News

  • Quadrant Chambers sponsoring the DIFC-LCIA Symposium at Dubai Arbitration Week 2019View More

    Mon, 11 November, 2019

    Quadrant Chambers is delighted to be sponsoring the DIFC-LCIA Symposium as part of Dubai Arbitration Week 2019. The Symposium takes place on Tuesday 19 November. 

    Stewart Buckingham will be taking part in the panel debate. 

    Robert-Jan Temmink QC, Ruth Hosking and Gary Ventura will also be at Dubai Arbitration Week. 

  • Quadrant Chambers International Arbitration Newsletter Autumn 2019View More

    Wed, 06 November, 2019

    The latest edition of the Quadrant Chambers International Arbitration Newsletter is now available.

    The editorial is provided by Tom Nixon with articles on the case of Process & Industrial Developments v Federal Republic of Nigeria and the seat of an arbitration from Koye Akoni and Ben Gardner looks at the Court of Appeal decision in Halliburton v Chubb ahead of the upcoming Supreme Court hearing. 

    Our latest news and upcoming events are also included. 

    > Download International Arbitration Newsletter here
     

  • Matthew Reeve to represent the Family in the Emiliano Sala Pre-Inquest ReviewView More

    Wed, 06 November, 2019

    The first public pre-inquest hearing is taking place before Senior Coroner for Dorset, Rachael Griffin on 6 November 2019, at Bournemouth.  Matthew Reeve will represent the family of Emiliano Sala, the Argentinian football player who tragically died aboard a Piper PA-46 Malibu single-engine aircraft (N-264DB) when it crashed into the sea 22 nautical miles north of Guernsey on 21 January 2019.  There are ongoing investigations by the AAIB, the Dorset Police and the CAA.  Matthew, instructed by Hickman & Rose , is representing the Family in respect of these investigations and any civil liabilities that arise. The full inquest will take place next year.

    Matthew Reeve

    Matthew is a highly experienced barrister with a wide-ranging commercial practice. He appears as the front-line advocate at all levels of the senior courts, especially the Commercial Court, the Court of Appeal and the House of Lords, as well as in international commercial arbitrations (in which he also receives appointments as an arbitrator).

    He has attracted recognition for his handling of larger cases requiring complex legal and factual analysis and the coordination of large teams of lawyers and experts on cases from around the world including (recently) Saudi Arabia, Brunei, Bermuda, Dubai, China, Korea, Cayman Islands, India and New Zealand. Clients include members of royal families, senior military figures, three premiership football clubs, international sportsmen and well-known business personalities in the United States and UK, aviation authorities (in the UK and abroad), insurance regulatory authorities, as well as international insurance and reinsurance companies and airlines.

    Matthew combines the highest standards of advocacy (including traditional cross-examination skills) with the application of the most modern litigation-management techniques. He is consistently ranked as a 'Leading Junior' in the latest editions of both Chambers UK and The Legal 500 for Aviation, Shipping and International Arbitration and was shorltisted for Shipping Junior of the Year for the Legal 500 UK Awards 2019.

    > View Matthew's profile

  • General average guarantees and the actionable fault defence: The BSLE Sunrise [2019] EWHC 2860 (Comm)View More

    Mon, 04 November, 2019

    In a judgment handed down today following a hearing on a preliminary issue, the Commercial Court has held that the “actionable fault” defence under Rule D of the York Antwerp Rules is available to the issuer of a general average guarantee in the standard AAA / ILU form. Ruth Hosking appeared for the claimant shipowner. Benjamin Coffer appeared for the defendant insurers, instructed by Andrew Nicholas and Cameron Boyd of Clyde & Co.

    The Case

    The dispute arose from the grounding of the “BSLE SUNRISE” off Valencia in September 2012. The owners declared general average. Cargo interests issued general average bonds. The defendant insurers provided security for those bonds on the standard form general average guarantee approved by the Association of Average Adjusters and the Institute of London Underwriters.

    Owners brought a claim under the guarantees for contribution in general average and it was agreed that the question of whether the wording of the guarantees made a Rule D defence available in principle to the guarantors would be decided by way of preliminary issue.

