QUEENS BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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FRANS MAAS (UK) LTD |
Claimant |
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- and - |
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SUN ALLIANCE AND LONDON INSURANCE PLC |
Defendant |
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ColinWynter (instructed by Hill Dickinson) for the Defendant
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Crown Copyright ©
Mr Justice David Steel :
"GENERAL CONDITIONSThe due observance and fulfilment of the terms and Conditions so far as they relate to anything to be done or complied with by the Insured and the truth of the statement and answers in the proposal shall be conditions precedent to any liability of the Company to make any payment under this Policy.
1. The Insured shall continuously trade under the Contract Conditions International Conventions or Statutes expressed in the Schedule as being Insured and shall take reasonable steps to notify all customer of the application of such Contract Conditions International Conventions or Statutes.
Notwithstanding this Condition the indemnity provided by this Policy shall not be prejudiced should the failure to notify any customer of the said Contract Conditions International Conventions or Statutes be due to an error by the Insured or any Employee provided the Insured can prove to the satisfaction of the Company that they have established procedures for such notification to be given to customers and that instructions have been given to all Employees to this effect.…
3. The Insured at his own expense shall take all reasonable precautions to prevent or diminish any Damage to property which may give rise to liability under this Policy.
GENERAL EXCLUSIONS
…
4. Damage to Property stored at a rental or under a contract for storage and distribution.
GENERAL DEFINITIONS
Damage
Physical loss destruction damage or misdelivery
Event
Any one occurrence or all occurrences of a series consequent on or
attributable to one course or original cause
Property
Goods and merchandise for which the Insured is responsible excluding containers and flats and goods and merchandise owned or hired or leased or loaned to the Insured
WAREHOUSING SECTION
Schedule Item
1. The National Association of Warehouse
Keepers Conditions of Contract Insured-1983 edition with a financial liability of £100 per ton(ne)2. The United Kingdom Warehousing Assoc Insured- Conditions of Contract 1983 edition with a financial liability of £100per ton(ne)
3. The Road Haulage Association Limited
Conditions of Storage Not insured4. The Standard Contact Conditions of the Institute
of Freight Forwarders Limited Not Insured5. The Standard Contract Conditions of the British
International freight Association Not Insured6. The Insured's own Contract Conditions
for Warehousing Not InsuredTotal Limit of Liability in respect of all
claims arising out of any one Event £3,000,000
General Exclusion 4 is deleted subject to the following
The Company will indemnify the Insured if the Property be damaged during any period of Insurance whilst warehoused at any Location specified in the Schedule to the extent that there is liability for Damage under the Contract Conditions expressed in the Schedule as being Insured or at Common Law if such Contract Conditions cannot be enforced.
CLAIMS CONDITIONS
….
1. If any claim is in any respect fraudulent or if any fraudulent means or devices be used by the Insured or anyone acting on their behalf to obtain any benefit under this Policy or if any Damage is occasioned by the wilful act or with the connivance of the Insured or by any relative of the Insured all benefit under this Policy shall be forfeited."
"Palmier plc contracts as the legal owner of the goods or as the authorised agent of such legal owner. …
Frans Maas UK shall be responsible for any loss or damage to the goods resulting from warehousing and loading of the goods or unloading the goods from the vehicle subject to the provisions of our Standard Trading Conditions which are as set out below…
Frans Maas UK will NOT insure the goods and all claims for loss or damage will be resolved in accordance with our Standard Trading Conditions as applicable which are
British International Freight Association (1989)
Road Haulage Association (1991 edition)
United Kingdom Warehousing Association (1994 edition).
These standard trading conditions rank pari pasu.
This contract shall run for 1 year and will thereafter continue unless at least 3 months notice of termination is given by either party."
"1. 50% of customs duty by CHAPS today
2. 50% of customs duty by cheque in our possession 5th March 1998.
3. Settlement of the balance by 4 equal weekly cheques commencing 12th March 1998.
4. Settlement of all other invoices within the normal terms."
"In view of the foregoing we are suspending all further deliveries forthwith from our Shipdham warehouse and all goods in our care and control are held by way lien in accordance with our standard trading conditions which are UKWA (1994 edition)…"
"We act on behalf of KSD Industries Limited in Hong Kong and have been consulted in connection with your fax to our client dated 9th June 1998.
If we understand the position correctly, you are exercising a lien against out client's buyer in the UK, Palmier plc, in relation to sums which are purportedly outstanding from Palmier plc to yourselves….
In relation to our own client's position, they are not as you are aware involved in the dispute with Palmier plc and yourselves but they do have substantial worth of stock which is caught by lien but to which our clients have legal title. We shall as necessary let you have a full list of stock which is held by you and for which our clients and/or their bank have the original Bills of Lading.
We cannot see there is any basis on which you could possibly exercise your lien against our clients and certainly not, as we see it, on the UKWA. Conditions. If you allege that those conditions in some way bind our clients, no doubt you will provide us with the necessary evidence."
"… we confirm our clients are exercising a lien pursuant to clause V1 of the UK Warehousing Association Conditions of Contract which were specifically incorporated into the contract between our clients and Palmier. Under those conditions, Palmier warranted that they either owned the goods or were authorised by the owners to accept the conditions…"
"- Clause 1 confirmed the lien exercised by FM on 8th June would remain in place "throughout the termination period" (i.e. the period from the date of the agreement to 31st October 1998).
- Clause 2 provided that "FM will act as sole suppliers to PL for the clearance and warehousing of PL's goods during the termination period in accordance with our standard trading conditions which are UKWA (1994 Edition) and BIFA (1989 edition)".
-By Clause 3 FM undertook to permit "the free flow of bona fide deliveries, subject to a minimum stock level of 30,000 cartons being maintained at the warehouse", on certain conditions including the receipt of payment from Palmier of £305,647 and the provision of a Bank Guarantee from Habib Bank.
