[1992] EWCA Civ J0616-1

92/0562
IN THE SUPREME COURT OF JUDICATURE
Tuesday 16th June 1992
Lord Justice Lloyd
(1) Ikerigi Compania Naviera S.A.
v.
(1) Graham Charles Francis Palmer

(Transcript of The Association of Official Shorthandwriters Limited, Room 392, Royal Courts of Justice, and 2
New Square, Lincoln's Inn, London, WC2A 3RU.)

MR ANTHONY HALLGARTEN Q.C. and MR CHARLES HADDON-CAVE, instructed by Messrs Sinclair,

Roche & Temperley, London agents for Messrs Davies Grant & Horton (Plymouth), appeared for the Appellant
(Second Plaintiff).
MR NICHOLAS LEGH-JONES Q.C. and MR TIMOTHY YOUNG, instructed by Messrs Hill Taylor Dickinson,
appeared for the Respondents (Defendants).
JUDGMENT

LORD JUSTICE LLOYD: In this appeal we are concerned with two policies of marine insurance which have
conveniently been referred to as the loss of hire policy and the freight policy. Under the loss of hire policy the
plaintiffs were covered against "loss of hire and/or earnings and/or anticipated hire" in respect of their vessels
"Wondrous" and "Welcomer". The perils insured were those enumerated in the Institute War and Strikes Clauses
Hulls Time. Under the freight policy the plaintiffs were covered in respect of their vessels "Wondrous" and "Tropez
Comfort". The risks insured were those set out in the Institute Time Clauses Freight, and the Institute War and
Strikes Clauses. There is a dispute whether the War and Strikes Clauses referred to in the freight policy are the Hull
Clauses, as in the loss of hire policy, or the Freight Clauses. But that is only one of very many issues between the
parties.
The old form of Lloyds S.G. policy was subject to a great deal of judicial criticism for two hundred years or more.
It was to be hoped that the new form of policy introduced in January 1982, and the new Institute Clauses would
have made it easier for the parties to define more clearly the intended scope of cover, whether the insurance be on
hull, freight or cargo. Unfortunately the present case proves that hope to have been in vain. The two policies are
littered with obscurities and infelicities, for which the chief responsibility must lie with the brokers.
The facts giving rise to the plaintiffs' claims under the two policies are the same. They are set out in great detail, and
with great precision, by the learned judge. I do not intend to repeat them here. His judgment is reported at [1991] 1
Lloyd's Rep. 400 . Save as to one point there is no attack on

the judge's findings of fact. As to the judge's conclusions, I find myself, with two exceptions, in complete agreement
with him. The exceptions make no difference to the result.
The "Wondrous" was chartered to load a full and complete cargo of 30,000 tons of molasses at Bandar Abbas in the
Persian Gulf for carriage to north Europe or the Mediterranean. She arrived on 10th March 1987. By 14th August
she had loaded 23,000 tons. But that was all. She did not sail until 17th October 1988. By then huge liabilities had
been incurred, both for port dues and demurrage.
But there was a bright side. On 20th October 1987 the plaintiffs made a claim against the Hellenic War Risks Club
for a constructive total loss of the vessel. On 14th July 1988 the Club compromised the claim. They paid fifteen
sixteenths of the insured value of the hull, amounting to $7,240,000. But they declined to accept the plaintiffs'
notice of abandonment. So the plaintiffs were left with the vessel, which they subsequently sold, as well as the
proceeds of insurance. They also received gross freight of $644,000 when the vessel eventually discharged at
Aarhus in Denmark, plus $84,000 dead freight. The gross freight was calculated at the charterparty rate of $28 per
ton on 23,000 tons. Out of the gross freight, the plaintiffs paid port dues amounting to $288,893 and certain other
charges amounting to $112,500. So the net freight received was $326,607.
I can now turn to the two policies, taking the loss of hire policy first.
Loss of Hire
The policy contains the follow provisions:
"INTEREST: WAR LOSS OF HIRE and/or EARNINGS and/or
4

ANTICIPATED HIRE. Daily amount US.$10,000 each vessel. Fixed and agreed, Chartered or
Unchartered.
SUM INSURED: US.$9,000 each vessel.
Conditions: This insurance to pay the above daily amount for 90 days any one accident or occurrence and
in all, excess of 14 days any one accident or occurrence.
Subject Jardine Glanvill Limited War Loss of Hire Wording No.l. dated 17.4.84".
The Jardine Glanvill wording provides:
"WAR ETC. LOSS OF HIRE WORDING
Subject to the conditions hereinafter set out, this policy shall only pay if in consequence of the risks

