Liberty Insurance Pte Ltd v Argo Systems FZE
| Jurisdiction | England & Wales |
| Judge | Laws,Aikens,Tomlinson L JJ |
| Judgment Date | 15 December 2011 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 December 2011 |
Court of Appeal (Civil Division).
Laws, Aikens and Tomlinson L JJ.
Michael Davey (instructed by Bugden & Co) for the appellant.
Colin West (instructed by Michael Bynane & Co) for the respondent.
The following cases were referred to in the judgment:
Allied Marine Transport Ltd v Vale do Rio Doce Navegacao SA (The Leonidas D)WLR [1985] 1 WLR 925.
Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd (The Good Luck)ELR [1992] 1 AC 233.
Bremer Handels GmbH v C Mackprang JrUNK [1979] 1 Ll Rep 221(CA).
Laker Vent Engineering Ltd v Templeton Insurance LtdUNK [2009] EWCA Civ 62.
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corp of India (The Kanchenjunga)UNK [1990] 1 Ll Rep 391.
Société Italo-Belge pour le Commerce et L'Industrie v Palm and Vegetable Oils (Malaysia) Sdn Bhd (The Post Chaser)UNK [1981] 2 Ll Rep 695.
Vitol SA v Esso Australia Ltd (The Wise)UNK [1989] 2 Ll Rep 451.
Shipping — Marine insurance — Tow — Total loss of floating casino being towed as dead ship — Voyage policy incorporated Institute Voyage Clauses (1983 version) and provided cover for total loss of vessel caused by perils of the sea — Policy subject to English law and practice — Warranted no release, waivers or “hold harmless” given to tug and towers — Claim on policy declined — Judge held shipowner in breach of hold harmless warranty by concluding towage contract on standard Towcon terms — Whether insurer had waived right to rely on that breach — No unequivocal representation by insurer that it would not rely on breach of hold harmless warranty.
This was an appeal from a decision on preliminary issues arising out the total loss of a floating casino during a voyage under tow from Alabama to India in March 2003.
The claimant (Argo) had purchased the floating casino for scrap and it was to be towed as a dead ship. The vessel was insured for the voyage under a voyage policy underwritten by the first defendant (Liberty) and effected through a US producing broker DeWitt Stern (DSI) and an English placing broker, the second defendant (LSR).
About 10 days into the voyage the vessel developed a list which gradually worsened. Two days later it sank in about 8,000 feet of water in the Caribbean Sea, thereby becoming an actual total loss.
The voyage policy incorporated the Institute Voyage Clauses (1983 version) and provided cover for the total loss of the vessel caused by perils of the sea. The policy was subject to English law and practice. It also contained a number of warranties, including one that stated: “warranted no release, waivers or “hold harmless” given to Tug and Towers”.
Argo made a claim on the policy in July 2003. The claim was declined in a letter sent by Liberty's US lawyers to LSR, who, as placing brokers, were then acting as agents for Argo. Litigation over Argo's claim ensued in the United States and in England.
In the present proceedings the judge decided four preliminary issues: that Argo was in breach of the “hold harmless” warranty; that Liberty had waived its right to rely on that breach; that Liberty had affirmed the contract of insurance and so could not avoid it for misrepresentation; and that Liberty was not entitled to claim damages for misrepresentation.
Liberty appealed on the question whether it had waived its right to rely on the breach of warranty. It submitted that it could only be held to have waived the breach of the hold harmless warranty by Argo if it was established that Liberty had made an unequivocal representation to that effect and that Argo had relied on that representation. However, that was not the effect of the US lawyers' letter. Nor could the combination of that letter, the conduct of Liberty in the US proceedings and the fact that the breach of the hold harmless warranty defence was not mentioned until Liberty had served its defence in the English proceedings amount to an unequivocal representation.
Held , allowing the appeal:
1. When a judge at first instance had to decide whether there had been a waiver of a breach of warranty for the purposes of s. 34(3) of the Marine Insurance Act 1906, and the judge therefore had to decide whether the insurer had made an unequivocal representation that it would no longer rely on its legal right that it was discharged from liability under the policy, the judge was making a finding of fact on whether an unequivocal representation had been made. (Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd (The Good Luck)ELR[1992] 1 AC 233 considered.)
