Dissertation submitted to the University of Nottingham in 2012, as part of LL.M ( Maritime Law).
Deviation and delay in charterparties and marine insurance is covered in this write up
1. 1
UNIVERSITY OF NOTTINGHAM
DISSERTATION FOR DEGREE OF MASTER OF LAW (LLM)
LLM in MARITIME LAW
DEVIATION IN MARINE INSURANCE
AND CONTRACTS OF CARRIAGE
BY
ROSHNI MANUEL
Student id-4112652
Candidate of the 2010 LLM Programme
School of Law, University of Nottingham
………………………………………………………………
I hereby declare that I have read and understood the
Regulations governing the submission of postgraduate
Dissertations, including those relating to length and
Plagiarism, as contained in the LLM Manual and that this
Dissertation conforms to those regulations.
3. 3
CONTENTS
INTRODUCTION ………………………………………………………………………………………….1
CHAPTER -1 …………………………………………………………………………………………………2
DEVIATION IN MARINE INSURANCE (ATTACHMENT AND ALTERATION OF
RISK)
WHAT MARINE RISK CONVEYS
DESCRIPTION OF THE VOYAGE
‘AT AND FROM’
ATTACHMENT OF RISK
DELAY IN COMMENCING THE RISK
ALTERATION OF RISK (CHANGE OF VOYAGE,DEVIATION,DELAY)
CHAPTER-2…………………………………………………………………………………………11
HELD COVERED CLAUSES AND ICC 2009
HELD COVERED CLAUSES
THE ICC
PRACTICALITY
NOTICE
ADDITIONAL PREMIUM
UTMOST GOOD FAITH
CHAPTER-3 …………………………………………………………………………………………19
DEVIATION IN CONTRACTS OF CARRIAGE
DEPARTURE FROM DIRECT ROUTE FOR NAVIGATIONAL REASONS
DEPARTURE FOR BUNKERING PURPOSES
JUSTIFIABLE DEVIATION (COMMON LAW AND HAGUE-VISBY RULES)
o SAVING HUMAN LIFE
o AVOIDING DANGER TO SHIP OR CARGO
o LIBERTY CLAUSES
o EFFECTS OF DEVIATION
o BREACH AND WAIVER
o WAIVER IN MARINE INSURANCE
DEVIATION AND GENERAL AVERAGE
POST HAIN CASE
4. 4
CHAPTER-4……………………………………………………………………………………………….34
COMPATIBILITY BETWEEN CARRIAGE CONTRACTS AND MARINE
INSURANCE
WHERE THERE IS ‘EXPRESS AUTHORIZATION BY AGREEMENT’
IMPLIED COVER BY THE POLICY
SAVING LIFE
INVOLUNTARY DEVIATION
UNINSURED PERIL
COMPATIBILITY BETWEEN MARINE INSURANCE AND CONTRACTS
OF CARRIAGE
CONSEQUENCES OF EXCUSED DEVIATION AND DELAY
RESTRICTIVE SCOPE, CESSATION OF EXCUSE AND CONTINUATION
OF THE CONTRACT VOYAGE
CONCLUSION……………………………………………………………………………………………….45
BIBLIOGRAPHY………………………………………………………………………………………………I-II
CASES REFERRED……………………………………………………………………………………………III-VII
5. 1
Introduction
‘If a boat captain violated the itinerary to which it was committed and thereby brought
about the loss of the boat, he shall measure out to its owner as much as the boat, and
its hire’- Sumerian tablet, circa 1800 B.C1.
Deviation is a subject of importance in both marine insurance and contracts of
affreightment. Deviation means, any departure from the insured adventure sufficient to
constitute a variation of risk.2The doctrine has its origin in marine insurance law;
whenever a vessel deviated from the route insured, the legal position used to be that
she was uninsured from the time she deviated as the voyage is different from that which
was insured.3 Concept arose from disputes on insurance policies where either the ship
or the cargo or may be both were lost during the voyage and insurance claims were
shielded by the insurers on the fact that the voyage insured for, was never performed.
“Where a ship without lawful excuse, deviates from the voyage contemplated by the
policy, the insurer is discharged from liability as from the time of deviation, and it is
immaterial that the ship may have regained her route before any loss occurs”.4 In
common law its origin is attached with Davis v. Garrett as it applies to contracts of
carriage. There is “a duty in the owner of a vessel whether a general ship or hired for
the special purpose of the voyage, to proceed without unnecessary deviation in the usual
and customary course”5 and this should be followed in the absence of a liberty clause.
1
The Deviating ship- by Steven F. Friedell .32 Hastings L.J. 1535 (1980-1981); J. Pritchard, Ancient near
eastern texts relating to the Old Testament 525 (3d ed J. Finkelstein trans, 1969).
2
Oswell v Vigne (1812) 15 East 70; provides idea on the concept.
3
15 (Lord wright) Rendall v. Arcos (1937)43 Com Cas 1 (HL), Hain Steamship Co v Tate & Lyle (1936) 55 Ll LR
159 (HL), 173 (Lord Atkin)
4
The Marine Insurance Act 1906, s.46(1)
5
Davis v. Garrett (1830) 6 Bing. 716 ,725 per Tindal C.J
6. 2
Chapter-1- Deviation in marine insurance (attachment and alteration of risk)
From its inception two factors where vital in deviation, firstly the act which amounts the
breach (geographically deviating from agreed voyage) and sec ondly the business
competence linking the cargo interests and the shipowners. The geographical deviation
still means the same but the business efficiency linking the cargo interests and ship
owners have evolved tremendously. The carrier inserted clauses which allowed them ‘to
sail, proceed and sky...’ at certain ports and in response to such clauses the cargo
owners tried to confine the significance of these clauses within the frame by insisting
upon the description and rationale behind the departure from the direct route.
What marine risk conveys The assured should have an insurable interest in the
subject matter insured only then he would be indemnified under a marine insurance
policy and the risk attaches from the moment the subject matter insured embarks upon
the voyage contemplated in the policy. If the risk is limited by time, the policy is a time
policy6 and if it is points of locality, then it is a voyage policy.7This discrepancy is
important to note, as the period for which the subject matter is insured depends on
whether it is written on time or voyage basis. ‘Every marine policy must either be a time
policy or a voyage policy or combination of both, and it cannot be something else’8.
There is implied warranty of seaworthiness in voyage policy and unless it is mentioned in
the contract, there is no implied warranty in time policy.9 Some general principles
applied to voyage policies will not apply to time policy; the doctrine of deviation, delay
and change of voyage will affect only policies written on voyage basis. In a voyage policy
the place where the risk commences terminus a quo is usually the port of departure, for
the ship and for goods it is the port of loading; the place where the risk ends terminus
ad quem is the destination port or port where cargo should be discharged.10
6
Arnould’s Law of Marine Insurance and Average (17TH
edn). chapter 14 para -02
7
MIA 1906 s.25 (1).
8
The Eurysthenes (1977) Q.B 49,73;
9
Arnould’s para 13-02; MIA 1906 S. 39.
10
Ibid Para 14-03.
7. 3
Description of the voyage The insured voyage must be described in the voyage policy
i.e. terminus a quo and terminus ad quem should be stated and described in such a way
that parties should know when exactly the subject insured is within the cover. And if the
vessel is to stop at intermediate ports, the policy should contain a clause providing
conditions in which the ship is allowed to halt. But in time policies, the policy will cover
any voyage the ship pursues and loss resulting from insured perils for the time covered
and once the risk is attached the insurer will have right to the full premium. 11 The
venture begins and ends with the term. But at times, the policy is worded: during the
expiry of the term, if the ship is at sea, the ship will be ‘held covered’ to her port of
destination (continuation clause)12 then in such cases the policy ends at port of
destination. Time policy may be written with local limits and in that case if the vessel
leaves the area specified in the policy there won’t be any cover. If insurance is stated to
have started from one date to another date, then the risk would not attach unless the
first date stipulated has begun and the cover will end on the last date given.13 And the
actual time the risk will attach and terminate depends on the place where contract is
executed, unless a different time is computed.14
‘At and From’ there is an implicit requisite that the adventure would commence within
a reasonable time under a voyage policy and the matter would be insured ‘at and from’
or ‘from’ a specific place and if the voyage has not been commenced the insurer may
avoid the contract15. Under the S.G form, the insured voyage would commence “at and
from” rather than simply “from” the terminus a quo, it’s because when it is simply ‘from’
the terminus a quo the risk would not attach unless it sailed for the insured voyage. But
when it is ‘at and from’, the vessel is deemed to be protected during the time she spends
at the port preparing for the insured voyage16. The MAR 91(commonly used) states
‘voyage’ or ‘period of insurance’. However with the advent of transit clauses even this is
11
Tyrie v Fletcher (1777) 2 Cowp. 666;
12
Institute time clauses (hulls) cl.2
13
Isaacs v Royal Ins Co (1870) L.R. 5 Ex.296 (fire policy)
14
Walker v Protection Ins Co, 29 Maine R. 317 (1849); 1 Phillips, S.949. English courts follow the same.
15
S.42 MIA 1906; Arnould’s Pg 437.
16
Motteux v London Ass Co (1739) 1 Atk.545 ; Forbes v Wilson (1800) Marshall, Ins. 206; 1 Park 472.
8. 4
less significant. But, if the hull cover is on voyage basis, it is necessary to define the
particular point ‘at’ which the cover begins and not merely ‘from’ the port of departure.
Attachment of risk The risk attaches only if the vessel embarks upon the insured
adventure; this applies to both time and voyage policies. Thus, “Where the place of
departure is specified by the policy and the ship instead of sailing from that place sails
from any other place, the risk does not attach”17 And similarly if the ship sails for other
destination than the one covered in the policy risk do not attach.18 And so is
unreasonably delayed commencement of insured voyage.19
A different voyage from what is insured, attaches no risk. In Simon, Israel & Co v
Sedgwick20 the cargo cover for the voyage ‘at and from Mersey, to any port or ports in
Portugal and/or Spain, this side Gibraltar, and/or at or from thence by any inland
conveyance, to any place or places in the interior’, any deviation or change of voyage
covered on an additional premium. The goods where shipped from Bradford to Madrid
and their discharge were anticipated ‘this side’ i.e. west of Gibraltar after the voyage at
Seville. But the shipment was in fact for discharge at Cartagena by error, on other side
of Gibraltar. The vessel was lost before it could reach the west coast and the assured
rendered additional premium for the mistake. The bills of lading (cargo) indicated ‘for
Cartagena’ and this means that, goods were never on the insured voyage and thus the
risk never attached to the lost cargo and the deviation clause could not be invoked. The
insurers refused to accept the additional premium in this case and the court upheld their
right to do so. Herein although the additional premium was paid, the risk did not attach;
hence the assured may be entitled to restitution by reason of a total failure of
consideration under s.84 (1) of MIA. Similarly, in Sellar v M’Vicar21 the insurers were
held not liable as the ship did not engage upon voyage insured. Herein the moment
master undertook to carry cargo from Demerara to Berbice which did not lie in the
17
MIA 1906 s.43.
18Wooldridge v Boydell (1778) 1 Doug 16.
