Aspen Underwriting Ltd and Ors v Credit Europe Bank NV

JurisdictionEngland & Wales
JudgeLord Kerr,Lord Lloyd-Jones,Lord Reed,Lord Kitchin,Lord Hodge,Lady Hale,Lord Sales
Judgment Date01 April 2020
Neutral Citation[2020] UKSC 11
Date01 April 2020
CourtSupreme Court
Aspen Underwriting Ltd and others
(Appellants)
and
Credit Europe Bank NV
(Respondent)
Aspen Underwriting Ltd and others
(Respondents)
and
Credit Europe Bank NV
(Appellant)

[2020] UKSC 11

before

Lady Hale

Lord Reed

Lord Kerr

Lord Hodge

Lord Lloyd-Jones

Lord Kitchin

Lord Sales

Supreme Court

Hilary Term

On appeals from: [2017] EWHC 1904 (Comm) and [2018] EWCA Civ 2590

Aspen

Peter MacDonald Eggers QC

Sandra Healy

(Instructed by Kennedys Law LLP (London))

Credit Europe

Steven Berry QC

Adam Board

(Instructed by Campbell Johnston Clark Ltd (London))

Heard on 4 and 5 November 2019

Lord Hodge

( with whom Lady Hale, Lord Reed, Lord Kerr, Lord Lloyd-Jones, Lord Kitchin and Lord Sales agree)

1

These appeals are concerned with a dispute over the preliminary question of the jurisdiction of the High Court of England and Wales in proceedings which commenced in December 2016. As I explain more fully below, the underwriters, Aspen Underwriting Ltd and others (“the Insurers”), insured the “Atlantik Confidence” (“the Vessel”) under a hull and machinery risks insurance policy (“the Policy”) on the Vessel. Credit Europe NV (“the Bank”), a bank which is domiciled in The Netherlands, funded the re-financing of two vessels, including the Vessel, and took mortgages over the Vessel and assignments of the Policy, which identified the Bank as mortgagee, assignee and loss payee. The Policy had an exclusive jurisdiction clause by which each party submitted to the exclusive jurisdiction of the courts of England and Wales.

2

After the Vessel sank, the Insurers entered into a settlement agreement with the owners and managers of the Vessel (the “Owners” and “Managers”) and paid out under the Policy. That payment was made to the insurance brokers, Willis Ltd, at the Bank's direction. Thereafter, the Admiralty Court ( [2016] EWHC 2412 (Admlty); [2016] 2 Lloyd's Rep 525) held after the trial in a limitation action that the Owners and Managers had procured the scuttling of the Vessel. The Insurers commenced legal proceedings in the High Court against the Owners, the Managers and the Bank to recover the sums paid under the settlement agreement by seeking to avoid the settlement agreement on the grounds of the Owners' and Managers' misrepresentation or the Insurers' mistake, and by seeking damages or restitution. The Bank challenges the jurisdiction of the High Court in respect of the Insurers' claims against it.

3

The appeals raise four issues which concern the interpretation of the Brussels Regulation Recast (Regulation (EU) 1215/2012) (“the Regulation”). The issues are: (i) Does the High Court have jurisdiction pursuant to the exclusive jurisdiction clause contained in the Policy? (ii) Are the Insurers' claims against the Bank “matters relating to insurance” within Chapter II, section 3 of the Regulation? (iii) If the answer to (ii) is yes, is the Bank entitled to rely on section 3 by virtue of it falling within a class of persons who are entitled to the protection afforded by that section? (iv) Are the Insurers' claims for restitution matters relating to tort, delict or quasi-delict under article 7(2) of the Regulation?

4

In this judgment I address the first three issues. For reasons explained below, it is not necessary to address the fourth issue.

The background facts
5

By a loan agreement dated 9 March 2010 (which was subsequently amended) the Bank lent $38.2m to the Owners and to an associated company, Capella Shipping Ltd, the owners of the “Atlantik Glory”, to re-finance 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. In 2011 the Bank lent a further $3.5m to the Owners which was secured by a second mortgage and a second deed of assignment.

6

The Policy: The Policy gives the value of the Vessel as $22m. It contains a choice of law and exclusive 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 owners and mortgagees. A contract endorsement dated 8 February 2013 records that the Vessel was mortgaged in favour of the Bank “… as per Notices of Assignment and Loss Payable Clauses attached”.

7

The Notice of Assignment dated 11 February 2013 (“the Notice of Assignment”), provides that the Owners:

“… GIVE NOTICE that, by 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 …”

8

The Loss Payable Clause notes the assignment and provides (as far as relevant):

“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.”

9

The Bank's Letter of Authority: After the Vessel sank off the coast of Oman on 3 April 2013, discussions took place between the Owners and the Bank about the payment of the Owners' operational costs and other matters. The Owners informed the Bank that the insured value ($22m) rather than the Vessel's then market value would be paid out under the Policy and there was some debate as to how the insurance proceeds would be applied. On 4 April 2013, the Owners asked the Bank for a letter formally authorising the Insurers to pay the proceeds of the insurance claim to the brokers, Willis Ltd. The Bank issued a Letter of Authority dated 5 April 2013 relating to the loss of the Vessel and addressed to “the Underwriters concerned” 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 respect of such amounts paid.”

10

The negotiation of the Settlement Agreement: On 18 April 2013, the Bank asked the Owners for the current status of the claim. The Owners replied that they would ask their lawyer for a weekly report but that the correspondence could not be shared because it was private and confidential. The settlement was negotiated between the Owners, the Managers and the Insurers. The Bank was not involved in the negotiations or in the settlement of the insurance claim. Willis Ltd in an email dated 29 July 2013 stated its understanding that the Settlement Agreement would be signed by solicitors on “Owners'/Bank's behalf” but that understanding was mistaken because the Settlement Agreement, dated 6 August 2013, was signed by Clyde & Co LLP “as agents only for and on behalf of the Assureds” (defined as being the Owners and the Managers) and by Norton Rose Fulbright LLP “as agents only for and on behalf of Underwriters.”

11

The Settlement Agreement was between the Underwriters on the one hand and Kairos Shipping Ltd of Malta (as the Owners) and Zigana Gemi Isletmeleri AS of Turkey (as the Managers) and their associated companies on the other. In its recitals it narrated the purchase of the Policy, the Bank's status as mortgagee and loss payee under the Policy and the Bank's consent to the payment of the insurance proceeds to Willis Ltd. The recitals also narrated the loss of the Vessel and the wish of the parties to resolve all claims in relation to the Vessel and the casualty. In the operative clauses, the Underwriters agreed to pay $22m to the Assureds in full and final settlement and the Assureds agreed to discharge and release the Underwriters upon payment of the sum to Willis Ltd. The Assureds warranted that, subject to the interests of the Bank, they were the only parties entitled to the settlement sum. Clause 4 of the Settlement Agreement confirmed that (subject to an irrelevant exception) the parties did not intend to confer any benefit on third parties which could be enforced by third parties under the Contracts (Rights of Third Parties) Act 1999. Clause 5 provided that English law was the governing law of the contract and that the parties submitted to the exclusive jurisdiction of the English High Court in respect of any claims arising in connection with the agreement.

12

The insurance proceeds were paid to Willis Ltd in London on or around 16 August 2013. Thereafter, Willis Ltd paid US$21,970,272.74 to the Bank in Malta. Of that sum US$20,294,143.56 was transferred into an account held by Kairos Shipping Ltd to discharge various debts and US$1,676,129.18 was transferred into the account of Capella Shipping Ltd as part repayment of the debt against the Atlantik Glory.

13

After the Admiralty Court held, in Kairos Shipping Ltd v Enka & Co LLC (“The Atlantik Confidence”) [2016] 2 Lloyd's Rep 525, a limitation action raised by Kairos Shipping Ltd, that the master and chief engineer of the Vessel had sunk the Vessel at the request of Mr Agaoglu, the alter ego of the Owners, the Insurers raised the legal proceedings to which I now turn.

The legal proceedings
14

The Insurers alleged that, in presenting a claim under the Policy, the Owners and Managers on their own behalf and on behalf of the Bank) made express or implied representations which included that the Vessel had been lost by an insured peril, that the loss was...

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2 firm's commentaries
1 books & journal articles

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