Sveriges Angfartygs Assurans Forening (The Swedish Club) & Ors v Connect Shipping Inc & Anor, Re Renos

Under the Marine Insurance Act 1906, the timeliness of a notice of abandonment is determined by the statutory wording and the facts. Reliable information may require reliable evidence of both the scope and cost of repairs. Where credible expert assessments materially conflict, the information may remain doubtful. A reasonable period may then be allowed for inquiry, followed by notice with reasonable diligence. In calculating constructive total loss, necessary recovery, salvage and repair expenses may be included whether incurred before or after notice. References to future salvage and general average costs are inclusive, not exclusive. SCOPIC remuneration may be included where it forms part of the cost of recovering the vessel. Reasonably and properly incurred costs to avert or minimise an insured loss may also be recoverable as sue and labour expenses.

The vessel suffered extensive fire damage during a laden voyage. The owners gave notice of abandonment and claimed constructive total loss under hull and machinery policies. The insurers argued that the notice was late, that the vessel was not a constructive total loss, and that certain salvage, SCOPIC and sue and labour costs were irrecoverable.

Knowles J gave judgment for the owners in the Commercial Court: [2016] EWHC 1580 (Comm). The insurers appealed. The owners brought a cross-appeal concerning sue and labour expenses and issued a Respondent’s Notice. The principal questions concerned notice under section 62(3) of the Marine Insurance Act 1906, the costs relevant to the constructive total loss calculation, and the recoverability of sue and labour expenses.

Hamblen LJ delivered the judgment, with Simon LJ and Vos C agreeing. The appeal and cross-appeal were dismissed.

1. Notice of abandonment. Section 62(3) of the Marine Insurance Act 1906 requires a fact-sensitive inquiry. The questions are whether the assured received reliable information of the loss, whether notice was then given with reasonable diligence, and, if the information was doubtful, whether the assured exceeded a reasonable time for inquiry. The statutory language should be applied without importing additional glosses from older authorities.
2. Reliable information and delay. In a complex repair case near the constructive total loss threshold, reliable information could require shipyard quotations and reliable assessments of both the scope and cost of repair. Conflicting expert specifications meant that the information remained doubtful. The owners’ subjective belief could not determine the issue. The complexity, history, absence of urgency and continuing technical disagreement justified the judge’s findings that the owners had taken no more than a reasonable time and had acted with reasonable diligence.
3. Constructive total loss calculation. Under section 60(2)(ii), the cost of repairing damage includes necessary recovery and salvage expenses and may include expenses incurred before notice of abandonment. The reference to future salvage operations and future general average contributions is inclusive rather than an exclusion of earlier expenses. The approach in Hall v Hayman and The Medina Princess was of limited authority and was not followed. The prudent uninsured shipowner test described in Sailing Ship ‘Blairmore’ Co v Macredie did not require existing repair costs to be disregarded. Constructive total loss is an objective state relating back to the casualty, distinct from the right to abandon, as recognised in Robertson v Petros M Nomikos.
4. SCOPIC remuneration. SCOPIC remuneration was an unavoidable and indivisible part of the total remuneration required to recover the vessel. It could therefore count as a cost of repair. Paragraph 15 of the SCOPIC clause did not apply because the constructive total loss claim was not a claim for indemnity or recourse relating to SCOPIC remuneration. The insurers’ reliance on section 1 of the Contracts (Rights of Third Parties) Act 1999 did not alter that conclusion.
5. Sue and labour. Costs reasonably and properly incurred to avert or minimise a loss recoverable under the policies were recoverable. The assessment of the tug costs was factual and supported by the evidence. The judge was also entitled to disallow agency costs that had not been sufficiently explained or proved.

• Court of Appeal (Civil Division): the insurers’ appeal and the owners’ cross-appeal were dismissed; the further issues in the Respondent’s Notice were not considered. [2018] EWCA Civ 230.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Knowles J gave judgment for the owners after trial. [2016] EWHC 1580 (Comm).