E.L.A.Z. INTERNATIONAL CO v. HONG KONG & SHANGHAI INSURANCE CO LTD

HCCL 16/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 16 OF 2003

(formerly HIGH COURT ACTION NO. 4862 OF 2001)

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J U D G M E N T

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Introduction

1. In this action the plaintiff garment trader (‘ELAZ') is suing the defendant insurer (‘HKSI') for the sum of US$482,904.00 consequent upon the insurer's refusal to pay the plaintiff's claim under a marine insurance policy taken out by the plaintiff with the defendant.

2. It is the case of ELAZ that the goods the subject of the insurance, a consignment of ladies' knitwear, was stolen in Laredo, Texas when in the ordinary course of transit to the final destination in Mexico City, Mexico.

3. The plaintiff contends that there has been compliance with the terms of the relevant policy, which was valid and subsisting at the time of the loss.

4. The insurer, HKSI, takes a different view.

5. It disputes whether the goods were stolen, as alleged, or indeed whether the plaintiff had an insurable interest at the time of such alleged theft, it says that cover had ceased under the policy at the time of the alleged theft, it asserts that there was a breach of warranty, and it further suggests that the plaintiff was in breach of its duty of utmost good faith.

6. Before turning to these issues, however, I should sketch in a little of the relevant history.

The factual background

7. The goods the loss of which forms the foundation of this claim were purchased for resale by the plaintiff from the St Hero factory in Dongguan, Guangdong Province. 

8. After manufacture, the plaintiff, which is a Hong Kong exporter, took delivery and paid for them in full.

9. These goods, which comprised ladies' knitwear garments packed in 941 cartons, were loaded into a Mitsui shipping line ocean-going container, No TRLU5575509, at the Dongguan factory; the container was sealed, and taken by road to the port of Yantian where it was inspected by Chinese customs, and resealed.

10. On 27 August 2000 the container was loaded onto a vessel, APL China, which sailed to Los Angeles via Hong Kong.

11. Between 12-14 September 2000 this container was offloaded in Los Angeles, and the US Customs formally placed the container in bond for what was termed ‘Immediate Exportation'.

12. The container then commenced its trip to Mexico.

13. On 14 September 2000 it was placed on a train to San Antonio, Texas, and from San Antonio the container was transported by road to Laredo, Texas, where it was again placed in bond under the supervision of US Customs.

14. The container appears to have remained in Laredo in the custody of the agent of the Mitsui shipping line, Transmaritime Inc., until 2 October 2000, when it was removed from the storage facility of Transmaritime and taken to the container yard of an entity known as ‘Consorcio Int'l del Norte' (‘Consorcio') in Laredo.

15. This container then appears to have been devanned, and the contents placed into another container, which was a trailer container (that is, a container on wheels, which is pulled by a tractor, and not a free-standing item).

16. The empty ocean-going container, in which these goods had travelled across the world from China to Laredo, then was returned to Transmaritime Inc. on 5 October 2000.

17. Thus far the evidential picture is reasonably transparent.  The problem in this case, however, began when these goods, which now had been loaded into a container trailer number 5301, were in the custody of Consorcio.

18. It is difficult to ascertain precisely what happened to this shipment, now transloaded into this container trailer, between 2 October and 2 November 2000; a marine surveyor employed by the defendant, Captain Tansley, carried out a short investigation in Laredo in June 2001, but was able to shed very little light upon what had happened in the month immediately prior to its loss. 

19. In the event, at some stage during the night of 2 November or the early hours of 3 November 2000 container trailer number 5301, into which this consignment of ladies' knitwear had been repacked, went missing from Consorcio's yard. 

20. In this regard, a Mr Fuentes of Consorcio made a report concerning the missing container trailer and its tractor at about 9.46 a.m. on 3 November 2000, and at about 4.30 p.m. on the same day the Laredo police discovered the tractor and empty container trailer in a cul-de-sac in Laredo.

21. The contents of the trailer had been removed, and the trailer was empty.  It is not known who had stolen the tractor and trailer, and who had removed the contents of the trailer.

22. It is from this theft that the present dispute has originated.

The policy in question

23.  The marine insurance policy dated 26 August 2000, as issued by the defendant to the plaintiff in respect of this shipment of ladies' knitwear, contained the following provisions :

“VOYAGE:  FROM YANTIAN, CHINA TO EXPORTADORA E IMPORTADORA GRUPO REYNOSA S.A. C.V. RFC.- 0002018M9  706 WIDENER, LAREDO, TX. 78041, MEXICO VIA LOS ANGELES/LAREDO, TX.

TERMS

Including the risk of transshipment, if any.  Subject to full container load.

…INCLUDING FROM WAREHOUSE TO WAREHOUSE, SUBJECT TO THE FOLLOWING CLAUSES:

INSTITUTE CARGO CLAUSES (A) – 1/1/82…”

The plaintiff's case

24. The plaintiff's case is not complex.

25. ELAZ says that it purchased insurance from the defendant covering this shipment of goods, which were being sent to a firm known as ‘Madame Collecion', its customer in Mexico City.

26. It says that the goods were lost, presumed stolen, whilst in the ordinary course of transit at Laredo, at a time when they were awaiting customs clearance into Mexico.

