Thu, 11 August, 2016
Guy Blackwood QC acted on behalf of the successful underwriters in this appeal, in which the Court of Appeal considered the interplay between insured perils and excepted perils under the Institute War Clauses.
On 13 August, 2007 the vessel “B Atlantic” was detained in Lake Maracaibo, Venezuela. She had loaded a cargo of coal, destined for shipment to Italy, when during a second divers’ inspection some 132kg of cocaine was discovered attached to the vessel’s hull. The vessel was detained and subsequently abandoned by her Owners, who claimed for a constructive total loss and for sue & labour expenses under war risks cover.
At first instance, Mr Justice Flaux held that the detention of the vessel was caused by an insured peril, malicious acts of the drugs smugglers, and held that the standard war risk exclusion for detainment by reason of infringement of any customs regulation, clause 4.1.5, did not apply when the infringement was no more than the “mere manifestation” of third parties’ malicious acts.
The Court of Appeal handed down judgment on 1 August 2016 unanimously overturning Flaux J (Christopher Clarke LJ, Sir Timothy Lloyd and Lord Justice Laws). The Court of Appeal held that the loss was caused by both the concealment of the drugs and the detention. The Court also held that clause 4.1.5 should not be read as being subject to the “mere manifestation” limitation imposed by Flaux J, for 7 main reasons.
In the circumstances, underwriters’ appeal succeeded and Owners’ claim failed.
Please click here for a copy of the judgment.
Fri, 22 July, 2016
In an article published in Tradewinds, Gemma Morgan and Matthew Montgommery from Holman Fenwick Willan discuss the issues facing shipowners and operators in relation to cyber security. A copy of the article is avialable to read via the attached link.
Wed, 20 July, 2016
The Supreme Court has held (by a majority of four to one) that the use of a “collateral lie” – referred to in previous cases as a “fraudulent device” – does not lead to forfeiture of an insurance claim.
A collateral lie is, as Lord Sumption held: “a lie which turns out when the facts are found to have no relevance to the insured’s right to recover. The question is whether the insurer is entitled to repudiate a claim supported by a false statement, if the statement was irrelevant, in the sense that the claim would have been equally recoverable whether it was true or false.”
In Versloot Dredging BV and Another v HDI Gerling Industrie Versicherung AG and others  UKSC 45, the assured had told a lie which was irrelevant to the facts of the claim. Essentially, he had speculated about one aspect of the relevant marine casualty (whether an alarm had sounded and why the crew had not investigated it), but had presented this speculation as if he had been told it by the crew. Popplewell J at first instance held that this was a reckless untruth. Ultimately, not only was the speculation confirmed by the master, but – more importantly for present purposes – the sounding of the alarm and the crew’s reaction to it were utterly irrelevant to the merits of the claim.
Popplewell J at first instance ordered that the claim, which was otherwise entirely good, was forfeit due to this reckless untruth. He expressed his regret at this disproportionately harsh sanction. Forfeiture was confirmed by a unanimous Court of Appeal, with Christopher Clarke LJ giving the judgment of the court (with, it is fair to say, rather less regret being expressed).
In the Supreme Court, the Appellants challenged forfeiture for a collateral lie/fraudulent device at common law, and on the basis of Article 1 of Protocol 1 of the ECHR (“A1P1”). Lord Sumption, with whose judgment Lord Clarke, Lord Hughes and Lord Toulson agreed (although each added their own judgment), held that the common law did not impose a sanction of forfeiture in respect of collateral lies. He said that “even the law of insurance is concerned more with controlling the impact of a breach of good faith on the risk than with the punishment of misconduct. The extension of the fraudulent claims rule to lies which are found to be irrelevant to the recoverability of the claim is a step too far. It is disproportionately harsh to the insured and goes further than any legitimate commercial interest of the insurer can justify.” Because of his findings on the common law, he held that he did not need to consider the Article 1 of Protocol 1 arguments. Lord Mance, in the minority, said that forfeiture should be imposed at common law.
Tue, 19 July, 2016
The Privy Council handed down its decision today in the Cape Bari  UKPC 20, the first appellate case since 1897 to consider the issue of whether and in what circumstances the Owners of a vessel may be found to have contracted out of their statutory right to limit their liability (a right now governed by the Convention on Limitation of Liability for Maritime Claims 1976).
