Commercial Court judgment on the joint tortfeasor principle

29/09/14

Mr Justice Flaux has handed down the latest judgment in Starlight Shipping v Allianz Marine and others [2014] EWHC 3068 (Comm).  The case had previously been to the Court of Appeal (twice) and the Supreme Court.

The background to the case is the loss of the Alexandros T in 2006, following which the Greek owners of the vessel commenced proceedings in the Commercial Court claiming an indemnity from its insurers. The insurers denied liability and alleged (amongst other things) that the vessel was not seaworthy. During the course of the proceedings, the insured made allegations that the insurers had fabricated false evidence and bribed key witnesses. In the event, the proceedings were settled and a Tomlin Order filed in January 2008.

In April 2011, however, the insured and associated entities commenced proceedings in Greece against not only the insurers but also their officers and employees and the English solicitors who had acted for the insurers in the original Commercial Court action. In the Greek proceedings, the claimants are alleging that the insurers and their solicitors fabricated false evidence and that they conspired to use that evidence in such a way as to harm the insured and to mislead the Commercial Court.  The claimants in the Greek proceedings are claiming damages in the total sum of approximately €170 million.

In July 2011, the insurers issued an application in the Commercial Court to enforce the terms of settlement.  They sought (amongst other things) an indemnity and damages for breach of the “full and final settlement” release provision in the settlement agreement.

In December 2011, Mr Justice Burton acceded to the insurers’ application and granted summary judgment in their favour.  Following a jurisdictional battle in the Court of Appeal and Supreme Court, the Court of Appeal handed down judgment in July 2014 upholding the orders made by Mr Justice Burton. 

The insurers subsequently applied for further relief, arguing that as a matter of construction of the release provision in the settlement agreement, the insured had agreed to settle any claims in relation to the loss of the Alexandros T not only against the corporate underwriters but also against their individual officers and employees.  Mr Justice Flaux accepted this argument, holding that although the release provision referred to “Underwriters” and that term was defined in the agreement as meaning only the corporate underwriters, nevertheless “Underwriters” was to be construed as encompassing the individual officers and employees.  Accordingly Mr Justice Flaux held that the Greek claims against the individual underwriters had been brought in breach of contract.

In reaching this conclusion, Mr Justice Flaux relied upon the joint tortfeasor principle, i.e. the common law principle that where there is a joint cause of action against two or more persons, a discharge as against one of them operates as a discharge against all.  Mr Justice Flaux held that for the purposes of construing the release provision, the insured should be taken to have known that the effect of the settlement agreements would be to settle all claims against all joint tortfeasors. 

The judgment is here.