Judgment

Lord Justice Waller :

The facts

“The policy of insurance

16. Meanwhile, the claimants sought insurance through brokers called Insfield Insurance Brokers Sdn Bhd. A cover note issued by the defendant insurers was sent to them on 20 July 2005, and a placement slip, schedule and certificate followed. It is common ground that it was a condition of the policy that Noble Denton approved the arrangements for the tow. The terms are not in dispute and so far as material are as follows (the references to RM are to Malaysian ringgit):

"Cover Note

Period of Cover 20^th July 2005 to 30^th November 2005

Description of Risk On Cendor MOPU …

For commencement of loading operations in Galveston Texas until completion of discharge in Lumut Port, Perak, Malaysia.

Total sum covered: RM38 million (Equivalent to USD10 million)

Placement Slip

…

ENDORSEMENTS 9. Institute Cargo Clauses (A) 1.1.82

…

DEDUCTIBLE USD1,000,000 or equivalent to RM3,800,000 …"

17. Further, by reason of the incorporation of the ICC(A) terms, the policy of insurance incorporated the following terms:

"RISKS COVERED

1. This insurance covers all risks of loss of or damage to the subject-matter insured except as provided in Clauses 4, 5, 6 and 7 below.

...

EXCLUSIONS

4. In no case shall this insurance cover:

…

4.4 loss damage or expense caused by inherent vice or nature of the subject matter covered."

The policy was therefore an "all risks" policy, excluding (among other things) "inherent vice".”

“Survey Clause or Pre shipment Survey including loading and Unloading, Tow Out to be supervised by approved and nominated surveyor. Noble Denton has been nominated and approved.”

“22. The Noble Denton Certificate of Approval was issued at 18.30 on 23 August 2005. It recommended among other things that the barge roll motions should be kept under 5 degrees. With regard to the legs it says as follows:

"1 The ODIN LIBERTY legs have been the subject of a simplified fatigue analysis. Taking into account the fact that some of the fatigue life has already been used in the rig's previous history, and the uncertainty associated with the simplified fatigue analysis for the wet tow from Galveston to Lumut, it is possible that the legs in way of the pinholes may not have sufficient fatigue life to undertake the full tow to Lumut.

2 Since the fatigue analysis shows possible damage, it is required that the legs be re-inspected at Capetown for crack initiation in way of the six levels of 'pinholes' above the mat. Capetown is, broadly speaking, the half way point and remedial work could be undertaken should it be found necessary. Inspection should be using eddy current or equivalent NDT [non-destructive testing] technique."

With approval from Noble Denton thus in hand, the tow sailed away from Galveston on the same day.”

“30. On 28 October 2005, the tow departed Saldanha Bay with two tugs in attendance, the "Smit Amandla" having joined the "Atlantic Hickory", in accordance with Noble Denton's stipulation, for the passage through the rough waters round the Cape. As planned, on 3 November 2005 the "Smit Amandla" let go, and the "Atlantic Hickory" continued on its own. North of Durban on 4 November 2005 at 20:00 hours, the starboard leg of the rig broke off at the 30 foot level. The following day at 20.50 hours, the forward leg broke off at the 30 foot level, and about half an hour after that, the port leg broke off at the 18 foot level. The legs all fell into the sea, fortunately without damaging the barge too substantially. The tow limped into Richards Bay on 11 November, departing three days later. In Mr Ooley's words, it then continued without further incident, arriving off Lumut on 9 December 2005.

32. The defendant's case was also subject to a late amendment. In its final form, it is said that the damage was caused by inherent vice in that the legs were not capable of withstanding the normal incidents of the tow, as demonstrated by the fact that they failed in weather conditions within what could reasonably have been expected. "Adequate" repairs (in the sense of repairs resetting the fatigue life of the legs) were not intended or attempted, and were not practically possible. Even if such repairs had been successfully performed, there would have been insufficient fatigue life in the legs to complete the voyage to Lumut. In the alternative, the defendant says that the fractures to the legs were inevitable.

The expert evidence

33. Four experts gave oral evidence at the trial. For the claimants, these were Dr John Aston (naval architecture), and Dr R.M. Andrews (metallurgy/fatigue). For the defendant, these were Mr Jeremy Colman (naval architecture), and Dr Jonathan Sykes (metallurgy/fatigue). It may be noted that Dr Sykes inspected what was left of the legs shortly after the rig arrived in Lumut, and was able to obtain samples. Each of the experts is experienced and well qualified, and they were able to reach a measure of agreement at their pre-trial meeting. There were also weather experts on each side, but because the claimants accepted that the weather experienced was within the range that could reasonably have been contemplated (albeit their expert puts it at the upper end), it was possible to proceed on the basis that their respective views could be treated as establishing an upper and lower range, and oral evidence from them was unnecessary.

34. It is common ground that the cause of the loss of the legs was fatigue cracking, which was caused by the repeated bending of the legs under the motions of the barge in the sea. The cracks propagated until they reached a critical size at which time, with the application of sufficient stress, the legs failed. The starboard leg failed first followed by the forward leg, and finally the port leg. It is also common ground that once the first leg failed, the effects operating on the remaining two legs would have been exacerbated. Nor is it in dispute that the second sector of the voyage in which the loss occurred included the seas which would be expected to be the roughest of the voyage, on account of the southern ocean depressions which circle the globe between Antarctica and the Cape of Good Hope.”

“48. The evidence is that a developed crack would not, on its own, have been sufficient to cause a leg to come off. That requires, in addition, a "leg breaking" or "final straw" stress, that finally fractures the weakened steel. I found the evidence of Mr Colman convincing in this regard. He told me that:

"When we have these fatigue cracks, they're 100 or 200 millimetres long – that's 4 or 8 inches – but remember that we have a leg which is 12 feet in diameter, a circumference of about 40 feet. So even quite a lot of these little cracks still leave a very large amount of good steel an inch and a half thick. This isn't light plate; this is very heavy steel, and that's an enormously strong structure. So you've got to catch it just right, if you want to make it actually fail all the way round. I'm not surprised that it takes a special event to make it go, but I think it was very lucky to have survived the first leg, as indeed the speed with which it failed during the second leg showed".

