HCCL 27/2009
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMMERCIAL ACTION NO. 27 OF 2009
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BETWEEN |
| | KAM HING TRADING (HONG KONG) LIMITED | Plaintiff |
and |
| | THE PEOPLE'S INSURANCE COMPANY OF CHINA (HONG KONG) LIMITED | 1st Defendant |
| | MST HONG KONG CO LTD | 2nd Defendant |
| ---------------------- |
Before: Hon Stone J in Court
Dates of Hearing: 22 - 26, 29, 30 March, 14 June, 3 July 2010
Date of Judgment: 31 August 2010
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INDEX TO JUDGMENT
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| | | Pages | |
| | This action | 2-4 | |
| | The background facts | 4-6 | |
| | The ‘shape’ of the case | 7-8 | |
| | Viva voce evidence: factual | 8-9 | |
| | Viva voce evidence: expert | 9-10 | |
| | Plaintiff’s Case: Against the 1st defendant insurer | 10-12 | |
| | The defences raised by the 1st defendant | 12 | |
| | (1) The plaintiff suffered no loss requiring indemnification; the plaintiffis not entitled to claim against the 1st defendant; the plaintiff’s actions adversely affected the insurer’s subrogation rights | 12-24 | |
| | (2) No insurable interest at the time of the loss; the plaintiff’s assignmentof the policy | 24-31 | |
| | (3) Carrying vessel neither ‘qualified’ nor ‘approved’; failure to give‘prompt notice’ to insurers | 31-54 | |
| | Order | 54 | |
| | Plaintiff’s Case: Against the2nd defendant insurer | 54 | |
| | The ‘shape’ of the dispute | 54-56 | |
| | The factual matrix: the involvement of MST | 56-60 | |
| | Nature and terms of the 2nd defendant’s engagement | 60-65 | |
| | Breach of duty? | 66-75 | |
| | Order | 75 | |
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J U D G M E N T
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This action
1. This is the trial of a marine insurance claim.
2. By writ issued on 6 June 2008, the plaintiff, Kam Hing Trading (Hong Kong) Limited (‘Kam Hing’), makes an insurance claim in respect of the loss of a cargo of 877 Malaysian round logs which on 31 October 2007 were shipped on board the vessel “WORLDWIDE SHANGHAI” (‘the vessel’) at the port of Sandakan, Sabah, Malaysia, for carriage to, and delivery at, Zhangzhou, China.
3. There is no dispute that the vessel sank in heavy weather in the Taiwan Strait, close to Kaohsiung, at around 0800 hours on 10 November 2007; the crew were rescued, but the cargo of 877 round logs went down with the vessel.
4. The 1st defendant, The People’s Insurance Company of China (Hong Kong) Ltd (‘People’s Insurance) is the insurer of this cargo.
5. On 5 November 2007 it had issued a Marine Cargo Policy (‘the Policy’) in respect of the cargo, backdated to 31 October 2007, pursuant to an Open Cover dated 12 December 2006.
6. The 2nd defendant, MST Hong Kong Ltd (‘MST’) was the insurance broker which had obtained the Open Cover for the plaintiff company. On 1 November 2010 the 2nd defendant had made a declaration on behalf of the plaintiff under that Open Cover as to this cargo, and it was in response to this declaration that the 1st defendant had issued the relevant Policy.
7. The plaintiff now claims against both defendants for the value of the lost cargo in the sum of US$1.3 million odd, together with interest and costs.
8. Different causes of action are in play, and differing defences have been raised; accordingly this judgment is responsive to the legal questions posed against a background of largely undisputed facts.
9. This case began life as HCA 1062 of 2008, and only subsequently was transferred to the Commercial List. In the early stages there appears to have been little or no case management, with the result that the time fixed for the hearing of this case significantly was underestimated; hence the attenuated hearing timetable, whereby additional dates had to be fixed ‘on the hoof’ to accommodate the diaries of court and counsel, and whereby this court was required to conclude the trial with the plaintiff’s final speech on a Saturday morning, fully 3 months after its commencement.
10. An unsatisfactory state of affairs, but the best that could be done in the circumstances; it is fortunate that the case is not particularly ‘fact sensitive’, and that the issues for decision primarily involve matters of law, all of which have been the subject of robust argument by counsel involved: Mr Sussex SC for the plaintiff, Mr Jeremy Bartlett leading Ms Ella Liang for the 1st defendant, and Mr Colin Wright for the 2nd defendant.
The background facts
11. The Marine Cargo Policy as issued in respect of this cargo of logs was a Valued Policy, the sum insured being identified as US$1,300,746.15.
12. The Policy incorporated the Institute Cargo Clauses (A) (‘ICC (A)’) which provides ‘all risks’ cover.
13. The same Policy also incorporated the Institute Classification Clause. However, there was an apparent anomaly. Whereas the Open Cover had referred to the 2001 version of that clause (namely, that dated 1/1/01), the Cargo Policy as issued referred to the 1997 version (dated 1/8/97).
14. Whilst at the outset of this case this appeared to pose a problem ‑ the 1st defendant insurer had pleaded, by way of Counterclaim, a prayer for rectification of the Conditions of the Cargo Policy to rectify reference therein of ICC 1/8/97 to that of ICC 1/1/01 ‑ by the conclusion of this case counsel had agreed that the reference to the ICC/97 version clearly was in error, and hence the reference in the Policy should be to the ICC dated 1/1/01, which was the version referred to in the Open Cover.
15. Thus as a practical matter the ‘rectification issue’ fell away, and ultimately the case was argued solely on the basis of the terms of the Institute Classification Clause dated 1/1/01.
16. Consequent upon the loss of vessel and cargo on 10 November 2007, two days later, on 12 November 2010, the 2nd defendant broker notified the 1st defendant insurer of the loss. At this stage the 1st defendant instructed marine loss adjusters to investigate.
17. In the course of the investigation the insurer asked the brokers for documentation, as did the loss adjusters, and in due course the plaintiff supplied documents requested; among these documents as requested were the Vessel’s Classification Certificate for Hull, and Classification Certificate for Machinery.
18. Thereafter a Composite Class Certificate was obtained by the plaintiff and sent to the 2nd defendant broker on 27 December 2007, which in turn was transmitted to the 1st defendant insurer.
19. By letter dated 10 January 2008 the insurer repudiated all liability under the Marine Cargo Policy as issued on the ground that the “WORLDWIDE SHANGHAI” was not an “approved vessel”, and therefore fell outwith ICC/01 requirements as to class.
20. In terms, this letter of rejection read:
“The relevant Marine Cargo Open Cover and Marine Cargo Policy are subject to the Institute Classification Clause 01/01/2001. It is clear from the relevant document provided by the Insured that the carrying vessel MV “Worldwide Shanghai” of the abovementioned shipment of cargo was not an approved vessel and it did not conform to the requirements of the Institute Classification Clause 01/01/2001. Further or alternatively, the Insured have failed to promptly notify the underwriters of that abovementioned shipment of cargo was carried by a non‑approved vessel, as required by the Institute Classification Clause 01/01/2001.
Please treat this letter as our notice to the Insured that the abovementioned shipment of cargo was not covered by the relevant Marine Open Cover and/or Marine Cargo Policy and the Insured’s claim is hereby rejected by us.”
21. The basis underpinning such rejection of liability clearly was that of class, since this was the only aspect upon which it was alleged that the vessel was not an ‘approved vessel’.
22. It is a matter of record that the Class Certificate supplied by the plaintiff in response to the loss adjuster’s query had revealed that the vessel in question was entered with the International Register of Shipping, which was not “a Member of Associate Member of the International Association of Classification Societies” as required by ICC/01.
The ‘shape’ of the case
23. Consequent upon repudiation of its liability under the Marine Cargo Policy proceedings were issued, and the matter pleaded out. As earlier noted, at this stage this case had been placed in the general High Court list and had not yet found its way to the Commercial Court.
24. As against the 1st defendant insurer, People’s Insurance, at the pleadings stage the plaintiff’s claim for indemnification under the Policy resulting from loss of the vessel, and with it the insured cargo of round logs, was met with the several main lines of defence: locus/title to sue, in the sense of the plaintiff in fact having suffered no loss; the vessel in question not being ‘approved’, the shipment not being covered under the Open Cover, and thus outwith the policy issued under that Open Cover; and absence of prompt notice that the carrying vessel nominated by the plaintiff was not so “approved”. In the course of this case these defences have been subject to elaboration, and later in this judgment I canvass the various objections raised on behalf of the 1st defendant, and the assertion of the non-liability of insurer to the plaintiff for the loss alleged.
25. As against the 2nd defendant broker, MST, which had been instrumental in obtaining the insurance cover for the plaintiff, issue is joined as to the duty of the broker in this situation, and in particular as to that which actually occurred between the 2nd defendant and the plaintiff at a meeting on 1 December 2006.
26. This latter point perhaps represents the only significant finding of fact that requires to be made in this case, all other issues being essentially matters of law.
27. The bases of denial of liability on the part of the 2nd defendant to the plaintiff, and the issues consequentially arising between them, likewise are examined later in this judgment.
Viva voce evidence: factual
28. In addition to the copious amounts of documentation placed before the court (as usual a great deal of which ultimately proving wholly unnecessary), in all there 5 witnesses of fact, plus one witness called under subpoena duces tecum to produce documents on behalf of the 1st defendant.
29. For the plaintiff, 3 witnesses were called: Miss Iris SoPui Yuk, an insurance broker who had been the person effecting the introduction of the plaintiff to the 2nd defendant broker; Miss Katherine Lui So Lai, the General Manager of the plaintiff, who handled all its shipping and insurance arrangements, and who had engaged the 2nd defendant, MST Hong Kong, to be its broker for the purpose of arranging this cargo insurance with the 1st defendant insurer, People’s Insurance; and Mr Sunny Ng Chun, Logistics Department Manager of the plaintiff, who had liaised with staff of the 2nd defendant broker.
30. For the 1st defendant insurer, there was one witness of fact, Mr Xie Chun Fan, a Senior Manager in the Marketing Department of the 1st defendant, who gave evidence of his dealings in this case with the 2nd defendant broker.
31. In addition, the 1st defendant called under subpoena a Mr Yan Siu Heung, an Assistant Vice President of DBS Bank, who had no knowledge of this case, but who simply produced certain documents in response to the terms of the subpoena.
32. For the 2nd defendant broker, a Mr Victor Cheung Shing Lee was called; at the material time Mr Victor Cheung was the Assistant General Manager of the 2nd defendant, and he gave evidence about being consulted in order to arrange the relevant open policy cover for the plaintiff in October 2006.
Viva voce evidence: expert
33. Expert evidence was given by Mr Philip Bilney, a ‘single joint expert’ admitted pursuant to that which I understand was a Consent Order formally made by Madam Registrar Au-Yeung dated 27 July 2009.
34. Mr Bilney, whose Report is dated 2 November 2009, was said to have been “jointly instructed” by the plaintiff and the 2nd defendant, and was interposed on the morning of the fifth day of the trial; he was briefly ‘examined’ by Mr Wright representing the 2nd defendant.
35. His Report contains three heads of discussion: first, the background, meaning and prevalence of both versions of the ICC’s; second, an explanation of the duties of an insurance broker to his principal in terms of marine cargo cover in the ordinary course of events; and third, a reference to ‘market practice’ as to the duty of a broker asked to source marine insurance to explain the ICC to his principal.
36. It is right formally to record that Mr Bilney’s report ‑ to the terms/obtaining of which the 1st defendant had not been privy ‑ had been heavily excised consequent upon the 1st defendant’s interlocutory application shortly after the transfer of this case to the Commercial List; the 1st defendant, who seems neither to have been consulted upon the application to call expert evidence nor as to the terms thereof, not surprisingly was discomfited to learn that the original Report as filed obviously was antipathetic to its interests, and accordingly, if Mr Bilney was to give evidence ‑ as ultimately he did ‑ application was made that he do so on the basis that his Report in its initial form be amended so as to render it unobjectionable to the 1st defendant.
37. No criticism is made of Mr Bilney for this curious state of affairs, but I observe yet again that in principle if expert evidence is permitted to be used, either in the Commercial List or elsewhere ‑ which in my view frequently should not be the case, given the desire of clients to employ ‘experts’ to answer what invariably is the ultimate question for the court ‑ it is vital that the necessity for, and the precise terms of, any such ‘expert evidence’ be carefully scrutinized/vetted by the ‘case‑managing’ tribunal at a relatively early stage in the proceedings, absent which the court encounters the sort of procedural nonsense that was on the verge of occurring in this case when, in effect, the plaintiff and the 2nd defendant effectively were left to their own devices in terms of expert evidence, resulting in this court ordering that the Report to be led at trial (if it was to be so led) be subject to significant amendment/deletion in order to remove a clear inbuilt bias against the 1st defendant.
