Vlasons Shipping Inc v Neuchatel Swiss General Insurance Co Ltd [1998] VSC 91

5. There was no contest that the loss fell within the perils covered by the policy or that the value of the vessel, machinery and equipment was the sum of US$1.2M as insured. The insurers relied upon the terms and the effect of a typhoon clause in the policy which was in the following terms:

"Notwithstanding any provision of this policy to the contrary, it is hereby expressly stipulated and made a condition herein that the insured vessel shall not be allowed to sail or put out of port when there is a typhoon or storm warning either at the port of destination or between the said port. Violation of this condition shall render the policy null and void. However should the vessel have sailed out of port prior to such warning, this warranty should no longer apply."

9. The insurers contend that when the vessel put to sea at 1730 or 1800 hrs Hong Kong time on 14 August 1991 there was an applicable storm or typhoon warning in existence so that the policy was null and void.

12. For the most part, the facts were not in contest. In setting them out and, generally, I shall use Hong Kong time, adopting the 24 hour clock system used by the witnesses.

15. On 10 August 1991 at 2200 hrs the vessel arrived at the pilot station at Beihai Harbour in South China. Beihai, also known as Pei-hi, is a port on the mainland a short distance west of the Luichow Peninsula in the Gulf of Tonkin. The peninsula itself is about halfway between Haiphong in Vietnam to the west and Hong Kong to the east.

18. At 1230 hrs on 11 August an joint entry inspection was conducted. This involved an inspection by the Harbour Master and representatives of customs, immigration and quarantine authorities in the presence of a representative of the local agent of the ships owner. The vessel at the time was managed by a Hong Kong company, Northern Star Shipping Co Ltd ("Northern Star"). Its local agent at Beihai was called Penavico whose representative at this joint entry inspection was Ruan Ruijie, the Deputy General Manager of a subsidiary of Penavico.

21. For reasons which are of no present concern it was not until 1800 hrs on 12 August that the ship berthed alongside the wharf in Beihai. It commenced loading its cargo of Kaolin Clay and this continued until it was completed at 0800 hrs on 14 August.

24. At 0500 hrs on the same day, 14 August, the Royal Observatory Hong Kong ("ROHK") issued its daily weather report which included a warning of tropical cyclone called "Fred". A tropical cyclone is the generic term for a tropical low pressure system with organised convection and definite cyclonic wind circulation. Tropical cyclones are classified in the publication, Hong Kong Weather Services for Shipping (14 ed, 1988), according to their maximum sustained wind speed, as tropical depressions (winds up to 62 km/hr; 33 knots); tropical storms (wind speeds from 63 km/hr to 87 km/hr; 34 knots to 47 knots); severe tropical storms (wind speeds from 88 km/hr to 117 km/hr; 48 knots to 64 knots); and, typhoons (wind speeds of 118 km/hr and over; 64 knots and over).

27. Tropical cyclone Fred was, at this time, classified by the ROHK as a tropical storm and was located in the South China Sea about halfway between Hong Kong and Manila in the Philippines. I shall return later to its precise location. This information was transmitted to the Hong Kong Coast Station which would have broadcast the warning in morse code to shipping on its receipt and at 18 minutes past the hour for three hours after receipt and, thereafter at 0918 hrs, 1518 hrs and 2118 hrs. A copy of the 0500 hrs weather chart issued by the ROHK was sent by fax to Northern Star at 0853 hrs where it was seen by Danny Shan, a director of that company and the person responsible for the management of the vessel.

30. Meantime, at 0800 hrs on the same day, the Japan Meteorological Agency Office in Tokyo ("JMA") also issued a weather warning which included a reference to the tropical cyclone Fred which it described as a severe tropical storm. Its position was given and also its expected position at 0800 hrs on 15 August. Captain Hiroshi Shinagowa said that these warnings were broadcast to shipping by morse code from 1028 hrs to 1115 hrs and again from 1148 hrs to 1215 hrs on 14 August.

33. At Beihai, Mr Ruan of Penavico said that between 0800 hrs and 0900 hrs he spoke by VHF radio to a person on the vessel. In this conversation he enquired as to the completion of the loading and of the Master's intentions to depart. He said that he gave to the person information about a forecasted typhoon but he was unable to recall its substance or where he obtained the information or the person to whom he spoke. He also enquired about arrangements for the joint exit inspection which was required before the ship could leave port.

36. At 1030 hrs on 14 August the joint exit inspection took place. Mr Ruan was present with representatives of the same authorities. The ship, however, did not leave immediately because it was experiencing some engine problem.

