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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Zeus Tradition Marine Ltd v Bell [2000] EWCA Civ 188 (13 June 2000) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/188.html Cite as: [2000] EWCA Civ 188

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Case No: A3/1999/0495
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
(MR JUSTICE COLMAN)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 13^th June 2000

(ii) alternatively, if they were not entitled to be provided with a survey report prior to commencement of the in commission period, the SVL report subsequently provided was insufficiently comprehensive as it did not evidence a condition survey which confirmed the structure of the hull and main deck as sound and seaworthy, that work carried out in the engine room had been carried out to a safe standard and in a workmanlike manner, that the vessel's fire systems and apparatus were properly operational and that alterations to the vessel had not adversely affected its stability. It was said the surveyor ought to have investigated the vessel's underwater parts while she was slipped and to have conducted sea trials and an engine survey involving opening-up. The survey was no more than a superficial survey reporting on the general condition of the vessel for valuation purposes;

(iii) non-disclosure in relation to the vessel being put into commission prior to the period of insurance.
THE JUDGE'S DECISION
8. So far as the underwriters' ground (iii) is concerned, suffice it to say on this appeal that the judge found against the underwriters and there is no cross-appeal in that respect.
9. So far as grounds (i) and (ii) were concerned, Miss Bucknall QC who appeared for the defendant both here and below submitted that the clause constituted a condition precedent to commencement of cover during the commission period and that, as a matter of construction or implication to give business efficacy to the contract, in order to satisfy the condition it was necessary for (1) the vessel to be surveyed, (2) the surveyor to have prepared the report, (3) the report to have been supplied to the underwriter and (4) the underwriter to have accepted the report as satisfactory. Mr Ruttle QC, who appeared and appears for the plaintiff, on the other hand, contended first that the clause was not a condition precedent to cover at all. Based on submissions as to the previous history of negotiations in earlier years, he submitted that its function was merely to require a survey prior to the commencement of the in commission period in order to substantiate the value of the vessel. Second, he submitted that the condition was sufficiently complied with if, prior to the commencement of the commission period, a survey had been carried out and the outcome was satisfactory in the sense that the surveyor discovered no unseaworthiness or lack of safety. The condition did not require that a report be submitted by the assured to underwriters for their approval prior to commencement of the commission period; the underwriters would be protected by the fact that, if and when the plaintiff was made aware of adverse findings by the surveyor he would be under a duty of good faith to inform the underwriters forthwith who would then be in a position to require that the vessel be rendered safe and seaworthy as a further condition of going on risk, alternatively to give thirty-days notice of termination under Clause 20 of the Institute Yacht Clauses.
10. So far as the content of the survey report was concerned, Mr Ruttle contended that the survey supplied fully complied with the purpose for which it was intended, namely valuation, and that, if it was required to be a survey which covered both condition and valuation, it was in any event appropriate for that purpose. Miss Bucknall on the other hand argued that the survey was inadequate because it did not consist of, or include, an out of water survey for examination of the underwater parts and opening-up of the engines, sea trials and an examination of stability.
11. At p.707 of his judgment, the judge identified the key issues relating to the construction of the policy condition as follows.
"(a) What steps relating to the carrying out of a survey are required to be taken by the assured prior to the vessel being brought into commission? In particular, does the survey have to have been carried out, the report prepared by the surveyor, delivered to the leading underwriter and approved by him, or is it sufficient if the survey has been carried out although the report has not (i) been prepared, or (ii) been received by the underwriter or (iii) been approved by the underwriter, provided that the report by the surveyor is, when prepared, one which would be satisfactory to a reasonable underwriter?
(b) What is the substance of the survey that has to be procured? In particular, is it necessary that the surveyor should examine the vessel's underwater parts, while she is shipped (sic), examine the engines after opening up, observe the carrying out of sea trials and consider the impact of repairs upon the vessel's stability and the operability of the fire safety equipment?
(c) What is the effect on cover of non-compliance with requirements of the condition?"
