Navalmar UK Ltd v Ergo Versicherung AG
| Jurisdiction | England & Wales |
| Judge | Pelling |
| Judgment Date | 04 November 2019 |
| Neutral Citation | [2019] EWHC 2860 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000588 |
| Date | 04 November 2019 |
[2019] EWHC 2860 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HIS HONOUR JUDGE Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2018-000588
Ms Ruth Hosking (instructed by Stephenson Harwood LLP) for the Claimant
Mr Benjamin Coffer (instructed by Clyde & Co LLP) for the Defendants
Hearing date: 17 October 2019
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.
HIS HONOUR JUDGE Pelling QC SITTING AS A JUDGE OF THE HIGH COURT
HH Judge Pelling QC:
Introduction
This is the trial of a preliminary issue as to whether, on a true construction of General Average Guarantees (“GA guarantees”) issued by the defendants and in the events that for the purposes of this trial it is to be assumed have happened, the defendants are entitled to raise a defence under Rule D of the York-Antwerp Rules 1974 (“YAR”) as a defence to their liability under the GA guarantees.
The trial took place on 17 October 2019, no evidence was adduced by either party and the question for determination proceeded on the basis of a statement of agreed facts and assumptions annexed to a consent order made by Butcher J on 25 February 2019.
The Facts
The claimant is the owner of Motor Vessel BSLE Sunrise (“vessel”). On 28 September 2012, the vessel was operating under a time charter on a laden voyage from Jebal Ali in Dubai to Antwerp in Belgium. The cargo included of about 774.733 MT of offshore pipes shipped under three Bills of Lading (“BL”) on the standard Congenbill form, which provided for general average (“GA”) to be adjusted in accordance with YAR.
On 28 September 2012 the vessel ran aground off Valencia. The owners incurred expenditure in attempting to re-float the vessel then carrying out temporary repairs before resuming the voyage. The vessel arrived at Antwerp on 26 November 2012, where all the cargo was discharged.
Meanwhile, on 5 October 2012, the claimant (“owner”) had declared GA. On 8 October Iteco Oilfield Supply France (“Iteco France”) issued an Average Bond in the Lloyds Average Form in respect of two of the BLs, known in these proceedings as BL Nos. 2 and 3. On 5 October 2012, the second defendant (then known as Ace European Group Limited) had issued an Average Guarantee in the wording approved by the Association of Average Adjusters and the Institute of London Underwriters. Notwithstanding its date, I infer that the second defendant's Average Guarantee was issued by way of security for Iteco France's liabilities under its Average Bond since it refers expressly to it being issued in consideration of the release without the collection of a deposit of the goods specified within the GA guarantee, which were those set out in Iteco France's Average Bond.
On 11 October 2012, Iteco Oilfield Supply GmbH (“Iteco GmbH”) issued an Average Bond in the Lloyds Average form in respect of the other BL, known in these proceedings as BL No. 1. On 15 October 2012, the first defendant issued an Average Guarantee in materially similar terms to that issued by the second defendant save that it referred to the goods and BL referred to in Iteco GmbH's Average Bond.
The Average Guarantees referred to above are referred to collectively below as “ GA guarantees”. The Average Bonds referred to above are referred to collectively below as the “ GA bonds”.
Each of the GA bonds was in materially identical wording. Each was addressed to the owner and in so far as is relevant provided that:
“In consideration of the delivery to us or our order, on payment of the freight due, of the goods noted above we agree to pay the proper proportion of any … general average … which may hereafter be ascertained to be properly and legally due from the goods or the shippers or owners thereof …”
Each of the GA guarantees was likewise addressed to the owner and in so far as is relevant provided:
“In consideration of the delivery in due course of the goods specified below to the consignees thereof without collection of a deposit, we the undersigned insurers, hereby undertake to pay to the ship owners … on behalf of the various parties to the adventure as their interest may appear any contributions to General Average … which may hereafter be ascertained to be properly due in respect of the said goods.
