MIRUVOR LTD. v. NATIONAL INSURANCE CO. LTD.

HCCL160/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.160 OF 1996

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J U D G M E N T

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THE PROCEEDINGS

1. This is an insurance claim. The plaintiff, Miruvor Limited, is an Hong Kong exporter. It insured with the defendant eight shipments of electrical goods which had been sold by the plaintiff to its Paraguayan buyer, one Dansun S.R.L. of the city of Ciudad del Este. The goods were stolen, and the defendant insurer declined payment of the plaintiff's claim under the eight policies of marine insurance issued in 1995 upon "all risk" terms and incorporating the Institute Cargo Clauses (A). Quantum is not in issue, and this trial has focused entirely upon the question of whether the defendant was right to refuse payment under its policies.

2. This case has attracted a considerable amount of detail, particularly in terms of the dates of issue of these eight policies, the chronology of the shipments made, and the dates of arrival of these shipments together with the dates of their release. In this regard Mr Sussex SC has prepared several schedules which provide a useful overview of the broad sequence of events.

THE BACKGROUND

3. Two individuals loom large in this case. They are Mr Dhanesh Teckchand, the owner of the plaintiff, and his Paraguayan purchaser, Mr Adnan Medlej, the proprietor in Paraguay of two companies, Dansun S.R.L. and Puerto Negro S.R.L. This court has had the opportunity to see and hear Mr Teckchand, who was the sole witness called on behalf of the plaintiff. Unsurprisingly, given his role in the scheme of things, there has been no sight of Mr Medlej.

4. Until the events the subject of the present case, Mr Teckchand had an ongoing commercial relationship with Mr Medlej dating from 1990. Indeed, Mr Medlej's company Dansun S.R.L. apparently had taken its name from Mr Teckchand's own brand name for his goods, 'Dansun' being an amalgamation of the names of his wife and himself.

5. Mr Teckchand's evidence was that in 1990-1991 he had done a small amount of export business with Mr Medlej. This had been on D/P terms. Thereafter there had been a lapse in that relationship, largely due to the poor business environment in Paraguay, until mid-1994 when Mr Medlej again approached Mr Teckchand and suggested that business between them should resume. After such resumption, Mr Teckchand insured with the defendant a total of 21 shipments to Paraguay, of which the only last eight form the subject of this action.

6. The precise details of the various shipments do not greatly matter. What is important, however, in light of the arguments put up in this case, are tow particular factors : first, that the sales of these eight shipments to Mr Medlej were effected, as were the other sales, upon a D/P basis; and second, that Paraguay is landlocked, thus necessitating the import of goods via one of its South American neighbours, Brazil, Uruguay or Argentina.

7. In the present circumstances, the goods the subject of this action were shipped on board various vessels destined for one of two ports in Brazil, namely either Santos or Paranagua, and were shipments dispatched in the period between 13 March 1995 and 7 June 1995. Upon arrival at these ports, discharge took place under special customs arrangements which involved the goods being kept in bond, in a special duty free warehouse, until they were taken into, and had arrived at, their destination in Paraguay.

8. What actually happened in this case is that the goods the subject of this action were all stolen by Dansun at either Santos or Paranagua. It appears that forged bills of lading were produced to the carrier's agents by Mr Medlej or his staff, so that Dansun was able to obtain each of these particular eight shipments absent payment therefor.

9. By this device Mr Medlej was able to sidestep the anticipated obligation to attend upon his bank in Paraguay and to obtain the original bill of lading for each of the shipments upon making payment for the goods so sold. Since each sale was a D/P transaction, in the eight instances presently in question the original bills of lading, together with other relevant documents (including the bills of exchange drawn in each case upon Dansun) has been presented by the plaintiff to its bank in Hong Kong, and it was these documents which, after the bills of exchange had been discounted by the bank in favour of the plaintiff, were remitted by the plaintiff's bank to the defendant's bank. It is against these documents that payment by Dansun then should have been made. In the event these documents remained within the banking system, eventually being returned to the plaintiff when it became clear that they would not be taken up.

10. It is worth noting that, with the exception of the eight shipments with which this court presently is concerned, the plaintiff had always been paid by Dansun for the sales of its goods, and in fact during the period when some of the present eight shipments were being made the plaintiff continued to be paid by Dansun for earlier (and non-contentious) shipments.

