Global Process Systems Inc & Anr v Syarikat Takaful Malaysia Berhad

In marine insurance, reasonably foreseeable weather does not by itself make a loss one caused by inherent vice. The insurer must establish that inherent vice was the proximate cause. The relevant question is whether an external, fortuitous accident or casualty caused the loss, judged against the ordinary action of wind and waves for the voyage, not merely against foreseeable conditions. Inherent vice may contribute causally, but where an insured peril is a proximate cause it cannot be the sole proximate cause. Cargo insurance carries no implied seaworthiness warranty. A leg-breaking wave was not bound to occur on an ordinary voyage round the Cape of Good Hope. The exclusion did not apply and the appeal was allowed.

The appellants’ oil rig was being transported by barge under an all-risks marine policy containing an exclusion for inherent vice. During the voyage round the Cape of Good Hope, the rig’s legs fractured after fatigue cracking caused by the motion of the barge and the sea.

Blair J held that the proximate cause was the rig’s inherent inability to withstand conditions reasonably expected on the voyage and ruled that the loss was excluded. His decision, reported at [2009] EWHC 637 (Comm), followed the approach in Mayban. The appeal concerned whether reasonable foreseeability of the weather was the correct test, or whether the loss was caused by a fortuitous peril of the sea.

Appeal allowed. Waller LJ gave the leading judgment. Carnwath LJ agreed and added observations on the statutory context and the treatment of earlier authorities. Patten LJ agreed with both judgments.

1. The all-risks policy covered loss proximately caused by an insured peril, subject to the inherent-vice exclusion in section 55(2)(c) of the Marine Insurance Act 1906. The court accepted Lord Diplock’s formulation in Soya v White, [1983] 1 Lloyd’s Rep 122. Inherent vice concerns loss caused by the natural behaviour of the insured property in the ordinary course of the contemplated voyage without a fortuitous external accident or casualty.
2. Inherent vice is not confined to damage caused solely by an internal process. An external agency may contribute causally. However, where an insured peril is itself a proximate cause, inherent vice cannot be treated as the sole proximate cause. The insurer bears the burden of proving inherent vice as the proximate cause.
3. The court rejected the wider test adopted in Mayban General Insurance v Alston Power Plants, [2004] 2 Lloyd’s Rep 609, under which conditions no more severe than could reasonably be expected necessarily pointed to inherent vice. Reasonable foreseeability is not decisive. Seasonal or foreseeable adverse weather may still amount to a fortuitous peril of the sea.
4. The ordinary action of wind and waves is judged by the common understanding of what would be bound to occur on a normal voyage of the kind undertaken. The definition excludes ordinary wear and tear, but does not require wholly exceptional weather. The broader observation of Donaldson LJ in Soya v White, [1982] 1 Lloyd’s Rep 136, was treated with caution because it was obiter or, at least, not clearly necessary to the decision.
5. The rig had been inspected and approved for the voyage. Fatigue contributed to the failures, but the leg-breaking wave which caused the first fracture was an external fortuitous event and was not bound to occur on an ordinary voyage round the Cape. The loss was therefore not shown to have been proximately caused by inherent vice. No remission for further findings was required.

• Court of Appeal (Civil Division) — The appeal was allowed in [2009] EWCA Civ 1398.
• Queen’s Bench Division, Commercial Court — Blair J held that the loss was caused by inherent vice and was excluded under the policy in [2009] EWHC 637 (Comm). That decision was displaced on appeal.