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England and Wales High Court (Commercial Court) Decisions
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Bayview Motors Ltd. v Mitsui Marine and Fire Insurance Company, Ltd. & Ors [2002] EWHC 21 (Commercial) (23rd January, 2002)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2002/21.html
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[2002] EWHC 21 (Commercial)
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Bayview Motors Ltd. v Mitsui Marine and Fire Insurance Company, Ltd. & Ors [2002] EWHC 21 (Commercial) (23rd January, 2002)
| | Neutral Citation Number: [2002] EWHC 21 (Comm) |
| | Case No: 2000/1132 |
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
| | Royal Courts of Justice Strand, London, WC2A 2LL |
| | 23rd January 2002 |
B e f o r e :
THE HONOURABLE MR JUSTICE DAVID STEEL
____________________
| BAYVIEW MOTORS LIMITED
| Claimants
|
| - and -
|
|
| (1) MITSUI MARINE AND FIRE INSURANCE COMPANY, LIMITED (2) CHIYODA FIRE & MARINE INSURANCE CO., LTD. (3) TOKIO MARINE FIRE INSURANCE CO., LTD. (4) NICHIDO FIRE & MARINE INSURANCE CO., LTD.
| Defendants
|
____________________
MICHAEL NOLAN (instructed by SWINNERTONS for the CLAIMANTS)
S.J. PHILLIPS (instructed by WALTONS & MORSE for the DEFENDANTS)
____________________
HTML VERSION OF HANDED DOWN JUDGMENT
____________________
Crown Copyright ©
Mr Justice David Steel:
Introduction
- The claimants bring a claim under two “all risks” policies of insurance, dated the 10th July 1997 and the 8th August 1997, subscribed by the defendants, for losses suffered as a result of the loss of two shipments of motor vehicles which had been shipped from Japan to the Dominican Republic in July and August 1997 for onward carriage to the Turks and Caicos Islands. The claimants contend that the vehicles were stolen or otherwise taken without any legal justification by employees of the Dominican customs after discharge from the vessels in Santo Domingo. The claimants put forward a claim amounting to some US$ 174,747 including a claim for $4,500 for expenses incurred in trying to minimise their loss.
- It is the defendants’ case that the cars were “confiscated” by the Dominican customs authority because, in purported contravention of Dominican law, the cars had not been declared for transhipment at their respective loading ports. As a consequence, the defendants contend that the loss was caused by “seizure”, an excluded or excepted peril under the terms of the insurance cover.
- It is also contended that the loss was proximately caused by the claimants’ failure to take reasonable steps to avert or minimise their loss, in particular by ensuring that their rights against the Dominican customs were properly preserved by seeking legal advice or otherwise pursuing legal proceedings.
The background
- The claimants are dealers in motor vehicles in Providenciales in the Turks and Caicos Islands. In 1997, they bought two consignments, each of six vehicles, from Toyota Tsusho Corporation. The terms of the contracts of sale both referred correctly to the destination of goods being the Turks and Caicos Islands but all the vehicles were in fact sold CIF Santa Domingo in the Dominican Republic, payment being made by letter of credit against presentation of documents.
- The first consignment was insured under a contract of insurance contained in a marine cargo policy dated 10th July 1997 by which the defendants had agreed to insure the six Toyota vehicles against all risks, for a voyage on board the “Topaz Ace” from Yokohama, Japan to Santo Domingo, warehouse to warehouse in the amount of $76,615.00. The second consignment was insured under a contract contained in a marine cargo policy dated 8th August 1997 by which the defendants agreed to insure the second set of six Toyota vehicles against all risks for a voyage on board the “Hojin” from Nagoya, Japan to Santa Domingo, warehouse to warehouse in the amount of $93,632.00. In the case of both policies, the named assured was the seller, Toyota.
- Both policies incorporated the 1/1/63 version of the Institute Cargo Clauses which provide, inter alia, as follows:
“1. This insurance attaches from the time the goods leave the warehouse or place of storage at the place named in the policy for the commencement of the transit, continues during the ordinary course of transit and terminates either on delivery:
a) to the Consignees’ or other final warehouse or place of storage at the destination named in the policy;
b) to any other warehouse or place of storage, whether prior to or at the destination named in the policy which the Assured elect to use either
(1) or for storage other than in the ordinary course of transit;
(2) for allocation or distribution; or
c) on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the overseas vessel at the final port of discharge whichever shall first occur...
