Gibbs v Mercantile Mutual Insurance

Gibbs v Mercantile Mutual Insurance - [2003] HCA 39 - HCA 2003 case summary — Zoe

[10]

A policy of insurance, described as a "marine pleasurecraft policy", was entered into in 1986. It was signed on behalf of the respondent by its agent, Anchorage Marine Underwriting Pty Ltd. It covered the appellants and a "Mr Sodaberg", as insured, in relation to the vessel "Lone Ranger". It was entered into in contemplation of the use of the vessel in a business described in the policy as "commercial paraflying". The vessel was described as a "runabout ski boat", constructed of fibreglass, and 17 feet in length. The insurance covered the hull, motor and a trailer for specified amounts. It also provided "third party liability cover" to $1 million. It contained a warranty that the commercial paraflying would take place within "Protected Waters of WA as per permit".
The 1986 policy expired. In February 1988, a renewal certificate was issued, identifying the same parties and signed by the same agent. That is the policy in question in these proceedings. It did not cover the hull, motor or trailer, but covered third party liability in the same amount, and on the same terms, as the original policy. Perhaps for reasons of economy, the insured wished to maintain only the third party cover. As in the 1986 policy, that cover was expressed in terms of an undertaking by the insurer to pay the insured if "by reason of your interest in the Vessel you become LEGALLY LIABLE to pay any sum or sums in respect of any liability, claim, demand, damages and/or expenses for liabilities to third parties".
The Full Court of the Supreme Court of Western Australia (Kennedy, Murray and Owen JJ) held that this was a contract of marine insurance[2]. The appellants contend that this conclusion was in error for two reasons. The first relates to the scope of the cover provided by the policy; the second relates to the locality in which, in the contemplation of the parties to the contract, the vessel was to operate. By reason of either or both of those matters, it is said, the contract was not a contract of marine insurance, but was a contract of general insurance. If that is so, it is the Insurance Contracts Act, and not the Marine Insurance Act, that applies, and the failure to give timely notice was not necessarily fatal to a claim for indemnity.
The identification of a contract as one of marine insurance sometimes gives rise to difficulty because of the mixed nature of the cover provided. In Leon v Casey[3], Scrutton LJ said:

[12]

In that case, and in the more recent case in this Court of Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd[4], a policy of insurance covered a number of risks which included, but were not limited to, risks of a kind ordinarily regarded as incident to a marine adventure. In both cases it was held that the problem is to be resolved as one of characterisation, viewing the policy in its entirety. That is somewhat different from the problem that arises in the present case. Here, it is the singular nature of the cover that is relied upon by the appellants for one part of their argument. The insurance was related to the interest of the insured in a vessel (which, for the reasons explained by Hayne and Callinan JJ, was relevantly a ship), but it is only against legal liability to third parties.
The indemnity clause in the policy was expressed to extend, subject to certain qualifications, "to any person navigating or in charge of the Vessel who is legally competent to do so and who has [the insured's] permission". It is clear that the ambit of the cover provided by the policy was primarily against liability arising out of events occurring in the course of navigation of the vessel. The vessel was to be used for commercial purposes, including, in particular, "commercial paraflying". Liability to third parties might include liability to customers or other passengers on the vessel, to people engaged in water sports or other activities on or near the water, or to the owners or users of other vessels. Putting to one side for the moment the argument as to locality, s 9 of the Marine Insurance Act provides that every lawful marine adventure may be the subject of a contract of marine insurance. It also provides that there is a marine adventure where any liability to a third party may be incurred by the owner of, or another person interested in or responsible for, insurable property, by reason of maritime perils (s 9(2)(c)). Maritime perils is an expression defined to mean the perils consequent on, or incidental to, the navigation of the sea. On the assumption that the "Lone Ranger" was to operate in waters which were part of the sea, then the vessel was to be exposed to maritime perils, and liability to third parties could be incurred by reason of maritime perils. The simplest example would be if the vessel capsized, or struck a submerged object, and sank. That would not necessarily occur in circumstances giving rise to liability to a third party, and a claim for indemnity under the policy; but it well might. It was not, and could not have been, suggested on behalf of the appellants that the cover provided by the policy was illusory. Indeed, it was claimed that the cover applied to the event described in the joint judgment, and the resulting legal liability.
Providing indemnity against legal liability to third parties is a form of marine insurance, reflected in what Lord Brandon of Oakbrook, in Firma C-Trade SA v Newcastle Protection and Indemnity Association[5], described as "the long-established practice of shipowners to enter their ships in Protection and Indemnity Associations ('P & I Clubs') for the purpose of insuring themselves against a wide range of risks not covered by an ordinary policy of marine insurance". In the present case, the original policy, written in 1986, covered hull and machinery, and third party liability. Subject to the argument about "sea", it was plainly a contract of marine insurance. When, upon renewal in 1988, the cover was reduced to third party liability, the character of the policy was not thereby transformed. The scope of the losses incident to marine adventure covered by the policy was reduced, but they remained primarily losses arising out of events occurring in the course of the navigation of the vessel.
The terms of s 9(2)(c) of the Marine Insurance Act make it clear that the incurring of liability to a third party by reason of maritime perils can involve a loss incident to a marine adventure. If the particular form of maritime activity in contemplation is the operation of a commercial vessel carrying passengers for the purpose of engaging in water sports, then liability to a passenger may result from perils incident to the navigation of the vessel. It was against such liability that the original policy provided such cover, in addition to other cover. It was solely against such liability that the renewal policy provided cover. The present dispute is not as to whether such cover existed, or whether it included the liability incurred by the appellants to their injured passenger. It is as to whether the provision of such cover, in a policy worded as the policy in question, could constitute marine insurance. In my view, it could. Whether it did requires consideration of the appellants' second point.

[13]

The appellants submit that neither the original 1986 policy, nor the renewed 1988 policy, was a contract of marine insurance because of the locality in which, in the contemplation of the parties, the vessel was to operate. It was common ground that the vessel was seaworthy. However, the policy, against the words "Navigation Warranties", stated "Protected Waters of WA as per permit". The word "permit" was a reference to the certificate of survey for the vessel required under the Western Australian Marine Act 1982 (WA). That certificate recorded the geographical limits of operation of the vessel as "smooth water only". In fact, as was intended, the vessel's commercial paraflying activities were conducted in the Swan River near the Narrows Bridge site, and near Heirisson Island. There was much debate as to whether those waters were part of the sea. In the Full Court, Kennedy J, with whom Murray and Owen JJ agreed, held that they were. Before coming to his Honour's reasons, three points should be made.
First, the application of the Marine Insurance Act to policies of insurance in respect of navigation in inland waters which do not form part of the sea is a subject of some uncertainty, as was recognised by the Australian Law Reform Commission in its 2001 review of that Act[6]. Leaving aside pleasure craft, it is common in Australia for commercial vessels, some of substantial size, to operate in Australian rivers, some of which extend for great distances inland. Accepting that a marine adventure, within the purview of the Marine Insurance Act, primarily involves navigation of the sea, it may be argued that vessels of the kind just mentioned are engaged in an "adventure analogous to a marine adventure" within the meaning of s 8 of the Act. In the present case, reference was made to that possibility, but senior counsel for the respondent accepted that it was common ground that the policy presently in question was not a policy to which the Marine Insurance Act applied unless the locality in which it was contemplated by the parties to the insurance contract that the vessel would operate was part of the sea.
Secondly, after the time relevant to this case, the Insurance Contracts Act was amended to provide that the Marine Insurance Act does not apply to contracts of insurance in respect of pleasure craft[7]. However, that expression was defined so as to exclude a vessel that is used for reward, such as the "Lone Ranger".
Thirdly, it would be an error to assume that, historically, the exclusive concern of the law of marine insurance was with adventures undertaken by great ships on the high seas. In Mountain v Whittle[8], the House of Lords considered a policy of marine insurance that covered a houseboat in the river Hamble, which was "a creek off Netley". (The New Shorter Oxford English Dictionary defines "creek" as "[a]n inlet on a sea-coast or in the tidal estuary of a river". The colloquial meaning of "creek" in Australia is somewhat different.) The houseboat was being towed by a tug to a yard for cleaning. She took on water, and sank, because the tug's bow wave raised the water to the level of some defective seams. The loss was held to be caused by perils of the seas. The fact that there was negligence in the management of the vessel did not alter the case[9]. It was not doubted that the policy of insurance by which the houseboat was covered came within the purview of the Marine Insurance Act 1906 (UK).
As Kennedy J pointed out, paraflying is not an activity that is feasible on a narrow river. It requires a relatively broad expanse of water.
The areas in the Swan River in which the appellants operated their vessel were part of a broad expanse of water, properly described as an estuary, near the conjunction of the Swan River and the Indian Ocean. Kennedy J said:

[15]

