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melinda holdings sa v hellenic mutual war risks association (bermuda) ltd

Queen's Bench Division, High Court, United Kingdom.

Marine Insurance - arrest of vessel to secure Court dues – effect of suing and laboring clause - Whether loss was as a result of "ordinary judicial process" or "any financial cause of any nature"

The assured's vessel was covered for war risk by the defendant. The policy specifically excluded loss arising out of: ordinary judicial process; action taken for the purpose of enforcing or securing payment of a claim; or any financial cause of any nature. The vessel was arrested by the Egyptian authorities to secure "court dues" against the owners of another vessel which had been involved in a pollution incident. There was no connection between the two owners. Though the arrest was challenged in appeal, the vessel remained in Court Custody for two years, as a result of which it was treated as constructive total loss. But relying on the sue and labour clause the insurers denied liability.

The Court held that the insurers were liable for the reason that "court dues" did not constitute an "ordinary judicial process", but an extortion from an owner who had nothing to do with the original claim. The Court also found that there was no breach of the suing and labouring clause in as much as Melinda's Egyptian lawyers had acted with the appropriate diligence, in that an ordinarily competent Egyptian lawyer would not have acted differently.


Supreme Court of United Kingdom.

Marine Insurance Act, 1906 - Cargo insurance - Oil rig lost legs due to fatigue cracking - Whether loss due to perils of the sea – or the excluded peril of inherent vice – interpretation of Proximate cause of loss.

The Cendor MOPU, an Oil rig on its voyage from Texas to Malaysia lost its legs due to fatigue cracking caused by the repeated bending of the legs due to the motion of the barge. The rig was insured under I C C (A) against all risks, except inherent vice. The insurers asserted that the cause of the loss was either inherent vice or the inevitable consequence of the inability of the oil rig to withstand the voyage. The Supreme Court held that by the defense of inherent vice cannot be applied if the proximate cause of the loss is due to an external fortuitous act. In other words the defense of inherent vice can be raised only if the cause of loss emerge from within the subject matter.


Court of Appeal, United Kingdom.

Piracy - Vessel seized by pirates released on payment of Ransom - Whether it constitutes an actual total loss on seizure – Whether payment of Ransom is against Public Policy.

Two parcels of biodiesel, shipped on board the oil tanker Bunga Melati Dua, was insured under an open cover. The policy covered piracy, and excluded constructive total loss. The vessel, while en route from Malaysia to Rotterdam, was seized by Somali pirates and later released on payment of ransom. The insurers denied liability for the difference in the value of cargo. The Court of Appeal held that there was no rule of law that capture or seizure was automatically an actual total loss and that paying a ransom was not illegal and not contrary to public policy, and the law did not require the possibility of a ransom being paid to be disregarded.


Queen's Bench Division.

International Convention on Civil Liability for Bunker Oil Pollution Damages 2001:- Under the International Convention on Civil Liability for Bunker Oil Pollution Damages 2001 a vessel trading in the waters of states who are parties to the Convention must obtain liability insurance in respect of bunker oil pollution. The defendant, Steamship Mutual, a P&I Club, provided such cover to shipowner members, including the claimant. By virtue of a financial restriction imposed on Iran, prohibited transactions and business relationships with the claimant.

The Club terminated the agreement with the claimant and the very next day the vessel suffered a casualty which led to bunker pollution. The Club contended that the policy had been frustrated. The Court held that the license permitted the Club to continue to provide insurance cover under the Bunkers Convention to the claimant and the contract as a whole was not discharged by frustration.