If after discharge overside from the overseas vessel at the final port of discharge, but prior to termination of this insurance the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such destination.
5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case be deemed to extend to cover loss damage or expense proximately caused by delay or inherent vice or nature of the subject-matter insured....
9. It is the duty of the Assured and their agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss and to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised.
12. Warranted free of capture, seizure, arrest, restraint or detainment and the consequences thereof or of any attempt thereat....”
The first consignment.
- The claimants’ previous practice had been to import vehicles from Japan via Bermuda. But in about March 1997, a company called Cargo Express, being the local representative of the freight forwarding company used by the claimants, Tropical Shipping, offered to arrange the importation of vehicles via Santo Domingo. Attracted by the prospect of lower costs of importation, the claimants decided to undertake two trial runs on the new route.
- The first consignment of vehicles arrived at Santo Domingo on 11th August, 1997 on board the vessel “Topaz Ace”. Neither the bill of lading nor the cargo manifest mentioned the fact that they were intended for shipment on to the Turks and Caicos albeit the bill named the claimants as the notify party and gave their Turks and Caicos address. The significance of this was that by virtue of Article 135 of the Dominican Customs Regulations No. 1469 of the 30th October 1943:-
“The transit of goods to foreign ports will be allowed, provided that such statement is made at the port of origin, and, in the case of emergency, by means of a special request upon the arrival of the goods at a Dominican port.”
- Article 138 of the same Regulations provided that, if the cargo was not transhipped 60 days after its arrival, 15 days was available to opt for its re-shipment or a declaration for local consumption, except in the case of a properly justifiable force majeure.
- On 13th August 1997, two days after discharge, Schad Inc., acting as local agents for the claimants, wrote to the Customs collector of the Dominican Port of Authority at Santo Domingo requesting correction of the cargo manifest so as to record (in addition to the chassis numbers) that the “merchandise in international transit to Providenciales”. The same day, Tropical Shipping wrote to the customs collector at the port requesting delivery of the six vehicles with a view to their being shipped on board “Tropic Isle” on the following Friday, 15th August from Puerto Plata to their final destination in the Turks and Caicos. This latter request was confirmed as “appropriate and acceptable” by Schad in a letter to the General Director of customs dated 14th August.
The second consignment.
- The second consignment arrived at Santo Domingo on the 14th September 1997 on board the vessel “Hojin”. This time the bill of lading expressly referred to the fact that the vehicles were for transhipment to Providenciales in the Turks and Caicos and indeed the same information appeared in the cargo manifest. It appears that the customs in Santo Domingo had already requested a letter from the shippers Toyota confirming that all the cargo was to be transhipped to the Turks and Caicos. Such a letter was written by Toyota on the 18th September, and legalised by the Dominican Consulate on the 19th September. It covered both shipments and served “to verify that the Toyota vehicles in your possession of which details described hereunder are intended for transhipment to Bayview Motors Limited Providenciales....” It concluded: “Should the documentation on these vehicles not meet your requirements, please consider the letter as verification for the same.” Schad duly dispatched this letter to the general Directorate of Customs.
- Despite Toyota’s optimism expressed in a letter to the claimants dated 19th September 1997, that the verification letter prepared and sent by them would result in the release of the vehicles, no release was forthcoming, despite the acknowledgement by the customs of the receipt of that letter on 30th September. No progress having been made, Mr Aquino, the managing director of the Claimants, sought the assistance of Toyota. Toyota recommended that he should contact their local distributor, Delta Commercial, and on the 17th October 1997, Mr Aquino wrote to Delta Commercial as follows:
“Alvaro, thank you for your offer to help me with my problems with Customs in your country. The problem is not clear to me but it seems that originally Customs told us the paper work was not correct for the trans shipment. Since then we have provided what we believe to be the proper documentation. Still they do not seem to be interested in clearing our vehicles. The Tropical Shipping agent has been working on this but has not made any progress. Follows is the appropriate documents and a letter authorising your company to negotiate on behalf of us. I included a letter in Spanish if needed but my Spanish is not so good so please proof and if not needed, discard. It is my plan to come over next week if no progress is made so I will leave it to you as to whether it is necessary. I am willing to do whatever is necessary to get my vehicles released. The Shipping agent working on this is Freship, Lewis Lopez 547 - 1909. Thanks.”
