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Brillante Virtuoso: Commercial Court rules on high-profile scuttling dispute

9th Oct 2019

Suez Fortune Investments Ltd & Piraeus Bank AE v. Talbot Underwriting Ltd & others [2019] EWHC 2599 (Comm)

The Commercial Court has handed down judgment in Suez Fortune Investments Ltd & Piraeus Bank AE v. Talbot Underwriting Ltd & others [2019] EWHC 2599 (Comm), concerning the loss of the oil tanker Brillante Virtuoso. Following a 52 day trial, Mr Justice Teare decided in favour of war risk underwriters on all the points of significance in the case, and in particular found that the vessel was fraudulently destroyed on the instructions of its beneficial owner, Marios Iliopoulos. The bank had claimed that the loss was due to a genuine fortuitous pirate attack.

The Brillante Virtuoso had been boarded by a group of seven armed men in July 2011, while drifting late at night off the Yemeni coast. The vessel was then ordered to head towards Somalia, but in fact only sailed a short distance from Aden before the engine stopped. The vessel was then set on fire by the detonation of an explosive device in its engine room. The fire spread and caused severe damage to the vessel, which became a constructive total loss. The armed men disappeared and were never found.

Proceedings were brought under the vessel’s war risks policy by the vessel’s owner and mortgagee bank, claiming an indemnity of US$77 million plus interest. The vessel was found by Mr Justice Flaux in 2014 to have been a constructive total loss. In 2015, war risk underwriters alleged wilful misconduct. The owner’s claim was struck out in 2016 for a failure to comply with disclosure obligations, Iliopoulos having been found by Mr Justice Flaux to have invented a false story in an attempt to explain his failure to make disclosure (see our news item of 17th May 2016). The claim was then pursued by the bank alone, but the central issue remained whether the attack on the vessel was or was not fortuitous.

The Commercial Court has accepted the insurers’ allegations, finding that “the supposed attack by pirates was a fake attack”, and that in reality it was a charade orchestrated by Iliopoulos. The vessel’s master and chief engineer, who gave evidence at the trial, have been found to have been complicit in the scheme, alongside local Aden-based salvors. Poseidon Salvage, and current or former members of the Yemeni coast guard or navy. The remarkable facts of the incident and the owner’s involvement were found to be proved to the necessary high standard, with the Court concluding that there was no plausible innocent explanation for the loss, and that it was not left in any doubt that the relevant events were instigated by Iliopoulos. The case is also of interest for its legal analysis of the standard form war risks perils, particularly “piracy” and “persons acting maliciously”, which have been held not to apply to the deliberate destruction of property by its owner for purposes of insurance fraud, even where the claim is by a mortgagee bank. War risk underwriters were also successful on a number of subsidiary and alternative defences.

This case note has been prepared by Jonathan Gaisman QC, Richard Waller QC and Keir Howie (all of 7KBW) who acted for the war risks insurers together with Nichola Warrender (of Quadrant Chambers), instructed by Kennedys Law LLP.

Please view the judgment here.