Bragg v Oceanus Mutual Underwriting Association (Bermuda) Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE STEPHENSON,LORD JUSTICE KERR,SIR DAVID CAIRNS
Judgment Date30 April 1982
Judgment citation (vLex)[1982] EWCA Civ J0430-1
Docket Number82/0178
CourtCourt of Appeal (Civil Division)
Date30 April 1982
Between:
James William Bragg (Suing on his own behalf and on behalf of all other members of Syndicate 65 at Lloyd's and certain other Lloyd's Syndicates)
Plaintiffs (Appellants)
and
Oceanus Mutual Underwriting Association (Bermuda) Limited
First Defendants (Respondents)

and

C.E. Heath & Company (Marine) Limited
Second Defendants (Respondents)
And Between:
Ulster Marine Insurance Company Limited (Suing on its own behalf and certain other insurance companies)
Plaintiffs (Respondents)
and
Oceanus Mutual Underwriting Association (Bermuda) Limited
First Defendants (Respondents)

and

C. E. Heath & Company (Marine) Limited
Second Defendants (Appellants)

(Consolidated by Order of Mr. Justice Neill dated 18th July 1980)

[1982] EWCA Civ J0430-1

Before:

Lord Justice Stephenson

Lord Justice Kerr

and

Sir David Cairns

82/0178

1978 B No. 2606

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

(MR. JUSTICE ROBERT GOFF)

Royal Courts of Justice

MR. JONATHAN MANCE Q.C. and MR. J. FLAUX (instructed by Messrs. Elborne, Mitchell & Co., Solicitors, London EC3R 6DS) appeared on behalf of the Plaintiffs (Appellants) (Respondents in second appeal).

MR. MICHAEL HARVEY Q.C. and MR. WILLIAM WOOD (instructed by Messrs. Herbert Smith & Co., Solicitors, London EC4 5SD) appeared on behalf of the First Defendants (Respondents).

MR. R. CORDARA and MR. VICTOR LYON (instructed by Messrs. Hewitt, Woollacott & Chown, Solicitors, London EC4N 5AU) appeared on behalf of the Second Defendants (Respondents) (Appellants in second appeal).

LORD JUSTICE STEPHENSON
1

I have asked Lord Justice Kerr to give the first judgment.

LORD JUSTICE KERR
2

These are appeals by the plaintiffs and the second defendants from a judgment of Mr. Justice Robert Goff given on 24th March 1982, whereby he gave leave to the first defendants to amend their points of defence. The issues arise in a heavy action which is due to come to trial in the Commercial Court in early Kay. We have accordingly heard the appeals as a matter of urgency, since their outcome has important implications for the scope of the issues at the trial. We announced at the end of the hearing last week that the appeals fail and must be dismissed, and that we would give our reasons as soon as possible. My reasons for dismissing these appeals are accordingly set out below.

3

The two plaintiffs are a representative Lloyds Underwriter and a representative Institute of London Insurance company. For convenience and brevity I will refer to them collectively as "Lloyds" and to this action as "the Lloyds action", in contrast to an earlier action brought against the first defendants ("Oceanus") alone by an American company, CTI International Incorporated, to which I will refer as "the CTI action". Oceanus are a Shipowners' Mutual Insurance Association, and the second defendants ("Heath") are marine insurance brokers. Both actions involve several million dollars.

4

The main ground of objection to certain of the amendments sought to be made to Oceanus' points of defence is that these are alleged to constitute an abuse of the process of the court, because the same issues were raised by, and decided against, Oceanus in the CTI action, although it is conceded that no question of res judicata or issue estoppel arises, since neither Lloyds nor Heath were parties to the CTI action. There is also an ancillary ground of objection that the application for the amendments is made unduly late. In order to deal with these matters it is necessary to say something about the background and the history of both actions. However, it is clearly undesirable to say more than is necessary for the purposes of the present appeals. I will therefore only refer to the alleged facts and the various contentions in outline, without any attempt at accuracy about details; and obviously without intending to express any views about the merits.

5

The background and history are shortly as follows. CTI is engaged in the business of leasing out containers to shipping lines on a very large scale. One of its main problems was that of damage sustained by the containers, and the consequent question whether the resulting responsibility and costs should fall on CTI or on their customers who hire the containers. Under CTI's standard forms of leasing it was ultimately provided that the first slice of any damage (US $250 in some cases and US $500 in others) should remain the responsibility of CTI, and CTI accordingly decided to insure themselves against this liability.

