“Underwriters note and agree that, in respect of any Transaction, it is hereby confirmed that the Insured is covered under this contract for the Transaction Premium that the Insured would otherwise have received and/or earned in the absence of a Default on the part of the Insured’s client. ‘Actual Sale Price’ means the sum received by the Insured upon the sale of the Subject Matter Insured to the applicable Exchange or to a third party on the open market. ‘Default’ means a failure, refusal or non-exercise of an option, on the part of the Insured’s client (for whatever reason) to purchase (or repurchase) the Subject Matter Insured from the Insured at the Pre-agreed Price. ‘Pre-agreed Price’ mean the amount for which the Insured’s client had agreed to purchase (or repurchase) the Subject Matter Insured from the Insured as specified on the relevant invoice or in the relevant transaction documents, comprising the principal together with any premium or profit element payable to the Insured. ‘Transaction’ means any transaction where, following a Default on the part of the Insured’s client, the Insured sells the Subject Matter Insured to the applicable Exchange or to a third party on the open market. ‘Transaction Premium’ means an amount that is equal to the difference in value between the Pre-Agreed Price and the Actual Sale Price.”
“20.1 Cover against costs, expenses and losses, including consequential loss resulting from an event beyond the control of the Insured, including grading delays, which prevents or substantially delays the Insured from delivering the Subject Matter Insured to the Exchange in the related Futures Month (as defined below) for any reason other than for physical loss or damage to the Subject Matter Insured caused by a peril outside the control of the licensed warehouse keeper. Futures month shall mean the futures month as defined in the purchase contract by the Insured. … 20.3 Any declaration under this clause 20 is to be recorded in accordance with the relevant contract terms and conditions and the Premium is to be calculated at 40% of cover rates. 20.4 Subject to individual declarations prior to Attachment of risk and subject to no previous losses which would be collectable under this contract.”
“… direct financial loss suffered by the Insured, in good faith during the Period and in the ordinary course of business acting upon a “Counterfeit Document” (as defined below) … subject to a limit of USD 5,000,000, for any one event or loss during the Period.”
“Additional Cover Confiscation and Expropriation”
“Subscription Agreement Section”
“ … if there is no damage/fraud/theft, and the transaction runs with complying contracts, BUT the market premium has “vanished” o[r] “reduced”, would then the insurance cover Icestar for that (transactional) loss?”
“… reviewed the document “wish list” and whilst do not feel that there is anything that is covered already [sic], the language for amendments needs to be discussed with the lead Underwriter point by point. He is on vacation until Tuesday of next week and I would rather talk to him than leave it to any deputy. also because of our regulations this endorsement will require the signatures of all Underwriters. Can you bear with me for a few days to make sure we have the required signatures from the market Underwriters? Thanks in advance.”
“Please see the attached “wish list” of Icestar in PDF and Word format”
“before I think of meeting with Underwriters I wanted to run by you the areas which I think could be of concern to Underwriters”
“Page 4.Section 2. Underwriters to agree that in respect of any transaction it is confirmed that the Insured is covered under this contract for transaction premium that the insured would otherwise have received and or earned in the absence of a default on the part of the Insured’s client (do not understand this – have you seen this before Lee?) I will be in later – let me know if you have any thoughts.”
“With reference to the above – and as discussed very preliminary – before we submit these to Underwriters, could we make the following observations please, and perhaps for further discussion either in London or the Netherlands.”
“The contract change made under Endorsement 4 is deleted and replaced with the following clause”
“Contract Extension under Endorsement 4. Could you please explain the relevance of the “transaction premium” contained under 1-2-3”
“ENDORSEMENT ATTACHING TO AND FORMING PART OF COVER NOTE NO. QM 349770”
“Attached is the proposed new wording which incorporates the changes you mention when we were in your office last week. I hope you didn’t mind but I have taken the liberty of having a full discussion with the lead Underwriter and make sure that we have no hidden surprises. The Underwriters have agreed to amend the “fraudulent document” wording with no sub limit. What the Underwriters have asked is a brief outline of your collateral management structure and due diligence procedures – we could discuss this next week. (Page 18 on the proposal) Underwriters have agreed the Missing Goods wording ( subject to your approval) on page 9. Underwriters will agree to increase the limit on the energy-oil- section to USD250,000,000. In doing so Underwriters will have to reserve this capacity on a product that is currently trading very sparingly. Whilst this can be achieved I will need to introduce new markets to the increase the capacity of the policy to accommodate this increase. Absolutely no problem with this but the current market premiums levels will be diluted. Just wondering, and we can discuss later, if this limit is realistic. Perhaps we can discuss at the meeting. Lawar, look forward to any comments on the attached.”
“David: Please confirm: is it appropriate for the Transaction Premium cover to appear up front, and is it clear that this cover is separate to the marine cargo and storage cover. Just like CEND and Business Contingent cover?”
“I have seen the comments made by Pauline and it appears her main concern is regarding Transaction Premium. Reading the clause it mentions that the Insured is covered by this policy for the transaction premium they would have earned if client of the insured defaults, regardless whether there has been any physical loss or damaged to the goods. Am I reading this correctly, and is this understanding of underwriters?”
“No you are correct but they appear to want this as a separate section. I saw Brian with this and his view is “they have the coverage and they should be satisfied”
“Dear Friends at Icestar. Thank you for your track and changes to the proposal. We very much appreciate your time on this subject. Thought it best because of the time frame to discuss with leading Underwriters and they are very comfortable with the suggested changes but make the following recommendations: Page 7 – sanctions exclusions: Currently the following Countries are subject to the Sanctions Exclusions clause To/from Iran ( soon to be lifted) Iraq. Syria. Libya. Myanmar, Yemen, Afghanistan, N Korea and Cuba. We can just include 131. the current Countries that are excluded but if others are subsequently added to the “naughty boy” list then we have to add/subtract as applicable. As this is a UN requirement Underwriters would feel relaxed either way but I think the recommendation from our compliance section that to leave this clause as currently in the policy alone in case we fall foul of the regulators. However Underwriters would be happy either way. Your decision really. 132. Page 9 - Transaction Premium: You are suggesting that a separate section for this similar to the CEND etc. We have deliberately sited this to the Basis of valuation section because this clause will determine the amount of recovery the Bank can obtain from the contract Underwriters. However again, we are happy to amend as you suggest. 133. Other than that we preparing the cleaned up copy and would appreciate your comments on the above before sending to you for approval.”
“they have the coverage and they should be satisfied”
“Do you mean the final slip showing the market?”
“Yes, a copy of the clean version you present to the market to sign”
“Following the renewal of the above account, please find attached our endorsement together with our final wording incorporating some minor alterations following a review by the clients’ in-house counsel i.e. capital letters replacing lower case, comma rather than semi colon etc.”
“Not to the knowledge of Icestar”
“To us, it is very clear: this loss falls under Clause 1.5 of Section 2: General Conditions”
“We can perhaps get together tomorrow for a chat after Nick [North] and Matt [Jones] have deliberated. If this is a financial guarantee, it is a no-no within RSA and I will be instructed to change the wording or manage an exit.”
“Just looking at Nick’s notes and this incident comes under the transaction premium section of the policy (page 12). This sections covers the Insured in the event of a default on the part of a Insured’s client. In this case the client is Euromar – a large purchaser of commodities and they are being liquidated. ABN have established and confirmed that all the good under this purchase agreement at in situ and in good condition. They have already sold on the open market butter cake which accounts for about 10% of these transactions and the sale price was the same as the purchase price. The remaining goods should be offered to the open market and ABN have several good contacts to move this forward but before doing so want to know if Underwriters are happy for them to look for offtakers or if Underwriters would like to explore the possibilities of re-sale. In all of these movements, ABN have acted as prudently uninsured and are mitigating the position. We have invited Matt to attend and he would be welcome.”
“Purpose of the GUA The General Underwriting Agreement is a replacement for existing Leading Underwriter Agreements, providing a form of standardisation where practical and appropriate. The purpose of the GUA is to: ● creates an agreement between the subscribing Underwriters on a particular contract for the management of changes ● clarify the extent of the delegated authority to the Slip Leader and Agreement Parties ● enable each class of business to define their specific requirements/needs within a common framework ● allow a single Slip Leader and/or Agreement Parties to agree contract alterations where empowered to do so by the GUA ● ensure all Underwriters are notified of alterations, where appropriate The GUA, as with previous Leading Underwriter Agreements, is not intended to affect the several liability of each subscribing Underwriter. As made clear throughout the GUA, each subscribing Underwriter’s obligations remain several and not joint and limited to the extent of its signed subscription. The GUA in outline The GUA is an agreement between the subscribing underwriters on a particular contract relating to the level of delegated authority in respect of post placement alterations. The GUA structure provides a standard agreement that is referenced from the slip. If there is a difference between the GUA and the slip terms, the slip overrules the GUA. This enables, where appropriate, the terms and conditions of a Policy/Contract to be tuned to individual contract needs. The GUA is intended to be used with the new LMP Slip, but can be incorporated into any other form of slip. The slip should make clear reference to the GUA within the Subscription Agreement section under “Basis of Agreement to Contract Changes”
“[10] The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds[1971] 1 WLR 1381 , 1383H1385D and in Reardon Smith Line Ltd v Yngvar HansenTangen (trading as HE Hansen – Tangen) [1998] 1 WRL 896, 912-913 Lord Hoffmann reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham of Cornhill in an extrajudicial writing, “A New Thing Under the Sun? The Interpretation of Contracts and the ICS decision” (2008) 12 Edin LR 374, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree. [11] Lord Clarke of Stone-cum-Ebony JSC elegantly summarised the approach to construction in the Rainy Sky case[2011] 1 WLR 2900 , para 21f. In the Arnold case[2015] AC 1619 all of the judgments confirmed the approach in the Rainy Sky case: Lord Neuberger of Abbotsbury PSC, paras 13-14; Lord Hodge JSC, para 76 and Lord Carnwath JSC, para 108. Interpretation is, as Lord Clarke JSC stated in the Rainy Sky case (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (the Rainy Sky case, para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299, paras 13, 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. [12] This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: the Arnold case, para 77 citing In re Sigma Finance Corpn[2010] 1 All ER 571 , para 12, per Lord Mance JSC. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each. [13] Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance JSC spoke in Sigma Finance Corpn[2010] 1 ALL ER 571 , para 12, assists the lawyer or judge to ascertain the objective meaning of the disputed provisions.”