- By clause 6, FM undertook, on certain conditions, not to make any application to the Courts for an order of sale pursuant to the lien.
- By clause 8, "The loan due from PL to FM of £2.9 million (being the balance of monies currently owed by PL to FM, less the first payment specified in Schedule 1) will be repaid in accordance with Schedule 1,"
- By clause 23: "PL will supply original Bills of Lading to FM's Felixstowe office prior to any release of any containers held by FM at any dock. Alternatively, authority from the relevant shipping line would be acceptable (see Schedule2).
- By clause 24: "Missing Bills of Lading in respect of past containers will be supplied by PL on or before 31st July 1998, failing which PL will procure completion by the shipping line of a letter in the attached format (see Schedule 2) on or before 15 August 1998." "
Liabilities in tort
"The Points of Agreement are as follows: -
In insurance of the cargo liability incurred by transport operators, the general approach of insurers is to insure the liability an operator incurs towards his customer, with whom there is a contractual nexus. The policies usually seek to define the terms of that contract, by requiring the operator to contract on the basis of approved trading conditions. These may be specific to the operator concerned or they may be those of a national association, such as the BIFA Standard Trading Conditions. Sometimes the measure of liability insured is agreed to be that contained in the relevant international convention, such as CMR (for the Carriage of Goods by Road), or the Warsaw Convention (for the carriage of goods by air).
Insurers accept also that there is a risk that sometimes the contractual terms will not be effective to protect the insured. This can arise primarily from two causes; either the terms have not been adequately incorporated into the contract with the claimant or the terms, though duly incorporated, are set aside by the court, on the grounds, for example, that they fail the test of reasonableness under the Unfair Contract Terms Act of 1977. Insurers will usually offer the insured so-called 'contingent risk' insurance in these circumstances, provided the insured can establish, in the first example, that he had in place a system to ensure the incorporation of the trading conditions in his contracts with his customers and that, in the given instance, the failure to incorporate was due to the isolated mistake of an employee.
Further, both experts recognise that the operator has another potential source of contingent exposure to claims in respect of cargo, namely the non-contractual claim that can arise in tort or bailment. In these cases, the question whether the trading conditions have been incorporated is irrelevant, because there is, by definition, no contract into which they could have been incorporated."
Warehousing activity
Condition precedent
Reasonable Precautions
"At our last meeting we discussed at length the above problem and I have set out below the main aspects of the matter: -
Frans Maas does not arrange for the delivery of goods without the presentation of bills of lading for any other client than Palmier and it is only by tacit agreement that the current mode of operation exists. I have registered my unease on this subject from an early date and included a clause to that effect in the original termination agreement.
My view is that it is a financial matter which Palmier should resolve without Frans Maas being involved in the risk, potentially, of not acting in accordance with Atlantic's instruction. As you know I would be perfectly willing to continue with the present arrangement provided I can obtain absolute clarification from Atlantic of their instruction. Unfortunately but not surprisingly you would not agree to me seeking the necessary clarification. Palmier and KSD's interpretation of that instruction has already been received in writing.
You asked if I would accept an indemnity from Palmier as an alternative. I think at this stage in Palmier's recovery it is too early to place complete reliance, financially, on such an indemnity although one should be in place as a matter of course.
It seems to me that as Palmier's strength grows, its ability to obtain appropriate credit lines with banks will also grow. As Frans Maas does not wish to remain as a quasi bank indefinitely, it is essential that fees are levied to discourage the status quo as well as to cover the risk undertaken. My proposal in this respect is attached but may need some adjustment as I have made various assumptions regarding the level of new bills of lading and the speed with which they are presented."
"For much the same reasons, FM must, or at least should, have appreciated that if they did not permit the unlawful release of the goods the consequence would be that the Claimants would not be paid for them. Indeed in a real sense that was the purpose of the release of the goods. As I have already said, FM knew or at the very least should have known that there were suppliers and of the interest of the bank. The loss by the Claimants of the price payable was therefore the probable and foreseeable consequence of FM's conduct."
Non-disclosure and affirmation
"Up to February 1998, with only this exception, there is no record of goods ever having been obtained or released without presentation of fully endorsed bills of lading…. It seems that at around this time general discussions ensued whereby, as a result of Palmier's claim of potential insolvency, they were permitted to receive containers without original bills of lading in return for repayment of the monies owed. It is unclear, and unlikely, that any agreements were formalised at this time leaving things to come to a head in June 1998…."
"KH queried the need for Frans Maas to insure the total stock as they do not have a lien on the whole stock. Palmier have been allowed to trade to clear their debt to Frans Maas and they currently owe around £1.5m. New stock is coming into Shipdham up to £800,000 without a bill of lading which has been agreed by the shippers Atlantic Shipping and in addition Frans Maas also allow another £500,000 on top. Also the original stock of £10m on which the lien was obtained has been substantially reduced and FM no longer have clear ownership of the entire stock. KH asked whether Ian could get the property insurers to reduce their sum insured to the amount of the current debt £1.5m and the freight liability insurer to resume their cover."
"KH raised the position on the lien which was no longer iron clad as FM had to allow Palmier to trade themselves out of the debt and they currently owe around £1.5m. The original stock was reduced considerably and the new stock coming in is not subject to the lien. SH advised that Aon would approach FM's property insurers to reduce Palmier's stock sum insured to £1.5m and the balance of stock needs to be covered under the freight liability policy under the usual UKWA conditions. JE will consider their position on this and advise."
"We have asked Norman Booth to prepare a typed version of the note and we may wish to serve a statement from him verifying his belief in the accuracy of his note and to what extent his notes are a record of his own spoken word at the meeting."
Conclusion