Dassault Aviation SA v Mitsui Sumitomo Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lord Justice Coulson,Lord Justice Phillips |
| Judgment Date | 12 January 2024 |
| Neutral Citation | [2024] EWCA Civ 5 |
| Year | 2024 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Appeal No: CA-2023-000137 |
[2024] EWCA Civ 5
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lord Justice Coulson
and
Lord Justice Phillips
Appeal No: CA-2023-000137
Case No: CL-2022-000210
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BUSINESS AND PROPERTY COURTS OF ENGLAND
AND WALES
COMMERCIAL COURT (KBD)
Mrs Justice Cockerill
Royal Courts of Justice
Strand, London, WC2A 2LL
Chris Smith KC and Benjamin Joseph (instructed by Norton Rose Fulbright LLP) for the Defendant/Appellant (MSI)
Paul Stanley KC, Nico Leslie and Daniel Carrall-Green (instructed by Addleshaw Goddard LLP) for the Claimant/Respondent (Dassault)
Hearing dates: 12 December 2023
APPROVED JUDGMENT
Sir Geoffrey Vos, MASTER OF THE ROLLS
Introduction
At its core, this appeal raises a single issue of contractual interpretation. The clause to be construed is a non-assignment clause in a contract dated 6 March 2015 for the sale of two Falcon maritime surveillance aircraft and spares (the aircraft) from Dassault in France to Mitsui Bussan Aerospace Co. Ltd. (MBA) in Japan (the sale contract). The sale contract was governed by English law. The aircraft were, however, to be sold on by MBA to the Japanese Coast Guard under a purchase contract of the same date governed by Japanese law (the sub-sale contract).
Article 15 in the sale contract (article 15) was headed “assignment – transfer” and provided as follows:
this Contract shall not be assigned or transferred in whole or in part by any Party to any third party, for any reason whatsoever, without the prior written consent of the other Party and any such assignment, transfer or attempt to assign or transfer any interest or right hereunder shall be null and void without the prior written consent of the other Party.
Notwithstanding the above and subject to a Seller's prior notice to Buyer, Seller shall have the right to enter into subcontracting arrangements with any third party, for the purpose of the performance of this Contract [emphasis added].
The proper interpretation of article 15 arose because Dassault challenged the jurisdiction of the arbitrators (Lord Lawrence Collins, Joe Smouha KC and Simon Crookenden KC) in an ICC arbitration in London initiated by MSI against Dassault in mid-2021. MBA had entered into a contract of insurance with MSI on 30 September 2017 (the insurance contract) to insure the risk of it (MBA) being held liable to the Japanese Coast Guard for late delivery of the aircraft. The aircraft were indeed delivered late. MBA duly claimed against MSI under the insurance contract. On 11 May 2020, MSI duly paid approximately JPY 1.8 billion (in respect of agreed liquidated damages due under the sub-sale contract) to the Japanese Coast Guard.
The arbitrators decided, and it was common ground before us, that, as a result of the payment made by MBA's insurers (MSI), MBA's claims against Dassault were transferred to MSI by operation of law under article 25 of the (Japanese) Insurance Act (Act No. 56 of 2008) (article 25). The insurance contract also provided (by article 35) for the transfer of third party damages claims from MBA to MSI, but the arbitrators also decided that the transfer of rights in this case had not taken place under that provision.
Article 25 (of the Insurance Act) provided as follows under the heading “Subrogation Regarding Claim”:
An insurer, when the insurer has made an insurance proceeds payment, shall, by operation of law, be subrogated with regard to any claim acquired by the insured due to the occurrence of any damages arising from an insured event …, up to the smaller of the amounts listed below …
The majority of the arbitrators (Lord Collins and Mr Smouha) decided that, because the transfer of the third party claims from MBA to MSI was by operation of law under article 25, Dassault's consent was not necessary under the prohibition of assignment in article 15. Accordingly, they held that the arbitral tribunal had jurisdiction to deal with MSI's direct claim against Dassault. Mr Crookenden dissented on a single point. He held that any transfer of rights from MBA to MSI under the insurance contract “would be the consequence of the voluntary decisions of MBA and MSI to enter into [the insurance contract]”.
Dassault appealed to the High Court under section 67 of the Arbitration Act 1996. Cockerill J (the judge) allowed the appeal, deciding that the arbitrators had no jurisdiction to decide the dispute between MSI and Dassault. She said expressly that she had reached her conclusion with an unusual degree of hesitation [121]. She concluded, in substance, that (i) a series of old authorities delineated, in relation to non-assignment clauses, a distinction between willing/voluntary and unwilling/involuntary transfers [112], (ii) the wording of article 15 pointed towards its general application, subject only to what was saved by the words “by any party”, which could perfectly well accommodate “[t]he same degree of voluntariness indicated in the authorities” [113], and (iii) the context/commercial purpose indications were not sufficiently clear or weighty to displace the position indicated by a consideration of the words [119]. In essence, therefore, the judge decided that article 15 (of the sale contract) caught and prohibited the transfer of MBA's claims to MSI under article 25 (of the Insurance Act).
On this appeal, MSI contends that the plain meaning of article 15 is that the sale contract cannot be assigned or transferred “by any Party”. MBA did not transfer its claims under the sale contract to MSI. Those claims were transferred to MSI by operation of law under article 25, as the arbitrators unanimously held and was not challenged by Dassault here or below. A transfer by operation of law is not one made “by any Party”. Moreover, the authorities support the proposition that an assignment by operation of law does not violate a non-assignment provision.
Dassault supports the judge's reasoning. Article 15 was a wide prohibition that should be given its full effect. There were good commercial reasons why the parties would have wanted to prevent all transfers. Those reasons included commercial confidentiality in the terms of the sale contract and the specifications of military equipment. As a matter of natural language, the words “by any Party” were apt to include the words “caused by any Party”. MBA's transfer to MSI was a voluntary one that MBA had caused by entering into the insurance contract, claiming under it and benefitting from the monies paid out.
Both parties made submissions about whether article 15 would or would not have prevented MSI making a subrogated claim against Dassault in MBA's name had the insurance contract been governed by English law. Ultimately, it seems to have been accepted on all sides that it would not. Whilst the juridical basis of the right of subrogation in English law is a matter of considerable academic interest, it does not seem to me that the question really arises on the facts of this case.
I have decided that the arbitrators were right about the proper interpretation of article 15 for the reasons that follow. The essential point is that I do not think that the words of article 15 are ambiguous or unclear. They prevent any transfer that is effected by a party to the sale contract, but not a transfer that is effected by operation of law. It is not, therefore, necessary to consider whether the commercial matrix of fact points in favour of one of two possible meanings of article 15. But even if one could, it is far from clear that article 15 was intended to catch transfers arising from insurance payouts, by whatever law those insurance contracts might be governed.
It is perhaps important to note three matters of commercial background at the outset. First, both sides in effect agree that it remains open, in theory at least, to MBA to make a direct claim in its own name against Dassault (so far as Dassault was concerned, that was made clear in oral argument). Secondly, it has not been explained to us why that has not happened thus far, but the possibility does not affect the legal questions we have to decide. Thirdly, despite the coincidence of names, we were told that MBA and MSI are not connected parties.
I will proceed in this judgment to deal with (i) the terms of the sale contract, (ii) the authorities that the parties have cited so far as relevant, (iii) the correct approach to the interpretation of article 15, and (iv) the proper interpretation of article 15.
The terms of the sale contract
I have already recited the terms of article 15 at [2] above.
Article 20.1 of the sale contract provided as follows under the heading “Confidentiality”:
Except with the written consent of the other Parties, each...
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