Ltd. 1920 4 Lloyds List L.R. 266 the Plaintiffs, who were a bank, were pledgees and assignees of policies from the assured as against whom the policy was null and void because they were enemy aliens. The Plaintiffs' claim in consequence failed. Thus it seems to me that Mr Mumford is correct when he contends that the present claim must be approached as if Wantex was the actual Plaintiff. I accept that the Defendants are entitled to maintain against the Plaintiff's claim any defence available to them against Wantex notwithstanding that it is accepted that the Plaintiffs are truly in the position of innocent assignees of the policies. 22. I turn now to consider the various defences. 1. Did the goods come on risk? 23. The first line of Defence is that the goods never came on risk and the insured transit never began. The defence contentions put at their simplest are, as I understand them, put as follows. The insured transit was for carriage on board the vessel TA SHUN from Hong Kong to Limassol; the goods were never shipped on board the TA SHUN which never came to Hong Kong; instead the goods were shipped aboard a different vessel namely TA HUNG for carriage on a different voyage namely from Hong Kong to Keelung where they were discharged and stored; that this was not the insured transit and that therefore the risk never attached. The defendants rely upon ss. 43 and 44 of Cap. 329 which read as follows:-
24. Thus it is contended that Limassol is the destination specified in the policies and that TA HUNG never sailed for Limassol which would involve passage ex-Hong Kong in a south-westerly direction but rather followed a north-easterly course for a different destination namely Keelung and that accordingly the risk did not attach. 25. The Plaintiff's case is that the insured transit did indeed commence well prior to loading on board the vessel TA HUNG by virtue of the terms of the policies of insurance and in particular by reason of the "warehouse to warehouse" provision in Clause 1 ("Transit clause") of the Institute Cargo Clauses (All Risks) 1/1/63 which formed part of the subject policies. The relevant warehouse to warehouse clause is in the following terms:-
26. Sub-clauses (a) (b) and (c) are not relevant to the present issue. 27. It is not in dispute that the policies covered transit from warehouse to warehouse, indeed they say so in terms. Thus since the goods were at all material times in Hong Kong being the place named in the policy for the commencement of the transit, the insurance would in accordance with the wording of the warehouse to warehouse clause attach from the time that the goods left their last warehouse or place of storage in Hong Kong for delivery to the carriers or their agents. Thus the Plaintiffs say that on the facts of the present case the insured transit began and the cover attached from the moment that the goods left Winsome's warehouse (or the place where they were stored by Winsome) on their journey to "Seawise Godown" and that since the endorsements on the Mate's receipts acknowledging receipt of the four deliveries were dated respectively 27th, 27th, 30th July and 4th August, that cover attached under each of the policies at latest by such dates all of which were well prior to the loading and departure of TA HUNG on 17th August. 28. As they point out, the cover is needed by the sellers when the goods leave the sellers' place of storage to protect them against obvious risks of loss or damage en route to the carrying vessel and by way of illustration of the commercial aspects my attention was drawn to a passage in Goodacre on Marine Insurance Claims 1973 Ed. at page 130. The paragraph commences with the words "it is particularly important to note that cover does not attach until the goods leave for the commencement of the transit. This effectively rules out journeys to and from packers' premises and whilst there being packed, such additional risk requiring special provision in the policy." Winsome were the firm employed by Wantex to make the goods up into bales. It is tolerably clear from Mr Cheung's evidence that the goods went from Wantex to Winsome and then from Winsome direct to Seawise Godown. That being so the Plaintiff contends that by the operation of the warehouse to warehouse clause the risk attached when they left Winsome's place of storage. Alternatively if the goods were in fact returned to Wantex before delivery to Seawise Godown then the insured transit began when they left Wantex's place of storage for delivery to Seawise. In any event the cover attached before the goods arrived at Seawise Godown. 29. Mr Mumford says however that Clause 1 of the ICC can only refer to the transit specified in the policy, that being a transit on the vessel TA SHUN from Hong Kong to Limassol and that such transit never took place and that therefore it follows that the goods could never have commenced any such transit since the carrying vessel TA SHUN was never in Hong Kong and in fact the goods were shipped to Taiwan on TA HUNG. He contends that the identity of the carrying vessel specified in the policy is of fundamental importance and cannot be changed without underwriter's agreement and that the risk only attaches to goods in transit for carriage on the named vessel. He says that the policy named TA SHUN and that TA SHUN never sailed under s. 43 of Cap. 329 from the place of departure specified in the policy namely Hong Kong; that under s. 44 TA SHUN never sailed for any destination and TA HUNG sailed for a different destination namely Taiwan; and that therefore the risk did not attach. 30. In my view the insured transit did begin and the risk did attach when the goods left their place of storage, whether that was at Winsome's or at Wantex's premises is immaterial, for carriage to Seawise Godown. It is important not to lose sight of the fact that the cover required was all risks cover on cargo. The purpose of the warehouse to warehouse clause is to ensure that cargo owners' interests are covered from the moment that the goods are despatched to carriers' agents for shipment by the intended carrying vessel and for the intended voyage. If the lorries carrying the goods to Seawise Godown had caught fire and goods been destroyed, it could hardly in my view be a defence to a claim on the underwriters that the vessel TA SHUN had not yet arrived and that in the event the vessel did not call at Hong Kong at all. The fact is the goods did leave a place of storage for the intended transit on TA SHUN from Hong Kong to Limassol under the cover of Seawise Shipping Orders addressed to the master of the TA SHUN asking him to receive the goods for shipment. In these circumstances in my view the cover attached. The fact that the goods were in the event carried on another vessel which sailed for Keelung is more material to the other main issue namely that of whether the goods remained on risk up to the time of loss. 31. S.43 of Cap. 329 seems to me to be of no relevance. The place of departure named in the policy was Hong Kong and the goods did in fact depart from Hong Kong albeit on the vessel TA HUNG. There was no alteration of the port of departure. 