enumerated in the Institute War and Strikes Clauses HullsTime 1.10.83 including London Blocking and
Trapping Addendum LPO 444 the vessel or craft be prevented from earning hire or reward for a period in
excess of AS ATTACHED consecutive period of 24 hours in respect of any one occurrence provided that:(a) such occurrence occurs to the insured vessel or craft and
(b) such occurrence occurs during the currency of this policy and
(c) repairs if actually carried out in respect if damage and (sic) completed within twelve months of the
expiry of this policy.
In such circumstances this policy shall pay AS ATTACHED for each 24 hour period during which the
vessel or craft is so prevented, for not exceeding a further AS ATTACHED days in respect of any
occurrence and Limit AS ATTACHED days in all.
..
Each casualty shall be subject to a deductible period, which shall be reckoned from the beginning of the
casualty and shall last until the loss of time in consequence of the casualty has reached the number of days
deductible stated in the policy wording
The insurers' liability for loss of time in consequence of any one casualty and for the total loss of time in
consequence of all casualties occurring during the insurance period, is limited to the sum insured per day
multiplied by the number of days of indemnity any one casualty and in all stated in the policy wording".
The Institute War and Strikes Clauses Hulls Time provide:
"1. PERILS
5

Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused
by
1.1 war, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by
or against a belligerent power
1.2 capture, seizure, arrest, restraint or detainment,
and the consequences thereof or any attempt thereat
1.3 derelict mines, torpedoes, bombs or other derelict weapons of war
1.4

1.5 any terrorist or any person acting maliciously or from a political motive
1.6 confiscation or expropriation.
4. EXCLUSIONS
This insurance excludes
4.1 loss, damage, liability or expense arising from
4.1.1. any detonation of any weapon of war employing atomic or nuclear fission and/or fusion
4.1.2 the outbreak of warbetween any of the following countries: United Kingdom
4.1.3. requisition or pre-emption
4.1.4 capture, seizure, arrest, restraint, detainmentby or under the order of the governmentof the
country in which the Vessel is owned
4.1.5 arrest, restraint, detainment, confiscation or expropriation under quarantine regulations or by reason
of infringement of any customs or trading regulations
4.1.6 the operation of ordinary judicial process, failure to provide security or to pay any fine or penalty or
any financial cause
4.2 loss, damage, liability or expense covered by the Institute Time ClausesHulls
4.3 any claim for any sum recoverable under any other insurance on the Vessel
4.4 any claim for expenses arising from delay"
The plaintiffs say that the vessel was prevented from
6

earning hire or reward for a period of 90 days in excess of 14 days in consequence of being "detained" within the
meaning of clause 1.2 of the Hulls Clauses, and that they are therefore entitled to recover $900,000.
The defendants rely on clause 4.1.5 which excludes from cover detainment "under quarantine regulations or by
reason of infringement of any customs or trading regulations". In the court below the plaintiffs argued that the
policy covers the perils enumerated in clause 1 without the exclusions. The judge rightly rejected that argument, and
it has not been revived.
There remains the question whether there was here any detainment at all within the meaning of clause 1.2, and if so
whether it was by reason of infringement of any customs regulation.

As to detention, the facts as found by the judge were as follows:

"The situation was simply that at no material time until October 1988 did she have clearance under the
local customs regulations to leave Bandar Abbas. Accordingly, if she had tried to leave, she would have
been forcibly detained as she would have been in breach of the local customs laws. In that sense, but in
that sense only, she was detained at Bandar Abbas".
There were two requirements to be satisfied before the vessel could obtain customs clearance. The first was the
payment of port dues, plus a local tax on freight. The second was the furnishing of a foreign currency guarantee, or
FCG, in respect of the cargo. The purpose of the FCG was to ensure in accordance with Iranian foreign exchange
control that at least $50 per ton, representing the FOB value of the cargo, was remitted in hard currency. The
exporter would then be reimbursed by the Iranian central bank in rials. The first of these requirements was the
responsibility of the vessel. The second was the responsibility of the exporter, Dr Tehrani, and his bankers, Bank
Melli.
As to the first of the requirements, the judge made the following finding:
"Accordingly the immediate cause of that detention was the failure to comply with local customs laws.
Insofar as it involved the payment of the debts which had to be settled before the ship could be granted
clearance, this was merely a matter of the payment of money; if this money had been paid, this obstacle to
the clearance of the vessel would have ceased to exist. At no material time were the owners
unconditionally willing to pay this money. Their attitude changed from time to time and was never
unequivocal. They were not prepared to pay the sums required without having first secured the release of
the vessel; they wanted others to bear at least part of the relevant sums. The owners never removed this
cause of the vessel's detention until they finally procured the performance of the September 1988
agreement".
It is important to notice that when the judge refers to "the immediate cause of that detention" he is referring to
detention in the limited or conditional sense which he had just described, namely that if the vessel had tried to leave
before paying her port dues she would have been forcibly detained. In that sense, and in that sense only, as he
explains, was she being detained.
Turning to the second requirement, namely, the furnishing of the FCG by the exporter, the judge found:
"Insofar as it involved the provision of an FCG for the cargo, this too in the last resort involved the
payment of money, though in this case it was money which the owners were under no liability to pay to the
Iranian authorities. They were the carriers, not the exporters, of the cargo. However, I find that, if the
owners had been prepared to put up the required amount of foreign exchange, the Iranian authorities would
have been satisfied and a way would have been found in which to complete the necessary documentation
and clear the vessel and her cargo. I accept that for the owners merely to offer to guarantee the foreign
exchange would not have sufficed; but just as the requisite foreign exchange was eventually provided by