11. After the plaintiff discovered the theft of the goods by Dansun, it sought to preserve underwriters' rights by commencing actions against the carriers and other parties who might be liable, the duty so to do arising by virtue of Clause 16.2 of the ICC(A). Accordingly, in addition to the sums claimed to be recouped under each of the eight policies (as to which, as I have said, there is no quantum dispute, and as to which tow claimed sums now have been adjusted downwards in the revised Schedule to the Statement of Claim), the plaintiff also seeks relief in terms of indemnification by the defendant for the costs and expenses of this exercise, the so-called "sue and labour" expenses.

12. There is no dispute that the insurance policies in question were in force, nor is it any longer alleged that the plaintiff had no insurable interest in the goods. If proof be necessary, Mr Teckchand, whose evidence I accept, confirmed not only the truth of his witness statement (which stood as his evidence-in-chief), but also formally confirmed the plaintiff's purchase of the goods the subject of the eight insured shipments, and also confirmed his interest in the goods as at the date these eight policies were effected. I turn now, therefore, to consider the three specific defences which have survived the widely pleaded defence and which ultimately were relied upon by Mr Sussex SC on behalf of the defendant insurer.

(ii) The Clause 8.1.2. defence

13. The broad proposition here is that, in the particular circumstances of this case, cover had ceased because, at the plaintiff's election, the goods the subject of each disputed shipment had been stored at the Santos/Paranagua warehouses other than in the ordinary course of transit.

14. At this juncture it may assist to set out in full the provisions of Clause 8 of the ICC(A), the 'Transit Clause'. It reads as follows :

"DURATION

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, 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 herein,

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.

8.2 If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance, whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination.

8.3 This insurance shall remain in force (subject to termination as provided for above and to the provisions of Clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment." (emphasis added)

15. This point, if correct, would constitute a complete defence to the plaintiff's claim, given the contention that cover had terminated at the time of the losses complained of by the plaintiff.

16. Mr Sussex SC argued thus. He submitted that whilst the customs warehouse at Santos or Paranagua did not fulfil the requirement of Clause 8.1.1 - it is not a 'final warehouse or place of storage' - nevertheless it is potentially capable of falling within the phrase "any other warehouse" within the terms of Clause 8.1.2. Moreover, he said, given that the destination named in the eight policies was either Santos or Paranagua, the customs warehouse at those places also potentially qualified as a termination point of cover, because they are situate "at the destination named herein".

17. It followed that the only question remaining to be answered for this contention to be made good was whether the Assured, the plaintiff herein, had elected to use that warehouse for storage other than in the ordinary course of transit. And the answer to this, submitted Mr Sussex, must be in his client's favour. Because the Assured all along had intended and chosen that the goods should remain in the customs warehouse not merely for the purpose of customs formalities but also for storage until such time as Mr Medlej was able to pay for the particular shipment of goods and had taken up the shipping documents, thereby placing himself in position legitimately to obtain the release of the goods.

18. This argument was propounded on the basis of the known difference between the average time of transit of Teckchand/Medlej shipments from Hong Kong to Paranagua/Santos of, inter alia, 10 prior shipments to Dansun in 1994, as compared with the considerably longer period of time it then had taken Mr Medlej actually to pay for the goods. In broad terms, therefore, the case was that in normal course (that is, in those instances in which Dansun had not obtained the release of cargoes absent original shipping documents) the time that Mr Medlej was taking to come up with the money and lawfully to pay for the goods exceeded the transit time by as much again, if not slightly more.

19. It followed, concluded Mr Sussex, given the payment delays experienced during these prior shipments, that it was inconceivable that the plaintiff did not know or assume that the goods were being stored for substantial periods at the customs warehouse at Santos or Paranagua. It was obviously the plaintiff's intention or choice that the goods should there remain pending payment, thereby satisfying the 'election' requirement within Clause 8.1.2. As a consequence, therefore, the cover under the eight policies had terminated upon delivery to the respective customs warehouses by reason of the plaintiff's prior election that they should be stored there pending payment.

20. I decline to accept this argument, persuasively though it was advanced. In my view it accords neither with the facts nor with principle.

21. In the particular circumstances of this case, I do not accept that there was any element of election by the assured in the terms for which Mr Sussex has argued. In both Santos and Paranagua there was but one designated warehouse into which goods in transit to Paraguay were deposited : as Mr Teckchand stated on several occasions in evidence not subject to dispute, there simply was no other place for these goods to be stored, and he had no choice whatever as to where his goods were sent when in transit en route to Paraguay.

