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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Atlasnavios - Navegacao, LDA v Navigators Insurance Company Ltd & Ors [2016] EWCA Civ 808 (01 August 2016) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2016/808.html Cite as: [2016] 2 Lloyd's Rep 351, [2017] 1 WLR 1303, [2016] EWCA Civ 808, [2016] WLR(D) 456, [2017] 1 All ER (Comm) 401, [2016] 2 CLC 349, [2016] Lloyd's Rep IR 565 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HON. MR JUSTICE FLAUX AND THE HON. MR JUSTICE HAMBLEN
2011 Folio 537
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE CHRISTOPHER CLARKE
and
SIR TIMOTHY LLOYD
____________________
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Respondent/Cross-Appellant/Claimant | |
- and - | ||
(1) NAVIGATORS INSURANCE COMPANY LIMITED (2) NAVIGATORS SYNDICATE 1221 AT LLOYD'S (formerly MILLENIUM SYNDICATE 1221 AT LLOYD'S) (3) TRAVELERS SYNDICATE 5000 AT LLOYD'S (4) AEGIS SYNDICATE 1225 AT LLOYD'S (5) ARGENTA SYNDICATE 2121 AT LLOYD'S (6) WATKINS SYNDICATE 457 AT LLOYD'S (7) INTERNATIONAL INSURANCE COMPANY OF HANOVER LIMITED (8) ALLIANZ GLOBAL CORPORATE & SPECIALTY (FRANCE) SA (9) AXA CORPORATE SOLUTIONS ASSURANCE SA (10) CAISSE CENTRALE DE REASSURANCE SA (11) GENERALI IARD SA (12) GROUPAMA TRANSPORT SA (13) MAPFRE GLOBAL RISKS, COMPANIA INTERNATIONAL DE SEGUROS Y REASEGUROS SA (14) MITSUI SUMITOMO INSURANCE COMPANY LIMITED |
Appellants/Cross-Respondents/Defendants ("insurers") |
____________________
Mr Colin Edelman QC and Mr Guy Blackwood QC (instructed by Stephenson Harwood LLP) for the Defendants
Hearing dates : 14 and 15 June 2016
____________________
Crown Copyright ©
Lord Justice Christopher Clarke :
"Whoever illicitly traffics, distributes, conceals, transports by any means, stores, carries out brokering activities with the substances or their raw materials…. .to which this Law refers and which were deviated, even in a discarded form, for the production of narcotic drugs and psychotropic substances, will be punished with a prison sentence of between eight and 10 years"
"Preventive seizure
Article 63 - When the offences covered by Articles 31, 32 and 33 of this Law are committed on ships … such items will be seized as a precautionary measure until their confiscation in a definitive judgment. The owner is exonerated from that measure when circumstances demonstrate its lack of intention. That question will be resolved at the preliminary hearing."
Secured, seized and confiscated property
Article 66 – The moveable or immoveable property... ships … and other items employed to commit the investigated offence, as well as property about which there is a reasonable suspicion that it originated from the offences envisaged in this Law or related offences …..will be in all cases seized as a preventive measure and, when there is a final and definitive judgment, an order will be given to confiscate and the property will be awarded to the decentralised agency in the field…"
Article 63 involves, as the judge found a reverse burden of proof [283].
The policy
"Institute War and Strikes Clauses Hulls – Time Clause 281. 01.10.1983. Including Strikes, riots and Civil Commotions, Malicious damage and Vandalism, Piracy and/or Sabotage and/or Terrorism and/or Malicious Mischief and/or Malicious Damage. Including confiscation and expropriation.
Line 20 of the Institute War and Strikes Clauses Hulls-Time Clause 281.01.10.1983 amended from 12 to 6 months."
"1 PERILS
Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused by
…
1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat
…
1.5 any terrorist or any person acting maliciously or from a political motive
1.6 confiscation or expropriation.