6

Initially CTI were insured in the United States by Messrs. Crum & Forster, through American brokers, Messrs. Alexander & Alexander. However, early in 1975 Crum & Forster became unhappy about their claims experience on this cover and declined to continue on risk beyond 1st June 1975. CTI accordingly instructed Alexander & Alexander to try to obtain fresh cover for them, and the latter approached Heath to see if the risk could be placed in the London market. Mr. Fleetwood of Heath was the person mainly concerned with these natters throughout, and he approached Mr. Bragg of Lloyds as leading underwriter. There were complex negotiations about premium rates between Mr. Fleetwood and Mr. Bragg which inevitably also involved discussion of the claims experience of Crum & Forster. Ultimately Mr. Bragg agreed on behalf of his syndicate to write a line covering the CTI risks without deduction, and this line was followed by some 23 other syndicates and company underwriters insuring these risks to the extent of 100% as from 1st June 1975.

7

However, by the beginning of 1976 it became apparent that the claims experience on the Lloyds insurance was equally unhappy, and a number of syndicates, including Mr. Bragg's, gave notice of cancellation as from 1st June 1976. Because of this, and as the result of further negotiations, Mr. Fleetwood persuaded the underwriters to allow the cover to run on up to 30th November 1976, but not beyond. However, thereafter Lloyds became even more concerned with the claims experience on this cover, and also as the result of an investigation which they arranged to be carried out by an adjuster, Mr. Bishop, who concluded that there appeared to have been non-disclosures. In the upshot Lloyds intimated to Mr. Fleetwood that they would seek to avoid the CTI cover for non-disclosure and misrepresentation, and would bring proceedings against Heath, unless they were relieved from liability for the "run-off" of the CTI policy by reinsurance. The run-off liability was a matter of great importance to them, because each container declared for insurance before 30th November 1976 remained covered for the duration of its then existing lease, which might be a period of years.

8

In these circumstances of pressure on Mr. Fleetwood he accordingly had the double task of finding new insurers for CTI as from 1st December 1976 and also reinsurers for the run-off of the Lloyds cover. He decided to approach Oceanus, initially to place the new cover. The person mainly concerned on behalf of Oceanus was a Mr. Lee. Again there were complex negotiations by Mr. Fleetwood, on this occasion with Mr. Lee, about premium rates, in which the claims experience of—on this occasion—Lloyds inevitably figured. Ultimately Oceanus agreed to take over the CTI cover as from 1st December 1976. Subsequently, and as the result of further negotiations between Mr. Fleetwood and Mr, Lee, Oceanus also agreed to reinsure the run-off of the Lloyds policy.

9

However, Oceanus, in their turn, then became greatly dissatisfied with their claims ratio on these risks, both under the direct insurance of CTI and under the reinsurance of Lloyds. After various warnings towards the end of 1977, Oceanus ultimately claimed in February 1978 to avoid both the CTI policy and the Lloyds reinsurance policy on grounds of non-disclosure and misrepresentation, in both cases—as they alleged—by Mr. Fleetwood. These claims then led to the two actions against Oceanus which have given rise to the present problem; the CTI action on the CTI policy against Oceanus alone, and the Lloyds action on their reinsurance policy against Oceanus, and alternatively against Heath for breach of duty. The central issue in both actions concerns the alleged non-disclosures and misrepresentations by Mr. Fleetwood of Heath in his various negotiations with Mr. Lee of Oceanus.

10

The next development was that in 1980 Oceanus applied for an order to consolidate the two actions. This is important, because if an order for consolidation had been made, the present problem would not have arisen. It is also important in considering whether Oceanus' application to make the amendments which form the subject-matter of these appeals constitutes an abuse of the process of the court. On the application for consolidation the case for Oceanus was, not surprisingly, that many of the important issues, and much of the evidence and many of the witnesses likely to be called, are common to both actions. However, the application was strongly opposed by all the three other parties involved, CTI, Lloyds and Heath. CTI said, again not surprisingly, that they were not concerned with the Lloyds reinsurance, and they also pointed out that their action was substantially more advanced. Lloyds, for their part, understandably pointed out that they were not concerned with CTI's claims; and counsel on behalf of Heath adopted the submissions made on behalf of CTI and Lloyds. In the upshot the application of Oceanus for consolidation was refused, first by Mr. Justice Neill in the Commercial Court and then by this court on appeal in January 1981. With hindsight it...

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