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On appeal from: [2018] EWCA Civ 230

This appeal considered whether the Court of Appeal was right to conclude that the respondents did not have ‘reliable information of the loss’ by 1 Feb 2013 for the purposes of the Marine Insurance Act, s 62(3). It also considered whether the Court of Appeal was right to conclude that the respondents served notice of abandonment with ‘reasonable diligence’ following 25 Jan 2013 for the purposes of the provision, and whether costs incurred prior to notice of abandonment and/or Special Compensation Protection and Indemnity Clause costs rank towards the calculation of constructive total loss for the purposes of s 60(2)(iii).

The Supreme Court unanimously allowed the appeal in part (dismissing it on issue (1), but allowing it on issue (2)).

On issue 1, the Court held that expenditure incurred before the service of the notice of abandonment did not fall outside the scope of costs under s 60(2)(ii). This was because, as a general rule, the loss under a hull and machinery policy occurs at the time of the casualty and not when the measure of indemnity is ascertained. The Court held that whether there has been a constructive total loss depends on the objective facts. Therefore, following this objective approach and the fact that the loss was suffered at the time of the casualty, the damage referred to in s 60(2)(ii) was in principle the entire damage arising from the casualty from the moment that it happened.

On issue 2, the Court held that it is well settled that “the cost of repairing the damage” in s 60(2)(ii) includes some costs not spent directly on actual reinstatement. The common feature of all the cases in which the cost of preliminary steps have been included is that their objective purpose was to enable the ship to be repaired. However, the objective purpose of Special Compensation Protection and Indemnity Clause charges is different as they protect an entirely distinct interest of the shipowner, namely potential liability for environmental pollution. Therefore the Supreme Court concluded that the courts below erred in holding that these charges were part of the “cost of repairing the damage” in s 60(2)(ii) of the Act.

For judgment, please download: [2019] UKSC 29
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (10 Apr 2019 morning session) (10 Apr 2019 afternoon session) (11 Apr 2019 morning session)