PROTECTING YOUR MARITIME TRADE SECRETS & COMMERCIAL REPUTATION

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Salt Ship Design AS v Prysmian Powerlink SRL [2021] EWHC 2633 is the latest case to offer us a valuable insight into the operation of the Trade Secrets (Enforcement etc.) Regulations 2018 [TSR]. Heard before Justice Jacobs in the Queen’s Bench Division (Commercial Court) the case concerns the design of a Cable Laying Vessel to become named The Leonardo Da Vinci – a specialist vessel used to lay undersea cable for power transmission, telecommunications etc. – owned by the Prysmian Group.

In 2017 Prysmian held a competitive tender process to appoint a designer for the new vessel, which was won by Salt (an independent Norwegian ship design company), who were appointed as the “exclusive designer” for the Project under a Short Form Agreement (SFA) dated 13th July 2017.

In due course it was the Vard Group AS (part of the Fincantieri Group) which entered into a ship building contract for the vessel with Prysmian in April 2018, from which point Salt played no effective further part in the design of the vessel, as Vard Group AS used a wholly owned subsidiary, Vard Design AS, for future design work (despite Vard Design AS having been an unsuccessful competitor to Salt in the 2017 tender process).

Salt brought legal proceedings against Prysmian on two grounds, breach of contract and misuse of confidential information and it is the latter which is now our focus.

Jacob J notes Salt’s case is Prysmian (together with the Vard group of companies) wrongly used Salt’s confidential information to develop an alternative design for the vessel. Salt relies upon the speed at which Vard purported to develop an alternative design for the vessel between 21st December 2017 and 3rd January 2018, and described this at trial as “the Christmas miracle”. Salt also relies upon what it alleges to be striking similarities between aspects of this alternative design and Salt’s. It is therefore alleged that Salt’s design work was wrongly used as a springboard, with Vard piggy-backing on it, and being encouraged to do so by Prysmian, so as to win the design work and cut out Salt. [8]

Salt sought a determination of the applicability of TSR, relying upon these Regulations for remedial purposes, specifically the appropriate dissemination and publication of the judgement at Prysmian’s expense, given the “allegedly damaging effects of Prysmian’s conduct on Salt’s reputation in the market.” [448]

Referring to relevant case law Jacob J concluded that Prysmian had acted in breach of both clause 6.4 of the SFA and its equitable obligations of confidence. In so doing he felt entirely satisfied that the requirements of Regulations 2 & 3 of TSR had been fully satisfied. [474-475]

Whereas Regulation 14 of TSR provided for injunctive or similar relief for Salt, Regulation 16 provides for compensation instead of an order under Regulation 14, as follows:

“(1) A person liable to the imposition of an order under regulation 14 may apply for, and a court may make, an order for compensation to be paid to the injured party instead of an order under regulation 14 – a) if at the time of use or disclosure the person neither knew nor ought, under the circumstances, to have known that the trade secret was obtained from another person who was using or disclosing the trade secret unlawfully,

b) if the execution of the measures in question would cause disproportionate harm to the person liable to the measures, and

c) if it appears reasonably satisfactory to pay compensation to the injured party.”

Prysmian submitted that compensation should not be available under Regulation 16, because any infringement was not made with the knowledge that unlawful acquisition, use or disclosure of a trade secret was being engaged in. Nor ought it to have known that it was, given the assurances it had received from Vard, a well-respected and reputable shipbuilder. This argument was, however, rejected on the facts by Jacob J. who regarded this, “as a bad case of breach of confidence…Prysmian did engage in blatant misuse of confidential information to facilitate an outcome where it could obtain a ship built by Vard with the benefit of the Salt design, but at a significantly lower cost.” [470]

Prysmian went on to advance two further arguments to Jacob J in relation to TSR:-

“First, it contended that they do not apply outside the UK, [because] all the alleged infringements took place in Norway, Italy and/or Singapore. Salt submitted, and I agree, that that the Regulations apply in the present case because Prysmian is subject to the in personam jurisdiction of this court and English law is the applicable law for the claims made.

Secondly, Prysmian contended that the regulations only came into force on 9th June 2019, after Vard’s design work … and… the conclusion of the shipbuilding contract. I agree with Salt that this is irrelevant. Regulation 19 provides that they apply to proceedings brought before a court after the coming into force of the Regulations, in respect of a claim for unlawful acquisition use or disclosure of a trade secret. In the present case, the claim form was issued on 12th July 2018 and the relevant temporal requirement is met.” [480 & 481]

Demurrage time bar clause. What is the time for “completion of discharge”?

In Euronav NV v Repsol Trading SA (mt Maria) [2021] EWHC 2565 (Comm) Henshaw J was faced with a dispute between owners and charterers as to whether a demurrage claim was barred by clause 15(3) of the Shellvoy 6 form, which requires notification to be made of a demurrage claim “within 30 days after completion of discharge” failing which the claim becomes time-barred. The Vessel discharged at Long Beach and disconnected hoses at 21:54 local time (PST – Pacific Standard Time) on 24 December 2019, as noted in the Statement of Facts and laytime statement. On 24 January the Charterers received owners’ brokers an email stating that: “According to owners, demurrage has incurred on above [subject] voyage. Hence, please take this email as demurrage notice”.