32. As to s.44 I deal below with the question of whether the TA HUNG sailed for a different destination from that specified in the policy. Again however it seems to me that s.44 is irrelevant in that the risk had already attached by virtue to the warehouse to warehouse clause before the TA HUNG sailed at all. The consequences of a change of destination after commencement of the risk are dealt with in s.45 and it seems to me that it is that section rather than s. 44 which may affect the position. This I deal with below. 2. Carriage on TA HUNG 33. The Defendants then say that even if the insured transit commenced, that nevertheless the policy provided for carriage on the vessel TA SHUN and that carriage on the vessel TA HUNG took the adventure outside the ambit of the insurance cover. Mr Mumford submits that the ship is an essential element in the risk and contends that the vessel cannot be changed unless a forced discharge situation arises. He says the risk only attaches to the goods carried on the vessel named in the policy; that the identity of the carrying vessel is of paramount importance and materiality of which the Court should take judicial notice and that it is indeed a rule of law that the identity of the vessel is material. 34. For the plaintiff Mr Philips accepts that in the 19th century the identity of the carrying vessel was almost always material. But this he says was at a time when marine insurance was largely transacted from the floor at Lloyds and underwriters considered individual risks with some nicety and would pay regard to the identity of the particular vessel as a factor to be weighed in accepting the risk and fixing the premium. However he says that there has been more recently a substantial change and that one now has floating policies and open cover for declaration where underwriters will accept risks as to the precise identity of the vessel. He is supported in this by a passage in Arnould on Marine Insurance Vol. 9 British Shipping Laws para. 241 where the learned authors of the text state:- "A merchant who has ordered goods from abroad may be anxious to effect an immediate insurance on them, while he is ignorant of the particular ship by which they may be sent. By the laws and practice of all maritime states, it is allowable under such circumstances to effect a policy on goods "on board ship or ships"; indeed insurance by a named ship is probably now the exception rather than the rule." The last sentence of footnote 11 is of significance in this context when it states "in view of the vast changes which have taken place in the business of cargo insurance in the past 150 years, it is submitted that the view previously taken in this work can no longer be supported". Even as long ago as 1872 Chief Baron Kelly said in Ionides v. Pacific Fire & Marine Insurance Co. 1872 LR 7 Q.B. 517 at p. 524-5
35. However, Mr Philips' answer to the defence that the goods were not covered by reason of a failure to ship on the TA SHUN is founded principally upon the wording of the Institute Cargo Clauses. He puts his arguments as follows: His primary point is that what was here done was done pursuant to a liberty granted by the contract of affreightment namely by Clause 13 of the TA SHUN Bill of Lading; alternatively he says that what occurred comes within the meaning of "Deviation" in the extended cover provision of paragraph 3 of Clause 1 of the ICC. By way of further alternative he says that in any event the identity of the carrying vessel was not of the essence of the contract of insurance and points to the fact that no evidence was adduced by the defendants as to the materiality of the identity of the carrying vessel. In the final alternative he relies upon Clause 4 of the ICC and contends that a "held covered" situation arose. 36. Clause 1 paragraph 3 of the ICC is in the following terms:-
37. The words in brackets have no application to the present issue. Thus the extended cover given by this Clause covers a specified catalogue of events namely:- delay beyond the control of the assured; any deviation; forced discharge; reshipment and transhipment. It also extends to any variation of the adventure arising from an exercise of any liberty granted to shipowners or charterers under the contract of affreightment. The contract of affreightment relied upon is that contained in or evidenced by the four TA SHUN Bills of Lading issued by Seawise as agents for Blue Sky Shipping Company Ltd. of Taiwan who were no doubt the charterers of the vessel TA SHUN. 38. The material provisions of the Bills of Lading are as follows. They commence on their face with the words
Further down they continue:-
39. Further down on the face of the document at the bottom left hand corner appear the words "IN ACCEPTING THIS BILL OF LADING the shipper, consignee and owner of the goods and the holder of this Bill of Lading expressly accept and agree to all its stipulations, exceptions and conditions whether written, typed, stamped or printed as fully as if signed by such shipper, consignee owner of the goods and/or holder of this Bill of Lading". 40. The terms on the reverse of the Bill of Lading are in common form. They commence with a Clause Paramount incorporating the Hague Rules which are in any event incorporated by virtue of the provisions of the Carriage of Goods by Sea Ordinance Cap. 46. Under Article I of those rules "Carrier" is defined as including the owner or the charterer who enters into a contract of carriage with a shipper. The Clause Paramount also incorporates a demise clause in common form. Clause 13 on the reverse of the Bill of Lading which is the liberty clause particularly relied upon by the Plaintiffs is in the following terms:-
41. I note in passing that the Seawise Shipping Orders completed by Wantex themselves also incorporated on their face the following reference "other terms and conditions as per carrier's bill of lading". 42. Mr Philips' first point then is that the terminology of Clause 13 of the Bill of Lading entitled the carrier in this case Blue Sky but acting through their agents Seawise to substitute a different vessel ab initio and to ship the goods in that substituted vessel to the extent that the goods need never in fact even be loaded on the vessel named in the Bill of Lading at all. His contention is that the policy cover extends to cover precisely such a shipment and that it is not even necessary for the underwriters to be notified. He says that Wantex implicitly agreed to the terms of the contract of affreightment set out on the reverse of the Blue Sky Bills of Lading when they received the blank form Shipping Orders from Seawise, filed in the details and returned therein. Thus he says that the terms of the contract of carriage are the Bill of Lading conditions accepted by Wantex and in due course by the plaintiffs who affirmed them by calling on Blue Sky to make arrangements for speedy delivery and that therefore the only issue is one of construction of the liberty clause. This seems to me to be quite correct. 