12. Having dealt with the background events prior to the placing of the risk, which also involved insurance of another vessel the "Zeus II" from 1989 onwards as well as "Zeus V" from 1990, and having dealt in detail with the placing of the "Zeus V" in 1993, the judge turned to the question of the construction in a passage of his judgment at p.712 headed "The Meaning and Effect of the Subject condition" He said:
"There can, in my judgment, be no doubt as to the ordinary meaning of the words "subject to" as they appear in the subject condition. The insurance at least potentially covered two periods of operation of the vessel: first that covered by "completion of refit" in the cruising range and second that following completion of refit when she went into commission. The period of insurance commenced on Apr. 1, 1993 and at that time underwriters would come on risk if the vessel was still undergoing a refit, for there was no condition precedent to the commencement of such cover. If however, the refit had by then been completed and the vessel was brought into commission, underwriters would not be at risk at all unless the requirements of the subject condition were complied with. This is the ordinary and natural effect of the words used in a marine policy. If there was an ambiguity about that point, I infer that the mutual intention of the parties would have been to that effect ..... . Secondly, the evidence of both expert witnesses, Mr Outhwaite for the plaintiff and Mr Day for the defendants, was clearly that they considered that the market understanding of a subject of this kind would be to the same effect, namely as a pre-condition to the commencement or continuation of cover"
Having further reviewed the history, he stated:
"There can thus be no doubt that the preface words "subject to" create a condition precedent to the continuance of cover after the commencement of the commission period." (p.713)
Finally, having observed that in his view the words gave rise to no ambiguity, he concluded that, on the evidence of the experts as well as Mr Bell:
"an experienced yacht underwriter could be expected to use "subject to" in this context to connote a condition precedent to the continuance of cover and that therefore is the meaning which it is to be inferred was mutually intended by Mr Fraser and Mr Bell when this risk was written." (p.713)
13. With regard to issues (a) and (b), he stated that the problem with the meaning of the subject to survey condition was to identify what was required to satisfy it. As to issue (a), having referred to the arguments of the parties, the judge stated:
"There can in my judgment, be no doubt that it is a requirement of the subject condition that the survey must be carried out before the commencement of the in commission period. Once the independent surveyor has completed the inspection of the vessel for condition and valuation, it is also clearly necessary that he should record his opinion in a report to be prepared as soon as practicable after the inspection" (p.714)

He thus repeated his conclusion that the carrying out of the survey was a condition precedent to the commencement of in commission cover, at the same time rejecting the submission of Mr Ruttle that it was a survey for the purposes of valuation only. He also held that recording of the surveyor's opinion in a report was essential before the vessel came on risk. Thus he accepted Miss Bucknall's submissions (1) and (2) (see paragraph 9 above)

14. The judge went on to state that the opinion required was to the effect that "the vessel was seaworthy and passenger-safe and free of recommendations in this respect". He stated in this connection that the condition could plainly not be satisfied by the carrying out of a survey which resulted in a report to different effect:
"... for if that were the case, the mutual assumption on which the underwriters must be taken to have accepted the risk, namely that the vessel would be seaworthy and passenger-safe at the commencement of the in commission period would not be correct. So it can safely be inferred that the mutual intention was that the surveyor would confirm this assumption and that, if he did not, the underwriters would not come on risk. In that event, the owners would have to put right the defects and have the vessel re-surveyed for the purpose of obtaining a report which confirmed the mutual assumption as to the condition of the vessel." (p.714)
15. However, the judge rejected Miss Bucknall's submissions (3) and (4) to the effect that, once the report had been prepared, in commission cover would not commence until it had been supplied to the underwriter and accepted by him as satisfactory. In that respect the experts on both sides were in agreement that, had it been the intention that, before the underwriter came on risk, the survey report was to be presented to him so that he could approve it, then there would be an express provision to that effect and that it was an impractical requirement that, after the completion of the refit, when the yacht was ready to sail and the owner wished it to be working and earning money that, following a satisfactory survey, a report would have to be produced and supplied to underwriters for their consideration and approval before the vessel could start earning. In this connection the judge held (at pp 714-5) that:
"... if the survey report must in any event confirm the seaworthiness and passenger safety of the vessel, an additional requirement that it should be approved by underwriters before the in commission period commenced would be otiose and cannot have been mutually intended. ....... .
Once it is accepted that the condition precedent to continuation of cover is complied with by a survey free of recommendations prior to commencement of the in commission period and is not complied with if a survey discloses defects, the question whether there would be a continuing duty .. to disclose to underwriters a report which questioned the vessel's seaworthiness or passenger safety does not arise, for in such circumstances if the assured brought the vessel into commission, underwriters would automatically be off-risk."