Whether owners’ notification was within the thirty days after completion of discharge depended on which time zone was used in respect of ‘completion of discharge’. It was agreed that when computing a period of time within which a certain thing must be done, the first day is not ordinarily counted and that the date of discharge – whichever date it was – was ‘day 0’ and not counted as one of the 30 days within which notification had to be given. In addition ‘day’, absent any contrary indication meant a calendar day, i.e. the period of twenty-four hours beginning and ending at midnight, and not merely a period of twenty-four consecutive hours.

If as charterers’ argued, one took local time in California, where discharge took place, day one would be 25 December and the claim submitted on 24 January would be out of time and time-barred. Owners argued that for three alternatives which would give the date of completion on 25 December, and day one on 26 December:   (a) the time zone of the recipient of the required notice (here, Spanish time, that of Charterers), (b) the time zone of the giver of the required notice (here, Belgian time, that of Owners) or (c) GMT, given that the contract applied English law?  On each of these approaches the claim would not be time-barred.

Henshaw J held that the date of completion of discharge is to be determined applying local time at the place of discharge for the following reasons [61]:

“i)                   The ordinary and natural approach is to allocate to an event (e.g. a historical event, or a person’s birth, marriage or death) the date that was current in the place where the event occurred.

ii)                 That approach gains some support from the authorities and commentary referred to in §§ 30-35 above.

iii)               The discharge of cargo from a vessel is a tangible physical event, which occurs at a specific location and in a particular time zone.  It will in the ordinary course be recorded in documents, such as the Statement of Facts and any laytime statement, as having occurred at the time and date current applying local time.  A contracting party would naturally expect the date stated in such documents to be the date of completion of discharge for contractual purposes.

iv)               The date of discharge of the cargo is significant not only for the purpose of notification of demurrage claims, but also for other purposes.  It represents the end of the contractual service to the shipper, and ends the running of laytime or demurrage.  Under clause 15(3) itself it is also the start date for the separate 90-day period for service of supporting documents.  It is generally the starting point for the time limit under the Hague-Visby rules for cargo claims.  It would be unnatural and illogical either (a) for there to be more than one date of discharge, used for different purposes, or (b) for the date of discharge pursuant to (say) the Hague-Visby rules to be determined by something as potentially arbitrary and non-transparent as the place of receipt (or, even, potential receipt) of a notice of any demurrage claim.  Whether the date of delivery for Hague-Visby purposes is determined using local time at the place of discharge (which I am inclined to consider the obvious approach) or using the relevant court’s own time zone (as was mooted during submissions but appears to me less attractive), Owners’ case creates the prospect of the same event being differently dated for different purposes.

v)                  The use of local time at the place of discharge gives rise to a single, clear and easily ascertainable date and time of completion of discharge.  It tends to promote certainty and reduce the risk of confusion.

vi)               It is inherent in a date based system that different time zones may apply to the events which define the start and end of the period, if they are in different countries.

vii)             The point that it is not essential to apply the same time zone to the beginning and end of the 30 day period under clause 15(3) is illustrated by a case where daylight saving time changes during the period.  If, for example, discharge is completed on a particular day in the UK, and a notice is served at half past midnight on day 31, the notice would be out of time even if the clocks had gone forward an hour to GMT + 1 in the meantime (so that half past midnight was 11.30pm on day 30 GMT).  

viii)           If it were appropriate to determine both dates using a single time zone, it would be more logical for that to be the time zone of the place of discharge.  As already noted, the completion of discharge is a significant physical event, with a natural date, usually recorded in contemporaneous documents, and with several consequences under the contracts relating to the voyage.

ix)               The considerations discussed in section (D) above give no compelling or sufficient to depart from the natural approach.

x)                  There is no ambiguity in clause 15(3) that might justify a contra proferentem interpretation.”

Extent of The Right of Subrogation in Insurance Law  

Sompo Insurance Singapore Pte Ltd v. Royal & Sun Alliance Insurance Plc [2021] SGGC 152

.

Singapore Marine Insurance Act 1994 (which is based on English Marine Insurance Act 1906) s. 79(1) stipulates (emphasis added):

Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.

The question in this case was: “does an insurer’s right of subrogation extend to the right to call upon a performance bond issued to the assured?”  

The facts can be summarised as follows: In December 2013, the Government of Singapore entered into a contract with Geometra for the transport of military cargo. It was a condition under the contract that Geometra would provide an unconditional performance bond for 5 % of the contract price. This was satisfied by Sompo issuing a bond in favour of the Government.

The Singapore Government also purchased an insurance policy from RSA with regard to this shipment against the risk of loss or damage to cargo. When the cargo was damaged during transport the Government sought and obtained indemnity for the loss from RSA, which then commenced a subrogated recovery action under s. 79(1) of the Act and called on the performance bond issued by Sompo. To this end, RSA’s lawyers wrote to Sampo and made a demand on the bond “on behalf of the Government of Singapore”. Sampo refused the call and the matter was then litigated. In the District Court, RSA secured a judgment in its favour. Sampo appealed the decision to the High Court.

