Neutral Citation Number: [2011] EWCA Civ 1572
Case No: A3/2011/0631
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN’S BENCH DIVISION, 
LONDON MERCANTILE COURT
HIS HONOUR JUDGE MACKIE QC
2009FOLIO236
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 15/12/2011
Before:

LORD JUSTICE LAWS
LORD JUSTICE AIKENS
and
LORD JUSTICE TOMLINSON
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Between:

	LIBERTY INSURANCE PTE LTD & ANR	Appellant	
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	ARGO SYSTEMS FZE 	Respondent	

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Mr Michael Davey (instructed by Bugden & Co) for the Appellant.
Mr Colin West (instructed by Michael Bynane & Co) for the Respondent.

Hearing date: 24 November 2011
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Judgment

Lord Justice Aikens: 
The story so far
1.	This appeal from an order of HHJ Mackie QC dated 21 February 2011  arises out of the total loss of a floating casino called “Copa Casino” (“the vessel”) during a voyage under tow from Mobile, Alabama,  to India,  in March 2003.  The vessel was,  effectively, owned by the claimant (“Argo”).   Argo had purchased the floating casino for scrap and she was to be towed as a dead ship by the tug “Fairplay XIV”. The vessel was insured for this voyage under a voyage policy of marine insurance dated 11 March 2003.   The policy was underwritten by the first defendant (“Liberty”) and effected through a US producing broker DeWitt Stern (“DSI”) and an English placing broker, the second defendant (“LSR”).   The voyage began on 3 March 2003.  On 14 March 2003 the vessel began to develop a list which gradually worsened.   She sank in about 8,000 feet of water in the Caribbean Sea on 16 March 2003,  thereby becoming an actual total loss.
2.	The voyage policy incorporated the Institute Voyage Clauses (1983 version) and provided cover for the total loss of the vessel caused by perils of the sea. The policy was subject to English Law and Practice.   It also contained a number of warranties,  including one that stated:  “warranted no release,   waivers or “hold harmless” given to Tug and Towers”. I shall call that “the Hold Harmless Warranty”.
3.	Argo made a claim on the policy in July 2003. This claim was declined in a letter dated 18 July 2003 and sent by Liberty’s US lawyers, Fowler, Rodriguez & Chalos to LSR,  who,  as placing brokers,  were then acting as agents for Argo.  The parties have been in litigation in the United States and in England over Argo’s claim since May 2004. 
4.	In the present proceedings an order was made for the trial of four preliminary issues.  These concerned,  first, the construction of the Hold Harmless Warranty to which I have referred above; secondly, whether the insurer, Liberty, had waived its right to rely on a breach of that warranty by Argo;  thirdly, whether Liberty had affirmed the contract of insurance such that it was not entitled to avoid the policy for alleged misrepresentation by Argo and, lastly, whether, if Liberty had affirmed the contract, it could still claim damages for the alleged misrepresentations pursuant to section 2(1) of the Misrepresentation Act 1967. 
5.	Judge Mackie found that Argo was in breach of the warranty, that Liberty had waived its right to rely on that breach, that Liberty had affirmed the contract of insurance and so could not avoid it for misrepresentation and that Liberty was not entitled to claim damages for misrepresentation.
6.	Argo has not appealed the judge’s conclusion on breach of warranty. Liberty has not appealed the judge’s conclusion on affirmation.   The appeal before us, which we heard on 24 November 2011, therefore concerned only the questions of whether Liberty had waived its right to rely on the breach of warranty and whether Liberty had a right to claim damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967.   In fact we only heard argument on the first of those two points.   
The Voyage Policy dated 11 March 2003
7.	The policy was written on behalf of Liberty by Marine Insurance Services Pte Ltd,   a Singapore company,  (“MIS”) but nothing turns on that fact.   The policy schedule stipulates that the vessel insured is “Copa Casino”,  described as “ex Galveston Pride”  and built in 1956 and of 11,900 LDT.   The period of insurance is stipulated as being “…from time of taking in tow by tug “FAIRPLAY XIV” at Gulf Port, Mississippi, thence in single tow on or about date to be agreed to Alang, India and until safe arrival there”.  The sum insured is given as US$1,225,000. The policy schedule also states that the insuring conditions are “as per Institute Voyage Clauses Hulls – total loss …” The Hold Harmless Warranty appears in the policy schedule under the heading “warranties”.   As already noted,  it provides: “… Warranted no release, waivers or “hold harmless” given to Tug or Towers”.
