Suez Fortune Investments Ltd v Talbot Underwriting Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 07 October 2019 |
| Neutral Citation | [2019] EWHC 2599 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2012-000028 |
| Date | 07 October 2019 |
[2019] EWHC 2599 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
THE HONOURABLE Mr Justice Teare
Case No: CL-2012-000028
“BRILLANTE VIRTUOSO”
Peter MacDonald-Eggers QC, Tim Jenns and Richard Sarll (instructed by Clyde & Co LLP) for the Second Claimant
Jonathan Gaisman QC, Richard Waller QC, Nichola Warrender and Keir Howie (instructed by Kennedys Law LLP) for the Defendants
Hearing dates: 18–21, 25–28 February, 4–7, 11–14, 18–20, 25–28 March, 2–4, 8–11, April, 2,3, 7–9, 13–17, 20–23 May, 15–18 and 22–25 July 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| Introduction | 1 | |
| The vessel and the voyage | 27 | |
| The policy | 46 | |
| The burden and standard of proof | 59 | |
| Witnesses of fact | The Owner | 71 |
| The master | 76 | |
| The chief engineer | 87 | |
| Mr. Paikopoulos | 94 | |
| Mr. Leotsakos | 101 | |
| Mr. Plakakis | 102 | |
| Mr. Veale | 112 | |
| Other witnesses | 113 | |
| Expert evidence | ||
| Piracy and Yemeni Criminality | 115 | |
| Marine engineers | 134 | |
| Fire experts | 143 | |
| Salvage experts | 156 | |
| BMP experts | 164 | |
| Accountancy experts | 168 | |
| Cargo loss experts | 171 | |
| The narrative | ||
| Anti-piracy measures | 174 | |
| Cargo theft at Jeddah | 182 | |
| The arrangements for the security team | 186 | |
| The vessel's approach to Aden | 194 | |
| The boarding of the vessel | 210 | |
| The actions of the armed men | 219 | |
| The stopping of the engines | 233 | |
| The chief engineer's escape | 252 | |
| The start of the fire | 255 | |
| The abandonment of the vessel | 264 | |
| The arrival of Poseidon | 274 | |
| The progress of the fire | 280 | |
| Discussion | ||
| The arrangements for the security team | 320 | |
| The permission to board | 331 | |
| The actions of the master and chief engineer | 333 | |
| The actions of the armed men | 340 | |
| The VDR audio record | 351 | |
| The response by Poseidon | 355 | |
| The progress of the fire | 367 | |
| The crew's initial statements | 401 | |
| The story as a whole | 413 | |
| Motive | 458 | |
| Conclusion as to wilful misconduct | 472 | |
| Insured perils | ||
| Piracy | 481 | |
| Persons acting maliciously | 498 | |
| Vandalism and sabotage | 507 | |
| Capture and seizure | 510 | |
| The Aden Agreement | 512 | |
| BMP 3 | 544 | |
| Warranty of legality | 576 | |
| Other defences | 592 | |
| Conclusion as to Bank's claim | 596 | |
| The Underwriters' counterclaim | 597 |
Introduction
Shortly before midnight on 5 July 2011 the laden motor tanker BRILLANTE VIRTUOSO was drifting in the Gulf of Aden. She was just within the territorial waters of Yemen and in an area of water where, or close to which, there was in 2011 a risk of attack by Somali pirates. Although drifting, the vessel was in the course of a voyage from Kerch in the Ukraine to China with a cargo of fuel oil. Her master had received instructions by email to embark an unarmed security team of three at Aden to assist the master and crew as the vessel proceeded through the Internationally Recommended Transit Corridor “IRTC” in the Gulf of Aden and then on towards India.
The second officer, an able seaman and an additional ordinary seaman on watch observed, initially by radar, and afterwards with the aid of binoculars, a small boat approaching the vessel. There were seven persons on board the small boat, their faces were covered and they were seen to be carrying arms. By the time of the trial, it was common ground that the persons in the small boat were current or former members of the Yemeni Coast Guard or Navy. There is cogent evidence that, when the small boat was off the starboard quarter of the vessel, those on board the small boat said they were “security”. The master permitted the armed men in the small boat to board the vessel by means of the pilot ladder.
Once on board the armed men required the crew to assemble in the day room. The crew did so; but two armed men took the master to the bridge and another two armed men took the chief engineer to the engine control room.
At about 0024 on 6 July one of the armed men told the master to “move to Somalia”. At about 0058 the chief engineer started the main engine. The vessel then proceeded, initially in hand steering by the master and then on auto pilot, not on an ESE course which would be the course required to reach Somalia, but on a SW course towards Djibouti.
Just before 0200 there were gun shots on the bridge.
At about 0218 an armed man asked the master on the bridge where the safe was and shortly afterwards there were further gun shots.
By about 0228 the main engine was stopped; there is a dispute as to precisely when and also as to whether the main engine was stopped by the chief engineer or whether it stopped by reason of an engine problem.
Very shortly thereafter, at about 0245, a fire broke out in the purifier room which was a space within the engine room on the third deck. It is common ground that the fire was started by the detonation of an improvised explosive incendiary device (an “IEID”) which was brought on board the vessel by the armed men. The fire spread from the purifier room to other parts of the engine room.
At 0303 the chief officer, on VHF channel 16, informed the USS PHILIPPINE SEA, one of the naval vessels forming part of the international effort to combat piracy in the area, that the vessel was under attack and that seven pirates were on board. At 0306 the vessel operated the Ship Security Alert System (“SSAS”) which informed various authorities (and the vessel's managers) that there had been a piracy incident. The armed men had in fact left the vessel; presumably by means of the small boat in which they had arrived.
At 0416 the master, officers and crew, apart from the chief engineer, abandoned ship by means of the starboard lifeboat and boarded the USS PHILIPPINE SEA. A photograph of the vessel at 0543 indicated a large fire in the engine room. The chief engineer remained on board the vessel but at 0744 was taken to the USS PHILIPPINE SEA.
A salvage tug and an anti-pollution vessel from Poseidon Salvage, an Aden based salvage company, arrived off the casualty by about 0723. A monitor on the tug cooled parts of the vessel. By 1030 on 6 July 2011 the fire appeared to be dying out.
By 1230, notwithstanding the presence of the local salvors, there had been a resurgence of the fire. The fire diminished again in the late afternoon before resurging overnight. By the afternoon of 7 July 2011 it had spread throughout the accommodation and had reached the wheelhouse. By 8 July 2011 the fire was out. The local salvors remained in attendance.
On 26 July the casualty was taken in tow to the Persian Gulf by Five Oceans Salvage, an international salvor based in Greece who had secured the LOF (Lloyd's Open Form) contract on 6 July to salve the vessel and cargo, with Poseidon as its sub-contractor. On 21 August the casualty arrived off Sharjah and was inspected. The casualty was then taken to Khor Fakkan where she arrived on 30 August. The cargo was discharged into another vessel by means of an STS (ship to ship) operation which was commenced on 4 September and completed on 27 September.
The vessel had been badly damaged by the fire and was later scrapped.
These were singular events. There is no known instance either before or after the events which befell BRILLANTE VIRTUOSO of Yemeni armed men boarding a merchant vessel in the Gulf of Aden and requiring her to be taken to Somalia. The events have given rise to a claim on the vessel's war risks policy by Suez Fortune Investments Limited, the vessel's Owner, and by Piraeus Bank AE, the vessel's mortgagee. The vessel's insured value was US$55 million plus US$22 million for disbursements and increased value. Thus the claim is for the sum of US$77 million on the basis that the vessel was a constructive total loss by reason of the damage caused by the fire.
In January 2015 Flaux J. determined that the vessel was, as claimed by the Owner and Bank but denied by the Underwriters, a constructive total loss; see [2015] EWHC 42 (Comm).
In March 2015 the Underwriters alleged that the fire had been deliberately started with the consent of the Owner, that is, the loss had been caused by the wilful misconduct of the Owner within the meaning of section 55(2)(a) of the Marine Insurance Act 1906.
In 2016 the Owner's claim was struck out after Flaux J. had found that Mr. Iliopoulos, the sole or principal beneficial owner of Suez Fortune, had refused, in breach of a court order, to provide his solicitors with an electronic archive of documents and had lied to the court in an attempt to prevent the claim from being struck out; see [2016] EWHC 1085 (Comm).
Thus the claim is now continued by the Bank. However, the Bank also had a mortgagee interest insurance policy and the underwriters of that policy have paid out and thereby claim to be subrogated to the Bank's claim. The Bank retains an interest in the claim, being the difference between the sum said to be payable under the war risks policy, some US$77 million, and the sum paid out by the mortgagee interest underwriters, some US$64 million. The dispute in this case is therefore largely between one set of underwriters and another set of underwriters....
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