Masefield AG v Amlin Corporate Member Ltd  EWHC 280 (Comm) concerned the interpretation of actual and constructive total loss under the Marine Insurance Act 1906.
In 2008, the vessel Bunga Melati Dua (the vessel), a chemical/palm oil tanker, was seized by Somali pirates in the Gulf of Aden and taken to Somalia waters. The claimant, Masefield AG, was the owner of two parcels of bio-diesel which had been shipped onboard the vessel. The defendant, Amlin Corporate Member Ltd, was the insurer of the cargo under an open cover contract. During negotiations for the release of the vessel the claimant served a notice of abandonment on the defendant. It was the claimant's primary case that the capture and removal of the vessel to Somali waters constituted an actual total loss under section 57(1) of the Marine Insurance Act 1906. In the alternative, the claimant asserted that the events constituted a constructive total loss under section 60(1) of the same Act.
The High Court, in drawing a distinction between a claim for actual total loss and a claim for constructive total loss, found that the claimant failed in proving either claim. First, in dismissing the alternative claim, the High Court stated that the criteria for proving constructive total loss under the Act were that (1) the subject matter must be abandoned and (2) an actual total loss must appear unavoidable. On the facts before it, the High Court found that that cargo was not abandoned in the relevant sense as the vessel and cargo owners "had every intention of recovering their property and were fully hopeful of doing so". In addition, there was no reasonable basis for regarding an actual total loss to be unavoidable (for the same reasons set out below).
For the claimant to prove an actual total loss it had to pass the objective test of being 'irretrievably deprived' of their cargo. This was to be assessed on the true facts as at the date of the commencement of proceedings, whether or not known or apparent to the claimant. The High Court found that for the purpose of establishing irretrievable deprivation an assured must establish that the recovery of the property is impossible. The High Court stated that an assured is not "irretrievably deprived of property if it is legally and physically possible to recover [that property]…even if such a recovery can only be achieved by disproportionate effort and expense".
Again, on the facts before it, the High Court found that much was known about the modus operandi of Somali pirates. It was clear that they take vessels in order to receive a ransom, at which point they release the vessel. The defendant's expert, a consultant providing security advice to the international shipping community, concluded that "it was more likely than not" that the vessel would be released and that there was a "high expectation" that upon the vessel being released the cargo would be released also. For this reasoning the High Court found that the claimant was not 'irretrievably deprived' of its cargo.