Talbot Underwriting Ltd v Nausch Hogan & Murray Inc.
| Jurisdiction | England & Wales |
| Judge | Waller,Moore-Bick,Richards L JJ |
| Judgment Date | 29 June 2006 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 June 2006 |
Court of Appeal (Civil Division).
Waller, Moore-Bick and Richards L JJ.
Julian Flaux QC and Peter MacDonald Eggers (instructed by Eversheds) for the appellants.
Gavin Kealey QC and Charles Kimmins (instructed by Russell Ridley & Co) for the respondent.
The following cases were referred to in the judgment of Moore-Bick LJ:
Burnand v Rodocanachi Sons & CoELR (1882) 7 App Cas 333.
Castellain v PrestonELR (1883) 11 QBD 380.
Colonia Versicherung AG v Amoco Oil Co (The Wind Star) [1997] CLC 454.
Co-operative Retail Services Ltd v Taylor Young PartnershipUNK [2002] UKHL 17; [2003] 1 CLC 75.
Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti)UNK [1990] 2 Ll Rep 191.
Glasgow Assurance Corp Ltd v William Symondson & CoUNK (1911) 16 Com Cas 109.
Glencore International AG v Alpina Insurance Co LtdUNK [2004] 1 Ll Rep 111.
London and North Western Railway Co v GlynENR (1859) 1 El & El 652.
Lonsdale & Thompson Ltd v Black Arrow Group plcELR [1993] Ch 361.
Mark Rowlands Ltd v Berni Inns LtdELR [1986] QB 211.
Merrett v Capitol Indemnity CorpUNK [1991] 1 Ll Rep 169.
National Oilwell (UK) Ltd v Davy Offshore LtdUNK [1993] 2 Ll Rep 582.
North Atlantic Insurance Co Ltd v Nationwide General Insurance Co LtdUNK [2003] EWHC 449 (Comm); [2003] 2 CLC 731.
O'Kane v Jones (The Martin P)UNK [2003] EWHC 2158 (Comm); [2004] 1 Ll Rep 389.
Scottish and Newcastle plc v GD Construction (St Albans) LtdUNK [2003] EWCA Civ 16; [2003] Ll Rep IR 809.
Siu Yin Kwan v Eastern Insurance Co Ltd [1994] CLC 31; [1994] 2 AC 199.
Small v United Kingdom Marine Mutual Insurance AssociationELR [1897] 2 QB 42.
Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association (The Padre Island) (No. 2)UNK [1990] 2 Ll Rep 191.
Teheran-Europe Co Ltd v ST Belton (Tractors) LtdELR [1968] 2 QB 545.
Tomlinson (A) (Hauliers) Ltd v HepburnELR [1966] AC 451.
Waters v Monarch Fire and Life Assurance CoENR (1856) 5 El & Bl 870.
Insurance — Insurance brokers — Undisclosed principal — Loss — Shipbuilding — Shipbuilding contract provided for yard to be co-assured — Brokers failed to ensure that shipyard named as assured — Vessel suffered damage at yard — Shipyard not additional assured under extension clause in slip policy — Terms of policy impliedly excluded yard's right to sue as undisclosed principal — 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 completion works at Sembawang Shipyard in Singapore in 2003.
The vessel's owners, CPL, had contracted with Sembawang to carry out the completion work. The defendants, NHM, were insurance brokers. They had been 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 part of the risk in London but apparently failed to instruct the brokers that Sembawang was to be named in the policy as a co-assured. The insurance was in the form of a “MAR 91/Slip Policy” and contained the following wording among the conditions: “Including Assured, interest of Mortgagees (and Notices of Assignment in respect thereof), Loss Payees, Additional Assureds and Waivers of Subrogation as may be required.” It was 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. 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. 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 dispute between Sembawang and CPL was compromised and they assigned any claim against NHM to the first claimant, Talbot, acting on behalf of all the London market insurers.
The insurers brought proceedings against NHM claiming damages for breach of duty and negligence by the brokers in placing the insurance on the vessel. In their defence NHM claimed, 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 had suffered any loss as a result of their failure to include Sembawang as a named co-assured. Cooke J decided those issues against NHM and NHM appealed.
Held, dismissing the appeal:
1. Sembawang was not an additional assured under the terms of the policy. The clause in the conditions which mentioned the additional assured was not intended to embody a self-contained provision providing for the extension of the policy to persons other than those referred to in the section dealing with the assured. The more natural reading of the clause was as referring to additional clauses which were to be included in the policy if required by the assured. The parties presumably had some “Additional Assureds” clause in mind, but none had been identified. On the true construction of the contract Sembawang was not one of the assured.
2. Sembawang was not entitled to enforce the contract as an undisclosed principal. The terms of the policy prevented Sembawang from taking the benefit of it as an undisclosed principal. The omission of any reference to the yard or its sub-contractors in the policy was not neutral but had to be regarded as a positive indication that the insurers were not willing to contract with them. Therefore the terms of the contract by implication excluded any right on the part of Sembawang to sue on it as an undisclosed principal.
3. It was not necessary to decide whether, if Sembawang had been in principle entitled to enforce the policy as a co-assured, the insurers would have been entitled to avoid it on the grounds that there was a failure to disclose the fact that CPL was contracting on its behalf. Any circumstances relating to the undisclosed principal that were material to the risk had to be disclosed to the insurers. Whether any particular circumstance was or was not material was a question of fact which the court usually determined after hearing expert underwriting evidence. It was not a question which could be determined on the basis of the agreed facts. The insurers had not waived disclosure of Sembawang's position as an undisclosed principal.
4. Even if the parties intended that in the event of loss of or damage to the vessel or the completion work they should have recourse to insurance and should not be entitled to make claims against each other, the completion contract only made Sembawang responsible for damage caused by its negligence and it could not be assumed that that was the cause of the flooding in this case. Sembawang, as a co-assured, would have been entitled to make a claim under the builder's all risks insurance, and would have been entitled to retain the proceeds of the policy in order to recover the cost of making good the damage. At the time of the flooding the work was at the risk of Sembawang which had to make good the damage in order to complete the contract and obtain payment. Sembawang had an insurable interest in the vessel as a whole (including the hull) and it would have been entitled to recover the cost of making good the damage in order to obtain payment under the contract. Therefore Sembawang did suffer loss as a result of NHM's failure to include it as a named assured in the London market policy.
5. CPL too had suffered loss. The argument that as owner of the vessel CPL itself sustained a loss at the very moment the flooding occurred and was therefore entitled to recover a full indemnity in its own right was rejected. In accordance with the ordinary principles of subrogation the insurers were entitled to the benefit of any rights held or benefits received by the insured which diminished the ultimate loss. In the present case there was nothing to suggest that Sembawang carried out the repairs to the vessel with any intention other than to complete the work under the contract and obtain payment of the price. In those circumstances it was impossible to say that Sembawang did not intend to make good the loss in respect of which CPL was entitled to claim on the insurers. By the time a claim was made CPL had not incurred a loss that could be recovered from the insurers.
Moore-Bick LJ:
1. 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”.
2. 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 &...
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