- This is a short point of construction of a clause in a policy of marine insurance brought as a Part 8 claim. It concerns the meaning of "at all times" in the context of this case.
Background and Policy wording
- The Claimant Mr John Pratt owns the fishing trawler mfv "RESOLUTE", a 21 metre steel stern trawler with a gross tonnage of 117 tonnes. Mr Pratt took out a policy of marine insurance with the Defendant Aigaion Insurance Company SA ("Aigaion") through brokers. The period of cover was for 12 months and ran from 23 June 2006. The insurance value of the vessel was given as £120,000. The living accommodation on the vessel comprises a crew cabin 6 foot by 9 foot and a galley 6 foot by 6 foot.
- The policy is apparently in Aigaion's Standard Trawler wording with the following additional express provisions described as "CONDITIONS".
"Aigaion's Trawler Wording with the following Endorsements; Endorsement C – Crew Liability for 4 men.
Machinery Damage included subject to Machinery undergoing a full overhaul by manufacturers representative and certified by a qualified marine surveyor.
Warranted Machinery Breakdown is covered for the main engine only, but no cover shall apply following damage as a result of, or caused by, failure of any associated ancillary parts, pumps, generators, writing or peripheral equipment of any kind.
Subject to MCA or appropriate Licences to be held and in force. A copy required for Underwriters files.
Warranted Owner and/or Owner's experienced Skipper on board and in charge at all times and one experienced crew member.
Warranted the vessel is to be maintained to MCA or equivalent authority requirements.
Warranted any piece of Equipment valued in excess of GBP 500 to be specifically declared failing which Underwriters maximum liability will not exceed GBP 500 per item.
Subject to sight of current MCA survey and Ultrasonic thickness Test that has been carried otherwise full Out of Water survey to be carried out prior to attachment and all recommendations to be complied with within the time frame set by surveyor. All survey costs to be for Owners account".
Facts
- The relevant facts should not be much in dispute in a Part 8 claim. There is however extensive material in the bundle including witness statements from Mr John Hulmes, a partner in Hill Dickinson LLP the Claimant's solicitors, Dr Barrie Deas, Chief Executive of the National Federation of Fishermen's Organisations, and Mr Joseph Crewdson of the Defendant's solicitors. Much of this material is irrelevant. As I see it the salient facts are as follows.
- The RESOLUTE is based at Fleetwood but in December 2006 was fishing from North Shields for prawns. On 11 December Mr Pratt and his crew of three took the vessel to fish for a day and it returned to North Shields where it was all fast at about 20:00 hours. The crew landed the catch and at 20.30 Mr Pratt went to file the vessel's fishing log sheet at the Fisheries Office. The crew readied the vessel for fishing the next day before one of them, who lived in North Shields, went home and another visited a pub some 200 yards from the vessel. At 22:00 Mr Pratt left the vessel to meet a friend at a café in Tynemouth and a few minutes later the fourth crew member also went to the pub. At about 22.20 Mr Pratt received a telephone call informing him that the vessel was on fire. When he and the crew members returned to the vessel the Fire Brigade was there putting out a fire which was extinguished by about 00:45.
- The vessel was inspected by Burgoynes on 15 January. Their report concluded that the fire started in the galley/mess room, but because of the severity of the fire it was not possible to identify the precise location of the seat or the cause with any certainty. Loss by human agency could not be completely ruled out but did not appear the most likely cause. On the evidence available it was plausible that the fire was caused by operation or malfunction of the deep fat fryer or the fridge. The fryer was used by unplugging the fridge and placing the fryer plug in the socket. The fryer's on/off switch was stuck in the on position so temperature was controlled by unplugging it when necessary. As was usual when crew were to return to the vessel for the night the generator was left running while they were ashore.
- Mr Pratt obtained quotes for repairs. One estimate was £142,500, the other £135,000 both higher than the £120,000 insured value of the vessel. The insurers declined to pay citing the 'at all times' warranty mentioned above.