Luke Parsons Q.C. and Paul Henton acted for the Owners, who were successful before the Court of Appeal of the Bahamas and in the Privy Council in arguing that they had neither waived nor contracted out of their right to limit their liability when they signed up to the Conditions of Use of the appellant, a Bahamian oil terminal. The decision will now become the leading authority on contracting out of tonnage limitation regimes, and is also of wider importance for the guidance it offers on the question of contracting out of legal and statutory entitlements more generally.
A copy of the Judgment of the Privy Council is available here.
Wed, 13 July, 2016
The Court of Appeal handed down its judgment today in Mitsui & Co Ltd v Beteiligungsgesellschaft LPG (The Longchamp)  EWCA Civ 708. Simon Croall QC and Paul Toms represented the successful cargo interests in challenging the decision of Stephen Hofmeyr QC (sitting as a Deputy High Court Judge) that certain expenses incurred during the period of negotiation with Somalian pirates were allowable in general average under Rule F of the York-Antwerp Rules 1974.
The case is the first time the English Courts have had to determine the scope and meaning of Rule F since it was introduced in 1924.
The Longchamp was seized by Somalian pirates in January 2009. The shipowners negotiated with the pirates for a period of 51 days during which the ransom demanded was reduced from an initial demand of US$6 million to US$1.85 million, which was paid by the shipowners.
The shipowners argued that their crew-related expenses and the cost of bunkers consumed in that period were allowable in Rule F because those expenses had been incurred “in place of another expense which would have been allowable as general average” within the meaning of Rule F. The saved expense was said to be the initial ransom which had it have been paid on demand would have been allowable under Rule A.
This argument was accepted by the Judge but rejected unanimously by the Court of Appeal. Lord Justice Hamblen, giving the main judgment of the Court, held that Rule F was not engaged since in a ransom situation there was no available course of action other than that in fact taken by the shipowners, namely to negotiate and agree a ransom and pay it to effect release of ship, crew and cargo.
He said "…payment on demand is simply a different way of going about the same course of action and not a true alternative course of action. Whether or not the ransom is paid on demand there will still be a negotiation, there will still be delay, there will still be the incurring of vessel and crew running costs during the period of delay… Is a short negotiation with pirates for payment of ransom leading to the release of the vessel a different course of action to a long negotiation with pirates to the same ends? In my judgment it is not; both fundamentally involve doing the same thing".
The decision notably gives further insight into how Rule F should be applied in practice.
It also establishes that where the preservation from peril of the property involved in the adventure is an effective cause of the incurring of expenditure (or the making of a sacrifice), that expenditure (or sacrifice) is allowable under Rule A even if there were other causes or purposes for which the expenditure was incurred or the sacrifice made. In other words, the preservation from peril of the property need not be the predominant or exclusive purpose for that expenditure (or sacrifice) to be allowed under Rule A.
A copy of the judgment can be found by clicking here.
Mon, 11 July, 2016
Quadrant Chambers is delighted to announce that it has been shortlisted for the 2016 ‘Halsbury Legal Awards in the Chambers of the Year – Exceptional Achievement’ category. Shortlisted sets have demonstrated outstanding performance / ingenuity in a particular area of practice/ business in the UK or overseas as well as demonstrating that they are a trailblazer and market leader in today's legal market.
Wed, 06 July, 2016
Michael McParland is speaking at the First Annual Conference of SCMA, the Standing Conference of Mediation Advocates in London on 7 July 2016.
The keynote address is from the Rt Hon Lord Falconer of Thoroton QC, with speakers and led workshops that include a number of leading mediators and mediation advocates, such as Michel Kallipetis QC, Colin Manning (Chairman of the English Bar’s ADR Panel), Tim Wallis (Chairman, ADR Working Party of the Civil Justice Council), Stephen Walker (mediator and author), and Professor Andrew Goodman. Michael has been asked to speak about preparing and delivering an opening statement in mediation.
Please click here for more information on the event.
Fri, 01 July, 2016
Michael McParland has published a new article in this month’s Butterworths Journal of International Banking and Financial Law entitled “Bad loans, bad banks and cross-border mergers: choice of law questions for troubled times”.
Michael’s article looks at the vexed question of what laws govern the termination of loan contracts and the rights of creditors when an insolvent bank is acquired by a ‘bad bank’ in a cross-border merger, and analyses the important decision of the CJEU in Case C-483/14 KA Finanz AG v Sparkassen Verischerung AG Vienna Insurance Group (7 April 2016) which provides answers to some of those questions on the relationship between EU company legislation and private international law rules for contractual obligations. For further information, please contact a member of the Clerking Team.
