Tradigrain SA v Intertek Testing Services (ITS) Canada Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WALLER,LORD JUSTICE LEVESON,Lord Justice Moore-Bick,Lord Justice Carnwath,Lord Justice Laws |
| Judgment Date | 28 February 2007 |
| Neutral Citation | [2006] EWCA Civ 1466,[2007] EWCA Civ 154 |
| Docket Number | A3/2006/1112,Case No: A3/2006/1112 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 February 2007 |
[2006] EWCA Civ 1466
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE LANGLEY)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Waller
Lord Justice Leveson
A3/2006/1112
MR I MILLIGAN QC and MR G MORPUSS (instructed by Messrs Clyde & Co) appeared on behalf of the Appellant.
THE RESPONDENT DID NOT APPEAR AND WAS NOT REPRESENTED.
Judgement
1. The second claimant, SIAT, renews its application for permission to appeal after refusal by me on paper. They are the insurers of the first claimant under a policy governed by German Law. SIAT paid the second claimants and had taken over the claim of the second claimant against the coinsured, the defendants, more particularly CBI. That claim can only succeed if the waiver of recourse provided for under the policy applies. The wavier of recourse was negotiated and ultimately provided that the recourse should only be available if gross negligence had been established on the part of representatives of CBI. The clause read:
"A waiver of the recourse/recovery action against ITS Caleb Brett employees is agreed. However, excluding wilful misconduct and gross negligence of ITS Caleb Brett representatives. Representatives are members of a board of executives, directors, general partners, proprietors or the equivalent category in the case of foreign firms."
The claim under the policy related to unauthorised, indeed fraudulent releases of cargoes of oil released to consignees without payment. The fraud was actually perpetrated by an employee called Nair, who made allegations, ultimately unpursued and without foundation (as the judge held) that his superior, Mr Rackham was involved. By the conclusion of the trial, the key issues were (1) was Mr Rackham a representative and (2) if so was he grossly negligent and to succeed SIAT had to win on both points. The judge was against SIAT on both points. The construction of the policy was a matter of German Law and experts were called and the judge clearly preferred the expert called by CBI.
When I considered the matter on paper, I was fully persuaded by the terms of the judge's judgment, paragraph 66 to 72, and indeed when the mater was renewed I was disinclined to change my mind.
What has persuaded me are the arguments of Mr Milligan. He has, as always, been a very persuasive advocate. He has persuaded me that it may be that there is a point, which comes to this: construction is a matter for the court applying the principles of foreign law and it is at least arguable that what the judge has done is to accept the view of the German expert as to the construction of the policy.
Thus as it seems to me, it is right to give permission to appeal on that aspect.
As regards gross negligence, it seems to me that Mr Milligan is right to this extent, that probably the key issue is the effect of the illness of Mr Rackham, having regard to the fact that the first point is one on which I am inclined to give permission now, it would seem to me wrong to keep this other point away from the Court of Appeal and I would grant permission on that aspect also.
I agree.
Order: Application granted.
[2007] EWCA Civ 154
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 Langley)
2003 Folio 356
Lord Justice Laws
Lord Justice Carnwath and
Lord Justice Moore-Bick
Case No: A3/2006/1112
Mr. Iain Milligan Q.C. and Mr. Guy Morpuss (instructed by Clyde & Co) for the appellants
Mr. Michael Swainston Q.C. and Mr. David Scorey (instructed by Barlow Lyde & Gilbert) for the respondents
Hearing dates: 5 th & 6 th February 2007
Background
This is an appeal from the judgment of Langley J. dismissing the claim of Tradigrain S.A. and its insurers, Societa Italiana Assicurazioni e Riassicurazioni (SIAT) S.p.A. (“SIAT”) and others, against Intertek Testing Services (ITS) Canada Ltd (“Intertek”) and Caleb Brett India Pvt Ltd (“CBI”) in respect of the loss between November 1999 and May 2000 of a number of parcels of vegetable oil from storage facilities in Mumbai. Under a contract described as a Collateral Management Agreement (“CMA”) Intertek had undertaken responsibility for ensuring the safe keeping of the oil and its delivery to third parties in accordance with instructions received from Tradigrain. It had delegated the performance of that contract to its Indian subsidiary, CBI, one of whose employees, Mr. Sadanand (“Sashi”) Nair, allowed two purchasers from Tradigrain, Lanyard Foods Ltd (“Lanyard”) and Shweta International Ltd (“Shweta”), to remove various parcels of oil amounting in all to 15,697.7 metric tons before they had paid for them and without instructions from Tradigrain to do so. Lanyard and Shweta did not pay for the oil and Tradigrain therefore suffered a loss agreed to have been US$5.25 million in respect of which it was indemnified by its insurers. On paying Tradigrain the insurers became entitled to pursue any claims that it may have had against third parties in respect of the loss.
Intertek's business in India was conducted through CBI, a company originally incorporated in India under the name of Seascan Services Pvt Ltd (“Seascan”) which already had an established business of cargo surveyors and inspectors and was acquired by Intertek in 1998 for the purpose of extending its operations into Indian ports. Following the acquisition the company's name was changed, first to Caleb Brett Seascan Pvt Ltd and later to Caleb Brett India Pvt Ltd, and new directors were appointed to the board. The new board continued to function as such and carried out all the formal business of the company, but the practical management of the business and day to day control of operations were taken over by Intertek itself. Intertek appointed one of its own employees, Mr. Christopher Rackham, to manage the business in India on its behalf and for that purpose he was granted a power of attorney by CBI in very wide terms to enable him to act, in effect, as the company's chief executive. Mr. Rackham reported to Mr. John Notman-Watt, Intertek's manager in charge of operations in the Middle East and the Indian sub-continent, whose offices were in Dubai.
One of Mr. Rackham's responsibilities following his appointment was to establish effective operating procedures for the different aspects of business in which Intertek was or intended to become involved. These included, but were by no means limited to, what is known as 'collateral management', that is, the provision to banks and other financial institutions a range of services required to manage and ensure the integrity of goods in transit over which they hold security interests. Such services involved controlling the physical movement of goods following their discharge from ocean-going vessels, their safe storage in warehouses or shore tanks operated by third parties and their eventual disposal in accordance with the client's instructions. Mr. Rackham inherited a substantial staff, among whom was Mr. Nair whose dishonest conduct and falsification of records led to the loss of the goods in this case.
The CMA
The CMA, as its name suggests, was a contract designed primarily for the purposes of providing collateral management service. In the case of Tradigrain, however, it was a means of providing services of a similar kind to an owner of goods who retained an interest in them as seller pending payment by its buyers. The contract took the form of a set of terms signed by both parties to which were attached three schedules: Schedule I contained a brief description of the services to be provided; Schedule II set out more detailed terms relating to the provision of those services; Schedule III contained Intertek's general conditions of contract. It will be necessary to refer to other parts of the CMA at a later stage, but for the moment it is necessary to refer only to clause (i) of Schedule III which provided as follows:
“…. .the total liability of ITS, its officers, employees, agents, and sub-contractors, for any loss or damage caused by or resulting from improper or negligent performance, purported performance of [sic] non-performance of such work shall not exceed a sum equal to fifteen times the fee payable for the work.”
The insurance
Intertek effected two policies of insurance with various continental insurers led by SIAT: a primary policy covering Intertek and its subsidiary and associated companies worldwide in respect of marine and 'Full Outturn Guarantee' risks and a subsidiary policy covering marine and collateral management risks. Apparently it was thought desirable to obtain a separate policy in respect of CMA business because of the different nature of the risks involved. Tradigrain was insured in respect of its interests in goods in respect of which Intertek was...
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