Engelhart CTP (US) LLC v Lloyd's Syndicate 1221 for the 2014 Year of Account & 6 Others
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 23 April 2018 |
| Neutral Citation | [2018] EWHC 900 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: Claim No. CL-2017-000453 |
| Date | 23 April 2018 |
[2018] EWHC 900 (Comm)
Sir Ross Cranston
Case No: Claim No. CL-2017-000453
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Dominic Kendrick QC (instructed by Reed Smith) for the Claimant
Luke Parsons QC and Ben Gardner (instructed by Kennedys) for the Defendants
Hearing date: 27 March 2018
Introduction
This is a construction summons under Part 8 of the Civil Procedure Rules regarding a cargo insurance policy dated 1 December 2014 of a type described as “Marine Cargo and Storage Insurance” (“the policy”). The policy is between the claimant assured and the defendant insurers. It operates on an open cover basis in relation to a range of commodities, including certain metals. The claimant claimed under the policy when containers were found not to contain the copper ingots it had traded, only slag of nominal value. For the purposes of the case it is assumed that no copper was ever shipped and that the claimant in good faith has paid for and taken up fraudulent bills of lading and other shipping documents.
The claimant, Engelhart CTP (US) LLC, is part of a large trading group. It previously traded under the name BTG Pactual Commodities (US) LLC, but for the purposes of the case these entities have been treated as interchangeable. The defendant insurers are members of Lloyd's of London. They agreed in their due proportions to insure the claimant on the terms and conditions of the policy. They have refused the claim. The claimant has settled its claim with other of the insurers who wrote the cover, including the leader.
In summary the claimant's case is that when properly construed its loss falls within the policy since it provides All Risks cover of the very broadest kind. The defendants' case is that none of its clauses provide cover for losses resulting from the acceptance of fraudulent documents for a non-existent cargo.
Agreed facts
For the purposes of this construction summons, the parties have agreed certain facts. These are as follows.
On 11 August 2015 the claimant bought 7,000 mt of copper ingots on cif China terms from World Gold International Ltd (“World Gold”). That day the claimant also sold 7,000 mt of copper ingots on cif China terms to receivers in China, Shing Fu (HK) Metal Co Ltd (“Shing Fu”). On 21 September 2015, both contracts were amended to increase the quantity to 9,000 mt.
The first shipment of 7,000 mt of copper ingots was shipped and delivered to Shing Fu without incident.
In accordance with the terms of a sale contract between the claimant and World Gold, between 16 and 24 September 2015 packing lists, quality certificates and bills of lading were issued in respect of a cargo of a further 1,967.898 mt of copper ingots, said to be shipped in 102 containers from New York. The packing lists and quality certificates appear to have been produced by the shipper, Asia Global Renewable Energy Corp.
When the containers said to contain the copper ingots arrived in Hong Kong for transhipment to China during November and December 2015, some were found to be leaking. A representative of Shing Fu notified the claimant around 24 November 2015. All the containers were opened in the presence of cargo surveyors. No copper ingots were in fact shipped in the containers and no such cargo ever existed. The containers only ever contained slag of nominal commercial value. The bills of lading, packing lists and quality certificates were therefore fraudulent. The claimant was unaware of the fraud at the time of shipment.
The claimant paid World Gold for the cargo of 1,967.898 mt over three instalments in late September 2015. Shing Fu refused to pay.
The claimant submitted a claim to the underwriters of the policy, including the defendants, for the loss of the cargo and insured expenses, but this has been refused.
The insurance policy
The policy is of a type described as “Marine Cargo and Storage Insurance”. The period is open cover for a year beginning 1 December 2015. Any means of conveyance, whether by land, pipelines, water and air, is covered. The interest clause provides as follows:
“On goods and/or merchandise and/or cargo and/or interest of all descriptions, that being the property of the Assured and/or for which they are responsible … including but not limited to Grain and oil Seeds, Soyabeans, Sugar and Ethanol, Metals, power and Gas Oil … all whilst in transit and/or in store elsewhere anywhere in the World.”
The policy states a Basis of Valuation and Loss Settlement, which is the purchase or sales price or cost of replacement, and which is to apply unless more broadly specified in the commodity specific insuring conditions.
Conditions are then spelt out. The first of the operative conditions refers to Institute Cargo clauses:
“(a) ‘All Risks’ in accordance with the Institute Cargo Clauses (A) CL 382 (1.1.09) … and/or American Institute Cargo Clauses (Sept. 1, 1965) 32B-10 but with Clause No. 3 amended to read as follows: ‘Against all risks of physical loss of or damage to the subject-matter insured from any external cause’ …”
There is a clause for claims before declaration: insurance for transit and storage risk will be effected at the condition normally applied for goods of the same nature as those damaged, and failing any precedent “the usual conditions and the most favourable will apply”. As to guaranteed outturn extensions, these are to be 150 percent of the tariff “all risks” rates and/or as might be further agreed by the slip leader. As a supplementary condition, the policy states:
“This insurance contract is subject to the above conditions and the commodity specific insuring conditions but it is understood and agreed that in all cases, the most favourable conditions will benefit the Assured notwithstanding what is mentioned on the insurance certificate and/or insurance declaration.”
There are ten sections setting out specific insuring conditions for the commodities insured including oil products, coffee, sugar, metals and vegetable oils. These commodity specific conditions begin:
“This insurance is subject to the above Operative Conditions and where applicable the below commodity section insuring conditions. It is noted and agreed that unless otherwise declared to the contrary, the broadest coverage shall apply.”
Section 5 of these conditions deal with metals. It provides, in part:
“As per operative conditions but also extended at the sole option of the Assured to include leakage and/or shortage and/or difference in weight and/or difference in volume as is appropriate howsoever arising.
Claims for leakage and/or shortage and/or difference in weight and/or difference in volume as is appropriate shall be assessed by a comparison of shipped and delivered weights or shipped and delivered volumes … as evidenced by an independent recognised surveyor which shall be binding on and accepted by Underwriters and the Assured for all purposes.”
The provision for the decisions of independent persons being binding on the insurers is echoed in other of the commodity specific insuring conditions.
The policy contains a number of general conditions applicable to all interests insured under it. War and strike risks are subject to their treatment in various Institute clauses. Risks include malicious damage, vandalism, sabotage and piracy. As well, the risk of theft also includes conversion. All warehouse receipts and warrants are accepted as conclusive proof of the existence of the insured interest and of actual quantities and qualities. Goods purchased on terms whereby the insured is not responsible for insurance are covered in accordance with the operative conditions, the insurers being subrogated to the insured's rights. In no case is the insurance to contribute to double insurance. The insurable interest clause reads, in part:
“Notwithstanding that the terms of purchase may provide that the responsibility of the Sellers and/or their Insurer shall cease at any point during transit it is agreed that cover hereunder shall operate for the whole transit per policy operative conditions…Where, by agreement with the Suppliers, the Assured accepts responsibility for the goods ex Suppliers' premises, cover commences when the goods leave such premises or at such time at which Assured takes a financial interest in the goods, whichever is the earlier.”
There are three clauses of particular relevance to this case, the concealed damage clause, the container clause and the fraudulent documents clause. These provide as far as relevant:
“ Concealed Damage Clause
It is agreed that any loss or damage discovered on removal the final packing shall be deemed to have occurred during the transit insured hereunder (and irrespective of attachment of Assured's interest) and shall be paid for accordingly unless proof conclusive to the contrary be established, it being understood that any containers, cases and / or packages showing signs of damage are to be opened as soon as practicable.
Container Clause
Notwithstanding anything contained herein to the contrary where Cargo, insured hereunder, is carried in Containers, it is agreed, as between the Assured and Insurers, that the seaworthiness and/or cargoworthiness of the Container is hereby admitted.
It is agreed that this Insurance contract is also to pay for shortage of contents (meaning thereby the difference between the number of packages as per shippers and/or suppliers invoice and/or packing list loaded or alleged to have been laden in the container and/or trailer and/or vehicle load and the count of packages removed therefrom by the Assured and / or their agent at time of container emptying) notwithstanding that...
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