Aspen Underwriting Ltd and Ors v Credit Europe Bank NV
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Moylan,Lord Justice Gross |
| Judgment Date | 21 November 2018 |
| Neutral Citation | [2018] EWCA Civ 2590 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: 2017/3203 2017/3193 2017/3525 |
| Date | 21 November 2018 |
[2018] EWCA Civ 2590
Lord Justice Gross
Lord Justice Moylan
and
Lord Justice Coulson
Case No: 2017/3203 2017/3193 2017/3525
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL DIVISION
The Hon. Mr Justice Teare
Royal Courts of Justice Strand, London, WC2A 2LL
Steven Berry QC and Adam Board (instructed by Campbell Johnston Clark Ltd) for the Appellant
Peter MacDonald Eggers QC and Sandra Healy (instructed by Norton Rose Fulbright LLP) for the Respondent
Hearing dates: 1–2 May 2018
Judgment Approved
INTRODUCTION
This is a dispute as to jurisdiction between the Claimants (“Underwriters”) and the Third Defendant (“the Bank”), in connection with Underwriters' claim to recover from the Bank insurance proceeds previously paid out to ship owners (“Owners”) and the Bank.
The essence of the matter was succinctly summarised in the judgment of Teare J, dated 27 July 2017: [2017] EWHC 1904 (Comm.); [2017] 2 Lloyd's Rep. 295 (“the judgment”):
“1. On 3 April 2013 the vessel ATLANTIK CONFIDENCE (‘the Vessel’) sank in the Gulf of Aden. It has been held by this court in a Limitation Action commenced by her Owners, the First Defendant, that the Vessel was deliberately sunk by the master and chief engineer at the request of Mr Agaoglu, the alter ego of the Owners; see The Atlantik Confidence [2016] 2 Lloyd's Reports 525. In this action the Hull Underwriters of the Vessel, who paid out on the hull and machinery policy (‘the Policy’) in August 2013 but who now consider, on further investigation, that the Vessel was deliberately cast away by her Owners, claim recovery of the insurance proceeds which were paid to Owners and the Vessel's mortgagees, Credit Europe Bank NV, the Third Defendant (‘the Bank’).
2. The Bank is domiciled in the Netherlands. These proceedings were served on the Bank there. The Bank maintains that under the Brussels Regulation this court has no jurisdiction to hear and determine the claim against the Bank. It must be sued in the courts of the Netherlands where it is domiciled. The Hull Underwriters maintain that this court has such jurisdiction…..”
As appears from the judgment and a further (short) judgment of Teare J dated 1 December 2017 (“the second judgment”), both Underwriters and the Bank had some success before the Judge, with Underwriters, however, ultimately enjoying partial success in establishing jurisdiction for their misrepresentation claims here. As, however, Underwriters failed to establish jurisdiction for their claim in restitution, the upshot is that (absent sensible agreement) different aspects of these proceedings must be pursued in different jurisdictions. This is an unfortunate consequence of the jurisdiction rules contained in Brussels Recast (as defined below). Further, on the facts of the present case, this matter cannot be remedied by Underwriters pursuing the entirety of their claim against the Bank in the Netherlands, given that their claims against Owners and Managers are brought in this jurisdiction. In these circumstances, before this Court, the Bank is thus an Appellant and a Cross-Respondent, whereas Underwriters are a Respondent and Cross-Appellant.
The principal Issues before this Court fall conveniently under the following headings:
i) What is the evidential standard to be adopted by the Court as to whether it has jurisdiction under the Brussels Regulation Recast (Regulation (EU) 1215/2012) (“Brussels Recast”)? (“Issue I: The evidential standard”)
ii) Whether the Court has jurisdiction pursuant to the exclusive English jurisdiction clause contained in the Settlement Agreement dated 6 August 2013 (“the Settlement Agreement”)? (“Issue II: The Settlement Agreement”)
iii) Whether the Court has jurisdiction pursuant to the exclusive English jurisdiction clause contained in the Hull and Machinery Insurance Policy for the period of 12 months from 15 October 2012 to 15 October 2013 (“the Policy”)? (“Issue III: The Policy”)
iv) Whether Underwriters' claims are matters relating to insurance within Chapter II, Section 3 (“the Insurance Section”) of Brussels Recast? (“Issue IV: Matters Relating to Insurance”)
v) If the answer to Issue IV is “yes”, whether the Bank is entitled to rely on the Insurance Section if it is not the economically weaker party within the meaning in Recital (18) of Brussels Recast? (“Issue V: Economic Imbalance”)
vi) Whether Underwriters' claims for damages for misrepresentation are matters relating to tort, delict or quasi-delict under Art. 7(2) of Brussels Recast, or, alternatively are matters relating to contract within the meaning of Art. 7(1) thereof (“Issue VI: Damages for Misrepresentation”)
vii) Whether Underwriters' claims for restitution are matters relating to tort, delict or quasi-delict under Art. 7(2) of Brussels Recast? (“Issue VII: Restitution”).
