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THE LAW TIMES REPORTS, July 7, 1923.

[Registered at G.P.O. Postage within the United Kingdom, One Penny; and to Canada at Canadian Magazine Rate.]

THE

LAW TIMES REPORTS:

COMPRISING

All the Cases Argued and Decided

IN THE

HOUSE OF LORDS, THE JUDICIAL COMMITTEE OF THE PRIVY COUNCIL, THE SUPREME COURT OF JUDICATURE, THE COURT OF CRIMINAL APPEAL, AND THE RAILWAY AND CANAL COMMISSION COURT.

FROM JULY TO DECEMBER 1923.

APP.] LA COMPANIA MARTIARTU v. CORPORATION OF THE ROYAL EXCHANGE ASSURANCE. [APP.

Supreme Court of Judicature.

COURT OF APPEAL.

Oct. 27, 30, 31, Nov. 1, 2, and 24, 1922. (Before BANKES and SCRUTTON, L.JJ., and EVE, J.)

LA COMPANIA MARTIARTU v. CORPORATION OF THE ROYAL EXCHANGE ASSURANCE. (a) APPEAL FROM THE KING'S BENCH DIVISION. Insurance (Marine)-Loss of insured vessel

Claim on policy-Vessel scuttled with connivance of owners-Onus of proof.

The plaintiffs had insured their vessel with the defendants against, inter alia, adventures and perils of the sea and barratry of the master and mariners. The vessel having been totally lost during the currency of the policy and a claim having been made against the defendants under the policy, the defendants refused to pay upon the ground that the vessel had been intentionally cast away by the captain and crew with the connivance of the owners.

Bailhache, J. having given judgment for the plaintiffs, the defendants appealed. Held, upon the facts that it was impossible to say that the plaintiffs had established that the loss of the vessel was due to a peril covered by the policy. The presumption might well be, when nothing was known except that the ship had disappeared at sea, that her loss was by perils of the sea. But when, although it was known she had sunk, there was evidence on each side which left the court in doubt whether the effective cause of the admission of sea water was within or without the policy, the plaintiffs, the assured, failed, for they had not proved a (a) Reported by EDWARD J. M. CHAPLIN, Esq., Barristerat-Law. Vol. 129.-3321.

loss by perils insured against and the defendants were therefore entitled to judgment.

Decision of Bailhache, J. reversed.
APPEAL from a judgment of Bailhache, J.

The action was brought by the plaintiffs to recover a sum of 150,000l. upon a policy of marine insurance from the 17th May 1920 to the 17th May 1921 against adventures and perils of the sea and barratry of the master and mariners upon the hull and machinery of the plaintiffs' steamship Arnus. The policy was subscribed by the defendants to the amount of 10,000l.

The defendants denied that the steamer was lost by any of the perils insured against; they alleged that she had been cast away with the connivance of the owners and they refused to pay under the policy.

Bailhache, J. held that the vessel was sunk as the result of a collision with floating wreckage and gave judgment for the plaintiffs.

The defendants appealed.

The facts and arguments appear sufficiently from the judgments.

Dunlop, K.C., G. P. Langton, and J. R. Ellis Cunliffe for the appellants.

Stuart Bevan, K.C. and Sir R. Aske for the respondents.

The following cases were cited in the course of the argument :

Mountain v. Whittle, 125 L. T. Rep. 193; (1921) 1 A. C. 615; 14 Asp. Mar. Law Cas. 534;

Munro Brice and Co. v. War Risks Associa

tion Limited and Anchor Marine Mutual
Underwriting Association Limited, 118
L. T. Rep. 708; (1918) 2 K. B. 78; 14
Asp. Mar. Law Cas. 312;

Lindsay and others v. Klein, 104 L. T. Rep.

261; (1911) A. C. 194; 11 Asp. Mar. Law Cas. 563;

App.] LA COMPANIA MARTIARTU v. CORPORATION OF THE ROYAL EXCHANGE ASSURANCE. [APP.

