Rhesa Shipping Co SA v Edmunds (The Popi M) (Rhesa Shipping Co SA v Fenton Insurance Co Ltd)

An assured claiming for a loss caused by an insured peril bears the legal burden of proving that cause on the balance of probabilities. An insurer who advances an uninsured alternative cause does not assume a burden to prove it.

The court may conclude that the true cause remains unknown. Rejecting one explanation does not establish another, especially where the remaining explanation is extremely improbable. Proof on the balance of probabilities requires the alleged event to be more likely than not, assessed with common sense.

Where the immediate mechanism of loss is known, the assured must identify with sufficient particularity the insured peril said to have produced it. Reliance on the generic expression “perils of the sea” is insufficient.

The owners of the Popi M brought two consolidated Commercial Court actions against hull underwriters for the vessel's alleged total loss by perils of the sea. The vessel sank after seawater entered through a large aperture in wasted shell plating beside the engine room. The owners attributed the aperture to an underwater collision, ultimately suggesting a submarine; the underwriters advanced wear and tear.

Bingham J found the submarine explanation extremely improbable but treated the competing wear-and-tear explanation as effectively ruled out. He entered judgment for the owners: [1983] 2 Lloyd's Rep. 235. The Court of Appeal dismissed the underwriters' appeal: [1984] 2 Lloyd's Rep. 555.

The sole question before the House was whether those courts were justified, on the primary facts, in inferring that an insured peril was the probable cause of the loss.

1. Appeal allowed unanimously. Lord Brandon of Oakbrook delivered the leading speech. Lord Fraser of Tullybelton, Lord Diplock, Lord Roskill and Lord Templeman agreed with his reasons.

2. Per Lord Brandon, the burden remained throughout on the shipowners to establish, on the balance of probabilities, that an insured peril proximately caused the loss. The underwriters were entitled to advance wear and tear as an alternative cause, but they had no obligation to prove that explanation. The observations of Scrutton LJ in La Compania Martiartu v The Corporation of the Royal Exchange Assurance [1923] K.B. 650, although obiter, correctly stated the applicable principle: if the evidence leaves the cause in doubt, the assured has failed to prove the claim.

3. Per Lord Brandon, a fact-finder is not invariably required to choose between the explanations advanced by the parties. A third conclusion is available: the party bearing the burden has failed to prove its allegation. The contrary Sherlock Holmes method was inappropriate because it presupposed that all relevant facts and possible explanations were known. It also conflicted with the common-sense meaning of proof on the balance of probabilities, which requires the alleged event to be more likely than not.

4. Per Lord Brandon, the owners could not rely merely on the generic expression “perils of the sea”. Once it was established that the fatal water entered through an aperture, they had to prove with sufficient particularity what insured peril probably created it. The submarine theory was extremely improbable for several cogent reasons. The trial judge's rejection of the underwriters' wear-and-tear mechanism did not make the submarine theory probable.

5. Per Lord Brandon, the trial judge erroneously treated himself as compelled to choose between the two theories and failed at the point of decision to consider whether the cause remained unproved. The only justifiable inference from the primary facts was that the true cause of the loss was in doubt. The owners therefore failed to discharge their burden.

6. The orders of Bingham J and the Court of Appeal were set aside. The underwriters were awarded their costs in the House and below, and the cause was remitted to the Queen's Bench Division to proceed consistently with the judgment.

1. House of Lords: In [1985] UKHL 15, reported at [1985] 1 WLR 948, the House unanimously allowed the underwriters' appeal. It set aside the orders below, awarded the underwriters their costs and remitted the cause to the Queen's Bench Division.

2. Court of Appeal: The court dismissed the underwriters' appeal from Bingham J: [1984] 2 Lloyd's Rep. 555. It concluded that the judge had not overlooked the possibility that the cause remained unknown.

3. Commercial Court: Bingham J entered judgment for the shipowners in the consolidated actions: [1983] 2 Lloyd's Rep. 235. Having treated wear and tear as effectively ruled out, he inferred that collision with a submerged submarine was the probable cause.