The insured cargo owner served a notice of abandonment on its insurers following capture by Somali pirates of a vessel carrying its cargo. Subsequently, the vessel’s owner paid a ransom and the voyage was completed. The cargo had not deteriorated during its delay, but had missed its market. The court had to determine:

  1. whether the capture of the vessel by the pirates created an immediate actual total loss (“ATL”); or
  2. whether the law could take account of the payment of a ransom as a relevant, legitimate reason for calculating the possibilities of recovery.

Applying the statutory test for an ATL of irretrievable deprivation (Section 57(1) of the Marine Insurance Act 1906), Rix LJ found the test had not been met since there was not only a chance, but a strong likelihood, that a ransom of a comparatively small sum relative to the value of the vessel and the cargo would secure recovery of both. Further, it was held that the fact that there may have been no duty to make a ransom payment could not turn a potential loss capable of being averted by the payment of a ransom into an ATL.

Masefield AG v Amlin Corporate Member Ltd

The Bungua Melati Dua

Court of Appeal, Civil Division

Rix LJ, Moore-Bick LJ and Patten LJ

26 January 2011