Commercial Disputes Weekly – Issue 19023 January 2024

Maritime
The MT Polar was seized by pirates in the Gulf of Aden. The shipowner paid a ransom of US$7.7m. Cargo interests refused to pay their General Average contribution to the shipowner’s expenses on the basis that the shipowner should recover the ransom payment from the additional insurance cover taken out in relation to the risks of sailing in a high risk area, which had been paid for by the charterer. The Supreme Court held in favour of the shipowner, thus overturning the conclusion of the arbitral tribunal but upholding the decisions of the lower courts. As a matter of interpretation of the contract, there was no complete insurance code agreed in the charter – the terms of this voyage charter were materially different to those of time charters in respect of which such a code had been found. The parties could have expressly provided that there were no rights of recovery or subrogation but had not done so. The Supreme Court held further that had there been such a code, it would have been incorporated into the bills of lading, as those parts of the war risks clauses concerning payment of insurance premia are directly relevant to the route to be taken by the vessel and therefore are directly relevant to the carriage. However, the additional insurance premium was paid by the charterer, not on behalf of cargo interests, so the shipowner would not have been precluded from claiming for such losses against the cargo interests/bill of lading holders.
Herculito Maritime Ltd and others v Gunvor International BV and others [2024] UKSC 2, 17 January 2024

Insurance – Covid-19
The dispute concerned the applicable limits under a business interruption insurance policy arising from whether there had been a single or multiple occurrences. The Court of Appeal upheld the lower court’s conclusion that the initial human infections in China constituted a single occurrence but that it was too remote from the business losses to be relevant. The meaningful explanation for the company’s losses was the later UK Government response concerning closure of social venues and related restrictions. The court rejected the company’s argument that limits under the policy should be applied on a ‘per location’ basis as it was not consistent with the terms of the policy.
Various Eateries Trading Ltd (formerly Strada Trading Ltd) v Allianz Insurance Plc [2024] EWCA Civ 10, 16 January 2024

Adjudication – Jurisdiction
When a dispute arose in relation to a PFI project, the project company (Lancashire) commenced proceedings against the building contractor and the contracting authority (the “Authority”). The Authority applied to set aside service of the claim form on the basis that there was a mandatory contractual requirement under clause 68 of the project agreement that disputes must first be referred to adjudication before litigation was commenced. No adjudication had taken place. The court held that on a proper construction of clause 68, the parties had clearly agreed that before one party may start legal proceedings against the other, it must first have adjudicated the dispute. However, the court had a discretion whether to order a stay of proceedings or other relief and chose not to do so. Among the reasons given were the facts that the adjudication would not be dealing with a short point of construction and any resolution would need the input of the other parties, who would not be party to the adjudication.
Lancashire Schools SPC Phase 2 Ltd (formerly Catalyst Education (Lancashire) Phase 2 Ltd) v Lendlease Construction (Europe) Ltd (formerly Bovis Lend Lease Ltd) [2024] EWHC 37 (TCC), 12 January 2024

Assignment
The sale contract for two aircraft contained a clause prohibiting assignment or transfer of the sale contract to any third party without the prior written consent of the other party and that any attempted assignment would be null and void. The aircraft purchaser also took out an insurance policy to protect against delivery of the aircraft being delayed and the purchaser incurring losses to its sub-purchaser. The policy was governed by Japanese law, which provides that if an insurer makes an insurance proceeds payment, it would, by operation of law, be subrogated to the rights held by the insured against the other person. The aircraft was delayed, the insurer paid out and then commenced arbitration under the sale contract against the aircraft seller. The Court of Appeal held that the tribunal did have jurisdiction over the dispute. The non-assignment clause only prohibited transfers effected by a party, not by the operation of law.
Dassault Aviation SA v Mitsui Sumitomo Insurance Co Ltd [2024] EWCA Civ 5, 12 January 2024

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: