MARIDIVE & OIL SERVICES (SAE) AND ANOTHER v. CNA INSURANCE CO. (EUROPE) LTD. [2002] EWCA Civ 369

A contractual bond must be construed according to its express identification of the obligee. A demand made by, and seeking payment for, a different person is not valid merely because its commercial purpose is apparent.

There is no absolute procedural rule preventing amendment to rely on a cause of action arising after proceedings began. The court has a general discretion exercised in accordance with justice. An irregular reply which introduces a new claim is not necessarily a nullity. It may be regularised by amendment under the Civil Procedure Rules. Where that reply was served before a contractual time-bar expired, the proceedings may satisfy a requirement that an action be brought or maintained within the stipulated period.

Maridive chartered an offshore vessel to Oceanografia. Oceanografia and CNA executed a Lease Bond in favour of the Shipowners’ Protection and Indemnity Association (Luxembourg) as the named obligee. Following the charter’s premature termination, solicitors made a first demand on CNA on behalf of Maridive. After CNA contended that this was not a demand by the named obligee, a second demand was made on behalf of both claimants and was pleaded in a reply.

HHJ Hallgarten QC held that only the second demand was valid, but held that it could not be relied on after the contractual period for bringing or maintaining proceedings had expired. He dismissed the action. The appeal concerned the validity of the first demand and whether the second demand could support the existing proceedings.

Appeal allowed unanimously. Lord Justice Mance gave the leading judgment. Lord Justice Chadwick agreed, and Lord Justice Ward also agreed with the disposition.

1. The appeal on the validity of the first demand failed. The Bond identified the Club, and the Club alone, as the obligee. Its terms required a demand by the Club and payment to the Club. The first demand was instead made by Maridive and sought payment for Maridive. It was therefore invalid. The construction principle in Mannai Ltd v Eagle Star Assurance Co Ltd [1997] AC 749 could not permit a recipient safely to assume that the error concerned the identity of the person entitled to demand and receive payment.
2. The court was bound by Hendry v Chartsearch Ltd [1998] CLC 1,382. There was no inflexible rule preventing amendment to rely on a cause of action arising after issue of the claim. The court had a general discretion to be exercised as justice required. The claimants could properly have amended to rely on the second demand before the contractual deadline.
3. A reply should not introduce a new claim, but the claimants’ pleading of the second demand in their reply was an error of procedure, not a nullity. CNA could have sought to strike it out. Instead, the court could regularise the existing claim by amendment under CPR 3.10.
4. Condition 3 of the Bond was satisfied. By 30 August 2000 the action included, albeit irregularly, a claim based on the valid second demand. The subsequent amendment did not introduce a new claim after the contractual time-bar; it corrected the pleading of a claim already made. The order dismissing the action was set aside.

The court would otherwise have refused permission to advance the unparticularised estoppel case. Costs were left for further submissions.

• Court of Appeal (Civil Division): Allowed the appeal, set aside the dismissal of the action, and held that the valid second demand could be relied on in the existing proceedings: [2002] EWCA Civ 369.
• Commercial Court: HHJ Hallgarten QC held that only the demand of 13 March 2000 was valid, but held that it could not be relied on after the contractual time-bar and dismissed the action.