JDA.Co.Ltd v AIG Insurance New Zealand Limited

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA677/2021
[2022] NZCA 532

BETWEEN	JDA CO. LTD First Appellant
AND	NIKKYO CO. LTD Second Appellant
AND	INTEGRITY EXPORTS CO. LTD Third Appellant
AND	AIG INSURANCE NEW ZEALAND LIMITED First Respondent
AND	VERO INSURANCE NEW ZEALAND LIMITED Second Respondent
AND	IAG NEW ZEALAND LIMITED Third Respondent

Hearing:	6 September 2022
Court:	Miller, Gilbert and Simon France JJ
Counsel:	P J Napier and H G Holmes for Appellants P Davies for Respondents
Judgment:	9 November 2022 at 3.30 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.
B The cross-appeal is dismissed.

CThe appellants must pay one set of costs for a standard appeal on a band B basis, with usual disbursements on their appeal only.

____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

The respondent insurers, led by AIG, declined claims under a marine cargo insurance policy for typhoon damage to second-hand vehicles awaiting export from Japan. The three appellants, JDA Co. Ltd, Nikkyo Co. Ltd and Integrity Exports Co. Ltd, are Japanese companies in business as car exporters. They appear as representative plaintiffs for exporters who claim to enjoy cover under the policy.
Cover was arranged through Automotive Technologies Ltd (ATL) and its broker, Sage Partners Ltd, under a scheme which they developed and offered to insurers and exporters. The scheme was called AIMS. ATL and Sage administered it in practice, collecting premiums and issuing certificates of insurance.
The policy was a marine open policy, under which the insurer agrees in advance to cover qualifying cargo declared periodically by the owner. In this case declarations were to be made monthly, the owner/exporter declaring “the number of units/Motor Vehicles received into the Assured’s control at the specified Pre Shipment Holding Yards … during the preceding month”. Exporters complied by giving notice to ATL of the vehicles for which insurance was taken, sometimes by providing spreadsheets or completing schedules on ATL’s website, and ATL compiled the monthly declarations for Sage, which calculated and invoiced the premiums. The premium was a fixed per-vehicle sum for the entire period of risk.
Very large numbers of cars — far more than would be expected in the ordinary course of business — were declared by exporters after 4 September 2018, in declarations for the months of August and September. Many of these vehicles had suffered damage in typhoons that struck Japan on 23 August and 4 September 2018.[1]
[1]Typhoon Cimaron on 23 August and Typhoon Jebi on 4 September 2018. Both struck the Kansai region.
The appellants sought declarations that that the insurers are liable for the damage.[2] They failed in the High Court, Gault J finding that JDA alone had evinced an intention to take insurance prior to the attachment of risk and none of the insurers had complied with their obligation, a promissory warranty, to include insured vehicles in the prescribed monthly declaration.[3] The appellants invite us to find that he was wrong. AIG has cross-appealed, saying that the Judge ought to have found that ATL breached the policy terms in several respects, and further that the appellants had acted in bad faith.

ATL and the AIMS Scheme

[2]The specific declarations sought were that the insurers were (a) liable for damage to the second appellant’s vehicles and (b) by declining cover, in breach of the contract of insurance for all represented exporters.

[3]JDA Co. Limited v AIG Insurance New Zealand Limited [2021] NZHC 2912 [Judgment under appeal] at [97].

ATL was described in evidence by one of its directors, Nigel Grindall, as a New Zealand company which operates five vehicle processing and inspection depots at major export ports in Japan. It offers services including structural inspection, biosecurity decontamination, odometer readings, “technology solutions” and marine cargo insurance to the international vehicle export industry. Some of these services are approved by New Zealand government agencies.
In 2010 ATL commissioned Sage to report on the establishment of a marine cargo insurance facility for ATL customers whose cars passed through ATL’s Japanese depots. Geoffrey Manks, a director of Sage, prepared the report. He recommended a marine open policy, which he described in evidence as a floating policy whereby the insurer is obliged to insure cargo, or a specific type of cargo, for a party or parties. Sage offered a premium cost per vehicle of $9.50, payable regardless of destination or value of the vehicle. ATL would provide a declaration at the end of each month simply listing the number of vehicles ATL had provided a “service” on during the past 30 days. The intention was to automatically cover any cargo destined to be handled by ATL. Customers must have either shipped using an ATL service or have been able to prove that they intend to use an ATL service.
ATL then authorised Sage to seek terms from the insurance market to support the proposed scheme, which commenced in 2012. Initially Lumley General Insurance (NZ) Ltd were appointed lead insurers with IAG New Zealand Ltd (trading as NZI) supporting. IAG later acquired Lumley and in 2012 Vero Insurance New Zealand Ltd became lead insurer.
Mr Manks explained that the “concept” expanded from customers who used other ATL services. ATL began to offer marine cargo insurance to any exporter. It is unclear when this began. In February 2012 Sage issued a “Marine Cargo Manual” explaining how the scheme worked. The Manual was given to Lumley and IAG. It explained that from 1 March 2012 all vehicles exported from Japan and declared by ATL would be covered by AIMS for Institute B clauses.[4] B clauses supplied “disaster cover” limited to certain named risks including earthquake, volcanic eruption or lightning. ATL customers and “[authorised] third parties” would be offered the opportunity to upgrade to Institute A clauses, which covered all risks, subject to some exclusions.
[4]This referred to standard policy wordings originally issued by the Institute of London Underwriters.
The Manual explained that cover was not subject to any other preconditions or the completion of any proposal form by the cargo owner. A retrospective monthly declaration of vehicle numbers from ATL was all that was required. Cover would attach from the time of purchase at auction or the completion of the survey inspection or delivery to the load port, whichever occurred first. For customers not using ATL services, ATL and Sage “will discuss this and agree an appropriate stage from which cover will apply for those customers”.
The policy with which we are concerned was issued following a proposal issued in May 2014 by Sage to restructure the AIMS scheme to be expanded “[t]hrough our client [ATL]” into the US marketplace. The insurers to whom it was addressed were Vero, IAG (trading as NZI), AIG and Starr. AIG became the lead insurer in June 2014.
The proposal explained that cover would be offered on Institute Cargo clauses A and B terms. B cover was to be priced at USD3.50 per vehicle, with pricing to be reviewed after assessing volumes and claims results. It was proposed that while there might be a lead insurer, Sage itself would take an active role in the management of the scheme. The proposal did not link cover to inspection or other services offered by ATL.

The policy

The policy covered the year commencing 1 June 2018. “Assured” was defined in the policy schedule:
1.Unless specified to the contrary elsewhere in the Policy, the Policy covers the Subject-matter insured for the transits and/or other insured risks and on the conditions named transported by or for the account of
Aims Kyosai, ATL America, Inc., Automotive Technologies Limited, trading as AIMS Worldwide, Kiwi Marine
and/or their subsidiary or associated or related companies or parties including the shippers/exporters and other customers of
Aims Kyosai, ATL America, Inc., Automotive Technologies Limited, trading as AIMS Worldwide, Kiwi Marine
for whom they are arranging insurance on behalf of, or the insurance of which is under their control unless insured elsewhere prior to the attachment of cover under the Policy.

