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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Handelsbanken v Dandridge & Ors [2002] EWCA Civ 577 (30th April, 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/577.html Cite as: [2002] 2 LLR 421, [2002] 2 All ER (Comm) 39, [2002] EWCA Civ 577, [2002] 2 Lloyd's Rep 421 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION (Mr Justice Toulson)
Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE POTTER
LADY JUSTICE ARDEN
____________________
HANDELSBANKEN, NORWEGIAN BRANCH OF SVENSKA HANDELSBANKEN AB (Publ) | Appellant | |
- and - | ||
CHRISTINE ELAINE DANDRIDGE AND OTHERS | Respondent |
____________________
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Graham Charkham Esquire (instructed by Hill Taylor Dickinson, London) for the 1st-11th defendants/respondents.
Nigel Meeson Esquire (instructed by Beaumont & Son, London) for the 12th defendant/respondent
____________________
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Potter:
This is the Judgment of the Court
THE RELEVANT POLICY TERMS
The MMI Policy
“4. WARRANTIES
It is warranted in respect of each vessel that-
4.1 ... War Risks Policies equivalent to Institute War and Strikes Clauses (Hulls–Time) and full Protection and Indemnity Risks (hereafter referred to as ‘the Owners’ Policies and Club Entries) have been taken out and shall be maintained throughout the currency of this contract ...
6. INDEMNITY
6.1 This contract is to indemnify the assured for loss resulting from: loss of or damage to or liability of each vessel which is prima facie covered by owners’ policies or club entries, but in respect of which there is subsequent non-payment .... :
6.1.1 by reason of any act or omission of any one or more of the Owners, Operators, Charterers or Managers of the vessel, or their servants or agents, including breach or alleged breach of warranty ...”
The Owners’ War Risks Policy
“Warranted, no illegal fishing ...”
“1. Perils. Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the vessel caused by:
1.1. war, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power
1.2 capture, seizure, arrest, restraint or detainment and the consequences thereof or attempt thereat
1.3 derelict mines, torpedoes, bombs or other derelict weapons of war
1.4 strikers, locked out work men or persons taking part in labour disturbances, riots or civil commotions
1.5 any terrorist or any person acting maliciously, or from a political motive
1.6 Confiscation or expropriation ......
3. Detainment. In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of twelve months then for the purpose of ascertaining whether the vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.
4. Exclusions. This insurance excludes:
4.1 loss, damage, liability or expense arising from ....
4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations;
4.1.6 the operation of ordinary judicial process failure to provide security or to pay any fine or penalty or any financial cause.”
“13.1 In case of any loss or misfortune it is the duty of the Assured and their servants or agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this Insurance.”
THE PRELIMINARY ISSUES
(1) Have the Claimants suffered a loss or damage which is “prima facie covered by the Owners’ Policies or Club Entries” within the meaning of Clause 6 of the Institute Mortgagees’ Interests Clauses Hulls 30.5.86
(a) Did a failure of the assured under the War Risks Cover comply with the warranty alternatively condition: “Warranted no illegal fishing” prevent prima facie coverage thereunder?
(b) Alternatively, on a true construction of the War Risks Policy, was the warranty not a relevant peril and had no relevance to the scope of the coverage thereunder?
(c) Was the loss or damage prima facie excluded by exclusions 4.1.5 and 4.1.6 of the War Risks Cover?
- Was the vessel detained under the Fisheries Management Act?
- Was the seizure and detention of the Australian Authorities by reason of infringement of trading regulations?
- Was the seizure and detention by the Australian Authorities by operation of ordinary judicial process or failure to provide security?
THE RELEVANT FACTS
THE HEARING BELOW
“Mr Charkham, for the underwriters, put his submission on this point in his skeleton argument with telling brevity as follows:
“The vessel was detained under the Australian Fisheries Management Act 1991. The act regulates commercial fishing. Commercial fishing is a trade. Ergo the vessel was detained by reason of infringement of a trading regulation.”
I accept Mr Charkham’s submission. Like Customs’ regulations which Lord Denning MR said in “THE ANITA” [1971] 1 Lloyd’s Reports 487 at page 492 “must be given a business-like interpretation”, trading regulations must equally be given a business-like interpretation. Most vessels insured under the Institute War Clauses are going to be used for trading purposes. Owners or managers may themselves be directly involved in the sale or purchase of goods, but more often they will not be. They will be involved in trading ventures which may well be subject to regulations, breach of which may lead to a vessel’s seizure. It is natural that underwriters offering war and strikes cover should draw the line at covering vessels whose owners or managers choose to run the risk of engaging in such ventures in breach of regulations governing them. That being the broad and commercially sensible purpose behind the relevant words of clause 4.1.5, I see no reason to give the expression “trading regulations” a particularly restricted interpretation.
