Scott v Copenhagen Reinsurance Company (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Keene,Lord Justice Schiemann |
| Judgment Date | 16 May 2003 |
| Neutral Citation | [2003] EWCA Civ 688 |
| Docket Number | Case No: A3/2002/1559 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 May 2003 |
[2003] EWCA Civ 688
Lord Justice Schiemann
Lord Justice Rix and
Lord Justice Keene
Case No: A3/2002/1559
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
COMMERCIAL COURT
Mr Justice Langley
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr Stewart Boyd QC, Mr Colin Wynter & Mr Shaen Catherwood (instructed by Messrs CMS Cameron McKenna) for the Appellant
Mr Dominic Kendrick QC, Mr Adam Fenton & Ms Caroline Laband (instructed by Messrs Holman, Fenwick & Willan) for the Respondent
On 2 August 1990 Iraq invaded Kuwait. By mid-morning Iraq's forces were in complete control of Kuwait International Airport and all the aircraft there on the ground. Kuwait's civil air fleet was owned by Kuwait Airways Corporation (KAC). It had 15 aircraft at the airport, and these and the fleet's spares were a prime target of Iraq's premeditated policy of plunder. Also at the airport was a British Airways (BA) Boeing 747 (and a few other foreign aircraft). The presence of the BA Boeing was unscheduled: it was in transit, and its late arrival meant that its departure failed by a mere half-hour or so to forestall the 5 am closure of the airport which the invasion occasioned. The KAC aircraft and spares were flown off to Iraq as soon as the logistics of that operation allowed and in due course incorporated into the Iraqi fleet. The BA aircraft however remained at Kuwait. It was still there on the outbreak of war between Iraq and the coalition forces ("Operation Desert Storm") on 16 January 199It was destroyed by allied bombing by, on or around 27 February 199This appeal is concerned with the excess of loss reinsurance of the claimant/appellant syndicates' whole account and raises the question whether the loss of the BA aircraft is to be aggregated with the losses of the KAC aircraft and spares.
Langley J held [2002] EWHC 1348 (Comm) that the KAC aircraft and spares had all been lost on 2 August 1990 and that these were all losses "arising from one event", namely Iraq's invasion of Kuwait and capture of the airport. There is no appeal from that conclusion. However, the judge also held that the loss of the BA aircraft did not arise out of the same event. He did not define that event save possibly by reference to the cause of its loss, which he said was "the actual destruction of the aircraft or the war or perhaps the inevitability of war" (para 73).
The syndicates no longer submit, as they did before the judge, that the BA aircraft became an actual total loss immediately on 2 August 1990 in exactly the same way as the KAC aircraft and spares were then lost to Iraq's policy of plunder. However, their appeal is based on their so-called alternative case, which is that even though a total loss of the BA aircraft could not be established until after a reasonable "wait and see" period, once proved it related back to the original event of the invasion and capture of the airport and was properly to be adjudged as having also arisen from the same one event as the KAC fleet losses. In this connection the written skeleton on behalf of the syndicates describes this as an example of –
"those unusual cases, such as this, in which a single event is claimed to have produced a series of immediate total losses at the same time as producing other losses, not immediately classed as total losses, but initially classed as deprivations of possession, requiring review as to their status at the end of a reasonable "wait and see" period."
This distinction between an immediate total loss and one which is established only after a period of "wait and see" derives from an analysis of the relevant law which is to a large extent common ground to the parties and to which I shall return below.
The insurances
The syndicates, on whose behalf the claimant, here the appellant, Mr Murray Scott sues as a named representative, obtained whole account excess of loss reinsurance from a number of reinsurers who are in turn represented in these proceedings by The Copenhagen Reinsurance Company (UK) Limited, defendant and on this appeal respondent ("Copenhagen"). The contract of reinsurance is contained in a slip policy No 90040114. It is sufficient to record the following terms:
"PERIOD: Losses occurring during 12 months at 1 st April, 1990, Local Standard Time at the place where the loss occurs.
LIMITS: £15,500,000 or US or CAN$ 31,000,000 each and every loss, as defined, EXCESS of £15,500,000 or US or CAN$ 31,000,000 each and every loss, as defined, WHICH IN TURN IS EXCESS OF the Combined Limit(s) and Retention(s) of the Reassured's Specific Excess of Loss Protections, as per Schedule attached.