Pickup v. The Thames and Mersey Marine
Insurance Company Limited, 39 L. T.
Rep. 341; L. Rep. 3 Q. B. Div. 594;
Lennard's Carrying Company Limited v.
Asiatic Petroleum Company Limited, 113
L. T. Rep. 195; (1915) A. C. 705; 13
Asp. Mar. Law Cas, 1;.*
Ajum, Goolam, Hossen, and Co. and others
v. Union Marine, Insurance Company,
84 L. T. Rep. 366; (1901) A. C. 362 ;
Mentz, Decker, and Co. v. Maritime Insur-
ance Company Limited, 101 L. T. Rep.
808; (1910) Ĭ K. B. 132; 11 Asp. Mar.
Law Cas. 339;

Westport Coal Company Limited v. McPhail,
78 L. T. Rep. 490; (1898) 2 Q. B. 130 ;
Jones v. Nicholson, 10 Ex. 28;
Green v. Brown, Stra. 1199;
Sassoon and Co. v. Western Assurance
Company, 106 L. T. Rep. 929; (1912)
A. C. 561; 12 Asp. Mar. Law Cas. 206;
Hamilton v. Pandorf, 57 L. T. Rep. 726;
12 App. Cas. 518; 6 Asp. Mar. Law Cas.
212;

Hurst v. Evans, 116 L. T. Rep. 252; (1917)
1 K. B. 352 ;

Smitton v. Orient Steam Navigation Com

pany Limited, 96 L. T. Rep. 848; 10
Asp. Mar. Law Cas. 459;
Leyland Shipping Company Limited v.
Norwich Union Fire Insurance Society
Limited, 118 L. T. Rep. 120; (1918)
A. C. 351; 14 Asp. Mar. Law Cas. 258.
Cur adv. vult.

BANKES, L.J.-This is an appeal from the decision of a learned judge upon a question of fact of a very serious character and involving serious consequences. Under ordinary circumstances this court naturally attaches very great weight to the opinion of the trial judge upon the question of the credibility of witnesses in any case where the judge has had the opportunity of seeing them and hearing them give their evidence. The learned judge who tried this action speaks of it in his judgment as one which had given him the greatest possible anxiety and one in which it was difficult to ascertain the facts with certainty. He finally took a view of the facts favourable to the respondents. It is made clear by his judgment that this view was based upon the belief that the second officer was telling the truth in reference to his having seen a floating mass close to the vessel shortly before the leak was discovered as the learned judge in terms says that the respondents' case in substance depended upon whether he believed the second officer or not. It was apparently because he believed this story that the learned judge accepted the evidence of the chief engineer as true, in spite of the fact that during his cross-examination he had apparently indicated that he did not regard him as a reliable witness. The learned judge in his judgment says that he formed the favourable opinion of the second officer after seeing him in the witness box and hearing him give his evidence. This was a mistake as this

witness was examined on commission in Spain. It is a pity that counsel did not call the learned judge's attention to the error. As the case comes before this court the judgment appealed from is one which rests entirely upon the view that the second officer is a witness of truth, and upon that question it is clear that the learned judge formed his opinion under a misapprehension. Under these circumstances this court must examine the evidence without the assistance, which it is always glad to have, of an opinion of the trial judge as to the credibility of witnesses whom he has heard and seen.

A point was raised at the end of the arguments of the counsel for the respondents upon what was, I think, erroneously referred to as the onus of proof. This I will deal with before referring to any of the facts. It arose in this way. Counsel was asked what the proper result would be, assuming the court, upon the whole of the evidence, was left in doubt as to whether the respondents had made out their case. The answer was that the court must then fall back upon the presumption that, the vessel being a seaworthy vessel and having been lost by some unascertained peril, the peril must be presumed to be a peril covered by the policy. This contention is, in my opinion, quite untenable. In a case like the present if the assured makes out a prima facie case, as the respondents in the present case did, then, unless the underwriters displace that primâ facie case, the assured is no doubt entitled to rely upon the presumption. On the other hand if the primâ facie case, which was the foundation upon which the presumption was rested, fails because the underwriters put forward a reasonable explanation of the loss the superstructure falls with it. If both the assured and the underwriters put forward an explanation of the loss, the loss is not unexplained in a sense which would admit of the presumption, merely because the court is unable to say which of the two explanations is the correct one. In my view of the facts of the present case this conclusion disposes of this appeal because, having regard to the case made for the appellants in the court below, I find it impossible to say that the respondents have established to my satisfaction that the loss of the vessel was due to a peril covered by the policy.

