Mopani Copper Mines Plc v Millennium Underwriting Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE : |
| Judgment Date | 16 June 2008 |
| Neutral Citation | [2008] EWHC 1331 (Comm) |
| Docket Number | Case No: 2007 Folio 1172 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 June 2008 |
[2008] EWHC 1331 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand,London, WC2A 2LL
Mr Justice Christopher Clarke
Case No: 2007 Folio 1172
Alistair Schaff QC & Rebecca Sabben-Clare (instructed by Clyde & Co) for the Claimant
Colin Edelman QC & Neil Hext (instructed by Kennedys) for the Defendant
Hearing dates: 21 st & 22 nd April 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
………………………..
I have before me for decision five preliminary issues ordered by Walker, J on 16 th November 2007, in an action in which Mopani Copper Mines PLC (“Mopani”) claims against the defendant on behalf of itself and other Lloyd's Underwriters and Company Insurers an indemnity in respect of damage done to an electrostatic precipitator.
The background
Mopani is a Zambian company. In 2004 it was making arrangements to construct new copper smelting facilities at its site at Mufulira in Zambia, The project was to comprise a number of freestanding units consisting of: (a) an oxygen plant; (b) an Isasmelt furnace (sometimes referred to as the TSL furnace); (c) an electronic precipitator (“ ESP”); (d) a matte settling electric furnace (“MSEF”); and (e) an acid plant. The function of the ESP is to process exhaust gases emitted by the Isasmelt furnace by removing copper dust particles from the gas and allowing cleaned gas to be transferred to the acid plant 1. The particles of dust separated out by this process add to the total production of copper.
Zambian law required the project to be insured with a Zambian insurer. For that reason the form which the insurance took was that the project was insured with, as it turned out, Zigi Insurance Company Limited, a Zambian insurer, and reinsured in London. In substance the risk was placed in the London market. The terms were negotiated with the reinsurers, the risk being broked to them by Cooper Gay and Company Ltd (“Cooper Gay”). The identity of the insurance company was only determined at the end of the negotiations. Subsequently the arrangements became subject to a Memorandum of Understanding (“the MOU”) by which it was agreed, inter alia, that monies due to the insured in respect of claims as agreed by the reinsurers would be paid by the reinsurers to the brokers for onward transmission to Mopani.
The reinsurance policy is, so far as presently relevant, contained in a slip, originally scratched by the defendant on 29 th November 2004, being an amended and retyped version of a slip scratched on 12 th November 2004, with further provisions agreed on 18 th January 2005, together with an endorsement (“Endorsement No 1”) scratched on 11 th February 2005 which varied the previous agreement.
There has been considerable debate before me as to what material is admissible as a guide to construction of the slip, and as to what use that material may be for that purpose. In the version of the slip as scratched on 18 th January 2005 certain words have been deleted. I consider hereafter the extent to which it is possible, or helpful, to look at the words deleted. It is common ground (i) that, in
construing the contract, the Court must look at the circumstances surrounding its making in order to see what was the objective that the parties had in view; (ii) that a prior agreement is at least admissible as a guide to construction; and (iii) that the following are inadmissible (a) the content of prior negotiations; (b) communications between the insured and its broker which were not communicated to the reinsurers and (c) the subjective views of the parties as to what they thought they had achieved. The fact that, in the summary of events which follows, I set out both communications that did and those that did not cross the line between Mopani and reinsurers does not mean that I have forgotten or intend to elide the distinction between the two types of communication.The placement of the risk
A preliminary meeting took place between the defendant, Millennium Underwriting Ltd (“Millennium”), and Cooper Gay to discuss the risk as early as 24 th February 2004. But it was not until September 2004 that Millennium was asked to provide, and did provide, indicative terms. In an e-mail of 20 th September 2004 Mr Stephen Coward, the lead underwriter for Millennium, set out terms for EAR insurance i.e. Erection All Risk insurance for a period of 18 months from October 2004, including 60 days T & C (Testing and Commissioning) plus 12 months extended maintenance. This was subject to, inter alia, satisfactory details of physical separation from existing plant.
