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Mayban General Assurance Bhd -v Alstom Power Plants Ltd

May 2004

On 25th January 2002 a large electrical transformer, weighing about 350 tonnes, was taken by road from the works of its manufacturers, Alstom, to Ellesmere Port, near Liverpool. It was there loaded on the vessel Eliane Trader, under the supervision of two cargo surveyors. The transformer was stowed longitudinally on the vessel's tank tops and secured by chains and wooden shoring to prevent movement whilst at sea.

The Eliane Trader, a small vessel of only 1,623 DWT, had been contracted to carry the transformer to Rotterdam. Heavy weather and gale force winds were forecast for the voyage, but all concerned were satisfied that the securing arrangements were adequate to prevent movement of the transformer during the voyage. In the event, two periods of gale force conditions totalling 46 hours were encountered, which caused the vessel to pitch and roll heavily.

On arrival at Rotterdam the transformer was transhipped to the container vessel P & O Nedlloyd Southampton for onward-carriage to Malaysia, where it was to be incorporated in a power station under construction at Manjung. No adverse weather conditions of any significance were encountered on the passage from Rotterdam to the Malaysian port of Lumut (apart from a two-day period of heavy weather, when the vessel was in the Western Approaches, which caused some pitching and rolling).

When the transformer reached the construction site at Manjung it was found to be seriously damaged. The plates forming the joints between the "fifth limbs" and the steel beam or "yoke" at either end of the assembly were found to have separated, allowing the limbs to become distorted. There was also evidence of movement between the laminations of the cores. The extent of the damage was such that the transformer had to be returned to Alstom's works - where repairs were carried out at a cost which, including associated expenses, totalled more than 1 million.

The Manjung project was insured with Mayban General Assurance Bhd and other Malaysian insurers under a policy which provided a range of cover to the owners, contractors and others employed on the project (including equipment suppliers). Materials and equipment shipped to the construction site were covered against all risks of loss and damage - subject to exclusions in respect of loss, damage or expense caused by insufficient or unsuitable packing or preparation or inherent vice.

Alstom's claim on the policy was rejected by the insurers. They took the view that the damage suffered was not caused by an insured peril but was due to the transformer's inability to withstand the ordinary incidents of carriage by sea from the UK to Malaysia in the winter months. (There was no evidence that any movement of the stow occurred during the voyage.) In addition to rejecting the claim the insurers commenced proceedings in the Commercial Court against Alstom, claiming a declaration that they were not liable.

It was common ground between the parties that the immediate cause of the damage to the transformer was the violent movement of the vessel due to the action of wind and sea. However, as the judge observed, the action of wind and waves is an inevitable incident of any sea voyage: goods tendered for shipment must, therefore, be capable of withstanding the forces they can ordinarily be expected to encounter whilst in transit. If the conditions encountered during the voyage had been no more severe than could reasonably have been expected, the judge concluded that the real cause of the loss must have been the inherent inability of the transformer to withstand the ordinary incidents of the voyage.

Evidence was given to the court by meteorologists and expert mariners but, in the judge's view, the issue was essentially one of fact and degree which could only be resolved by commercial experience. The judge accepted the statistical evidence that a vessel proceeding from the River Mersey to Rotterdam in January was unlikely to encounter such a long continuous spell of conditions of the kind that were experienced by the Eliane Trader. However, he did not think that a commercial man with experience of short sea voyages along the west coast of the UK would regard those conditions as falling outside the range of what could reasonably be expected at that time of year, or anything other than an ordinary incident of the voyage for which the vessel and cargo ought to be prepared. Though unusual, the judge did not consider that the periods of force 8 wind conditions came near to being extraordinary; cargo that could not withstand prolonged exposure to such conditions could not, in his view, be regarded as fit for the voyage.

For these reasons the judge held that Alstom's 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 could not reasonably have been expected. The insurers were, therefore, granted a declaration that they were not liable to indemnify Alstom in respect of the damage suffered.

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