    The guarantees provided that the insurers undertook to pay ‘“any contribution to General Average and/or Salvage and/or Special Charges which may hereafter be ascertained to be properly due in respect of the said goods.” 

    Judgment

    HHJ Pelling QC, siting as a High Court Judge, held that if the actionable fault defence was available to the receivers, no sums were payable under the guarantees. The standard form wording preserved the insurer’s right to rely on the defence available to the receivers under Rule D if the loss was caused by the shipowner’s actionable fault.

    The Judge considered that the word “due” in the bonds signified a sum that was legally owing or payable. He relied on the judgment of Sheen J in The Jute Express [1991] 2 Lloyds Rep 55 in holding that “and which is payable” means “and which is legally due.” He noted that the payment was to be made “on behalf” of the cargo interests concerned, suggesting that what the insurer was agreeing to pay was what the parties to the adventure would otherwise have had to pay themselves.

    The inclusion of the word “properly” served to put the point beyond doubt. The Judge found support in the success of insurers resisting claims under similarly worded guarantees in The Cape Bonny [2017] EWHC 3036 and The Kamsar Voyager [2002] 2 Lloyds Rep 57 (the Judge inferring that the guarantee in Kamsar was worded similarly to those in the present case).

    Owners relied upon The Maersk Neuchatel [2014] EWHC 1643 in support of their interpretation. Hamblen J had held a that Letter of Undertaking assumed an obligation to pay the sum determined under the average adjustment. The Judge distinguished the case on the basis that the wording of the LOU in that case was different.

    Conclusion

    It is now clear that actionable fault is a defence available to insurers under the standard form ILU / AAA guarantee. The same is also likely to be true for most other forms of guarantee: the Judge considered that his conclusion was in accordance with the settled practice and understanding of the shipping industry, and that only very clear wording could justify departing from that practice and understanding. The Maersk Neuchatel looks to be the exception rather than the rule. 

    > download a copy of the judgment here

            

    Ruth Hosking

    Ruth’s practice encompasses the broad range of general commercial litigation and arbitration.  Her particular areas of specialism include shipping, civil fraud, private international law and commodities.  She undertakes drafting and advisory work in all areas of her practice and regularly appears in court and in arbitration, both as sole counsel and as a junior.  Ruth also accepts appointments as an arbitrator (both as sole and as part of a panel).

    Ruth has appeared in the House of Lords, Court of Appeal, High Court and has represented clients in a variety of international and trade arbitrations (including ICC, LCIA, LMAA, GAFTA and FOSFA).  She has been involved in a number of high profile cases, including "The Achilleas", a leading case on the contractual principles of remoteness of damage and "The Atlantik Confidence", the first case in which an English Court has determined that a person was barred from relying on the limits provided by the Limitation Convention. 

    > view Ruth's full profile

    ruth.hosking@quadrantchambers.com

    Benjamin Coffer

    Ben was named Shipping Junior of the Year 2019 at the Chambers & Partners Bar Awards. He is described by the directories as  "a rising star" (Legal 500, 2019); “a standout shipping and commodities junior" (Chambers & Partners, 2018) and “a star of the future” (Chambers & Partners, 2017). He is also recognised as a leading junior in the Legal 500 Asia Pacific Guide. His significant recent cases include: 

    • Volcafe v. CSAV [2019] AC 358, the Supreme Court's authoritative analysis of the inherent vice defence and the burden of proof in cargo claims;
    • The Lady M [2019] 2 Lloyd's Rep. 109 (Court of Appeal), the first modern decision on the meaning of 'barratry' and its effect on the defences under the Hague Rules;
    • Alba Exotic Fruit v MSC Mediterranean Shipping Co [2019] EWHC 1779 (Comm), considering the test to be applied on an application to strike out for intentional delay;
    • The Maersk Tangier [2018] 2 Lloyd’s Rep 59 (Court of Appeal), the leading English case on package limitation for containerised cargoes under the Hague-Visby Rules; 
    • Al Khattiya c/w Jag Laadki [2018] 2 Lloyd's Rep. 243, concerning the significance of the place of a collision in a forum non conveniens application; and,
    • The Aqasia [2018] 1 Lloyd's Rep 530 (Court of Appeal), settling a 90-year dispute as to whether Article IV.5 applies to bulk cargoes. 