39. At 1222 hrs, Mr Shan of Northern Star telexed from Hong Kong to Penavico in Beihai enquiring as to the progress of the loading and as to the vessel's likely departure time. He also asked the Penavico to pass to the Master the following message:

"Dear Captain, Understand there are Typhoon Fred approaching which kindly take extra cautions and always consider safety first. Regards - Norstarco"

Mr Ruan said he took this telex to the wharf and "handed it to the ship".

44. Later the same afternoon, at 1400 hrs the ROHK also upgraded tropical cyclone Fred to a severe tropical storm. Both the ROHK and the JMA at this time issued warnings of the present and expected locations of this cyclone.

47. 14 August at 1730 or 1800 hrs the vessel left Beihai bound for Hong Kong. In order to reach Hong Kong the vessel was obliged to sail south to clear the peninsula and then east through the Hainan Strait between the Luichow Peninsula and Hainan Island and then in a north east direction to Hong Kong across the South China Sea. It was possible, too, for the ship to have by-passed the strait and travelled a longer distance around Hainan Island.

50. Notwithstanding some suggestions to the contrary, it is clear from the information provided by the Master to North Star that his intention on leaving port was to travel to Hong Kong through the Hainan Strait. On 15 August at 0847 hrs he advised by cable that he expected to arrive at the inner anchorage entry to the strait at 1000 hrs on that day, passing the strait at 0500 hrs on 16 August. At 1131 hrs Northern Star acknowledged receipt of this cable and again warned the Master to take precautions to avoid the typhoon.

53. In fact, the vessel arrived at the anchorage at 1130 hrs on 15 August, as the Master advised the local agents in Beihai at 1359 hrs on the same day. The ship was having engine trouble but he still expected to pass the strait at 0500 hrs on 16 August and to arrive at Hong Kong at 1500 hrs on 17 August.

56. On 16 August at 0800 hrs tropical cyclone Fred, which was then properly called a typhoon, entered the strait travelling from east to west towards the vessel. At 0800 hrs an SOS signal from the vessel was received in Beijing. It is apparent that, very soon thereafter, the Biyiyang Ginto sank. There were no survivors.

59. The relevant time for the purposes of the typhoon clause is the time of departure, 1730 hrs or 1800 hrs on 14 August. Evidence was given of the location of the tropical cyclone plotted at that time by the ROHK and by the JMA. Each of these organisations also issued cyclone warnings to which I shall now refer. According to the ROHK, at 1700 hrs on 14 August the severe tropical storm "Fred" was located in the South China Sea within 60 miles of 19.80 north and 117.00 east, travelling west north-west at eight knots. This location was over 400 miles east of the inner anchorage at the entry to the Hainan Strait where the vessel is presumed to have sunk. The ROHK also reported maximum winds at the centre of the storm estimated to be 55 knots, with a radius over 150 nautical miles for 33 knot winds and a radius over 60 nautical miles for 47 knot winds. The JMA report as at 1400 hrs on the same day described Fred as a severe tropical storm in a similar location moving west north west at 7 knots. The maximum wind velocity near the centre was estimated by it to be 55 knots, with 30 mile radius for winds over 50 knots, and 130 mile radius for winds over 30 knots. It follows that, at the time the vessel left port, tropical cyclone Fred was properly described as a severe tropical storm and not as a typhoon.

62. In each of these reports the expected positions of the tropical cyclone were also given. That issued by the JMA forecast its position at 1400 hrs on 15 August with an uncertainty of 90 mile radius and, at the same time on 16 August with an uncertainty of 180 mile radius. That issued by the ROHK forecast its position at 1700 hrs on 15 August and again on 16 August. No degree of uncertainty was given by the ROHK forecasts but the centre was said to be located within 60 nautical miles of the co-ordinates specified in the warning. It will be recalled that both the ROHK and the JMA warnings contained a statement of the radius from the centre of the storm in which the winds were of speed greater than 47 knots. In the case of the ROHK warning, this radius was 60 nautical miles; in the JMA warning it was about 30 miles. The area predicted to be affected by these winds must be enlarged accordingly. Captain Michael John Leslie Bozier plotted on a chart (annexure 7) the locations given by each of these meteorological authorities at different times and at each time the expected location of the tropical cyclone in the future as was shown in the reports. In each of the reports current at the time the ship left Beihai it is shown that the centre of the cyclone would cross the likely path of the vessel between the Hainan Strait and the Port of Hong Kong at different points but about 2300 hrs on 15 August or 0200 hrs on 16 August respectively. It will be recalled that the Masters' advice to the Hong Kong agents was to the effect that the vessel would pass the strait at 0500 hrs on 16 August with an expected arrival time in Hong Kong at 1500 hrs on 17 August. Captain Bozier, however, pointed out that there was in each case a degree of uncertainty as to the future location of the cyclone and, further, that the effect of a cyclone of this magnitude is such that mariners are advised to maintain a distance of at least 80 miles from the centre and, if possible, more than 250 miles from the centre. The consequence of this is that the effect of the warnings was such that, at the time the ship left port, assuming it proceeded to Hong Kong as the Master said he intended, it must pass through that part of the South China Sea which was affected by the warnings issued by both meteorological authorities.