He went on to consider various statutory definitions of "sea", and English authorities relating to the jurisdiction of the High Court of Admiralty. These are of some interest, but are not determinative of this case. An estuary, where the tide ebbs and flows, would be included within the definition of sea in s 3 of the Admiralty Act 1988 (Cth) and s 6 of the Navigation Act 1912 (Cth). Kennedy J said that the two sites in which the "Lone Ranger" operated "were estuarine, being waters within the ebb and flow of the tide and, in my opinion, they are to be regarded as the 'sea'". I see no reason to differ from that opinion. The "sea" is not limited to the open ocean.
Some point was made of the fact that the Swan is called a "river", not a "sea". The Swan River is, for most of its length, relatively narrow; but where it meets the ocean it takes the form of a broad estuary. That is the locality with which this case is concerned. The Full Court did not misdirect itself on any point of law, and no error has been shown in its factual judgment.
The appeal should be dismissed with costs.
McHUGH J. The Marine Insurance Act 1909 (Cth) ("the Marine Act") - whose provisions are generally more favourable to insurers than the Insurance Contracts Act 1984 (Cth) - applies to policies indemnifying the insured against losses that are incidental to a "marine adventure"[10]. The respondent agreed to indemnify the appellants against any sum payable for liabilities to third parties by reason of the appellants' interest in a boat that was engaged in parasailing activities in the estuary of the Swan River, Western Australia. The question in this appeal is whether the Marine Act applies to a policy covering liabilities to third parties arising out of parasailing activities on a section of a river that is an estuary.
In my opinion, given the way that the case was conducted in this Court and the District[11] and Supreme[12] Courts of Western Australia, the Marine Act does not apply to the policy because it did not insure against the risks of a marine adventure. Primarily, a policy of insurance will not insure in respect of a marine adventure unless the ship the subject of the policy will be used for voyages that involve traversing the open sea. An adventure involving a ship that is not intended to leave a river is not a marine adventure for the purpose of the Marine Act. That does not mean that an insurance policy insuring the risks involved in a marine adventure cannot cover risks that occur in rivers, creeks, bays, inlets, harbours, dry docks or ports. A policy insuring against the risks of a marine adventure may even cover a risk occurring on land. But before a risk qualifies as a risk of a marine adventure, and comes within the primary scope of the Marine Act, it must be incidental to or a consequence of a voyage or intended voyage on the open sea. In form, a policy may be identical with a marine policy and insure against the same kind of risks as a marine insurance policy. But, unless the risk involves, or is incidental to, or a consequence of, a voyage on the open sea, it will not be insuring the risks of a marine adventure so as to come within the primary operation of the Marine Act.
The Marine Act has a secondary operation. It extends to any policy "in the form of a marine policy" that covers "any adventure analogous to a marine adventure"[13]. The respondent might have argued that the "adventure" insured against in the present case was "analogous to a marine adventure". But it did not do so in the Western Australian courts and expressly refused to do so in this Court. Perhaps it thought that, if parasailing is not a marine adventure, it cannot be analogous to a marine adventure. At all events, it accepted that the Marine Act did not apply to the policy unless the estuary of the Swan River was the "sea" for the purpose of that Act.
It follows that, because the insured's enterprise was not a marine adventure, and was not argued to be analogous to such an adventure, the Marine Act did not apply to the policy.

[16]

Mrs Helen Morrell sued Paraglide Pty Ltd, Ian Gibbs and Rod Soderberg in the District Court of Western Australia for damages for negligence after being seriously injured in a parasailing accident. The accident occurred in January 1989 when a boat driven by Gibbs came too close to land causing Mrs Morrell to crash into trees. The trial judge, Kennedy DCJ, held Gibbs liable for the damage that Mrs Morrell suffered because his negligent navigation caused the accident. Her Honour held Paraglide liable because it was the owner of the parasailing business, had an interest in the boat and had undertaken for reward to take Mrs Morrell parasailing. Her Honour held that Mrs Morrell had not proved any liability on the part of Soderberg.
In third party proceedings brought by Paraglide and Gibbs against Mercantile Mutual Insurance (Australia) Ltd, the learned trial judge held that Mercantile was obliged to indemnify them under a contract of insurance made between Mercantile, Paraglide and Gibbs. Her Honour rejected Mercantile's argument that the policy was a marine insurance policy covered by the Marine Act and that under that Act it was entitled to deny liability because the defendants had failed to disclose material matters when renewing the policy. The learned judge held that, although the defendants had failed to disclose such matters, the Insurance Contracts Act applied - not the Marine Act - and prevented Mercantile from denying liability.
The Full Court of the Supreme Court of Western Australia allowed an appeal by Mercantile. Kennedy J, with whose judgment Murray and Owen JJ agreed, held that the Marine Act governed the policy because it indemnified the defendants against risks that were incidental to a marine adventure within the meaning of s 9(2)(c) of the Marine Act. That paragraph provides that there is a marine adventure where "any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils." The Full Court held that the relevant section of the Swan River was the sea for the purpose of that Act and that the risk insured against was a peril of the sea. The Full Court entered judgment for Mercantile.
Subsequently, this Court granted special leave to appeal against the order of the Full Court.

[37]

Where the Marine Act does not apply to a risk, the default regime is that contained in the Insurance Contracts Act[18]. The distinction between the insurance covered by the two Acts is not arbitrary; it is largely based on the commercial or non-commercial nature of the insured activities. The Insurance Contracts Act is largely intended to apply to non-commercial activities. It gives greater protection to the insured than the Marine Act does[19].
Subject to public policy - particularly in respect of gaming, illegality and enemies - or statutory prohibitions, an insurer can insure against any risk. If the risk eventuates, the insured is entitled to an indemnity in accordance with the terms of the policy. Classification of a policy as a marine or non-marine policy is of practical importance only where legislation adds to or detracts from the terms of the policy or adds to the obligations of a party. Early in the history of marine policies, for example, classifying a policy as a marine policy meant that stamp duty was payable on it, and such policies were a large source of revenue for the United Kingdom government. In Australia today, classifying a policy as a marine policy has important consequences. It means, in the absence of an indication to the contrary in the policy, that non-disclosure of material matters may entitle the insurer to set aside the policy in circumstances that are not available if the policy is governed by the Insurance Contracts Act. Another matter of great practical importance arising from classification is that the Marine Act imposes warranties concerning seaworthiness. Important also are the provisions of the Marine Act concerned with salvage, particular average loss and general average loss.
Marine policies take many forms, but in broad terms they fall into the following categories: voyage, time or time and voyage. A voyage policy insures the subject matter of the policy against risks occurring while the ship is at or between ports. It insures the relevant subject matter "at and from" specified places. In contrast, a time policy insures the subject matter against risks occurring during a particular period. A time and voyage policy limits the risk to particular voyages during a particular period. These policies may also be valued or unvalued policies or floating policies.

[38]

A contract indemnifying the insured against losses that are not substantially incidental to a marine adventure, or an adventure analogous to a marine adventure, is not a contract of marine insurance within the meaning of the Marine Act[20]. So the critical question in the present appeal is whether the losses against which Mercantile agreed to indemnify Gibbs and Paraglide were losses arising from, or consequent on, or incidental to, a marine adventure. That is, was parasailing on the Swan River a marine adventure? No question arises, for the reasons I have stated, whether the losses arose from an adventure analogous to a marine adventure.
The question is not one to be determined by using a dictionary to ascertain the meaning of the words of the Marine Act and then applying those meanings to the policy and the facts of the case. Still less is it a question of giving the words of the Act meanings that they have in contexts different from legislation concerned with marine policies. Rather, the question must be answered by regard to the purpose of the legislation, in the light of the long history and development of maritime law governing marine policies, and the light that it throws on the text of the Act. That history and development, as well as the text of the Marine Act, shows that the law of marine insurance is and was principally concerned with the risk ("the perils of the sea") to ships and goods (hence the famous Lloyd's SG policy) involved in international or coasting trade[21]. When insurers and insured spoke or wrote of "the perils of the sea" - a phrase at the heart of traditional marine insurance policies - they were not speaking of the risks that might be encountered by ships that never left the safety of inland waters - rivers, creeks and lakes. They were referring to the hazards that ships encountered on the open sea - shipwrecks, foundering, stranding collisions, pirates, capture, seizure and the treachery of crews (barratry) and similar perils. The enumeration of these matters in the traditional Lloyd's policy contained in the Second Schedule of the Marine Act and the definition of "maritime perils" strongly indicates that the Act is also concerned with voyages across the open sea.
Most of the enumerated perils in the definition of "maritime perils" are not perils that are likely to be encountered by boats that never leave the safety of the rivers of a country. Boats on rivers are not likely to be seized by pirates, captured by the vessels of other nations, detained by the rulers of other countries or sunk by enemy vessels. In Hamilton, Fraser & Co v Pandorf & Co[22], Lord Bramwell and Lord Macnaghten, respectively, thought that the definition given by Lopes LJ sitting in the Queen's Bench Division of "dangers or accidents of the sea" - which they equated with "perils of the sea" - was "very good"[23] and could not "be summed-up better"[24]. Lopes LJ said[25]: "it is sea damage occurring at sea and nobody's fault." (emphasis added) Similarly, Professor Sutton has written[26] that "the definition ... of maritime perils as 'perils consequent on, or incidental to, the navigation of the sea ...' etc implies that the vessel must either be on a sea voyage or at least be waterborne on the sea". For that reason, he expressed[27] the view that "pleasure craft (or commercial craft for that matter) used exclusively on lakes and rivers would appear to come within the provisions of the Insurance Contracts Act 1984 and not the Marine Insurance Act 1909."
No doubt boats used on inland waters were and frequently are insured against risks similar to some of those falling under the label "perils of the sea". But I do not think that policies insuring against these risks can be regarded as marine policies. Nor was the Marine Act intended to apply to them. Conversely, marine policies today frequently insure against risks commonly encountered by vessels that never enter the open sea. But for the risk to be a marine risk for the purpose of the Act, it must be incidental to or consequent on a sea voyage. Thus, marine policies may cover risks involved in loading and unloading cargo, may cover the hazards of docks, ports, harbours and rivers, may cover even the risks associated with the building of a ship. And in the course of time, marine policies have come to cover the risk of liability to third parties caused by the perils of the sea. But all these extended risks are risks that are incidental to, or consequent on, the use or intended use of ships engaged in the international or coasting trade or at all events risks incidental to ships on voyages across the open sea.

[39]

The history of marine insurance shows that marine policies were concerned primarily with ships engaged in international and coasting trade. Maritime law and marine insurance law originated in the southern European trading centres - particularly the Italian cities of Genoa, Venice and Florence - the term "policy" being derived from the Italian word "polizza" meaning promise or undertaking[28].
By the Middle Ages, the customs of the sea were codified and applied as law in most European countries with sea ports and a coasting trade. A number of laws formed "a series of codes which governed all the various maritime states of Europe."[29] The conditions of sea trade involving, as it did, journeys over long distances to a limited number of ports gave rise to essentially similar rules, a matter of considerable importance to foreign merchants[30]. Perhaps the most important of these codes were "the laws of Oleron"[31] which regulated the "duties of the mariners, the power of the master, jettison, contribution, average, salvage, collision, loading, freight"[32]. The laws of Oleron and other codes were included in the Black Book of the English Admiralty around 1350[33].
From Italy, maritime law and marine policies found their way to the Northern European cities that became the centre of trade with the Americas and the Indies. Lombard merchants, who settled in London, introduced maritime policies into English commerce[34]. Until the middle of the 14th century, the maritime part of the law merchant including the law of insurance was generally administered in England in the local courts of the seaport towns. That law was almost certainly based upon the laws of Oleron[35]. Upon the rise of the Admiralty Court in the middle of the 14th century, however, jurisdiction over maritime law passed to that Court. There were three reasons[36] why the Admiralty Court obtained this jurisdiction. First, a close connection existed between cases involving merchant shipping - its primary jurisdiction - and those arising out of foreign trade. Second, as I pointed out in Commonwealth v Yarmirr[37], the common law rules as to venue prevented the common law courts having jurisdiction over actions arising outside the realm. It was only later by the use of fictions that the common law courts gained jurisdiction over such matters. Third, the procedures of the Admiralty Court, based as they were on the civil law, were more intelligible to foreigners than the common law rules of procedure. The Admiralty Court retained this jurisdiction for several centuries. But it is almost certain that the law applied was foreign law. As late as the 16th century, a petition to the Council asserted that insurance "is not grounded upon the lawes of the realme, but [is] rather a civill and maritime cause, to be determined and discided by civilians, or els in the highe courte of the Admiraltye."[38]
But eventually, after a struggle between the common law courts and the Admiralty Court, the common law courts by the use of fictions and their general jurisdiction triumphed and absorbed the rules and practices of marine insurance into the common law as part of the law merchant[39]. The procedures of the common law courts were unsuited to the trial of insurance claims - a major difficulty being the common law's insistence that a separate action must be brought against each underwriter[40]. Moreover, the common law judges and counsel were ignorant of many technical terms used by merchants and seamen, with the result that judges tended to leave matters to juries with no judicial guidance as to the principles applicable[41]. To make matters worse, cases involving points of law were often argued in private chambers so that the decisions gave no guidance for future cases[42]. This lamentable state of affairs continued until the 18th century when "Lord Mansfield evolved from mercantile custom and foreign precedents the principles of our modern law."[43] Significantly, as Sir William Holdsworth has pointed out, at this time nothing resembling the modern contract of life or accident insurance existed because the "statistical knowledge, which has rendered those contracts possible in modern times, was wholly wanting"[44]. Underwriters lacked the statistics and the statistical techniques to make judgments concerning public risk liability. For that and other reasons, clauses concerning public risk liability were not found in marine policies until well into the 19th century.
The combination of the foreign origins of insurance law, the growth of the United Kingdom's sea trade, especially with the Indies and the Americas, and the lack of modern accident insurance all point to the marine policy being concerned with the risks involved in the international and coasting trades. It is no accident that the first of the leading cases on the construction of insurance policies concerned "goods, in a Dutch ship, from Malaga to Gibraltar, and at and from thence to England and Holland, both or either"[45].
By the end of the 17th century, England had come to rival Holland as the great commercial power of the time. The risks of loss arising from this growing import and export trade gave rise to the marine insurance policy whose basic form is in the Second Schedule to the Marine Act. The form of that policy arose from the undertakings given to merchants and shipowners by the underwriters and brokers who first gathered at Mr Edward Lloyd's Coffee House which he opened in 1687 on Tower Street near the river Thames. In 1696, he launched Lloyd's List "and filled it with information on the arrivals and departures of ships and intelligence on conditions abroad and at sea."[46] As one writer, Peter L Bernstein, has pointed out[47]:

[51]

I have not seen any case in the law reports of British Commonwealth countries where a court has held that a policy was a marine policy or was covered by the Marine Act (or equivalent legislation) where it was not contemplated that the ship was or might be used as a sea-going vessel or would have to traverse the open sea. Nor did the research of the Australian Law Reform Commission uncover any such case[58]. Indeed, the reasoning in Joyce v Kennard[59] indicates that policies insuring river risks that are not incidental to a sea voyage are not marine policies. In Joyce, the Divisional Court held on a case stated that the insured could recover on a policy insuring goods and merchandise "at any ports and places whatsoever and wheresoever in the river Thames"[60]. Mellor J said[61] that the policy "is not strictly a marine insurance; it is a contract by which the defendant indemnifies the plaintiffs against any liability which they may incur as carriers to the owners of the goods entrusted to them". Similarly, Lush J said[62] that it was "not an ordinary marine policy, but a policy of a mixed nature, the object of which was to secure to the plaintiffs an indemnity to the extent of the sum subscribed for, for any loss ... which they might sustain". Hannen J concurred with both judgments. Unless these statements are wrong, this appeal must be allowed. If a policy insuring against risks to merchandise at any place in the river Thames is not a marine policy, how can a policy insuring against the risks involved in parasailing on the Swan River be a marine policy?
Nothing in Mountain v Whittle[63] or in Cunard Steamship Co v Marten[64] supports the view that "maritime perils" include risks to ships that are not used or intended to be used on the open sea. Mountain concerned a time policy for a houseboat "anchored in a creek off Netley". But the risks insured included the risk of changing docks and going on graving docks and gridirons. There were no docks or gridirons "in any creek off Netley."[65] So the policy must have contemplated a coastal voyage to such a dock or gridiron. The House of Lords upheld a finding that the insured could recover for the loss of the houseboat when, in moving to a dock, it sank on "a voyage of 7 or 8 miles to a different part of the coast."[66] In Cunard the policy concerned a journey from New Orleans to Cape Town. So it was a voyage policy across the open sea. On the facts and the terms of the policy, the insured failed to recover under the "suing and labouring clause" of the policy. The case is of no assistance in determining whether the present policy is a marine policy. At its highest, Cunard recognised that a policy on the ordinary Lloyd's printed form may be confined to insurance against third party liability. Moreover, in neither case did any issue arise as to whether the Marine Insurance Act applied to the policy in question. Each case turned on the terms of the policy issued in respect of the particular ship. Whether that Act did or did not apply was irrelevant.
Nor does Continental Illinois National Bank & Trust Co of Chicago v Bathurst (The "Captain Panagos DP")[67] support the view that maritime perils include risks to ships that are not used or intended to be used on the open sea. That case concerned insurance over a mortgagee's interest in the insured property. Mustill J held that the risk of loss was not one covered by the term "perils of the sea" in the traditional policy. He held, however, that it was a risk that was "consequent on or incidental to the navigation of the sea". He said, in relation to the provisions of the Marine Insurance Act[68]:

[66]

Many provisions of the Marine Act indicate that it, like the traditional Lloyd's policy, is primarily concerned with voyages involving the international and coasting trade. The Explanatory Memorandum[87] to the Insurance Laws Amendment Bill 1997 (Cth) declared, correctly in my opinion, that the Marine Act was "primarily designed to cover insurance contracts relating to the international carriage of goods". When the Bill that became the Marine Act was before the House of Representatives, Mr William Knox MHR, a director of a marine insurance company, spoke of "the value of insurances effected upon our oversea and coastal risks."[88] This statement indicates that in Australia marine insurance was perceived as concerned with international and coasting trade. Indeed, it is difficult to read the Act without coming to the conclusion that it is dealing with time and voyage policies in respect of the international and coasting trade. This does not mean that a policy is not a marine policy unless it involves trade or voyages between different ports. Marine policies cover private yachts and motor cruisers, passenger liners and fishing boats as well as cargo ships. But a policy will not be a marine policy unless substantially - perhaps principally - the risks covered are risks involved in sea voyages[89].
Rules concerning voyages, ports and destinations make up a good deal of the Act. Other provisions of the Act imply that a voyage across the open sea under a time or voyage policy is the concern, and the only concern, of the Act. Thus, the phrase "the navigation of the sea"[90] - a key expression in the definition of "maritime perils" - indicates a voyage. Section 11(2) refers to the "due arrival of insurable property". Section 22 refers to the ship being fit "for the voyage or adventure contemplated by the policy", to a "ship engaged in a special trade" and to "insurance on freight". Section 29 states that the policy must specify "the voyage, or period of time, or both, as the case may be, covered by the insurance". Similarly, s 31(1) declares that, where the contract is to insure the subject matter "at and from", or from one place to another place or places, the policy is called a "voyage policy". Section 31(2) extends the duration of a policy "in the event of the ship being at sea or the voyage being otherwise not completed on the expiration of the policy".
Section 36 states that a policy may be in the form in the Second Schedule. The form of policy in the Second Schedule is a valued voyage policy in the traditional Lloyd's form in use since 1779[91]. It insures "any kind of goods and merchandises" and the ship and its equipment "at and from", "for this present voyage" until the ship etc "shall be arrived at ...". It states that it shall be lawful for the ship "to proceed and sail to and touch and stay at any ports or places whatsoever". The policy identifies the risks as:

[68]

The rules for the construction of the policy that are set out in the Second Schedule also contain a number of references to voyages and ports.
Section 42 declares that where insurable property is expressly warranted "neutral", there is an implied condition that the property shall have a neutral character at the commencement of the risk. Section 43 declares that there is "no implied warranty as to the nationality of a ship, or that her nationality shall not be changed during the risk." Section 45(1) declares that in a voyage policy "there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured." Section 45(2) declares that, where the policy attaches "while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port." Section 45(5) declares that in a time policy "there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness." (emphasis added) Sections 46(2), 48-55 and 65 all lay down rules for voyages, ports of departure, deviations from contemplated voyages and changes of destination or voyages.
Other provisions of the Act, dealing with missing ships[92], particular average loss[93], general average loss[94] and salvage[95], are also more indicative of policies insuring against the risks in the international and coasting trade and sea voyages than policies concerned with the risks attached to the navigation of inland waters.
Finally, the reference in s 91 to mutual insurance acknowledges the Protection and Indemnity Associations that shipowners created to cover risks - particularly third party risks - that fell outside the standard Lloyd's policy.
Thus the Marine Act is directed to sea voyages. Where it is concerned with risks arising on inland waters or land, it expressly says so, but makes it clear that such risks must be incidental to a sea voyage[96].

[73]

Accordingly, the Full Court held that the navigation risks consequent on parasailing on this part of the Swan River were "maritime perils", being perils consequent on or incidental to the navigation of the sea.
The Marine Act does not provide a definition of the "sea". There are no Australian cases dealing with the meaning of the "sea" in the Marine Act[100]. Other Acts of the federal and State legislatures contain definitions of the "sea"[101], but none of these Acts is in pari materia with the Marine Act. Moreover, the definitions vary substantially as a result of the differing purposes and subject matters of these Acts. The majority of the definitions refer to the sea as including waters within the "ebb and flow of the tide".
Dictionary definitions[102] of the "sea" are not helpful. Although they provide a broad notion of what the sea is, they do not define the geographical limits of the sea, other than to declare that it is the expanse of salt water that surrounds a land-mass. In Risk v Northern Territory[103], members of this Court noted that the distinction between land and sea is as difficult to ascertain as the distinction between night and day, as "[i]n each case, the legal geometer who seeks to define the line may find it blurred and indistinct."
In ordinary parlance, however, a river is not the sea. It is a natural stream of water flowing into the sea or into a lake or in some cases into another river. I doubt that any Perth resident who had spent a day picnicking by the shores of the Swan River would regard him or herself as having spent a day at the sea-side. In Overseers of Woolwich v Robertson[104], the Queen's Bench Division upheld a finding that the river Thames at Woolwich was not the "sea" although at that place it was "a navigable tidal river where great ships go."[105] The issue in Woolwich was whether bodies washed up on the bank of the river as the result of a collision in the Thames were "cast on shore from the sea". Lindley J said[106] that the particular legislation involved was a remedial measure - it imposed duties on overseers to cause bodies "cast on shore from the sea" to be buried. Despite its remedial nature, however, he said he could not bring himself "to think that the river Thames at Woolwich, from which these bodies came, is within the meaning of the word 'sea'." His Lordship said[107]:

[75]

Mathew J, the other member of the Court, said[108] that he could "find nothing in the Act to shew that the word 'sea' was intended to comprise navigable tidal rivers."
Similarly, there is nothing in the Marine Act to show that "sea" was intended to include navigable tidal rivers or parts of them. Indeed, the reference to "inland waters" suggests that the term "sea" is referring to waters below the high water mark of the coastal sea.
In determining the meaning of the term the "sea", great weight must be attached to the statement of Sir Mackenzie Chalmers that the object of the Marine Insurance Act was to reproduce as exactly as possible the existing law, without making any attempt to amend it[109]. Thus, in determining the meaning of the term, it is necessary to give weight to the fact that the term "perils of the sea" was a contractual term used in marine policies, the vast majority of which on any view dealt with ships engaged in the international or coasting trade. Great weight must also be given to the fact that the insured were frequently foreigners and, as the evidence of Mr John Angerstein, "The Father of Lloyd's"[110], to the Select Committee of the House of Commons showed, the risks insured included "cross risks" as well as "regular risks". He explained[111] that "cross risks are from foreign countries to other foreign countries, or from different ports in foreign countries." These considerations make it highly unlikely that doctrines of the common law concerned with the prerogative rights of the Crown over the sea or the jurisdiction of the Admiralty Court throw any light on the meaning of the term "perils of the sea". A European trader - still less an Asian merchant after Commodore Perry's venture into Japan - would have been astonished to be told that the meaning of the term "perils of the sea" depended in part on such esoteric and insular doctrines. After all, maritime law and the rules, terms and practices concerning marine policies were the invention of the Italians, not Englishmen, and it was the Lombard merchants who introduced marine policies into England. Moreover, as the Australian Law Reform Commission has pointed out[112], the terms of the Marine Act operate "by custom or contractual incorporation in numerous countries, not only those that have inherited the English legal system generally." Accordingly, the Act should not be given a construction that is incomprehensible to nations with a legal system different from the Anglo-Australian legal system.
I do not think that it can be contended that any guidance concerning the meaning of the "sea" in a marine policy can be found in the law concerning the Crown's dominion and ownership over the British sea. In this regard, Hall said[113]:

[83]

