Quadra Commodities S.A. v XL Insurance Company SE
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 04 March 2022 |
| Neutral Citation | [2022] EWHC 431 (Comm) |
| Docket Number | Case No: CL-2020-000325 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 431 (Comm)
THE HON Mr Justice Butcher
Case No: CL-2020-000325
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Jawdat Khurshid QC and Anna Gotts (instructed by Reed Smith LLP) for the Claimant
Peter Macdonald Eggers QC and Sandra Healy (instructed by Clyde & Co LLP) for the Defendants
Hearing dates: 31 January, 1–3, 7–8 February 2022
Approved Judgment
THE HONOURABLE Mr Justice Butcher
This is a claim made by the Claimant (‘Quadra’) against the Defendant underwriters under a contract of marine cargo open cover insurance. It arises out of what has become known as the ‘Agroinvestgroup Fraud’, which affected the Ukrainian agribusiness, and came to light in early 2019.
Quadra is a company incorporated under the laws of Switzerland. It is a commodities trading and logistics company, specialising in the trade of agricultural commodities, including grains, oilseeds and vegetable oils.
Quadra first had an involvement with the Agroinvestgroup, a loose association of companies involved in the production, storage and processing of agricultural products, in 2014. Its involvement with the Agroinvestgroup mainly involved the trading of commodities in Ukraine.
One of the entities in the Agroinvestgroup with which Quadra had significant dealings in the period 2014–2018 was Agri Finance SA (‘Agri Finance’). As part of those dealings, Contract No. 180524-1, dated 24 May 2018 (‘the Agri Finance Contract’), was entered into between Quadra and Agri Finance and provided for general terms to be applied to specific transactions which would be provided for by Addenda to the Agri Finance Contract.
In addition, from July 2018, Quadra had dealings with another company in the Agroinvestgroup called Linepuzzle Ltd (‘Linepuzzle’), a company incorporated under the laws of Cyprus. The primary purpose of Quadra's relationship with Linepuzzle was asset or ownership-based financing. The intention was that Quadra would buy goods from Linepuzzle and then sell them to Agri Finance to assist those entities with the financing of the commodities.
The Policy
Quadra had insurance under Marine Cargo Open Policy No. 161986 (‘the Policy’), of which the Defendants were underwriters. This contract was originally made to cover declared shipments and storage operations attaching during the 12 month period commencing 1 October 2016, but was renewed on the same terms and conditions for two further 12 month periods, beginning 1 October 2017 and 1 October 2018 respectively.
The Policy contained the following provisions of significance:
‘Conveyance
Any means of conveyances – whether by Land, Water (including Barges) and Air, including connecting conveyances, including incidental and/or permanent storage.
Geographical Areas
At and from ports or places anywhere in the world to ports or places anywhere in the world … including transits to or from and whilst at the premises of the Assured, forwarders, packers, consolidators, hauliers, warehousemen and other bailees … Including all domestic and/or internal transits, loading and unloading risks and periods of storage prior to dispatch or after arrival or at any intermediate port or place if required and/or storage whether customary or otherwise.
Interest
On goods and/or merchandise and/or cargo and/or interest of every description incidental to the business of the Assured, or otherwise, including duties and taxes applicable and increased value howsoever arising, the property of the Assured or for which the Assured have or assume a responsibility to insure, whether contractually or otherwise, or for which the Assured receive instructions to insure prior shipment or prior to known or reported loss or accident, consisting principally of but not limited to cereals, grain, soybean, pulses, maize and food products in container, bulk and/or break-bulk.
Limits of Liability
USD 30,000,000 (or equivalent in any other currencies) each and every loss, per vessel and/or barges and/or per location.
General Conditions
The subject matter of this contract is to cover the goods designated above as per ‘All Risks’ conditions of the General Conditions listed below and as per the Special Conditions of the contract …
Ordinary Risks
— Institute Cargo Clauses (A) Cl. 382 dated 1.1.09
…
It is agreed that in the event that clause(s) and/or general conditions of the present policy are inconsistent with each other, the most favourable clause to the Assured will prevail.
…
Chapter 3 – Storage
Storage risks
Any storage operation taking place before and/or after any transport operation are covered under the terms and conditions of the present policy, as per attached tariff, without any time limit, and apply to sold goods or to unsold goods stored in any storage location under the custody of a third party or the Assured.
For the purposes of this insurance contract, ‘Location’ is defined as any building, tank, silo …
The cover starts at the time the goods enter the storage location and are covered under ‘All risks’ terms and conditions and all other terms provided by this policy …
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Chapter 5 – Particular Conditions
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Co-Mingling Clause
Where the subject-matter insured hereunder is shipped or stored in such a manner as to be co-mingled with other property of a like kind belonging to and/or insured by others or owned by the Assured but intended for different consignees, it is agreed that in the event of loss or damage caused by a peril insured against, such loss or damage shall be pro-rated in accordance with the respective interest(s) of the party or parties involved in the ratio that the quantity of the property belonging to each party bears to the total quantity of property co-mingled.
…
Fraudulent Documents
This policy covers physical loss of or damage to goods and/or merchandise insured hereunder through the acceptance by the Assured and/or their Agents and/or Shippers of fraudulent shipping documents, including but not limited to Bill(s) of Lading and/or Shipping Receipts and/or Messenger Receipt(s) and/or Warehouse Receipts and/or other shipping document(s).
This policy is also to cover physical loss of or damage to goods insured caused by utilisation of legitimate Bill(s) of Lading and/or other shipping documents without the authorisation and/or consent of the Assured or their Agents and/or Shippers.
…
Misappropriation
This insurance contract covers all physical damage and/or losses, directly caused to the insured goods by misappropriation.
By misappropriation is exclusively understood:
1. The use or disposal of the insured goods, in bad faith, by a contracting party (either suppliers and/or customers) of the assured and/or the policy holder or by the servant of a contracting party, with or without the involvement of the storage manager, contrary to the purpose for which he has received the insured goods, or in disregard of the instructions given to him by the assured/policy holder and/or by any other natural and/or legal person authorised to give such instructions;
2. The physical or legal delivery, in bad faith, of the insured goods to any natural and/or legal person by a contracting party of the assured and/or the policy holder or by the servant of the contracting party, when this contracting party or this servant was aware or reasonably should have been aware that this natural and/or legal person was not entitled to the delivery of the insured goods.
The risks covered under this clause will start at the time the Policy holder and/or affiliated companies assume an interest in the cargo and/or are in possession of a document of title and shall end when this interest finally ceases. The present clause shall benefit exclusively to the Policy holder and/or affiliated companies and shall prevail notwithstanding other provision agreed in the Policy.
The above clause is subject to SMA and/or CMA and/or monthly external audit to be performed by a reputable surveyor
The above clause is limited to
— USD 10,000,000 any one loss when a SMA or CMA is performed by a reputable surveyor
— USD 4,000,000 any one loss when a monthly external audit is performed by a reputable surveyor
Notwithstanding the above sub-limit, the above clause is subject to USD 10,000,000 annual aggregate
The above clause is also subject to the following deductible: 10% of the loss with a minimum of USD 100,000 and a maximum of 500,000
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Chapter 6 – Insured Value / Contingency
Declaration clause
All shipments and storage operations are automatically covered unless as otherwise specified in the conditions of the present policy.
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Loss settlement clause
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2 Storage
— The market value at the date of declaration of the loss plus costs plus 10%, or
— The price at which the goods were bought including other costs plus 10% Whichever the highest, always at the insured's option.
Buyers / Seller's Contingent Interest Clause
This Policy is extended to cover the Assured's Contingent Financial Interest in goods which would be covered hereunder, where the Assured has no responsibility to insure under the terms of Sale/Purchase.
The cover is limited to loss and/or damage which would otherwise be recoverable under the terms and conditions of this Policy but only to the extent that the Assured is unable to recover such loss and/or damage under the insurance effected by the buyer or seller as may be applicable.
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Insurable Interest Clause
Notwithstanding that the interest insured may be purchased on Free on Board and/or Cost and Freight and/or Free Along Side or similar terms, it is agreed that the risk hereunder shall attach from the time of handling for the purposes of loading onto the carrying...
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