49. I asked him to explain further what he meant by "catching it just right" and he said:

"Just right in terms of roll angle, the direction of the motion and the amplitude of the motion and the presence of a crack of the right orientation in the right place, I suppose. Perhaps it's worth bearing in mind that the legs aren't just rolling from side to side or pitching backwards and forwards. They're getting a combination of those motions. So they're going around in great circles, or ellipses in different directions, and the stressing that is caused by that is complex. So somewhere all of the ingredients have to come together, but I think once you have used up a lot of fatigue life and you have cracks everywhere, then all you need is probably the 2, 3, 4-metre sea states that the Cape waters can provide."

The agreed range of wave heights demonstrates that waves in excess of 3 metres were in fact regularly experienced during the second stage of the voyage as the rig navigated the waters of the Cape.”

“111. The weather is plainly an important part of the evidence in the case, but it is only part. In arriving at a conclusion I have kept in mind the claimants' submissions on the law, and have tried to take account of the evidence as a whole. Nevertheless, I cannot accept that the proximate cause of the loss of the legs was inadequate repairs at Saldanha Bay. There was no intention or attempt on the claimants' part to reset the fatigue life of the legs. To state that, is not to criticise the claimants' conduct in any way. But the tow was midway through the voyage, and it would in practice have been difficult to achieve repairs to that standard. I have given my reasons above and shall not repeat them. As a matter of common sense, the legs failed not because of the repairs, but despite them. The real problem lay with the inherent inability of the legs to withstand the normal incidents of the voyage. In that regard, I felt that the defendant's expert Mr Colman came closest to expressing the view of a "business or seafaring man" (Noten B.V. v. Harding, ibid, per Bingham LJ). As he put it—"I don't think that these legs were ever going to make it round the Cape". That in my opinion is the reality of this case. Taking the evidence as a whole, I am satisfied that the defendant insurers have proved that the proximate cause of the loss was the fact that the legs were not capable of withstanding the normal incidents of the insured voyage from Galveston to Lumut, including the weather reasonably to be expected.”

The issue is whether the judge is applying the right test and whether that conclusion was right.

Marine Insurance Act 1906

“39. Warranty of seaworthiness of ship

(1)In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.

(2)Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.

(3)Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.

(4)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.

(5)In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.

40. No implied warranty that goods are seaworthy

(1)In a policy on goods or other moveables there is no implied warranty that the goods or moveables are seaworthy.

(2)In a voyage policy on goods or other moveables there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other moveables to the destination contemplated by the policy.

. . .

55 Included and excluded losses

(1)Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.

(2)In particular—

(a)The insurer is not liable for any loss attributable to the willful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;

(b)Unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against;

(c)Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.”

Inherent Vice

“The facts as I have summarized them for the purpose of determining the question of construction of the HSSC policy in the instant case, assume that the loss resulting from the deterioration of the soya beans during the voyage was proximately caused by the "inherent vice or nature of the subject-matter insured". This phrase (generally shortened to "inherent vice") where it is used in s. 55 (2) (c) refers to a peril by which a loss is proximately caused; it is not descriptive of the loss itself. It means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.”

The difference between counsel lies to some extent in the interpretation of what Lord Diplock would have had in mind in a case such as the present as the intervention of “any fortuitous external accident or casualty.”

Those words seem to come from the Marine Insurance Act Schedule 1 paragraph 7 of the Rules of Construction, where the perils of the sea are defined in these terms:-

“The term “perils of the seas” refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves.”

“96. The policy was an "all risks" one, as in the present case. At [7], Moore-Bick J says as follows.

"The expression "all risks" is used in policies of insurance as a convenient way of encompassing all insurable risks to which the property in question may be exposed without attempting to identify them individually. The contract nonetheless remains one under which the insurer accepts the risk of loss occurring through the occurrence of some peril acting on the property insured. A number of consequences follow from this. The first is that in order to recover under the policy the insured must prove that the loss was caused by an accident or casualty of some kind. Insurers accept the risk, but not the certainty, of loss. The second is that although the insured must prove a loss by an accident of some kind, it is not necessary for him to go further and establish the exact nature of the accident by which it occurred. The third is that the policy does not cover the insured against loss due to wear and tear or the inherent vice of the thing insured, whether that loss was bound to occur or was fortuitous in the sense that its occurrence depended on the particular circumstances to which the goods happened to be exposed in the course of the voyage.

He then goes on to cite the passage from Lord Diplock's judgment in Soya GmbH v. White which I have set out above. It was not in dispute that inadequate packing, where packing is required to enable the goods to withstand the ordinary incidents of the voyage, can properly be regarded as an aspect of inherent vice (see [19], and Bennett, The Law of Marine Insurance, 2^nd edn, paragraph 15.55).

97. Having analysed the facts, Moore-Bick J said at [21] that the immediate cause of the damage to the transformer was the violent movement of the vessel due to the actions of the wind and sea: "These in themselves were certainly events of a fortuitous nature and they were external to the cargo, but were they the real cause of the loss?" There then follows the passage in the judgment to which the claimants take exception:

"The action of the winds and waves is, of course, an inevitable incident of any voyage and is therefore a hazard to which all goods carried by sea are necessarily exposed. Goods tendered for shipment must therefore be capable of withstanding the forces that they can ordinarily be expected to encounter in the course of the voyage and these may vary greatly depending on the route and the time of year. In a case such as the present, therefore, the competing causes, namely, perils of the sea and inherent vice, are to a large extent opposite sides of the same coin. If the conditions encountered by the vessel were more severe than could reasonably have been expected, it is likely that the loss will have been caused by perils of the sea (though even then there might be evidence that the goods would have suffered the same degree of damage under normal conditions). If, however, the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage."

98. The judge went on at [26] to find that the relatively short periods of high wind encountered on the passage were neither extreme nor even unusual in the sense that they are encountered often enough for mariners to regard them as a normal hazard, concluding that a cargo that could not withstand exposure to conditions of that kind could not be regarded as fit for the voyage. In the result, he was satisfied the loss was caused by the inability of the transformer to withstand the ordinary conditions of the voyage rather than by the occurrence of conditions which it could not reasonably have been expected to encounter.