8.	The Institute Voyage Clauses incorporated were those of the 1 October 1983 edition.   Clause 1.1 is headed “Navigation”. It provides:
“The Vessel is covered subject to the provisions of this insurance at all times and has leave to sail or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in distress but it is warranted that the Vessel shall not be towed, except as is customary or to the first safe port or place when in need of assistance, or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/or Managers and/or Charterers. This Clause 1.1 shall not exclude customary towage in connection with loading and discharging.”
The Loss of the vessel and the US Proceedings
9.	In December 2002 the vessel was at Gulf Port, Mississippi. On 23 December 2002 she was surveyed by a surveyor called Richard Carmack. On the same day the vessel was moved from Gulf Port, Mississippi to Mobile, Alabama. On 20 February 2003 the producing brokers, DSI, issued a marine cover note for the voyage of the vessel to Alang. The following day MIS, acting for Liberty, signed the slip for the insurance coverage of the vessel during the voyage. This was said to be “subject to survey”.   A “trip in tow” survey of the vessel and the tug “Fairplay XIV” was conducted by Franklin Skinner, a marine surveyor of Marine Surveying and Consulting. The surveys were undertaken at Mobile.
10.	The contract for the tow of the vessel from the US Gulf to India was made subject to terms known as the “Towcon” International Towage Agreement (Lump Sum).   This is a widely used and well known standard form of towing contract.   Clause 18 of the standard form agreement provides for extensive mutual exceptions of liability and cross indemnities between the tug owner and the hirer of the tug.  In this case, Argo was the hirer of the tug.  At the trial of the preliminary issues before Judge Mackie, Liberty contended that the provisions of clause 18 of the Towcon terms were such as to breach the Hold Harmless Warranty. The judge accepted that submission and there is no appeal.   This means that,  subject to the issue of a possible waiver by the insurers of the breach of warranty,  Argo’s failure to comply with the warranty discharged Liberty from liability under the policy as from the breach of the warranty:  see section 33(3) of the Marine Insurance Act 1906 (“the MIA 1906”).    Therefore,  subject to the waiver argument,   Liberty could be under no liability for the total loss of the vessel,  which (obviously) occurred after the breach of warranty.
11.	Following the total loss of the vessel on 16 March 2003,  Liberty,  through MIS,  requested Argo to warrant to insurers that no release, waiver or hold harmless terms had been agreed with the tug or the towers. On 28 March 2003 Argo warranted as follows: 
“With respect to the above claim
1.	The Copa casino was being towed as a single tow only;
2.	The Copa casino had no cargo on board;
3.	No release, waivers or hold harmless has been given to Tug or Towers;
4.	The above warranties have been fully complied with.”
12.	In June 2003 Liberty sought and received certain documents from Argo.  These included the towage contract. On 18 July 2003 Fowler, Rodriguez & Chalos, Counsellors at Law based in New Orleans, Louisiana, who were retained by the insurers, wrote to LSR, the placing brokers, who were in the position of agents for the assured under the policy, viz. Argo. The judge noted, at [10] of the judgment, that Fowler, Rodrigues & Chalos had offices in London and that they “…were writing, without hesitation, about an English law policy”. The judge stated that he saw “…no reason to make any allowances for the words chosen in this letter”.    Nor do I.
13.	The letter stated, in the first paragraph that, “for the reasons set out below, [the insurers] hereby denies coverage for claims by the assured arising from the sinking [of the vessel on 16 March 2003]”. The first ground put forward was that there was no evidence that the sinking was due to an insured peril and thus no basis to support a claim under the policy. Secondly, the letter alleged that the tug and the tow were in violation of a “weather state warranty”. Thirdly, the letter stated that the lawyers had received information indicating that the assured had made several misrepresentations.  Six alleged misrepresentations were identified. After drawing attention to various other matters the letter ended by making the following statement:
“[the insurer therefore] “reserves the right to alter its position in light of discovery of previously undisclosed information which would materially alter the facts and circumstances known. Should the assured wish to provide any additional information concerning this claim, we will review it. The foregoing is without prejudice to all the remaining terms and conditions of the policy, along with any other defenses which may be discovered after further investigation”. 
14.	On 3 September 2003 Mr Richard A Zimmerman, a New York attorney then instructed by Argo, replied in detail to the letter of 18 July 2003. Fowler, Rodrigues & Chalos responded to that letter in another detailed letter of 25 September 2003. That letter concluded by saying that Mr Zimmerman had not provided any new information “…which would cause us to change our opinion regarding the denial of the assured’s claim”.