One of the arguments put forward by Sompo was that the bond had ultimately expired as it was not called upon by the Singapore Government. This point was easily disposed by the High Court on the ground that the letter of the RSA’s lawyers was in effect written “on behalf of Singapore Government” as they acquired the right to wear the shoes of the assured, in this case the Government, pursuant to their right of subrogation.

The main discussion was whether the insurer’s right of subrogation extended to the right to call on the performance bond.  The High Court had no doubt that it did. Philip Jeyaretnam JC confirmed that the common law principle of subrogation grants an insurer the entitlement to every right the assured has to recover in respect of a loss including the right to call on a performance bond.    

The judgment is not only in line with the wording and ethos behind s. 79(1), but is in accord with the case law on the subject especially Castellian v. Preston (1883) 11 QBD 380; London Assurance Corp. v. Williams (1892) 9 TLR 96 and more recently England v. Guardian Insurance Ltd [2000] Lloyd’s Rep IR 409. Moreover, it would have been incongruous to hold that insurers are entitled to pursue subrogated recoveries against the person responsible for the loss but not use all rights and remedies that the assured would be able to pursue for recovery including calling on performance bonds. It is very likely that a similar judgment would have been delivered, had the case been litigated in England & Wales.

Misrepresentation in Procuring Insurance- Avoidance or Not?  

Jones v. Zurich Insurance [2021] EWHC 1320 (Comm)

When obtaining insurance cover for his Rolex watch in May 2018, Mr Jones made a representation to the insurer (Zurich), through his insurance broker, that he had not made any other insurance claim in the previous five years. This was not accurate as Mr Jones had previously claimed for a lost diamond in 2016.

Mr Jones put forward an insurance claim for loss of his beloved Rolex watch (valued at £ 190,000), said to have come off his wrist while skiing. The insurer turned down the claim on the basis that Mr Jones made a misrepresentation on his claim history and it would not have written the policy, or would have written it on materially different terms, had the true state of affairs been disclosed (s. 2(2) of the Consumer Insurance (Disclosure and Representation) Act (CIDRA) 2012). In the alternative, the insurer argued that if it had known the true state of affairs, it would have charged a substantially higher premium and the claim should be reduced proportionately. The insurer did not plead that the misrepresentation was “deliberate or reckless”.

His Honour Judge Peeling QC had no hesitation in holding that the assured failed to take reasonable care not to make a misrepresentation to the insurer when questioned about his claim history and he was also satisfied that the insurer could avoid the policy as it managed to demonstrate that it would not have entered into the insurance contract at all had it been aware of the previous claim made in 2016 for a lost diamond. In reaching this decision, the judge considered expert evidence from underwriters. Both experts agreed that some underwriters might accept this particular risk at higher premium and others would refuse to underwrite altogether, but different in emphasis as to how usual a refusal to underwrite would be. However, what ultimately swayed the judge was the fact that the underwriter (Mr Green) had expressed concern in his written notes about the jewellery element of the cover. He also stated in his evidence that “the answer to whether or not there had been ant previous claim was extremely significant to my assessment of the risk… it was already a case which was borderline declinature… it’s just not one which would fit our underwriting strategy.”. The judge accepted his evidence.

The judgment makes clear that the burden of proof on the insurer to establish that it would not have entered into an insurance contract is a high one but can certainly be satisfied especially in cases where underwriters could present to judge written notes confirming their hesitancy to take the risk in the first instance supported by reliable expert evidence. The relevant underwriter’s contemporaneous notes and records giving clues about his thought process at underwriting stage as well as copes of e-mails and documents provided by the assured and his broker were very helpful to advance the insurer’s case.       

The case was considered under the CIDRA 2012 (as this was personal insurance) but it is certainly a good illustration as to how the judges might interpret certain parts of the Insurance Act (IA) 2015 since CIDRA 2012 and IA 2015 share similar provisions (i.e. both of these legal instruments allow an insurer to avoid the policy for misrepresentation if the insurer can demonstrate that the misrepresentation was “deliberate or reckless” or “the insurer would not have underwritten the policy on any terms had there been no misrepresentation”).    

Time charter trip. Quantifying shortfall of bunkers remaining on board on redelivery.

In London Arbitration 19/21 the bunker clause in a trip time charter from the Far East to Egypt provided:

“8. BUNKER CLAUSE:

BOD about 830 metric ton IFO 380 CST about 78 metric ton LSMGO.

Prices both ends: USD425 PMT for IFO 380 and USD685 PMT for LSMGO. 

BOR about same as BOD of IFO and BOR as onboard of LSMGO.”

The vessel was delivered with 888.56 mt of IFO on board and redelivered with 686.07 mt. The owners were prepared to allow a margin of 2 per cent for the term “about” but submitted that even on that basis the charterers had redelivered with a shortfall of 184.7188 mt of IFO. They said that the prevailing market price of IFO at the place of redelivery in Egypt was US$510 per mt, and claimed the difference between that price and the charterparty price of US$425 per mt on the shortfall, a total of US$15,701.10.

The Tribunal  held that the word ‘about’ without further clarification imported a 5 percent margin for both delivery and redelivery. Owners argued that this was not the case on redelivery because the charterers had the opportunity of supplying further bunkers to make up the shortfall but deliberately decided not to do so. Although the Tribunal could see the attraction of the argument it rejected it as adding such a gloss to the usual understanding of the term ‘about’ would cause uncertainty and leave the parties in the dark as to the nature and extent of their obligations.

The Tribunal then held that the charter prices on redelivery only applied to legitimate quantities on delivery and redelivery and not to any quantities as submitted by the charterers. The appropriate comparison to be made was between the charterparty price and prevailing market price at the place of redelivery. Speculation as to where and at what price the owners might have taken on bunkers after redelivery had to be discounted as a matter of an independent commercial decision of the owners after redelivery. 

The Tribunal rejected Charterer’s argument that they had requested the owners to load more bunkers at Singapore but were told that the vessel did not have sufficient tank capacity to load the quantity proposed by the charterers. The charterers had not then taken on additional bunkers in Egypt because the supply of bunkers there was unreliable both in terms of service and quality. There was no warranty as to the bunker capacity of the vessel and/or its ability to take on board any quantity of bunkers required by the charterers at any time at Singapore, or elsewhere, during the course of the trip.

DAMAGE LIMITATION: TAKING BACK CONTROL OF IP DAMAGES POST BREXIT

By Jane Foulser McFarlane

The civil enforcement of intellectual property (IP) rights, was altered fundamentally when the Civil Enforcement Directive 2004/48/EC or IPRED, came into force. It was implemented to address the disparities between EU Member States for the enforcement of IP rights. The objective was to approximate legislative systems, so as to ensure a high equivalent and homogenous level of protection in the internal market. The Directive contains detailed obligations concerning final sanctions, preliminary measures and the disclosure and preservation of evidence, but the greatest effect upon UK IP law has been in relation to awards of damages and injunctive relief. However, since the UK exited the EU, with Brexit finally taking effect on 31 December 2020, it is wrong to assume that the remedies of the Enforcement Directive may no longer apply, as the civil enforcement regime for IP is now contained within the Post Brexit Trade and Co-operation Agreement (TCA), a 1246 page document, with the IP provisions set out at Title V and which came into effect on 1 January 2021, although the general principles of EU law now no longer apply to the UK, with EU regulations only continuing to apply in domestic law by virtue of the European Union (Withdrawal) Act 2018, which repealed the European Communities Act 1972, to the extent that they are not modified or revoked by regulations under that Act.

The object of Brexit was to ‘Take Back Control’, but the UK will still have to comply with some aspects of the EU aquis communautaire, since every EU Free Trade Agreement with other non EU countries, such as Australia or New Zealand, has a detailed IP Chapter and these countries are bound by bi-lateral agreements with the EU.If the UK wants to take back control of its IP laws it should redraft the Copyright, Designs and Patents Act 1988 (CDPA 1988). Brexit has made the need for a new Act more pressing, not less so.

Under the CDPA 1988, damages are awarded for infringement under section 97(2). There is no provision for an award of damages under section 97(1) where the infringer did not know and had no reason to believe, that copyright subsisted in the work to which the infringement action relates. However, without prejudice to any other remedy, section 97(2) allows the court to make an award of additional damages, after having regard to all the circumstances and in particular, to the flagrancy of the infringement and any benefit accruing to the defendant by reason of the infringement, thereby creating an implied punitive, or at least deterrent basis for a further award. Section 97 was not the most lucid legislative provision prior to 2004 and it was further complicated by the application of Article 13(1) of the Enforcement Directive. Under Article 13(1), the IP right holder can apply to the court for damages against an infringer who has the requisite knowledge that they were engaging in an infringing activity. The basis for such awards are compensatory, in that the damages must be appropriate to the actual prejudice suffered as a result of the infringing activity.

Under Article 13(1), the court has two alternative options for assessing the level of damages where the requisite knowledge is present. The first alternative under Article 13(1)(a), directs the court to take into account, all appropriate aspects, which include the negative economic consequences, including lost profits, which the right holder has suffered, unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as moral prejudice. The second alternative under Article 13(1)(b), allows the court, in appropriate cases, to set the damages as a lump sum on the basis of elements such as, at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the IP right in question. Where the infringer did not have the requisite knowledge, Article 13(2) gives the court the discretion to order the recovery of profits or the payment of damages which may be pre-established. Recital 26 of the Directive expands on Article 13, by stating that the aim is not to introduce an obligation to provide for punitive damages, but to allow compensation based upon an objective criterion, while taking account of the expenses incurred by the right holder, such as the cost of identification and research. 

Section 97(1) of the CDPA 1988 does not explicitly refer to the compensatory principle where damages can be awarded for infringement with knowledge, although like Article 13, the court may order damages which are arguably implicitly punitive in nature, even though there is an absence of requisite knowledge. The courts are now grappling with the contrasting provisions of section 97 and Article 13, when there is a recognised need to compensate the right holder based upon the infringer’s lack of respect for the law and also as a dissuasion to the infringer in question, as well as to other potential infringers, to prevent them from committing such acts of infringement in the future.

Several cases have illustrated the interpretation and interplay between section 97 and Article 13. The first case is Absolute Lofts South West London Limited v Artisan Home Improvements Limited, [2015] EWHC 2608 (IPEC), a case in which the dispute was about the quantum of damages for the defendant’s infringement of the Claimant’s copyright in 21 photographs of loft conversions undertaken by Absolute in the course of their business as providers of home improvements. There was no dispute that Artisan had used the photographs on their website, infringing the copyright held by Absolute. The issue for the court was the level of compensatory damages due to Absolute and whether they were also entitled to additional damages in accordance with section 97(2) of the CDPA 1988, the level of those damages, or whether the Absolute was entitled to a claim under Article 13 of the Enforcement Directive.

The parties had agreed the ‘user principle’ for the basis of calculating the compensatory damages, being the licence fee of £300.00 that Artisan subsequently paid for the use of the photographs. The court, with Hacon J sitting, went on to determine the issue of additional damages, which creates difficulties, as both regimes, under section 97(2) and Article 13 fall to be considered. Section 97(2) requires the court to assess whether the infringement is flagrant and the Article 13 criteria for assessment is the right holders lost profits, the infringer’s unfair profits and any moral prejudice caused to the right holder. The court accepted that the Director of Artisan had the requisite knowledge for the infringement and found that his ‘couldn’t care less’ attitude was sufficient to merit an award under section 97(2). However, the court’s conundrum did not end there, as Hacon J had to assess whether in fact, section 97(2) still applied, or whether Article 13 took precedence. In doing so, he referred back to his own decision in the case of Jodie Aysha Henderson v All Around the World Recordings Limited [2014] EWHC 3087 (IPEC), a case involving performers rights and liability for additional damages under section 191J(2) of the CDPA 1988 which is equivalent in all material respects to section 97(2). In that case, Hacon J had questioned whether the CDPA 1988 provisions continued to apply, but he had not been required to decide the point, whereas in Absolute v Artisan, the continuing applicability of section 97(2) was unambiguously in issue and had to be determined.

The complexity required in the court’s assessment of this issue cannot be understated and can only be briefly summarised here. Regulation 3(3) of the UK Intellectual Property (Enforcement etc) Regulations 2006, provide that this Regulation does not affect the operation of any enactment or rule of law relating to remedies for the infringement of intellectual property rights except to the extent that it is inconsistent with its provisions. The court found that this suggested that existing national law with regard to knowing infringement is preserved unless it is inconsistent with Regulation 3. Hacon J dismissed the proposition that either national law is consistent with Regulation 3 of the 2006 Regulations and therefore must be taken to have the same effect as Article 13(1) of the Directive and so to apply it in parallel is pointless, or it is contrary to the Regulations and should not be applied, with the implication that any national provision that falls short or goes beyond the relief contained within the Directive, is contrary to EU law. The court found that Article 2(1) of the Enforcement Directive preserves national legislation that provides for more favourable remedies than the Directive, which went no further than setting out a minimum level of EU wide remedies, it remained the position that a successful right holder can rely on either section 97(2) or Article 13(1), whichever provides the higher level of damages.

The court considered the distinction between punitive and compensatory damages, as English law is compensatory in nature, putting the Claimant back into the position they would have been in, but for the wrongful act. However, it was held that it would be wrong to limit the award of damages to a purely compensatory level under Article 13(1), as that provision allows the concept of unfair profits to be awarded. These can be indirect, as well as direct. In the case of Absolute and Artisan, Artisan suffered reduced profits leading to liquidation after it was forced to remove the infringing photographs from its website. The court implied that the company may have been liquidated sooner had it not relied upon the photographs and to that extent they had profited from the infringement on the back of Absolute’s intellectual creativity, whilst Absolute had not lost profits in the true sense. The strictly compensatory award of £300.00 would therefore lack the dissuasive element required by Article 3(2) of the Enforcement Directive and an award of £6,000 was made. A second assessment based on flagrancy was then made under section 97(2) and the same figure of £6,000 was awarded, but not on a cumulative basis, the total award being £6,300.

Hacon J revisited the the relationship between section 97(2) and Article 13 again, in the case of Phonographic Performance Limited v Raymond Hagan [2016] EWHC 3076 (IPEC) (PPL v Hagan). PPL brought a claim against Hagan for additional damages under section 97(2) to include a claim for unfair profits under Article 13(1), the issue of compensation having been dealt with at an earlier hearing. Both provisions require requisite knowledge, but whilst this is explicit under Article 13(1), it is not under section 97(2), where the court has to take flagrancy into account, which implied knowledge. Hacon J considered that it would be difficult to imagine circumstances in which additional damages would be appropriate without that knowledge. This case made the important point, in that it identified as an important factor, the extent to which an award of damages is likely to be dissuasive, the dissuasive element being to deter the infringer from infringing again and that other, potential infringers should be dissuaded from engaging in infringing activities.

It would have been reasonable to assume, having considered the inherent complexities involved when the courts award damages for IP infringement and the stated need to dissuade infringement, that greater consideration would have been given to the IP provisions of the TCA. IP Article 47 of that Agreement is materially the same as Article 13 and the UK has failed to take back control of its ability to determine how damages for IP infringement shall be awarded, with both regimes still  requiring consideration and assessment.

