Elafonissos Fishing and Shipping Company v Aigaion Insurance Company SA

This is a claim by the owners of the fishing vessel “AGIOS SPYRIDON” for damages or an indemnity under a policy of insurance dated 17 August 2006 underwritten by the defendant insurance company. The claim is in respect of damage suffered by the vessel in the port of Mahajanga (otherwise spelled Majunga), Madagascar, on Christmas Day, 2006, when a cyclone struck the port. The defendant denies liability and says that the claimant is in breach of warranty. It puts the claimant to proof that the loss occurred, that it was caused by an insured peril, and it has incurred and paid the sums claimed by it and that those sums were reasonably incurred. The other issues are as to the settlement by the claimant of a salvage claim, and a counterclaim for breach of an exclusive jurisdiction clause in the policy.

It is necessary to say something about the course of these proceedings, which were issued on 6 January 2011. It is a small claim in monetary terms, and doubtless with that in mind, at the CMC on 7 October 2011, Burton J ordered that if the defendant wished to advance a positive case that any of the sums claimed were not caused by an insured peril or were unreasonable, it would amend its Defence accordingly, together with an expert report in support, no later than 3 February 2012. Shortly before trial, the defendant confirmed that it did not put forward a positive case, though it did put the claimant to “strict proof”. An issue at trial has been whether in the conduct of its defence the defendant has stepped outside the terms of the order.

The other point goes to the defendant’s breach of warranty claim. Relatively close to trial, the defendant sought permission to amend its case in this respect. Permission was largely refused by Gloster J on 4 April 2004 on the basis that the amendments stood no realistic prospect of success. Parts of the witness statement of a marine surveyor, Mr Dimitrios Kardiakopoulos, in support of the proposed amendment, were ruled inadmissible. At trial, there was a dispute as regards the admissibility of the remainder.

The trial itself was conducted with admirable economy by the parties over two days. The claimant adduced statements from seven factual witnesses. None of these were called to give oral evidence, Civil Evidence Act notices being served shortly before trial. The defendant adduced factual evidence from one witness, and again a Civil Evidence Act notice was served shortly before trial. It called Mr Kardiakopoulos, though his status as an expert witness (as opposed to a factual witness) was in dispute. The only other witnesses called at trial were Greek lawyers, Mr Christos E Stefas (for the claimant), and Mr Miltiades Papangelis (for the defendant). Their evidence concerned Greek law in connection with the settlement of the salvage claim.

The defendant laid considerable emphasis on the fact that the claimant did not call factual evidence at trial, tendering the evidence under the Civil Evidence Act. The defendant would, it was contended, have had many issues to put to these witnesses in cross-examination (though the claimant pointed out that there was no application for permission to cross-examine under CPR r.33.4.) The claimant justified the fact that oral evidence was not called on the basis that the witnesses were in Madagascar or Greece, one had left the claimant’s employment, the low value of the claim, the fact that the nature of the defendant’s case as to breach of warranty has been the subject of change, and the absence of a positive case by the defendant on the claim (as opposed to the warranty defence).

There is in my view some force in these points, and some (but not all) of the evidence in the witness statements is relatively marginal. On the other hand, there are issues that could have been clarified by oral evidence and cross-examination. I have approached this issue as follows. I accept the defendant’s submission to the extent that only limited weight can be given to the Civil Evidence Act statements (on both sides), save where the evidence is supported in the documents. However, I reject the submission that no weight should be given to them. Applying the considerations set out in s.4 Civil Evidence Act 1995, I consider that some limited weight should be given to these statements. In any case, the facts can largely be established from the documents, and that has been the main source of my findings, which are as follows.

The “AGIOS SPYRIDON” is a fishing vessel which was classed with the Hellenic Register of Shipping (“HRS”). It was one of a number operating out of the port of Mahajanga in Madagascar, under an agreement with a charterer called Pechexport SA, by which Pechexport would buy the shrimps caught by the vessel, and would deduct from the purchase price the costs incurred in operating the vessel. The fishing season ends at the beginning of November until the end of February, during which time vessels are laid up. This period coincides with the cyclone season.

The policy was for a period of a year from 1400 hours on the 11 August 2006 to 1400 hours on the 11 August 2007. In consideration of a premium of €14,550, the defendant agreed to insure the vessel with an insured value of €450,000. The policy contained the following warranties of which the second is at issue:

“TRADING: WARRANTED TRADING FROM 15/3/06 UNTIL 31/10/06 B.D.I. [both dates inclusive] IN TERRITORIAL WATERS OF MADAGASCAR; NOT NORTH OF MAHAJANGA, NOT SOUTH OF TOULEAR.

WARRANTED LAID UP FROM 1/11/06 UNTIL 28/2/07 B.D.I. IN PORT OF MAHAJANGA, BUT LIBERTY TO CARRY OUT ONE ROUND TRIP TO DIEGO SOARES (DURING THE LAY UP PERIOD) FOR DRYDOCKING ETC.

So far as material, it also contained the following conditions:

The Institute Fishing Vessel clauses 20.7.87 referred to here provide so far as material:

“6.

PERILS

6.1

This insurance covers loss of or damage to the subject-matter insured caused by

6.1.1

perils of the seas...

6.1.7

contact with … dock or harbour equipment or installation

On the 13 October 2006, Pechexport wrote to the director of the port of Mahajanga, providing to him its plan of organisation for the lay-up in the anchorage of the port of its fishing vessels (including the “AGIOS SPYRIDON”) between the 1 November 2006 and the 28 February 2007. The plan is stated to be “in accordance with the regulations and taking into consideration the requirements of the port”. It states that there will be no maintenance work or repairs during this period, and that a minimum crew will be kept for security reasons, namely, a captain, an engineer, and two crew members. The reference in this document to “regulations” is relied on in the defendant’s breach of warranty claim.

On 27 October 2006, in compliance with Madagascan law, the vessel discharged its fishing equipment which went into store until the start of the new season.

The logbook for 2 November 2006 shows the vessel steaming to anchorage, and the completion of anchoring. It says that the master and chief engineer together with the skeleton crew of “eight foreign crew members” remain on board for the vessel’s safety and various works. The entries in the log book end on this day.

By 21 December, the claimant knew of the imminent arrival of cyclone Bondo on 25 December. According to his witness statement,Mr George Molfetas (Pechexport’s technical director) agreed that six more crew should be placed on board the vessel.

There are two stamped documents which contain an account of what happened, namely a statement of facts from a vessel called the “SAINT RAPHAEL”, and an incident report from the “AGIOS SPYRIDON” signed by Mr Ioannis Kapsalis, the chief engineer. According to the latter, the cyclone struck at around 1430 hours. At about 1515 hours, the vessel started to drift towards the port. Mr Kapsalis tried to communicate with the local authorities by VHF to ask for help. The vessel hit the quay initially on the prow, and then repeatedly on the port side. There was no response until at about 1630 hours when the “SAINT RAPHAEL” came to its assistance, and a line was attached between the vessels. This vessel was eventually able to pull her off the quay. The weather started to improve, and according to the statement of facts, the manoeuvres were completed and both vessels were all fast by 1845 hours.

The defendant submitted that there were aspects of this account which called for cross-examination, including the fact that the HRS surveyor, Mr Constantinos Dounis, said in his report that he was informed by the owners that the vessel was “berthed alongside to the container pier” at the time of the incident. I accept that the matter is not beyond doubt, but though these two documents are not dated I think it was accepted at trial that they were contemporary. In any case, in my view they provide the best available evidence of what happened, and broadly I accept them as such.

There is (as the defendant said) a lack of clarity in the evidence as to crew on board. The defendant ran a case that there was nobody on board when the cyclone struck. But this was based on a word in the salvage claim brought by the owners of the “SAINT RAPHAEL” in the Piraeus court wrongly translated into English as “unmanned” (something which the Greek lawyers confirmed in their oral evidence). In closing submissions, the defendant could only go as far as saying that it did “… not abandon the ‘unmanned’ point. They realistically accept that there is evidence both ways and it is for the Court to weigh the totality of the evidence”. Taking into account the alarm signal sent from the “AGIOS SPYRIDON”, and the fact that a rope was tied up on the vessel, on balance I am satisfied that it was manned (as he says in his statement) by the chief engineer, Mr Kapsalis, and at least two other crew members. Mr Kapsalis says that the captain was also on board, but the captain himself has not given a statement, and I cannot be satisfied that he was on board on the available evidence.

