COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QBD (LONGMORE J.)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MANCE
MR. JUSTICE CHARLES
RAIFFEISEN ZENTRALBANK ÖSTERREICH AG
- and -
AN FENG STEEL CO. LIMITED & OTHERS
| RAIFFEISEN ZENTRALBANK ÖSTERREICH AG
|- and -
|AN FENG STEEL CO. LIMITED & OTHERS
Crown Copyright ©
LORD JUSTICE MANCE:
Introduction and facts
"In the event that any sums shall become due under any protection and indemnity entry or insurance, such sums shall be paid to the Owners to reimburse them for, and in discharge of, the loss, damage or expense in respect of which such sums shall have become due PROVIDED THAT if at the time such sums become due, there shall have occurred and be continuing an Event of Default or any event which, with the giving of notice and/or the passage of time and/or the satisfaction of any materiality test would constitute an Event of Default, the Mortgagees shall be entitled to receive such sums and to apply them either in reduction of the indebtedness or, at the option of the Mortgagees, to the discharge of the liability in respect of which they were paid."
"6.1 The Underwriters agree to indemnify the Assured for four-fourths of any sum or sums paid by the Assured to any other person or persons by reason of the Assured becoming legally liable by way of damages for:
6.1.1 loss of or damage to any other vessel or property on any other vessel …."
"to carry out a seizure of all sums in the hands of [the insurers] held for the account of Five Star General Trading …. in their capacity as owner of the vessel "MOUNT I" for security and conservation of their [i.e. the arrestors] maritime lien which we value provisionally at the principal sum of $2,685,005.63 or the equivalent in French Francs"
"Any third parties whose property has been seized are required to declare to the Applicants the extent of the debtor's claims against them, the extent of any future modes of enforcement which might come to affect these claims and the existing satisfaction of any claims, the existing assignment of any debts or the existence of prior Orders."
The present proceedings
"The assignee is only saisi in relation to third parties through notification of the assignment to the debtor ("signification de transport faite au débiteur").
Nevertheless, the assignee may also be saisi by acceptance of the assignment in the form of a legal deed, passed in front of a Notaire. ("l'acceptation du transport faite par le débiteur dans un acte authentique")"
"agreements are only valid between contracting parties: they cannot harm third parties and they may profit from them only in the case provided for in Article 1121".
The order under appeal
Principles governing identification of the appropriate law
"…. the proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the true issue or issues thrown up by the claim and defence. This requires a parallel exercise in classification of the relevant rule of law. However, classification of an issue and rule of law for this purpose, the underlying principle of which is to strive for comity between competing legal systems, should not be constrained by particular notions or distinctions of the domestic law of the lex fori, or that of the competing system of law, which may have no counterpart in the other's system. Nor should the issue be defined too narrowly so that it attracts a particular domestic rule under the lex fori which may not be applicable under the other system …." (emphasis added).
"12.-1 The mutual obligations of assignor and assignee under a voluntary assignment of a right against another person ("the debtor") shall be governed by the law which under this Convention applies to the contract between assignor and assignee.
2. The law governing the right to which the assignment relates shall determine its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment can be invoked against the debtor and any question whether the debtor's obligations have been discharged."
"First, since the Convention is concerned only with the law applicable to contractual obligations, property rights and intellectual property are not covered by these provisions. An Article in the original draft had expressly so provided. However, the Group considered that such a provision would be superfluous in the present text, especially as this would have involved the need to recapitulate the differences existing between the various legal systems of the Member State of the Community."
Application of principles to present case
"Article 12(2) is not about the person to whom the debtor owes the debt nor about who has the right to demand payment, but only about the conditions on which the creditor – either assignor or assignee, depending on whether there has been a valid and effective transfer of ownership – may exercise the right to demand payment, whether notice to the debtor is required, and about the contractual aspects of the obligation to pay such as the terms, the place and the time of payment, and the possibilities of set-off, and the like. It is also about the conditions under which there is a valid discharge of the debtor, i.e. about bona fide payment to the wrong person"
"The words "conditions under which the assignment can be invoked" cover the conditions of transferability of the assignment as well as the procedures required to give effect to the assignment in relation to the debtor."
"It seems to me that I must treat the debt due from Delaunay & Cie. as being situate in France, and subject to French law, and I cannot therefore prevent the claimants, at the suit of the debenture-holders, from taking any proceedings the law of France allows for recovering their debt out of this French asset."
"The debenture-holders having according to English law a good assignment of the French debt, but having according to French law no such assignment, and the claimants having according to French law a good inchoate charge or assignment, which ought to prevail? It seems to me that I am bound to hold that that assignment which alone is recognised by the law of France ought to prevail, and that the claimants have a better title than the debenture-holders. This is the view taken by Mr. Dicey in his work on the Conflict of Laws, rule 141: "An assignment of a movable which cannot be touched, i.e. of a debt, giving a good title thereto according to the lex situs of the debt (in so far as by analogy a situs can be attributed to a debt), is valid." I am not satisfied that the authorities cited by him necessarily involve this principle; but I think it is correct, and, indeed, is a necessary consequence from the admission that a debt has a locality or quasi-locality."
Finally, he held that the appointment of English receivers made no difference to this result.
The nature and scope of the assignment
"(1) A marine insurance policy is assignable, unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.
(2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.
(3) A marine policy may be assigned by indorsement thereon or in other customary manner."
"Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice- (a) the legal right to such debt or thing in action; (b) all legal and other remedies for the same; and (c) the power to give a good discharge for the same without the concurrence of the assignor …".
