Talbot Underwriting Ltd v Nausch Hogan & Murray Inc. (The Jascon 5)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lord Justice Richards,Lord Justice Waller |
| Judgment Date | 29 June 2006 |
| Neutral Citation | [2006] EWCA Civ 889 |
| Docket Number | Case No: A3/2005/2690 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 June 2006 |
[2006] EWCA Civ 889
Lord Justice Waller
Lord Justice Moore-Bick and
Lord Justice Richards
Case No: A3/2005/2690
2004 Folio 911
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Mr. Justice Cooke
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Julian Flaux Q.C. and Mr. Peter MacDonald Eggers (instructed by Eversheds) for the appellants
Mr. Gavin Kealey Q.C. and Mr. Charles Kimmins (instructed by Russell Ridley & Co) for the respondent
Background
This is an appeal against the judgment of Cooke J. determining a number of preliminary issues in this action. The dispute between the parties arises out of arrangements for the insurance of the vessel Jascon 5 while she was undergoing completion, outfitting, commissioning and testing at Sembawang Shipyard Pte Ltd ("Sembawang") in Singapore in 2003. I shall refer to this as 'the completion work' and the contract between the vessel's owners, Consolidated Projects Ltd ("CPL"), and Sembawang under which it was carried out as 'the Completion Contract'.
The defendants, Nausch, Hogan & Murray Inc. ("NHM"), are insurance brokers. They were instructed by CPL to obtain a shipbuilders' all risks policy of insurance on the vessel's hull and machinery in respect of the period of the completion work on behalf of various interested parties and specifically to include Sembawang as co-assured pursuant to the terms of the Completion Contract. NHM placed the risk in three markets: London, Norway and Russia. They instructed the firm of Newman, Martin & Buchan ("NMB") to carry out the placing in the London market, but apparently failed to instruct them that Sembawang was to be named in the policy as a co-assured. Forty per cent of the risk was eventually placed in the London market with the claimants as insurers. It is common ground that Sembawang was not named as a co-assured in the London policy.
Much of the fitting out of the vessel was done in drydock. On 14 th October 2003 while the vessel was being refloated she sustained serious flooding of several compartments. The damage was repaired by Sembawang which made a claim under the insurance. However, that claim was rejected by the London market insurers on the grounds that Sembawang was not one of the assured and as a result disputes arose between Sembawang, CPL and NHM. The loss attributable to the London market's share of the risk was eventually assessed at US1,253,332 and Sembawang sought to recover that amount from CPL by way of damages for failing to procure insurance on its behalf in accordance with the terms of the Completion Contract. It also sought to hold NHM liable in negligence. CPL looked to the brokers for an indemnity against any liability it might have to Sembawang on the grounds that it had been brought about by their breach of duty.
The dispute between Sembawang and CPL was eventually compromised on the terms of a Settlement Agreement dated 28 th April 2004 under which CPL agreed to pay Sembawang US850,000. By an Assignment Agreement dated 26 th July 2004 CPL and Sembawang assigned any rights they might have against NHM or their agents to the first claimant, Talbot Underwriting Ltd ("Talbot"), acting on behalf of all the London market insurers in consideration of the payment by Talbot to CPL of US501,252.80. Talbot agreed to pursue claims against the brokers with the assistance of CPL and Sembawang and to distribute any amounts recovered from them to the parties to the agreement in accordance with a prescribed formula.
On 16 th May 2005 the insurers began the present proceedings against NHM claiming damages for breach of duty and negligence by the brokers in placing the insurance on the vessel. They seek to recover US403,132 as assignees of the rights of Sembawang and US536,717 as assignees of the rights of CPL. In their defence NHM allege, among other things, that Sembawang was a co-assured under the policy, either because it was an assured or an "additional assured" within the meaning of the policy or because it was entitled to enforce the policy as an undisclosed principal of CPL, and that in any event neither CPL nor Sembawang has suffered any loss as a result of their failure to include Sembawang as a named co-assured.
At the request of the parties Cooke J. gave directions at the case management conference for the determination of a number of preliminary issues on the basis of the admissions made in the statements of case, certain documents which were identified in the order and certain facts which, by agreement between the parties, were to be assumed to have been established for the purposes of the trial. Those facts were set out in a schedule to the order.
