In Sealion Shipping Ltd & Anor v Valiant Insurance Company (Toisa Pisces)1the insurers denied liability for the insured's lossof hire claim on various grounds and, in the alternative, argued that three breakdowns suffered by the vessel were three separate occurrences and that the excess period of 21 days applied to each individual breakdown so as to reduce the insured's claim. Mr Justice Blair decided against the insurers on all accounts and the insurers subsequently appealed to the Court of Appeal on certain grounds, including on the issue of causation (Sealion Shipping Ltd & Anor v Valiant Insurance Company2).
The Toisa Picses was a specialist drill-ship vessel propelled by two azimuth thrusters driven by an electrical motor, one on the port side (PAM) and one on the starboard side (SAM). There was an initial breakdown on 25 February 2009 when the PAM failed (the first breakdown). The vessel proceeded to Coatzacoalcos for repair, arriving on 8 March. At this time the SAM was ashore and not in use; a Louis Allis motor was being used in its place. The insured had the SAM sent to the vessel and planned to re-install it and move the Louis Allis motor (which could operate on both sides of the vessel) to the port side. In the meantime the PAM was sent to Alabama for repair.
With both motors removed, maintenance work could be done for which there would not otherwise have been easy access. Whilst this work was being carried out, there was a failure of the starboard azimuth hydraulic system which resulted in the consequential failure of the starboard azimuth thruster. Blair J held that this second breakdown happened on 11 March. The repair work to the hydraulic system and starboard azimuth thruster had to be carried out in dry dock and so on 20 March the vessel left Coatzacoalcos for Mobile, Alabama, arriving on 26 March.
Work commenced on 28 March and on 21 April the vessel left Mobile and headed towards an oilfield. However, on 25 April the SAM failed (the third breakdown). As a result, the vessel proceeded to Brownsville for repair, arriving on 2 May. The SAM was removed for repairs and the Louis Allis motor was moved from the port side back to the starboard side and the repaired PAM (which arrived on 4 May) was re-installed. The vessel left Brownsville on 11 May and was accepted back in to service on 19 May.
The policy provided loss of hire cover at a daily rate of US$70,000 and for a limit of "30 days each accident or occurrence or series of accidents or occurrences arising out of one event and in all" with an aggregate limit per annum of US$2.1 million and excess of "14 days any one occurrence, 21 days in respect of Machinery claim". The insurers contended that the three breakdowns were three separate occurrences and given that the excess applied to "any one occurrence" nothing, or much less than the maximum 30 days claimed, was recoverable. The insured argued at first instance that the delay caused by the first breakdown was the time the insured had taken, doing its reasonable best, to get the PAM repaired, reinstalled and sea-tested; the failed attempts to mitigate by juggling engines were not its fault and were not relevant to the computation of time lost by reason of the first breakdown. In short, it contended that all of the time lost was by reason of the first breakdown.
Blair J concluded that, on balance, the insured's submission was correct. He held that a "practical approach" must be taken to causation issues and noted that the reality was that after the first breakdown, "one thing led to another" and that there was no break in the chain of events. He held that there would be one deductible applicable.
The insurers appealed inter alia against this part of the judgment, arguing that the second breakdown while the vessel was in dry dock had broken the chain of causation and constituted a separate occurrence. The Court of Appeal dismissed the appeal.
The issue was a factual one and the Court of Appeal was not persuaded that Blair J had decided this incorrectly. It held that the PAM was not available for use from the date of the first breakdown until the vessel was ready to resume service on 19 May 2009. Lord Justice Gross, giving the leading judgment, expressed concern at whether the wording "one thing led to another" formed a proper basis for a conclusion that the first occurrence remained of causative potency following the second breakdown. However, after consideration, he was not persuaded that Blair J was wrong in his factual finding. Gross LJ held that Blair J's conclusion was correct unless it could be concluded that the second breakdown broke the chain of causation. In considering this issue, Gross LJ noted that the insured's decision to carry out work to the hydraulic system during the repair time was reasonable and it was closely related to the insured's efforts to mitigate its losses arising from the first break down. These were factors pointing strongly against the second breakdown being a new intervening act serving to break the chain of causation between the first breakdown and the loss of time due to the subsequent breakdowns.
Gross LJ held that the correct analysis was simply that, from the time of the second breakdown, there were two operative causes for the insured's loss of hire: the first and second breakdown.
Lord Justice Tomlinson noted that the critical finding was that "but for" the first breakdown, the work which led to the second breakdown would not have been carried out. Viewed in that way, he held that the decision to carry out the work which resulted in the second breakdown could probably be regarded as itself caused by the first breakdown.
The case serves as a reminder of the importance of factual causation and its relationship to aggregation of loses and of the difficulty of successfully appealing on issue of fact.
Footnotes
1 [2012] Lloyd's Rep IR 141
2 [2013] Lloyd's Rep IR 122
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