    > view Ben's full profile

    benjamin.coffer@quadrantchambers.com

  • Benjamin Coffer named Shipping Junior of the Year 2019View More

    Fri, 01 November, 2019

    At the Chambers & Partners Bar Awards which took place on 31 October, Benjamin Coffer was awarded Shipping Junior of the Year 2019. 

    Benjamin Coffer

    Ben was named Shipping Junior of the Year 2019 at the Chambers & Partners Bar Awards. He is described by the directories as  "a rising star" (Legal 500, 2019); “a standout shipping and commodities junior" (Chambers & Partners, 2018) and “a star of the future” (Chambers & Partners, 2017). He is also recognised as a leading junior in the Legal 500 Asia Pacific Guide. His significant recent cases include: 

    • Volcafe v. CSAV [2019] AC 358, the Supreme Court's authoritative analysis of the inherent vice defence and the burden of proof in cargo claims;
    • The Lady M [2019] 2 Lloyd's Rep. 109 (Court of Appeal), the first modern decision on the meaning of 'barratry' and its effect on the defences under the Hague Rules;
    • Alba Exotic Fruit v MSC Mediterranean Shipping Co [2019] EWHC 1779 (Comm), considering the test to be applied on an application to strike out for intentional delay;
    • The Maersk Tangier [2018] 2 Lloyd’s Rep 59 (Court of Appeal), the leading English case on package limitation for containerised cargoes under the Hague-Visby Rules; 
    • Al Khattiya c/w Jag Laadki [2018] 2 Lloyd's Rep. 243, concerning the significance of the place of a collision in a forum non conveniens application; and,
    • The Aqasia [2018] 1 Lloyd's Rep 530 (Court of Appeal), settling a 90-year dispute as to whether Article IV.5 applies to bulk cargoes. 

    Ben's broad international commercial practice has a particular emphasis on commodities, insurance / reinsurance and shipping. He appears as sole and junior counsel in the Court of Appeal, the Commercial Court and the London Mercantile Court, and before arbitral tribunals under the rules of many different international organisations including the LMAA, the LCIA, the ICC, the SIAC, the HKIAC, the Swiss Chambers' Arbitration Institution, FOSFA and GAFTA.

    Ben undertakes the full spectrum of shipping work, including every species of charterparty and bill of lading claim, as well as shipbuilding and ship finance disputes. He has developed a particular specialisim in cases involving carriage of goods under the Hague and Hague-Visby Rules, and has appeared in several of the leading cases on such claims in recent years in the Court of Appeal and Supreme Court. 

    > view Ben's profile

  • Success in fraudulent misrepresentation / deceit trial - Jeremy Richmond and Max DavidsonView More

    Fri, 01 November, 2019

    Jeremy Richmond leading Max Davidson (instructed by Greenwoods GRM) acted for the successful second defendant in the London Circuit Commercial Court trial of a fraudulent misrepresentation / deceit claim arising out of a US$3m investment in the United States: Damazein Global Investments Ltd v Salamanca Capital Ltd and another [2019] EWHC 2730 (Comm).

    Jeremy and Max’s client was a former director of a private merchant bank, the arranger for the investment. The claimant investor alleged that Jeremy and Max’s client had induced it to invest US$3m on the basis of allegedly deceitful statements about the investment sums already raised.

    The trial began on 2 October 2019, listed for 10 days before HHJ Pelling QC (sitting as a Judge of the High Court). After 2 days of evidence by the claimant’s witnesses (including Jeremy’s cross-examination of the claimant’s sole director), the claimant discontinued its claim and agreed to pay the defendants’ costs of the proceedings on the indemnity basis.

     

    Jeremy Richmond

    Jeremy specialises in commercial and modern chancery law.  He is described in Chambers and Partners as a “superb advocate” whose “expertise in chancery, commercial and banking matters is a useful complement to his insolvency skills”. He has been ranked as 'Leading Junior' for Commercial Litigation and Insolvency in The Legal 500 2020. 

