Heath Lambert Ltd v Sociedad De Corretaje De Seguros & Anor

Under section 53(1) of the Marine Insurance Act 1906, a broker’s right to recover premium from the assured ordinarily depends on when the broker’s obligation to the underwriter arises. That date is determined by the true construction of the policy and any other agreement between the parties. A term providing that premium is payable in cash within 90 days of attachment gives credit for that period. It does more than warrant that payment will eventually be made. The premium is therefore not due at inception, and the broker’s cause of action does not accrue until the payment obligation arises. The customary fiction that the broker has already paid the premium cannot require a different result where the policy expressly requires cash payment. On that construction, the claim was brought within time.

Instituto Nacional de Canalizaciones insured vessels with Banesco, while Sociedad de Corretaje de Seguros placed the underlying insurance and helped obtain London-market reinsurance through Heath Lambert. Heath Lambert sought reimbursement of premiums paid to reinsurers.

The defendants applied to set aside permission to serve the claim form out of the jurisdiction, arguing that the claims were time-barred. The Deputy High Court judge held some claims plainly time-barred, but held that the claim concerning an extension covering 2 July to 31 December 1996 was not plainly time-barred: [2003] EWHC 2269 (Comm). The defendants appealed on the construction of the premium clause. The central issue was when Heath Lambert’s cause of action accrued.

The Court of Appeal, giving a judgment of the court, dismissed both appeals. It held that the premium for the extension was not payable when the extension contract was made, but within 90 days of attachment. The claim was therefore not plainly time-barred.

1. Statutory framework. Section 53(1) of the Marine Insurance Act 1906 makes the broker directly responsible to the insurer for the premium, unless otherwise agreed. In the ordinary case the broker has a cause of action in its own right against the assured for unpaid premiums. The broker, assured and insurer have independent rights and obligations, which are primarily determined by the policy terms and any separate agreements.
2. Market practice and the payment fiction. The historical authorities, including Power v Butcher (1829) 10 Br & 329, Universo Insurance Co of Milan v Merchants’ Marine Insurance Co [1897] 1 QB 205 and its appeal [1897] 2 QB 93, and Prentis Donegan & Partners Ltd v Leeds & Leeds Co Inc [1998] 2 Lloyd’s Rep 326, explained the customary fiction that the broker was treated as having paid the premium. The court agreed with the approach in Chapman & Co Ltd v Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep Insurance and Reinsurance 377: after the 1906 Act, construction is primarily governed by the statutory scheme, with market practice providing background only.
3. Construction. The word payable identifies when the obligation to pay arises, whereas a warranty that premium will be paid by a stated date assumes an earlier obligation. The words in cash specify the required mode of payment. The clause therefore gave the broker 90 days’ credit and did not require payment at inception. It would make no commercial sense for the premium to be paid at inception and then paid again in cash within 90 days.
4. Application. Read with section 53 and the other policy terms, including Article 3 of the underlying insurance, the clause required Heath Lambert to pay the reinsurers in cash within 90 days of attachment, with the assured liable to indemnify it on the same basis. The deemed-payment fiction could not override that express term. No separate agreement altered the position. Heath Lambert’s cause of action had not accrued by 23 July 1996, so the claim issued on 23 July 2002 was not time-barred. Appeals dismissed. Costs were divided equally between the appellants, and permission to appeal was refused.

1. Court of Appeal (Civil Division): In [2004] EWCA Civ 792, both appeals were dismissed. The first and second appellants were ordered to pay equal shares of the respondent’s appeal costs. Permission to appeal was refused.
2. High Court, Commercial Court: In [2003] EWHC 2269 (Comm), the Deputy High Court judge held some claims plainly time-barred but held that the claim concerning the 1996 extension was not plainly time-barred.
3. High Court: Tomlinson J had granted permission to serve the claim form out of the jurisdiction on 7 October 2002.