Hull underwriters have again failed in an attempt to recover a $22m payout for a fraudulent claim in the case of a scuttled bulker.
The UK court of appeal turned down a bid by insurers led by Aspen Underwriting to recover money it paid to settle the total loss of the 27,209-dwt geared bulker Atlantik Confidence (built 1996) in the Gulf of Aden in 2013, although it was deliberately sunk by the master and chief engineer on the instructions of Turkish shipowner Ahmet Ali Agaoglu.
Most of the settlement was used to discharge mortgages and other debts of Agaoglu to the Netherlands-based, Turkish-owned Credit Europe Bank.
Aspen had sought to recover the payout last year, but the UK commercial court rejected this.
The appeal sought to challenge the ruling and recover money paid to the shipowner and Credit Europe Bank.
Nuanced judgement
A jurisdictional dispute developed with the bank, the third defendant after Kairos Shipping, the one-ship company that owned Atlantik Confidence, and shipmanager Zigana Gemi Isletmeleri.
In a nuanced 2017 judgment, Justice Nigel Teare ruled that the hull underwriters “do not have the better of the argument” that the bank is bound by an English law and London jurisdiction clause in the settlement agreement or in the policy.
But the hull underwriters won the argument that the misrepresentation behind the claim was a matter relating to tort (the claim for wrongful action), so the court had jurisdiction.
However, Teare then crucially ruled that a claim for restitution was not a matter relating to tort — so the high court has no jurisdiction.
Teare conceded it was unsatisfactory on case-management grounds to reach a conclusion that a tort claim may be brought in England, but that the claim for restitution may not be.
The appeal court judges shared this regret and backed him on all points.
It said in a ruling: "It follows that the tort element of underwriters’ claim against the bank can proceed in this jurisdiction.
"The English court does not, however, have jurisdiction to entertain underwriters’ claim in restitution against the bank."
The legal headache was a consequence of the Brussels regulation on jurisdiction of courts in the European Union. One of its principles is that jurisdiction in general lies in the domicile of the defendant.
As Credit Europe is a Dutch bank, jurisdiction is the Netherlands.
In earlier proceedings, Justice Teare heard that the Atlantik Confidence had a market value of $6.5m at the time of the loss, so the payout would greatly ease the financial difficulties of Agaoglu, who was the sole shareholder and director of Atlantik Denizcilik ve Sanayi, a Turkish company that in 2013 controlled six owned and operated vessels and managed eight.
There has already been a legal battle over the acceptability of a club guarantee in relation to cargo claims.
The Standard Club won a London appeal court ruling that a limitation fund could be established through a club guarantee rather than by providing cash security.
