Melinda Holdings SA v Hellenic Mutual War Risks Association (Bermuda) Ltd (The "Silva")
| Jurisdiction | England & Wales |
| Judge | Mr Justice Burton |
| Judgment Date | 18 February 2011 |
| Neutral Citation | [2011] EWHC 181 (Comm) |
| Date | 18 February 2011 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 FOLIO 1700 |
[2011] EWHC 181 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2009 FOLIO 1700
Mr Christopher Butcher QC and Mr Adam Turner (instructed by Waterson Hicks) for the Claimant
Mr Stephen Moriarty QC and Mr James Cutress (instructed by Ince & Co) for the Defendant
Hearing dates: 11, 12, 13, 17, 18, 19 January and 11 February 2011
Mr Justice Burton :
This has been the hearing of a claim by a Liberian company, Melinda Holdings SA ("Melinda"), as Claimant, to enforce its War Risks insurance by the Defendant, Hellenic Mutual War Risks Association (Bermuda) Ltd ("Hellenic"), in respect of its vessel the SILVA, which was arrested by the Port Suez Court in Egypt on 24 December 2008, where it still remains, now more than 2 years later. It is accepted that, by virtue of Rule 3.13.2 of Hellenic's policy (Rules 2008 and Bye-laws), the vessel is a constructive total loss, and (by virtue of Rule 2A.5.1.4) if Melinda is otherwise entitled to recover under the policy, there is no dispute that freight and disbursements are also recoverable in those circumstances, such that the quantum, of US$ 16m for hull and machinery and US$ 3,200,000 for freight and disbursements, is agreed.
Two Rules within the Hellenic policy have been in issue before me, it being accepted that prima facie there is an insured cause of loss pursuant to Rule 2A.2.2 ("capture, seizure, arrest, restraint or detainment, and the consequences thereof"), namely the Exclusions provided by Rule 3.6 (subrules 1, 3 and 4) and 3.15, which read as follows:
"3.6 Exclusion of claims arising out of ordinary judicial process etc.
An Owner of an Entered Ship is not insured for any loss, damage, cost or expense arising out of:
3.6.1 ordinary judicial process; or …
3.6.3 action taken for the purpose of enforcing or securing payment of a claim; or
3.6.4 any financial cause of any nature.
…
3.15 Obligation to Sue and Labour
In the event of any occurrence which may give rise to a claim by an Owner upon the Association, it shall be the duty of the Owner and his agents to take and to continue to take all such steps as may be reasonable for the purpose of averting or minimising any loss, damage, liability, cost or expense in respect whereof he may be insured by the Association. In the event that an Owner commits any breach of this obligation, the Directors may reject any claim by the Owner against the Association arising out of the occurrence or reduce the sum payable by the Association in respect thereof by such amount as they may determine."
The parties were ably represented by Counsel, whose concise and persuasive submissions and the nature of whose incisive cross-examination will become clear from my judgment below, namely Christopher Butcher QC and Adam Turner for the Claimant and Stephen Moriarty QC and James Cutress for the Defendant. One further purported Exclusion, provided for by Rule 3.8.1, was pleaded and heralded as to be relied upon by Mr Moriarty, notwithstanding scepticism as to its efficacy and applicability forcefully expressed by Mr Butcher in his opening, but such reliance was abjured by Mr Moriarty prior to closing submissions. The issues thus fell within the ambit of the two Rules, and I have set them out below, the first of which can be loosely described as "ordinary judicial process", and the second as "sue and labour clause".
I shall set out my findings of fact first in this judgment, and then deal first with the ordinary judicial process issue before coming to the sue and labour clause issue. With regard to the latter, a number of sub-issues arise, to which I shall turn later in the judgment. With regard to the former, there was, in the event, a great deal of common ground, the most important of which I shall mention now:
i) After some jockeying in the helpful written opening submissions, and after some useful analysis of the history of the clause (including its derivation, analysed by Mr Butcher, from the 19 th century Lloyds SG form policy, providing coverage for "arrest, restraints and detainments of all kings, princes and people", and the principles set out in Schedule 1 to the Marine Insurance Act 1906, particularly at Rule 10) the question as to where the onus lies fell into place. It was agreed that, Rule 3.6 (like 3.15) being an exclusion, the legal onus lies upon Hellenic to bring itself within such exclusion. However, it is accepted that that is not the end of it, given the need to consider, central in this case, what ordinary judicial process amounts to, and/or whether the facts of a given case can satisfy that definition. Lord Denning MR in The Anita [1971] 1 WLR 882 spoke at 887E-F of what he called the shifting of the legal burden of proof, which arose on the facts of that case. Whatever may have been the fashionable jurisprudential approach at that time (and Lord Denning was himself a writer of learned articles as well as a very eminent judge), it seems to me that the modern approach, one not in the event dissented from by the parties, would be to regard the position rather as being one in which the evidential burden shifts. That has been my approach in this case.
