Pan-United Shipyard Pte Ltd v India International Insurance Pte Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 12 September 2000
• Neutral Citation: [2000] SGCA 49
• Docket Number: Civil Appeal No 1 of 2000
• Date: 12 September 2000
• Year: 2000
• Published date: 19 September 2003
• Plaintiff Counsel: Navinder Singh and Ung Tze Yang (Joseph Tan Jude Benny)
• Citation: [2000] SGCA 49
• Defendant Counsel: Jainil Bhandari and Kelly Yap (Rajah & Tann)
• Court: Court of Appeal (Singapore)
• Subject Matter: Ship repairers sued by third party for damage to another vessel during repair of ship,Whether indemnity for legal costs subject to specified deductible sum,Whether ship repairers entitled to indemnity as "owner of vessel", for legal costs incurred in defending action, when causing damage to third party while repairing ship,Insurance policy indemnifying assured as owner of vessel,Insurance

(delivering the judgment of the court): This is an appeal against the decision of Goh Joon Seng J where he refused the appellant`s claim under an insurance policy taken out with the respondents, an insurer. The central issue is on the construction of a term in the policy relating to its scope.

The background

The facts giving rise to the claim under the policy are largely undisputed. On 22 January 1992, Pan United Shipyard Pte Ltd (`Pan United`), who are shipping builders and repairers, contracted with Ranger Shipping Pte Ltd (`Ranger Shipping`) to convert a bulk carrier The Ikopa into a clean-product tanker (`the conversion contract`). Under the conversion contract, the title and risk in The Ikopa were vested in Pan United until delivery of the vessel was effected to Ranger Shipping.

On or about 25 January 1992, Pan United, acting through their brokers, Frank B Hall insurance Brokers (S) Pte Ltd, obtained a Collective Policy of Insurance (`the policy`) with the respondents (hereinafter called `the insured`), to insure the vessel and the attendant risks. The policy covered risks during the conversion of The Ikopa and was expressly stated to be subject to, inter alia, the Institute Time Clauses (ITC) for Builders` Risks. Besides Pan United, the insureds included Petroships Pte Ltd and/or Ranger Shipping and/or Asian Lift Pte Ltd for their respective rights and interests. The policy was expressed to cover `hull and machinery, equipment, outfits and everything connected therewith in respect of a bulk carrier IKOPA to be converted to a clean product tanker`.

The conversion works to The Ikopa were done during the period from February 1992 to January 1993. As part of those works, grit blasting and spray painting were carried out on the vessel. As it so happened, at the same period, a yacht, the El Corsario (`the yacht`), was also undergoing warranty and docking works at the neighbouring shipyard of Kvaerner Fjellstrand, which premises were located next to Pan United.

Some more than two years later, in June 1995, Pan United received a claim from the owners of the yacht, Malec SA (`Malec`), alleging that the grit blasting and spray painting works carried out by Pan United on The Ikopa had caused damage to the yacht. The insurers were accordingly notified of the claim. However, by a letter dated 4 October 1995, the insurers denied liability under the policy on the grounds that firstly, the claim did not fall within the scope of cl 19.1.1 of the policy and secondly, that even if it did, the exemption in cl 19.3.10 applied to exclude the claim.

On 31 August 1996, Malec, as the owners of the El Corsario, instituted Suit 1627/96 against the appellants and Kvaerner Fjellstrand, claiming for damage caused to the yacht. Malec alleged that Pan United`s servants and/or agents had been negligent in carrying out the grit blasting and spray painting works. As the respondents had rejected liability to indemnify Pan United, the latter conducted their own defence of the claim.

On 6 February 1998, pending the hearing of Suit 1627/96, Pan United filed the present proceedings against the insurers, claiming for, inter alia, a declaration that, in the event that they were held liable for the claim made by Malec, they were entitled to be indemnified by the insurers under cl 19 of the policy.