99. In her well argued submissions, Ms Blanchard submits that it is wrong to say that if the conditions encountered by the vessel are no more severe than could reasonably have been expected, the conclusion "must" be that the real cause of the loss is the inherent inability of the goods to withstand the ordinary incidents of the voyage. All her arguments (as I have understood them) really go to that point. The decision it is submitted is in "flat contradiction" to NE Neter & Co Ltd v. Licenses and General Insurance Co Ltd [1944] 4 All ER 341, Tucker J, where it was said (at p.343G) that "it is clearly erroneous to say that, because the weather was such as might reasonably be anticipated, there can be no peril of the sea". The Mayban case, it is said, is relied upon by the defendant as effectively creating a rule of evidence that, absent exceptional weather being shown to have occurred, the loss must be attributed to inherent vice. The effect is to reverse the burden of proof, by taking the burden of proof off the insurer to prove inherent vice and requiring the insured to prove extraordinary weather. It is said that the consequence is to significantly reduce the scope of cover afforded for perils of the sea in a cargo policy. Finally, it is said that the Mayban case wrongly equated the concept of fitness to withstand the ordinary incidence of the voyage as it is typically applied in a contract of carriage by sea with the concept of inherent vice in an insurance contract.

100. In my opinion, this is a mistaken analysis of the Mayban case. Taking the last point first, the view that the exception against "inherent vice" is the same in the context both of carriage by sea and marine insurance is supported by the judgment of Donaldson LJ in Soya GmbH v. White at p.149-150 that I have quoted above. I agree with Mr Parsons QC for the defendant that one would expect the test to be the same. As Arnould says in paragraph 22-25, although Lord Diplock did not refer to these observations, there is no reason to suppose that he disagreed with Donaldson LJ's approach, or that he intended to give the concept of inherent vice a narrower meaning than had been indicated in the Court of Appeal. At paragraph 22-26 Arnould says that after Soya v. White "inability to withstand the ordinary incidents of the voyage is clearly an appropriate test of inherent vice". With the addition of the word "inherent" before "inability", I accept this as an accurate statement of the law. It was the approach that J adopted in the Mayban case, and I respectfully consider that he was correct to do so. Contrary to the claimants' submission, there is no contradiction with the NE Neter case, in which Tucker J made it clear that he was contemplating a situation in which the goods were properly stowed and in good condition when loaded (ibid, at p.343H, and see the headnote at p.341).

101. I do agree with Ms Blanchard that were it to be submitted that Mayban effectively created a rule of evidence that, absent exceptional weather being shown to have occurred, the loss must be attributed to inherent vice, such a submission would be contrary to authority, and wrong. But that is not the defendant's submission, nor is it what Mayban decided. The defendant says rightly in my view that the enquiry in Mayban was as to the proximate cause of the damage to the transformer. The wind and the weather were identified as a cause, as was the inherent nature of the transformer being shipped. On the facts, Moore-Bick J decided that inherent vice was the proximate cause. He did not suggest that, in order to qualify as a peril of the sea, the weather has to be extraordinary. On the contrary, he expressly contemplated that ordinary weather conditions could qualify as a peril of the sea. The real question in the case, as in the present case, was as to the proximate cause of the loss.”

“Inherent vice must also be distinguished from inherent frailty. Suppose, for example, an insurance on a cargo of eggs. If the voyage is long many may be expected to go bad. This is inherent vice. Many also are likely to be broken; this, it is submitted, is not inherent vice, and loss in excess of ordinary breakage will, subject to proof of the operation of an insured peril, be covered. See further, as to the distinction between inherent vice and ordinary wear and tear, in the context of hull policies.”

“The suggestion has sometimes been made that inherent vice means the same thing as damage that must inevitably happen, but this is not so. The distinction is between damage caused by external occurrence and damage resulting solely from the nature of the thing itself.”

“The only respect in which I would differ from Mr Justice Lloyd is in relation to his findings on causation. The learned Judge said:

“The burden of proving inherent vice undoubtedly rests on the defendants. They have proved that inherent vice was a cause in the sense that without moisture, the damage could not have occurred at all; but they have not succeeded in proving that inherent vice was the cause, the proximate cause, or one of the proximate causes. It was, to use the language which to my mind still expresses the meaning most accurately, a causa sine qua non, but not a causa causans. It may be said that inherent vice must have been the proximate cause if the soya beans were in fact incapable of withstanding the ordinary incidents of the voyage; that is what inherent vice means. I do not agree. Where there is an insurance against risks of heating, and heating occurs because of the conditions under which soya beans were carried on the particular voyage, I am entitled to hold that the cause of the damage were the conditions under which the soya beans were carried, even though the conditions were normal, and even though nothing untoward occurred. I would only be obliged to find that inherent vice was the proximate cause if the soya beans were such that they could not withstand any normal voyage of that duration. For the reasons already mentioned, that was not the case here.”

I fully accept his finding that the cause of the loss was the condition under which the soya beans were carried, but I disagree with his conclusion that this does not constitute a loss proximately caused by inherent vice. As I have said, in my judgment a loss is proximately caused by inherent vice if t he natural behaviour of the goods is such that they suffer a loss in the circumstances in which they are expected to be carried. This is the test under a contract of affreightment and the shipowner in this case could have pleaded inherent vice in answer to a claim for damage to the cargo. In holding that inherent vice is only proved if the soya beans could not withstand any normal voyage of that duration, the learned Judge was introducing a different concept, namely that of certainty of loss. That is a quite different defence. It is in any event subject to the qualification that it must be a certainty which is, or should be, known at least to the assured.”

“Arnould’s view, which has been supported in subsequent editions that a loss can only be said to be caused by inherent vice when it is solely due to the nature or condition of the insured property has, therefore, now to be qualified.

After Soya v White (above), inability to withstand the ordinary incidents of the voyage is clearly an appropriate test of inherent vice. It can no longer be said that inherent frailty is to be distinguished from inherent vice, or that the concept of inherent vice is necessarily inapplicable where external factors have contributed to the loss or damage to the insured.

