Lloyd's Maritime and Commercial Law Quarterly
AUSTRALIAN MARITIME LAW
Martin Davies*
CASES
1. Alstom Ltd v Liberty Mutual Insurance Co (No 2) 1
Marine insurance—whether proximate cause was excluded peril of inherent vice—operation of “unsuitability of packaging” clause creating presumption of sufficient packaging
The applicant purchased two electrical generator transformers from a manufacturer in Mumbai, India, for carriage to Fremantle, Western Australia. Each transformer contained a core coil assembly, which was housed inside a steel container or tank. During the ocean voyage from Mumbai to Fremantle, the core coil assembly moved within each of the steel tanks and the cores suffered significant damage. The applicant claimed an indemnity under its marine insurance policy with the respondents, which incorporated the Institute Cargo Clauses (A). The respondent insurers declined to indemnify on the basis that the damage arose through an inherent vice in the transformers, which was an excluded peril under the policy. The applicant sued the respondents in the Federal Court of Australia.
Decision: The applicants were entitled to an indemnity under the contract.
Held: (1) The respondents contended that the damage to the transformers was proximately caused by the inability of the internal components of the transformers as designed and manufactured to withstand sea conditions of a kind that would ordinarily be expected on a voyage between Mumbai and Fremantle. In particular, the respondents said the proximate cause of the damage was the incorporation of rubber anti-vibration mats, which the respondents said was an inherent vice in the transformers.
(2) The marine insurance contract contained a provision entitled “Unsuitability of Packaging Clause”, which stated that any packaging or external preparation of the transformers was deemed to be sufficient if it was in accordance with the usual custom or trade, or if any insufficiency had not arisen through the fault of or with the knowledge and consent of the assured. The applicant contended that the proximate cause of the damage was the failure of lignostone strips that had been inserted as buffers within the steel tanks by the Indian manufacturer, without the applicant’s knowledge, as they were not visible once the tank had been sealed by the manufacturer. Thus, the applicant said, the proximate cause of the loss was failure of packaging deemed by the contract to be sufficient. The
* Admiralty Law Institute Professor of Maritime Law, Tulane University Law School; Director, Tulane Maritime Law Center; Professorial Fellow, Melbourne Law School.
1. [2013] FCA 116.
002