Sompo Insurance Singapore Pte Ltd v Royal & Sun Alliance Insurance Plc

• Jurisdiction: Singapore
• Judge: Philip Jeyaretnam JC
• Judgment Date: 24 June 2021
• Court: High Court (Singapore)
• Docket Number: Registrar's Appeal from State Courts No 12 of 2021

Sompo Insurance Singapore Pte Ltd

and

Royal & Sun Alliance Insurance plc

[2021] SGHC 152

Philip Jeyaretnam JC

Registrar's Appeal from State Courts No 12 of 2021

General Division of the High Court

Credit and Security — Performance bond — Whether performance bond required call to be made with proof of authority

Insurance — General principles — Subrogation — Insured's cargo damaged by shipping company — Insured entitled under contract of carriage to draw on performance bond to satisfy damages — Insurer indemnifying insured for loss resulting from damage to cargo — Whether insurer subrogated to insured's rights under performance bond

Insurance — Marine insurance — Insured's cargo damaged by shipping company — Insured entitled under contract of carriage to draw on performance bond to satisfy damages — Insurer indemnifying insured for loss resulting from damage to cargo — Whether insurer subrogated to insured's rights under performance bond

Held, dismissing the appeal:

(1) Sompo's contention that there had been insufficient evidence of authority accompanying the C&C Letter was not made out. The formal requirements for a call on a bond had to be clearly stated on the face of and within the four corners of the bond. In the present case, the performance bond simply did not require a demand to be accompanied by evidence of the Government's authority. The only requirement stated in the performance bond issued by Sompo was that a demand had to be in writing and “the Government's”. In this regard, the C&C Letter had been explicit concerning its authority to make the call on behalf of the Government: at [21], [24] and [25].

(2) As for Sompo's contention concerning the extent of subrogation, it was important to consider the juridical basis of the law of subrogation in the context of indemnity insurance. The fundamental principle of indemnity insurance was that the assured would receive no more than a full indemnity for his real loss, and could not be permitted to make a profit out of being insured. This entailed the implication of terms in indemnity insurance, whereby the insured promised to take specific steps so that he would not be overcompensated and the insurer's interest in paying only for the insured's actual loss would be protected. To be effectively enforced, these implied contractual promises might have to be recognised or given effect to in relation to third parties. For this purpose, equity would step in to confer on the insurer an equitable interest in the insured's rights of action against third parties in respect of the subject matter of the loss: at [32] to [35].

(3) It followed that the insurer, upon payment to the insured, was subrogated to the insured's rights even on a contract that was given not by the person responsible for the loss but by someone else, so long as that contract concerned the subject matter of the insured loss. In the present case, the performance bond related to the loss suffered by the Government from breach of the Carriage Contract, and it was that same loss which was insured: at [38] and [39].

(4) Sompo's argument that RSA should be limited to pursuing its subrogated rights against Geometra was not correct. RSA had the option to pursue its subrogated rights against Geometra or against Sompo, just as the Government did. Once Sompo paid on the performance bond, it would have the right to look to Geometra, its principal: at [41].

Case(s) referred to

Castellain v Preston [1883] 11 QBD 380 (refd)

Lord Napier and Ettrick v Hunter [1993] AC 713 (refd)

Maridive & Oil Services (SAE) v CNA Insurance Co (Europe) Ltd [2002] 1 All ER (Comm) 653 (distd)

Master Marine AS v Labroy Offshore Ltd [2012] 3 SLR 125 (refd)

Facts

The Government of Singapore (the “Government”) entered into a contract (the “Carriage Contract”) with Geometra Worldwide Movers Pte Ltd (“Geometra”) for Geometra to transport certain cargo by sea. Pursuant to the terms of the Carriage Contract, Sompo Insurance Singapore Pte Ltd (“Sompo”) issued a performance bond in favour of the Government, to be drawn on to satisfy any damages that might come due to the Government under the Carriage Contract. The performance bond obliged payment to be made “upon receipt of the Government's first demand in writing”.

Subsequently, damage was caused to some of the cargo during discharge. The Government took the position that under the Carriage Contract, Geometra was liable for the loss and damage. This loss was quantified, and Royal & Sun Alliance Insurance plc (“RSA”), who was the Government's underwriter in respect of the cargo, indemnified the Government for the full quantified loss.

RSA's solicitors issued a letter to Sompo on behalf of the Government calling on the performance bond for the indemnified sum (the “C&C Letter”). Sompo denied RSA's claim.

RSA thus commenced a claim in the District Court, arguing that upon indemnifying the Government, it had succeeded to the Government's rights on the performance bond by way of subrogation, and was therefore entitled to call on the performance bond.

Sompo responded that RSA was not entitled to call on the performance bond because only the Government was entitled to do so under its terms. Although it accepted that agents duly authorised by the Government could call on the performance bond, it contended that insufficient evidence of authority had been provided at the time of the call. Sompo also argued that subrogation only extended to rights against the person responsible for the loss. In the present case, the person responsible for the loss was Geometra and not Sompo. Hence, Sompo was not liable to RSA under the performance bond.

The district judge gave judgment in favour of RSA. He accepted that the C&C Letter was given on behalf of the Government, and held that the right of subrogation was not limited to rights and remedies against the person responsible for the loss.

Sompo appealed against the whole of the district judge's decision.

Legislation referred to

Marine Insurance Act (Cap 387, 1994 Rev Ed) ss 79, 79(2)

Marine Insurance Act 1906 (c 41) (UK) ss 79, 79(2)

Govintharasah s/o Ramanathan, Sharma NeharikaandBeverly Nah (Gurbani & Co LLC) for the appellant;

Wong Wan Chee and Ng Tse Jun Russell (Rev Law LLC) for the respondent.

24 June 2021

Judgment reserved.

Philip Jeyaretnam JC:

Introduction

1 Does an insurer's right of subrogation to the rights and remedies of the insured in respect of the subject matter of the loss extend to the right to call upon a performance bond provided to the insured by a third party in connection with the insured's original contract with the party responsible for the insured loss?

2 In this case, the insurance contract is governed by English law, and so the relevant statutory provision is s 79(2) of the Marine Insurance Act 1906 (c 41) (UK), which is in pari materia with s 79(2) of the Marine Insurance Act (Cap 387, 1994 Rev Ed). Both the performance bond and the original contract (here one of carriage) are governed by Singapore law. No evidence was given of English law, and counsel confirmed before me that I should proceed on the basis that there is no...