Sea Glory Maritime Company and Another v Al Sagr National Insurance Company
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair,Mr Justice Andrew Smith |
| Judgment Date | 17 July 2013 |
| Neutral Citation | [2013] EWHC 2116 (Comm),[2013] EWHC 964 (Comm) |
| Docket Number | Case No: 2009 FOLIO 576,Case No: 2009 Folio 576 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 July 2013 |
[2013] EWHC 2116 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Blair
Case No: 2009 FOLIO 576
Mr Peter MacDonald Eggers QC and Ms Nichola Warrender (instructed by Hill Dickinson LLP) for the Claimant
Mr Ravi Aswani and Mr Andrew Leung (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 16, 17, 18, 19, 22, 23, 24, 25, 29 and 30 April 2013 and 2 May 2013
This is an insurance claim in respect of the First Claimant's vessel Nancy ("the NANCY"), a 23,566 GRT Panamanian-flagged bulk carrier built in 1980. It arises out of a fire occurring at the Russian port of Nakhodka near the Sea of Japan on 14 to 15 February 2009 which rendered the vessel a constructive total loss.
The NANCY was insured against marine perils under a policy of marine insurance dated 2 December 2008 (the "Policy") issued by the defendant, Al Sagr National Insurance Co ("Al Sagr"). Al Sagr is an insurance company headquartered in Dubai. The First Claimants, Sea Glory Maritime Co, and the Second Claimants, Swedish Management Co SA (both of which are based in Ajman in the UAE) were named as insureds in the Policy as the owner and manager of the vessel respectively.
Fire is an insured peril under the Policy, and the claimants claim an indemnity for the constructive total loss in the sum of US$6 million (with credit given for the net proceeds of sale amounting to US$1,412,275.70, plus premium returned of US$201,617.76) together with US$78,672.47 in respect of sue and labour expenses. The total claimed is US$4,464,779.21.
Quantum is not in issue. The defendant disputes liability on the following grounds:
(1) Misrepresentation/non disclosure in relation to the management of the vessel;
(2) Non disclosure in relation to Port State Control detentions;
(3) Non disclosure in relation to an alleged conflict of interest on the part of the Second Claimant's "Designated Person Ashore" for ISM purposes;
(4) Breach of the ISM Warranty in the Policy;
(5) Illegality under United States law in connection with trading with Iran.
THE PROCEEDINGS
The claim form was issued in 5 May 2009, and Particulars of Claim were served on 12 January 2010. There was originally a trial date set for 2012, which was vacated following amendments by the defendant to its defence raising the issue of illegality under US law.
There were a considerable number of trial bundles, but the documentary evidence was limited to the documents which were relied on by the parties during the hearing, and placed in the court's supplementary core bundle.
The court heard evidence at trial from three witnesses of fact for the claimants, namely (1) Captain Abdul Kader Kassab, who is the principal of Kassab Inter-Shipping LLC which owns Swedish Management Co, (2) Mr Roy Khoury who is the managing director of companies called Blue Fleet Management Co Ltd and Blue Fleet Chartering SA, and (3) Mr Richard Medawar who was the relevant ISM "Designated Person Ashore" for the vessel from September 2007 to May 2010.
Al Sagr called a single witness of fact, namely Mr Kesava Moorthy, who was a member of Al Sagr's underwriting team that underwrote the hull and machinery insurance for the NANCY.
Each of these witnesses on the whole gave their evidence well, and I have no hesitation in regarding them as honest witnesses of fact. I have not accepted all of their evidence however where the weight of other evidence including contemporary material is to the contrary. Any further comments I have on the witnesses are made in the course of the judgment.
Because of the volume of material, the parties agreed a reading list to avoid the reading of expert evidence which had been superseded or was otherwise peripheral. Expert witnesses gave evidence in three respects. Evidence as to underwriting issues was given by Mr Bernard Devereese for the claimants, and Mr M. D. A. Emblin for the defendant. Evidence on ISM issues was given by Mr Jon Gray for the claimants, and Captain Andrew Mitchell for the defendant. Evidence on US Law was given by Mr Peter Skoufalos for the claimants, and Mr Michael Gershberg for the defendant. The experts were all well qualified in their fields, and I deal with the substance of their evidence below.
Both parties produced detailed written submissions in opening and closing, for which I was grateful.
