Nautical Shipping (Tortola) Ltd v Edinburgh Insurance Company Ltd

• Jurisdiction: British Virgin Islands
• Court: High Court (British Virgin Islands)
• Judge: Joseph, J.
• Judgment Date: 26 October 1984
• Neutral Citation: VG 1984 HC 10
• Docket Number: Civil Suit no. 73 of 1980
• Date: 26 October 1984

High Court of Justice

Joseph, J

Civil Suit no. 73 of 1980

Nautical Shipping (Tortola) Ltd.

and

Edinburgh Insurance Co. Ltd.

Appearances:

Mr. McWelling Todman, Q.C. and Mr. P. Webster for plaintiff

Mr. J. Smith-Hughes for defendant

Insurance - Marine.

Facts: The plaintiff insured a vessel against perils including the perils of the sea with the defendant insurance company. It was alleged by the plaintiff that the vessel was severely damaged by gales and heavy weather. The defendant refused to meet the claim on the ground that the plaintiff was in breach of an express warranty of seaworthiness in the policy.

Held: The vessel was reasonably fit to encounter the ordinary perils of the sea. Extensive damage resulted from heavy weather encountered. The vessel was insured for $80,000 and sold for $20,000. The defendant was ordered to pay the plaintiff $60,000.

Joseph, J.

1 The plaintiff is a company operating in Tortola and the owner of 64/64th shares in the vessel The Roamin Brio (the vessel). The defendant is a company carrying on the business of insurers in Tortola.

2 In a statement of claim filed on 29th December 1980, the plaintiff claims that –

• (1) by a policy of marine insurance dated 5th April 1978, made between the parties and subscribed by the defendant for the sum of US $80,000.00 (the policy), the defendant, in consideration of a premium paid by the plaintiff, insured the vessel from noon on 5th April 1978, to noon on the 5th April, 1979 against the perils mentioned in the policy, including perils of the sea;

• (2) the value of the vessel was stated to be US $80,000.00 and that any sum payable for loss under the policy would be paid to the plaintiff and the Bank of America, St. Croix within thirty days of proof of loss.

• (3) the interest of the Bank of America has been released to the plaintiff absolutely;

• (4) between the 25th and 28th today 1978, while the policy was in force, the vessel was severely damaged on a voyage from Curacao to St. Lucia by gales and heavy weather which perils are insured against under the policy;

• (5) as the estimated cost of repairing the vessel of US $140,000.00 exceeded its insured value, the plaintiff treated the vessel as a constructive total loss as it was entitled to do under the policy — and duly informed the defendant of the fact;

• (6) due to the expenses of docking and maintaining the vessel in Curacao, the plaintiff gave notice to the defendant of its intention to abandon the vessel and in or about October, 1978 the plaintiff sold the vessel for US $20,000.00.

• (7) with knowledge and consent of the defendant, the plaintiff commissioned an ultrasonic survey of the bottom structure of vie vessel in November, 1979 and April, 1980 which surrey revealed that all gauging in the ultra sonic measurement reports were well within the recommendation and requirements of the classification societies.

3 The plaintiff made a claim to the defendant and allege that, notwithstanding the result of the ultrasonic surveys, the defendant refused to meet the claim on the ground that the plaintiff was in breach of the express warranty in the policy, that is, the warranty of seaworthiness.

4 In a defence filed on 8th January 1981, the defendant admits that at the material time the vessel was insured against the perils of the sea, but denies that the vessel sustained damage as a result of any of those perils. The defendant admits that it wrote the plaintiff, alleging that pat the time the vessel sustained damage, the floors were wasted and the vessel was in an unseaworthy condition.

5 The history of the matter — the vessel which was built in 1950 and acquired by the plaintiff company in 1977, is a 156 feet European coastal freighter with two hatches and a large hull. Before purchase, a survey was conducted of the engine and the hull by Germanicher and Lloyd, a classification society, who also in 1977, carried out a load line survey on the vessel and gave it clearance to cross the Atlantic. Insurance coverage was taken out with the defendant company for a year from April, 1977 to April, 1978 and there was a renewed policy in identical terms of the first policy for a further year. Peter Norguoy, director of the plaintiff company, and captain of the vessel (captain) testified that a few months prior to July 1978, the vessel was dry docked at Martinique at which time the hulls and floor boards were cleaned, and no cracks on the bottom of the vessel were seen.

