Continental Illinois National Bank & Trust Company of Chicago v Alliance Assurance Company Ltd (Captain Panagos D.P.)

JurisdictionEngland & Wales
JudgeLORD JUSTICE NEILL,SIR ROGER ORMROD,LORD JUSTICE O'CONNOR
Judgment Date29 July 1988
Neutral Citation[1988] EWCA Civ J0729-10
Docket Number88/0697
CourtCourt of Appeal (Civil Division)
Date29 July 1988

[1988] EWCA Civ J0729-10

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

EVANS J.

Royal Courts of Justice

Before:

Lord Justice O'Connor

Lord Justice Neill

and

Sir Roger Ormrod

88/0697

Continental Illinois National Bank & Trust Co. Of Chicago and Xenofon Maritime S.A.
Appellants (Plaintiffs)
and
Alliance Assurance Co. Ltd
Respondents (Defendants)
The "Captain Panagos"

MR. DAVID STEEL, Q.C. and MR. NIGEL TEARE (instructed by Messrs Horrocks & Co.) appeared on behalf of the Appellants (Plaintiffs).

MR. ADRIAN W. HAMILTON Q.C., MR. STEPHEN TOMLINSON Q.C. and MR. STEPHEN KENNY (instructed by Messrs Ince & Co.) appeared on behalf for the Respondents (Defendants).

LORD JUSTICE NEILL
1

This is an appeal from the judgment of Evans J. dated 23rd May 1986 whereby he dismissed the plaintiffs' claim against the defendants under a policy of marine insurance. The second plaintiffs were the owners of the m.v. "Captain Panagos DP" ("the vessel"). The first plaintiffs are the mortgagees of the vessel and the assignees of the policy which was effected with the defendants and others. The judgment of Evans J. is reported at [1986] 2 Lloyds Reports 470.

2

On 20th November 1982 the vessel grounded on the edge of the Farazan Sands on the eastern shore of the Red Sea in the course of a voyage from Canada to Bandar Abbas in Iran. On 23rd November, whilst still aground, the vessel suffered from a serious fire which caused extensive damage to the engine room and to other parts of the vessel.

3

By a writ issued on 26th August 1983 the plaintiffs claimed against the defendants as the insurers with others of the risks covered by the policy for the constructive total loss of the vessel. The insured risks relied upon were "perils of the seas" and "fire". By their re-amended points of defence the defendants did not admit that the vessel grounded fortuitously or that any of the damage was caused by an insured peril. In addition they pleaded affirmatively that the second plaintiffs "procured or connived at the wilful running aground and setting on fire of the vessel". No allegation of any kind was made in the pleadings against the first plaintiffs, though it has been accepted on their behalf that as the law stands at present any claim by them is liable to be defeated by a defence which is available against the second plaintiffs.

4

The trial of the action opened on 29th October 1985. The hearing lasted for about forty days and concluded on 21st January 1986. Much of the trial was concerned with the circumstances in which the vessel grounded and with the circumstances of the subsequent fires which took place on board. As to the grounding the judge came to the conclusion (ibid. at p.483) that the vessel was deliberately run aground by the master (Captain Lambros) "probably with the active cooperation" of the second officer (Mr. Dedes). As to the fire the judge came to the conclusion that it was deliberately caused by the master and the second engineer (ibid. pp.499, 500, 512). In addition, the judge concluded that Captain Pateras, who at the material time was the managing director and the principal shareholder of the second plaintiffs, had connived at both the grounding and the main fire. At p.510 the judge expressed his conclusion as to privity of the owners (the second plaintiffs) in these terms:

"I am left in no doubt that the vessel was deliberately run aground and set afire, and that the master carried out these operations in accordance with a preconceived plan. Whether it was his own plan, or one that was given to him, it is impossible to say. He is intelligent and competent enough to have organised the operations himself. The evidence does not establish, in my judgment, that the master received detailed instructions from Captain Pateras and it is possible that the master made the original suggestion to him and took matters largely into his own hands…. But I am sure, taking account of the whole story, that the master received a sufficient indication of assent and authority from Captain Pateras, to cause him to proceed as he did. I cannot see any realistic basis for concluding, on the evidence, that Captain Pateras authorised one casualty but not the other. I therefore find that the defendants' allegations of privity are proved."

