PT Karimun Granite v Insurance Company of North America

• Judge: Lai Siu Chiu JC
• Judgment Date: 28 September 1992
• Neutral Citation: [1992] SGHC 254
• Citation: [1992] SGHC 254
• Defendant Counsel: N Pillai (Harry Elias & Partners)
• Published date: 19 September 2003
• Plaintiff Counsel: Thomas Tan (Haridass Ho & Partners)
• Date: 28 September 1992
• Docket Number: Suit No 12833 of 1985
• Court: High Court (Singapore)
• Subject Matter: Barge breaking loose from moorings due to strong winds and waves generated by Sumatra and ran aground,'Perils of the sea',Insurance,Institute time clauses (hull) and liner negligence clause,General principles,Marine hull policy,Liability of defendants/insurers for damage to barge,Quantum of damages,Whether due to want of due diligence on part of plaintiffs as shipowner and/or peril of the sea,Proximate cause of grounding of barge,Construction of policy,Applicability of clauses to claim for repairs, salvage and out-of-pocket expenses,Words and Phrases,Claims

Cur Adv Vult

The facts

The plaintiffs, an Indonesian company, operate a granite quarry at Karimun Island (`the island`) which is about 18 nautical miles away from Singapore`s Sultan Shoal. For the purpose of their quarrying operations, the plaintiffs owned amongst other vessels, a 200ft long dumb barge known as the Burung 3003 (`the barge`). At the material time the plaintiffs were a subsidiary of Promet Pte Ltd (`Promet`) which in turn was a subsidiary of Promet Bhd, a Malaysian public company. Originally the plaintiffs were a subsidiary of Bovis Bhd, another Malaysian public company. Promet bought over Bovis Bhd in 1979 and along with it the plaintiffs. When Promet Bhd was placed under receivership in 1985/1986, it sold off its 50% interest in the plaintiffs.

The plaintiffs had insured the barge with the defendants under a marine hull policy (`the policy`) No 205-10024 (AB7-12) in the sum of $360,855 for the period 1 January to 31 December 1985. The policy was a renewal of a previous policy placed with the defendants. The plaintiffs used Malaysian brokers Sepakat Insurans Brokers Sdn Bhd (`Sepakat`) who in turn used Singapore brokers James Lumsden Insurance Brokers (S) Pte Ltd (`Lumsden`) to place the policy with the defendants. A director of Promet, Anthony Aurol (`Aurol`), who was in charge of the Promet group`s insurance portfolio, negotiated the terms of the policy which included the institute time clauses (hull) dated 1 October 1983 (AB17-21) and the liner negligence clause (AB14).

As the plaintiffs have relied on the institute time clauses (`ITC`) to support their claim whilst the defendants have relied on the liner negligence clause and cl 12 of the ITC to resist it, I shall set out the relevant clauses. Clause 6 of the ITC states:

This insurance covers loss of or damage to the subject matter insured caused by:

(6) .1.1 perils of the seas, rivers, lakes or other navigable waters;

(6) .1.2 fire, explosion;

(6) .1.3 violent theft by persons from outside the vessel;

(6) .1.4 jettison;

(6) .1.5 piracy;

(6) .1.6 breakdown of or accident to nuclear installations or reactors;

(6) .1.7 contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation;

(6) .1.8 earthquake, volcanic eruption or lightning.

6.2 This insurance covers loss of or damage to the subject matter insured caused

by:

(6) .2.1 accidents in loading, discharging or shifting cargo or fuel;

(6) .2.2 bursting of boilers, breakage of shafts or any latent defect in the machinery or hull;

(6) .2.3 negligence of master, officers, crew or pilots;

(6) .2.4 negligence of repairers or charterers provided such repairers or charterers are not an assured hereunder;

(6) .2.5 barratry of master, officers or crew,

provided such loss or damage has not resulted from want of due diligence by the assured, owners or managers.

(6) .3 Master, officers, crew or pilots not to be considered owners within the meaning of this cl 6 should they hold shares in the vessel.

A condition endorsed on the policy reads:

Clause 12 Deductible S$50,000 all claims each accident except total loss and/or constructive total loss. When losses by reason of the difference between the above deductible and the following amounts each accident or occurrence.

(1) In respect of vessels valued S$2m and below S$15,000

(2) In respect of vessels valued above S$2m S$30,000

But

(3) In respect of `Burung` vessels used for carriage of granite rocks S$30,000

Exceed S$250,000 in the aggregate per annum, all subsequent losses shall be recoverable subject only to deductibles all claims each accident except total loss and/or constructive total loss as follows:

(1) Vessels $2m and below: S$15,000

(2) Vessels above $2m: S$30,000

But

(3) `Burung` vessels used for carriage of granite/rocks: S$30,000

The liner negligence clause states:

Subject to the terms and conditions of this policy this insurance is also to cover

Bursting of boilers and/or breakage of shafts,

Damage to and/or loss of the subject matter of this insurance caused by any accident, latent defect, malicious act, negligence, error of judgment or incompetence of any person whatsoever but excluding the cost of repairing, replacing or renewing any defective part condemned solely in consequence of a latent defect or fault or error in design or construction.