I am unwilling, however, to rest my judgment entirely on this point, as the evidence has been exhaustively discussed, and I have formed a clear opinion upon it. The respondents' case rests upon what is alleged to be a fact and upon a series of theories all founded on that fact. The fact is the presence of the black mass as deposed to by the second officer. The theories founded on that fact are (1) that some projecting portion of the floating mass came into collision with the vessel; (2) that the blow was a slanting blow stripping some portion of the bilge keel; (3) that water found its way into the vessel through the holes where the rivets holding the bilge keel to the plates of the vessel had been sheered off. The second and third theories are put forward as accounting for the

App.] LA COMPANIA MARTIARTU v. CORPORATION OF THE ROYAL EXCHANGE ASSURANCE. [APP.

absence of any noise of a violent blow, or of any vibration, and as accounting for the slow inflow of water immediately following the collision and increasing later but never with such inrush as would sink the vessel in less than five and a half hours. If the evidence of the second officer is disbelieved, the respondents' case must fail, because that case rests upon the assumption that a collision took place between some projecting portion of the submerged mass and the vessel. This witness gave evidence on commission. This court has therefore the same opportunity of forming an opinion on that evidence as the learned judge had in the court below. This comment may no doubt be made on this witness' evidence, namely, that if he had desired to tell lies, he might have made up a much better story for the respondents than he in fact did. Apart from the single fact that he speaks to seeing the floating mass, his evidence is entirely favourable to the appellants' case. According to him the mass when first seen is abaft the bridge. It is at such a distance that any contact appears to be at least extremely unlikely. No noise is heard or vibration felt. The witness suspects nothing and undresses and goes to bed. On the other hand, in cross-examination, he persisted in denying that he had ever heard that there were suspicions about the manner in which the ship was lost, and he was not prepared to admit that he had any knowledge of the suggestion that the vessel had been cast away. The witness was examined on the 2nd Feb. 1922. The action had been commenced in the previous October. Having regard to this fact and to the pecuniary interest of the witness and his family in the result of the action, I cannot believe that in this part of his evidence the witness was either telling the truth or desirous of telling the truth, with the result that I cannot regard him as a witness upon whose veracity and reliability the entire case of the respondents may be rested. If the story of the floating mass breaks down the rest of the story goes with it. But assuming, without deciding, that the floating mass was seen as described by the second officer, what then? Unless some portion of the floating mass touched the vessel the presence of the mass is immaterial. According to the theory of the respondents, as finally developed by their experts, the point of contact was most probably where the bilge keel commences, that is to say, at a point opposite to the foremast of the vessel, and some 80ft. forward of the watertight bulkhead at frame 92. This point of contact is selected in order to account for the alleged stripping back of the bilge keel without noise or vibration, and for the entrance of water into the fore part of the vessel, as well as into the engine and boiler rooms. The fact that a point so far forward has to be selected as the point of contact in order to account for certain ascertained facts renders the theory of a possible contact between some projecting portion of the submerged mass and the vessel not merely very unlikely, which was the view taken by the learned judge, but, in my opinion, quite unten

