The plaintiffs, a Norgwegian insurance company, insured the owners of a Norwegian fish farm against, inter alia, the loss of living fish from any cause whatsoever. The plaintiffs reinsured with the defendants, London underwriters, through brokers for 90% of the risk. The insurance and reinsurance contracts were on the same terms and conditions, incorporating a warranty that a 24-hour watch be kept over the site and stating that failure to comply with any of the warranties would render the policy null and void. When the owners of the fish farm saw their insurance policy, they objected to the 24-hour watch clause. The plaintiffs telephoned their brokers to inform them that the watch clause could not be complied with and that they would await confirmation that this was acceptable. The brokers did not act on this message, the plaintiffs did not follow up their telephone call and the reinsurers never heard of the problem. When a violent storm caused the loss of over 100,000 fish, the plaintiffs settled a claim against the company for NK 2.75 million. However, when the plaintiffs claimed under their reinsurance contract, the reinsurers repudiated liability on the ground that the breach of the watch clause rendered the policy null and void.

The plaintiffs sued the underwriters to recover the 90% indemnity and, alternatively, sued the brokers in contract and tort for breach of their duty to vary the watch clause in the light of the telephone message. In turn, the brokers claimed that the plaintiffs had been contributorily negligent in not following up their original message after they had failed to receive confirmation of whether there had been a variation of the watch clause. The plaintiffs contended that, as a matter of law, the Law Reform (Contributory Negligence) Act 1945 could not apply to reduce damages in an action for breach of contract.

Before Hobhouse, J., the Court of Appeal and the House of Lords, the plaintiffs succeeded in their claim against the underwriters to recover the 90% indemnity. However, while all the judges agreed that the merits of the dispute clearly favoured the plaintiffs, there was no unanimity on how this result was to be achieved.

The essence of the reinsurers’ argument was that, although under Norwegian law