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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Suez Fortune Investments Ltd & Anor v Talbot Underwriting Ltd & Ors Re: M/V Brillante Virtuoso  EWHC 42 (Comm) (15 January 2015)
Cite as:  EWHC 42 (Comm)
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QUEEN'S BENCH DIVISION
Fetter Lane, London, EC4A 1NL
B e f o r e :
| (1) SUEZ FORTUNE INVESTMENTS LTD
(2) PIRAEUS BANK AE
|(1) TALBOT UNDERWRITING LTD
(2) HISCOX SYNDICATES LTD
(3) QBE CORPORATE LTD
(4) CHAUCER CORPORATE CAPITAL (NO. 2) LTD
(5) MARKEL CAPITAL LTD
(6) CATLIN SYNDICATE LTD
(7) APRILGRANGE LTD
(8) BRIT UW LTD
(8) NOVAE CORPORATE UNDERWRITING LTD
(10) GAI INDEMNITY LTD
"M/V BRILLANTE VIRTUOSO"
Mr David Goldstone QC & Ms Nichola Warrender (instructed by Norton Rose Fulbright LLP) for the Defendants
Hearing dates: 19th, 20th Nov, 24th to 27th Nov, 1st, 2nd, 4th,10th and 11th Dec 2014
Crown Copyright ©
The Honourable Mr Justice Flaux:
i) Was the vessel a CTL?
ii) Have the claimants lost the right to claim for a CTL by the sale of the vessel?
iii) Was the NOA served on behalf of the bank?
iv) If the vessel was not a CTL, what is the measure of indemnity recoverable by the claimants for a partial loss?
v) Are the claimants entitled to an indemnity for Loss of Hire?
vi) Are the claimants entitled to an indemnity for salvage, tug hire and port expenses incurred since the date of the casualty in respect of the vessel as (a) salvage, (b) sue and labour, and/or (c) by reason of an election made by the insurers under section 63 or 79 of the Marine Insurance Act 1906?
The terms of the policy
Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused by: ...
1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat ...
1.5 any terrorist or any person acting maliciously or from a political motive ...
1.7 violent theft by persons from outside the Vessel
1.8 piracy ...
The Institute Time Clauses - Hulls 1/10/83 ... are deemed to be incorporated in this insurance in so far as they do not conflict with the provisions of these clauses ..."
"11 GENERAL AVERAGE AND SALVAGE
11.1 This insurance covers the Vessel's proportion of salvage, salvage charges and/or general average ...
13 DUTY OF ASSURED (SUE AND LABOUR)
13.1 In case of any loss or misfortune it is the duty of the Assured and their servants and agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this insurance.
13.2 Subject to the provision below and to Clause 12 the Underwriters will contribute to charges properly and reasonably incurred by the Assured their servants or agents for such measures ...
13.6 The sum recoverable under this Clause 13 shall be in addition to the loss otherwise recoverable under this insurance but shall in no circumstances exceed the amount insured under this insurance in respect of the Vessel ...
18 UNREPAIRED DAMAGE
18.1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the Vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs ...
19 CONSTRUCTIVE TOTAL LOSS
19.1 In ascertaining whether the Vessel is a constructive total loss, the insured value shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck shall be taken into account.
19.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel shall be recoverable hereunder unless such cost would exceed the insured value ...".
"9 CONSTRUCTIVE TOTAL LOSS
9.1 In ascertaining whether the vessel is a constructive total loss, the insured value in the insurance on hull and machinery shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the vessel or wreck shall be taken into account.
9.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the vessel shall be recoverable hereunder unless such cost would exceed the insured value in the insurance on hull and machinery ..."
"Including War Loss of Hire cover, conditions:
This policy to pay up to total amounts as above, fixed and agreed, chartered or unchartered for up to 180 days in all each vessel.
Excess 7 days any one accident each vessel, but nil where deductible is applied.
Underwriters hereby agree to include the risks of Piracy and Mutiny herein in respect of Loss of Hire.
Subject to Loss of Charter Hire Insurance as LPO454 and LPO444 as far as applicable but this policy only to pay claims in consequence of Loss, Damage or occurrence covered by Institute War Strikes Clauses - Hulls (01.10.83) Clause 3 period and that in LPO444 amended to pay after the expiry of 180 days and cover continues whether vessel(s) chartered or unchartered - Clause 4 amended to permit above trading ...
