SUEZ FORTUNE INVESTMENTS LTD and PIRAEUS BANK SA -v- TALBOT UNDERWRITING LTD and others

On 5-6 July 2011, the vessel “BRILLANTE VIRTUOSO” was taken by pirates off the coast of Aden, Yemen. The pirates ordered the vessel to proceed to Somalia, but after the vessel’s main engine stopped and could not be restarted, the pirates detonated an incendiary device in the vessel’s engine room. The explosion caused a fire which substantially damaged the vessel’s engine room, funnel casing and accommodation block.

The claimants (the vessel’s owner and mortgagee bank) claimed an indemnity for the constructive total loss, alternatively a partial loss, of the vessel under the war risks insurance policy issued by the defendant insurers. The policy incorporated the Institute War and Strikes Clauses - Hulls - Time (1983), as amended by the Violent Theft, Piracy and Barratry Extension.

The court directed that issues of quantum (whether the vessel was a CTL, the measure of indemnity for a partial loss and the recovery of sue and labour expenses) be tried first (Stage One) before issues of liability (based on an alleged breach of warranty) are tried (Stage Two).

After a four week trial of the Stage One issues during November and December 2014, the Commercial Court (Flaux, J) made the following findings on 15 January 2015, namely that subject to the defences and issues to be determined at the Stage Two trial:

  1. The vessel was a CTL and the claimants are entitled to an indemnity for US$76,328,000. The court laid down the principles to be applied to the determination of whether a vessel is a CTL caused by damage.
  2. The claimants are entitled to reimbursement of the costs of salvage and other sue and labour expenses. The court explained the principles applicable to determine the recovery of sue and labour expenses.

As a result of these findings, the issues relating to partial loss did not arise. Nevertheless, the court held that, if the vessel had been a partial loss, the claimants would have been entitled not only to an indemnity for a partial loss and for sue and labour expenses, but also to an indemnity against Loss of Hire under the LPO454 wording.