KEANE & MARLOWE, LLP

Attorneys for Defendants

REPINTER INTERNATIONAL SHIPPING

CO. S.A. and MIACHART CORPORATION LLC

197 Route 18 South Suite 3000

East Brunswick, New Jersey 08816

(732) 951-8300

Mary Ann C. Marlowe (MM-0723)

Christopher P. Keane (CPK-4394)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

x

DEV AL DENIZCILIK VE TICARET A.S.,

Plaintiff, REPLY AFFIDAVIT OF

MYLES A. SUNLEY

-againstREPINTER INTERNATIONAL SHIPPING

CO. S.A. and MIACHART CORPORATION

LLC.,

07 Civil 3397 (JGK)

ECF CASE

Defendants.

x

MYLES A. SUNLEY, being duly sworn, deposes and says:

1 I am a Senior Claims Adjuster of the C.R. O'Farrell Syndicate (Lloyd's Syndicate No.

COF 1036) ("Syndicate 1036") at Plantation Place, 30 Fenchurch Street, London EC3M

3BD. I have a Bsc (Hans), am an Associate of the Chartered Insurance Institute as well as

a Chartered Insurer. I have been involved in the field of marine insurance and reinsurance for 11 years.

2 I remain duly authorized by Syndicate 1036 to make this Affidavit in further support of

the application brought by Repinter International Shipping Co. S.A. and Miachart

Corporation, LLC., ("Repinter-Miachart"), the Defendants/Charterers in the abovecaptioned action to have the attachment released against a Letter of Undertaking put up

by Syndicate 1036.

3 I make this Affidavit based upon the facts and matters within my personal knowledge and

upon the information provided to me by Defendants' English and United States counsel,

namely, Reed Smith Richards Butler LLP and Keane and Marlowe, LLP, respectively.

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 1 of 7
4 I have read the affidavit of Epaminondas G. Arghyrakis filed in these proceedings and

respond to Mr Argyrakis's contentions insofar as he contests the status and solvency of

Syndicate 1036 and its corporate member, QBE Corporate Ltd as set out further below.

Paragraphs 10"12

5 As the signature block at the end of the LOU makes clear, the security tendered in this

matter has always been tendered by Michael Else & Company as agents for Syndicate

1036 for and on behalf of Syndicate 1036.This is pursuant to a Power of Attorney given

to Michael Else & Company by the Syndicate.

6 When the LOU was first tendered to the Claimants, the Claimant's US attorneys

confirmed on 15thMay that they were in principle prepared to accept the LOU as

substitute security for the sums attached in this action provided that the syndicate gave a

2nd,separate undertaking [Exhibit 1].

7 Owners were then provided with a copy of the Power of Attorney issued to Michael Else

& Co authorising them to bind the Syndicate to Letters of Undertaking to demonstrate

that no "separate" LOU from the Syndicate was necessary, as the LOU was in fact given

on behalf of, and bound, Syndicate 1036 [See Exhibit 3 to my initial Affidavit of 13th

June Affidavit].

8 I am advised by Mr Semark that Owners' reversal of their previous acceptance of the

LOU came after, (as foreshadowed in Mr Unger's email of 15thMay, and highlighted in

paragraph 35 of Mr Argyrakis's affidavit), Owners had demanded that Charterers

relinquish any claim to counter-security and Charterers had refused to do so.

9 I respectfully submit that it would be reasonable, in the light of their previous in principle

acceptance of the LOU, to conclude that Owners' present challenge to the solvency of the

Syndicate and its Corporate Member is not based on any genuine concern that the

Syndicate and QBE Corporate Ltd may not be able to meet the relatively modest sums

secured by this undertaking, but is a tactical ploy, designed to pressure Charterers to

surrender their right to seek counter-security.

Paragraphs 15-20

10 Aside from the information allegedly revealed to Mr Argyrakis by his unidentified

Lloyds Broker, there is nothing in Exhibit 4 or Exhibit 5 to his affidavit which would give

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 2 of 7
rise to any reasonable inference that the Syndicate is, or was ever, in run-off. These

exhibits simply show that for administrative reasons Syndicate 1036 no longer operates

completely independently, but is part of a larger umbrella syndicate. Many other Lloyds

syndicate operate in the same manner.

11 The factthat the sub-syndicates share a common corporate member means there is a far

larger pool of resources from which claims can be met. It is a measure which increases

the stability of the syndicate, not one which calls it into question.

