Forsikringsaktieselskapet Vesta v Butcher

JurisdictionEngland & Wales
JudgeLORD JUSTICE O'CONNOR,LORD JUSTICE NEILL,SIR ROGER ORMROD
Judgment Date30 October 1987
Judgment citation (vLex)[1987] EWCA Civ J1030-6
Docket Number87/1067
CourtCourt of Appeal (Civil Division)
Date30 October 1987
Between
Forsikringsaktielskapet Vesta
Plaintiff (Respondent)
and
J.N.E. Butcher (Male)
First Defendant (Appellant)

and

Bain Dawes Limited
Second Defendant

and

The Aquacultural Insurance Service Limited
Third Defendant (Appellant)

[1987] EWCA Civ J1030-6

Before:

Lord Justice O'connor

Lord Justice Neill

and

Sir Roger Ormrod

87/1067

1979 F No 1032

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 HOBHOUSE

Royal Courts of Justice

MR. TIMOTHY WALKER, Q.C. and MR. ANDREW SMITH (instructed by Messrs. Clyde & Co., Solicitors, London EC3R 7BR) appeared on behalf of the First Defendant (Appellant).

MR. CHRISTOPHER PURCHAS (instructed by Messrs. Hewitt, Woollacott & Chown, Solicitors, London EC4N 5AR) appeared on behalf of the Third Defendant (Appellant).

MR. ADAM FENTON (instructed by Messrs. Richards Butler, Solicitors, London EC3A 8AA) appeared on behalf of the Plaintiff (Respondent).

LORD JUSTICE O'CONNOR
1

In September 1978 a very severe gale struck the coast of Norway and caused damage to a fish farm operated by Fjordlaks Tafjord A/s. Fjordlaks was insured in respect of the loss and damage sustained under a policy issued by Vesta, a large Norwegian insurance company. Vesta reinsured 90% of the risk in Lloyds and the first defendant is the representative underwriter. The second and third defendants are brokers in London.

2

The contracts of insurance and reinsurance each contained a clause that Fjordlaks would keep a 24-hour watch over the site. At all material times Fjordlaks was in breach of that clause. The clause was a safety regulation within the meaning of the Norwegian Insurance Contracts Act 1930. By Section 51 a breach of a safety regulation is no defence to a claim under the policy unless the loss was caused by the breach. Here the loss had nothing to do with an absence of a 24 hour watch and in due course Vesta settled the claim of Fjordlaks for 2.75 million Norwegian Krona and it is not suggested that that settlement was other than reasonable and proper.

3

One might have expected that that would have been an end of the matter, but it was not to be. Reinsurers refused to pay their 90% on the ground that the 24-hour watch clause was a warranty in a contract governed by English law and the breach entitled them to refuse to pay regardless of the position in Norway. Not surprisingly Vesta refused to accept so novel a stance by reinsurers and brought this action to recover 90% of the sum paid to Fjordlaks.

4

To guard against the possibility that they might not succeed against re-insurers Vesta joined the brokers, claiming against them that if the reinsurance was ineffective this was due to their breach of duty in failing to obtain back-to-back cover from reinsurers

5

The learned judge held that Vesta were entitled to recover against reinsurers. I agree with Neill L.J. that reinsurers' appeal against that finding should be dismissed for the reasons given by him.

6

The learned judge went on to consider the alternative claim by Vesta against the brokers in the event that Vesta could not recover from reinsurers. He held:-

(i) That Mr. Hewett's failure to report to reinsurers that Fjordlaks could not comply with the 24 hour watch clause was a breach of their duty owed to Vesta.

(ii) That but for the breach an acceptable solution to the 24 hour watch problem would have been found and the reinsurance would have been back-to-back.

(iii) That the breach was causative of the loss.

(iv) That Vesta were guilty of contributory negligence in that Mr. Kolbeinson should have remembered that he had had no reply from Mr. Hewett on the 24 hour watch problem.

(v) That fault should be apportioned 75% on Vesta and 25% on the brokers.

7

The brokers appeal against the finding that their breach of duty was causative of any loss. Vesta appeals against the findings of contributory negligence and apportionment on the grounds (a) that in law contributory negligence is no answer to a claim in contract; alternatively (b) that the apportionment was wholly unreasonable.

