Schiffshypothekenbank Zu Luebeck A.G. v Compton (Alexion Hope)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PURCHAS,LORD JUSTICE LLOYD,LORD JUSTICE NOURSE |
| Judgment Date | 18 December 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J1218-6 |
| Docket Number | 87/1310 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 December 1987 |
[1987] EWCA Civ J1218-6
Lord Justice Purchas
Lord Justice Lloyd
Lord Justice Nourse
87/1310
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM AN ORDER OF MR JUSTICE STAUGHTON
Royal Courts of Justice
MR DAVID JOHNSON Q.C. and MR BERNARD EDER, instructed by Messrs Hill Dickinson & Co., appeared for the Appellant (Defendant).
MR DAVID STEEL Q.C. and MR JONATHAN GILMAN, instructed by Messrs Constant & Constant, appeared for the Respondents (Plaintiffs).
I will ask Lord Justice Lloyd to give the first judgment.
In this case we are concerned with a new type of insurance. It seems a pity, therefore, that the parties should have incorporated their contract in a form which was described as long ago as 1791 by Buller J. as absurd and incoherent: Brough v. Whitmore (1791) 4 Term Rep. at 210.
The conditions of insurance which comprise the main terms of the contract are known as "Mortgagee's Interest Clause 1". Clause 1 consists of eight numbered paragraphs, to which I shall have to refer in a moment. We were not told whether there is a Clause 2. If there is, it was not incorporated, for which we should perhaps be grateful. What we were told is that Clause 1 is a translation from the Swedish, where these particular conditions originated. We were urged by both sides to give certain words in Clause 1 their plain and ordinary meaning. Whether they have a plain and ordinary meaning in Swedish I do not know. But they certainly have no plain or ordinary meaning in English.
We were also urged to construe the document as a whole against the contractual background. But the combination of a medieval English form with a translation from modern Swedish does not make this task any easier.
The courts have been protesting for many years about the way in which the marine insurance market make their contracts. In defence of the market it can be said that the form used in the present case is the one scheduled to the Marine Insurance Act 1906. But I hope that it will never again be used for a contract of mortgagee interest insurance, and certainly not in combination with Mortgagee's Interest Clause 1, without at least some explanation as to how they are to be read together.
Mr Johnson, who appeared for the defendant insurers, warned us that we must not presume that the insurance had any purpose or object other than what is to be deduced from the language used. I bear that warning in mind. He even went so far as to warn us against construing the policy so as to produce commercial sense. Since the conditions originated in Sweden, it was not legitimate, he said, to construe the policy against the background of English practice. But neither of the parties are Swedish, and the contract was made in London and is governed by English law. Unless compelled by the clearest possible language, I decline to give the policy a meaning which makes commercial nonsense.
As for the purpose or object of this class of insurance, I think I am entitled to deduce from the language used that it was to protect the plaintiffs, as mortgagees, against the possibility of their security, the "Alexion Hope", proving insufficient in two sets of circumstances: first, if the vessel were to become a total or partial loss, and the mortgagees were to find themselves unable to recover from hull underwriters, as they would ordinarily be able to do, as assignees of the hull policy; and, secondly, if the vessel were to incur liability to a third party, and the vessel's P. and I. Club were to decline liability on the ground of the shipowners' privity. The circumstances in which the mortgagees might not be able to recover from hull underwriters are not spelled out. But they would presumably include cases where the hull underwriters decline liability on the ground of misrepresentation or nondisclosure, or because the vessel has been wilfully cast away with the connivance of the owners. Inability to recover from hull underwriters on the ground of their insolvency is specifically excluded.
I must now give some account of the facts. The case comes before the court on preliminary issues. The issues are elaborate, and will have to be set out in full. The facts, which we are asked to assume, may be stated more briefly. The "Alexion Hope" is, or was, owned by Alexion Maritime Corporation. The shipowners insured her hull and machinery with Lloyds Underwriters, among others, on terms which included the Institute Time Clauses (Hulls). The agreed value was $4,750,000. It is said that the vessel may have been worth no more than $2 million. The benefit of the policy was assigned to the plaintiffs, as mortgagees.
On 23rd October 1982 a serious fire occurred in the engine room. On 27th October 1982 the owners gave notice of abandonment, claiming that the vessel was a constructive total loss. On 8th June 1983 the plaintiffs issued a writ against hull underwriters. On 12th September 1983 hull underwriters served their defence. They denied that the damage to the vessel was caused by an insured peril.. Alternatively, they pleaded that the damage was caused by the wilful misconduct of the shipowners. This would, of course, afford hull underwriters a complete defence against the plaintiffs, since the plaintiffs are suing hull underwriters as assignees of the policy. That action is due to be heard, as to liability only, in January 1988. The hearing as to damages is due to take place in the spring of 1989.
Meanwhile, on 25th April 1985 the plaintiffs issued the writ in this action. Their case is that since they are unable to recover from hull underwriters, they are entitled to recover from the defendants, under the mortgagee interest policy dated 28th February 1983. By their re-amended defence the defendants admit almost nothing. They do not even admit that there was a fire on board. Apart from non-admission, the defendants' substantive defence is that, if there was a fire at all, the fire was not fortuitous. On the true construction of the mortagee interest policy, they say they are not liable. Further or alternatively, they assert that the damage was caused by the wilful misconduct of the shipowners. In other words, they adopt, pro tanto, the same defence as hull underwriters. It should be noted that the defendants do not allege that the damage was caused by the wilful misconduct of the plaintiffs. Nor do they allege that the plaintiffs were privy to the alleged wilful misconduct of the shipowners.
Mr Steel, who appears for the mortgagees, submits that in the above circumstances it would be a waste of time and money for the mortgagees to continue their action against hull underwriters, in order to establish a negative, namely, that the plaintiffs are unable to recover against hull underwriters, when that same inability is part of the defendants' own pleaded case. On the other hand, if, contrary to their pleading, the defendants wish to argue that the damage to the vessel was not caused by the wilful misconduct of the shipowners, and that hull underwriters are therefore liable, it is surely better, says Mr Steel, that that should be done by the defendants themselves in the plaintiffs' name, by virtue of their right of subrogation.
The obvious commonsense of Mr Steel's submission is compelling. This court, like the Commercial Court, will always do what it can to obviate unnecessary litigation. It is in the interests of the State that there should be an end to law suits. But it is equally in the interests of the State that avoidable law suits should never begin, and, if begun, that they should be terminated as soon as they have become pointless.
It is true that various issues would remain for decision in the present action. Thus the defendants have recently amended to plead a separate defence of misrepresentation and non-disclosure. There is also the question of quantum. But all these issues could conveniently be tried in the action against the mortgagee interest underwriters, once the action against hull underwriters has been discontinued.
So I turn to see whether the contract between the parties compels the plaintiffs to continue with their action against hull underwriters. This turns on the language of the policy. I have already mentioned that the policy is written on the standard S.G. form. Typed on the front of the policy appear the following details:
| " Vessels: | 1) "ALEXION HOPE" Amount DM6,650,000 |
| 2)….. | |
| 3)….. | |
| Sum Insured: | 100% of amounts as above |
| Trading: | As Mortgagees Interest Clause. |
| Conditions: | Mortgagees Interest Clause 1 as attached. Warranted vessels insured on Institute Time Clauses for Hull and Machinery including War." |
There then follow the traditional words in print:
"Touching the adventures and perils which we the assurers are contented to bear and do take upon us in this voyage: they are of the seas, men of war, fire, enemies, pirates, rovers, thieves,…barratry of the master and mariners, and of all other perils, losses and misfortunes, that have or shall come to the hurt, detriment, or damage of the said goods and merchandises, the ship [etc.], or any part thereof."
Over the page are the typed conditions under the headings
" MORTGAGEES' INTEREST— CLAUSE I"
" Conditions of Insurance.
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1. This policy has to pay if an occurrence which takes place during the period of this policy causes
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a) total or constructive total loss
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b) other loss or damage to the vessel
and after a final Court Adjustment or average Adjustment having been passed, the Assured is unable to recover from the vessel's Hull...
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