It is hereby noted and agreed that in the event that a vessel is hijacked or detained by Pirates with or without damage, this policy will respond in respect of Loss of Hire for the period of hijack or detainment by pirates up to policy limits ...
No claim to attach to this insurance if the occurrence in respect of which such claim arises the cause of the vessel becoming a Total Loss (Actual or Constructive) excluding however, Constructive Total Loss covered by Institute War Strikes Clauses - Hulls (1.10.83) Clause 3 as amended by London Blocking and Trapping Addendum LP0444 …"
"1. If in consequence of any of the following events:
(a) loss, damage or occurrence covered by ... Institute War and Strikes Clauses - Hulls (1/10/83) ...
occurring during the period of this insurance the Vessel is prevented from earning hire for a period in excess of [7 days if applicable] then this insurance shall pay [US$65,000] of the sum hereby insured [US$11,700,000] for each 24 hours after the expiration of the said days during which the Vessel is so prevented from earning hire for not exceeding a further  days in respect of any one accident or occurrence ...provided that the repairs in respect of which a claim is made hereunder are completed within 12 months of the expiry of the period covered by this policy.
2. No claim to attach to this insurance if the occurrence in respect of which such claim arises is the cause of the vessel becoming a Total Loss (Actual or Constructive) ...
8. It is understood and agreed that if the Vessel is prevented from earning hire on separate occasions, which shall not in any event exceed three, in respect of any one accident or occurrence falling within this insurance, for the purpose of ascertaining the amount claimable hereunder the total time that the Vessel is off hire shall be taken into account, provided that the repairs are completed within 12 months of the expiry of this insurance.
12. The Assured shall effect, or cause to be effected, all repairs (temporary or permanent) with due diligence and dispatch."
The witness evidence
i) in the engine room all machinery equipment were completely destroyed by fire / conductive heat / flooding and debris;
ii) the engine room was contaminated by substantial amounts of residual oils and rubberized oil from pipes systems which had been broken open by fire / conductive heat;
iii) the engine control room was completely destroyed by fire;
iv) engine room equipment damaged by fire / conductive heat to be renewed;
v) all auxiliary systems damaged by fire / conductive heat to be renewed;
vi) superstructure and all accommodation spaces to be renewed;
vii) main deck between frames 5 to 55 found buckled / heat and fire affected and ship's funnel structure to be renewed;
viii) side shell plating, PS and SB, between frames 59-101 was damaged or dented; substantial quantity of guard railing damaged; starboard gangway; to be renewed as necessary;
ix) cargo tanks and slop tanks had about 1700 tons of sticky oil residuals;
x) the water in ballast tanks of the vessel was contaminated by oil.
"1 As a result of the survey now held the ship has been found in severely damaged condition with heavy damages of items subject to technical supervision of the Class.
2 Class of the ship is suspended."
"…all cargo tanks, pump room, engine room and accommodation spaces must be cleaned and gas freed so that they become safe for hot works.
All cargo tanks and slop tanks…must be cleaned, sludges removed and tanks be prepared for hot works.
It has not been possible to ascertain the exact amount of sludges that need to be removed but as vessel's last cargo was removed by emergency equipment without any COW operations a big amount of sludge remaining on board is anticipated."
The law on constructive total loss
"The principle laid down in these latter cases is this: that the question of loss, whether total or not, is to be determined just as if there was no policy at all; and the established mode of putting the question, when it is alleged that there has been, what is perhaps improperly called, a constructive total loss of a ship, is to consider the policy altogether out of the question, and to inquire what a prudent uninsured owner would have done in the state in which the vessel was placed by the perils insured against."
"The proper approach to the question of what was the cost of repairs is, as I understand the law, what would be their cost to a prudent uninsured shipowner. In Roux v Salvador, (1836) 3 Bing NC 266, 286 (cited in Arnould (loc cit) para 28-020,) Lord Abinger CJ put it in terms of whether "… a prudent man, not insured, would decline any further expense in prosecuting an adventure, the termination of which will probably never be successfully accomplished"."