16. Having reviewed the experts' evidence the Judge stated:

"Accordingly, I hold that it was a requirement of the subject condition that before the commencement of the in commission period: (i) a survey of the vessel should have been conducted for condition and value by an independent surveyor and (ii) a condition survey should have been satisfactory in the sense that it gave rise to no defects or recommendations in respect of seaworthiness or passenger safety. Further, whereas it was not a precondition of the continuance of cover that underwriters would be provided with a report and that they should approve it, nevertheless the assured would have to provide the underwriter with such a report for the purpose of evidencing compliance with the subject condition. In practice, provision of the report to the underwriter would normally occur within a reasonable time of the survey inspection and no doubt the underwriter could call for its production forthwith, but, if such a report were produced to him and it disclosed no defects, he could not then treat himself as off-risk simply because of the delay beyond the commencement of the commission period in providing it to him." (pp715-716)
17. The Judge then moved on to consider what kind of survey was required. He noted the Defendant's case that the survey conducted was completely deficient, being apparently no more than was necessary for valuation. It was based on the argument that the condition required not merely a superficial survey of the kind conducted by SVL, but specifically an out of water survey for examination of the underwater parts and opening up the engines, sea trials and examination of stability. The contrary argument advanced by Mr Ruttle for the Plaintiff was that, if the underwriter had wanted a particular type of survey it was for him to specify to that effect in the contract of insurance and, in this respect, he contrasted earlier assurances written by the Defendant in respect of other vessels in the Plaintiff's fleet where phrases such as "full survey" and "subject to full out of water survey prior to policy inception" were employed. Mr Ruttle also submitted that, in the absence of any express specific requirement, the words should be construed against the underwriter for whose benefit they were. The Judge observed:
"The words "subject to survey" were so non-specific that they are capable of bearing a range of meanings relating to the nature of the survey required. However, it is reasonably clear that it must have been the mutual intention that any condition survey must have regard to the seaworthiness of the vessel and to its passengers safety, both being directly material to the risks insured. Key factors relating to seaworthiness would be the condition of the wooden hull, the engines and steering gear. Stability would also be relevant." (p.716)
18. The Judge referred to the rival evidence of the experts, who were not agreed as to whether participants in the market would have used more specific words if they had mutually intended a survey as comprehensive as that asserted by the Defendant. Whereas Mr Day for the Defendant stated that he considered that the express words used required an out of water survey Mr Outhwaite for the Plaintiffs said that, given that the vessel had completed its refit and had just four weeks previously been subjected to the MMM survey, he, as a prudent underwriter, would have asked only for a survey which checked that all the things which had been done to the vessel were satisfactory and did not affect the vessel's safety or the hazards involved with the operation of the vessel. He also made the point that once the refit had been completed one could not start dismantling internal decorations and furnishings to investigate the vessel's seaworthiness.
19. In approaching the question of what the clause required, the Judge considered the appropriateness of the principle that, since the words used were in the context of the other terms capable of bearing a broad range of meanings, there were grounds for construing them as bearing the meaning in the range least onerous to the Plaintiffs as the assured and against the underwriters for whose benefit the term would necessarily operate and who had put it forward for their own benefit. However, having referred to other authorities which have suggested that this approach is not appropriate where the ambiguous wording is contained in a slip tendered to the underwriter by the assured's broker, he declined to apply the contra proferentem principle in coming to his conclusion on construction. He stated his conclusion in this way at pp718-9:
"In my judgment the subject condition is not to be construed as necessarily imposing on the assured the requirement that there should be an out of the water survey or the opening up of machinery or sea trials or stability tests after completion of the refit and before commencement of the in commission period. Rather, the nature of the survey required on the proper construction of the condition is one which is to be no more stringent than in all the circumstances would reasonably be necessary to satisfy the underwriters of the vessel's seaworthiness and safety. Only if it were inadequate for this purpose would the underwriters be entitled to plead themselves as off risk once the period of commission had started. For example, the vessel might have been subjected to an out of the water survey many months prior to the commencement of the in commission period but so long before the completion of the refit that, unless it was once again inspected out of the water, its seaworthiness might be in serious doubt. Alternatively, no such inspection might be needed if there had been one a relatively short time previously to completion of the refit and commencement of the in commission period. Or, following sea trials, further alternations could have been made to it which might go to its steering gear which ought therefore reasonably to be tested once again before it went into commission. What was reasonably necessary in each case would depend on all the circumstances, including the nature of the refit and the length of time since the last out of the water survey, engine opening up or sea trials."