43. The opening words of Clause 13 are "carrier shall have liberty to forward ... the goods ... by the above or any other vessel ... and at vessels' option to tranship .. to any other vessel, vessels ... to reship in the same or other vessel .. " Mr Mumford says that since the clause uses the word "forward" this necessarily means that the original shipment is not encompassed by the clause which only covers what takes place after the goods have been loaded on the original vessel. He points out that if it was intended that the liberty should extend to the original vessel then the clause could have read "the carrier shall have liberty to ship" any or all of the goods etc. However, we have of course to construe the words that have been used not words that might have been used, and I have come to the view that the plaintiffs construction of the clause is the correct construction namely that it not only permits transhipment and reshipment but also permits a vessel to be substituted for the named carrying vessel in the Bill of Lading. It would indeed seem illogical if the true situation was that the carrier could tranship by vessel or vessels even immediately after the transit had commenced by the named vessel in which case the goods would be covered by paragraph 3 of Clause 1 of the ICC but that there should be no cover without further express agreement in the event of initial shipment aboard a different vessel because the named vessel was some reason not available. 44. Mr Mumford referred to para. 110 in Halsbury's Laws of England 4th Ed. Vol. 25 where the text states "It is an implied condition in a marine policy that the ship named in it is not to be changed after the commencement of the risk without necessity or the underwriters' consent". Whilst this no doubt is the position at Common Law, we are dealing here with a policy expressly incorporating a clause providing that the insurance is to remain in force during any variation of the adventure arising from the exercise of a liberty granted under the Contract of Affreightment. If, as a matter of construction, Clause 13 of the Blue Sky Bill of Lading permits substitution of the carrying vessel then by virtue of the extended cover provisions of Clause I of the ICC the change of vessel is effected with the underwriters consent. 45. There is no reference in the text to the ICC and I would therefore construe it as referring to a situation obtaining in the absence of the ICC. To put the matter in to context, clauses such as Clause 13 of the TA SHUN Bill of Lading are extremely common and normally purport at least to give the carriers very wide liberty to deviate, tranship etc. The existence of such clauses must be well known to underwriters who nevertheless are content to extend all risks cover in accordance with the terms of the ICC. Provided that the risk falls within the extended cover of para. 3 of Clause 1 of the ICC the underwriters are not entitled to notice and having regard to the width of the extended cover and of the liberty clause it seems to me that as a matter of construction that there is on necessity to obtain underwriters consent for either a change or even a substitution of carrying vessel as here occurred. 46. Thus since I am of the view that carriage on the vessel TA HUNG did not take the adventure outside the ambit of the insurance cover because of the provisions of para. 3 of Clause 1 of the ICC and Clause 13 of the Bill of Lading, it is strictly not necessary for me to deal with Mr Philips' alternative submissions that are summarized above and I do not in fact intend to do so. However I would say in passing that there seems to be considerable substance in his contention that the identity of the carrying vessel was not a matter of any particular concern to the underwriters in the present case. Indeed in any situation where the carrier is given such wide liberty to forward, reship and tranship the goods in other vessels and where ex hyopothesi underwriters do not know the identities of those vessels at the time that the policies are issued, it would appear that the identity of the carrying vessel is of no real concern to them. The reality of the matter no doubt is that underwriters are well aware that the goods may be carried in other vessels for part or even all of their transit and they adjust their premiums to take this risk into account. 3. Change of Voyage 47. The third main line of defence advanced is that there was a change of voyage resulting in the defendants being discharged from liability under Section 45 of Cap. 329. Section 45 provides as follows:-
Thus the Defendants say that whereas the destination contemplated by the policies of insurance was Limassol, the TA HUNG sailed from Hong Kong for Keelung. Thus it is contended that the destination for the purposes of s.45 changed and the Defendants were thereby discharged. The plaintiffs accept that if the destination was changed to Keelung then there was a change of voyage but their contention is that what occurred was merely a deviation and not a change of voyage and they say that deviation is covered by the express provisions of the ICC. To use the appropriate terminology, the Plaintiffs say that the "terminus a quo" was Hong Kong and that the destination or "terminus ad quem" was always Limassol. That being so, they say that the destination was not changed even though the goods were in fact shipped aboard the TA HUNG for Keelung since this was part of the carriage under the contract of affreightment to Limassol. Blue Sky had, through its agents Seawise, issued Bills of Lading by which it was contractually bound to carry the goods to Limassol. Limassol was the contractual destination and so the argument goes, the fact that they chose to perform the first leg of the contractual voyage with one vessel before transhipping for on-carriage under the contract of affreightment does not make the end of the first leg the new terminus ad quem. Even the Oneness Bill of Lading made it plain on its face that the object of the carriage was for the goods to be transhipped and on-carried to the Mediterranean. That coupled with the letter of 18th August 1976 from Seawise to Worldwide Marine Corporation certainly make it clear that the carriage to Taiwan was merely intended as the first leg of a much longer transit to the Mediterranean. 