"Precise estimates are, of course, impossible, and it seems to me that, unless the insured shipowner is to take upon himself risks which ought not to be borne by him (such as the risk whether the ship will be got afloat at all, or, having been got afloat, will arrive at a port for temporary repairs, and ultimately at home for permanent repairs), a large margin ought to be added to the figures of cost of repair to cover risks of this sort—risks which a "prudent uninsured owner" would certainly take into consideration in determining whether he should repair or sell …
Now in my judgment the "prudent uninsured owner" test was clearly accepted as the proper test at least down to 1873. The recognition of the test in Irving v. Manning 1 HL Cas 287 and in Rankin v. Potter LR 6 HL 83 puts the matter, to my mind, beyond argument. Nor do I think that it is possible to say that Moss v. Smith 9 CB 94, which was cited in Rankin v. Potter, had then been recognised as substituting for the "prudent uninsured owner" test an arithmetical test turning on the difference between estimated totals. The prudent uninsured owner test was, I think, adopted for the very purpose of covering considerations which cannot be embodied in the figures of an arithmetical calculation."
"It is said that, at the time of the adoption of the "prudent owner" test, the master, through difficulty of communication and inability to secure with any certainty means of repair, was in practice apt to consider seriously the question whether he should sell the materials of the ship, or the ship as she lay, rather than make the attempt to repair. But it is said that nowadays such a case rarely arises, and that when it does the old test can be applied; but that now the conveniences of modern times, telegraphic communication, the salvage associations, and Lloyd's agents everywhere, throw on the master but rarely the old alternative, "repair or sell"; and that in modern times the shipowner ought to guide his conduct as an insured owner desirous to have regard to the interests of all concerned, and that the damaged ship ought, whenever it is possible, to be taken to the port where permanent repairs can be effected, and the arithmetical test applied with something like precision. Such a rule seems to me too favourable to the underwriter. I think that this contention is open to the criticism that the shipowner at the moment of election, when he has to exercise the option of giving notice of abandonment, has really no precise data upon which to act, and that there must always be a quantity of items, especially the cost of the temporary repairs and the getting of the ship to the ports of temporary and permanent repair, as there were in the present case, which do not admit of precision. I doubt whether under the absolute arithmetical test the underwriter really takes upon him the whole of the risks of the perils of the sea. I think it was a doubt of this sort which made lawyers of the United States of America adopt the 50 per cent. rule." [A reference to the fact that in the United States the rule is that the vessel is a CTL if the cost of repair exceeds 50% of her insured value.]
"Phillips, 5th Ed., Sect. 1548, founding himself upon the American authorities, seems to assume that the usual port of repair is the port of necessity, but that it is a question of fact in each case what a prudent uninsured owner would do-see American Insurance Company v. Center, 4 Wend. N.Y. 45; Hall v. Franklin Insurance Company, 9 Pick. Mass. 466; Orrok v. Commonwealth Insurance, 21 Pick. Mass. 456. All three, of course, are American reports. I think that Phillips expresses the true view, and that in determining at what port to repair all the circumstances must be taken into consideration, including the loss of time necessary to reach the substituted port, the expense of reaching it, and the lack of facility to obtain freights there as compared with the port of refuge. But I think, myself, that at any rate, provided the repairs can be effected at the port of necessity, the assured is entitled to regard that port as the natural place of repair and to regard the cost of repair at any other port as substituted expenses, i.e., he would be entitled to be recouped (a) the necessary cost of temporary repairs at the nearest port; (b) the necessary cost of any further temporary repairs at the nearest repairing port; (c) the cost of permanent repairs at the ultimate repairing port, together with the necessary cost of getting to and from the various ports. "
The extent of the damage to the vessel
The lower areas of the engine room
The third deck level
"… this fire was not a kind of polite drawing room fire which strayed somehow out of its grate and licked paint here and there with flame. This was a raging inferno that started with an explosion, and spread throughout the engine room at temperatures, at the hottest parts of the flame, probably 800 or 900 degrees centigrade, and created an oven the whole of the top of this engine room, where the ambient temperature for several hours was probably in excess of 600 degrees … At 500 degrees carbon steel starts to re-crystallise, which means that the smooth molecular structure starts to break down, it loses its tensile strength and its hardness, and increases its ductility; that's one thing. But the other thing that's going on at the same time, and is more germane to the top of this engine, is expansion. At 500, 600 degrees, all of these pieces that are bolted together expand at different rates, differential expansion. I would expect to find, when these places were taken apart, that there were multiple fractures, that there was extension of the studs and the bolts and the tie rods, and that this engine was certainly at the top no longer fit to carry the loads and the pressures it's required."