15.	In October 2003 Mr Michael C. Bynane, an attorney of Houston, Texas, was instructed to take over the conduct of Argo’s claim under the policy.  On 13 October 2003 Mr Bynane wrote to Fowler Rodrigues & Chalos, indicating that he was reviewing the file and “preparing a detailed submission in response to underwriter’s denial of this claim”. 
16.	Further correspondence ensued between Mr Bynane and Fowler Rodrigues & Chalos. Mr Bynane wrote a detailed letter dated 24 November 2003.  On 3 February 2004, Fowler Rodrigues & Chalos replied.  That letter stated that the insurer rejected the contentions put forward by Mr Bynane.   It stated that the insurer continued “…to deny coverage of the claims by the assured arising from the sinking”.   The grounds set out were the same as those identified in the letter of 18 July 2003.
17.	On 14 May 2004 Argo began proceedings against Liberty,  MIS and DSI in the US District Court for the Southern District of Alabama. The “Original Complaint” of Argo was issued the same day.  In its Answer to the Original Complaint Liberty denied that the Alabama court had “personal jurisdiction” over Liberty.   It did so on the basis that the voyage policy made no mention of Alabama at all, but referred instead to a tow from Gulf Port, Mississippi. Liberty also stated, in its “Second Affirmative Defense” in the Answer that Argo had “breached one or more express warranties under the policy in question and therefore plaintiffs should have no recovery against Liberty or MIS.”   No further details were given. Argo sought details of each and every separate ground on which Liberty claimed it could deny the claims. Liberty objected in principle to answering to this particular question in the “Interrogatories”.   However the answer continued by stating that Liberty had set out its reasons for denying coverage of the claim in the letter of 18 July 2003.    The letter was then quoted in full. 
18.	On 30 March 2006 the Alabama court dismissed the claim against Liberty on the ground of lack of “personal jurisdiction”. The decision was based upon the fact that the contract of insurance was first made in the slip which was signed on 24 February 2003 and the Insurance slip expressly provided for cover from “Gulf Port in Mississippi”. The court found that Liberty had not “purposively derived benefit” from any Alabama contact.
19.	The US proceedings then continued against DSI alone. The basis of the claim against DSI as producing broker was that it had failed to obtain effective insurance coverage because the contract had referred to the departure port as “Gulf Port, Mississippi” whereas the tug and tow actually began from Mobile, Alabama. It was asserted that the consequence of this was that (pursuant to section 43 of the Marine Insurance Act 1906) the risk never attached to the policy.  However, this was a point that Liberty had never taken against Argo,  doubtless because it was fully aware that the vessel had moved to Mobile and been surveyed there before the start of the tow to Alang. 
20.	The trial between Argo and DSI took place in the Alabama court in September 2006.   On 27 September 2007 the Alabama court gave judgment dismissing the claim against DSI on the merits. Argo appealed but that appeal was dismissed on 23 May 2008 by the US eleventh circuit Court of Appeals.
The Present Proceedings
21.	Argo issued the present proceedings on 24 February 2009. The Particulars of Claim were served on 17 July 2009.   Argo pleaded that the cause of the loss of the vessel was “perils of the seas”,  which was an insured peril.  The Particulars also noted that Liberty had never denied in the US proceedings that the policy provided cover in respect of a voyage from Mobile, Alabama. They further alleged that Liberty was always aware that the tug and tow would start from that port and that, therefore,  the reference in the policy to a voyage from Gulf Port, Mississippi to Alang, India was a mistake.   Accordingly, Argo sought rectification of the policy as well as unliquidated damages against Liberty for its failure to pay for the total loss of the vessel in accordance with the policy terms.
22.	Liberty applied to challenge the jurisdiction of the English courts. That challenge was dismissed by HHJ Chambers QC on 22 March 2010.
23.	Liberty served its defence on 21 May 2010.  The first relevant defence pleaded by Liberty was that Argo was in breach of the express warranty that “no release, waivers or “hold harmless” [be] given to Tug and Towers” by virtue of its agreement to clause 18 in the towage contract of 3 February 2003.  The pleading asserted that clause 18 included “extensive releases and/or waivers and/or hold harmless provisions in favour of the Tug and Towers”.  The defence alleged that the consequence of this breach of warranty was that the insurers were thereby discharged from all liability under the policy, pursuant to section 33(3) of the MIA 1906.
24.	The second relevant defence pleaded by Liberty was that Argo had made various misrepresentations upon the strength of which Liberty had been induced to enter the contract of insurance.   It was alleged that Liberty was entitled to avoid the policy and it had done so by virtue of the letter of 18 July 2003. Liberty pleaded, in the alternative, that it was entitled to damages for misrepresentation, which damages would be equal to its alleged liability to Argo.