48. S.45 of Cap. 329 speaks in terms of a change of the destination of the ship. However the plaintiffs say that where the contract of insurance permits transhipment one has to read s.45 as referring to a change of destination under the contract of affreightment and they refer to Arnould at para. 438-440 to illustrate the distinction between distinction between deviation and a change of voyage. Arnould states "It is sometimes a matter of very nice discrimination to draw the line between an intention to deviate and a change of the voyage; the test in all cases is whether the terminus ad quem, specified in the policy, remains the ultimate place of intended destination; if it does then the design though formed before sailing of putting into any other port or taking an intermediate voyage, on the way to such ultimate place of destination does not amount to a change of the voyage and the underwriter remains liable for all loss incurred prior to its being actually carried into effect; i.e. as long as the vessel is on the direct course of the voyage insured, and before she has reached the dividing point." 49. This passage of course illustrates the distinction between a change of voyage and a deviation but in a case such as the present must be read in the light of and subject to the provisions of the Institute Cargo Clauses. In Hewitt -v- London General Insurance Co. Ltd. 1925 23 Lloyds List Reports p. 243 the vessel sailed with the intention of deviating and the issue was whether this of itself avoided the risk. At page 244-5 Branson J. said "the defendants set up a number of defences. Firstly it is said that the policy never attached at all. It is said that at common law a voyage policy does not attach where the ship sails with an intention to deviate, if the deviation is sufficiently material; that there is no express provision on the point in the Marine Insurance Act 1906; and that consequently the common law rule is preserved by s.91. In my opinion that proposition is untenable." Further on he cites Lord Davey in Thames and Mersey Marine Insurance Co. Ltd. -v- Van Laun & Co. 1917 2 KB 48 for the proposition that "the usual test is whether the ultimate terminus a quem remains the same." He then goes on "The cases cited by Mr Davies on the other hand show conclusively to my mind that at common law the policy will attach notwithstanding an intention to deviate existing before the inception of the voyage provided that the terminus a quo and the terminus a quem remain unaltered." Branson J. goes on to cite a passage from the judgment of Lindley L.J. in Simon Israel & Co. -v- Sedgwick 1893 1 Q.B. 303. In that case the insurance was upon merchandise from the Mersey or London to any port in Spain this side of Gibraltar and then to any place. in the interior. The plaintiffs despatched goods from Bradford expecting that they would be landed on this side of Gibraltar. By some blunder they were shipped on a vessel from Liverpool to Carthagena and the Bills of Lading were made out to Carthagena. In those circumstances the Court of Appeal held that the decision of the case depended on the true construction of the policy and that if it was a policy from Bradford to Madrid the underwriters would be liable. However the Court held that upon the true construction of the policy it was not a policy from Bradford to Madrid but was a policy from Liverpool to some port on this side of Gibraltar and that consequently the goods having started on a voyage to the other side of Gibraltar the policy did not apply. Lindley L.J. said "Plaintiffs say that upon the true construction of the policy this is a policy from Bradford to Madrid. If it is then I think it is not denied by their opponents that the underwriters would be liable. Underwriters would have been liable if the terminus a quo and the terminus a quem had remained the same although the voyage involved a deviation to a port on the other side of Gibraltar". 50. Thus the Plaintiffs contend that as Limassol remained throughout the terminus a quem for the goods that there was no change of voyage caught by s.45 of Cap. 329 but that there was merely a deviation which itself is expressly envisaged and covered by the extended cover provisions of Paragraph 3 of Clause 1 of the ICC. In this context s.49 (1) (a) of Cap. 329 provides that deviation or delay in prosecuting the voyage contemplated by the policy is excused where authorised by any special term in the policy. Mr. Mumford on the other hand contends that there was indeed a change of voyage giving rise to a "held covered" situation which is dealt with in Clause 4 of the ICC, the change of voyage clause. That clause provides as follows :-
In these circumstances he contends that notice must be given to the underwriters of the change of voyage and an additional premium paid if cover is to continue. He says that even if the risk did attach when the goods left the warehouse or place of storage in Hong Kong, that nevertheless once the goods were loaded upon the vessel TA HUNG for carriage to Keelung there was a change of voyage bringing about the discharge of the underwriters from liability under s. 45. Thus he says that paragraph 3 of Clause 1 of the ICC has no application; that the intention of the carriers was no more than to carry the goods in the opposite direction from the carriage intended by the contract of affreightment and to discharge them in Taiwan with no definite plans for onshipment. He points to the false statement of the TA SHUN Bills of Lading that the goods had been shipped on-board and further to the "outrageous" demand for second freight and says that the circumstances where by the goods came to be carried to Taiwan on the TA HUNG were wholly inimical to the fundamental objectives of the contract of carriage. 51. He cited Glynn v. Margetson 1893 A.C. 351 for the proposition that however wide the terms of the liberty clause may be they must be read subject to the words which describe the voyage and must not be construed so as to defeat the main object and intent of the contract. In that case, the goods in question were oranges, a perishable cargo, and the contract of affreightment was for carriage of the oranges from Malaga to Liverpool. In fact, after the vessel left Malaga she proceeded in the opposite direction to Burriana, took on cargo and then retraced her course and went on the Liverpool. The oranges arrived in a damaged condition owing to the delay and it was held that the deviation in question was not justified and that the ship-owners were liable. Lord Herschell said at page 355, "My Lords, the main object and intent as I have said of this charterparty is the carriage of oranges from Malaga to Liverpool. That is the matter with which the shipper is concerned; and it seems to me it would be to defeat what is the manifest object and intention of such a contract to hold that it was entered into with a power to the ship-owner to proceed anywhere that he pleased, to trade in any manner that he pleased, and to arrive at the port at which the oranges were to be delivered when he pleased." Lord Halsbury said at page 357, "Looking at the whole of the instrument, and seeing what one must regard, for a reason which I will give in a moment as its main purpose, one must reject words indeed whole provisions if they are inconsistent with what one assumes to be the main purpose of the contract. The main purpose of the contract was to take on board at one port and to deliver at another port a. perishable cargo". Again at page 359 he says, "My Lords, I also concur with my noble and learned friend on the woolsack that the particular words which give the liberty are to be construed to refer to a liberty to deliver in the course of a voyage which had been agreed upon between the parties." Mr. Phillips accepts these propositions as principles of construction. Mr. Mumford then refers to Scrutton on Charterparties 18th Edn. page 262 for the following passage :-