"Those turbochargers, in common with all the other areas from the third deck upwards, were subjected to very high temperatures, and you may think I am not an expert in this field and shouldn't mention temperatures, but I disagree with you. These temperatures were in excess of 500 degrees. Turbochargers rotate at 16,000 plus revs per minute. The elevated temperatures in that engine room, ambient, would be enough to distort these turbocharger casings, even if they didn't cause actual damage to the rotors which they would of course and the aluminium would have softened at the compressor ends. Those turbochargers were not fit to be ever used again, in my opinion."
"when you are talking about degrees of heat exposure, it's a little bit like saying that somebody is less dead than somebody else, even though they are both in the graveyard. The position is that that machine had to expand for that paint to crack. So the parent metal underneath that paint, which is quite thick, because these are 20-year-old machines that have been originally coated to a high standard and then coated many times since by the crew, has cracked, which means that the casing has expanded."
The second deck level
The main deck
"The main deck within the accommodation was also the deck head of the engine room and was subjected to fire attack from both sides. It was seen to have been heat damaged in areas such as the cross alleyway...[T]he deck plating between the accommodation and engine casing superstructures also formed a section of the engine room deckhead and was seen to be distorted…Very severe heat damage was evident internally throughout all the decks in the accommodation block, extending from frame 32 to 51, with virtually all combustible materials having been consumed. All levels of the accommodation block had been totally gutted by fire."
The accommodation block and funnel casing
The hull plating and handrails
The place of repair
"The physical risks are obviously the risk of towage over a very long distance, which I think is fairly obvious to most people, the perils of the sea, and so on. The commercial risk is being trapped there. Dockwise had experience of having a ship in COSCO for a damage, and the period under repair overran – this was a favour to them, I think, and the period under repair overran, and I think they were charged upwards of $80,000 a day for dock dues for the extra days. It's not unknown, that. That's the worst I've come across, but it's not unknown, but that's one of the commercial risks. The other is that if you are in a shipyard for a year, people lose interest, the shipyard loses interest, there is no guarantee that they will have a steady flow of workers on the job, something new comes in, they take away the people, the thing breaks down, the times goes down, and the site team is there for a long time, there is friction, they fall out with the yard managers, everybody blames everybody else and work goes downhill. Then there is the low level corruption that just poses a risk to everything, to try and keep the wheels oiled. Those are the sorts of things that Dockwise took into account."
"But I also need to say something which is common knowledge in the trade, that when a vessel goes to China for a project, let's say 1 [million], then it always becoming something more, 3.5 million. And you can cross-check this with everyone in the trade."
"At the beginning of last year, or the end of 2012, I was asked by the North of England P&I Club to attend in a German owner's office with respect to a relatively newish – by which I mean under two years old, I don't remember exactly – ship that had been built in China, and had suffered a grounding damage, I think off the mouth of the Yangze, somewhere like that, and it was salved, and on the basis of a quotation from the local shipyard, underwriters had agreed to place the repairs in hand. As it happens, the overall cost turned it into a CTL, mostly because – not mostly perhaps – but largely because of the extended time."
"In my opinion it is not sufficient to just look at China and to dismiss other repair areas without due consideration. As with shipbuilding, where it is well documented in online articles by Reuters … and others that new ship deliveries can be long delayed in China and quality is not uniform. As with new build so too with repairs and so there are many factors an owner must weigh in making the decision on where to carry out major repairs …"
The cost of repair in China
Cleaning of cargo tanks and slop tanks (Items 1-8, 14-15 and 17)
"Ships and shipyards become integral. When you look at the risk in a shipyard, you have to look at the - I am talking about property risk here now, not commercial risk - what the ship can do to the shipyard and what the shipyard can do to the ship in way of damage. I am not aware of anywhere in the world, nowhere in my experience can you put a tanker with dirty tanks in a shipyard for a year, at the minimum, for any time but let's just say a year. There are lots of reasons for this. One is if you have only cleaned for gas free man entry, which I think nobody would argue with is at least a prerequisite, in order to maintain that gas free status - and, as you have seen, every yard wants to check every tank every day with a chemist and charge you a vast amount of money for it, then you have to have the tank lids open on the main deck. You cannot maintain a gas free status if the lids are closed. So there has to be ventilation.