The time has now come, when the CDPA 1988 is torn up and placed in the legislative shredder and the remedies for IP infringement are clarified and simplified. For example, there should be two elements to an award of damages, with compensation determined first and a dissuasive element second. The requisite knowledge and issues such as flagrancy and unfair profits should go to the assessment of the level of the award and any new legislation should reflect the basis of Article 13 or Article IP 47 of the TCA in the new Act, thereby negating the need to balance one provision against the other, as the courts are currently having to do. Only then, will we go some way to taking back control of our IP and exercise some damage limitation.

Jane Foulser McFarlane ©
September 2021

Repudiation of time charter. Owners’ claim for summary judgment for damages.

The Marquessa (Giorgis Oil Trading Ltd v AG Shipping & Energy PTE Ltd) [2021] EWHC 2319 (Comm) involved repudiation of a time charter on Shelltime 4 form (as amended). Following repeated non-payment of instalments of hire, owners eventually accepted this conduct as Charterers’ repudiation and terminated the charter.  The vessel was then carrying a cargo, loaded on the orders of Charterers, for sub-sub-charterers, and having exercised a lien, as an act of mitigation, Owners agreed with Voyage Charterers to complete the voyage in exchange for payments to escrow.

 Owners applied for summary  judgment in respect of:

i)  unpaid hire accrued due prior to the termination of the Charterparty (the “Pre-Termination Claim”), and,

ii) damages consequent upon Owners’ termination of the Charterparty on the basis of Charterers’ repudiation or renunciation (the “Post-Termination Claim”), but excluding damages in respect of the period after the discharge of Charterers’ cargo from the Vessel.

Henshaw J rejected Charterers’ assertion that Owners had failed to allow for off-hire periods, presumably for the periods during which Owners suspended performance. Suspension of performance was permitted by the following clause in the charter.

“… failing the punctual and regular payment of hire …  [Owners] shall be at liberty to at any time withhold the performance of any and all of their obligations hereunder … and hire shall continue to accrue …”

Owners’ right to suspend performance was not a penalty. Nor was it arguable that Owner’s exercise of the right to suspend performance was an unlawful exercise of a contractual discretion.  The nature of the right is such that owners could reasonably have regard purely to their own commercial interests.  In any event, the suspension of performance in the present case was not arguably irrational, arbitrary, or capricious. Neither were Owners obliged to mitigate. Their claim was for liquidated sums due under the contract, not damages for breach. Further, any obligation to mitigate did not require them to refrain, while the Charterparty remained on foot, from exercising their right to suspend performance.  In any event, Owners did subsequently take reasonable steps to mitigate by means of their arrangement with the Voyage Charterers.

Henshaw J agreed that by the time Owners treated the Charterparty as having come to an end by reason of Charterers’ breaches a reasonable owner would have concluded from Charterers’ conduct that they would not pay hire punctually in advance as required by the Charterparty:

i) Charterers had failed to pay hire from the outset, and this continued over the ensuing months. 

ii) At most, Charterers expressed a willingness to perform, but repeatedly proved unable or unwilling to do so. 

iii) Charterers’ conduct in the present case deprived Owners of “substantially the whole benefit” of the Charterparty, and they were seeking to hold Owners to an arrangement “radically different” from that which had been agreed. 

It was not arguable, that Owners themselves were in repudiatory breach, for suspending performance and then reaching an agreement with Voyage Charterers: The charter entitled Owners to suspend performance, and the arrangement with the Voyage Charterers was a lawful step in mitigation, realising value from the exercise of Owners’ lien, and in any event post-dated the contract having come to an end upon their acceptance of Charterers’ breaches.

When the Charterparty came to an end in November 2020, the Vessel was laden with cargo and until discharge, no replacement charterparty at the current market rate was possible, and therefore there was no scope for entering into a mitigation charterparty. Accordingly damages ran at the charter rate up until discharge, from which Owners gave credit for address commission, Charterers’ payments and relevant sums received from the Voyage Charterers.  Credit was also given credit for the value of bunkers remaining on board at the date of discharge at the contractual rate in the absence of any evidence from Charterers as to the actual sums paid for the bunkers.

The correct date for assessing the credit for bunkers remaining on board was that of discharge on completion of the voyage for which Charterers had given orders, and not the date of termination. Clause 15 of the Shelltime 4 form (as amended) provides that “… Owners shall on redelivery (whether it occurs at the end of the charter or on the earlier termination of this charter) accept and pay for all bunkers on board …”.

The relevant date must, logically, be the date of actual redelivery, even if it was in fact later than the (natural) end of the charter or the date on which it was contractually brought to an end.  In any event, even if clause 15 were not construed in that way, owners would be still entitled to recover the bunkers used to complete Charterers’ voyage on a different basis, viz as damages or in bailment – as in The Kos [2012] UKSC 17.

Accordingly, Henshaw J found that Owners were entitled to summary judgment for a sum equivalent to hire from when they accepted Charterer’s repudiation to the date of discharge on the laden voyage in progress at that date, less credit for commission and bunkers remaining on board at the latter date.

