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ICLR: King's/Queen's Bench Division/1896/Volume 1/ASFAR & CO. v. BLUNDELL AND ANOTHER. - [1896]
1 Q.B. 123

[1896] 1 Q.B. 123

[IN THE COURT OF APPEAL.]

ASFAR & CO. v. BLUNDELL AND ANOTHER.

1895 Nov. 7, 8.

LORD ESHER M.R., LOPES, and KAY L.JJ.

Ship - Freight - Damage to Goods - Loss of Merchantable Character - Liability to pay Freight - Marine Insur-
ance - Insurance of Profit - Warranty against Average - Concealment of Material Fact.

A vessel, on board which dates had been shipped under bills of lading making the freight payable on right
delivery, was sunk during the course of the voyage, and subsequently raised. On arrival at the port of dis-
charge it was found that although the dates still retained the appearance of dates, and although they were of
considerable value for the purpose of distillation into spirit, they were so impregnated with sewage and in
such a condition of fermentation as to be no longer merchantable as dates:-

Held, that freight was not payable in respect of them.

A ship having been chartered for a lump sum, the charterers put her up as a general ship, and goods were
shipped on board under bills of lading at freights which in the aggregate exceeded the charter freight. The
charterers insured their "profit on charter" by a policy which contained a warranty against average.

On arrival of the ship part of the cargo was delivered, and freight was payable under the bills of lading for
that portion; but owing to sea damage the remainder of the cargo had lost its merchantable character, and
freight was not payable in respect of it; the result being that the total amount of the freights payable under the
bills of lading was less
[1896] 1 Q.B. 123 Page 124

than the charter freight, and the charterers' profit was consequently lost:-

Held, that there had been a total loss of the subject-matter of the insurance within the meaning of the war-
ranty:

Held, also, that the fact that the charter freight was a lump sum and not a tonnage rate, although material,
had been sufficiently disclosed by a reference to the charterparty, a clause for payment of a lump sum for
freight being a usual clause in charterparties, and the obligation to specifically disclose the contents of a
charter extending only to unusual clauses, the insertion of which the underwriters could not reasonably have
anticipated.

Decision of Mathew J. affirmed.

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APPEAL from the judgment of Mathew J. in favour of the plaintiffs. (1) Upon the trial before the
learned judge without a jury the following facts appeared:-

The plaintiffs were merchants at Bussorah, and the defendants were underwriters in London. On
August 4, 1888, the plaintiffs entered into a charterparty with the owners of the steamship Govino
for the hire of the said ship from Bussorah and/or certain other places in the Persian Gulf to London
for a lump sum of 3900l., upon the terms that all freight earned by the ship should be for account of
the charterers. The plaintiffs placed the steamer on the berths in the usual way at ports or places in
the Persian Gulf, and cargo was shipped by various parties at certain rates of freight under bills of
lading which made the freight payable on right delivery; the total of such bill of lading freights was
4690l. While the ship was in course of loading, the plaintiffs insured their profit on the charter for
2000l. with the defendants, who accepted the risk on ship on or about October 17.

The defendants, when they so agreed to become insurers of the plaintiffs, were not informed, and
did not inquire as to, and did not know any of, the terms or conditions of the charterparty or of the
bills of lading, nor that the charter was for a lump sum freight.

On October 23 the formal policy was underwritten by the defendants. By it the plaintiffs were ex-
pressed to be insured in respect of the Govino for 2000l. at or from any ports or places

(1) [1895] 2 Q. B. 196.

[1896] 1 Q.B. 123 Page 125

in the Persian Gulf to London. The interest insured was described as "2000l. on profit on charter ....
Warranted free from all average." On or about October 26 the Govino sailed from the last port in
the Persian Gulf at which she loaded cargo. After her arrival in the Thames, but before she had
reached her discharging dock, and during the voyage covered by the policy, she was run into by
another vessel, filled with water, and became almost entirely submerged for two or three tides,
when she was raised and docked.

