Glencore International AG v Ryan (The Beursgracht) (No 1)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE TUCKEY,LORD JUSTICE JONATHAN PARKER |
| Judgment Date | 21 December 2001 |
| Neutral Citation | [2001] EWCA Civ 2051 |
| Docket Number | B2/2001/1432 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 2001 |
[2001] EWCA Civ 2051
Lord Justice Tuckey and
Lord Justice Jonathan Parker
B2/2001/1432
B2/2001/1434
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(His Honour Judge Hallgarten QC)
Royal Courts of Justice
Strand
London WC2
Mr T Saloman QC and Mr G Geary (instructed by Messrs Davies Arnold Cooper, London EC4) appeared on behalf of the Appellant Defendant.
Mr A Hunter (instructed by Messrs Clyde & Co, London EC3) appeared on behalf of the Respondent Claimant.
The main question in these two appeals is whether the open cover against charterers' liability provided by the appellant underwriters to the respondent assured gave cover automatically when the insured chartered a vessel and so assumed such a risk or whether underwriters were only bound when they received a declaration of the risk to the cover from the assured. The question arises in respect of a risk where the declaration was not made until over five years after the charter and the accident giving rise to the assured's liability under it.
Judge Hallgarten QC decided this question as a preliminary issue in the assured's favour. At the subsequent trial he also rejected underwriters' alternative defences that a declaration was a condition precedent to their liability, that the obligation to make declarations was an insurance warranty and/or that the failure to declare was a serious breach of an innominate term of the cover. Underwriters appeal both decisions with the permission of the judge.
The assured (formerly Marc Rich & Co AG) are well known international traders. Their business often requires them to charter vessels to carry a variety of cargoes from and to ports around the world. The open cover was part of a programme of insurance covering their trading activities which had been placed in a number of markets for a number of years. The contract in question was placed in London on a slip which has not survived. It is agreed, however, that its terms were set out in a cover note dated 1st November 1986 from the Belgium producing brokers to the assured's insurance agents in Amsterdam. Ninety-three per cent of the cover was written at Lloyd's. The representative defendant to the claim was the leading underwriter of the cover.
The cover note starts by identifying the assured as a number of Marc Rich companies in various countries around the world and/or: "any wholly-owned or financially controlled subsidiary, but it will not prejudice the Assured's rights when a declaration is done by one of the named Companies in this policy whereas the Charter Party has been signed by a party acting on instruction and on behalf of one of the named Assureds and for which Company the named Assured accepts full responsibility."
The interest insured is defined simply as "Charterers' liability".
Under the heading "Period" the cover note says:
"Open Cover to accept all vessels chartered by the Assured for and during the period of 12 calendar months commencing 1st November 1986 … and ending 31st October 1987 …
Expiry shall not prejudice risks which have attached prior to expiry becoming effective."
The length of each attachment and the class and age of the vessels covered are restricted.
Under the heading "Cargo" the cover note says:
"To accept all vessels chartered by the Assured to carry approved cargo, or held covered at terms, conditions and rates to be agreed, by Underwriters …"
A list of approved cargoes is then set out.
Under the heading "Conditions" the document says:
"It is agreed that all declarations of vessels chartered by Richco Rotterdam carrying bagged agricultural products will be inclusive of liability to cargo, and it is further agreed to include these declarations in the usual monthly bordereaux."
These conditions also excluded liability to cargo, although later in the cover note optional coverage was offered for cargo insured by the other party in the following terms:
"… the Assured has the option, if exercised prior to commencement of loading and prior to any known or reported loss or accident, to include loss of or damage to cargo for which the Assured may be liable as Charterers …"
Cover was limited to US$5 million for any one accident or occurrence. The leading underwriter was to approve charterparty terms, but once standard terms per type of traffic had been approved there was no need to submit future charterparties for individual attachments provided the approved standard terms were used.
Under the heading "Rates" rates were set out for time and voyage charters. In the "Voyage charters" section the words "monthly declarations" appear. Special rates and conditions then follow for coasters, iron briquettes, scrap, turnings and borings. In some of those special conditions there are references to declarations.
There was a certain amount of evidence before the judge as to how the cover was operated. He summarised this in his trial judgment as follows:
"(1)In reference to each particular month [the Lloyd's placing brokers] would produce a statement or slip to the effect that it was 'noted and agreed to include herein declarations as per attached schedule for' a particular month. This document would ordinarily be drawn up some 6 weeks after the end of the month to which it referred and would in due course be endorsed on behalf of Underwriters.
(2)The schedules in question would identify the underwriting year and month in question and would usually set out vessels in alphabetical order, giving details of each vessel's year of manufacture, [gross registered tonnage], space, commodity and voyage. There was also an entry for premium, but prior to that there was a 'remarks' column based on a code set out at the foot of the schedule: eg code 10 represented 'items being queried or amended on a subsequent schedule'.
(3)A feature of these schedules was that they gave no date either for the charterparty or the voyage, and I draw the inference that the schedule for a particular month was not necessarily confined to charterparties made or performed during that month.
(4)Indeed, monthly declarations continued to be made under the 1986/7 Open Cover for a considerable period into 1988. For instance, as late as 28.10.88, a slip was prepared for the month of July 1988, and as late as 6.12.88 one was prepared for the month of March 1988. The later declarations from December 1987 onwards showed fewer vessels—generally only a handful—compared with those made during the currency of the underwriting year or immediately thereafter: eg that for October 1987 drawn up 29.12.97 showed some seventy five different vessels/voyages.
(5)There was also evidence of the occasional individual declaration in relation to a single vessel, but no pattern can be discerned, save that a large number seem to have related to Richco and encompassed liability to cargo …"
The charterparty for the risk in question relating to the "Beursgracht" was made on 13th October 1987 for the carriage of an approved cargo, aluminium products, from Santos to Rotterdam. During loading in Brazil on 31st October 1987 there was an accident which caused injuries to a stevedore from which he died four days later. In the ordinary course of events, as the judge found, that charter would have been declared in the monthly declarations for October or November 1987, which were seen by underwriters on 29th December 1987 and 18th January 1988 respectively. However, the "Beursgracht" was not included in those declarations.
The first the assured heard of any claim arising out of the accident in Brazil was a letter from owners of 12th June 1991 saying that proceedings had recently been started against them in Brazil and asking the assured to undertake to meet any liability. The claim was notified to underwriters the following year and they agreed to settle Clyde & Co's fees for acting for the assured. But in due course the assured were told that no declaration of the "Beursgracht" could be traced. After a certain amount of correspondence between brokers and claims brokers an endorsement asking underwriters formally to accept a declaration was drawn up on 24th May 1993. It is not clear when this endorsement was presented to underwriters, but one can deduce something of what happened from a fax by the Lloyd's brokers to the assured's insurance agents dated 2nd August 1994, which says:
"We refer to our recent telephone conversation and believe that the claims documents are still held by the leading underwriter, having originally approached them for total fee settlement as of May 1992 of £9,226. Not currently having at the moment any claims documents, we are unable to establish whether Clydes' fee of £5,000 odd is part of the above figure or in addition these comments also apply to some other fee. However, what we can establish is that considerable time etc. was spent together with our placing director in seeing and discussing the matter with the leading underwriters on numerous occasions, including having to revert to you for additional information regarding the declarations."
At trial underwriters put the assured's good faith in issue. The judge found, however, that their omission to declare the "Beursgracht" was a good faith mistake. There is no appeal against this finding. The assured settled the claim against them in June 1996 by payment to owners of $75,000. This sum plus £22,541 (being the costs of...
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