MASEFIELD AG V AMLIN CORPORATE MEMBER LTD

[2011] EWCA Civ 24, Court of Appeal, Lord Justice Rix, Lord Justice Moore-Bick and Lord Justice Patten, 26 January 2011

Insurance (marine) - Piracy - Theft - Vessel seized by pirates - Ransom paid and vessel and cargo released - Whether became an actual total loss on seizure - Whether cargo became a constructive total loss on seizure - Legality of payment of ransom - Marine Insurance Act 1906, section 57 - Theft Act 1968, section 6

A cargo consisting of two parcels of biodiesel, shipped on board the oil tanker Bunga Melati Dua, was insured by the defendant insurers under an open cover. The policy covered piracy, and excluded constructive total loss "unless the subject matter insured is reasonably abandoned either on account of its actual loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject matter to the destination to which it is insured would exceed its value on arrival". The vessel, while en route from Malaysia to Rotterdam, was seized by Somali pirates on 19 August 2008. A notice of abandonment in respect of the cargo was served, but rejected on 18 September 2008. A ransom was paid and the vessel was released about 11 days after the service of the notice of abandonment. The cargo was taken to Rotterdam and for about half of its insured value. The insurers denied liability for the difference. David Steel J held that they were not liable: there was no actual total loss under section 57 of the 1906 Act because the claimants had not been irretrievably deprived of the cargo; there was no constructive total loss under section 60 of the 1906 Act. It could not be said that the subject matter had been reasonably abandoned because an actual total loss appeared unavoidable; and the ransom was not to be disregarded in determining whether there was an actual or constructive total loss because payment of a ransom was not illegal or contrary to public policy. The assured appealed against the finding that there was no actual total loss. The Court of Appeal dismissed the appeal. (1) In marine insurance the test of "actual total loss" was applied rigorously. (2) There was no rule of law that capture or seizure was automatically an actual total loss. (3) There was on the facts no actual total loss by reason of piracy. (4) There was no actual total loss by reason of theft. Even though section 6 of the Theft Act 1968 provided that there was theft if a person appropriated property belonging to another without intended to permanently deprive that other of it, it could only be an ATL if there was irretrievable deprivation. (5) It was common ground that paying a ransom was not illegal and not contrary to public policy, and the law did not require the possibility of a ransom being paid to be disregarded.