12 This, as well as the continued existence of Syndicate 1036, is demonstrated by the very

documents relied upon by Mr Argyrakis (but he has not chosen to draw the Court's

attention to this). As the comment on numbered pg 2 of Exhibit 5 to Mr Argyrakis's

affidavit states:

AT A GLANCE

For 2007, Syndicate 2999 comprises fivesub-syndicates with a combined

underwriting capacity of £780 million and is the primary entity from a Lloyds

Reporting and Regulatory Perspective

2999 is a wholly aligned syndicate, whereby J00% of its capital is provided by

the QBE Insurance Group. Sub-Syndicate capacity allocations are not restrictive

and may be adjusted within the overall umbrella allocation. This means the team

can respond to underwriting opportunities as they arise, whilst minimising the

cost of capital provision.

Each of the sub-syndicates (referred to herein as syndicates have established

licences and premium trust funds under their own number for the specific types of

business they underwrite. They are all licensed and accredited to underwrite both

surplus lines and re-insurance business in the United States and have funded trust

funds in accordance with local regulatory requirements.

13 As far as the reference to the premium trust funds referred to in the above extract from

Exhibit 5 to Mr Argyrakis's affidavit is concerned, and as mentioned in paragraph 34 of

my first affidavit, I have asked the QBE Finance Department to compute the current level

of syndicate level assets held by syndicate 1036 as Premium Trust Funds. As the attached

letter from Mr David Winkett,our financedirector,makes clear, as at 31stMaythese

exceeded £275 million or US$548 million on current rates of exchange. [Exhibit 2]

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 3 of 7
14 Mr Winkett's letter also confirms that the syndicate's corporate member, QBE Corporate

Ltd currently has over £530 million (i.e. US$1.054 billion) in secured funds at Lloyds to

meet claims.

15 As far as the online directory entry in Exhibit 6 is concerned, the reference to the

syndicate being "closed" means nothing more than for Lloyds reporting and regulatory

purposes, the primary syndicate is 2999. The entry does however say explicitly that the

Syndicate 1036 is not in run-off.

Paragraph 22

16 As to the correspondence sent to the Syndicate by Mr Arghyrakis between 25th May 2007

-31stMay 2007, I had no idea at the time who Mr Arghyrakis was or who he represented,

but in any event it is not our policy to correspond directly with lawyers representing

claimants against our policyholders where the policyholders have their own legal

representatives on record.

17 3 days prior to Mr Arghyrakis's fax of 25thMay, Mr Semark of Reed Smith Richards

Butler LLP wrote to Mr Arghyrakis advising that Reed Smith Richards Butler LLP were

on record for the Charterers and challenging the rejection of the LOU [Exhibit 3]. Mr

Arghyrakis declined to engage with Reed Smith Richards Butler LLP allegedly on the

basis that "our respective clients are in direct contact" [Exhibit 4]. However, whilst

purporting to "note [Reed Smith Richards Butler's] interest in case our involvement is

necessary in the future ", I am advised that Mr Arghyrakis did not address any of his

inquiries between 25thMay 2007 -31stMay 2007 to Mr Semark, despite prior notice that

he represented Charterers in this matter.

18 I had in fact already sent, at the request ofMr Andrew Goodyear of Michael Else & Co, a

copy of the letter confirming that the Power of Attorney given by Syndicate 1036 to

Michael Else & Co to issue letters of undertaking on the Syndicate's behalf was still

valid, and assumed that this would answer any reasonable concerns that Owners might

have had.

19 I do not see how it follows that Mr Arghyrakis's failure to direct his inquiries regarding

the security tendered by Charterers to Charterers solicitors of record can be grounds for

concluding that "future efforts to enforce an LOU for over US$lmillion will meet with

much greater difficulty".

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 4 of 7
20 The LOU makes it clear that proceedings to enforce the LOU are to be brought against

the syndicate's corporate member, QBE Corporate Ltd, in the English High Court. QBE

Corporate Ltd is an English Company. Were the LOU to become enforceable after a final

Award or judgment on appeal tomoITow, there would be over US$548 million in

syndicate assets, and, as Mr Winkett's letter makes clear, over US$1.054 billion in QBE

Corporate Ltd's Funds at Lloyds against which the LOU could be enforced, assuming, for

some bizaITereason, the Syndicate chose to dishonour it.

Paragraphs 23-28

21

22

23

In these paragraphs, Mr Arghyrakis attacks the solvency of QBE Corporate Ltd,

describing it at paragraph 27 as "insolvent".