I have set out above in some detail the material provisions of the Blue Sky Bills of Lading. In particular, they permit on their face the vessel "to call at any port or ports or place or places, once or oftener in or out of or beyond, the customary or advertised route, in any order, forward or backward, for the purpose of discharge and/or loading goods .. and/or any other purpose whatsoever." Clause 13 on the reverse gives the carrier liberty to forward the goods "by any route, direct or indirect and at vessel's option to tranship at any place or places ..." It continues "... and also the carrier shall have liberty .. to proceed to any other ports or places, with full liberty to return, call, deviate, delay or stay as elsewhere in this Bill of Lading provided, at any place or places even though outside the scope of the voyage or the route to or beyond the port of destination." These provisions seem to me clearly wide enough to cover carriage of the goods on board the vessel TA HUNG to Keelung notwithstanding that this was effectively in the opposite direction from the normal geographical route for a voyage from Hong Kong to Limassol. 52. Can it then be said that by shipping the goods on the vessel "TA HUNG" to Keelung for transhipment and on-carriage pursuant to the liberties granted in the contract of affreightment that the contract was thereby frustrated. It seems to me not. The cargo was not a cargo of perishable goods. On the evidence there were relatively few sailings direct from Hong Kong to Limassol and in my view the purpose of carriage to Keelung was not inimical to the contract of affreightment but was rather for the purpose of transhipment and on-carriage to Limassol. There is of course no evidence as to precisely what was intended to happen when the goods reached Taiwan on the TA HUNG but the reasonable inference must be that this carriage was for the purpose of the goods being transhipped to another vessel which presumably was then anticipated to call at Keelung. 53. In my view what occurred was a deviation and not a change of voyage resulting in discharge of the underwriters under s. 45 of Cap. 329. The terminus ad quem remained Limassol throughout. This appears to be accepted as the determining factor in a case such as the present where there may be transhipment. I find that the purpose of carriage on the vessel TA HUNG to Keelung was for transhipment and onward carriage to Limassol and although, in the event, the goods after discharge at Keelung remained for some considerable time in storage in the customs warehouse, nevertheless the ultimate intended destination of the goods remained throughout as Limassol. Under s. 46 of Cap. 329 where a ship without lawful excuse deviates from the voyage contemplated by the policy the insurer is discharged from liability. However, under s. 49, one of the lawful excuses envisaged is where deviation is authorised by any special term in the policy. Paragraph 3 of Clause 1 of the ICC in terms extends cover to any deviation and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment. I find that the carriage to Keelung on the TA HUNG did not frustrate the contract of affreightment and accordingly the cover continued and the Defendants were not thereby discharged from liability. 4. Material non-disclosure 54. The next defence that is relied upon is that there was material non-disclosure entitling the Defendants to avoid the contracts of insurance. It is said that Wantex knew or ought to have known that the goods were not in fact to be shipped on the TA SHUN, that this was a material circumstance known to Wantex as the assured before the contracts of insurance were concluded and that as there was a failure to disclose this the Defendants may avoid the contracts. 55. S. 18 of Cap. 329 provides as follows :-
56. The four policies of insurance are dated respectively 22nd July, 24th July, 31st July and 31st July although in the case of the policies issued by the 1st Defendant, the marine insurance application in each case bears a later date than the policy itself. This discrepancy in date was not explained in evidence but nothing turns upon it. In order to sustain this line of defence therefore the Defendants must establish that Wantex either actually knew or ought to have known prior to the policy dates that I have set out that the goods were not to be shipped on TA SHUN. 57. Mr. Mumford formulated what he referred to as a 3 tiered submission. In the first place he says Wantex knew that the goods were never to be shipped on the TA SHUN and had come to a special arrangement with Seawise. As to this he concedes that it is very difficult to prove that in fact Wantex actually knew that the TA SHUN was not in Hong Kong and would not carry the goods. Mr. Cheung denied any such suggestion. However, Mr. Mumford says that the subsequent behaviour of Wantex was quite inconsistent with the behaviour of an outraged deceived shipper who would at once have informed the insurance company and instituted proceedings against Seawise. He has referred to the "devious" way in which Wantex behaved from 7th October onwards as strongly supporting a conclusion by inference that Wantex was trying to cover-up for Seawise or avoid causing trouble for them and he has specifically drawn attention to a number of the letters and telexes in the agreed bundle to support his argument. 58. What is clear is that Seawise quite improperly did issue "SHIPPED ONBOARD" Bills of Lading at a time when the TA SHUN was not in Hong Kong. How far if at all Wantex was a party to this deception is not clear. Wantex no doubt were anxious to be able to get shipped Bills of Lading to enable them to draw under the letters of credit. They no doubt pressed Seawise to supply them with shipped Bills of Lading. This by itself would be quite normal. No doubt most exporters will want to obtain the documents which enable them to draw under credits in their favour as soon as possible. By the same token, Seawise also would be anxious to receive the freight due to it as soon as possible but could not expect to be paid other than against shipped Bills of Lading. Clearly Seawise will have known that the indorsement "SHIPPED ONBOARD" was false since the vessel was not here. There is however no evidence that Wantex actually knew of its falsity and the only witness called to testify on the point Mr. Cheung, said Wantex, by which I understand him to refer to himself and