The dispute between the parties
- In essence the Defendant says that the clause means what it says and that it owes no liability because there was no owner or experienced skipper on board and in charge "at all times" or specifically at the time of the fire. The Claimant submits that this construction ignores the fact that the clause is obviously directed to periods when the vessel was navigating or working and, if applied literally, would lead to absurd results. It is not how a reasonable person having the background knowledge available to both parties would understand it and it is not how it was understood by those in the industry at the time. The Claimant also submits that the other terms of the contract show that the clause does not have the meaning contended for by the insurers.
Submissions of the Claimant
- Mr Nolan for the Claimant takes as his starting point the very well-known principles of construction set out by Lord Hoffmann in ICS v West Bromwich [1998] 1 WLR 896 at 912 to which the court was taken in rather more detail than is usual . He also put forward the following submissions about the approach to construction which I take from his skeleton argument.
"The apparently literal meaning of the words of a warranty must be restricted if they produce a result inconsistent with a reasonable and businesslike interpretation. The words used ought to be given the interpretation which, having regard to the context and circumstances, would be placed upon them by ordinary men of normal intelligence conversant with the subject-matter of the insurance.
MacGillivray on Insurance Law (10th Edn) paragraph 10.50.
Thus a warranty in a burglary policy that the insured premises would be "always occupied" meant not that there should always be someone on the premises but that they should be used as a residence as opposed to a lock up left unoccupied after business hours.
Simmonds v Cockell [1920] 1 KB 843.
Whether or not there is ambiguity the court seeks to avoid a literal construction of warranties which would give absurd results. To that extent at least the courts put upon words a reasonable construction.
Clarke – The Law of Insurance Contracts para 20-4B
A continuing warranty is a draconian term. If insurers want such protection it is up to them to stipulate for it in clear terms.
Per Saville LJ in Hussain v Brown [1996] 1 Ll. Rep. 627 at 630.
Any ambiguity in the terms of the policy must be construed against the insurer. The principle rests in part on the general contra proferentem rule but also on the court's sympathy for ordinary people unaccustomed to legal documents who find it difficult to relate the different parts of a complex policy and understand what is being asked of them, especially when insurers could with more care remove the ambiguities present in it.
MacGillivray on Insurance Law (10th Edn) paragraph 10-54".
- Mr Nolan next identified a significant number of matters taken from the statements of Mr Hulmes and Mr Deas as being relevant background facts against which to construe the wording. These matters included the fact that the insurers insured much of the UK fleet of trawlers and have their own policy wording, that vessels like RESOLUTE put to sea for a day or so at a time after which they have to return to port for the usual reasons, that the EU limits the number of days that the vessels can remain at sea (in the case of the RESOLUTE limited to 227 days in a relevant year), and that the skipper and crew of fishing vessels do not usually live on board except when at sea. Further as vessels are usually tied up for days between trips, it would put an intolerable strain to require an owner/skipper and one crew member to remain on board in the cramped confines of the vessel. It is outside the expectations of the industry that a policy term would include such a requirement. The crew and skipper often have to go ashore on duty when the vessel is in port and also have duties such as attending fish auctions and the harbour master's office essential to running the vessel. The cost of employing a relief skipper and an experienced crew member for a UK trawler would be prohibitive.
- Mr Nolan submits that when the legal principles are applied to these facts it becomes clear that the clause does not require an owner or skipper together, depending upon how one approaches the construction of the remainder of the clause, with an experienced crew member to be on board the vessel 24 hours a day, 7 days a week even when it is in port. He says the meaning contended for by the insurers is not the one which the policy would convey to a reasonable person. The expression "at all times" is sensitive to syntax and context in the sense identified by Lord Hoffmann in Charter Reinsurance Co Limited v Fagan [1997] AC 313 at 391 where he observed that "In some cases the notion of words having a natural meaning is not a very helpful one". These words given the context of "Skipper … in charge" and "experience" indicate that the clause is directed at the navigation or working of the vessel. If, as insurers suggest, the purpose of the clause was to protect against security problems in port it would not require the presence of a skipper and one experienced crew member. Mr Nolan points out that the insurers concede that the literal wording requires some clarification, to deal with emergencies, when the vessel is out of the water or the skipper is ashore to perform his duties. Once that concession is made the results are absurd. For example why should the vessel be covered if the skipper goes to a fish auction a mile away but not if he went for a drink in a pub opposite the vessel keeping it in full sight at all times? Absurdity would also follow because if the insurers' construction was correct most of the many fishing vessels covered by the Defendant are not in fact insured at all because it is unheard of for crew in port never to go ashore.
- Mr Nolan says that the insurers' construction is inconsistent with other clauses of the policy. Clause 27 requires the vessel to be moored when unattended, Clause 26.1 maintains cover whilst the vessel is at a place of storage and when it is being dismantled or fitted out, occasions when one would not find two people remaining on board. Further Clause 33.2 provide that claims shall not be recoverable for theft when the vessel is laid up out of commission, except in certain circumstances. It would be absurd to expect an owner/skipper and an experienced crew member to be on board when the vessel was in a locked roof space like a garage.
- Mr Nolan also submits that the clause is ambiguous and should be construed against the insurers because the clause is of their devising and it is they who are seeking to rely on it. Overall he submits that the clause has to be read as referring to the vessel needing an experienced skipper and crew member on board when underway. Alternatively the clause should be read as being qualified to the extent that a temporary stay ashore to have a meal or a drink would not amount to a breach of warranty.
Submissions of the Defendant
- Mr Bailey QC says that this is a pure question of construction. The clause means what it says and the court should conduct an exercise similar to that undertaken by Aikens J in The Milasan [2000] 2 Lloyd's Rep 458 at paragraphs 21-24 and 162(2) and by Gross J in The Newfoundland Explorer [2006] Lloyd's Rep IR 704 at paragraphs 14-31. Mr Bailey says that in each case the judge construed the crewing warranty by reference to the natural meaning of the words used and their commercial context. Mr Bailey submits that I should disregard much of the written evidence to the extent to which it is being relied upon indirectly to set up a customary meaning in the market or an established usage in the fishing industry. He submits that such material should not be let in because it is a pretext to introduce extrinsic evidence. That submission does not require citation or authority but he refers to a helpful passage in the judgment of Mance J in Roar Marine v Bimeh Iran [1998] 1 Lloyd's Rep 423 at 429-430:
: "The Defendants are in reality seeking not to construe but to contradict the wording of the … clause. This is illegitimate in the context of custom and practice in the strict legal sense. It is a fortiori impermissible in so far as they seek to rely on the weaker conception of a suggested matrix of usual attitudes or behaviour. The only matrix of any real relevance in the material before me is, in my view, to be found in the obvious commercial purpose of the clause …".
He next submits that I should bear in mind that the crewing warranty is a "delimiting" clause rather than a "promissory" one and the vessel is therefore off risk only when the warranty is not being complied with. That debate is not however necessary for my decision.
- Mr Bailey submits that the commercial purpose of the warranty is to safeguard the insured property when in port as much as elsewhere. The presence of the skipper reduces the security risk but also minimises those risks if they materialise because, on board, the skipper can deal with an emergency.
- The Defendant recognises that common-sense requires some qualification to the literal meaning of "on board … at all times" and thus adopts the approach of Gross J in The Newfoundland Explorer that "It is the purpose of the departure, rather than the distance travelled from the vessel which is critical", the purpose complying with the clause if it is an emergency or the performance of crewing duties. Mr Bailey accepts that the warranty in this case is not identical to that in the two cases relied on but submits that the rationale is the same. The judges in those cases accepted that insurers were concerned that a vessel be manned at all times to ensure that she was properly looked after.
- Mr Bailey criticises the Claimant's approach as being an attempt to re-write the warranty to provide a better or more sensible bargain than the one he entered into. He rejects the suggestion that the court should not begin by looking at the natural and ordinary ("conventional") meaning of the words. He says that the Claimant's approach elides what a reasonable man might expect a crewing warranty to require with what a reasonable man would understand this particular wording to impose. That it is very inconvenient for the owner or skipper to be on board the vessel even while in port does not mean that it is so commercially nonsensical that the parties cannot have intended it.
