In what is a very rare decision on container lessee default insurance, readers of our blog will recall that BDM Law and their clients Textainer achieved a substantial court victory on 27 July 2022 against various insurers operating in this class of insurance – click on this link to read our blog article summarising the underlying facts and judgement. The case concerned entitlement to substantial sums that Textainer recovered and expected to recover from the Estate of its bankrupt lessee, Hanjin Shipping Company of South Korea. Textainer had already recovered most of its losses from its insurance programme and the insurers of the programme sought to recover the monies paid and to be paid by the Hanjin Estate by way of their rights of subrogation.
In short, the judgement reaffirmed the principles of English insurance law set out in the decisions of the House of Lords (now the Supreme Court) in Lord Napier and Ettrick v Hunter [1993] AC 713 and of the Court of Appeal in Kuwait Airways Corp. v Kuwait Insurance Co SAK [2000] 1 Lloyd’s Rep 252, namely, that in an excess of loss insurance programme the insurance “paid up” in terms of claims and “recovered down” in terms of the insurers’ rights of subrogation, not on a proportionate basis as the insurers had argued. This had the effect that all rights of subrogation of the fourth and fifth excess layer insurers passed to Textainer, from whom Textainer had obtained a waiver of rights of subrogation, such that Textainer was entitled to keep all the monies so far recovered from the Hanjin Estate.
Having been refused permission to appeal by the trial Judge, the insurers have been granted leave to appeal by the Court of Appeal and the High Court decision of Deputy Judge David Railton QC is to be referred to the Court of Appeal for a three-day oral hearing in late November 2023.
The appeal made is on limited grounds and on a limited quantum of the claim. Rather than argue that the entire insurance programme operates on a proportionate basis the insurers now argue on appeal that it applies only to the Primary, First, Second, and Third Excess Policies as a proportion of the losses sustained by Textainer. As such, after applying these proportions against the losses sustained, they now claim only 39.3% of the monies paid and to be paid by the Hanjin Estate rather than 100%.
An appeal in English Court proceedings is not a re-trial of the whole action, or to put it colloquially a second bite of the cherry. It is an appeal on law and not an appeal on facts. It will be difficult for the insurers to succeed on appeal because in addition to being wrong on the law regarding the rights of subrogation not operating on a proportionate basis, they had, as noted by the trial Judge, failed to establish their case on the basis of that principle as a matter of fact. It is unusual, although certainly not impossible, that a High Court decision is overturned in the Court of Appeal.
BDM Law will represent Textainer in the Court of Appeal together with Chris Smith KC of Essex Court Chambers. We will update readers of our blog once the matter goes to trial.
David Mclnnes
Partner
Joshua Geesing
Associate