Plaintiff’s Case: Against the 1st defendant insurer
38. As far as the plaintiff was concerned, Mr Sussex SC submitted that this was a simple and straightforward case, and that it had been “greatly overcomplicated” by the ingenuity of the 1st defendant seeking to deflect liability for the obvious loss of the insured cargo of round logs on board the “WORLDWIDE SHANGHAI” on the date when she sank in the Taiwan Strait.
39. There was no doubt, he said, that the Marine Cargo Policy covered “all risks”, and would certainly cover a loss of this nature by the carrying vessel ‑ and loss to the plaintiff most certainly there had been.
40. Mr Sussex asserted that the “WORLDWIDE SHANGHAI” was an ‘approved’ vessel within the meaning of the insurance cover in place during this period, a Marine Cargo Policy duly having been issued for this voyage, a premium having been determined and charged, and prompt notice of the cargo in question having been given to the 1st defendant insurer on 1 November 2007.
41. In fact, he said, what specifically had happened was that the plaintiff, through its broker, had made a declaration under the Open Cover, identifying the cargo, the interest of the insured, the shipment date, the voyage, the invoice amount and the amount insured, whilst the vessel in question was identified by name, albeit he accepted that no attempt by the plaintiff had been made to show that the vessel was “below 31 years”, in itself hardly significant, he said, because from the evidence adduced in this case it appeared that the internal practice of the 1st defendant was to check the age of each carrying vessel.
42. What then had happened was that the plaintiff, through its broker, had made a declaration within one day of the shipment of the cargo in question on board the “WORLDWIDE SHANGHAI”, and thereafter within days the 1st defendant had issued a Marine Cargo Policy, and duly had charged the premium for this particular shipment.
43. For its part, therefore, Mr Sussex concluded, the plaintiff had discharged its side of the contractual bargain, yet for what he submitted were specious reasons the 1st defendant insurer consistently had refused to indemnify his client for the loss of the logs pursuant to an insured risk.
44. Hence this claim, which leading counsel submitted should succeed notwithstanding the strenuous if misplaced efforts by those acting for the plaintiff to deflect attention from the reality of this case.
45. That at any rate was the gist of the submission on behalf of the plaintiff assured.
46. Mr Bartlett, counsel for the insurer, differed from this robust view, and in his closing submission he relied upon numerous issues in the course of arguing his client’s legitimate right to refuse so to indemnify the plaintiff.
47. For convenience of reference, I evaluate these arguments in the inter-related manner in which they were run at this trial.
The defences raised by the 1st defendant
(1) The plaintiff suffered no loss requiring indemnification; the plaintiff
is not entitled to claim against the 1st defendant; the plaintiff’s actions
adversely affected the insurer’s subrogation rights
48. Discovery of the facts underpinning the plaintiff’s claim of loss has generated some heat between the plaintiff and the 1st defendant; Mr Bartlett has gone so far as to characterize the procedural history as revelatory of “a blatant attempt by the plaintiff to prevent the true facts coming to light and to suppress the disclosure of documents that would show the true picture”, which strikes me as a fairly strong procedural critique.
49. For purposes of immediate resolution of this dispute there is nothing to be gained by the court being diverted by what in effect was a procedural sideshow, save to record that Mr Sussex maintained that, to the contrary, his witnesses had been subjected to an “oppressive inquisition” and that the 1st defendant irresponsibly now was making an “wholly unjustified” allegation of fraud.
50. In circumstances in which this vessel indubitably sank, and wherein equally indubitably these logs had ended up on the sea floor, what had occurred to turn what otherwise might be thought to represent a tolerably straightforward claim for an obvious loss consequent upon an insured marine risk into a hostile adversarial dispute?
51. The answer seems to lie in the particular banking arrangements to which the plaintiff was privy, and the manner in which those arrangements are alleged by the 1st defendant to have been “manipulated”.
52. Putting to one side the ‘interstitial’ manner in which this factual information is said to have emerged ‑ Mr Bartlett scathingly described this aspect of the evidence as “dribbling out” ‑ there is now, I think, no debate as to the precise sequence of events.
53. This cargo of Malaysian round logs was the subject of a sale by the plaintiff to Chinese buyers, Xianmen Xindeco, for the payment of which it had applied to the Industrial Bank Co of Fuzhou (‘Fuzhou Bank’) for the issuance of a letter of credit to effect payment relating to this transaction; this was a ‘negotiation credit’, and thus it was available for negotiation with any bank.
54. Accordingly, on 5 November 2007 the plaintiff seller presented the shipping documents required under the documentary credit to its own bank, DBS, and requested that DBS negotiate the credit, including the draft as drawn on Fuzhou Bank, the issuing bank.
55. DBS complied; consequent upon such negotiation, on 8 November 2007 DBS notified the plaintiff that it had credited the plaintiff’s account with the sum of HK$9,178,489.08; this ‘transaction advice’ stated, in terms:
“We have today negotiated/purchased/prepaid subject documents with transaction details as follows.”
56. At that stage, whilst the negotiating bank, DBS, had negotiated the credit, it had not yet been reimbursed by the issuing bank, Fuzhou Bank, consequent upon presentation by DBS of compliant documents to that bank; as Mr Sussex submitted, in principle the payment made to his client consequent upon the negotiation thus constituted no more than a ‘monetary advance’: see Jack on Documentary Credits (4th ed) which states, at paragraph 2.19, that:
“…the credit may be available by negotiation with a bank nominated in the credit (or with any bank if the credit so provides). UCP Article 2 defines negotiation as follows:-
“Article 2:
Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.”
57. Mr Sussex emphasised that whilst in the present case there was no ‘nominated bank’, nevertheless the credit was available by negotiation with any bank, and in so negotiating the documents, DBS merely was advancing funds to the plaintiff against its contractual right of recourse against the plaintiff in the event that the issuing bank ultimately declined to accept the documents as compliant, and therefore failed to honour the relevant bill of exchange in accordance with its tenor: see for example, s. 55(1) of the Bills of Exchange Ordinance, Cap 19; also Jack, op cit., at paras 7.9 and 7.10.
58. Thus far in the analysis Mr Bartlett does not, I think, demur in principle.
59. However, Mr Bartlett says that ‘post-negotiation events’ have had a profound effect upon the allegation by the plaintiff as to its alleged loss, against which it now seeks indemnification by the 1st defendant insurer.
60. This, he said, is because what then happened was that before the buyer, Xiamen Xindeco, had taken up and paid for the documents as negotiated by DBS, which documents had been forwarded by DBS to Fuzhou Bank for payment on the draft drawn upon it and for normal inter‑bank reimbursement, the cargo already had gone down with the vessel on 10 November 2007.
61. Thereafter, argued Mr Bartlett, presumably for entirely self‑serving commercial reasons ‑ it being well-known that the plaintiff is one of the primary importers of timber products into the PRC, and that Xiamen Xindeco is a major state-owned trading entity and a frequent purchaser of timber from the plaintiff ‑ the plaintiff had instructed DBS to inform Fuzhou Bank that the documents as hitherto negotiated under the credit be released to Xiaman Xindeco absent acceptance of the draft drawn upon the Fuzhou Bank, thus in turn releasing Xiamen Xindeco, the putative buyer of the logs (now, sadly, reposing on the seabed) from any obligation to make payment under the documentary credit for which, at the outset, it had applied to effect purchase of these logs.
62. In normal course, if DBS, qua negotiating bank, had negotiated the documents and had advanced money to its customer against the draft, but then was not reimbursed under the credit by the issuing bank (on the basis, for example, of submission of ‘non-compliant’ documents), DBS simply would have exercised its right of recourse against its customer, the plaintiff, to recover the money thus already paid.
63. However, Mr Bartlett complained, what seems to have happened in this instance (and that which he said had emerged into the cold light of day only at the stage of the plaintiff’s trial opening, and contrary to the content of earlier witness statements), was a significant variation upon that theme: it now had become clear that the sum as advanced by DBS to the plaintiff upon negotiation of the credit, but for which advance DBS was not to receive reimbursement from Fuzhou Bank, apparently had been converted ‑ pursuant to DBS’s right of recourse against the plaintiff ‑ into a ‘term loan’ (as evidenced by a letter from the plaintiff to DBS of 13 November 2007 and a ‘transaction advice’ of the same date), which sum was required to be repaid by the plaintiff to DBS.
64. Arising from this “belated” factual revelation, Mr Bartlett took three points which in the circumstances of the present case he made it clear that he regarded as fundamental and unanswerable:
first, that the DBS negotiation of the credit, whereupon it had credited the plaintiff’s account with the sum of HK$9,178,489.08 (equivalent to the Commercial Invoice value of US$1,182,496.50) meant that this payment had cancelled the amount of any actual loss to the plaintiff, and in consequence had cancelled any obligation of the 1st defendant, qua indemnifier, to make payment to the plaintiff under the insurance contract; as counsel put it: “the plaintiff is in the highly unattractive position of having been paid for the cargo but now also making a claim for insurance”, and that “this is but one of the insurmountable obstacles standing in the way of the plaintiff’s claim”;
second, that the conversion of the payment from DBS to the plaintiff into a ‘term loan’, and the plaintiff’s “voluntary decision” to permit release the documents free of payment to Xiamen Xindeco absent payment on the draft necessarily had taken the loss outwith of the ambit of the terms of the 1st defendant’s Open Cover; and
third, that the conversion of the DBS payment to the plaintiff into a ‘term loan’, and the release of the credit documents to Xiamen Xindeco without payment, had prejudiced the subrogation rights of the 1st defendant insurer.
65. In my view the first point does not run; I surmise that this may have been one of those apparently enticing arguments which lose appeal in the harsh light of the courtroom.
66. In these particular circumstances, which factually are undisputed, it seems to me to matter not whether the right of recourse of DBS, qua negotiating bank, against the plaintiff ‑ which initially had been placed in funds prior to acceptance by/honouring of the credit by Fuzhou Bank ‑ takes the form of an out and out demand to its customer for immediate payment of the entire sum as thus advanced, or whether, as between bank and customer, an alternative financial arrangement is worked out (in this instance apparently initially a 3 month loan later converted to 12 months) upon usual commercial terms depending, for example, upon agreed repayment period and interest rate charged and so on.
67. Accordingly, in my judgment this first argument has no substance, although I can understand why this lately-acquired information as to what had transpired served to stoke the adversarial fires. Thus I do not accept, as Mr Bartlett now has argued, that initial receipt by the plaintiff of the DBS advance consequent upon the negotiation “put it in a ‘no loss’ position from that point on”.
68. With respect it did no such thing; it always had been open to DBS to exercise its right of recourse should such have proved necessary, and the sole difference in this instance is that it proved necessary as a result of the plaintiff’s own action in releasing Xiamen Xindeco from its obligations under the credit, there having been no assertion/evidence that the documents furnished pursuant to that credit, and which duly were passed down through the banking chain, were in any way non-compliant.
69. However, I do not consider that this fact makes a difference in principle. In acting as it did, DBS did not buy the cargo, nor acquire title thereto. The payment that it made to the plaintiff, whilst calculated by reference to the price to be payable by Xiamen Xindeco, represented no more than an advance of funds which under the terms of the documentary credit arrangement would not become payable by the bank issuing the credit until 90 days after its acceptance of the bill of exchange drawn upon it by the plaintiff; in return for its advance, DBS had acquired the documents presented under the L/C, and it also had acquired a security interest by way of pledge, but no more than that.
70. Admittedly the plaintiff chose to take the loss upon itself, which otherwise it could have insisted on passing on to Xiamen Xindeco, but in principle should this make a difference? A loss there undoubtedly was, and in the particular circumstances possibly the only arguable point thereby arising was one of locus, namely that Xiamen Xindeco and not Kam Hing Trading should have been named as plaintiff. As to this argument I am unsympathetic. Whilst I appreciate that it was the plaintiff’s choice to do what it did, and to let the Chinese buyer ‘off the hook’ and itself to absorb the loss occasioned by the marine peril, it makes no difference as to which entity is to be indemnified by the insurer, always assuming that it is otherwise legitimate that indemnification should be ordered; in any event, I do not consider in reality that this is a true ‘locus’ point, given that in these circumstances property in the logs had not passed to Xiamen Xindeco at the time when it had been released from its obligation under the documentary credit.
71. This links into Mr Bartlett’s second argument.
72. Mr Bartlett prays in aid the established principle that loss under ‘all risks’ cover must result from a fortuitous cause and cannot be the result of an assured’s deliberate act, quoting the well-known dictum of Lord Sumner in British & ForeignMarine InsuranceCo Ltd v Gaunt, [1921] 2 AC 41, at 57:
“There are, of course, limits to ‘all risks’. They are risks and risks insured against…It covers a risk, not a certainty; it is something which happens to the subject-matter from without…Nor is it a loss which the assured brings about by his own act, for then he has not merely exposed the goods to the chance of injury, he has injured them himself…”
73. Thus, in the circumstances of this case, Mr Bartlett says, on 13 November 2007, when the plaintiff had instructed DBS to instruct the issuing bank, Fuzhou Bank, to release the L/C documents to Xiamen absent payment thereunder, and on the same day had applied to DBS to convert the advance as made into a term loan, the plaintiff thereby irredeemably “had taken itself out of the ambit of the Open Cover.”