2 INCORPORATION
The Institute Time Clauses-Hulls 1/10/83 (including 4/4ths Collision Clause) except Clauses 1.2, 2, 3, 4, 6, 12, 21.1.8, 22, 23, 24, 25 and 26 are deemed to be incorporated in this insurance in so far as they do not conflict with the provisions of these clauses.
…
3 DETAINMENT
In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of [6] months then for the purpose of ascertaining whether the Vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.
4 EXCLUSIONS
This insurance excludes
4.1 loss damage liability or expense arising from
…
4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations.
4.1.6 the operation of ordinary judicial process, failure to provide security or to pay any fine or penalty or any financial cause …
4.2 loss damage liability or expense covered by the Institute Time Clauses-Hulls 1/10/83 (including 4/4ths Collision Clause) or which would be recoverable thereunder but for Clause 12 thereof."
"PERILS
6.1. This insurance covers loss of or damage to the subject- matter insured caused by:
6.1.5 piracy
…
6.2.5 barratry of Master Officers or Crew
Provided such loss or damage has not resulted from want of due diligence by the assured, owners or Managers."
(1) Whether, in order for Underwriters to be able to rely on the exclusion in clause 4.1.5, they must show that there was privity or complicity on the part of the insured in any infringement of customs regulations.
(2) If not, whether Underwriters must show that there was privity or complicity on the part of the servants or agents of the insured in any infringement of customs regulations.
(3) Whether the exclusion in clause 4.1.5 is only capable of applying to exclude claims for loss or damage to a vessel which would otherwise fall within insuring clause 1.2 or 1.6, and not the other perils insured against under clause 1 and/or Section A of the Conditions.
(4) Whether the exclusion in clause 4.1.5 is capable of applying if an infringement of customs regulations is found not to be, or not reasonably arguably to be, a ground for the arrest, restraint, detainment, confiscation or expropriation of the vessel in question as a matter of the relevant local law.
"20. Only a handful of cases have considered the exclusion contained in clause 4.1.5 of the present clauses and their similarly-worded predecessors – all at Court of Appeal level. They are The "Anita" [[1971] 1 WLR 882] (generally cited as the leading case), The "Wondrous" [1992] 2 Lloyd's Rep. 566, The "Kleovoulos of Rhodes" [2003] 1 Lloyd's Rep 138 and The "Aliza Glacial" [2002] 2 Lloyd's Rep 421. The last of these is concerned with an alleged infringement of trading regulations (though in fact the regulations in question were held not to be so characterised, with the result that the exclusion did not apply). The remainder involved an alleged infringement of customs regulations, as does the present case.
21. As was largely common ground, a number of general principles can be derived from those cases.
22. First, the exclusions contained in clause 4.1.5 must be given a "businesslike interpretation in the context in which they appear": see The "Aliza Glacial" at para. 24, referring to the judgments in The "Anita", and "The Kleovoulos of Rhodes" at para. 39.
23. This means, secondly, that questions of construction need to be answered in the light of the fact that the Clauses are to be used worldwide. So they must be given a wide meaning to the extent that they are intended to cover laws in force anywhere in the world. They cannot turn on niceties of local law: The "Kleovoulos of Rhodes" at paras. 12 and 38.
24. Thirdly, the draughtsmen are to be taken to have had in mind decisions of the courts on earlier editions of the clause which have given the wording a settled meaning: The "Kleovoulos of Rhodes" at para. 28.
25. Fourthly, the burden is on Underwriters to bring themselves within the exclusion: see The "Aliza Glacial" at para. 24 and The "Anita" at page 492.
26. A fifth principle was a matter of some dispute between the parties, namely whether the exclusions fall to be construed against Underwriters by reason of the contra proferentem canon of construction. The "Aliza Glacial" at para. 27 suggests that they may not because "if the task of the Court is to ascertain the extent of the risk in the light of the defined perils read together with the relevant exclusion, there is no room for the operation of that rule". On the other hand, in The Silva [2011] 2 Lloyd's Rep 141 at para. 46 the rule was applied when considering the construction of the "any financial cause" exclusion. It is not necessary to resolve that issue in the present case, although there is force in the Claimant's point that if, as is accepted, the burden is on Underwriters to bring themselves within the exclusion as a matter of fact one would logically expect the burden to be on them to do likewise as a matter of construction."
