Connect Shipping Inc & Anor v Sveriges Anfgartygs Assurans Forening (The Swedish Club) & Ors

For constructive total loss purposes, the relevant question is whether the assured received reliable information of the loss and then acted with reasonable diligence. Certainty is unnecessary. Where the policy measures constructive total loss by recovery and repair costs, reasonable pre-notice recovery and repair costs may be included unless the wording provides otherwise. Salvage remuneration forming an indivisible part of necessary salvage operations may qualify as a cost of recovery or repair. The assessment should allow a suitable contingency or margin for uncertainty, judged on the evidence and circumstances of the casualty. A notice of abandonment is not itself an essential ingredient of constructive total loss.

A fire seriously damaged the vessel MV Renos. The owners sought indemnity under hull and machinery policies on a constructive total loss basis, while the insurers contended that only a partial loss was recoverable.

The issues included whether notice of abandonment was given in time, whether recovery and repair costs incurred before notice could be included in the constructive total loss calculation, whether SCOPIC remuneration formed part of those costs, and the proper allowance for repairs, contingencies and sue and labour expenses.

1. Notice of abandonment. The owners had not elected against abandonment by their conduct, and the passage of time did not amount to an implied election. Under section 62(3) of the Marine Insurance Act 1906, the notice had to be given with reasonable diligence after reliable information of the loss, subject to reasonable time for inquiry where information was doubtful. The owners acted within a reasonable time. The conflicting expert estimates, the complexity of assessing the damage and the need to develop and test repair specifications meant that obtaining reliable information was itself a factual process. Certainty was not required.
2. Pre-notice costs. Clauses 19.2 and 9.2 required the cost of recovery and repair to be compared with the insured value. Neither the policy wording nor section 60(2)(ii) excluded costs incurred before notice. Notice of abandonment concerns the right to claim for a constructive total loss, not the existence of the loss itself. The court declined to follow the relevant reasoning in Hall v Hayman and departed from the decision in Helmville Ltd v Yorkshire Insurance Company Ltd (the “Medina Princess”) on this point.
3. Salvage and repair assessment. The owners’ liability for the Article 13 award, SCOPIC remuneration and reasonable legal costs was an indivisible part of the necessary salvage operations and could be included in the calculation. The court assessed the reasonable tug costs at US$1.2 million and allowed appropriate figures for the principal repair categories.
4. Contingency. A general contingency of about 10 per cent was appropriate. The location, casualty, conflicting estimates and inability to determine all matters with precision justified a substantial allowance.
5. The resulting figures established that the vessel was a constructive total loss. The insurers were obliged to pay their respective proportions of the US$12 million insured value; the Swedish Club was obliged to pay the US$3 million increased value; and sue and labour costs were payable in the total sum of 85 per cent of US$1,440,970.