Inherent vice will afford a defence where the sole cause of loss is the internal decomposition or deterioration of the subject matter insured, unless the policy otherwise provides. This is the case envisaged under s.55(2)(c) of the Act. Where the loss results both from the inability of the insured ship or cargo to withstand ordinary incidents of the voyage and from some fortuitous but not unusual external occurrence, it may sometimes be appropriate to conclude that inherent vice was so much the dominant cause that it ought to be viewed as the sole proximate cause of loss but, in many cases, the appropriate conclusion will be that the loss was due to a combination of causes of approximate equal efficiency. In those circumstances, if the external cause is an insured peril and if there is no express exclusion of inherent vice, the assured will be able to recover; if there is an express exclusion of inherent vice, the claim under the policy will be defeated.”

“See Mayban Gen Ins Bhd v Alstom Power Plants Ltd [2004] 2 Lloyds Rep. 609. The insured cargo was a heavy piece of equipment (a transformer) which was damaged when the carrying vessel encountered adverse but not unusually severe weather conditions. The policy incorporated the Institute Cargo Clauses, expressly excluding inherent vice and insufficiency or unsuitability of packing or preparation for the voyage, but J did not base his decision on there being a loss by combination of causes, one of which was excluded; the decision was based on inherent vice, in the sense of inability to withstand the ordinary incidents of the voyage, being the sole cause of the loss. This analysis of causation is to be contrasted with the approach which as been followed in the hull cases, where damage by adverse but not exceptional weather, which a seaworthy vessel would have been able to withstand, has not been seen as resulting solely from unseaworthiness, as the dominant cause: see The Miss Jay Jay [1987] 1 Lloyd’s Rep 32; para. 22-18 above; para 23-15 below. The hull cases do not appear to have been cited in Mayban v Alstom. “The controversial result” of this case, if applied generally, is that it would restrict the scope of cover in respect of heavy weather damage under the Institute Cargo Clauses (A) (January 1, 1982) to wholly exceptional weather conditions; see Bennett, Law of Marine Insurance, 2^nd edn para.15.54.”

“Accordingly, it was, surprisingly, held that even the rare, sustained period of heavy seas was within the range of conditions to be expected and that cargo had to be fit to encounter. Other shorter periods of such heavy seas were more common and clearly to be expected. On the facts, the damage could have been occasioned by the sustained period alone or by two or three of the shorter periods. Consequently, even if exposure to the sustained period of heavy seas fell outside the scope of inherent vice, the evidence demonstrated an inability to withstand the ordinary incidents of the voyage.

The Mayban case clearly applied a broad concept of fortuity to the Diplock formulation of inherent vice. The controversial result is that cover under the Institute Cargo Clauses (A), the most generous standard cargo cover, is confined in respect of bad weather damage to wholly exceptional adverse conditions.”

“With respect to fortuity on the facts, the insurers argued that, if bales of wool are not properly covered, becoming wet if it rains is not fortuitous. It was held, however, that the failure to cover properly at a time of rain would supply the requisite fortuity. Responding to the insurer’s argument and elaborating more broadly on fortuity in an all risks context, Lord Sumner stated as follows:

All risks” . . . includes the risk that when it happens to be raining the men who ought to use the tarpaulins to protect the wool may happen to be neglecting their duty. This concurrence is fortuitous; . . . it is not a thing intended but is accidental; it is something which injures the wool from without; it does not develop from within. It would not happen at all if the men employed attended to their duty.

There are, of course, limits to “all risks”. There are risks and risks insured against. Accordingly the expression does not cover inherent vice or mere wear and tear or British capture. It covers a risk, not a certainty; it is something which happens to the subject-matter from without, not the natural behaviour of that subject-matter, being what it is, in the circumstances under which it is carried. Nor is it a loss which the assured has brought about by his own act, for then he has not merely exposed the goods to the chance of injury, he has injured them himself. Finally the description “all risks” does not alter the general law; only risks are covered which is lawful to cover . . .

Similarly, according to Viscount Finlay, “no one would contend that a policy of this kind would cover ordinary wear and tear or deterioration incidental to the transit of goods. There must be something in the nature of an accident to bring the policy into play”.

Since the restriction of “all risks” cover to accidental losses arises largely as a matter of construction, it follows that the precise scope of any given “all risks” policy will depend on the policy wording. In the absence of contrary intention, however, the general guidance offered in Gaunt remains authoritative. Four parameters on cover are identified. Three relate to fortuity: the loss should not be caused by the assured’s own, voluntary act; it should not be a certainty; and it should be external to the insured property. The final parameter consists of the restraints imposed by public policy. As such, it is not particular to “all risks” policies and flows from neither the concept of the term “risk” not the construction of the policy as a whole. The example given by Lord Sumner is of British capture. This refers classically to capture of the property of enemy aliens in time of war. Payment by a British insurer to an enemy assured would be detrimental to British interests and contravene public policy. Such loss is not recoverable under any insurance policy no matter how worded. This restriction on cover will not be discussed further. ”

“The extent of the inherent vice exclusion is problematic.

There is no statutory definition of inherent vice. In the cargo case of Soya v White inherent vice was described by Lord Diplock as denoting “the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty. It is clear from the statutory wording (“vice or nature”) and the description of Lord Diplock that the phrase “inherent vice” should not be understood as confined to circumstances where the insured property is defective in the normal sense of that term. Accordingly, where leather gloves were damaged in the course of transit by moisture previously absorbed by the gloves, a defence of inherent vice was upheld even though the ability of the gloves to absorb moisture was a natural function of leather and not attributable to any defect in the gloves. The scope of the concept is not, however, free from difficulty. According to Lord Diplock the intervention of a “fortuitous external accident” is inimical to an inherent vice defence. What is meant by “fortuitous” in this context?

Ambiguity is injected by two sets of variables. First [A] inherent vice might be confined to loss or damage incurred solely and exclusively by reason of internal characteristics of the insured property and not by exposure to any risks of transit. Alternatively, [B] it might extend to loss or damage caused by a combination of internal characteristics and risks of the insured adventure. In other words, inherent vice may amount to reasonable fitness of the insured property for the insured adventure. A further sub-level of ambiguity arises with respect to the likelihood of the risks of the adventure impacting upon the goods given their internal characteristics. The relevant risks of the insured adventure [1] may be confined to such risks that are so natural a feature of the transit that it would be unusual not to encounter them (“habitual risks”) or [2] could extend to all reasonably foreseeable perils of the insured transit. Indeed, further levels of foresight of perils of the insured transit could be postulated.”

