Fedsure General Insurance Limited v Carefree Investments (Proprietary) Limited

The respondent, a clothing manufacturer in Ladysmith, was the insured and consignee under a marine open insurance policy with the appellant insurer. The policy covered a containerised consignment of fabric against various risks, including theft, while in transit from South Korea to Durban. The container was discharged at Durban on 8 June 1995 and stored first in the Portnet container terminal, then from 16-17 June in the South African Container Depot warehouse. The respondent's managing director, Mr Kazi, received the original bill of lading and shipping documents between 10-19 June but delayed customs clearance due to cash flow concerns. He only contacted the clearing agent on or after 25 June, provided documentation on 5 July, and arranged loan finance on 14 July. On 8 July, before clearance could be completed, the goods were stolen from the warehouse. The respondent sued on the policy for the value of the goods. Evidence showed that clearance could have been expedited and completed much sooner, and that Mr Kazi deliberately left the goods in bonded storage for commercial convenience while awaiting a favorable cash flow position, despite knowing loan finance was available.

• Whether goods were still in the 'ordinary course of transit' at the time of theft under the Institute Cargo Clauses 'warehouse to warehouse' or 'transit' clause
• Whether the insurance had terminated under paragraph 8.1.2 of the transit clause before the theft occurred
• Whether a delay or interruption occasioned by collateral commercial purposes falls outside the scope of 'ordinary course of transit'
• What constitutes an interruption of the ordinary course of transit sufficient to remove goods from insurance cover

The appeal succeeded with costs. The order of the High Court was set aside and substituted with an order dismissing the plaintiff's (respondent's) claim with costs.

A delay or interruption which, objectively viewed, is not part of the usual and ordinary means of effecting transit, and which is occasioned by some collateral commercial purpose, will disturb the ordinary course of transit under a marine insurance policy containing Institute Cargo Clauses. Loss occurring within the period of such delay or interruption will not be covered by the policy, not because the insurance has terminated or the transit has ended, but because the insurance pertains only to the ordinary course of transit and what falls outside that course cannot be within the cover. Where an interruption to transit is within the control of the insured for collateral commercial purposes (such as delaying customs clearance for cash flow convenience when clearance could reasonably have been expedited), goods are not in the 'ordinary course of transit' during such delay. The determination of whether something occurred within the ordinary course of transit requires an objective test, not merely the subjective intention of the insured.

The Court expressed, without finally deciding, significant doubt about the trial judge's interpretation of paragraph 8.1.2 of the transit clause. Howie JA questioned whether an insured must have paid clearance dues and obtained control of goods before an election to use premises for storage can be made, noting there appears to be 'no logical reason, when all one is doing in order to store goods is to leave them where they are, for the law to require that one first has to have control before one can use such venue for storage.' The Court also observed that there would seem to be 'scant reason why the necessary election cannot precede the end of such storage and indeed precede the delivery into such storage.' The Court indicated that on the facts, there 'may well have been termination of the insurance under paragraph 8.1.2' but expressed no final opinion on that issue. The Court also clarified that the 'shifting cover' concern raised in John Martin of London Ltd v Russell regarding fluctuating intentions does not apply when applying the objective test for whether a delay or interruption is part of the ordinary course of transit.

This case is significant in South African marine insurance law as it clarifies the interpretation of the 'ordinary course of transit' requirement in Institute Cargo Clauses. It establishes that delays caused by the insured's collateral commercial purposes, even if the goods remain in a secure bonded warehouse, can take goods outside the protection of transit insurance coverage. The judgment emphasizes that insurance coverage during transit is determined by an objective assessment of whether delays form part of the usual and ordinary means of effecting transit, rather than by subjective intentions alone. The case is important for insureds and insurers in understanding when marine transit insurance coverage ceases, particularly in circumstances where goods are left in bonded storage for commercial convenience rather than logistical necessity. It demonstrates that even though insurance may not have formally terminated, loss can still fall outside coverage if it occurs during an interruption to the ordinary course of transit.