MV Renos  UKSC 29
The Supreme Court has today handed down judgment in the case of MV RENOS, a long-running marine insurance dispute raising issues relating to constructive total loss (“CTL”).
The case arose out of a casualty in August 2012, in which the vessel was damaged by an engine room fire. The owners of the vessel subsequently brought a claim for CTL against the insurers, arguing that the cost of repairing the vessel would exceed the vessel’s insured value of $12 million.
Following a three week trial in 2016, Knowles J held that the vessel was a CTL, and the owners were accordingly entitled to a full indemnity under the policy. The Court of Appeal upheld that decision. In a unanimous judgment, the Supreme Court has held that the order of Knowles J should be set aside, and the case remitted to him for further consideration.
There were two issues before the Supreme Court. The first was whether costs incurred by the owners prior to the service of a notice of abandonment could rank towards the CTL calculation. This is an issue which has long been controversial, with no clear and authoritative guidance from the courts. Upholding the decisions of the courts below, the Supreme Court held that such costs could rank. In reaching this decision the Court has therefore finally resolved this long-standing debate.
The second issue was whether SCOPIC costs payable to the salvors of the vessel could rank. On this issue the Supreme Court overturned the decisions of the Courts below, holding that such costs could not rank. According to the Supreme Court, SCOPIC costs cannot be regarded as part of the “costs of repairing the damage” for the purposes of the CTL calculation, because they were paid for an entirely distinct purpose, namely to protect the shipowner (or its P&I club) from a potential liability for environmental damage following a casualty.
It followed from the Court’s decision on the SCOPIC issue that the conclusion of Knowles J that the vessel was a CTL could not stand on the basis of the findings of fact made by him. In the circumstances, the case was remitted to the Judge for further factual determinations in the light of the Court’s decision.