May 10, 2016

War Risks Policies/Sanctions - Suez Fortune v Talbot Underwriting (High Court)

Judge refuses relief from sanctions where claim struck out for breach of a disclosure unless order

The insured vessel was allegedly seized by pirates, who set off an explosive in the engine room, rendering the vessel a constructive total loss (as Flaux J had found). The owners claimed under the war risks policy issued by the defendant insurers. Unusually, the parties had agreed that the issue of quantum would be tried before liability and so a split trial was ordered.

Following the decision on quantum, the judge made a consent order for disclosure which included an order for Peruvian Guano disclosure as well as specific disclosure of certain categories of documents. The owners missed the deadline for that disclosure and an extension was given by the court. The owners' solicitors were unable to comply with their disclosure duty which (as described in Matthews & Malek On Disclosure and approved by the Court of Appeal in Hedrich v Standard Bank (2008)) is as follows: "The solicitor has an overall responsibility of careful investigation and supervision in the disclosure process and he cannot simply leave this task to his client … The best way for the solicitor to fulfil his own duty and to ensure that his client's duty is fulfilled too is to take possession of all the original documents as early as possible. The client should not be allowed to decide relevance – or even potential relevance – for himself, so either the client must send all the files to the solicitor or the solicitor must visit the client to review the files or take the relevant documents into his possession. It is then for the solicitor to decide which documents are relevant and discloseable".

Following the issue of a final order, an unless order was made against the owners. When the owners failed to comply with the unless order, the insurers sought the strike out of the claim and the owners sought relief from sanctions and an extension of time. Flaux J refused to grant relief. In a lengthy judgment setting out the factual background to the case, the judge concluded that the owners had deliberately misled the court regarding their ability to comply with the order. Even if the owners' case had been accepted, it was clear that they did not intend to comply with the disclosure order and there was no realistic prospect of success of any court process outside the jurisdiction to compel them to comply. The breach was serious and deliberate and no fair trial could now take place. Accordingly, the owners' claim was struck out.