Fri, 24 June, 2016
The Court of Appeal has today given judgment in Michael McParland’s case of Dusek v StormHarbour Securities LLP  EWCA Civ 604, dismissing the defendant’s final attempts to obtain permission to appeal the judgment of the trial judge, Mr Justice Hamblen (as he then was), who found in the Claimants’ favour in January 2015. The action concerns the death of Mr Tomas Dusek, who was working in 2012 for StormHarbour as an investment banker on a project to secure funding for the development of a hydroelectric complex in the Andes Mountains in Peru. On 6 June 2012, Mr Dusek was returning from a project site visit on-board a Sikorsky S58-ET helicopter when it crashed into the Andes Mountains at an altitude of 16,026 ft. above mean sea level. The helicopter disintegrated and caught fire, killing all 12 passengers and 2 crew on board. Mr Dusek was 37 years old and left a wife and two children, then aged 8 and 5.
His widow and children brought claims under the Fatal Accidents Act 1976 and the Law Reform (Miscellaneous Provisions) Act 1934 against StormHarbour, alleging that it was in breach of its duty of care as employers to Mr Dusek. StormHarbour denied any liability for Mr Dusek’s death, arguing their duties did not extend to an employee’s safety on a helicopter that had been chartered by reputable Peruvian clients from a local carrier with a Peruvian Air Operators Certificate (‘AOC’).
At trial, after detailed cross-examination and expert evidence, Mr Justice Hamblen agreed with Michael’s submissions that Mr Dusek was acting in the course of his employment, and StormHarbour therefore owed a duty to take reasonable care to see that he was reasonably safe while travelling to and from his place of work abroad, which, in this case, was the Peruvian project site. His Lordship also found that StormHarbour was in breach of its duty of care in doing nothing to investigate the safety of the proposed helicopter flight. He rejected StormHarbour’s claims that no specific safety inquiry was needed, or that any such inquiry would have been limited to asking about whether the carrier was properly licenced and held an AOC. The judge held on the evidence that if StormHarbour had made the safety inquiry required to make an appropriate risk assessment, it would have instructed Mr Dusek not to take the flight because of safety concerns, and he would have complied. StormHarbour’s breach of duty therefore caused Mr Dusek’s death. Judgment was given for the Claimants for damages to be assessed.
StormHarbour had been seeking permission to appeal this verdict for 18 months, with it being refused by Mr Justice Hamblen, and by Lord Justice Tomlinson on paper. The Court of Appeal has now refused their application after a lengthy contested oral application, with a detailed judgment explaining the Court’s reasons why StormHarbour had no realistic prospects of success in their appeal. A copy of the original trial judgment ( EWHC 37 (QB) is attached here. A copy of the Court of Appeal’s judgment of 24 June 2016 ( EWCA Civ 604) is attached here.
Thu, 16 June, 2016
Robert-Jan Temmink, instructed by Teacher Stern, successfully acted for Mr Alade, a former client of Alpha Rocks Solicitors, in defence of a claim for professional fees. The defence alleged fraud on the part of the solicitors and counterclaimed for fees paid on account. The Court found that an “invoice and bill of costs were false as regards a majority of the fees charged and Alpha Rocks must have known that, or at the very least been reckless”. The Court found that another “bill was false. Alpha Rocks could not have submitted its invoice and bill without knowing, or being at least reckless as to its falsity… I have no alternative but to find that Alpha Rocks’ instructions to [a costs consultant], the failure to correct the bill of costs created by [the costs consultant] and Alpha Rocks’ continuing reliance on it was all dishonest”.
The claim had an interesting procedural history, having been struck out as an abuse of the Court’s process at an interlocutory stage ( 6 Costs LR 1039), only to be reinstated by the Court of Appeal ( 1 WLR 4534) on the basis that strike out at an early stage of the proceedings had been too draconian a remedy and the findings then made of dishonesty should not have been made without oral evidence.
At trial, after cross-examination of the firm’s witnesses, the Court found “Alpha Rocks appeared to demonstrate a high level of ineptitude.. much of its argument might be described as perverse, naïve or even preposterous.. I must conclude that many of its shortcomings in dealing with and for Mr Alade were not the result of negligence or eccentricity, however gross. In particular, its bills.. were each variously false… this can only have resulted from a dishonest plan to charge for sums which it knew it was not entitled on the basis claimed, or was at least reckless as to the same..”.
The Court dismissed the firm’s claim for fees and ordered Alpha Rocks to pay back all sums paid by Mr Alade on account together with interest. A copy of the judgment can be found via the attached link