All of the named firms are members of the ATL group.

The business of the Assured for purposes of the policy was described as principally “buyers, exporters and distributors of [s]econd-hand [m]otor [v]ehicles and any occupation incidental thereto”. The evidence does not disclose, and counsel could not agree, whether any of the named firms is a vehicle exporter. ATL, at least, is not.
However, it is common ground that the policy extends to some other firms which are car exporters and to which cover was extended by ATL. The parties dispute about how far this extension went. AIG says cover was limited to exporters who used other ATL services. ATL maintains that cover was available to any exporter whether or not they used its other services. We address this issue at [69] below.
The policy covered second-hand motor vehicles for, relevantly, transits and storage risks within Japan. Cover attached at the place at which the Assured’s insurable interest first attached anywhere in Japan and continued while the vehicle was in transit to pre-shipment holding yards, while the vehicle was situated at such yards up to a maximum of 90 calendar days, in transit from such yards to shipping ports, at such shipping ports awaiting shipment, and in transit to destination ports in New Zealand and elsewhere:
3.1Cover attaches at the place at which the Assured’s insurable interest first attaches anywhere in USA or Japan and continues
3.1.1whilst the Subject-matter insured is in transit from such places to pre shipment holding yards (as specified in the Policy Limits section of the Policy Schedule), and continues
3.1.2whilst the Subject-matter insured is situated at such pre shipment holding yards (as specified in the Policy Limits section of the Policy Schedule) for up to a maximum of 90 calendar days, and continues
3.1.3whilst the Subject-matter insured is in transit from such pre shipment holding yards (as specified in the Policy Limits section of the Policy Schedule) to shipping ports anywhere within USA or Japan pending the commencement of loading of the Subject-matter insured onto the oversea vessel, and continues
3.1.4whilst the Subject-matter insured is situated at such shipping ports awaiting shipment, and continues
3.1.5whilst the Subject-matter insured is in transit from such shipping ports to destination shipping ports anywhere within New Zealand and the other specified countries (as specified in the Declaration section of the Policy Schedule), including transhipment if applicable, and continues
3.1.6in respect of transits to New Zealand only, whilst the Subject-matter insured is in transit from such destination shipping ports anywhere within New Zealand to places anywhere in New Zealand.

“Pre shipment holding yards” was defined as a place or premises at which a vehicle insured was temporarily situated following acquisition by the Assured but prior to the commencement of transit to the port of loading.

It appears that Japanese exporters typically purchase second-hand vehicles at auction. Under these terms cover attaches on purchase and continues until the vehicle reaches its export destination port, subject to a 90-day limit for storage at pre-shipment holding yards. Insured storage was, as Ms Davies put it for the insurers, incidental to transit.
The policy’s Standard Conditions & Extensions expressly contemplated that the Assured would select Institute A or B clauses prior to the attachment of risk:
1.Unless specified to the contrary elsewhere in the Policy, the Policy covers:
1.1Where, prior to the attachment of risk hereunder, the Assured has elected for coverage to be on an “all risks” basis, then, unless specified to the contrary elsewhere in the Policy, the Policy covers all risks of loss of or damage to the Subject-matter insured in accordance with the Institute Cargo Clauses (A)
OR
1.2Where, prior to the attachment of risk hereunder, the Assured has elected for coverage to be on a “named peril” basis, then, unless specified to the contrary elsewhere in the Policy, the Policy covers risks of loss of or damage to the Subject-matter insured in accordance with the Institute Cargo Clauses (B)…
The policy was subject to a combined single policy limit of USD10 million and various sub-limits.
The policy schedule contained an estimate of the annual premium payable, based on the estimated number of units to be shipped:
Premium
1.In consideration of the Declaration made by the Assured and accepted by the Insurer at inception of the Policy, the estimated annual Premium payable to the Insurer is specified below:
Estimated number of units   28,000
x ‘B’ Clauses per unit Premium rate   USD3.80
Estimated number of units           4,750
x ‘A’ Clauses per unit Premium rate   USD9.50
Estimated annual premium   USD151,000
The declaration said to have been made by the Assured and accepted by the insurer at inception of the policy is not in evidence. It is unclear whether such a declaration was ever made. Nonetheless, the premium clause makes clear that there was a correlation between volumes and pricing, the premium having been calculated in the expectation that insured vehicles would be shipped in substantial numbers.
The policy contained a bound to declare clause:
Bound to Declare Clause
It is a condition of the Policy that the Assured is bound to declare hereunder each and every shipment or sending or risk without exception falling within the terms of the Policy whether arrived or not, the Insurer being bound to accept same up to but not exceeding the Policy Limits.

It will be seen that it was a condition of the policy that the Assured declare every shipment or sending or risk without exception and the insurer had a corresponding obligation to accept the same up to the Policy Limits.

Provisions relating to the monthly declarations were found in the policy schedule. Clause 2 stated that:
2. Within
7 calendar days
of the end of each month, the Assured shall declare to the Insurer the number of units/Motor Vehicles received into the Assured’s control at the specified Pre Shipment Holding Yards (as specified in the Policy Limits section of the Policy Schedule) during the preceding month and the Insurer shall calculate the Premium payable by the Assured thereon.
Under this provision a monthly declaration was to include vehicles received into the Assured’s control at a specified pre-shipment holding yard. Several points may be made about this. First, it was not necessary to include in a given monthly declaration vehicles to which cover had attached when purchased at auction anywhere in Japan but which had not reached a yard during that month. Second, the policy did not specify any named yards; rather, “Pre Shipment Holding Yards” was defined to mean “the place or premises at which [an insured vehicle] is temporarily situated following acquisition by the Assured but prior to the commencement of transit to the port of loading for export”. There is no dispute about qualifying yards. Third, the policy presumed both that the Assured had acquired insured vehicles and that vehicles would be received into the Assured’s control at a pre-shipment yard, which suggests that in this context “Assured” was used to include both the exporter which owned a given vehicle and the ATL entities which operated the yards into which it was received.
The insurer had a right to amend the policy terms and conditions during the currency of the policy if at any time the Assured estimated that the actual number of units to be insured would fall short of the estimated number of 30,000 by more than 20 per cent. We observe that the May 2014 proposal contained estimates of increasing volumes from an average of 11,000 cars monthly in the 2014 policy year to 43,000 in the 2016 policy year. In practice volumes never reached anything like this level and the 2018 policy schedule makes clear that the parties had adjusted their expectations. It appears that but for the upsurge in business caused by the typhoons roughly 30,000 vehicles would have been insured under the policy during the 2018 policy year. The significance of this for present purposes is simply that the policy expressly recognised a continuing relationship between the number of cars exported and the premium and other terms of the policy.
It is not in dispute that a vehicle covered under the policy which entered a Pre Shipment Holding Yard (which we will call a “yard”) in a given month, and which suffered insured damage there, would be covered if included in the declaration made for that month. To that extent cover was retrospective.

