Talbot Underwriting Ltd v Nausch Hogan & Murray [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Cooke J |
| Judgment Date | 31 October 2005 |
| Date | 31 October 2005 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Cooke J.
Gavin Kealey QC and Charles Kimmins (instructed by Russell Ridley & Co) for the claimant.
Peter MacDonald Eggers (instructed by Eversheds) for the defendant.
The following cases were referred to in the judgment:
Assicurazioni Generali SpA v Arab Insurance Group [2003] LRIR 131.
Boston Fruit Co v British & Foreign Marine Insurance CoELR [1905] 1 KB 637.
Browning v Provincial Insurance Co of CanadaELR (1873) LR 5 PC 263.
Dixey & Sons v Parsons (1964) 192 EG 197.
Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti)ELR [1991] 2 AC 1.
FNCB Ltd v Barnet Devanney (Harrow) Ltd [1999] Ll Rep IR 459.
Glasgow v SymondsonUNK (1911) 16 Com Cas 109.
Glencore International AG v Alpina Insurance Co LtdUNK [2004] 1 Ll Rep 111.
Insurance Corp of the Channel Islands v Royal Hotel Ltd [1998] Ll Rep IR 151.
Les Affreteurs Reunis SA v Leopold Walford (London) LtdELR [1919] AC 801.
Levy v SpyersENR (1856) 1 F & F 3.
Marc Rich & Co AG v PortmanUNK [1996] 1 Ll Rep 432; [1997] 1 Ll Rep 225 (CA).
Marine Sulphur Queen, TheUNK [1970] 2 Ll Rep 285 (US DC).
Martin P, TheUNK [2004] 1 Ll Rep 389.
National Oilwell (UK) Ltd v Davy Offshore LtdUNK [1993] 2 Ll Rep 582.
St Paul Fire & Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd [1995] CLC 818.
Sharp v Sphere Drake Insurance (The Moonacre)UNK [1992] 2 Ll Rep 501.
Siu Yin v Eastern Insurance Co Ltd [1994] CLC 31; [1994] 2 AC 199.
Small v UK Marine Mutual Insurance AssociationELR [1897] 2 QB 42.
Socony Mobil Oil Co Inc v West of England Shipowners Mutual Insurance Association (London) Ltd (The Padre Island) (No.2)ELR [1991] 2 AC 1.
Teheran-Europe Co Ltd v ST Belton (Tractors) LtdELR [1968] 2 QB 545.
Insurance — Insurance brokers — Reinsurance intermediaries — Trial of preliminary issues — Outfitting of pipe laying barge — Owners instructed defendant to place builders' all risks policy in respect of vessel including shipyard as co-assured as required by contract between owners and yard — Shipyard claimed on policy after vessel sustained flooding damage — Claim refused on basis that shipyard not named as assured under policy — Shipyard not associated or interrelated company or joint venture under “assured” clause — Shipyard not “additional assured” and not beneficiary of trust of promise by insurers to pay — Terms of insurance contract prevented shipyard from taking its benefit as undisclosed principal Investigation of fact required to see if fair presentation of risk had been made Role of undisclosed principal as builder and fact that subrogation rights might be affected capable of being material for disclosure purposes — Entitlement to avoid not lost by affirmation but waived by entering into assignment agreement -Brokers failed to act with due care and skill in placement of insurance — Shipyard repaired vessel and thus suffered loss and damage — Owners had suffered loss.
This was a trial of preliminary issues in a claim by London insurers against the defendant brokers, NHM.
Shipowners, CPL, contracted with the Sembawang Shipyard in Singapore for the completion, outfitting, commissioning and testing of a pipelaying barge which had been built in China. CPL instructed NHM to place a builders' all risks policy in respect of the vessel, which policy was to include Sembawang as a co-assured.
The insurance obtained by NHM which took the form of a slip policy incorporating the Institute Clauses for Builders' Risks made no mention of the outfitting yard, Sembawang, in circumstances where, it was common ground, CPL had agreed with Sembawang that Sembawang should be included as a co-assured and had instructed NHM accordingly.
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. Sembawang incurred expense by way of the cost of repair of the vessel and made a claim upon the London insurers under the policy, but the claim was refused by the London insurers on the ground that Sembawang was not an assured under the policy.
CPL, Sembawang and the London insurers settled and CPL and Sembawang assigned their claims against NHM to the London insurers.
NHM contended 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.
