A “WIN WIN” win: ship interests succeed in constructive total loss claim

This dispute arose out of a completely unintentional and unexpected traffic infringement by the Master of the M/V WIN WIN, while anchored like hundreds of other ships outside the port of Singapore in February 2019. What transpired was almost 18 months’ detention of the vessel and her crew by the Indonesian authorities and the Master’s prosecution and conviction – significantly more than a mere ‘slap on the wrist’. 

The Commercial Court, on 25 March 2024 (coincidentally a key date in the Greek calendar), handed down judgment in respect of claims arising from these events, made under a war risks policy for an indemnity for constructive total loss (CTL) of the vessel. In so doing, the Court found that these events constituted a war risk. 

The background facts

In February 2019, while waiting for her next fixture at OPL Singapore, the Master of the M/V WIN WIN unintendedly anchored the vessel just inside Indonesian territorial waters which border those of Singapore. That particular position had been chosen by the Master to ensure the vessel and crew’s safety, given the usual congestion at OPL Singapore and proximity of traffic along the busy nearby traffic separation scheme that runs between Singapore, Malaysia and Indonesia. 

What started as something akin to an accidental traffic infringement resulted in the vessel being detained by the Indonesian authorities and remaining in Indonesia for nearly 18 months until August 2020, during which time the Master was prosecuted and eventually convicted under the Indonesian Shipping Law.

As Mrs Justice Dias DBE in the Commercial Court put it as follows: 

“The layman might be forgiven for thinking that for an infringement of this nature the vessel would have been given a metaphorical slap on the stern and a parking fine, maybe with a discount for prompt payment, and send on her way.”

The issues and Commercial Court decision

Following the detention of the vessel for more than six months, after which it became a CTL under the relevant insurance policy’s Detainment Clause, the claimants brought a claim under the Policy. The defendant insurers denied the claim on four bases. All of these defences were rejected by Mrs Justice Dias, thereby answering her own question as to whether the vessel had been “appositely named” decisively in the affirmative.

In summary:

1. The defendant insurers alleged that the detention was not fortuitous since the Master and/or the claimants knew or should have known that the vessel had anchored in territorial waters and the arrest was the consequence of their voluntary conduct in so doing. The Court held, however, that these allegations had not been proven on the facts and, in any event, the arrest and subsequent detention of the vessel was not the ordinary consequence of voluntary conduct arising out of the ordinary incidents of trading.
    
2. The Policy included Exclusion (e) of the American Institute Hull War Risks and Strikes Clauses (1977), which excludes loss caused by, resulting from or incurred as a consequence of “Arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments not arising from actual or impending hostilities.” The defendants alleged that the arrest of the WIN WIN under the Indonesian Shipping Law was a similar arrest, restraint or detainment to one under customs or quarantine regulations.

   The Court rejected this defence, ruling in favour of the claimants’ proposed construction of the Exclusion, and finding on the facts that the detention was not “similar” to detentions under customs or quarantine regulations. 
    

3. The defendants alleged that the detention of the vessel in Indonesia was materially caused by the claimants’ unreasonable conduct in breach of their duty to sue and labour, suggesting that the claimants got side-tracked into discussions with the Navy, which ultimately led to a realisation that the Navy was seeking an illegal payment. This allegation in relation to the claimants’ conduct was firmly rejected by the Court, which ultimately concluded that the claimants “cannot be criticised for pursuing all lines of enquiry” to procure the release of the vessel. The Court also noted that there was no suggestion that the claimants had any intention of making an illegal payment, nor did they do so. 
    
4. The defendants alleged that the claimants breached the duty of fair presentation under the Insurance Act 2015 (2015 Act) by failing to disclose that the sole nominee director of the registered owner of the vessel was the subject of criminal charges in Greece. 

   The Court rejected this defence on the primary basis that the claimants did not have actual or constructive knowledge of the criminal charges. In so doing, the Court held that the director was not “senior management” for the purposes of section 4(3) of the 2015 Act. In any event, the defendants were held not to have been induced by the alleged non-disclosure. 

Therefore, the claimants’ claim for an indemnity under the war risks policy for the constructive total loss of the vessel succeeded in full. A separate claim for damages pursuant to section 13A of the 2015 Act was not allowed. However, the Court expressed serious doubts as to the reasonableness of the defendant insurers’ reliance on three out of the four defences above. 

Hill Dickinson has acted for the successful claimants in this case, who include: NICHOLAS G. MOUNDREAS SHIPPING S.A.; FML SHIP MANAGEMENT LTD; and THE NATIONAL BANK OF GREECE S.A. The claimants were represented by Maria Moisidou, Alexander Freeman and Harris Kouppas of our Piraeus office and supported by the vessel’s defence insurers (NorthStandard P & I Club). 

Peter MacDonald Eggers KC, Sandra Healy, Charlotte Payne and Sophie Hepburn of 7KBW appeared as counsel for the successful claimants.