able. No satisfactory explanation was, in my opinion, given by the respondents' witnesses as to how any portion of the alleged floating mass could project sufficiently to come into contact with the vessel 20ft. below the waterline, and even if such a thing was possible the point of contact must have been so far aft as not to account for the water in the fore part of the vessel in sufficient quantity to cause her to sink by the head. Apart from these considerations, there is an entire absence of any evidence of any vibration, and no noise is spoken to except by witnesses who, if the vessel was thrown away, must have been privy to the scuttling. The evidence as to the nature of the noise is suggestive of the idea that the witnesses who spoke to the alleged noise were not aware of what the proper description of the kind of noise would be to fit in with the collision theory. There only remains for consideration the third theory upon which the respondents' case depended, namely, the theory as to how the water entered the vessel in such a way as to account for the appearances spoken to by the chief engineer and other witnesses and the sinking of the vessel by the head in about five and a half hours. Some theory must be suggested which would account for the very gradual inflow of water into the engine and boiler rooms, and for the fact that the water when first seen was flowing aft from a point between the port boiler and the port bunker in the boiler room. Any idea that any of this water found its way from No. 2 hold into the boiler room can be dismissed summarily. If once the water had risen in No. 2 hold to a height sufficient to enter the boiler room through the doors, or either door, in the watertight bulkhead, it seems unlikely that any water could run aft until it had risen in the boiler room to the height at which it stood in No. 2 hold. Apart from this consideration, the stokers in the boiler room would never have allowed the doors to remain open if water was coming through them. To account for the water, therefore, the theory must be that a stripping of the bilge keel took place just aft of frame 92, and that the sheared rivets gave way one by one just sufficiently quickly to account for the rise of water in the boiler room and engine room. Combined with this theory must be the theory that sufficient rivets were sheared forward of the watertight bulkhead at frame 92 to admit sufficient water into No. 2 hold to cause the vessel to sink by the head, and combined with both theories must be the theory that the rivets which were forced in were forced in at such times and in such manner as to account for the requisite amount of water getting into the vessel to sink her in five and a half hours. These appear to me to be fanciful theories, but the facts were not sufficiently investigated to enable me to form any confident opinion upon them. I can only say that such theories as these must themselves be based either upon sound theories or upon well-ascertained facts before I should feel inclined to accept them. Turning now to the appellants' case, I find a theory which to all appearances

APP.] LA COMPANIA MARTIArtu v. CorporATION OF THE ROYAL EXCHANGE ASSURANCE. [APP.

fits in with the ascertained facts as to the first appearance of the water and the sinking of the ship. The chief engineer had abundant opportunity of doing what it is suggested he did. The No. 2 ballast port tank manhole cover could easily have been adjusted before the vessel put to sea. There only remained the opening of the proper valve in the valve box in the boiler room to which the chief engineer had access, and to which he admittedly went on two occasions, on either of which he might have opened the valve and the opening of the sea connection in the engine room where the engineers would naturally be. If water was admitted into No. 2 ballast tank while the port manhole cover was either open or loose, the water would, according to the evidence, first appear where it was first noticed, and it would flow aft, as it was stated that it did, and it would have flowed at a rate sufficient to sink the vessel in five and a half hours. If this was

done deliberately there is no reason to suppose that the watertight doors were ever sufficiently closed to prevent sufficient water passing through them into the crossbunker and No. 2 hold to account for the vessel going down by the head. What, then, is the position created by the cases made for the appellants and respondents respectively to account for the sinking of the vessel? On the one hand a story or series of stories which appear to me to be either unreliable or incredible. On the other hand, a story which is consistent with the ascertained facts, but which no doubt rests upon the assumption that several of the officers and crew are both liars and criminals.

It is only natural to shrink from coming to such a conclusion unless forced to do so, especially in a case where the learned judge who tried the action took the opposite view. I have given this case my most careful consideration and I feel compelled to arrive at the conclusion that the vessel was deliberately scuttled with the connivance of the responsible managers of the company owning her. Apart from the considerations to which I have already referred it is necessary to take into account various matters, all of which go to support the conclusion which I have already indicated. To these I will briefly refer, First, motive. It is not necessary to go into the figures to prove an abundant pecuniary motive, not only on the part of the responsible managers of the company but on the part of members of the crew including the chief engineer and the second officer. Secondly, relationship between various members of the crew to each other, and to the managing directors which, to some extent, might supply the want of pecuniary motive, and to some extent might encourage the idea of securing any necessary assistance without the danger of being betrayed and detected. Thirdly, the extremely suspicious circumstances attending the abandonment of the vessel. No Marconi signal. No flares. No summoning of the carpenter, and the apparent acceptance by the captain and responsible officers of the fact that the vessel was doomed, and that there was no