We further agree:
(a) to make prompt payment(s) on account of such contributions as may be reasonably and properly due in respect of the said goods as soon as the same may be certified by the … Average Adjusters …”.
The owner appointed GA adjusters. On 24 April 2013, the GA adjusters issued a certificate recommending a payment on account and thereafter a GA adjustment, which was subsequently varied, calculating the first defendant's share of the GA loss and expenditure to be US$525,365 and the second defendant's share to be $548,030. Although the statement of agreed facts does not say so in terms, it necessarily follows that Iteco GmbH's share under its Average Bond is the same as that of the first defendant under its Average Guarantee and Iteco France's share under its Average Bond is the same as that of the second defendant under its Average Guarantee.
The Issue for Determination
The relevant cargo interests and the defendants maintain that the casualty event occurred because the owner failed to exercise due diligence before and/or at the commencement of the voyage to ensure that the vessel was seaworthy and/or properly to equip and/or supply the vessel in breach of Art. III.1 of the Hague/Hague-Visby Rules (“HVR”), which were incorporated by reference to each of the contracts of carriage contained in or evidenced by the BLs. It is common ground between the parties that if the casualty event occurred because of a breach by the owner of Art. III.1 of the HVR then no GA is due from the relevant cargo interests by operation of Rule D of the YAR. The issue that I have to determine is whether the same defence is available to the defendants in relation to their liability under the GA guarantees.
Applicable Principles
It is common ground that the general principles applicable to the construction of contracts governed by English law apply to the construction of the GA guarantees unwritten by the defendants. In summary:
i) The court construes the relevant words of a contract in its documentary, factual and commercial context, assessed in the light of (a) the natural and ordinary meaning of the provision being construed, (b) any other relevant provisions of the contract being construed, (c) the overall purpose of the provision being construed and the contract in which it is contained, (d) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (e) commercial common sense, but (f) disregarding subjective evidence of any party's intentions – see Arnold v. Britton [2015] UKSC 36 [2015] AC 1619 per Lord Neuberger PSC at paragraph 15 and the earlier cases he refers to in that paragraph;
ii) A court can only consider facts or circumstances known or reasonably available to both parties that existed at the time that the contract or order was made — see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 20;
iii) In arriving at the true meaning and effect of a contract, the departure point in most cases will be the language used by the parties because (a) the parties have control over the language they use in a contract or consent order and (b) the parties must have been specifically focussing on the issue covered by the disputed clause or clauses when agreeing the wording of that provision – see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 17;
iv) Where the parties have used unambiguous language, the court must apply it – see Rainy Sky SA v. Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900 per Lord Clarke JSC at paragraph 23;
v) Where the language used by the parties is unclear the court can properly depart from its natural meaning where the context suggests that an alternative meaning more accurately reflects what a reasonable person with the parties' actual and presumed knowledge would conclude the parties had meant by the language they used but that does not justify the court searching for drafting infelicities in order to facilitate a departure from the natural meaning of the language used – see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 18;
vi) If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other – see Rainy Sky SA v. Kookmin Bank (ibid.) per Lord Clarke JSC at paragraph 2 — but commercial common sense is relevant only to the extent of how matters would have been perceived by reasonable people in the position of the parties, as at the date that the contract was made – see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 19;
vii) In striking a balance between the indications given by the language and those arising contextually, the court must consider the quality of drafting of the clause and the agreement in which it appears – see Wood v. Capita Insurance Services Limited [2017] UKSC 24 per Lord Hodge JSC at paragraph 11. Sophisticated, complex agreements drafted by skilled professionals are likely to be interpreted principally by textual analysis unless a provision lacks clarity or is apparently illogical or incoherent – see Wood v. Capita Insurance Services Limited (ibid.) per Lord Hodge JSC at paragraph 13; and
viii) A court should not reject the...
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