19
Maritime Ins Co v Stearns [1903] 2 KB 912.
20
(1893) 1 QB 303 (CA)
21
(1804) 1 Bos & Pul( NR) 23.
9. 5
ordinary course of voyage from Demerara to London, the vessel is said to have departed
from the insured voyage.
Again, if the vessel does not embark upon the insured adventure, although the route
stipulated in the policy is followed; the underwriters would not be liable. In Way v.
Modigliani22 the policy was ‘from any port in Newfoundland to Falmouth or ports of
discharge in England at and from 20 october’. The vessel did pursue the voyage from
Newfoundland to England. But the insurers were held not liable as the vessel went on a
fishing voyage rather than sailing directly to England. The initial attachment of risk
would be there as the vessel did pursue the voyage from Newfoundland to England; but
the underwriters were not liable because of the deviation from insured adventure.
The subject matter insured is expected to embark upon the insured voyage and if that
voyage is not pursued the risk would not attach and in the absence of a cover, it would
be a burden for the carrier if the deviation is not justified or else it should be given cover
by payment of additional premium. But what happens if the loss occurs before the
dividing point i.e. whilst in common route. This was discussed in Wooldridge v Boydell23
where insurance cover commenced ‘at and from Maryland to Cadiz’. But the vessel sailed
to Falmouth and was lost in the initial common route. In such cases normally if the loss
had occurred before the deviation when the ship was in fact in the voyage insured, cover
should be given as there was initial attachment of risk. But herein evidence showed that
Cadiz was never considered to be the destination port. Hence no cover and held that
‘there cannot be a deviation from what never existed.’24
In Simon,Israel & Co v Sedgwick, although the insurance policy worded, ‘from the time
of leaving the warehouse in UK’ ;the argument that risk attached from the time the
goods left the warehouse in Bradford and the consequent error of loading for a port
beyond Gibraltar fell within the purview of the clause permitting deviation on the
payment of additional premium was rejected on the ground that, even if cover could be
22 (1787) 2 TR 30
23
(1778) 1 Dougl 17
24
Ibid 18 per Buller J.
10. 6
extended to incidental land or inland water transit, subject matter of the insurance is the
designated sea voyage.25 This reasoning was followed in The Prestrioka26 where a cargo
of rice was insured for an adventure ‘from Kohischang, Thailand to Dakar port, Senegal’
and it incorporated institute cargo clauses (A). The goods were taken on board of
Prestrioka and bill of lading was issued for Dakar. However ship never reached its
destination and was never known of but strong evidence showed that it was “a ‘Phantom
vessel’ destined before departure for disappearance and/or destruction having carried its
cargo to a port far from that anticipated by the cargo owners”.27The CIF purchasers of
rice claimed under the insurance which under the transit clause would cover risk ‘from
the time the goods leave the warehouse or place of storage for commencement of
transit’. But the court on the basis of s.44 stated that risk would not attach unless the
vessel embarks upon the insured voyage. The evidence in this case shows “no intention
to embark upon the insured adventure”. By following Simon, Israel v Sedgwick it was
held that marine adventure did not commence until the vessel carrying the subject
matter insured leave the named port to pursue the voyage insured.
Moreover, ‘where an insurer invokes s 44,the court will conduct ex post facto exercise to
determine not simply the contractual, but the actual, destination of the ship at the time
of sailing, which exercise depends upon the acts and intentions of the owners/or a
master at the time of its departure. If the court determines that, at the time of sailing,
vessel and cargo were in truth bound for a terminus ad quem other than that identified
in the policy as definitive of the voyage insured, then s 44 will apply and the risk which
prima facie attached when the goods left the warehouse will in the event be held not to
have attached’.28The risk would not attach if the subject matter was never intended to
embark upon the voyage insured. It is clear through these cases that a clause in the
policy cannot change the ‘fundamental nature of the policy’.29This ‘operates on the
assumption that the insured adventure takes place and on that basis addresses the
25
MIA 1906,ss 1-3.
26
Nima SARL v Deves Insurance plc ( The Prestrioka) (2003) 2 Lloyd’s Rep 327
27
Ibid Para 59 Per Potter LJ.
28
Ibid Per Potter LJ Para 53-54.
29
Howard Bennett-The Law of Marine Insurance (2nd
edn) 2006; pp 18.12.
11. 7
question of the commencement and termination of the risk’30 and if assured varies it the
underwriter is discharged.31 (‘The prestrioka’ and ICC 2009 will be dealt in next chapter)
Delay in commencing the risk The policy will attach at the place of departure and the
vessel won’t be covered there indefinitely. In Chitty v Selwyn32it was held that ‘if all
thoughts of the voyage are laid aside, and the ship lies there five, six or seven years,
with the owners privity, it shall never be said that the insurer is liable; for it would be
absurd to make him suffer for the whim or caprice of the owner, who chooses to let the
ship lie and rot there’33. This approach was followed in Grant v King34 ‘To discharge the
policy there must be a clear imputation of waste of time, mere length of time elapsing
between the sailing of the vessel and the underwriting of the policy, is not of itself
sufficient to avoid the policy; it is capable of explanation’.35 However this kind of delay
whether ‘for the purpose of voyage’, or not should be considered and should be clarified.
Furthermore, the delayed voyage should be in terms with policy agreed for and not
deviate from it36.
Alteration of risk (change of voyage, deviation, delay) -‘Any departure from the
voyage insured is sufficient to cause a variation of risk’.37Change of voyage is a
voluntary change of the destination from that contemplated by the policy after the
commencement of risk38. To identify change of voyage, identifying the insured voyage,
liberty clauses and the voluntary nature of it is necessary. Here the assured has no
intention to complete the voyage insured i.e. Termini ad quem would be changed. In
Simon, Israel & Co v Sedgwick39 - a ‘held covered’ clause cannot be invoked if the policy
does not attach and this means there can be change of voyage only after the risk has
30 Nima SARL v Deves Insurance plc( ThePrestrioka) (2003) 2 Lloyd’s Rep 327. Per Potter LJ at para 48; Nam
Kwong Medicines & Health Products Co Ltd v China Insurance Co Ltd (2002) 2 Ll Rep 591 (Hong Kong High
Court)
31
Per Blackburn J. Company of African Merchants ltd v British & Foreign Marine Insurance Co.Ltd (1873) LR 8
Ex 154,157.
32
Chitty v Selwyn(1742) 2 Atk 359
33
Ibid Per Lord Hardwicke.
34
Grant v King (1802) 4 Esp 175,176-7
35
Ibid 176-7 per Lord Ellenborough.
36
The law of marine insurance (2nd
ed) Howard Bennett. Pg 521.
37 Birrell v Dryer (1884) 9 App Cas 345
38
MIA 1906,s 45(1).
39 (1893) 1 QB 303;
12. 8
attached.40 In Thames & Mersey Marine Insurance Co Ltd v HT Van Laun & Co - the test
for determining whether an interruption of voyage amounts to a deviation only or is it a
change of voyage, is to identify whether the ultimate terminus ad quem remains the
same’41.But if the master ‘not acting on his own initiative, but on orders which morally as
a good subject he ought not to have resisted’42 is an excepted peril. Under s. 45(2),
‘unless the policy otherwise provides, where there is change of voyage, the insurer is
discharged from liability as from the time of change of voyage...’. provision stipulates
‘unless a policy otherwise provides’ and an example of such a policy is Cl-2 IVCH (83)
the ‘held covered’ clause states; “Held covered in case of change of voyage; provided
notice be given to the underwriters immediately after receipt of advices and any
amended terms of cover and any additional premium required by them be agreed”.
“When a ship is insured at and from a given port, the probable continuance of the ship in
that port is in the contemplation of the parties to the contract. If the owners, or persons
having authority from them, change their intention, and the ship is delayed in that port
for the purpose of altering the voyage and taking in a different cargo , the underwriters
run an additional risk if such a change of intention is not to effect the contract”.43
The unlawful departure from the route insured without changing the terminus ad quem
amounts to deviation in Marine insurance and discharges the insurer under the contract.
The risk will not re-attach if the ship rejoins the insured route after the deviation44. In
deviation the vessel departs from her usual and customary route but there is intention to
complete the insured voyage by returning to the course insured. Here the termini ad
quem is not changed. ‘Deviation from the voyage insured arise from after thoughts, after
interest, after temptation; and the party who actually deviates from the voyage
described, means to give up his policy. However, a deviation merely intended but never
40
Law of Marine Insurance- Susan Hodges (1996) Pg 60.
41
Thames & Mersey Marine Insurance Co Ltd v HT Van Laun& Co (1917) 23 Com Cas 104,110 per Lord Davey
42
Richard v Forest Land, Timber & railway Co ltd (The Minden) [1942] AC 50,109 per Lord Porter.
43
Tasker v. Cunninghame (1819) 1 Bligh 87. Per Lord Chancellor
44
Elliot v Wilson (1776) 4 bro PC 470.MIA 1906 .s 46(1).
13. 9
carried into effect is no deviation45. In all the cases of that sort, the terminus a quo and
ad quem, were certain and the same’.46
If the policy doesn’t specify any route the insured route would be the usual and
customary route47. ‘It is the duty of a ship, at any rate when sailing upon an ocean
voyage from one port to another, to take the usual route between those two ports. If no
evidence be given, that route is presumed to be the direct geographical route, but it may
be modified in many cases for navigation or other reasons, and evidence may always to
be given to show what the usual route is, unless a specific route be prescribed by the
(contract)’.48 Clauses are inserted in the contract of carriage which gives ‘liberty to touch
and stay’ at some specific ports and this liberty is to halt at only those ports prescribed
in the clause and those ports must be visited in the order given in the policy and if the
order is not mentioned then geographical order should be followed49. It also abstains
from halting at a port which might be sanctioned by usage in the absence of express
contractual term.50Furthermore such clauses would be construed in a way that the
vessels could touch those ports only in connection to the voyage.51
Once the vessel embarks upon the insured voyage, there is cover for that particular
voyage and cover ceases to exist when there is actual deviation and not merely intention
to deviate.52 From the point the vessel deviates the cover is lost and the insured route
pursued till the deviating point will be covered. However if evidence prove that a
different destination was ventured upon then no cover as the ‘insured adventure’ is the
subject matter of marine insurance. And ‘it is immaterial that the ship may have
regained her route before any loss occurs.’53‘A deviation never puts an end to the
45
MIA 1906, s.46(3)
46
Wooldridge v Boydell (1778) 1 Doug 16, 18
47
MIA 1906- s. 46(2).
48
Reardon Smith Line Ltd v Black sea & Baltic general insurance co ltd (1939) AC 562,584.
49
Beatson v Haworth (1796) 6 TR 531; Marsden v Reid (1803) 3 East 572; The Dunbeth (1897) P 133; MIA
1906 s. 47(1 &2); Law of Marine Insurance (2nd
edn) 2006- Howard Bennett, Pg-528;
50
Elliot v Wilson (1776) 4 Bro PC 470; Law of Marine Insurance (2nd
edn) 2006- Howard Bennett, Pg-528.
51
Hammond v Ried (1820) 4 B &Ald 72; MIA 1906, Sch 1 , R 6.
