Scottish Court of Session Decisions

This was an action raised by H. B. Dryer, merchant, St John's, Newfoundland, and others, owners of the barque “L. de V. Chipman,” against Walter Birrell and others, the underwriters with whom the ship had been insured under a time policy of insurance in which she was valued at £3000. The pursuers concluded against the defenders for their several proportions of the sum of £3396, 15s. 10d., being the amount of average loss and total loss under the said policy. The vessel was insured from and during the space of twelve calendar months, commencing on the 29th May 1878 and ending on the 28th May 1879, both days inclusive, as employment might offer, in port and at sea, in docks and on ways, at all times, in all places, and on all lawful trades and services whatsoever. On the margin of the policy there was written the following warranty, viz:—“Warranted no St Lawrence between 1st October and 1st April.” The “Chipman” during the period for which she was insured carried a cargo of iron from Cardiff, in Wales, from which she sailed in September, to Charlottetown, Prince Edward's Island, in the Gulf of St Lawrence; after discharging this cargo she loaded at Souris, Prince Edward's Island, also a port in the Gulf of St Lawrence, a cargo of oats and deals, with which she sailed on 14th December 1878 for Queenstown or Falmouth in the United Kingdom for orders. During this voyage she was totally lost by perils of the sea in the open Atlantic on 11th January 1879.

The pursuers averred—“By long established custom the warranty expressed in said policy, ‘Warranted no St Lawrence between 1st October and 1st April,’ has been and is understood among underwriters and owners of vessels insuring the same to mean that the vessel insured shall not during the period specified be sent to or be in the river St Lawrence. The said warranty is, and has been for a very long period, so understood by underwriters and owners of vessels insuring the

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same in Glasgow, Liverpool, and other ports in the United Kingdom, as well as by those in St John's, in the island of Newfoundland, which forms the north-east side of the main entrance to the Gulf of St Lawrence. It was on the understanding foresaid that the policy in question was entered into. The said vessel was not in the river St Lawrence during the period mentioned in said warranty.”

The defenders denied liability, on the ground that the vessel having been in the Gulf of St Lawrence between 1st October and 1st April, there was a breach of warranty liberating them from theirobligation of indemnity. They averred as follows:—“It has long been customary in time policies of insurance to insert a warranty providing that the vessel shall not during the winter months visit certain parts of the globe which are specially dangerous for navigation at that season. In particular, it has been a long established custom to stipulate in time policies that the vessel insured shall not enter or be in the river and Gulf of St Lawrence between 1st October and 1st April. Sometimes the exclusion is from the river alone; and the usual form of warranty in such cases is ‘Warranted no river St Lawrence’ between the dates specified. In the present case the exclusion was intended to be applied to both Gulf and river St Lawrence; and accordingly the words ‘Warranted no St Lawrence between 1st October and 1st April’ were used. The said clause of warranty was not framed by the defenders’ but by the pursuers’ brokers, who prepared the original covering slip and the policy which followed upon it. By the said warranty it was stipulated and agreed between the parties to the insurance contract that the vessel insured should not within the period specified enter or be in either the river or Gulf of St Lawrence. The terms of the said warranty are distinct and unambiguous; but in the event of its being held competent to interpret them by proof of a custom or understanding of trade, the defenders aver that the construction above set forth is the true construction of the said clause, according to the custom and understanding of underwriters and shipowners, and at all events according to the custom and understanding of underwriters and shipowners in Glasgow, where the policy in question was entered into.” “The geographical limits of the Gulf of St Lawrence are distinctly marked The navigation of the Gulf of St Lawrence, and of the approaches to it in the Atlantic Ocean, is in many respects dangerous and difficult, and it is especially so in the winter months, on account of the fogs which prevail. The principal shipments from Prince Edward's Island, which is situated in the Gulf of St Lawrence, consist of grain; and vessels with grain cargoes sailing from that port in the winter months are uniformly considered by underwriters as extra hazardous risks The rate of premium charged on the policy founded on for a twelve months' policy was ten guineas per cent., and was greatly less than the usual premium for such a policy where liberty is given to the vessel to enter the lower ports on the Gulf of St Lawrence, which include the ports of Prince Edward's Island, during the winter; and it is the usual premium charged where both the river and Gulf of St Lawrence are excluded.”

The pursuers pleaded—“(1) The pursuers having committed no breach of said warranty, the defenders are not entitled to withhold payment of the sums due by them under said policy.”

The defenders pleaded—“(3) The policy having been rendered null and void by the pursuers' breach of warranty, the defenders are entitled to absolvitor.”

The case originally depended before Lord Craighill. He allowed a proof, which was partly taken abroad on commission and partly before the Lord Ordinary (M'Laren), before whom the action afterwards came to depend. It related to the understanding among brokers and shipowners as to the meaning of the expression “No St Lawrence” and similar expressions occurring in policies of marine insurance. The evidence, which is summarised in the opinions of the Judges, showed that the expression “No St Lawrence” was understood by a number of the witnesses (who were merchants, brokers, underwriters, and others acquainted with shipping) to mean both the Gulf and river St Lawrence. A number, however, deponed that it referred, as they understood it, to the river only, and not the Gulf. In the Inner House it was held that the general usage contended for by the defenders was not proved.

The Lord Ordinary ( M'Laren) on 4th August 1882 found “that the ship ‘L. de V. Chipman’ was in the Gulf of St Lawrence between 1st October and 1st April, during the period intended to be covered by the policy of insurance sued on, and that in breach of the warranty indorsed thereon, which the Lord Ordinary finds to be a warranty against the navigation of the river and Gulf of St Lawrence during the prescribed period; therefore assoilzies the defenders from the several conclusions directed against them respectively, and decerns.

“ Note.—…. The parties are therefore at issue as to the meaning of the words ‘No St Lawrence’ in the clause of warranty. Lord Craighill, before whom the case originally came to depend, on 28th May 1880 allowed the parties a proof of their respective averments. Under this order evidence was taken on commission at London and Liverpool, and under another commission at St John's, Newfoundland, as to the usage and understanding of the mercantile profession with reference to clauses restricting the period of navigation of the waters of the St Lawrence. This evidence has been supplemented by a parole proof before myself.

At the commencement of the proof before me exception was taken by one of the parties to the admission of parole evidence of the meaning of the words ‘No St Lawrence,’ on the ground that no such evidence could be admitted to qualify the meaning of a written instrument. I consider that the ascertainment of the limits and extent of the geographical expression ‘St Lawrence’ was a proper subject of extrinsic evidence, and for this reason, and because there was really no other subject to which the proof allowed by Lord Craighill could be usefully directed, I admitted the evidence quantum valeat.

In view of the apparent conflict of evidence on this subject, I was invited by both parties to avail myself of such aid as might be derived from certain presumptions which they conceived to be applicable to the construction of the policy of insurance. Counsel for the pursuers (the owners of

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the ship) contended, on the authority of a recent case relating to the contract of life assurance, that the language of the clause of the warranty ought to be construed in accordance with precedent, fortius contra proferenteM. In the case referred to the question was whether a warranty of the truth of the representations or answers returned by the assured meant a warranty of their absolute truth, or only of their truth in the knowledge and belief of the assured. It was thought that the former construction would be most unreasonable, because an assured could not be expected to guarantee the absolute truth of statements regarding his own medical history, but only to give such assurances on the subject as a person not professionally instructed could give regarding his case. The warranty was therefore construed against the contention of the Assurance Company (who framed it), and in a sense least burdensome to the assured.

The present case, however, does not raise any question as to the obligatory force of the clause of warranty. The question is not one of degree, but of identification. The clause is of usual, or, as I am informed, almost universal, occurrence in time policies. In the present case the breach of warranty alleged is the being in the Gulf of St Lawrence after the 1st of October; but in the next case of casualty the objection may be that the ship was in the river St Lawrence after that date—for example, on her outward voyage. Supposing such a case to be set down for trial along with the present case, it would be necessary (according to the principle of construction contended for) to give different meanings to the term St Lawrence in the two cases, in order that in each case a construction should be adopted which should be the least favourable to the case of the underwriters. I only suggest such a case to illustrate the difficulty of extending a rule primarily applicable to the interpretetion of general words to questions of specific identity.

For the defenders (the underwriters) it was contended that the words ‘St Lawrence,’ being used without limitation, must be presumed to apply to all waters bearing that name, unless the contrary be clearly established. I think it was suggested that ‘No St Lawrence’ is a universal negative proposition, excluding all waters of that name or genus. But it is in evidence that policies are not infrequently endorsed ‘No Baltic,’ and ‘No British North America,’ where the defenders’ construction is plainly inadmissible. It is evident when the ellipsis is supplied that the subject of the universal negative is not the term ‘St Lawrence,’ but ‘navigation’ or some equivalent term, and that St Lawrence is not a universal but a specific term. The true reading is ‘No navigation in the waters named St Lawrence,’ and I think I must endeavour, without the aid of presumptions, but with the benefit of such information as was available to the parties to this contract of insurance, and to the shipowners, masters, and underwriters who make use of the warranty, and who regulate their contracts and navigate their ships with reference to it, to determine its meaning.

1. It is in my opinion a material consideration that the river or estuary of St Lawrence, and the Gulf of that name, are in a geographical sense very closely connected. A glance at the map of the east coast of America will make this more clear than any description. I may, however, point out that the Gulf of St Lawrence is almost completely landlocked by the islands of Newfoundland and Cape Breton, being approached from the Atlantic by three passages—the Straits of Belleisle, the Middle Strait, and the Gut of Canso. It is in evidence that these passages are used at different seasons of the year by vessels bound for Montreal. Thus the Gulf of St Lawrence is traversed in every direction by traders to and from the great Canadian river, the traffic to ports in the Gulf being inconsiderable in comparison with the traffic passing through the Gulf to the river St Lawrence. The witnesses are not agreed as to what should be considered the seaward limit of the river, and it is not easy to determine at what part of the voyage the river ends and the waters of the Gulf are entered. Above the island of Anticosti it is considered river, although the distance between the shores exceeds a degree of latitude. On either side of that island and below it the estuary expands into the Gulf of St Lawrence in a way that suggests that the whole should be regarded as one arm of the sea. The application of the same name to the river and the Gulf indicates, and as I think correctly indicates, the geographical identity of the basin of the river and Gulf.

2. The considerations to which I shall next advert are those which have relation to the clause of warranty, and the reason for its insertion in policies of insurance. The warranty in question was introduced about twenty years ago, about the time when time policies came into general use in the American trade. It is explained that when time policies are effected at rates representing an ordinary risk, it has been usual to exclude the navigation of the St Lawrence waters during six months of the year, because the ordinary rates of insurance would not cover the special risks incident to the navigation of these waters in the winter season. In the present case, for example, the ‘Chipman’ was insured at ten guineas per cent., being the ordinary annual rate for a first—class vessel; but there is evidence that twenty guineas would not be considered too high a premium for a winter voyage to the river or Gulf of St Lawrence.

It was suggested for the pursuers that the risks intended to be avoided by the warranty are confined to the river St Lawrence. The evidence points very strongly to a different conclusion. Except for a few weeks at the beginning and end of the excepted period, the river is entirely frozen, and is therefore not navigable at all. No doubt, during the early and later weeks of the winter season the navigation of the river is in a sense possible, although extremely dangerous in consequence of the masses of floating ice which are carried down by the current. But the navigation of the Gulf is also very dangerous during the whole of the excepted period. This is admitted with perfect candour by all the witnesses examined for the pursuers to prove their construction of the warranty. For example, Mr W. B. Grieve, shipowner and merchant, St John's, says:—‘The percentage of vessels lost in the Gulf is very high, and during the prescribed period it is shunned by underwriters.’ Mr Thorburn, a witness also of large experience, when questioned as to the dangerous character of the shores of the Gulf in the winter months, makes answer—‘I

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believe they are regarded as dangerous by underwriters, but much more on the Canadian side.’ Mr Cooper, insurance-broker at Lloyds', says:—‘I should say the dangers in the river and the Gulf, which the warranty is required to guard against, are about the same.’ Mr Dale, a Liverpool underwriter, says:—‘The Gulf of St Lawrence in winter is not an ordinary risk. We get a very enhanced premium for it.. … I am not aware whether or not fogs and snow-storms are more frequent in the Gulf or in the river.’ Mr Evans, manager for a Liverpool firm, says:—‘We do not think there is sufficient inducement to send our ships there at that season. In fact, freights in that trade have been very low in the last few years, and the winter risks in the Gulf are very great.’ Mr Pollexfen, a Liverpool shipowner, holds that the river is more dangerous than the Gulf in winter, but adds—‘The Gulf is more dangerous in the spring than the river is in November and December.’ Of four witnesses for the pursuer examined in Court, three—Grieve, M'Intyre, and Thorburn—gave evidence to the same effect:—‘I know that navigation in the Gulf of St Lawrence is dangerous in winter from snow-storms, not from fogs’ (Grieve). ‘The Gulf of St Lawrence is dangerous on account of fogs and snow and ice in winter making the navigation more risky’ (M'Intyre). ‘I believe part of the Gulf freezes …. I should say that in winter the Gulf is a hazardous place to navigate’ (Thorburn).

While such is the character of the pursuers' evidence on the subject of risk, that of the defenders is really overwhelming. I shall only quote the statement of Captain Lees, for many years a chief officer in the Allan and Anchor lines of steamers—a gentleman who has seen more of the Gulf in winter than any of the other witnesses, because, as he explains, the vessels in which he served carried the mails, and were among the last to leave Montreal. He states—‘In winter there is no navigation in the Gulf; it is closed by ice. The navigation of the Gulf is dangerous at any time. In winter the snow covers the land, and completely changes its appearance, filling up the valleys and obliterating the landmarks …. The polar ice usually comes in by Belleisle and drifts down with the current …. Even the fastest steamer tries to get out of the Gulf by 1st December. The lighthouses are put out all winter and re-lighted on 1st April.’ Other witnesses speak to the extinction of lighthouses in winter, except those at Cape Ray and the Straits of Belleisle, which are considered to be Atlantic lights. If the Gulf were considered navigable, though dangerous, it would be very necessary that it should be lighted in winter. The extinction of the lights is therefore a proof that the navigation of the Gulf is considered to be closed during at least four of the six excepted months of the policy.

I shall conclude my analysis of the indirect evidence by observing that while the words of the warranty are sufficient to cover the Gulf and river, and while the Gulf and the river are geographically or hydrographically continuous, and are traversed in succession by the greater part of the vessels engaged in the Canadian trade, all the reasons which would induce an underwriter to stipulate for the exclusion of the more hazardous risks in a time policy at ordinary rates of premium appear to me to apply as much to the Gulf as to the river. Of course the dangers incident to the navigation of the river and the Gulf are not precisely the same. The river is more affected by ice and the Gulf by storms. But from the point of view of an underwriter, the risks are substantially the same, and are due to the same causes. All the witnesses are agreed that a winter voyage to the Gulf would not be insured against except at a very high premium. As regards time policies, a warranty ‘No river St Lawrence’ would not protect the underwriter against the whole of the special risks which he is entitled to except when he insures at the ordinary rates; and the indirect evidence is all strongly opposed to the pursuers' theory that by ‘No St Lawrence’ they only warranted the ship not to enter the river St Lawrence within the winter months.

3. I do not propose to refer in detail to the direct evidence as to the meaning attributed by insurance-brokers and shipowners to the words in the warranty. Their impressions as to the meaning of the words are to my mind much less valuable than the reasons which they assign for the insertion of the clause. I have, however, carefully read and considered this part of the evidence, especially that of the witnesses from London, Liverpool, and the Clyde. I think the body of evidence in favour of the more extended construction is superior in weight and consistency to that on the other side. I must observe also that while the pursuers' witnesses are very decided in the expression of their opinion that the warranty means ‘No river St Lawrence,’ they all, or almost all, base that opinion on the apprehension that the clause was intended to except the special dangers of the river in winter. Now, if my estimate of the indirect evidence be well founded, this reason is a complete non sequitur. The dangers of navigation in the winter season are by no means confined to the river. During a great part of the winter the river is completely frozen, and where navigation is impossible there can be no dangers of navigation to be avoided. The Gulf is always open, and its navigation in winter is very dangerous. If the meaning of the clause is to be collected from a consideration of the risks intended to be covered, and the risks not intended to be covered or insured against, I can have little doubt that it was not the intention of the parties who negotiated the policy that the premium paid—the ordinary premium of ten guineas per annum—should cover the special risks incident to winter navigation in the river or the Gulf of St Lawrence.

I need hardly add that although the ‘Chipman’ was not lost in the Gulf, but in the open Atlantic, this makes no difference in the question of liability. Having incurred a risk which her owners warranted that she should not undertake, she is in law not insured. The underwriters are freed from their obligation, or, to speak with strict accuracy, are held never to have undertaken any obligation to indemnify the owners against sea risks.”

The pursuers reclaimed, and argued—The warranty in question is unusual and ambiguous. Now, the rule of law as applicable to such a case is that insurance companies having the framing of their contracts in their own hands must make them so clear and unambiguous that there shall be a

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consensus between the parties to the contract as to what it exactly means; if they fail to do this, then the contract will be construed strictly contra proferentes and in favour of the insured. Now, how was this ambiguous contract explained by the evidence? While a body of evidence was brought to show that many people understood the words “No St Lawrence” to apply to the Gulf and the River, there was also a strong body of evidence to show that just as many people understood the words to apply only to the river. The underwriters, then, had failed to establish the consensus in the parties to the policy required by the law, and therefore the warranty fell to be construed against them.

Authorities—Arnold on Marine Insurance, vol. i. 5th ed. p. 296; Carr & Josling v. The Royal Exchange Insurance Company, Nov. 20, 1863, 33 L.J., Q.B. 63; Fitton v. The Accidental Death Insurance Company, June 18, 1864, 34 L.J., C.P. 28; Life Association of Scotland v. Foster, Jan. 31, 1873, 11 Macph. 351.

The defenders replied—(1) The natural and obvious meaning of the expression “No St Lawrence” is an exclusion from all the waters known as St Lawrence, i. e., the river as well as the Gulf. It was a term really needing no proof to explain it, for whatever was outside its meaning (it meant both Gulf and river) was clearly “St Lawrence.” But (2), assuming that the expression is ambiguous, it is thoroughly cleared up by the evidence given by the Glasgow underwriters, which was all in defenders' favour, and was of special value, inasmuch as Glasgow was the locus contractus (vide Cook v. Greenock Marine Insurance Co., July 18, 1843, 5 D. 1379). These witnesses were all of opinion that the Gulf as well as the river fell within the warranty.

At advising—