QBE Corporate Ltd is not insolvent, nor would it be allowed to act as a Corporate

Member of Lloyds ifit were. I COITectMr Arghyrakis's misrepresentations below:

(a) There is nothing "surprising" in the fact that QBE Corporate Ltd has a nominal

issued share capital. As a wholly-owned subsidiary ofa listed company, its capital

comes from the parent company, not from rd party shareholders.

(b) A company is insolvent if it is not able to pay debts as they fall due. Had the

auditors, Pricewaterhouse Coopers LLP any concerns in this respect, they would

have been legally obliged to qualify the accounts accordingly. There is no such

qualification.

(c) While it is true that in 2005, there was an accumulated deficit of £32A74,000 on

the profit and loss account, (due principally to hUITicanesKatrina, Rita and

Wilma, as note 18 to the accounts make clear), Mr Arghyrakis ignores the fact

that in 2005 the company had off-balance sheet assets, in the form of Members

Funds at Lloyds, in the sum of £660,900,571 (or US$I.31 billion) with which to

meet claims (note 19 to the financial statements). This is over 20 times the sum

Mr Arghyrakis says "proves" the company is insolvent.

As to the Company Charges, at exhibit 9 to Mr Arghrakis's affidavit, he appears not to

have read these. These are charges which QBE is obliged by Lloyds and various state and

national laws to register in order to provide security for claims before it can underwrite

business in the variousjurisdictions concerned. They provide another layer of security for

claimants:

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 5 of 7
(a) For example, the first of these secures "all the underwriting obligations of the

company as an underwriting members of the society (Lloyds)" - in other words,

underwriting obligations of the sort secured by the present LOU. [See p.2 of

Exhibit 9 to Mr Argyrakis's affidavit]

(b) Mr Argyrakis also fails to draw the Court's attention to the fact that several of

these charges exist specifically to secure liabilities underwritten by Syndicate

1036 (the syndicate Mr Argyrakis claims does not exist) in the United States [See

pp 46, 47, 49 and 54 of Exhibit 9 to Mr Argyrakis's affidavit]

Paragraphs 29 -31

24 Mr Argyrakis, despite admitting in paragraph 31 of his affidavit, that he does not know if

what he is saying is correct, claims that neither the syndicate assets nor the Members

Funds would respond if a claim on the LOU was dishonoured. I am happy to put him

straight.

25 Quite simply, one of the risks we underwrite is Charterers' liability to 3rdparties. One of

the benefits holders of our policies enjoy, is the right to have these liabilities secured if

the cover responds. In this case, the cover has responded, and, if a liability is found by an

arbitration tribunal, or Judge on appeal, to exist, an action by the beneficiary of the

guarantee to enforce it would have the same claim on the resources which exist to satisfy

claims as would be the case with any other claim we underwrite.

Paragraphs 33 - 34

26 There can be no genuine need for QBE Corporate Ltd's parent company to provide a

separate undertaking for a US$1 million claim. Syndicate 1036's 2007 underwriting year

is currently backed by over US$548 million in syndicate assets, and QBE Corporate Ltd

has over US$1.054 billion in Funds at Lloyds. There is therefore U8$1.6 billion in funds

set aside, as a ring-fenced reserve to meet claims.

27 As pointed out in paragraph 41 of my first affidavit, by contrast, Owners' own P&I Club

has relatively modest free reserves, of only U8$263 million - a fact which Mr Argyrakis

does not dispute. His clients have been offered security by an entity with ring-fenced

reserves 6 times greater than their own P&I Club - his challenge to its adequacy cannot

be sustained.

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 6 of 7
CONCLUSION

28 For the reasons set out above, and in my first affidavit, I respectfully submit that there

cannot be any genuine doubt concerning the sufficiency of a Letter of Undertaking put up

on behalf of Syndicate 1036 as substitute security for the funds currently restrained

pursuant to this Court's April 30, 2007 Order of attachment, or for Rule B attachments

generally. /

~~/

Myles A. Sunley

Sworn to before me

this'Z..\!1 day of June, 2007

i~

"V

BARLOW LYDE & Gll..BERT LLP

BEAUFORT HOUSE '

15 ST. BOTOLPHSTREET

LONDON, EC3A 7NJ

Case 1:07-cv-03397-JGK Document 18 Filed 06/21/2007 Page 7 of 7