65. I return now to the typhoon clause. Counsel for the ship owner submitted that it was so uncertain as to be incapable of being sensibly construed. Any attempt to give meaning to its words, they said, would require the court to rewrite it. The consequence of this, they argued, was not that the policy should be struck down in its entirety, but that only the typhoon clause should be ignored. Alternatively, it was said that the insurers had failed to establish that the clause applied to the facts before the court.

68. The insurance policy is a commercial document operating in a technical environment. I will therefore approach it as such. I will give technical maritime terms their technical meaning where the context suggests that this is appropriate. I shall not be "too astute or too subtle" in finding defects in the language used: Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503 at 514, per Lord Wright. I will struggle with the words to give to the clause a meaning and that this be a meaning which honest business people would understand the words to bear and one which is consistent with the commercial objective of the document, insofar as this objective is apparent: Cohen & Co v Ockerby & Co Limited [1917] HCA 58; [1917] 24 CLR 288 at 300, per Isaacs J.

71. The first aspect of the clause upon which counsel for the ship owner relied was the consequence of its application. Where the vessel puts to sea where there is a typhoon or storm warning the policy is null and void. Accordingly, if, in these circumstances, the vessel has the good fortune to avoid or survive the storm the insurer is nevertheless off-risk generally. Second, this policy which, for the most part, is on a printed form covering risks to "the vessel" has been taken out over two named vessels other than the Biyiyang Ginto. This means that, if the Biyiyang Ginto sets sail in circumstances which bring into play the typhoon clause, the policy is null and void so that the other vessels are uninsured notwithstanding that they or their owners are innocent of the violation of the typhoon clause or ignorant of this. Counsel for the insurers submitted that this was irrelevant for my purposes which are to construe the clause in the events before the court. I agree, but the argument does illustrate the potential seriousness of the typhoon clause for both contracting parties.

74. It will be recalled that the typhoon clause speaks of a typhoon or storm warning. These warnings are defined in the operational manual of the typhoon committee of the World Meteorological Organisation in the following terms:

Meteorological message intended to warn those concerned of the occurrence or expected occurrence of average wind speeds in the range of 48 to 63 knots or windforce 10 or 11 in the Beaufort scale.

Meteorological message intended to warn those concerned of the occurrence or expected occurrence of the mean wind speed of 64 knots or higher, or wind force 12 in the Beaufort scale.

These definitions were accepted as generally appropriate by Wong Kim Po, a chief experimental officer employed by the ROHK. I accept that this was the meaning given to these meteorological expressions as understood by mariners generally.

82. The case before me was conducted on the basis that the word "warning" in the typhoon clause referred to a formal warning of one or other of these kinds, emanating from some meteorological centre. In my view this is correct. As a matter of construction, it is borne out by the terminology of the clause itself which specifies the warning in meteorological terms and the location of the typhoon or storm. As a matter of practicality, too, it would be destructive of certainty if the clause might be brought into operation by some informal observation of the prospect of a typhoon from a less authoritative source. It will be noted that the clause does not admit an argument as to the reliability of the warning.

85. The first question, therefore, resolves itself into this: was there in existence at 1730 or 1800 hrs on 14 August 1991 "a typhoon or storm warning either at the port of destination or between the said port". "At" in this phrase refers obviously enough to the location of the storm, not that of the warning. Notwithstanding the submission put on behalf of the ship owner that the port of destination was the Hainan Strait, I am satisfied that the vessel left Beihai bound for Hong Kong and that this was its port of destination. There was at the time of departure no warning of a typhoon or storm at Hong Kong. As a matter of construction I am satisfied also that the expression "between the said port" means between the port of departure and the port of destination.

