The Sirena I

• Jurisdiction: Singapore
• Judgment Date: 28 June 2000
• Date: 28 June 2000
• Docket Number: Suit No 470 of 1999
• Court: Court of Appeal (Singapore)

Everbright Commercial Enterprises Pte Ltd and another

Plaintiff

and

AXA Insurance Singapore Pte Ltd

Defendant

[2000] SGHC 119

Judith Prakash J

Suit No 470 of 1999

High Court

Insurance–Marine insurance–Cover note–Effect of cover note–Whether phantom ship fell within meaning of “approved vessel” and “held covered”–Institute Classification Clause (ICC)–Whether assured and insured allowed to raise estoppel

The first plaintiff (“Everbright”) purchased logs and needed to charter a ship to transport the logs to buyers in India. The second plaintiff, a bank in Singapore (“the bank”), partially financed the transaction. Everbright insured the marine transit of the cargo with the insurer through Wilcom Underwriting Agency Pte Ltd (“Wilcom”), who was the insurer's insurance broker. Everbright obtained a cover note from Wilcom in May 1997 and another in September 1997. The cover notes included these words: “Per any approved vessel or vessels (excluding Landing Craft and/or Wooden Vessel) Subject to Institute Classification Clause printed overleaf.”

In June 1998 Everbright chartered a vessel, Sirena 1. On 2 July 1998, Everbright notified Wilcom of the loading of the cargo and that the class of the vessel was HSR-100A1. In August 1998, after the ship had departed the Solomon Islands, Everbright faxed Wilcom to inform it that the cargo had been shipped. On 3 September 1998, Wilcom responded that the insurance should be effected under the first cover note and not the second one.

The Sirena 1 never arrived at its destination. It disappeared with the cargo. It appeared to be a phantom ship operated by criminals to steal cargo. On 24 September 1998, Everbright notified Wilcom that the Sirena 1 could not be located and Wilcom notified the insurer. The insurer appointed investigators who could not trace any current record of the Sirena 1 and reported that she was probably a phantom ship. The insurer checked but could not locate the Sirena 1 in the Lloyds Register of Ships. It informed Everbright through Wilcom that it should act as a prudent uninsured, and also instructed Wilcom not to issue a policy in respect of this cargo, as the Sirena 1 could not be located.

Everbright sued the insurer, claiming that it had insured the cargo. The bank claimed an insurable interest on the basis of it having financed the purchase. Everbright argued that once issued, a cover note provided insurance for a prospective shipment. The insurer denied any contract of insurance. Even if there was a contract, it was illegal and therefore unenforceable. The main issue before the court was whether there was a valid and effective contract of insurance between Everbright and the insurer.

Held, dismissing the claim:

(1) A cover note was an undertaking to insure, independently of the policy of insurance, shipments declared under the cover note provided that all relevant particulars of the shipment had been declared by the proposed insured and the terms of the cover note had been fully complied with: at [36], [37] and [38].

(2) The Sirena 1 was not an “approved vessel” within the meaning of the cover note. The natural and ordinary meaning of “approved vessel” was one which fell within the parameters of the ICC. To be covered, Everbright had to ensure that it chose a vessel that qualified as an approved vessel within the meaning of the ICC: at [42] and [43].

(3) Paragraph 4 of the ICC, which was what was known as a “held covered” provision, allowed an assured to obtain the benefit of the cover even though the ship it was using was not an approved one subject to the insurer being able to impose additional conditions to be complied with and to charge an increased rate of premium from that which would apply to a shipment on an approved ship. The “held covered” clause covered only cargoes and/or interests carried by mechanically self-propelled vesselsnot falling within the scope of paras 1, 2 or 3 of the ICC. The Sirena 1, as a chartered vessel, fell within the scope of para 2 of the ICC and therefore could not in any event be “held covered” under para 4 of the ICC. Accordingly there was no contract of insurance between the plaintiff and the insurer: at [44], [45] and [52].

(4) Even if the construction of the “held covered” clause was wrong, and the Sirena 1 could be said to come within it, Everbright would still not have been entitled to rely on it in the circumstances of this case. The clause could only be invoked if two requirements were met: (a) if reasonable notice had been given; and (b) if it was still possible to obtain a reasonable commercial rate of premium for the insurance coverage. On the facts, reasonable notice was given by the fax of 2 July 1998 which informed the insurer of the details of the carrying vessel: at [53], [54], [56] and [62].

(5) However, the second requirement was not met. As the Sirena 1 was a phantom ship, no underwriter would have been willing to insure cargo on it. As such, it would not have been able to establish a reasonable commercial rate of premium for goods shipped on board the Sirena 1: at [61] and [62].

(6) Everbright could not argue that the insurer was estopped by Everbright's reliance on the fax of 3 September 1998, which informed Everbright that the first cover note was applicable. This was because the vessel had sailed before the fax was sent. The insurer was therefore not estopped from contending that the cover note never attached to the plaintiff's cargo shipped on Sirena 1: at [64] and [69].

(7) Everbright could not raise the issue of estoppel on the basis of the insurer not objecting to its fax of 2 July 1998, because there was no duty on the part of the insurer to advise the plaintiff that the Sirena 1 was not an approved ship or one capable of being considered an approved ship by reason of the “held covered” clause. It was Everbright's responsibility as the assured, to comply with the conditions of the insurance by shipping the cargo on board an approved ship if it wanted to invoke the cover note: at [67].

[Observation: If the court had not held as in (2) above and had instead adopted the plaintiff's contention that it was up to the insurer in each case to approve a ship, then the court would have held that the insurance could not have taken effect until the insurer had actively indicated its approval of a particular ship rather than holding that the insurance took effect until the insurer disapproved of the ship: at [42].

If the contract of insurance had been effective, it would not have been rendered unenforceable by the plaintiff on the ground of illegality. On the facts, the insurer did not prove its allegation that the shipment and carriage of the goods on board the Sirena 1 was an unlawful adventure and/or a lawful adventure performed in an unlawful way: at [95].]

Euro-Diam Ltd v Bathurst [1990] 1 QB 1 (refd)

Greenwood v Martins Bank Ltd [1933] AC 51 (refd)

Liberian Insurance Agency Inc v Mosse [1977] 2 Lloyd's Rep 560 (folld)

Regazzoni v K C Sethia (1944) Ltd [1958] AC 301; [1957] 3 All ER 286 (refd)

Royal Boskalis Westminster N V v Mountain [1997] LRLR 523, HC (refd)

Royal Boskalis Westminster N V v Mountain [1999] QB 674, CA (folld)

Spiro v Lintern [1973] 1 WLR 1002; [1973] 3 All ER 319 (distd)

Thames and Mersey Marine Insurance Co Ltd v H T Van Laun & Co [1917] 2 KB 48 (folld)

Marine Insurance Act 1906 (c 41) (UK)ss 32 (3),41

Brij Raj Rai and Gavin Khoo (Rajah & Tann) for the plaintiffs

Richard Kuek and R Govintharasah (Gurbani & Co) for the defendant.

Judgment reserved.

Judith Prakash J

Background

1 The first plaintiffs are a company trading in round logs and other wood products purchased from South East Asian and Pacific countries and sold to buyers in India and other South Asian countries. This action involves a consignment of logs purchased from a seller in the Solomon Islands and sold to buyers in India. The transaction was partially financed by the second plaintiffs, a bank carrying on business in Singapore.

2 From 1993 onwards, the first plaintiffs insured the marine transit of their cargo with the defendants through Wilcom Underwriting Agency Pte Ltd (“Wilcom”) who were the defendants' insurance broker.

3 In about 1997, the first plaintiffs discovered the commercial possibilities inherent in the trade of vitex round logs produced in the Solomon Islands. Their managing director, Mr Tadjoudine, made numerous trips to the Solomon Islands to investigate the possibilities of purchasing these logs from suppliers there and selling them on to buyers in India who use vitex logs (known locally as Pacific teak) in conjunction with the more expensive and famous Burmese teak, in their production of furniture.

4 One such supplier of vitex logs in the Solomon Islands was a company called Mbaeroko Timber Co Ltd (“Mbaeroko”). In August and September 1997, Mr Tadjoudine met and negotiated with Dr Ziru, Mbaeroko's managing director, a contract for the purchase of 10,000 cubic metres of vitex logs by way of two shipments of 5,000 cubic metres each from the Solomon Islands in the months of October and November 1997 respectively. The first plaintiffs intended to resell this cargo to buyers in Tuticorin, India. The actual contract between the first plaintiffs and Mbaeroko was dated 9 September 1997.

5 In anticipation of shipping timber from the Solomon Islands to India, the first plaintiffs had obtained Cargo Cover Note No 03019 from Wilcom on 9 May 1997. This cover note was stated to cover about 6,000 cubic metres of vitex round logs on a voyage from the Solomon Islands to Tuticorin. On 10 September 1997, after concluding their contract with Mbaeroko, the first plaintiffs procured a second Cargo Cover Note No 00515 from Wilcom to cover the shipment of 5,000 cubic metres of vitex logs from the Solomon Islands to Tuticorin.

6 To finance the purchase, the first plaintiffs relied on a credit facility extended to them by the second...