Argo Systems Fze v Liberty Insurance (Pte) and another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Aikens,Lord Justice Tomlinson,Lord Justice Laws |
| Judgment Date | 15 December 2011 |
| Neutral Citation | [2011] EWCA Civ 1572 |
| Docket Number | Case No: A3/2011/0631 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 December 2011 |
[2011] EWCA Civ 1572
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION,
LONDON MERCANTILE COURT
HIS HONOUR JUDGE MACKIE QC
2009FOLIO236
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Aikens
and
Lord Justice Tomlinson
Case No: A3/2011/0631
Mr Michael Davey (instructed by Bugden & Co) for the Appellant.
Mr Colin West (instructed by Michael Bynane & Co) for the Respondent.
Hearing date: 24 November 2011
The story so far
This appeal from an order of HHJ Mackie QC dated 21 February 2011 arises out of the total loss of a floating casino called "Copa Casino" ("the vessel") during a voyage under tow from Mobile, Alabama, to India, in March 2003. The vessel was, effectively, owned by the claimant ("Argo"). Argo had purchased the floating casino for scrap and she was to be towed as a dead ship by the tug "Fairplay XIV". The vessel was insured for this voyage under a voyage policy of marine insurance dated 11 March 2003. The policy was underwritten by the first defendant ("Liberty") and effected through a US producing broker DeWitt Stern ("DSI") and an English placing broker, the second defendant ("LSR"). The voyage began on 3 March 2003. On 14 March 2003 the vessel began to develop a list which gradually worsened. She sank in about 8,000 feet of water in the Caribbean Sea on 16 March 2003, thereby becoming an actual total loss.
The voyage policy incorporated the Institute Voyage Clauses (1983 version) and provided cover for the total loss of the vessel caused by perils of the sea. The policy was subject to English Law and Practice. It also contained a number of warranties, including one that stated: "warranted no release, waivers or "hold harmless" given to Tug and Towers". I shall call that "the Hold Harmless Warranty".
Argo made a claim on the policy in July 2003. This claim was declined in a letter dated 18 July 2003 and sent by Liberty's US lawyers, Fowler, Rodriguez & Chalos to LSR, who, as placing brokers, were then acting as agents for Argo. The parties have been in litigation in the United States and in England over Argo's claim since May 2004.
In the present proceedings an order was made for the trial of four preliminary issues. These concerned, first, the construction of the Hold Harmless Warranty to which I have referred above; secondly, whether the insurer, Liberty, had waived its right to rely on a breach of that warranty by Argo; thirdly, whether Liberty had affirmed the contract of insurance such that it was not entitled to avoid the policy for alleged misrepresentation by Argo and, lastly, whether, if Liberty had affirmed the contract, it could still claim damages for the alleged misrepresentations pursuant to section 2(1) of the Misrepresentation Act 1967.
Judge Mackie found that Argo was in breach of the warranty, that Liberty had waived its right to rely on that breach, that Liberty had affirmed the contract of insurance and so could not avoid it for misrepresentation and that Liberty was not entitled to claim damages for misrepresentation.
Argo has not appealed the judge's conclusion on breach of warranty. Liberty has not appealed the judge's conclusion on affirmation. The appeal before us, which we heard on 24 November 2011, therefore concerned only the questions of whether Liberty had waived its right to rely on the breach of warranty and whether Liberty had a right to claim damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967. In fact we only heard argument on the first of those two points.
The Voyage Policy dated 11 March 2003
The policy was written on behalf of Liberty by Marine Insurance Services Pte Ltd, a Singapore company, ("MIS") but nothing turns on that fact. The policy schedule stipulates that the vessel insured is "Copa Casino", described as " ex Galveston Pride" and built in 1956 and of 11,900 LDT. The period of insurance is stipulated as being "…from time of taking in tow by tug "FAIRPLAY XIV" at Gulf Port, Mississippi, thence in single tow on or about date to be agreed to Alang, India and until safe arrival there". The sum insured is given as US$1,225,000. The policy schedule also states that the insuring conditions are "as per Institute Voyage Clauses Hulls – total loss…" The Hold Harmless Warranty appears in the policy schedule under the heading "warranties". As already noted, it provides: "…Warranted no release, waivers or "hold harmless" given to Tug or Towers".
