Case Study One Xenos v Fox (1868-69) L.R. 4 C.P. 665

Case Study One

Xenos v Fox (1868-69) L.R. 4 C.P. 665

Ship and Shipping—insurance—Suing and Labouring Clause—running—down Clause.

A policy was made subject to a stipulation that, in case the vessel should by accident or negligence run down or damage any other vessel, and the assured should thereby become liable to pay and pay as damages any sum not exceeding the value of ship and freight, by or in pursuance of any judgment of any Court given in any action defended with the consent of the underwriters, they (the underwriters) would bear and pay a given proportion of the sum so paid.

The owners were sued for running down another vessel, and obtained a judgment in their favour, but were put to costs:—

Held, —affirming the judgment of the Court of Common Pleas,—that these costs were not recoverable from the underwriters either under the running-down clause or under the usual suing and labouring clause.

The plaintiff insured the SS Smyrna with the defendants under a Lloyd's policy for £6000. While navigating a branch of the River Danube, the SS Smyrna, collided with the SS Mars, and the SS Mars sustained such injuries that she shortly afterwards sank and was lost.

The owners of the Mars sued the Smyrna and her owners in the Consular Court, at Galatz, Turkey, for the recovery of damages for the loss of the Mars. The plaintiff resisted the claim, and the Court gave judgment, dismissing the suit, leaving each party to bear their own costs. The owners of the Mars appealed to the Supreme Consular Court at Constantinople. That Court confirmed the judgment of the Court below, with costs. The owners of the Mars again appealed to the Privy Council, and the appeal was dismissed, with costs.

Having, incurred considerable costs in these proceedings, the plaintiff, brought this action to recover a proportion of their legal costs, under the policy

The policy was subject to the running-down clause, as per slip attached. The slip was as follows:

“And we, the assurers, do further covenant and agree that, in case the said vessel shall, by accident or negligence of the master or crew, run down or damage any other ship or vessel, and the assured shall thereby become liable to pay, and shall pay, as damages, any sum or sums not exceeding the value of the said vessel Smyrna and her freight, by or in pursuance of any judgment of any court of law or equity given in any suit or action defended with our previous consent in writing, or by or in pursuance of any award made upon reference entered into by the assured with our previous consent in writing, we, the assurers, shall and will bear and pay such proportion of three fourth parts of the sum so paid as aforesaid as the sum of £6000 hereby assured bears to the value of the said vessel Smyrna and her freight.”

The policy also contained the usual suing and labouring clause:

“And, in case of any loss or misfortune, it shall be lawful to the assured, their factors, servants, and agents, to sue, labour, and travel for, in, and about the defence, safeguard, and recovery of the said goods and merchandize, and ship, &c., or any part thereof, without prejudice to this insurance.”

The Running Down Clause was thus silent on the legal costs; nevertheless, the plaintiff alleged that they had defended the actions with the consent of the insurer, but this argument was rejected by the court as immaterial, in the light of the policy

The running-down clause was introduced in consequence of the decision of the Court of Queen's Bench in De Vaux v. Salvador 4 Ad. & E. 420 ; and, although the costs in question are not, strictly speaking, “damages,” yet, in construing this clause, regard must be had to the obvious intention of the parties, and the liberal interpretation which is always applied to the language of policies of insurance: Paterson v. Harris 1 B. & S. 336. At all events, the money was paid for the purpose of averting a loss which otherwise would have fallen upon the underwriters, and so is recoverable under the suing and labouring clause: Kidston v. Empire Marine Insurance Company Law Rep. 1 C. P. 535. The main object of the suing and labouring clause is to give the assured an interest in saving as much as possible for the underwriters.

[LUSH, J. The suing and labouring clause does not come into operation until a loss or misfortune has actually happened. The assured cannot, under that clause, claim the cost of employing a tug to prevent the vessel going on shore.

BLACKBURN, J. The only “misfortune” here is, that the owners of the Mars were unreasonable enough to sue the Smyrna without sufficient cause. In Kidston v. Empire Marine Insurance Company, there was a total loss of the ship; and the claim was for expenses incurred in rescuing the cargo from a situation in which there would have been a total loss of that also.]

Then, the plaintiff had the consent of the underwriters to defend the proceedings; consequently, he is entitled to recover, as for money paid, the expenses which he incurred in making his defence.

COCKBURN, C.J.

I am of opinion that the judgment of the Court below was right. The suing and labouring clause has no application whatever to the facts of this case. That clause applies to a loss or misfortune happening to the thing insured. Nor has it any relation to the running-down clause. The running-down clause is a distinct contract, under which the underwriters engage to pay a proportion of any damages which may be awarded against the assured in a suit for a collision which may be defended with their previous consent in writing. That is express. The view suggested by Sir G. Honyman would, no doubt, be an equitable view of the matter. But the parties have not so contracted, and we cannot do it for them. It can hardly be said that the expenses in question were incurred by reason of the consent of the underwriters to the suit being defended. That assent was given only with reference to the special terms of the running-down clause. If damages had been recovered by the owners of the Mars against the plaintiff that would have brought the case within the clause.

KELLY, C.B., CHANNELL, B., LUSH and HAYES, JJ, and CLEASBY, B.

Concurred.

Judgment affirmed.

Of interest here is Cl 8.1which, incidentally is in similar terms to Lord Lindley’s judgment in the North Britain, to which now turn.

The plaintiffs' vessel, the SS Britain, was insured with the defendant insurers under a hull policy, including a Running Down Clause, subject an exclusion clause, which, inter alia, stated:

“Provided always that this clause shall in no case extend to any sum which the assured may become liable to pay or shall pay for removal of obstructions under statutory powers … consequent on such collision. ….”

On February 10, 1891, the North Britain came into collision with the SS Paraguay in the river Scheldt, Belgium, and in consequence thereof the latter vessel sank.

On February 21, the governor of the province of West Flanders, acting in the exercise of legal powers conferred upon him by a Royal decree, gave the master of the Paraguay notice to commence within six days the removal of the vessel as an impediment to navigation, otherwise such removal would be undertaken by the authorities at the expense of the interested party. This notice not having been complied with, the authorities proceeded with the work, and, on September 26, the governor of West Flanders caused the agents at Antwerp of the owners of the Paraguay to be served with an order to pay to the cashier of the State, within fifteen days, the sum of 26,390 francs (£1047. 4s. 6d.), being the amount expended by the government in removing the wreck from the bed of the Scheldt. And so it was done; the sum was duly paid and was subsequently recovered from the owners of the North Britain, who in turn claimed it from their insurer under the policy.
Held, by the Court of Appeal (Lindley, A. L. Smith, and Davey, L.JJ.), reversing the decision of Gorell Barnes, J., that the defendants were not liable, as the proviso exempted them from indemnifying the plaintiffs for payments made directly or indirectly for removal of obstructions under statutory powers.

LINDLEY, L.J.

This is an appeal from the decision of Gorell Barnes, J., and the question raised by the appeal turns upon the construction of an addition made to an ordinary marine policy on ship.

The policy itself contains nothing which requires comment; but in the margin of it we have printed certain special clauses, and one relating to collisions which I will read. Before I read it I will state that there was a collision between the North Britain, the ship assured, and a ship called the Paraguay, in the Scheldt, and the Paraguay sunk; and, being an obstruction in the river, the Belgian authorities removed her, or ordered her to be removed, and that put the owners of the Paraguay to considerable expense. Both vessels were to blame. She sought to recover, and did recover, half the expense against the North Britain, and the North Britain seeks to be indemnified for that expense under the policy.

The question is whether the clause I am about to read covers that item of damage.

Now, what is the clause? The first part of the clause is by no means easy to construe. I am warranted in saying that, because it is construed one way in England and another way in Scotland. There is an ambiguity in the first part of the clause when you come to look at it. The ambiguity arises in respect of the expression “in consequence thereof.”

The first clause is a damage clause; it is a clause under which the ship insured may have to pay damages. The words “in consequence thereof,” namely, in consequence of the collision, are ambiguous, because it is doubtful what sort of consequences are included in that expression.

The proviso which I have read is a proviso to this clause. It begins, “Provided always that this clause.” It is impossible to read that proviso as applying to that part of the clause which immediately precedes, and which relates only to the mode of ascertaining the liability. That would not make sense. The proviso is a proviso to the first part of the clause, and that is agreed upon all hands.

Now, when we come to read the first part of the clause, with the proviso, it appears to me that the object of the proviso is to remove the ambiguity to which the general language of the first part of the clause gives rise; and I cannot see how it is possible to construe or cut down this proviso so as to effectuate the intention of the parties, and so as to read it in the very narrow view which has been adopted by Gorell Barnes, J. He says the proviso is not, technically speaking, an exception. I do not think it is. He says it is put in by way of precaution. I think it is; but what we have to construe is the clause with the proviso, and I regard the proviso as a warning that you are not to read the clause so as to include the consequences mentioned in the proviso. The true meaning of the proviso is that “this clause shall in no case extend to any sum which the assured shall have to pay for removal of obstruction consequent on such collision.” I know the clause itself says in terms “shall pay by way of damages”; but I do not think the construction which I am adopting involves the insertion of any words at all. It is, “in no case shall extend to any sum the assured shall become liable to pay” - that is, pay in respect of any ship by way of damages or otherwise.

