Gibbs v. Mercantile Mutual
The question in this case was whether a contract of liability insurance issued to the owner of a para-sailing towboat was a contract of marine insurance for the purposes of the Marine Insurance Act 1909 (Cth). Despite the fact that the boat operated on the Swan River in Perth, the High Court held, by a majority of 3 to 2, that it was.
DMC Category Rating: Confirmed
Case note contributed by Lia Darby, Lawyer, & Joe Hurley, Partner, at Ebsworth & Ebsworth Lawyers, Sydney. Ebsworth & Ebsworth Lawyers are International Contributors for Australia
The case went to the Full Court of the Supreme Court of Western Australia, which allowed the insurer’s appeal, holding that the contract was one of marine insurance. The Full Court said, inter alia, that the towboat operated in the "sea" for the purposes of the Act because the waters of the Swan River at that point were within the ebb and flow of the tide. The insured appealed to the High Court of Australia.
Hayne and Callinan JJ agreed largely with Gleeson CJ. They set out the facts, including the fact that the injured party was injured whilst landing, when she was dragged through trees. They also noted the insurance policy the insured held was subject to a warranty of navigation in the "protected waters of WA". Their Honours did not, however, accept the insured’s argument that there was an "insufficient connection" with the sea, in that the incident neither happened at sea nor was an incident upon the sea. They held that one should ask not where the event happened, but rather what was the risk against which the insurer agreed to indemnify the insured. On that basis Hayne and Callinan JJ found, despite the involvement of the trees, that the careless operation of the craft causing injury to the person being towed was a peril properly described as a peril "consequent on, or incidental to, the navigation of the sea". They did not make findings upon the meaning of the "sea" per se but said if they had to draw a distinction, they would follow the Full Court, which had concluded that tidal flow was the determinative consideration.
McHugh J, in dissent, held that the Marine Insurance Act did not
apply to the policy as it did not insure against the risks of marine adventure.
He agreed with the statement of the trial judge who said the insured vessel was
never going to encounter perils of the sea, as it was restricted to protected
waters. McHugh J said:
In answer to Hayne and Callinan JJ above, McHugh J said for a risk to be a marine risk for the purpose of the Marine Insurance Act, it must be incidental to or consequent on a sea voyage. This, he said, was patently not the case here.
Kirby J also rejected the argument that the Marine Insurance Act
applied in this case. He said:
Both McHugh and Kirby JJ held that the appeal should be allowed with costs, and the matter remitted to the Full Court.
On the issue of the definition of the "sea" in contracts of maritime insurance, as this case did not turn on the matter, we shall have to wait. The Full Court of WA’s thoughts on the implications of the ebb and flow of the tide in estuarine conditions are, for the moment, authoritative. Anybody operating a business on an inland waterway which does not fit within the scope of the Insurance Laws Amendment Act mentioned above, should take note.
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