Jones Construction Company v Alliance Assurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Ormerod,LORD JUSTICE DANCKWERTS,LORD JUSTICE ORMEROD,LORD JUSTICE DEVLIN |
| Judgment Date | 13 February 1961 |
| Judgment citation (vLex) | [1961] EWCA Civ J0213-4 |
| Court | Court of Appeal |
| Date | 13 February 1961 |
[1961] EWCA Civ J0213-4
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Ormerod
Lord Justice Devlin, and
Lord Justice Danckwerts
MR. MARTJN JUKES, Q.C., and MR. ROBERT MacCRINDLE appeared on behalf of the Plaintiffs (Appellants), instructed by Messrs. Barlow, Lyde & Gilbert.
MR. EUSTACE ROSKILL, Q.C., MR. J.G. LE QUESNE and MR. G.W. CHEYNB appeared on behalf of the Defendants (Respondents), instructed by Messrs. Chamberlain & Co.
: I will ask Lord Justice Danckwerts to deliver the first Judgment.
This is an Appeal from a Judgment of Mr. Justice Pearson, dated the 7th March, 1960. As the Writ was only issued on the 17th February, 1960, and the trial began on the 4th March, it is an example of the speed with which the Courts can act, at any rate in the Commercial Court, when not impeded by the parties.
The action concerns two Policies of insurance. The reason for the Policies of insurance was a Contract dated the 8th January, 1956, made between the Development Board of the Government of Iraq and three American Companies and one German Company, who formed a "Consortium" called Derbendi Khan Contractors, for the construction of a dam in Northern Iraq. The price of the Contract originally was 32,200,000 United States dollars, and subsequently it was extended to 44,700,000 United States dollars.
It will be sufficient, I think, to go quite briefly through the previsions of the Contract which are relevant for the purpose of the present case, which is one which really depends upon the proper construction of the terms of the two Policies of insurance. The original term of the Contract was for 45 months, plus a 12 months' period of maintenance, that is to say from the 8th January, 1956, to the 30th September, 1959, plus the maintenance period. By Clauses 27 and 30 the Contractors bound themselves to insure the works and also to take out third party insurance; and Clause 33 empowered the Board to insure or to keep in force any Policies in the event of the failure of the Contractors so to do. Clauses 61, 62 and 63 deal with the time for commencement and completion of the works; and Clause 64 provides that, in the case of extra or additional work, or other special circumstances, which might fairly entitle the Contractors to do an extension of time, the Board, on the recommendation of the Engineer, are to determine the amount of such extension. Clause 73 empowers the Engineer to make variations of the works, but there was no general provision in the nature of an "escalator" Clause. There was an Arbitration Clause in the Contract, and the Contract was to be an Iraqi Contract and to be governed by the law of Iraq. The remuneration of the Contractors was dealt with in Clauses 92 and 93 of the Contract, and, shortly, it can be said that their remuneration was to be on the basis of the amount of the work when measured up.
Two extensions of time for the performance of the Contract were given first of all, one of five months, which took the time for completion to the 1st March, 1960, and there was a second period of extension of 330 days, which would be somewhere in the region of eleven months. The first extension was accepted by the insurers, but not the second; hence the present action.
The two Policies of insurance were numbered C. P. 227, dated the 29th May, 1956, and C. P. 284, dated the 21st January 1958, and in each of those Policies a certain percentage was taken by the tariff Companies, of which the Defendants, the Alliance Assurance Company, Ltd. Is one, and the rest of the risk was taken over by the non-tariff Companies and Lloyd's underwriters. The proportion taken by the tariff Companies in the case of the first Policy was 50 per cent, of the total risk, and in the case of the second Policy it was 53 per cent.