SVG [the importers], albeit because they were buying the cargo, so it could have been provided by the
owners either directly or through a confirmed letter of credit payable against surrender of the bills of
lading. Whatever had been done would also have had to have involved the provision of sufficient funds to
buy out the interest of
[1992] EWCA Civ J0616-1

Bank Melli in the cargo and the bills of lading; therefore the owners would probably have had to be
willing in effect to buy the cargo themselves. The co-operation of Bank Melli was essential but was
obtainable on an ordinary commercial basis having regard to their legitimate interests as bankers".
Having made those findings of fact, the judge turned to the law. He referred to rule 10 of the Rules for Construction
under which "arrests etc" is to be taken as referring to political or executive acts. But he accepted on the strength of
Miller v. The Law Accident Insurance Company [1903] 1 K.B. 712 and " The Anita " [1970] 2 Lloyd's Rep. 365
that detention under the ordinary laws of Iran would not be fatal to the plaintiffs' case, provided it was not the result
of ordinary judicial process.
As to clause 4.1.5 he held:
"However, the exclusion under clause 4.1.5 [of] loss arising from detainment by reason of the infringement
of any customs regulations does fully apply to this case. In one sense the vessel was not detained at all; as
previously stated, she was not physically restrained. What happened was that she was not able to comply
with the customs regulations and therefore, if she had attempted to sail, she would have been physically
detained for infringement of those customs regulations. The words 'restraint' and 'detainment' have to be
given a wide commercial interpretation (see for example The Bamburi at [page] 315) but by the same
token the exclusion must be read in the same way. In a commercial sense she was detained by reason of
infringement of customs regulations. She was only detained because, if she had tried to leave, she would
have been infringing customs regulations and would have been stopped by force; therefore the reason for
her detention was infringement of customs regulations.
It does not advance the plaintiffs' case to say, insofar as it can be said, that one essential formality was a
formality to be completed by the exporter not the shipowner; it remains the fact that it was the customs
regulations that were making it illegal for the vessel to sail and that, if she had sailed without clearance,
the ship herself would have been infringing those regulations".
I agree with that reasoning. The judge again correctly emphasises that the detention was conditional. If the vessel
had tried to leave, without having obtained customs clearance,
[1992] EWCA Civ J0616-1

she would have been forcibly detained. I do not suggest that the threat of detainment was any less real or effective
on that account. But the threat of detainment depended on prior infringement. If, therefore, "detainment" in clause

1.2 is to be read as including conditional detainment, so also must "infringement" in clause 4.1.5.
Mr Hallgarten argues that infringement must mean "actual infringement". But that is an over-simplification for the
following reasons:
(1) I cannot see why the parties should have intended to draw a distinction between quarantine regulations on the
one hand and customs and trading regulations on the other. In the case of quarantine regulations, there does not
need to be an actual infringement. It is sufficient that the detainment is under the regulations. Why should the
parties have required something different in the case of customs and trading regulations? If it be asked why, then,
did the parties use different language, I would answer that that objection would have force, if the clauses had been
settled by an equity draftsman. But regrettably it has less force in construing a contract of marine insurance.
(2) Secondly, it does not make commercial sense to draw a distinction between actual infringement, and threatened
infringement. Suppose the vessel had attempted to leave in August 1977 after she had loaded 23,000 tons, but had
been stopped before she had got under way. The exclusion would presumably have applied, and underwriters would
not have been liable. Why should owners recover merely because they have made no attempt to leave? Was the
exclusion intended as a punishment for breaking, or attempting to break, the local law? Surely not. Yet that, is the
effect of the construction for which the
[1992] EWCA Civ J0616-1

10

owners contend.
Moreover, if actual infringement is required, there would be great difficulty in determining the point at which actual
infringement starts. Would the exclusion apply when the vessel was preparing to leave? Or casting off? Or raising
anchor? Or leaving the geographical or commercial area of the port? The point is well illustrated by a passage in the
master's evidence on which Mr Hallgarten relied to underline the threat of force.
"I did, on one occasion, ask for permission to start the main engine and do a short circuit in order to check
that everything was functioning properly. My thought was to see how far we could get before being
stopped by the Iranian authorities. Permission was, however, denied. I also tried lifting the anchor on one
occasion to see what would happen. Almost immediately a fast patrol vessel belonging to the
Revolutionary Guards appeared and ordered us to drop anchor again immediately".
If this evidence illustrates the threat of detainment by force, it also shows an actual, or at least threatened,
infringement.(3) The third reason why Mr Hallgarten's approach involves an over-simplification turns on a proper
appreciation of the way in which the framers of the new Institute Clauses have set about their task. They have
retained the familiar "capture, seizure, arrest etc" since, in the words of one academic writer, "to have tinkered with
these hallowed perils would have invited litigation". At the same time it was important to preserve the essential
meaning of the terms in the context of a war risks policy, namely, that they refer to political or executive acts: see
rule 10 of the Rules of Construction. This is the function of clause 4.1.5 and 4.1.6. It would, I think, be a mistake to

regard clause 1.2 as defining the perils, and clause 4.1.5 and 4.1.6 as providing exceptions to liability in specified
circumstances. That may be true of clause 4.24.4. But it is better to regard 4.1.5 and 4.1.6 as part of the definition
of the
[1992] EWCA Civ J0616-1