27. ELAZ asserts that title in the goods had not passed to Madame Collecion at the time of the alleged theft, that it had complied with the terms of the policy as issued, and that in the circumstances there was no valid reason why the defendant insurer should have refused to pay the plaintiff's claim for US$482,904, representing the insured value of the lost shipment.

28. It is undisputed that this lost shipment was in fact the third and last of three shipments made by ELAZ in 2000 to its Mexican customer, Madame Collecion.

29. The first two shipments, which successfully arrived at their destination in Mexico City, had followed identical routes from the Dongguan factory via Yantian to Los Angeles, and subsequently had been carried overland to Laredo.

30. Once in Laredo, these earlier shipments had been offloaded into Mexican trailer containers, trucked to the border, cleared through Mexican customs and thereafter trucked to Mexico City, where they were delivered direct to Madame Collecion's warehouse, at which point they were broken up and in turn delivered to the purchaser's sub-buyers in Mexico City.

31. Regrettably, however, the voyage of this third shipment had not been as successful, and had gone missing whilst still in Texas – hence this case.

The evidence

         (i)      For the plaintiff

32. The plaintiff insured called 4 witnesses of fact to give viva voce evidence : Miss Julie Chen, Mr Aviram Zelikha, Mr Ehud Zelikha, and Mr Boaz Elkayam.

33. Miss Chen was the shipping clerk employed by the plaintiff who, inter alia, had been acting as a production co-ordinator with Chinese factories, and who was responsible for booking containers for the shipment of goods, including this lost shipment.

34. She had completed the shipping order in this case, in accordance with the instructions of the client, Mr Elkayam of Madame Collecion, whereby the Consignee was one ‘Godinez Forwarding', which would take delivery of the goods when they had arrived in Laredo, and that the Notify Party was one ‘Exportadora E Importadora Groupo Reynosa', which was to be in charge of the process of importing and transporting the goods into Mexico.

35. Miss Chen also gave evidence that she had completed the Marine Insurance application form and had faxed it to the plaintiff's agent, Harvest Insurance Agent Ltd, an insurance broker, for it to take out the necessary insurance for the voyage to Mexico.  This fax application had been sent on a standard form provided by Harvest, and upon sending it on 29 August 2000, Harvest had sent by return fax a debit note, together with the relevant policy for her confirmation; an official receipt for the premium of HK$10,895.28, as paid by ELAZ, was received on 18 September 2000.

36. I accept Miss Chen's evidence, which struck me as essentially uncontroversial.

37. The second and third witnesses of fact were the brothers Aviram and Ehud Zhelikha, the owners of the plaintiff, ELAZ.

38. Aviram Zhelikha gave evidence of the history of the dealings of the plaintiff with Madame Collecion, which was owned by a long-standing friend, Boaz Elkayam.

39. Madame Collecion would develop styles for the Mexican market in cooperation with ELAZ, which then would manufacture to these specifications and ship to Madame Collecion, its purchaser in Mexico.

40. The lost shipment was one such order.  Mr Aviram Zhelikha said that by the time that the Marine Insurance Application had been submitted, the goods already had departed, and the voyage number was completed in accordance with details provided by the shipping agent.  Harvest Insurance, he said, was their regular agent – in fact, ELAZ had dealt with Harvest on no fewer than 34 previous occasions in terms of like shipments to Mexico – and at the time of application Harvest was fully aware that these goods had been dispatched.

41. Mr Aviram Zhelikha noted that in the Marine Application form the plaintiff specifically had requested that the goods would be insured from Yantian to Mexico, via Los Angeles and Laredo, Texas, which was one of the major gateways for the entry of goods into Mexico.

42. He gave evidence of his understanding that the shipped goods had been transferred from the ocean-going container to the new container, and said that he was aware that this had to be done because as far as the ocean carrier was concerned, its services ended in Laredo, as indicated on the bill of lading.  In this connection ELAZ had prepaid freight up to Laredo, and thereafter a licensed US customs broker, Mr Rafael Orduna, would arrange the shipment across the border, the fee for this service being paid by the purchaser of the goods.

43. He said that under US Customs regulations goods which are in transit can remain for up to 30 days in a private bonded facility, of which he believed that Consorcio was one such, and that during the 30 day period whilst the goods were at Consorcio's premises he understood that Mr Orduna unsuccessfully had been trying to obtain customs clearance to Mexico; at the expiry of the 30-day period, he further understood that the goods would have to be moved to a bonded facility regulated directly by US Customs, and that Orduna in fact had applied on 2 November 2000 to one Alesa Forwarding for the goods to be thus transferred.  However, all the relevant warehouses had been said to be full, there was a delay, and it was on the night of 2 November 2000 that the tractor and container trailer containing the goods had been stolen from Consorcio's premises.

44. Mr Aviram Zhelikha also stated that the Notify Party in the bill of lading had been Grupo Reynosa since this was the agent appointed by Madame Collecion to deal with the transportation and customs clearance to Mexico, whilst Godinez was the stated Consignee since that entity was the forwarding company appointed by Grupo Reynosa to receive the goods in Laredo on behalf of Madame Collecion, and thereafter to deliver them to Consorcio's premises.