The reasoning of the judge
"254 Mr Schaff QC drew my attention, albeit in relation to … the exclusion for "any financial cause of any nature", to what Toulson J said in Handelsbanken v Dandridge ("The Aliza Glacial"). The actual decision in that case, that the claim was excluded because there had been an infringement of trading regulations, was reversed on appeal, but at [52] of the judgment of the Court of Appeal ([2002] EWCA Civ 577; [2002] 2 Lloyd's Rep 421), Potter LJ quoted with approval this passage from Toulson J's judgment:
"Wide as the words 'any financial cause' are, it seems to me they must have some limitation. Suppose that a vessel was seized by a terrorist organisation wanting to raise money, a ransom demand was made for a million pounds and the owner declined to pay the money: could it be said that the detention of the vessel thereafter was through a financial cause? In a literal sense, it could, but no one would suggest that such a conclusion would accord with the spirit of the policy."
255 Although Toulson J went on to decide the particular point as a matter of causation, that the proximate cause of the detention was not a financial cause, it seems to me that he was recognising that some implied limitation on the wide wording of the exclusion was appropriate. That there should be some such implied limitation was confirmed by Burton J in The Silva at [46(ii)]:
"…although the words "any financial cause of any nature" appear wide, they must be construed in their context, namely as an exemplar of "Exclusions of claims arising out of ordinary judicial process etc", and, so far as necessary, both eiusdem generis to the other exceptions, and contra proferentem. Lord Denning's words above [in The Anita] would appear to be applicable. The words of Lloyd LJ in The Wondrous [1992] 2 Lloyd's Law Rep 566 at 573 emphasise that, wide as the words are, the "financial cause must, of course, affect the ship" – which this did not. Potter LJ in The Aliza Glacial [2002] 2 Lloyd's Law Rep 421 at 432 quoted with approval words of Toulson J at first instance, namely that the detention of a vessel for ransom by a terrorist organisation could not be detention for a financial cause, because "no-one would suggest that such a conclusion would accord with the spirit of the policy": Professor Bennett in The Law of Marine Insurance (2nd Ed) at 13.76 stated (in part by reference to The Aliza Glacial) that "the exclusion has to be understood as subject to an implied limitation that the financial issue must be triggered by a reasonable and legitimate claim against the vessel"."
"… subject to the implied limitation that they do not apply where the only reason why there has been an infringement of the customs regulations by the vessel is because of the malicious acts of third parties, whether the authorities themselves or their agents in the conceded case or the blackmailer or persons acting with actual malice in my two examples or the drug smugglers in the present case who strapped the drugs to the hull for their own ends, knowing that or being reckless as to whether the vessel would be detained by the Venezuelan authorities if they discovered the drugs. In each case, the "infringement" brought about by the drugs being strapped to the hull of the vessel is no more than the manifestation of the relevant act of persons acting maliciously...
……
Accordingly, in my judgment upon the correct construction of the policy and reading the malicious acts cover and the exclusions together, "infringement of customs regulations" in the exclusion does not include an "infringement" which is itself no more than the manifestation of the relevant act of third parties acting maliciously and the exclusion is subject to that limitation, equally applicable on the facts of this case as in the cases of the various "put-up jobs" I have identified above."
First principles
Cory v Burr
Conclusion
"The underwriter said: "I am a war risks underwriter. But there are two types of situation which I am not taking upon myself: where the vessel gets into trouble under the quarantine regulations owing to characteristics of the vessel or crew and where the vessel gets into trouble with Customs."