It is now necessary to turn to the material provisions of the Policies. I think it will only be necessary to deal with the Policy C. P. 227, because, except for the proportions required by the circumstances, they are in the same form. It provides that, in consideration of the premiums, "The Insurers severally agree each for the proportion set against its name (subject to the Conditions contained herein and endorsed or otherwise expressed here on which Conditions shall so far as the nature of them respectively will permit be deemed to be Conditions precedent to the right of the Insured to recover hereunder) that after payment of the premium they will indemnify the Insured as hereinafter specified for loss arising during the period stated in the Schedule or any subsequent period in respect of which the Insured shall have paid and the Insurers accepted the premium required for this extension of the terms of this Policy." There are two provisoes, one of which deals with the liability of the Insurers in respect of each item, and secondly there is a provision for substitution of the proportion set against the name of each Company by memorandum signed by or on behalf of the Insurers. And the second provision limits the liability of the Insurers to the percentage set against their respective names.
The Schedule is divided into what have conveniently been termed boxes, of which there are seven. The Insured are: "Derbendi Khan Contractors and/or Subsidiary and/or Associated Companies and/or Sub-Contractors and the Iraq Development Board and Ministry of Development for their respective rights and interests." The property insured is: "As detailed in the Specification attached hereto which is declared to be incorporated in and to form part of this Policy situate: Derbend-I-Khan on the Diyalah-Sirwan River in the Sulaimaniya Area, North Iraq." The total Contract price is 32,200,000 United States dollars. The term of contract is 45 months plus 12 months mainteance. The sum insured is: "Total of Specification. 32,200,000 United States dollars. Total hereby (being 50 of each item of the Specification) 16,100,000 United States dollars." "Period of Insurance (both days inclusive): From 8th January 1956, to 30th September, 1959. Plus 12 months maintenance." Then, in the last box, the Premium is stated to be payable in four instalments.
Turning to the Specification in the Policy, Item No.1 is described as: "On the works temporary or permanent including Plant, Materials, Buildings completed or in course of erection, and all property brought on to the site including motor vehicles (except those licensed for general road use), the property of the Insured or for which they are responsible all whilst on site of the construction of the dam," amounting to a total of 32,200,000 United States dollars. Then there is a provision requiring the Insured to bear the first 700 of each and every claim. Then come two Memoranda. Memorandum 1 is: "At the termination of this insurance the Insured will declare to the Insurers all alterations in the price of the various contracts for the construction of the risk insured hereby. If as a result of such alteration the Total Contract Price mentioned in the Schedule has been exceeded the Insured will pay an additional premium to be agreed. If the Total Contract Price is less than mentioned in the Schedule a return premium to be agreed will be paid by the Insurers." And then it says: "Nothing in this Memorandum shall be construed as relieving the Insured of his obligations under condition No.2."
Then I turn to the Conditions, of which there are nine. Condition 1 provides: "This Policy shall be voidable in the event of misrepresentation misdescription or non-disclosure in any material particular" – which, of course, is no more than would be provided by the law, in any event. Condition 2 has been the subject of argument and is of some importance. It reads: "If there shall occur any change involving a material alteration in the facts set out in this Policy and forming the basis of this insurance the Insured shall, as soon as possible, give notice in writing to the Insurers and the premium shall if necessary be adjusted by agreement." I do not think I need read the second sentence of the provision. And it is only necessary, I think, to mention that the last Condition provides for Arbitration.
As I have already mentioned, there was an extension of five months, and upon the occasion of that extension the position was accepted by the Insurers and as a result an Endorsement entitled "Endorsement No.3" was attached, to the Policy in question. This Endorsement is expressed to form' part of the Policy in question, and is in the form of a Memorandum, and it is expressed as follows: "It is hereby agreed and declared that: 1. Consequent upon rescheduling of the contract insured by this policy the Total Contract Price is increased to U. S. 44,700,000 and the Term of Contract is increased to 50 months plus 12 months maintenance. 2. Condition No. 8 of this policy is cancelled. 3. The Period of Insurance is extended to 1st March 1960 plus 12 months maintenance. 4. In consequence of the foregoing a total additional premium of U.S. 34,209.50 is payable by the Insured in two instalments as follows," and they are set out, "Total premium...
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...to extend or renew an insurance policy, unless the policy expressly so provides: Jones Construction Co v Alliance Assurance Co Ltd [1961] 1 Lloyd’s Rep 121. 85 Likewise, where a project manager is engaged by the owner to arrange contracts and ensure that contractors and consultants have app......