If you have got oil residues in the tanks, then you are at risk, all the time you are at risk. Not just the work on your own ship, though that's part of it, here we are cutting huge amounts of the accommodation off, there is hot work everywhere. But other ships, if I have a ship in the shipyard for a year or more it's going to be shifted from one berth to another, there will be ships outside it, there will be ships – maybe it will be outside another. There will be hot work everywhere in the shipyard, and I don't think, it's certainly not my experience, that any shipyard in the 21st century will accept a dirty ship in its shipyard ...
[E]ven if you could find a shipyard that would allow that, then no prudent owner would allow his ship to be in that condition, and no professional person in my position could ever put their name to such a practice, it is not right, it's an ethical engineering point, as I say."
"No shipyard will accept a vessel with oil residues in it, or a vessel which is not very well cleaned, according to the hot works standards. So the rule is that the ships and tankers in particularly have to be cleaned, they have to be gas free not only for people or entry man, but also for hot work…
You never know what the workers will do inside the vessel, inside the hull. You cannot know what they are going to touch or what part of the structure might be overheating, and then convey the heat further inside the vessel. All this is common knowledge and people in trade are aware of that. And this is why, if a tanker is to stay in a drydock, shipyard still demands that tankers be cleaned for hot work, unless you go to a place where people respect no standards and no laws…
There are so many objects that get carried in order to - over the hull. All this is very risky, and that is why shipyards do not undertake such repairing projects unless the vessel is thoroughly clean and is gas free for hot work"
Removal and disposal of contaminated ballast water (Item 10)
"MR JUSTICE FLAUX: I understand your opinion to be, though, that you would still, if there was dirty ballast water in the ballast tanks, never mind where it came from, but assuming there was, that that's something that any prudent yard would also require to be -- or need to be dealt with?
A. Oh, there is no question about that, my Lord. If this ship has to go into drydock then you have to deballast or part deballast or shift, and if you have to deballast and there is any suggestion of dirty ballast, then it has to be disposed of and cleaned, otherwise you can't reballast."
Cleaning of debris and removal of damaged items from pump room (Item 18)
Cleaning of engine room and bunker tanks (Items 25 and 27-30)
Asbestos removal and disposal (Item 32)
Steel repairs to the engine room, hull, funnel casing, accommodation, ladders and handrails (Items 36-38, 206 and 47-48)
Main engine (Items 56, 57 and 59)
Auxiliary systems (Items 61, 65-68, 70-71)
Electrical generation (Items 76 and 77)
"Mr Templeman based another argument on this email: that, if she were not repaired by the section method, the "Irene EM" would not have been given classification, that therefore she could not have been insured, and so that she could not have been operated. In other words, for practical purposes the position adopted by BV and stated in the email took out of the claimants' hands any decision about how the repairs might be done. I reject that argument: as I have said (at para 197), I accept Mr Templeman's interpretation of what BV meant in their email, but it does not follow that after further inspection of the damage, in particular the damage to the double bottomed structure, they would not have agreed to another method of repair; nor that, if the claimants had adopted another method of repair, BV would not have accepted the vessel back into class when they saw the results. While the claimants were contemplating the section method, BV had no reason to object to it even if they thought that the claimants were being more cautious than necessary. It does not mean that, if the claimants had re-assessed the damage and had proposed less expensive repairs, BV would not have considered them. After all, it was not for a classification society to insist on particular repairs: their role was to survey the vessel after repairs had been done and to decide whether to accept the vessel back into class. Of course, it was sensible for the claimants to seek BV's views about what repairs might be acceptable to them, and for BV to give them guidance. But in the end, if the vessel was to be repaired, it was for the claimants to decide what repairs would (i) restore the vessel to her pre-incident condition and (ii) meet classification requirements. Indeed, if the claimants had had the vessel properly repaired to their surveyor's satisfaction but BV declined to classify her, the claimants were entitled under BV's rules to challenge the decision."
