Technip Saudi Arabia Ltd v The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 21 July 2023 |
| Neutral Citation | [2023] EWHC 1859 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2021-000177 |
[2023] EWHC 1859 (Comm)
Mr Justice Jacobs
Case No: CL-2021-000177
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Peter MacDonald Eggers KC and David Walsh (instructed by HFW LLP) for the Claimant
James Brocklebank KC and Douglas Grant (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 15 th – 18 th and 23 rd – 24 th May 2023
Approved Judgment
This judgment was handed down remotely at 8:45am on Friday 21 st July 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
Index
| Section | Para. Number |
| A: Introduction | 1 |
| B: The chronology of events | 16 |
| The parties and the contractual relationships | 16 |
| The Allision | 26 |
| Events subsequent to the Allision | 30 |
| C: The Policy terms | 47 |
| D: Did Technip have a legal liability to KJO | 50 |
| D1: The relevant contractual terms | 50 |
| D2: The parties' arguments | 54 |
| Technip's argument | 54 |
| Medgulf's argument | 63 |
| D3: Discussion | 70 |
| E: Absence of consent to settlement | 94 |
| The issue | 94 |
| The parties' arguments | 96 |
| Discussion | 104 |
| F: The Existing Property Endorsement and other exclusions | 119 |
| F1: Introduction and the parties' arguments | 119 |
| Introduction | 119 |
| The Existing Property Endorsement: Medgulf's argument | 123 |
| The Existing Property Endorsement: Technip's argument | 130 |
| F2: Discussion | 144 |
| Limb 1 | 147 |
| Limb 3 | 184 |
| F3: The Watercraft exclusion | 185 |
| G: Quantum issues | 187 |
| G1: Introduction to the issues | 188 |
| G2: Legal principles | 198 |
| G3: The expert evidence | 211 |
| G4: Safeguarding costs | 213 |
| G5: Repair costs: Agreed Scope or Reduced Scope | 226 |
| G6: Reduced Scope – repair costs | 235 |
| G7: Miscellaneous costs | 246 |
| Conclusion | 253 |
A: Introduction
On 16th August 2015, the anchor-handling tug “MARIDIVE-43” (the “Vessel”) collided with an un-manned wellhead platform known as NR-09 (the “Platform”) in the Khafji Field, offshore Saudi Arabia. Since the incident involved a moving vessel and a stationary object, it was an “allision” rather than a “collision”, and I will refer to it (as did the parties) as the “Allision”.
The Claimant (“Technip”) had chartered the Vessel to perform certain work as part of a project to improve certain production assets in the Khafji Field, in accordance with its responsibilities as the “Contractor” under a contract with an unincorporated joint venture known as the Al-Khafji Joint Operation (“KJO”).
Technip's case, at the start of trial, was that the damage to the Platform resulted in Technip being liable to KJO in the sum of US$ 31,038,265 plus €458,052, comprising US$ 25,000,000 in respect of the cost of repair (for which Technip incurred a legal liability to KJO) and additional costs incurred by Technip in the sum of US$ 6,037,932 plus €458,052. Technip claimed an indemnity in respect of these sums (less the applicable deductible) under an offshore construction insurance policy (the “Policy”) underwritten by the Defendant (“Medgulf”). These figures were reduced in various respects during the course of the trial and, in one respect, subsequent thereto. Notwithstanding these reductions, Technip's claim against the Defendant insurer remains a substantial one.
The Policy was written on an amended WELCAR 2001 Offshore Construction Project Policy wording (“WELCAR”). This is the standard form wording for offshore construction all risks cover. As is apparent from its name, the WECLAR policy wording has been in existence for many years, and it is discussed in two specialist treatises to which I was referred, namely: David Sharp, Upstream and Offshore Energy Insurance (3 rd ed) (“ Sharp”) and Paul Reed KC, Construction All Risks Insurance (3 rd ed) (“ CAR Insurance”).