45. He confirmed the purchase of these goods from the St Hero factory in Dongguan, and further confirmed that the quantity of 41,901 items in the plaintiff's invoice was correct and corresponded with the quantity cited both in the Marine Application form and in the relevant insurance policy.  He said that the plaintiff had taken out insurance cover at 10% more than the goods' value to cover all risks, and that this conformed to standard industry practice.

46. Mr Ehud Zhelikha is the older brother of Aviram, with whom he was in partnership at ELAZ.

47. His evidence was in shorter compass, in that he had left the practical arrangements for the shipment of these goods to his brother.

48. He gave evidence of his relationship, personal and commercial, with Mr Boaz Elkayam, his trading partner in Mexico City, whom he first had met in Japan in the late eighties.

49. He knew and trusted Mr Elkayam, he said, which extended to a credit-line he afforded Mr Elkayam of 90-120 days to enable the sale of the goods in Mexico and payment of the ELAZ invoice, it being agreed that in the interim the goods in question would belong to ELAZ until settlement of the purchase price.

50. He described the circumstances surrounding the execution of the business documents executed between ELAZ and Madame Collecion which Mr Elkayam and himself had signed.

51. Ehud Aviram stressed that the sales element of the business he had left in the hands of his brother Avi, “the hands-on person”, since he had been travelling a good deal, and that he personally had known little of the details of the placement of orders or shipments, since that was his brother's job.

52. He recalled that he first had learned of the theft of this container one early morning in November 2000, when Mr Elkayam had called him with the news; thereafter he had requested the insurance agent, Harvest, to process the necessary insurance claim.

53. Mr Ehud Aviram related how a freelance insurance investigator, one Mr Zennon Cheng, had come to his office a few days later; Mr Cheng had wanted to see documentation relating to this shipment/claim, and he, Ehud Aviram, had done his best to assist, although he had had to get Mr Elkayam to fax him the relevant Purchase Order. 

54. He denied specifically the allegation levelled by Mr Zennon Cheng that he, Mr Ehud Aviram, had said at their first interview that Grupo Reynosa was the buyer of these garments – he had not known of Grupo Reynosa and had never had contact with them, and simply had followed the instructions given by Mr Elkayam as to how the customs clearance process and transport across the US/Mexico border at Laredo was to be effected, and by whom.

55. Mr Ehud Aviram said in terms that Madame Collecion/ Mr Elkayam was his customer, and that he looked to Mr Elkayam for payment; nor, he said, had he been aware of the status of Madame Collecion, or whether they legally could import into Mexico.

56. I accept the evidence of the Aviram brothers.  They gave their version of events in a forthright manner, and, despite the frustration evinced when being pressed in cross-examination – Mr Aviram Zhelikha was a somewhat volatile witness who had a tendency to go off at a tangent, whilst Ehud Zhelikha in particular clearly was disturbed by suggestions that Grupo Reynosa was his purchaser – in my judgment there was no attempt to dissemble or to tell other than the truth surrounding the transaction with Mr Elkayam, and the perceived arrangements for the importing of these goods into Mexico.  In this regard I reject the skein of suspicion so skilfully woven by Mr Wright in the course of his probing cross-examination.

57. The final witness of fact for the plaintiff was Mr Elkayam, who had come from Mexico to give evidence in this trial.

58. He recounted the history of his trading relationship with ELAZ and the Zhelika brothers, and noted that it was common practice within the industry to use the services of an import/export agent such as Grupo Reynosa to clear customs, whilst the US/Mexican border at Laredo, Texas was a “major gateway” for goods entering Mexico from overseas.

59. He stated that Grupo Reynosa had been authorized by his firm to deal with this shipment the subject-matter of the current dispute, and he was aware that Grupo Reynosa used Godinez International Forwarding, the consignee shown in the bill of lading, whose role in the present scheme of things was to effect transport this shipment from Laredo to Mexico City, and that Mr Raphael Orduna of America's Link Customs Services specifically had been responsible for this transaction for onward transportation to Mexico.

60. Mr Elkayam said that so far as he was aware Consorcio was a private bonded warehouse at which the goods were stored whilst awaiting clearance by Mexican customs.

61. Mr Elkayam confirmed that it had been himself/Madame Collection which had instructed ELAZ as to the manner in which the various shipping documents were to be completed, and to whom the goods should be directed, adding that absent use of professional agents to deal with the border crossing at Laredo there would have been no alternative but personally to travel to Laredo and to clear the goods, a matter which required local knowledge and clearly would have been impracticable.

62. He recited his understanding of events, including the theft of the container trailer and its contents, as to which fact he had been informed by one Mr Padilla of Grupo Reynosa, before he in turn had informed the Zhelikha brothers by telephone of the theft.

63. His understanding was that to-date the Laredo police had not recovered the stolen goods, which then belonged to ELAZ and not to him, and that since these goods never had reached his warehouse in Mexico City he was not responsible for the goods or any loss sustained by ELAZ.

64. I found Mr Elkayam, an Orthodox Jew, to be a solemn and impressive witness, and I have no reason to disbelieve his account of events from the perspective of the putative buyer of these goods.