In outline terms, Underwriters challenge the approach adopted by the Judge under Issue I. On Issues II, III and IV, the Bank succeeded before the Judge. However, on Issue V, the Judge found in favour of Underwriters, as he did on Issue VI. Before the Judge, the Bank succeeded on Issue VII.
I shall deal with the Issues in turn but, before doing so, it is necessary to say something as to the facts, essentially (and gratefully) adopting the Judge's summary.
THE FACTS
Financing: In the judgment, the Judge recounted the history of the financing arrangements entered into by Owners and the Bank in respect of the Vessel, together with the financing arrangements for a vessel, The Atlantik Glory, in associated ownership. Thus:
“4. By a loan agreement dated 9 March 2010 (but subsequently amended) the Bank lent $38.2m to the Owners and to Capella Shipping Limited, the owners of the ATLANTIK GLORY, to refinance the purchase of the Vessel and the ATLANTIK GLORY. The loan was secured by a first mortgage on both vessels and by a deed of assignment which included an assignment of the insurances on the vessels….
5. By a further loan agreement (entitled Framework Credit Agreement) dated 14 March 2011 the Bank lent $3.5m to the Owners for working capital and enabling overdraft. This loan was secured by a second mortgage and a second deed of assignment.
6. At the beginning of April 2013 the debt against the Vessel under the first loan was just under $10m, namely $9,990,158, and under the second loan just under $3.9m, namely $3,899,704.86. The debt against the ATLANTIK GLORY under the first loan was just under $25m, namely $24,906,136.39. Those sums included missed repayment of principal in the sum of $723,280 and missed repayment of interest in the sum of $685,068.”
The Policy: Reference has already been made to the Policy. It contained a choice of law and jurisdiction clause in these terms:
“This insurance shall be governed by and construed in accordance with the law of England and Wales and each party agrees to submit to the exclusive jurisdiction of the courts of England and Wales.”
The Policy includes a schedule of the respective owners and mortgagees. The value of the Vessel was given as US$22 million. A Contract Endorsement in respect of the Vessel, dated 8 February 2013, recorded a change in the managers and that the Vessel was mortgaged in favour of the Bank “…as per Notices of Assignment and Loss Payable Clauses attached”.
The Notice of Assignment, dated 11 February 2013 (“the Notice of Assignment”), provided that Owners:
“…. GIVE NOTICE that, by an assignment in writing dated 11 February, 2013, we assigned to ….[the Bank]…, a company incorporated under the laws of the Netherlands acting through its Malta branch…..all our right, title and interest in and to all insurances effected or to be effected in respect of the Vessel, including the insurances constituted by the policy on which this notice is endorsed, and including all money payable and to become payable thereunder or in connection therewith….”
The Loss Payable Clause of the same date (“the Loss Payable Clause”), noted the assignment and went on to provide (so far as here relevant) as follows:
“Claims payable under this policy in respect of a total or constructive total or an arranged or agreed or compromised total loss or unrepaired damage and all claims which (in the opinion of the Mortgagee) are analogous thereto shall be payable to the Mortgagee up to the Mortgagee's mortgage interest.”
Events after the loss of the Vessel: The Vessel sank on 3 April 2013. As set out in the judgment, various discussions between Owners and the Bank followed in short order, as to payment of Owners' operational costs and other matters. The Bank was informed, apparently to the surprise of a Mr Tayfun, the Division Director since 2006 of the Bank's Corporate Credits Department, that the amount which would be paid under the Policy was the insured value (namely US$22 million), rather than the Vessel's market value. There was some debate as to how the insurance proceeds would be applied.
On 4 April 2013, Owners asked the Bank to provide a letter formally authorising Underwriters to pay the proceeds of the insurance claim to the brokers, Willis. Such a letter was forthcoming from the Bank, on 5 April 2013 (“the Letter of Authority”). It was addressed to “Underwriters concerned”, headed “Re: ‘Atlantik Confidence’/ 30 th March 2013 Fire, explosion and subsequently sank” and was in these terms:
“We hereby authorise you to pay to Willis Ltd all claims of whatsoever nature arising from the above mentioned casualty provided that (i) there are no amounts due under the policy and (ii) …[the Bank] is the sole loss payee of the policy.
We agree that settlement of such amounts in account or otherwise with Willis Ltd, shall be your absolute discharge in...
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