Provided that such damage or loss has not resulted from want of due diligence by the owners of the vessel or any of them or by the managers. Masters, mates, engineers, pilots or crew not to be considered as part owners within the meaning of this clause should they hold shares in the vessel.

Aurol (PW1) gave evidence that on 2 March 1985 he was informed by Andrew Yun (`Yun`), the then marine superintendent of the plaintiffs, that in the early hours of that morning due to a Sumatra wind which struck the island, the barge broke loose from her moorings (she had been secured to a buoy opposite jetty A), ran aground on the breakwater and was badly damaged. Aurol immediately informed Sepakat and Lumsden of the incident by telex (AB21A) and requested them to inform the defendants.

The plaintiffs appointed United States Salvage Association (`USSA`), in particular NJ Mistry (`Mistry`) to survey the damage, to investigate the cause of the incident, to assist in the repairs and to provide any other assistance which the plaintiffs may require. The defendants eventually appointed Tech-Mar Services Pte Ltd (`Techmar`) as their surveyors, in particular HA Savage (`Savage`) after objections were raised by the plaintiffs to the defendants` first choice of London Salvage Association.

To Aurol`s surprise the defendants appointed another firm of surveyors, namely, Perfect, Lambert & Co (`PL`). In answer to Lumsden`s query (AB49) on 19 March 1985 as to the need to appoint PL when Techmar had already been appointed, the defendants explained (AB51) that Techmar had been appointed for the damage survey only whereas PL was appointed to conduct investigations into the cause of the casualty. The different tasks performed by Techmar and PL were explained by the defendants` regional claims manager, Robert Meagher (`Meagher`).

Fearing something was amiss and thinking that the only reason for the defendants to engage a second surveyor was to look for a way to deny liability, Aurol decided to and did, appoint another surveyor for the plaintiffs in the person of Captain Francis Koh (`Koh`) from Consolidated Adjusters & Surveyors Pte Ltd (`Consolidated`) to investigate into the cause of the incident and to make recommendations to the plaintiffs on management of vessels and on landing sites. Koh (PW6) was also given the task of recording statements from all the crew members and personnel involved in the matter.

The plaintiffs did not inform the defendants of Koh`s appointment. Neither did they obtain the defendants` prior approval when they appointed Richards Hogg International (`RHI`) as adjusters in March 1985. In March 1986 (AB293) the defendants` counsel objected to RHI`s continued appointment by the plaintiffs; the plaintiffs ignored the objection.

Savage (PW2) and Mistry surveyed the grounded barge on several occasions in March and April 1985. The plaintiffs through Yun (PW8) obtained repair quotations from five shipyards and with the approval of the defendants, they accepted the quotation of Singmarine Shipyard (Pte) Ltd (`Singmarine`). The barge was repaired by Singmarine after it had first been refloated and then towed to Singapore, by Smit International SEA (Pte) Ltd (`Smit`). Before the barge left the island, it was also surveyed by the classification society (American Bureau of Shipping (`ABS`)) surveyor and temporary repairs were effected to ensure she was seaworthy.

The barge was at Singmarine`s yard between 13 April and 15 May 1985. Singmarine`s Bill No sm/088/z/85 (AB270-285) for the repairs totalled $164,093.64. Between October 1985 and July 1986 the plaintiffs by various instalments and a set-off arrangement paid the said bill.

The defendants originally appointed Captain Womersley of PL to carry out the investigations. Because Captain Womersley could not interview the barge`s crew in early April as he had intended to, the interviews were eventually conducted by his colleague, Captain R Sherriff (`Sherriff`) in Singapore on 27 May 1985. Thereafter Sherriff (DW2) rendered a report to the defendants dated 4 June 1985 (exh D10).

Before the defendants had completed their investigations, the plaintiffs submitted their formal claim (2PB1-3) through Lumsden in June 1985 based on cl 6.1.1 of the ITC, namely, that the proximate cause of the damage was due to heavy weather and therefore a peril of the sea.

In response to the plaintiffs` claim (after several reminders from Lumsden), the defendants by telex to Lumsden dated 1 July 1985 (AB116) advised that their investigations showed that prima facie there was a want of due diligence on the part of the plaintiffs - the port captain failed to ensure the safety of the barge and its moorings and the plaintiffs` practice of split responsibility was indicative of negligence. The defendants followed up with another telex to Lumsden on 5 July 1985 (AB240) requesting that the plaintiffs make available the port captain, the barge master and the tugmaster for further interview. Aurol rejected the request.

In a subsequent facsimile transmission to Lumsden on 25 October 1985 (AB262), the defendants reiterated that there was a lack of due diligence on the part of the plaintiffs and added that they had ample evidence to establish that the barge was unseaworthy.

In response to AB262, the plaintiffs` solicitors on 18 November 1985 made a telex demand (AB286) on the defendants for payment of $229,458.99 and US$3,657.70 under the policy representing the repair, salvage and other out-of-pocket expenses incurred by the plaintiffs. Notice was given...