The appeal must be allowed with costs and the notice of contention remitted to the Full Court. This Court should not determine the notice of contention. The matters involved are not matters that can be defended by a notice of contention. They concern the effect of a different statutory regime. Although the Full Court expressed a tentative view about these matters, it did not decide the issue that gives rise to them.
KIRBY J. In Risk v Northern Territory[126] four members of this Court[127] reflected on the distinction, often made for legal purposes, between "land" and "sea". The differentiation was said to be "attended by the same kind of difficulty as arises in distinguishing between 'night' and 'day'". "In each case", it was pointed out, "the legal geometer who seeks to define the line may find it blurred and indistinct. But that is not to deny … that there is a distinction"[128]. Nor is it to deny that ordinary usage of language provides a basis for defining the distinction when the law renders it necessary to do so.
In this appeal, which comes from a judgment of the Full Court of the Supreme Court of Western Australia[129], a number of questions arise concerning the meaning and application of the Marine Insurance Act 1909 (Cth) ("the MIA"). The provisions of that Act[130], as its title implies, are concerned with insurance contracts providing cover against losses incident to "marine adventures". A "marine adventure" includes a risk where "any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils"[131]. "Maritime perils" are defined in the MIA by reference to "navigation of the sea" and "perils of the seas". In this way, it is necessary, in judging whether the particular insurance contract propounded is governed by the MIA, to determine whether the peril against which the policy afforded cover is of the defined character. If it is not, the policy is not governed by the MIA. With few exceptions, it is then governed by a later federal statute containing important provisions generally more protective of the insured. That later Act is the Insurance Contracts Act 1984 (Cth) ("the ICA").
The primary judge in the District Court of Western Australia (Kennedy DCJ) held, relevantly, that the subject insurance contract was not a policy of marine insurance. It was therefore not a policy governed by the MIA but by the ICA[132]. This was an important conclusion. As her Honour acknowledged, if she was wrong and the subject policy was one of marine insurance under the MIA, the insured's delay in notifying the insurer of the subject accident, outside the fourteen days required by the terms of the policy, would be "fatal"[133]. The provisions of the ICA, on the other hand, if it applied, would afford the insured relief against default for immaterial breaches. The ICA would also provide possible relief against other contentions which the insurer raised to resist the demand for indemnity under the policy, subject to the insurer establishing prejudice to its interests as a result of such default[134].
The Full Court reversed this aspect of the primary judge's decision. Giving the reasons of that Court, Kennedy J concluded that the policy in question was one of marine insurance governed by the MIA[135]. Upon that basis, the insured were in breach of a condition requiring immediate notice of the subject accident[136]. They were also in breach of a warranty which, by virtue of a provision of the MIA[137], was one that had to be exactly complied with, whether it was material to the risk or not. Although such breaches were not found to be material to the risk, Kennedy J held that, by the operation of the MIA, the insurer was discharged from liability under the policy from the date of the breaches. In consequence, the claim upon the policy failed. The appeal was allowed. The relevant parts of the primary judge's judgment were set aside. The third party proceedings to enforce indemnity under the policy were dismissed.
The central issue in the appeal to this Court is whether the Full Court's view that the MIA applied to the subject policy was correct, or whether the decision of the primary judge on the issue of insurance indemnity should be restored. A subsidiary question potentially arises as to whether the insurer was entitled to succeed in any case under the ICA, upon grounds, including breaches of the subject policy by the insured, not finally resolved by the Full Court in light of its conclusion that the MIA applied to the policy.

[84]

The background facts: The background facts in the appeal are described in the reasons of McHugh J[138] and of Hayne and Callinan JJ ("the joint reasons")[139]. I will not repeat the detail that is set out there. Suffice to say that on 30 January 1989 Mrs Helen Morrell was injured in a descent from paraflying near Burswood, a suburb to the north of Heirisson Island within the City of South Perth in Western Australia. The primary judge found that Mrs Morrell's injuries were "entirely" the fault of Mr Ian Gibbs (the first appellant in this Court)[140]. He was in charge of the vessel used to tow Mrs Morrell so as to achieve lift off and flight. Paraglide Pty Ltd (the second appellant) was Mr Gibbs' company through which he operated his paraflying business.
The appellants' proceedings against Mercantile Mutual Insurance (Australia) Ltd ("the insurer"), the respondent in this Court, concerned the demand for indemnity arising out of Mrs Morrell's claim against them. It was because the insurer denied indemnity that the appellants joined it as a third party in the proceedings in the District Court. In this way the issues concerning the liability of the appellants to Mrs Morrell and their entitlement, if liable, to indemnity from the insurer came to be decided by the courts below. Mrs Morrell was very seriously injured. It can be inferred that, as a practical matter, the decision in this appeal will have important consequences for Mrs Morrell's prospects of actual recovery from the appellants.
The "Vessel" referred to in the insurance policy issued by the insurer was a 17 foot (5.2 metres) Ranger speed boat, described by the primary judge as a "runabout, restricted to protected waters, [which] was never going to encounter a peril of the sea"[141]. In the notification of the premium details for the first policy of insurance, the insurer's agent described the cover in the policy as "Commercial Paraflying Insurance Cover" and "Marine Pleasurecraft Insurance Cover". The printed proposal form itself was described as a "Proposal for Pleasurecraft Insurance". The policy was similarly so described.
A preliminary note to the printed policy stated that the MIA "shall be deemed to apply to this insurance". This note appeared above the words "The Policy" and before the governing provisions of the policy were set out. Of course, the application of the MIA involves a question of law, having regard to the terms of that Act and the nature of the risks for which the policy provides. It is not simply a matter of agreement between the parties nor of the nomenclature of their documents. If the ICA and not the MIA applies to the policy, no assertion in an insurance policy to the contrary would be legally effective.
On 9 March 1988, a "renewal certificate" was issued to the appellants by the agent of the insurer. The renewed policy operated for one year from 9 February 1988. Mrs Morrell was injured in that period. In the schedule to that certificate, setting out the items insured, all of the items for "Hull", "Motor(s)", "Auxiliary Motor", "Masts, spars, sails, rigging", "Trailer" and "Equipment" that appeared in the printed form were left blank. The sole item in respect of which the "sums insured" were stated was "Third Party Liability Cover to $1,000,000". The renewal certificate contained an entry for "Navigation Warranties". This was answered "Protected Waters of WA as per permit". The "Road Transit Risks Extension" was shown as "Included". The "Legal Liability to Third Party Extensions" was answered "Commercial Paraflying included". The "Racing Risks Extension" was "Excluded". There were then typewritten warranties expressing that "Warranty 1 of the policy is amended to permit Commercial Paraflying operations as per relevant authority approvals. Further Sections 1 and 2 of the policy are deleted in full. Notwithstanding all other terms and conditions." Effectively, these endorsements on the printed form of the policy left only one operative part of the policy applying to provide indemnity to the appellants, namely, "Section 3 - Legal Liability to Third Party".
The issues: Two issues arise in this appeal and, contingently, a third. They are:

[88]

The legislative context: The passage of the ICA in 1984 presented to Australian insurance law a new paradigm that had not existed in general insurance[144] in the preceding years of federation. Until the ICA came into force, if a contract of general insurance was propounded as falling within the MIA, the issue was simply one of ascertaining whether that Act applied or not. There was no potentially competing comprehensive Act of the Federal Parliament to afford an alternative federal legal regime to govern the contract of insurance in question. Depending upon the State or Territory in or in respect of which the question arose, a policy of insurance falling outside the MIA before the commencement of the ICA would be governed by a mixture of Imperial, colonial and State legislation and unwritten law.
That situation changed radically with the passage of the ICA. Thereafter, one of two federal statutes applied to most Australian contracts of general insurance. Between them, they prescribe significantly different legal regimes. The Federal Parliament attempted to deal with the potential problems of uncertainty and inconsistency in the provisions of these two federal laws. In the ICA it enacted that: "Except as otherwise provided … [the ICA] does not apply to or in relation to contracts and proposed contracts … to or in relation to which the [MIA] applies"[145]. Nevertheless, after the commencement of the ICA, the characterisation of a contract of insurance as one of "marine insurance" had to be performed within a completely new legal setting. Thereafter, a decision that a policy was, according to its character, not a contract of marine insurance would mean, in virtually every case, that it was governed by the ICA with its more contemporary provisions adopted by the Parliament substantially to give effect to recommendations of the Australian Law Reform Commission ("ALRC")[146].
Allocating contracts of insurance to one or other of the statutory systems (or in rare cases to neither) was thus a task to be performed, in the first instance, by reference to the text of the MIA. However, in Australia, after the enactment of the ICA, the task of allocation according to the characterisation of a propounded policy of insurance could not be performed without regard to the fact that the same legislature had enacted a significantly different statute which was expected to operate in the Australian insurance market, side by side with the MIA. The new legal paradigm obliges a court, in giving effect to the MIA, to take into account the later enactment of the comprehensive ICA and the need to implement its provisions too, where they are applicable, to the full extent of the ICA's purposes as revealed in its text. This change to the legal setting of insurance law in Australia cannot be explained solely by reference to the bare language of the two Acts in question. It is necessary to have some notion of how the two federal laws are intended to operate together, applying to insurer and insured alike so as to avoid needless clashes and uncertainties between the two laws of the same polity.
The ALRC report: In 1997, the problem of the potential intersection of the ICA and the MIA was investigated by a federal departmental committee[147]. Thereafter, it was further examined as a new project by the ALRC[148]. In 1998, in advance of the ALRC's report on marine insurance, the Federal Parliament enacted an amendment of the ICA to insert into its provisions s 9A. By that section, "the insurance of pleasure craft was moved from the MIA to the ICA"[149]. The 1998 amendment had no retrospective operation. In any event, according to its terms, it would not apply to the policy in issue in this appeal.
The ALRC delivered its report on marine insurance in 2001. It recommended that contracts for the transportation of goods for non-commercial purposes should also be removed from the MIA to the ICA "consistent with the overall approach that consumer contracts of insurance should be covered by the ICA (although that Act also covers many forms of commercial insurance)"[150]. The ALRC further recommended that the coverage of the MIA should extend that Act "to include adventures on inland waters"[151].
The ALRC expressed a conclusion that[152]:

[93]

Applying the same approach to the contract of insurance in the present case, constituted by the second policy evidenced by the renewal certificate of 9 March 1988, I would arrive here at the same conclusion as this Court reached in Con-Stan. I approach the question to be resolved as one of characterisation. I decide it by reference to the substance of the policy, not merely its form. I look at the policy and view it in its entirety. I consider the types of losses against which it promised to afford indemnity to the insured.
Approaching the subject policy in this way, read together with the proposal form that led to the certificate of renewal, it is clear that although items of a vessel were mentioned in the printed form (that might otherwise give the policy something of a maritime flavour), the actual substance of the insurance contract, as agreed, was that which was stated on the face of the certificate. It was one confined to the provision of indemnity to the insured with respect to "Third Party Liability Cover". That was all that was left in the policy after the deletions. Such indemnity was granted only in respect of the promise contained in Section 3 of the subject policy. The other sections of the policy, involving physical loss or damage to the vessel and salvage charges and other charges (such as the "expense of sighting the bottom after stranding" of the vessel), were specifically excluded from the policy as issued. What remained, and all that remained, was a promise to provide indemnity in respect of the named business' "liabilities to third parties".
It is true that Section 3 of the policy was expressed to apply "by reason of your interest in the Vessel". However, this was not, as such, an "interest" defined by reference to a "marine adventure" as that phrase is used within the MIA[160]. On the contrary the "adventure" to which the subject policy was addressed was made clear on its face. It was confined by the proposal for insurance and elaborated by the anterior correspondence of the appellants with the insurer through its agent. Substantially, it was the "adventure" inherent in the appellants' business of providing paying customers with facilities of paraflying over "Protected Waters of WA" using what the policy described as a "Runabout Ski Boat" restricted to "smooth waters only" on and from the Swan River in the City of South Perth. The last mentioned descriptions defined the venue of the risk but the risk itself was third party business liability for "paraflying", which is an aerial and not a maritime activity.
Subject further to whether this insured "adventure" took place on a "river" that is an "inland water", and was therefore not a peril "consequent on, or incidental to, the navigation of the sea", the attempt to bring the policy within the "contract of marine insurance", as that phrase is used in the MIA, fails. Properly characterised, the policy was, and was stated to be, one of third party liability insurance for a business for which any maritime connection was inessential to the risk. In short, it was a third party liability policy not a marine policy. Although marine policies might in accordance with s 9(2)(c) of the MIA include liability to a third party, the essential character of the subject policy was not given by that supplementary provision. Its essential character was that of a business third party liability policy - not marine.
To the extent that this was a conclusion that I would have reached in the absence of the ICA, it is one that is reinforced - and certainly not thrown into doubt - by the passage of that Act into law. A decision that the subject policy was not a "contract of marine insurance" can now more comfortably be arrived at given that the consequence is not that the contract is unregulated by federal law, thrust into an uncertain mixture of other legal sources, but that it is regulated by a different federal law, namely the comprehensive Act (the ICA) containing detailed provisions applicable outside the exceptional category of marine policies of insurance for sea and sea-related risks.
In characterising an insurance policy in contemporary Australian legal conditions, weight must now be given to the existence of the ICA. Its provisions are engaged where they are applicable, as they were here. The conclusion that the MIA did not apply did not now have the consequence of placing the parties beyond the federal legislative pale. It simply engaged another more comprehensive and relevant federal law to govern their dispute.
A policy falling outside the MIA: It follows that the appellants were entitled to succeed upon the first issue concerning the essential character of the indemnity provided to them under the subject policy. The mere fact that some use of the vessel in question might hypothetically have attracted the MIA, should it ever have proceeded onto the open seas, does not alter the type of insurance that was effected in this case. When properly classified within the dual regime now provided by federal law, it was a business third party liability insurance policy for the appellants' notified business. Viewed in its entirety, it fell outside the MIA. In the circumstances, it therefore fell within the ICA. The primary judge was correct to so conclude.
Assuming that this conclusion about the true character or classification of the subject insurance policy is incorrect - or is not determinative of whether the MIA or the ICA applies[161] - it is appropriate for me to address more closely the ambit of the sea issue. As will appear, it affords an alternative route that takes this judicial voyage to the same safe harbour.

[94]

Significance of "the sea" to the proceedings: The joint reasons[162] are, with respect, correct in stating that whether the precise place at which the accident to Mrs Morrell occurred was "the sea" for the purposes of the MIA does not resolve, as such, the issue arising in this appeal. The insurer did not deny indemnity to the appellants because of the location of the accident to Mrs Morrell. Rather it did so, relevantly, because of its view as to the legal character of the policy, the law then applicable to that policy and the suggested consequences of breaches of the policy under that law.
Because of the language of the policy, and of the MIA which the insurer contended was applicable to the risks for which it afforded the promise of indemnity, it is necessary (on this hypothesis) to decide whether the contract of insurance involved an obligation on the part of the insurer to indemnify the appellants in respect of a "marine adventure" within the MIA[163].
In the case of "liability to a third party"[164] - being liability arguably of the kind provided by the subject policy of insurance - the MIA accepts that such liability may be the subject of a "contract of marine insurance", in particular where the owner of, or other person interested in or responsible for, insurable property (in this case the vessel) incurs such liability "by reason of maritime perils"[165]. In the "cascading definitions"[166] provided by the MIA, that expression is, in turn, defined by that Act to "mean" the perils "consequent on, or incidental to, the navigation of the sea"[167]. This latter expression is, in its turn, elaborated, relevantly, by the phrase "that is to say, perils of the seas … either of the like kind, or which may be designated by the policy".
It can be seen that the MIA is focussed, relevantly, upon an identified place on the earth's surface, namely, "the sea" and "the seas". It is therefore pertinent to ask whether the place where, by its terms, the policy in question in these proceedings applied, involved a risk defined, in a relevant way, by reference to "the sea". Necessarily, that question presents the issue as to where the boundary of "the sea" or "the seas", as so described, finishes - giving way, for example, to other geographical places on the earth's surface, such as "land" or "inland waters".
Discerning the ambit of the sea: The Full Court answered the ambit of the sea question by reference to considerations of salinity and tidal flow in the Swan River at the point where the accident occurred and also at the Narrows site where the appellants' commercial parasailing was normally intended to occur and did in Mrs Morrell's case occur[168]. At each of those points the river was subject to the rise and fall of the tide and, depending on the time of year, to varying degrees of salinity. The Full Court considered that that part of the river was therefore to be regarded as part of "the sea" for the purposes of the MIA. The joint reasons express the opinion that this is the preferable way to locate the boundary between "the sea" and "the river" if that should be important to the decision in the case[169]. I disagree.
Intuitively, the argument that the Swan River, in either area of its length where the appellants carried on their business of paraflying, is part of "the sea" or "the seas" exposed to the "perils of the seas", appears incorrect. Unlike certain other Australian statutes, the MIA does not define "sea" for its purposes. Little assistance is to be obtained by looking at the definition of "sea" in other Acts, federal[170] or State[171]. There is no authoritative decision of this or any equivalent court that determines the issue, whether in relation to the MIA or to the United Kingdom Act ("the UK Act") upon which it was originally based[172] or any of the many statutes of other Commonwealth countries which copied the UK Act[173].
In Hansen Development Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd[174], the New South Wales Court of Appeal rejected the proposition that a wave sled accident on Cugden Lake in New South Wales attracted the MIA so that the relevant insurance policy was governed by that Act and not by the ICA. In the course of his reasons in that case, Meagher JA, after referring to Arnould's Law of Marine Insurance and Average[175] and to the Lloyd's "SG" Policy[176], remarked[177]:

[99]

The distinction between "the sea" or "the seas" and "inland waters" in the MIA is important to this appeal because it indicates that, as such, "inland waters" were not viewed by the Parliament as part of "the sea" for the purposes of the MIA nor perils upon them as "perils of the seas". Nor are inland waters regarded as part of "the sea" in common speech in Australia. A river, even a tidal and sometimes partly salinated river, is not ordinarily described as "the sea", still less "the seas". At least this is so where the part of the river that is in question is some distance from its mouth to the sea and especially where (as here) the river flows through a city or suburban area, populated by people who regard the waterway in question as an identified river - something quite different from "the sea" in common speech. Unsurprisingly, this is the way the ALRC regarded the MIA and its intended scope. Only on that basis can the ALRC's suggested solution to the dilemma of differentiation between the sea and other ("inland") waters be understood. The ALRC proposed that, instead of trying to define "the sea" for the purpose of the MIA, the opportunity should be taken, by amendment of that Act, to make it clear that the MIA "clearly covers risks on inland waters"[184]. By inference, it accepted that the MIA, as applicable to this appeal, did not do so. The ALRC's report is still under consideration but I regard its analysis as accurate and helpful to the resolution of the issue before this Court.
The Canadian[185] and Indian[186] legislation on marine insurance appears now to include inland waters within marine insurance law by express statutory provisions that do not relate such coverage to accidents incidental to sea risks[187]. In this respect, the Australian MIA to this day adheres to the original Imperial language. It continues to draw the distinction between "the sea" or "the seas" on the one hand and "inland waters" on the other. Such "inland waters" would ordinarily include rivers, including navigable rivers separated from the sea, lakes, enclosed bays, inlets, estuaries and other waters not as such constituting part of "the sea" or "the seas".
In Raptis (A) & Son v South Australia[188], a fisheries case, Stephen J drew attention to the difficulty which the common law had traditionally experienced in distinguishing "the sea" from "inland waters". His Honour said[189]:

[101]

Whatever such difficulties may be, in the context of the MIA and the distinctions it draws, the kind of notion encompassed by the waters beyond the "fauces terrae"[190] (jaws of land), seems closer to the ordinary concept of "the sea" or "the seas" than the attempt that the insurer urged on this Court to turn the relevant section of the Swan River within the City of South Perth into part of "the sea". I doubt if any resident of Perth or any visitor for whom English was a native language, would describe the area of the Swan River near the Burswood Casino (or near the Narrows Bridge) as "the sea" or part of "the sea". Asked to identify the stretch of water in question, the observer would call it part of "the river"[191]. If pressed with statutory alternatives, he or she might describe it as a section of one of the "inland waters" of Western Australia. In giving meaning to the MIA, an Australian statute, this Court should be careful not to stray too far from the perceptions and use of language of the ordinary person. After all, the basic task before the Court is to give meaning to the provisions in a statute of the Federal Parliament speaking to us today.
What then is the basis upon which it is suggested that the Court would be warranted as treating that part of the river as part of "the sea" or "the seas", contrary to the ordinary understanding of those words in daily Australian usage? Had the Parliament in 1909 (or the United Kingdom Parliament in enacting the UK Act in 1906) intended to adopt an artificial, unusual and technical meaning of "the sea" (as by reference to the susceptibility of a river or other internal water to tides or salinity) it could have said so. Later Australian legislation has sometimes (but not uniformly) adopted such a definition to expand the ordinary meaning of the word "sea" and its analogue "seas" to include other "waters within the ebb and flow of the tide"[192]. However, without such an expanded definition, expressly included in the Act, this Court should give the word "sea" in the MIA its ordinary meaning according to common usage. It should especially do so here in a context in which the legislation has expressly drawn the distinction between "the sea" or "the seas" and "inland waters".
The legal geometer in the context of this appeal: The insurer's attempt to import into the MIA tidal or salinity concepts contained in special statutory definitions adopted in later and other legislation, enacted for different purposes, should be rejected. Apart from anything else, such an expanded definition is unnecessary to carry into effect the purposes of the MIA. This is because provision is made for express extensions of a policy for application to losses on inland waters (or land risk) but only where such losses are "incidental to any sea voyage"[193]. As McHugh J explains in his reasons, no such "sea voyage" was contemplated in this case as that phrase would ordinarily be understood. Nor was there any "navigation of the sea" giving those words their normal meaning. Nor were there any consequences of the "perils of the seas" or other perils of the kind listed in the definition of "maritime perils"[194] as those words are commonly used in the English language.
The statutory setting therefore reinforces, and confirms, the inference that the MIA is addressed to sea perils properly so understood and certain other perils incidental thereto. It is not, as such, addressed to disconnected perils upon Australia's "inland waters" such as a river flowing through metropolitan suburbs in a large Australian city. The latter perils are different and typically involve smaller risks. Exposure to the elements is ordinarily more confined; the length of the journey is more restricted; and rescue is normally closer at hand in the event of mishap.
Furthermore, none of the features of the subject policy suggested, still less provided, that it extended in any way to "navigation of the sea" in the ordinary sense of that term. On the contrary, the nature of the business as described, the capacity of the nominated vessel and the specified limitations of the applicable waters indicated that the policy of insurance was wholly one confined to "inland waters" of the State, namely a limited section of the Swan River in the City of South Perth, several kilometres from the mouth of that river to the sea. So confined, the policy excluded any cover in respect of a "sea voyage" or "perils of the seas" as those words are used in the MIA.
We are not in this case concerned with a contract of insurance issued to insure a vessel whose primary deployment involves navigation upon the high seas and which incidentally, from time to time, visits the internal waters of Australia and might then expect its policy of marine insurance to apply to it in such waters, whether in a harbour, bay, estuary or navigable river or when docking, anchored or being repaired in such a place. Here, with this particular insurance policy, no navigation of "the sea" or "the seas" in the normal sense of those words was contemplated. On the contrary, it was denied in multiple ways by the terms used in the policy. The only way a different conclusion could be reached would be by assigning a wholly artificial and unnatural meaning to the expressions "the sea" and "the seas" in the MIA. In the absence of clear textual or decisional authority obliging such an artificial meaning, I would not adopt it.
A policy falling outside the MIA: In applying the foregoing linguistic and conceptual dichotomy derived from the MIA to the facts of the present case, the space of water on the Swan River envisaged by the subject policy was an inland water. It was not part of the sea or the seas. The insured adventure therefore fell outside the ambit of the sea. It did not extend to "perils of the seas". The policy fell outside the MIA. It was accordingly governed by the ICA. The Full Court erred in giving effect to the contrary view.

[104]

The second appellant, Paraglide Pty Ltd, conducted a business offering paraflying, sometimes called parasailing, to the adventurous. The first appellant, Mr Gibbs, was a principal of the company. The company operated a 17 foot run-about ski boat, powered by a 160 horsepower sterndrive motor, called the "Lone Ranger". When paraflying, the boat towed a person wearing a parachute who could ascend to the length of the tow rope while the boat made sufficient speed to generate enough lift under the canopy of the parachute.
On 30 January 1989, Mrs Helen Morrell went paraflying with the appellants. Her husband had bought her a ticket as a birthday present. The ticket said that she would go paraflying at "The Narrows Bridge" on Perth's Swan River. In fact, by arrangement, she met Mr Gibbs, who was to operate the boat, and some others who were to go paraflying on that day, at a point a few kilometres upstream of the Narrows Bridge, near the Burswood Casino. They were to use the "Lone Ranger". From the place where they met, the party went a short distance downstream, to the northern tip of Heirisson Island in the Swan River. After some instruction, an attempt was made to launch Mrs Morrell into the air. For reasons that do not matter, that attempt failed and the party moved further to the south east and, after another abortive attempt, Mrs Morrell took off. All went well until an attempt was made to land her towards the north east end of the island. She hit trees on the island, and was dragged through them, suffering serious injuries as a result.
Mrs Morrell sued a number of persons, including Mr Gibbs, who had been operating the "Lone Ranger", and Paraglide Pty Ltd. Mr Gibbs and Paraglide sought indemnity from the respondent under a policy of insurance called a "Marine Pleasurecraft Policy" which the respondent had issued to "R Sodaberg [sic] & I Gibbs T/as Paraglide Pty Ltd". Each of those named has been treated in the litigation as an insured.
The respondent denied liability to indemnify Mr Gibbs or Paraglide. Mr Gibbs and Paraglide therefore joined it as third party to the proceeding brought by Mrs Morrell.

[129]