Oil fired and composite boilers (Item 87)
Piping and valves (Items 96 to 100)
Cargo-handling equipment (Items103-106, 109-11, 113 and 115)
Engine room insulation (Item 124)
"Mr Cuffe uses a lump sum quote from Mr Chen at USD 100,000 whereas I estimate that some 2000m2 of sheet insulation will be required at up to USD 100/m2 as per my first report and in addition there will be approximately 1600m of pipe insulation making a total figure of USD 450,000 in China. I note that, on the basis of the area which I have calculated to be 2000 m2 Mr Chen's figure of USD 100,000 would be the equivalent of about USD 5 per m2 which I regard as quite unrealistic."
Electrical distribution (Items 127 to 131)
Engine Control Room (Item 133)
Cargo Control Room (Item 141)
Electrical motors and auxiliary system and other equipment (Items 145 to 147, 152-156, 158-161, 164, 165, 167 and 174)
Agency Fees (Item 178)
System commissioning and sea trials (Item 182)
Workshop Design (Item 185)
"I mean, the cost of all of these things for all of those cases was high, very high in fact. The Class involvement in doing these drawing approvals – and the older the ship, the worse it gets – can be $100,000 on its own. Every system that's going to be recommissioned here, every drawing has to be redone, everything has to be approved, all of the new equipment that replaces obsolete equipment, or change of style, the insulation, the soundproofing, the anti-vibration, all of this stuff has to be re-approved by Class. So that's what goes into that, that and the planning, the procurement. Trying to find out where you can buy a similar engine or engine parts or boilers that need to be renewed, all of that stuff takes time and planning. I have included there in the planning things like Mr Paikopoulos, and myself to some extent, and other things, and all of these fees add up."
Replacement bunker fuel oil, diesel oil and luboil (Item 188)
Navigation/Safety Equipment (Item 193)
Accommodation (Item 206)
"Of this, some USD 1.5 million is the cost of modular cabin construction with bathrooms to be fitted with a constructed framework, USD 250,000 to construct and outfit the wheelhouse (excluding the cost of navigation equipment, USD 125,000 for the galley and USD 1.6 million for the internal build of partition and framework and all other spaces ..."
Painting (Item 212)
"Mr Smith submitted that some of these items, namely office expenses, costs for consulting and attendances, and adjusters' fees, would not have been recoverable from insurers, and so should not be brought into account when deciding whether the vessel was a CTL. This point was not expanded in submissions before me, and no authority was cited about it. On a simple reading of section 60 of the 1906 Act, the relevant costs are not defined by what would be recoverable from insurers: subject to the policy terms, in cases of damage to a ship what matters is "the cost of repairing the damage". The policies in this case referred to "the cost of recovery and/or repair of the vessel". However, my decision does not depend upon this point, and I do not determine it: it is better decided in a case in which there have been full submissions from the assured and the underwriters."
General Services (Items 225, 228-232, 238, 241, 243-245, 247-248, 253, 255-256, 258-259, 261, 263-264, 266-267, 269-270, 274-276)
Towage (Items 279-281 and 292)
"30 odd years of experience, most of it working for The Salvage Association, great lumps of it as a warranty surveyor. I know towing, I know ships, and I can tell you that to do a trip like this with a 125 tonne bollard pull in all of those miles of mostly adverse currents, is asking for trouble. If you were to look at the documents surrounding the tow to Pakistan, in that case with very light ballast, ballast suitable for beaching, they chose a smaller tug and they managed to achieve 3.5 knots as a voyage average over several days. That's not enough at sea. To do 3.5 knots between Khor Fakkan and China, you would be doing it for, I don't know, 69 days, 65 days, in that region. ... I'm telling you categorically to do that trip you need deep ballast. With a 125 tonne bollard pull with an average of seven to nine metres draught with a trim, you would be struggling to do four knots. It's not enough."