25.	In its Reply, Argo pleaded that Liberty had waived its right to make any allegation of breach of the hold harmless warranty within the terms of section 34(3) of the MIA 1906;  alternatively that Liberty was estopped from being able to rely on that breach.  Argo pleaded that no allegation of a breach of the Hold Harmless Warranty had been made at any stage in the US proceedings, in particular in the letter of 18 July 2003 declining liability, the Answer of Liberty dated 14 June 2004 in the US proceedings and Liberty’s Response dated 13 December 2004 to the Interrogatories requested by Argo.   Argo further pleaded that it had relied on these “representations” to its detriment “in that if the point had been take earlier [Argo] could and would have brought a corresponding claim against its broker DeWitt and LSR for negligence”. Argo further pleaded that because this assertion of breach of warranty was made so late “it would now be impossible for the claimant to bring such a claim against DeWitt and impossible or extremely difficult to do so against LSR”.   The pleading also noted that a claim against LSR would now be time barred, subject only to an application to amend the pleadings outside the Limitation Act 1980 period of six years, which LSR had already indicated it would oppose.
The Preliminary Issues
26.	Against this background the parties agreed and the court directed the trial of five preliminary issues. These were:
1.	Whether the Claimant was in breach of the warranty that no ‘hold harmless' had been given to the tug or towers. 
2.	The plea of waiver/estoppel in relation to the First Defendant's allegation of breach of the ‘hold harmless' warranty. 
3.	The plea of waiver/estoppel in relation to the First Defendant's allegation of breach of the ‘no cargo’ warranty. 
4.	The plea of affirmation/waiver/estoppel in relation to each of the First Defendant's allegations of misrepresentation/non-disclosure. 
5.	The issue whether, assuming it is no longer open to the First Defendant to avoid the policy, the First Defendant can instead sue for damages in relation to the misrepresentations alleged. For the avoidance of doubt, the issues whether the alleged misrepresentations were in fact made, or were negligent, is not to be within the scope of the preliminary issues trial, but only whether in principle the remedy of damages is available to the First Defendant in the alternative to its avoidance claim.”
27.	The parties subsequently agreed that the third of these  should not be tried as a preliminary issue.   At the trial of the preliminary issues Judge Mackie heard oral evidence from Mr Bynane,  the US lawyer who had been instructed by Argo in October 2003 and who had continued to represent Argo thereafter.  Indeed,  it was Mr Bynane who signed the “Statement of Truth” at the foot of Argo’s Particulars of Claim in the present proceedings.
The judgment of HHJ Mackie QC
28.	Judge Mackie decided, first,  that Argo was in breach of the express warranty in the policy “warranted no release,  waivers or “hold harmless” given to Tug and Towers”,  by concluding the towage contract which contained the standard “Towcon” form terms,  in particular clause 18.     As noted,  Argo does not appeal that conclusion.   It followed,  as both parties accept must be the case,  that by virtue of section 33(3) of the MIA 1906,  Liberty was thereupon discharged from all liability under the voyage policy unless Argo could establish that Liberty had waived breach of this warranty,  within section 34(3) of the MIA 1906.   
29.	Secondly,  Judge Mackie noted that Liberty did not take the breach of the Hold Harmless Warranty point at any stage in the US proceedings and it only emerged in the Defence of Liberty in the English proceedings which was served in May 2010.   However, he held that Liberty had had,  from the outset,  the material it required to take the breach of the Hold Harmless Warranty point.   The effect of the letter of 18 July 2003 was,  the judge held,  that “Liberty told Argo that other defences [other than those identified in the letter] would be relied on only if new information came to light”.    Liberty knew all the points that were available to be taken in defence of the claim under the voyage policy.   It also knew the position being adopted by Argo against DSI in the Alabama proceedings.  The judge accepted the evidence of Mr Bynane,  given before him,  that “had the hold harmless point been taken by Liberty,  Argo would have raised it in its claim against DSI and may also have wished to pursue LSR”.   However,  the breach of the Hold Harmless Warranty point was only finally taken by Liberty “after it was too late for Argo to raise it against DSI and probably too late for it to pursue LSR”.   This was not Argo’s fault;  it could only be expected to give a “proportionate response to what it understood Liberty’s claims against it to be”.   Moreover,  “the period of 7 years”  (which I take to mean the period between the 18 July 2003 letter and the service of the Defence by Liberty in the English proceedings) was a powerful factor.
