European Group Ltd & Ors v Chartis Insurance UK Ltd.

In marine insurance, proximate cause means the real efficient cause. A court is not required to choose between two rival explanations where the evidence does not establish either on the balance of probabilities. However, where competing explanations are neither improbable and all realistic possibilities have been identified, rejecting one may logically support the conclusion that the other was more probable. A 50/50 clause applies where proper investigation leaves genuine uncertainty as to when the damage occurred, or where the remaining explanation is so improbable that it cannot sensibly be treated as more likely than not. Where an insured fortuity is established as the proximate cause, inherent vice cannot operate as an additional proximate cause of the same loss.

The claimant insurers settled a claim arising from fatigue cracking in economiser tubes at a waste-recycling facility and sought recovery from the defendant insurer under an assigned marine policy. Both the marine and erection-all-risks policies covered the project, and both contained 50/50 clauses addressing uncertainty about whether damage occurred before or after arrival at the site.

The central issues were whether resonant vibration causing the cracking occurred during transport or resulted from wind excitation after arrival, whether inherent vice excluded liability, and whether the assured’s insured loss exceeded the settlement sum.

1. Causation. The court held that proximate cause in marine insurance is the cause proximate in efficiency, namely the real efficient cause. The evidence did not require the court to select mechanically between the parties’ theories. The applicable question was whether the proposed cause was more likely than not to have occurred.
2. The reasoning in Rhesa Shipping Co SA v Edmunds (The Popi M) and Ide v ATB Sales Ltd showed that eliminating one possibility does not establish another where the evidence is unsatisfactory or the remaining explanation is itself improbable. Conversely, where the possible causes are identified and are not improbable, rejecting one may support a finding that the other was the probable cause.
3. The court accepted the evidence that wind excitation after arrival could effectively be ruled out. Resonant vibration during transport, particularly during the road journey from Bucharest, was a realistic and credible explanation. The missing or ineffective packing, road conditions and available journey time could account for the required cycles and stress range. On the balance of probabilities, the damage occurred before arrival at the site.
4. The 50/50 clauses would apply if proper investigation left it impossible to determine when the damage occurred, or if the remaining theory was so improbable that it could not sensibly be described as more likely than not. Those conditions were not met.
5. Inherent vice. The welding, set-on design and condition of the economisers did not constitute proximate causes of the loss. The loss was caused by fortuitous resonant vibration during transit, associated with inadequate packing. Following Soya GmbH Mainz Kommanditgesellschaft v White and Global Maritime Systems Inc v Syarkat Takaful Malaysia Berhad (The Cendor Mopu), there was no room for inherent vice to operate as an additional proximate cause where an external fortuity had caused the loss.
6. The assured had proved an insured loss exceeding £4.6 million. Judgment was therefore entered for the claimants for their respective proportions of £3.68 million.