Kastor Navigation v. AGF MAT
Note: This decision has been affirmed on appeal by a judgment of the Court of Appeal dated 10 March 2004. For a note of the Court of Appeal judgment click here
DMC Category Rating: Confirmed
At the close of the trial, the underwriters accepted (to the surprise of the judge) that the fire was accidental, but denied that the insured could recover for a CTL. Although underwriters accepted that the cost of repairing the fire damage to the engine room would have exceeded the insured value of the ship, they contested the CTL claim on the basis that no notice of abandonment had been served and that such notice could not effectively be given once the vessel had become an actual total loss.
As to the actual total loss, the underwriters
asserted that a fire in the engine room and consequent explosions would not have
caused and did not cause the flooding of any space of the vessel, other than the
engine room, or the sinking of the vessel. They had no positive case as to how
seawater, at any rate in significant quantities, entered the engine room. They
suggested only that water entering from an unknown cause both before and after
abandoning was a proximate cause of the sinking. Unidentified ingress of water
not being an excepted peril, the claimants suggested that they were entitled to
succeed in their claim for an actual loss on the basis of concurrent causes:
ingress of water into the engine room caused by the fire, together with water
that had entered the ship by unidentified means forward of the engine room
(2) In the present case, cession or transfer of the ship to underwriters under a notice of abandonment whilst the vessel was and remained a CTL was both impossible and of no conceivable benefit to underwriters. Should recovery for a CTL be, therefore, contingent upon the assured having complied with a condition precedent (the giving of the notice of abandonment), the performance of which was impossible in a case like the present?
(3) The purpose of the notice of abandonment was described in Kaltenbach v Mackenzie (1878) 3 CPD 467. None of the reasons identified in that case as grounds for the parties to agree that notice of abandonment should be given as a condition precedent to recovery for a CTL, led to the conclusion that an insured in such circumstances ought not to be permitted to recover for a CTL - at any rate not simply on account of failure to serve notice of abandonment before the vessel became an actual total loss by operation of a peril other than that which had caused the CTL.
(4) In a case like the present, the proper analysis was that abandonment of the subject matter insured would take place by operation of law when the underwriters settled the claim. Section 61 of the Marine Insurance Act 1906 was thus satisfied. The insured had been deprived of his right of choice envisaged by s.61. He had no option but to treat the vessel as a total loss (rather than a partial loss). Section 62(7) of the Act said in terms that notice of abandonment was unnecessary where, when the insured received information of the loss, there would be no possibility of benefit to the insurer if notice were given to him. That was the case here. The claimants were therefore entitled to recover as for a CTL.
(5) The claim in respect of an actual total loss would have failed, had it still been in issue. On the basis of the evidence, there must have been water present when the crew abandoned ship, the quantity and location of which simply could not be regarded as the likely consequence of a fire that had started so soon before. The judge could not reach a principled conclusion that the fire was probably the proximate cause of the sinking or the probable cause of an ingress of water sufficient to sink the vessel within 15 hours.
(6) Nor could the fire be regarded as one of two
equally effective concurrent causes. On the judge’s findings, the vessel would
not have sunk when she did, without a large unexplained ingress of water. On
that basis, the water contributed by the fire in the engine room could not
itself be regarded as a proximate cause of the sinking.
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