A portion of the cargo consisted of dates, which, being saturated with sewage and in a fermenting
condition, were condemned by the sanitary authority as unfit for human food, and were not allowed
to be landed in London. Although they were unmerchantable as dates, a large proportion of them
retained the appearance of dates, and, notwithstanding that they were unfit for human food as
dates, they were of considerable value, and were sold for 2400l. for the purpose of distillation into
spirit, and were transhipped and exported. The part of the cargo which did not consist of dates was
landed and delivered, and the lump freight of 3900l. became payable to the shipowners under the
charterparty. The total of the bill of lading freights payable on the part of the cargo which was deliv-
ered to the consignees was less than 3900l. The plaintiffs brought the present action as for a total
loss of profit on the charter, claiming 2000l. as on a valued policy, or in the alternative 790l., being
the difference between the lump freight payable by the plaintiffs under the charterparty and the total
amount of the bill of lading freights which the plaintiffs would have been entitled to receive had the
whole of the cargo been duly delivered in London. Mathew J. gave judgment for the plaintiffs for
790l. The defendants appealed.

Carver, for the defendants. First, there was not a total loss of the freight on the dates. To entitle the plaintiffs
to freight, it was enough that on arrival the dates existed in specie. Duthie v. Hilton (1) is distinguishable:
there the cement had ceased to exist as cement; but in the present case the dates still
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(1) L. R. 4 C. P. 138.
[1896] 1 Q.B. 123 Page 126

retained the form and substance of dates, and had not lost their merchantable quality. Secondly, even if
freight was not payable on the dates, the defendants are not liable upon this policy, being protected by the
warranty against average. Although only the profit was expressed to be insured, what was really at risk was
the bills of lading freight, and the warranty must be read with reference to that subject-matter of insurance; so
that there could be no total loss under the policy unless the whole of the bills of lading freight was lost. In the
analogous case of an insurance of profit on goods, a warranty against particular average can only be satis-
fied by a total loss on the goods from which the profit is to be made. Assuming the profit to be 10 per cent. on
the value, there would not be a total loss of profit for the purposes of a marine insurance policy if 10 per cent.
of the goods were lost, although the whole of the profit would be swept away; there would be only a 10 per
cent. loss on the profits: Hodgson v. Glover (1); Phillips on Insurance, s. 1503; Benecke on Marine Insur-
ance, 31. There is no more difficulty in distributing the profit in the case of freight than in the case of goods. A
warranty against average is a warranty against a partial loss of the subject-matter of the insurance.

Thirdly, assuming that the construction placed by the defendants upon the warranty against average is
wrong, the plaintiffs were guilty of the concealment from the defendants of a material fact, that the freight,
payable under the charterparty was a lump sum and not a tonnage freight. If the chartered freight had been a
tonnage freight it would have been payable only on so much of the cargo as actually arrived, and the plain-
tiffs would have made a profit if any of the cargo arrived, namely, the difference between the charter and the
bill of lading freights on that portion of the cargo. In such a case there would have been only a partial loss of
profit, and there could not have been a total loss of profit to satisfy the warranty against average unless there
had been a loss of the whole of the bills of lading freight. It was, therefore, material that the underwriters
should know that the charter was for a lump sum

(1) 6 East, 316.

[1896] 1 Q.B. 123 Page 127

freight in order that they might estimate their risks; and the policy is void on the ground of concealment by
the plaintiffs of a material fact. [He also cited Dakin v. Oxley (1); Roux v. Salvador (2); The Bedouin (3);
Haywood v. Rodgers (4); Tate v. Hyslop (5); Mercantile Steamship Co. v. Tyser.(6)]

Joseph Walton, Q.C., for the plaintiffs, was directed to confine his argument to the third point. There was no
concealment by the plaintiffs of a material if act. It is not suggested that a lump sum freight is not a common
provision in a charterparty; and assuming that the fact was material, there was no duty on the plaintiffs to
disclose it. It is only necessary to specifically disclose a clause in a charterparty where the clause is an unu-
sual one; although everything in a charterparty relating to the payment of freight is in a sense material, it is
impossible to contend that it must all be disclosed. [He cited The Bedouin (3); Inman Steamship Co. v. Bis-
choff. (7)]

LORD ESHER M.R. I am of opinion that this appeal should be dismissed. The first point taken on behalf of
the defendants, the underwriters, is that there has been no total loss of the dates, and therefore no total loss
of the freight on them. The ingenuity of the argument might commend itself to a body of chemists, but not to
business men. We are dealing with dates as a subject-matter of commerce; and it is contended that, alt-
hough these dates were under water for two days, and when brought up were simply a mass of pulpy matter
impregnated with sewage and in a state of fermentation, there had been no change in their nature, and they
still were dates. There is a perfectly well known test which has for many years been applied to such cases as
the present - that test is whether, as a matter of business, the nature of the thing has been altered. The na-
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ture of a thing is not necessarily altered because the thing itself has been damaged; wheat or rice may be
damaged, but may still remain the things dealt with as wheat or rice in

(1) 15 C. B. (N.S.) 646.

