Penguin Boat International Ltd v Royal & Sun Alliance Insurance (Singapore) Ltd

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 06 June 2008
• Neutral Citation: [2008] SGHC 83
• Docket Number: Suit No 145 of 2007
• Date: 06 June 2008
• Year: 2008
• Published date: 19 June 2008
• Plaintiff Counsel: Yap Yin Soon, Leona Wong and Clara Feng (Allen & Gledhill LLP)
• Citation: [2008] SGHC 83
• Defendant Counsel: Richard Kuek and Adrian Aw (Gurbani & Co)
• Court: High Court (Singapore)
• Subject Matter: Owners notifying insurers,Whether reporting requirement fulfilled,Exclusion clause containing reporting requirement,Shiprepairers policy,Loss of vessel during voyage due to failure of cradle,Insurance,Shiprepairers building cradle for transportation of vessel,Indemnity for legal liability for loss or damage to third-party property occurring in the course of or arising from shiprepairing operations,Whether loss covered by shiprepairers policy

6 June 2008 Judgment reserved.

Kan Ting Chiu J:

1 The plaintiff, Penguin Boat International Ltd which carried on the business of shipbuilding and shiprepairing, obtained insurance coverage from the defendant, Royal & Sun Alliance Insurance (Singapore) Limited. The policy was a Shiprepairers Legal Liability Insurance policy (“the shiprepairers policy”). Under the policy, the defendant undertook to:

[I]ndemnify the [plaintiff] for all sums which the [plaintiff] shall become liable to pay by reason of the legal liability of the [plaintiff] as shiprepairers for … loss of or damage to third party property occurring in the course of or arising from the shiprepairing operations of the [plaintiff].

2 The scope of the indemnity is the primary issue in dispute in these proceedings.

3 The other major issue in dispute between the parties was the effect and construction of the exclusion clause in the policy which provided that the policy shall not cover any loss or damage:

… unless discovered and reported in writing to the [defendant] within 6 months of the delivery to Owners or within 6 months after work is completed by the [plaintiff] whichever may first occur.

4 The policy was issued by the defendant on 5 March 1999. In July 1999, YTC Yachts (SEA) Pte Ltd (“YTC”) sent a yacht MY Paesano for repair works to be carried out. In addition to the repair, the plaintiff also supplied, at YTC’s request, a cradle for the Paesano the fabrication of which was undertaken by the plaintiff’s sub-contractor. After the Paesano was repaired and the cradle was constructed, the Paesano was loaded on a seagoing vessel, the Gertrude Oldendorff, on the cradle for intended delivery to Vancouver to its owner Goodman Yachts LLC, and the yacht was insured with the defendant under a marine cargo policy for this purpose. During the voyage to Vancouver, the Gertrude Oldendorff encountered a severe storm during which the cradle broke and the Paesano was lost. The owner sued the plaintiff and other parties. The owner’s claim under the marine cargo policy was paid by the defendant, with the result that the owner’s interest in that action was subrogated to the defendant. The plaintiff eventually settled that suit with the payment of US$150,000, and sought indemnity from the defendant under the shiprepairers policy, and the defendant denied that the plaintiff’s loss was covered under the policy.

The coverage issue

5 It is to be noted that there were no complaints over the repairs to the Paesano itself. The loss of the Paesano was not attributed to the repairs to the Paesano, but to the failure of the cradle which was secured to the deck of the Gertrude Oldendorff. When the Gertrude Oldendorff came into rough sea the cradle failed, and the Paesano was washed off the deck.

6 The Paesano was sent to the plaintiff’s yard without any cradle. In a note issued by YTC listing the work required to be done on the Paesano, there was an item “Build Shipping Cradle”.[note: 1] The plaintiff issued a quotation for the construction of a support cradle for the Paesano. In its statement of claim in the present action, the plaintiff referred to the cradle simply as a “steel cradle framework”.[note: 2]

Was the construction of the cradle shiprepair?

7 The parties were at issue whether the construction of the cradle for the Paesano came within the description of shiprepair. The plaintiff took the position that it did, but the defendant did not recognise that as shiprepair.

8 In a situation where there is no agreement that a loss is covered by a policy, the burden is on the insured to show that the loss is covered: see Poh Chu Chai’s Principles of Insurance Law (LexisNexis, 6th Ed, 2005) p 665, Regina Fur Co Ltd v Bossom [1958] 2 Lloyd’s Rep 425 (cited by Assoc Prof Poh at p 665 fn7), and Maratz Ltd v New India Assurance Co Ltd [1998] 2 SLR 909 at [23].

9 Although the policy issued by the defendant was named a shiprepairers legal liability policy, there was no definition of ‘shiprepairer’, or ‘shiprepair’ in the policy. There appears to be no general understanding on the meanings of these terms in the insurance industry.