30.	Judge Mackie therefore reached the following conclusion on the issue of “waiver” at [36] of his judgment:   
“In my judgment by not raising the point sooner despite having every opportunity to do so and by standing by while Argo took the steps it did in the US proceedings Liberty represented by its conduct that it was not relying on the breach of [the Hold Harmless] warranty defence.   Argo relied upon that representation and it would be unfair for Liberty to be permitted to go back on it now”.
	The judge said that this conclusion was in accordance with established authority.    He also pointed out that it was consistent with the current practice that parties are encouraged to bring before the courts all the issues they propose to rely on,  “placing all their cards on the table at one time”.   Although there could be permission to amend pleadings at any time,   in this case: 
“…Liberty should not be permitted to introduce a new point almost 7 years after it could reasonably have been expected to raise it and in circumstances where Argo has acted to its disadvantage in the reasonable assumption that it would not have to deal with the issue.”
31.	Thirdly,  Judge Mackie concluded that Liberty had elected to affirm the voyage policy and in doing so had thereby lost any right it might have had to avoid the policy for non-disclosure or misrepresentation.    He noted that there had been no notice of avoidance in the letter of 18 July 2003,  despite the fact that the letter had asserted that there had been misrepresentations by Argo as the assured.   Accordingly,  “…any reasonable person in the position of [Argo] would therefore have concluded that Liberty had elected not to avoid the policy”.   Furthermore,  Liberty had full knowledge of the facts and must be taken to be aware of its legal rights because it was legally represented at the time.   Lastly,  Liberty had never offered to return the premium paid by Argo.   Thereafter there was “almost seven years of silence”.   
32.	On the last issue,  viz.  whether Liberty could recover damages for pre-contractual misrepresentations by Argo in circumstances where Liberty had affirmed the contract of insurance thereby losing its right to avoid,  the judge noted that it had only briefly been argued before him.   Judge Mackie’s “tentative” conclusion was:
“…on the facts known to me about this case the claim for damages [for misrepresentation] which may in theory be open to Liberty will not be available where the right to avoid has been lost by [affirmation].”
33.	The judge granted permission to appeal the last point he decided, viz.  whether Liberty could in principle claim damages for misrepresentation when it had affirmed the contract of insurance.  He refused permission to appeal the second issue he decided, viz.  waiver of the breach of the Hold Harmless Warranty.   But permission was granted by Tomlinson LJ on paper.  As already noted,  Argo does not appeal the breach of warranty issue and Liberty does not appeal the affirmation issue.
The issues before this court and the argument of the parties
34.	At the opening of Liberty’s appeal by Mr Michael Davey,   we asked counsel to state what,  in their submission,  was the legal consequence of the unappealed conclusion of the judge that Liberty had affirmed the contract of insurance.   Mr Davey submitted that the effect was that the policy remained on foot and was subject to all its terms,  including the Hold Harmless warranty.  Therefore,  Liberty would be entitled to rely on Argo’s breach of that warranty,  as that was not now in dispute.   However,  Mr Davey accepted that Mr Colin West,  for Argo,  was still entitled to argue that Liberty had waived its right to rely on that breach of warranty and,  if the judge’s conclusion on that point was upheld,  then Liberty would not be able to assert that its liability under the policy had been discharged by breach of the Hold Harmless Warranty.   Mr West,  whilst agreeing with this,  added,  correctly in my view,  that the effect of the finding of affirmation was that the insurers had elected not to avoid the voyage policy for either non-disclosure or misrepresentation by the assured pursuant to rights given them by sections 18(1) and 20(1) of the MIA 1906.   The appeal before us was conducted on that basis.
35.	Therefore there were,  potentially,  three issues for decision by this court. First,  was the judge correct to conclude that Liberty had made an unequivocal representation to Argo that it would not rely on Argo’s breach of the Hold Harmless Warranty.  Secondly,  was the judge correct to conclude that Argo had relied on that representation.  Thirdly,  if the answers to those two questions was that the judge was correct, then,  as a matter of principle could Liberty claim damages for pre-contractual misrepresentations by Argo,  relying on section 2(1) of the Misrepresentation Act 1967.  Mr Davey,  for Liberty, accepted that if this court concluded that Liberty had not waived Argo’s breach of the Hold Harmless Warranty,  then he need not pursue the third issue. We decided to hear argument from both counsel on the first two issues.  In the event,  we did not need to hear any argument on the damages for misrepresentation point and I will say no more about it.  Exploration of that interesting question must await another case.