Stores and spares (Items 282 to 284)
Insurance (Item 285)
Site Team (Item 286)
"As stated above, owners' engineering, bidding processes, technical support, site team, procurement services and general input for repairs will cost in the region of USD 10,000 per man per month including expenses. Repairs in the Gulf would require 4 men for say 12 months in the best case and 18 months in the worst case totalling USD 0.5 million to USD 0.75 million…As stated above, repairs in China require more supervision and I would expect there to be 6 people totalling USD 0.9 million for 15 months in the best case and USD 1.2 million in the worst case on the basis of 20 months."
Removal of tailshaft (Item 290)
Conclusion on cost of repair in China
Additional costs in determining whether the vessel was a CTL
The "large margin" and conclusion on whether the vessel was a CTL
Have the owners lost the right to claim for a CTL?
The measure of indemnity recoverable for a partial loss
"Where a ship is damaged, but is not totally lost, the measure of indemnity, subject to any express provision in the policy, is as follows:—
(3) Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage, computed as above."
(A) Insured value less damaged market value.
(B) The proportion of the vessel's actual depreciation (sound less damaged market values) applied to the inured value.
(C) Actual depreciation in market value.
18 UNREPAIRED DAMAGE
18.1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the Vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs ...
Indemnity for Loss of Hire
"The purpose of the proviso is thus to enable the owners to recover for loss of hire resulting from damage during the currency of the policy, provided the repairs are carried out within 12 months of the expiry of the policy. This shows that the parties were contemplating loss of hire resulting from damage to the vessel, and the consequential need for repairs, as being the primary, and I would say only, cover afforded by the policy."
"The inference is, I think, irresistible that the parties chose the Hulls Clauses because they intended to limit recovery for loss of hire to cases where there had been loss of or damage to the vessel. This makes good commercial sense. Insurance against loss of hire irrespective of loss of or damage to the vessel would no doubt have cost more …
Although the words "risks enumerated in the Institute War and Strikes Clauses Hulls Time" may at first sight seem to indicate, and be confined to, the risks in the numbered sub-clauses, it is now accepted that the clause itself is incorporated at least to the extent that the risks are expressly made subject to the exclusions in cl. 4. Moreover there are other indications in the Jardine Glanvill wording which suggests that damage to the insured vessel is a prerequisite. I have in mind in particular provisos (a) and (c). Proviso (c) does not make grammatical sense as it stands. But it should presumably read:
Provided that . . . repairs if actually carried out in respect of damage are completed within twelve months of the expiry of this policy.
The purpose of the proviso is thus to enable the owners to recover for loss of hire resulting from damage during the currency of the policy, provided the repairs are carried out within 12 months of the expiry of the policy. This shows that the parties were contemplating loss of hire resulting from damage to the vessel, and the consequential need for repairs, as being the primary, and I would say only, cover afforded by the policy.
The learned Judge observed that the vessel would not be likely to be damaged by detention. This may be true. But detention is not the only risk covered. Other risks, such as war, mines, torpedoes, bombs and terrorist activity would all be very likely to cause damage to the vessel.
In summary I would hold that the parties deliberately chose the Hulls Clauses rather than the Freight Clauses, and that their purpose was to confine the loss of hire policy to loss of hire resulting from loss of or damage to the vessel."
Sue and labour
(1) The owners' proportion of the salvage award: U.S. $2,343,703.65;
(2) The cost of the various standby tugs from redelivery by the salvors on 7 October 2011 until the vessel was delivered to Aryana on 15 March 2012, as set out in - above, which total U.S. $7,526,805.44;
(3) Agency Fees and Disbursements paid to Archipelago in the sum of U.S.100,800.
(1) Whether upon the completion of the salvage services on 7 October 2011, it can be said that the peril covered by the war risks policy was still operating;
(2) Whether any sue and labour expenses are recoverable at all after the NOA on 7 December 2011 or once the claim form was issued on 8 February 2012.
Whether the peril was still operating
"Summarised, the facts seem to me to come to this. After the torpedo struck her she was a doomed ship, unless she could get to a real place of safety. She nearly got to a place of safety, but never quite did so. What happened was in the circumstances the natural sequel to the injury by the torpedo. Water was admitted, at first only so far."
