Sunport Shipping Ltd and Others v Tryg-Baltica International (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Cresswell J. |
| Judgment Date | 27 February 2002 |
| Neutral Citation | [2002] EWHC 235 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 27 February 2002 |
| Docket Number | Case No: 2000 Folio No. 565 |
[2002] EWHC 235 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Cresswell
Case No: 2000 Folio No. 565
Mr. Andrew Baker and Mr. Stephen Morris (instructed by Clyde & Co) for the Claimants.
Mr. Michael Thomas QC and Miss Philippa Hopkins (instructed by Ince & Co) for the Defendants (save the 30th).
Institute War and Strikes Clauses, Hulls-Time; clause 4.1.5 "loss, damage…arising from… detainment… by reason of infringement of any customs or trading regulations"; discovery of cocaine in a sea chest below waterline of vessel; whether exclusion in clause 4.1.5 applied.
Mr. Justice Cresswell
I direct that pursuant to CPR 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
JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN
Mr Justice Cresswell
Introduction
The claimants sue on a war risks insurance of the m.v. "Kleovoulos of Rhodes" ("the vessel"). Having sailed from Colombia, the vessel was detained in Greece following the discovery of cocaine in a sea chest below the vessel's waterline in August 1998. The vessel's Master and crew were charged with drugs offences, but were all acquitted in January 2000. In the meantime, the vessel was detained for long enough to be deemed, by the terms of the insurance, a constructive total loss.
To the extent that evidence of foreign law and practice is relevant, the evidence before the Court is confined to the evidence of Professor Anagnostopoulos as to Greek law and practice (and of Snr Cordoba as to Colombian law and practice).
The central issue is whether the exclusion in clause 4.1.5 of the Institute War and Strikes Clauses, Hulls-Time of 1.10.83 ("the Institute Clauses") applies. Clause 4.1.5 excluded from cover "loss, damage… arising from arrest, restraint, detainment, confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations".
By the insurance, the vessel was insured, valued at US$ 8 million, against war and other perils on the terms of the Institute Clauses, with the deemed constructive total loss period (clause 3) reduced to 6 months.
The first claimant is the owner of the vessel, the third claimant is her manager and the fourth claimant her mortgagee. The second claimant was named as an assured in the governing insurance cover note which set out the terms of war risks cover for 12 months from 15 March 1998 on some 16 vessels. There is no live issue as to the claimants' respective titles to sue on the insurance.
The defendants are the various underwriters who subscribed to the insurance.
After the vessel's release the claimants sold the vessel for a net recovery of US$ 1,362,573 (US$ 2,150,678 less costs of maintaining the vessel after abandonment and costs of sale of US$ 788,105). These figures are agreed subject to liability.
The claimants say that the exclusion in clause 4.1.5 does not apply and claim US$ 6,637,427 and interest. The defendants say that the exclusion in clause 4.1.5 does apply and that no sum is payable.
Common Ground
The following facts and matters are common ground between the parties.
By a policy of marine insurance, numbered HM 136698, subscribed by the defendants for their respective proportions, the defendants agreed to insure the vessel, which was valued by the policy at US$8 million, against war and other perils for a period of 12 months from 15 March 1998.
The Policy incorporated the Institute Clauses (Hulls-Time) and covered among other things loss of or damage to the vessel caused by her detainment.
The Policy provided that if, as the result of detainment, the assured lost the free use and disposal of the vessel for a continuous period of 6 months, then, for the purposes of ascertaining whether the vessel was a constructive total loss, the assured would be deemed to have been deprived of the possession of the vessel without any likelihood of recovery.
The Policy provided (so far as material):—
"1. PERILS
Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused by
1.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power
1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat
1.3 derelict mines torpedoes bombs or other derelict weapons of war
1.4 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions
1.5 any terrorist or any person acting maliciously or from a political motive
1.6 confiscation or expropriation. …
3. DETAINMENT
In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of 6 months then for the purpose of ascertaining whether the Vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.
4. EXCLUSIONS
This insurance excludes
4.1 loss damage liability or expense arising from …
4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations."
On 19 August 1998, the vessel arrived at the port of Aliveri in Greece in order to discharge a cargo of coal which had been loaded at Puerto Prodeco in Colombia.
On the following day, 20 August 1998, the port authority at Aliveri required an underwater inspection of the vessel to be carried out by divers. During that inspection a large quantity (188.9kg) of cocaine was discovered in waterproof packaging behind a grill in a sea chest on the starboard side of the vessel, well below the waterline.
Immediately following that discovery the officers and crew of the vessel were charged with drugs offences under Greek criminal law and the vessel was detained pursuant to the provisions of the Narcotics Act (Act 1729/1987) as amended in connection with those alleged criminal offences. The Report on Seizure of the vessel read (in translation):
"Aliveri… Thursday 20th August 1998… enquiring into the transportation of drugs, an investigation which took place on 20.8.98 in relation to the crew of the "Kleovoulos of Rhodes", a vessel sailing under the flag of Cyprus, we proceeded to take into possession —
1. the vessel above described and its certificates of seaworthiness … as these items have a bearing on the above offence, and we appoint as custodian and sequestrator the Port Authority of Aliveri …
Examining Magistrate
Signature"
On 17 September 1998, the first claimant formally applied to the Halkida District Court Committee for the release of the vessel, but the application was dismissed by a decision published on 30 November 1998.
On 17 December 1998, the claimants applied to the Halkida District Court for an order that the vessel be moved to the port of Piraeus, for her own safety.
On 25 January 1999, the Halkida District Court acceded to that application and ordered that the vessel be moved to Piraeus.
On or about 25 February 1999, the claimants gave notice of abandonment in writing which the defendants did not accept. As at that date, the vessel had remained under detention for a continuous period of over six months, and the claimants had not had the free use and disposal of the vessel during that six month period.
On 17 March 1999 the Athens Public Prosecutor of the Court of Appeal indicted the members of the crew with the same drugs offences.
The claimants did not make any other applications for the release of the vessel until 5 April 1999, when they then made an application to the Athens Court of Appeal.
The claimants' application on 5 April 1999 to the Athens Court of Appeal resulted in a release of the vessel on 13 May 1999, subject to the provision of Dr 500 million bail.
The claimants applied for the condition of bail to be lifted on 7 June 1999 and this was granted on 6 July 1999.
The trial of the officers and crew was concluded on 10 January 2000, when they were all acquitted.
The defendants have not paid the sum of US$ 6,637,427 or any part thereof to the claimants.
The respective contentions of the parties summarised
The claimants say that the words "customs regulations" mean rules of law concerning duty levied on imports from abroad. The defendants' case is that the words "customs regulations" mean any law which figuratively might be described as in the realm of customs, the words being wide enough to include smuggling of prohibited goods, substances or materials as well as smuggling of dutiable goods.
Thus the claimants argue for a narrow construction, the defendants for a wider construction, of the words "customs regulations".
The defendants accept that if the claimants are correct as to the meaning of "customs regulations", the exclusion in clause 4.1.5 does not apply in this case. Conversely the claimants accept that if the defendants are correct as to the meaning of "customs regulations", there was in this case an...
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