The Swashplate case – Decision on Appeal

As it is often said ‘For every case law in favour of something, there is a case law against.’ Even the judgement in one case gets turned round on its head on appeal. Those who had read my earlier post on The Swashplate case would recall the judgment. Very recently on 13th August 2020, the said judgement by a Primary Judge of the Federal Court of Australia was over-ruled and a contrary decision given by a three-judge bench of the Court. Amazed at the quick disposal of appeals in Australia.

Drawing your attention to the facts of the case and the judgement given by the Primary Judge:

Brief facts of the case: Swashplate Pty Ltd, Australia had purchased two Bell 427 helicopters in the USA and transported them in containers (by sea) to Australia. Two specific marine cargo insurance policies were issued by Liberty Mutual Insurance Company in Australia covering the two separate shipments. The ‘chocking’ of the helicopters’ temporary wheels inside the containers was not done in both cases.. Hence the stowage was inappropriate and fell within the ‘improper stowage’ exclusion of Clause 4.3. Both the shipments suffered damages because of this and claims were lodged on Liberty by Swashplate. Surprisingly, Liberty admitted the claim for one helicopter and rejected the claim on the other. No, it was not a compromised settlement or a commercial settlement but based on technicalities. Aggrieved, Swashplate approached the Federal Court of Australia, which upheld the decisions of Liberty Mutual.

The insurance placements were done in Australia for both these policies and the placement slips showed the policy commencement date as 19th May 2018 till the arrival at Sunshine Coast, Queensland. The transits were to commence from Picayune, Mississippi in the USA. Incidentally, Picayune was 15 hours behind Australian Eastern Standard Time, the location where the policies were issued.A chronological sequence of events will help understand the factual position.

19th May 2018 — Two specific policies issued in Australia covering the two helicopters from Picayune in USA to Sunshine Coast, Australia. Policies were on ICC-A terms including static cover for up to 5 days prior to loading.

18th May 2018, 3 PM Local standard time at Picayune: It may be noted that 3 PM in Picayune would mean 6 AM of 19th May 2018 in Australia (AEST). The container arrived to load the first helicopter. Stuffing into the container was completed, although chocking was not done and by 5 PM, the container was loaded on to a truck and sent to the port of loading, New Orleans.

19th May 2018, 8 AM Local standard time at Picayune: This would translate to 11 PM AEST on 19th May 2018. The container arrived for loading of the second helicopter. Stuffing into the container was completed, again, chocking was not done and by 5 PM, the container was loaded on to a truck and sent to the port of loading, New Orleans.

The Court agreed with the contentions of Liberty that contractually, 19th May 2018 would mean from 12 AM of 19th May 2018 in Picayune, USA (LST). Further the wording on static cover extension was ‘ up to ‘ five days prior to loading and this does not mean a back-dating of cover even before the date the cover was finalised. Since loading of the first helicopter was completed by 5 PM on 18th may 2018, i.e.prior to attachment of cover, Exclusion 4.3 would apply. In case of the second helicopter the packing was done after the attachment of insurance i.e. 10 AM on 19th May 2018, LST Picayune.

Swashplate Pty Ltd went on appeal before a three-judge bench of the Federal Court which reviewed the decision of the Primary Judge.

The three-judge bench upheld the appeal and ruled in favour of Swashplate Pty Ltd. The judges did not go into whether the date stated in the placement slip referred to time at the place of issue or at the place of loading. Their decision was based on ‘policy construction’ for which they advanced the undermentioned justifications:

First, the placement slip was issued by the broker, Austbroker under a marine facility accorded to them by Liberty for which a Master Slip was issued spelling out the terms, conditions, premium working as also the period viz. ‘risks attaching between 23rd May 2017 to 22nd May 2018, both days inclusive, Local standard Time’. The placement Slip under ‘Period of insurance’ mentioned ‘From’ and ‘To’ dates. The From date was mentioned as 19th May 2018 but the ‘To’ date showed ‘date of arrival at destination airport’. So, if actual dates are to be significant, the date of arrival should also have been mentioned. This being a specific voyage policy, the ‘ From & To” dates are not significant and apply more to the Master Slip under which this risk was placed.

Second, the Master Slip did not specify the start and end-point of each voyage/transit but only the overall geographical limits. The purpose of the placement slip was to specifically mention the start and end locations of the voyage/transit which had been duly inserted.

Third, The Master Slip used the terminology ‘risk attaching’ under period of insurance and not ‘insurance commencement date’. Risk attachment will be as per 8.1 of ICC-A ( was part of the Master slip) which talks about ‘ when the subject-matter insured is first moved in the warehouse or place of storage for the purpose of immediate loading…’. The placement slip wording about the ‘period of insurance’ therefore did not conform to the ‘risk attachment ‘ date. The static cover extension of ‘up to five days’ featured in the Master slip and also in the placement slip. This should be reckoned from the risk attachment date and not insurance commencement date.

Fourth, ICC-A does contemplate arrangement of insurance after attachment of risk. Hence the wording used under 4.3 is ‘ loss or damage caused by defective packing prior to ‘attachment of the policy’. If that be so, this exclusion can be triggered only if the insured was aware of the loss at the time the insurance contract was concluded and the insurer was not. This is not the case here.

Well, mull over both the initial judgment and the decision on appeal. On appeal, the three-judge bench made a distinction between ‘risk attachment’ date and ‘insurance commencement date’, something used interchangeably by many. Do you agree to the reasoning? Needless to add, this may not have relevance in markets like India, where the policy inception cannot happen without payment of premium beforehand. Having said that, we need to re-look the language used in our policies so that there is no ambiguity between ‘risk inception’ and ‘policy attachment’. Suggestions welcome!