In response to NHM's plea that Sembawang was a party to the slip policy as a principal and/or was entitled to enforce the policy as the beneficiary of a trust, CPL and Sembawang pleaded that the London insurers were entitled to avoid the insurance on the ground of non-disclosure of CPL's intention and authority to obtain insurance for Sembawang. In answer to that plea, NHM contended that the London insurers, by reason of the terms of the policy, had waived disclosure of those matters, or had abandoned their rights to avoid, or had affirmed the insurance, by concluding the assignment agreement and/or commencing the action.
Held ruling accordingly:
1. Sembawang was not a co-assured under the policy as an “associated” and/or an “interrelated” company and/or a “Joint Venture” within the meaning of the “Assured” clause. Nor was it an “Additional Assured” within the meaning of the policy.
2. Sembawang was not entitled to step in and take the benefit of the contract as undisclosed principal on the basis that CPL was authorised by Sembawang and intended to place the insurance on its behalf and to include it as co-assured. In this case the terms of the insurance contract prevented Sembawang, as an undisclosed principal, from taking its benefit. If no intention to cover Sembawang directly appeared from the policy, that intention could not be circumvented by an application of the doctrine of the undisclosed principal. The fact that the insurance was not, on its proper construction, an insurance for the benefit of the builders provided a strong reason for disapplying the doctrine of an undisclosed principal in the shape of the builders, it being plain that there was the possibility of a loss of subrogation rights and consequent impact on the premium which would be charged. (Siu Yin v Eastern Insurance Co Ltd[1994] CLC 31; [1994] 2 AC 199 considered.)
3. Sembawang was not a beneficiary of a trust in respect of the London insurers' promise of an indemnity under the policy. Sembawang was not an Assured within the meaning of the contract and in those circumstances it was impossible to construe the contract as containing a promise in its favour.
4. As a matter of principle, disclosure was required of anything which was material in relation to the intervention by an undisclosed principal. That might relate to the characteristics of the entity concerned or to the role or function fulfilled by that entity or to any of the other wide range of circumstances which could influence the insurers' judgment. The role of the undisclosed principal as the builder and the fact that subrogation rights might be affected, were both capable of being material facts for that purpose. There had to be a fair presentation of the risk before there could be any waiver of the disclosure obligation. Whether or not, on the facts, there was a fair presentation of the risk could only be decided on proper investigation.
5. The London insurers did not lose any entitlement to avoid by affirmation by reason of entering into the assignment agreement, commencing the proceedings or serving their statements of case. The London insurers did lose their entitlement to avoid when they entered into the assignment agreement.
6. If NHM did not obtain cover which clearly did include Sembawang as co-assured, without room for significant debate, that represented a failure to act with due care and skill in the placement of the insurance.
7. Sembawang had suffered loss in incurring the expense of reparation work. CPL had also suffered loss by making a payment to Sembawang under the settlement agreement. That was a sum which it would never have had to pay if NHM had not failed to obtain a policy in which Sembawang was named as a co-assured. CPL had recovered sums from the London insurers under the assignment agreement which still left a shortfall against the sum it has paid out to Sembawang. In addition, both Sembawang and CPL alleged that they had incurred costs and expenses as a result of NHM's breach and, to the extent that those were established, they were in principle recoverable.
| Para | |
| Introduction | 1 |
| The Issues | 24 |
| Associated and interrelated Companies and/or Joint Venture | 28 |
| Additional Assured | 35 |
| Undisclosed Principal | 55 |
| Issue 2 | 69 |
| The non-disclosure Issue | 72 |
| Issue 7 | 103 |
| D — The no loss Issue | 113 |
| Sembawang's loss | 114 |
| CPL's loss | 128 |
| E — The Delay Issue | 131 |
| Conclusion | 138 |
Cooke J:
1. The parties agreed and the Court ordered, on 29th July 2005, that there be a trial of preliminary issues by reference to the parties' contentions as set out in their respective statements of case, on the basis of specified documents, agreed assumed facts and the facts admitted in the statements of case, all without prejudice to other issues raised by those statements of case.
2. For the purposes of this judgment I shall refer to the Claimants as the London Insurers, to the Defendants as NHM, to the London placing brokers as NMB and to the Shipyard responsible for outfitting the pipe laying barge, the Jascon 5, as Sembawang. The London Insurers sue in the capacity of assignees of the causes of action of CPL (an admitted assured which gave instructions to NHM as its brokers) and of Sembawang (the ship repairers who, through the agency of CPL sought to obtain insurance via NHM), in contract...
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Talbot Underwriting Ltd v Nausch Hogan & Murray Inc.
...— Shipyard and shipowners had suffered recoverable loss. This was an appeal against the judgment of Cooke J ([2005] EWHC 2359 (Comm); [2005] 2 CLC 868) determining a number of preliminary issues in an action arising out of arrangements for the insurance of a vessel while she was undergoing ......