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

• Jurisdiction: Singapore
• Judge: G P Selvam J
• Judgment Date: 31 March 1994
• Neutral Citation: [1994] SGHC 83
• Docket Number: Suit No 2330 of 1987
• Date: 31 March 1994
• Published date: 19 September 2003
• Year: 1994
• Plaintiff Counsel: Anthony Coleman QC, Michael Collins QC and C Arul (C Arul & Pnrs)
• Citation: [1994] SGHC 83
• Defendant Counsel: Michael Thomas QC and Tongel Yeo (Chong Yeo & Pnrs)
• Court: High Court (Singapore)
• Subject Matter: Carriage of goods by sea,'Perils of the seas',Insurance,Whether breach of warranties on satisfactory condition survey and class maintenance,Whether unseaworthiness a defence to a claim under time as opposed to voyage policy,Perils of the sea,Express warranties,Marine insurance,Privity of seaworthiness,Words and Phrases,Sch 1 Construction Rules r 7 Marine Insurance Act 1906,Insurable interest of persons who advanced moneys for purchase of vessel,Seaworthiness,Definition,Class maintained,Satisfactory condition survey,s 5 Marine Insurance Act 1906,Admiralty and Shipping,s 39(1) & (5) Marine Insurance Act 1906,What constitutes a peril of the sea,Insurable interest,Underwriters estopped,Insured peril,Property insurance

The hull policy

Cur Adv Vult

This case concerns a claim under a policy of marine hull insurance for the total loss of the Panama registered vessel `PAB` ex `PABLO V`. The insured value of the vessel was US$650,000.

The policy named the following three entities as `and/or` insured for their respective rights and interests:

(i) Debralinas Navigation SA, as the owners,

(ii) Kin Yuen Co Pte Ltd, as beneficiary,

(iii) KYC Line (S) Pte Ltd, as managers.

The period of cover was from 30 May 1985 to 29 December 1985.

It was not in the archaic Lloyd`s S & G forms but in the modern simple form for a time policy. Institute Time Clauses - Hulls (1 October 1983) were incorporated in the policy. Under cl 6.1.1. the policy covered loss of or damage to the vessel caused by perils of the sea, rivers lakes or other navigable waters. Negligence of the master, officers and crew were also included as perils covered. The insurance was free from particular average unless caused by the vessel being stranded, sunk, burnt, explosion, grounded or fire or in collision with another vessel or substance other than water. The policy contained a number of warranties. One of the warranties limited the trading area of the vessel to `Far East and Pacific not west of Capetown, not North of Vladivostok, not east of Japan and not south of Australia but excluding Iran, Iraq, Vietnam and Kampuchea`. The policy, however, covered one delivery voyage from Montevideo, South America to the trading area. In effect, therefore, the policy permitted one straight voyage outside the trading area, from Montevideo to Capetown and then any voyage within the trading area.

The claim

The claim was brought by only one of the insured, namely, Kin Yuen Co Pte Ltd (`the plaintiffs`). The basis of their claim was that in or about May/June 1985 they advanced to Debralinas Navigation SA (`Debralinas`) US$710,400 by way of a loan as evidenced by letters from Debralinas to the plaintiffs dated 6 and 10 May 1985 and/or a mortgage executed on or about 25 June 1985 by Debralinas in favour of the plaintiffs. It was also asserted that Debralinas assigned the policy to the plaintiffs and freights on any earnings as might accrue from the operation of the vessel. It was alleged that the loan amount was outstanding and due to the plaintiffs and that the vessel was the security for the loan. This, the plaintiffs said, entitled them to make the claim as a co-insured and/or as assignees of the policy.

Further the plaintiffs asserted that at or about 0430 hours on 1 August 1985 the vessel departed from Maputo, Mozambique to Bombay and encountered rough sea conditions and bad weather, in particular on 6, 9, 14 and 18 August 1985. Water leaked into No 6 hold through a crack in the port side shell plating in way of frame 57. Additional cracks developed. On 19 August water entered the engine room resulting in electricity failure rendering the vessel`s pumps unworkable. The crew abandoned the vessel and it was totally lost at 0950 hours off the west coast of India.

The defences

The defendants denied liability. The grounds advanced for denial of liability were as follows:

(1) First, the defendants relied on express warranties in the policy which stated that (i) the vessel `PAB` was classed `NV` (meaning `Det Norseke Veritas`) and that class was maintained and (ii) satisfactory condition survey by SGS at Vitoria and all recommendations complied with prior to delivery voyage of vessel to trading area. The defendants went on to say that plaintiffs were in breach of the warranties in that :

(i) The plaintiffs and/or the assured failed to ensure that there was a satisfactory condition survey prior to the delivery voyage of the vessel to the trading area.

