Case Nos: CL-2022-000294; CL-2022-000557; - [2025] EWHC 2529 (Comm)

Merx Claim

By the time of the hearing on consequentials, Merx had settled with all its war risks insurers, with no order as to costs. The only remaining issues, accordingly, related to HFW AR Insurers’ claim for costs against it or against Merx’s war risks insurers, and as to Swiss Re’s costs.

As HFW AR Insurers were successful, they should be entitled to their costs. That is subject to the fact that, as in the case of AerCap’s All Risks insurers, I consider that there should be a discount of 10% to allow for HFW AR Insurers’ costs referable to non-peril issues on which they did not prevail.

The further question which arises is as to whether those costs should be borne by Merx or by War Risks Insurers, and if the latter whether there should be a Sanderson or Bullock Order.

In my view it is appropriate that War Risks Insurers should bear 100% of (90% of) HFW AR Insurers’ costs. Merx, unlike AerCap, supported All Risks insurers’ case on peril at trial. It described that case, in its Opening Submissions, as ‘irresistible’. HFW AR Insurers relied on Merx’s factual and expert witnesses.

As to whether there should be a Bullock or a Sanderson Order, Mr Shah KC for War Risks Insurers said that, if either, it should be a Bullock Order. He suggested that the settlements which had been reached between Merx and War Risks Insurers may have precluded a claim for costs by Merx against those insurers; that effect to such an arrangement would be given if a Bullock order was made; but that that arrangement might be undermined by a Sanderson order.

For his part, Mr Temmink KC for Merx objected to reference to the terms of what were confidential settlement agreements. He submitted that the court should consider whether, any issue of the settlements apart, it was appropriate for there to be a Sanderson order, and if so, to make one. He submitted that the case was clearly one where a Sanderson order should be made.

In my view, without consideration of the impact of the settlements, this is a case in which it is appropriate to make a Sanderson order. It was War Risks Insurers who were responsible, in the Merx action, for the incurring of the costs relating to the arguments on peril, which are the costs which I have found that HFW AR Insurers should be able to recover. It is simpler and more convenient for there to be a direct order for those costs to be paid by War Risks Insurers in this case, as in the AerCap claim.

I do not consider that I should have regard to whether a Bullock Order might mean that Merx could not recover any costs of HFW AR Insurers which, under such an order, it was ordered to be liable for in the first instance. I have not seen the terms of the settlements. If they are as Mr Shah KC suggested, then that would mean that the parties have not made contractual provision for the situation where a Sanderson Order is made, and were content that, if the court decided to make a Sanderson Order, War Risks Insurers should bear that liability. That does not appear to me to be a reason not to make a Sanderson Order, if I otherwise considered it appropriate to do so. As I have said, I do so consider.

As to a payment on account of HFW AR Insurers’ costs, I consider that this should, as in the AerCap case, be of 50% (of 90%) of their costs.

Issues have been canvassed as to the apportionment of costs amongst HFW’s clients, in light of the overlap of issues across the AerCap, Merx and KDAC claims. Those matters appear to be ones which will arise, if at all, on the detailed assessments of costs. They are not matters on which I need to adjudicate at this stage.

Swiss Re also seeks its costs of the Merx action as against Merx, alternatively as against War Risks Insurers.

Swiss Re was sued by Merx only as an all risks insurer. I accordingly consider that, in principle, it should be entitled to its costs as against Merx, and, by way of a Sanderson order, against War Risks Insurers. I would reduce the percentage of its costs which it can recover, however, in the same way as for HFW AR Insurers in order to take account of non-peril issues, and thus order that it can recover 90% of its allowable costs from the War Risks Insurers.

I was, however, pressed by War Risks Insurers with the point that, given that Swiss Re was solely an all risks insurer in Merx, its interests would inevitably have been, and were, fully protected by HFW AR Insurers, and that there was no justification for it to have incurred any substantial costs, and certainly not the very significant amounts which it claims. I cannot make any determination of how much of Swiss Re’s costs may ultimately prove recoverable, but can say that the magnitude of costs claimed by Swiss Re in relation to the Merx action surprises me. Given the degree of my uncertainty as to the level of Swiss Re’s costs which will prove recoverable, I decline to make an order for an interim payment.