65. I accept his evidence.

         (ii)     For the defendant

66. The defendant also called 4 witnesses.  None of these witnesses had any direct knowledge of the events the subject of this case.

67. The first witness was Captain Mervyn Tansley, of Marine Consultants Inc, which was retained by the defendant to investigate the plaintiff's claim.

68. Captain Tansley had travelled to Laredo, and had made certain inquiries there.  He said that he had discovered that the address of Grupo Reynosa was a private residence in Laredo, which address, at 706 Widener, was one of two addresses locally listed for Concorcio, which entity he was unable to contact – in this connection he was unable to speak to Mr Fuentes, despite his attempt to do so.

69. As to Grupo Reynosa, he had spoken to a Mr Lopez, who had informed him that Grupo Reynosa had played no part in the handling of the subject shipment, although in this connection he noted that he did not believe that Mr Lopez was being truthful.

70. He also had spoken to a Mr Leon of Godinez, and a Mr de Luna at the McAllen Foreign Trade Zone.  In this connection he had been told that the subject shipment had not been handled in the McAllen FTZ, and there was no record of it in the Godinez files, although the two prior shipments of ladies clothing from ELAZ which had preceded the present shipment indeed were handled by Godinez and had been transported from Laredo to McAllen for ‘in bond' storage, and thereafter returned to Laredo for transport into Mexico.

71. Captain Tansley clearly was attempting to be helpful; equally clearly, however, the information he had garnered may or may not have been reliable, and I was not materially assisted by his evidence.

72. The defendant's second witness was Mr Rafael Murillo.

73. Mr Murillo is a Mexican lawyer, and had been instructed by the defendant to advise on the legal position regarding the cross-border entry of goods into Mexico.

74. He said that his inquiries had revealed that although Madame Collecion presently was authorized to import into Mexico, it appeared from the available Mexican records not to have been so authorized at the time.

75. Mr Murillo outlined the normal procedures for the import of goods into Mexico, with specific reference to a document known as a ‘Pedimento de Importacion', and said that in normal course the import of containerized cargo from the US into Mexico could be achieved “in a matter of hours”.  He also noted that there were no laws and regulations in force requiring cargo to be removed from containers before being imported into Mexico, although he did recognize that for importation into Mexico a customs broker was necessary for an authorized importer to arrange such import.

76. Once again, I did not find Mr Murillo's evidence, whilst generally interesting, to be of assistance in determining liability in this particular case.  Nor did I permit Mr Murillo to be used by the defendant, at short notice, as an expert of Mexican law.

77. In some ways the defendant's main witness was Mr Cheng Chin Pang of Zennon Pierre Marine Services Ltd, which at the outset had been instructed by the defendant to investigate the plaintiff's claim.

78. Mr Cheng related how he had visited Mr Ehud Zhelikha on 9 November and 16 November 2000 in order to interview him about this case.

79. He maintained that on the first interview Mr Ehud Zhelikha had told him that the named consignee for these goods, Godinez International Forwarding, was a forwarding agent and, more significantly, that Grupo Reynosa was in fact the buyer of these goods which had traded with the plaintiff for 7 years.  However, said Mr Cheng, in the second interview Mr Ehud Zhelikha had “changed his story” and had said that the actual buyer was Madame Collecion in Mexico, and that at the same time he had been shown a copy of a Purchase Order dated 15 April 2000 wherein no unit price was mentioned.

80. Mr Cheng outlined his other investigations as to the source of these goods, including his visit to Samhong International Shipping, which had received a shipping order from the plaintiff on 17 August 2000, noting apparent discrepancies he perceived in the relevant bill of lading.

81. Mr Cheng opined that he “found it suspicious” that the goods should have arrived in Los Angeles in mid-September 2000, and yet the container was stolen on 3 November 2000, as indicated on the Laredo Police Report, which was almost one and a half months later.

82. He also ventured the view that although the actual buyer designated by Mr Zhelikha was in Mexico, the transit had terminated in Laredo as the place of delivery stipulated on the bill of lading, and that all of the parties identified in the documentation appeared to be based in Laredo.

83. I was not greatly impressed by Mr Cheng's evidence, and in particular the barely suppressed idea that this whole shipment, and consequent claim, was fraudulent.  I do not suggest that he wished to mislead; simply that in my view he had a preconception to justify.

84. Insofar as his account of what transpired at the interviews with Mr Ehud Zhelikha are concerned, I consider that, at the least, there was ample scope in that first conversation for misunderstanding as to the identity of the buyer. 

85. In this connection I bear in mind that Mr Ehud Zhelikha was not the ELAZ partner in charge of these matters, and that he was not as familiar with the details of the situation as was his brother, Aviram.  I also consider it most unlikely that Mr Ehud Zhelikha seriously would have represented that Grupo Reynosa was the buyer of these goods, and having seen Mr Zhelikha' indignant reaction to this suggestion on the witness box on the balance of probabilities I am prepared to find that he did not do so. 

