Eurodale Manufacturing Ltd. v Ecclesiastical Insurance Office Plc

Eurodale Manufacturing Ltd (“Eurodale”) are wholesale buyers and sellers of mobile telephones. Their method of business is that they receive from their suppliers information about the number of telephones available and arrange with them that the telephones be held for a short period while they obtain orders from their customers. Having obtained orders from their customers, they make purchase agreements with their suppliers. They then arrange for the suppliers to send the telephones to a warehouse; under the terms of their purchase contracts, property and risk pass to Eurodale on delivery to the warehouse. Eurodale, at much the same time or a short time after delivery, then give instructions to the warehouse for delivery of the telephones to their customers. This they do by faxing to the warehouse copies of their invoices to the customers and the warehouse will then arrange either themselves to transport the telephones to the customers or to instruct third party carriers to do so. Eurodale has an arrangement that favoured customers can obtain telephones on credit but that Eurodale will retain property in the telephones until payment; otherwise the warehouse retains the telephones until payment is made to Eurodale by telegraphic transfer from their customer. Eurodale would say, therefore, that they need insurance between the time of receipt in the warehouse and receipt by their customer.

The facts of the present appeal are that Eurodale ordered a number of telephones from a company called Frontline Commercials Ltd (“Frontline”) and caused them to be delivered on Friday 26th May 2000 to a warehouse at Colnbrook in Berkshire partly operated by Hawk Precision Logistics Ltd (“Hawk”). Hawk had use of an area on a mezzanine floor protected by a security cage. Eurodale's instructions to Hawk were to place the telephones in the secure cage “on hold”. On the same date Eurodale faxed copies of their invoices to their customers, which according to the judge constituted instructions to Hawk to make the necessary arrangements for delivery to those customers. The telephones arrived by means of two separate lorry deliveries at about 7.00 and 8.00pm respectively. It was, of course, the Spring Bank Holiday week-end and no one from Hawk was present again until Tuesday 30th May. Meanwhile, on Monday night 29th May a ram raid burglary occurred and telephones were stolen to the value of £340,060.

Eurodale had insurance in the form of an open cover for 12 months from 1st January 2000 subscribed by the defendant insurers, Ecclesiastical Insurance Office Ltd; appropriate declarations of the telephones were made under that cover; the formal documentation was not issued until 16th January 2001, but nothing turns on that. It is headed “Marine Cargo Policy” and is of a type called “Transit Insurance”. Relevant typewritten clauses of the policy include:

“VOYAGES:1. United Kingdom to World-wide &/or vice versa

2.

United Kingdom to United Kingdom

Cover attaches from the time the Assured accept delivery of the insured goods and continues during the ordinary course of transit and terminates upon transfer of title as per invoice or instructions.

Including loading/unloading risks ...

LIMITS OF LIABILITY:

Maximum per any Sending £1,000,000 but United Kingdom Sendings £300,000 (limited to £30,000 per Assured's own vehicle).

Basis of valuation: Invoice Cost

CONDITIONS

Institute Cargo Clauses (A) 1.1.82 Cl 252

...

[Further Institute and other standard clauses]

...

Whilst in store cover excludes:

Theft unless following violent and forcible entry into or exit from the premises.

Stock taking losses and mysterious disappearance.

...

EXCESS:£250 each & every loss.

RATE:1.

United Kingdom to or from:

Europe/Scandinavia0.15%

S.Africa, U.S.A., Cyprus,

Far East0.25%

Above rates subject to the addition of the London Scale War & Strikes rate applicable at date of sending.

2.

United Kingdom to United Kingdom 0.10% incl.

...

Other voyages held covered at rates and conditions to be agreed ...”

The Institute Cargo Clauses (A) are incorporated and the material provisions of those well-known printed clauses are:

“8.1

This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either

8.1.1

on delivery to the Consignees' or other final warehouse or place of storage at the destination named herein,

8.1.2

on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the Assured elect to use either

8.1.2.1for storage other than in the ordinary course of transit or

8.1.2.2for allocation or distribution,

or

8.1.3on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the oversea vessel at the final port of discharge,

whichever shall first occur.”

Eurodale argue that they accepted delivery of the insured goods within the typed Voyages Clause once the telephones arrived at Hawk's warehouse and were checked and accepted by Hawk on Eurodale's behalf. The insurers argue in broad terms that, since the insurance was transit insurance, the telephones were not insured at any time before being divided up into smaller consignments for onward delivery; so they were not insured while they were held in Hawk's warehouse “on hold”.