As I have mentioned, the Act had the twin objectives, in summary, of economic advancement and environmental protection. An important part of the statutory scheme was the imposition of control over commercial fishing. Sections 100 and 101 were specifically directed towards unlicensed commercial fishing by foreign vessels. I do not regard it as a strained interpretation of the word “trading” to say it includes commercial fishing. On the contrary, bearing in mind that the expression is to be understood in a business-like way, if a businessman were asked whether he would describe commercial fishing as a form of trade or trading, I would expect his answer to be, “of course”. In deference to Mr Hill’s argument about the parsing of the phrase, I would read the word “trading” as derived from the verb “trade” in its intransitive sense; i.e. ‘to take part in a trading or commercial venture”. I would regard regulations which govern such activities as naturally described by the words “trading regulations”.
“I bear in mind that the wording of these policies represents the proposal of the assured through his professional agent (the broker) for subscription by the underwriter and, therefore, in the event of ambiguity, it must be construed against the assured (e.g. AS Ocean and Black Sea and Baltic General Insurance Co Limited (1935) 51 Lloyd’s Law Reports 305 at page 307).”
“It seems to me that, in any given case, the court has to ask itself as a matter of fact whether the real or effective or dominant cause of the seizure and detention is a financial cause or something else. In the case of the “The Wondrous” the reason for the deemed detainment was financial. In the present case, it seems to me that the dominant reason for the detainment of the vessel by the AFMA was that it had been caught fishing in the Australian Fishing Zone, and the fact that its release might have been procured by the payment of money should not lead to the conclusion that the cause of the detainment was financial. The conclusion which I have therefore reached is that the claim by the mortgagees on the assumed facts fails by virtue of exclusion 4.1.5 and not 4.1.6.”
THE FMA
“(a) Implementing efficient and cost-effective fisheries management on behalf of the Commonwealth; and
(b) ensuring that the exploitation of fisheries resources and the carrying on of any related activities are conducted in a manner consistent with the principles of ecologically sustainable development and the exercise of the precautionary principle, in particular the need to have regard for the impact of fishing activities on non-target species and the long term sustainability of the marine environment; and
(c) maximising economic efficiency in the exploitation of fishery resources; and
(d) ensuring accountability to the fishing industry and the Australian community in AFMA’s management of fisheries resources; and
(e) achieving government targets in relation to the recovery of the costs of AFMA.”
ISSUE 1
Trading Regulations
“The Institute Clauses include a coherent scheme of the formulation of the risks covered and to take only one part is not only contrary to that scheme, it is also contrary to the express wording of the clauses themselves and to the terms of the incorporation. The risks are the perils with the exclusions; together they delimit the risks covered. Accordingly the defendants are entitled to rely on the relevant parts of the cl.4.”
See also, on appeal, [1992] 2 Lloyd’s Rep 566 at 572 lhc per Lloyd LJ.
“When one reads together Clause 1 (the insured perils) and Clause 4 (the exceptions), the broad picture which emerges is that the policy is intended to provide cover against a vessel being seized or damaged as a result of war or political or industrial action. It is not intended to provide cover against arrest by reason of civil claims or by reason of a vessel engaged in illegal trading.” (emphasis added)
“The exception relating to “customs regulations” has been broadly construed, as referring to laws in force in the country concerned, whatever their form, which deal with smuggling or other offences in the realm of customs .... The other expressions in this clause (quarantine, trading regulations), should no doubt also be construed broadly.”
“The ordinary man, if asked what was the reason for the ship’s confiscation, would surely reply that it was by reason of the members of the crew having been caught smuggling.”
ISSUE 2
The operation of ordinary judicial process
“... the legislature has not provided that the general power of sale exercisable by a Court of Admiralty, including conveyance to a purchaser from the Marshal of a clean title of the vessel should, in all cases, override the right of detention under the Act and the inchoate right of the Crown to the forfeiture of the vessel.
In these circumstances, I consider that the legislature intended to leave to the Court of Admiralty, in the exercise of its discretion, the adjustment of the competing rights of the authorised officer under the Act on the one hand, and of the plaintiff in an action in rem and other persons concerned in the resolution of that action on the other. This interpretation allows the Court of Admiralty to make an order, for example securing the salvor’s reward for salvage of the vessel while she is under detention ... it also permits the Court in an appropriate case, to defer the sale to preserve the utility of the detention of the vessel under the Act if those who would be entitled to claim on the fund in the event of a sale refused to allow an order for forfeiture, if made, to attach to that fund in lieu of the vessel.”