Mr. So, did not know the goods were not being shipped on the TA SHUN. Thus in effect I am asked to infer the existence of a conspiracy between Mr. Cheung (or Mr. So) of Wantex and Seawise to issue false Bills of Lading. The onus of establishing a defence of material non-disclosure rests on the Defendants and although many of the criticisms of Wantex's subsequent behaviour are well-founded, they have not in my view made out a sufficient case for inferring the existence of the suggested conspiracy. Indeed the fact that Wantex subsequently made reports to the police strongly suggests that they did not feel that they themselves had anything to hide. Equally the fact that Cottontex also received bills of lading with the same false indorsements suggests that this was not the product of a specific conspiracy between Seawise and Wantex but rather the outcome of Seawise's need to get the freight as soon as possible. The onus of establishing a conspiracy of the type suggested by Mr. Mumford is a heavy one and the evidence falls far short of the standard of proof required. Mr. Mumford's argument under the first tier therefore fails. 59. Alternatively, Mr. Mumford then says that Wantex deliberately turned a blind eye to what was happening and as his third-tier says that on any view Wantex failed to make the kind of checks and investigations which they would be expected to make in the ordinary course of business; that if they had made such checks they would have discovered that TA SHUN never called at Hong Kong at all at the time in question. Thus, so the argument goes, if in the ordinary course of business they ought to have known that the goods were not being shipped on the TA SHUN then they are deemed under s. 18 of Cap. 329 to have known this fact and were under a duty to disclose it, and that as they did not do so the insurers can avoid liability. 60. As I have stated, Mr. Cheung's evidence was they did not in fact check the newspapers to ascertain the arrival date of the TA SHUN. He said he relied upon the information supplied by Seawise. Had they checked the South China Morning Post they would have been put on enquiry in the following circumstances. The issue for 27th July indicated that TA SHUN was expected to arrive on 30th July. Thus when they received the Bills of Lading No. LIM-16 and LIM-17 bearing "Shipped Onboard" endorsements dated 28th July they would have realised that it was highly unlikely that the vessel would have arrived 2 days early and that the goods could actually have been loaded onboard in the time available. Equally if they had looked at the issue for 30th July, they would have seen that notwithstanding that they held "Shipped Onboard" Bills of Lading dated 28th July that the vessel was not due until 2nd August. 61. Thus if the representatives of Wantex had not simply relied on what they were told by Seawise and had checked the newspapers for the arrival date of the TA SHUN they would have ascertained, prior at least to the conclusion of 2 of the policies, namely M/116972 and M/116973 that the vessel's agents were issuing false bills of lading. This then poses the question of whether the fact that TA SHUN was not in Hong Kong at the time that Seawise was issuing "Shipped Onboard" Bills of Lading was a fact which ought to have been known to Wantex in the ordinary course of business because it was advertised in the newspapers. Mr. Mumford says that it was elementary common sense to check advertisements of ships movements and he relies upon a statement of Mr. Fritz Pleitgen the general manager of the export department of Gilman & Co. Ltd. In his statement Mr. Pleitgen says that where non-conference or little known shipping lines are used that his staff make a point of carrying out a check of the arrival and departure dates of vessels independently of the information supplied by the booking agents. He says that so far as he is aware based upon his experience and conversations with his opposite numbers in big companies in Hong Kong that this is the procedure adopted by other exporters. 62. There is apparently no authority directly in point as to the meaning of the words in s. 18 "every circumstance which in the ordinary course of business ought to be known to him". Such authorities as there are relate to the question of whether the knowledge of an agent of the insured can be imputed to his principal so as to affect the principal with that knowledge. This was the question raised in Australia and New Zealand Bank v. Colonial and Eagle Wharfs Limited 1960 1 Lloyds 241 cited by Mr. Philips. In that case a clerk had been guilty of breach of duty and the question was whether under s. 18 the Company employing him was deemed itself to have knowledge of or was affected by the knowledge of the clerk its servant. McNair J. in holding that it was only the knowledge of a limited class of servants which was to be imputed to the proposer of any insurance said this at page 251:-
and at page 252 he continues :-
Again at page 254 he says :-
63. As Mr. Mumford says however that case is factually far removed from the present one. Here we are concerned with whether either Mr. Cheung or Mr. So of Wantex should have made enquiries and ascertained that TA SHUN was not in Hong Kong when Seawise, by issuing shipped Bills of Lading was representing that it was here. As I have said the onus of establishing a defence of material non-disclosure is squarely on the defendants and I am not persuaded that they have discharged this burden. It is for them to demonstrate that in the ordinary course of Wantex's business the representatives of that company ought to have known the TA SHUN was not here. I accept that Mr. Cheung was told by Seawise the agents for TA SHUN that the vessel had arrived when they called for the goods on 27th July. Although with the benefit of hindsight it would no doubt have been more prudent for further enquiries to have been made, he was entitled to accept that statement at its face value and he apparently did so. Whatever might have been the ordinary course of business or practice for other larger organisations such as Gilmans. Jebsons and Jardines we are concerned here with the knowledge that ought to have been acquired in the ordinary course of Wantex's business and as to that we have virtually no evidence. Although Cheung did accept that it might have been a good idea to check the newspapers for the arrival date of the TA SHUN he in fact did not do so. Having been told and accepted that TA SHUN had arrived by 27th July I am not aware of any basis for suggesting that the representatives of Wantex were nevertheless under a duty to treat that information with suspicion and pursue an investigation into whether in fact the vessel was here. I find that such information was not information which ought to have been known to Wantex in the ordinary course of business and it follows therefore that the defence of material non-disclosure fails. 