    Jeremy’s practice spans a broad range of commercial chancery and insolvency matters.  It encompasses company law (including directors misfeasance), shareholder and joint venture disputes, banking law, sale of goods (both international and domestic), fraud (with an emphasis on asset recovery) and all aspects of general commercial law.   He also has a specialisation in cross-border insolvency issues particularly in relation to the shipping, commodities, insurance and aviation sectors.  Jeremy has advised and / or appeared for key parties in OW Bunker, Hanjin Shipping, STX Pan Ocean, Alpha Insurance and Arik Airlines. He regularly appears in the Chancery Division as well as in the Commercial and Circuit Commercial Courts.   Jeremy often works in conjunction with Counsel from other jurisdictions and with experts. 

    > view Jeremy's profile

    Max Davidson

    Max undertakes work in a broad range of commercial disputes, including shipping, sale of goods, international arbitration, conflicts of law, aviation, energy and insurance. He regularly appears in the Commercial Court and in international arbitration.

    Prior to joining Quadrant Chambers, Max studied law at King's College London, Oxford and Harvard. He was also a Visiting Tutor in Contract Law and Trusts Law and an Examiner in Commercial Arbitration at King's College London during 2012-2013.

    > view Max's profile

  • Claiming Negotiating Damages at Common Law - James M. Turner QCView More

    Tue, 29 October, 2019

    In a judgment handed down this week in Priyanka Shipping Limited v Glory Bulk Carriers Pte Limited (“The Lory”) [2019] EWHC 2804 (Comm), David Edwards QC (sitting as a Judge of the Commercial Court) dismissed a common law claim for negotiating damages for the breach of a memorandum of agreement (MOA) for the sale of a ship.

    The decision is one of the first to grapple with the recent Supreme Court decision in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20, [2019] AC 649.  In that case Lord Reed’s majority judgment issued a corrective to jurisprudence which, since the House of Lords’ decision in AG v Blake [2001] 1 AC 268, had seen the award of negotiating damages at common law “on a wider and less certain basis” than had been the case before Blake.

    What are "negotiating damages"?

    Negotiating damages “represent such a sum of money as might reasonably have been demanded by [the claimant] from [the defendant] as a quid pro quo for [permitting the continuation of the breach of covenant or other invasion of right]” (per Neuberger J in Lunn Poly Ltd v Liverpool & Lancashire Properties Ltd [2006] 2 EGLR 29 at [25]; see One Step at [4]).  They are “assessed by reference to a hypothetical negotiation between the parties, for such amount as might reasonably have been demanded by the claimant for releasing the defendants from their obligations” (One Step at [25]).

    Negotiating damages are commonly encountered in two situations: so-called user damages in tort; and damages awarded under Lord Cairns’ Act.

    A claim for user damages arises where the defendant has used or invaded the claimant’s property without causing direct financial loss: examples commonly given are riding a horse without permission or erecting an advertising hoarding protruding into the claimant’s airspace.  The defendant, having taken something for nothing, is required to pay a reasonable fee for the use made of the claimant’s property.

    As for Lord Cairns’ Act: historically, the Common Law Courts could only award damages for past breaches, i.e., where the cause of action was complete at the date the writ was issued. For the future, litigants had to look to the Courts of Equity for orders for specific performance and injunction etc. However, the latter had no power to award damages.  That inconvenience was remedied by Lord Cairns’ Act 1858, section 2 of which (now s. 50 of the Senior Courts Act 1981) allowed the Courts of Equity to award damages as well as or instead of an injunction.  

    Damages may be awarded under Lord Cairns’ Act for past breaches: Experience Hendrix LLC v PPX Enterprises Inc [2003] 1 All ER (Comm) 830 at [34] (where an injunction could still have been awarded; compare Surrey CC v Bredero Homes Ltd [1993] 1 WLR 1361, where it could not, and so no claim under Lord Cairns’ could be made).  However, damages for such breaches are assessed on the same basis as damages at common law: Johnson v Agnew [1980] AC 367.