"If by perils insured against the subject matter of insurance is brought into such danger that without unusual or extraordinary labour or expense a loss will very probably fall on the underwriters, and if the assured or his agents or servants exert unusual or extraordinary labour…[then the assured can recover such expense as sue and labour]"
"There is nothing in the clause or statute which requires the assured to show that a loss would 'very probably' have occurred. There have been very few cases on the effect of the sue and labour clause. I do not think that Lord Justice Brett was choosing words which were intended to be given almost statutory force and to lay down the elements which have to be proved before the assured can recover under the clause. He was dealing with a case where a loss would very probably have occurred and where underwriters would very probably have had to bear it…
Those words [of section 78 of the Act] seem to me to impose a duty to act in circumstances where a reasonable man intent upon preserving his property, as opposed to claiming upon insurers, would act. Whether or not the assured can recover should depend upon the reasonableness of his assessment of the situation and the action taken by him. It should not be possible for insurers to be able to contend that, upon an ultimate investigation and analysis of the facts, a loss, where possible or even probable, was not 'very probable'. As the right to recover expenses is a corollary to the duty to act, in my opinion, the assured should be entitled to recover all extraordinary expenses reasonably incurred by him where he can demonstrate that a prudent assured person, mindful of an obligation to prevent a loss, would incur expense of an unusual kind. In my opinion, this is the effect of the sue and labour clause ..."
"[he] emphasised…in giving the judgment of this Court, that the sue and labour clause is concerned with expenses incurred to avert or minimise loss by perils insured against which would very probably fall on the underwriters. The probability of loss is emphasised throughout the judgment."
The effect of the issue of the claim form
"I do not see why the making of a total loss claim should bring the right to sue and labour to an end. It does not in the marine context. The date of payment ushers in the right of subrogation. It might be said that at that date, if the right to sue and labour were still extant, it made way for the insurer's right of subrogation: but that point has not been pressed. The date of issue of a writ for a constructive total loss, however, is a familiar date in the case of marine insurance. Up to that date any recovery by an assured goes to reduce his claim, even though notice of abandonment has already been given; after that date any recovery does not reduce the claim: Polurrian Steamship Co. Ltd. v. Young,  1 K.B. 922 at pp. 927-928, Rickards v. Forestal Land, Timber and Railways Co. Ltd.,  A.C. 50 at pp. 84-85. That suggests that the date of issue of writ is a watershed in respect to not only the effect of recovery but also the right to sue and labour. Mr. Webb submitted that this was some irrelevant peculiarity of the concept of constructive total loss in marine insurance law. It seems to me, however, that if that were so, then the watershed date would be the date of notice of abandonment, rather than of issue of writ. In Ruys v. Royal Exchange Assurance Corporation,  2 QB 135 at p. 142 Mr. Justice Collins said:
'. . .and much might be said for the view suggested by Lord Eldon and adopted in the American and other systems, that the rights of the parties should be finally ascertained upon a proper abandonment. But, the object of litigation being to settle disputes, it is obvious that some date must be fixed upon when the respective rights of the parties may be finally ascertained, and the line of the writ may be regarded as a line of convenience which has been settled by uniform practice for at least seventy years . . .'
Moreover, in Roura & Forgas v. Townend,  1 K.B. 189 at pp. 195-196 Mr. Justice Roche gave as the reason for the rule the general one that "an assured cannot, under a contract of indemnity, recover in respect of a loss if before action it has been made good to him". Although that explanation has been criticised as being circular (see Arnould at par. 1178), it seems to me to emphasize the point made by Mr. Justice Collins that it is at the time of issue of proceedings that the rights of the parties must be viewed as crystallized. Since therefore recovery after action brought does not affect the total loss indemnity to which an assured is entitled as of that date, that also seems to me to be an appropriate date at which to find that an assured's right (and correlative duty under s. 78(4) of the MIA) comes to an end. In the present case that would be on July 30, 1991."
Points on quantum
(1) The vessel was a CTL and the claimants are entitled to an indemnity on that basis.
(2) The claimants are entitled to an indemnity in respect of salvage and in respect of standby tug costs and agents' fees until the date of issue of the claim form, 8 February 2012.