The defendant also submitted that it is plain that the crew was doing work on the engine at the time, and that the engine was not working, otherwise the vessel could have steamed its way out of trouble. The defendant’s case in this respect was supported by the evidence of Mr Kardiakopoulos, whose evidence was a deduction from the fact that the log book entries for the beginning of November refer to maintenance works being carried out on board the vessel. In so far as it remained in dispute, I consider that in this respect his evidence did just qualify as expert evidence. The defendant also pointed to earlier entries in the log book to show that at the end of the previous lay up (at the beginning of 2006) the crew did repair and maintenance work at that time. It was contended further that the fact that the vessel was about to undergo not just her annual machinery survey but also her intermediate machinery survey, made such work more likely. The claimant on the other hand was unable to say one way or the other whether the engine was operational. However, it did point out that even if maintenance works were being carried out, it does not follow that the engine was not operational.

The issue as to whether or not the engine was working is relevant to the breach of warranty claim, where the burden is on the defendant. I accept that there is some substance in the defendant’s points in this respect. However there is nothing substantial that can be said to establish the point. The claimant suggested that had this issue been raised earlier, it might have been able to provide further clarification. In any case, the state of the engine at the time of the cyclone seems to me to be largely a matter of speculation, and I do not find this point established on the facts one way or the other.

After the incident, the claimant arranged for the towage of the vessel to Diego Suarez in the North of Madagascar for repairs. The defendant asked that Mr Dounis (of HRS) also report to underwriters as regards the incident. His survey was carried out between 21 and 22 January 2007. The vessel arrived in Diego Suarez on 30 January 2007, repairs being carried out at the SECREN dockyard. Afterwards, a class survey was carried out by Mr Dounis at the beginning of March 2007.

Adjusters in the form of the London International Average Adjusters were appointed by the claimant. Comments were made by the defendant’s surveyors (a firm called P&P Marine Consultants Inc). An adjustment in the final sum of €270,127.07 prepared by Mr Bramwell (a member of the Association of Average Adjusters) was presented to the defendant on 7 January 2009. However, though discussions continued for some time, no payment was made by the defendant insurer.

Then, in circumstances which I shall subsequently explain, on the 24 June 2009, the owners of the “SAINT RAPHAEL” commenced salvage proceedings against the claimant in the Piraeus Single Member Court of First Instance, claiming €40,000 plus interest and costs.

The defendant accepts that the vessel was undoubtedly within port limits when the cyclone struck, and that it is likely that some damage was suffered by it, but otherwise puts the claimant to proof of the damage and its cause. The starboard shell plating and the tailshaft and propeller are the main items identified by the defendant as not caused by the incident. For reasons I have explained, the defendant was not entitled to put forward a positive case (this does not apply to the claim in respect of the salvage claim of the “SAINT RAPHAEL” which I deal with separately).

I begin by stating that there is no doubt on the evidence that the vessel suffered extensive damage caused by repeated contact with the quay during the cyclone. It was not in dispute at the trial that the damage was caused by insured perils, namely “collision and/or contact with all objects” (the quayside in Mahajanga), “grounding, stranding and/or striking the ground”and/or perils of the sea.

The damage is clearly demonstrated in the contemporary photographs, as Mr Hill QC for the defendant acknowledged. It is correct that the contact damage appears most obviously on the port side of the hull. As to the more limited damage to the prow and starboard side, the claimant points to the fact that in the last survey ten months before the cyclone carried out by HRS, the condition of the hull attracted no remarks. The report of Mr Dounis dated 6 February 2007 together with the attached drawing refers to damage which includes the prow and starboard side. As class, Mr Dounis was not prepared to advise on causation, and in his witness statement he says that he is not in a position to confirm that all the damage he describes in his report was consistent with contact damage or was caused during the incident. The defendant highlights this omission. However, Mr Dounis does confirm that all of the damages described in his report were of the same age. The latter point goes a considerable way to make up for the omission, and on balance, I am satisfied that all the hull damage was caused by impact during the cyclone.