10 The defendant referred to the general definition of ‘repair’ in The Shorter Oxford English Dictionary (Clarendon Press, 3rd Ed):

To restore … to good condition by reversal or replacement of decayed or damaged parts, or by refixing what has given way

to argue that only work done which come under one of the three ‘R’s, restoration, renewal or replacement of parts can be considered as repair. [note: 3]

11 It would have been helpful if the plaintiff, who had the onus to prove that cradle construction is shiprepair, had adduced evidence from parties knowledgeable in the shipbuilding and shiprepairing and insurance industries in Singapore on the understanding of those terms in these industries. However, the plaintiff did not adduce evidence from any person with any special knowledge on these matters.

12 The plaintiff’s sole witness, its executive director Cheng Yee Seng deposed that the plaintiff did not carry out fabrication of cradles as a stand-alone business nor undertake such work as part of its shiprepairing operations.[note: 4]

13 I do not think that it is feasible to have an exhaustive description of shiprepair as it is not a term of art. Shiprepair can be a single job, e.g. to mend a hole in a hull or it may involve extensive work on the hull, engine, generator, crew and passenger accommodation and other facilities on the vessel. While restoration, renewal and replacement are common forms of repairs, they are not exhaustive. Reasonable improvements and additions such as the fitting of a larger generator or of additional handrails can be properly considered as a part of the overall repair of a vessel.

14 However, when the Paesano was sent to be repaired, the construction of a cradle for it can hardly be a repair to the Paesano. This is so because the cradle, unlike a generator or a handrail, is not a part of the Paesano and the Paesano does not sail while it is attached to the cradle.

15 A caution should be raised against an over-restrictive construction. The policy covered loss or damage occurring in the course or arising from shiprepairing operations, not just the repairs made to ships. If a crane used in the course of repairs collides with the vessel under repair, the resultant damage would have arisen from shiprepair operations even though the crane was not intended to be part of the repairs to the vessel. The damage would be covered even if the crane was not used for the repairs to the damaged vessel, but for the repair of a vessel nearby.

16 As I understand from counsel, there are two main types of cradles. A support cradle is used to support a vessel when it is out of the water, e.g. when it is under repair, or is in storage. A shipping cradle is used to hold a vessel when it is transported on board another vessel (“the carrying vessel”).

17 There is some confusion whether the cradle that was constructed was a support cradle or a shipping cradle because different descriptions were used in the order and the quotation, but this is not material for two reasons. Firstly, the different descriptions do not necessarily mean different cradles; a cradle can be constructed to serve as both a support and a shipping cradle. Secondly, in my analysis, the conclusion is the same whether the cradle is a support cradle or a shipping cradle.

18 If a support cradle fails when the vessel it holds (“the vessel held”) is undergoing repairs, the failure and the resultant damage would have arisen in the course of the repairs to the vessel held. If the cradle fails while it is holding the vessel on land for storage, it cannot be said that any damage should be considered to have arisen from shiprepairing operations. In a situation where a vessel undergoes repairs, and is subsequently placed on a cradle for storage, the conclusion is the same: that any damage incurred from the failure of the cradle during storage would not be considered to have arisen from shiprepairing operations.

19 In another situation, where the vessel held and the cradle are placed on board a carrying vessel for transportation rather than storage, without there being any repairs to the vessel held, or subsequent to the completion of repairs to the vessel held, any damage resulting from the failure of the cradle should not be considered to have arisen from shiprepairing operations on the vessel held.

20 There is yet another variation to the situation. If a shipping cradle is supplied and installed onto the carrying vessel as a part of the repairs to the carrying vessel, it may be argued that any damage caused to the vessel held as a result of the failure of the cradle can be considered to have arisen from the shiprepairing operations on the carrying vessel.

21 In the present case, the evidence was that it was constructed at the request of YTC. The plaintiff did not plead in its Statement of Claim that the cradle was used in the repairs to the Paesano and Cheng Yee Seng did not depose to that in his affidavit of evidence-in-chief as he was not involved with the technical operations of the shiprepairing activities of the plaintiff and has no direct knowledge of them.[note: 5] He mentioned in re-examination that the yacht was placed on the cradle sometime in September 1999 to do some undocumented and unspecified “touch-up work”, without disclosing the source of the information.[note: 6] I find that the loss of the Paesano from the failure of the cradle did not arise from the plaintiff’s shiprepair operations.

The exclusion issue

22 The policy specifically stated that any liability of the insured is not covered:

unless discovered and reported in writing to the [defendant] within 6 months of the delivery to Owners or within 6 months after work is completed by the [plaintiff] whichever may first occur.

23 The significant time periods in respect to the issue are:

14/8/1999 Cradle...