The judge, in coming to his conclusion, referred to the authority of Crows Transport v Phoenix Assurance Co Ltd [1965] 1 WLR 383, in which a carrier, who had a goods in transit policy “per the insured vehicles”, claimed for loss of gramophone records which had been unloaded and carried down some steps to a lobby outside the manager's office. The manager then went out to lunch, leaving his wife in the office with the door closed. During that time they were stolen. The intention had been to load them on a lorry bound for Gateshead that evening. At p.388 Lord Denning MR said this:

“When you take a parcel to the post office or to a railway station and you hand it over and get a receipt, the goods are in transit from the moment the post office or the railway take them. They are in transit by the post office or the railway's vehicles, as the case may be, because from that moment onwards everything that is done is incidental to that transit. So here it seems to me that from the moment that the plaintiffs accepted these goods from Decca and took them down the steps, they were there temporarily housed awaiting loading on the plaintiffs' own vehicles. It was an incident of the transit by those vehicles. That seems to me to be `in transit per the plaintiffs' vehicles.'“

The judge then proceeded to say this in paragraph 24 of his judgment:

“I accept that in the absence of express wording in the insurance contract the goods would not in these circumstances properly be regarded as being in transit. But the effect of the voyage provision, in my judgment, is that the parties agreed that the goods should fall within the transit cover. This agreement does not seem to me an improbable arrangement or one repugnant to the essential nature of the transit cover. On the contrary, it seems to me unsurprising that the parties agreed that these arrangements should be regarded (in the words of Lord Denning) as `an incident of the transit'. There is no reason that effect should not be given to the natural meaning of the typed clause for which Eurodale contends.”

I, for my part, agree with the judge and there is little I can usefully add to his admirably concise judgment.

Mr Dingemans QC accepted that the judge would be right if there had been a full stop after the words “insured goods” in the Voyages Clause, but submitted, first, that the wording went on “and continues during the ordinary course of transit”. That, together with the designation of the type of insurance as “transit insurance” showed, he submitted, that the intention of the parties was that the goods had to be actually in transit before they were covered. It was not intended that the goods be covered while they were warehoused before transit began, particularly when there was an express instruction to keep the goods “on hold”. Secondly, he relied on two other typed clauses in relation, first, to limitation and, secondly, to premium.

As to these arguments, it must be remembered that the insured had made their contractual arrangements for on-sale to their customers before they made their purchase contracts with their suppliers and before delivery to the warehouse had occurred. In those circumstances it can legitimately be said that there was a single transit venture, with intermediate storage at the place where Eurodale accepted delivery for their own account. It is precisely to cater for this situation that the Voyages Clause has been drafted and, since it is a typed clause, it must on ordinary principles take precedence over the incorporated and printed Institute Cargo Clauses to the extent that there is any inconsistency between them. It does not to my mind make any difference that the goods may have been “on hold” pending receipt of instructions for onward delivery to Eurodale's customers.

The judge held, as a matter of fact, that instructions were sent on Friday 26th May by Eurodale to Hawk for onward delivery. Mr Dingemans has challenged that finding as being against the weight of the evidence, but there was evidence from Mr Gallant of Eurodale which supported that conclusion and I would not be minded to disturb that finding. As I have said, however, the absence of receipt of instructions before the theft is nothing to the point, in a case where contracts for on-sale have already been made.

Mr Dingemans' reliance on the typed limitation clause and the typed premium clause is to my mind misplaced. There is no difficulty with reading the word “sendings” in the limitation clause as including contemplated and invoiced sendings; the parties, moreover, seem to have had no difficulty in calculating and agreeing a premium, which was duly paid. It is expressed to be a percentage of the amount of the invoice and, again, invoices had already been raised at the time of the theft.

Mr Dingemans said that if delivery of the goods were accepted at a warehouse and nothing was done with them for an indefinite period, it could not have been the intention that they would be covered under this form of transit insurance. One can only say that that might be the case, but it is not this case.

Lastly, Mr Dingemans submitted that underwriters never could have intended to cover valuable goods at an unsurveyed warehouse over a bank holiday week-end. Put that widely, the submission cannot be correct since it is common ground that storage at an intermediate warehouse, once transit had started, would be covered provided that there was, as in this case, violent and forcible entry into the premises.

In my judgment, the insurers did agree to cover the loss that has happened in this case and I would dismiss this appeal.

I agree.

I also agree.