The plaintiff claimed the sum of PGK 33,425.37, or damages, by way of indemnity under a contract of marine insurance between the plaintiff and the defendant. The claim arose after a cargo of soya bean meal was damaged during shipment to Port Moresby.

The plaintiff contracted through Gardener Smith Pty Ltd (GS) of Sydney, New South Wales, to buy 1,430 bags of Brazilian soya bean meal as chicken feed to be used on its chicken farm near Port Moresby. GS arranged for the meal to be shipped from Singapore at a cost of AUD 43,901. The contract was arranged on a C and F basis which left the plaintiff to arrange insurance. The plaintiff had an 'all risks' open insurance policy with the defendant which incorporated various Institute Cargo clauses (including 'all risks' and Free of Particular Average (FPA) clauses).

As there was some urgency, the plaintiff telephoned Mr Hannon of GS, who in turn contacted his Singapore agents, to urge them to arrange for at least 100 tons to be shipped on a small freighter called the Solomon Sea. The captain of the Solomon Sea accepted the full cargo and issued a 'clean' bill of lading. In the trade this indicates that the cargo is loaded below deck. In fact, however, the captain then accepted a more valuable cargo which took up the below deck space, and he stowed the soya bean meal as deck cargo. It was stacked on pallets on top of an aft hatch and covered with an inadequate blue plastic material. This was a negligent and unauthorised act by the captain, contrary to all maritime practices. It meant that the cargo would almost certainly be made wet by sea spray and rain in the normal conditions to be expected in a December voyage from Singapore to Port Moresby.

The action of the captain in stowing the soya meal as deck cargo was in breach of contract and was completely unknown to, and unauthorised by, the plaintiff and the vendor. Once the clean bill of lading was viewed by the plaintiff's agent (Schofield Goodman), it paid the full purchase price.

The Solomon Sea arrived in Port Moresby in December 1980. On arrival it was discovered that the cargo was in a wet, rotten and stinking condition. It was inspected by the defendant’s surveyor, Mr FW Millar of Topliss Harding & Co, who made a written report. The cargo was a total loss for purposes of feeding to animals as a dangerous mould had contaminated it after it had become damp. The uncontested scientific advice was that it would be poisonous for chickens.

The general manager of the plaintiff, Mr RJ Catchell, who is a highly qualified expert in stockfeeds and is familiar with this kind of mould contamination, formed the opinion that the cargo was a total loss but nevertheless accepted the advice of Mr Millar that it would expedite payment of the insurance claim if he offered to salvage purchase the cargo from the defendant for a nominal sum. He therefore offered to buy the cargo for PGK 3,500 as 'pig fill'. He then dumped and burned the entire cargo after subjecting the less damaged portion of it to further testing.

The defendant rejected the plaintiff's claim for indemnity under the insurance policy. It argued that the cargo was shipped as 'deck cargo' and that consequently the insurer is entitled to rely on the Marine Insurance Act (Ch No 258) as protecting it against liability. That Act incorporated the Hague Rules which, the defendant argues, require deck cargo to be specifically insured. Rule 17(2) is in the following terms: 'In the absence of any usage to the contrary deck cargo and living animals must be insured specifically and not under the general denomination of goods.' The defendant argued that even if the plaintiff was completely ignorant of it being carried as deck cargo, r 17(2) still applied because, in fact, it had been carried as deck cargo.

The plaintiff, however, argued that r 17(2) is meant to apply when cargo has been 'shipped' as deck cargo. The plaintiff claimed that, although this cargo was actually 'carried' as deck cargo, it had been 'shipped' or 'contracted' as cargo to be stowed below deck. This is evidenced by normal practice and by the issuing of a clear bill of lading. The plaintiff supported this argument by reference to the way deck cargo is excluded from the definition of goods in the Schedule to the Sea-Carriage of Goods Act (Ch No 261): '"goods" includes goods, wares, merchandise and articles of every kind except ... cargo which by the contract of carriage is stated as being carried on deck and is so carried'.

Held: Judgment for the plaintiff.

Rule 17(2) is a rule of construction only and will give way to other indications in the policy (see Kulukundis v Norwich Union [1936] 2 All ER 242, per Scott LJ). The policy as a whole shows that it was never intended that the plaintiff would be deprived of cover if through no fault of its own and without its intention or knowledge the cargo was carried on deck.

The defendant sought to rely on cl 6 of the printed schedule to the all risks terms as relieving it from liability by making coverage of deck cargo subject to the Institute Cargo clauses. But the wording of cl 6 is: 'Deck Cargo. Cargo shipped on deck is covered subject to the Institute Cargo clauses (FPA)'. The damage which occurred was a loss by accidental cause, during transit, of the nature intended to be covered by the all risks policy. The damage falls within the principles discussed in Gaunt v British & Foreign Insurance Co Ltd [1921] All ER 447, 450, per Lord Birkenhead LC. It was not 'deck cargo' within the meaning of r 17(2) as incorporated by the Marine Insurance Act as it was clearly contracted to be shipped below deck. The fact that it was carried on deck resulted from a wrongful act or misconduct of the captain and cl 8 of the Institute All Risks Policy preserves the plaintiffs right of recovery in those circumstances: 'In the event of loss the Assured’s right of recovery hereunder shall not be prejudiced by the fact that the loss may have been attributable to the wrongful act or misconduct of the shipowners or their servants, committed without the privity of the Assured.' On an objective, overall view of this contract of insurance the damage which occurred to this cargo, while it was wrongfully being carried on deck, was intended by the parties to be covered by insurance.

Had the cargo been properly considered as 'shipped on deck', the defendant would still have been liable on this claim because a proper construction of cl 5 of the FPA terms provides for recovery in cases of the total loss of such deck cargo. This was a case of 'total loss' as the damage rendered the meal totally unfit for the purpose for which it was intended.