According to a conversation in February 2011 reported by Mr Kardiakopoulos, Mr Dounis said that the tailshaft and propeller had nothing to do with the damage to the vessel during the cyclone. However, a contemporary dive survey report of 24 January 2007 appears to contradict this, referring to damage to the propeller “caused by the to and fro impact in the Mahajanga Bay during cyclone Bondo” and to the rudder being displaced. In cross-examination, Mr Kardiakopoulos appeared to accept that Mr Dounis did not have the diving report before him when they met, and since the report was made some four years earlier, he may simply have overlooked it. The amount of damage under this head is in any case small (€5,655.58). On balance, I accept that this damage was also caused by the cyclone.

The sums claimed are in respect of repairs to the damage set out in the report of Mr Dounis. The invoices concerned are referred to in the Adjustment, and I am satisfied that they were scrutinised by the adjusters. The Adjustment disallowed €66,861.79 of the total invoiced sums. The total claimed is €270,127.06 for the cost of repairs and adjuster’s fees and expenses. It includes VAT, which is shown separately in the adjustment because (as I accept) it is not recoverable under the law of Madagascar.

The evidence indicates that the adjusters provided the defendant’s surveyors P & P Marine with documents and invoices relating to the casualty for consideration and approval, and that the final amount reflected their points. There is an email from the adjusters to the owner’s agent of 26 May 2009 which says that P & P Marine “are adamant that after careful examination of all relevant reports, information and documents provided, all damages described and repaired as per SECREN invoices are due to a single incident namely contact damage on 25.12.06”.

As the defendant pointed out, an adjuster’s report is an expression of opinion, rather than a conclusive statement of every aspect of liability (The Zeus [1993] 2 Ll. Rep. 497). But the claimant does not rely on it as conclusive. It relies on it as part of the evidence in the case, in circumstances in which there is no positive case to the contrary.

The defendant accepted in oral submissions that by far the largest part of the claim, that is, SECREN’s invoices for hull, rudder and propeller repairs in dry dock (repairs which I have found were caused by the incident) were paid. Various other points were conceded. Remaining points taken by the defendant were as follows:

In reaching the above conclusions, I have kept in mind that though (as Mr Hill QC said) the burden of proof was not reversed by the order made by Burton J, the defendant came close to putting a positive case in respect of the disputed items notwithstanding the terms of the order. A consequence, Mr Michael Nolan, counsel for the claimant submitted, was that the claimant did not have proper notice of the points that were taken, so as to enable it to meet them factually. In fact, I consider that Mr Nolan did convincingly respond in a detailed counter-schedule served during the trial, and it was not necessary to give the claimant the benefit of the doubt on the basis that it had lacked a proper opportunity to meet the points taken against it. For these reasons, I am satisfied that the claimant has proved on the balance of probabilities that the damage recorded in the Adjustment was caused by the vessel colliding with the quayside during the cyclone, that the figures as set out in the adjustment were reasonable, and save as indicated above, that the amounts in question were paid.

In the light of the facts as I have found them, a claim for salvage by the “SAINT RAPHAEL” would reflect the fact that the vessel towed the “AGIOS SPYRIDON” to safety. As I understand it, the defendant accepted in the course of argument that the sums claimed in this respect were recoverable in principle under the policy as a claim for a loss caused by an insured peril, or pursuant to clause 10 of the Institute Fishing Vessel clauses.

What is said by the defendant is that there is no factual basis made out for such a claim. It is necessary therefore to examine its basis. It is not in dispute that a claim has been brought by the owners of the “SAINT RAPHAEL” in the Piraeus court against the claimant. It is there alleged that: “Following discussions and negotiations in order to avoid court disputes, the defendant agreed to pay us immediately the amount of €40,000 and we would negotiate the remaining amount of our claim based on our aforementioned position, following the arrangements between the defendant and its insurers.”

However, this is not evidence. The only evidence relied on is the witness statement of Mr George Molfetas (Pechexport’s technical director) tendered under the Civil Evidence Act (he is said to be in Madagascar). It was, therefore, not subject to cross-examination. He says in his statement that payment of the sum of €40,000 was made on 16 January 2007.

Such a payment (in the currency of Madagascar) is recorded in the Pechexport/Owners statement of account. The defendant does not accept the genuineness of this document, but as the claimant said, it did not comply with the Admiralty & Commercial Court Guide in that respect (E5.1 (a) provides that, “Where the authenticity of any document disclosed to a party is not admitted, that party must serve notice that the document must be proved at trial in accordance with CPR 32.19. Such notice must be served by the latest date for serving witness statements or within 7 days of disclosure of the document, whichever is later”).

