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Note: the decision in this case has now
been overruled by the Singapore Court of Appeal, in a decision dated 11
September 2006. For a note on the Court of Appeal's decision, click here.
DMC/INS/06/05
Marina Offshore Pte Ltd v China Insurance Co (Singapore) Pte Ltd and AXA
Insurance Singapore Pte Ltd
Singapore High Court: Tan Lee Meng J: [2005] SGHC 238: 30 December 2005
Haridass Ho and Partners for Marina Offshore Pte Ltd
Rajah and Tann for the insurers
MarinE Insurance: Breach of Warranty as
to the recommended route of the voyage: Seaworthiness of the vessel: Whether
loss of the vessel caused by unseaworthiness or perils of the sea
Summary
This case involved a claim against insurers for the total loss of a coastal tug
whilst on an ocean voyage from Japan to Singapore. The court held that the
insurers were entitled to deny liability on the grounds that 1) there had been a
breach of the express warranty in the policies regarding the recommended route
to be taken by the tug; 2) the tug was unseaworthy at the commencement of the
voyage and that, on the balance of probabilities, unseaworthiness was the cause
of her loss, rather than perils of the sea; 3)the tug’s initial
unseaworthiness represented a breach of the warranty of seaworthiness implied in
voyage policies under s.39(1) of the Singapore Marine Insurance Act and 4) the
shipowners were privy to the unseaworthiness in breach of s.39(5) of the Act
DMC Category Rating: Confirmed
This case note has been contributed by Ang &
Partners, the
international contributors to the Website for Singapore
Facts
Marina Offshore Pte Ltd ("Marina Offshore") purchased a steel-hulled
coastal tug, ""Marina Iris". The tug was insured by China
Insurance Co (Singapore) Pte Ltd ("CIC") and AXA Insurance Singapore
Pte Ltd ("AXA").
The tug was constructed as a coastal vessel and not as an
ocean-going one. Prior to the finalisation of the purchase, Marina Offshore
instructed TG Marine Services Pte Ltd ("TG") to conduct a pre-purchase
condition survey while the ""Marina Iris" was in Kobe. The
TG report set out a fairly comprehensive list of matters that required Marina
Offshore’s attention before the "Marina Iris" could begin
trading operations in Singapore or within South East Asia. Marina Offshore
decided to have a large part of the repair work done in Singapore. Instead of
being shipped on board a carrier, Marina Offshore decided that the "Marina
Iris" was to sail on her own propulsion from Kobe across the Pacific
Ocean to Singapore during the December monsoon.
Marina Offshore insured "Marina Iris" with CIC
and AXA for one year. The cover included the delivery voyage from Kobe to
Singapore. Both CIC and AXA required a condition survey to be carried out before
the"Marina Iris" sailed from Kobe. TG carried out this survey
as "warranty surveyor". It was not disclosed to the insurers that TG
had previously carried out the pre-purchase survey.
The condition survey contained six recommendations, one of which
consisted of the route of the voyage from Kobe to Singapore in fair weather
conditions.
Although gale warnings had been issued, the "Marina
Iris" left Kobe on 26 December 2003 with 6 Indonesian crew members. The
tug sank when she was only 50 miles from Kobe. All 6 crew members perished.
Marina Offshore claimed an indemnity against CIC and AXA, on the
grounds that the ship had been lost by the insured risk of "perils of the
sea". Both insurers denied liability.
Judgment
- Considering that the insurers were affording cover to an unclassed tug,
which was built for operations in coastal waters, to undertake a voyage across
the Pacific Ocean and that both policies expressly required the warranty
surveyor’s recommendations to be complied with before the tug sailed from
Kobe, the recommended voyage route had to be regarded as an insurance
warranty. The significance of this is that the warranty must be complied with,
whether it be material to the risk or not. TG’s recommended route was for
the tug to navigate along the inside coast of Japan via the Inland Sea. The
tug did not follow this recommended route. The tug instead exited the Inland
Sea and headed towards the North Pacific Ocean. Marina Offshore had thus
breached the warranty and was not entitled to an indemnity under the policies.
- As for the risk of "Perils of the sea", this does not cover every
loss or damage of which the sea is the immediate cause. There must be some
casualty, something which could not be foreseen as one of the necessary
incidents of the adventure.
- If the ship was seaworthy when she set out on her voyage and she then sank,
on the balance of probabilities she must have sunk due to "perils of the
sea". The question of the seaworthiness of the "Marina Iris"
thus had to be considered.
- Seaworthiness does not refer to a fixed standard but to a relative standard
varying according to the ship and exigencies of each voyage. A vessel must
have a competent master and a sufficient number of competent crew. The "Marina
Iris" was reported to have "three masters" but none of them
possessed the necessary qualifications to be a master of the "Marina
Iris" for the delivery voyage from Kobe to Singapore. As she was
improperly manned, she was unseaworthy when she left Kobe.
- The "Marina Iris" was also unseaworthy in that her
stability was also in issue. The insurers’ surveyor expert stated that the
superstructure of the tug was unusually high in comparison to the depth of its
keel. The master was not provided with the requisite information on the
stability of the tug and the stability booklet was not on board the "Marina
Iris".
- There were other aspects of unseaworthiness. The tug lacked the necessary
pilot books and possibly important charts. The safety equipment on board was
not adequately checked. There was also a suspicion that the tug did not have
proper equipment to receive weather reports.
- In view of the fact that the "Marina Iris" was improperly
manned and insufficient attention was paid to her stability for the delivery
voyage, it would take much more to persuade the court that the tug was lost as
a result of "perils of the sea". Marina Offshore had not established
that the loss was due to a peril of the sea and its claim under this heading
should also be dismissed.
- The Court also considered whether the warranty of seaworthiness was implied
under section 39(1) of the Marine Insurance Act (Cap 387, 1994 Rev Ed).
Section 39(1) applies only to voyage policies. The Court found that the
insurance polices in question were mixed policies. First, there was the voyage
from Kobe to Singapore, which was a "voyage risk". Secondly, after
being repaired and classed in Singapore, insurance cover was afforded for
trading activities within the limits of the "Singapore home trade
including Indonesian waters" which was a risk covered on a time basis.
Therefore, a section 39(1) warranty of seaworthiness was implied for the
voyage from Kobe to Singapore. As the "Marina Iris" was
unseaworthy when she left Kobe, the insurers were entitled to avoid liability
on this ground too.
- Even if the policies were time policies, CIC and AXA were also entitled to
rely on section 39(5) of the Marine Insurance Act to avoid liability, since
the vessel was sent to sea in an unseaworthy state with the shipowner’s
privity, and was lost as a result of its unseaworthiness.
Comment
This case serves as a useful illustration of the relationship
between seaworthiness and perils of the sea in the marine insurance context.
Given the facts of the case, the Judge’s decision is not surprising.
Sections 39(1) and (5) of the Marine Insurance Act provide as
follows:-
Warranty of seaworthiness of ship
39. —(1) In a voyage policy, there is an implied warranty that, at the
commencement of the voyage, the ship shall be seaworthy for the purpose of the
particular adventure insured.
(5) In a time policy, there is no implied warranty that the ship
shall be seaworthy at any stage of the adventure, but where, with the privity of
the assured, the ship is sent to sea in an unseaworthy state, the insurer is not
liable for any loss attributable to unseaworthiness.
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