5. Termination of Adventure 64. As has been seen the TA HUNG left Hong Kong for Keelung on 17th August 1976. On arrival at Keelung the goods were discharged into customs warehouse where they apparently remained until loaded on the MV INTELLECT which then sailed for Suez and the Mediterranean via Hong Kong on about 16th November 1976. There is no evidence as to what if anything happened to the goods whilst in Keelung save that they were apparently stored in the customs warehouse for a period of some 82 days. 65. Mr. Mumford contends in these circumstances that the adventure terminated in Keelung and that as no prompt notice was given to underwriters and as in any event more than 60 days expired after discharge at Keelung that cover lapsed and the goods were not on risk at the time of loss. 66. Mr. Philips approaches the matter by asking the question, was the contract of affreightment terminated. He submits that there are three possible ways in which the contract of affreightment could have terminated and that none of these three alternatives apply, accordingly he says that the contract of affreightment remained in force, the adventure continued and the goods were on risk on 27th November when the fire occurred on MV INTELLECT. 67. The three possible ways in which he suggests that the contract of affreightment could have terminated are (1) by agreement, (2) by reason of impossibility, (3) by repudiation duly accepted. As to (1) this alternative need not be considered as there is no suggestion that there was any such agreement. (2) As to impossibility he says that while there may have been considerable delay this of itself did not frustrate the contract of affreightment which was to get the denim to Limassol. Denim is not a perishable commodity and there was no frustrating event. (3) As to the third alternative, he accepts that it is arguable that there may have been repudiation by Blue Sky but says that this was never accepted by the plaintiffs who, as the innocent party, elected to keep the contract in being; that therefore the contract of affreightment never terminated. He contends that the initial carriage to and discharge at Keelung for transhipment and on-carriage was within the liberty granted to the carriers under Clause 13 of the Bill of Lading and therefore within the extended cover given by Clause 1 of the ICC notwithstanding the extensive delay that occurred. He says that even if Blue Sky were deliberately delaying at Keelung in order to blackmail the shippers into paying second freight and thus outside the liberty that nevertheless this was covered under the heading of delay beyond the control of the assured and therefore nevertheless within the extended cover. 68. I turn to consider the position under the ICC. Paragraph 1 of the transit clause deals with when cover attaches and when it terminates. As I have found the cover attached when the goods left their place of storage in Hong Kong for delivery to Seawise Godown. Paragraph 1 of the transit clause goes on to provide that cover then "continues during the ordinary course of transit and terminates on delivery (a) .. (b) ... (c)". Counsel, no doubt for good reason, did not address any arguments on the meaning of the words "during the ordinary course of transit" and it was not suggested that cover lapsed because what occurred was not in the ordinary course of transit. Curiously, the words "continues during the ordinary course of transit" were excluded from the warehouse to warehouse clause in the 1/1/58 version of the institute Cargo Clauses but were reintroduced in the 1/1/63 version. However in the context of a transit clause incorporating wide extended cover and liberty provisions, no doubt the words "in the ordinary course of transit" must be construed in the light of and qualified by the wide umbrella of the cover thereby provided. 69. Paragraph 1 of the transit clause then provides that cover continues until delivery in three alternative circumstances. I need not set them out as they clearly do not apply here. Thus under (a) the goods never reached their destination Limassol; under (b) the assured never "elected" to use any warehouse or place of storage to which the goods were delivered; under (c) the goods never reached the final port of discharge, again Limassol. Paragraph 2 of the transit clause again has no application since the goods never reached the final port of discharge (Limassol). Under the extended cover provisions of paragraph 3 of the transit clause, it is then provided that the insurance remains in force in certain defined circumstances including any variation of the adventure arising from the exercise of a liberty under the contract of affreightment. The terms of the Blue Sky Bills of Lading are clearly wide enough to permit the carrying vessel TA HUNG to call at Keelung, discharge the goods and store them and for them to be reshipped on another vessel to destination. Thus the cover remained in force subject only to the question of whether the contract of affreightment terminated. 70. Clause 2 of the ICC, the "termination of adventure clause" deals with the circumstances where the contract of affreightment or adventure is terminated at a port or place other than the named destination or before delivery of the goods owing to circumstances beyond the control of the assured. In such circumstances then subject to prompt notice being given the cover remains in force for certain specified periods. The clause does not define the circumstances in which the contract of affreightment or adventure may terminate and in any event it has no application to the facts of the present case in that no notice was given and the period of storage in Keelung exceed the period specified in the clause. Mr. Philips says that he does not rely on the held covered provisions in the termination of adventure clause and understandably so. He concedes that if the contract of affreightment or adventure terminated on discharge at Keelung then he must fail. Thus the simple question is, did the contract of affreightment or adventure terminate at Keelung and the onus of establishing this is again on the defendants. 71. I have set out above the outline of Mr. Philips's argument. Mr. Mumford says that the contract of affreightment was terminated when Blue Sky demanded new freight by their circular of 30th October. He says that this was not merely a repudiatory act but was a breach of contract since the time for performance had arrived and that therefore by this act Blue Sky brought the contract to an end. He goes on to argue that Blue Sky had made it clear they would not carry the goods free and that on-carriage must therefore have been under a new contract and the plaintiff would have had to pay new freight at destination. He says that the authenticity of the transhipment certificate is very dubious. In the alternative he submits that if the contract of affreightment did not terminate that in any event the adventure terminated. His contention was that by analogy with the law of general average the physical adventure terminated when the ship and the goods parted company. He said however that if the owner of the TA HUNG had arranged for the on-carriage it might be argued that the adventure continued but that doesn't arise since it didn't happen. 