36.	For Liberty,  Mr Davey submitted that the insurer could only be held to have waived the breach of the Hold Harmless Warranty by Argo if it was established that Liberty had made an unequivocal representation to that effect and that Argo had relied on that representation.   He submitted that Argo therefore had to establish that Liberty had unequivocally represented that it would not,  at any stage in any proceedings,  rely on its legal right that Argo had been in breach of the Hold Harmless Warranty so that (pursuant to section 33(3) of the MIA 1906) Liberty was thereafter discharged from all liability under the policy.   However,  Mr Davey argued,  that was not the effect of the letter of 18 July 2003 upon its true construction.  Nor could the combination of that letter,  the conduct of Liberty in the US proceedings and the fact that the breach of the Hold Harmless Warranty defence was not mentioned until Liberty had served its Defence in the English proceedings in May 2010 amount to an unequivocal representation.     Mr Davey next submitted that the judge’s acceptance of Mr Bynane’s evidence that if Liberty had taken the Hold Harmless Warranty point against Argo,  then Argo would have taken the point against DSI in the US proceedings, did not prove reliance.     The fact that Liberty did not take the point may have caused Argo not to take it against the brokers,  but that did not,  in his submission,  demonstrate that Argo relied on the fact that Liberty had not taken the point against Argo in making its decision not to take that point against the brokers and only to take the “port of departure” point against DSI in the US proceedings.
37.	Mr Colin West,  for Argo,  submitted that the judge made no error of law in reaching his conclusions on waiver.   He applied the right legal test to the facts.  The judge rightly commented that “as in other areas of estoppel,  this exercise is highly fact sensitive”.  Therefore the judge’s conclusions on both the nature of Liberty’s representation and Argo’s reliance on it could only be successfully challenged on appeal if this court was satisfied that the judge was not entitled to find as he did on those issues.   But,  he submitted,  the judge was correct to have done so.   He submitted that the effect of the letter of 18 July 2003,  Liberty’s failure to take the breach of the  Hold Harmless Warranty point on the pleadings in the US proceedings,  together with very long silence thereafter did amount to a continuing unequivocal representation (albeit implied) by Liberty that it would not rely on this point against Argo.  On “reliance”,  Mr West submitted that Liberty could not go behind the finding of the judge based on the evidence of Mr Bynane.  The effect of that was that Argo took the position it did against DSI in the US proceedings because Liberty had not taken the Hold Harmless Warranty point against Argo.   But if Liberty had done so,  then Argo would have taken the point against DSI.   On the facts of this case,  Liberty’s failure to take the Hold Harmless Warranty point against Argo was not only the cause  of Argo’s failure to take it against DSI (or LSR) but,  on the basis of Mr Bynane’s evidence,  demonstrated that Argo relied on the fact that Liberty had not taken the point in the way Argo dealt with the US proceedings against DSI and the potential proceedings against LSR in England.
Discussion and conclusions
38.	In the leading case of Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (“The Good Luck”) the House of Lords confirmed that when an assured has been in breach of a warranty in a policy of marine insurance then the breach automatically discharges the insurer from further liability under the policy.  No other positive action,  whether described as avoidance or acceptance of repudiation or otherwise,  is needed to make that discharge of liability effective.   Because the discharge of the insurer’s liability under the policy takes place automatically upon the breach of warranty and no further positive action is needed to bring about the discharge,  the insurer therefore does not need to “elect” whether to terminate the contract or its liability under it, or continue with the contract in being.   Thus,  logically,  when it is alleged that an insurer has “waived” a breach of a warranty in a marine policy by an assured,  this must mean that the insurer has waived the breach because the insurer is now estopped from relying upon it.  So,  where section 34(3) of the MIA 1906 states that “a breach of warranty may be waived by the insurer”,  this must refer to that type of “waiver” which is concerned with the forebearance from exercising a legal right.   In this case the relevant legal right of the insurer is to declare:  the assured has been in breach of the Hold Harmless Warranty,  therefore I,  the insurer,  am discharged from all liability under the policy of insurance,  except for any liabilities that existed before the breach of warranty was committed.  This view of the type of “waiver” referred to in section 34(3) of the MIA 1906 is shared by the learned editors of Arnould’s Law of Marine Insurance and Average:  see para 19-37.
39.	There are similarities and differences between the allied doctrines of “waiver by election” and “waiver by estoppel”.  They were discussed by Lord Goff of Chieveley in Motor Oil Hellas (Corinth) Refineries SA v Shpping Corporation of India (“The Katchenjunga”).   Both doctrines require that the person who is alleged to have “waived” the relevant contractual right has made an unequivocal representation,  by words or conduct,  that he does not,  in future, intend to enforce that legal right which he has as against the other party to the contract.   However,  in the case of “waiver by estoppel”,  which Lord Goff characterised as “equitable estoppel”,  it also has to be demonstrated that the other party, (“the representee” in Lord Goff’s phrase), relied upon that unequivocal representation in such a way that it would render it inequitable for the representor to go back on his representation.  
