Comatra Ltd & Anor v Various Underwriters

A reasonable non-separation agreement made after an insured casualty may define both the general average expenditure and the parties’ respective proportions recoverable from hull underwriters. Where the agreement is one indivisible instrument, its cargo cap must be read together with its provisions extending general average and prescribing valuation. The phrase “the proportion of the loss which falls upon” the assured in section 66(4) of the Marine Insurance Act 1906 is not confined to a rateable proportion calculated solely by value. The agreement must, however, be reasonably made, proximately caused by the insured peril, and assessed with regard to the insurer’s statutory protection.

The owners of the ABT RASHA claimed from hull underwriters the excess created by a Bigham cap in post-casualty non-separation agreements with cargo interests. The agreements treated certain post-separation expenses as general average, prescribed valuation provisions, and capped cargo’s contribution at the cost of forwarding the cargo from the port of refuge.

On a preliminary issue, Steel J held that the excess Bigham amount was not recoverable under clause 11.1 of the Institute Time Clauses or section 66(4) of the Marine Insurance Act 1906, reported at [2000] 1 Lloyd's Rep 8. The central question was whether the owners’ recoverable proportion included the amount excluded from cargo’s contribution by the contractual cap.

The appeal was unanimously allowed. Clarke LJ gave the principal judgment; Pill LJ agreed with his reasoning and Bennett J agreed.

1. Nature of the agreement. A non-separation agreement containing a Bigham clause may in principle be reasonable. The assumed facts established that the agreement, the expenditure treated as general average, and the owners’ liability were reasonably connected with an insured peril.
2. Agreement read as a whole. The three paragraphs were an integral and indivisible agreement. Paragraph 1 defined additional general average expenditure, paragraph 2 prescribed the valuation basis, and paragraph 3 capped cargo’s contribution. The cap therefore operated together with paragraphs 1 and 2. Where it applied, cargo’s proportion was the capped amount and the ship’s proportion was the balance.
3. Construction of section 66(4). The statutory expression “the proportion of the loss which falls upon” the assured did not mean only a rateable proportion calculated by reference to value. It bore its natural meaning and included the proportion resulting from the reasonable agreement. Clause 11.1 consequently covered the vessel’s proportion calculated under the whole agreement, including the excess Bigham amount.
4. Limits on the principle. The decision did not authorise arbitrary agreements between shipowners and cargo interests. The agreement had to be made after the casualty, reasonably, and as a reasonable reaction to an insured peril. Pill LJ added that reasonableness must take account of section 66(4), so the device could not be used merely to increase underwriters’ liability for the benefit of another interest.

Green Star Shipping supported the conclusion that recovery under section 66(4) was not necessarily limited to a value-based rateable assessment. The Mary Thomas did not assist because it concerned a different loss caused by the shipowners’ fault. The preliminary issue was answered “yes”; the judgment below was set aside and costs were awarded to the appellants.

• Court of Appeal (Civil Division) — Appeal allowed; the judgment and order of Steel J were set aside. Preliminary issue (1) was answered yes and preliminary issue (2) no.
• Commercial Court — Steel J determined the preliminary issue against the owners, holding that the excess Bigham amount was not recoverable; decision reported at [2000] 1 Lloyd's Rep 8.