Dornoch Ltd & Ors v Westminster International BV & Ors, Court of Appeal - Admiralty Division, July 17, 2009, [2009] EWHC 1782 (Admlty)

Resolution Date:July 17, 2009
Issuing Organization:Admiralty Division
Actores:Dornoch Ltd & Ors v Westminster International BV & Ors
 
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Neutral Citation Number: [2009] EWHC 1782 (Admlty)

Case No: 2008 Folio 1277

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMIRALTY COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 17 July 2009

Before :

THE HON. MR JUSTICE TOMLINSON

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Between :

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Iain Milligan QC, Guy Blackwood and David Walsh

(instructed by Messrs Stephenson Harwood) for the Claimants

Tom Weitzman QC and Peter Macdonald Eggers

(instructed by Messrs Nabarro LLP) for the First to Third Defendants

Jonathan Gaisman QC and Patricia Edwards

(instructed by Messrs Pinsent Masons) for the Fourth Defendants

Hearing dates: 14,15,18,19,20,21 & 22 May; 3,4 & 5 June 2009

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JudgmentThe Hon. Mr Justice Tomlinson :

1. On 29 April 2009 I delivered my judgment on what have been described as the Phase 1 issues. I shall refer to that judgment, [2009] EWHC 889 (Admlty) as the Phase 1 judgment. This second judgment is to be read with and in the light of the Phase 1 judgment. I do not propose to lengthen this judgment by repeating the introductory passages in the Phase 1 judgment which outline the dispute between the parties. I will have to add some narrative, and to make some findings of fact additional to those facts which were agreed for the purposes of the first hearing. The facts agreed for the first hearing are in any event uncontroversial.

2. In the Phase 1 judgment I recorded that the insured value of the vessel W. D. Fairway for hull and machinery was €73.5 million. There was an interval of very nearly one year between the tender of notice of abandonment on 27 March 2007, and underwriters accepting that the vessel was a constructive total loss, hereinafter ``CTL''. That is because it was not until 10 March 2008 that underwriters were prepared to accept that the cost of repairing the damage would exceed the relevant agreed value, €73.5 million. Boskalis, by which I intend a compendious reference to the Boskalis Group, is critical of underwriters in this regard, and says that they acted unreasonably in not earlier agreeing that the vessel was a CTL and making payment accordingly. I do not have to decide whether that criticism is well-founded, and no argument has been directed specifically to that issue. I express no view on the issue, not least because Boskalis has launched separate proceedings against underwriters with a view to the recovery of interest and/or damages consequent upon what it characterises as underwriters' unreasonable conduct. I should however record that as a result of the time spent in resolving the question whether the vessel was a CTL on the figures Boskalis formed the view, rightly or wrongly, that underwriters had adopted an entrenched position in reliance upon advice which was unreliable in that it came from those who were not acknowledged experts in the field and/or had been commissioned upon an inappropriate and misconceived basis: see for example the e-mail of 29 August 2008 from Mr Oscar Bus, Head of Insurance at Boskalis to its brokers Marsh. Boskalis found this frustrating. Once the question of the realisation of the residual value of the vessel became an issue between the parties, Boskalis believed that underwriters were again basing themselves upon advice from an inappropriately qualified source, in this case Mr Geoff Webster of Vener Marine in the United States. Boskalis was in my view wrong to regard Mr Webster's experience as irrelevant to the valuation of the Fairway. However that may be, it is crucial to a proper understanding of the events with which I am concerned that Boskalis felt aggrieved in consequence of underwriters' handling of its claim for a CTL and felt that history was repeating itself in underwriters' approach to the realisation of the residual value of the vessel following payment for the CTL.

3. I should also record that the total outlay of the underwriters with whom I am concerned was €150 million, comprising €5 million on the primary layer, €68.5 million excess of €5 million on the excess hull and machinery cover, €18.375 million on the excess policy for Outfit and/or Disbursements and €58.125 million for the Excess layer Section B ``Interest Whatsoever''.