By s 509 of the Merchant Shipping Act 1894, Pt VIII of that Act was extended, unless the context otherwise required, "to the whole of Her Majesty's dominions". Accordingly, at the time the Marine Insurance Act was enacted in Australia, the Imperial Merchant Shipping Act 1894 applied in this country.
It is not necessary to consider any particular aspects of the way in which particular provisions of the Merchant Shipping Act 1894 operated. For present purposes, what is important is that it reinforces the conclusion that would otherwise follow from s 9(2)(c) of the Marine Insurance Act that a contract of insurance providing indemnity against liability for death of, or injury to, a third party could, in some circumstances, be a contract of marine insurance. Those cases included at least some circumstances where loss of life or injury was caused to a person being carried in the ship or was caused to a person carried in another vessel by reason of the improper navigation of the ship.
The Marine Insurance Act (and its progenitor, the UK Act) use the word "ship" but do not define that term. "Ship" was defined in the Merchant Shipping Act 1894[213] as including "every description of vessel used in navigation not propelled by oars"; "vessel" was defined as including "any ship or boat, or any other description of vessel used in navigation". By these definitions the "Lone Ranger" was an example of the species of "vessel" referred to in the Merchant Shipping Act 1894 as a "ship".
It may greatly be doubted that it is necessary or appropriate to read the word "ship", when used in the Marine Insurance Act or in the UK Act, as necessarily limited to what the Merchant Shipping Act 1894 meant by that term. Even so, the word "ship" should not be given a narrow meaning when used in the Marine Insurance Act. Although "ship" is now used[214] to refer to a large sea‑going vessel, as opposed to a "boat", the word should not be read as used in the Marine Insurance Act as drawing such a distinction. Rather, it should be read as encompassing a powered craft like the "Lone Ranger". Perhaps the word extends to some other forms of water‑borne craft, but it is not necessary to explore that question.
The UK Act was enacted to codify the law of marine insurance. It therefore reflected a long and elaborate commercial history. The references in both the UK Act and the Marine Insurance Act to "usage of trade"[215] or "usage"[216] expressly acknowledge the importance of commercial practice. Both the UK Act and the Marine Insurance Act adopted the statutory form of policy for which provision had been made in 35 Geo III c 63 and 30 Vict c 23. That form of policy is found in the Second Schedule to the Marine Insurance Act. The courts have often criticised this policy[217]. It has been said[218] to have "always been regarded by our courts of law as an absurd and incoherent instrument, yet length of time and a variety of decisions have now given it such a degree of certainty that it is likely to be retained among the chief instruments of English commerce" (footnote omitted).
Again, it is not necessary to explore the nature or extent of these difficulties. What is important is that the UK Act was enacted to codify the law regulating dealings in a particular commercial market. It did that, no doubt taking account of the importance of both the maritime trade and the marine insurance market to Great Britain. That being so, it may be doubted that the UK Act was intended to preclude any expansion of the marine insurance market as marine technology developed, and smaller powered craft like the "Lone Ranger" came into use. The conclusion that the UK Act was not intended to prevent the emerging of new forms of marine insurance (whether on or in relation to new forms of water‑borne craft, or on or in relation to new forms of marine adventure) would follow from the provisions of the UK Act that are equivalent to s 8 of the Marine Insurance Act. Those provisions expressly contemplate not only the extension of a contract of marine insurance to, among other things, certain land risks but also the application of the provisions of the Act to adventures analogous to marine adventures, if covered by a policy in the form of a marine policy.
No doubt the market to which the UK Act was directed was the London market for marine insurance. By adopting the language of the UK Act, the Marine Insurance Act can be understood as having a similar focus. The chief concern of the London market was the international shipping trade. There was some trade on the inland waters of Great Britain, particularly by canal, but much of that trade was directed to the export market. If cargo was to be insured while in transit on inland waters, it could be insured by a policy covering the risk from warehouse to warehouse. The vessels which transported the cargo on those inland waters may or may not have been insured by a policy in the form of a marine policy, the operation of that vessel being an adventure "analogous to a marine adventure"[219].
Unlike some other insurance markets, there was not the same scale of shipping operations on the inland waters of Great Britain as, for example, on the Mississippi or other great rivers of the world. There was, therefore, no occasion to develop a body of commercial practice in Great Britain in insuring vessels or goods engaged in such trade. By contrast, as 19th century texts like Phillips[220] reveal, the marine insurance markets of the United States developed a body of practice[221] that applied to ventures on inland waters. So far as Phillips' work reveals, insurance of these ventures was not seen as something distinct from the general subject of marine insurance. It was simply a particular kind of marine insurance, although, in the trade on the Mississippi and Ohio, for example, the phrase "perils of the river" was substituted for, or added to, "perils of the seas"[222].

[131]

The first of the phrases used in explanation of the general expression "the perils consequent on, or incidental to, the navigation of the sea" found in the definition of "maritime perils" in s 9(2) of the Marine Insurance Act is "perils of the seas". Over the years, much attention has been given to what is meant by "perils of the seas". The discussion of that expression, in cases decided after the passing of the UK Act and the Marine Insurance Act, has necessarily given close attention to r 7 of the rules for construction of the policy found in the Second Schedule to the Marine Insurance Act. In this case the operation of that rule may be put to one side.
In earlier decisions considering what are "perils of the seas"[224], much attention was given to distinguishing between the fortuitous or unexpected and the inevitability of a ship's decay. The former kinds of event might be caused by perils of the seas; the inevitable decay of the ship was not. Often, the discussion of such issues embraced distinctions between proximate and other causes[225]. Sometimes, the discussion in the cases reflected the way in which the claim was pleaded. So, for example, in Phillips v Barber[226], the court considered whether damage to a ship lying in a graving dock in the harbour of St John, New Brunswick, when blown on its side, was a loss by the perils of the seas or a loss "by other perils and misfortunes".
Attention to particular provisions of policies, especially to the common provision concerning perils of the seas, should not distract attention from the more general questions that are presented by the expression "maritime perils". It is an expression that includes more than "perils of the seas". Perils of the seas are but one species of that genus. Reference to the cases about what are perils of the seas is important, but only to the extent that those cases reveal the nature of the perils embraced by the words "maritime perils".
The emphasis given in early cases to identification of the proximate cause of the loss caused some uncertainty in cases where the vessel's master or crew were negligent. By the early 19th century[227], the better view was that underwriters were answerable for perils insured against, however the operation of those perils may have been affected by the measures taken by the vessel's master or crew. So, the insured recovered under policies of marine insurance in cases where vessels were burnt through the negligence of the master or crew[228], where a vessel was stranded in a river because the cargo was loaded carelessly[229], and where the vessel was blown over in consequence of the master's discharging ballast[230]. The negligence of the master or crew did not preclude recovery. What mattered was whether an insured risk had occurred. That did not turn on where the event occurred but on what happened and why. Was what happened a peril consequent on, or incidental to, the navigation of the sea - a fortuitous or unexpected event consequent on, or incidental to, the operation of the vessel?
As pointed out earlier in these reasons, the appellants sought to attribute particular significance to where the incident occurred. The appellants submitted that the incident did not happen at sea or as an incident to any intended voyage on the sea. They submitted that the policy was not a policy of marine insurance because not only was the "Lone Ranger" never intended to go out into those open waters that would ordinarily be referred to as the sea, the policy limited the insured's cover to their operating the craft while it was in Western Australian waters gazetted under the Western Australian Marine Act 1982 (WA) as "smooth waters only". The respondent sought to counter these contentions by submitting that the incident had occurred at a point in the Swan River that was properly found by the Full Court to be part of the sea.

[133]

The appellants emphasised the limited extent of the cover provided by the contract: cover which the appellants described as "public liability" cover. For some purposes, the description of the contract on which the appellants sued as a "public liability policy" may not be inappropriate. But a contract of insurance indemnifying a shipowner against liability for death or injury to a passenger might likewise be called a form of "public liability insurance". The application of the name "public liability" was intended by the appellants to suggest the existence of some taxonomy of insurance in which marine policies stood apart from public liability policies. Section 9(2)(c) of the Marine Insurance Act demonstrates that that is not so. There is a marine adventure where liability to a third party may be incurred by the owner of, or other person interested in, or responsible for, a vessel by reason of maritime perils.
Under the present contract, the insurer agreed to indemnify the insured against liability to third parties which the insured incurred "by reason of" their interest in the "Lone Ranger". The liability against which the appellants sought indemnity was liability owed to Mrs Morrell as operators of that craft: in the case of Mr Gibbs by his having personally operated it, and in the case of Paraglide Pty Ltd as the owner vicariously liable for the conduct of its employed operator. Mrs Morrell claimed against each on the basis that the craft had been operated carelessly, thus causing her injuries, loss and damage.
The careless operation of the craft causing injury to the person being towed by the vessel was a peril of a kind properly described as a peril "consequent on, or incidental to, the navigation of the sea". What happened was that, because the craft was operated carelessly, the person being towed by that craft was injured. Collision of a vessel, or something (or, in this case, someone) being towed by the vessel, as a result of the negligent operation of the vessel is a peril consequent on, or incidental to, the navigation of the sea. It is no different from a case of grounding or stranding a vessel where that does not happen in the ordinary course of navigation[231].
That Mrs Morrell's injury happened when she was being towed by the "Lone Ranger", rather than when she was on board the craft, neither requires nor permits any different conclusion. Those operating the craft incurred liability to her because they operated it carelessly, causing her, while in tow, to strike trees on the island. That is a form of maritime peril. Neither the way the injury was sustained nor the place where it happened detract from that conclusion.
Because the contract insured the appellants against the consequences of negligent operation of the craft causing injury to a person being towed by the craft, it was a contract to indemnify the insured against losses incident to marine adventure. The relevant marine adventure was exposing the owner of, or other person interested in or responsible for, the craft to liability by reason of maritime perils. Accordingly, the contract on which the appellants sued was a contract of marine insurance and the Marine Insurance Act applied; the Insurance Contracts Act did not apply.
For these reasons it is, in our opinion, unnecessary to found the decision on the proposition advanced by the respondent, namely, that the incident occurred in a part of the Swan River properly regarded as part of the sea. It is as well, however, to say something briefly about this aspect of the matter.

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