11

peril itself. It is identifying the sort of arrest, restraint or detainment which the draftsman had in mind. If that is the
right approach, then I have no doubt that the failure to obtain normal customs clearance, for whatever reason, was
outside the cover, whether or not there was an actual infringement of the customs regulations.
Suppose, to take an example suggested by Mr Legh-Jones, a vessel was detained by reason of her International
Safety Certificates having expired. Nobody would regard that as "detainment" within the meaning of clause 1.2. In
my view the same should apply where the vessel is detained by reason of the owner's failure to pay port dues, or the
exporter's failure to furnish an FCG acceptable to the Central Bank of Iran.
On the above ground, I would hold in agreement with the judge that if there was a detainment within the meaning
of clause 1.2 then there was an infringement within the meaning of clause 4.1.5. But putting it in my own words I
would prefer to say that, reading the two clauses together, there was no detainment within the meaning of clause 1.2
at all. Nothing in Miller v. The Law Accident Insurance Company , the case mainly relied on by Mr Hallgarten,
compels us to a different conclusion. It was common ground that if there was no detainment within the meaning of
clause 1.2, the plaintiffs' claim under the loss of hire policy must fail.
But I should go on to deal with two alternative arguments advanced by Mr Legh-Jones. The Jardine Glanvill
wording provides cover in the event of the vessel or craft being prevented from earning hire "in consequence of the
risks enumerated in the Institute War and Strikes Clauses Hulls Time". Clause 1 of the Hulls Clauses provides
"subject always to the
[1992] EWCA Civ J0616-1

12

exclusions hereinafter referred to, this insurance covers loss of or damage to the vessel caused by" the enumerated
causes. It is now accepted that clause 1 must, for the purposes of the Jardine Glanvill wording, be read subject to
the exclusions in clause 4. Clause 4 provides "This insurance excludes loss, damage, liability or expense arising
from" the excluded causes. The question is whether the policy covers loss of or hire irrespective of loss of or
damage to the vessel.
Mr Hallgarten argues, and the judge has held, that loss of or damage to the vessel is not a prerequisite for recovery
of loss of hire. Loss of or damage to the vessel is, in the judge's words, "germane" to a hull policy. But it is not
"germane" to the loss of hire policy.
But I ask, why not? As already mentioned, the vessel was covered by the Hellenic War Risks Club against war risks
in respect of the hull. In order to recover under the hull policy the plaintiffs had to show loss of or damage to the
hull. But recovery under the hull policy would not enable the plaintiffs to recover loss of earnings. I do not doubt

that this was the gap which the loss of hire policy was intended to cover. Thus if, for example, the vessel had struck
a mine while trading to the Persian Gulf, the hull policy would have entitled the plaintiffs to recover the cost of
repairs. The loss of hire policy would have entitled the plaintiffs to recover loss of earnings while the vessel was
being repaired. So I do not with respect agree that loss of or damage to the vessel is not "germane" to a loss of hire
policy.
Of course the parties could have intended that the loss of hire policy should go wider than the hull policy, and cover
loss of hire irrespective of loss or damage to the vessel. But the
[1992] EWCA Civ J0616-1

13

question is whether they have done so. For two reasons I consider that they have not.
(1) If the plaintiffs had desired to be covered against loss of earnings irrespective of loss of or damage to the vessel,
then the means were ready to hand. They would have referred to the perils enumerated in the Institute War and
Strikes Clauses Freight Time. Clause 1 provides:
"PERILS
Subject always to the exclusions hereinafter referred to, this insurance covers
1.1 loss (total or partial) of the subject-matter insured caused by"
It will be noted that there is no reference to loss of or damage to the vessel, but otherwise the perils enumerated in
clause 1are identical. Similarly clause 4 provides:
"EXCLUSIONS
This insurance excludes loss (total or partial) or expense arising from"
It will be noted that there is no reference to damage. Why then did the parties choose the Hulls Clauses rather than
the Freight Clauses, seeing that the Freight Clauses are specifically designed for incorporation in a policy on
freight? (Freight is defined widely in the Marine Insurance Act as including the profit derivable by a shipowner
from the employment of his ship. So it includes hire as well as freight). The inference is, I think, irresistible that the
parties chose the Hulls Clauses because they intended to limit recovery for loss of hire to cases where there had
been loss of or damage to the vessel. This makes good commercial sense. Insurance against loss of hire irrespective
of loss of or damage to the vessel would no doubt have cost more.
[1992] EWCA Civ J0616-1

