This case involved an appeal to the Court of Appeal in which M appealed against the decision of the lower court that seizure of a ship by pirates did not cause actual loss of M’s cargo.
M’s cargo was shipped from Malaysia to Rotterdam. During the voyage the ship was captured by Somali Pirates, the Pirates held the ship to ransom. The shipowner naturally wanted his vessel back (together with the crew and cargo of course). Accordingly the shipowner entered into negotiations to recover his vessel.
After 4 weeks had past M served a notice of abandonment on C’s insurers, which was rejected by the same this was due to proceedings being commenced on that day. Eventually $2 million was paid for the return of the ship, crew and cargo and the ship continued to her destination.
M submitted that as a result of the momentary piratical seizure immediate loss had followed. A further submission was made that the fact that a ransom had paid should be irrelevant. The submission was in short as the cargo had not been recovered by the time proceedings had been commenced.
It was counter submitted that M had to show that it was “irretrievably deprived” by section 57(1) of the Marine Insurance Act 1906 of the cargo. Emphasis was placed on the word irretrievably, in that there was a reasonable chance of recovering the cargo.
The Court found that it was not actual loss in the circumstances due to the likelihood of recovery of the cargo it was in the words of the court a wait and see situation and therefore there was no irretrievable deprivation within the meaning of section 57(1).
Lord Justice Rix found:
“…the function of section 78(4) has been said to be limited to a question of causation, in a rare case where negligence or misconduct can be said to break the chain of causation between peril and loss: see State of the Netherlands v. Youell  1 Lloyd’s Rep 236 (CA) at 244/245. There has apparently been no example of section 78(4) providing underwriters with a defence to a claim since 1906 (ibid at 244). 77
In this appeal, however, we are not concerned with the consequences of a failure to pay a ransom. Not only that, but the payment of the ransom in this case was made, and negotiated, by the owner of the vessel, MISC, and not by the insured. In such circumstances, it seems to me to be simply impossible for Sir Sydney’s submission to succeed. As the judge remarked (at ), the fact that shipowners paid a ransom. Inevitably defeats the insured’s claim.”
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