Liberty Mutual Insurance Company (UK) Ltd. & Anor v HSBC Bank Plc [2002] EWCA Civ 691 (16th May, 2002)

Liberty Mutual Insurance Company (UK) Ltd. & Anor v HSBC Bank Plc [2002] EWCA Civ 691 (16th May, 2002)

The clause in the surety bond did not exclude or postpone Liberty's rights of subrogation to HSBC's security; clear words are required to do so and were absent. 'Guarantee' in the bond refers to the admiralty bond provided to the claimant, not the bank's counter-indemnity. Liberty is not liable under its bond for claims made after one year where OMMIA instructed a one-year guarantee but the actual guarantee was automatically renewable and inconsistent with OMMIA's instructions.

Citation
[2002] EWCA Civ 691
Parties
Claimant/respondent: Liberty Mutual Insurance Company (UK) Ltd & Another; Defendant/appellant: HSBC Bank plc
Jurisdiction
England and Wales
Procedural Posture
Appeal From Chancery Division (preliminary Issues) / Court of Appeal (civil Division) Judgment
Outcome
Appeal dismissed; judgments below affirmed in favour of Liberty.
Legal Topics
Surety Bonds, Subrogation, Contract Construction, Guarantees, Security Interests
Banking and Finance Insurance Law Equity Surety Bonds Subrogation Contract Construction Guarantees Security Interests

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Parties

Liberty Mutual Insurance Company (UK) Ltd & Another

Claimant/respondent

HSBC Bank plc

Defendant/appellant

Procedural Posture

Appeal From Chancery Division (preliminary Issues) / Court of Appeal (civil Division) Judgment

Legal Issues

  1. 1 Whether the surety bond clause excluded or postponed Liberty's rights of subrogation to HSBC's security under a fixed charge (the 'subrogation issue')
  2. 2 What is the meaning of 'Guarantee' in Liberty's standard form bond (the 'Guarantee issue')
  3. 3 How must HSBC prove liability attaches to Liberty under the bond when the Guarantee is issued by HSBC or its correspondent bank

Ratio Decidendi

The clause in the surety bond did not exclude or postpone Liberty's rights of subrogation to HSBC's security; clear words are required to do so and were absent. 'Guarantee' in the bond refers to the admiralty bond provided to the claimant, not the bank's counter-indemnity. Liberty is not liable under its bond for claims made after one year where OMMIA instructed a one-year guarantee but the actual guarantee was automatically renewable and inconsistent with OMMIA's instructions.

Court Disposition

Appeal dismissed; judgments below affirmed in favour of Liberty.

Orders

  • Liberty and St Paul have not waived or postponed their rights of subrogation to the bank's security under the fixed charge.
  • 'Guarantee' in the bond means the admiralty bond provided to the claimant, not the bank's counter-indemnity.