14

(2) Although the words "risks enumerated in the Institute War and Strikes Clauses Hulls Time" may at first sight
seem to indicate, and be confined to, the risks in the numbered sub-clauses, it is now accepted that the clause itself
is incorporated at least to the extent that the risks are expressly made subject to the exclusions in clause 4. Moreover

there are other indications in the Jardine Glanvill wording which suggests that damage to the insured vessel is a
prerequisite. I have in mind in particular provisos (a) and (c). Proviso (c) does not make grammatical sense as it
stands. But it should presumably read:
"Provided thatrepairs if actually carried out in respect of damage are completed within twelve months
of the expiry of this policy".
The purpose of the proviso is thus to enable the owners to recover for loss of hire resulting from damage during the
currency of the policy, provided the repairs are carried out within twelve months of the expiry of the policy. This
shows that the parties were contemplating loss of hire resulting from damage to the vessel, and the consequential
need for repairs, as being the primary, and I would say only, cover afforded by the policy.
The learned judge observed that the vessel would not be likely to be damaged by detention. This may be true. But
detention is not the only risk covered. Other risks, such as war, mines, torpedoes, bombs and terrorist activity would
all be very likely to cause damage to the vessel.
In summary I would hold that the parties deliberately chose the Hulls Clauses rather than the Freight Clauses, and
that their purpose was to confine the loss of hire policy to loss of hire resulting from loss of or damage to the vessel.
Mr Hallgarten had a fall-back argument that the vessel was

[1992] EWCA Civ J0616-1

15

indeed "lost" since she became a constructive total loss in October 1987 when the owners gave notice of
abandonment. But the owners never came near showing that the vessel was a constructive total loss within section
60 of the Act. Alternatively it was argued that the vessel was a deemed constructive total loss within clause 3 of the
Institute clauses. But there is nothing in the Jardine Glanvill wording which incorporates clause 3. The whole thrust
of Mr Hallgarten's other arguments was that the wording incorporates the risks enumerated in clause 1, subject to
the exclusions in clause 4, but nothing else.
The second of Mr Legh-Jones's two alternative arguments depends on clause 4.1.6 which excludes "loss or
damagearising fromfailure to provide security or to pay any fine penalty or any financial cause". The judge
accepted that in so far as the failure to obtain customs clearance was due to the failure or refusal of the plaintiffs to
pay port dues etc., then the defendants can rely on "any financial cause" to exclude their liability. But he took a
different view about the FCG. The failure to provide the FCG was not, he thought, a financial cause, since in the
context of clause 4.1.6 financial cause must be read as applying to the ship and the owners, but not to the cargo.
We were not referred to any decided cases on the meaning of "financial cause". But I see no reason to confine the
words to causes for which the owners are responsible, as the judge held. The words are not financial default, still
less financial default on the part of the owners; but financial cause. The financial cause must, of course, affect the
ship. Otherwise there would be no detainment. But assuming the ship is detained by a

[1992] EWCA Civ J0616-1

16

failure to pay money on the part of the cargo interests, it comes within the ordinary meaning of the words "financial
cause". I accept that the ordinary meaning of the words is very wide. But they are the words which the parties have
chosen. In the context of a War Risks policy the words can and should be given their ordinary meaning.
This led on to a submission by Mr Hallgarten, that even if the words bear their ordinary meaning nevertheless the
cause of the delay was not financial. It was not Bank Melli's failure to put up the money for the FCG which lay at
the root of the problem, as the judge found, but Dr Tehrani's refusal to sign the FCG. According to the judge, Bank
Melli could have provided the requisite FCG as soon as they obtained a power of attorney from Dr Tehrani at the
end of 1987. Mr Hallgarten submits that the judge was wrong about that. It follows that until then, there must have
been some other non-financial cause for the delay.
I agree with Mr Hallgarten that the judge fell into error in thinking that the power of attorney was granted when Dr
Tehrani left the country at the end of 1987. But I do not agree that the cause of the delay thereafter was nonfinancial. As the judge points out on more than one occasion, Dr Tehrani was in serious difficulties almost from the
outset. As time passed, his cash-flow problem became acute. It is unnecessary to look further to find the cause of Dr
Tehrani's procrastination. He was hoping that something would turn up. Although he did not give up hope until July
1988, I have no doubt that the failure to obtain the FCG before then was due to his financial situation and not, as Mr
Hallgarten submits, to some non-financial cause. There were, in truth, two causes for the failure to obtain customs
clearance prior to October 1988. Both were financial.

[1992] EWCA Civ J0616-1

17

Both fell within the ordinary meaning of the words "financial cause" in clause 4.1.6. Even if, therefore, the vessel
was detained within the meaning of clause 1, the defendants are not liable.
Freight Policy
I now turn to the freight policy. The language of the policy is even more confusing than the loss of hire policy. It
provides as follows (for convenience I have numbered the lines):

"Interest:

freight at risk or not at risk on board or not on board in

and/or over and bunkers.

Freight All Risks:

US $500,000

Freight Total Loss Only:

US $750,000

Bunkers:

nil

Conditions:

A) Freight All Risks

1.

