CA-2024-000950 - [2025] EWCA Civ 1019

I deal first with the issue of actual knowledge. ‘Senior management’ is defined by section 4(8)(c) of the 2015 Act to mean ‘those individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed and organised’. Who those individuals are in any particular case is a question of fact which requires an evaluation of all the circumstances. Thus it is necessary to identify the insured’s activities, to identify the individuals who make decisions about how those activities are to be managed and organised, and to consider the significance of each individual’s role in such decision-making. That is the kind of evaluative assessment with which this court should not interfere unless it is clear that the trial judge has gone wrong (see In re Sprintroom Ltd [2019] EWCA Civ 932, [2019] BCC 1031, paras 72 to 78, referring to a number of well-known authorities explaining the limited scope of appellate review in such a case).

In the present case I see no basis for thinking that the judge has gone wrong. On the contrary, on the basis of the facts which she found, which do not appear to have been seriously disputed, her decision that Mr Bairactaris was not part of Delos’s senior management was inevitable. In short, I agree with her reasoning as I have summarised it in paras 79 to 81 above.

In my judgement the judge was right to say that Delos’s activities consisted of owning and operating the vessel for profit. It mis-characterises those activities to say that they consisted of nothing more than administering the paperwork. For example, it was Delos which entered into contracts for the trading of the vessel, including charterparties and bills of lading, under which it acquired valuable contractual rights to freight or hire and undertook significant liabilities. If any disputes had arisen under those contracts, it was Delos which would have been the claimant or defendant in any litigation or arbitration. If profits were earned after taking account of operating expenses and loan repayments, it was probably important for tax purposes that those were the profits of Delos, a Marshall Islands company. I see no basis on which such activities can somehow be disregarded or treated as if they were not the activities of Delos. On the judge’s findings, Mr Bairactaris played absolutely no part in them, and had no role, let alone a significant role, in the making of decisions about them.

But even if the company’s activities can be narrowly confined to matters of legal and financial administration, it remains the case that Mr Bairactaris had no decision-making role. He simply did what he was told. So even on this basis, he does not come within the definition of ‘senior management’ in section 4(8)(c). It is not enough that he was merely ‘involved’ in such activities.

I would reject Ms Hopkins’ submission that the sole director of a corporate insured with no employees will always be part of the company’s senior management. There is nothing in the Act to require this. Whether an individual is part of an insured’s senior management depends on the factual issues raised by section 4(8)(c). I agree that a director (and perhaps even more so in the case of a sole director) will usually form part of a company’s senior management, but that is because in the ordinary course of events a director will satisfy the statutory definition, and not because of any rule of law which forces a director within the definition even when the facts do not fit.

This does not mean that Delos had no senior management. The individuals who played significant roles in the making of decisions about how Delos’s activities were to be managed and organised included at least Mr Nikolaos Moundreas and Mr Georgios Moundreas. These were the principal individuals who made relevant decisions and gave instructions to Mr Bairactaris. Other members of the Moundreas family or officers of NGM may also have come within the definition of Delos’s senior management, depending on the role which they played and the significance of those roles in the making of relevant decisions. A person may play a significant role in the making of decisions about how a company’s activities are to be managed or organised without holding any formal position in, or being an employee of, the company. However, it is unnecessary to explore how far Delos’s senior management may have extended beyond Mr Nikolaos Moundreas and Mr Georgios Moundreas as it is common ground that no potentially relevant individual knew anything about the charges against Mr Bairactaris.

So far as relevant, the conclusion which I have reached from the plain wording of the Act is confirmed, and certainly not contradicted, by the Law Commission Report and the Explanatory Notes. Paragraph 8.59 of the Report gives a series of examples of who would constitute the ‘senior management’ of various kinds of organisation. While it is fair to say that, in the examples given, the Law Commission expressed the view that the members of the board of directors would constitute the senior management, none of the examples resembles a one ship company with a nominee director.

Paragraph 54 of the Explanatory Notes says that, in a corporate context, senior management ‘is likely to include members of the board of directors but may extend beyond this, depending on the structure and management arrangements of the insured’, while paragraph 55 expresses the view that the categories of persons comprising senior management ‘are expected to be construed relatively narrowly, but are capable of being applied flexibly’. I respectfully agree. It is likely that, in most cases, members of the board of directors of a company will form part of (and in some case the entirety of) its senior management, but that will not necessarily be the case. It all depends upon the facts.

We were referred to a statement in Parliament by the Secretary to the Treasury which explained why an earlier version of the Explanatory Notes had been regarded as too narrow:

‘The Lloyd’s Market Association is concerned that the existing definition is too narrow and refers only to the board of the company, rather than potentially capturing people who are more operational. We have therefore amended the explanatory notes to make it clear that the senior management is likely to include the board, but can also go beyond it, depending on the corporate structure of the relevant policyholder.’

We heard no submissions as to whether a statement about the intention underlying an amendment of the Explanatory Notes, as distinct from the Bill itself, is admissible in accordance with Pepper v Hart [1992] UKHL 3, [1993] AC 593, but in any event this is of no real assistance. It adds little or nothing to what is apparent from the terms of the Act and the Explanatory Notes themselves, which is that identification of the individuals comprising senior management will depend on the corporate structure of the relevant policyholder.