WORDING: Full wording as Joint Excess Loss Committee Clauses 1.1.90 with additional clauses…
War included."
The Joint Excess Loss Committee Clauses 1.1.90 ("JELC Clauses") provided as follows:
"EVENT CLAUSE
"Loss" under this contract means loss, damage, liability or expense arising from any one event or as described in section J of the schedule."
Section J read:
"J LOSS DESCRIPTION
Each and every loss or series of losses arising from one event."
Thus the critical provisions for present purposes were the period of the reinsurance and the aggregation provisions which defined loss as all those losses "arising from one event". As the judge said, it is the application of those words to the facts which is in issue in these proceedings.
The syndicates had in turn entered into various inward contracts of excess of loss reinsurance by which they covered (either directly or indirectly) the insurers/reinsurers of KAC's primary insurance and reinsurance as well as BA's insurance contracts. The details of those contracts can be found in the judgment below.
Aggregation
How aggregation will affect any particular reinsured is very difficult to predict. As Copenhagen's opening statement below said –
"In fact, of course, many individual companies will have interests on both sides of the fence, as retrocedents and also as retrocessionaires under different XL contracts, and where their best interests lie is not always clear."
This is so even after the event. How an aggregation clause will operate in advance is even more unpredictable. As the judge remarked, aggregation is a concept which may assist a reinsured to pierce the limits of an XL layer but may also operate so as to exhaust a layer and so damage his interests. An illuminating exposition of the underwriting considerations can be found in Lord Mustill's speech in Axa Reinsurance (UK) Plc v. Field [1996] 1 WLR 1026 at 1034.
There were no submissions as to how, if at all, the function of an aggregation clause might assist this court to resolve the issue before it. I suppose, however, that its function is to police the imposition of a limit by treating a plurality of linked losses as if they were one loss. For this purpose the losses have to be identified by a unifying concept: in this case "one event", or strictly speaking "arising from one event".
The facts
A résumé of the facts has been made easier both by the parties' Schedule of Agreed Facts (which is annexed to the judgment below) and by Langley J's own succinct findings, which I would gratefully adopt and make direct use of here. There is in general no dispute as to those findings (save in one aspect indicated below). In the light of the limited nature of this appeal, which as explained above does not relate to the KAC aircraft and spares nor to the syndicates' primary case that the BA aircraft was as much an object of Iraq's policy of plunder as the KAC fleet, I can restrict the judge's findings to the minimum necessary to determine the present appeal.
Under the heading of "The facts" the judge said this:
"30…I accept Captain Clark's evidence [he was the BA aircraft's pilot] that the Iraqis took immediate control and possession of the BA aircraft when they occupied the airport on August 2 and if it was to go anywhere it would have required Iraqi permission to do so."
Under "Politics" the judge made the following findings:
"34…On August 6 UN Security Resolution 661 collectively introduced sanctions against Iraq and Kuwait effective on August 9…On August 6 it appears that Iraq began to formulate the policy towards foreign nationals trapped in Kuwait which became the human shield policy…
"35. It was also on August 6 that King Fahd agreed to the deployment of American forces in Saudi Arabia. President Bush said that the role of the American troops was defensive…
"38…On 30 August Iraq announced that all foreign women and children would be released and a few days later they were. Throughout September the coalition military presence was increased but further peace initiatives were also proposed. On 21 September the Royal Air Maroc Boeing 727 was allowed to leave flying out of Kuwait via Baghdad. On 18 October the TMA and MEA aircraft were also allowed to leave again flying via Baghdad.
"39. A flight plan for the BA aircraft was filed in Baghdad on 16 October and re-filed on 23 October. On 2 November BA was requested to pursue the matter through diplomatic channels. Again it is difficult to conclude that this was more than game-playing by Iraq.
"40…On 29 November the UN Security Council passed Resolution 678 which authorised the use of all necessary means against Iraq unless it withdrew from Kuwait by 15 January 1991…
"41. On 6 December Iraq announced the release of all hostages. The BA...
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