72. It cannot be correct in my view to say that the adventure terminated once the goods and the carrying vessel TA HUNG parted company and that cover thereupon lapsed. This would be quite inconsistent with the extended cover and liberty provisions of the transit clause. When the termination of adventure clause speaks in terms of "either the contract of affreightment is terminated .. or the adventure is otherwise terminated" the use of the word "otherwise" suggests as a matter of construction that the two should be equated. It seems to me, bearing in mind the provisions of s. 3 of Cap. 329 that the adventure we are concerned with is the carriage of the goods by sea exposed to maritime perils from Hong Kong to Limassol. So long at least as the goods were destined for Limassol and the goods would continue to remain exposed to maritime perils the adventure continued. 73. Did the contract of affreightment continue and did the goods remain exposed to future maritime risks. In my view clearly they did. There is no suggestion or hint in the evidence that the goods were ever destined for Taiwan. After discharge at Keelung they were not imported but were held in customs warehouse presumably in bond pending on-carriage. 74. Although there was no direct evidence as to the identity of the vessel originally intended to on-carry the goods from Taiwan, the letter of 18th August from Seawise to World-Wide Marine Corporation who were the agents for the MV INTELLECT suggests that plans had already been made to on-ship on that vessel. We do not know when INTELLECT was originally anticipated to depart Keelung. The report of Mr. Bailey shows that she loaded her main cargo at Busan on 22nd October 1976 and arrived at Keelung on 30th October 1976. The departure was then however delayed by repair work to her boilers and she did not leave until 16th November 1976. There was clearly substantial delay but not such delay in my view as would be sufficient to frustrate the commercial objectives of the contract of affreightment. It was delay within the liberty of the transit clause or in any event was delay beyond the control of the assured within transit clause. Indeed it has not been suggested that as delay it was in any way under the control of either Wantex or the plaintiffs. 75. I accept Mr. Philips's analysis of the situation when he says that by its demand for new freight Blue Sky merely repudiated its obligations under the contract of affreightment but that the contract continued in being and Blue Sky's obligations thereunder continued because neither Wantex nor the plaintiff accepted such repudiation. In fact as appears from the transhipment certificates dated 25th November 1976 and the telex of 27th November 1976 Blue Sky by their agents did arrange for the goods to be on-carried pursuant to its obligations under the Bills of Lading. I see no reason to doubt the authenticity of these transhipment certificates. Similar certificates were issued in respect of the Cottontex goods and I accept them at their face value. 76. Accordingly, I find that the contract of affreightment and adventure did not terminate when the goods were discharged into customs warehouse in Keelung and that the insurance remained in force during storage in Taiwan and during re-shipment and on-carriage in the MV INTELLECT. Cover continued to attach at the time that the goods were a total loss as a result of the fire on 27th November 1976. 6. Held Covered 77. As I have come to the view that the goods came on risk and remained on risk up to the time of loss it is not necessary for me to consider the alternative submissions of Counsel based upon the held covered provisions of Clause 4 of the ICC namely the "Change of voyage clause". 7. Sue and Labour 78. The final matter raised by way of defence that I must deal with is an allegation that there was a breach of Clause 9 of the ICC namely the "Bailee clause" which provides as follows :-
79. As pleaded the complaint in the defence was that the Plaintiff and/or Wantex had failed to preserve or exercise their rights against the carrier, bailee or other 3rd party by instituting proceedings promptly or within 1 year or at all. During his opening, Mr. Philips stated that if the point was pursued evidence would be adduced that proceedings in rem had been commenced in Singapore against the MV INTELLECT and that further sistership proceedings had also been commenced against the "HUMANITY". In the event, no doubt as a result of discussions between Counsel, Mr. Mumford limited himself to a contention that there had been a breach of Clause 9 before loss and it was unnecessary for the evidence indicated by Mr. Philips to be adduced. 80. In its final form the point was but faintly argued. Mr. Mumford said that the plaintiffs were bound to act with utmost good faith and as if uninsured and should therefore even before loss have taken prompt action to obtain security by arresting one or more of the vessels involved; that the failure to do so was a breach of Clause 9 entitling the Defendants to damages in an amount equal to the plaintiffs claim; that thus the claim is barred by the rule against circuity of action. 81. I confess that I find the suggestion that the plaintiffs are under a duty to sue and labour even prior to the loss somewhat startling. It may be that I have not truly understood Mr. Mumford's submissions but I fail to see how the assured can take measures to avert a loss unless it is reasonably apparent that it is about to occur or to minimise a loss which has not already occurred. I cannot accept the suggestion that it would have been a reasonable measure for the Plaintiffs or Wantex to arrest any of the vessels involved prior to the date of the loss by fire on the MV INTELLECT and I hold that there was no breach of Clause 9 entitling the underwriters to a set-off or to damages. 82. As I pointed out during the course of the proceedings there is a typographical error in the amount of the plaintiffs claim which should be for US$91,264 against the 1st Defendant. This is because the insured value of the goods shipped under policy M/116768 was US$38,280 and not US$38,380 as pleaded. There will accordingly be judgment for the Plaintiff against the 1st Defendant in the sum of US$91,264 and against the 2nd Defendant in the amount of US$31,900.00. I award interest at the rate of 10% per annum to run from 1st June 1977 which I choose as being a date some 6 months from the date of the loss and a reasonable period within which to investigate and meet the Plaintiff's claim. The Plaintiffs are also entitled to their costs.
Representation: N. A. Philips, Q.C. & R. Faulkner (Robertson & Co.) for Plaintiff. E.C. Mumford (Deacons) for 1st & 2nd Defendants. |