On 25 August 1998, Suit 1627/96 was eventually settled on the terms that the claim of Malec against Pan United be dismissed but with no order as to costs. Consequently, on 1 March 1999 the appellants amended their claim in the present action and sought instead for a declaration that, pursuant to cl 19 of the policy, they were entitled to be indemnified by the respondents for the legal costs they had incurred in defending Suit 1627/96. The legal costs so incurred amounted to $146,193.96.

Relevant terms of the policy

We shall now set out the clauses in the policy which are relevant to this case:

Clause 19

19.1 The Underwriters agree to indemnify the Assured for any sum or sums paid by the Assured to any other person or persons by reason of the Assured becoming legally liable, as Owner of the Vessel, for any claim, demand, damages and/or expenses, where such liability is in consequence of any of the following matters or things and arises from an accident or occurrence during the period of this insurance: [Emphasis added.]

19.1.1 loss of or damage to any fixed or movable object or property or other thing or interest whatsoever, other than the Vessel, arising from any cause whatsoever in so far as such loss or damage is not covered by Clause 17. [Clause 17 refers to liability of the Assured arising from collision involving the Vessel.]

19.1.2 any attempted or actual raising, removal or destruction of any fixed or movable object or property or other thing, including the wreck of the Vessel, or any neglect or failure to raise, remove, or destroy the same.

19.1.3 liability assumed by the Assured under contracts of customary towage for the purpose of entering or leaving port or maneuvering within the port.

19.1.4 loss of life, personal injury, illness or payments made for life salvage.

19.2 The Underwriters agree to indemnify the Assured for any of the following arising from an accident or occurrence during the period of this insurance.

19.2.1 the additional cost of fuel, insurance, wages, stores, provisions and port charges reasonably incurred solely for the purpose of landing from the Vessel sick or injured persons or stowaways, refugees, or persons saved at sea.

19.2.2 additional expenses brought about by the outbreak of infectious disease on board the Vessel or ashore.

19.2.3 fines imposed on the Vessel, on the Assured, or on any Master Officer crew member or agent of the Vessel who is reimbursed by the Assured, for any act or neglect or breach of any statute or regulation relating to the operation of the Vessel, provided that the Underwriters shall not be liable to indemnify the Assured for any fines which result from any act neglect failure or default of the Assured their agents or servants other than Master Officer or crew member.

19.2.4 the expenses of the removal of the wreck of the Vessel from any place owned, leased or occupied by the Assured.

19.2.5 legal costs incurred by the Assured, or which the Assured may be compelled to pay, in avoiding, minimizing or contesting liability with the prior written consent of the Underwriters.

Clause 10

10.1 No claim arising from a peril insured against shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence (including claims under clauses ... 19 ... exceeds - ... in which case this sum shall be deducted.

(The schedule sets out the exclusion sum to be $50,000).

Decision below

In the court below, the learned trial judge held that the indemnity which the insurers provide under cl 19.1 is a limited one. It relates only to liability arising `as owner of the vessel`. The claim of Malec arose out of alleged negligent carrying out of the works by Pan United as repairers. The alleged liability in no way arose on account of the fact that Pan United were the owners of the vessel. Accordingly, he ruled that the claim does not come within cl 19.1 and thus the insurers are not liable to indemnity Pan United. He also went on to rule that even if he were wrong on that and that the insurers were liable to so indemnify Pan United, the insurers` liability is subject to the deduction of $50,000 as provided by cl 10.

We should add that the insurers had also raised another ground to contend that they were not liable. They said that the `pollution and contamination` exemption provision in cl 19.3.10 would operate to exclude the claim. The learned trial judge did not think it necessary to go into a consideration of cl 19.3.10.

Scope of cl 19.1

Before us the same issues mentioned in the preceding two paragraphs were canvassed. We will first deal with the question of the extent of coverage provided in cl 19.1, as it could be decisive. Before doing so, there is, however, a preliminary point which we should briefly...