86. Mr Cheng genuinely may have misunderstood the situation, but in any event I cannot believe, in light of the evidence placed before this court, and in particular the most detailed evidence regarding the ongoing commercial relationship with Mr Boaz Elkayam, that Mr Zhelikha could have represented that this was the situation.  It is as plain as a pikestaff that Mr Elkayam/Madame Collecion was the buyer of these goods, and I make a finding of fact to this effect.

87. Having reached this conclusion, I do not consider that Mr Cheng's evidence materially assists in terms of the arguments as to liability as were presented in final submission – as to which arguments I shortly turn.

88. The final witness for the defendant was Mr David Tang, an insurance practitioner, who at the material time was employed by the defendant as a Marine Manager with expertise in cargo insurance and related matters.

89. At the time of this claim Mr Tang acted as a Consultant to the defendant insurer, and was supervising in the Marine Claims Department; a Mr Eric Sung was the person who had dealt directly with the agent, Harvest Insurance, in relation to the underwriting of the policy to which this claim related.  It followed, therefore, that Mr Tang had no direct personal knowledge of this case until subsequently he had been informed about it.

90. Mr Tang confirmed that Harvest Insurance was the defendant's agent which had entered into this policy directly with the plaintiff, and that the person who had dealt with the defendant was Vincent Lam, the owner of Harvest.  Mr Tang outlined what would have happened, in terms of the actions by Vincent Lam and Eric Sung in entering into his policy, and noted that he himself had not seen this policy on file until the plaintiff had made a claim in or around August 2000.

91. Mr Tang opined that there was an express warranty in the policy to the effect that the goods would be “subject to a full container load”, and concluded that the goods therefore were required to be loaded in a container at all times throughout the transit.  He said that his inquiries of Vincent Lam yielded information to the effect that he was not told by the insured that the cargo would be unloaded from the container at anytime during the transit, and also that Vincent Lam had told him that he did not know (and hence the defendant had not known) and was not told that the cargo would be stored in Laredo prior to being carried into Mexico by truck.

92. Some of Mr Tang's evidence was, in effect, no more than argument in the thin guise of evidence, and I deal with the contentions advanced by counsel later in this judgment.  Neither Vincent Lam nor Eric Sung was called to give evidence, and I did not find Mr Tang's evidence to be of assistance in deciding the issues of law which are thrown up by this case.

         (iii)    Letter of Request

93. During preparation for this case, in early 2005, the solicitors for the defendant caused a letter of request to be issued to the judicial authority in Texas with the intention of gathering evidence not hitherto available in terms of the disappearance of this shipment of goods.

94. In fact, the trial dates of this action themselves were delayed in an attempt to permit this letter of request procedure to be completed, and upon being apprised by counsel that such completion was imminent, this court again was persuaded to delay final submissions for a further short period in order to give the defendant the opportunity to peruse such material as might (it was thought) shortly be made available.

95. However, by the conclusion of the trial this situation had not transpired, and I consider it appropriate formally to record that this court has not seen, or been directed by the parties to, any such evidence as now may have been produced consequent upon this letter of request.

The issues for decision

96. Counsel for the plaintiff, Mr Colin Wright, has submitted that in this case there are two principal issues for decision, and four of a subsidiary nature.  For the present purposes I am content to adopt that classification.

97. The two main points that are taken in this case are : (1) whether in the circumstances of this case insurance cover had ceased, by reason of the operation of clause 8 of the ICC(A), by the time of the alleged theft; and (2) whether there was a breach by the plaintiff of an express policy warranty.

98. If either of these primary issues is decided against the plaintiff, asserted Mr Wright, this claim must fail, and there would be no necessity to deal with the remaining issues arising.

99. I deal with each issue in turn.

         (i)      The Clause 8 point

100. Clause 8 of the ICC(A) provides as follows :

“ 8.1        This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit and continues during the ordinary course of transit and terminates either

8.1.1        on delivery to the Consignees' or other final warehouse or place of storage at the destination named therein

8.1.2        on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein which the Assured elect to use either

8.1.2.1     for storage other than in the ordinary course of transit or

8.1.2.2     for allocation or distribution or

8.1.3        on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the oversea vessel at the final port of discharge whichever shall first occur.”

101. Mr Wright says, correctly, that the plaintiff in this case bears the burden of proving on the balance of probabilities that the goods the subject of this insurance were stolen whilst in the ordinary course of transit.

102. Under this head he advances two differing arguments.

103. First, he asserts that on its true construction the insured adventure in this case was from Yantian, China to Laredo, Texas, and that although the word ‘Mexico' appears in the policy, the proper construction of that policy requires the final destination to be treated as Laredo. 

104. If this be correct, he continues, then Clause 8 provides that the insurance shall terminate on delivery to “the Consignee's or other final warehouse at the destination named” in the policy, namely Laredo.

105. I do not accept this contention.

106. It is plain that the adventure insured against was to Mexico; I decline simply to ignore that word, and the clear evidence is that Harvest were instructed to effect such insurance – the Marine Application form completed by Harvest in terms reflects the Mexican destination, viz : “From Yantian, China  To Mexico  Transhipment at/via Los Angeles, Laredo, tx”.

107. It is also clear that the shipment (for which the plaintiff had prepaid freight) was to go to Laredo, whence it was to be transported to Mexico City upon the instructions of Mr Elkayam, whom the evidence, which I accept, reveals had paid the customs brokers $50,000 for the completion of that final leg of the trip.

