Judgment handed down in Oceanus Capital SARL v Lloyd’s Insurance Company SA – The “Vyssos” [2025] EWHC 3293 (Comm)
On 6 July 2026, the Court of Appeal handed down judgment in Oceanus Capital Sarl v Lloyd’s Insurance Company SA – The “Vyssos” [2026] EWCA Civ 863. Nick Vineall KC and Neil Dowers, instructed by Chris Grieveson and Alice Hoare of Wikborg Rein, acted for the successful respondent.
The background to the case is that, in late December 2023, the Vyssos (the Vessel) struck a mine in Ukrainian waters. Fortunately nobody was killed, but the Vessel was a constructive total loss.
The owners’ war risks insurance did not respond because the Vessel was trading in breach of trading warranties contained in that policy. Additional war risks cover that the charterers had purported to put in place to cover the trip to Ukraine turned out to be a forgery. The owners were left without insurance cover for the casualty.
The Vessel’s mortgagee claimed under its mortgagee’s interest insurance policy (the MII Policy) for the loss of its security interest in the Vessel. The insurers declined cover on three grounds: (1) the proximate cause of the mortgagee’s loss was the forgery, not anything covered by the MII Policy; (2) the mortgagee, who had been taking a closer interest in the Vessel’s employment than would normally be expected of a mortgagee, was privy to the breach of trading warranties in the war risks cover; and (3) the breach of the trading warranties in the war risks policy was not fortuitous, because the mortgagee always knew that the trip to Ukraine would breach the trading warranties. There was also a threshold issue between the parties as to what interest the MII Policy insured.
On 17 December 2025, Sue Prevezer KC, sitting as a Deputy High Court Judge, handed down judgment (Oceanus Capital SARL v Lloyd’s Insurance Company SA – The “Vyssos” [2025] EWHC 3293 (Comm)) rejecting the MII insurer’s defences and awarding the mortgagee an indemnity in an agreed sum.
The Court of Appeal (Newey, Males and Popplewell LJJ) dismissed the appeal for reasons largely mirroring those given by the Deputy Judge in the Commercial Court. Popplewell LJ gave the unanimous judgment of the court, holding in summary:
(1) The insured interest under the mortgagee’s interest insurance policy was the mortgagee’s interest in the Vessel as mortgagee, and that the insured loss under the policy was the loss to the mortgagee’s security interest in the Vessel itself, subject to a cap in the amount which would be recoverable under the owner’s relevant underlying policy. Applying the approach to composite insured perils from FCA v Arch [2021] UKSC 1, the insured peril under the policy was a composite of three insured perils operating on one another to cause the loss in combination: (1) loss of or damage to or liability of the Vessel; (2) occurring by reason of one of the perils insured under the owner’s primary policies which operate to give prima facie cover; and (3) non-payment under such policies by reason of the insured perils defined in the MII policy.
(2) The judge below was correct to approach the question of proximate cause as a question of whether the requirements of the insuring clause were fulfilled, which (subject to privity) they were in this case. The proximate cause of the mortgagee’s loss was the composite insured peril identified above. The forged December additional cover note was not one of the owner’s policies and club entries within the meaning of the insuring clause because it was a fraudulent nullity. The mortgagee’s subjective understanding was irrelevant to the question of whether the insured perils caused loss. The relevant counterfactual was: what would have happened had there been no dishonesty? In those circumstances, the Vessel would have travelled to Ukraine anyway and the loss would have happened as it did. This conclusion accords with the commercial reality of the mortgagee’s position, whose approach to events could not fairly be criticised.
(3) As to privity, while fraud does not destroy the fact of consent induced by that fraud, it may negative legal rights or obligations flowing from that consent. The deception must be sufficiently closely connected to the subject matter of the privity to vitiate the consent element of such privity. In this case, the deception was sufficiently closely connected to the breach of trading warranties under the owner’s war risks policy because it caused the mortgagee to believe that the MII Policy would not be called on to respond to a casualty. Popplewell LJ also observed that, had the deception been about an endorsement to the existing war risks policy (rather than a separate policy), the fraud would undoubtedly have vitiated consent. Since it would have been a matter of commercial indifference to the mortgagee which form the additional cover took, it would be uncommercial for the existence of privity to differ based on this happenstance.
(4) As to fortuity, the insured loss was the loss to the mortgagee’s interest in the Vessel. That loss arose, and only arose, because there was damage to the Vessel as a result of a fortuitous mine strike. Where there are a number of insured perils that must act in combination to bring about the insured loss, the fortuity principle can only apply if each of them acting with the others is inevitable so that the combination of them is inevitable. Moreover, on the insurer’s case, a lack of fortuity only exists where the loss is the inevitable consequence of a voluntary choice by the insured, and for the same reasons that consent was vitiated by fraud, so too was any relevant choice by the mortgagee for the purposes of assessing fortuity.
The case is also a remarkable advert for dispute resolution before the English commercial courts, having taken just two-and-a-half years from the casualty to the Court of Appeal’s judgment.
Article written by Mek Mesfin.
Read the full judgment here.