52
MIA 1906, S.46 (3)
53
MIA 1906, S.46 (1)
14. 10
insurance, unless it be the voluntary act of those who have the management of the
ship.’54
Unreasonable delay in conducting the voyage insured might result in the termination of
the policy in the same way as in the case of change of voyage and deviation. S.48
requires the adventure to be prosecuted with ‘reasonable dispatch’. Whether this
prosecution is with reasonable dispatch is a question of fact.55And reasonableness is to
be determined ‘not by any positive and arbitrary rule, but by the state of things existing
at the time at the port where the ship happens to be’56- Phillips v. Irving. If without
lawful excuse the insured adventure is not prosecuted, the insurer is discharged from
liability as from the time when the delay became unreasonable.57 Delay is considered to
be reasonable if it was a result, to obtain a permit from authorities58 or shortage of
tonnage in wartime and more importantly the delay should be to promote the insured
voyage.59 Deviation and delay are considered to be grounds for termination of the policy
and it could be excused in certain circumstances; by referring to s.46 and s.48 it is clear
that in deviation the departure without ‘lawful excuse’ and in delay prosecution of
adventure without ‘reasonable dispatch’ might bring the policy to an end (ICC cl 18 -
avoidance of delay is a reflection of this section) S.49 deals with excuses for deviation or
delay (discussed in chapter -4) .The assured will not lose cover in cases where deviation
or delay was due to ‘necessity’.
54
Scott v Thompson (1805) 1 B & P NR 181, 186 per Sir James Mansfield C J.
55
S.88 MIA 1906; Bain v Cove (1829) 3 Car & P 496.
56
Philips v.Irving [1844] 7 Man & G 325 at 328 Per Tindal CJ
57
S.48 MIA 1906.,
58
British- American Tobacco Co Ltd v. HG Poland (1921) 7 Lloyd’s law Rep 108.
59
Niger Co Ltd v. Guardian Assurance Co (1922) 13 Ll law Rep 75; Law of marine insurance- Howard Bennett
(1996) pg 530.
15. 11
Chapter-2 Held covered clauses & ICC 2009
Held covered clauses; The held covered clauses came into existence in the late
nineteenth century.60 These clauses protect the assured by extending the cover within
the limits of the cover agreed and it works on the, discretionary right to demand an
additional premium and/or amended terms of the cover.61 ‘ The whole object of the
clause is to keep the underwriter on risk, notwithstanding that, in the absence of the
clause, he would be discharged from liability or the risk would fall outside the policy’.62
The departure from the insured adventure agreed to be protected by h/c clause should
be viewed strictly in conjunction with the wording of the clause invoked.
The institute cargo clauses (a) (b) (c) ICC (examples of h/c clauses)An example of
clauses which lessen the doctrine of ‘alteration of risk’ include ICC (A), (B), (C) Cl 8,9 &
10 and they should be considered together.
Cl 8.3 states ‘this insurance shall remain in force (subject to termination as provided for
in clauses 8.1.1 to 8.1.4 and to the provisions cl 9 below) during delay beyond the
control of the assured, any deviation, forced discharge, reshipment or transhipment and
during any variation of the adventure arising from the exercise of a liberty granted to
carriers under the contract of carriage’
Under the Institute cargo clauses 1/1/09, the risk attaches the moment goods are ‘first
moved in the warehouse or at the place of storage (at a place named in the contract of
insurance) for the purpose of immediate loading into or unto the carrying vehicle or
other conveyance for the commencement of transit’ and this means the cover begins
from the time its ‘shelf to unloading’.63 And terminates “(Cl 8.1.1) on completion of
unloading from the carrying vehicle or other conveyance in or at the final warehouse or
place of storage at the destination named in the contract of insurance, (same effect as
82’ clause).
60
Held covered clauses in marine insurance- Prof. Rhidian Thomas. Pg -1.
61
Ibid Pg -2; Bennett, The law of marine insurance (2006,OUP,Oxford) pp,308-316;
62
Liberian Insurance Agency Inc. v. Mosse(1977) 2 Ll Rep. 560,567; Per Donaldson J.
63
Insuring cargoes in the new millennium: The Institute Cargo clauses 2009 by John Dunt and William
Melbourne, Pg 120.
16. 12
(cl 8.1.2) on completion of unloading from the carrying vehicle or other conveyance in or
at any other warehouse or place of storage, whether prior to or at the destination named
in the contract of insurance, which the assured or their employees elect to use either for
storage other than in the ordinary course of transit or for allocation or distribution, or (cl
8.1.3)-when the assured or their employees elect to use any carrying vehicle or other
conveyance or any container for storage other than in the ordinary course of transit,
(these clauses refer to the election to store in warehouses and also to store in vehicles
or in containers other than in the ordinary course of transit).
(cl 8.1.4) on the expiry of 60days after completion of discharge over side of the subject-
matter insured from the oversea vessel at the final port of discharge, whichever shall
first occur”64 (Termination of cover, on expiry of 60 days after discharge from the
vessel). This revision in cl.8 provides wider cover i.e. policy covers any loss incurred
within the warehouse if stored for immediate loading for commencing the contemplated
transit. However, ‘The policy does not attach if the adventure insured is for carriage by a
named vessel and the goods are never appropriated by a contract of carriage to that
insured voyage but are shipped by some other vessel’.65The insurance will cease to exist
if the goods remain in the carrying vehicle and the assured or its employees elect to use
it for storage other than ‘ordinary course of transit’. And this transit should be pursued
with ‘reasonable dispatch’ stipulated in s.48 and cl.18 of ICC. According to cl.9, it would
be considered prudent for an assured to inform the insurers in the happening of a
serious casualty or possible delay, instead of waiting till the notice of termination is
received and under the ‘prompt notice’ referred to in this clause the insurers are entitled
to charge an additional premium but under clause 10.1 referred below, the same term
refers to reasonable market rate and reasonable market terms. There is a difference in
the approach of these two clauses but the similarity is in the fact that they deal with
change of circumstances once the insurance is attached under cl 8.
64
Institute cargo clauses 2009
65
Arnould’s law of marine insurance and average- (first supplement to the 17th
edn by Jonathan Gilman QC,
Professor Robert Merkin ) Pg 83; The prestrioka;
17. 13
ICC cl -10.166 –once the destination is changed after the attachment of this insurance,
the assured should provide prompt notice to the insurer so that rates and terms could be
agreed at. But if the loss occurs prior to such agreements, the cover could be obtained
only if it is available on reasonable commerc ial market rates on reasonable market
terms67. This part of the clause covers ‘held covered’ provision. But after the revision of
this clause in 2009, usage of the term ‘held covered’ have been avoided because of
misunderstandings related to the ambit of the term as it was misconstrued as
‘guaranteed cover’ even in situations where cover was not available on reasonable
commercial market rates.68
The revision made the clause ‘understandable’ for the assured with no knowledge about
the operation of held covered clause and MIA 1906. It explains the ambit of the
additional cover available i.e. whenever such cover was commercially available in market
and this avoids the misconception of treating the ‘held covered’ as guaranteed cover,
even in situations where cover is not available at reasonable commercial market rate;
the clause also stipulates the results where loss occur before the rates have been agreed
for the continuation of cover. ‘The assured seeking the benefit of the clause must give
prompt notice to underwriters of his claim to be held covered as soon as he learns of the
facts which render it necessary for him to rely upon the clause and clause only applies if
the premium to be arranged would be such as could properly be described as a
reasonable commercial rate’.69
Clause 10.2 of ICC solves the ‘Phantom ship’70 problem and accordingly “where the
subject matter insured commences the transit contemplated by this insurance
(accordance with cl 8.1), but, without the knowledge of the assured or their employees
66
ICC 2009 Cl. 10.1 “Where after attachment of this insurance, the destination is changed by the assured, this
must be notified promptly to insurers for rates and terms to be agreed. Should a loss occur prior to such
agreement being obtained cover may be provided but only if cover would have been available at a reasonable
commercial market rate on reasonable market terms”.
67
Clause 10.1 – (voluntary change of voyage) ICC 2009; Held covered clauses in marine insurance- Prof.
Rhidian Thomas. Pg -131.
68
Liberian Insurance agency v. Mosse [1977] 2 Lloyds Rep 560 per Donaldson J at p.568.
69
Liberian Insurance Agency Inc v Mosse (1977) 2 Ll Rep 560 per Donaldson J
70
‘A phantom vessel is a ship with no traceable registration, controlled by fraudsters and used to steal
cargoes’- Bennett, para. 18.12, fn.17
18. 14
the ship sails for another destination, this insurance will nevertheless be deemed to have
attached at the commencement of such transit”. This provision came to being after ‘The
Prestrioka’. In this case S.44 was applied and the assured could not get cover for the
theft of their cargo. The ground on which they were rejected cover was that the risk
never attached (did not embark upon the insured voyage); hence the warehouse to
warehouse cover (transit clause) could not be relied. It was decided that the transit
clause did not displace or avoid s.44. The transit clause is an example of the extension of
a marine insurance policy to a land risk ‘incidental to’ the sea voyage as permitted by s.2
of MIA and it does not alter the fundamental nature of the marine insurance policy. The
clause operates on the assumption that marine adventure takes place and if that
adventure is never embarked upon, the insurer will not be liable under s.44. (cl 10.2)
wording ‘This insurance will nevertheless be deemed to have attached’ will operate to
cancel the effect of s.44. Now if the vessel sails for another destination than the one
prescribed in the policy the risk will attach under cl 8.1 of the transit clause. But this is
conditional to the fact that the vessel should sail for such other destination without the
“knowledge of the assured or their employees.”
Furthermore, in Institute war clauses (cargo) cl 6, Institute strike clauses (cargo) cl 7
the change in voyage is held covered provided certain conditions are accomplished.
Other examples of h/c clauses include ‘change of voyage clause’ IVCH 83’ & 95’ -Cl.2
“Held covered in case of deviation or change of voyage or any breach of warranty as to
towage or salvage services, provided notice be given to the underwriters immediately
after receipt of advices and any amended terms of cover and any additional premium
required by them be agreed”. ITCH 83’ & 95’- Cl.3 “Held covered in case of any breach
of warranty as of cargo, trade, locality, towage, salvage services or date of sailing,
provided notice be given to the underwriters immediately after receipt of advices and
any amended terms of cover and any additional premium required by them be agreed”
Practicality-The insurer will indemnify the assured only to the extent specified in the
policy. Even the policy which covers ‘all risks’ is not what it appears to be on its
19. 15
face.71Firstly, the risk undertaken by the insurer would be limited to the subject matter
of the insurance, say ship, cargo, freight or any other interest. In Overseas Commodities
Ltd v. Style72the cargo did not bear the markings which formed the part of the subject
matter insured and as a result h/c clause which was incorporated in the cargo policy
ceased to operate. It was held that the assured could not correct the ‘wrong marking’
and considered this a sufficiently valid reason for not applying the clause73and this was
also upheld in Hood v. West End Motor Car Parking Co.74 Furthermore, the subject
matter insured should be stated in the policy with reasonable certainty75 and the
construction of the words must be in conjunction with MIA, trade, market usage and
more importantly the intention of parties76. Secondly, the insurer would indemnify the
assured only against risks that are insured and in order to recover, the loss should be
caused by an insured peril and it should also appropriate a test of causation. If it is not
an insured loss, there is no right of recovery under the policy.77But a well constructed
h/c clause may safeguard the limitations of the policy. In Greenock Steamship Co. Ltd v.