108. Not only is it clear that this adventure was to Mexico; this was entirely consistent with the other two shipments which had preceded it, and which had been the subject of like insurance by Harvest with the defendant.

109. For the defendant insurer now apparently seriously to contend that the ambit of the intended insurance adventure was to be only from Yantian to Laredo strikes me as both ambitious and wrong.

110. So I am against Mr Wright on what I will term the ‘policy construction' point.

111. That however is not the end of the Clause 8 argument, which then became somewhat more refined.

112. Mr Wright contended that in the circumstances of this case, as revealed on the evidence, Clause 8 of the ICC(A) is engaged in that even if this shipment of goods is not to be treated as having reached its final destination at the time of the alleged theft in Laredo, nevertheless the plaintiff had failed to establish that at the time of such theft that these goods were “in the ordinary course of transit”, and thus it must follow, pursuant to the provision of Clause 8.1.2 and 8.1.2.1, that this insurance had terminated.

113. This submission, which in my view represented potentially the defendant's most promising argument, begs the question as to what this shipment of goods was doing in Laredo for the length of time that transpired between its delivery by Transamerica to Laredo on 2 October 2000 and the theft (or alleged theft), from the premises of Consorcio, on the night of 2/3 November 2000?

114. Because if the court were to be satisfied that the sojourn of this shipment in Laredo for this 31 day period represents a ‘place of storage' which, in the words of Clause 8.1.2, the assured has ‘elect[ed] to use…for storage other than in the ordinary course of transit', then it is clear that, by operation of law, under Clause 8.1 the insurance indeed terminated at this juncture.

115. Mr Wright submitted that the decided cases on the construction of the ICC(A) establish that the ‘ordinary course of transit', as that term is used within Clause 8, will be interrupted if a delay arises from any cause within the control of the assured.

116. Thus he points to a case in the Supreme Court of South Africa, Fedsure General Insurance Ltd v. Carefree Investments (Proprietary) Ltd, [2001] SASCA 77, decided on 11 September 2001, in which goods insured subject to the ICC(A) were stored following discharge in the harbour precincts, initially in a container terminal and subsequently in a warehouse.  Whilst in storage but prior to clearing customs, the goods were stolen, and the resultant claim against the insurers failed because it was held that the goods stored in the warehouse were not in the ‘ordinary course of transit', the court concluding on the facts of that case that the assured had “let the goods remain in bond for reasons of commercial convenience and it was for those reasons that they were effectively in storage when stolen.”

117. Mr Wright also cited the Supreme Court of Victoria case of Verna Trading Pty Ltd v. New India Insurance Co. Ltd, [1991] 1 VR 129, in which the assured had left goods in an area adjacent to the wharf whilst waiting for space to become available in its warehouse, the court there holding that the goods in question (cassettes) ceased to be in transit when the assured had decided to leave them in the stevedore's area for its convenience, and unrelated to any requirements of transportation; accordingly, when the theft in question had occurred the insurance had terminated.

118. It was Mr Wright's contention that the circumstances of the present case, wherein the alleged theft had taken place some 5 weeks after arrival in Laredo, and wherein the plaintiff had called no evidence to explain the lengthy delay, effectively precluded the court from concluding that the goods were in the ‘ordinary course of transit' throughout the time they had remained in Laredo.

119. Each case clearly stands on its own facts, and little is to be gained by extensive reference to other decided cases wherein the judges, upon application of accepted principle, have reached conclusions, on particular facts, as to the termination, or otherwise, of the relevant insurance cover.

120. After some reflection, however, I do not consider that Mr Wright's argument prevails in this instance.  The evidence as to what happened, when and why in Laredo is sketchy indeed, and the court simply has to do its best on the evidence currently available.

121. Accepting as I do the proposition (undisputed as a matter of law by Mr Nigel Bedford for the plaintiff) that the insured bears the burden of establishing that this shipment of goods remained in the ordinary course of transit at the time of the loss, in my view the evidence in this case establishes on the probabilities (and I so find) that these goods arrived at, and had remained in, Laredo solely for the purpose of on-shipment to Mexico, that for reasons which are less than clear this third shipment did not receive the expedited cross-border progress that had been accorded to the two shipments preceding it; I find, further, that pending onward cross-border transportation these goods were retained in a container trailer at the premises of Consorcio, but that such delay was attributable to no wish or instruction or election from or on the part of this assured – or, to put the matter another way, that such delay as undoubtedly did occur transpired absent any collateral commercial purpose on the part of the plaintiff assured, which, until notified of the theft, appears to have been wholly unaware of the difficulties then being encountered in terms of this third shipment.

122. In fact, in the circumstances of this case ELAZ, the assured in this case, had done precisely what had been required of it by Mr Elkayam, the purchaser in Mexico City.  The plaintiff had arranged for shipment to Laredo, with Grupo Reynosa named as Notify Party in the bill of lading, the arrangement with Mr Elkayam being, as Mr Elkayam said, and as I accept, that he would make all the cross-border import arrangements, and to this end had given an all-inclusive fee of US$50,000 to Grupo Reynosa to cover importation expenses and charges in relation to the import into Mexico of this third consignment.