74. Had this not occurred, he submitted, Fuzhou Bank, as issuing bank, would have had to reimburse DBS notwithstanding the loss of the cargo, as the documents clearly were compliant (it never having been suggested by anyone at anytime that there was any issue as to non‑compliance), and thus by reason of the plaintiff’s voluntary release of the obligations of Xiamen Xindeco, the applicant for the credit, the plaintiff not only had run a ‘coach and horses’ through the entire documentary credit process, but by deliberately circumventing this process, the plaintiff’s own actions meant that it would not receive payment against compliant documents, that the true ‘loser’, the putative purchaser, Xiamen Xindeco, would be released from all liability ‑ “the plaintiff deliberately and voluntarily incurring loss” ‑ which in turn had ensured that the ‘loss’ for the indemnification now claimed in this action would remain with the plaintiff.
75. At bottom this is no more than a rehash of the basic ‘locus’ point, the inference necessarily being that the proper plaintiff in this whole affair should have been Xiamen Xindeco, the buyer of this cargo of Malaysian round logs, and not Kam Hing Trading, and that by entering into a “fresh commercial arrangement” with DBS bank, the plaintiff’s actions fell outside the parameters of risk identified in British & Foreign MarineInsurance, op cit.
76. I remain unconvinced that this argument is sound.
77. I say this because it seems to me that it elides two separate concepts: the undoubted loss of the cargo of round logs caused by a marine risk insured against, and the method of payment for such cargo.
78. The shipping documents, which formed part of the documentary credit documentation, was not the subject-matter of the insurance; this was the cargo of Malaysian round logs, as to the fate of which unfortunately there can be no debate: they went to the bottom of the sea on the morning of 10 November 2007. As Mr Sussex pointed out in argument, if the shipping documents had been lost in transit, for example, the 1st defendant would have been under no liability. But this is not what happened.
79. In my view the salient question is whether, on these facts, it properly can be said that the plaintiff in this case, Kam Hing Trading, to‑date has made a recovery in respect of the subject-matter as insured which has served to diminish or to extinguish its right to be entitled to indemnification by the 1st defendant insurer?
80. With due respect to Mr Bartlett’s cogent submissions, in my view the answer to this question is ‘No’. Nor do I think that his argument represents the correct analytical situation, since it elides the issue of an insured loss, that is, the physical destruction of cargo, with the financial consequences flowing therefrom.
81. The fact that the plaintiff did not choose to pass the unequivocal loss onto its counterparty buyer, Xiamen Xindeco, by reason of the release of the latter’s obligations under the documentary credit process, and instead converted into a term loan the advance of funds earlier made to it by DBS, in my judgment does not preclude the plaintiff’s right to maintain this action for indemnification against the loss of this cargo, the insurance under the Marine Cargo Policy as issued by the 1st defendant being an insurance of marine cargo covering “all risks of loss or damage to the subject-matter insured”: vide Clause 1 of the Institute Cargo Clauses (A).
82. As Mr Sussex has stressed, the loss complained of in this action is the total loss of the cargo by operation of a marine peril upon the sinking of the “WORLDWIDE SHANGHAI”, and equally obviously the loss of this cargo of Malaysian round logs was not a loss engineered by the plaintiff.
83. Accordingly, I agree with the plaintiff’s submission that there is no independent ‘fortuity point’ which serves to relieve the 1st defendant insurer from liability to indemnify, and it seems to me to make no difference in principle that the plaintiff chose to deal with the documentary credit obligation of Xiamen Xindeco in the manner that it did after it had learned of the loss of the “WORLDWIDE SHANGHAI”.
84. It follows that I fail to grasp how the initial advance payment by DBS, and its subsequent conversion into a term loan in the circumstances as now revealed, has any impact upon the plaintiff’s entitlement to sue to recover under the Marine Insurance Policy the subject of this action.
85. As to the third issue raised under this head, namely prejudice to the subrogation rights of the 1st defendant insurer by reason of conversion of the DBS advance to the plaintiff into a term loan, and the unconditional release of the documentary credit documents to Xiamen Xindeco, Mr Bartlett submitted that the plaintiff clearly had breached its duty under Cl. 16.2 of the Institute Cargo Clauses to ensure that all rights against carriers, bailees and other third parties were preserved, and that in any event an assured has a common law duty, breached in this instance, not actively to prejudice the insurer’s right of subrogation (see Arnould, page 1508), and that in itself this is a complete defence to the plaintiff’s claim.
86. I do not accept this submission either. Such rights as the plaintiff enjoyed against DBS, and for that matter as against Xiamen Xindeco, do not seem to me to be rights to which in these particular circumstances, whereby loss of the cargo stems from loss of the carrying vessel, the 1st defendant could have had any right of subrogation.
87. Accordingly, in my judgment none of these three primary ‘fundamental’ points, as so strongly pressed by Mr Bartlett, suffices to relieve his client of liability.
(2) No insurable interest at the time of the loss; the plaintiff’s assignmentof the policy
88. It is trite law that the assured must have an interest in the subject-matter insured at the time of the loss: section 6(1) of the Marine Insurance Act 1906 provides that “the assured must be interested in the subject-matter insured at the time of the loss”, and section 6(2) that “where the assured has no interest in the title at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss.”
89. It is Mr Bartlett’s case that these requirements plainly are not satisfied in the circumstances of the present case as now known and understood; in truth, however, this strikes me as yet another manifestation of the fundamental ‘locus’ question.
90. Mr Bartlett has referred to the various provisions of the Sale of Goods Ordinance, and observes, correctly, that property passes to the buyer when the parties intend it to pass [s.19(1)], and that such intention is to be inferred/discerned from the contract terms and surrounding circumstances [s.19(2)].
91. His contention is that notwithstanding the presumption that a seller under a CIF contract who is in receipt of a documentary credit reserves the right of disposal until it receives payment by the issuing bank ‑ see Benjamin (7th ed) at para 18-209, The Ciudad de Pasto and the Ciudad deNeiva [1988] 1 WLR 1145, at 1153 – and, further, that under s 55(1) of the Bills of Exchange Act (s 55(1)(a) of the Hong Kong Ordinance) a negotiating bank has a right of recourse against the drawer of a draft if the letter of credit documents are not honoured by the issuing bank (Jack, op cit., at 69) ‑ nevertheless payment by documentary credit is but a relevant factor, and one of the clearest bases upon which the presumption may be rebutted is where the seller provides credit to the buyer: see Benjamin, paras 18-209, 19-103.
92. Hence, Mr Bartlett’s submission that on the facts of this case the plaintiff seller of these logs intended only to reserve its right of disposal until DBS accepted the documents in the course of negotiation and had made payment to the plaintiff, and that the statutory presumption as to reservation of title thus no longer operates: “it is satisfied and/or displaced”.
93. The fact that that the plaintiff intended to grant credit to Xiamen Xindeco, given that the time drafts were payable at 90 days and not at sight was, he said, merely grist to the argument that a time draft of this tenor displaces the presumption concerning the right of disposal, quoting Benjamin, op cit., at para 18‑218:
“The difficult case is that in which the bank has accepted the documents against a time draft. In such a case property may pass on the bank’s acceptance of the draft, by analogy with the rules relating to documentary bills…A seller who parts with documents against such a draft can be regarded as giving credit and so displacing the prima facie rule that property only passes on payment…”
94. Thus, concluded Mr Bartlett, the existence of the time drafts specifying that the issuing bank was to pay DBS 90 days after sight of the bill, together with the terms of the credit which stated “Drafts…90 days after sight for 100 pct of the invoice value”, in this instance was strong evidence that the plaintiff was to grant credit to Xiamen Xindeco, thereby displacing the ‘normal rule’, and leading to the conclusion that the property would have passed to Xiamen Xindeco upon the purchase by DBS of the first and second bills of exchange dated 31 October 2007.
95. To this, Mr Bartlett had a follow up argument.
96. It was this. Even if the plaintiff had reserved a right of disposal until the issuing bank had accepted the documents remitted by the negotiating bank and had reimbursed the latter, waiver had taken place when the plaintiff had instructed DBS to release the shipping documents to Xiamen Xindeco on 13 November 2007 without requiring payment, citing a dictum in FE Napier v Dexters Ltd (1920 2 Ll.L.R. 62, at 63-64, to the effect that where there is a contractual stipulation as to reservation of the right of disposal, nevertheless where that is an unilateral stipulation for the benefit of the vendor, “it is possible and lawful for the vendor upon appropriation to waive or abandon a stipulation which is in his favour…”
97. Mr Sussex took issue with both lines of argument.
98. He did not accept the proposition that, as the plaintiff now was alleged to have intended, property in the logs had passed to Xiamen Xindeco when, upon negotiation of the credit, DBS had accepted the documents as compliant, and as a consequence provisionally had placed the plaintiff in funds.
99. Mr Sussex’s position was that in the circumstances of this case property had not yet passed to Xiamen Xindeco, and at all material times such property had remained vested in the plaintiff.
100. He stressed that there was no stipulation within the Sales Contract between the plaintiff and purchaser that the L/C to be opened by Xiamen Xindeco should be confirmed by a bank in Hong Kong, nor that it should be available by negotiation with any bank; this Sales Contract thus contemplated that one of the shipping documents which would be required to ‘trigger’ payment (or, at least, to ‘trigger’ acceptance of a draft drawn at 90 days after sight) was a bill of lading deliverable to the order of the plaintiff, and s 21(2) of the Sale of Goods Ordinance expressly provided that:
“Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.”
101. Moreover, he said, by s 21(1) of the Ordinance the ‘right of disposal’ is described as “the right of disposal until certain conditions are fulfilled”, and that “property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.”
102. Accordingly, Mr Sussex argued, having regard to the terms of the Sales Contract, the conditions which the plaintiff imposed therein either were payment or, at the least, acceptance by the bank issuing the L/C, in this instance the Fuzhou Bank, of a bill of exchange drawn upon it at 90 days after sight. It followed therefore that property would not pass to Xiamen Xindeco “until the conditions imposed [by the plaintiff] are fulfilled”.
103. In context of the twin ‘insurable interest’ and ‘passage of property’ arguments, I do not accede to Mr Bartlett’s thesis.
104. Whilst reasonably it may be inferred that it was intended that Xiamen Xindeco should be able to deal with the documents presented under the bill of exchange as soon as the issuing bank, Fuzhou Bank Ltd, had accepted the bill of exchange drawn upon it ‑ as Mr Sussex pointed out, this would make sense because the plaintiff then would have the benefit of the issuing bank’s promise to honour the bill of exchange 90 days after sight (vide Benjamin (7th ed) at para 18-218) - I agree with the correlative proposition that there is no evidence before the court to suggest that it ever was intended that property would pass to Xiamen Xindeco at any time earlier than the time at which the issuing bank had accepted the time draft drawn upon it ‑ which eventuality never occurred.
105. Nor do I accept the contention on behalf of the 1st defendant that property in the logs had passed to Xiamen Xindeco from the moment that DBS had negotiated the documents and had advanced the money to the plaintiff ‑ and, for that matter, before the loss of the vessel and its cargo. With respect, I do not grasp the premise underlying this contention.
106. It seems clear that advance payment by DBS did not diminish the plaintiff’s loss, but merely exposed the plaintiff to the right of recourse by DBS, qua negotiating bank, which upon the issuing bank failing to make reimbursement had retained its pledge interest in the documents.
107. As to the additional ‘waiver argument’, in retrospect I am unsure if this was addressed as such by Mr Sussex, but in this regard I remain impressed only by the forensic ingenuity brought to bear on the problem by Mr Bartlett.
108. I cannot see how the facts of the present case legitimately can be said to be characterized as a ‘waiver’ on the part of the plaintiff of its reservation of the right of disposal, and in so far as it be relevant I reject this argument also in the context of the argument as to the plaintiff’s lack of insurable interest.
109. Finally under the umbrella ‘insurable interest’ head, Mr Bartlett ran the argument that the plaintiff had in fact assigned its interest under the marine insurance policy, and thus was and remains unable to make a claim – a further variant, it seems to me, upon the ‘locus’ issue.
110. This ‘assignment argument’ depends on the proposition that under s 50(2) of the Marine Insurance Act, 1906, an assured can only assign the entire beneficial interest in a policy to an assignee, and that as the cargo in this case was a total loss, it followed that the only property covered by the policy was the interest in the claim against the 1st defendant insurer.
111. Hence, said Mr Bartlett, the plaintiff had assigned that interest to Xiamen Xindeco by way of endorsement in accordance with s 50(3) of the Marine Insurance Act, and this beneficial interest had remained with Xiamen Xindeco as the policy had been transferred back to the plaintiff absent correlative endorsement by Xiamen.