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need and no necessity to do anything, or to attempt to do anything, either to save her, or to summon assistance. Fourthly, the very unsatisfactory way in which the chief engineer apparently gave his evidence and which resulted in the learned judge indicating pretty plainly that he did not accept his answers. Fifthly, the very suspicious account which the chief engineer gave of his movements after he heard the noise and after the first discovery of the water in the engine room. He omitted to summon the carpenter or to sound the bilges, though he did examine the tanks including No. 2 ballast tank. It is difficult to see why he did this unless it was in order to ascertain how the flooding of the tank was progressing. Finally, there is the course taken by the master. This seems to me to be consistent only with a predetermined decision to cast away the vessel. On the question of the owner's responsibility this decision of the master appears to me to be all important. I cannot conceive of such a decision intended to be put into operation so soon after the vessel left her port of loading, having been arrived at except with the connivance, or by the instruction, of the managing director, whose pecuniary interest in such a decision is very marked. I do not think that it at all necessarily follows that the other directors were personally responsible, and I think that the learned judge was mistaken in his view of the evidence as affecting Don Jesus de la Rica's position in regard to his loan. I have not gone into the facts in full detail, but I have, I think, sufficiently indicated the reasons for my decision. Though in the result I differ from the conclusion arrived at by the learned judge, I cannot help feeling that had he not been influenced by an unfortunate misapprehension in reference to the evidence of the second officer, he would have taken the same view of the facts as this court is now taking. The appeal must be allowed with costs and the judgment entered for the plaintiffs must be set aside and entered for the defendants with costs.

SCRUTTON, L.J.-A Spanish company sued underwriters for the loss by perils insured against of the steamer Arnus. They alleged that she sank through the entry of water by reason of a collision with floating wreckage. The underwriters replied that she sank because she was scuttled by the desire and with the privity of the owners. Bailhache, J., who describes the case as having given him the greatest anxiety and says that he has never tried a case which gave him so much trouble, found that the water entered through a collision. He did so mainly because he believed the second officer who described his seeing floating wreckage and because he thought this evidence made the rest of the story possible, and he speaks of his resultant decision as "practically unappealable.” Counsel for the respondents took the same line, describing it to us as a conclusion of fact with which this court would not interfere. The judgment of this court in Slingsby v. The AttorneyGeneral (T. W. and A. P. Slingsby cited ) (32 Times L. Rep. 364). shows that this court will

App.] LA COMPANIA MARTIARTU v. CORPORATION OF THE ROYAL EXCHANGE ASSURANCE. [App.

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reverse even the judgment of a judge who has seen a witness and believed her from her demeanour if the other facts in the case are strong enough. In this case there is this peculiar feature. The learned judge says of second mate, Filipe Ybarra, "he gave his evidence on commission, and repeated it here, and I was impressed with his demeanour and his frankness." The learned judge's memory had unfortunately failed him : Felipe Ybarra did not give evidence before the learned judge at all, but was examined on commission. His brother, Jose Ybarra, did, but gave no evidence material to the point the judge considered crucial. have no desire to encourage counsel to interrupt and correct the judge in the course of his judgment at every statement which they think is not quite accurate, but this was such an obvious and important error that I regret the judge's attention was not at once called to it, that he might consider whether the absence of observation of demeanour of the witness influenced his view in a matter in which he had obviously been hesitating. Further, the conclusions of fact are largely inferences from other facts and balances of probability as to which this court can judge as well as the judge below.