22. Mr Sussex's riposte to this was that it is the 'use' of the warehouse which is the subject of the assured's election, not its identity. I do not think that this takes him any further forward. Even if for present purposes one is prepared to indulge extrapolation from prior shipments to anticipated periods for payment for goods the subject of this case, it is difficult to see how or why the fact that Mr Medlej hitherto had not purchased the shipping documents as quickly as he might have done - a matter entirely within Mr Medlej's control - can suffice to constitute the election Mr Sussex seeks in order to afford his client the protection of sub-clauses 8.1.2/8.1.2.1.

23. The fact that a delay may happen seems to me nothing to the point in terms of rendering this a cargo stored "other than in the ordinary course of transit". All that is occurring here is that the "ordinary course of transit" may (and did) take longer in some instances than in others, depending upon whether Mr Medlej had available funds enabling, in normal course, early collection of the cargo. But the fact that in certain prior instances he had delayed - the instant cases currently under consideration, of course, were simply cases of straight theft - and had taken time to pay and to take up the documents, in my view does not permit the situation to be categorized as "other than in the ordinary course of transit".

24. Nor do I consider that the case of Safadi v. Western Assurance Company, [1933] KB 140, strongly relied upon by Mr Sussex, offers him support for his argument. This case concerned an earlier version of Clause 8, the point at issue focusing upon a special provision in the policies there in question to the effect that if there was delay over and above the contractually permitted period arising from circumstances beyond the control of the assured, the goods were to be held covered at a premium to be arranged. On the facts of Safadi the delay whereby the cotton bales remained in the Customs House (wherein they had been destroyed by fire) beyond 30 days was said by the assured to be as the consequence of insurrection and civil unrest which made it insecure and unsafe to send the goods onwards from the Customs House at Beyrout to Damascus - and thus, it was argued, the delay at the Customs House beyond the permitted 30 day period was a delay within the meaning of the policies, and had been caused by circumstances beyond the assured's control. For their part the defendant underwriters maintained the goods were not covered at the time of their destruction.

25. That case was decided on its particular facts. The assured lost. Roche J found that the truth of the matter was that the cotton bales deliberately had been left at the Customs House for longer than the permitted period because the Syrian importers, business partners of the plaintiff seller, specifically chose to leave the goods there for periods exceeding one month in order to take advantage of an extended period of credit, and not because they were in fact afraid of anything happening to the goods in subsequent transit. So that, on the judge's view of the facts the delay was purely a function of commercial convenience and did not fall within the policy provisions as to circumstances beyond the control of the assured.

26. There is no echo of that in the present case. Goods were shipped on a D/P basis. The goods the subject of the present claim were stolen. Other shipments were not. The latter had taken some time to be collected, a delay (unlike the position in Safadi) entirely out of the hands of the plaintiff. No other bonded warehouse was available to the plaintiff or to the carrier either at Santos or Paranague. Simply put, there was no choice in the matter.

27. In any D/P sale transaction there inevitably occurs a point in time and a place at which goods are being retained pending payment and consequent provision of relevant documents by the buyer, and such retention obviously will occur in a warehouse or other place of storage. Such a situation necessarily is implicit in this form of transaction/payment, and to characterize this as an 'election' within the meaning of Clause 8.1.2/ 8.1.2.1 seems to me to be both ambitious and wrong. The words "ordinary course of transit" must be construed in the context of the commercial transaction giving rise to the particular shipment, and if there is to be an 'election' in the sense used in this clause one would expect a supervening conscious decision on the part of the assured and its communication to the carrier and/or warehouseman. There was here no election by the assured for "storage other than in the ordinary course of transit". To the contrary. The goods in question at all times remained within such ordinary course, and in any event remained subject to the 60 day expiry period laid down in Clause 8.1.3, unless the 'held covered' provision within Clause 8.3 were to apply. It seems to me that the effect of the present argument would be to subvert this contractual structure, and in my judgment this defence fails, and fails clearly.

(ii) Policy No. 7 : Material Non-Disclosure

28. The point here is short. If successful, it would provide a complete defence in relation to a claim under one policy only, namely Policy No. 7. It is said that the plaintiff was guilty of material non-disclosure in that it must have known or suspected by 23 June 1995, the date of issuance of the policy, that goods wrongfully were being released to Dansun, and yet it failed to disclose to underwriters such knowledge or suspicion.