Maritime insurance Co.Ltd78 the clause stated, ‘held covered in case of.....unprovided
incidental risk...at a premium to be hereafter arranged’ the effect of the clause was an
issue and it enabled the assured to get additional cover for incidental risk not stipulated
in the policy. ‘Incidental’ is construed in a restricted sense and would not cover risks
which are wholly independent. But it would ‘cover risks which are incidental to the risks
already covered under the policy’79. In this case the held clause was to apply even when
the matter for which the ship was held covered wasn’t discovered until the loss occurred
and the additional premium the insurer would demand has to be calculated as ‘if the
71
British and foreign Marine insurance Co. v. Grant ( 1921) 2 A.C.41; Held covered clauses in marine
insurance- Prof. Rhidian Thomas (vol.2) pg 13.
72
(1958) 1 Lloyd’s Rep .546.
73
Overseas Commodities Ltd v. Style (1958) 1 Ll Rep .546; ; Held covered clauses in marine insurance- Prof.
Rhidian Thomas pg 14;
74
Hood v. West End Motor Car Parking Co (1916) 2 K.B. 395 (CA); In this case goods which were not intended
to be covered by the policy were shipped.
75
S. 26(1) MIA 1906.
76
MIA 1906, First schedule , Rules for construction of policy, rules 15-17, S.26(3-4).
77
MIA 1906, s.55 (1).
78
(1903) 1 K.B. 367.
79
Held covered clauses in marine insurance- Prof. Rhidian Thomas (vol.2) pg 15.
20. 16
parties had known of the deviation at the time that it happened’.80 Thirdly, Risks of
maritime nature could be underwritten in time or voyage basis or may be a combination
of both.81 In present times, policies in voyage basis are more in cargo insurance, and in
case of hull and machinery insurance voyage-based risk are taken only in particular
circumstances. S.42-49 of MIA deals with the voyage and the effect of these provisions
is to define the risk taken up by the underwriter when the policy is on voyage basis. In a
voyage policy, place of departure and destination are stipulated and the voyage should
be pursued with reasonable dispatch throughout without delay, deviation unless they are
excused. If the actual voyage performed is not according to the policy then the
underwriter would not be liable. Fourthly, risks underwritten in time basis; in time policy
the insurer takes up the risk for a specific period of time. Earlier it was twelve months
and now it depends upon the contract; and the time from which cover commences and
terminates is dependent on the construction of words in the policy. Only loss falling
within insured period is covered i.e. pre- or post-date losses will not be covered.
Sometimes the attachment of cover depends on assureds’ duty of utmost good faith in
case of ante-dating of the cover. And when ship is at sea when policy ends there should
be h/c continuation clause to give extended cover. ITC (Hulls) cl 2 provides for h/c in
such situations. This h/c clause would apply, if at the time of the termination of policy
the vessel insured is at sea and in distress or at port and in distress; Furthermore, notice
should be served by the assured before the expiry of the original cover and pro-rata
monthly premium should be paid too.82 Time policies are common in hull and machinery
insurance and also in mutual cover provided by P & I clubs.83 Fifthly, the insurance has
territorial limits and its connection with additional cover is such that by the payment of
additional premium and after giving notice the vessel insured can move out of the
territorial limits (eg: Institute war and strikes clause (cl 6)84) and Finally the subject
matter in risk insured might have certain specific ways through which they should be
80
(1903) 1 K.B. 367; Law of marine insurance by Susan Hodges p.62(1996)
81
S.25(1) MIA 1906.
82
Held covered clauses in marine insurance- Prof. Rhidian Thomas (vol.2) pg 20.
83
The insurance runs for 12months from noon GMT on 20th
February.
84
‘Held covered subject to prompt notice and a premium to be arranged, in the event of the named storage
vessel proceeding outside the limits of the area specified in this insurance’
21. 17
employed and it would be contemplated in the policy if the assured employs it in a
contradicting manner there won’t be any cover. But again this could be tackled with the
help of a h/c clause ( eg: Institute clauses hulls cl 1.4).
Notice Under h/c clause due notice must be given by the assured on receipt of advice of
a deviation. In Mentz, Decker & Co v. Maritime insurance Co85 Question arose as to
whether a notice given after the loss was effective and following the Greenock steamship
Co v. Maritime insurance, the court held that notice given by the assured, though given
after loss, was sufficient to satisfy the terms of the clause. It was opined that delay
should not prevent the assured from recovering under the policy ‘if nothing practical
could be done on receipt of the notice’.86Moreover ‘it is an implied term of the provision
that reasonable notice should be given that it is not competent to the assured to wait as
long as he pleases before he gives notice and settles with the underwriter what extra
premium can be agreed upon’- Thames and Mersey Marine Insurance Co v. Van Laun.87
But under IVCH(83) the term ‘reasonable notice’ has no implication and rather
’immediately’ stipulated in cl 2 applies and it demands urgency than reasonable time .
Hence once the assured is aware of the happening of the event he will have to give the
notice to the insurer.
Additional premium-The insurer can demand an additional premium for the additional
cover he provides through h/c clauses. The underwriter by adding h/c clauses extends
the purview of the cover and accepts additional risk by accepting additional premium,
here understanding the wording of the clause against which h/c clause provides cover is
important as the extended cover depends on it. Therefore a clause which covers ‘change
of voyage’ and ‘deviation’ will not operate where the risk never attaches.88Depending on
the construction of the clause, it could be understood whether there is a conditional
obligation to the assured, with additional premium payable only when it is demanded by,
85
(1910) 1 KB 132
86
Ibid per Hamilton J pg 135.
87
(1917) 23 Com Cas 104 at p 109,HL per Lord Halsbury LC
88
Wooldridge v. Boydell (1778) 1 Doughl 17; Simon Israel & Co v. Sedgwick [1893] 1 Q B 303; Maritime
Insurance Co. v. Stearns [1901] 2 K B 912; Bennett, The law of marine insurance (1996,OUP,Oxford) pg 558.
22. 18
the insurers89; and in such cases the phrase ‘if required’ would be used.90 However,
some clauses are drafted in a way which makes it obligatory for the assured to pay
additional premium and this depends on the construction of the words implied in the
clause. Furthermore, h/c clauses show that insurers can either accept or reject the
premium depending upon the risk they have to cover but courts would require strict
language before recognizing that the underwriters had lost their right of election.91At
times the additional premium paid to the insurer would be more than the indemnity
assured seeks to recover; in Greenock steamship Co v. Maritime Insurance Co Ltd the
vessel was unseaworthy (inadequate fuel) and in order to avoid danger, master burned
the ship’s fittings, spars and cargo which resulted in a general average sacrific e which
the insurance covered on the happening of breach of warranty; and the court in this case
holds the opinion that ‘the parties must assume that the breach was known to the
parties at the time it happened, and must ascertain what premium it would then have
been reasonable to charge’92 here the breach was not discovered until the loss occurred.
Accordingly the insurer would reasonably charge the parties a premium worth the value
of the sacrifice and an additional premium for the increased risk of the loss of vessel.
Furthermore, the insurer is expected to charge reasonable additional premium
depending on the extra risk undertaken and may not ‘amend the terms’ of the cover
unreasonably for his benefit under h/c clause.
Utmost Good Faith ‘A condition precedent to the application of the clause’93 and ‘to
obtain the protection of ‘held covered’ clause, the assured must act with the utmost
good faith towards the underwriters, this being an obligation which rests upon them
throughout the currency of the policy’.94However, this duty is limited to the prudent
underwriter’s assumption in extending the cover under the clause.
89
The term ‘Insurers’ replaced the term ‘underwriters’ in clause 9 of ICC 2009.
90
Examples: Institute cargo clauses (A), (B) and (C), Clause 9.
91
Held covered clauses in marine insurance- Prof. Rhidian Thomas. Pg -38.
92
Per Bingham J. (1903) 1KB 367 at 375;
93
(1977) 2 Ll Rep 560 per Donaldson J at 567
94
Overseas Commodities Ltd v Style (1958) 1 Ll Rep 546,559 Per McNair J
23. 19
Chapter-3 Deviation in contracts of Carriage
Deviation from the Latin word De via, ‘from the way’, has two significant meanings (1)
wandering from the way of course or the act of turning aside (English concept mostly
confined to this) and (2) is to err or transgress (U.S concept).95 If the ship deviates, the
entire bill of lading is invalidated, and the warranty that the goods will reach at the
destination securely on time, is substituted. The carrier by making variation in the risk
releases the underwriter. This invalidity of the contract makes the carrier a common
carrier (carrier becomes insurers). Unreasonable delay, in performing the contract is
deviation as it increases the risk of the voyage but the delay should be ‘such as to
substitute an entirely different voyage for that contemplated by the bill of lading’96
Usually, the shipowner undertakes that the vessel will pursue the route contracted for
the performance of the contract; ‘any intentional and unreasonable change in the
geographic route of the voyage contracted’97 would amount to deviation. To find
whether a deviation has occurred, the precise route envisaged in the contract of
affreightment should be ascertained. In common law the shipowner is under an
obligation to follow ‘the usual and customary course’.98 And this route is presumed to be
‘the direct geographical route between the port of loading and discharge’99 and the direct
geographical route or customary route should be followed in the absence of an express
provision in the charterparty. ‘Direct geographical route should be followed, but the
shipowner can prove that a different route is the customary one’; 100the voyage pursued
could vary for navigational reasons, such as, the necessity to avoid harsh weather
conditions or the draught restrictions for a particular vessel. The departure for bunkering
is justified101 and so is call at intermediate ports by vessels operating in liner trade;
however, if a vessel deviates from the route because of negligence, it will not be a
95
11 JILE 147 (1976-77) ‘Deviation in the law of Shipping- U.S, U.K. and Australia a comparative study’.
96
Brandt v Liverpool S.N.Co (1924) 1 K.B. 575 Per Atkin LJ at 661
97
Tetley p 1812.
98
Davis v. Garratt (1830) 6 Bing 716,725;
99
Reardon Smith Line v. Black sea and Baltic general Insurance (1939) 64 Ll LR 229 per Lord Porter
100
Ibid; Achille Lauro Fu Gioacchino & Co v. Total Societa Italiana Per Azioni (1969) 2 Ll LR 65, 67-668 ( Lord
Denning MR)
101
Ibid 101
24. 20
deviation and the shipowner will be able to raise the defence of ‘negligence in
navigation”102.The performance of the contracted voyage via the direct geographical
route between two ports is expected; and in order to avoid such an obligation, contracts
of carriage may include clauses to allow other routes other than the direct geographical
route. example: Clause 5 of Conebill 2000.