The circumstances of the loss were very suspicious, as Bailhache, J. thought. The company, with a capital of, roughly, 100,000l. at the height of the shipping boom, had bought the ship for 160,000l., the excess of price over the capital being a loan from one of the owners, Mr. de la Rica. The ship had made some profits, but the slump in shipping had then come, and the value of the ship had fallen from 160,000l. to 14,000l. The company owed a considerable sum to Mr. de la Rica and over 50,000 pesetas to the managing director, M. Longaray. On the 27th April 1921, when she was lost, her assurance policy had nearly expired, but as she was insured for 150,000l. on ship and 24,000l. on disbursements, her loss would obviously be very profitable to her owners, though this could be said of a great many ships at that time. She was being navigated by a family party. Her first and second officers, the two Ybarras, were stepsons of the managing owner, Longaray. Her captain was the uncle of the Ybarras. Of the 4820 shares of 500 pesetas each, the managing director held 1240 shares; his nine stepchildren, the two Ybarras and their seven brothers and sisters, 648 shares, and the engineer, Gomeza, eighty shares. The captain was not a shareholder. There were remarkable incidents on the voyage and loss such as are frequently found in scuttling cases. The voyage was from Vivero with ore to Rotterdam. Vivero is a port near the north-western corner of Spain, a little north of Finisterre, and the course should be laid by the captain to pass clear of Ushant, with its dangerous rocks and fogs, or, at any rate, clear of the lights south of Ushant, at Armen Rock, and Penmarch Point. A course was set which, if prolonged, would take the ship ashore inside Armen Rock, an unusual course and out of the

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track of ships passing from Finisterre to Ushant. It would have the advantage of bringing the ship nearer the fishing fleet in the bay south of Penmarch, who, in fact, picked up the crew when in their boats. There was an unjustifiably hasty abandonment of the ship about two hours after the suggested collision. She kept afloat for three hours after she was abandoned. No attempt was made to use the Marconi apparatus with which she was fitted, or to use blue lights or rockets, or to secure a tow towards land from salving ships. One has abundant motive for scuttling, and incidents suggestive of scuttling, before one comes to examine the evidence as to the suggested collision and the rival theories of the entry of water. No one in the ship felt the alleged collision, though part of its effects were said to be near the engine room, in which an engineer and donkeyman were working, and just under the engineers' berths in which two engineers were lying. The second officer on the bridge, who is said to have seen the floating wreckage, did not think a collision had occurred, or report the wreckage to anyone. Neither the deck look-out nor the helmsman was called, and presumably saw no wreckage. The second officer's story was that between 11.15 p.m. and 11.30 p.m., standing on the portside of the bridge, in good weather, starry and dark," he saw a dark mass, about 2ft. above water, which he estimated to be 25 metres (81ft. long) and 8 metres (26ft.) wide. He thought it was "6 to 7" or "7 to 8" metres from the ship (20ft. to 26ft.). He did not see it till it was a little behind them. The theory of the plaintiffs has always been that the ship was struck very deep in the water. The water was first seen in the engine room bilges; and they gradually developed a theory that the bilge keel was ripped off by a glancing blow. At first they simply said a leak" then a glancing blow on her port side in the neighbourhood of the crossbunker bulkhead." If this were high up, it would mean a fractured plate, which must mean considerable force and a blow that would be felt. So the suggested blow was made to be one which ripped off the bilge keel, which is a plate riveted to a T bar, which again is riveted to the side of the ship. It was suggested that a sliding blow might shear or tear out the rivets, and so leave holes in the side of the ship. The importance of this is that the bilge keel is on the turn of the bilge and some 20ft. below the water line. What sort of wreckage is it that, visible above the sea, 20ft. at least from the side of the ship, strikes the ship 20ft. below water? The simplest mathematics show that it is something over 30ft. long, projecting at an angle of 45 degrees from the nearest side of the wreckage. The ships' experts thought it might be a submerged and derelict hulk with its cargo shifted so as to have a list. They were not quite clear whether it was right side up or wrong side up. But what sort of a hulk is it that is, say, 100ft. long and 30ft. deep, that has a width of between 26ft. and 50ft. and floats at an angle of 45 degrees? Boats that

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