DNKH Logistics Pte Ltd v Liberty Insurance Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 24 August 2018
• Neutral Citation: [2018] SGHC 187
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1279 of 2017
• Year: 2018
• Published date: 04 July 2019
• Hearing Date: 09 July 2018
• Plaintiff Counsel: NK Rajarh and Daryl Cheong (Straits Law Practice LLC)
• Defendant Counsel: Michael Eu (United Legal Alliance LLC)
• Subject Matter: Courts and Jurisdiction,Court judgments,Declaratory
• Citation: [2018] SGHC 187

Belinda Ang Saw Ean J:

By Originating Summons No 1279 of 2017 (“the Application”), the applicant, DNKH Logistics Pte Ltd (“DNKH”), sought a declaration and an order in relation to DNKH’s legal position as insured under a fire insurance policy issued by the respondent, Liberty Insurance Pte Ltd (“Liberty Insurance”), to DNKH. I made no order on the Application on 9 July 2018. I was not minded to hear the Application on the basis of legal arguments alone since the real controversies in issue between the parties would require an assessment and determination of relevant facts without which a resolution of the conflict between the parties’ views on the scope of coverage would not be satisfactory. Any attempt at this stage to embark on a pure construction of the policy terms and conditions would be undertaken in vacuum and was premature.

DNKH has appealed and I now provide full grounds of my decision.

Facts

DNKH’s principal activities of business are freight forwarding, transport and warehousing, packing, and crating services and providing services as general contractors for non-building construction. For its warehousing business, it leases several warehouses in Singapore, including the warehouse premises at 8 Tuas Avenue 20, Singapore 638821 (“the Warehouse”). In relation to the Warehouse, DNKH purchased the insurance policy in issue, Fire-Warehousing Risk Insurance Policy No SD1500369/FFW/R3/E0 (“the Fire Policy”), which was issued on 16 January 2015, covering the period from 1 January 2015 to 31 December 2015.¹

The Fire Policy set out that the property insured as follows:²

THE PROPERTY INSURED

ON THE FOLLOWING PROPERTY BELONGING TO THE INSURED OR HELD BY THEM IN TRUST OR ON COMMISSION OR FOR WHICH THEY HOLD THEMSELVES RESPONSIBLE

RISK NO – 1, 2, 3, 4, 5, 6 & 7

1 ON ALL REAL AND PERSONAL PROPERTY (EXCLUDING BUILDING) INCLUDING BUT NOT LIMITED TO FIXTURES AND FITTINGS THEREIN AND THEREON, WALLS, GATES, FENCES, PAVING, AWNING, EXTERNAL SIGNS, RENOVATION, ALL IMPROVEMENT OF STRUCTURAL OR TEMPORAL NATURE, SERVICES AND UTILITIES, ELECTRICAL INSTALLATION, FIRE AND SECURITY SYSTEM, FURNITURE, OFFICE EQUIPMENT, PLANT, MACHINERY, CUSTOMERS’ MACHINERY, PLANT AND EQUIPMENT WHILST IN THEIR CARE, CUSTODY AND CONTROL FOR REPAIRS, STOCK OF LOSE TOOLS, SPARES AND ACCESSORIES AND ALL OTHER CONTENTS THEREIN 2 ON CUSTOMERS’ STOCK (OTHER THAN STOCKS ALREADY INSURED BY CUSTOMERS (INCLUDING CONTAINERS OWNED BY INSURED OR LEASED OR HELD BY THEM IN TRUST OR ON COMMISSION).

...

[Emphasis added]

Risk No 2 was relevant to this Application. The sum insured for Risk No 2 was S$10 million.

Sometime in August 2015, there was a fire at the Warehouse (“the Fire”) resulting in damage to, inter alia, some goods/stocks belonging to DNKH’s customers. At the hearing, Counsel for Liberty Insurance, Mr Michael Eu (“Mr Eu”), informed the court that the cause of the fire had yet to be established. Counsel for DNKH, Mr N K Rajarh (“Mr Rajarh”), did not contradict Mr Eu’s statement on the matter, and had also stated so in DNKH’s submissions.

Subsequent to the Fire, DNKH received claims for damages from its customers. DNKH duly filed claims with Liberty Insurance pursuant to the Fire Policy. Liberty Insurance only agreed to indemnify DNKH in respect of a claim made by one of its customers to date.

DNKH filed the Application on 10 November 2017, seeking the following: A declaration that the containers, goods and/or stocks belonging to DNKH’s customers and affected by the Fire are covered by the Fire Policy; and An order that Liberty Insurance indemnify DNKH for all costs, expenses and damages incurred and/or to be incurred by DNKH in respect of the claims of DNKH’s customers arising out of the Fire.

There were no other proceedings filed between the parties arising out of the same limited set of facts.

DNKH’s case

DNKH’s primary position was that the intention of the Fire Policy was to indemnify DNKH for its legal liability resulting from any fire damage, including coverage for all its customers’ goods/stocks, regardless of any coinsurance taken on the goods/stocks. I will elaborate on DNKH’s coinsurance argument at [11] below. Suffice it to say for now, DNKH did not agree with Liberty Insurance’s position that the Fire Policy excluded goods already insured. DNKH’s reading of the coinsurance clause in the Fire Policy (see [11] below) extended coverage to include its customers’ goods and/or stocks in the Warehouse for which the customers had bought separate insurance. Further and/or in the alternative, DNKH took the position that Risk No 2 was ambiguous when read in the context of the Fire Policy and should thus be interpreted in DNKH’s favour.

DNKH relied on Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 (“Zurich Insurance”) for the proposition that the construction of a contract must be based on an holistic approach and must be informed by the surrounding circumstances or external context (at [131]). In relation to its primary contention, DNKH first highlighted that the following provision in the Fire Policy clearly showed that the Fire Policy was intended to cover DNKH’s legal liability for destruction or damage of its customers’ goods/stocks (“Customer’s Goods clause”):³

CUSTOMER’S GOODS

It is hereby declared and agreed notwithstanding anything contained in the within Policy [sic] to the contrary but subject to its terms, limitations and conditions that as regards Customer’s Goods, this Policy indemnifies the Insured against his legal liability for destruction or damage of such property by fire or any other perils thereby insured against.

Second, DNKH pointed out that the provision in the Fire Policy allowing for coinsurance did not differentiate as to whether coinsurance referred to other insurance policies bought by DNKH or insurance policies bought by DNKH’s customers. It should therefore be read as allowing for coinsurance on the goods/stocks of DNKH’s customers taken out by these customers. Mr Rajarh submitted that the Fire policy should properly respond to the loss of DNKH’s customers even if the same loss were covered by more than one insurance contracts, and that it would be for Liberty Insurance to deal with double insurance issues with the customers’ insurers. The provision (“the Coinsurance clause”) read as follows:⁴

COINSURANCE

Coinsurance allowed, particulars to be declared in the event of loss or damage or when required.

Third, DNKH also pointed out that Condition 7, which was part of the conditions specifically excluding coverage of certain goods and/or certain events, excluded certain goods, but did not exclude customers’ goods and/or stocks which had already been insured by the customers. Condition 7 read as follows:⁵

CONDITION 7

Unless otherwise expressly stated in the Policy this insurance does not cover: -

(a) Goods held in trust or on commission. (b) Bullion or unset precious stones. (c) Any curiosity or work of art for an amount exceeding $200.00 or its local currency equivalent. (d) Manuscripts, plans, drawings or designs, patterns, models or moulds. (e) Securities, obligations, or documents of any kind, stamps coined or paper money, cheques, books of account or other business books, computer systems records. (f) Explosives.

Fourth, DKNH submitted that the Designation of Property clause in the Fire Policy meant that Liberty Insurance had agreed to accept DNKH’s recorded designation, including DNKH’s customers’ goods and/or stocks covered by other insurance policies. The clause read as follows:⁶

DESIGNATION OF PROPERTY

For the purpose of determining where necessary the column heading under which any property is insured the Company agrees to accept the designation under which such property has been entered in the Insured’s books.

Fifth, DNKH argued that the very high sum of S$10 million insured for customers’ stocks indicated that Liberty Insurance did envision coverage for goods/stocks which were also covered by other insurance contracts. This was especially so when compared to the sum of the claims faced by DNKH: the largest claim brought was S$2,553,941.34, while the rest of the claims were presently less than S$150,000.00 each.⁷ Moreover, compared to the sum of S$200,000.00 insured under Risk No 1 for items including customers’ machinery, plant and equipment, which were potentially high-value items, the much higher value of S$10 million should cover all customers’ goods/stocks. DNKH submitted that on the basis of a holistic and contextual approach, the Fire Policy was meant to cover DNKH’s legal liability for all of its customers’ goods/stocks, whether or not insured.

In relation to its second argument, DNKH submitted that Risk No 2 was patently ambiguous and should be construed in favour of DNKH, applying the contra proferentem rule. DNKH suggested that it was unclear whether the use of the phrase “already insured” in Risk No 2 referred to customers’ stocks that were insured as at the date of the issuance of the Fire Policy or after the issuance of the Fire Policy but before the occurrence of the Fire; whether Risk No 2 should...