- The principle of Delta was a Mr Peynado, a former President of the Dominican Republic. On 31st October, he spoke to the director of customs, Mr Cocco, and received an assurance that the cars would be released the following week. No such release occurred.
- In short, the customs had, by this stage, made it plain that it had been appropriate for some unidentified reason to confiscate the cars and, accordingly, on November 17th, Mr Aquino notified Schad that a claim under the insurance policy was likely. The situation was such that Mr Aquino decided to fly to Santo Domingo on the 18th. Having visited Schad and B & R, he made enquiries with the Port Authority. In response to his request to see his vehicles, he was told that the vehicles had “gone” and that indeed they had been taken by “Customs” about a month earlier. (This account of his meeting with the Port Authority is taken from Mr Aquino’s letter to the defendants, dated 29th January 1998).
- The following day, Mr Aquino went to visit Mr Peynado. During that visit, Mr Peynado telephoned Mr Cocco. The conversation was conducted in Spanish. Mr Peynado translated the contents of the conversation for Mr Aquino’s benefit. The thrust of Mr Cocco’s comment was an admission that the vehicles had been taken, as he put it, “prematurely and unlawfully” and had been distributed to members of the Customs, their friends and relations. He suggested that Bayview might receive recompense and suggested a meeting in a few days time. In fact, neither money nor a meeting was forthcoming. Mr Peynado opined that the Customs officers were involved, in accordance with an established practice, in using their office to steal cars.
- Attempts by Mr Aquino to meet with Customs officers were unsuccessful. Mr Aquino left Santo Domingo and on arriving back in the Turks and Caicos, sent the following fax to Toyota:-
“Following is an update on vehicles missing in Santa Domingo. After our representative attended a meeting with the Dominican Customs Department, it was agreed that the vehicles had been unlawfully confiscated from the port. Customs have requested for another meeting to be provided with the complete documentation of which we had already supplied to them. It is obvious they are aware of there [sic] act and are now just delaying the inevitable.
To this end, we maintain that the vehicles we contracted for were not delivered to us and now formally notify all parties involved as to a claim for full value, plus 10%.... ”
- The response from Toyota was discouraging. It appears that they too had learned of the fact that the vehicles were now being driven by members of the Dominican Customs Authority. Toyota complained that Mr Aquino had left Santo Domingo without meeting with the Customs. Indeed, Toyota insisted that he should attend a meeting with the Customs and not leave any such arrangement (if achievable) to his agents. In addition, Toyota somewhat surprisingly, took some points on coverage suggesting that the claim was not within the scope of the cover and in any event, was too late. Following a sequence of further communications from Toyota, asserting that the claim was not within the scope of the insurance cover and insisting that Mr Aquino had failed to effect a recovery of the vehicles, Mr Aquino wrote to Toyota on 3rd December 1997 as follows:-
“At a meeting with Customs officials yesterday with the agents Frederic Schad (who represents Mitsui) Customs have not given any reason for removing the vehicles, except as they stated from the beginning: the documentation was incorrect. Still, they are evasive and even after a formal response has been requested, they have not written to us. They say they will send us a written response this week but have not as of this morning. It is agreed by all parties that the vehicles are unrecoverable as they were given out to government employees so I fail to see the reasoning of the continuous reference to recovering the vehicles... ”
- Schad (as indicated in the quote above, now acting for Mitsui) made a report to their clients on the 19th January 1998 confirming that no good reason had been furnished by the local authority for the confiscation of the cars. The report also went on to say:-
“Pursuing legal action against the local Customs authorities would prove a lengthy and fruitless exercise, since their assets are non attachable, as per local law....”
- On 22nd January, the defendants asserted reliance upon the exceptions in the FC & S clause. In short, it was that the cars had been seized or confiscated by the customs, and not stolen.
- Mr Schad wrote again to the customs on the 29th January asking for confirmation that the cars had been confiscated, and the reasons for this. In response, committing themselves to paper for the first time, Mr Cocco replied on the 5th February as follows: “We ought to inform you that there having been elapsed the terms established in Article 138 of the local law, 3489 of the Customs regime, the vehicles referred by you have been considered as abandoned, proceeding to appropriate/confiscate the same as per the terms established the law No. 650 of the year 1941 and the rule 1469 of the year 1943.”
- In fact it is common ground between the parties that the vehicles had not been abandoned, (and indeed if they had been the appropriate action on the apart of the authority was to effect a sale by public auction after a period of six months). Furthermore, Law 650 had been repealed and in any event the Customs had no right to appropriate or confiscate cargo which was not transhipped within the period mentioned within Article 138.
