Handelsbanken, Norwegian Branch of Svenska handelsbanken AB (Publ) v Christine Elaine Dandridge and Others [CA (Civil), 30/04/2002]
| Jurisdiction | England & Wales |
| Judge | Lord Justice Potter |
| Judgment Date | 30 April 2002 |
| Neutral Citation | [2002] EWCA Civ 577 |
| Docket Number | Case No: A3/2001/1176 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 April 2002 |
[2002] EWCA Civ 577
Master of the Rolls
Lord Justice Potter
Lady Justice Arden
Case No: A3/2001/1176
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (Mr Justice Toulson)
Lionel Persey QC and Timothy Hill Esquire (instructed by Ince & Co, London) for the appellant
Graham Charkham Esquire (instructed by Hill Taylor Dickinson, London) for the 1 st-11 th defendants/respondents.
Nigel Meeson Esquire (instructed by Beaumont & Son, London) for the 12 th defendant/respondent
This is the Judgment of the Court
This appeal is concerned with the construction of two standard clauses in the Institute War and Strikes Clauses Hulls-Time, 1983 edition ("the Institute War Clauses").
The claimants/appellants are a Norwegian Bank who claim as mortgagees of the mv "The Aliza Glacial" ("the vessel") under a Mortgagees' Interest Insurance ("MII") Marine Policy Number 1328/1996, dated 18 December 1996 and amended on 6 December 1997. The first to eleventh defendants are sued as underwriters of that policy. They aver, and for the purposes of the preliminary issues under appeal it is argued, that the cover granted was in accordance with the terms of slip policy reference MD966752/PJM and incorporated the Institute Mortgagees Interest Clauses Hulls edition 30.5.86. The twelfth and thirteenth defendants are the brokers who were involved in the placement of the cover. The claimants claim from the underwriters the sum of NOK 20,996,489.00 which they contend is due under the MII policy following the seizure and detention of the vessel by the Australian Navy and the threatened forfeiture of the vessel, her equipment and the fish on board pursuant to the Fisheries Management Act 1991 of Australia ("the FMA") on grounds of illegal fishing. In order to avoid the forfeiture of the vessel and thereby to minimise their loss, the claimants themselves commenced foreclosure proceedings in Australia, obtaining summary judgment in their favour for the sums due and owing from the owners to the claimants with a direction that the vessel be valued and sold. The claimants thereafter purchased the vessel for US$ 4,500,000 from the Australian Admiralty Marshal by a judicial sale in December 1998 so as to extinguish the rights of detention and forfeiture under the FMA.
The owners had insured the vessel under a War Risks Policy incorporating the Institute War Clauses, with Clause 4.1.4 and 4.1.7 deleted. However, the policy contained an express term 'Warranted no illegal fishing …'. The owners having tendered notice of abandonment and a claim for constructive total loss to the underwriters of the War Risks Policy prior to the sale of the vessel to the claimants in Australia, that claim was rejected by the leading underwriter for breach of the 'no illegal fishing' warranty and the claimants therefore claimed indemnity under the MII policy in respect of the outstanding indebtedness of the owners under their loan agreement and the costs incurred by the claimants in connection with the sale of the vessel and otherwise in Australia. The amount claimed is some £1.6 million plus interest.
On 23 June 2000, preliminary issues were ordered to be tried inter alia relating to the meaning and effect of exclusions 4.1.5 (Issue 1) and 4.1.6 (Issue 2) contained in the War Risks Policy (see further at paragraph 11 below). Having decided Issue 1 in favour of the underwriters, Toulson J dismissed the action against all defendants, at the same time granting the claimants permission to appeal. In the light of his decision it was strictly unnecessary for him to consider Issue 2. However, he did so, indicating that, upon that issue, he found in favour of the claimants' argument. There is a cross-appeal by the underwriters in respect of that finding, should this court hold that the judge was wrong in respect of Issue 1.