Departure from direct route for navigational reasons -vessels do not pursue the exact
direct route in practice and are required to follow only ‘the ordinary sea track of such a
voyage according to a reasonable construction of that term’.103 The precise route may
differ for navigational purposes i.e. to avoid hurricanes or ice or to avail favourable
weather conditions. And such departure would not fall under departure from usual and
customary route’.104
Departure for bunkering purpose -Some voyages do have this feature. If calling at ports
for bunkering purpose is a usual practice (provided the bill of lading is consistent with it)
for the vessels in a particular trade or line, then calling at those ports for bunkering
during the course of the voyage will not be deviation and departure of this kind would be
considered as part of usual and customary route105.
Justifiable deviation (a) common law (b) hague visby rules
(a) Common law permits deviation from direct route in few circumstances and they are:
Saving human life or to communicate with a vessel in distress - deviating to
assist and save human life on seas doesn’t invalidate the contract rather it is considered
as a moral duty. ‘Deviation for the purpose of saving life is protected and involves
neither forfeiture of insurance nor liability to the goods owner in respect of loss which
would otherwise be within the exceptions of ‘peril of the seas’. And as a necessary
consequence of the forgoing, deviation for the purpose of communicating with a ship in
102
(1939) 64 Ll LR 229 ;Hague-Visby Rules
103
Leduc v. Ward (1888) 20 Q.B.D 475,481 per Lord Esher
104
Morrison v. Shaw Savill (1916) 2 K.B 783,797 per , Phillimore L.J; also cited in Reardon Smith v. Black sea
Insurance per Lord wright
105
Voyage charters (Lloyds shipping law library) chapter 12,pg 236; (1888) 20 Q.B.D 475; (1916) 2 K.B 783.
25. 21
distress is allowed, in as much as the state of the vessel in distress may involve danger
to life. However deviation for the sole purpose of saving property is not thus privileged,
but entails all the usual consequences of deviation. If therefore, the lives of the persons
on board of a disabled ship can be saved without saving the ship, as by taking them off,
deviation for the purpose of saving the ship will carry with it all the consequences of an
unauthorised deviation’.106 In this leading case, the vessel not only deviated to save the
crew but also tried to earn salvage. And whilst towing she was lost and grounded with all
her cargo. Such a deviation was held unjustifiable and the charterers (claimants) could
recover the value from the shipowners(defendants). Thus it is established in common
law that deviation for saving life is justified but not saving property. However in cases
where there is more than one reason to deviate, the court should look into the primary
motive and check whether such motive is to save life or to save property.
Furthermore, there is a statutory duty prevalent in several countries, which obligates
saving life at sea principally during distress. An example of the same is S-93 of Merchant
Shipping Act 1995. This obligation is applicable to masters of UK ships and on the
masters of foreign ships when in UK waters and ‘the breach of this obligation would
result in summary conviction, imprisonment for a term not exceeding six months or a
fine not exceeding the statutory minimum,’or both’.107However, this obligation applies
only in territorial waters and not in high seas.
Avoiding danger to ship or cargo; The danger to ship or cargo should be of a
reasonable permanent nature. The master of the ship may deviate justifiably if the
safety of the ship and its cargo is at jeopardy. In The Teutonia108, war broke out and the
master deviated to make inquiries. It was held that ‘the whole situation should be taken
into account to understand whether or not deviation is in fact justified and it could be
even obligatory in certain situations’ and hence justified. The Anastasia109- it was held
that disobeying the orders of a charterer where the master knew that following it would
106
Scaramanga v. Stamp (1880) 5 CPD 295 (CA), 304.per Cockburn CJ.
107
S.93(6) of The Merchant shipping Act 1995.
108
Duncan v. Koster ( The Teutonia) (1872) LR 4 PC 171
109
The Anastasia (1971) 1 Ll Rep 375
26. 22
result in danger to the vessel would not amount to an unlawful deviation and ‘the master
has a duty to exercise his own judgement and she should not perform his duties merely
at the whim and dictat of the vessel’s owner or charterer’ (apprehension of peril not
justified in MI). In Kish v Taylor, the vessel was overloaded with deck cargo which made
it unseaworthy and she deviated from her contracted route to a port for repairs. It was
decided that ‘deviation would be justified although it resulted from initial
unseaworthiness for according to them justification should be given to the existence of a
danger and not in its cause’ (U.S courts contradictory view- held that deviation not to be
justified where the shipowner was aware of the unseaworthy condition of the vessel
before it sailed110). However compensation in the form of damages would be available
for any loss including delay resulting from the initial unseaworthiness111. The rationale
followed is that, it is the peril and not its cause which determines the character of the
deviation. On the same, Carver112 and Payne & Ivamy113 are of the view that if/when the
ship becomes unseaworthy, and once the shipowner know of the vessel’s poor state on
sailing, the master must not be forced to choose between risking the life and property
concerned and changing courses to maximize safety.
Furthermore, Carver114 views, that if the safety of the adventure requires the master to
go out of course, then he is not only justified in doing so, but it might become his duty in
performance of the contract made with the owners of the cargo. However, there is
uncertainty in law regarding situations where the risk is to cargo alone. If the
continuation of voyage would result in substantial damage to the cargo, the master
might be under a duty to deviate to protect the interests of the cargo owners- The Rona
(No 2)115 and it was also decided in this case that seaworthiness must exist at the
commencement of the voyage and it is not a breach of condition of seaworthiness if the
ship later falls below standard. Similarly if essential repairs require deviation, the
110
The Louise (1945) AMC 363
111
(1912) AC at pp 618-619
112
3 Carver, British Shipping Laws 601 (2 ed. 1963)
113
L. Payne and E.Ivamy, Carriage of goods by sea 19,29 (1972)
114
3 Carver, British Shipping Laws 598 (2 ed. 1963)
115
The Rona (No 2) (1884) 51 LT 28
27. 23
particular route pursued may be acceptable even though only cargo interests are
protected by the new route taken- Phelps v. Hill.116
But the chaos is in cases where the apprehended damage is slight or effects only part of
the cargo, the popular view is that in such cases ‘there is no requirement for a master to
deviate for the sole purpose of saving a part of cargo’.117 Moreover, such deviation being
justified depends upon the comparison between the gravity of the danger and the
inconvenience and expense of taking the avoiding action118.Again the ship could be taken
into port to discharge dangerous cargo if it was loaded by the charterer without the
knowledge of the shipowner. And if the charterer has breached the contractual duty to
load full cargo, the master may duly be permitted to deviate to acquire more cargo119.
(b) Under the Hague and Hague- Visby Rules The Hague/Visby Rules(Art IV rule
4)120 states ‘deviation in saving or attempting to save property at sea and any
reasonable deviation’. The purpose is to protect the shipowners by adding deviations to
save property and reasonable deviations to the existing list of deviations which are
justifiable at common law.121 ‘Any reasonable deviation....’ referred herein depends on
the facts in each case. In Stag Line v Foscolo, Mango & Co122, the vessel deviated to land
two engineers who were taken on board for testing the fuel-saving apparatus. On leaving
that port she stranded and cargo was lost. The deviation was not considered as
‘reasonable’ by the House of Lords and the shipowner couldn’t rely on the Hague rules
protection. The question raised was ‘whether a deviation could be reasonable if it was
not in the interests of both ship and cargo’ and Per Lord Atkin- ‘the true test seems to be
what departure from the contract voyage might a prudent person controlling the voyage
at the time make and maintain, having in mind all the relevant circumstances existing at
the time, including the terms of the contract and the interests of all parties concerned,
but without obligation to consider the interests of anyone as conclusive’
116
Phelps v. Hill (1891) 1 QB 605
117
Notara v. Henderson (1870) LR 5 QB 346.
118
Wilson-P 19
119
Wallem v. Muller (1927) 2 K.B 99; Wilson- P 19
120
The Hague Rules are identical on this point.
121
Wilson- p 208.
122
(1932) AC 328
28. 24
There is Uncertainty regarding relation between express liberties to deviate contained in
the contract of carriage and the provisions of Art IV rule 4. The courts considering those
liberties to be ‘ reasonable’ within the meaning of art iv depends on the facts; and If
those liberties do not fall within ‘reasonable deviation’ in Art iv then they might fall under
Art iii r- 8 which renders void any clauses which derogates from the protection offered by
the rules. However the popular view which avoids such conflict is that, ‘the object of the
rules is to define, not the scope of the contract of service, but the terms on which that
service is to be performed’.123
Liberty Clauses Deviation from the contracted route would be justified by inserting
express clauses known as liberty/ deviation clauses. Through these clauses the
shipowners expand their right to deviate and to call at any port during the course of the
voyage without being questioned about its reasonability. Here the shipowners come to
an agreement with shippers, which grants them express liberty to deviate by inserting
the ‘liberty clause’124. Paradoxically, it may so happen that ‘such a liberty clause may
limit the common law rights of the master to deviate if the provisions give the vessel an
express right to deviate in situations not under the cover of the deviation in question and
in such circumstances the shipowner may be estopped from relying on his implied right
at common law to deviate on the principle expressum facit cessare taciturn i.e. a liberty
which is in conflict with an expressed liberty will not be implied’125.
Nevertheless in present times almost all liberty clauses are worded in such a way as to
include almost all kinds of deviation. In Leduc v. Ward126 the Bill of lading gave ‘Liberty
to call at any port in any order and to deviate for the purpose of saving life or property.’
The vessel deviated for the shipowners private business and was lost in a storm. The
court held that the shipowner was liable because the clause merely gave right to call at
any ports in the ‘ordinary course of voyage’. But the twist in inserting such a liberty
clause is that it should be in rhythm with the voyage contemplated. ‘The liberty to
123
Renton v Palmyra (1956) 1 QB 462 at p 510; Stag Line v Foscolo, Mango & Co (1932) AC 328 ;
124
11 JILE 147 (1976-77) ‘Deviation in the law of Shipping- U.S, U.K. and Australia a comparative study’.
125
3 Carver, British Shipping Laws at 602; United States Shipping Board v. Bunge y Born (1925) T.L.R. 174.
126
(1888) 2. Q.B. 475
29. 25
deviate and the described voyage must be read together and reconciled, and that a
liberty, however generally worded, could not frustrate but must be subordinate to the
described voyage’.127
For example: Glynn v. Margeston & Co128, a case where liberty clause overlapped with
that of the voyage contemplated. The clause suggested the ‘liberty to proceed to and
stay at any port or ports in any rotation’. The cargo damaged because of the delay
caused by deviation which was duly allowed as per the liberty clause. But by focussing
on the conflict between general printed conditions (liberty clause) and special conditions,
the court upheld that the shipowners were liable for the decayed cargo as it happened as
a consequence to the delay and stated that, ‘the general words must be limited so that
they shall be consistent with and shall not defeat the main object of the contract ing
parties’.129 Here the confusion was in the words “in any rotation” and in Leduc v Ward
the words were ‘in any order or any rotation’ and it was held that vessel may take only
those ports which are substantially on the course of the voyage’- Lord Esher.