123. Accordingly I find that in this case the plaintiff had done all that it was to do in terms of arranging the transport of these goods, that is, to get them to Laredo, that arrangements for the Laredo-Mexico City leg of the voyage being solely the responsibility of Mr Elkayam, who had instructed third party brokers to effect the final importation leg; that these third parties clearly had failed to do so with expedition prior to the theft, for reasons of which Mr Elkayam also was unaware, strikes me as nothing to the immediate point.

124. There is no evidence that the sum of US$50,000 was insufficient to do the job – indeed, I understood Mr Elkayam to say that this had been the practice for the other two shipments – and whilst it is unclear why the named consignee, Godinez, or alternatively, possibly, the customs broker, appear to have failed to prepare the necessary ‘pedimento' in order to effect the export from the US and import into Mexico, this is not something which in my view should be left at the plaintiff's door.  In this connection I note in the papers a letter dated 5 June 2001, apparently sent to the plaintiff by Mr Fuentes of Consorcio, in which he stated that “Due to the Company Godinez International had not the Mexican Pedimento ready during the period of 09/25/00 to 10/31/00 the Merchandise must be transferred to : ALESA Forwarding bonded warehouse.”

125. I find as a fact, therefore, that there was no collateral commercial purpose, on behalf of the plaintiff assured (or, for that matter on the part of Mr Elkayam, whose financing arrangements for these goods were the subject of extensive query in cross-examination), which was attributable to the delay which undoubtedly took place in Laredo in terms of the transit of these goods.  I find that this is the case notwithstanding Mr Wright's efforts to inject into this case the notion that the Zhelikha brothers and their Mexican trading counterpart, Boaz Elkayam, were being less than frank about the terms of their ongoing business relationship, a submission I also reject.

126. On the basis of the evidence, therefore, and to revert to the express terms of Clause 8.1.2/8.1.2.1, I hold that there was no such election on the part of this assured that there should be storage of this shipment in Laredo “other than in the ordinary course of transit”, and that on the probabilities the plaintiff assured has discharged the burden of showing that these goods remained in the ordinary course of transit at the time of the loss the subject of this claim.

127. If this conclusion be correct, it follows that the defendant's arguments on the basis of the application of Clause 8 of the ICC(A) must fail.  I so hold.

         (ii)     The container warranty point

128. The submission under this head is that this was a marine insurance policy which was issued “Subject to full container load”, and accordingly that the policy was subject to a warranty that the goods at all times would be in a container.

129. It followed, so the argument went, since it is accepted (indeed specifically pleaded) by the assured that the ocean-going container TRLU 557550-9 was devanned at the premises of Consorcio, and that this shipment thereafter was stuffed into the replacement container trailer No 5301 – which trailer, together with tractor, allegedly thereafter was stolen – that there had been a breach of warranty the consequence of which, on application of usual insurance principles, resulted in the insurance coverage automatically terminating from the date of breach of such promissory warranty.

130. Moreover, said Mr Wright, whilst it is clear that the goods in question were removed from the ocean-going container, there is no evidence supporting the assertion that the goods immediately were repacked into the replacement unit.

131. On this latter aspect, despite the invitation so to do I see no reason to disbelieve the letter from Mr Orduna dated 6 November 2000 which states (albeit with an inversion in the stated trailer container number) that “The merchandise was transloaded to trailer #3501 in order to be transported to Alesa Forwarding Inc” (which was the bonded warehouse into which, absent the theft, the goods would have had to be sent at the expiry of the relevant 30 day period).

132. In any event, I do not consider that this latter point greatly matters, nor do I attach much importance to the hypothesis, emerging from Captain Tansley's evidence, that when crossing the border into Mexico that Mexican trucks/trailers must be used, and that it appears that the registration number of the trailer recovered by the Laredo police on 3 November, ‘01-75461', appears to have been a Maine registration, and thus arguably could not have been employed for the cross-border transit.

133. On any basis the goods have come out of the original container, and, if Mr Wright's argument is correct, that, ipso facto, is that.

134. The problem with this argument, however, is that I have not been convinced – and I have been shown no authority to this effect – that the term “Subject to full container load” is sufficient to import other than precisely what such term imports, namely, that it would be these goods, and these goods alone which would be in a container, and that there would be no intermingling with other shipments – as to which, on the facts of this case, there is no suggestion or evidence whatever.  What in my view this term does not import is the notion that there is thereby a warranty that there never can be transshipment between containers.

135. Accordingly, despite Mr Wright's efforts to assert to the contrary, I am against him on this argument also, and hold that in the circumstances of this case there has been no breach of warranty, as alleged, enabling the defendant insurer to disclaim liability under such policy.

Secondary issues

136. Having found against the defendant upon the two primary arguments canvassed on its behalf, I turn now to consider the other issues which were advanced by the insurer, and which were said by Mr Wright to provide cogent reason to reject liability under this insurance.

137. I take them briefly in submission order.

         (i)      Alleged theft

138. The defendant puts the plaintiff to strict proof that this shipment of goods was stolen in Laredo, as the plaintiff has alleged.