    Damages in lieu of an injunction for future breaches, on the other hand, cannot be assessed on the same basis as damages at common law, as by definition such damages cannot be awarded at common law: Jaggard v Sawyer [1995] 1 WLR 269 CA at pp. 290-291 and One Step at [47].  Instead, negotiating damages may be awarded.

    The Issue

    As will be seen, the issue in The Lory was whether negotiating damages were available at common law for past breaches of the relevant term of the MOA.

    The Facts

    The Defendant Seller sold the Claimant Buyer its vessel on terms that included clause 19, by which the Buyer undertook that it would not trade the vessel and would sell it only for demolition.  By the time of (and after) delivery, however, the markets had moved against the Buyer, who then twice traded the vessel.  By the time of the trial, the vessel was completing discharge under the second fixture.  The day before the trial, it was fixed for a third.  The Seller claimed damages for or an injunction to restrain breach of clause 19 of the MOA (or both). The Buyer claimed a declaration that the Defendant was entitled to no more than nominal damages.

    The Outcome

    The Judge awarded an injunction restraining future trading of the vessel (expressly including the third fixture).  Damages could in principle be claimed for the first and second fixtures, but – because they were now in the past – only at common law.

    In a long and careful judgment, the Judge analysed Lord Reed’s judgment in One Step, noting his restatement of the purpose of the award of damages for breach of contract and affirmation of the compensatory principle in Robinson v Harman (1848) 1 Exch. 850.  He noted that, once the vessel had been sold and delivered, the Seller no longer had any proprietary interest in it, “no right or ability to use the Vessel to trade, and no right or ability to profit from the Vessel’s use (and equally no responsibility for any costs or liabilities incurred in relation to the Vessel’s operation)”.  Although the Seller was entitled to be placed in the position it would have been if the contract had not been breached, “it is not obvious how any further trading of the Vessel by the Buyer, albeit in breach of clause 19, could cause the Seller any loss.” [163].

    It was “no doubt” for this reason that no conventional damages claim had been made, but only a claim for a hypothetical release fee.  The “critical question”, so far as that claim was concerned, was whether the Seller could bring itself within [95(10)] of Lord Reed’s judgment and show that “ … the loss suffered by the claimant is appropriately measured by reference to the economic value of the right which has been breached, considered as an asset.” [189]

    Lord Reed had made clear that “that such an approach is not available in the case of a breach of any contractual right, but only where:… the breach of contract results in the loss of a valuable asset created or protected by the right which was infringed.”  The paragraph implicitly regards the relevant asset not as the contractual right itself but as something else, a valuable asset “created or protected by the right”.”  [190]

    The “valuable assets” that Lord Reed had in mind were essentially proprietary rights and analogous rights such as intellectual property and rights of confidence [193].  The Judge rejected the Seller’s submission that its right under clause 19 was within the same class: “once the Vessel was sold and delivered to the Buyer, the Seller had no proprietary or financial interest in her.  The Buyers’ use of the Vessel for trading, though in breach of clause 19, did not involve the Buyers taking or using something in which the Seller had an interest, a valuable asset, for which the Seller was entitled to require payment.” [196]

    The Judge regarded the right under clause 19 as more closely analogous to the non-compete obligation at issue in One Step, which Lord Reed did not consider fell within “the category of cases where negotiating damages were available as a measure of the Seller’s loss”.  [199]

    The claim therefore failed.  The Judge did, however, grant permission to appeal.  We may not, therefore, have heard the last word on this topic.

    James M. Turner QC appeared for the Buyer on the instruction of Alex Andrews and Claire Don of Reed Smith.

    The judgment can be read here: Priyanka Shipping Ltd v Glory Bulk Carriers PTE Ltd [2019] EWHC 2804 (Comm)

            

    James M. Turner QC

    James M. Turner QC is a commercial advocate specialising in commercial contractual disputes across sectors including international commercial arbitration, energy, shipbuilding, offshore construction, shipping and banking.

    He appears on appeals from the Commercial Court and has extensive experience of Arbitration, appearing before (and sitting as arbitrator in) domestic and international arbitral bodies (such as HKIAC, LCIA, ICC and LMAA) as well as in ad hoc matters.