5

As a result, Evans J. rejected the plaintiffs' claim on the basis:

  • (a) That they had failed to prove a loss by perils of the seas because the grounding was deliberate.

  • (b) That even if a barratry claim had been pleaded (which it had not, though "barratry of the master and mariners" was an insured risk. (6:272)), it would have been defeated because the owners had connived at the grounding.

  • (c) That the plaintiffs had proved a loss by fire becaue a barratrous fire was a fire within the meaning of the policy, but that the claim for loss by fire was defeated by reason of the owners' connivance. On this aspect of the case it may be noted that in the "Alexion Hope" [1988] 1 Lloyds Reports 311 it was held that "fire" in a marine policy includes, as a matter of construction, a fire started deliberately by a stranger to the insurance: see per Lloyd L.J. at p.317.

6

In reaching his conclusion that Captain Pateras was privy to the grounding and to the fire the judge had to rely on the circumstantial evidence and on the inferences which he felt able to draw from that evidence. There is no direct evidence against Captain Pateras. He had died on 27th February 1983, some three months after the casualties, at the early age of 46. His death from a heart attack was sudden and unexpected and, as the judge recognised, he never had an opportunity of defending himself against the serious allegations of wilful misconduct and fraud which were made against him in the action and which the judge had to decide in his absence.

7

The issues in the appeal

8

By their amended Notice of Appeal dated 23rd October 1986 the plaintiffs sought (inter alia) to challenge the finding that the vessel was deliberately run aground. At the outset of the hearing, however, Mr. David Steel Q.C. made it clear that this ground of appeal was no longer pursued. It therefore became unnecessary for us to examine in detail the precise circumstances of the grounding which the judge had had to consider at length with the assistance of a substantial amount of expert evidence.

9

On the other hand at the hearing in this court we had, in the form of a diary written by Captain Pateras in the months before he died, a quantity of written material which was not before the judge and which the plaintiffs sought to introduce as fresh evidence. In addition we had before us an opposed application further to amend the points of claim to introduce a claim for loss by barratry and, if this application succeeded, a partly opposed application further to amend the points of defence.

10

Taking account of these further matters it is possible to formulate the issues which arise for decision in this appeal as follows:

  • (1) Whether the court should admit the diaries of Captain Pateras as further evidence.

  • (2) Whether in the circumstances of this case it is necessary for the plaintiffs further to amend the points of claim so as to plead, as an alternative claim, loss by barratry, and, if so, whether the plaintiffs should be granted such leave.

  • (3) Whether the defendants should be granted leave further to amend the points of defence.

  • (4) Whether the defendants have proved, taking account of the whole of the evidence now before the court, that the second plaintiffs connived at the grounding of the vessel.

  • (5) Whether the defendants have proved, taking account of the whole of the evidence now before the court, that the second plaintiffs connived at the setting fire to the vessel.

  • (6) Whether, in a claim for loss by barratry, the plaintiffs have to prove that the deliberate grounding was to the prejudice of the owners; in other words, is it for the owners to establish that the grounding was without their consent or connivance?

11

It will be appreciated that the central issues in this appeal are issues (4) and (5). Nevertheless, I propose to deal first with issues (1), (2) and (3) so that in due course the central issues can be examined in the light of all the admitted evidence and with the pleadings in their final form.

12

I should also record at this stage that the plaintiffs wish to reserve for possible argument hereafter in the House of Lords the point that notwithstanding the decision of the majority of the House in Samuel and Co. Ltd. v. Dumas [1924] A.C. 431 a deliberate scuttling is capable of constituting a loss by a peril of the sea within the meaning of a marine policy.

13

The diaries

14

At the outset of the hearing of the appeal the plaintiffs applied for leave to put before the court by way of further evidence a large number of translated extracts from the diaries kept by Captain Pateras during his lifetime. The diaries had not been disclosed on discovery. The application was opposed.

15

It was accepted by the plaintiffs that if the application were to succeed they would have to show that special grounds existed to justify the admission of further evidence: see R.S.C. Order 59, rule 10 (2). In practice this meant that they had to satisfy the three conditions formulated in Ladd v. Marshall [1954] 1 W.L.R. 1489 and approved by the House of Lords in Skone v. Skone [1971] 1 W.L.R. 812. The three conditions were set out by Denning L.J. in Ladd v. Marshall (supra) in these terms at p.1491:

"To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled; first, it must be shown that the evidence...

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