20. In the light of that construction, the Judge considered whether the Plaintiffs had complied with the survey condition. In this connection he noted that whereas the SVL report included some limited first-hand evidence of the yacht's state of seaworthiness derived from the inspection of the surveyor, the most significant contents in relation to seaworthiness were the references to the findings of MMM when inspected ashore on 15th January 1993, some ten weeks earlier. In this connection the Judge stated:
"It was the evidence of Mr Venetopoulos, which I accept, that the MMM survey covered all aspects of the vessel's seaworthiness, including stability, and was most searching. In the view of the fact that the last previous SVL survey of the vessel ashore was on Nov. 6, 1991 and afloat on Apr. 16, 1992, was the "survey" prior to the in commission period sufficiently comprehensive reasonably to satisfy the underwriters of the vessel's seaworthiness and passenger safety?" (p.720)
In that connection he summarised the expert evidence as follows:
"Mr Bell said that no yacht underwriter would have been satisfied that the SVL survey was sufficient. Mr Day said that it was insufficient, mainly because it did not include an out of the water inspection. Mr Outhwaite disagreed. He stated that an underwriter would place reliance on the MMM survey just as he would rely on a classification society survey if the vessel were entered in such society. He would take into account the results of the survey and of the afloat survey conducted by SVL. Having regard to the fact that the MMM survey had been carried outshortly before completion of the refit it would not be necessary for a further out of the water survey and further engine trials at sea a few weeks later prior to the in commission period." (p.720)
21. The Judge stated that he did not doubt that any prudent underwriter would have wanted a survey of the Yacht's underwater parts to be conducted before the vessel re-entered commission. He said:
"Accordingly, the key question is whether, having regard to the vessel's having just previously satisfied the 1993 MMM survey, the underwriters reasonably required the same ground to be covered by a survey by another independent surveyor or whether, as the Plaintiffs suggest on the basis of Mr Outhwaite's evidence, it was sufficient for SVL to conduct a much more limited survey afloat, a few weeks later, and to report that MMM survey had approved the vessel's condition. (p.720)
On this point the Judge found in favour of the defendant. He said:
"In my judgment, the subject condition requires any condition survey and valuation to be entirely conducted and results recorded by the same independent qualified surveyor or surveying company and not partly by an anonymous governmental survey in respect of some aspects of the vessels and partly by another surveyor engaged by the assured in respect of other aspects of the vessel. The fact that the SVL report refers to what was stated to be the results of the MMM inspections ashore and afloat does not, in any ordinary sense, amount to a survey report in respect of those results. It lists them as a matter of record but not by way of approval by the SVL surveyor. Furthermore, the MMM certificate is not expressed in the form of a detailed survey report, but as a list of those parts of the vessel as to which the MMM surveyors had to be satisfied. It also seems probable that, if the underwriter wanted further information about the condition of any of those parts of their vessel inspected only by MMM, he would not be able to have access to the surveyor in the same way as if the sole qualified independent surveyor carried out the inspection and produced his own single report." (p.720)
22. Finally, the judge referred to the apparently common understanding of the parties concerned in the insurance of the Plaintiff's vessels in the past that the vessels were required to be inspected out of the water by the independent surveyor in addition to inspections conducted by MMM.
23. Accordingly, he concluded:
"that the survey conducted by SVL, notwithstanding its references in his report to the MMM inspection, was insufficiently comprehensive to satisfy the reasonable requirements of an underwriter for the purposes of the subject condition ... . The underwriters were therefore not on risk at the time of the loss."
He added:
"In arriving at this conclusion in spite of Mr Outhwaite's evidence, I formed the opinion that his opinion does not give weight to the entitlement of the underwriter, which is implicit in this condition, to a survey report evidencing an inspection by the author of it of all those aspects of the vessel's seaworthiness and safety as to which an independent assessment is reasonably necessary together with a valuation of the vessel. His opinion does not give effect to the sense of the express words of the subject condition."
Thus it is to be noted that the judge did not state that the MMM survey could not be relied on because it had been effected too long before the date of the SVL survey (c.f. the judge's view of the nature of the MMM survey and Mr Outhwaite's evidence as quoted at paragraph 20 above which the judge did not reject), or because it was in any respect inadequate so far as the underwater parts and the question of stability were concerned. He simply indicated that it could not be relied because it had not been carried out or formally endorsed by the individual or company which was the author of the SVL report.