“Since an all risks marine cargo policy is generally construed as covering only losses flowing from physical loss and damage to goods, there must be clear words indicating a broader intention”
“[11-006] There is a presumption that the words to be construed should be construed in their ordinary and popular sense, since the parties to the contract must be taken to have intended, as reasonable men, to use words and phrases in their commonly understood and accepted sense. This presumption can be rebutted in certain circumstances which are examined later in this chapter, but it is frequently the case that there is no reason to depart from the ordinary meaning of the words in question. [11-007] It is an accepted canon of construction that a commercial document, such as an insurance policy, should be construed in accordance with sound commercial principles and good business sense, so that its provisions receive a fair and sensible application. Several consequences flow from the principle. The literal meaning of words must not be permitted to prevail where it would produce an unrealistic and generally unanticipated result, as, for example, where it would unwarrantably reduce the cover which it was the purpose of the policy to afford. [11-008] It follows that in interpreting any clause of a policy, it is correct to bear in mind: (1) the commercial object or purpose of the contract; and (2) the purpose or function of the clause and its apparent relation to the contract as a whole. It may then become apparent that the literal meaning of the clause must yield to business sense or that an ambiguity in the wording can be resolved, or the ordinary meaning of the words used may need to be modified. [11-009] If a literal reading of the word leads to an absurd result or one manifestly contrary to the real intention of the parties, it should be rejected in favour of a more reasonable interpretation if that can be adopted without doing violence to the words used.”
“One of the canons of construction is that, in order to arrive at the true interpretation of a document, a condition must not be considered in isolation but in the context of the document as a whole. A related principle is that the court should always lean towards a construction that validates the contract, on the basis that the parties are unlikely to have intended to agree to something that was legally ineffective... And perhaps the most important canon of construction for the purposes of the present case is that, in construing a contract, all parts of it must be given effect where possible, and no part of it should be treated as inoperative or surplus. Whilst the presumption against surplusage is unlikely to be useful in interpreting a standard form of contract ... this is not of course a standard form contract but a bespoke contract carefully drafted by the parties to meet the exigencies of this particular and significant commercial arrangement”
“this insurance is not contingent on physical loss or damage”
“This contract is to protect against all risks of physical loss or damage to the Subject Matter Insured from whatsoever cause arising”
“The contract change made under Endorsements 3 is amended and restated as follows”
“Marine Cargo and Storage Insurance”
“GENERAL CONDITIONS: (Applicable to all sections of this contract) Notwithstanding anything contained herein to the contrary, it is agreed and understood in general terms that it is the intention of this contract to protect the interest of the Insured at all times and in all circumstances. This contract is to protect against all risks of physical loss of or damage to the Subject Matter Insured from whatsoever cause arising. (emphasis supplied) All other conditions are more fully detailed in each respective section and/or other parties, with the prior written consent of the Insured.”
“All goods and or merchandise appertaining to the Insured’s business for which the Insured is the legal owner or for which the Insured is at risk or responsible, contractually or otherwise, consisting principally but not limited to [(A) Hard commodities, (B) Soft commodities, (C) Energy Commodities]”
“To explain how they operate, and they have just 42 people worldwide, and operate on a repo plan where they physical purchase the goods and therefore are owners, and either sell them back to the supplier after a given time, normally 6 months, or to any interested party. This is directly opposite to traders who speculate on particular interests”
“Any alteration which increases the limits of liability monetary exposure …”
“it is necessary to show either (1) that the document fails to give effect to a prior concluded contract or (2) that, when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record. In the latter case it is necessary to show not only that each party to the contract had the same actual intention with regard to the relevant matter, but also that there was an outward expression of accord meaning that, as a result of communication between them, the parties understood each other to share that intention.”
“There is a presumption that a policy which is issued by the insurer and accepted by the insured contains the complete and final contract between the parties. Consequently, the courts’ equitable jurisdiction to rectify insurance policies is exercised with restraint inside certain well-established limitations, or else it would tend to destroy certainty in insurance business. When a plaintiff seeks rectification, he must establish as a fact that the parties were agreed upon the point in question, and that the policy accidentally fails to record their agreement.”
