Contract of insurance - Warranty - Claimant vessel owner obtaining insurance for vessel's voyage with first defendant

Argo Systems FZE v Liberty Insurance (PTE) and another: Court of Appeal, Civil Division (Lord Justices Laws, Aikens and Tomlinson): 15 December 2011

During a voyage under tow the vessel effectively owned by the claimant became a total loss. The voyage had been underwritten by the first defendant underwriter, and effected through the second defendant broker. The voyage policy had incorporated the Institute Voyage Clauses 1983. It provided cover for the total loss of the vessel caused by the perils of the sea. It contained a number of warranties including one that stated ‘warranted no release, waivers or hold harmless given to tug and towers’ (the hold harmless warranty).  

The claimant made a claim on the policy, which was declined. Proceedings were issued in the United States of America and in England and Wales. In the proceedings issued in the High Court, the court considered a number of preliminary issues, including whether the first defendant had waived its right to rely on a breach of the hold harmless warranty by the claimant.

The judge found that the claimant had been in beach of the warranty, but that the first defendant had, on the proper construction of a letter sent to the claimant (the letter) waived its right to rely on that breach. The first defendant appealed. The first defendant submitted that the judge had erred in finding that there had been a waiver of its right to rely on the hold harmless warranty. Consideration was given to section 34 of the Marine Insurance Act 1906. The appeal would be allowed.

Where a judge had to decide whether there had been a waiver of a breach of warranty for the purposes of section 34(3) of the 1906 act, the judge had to decide whether the insurer had made an unequivocal representation that it would no longer rely on its legal right that it was discharged from liability under the policy, and would be making a finding of fact on whether an unequivocal representation had been made. The judge had to place his assessment of the evidence against the legal concept of what constituted an ‘unequivocal representation by words or conduct’.

That was an objective legal concept; either there had been such an unequivocal representation or there had not. It did not depend on whether the ‘representee’ subjectively believed that a representation was being made to him or how he,  subjectively, understood any particular words, action or inaction. Where the judge’s assessment was made on the basis of oral evidence, expert evidence and other matters, the Court of Appeal would take particular care before deciding that it could safely interfere with the judge’s assessment (see [41] of the judgment).  

The letter, on its proper construction, had not made any representation, let alone an unequivocal one, that Liberty was not going to rely in the future on any legal rights that it had because of the claimant's actual (although unstated) breach of the hold harmless warranty. No such representation had in fact been made (see [44], [53] of the judgment)

Allied Marine Transport Ltd v Vale do Rio Doce Navegacao SA, The Leonidas D [1985] 2 All ER 796 considered; Motor Oil Hellas (Corinth) Refineries SA v Shipping Corpn of India, The Kanchenjunga [1990] 1 Lloyd's Rep 391 considered; Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck [1991] 3 All ER 1 considered; Laker Vent Engineering Ltd v Templeton Insurance Ltd [2009] 2 All ER (Comm) 755 considered. Decision of Mackie J [2011] All ER (D) 239 (Feb) affirmed.

Colin West (instructed by Michael Bynane & Co) for the claimant. Michael Davey (instructed by Bugden & Co) for the first defendant.