    Many of his cases require the co-ordination of a range of expert specialisms, ideally suited to James’s down to earth approach, team-building skills and highly-regarded technical knowledge. Reflecting the invariably international character of his practice, James has extensive experience in dealing with foreign law and multi-jurisdictional disputes. He has a particular eye for appreciating and addressing cultural barriers in international arbitration.

    james.turner@quadrantchambers.com

    > To view James' full website profile, please click here.

  • Section 70 Arbitration Act 1996: challenge or appeal: supplementary provisions - Ruth HoskingView More

    Fri, 18 October, 2019

    This article was first published on the Practical Law Arbitration Blog and can be found here.

    Mention section 70 of the Arbitration Act 1996 (AA 1996) to most arbitration practitioners and it is likely that they will immediately think of the sections 70(2) and (3). They require:

    • An applicant or appellant under sections 67, 68 or 69 of the AA 1996 to first exhaust any other available remedy of challenge.
    • An applicant or appellant to bring any application or appeal within 28 days of the award (or where there has been any arbitral process of appeal or review, the date when the applicant or appellant was notified of the result of that process).

    However, a recent decision of Moulder J, BSG Resources Limited v Vales and others, has considered the provisions of sections 70(6) and (7), AA 1996. Those provisions provide as follows:

    “(6) The court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.

    The power to order security for costs shall not be exercised on the ground that the applicant or appellant is—

    (a) an individual ordinarily resident outside the United Kingdom, or

    (b) a corporation or association incorporated or formed under the law of a country outside the United Kingdom, or whose central management and control is exercised outside the United Kingdom.

    (7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.”

    Section 70(6), AA 1996

    It was common ground between the parties that Vale (the respondent to the applications under sections 24 and 68 of the AA 1996) was entitled to security for its costs pursuant to section 70(6) AA 1996, but there was a dispute as to the quantum of that security.

    It was also common ground that, in principle, the court should award the sum which the applicant would be likely to recover in a detailed assessment if awarded costs on the standard basis, having regard to the factors set out in CPR 44.5. However, Vale submitted that there was a real possibility it would be awarded costs on the indemnity basis given (what it said) were the weaknesses of the challenge and the history of without merit applications.

    The question for the court was whether there was a real possibility that costs would be awarded on an indemnity basis (Danilina v Chenukhin). Moulder J confirmed that the question did not requite a consideration of the merits of the claim but rather an assumption that the appellant loses its challenge application. On the facts, Moulder J was not persuaded that Vale had shown a real possibility of costs being awarded on an indemnity basis. She noted the “unusual feature” of the case that when it was put to the administrators by Vale that the application under section 68 was “hopeless and plainly inappropriate”, the evidence was that the administrators sought further advice on the pending litigation. Having taken legal advice on the merits, they decided to proceed with it as being “clearly in line with the court approved objective of the administration”.

    Section 70(7), AA 1996

    Moulder J confirmed that the test under section 70(7) is different for appeals under sections 68 and 69 of AA 1996 from applications under section 67 of the AA 1996. Relying on Picken J in Progas v Pakistan, she held that it is necessary to show that the challenge in some way prejudices the ability of the defendant to enforce the award or diminishes the claimant’s ability to honour the award, and that (at paragraph 64):

    “In order to show that the ability to enforce the award has been prejudiced or the ability of the applicant to honour it has been diminished, it is therefore effectively necessary to satisfy a similar requirement to that of a freezing injunction, namely the risk of dissipation of assets between the time of the section 67 application and its final disposal.”

    It is not necessary (compare the position under section 67, AA 1996 challenges) to satisfy an additional threshold or requirement that the party seeking security should show that the challenge to the award is flimsy or otherwise lacks substance.

    In considering the facts before her, Moulder J bore in mind the observations of Teare J in X v Y that “… the jurisdiction conferred on the court by section 70 should not be used as a means of assisting a party to enforce an award which has been made in its favour”. However, on the facts of that case, Moulder J considered that Vale had not established a risk of dissipation or diminution of assets and was seeking by its application to use it as a means to assist in the enforcement of the award.