On 24 th September 2004 Mr Coward scratched a slip drawn up by Cooper Gay which described the risk as follows:
“TYPE: Construction/Erection All Risks including Third Party Liability Reinsurance as original
PERIOD Whole contract period estimated to be 18 months from 27 th September 2004 including 30 days Testing and commissioning plus 12 months extended maintenance period thereafter”.
Mr Coward scratched the slip for a 25% line with certain amendments and the addition of the words “Subject receipt of o/s information referred to in email 20/9/04“. Munich Re UK and Liberty scratched the slip for a 25% line each on the same day, below Mr Coward's scratch.
The information needed was provided in a letter of 28 th October from Glencore UK Ltd (“Glencore”), who acted for Mopani, to Cooper Gay. Cooper Gay e-mailed that letter to Mr Coward on 1 st November 2004 and in April 2005 he scratched it as “Contents Noted”. In that letter Ms Went of Glencore wrote as follows:
“We want to make sure that we do not, have, or incur at a later date, any gaps in cover and therefore, please would you confirm when each party (sic) of the cover is intended to trigger i.e. When does the construction all risks cover cease and the 30 day testing and commissioning period commence? Also when does the extended maintenance period start and also how does this work in relation to Mopani purchasing all risk of physical damage insurance (incl BI) for the plant as the plant will be up and running”.
On 12 th November 2004 Cooper Gay presented a slip to Mr Coward which he modified slightly and scratched on behalf of Millennium for a 25% line. By now the Risk Details included:
“TYPE Construction/Erection All Risks & DSU 2 including Third Party Liability Reinsurance as original. Wording to be agreed MLM.
……
REINSURED As agreed by MLM
PERIOD Whole contract period estimated to be 18 months from 1 st November 2004 including 30 days Testing and commissioning plus 12 months extended maintenance period thereafter.
INTEREST Section 1 All Risks
All Contract Works, whether permanent or temporary, materials incorporated or for incorporation therein, Temporary Buildings and their contents, and all other property or equipment of whatsoever nature (other than Constructional Plant and Equipment) the property of the Original Insured or for which they are responsible, whilst at the contract site(s) or elsewhere in the territorial limits, including whilst in transit other than by sea or air as may be more fully described in the Original Policy.
Section 2 – Third Party Liability
[Various provisions were then set out]
Section 3 – Delay in Start-Up
The individual pieces of plant were set out in the Information sheets with their respective values.
The slip scratched by Mr Coward constituted a contractual obligation on behalf of Millennium for a 25% line and was treated as such by the brokers: see their e-
mail of 22 nd November 2004. The slip was not, however, taken round the market because in the afternoon of Friday 12 th November 2004 Mr Colin Chappell of Glencore telephoned Cooper Gay to confirm the order, but then called back to say that Third Party Liability cover was not required, and, later still, to say that the price needed to come down to $ 714,500, a further reduction of about 6%.The concern expressed by Ms Went in her letter of 28 th October 2004 about gaps in cover was apt. The type of cover then under consideration was Construction/Erection All Risks. The risks covered by such a policy are the risks associated with constructing or erecting one or more buildings or structures. Such risks are to be contrasted with those insured under Property or Operational Insurance, where the risks are the risks associated with the ownership and use of constructed or erected buildings or structures.
As is apparent from the description of the perils in the two slips of 12 th November (see above) and 29 th November 2004 (see below) the insurance was to cover 30 days (but no more) of testing and commissioning. Cover for testing and commissioning is a form of operational cover often provided by a CAR/EAR policy. What is covered is the operation of the plant for the purpose of seeing whether it works as it should, an activity which takes place during the contractor's period of responsibility for the plant and before it is handed over to the owner.
The slips also provided cover for an extended maintenance period. Maintenance cover is limited and relates, in effect, to manifestations of the construction risk during the maintenance period. During that period the plant will be in operation, and its operational risks will be covered by the operational policy. It is not suggested that Mopani is entitled to...
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