Background of Questions 1 to 4 is listed below. Question 5 is a separate question.

NT Machinery Limited (NML) in Hong Kong sold 12 iron tool machines to Oxford Machinery Limited (OML) in England. Each machine valued at $100,000. All the machines were put on pallets made with pressure treated wood and stuffed into two 40-foot containers.

NML arranged a cargo policy in the form of ICC-A with Kowloon Insurance Limited (KIL). NML agreed a deductible of $10,000 in the cargo policy. The containers were shipped by sea in September from HK to Oxford.

During the voyage, the ship was attacked by a typhoon. Due to the loosing lush system, one container had fallen 10 meters to the deck. As a result, the 6 machines inside the first container were damaged. The cost of repair to all 6 machines would be $90,000 in total.

After the payment of the machines by OML, NML handed over the bill of lading of the two containers and the endorsed cargo policy to OML two days after the above container had fallen on to the deck.

After the delivery of the containers at Oxford, OML opened the second container and discovered that all the 6 machines were rusted because of the moisture formed inside the container. According to the survey report, the condition of the container was good. The moisture came from the wooden pallets and the temperature difference between HK and Oxford. The cost of repairs to those 6 machines would be in a total sum of $620,000.

Q3. For this question only, suppose there is a Free of Particular Average Clause in the cargo policy. What would be the best claim to be made by the assured for the damaged machines in the second container? (30 marks)

The answer should be explained by issue, fact, law, application and conclusion