    The case therefore reaffirms the high threshold required for applications under section 70(7) of the AA 1996.

            

    Ruth Hosking

    Ruth’s practice encompasses the broad range of general commercial litigation and arbitration.  Her particular areas of specialism include shipping, civil fraud, private international law and commodities.  She undertakes drafting and advisory work in all areas of her practice and regularly appears in court and in arbitration, both as sole counsel and as a junior.  Ruth also accepts appointments as an arbitrator (both as sole and as part of a panel).

    > To view Ruth's full profile, please click here.

    ruth.hosking@quadrantchambers.com

  • Scuttling: the Innocent Co-Assured’s (Uninsured) Peril - “The Brillante Virtuoso” - Nichola WarrenderView More

    Thu, 10 October, 2019

    Can a separate innocent co-assured establish an insured peril of “piracy” “malicious mischief” “persons acting maliciously” “vandalism” or “sabotage” in the face of a finding of wilful misconduct by its co-assured?

    This was just one of the questions considered by Teare J in the context of a war risks policy in the latest first instance decision in Suez Fortune Investments Ltd & Piraeus Bank AE v Talbot Underwriting Ltd & others (“The Brillante Virtuoso”) [2019] EWHC 2599 (Comm) arising out of the loss of the tanker Brillante Virtuoso off the coast of Aden in July 2011.

    The Claims

    On 5/6 July 2011 the Brillante Virtuoso was boarded by a group of armed men as she was drifting off the coast of Aden late at night. The vessel was ordered towards Somalia but sailed only a short distance after which her main engines were stopped and an improvised explosive incendiary device was detonated causing a fire in her engine room.  The fire spread and caused severe damage to the vessel. 

    The Owners claimed this was a result of a fortuitous hostile third-party attack on the vessel and together with the mortgagee bank as separate co-assured brought a claim under their war risks policy.  The war risk insurers denied liability.  They did so, primarily on the basis that the vessel had been scuttled although various other defences were also raised. They counterclaimed for declarations of non-liability under the policy. 

    The vessel was found to be a constructive total loss by Flaux J in 2014 (see [2015] EWHC 42 (Comm)).  In 2016 the Owners’ claim was struck out for failing to disclose documents and a subsequent application for relief for sanctions was refused by Flaux J (see [2016] EWHC 1085 (Comm)) leaving the bank’s claim and the war risk insurers’ counterclaim to proceed to trial.

    The Court’s Decision

    After a lengthy enquiry into the circumstances of the loss at trial, Teare J held that the Owners had scuttled the vessel. 

    Nevertheless the bank argued that from its perspective what had occurred was an act of “piracy” or “malicious mischief” or “persons acting maliciously” or “vandalism” or “sabotage.”   Teare J did not share that view.   

    He held that this was an attempted insurance fraud against the war risk insurers and in such circumstances:-

    1. It was not piracy: to establish piracy as an insured peril there must not only be an unlawful attack at sea but conduct which a business man would say amounted to piracy. The events which had occurred did not amount to piracy in the popular or business sense.  There was no attack on the vessel.  The motives of the armed men were not to steal or ransom the vessel or steal from the crew but to assist the Owners to commit a fraud upon their insurers.  Irrespective of whether the events were considered from the point of view of the Owners or of the innocent bank, an attempted insurance fraud is not an act of piracy.
    2. It was not “persons acting maliciously”: following the Supreme Court decision in the B Atlantic [2018] UKSC 26 an element of “spite ill-will or the like” was required to be involved and this was absent in the present case.  There was an intention to damage the vessel but this was in furtherance of a fraudulent plan and no doubt with an intention to profit from doing so. As in The Salem [1982] QC 946 the vessel was not lost or damaged because of a desire to harm the vessel or the Owners.  It was damaged because the armed men wanted to assist the Owners and make money from their actions and whatever threats were made to the crew in the carrying out of the plan, that element of ill-will was not sufficient to colour the operation as a whole.
    3. It was not “malicious mischief”: this must bear the same meaning as “malicious” for the peril of “persons acting maliciously.”
    4. It was not vandalism: vandalism is not just damage to property but wanton or senseless damage to property. The damage in this case was not undirected or mindless violence or damage which was ordinarily described as vandalism. 
    5. It was not sabotage: sabotage is damage to, or disabling of, property so as to frustrate the use of that property for its intended purpose.