88. The typhoon clause operates where the vessel sails at a time when there is a warning of the type specified. For present purposes, this is where there is a warning of a storm or typhoon between the port of departure and the port of destination. The warning may be of the present occurrence or the expected occurrence of such a storm at a point between those ports. The evidence showed that tropical cyclones tend to move and that their course is sometimes erratic. The typhoon clause, then, may have one of the following meanings. First, that the clause operates where, at the time of sailing, the warning in question is of an existing storm or typhoon then located at any point along the projected course, notwithstanding that it is known or expected that it will have moved or dissipated by the time the vessel will have reached its location at the present time. Second, it may operate where the warning speaks of an expected occurrence of a storm or typhoon which is predicted in the warning to affect waters through which the vessel is expected to pass and at the time of its passage through those waters in the normal course, bearing in mind that it is always open to the Master in such a case to deviate from the projected course to avoid the storm. The third possible circumstance in which the clause might operate is a combination of the first two. It would be sufficient that there be in existence a warning of the present or predicted location of a storm or typhoon affecting an area through which the vessel intends to pass at any time.

91. The difficulty and the sting of the typhoon clause is that it operates, if at all, the moment that the vessel leaves port when an appropriate warning exists. It matters not that the Master, being aware of the storm, intends to avoid it and that he does so. It is, to my mind significant that the clause contains a proviso that it is not applicable where the vessel has sailed before the warning is given. It may be supposed that the commercial objective of the clause was to put the insurers off-risk where the vessel is exposed to the risk of encountering a tropical cyclone in Far Eastern waters by a decision to put to sea in the face of a cyclone warning affecting the voyage. The drafting of a clause suggests that the parties have sought to address this objective in a fairly arbitrary way. This is doubtless in an attempt to avoid disputes which may arise as to whether the ship undertook the risk of the cyclone unnecessarily or whether the cyclone in a given case might affect the voyage. The severe consequences of the application of the clause and the evident need that ship owners should be in no doubt whether the policy is valid or not, all lend support for this conclusion.

94. The first thing the parties have done is to fix the moment at which the clause may have operation by reference to the time of sailing. Second, they speak of a typhoon or storm warning in the present tense. It was submitted that they may have had in mind that the vessel in 1991 was engaged in relatively short voyages in the Far East. What they have stipulated, therefore, in order to trigger the clause is a present warning. A warning in ordinary speech may apply to an existing danger or one in the future. The meteorological definition likewise speaks of the occurrence or expected occurrence of the condition. It appears from the evidence that meteorological agencies publish warnings in which they set out not only the present location of a tropical cyclone but also its expected future locations. The degree of particularity used in the language of the typhoon clause and the omission of any words which might make it applicable to warnings of future danger, lead me to the conclusion that the parties again adopted the arbitrary expedient of specifying only warnings of existing danger. In a relatively short voyage such as that from Beihai to Hong Kong, the presence at the time of sailing of an existing storm warning at any point along the projected course might be seen as an unacceptable risk by an insurer.

97. In my opinion, the correct interpretation of this part of the clause is that it operates where there is, at the time of departure, a warning of the existence of a tropical cyclone with average wind speeds of 48 knots or more at that time affecting either the port of destination or any point along the then intended course to the port of destination. I have mentioned that the interpretation that I favour has the merit of avoiding a number of uncertainties. It avoids also the uncertainties inherent in determining whether a warning predicts the likely presence of such a storm at the port of destination or at some point along the projected course to that port at the time when the ship will be at that point, assuming it takes no evasive action. It avoids the difficulties of determining the geographical area affected by the storm wherever its centre be located. In this regard I am conscious of the different degrees of uncertainty contained in the predicted locations of the storm in the warnings issued by the ROHK and the JMA respectively. It is implicit in this conclusion that I reject the argument put on behalf of the ship owner that the clause is bad for uncertainty.

100. The winds generated by the severe tropical storm, Fred, at the time when the vessel left Beihai were of a speed of 48 knots or more only at or near the centre of the tropical cyclone and its centre was then far from Hong Kong and from any point on the likely course from Beihai through the Hainan Strait and thence to Hong Kong. Accordingly, the typhoon clause has no operation.

103. It was next submitted on behalf of the ship owner that the use in the typhoon clause of the word "allowed" carried with it the connotation that the commencement of the voyage must be voluntary and, further, that it must be commenced with knowledge of the typhoon or storm warning. In my judgement, if the mere fact of the putting to sea or sailing at a time when a specified warning had been given were sufficient to activate the clause, the parties might have done so by omitting the words "be allowed to", as was done in the proviso. These words introduce the requirement that a decision be made by someone. From the ship owner's perspective, the decision to sail is vested in the Master. It is reasonable, therefore, that the word "allowed" means allowed by the Master. If the vessel puts to sea or sails otherwise than by the decision of the Master or some person with the Master's authority, the clause has no operation. I am satisfied that, as a matter of construction, the typhoon clause does not operate unless the Master or the person exercising the functions of the Master has knowledge of the relevant warning. It was submitted against this that such an interpretation would reward a Master who, whether deliberately or negligently, failed to obtain details of weather conditions before sailing. I think not. The clause operates where the person has knowledge of the terms of the meteorological warning or of its existence. It is not necessary for me to consider in this case whether constructive notice would have a role to play and I do not do so.