29. It is accepted in principle that if by this date Mr Teckchand indeed had had the knowledge or suspicion that Mr Medlej was obtaining release of his cargoes without taking up and paying for the shipping documents, such failure to disclose would entitle underwriters to avoid the policy.

30. The disagreement between the parties arises in terms of the assertion as to such state of mind as at 23 June 1995. Mr Teckchand stated that he had become concerned at the end of June 1995, and had caused his staff to check the position with the relevant shipping companies. More important in this context, he stated specifically, and I accept, that he did not have sight of one of the key documents in this case, a fax dated 23 June 1995 (a Friday) from Brazilian shipping agents detailing four shipments "already released to receivers against thru' original Bs/L" until one or two days after that date, that is, during the weekend of 24 or 25 June, and certainly by the following Monday, 26 June.

31. In response, Mr Sussex characterized the sequence of events around this time as "bizarre", and focused on the Medlej/Teckchand correspondence between 21 and 23 June in relation to two earlier shipments not the subject of this claim - namely, the first two shipments specified in the fax of 23 June - for which Mr Teckchand had received payment directly from Mr Medlej on 5 and 14 July and against which payment he had remitted original bills of lading which allegedly had not arrived in Paraguay - and this notwithstanding that at least by 26 June Mr Teckchand had seen the fax of 23 June, and consequently had learned that these two cargoes (together with shipments 4 and 8) already had been released on or by 1 June. Even more oddly, submitted Mr Sussex, such knowledge that Mr Medlej had obtained cargoes absent production of original bills of lading apparently had provoked no protest from Mr Teckchand, but merely a telex of 26 June to shipping agents concerning shipments 5 and 6.

32. The inescapable conclusion, argued Mr Sussex, was that Mr Teckchand was not disturbed by the fact that his Paraguayan customer had obtained delivery without bills of lading - "he just wanted to be paid" - and in light of the surrounding events he invited the court to conclude that as at the date of the issuance of Policy No. 7 Mr Teckchand simply had been turning a "blind eye" to what Mr Medlej had been doing.

33. I have reflected upon the factual sequence underpinning this submission. However, I do not consider that this defence can succeed. Whether or not Mr Teckchand was concerned more with payment than with "legal niceties", as Mr Sussex submitted, on the evidence before the court I am disinclined to find that as at Friday, 23 June 1995 Mr Teckchand knew or suspected what was happening but nevertheless failed to make due disclosure to underwriters at the time of the issuance of Policy No. 7. At bottom, there simply is not the evidence to sustain what is a serious allegation, nor do the surrounding facts and the particular Medlej/Teckchand correspondence relied on provide the inferential result Mr Sussex seeks to achieve. Accordingly in my judgment this line of argument fails also. In the fact of Mr Teckchand's direct evidence on the point, the defendant has not discharged the burden of establishing this allegation.

(iii) The Clause 16.1 defence

34. This was Mr Sussex's second point in the sequence of his submissions, although I take it last. To some extent, also, it is related to facts relied upon to support the non-disclosure argument.

35. Clause 16 of the ICC(A) deals with the duty of the assured to minimize losses. It is drawn in the following terms :

"MINIMISING LOSSES

It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder

16.1 to take such measures as may be reasonable for the purpose of averting or minimizing such loss, and

16.2 to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised

and the Underwriters will, in addition to any loss recoverable hereunder, reimburse the Assured for any charges properly and reasonably incurred in pursuance of these duties." (emphasis added)

36. As Mr Sussex pointed out, this is really a defence of set-off, the defendant claiming damages for breach of the plaintiff's duty under Clause 16.1 of the ICC(A) to take reasonable steps to avert loss, a duty which arises in circumstances where a reasonable (uninsured) man intent on preserving his property would take action: see, or example, ICS v. BTI, (1984) 1 Lloyds Rep. 154 at 158; and The "Vasso", [1993] 2 Lloyds Rep. 309 at 313, wherein Hobhouse J, observed:

" The subject matter of cl. 16, as of s. 78, is to make express the duty of the assured to minimize or avoid a loss and to provide for the assured to be indemnified against the expenses that he so incurs. Neither cl. 16 nor s. 78 has any role in defining the scope of the primary cover. It states a collateral duty which arises once an insured peril has begun to take effect and confers collaterally an additional indemnity in connection with the performance of that duty. Neither under the statute nor under the clause is the assured required to act unreasonably or to undertake any step other than one which could reasonably be expected to result in the avoidance or reduction of the loss. The word 'reasonable' is included in 16.1 and the word 'properly' is included in 16.2.

