In New Zealand, the Contracts of Insurance Act 2024 (Contracts of Insurance Act) introduces a new duty of fair presentation for non-consumer insurance contracts. The Court of Appeal of England and Wales (Court) has recently considered what constitutes a fair presentation of a risk in Delos Shipholding SA & Ors v Allianz Global Corporate and Speciality SE & Ors.[1]
The Decision
This case arose following the detention of the bulk carrier “WIN WIN” (Vessel) by the Indonesian Navy for anchoring in Indonesian waters without authorisation. Delos Shipholding SA (Delos) was the special purpose vehicle that owned the Vessel. Delos formed part of the NGM Group (NGM), a larger Greek shipping group. The Vessel had the benefit of a war risks policy (Policy) taken out by NGM. The Policy provided that the Vessel would be considered a total constructive loss if it was detained for over six months. Delos claimed under the Policy when the Vessel’s detention continued beyond this period. The insurers challenged the claim on several grounds including that Delos had breached the duty of fair presentation.
Delos’ sole director was Mr Evangelo Bairactaris, a solicitor who provided services to NGM. Three months prior to the Policy’s renewal, Mr Bairactaris was subject to criminal charges in Greece, which were unrelated to Delos. The charges concerned his alleged involvement in an organised criminal group engaged in drug trafficking, including the use of another vessel in connection with those activities (Charges). This was not disclosed to the insurers. Mr Bairactaris always denied the Charges and they were subsequently discontinued.
The duty of fair presentation under the Contracts of Insurance Act requires an insured to disclose every material circumstance it knows or ought to know. It will be material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms. The insurers argued the Charges should have been disclosed as they were material to the risk. Ultimately, this issue turned on whether knowledge of the Charges could be attributed to Delos.
In terms of actual knowledge, the Contracts of Insurance Act provides that the knowledge of persons who are part of an entity’s senior management or responsible for its insurance can be attributed to that entity. The Insurance Act 2015 (UK) (Insurance Act) contains identical provisions.
For both Acts, “Senior management” is defined as people who have significant decision-making power over how an entity’s activities are managed. Nobody involved with Delos knew about the Charges, except Mr Bairactaris himself. The insurer’s case was that as Delos’ sole director, Mr Bairactaris had to be its senior management.
The Court disagreed and found that directors were not automatically senior management. The Court held that Mr Bairactaris lacked significant decision-making power as NGM, in practice, controlled Delos, with Mr Bairactaris following NGM’s instructions. He was in effect a nominee director. Therefore, Delos did not have actual knowledge of the Charges against Mr Bairactaris.
The Insurance Act states that an insured ought to know what should reasonably be revealed by a reasonable search of the information available to it. The Court also found that Delos did not have constructive knowledge of the Charges because the Charges were not publicised and because it found that reasonable enquiries do not require asking a nominee director, with no operational role pointless questions. The Court noted that there was no evidence that such questions were routinely asked in the shipping industry, particularly where nominee directors are common.
Comment
New Zealand’s Contracts of Insurance Act borrows heavily from the UK’s Insurance Act. This decision is therefore likely to be considered by New Zealand’s court as very persuasive when interpreting the Contracts of Insurance Act.
The decision shows a rejection of a formalistic approach to determining who exercises control over a company. Rather than being able to rely on the position or office a person holds, insurers will need to understand how the entity is run and by whom. This may entail insurers scrutinising the governance of insureds more closely before accepting a proposal form/declaration.
If you have any questions about the Contracts of Insurance Act 2024, please get in touch with our Insurance Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
[1] Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2025] EWCA Civ 1019. On appeal from the High Court decision of [2024] EWHC 719.
