MOK Petro Energy FZC v Argo (No 604) Limited & Ors

In an all-risks marine cargo policy, the insured must prove on the balance of probabilities that a fortuity caused loss or damage to the insured subject matter. Evidence casting plausible doubt on load-port certificates does not shift that legal burden.

The blending of component products does not itself damage a cargo merely because the resulting product has an undesirable inherent characteristic, such as a high phase separation temperature. Cover for a specific shipment attaches to goods appropriated to the insured voyage; it does not necessarily cover an undivided bulk before appropriation.

A survey warranty requiring inspection and certification may require both. “Clean” means compatible with the nominated cargo, and certification must be supplied within a reasonable industry period. The claim failed on the evidence and, alternatively, for breach of warranty.

MOK Petro Energy insured a cargo of M15 gasoline under an all-risks marine cargo policy. The cargo was certified as compliant at Sohar but later phase-separated and was rejected in Yemen.

MOK claimed that water contamination during loading fortuitously damaged an otherwise compliant cargo. Alternatively, it argued that the deliberate choice of blend proportions was a fortuity which created a defective cargo. The insurers disputed the reliability of the load-port certificates, relied on the cargo’s inherent characteristics, and alleged breach of a survey warranty concerning the shorelines.

The central issues were whether MOK had proved fortuitous damage and loss, whether blending could constitute damage, and whether the survey warranty had been breached.

1. Primary case. MOK bore the legal burden of proving that the cargo was damaged by a fortuity and of proving the loss attributable to that damage. The insurers bore only the evidential burden of raising plausible doubt about the load-port certificates. Once that doubt was raised, the legal burden remained on MOK.
2. The 2018 testing was sufficiently reliable to show that the cargo blended in the actual proportions had a phase separation temperature substantially above the temperature required for the contractual tests. MOK therefore failed to establish that the certificates accurately represented the cargo’s condition on loading. Since cargoes with phase separation temperatures of 17°C and 29°C had materially the same value, the primary claim failed.
3. Alternative fortuity case. The choice of blend proportions was assumed to be fortuitous, but blending did not cause relevant damage. A phase separation temperature was an inherent characteristic of the blend, and the blended cargo did not exist in another physical state before the alleged damage. The case was analogous to Bacardi-Martini Beverages Ltd v Thomas Hardy Packaging Ltd, [2002] EWCA Civ. 549, [2002] 2 Lloyd's Rep. 379. MOK also failed to prove that another blend would have met all contractual specifications or had a higher value.
4. Survey warranty. “Clean” shorelines meant shorelines containing no residues incompatible with the nominated cargo. Inspection required the usual industry steps, but certification was a separate requirement. The March 2023 certificate was supplied too late. The warranty wording did not clearly contract out of the Insurance Act 2015. In any event, under sections 10 and 11, the relevant term had to be considered as a whole, and non-compliance could have increased the risk of the loss.
5. The claim was dismissed. The inherent-vice and quantum issues did not require determination.