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Vesta V. Butcher Notes

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VESTA V. BUTCHER FACTS In September 1978 a very severe Gale struck the coast of Norway and caused damage to a fish farm operated by Fjordlaks Tafjord A/S. Fjordlaks was insured in respect of the loss and damage sustained under a policy issued by Vesta, a large Norwegian insurance company. Vesta reinsured 90 per cent. of the risk in Lloyds and the first defendant is the representative underwriter. The second and third defendants are brokers in London. The contracts of insurance and reinsurance each contained a clause that Fjordlaks would keep a 24-hour watch over the site. At all material times Fjordlaks was in breach of that clause. The clause was a safety regulation within the meaning of the Norwegian Insurance Contracts Act 1930. By section 51 a breach of a safety regulation is no defence to a claim under the policy unless the loss was caused by the breach. Here the loss had nothing to do with an absence of a 24-hour watch and in due course Vesta settled the claim of Fjordlaks for 2.75 million Norwegian Krona and it is not suggested that that settlement was other than reasonable and proper. One might have expected that that would have been an end of the matter, but it was not to be. Reinsurers refused to pay their 90 per cent. on the ground that the 24-hour watch clause was a warranty in a contract governed by English law and the breach entitled them to refuse to pay regardless of the position in Norway. Claim by Vesta against Brokers: To guard against the possibility that they might not succeed against the reinsurers Vesta joined the brokers, claiming against them that if the reinsurance was ineffective this was due to their breach of duty in failing to obtain back-to-back cover from the reinsurers. Brokers allege contributory negligence of Vesta: the brokers argument was that that Vesta were guilty of contributory negligence in that Mr. Kolbeinson [the plaintiffs' manager] should have remembered that he had had no reply from Mr. Hewett on the 24-hour watch problem; (v) that fault should be apportioned 75 per cent. on Vesta and 25 per cent. on the brokers. QUESTION The important issue of law is whether on the facts of this case there is power to apportion under the Law Reform (Contributory Negligence) Act 1945 and thus reduce the damages recoverable by Vesta. HOLDING

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