THE ISSUES IN THE APPEAL
24. Following his judgment, the Judge gave leave to appeal to the Plaintiffs confined to the issues arising in relation to the proper construction of the survey condition, excluding the question relating to the independence of the surveyor which was raised by, and resolved against, the Defendant but to which I have not troubled to refer. The sub-issues which have arisen and been argued in this field may best be approached thus:
(1) Did the clause create a condition precedent to liability, or was it a mere innnominate term?
(2) Did the provision merely require a valuation survey or did it require a condition survey which included a valuation of the vessel?
(3) On its true construction, what kind of condition survey was required by the provision and, in particular, was it one which required to be entirely conducted and the results recorded by the same independent surveyor or surveying company and excluded reliance upon a government survey conducted by MMM.
ISSUE (1): CONDITION PRECEDENT
25. Mr Ruttle has argued that the clause was not a condition precedent to in commission cover but an innominate term. The term appeared in the Certificate of Insurance under the heading "Conditions", which, in the absence of an express statement that the clause was a condition precedent, indicated that it was no more than a general term of policy. He also relied on the decision in Re Bradley v Essex and Suffolk Accident Indemnity Society [1912] 1 KB 415 (which the Judge distinguished) as authority indicating that, in the case of what Mr Ruttle suggested was an ambiguity, the question whether or not the term was a condition precedent should be resolved against the insurer. In my view, these and certain other subsidiary arguments were doomed to failure. First Mr Ruttle failed to make clear how, if the disputed provision was an innominate term, it would operate. Second, in my view, the mere location of the clause under the printed head "Conditions" is in no way determinative of the status of the clause as a general term rather than a condition precedent. Third, the submission was contrary to the view of the experts on both sides. Fourth, he entirely failed to overcome the Judge's finding that:
"... an experienced yacht insurance broker dealing with an experienced yacht underwriter could be expected to use "subject to" in this context to connote a condition precedent to the continuance of cover ..."
Finally, the circumstances in which the provision came to be included in the cover militated in favour of a condition precedent. This was an elderly craft which had undergone a lengthy refit extending over a considerable period. She was covered under the policy while the refit continued, but known to the parties to be intended for commercial use when she eventually came into commission, the plaintiff requiring cover for such use. It was also the understanding on the part of the defendant, as the underwriter assessing the risk, that the refit had still not been completed by the time that negotiations for the period of cover commencing on 1st April 1993 were taking place. Accordingly, this ground of appeal fails.
ISSUE (2): CONDITION AND/OR VALUATION SURVEY?
26. Mr Ruttle persisted on this appeal with his principal contention before the Judge that the survey was intended to be a valuation and not a condition survey. He accepted that more than a one-line valuation was required and that it should be supported by a survey justifying the valuation by reference to the condition of the vessel. However, he contended that the focus was primarily on the valuation, the insurers having already rated the risk.
27. Whether or not the focus was primarily upon valuation, it does not seem to me that the Judge's finding in this respect can be disturbed. Having reviewed the evidence as to the negotiations in previous years, and, having concluded that neither Mr Fraser nor the defendant, Mr Bell, knew prior to commencement of the period of insurance on 1st April 1993 that the refit had definitely been completed and the yacht was immediately ready to go into commission, the Judge concluded:
"The 1993 Certificate operated in a manner which differed from the previous years' contract in one respect, namely the absence of a requirement for the justification of value if the vessel suffered a loss before a surveyor had valued her. This could be because Mr Bell and Mr Fraser both assumed that the survey would be conducted at latest soon after the commencement of the period of insurance. Nevertheless, the words "survey including valuation" are retained. As with the earlier years' contracts, they clearly show that the survey was to cover the vessel's condition as well as its value and that such survey was to be a pre-condition of the continuance of cover if the vessel went into commission at the commencement of or during the period of the insurance." (p.713)
It seems to me that, in the light of the wording of the relevant phrase "survey including" valuation", as well as the factual matrix to which the Judge properly had regard, such conclusion is unassailable. However, that still leaves open the question as to the level of detail required by the survey and, in particular, whether it required to be one carried out by a particular surveyor or company.