Renvoi

4. Before proceeding further I propose first to determine an issue which I left not conclusively resolved in paragraph 89 of the Phase 1 judgment. It is agreed between the parties that at first instance the relevant system or systems of law for determining the incidence of proprietary interests in the vessel prior to, at the time of, and after the purported transfer of the vessel to the Fourth Defendant must be held to be the lex situs. I have determined that at all relevant times the lex situs was Thai law. Without evidence as to the content of the lex situs, I was unprepared to give a definitive answer to the question whether reference to the lex situs in this context includes or excludes reference to the private international law rules, if any, of that system of law. My provisional answer was that reference to the domestic law of the situs is alone permissible. I am now in a position to confirm that answer. There is no principle in Thai private international law application of which will better serve the object of the English conflict rule than will application of Thai domestic law. The question is however academic. If the Thai rule of private international law were to be applied, a Thai court would nonetheless apply Thai domestic law to determine the incidence of proprietary interests in the vessel.

5. On the question of principle, Mr Iain Milligan QC for underwriters argued that there should be recognised an exception to the general rule which I provisionally embraced at paragraph 89 of the Phase 1 judgment. As I understood the argument, it was to the effect that where the lex situs recognises transfer of property by contract alone, as opposed to, for example, imposing as a requirement for the efficacy of a transfer the completion of physical delivery or the effecting of registration, and where the contract in question is governed by a law other than that of the situs, the English court should apply the conflict rule of the lex situs in order to determine the question whether a contractual transfer of property was in fact achieved. On reflection I am not sure that this point is open to Mr Milligan in the light of the concession at Phase 1 and the very limited terms in which I left the point open at paragraph 89 of the Phase 1 judgment. However that may be the argument is, if I have correctly understood it, in my view misconceived. Since I consider that the point is in any event academic, in view of my findings as to the content of Thai law, I do not propose to deal with it at length. It suffices to say that I agree with Mr Jonathan Gaisman QC for Nigerian Westminster that the argument confuses or at any rate appears to confuse the contractual effects of a transfer, or of a transaction said to confer a legal or beneficial title, with the proprietary effects of the transfer or transaction - see Dicey & Morris, Conflict of Laws 14th Edition at paragraph 24-006. I respectfully agree with the analysis of Moore-Bick J in Glencore v Metro [2001] 1 Lloyd's Rep. 284 at pages 290-295, paragraphs 14-32 of his judgment. Moore-Bick J held that the proprietary effects of a contractual transfer are governed by the lex situs, even in a dispute between only the contracting parties. Moore-Bick J adopted a well-known dictum of Diplock LJ in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association, [1966] 1 WLR 287 at page 330:

``... The proper law governing the transfer of corporeal moveable property is the lex situs. A contract made in England and governed by English law for the sale of specific goods situated in Germany, although it would be effective to pass the property in the goods at the moment the contract was made if the goods were situate in England, would not have that effect if under German law (as I believe to be the case) delivery of the goods was required in order to transfer the property in them.''

As Mr Gaisman trenchantly put it, resort is only had to the lex situs because the court is concerned with proprietary rights. If the court were concerned only with contractual rights, resort would not be had to the lex situs at all. The proposed exception to the general rule is therefore on analysis somewhat illusory, since it presupposes, wrongly, that the court is here relevantly concerned with contractual rights.

6. As to Thai private international law, on examination the relevant rules are not dissimilar to those in English private international law. The Act on Conflict of Laws, B.E. 2481 (1938) provides:

``DIVISION III Obligations

Section 13. The question as to what law is applicable in regard to the essential elements or effects of a contract is determined by the intention of the parties to it. If such intention, express or implied, cannot be ascertained, the law applicable is the law common to the parties when they are of the same nationality, or, if they are not of the same nationality, the law of the place where the contract has been made.

When the contract is made between persons at a distance, the place where the contract is deemed to have been made is the place where notice of acceptance reaches the offeror. If such place cannot be ascertained the law of the place where the contract is to be performed shall govern.

A contract shall not be void when made in accordance with the form prescribed by the law which governs the effects of such contract.

...

DIVISION IV Things

Section 16. Moveable and immoveable property is governed by the law of the place where the property is situated.

However, in case of exportation of moveable property, the law of nationality of its owner shall govern from the...

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