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

For the insurers Ms Hopkins challenged the judge’s conclusions on the knowledge issues, while Mr David Walsh KC dealt with the issue of inducement and remedy. Ms Hopkins submitted that the starting point should be that a director is part of the senior management of a company. Indeed she submitted that the sole director of a corporate insured with no employees will always be part of the company’s senior management, on the basis that there is nobody else who could be. On the facts of the present case, the judge was wrong to say that Delos’s activities included operating the vessel for profit as that was the function of NGM and FML. Rather, Delos was a special purpose vehicle whose only activity consisted of dealing with the paperwork associated with the company’s administration, i.e. the legal and financial formalities associated with ownership of a vessel. That comprised the organisation of the company’s activities and was a matter in which Mr Bairactaris had a significant role. If the judge’s reasoning was correct, that would lead to the startling conclusion that Delos had no senior management within the meaning of the Act at all, which could not be what Parliament and the Law Commission had intended.

On the issue of what the insureds ought to have known, Ms Hopkins did not repeat the submission made to the judge that Mr Bairactaris should have been asked whether he was the subject of any criminal proceedings. She limited her case to a submission that, as the sole director of not only Delos but many other companies within the NGM Group, he should have been asked whether he knew of any circumstances which might affect the risk. She submitted that the fact that he had no operational role was not a good reason why that question need not be asked because there were potentially material circumstances which might have been known to him in his capacity as the sole director. Indeed, this was demonstrated by the very fact that the judge found the charges against Mr Bairactaris to be material.

On the issue of inducement and remedy, Mr Walsh pointed out that according to paragraph 5 of Schedule 1 to the Act, if the insurer would have entered into the contract, but on different terms, the contract is to be treated as if it had been entered into on those different terms if the insurer so requires. But the Act does not go on to require consideration of whether the insured would then have taken steps to comply with those different terms. In the present case the judge had found that the insurers would have entered into the contract, but only after imposing a condition that Mr Bairactaris should resign as a director. Accordingly the policy had to be treated as if it contained such a condition. As Mr Bairactaris had not in fact resigned as a director, the insurers were entitled to reject the claim and that was the end of the matter. It was irrelevant that, as the judge had found, if such a condition had been imposed, Mr Bairactaris would in fact have resigned.