ISSUE (3) THE KIND OF CONDITION SURVEY REQUIRED/RELIANCE ON THE MMM SURVEY
28. The Judge, held that, for the condition precedent to be satisfied, "a condition survey should have been satisfactory in the sense that it gave rise to no defects or recommendations in respect of seaworthiness or passenger safety". The SVL survey clearly satisfied such a condition. However, the judge elaborated and supplemented that basic requirement by going on to hold also that the nature of the survey was one which required to be "no more stringent than in all the circumstances would reasonably be necessary to satisfy the underwriters of the vessel's seaworthiness and safety" (p 718). In this respect he expressly held that the condition did not necessarily impose a requirement that there should be an out of water survey or the opening up of machinery or sea trials or stability tests after completion of the refit and before commencement of the in commission period. He contemplated that whether or not such obligation was imposed was likely to depend on whether an out of the water survey had taken place so long before the commencement of the refit that, unless it were once again inspected out of water, the seaworthiness might be in serious doubt, or whether there had been such survey "a relevantly short time previously to completion of the refit and commencement of the in commission period" (see paragraph 19 above). He also cited the example of further alterations having been made following sea trials which might affect the steering gear and thus require it to be tested again before it went into commission. In this connection, he accepted that the out of water survey and engine surveys carried out by MMM on 15th January and 14th March 1993 respectively covered all aspects of the vessel's seaworthiness, including stability, and was most searching (see paragraph 20 above). In that context he posed the key question, on the answer to which his decision finally turned, namely whether, the vessel having "just previously satisfied the 1993 MMM survey, the underwriters reasonably required the same ground to be covered by a survey by another independent surveyor", or whether it was sufficient for SVL to conduct its more limited survey afloat a few weeks later, reporting that the MMM had surveyed and approved the Yacht's condition (see paragraph 21 above). As Mr Ruttle submitted, a reading of the judgment up to that point suggests that the Judge was poised to give the answer that, taken together, the two surveys were a sufficient fulfilment of the condition. In fact, he held to the contrary, stating as his pivotal reason that the clause required that any condition survey and valuation should be entirely conducted and the results recorded by the same surveyor or surveying company (see also paragraph 21 above).
29. Mr Ruttle has attacked that conclusion, taken on its own, on the basis that it cannot be derived from the wording of the clause either on ordinary principles of interpretation, or on the basis of the Judge's own earlier finding that an earlier out of water survey might avoid the necessity for anything more than a survey afloat, for the purpose of satisfying the clause. As to the construction of the clause, Mr Ruttle submits that there is no reason to suppose that the defendant intended to exclude the plaintiffs from relying upon two survey reports going to different aspects of the yacht's performance and passenger safety, provided that together they constituted a reasonably satisfactory report. He tested this by submitting that there could be no reason in logic or as a matter of practice to exclude the ability of the plaintiffs' surveyor (whether as an individual or a company) to sub-contract part of the survey in an area where he lacked expertise or was unable for some reason to carry out that part of the survey himself. The word "survey" should thus be interpreted as `survey or surveys' whether as a matter of commercial good sense or on the basis that the singular includes the plural, save where the context otherwise demands. If that is correct, then the issue becomes whether the MMM survey, despite the judge's finding that it was a most searching survey which covered all aspects of the yacht's seaworthiness, including stability, is for some other reason to be excluded or disqualified from the category of additional survey able to be relied on.

30. I accept Mr Ruttle's submission as I have summarised it in paragraph 29. I also accept his submission that, in a case where uncertainty arises as to the meaning or scope of a provision in an insurance policy designed to exclude or diminish the liability of an insurer which would otherwise arise under the terms of the policy, a contra proferentem approach is appropriate. As observed by Staughton LJ in Youell -v- Bland Welch & Co Limited [1992] 2 Lloyd's Rep 127 at 134:
"There are two well established rules of construction, although one is perhaps more often relied on with success than the other. The first is that, in case of doubt, wording in a contract is to be construed against a party who seeks to rely on it in order to diminish or exclude his basic obligation ... . The second is that, again in case of doubt, wording is to be construed against the party who proposed it for inclusion in the contract: it was up to him to make it clear."
In most insurance cases, the rule is employed in its second form and against the insurer. However, as it seems to me, both rules are applicable here to support a common sense reading of the clause so as to permit the insured, in appropriate circumstances, to rely upon inspections or findings of more than one surveyor or company to satisfy the `subject to survey' provision. Thereafter, however, the question of whether or not the content of a survey or surveys relied on would reasonably be necessary to satisfy the underwriters of the vessel's seaworthiness or safety is a matter to be determined on the evidence and in all the circumstances of the case.
