Zeus Tradition Marine Ltd v Bell
| Jurisdiction | England & Wales |
| Judge | Sir Murray Stuart-Smith,Potter L JJ,Pill |
| Judgment Date | 31 July 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0613-15 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/1999/0495 |
| Date | 31 July 2000 |
[2000] EWCA Civ J0613-15
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(MR JUSTICE COLMAN)
QUEEN'S BENCH DIVISION COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Pill
Lord Justice Potter and
Sir Murray Stuart Smith
Case No: A3/1999/0495
Stephen Ruttle QC (instructed by Messrs Sinclair Roche & Temperley, London, for the appellant)
Belinda Bucknall QC and John Russell Esq. (instructed by Hill Dickinson, London, for the respondent)
POTTER LJ:
INTRODUCTION
This is an appeal with the leave of the judge from a judgment of Colman J sitting in the Commercial Court delivered on 30 th October 1998 dismissing the plaintiffs' claim against the defendant for an indemnity under a marine insurance policy. By subsequent order dated 16 th April 1999 and sealed on 21 st April 1999, he gave leave to the plaintiffs to appeal, confined to the proper construction of the survey condition included in the policy. He also gave leave to the defendant to cross-appeal. However, the defendant has not done so. The plaintiffs' claim arises out of a fire on 20 th April 1993 on board the plaintiff's yacht "Zeus V" ("the yacht") when on a cruise off the island of Sikinos in the Aegean Sea. At the time the yacht was on a seven-day study cruise with twenty passengers aboard as well as her crew. All were rescued. However, the yacht was burned to the water line so as to become a total loss. The yacht had a wooden hull and had been built in 1958. It had been re-built and re-fitted during the period 1990–1992 in order to prepare her for use as a charter vessel for the cruise trade.
At the time, the yacht was insured under a Lloyds' policy entered into by the defendant who, as the active underwriter of Lloyds Syndicate 625 which was the leading underwriter of the insurance, is sued as representative of all other insurers. The risk was placed with the defendant on 22 nd March 1993 by Lloyds brokers, Ian McCall & Co. Limited ("McCall"), by their representative Mr John Fraser. McCall's instructions were in turn received from Hellas Yacht Insurance ("Hellas"), Greek brokers whose office was in Piraeus and whose principal and owner was Mr Vassilakis who acted for the plaintiffs. The insurance was in terms evidenced by Certificate of Insurance No. M2359289 and was stated to be Hull & Machinery Insurance, value Drs 149,820,000. The Institute Yacht Clauses were also incorporated, as well as a condition which provided:
"Subject to survey including valuation by independent qualified surveyor prior to commencement of in commission period." ("The clause")
The yacht was surveyed on behalf of the defendant and it was agreed that the loss had been by reason of an insured peril. However, the claim was rejected by the underwriters against the following background. The plaintiffs had acquired the yacht in 1990 with a view to its being re-built. They obtained cover through McCall against builders' risks for a building period up to 31 st March 1991, the works then being estimated to take six months. The cover was provided by a syndicate of which Mr Bell was not the leading underwriter. That insurance was renewed for a further period of twelve months from April 1 st 1991 and again in 1992. The latter renewal was "subject to survey and to valuation prior to navigation". At that time it was mutually envisaged that during the 1992/93 cover there would be some period of time before the vessel went into commission. The yacht was subsequently brought into commission on 3 rd May 1992 following a survey by SVL. However, the survey report was never sent to McCall who were not aware that the vessel was navigating during the currency of the insured period.
During the 1992/93 period of cover the vessel was surveyed by the Greek Ministry of Mercantile Marine ("MMM"), as it had been the year before. This was an annual requirement for Greek passenger carrying vessels. As the yacht was not entered with a classification society, as a cargo vessel would have been, this represented the only official and independent survey to which it was subjected. It consisted of a survey ashore and afloat. The former included the hull, engines and safety equipment and was carried out on 15 th January 1993, followed by an engine survey at sea on 3 rd March 1993. The judge accepted that the MMM survey:
"covered all aspects of the vessel's seaworthiness, including stability, and was most searching."