Institute Time Clauses, Freight 1.10.83

2.

Section 9 amended to 4/4ths, including fixed

3.

and floating objects.

4.

Clause 14 deleted.

5.

This insurance also to pay up to the amount

6.

insured any one accident or occurrence, loss

7.

of freight to be earned under any forthcoming

8.

voyage due to the loss of or damage to the

9.

vessel from a peril insured against under the

10.

Institute Time Clauses Hulls 1.10.83 and/or

11.

the Institute War and Strikes Clauses 1.10.83

12.

occurring on any preceding voyage subject to

13.

the total claim recoverable any one accident

14.

or occurrence not exceeding the insured amount

15.

for the relevant vessel.

16.

Including jettison and washing overboard.

17.

Including salvage, salvage charges and sue and

18.

labour.

19.

Section 15 Line 1 after 'herein' insert

20.

'resulting in the total loss of the subject

21.

matter insured' etc.

22.

Increases in the insured amount up to

23.

US$1,000,000 each vessel held covered, subject

24.

prompt telex advice to Jardine Glanvill

25.

Limited and with additional premium at slip

26.

rates.

B)

[1992] EWCA Civ J0616-1

18

27.

Freight Total Loss Only Policy Proof of

28.

Interest. Full Interest Admitted.

29.

This policy to pay the insured amount in the

30.

event of the Total Loss and/or Constructive

31.

and/or Compromised and/or Arranged Total Loss

32.

of the vessel by a peril covered under the

33.

Institute Time Clause Hulls 1.10.83.

C) Bunkers

..
34.

All Sections

35.

Including War and Strikes as per Institute War and

36.

Strikes Clauses 1.10.83 including L.P.O 444.

37.

In the event of vessels attaching to their policy

38.

for less than 12 months underwriters agree allow

39.

Short close on daily pro rata of annual rates.

40.

Quarterly Premium.

41.

Cancellation Clause (Jardine Glanvill Limited)."

It will be seen that the policy is divided into three sections. We are concerned with section A. Section B is void
under section 4 of the Marine Insurance Act 1906, since it is policy proof of interest. But it may be noted in passing
that the policy pays under section B only in the event of a total loss of the vessel.
Although section A is headed All Risks, it does not mean all risks in the conventional insurance sense. It must mean
partial loss as well as total loss. "Freight at risk or not at risk" is obscure. Mr Hallgarten submits that freight not at
risk covers freight which has been earned but not yet paid. Mr Legh-Jones submits that it covers freight which has
been booked but is not yet being earned. In other words it adds little to "on board or not on board". I prefer the
defendants' submission. "In and/or over" defies any attempt at rational construction.

Lines 515 in section A are in the nature of an insertion in the main cover, ("This insurance also to pay"). It covers
loss of freight to be earned on a forthcoming voyage, as a consequence of loss of or damage to the vessel on the
preceding voyage.

[1992] EWCA Civ J0616-1

19

Otherwise the policy covers loss of freight on the voyage in question, on terms of the Institute Time Clauses
Freight, as one would expect.
Turning to the "all sections" wording, the policy incorporates War and Strikes cover. But the question is, which
clauses? Are they the Hulls Clauses, as in the loss of hire policy? Or the Freight Clauses? Mr Hallgarten submits
that the reason why no clauses are identified, is that the Freight Clauses are incorporated into section A, save for the
insertion, and the Hulls Clauses in sections B and C. In my view this is much too subtle. Internal evidence suggests
strongly that it is the Hulls Clauses which the parties had in mind. This must be the meaning of the reference in line
11; and the express inclusion of the London Blocking and Trapping Addendum, which is specifically for use with
the Hulls Clauses, points to the same meaning in line 36. I would hold that it is the Institute War and Strikes Clauses
Hulls Time which are incorporated.
That being so, the defendants are entitled to succeed for all the reasons mentioned under the loss of hire policy. If
there was a loss of freight, the defendants are not liable because (i) there was no loss of or damage to the vessel; (ii)
there was no detainment within clause 1.2 when read in conjunction with clause 4.1.5 and (iii) the cause of the
detainment, if any, was financial.
But there is a more fundamental objection to the plaintiffs' claim under the freight policy. Was there a loss of freight
at all? The judge has held not. In my view he was right. The gross freight was earned on the cargo carried when she
discharged at Aarhus. It follows that there was no loss of freight as such, since the policy does not cover the
increased cost of