Mr Molfetas’ witness statement says that after the payment on 16 January 2007, an agreement was subsequently made to pay “an additional amount of up to €40,000.”In the Piraeus action, the owners of the “SAINT RAPHAEL” allege however that the agreed settlement was for a lump sum of a further €40,000.

The defendant refers in its closing submissions to the “remarkable case put forward by the Claimants, namely they rushed to settle the claim for Euros 40,000 21 days after the incident without taking legal advice, without informing underwriters and seeking their approval and then, apparently, subsequently agreed to pay some more! The Court is asked to note that on 4 January 2007 the Claimants asked the Defendant underwriters to approve the cost of towage (Euros 37,500) before it was incurred. But apparently did not see fit to seek underwriters’ approval to settle a salvage claim in the sum of Euros 80,000 or Euros 40,000 on 16 January 2007. Why? Because the settlement did not happen and the payment was not made.” That substantially summarises its case.

My conclusion is as follows. The circumstances of the incident as I have found them appear to justify a claim for salvage by the owners of the “SAINT RAPHAEL”. So to that extent, I accept that the claim has substance, and I also accept that the context of the claim, involving the rescue of a fishing vessel in a port in Madagascar, cannot necessarily be expected to have generated much formality. However, the claimant still has to prove its case in this regard, which is essentially based on an agreement said to have been reached with the owners of the “SAINT RAPHAEL”.

Only limited weight can be given to the statement of Mr Molfetas, since he did not testify in person. In any case, it is noticeable that even in his statement, the agreement is entirely un-particularised. Although the statement of account with Pechexport shows on its face a debit of €40,000 on 16 January 2007, and I accept the authenticity of the document, this does not unequivocally establish payment or liability, particularly since Pechexport appears to have a relationship with both vessels (see the address given on the witness statement of the Captain of the “SAINT RAPHAEL”). Furthermore, no explanation has been given as to why the insurers were not asked for their agreement to the asserted payment of €40,000, nor why there should have been an agreement to pay a further (on the claimant’s case) unspecified sum. Unlike the repairs claim, this claim was not intermediated through a third party, so there is no element of outside scrutiny. On balance, I do not consider that the claimant has proved its case as to the agreement said to have been reached with the owners of the “SAINT RAPHAEL”.

Strictly speaking therefore, the further question, that is, whether it was reasonable for the claimant to settle, and whether settlement in the sum of €40,000 and up to a further €40,000 was reasonable (see as to the applicable test The Krapanj [1999] 1 Ll.Rep. 688 at 692), does not arise. I should however express my conclusions briefly.

This issue was the subject of expert evidence from Greek lawyers, Mr Christos E Stefas (for the claimant), and Mr Miltiades Papangelis (for the defendant), both of whom are very experienced in the field of maritime law. In the opinion of Mr Stefas, the award would be 30 to 35% of the salved value of the vessel (agreed for these purposes as €201,000). In the opinion of Mr Papangelis, the award would be no more than €30,000 and the possibility of an award of €25,000 to €20,000 could not be excluded.

Both experts cited the jurisprudence of the Piraeus court. It is plain that decisions are (as one would expect) entirely dependent on the facts of each case. I think that Mr Stefas accepted that the level of awards by the court can be considered low. In fact, only one decision could be found where there was an award of more than 20%, and that was a low value claim where there was an award of €20,000 in respect of a yacht with a salved value of €60,000. On balance I prefer the evidence of Mr Papangelis on this point. Even taking account of the desirability of a settlement so as to avoid incurring legal costs, I am not satisfied that a settlement of up to €80,000 was reasonable.

There are two other points to mention. First, in so far as it remains a live issue, I do not consider that the possibility of apportionment as between owner, master and crew is relevant.

Second, the issue of limitation is canvassed in the expert evidence, since a two year time bar may apply under the 1989 Convention, which Greece has ratified. According to the writ, “the defendant declared an extension of the time limit in July 2008”.

On the second day of the trial, the claimant sought to put in a further witness statement from Eirini K. Lagoudaki, who is the Greek lawyer who acted for the claimant in relation to the salvage proceedings. It is said that, “In July 2008 my clients agreed a time extension for the filing of the claim until the end of July 2009”. The defendant objected to the late production of this evidence, with justification in my view. I need make no findings in this regard, but note the absence of any particulars as to how this agreement was entered into. The lack of detail tends, in my view, to support a conclusion that the claimant has not made good made its case in relation to the salvage claim generally.

