This was a claim made by Quadra (the claimant) against its insurers (the defendant) for the insurance compensation under the Marine Cargo Open Policy.

The claimant entered into agreements to purchase the grain with several companies belonging to the Ukrainian group Agroinvest (the seller). The seller sold the same party of grain not only to the claimant but to the other parties. This resulted in a shortage of cargo in the warehouse. When the claimant’s inspectors failed to enter the premises to inspect the cargo, the claimant claimed the loss of cargo. The insurers refused to pay the insurance compensation. The refusal was due to the absence of the insurable interest since the cargo did not physically exist.

In the first instance, Butcher J concluded that the cargo physically existed since the documents on it were issued when it was in the elevators. Furthermore, the inspectors’ reports confirmed the existence of the cargo. The Judge also found that the claimant had an insurable interest in the cargo, although it had no proprietary title. The insurable interest was established since the claimant paid the price for the grain and had an immediate right to its possession.

One of the issues before the Court was that the cargo was uncertain. The seller did not distinguish the cargo, and the elevators contained different kinds of grain. It was impossible to determine which grain should have been transferred to the claimant in ordinary circumstances. In any event, it did not mean that the relevant cargo did not exist.

The Court of Appeal upheld Butcher J’s judgment.

The case is interesting for several reasons. First, it has very peculiar circumstances. The Courts needed to deal with the seller’s fraudulent activities and decide whether the outcomes of such activities were covered by the insurance policy. Second, the judgments deal with the fundamental issue of insurance law, ie, the meaning of insurable interest. Third, although it was evident that the claimant did not commit fraud and should be compensated from the justice perspective, the decisions in the present case increased the insurers’ risks. The insurers should take these risks into account. Fourth, it is important to see how the Courts deal with the fraudulent documentation and evidence provided.

The importance of the relevant case is confirmed, among other things, by the fact that the ruling was permitted to be appealed in the Supreme Court. ■