“By virtue of r 7 of the Rules for Construction of Policy in the Schedule to the Marine Insurance Act 1906, unless the policy otherwise provides, the phrase perils of the sea “refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves”. Fortuity, in this context, addresses two related matters. First, insurance policies are not designed to finance routine maintenance; some wear and tear to a vessel is a natural product of a vessel’s normal existence. Perils of the sea do not include “the silent, natural, gradual action of the elements upon the vessel, which is just another way of describing ordinary wear and tear. In The Xantho Lord Herschell famously observed that the words “perils of the sea”:

“do not protect, for example, against that natural and inevitable action of the wind and waves, which results in what may be described as wear and tear. There must be some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen.”

In truth, the precise impact that the natural action of the elements will have upon any given vessel during the period of cover under any particular policy cannot be predicted with certainty. However, such loss as does occur cannot be regarded as fortuitous from an underwriting perspective.

Secondly, hull policies do not guarantee the sound condition of the insured ship. A ship may degenerate to such an extent that it then sinks purely by virtue of its debilitated condition by reason of age, neglect, or a combination of the two. The precise timing and circumstances of the loss will remain a matter of uncertainty, but the cause of the loss when it occurs will not be characterized as fortuitous so as to qualify as a peril of the sea. In The Miss Jay Jay, Mustill J stated as follows:-

“There can be few losses of which it can be said that they must happen, in the sense that this accident is bound to happen in this way at this time . . . When the vessel succumbs to debility, the claim fails, not because the loss is quite unattended by fortuity, but because it cannot be ascribed to the fortuitous action of the wind and waves. A decrepit ship might sink in perfect weather tomorrow, or it might not sink for sic months. To this extent a loss tomorrow is not inevitable. But if the ship does sink, there is no external fortuitous event which brings it about. In respect of such losses, the ordinary marine policy does not provide a remedy.”

Significantly, however, fortuity does not restrict perils of the sea to wholly unforeseeable or not reasonably foreseeable events. In Canada Rice Mills Ltd v Union Marine & General Insurance Co Ltd, cargo on a voyage from Rangoon to British Columbia and insured against perils of the sea was damaged by reason of heating occasioned when cargo hold ventilators were closed to prevent ingress of water in heavy weather. The Court of Appeal of British Columbia held that the cause of the loss was not a peril of the sea because, as summarized by Lord Wright in the Privy Council, “the weather encountered was normal, and such as to be normally expected on a voyage of the character, and there was no weather bad enough to endanger the safety of the ship if the ventilators had not been closed”. However, delivering the opinion of the Board reversing this decision, Lord Wright was clear: “these are not the true tests.” Any accidental ingress of water into the vessel was a peril of the sea. The entry of sea water through an opening by which it was not supposed to enter was accidental even if the sea conditions were entirely normal for those waters at that time of year. Thus, storms that were seasonal and frequent, and therefore to be expected, nevertheless “are outside the ordinary accidents of wind and sea [and are therefore fortuitous]. They may happen on the voyage, but it cannot be said that they must happen.”

Similarly, in The Miss Jay Jay, the relevant sea conditions were such as a person navigating in those waters could have anticipated that he might find, but would hope that he would not find. The conditions were markedly worse than average, but no so bad as to be exceptional. These sufficed to qualify as peril of the sea.

It is, consequently, clear that weather and sea conditions are not disqualified from giving rise to fortuitous losses in the context of perils of the sea merely because they are such as might reasonably be expected of the relevant waters at the relevant time of year. The precise threshold posed by fortuity is, however, uncertain. References to events that “must” happen suggest a test of factual inevitability. However, the intention behind the fortuity requirement of excluding ordinary wear and tear suggests a slightly lower threshold. It may be that circumstances will not qualify as fortuitous so as to give rise to a loss by perils of the sea if they are so characteristic of the relevant waters at the relevant time of year that an informed seaman would consider it highly unusual not to encounter such circumstances, even if they are occasionally not in fact encountered and cannot, therefore, be considered inevitable in an absolute sense.

The inclusion of fortuity within the definition of perils of the sea requires the assured to adduce evidence negating a loss by ordinary wear and tear or inherent vice or nature of the insured vessel. Thus, whereas with most named perils the burden lies on the insurer to invoke s.55(2)(c) and adduce supporting evidence, the definition of perils of the sea reverses that burden.”

“Assuming, therefore, that the cases on "perils of the seas" may properly be cited in the present context, what principles do they lay down? I think it helpful, when approaching this difficult area of the law, to draw two sets of distinctions. The first relates to weather conditions, which for present purposes may be divided into three categories: (i) "Abnormally bad weather". Here the weather lies outside the range of conditions which the assured could reasonably foresee that the vessel might encounter on the voyage in question. (ii) "Adverse weather": namely, weather which lies within the range of what could be foreseen, but at the unfavourable end of that range. In effect, the weather is worse than could be hoped, but no worse than could be envisaged as a possibility. (iii) "Favourable weather": namely, weather which lies within that range, but is not bad enough to be classed as "adverse". At the other extreme of the range from "adverse" weather can be found what may be called "perfect" weather.

The assignment of the conditions of wind and sea encountered on any particular occasion to one of these categories will vary according to the nature of the voyage: what is abnormal weather for a short passage in sheltered waters may well be commonplace on a winter voyage in the North Atlantic. Similarly, the nature of the vessel will have to be taken into account. Some craft are not intended to endure conditions which would be trivial for a more robust vessel.

The second distinction relates to seaworthiness, and is one of degree. A vessel is "unseaworthy" if it is unfit to face all the hazards which "a ship of that kind, and laden in that way, may fairly be expected to encounter" on the voyage: Steel v. State Line S.S. Co., (1877) 3 App. Cas. 72, at p. 77. Thus the vessel must be fit to deal adequately with adverse as well as favourable weather. Moreover, quite apart from mere unseaworthiness, there may be instances in which the ship is in such a weak condition that it cannot withstand even perfect weather. Borrowing a word from Wadsworth Lighterage & Coaling Co. v. Sea Insurance Co., (1929) 34 Ll.L.Rep. 98 at p. 105, the ship may be said to suffer from "debility". All debilitated ships are unseaworthy, but the contrary is not the case.