112. To this submission, Mr Sussex observed that this proposition necessarily assumed that the Open Cover was superseded by the issuance of the Marine Cargo Policy, but maintained that if, as was his case, the plaintiff indeed had reserved to itself the right of disposal at least until the issuing bank had accepted the bill of exchange drawn upon it, pending occurrence of this event ‑ which of course did not transpire ‑ it must follow that there can have been no intention to assign the beneficial interest in the policy.
113. This was so, leading counsel said, because assignment of a policy was no different from indorsement of a bill of lading: in order to assign the beneficial interest there must be an accompanying intention to pass property.
114. Mr Sussex emphasized that in this argument the plaintiff effectively was attempting to have it both ways: having contended that the act by which it complains that the plaintiff engineered a loss (that is, when the plaintiff absolved Xiamen Xindeco of any payment obligation under the documentary credit, notwithstanding presentation to the issuing bank of compliant documents), nevertheless the plaintiff now saw fit to argue that this had resulted in the plaintiff parting with the beneficial interest in the marine cargo policy, and it certainly could not be inferred, at the time that it had absolved Xiamen Xindeco of any payment obligation, that the plaintiff had intended to assign the insurance claim.
115. The short and ineluctable point, Mr Sussex submitted, was that the Marine Cargo Policy bearing the indorsement in question was among the documents presented to the negotiating bank, DBS, and that this had occurred prior to the sinking of the vessel and the consequential loss of its cargo of logs. At that stage there was, and therefore could have been, no intention to pass the property in the logs, and therefore there could have been no intention to assign the entire beneficial interest in the Policy.
116. I agree with, and accept, this analysis. By absolving the payment obligation otherwise incumbent upon Xiamen Xindeco given the compliant nature of the documents submitted under the credit, I do not consider that it can be said that at the same time (and inadvertently) the plaintiff had assigned the insurance claim to Xiamen Xindeco.
117. In my view therefore this point fails also.
(3) Carrying vessel neither ‘qualified’ nor ‘approved’; failure to give‘prompt notice’ to insurers
118. In my opinion this element of the argument goes to the heart of this case; the other points as taken effectively fall away, and the court necessarily returns to that which had formed the basis of the rejection letter of 10 January 2008 as issued by the 1st defendant (quoted at para 20 above).
119. Central to this debate are specific provisions of the Open Cover ‑ which resulted in the issuance of Marine Cargo Policy PICC/HK2/MCA/2006/013705 in the name of the plaintiff assured regarding the cargo of round logs the subject of this claim ‑ and the Institute Classification Clause dated 1/1/01 (‘ICC/01’).
120. The manner in which this Open Cover and this Marine Cargo Policy operated, as Mr Bilney observed in his evidence, was “very unusual today”, in that whilst every shipment essentially is pre-agreed by the insurer via the existence of the Open Cover, a separate policy then formally was issued for each individual shipment as thus declared under that Open Cover; it is this latter fact which has assumed considerable significance during argument on this issue.
121. In the terms of the Open Cover as issued, the assured is certain of obtaining insurance for all cargoes shipped during the “Period of Insurance”, which is identified as from 12 December 2006 to 11 December 2007, provided that each cargo complies with the criteria identified in the Schedule to the Open Cover, namely:
(i) the cargo must be of the types identified under the heading “Insured Interest” ‑ which it was in this instance, since the first category thereunder was listed “(1) On Timber, Long Timber, Logs”;
(ii) the value that can be ascribed to the cargo is identified under the head ‘Basis of Valuation’ ‑ which in this instance is denoted as “Invoice Value but not greater than Cost, Insurance & Freight, plus 10-20% thereof;
(iii) the type of packing or method of stowage is identified as “in bulk, container or on deck”: in this instance the Malaysian round logs were stowed on deck;
(iv) the categories of voyage that can be undertaken are geographically identified: in this instance the first category listed covers the present voyage, namely “From…South East Asia…to China and Hong Kong”;
(v) a monetary limit is imposed for each transit, the specified limit for timber, log wood in bulk being US$8 million for any one conveyance; in this instance the claim is within that monetary limit.
122. So far so good; no difficulty arises.
123. However the crucial legal debate in this case has revolved around two specific inclusions within this Open Cover:
First, the clause specifying ‘Conveyance’ reads:
“(1) For Log-Wood ‑ By Approved Vessel aged below 31 years” (emphasis added)
whilst second, under the head “Conditions ‑ Subject to the following Clauses current on date of signature of this policy”, the penultimate entry reads:
Institute Classification Clause Dated 1/1/01”. (emphasis added).
124. As Mr Bilney told the court, and as I accept, the Institute Classification Clause has been in widespread, indeed almost universal, use in Marine Cargo Open Covers based on the Institute Cargo Clauses for many years, and that the fundamental aim of the ICC always has been the same, namely to ensure that neither unusual nor unanticipated elements of risk, specifically relating to the carrying vessel, are introduced into the insured venture.
125. Thus, the practical effect of this clause is to allow the insurer specifically to consider and to evaluate any shipments which are contemplated on board old, or non-IACS [International Association of Classification Societies] classed, ships, since in certain trades (the log trade specifically being recognized as one such) it frequently is the case that ships are employed which fall outside the parameters of the ICC.
126. Mr Bilney also said, and again I accept, that where a vessel is simply ‘overage’ insurers normally would accept the risk at an additional premium, or even waive such addition if the vessel did not significantly exceed the stipulated age. However, where the issue is one of classification per se, insurers sometimes are inclined to decline the risk altogether or, alternatively, to impose a substantial additional premium, the reason being that there is a widespread perception that a vessel which is not so classed is likely in some way to be physically substandard.
127. In relevant part, the ICC/01 reads as follows:
“INSTITUTE CLASSIFICATION CLAUSE 01/01/2001
QUALIFYING VESSELS
1. This insurance and the marine transit rates as agreed in the policy or open cover apply only to cargoes and/or interests carried by mechanically self-propelled vessels of steel construction classed with a Classification Society which is:
1.1 a Member of Associate Member of the International Association of Classification Societies (IACS), or…..
Cargoes and/or interests carried by vessels not classed as above must be notified promptly to underwriters for rates and conditions to be agreed. Should a loss occur prior to such agreement being obtained cover may be provided but only if cover would have been available at a reasonable commercial market rate on reasonable commercial market terms.
AGE LIMITATION
2. Cargoes and/or interests carried by Qualifying Vessels (as defined above) which exceed the following age limits will be insured on the policy or open cover conditions subject to an additional premium to be agreed.
…….
PROMPT NOTICE
5. Where this insurance requires the assured to give prompt notice to the Underwriters, the right to cover is dependent upon compliance with that obligation.
LAW AND PRACTICE
6. This insurance is subject to English law and practice.
* For a current list of IACS Members and Associate Members please refer to the IACS website at www.iacs.org.uk
1/1/01”
128. The situation, therefore, is that two separate concepts are atplay: first, that of an “Approved Vessel” which appears (but is not specifically explained) within the Open Cover, and second, that of a “Qualifying Vessel” as set out within the terms of the ICC/01.
129. The question thus arising is what is the difference; and, if there is a difference, how does it impact upon the facts of this case?
130. Mr Sussex submits that in light of the differing terminology, it reasonably may be inferred that an ‘Approved Vessel’ must be something other than, as he put it, “just a ‘Qualifying Vessel’”. He further submits that an “Approved Vessel” either is a “qualifying vessel” which the insurer cannot refuse to cover, or alternatively is a vessel which the insurer has notrefused to cover.
131. Instances of the former category of “approved vessels” for which insurance coverage clearly cannot be refused are ‑ as per the express terms of the ICC/01 ‑ vessels which are mechanically propelled and of steel construction (thereby excluding, for example, cargo barges which are towed), and are classed with a Classification Society which is an IACS member. No difficulty arises here. However, these are not the facts of the present case, given that it is common ground that the “WORLDWIDE SHANGHAI” was of steel construction and was mechanically propelled and was not classed with an IACS member.
132. The correlative question, therefore, rhetorically asks Mr Sussex, is whether, on the facts of this case, the “WORLDWIDE SHANGHAI” may be characterized as a vessel which the insurer refused to cover?
133. To this leading counsel essays a definitive ‘No’. Coverage indeed was issued, he points out, by the issuance of a Marine Cargo Policy on 5 November 2007 (albeit backdated to 31 October 2007), pursuant to the terms of the Open Cover dated 12 December 2006 ‑ which fits in with use of the term “approved vessel”, which clearly connotes a process of ‘approval’, wherein it was contemplated (as in fact occurred) that a separate Marine Insurance Policy would be issued for each and every interest declared under the extant Open Cover. Hence, Mr Sussex argued, a policy would not have been issued had the vessel in question not been so ‘approved’. Counsel maintained that the fact that the policy, when issued, had made no reference to the requirement that the carrying vessel should be an “Approved Vessel” in itself strongly suggested that the process of determining whether or not any given vessel has satisfied the criteria required for an “Approved Vessel” comes to an end when the Marine Cargo Policy is issued (as it was), and when the premium is determined (as it was) and when it was charged (as it was).
134. This argument sounds plausible so far as it goes; the problem, however, is that I do not think that it withstands analysis, or that it suffices to get the plaintiff home.
135. Under Clause 1 of ICC/01, under the head ‘Qualifying Vessels’, cargoes carried by vessels not classed in the manner required “must be notified promptly to underwriters for rates and conditions to be agreed”, with the express rider (in bold font) that should a loss occur prior to such agreement “cover may be provided but only if cover would have been available at a reasonable commercial market rate on reasonable commercial market terms.” See also Clause 5, which emphasizes (again in bold font) that where the insurance requires such “prompt notice” to underwriters, the right to cover is dependent upon compliance with that notice obligation.
136. At bottom, this aspect devolves into an argument between the plaintiff and the 1st defendant as to which entity bears the relevant burden: does the plaintiff claimant merely have to demonstrate that pursuant to the Open Cover it had declared to the defendant insurer the name of the vessel, the “WORLDWIDE SHANGHAI”, the type of cargo and the geographical route, and thereafter leave it to the defendant insurer independently to ascertain/verify whether the vessel fell within the qualifying criteria in terms of class?
137. Alternatively, and to the contrary, is it necessarily incumbent upon the plaintiff itself to ascertain the precise position and thus to give ‘prompt notice’ to the insurer of the relevant facts, thus to provide data for the underwriter to conclude if the vessel is indeed “Qualifying”, and consequently, whether it should consider/treat it as “Approved” for the purpose of that particular underwriting exercise?
138. The plaintiff contended that the defendant insurer indeed was so obliged, under the “Approved Vessel” requirement, itself to ensure that the vessel under consideration complied with ICC/01 prior to issuing the Cargo Policy. The argument was that where the assured has given the insurer the name of the carrying vessel, the insurer thereby was enabled, and would be in position to check, the vessel’s precise details in published information (such as “Lloyd’s Register of Ships”) or in online resources such as the website “Shipfinder Online” (to which forms of data, the evidence shows in this case, this particular insurer subscribed); accordingly in circumstances wherein such data resource or resources were able to provide both the age and class details of any given vessel, the assured thereby fully had satisfied its disclosure obligations.
139. Thus, the plaintiff’s argument went, if against such background the insurer thereafter formally had issued a policy, and charged no additional premium ‑ as in fact was the situation in the present case ‑ the “obvious conclusion”, Mr Sussex submitted, was that the insurer did not perceive any increased risk necessitating any additional premium to cater for such perceived additional risk.
140. In advancing this argument, Mr Sussex submitted that the issue properly could be tested by considering the assured’s general duty of disclosure, citing by analogy in this context s. 18 of the Marine Insurance Act1906, which provides:
“(1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract.
(2) In the absence of inquiry the following circumstances need to be disclosed, namely:-
……
(b) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know…”
141. Mr Sussex argued that in circumstances wherein the insurer could issue a policy and charge a premium, and actually did so, it was not open to the insurer thereafter to assert that the policy (and thus the necessarily implicit approval of the vessel in question), was not binding upon it, and thus that the insurer was not entitled to avoid the insurance as if a material fact had not been disclosed. This represented, I suppose, a form of estoppel/preclusion argument, although counsel did not put it in precisely those terms.
142. In any event there was, leading counsel submitted, “no freestanding right” to avoid cover, or to allege that no insurance ever had come into existence, arising from non-disclosure pursuant to ICC/01 within the context of an Open Cover, and in these circumstances the duty of disclosure should not be construed in a manner inconsistent with the statutory obligations imposed by section 18 of the 1906 Act.
143. As part of this argument Mr Sussex accepted that until a declaration is made under the Open Cover the insurer is or may be unaware of any information concerning the ‘interest’ which he is expected to insure, and thus if prompt disclosure is not then made, potentially the insurer could be deprived of the opportunity further to consider the position and to impose additional terms, and in turn would not be obliged to issue a policy or otherwise to provide insurance.