8

Like the learned judge, we heard full argument on this part of the case and the parties requested us to deal with this part of the appeal even if we decided to dismiss the reinsurers' appeal. I can deal with the issues of causation and apportionment very shortly. The learned judge said at page 32 of his judgment:

"The brokers contended that even if they were negligent in forgetting about the telephone call Vesta themselves were also negligent and had so many subsequent opportunities to put the matter right that the negligence of Vesta, not that of the brokers, should be treated as the sole cause of the failure to obtain a variation of the 24 hour watch warranty. Thus in January Vesta through Mr. Magnus and Mr. Kolbeinsen has been actively involved in discussions of the question with Mr. Pedersen. Mr. Kolbeinsen had, as I have found, a note on his file. He should have appreciated that he had not been rung back by Mr. Hewitt. In July or August Vesta were on the evidence again involved in the temporary employment of the night watchman. In September shortly before the casualty when Mr. Secretan again visited Norway, nothing was said about the matter.

"I quite agree that these factors show a high degree of blameworthiness on the part of Vesta but they are not enough altogether to remove the causative potency of the brokers' neglect of their duty as Vesta's brokers back in January. The brokers should have made and kept a note of the telephone call. Its importance was admitted. The necessity for action on their part was admitted. Their failure was just as much a continuing one as was Vesta's, although less grave. In my judgment the negligence of the brokers would have been causative had loss to Vesta resulted and I assess the relative degree of blameworthiness as to Vesta three-quarters and as to the brokers one-quarter."

9

For brokers it was submitted that Vesta, through Mr. Kolbeinsen on his own evidence, knew the different effect of a warranty in a contract of insurance in Norwegian and English law and that on the facts found by the learned judge he should have concluded that any loss occurring in September 1978 was caused solely by the fault of Vesta. In my judgment the learned judge was fully justified in concluding that causative potency of the negligence of the brokers had not been exhausted and for my part I do not think that there are any sufficient grounds for interfering with his apportionment of fault.

10

The important issue of law is whether on the facts of this case there is power to apportion under the Law Reform (Contributory Negligence) Act 1945 and thus reduce the damages recoverable by Vesta.

11

I start by pointing out that Vesta pleaded its claim against the brokers in contract and tort: (see paragraphs 10, 11 and 12 of the points of claim). This is but a recognition of what I regard as a clearly established principle that where under the general law a person owes a duty to another to exercise reasonable care and skill in some activity, a breach of that duty gives rise to a claim in tort notwithstanding the fact that the activity is the subject matter of a contract between them. In such a case the breach of duty will also be a breach of contract. The classic example of this situation is the relationship between doctor and patient.

12

Since the decision of the House of Lords in Hedley Byrne the relationship between the brokers and Vesta is another example. Mr. Longmore for Vesta accepts that this is so but he submits that if a plaintiff makes his claim in contract contributory negligence cannot be relied on by the defendant, whereas it is available if the claim is made in tort. If this contention is sound then the law has been sadly adrift for a very long time for it would mean that in employers' liability cases an injured employee could debar the employer from relying on any contributory negligence by framing his action in contract.

13

In support of his submission Mr. Longmore relied upon two decisions at first instance A.B. Marintrans v. Comet Shipping (1985) 1 Weekly Law Reports 1270 and Basildon D.C. v. Lesser (1985) Queen's Bench 839. The learned judge dealt with this submission at page 34 of his judgment:

"The question whether the 1945 Act applies to claims brought in contract can arise in a number of classes of case. Three categories can conveniently be identified:

(1) Where the defendant's liability arises from some contractual provision which does not depend on negligence on the part of the defendant.

(2) Where the defendant's liability arises from a contractual obligation which is expressed in terms of taking care (or its equivalent) but does not correspond to a common law duty to take care which would exist in the given case independently of contract.

(3) Where the defendant's liability in contract is the same as his liability in the tort of negligence independently of the existence of any contract."

14

The present case fell fairly and squarely within the learned judge's category (3). He said at page 36:

"The category (3) question has arisen in very many different types of case and the answer is treated as so obvious that it passes without any comment. It is commonplace that actions are brought by persons who have suffered personal injuries as the result of the negligence of the person sued and that there is a contractual as well as tortious relationship. In such cases apportionment of blame is invariably adopted by the court notwithstanding that the plaintiff could sue in contract as well as in tort. The example normally cited in the present context is the decision of the Court...

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