“If the loss is caused by two causes effectively operating at the same time and one is wholly expressly excluded from the policy, the policy does not pay”
per Roskill LJ in Wayne Tank and Pump Co Limited –v- Employers Liability Assurance Corporation Limited [1974] QB 57 at 75; see also P. Samuel & Co Ltd –v- Dumas [1924] AC 431 at 467 per Lord Sumner:
“Where a loss is caused by two perils operating simultaneously at the time of loss and one is wholly excluded because the policy is warranted free of it, the question is whether it can be denied that the loss was so caused, or if not the warranty operates.”
It is also submitted that, where two or more causes are operating concurrently, they do not have to be exactly co-extensive in time; thus a later cause may join with a previous and continuing cause so as to become concurrent.
Failure to provide security ... or any financial cause
“I am inclined to accept Mr Hill’s argument that the businessman would have had in mind when considering a clause of this kind security as something relating to claims against the vessel. Here, the bond required was, among other things, a form of surety for the attendance of defendants. I think that it is an over-wide interpretation of security in such a clause to treat it as extending to a requirement to put up recognisances for an individual charged with a criminal offence. On that ground, I would accept Mr Hill’s argument that this part of the clause is not applicable in the present circumstances.”
“The financial cause must, of course, affect the ship. Otherwise there would be no detainment. But assuming the ship is detained by a failure to pay money on the part of the cargo interest, it comes within the ordinary meaning of the words 'financial cause’. I accept that the ordinary meaning of the words is ‘very wide. But they are the words which the parties have chosen. In the context of a War Risks policy the words can and should be given their ordinary meaning.”
“Wide as the words ‘any financial cause’ are, it seems to me they must have some limitation. Suppose that a vessel was seized by a terrorist organisation wanting to raise money, a ransom demand was made for a million pounds and the owner declined to pay the money: could it be said that the detention of the vessel thereafter was through a financial cause? In a literal sense, it could, but no one would suggest that such a conclusion would accord with the spirit of the policy. The perils insured against include seizure of vessels by terrorist organisations and a common major procedure would be to make a monetary demand. It is easy to say as a matter of instinct that the exclusion under 4.1.6 would not apply in those circumstances, but as a matter of construction, I ask the question why it would not? It seems to me that, in any given case, the court has to ask itself as a matter of fact whether the real or effective or dominant cause of the seizure and detention is a financial cause or something else. In the case of “THE WONDROUS”, the reason for the deemed detainment was financial. In the present case, it seems to me that the dominant reason for the detainment of the vessel by the AFMA was that it had been caught fishing in the Australian Fishing Zone, and the fact that its release might have been procured by the payment of money should not lead to the conclusion that the cause of the detainment was financial.”
“The structure of Clause 5 pre-supposes that the loss (which would otherwise be insured) is one “arising from” the various exceptions. Failure to provide security, or to pay a fine or penalty may in some circumstances prevent restoration of the vessel, after there has already been an operation of insured perils and after there is therefore either already a loss, or a situation has already arisen which (if not remedied) will develop into one of total loss. It is open to question whether these exceptions in 5.1.5 should apply in such circumstances; the wording of the clause can more aptly be applied where the failure to provide security or effect payment is what brings about the operation of an insured peril.”
“be construed so as to afford a defence in circumstances where it would have been unreasonable to provide the security etc demanded in order to recover the vessel, or where the amounts involved would otherwise enable her to be treated as a total loss.”
See also Stringer –v- English & Scottish Marine Insurance Co (1869) LR 4 QB 676 at 691-2, affirmed on appeal at LR 5 QB 599 at 603, a case in which the court held it to be no answer to a claim for total loss that the vessel could have been recovered by provision of bail to its full value. We agree that such a limitation is indeed appropriate, and would hold that the exception in respect of a failure to provide security should be read as inoperative in a case where the amount and circumstances of such provision would otherwise enable the vessel to be treated as a total loss.
“Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purposes of determining whether there has been a constructive total loss.”
“19.1 In ascertaining whether the Vessel is a constructive total loss, the insured value shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the vessel or wreck shall be taken into account.
19.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the vessel shall be recoverable hereunder unless such costs will exceed the insured value. In making this determination, only the cost relating to a single accident or sequence of damages arising from the same accident shall be taken into account.”
“There is a constructive total loss where the assured is deprived of possession of his ship ... by a peril insured against and ... (b) the cost of recovering the ship ... would exceed their value when recovered.”
CONCLUSION