Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurnace Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Clarke |
| Judgment Date | 02 December 2004 |
| Neutral Citation | [2004] EWCA Civ 1598 |
| Docket Number | Case No: A3/2004/0153 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 December 2004 |
[2004] EWCA Civ 1598
The Lord Chief Justice Of England and Wales
Lord Justice Clarke and
Lord Justice Rix
Case No: A3/2004/0153
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
MR JUSTICE MOORE-BICK
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Mark Howard QC and Mr Ricky Diwan (instructed by Birketts) for the Claimant/Respondent
Mr Christopher Smith (instructed by Holmes Hardingham Walser Johnston Winter) for the Defendant/Appellant
Introduction
This is the judgment of the court on an appeal from an order of Moore-Bick J dated 18 December 2003. By that order he dismissed the defendant's challenge to the jurisdiction of the English High Court, declared that the defendant was bound to refer certain claims to arbitration in England and that proceedings issued by the defendant in Finland were brought in breach of the agreement to arbitrate and granted an injunction restraining the defendant from continuing with the proceedings in Finland and/or from commencing proceedings otherwise than by way of arbitration in London. The judge also ordered the defendant to pay the claimant's costs and gave the defendant permission to appeal.
The facts
The facts are not in dispute and can be taken from the judge's judgment. In October 1999 an Indian merchant, Saluja Fabrics, shipped on board the vessel Hari Bhum at Calcutta a container said to contain various types of garments for carriage to Moscow. The container was shipped under two through transport bills of lading issued by Borneo Maritime Ltd ("BML"), which provided for the goods to be carried by sea to Kotka in Finland and thence by road to Moscow. The goods were insured against loss or damage in transit by the defendant, New India Assurance Company Limited ("New India").
The container arrived at Kotka on 30 November 1999. On 16 December Borneo Maritime Oy ("BMO"), an associated company of the carrier incorporated in Finland, issued a CMR waybill for the carriage of the container by road from Kotka to Moscow. Unfortunately, the container did not reach Moscow, having been lost in circumstances which are still in dispute somewhere in the course of its journey through Russia.
The claimant, Through Transport Mutual Insurance Association (Eurasia) Ltd ("the Club"), is a mutual insurance association which provides insurance to its members in respect of various kinds of losses and liabilities incurred in connection with the carriage of goods. BML was a member of the Club for the year beginning 1 September 1999. BMO was also insured under the same cover as an associated company of BML.
Following the loss of the container, Saluja Fabrics made a claim against New India which was in due course compromised. As a result of the compromise New India became entitled to exercise Saluja Fabrics' rights against the carrier, either as assignee of those rights or by way of subrogation; we are not sure which. During 2002 BMO filed for bankruptcy and on 26 November 2002 it was struck off the register in Finland. As the judge observed, it is not clear whether any claim had been intimated to the company before that occurred, but it is common ground that no payment had been made by either BMO or BML in respect of the loss of the container.
The Club rules for the year beginning 1 September 1999 included the following provisions:
" Clause A. Cargo Liabilities
1 RISKS INSURED
1.1 Loss of or Damage to Cargo
You are insured for your liability for physical loss of or damage to Cargo and for consequential loss resulting from such loss of damage.
General Provisions
Clause A. Exclusions & Qualifications
1. STANDARD EXCLUSIONS AND QUALIFICATIONS
………………..
1.3 Indemnity insurance
Insurance with the Association is on the basis of indemnity which means that the Association shall pay you only
(a) after you have suffered a physical loss of your insured property, for example, your Equipment, or
(b) after you have expended money, for example, by paying a claim of your Customer or a Third Party for which you are liable or by paying for repairs to your insured property.
Clause D. Law & Disputes
1. LAW
Every insurance provided by the Association and the rights and obligations of you (or any other person) and the Association arising out of or in connection with such insurance, is subject to and shall be construed in accordance with English law.