At the trial itself a question arose whether the parties could rely on any facts other than those set out in the schedule insofar as they were not for practical purposes in dispute, albeit they were not the subject of any admissions in the statements of case. The judge ruled that they could not and there is no appeal against his decision. Accordingly, apart from any admissions in the statements of case and any facts which can fairly be said to be implicit in the documents referred to in the order, the schedule contains the entire factual basis on which the issues fall to be determined. In those circumstances I think it is appropriate to set it out in full in this judgment.
The facts
The following facts are to be taken as having been established for the purposes of the determination of the preliminary issues:
1. The vessel Jascon 5 ("the vessel") was an offshore pipelay construction barge, which was owned by CPL. CPL was part of the Sea Trucks group of companies.
2. The vessel was built in China.
3. In March 2003, the vessel was towed from China to Sembawang's Shipyard in Singapore, where the completion, outfitting, commissioning and testing of the vessel was to take place. The said work was commenced in March 2003 and was to be carried out pursuant to the Completion Contract entered into between CPL and Sembawang on 5th October 2002 (Appendix 1) . The only legal relationship between Sembawang and CPL and/or Sea Trucks was constituted by the Completion Contract and the fact that Sembawang was undertaking works in respect of the vessel at its shipyard.
4. In May 2003, NHM was instructed by Mr Roomans of CPL, Sea Trucks and Roomans Eneli Flynn Brokers Ltd to place a builders' all risks policy in respect of the vessel, which policy was to include Sembawang as a co-assured.
5. Mr Roomans, CPL and Sea Trucks were authorised by Sembawang and intended to place builders' all risks insurance on behalf of Sembawang and to include Sembawang as a co-assured.
The vessel was insured with a final contract value of US70,800,000. The risk was placed in London (to the extent of an order of 40%), in Norway (35%) and Russia (25%) .
7. The London insurers (for their 40% order) subscribed to the Builders' Risks Policy (Appendix 2) in respect of the vessel on various dates between 21st and 27th May 2003 respectively. The risk in London was placed by Newman Martin & Buchan ("NMB") on the instructions of NHM.
8. At all material times, Sea Trucks and CPL intended to include Sembawang as a co-assured under the Builders' Risks Policy as required by the Completion Contract.
9. The Claimants contend that, unless the contrary can be said by reason of the terms of the Builders' Risks Policy, NMB did not entertain an intention that Sembawang would be covered as a co-assured under the Builders' Risks Policy.
10. NHM contends that NMB intended that Sembawang would be covered as a co-assured under the Builders' Risks Policy.
11. Unless the contrary can be said by reason of the terms of the Builders' Risks Policy, the London insurers were not notified that Sembawang was intended to be a co-assured under the Builders' Risks Policy until after 14th October 2003.
12. The Claimants contend that, unless the contrary can be said by reason of the terms of the Builders' Risks Policy, the London insurers (at the time of or after their agreement to the Builders' Risks Policy) did not entertain an intention that, or specifically agree that, Sembawang would be covered as a co-assured.
13. NHM contends that, by reason of the terms of the Builders' Risks Policy, the London insurers intended or agreed that Sembawang would be covered as a co-assured.
14. On 14th October 2003, during the period covered by the Builders' Risks Policy, the vessel sustained flooding in various compartments, including the generator room, whilst the vessel was being refloated after drydocking at Sembawang's Shipyard.
15. Sembawang incurred expense by way of the cost of repair of the vessel.
16. Sembawang has not acknowledged liability, nor has been held liable, to incur the said expense.
17. Sembawang made a claim upon the London insurers under the Builders' Risks Policy, in respect of the London market's order of 40%, but the claim was refused by the London insurers on the ground that Sembawang was not an assured under the Builders' Risks Policy.
18. The London insurers did not avoid the Builders' Risks Policy.
The issues
Cooke J. gave directions for the determination of ten preliminary issues, but the notice of appeal only sought to challenge his decision in relation to five of them and by the end of the hearing those five had been reduced to the following four (for convenience I have retained their original numbering):
Issue 1: Was Sembawang a co-assured under the Builders' Risks Policy on the...
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