31. Miss Bucknall has been quite unable to persuade me that, in principle, the clause is to be interpreted so as to exclude plural surveys covering different aspects of the vessel's seaworthiness, safety and performance provided that, taken together, they satisfy the reasonable requirements of the underwriters. As to the question whether a governmental survey such as that conducted by MMM is in principle capable of amounting to a survey on which the plaintiffs were entitled to rely, either standing alone or as incorporated into a single report as in this case, I again see no good reason to hold otherwise. All the clause requires is that the survey should be independent. Nor did the judge (or more significantly the witnesses) seek to criticise the quality of the MMM survey which the judge found was `most searching' and which he contemplated could (if sufficiently recent) preclude the necessity for a repeated inspection by the reporting surveyor. Nor did he hold that the MMM survey was insufficiently recent to be relied on.
32. I find myself unable to support the subsidiary reasons which the judge advanced for his view that the clause required that the survey and valuation be entirely conducted, and the results recorded, by the same surveyor, rather than, in part, by a government inspector. In this connection I remind myself that the question before the court is whether, in the circumstances, the report was sufficient to satisfy a reasonable underwriter as to the seaworthiness and passenger safety of the yacht for the purposes of the commencement of in commission cover and not what might appear reasonable to an underwriter who received and considered the report after the occurrence of the loss.
33. The first reason stated by the judge was that the SVL report did not amount to a survey report covering or incorporating the results recorded by the MMM because it listed them as a matter of record but not by way of approval by the SVL surveyor. While it is true that the SVL surveyor did not expressly approve the results of the MMM inspections, it seems to me quite plain that by specifically referring to the MMM surveys and stating that no outstanding recommendations existed against the yacht's seaworthiness for navigation, accompanied by an exhibition of the certificate issued by the MMM in the terms set out at paragraph 5 above, the SVL surveyor was adopting and incorporating the MMM survey and inspection of the relevant parts of the vessel and the statement of condition in the certificate as part of SVL's own survey report. The judge's second reason was that the MMM certificate is not itself expressed in the form of a survey report but rather as a list of those parts of the vessel as to which the MMM surveyors were satisfied. I do not find this a valid objection, given the form of the certificate and the judge's express finding that the MMM survey covered all aspects of the vessel's seaworthiness, including stability.
34. As to the judge's third reason, it may well be that, if the underwriter wanted to ask for further information about the condition of any underwater parts of the vessel inspected he would lack direct access to the surveyor concerned in the same way as if a sole independent surveyor had carried out the inspection and produced his own single report. However, he would not lack access to the insured's representatives and the reporting surveyor who, if they could not themselves provide or procure the answers, would leave the insured at risk of lack of cover. In this connection, I note in any event that the underwriters' rejection of cover was based upon their outright rejection of the adequacy of the SVL survey and was not based upon the narrow point raised by the judge.
35. The judge's fourth, and potentially more substantial, subsidiary reason was that it was the common understanding or assumption of the parties that an MMM inspection could not be relied on, because the parties did not appear to have regarded it as relevant to compliance with previous survey requirements under earlier certificates of insurance in respect of Zeus vessels. Mr Ruttle has informed us, and Miss Bucknall has not gainsaid, that this was essentially the judge's own point, no evidence or cross-examination of the witnesses having been directed to it. It was based upon two incidents.
36. In November 1991, when the "Zeus V" was shipped for various works to be carried out, Mr Venetopoulos, the President of the plaintiffs, took the opportunity to have the vessel surveyed by SVL because he said he knew for the purposes of the insurance it would have to be surveyed both ashore and afloat and for purposes of valuation before she could navigate. The vessel was also separately inspected in that month by MMM for the purposes of her annual certificate (see p.709 of the judgment). In those circumstances, it seems that the judge concluded that the duplication of inspection indicated the understanding or assumption of Mr Venetopoulos that the MMM inspection could not be relied on for insurance purposes. If so, Mr Ruttle submits (rightly in my view) that was not a legitimate conclusion to draw from Mr Venetepoulos' evidence at least without further exploration. On any view, a survey had to be carried out for the purposes of insurance and valuation, and the occasion presented an ideal opportunity for such inspection. At the time the SVL inspection was arranged, the MMM survey had not yet taken place and its outcome was not known. Mr Venetepoulos was never asked whether, if he had been unable to arrange an out of water inspection, he would have felt entitled to rely on the MMM inspection as part of, or a supplement to, a survey report by his own surveyor.