.... . On the correct construction of the clause more has to be shown than merely that some step was not taken. Underwriters have to show that the step was a proper one which a reasonable assured, having regard to the interests of himself and the insurers and to the provisions of the policy, should have taken."

37. The defendant's case is that it is clear from the evidence that the plaintiff knew, or at least had real reason to suspect, from at worst as early as 26 June1995 that the cargoes were being stolen, and that being so the plaintiff came under a duty to exercise reasonable care to avert loss of those cargoes not yet so obtained - in this case, as at 26 June some four shipments, namely those covered by Policy Nos. 1, 2, 3 and 7.

38. Mr Sussex argued that the plaintiff did not take proper steps to ensure that these cargoes were properly protected against theft. Mr Teckchand, he said, should have alerted the relevant carriers early in the day to the fact that Mr Medlej in fact was obtaining release of the cargoes without original bills of lading, and should have told the carriers that original shipping documents had not yet been taken up or paid for. Moreover ultimately the plaintiff had had the ability to collect the goods itself, albeit having discounted the bills of exchange drawn on Mr Medlej, and having already been placed in funds by the discounting banks, it might have been required to repay such sums to those banks. But in any event, submitted Mr Sussex, at this stage, that is, at the end of June 1995, Mr Teckchand should if necessary have visited Paraguay to obtain whatever legal practical assistance was required in order to assure that Mr Medlej could not steal any other cargoes.

39. For the plaintiff, Mr Smith SC took firm issue with this line of defence. The substance of his submission was that it was only considerably after 24 June (or 26 June 1995) that Mr Teckchand began to discern what might be happening, that in any event any concerns arising from the fax of 23 June necessarily would have been assuaged by the apparent inclination of Mr Medlej to send the money regarding two collateral shipments not the subject of this case (the original bills of lading only being forwarded by Mr Teckchand after receipt of such monies), that of the four shipments now in question two had dates of wrongful delivery very close to the date of the alleged 'knowledge', and that in any event (as the sequence of events with regard to the Policy No. 2 goods demonstrated), such goods apparently were released by the carrier notwithstanding appropriate warnings from the plaintiff.

40. Having considered the respective positions, it seems to me that this line of defence has little prospect of success in terms of two of the four shipments presently in issue. The chronology demonstrates that goods the subject of Policy No. 3 were wrongfully released to Dansun at Paranagua on 30 June 1995, whilst four days later, on 4 July 1995, goods the subject of Policy No. 1 were so released at Santos.

41. Mr Smith argued that the dates of these two releases were very close to the alleged 'date of knowledge' of 26 June (or 24 June) so that, as he put it, there would have been a "very short window" for Mr Teckchand to comply with the requirements of Clause 16.1 and "to take such measures as may be reasonable for the purpose of averting or minimizing such loss".

42. I take this point, although in itself it is not conclusive. If, for example, on 26 June 1995 Mr Teckchand indeed had known or understood that which undoubtedly he learned later, it seems to me that the efficiency of modern communications would have served to obviate the admittedly "short window" of opportunity open to him in relation to these shipments.

43. However, clearly more relevant in this instance is that Mr Teckchand has said, and I accept, that whilst indeed he had become concerned by the end of June, he did not know then what in fact was happening. Checks by his staff with the carriers had yielded information that some containers had been delivered against original bills of lading, but upon approach to Mr Medlej in their frequent telephone calls the latter had insisted that this was erroneous, and that the goods in question were still on hand at the ports to be collected when financially he was able so to do. Nevertheless, Mr Teckchand said, he remained "concerned that we were not being told the whole story", and as a matter of prudence he had cancelled four additional shipments scheduled for July, albeit without informing Mr Medlej of this fact.

