Lombard Insurance Co Ltd and Others v Kin Yuen Co Pte Ltd

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 08 February 1995
• Neutral Citation: [1995] SGCA 12
• Docket Number: Civil Appeal No 70 of 1994
• Date: 08 February 1995
• Published date: 19 September 2003
• Year: 1995
• Plaintiff Counsel: Michael Thomas QC and Tongel Yeo (Chong Yeo & Pnrs)
• Citation: [1995] SGCA 12
• Defendant Counsel: Michael Collins QC and C Arul (C Arul & Pnrs)
• Court: Court of Appeal (Singapore)
• Subject Matter: Insured peril,Whether issue of endorsement on policy amounted to representation,Promissory estoppel,Estoppel,Insurance,Property insurance,Whether vessel loss caused by perils of the sea or unseaworthiness,Character of policy,Unseaworthiness,Equity,Whether appellants' conduct amounted to communication of belief to respondents,Time or mixed,Whether representation clear and unequivocal,Need to use commonsense approach,Marine insurance,Satisfactory condition survey,Whether breach of express warranties,Estoppel by convention,Existence of mutual understanding and belief on part of both parties,Perils of the sea,Express warranties

Cur Adv Vult

The appellants by a marine hull policy of insurance (the policy) issued by the first appellant (Lombard) as the leading insurer collectively insured the Panamanian registered vessel `PAB ex Pablo V` (the vessel) against total loss for US$650,000. The vessel was totally lost at sea during the currency of the policy. The respondents, whose insurable interest in the vessel is not in issue in this appeal, successfully claimed against the appellants under the policy for her total loss. At the trial the appellants raised several defences all of which failed for the reasons given in a most comprehensive judgment by GP Selvam J which is reported at [1994] 2 SLR 887 .

This appeal is confined to three specific issues; all three issues were canvassed in the court below. They are:

(1) Whether the proximate or dominant cause of the loss of the vessel was the vessels` unseaworthiness, that is to say her debilitated and weakened structural condition which rendered her shell plating prone to the progressive cracking which developed during the voyage and led to her foundering, or whether her loss was due to the perils of the sea. If the loss of the vessel was due to the latter and not due to the former, the appellants would be liable under the policy.

(2) Whether the policy was a time policy or whether it was a `mixed policy`, that is to say that the policy covered the risks and incidence of both a time policy and a voyage policy.

The appellants contend that if the policy was a `mixed policy` the warranty of seaworthiness under s 39(1) to (4) of the Marine Insurance Act 1906 (the Act) would be implied into the policy and, as the respondents admit that the vessel was unseaworthy when she set sail from Vitoria in Brazil on 22 June 1985, there was a breach of the warranty of seaworthiness of the vessel. Accordingly, the appellants contend that they would not be liable under the policy. On the other hand the respondents contend that the policy was a time policy and as such the question of whether or not the warranty of seaworthiness is to be implied into the policy does not arise.

(3) Whether there was a breach of the express warranty of `satisfactory condition survey by SGS at Vitoria`, contained in the policy.

If there was a breach of this express warranty it follows that the appellants would not be liable under the policy.

It is logical that we should first address the issue of whether the policy was a time policy or whether it was a `mixed policy`. If this issue is decided in favour of the appellants then the other two issues do not arise.

The warranty of seaworthiness applies only in respect of a voyage policy. Section 39 of the Act provides as follows:

(1) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.

(2) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.

(3) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that, at the commencement of each stage, the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.

(4) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.

(5) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.

The learned judge found as a fact that the respondents had not sent the vessel to sea on her voyage from Vitoria, Brazil, knowing her to be unseaworthy. This finding of fact is not challenged by the appellants on appeal.

The Act is silent as to the applicability of the warranty of seaworthiness to a `mixed policy` although the Act recognizes that a contract for both voyage and time may be included in the same policy. Section 25 of the Act reads as follows:

Where the contract is to insure the subject-matter `at and from` or from one place to another or others, the policy is called a `voyage policy` and where the contract is to insure the subject-matter for a definite period of time the policy is called a `time policy`. A contract for both voyage and time may be included in the same policy.

The expression `mixed policy` is not used in the Act. It has been used in this case and we use it in this judgment to mean a policy in which a vessel is insured in the same policy for a voyage, to use the words of the section, `at and from` or from one place to another or others and also for a definite period of time.

The appellants rely on The Al-Jubail IV reported as ; sub nom , a decision of this court, for both the purposes of characterizing the policy as a `mixed policy` and also of implying the warranty of seaworthiness on ordinary contractual principles into the policy, having characterized it as a `mixed policy`. It seems that no other reported case has dealt with these questions.

The question of characterizing a marine hull policy of insurance arose in in this way. In early 1975, Almojil, a Saudi Arabian organization engaged in offshore oil exploration, purchased a Ford Class Seaward Defence Boat built before the Second World War for coastal defence and had it completely refitted in Singapore in accordance with drawings prepared by a naval architect. The intended use of this coastal defence craft, when it was accordingly completely refitted, was as a ferry boat to ferry about 30 to 40 persons to offshore oil installations in the Persian Gulf. The completely refitted coastal defence craft was named the Al-Jubail IV. When the refitting of the Al-Jubail IV was completed, it was intended to sail her under her own steam or power to the port of Damman in the Persian Gulf from where it must be assumed she would commence her operations as a ferry boat ferrying personnel to and from the offshore oil installations in the Persian Gulf. It was in these circumstances that Almojil negotiated the marine hull insurance for the Al-Jubail IV with Malayan Motor and General. The policy issued was in the usual form and contained the following material words: ` at and from or for the period: from 21 April 1975 to 20 April 1976 (both days inclusive).` The policy contained three warranties as follows:

Warranted:

(a) Trading within Persian Gulf but including one delivery from Singapore to Persian Gulf on its own steam sailing on or about 21 April 1975;

(b) Panamanian Loadline and Maintained;

(c) Subject to satisfactory condition survey by approved surveyors.

The 12-month period of cover was later amended to commence from the date the Al-Jubail IV left Singapore. The Al-Jubail IV sailed from Singapore for Damman on 30 May 1975.

The Al-Jubail IV originally built as a coastal defence craft and refitted as a ferry boat for operation in the relatively sheltered waters of the Persian Gulf had a freeboard , that is to say the height of her hull out of water, of just over four feet amidship. She was not in any sense an ocean-going vessel. Accordingly, when she reached the open seas of the Indian Ocean on her voyage to Damman she could not cope with the stormy winds and high seas and soon became disabled and had to put into Colombo for repairs. She sailed from Colombo for Damman after her repairs and nearing the coast of Iran she again encountered heavy weather which she could not encounter, ran aground, capsized and was totally lost.

This court found that the Al-Jubail IV was unseaworthy for an ocean voyage at the time of the year when the ocean voyage was undertaken as, being built as a coastal vessel and refitted for operation in sheltered waters, she was not fit for and, in the words of Lai Kew Chai J who delivered the judgment of the court, `should not have made the voyage from Singapore to Damman at the time of the year it did.` He went on to say that p 5 of the MLJ report:

What amounts to seaworthiness? It is not a fixed but a relative standard varying according to the ship and the exigencies of each voyage. `The ship should be in a condition to encounter whatsoever perils of the sea a ship of that kind, laden in that way, may be fairly expected to encounter`: [[1877] 3 AC 72, 77] per Lord Cairns. We are, in the circumstances, of the opinion that the vessel was not seaworthy and the respondent was in breach of the warranty of seaworthiness.

Earlier in his judgment, Lai Kew Chai J dealt with the characterization of the marine hull policy of the Al-Jubail IV and, having characterized it as a `mixed policy`, whether the warranty of seaworthiness will be implied into it. It is to this we must now turn. This is how he dealt with these two questions at p 4 of the MLJ report:

In construing the policy and ascertaining the intention of the parties, we look at the whole policy and the terms used in it for their plain, ordinary and popular sense. We also look at all the surrounding circumstances known to the parties at the time the contract of insurance was made: see (4th Ed), paras 43 and 45. The material context is briefly this. The respondent had the vessel just refitted in Singapore. It was a vessel intended for work in protected waters. It had to sail the Indian Ocean for its delivery to the Persian Gulf. The appellants or their agents were told very little about the type and size of the vessel. If the vessel had reached Damman it was intended for use to ferry passengers or workers within protected waters in the Persian Gulf. Seeing the size and type of the vessel, the `delivery` voyage over the Indian

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