As I have mentioned, the defendant did not get permission to amend its breach of warranty defence as it wanted. Its remaining warranty case (supported by the evidence of Mr Kardiakopoulos and the witness statement of Mr Panagiotis Kounoupas, a Senior Underwriter of the defendant served under the Civil Evidence Act) is that:

In the course of submissions, the defendant sought to read in the term “requirements” in place of “port regulations”, but I do not think that it can depart from its pleaded case in this respect. The term “port regulations” is intended, I have no doubt, to refer to regulations in written form. In any case, I reject the suggestion that was made in argument that even oral requirements should count for these purposes. A warranty in such terms would be unworkable.

As explained above, on balance I am satisfied that at the time of the cyclone the vessel was manned (as he says in his statement) by the chief engineer, Mr Kapsalis, and at least two other crew members. Mr Kapsalis says that the captain was also on board, but the captain himself has not given a statement, and I cannot be satisfied that he was on board on the available evidence. I have found that the state of the engine at the time of the cyclone is largely a matter of speculation, and have not found this point established one way or the other. So except for the absence of the captain, the defendants have not made out their factual case.

There is a further factual obstacle in this respect. Although one might expect there to be port regulations, and the Pechexport letter of 13 October 2006 to the director of the port of Mahajanga refers to such regulations, no regulations have been produced. This is not simply a gap in the evidence, because according to a “questionnaire” answered by the present harbourmaster, a surveyor instructed by the defendant, Ms Daria Cabai, a consultant naval architect working for Braemar, attended the port between the 29 January and 1 February 2012 and asked him about the 2006 lay-up procedures and requirements of the port along with details of the lay-up location in the closed season. He says that he provided to her the information provided in his statement, which is that, “There are no written regulations governing the lay-up of vessels at the port of Mahajanga”. The defendant points out that answers to a “questionnaire” do not constitute evidence, which is correct. Nevertheless, the defendant was not prepared to shed any light on the investigations which it made (clearly with a view to the trial), and I infer that it has looked for regulations, but has not found any.

The position therefore is that the defendant has not established the factual basis for its breach of warranty case. In any event, I reject the asserted warranty as a matter of law. The express warranty in the policy was that the vessel would be “laid up from 1/11/06 until 28/2/07 … in Port of Mahajanga”. This warranty was not breached. As Mr Nolan submitted, in my view rightly, because of the potentially draconian effects of the breach of promissory warranties (i.e. that breach discharges the insurer as from the moment of breach regardless of whether the breach causes or contributes to the loss), they will be construed narrowly. There is no basis for the implication of further requirements as to compliance with the port regulations, as the defendant contends. If underwriters wanted such protection, then it was up to them to stipulate for it in clear terms (c.f. Hussain v Brown [1996] 1 Ll. Rep. 627 at 630, Saville LJ, and The “Resolute” [2009] 1 Ll. Rep. 225 at 229, Sir Anthony Clarke MR).

There is a counterclaim based on an alleged breach of the exclusive English jurisdiction clause in the policy. On the 8 July 2009, before the commencement of the present proceedings, the claimant joined the defendant to the proceedings brought against them by the owners of the “SAINT RAPHAEL” in the Piraeus court. On the 23 September 2011, an objection was made on the part of the defendant, and on 7 October 2011, the Piraeus proceedings were withdrawn.

This may well have been a breach of the exclusive jurisdiction clause, but the issue is whether there was any loss. Documents were produced by the defendant for the first time during closing submissions apparently showing legal fees incurred totalling €5,970.85. Mr Nolan sent written submissions after the trial ended to the effect that the fees incurred were hard to match with the relevant events, and that although the documents refer to “legal professional charges in this matter for services rendered as per the attached narrative”, no narrative is attached. This appears to be correct, but in any case, I find that the defendant has not proved its loss, or indeed any loss. The counterclaim must be dismissed.

The claimant succeeds on its claim except as regards the claim in respect of the salvage claim. No loss has been proved in respect of the counterclaim, which is dismissed. I am grateful to the parties for their assistance, and will hear them as to any directions consequential on this judgment.