11/12/2019
In this briefing we consider some recent decisions addressing issues including establishing the cause of damage to perishable cargo, actionable fault under the York-Antwerp rules, cancellation of seemingly back to back voyage charterparties, the Brillante Virtuoso and duty of fair presentation under the Insurance Act 2015.
A perishable cargo arriving at destination in a damaged state is a common feature of cargo shipping. Discovering the cause of the damage, so as to work out the all-important question as to who is the responsible party, can be a troublesome task. There are often a number of possible reasons and each potential cause may give rise to different results in the claims that parties might have against one another. In The Santa Isabella, in which the owners were claiming demurrage, a variety of reasons for the cause of the contamination were considered because if they were attributable to the owners, then the owners could not claim for demurrage arising from results from delays at the discharge ports.
On the facts of this case, the court found that the owners were entitled to take the route that they took but had failed to properly care for the cargo. Further, because the owners did not have a sound system for ventilation (by failing to ventilate when they safely could have), the damage was significantly worse and was thus the cause of the delays meaning that the owners were not entitled to the demurrage that they were claiming.
Contact: Michael Biltoo
Related article: The importance of establishing the cause of damage to perishable cargo
The Commercial Court has recently held that ‘actionable fault’ under Rule D of the York Antwerp Rules 1974 is a defence available to Insurers under the standard form ILU/AAA guarantee. General Average (GA) was declared by the Owners following the grounding of the cargo ship BSLE Sunrise off Valencia in September 2012. Cargo interests and their underwriters declined to settle the GA contribution, as the Owners failed to exercise due diligence to ensure the vessel was seaworthy. This ‘actionable fault’ was in breach of Article III rule 1 of the Hague Visby Rules. Owners argued that the GA guarantee wording imposed a primary obligation on cargo interests and insurers to pay that which was “properly due” as between cargo interests and Owners.
The question for the court was whether, on the true construction of guarantees, an ‘actionable fault’ Rule D defence was open to insurers as well as cargo interests. Pelling J considered that whilst the language used in the guarantees created a primary obligation between insurer and Owners, that did not lead to a more onerous obligation which existed between Owners and cargo interests under the bonds. Pelling J concluded that no sum should be payable under the guarantee, if the loss was caused by the Owners’ actionable fault. Insurers are therefore left off the hook in such circumstances.
Contacts: Mark Lloyd and Jessica Tham
Related article: General Average guarantees and the actionable fault defence
The Commercial Court heard two appeals from arbitration concerning the purported cancellation of two, seemingly, back to back voyage charterparties on the grounds that Notices of Readiness (NOR) were not provided in time. On the face of things, the NOR requirements and the cancellation entitlements were back to back so that if the sub-charterer validly cancelled, the charterer could do the same up the line.
It was held that the subtle differences in the charters were sufficient to give rise to the Sub-Charterers’ entitlement to cancel but not to give any entitlement to the Charterers. This meant that the middle charterer did not have the safety of a back to back situation that they thought they had.
Contacts: Michael Biltoo and Jonathan Biggins
Related article: Same, same… different: Charterparty terms considered in “The Alpha Harmony”
The alleged attack on the Brillante Virtuoso – some 10-12 miles off Aden on the night of 5-6 July 2011 - was no pirate attack. The original account was that in an attack by Somali pirates, the vessel had been hit by RPG and caught fire. War risks underwriters were suspicious from the start.
The legal dispute which followed owners’ and their mortgagee bank’s claim against underwriters has been ongoing since 2012. Underwriters denied the claim, alleging that the loss had been caused by the wilful misconduct of the owner within Section 55(2)(a), Marine Insurance Act 1906. Since mid-2016 the claim has been pursued by the mortgagee bank alone, both as a co-assured under the war risks policy in its own right and as assignee of owners’ claim. The bank claimed that an attack on the vessel by the owner was an attack on the bank’s proprietary interest in the vessel as mortgagee.
Following a trial which lasted some 52 days, the court found that the vessel’s beneficial owner, Mr Iliopoulos, was the “instigator of the conspiracy” to destroy the vessel in order to commit insurance fraud. In these circumstances the bank failed to establish a loss by insured peril under the war risks policy. The claim failed.
Contacts: Chris Zavos, Jo Ward, Suzy Oakley, Jacob Hooper and Anna Haigh
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Marex entered three purchase and repurchase contracts with Come Harvest Holdings (CHH) for the sale of various parcels of nickel. Marex was the broking intermediary for Natixis bank, which provided financing for the purchases of the nickel. The nickel was purchased by way of transferrable warehouse receipts, originally issued by the warehouse operator Access World.
The warehouse receipts transpired to be counterfeit documents and as such neither Marex nor Natixis had title to the nickel they believed they had purchased. Natixis brought a claim under the purchase contracts against Marex for failure to deliver up the nickel.
In turn, Marex issued Part 20 proceedings against Access World and its marine cargo insurers for a declaration that the losses Marex would suffer, should Natixis’ claim be successful, be indemnified by insurers under the terms of the policy.
On the thirteenth day of the trial, Marex entered into a confidential settlement agreement with insurers and Marex’s claim against insurers was dismissed.
Contacts: Chris Dunn, Jonathan Biggins and Freddie Mehlig
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