144. However, he said, in the instant case such a consideration had not arisen because the shipment had taken place on 31 October 2007, and the declaration (by the 2nd defendant broker on behalf of the plaintiff) concerning the vessel had been made upon the following day, 1 November 2007; consequent thereon a policy was issued, and thus in these circumstances, he asserted, it must follow that the assured was bound to notify the insurer only of any new circumstances (such as loss of/change of class) occurring after such issuance of the relevant Policy.
145. In response, Mr Bartlett took issue with the twin propositions of principle as thus advanced: first, under the ‘Approved Vessel’ requirement, that the obligation lay on the defendant insurer independently to ensure that the actual carrying vessel complied with ICC/01 before it issued the Cargo Policy; and second, the concept that in so issuing the policy the insurer effectively had confirmed that the vessel was ‘approved’, and therefore that the vessel thereby had become an “Approved Vessel” within the terms of the Open Cover and for the purpose of insuring this marine adventure.
146. Mr Bartlett laid emphasis upon the obligatory/obligatory nature of the Open Cover which, when taken together with the apparent purpose of ICC/01, he maintained lent strong support to the view that it was the plaintiff assured which had the obligation to ensure that its vessels complied with ICC/01 before policies were issued, and indeed throughout the duration of the Open Cover.
147. In this context he referred to the description of obligatory/obligatory cover by the Commercial Court in BC Enterprise Sdn Bhd v Bank of China Group Insurance Ltd [2004] 1 HKLRD at 26D-F:
“…the crux of the cover lies in the mutual obligations inherent within it, namely, an obligation on the part of the assured to declare all shipments falling within the terms of the open cover, and a corresponding obligation on the underwriter to accept and issue policies for all these shipments. In short, therefore, the situation is that the assured knows that he has cover, and its terms and conditions, and the underwriter knows that he has a binding commitment to an income stream in the form of premiums accruing upon coverage of each shipment…”
148. It is not in dispute that under an obligatory/obligatory Open Cover the insurer is on risk from the date of the shipment, which almost invariably means as soon as the cargo leaves the warehouse ‑ see, for example, The Beursgracht [2002] 1 Lloyd’s Rep. 574, at 579 ‑ with the result that the insurer is on risk before the assured makes a declaration and before the insurer issues a cargo policy; thus Mr Bartlett made the point that the parties incorporate an ICC precisely to alleviate the risk the insurer faces, inter alia, even before the assured makes a declaration as to the carrying vessel.
149. In this connection Mr Bartlett referred to the commentary in Brown, Marine Insurance-Cargo Practice, and placed reliance upon the following passage (at page 46):
“It is customary for both floating policies and open covers to be subject to the classification clause, the provisions of which are a very important factor in the operation of any long term cargo contract. It must be remembered that in writing a line on a floating policy or open cover the underwriter is agreeing to automatic cover in advance for the benefit of all those concerned. Had he been considering the acceptance of each shipment separately, that is on a facultative basis, the carrying vessel would have been one of his major considerations. Whilst the goods are on board the carrying vessel neither the assured nor the underwriter has any control over their safety, the goods being entirely in the hands of the operators of the ship and largely dependent on the fitness of the ship and competence of the master and crew to carry and deliver such goods in sound condition…
…..
Neither the underwriter nor the assured can be certain which particular ship will carry the goods for any one declaration but, because the rate is fixed in advance on the assumption that the goods will be carried by a good class vessel, it is necessary to incorporate in the floating policy, or open cover, a clause which limits carriage, at the agreed rate, to certain types of vessels. The classification clause fulfils this purpose.”
150. As Brown suggests, therefore, a significant purpose of the ICC is that even though the insurer is on risk before it is aware of the carrying vessel, nevertheless it has the security of knowing that the assured has ensured that the vessel is within the scope of the agreed risk, and I agree with Mr Bartlett that this represents a sound reason in principle why it is the assured which should bear the burden of ensuring that the carrying vessel is in compliance with the requirements laid down by the ICC.
151. Nor must it be overlooked that in many instances the assured does not act alone; very frequently an assured’s insurance broker liaises/informs the underwriter in terms of a declaration as to shipment, which is, of course, the situation in this case ‑ and which in turn has spawned the alternative case now run by the plaintiff against MST, the 2nd defendant.
152. This ‘burden point’, if I may so term it, is not free from authority, although not within the specific context of ICC/01, albeit I do not think that the differingly-worded versions of the ICC serve to make a great deal of difference in terms of guiding principle.
153. In “The Sirena I”, Everbright Commercial Enterprises Pte Ltd v AXA Insurance Singapore Pte Ltd, [2001] 2 SLR 316, the Singapore Court of Appeal was dealing with an earlier version of the ICC, namely ICC/92, in a case in which the vessel “The Sirena I” had disappeared with her cargo of logs, and wherein subsequently it was discovered that there was no current record of the vessel, which was not registered in Lloyd’s Register of Ships. The insurance company, AXA, rejected the claim for the loss on the part of the plaintiff purchaser, Everbright, on the ground that the carrying vessel was not an approved vessel and did not comply with the Institute Classification Clause, to which the insurance cover was subject. The trial judge dismissed the plaintiff assured’s claim, inter alia holding that the Cover Note had insured cargo shipped on board an ‘approved vessel’, that an ‘approved vessel’ was one which fell within the parameters of the ICC, that the “Sirena I” did not possess the necessary qualifications listed in the ICC, and that as a consequence there was no contract of insurance in force between AXA and Everbright.
154. In dismissing the appeal from this 1st instance decision, the Singapore Court of Appeal held, inter alia, that where an approved vessel was declared by Everbright, AXA were obliged to accept it for the purpose of insurance; however AXA were under no obligation to inform Everbright that the vessel declared did or did not fall within the parameters of the ICC, and that the responsibility rested with the plaintiff, Everbright, to ensure that the vessel declared was one which could, at least, fall within the scope of the ‘held covered’ clause. In other words, that in the context of a marine open cover, it was the assured which had the duty to ensure that the vessel complied with ICC/92, precisely because it was the insurer was agreeing to automatic cover in advance. In giving the judgment of the court, LP Thean JA said (at paras 25-26):
“In considering this [the ‘approved vessel’] issue, it is necessary to bear in mind the type of marine insurance effected or sought to be effected by Everbright with AXA. It was not a facultative insurance, where full details of the cargo, the voyage and the vessel are known to the insured and are furnished to the underwriter, and the latter is in a position to assess fully the risks involved on the proposed shipment and make a decision on whether to accept the shipment for insurance, and stipulate the premium payable. In such a case, where the risk is not accepted, the underwriter would notify the insured accordingly. Where, however, the risk is accepted and the premium is acceptable to the insured, the contract of insurance will then be concluded.
In contradistinction to this type of marine insurance is an open cover marine insurance. In such insurance, the rates of premium for the type of cargo to be insured are first agreed upon between the insured and the underwriter. The ICC is adopted and is incorporated into and forms part of the cover note. When a particular cargo is available for shipment on a certain voyage, at the instance of the insured, a cover note for insuring the proposed cargo for a certain amount is issued by the underwriter; but the details of the vessel are still unknown and yet to be declared to the underwriter. The insured will in due course declare to the underwriter such particulars when the vessel is found for carrying the cargo and loading is about to take place. The underwriter on its part is obliged to accept the shipment which comes within the scope of the cover note. In other words, the underwriter is obliged to accept all valid declarations made under the cover and in effect agrees to an automatic cover of the cargo in advance for the benefit of the insured. In this type of insurance, the obligation is on the insured to ensure the details of the cargo, including the vessel carrying it, fall within the terms of the cover note…”(emphasis added)
155. In dealing with conceptual difficulty to his case as posed by the decision in the “Sirena I”, Mr Sussex dismissed this decision as being wholly distinguishable on its facts, in the sense that in that case no policy of marine insurance had been issued, in contrast to the present wherein the insurer had issued a policy after being provided with the name of the vessel; whilst factually accurate, however, this does not seem to me to represent a compelling answer to the appropriate guiding principle underpinning the ‘burden issue’.
156. As Mr Sussex has pointed out, as yet there has been no specific judicial decision on the ICC/01, and thus, he commented, those cases dealing with earlier versions of the clause “must be approached with circumspection”, not least since the latest incarnation of this clause no longer incorporates an express ‘held covered’ provision; he further observed that the existence of cover appears dependent upon compliance with part 1 of the 2001 Clause, and thus that the existence of cover under part 2 of the Clause (that is, in respect of cargoes and/or interests carried by vessels “not classed as above”) is dependent upon prompt notification and agreement on rates and conditions, and thus that the position after a loss may be subject to the “whim of the insurer”.
157. Nevertheless, I do not consider that these points carry significant weight in terms of the present specific debate as to the ‘burden’ issue.
158. The salient fact in The “Sirena I” is that the Singaporean Court of Appeal found, in my respectful view correctly, that it is the assured which bears the obligation to ensure ICC compliance in light of the fact that the insurer, with obligatory commitments already in place, was agreeing to be on risk prior to being furnished details of the carrying vessel.
159. The plaintiff’s submission that a vessel classed incorrectly simply attracts an increased rate of premium, and that in practical reality that really is all there is to it, is, with respect, unpersuasive.
160. In the context of obligatory/obligatory cover, cargoes and/or interests carried by unclassed (that is, by non-ICC-compliant) vessels must be subject of ‘prompt notice’ to the insurer; as Clause 1 of the ICC states, in that situation “rates and conditions” are to be agreed by underwriters, and then only after the assured has elected to seek to be held covered for shipment on a non-compliant vessel, and has given the insurer requisite notice thereof.
161. In this context I note that even had such ‘prompt notice’ purported to have been given by the plaintiff (which it was not), in this case there was no cogent evidence whatever of “reasonable commercial market rate on reasonable commercial market terms”, notwithstanding Mr Sussex’s ambitious (and wholly unsuccessful attempt) to get something useful out of Mr Bilney in terms of evidence of any such additional premium, an attempt that Mr Bartlett was minded to describe as a “fiasco”, to say nothing of the fact that this was in breach of the plaintiff’s prior undertaking that nothing in Bilney’s evidence was to be permitted to sound to the plaintiff’s case against the 1st defendant.
162. For the sake of completeness I record also that in this connection Mr Sussex attempted to rely upon an isolated Marine Cargo Open Cover issued by one ‘Seascope Insurance Services (Hong Kong) Ltd’ [Exhibit 2] which was handed up, which was obtained in circumstances of which I am unaware, and to the admission of which Mr Bartlett strongly objected since he had been afforded no opportunity to consider/rebut, not least since up to the trial itself this particular issue appeared not to have been in play, had remained wholly unpleaded, and that there was no expert evidence of that which he correctly observed essentially represented a ‘market question’. For the avoidance of doubt I give no weight whatever to this isolated piece of paper, which I looked at on a ‘de bene esse’ basis, as constituting evidence of new cover available at reasonable market rates and on reasonable market terms.
163. In any event, as to what such ‘notice’ should comprise, I do not, with respect, accept Mr Sussex’s beguiling submission that the requisite notification is not as to the unclassed nature of the carrying vessel, but relates solely to “cargoes and/or interests”.
164. Leading counsel further suggested that it is noteworthy that the form of the declaration given by the plaintiff in the case of each cargo and interest declared under the Open Cover in this case merely identified the “Conveyance” by the name of the vessel, and that no attempt was made to show that the vessel in question was “below 31 years”. This, Mr Sussex says, is unsurprising because on the evidence of Mr Xie Chun Fan apparently it was the general practice of the 1st defendant to check the age of each carrying vessel; it was also clear, he said, that the 1st defendant had had access to “Shipfinder Online”, an online data-resource provided by Lloyd’s Register, and when the ‘links’ on that site are pursued it would show the class details of a vessel: in Mr Sussex’s appealing phrase “the relevant information is therefore only a mouse-click away.”
165. In the present case, he said, the plaintiff, through its broker, the 2nd defendant, had made a declaration within one day of the shipment of the cargo on board the vessel, and within days the 1st defendant had issued a Marine Cargo Policy, and had charged a premium for this particular shipment. Thus, by issuing the policy the 1st defendant must be taken to have “approved” the vessel, and the “obvious conclusion”, Mr Sussex asserted, to be drawn from the fact that the 1st defendant had charged no additional premium is that the insurer did not perceive any increased risk thereby necessitating consideration of any such increased premium.
166. It therefore followed, concluded Mr Sussex, that on these facts in the context of the Open Cover obligation the plaintiff thereby had discharged its obligation with regard to ICC notification.
