Piraeus Bank A.E. v Antares Underwriting Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Calver |
| Judgment Date | 17 May 2022 |
| Neutral Citation | [2022] EWHC 1169 (Comm) |
| Docket Number | Case No: CL-2020-000337 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 1169 (Comm)
Mr Justice Calver
Case No: CL-2020-000337
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Peter MacDonald Eggers QC and Sarah Martin (instructed by Reed Smith LLP) for the Claimant
Guy Blackwood QC and Benjamin Coffer (instructed by Kennedys Law LLP) for the Defendants
Hearing dates: 28 March 2022 to 7 April 2022
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:00 on 17/05/22.
| (A) THE ISSUE BEFORE THE COURT | 3 |
| (B) FACTUAL BACKGROUND TO THE DISPUTED LEGAL ISSUES | 3 |
| (1) The Parties | 3 |
| (2) The War Risks Policy | 4 |
| (3) The MII Policy | 5 |
| (4) The detention of the Vessel and the attempts to have it released | 8 |
| (i) Circumstances giving rise to an allegation of fuel smuggling | 8 |
| (ii) The ensuing Venezuelan legal proceedings and Owners' attempts to have the Vessel released | 10 |
| (iii) The Accusation Brief and the factual position as at 9 October 2015 | 13 |
| (iv) Circumstances leading up to the Owners' Motion for the release of the Vessel | 17 |
| (v) The Third Party Motion | 18 |
| (vi) Correspondence between the Owners and the Club | 21 |
| (vii) Filing of the Ratification Brief by the Owners | 21 |
| (viii) The Prosecutors' First Answer | 23 |
| (ix) The ONCDOFT opinion filed with the Court | 25 |
| (x) The Prosecutors' Second Answer | 26 |
| (xi) Owners tender the First NOA | 27 |
| (xii) The Release Order | 27 |
| (xiii) The Second NOA followed by avoidance of the War Risks Policy | 31 |
| (C) DETENTION OF VESSEL FALLS WITHIN THE WAR RISKS EXCLUSION | 32 |
| (D) PROPER CONSTRUCTION OF VENEZUELAN LAW PROVISIONS | 35 |
| (i) The relevant provisions | 35 |
| (ii) Insurers' submissions | 39 |
| (iii) Submissions of the Bank | 40 |
| (iv) Discussion | 42 |
| (E) DID THE VESSEL BECOME UNLAWFULLY DETAINED AT ANY POINT IN TIME? | 51 |
| (F) WAS THERE A CONSTRUCTIVE TOTAL LOSS UNDER THE DETAINMENT CLAUSE? | 53 |
| (G) WAS THERE A CONSTRUCTIVE TOTAL LOSS UNDER SECTION 60(2)(i) OF THE MARINE INSURANCE ACT 1906? | 55 |
| (H) CONCLUSION ON WAR RISKS COVERAGE ISSUES | 58 |
| (I) IS THERE COVER UNDER THE MII POLICY? | 58 |
| (i) Clause 1(ii) of the MII Policy | 61 |
| (ii) Clause 1(i) of the MII Policy | 66 |
| (J) QUANTUM | 68 |
(A) THE ISSUE BEFORE THE COURT
This case concerns whether the prolonged detention of a vessel in Venezuela gave rise to a constructive total loss of that vessel under the owners' war risks policy and if so, whether the mortgagees under a mortgagees' interest policy of insurance can recover an indemnity in respect of their loss as assignees and loss payees under the owners' war risks policy.
(B) FACTUAL BACKGROUND TO THE DISPUTED LEGAL ISSUES
(1) The parties
Piraeus Bank A.E. (“ the Bank”) is a company incorporated in Greece, engaged in the business of providing banking and related services. It is the mortgagee of the vessel ‘ ZouZou’ (“ the Vessel”) and the assured under a Mortgagees' Interest Insurance Policy bearing unique market reference B0618 B49016030 (“ the MII Policy”).
The First to Twelfth Defendants are members of syndicates which underwrote insurance at Lloyd's for the 2014 year of account, and the Thirteenth Defendant is a U.S. insurance and reinsurance company, and they underwrote the MII Policy (collectively, “ the Insurers”).