[1992] EWCA Civ J0616-1

20

earning the freight, or the charterers' failure to pay the freight, when earned. Nor was it suggested that the plaintiffs
can recover dead freight on the cargo which the charterers failed to load. The argument, as I understand it, is that
the plaintiffs were entitled to earn their freight in 1987. The freight which they earned in 1988 is not the same as the
freight they would have earned in 1987. It was not the contractual freight, albeit earned at the contractual rate.
Originally it was submitted that if the freight had been earned in 1987, the vessel could have been put on the market
in 1988, and would have earned at the rate of $8,000 per day. That submission has now been abandoned. But Mr
Hallgarten argues, nevertheless, that there was a total loss of freight in 1987, which the plaintiffs are entitled to
recover under the freight policy.
If, contrary to my view, the War and Strikes Clauses Freight Time were incorporated, there would be a short answer.
If the 1987 freight was lost, it could only be by reason of the frustration of the adventure, which is excluded by
clause 4.5. But in truth the 1987 freight was not lost. The freight earned in 1988 was the same as the freight which
should have been earned in 1987. It was for carrying the same cargo in the same ship, to the same destination under
the same reinstated charterparty. The voyage was delayed. But the freight was not lost. The deletion of clause 14 of
the Institute Time Clauses Freight, the Loss of Time Clause, does not help the plaintiffs. If they were to recover for
loss of freight under the policy, as well as the freight earned in 1988, they would be recovering twice over. The
judge was quite right to hold that there was no total loss of freight.
But was there a partial loss of freight? Mr Legh-Jones

[1992] EWCA Civ J0616-1

21

relied on Inman Steamship Company, Limited v. Bischoff (1882) 7App. Cas. 670 . In that case the charterers were
entitled under the charterparty to make a deduction from the freight in the event of the vessel becoming inefficient.
The amount of the deduction was at the discretion of the charterers. The charterers exercised their right of
abatement. The owners made a claim for loss of freight on their insurers. It was held by the House of Lords that
there had been no loss of freight. This appears distinctly from the speeches of Lords Selborne, Blackburn and
Watson. Lord Blackburn said at page 682:
"It is obvious that the pecuniary damageto the assured was precisely the same whether the hire for these
two months was, in consequence of the peril of the sea, never earned, or whether the commissioners had,
in consequence of the peril of the sea, a right to make abatement by way of mulct to such amount as in
their judgment was fit and reasonable, and to deduct that from the pay, and thought it fit and reasonable to
deduct the whole. But the difference to the underwriters is considerable. In the first case the hire is clearly
lost by the peril insured against. In the other, I think it cannot properly be said that the hire has been lost at
all, though the assured have had an equivalent mulct levied out of it".
A little later he said:
"I must own that I have always sympathised with Lord Colonsay in Rankin v. Potter , where he says:
'Something is said about proximate and remote causes, and these are matters which are very apt to lead us
into philosophical mazes'; which, I think, he did not use as a term of eulogy. I think, as he did, that when
we get a clear view of the fact it is best to keep clear of such philosophical mazes. And, as I think, the
question here is not what was the proximate cause of a loss of freight, but whether there was any loss of
freight".
Lord Watson said at page 690:
"In these circumstances, whilst I am conscious that the question is one of great nicety, I am unable to
regard a disallowance of freight, which may be legitimately made on such considerations, as lost freight in
the proper sense of that term".
Inman v. Bischoff is, in my opinion, conclusive authority that the plaintiffs are unable to recover for partial loss of
freight

[1992] EWCA Civ J0616-1

22

in this case.
Mr Hallgarten seeks to distinguish Inman v. Bischoff on the ground that in that case there was no operative peril.
Here there is. He relies on the speech of Lord FitzGerald at page 691693. But the whole point of Inman v.
Bischoff was that the vessel had been rendered inefficient by perils of the sea. Nevertheless it was held that, since
the freight was earned despite the peril of the sea, there was no loss of freight at all. So Inman v. Bischoff cannot be
distinguished on that ground. It decides that where there is a deduction from freight under a discretionary power
conferred by the charterparty, there is no loss of freight, whether total or partial. I can see no difference between a
discretionary power conferred under the charterparty, and a subsequent agreement between the parties where by the
plaintiffs agreed to defray certain expenses out of the gross freight receivable. At page 675 Lord Selborne said:
"If the shipowners had voluntarily consented to a variation of the terms of the charterparty, involving a
relinquishment of their claim to freight (which does not appear to have been the case), this could not have
thrown upon the insurers any liability to which they would not otherwise have been subject".
That is precisely what happened here. I would reject the plaintiff's claim for partial loss of freight.
As an alternative, Mr Hallgarten sought to recover certain charges deducted from the freight as expenses properly
incurred under the sue and labour clause. The total sum claimed under the sue and labour clause was well over
$5M. There is a short answer to this way of putting the plaintiffs' claim. It is to be found in section 78(3) of the
Marine Insurance Act 1906 under which expenses incurred for the purpose of averting or diminishing a loss not
covered by the policy are not recoverable

[1992] EWCA Civ J0616-1

23

under the clause. Here there was no loss covered by the policy, so the expenses are not recoverable. It is
unnecessary to consider whether the plaintiffs could in any event have recovered in the absence of a sue and labour
clause in the loss of hire policy.
Many other questions were argued. But they do not fall for decision. I would dismiss the appeal.