With these distinctions in mind, I believe that the effect of the authorities, so far as material to the present case, may be quite briefly stated as follows.

First, as to "perils of the seas". The definition contained in r. 7 of the rules for the construction of policy set out in the first schedule to the Act excludes "the ordinary action of the winds and waves". While it is tempting to deduce from these words that a loss is not recoverable unless it results from weather which is extraordinary (namely, what I have referred to as abnormal weather conditions) this interpretation is mistaken. The principal object of the definition is to rule out losses resulting from wear and tear. The word "ordinary" attaches to "action", not to "wind and waves". The cases make it quite plain that if the action of the wind or sea is the immediate cause of the loss, a claim lies under the policy notwithstanding that the conditions were within the range which could reasonably have been anticipated. All that is needed is (in the words of Lord Buckmaster in Grant, Smith & Co. v. Seattle Construction and Dry Dock Co., [1920] A.C. 162 at p. 171)—

. . . some condition of sea or weather or accident of navigation producing a result which but for these conditions would not have occurred.

See also Hamilton, Fraser & Co. v. Pandorf & Co., (1887) 12 App. Cas. 518 at p. 527; Canada Rice Mills v. Union Marine and General Insurance Co., (1941) 67 Ll.L.Rep. 549; [1941] A.C. 55 ; N. E. Neter & Co. v. Licences and General Insurance Co., (1944) 77 Ll.L.Rep. 202 at p. 205.

Second, as to causation. It may be that the doctrine of proximate cause has undergone some reassessment since the days when the most important cases on the present topic were decided. In those days the ultimate cause was more readily identified as the proximate cause than might be the case today. Nevertheless, it is clearly established that a chain of causation running — (i) initial unseaworthiness; (ii) adverse weather; (iii) loss of watertight integrity of the vessel; (iv) damage to the subject-matter insured — is treated as a loss by perils of the seas, not by unseaworthiness: see, for example, Dudgeon v. Pembroke, (1874) 9 Q.B. 581, per Mr. Justice Blackburn at p. 595, and (1877) 2 App. Cas. 284 , per Lord Penzance at p. 296, and Frangos v. Sun Insurance Office, (1934) 49 Ll.L.Rep. 354 , at p. 359.

Third, as to "debility". Where a ship sinks through its own inherent weakness, there is no loss recoverable under the ordinary form of policy. It is not enough for this purpose that the vessel is unseaworthy. The loss must be disassociated from any peril of wind or water, even if these form the immediate context of the loss, and constitute the immediate agency (for example, the percolation of water through an existing flaw in the hull) by which the loss takes place. As Lord Buckmaster said in Grant, Smith v. Seattle Construction , sup., the policy is not a guarantee that a ship will float. See also Fawcus v. Sarsfield, (1856) 6 E. & B. 192, in relation to the first loss; Merchants' Trading Co. v. Universal Marine Insurance Co., (1870) 2 Asp. M.L.C. 431, the direction of Mr. Justice Lush approved by the Court of Common Pleas; Ballantyne v. Mackinnon, [1896] 2 Q.B., 455; Sassoon v. Western Assurance Co., [1912] A.C. 561 .

Finally, as to the requirement that a loss by perils of the seas shall be "fortuitous". There may be philosophical problems here, possibly compounded by the placing of more weight than it was intended to bear on the apophthegm of Lord Herschell in Wilson, Sons & Co. v. Owners of Cargo per the "Xantho", ((1887) 12 App. Cas. 503 at p. 509) that—

. . . the purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen.

There can be few losses of which it can be said that they must happen, in the sense that this accident is bound to happen in this way at this time. Indeed, in some of the leading cases it could hardly have been predicted that the loss was bound to happen at all, whilst the policy was on risk. It is, however, unnecessary to enter into this problem. When the vessel succumbs to debility, the claim fails, not because the loss is quite unattended by fortuity, but because it cannot be ascribed to the fortuitous action of the wind and waves. A decrepit ship might sink in perfect weather tomorrow, or it might not sink for six months. To this extent a loss tomorrow is not inevitable. But if the ship does sink, there is no external fortuitous event which brings it about. In respect of such losses, the ordinary marine policy does not provide a remedy.

In the light of these propositions, I now return to the facts of the present case. Miss Jay Jay was plainly unseaworthy, but can it be said that the craft suffered from debility in the sense to which I have referred? It seems to me that the answer must be — "No". There is no reason to suppose that the boat would have sunk at her moorings, or while under way in a millpond sea. Indeed, she had only recently completed a Channel crossing. Conversely, if one asked whether the loss was due to the fortuitous action of the wind and waves, the answer must be — "Yes". True, the weather was not exceptional, but this is immaterial. Whichever of the expert witnesses may be right as to the mechanism of the structural failure, the immediate cause was the action of adverse weather conditions on an ill-designed and ill-made hull. The cases show that this is sufficient to bring the loss within the words of a time policy in the standard form. Since I consider that there is, for present purposes, no material distinction between "perils of the seas" and "external accidental means", I hold that the plaintiffs establish a prima facie loss under section 1 (a) of the policy.”

“In P. Samuel & Co. Ltd. v. Dumas, (1924) 18 Ll.L.Rep. 211; [1924] A.C. 431 at pp. 222 and 458 Lord Sumner observed:

. . . As has been often said, perils of the sea refer to things that may happen, not to things which must happen in the ordinary course of navigation.

The word "accidental" in section 1(a) of the policy in the present case must, in my opinion, similarly exclude events which must happen in the ordinary course of navigation. As the learned Judge commented, ( [1985] 1 Lloyd's Rep. at p. 271) the word "accidental" makes explicit what is implicit in the older form of words, that there is no recoverable loss in the absence of a fortuitous event. It would not, for example, include the ordinary action of the wind and the waves in a dead calm sea. Nor would it include an intentional act on the part of the insured: (see In re Kate Scarr and The General Accident Assurance Corporation Ltd., [1905] 1 K.B. 387 at p. 393).

In my judgment, however, the sea conditions encountered by the vessel in the present case did not fall outside the phrase "accidental means" merely because, in the learned Judge's words ( [1985] 1 Lloyd's Rep. at p. 270), they-

. . . were such as a person navigating in those waters could have anticipated that he might find, but would hope that he would not find.