However, this effect of following the geographical routing could be cancelled if the clause
gives clear direction as to the route to be followed. In Connolly Shaw Ltd v. A/S Det
Nordenfjeldske D/S130, the carriage contract was to carry lemons from Palermo to
London. The vessel went to other ports and then steamed for London. The liberty clause
allowed ‘to call at any port or ports, whether beyond the route of the port of delivery or
not, which she could call at in the course of her voyage without frustrating the object of
the voyage namely the safe carriage of a perishable cargo’.131 This means the ship could
go wherever she pleased but the purpose of the contract should not be frustrated. The
cargo of Lemons did reach London in good condition but their price fell by the time the
vessel reached London and this frustrated the contract.
127 Frenkel v MacAndrews & Co Ltd (1929) AC 545 per Viscount Sumner.
128
(1893) AC 351 (HL).
129
(1893) AC 351 (HL) Per Fry L.J; (1934) 39 Com. Cas. 259, 268 Per Scrutton L.J, ‘ To call at any ports in any
order whether in or out of the route’ should be limited by the purpose of the contract
130 (1934) 49 Ll LR 183
131
Connolly Shaw Ltd v.A/S Det Nordenfjeldske D/S (1934) 49 Ll LR 183 Per Branson J
30. 26
No two charterparties or bills of lading are the same; the liberty clause could be worded
in any way as to make provision for any number of eventualities, including the possibility
of strikes.132 In GH Renton & Co Ltd v. Palmyra Trading Corp of Panama (the
Caspiana)133 the bill of lading stated, carriage to ‘London or Hull so near thereunto as the
vessel may safely get’. The direct route was not stipulated. Strikes broke out in both
London and Hull; so the shipowners ordered the vessel to proceed to Hamburg and
discharge the cargo. The plaintiffs (the endorsees of Bill of Lading) claimed damages for
breach of contract. Here the liberty clause was applicable and operative only during
emergencies and the court found no conflict between the main object of the contract and
liberty clause. The bill of lading stated ‘to London or Hull’ and it did not specify the direct
contractual route. Moreover, the liberty clause would operate ‘only with the occurrence
of epidemics, quarantine, ice, labour troubles, strikes, or lockouts such that would
prevent the ship from leaving the loading port or reaching the discharge port’ but
discharging the cargo in such situation at the port of loading or any other safe or
convenient port was questionable. The court distinguished this clause from Glynn case
by holding that “there is a material difference between a deviation clause purporting to
enable the shipowner to delay indefinitely the performance of the contract voyage simply
because they choose to do so as, in Glynn and provisions-such as those contained in
Renton which are applicable and operative only in the event of the occurrence of certain
specified emergencies”.134 It was also elucidated that, in Glynn the material difference
was such that the master had the right to nullify the contract at will, but whereas in
Renton, the clause stated that the rights and obligations of the parties in the event of
obstacles arising beyond their control, which would impede the contract and only then
would the shipowner be freed from liability by the clause. In Leduc, Glynn and Renton
the court stressed on the main purpose of the contract than the liberty clause but in
Connolly the liberty clause was given importance and thus the ship could go wherever
she pleased but the purpose of the contract should not be frustrated. If this approach is
132
Stephen Girvin – Carriage of goods by sea; Chapter -24 , Pg 315.
133
(1956) 1 QB 462 (CA)
134
(1955) 2 Lloyds List L.R 742, Per Jenkins L.J
31. 27
not followed “shipowners may well be able to nullify the contract at will”.135And while
interpreting liberty clauses the court will “take account of the nature of the trade in
which the vessel is known to be engaged”.136 In Theiss v. Australian Steamships,137 a
specific liberty to bunker was included. This does not confer any right to take on bunkers
which were not necessary for the subject voyage and a deviation wouldn’t be reasonable
within the meaning of Art IV, Rule 4 HVR. The liberty clause should be read in conscience
with the basic contract and the trade practices as well. The liberty to deviate ‘for other
purposes’, held to be restricted to purposes connected with the contracted voyage138.
Effects of Deviation The unjustifiable deviation from the usual and customary route has
been traditionally regarded as fundamental breach of the contract of affreightment at
common law. It is considered as an implied undertaking and not a warranty as in marine
insurance (discussed below in the light of Thorley v. Orchis). If a vessel deviates from
the contracted course, the shipowner becomes liable for the delay and would be taken
responsible for any damage or loss that happens to the goods resulting from such delay,
unless the owner of goods have waived the deviation. The cargo owner after knowing
about the deviation may elect to treat the contract as subsisting and once the contracted
is treated as affirmed the cargo owner is entitled to damages for the loss caused by such
deviation. It was held in Hain S.S Co v. Tate & Lyle139 that ‘an obligation not to deviate is
a contract condition and the breach of such a condition entitles the goods owner, if he so
desires to treat the contract as repudiated’. The shipowner wouldn’t be protected by the
exceptions in bills of lading; will have to carry the goods as a common carrier and would
most definitely be liable for the damage and loss resulted by delay/deviation. For
exemption, he will have to prove that such loss or damage was occasioned by either an
135
W. Poor, Charter Parties and Ocean Bills of Lading 195-207 (1968) ; ibid per Jenkins L.J
136
Hadji v. Anglo- Arabian (1906) 11 Com. Cas. 219.
137
(1955) 1 Ll Rep. 459
138
Stag Line v. Foscolo, Mango (1932) A.C. 328
139
(1934) 39 Com Cas 259 Per Scrutton L.J
32. 28
act of God, by King’s enemies or by inherent vice of the goods and the loss would have
equally happened even had the ship not deviated.140
Firstly, an unjustified deviation would lead to damages in favour of the aggrieved party.
In Heron II141 the ship had to load sugar and proceed in full speed to the port of
discharge. But there was a delay as the vessel called at several ports en route to the
port of discharge. During this period, price of sugar fell. The delay was admitted to be in
breach of charterparty even though the shipowners did not know that the appellants had
an intention to sell off the sugar as soon as it arrived. It was decided that the
shipowners ought to have foreseen that such delay would possibly result in the price fall
of sugar and they awarded damages. The difference between the price the cargo of
sugar ought to have fetched if it had arrived on time and the price which it in fact
fetched was awarded as damages.
Secondly, Deviation might result in displacement of contract. The moment the vessel
departs from her contracted route, the shipowner loses the benefit of clauses which
exempts from liability. In James Morrison v Shaw, Savill & Albion142 the vessel deviated
to deliver other cargo and during the ‘act’ of deviating she was sunk by enemy
submarine in World War I and the shipowner couldn’t rely on king’s enemies. In Joseph
Thorley Ltd v. Orchis Steamship Co Ltd143, a conract to carry beans from Limassol to
London. The beans were damaged during unloading. The shipowners relied on the
exception clause which exempted them from liability or loss arising from- ‘Any act,
neglect or default whatsoever of the pilot, master, officers, engineers, crew, stevedores,
servants, or agents of the owners, in the management, loading, stowing, discharging or
navigation of the ship or otherwise’. On knowing that the vessel had deviated from the
proper route the plaintiffs pleaded deviation. It was held that shipowner couldn’t rely on
exception as ‘a deviation is such a serious matter and changes the contemplated voyage
so essentially that a shipowner guilty of deviation cannot be considered as having
140
11 JILE 147 (1976-77) ‘Deviation in the law of Shipping- U.S, U.K. and Australia a comparative study’
141
Koufos v. C Czarnikow Ltd (The Heron II) (1969) 1 AC 350.
142
(1916) 1 K.B 783
143
Joseph Thorley Ltd v. Orchis S.S. Co.(1907) 1 K.B 660 (CA)
33. 29
performed his part of the bill of lading, but something fundamentally different. He
therefore cannot claim the benefit of stipulations in his favour contained in Bill of
lading’144
Furthermore, it was reasoned: like marine insurance contracts, deviation altered the risk
in a serious manner that the agreed terms of contract could not be applied to the
deviating voyage. “The principle would be that, the undertaking not to deviate has the
effect of a condition, or a warranty in the sense in which the word is used in speaking of
the warranty of seaworthiness, and, if that condition is not complied with, the failure to
comply with it displaces the contract. It goes to the route of the contract and the
shipowner cannot set up the exception clause in the bill of lading contract, which only
exists for his benefit. If he has not performed a condition precedent upon which his right
to rely on that contract depends”- Lord Collins MR. This simply means that once there is
deviation. The contract is displaced and the shipowner will not be able to rely on
exemption clauses which are in his favour, including the exceptions in HVR art iv145
wherever applies. Thus the shipowner becomes strictly liable for the loss incurred as he
is put to the position of insurer. He will be held liable until the cargo-owner treats the
contract as repudiated. But the cargo-owners claim for damages could be defeated if the
shipowner invokes any of these defences: Act of God, the Queen’s enemies, inherent
vice, defective packing or general average sacrifice. However these defences would be
valid only for the shipowner who has performed his contract. If he has broken it by
deviation they might fail146. But on the contrary if the shipowner proves that ‘such a loss
was likely to occur on the proper route as it did on the deviating one’147, he will succeed.
Thirdly, an unjustified deviation may result in a discharge of contract by breach. In Hain
Case, The vessel had to proceed to two ports but owing to a failure to communicate by
the owner’s agents, the master was not informed of the nominated port ; hence he
proceeded to two other ports, loaded sugar and went to Queenstown and awaited further
144
(1907) 1 K.B 660 (CA) at 669 Per Moulton LJ
145
Chorley & Giles- Shipping law (8th edn) 1988 at pp 276
146
International Guano v. MacAndrew & Co. (1909) 2 K.B 360.
147
Ibid 146
34. 30
instructions. Shipowners and charterers found out the error and the master was asked to
return to load the remaining cargo and after leaving the port, the vessel ran aground
and part of cargo was lost and the remainder was transhipped on another vessel for
completion of the voyage to the UK. Tate & Lyle took delivery of the cargo upon the
endorsement of bills of lading covering the cargo without knowing about the deviation.
It was held that ‘deviation constituted “fundamental breach of contract” entitling the
cargo owners to treat the contract as repudiated’148 and the ‘true view is that the
departure from the voyage contracted is a breach by the shipowner of his contract, the
breach of such a serious character that, however slight the deviation, the other party to
the contract is entitled to treat it as going to the root of the contract, and to declare
himself as no longer bound by any of the contract terms’.- Lord Atkin. If this perspective
is followed, then breach by deviation would not cancel the express contract, If not the
shipowner, by his own wrong would be able to get rid of his own contract149. This makes
the effects of unjustifiable deviation in Hain clearly different from those espoused in
Joseph Thorley Ltd v. Orchis Steamship Co Ltd. ‘In particular the innocent party would
have an election as to whether he was to be bound by the contract. He could, if he
desired, treat himself as no longer bound or he could elect to maintain the contract,
reserving his right to damages’.150
Furthermore, the effect remains the same even if the ship regains the contracted course
after deviation. But in cases where the cargo is damaged by an excepted peril before
deviation occurred then the carrier can rely on the exception clause. In Hain case it was
held that the charterer can treat the contract as at an end ‘as from the date of
repudiation’ (i.e. from the moment of deviation) and with regard to the effect on freight
it was decided that he will have to pay full freight if the cargo owner doesn’t c onsider the
contract as repudiated. However if the contract is treated as repudiated and goods reach
the destination, reasonable freight would be payable on quantum meruit basis.