LORD JUSTICE NOURSE: I have had the advantage of reading in draft the judgment of Lloyd L.J. I agree with
him that the appeal should be dismissed. I wish to add some observations on three questions relating to the loss of
hire policy, of which the first two arise on the exclusions in the Institute War and Strikes Clauses Hull-Time.
Clause 4.1.5. It was agreed in argument that in its application to this case this exclusion should be construed as if it
were expressed as follows:
"This insurance excludes loss damage liability or expense arising fromdetainment[either (1)] under
quarantine regulations or [(2)] by reason of infringement of any customs or trading regulations."
The contrast between the wording of (1) and (2) suggests that the "infringement" referred to in (2) is an actual and
not a "conditional" infringement. Since the contrast is so marked, that construction does not seem to me to be at all
pedantic, even in a marine insurance contract. However, both Lloyd L.J. and Hobhouse J. have taken the contrary
view and I am not so confident of my own as to make it appropriate for me to dissent from their combined opinion
on a question of this nature.
Clause 4.1.6. Like Lloyd L.J., I can see no reason to confine the words "financial cause" to causes for which the
owners are responsible, albeit that that construction gives to

[1992] EWCA Civ J0616-1

24

the exclusion a very wide effect. However, Mr Hallgarten Q.C. argued that here the loss was caused by a lack, not
of finance, but of an exporter (Dr Tehrani) who was willing to export. I found that a powerful argument. But in the
end I have come to accept that the conclusion of Lloyd L.J. is correct. On a view of the case as a whole, I think it
unrealistic to distinguish between Dr Tehrani's unwillingness to export and his financial inability to fund the
provision of an FCG.
The third question on which I have felt some difficulty is whether the policy covers loss of hire irrespective of the
loss of or damage to the vessel. Again, however, the reasoning of Lloyd L.J. has convinced me that, by choosing to
incorporate the Hull clauses rather than the Freight clauses, the parties must be taken to have intended that the loss
of or damage to the vessel should be a prerequisite to liability under the policy. There is no logical basis for taking
the contrary view.

LORD JUSTICE MCCOWAN: Having had the advantage of reading in draft the judgment of Lloyd L.J., I
respectfully agree with it, save in respect of clause 4.1.5 of the Institute War and Strikes Clauses Hull Time.
Clause 4 so far as relevant provides:
"This insurance excludes

.1 loss dam
liability
expense
arising
from
..
.1.5

Hobhouse J. dealt with clause 4.1.5 as follows:

ar
restrain
detainm
confisc
n
expropr
on un
quarant
regulati
or
reason
infringe
nt of
custom
trading
regulati
."

"However, the exclusion under clause 4.1.5, loss arising from detainment by reason of the infringement of
any customs regulations does fully apply to this case. In one sense the vessel was not detained at all; as

[1992] EWCA Civ J0616-1

25

previously stated, she was not physically restrained. What happened was that she was not able to
comply with the customs regulations and therefore, if she had attempted to sail, she would have
been physically detained for infringement of those customs regulations. The words 'restraint' and
'detainment' have to be given a wide commercial interpretation (see for example The Bamburi at
315) but by the same token the exclusion must be read in the same way. In a commercial sense she
was detained by reason of infringement of customs regulations. She was only detained because, if
she had tried to leave, she would have been infringing Customs regulations and would have been
stopped by force; therefore the reason for her detention was infringement of customs regulations."
I have no difficulty in concluding that the vessel was detained in this case, in the same sense that a man under house
arrest could be properly described as detained, since, although free within his house, he would immediately be
apprehended if he tried to leave it. I would not have thought it was necessary to give "a wide commercial
interpretation" to arrive at the same conclusion in respect of the "Wondrous".
What puzzles me is how the judge arrives at his conclusion that "in a commercial sense she was detained by reason
of infringement of customs regulations", when she did not attempt to leave the port (any more than the man under
house arrest who made no attempt to leave it could be said to have infringed the terms upon which he was permitted
to remain under house arrest). No authority has been put before this court to support a suggestion that
"infringement" has to be given a special sense in commercial cases.
In my judgment, the interpretation put upon this clause by Hobhouse J. and Lloyd L.J. involves eliminating the
words "by reason of infringement" from the clause. The clause could in fact very easily have been worded "under
quarantine, customs or trading regulations". The parties chose, however, to make a distinct between quarantine
regulations on the one hand and

[1992] EWCA Civ J0616-1

26

customs and trading regulations on the other. Having so chosen (whether or not they employed an equity draftsman
for the purpose) I do not see how the courts can be entitled to re-draw their bargain for them.
Finally, it was argued before us by Mr Legh-Jones that the phrase "by reason of infringement" was incorporated in
the clause to cover an alleged or suspected infringement. If, he submitted, a ship were stopped by the navy because
they suspected an infringement, but it turned out they were wrong, there would nevertheless be an infringement. I
am bound to say I react in exactly the opposite way. If the navy were wrong, and the question were then asked,
"Was the vessel guilty of an infringement?" I fail to see how in common sense the answer could be other than "No".
I agree, however, for all the other reasons set out by Lloyd L.J. in his judgment, that the appeal should be dismissed.
Order: Appeals dismissed with costs; application for leave to appeal to the House of Lords refused.