Quadra Commodities S.A. v XL Insurance Company Se and Others
| Jurisdiction | England & Wales |
| Judge | Sir Julian Flaux C,Lord Justice Popplewell,Lord Justice Snowden |
| Judgment Date | 21 April 2023 |
| Neutral Citation | [2023] EWCA Civ 432 |
| Docket Number | Case No: CA-2022-000694 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 432
Sir Julian Flaux CHANCELLOR OF THE HIGH COURT
Lord Justice Popplewell
and
Lord Justice Snowden
Case No: CA-2022-000694
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
BUTCHER J
Royal Courts of Justice
Strand, London, WC2A 2LL
Peter MacDonald Eggers KC and Sandra Healy (instructed by Clyde & Co LLP) for the Appellants
Jawdat Khurshid KC and Anna Gotts (instructed by Reed Smith LLP) for the Respondents
Hearing dates: 28 February and 1 March 2023
APPROVED JUDGMENT
Introduction
The issues raised by this appeal concern whether the claimants, Quadra Commodities SA (to which I will refer as “Quadra”) had an insurable interest in certain cargoes of grain purchased by them in respect of which they were the victims of a fraud perpetrated by their sellers Agri Finance SA (and other companies in the same Agroinvest group) in Ukraine, for the purposes of Quadra's claim against the defendants (to whom I will refer as “the insurers”) under a Marine Cargo Open Policy. The insurers appeal with the permission of the judge, Butcher J, against his Order dated 4 March 2022 entering judgment for Quadra on its claim in an amount to be determined, if not agreed.
The judge gave the insurers permission to appeal on the four grounds of appeal before this Court (set out below). He refused permission to appeal on three further grounds set out in the insurers' skeleton argument in support of their application for permission to appeal. The application for permission to appeal in respect of those three grounds was renewed before this Court and refused by the Order of Males LJ of 11 May 2022, as confirmed in his judgment on 24 May 2022, following an oral hearing attended by both parties.
Factual background
Quadra had significant dealings in the period 2014 to 2018 with Agri Finance, including a Contract 180524-1 dated 24 May 2018 (“the Agri Finance Contract”) which provided for general terms to be applied to specific transactions for the sale and purchase of grain which would be covered by Addenda to the Agri Finance Contract. From July 2018, Quadra also had dealings with another company in the Agroinvest group called Linepuzzle Ltd for the principal purpose of asset financing, whereby Quadra would buy goods from Linepuzzle and then sell them to Agri Finance to assist with financing of the commodities.
The Marine Cargo Open Policy had been renewed for annual periods from 1 October 2017 and 1 October 2018 respectively. The judge set out at [7] of his judgment the provisions of the Policy of particular significance. It is not necessary to set out all of those but only the provisions of relevance to the appeal:
“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.
Chapter 5 – Particular Conditions
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
…
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.
The Insured will provide:
• A monthly declaration in respect of shipments (including inland transit where applicable)
• A monthly storage declaration based on the market value per location at the end of the month for all commodities.
As the judge pointed out, by an Endorsement to the Policy, the original French law and jurisdiction clause was replaced by a clause which provided Quadra with the option of making the insurance subject to English law and jurisdiction, which it did by its letter before action of 23 December 2019.
The Agri Finance Contract was governed by English law. The provisions relevant to this appeal were:
“… DELIVERY TERMS AND CONDITIONS
Delivery of Goods is made by rail cars and/or by trucks.
DAT [Delivered at Terminal] sea trade port, Ukraine at buyer's option (to be specified in addendums to the contract), hereinafter referred to as ‘Place of Delivery’, acc Incoterms-2010
…
The title of ownership for the Commodity is transferred from the Seller to the Buyer at the moment when the Commodity is accepted at the Place of Delivery.
PAYMENT:
Period of transferring goods at internal warehouses from seller to buyer. To be specified in addendums to the contract.
The claim concerned three Addenda to the Agri Finance Contract: (i) Addendum 7 dated 17 September 2018 for the purchase of 5,000 mt (+/- 5%) of Ukrainian corn 3 rd grade 2018 crop; (ii) Addendum 9 dated 30 October 2018 for the purchase of 6,000 mt (+/- 5%) of Ukrainian corn 3 rd grade 2018 crop; and (iii) Addendum 10 dated 29 November 2018 for the purchase of 4,000 mt (+/- 5%) of Ukrainian corn 3 rd grade 2018 crop. It is of some relevance to the issues on the appeal that there was no claim in respect of Addendum 8, a purchase of 8,000 mt (+/- 5%) of Ukrainian corn 3 rd grade 2018 crop, since all the corn in question was delivered to Quadra's order and loaded on a vessel from one of the warehouses of the Agroinvest group on 5 November 2018.
The Delivery Terms and Conditions and Payment Terms of each Addendum were in accordance with the provisions of the Agri Finance Contract set out above. The detail is set out in [11] to [13] of the judge's judgment. In each case, Quadra undertook to pay 80% of the purchase price against originals of the seller's invoice, the Warehouse Receipt and the analysis card issued by the grain warehouse's laboratory. The balance was payable against originals of shipping documents for delivered and accepted goods.
Quadra also concluded three contracts of relevance with Linepuzzle: (i) a contract dated 14 November 2018 for the purchase of 4750 mt Ukrainian wheat, crop 2018, (the “First Linepuzzle Contract”); (2) a contract dated 22 November 2018 for the purchase of 4650 mt Ukrainian wheat, crop 2018, (the “Second Linepuzzle Contract”); and (3) a contract dated 11 January 2019 for the purchase of 4150 mt Ukrainian barley, crop 2018, (the “Third Linepuzzle Contract”). Each Linepuzzle Contract provided for payment of 100% of the purchase price against the originals of various documents including the Warehouse Receipt, an Act of transfer of title from seller to buyer and a quality certificate issued by the warehouse laboratory. The contracts also provided expressly that title was to pass to Quadra upon 100% payment.
In relation to the Agri Finance purchases, the documentation and the events followed the same course so that it is only necessary to look in detail at Addendum 7 which is what was done at the hearing of the appeal....
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