In the Court of Appeal Sir Gordon Willmer observed:
"The common sense of the matter, as Mr Mustill puts it, is that by that clause the underwriters were in effect saying: "We will not pay for loss caused by reason of the crew being sick or being caught smuggling". That is to put it in everyday language, but I would agree that that is prima facie what the exception means."
"But then it is contended that, though there was a capture or seizure, and though the capture or seizure only caused the loss and there would have been no loss without the capture or seizure, yet that if a claim might be made upon the footing of barratry then the warranty does not apply. I confess I have never seen how such a construction could be put upon the policy and the warranty, taken together, without leading to consequences altogether destructive of the whole operation of the warranty ….
It is quite manifest that the object of this warranty is and must be to except such losses otherwise covered by the policy, otherwise coming within the express terms of the policy, as arise out of and are losses occasioned by "capture or seizure." That appears to me to be equally the case whether remotely it was occasioned by barratry or not – in fact the remoter it is the stronger the arguments that it must be the case as to barratry."
"…supposing there had been no warranty at all, was there a loss here which would be one for which the underwriters would be liable? Upon the facts stated I cannot doubt it. The definition of barratry in the case of Earle v. Rowcroft has never been departed from. The effect of that case is that the act of a captain, for his own purposes and to serve his own ends, engaging in a smuggling transaction which might tend, and in fact in this case did tend, to the injury of his owners and to the ship being seized, is barratry. The captain in the present case had done that—he had employed the ship for the purpose of carrying tobacco. When he was off the coast of Spain he caused the engines to be stopped to look out for the ship into which he had intended to trans-ship the tobacco in order that it might be smuggled; and he proceeded "dead slow" while he was looking out for that vessel. That was a clear case of barratry. While he was doing this 'two craft came alongside with Spanish revenue officers on board, who seized the ship and took her into Cadiz.'"
"Now here [the underwriters] are "warranted free from capture and seizure and the consequences of any attempts thereat." It was argued that here they have not been warranted free from barratry. That is true, but the barratry would itself occasion no loss at all to the parties insured. If it had not been that the Spanish revenue officers, doing their duty (they were quite right in that respect), had come and seized the ship, the barratry of the captain in coasting along there, hovering as we should call it along the coast, in order that the small smuggling vessel might come and take the tobacco, would have done the assured no harm at all. The underwriters do undertake to indemnify against barratry; they do undertake to indemnify against any loss which is directly sustained in consequence of the barratry; and in this case, as I said before, I think the seizure was as direct a consequence of the barratry as could well be. But still, as Mr. Justice Field says, it was the seizure which brought the loss into existence—it was a case of seizure. Then why should it not be protected by this warranty?
…
The question then is reduced, as it seems to me, to this. When the whole loss was occasioned by that which was certainly a 'seizure,' is it within the meaning of the warranty? I say certainly it is."
The "Kleovoulos of Rhodes"
"2. The appellant claimants were insured under the terms of a war risk insurance which included the Institute Clauses. The defendant respondents were the underwriters and one of the 16 vessels insured was the KLEOVOULOS OF RHODES. … the insurance was to provide cover for 12 months from 15 March 1998. The vessel sailed from Colombia to Greece, where she was detained on 20 August 1998 following the discovery of cocaine in a sea chest below the waterline. Her master and crew were charged with drugs offences, although they were all acquitted in January 2000.
3. In the meantime the vessel was detained long enough to be deemed a constructive total loss ('CTL') under the terms of the insurance. The insured value of the vessel was agreed to be US$8,000,000. It was common ground that after her release the vessel was sold for a net sum of US$1,362,573 and that the quantum of the respondents' liability, if any, for a CTL was therefore US$6,637,427 plus interest. In these circumstances it was and remains common ground that the respondents are liable in that amount unless their liability is excluded by clause 4.1.5.
4. In the event the judge held that the claim failed because the loss arose from detention of the vessel by reason of loss arising from "detainment … by reason of infringement of customs regulations" and was excluded by clause 4.1.5 of the Institute Clauses."
Sir Timothy Lloyd:
Lord Justice Laws: