Unseaworthiness - Turning a Blind Eye?

• Author: Nicola S Pretty
• Position: BSc/LLB (University of Auckland), LLM (International Trade Law) (University of Queensland), PGDipTchg (Sec), Barrister. This paper was written as a dissertation towards completion of the LLM degree at the University of Queensland
• Pages: 42-55

UNSEAWORTHINESS — TURNING A BLIND EYE?

Nicola S Pretty*

1 Introduction

The safety of human life, the confidence of cargo interests and parties with financial interests, whether insurers

or banks, and the protection of the environment all demand certain standards of construction, maintenance, and

operation of shipping. Marine insurance law establishes required standards by affording insurers defences where

vessels are unseaworthy.1 The Marine Insurance Act 1909 (Cth) (‘MIA’) states that ‘a ship is deemed to be

seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure

insured’.2

Into every voyage policy, whether on cargo, hull, freight or other interest, there is implied a warranty of

seaworthiness of the vessel. This is by far the most important of the implied warranties in a contract of marine

insurance. Unless the policy otherwise expressly provides, every voyage policy on hull or on goods contains an

implied warranty that the ship shall be seaworthy for the voyage when she sails, by which is meant that she

shall be in a reasonably fit state as to repairs, equipment, crew, and all other respects to encounter the ordinary

perils of the voyage insured at the time of sailing on it.3 There is nothing in the law of marine insurance more

important to commerce and the preservation of human life than a strict compliance with this warranty.4 An

assured, who, by its nature, is privy to the contract of insurance of its ship, is under a duty to disclose any details

about its ship which might render her unseaworthy, either prior to the commencement of the voyage or once the

voyage commences. If the insured fails to disclose such information which may affect the insurer’s intention to

insure the ship, it is knowingly ‘turning a blind eye’ and effectively misleading the insurer.

However, in a time policy, which is commonly commenced during performance of a voyage, the House of

Lords5 held that it would be wrong to impose an obligation, in the form of an implied warranty, at that time,

when it would not exist in a voyage policy; and that, at that time, the assured would generally be unaware of the

condition of the vessel.6

Minimal compliers are those ship-owners that lack any quality standards of their own, that cut every corn er

possible to save costs, but still hope to just be able to scrape over the bar of quality standards set by others. Until

exposed by post-casualty investigation they may be able, chameleon-like, to take on the colouring of reputable

ship-owners.7

In 2001 the Australian Law Reform Commission (‘ALRC’) put forward recommendations for changes to the

MIA:8

10. The MIA should be amended to repeal the implied warranties of seaworthiness. Obligations of

seaworthiness should be dealt with as express terms of the contract.

11. The MIA should be amended so that an insurer is discharged from liability to indemnify the insured

for any loss attributable to a breach of an express term of the contract relating to the seaworthiness

of a ship where the insured knew or ought to have known of the relevant circumstances and that

they rendered the vessel unseaworthy and where the insured failed to take such remedial steps as

were reasonably available to it.

* BSc/LLB (University of Auckland), LLM (International Trade Law) (University of Queensland), PGDipTchg (Sec), Barrister. This paper

was written as a dissertation towards completion of the LLM degree at the University of Queensland.

1 Bennett, H, The Law of Marine Insurance (2nd Ed, 2006) 565.

2 MIA, s 45(4).

3 Mustill, M, and Gillman, J, (Eds) Arnould’s Law of Marine Insurance and Average (16th Ed, 1981) 706.

4 Douglas v Scougall (1816) 4 Dow 276; Wilkie v Geddes (1815) 3 Dow 60.

5 Gibson v Small (1853) 4 HCL 353.

6 Rose, F, Marine Insurance: Law and Practice (2004) 174.

7 Coghlin, T. ‘Tightening the Screws on Substandard Shipping’ [2005] Lloyd’s Maritime and Commercial Law Quarterly 316, 317.

8 The Australian Law Reform Commission, Review of the Marine Insurance Act 1909 (Cth), Report No 91, reflecting the law as at 28

February 2001 (‘ALRC MIA Review’).

(2008) 22 A&NZ Mar LJ 42