44. In his evidence-in-chief, Mr Teckchand stated that on his return to Hong Kong from India in late August (having received no additional monies from Mr Medlej in the interim) he had resumed his efforts to find out what was going wrong. It was by this time, he said, that the banks had confirmed that they still held the original bills, and he stated that "I realized that the copies sent to me previously [by the carriers] must be forgeries". Accordingly, since he could get no satisfactory explanation he had decided to go to South America "to try to find out the facts for myself", which he did on 15 September 1995. Ultimately he had confronted Mr Medlej on 18 September, and whilst Mr Medlej did not deny he had taken delivery of the plaintiff's goods, he denied that he had used fraudulent bills to do so, and had insisted that "he had given personal guarantees through contacts". By this stage, of course, all the goods in question had been lost, albeit Mr Teckchand was not unduly worried because he believed that a satisfactory payment schedule had been worked out with Mr Medlej.

45. Against this factual background, and in the context of the present defence, the question which arises is at what stage could Mr Teckchand reasonably be regarded as having known what was happening? And what reasonably should have done about it? As Everleigh LJ observed in ICS v. BTI, op.cit., at 158, in terms of the duty under section 78(4) of the Marine Insurance Act (the wording of which mirrors Clause 16.1 of the ICC(A)):

"Those words seem to me to impose a duty to act in circumstances where a reasonable man intent upon preserving his property, as opposed to claiming upon insurers, would act. Whether or not the assured can recover should depend upon the reasonableness of his assessment of the situation and the action taken by him. ....

From the point of view of insurers, they wish to encourage the assured to act expeditiously in an emergency where there is a risk of their having to meet a claim. The nature and degree of the risk will of course vary. It will determine what measures are reasonable to avert it. I therefore think that the sue and labour clause entitles the assured to recover the cost of such measures as were reasonably taken for the purpose of averting or minimizing a loss when there was a risk that insurers might have to bear that loss. I do not think that it is open to insurers by searching enquiries and detailed analysis to assert that as a matter of ultimate truth they would never have been liable. Section 78(4) would in such circumstances place an intolerable strain upon the assured."

46. Mr Teckchand could not recall the precise date when he could say that he knew about the forged bills of lading. He said in cross-examination that even at the end of August when he decided he had to go to Paraguay in order to see Mr Medlej he was "still not 100% sure" about what was going on. Nevertheless, having considered the totality of his evidence, it seems to me, and I so find, that at some stage shortly after his return to Hong Kong from India in late August 1995 that he must have realized what was happening, notwithstanding Mr Medlej's constant excuses and evasions. Indeed, the terms of his company's fax of 24 August to the shipping company with regard to the goods the subject of Policy No. 2 serves amply to demonstrate his state of mind at that stage :

"KINDLY PLEASE URGENTLY SEND A TELEX TO YOUR AGENT IN PARANAGUA TO INFORM THEM DON'T RELEASED THE ABOVE CARGO TO THE CONSIGEE UNTIL OUR INSTRUCTION.

WE WILL FULLY TAKE THE RESPONSIBILITY AND ALL THE CHARGES WILL PAID BY THE FURTHER CLIENT."

47. This attempt to prevent release proved unsuccessful, albeit given the release date is said to be 6 September 1995 it is not clear whether such release took place notwithstanding this instruction, or whether the instruction did not arrive in time for it to be acted upon. In any event a fax of 30 November 1995 to recovery agents from the Paraguayan agents of the carrier specifically disclaimed responsibility for the wrongful delivery against Dansun's presentation of the original house bill of lading, and concluded in these terms :

"PLS BE IN MIND THT WE ARE UNABLE TO KNOW WHETHER ALL THE ORIGINAL HOUSE B/L WHICH ARE DAILY PRESENTED AT OUR OFFICE BY THE VARIOUS CONSIGNEE ARE GENIUNE OR FORGED."

48. The thrust of Mr Sussex's approach was that Mr Teckchand clearly ought to have done more than he did, that he should have gone to Paraguay far earlier and, for example, obtained a court injunction against release. Disregarding for the moment the necessity for the co-operation of the banks (in light of their discounting role), in my view this is to pitch the obligation upon the assured unreasonably high, and certainly I have not been persuaded by a suggestion from the Bar that it would have been possible to obtain appropriate judicial relief in Paraguay at short notice (or, perhaps, at all). This argument in any event does not get off the ground in terms of cargoes the subject of Policies Nos. 1 and 3, given my finding as to the then state of Mr Teckchand's knowledge and the admittedly "short window" with regard to those shipments, whilst in terms of the goods subject to Policy No. 2 the fact that his specific instruction not to release was not honoured is not, I think, ultimately to be laid at Miruvor's door. It follows, therefore, that with regard to three of these four shipments, in my judgment this defence fails. The fact remains; as Mr Smith noted, that underwriters are subrogated to the assured's remedies against the carrier.