148
Stephen Girvin- Carriage of goods by sea, at 318; (1936) 55 Ll LR 159 (HL)
149
(1936) 55 Ll LR 159 at 173-174.
150
Ibid per Lord Wright.
35. 31
The effects of waiver In the context of Hain case, the charterers were aware of the facts
and elected to waive the breach i.e. affirmed the contract. Here ‘the cargo owner can
elect to treat the contract as subsisting; and if he does this with full knowledge of his
rights, he must in accordance with the general law of contract be held bound’151 and in
such situations when any claim is made by the charterers, the shipowners shall rely on
the exception clause, including for peril of the sea for protection152. In Hain case the bill
of lading was endorsed to the claimants and it was decided that ‘they were not bound by
any waiver on the part of charterers and, for this reason, the shipowners were unable to
rely on the bill of lading exceptions as a defence to any cargo claim brought by the
consignees’. Moreover, all parties were aware of the mistake in this case. The court held
that, as the charterers without protest sent the vessel back to San Domingo, that very
‘act’ shows that they have waived the deviation. The waiver in ‘this case is like any other
breach of a fundamental condition, which constitutes the repudiation of a contract by
one party, i.e. the other party may elect not to treat the repudiation as being final, but
to treat the contract as subsisting and to that extent may waive the breach with any
right to damages being reserved.’153 The applicability of this doctrine depends upon the
affirmation of the contract by the goods owner and there must be acts by him which
show that he intends to treat the contract as subsisting.154 The waiver should be
“Unequivocal, definite, clear, cogent and complete.”155
Waiver in Marine Insurance A similar view is followed in marine insurance when there is
a breach of warranty. Prima facie breach of warranty discharges the insurer from liability
but the insurer can waive the breach and remain liable.156 In marine insurance contracts
the insurer will gain nothing by continuing the contract after deviation, and this is
because he earns his premium once there is attachment of risk; however marine policies
do make express provision for deviation through an extension clause which would come
151 Ibid per Lord Atkin.
152 The carriageof Goods by sea- Stephen Girvin,Para 24.22
153
(1936) 55 Ll LR 159 Per Lord Wright
154
(1936) 55 Ll LR 159 at 355 per Lord Atkin
155
McCormich v. National Motor Ins. (1934) 40 Com.Cas 76, 93 per Slesser L.J.
156
MIA 1906 ss 33, 34(3)
36. 32
into effect on the discharge of the contract and provides for the continuation of cover on
agreed terms. It is uncertain whether an unjustifiable deviation can be excused by
subsequent waiver; there is no declared excuse in the statute. In this context, if waiver
can operate, it must be unequivocal157; In Redman v London158 ‘the insurer agreed to
insure with knowledge that the ship has sailed and had deviated, held- liable for the loss
occurring prior to the deviation and the insurer was not bound by waiver of a post-
deviation loss; this reveals that even if the insurer is notified it would not serve as an
excuse and there must be unequivocal evidence of a waiver for the insurer to be bound’.
However, it is uncertain that in the case of ordinary repudiatory breach of contract the
contract remains operative, subject to the innocent party’s election to terminate; but
that, where a contract has been discharged there is nothing left to affirm by subsequent
waiver. However a breach of warranty can be excused by subsequent waiver MIA 1906
ss. 33(3), 34 (3) and the same should be arguably be true in the case of deviation.159
Deviation and general average- When there is a common danger to the vessel or cargo
and if some part of the vessel or cargo is sacrificed or if an extra expenditure incurred
while averting that danger, the loss and expense thus incurred would fall within general
average contribution and the apportionment would be between the ship and cargo
depending their salved values.160 Furthermore, the ship owner can claim as a common
carrier at common law and should be successful if the loss would have occurred even if
there had been no deviation161. And if there is waiver for the breach of the contract by
deviation (Hain case) the shipowner can claim general average contribution.
Post Hain Case: ‘Fundamental breach’ developed further in the context of cases falling
within contract law.162. In Suisse Atlantique163, it was held ‘correct approach to
fundamental breach was constructive and that exempting clauses were to be viewed in
the context of the entire contract’. And in Photo production Ltd v. Securicor
157
According to F.D Rose
158
(1813) 3 Camp 503
159
F.D Rose- Law of Marine Insurance.
160
L. Payne and E.Ivamy – Carriage of goods by sea; at 161 (1972)
161
Carver at 614,615
162
Treitel (2003),225
163
Suisse Atlantique Societe d’Armament Maritime SA v. NV Rotterdamche Kolen Centrale (1967) 1 AC 361
37. 33
(Transport)164 the doctrine of fundamental breach was given its ‘formal burial’ but they
opined that ‘deviation cases should be considered as a body of authority sui generis with
special rules derived from historical and commercial reasons’.165 In The Antares Nos 1 &
2, a quasi deviation166 case, where the shipowner relied on the 1 yr time bar, it was
decided that ‘the doctrine of fundamental breach, which displaced exception clauses
altogether, no longer existed’167 and an unauthorised loading of deck cargo could not be
considered as a special case and thus on the true construction, art III r 6 of HVR applies
and the carrier will be discharged from all liability unless a suit is brought within one
year. Similarly in The Kapitan Petko Voivoda168 (quasi deviation) this reasoning was
accepted. Through these cases it was strongly suggested that whenever the court
reconsider the doctrine of deviation, it would not ‘survive as an independent legal
concept’.
Furthermore, in Astrazeneca UK Ltd v Albermarle International Corp & Ors.169 “Even if
the breach of its obligation (deliver the product) had been a deliberate repudiatory
breach,the question whether any liability for damages for that breach was limited by the
(exclusion clause) would simply be one of the construing the clause”. Thus the doctrine
is put to snooze.
164
(1980) AC 827
165
Photo production Ltd v. Securicor (Transport) (1980) AC 827 Per Lord Wilberforce at 845
166
‘Cases which did not concern a deviation from geographical route’. Girvin- p320 fn 79
167
Kenya Railways v Antares Co Pte Ltd (The Antares Nos 1 & 2) (1987) 1 Ll Rep 424 (CA) Per Lloyd LJ at 430
168
(2003) 2 Ll Rep 1
169
(2011) EWHC 1574 (Civ)
38. 34
CHAPTER-4 (COMPATIBILITY BETWEEN CARRIAGE CONTRACTS AND MARINE
INSURANCE s.49 REASONABLENESS)
s.46 (1) and s.48 declare that only a delay or deviation ‘without lawful excuse’
discharges the insurer from liability. In s.49 justifiable excuses are identified; it refers to
the consequences where there is a deviation or delay (unreasonable) ‘without lawful
excuse’.170 But the examples of lawful excuse prescribed are neither generally nor
mutually171 exclusive172. Moreover, the act does not make any distinction between
excuses which prevent departure from the prima facie method of performance from
becoming a deviation in the first place and those which excuse what is prima facie
unjustifiable conduct;173 and the duty falls on the assured to prove that deviation is
justified.174 Excusable deviations stipulated in S.49 are discussed below:
where there is ‘express authorization by agreement’ - Firstly, the provision deals with
‘authorisation by a special term in the policy’- s.49(1(a); this means, if there is
authorisation and if it is evident from the policy that the vessel can halt or visit a port
apart from the insured route, then such departure would not amount to deviation
requiring excuse and would very much fall within the voyage contemplated by the policy;
it is in principle always permitted rather than excused175.This is the case with liberty
clauses in contracts of carriage and with Institute Cargo Clauses, cl 8.3.176 Any deviation
authorised by policy would not amount to deviation within s.46 or delay (unreasonable)
within s.48 and cl.8.3 is a clause authorising deviation or delay. A deviation in existence
could also be sanctioned by a special agreement, although it is not expressly provided, it
could be done by amendment to the policy.177 The function of these express terms is to
170
MIA 1906 ss 46 (1), s 47 (‘in the absence of any usage or sufficient cause to the contrary’); Marine
Insurance law and Practice- F.D Rose (2004)
171
Eg: barratry may be excused either generally under s.49 (1) (b) or specifically under s.49(1)(g); and
sickness of the crew may be excused specifically under s.49(1)(f) or where the safety of the ship is imperiled,
under s.49 (1)(d); Marine Insurance law and Practice- F.D Rose (2004) pp 11.50
172
Marine Insurance law and Practice- F.D Rose (2004) pp 11.50 (The act does not link the possibility of
‘lawful excuse’ in s.46(1) and s.48 with the excuse listed in s.49)
173
Bennett- s.49 excuses as ones which prevent the relevant conduct becoming an unjustifiable deviation or
unreasonable delay
174
Woolf v. Claggett (1800) 3 Esp 257
175
Marine Insurance law and Practice- F.D Rose (2004) pp 11.23-11.28
176
ICC 2009 discussed in chap- 2
177
Weir v. Aberdeen (1819) 2 B & Ald 320
39. 35
nullify the effect of deviation by authorizing the conduct. In practice cover is given to
unjustified deviation by means of h/c clauses; Arnould’s state that ‘common h/c clauses
do not authorise deviation or delay: they merely protect the assured from consequences
of deviation or delay upon the fulfilment of certain conditions’.
Implied cover by the policy – Delay in commencing a voyage, ‘to be justifiable, should
have been a delay for the purpose of the voyage, as waiting for a wind, provisions, or
the like’.178 Few illustrations in s.49 (1), regardless of the act, states that deviation/
unreasonable delay would be permissible if there is implied cover by the policy. Firstly,
‘when it is reasonably necessary in order to comply with an express or implied warranty’-
s.49(1)(c). Such a situation arose in Bouillon v. Lupton179 ‘insurance on a voyage from
Lyons to Galatz’ and there was sea voyage and river voyage. The vessel was not
equipped for the sea voyage; so the vessel sailed after the warranted sailing date. The
court held that dividing the voyage into two stages was customary and both river and
sea voyages required different equipment and no seaworthiness warranty have been
infringed as the vessel was ready for each stage and the sailing warranty was fulfilled
when the voyage begun from Lyons on time. Secondly, when it is necessary for the
‘safety of the ship’ or ‘subject matter insured’- s.49(1)(d). First part deals with ‘safety of
the ship’; Deviation for repairs necessary for the ship to facilitate safe voyage is excused
under this provision180. “Deviation occasioned by force, and deviation occasioned by
necessity are the same, for necessity is force. It is the want of repair, or any other
immediate danger, which renders the deviation necessary. When the deviation is
necessary and unavoidable, it has no effect on the obligation of the insurer”.181 And
‘reasonable necessity’ refers to the standard of the reasonably competent and skilful
master.182 The second part of the provision deals with the ‘subject matter insured’; and
accordingly if the deviation is for saving the cargo which is not the subject matter
insured, then such deviations would not be excused. However in few cases ‘master’s
178
Palmer v Fenning (1832) 9 Bing 460
179
Bouillon v. Lupton (1863) 15 CB (NS) 113.
180
Motteux v London Assurance Co (1739) 1 Atk 545; Smith v Surridge (1801) 4 Esp 25
181
Scott v. Thompson (1805) 1 B & P (NR) 181 at 186 per Sir James Mansfield CJ.