However, at the time of the placing of the risk in February/March 1993, the defendant was unaware that such survey had been carried out or, indeed, that the yacht was yet in commission.
On 27 th March 1993, SVL conducted a survey afloat, following which they prepared and submitted to the plaintiffs a report dated 14 th April 1993 described as a "Condition and Valuation Survey Report". The report consisted of ten pages. After the 'Principal Particulars' and 'General Description' had been set out it dealt in some detail with the condition of the yacht under headings relating to its various parts such as Hull, Decks, Navigating Room, Passenger Accommodation, Galley, Engine Room (in which the testing of the engines was included), Deck Fittings and Moving Equipment and Life Saving and Fire Fighting Equipment. So far as the inspection of the hull was concerned it found no defects, but made clear that the inspection was limited to the yacht whilst lying afloat and that the underwater parts had not been inspected. So far as those parts were concerned it recited the slipway survey and survey afloat of MMM on 15 th January and 4 th March 1993 respectively, exhibiting the Certificate of General Inspection issued by MMM on 5 th March 1993 which set out the details of the yacht and the parts and equipment inspected which concluded:
"This certificate is issued following an inspection at the Port of Piraeus Marina Zeas on 3 rd March 1993, which showed that the hull, engines and machinery, the telecommunication means, navigation lights and shapes and means of making sound signals and distress signals as well as the life saving appliances and fire-fighting equipment were on the date of inspection in satisfactory condition and in accordance with the Regulations. It will remain in force until 14 th January 1994."
The SVL report stated that no outstanding recommendations existed against the yacht's seaworthiness and navigation.
Subject to the 'underwater parts' qualification the survey report proceeded comprehensively through, and found no fault with, the various parts and equipment of the vessel. Under the final 'Comments and Remarks', it stated that the examination had been made 'always afloat' without making removals or opening up to expose parts originally concealed, or testing for tightness or trying out machinery, and without examination of underwater parts." It also made clear that no determination had been made and no opinion was expressed as to the yacht's 'actual stability characteristics'. The conclusions were stated in the following terms:
"From the point of view of hull, except for the underwater parts which were not sighted, the yacht is in a satisfactory condition the passenger cabins and public rooms, decks and superstructures are in very good condition …
Deck machinery, auxiliaries, navigating instruments, galley equipment, etc were found in order.
The engine room main and auxiliary machinery were noted to be in a satisfactory state.
As far as it could be ascertained from a general examination of the above yacht in ballast afloat it is the opinion of the Undersigned, as here above qualified, that the yacht and her equipment are in a satisfactory condition for the intended service, i.e. passenger cruise yacht and her estimated present day values are indicated above."
A copy of the survey report was despatched to McCall in London on 14 th April 1993 by registered mail. However, it had not arrived by the date of the loss and was not seen by the underwriters until a copy was faxed to them on 23 rd April 1993.
The plaintiff's claim under the insurance was rejected by the underwriters on three grounds:
(i) they had not been provided with the survey report on the vessel prior to the commencement of the in commission period; the vessel having already been in commission at the date of the inception of the insurance, continuing in commission thereafter;.
(ii) alternatively, if they were not entitled to be provided with a survey report prior to commencement of the in commission period, the SVL report subsequently provided was insufficiently comprehensive as it did not evidence a condition survey which confirmed the structure of the hull and main deck as sound and seaworthy, that work carried out in the engine room had been carried out to a safe standard and in a workmanlike manner, that the vessel's fire systems and apparatus were properly operational and that alterations to the vessel had not adversely affected its stability. It was said the surveyor ought to have investigated the vessel's underwater parts while she was slipped and to have conducted sea trials and an engine survey involving opening-up. The survey was no more than a superficial survey reporting on the general condition of the vessel for valuation purposes;
(iii)non-disclosure in relation to the vessel being put into commission prior to the period of insurance.
THE JUDGE'S DECISION
So far as the underwriters' ground (iii) is concerned, suffice it to say on this appeal that the judge...
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