Even if the occurrence of a particular unwanted event, which may or may not occur, is a readily foreseeable risk, the event may still be properly regarded as accidental when it does in fact occur. In the present case the weather conditions at the relevant time were found by the learned Judge (ibid at p. 270) to have been "markedly worse than average". They were by no means bound to occur. They fell within the description of an "accidental" cause.”

“The learned Judge found as facts ( [1985] 1 Lloyd's Rep. at p. 270) that (a) the sea conditions encountered by the vessel were "markedly worse than average but not so bad as to be exceptional"; (b) the vessel was in such a condition by reason of defects in design and construction as to be unseaworthy for a passage from Deauville to Hamble; (c) a boat of its size and configuration, complying with the description set out in the manufacturer's brochure would, if properly designed and built, have made the relevant voyage in the conditions actually encountered without suffering damage; (d) nevertheless, the vessel would have been able to survive the voyage if the sea conditions had been no worse than average.

In the light of findings (a) and (d) I think it clear on any commonsense view that the sea conditions at the relevant time must be regarded as at least a cause, whether or not the proximate cause, of the damage to the yacht, and I did not understand Mr. Brice to dispute this proposition. However, in the light of the findings (b) and (c), I think it no less clear that the faulty design and construction of the boat must also be regarded as at least a cause, whether or not the proximate cause of the damage. On a commonsense view of the facts both these two causes were, in my opinion, equal, or at least nearly equal, in their efficiency in bringing about the damage.”

“If at the start of a voyage a vessel is in such a state of general debility that the ordinary action of the wind and waves in any type of sea is bound to cause her damage and such action duly causes her damage, commonsense may dictate that the condition of the vessel rather than the action of the wind and waves shall be treated as the sole proximate cause of the damage.”

“As a general rule, the insurer is not liable for damage resulting from a peculiar vice or infirmity in the thing which is the subject of insurance. It is upon that footing that the seaworthiness of the ship is held in our law, as well as in that of most commercial countries, to be an implied warranty. It is a sufficient answer to the assured to shew that the vessel was unseaworthy when she sailed on her voyage, without going on to shew that the damage sustained was the consequence of that unseaworthiness. But, in the case of an insurance on goods, it is no answer to say that they were in an unfit condition to be shipped, unless it is shewn that the loss arose from that unfitness.” [My underlining]

“With a great deal that Mr Williams has said I fully concur, viz that a loss of goods which perish by some inherent vice or weakness, as in the case of tender animals unfit to bear the agitation of the sea, gun-cotton, or the like, or in the more ordinary instances of fruit, flour, or rice, which are liable to heat or perish on the voyage, is not a loss by perils of the sea.”

“If the factual cause of the damage to these gloves has been correctly identified, then I think it plain that that was an excepted peril under these policies. The goods deteriorated as a result of their natural behaviour in the ordinary course of the contemplated voyage, without the intervention of any fortuitous external accident or casualty. The damage was caused because the goods were shipped wet. For the reasons already given I regard it as immaterial that the moisture travelled round the containers before doing the damage complained of.”

“It is, with respect, suggested that this analysis falls into error. First, the reference to vessel and cargo indicates that Moore-Bick J was drawing a parallel between the standards expected of a carrier of goods by sea and the limits of cover offered by a marine insurer. It has already been suggested that it is by no means self-evident that such a parallel can be supported. Secondly, assureds do not procure insurance against losses that they consider fanciful. Rather, it is precisely because commercial experience indicates a certain level of probability of a particular type of loss that the reasonable person considers insurance a sensible and prudent investment. If, however, goods have to be fit to withstand reasonable foreseeable perils or the loss will be considered to be proximately caused by the inherent vice of the goods, or at least not by a “risk” within the meaning of the “all risks” insurance claim, much of the point of cargo insurance disappears. “All risks” cover would be confined to loss or damage occasioned only by wholly unusual perils or wholly unusual examples of known perils. “All risks” insurance would not cover cargo destined for New Orleans against loss or damage caused by a hurricane of no greater force than Hurricane Katrina that so devastated the city and surrounding area in 2005. It would not insure against loss by piracy cargo that was to be shipped through waters notorious for piratical attacks, such as the Straits of Malacca. And what sort of packaging and security would be required to insure cargo against theft on a voyage during which theft was within the reasonable commercial experience?

Insurers know they are being asked to assume risks that might well occur and have the protection of the law of non-disclosure and misrepresentation in reaching their decision on whether to accept the risk and, if so, on what terms. Insurers, of course, enjoy contractual freedom to restrict their liability by reference to the probability of loss occurring. However, the approach to inherent vice adopted in Mayban represents a restriction on cover that goes far beyond any logical presumed exclusion of ordinary losses and introduces a startling dichotomy between hull and cargo insurance that does not seem to respond to commercial common sense. Foreseeable events, it is suggested, can still constitute risks within the meaning of an all risks policy and the concept of inherent vice should be confined to losses analogous to ordinary wear and tear emanating from the internal characteristics of the insured property.

The above discussion has focused on the single, prolonged period of heavy weather encountered by the Eliane Trader. It may, however, be noted that, on the facts of Mayban “it would not have been at all unusual for the transformer to be exposed to several similar, albeit briefer, spells of bad weather at various stages of its voyage to the Far East” and the damage could have been caused by two or three such shorter periods of adverse weather. The decision in the case may be justified if such shorter periods of bad weather could be considered so ordinary and natural an incident of the voyage that it would be unusual to complete a voyage without encountering them. An inability to withstand such shorter periods would then qualify as inherent vice even on the narrow view favoured in this article.”

Discussion

“In case I am wrong as to the proper inferences to be drawn from the evidence, I think I ought to deal with the defendants' submission that in any event damage so caused could not constitute loss due to a peril of the seas. This point was fully argued on both sides, and is one of some importance. The defendants say there was nothing abnormal or unexpected in the weather experienced on such a voyage in the month of June, there was nothing fortuitous in what occurred, the damage was solely due to the ordinary action of wind and waves, and there was no peril. They contend that a distinction should be drawn between the incursion of sea water in normal weather through some aperture wrongly left open, which is fortuitous, and the ordinary rolling and pitching of a vessel in heavy, but not unexpected, weather, which is wholly lacking in any fortuitous element.

