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Ilimo Farm Products Pty Ltd v General Accident Fire & Life Assurance Corp Ltd [1988-89] PNGLR 342 (1 September 1989)

Papua New Guinea Law Reports - 1988-89

[1988-89] PNGLR 342 - Ilimo Farm Products Pty Ltd v General Accident Fire & Life Assurance Corp Ltd 

[1988-89] PNGLR 342

N748

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

ILIMO FARM PRODUCTS PTY LTD

V

GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION LTD

Waigani

Barnett J

14 July 1986

1 September 1989

INSURANCE - Marine insurance - All risks policy - Liability for loss of perishable cargo - Cargo shipped below deck - Cargo wrongfully carried on deck - Not “deck cargo” - Liability for total loss intended in any event - Sea-carriage of Goods Act (Ch No 261) - Marine Insurance Act (Ch No 258) - Hague Rules, r 17 (2).

Rule 17(2) of the Hague Rules, which are incorporated into the Marine Insurance Act (Ch No 258), provides:

“In the absence of any usage to the contrary deck cargo and living animals must be insured specifically and not under the general denomination of goods.”

A perishable cargo of soya meal was contracted to be shipped below deck but the captain of the vessel wrongfully, without authorisation and without informing the assured, stowed the cargo above deck where it was rendered unfit for its intended use. The cargo was covered by an all risks open contract of insurance incorporating r 17(2) of the Hague Rules and providing for recovery in regard to “deck cargo” in the case of total loss. Under the terms of the policy, the assured’s right to recovery in the event of loss was not to be “prejudiced by the fact that the loss may have been attributable to the wrongful act or misconduct of the shipowners or their servants, committed without the privity of the assured”.

Held

(1)      Because the cargo was “shipped” or “contracted” for carriage below deck, the fact that it was wrongfully carried on deck without the knowledge of the assured did not bring the cargo within the meaning of “deck cargo” for the purposes of r 17(2) of the Hague Rules.

(2)      On an objective, overall view of the contract of insurance, the damage to the cargo (its total loss) was a matter which was intended by the parties to be covered by the insurance and the assured should receive the full amount of the loss.

Cases Cited

Alluvials Mining Machinery Co v Stowe (1922) 10 Ll L Rep 96.

Gaunt v British and Foreign Insurance Co Ltd [1920] 1 KB 903 affirmed sub nom British and Foreign Marine Insurance Co Ltd v Gaunt [1921] 2 AC 41; [1921] All ER 447.

Kulukundis v Norwich Union [1937] 1 KB 1; [1936] 2 All ER 242.

Statement of Claim

These were proceedings in which the plaintiff assured sought to recover by way of indemnity under a marine insurance policy, the total loss of cargo.

Editor’s Note

An appeal to the Supreme Court has been lodged.

Counsel

P E King, for the plaintiff.

A Tink, for the defendant.

Cur adv vult

1 September 1989

BARNETT J: This action is brought by way of writ of summons whereby the plaintiff claimed the sum of K33,425.37, or damages, by way of indemnity under a contract of marine insurance between the plaintiff and the defendant. The claim arose after a cargo of soya bean meal was damaged during shipment to Port Moresby. My findings of fact are set out in the ensuing judgment.

The plaintiff contracted through Gardener Smith Pty Ltd of Sydney, New South Wales, to buy 1,430 bags of Brazilian soya bean meal as chicken feed to be used on its chicken farm near Port Moresby. Gardener Smith arranged for the meal to be shipped from Singapore at a cost of $A43,901 as itemised in invoice no 10630 dated 26 November 1980. The contract was arranged on a C and F basis which left the plaintiff to arrange insurance. The plaintiff had an “all risks” open insurance policy with the defendant which incorporated various Institute Cargo clauses (including “all risks” and FPA clauses).

As there was some urgency, the plaintiff telephoned Mr Hannon of Gardener Smith who in turn contacted his Singapore agents to urge them to arrange for at least 100 tons to be shipped on a small freighter called the “Solomon Sea”. The captain of the “Solomon Sea” accepted the full cargo and issued a “clean” bill of lading. In the trade this indicates that the cargo is loaded below deck. In fact, however, the captain then accepted a more valuable cargo which took up the below deck space and he stowed the soya bean meal as deck cargo. It was stacked on pallets on top of an aft hatch and covered with an inadequate blue plastic material. This was a negligent and unauthorised act by the captain, contrary to all maritime practices. It meant that the cargo would almost certainly be made wet by sea spray and rain in the normal conditions to be expected in a December voyage from Singapore to Port Moresby.

The action of the captain in stowing the soya meal as deck cargo was in breach of contract and was completely unknown to, and unauthorised by, the plaintiff and the vendor. Once the clean bill of lading was viewed by the plaintiff’s agent (Schofield Goodman), it paid the full purchase price.