167. Mr Bartlett countered with the submission that any such internal “preliminary check” conducted by the 1st defendant, if and when actually done (since on the evidence such was not invariable, and certainly varied as to scope) did nothing to alter the fact that, as soon as the insured goods left the warehouse, under the Open Cover the insurer remained on risk to cover shipment upon vessels about which it then knows nothing; in particular, any ‘internal practice’ as may or may not have been conducted did not, he argued, alter the primary contractual obligations of the assured, and did not relieve the assured of the specific obligations under the ICC, including the highly salient ‘notice requirement’ should the assured seek to be held covered in respect of a ‘non-classed vessel’.
168. The fact that the 1st defendant’s resources may have included material which, if a detailed and exhaustive search had been conducted, might have revealed class details, was nothing to the point, he said. In fact, he added, the evidence in this case was that even a contemporary search of the ‘links’ on the ‘Shipfinder’ website regarding this vessel had proved unreliable, since such had revealed a blank space for class details (with no legend clarifying whether this meant that the vessel was not classed at all, or that the class was unknown), and in fact this particular website even had continued to represent that the “WORLDWIDE SHANGHAI” was still in service, notwithstanding that, regrettably, at the time of this search it reposed on the sea bed.
169. In my judgment Mr Bartlett is correct.
170. I agree with his contention that it is inconsistent with the basic understanding of the insurance industry to suggest that in circumstances wherein an Open Cover is in place it nevertheless is the insurer which is responsible for ensuring an assured’s compliance with the conditions of such cover, including the ICC/01 requirement as to vessel class.
171. I further do not accept the plaintiff’s submission that, in effect, a limited internal check conducted by the insurer which was not revelatory of class ‑ which was the evidence in this case and was evidence the truth of which I accept ‑ as then followed by issuance of a pro forma Marine Cargo Policy in ignorance of the true position, when taken together sufficed to comprise an acceptance by the insurer of a ‘non‑class‑compliant’ carrying vessel, nor for that matter do I accept that such issuance amounts to any representation of such fact by underwriter to assured.
172. It was the evidence of Mr Bilney, which in its substantially amended form I accept, that the ICC/01 class requirement is of central importance, and constitutes a condition of the insurance. I also accept the evidence of Mr Xie that such internal check as was made by the insurer did not extend to class, and in any event my view is that as a matter of principle that in the situation as had arisen the plaintiff was obliged to ensure by ‘prompt notice’ to the insurer that the carrying vessel was an “approved” vessel in terms both of the Open Cover and after issue of an actual policy; the Open Cover and the Cargo Policy each incorporated the ICC, and I have no doubt that this must be a continuing obligation on the part of the insured.
173. The short and ineluctable point is that plainly this did not happen.
174. It follows that I reject the plaintiff’s submission that the legal/evidential ‘burden’ of discovering the non-compliant class of the vessel lay on the insurer, which in light of such information as it may then discover of its own volition then has to evaluate whether, and upon what terms, it is going to assume the increased risk, just as I reject the argument that the formal issuance of a cargo policy effectively is conclusive of the insurer’s acceptance of the situation and/or that by such issuance a ‘non‑ICC‑classed’ vessel thereby is, in effect, somehow transmuted to an ICC/01 ‘approved vessel’.
175. It seems to me that since the insurer is on risk upon issuance of the Open Cover ‑ in itself regarded as an insurance policy (see Arnould, 17th ed., para 9-11) ‑ if any computer ‘mice’ are going to be ‘clicked’ on web‑site ‘links’ in order to ascertain, and thereafter to inform, of the true class situation as to any particular vessel, it is the assured (or its broker) wishing to secure the cover for ‘non-classed’ vessels which must do the ‘clicking’, and the insurer cannot be heard to say, as in effect is being said in this case by plaintiff to the 1st defendant: ‘well, you could have found out, but you didn’t, and then you issued a policy, which is conclusive of the insurance coverage issue, so now indemnify me for the loss’.
176. I also firmly decline to accept Mr Sussex’s invitation, in his closing address, to find as a matter of fact that the 1st defendant was aware ‑ by actual or imputed knowledge ‑ of the class status of the vessel at the time of issuing the policy, but nevertheless that the 1st defendant had agreed to insure this cargo with no revision of rates and terms.
177. With respect to Mr Sussex’s forensic skill, and the ingenuity of his arguments in the context of this factual matrix, I can see no basis for the plaintiff’s characterization of an underwriter’s limited internal check, followed by issuance of a policy, as comprising acceptance and approval of the non-classed “WORLDWIDE SHANGHAI” under the ICC/01.
178. Under an obligatory/obligatory cover an insurer agrees to cover shipments within the terms of that cover, and I fail to see that subsequent policies as issued can or should be regarded as inconsistent with the specific terms of that cover. As the Singapore Court of Appeal was at pains to stress in The “Sirena I”, op cit, at para 35:
“In construing this [held covered] clause, we should bear in mind that the purpose of adopting the ICC is to ensure that the vessel chosen by the insured to carry his cargo would meet certain standards of seaworthiness and maintenance by virtue of the fact that the carrying vessel is classed by one of the well established international classification societies listed in the ICC and is within certain age limits. In an open cover insurance, as in the present case, the ICC is adopted and forms part of the cover note, and is principally intended to deal with the agreed rates of premium for the insurance of a shipment in a case where the cover is provided before the particulars of the carrying vessel are available to the underwriter. Where the carrying vessel subsequently declared has a listed classification and is within the age limitation, the ICC applies the agreed rates of premium for the insurance of such shipment. Where, however, the carrying vessel declared does not have a listed classification or is not within the age limitation, such agreed rates are not applicable for the insurance of the shipment; but in such event, the shipment is, nonetheless, covered and falls within the held covered clause…
…The held covered clause is in effect a safety net to provide shippers a cover for their cargoes in the event that the carrying vessels declared by them do not satisfy the requirements as to class and age specified in the ICC, subject to the payment of a premium and on conditions to be agreed…”
179. Accordingly, I reject the argument that in the circumstances of this case the information given by the insured to the insurer constituted ‘prompt notice’ in ICC/01 terms (see clauses 1 and 5 of ICC/01), and that thereafter it was the responsibility of the insurer to do its own investigation from the primary (but patently incomplete) data provided by the putative insured, and thereafter to ‘fill in the blanks’ in terms of acceptance or otherwise arising from any perception of increased risk due to any knowledge which may have been gained as to the ‘non-ICC-classed’ status of this carrying vessel.
180. I accept the contention of the 1st defendant that the whole object of the ICC/01 ‑ even absent an express ‘held covered’ clause ‑ is to place the underwriter on risk, and that if the assured wishes to seek extended cover ‑ as for example, due to the use, as here, of a non‑ICC‑classed vessel ‑ then “prompt notice” (vide Clause 5 of the ICC) must be given to underwriters.
181. In this context I record, and also accept, Mr Bartlett’s submission that the plaintiff never pleaded a case that it did send ‘notice’ to the insurers, and factually never did so, although he noted that at trial Mr Sussex but “faintly” had referred to an email from a Mr Sunny Ng of the plaintiff to loss adjusters dated 27 December 2007 as comprising such ‘notice’. I agree with the submission that this email clearly was nothing of the sort, and said no more than it was attaching documents pursuant to a request from the loss adjusters for such documents, and made no mention of a desire to engage in negotiation for revised insurance terms, and thus could not possibly constitute nor purport to be a ‘notice’ to insurers; indeed, in her evidence Ms Lui had confirmed that the plaintiff had never sent nor instructed the 2nd defendant to send such a notice to the insurer under ICC/01.
182. It follows that (if it be seriously contended, and I am by no means sure that it is) I find as a fact that there was no such ‘notice’ from the plaintiff to the 1st defendant.
183. Finally, within the context of ‘prompt notice’ I should also touch on the vexed issue of ‘Nelsonian knowledge’.
184. Although Mr Bartlett suggested that the plaintiff must have possessed such ‘blind eye’ knowledge from the outset, it seems to me that with reasonable certainty the plaintiff can only be affixed with knowledge that the vessel was out of class when it received the Interim Class Certificate prior to the 1st defendant’s rejection letter of 10 January 2008; I do not think (and for present purposes do not so find) that at the time a declaration was made by the 2nd defendant broker on behalf of the plaintiff that the plaintiff was aware of the potential problem in terms of the vessel being unclassed. Nor do I consider the point a realistic ‘live issue’ in this case since, as I have said, not only have I found an absence of any such ‘prompt notice’ as a matter of fact, but also, and notwithstanding some late and ingenious forensic manoeuvring, in substance the plaintiff has chosen to run this case at trial solely on the basis of approval/waiver consequent upon issuance of the policy.
185. At the end of the day, therefore, in my judgment the plaintiff must fail against the 1st defendant on the basis of the non-compliant class of the vessel, and also a lack ‘prompt notice’ to the 1st defendant to enable the underwriter to renegotiate terms (even if it were minded so to do) to take account of the potentially increased risk.
186. This conclusion necessarily means that there is no need to consider yet further lines of defence set up and run by Mr Bartlett, in terms of estoppel and lack of utmost good faith, although in truth these seem to me to be but variations/implicit extensions of existing arguments.
Order
187. It follows from the foregoing that in terms of the plaintiff’s case against the 1st defendant, the Order of the court is as follows:
(1) The plaintiff’s action against the 1st defendant is dismissed;
(2) There be an order nisi that the costs of the action be to the 1st defendant, to be taxed if not agreed.
Plaintiff’s Case: Against the 2nd defendant broker
The ‘shape’ of the dispute
188. This is an entirely different case, and clearly is more fact‑sensitive than the action against the 1st defendant insurer; in his closing submission Mr Sussex properly accepted that this part of the case exclusively turned upon this court’s findings of fact.
189. The plaintiff’s case against the 2nd defendant insurance broker is that it was engaged by the plaintiff to arrange a Marine Open Cover, and to arrange for the issuance by the 2nd defendant of individual Marine Cargo Policies pursuant to that Open Cover.
190. Accordingly, submitted Mr Sussex, by reason of the terms of this engagement the 2nd defendant had become subject to a duty to ensure that the plaintiff understood the terms of the insurance that it was obtaining, and that this was an explanatory duty which clearly was something of which Mr Victor Cheung Shing Lee, as Assistant General Manager of the 2nd defendant, was capable, because in evidence he had accepted that he knew what the ICC/01 provided, and as to its importance within the marine insurance context.
191. Thus, said counsel, if the plaintiff were able to demonstrate that the 2nd defendant was in breach of that duty to ensure proper understanding by the plaintiff of the insurance obtained on its behalf, the plaintiff’s loss must flow directly from the 2nd defendant’s breach, because had it been advised that using vessels which were not classed in accordance with ICC/01 could jeopardize its insurance cover, the plaintiff would not have chartered the “WORLDWIDE SHANGHAI”, and ‑ as Miss Katherine Lui had stated in evidence - clearly would have used another vessel in respect of which there could have been no valid refusal by the 1st defendant insurer to provide cover.
192. Mr Sussex argued that on the evidence the nature of the 2nd defendant’s engagement did not admit of doubt, and that after the arrangement of suitable Open Cover, thereafter it was to make declarations to the insurer under that Open Cover, and thence to obtain individual marine policies for each shipment declared; moreover, having regard to its engagement to make declarations on behalf of the plaintiff, the 2nd defendant came under a “self-evident duty” to ensure that the 1st defendant underwriter was provided with information relating to the class or age of any carrying vessel which, if necessary, could attract the need to agree additional rates and conditions pursuant to the ICC/01. In this context Mr Sussex went further: he submitted that even if the plaintiff could not provide the information, the 2nd defendant was under an independent duty, where reasonably possible, to obtain such information itself.
193. For the 2nd defendant Mr Colin Wright strongly demurred.
194. He did so on all fronts. He submitted that the plaintiff’s claim should be dismissed on the basis that the plaintiff had failed to prove its central allegation against his client insurance broker (‘MST’), namely that MST had acted in breach of a contractual obligation or duty of care owed to the plaintiff in the terms alleged, and further that the plaintiff had failed to prove that causatively it had suffered loss by reason of any act or omission on the part of MST.
The factual matrix: the involvement of MST
195. Sorting out the wood from these particular trees requires examining, and making findings upon, the primary facts which form the basis of the alleged entitlement of the plaintiff to mount its claim for relief against the 2nd defendant.
196. The evidence of Miss Katherine Lui, the General Manager of the plaintiff, which on this particular aspect was not disputed, was that at the time of its involvement with MST the plaintiff was an experienced trading company, and in fact had been engaged in trading/importing wood products since 1995.
197. Prior to the involvement of MST and the 1st defendant underwriter, the plaintiff hitherto had had its insurance needs met through the services of Mitsui Sumitomo Insurance Co (HK) Ltd (‘Mitsui’), which had agreed to cover shipments made by the plaintiff upon the terms and conditions set out in a Mitsui Open Policy for the period from 2 March 2006 to 1 March 2007.