“Contract Certainty Principles A When entering into the contract The insurer and broker (where applicable) must ensure that all terms are clear and unambiguous by the time the offer is made to enter into the contract or the offer is accepted. All terms must be clearly expressed, including any conditions or subjectivities. Explanation (A.1) The proposed contract is the document which contains the offer and can take many forms. Individual market protocols define these. Examples include: completed presentation templates; proposal forms; slips or other placing documents. Terms are the contractual provisions of the contract, and should be clear and unambiguous. Contract terms should comply with all relevant regulations and codes of practice. Guidance … All terms should either be expressed in full or unambiguously identified; for example, by specific reference to bespoke or model material. … Insurer actions (A.3) The insurer should check that the proposed contract clearly identifies all of the terms by the time it formally commits to the contract. Where there is more than one participating insurer, each insurer should satisfy itself that adequate contract checking has been completed. Where the contract is to provide cover that will commence prior to the contract being entered into, the insurer should ensure that: - this is permissible, having regard to the class of business and all appropriate laws and regulations; - the scope of coverage for any claims which arise in respect of the period and the date on which they enter into the contract, is clear. Broker actions (where a broker is involved) (A.4) The broker should provide the necessary risk and contractual information that represents the insured’s demands and needs, in order to enable to agreement of all terms. … C Demonstration of performance The insurers and brokers (where applicable) must be able to demonstrate their achievement of principles A and B.”
“It may be difficult to treat a statement made in the course of negotiations for a contract as a term of the contract itself, either because the statement was clearly prior to or outside the contract or because the existence of the parol evidence rule prevents its inclusion. Nevertheless, the courts are prepared in some circumstances to treat a statement intended to have contractual effect as a separate contract or warranty, collateral to the main transaction. In particular, they will do so where one party refuses to enter into the contract unless the other gives him an assurance on a certain point or unless the other promises not to enforce a term of the written agreement”
“Estoppel by convention may arise where both parties to a transaction “act on assumed state of facts or law, the assumption being either shared by both or made by one and acquiesced in by the other”
"It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption … It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."
"… (i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them. (ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it. (iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter. (iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties. (v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position."
“Although there are superficial differences of formulation it seems to us that these are more apparent than real, and that in practice there is likely to be little if any material difference in the outcome whichever version of these principles is applied.”
“what do you expect me to do with this”, which implied that he was surprised by the level of changes requested. When he asked Mr. Mullen if he understood what was being asked of him, he did not receive a reply that suggested that Mr. Mullen understood any better than Mr. Beattie did. Mr. Mullen said, basically, that he was unsure. As far as the TPC itself was concerned, he said that he gave his interpretation, and then asked Mr. Mullen if he understood it in the same way, “to which I got no confirmation or denial”
“He shall we say fudged the issue”
“look this is what I understand this to mean as per our previous conversation and I am correct in that assumption, aren’t I”
“I had the wording in front of me, which was sacrosanct as far as I was concerned … I’m sure Brian didn’t mention it, about the BOV [Basis of Valuation]”
“Q. Well can you recall the 29th, the meeting? A. I honestly can’t, no. Q. Okay. So Mr Beattie says that he was happy to agree having the TPC moved on the basis that it only related to the basis of valuation and that's what he told you. Again, do you agree, disagree or can't recall? A. If it was in this document, this document you're showing me, and I imagine it was in the two places, he obviously agreed it. Q. Yes. But my question was: he told you that he was doing it on the basis that it was a basis of valuation clause still. Do you recall that and do you -- well, do you recall that? A. I don't recall him saying that, no. Q. He might have said that? A. "He might have said that?", did you say? Q. Yes. He might have said that to you? A. Again, I can't recall the conversation but he may very well have done.”
“I have seen the comments made by Pauline and it appears her main concern is regarding Transaction Premium. Reading the clause it mentions that the insured is covered by this policy for the transaction premium they would have earned if client of the insured defaults, regardless whether there has been any physical loss or damaged (sic) to the goods. Am I reading this correctly, and is this understanding of underwriters.”
“If the discussions alleged by underwriters had taken place during the20 January 2016 meeting (which I attended), I would have known that Mr. Beattie understood the TPC to be a basis of valuation, as underwriters allege he did. In those circumstances, it would have made no sense for me to ask David if it was underwriters’ understanding that the TPC provided cover “regardless whether there has been any physical loss or damage to the goods” as I did on28 January 2016 at 12:21. For that reason I do not think that the underwriters’ account can be correct.”
“Q. If Mr. Mullen and Mr. Beattie discussed the TPC clause as a basis of valuation clause, that’s something that you probably wouldn’t even remember or remark on. That’s fair, isn’t it? A. Yes. I can’t recall that being referred to as a BOV clause. Q But if it had been – you see Mr. Beattie says that he told Mr. Mullen that he understood the TPC related only to the basis of valuation. If he did say that, it wouldn’t be too surprising if you can’t now remember. A. Correct. I mean it was such a long time ago.”
"Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth."