182
Phelps, James & Co v Hill (1891) 1 QB 605
40. 36
duty to care for the cargo’ was successfully invoked (would be discussed under
Compatibility below). Thirdly, s.49 (1) (f) Excuses deviation where reasonably necessary
for the purpose of obtaining medical or surgical aid for any person on board the ship. In
Woolf v Clagett183 it was decided that for successfully invoking this clause ‘it should be
proved that (1) a proportion of the crew are afflicted and the difficulty to navigate the
vessel (2) there should be evidence showing that the vessel had adequate medical
provision fit for the voyage undertaken. In this case the insurer was discharged as there
wasn’t any evidence proving the conditions prescribed. Presently illness to one person
(crew or passenger) would excuse the deviation (s.49(1)(f))’.184 Another important factor
is the extent of warranty of seaworthiness which is implied in voyage policies. In Kish v.
Taylor , despite the fact that an overloaded deck rendered the vessel unseaworthy and
she had to deviate for necessary repairs for safe voyage; such a deviation was held
justified but the shipowner’s right under the charterparty for breach of the terms
existed.(i.e. the charterers failed to provide full cargo). Thus the excuse prevailed.
Furthermore, ‘an action necessarily taken to avoid a threat to the adventure is simply a
proper method of carrying out the adventure rather than a deviation’ -Hyderabad
(Deccan) Co v Willoughby185
Another aspect is, as the course of the voyage and reasonable despatch referred to in
the act be defined by usage, such usage should be regarded as an excuse for otherwise
unjustifiable conduct.186 Moreover, as per s. 49(1)(g) it would be excused if deviation is
‘caused by the barratrous conduct of the master or crew,if barrat ry187 be one of the
perils insured against’. This means, even if there is no authorisation by the contract of
insurance, an assured may recover in spite of the deviation from the voyage
contemplated if that particular deviation falls within perils insured by it and barratry is
also an excuse under s.49(1) (b).
183
(1800) 3 Esp 257
184
Bennett-law of marine insurance pp 536
185
(1899) 2 QB 530 per Bingham J.
186
Marine Insurance law and Practice- F.D Rose (2004) pp 11.54.
187
Barratry- ‘In one sense refers to, deviation by the captain for fraudulent purposes of his own’- Ross v
Hunter (1790) 4 TR 33 per Buller J
41. 37
Saving life – Deviation/delay for saving human life or aiding a ship in distress where
human life may be in danger is excused and articulated in s.49(1)(e); Saving human life
and saving property incidental to saving human life is justified at common law and
contracts of carriage governed by HVR sanction ‘any deviation in saving or attempting to
save life or property at sea or any reasonable deviation’.188 However, a licence
prescribed in contract of carriage will not justify conduct under a contract of
insurance.189 “To save human life when in peril is one of the most beneficial instincts of
humanity, and is nowhere more salutary in its results than in bringing help to those who,
exposed to destruction from the fury of the winds and waves….and is a uniform practice
of the mariners of every nation….and there is neither injustice nor hardship in treating
both the merchant and insurer as making their contracts with the shipowner as subject
to this exception to the general rule of not deviating from the appointed course”.190
Saving property as distinct from saving human life would be of interest to insurers,
shipowners and merchants for the law of salvage rewards the successful abundantly.191
Thus it would be ‘most unjust if the shipowner could thus take a chance of highly
remunerative gain at the risk and possible loss of the merchant or the insurer neither of
whom would derive any benefit from the preservation of the property saved’192 Clause
1.1 of IVCH’83 & 95 provides for liberty ‘to assist and tow vessels or craft in distress’ but
these towage services should be consistent to the object of the contract.193 Similarly in
the absence of threat to human life, the underwriters were held liable under this clause;
Per Pollock B ‘you must not so construe a condition as to make it eat up the contract’.194
Furthermore under s.93 of The Merchant Shipping Act there is a general duty vested in
the master of the ship to deliver assistance to vessels in distress; it is for the ‘common
advantage of all persons, underwriters and others to give and receive assistance to and
188
Carriage of goods by sea act 1971, s.1(2),Sched, art iv, r.4.
189
The Goring (1988) AC 831 ; F.D Rose ‘Restitution of the Rescuer’ (1989) 9 OJLS 167.
190
Scaramanga & Co v. Stamp (1880) 5 CPD 295, 304-305 per Cockburn CJ.
191
Bennett- Law of Marine Insurance pp 535
192
Ibid 189
193
John Potter & Co v Burrell & Son (1897) 1 QB 97
194
Stuart v British & African Steam Navigation Co (1875) 32 LT 257
42. 38
from each other in distress’ -Lawrence v. Sydebotham.195 Some jurists do think that, in
principle there is a wider public policy justification of deviation to save property and
perhaps it is not confined to the narrower statement of licence under s.49(1)(e) to save
life.196 However the Lawrence case justification of deviation for the benefit of the
underwriters, function in favour of the underwriters of salved rather than the salving
interests.197Moreover this traditional perspective on the limited scope of the excuse,
clubbed with the free will of parties to insurance contracts to extend the excuse by
express provision for deviation, makes it improbable for condoning the deviation for
property salvage under marine policies198.
Involuntary deviation –s.49 (1)(b) portrays the principle that, only a voluntary and
unexcused departure from the course of voyage discharges the underwriter from all
subsequent loss199 and this means that deviation is excused if caused by circumstances
beyond the control of the master and his employer for example, compulsion by the
crew200 or force of weather201 and these constitute involuntary deviations. However the
act of a master who deviates simply because of ignorance of the proper route202 is not
involuntary. The rule which is given effect in s. 49(1)(b) and (d) of the act is that ‘a
deviation if necessitated either by moral203 or physical force, or reasonably necessary for
the safety of the ship or of the subject matter insured, will never discharge the
insurer’204 ; and ‘there is not probably any exception to be met with to the application of
the general rule, that if the vessel departs from the usual course of the voyage from
195
(1805) 6 East 45,54 per Lawrence J.
196
F.D Rose- marine insurance law pp 11.56
197
(1805) 6 East 45, 54 per Lawrence J.
198
This view referred in- Company of African Merchants v. British and Foreign M I Co Ltd (1873) LR 8 Ex 154
199
Arnould’s statement –The provisions of ss 46 and 49 have necessitated a change of language and the act
seems to regard even an involuntary departure from the proper course as a deviation, though excusable by
reason of s.49(1)(b)
200
Elton v. Brogden (1747) 2 Str 1264 – where the crew with the letter of marquee insisted to return to a port
with the prize captured); Driscol v. Bovil (1798) 1 B & P 313 ( the crew refused to proceed on the voyage
insured for fear of Moorish Cruisers.
201
Delany v. Stoddart (1785) 1 TR 22.
202
Phyn v Royal Exchange Ass Co (1798) 7 TR 505 (it was held deviation)
203
Bennett, 277 ‘ Moral imperative’; Arnould, 494 ‘Moral Force’
204
Arnould’s- Law of Marine Insurance; Roccus; nn.52,53 cited 2 Emerigon, cl 13,s.15, p.94
43. 39
necessity, and departs no further than that necessity requires, the voyage will still be
protected by the policy’- Robinson v Marine Insurance Co.205
Under s.49, deviations resulting from circumstances within the control of the master and
employee are excused under one or the other heads206. Arnould’s –‘difficult to determine
(1) what degree of force or constraint will amount unavoidable necessity as, on that
ground to justify a departure from the course of the voyage; (2) what circumstances,
short of such unavoidable necessity, will excuse the ship in departure from, or delaying,
the usual course of the voyage.’ Elton v. Brogden207 is an example for a situation that
would amount to unavoidable necessity. Herein the crew sailing with letters of marque
rebelled against the master and insisted to return home with the prize he had taken
rather than continuing the voyage. The master had to submit to this remonstration and
return home; Held- such a deviation by the master did not discharge the insurers.
Whereas in Phelps v Auldjo208 the master without any remonstration and without any
threat or force to another submitted to the captain of the king’s ship by deviating to
examine the strange sail bearing enemy colours. Held- amounts to deviation. Therefore
when a ‘deviation is required to be justified on the ground of unavoidable necessity, it
must be shown that a degree of force was exercised towards the captain, which either
physically he could not resist, or morally as a good subject, he ought not to resist’.209
Uninsured peril Arnould’s –‘The functioning of uninsured peril does not discharge the
insurer’; ‘peril insured is irrelevant to whether it generates a necessity denying
voluntariness’- Bennett . It is excusable ‘if caused by circumstances beyond the control
of the master and his employer’ but expenditure would not be met because ‘incurred for
the purpose of averting or diminishing a loss not covered by the policy’.210 In O’Reilley v.
Royal Exchange Assurance Co211. The ship was not ready to face capture (expressly
205
2 Johns. 89 (1806) per Chancellor Kent.
206
Kish v Taylor, Sons & Co (1912) AC 604; MIA 1906 s.55(2)(a)
207
(1747) 2 Strange 1264.
208
(1809) 2 Camp. 350
209
Ibid Per Lord Ellenborough at 351
210
Expense would not be recoverable under suing and laboring clause. S.49(1)(b), s.78 (3);Duty of assured
clauses in Institute clauses- same effect- Arnould’s pp 14-85.
211 (1815) 4 camp 246
44. 40
excluded peril). For avoiding seizure the vessel was at sea before she was properly
loaded, and was forced was put to a port out of the course of voyage and she wrecked
held- insurers not liable (warranty of the policy) as the loss was the result of an
undertaking to avoid a risk, which the underwriters had predetermined to be not liable
(contained f.c&s.clause). In O’Reilley v Gonne 212, same ship but claim for freight and
there was no f.c.&s.clause; held, insurers liable and produced a different result from that
of the first. By applying s.49 (1)(d), the insurer would not be discharged for deviation.
However, when a peril is specifically excluded and not included in the policy, the assured
would not be able to recover on that ground.
Compatibility between MI and Carriage of goods-Firstly, under common law, Hague Visby
rules and insurance, saving human life, or aiding a ship in distress where human life may
be in danger is justified (s.49(1)(e)). In Scaramanga v Stamp it was held that such a
liberty will not apply to deviations for the sole purpose of saving property and this rule is
applied in contracts of insurance as well; saving property does not carry the same ‘moral
imperative’213 as that of saving life. Although there is no moral imperative, it is highly
rewarding to save property at sea (successful salvors). Secondly, saving property -The
master has the duty to take ‘reasonable care of the cargo’ and deviation would be
justified if the danger is of a reasonably permanent nature.214 However there is
uncertainty in law, regarding the master’s duty to take reasonable care of the cargo
entrusted to him and extending this obligation to deviate in the interests of preserving
the cargo alone, in the absence of any danger to the vessel. The MIA excuses ‘deviation
or delay in prosecuting the voyage contemplated by the policy, where reasonably
necessary for the safety of the ship or subject matter insured.’ Under common law
‘saving property alone was considered unreasonable but saving ship was justified’ and
under Hague-Visby rules art iv r.4 ‘deviation to save property at sea and any reasonable
deviation was included’. In UK the courts gave a very restricted approach towards the
212 (1815) 4 camp 249
213 Bennett. 18.52
214
Hand v. Baynes (1839) 4 Wharton 204