The “Solomon Sea” arrived in Port Moresby during the last days of December 1980. On arrival it was discovered that the cargo was in a wet, rotten and stinking condition. It was inspected by the defendant’s surveyor, Mr F W Millar of Topliss Harding and Co who made a written report. I am satisfied that the cargo was a total loss for purposes of feeding to animals as a dangerous mould had contaminated it after it had become damp. The uncontested scientific advice was that it would be poisonous for chickens.

The general manager of the plaintiff company, Mr R J Catchell, who is a highly qualified expert in stockfeeds and is familiar with this kind of mould contamination, formed the opinion that the cargo was a total loss but he nevertheless accepted the advice of Mr Millar (the defendant’s surveyor) that it would expedite payment of the insurance claim if he offered to salvage purchase the cargo from the defendant for a nominal sum. He therefore offered to buy the cargo for K3,500 as “pig fill”. He then dumped and burned the entire cargo after subjecting the less damaged portion of it to further testing. I accept Mr Catchell’s explanation as to why he made the offer to pay a salvage price and it does not alter my finding that the cargo was, in fact, a total loss for the purpose for which it was intended.

The defendant insurance company rejected the plaintiff’s claim for indemnity under the insurance policy. It argued that the cargo was shipped as “deck cargo” and that consequently the insurer is entitled to rely on the Marine Insurance Act (Ch No 258) as protecting it against liability. That Act incorporated the Hague Rules which, the defendant argues, require deck cargo to be specifically insured. Rule 17(2) is in the following terms:

“In the absence of any usage to the contrary deck cargo and living animals must be insured specifically and not under the general denomination of goods.”

Mr Tink, counsel for the defendant, argued that even if the plaintiff was completely ignorant of it being carried as deck cargo, r 17(2) still applied because, in fact, it had been carried as deck cargo.

Mr King, for the plaintiff, however, argued forcefully that r 17(2) is meant to apply when cargo has been “shipped” as deck cargo. He claimed that, although this cargo was actually “carried” as deck cargo, it had been “shipped” or “contracted” as cargo to be stowed below deck. This is evidenced by normal practice and by the issuing of a clear bill of lading. Mr King supported his argument by reference to the way deck cargo is excluded from the definition of goods in the Schedule to the Sea-carriage of Goods Act (Ch No 261):

“... ‘goods’ includes goods, wares, merchandise and articles of every kind except ... cargo which by the contract of carriage is stated as being carried on deck and is so carried.”

He distinguished cases such as Alluvials Mining Machinery Co v Stowe (1922) 10 Ll L Rep 96, where the goods were known by the shipper to be intended for shipment as deck cargo and this fact was not disclosed to the insurer.

Rule 17(2) is a rule of construction only and will give way to other indications in the policy (see Kulukundis v Norwich Union [1936] 2 All ER 242, per Scott LJ). My interpretation of this policy as a whole shows that it was never intended that the plaintiff would be deprived of cover if through no fault of his own and without his intention or knowledge the cargo was carried on deck.

The defendant sought to rely on cl 6 of the printed schedule to the all risks terms as relieving it from liability by making coverage of deck cargo subject to the Institute Cargo clauses. But the wording of cl 6 is:

“Deck Cargo. Cargo shipped on deck is covered subject to the Institute Cargo clauses (FPA) ...”

I find that the damage which occurred was a loss by accidental cause, during transit, of the nature intended to be covered by the all risks policy. The damage falls within the principles discussed in Gaunt v British and Foreign Insurance Co Ltd [1921] All ER 447, per Lord Birkenhead LC, at 450. It was not “deck cargo” within the meaning of r 17(2) as incorporated by the Marine Insurance Act as it was clearly contracted to be shipped below deck. The fact that it was carried on deck resulted from a wrongful act or misconduct of the captain and cl 8 of the Institute All Risks Policy preserves the plaintiff’s right of recovery in those circumstances.

“Clause 8. In the event of loss the Assured’s right of recovery hereunder shall not be prejudiced by the fact that the loss may have been attributable to the wrongful act or misconduct of the shipowners or their servants, committed without the privity of the Assured.”

On an objective, overall view of this contract of insurance I find that the damage which occurred to this cargo, while it was wrongfully being carried on deck, was intended by the parties to be covered by insurance.

Had the cargo been properly considered as “shipped on deck”, the defendant would still have been liable on this claim because a proper construction of cl 5 of the FPA terms provides for recovery in cases of the total loss of such deck cargo. I have already found that this was a case of “total loss” as the damage rendered the meal totally unfit for the purpose for which it was intended.

Consequently I order that the defendant pay to the plaintiff the full amount of the loss claimed, being K35,978 together with interest (as agreed) at the rate of 12 per cent from the date the cause of action arose on 24 December 1980 to the date of judgment on 1 September 1989. On this basis, the interest amounts to K37,507.

I further order costs of this action in favour of the plaintiff and certify that it was an appropriate case for the parties to brief overseas counsel.

Judgment for plaintiff

Lawyers for the plaintiff: Beresford Love Francis & Co.

Lawyers for the defendant: Kirkes.