6 On 25th July 1978, the vessel with six crew members and the captain left Curacao for St. Lucia. The vessel did not carry cargo but had four ballast tanks: one in the bow: two midships and one astern. All the tanks were full except the one at the stern which was half full. For the first day the weather was calm: then the vessel encountered heavy weather. Speed was reduced as the vessel had started to come down with a slam. The captain stated that this was known as slamming. The wind was 25 to 30 knots. Waves were about 8 feet and swells were 12/14 feet. Slamming is described as a condition whereby a vessel pounds heavily into the seas. This condition is normally created by bad weather or high winds and rolling seas of 6 to 8 feet or higher.

7 Late in the night of the second day the captain noticed that the vessel was sitting down on the stern and listing slightly. He checked the engine room and sent the first mate too check the hatch. There was water in the hull: and the floor boards in the hatch were covered with water that was in the hatch.

8 The water was pumped out. Upon arrival at St. Lucia on 28th to 29th July, the captain inspected the vessel and found a leak located in the aft section of the hull. There were cracks in the metal and in the forward section of the hull all floor boards were disrupted: the keel and ribs of the vessel were fractured in various places and pushed upwards.

9 The captain effected temporary repairs by putting a cement box over the crack where the leak was located. On 1st June, the captain sailed the vessel from St. Lucia to a dry dock facility in Curacao. By an undated letter, the captain reported the damage to the vessel to Island Enterprises Ltd. (agent for the defendant company). A report was also submitted to Island Enterprises by the first mate, Renmark Johnson. A Brian Cummings from the United States Salvage Association conducted surveys on behalf of the defendant and submitted reports. Frank Singleton, on behalf of the plaintiff, surveyed the vessel and also submitted a report. These reports will be considered later in the judgment.

10 By letter of 30th June 1978, the defendant declined liability on the ground that at the time of the alleged damage, the vessel was in an unseaworthy condition. In a letter to Island Enterprises Ltd., dated 12th September 1978, the plaintiff claimed that the vessel was inspected by Germanicher Lloyds, Surveyor on 8th April 1977, and found to be in “A1 condition” and that the vessel obtained permission to make an Atlantic crossing with cargo aboard from Holland to Curacao.

Policy of Insurance

11 The plaintiff held a policy of Marine Insurance of the vessel with the defendant. Incorporated into the policy in an Endorsement No. 1/78, is a warranty of seaworthiness dated 5th April 1978, that reads:

“Warranted that at the inception of this policy the vessel shall be in a seaworthy condition and, thereafter, during the currency of this policy, the assured shall exercise due diligence to keep the vessel seaworthy, and in all respects fit, tight and properly manned, equipped and supplied”.

Allegation of Unseaworthiness

12 Section 44(4) of the Marine Insurance Ordinance (Cap. 123) provides that –

“A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured”.

13 The fact that the vessel was not a member of a classification society at the time it sustained damage, raises a presumption that it was unseaworthy and the evidential burden is therefore on the owner to establish that there was bad weather or some external factor to account for the damage to the vessel. However, the onus still rests on the defendant to prove unseaworthiness.

14 I cite from Lindsay v. Klein 1911 A.C., page 194 at page 203.

“My Lords, in the judgments stress is repeatedly laid upon the fact that the onus of proving unseaworthiness is upon those who allege it. This is, of course, a sound doctrine; mad it is none the less sound although the vessel break down or sink shortly after putting to sea. That is the principle of law. But the enunciation of that proposition does not impair or alter certain presumptions of fact, such presumptions, for instance, as those which arise from the age, the low classing, or non-classing, the non-survey of the ship or machinery, the refusal to insure, the laying up, the admitted defects, and generally the poor and worsening record of the vessel, together with finally the breakdown, say, of the machine, immediately, or almost immediately, on the ship putting to sea”.

15 In order to determine whether the vessel was unseaworthy, I shall now consider the reports relative to the damage to the vessel. In June 1978, at the request of the defendant, B.P.R. Cummings of the United States Salvage Association surveyed the ship and reported –

“Fractures in floors appear to have developed over a considerable period. Floors were not sighted at time of purchase, April 1977. Last special survey was 1974 in Holland. Floors are generally wasted. Owner is representative advised that we are not in agreement with allegation of heavy weather, May 25-28, 1978”.

16 Frank Singleton, a Marine Surveyor, on behalf of the plaintiff, surveyed the vessel and submitted a report dated November 7th, 1978. Extracts of the report follow:

“Center Section of hull, keel, transverse frames and floor stringers from just...