"I respectfully agree with Lord Justice Browne when he said in re F, [1976] Fam. 238 at p. 259, that in his experience it was difficult to decide from seeing and hearing witnesses whether or not they are speaking the truth at the moment. That has been my own experience as a Judge of first instance. And especially if both principal witnesses show themselves to be unreliable, it is safer for a Judge, before forming a view as to the truth of a particular fact, to look carefully at the probabilities as they emerge from the surrounding circumstances, and to consider the personal motives and interests of the witnesses. As Lord Wright said in Powell v. Streatham Manor Nursing Home sup. at p. 267: … Yet even where the Judge decides on conflicting evidence, it must not be forgotten that there may be cases in which his findings may be falsified, as for instance by some objective fact … and he referred in particular to some conclusive document or documents which constitute positive evidence refuting the oral evidence of the witnesses."
"And it is not to be forgotten that, in the present case, the Judge was faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years before. In such a case, memories may very well be unreliable; and it is of crucial importance for the Judge to have regard to the contemporary documents and to the overall probabilities. That observation [ie of Robert Goff LJ] is, in their Lordships' opinion, equally apposite in a case where the evidence of the witnesses is likely to be unreliable; and it is to be remembered that in commercial cases, such as the present, there is usually a substantial body of contemporary documentary evidence."
“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party's internal documents including emails and instant messaging. Those tend to be the documents where a witness's guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence.”
“Attaching to and forming part of Policy No. QM349770L The following amendments are hereby noted by Underwriters hereon”
“Underwriters note and agree that, in respect of any Transaction, it is hereby confirmed that the Insured is covered under this contract …”
“The contract change made under Endorsement 4 is deleted and replaced with the following clause:” (underlining in original) The following amendments are hereby noted by Underwriters hereon”
“If this is a financial guarantee, it is a no-no within RSA and I will be instructed to change the wording or manage an exit”
“David, I know you are travelling, but assume you are picking up your emails. I am told today that the ABN Amro “Financial loss” on the aborted cocoa sale in Europe could be as much as$30m . This, combined with the fraudulent documentation loss on ANZ and the well documented misappropriation loss on your ex-client account will probably bring to an end our foray into bank traders’ accounts. Indeed, it may be better if I shut them all down prior to my final departure rather than leave the task to others. This is just a heads up for discussion and we can discuss further next week. Regards, Brian.”
“we are expressly stating that market premium loss is not contingent on physical loss or damage to the commodity”
“We have deliberately sited this to the Basis of valuation section because this clause will determine the amount of recovery the Bank can obtain from the contract Underwriters”
“Non-Avoidance The Underwriters will not: a) Seek to avoid or repudiate this contract for non-disclosure or misrepresentation other than fraudulent non-disclosure or fraudulent misrepresentation; or b) Rely on, or assert any breach of warranty as grounds for the Underwriters to be discharged from any liability other than where the warranty was given fraudulently; or c) Seek damages for or seek to reject a claim for loss on the grounds of: i. Non-disclosure or misrepresentation other than fraudulent non-disclosure or fraudulent misrepresentation; or ii. Any breach of warranty other than where the warranty was given fraudulently.” a) Seek to avoid or repudiate this contract for non-disclosure or misrepresentation other than fraudulent non-disclosure or fraudulent misrepresentation; or b) Rely on, or assert any breach of warranty as grounds for the Underwriters to be discharged from any liability other than where the warranty was given fraudulently; or c) Seek damages for or seek to reject a claim for loss on the grounds of: i. Non-disclosure or misrepresentation other than fraudulent non-disclosure or fraudulent misrepresentation; or ii. Any breach of warranty other than where the warranty was given fraudulently.”
“At common law a person could not contract out of liability for fraud inducing the making of a contract with him, at least where the fraud was his own. It is, however, possible that he could do so where the fraud was that of his employees or agents and there seems no doubt that it was possible, by a provision of the contract itself, to exclude or modify the normal consequences of innocent or negligent misrepresentation.”
“[105] In my judgment, in a case where the party said to have elected has been represented by solicitors and counsel whose conduct is relied upon as amounting to an election, it is normally to be inferred that such conduct has been specifically authorised by the client and has been the subject of legal advice. If, on the evidence before the court it is established that either the legal advisers or the client had knowledge of the facts giving rise to the right said to have been waived at the time when the affirmatory conduct took place, there must be the further inference that the party has been given legal advice as to his rights arising out of those facts. If that inference is to be displaced, there must be evidence of the advice, if any, that was given by solicitors and counsel and of the extent to which the party concerned was aware or was made aware of the right which he appears to have abandoned.”
“[160] The need for knowledge of the legal right, although established by authority, is difficult to justify in principle. The requirement is inconsistent both with the principle that ignorance of the law is no defence and with the principle that in the field of commerce the existence and exercise of legal rights should depend on objective manifestations of intent and not on a party's private understanding. It is also potentially extremely difficult for the other party to prove such knowledge – all the more so since any relevant legal advice which may have been received will be protected from disclosure by legal professional privilege. The unfairness of the rule is mitigated, however, by a presumption that a party which had a legal adviser at the relevant time received appropriate advice. That presumption can only be rebutted by waiving privilege and proving otherwise: see Moore Large & Co Ltd v Hermes Credit & Guarantee plc [2003] Lloyd's Rep IR 315 , 334-6, paras 92100.”