49. This leaves outstanding the claim for loss of the goods the subject of Policy No. 7, which goods wrongfully were released at Paranagua on 6 September 1995. I have, of course, earlier rejected the defence of material non-disclosure with regard to Policy No. 7, given the state of Mr Teckchand's knowledge as at 23 June 1995. On reflection, however, it seems to me that the Clause 16.1 defence with regard to Policy No. 7 has greater substance, not least because on the papers before the court Miruvor and Mr Teckchand appear to have done little to attempt protect the shipment - there is, for example, no similar fax instructing against release as was the case with the goods the subject of Policy No. 2. The only fax correspondence appears to be an inquiry from Miruvor dated 8 August 1995 requesting that the carrier send an urgent telex to its Paranagua agent to check the whereabouts of the goods, and if they had been released, to indicate what documents had been presented to obtain such release.

50. Why a similar course to that adopted in terms of the Policy No. 2 shipment did not take place in this instance is not clear. It would certainly have constituted a proper step which reasonably could and should have been taken. During cross-examination, Mr Teckchand asserted that he had "tried to hold" the cargoes of Policy Nos. 2 and 7 with the shipping line, but went on to say that "the only cargo I thought I could salvage was No. 2" - in which regard, of course, he had sent a specific fax requesting non-delivery whatever documents were presented - but he did not amplify further, counsel's probing notwithstanding.

51. At the end of the day I have concluded that, in terms of the Policy No. 7 shipment only, the plaintiff made an insufficient attempt to safeguard its goods, and accordingly should not be permitted to recover its claim under this head. If it so wishes, Miruvor remains in a position to maintain suit against the carrier for such wrongful delivery, but in terms of the loss of this shipment I decline to order that the defendant should be liable for the claim under this policy (in the sum of US$75,322.28), and this policy only.

(iv) Other matters

52. I have earlier noted that quantum is not in dispute. This is true save for one minor matter. It is this. In its course of dealing with Dansun, Miruvor had been given by Dansun a 20% 'roll-over' deposit in relation to shipments of electronic games. A dispute further exists as to whether this 'roll-over' deposit, of US$29,945, should be deducted from the overall claim at this stage. The defendant says that this must be the case - the deposit was, after all, used to secure precisely these electronic games shipments which, upon no payment being made, would have been used to offset the purchase price therefor - whilst the plaintiff wishes the deposit to be deducted from its subsequent claim for 'sue and labour' costs.

53. The existence of this minor accounting subplot was referred to only at the end of the trial, and it had been anticipated that it would be settled by agreement. This turned out not to be the case, and the respective solicitors for the parties subsequently attended upon a short chambers appointment in order to argue the point.

54. Having heard the respective positions, I favour that adopted by the defendant, and hold that this deposit sum, which was specifically advanced solely in respect of the particular shipments of electronic games, should be deducted from the claim at this stage, and not, as the plaintiff would have it, from the relevant sum ascertained due in terms of claimed 'sue and labour' expenses.

55. Accordingly, this further sum of US$29,945 must also be deducted from Mr Smith's downwardly revised claim (vide his Amended Schedule B, from the originally claimed US$947,253.64 to US$912,520.78), such downward revision being necessary because the plaintiff recognized that it was entitled to claim the value of the shipments only up to the relevant policy limits.

ORDER

56. By reason of the foregoing, therefore, the Order of this court in this case is as follows :

(i) The plaintiff is to have judgment against the defendant in the sum of US$807,253.50;

(ii) There be an order nisi that interest be payable on such principal sum at the rate of 1% over HIBOR from the date of the issuance of the writ herein, namely 7 June 1996, until the date of judgment, and thereafter upon such principal sum at the judgment rate from time to time prevailing until payment;

(iii) That the plaintiff be indemnified by the defendant against all expenses properly and reasonably incurred in complying with its obligations under Clause 16 of the ICC(A);

(iv) That the amount of such indemnity as aforesaid be assessed upon a reference to a Master of the High Court, who shall make all necessary directions as to the conduct of such reference; and

(v) There be an order nisi that the costs of this action (save and except for the hearing on 4 October 2001) be to the plaintiff, to be taxed if not agreed.