Quadra Commodities SA v XL Insurance Company SE & Ors

For property insurance covering physical loss, the assured must prove that goods capable of being insured and lost physically existed at the relevant time. Documents affected by fraud may still evidence physical stock, particularly when supported by inspections, deliveries and the nature of the fraud.

An insurable interest is distinct from proprietary title. Under section 5(2) of the Marine Insurance Act 1906, payment or part-payment under a sale contract may suffice where the buyer may be prejudiced by loss, even if property, risk or identification of a bulk has not passed. The Sale of Goods Act 1979 does not impose an additional identification requirement.

Quadra purchased grain under contracts with Agri Finance and Linepuzzle, paid in full or in part, and declared the cargoes under a Marine Cargo Open Policy. The sellers’ Agroinvest group fraudulently issued multiple warehouse receipts for the same grain. Quadra claimed an indemnity for physical loss by misappropriation.

Butcher J entered judgment for Quadra after finding that corresponding grain existed and that Quadra had an insurable interest through payment and an immediate right to possession: [2022] EWHC 431 (Comm). The insurers appealed on existence, identification, possession and practical consequences. The central questions were whether the grain physically existed and whether Quadra’s contractual and possessory relationships sufficed without proprietary title or an identified bulk.

Appeal dismissed. The Court of Appeal upheld the judgment for Quadra under the Marine Cargo Open Policy.

1. On ground 1, the appellate court applied the restraint required when reviewing findings of fact, evaluations and inferences: Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5. The judge’s conclusion that grain corresponding in quantity and description to the cargoes existed when the warehouse receipts were issued was supported by three cumulative categories of evidence: warehouse records and analysis cards, stock inspections, and subsequent physical deliveries. The fraud involved multiple receipts for existing grain, not the creation of wholly fictitious goods. Even if the evidence established only the generic type and quantity of grain, the policy and declarations identified the insured goods generically.
2. On ground 2, an insurable interest does not depend on proprietary title or on the goods being ascertained or forming part of an identified bulk. The characteristics identified under section 5(2) of the Marine Insurance Act 1906 were present. Quadra’s payment or part-payment created a legal or equitable relation to the goods and potential prejudice from their loss. Cumberland Bone Company v Andes Insurance Co 64 Me 466 (1874) was applied as a principle of English law. The identification requirements in section 20A of the Sale of Goods Act 1979 concern proprietary interests and do not restrict insurable interests.
3. The Court additionally upheld, although unnecessarily for the result, the finding that Quadra had an immediate right to possession under Ukrainian law. The insurers had not pleaded or proved that competing rights defeated that right. The default application of English law and the presumption of similarity discussed in Brownlie v FS Cairo (Nile Plaza) LLC [2021] UKSC 45 could not repair that evidential gap.
4. The practical-consequences ground was also unsound. There was no evidence of other recoveries, and multiple indemnities would not be objectionable if required by the relevant policies. The Court left the proprietary-interest questions under section 20A and the alternative Fraudulent Documents Clause undecided, following the caution in Housden v The Conservators of Wimbledon and Putney Commons [2008] EWCA Civ 200.

• Court of Appeal (Civil Division): Appeal by the insurers dismissed. Judgment dated 21 April 2023: [2023] EWCA Civ 432.
• High Court, Commercial Court: Butcher J entered judgment for Quadra, with the amount to be determined if not agreed: [2022] EWHC 431 (Comm).