Having regard to the three authorities reported in Vol. 12 Appeal Cases, namely, Thames & Mersey Marine Insurance Company v. Hamilton, Fraser & Co., 12 App. Cas. 484; The Xantho, 12 App. Cas. 503; and Hamilton Fraser & Co. v. Pandorf & Co., 12 App. Cas. 518; and the recent Privy Council decision in Canada Rice Mills, Ltd. v. Union Marine & General Insurance Company, Ltd., [1941] A.C. 55; 67 Ll.L.Rep. 549 , I think it is clearly erroneous to say that because the weather was such as might reasonably be anticipated there can be no peril of the seas. There must, of course, be some element of the fortuitous or unexpected to be found somewhere in the facts and circumstances causing the loss, and I think such an element exists when you find that properly stowed casks, in good condition when loaded, have become stove in as a result of the straining and labouring of a ship in heavy weather. It is not the weather by itself that is fortuitous; it is the stoving in due to the weather, which is something beyond the ordinary wear and tear of the voyage. This appears to me to be "something which could not be foreseen as one of the necessary incidents of the adventure." It was "an accident which might happen, not an event which must happen," to quote the language of Lord Herschell in the Xantho , sup. In the Canada Rice Mills case, sup. , Lord Wright says at p. 69:

“On any voyage a ship may, though she need not necessarily, encounter a storm, and a storm is a normal incident on such a passage as the Segundo was making, but if in consequence of the storm cargo is damaged by the incursion of the sea, it would be for the jury to say whether the damage was or was not due to a peril of the sea.”

If for the words, "by the incursion of the sea" there are substituted the words "by the action of the sea," the above passage is applicable to the present case on the assumption that the casks of dye-stuff, though properly stowed and loaded in good condition, had been stove in as the result of the action of the sea in stormy weather causing the straining and labouring of the vessel. And on such facts, sitting as a jury, I should have found that this was a loss due to a peril of the seas. It has been decided that it makes no difference whether the sea comes in through a hole or the cargo goes out through a hole into the sea. and I can see no distinction in principle between these happenings and damage to the cargo by the action of the sea without actual contact with the water and not due to action taken to prevent such contact as in the Canada Rice Mills case, sup. This view seems to be in accord with one of the issues decided in the Catharine Chalmers, 32 L.T. 847, the correctness of which decision on this point has never, so far as I am aware, been questioned.”

“110. It is not in issue that the weather experienced was within the range that could reasonably have been contemplated (albeit the claimants' expert puts it at the upper end). Nevertheless, the legs broke off some seven days after the tow ventured out into the waters of the Cape.

The judge has clearly applied the wider test as favoured by Moore-Bick J.

Lord Justice Carnwath

“If the conditions encountered by the vessel were more severe than could reasonably have been expected, it is likely that the loss will have been caused by perils of the sea (though even then there might be evidence that the goods would have suffered the same degree of damage under normal conditions). If, however, the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage.” (Mayban General Insurance v Alstom Power [2004] 2 Lloyd’s Rep 609 para 21, emphasis added)

We are asked to test this by reference to Mustill J’s discussion of three categories of “perils of the sea” in the Miss Jay Jay [1985] 1 Lloyd’s Rep 264, 271ff:

“… (i) "Abnormally bad weather". Here the weather lies outside the range of conditions which the assured could reasonably foresee that the vessel might encounter on the voyage in question. (ii) "Adverse weather": namely, weather which lies within the range of what could be foreseen, but at the unfavourable end of that range. In effect, the weather is worse than could be hoped, but no worse than could be envisaged as a possibility. (iii) "Favourable weather": namely, weather which lies within that range, but is not bad enough to be classed as "adverse". At the other extreme of the range from "adverse" weather can be found what may be called "perfect" weather….”

The appellants submit in short that reasonable expectation or foreseeability of the adverse weather conditions from which the loss arises (Mustill J’s category (ii)) is not in itself enough to bring the case within the scope of “inherent vice”.

“(c) Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.”

This is to be read in the context of the standard form of policy (First Schedule) which includes cover against “perils of the sea”, a term which is defined (in para 7 of the Rules of Construction):

“The term ‘perils of the seas’ refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves.”

“This phrase (generally shortened to ‘inherent vice’) where it is used in s. 55 (2) (c) refers to a peril by which a loss is proximately caused; it is not descriptive of the loss itself. It means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty”

I understand this passage, not as an endorsement of the much fuller and more controversial analysis by Donaldson LJ in the Court of Appeal ([1982] 1 Lloyd’s Rep 136), but rather as a concise summary of the conventional understanding, in a context where the issue did not arise directly for decision. While of course one pays great respect to the views expressed by Donaldson LJ on this topic, they are not binding on us, and, given the differing responses of commentators, they need to be considered with some care.

“… the underwriter is not liable for that loss or deterioration which arises solely from a principle of decay or corruption inherent in the subject insured, or, as the phrase is, its proper vice…” (para 286)

This wording, with its emphasis on the something inherent in the subject insured, as opposed to the impact of external factors, has proved remarkably resilient over the ensuing 150 years. It is true that the cases (both before and since) show that this emphasis cannot be taken too far, and that external factors may be relevant (for example, weather conditions hastening the deterioration of the gloves, in Noten BV v Harding [1990] 2 Lloyd’s Rep 282). However, I treat with caution the implication of the more recent editions of Arnould that a concept whose meaning was regarded as settled for so long, and from well before the 1906 codification, now requires substantial reinterpretation in the light of obiter comments in a 1982 judgment, however distinguished the author.

“… assureds do not procure insurance against losses that they consider fanciful. Rather, it is precisely because commercial experience indicates a certain level of probability of a particular type of loss that the reasonable person considers insurance a sensible and prudent investment. If, however, goods have to be fit to withstand reasonable foreseeable perils or the loss will be considered to be proximately caused by the inherent vice of the goods, or at least not by a ‘risk’ within the meaning of the ‘all risks’ insurance claim, much of the point of cargo insurance disappears. ‘All risks’ cover would be confined to loss or damage occasioned only by wholly unusual perils or wholly unusual examples of known perils.” (at p 348)

Lord Justice Patten