re 529 LLOYD’S LAW REPORTS Editor: Miss M. M. D’SOUZA, LL.B., Barrister Part 6 ‘The “Zephyr” 11985] Vor. 2 COURT OF APPEAL May 20, 21, 22 and 23, 1985 GENERAL ACCIDENT FIRE AND LIFE ‘ASSURANCE CORPORATION AND OTHERS PETER, WILLIAM TANTER "AND OTHERS. (THE “ZEPHYR”) Before Lord Justice Ourver, Lord Justice SrapiiEN Brown and Lord Justice Mumm. ‘Reinsurance — Indemnity — Vessel constructive total ‘os Relasuranee placed by broker before original Solar neon of dry of eae Legal Ut of long alton. Jn December, 180, MS. was negotiating buy’ a vessel Amtelveld (renamed ‘asked his insurance brokers, the ith fblain a quote for suitable insurance. (On the London marine market, the insurance placed by the Brokers covered. formal marine pers (heal sks insurance) and since the all isk Underwriters might wish to reinsure the whole or part of the total loss risk, the broker obtained uote from the first defendant, a total los leading Underwriter. Having obtained the frst defendant's Sgnature to this slip at a total loss rate of 43 per tent, the broker was then ina position to Oban ‘quotes from some all risks underwriters. ‘The purchase ofthe vessel went ahead and on. ‘Dec. 29,1980, the brokers were asked to place the ingurance. On Jan. 2, 1981, they confirmed that all the insurance cover which had been requested had ‘been completed, ‘On Jan, 11 the vessel anchored off Bilbao. On Jan. 13 she got into dificaltes in strong wind fendanis to ‘and drifted ashore. The vessel suffered serious damage and the crew had to be taken off (On Jan, 19 and 20 the all risks undervriters were {given notice of abandonment by the brokers on the bass ofa constructive total loss, ‘The shipowners were id. The cantly wit Sod ts the Ebnanl eure Sr they Fepuite labity and efased to pay The rsaurer argued that sine an renserantsSoubad tad eat ‘Sater i an ude 1 a eo any ign sian var ad an fore Gi Geraci just mua could pace “any ensure, tfeadant and following ott toss tnderwrters ould not be bound by his filing ofthe total fon ip. tn th alternative the retnsrer mado Gein Mons aan the broker th tena respect of alleged ses abt under the remsrsnce sip, hey Srmcd thatthe signi indeation mite. te Author of the brokers toler reinarance 0 one. thd "and thatthe. sigingindction had lundervriters as reassured and the riasuring total Toss underwriters. ‘The brokers denied that they had broken any contractual oF tortious duty to any party and ‘contended thatthe signing indication had merely ‘moral and no legal significance “Held, by Q.B. (Com, Ct. (HHosoust, 3.), inter alia that () since: the ‘relevant signing indication was not te inthe slip i was @) the signing indication did not affect the authority oF capacity of the broker to offer Teinsurance to all sks underwriters; (3) the market recognized an obligation on the part of the broker to use his best endeavours 10 Achieve the indicated signing down; there was no legal reason why a duty of eare on the part of the ‘brokers to take such reasonable care should not be[1985] vor. 2 (4) the giving of the indication was a voluntary act by the brokers asa result of which the Underwriter, 10 the ‘broker's knowledge, yas placed in a situation of reliance upon the broker xercising his professional function with reason. ‘ble skill and eave; the broker toerefore owed @ daty of care to the total foss underwriters where there was an expres signing dwn ington; the Absence of such an indicaton would sill render him fable if he knew or ought to have known that fan underwriter belioved he intended Yo achieve the ‘elevant signing down and relied on that belief; (6) here the brokers had no proper system to see that signing down indications were met and 10 ‘check the postions on a total loss reinsurance slip ‘when accepting oral orders for reinsurance; the position was throughout in the control of the Brokers; they acted negligently and were therefore Iiable tothe reinsurers; (6 the damages recovered by the reinsurers were 10 be assessed by reference to the difference between the actual