ii) Although there has been some analysis of the precise meaning and role of the subrules 3.6.3 and 3.6.4, it was in the event conceded in closing by Mr Moriarty (and rightly so) that, on the facts of this case, if he failed to establish the exclusion in 3.6.1, then the other two subrules would not avail him.
The 1996 Judgment
The arrest of the SILVA by the Port Suez Court on 24 December 2008 was an executory (i.e. not conservatory) arrest, said to be justified by reference to a 1996 judgment in the Port Said Court of First Instance ("the Port Said Court"). This arose out of an incident in September 1989, when another vessel, the SAFIR, grounded on coral reefs off Tiran Island off the coast of Egypt. It apparently spilled its cargo of phosphate into the sea in that area, causing substantial environmental damage. The SAFIR was in the registered ownership of a company called Fonderance Overseas Inc ("Fonderance"), apparently a Norwegian company, and managed by Seama International Shipping Ltd ("Seama"), a UK registered company, which has in some documents been described as the 'beneficial owner' of the SAFIR. Its Companies House Annual Returns identify the name of a British director and a Pakistani director, and that latter director and another Pakistani as shareholders, all three living at London addresses.
Proceedings were brought in the Port Said Court by various government entities, which can, it is common ground, best be identified by reference to the Egyptian Environmental Affairs Agency ("EEAA"), against five defendants, the Cairo Shipping Agency (1), the named Master of the SAFIR (2), Seama (3), Fonderance (4) and the Crew, Cargo and Compensation for Pollution Insurers of the SAFIR (5). The five defendants were held liable in those proceedings (although there was subsequently (immaterial for our purposes) a limited but successful appeal by the Cairo Shipping Agency) and on 22 December 1996 they were found jointly liable to EEAA for the sum of 300 million Egyptian pounds (LE 300m). This is the approximate equivalent of US$ 51,650,000. No part of that sum, it appears, was ever paid by any of the defendants. For our purposes, the only relevant defendants (and thus judgment debtors) in the 1996 Port Said proceedings were Fonderance and Seama.
Fonderance and Seama, as unsuccessful defendants, were also made liable for two forms of 'court dues'. Unsuccessful defendants in Egyptian court proceedings are made liable in addition to any judgment debt for a sum of up to 7.5% (in this case 5%) of the judgment debt for transmission to the Egyptian National Treasury ("proportional court dues") and, additionally, a further one half of the amount of the proportional court dues (hence 2.5% of the judgment debt in this case) to the "Health and Social Services fund of the members of the Judicial Authorities", called the "Judges' Fund" or the "Judicial Services Fund" ("the Judges' Fund"). Sums paid into the Judges' Fund are used to pay for the health and welfare of judges and other "present and former members of the judicial corps", state lawyers, and their families. The benefits paid to judicial officials and their families out of the Fund are not fixed, but vary according to the amount of money available in the Fund.
Both the Egyptian law experts instructed by the parties (to whom I shall refer further below) agreed that the collection of such funds for the benefit of the judges, judicial officials and their families is inconsistent with the Egyptian constitution: that opinion is held by two such distinguished Egyptian lawyers notwithstanding two decisions by the Egyptian High Constitutional Court that the Judges' Fund is compatible with the Egyptian constitution, and it continues to be collected by the Egyptian courts.
On 30 December 1996, court dues were imposed on the unsuccessful defendants in the SAFIR proceedings (for our purposes Fonderance and Seama) as debts owing to the Port Said Court, being 5% proportional court dues in the sum of LE 14,999,937.50 (approximately US$ 2,587,500) and Judges' Fund dues of 2.5% of the judgment debt, i.e. LE 7,499,968.75 (approximately US$ 1,293,750). No part of these dues has, it appears, ever been paid by any of the defendants in the SAFIR proceedings.
The Arrest
The arrest of the SILVA on 24 December 2008 by the Port Suez Court (at the instance of the Port Said Court) was a purported executory arrest in respect of the judgment debt owed by Fonderance and Seama, not that to the EEAA (LE 300m) but that owed...
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