The managers of the Vessel were Opera S.A, the latter having entered into a Management Agreement on 14 May 2013 with the owner of the Vessel, Doran Navigation Inc (“ the Owners”).
The Bank and the Owners entered into a first preferred mortgage dated 27 December 2013 (with addenda thereto dated 3 April 2014 and 22 August 2016) and a second preferred mortgage dated 27 December 2013 (with an addendum thereto dated 22 August 2016).
(2) The War Risks Policy
By a certificate of entry dated 22 December 2014 issued by the Hellenic Mutual War Risks Association (“ the Club”), the Vessel was insured against war risks on the terms and conditions set out in the rules of the Club in force at the relevant time (“ the Club Rules”), for the period 1 January 2015 to 31 December 2015 (“ the War Risks Policy”). The War Risks Policy also incorporated, and was subject to, the terms of two notices of assignment dated 20 January 2010 in favour of the Bank (as first mortgagee and second mortgagee). The War Risks Policy and certificate of entry stated that the Club Rules and all contracts of insurance were subject to the Marine Insurance Act 1906 (“ MIA”).
The War Risks Policy and certificate of entry also stated that a Letter of Undertaking dated 29 February 2012 from the Club to the Bank remained valid and in place. The Letter of Undertaking dated 29 February 2012 in respect of the first mortgage: (a) recognised and consented to the notice of assignment dated 20 January 2010 made by the Owners; (b) undertook to hold the benefits of the insurance and any renewal to the Bank's order; and (c) incorporated into the certificate of entry a loss payable clause under which “ claims payable hereunder exceeding USD 500,000 and those payable in respect of an actual, constructive, arranged, agreed or compromised total loss shall be payable to the First Mortgagee(s), and all other claims shall be paid to the shipowner unless and until the Association has received notice in writing from the First Mortgagee(s) of a default under the First Mortgage in which event all claims shall be payable to the First Mortgagee(s).” By a separate Letter of Undertaking dated 29 February 2012, references to the first mortgage were replaced by references to an identically-worded second mortgage.
The Bank was accordingly the assignee of the War Risks Policy, which had an agreed value in respect of hull and machinery of US$44,000,000 and an increased value of US$11,000,000. The Vessel was therefore insured for a total value of US$55,000,000.
The War Risks Policy insured the Owners of the Vessel against loss or damage caused by ( inter alia):
i) “ capture, seizure, arrest, restraint or detainment, and the consequences thereof or any attempt thereat” (Rule 2A.2.2)
ii) “ any terrorist or any person acting maliciously, or from a political, religious or ideological motive” (Rule 2A.2.5); and
iii) “ confiscation or expropriation” (Rule 2A.2.7).
The War Risks Policy contained a deeming provision under Rule 3.14.2, whereby if the Vessel was detained for more than 12 months, the Owners would be deemed to have been deprived of possession without any likelihood of recovery:
“ If an Owner is deprived of the free use and disposal of an Entered Ship by capture, seizure, arrest, restraint, detainment, confiscation or expropriation …
3.14.2 if such deprivation lasts for a continuous period of 12 months, the Owner shall be deemed to have been deprived of the possession of the ship without any likelihood of recovery”.
The War Risks Policy also included the following exclusions:
“ An Owner of an Entered Ship is not insured for any loss, damage, liability, cost or expense arising out of action taken by any state or public or local authority:
3.5.1 under the criminal law of any state; or
3.5.2 on the grounds of any alleged contravention of the laws of any state …”.
(3) The MII Policy
Pursuant to the terms of the MII Policy, the Insurers agreed to insure the Bank to cover all vessels mortgaged to and declared by it under the policy during the period from 1 July 2014 to 30 June 2015 inclusive. The MII Policy incorporated Mortgagees' Interest Insurance Wording as per Master Cover no. B49001118 (“ the MII Wording”)...
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The ZouZou: No Insurance Cover For Ship Detained Under Venezuelan Anti-Smuggling Laws
...The Commercial Court handed down judgment today in Piraeus Bank v. Antares ("The ZouZou") [2022] EWHC 1169 (Comm). The decision concerns mortgagees' interest insurance and the standard exclusions in a war risk Guy Blackwood QC and Benjamin Coffer appeared for the successful insurers, instru......