The Institute Voyage Clauses incorporated were those of the 1 October 1983 edition. Clause 1.1 is headed "Navigation". It provides:
"The Vessel is covered subject to the provisions of this insurance at all times and has leave to sail or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in distress but it is warranted that the Vessel shall not be towed, except as is customary or to the first safe port or place when in need of assistance, or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/or Managers and/or Charterers. This Clause 1.1 shall not exclude customary towage in connection with loading and discharging."
The Loss of the vessel and the US Proceedings
In December 2002 the vessel was at Gulf Port, Mississippi. On 23 December 2002 she was surveyed by a surveyor called Richard Carmack. On the same day the vessel was moved from Gulf Port, Mississippi to Mobile, Alabama. On 20 February 2003 the producing brokers, DSI, issued a marine cover note for the voyage of the vessel to Alang. The following day MIS, acting for Liberty, signed the slip for the insurance coverage of the vessel during the voyage. This was said to be "subject to survey". A "trip in tow" survey of the vessel and the tug "Fairplay XIV" was conducted by Franklin Skinner, a marine surveyor of Marine Surveying and Consulting. The surveys were undertaken at Mobile.
The contract for the tow of the vessel from the US Gulf to India was made subject to terms known as the "Towcon" International Towage Agreement (Lump Sum). This is a widely used and well known standard form of towing contract. Clause 18 of the standard form agreement provides for extensive mutual exceptions of liability and cross indemnities between the tug owner and the hirer of the tug. In this case, Argo was the hirer of the tug. At the trial of the preliminary issues before Judge Mackie, Liberty contended that the provisions of clause 18 of the Towcon terms were such as to breach the Hold Harmless Warranty. The judge accepted that submission and there is no appeal. This means that, subject to the issue of a possible waiver by the insurers of the breach of warranty, Argo's failure to comply with the warranty discharged Liberty from liability under the policy as from the breach of the warranty: see section 33(3) of the Marine Insurance Act 1906 ("the MIA 1906").1 Therefore, subject to the waiver argument, Liberty could be under no liability for the total loss of the vessel, which (obviously) occurred after the breach of warranty.
Following the total loss of the vessel on 16 March 2003, Liberty, through MIS, requested Argo to warrant to insurers that no release, waiver or hold harmless terms had been agreed with the tug or the towers. On 28 March 2003 Argo warranted as follows:
"With respect to the above claim
1. The Copa casino was being towed as a single tow only;
2. The Copa casino had no cargo on board;
3. No release, waivers or hold harmless has been given to Tug or Towers;
4. The above warranties have been fully complied with."
In June 2003 Liberty sought and received certain documents from Argo. These included the towage contract. On 18 July 2003 Fowler, Rodriguez & Chalos, Counsellors at Law based in New Orleans, Louisiana, who were retained by the insurers, wrote to LSR, the placing brokers, who were in the position of agents for the assured under the policy, viz. Argo. The judge noted, at [10] of the judgment, that Fowler, Rodrigues & Chalos had offices in London and that they "…were writing, without hesitation, about an English law policy". The judge stated that he saw "…no reason to make any allowances for the words chosen in this letter". Nor do I.
The letter stated, in the first paragraph that, "for the reasons set out below, [the insurers] hereby denies coverage for claims by the assured arising from the sinking [of the vessel on 16 March 2003]". The first ground put forward was that there was no evidence that the sinking was due to an insured peril and thus no basis to support a claim under the policy. Secondly, the letter alleged that the tug and the tow were in violation of a "weather state warranty". Thirdly, the letter stated that the lawyers had received information indicating that the assured had made several misrepresentations. Six alleged misrepresentations were identified. After drawing attention to various other matters the letter ended by making the following statement:
"[the insurer therefore] "reserves the right to alter its position in light of discovery of previously undisclosed information which would materially alter the facts and circumstances known. Should the assured wish to provide any additional information concerning this claim, we will review it. The foregoing is without prejudice to all the remaining terms and conditions of the policy, along with any other defenses which may be discovered after further investigation".
On 3 September 2003 Mr Richard A Zimmerman, a New York attorney then instructed by Argo,...
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