THE RELEVANT POLICY TERMS
The MMI Policy
The Institute Mortgagees' Interest Clauses (Hulls), 1986 edition (the "IMI" Clauses) included the following:
"4. WARRANTIES
It is warranted in respect of each vessel that—
4.1 … War Risks Policies equivalent to Institute War and Strikes Clauses (Hulls–Time) and full Protection and Indemnity Risks (hereafter referred to as 'the Owners' Policies and Club Entries) have been taken out and shall be maintained throughout the currency of this contract …
6. INDEMNITY
6.1 This contract is to indemnify the assured for loss resulting from: loss of or damage to or liability of each vessel which is prima facie covered by owners' policies or club entries, but in respect of which there is subsequent non-payment …. :
6.1.1 by reason of any act or omission of any one or more of the Owners, Operators, Charterers or Managers of the vessel, or their servants or agents, including breach or alleged breach of warranty …"
The issues before the judge were directed to the question whether the loss for which the claimants sought indemnity was prima facie covered by the owners' policies, subject to the breach of warranty ('no illegal fishing') as a result of which there was non-payment by the underwriters of the owners' policy.
The Owners' War Risks Policy
As already indicated the War Risks Policy contained a term:
"Warranted, no illegal fishing …"
The Institute War Clauses which, subject to deletions, were incorporated into the owners' policy provided inter alia:
"1. Perils. Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the vessel caused by:
1.1. war, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power
1.2 capture, seizure, arrest, restraint or detainment and the consequences thereof or attempt thereat
1.3 derelict mines, torpedoes, bombs or other derelict weapons of war
1.4 strikers, locked out work men or persons taking part in labour disturbances, riots or civil commotions
1.5 any terrorist or any person acting maliciously, or from a political motive
1.6 Confiscation or expropriation ……
3. Detainment. In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of twelve months then for the purpose of ascertaining whether the vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.
4. Exclusions. This insurance excludes:
4.1 loss, damage, liability or expense arising from ….
4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations;
4.1.6 the operation of ordinary judicial process failure to provide security or to pay any fine or penalty or any financial cause."
Clause 2 of the Institute War Clauses had the effect of importing into the owners' policy various of the Institute Time Clauses Hulls including the sue and labour provision:
"13.1 In case of any loss or misfortune it is the duty of the Assured and their servants or agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this Insurance."
THE PRELIMINARY ISSUES
The preliminary issues ordered to be tried were as follows:
(1) Have the Claimants suffered a loss or damage which is "prima facie covered by the Owners' Policies or Club Entries" within the meaning of Clause 6 of the Institute Mortgagees' Interests Clauses Hulls 30.5.86
(a) Did a failure of the assured under the War Risks Cover comply with the warranty alternatively condition: "Warranted no illegal fishing" prevent prima facie coverage thereunder?
(b) Alternatively, on a true construction of the War Risks Policy, was the warranty not a relevant peril and had no relevance to the scope of the coverage thereunder?
(c) Was the loss or damage prima facie excluded by exclusions 4.1.5 and 4.1.6 of the War Risks Cover?
• Was the vessel detained under the Fisheries Management Act?
• Was the seizure and detention of the Australian Authorities by reason of infringement of trading regulations?
• Was the seizure and detention by the Australian Authorities by operation of ordinary judicial process or failure to provide security?
Before Toulson J, the only live issues arose under (c). It was not in dispute that the vessel was detained under the FMA. However, there was an issue under Clause 4.1.5 as to whether the arrest and detention was for infringement of trading regulations as properly construed for the purposes of the policy (Issue 1). The issue under Clause 4.1.6 was whether the arrest and detention of the vessel arose from the operation of ordinary judicial process, or failure to provide security, or failure to pay a fine or penalty, or any financial cause (Issue 2).
THE RELEVANT FACTS
A list of assumed facts was agreed for the purposes of the Issues which can be summarised as follows.
On 17 October 1997, during the currency of both policies, the vessel was boarded in the Australian Fishing Zone by naval personnel of the Western Australian Fisheries Management Department pursuant to powers granted by s.84(1)(a) of the FMA. The vessel was boarded and seized and ordered to sail to Freemantle pursuant to powers under s.84(1)(a) and (k) of...
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