40.	Mr West for Argo effectively argues that there are three facts which,  together,  amount to an unequivocal representation by Liberty that it did not intend in future to rely on its legal right to treat itself as discharged from all liability under the policy because of Argo’s breach of the Hold Harmless Warranty.   First,  the contents of the letter of 18 July 2003.   Secondly,  the fact that the breach of the Hold Harmless Warranty was not pleaded in the US proceedings.  Thirdly,  the fact that nothing was said by Liberty about breach of the Hold Harmless Warranty until the point surfaced in Liberty’s defence in the English proceedings in May 2010.   
41.	I accept that when a judge at first instance has to decide whether there has been a waiver of a breach of warranty for the purposes of section 34(3) of the MIA 1906,  and the judge therefore has to decide whether the insurer has made an unequivocal representation that it will not longer rely on its legal right that it is discharged from liability under the policy, the judge is making a finding of fact on whether an unequivocal representation has been made.  The judge has to place his assessment of the evidence against the legal concept of what constitutes an “unequivocal representation by words or conduct”.   That is an objective legal concept;  either there has been such an unequivocal representation or there has not.   It does 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 is made on the basis of oral evidence,  expert evidence and other matters,  the Court of Appeal will take particular care before deciding that it can safely interfere with the judge’s assessment.    
42.	However,  in this case the only materials before the judge on which he had to assess whether there had been an unequivocal representation by Liberty consisted of the letter of 18 July 2003,  the fact that the breach of the Hold Harmless Warranty point was not taken by Liberty in the US proceedings and the silence on the point until it appeared in Liberty’s Defence in the present action in May 2010.    Mr Bynane’s evidence is irrelevant to the question of whether the judge was correct to assess those matters as amounting to an unequivocal representation.  His evidence is only relevant to the issue of reliance;  and that issue does not arise for consideration if there was no unequivocal representation. 
43.	I must therefore examine closely the letter of 18 July 2003 from Fowler,  Rodriguez & Chalos.   In the second sentence it says:  “For the reasons set out below,  [the insurer] hereby denies coverage”.   That is entirely general.  On the second page of the letter it is asserted that,  at the start of and during the voyage,  the tug “Fairplay XIV” and the tow were “in violation of certain express warranties in the policy”.  The “Hold Harmless Warranty” is not referred to at all,  either positively,  in the sense of Liberty relying on it, or negatively, in the sense of Liberty saying it was not going to do so.   Then,  after reference to various alleged misrepresentations,  there is a reference to the “attestation of warranties” of 28 March 2003.   It will be recalled that in that attestation,  Argo had confirmed that it had not given any “release,  waiver or hold harmless”  to the Tug or Towers,  contrary to the Hold Harmless Warranty in the policy.    On the last page of the letter,  after the complaint that Argo had not given much relevant information to Liberty or its lawyers and that Argo had given “minimal assistance”,  there are the final two sentences which the judge particularly relied upon and which I have already quoted.   The judge regarded those two sentences as indicating,  in the context of the letter taken as a whole,  that Argo was being told “that other defences would be relied on only if new information came to light”:  see [34] of his judgment.
44.	In my view that is not the correct assessment of those sentences in the context of the whole letter.   In particular,  that assessment does not take account of the important words “The foregoing is without prejudice to all the remaining terms and conditions of the policy”.   To my mind those words are a clear indication that Liberty and its lawyers were reserving the right to rely on any of those remaining terms and conditions of the policy in the future if advised to do so.  I also think it is important that the final phrase in the letter  begins with the two words “along with”,  which makes that last sentence disjunctive.   In short,  Fowler,  Rodriguez & Chalos were saying,  on behalf of Liberty,  that the insurers reserved the right to rely on other terms of the policy in support of its denial of coverage and also reserved the right to rely on any other defences that might be discovered after further investigations.    With great respect to the judge’s view,  I cannot regard the wording of the letter as making 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 Argo’s actual (although unstated) breach of the Hold Harmless Warranty.
45.	The fact that there is nothing in Liberty’s “Answer” to Argo’s “Original Complaint” in the US Proceedings does not add anything.   The focus of the Answer is on the jurisdictional issue.   The “Second Affirmative Defense” is in very general terms.   If there is any representation at all there it is equivocal rather than unequivocal.  The same is true of the “Answers to the Interrogatories” which simply repeat the terms of the letter of 18 July 2003.   