106. In this case the Master was not available to give evidence. There was evidence that the ROHK and the JMA transmitted their warnings by radio at regular intervals. I was invited to infer that the Master of the Biyiyang Ginto, being an experienced mariner and doubtless concerned for the safety of his vessel and crew, would have picked up these broadcasts. This inference is somewhat diminished by the evidence which I accept of the practice of the Chinese port authorities of sealing the radio room of ships in port and of their practice of jamming radio signals in the vicinity of the Chinese coastline. I find that no radio or similar communication except VHF radio was available on the ship before it sailed for the receipt of such messages. I am unable to infer that the vessel received before it sailed out of port any of the warnings transmitted by the ROHK or the JMA.

109. Reliance was then placed by the insurers on the evidence of the ship's agent, Mr Ruan called as witness by them. This witness, it will be recalled, said that he spoke to the vessel by VHF between 0800 hrs and 0900 hrs on 14 August and that he would have provided information about the typhoon. Further, about 1400 hrs he delivered the Northern Star telex to the ship. Let me say immediately that I am not comfortable acting on the uncorroborated evidence of this witness. As the local agent of the ship who had notice of the typhoon from Northern Star and perhaps from the local radio, he has a powerful motive to deny that the decision to sail was made by the Master in ignorance of a matter which it was his duty to communicate to him. The events with which I am concerned occurred in 1991. It was not until some six years later that Mr Ruan was asked to recollect them. The evidence he gave to me as to the two points of contact with the vessel was imprecise and surprisingly so. He seemed to recall nothing of the VHF conversation other than it took place and that there was some mention of some typhoon. Surprisingly, too, he said that this was only one of a number of matters mentioned in this conversation which dealt with the arrangements for departure. This concern about the departure arrangements suggests that, to him at least, the approach of the typhoon was not seen as a serious impediment to the vessel's departure. Moreover, Mr Ruan made two statements in writing before he gave evidence in court.

112. The first which was procured by a Chinese lawyer acting on instructions for the insurers, resulted in a signed witness statement dated 17 July 1997 which was put in evidence by cross-examining counsel. The second took the form of a transcript of answers which he gave on 27 November 1997 to questions directed to him by other Chinese lawyers on instructions from the ship owner. This, too, was put in evidence by cross-examining counsel. In each case Mr Ruan signed the statement which included an acknowledgement that he had read it and that it was true. In neither of them does he make mention, in terms of, the VHF communication with the Master. It is true that in the July statement he says that he received the information about the typhoon warnings from several different sources on several different occasions but that he was unable to recall how many times he notified the Master of the warnings. His evidence before me was that he received two warnings of the typhoon, one from local radio and the other by telex from Northern Star. He is unable to state that he notified the Master directly of either.

115. His evidence of passing the telex to the Master was even more disturbing. I have already summarised this. He said he received the telex timed at 1222 hrs from Northern Star and took it about 1400 hrs from his office to the wharf one kilometre away where there was work being done to the ship's engines. He said he simply handed the telex to someone who was on the deck. He was unable to recall who it was or what he said to that person. In his July 1997 statement he said that he probably handed the telex to the Master at the joint exit inspection. That cannot have been correct since the telex was sent from Hong Kong nearly two hours after that inspection was complete. When he was questioned about the delivery of the telex in November 1997, he said he "could not remember the exact situation". I will not, therefore, act upon the evidence of this unreliable witness.

118. I am unable to find on the balance of probabilities that the existence of the storm warning or the typhoon warning was brought to the attention of the Master or of anyone in authority on the ship before it left port or was then known by that person. I should add for completeness that I have not overlooked the evidence that at the port of Beihai there was a method of giving storm warnings by the raising of wind balls. There was no evidence that such warning was given in relation to tropical cyclone Fred or was received by the ship prior to its departure. Finally, the conclusion which I have reached goes a long way to explaining an otherwise mystifying aspect of this case. This is why an experienced Master would set sail into an area where a typhoon was known to be present or likely to be present. The answer, as I find it, is that the Master did not know.

121. My conclusion, therefore, is that the defence of the insurers based on the typhoon clause has not been made out. There being no other issue in this case I propose that there be judgment for the plaintiff in the sum of $1.2M plus interest and that the defendants pay the costs of the plaintiff including reserved costs and the costs of transcript. I will hear counsel further as to the amount of interest and as to any aspect of the terms of the proposed orders.