(ii) Whilst the vessel was in Maputo, the plaintiffs and/or the assured failed to cease further loading of cargo into hatch No 6 after the Master of the vessel was instructed by the class surveyor, one Mr Coltzau from Det Norseke Veritas, that no further loading was to take place in hatch No 6.

(iii) The plaintiffs and/or the assured failed to comply with the recommendation of the said class surveyor not to further load cargo in hatch No 6.

(iv) The plaintiffs and/or the assured failed to fulfil the conditions of the class surveyor for the vessel to leave the port of Maputo.

(2) The next ground advanced for denial of liability was based on s 39(5) of the Marine Insurance Act 1906 which states that:

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.

It was said that the vessel was, with the privity of the plaintiffs and/or the assured, sent to sea in an unseaworthy state and that the alleged loss was due to such unseaworthiness. In support of this, the defendants adopted and repeated the allegations set out in the preceding paragraph and in addition alleged that:

(i) The plaintiffs and/or the assured failed to effect repairs properly or at all.

(ii) The plaintiffs and/or the assured failed to replace certain frames which were broken off and partly dislocated and which were all in very poor condition.

(iii) The plaintiffs and/or the assured failed to ensure that the vessel was in a condition reasonably fit to proceed with the intended voyage.

(3) The defendants further said that the plaintiffs and/or the assured under s 78(4) of the Marine Insurance Act 1906 were required to take such measure as may be reasonable for the purpose of averting or minimising the loss. In breach of this obligation it was alleged the plaintiffs and/or the assured failed to put the vessel in the nearest African port for repairs and/or to cease voyage, in particular, when the vessel was following the African coastline. This point was eventually abandoned.

(4) Finally, the defendants relied on s 39(1) to (4) of the Marine Insurance Act 1906 which 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.

It was alleged that the plaintiffs were in breach of the implied warranty as to seaworthiness. In support of this ground the following matters were asserted:-\\

(i) The plaintiffs and/or the assured failed to ensure that there was a satisfactory condition survey conducted on the vessel at Vitoria.

(ii) The vessel was not fit to encounter the ordinary perils of the voyage from Vitoria to Maputo and took in water in hold No 6 before her arrival in Maputo.

(iii) At Maputo, the plaintiffs and/or the assured failed to effect repairs properly such as to render the vessel fit to encounter the ordinary perils of the voyage to Bombay. In particular, the plaintiffs and/or the assured failed to replace certain frames which were broken off and partly dislocated and which were all in very poor condition.

Over and above the positive matters set out above which were raised by the defendants, the general denial by the defendants in effect required the plaintiffs to prove that they had an insurable interest in the vessel and that it was lost by an insured peril - that is perils of the seas.

The factual matrix

Before discussion of the issues I shall outline the factual matrix of the case in some detail.

First a description of the persons involved and the vessel. The plaintiffs are a Singapore incorporated company. Mrs Jayanthi Rehman, who was a principal witness for the plaintiffs, was their executive director. She held no shares in the plaintiff company but her husband did. The plaintiffs were basically traders and Bangladesh was their main market. Ronnie Tan was another shareholder and also a director of the plaintiffs.

As the plaintiffs were moving a lot of cargo and vessels had to be chartered, KYC Line (S) Pte Ltd (`KYC Line`) was set up to do the chartering. Mr Ronnie Tan was also a shareholder in KYC Line. The chartering work of this company was done by a Mr Michael Lwee Wan Tho and a Mr Edward Tan, a brother of Mr Ronnie Tan.

In 1983 a vessel called the `Debrilinas Pride` was purchased and registered in Panama under the ownership of Debralina Navigation Ltd. The vessel was acquired to carry the plaintiffs` cargo of cement. Later it was decided to purchase another vessel to carry pig-iron cargo to Bangladesh and eventually the plaintiffs purchased the `PAB`. Before the purchase this vessel was called the `PABLO V`. The `PAB` was also registered in Panama but under the ownership of Debralinas.

At the time of purchase the `PAB` was under Argentine flag. It was built in 1962 in Norway and classed with Norske Veritas. The `PAB` measured 12621.62 gross and 6803.21 nett with a deadweight of 19472 tons.

An agreement for the purchase of the vessel was made on 15 May 1985. The purchase price was US$585,000 exclusive of bunkers and lubricating oil. Clause 4 of the agreement provided that the buyers had waived their right to inspect the vessel and her class records and consequently the sale was definite and outright. The vessel was to be delivered at a safe port at sellers` option...