37. The second incident related to "Zeus II" another vessel in the Zeus fleet which, in 1989, was being re-built. The plaintiffs similarly required cover in respect of builders' risks and thereafter in commission. The in commission cover was "subject to full survey and valuation" upon which Mr Bell insisted. On 1^st June 1989, SVL produced a survey report, which Mr Bell accepted as satisfactory, treating in commission cover as having incepted (see pp 707-8 of the judgment). In that report, it was stated that the inspection had been carried out ashore and afloat. It also made reference, without more, to the fact that there had been an MMM inspection on the slipway some five weeks earlier. The judge appears to have concluded from this that it was accepted or appreciated by the parties that such an inspection could not be relied upon as a relevant survey for the purposes of the clause in this case. Again, I do not accept that reasoning. First, the obligation as stated in respect of Zeus II required a "full" survey and Mr Bell had already rejected a short "condition preliminary report", stating that a "full" survey was required. This may well have affected the parties' view as to what was necessary. Second, because the author of the full survey report had in fact conducted an out of water survey for himself, he had no need to seek and did not purport, to incorporate the MMM survey as part of his report for the purposes of reporting on seaworthiness and passenger safety.
38. I would only add one further comment, in respect of the argument of Miss Bucknall that it would be commercially unreasonable to hold that the clause anticipated that an insurer could seek to rely upon the findings of a governmental body carrying out the survey, not for the purposes of insurance, but for some regulatory purpose. Her argument was that, if insurers did so, should there have been some error in the survey, neither the insured, nor (more importantly) the underwriters by way of subrogation, would have any recourse in contract or negligence in respect of errors made. This was a sophisticated argument not considered by the judge. More significantly, it was never raised, or apparently even considered, by the underwriters themselves when repudiating liability; nor was it an argument advanced or rehearsed with the defendant or the experts. In those circumstances I am not prepared to regard it as a matter which would have affected the thinking of a reasonable underwriter when considering the merits of the SVL survey.
39. Since the judge predicated his conclusion (at p.721) that the survey by SVL was insufficiently comprehensive to satisfy the reasonable requirements of the underwriters for the purposes of the clause upon reasoning which I regard as incorrect, that conclusion seems to me to be irremediably flawed and I would allow the appeal on the issue of construction. It is not clear whether, had the judge taken the right approach to construction, he would or would not have decided that the survey was inadequate to satisfy a reasonable underwriter as to seaworthiness or passenger safety. In her submissions to us, Miss Bucknall raised a number of matters of detail which were not relied on by the judge as demonstrating the inadequacy of the survey for the purpose of satisfying a reasonable underwriter as to seaworthiness and passenger safety. However, these were not made the subject of any cross-appeal or notice of additional grounds upon which the judgment should be upheld, whatever the outcome on the construction issues. In those circumstances I would wish to hear further argument from the parties as to the appropriate form of order to be made consequent upon the success of the appeal.
40. Subject to that observation, I would allow the appeal.
Sir Murray Stuart Smith I agree.

Lord Justice Pill: I agree. That conclusion does not involve support for any general principle that the requirement for a "survey including valuation by independent qualified surveyor" is normally satisfied by reliance on a report of an official or public body. While it is intertwined with other points, as to which I accept Potter LJ's analysis, I see force in the doubts the judge expressed about "an anonymous governmental survey" and in one of the reasons he gave for that doubt, namely that access to the surveyor would not be possible in the same way as access to an independent surveyor. The likely absence of recourse in contract or negligence in respect of errors made was probably a factor the judge had in mind. Whether he did or not, it is in my view a relevant factor when considering the effect of the contractual requirement.
The question of reliance on a report by a public authority was considered in the very different context of a house purchase in Sneesby v Goldings (a firm) [1994] EGCS 201. A survey of a house which had been modernised with a local authority improvement grant was commissioned. Hoffman LJ stated that, in the circumstances of that case, that very little weight could be placed on the improvement grant inspection.

On the facts of the present case, as explained by Potter LJ, and subject to his observation in paragraph 39, I agree that the appeal should be allowed.
Order: Application Adjourned with new skeleton to be delivered on 15^th September 2000.
(Order does not form part of approved judgment.)