    The war risk insurers also succeeded on alternative defences including breaches of specific warranties in the policy relating to navigational limits and a compliance with BMP3 with respect to anti-piracy measures.

    Commentary

    Given that the war risk insurers were required to establish wilful misconduct to the usual high standard, the decision is in many ways a classic investigation into a maritime casualty and those that practice in this area would do well to heed the practical guidance given by Teare J as to what documents are useful to those charged with such task and the general approach to the evaluation of the evidence in such cases.

    Even to those who are unfamiliar with the maritime peril of “piracy,” it is unlikely to come as much of a surprise that a pretend pirate attack is not such an act. 

    A theme common to Teare J’s analysis of the other perils is that it confirms that it is not only the physical damage which must be proved but also an additional element relevant to the motive or manner in which such damage is carried out.  Thus for “malicious damage” and “malicious mischief” the requirement of “spite ill-will or the like”; for “vandalism” the “undirected or mindless violence or damage” and for “sabotage” an intention to “frustrate the use of the property for its intended purpose.”  As these classes of perils are not exclusive to marine policies, the approach taken by Teare J to them is likely to be of interest beyond the seas of marine insurance.

    Accordingly The Brillante Virtuoso decision may well yet be known as something other than (or at least not just) a unique scuttling case.

    This case note and commentary has been prepared by Nichola Warrender who acted for the war risk insurers led by Jonathan Gaisman QC, Richard Waller QC and together with Keir Howie (all of 7KBW), instructed by Chris Zavos, Jo Ward, Anna Haigh, Suzy Oakley and Jacob Hooper at Kennedys Law LLP.

    Download the judgment here.

     

            

    Nichola Warrender

    Nichola is an experienced junior who enjoys a broad commercial litigation and arbitration practice with particular emphasis on shipping, carriage of goods, commodities, shipbuilding, energy and construction and related insurance and finance disputes.

    Nichola undertakes drafting and advisory work in all of her practice areas.  She regularly appears as an advocate in the High Court and in arbitration, as sole counsel and as a junior.  She has a good balance between led and non-led work and is frequently recommended as a junior by those with whom she has previously worked.

    Nichola is a meticulous and persuasive advocate with a wide range of experience within her fields of specialism and in more general commercial disputes.  Many of her cases involve issues of jurisdiction, private international law or require careful analysis of complex factual, expert and technical or legal issues.  She has experience in various forms of pre-emptive remedies such as freezing orders, anti-suit injunctive and other pre-action relief and has obtained or resisted most forms of pre-trial applications.

    Nichola is recommended as a leading junior for shipping law. Latest quotes include:  "Her attention-to-detail is outstanding, she is highly personable, and is a persuasive orator."

    > view Nichola's full profile

    nichola.warrender@quadrantchambers.com

  • Quadrant Chambers is raising money for Breast Cancer Care through Tour de LawView More

    Wed, 09 October, 2019

    Quadrant Chambers is proud to be taking part in 'Tour de Law 2019', the legal sector's biggest charity bike race in aid of Breast Cancer Care.

    On Wednesday 16th and Thursday 17th October, we will be virtually cycling to Paris and back from the comfort of our library. We will be going head-to-head with fellow chambers and law firms whilst watching all the action live on a digital leader board. We are aiming to cycle 1,000km as quickly as we can in a bid to become Tour de Law Champion, and, more importantly, raise £5,000 to support those living with breast cancer.

    If you would like to help us cycle to victory, then please email Olivia de Satgé in our marketing department by clicking here and sign up to one (or more) of our 15-minute slots. It is possible to cycle as an individual or bring colleagues together to form a team, as two Wattbikes (indoor exercise bikes) will be set up in the library.

    You can help us raise funds for this fantastic charity by donating to our JustGiving page. Every pound counts!