NARRATIVE SUMMARY
I shall have to deal further with the disputed facts when considering the defendant's grounds of defence. I begin with a narrative summary of the facts as I find them on the evidence, and which were largely undisputed.
The vessel is acquired
The First Claimant ("Sea Glory") is a company incorporated in and registered pursuant to the laws of the Marshall Islands. Sea Glory purchased the NANCY in early 2005 and was the registered owner of the vessel.
The principal of the company is Captain Abdul Kader Kassab who is a Lebanese national now based in Ajman in the United Arab Emirates. He is extremely experienced in the shipping business. He is the decision-maker and principal of the Second Claimant ("Swedish Management") and its parent company Kassab Inter Shipping LLC. These operate out of the same office in UAE.
An important issue in the case is as to the management of the NANCY. The claimants say that Swedish Management was the commercial and technical manager of the vessel, assuming responsibility for its operation from Sea Glory, and agreeing to take over all duties and responsibilities imposed by the International Safety Management Code known as the ISM Code.
The defendant does not admit that Swedish Management was the commercial and technical manager, or that the company assumed responsibility for the operation of the vessel. For reasons explained in due course, I am satisfied from the evidence that the claimants have proved their case in this respect. But there remains an important issue as to whether the defendant is correct to say that this is not the full picture. Its case is that Mr Roy Khoury and/or a company called Blue Fleet Management Company Ltd ("Blue Fleet") participated in the vessel's commercial and technical management to a material extent, which should have been disclosed/was misrepresented. This is at the heart of the defendant's first ground of defence which I have to decide.
It is common ground that claimants used Blue Fleet as chartering brokers for the NANCY and other vessels in the fleet, and the real question is how much further the role of Blue Fleet went. It is a company which was set up in 1996, and which operates in Greece. In its written submissions, the defendant refers to Blue Fleet (and for that matter the claimants) as "serious international players". Mr Roy Khoury (who like Captain Kassab is a Lebanese national) is the managing director of both Blue Fleet and of Blue Fleet Chartering SA. It is clear from the evidence that Mr Khoury and Captain Kassab are close friends as well close business acquaintances.
Some time in 2005, Blue Fleet applied to the Russian Register Classification Society ("Russian Register" or "Class" or "RS") for entry of the NANCY. The Russian Register is a member of IACS (the International Association of Classification Societies). As from October 2005, the NANCY was classed with the Russian Register.
In the application, Blue Fleet was named as manager, and though the claimants' case is that this was an error which they tried to get rectified, Blue Fleet was described in the Russian Register as the vessel's manager. The defendant relies on this in support of its first ground of defence, namely that what it says was Blue Fleet's participation in the management of the NANCY should have been disclosed.
Blue Fleet was also the manager of other vessels which are relevant on the evidence. As from 10 December 2007, the SANIE and the LADY BELINDA were insured by the defendant for hull and war risks cover. The SANIE was a Panamanian-flagged general cargo vessel built in 1973, and the LADY BELINDA was a North Korean flagged bulk carrier built in 1971. Both these vessels were beneficially owned by Dr Farid Alsaid.
Blue Fleet's management of the LADY BELINDA is raised by the defendant in the context of its first ground of defence. Cover was suspended by the defendant on 13 February 2008 following a condition survey which revealed that the vessel was in such a poor condition that the surveyor found she presented "a high risk to Hull & Machinery underwriters". The fate of the vessel is not altogether clear on the evidence, but it is not in dispute that she sank late in 2009. It is not part of the defendant's case that Captain Kassab knew these facts, but they are relied on in support of its case as to materiality.
In relation to the third and fourth grounds of defence, which are both ISM related, the role of the vessel's Designated Person Ashore (" DPA") is important. Initially, Captain Kassab had employed an in-house DPA for ISM purposes, Mr Fadi Al Moujawer. Then from 20 September 2007, Mr Richard Medawar, who is a Lebanese national based in Beirut, was engaged as Swedish Management's DPA, with Captain Kassab acting as the Deputy DPA for day-to-day matters. Swedish Management employed Mr Khaled Ismail as the in-house Technical Superintendent responsible for the technical management of the NANCY.
The hull and increased value policy
The defendant, Al Sagr, is an insurance company licensed to transact all types of insurance business including marine hull and machinery cover and war risks for a variety of vessels. Mr Kesava Moorthy was the member of Al Sagr's underwriting team that underwrote the hull...
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