WELCAR (including the Policy in issue in the present case) contains two distinct sections of cover. Technip's claim was originally advanced under Section I of the Policy, where the basic cover is in respect of physical loss and damage to the construction work being performed, but with liability cover in accordance with Institute Clauses for Builders' Risks also being provided. Ultimately, however, this aspect of Technip's claim, which was always their secondary claim, was not pursued. The relevant claim is therefore advanced under Section II of WELCAR. This provides cover in respect of liabilities arising out of the contract works. This Section II incorporates an “Existing Property Endorsement”, whose interpretation and application to the facts of the present case are critical to the determination of Technip's claim. It is clear from the discussion in Sharp that the Existing Property Endorsement is a standard endorsement which can be added to a WELCAR policy.
Since the Policy is a liability policy governed by English law, a claim for recovery can only be made once the liability of Technip has been established by judgment or settlement: Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363. Technip contends that its liability has been established by a settlement agreement (the “Settlement Agreement”) concluded between Technip and KJO on 17th December 2019. There was no dispute that a Settlement Agreement was indeed concluded between the parties, and therefore Medgulf did not suggest that the claim advanced by Technip was premature (as had been successfully contended in Post Office v Norwich Union). It was, however, common ground that the Settlement Agreement did not establish that Technip was in fact liable to KJO in the amounts provided for in that agreement.
The basic rule under English law is that where a policyholder settles its liability to a third party claimant, and wishes to claim under its liability policy, it is not sufficient for the policyholder simply to establish the reasonableness of the settled amount. In order to succeed, the policyholder must prove (i) that it was in fact legally liable (here in respect of the damage to the Platform), and (ii) that the amount for which it would have been liable had the matter been litigated is at least as much as the amount paid under the settlement: Colinvaux & Merkin's Insurance Contract Law, B-0935; Enterprise Oil Ltd v Strand Insurance Co Ltd [2006] 1 CLC 33, per Aikens J at [27]; Astrazeneca Insurance Co Ltd v XL Insurance (Bermuda) Ltd [2013] 1 CLC 478, per Flaux J at [98]–[102]. As Colinvaux notes in footnote 2 to paragraph B-0935, other common law jurisdictions take the view that a failure by the insurer to pay is a repudiation of that obligation (albeit not of the contract as a whole) and that the policyholder's settlement with the third party is binding on the insurer if reasonable. A similar position applies under New York law: Luria Brothers & Co v Alliance Assurance Co 780 F2d 1082 (2d Cir 1986). English law, however, takes a different approach.
Technip notified Medgulf of the Allision in or about August 2015 and formally presented a claim to Medgulf for an indemnity under Section II of the Policy including by letter dated 29 June 2016.
On 29 July 2016, Medgulf informed Technip that there was no cover under the Policy by reason of the operation of certain Policy exclusions. These exclusions were those contained in (i) the Existing Property Endorsement and (ii) a “Watercraft” exclusion. Both of these exclusions are relied upon by Medgulf in the present proceedings, and they are a key part of Medgulf's defence.
In addition, Medgulf contends that Technip's claim does not get to first base, because Technip cannot prove that it had any legal liability at all to KJO in respect of the Allision. Even if that submission were unsuccessful, Medgulf contends that Technip's liability to KJO was substantially less than the amount reflected in the Settlement Agreement and which Technip now claims. A further argument advanced is that Medgulf were not asked to consent, and did not consent, to Technip's settlement with KJO, and that this provides a complete defence to the claim.
In its 29 July 2016 letter, Medgulf said that it was “grateful for Technip's confirmation that they are acting as a prudent uninsured”. The evidence of Mr Marwan Cortas, who was a project manager for Technip and who gave evidence at the hearing, was that there were a number of occasions when Medgulf advised that Technip had to act as a prudent uninsured. Technip's case is that this is what they did, in entering into the Settlement Agreement with KJO.
On 11th November 2020, Technip's solicitors (HFW) issued a letter before action to Medgulf's solicitors, Clyde & Co. Medgulf has declined to indemnify Technip, thus giving rise to the present proceedings.
The trial took place over a period of 6 days, including opening and closing submissions. The only factual witness was Mr Cortas. He had been employed as a project manager with Technip since 2007. He had become involved in the relevant project (described in Section B below) following the Allision, and was appointed as its project manager in September 2015. His evidence described the background to the project and his involvement in the dispute which developed with KJO, following the Allision, and its ultimate settlement. Mr Cortas was an impressive witness, and he answered questions fairly and with a view to assisting the court. Some of his evidence resulted in certain aspects of Technip's claim being reduced. Whilst the evidence was...
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