"Whenever a policy of insurance on any ship, or on any goods in any ship, or on any freight has been assigned so as to pass the beneficial interest in such policy to any person entitled to the property thereby insured, the assignee of such policy shall be entitled to sue thereon in his own name …."
"A valid assignment before loss supposes the co-existence of three things at the time of assignment: (1) an insurable interest in the subject-matter of the policy in the assignor; (2) the continuance of the risk insured in the policy; (3) the assignment of an insurable interest in the subject-matter of the policy to the assignee, and its exposure to the perils during the continuance of the risk."
"The principle that the contract is one of indemnity implies that the beneficial interest in the policy cannot while it remains in force be severed from the interest insured: Arnould, 11th ed., s.176."
"grant, convey, mortgage, pledge, assign, transfer, set over and confirm to the Mortgagees the whole of the vessel and all shares in the Vessel TO HAVE AND TO HOLD the same unto the Mortgagees for ever upon the terms set forth in this Mortgage for the enforcement of payment to the Mortgagees of the Indebtedness ….".
"It is noted that by an Assignment in writing dated the day of 1997 (together "the Assignment") made in consideration of the Bank advancing a loan to us pursuant to a Loan Facility dated 1997 ("the Loan Agreement") we FIVE STAR GENERAL TRADING of PO Box 2274, Ajman, United Arab Emirates, ("the Owners") owners of the vessel "MOUNT I" (ex "MOUNT ATHOS I") ("the Vessel") assigned absolutely to RAIFFEISEN ZENTRALBANK ÖSTERREICH AKTIENGESELLSCHAFT of 36-38 Botolph Lane, London EC3R 8DE ("the Bank") this policy and all benefits thereof including all claims of whatsoever nature (including return of premiums) hereunder.
Claims hereunder payable in respect of a total or constructive total or an arranged or agreed or compromised total loss or unrepaired damage and all claims which (in the opinion of the Bank) are analogous thereto shall be payable to the Bank.
Subject thereto all other claims, unless and until underwriters have received notice from the Bank of a default under the Loan Agreement in which event all claims hereunder shall be payable directly to the Bank, shall be payable as follows:-
(i) a claim in respect of any one casualty where the aggregate claim against all insurers does not exceed ONE HUNDRED THOUSAND UNITED STATES DOLLARS (US $100,000) or the equivalent in any other currency prior to adjustment for any franchise or deductible under the terms of the policy shall be paid directly to the Owners for the repair salvage or other charges involved or as a reimbursement if they have fully repaired the damage and paid all of the salvage or other charges;
(ii) a claim in respect of any one casualty where the aggregate claim against all insurers exceeds ONE HUNDRED THOUSAND UNITED STATES DOLLARS (US $100,000) or the equivalent in any other currency prior to adjustment for any franchise or deductible under the terms of the policy shall subject to the prior written consent of the Bank be paid to the Owners as and when the Vessel is restored to her former state and condition and the liability in respect of which the insurance loss is payable is discharged provided that the insurers may with such consent as aforesaid make payment on account of repairs in the course of being effected.
Notwithstanding the terms of the said Loss Payable Clause and Notice of Assignment unless and until Brokers receive notice from the Bank to the contrary Brokers shall be empowered to arrange their proportion of any collision and /or salvage guarantee where the aggregate liability under all guarantees given in respect of any one casualty shall not exceed ONE HUNDRED THOUSAND UNITED STATES DOLLARS (US $100,000) or the equivalent in any other currency to be given in the event of bail being required in order to prevent the arrest of the Vessel or to secure the release of the Vessel from arrest following a casualty.
All collections are to be made through [ ]."
This wording seems to me to recognise, as I have said, that the insurances, despite and following any assignment, were intended to and did continue to protect Five Star's insurable interests in respect of any losses and liabilities which it incurred as mortgagor (and, in commercial terms, owner) or as operator of the vessel.
"The principle that equity regards as done that which ought to be done is applied, so that, once the assignor has received the valuable consideration and became possessed of the property, the beneficial interest in the property passes to the assignee immediately."
The appropriateness of declaratory relief
Conclusion and relief to be granted
MR JUSTICE CHARLES: I agree
LORD JUSTICE ALDOUS: I also agree
ORDER: Appeal will be varied; paragraph 1 of the Judges order set aside; declarations made in the following form:
It is further declared as between the claimant (RZB), the first defendant (five star), the second to tenth defendants (the insurers) and the 11th to 15th defendants, that:
1. The effect of the assignment comprised in the deed of assignment dated 17th December 1997 was, and is to be determined by English law pursuant to Article 12 (2) of the Rome Convention rather than by French law.
2. The effect of such assignment was, and is that RZB (as mortgagee) became and is:
(a) entitled from 17th September 1997 as against Five Star, and , in addition,
(b) entitled from 7th October 1997, as against the insurers
In each case, to the benefit of all claims under the contract of insurer contained in or evidenced about the covernotes referred to in paragraph 10 of the particulars of Claim, including claims under the collision liability cover.
3. The above declarations leave open for subsequent determination, if necessary, any case that – notwithstanding that the effect of the assignment falls to be determined by English law and is, as stated in paragraph 2, the preventative attachments obtained by the appellants in France override that effect.
The Respondent to receive 90 per cent of their costs, to be the subject of a detailed assessment if not agreed; there will be payment on account of Ł19,3000, to be paid within 28 days; permission to appeal refused; counsel to lodge a draft minute order.
(Order not part of approved judgment)