Thor Navigation Inc. v Ingosstrakh Insurance Company Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Gloster DBE |
| Judgment Date | 14 January 2005 |
| Neutral Citation | [2005] EWHC 19 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No: 2003 Folio 804 |
| Date | 14 January 2005 |
[2005] EWHC 19 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Mrs Justice Gloster DBE
Claim No: 2003 Folio 804
Mr Stephen Kenny (instructed by Holman Fenwick and Willan) for the Claimant
Mr Huw Davies (instructed by Hill Taylor Dickinson) for the 1 st and 2 nd Defendants
Hearing dates: 12, 13, 14 and 15 July 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mrs Justice Gloster DBE
Background
This is the trial of certain preliminary issues ordered to be determined by Cresswell J at the Case Management Conference on 5 th March 2004. The parties agreed that I should also determine certain additional preliminary issues.
Once these preliminary issues are determined, the parties intend to attempt mediation to resolve the balance of their dispute. The hope is that the answers to these preliminary issues will assist with the mediation.
The estimated length of trial was 3 days with half a day estimated reading time. In fact the trial lasted 4 days (12, 13, 14 and 15 July 2004). There were 2 live witnesses who gave evidence and 2 experts who also gave evidence. There were a number of files of documentary evidence and numerous authorities referred to. Opening skeleton arguments ran to over 30 pages on each side and there were extensive written closing submissions.
The claim is made by the Claimant, Thor Navigation Inc. ("Owners"), owner of the vessel "THOR II" ("the Vessel"), under two fleet policies of hull and machinery insurance insuring the Interglobal fleet. The first policy, dated 11 July 2002, was issued by the First Defendant, Ingosstrakh Insurance Company Ltd ("Ingosstrakh"), covering 40% of the risk; the second policy, dated 29 June 2002, was issued by the Second Defendant Schwarzmeer Und Ostsee Versicherungs-Aktiengesellschaft ("SOVAG"), covering 60% of the risk. I shall refer to the First and Second Defendants collectively as "Insurers".
Ingosstrakh is a Russian joint-stock company and has been a leader in the Russian insurance market for 55 years, including the marine hull insurance market. SOVAG is a German company owned by Ingosstrakh. Although SOVAG took 60% of the risk, this business was led at all times by Ingosstrakh. Mr Semenkov, a director of Ingosstrakh's marine hull ocean going department, was the individual responsible for agreeing the terms on which Insurers were prepared to offer and provide cover for Owners' vessels (including the Vessel).
Topmar Shipping Corp SA ("Topmar") acts, amongst other things, as a producing broker for Ingosstrakh in Greece. The agency relationship began in 1997. Topmar (acting primarily by Mr Krasnokutskiy and also by Mr Hallak) acted as brokers for Insurers in relation to the placement of this business, their role being that of a conduit between Insurers on the one hand and Owners and their brokers on the other.
Owners, a Liberian company, own the Vessel which operates as part of a fleet of vessels managed by Interglobal Marine Agencies ("Interglobal"). European Link SA ("Link") acted on behalf Interglobal and Owners in the placement of this business. The individual at Link who was concerned with the placement was Mr Myrianthopoulos.
Ingosstrakh writes business in a number of international markets, not just Russia. Most of its international business comes from London, Greece, Norway and Germany. About 50% of the hull and machinery policies written by Ingosstrakh are written on an unvalued (as opposed to valued) basis although the percentage figure varies from market to market. In the Russian market the figure is more than 90%, in the Greek market it is between 80–90%, whereas in the London and German markets it is approximately 5%. The majority of Ingosstrakh's international business incorporates Institute Time Clauses—Hulls, clause 280, 1/11/95 (which is expressed to be subject to English law and practice) and is subject to English jurisdiction.
The policies gave hull and machinery cover in materially identical terms for a period of 12 months from noon on 29 June 2002. They set out, in respect of each vessel insured, brief details of the vessel, its owners, the particular terms of cover applicable to that vessel, and a "sum insured" for each. In particular, the Vessel was listed with a "sum insured" of US$1.5m and was subject to "Institute jurisdiction clause 358 1/11/81." Cover for the Vessel was subject to the Institute Time Clauses—Hulls 1/11/95, as amended by various other terms including the following: "For Thor II conditions are amended to be free from particular average unless caused by fire, grounding, collision, stranding, lightning, explosion including 4/4 RDC".
On 15 September 2002 the Vessel suffered a casualty: she broke her intermediate shaft, causing further damage to her main engine. The vessel was immobilised, and had to be towed to Piraeus. At Piraeus, the vessel was inspected, and repair specifications were drawn up and sent to three repair yards. The repair yards' quotations indicated that the costs of repairs would exceed US$2m. Owners claimed for a constructive total loss and gave Notice of Abandonment (which was declined).
On 12 November 2002 the Insurers gave notice that they believed that the Vessel could be repaired for less than her sum insured (but gave no details). On 14 November 2002 Owners sold the vessel for scrap.
Insurers now claim that the policies were unvalued policies. Owners deny this; but assert that, if the policies are, on their true construction, unvalued policies, then Insurers are estopped from so contending, alternatively that the policies ought to be rectified.
Preliminary Issues
The Preliminary Issues for the Court's determination are as follows:
(1) whether the hull policies the subject of the claim were as a matter of construction valued or unvalued policies;
(2) whether Insurers are estopped from contending that they are unvalued;
(3) whether the policies should be rectified;
(4) on the assumption that the policies are unvalued, what the repaired value of the Vessel would have been (for the purpose of ascertaining whether she was a constructive total loss); (this has now been agreed by the expert valuers to be US $ 900,000, so no longer needs to be determined;)
(5) a determination in principle, on the assumption that the policies are unvalued, of the measure of insurable value payable to Owners if the vessel is ascertained to be a constructive total loss.
Construction of the policies
Section 27(1) of the Marine Insurance Act, 1906 expressly provides that a (marine) policy may be "valued or unvalued". If the policy is valued, then the value fixed by the parties is conclusive of the insurable value of the subject matter insured (section 27(3)). Section 27(2) provides that:
"A valued policy is a policy which specifies the agreed value of the subject matter insured."
So the burden rests on the parties to specify the agreed value in the policy if it is to be regarded as valued. Section 28 defines an unvalued policy as one which "does not specify the value of the subject matter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained".
It was common ground before me that whether a policy is valued or unvalued is a matter of interpretation of the particular contract; see para 28–7 of The Law of Insurance Contracts by Clarke and para 1–15 of MacGillivray on Insurance Law (10 th ed). It was also common ground that the parties' intentions are to be objectively assessed to determine whether they intended to (1) place an agreed value on the subject matter insured or (2) just limit the insurer's liability to a stated maximum and that the ordinary principles of construction, for establishing the intentions of the parties, objectively ascertained, applied. Thus, adopting the approach of Lord Hoffmann in ICS v West Bromwich BS [1998] 1 WLR 896 at 912–913, the Court must ascertain the meaning "which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract"; that background knowledge includes "anything which would have affected the way in which the language of the document would have been understood by a reasonable man." In particular:
"the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749."
See per Lord Hoffmann in ICS v West Bromwich BS (ibid) at 912–913.
Accordingly, the critical issue of construction which I have to decide is whether, although the policy makes no express reference to "an agreed value", nonetheless the reference to a particular "SUM INSURED" for each vessel is, in the context of these particular policies, to be regarded as a specification of the agreed value of the vessels or whether, in the words of section 28, the policies, subject to the limit of the sum insured, leave the insurable value to be subsequently ascertained.
Normally, words such as "valued...
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