139. After reviewing the available evidence, in particular the relevant police report, together with the available circumstantial evidence, there is nothing to place the court on notice that this was not the case, and I have concluded, on the balance of probabilities, that these goods indeed were stolen, as alleged.

140. Accordingly, I reject the defendant's argument in this regard.

         (ii)     Illegality

141. The defendant's next assertion is founded on section 41 of the Marine Insurance Act 1906, under which there is an implied warranty “that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.”

142. Mr Wright also relies upon a separate defence of illegality at common law which is based on the principle of public policy that the courts will not assist a plaintiff to enforce a claim when that plaintiff has engaged in illegal conduct : he cited, for example, Geismar v. Sun Alliance [1978] QB 383, Reggazoni v. Sethia [1958] AC 301, and wherein the illegality represents an important element of the claim, see also Euro-Diam Ltd v. Bathurst [1990] QB 1.

143. On this premise Mr Wright constructed an ingenious argument to the effect that since Madame Collecion was not at the time licensed to import textile goods into Mexico, any representation that Madam Collecion would have had to make in this regard would have been false, and thus that an essential element of the present claim involved (I think that he means ‘would have involved') the making of a false statement to the Mexican customs authorities.

144. This point can be shortly dismissed.  In my view the present plaintiff has done nothing in this insurance transaction which would have involved illegality on its behalf.  It did no more, and no less, than it has said that it did in terms of entering this insurance contract to cover the risk of the adventure from Yantian into Mexico, and in so doing I can divine no illegality, actual or intended, on its behalf.

145. Against the background of the stated insurance cover, the transit arrangements were that ELAZ was to underwrite the journey to Laredo, and that the purchaser, Madam Collecion/Mr Boaz Elkayam, was to arrange and fund the cross-border import from Laredo, Texas into Mexico.

146. No evidence was adduced in terms of Mexican law – indeed, the defendant's eleventh hour application so to do expressly was refused by this court as constituting a late ‘ambushing' tactic the inevitable result of which would have resulted in yet another adjournment of this case, already delayed by reason of the tardiness created by the letter of request process – and I had little difficulty in repeating Mr Wright's endeavour to circumvent this procedural obstacle concerning evidence of foreign law by suggesting, against the background of such refusal, that therefore Mexican law must be presumed to be the same as that of Hong Kong, in terms, for example, of making incorrect statements to a customs officer.

147. Nor am I satisfied that such necessity would have been the situation in fact, and in any event it has not been shown that any such customs' infraction, if established (which demonstrably it was not, and could not have been, by reason of the prior theft), could be laid at the plaintiff's door, or indeed that this plaintiff could have had, or would have had, any knowledge of such event or that it was guilty, as Mr Wright put it, of ‘Nelsonian blindness' in this regard.

148. In the circumstances, therefore, in my judgment this ambitious submission fails in limine, and I reject it.

         (iii)    Lack of insurable interest

149. It is next said on the defendant's behalf that the requirement of an insurable interest in the goods the subject of the risk arises both by reason of Clause 11.1 of the ICC(A), and under the general law, and that on the evidence the plaintiff cannot assert that at the time of the loss the plaintiff retained such an insurable interest.

150. I do not understand this point.  Pursuant to section 5 of the Marine Insurance Act a person has an insurable interest if he is interested in a marine adventure, in particular if he stands in any legal or equitable relation to the property at risk in consequence of which he may be prejudiced by its loss.

151. It is abundantly clear on the evidence in this case that at the time of the loss, the factum of which I have found to be established, that the assured continued to retain an insurable interest in these goods, and any submission to the contrary strikes me, with respect, as nonsense.

152. I thus reject this point also.

         (iv)     Breach of the duty of good faith

153. Although this contention finds its way into Mr Wright's skeleton argument, he did not, I think, pursue it.

154. This was an argument apparently predicated upon the court having accepted the evidence of Mr Zennon Cheng as to his understanding, arising from his conversation with Ehud Zhelikha, that the buyer of these goods was Grupo Reynosa, evidence which, as earlier indicated, I decline to place any weight, not least because on the evidence in this case it is absolutely plain (and as I have so found) that in fact the buyer of these goods was Madame Collection/Boaz Elkayam.

155. In light of this conclusion any purported basis of an uberrimae fidei argument must fall away, and thus there is thus no question of this assured having failed to disclose to the defendant insurer the identity of the buyer, and as a consequence falling foul of the assured's duty to disclose all information material to the risk proposed.

Order

156. Notwithstanding the strenuous efforts of the defendant in this case, I find that on the probabilities the plaintiff assured has proved its claim in this case against the defendant insurer.

157. Accordingly, the plaintiff is to have judgment entered in its favour against the defendant in the sum claimed, namely US$482,904.00.

158. I make an order nisi that interest on the said principal sum is to run at the rate of 1% over US dollar prime for the period commencing from the date of the writ herein, namely 12 September 2001, until the date of judgment herein, namely 4 May 2006, and thereafter on the said principal sum at the judgment rate from time to time prevailing until payment.

159. I further make an order nisi that the costs of this action are to follow the event, and are to be paid by the defendant to the plaintiff, such costs to be taxed if not agreed.