“Failure to return the premium is not per se a waiver of the right to avoid for non-disclosure. But refusal to pay a claim while not declaring avoidance and making a return of premium is evidence of an intent to affirm the contract.”
“78. It is implicit in the basis of avoidance that an insurer who has not avoided a policy despite knowledge of non-disclosure may subsequently do so if he learns of material additional nondisclosure by the insured. The requirement of affirmation that the insurer has knowledge of the facts not disclosed is to the same effect. An insurer may be reluctant to avoid for nondisclosure, for reasons connected with its appreciation of its liability or the effect of non-disclosure on its reputation or some other reason, and decide not to avoid a policy initially, but reasonably wish to do so when additional non-disclosure comes to light. But not every new fact not disclosed will entitle an insurer to avoid after affirmation. Just as it is unnecessary for affirmation that the insurer knows (to use the language of Mance J in the Icci case) “all aspects or incidents of the (undisclosed) facts”, provided he “knows sufficient of the facts to know he has the right to avoid”, so his learning of the immaterial aspects or incidents of the undisclosed facts cannot entitle him again to elect to avoid the policy. The new nondisclosure must make a material difference to the reasonable insurer's decision whether to affirm or to avoid the policy.”
“not to the knowledge of Icestar”
“However, insurers specifically further rely upon the inducements made by Mr. Mullen and Mr. Lockyer in respect of their respective representations, as set out above. In those circumstances, insurers reserve their position to avoid or repudiate the policy for non-disclosure or misrepresentation based upon the above material representations Insurers fully reserve, and do not waive, any of their rights and defences under the policy (including the revised policy) and at law, including their right to assert additional grounds for avoidance and/or recession [sic – presumably rescission] or, alternatively, revise their coverage position after the review of any further documents and information that the assured is able to provide”
“The position on coverage”
“Further or alternatively, if, as the Bank contends, the Transaction Premium clause was intended to and/or did give 564. rise to a separate head of cover in respect of credit risks and/or financial defaults, then: a. that was a material fact of which a reasonable and prudent underwriter would have desired to be informed before deciding whether, and if so on what terms, to agree [the 2015 endorsement and/or the 2016 Policy] …”
“… if, contrary to the case of the First to Fourteenth Defendants herein, the Transaction Premium clause does not have the application, meaning and effect referred to in paragraphs 43- 44 above and/or it was not specifically agreed between Mr. Beattie and Mr. Mullen that it had no such application, meaning and effect, then RSA was induced to underwrite the 2016 Policy and/or was induced to write it on more favourable terms [than] would otherwise have been the case …”
“If, as the Bank and Edge assert, but the underwriters do not admit (or deny) their purpose and intention was to obtain credit risk cover, the policy is voidable and is hereby avoided for non-disclosure of that purpose and intention”
“Further or alternatively, and if the wish list referred to in paragraphs 14-15 above was in fact agreed by Mr. Beattie on behalf of RSA and/or if a valid and binding endorsement to the 2015 Policy arose out of it, which is denied, then … a. the fact that the wish list and/or a written endorsement had been agreed was a material fact … If the wish list and/or a written endorsement had been agreed, then that would have been material …”
“[134] The starting point iss.18 of the Marine Insurance Act 1906 (“the MIA”), which provides: “18. — Disclosure by assured. (1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract. (2) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk. (3) In the absence of inquiry the following circumstances need not be disclosed, namely:— (a) Any circumstance which diminishes the risk; (b) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know; (c) Any circumstance as to which information is waived by the insurer; (d) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty. (4) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact. (5) The term “circumstance” includes any communication made to, or information received by, the assured.” [135] Mr Ashcroft distilled a series of propositions which I am content to adopt as accurate general statements of the law. They were as follows: (a) Non-disclosure is the failure to communicate a material fact within the knowledge of the assured which the insurer has not the means of knowing or is not presumed to know. (b) The burden of proof in relation to any allegation that a fact or matter has not been disclosed is upon the insurer. (c) In general terms, a fact or matter is material if it would have been taken into account by a hypothetical prudent insurer when assessing the risk. (d) But, a minute disclosure of every material circumstance is not required. The assured complies with the duty if he discloses sufficient to call the attention of the underwriter to the relevant facts and matters in such a way that, if the latter desires further information, he can ask for it. A fair and accurate presentation of a summary of the material facts is sufficient if it would enable a prudent insurer to form a proper judgment, either on the presentation alone, or by asking questions if he was sufficiently put upon enquiry and wanted to know further details, whether to accept the proposal, and, if so, on what terms. (e) Underwriters should listen carefully to what they are being told; they cannot complain if they do not grasp the detail or the implications of it. (f) In accordance withs.18(3)(b) of the MIA , in the absence of inquiry, there is no need to disclose a fact or matter that the insurer already knows, or is presumed to know; there is therefore no duty to disclose matters of common notoriety or matters that the insurers should, in the ordinary course of business, know. In the context, the test is objective. One