“Inducement” Requirement for Non-Disclosure and/or Misrepresentation Further Clarified

What if the insurer ends up charging less premium and non-disclosure of material facts is a contributory factor? Could it be said in that case that inducement is established as a matter of law? This was essentially the thrust of the insurer’s appeal in Zurich Insurance plc v. Niramax Group Ltd [2021] EWCA Civ 590 against the judgment of Mrs Justice Cockerill, J (which also was reported on this blog last year). Reminding readers the facts briefly: the assured ran a waste collection and waste recycling centre and obtained an insurance policy from the insurer in December 2014. In September 2015 a fixed shredding machine, known as Eggersmann plant, was added to the policy with an endorsement. On 4 December 2015, a fire broke out at the assured’s premises and the Eggersmann plant along with the other plant was destroyed. The assured made a claim, which, at trial was valued at around £ 4.5 million, under the Policy. The majority of the claim related to the loss of the Eggersmann plant, which was valued around £ 4.3 million. The insurer refused to pay stating that the assured’s non-compliance with risk requirements under the buildings policy with another insurer and the fact that special terms under that policy were imposed on the assured were materials facts which needed to be disclosed under s. 18(1) of the MIA 1906. Mrs Justice Cockerill agreed that these were material facts and needed to be disclosed. However, it was held that the insurer failed to demonstrate that, if the facts had been fully disclosed, the original Policy for the plant (effected in December 2014) would not have been renewed. On the other hand, the insurer was able to demonstrate that, if the facts had been fully disclosed (especially imposition of special circumstances for the assured company by another insurer), the extension of cover for the Eggersmann plant would have been refused. Accordingly, it was held that the insurer was entitled to avoid the cover for the endorsement under the Policy and no indemnity was due for the loss of the Eggermanns plant.  Otherwise, the original Policy stood and the insurer was bound to indemnify the assured for the items of mobile plant which were covered by the original Policy (as renewed in December 2014) and damaged in the fire.

On appeal, the assured was essentially arguing that they should have been allowed to avoid the original policy as well as the Eggersmann endorsement as they ended up charging less premium as a result of the assured’s non-disclosure with regard to special conditions imposed on them by another insurer due to non- compliance with risk requirements. Before evaluating the legal position on “inducement”, it is worth highlighting facts that led the insurer to charge premium less than it would have normally done. When rating risks, the particular insurer normally apply a “commoditised and streamlined” process that take into account three aspects, namely the amount of the cover, the nature of the trade, and the claims experience. A junior employee of the insurer when entering these variables, instead of categorising the risk as waste, with an automatic premium of 6 %, categorised it as contractor’s portable plant, with a premium of 2.25, to which a loading of 40 % was applied. The argument of the insurer is that if full disclosure had been made, the risk would have been referred to the head underwriter who would have noticed the mistake and accordingly priced the premium correctly. The non-disclosure therefore fulfills a “but for” test of causation in that it provided the opportunity for a mistake to be made in the calculation of premium that would not otherwise have been made.

Popplewell, LJ stressed in his judgment, at [30], that

“in order for non-disclosure to induce an underwriter to write the insurance on less onerous terms than would have been imposed if disclosure had been made, the non-disclosure must have been an efficient cause of the difference in terms. If that test of causation is not fulfilled, it is not sufficient merely to establish that the less onerous terms would have not been imposed but for the non-disclosure.”                            


To support this finding, he made reference to several legal authorities, including the judgment of the House of Lords in Pan Atlantic Insurance Ltd v. Pine Top Ltd [1995] 1 AC 501, but perhaps the words of Clarke, LJ, in Assicurazioni Generali SpA v. Arab Insurance Group [2002] EWCA 1642, at [62] emphasised in the clearest fashion the accurate legal position:

“In order to prove inducement the insurer or reinsurer must show that the non-disclosure or misrepresentation was an effective cause of his entering into the contract on the terms on which he did. He must therefore show at least that, but for the relevant non-disclosure or misrepresentation he would not have entered into the contract on those terms. On the other hand, he does not have to show that it was the sole effective cause of doing so.”

 The Court of Appeal’s judgment in the present case, and the line of authority on the subject of inducement, is a good reminder that in most cases if an insurer cannot satisfy the effective cause test he will also be unable to satisfy the “but for test”. But the opposite is not always true. There could be cases, like the present one, where it is possible to satisfy the “but for test” but the non-disclosure or misrepresentation could still not be the effective cause leading the insurer to enter into the contract on the terms it did. Here, the reason for the insurer charging less premium for the risk underwritten in December 2014 was the error of the junior employee mistakenly categorising the risk. The insurer has, therefore, failed to prove that non-disclosure of the condition imposed by another insurer had any impact on the premium charged or the decision to insure the assured. Accordingly, the judgment of the trial judge on this point (lack of inducement to enable the insurer to avoid the original policy) was upheld.

The case was considered under the Marine Insurance Act 1906 (s. 18). The law in this area was reformed by the Insurance Act 2015 especially with regard to remedies available in case of breach of the duty to make a fair representation. There is no indication, however, that the law reform intended to alter the “inducement” requirement (and in fact the Law Commissions stated clearly in the relevant reports published that this was not the case). It can, therefore, be safely said that the decision would have been the same has the case been litigated under the Insurance Act 2015.       

When is a bill of lading not a bill of lading?