46.	The last element on which the judge concentrated was the fact that Liberty did not advert to the breach of the Hold Harmless Warranty point for nearly seven years after the letter of 18 July 2003 until it was raised in its Defence in the English proceedings.   The judge stated (at [36]) that the period of almost seven years was “of itself a powerful factor”,  when coupled with the fact that Liberty stood by “while Argo took the steps it did in the US proceedings…”.   Saying nothing and “standing by”,  ie. doing nothing,  are,  to my mind,  equivocal actions.   This court has stated that,  in the absence of special circumstances,  silence and inaction are,  when objectively considered,  equivocal and cannot,  of themselves,  constitute an unequivocal representation as to whether a person will or will not rely on a particular legal right in the future.   In my view,  there are no special circumstances in this case that are capable of turning the silence and inaction of Liberty into an unequivocal representation to Argo that it did not intend to enforce its strict legal rights based on a breach of the Hold Harmless Warranty.
47.	Nor is the position for Argo improved by taking together all three aspects relied on: viz the letter,  the US proceedings and the seven year silence/inaction.   Together they remain equivocal;  they are consistent with many different possible attitudes by Liberty.   
48.	Judge Mackie said (at [36]) that his conclusion that there had been an unequivocal representation by Liberty was “fortified” by a statement of Mustill LJ in another case about waiver, Vitol SA v Esso Australia Ltd (“The Wise”),  in which the learned Lord Justice said that two previous decisions did show that:
“…explicit reliance on one contention and the absence of reliance on another,  which could have been advanced on facts already known,  is capable of being a tacit representation that the latter would not be relied upon”.
49.	However,  as Mustill LJ emphasised on the same page,  cases of waiver turn particularly on the facts of each case.   The facts in the Vitol case are very different from those in this case,  not least because the two parties to the C&F contract had entered into a “Without Prejudice” agreement after disputes had arisen between them and then one side had attempted to rely on arguments not foreshadowed in that agreement. The Vitol decision does not assist in the close analysis of the facts that must be undertaken in the present case. 
50.	Accordingly,   I would accept Mr Davey’s submission that the judge erred in concluding that Liberty had made an unequivocal representation to Argo that it no longer intended to rely on its legal rights as a result of Argo’s breach of the Hold Harmless Warranty.   The consequence of that conclusion is that there is no point in going on to consider whether Argo “relied” on Liberty’s unequivocal representation.  By definition,  there was none to rely on.   
51.	This means that Liberty is able to plead and rely upon Argo’s breach of the Hold Harmless Warranty in the present proceedings.   As already noted, it was accepted by Mr Davey that, if that was our conclusion,  then he would not pursue the appeal on the third issue,  viz. whether Liberty was entitled to claim damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967.    
Disposal
52.	I would therefore allow the appeal in respect of Judge Mackie’s order on the second of the four preliminary issues he considered.   Thus,  to the question: “Whether the First Defendant is estopped from relying upon a breach of the “Hold Harmless Warranty” (Amended Reply to First Defendant paragraphs 14 to 18),  I would answer “No”.

Lord Justice Tomlinson:
53.	I entirely agree with Aikens LJ. The letter of 18 July 2003 was insurers’ first considered response to the claim in respect of the total loss which had occurred on 16 March 2003.  The judge concluded that Liberty “in substance told Argo that other defences would be relied on only if new information came to light.”  Whilst there is always a danger that a lawyer acquires a jaundiced view of the manner in which claims handling typically progresses, I have to say, with all respect to the judge, that it is implausible that a letter in such terms would be written so soon after a casualty and as the first response to a claim in respect thereof.  This is the more so in a case where brief perusal of the letter itself indicates a clear intention on the part of the underwriters to take every point open to them in circumstances where they had grave reservations about both the placing of the risk and the circumstances of the loss.  Still less plausible is it that underwriters would give an indication of the sort found by the judge where the critical passage in the letter is preceded by a complaint that, despite request, the assured had provided little if any relevant information concerning the loss until the end of June and that, in the investigation of the loss, underwriters had received “minimal assistance” from the assured.  The judge recognised that close textual submissions could be made about what precisely the letter means.  In my judgment textual analysis and the context in which the relevant passage is written, both singly and in combination, lead inexorably to the conclusion that no representation was made, let alone a representation that no further defences would be relied upon in due course.

Lord Justice Laws:
54.	I agree with both judgments.