(2) 3 Bing. (N.C.) 266.

(3) [1894] P. 1.

(4) 4 East, 590.

(5) 15 Q. B. D. 368.

(6) 7 Q. B. D. 73.

(7) 7 App. Cas. 670.

[1896] 1 Q.B. 123 Page 128

business. But if the nature of the thing is altered, and it becomes for business purposes something else, so
that it is not dealt with by business people as the thing which it originally was, the question for determination
is whether the thing insured, the original article of commerce, has become a total loss. If it is so changed in
its nature by the perils of the sea as to become an unmerchantable thing, which no buyer would buy and no
honest seller would sell, then there is a total loss. That test was applied in the present case by the learned
judge in the Court below, who decided as a fact that the dates had been so deteriorated that they had be-
come something which was not merchantable as dates. If that was so, there was a total loss of the dates.
What was the effect of this upon the insurance? If they were totally lost as dates, no freight in respect of
them became due from the consignee to the person to whom the bill of lading freight was payable - that is, to
the charterers - and there was a total loss of the bill of lading freight on these dates.

Let us now consider what was the subject-matter of the insurance. The plaintiffs had chartered a ship in such
a form that until she arrived at her destination they were to have the whole of her carrying power and capaci-
ty, paying to the owners an agreed sum as chartered freight. The plaintiffs were then, through their captain,
to collect cargo and to give bills of lading in respect of it, and their profit would depend upon whether they
received more for the bills of lading freight than they paid as chartered freight, the difference between the two
being their profit. That was their speculation; and if by reason of the perils of the sea they were prevented
from getting a larger sum as bills of lading freight than they were paying as chartered freight, they would get
no profit from their venture. I may say that it is as nearly certain as possible in business that the chartered
freight in such a case as the present would be a lump sum; it is the ordinary practice to stipulate for a lump
freight. It must be taken, therefore, that in this case there was a lump freight, and the profit insured was the
difference between that lump freight or chartered freight and the sum eventually earned as bills of lading
freight, which is payable ordinarily at the port
[1896] 1 Q.B. 123 Page 129

of destination. There was here a total loss of the bill of lading freight on these dates; and that being so, there
was no profit on the venture, the profit being the difference between the chartered freight and the bills of lad-
ing freight, which difference wholly disappeared with the loss of the freight on these dates. There was, there-
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fore, a total loss of the subject-matter of insurance. The case was put on behalf of the defendants as though
the subject-matter of the insurance had been the freight on the goods themselves - in which case the war-
ranty against average loss might have applied; the contention, however, has no application to the facts of the
present case, where the subject-matter of insurance was the difference between the two freights, which dif-
ference was totally lost.

I now come to the point that there was a concealment of a material fact by the plaintiffs when they effected
the insurance. The rule as to this is well known, and as to it I feel no doubt. The assured is bound to disclose
every material fact which is within his knowledge, and which is not to be taken as being within the knowledge
of the underwriters. If he fails to do so, he is guilty of what is called in insurance law concealment, which may
in fact be either innocent or fraudulent. But it is not necessary to disclose minutely every material fact; as-
suming that there is a material fact which he is bound to disclose, the rule is satisfied if he discloses sufficient
to call the attention of the underwriters in such a manner that they can see that if they require further infor-
mation they ought to ask for it. In this case the plaintiffs disclosed that there was a charterparty in existence,
for one of the parts of the subject-matter of insurance was chartered freight; and further, that the sub-
ject-matter which the underwriters were asked to insure was the difference between the chartered freight
payable by the assured to the shipowner, and the bill of lading freights which they were to obtain from the
consignees of the goods. But having given this information, they did not tell the underwriters whether the
chartered freight was a lump sum, or whether it was a tonnage freight depending upon the delivery of the
goods to the consignees. But that the freight must be a lump sum was almost certain; and if the underwriters
wanted to be sure on
[1896] 1 Q.B. 123 Page 130

the point, they could have immediately acquired the knowledge by asking the question; the question ought to
have been present to their minds. I think, therefore, that sufficient was disclosed by the plaintiffs to satisfy the
rule that the assured must make a disclosure of the material facts, and I have no doubt that the learned
judge in the Court below was justified in so holding. We are laying down no new law in the present case,
which has to be determined on well known principles of the law of marine insurance; we have only to apply
those legal principles to the facts of the case.