198. By this Mitsui Open Policy, Mitsui had agreed to provide insurance for shipments declared by the plaintiff in so far as the risk fell within the terms of that particular Open Cover. In addition, the Mitsui Open Policy was subject to the Institute Cargo Clauses (A) and the ICC/01; in fact, as Mr Wright emphasised, the full text of ICC/01 had been expressly set out in the Schedule to the Mitsui Open Policy.
199. Mr Wright further noted that third party discovery from the entity with which Mitsui had merged in January 2009 indicated that in the period between 17 February 2006 and 30 November 2006 the plaintiff had arranged the carriage of a significant number of consignments of wood products, and that each of the specific policies as issued by Mitsui expressly was subject to ICC/01.
200. That which apparently had happened, counsel said, was that the Mitsui Open Policy abruptly had been cancelled in late 2006. It was not clear precisely why this had occurred, and nothing had been produced by the plaintiff on discovery, although there was some suggestion in evidence that Mitsui’s interest had ceased because of a claim being mounted against it by the plaintiff, but in any event it was obvious that in October 2007 the plaintiff actively and urgently had been looking for replacement cover for such timber shipments, Mitsui now having dropped out of the insurance picture.
201. This background is not in dispute. The evidence is that in October 2006 Mr Victor Cheung, the Assistant General Manager of the 2nd defendant broker, was introduced by a Mr K C Yiu to Miss Iris So, an independent insurance broker, and that as a consequence on 24 October 2006 Mr Cheung had had telephone conversations with Miss So regarding the plaintiff’s insurance requirements; thereafter by a fax dated 24 October 2006 Miss So had informed Mr Cheung of the terms of the pre-existing Mitsui insurance, and Ms So had requested the 2nd defendant to obtain quotations from other potential insurers on the terms as set out in this fax, which included ICC/01.
202. It appears that save for the 1st defendant, all the insurers thus approached had declined to quote, and on 22 October 2006 the 1st defendant advised the 2nd defendant, MST, that it would be prepared to quote for providing the required open cover.
203. On 24 November 2006 the 1st defendant underwriter sent a quotation to MST in respect of the open cover the 1st defendant was prepared to provide; this quotation was in the terms outlined in the earlier fax of 24 October, and specifically provided that the proposed open cover would be subject to ICC/01.
204. On 1 December 2006 Mr Cheung of MST attended at the plaintiff’s registered office, and met with Miss Katherine Liu and Miss So, and he presented the 2nd defendant’s quotation to Miss Liu; Miss Liu wished to know if the quotation was on identical terms to the Mitsui policy, and when Mr Cheung confirmed that to be the case Miss Lui said she would ask her colleagues to ‘vet’ the document and that she would revert.
205. A week later, on 8 December 2006, Mr Cheung faxed a quotation slip to Mr Sunny Ng, the Logistics Department Manager of the plaintiff, and a confirmatory telephone conversation took place later that day between the two men. I return in some detail to the earlier meeting with Miss Liu at the plaintiff’s office, since that which then is said to have transpired is integral to the case the plaintiff now runs against the 2nd defendant.
206. On 8 December 2006 the plaintiff accepted the quotation by faxing back the quotation slip to MST, and on 29 December 2006 Mr Cheung faxed a copy of the open cover to be issued to Mr Ng of the plaintiff for checking.
207. The 1st defendant subsequently issued marine open cover policy No. PICC/HK2/MCA/2006/014705 (‘the Open Cover’) which bears the date 12 December 2006, albeit – and nothing turns upon it ‑ it seems to have been issued after that date.
208. Under the Open Cover, each new shipment required a declaration of the shipment details before the coverage could be confirmed. By email dated 1 November 2007, the plaintiff advised the 2nd defendant of the new shipment. On the same day, the 2nd defendant forwarded the email from the plaintiff to the 1st defendant and requested the issuance of cover. On 2 November 2007, the plaintiff issued a policy of marine cargo insurance No. PICC/HK2/MCA/2007/011667, and at the plaintiff’s request, this cargo policy was amended and reissued on 5 November 2007.
209. By this policy, the 1st defendant provided cover for a cargo of 877 pieces of Malaysia Sabah round logs carried on board the M.V. “WORLDWIDE SHANGHAI” which, as we now know, regrettably foundered under severe weather conditions and sank in the Taiwan Strait, thereby causing the entire loss of the cargo.
210. The extent to which, if at all, the 2nd defendant is liable to the plaintiff must depend first, upon a classification of the nature and terms of the 2nd defendant broker’s engagement by the plaintiff, and second, the issue of any breach of duty/causal nature of such breach on the part of the 2nd defendant.
Nature and terms of the 2nd defendant’s engagement
211. Mr Sussex says that the service which the 2nd defendant was engaged to provide for the plaintiff clearly was the arrangement of suitable Marine Open Cover, and that, having obtained that Open Cover, the 2nd defendant broker then was to pass on declarations made by the plaintiff under that Open Cover, and to obtain individual Marine Cargo Policies for each shipment as thus declared.
212. He submitted that it was “fanciful” to suggest that the 2nd defendant merely was engaged to ‘source’ alternative quotations from underwriters, following upon the cancellation of the plaintiff’s Open Cover with Mitsui Sumitomo, and thereafter to act as no more than a ‘post box’ for communications between the plaintiff and 1st defendant underwriters.
213. He pointed out that in evidence Mr Victor Cheung had accepted that if he had taken the view that any of the terms which Ms Iris So had faxed to him were inappropriate for the type of insurance the plaintiffs were seeking, he would have so advised the plaintiff. It just so happened that he had not identified anything inappropriate among those terms, which were fairly standard for the Open Cover of the type being sought by the plaintiff; in fact, Mr Cheung specifically had accepted that in the circumstances of this cargo it would have been difficult to find an underwriter prepared to provide open cover without incorporation of the ICC/01.
214. For his part Mr Wright maintained to the contrary; he asserted that on the basis of these very particular facts the true position was that MST simply was required to, and duly had, provided the service of sourcing quotations from potential insurers, and also had provided the service of passing information received from the plaintiff on to the 1st defendant, but that on the evidence before the court there could be no justification in finding that the plaintiff and MST had entered into any agreement imposing obligations stemming from what might be regarded as a standard broker/client relationship.
215. Counsel submitted that the plaintiff had called 3 witnesses of fact, and that none of the witnesses had given evidence which would justify the finding as now sought by the plaintiff to the effect that MST had assumed any obligation to provide any service other than to source a quotation or quotations from potential insurers, and thereafter to pass the information so received to the plaintiff.
216. Mr Wright also declined to accede to a picture of the plaintiff as an insurance ingénue. He noted that Miss Katherine Lui had accepted ‑ and there was no reason to take this evidence other than at face value ‑ that she had had “experience in banking, shipping and insurance matters”, and that her evidence was that the plaintiff regularly shipped about 30,000 cubic metres of timber products into Mainland China on a monthly basis, and that as a consequence the plaintiff could be regarded as one of the primary importers of timber into the Mainland; in fact, although this had not come out from the plaintiff on discovery, he said, the third party discovery obtained from Sun Fung, the plaintiff’s former broker, and also from Mitsui, had disclosed not only that the policy document for the Mitsui Open Cover contained the full text of ICC/01, but that during the period from 17 February 2006 to 30 November 2006 the plaintiff had taken out as named assured no less than 51 shipment specific marine cargo policies with Mitsui, each of which expressly incorporated the ICC/01, with each of the policy documents containing the full text of ICC/01 on its reverse.
217. As to the raison d’etre of MST’s involvement in this sequence of events in the first place, I have little doubt that Mr Wright is correct in his characterization that it was the plaintiff’s urgent need for assistance in the task of obtaining quotations from alternative insurers consequent upon Mitsui’s notice of cancellation of the Mitsui Open Policy, that this had caused the ad hoc involvement of MST, and that at this stage there had been no question of MST acquiring the status of a retained insurance broker.
218. I also find that with this urgent need in mind Miss Katherine Lui had turned to her friend, Miss Iris So, for assistance, since Miss So’s evidence was that she was a qualified insurance intermediary, and that it was her understanding that the plaintiff urgently was seeking alternative insurance coverage consequent upon Mitsui’s sudden departure from underwriting the plaintiff’s log transactions.
219. Accordingly it seems tolerably clear (and I so find) that the only reason MST came into this particular picture at all was because of the plaintiff’s urgent need to obtain quotations for replacement insurance; I also accept that it was following the direct request for assistance made from Miss Lui to Miss So that Miss So had contacted Mr KC Yiu, whom I accept had “bumped into” Mr Victor Cheung of MST in Dundas Street in October 2006.
220. I further accept, and make consequent findings in these terms, that there is nothing in the evidence either of Miss Lui or of Miss So which is suggestive of a decision by the plaintiff to use MST on this occasion as anything other than a convenient ‘sourcing agent’, or to suggest that MST was engaged for the purpose of general advice and/or for the purpose of obtaining specialist broking information as to the age/class of carrying vessels, or for that matter that the plaintiff had sought to retain MST on the basis of any purported specialist broking expertise.
221. The undisputed factual sequence of events tends to bear out this conclusion. After meeting Mr Yiu in Dundas Street, Mr Cheung’s evidence, which I accept, is that Mr Yiu had told him that he had a client looking for insurance for timber products and logwood in place of Mitsui, who had been their existing insurers, and that Miss So subsequently had contacted Mr Cheung by telephone and, having obtained his fax number, had told him that she would fax him the terms of her client’s pre-existing policy with Mitsui; this she did on 24 October 2006. The insurance period is stated to be “3 Mar 2006 to 2 Mar 2007”, and all other main terms of the Mitsui Open Policy are contained in this fax.
222. Mr Cheung’s further evidence, which I see no reason not to accept, is that he was asked by Miss So to seek quotations in the like terms to those appearing in the fax of 24 October 2006. In the circumstances I do not find this surprising; the plaintiff was looking urgently for insurance to replace the Mitsui cover, and I have heard no evidence that there was dissatisfaction on the part of the plaintiff with the type of cover which, via the good offices of Mitsui, had been in place for 50 odd previous timber imports into China.
223. Consequent upon this interchange, Mr Cheung’s evidence was that he copied the content of the fax onto the MST letterhead, and faxed it to a number of addressees whom he viewed as likely underwriting prospects; each document thus faxed had affixed thereon a ‘Post It’ note with a personal message from Mr Cheung.
224. However, save for the 1st defendant, all the addressees had declined offers of cover; however, on 22 November 2006 the 1st defendant advised that it would be prepared to quote for providing the open cover which was being sought, and in response Mr Cheung had prepared a written quotation which the 1st defendant was prepared to provide, a quotation which appears to be in substantially like terms to the terms set out in the fax of 24 October 2006, save for the premium quoted and the identification of the 1st defendant as putative underwriter.
225. Accordingly, as to the nature of the 1st defendant broker’s retainer/duties, I have little doubt, and so find, that in this instance MST indeed was acting as an intermediary broker seized with a specific ‘one off’ task, namely urgently to locate replacement open cover to cover the substantive gap left by Mitsui’s sudden withdrawal from this insurance scene. In the circumstances as revealed on the evidence, and on the facts as found, I therefore am unable in this instance to imbue MST, the 2nd defendant broker, with the type and scope of ‘umbrella’ supervisory/advisory duties the plaintiff now asserts in these circumstances were incumbent upon the 2nd defendant.
226. The nature and terms of the 2nd defendant’s involvement was to ‘source’ alternative cover, for want of a better term, and I so find.
227. However, such finding is not necessarily dispositive of the success or otherwise of the plaintiff’s case against the 2nd defendant, which is pleaded not only in terms of breach of contract, but also in tort in the sense of negligent breach of a duty of care owed to the plaintiff.
228. As I have indicated, I am unable discern any case in contract on the facts as found, and do not hold that the 2nd defendant was responsible for any contractual breach. Normally conclusions on alternative cases in contract and tort are co-extensive, but if I be wrong as to the restrictive ‘sourcing’ nature and terms of the 2nd defendant’s ad hoc contractual retainer ‑ which is the specific finding I now have made – I proceed further to consider whether there is scope for successfully alleging a breach of a duty of care by 2nd defendant to plaintiff.
Breach of duty?
229. Accordingly, I approach this aspect of the case on the assumed basis that I be wrong in terms of the parameters of the obligations upon the 2nd defendant in this case, and that the 2nd defendant was retained by the plaintiff to do more than it in fact was required to do (and indeed did) consequent upon the withdrawal of the Mitsui cover on 17 February 2006.
230. Thus, may it legitimately be said, in the particular circumstances of this case, that it was incumbent upon the 2nd defendant broker to advise andtoensure comprehension of the open cover that it had been instrumental in sourcing between the plaintiff and the 1st defendant?
231. It is at this juncture that the factual focus necessarily falls upon the meeting which took place on 1 December 2006, when Mr Cheung of the 2nd defendant broker attended at the plaintiff’s registered office and therein met with Miss Katherine Lui and Miss So; it is also at this stage that there requires to be a finding as to the relative credibility of Miss Lui of the plaintiff on the one hand, and of Mr Cheung of the 2nd defendant on the other.