Issues
- The defendants were not shy of taking points in defence of the claim. Their pleaded case raised the following issues:-
a) Did the claimants have an insurable interest in the cars?
b) Did the claimants have title to sue under the policies?
c) Did the losses occur after cover had ceased?
d) Were the losses occasioned by inherent vice?
e) Were the losses caused by seizure?
f) Were the losses caused by the claimants’ failure to take reasonable measures to avert the loss?
- In the event, issues (a), (b), and (d) were not pursued.
Cessation of cover
- The defendants conceded that the claimants had not elected to use the quay side for storage “other than in the ordinary course of transit”: see clause 1(b). The defendants’ case was that cover terminated when the vehicles were discharged from the two vessels on the grounds that the quay at Santo Domingo was “the final place of storage” within the meaning of clause 1 (a).
- A similar argument was advanced in John Martin v. Russell 1960 I LR 554:-
“The third argument, however, was that that was not a final warehouse within the meaning of the clause. On that point I have come to the conclusion that the plaintiffs are right; that it was not a final warehouse. The first and elementary consideration is this. The expression “final warehouse” seems to contemplate that there may be a warehouse which is not final. If one were searching for an example of a non-final example of a warehouse it would be difficult or impossible to find a better example than a transit shed, which is essentially a shed in which goods are temporarily placed pending some further movement to some other place. The word “transit” itself implies its transitory character. Then one looks at the clause itself, and one must try to construe it as it stands in relation to the other provisions of the policy. One has to bear in mind also what was said in the Mersey Docks and Harbour Board letter, that, when a ship is unloading, the normal practice is to put the goods in a transit shed. That is where they go straightaway. The effect of the Act and Regulations is that for the purposes of free rent or special rent the transit shed counts as the quay, or goods in a transit shed count as goods on a quay. It is clear under Clause 1 that the mere putting of goods on a quay does not terminate the insurance. After the arrival of the goods on the quay the insurance may last 60 days. ”
- In my judgment, similar considerations apply here. Mr Aquino’s evidence was to the effect that the cars had been placed within a fenced off parking lot within the port. It was, to all intents and purposes, a bonded store, run by the customs who controlled access. Such cannot be fairly categorised as the “final place of storage.” The decision in Martin was on an earlier edition of the Institute Cargo Clauses form. The editor of Arnould expresses the view that the reasoning remains valid. I agree. I conclude that cover extended to 60 days after completion of discharge, (e.g. 10th October and 13th November 1997 respectively).
Loss within 60 days
- It was the primary thrust of the defendants’ case that no loss in the form of an actual or constructive total loss of the cars occurred until they were removed from the car park. In fact, the precise date or dates on which the cars were removed remains unclear. Mr Aquino was told, at one stage, that they had “gone” about a month before he arrived in Santo Domingo on the 18th November. But for the purposes of argument, I am prepared to assume that some or all of them were not taken out until after the expiry of the 60 day period following discharge of both shipments.
- In my judgment, the claimants were correct to contend that, within the period of cover, a loss was nonetheless sustained by reason of a peril insured under the all risks policy, namely, conversion in the form of an improper refusal by the customs to release the goods. This partial loss later lead to an actual total loss, albeit after the expiry of cover. The circumstance were analogous, the claimants contended, to those in London v. Provincial Leather Processes Ltd v. Hudson [1939] 2 KB 724. There, administrators had wrongfully converted goods prior to the expiry of the relevant policy. The subsequent disposal by sale was treated as relating back to the time of the conversion.
- The defendants invited me not to follow Hudson (which they emphasised was unreserved) on the grounds that no argument was presented vis a vis the timing of the total loss but it seems to me to be entirely in accord with principle: see e.g. Fooks v Smith [1924] 2 KB 505, Anderson v Marten [1908] AC 334 and generally Arnold’s Law of Marine Insurance 16th ed. para 1138.