2. Where the judge's assessment was made on the basis of oral evidence, expert evidence and other matters, the Court of Appeal would take particular care before deciding that it could safely interfere with the judge's assessment. However, in this case the only materials before the judge on which he had to assess whether there had been an unequivocal representation by Liberty consisted of the 2003 letter, the fact that the breach of the hold harmless warranty point was not taken by Liberty in the US proceedings and the silence on the point until it appeared in Liberty's defence in the present action
3. The judge had erred in construing the letter as indicating that Argo was being told that other defences would be relied on only if new information came to light. That assessment did not take account of the important words “The foregoing is without prejudice to all the remaining terms and conditions of the policy”. Those words were a clear indication that Liberty and its lawyers were reserving the right to rely on any of those remaining terms and conditions of the policy in the future if advised to do so. In short, Liberty reserved the right to rely on other terms of the policy in support of its denial of coverage and also reserved the right to rely on any other defences that might be discovered after further investigations. The letter did not make any representation, let alone an unequivocal one, that Liberty was not going to rely in the future on any legal rights that it had because of Argo's actual (although unstated) breach of the hold harmless warranty.
4. The fact that there was nothing in Liberty's pleading in the US proceedings did not add anything. If there was any representation at all it was equivocal. The fact that Liberty did not advert to the breach of the hold harmless warranty point for nearly seven years until it was raised in its defence in the English proceedings was also equivocal. There ware no special circumstances in this case that were capable of turning the silence and inaction of Liberty into an unequivocal representation to Argo that it did not intend to enforce its strict legal rights based on a breach of the hold harmless warranty. Nor was the position for Argo improved by taking together all three aspects relied on: viz the letter, the US proceedings and the seven year silence/inaction. Together they remained equivocal.
5. It followed that Liberty was able to plead and rely upon Argo's breach of the hold harmless warranty in the present proceedings.
Aikens LJ: The story so far
1. This appeal from an order of HHJ Mackie QC dated 21 February 2011 arises out of the total loss of a floating casino called “Copa Casino” (“the vessel”) during a voyage under tow from Mobile, Alabama, to India, in March 2003. The vessel was, effectively, owned by the claimant (“Argo”). Argo had purchased the floating casino for scrap and she was to be towed as a dead ship by the tug “Fairplay XIV”. The vessel was insured for this voyage under a voyage policy of marine insurance dated 11 March 2003. The policy was underwritten by the first defendant (“Liberty”) and effected through a US producing broker DeWitt Stern (“DSI”) and an English placing broker, the second defendant (“LSR”). The voyage began on 3 March 2003. On 14 March 2003 the vessel began to develop a list which gradually worsened. She sank in about 8,000 feet of water in the Caribbean Sea on 16 March 2003, thereby becoming an actual total loss.
2. The voyage policy incorporated the Institute Voyage Clauses (1983 version) and provided cover for the total loss of the vessel caused by perils of the sea. The policy was subject to English Law and Practice. It also contained a number of warranties, including one that stated: “warranted no release, waivers or “hold harmless” given to Tug and Towers”. I shall call that “the Hold Harmless Warranty”.
3. Argo made a claim on the policy in July 2003. This claim was declined in a letter dated 18 July 2003 and sent by Liberty's US lawyers, Fowler, Rodriguez & Chalos to LSR, who, as placing brokers, were then acting as agents for Argo. The parties have been in litigation in the United States and in England over Argo's claim since May 2004.
4. In the present proceedings an order was made for the trial of four preliminary issues. These concerned, first, the construction of the Hold Harmless Warranty to which I have referred above; secondly, whether the insurer, Liberty, had waived its right to rely on a breach of that warranty by Argo; thirdly, whether Liberty had affirmed the contract of insurance such that it was not entitled to avoid the policy for alleged misrepresentation by Argo and, lastly, whether, if Liberty had affirmed the contract, it could still claim damages for the alleged misrepresentations pursuant to section 2(1) of the Misrepresentation Act 1967.
5. Judge Mackie found that Argo was in breach of the warranty, that Liberty had waived its right to rely on that breach, that Liberty had affirmed the contract of insurance and so could not avoid it for misrepresentation and that Liberty was not entitled to claim damages for misrepresentation.
6. Argo has not appealed the judge's conclusion on breach of warranty. Liberty has not appealed the judge's conclusion on affirmation. The appeal before us, which we heard on 24 November 2011...
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