232. The material facts are relatively straightforward and, save for one significant element, are not in dispute.
233. As earlier noted, on 22 November 2006 the 1st defendant had indicated to the 2nd defendant that it would be prepared to quote for the provision of the Open Cover, and Mr Cheung of the 2nd defendant had prepared a written quotation in the terms of that which the 1st defendant was prepared to provide, and which reflected that which was contained in the fax of 24 October 2006.
234. On 1 December 2006 Mr Cheung attended at the plaintiff’s office and met with Ms Lui and Ms So. The factual dispute is as to what occurred at that meeting, in particular whether Ms Lui was shown a copy of the quotation dated 24 October 2006 and what, if anything, was said about it.
235. For her part, Ms Lui says in her witness statement that Mr Cheung “roughly referred to the terms of the insurance quotation” and that he “merely provided me with a general and brief introduction to, inter alia, the terms of the insurance quotation.” Subsequently, in her oral testimony Ms Lui initially seemed to deny she had seen the quotation dated 24 November 2006: “I have not seen this piece of paper”, and then under cross-examination the following exchange took place between herself and Mr Wright:
“Q the document which appears at page [B] 97 is the document that Mr Cheung handed to you at the meeting on 1 December?
A. Well, he did not give me this document. Perhaps, perhaps on that day, he did brought along this document and – that is to say, well, this document is similar to the previous document.
Q. He showed you a similar document on the meeting of 1 December?
A. Right.
Q. He explained that the quotation was for clause A all-risk cover?
A. At the beginning, he did not say these.
Q. He then started to explain the terms of the quotation?
A. No, that’s not the case.
Q. He got as far as the clause which refers to voyage on the first page, and then you turned over your copy of the document, didn’t you?
A. It happened so long ago, now I cannot remember whether I had the document with me and whether I was turning over the pages of any document with me or not.
Q. So, let me just summarise Ms Lui. You cannot remember what was said at the meeting on 1 December 2006?
A. I did not say I have – I have not said I cannot recall.
COURT: Is it fair to say that you can recall the meeting but you cannot recall the precise sequence of events?
A. That’s correct…”
236. Contrary to the obviously vague recollection of Miss Lui, Mr Cheung’s evidence of what transpired at this meeting was that he had presented the quotation for the inspection of Ms Lui and Ms So, but that before he could explain all the clauses, he was stopped by Ms Lui with a question as to whether the quotation was on identical terms to the subsisting insurance hitherto held by the plaintiff with Mitsui, and that when he confirmed that it was, Ms Lui had said that there was no need for Mr Cheung to give any further explanation, and that she would instruct her colleagues to ‘vet’ the quotation and formally to respond.
237. I was impressed with Mr Cheung’s cross-examination on this issue; he was solid and down to earth, and expressly rebutted Mr Sussex’s suggestion that he had not explained any of the clauses in the quotation before Ms Lui and Ms So: “That’s not right” [T7, page 48].
238. When specifically challenged on this issue he made it clear that effectively he had been ‘cut-off’ by Ms Lui from any further attempt to examine/explain the terms of the quotation, although he told the court that in going through the clauses he had “adopted our usual procedure” in purporting to go through the various clauses. However, early in the piece Ms Lui had asked if a particular clause, in this instance the ICC(A), was the same “as the original one”, and he had said ‘yes’ [T7, page 48, line 25], and thereafter when he was going through the quotation in relation to ‘voyage’ and ‘conveyance’ “again Ms Lui told me that she knew”. He then added:
“…she said, when they chartered a ship, they knew about this issue. She said she knew that the insurance company would have a requirement on the ship. She said that they also had a ship or ships. She said that they knew ships would have a P&I and also a relevant certificate. Then we recontinued our discussion…[as to deductible, rate, transit limit, rating]…Then…I started to talk about the terms and conditions…[page 51]…At this juncture Ms Lui asked me if this particular one was the same as the one they had all along had. I replied to Ms Lui, “Yes, it is based on ‑ it is in accordance with what you have all along had…in fact, before I sat down and started this, I already said this to them. I said to Ms Lui, “This quotation is based on what Iris So gave me”, namely the one from Ms So in fact is the same as the Mitsui terms.
At this juncture, one of Ms Lui’s colleagues asked her to go out and get a phone call. Then Ms Lui came back from answering the phone call… [page 52]…Then I brought them back to this particular matter…I asked Ms Lui, “Shall we continue our thing?” [page 53] At this juncture, Ms Lui asked me again, “Are the terms the same as what we have all along?” Then I glanced at Madam So…I answered Madam Lui, “Yes”, and at that time Madam So also nodded her head.
Then Katherine Lui said, “If they are the same, then you just put it down here. After my colleagues have read them, it will be given to you.” At this point of time they were talking about where they would have their dinner that night.
Then I said to Ms Lui, “I won’t trouble you anymore. That doesn’t matter, its nothing. If there is any question or problem, please feel free to contact me any time.” Then I said goodbye to them. I went downstairs and took a taxi back to my company to continue my work. I should say at that time the time was 6.30…”
239. Shortly afterwards, within the same cross-examination sequence, Mr Sussex began to test the issue of the Institute Classification Clause [page 54, line 11 et seq]:
“Q. You do not suggest, do you, that during that meeting on 1 December, on or about 1 December, you explained to Ms Lui the meaning or importance of the Institute Classification Clause, did you?
A. Correct.
Q. You had a conversation with Sunny Ng on 8 December 2006, when you faxed the quotation to him which is at B/100.
A. Yes
Q. Sunny Ng certainly didn’t tell you that the plaintiff was very familiar with the terms and conditions appearing in the quotation. Let me make it clear what I’m talking about. By ‘terms and conditions’ I mean the various institute clauses which are referred to under “Terms & Conditions”.
A. I disagree.
Q. He didn’t ask you if the quotation was on the same terms as the plaintiff’s cover with Sumitomo, Mitsui Sumitomo.
A. Well, this is what Sunny Ng asked. Sunny Ng asked, “Is it the same as the one we have all along had?”
Q. But you don’t suggest, do you, that during that conversation on 8 December 2006 you explained to Sunny Ng the meaning and importance of the Institute Classification Clause? You don’t suggest that, do you? That one you can answer ‘yes’ or ‘no’.
A. That’s right. I did not explain it to him on that day…”
Thereafter in the same cross-examination Mr Cheung insisted that it was not obvious to him that the plaintiff did not understand the ICC clause [page 58].
240. Having seen and heard from both Miss Lui and Mr Cheung in relation to this crucial ‘explanatory’ point, I have little hesitation in preferring the evidence of Mr Cheung to that of Miss Lui, whom I regret I did not regard as a satisfactory witness. I do not wish to be personally unkind, and I am sure that Miss Lui meant well, but it struck me with some force that she had allowed herself to become unduly emotionally involved with this case and with its success, and that she was only too well aware of the significance of the questions posed to her and of the plaintiff’s agenda in terms of its case against the 2nd defendant, and over the course of time may well have persuaded herself as to the truth of her version of events; nevertheless, and once more I stress that I do not wish to be unduly critical, at times it was difficult to avoid a lingering suspicion that she was prepared to ensure that her evidence suited the plaintiff’s case, since clearly she was aware of the relevant issues, and equally clearly her experience and professional background bespoke of considerable familiarity with this type of insurance relative to timber importation into China.
241. In this connection I regret that I am simply not prepared to ‘buy’ into the impression sought to be imparted by Miss Lui of being less than familiar with basic insurance issues, including in particular that of ICC/01 and its implications. In my judgment she knew exactly what the situation was, and why, and that in terms of knowledge of these issues she did not require explanation from Mr Cheung. I so find.
242. I should add also that I was unimpressed by her claim that she had telephoned Mr Cheung in early 2007 ‑ she could not recall the month ‑ to ask about the meaning of the various clauses in the policy because she wanted a “chat” to ascertain “that there would be anything hidden in the small print”, and in any event it seems that the concern over the “small print” was directed at the ICC, which was a standard term with which I have found that she was entirely familiar. For his part, Mr Cheung did recall a call from Ms Lui at about noon on 5 January 2007, and I accept his recollection as to the general nature and apparent insignificance of that call.
243. Aside from the court’s evaluation of the reliability/credibility of these two individual witnesses, having seen and heard them in the witness box, the overwhelming probability on the facts is that when Mr Cheung actually presented the quotation to Miss Lui at the meeting on 1 December 2006, in light of the unchallenged evidence that the plaintiff previously had received no less than 51 policies issued by Mitsui, each of which had set out in full the terms of the ICC/01, that Miss Lui (and indeed latterly Mg Ng on the telephone) fully was conversant with the terms of ICC/01, and accordingly, upon being assured by Mr Cheung that this clause was in the same terms as that which they all along had been used to seeing, Miss Lui indeed had indicated to Mr Cheung that there was no need to go through it all or to explain it yet again.
244. Thus I have no doubt, and so find, that Mr Cheung’s version of that which transpired at the meeting on 1 December 2006 was correct, and that Ms Lui said to Mr Cheung that in the circumstances there was no need for further explanation. I so find.
245. In my judgment Mr Cheung’s evidence was straightforward, relatively precise and in my view truthful; he recalled most of the significant details of the meeting, which was his first with Miss Lui, whom he may well have viewed as a potential new client for MST, and his sensible purported attempt to go through the clauses was, in effect, ‘waved off’ and curtailed by Miss Lui.
246. It follows that in my view the evidence of Miss Lui and Miss So cannot be relied upon in order to justify a contrary conclusion: each of these ladies clearly had a very limited recollection of the events of the meeting of 1 December 2006, a meeting which appears to have been of relatively minor import from their perspective when it became clear, as it did, that insurance similar to that hitherto offered by Mitsui had been able to be obtained, and their preoccupation as to what they were going to have for dinner on the evening in question, as opposed to listening to the proposed exegesis by Mr Cheung as to ICC/01, has the distinct and unmistakeable ring of truth.
247. In short, I find no basis to reject Mr Cheung’s straightforward account of this meeting, or indeed of his dealings with Miss Lui with regard to these events, and where there are differences between the two, I unhesitatingly prefer Mr Cheung’s evidence.
248. Against this backdrop, therefore, and as I have said on the assumption that in these particular circumstances there was a duty on the 2nd defendant broker to proffer appropriate explanations/advice as to the relevance of the age/class of the proposed carrying vessel, in my judgment there is no basis whatever to find ‑ and I do not so do ‑ that in the circumstances the 2nd defendant was in breach of any such duty of care to the plaintiff in the terms as alleged or at all. For the avoidance of doubt, I reject also Mr Sussex’s further contention that irrespective of the information provided by the plaintiff, that the 2nd defendant was under an independent duly to ascertain such information of its own volition.
249. In fact, it strikes me as a bit rich to level the type of accusation as has been levelled by the plaintiff against the 2nd defendant when, on the facts as I have found them, Miss Lui patently was unprepared to listen nor pay any significant attention to that which Mr Victor Cheung was prepared to say at the meeting on 1 December 2006.
250. In light of this conclusion, it follows that there is no need to go further and to consider the consequently otiose issue of causation, as to which I make no finding. I have already come to the view that on the probabilities the plaintiff has not been proven to have had ‘Nelsonian knowledge’, although in all the circumstances as revealed on the evidence, and with insurance for yet another similar log shipment now apparently successfully in place upon Mitsui’s departure from the scene, even had the plaintiff earlier become aware that the carrying vessel in fact was not ‘class‑compliant’, I confess to a lurking doubt as to whether any such ‘prompt notice’ would have been given to the 1st defendant, and consequently any attempt made to renegotiate the terms of the cover. However this latter factor has played no part in my analysis and evaluation of this case.
251. When looked at in the round, I have been driven to the view that this case as mounted against the 2nd defendant broker was ambitious from the outset, and that the 2nd defendant has been impleaded as ‘forensic insurance’ against the possibility of failing to get home against the 1st defendant underwriter.
252. If I may say so, in my view the case against the 2nd defendant never really got off the ground, and it was only the forensic skill of the plaintiff’s leading counsel which was able to impart a degree of plausibility to that which, on the facts as found, was an unattractive and insubstantial case.
Order
253. It follows from the foregoing that in terms of the plaintiff’s action against the 2nd defendant, the Order of this court is as follows:
(1) The plaintiff’s action against the 2nd defendant is dismissed;
(2) There is to be an order nisi that the costs of and occasioned by this action be to the 2nd defendant, such costs to be taxed if not agreed.
| (William Stone)
Judge of the Court of First Instance
High Court |
Mr Charles Sussex SC, instructed by Messrs Holman, Fenwick & Willan, for the plaintiff
Mr Jeremy Bartlett leading Ms Ella Liang, instructed by Messrs Stephenson Harwood, for the 1st defendant
Mr Colin Wright, instructed by Messrs Ince & Co, for the 2nd defendant