asks what a reasonable insurer, writing the particular type or class of business concerned, would, or should, know. A reasonable underwriter is presumed to know matters which he should have known from the facts in his possession or matters which he had means of learning from the sources available to him. A reasonable underwriter is presumed to know the ordinary incidents or attributes of any peculiar or specialist risk he undertakes: every underwriter is presumed to be acquainted with the practice of the trade he insures; if he does not know, then he ought to inform himself. Because of these aspects, and absent inquiry by the insurer, only unusual elements affecting the risk have to be disclosed by the proposer. (g) As regardss.18 (3) (c) of the MIA , waiver in insurance law bears a wider meaning than it does in other areas of the law. There is no need for an intentional act with full knowledge of the facts. If the facts and matters disclosed give a fair presentation of the risk, the underwriter must ask if he wishes to have more information; further, even if the initial presentation was unfair, waiver might arise if the information disclosed was such as to prompt a reasonably careful insurer to make further inquiries. In short, if the insurers receive information, which taken on its own, or in conjunction with other information known to them or presumed to be known to them, would naturally prompt a reasonably careful insurer to make further inquiries, then, if they omit to do so, they waive disclosure of the material facts and matters which such an inquiry would have revealed. A particular case in which insurers may be put upon inquiry is one where the character of the ship to be insured puts them on notice that specific preparations are or may be required before it puts to sea. Finally, an assured is entitled to assume that the insurers are waiving disclosure of matters concerning which they appear to be indifferent or disinterested. … (i) Even where there is non-disclosure of a material fact, if this does not in fact influence the judgment of the actual underwriter, avoidance is not justified. …To justify avoidance, the non-disclosure must be a real and substantial cause affecting the decision of the insurer to enter into the contract, or to do so on the terms agreed, the insurer bearing the onus of proving inducement on the balance of probabilities. No presumption of fact applies where the underwriter is called to give evidence.” “18. — Disclosure by assured. (1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract. (2) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk. (3) In the absence of inquiry the following circumstances need not be disclosed, namely:— (a) Any circumstance which diminishes the risk; (b) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know; (c) Any circumstance as to which information is waived by the insurer; (d) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty. (4) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact. (5) The term “circumstance” includes any communication made to, or information received by, the assured.”
“But either party may be innocently silent, as to grounds open to both, to exercise their judgment upon.”
“Neither is the insured bound to give the insurers advice on the legal consequences of the facts disclosed or on other matters”
“Thus, when loss experience on marine business is recorded in triangulated form, the data itself is material and ought to be disclosed, but the insured’s own estimates of future losses calculated from the loss statistics need not be disclosed since the insurer is in as good a position to calculate them as is the insured. In such cases the concept of utmost good faith has to be accommodated within the framework of a commercial negotiation. “As I see it”, said Waller J in Pan Atlantic Insurance Co v Pine Top Insurance Co, “the negotiation is a commercial one, the broker does not have an obligation to tell the underwriter how to do his job”
“… the vice of misrepresentation and non-disclosure is … that a breach of the duty of good faith has led the underwriter to approach the proposal on a false basis.”
“The assured is not to keep anything back which goes to the computation of the "contingent chance", for otherwise there is no "fair presentation", and the underwriter is led to approach the "risk understood to be run" on a false basis ... Every fact and circumstance which can possibly influence the mind of any prudent and intelligent insurer, in determining whether he will underwrite the policy at all, or at what premium he will underwrite it, is material.”
““Well, what’s all this about? I don’t really get this,” that’s kind of what I would expect him to say, because I didn’t get it either”
“Yeah, I think −− I think, to be fair, I think they should be able to −− they should be able to see. But they may not necessarily −− they might be able to see that there’s something that’s not normal. In which case, it’s when they’d said, “Well, go away and find out” or, “Come back and talk to me about it,” or ask specifically to understand “what you’re trying to get at here”
“Is it all as expiry, or are there any changes”
“The insurer is presumed to know his own business and to be able to form his own judgment on the risk as it is presented to him. The duty relates to facts not opinions. The duty is essentially a duty to make a fair presentation of the risk to the insurer”
“The slip that was sent up to Reader [the broker in London] clearly showed that particular risk … Reader had prepared a slip from the slip sent up to him, but unfortunately it omitted words that were very material. On the slip which he presented there was nothing to indicate this particular risk”
“All else as before”
“A relevant inquiry is as to what the representee would have done if he had been given sufficient information to correct the falsity of what had been said. Any other question would not relate to the falsity of the representation but to what the representee would have done if he was given further information (of uncertain extent) beyond that necessary to ensure that there was no misrepresentation. That would involve asking what the representee would have done if he had been given a representation different to the one which he was actually given.”