Terms of trade for exported cars

It appears that cars exported from Japan are almost always exported on Incoterms CIF (Cost, Insurance, Freight) terms, meaning that the exporter is contractually obliged to arrange transit insurance.[5] So insurance is practically obligatory. It likely follows that all vehicles affected by this proceeding would have been insured — by some insurer — before export. If insured under AIMS, the exporter would have paid a per-vehicle premium that covered the entire period of insured risk.
[5]K S Vishwanath Insuring Cargoes: A Practical Guide to the Law and Practice (Witherby Publishing Group, 2010) at 107.
In practice cover is taken on Institute B clauses for a large majority of vehicles exported. There is a dispute between the parties about whether the exporter must always nominate A or B clauses before risk attaches, the alternative being that B clauses apply in default of the exporter choosing A clauses. We address this issue at [76] below.

AIMS cover in the ordinary course of business

In practice an exporter might seek cover from ATL in one of two ways. It might periodically notify ATL Japan, by email, of the cars exported during the preceding month, giving their identifying details. This was described as a standing order arrangement. The first and second appellants, JDA and Nikkyo, operated in this way. Or it might go onto ATL’s website and arrange cover for specified vehicles. The website required at a minimum the vehicle chassis number and the type of cover sought. The third appellant, Integrity Exports, arranged insurance from time to time in this way.
At the end of each month ATL Japan would supply ATL’s financial controller in New Zealand with a spreadsheet listing the vehicles to be insured under AIMS. The financial controller would add to this spreadsheet what was described in evidence as “a small number of vehicles from other companies that use the AIMS programme”. The consolidated monthly lists would be sent to an administrator at Sage, again in the form of a spreadsheet giving the number of units shipped and whether cover was under A or B clauses. Sage calculated the premium and the brokerage fee to be deducted, leaving a net amount paid to the insurers.
Sage invoiced premiums to ATL, which issued the exporters with certificates of insurance. Each certificate certified that an identified vehicle was insured by AIG under and subject to the terms and conditions of the policy. It contained the facsimile signatures of an AIG and an ATL representative and was to be countersigned by the shipper. The certificates were negotiable, meaning that they might be enforced against the insurer by any owner of the vehicle.
In practice declarations were not always completed within seven calendar days after the end of a calendar month, with the insurer’s acquiescence.

From time to time the insurer learned of unsatisfactory administration by ATL, usually in connection with a claim. Grant Sheppard, AIG’s head of marine insurance for Australia, gave evidence that there were instances where a claim was made for a vehicle that had not been the subject of a declaration, or where the number of cars declared by the exporter was much higher than had historically been the case. In each case the loss adjuster representing the insurer instructed ATL that cars must be declared in time and exporters could not make claims for cars they never intended to declare.

Declarations for August and September 2018

The list of vehicles shipped in August 2018 was provided to Sage by ATL on 12 September 2018. The list included vehicles that, according to ATL, were expected to be shipped in August but were written off due to damage caused by Typhoon Cimaron. It also included 628 vehicles that, again according to ATL, would have been shipped in September and included in that month’s declaration but which had been written off due to damage caused by Typhoon Jebi on 4 September. These were included in the list because they would not now be shipped at all.
Sage decided, however, that the 628 vehicles should be included in the September declaration instead. That was duly done on 10 October. Sage duly invoiced ATL premiums for all of these vehicles. The premiums were paid.
Because Japan had been seriously affected by typhoons during the 2018 typhoon season, AIG placed a moratorium on new business. Sage was notified of the moratorium on 28 September. AIG recognised that the moratorium would not apply to cover taken on a business-as-usual basis; rather, it would prevent an influx of opportunistic business from entities that had not insured previously or had not done so regularly. Nothing presently turns on the moratorium; AIG does not rely on it to deny cover for vehicles damaged by Typhoons Cimaron or Jebi.
ATL’s September declaration contained 27,717 cars, an enormous increase on the number of approximately 2,500 that would have been expected for that month in the ordinary course of business. AIG found that 32 exporters had insured cars where they had either not insured previously or had previously insured many fewer cars. 21,855 cars were being shipped by a single exporter called BeForward which had been an AIMS customer previously but had stopped insuring at all in its own name. BeForward appears to have sought cover through Moana Blue Ltd, a shipping company which is associated with ATL and has access to the AIMS computer system (Mr Grindall is a director and shareholder of both).
Another, SK Trading Co, insured 1,438 cars in September when it had never previously insured more than four. A firm called Relation Co insured 173, with its previous high being 49. AIG was dismayed to find that, as it saw it, ATL had been offering cover outside the ordinary course of business.
We were told that many of the claims, including BeForward’s, have been weeded out and BeForward is not now among the represented plaintiffs.

Termination of the policy

On 26 October 2018 AIG gave Sage 30 days’ notice of termination of its involvement in the policy. It asserted that the large number of cars declared had increased risk well beyond the level contemplated when the policy had been renewed in June 2018. It observed that ATL was issuing insurance certificates on AIG paper which was enforceable against AIG and it expressed concern that AIG might be presented with certificates for losses totalling more than the policy limit of $10 million. It expressed concern that ATL had refused to engage over the policy limits.
Mr Manks unsuccessfully invited AIG to reconsider. He argued that the increased volumes did not materially change the risk; the policy was still insuring the same subject matter, during the same transits, collecting a premium per vehicle and subject to the same excess and policy limits. He acknowledged a “need to tighten up on the timing and basis for declaration of vehicles”. He suggested that likely future declarations would be about 4,000 to 6,000 units monthly.

The appellants

JDA

JDA is a car exporter based in Osaka. The evidence of its president, Yoji Tagami, is that in 2014 he reached an agreement with ATL that it would arrange insurance cover for all vehicles exported by JDA. This was a standing order which worked by JDA giving notice to ATL of all of the vehicles that had been exported in the previous month.
JDA’s claim in this proceeding concerned a single car that was purchased on 28 July 2018 and entered a pre-shipment yard on 3 August. It was destroyed by Typhoon Jebi on 4 September.
The evidence is scant and it was not examined before us. On 12 September — the same date as the ATL declaration for August was made — JDA lodged a claim with AIMS. On 18 September it notified ATL that it was exporting the car and, as Mr Tagami deposed, “therefore buying marine cargo insurance for it pursuant to the [s]tanding [o]rder”. It is clearly implicit in his evidence that not until he decided in September to export the car did he choose to purchase insurance through AIMS. (Of course the car was already in a yard, but we surmise that its destination, and hence perhaps the choice of insurer or cover, may not have been decided.) ATL invoiced JDA for the premium (according to ATL this was done on 10 October but Mr Tagami says it was done on 30 September) and it was duly paid. The car was included in ATL’s September declaration, which as noted was made on 10 October.
JDA sued as representative plaintiff for three exporters.

Nikkyo

Nikkyo is said to be a substantial exporter which uses more than one shipping and logistics firm to export its cars. One such firm was Moana Blue, which advertised itself as providing a “door to door” service for vehicles exported to New Zealand. The service included biosecurity clearance, structural border inspections, odometer inspection and insurance. Nikkyo had a standing order arrangement with Moana Blue to take insurance through AIMS for all vehicles which it exported through Moana Blue. In practice it would have the vehicles delivered to the yard, then send an email attaching a list of the vehicles. Moana Blue staff would input the details into the AIMS computer system.
Nikkyo purchased a number of vehicles for export to New Zealand and had them transported to the Moana Blue yard in July and August 2018. It provided Moana Blue with lists of these vehicles in August. A number of the vehicles were damaged in the yard on 4 September.
On 6 September Nikkyo provided ATL with a separate list of vehicles which had been delivered to the yard for export prior to the typhoon but which had not been included in prior lists.
It appears that all of the cars included in the Nikkyo claim were to be exported through Moana Blue and were in the yard when damaged on 4 September. However, some of them had been purchased and/or delivered to the yard in July.
Nikkyo sued as representative for 11 exporters (although it was suggested before us that the claims of some of the exporters are no longer contested).

Integrity Exports

As noted earlier, Integrity was a spot purchaser of insurance, meaning that it did not have a standing order arrangement with ATL.
Integrity purchased a number of vehicles in June, July and August 2018 and arranged for them to be transported to a yard in Kobe. The vehicles were transported on various dates ranging from 23 June to 30 August. The yard would provide Integrity intermittently with a list of its vehicles which had entered the yard.
Integrity took out insurance itself through the AIMS website. It did not always do so immediately; sometimes it waited until the shipping schedule was fixed, and it did not insure vehicles needing repair until the repairs had been completed. It is evident that it did not always declare vehicles in the month in which they entered the yard.
Integrity did apply for insurance for a number of vehicles in August and before 4 September. ATL duly invoiced it for the premiums. Some cars were damaged on 23 August and others on 4 September.
Integrity sued as representative for four exporters.

The position of represented exporters

The pleadings contain some information about the represented exporters, reciting numbers of vehicles and dates of damage. The parties provided an agreed spreadsheet listing all of the many hundreds of vehicles affected by this proceeding. Otherwise nothing is said about the represented exporters’ circumstances in the pleadings and evidence. We were not told whether or to what extent they have agreed to be bound by the findings in this proceeding. The Judge was not asked to make specific findings about them. Our own factual findings extend to the behaviour of exporters collectively, but we make no findings about individual exporters other than the appellants.

The High Court judgment

Gault J reached the following conclusions. First, he found that the policy did not require that exporters be customers of ATL for services other than insurance.[6] He found that all three plaintiffs were Assureds under the policy; each was a shipper/exporter for which ATL was arranging insurance.[7]
[6]Judgment under appeal, above n 3, at [42].
[7]At [43]–[46].
Second, the Judge found that the policy required the Assured to elect the terms of cover — Institute A or B clauses — prior to attachment of risk.[8] However, he found that, whether through estoppel or interpretation in context, Institute B clauses would apply in the absence of an express election to take “all risks” cover.[9]
[8]At [61].
[9]At [61].
Third, the Judge found that “[a]n open marine policy involving subsequent declarations does not dispense with the need to evince an intention to take insurance in the first place”.[10] The need for such intention was inherent in the AIMS scheme. He rejected the appellants’ argument that ATL was acting as the agent of the insurers and was authorised to bind them to cover without communicating to insurers an intention to take insurance. ATL was arranging insurance on behalf of exporters. It did so via its broker, Sage, and it is well-established in marine insurance that a broker is not the agent of the insurer. At most, ATL was authorised by insurers to bundle the instructions and monthly declarations of each Assured. It was necessary that intention to take insurance be communicated to insurers prior to attachment of risk.[11]
[10]At [62].
[11]At [63].
No issue would arise in the case of spot orders made prior to attachment of risk, but the parties agreed that an established course of business in which insurance is taken out based on a standing order would suffice.[12]
[12]At [62].
On the facts, the Judge found that JDA and Nikkyo both had standing orders with ATL.[13] There was sufficient evidence of JDA’s intention to take insurance prior to the attachment of risk with respect to the single vehicle affected by its claim.[14] The position was otherwise for Nikkyo and Integrity. The Judge found that:
[67] … Mr Sera acknowledged that NCL did not ship all its vehicles through MBL. Until NCL nominated a vehicle as being one for shipment by MBL, it did not fall under the arrangement with MBL. Mr Yamada of MBL said the timing of the order depended on the exporter: some exporters would place an order with MBL immediately after purchasing a vehicle at auction, others would order once the vehicle had been delivered to the holding yard for shipping by MBL, and others would order when a vehicle had been sold to a New Zealand consignee. He said MBL would input this information into the AIMS website operated by ATL at the beginning of each month. The Car chronology indicated that some vehicles were booked with MBL weeks after entry into a yard, with insurance orders received by ATL weeks after that. The issue is whether this arrangement that required NCL to nominate a vehicle as being one for shipment by MBL is sufficient to give rise to an established course of dealing. The nomination occurred after purchase, sometimes weeks after. Even though insurers have accepted other NCL claims, I do not consider this arrangement sufficiently evinces NCL’s intention to take insurance prior to the attachment of risk.
[68] In relation to Integrity, Mr Tanaka of Integrity gave evidence of taking out insurance for specific vehicles that it was shipping through ATL using the AIMS website. Integrity also nominated the type of cover when entering an insurance order on the AIMS website. These spot orders were received by ATL after purchase, consistent with the prevalence of only insuring vehicles exported on a CIF basis. There was no standing order. Unless there was an established course of dealing, the required intention to take insurance was not communicated to insurers until they received each declaration, which was well after attachment of risk. Even though insurers accepted claims for 24 of Integrity’s vehicles, I do not consider the individual declarations amount to an established course of dealing evincing an intention to take insurance prior to the attachment of risk.
[13]At [64] and [66].
[14]At [64]–[65].
Fourth, the Judge found that, when read with the bound to declare clause, the premium clause, which we have set out at [23] above, was a promissory warranty for the purposes of s 34 of the Marine Insurance Act 1908.[15] A promissory warranty must be exactly complied with, whether it is material to the risk or not, and non‑compliance discharges the insurer from liability as from the date of breach. Section 11 of the Insurance Law Reform Act 1977 (the 1977 Act) did not apply, because that provision is confined to exclusions or limitations.[16] Nor were the exporters saved by the errors and omissions clause, which provided that unintentional errors or omissions in a declaration did not invalidate the policy.[17] Finally, the insurers had not waived compliance with the requirement for monthly declarations.[18]
[15]At [86].
[16]At [87].
[17]At [92].
[18]At [76]–[77].
The Judge accordingly found that there was a breach of warranty where the vehicle in issue was not included in the declaration for the month in which it entered the pre-shipment holding yard. In the case of JDA, its vehicle entered the yard on 3 August 2018 and was omitted from the 12 September 2018 declaration in breach of warranty.[19] More generally, the plaintiffs were not entitled to cover for vehicles which entered a pre-shipment holding yard in or before July 2018 but were only declared on 12 September 2018, or for vehicles which entered a yard in or before August 2018 but were only declared on 10 October 2018.
[19]At [88].
The appellants argued that the insurer’s liability arose before the date of any breach of warranty. As noted earlier, the JDA vehicle had been destroyed on 4 September 2018, and because it entered the yard in August there would have been no breach of warranty had it been included the declaration made on 12 September 2018. The Judge rejected this argument. He accepted that cover is retrospective once a contract of insurance is formed, but found a contract is formed only on the making of a declaration that conforms with the policy terms.[20]
[20]At [89].
In the result, the Judge found for the insurers against all the appellants. For that reason, he did not find it necessary to address their defence that delays in insuring, or the act of insuring after loss, evidenced lack of good faith on the part of the Assureds.[21]

The grounds of appeal

[21]At [96].

For the exporters, Mr Napier argued that the Judge erred by:
(a)finding that only JDA evinced the requisite intention to take insurance prior to the attachment of risk to the cover;
(b)finding that ATL was not the agent of the insurers for the receipt or notification of the taking of insurance;
(c)finding that the timing of the monthly declaration was a warranty;
(d)finding that the errors and omissions clause did not apply to late declarations;
(e)finding that s 11 of the Insurance Law Reform Act 1977 did not apply;
(f)finding that breach of warranty entitled declinature of cover, notwithstanding that liability to pay had already arisen; and
(g)finding that the insurers had not waived strict compliance with the timing of monthly declarations.
Because it does not seek any other relief, the cross-appeal is arguably better characterised as a notice of intention to support the judgment below on other grounds. Generally, the insurers resist cover for vehicles owned by exporters who were not otherwise customers of ATL, or for vehicles that ought to have been declared in an earlier month, or for vehicles that the exporter did not intend at the attachment of risk to insure through AIMS. They take issue with the number of the Judge’s findings. Ms Davies argued that he erred by:
(a)finding that ATL could make insurance available to entities that were not its customers for any other service, and therefore that the appellants were Assureds;
(b)finding that an Assured need not elect the terms of cover prior to attachment of the risk, but rather that Institute B clauses would apply by default;
(c)finding, in relation to JDA, that it had a standing order to insure all vehicles purchased for export; and
(d)declining to decide the allegation of bad faith on the part of the exporters, who were intentionally not insuring their pre-shipment risks and were tying the taking of insurance to their obligations to buyers under their CIF agreements.
We find it convenient to examine the issues in this way:
(a)First, we will decide whether the appellants were Assureds.
(b)Second, we will decide whether Assureds must evince an intention to take insurance prior to the attachment of the risk, and whether the appellants did so, addressing as we do the questions whether ATL was the insurers’ agent for this purpose and whether JDA had a standing order with ATL.
(c)Third, we will decide whether the promise to provide monthly declarations was a promissory warranty breach of which discharged the insurers. We will address the arguments that s 11 of the 1977 Act applies, that liability had already arisen when the obligation to declare was breached, and that compliance was waived by insurers.
(d)Lastly, we explain why we do not think it necessary or appropriate on the record before us to deal with the insurers’ allegation of bad faith.

Were the appellants Assureds?

Ms Davies submitted that the proposal originally made to insurers was that the cover would be available only to customers of ATL; that is, exporters who used its other services. The insurers did not know that the plaintiffs were not customers of ATL for purposes other than insurance. That was never drawn to their attention by ATL, which was responsible for administering the insurance. The insurers would not have agreed to ATL on-selling cover to any exporter who wished to take it. The Judge was wrong to rely on vague and belated evidence of Mr Manks, who claimed he had had a conversation with a representative of the insurers in which the possibility of sourcing business from non-customers was discussed.[22] For AIG, Mr Sheppard said that he had no knowledge of any such conversation and would expect to have been told of it had it happened.
[22]The evidence was elicited in cross-examination, apparently in response to an amended pleading which the insurers were permitted to file at the commencement of the trial.
The Judge reasoned that the wording of the Assured clause (at [13] above) did not require that the plaintiffs need be customers of ATL other than for the purpose of buying insurance.[23] He observed that the policy also referred to acquisition of vehicles by the Assured and attachment of the Assured’s insurable interest.[24] ATL did not have an insurable interest in the vehicles.[25] Nor did the proposal necessarily imply that insurance was confined to exporters who are ATL’s customer for inspection or odometer reading.[26] The Judge mentioned the evidence of Mr Manks but did not appear to place a great deal of weight on it.[27]
[23]Judgment under appeal, above n 3, at [39]–[42].
[24]At [40].
[25]At [40].
[26]At [41].
[27]At [38] and [41].

We are not persuaded that the Judge was wrong. The policy covered the Subject-matter (vehicles) for transits by and for the account of the named ATL entities “and/or their subsidiary or associated or related companies or parties including the shippers/exporters and other customers of” the same entities “for whom they are arranging insurance on behalf of, or the insurance of which is under their control …”. This language does not limit “customers” to exporters who also use other ATL services. It must be borne in mind that we are dealing here not with a dispute between ATL and AIG, but with claims under the policy by exporters to whom ATL sold cover with, as Mr Napier submitted, the actual or apparent authority of the insurers. Having purchased it, the appellants are undoubtedly customers of ATL. Clear language would be needed to permit insurers to deny their claims on the ground that they had to take other ATL services as well.

Prior intention to insure

Mr Napier accepted that the Court must be satisfied that the appellants intended and had committed to take insurance for the affected vehicles prior to typhoon damage. He contended however that such intention need not be communicated to insurers; and if it must, ATL was the agent of the insurers for this purpose.
Ms Davies submitted that the appellants were required to evince an intention to take insurance prior to attachment of the risk by communicating their intention to insurers, and this obligation extended to nominating the required terms of cover by affirmatively electing Institute A or B clauses. Neither ATL nor Sage were agents of the insurers for this purpose; in accordance with long-standing marine insurance practice, they were agents of the Assureds.[28]

Intention to insure with AIMS in fact

[28]Anglo-African Merchants Ltd v Bayley [1970] 1 QB 311 at 322 per Megaw J, referring to Rozanes v Bowen (1928) 32 Lloyd’s Rep 98 at 101.

As we see it, the first question is one of fact; did the appellants intend to insure with AIMS. This should be assessed at the attachment of risk — not, as Mr Napier would have it, at any time prior to loss being suffered. This was a policy which was designed to operate in the ordinary course of business, the Assureds being bound to declare each and every shipment without exception and the insurers being obliged to accept the same up to the policy limits. Declarations must specify the number of vehicles received into pre-shipment yards in the preceding month. As we have explained, cover attached where the Assured’s insurable interest first arose, likely at auction, and extended to transit from such place to the pre-shipment yards.
Intention to insure is, as the Judge recognised, a very significant issue in this case. It is true that most cars are sold on CIF terms, meaning they must be insured by the exporter, so most of the damaged cars would have been insured prior to being loaded onto a ship. The premium under this policy is also fixed. But there is evidence consistent with a practice of exporters taking insurance and paying the premium only when the vehicle concerned had been sold to an overseas buyer. The dramatic increase in vehicles insured by ATL after the typhoons, and the appearance of exporters who had not previously or recently used AIMS, suggests that but for the typhoons some exporters would have taken cover with another insurer. Both practices are incompatible with the structure of the parties’ bargain, under which open cover was offered on terms that the Assureds would declare monthly, and the insurers would cover, all shipments that met the policy terms. These obligations were plainly material to the insurers’ assumption of risk under the policy. If freed of them, exporters would be able to select against the interests of the insurers. And if vehicles were not declared in the declaration for the month in which they entered a pre-shipment yard, the insurers would not have an accurate measure of their exposure.[29]

The obligation to select Institute A or B clauses

[29]Union Insurance Society of Canton Ltd v George Wills & Co [1916] AC 281 (PC) at 288–289.

Ms Davies submitted that the policy required in clear and unambiguous terms that an Assured must elect terms of cover prior to attachment of the risk.
She pointed to evidence of Mr Sheppard, who drafted the relevant provisions, that a decision had been made to remove wording providing for use of Institute B clauses in default. He deposed that he wanted insured parties to elect terms of cover before suffering a loss. She submitted that the Judge was wrong to accept the evidence of Mr Manks that the original wording was actually removed because he and another AIG employee, Fraser Walker (who did not give evidence), agreed that it was superfluous. The Judge accepted Mr Manks’s evidence, finding that the parties proceeded on an assumption that B clauses would apply in the absence of an express election to take all-risks cover.[30] He appears to have accepted that an estoppel arose accordingly.[31] He also reasoned that, on a proper interpretation of the policy, B clauses applied by default.[32]
[30]Judgment under appeal, above n 3, at [56]–[57].
[31]At [59].
[32]At [59].
In our view the purpose of cl 1 of the standard conditions, which we have set out at [18] above, was to define the extent of cover and allow the Assured to elect one of two forms on offer. The policy contains no process for selecting the form of cover prior to the attachment of risk, either generally or in relation to each vehicle. Rather, cover was secured through the monthly declaration, which was made after the risk had attached. The better reading of the policy, in our view, is that the Assured’s intention to insure when the risk attached must extend to the form of cover, with that election being confirmed when the declaration was made. An Assured which selected A clauses would need to prove, if called on to do so, that it had always intended to do so.
Nor are we persuaded that the Judge was wrong to prefer the evidence of Mr Manks that he and Mr Walker agreed that express wording to the effect that B clauses applied in default was superfluous, and that ATL and AIG thereafter proceeded on that basis. He had the advantage of hearing the evidence. It was not necessary that he make an adverse credibility finding against Mr Sheppard in order to accept Mr Manks’s account; it was enough that he found Mr Manks reliable and recognised that Mr Sheppard may not have known of the conversation between Mr Manks and Mr Walker.[33]

Notification to insurer of intention to insure

[33]At [57].

Gault J found that the intention to take insurance had to be communicated to the insurers.[34] Ms Davies agreed with Mr Napier that there was no policy requirement for communication to insurers prior to the submission of each monthly declaration. We concur. The questions are whether the Assured intended to insure a given vehicle when the risk attached, and on what terms, and whether the Assured subsequently complied with their obligations to declare.
[34]At [63].
It follows that we need not address the argument that ATL and/or Sage were agents of the Assureds for the purpose of receiving prior notice of an intention to insure. We record that we accept that in marine insurance practice a broker ordinarily is the agent of the insured.[35] We also accept that Sage acted as the agent of ATL when the proposal was made to insurers and the policy terms were negotiated. But ATL is not a broker and it was responsible as between itself and AIG for the administration of the insurance, receiving monthly notifications from exporters, combining them into a monthly spreadsheet which it supplied to Sage and issuing exporters with certificates of insurance. ATL is not a party to the present proceeding and on the view we take of the case we need not define the precise parameters of its agency.[36]

The obligation to provide monthly declarations

[35]See Anglo-African Merchants Ltd v Bayley, above n 28, at 322; Rozanes v Bowen, above n 28, at 101; and Empress Assurance Corp Ltd v CT Bowring & Co Ltd (1905) 11 Com Cas 107 (KB) at 112.

[36]Nor is it necessary to consider the application of s 19 of the Marine Insurance Act 1908.

We have explained that the monthly declarations to the insurers under the policy were made by ATL, which consolidated exporters’ notifications into a spreadsheet that it sent to Sage, which calculated the premium and accounted to the insurers. The Judge observed that exporters needed to declare cars to ATL before it could declare them to the insurers and the ATL declaration acted as the exporters’ declaration.[37] It is not suggested, so far as we are aware, that there was any mismatch between the two.
[37]Judgment under appeal, above n 3, at [75].
The first question is whether the monthly declarations must include all vehicles that entered pre-shipment yards in that month. If so, we must decide whether the insurers waived compliance, whether such obligation was a warranty breach of which releases the insurer, and whether, if it was a warranty, it was breached after liability had accrued.

Must vehicles be declared for the month in which they entered a yard?

The short answer to this question is that the policy expressly required that within seven calendar days of the end of each month the Assured must declare to the insurer the number of vehicles received into pre-shipment holding yards during the preceding month. Mr Napier did not suggest otherwise, arguing rather that the insurers waived compliance and that the premium clause in which this language appeared was not a warranty.

Did the insurers waive compliance with the obligation to declare?

Mr Napier noted that a breach of warranty may be waived by the insurer,[38] and submitted that the insurers did so in this case by meeting claims even when vehicles were declared late, or a declaration was missed entirely. He sought support in the insurers’ practice of allowing ATL to make monthly declarations after the seven-day period for doing so had expired.
[38]Marine Insurance Act, s 35(3).
It is correct that the insurers did not strictly insist on declarations being made within seven days. The Judge found that the August and September declarations were made on 12 September and 10 October respectively and the insurers took no issue with that. To that extent, the Judge found, there was a waiver.[39] Mr Napier took us to evidence from Sage and ATL suggesting that delays of this kind happened from time to time. However, we agree with Ms Davies that timing of the declarations is a red herring. The real question is one not of timing but of content. And as the Judge found and we have noted at [33] above, when insurers became aware of failures to declare vehicles that had entered yards in the preceding month they complained to ATL. The Judge clearly accepted that the insurers did not waive compliance.[40] We agree. The evidence does not satisfy us that they led ATL to understand they did not insist on compliance. From the insurers’ perspective the obligation to declare when the policy required it was important.

Does breach of the obligation to declare for the month in which vehicles enter a yard release the insurer?

[39]Judgment under appeal, above n 3, at [76].

[40]At [77].

We turn to the question whether the obligation to declare is a warranty for purposes of the Marine Insurance Act, s 34 of which provides:
34       Nature of warranty
(1)A warranty, in the following sections relating to warranties, means a promissory warranty—that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.
(2)       A warranty may be express or implied.
(3)       A warranty as above defined is a condition which must be exactly complied with, whether material to the risk or not. If it is not so complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.
Generally, the Act implies standard terms into contracts of marine insurance.[41] Many of these terms can be excluded by agreement. Whether an obligation to declare clause is a warranty is a question of interpretation of the particular policy.[42]
[41]It follows the Marine Insurance Act 1906 (UK), which codified common law of the time. Similar legislation has been adopted in Australia and Canada.
[42]Compare Union Insurance Society of Canton Ltd v George Wills & Co, above n 29, and Glencore International AG v Ryan [2001] EWCA Civ 2051, [2002] 1 Lloyd’s Rep 574 [The Beursgracht].
Mr Napier pointed out that the obligation to declare is found in a clause dealing with the calculation and payment of premium, and it is not labelled as a warranty. If it was to enjoy the status of a warranty, one would expect it to appear in the bound to declare clause. He submitted that the errors and omissions clause is inconsistent with it having that status.
The Judge found that the requirement to declare does not lack prominence in the policy,[43] and he emphasised that this was an open marine policy under which cover could attach on the basis of a standing order before insurers knew the number of vehicles.[44] The obligation to declare monthly was important for that reason, and for reinsurance purposes.[45] By way of emphasising its importance, he noted that the bound to declare clause required that the Assured declare each and every shipment or sending or risk without exception.[46]
[43]Judgment under appeal, above n 3, at [82].
[44]At [84].
[45]At [84].
[46]At [85]–[86].
We have explained that the structure of the parties’ bargain was that open cover was offered on terms that the Assureds would declare monthly, and the insurers would cover all shipments that met the policy terms. We recognise that the insurers have not argued that they are excused liability in connection with exporters who did not insure all their exported vehicles through AIMS. The narrative at [33] above suggests they may have acquiesced in that practice, which resulted in the policy becoming facultative on the part of the Assured and obligatory on the part of the insurers.[47] Rather, the insurers have invoked the bound to declare clause for the purpose of insisting that all vehicles which exporters intended (at attachment of risk) to insure through AIMS were declared in the declaration for the month in which they first entered a pre-shipment yard. Nonetheless, we accept that the obligation to declare all vehicles which were to be insured through AIMS was material to the insurers. In our view it was a promissory warranty for purposes of s 34(1) of the Act.
[47]See Glencore International AG v Alpina Insurance Co Ltd [2003] EWHC 2792 (Comm) at [263]–[264] for the importance of declarations under such a policy.
We agree with the Judge that the errors and omissions clause does not detract from this conclusion.[48] That clause provided that unintentional errors or omissions in the making of declarations should not invalidate the policy provided steps were taken to rectify them as soon as they came to the notice of the Assured. The language of the clause recognises that some failings in making declarations might invalidate the policy. We do not accept Mr Napier’s sweeping submission that there was no deliberate lateness in making declarations. The enormous number of vehicles declared for August and September 2018 indicates that what is in issue here is not unintentional errors or omissions, such as an oversight in notifying ATL that a given vehicle had entered a yard, but rather a practice of exporters keeping their shipping and insurance options open or waiting to sell a vehicle on CIF terms before paying the premium. These practices allowed exporters to select against the interests of the insurers, and that is exactly what appears to have happened during the 2018 typhoon season.
[48]Judgment under appeal, above n 3, at [92].
Mr Napier invoked s 11 of the Insurance Law Reform Act, which provides that:
11 Certain exclusions forbidden
Where—
(a)by the provisions of a contract of insurance the circumstances in which the insurer is bound to indemnify the insured against loss are so defined as to exclude or limit the liability of the insurer to indemnify the insured on the happening of certain events or on the existence of certain circumstances; and
(b)in the view of the court or arbitrator determining the claim of the insured the liability of the insurer has been so defined because the happening of such events or the existence of such circumstances was in the view of the insurer likely to increase the risk of such loss occurring,—
the insured shall not be disentitled to be indemnified by the insurer by reason only of such provisions of the contract of insurance if the insured proves on the balance of probability that the loss in respect of which the insured seeks to be indemnified was not caused or contributed to by the happening of such events or the existence of such circumstances.
On its face, this may appear inapplicable to s 34 of the Marine Insurance Act, which defines a warranty as “a condition which must be exactly complied with, whether material to the risk or not”.[49] The 1977 Act provides that nothing in the 1908 Act shall limit any provision of the 1977 Act, which prevails in any case where they are in conflict.[50] There is a question whether the 1977 Act applies to warranties that are incorporated not because the insurer thought the events they address were likely to increase the risk but because the legislature chose to imply them into the contract.[51] Ms Davies did not invite us to answer it here, perhaps because the evidence suggests the warranty was specifically negotiated. Rather, she argued that the warranty was not so defined as to establish a causal connection between its breach and the insured’s loss.
[49]Section 34(3).
[50]Insurance Law Reform Act 1977, s 14.
[51]Robert Merkin and Chris Nicoll Colinvaux’s Law of Insurance in New Zealand (2nd ed, Thomson Reuters, Wellington, 2017) at 1342, referring to Harbour Inn Seafoods Ltd v Switzerland General Insurance Co Ltd (1991) 6 ANZ Insurance Cases 61-048 (HC); and Womersley v Peacock HC Christchurch CP24/98, 8 September 1999.
The question can be framed in this way: did the obligation to declare clause exclude the insurers’ liability on the happening of certain events or on the existence of certain circumstances because it was of the view that those events or circumstances were likely to increase the risk of loss occurring, so allowing the insured to show on the balance of probabilities that the loss was not caused or contributed to by such events or circumstances?
Gault J found for the insurers.[52] Mr Napier submitted that this was an error; if the clause was a warranty it both excludes and limits the liability of the insurer to indemnify the insured in the event of a late declaration. But the bound to declare clause does not exist because the insurer considered the absence of a declaration increased the likelihood of loss occurring. We consider rather that the bound to declare clause was, as Ms Davies put it, part of the administrative framework of the policy, allowing the insurers to calculate and invoice the premium, monitor their exposure, assess reinsurance arrangements, and determine in advance of the next renewal whether the premium remained appropriate.[53]
[52]Judgment under appeal, above n 3, at [87].
[53]Compare the catalogue of facts that have been found material to risk in Merkin and Nicoll, above n 51, at [18.4.1(2)].

This conclusion is not inconsistent with our finding that the bound to declare clause was material to the insurers, in the sense that it affected the risk associated with insured vehicles collectively. As we next explain, in the context of a marine open policy the insured’s obligation to declare in the applicable month all vehicles which it intended to insure through AIMS went to the question whether a contract was formed at all.

Had liability already accrued when the obligation to declare was breached?

Mr Napier argued that if the bound to declare clause was a warranty, breach did not operate to release the insurer because liability had already accrued when the obligation to declare arose. This meant, he submitted, that cover could not be declined for vehicles delivered to the yards in August because a declaration was not due until 7 September and typhoon damage was suffered on 23 August or 4 September. He submitted that Gault J did not engage with this argument.
The Judge held that while cover attaches before a declaration is made, it is subject to a declaration in accordance with the policy terms.[54] Absent a compliant declaration, no contract was formed. He explained in relation to JDA that liability for the loss, which occurred on 4 September, would have arisen only if the vehicle was included in the declaration made on 12 September. It was not.[55] More generally, vehicles which entered the yards in or before July 2018 could not be included in the 12 September declaration, and the same would apply for vehicles which entered the yards in August but were not declared until 10 October.[56]
[54]Judgment under appeal, above n 3, at [89].
[55]At [90].
[56]At [91].
We consider the Judge was correct. The rule is that where a declaration under a marine open policy does not comply with the terms of the policy no contract was formed.[57] The contract having been formed, cover attaches retrospectively.

Conclusion

[57]Seavision Investments SA v Evennett [1990] 2 Lloyd’s Rep 418 [The Tiburon] at 422.

In the result, exporters were covered under the policy if they intended to insure with AIMS at the attachment of risk and made a timely declaration. We appreciate that this meant the cover may have had little value for exporters who believed they could delay the choice of export destination and insurer and the timing of payment until shipping was imminent. But the alternative is that exporters were free to select against the insurers. That is behaviour which, in our view, the policy was structured to prevent.

The position of each of the representative plaintiffs.

We now turn to the circumstances of each of the appellants. We address whether each of them intended to insure with AIMS, and whether they were in breach of the obligation to declare warranty.

JDA

We have referred to the Judge’s findings at [61]–[64] above. We record that it was common ground that a standing arrangement between an exporter and ATL might sufficiently evidence timely intention to take cover with AIMS and on what terms.
Ms Davies challenged the Judge’s finding that JDA had a standing arrangement to purchase insurance. Evidence of such arrangement was given by Mr Tagami and Mr Grindall, who deposed to establishing such arrangement in 2014. Ms Davies submitted that this evidence should be rejected, pointing out that the arrangement was said to be oral but a written document was produced at a late stage and the written agreement both predated the AIMS scheme and limited the arrangement to cars being exported on CIF terms. We observe that some of her criticisms related to the obligation to declare, rather than the existence of the standing order.
We are not persuaded that the Judge’s findings were not available to him. Mr Tagami and Mr Grindall deposed that JDA had a standing arrangement to insure all vehicles it exported. We are not persuaded that the Judge was wrong to accept that evidence.
However, we do accept that the standing order involved JDA giving notice to ATL that it had decided to export each car and accordingly wanted insurance. It appears that JDA often exported on CIF terms, so it need not take insurance until a sale had been arranged. So JDA’s declarations to ATL were not always made in the declaration for the month in which a given vehicle entered a yard.
It is not in dispute that, as recorded at [43]–[44], JDA made a late declaration for the single car which is the subject of its claim. The car had entered a yard in August and was not included in the declaration for that month. We have agreed with the Judge that the late declaration was in breach of warranty, discharging the insurers.

Nikkyo

Mr Napier submitted that Nikkyo intended to take cover through AIMS for all vehicles that it shipped through Moana Blue. Mr Sera and Mr Grindall gave evidence to that effect. Mr Sera deposed to there being a number of vehicles that had been purchased by Nikkyo and entered a Moana Blue yard on various dates in July and August. A few more entered the yard in September shortly before Typhoon Jebi struck.
We have quoted the Judge’s findings at [61] above. He accepted that Nikkyo had a standing arrangement with ATL.[58] But it used other exporters, and not until it nominated a vehicle as being shipped by Moana Blue did the standing arrangement apply. It followed that the standing arrangement did not evidence Nikkyo’s intention to take insurance prior to attachment of the risk. Further, the nomination might occur weeks after purchase of a given vehicle.[59] He appears to have found that most of Nikkyo’s cars were not exported through Moana Blue in practice.
[58]Judgment under appeal, above n 3, at [66].
[59]At [67].
We agree with the Judge. The decision to export a given vehicle through Moana Blue appears to have been made after the attachment of risk, and sometimes weeks later. Until that decision was made it could not be said that the exporter intended to insure through AIMS.
It follows that Nikkyo failed to show that it had evinced an intention to insure through AIMS when the risk attached in relation to its vehicles. That is so for the cars which are the subject of Nikkyo’s claim in this proceeding, all of which were in the Moana Blue yard when damaged. A decision to insure through AIMS was made when these cars entered the yard, where they were subsequently damaged, but that decision post-dated the attachment of risk.
We note that in some cases Nikkyo was also in breach of the bound to declare clause. Some claims were declined because it had owned the vehicles for more than 90 days. Mr Sera also acknowledged that some of the cars to which he referred in evidence had entered the yard in July. It is not easy to identify which vehicles entered the yard in August and were the subject of a declaration made in September, but it may have been as many as 14.

Integrity

As we have explained, Integrity insured cars on a “spot” basis, going onto the AIMS website to declare them case-by-case. It is evident that Integrity did not insure all its cars through AIMS. There was no standing order, nor was there a sufficient course of conduct evidencing an intention to take insurance prior to attachment of the risk. The Judge found rather that Integrity declarations were made “well after” attachment of the risk, and its practice was consistent with only insuring vehicles exported on a CIF basis.[60] In short, it cannot be said that Integrity intended to insure a given vehicle through AIMS at the time of attachment of the risk. All that can be said is that the intention to insure through AIMS was formed by the time that details were entered on the website.
[60]At [68].
Mr Napier responded by arguing that Integrity met the definition of Assured and the insurers were obliged under the bound to declare clause to accept every vehicle that an Assured declared to them in good faith (prior, we assume, to any damage). We cannot accept this argument. It supposes that Integrity was insuring through AIMS all vehicles that it exported, which is not the case. And we have preferred the view that the intention to insure through AIMS must be formed at attachment of the risk.

Bad faith

As noted earlier, Ms Davies argued that the Judge was wrong to decline to consider the respondents’ claim that the appellants acted in bad faith, contending that he was obliged to deal with any issue raised.
We do not agree that the Judge was strictly obliged to deal with the issue, since he had concluded the outcome did not depend on it.
Nor do we intend to deal with it, for three reasons. First, we would not be prepared to make findings of this kind when the trial Judge did not address the issue. It might be necessary to descend to per-vehicle analysis. If the outcome depended on it and we were allowing the appellants’ appeal to some extent, we would remit the issue to the High Court for decision.
Second, we do not find it necessary. We have accepted that the insurers may decline cover where the exporter did not intend at the attachment of risk to insure the vehicle with AIMS, or where the exporter was in breach of the bound to declare warranty. The allegation of bad faith appears to add little. Further, the evidence of bad faith appears to rest in part on the total number of cars declared and the behaviour of exporters and firms other than the appellants. We have explained at [56] above that our findings are confined to the positions of the appellants. Mr Napier accepted that. He acknowledged that it remains open to the insurers to deny cover to any other exporter, including those represented by the appellants, whose claims were fraudulent or which chose to insure with AIMS because their vehicles had already been damaged or were thought to be at imminent risk of typhoon damage.
Third, so far as the appellants were concerned, Ms Davies confined herself to arguing that because they had withdrawn some claims or accepted declinature they were “not blameless”, which falls short of an allegation that they acted dishonestly.

Disposition

The appeal is dismissed.
The cross-appeal is dismissed.
The respondents having succeeded, the appellants must pay one set of costs for a standard appeal on a band B basis, with usual disbursements on their appeal only (not the cross-appeal).

Solicitors:
Keegan Alexander, Auckland for Appellants
Fee Langstone, Auckland for Respondents

[2022] NZCA 532

9 November 2022 at 3.30 pm