LOPES L.J. I am of the same opinion. The first point taken was that there was no total loss of the dates. But
the facts shew that they had been submerged for two days, and that when they were again seen they were a
mixture of date pulp and sewage and were in a state of fermentation and putrefaction; they had clearly lost
any merchantable character as dates. In my judgment, it is idle to suggest that there was not a total loss of
the dates, and that the plaintiffs were not entitled to recover as for a total loss of their freight. But then it was
said that, even though there had been a total loss of the freight upon the dates, there was a profit on the rest
of the cargo which prevented the plaintiffs recovering on this policy. In order to determine this question it is
all important to consider what was the subject-matter of insurance, and as to this I agree with the learned
judge below that it was the charterers' anticipated profit on the adventure - in other words, the excess of the
bills of lading freights over the lump or chartered freight: that seems to me to be beyond all question. If that is
the subject-matter of the insurance, can it be denied that, if that profit were entirely lost, the assured would
be entitled to recover? In my opinion, it is impossible to deny that proposition, and the learned judge was
perfectly right upon that point. Then it was further contended that there had been a concealment of a material
fact by the plaintiffs, in that they had not disclosed to the underwriters the fact that the ship was chartered at
a lump freight, and that as the freight might have been a tonnage freight they were bound to disclose the fact
that it was not so, but was a lump sum. In
[1896] 1 Q.B. 123 Page 131

my opinion, the plaintiffs under the circumstances of this case disclosed all that was necessary. No doubt
they were bound to disclose every material fact that was within their knowledge; but did they not disclose all
that they were under any obligation to disclose to the underwriters? Upon this point it is not immaterial to
bear in mind that it was highly probable that the chartered freight would be a lump sum and not a tonnage
freight; it is indeed not denied that it is very usual in cases of this kind to charter a ship at a lump sum for
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freight. When this insurance was effected, the underwriters were distinctly informed of the subject-matter of
the insurance - that it was profit on charter, that is, on chartered freight; and if they wanted further information
as to the nature of the freight, they could have asked the question or have seen the charterparty. I think that
the learned judge was right under the circumstances of this case in holding that sufficient had been disclosed
by the plaintiffs to entitle them to recover upon the policy.

KAY L.J. I am of the same opinion. The action is brought against underwriters upon a policy of marine insur-
ance, and on behalf of the defendants three points have been taken, two of which I think are very fairly ar-
guable. The policy is one to insure "2000l. profit on charter," and the charter was for a lump sum of 3900l.
The charterers took on board a general cargo of various classes of goods, among which were 700 tons of
dates. The vessel was sunk in the Thames, the cargo remained under water for two days, and the dates
were spoiled. Under these circumstances, was there or was there not a total loss of the bill of lading freight
on the dates? If there was, then the profit, which was to be the excess of the bills of lading freights over the
lump sum for chartered freight, was utterly gone, and there was no profit on the whole adventure; for the
amount of freight received by the plaintiffs on the other bills of lading was less than 3900l. The defendant
contends that there has been no change in the nature or character of the dates; that they were still dates,
composed of stone, skin, flesh, and whatever else goes to make dates; that though it was true that they had
been contaminated with sewage, and were not
[1896] 1 Q.B. 123 Page 132

merchantable as dates, they were not the subject of a total loss. I agree that the substance of the dates still
remained, and that they had not been changed into anything but dates in a peculiar condition. But does the
law require the nature of the thing insured to be so far changed as was suggested in argument? In Duthie v.
Hilton (1) cement had become wet and had lost its properties as cement; it had been changed into a hard
substance, though all the cement was there; and it was held that no freight was payable in respect of it. That
is really a very analogous case to the present. I think, therefore, that the learned judge below was right when
he said, "Total destruction is not necessary, destruction of the merchantable character of the goods is suffi-
cient; and in accordance with the principle recognised in Roux v. Salvador (2), Dakin v. Oxley (3), and Duthie
v. Hilton (1), I hold that the plaintiffs were not entitled to receive freight in respect of these dates." Therefore,
the bill of lading freight on the dates not being recoverable, the plaintiffs made no profit whatever on the
whole adventure.

The second point taken is a very minute one, and I am not sure that I entirely appreciate it; it turns on the
clause in the policy "warranted free from all average." It is said that, admitting if there was a total loss of the
dates there was no profit in respect of them, yet there was a profit on the other goods on board when con-
sidered by themselves, and that thereby the average clause is brought into operation. But that argument
omits to take note of the subject-matter of insurance, which was the difference between 3900l., the chartered
freight, and 4690l., the bill of lading freight. That sum of 790l. was in point of fact the thing insured; that 790l.
was totally lost to the plaintiffs, and I agree again with the learned judge when he says, "That argument must
go the length of maintaining that the intention of the policy was to afford protection to the assured only in the
event of a total loss of all freight. I cannot think that that was what the parties meant. I am satisfied that what
was intended to be the subject-matter of the insurance was the charterers' profit on the adventure, the ex-
cess of the

(1) L. R. 4 C. P. 138.

(2) 3 Bing. (N.C.) 266.

(3) 15 C. B. (N.S.) 646.

[1896] 1 Q.B. 123 Page 133
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total bills of lading freights over and above the lump freight of 3900l., and the intention was that in the event
of a total loss of that profit the assured should be entitled to recover." I adopt that language, which I think af-
fords a complete and perfect answer to this contention of the defendants.

With the third point I was certainly more impressed. It was this: that, when the policy was effected, there was
a concealment by the plaintiffs of a material fact, because they did not disclose the fact that under the char-
terparty the freight was not to be a tonnage freight, but a lump sum. Beyond all question that was a material
fact; for had it been a tonnage freight the underwriters would not have had to pay anything like the sum
which by the judgment they are held liable to pay. But was this fact concealed by the plaintiffs? I agree that
concealment is something more than non-disclosure: it is the keeping something back which it is the duty of
the assured to bring specifically to the notice of the underwriters. Was there then in the present case a duty
on the plaintiffs to specifically bring to the notice of the defendants the fact that the freight payable under the
charterparty was a lump sum? It is agreed that, if a charterparty contains an unusual clause which it is very
material to the underwriters to know, it is not enough for the assured merely to tell the underwriters that there
is a charterparty in existence; the assured is bound to go further, and to state that it contains an unusual
clause; if he does not do so, there is concealment which vitiates the policy. But here the clause is not unusu-
al; it is common enough that a lump sum for freight should be inserted in a charterparty, and that it was a
policy to insure profits on freight payable under a charterparty is explicitly stated in the policy itself. Were the
plaintiffs bound to say more than that there was a charterparty, there being no unusual clause in that char-
terparty? I think not. The principle of law has been clearly laid down in recent years by Lords Blackburn and
Watson in Inman Steamship Co. v. Bischoff (1), in which case the latter learned Lord says(2): "Seeing that
the respondents when they accepted the insurance had

(1) 7 App. Cas. 670.

(2) 7 App. Cas. at p. 687.

[1896] 1 Q.B. 123 Page 134

notice that the City of Paris was under a contract of charterparty, I am of opinion that the policy attached to
the freight therein stipulated, whether they did or did not choose to inform themselves of the particulars of the
contract; and consequently, that the respondents became liable for such part of that freight as might be lost
through any of the risks insured against during the period covered by the policy"; and there is a more recent
statement of the principle by Gorell Barnes J. in The Bedouin (1). I adopt the doctrine as laid down by those
learned judges; and I am of opinion that, although the fact alleged to have been concealed was a material
fact, it was sufficiently disclosed by the reference to the charterparty; for the clause was not an unusual
clause, and the underwriters might have inferred without looking at the charterparty that it would exist in this
particular case.

Appeal dismissed.

Solicitors for plaintiffs: Ince, Colt & Ince.

Solicitors for defendants: Waltons, Johnson, Bubb & Whatton.

(1) [1894] P. 1.

W. J. B.