The clause admits of two constructions; but one construction appears to me, with great deference to Gorell Barnes, J., not to give effect to the true meaning of this policy. I think, therefore, the appeal must be allowed.

A collision clause in a policy of marine insurance, covering damages payable in respect of a collision with another vessel, contained a proviso “that this clause shall in no case extend to any sum which the assured may become liable to pay or shall pay for removal of obstructions under statutory powers.” The insured vessel came into collision with another vessel, which sank and was removed as an obstruction by commissioners under statutory powers. Both vessels were to blame for the collision. The owners of the insured vessel paid as damages to the owners of the sunken vessel a moiety of the sum which the latter had paid to the commissioners for the expenses of the removal, and made a claim upon the underwriters in respect of the moiety:—

The North Britain, [1894] P. 77, approved.

THE following were the material parts of an agreed statement of facts in an action brought in the Queen's Bench Division by the appellants against the respondent, and tried without a jury by Bruce J.:—

In June 1895 the appellants, as owners of the SS Engineer, effected with the respondent (inter alios) a policy of insurance subscribed by the respondent in the sum of £100 on the hull and machinery of the SS Engineer, valued at £8500, for twelve months.

Attached to the policy were clauses, known as Institute Clauses, the material one being as follows: There follows the Running Down Clause, and the Proviso et al

In April 1896 whilst the policy was in force the SS Engineer came into collision with the SS Harraton near the entrance to the River Tees, and by reason of the collision the SSEngineer was considerably damaged and the SS Harraton sank and became a constructive total loss.

The appellants as owners of the Engineer properly paid to the owners of the Harraton under the agreement £673, being a moiety of the £1346, for removing the obstruction caused by the wreck as being a loss or damage sustained by the owners of the Harraton incidental to and arising out of the collision, and thereafter the appellants sought to recover that moiety from their underwriters (including the respondent), but they declined to pay any part thereof, alleging that they were expressly excepted from liability in respect of that sum by the terms of the proviso.

My Lords, I agree with what Davey L.J. appears to have said in respect to the mode in which that contract should be construed. In looking at a document between business men I do not think it is wise to look at technical rules of construction. I think it is well to look at the whole document, to look at the subject-matter with which the parties are dealing, and then to take the words in their natural and ordinary meaning and construe the document in that way. I have come to the conclusion that what the underwriters did mean to exclude in their contract of liability was any payment of money for the removal of obstructions to navigation. These damages or this money payable, whichever it is to be called, comes practically within the description. It was a payment actually made by reason of the removal of an obstruction. Therefore, applying the test I have suggested to the contract, I cannot doubt that that was what the underwriters intended to exempt from the contract into which they entered.

Under those circumstances I think that the case which is supposed to have governed the case now before your Lordships does govern it. I think that case was rightly decided; and I therefore move your Lordships that this appeal be dismissed with costs.
Order appealed from affirmed and appeal dismissed with costs

The Sister ship Clause

The terms of the clause are as follows:

ON the 4th of February, 1876, the Dunluce Castle, on her passage from London to Leith, was run down, and destroyed, by the Fitzmaurice; both vessels belonged to the same owner, one William Burrell, of Glasgow.

Under the Mercantile Shipping Acts Burrell petitioned the Court to limit his liability, as owner of the Fitzmaurice, to those who had suffered by the collision, to a sum of £3590; equalling the value of the ship in fault at £8 per ton.
The underwriters, who having insured the Dunluce Castle, had paid Burrell, as the owner, under two time policies effected by him, £6000 as for a total loss. For this sum they claimed to rank with Messrs Simpson & Co., owners of cargo lost; and the other claimants, upon the fund of £3590.
Held, (reversing the decision of the Court below), that the underwriters had no such right under the circumstances of the case.

Per THE LORD CHANCELLOR:—The underwriters' right must be asserted in the name of the person insured, but if he be the person who has caused the damage, the right cannot be maintained against himself.

Per LORD PENZANCE:—The underwriters of the lost ship have no right of action against the owner of the ship that did the mischief, as he himself had no such right, inasmuch as, being the owner of both vessels, any right of action he had must be a right of action against himself, which is an absurdity, and a thing unknown to the law.