Masefield AG v Amlin Corporate Member Ltd

Capture by pirates does not necessarily create an actual total loss under the Marine Insurance Act 1906. Actual total loss requires irretrievable deprivation, assessed objectively on the true facts. Recovery must be legally or physically impossible; substantial difficulty, expense or uncertainty is insufficient. A ransom situation requires the court to consider the realistic prospect that payment will secure recovery.

A constructive total loss requires abandonment in the sense of abandoning hope of recovery, together with an actual total loss appearing unavoidable. A formal notice of abandonment alone is insufficient. The possibility of recovering property by a lawful and reasonable ransom payment cannot be disregarded on public-policy grounds.

The claimant owned cargo seized with the vessel Bunga Melati Dua by Somali pirates. The defendant insured the cargo under an all-risks policy covering piracy and theft. The claimant served a notice of abandonment shortly after the seizure, while ransom negotiations were in progress. The vessel, cargo and crew were released after payment of a ransom.

The claimant claimed an actual total loss under section 57(1) of the Marine Insurance Act 1906, alternatively a constructive total loss under section 60(1). The central questions were whether the cargo had been irretrievably lost when the notice was served and whether recovery by ransom could be taken into account.

1. Actual total loss. The claim failed. The test under section 57(1) was objective and required assessment of the true facts as at 18 September 2008. Subsequent recovery could assist in determining what the probabilities had reasonably been at that date: Marstrand Fishing Co Ltd v Beer and Bank Line Ltd v Arthur Capel and Co.
2. Irretrievable deprivation requires recovery to be legally or physically impossible. It is not enough that recovery is unlikely, difficult or expensive. The authorities concerning physical salvage and legal recovery supported that distinction: George Cohen, Sons & Co v Standard Marine Insurance Co, Panamanian Oriental Steamship Corporation v Wright and Fraser Shipping Ltd v Colton.
3. Capture by pirates does not automatically constitute an actual total loss. The effect of capture is fact-sensitive. Mere seizure transfers possession, not title or dominion. Dean v Hornby was distinguishable in its unusual factual and procedural setting, and the contrary observation in Kuwait Airways v Kuwait Insurance was a doubtful side observation in a non-marine case. The court approved the more fact-sensitive approach in Marstrand Fishing Co Ltd v Beer.
4. Constructive total loss. Section 60(1) required abandonment of hope of recovery because an actual total loss appeared unavoidable. The claimant’s notice was not the relevant abandonment: the owners remained hopeful and intended to recover the property. The distinction between abandonment under section 60(1) and notice of abandonment under sections 61 to 63 was explained in Court Line Ltd v R.
5. Payment of ransom was lawful and could not be excluded as contrary to public policy. Public policy should be invoked only in clear cases of substantially incontestable harm. The court also considered that ransom payments could be recoverable as sue-and-labour expenses under section 78(4), following Royal Boskalis Westminster NV v Mountain. No duty to pay ransom was required; the question was whether payment would or might achieve recovery, and this payment was reasonable in relation to the value of the property.
6. The claim for actual and constructive total loss was dismissed. Consideration of the alternative issue concerning late declaration of freight was unnecessary.