signing down and a one-third Sening. ‘The brokers appealed, the issue being whether the brokers owed any duty in tort to the speond and ‘third. defendants, the Posgate syndicates ‘ezarding the collection of furthee Subscrptio {the absence of any express signing indication t0 Mr Poseate Held, by C.A. (Ouiver, SteeHEN Brown gag Mosmti C35), iba (1) the Fears Judge Ihad accepted evidence from the market to the effect that the” signing indication implied the acceptance of a responsibility to" use. best, ‘endeavours to procure the sign ato of inception and if that was right there was no, ‘reason why the indication should not form part of ‘contractual bargain between the brokers and the first and fourth defendants, the Tanter and Moller syndicates (se p. 537, col.) @) if the signing indication had conveyed a representation of present fact relied upon by the Syndicates to thelr detriment the existence of Habit could, not have been denied; but the promise ‘to “use. best. endeavours” ‘bore no esemblance to the kind of obligation to av doing something or To avoid doing something badly which was the subject matter of the law fof negligence and. the fault of the brokers ay in a eontinging failure to. perform. a. positive undertaking (se p-538, cols. band 2); ) thee was othing in the decided cases 1 sugget that a bare promise gen in orcurrstances ‘where the partice Hood inno relationship, save That ope as speaking. to. another about a transaction eed berwee hat oer and hid was capable of creating a situation where Trespeaker mat do what he expressly or impliedly conveyed that he would do. or pay damages 14 Sef Gee p38, cok 3; 7898, (@) there was nothing in the terms of the promise to suggest that it was directed to anyone fher than the person who received it'ie. Mr. ‘Tater; thus the Posgate syndicates had to show LLOYD'S LAW REPORTS ‘The “Zephyr Sova’ | that there was some special feature of the London marine market which transformed an understanding to the leader into one which could be'sued by those who followed him on the slip and thi they ad 0 So (ep 59, eo 3 Pe 54, col. 1s $2.gt0 fa deet and cali, sing indication. was ‘capable. of creating an extra ‘contractual promissory liability the situation here ‘was ofa different category so far as concerned the proximity of the relationship and the precision of the obligation; there was no suggestion that a broker might be lable ia circumstances where he said nothing, because the underwriter didnot {rouble to ask and the appeal would be allowed (Gee p. 540, ca.2). ‘The following cases were referred to in the judgment of Lord Justice Must Carll v. Carbolic Smoke Ball Co., (CA) {1983] 1Q.B. 2565 | Gomer v. Pitt & Scott, (C.A.) (1922) 12 LLLRep. 1155 (1922) 10 LLL-Rep. 668; Hedley Byrne & Co. v. Heller & Partners, (HL) {1963} 1 Lloyd's Rep. 485; [1964] A.C. 465; Junior Books Ltd. v. Veitehi Co. Ltd., ELL.) {1983] A.C. 5205, Midland Bank Trust Co. v. Hett Stubbs & Kemp, (1979] Ch. 384 Lloyd's Rep. 5345 (1975) A. 154. ‘This was an appeal by the fifth defendants Berisford Mocatta & Co. Ltd. from the judgment of Mr. Justice Hobhouse ((1984) 1 Lloyd's Rep. 58) in which he held inter alia that the reinsurers, the first four defendants, Mr. Peter William Tanter (sued on his ovn behalf and on behalf of Syndicate 920); Mr. Ian Posgate (sued on his own behalf and on behalt ‘of Syndicate 127), Mr, Mark Edmund Denby (Sued on his own behalf and on behalf of Syndicate 700); and Mr. John Albert Reeve Moller (sued on his own behalf and on behalf of ‘Syndicates 275 and 645) were entitled to recover ‘damages from the brokers for breach of duty. ‘The plaintiffs, General Accident Fire and Life Assurance Corporation had claimed under their reinsurance policies in respect of the loss of the Insured vessel Zephyr. Mr. Jonathan Mance, Q.C. and Mr. Julian Flaux (instructed by Messrs. Fiewitt Wooilacott & Chown) for the fifth defendants; Mr. M. Phillips, Q.C. and Mr. 8. Ruttle (instructed by ‘Messrs. Elborne Mitchell & Co.) for the first to fourth defendants.