- The Defendant submits that the apparent inconsistency between the wording in issue in this case and that of three of the standard clauses does not assist the Claimant's argument. First such inconsistency is not uncommon. Secondly as Lord Bingham said in The Starsin [2003] 1 Lloyd's Rep 571 … "It is common-sense that greater weight should attach to terms which the particular contracting parties have chosen to include in the contract than to pre-printed terms probably devised to cover very many situations to which the particular contracting parties had never addressed their minds".
The Milasan and the Newfoundland Explorer
- The Milasan was a "scuttling" case about a motor yacht worth some £700,000. As part of his decision the judge was concerned with the proper construction of a "professional skipper" warranty that "warranted professional skippers and crew in charge at all times". In accepting that a practical construction must be given to the words of the warranty the judge said this at Paragraph 24
"They are also to be "in charge" of the vessel together "all the time". The last phrase is, in my view, quite clear. It means that there must be a professional skipper and a crew that looks after the vessel the whole time, as opposed to intermittently or at intervals. All these requirements for the warranty are cumulative and must all be complied with".
The judge held that the rationale for the warranty was to ensure that the vessel was properly looked after all the time both winter and summer and whether cruising or in a marina.
- The Newfoundland Explorer concerned a motor yacht (apparently worth £3 million (see Para 27)) damaged by fire while up alongside a berth in the marina at Fort Lauderdale. The policy included the express warranty "Warranted vessel fully crewed at all times". On the central issue the judge said this:-
"17. The context powerfully reinforces the impression, based on language alone, that the warranty ordinarily requires the presence of at least one crew member on board the vessel. This was a valuable yacht. It can readily be understood that the presence of a crew member on board affords some protection or safeguard against such risks as vandalism, fire pollution, the onset of bad weather or theft. While it is true that there are circumstances in which human presence can increase some risks to a vessel (see The Moonacre [1992] 2 Lloyd's Rep. 501, at page 507), I do not think that the tail should be allowed to wag the dog. The briefest consideration of the context serves to explain why the warranty should focus on the need for an on board "watchman", a fortiori if and when machinery was running. Moreover, in the context of a valuable yacht, that a crew member should be required on board 24 hours a day is in no way surprising.
18. However, as foreshadowed, it seems to me that considerations of commercial common-sense also point to the need for some qualification of the literal meaning of the wording "at all times". So:
(i) Emergencies can arise, requiring the evacuation of the vessel or even the area. Take, for instance, a bomb scare or similar alert. It is inconceivable that the parties are to be understood as intending that the absence of crew from the vessel for the duration of such an emergency could place the Defendant in breach or warranty.
(ii) It may be necessary for certain crewing duties to be performed ashore or otherwise than on board the vessel. For instance, adjusting moorings, working on a fouled propeller, or painting the outside of the hull. Given the Claimant's acceptance that a one-man crew would be sufficient while the vessel was laid up alongside a berth, it could not sensibly be said that the absence of any crew member on board the vessel while such duties were performed would result in a breach of warranty.
(iii) On the premise that a one-man crew suffices, the context tells against certain other situations resulting in a breach of warranty. By way of example, consider the purchase of food or other supplies for the vessel. Necessarily, the single crew member will be absent while undertaking such tasks. I am not inclined to think that the parties could realistically have intended that in these circumstances there would have been a breach of warranty. To cater for such eventualities, I would amend Mr Kendrick's (alternative) formulation by adding the words "or other related activities" – lest it be said that these were not, strictly, crewing duties. Further with respect to Mr Kendrick's formulation, I am unable to accept that such temporary departments must be within "the vicinity of the vessel" could it, for example, make all the difference to insurance cover that the chandlery was in one part of the marina or another? To my mind, it is the purpose of the departure, rather than the distance travelled from the vessel, which is critical. I would therefore delete the words "within the vicinity of the vessel".
- Both judges were able to reach conclusions on the basis of more limited consideration of factual context that I have been urged to make in this case.
- It is understandable and interesting for Counsel to extrapolate from the facts of these two cases to those which I have to consider. I am however concerned with the wording of this particular contract set in its factual context. I accept that those decisions are not binding on me when considering this clause. Against that they adopt a consistent approach. I follow that approach first because I respectfully agree with it and secondly because it is desirable for this court to be consistent in its approach to policy wording.
Decision
- I have summarised briefly the main submissions of the parties but I make no apology for not setting them all out. There is a danger when drawing on such a wide range of background material and on so many facets of the law of construction of losing sight of the object of the exercise. It is my task to find a meaning for the words at issue in the context of the clause and the agreement as a whole set against the factual background.
- The natural and indeed literal meaning of the words is that the owner or the owner's experienced skipper must be on board and in charge at all times. That means all the time. There is no ambiguity except, perhaps, as to whether the "one experienced crew member" must also be on board and in charge at all times, a consideration irrelevant to this dispute.
- The context and factual background is also not much in dispute but the exercise should be less extensive than that conducted by the Claimant. I have no doubt that the parties were aware that the vessel being insured was a trawler with a small crew, spartan living accommodation and the ability to fish at sea for only a limited number of days a year. But those considerations do not seem to me to shift the natural meaning of wording as explicit as this. They do bear on the extent of the qualification to the literal meaning of "on board … at all times" that both sides accept is required. At that point the Claimant contends that the clause should be read to include "but only while the vessel is underway or working". Mr Nolan concentrated on "working" in contrast to Mr Bailey who seeks the limitations in The Newfoundland Explorer to emergencies requiring departure from the vessel or for the purpose of carrying out other crewing duties. The Defendant also submits that if "working" was accepted as a qualification then the vessel was in that mode at the time of the fire because its generator and electrical equipment had been left on.
- The qualification to the literal wording should be only that required by commercial common-sense not a means to arrive at what in retrospect the Claimant and perhaps others see as a more advantageous bargain. That would be illegitimate for the reasons given by Lord Mustill in Charter Re v Fagan [1997] AC 313:
"There comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for the court".
We all make unwise bargains from time to time but the fact that we incur burdens that later seem folly does not relieve us from our legal obligation. As I see it the qualification to make is the same as or in substantially similar terms to that set out by Gross J in The Newfoundland Explorer. In the case before me the skipper and crew were reasonably and no doubt deservedly ashore when the fire broke out but their absence was due neither to an emergency nor a requirement of crewing duties. The qualification would have to be a wide one to cover the fire and the absence in this particular case. I have already explained that I do not see the clause as being in any way ambiguous and the fact that its provisions are in a sense inconsistent with some of the standard terms of the policy is, for the reasons given by the Mr Bailey, of little weight. So this claim fails.
The use of the wording "at all times"
- This is the third occasion within a few years when this court has considered "at all times" or similar wording. This suggests that the words, when used on their own without emphasis or explanation, have quite often given rise to misunderstanding with smaller vessels. Since "at all times" requires, at least in some cases, qualification in the interests of common-sense no underwriter should assume that this wording has somehow received judicial blessing.
Claimant's brokers
- The Claimant Mr Pratt is a trawler man skilled in fishing in deep waters but not in the negotiation of suitable terms for marine insurance. Wisely he retained brokers for this purpose. Brokers owe their clients a duty to take reasonable care in the placing of insurance and in the choice of policy wording. At first sight policy wording which provides cover only if the skipper of a trawler is on board "at all times" seems obviously unsuitable for the reasons put forward by Mr Nolan in his submissions on behalf of the Claimant. Before the hearing started I inevitably read a few of the considerable number of papers in the bundle irrelevant to the issues. These include copies of other policies for trawlers obtained by Mr Pratt's brokers in somewhat different terms. One policy from March 2007 to March 2008 contains the condition "warranted owner/owner's skipper on board and in charge at all times whilst underway" so the brokers appear to have had experience, around the time they advised on this policy, of wording which would have protected Mr Pratt in this case. It is not for me to pre-judge any issue arising between Mr Pratt and his brokers but, given the financial constraints in this industry, the amount in dispute and the burdens of costs I will make the observation that the brokers may have questions to answer about their service to Mr Pratt.
Conclusion
- I therefore find for the Defendant. I shall be grateful if counsel will let me have a note of corrections of the usual kind and of what they seek when judgment is handed down, at least forty eight hours beforehand.
GH010323/SCW
