Mitsui v. Bayview Motors: CofA
Nevil Phillips, instructed by Waltons & Morse, for the appellant insurers
Michael Nolan, instructed by Swinnertons, for Bayview
ALL RISKS CARGO INSURANCE POLICIES: INSTITUTE CARGO CLAUSES 1/1/63: MOTOR VEHICLES: STOLEN BY CUSTOMS OFFICERS: TRANSIT CLAUSE: DESTINATION: FINAL PLACE OF STORAGE: SEIZURE: CESSATION OF COVER: TIMING OF LOSS
This case established, in the context of claims for the loss of cargo insured on Institute Cargo Clauses 1/1/63 (‘ICC’) ‘All Risks’ terms, that
DMC Category Rating: Developed
This case note is based on an Article in the December 2002 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers,DLA. DLA is an International Contributor to this website.
The cars were initially held in a fenced compound in the port controlled by Customs. Despite Bayview’s efforts, they were never released. In November, Bayview learnt that the cars had been removed from the compound about a month earlier and distributed to Customs Officers, their friends and relations. The Director of Customs subsequently claimed that the cars had been abandoned. Mr Justice David Steel, hearing the case at first instance, dismissed this excuse as "transparently bogus". There was no legal justification for refusing the release of the vehicles. The only inference which could be drawn was that the Customs officials had manufactured a situation in which they could assert that the vehicles had been abandoned.
Bayview claimed under their insurance, which was on Mitsui's
standard marine policy form. This named the Japanese port where the transit
began, identified Santo Domingo as the port "arrived at/transhipped
at", and left a box labelled "thence to" blank. The cover also
incorporated Institute Cargo Clauses (1/1/63) (‘ICC’) "All
Risks"), which contain the following transit clause:
The cover was also, by clause 12, "warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof…"
Mitsui argued that the losses occurred after cover had ended under clause 1(a) or, alternatively, after the 60-day period under clause 1(c). In any case, the loss was a "seizure" and therefore an excluded peril by reason of the FOC ("free of capture") warranty.
Judgment at first instance
As for the warranty point, he held that this was not a case of
seizure. The classic definition of seizure was given in Cory v Bury (1883) 8
App. Cas 393:
None of these conditions was satisfied: misappropriation after the cars had been voluntarily placed in the custody of Customs could not be described as "forcible", the actions of the Customs officers were clearly unlawful, and there had been no display or threat of overpowering force.
Judgment of Court of Appeal
Although the "thence to" box in the policy had been left blank, this did not mean that Santo Domingo was the final destination of the goods. The Court of Appeal took the view that insurers who agree to the inclusion of a full transit clause "must take the facts as they find them". Unless insurers specifically asked, there was always likely to be some uncertainty about how long they would be on risk after discharge at the destination named in the policy. They were, in any event, protected by the 60-day cut-off. In any case, the fact that the cars would only be in Santo Domingo in the course of transit was sufficiently clear if the policy was read together with the invoice to which it referred.
Even if clause 1(a) did apply, the Customs compound could not be described as the final place of storage. Like the transit shed in John Martin v Russell  Lloyd’s Rep 554, it was a holding area. Goods are not held in a Customs compound for storage, but for Customs purposes.
The loss which Bayview had suffered was a constructive total loss that had occurred within the period of cover. Bayview had been deprived of the possession of the goods by an insured peril in circumstances where it was unlikely that it could recover them (section 60 of the Marine Insurance Act 1906).
The likelihood of recovery at any particular time has to be determined objectively on the true facts. The judge had found that, whatever the officials may have said or Bayview may have thought, the Customs officers involved were trying to manufacture a situation where they could claim the cars had been abandoned. The Court of Appeal was satisfied that this was the right conclusion.
As for the warranty ‘free of…seizure’, the arguments put forward by Mitsui were very similar to those raised by insurers in The Salem ( 2 AC 375). In that case, the Master changed course in order to misappropriate the cargo. Insurers argued that this was a seizure for the purpose of the insurance because, although the shipowners had initially held the goods lawfully, they began to hold them wrongfully from that point. But the House of Lords held that misappropriation of cargo already held by shipowners in this way was not taking at sea (or seizure) for the purposes of the law of Marine insurance.
Mitsui’s arguments similarly failed. There had not been any forcible dispossession of the kind needed to establish seizure. The Customs officers were not acting lawfully but purely for their own interests and there was no evidence of actual force or the threat of force. Bayview were therefore entitled to recover under the policy.
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