2. DISPUTES
If any difference or dispute shall arise between you (or any other person) and the Association out of or in connection with any insurance provided by the Association or any application for or an offer of insurance, it shall be referred to arbitration in London.
2.2 The submission to arbitration and all proceedings in connection with it shall be subject to English law.
2.3 No action or other legal proceedings against the Association upon any such dispute may be maintained unless and until it has been referred to arbitration and the award has been published and become final.
2.4 The sole obligation of the Association to you in respect of such dispute is to pay such sum, if any, as such final award may direct."
Clause A1.3(b) is colloquially known as a pay to be paid clause and clauses D2, 2.3 and 2.4 together contain both an arbitration clause and a Scott v Avery clause and are very similar to the clauses considered by Leggatt J in Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association (London) Ltd (The Padre Island (No 1)) [1984] 2 Lloyd's Rep. 408.
On 19 October 1999 the Club issued a certificate of membership ("the certificate") with the terms of the cover attached. The parties to the contract at that time were of course only BML and BMO on the one hand and the Club on the other. Neither Saluja Fabrics nor New India was a party. However, having paid Saluja Fabrics, New India naturally wanted to recover the amount it had paid from those responsible for the loss. It could not recover from BMO because it was insolvent (or indeed from BML presumably for the same reason) and it naturally considered how it could recover directly from the Club as the liability insurer of both BMO and BML. The claim is, by today's standards, comparatively modest. We were told that it is of the order of US$250,000 plus interest.
New India did not proceed in England under the Third Party (Rights Against Insurers) Act 1930, no doubt because of the pay to be paid clause and the decision of the House of Lords in Firma C-Trade S.A. v Newcastle Protection and Indemnity Association (The Fanti) and Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association (London) Ltd (The Padre Island (No.2)) [1990] 2 Lloyd's Rep. 191. Instead, on 16 December 2002 New India began proceedings in its own name against the Club in Finland by applying to the District Court of Kotka for the issue of a writ in respect of its claim for the loss of the container. The claim was made under section 67 of the Finnish Insurance Contracts Act 1994 ("the Finnish Act").
Section 67 provides as follows:
"Injured person's entitlement to compensation under general liability insurance
A person who has sustained bodily injury, property damage or financial loss under general liability insurance is entitled to claim compensation in accordance with the insurance contract direct from the insurer, if:
1) the insurance policy has been taken out pursuant to laws or regulations issued by the authorities;
2) the insured has been declared bankrupt or is otherwise insolvent; or
3) the general liability insurance has been mentioned in marketing efforts launched to promote the insured's business.
If such claim is made to the insurer, the insurer shall inform the insured of the claim without undue delay and reserve the insured an opportunity to give further information on the occurrence of the insured event. The insured shall also be notified of the subsequent processing of the claim.
If the insurer accepts a claim made by a person who has sustained bodily injury, property damage, or financial loss, such acceptance is not binding on the insured."
Section 67 thus gives a third party the right in some circumstances to proceed directly against a liability insurer such as the Club when the insured who would otherwise be liable to the third party is insolvent.
The only other section of the Finnish Act which is (so far as we are aware) relevant or potentially relevant is section 3, which provides as follows:
"Peremptory nature of the provisions
(1) Any terms or conditions of an insurance contract that deviate from the provisions of this Act to the detriment of an injured person or a person entitled to compensation or benefits other than the policyholder shall be null and void.
(2) Any terms or conditions of an insurance contract that deviate from the provisions of this Act to the detriment of the policyholder shall be null and void if the policyholder is a consumer or a business which in terms of the nature and scope of its operations or other circumstances can be compared to a consumer as a party to the contract signed with the insurer. What is provided in this Subsection is not applied to group insurance contracts.
(3) The provisions contained in Subsections 1 and 2 are not applied to credit insurance, marine or transport insurance taken out by businesses, or insurance taken out by businesses to insure aircraft."
As can be seen, section 3 is an anti-avoidance provision not dissimilar from that contained in...
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