- The argument is, however, arid. In my judgment, the claimants were correct in asserting that a constructive total loss occurred during the currency of the cover:-
a) It has become common ground that the customs had no legal justification for refusing release of the vehicles for transhipment. This was true from the outset as regards the second consignment. As regards the first consignment, the absence of declaration in the bill of lading that the goods were intended for transhipment was appropriately corrected in two days. As regards both consignments, even if the customs might legitimately have sought the reassurance of a legalised letter from Toyota, its delivery in September had no impact.
b) I reject the defendants’ submission that the customs’ personnel simply made a mistake about the lawfulness of effecting a confiscation order. The letter of 5th February was transparently bogus. The inference that can be fairly drawn is that members of customs (including Mr Cocco) had from the outset been seeking to manufacture a situation in which it could be asserted that the vehicles had been abandoned. Indeed, there was some evidence to the effect that two Mercedes cars, bound for the Japanese embassy, were illegitimately taken by customs’ officers at about the same time. In any event, the later finding by the Supreme Court of abuse of authority on the part of Mr Cocco in the form of the improper seizure of yet a further automobile in 1997, also under the guise of abandonment, gives further credence to Mr Peynado’s observation that the customs’ personnel were engaged in a crime ring to benefit themselves, their friends and family.
c) Against this background, the claimants were on firm ground in contending that it was, to put the matter at its lowest, “unlikely”, as from 30th September at the latest, that they could recover their goods. Whatever steps were taken, the claimants were met by evasion, cancellation of meetings and unfulfilled promises, all with a view, it can be seen with hindsight, to enabling those responsible in the customs to string the claimants along while dissipation was organised and effected.
d) Such was the extent to which the claimants were encouraged to have false hopes regarding the release of their property, it was not until November at the earliest that Mr Aquino was in receipt of reliable information as to the dispersal of his cars. If required, his letter of the 29th November constituted a timely and effective notice of abandonment. Be that as it may, I agree with the claimants that, on the facts, notice of abandonment was unnecessary. The vehicles had, of course, been by then distributed and used. It is quite unreal for the defendants to suggest that, in the event of notice, they “could have investigated whether or not to take proceedings” when in January they were advised by Schad that legal action would be “lengthy and fruitless”.
Seizure
- It was the defendants’ pleaded case that the vehicles had been “confiscated” by the Dominican Customs Authorities, by virtue of the fact that, in contravention of Dominican law, the same had not been declared for transhipment at the loading ports of Yokohama and Nagoya “and/or were not shipped within 60 or alternatively 75, days of being discharged from the relevant carrying vessel.”
- In the light of the expert evidence, the defendants were forced to concede that no such lawful confiscation had occurred. To the contrary, as already indicated, individual customs officers, acting illegally, had simply made off with the cars. The defendants nonetheless insisted that the cause of the loss was an excepted peril, namely “seizure”. This proposition was dependent upon the startling submission that any unlawful misappropriation by a person spuriously invoking the authority of the state and thereby effecting a theft constituted a seizure.
- The classic definition of seizure is to be found in the speech of Lord Fitzgerald in Cory v. Burr (1883) 8 App.Cas. 393 at 405:-
“Seizure...may be reasonably interpreted to embrace every act of taking forcible possession, either by lawful authority or by overpowering force...”: see also Kuwait Airways v. Kuwait Insurance [1999] 1 Lloyd’s Rep 803 at p.814. ”
- I agree with the claimants that no such excepted peril is made out on the facts of this case:-
i) When the customs officers converted the cars by refusing to release them, the cars had already been voluntarily placed in their custody and control in the bonded car park. Misappropriation in this manner does not constitute the taking of forcible possession: cf. The Salem [1983] 2 AC 375.
ii) Further, there was no taking by lawful authority. The customs officers were not acting as organs of the State, lawfully or otherwise. They were acting solely in their own interests: cf. Robinson Gold Mining v. Alliance Insurance [1904] AC 359, Lozano v. Janson (1859) 2 E & E 160, Powell v. Hyde (1855) 2 E & E 160. The claimants rightly categorised them simply as thieves.
iii) Nor, in that independent capacity, was the taking implemented by any display, or threat, of overpowering force: cf. Kleinwort v. Shepherd (1859) 1 E&E 441, Johnson v. Hogg (1883) 10 QBD 432.
Section 78 (4)
- The only pleaded case on reasonable measures that should have been taken to avert the loss was to the effect that the claimants should have instructed lawyers and sued for the return of the cars. But the insurers’ own agents regarded such actions as “lengthy and fruitless”. I reject the complaint, which, even if valid, could not arguably be categorised as the proximate cause of the loss.
Quantum
- I accept Mr Aquino’s evidence that expenses of some $4,500.00 were incurred by him in the course of his trip to Santo Domingo.
© 2002 Crown Copyright