Court of Appeal upholds decision that ship insurers required to pay out after vessel detained by Indonesian navy for six months

About this case:

• Citation:
  [2025] EWCA Civ 1019
• Judgment:
  External link
• Court:
  England and Wales Court of Appeal
• Judge:
  Lord Justice Males

Delos Shipholding and three other claimants raised a commercial action against SA Allianz Global Corporate and Speciality SE and five other insurers, which had provided cover for the vessel since 2008. The appellants contended that the High Court judge erred in her interpretation of the duty of fair presentation under the Insurance Act 2015, and that the vessel’s loss was excluded from cover as a result of detainment under customs or quarantine regulations

The appeal was heard by Lady Justice Asplin, Lord Justice Males, and Lord Justice Popplewell. Philippa Hopkins KC, David Walsh KC and Lorraine Aboagye appeared for the appellants, and Peter MacDonald Eggers KC, Sandra Healy and Sophie Hepburn appeared for the respondents.

Part of policy change

The first respondent, a company registered in the Marshall Islands with Mr Evangelos Bairactaris as a its sole nominee director, owned a Capesize bulk carrier, the Win Win. The Win Win was managed by the NGM group of companies controlled by Mr Nikolaos Moundreas and his family. The vessel’s war risks insurance had been placed with a Paris-based underwriting agency, GAREX, which underwrote for a pool of insurers including the appellants.

In late 2018, the Win Win was ordered to sail from China, where it had just unloaded its cargo, to Singapore outside port limits, where she was to find safe anchorage and await further instructions. The area in which she dropped anchor formed part of Indonesian waters and prior to February 2019 had been used by many vessels without issue. However, after that time the Indonesian navy began arresting large numbers of ships for anchoring without permission, and the Win Win was one such vessel that was boarded and detained.

It became apparent that the vessel would not be released without the payment of a bribe, which the respondents were not willing to do, resulting in the continued detention of the vessel until January 2020. Due to Covid-19, she did not leave Indonesian waters until August 2020. Under the Win Win’s war risks policy, the vessel was to be considered a constructive total loss if detained for a six-month period.

The High Court judge concluded that the vessel had been detained lawfully under Indonesian law and that the detention occurred as part of a policy change intended to strengthen the country’s sovereignty over its waters. She concluded that there was no sufficient similarity between this detention and Indonesia’s customs and quarantine laws as to engage the exclusion relied upon by the appellants. On appeal, the appellants submitted that the exclusion should be construed as including all detentions under ordinary peacetime laws. Customs and quarantine were merely examples of the kind of regulations dealt with by the exclusion.

It was also argued that the respondents had breached the duty of fair presentation of risk in light of a failure to disclose during a policy renewal in 2018 that criminal charges were brought against Mr Bairactaris as part of a drug trafficking prosecution against Mr Moundreas. While the charges had since been discontinued, the fact of their existence was a material circumstance which ought to have been disclosed to the appellants and entitled them to avoid the policy.

As straightforward as that

In an opinion with which the other judges agreed, Males LJ said of the wording of the exclusion: “Exclusion 1(e) is concerned with ‘arrest, restraint or detainment under customs or quarantine regulations and similar arrests, restraints or detainments’. As a matter of strict language it might be said that it is the arrest, restraint or detainment which has to be similar to an arrest, restraint or detainment under customs or quarantine regulations, but as all arrests are similar in that they place a vessel under the control of the arresting state, it is clear that the similarity with which the clause is concerned is whether the regulation under which the arrest is effected is similar to, or has a similar purpose to, a customs or quarantine regulation.”

He added: “[The arrest] was completely unconnected with the import of goods (the vessel was in ballast) and with health (there was no question of any cargo being infected, as there was none, and no suggestion of any member of the crew having any disease) and there was no suggestion that the crew was engaged in smuggling. The point is really as straightforward as that.”

Considering the fair presentation argument, Males LJ noted: “The judge said that the use of special purpose vehicles with nominee directors was a common arrangement in the shipping industry and that, in any transaction involving Delos, the participants would have regarded themselves as dealing with the NGM Group rather than focusing on the specific company or its directors. Accordingly Mr Bairactaris could not in any way be regarded as the visible or public face of Delos.”

He concluded: “Having regard to the fact that he had no operational role or function regarding the trading of the vessel and her insurance, the judge considered that he would not have known anything about the risk to be insured and that this would reasonably have been regarded as a pointless question. This was, in my judgment, a conclusion which the judge was entitled to reach.”

The appeal was accordingly dismissed.