“if I had not been told this, I would have made sure that I reviewed the policy and asked what changes there had been, and unless satisfied with each and every change, I would not have written the policy”
“All rates terms and conditions as expiry”
“As expiry but brokerage up from 22.5%”
“This policy covers ABN AMRO for loss/damage to products where finance provided”
“Thus, I believe that I was specifically told that the Policy covered the Bank for loss and damage to products where finance was provided”
“Expropriation/Confiscation included”
“the duty is generally this, provided that in the following particular situation the duty is this”
“Returning to the main line of the argument, it is at once apparent that some limitation must be placed on the full width of the language of General Condition 2. This follows from the fact that the condition applies to all sections of the policy; not just section 3. If the clause were to be taken as meaning that the insured must take all reasonable care of the property insured and all reasonable care to avoid accidents, then the insurers could never be liable under section 11, for liability under section 11 pre-supposes that the insured or a member of his family is legally liable to a third party. Legal liability in the great majority of cases depends on want of reasonable care. So a wide construction of General Condition 2, requiring the insured to take all reasonable care, would be altogether repugnant to the cover apparently afforded by section 11 of the policy. Similarly, the insurers would escape all liability under sections 1 and 2 in the very ordinary case of damage to a house or its contents by fire (one of the insured perils) if the fire were caused by the negligence of the insured. That could not be right.”
“Secondly, Mr. Wadsworth argued that the recklessness test applies only to liability insurance such as was in issue in Fraser v. Furman, not to property insurance. In the case of liability insurance, there is nothing to insure at all unless the insured is liable to a third party. In the case of property insurance, that is not so. Therefore, in the case of property insurance, there is no need to give a restricted meaning to the words. ”
“ … but you have to appreciate that commodities are stored all over the world. No commodity bank that does secured financing on commodities sends an independent quality inspector to every single stock they’re financing. It’s just not market practice. … But they’re not traders, they’re financiers and so they wouldn’t always be able really look at … a certificate and assess exactly what that certificate means. They do a very detailed level of due diligence on their client, on their position in the market, what would they need the product for. For us we had pre-sold these goods on an as-is, where-is basis to a client that was at that point in time well respected and we expected to buy it from us. So no, it’s also not practice for a lot of banks to get quality certificates for all the commodities that they finance on a secured basis”
“It wouldn’t be a breach, but it would still be a break in the chain of causation”
“‘When questions of causation arise in contracts, points of construction are often involved. The contract defines the event which sets in motion the train of consequences. If in this respect the contract is misconstrued and the angle of view is, as it were, incorrectly plotted, the view will be wrong ... ”
“He made it clear, first of all, that the test of causation is a matter of interpretation of the policy and that “[t]he true and the overruling principle is to look at a contract as a whole and to ascertain what the parties to it really meant”.”
“No you are correct but they appear to want this as a separate section. I saw Brian with this and his view is “they have the coverage and they should be satisfied”
“perhaps have a chat with him but otherwise make the amendment as per NRF’s advice”
“Was Edge obliged to make clear to RSA the intended meaning and effect of the TPC and the non-avoidance clause”
“Look, there is a credit risk. What are your feelings about it”
“… by all means have that discussion with the cargo underwriters. Once you’ve given your advice to your client, this is what you should do. If you’re insistent therefore I will have that discussion with underwriters but – and at that point in the knowledge – you would obviously make full disclosure of all the facts.”
“ …yes, quite rightly he’s been instructed to get cover in place and, yes, indeed, he may well in that event discuss with the cargo underwriters but in doing so you’d make – you would need to make it abundantly clear to those cargo underwriters that this is something that you don’t normally do, because they don’t, and “actually I want to make it very clear to you what we’re covering to avoid any doubt or any potential dispute in the future”
“As far as the TPC is concerned, it’s a new wording, it’s a new clause. Nobody in the cargo market would be familiar with it. Therefore, your duty … would be to say, “Well, this is what it means”
“Q. And in circumstances in which he was broking the clause to participants in the same market, the cargo market, he was under an obligation to tell them what it was intended to achieve because he couldn’t assume that they would understand it as credit risk, could he? A. Well, no … I don’t agree with that. I think that … he had an instruction from the client to ask the cargo underwriters to agree. They … had an opportunity to read the endorsement and decide whether they wanted to agree it or not and [if] they were unclear to ask any questions. If you are asking me whether it would be better if Mr. Mullen was feeling [un]comfortable with the endorsement and as to what the TPC meant, then quite clearly it would have been better that he had but I don’t think that he had to volunteer that information. Q. Wouldn’t merely have been better, it’s what any reasonably competent broker would have done, isn’t it, to protect the interests of their client? … You agree with that? A. Yes.”
“is it clear that this cover is separate to the marine cargo and storage cover”
“Do you agree that this is credit risk cover”
“going to see the wrong market made it all the more important, for the broker to explain to the underwriter what the transaction premium clause was intended to address”
“do not understand this – have you seen this before Lee”? He then asked the Bank, on9 July 2015 , to explain the “relevance of the “transaction premium” contained under 1-2-3”
“the language for amendments needs to be discussed with the lead Underwriter point by point”
“Bits that needed no discussion and others that needed some explanation”
“If the defendant’s negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given. … Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour.”
“Q. But you’ve said in your witness statement that you would look to take out insurance for all of Transmar, Euromar, Louisiana – ”