If something looks like a duck, but doesn’t swim like a duck or quack like a duck, then there’s a fair chance it may not actually be a duck. A salutary decision last Friday from Singapore made just this point about bills of lading. You can’t simply assume that a piece of paper headed “Bill of Lading” and embodying the kind of wording you’re used to seeing in a bill of lading is anything of the sort if the circumstances show that the parties had no intention to treat it as one.

The Luna [2021] SGCA 84 arose out of the OW Bunkers debacle, the gift that goes on giving to commercial lawyers with school fees to pay. In brief, Phillips was in the the business of acquiring and blending fuel oil in Singapore, and then supplying it to bunkering companies that would ship it out in barges to ocean-going vessels in need of a stem. One of those companies was the Singapore branch of OW. Phillips sold barge-loads of bunkers to OW on fob terms, with ownership passing to OW when the oil went on board the barge, payment due in 30 days and – significantly – not so much as a smell of any retention of title in Phillips.

When OW collapsed in 2014 owing Phillips big money, Phillips, having given credit to the uncreditworthy, looked around for someone else to sue. Their gaze lighted on the barge-owner carriers. For each barge-load, the latter had issued a soi-disant bill of lading to Phillips’s order with the discharge port designated rather charmingly as “Bunkers for ocean going vessels or so near as the vessel can safely get, always afloat”. The modus operandi, however, had been somewhat at odds with everyday bill of lading practice. The bunkers had in normal cases been physically stemmed within a day or so; OW (while solvent) had paid Phillips after 30 days against a certificate of quantity and a commercial invoice; and the bill of lading had remained at all times with Phillips, and no question had ever arisen of any need to present it to the carriers to get hold of the goods it supposedly covered.

On OW’s insolvency Phillips totted up the bunkers sold by it to OW and not paid for, took the relevant bills of lading out of its safe, and on the basis of those documents formally demanded delivery of the oil from the issuing carriers. When this was not forthcoming (as Phillips knew perfectly well it would not be) Phillips sued the carriers for breach of contract, conversion and reversionary injury, and arrested the barges concerned.

Reversing the judge, the Singapore Court of Appeal dismissed the claim. The issue was whether these apparent bills of lading had been intended to take effect as such, or for that matter to have any contractual force at all. Whatever the position as regards the matters that could be regarded when it came to interpretation of a contract, on this wider issue all the underlying facts were in account. Here the practice of all parties concerned, including the acceptance that at no time had there been any question of the carriers demanding production of the bills before delivering a stem to a vessel, indicated a negative answer.

Having decided that there could be no claim under the terms of the so-called bills of lading, the court then went on to say – citing the writings of a certain IISTL member – there could equally be no claim for conversion or reversionary injury.

This must be correct. Further, given the tendency of businesses to issue documents without being entirely sure of their nature or import, the result in this case needs noting carefully by commercial lawyers throughout the common law world.

A note of caution may also be in order, however, as regards carriers. You must still be careful what documents you do issue. True, the carrier in The Luna escaped liability because all parties accepted that the so-called bill of lading didn’t mean what it seemed to say (indeed, it doesn’t seem to have meant very much at all). But imagine that a bill of lading issued in these circumstances which ends up in the hands of a bank or other financier who is not aware of the circumstances and who in all innocence lends against it. The betting there must be that, as against the financier, the carrier issuing it would take the risk of being taken at its word. And this could be a very expensive risk, particularly since the chances of it being covered by any normal P&I club are pretty remote. Carriers, you have been warned.

Breach of the new Trade Secret law strengthens a claim to the application of the Rome II Convention

In his latest judgement in Fetch.ai v Persons Unknown & Others [2021] EWHC 2254 (Comm) His Honour Judge Pelling QC makes clear that not all claims in equity under Breach of Confidence will fall within the scope of the Rome II Convention, “[S]ome will where they involve unfair competition and acts restricting free competition, but many others will not.”[para.12]

Image by VIN JD from Pixabay

The case relates to confidential information in the form of an access key code, allowing an operator to trade in assets nominally credited to a cryptocurrencies Exchange Account. This confidential information had been acquired by persons unknown and used to perpetrate alleged fraud against the account holder, generating losses in excess of $2.6m.

It was contended that the decision of the Court of Appeal in Shenzhen Senior Technology Material Company Limited v Celgard, LLC [2020] EWCA (Civ) 1293; [2021] FSR 1 would lead one to the conclusion that all breach of confidence actions come within the scope of Rome II, Chapter II, Article 4.1., because the principles in Article 6 apply. Judge Pelling noted, however, what Article 6 is concerned with is anti-competitive practices and anti-competitive conduct, “Celgard had sought to restrain the defendant from placing its rival lithium-ion battery separators on the market in the UK or importing them into the UK on the basis that the defendant had obtained access to the claimant’s intellectual property in relation to its product; and, thus, what the defendant in that case was seeking to do was not merely a breach of confidence in equity, but was also contrary to reg.3.1 of The Trade Secrets (Enforcement, etc) Regulations 2018.” [para.11]

Applying the Rome II Convention in this instance allowed Judge Pelling to provide injunctive relief and various orders for disclosure in favour of the account holder.