Bayswater Carriers v. QBE Insurance

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DMC/INS/06/04
Bayswater Carriers Pte Ltd v. QBE Insurance (International) Pte Ltd
Singapore High Court: Belinda Ang Saw Ean J: 29 September 2005: [2005] SGHC 185
Just Law LLC for Bayswater Carrier
CCH Leo and Co for QBE
MARINE INSURANCE – INSTITUTE TIME CLAUSES (HULLS) 1.10.83 – WHETHER LOSS WAS BY PIRACY OR VIOLENT THEFT BY PERSONS FROM OUTSIDE THE TUG
Summary
In this case the Court held that the definition of "piracy" within Institute Time Clauses (Hulls) 1.10.83 does not require the vessel concerned to have been on the high seas or within territorial waters at the time. It is sufficient that she be "at sea"; within port limits will suffice for this purpose. Nor does it matter that she is at anchor or moored.
The judge found on the facts that the necessary element of force or the threat of force to constitute both the peril of piracy and that of violent theft had been present.
The judge dismissed a defence from the insurer based on the allegation that the assured had failed, contrary to the terms of the policy, to take reasonable measures to avert or mininise the loss, there being no evidence as to the precautions that a reasonable assured should take against perils of this nature

DMC Rating Category: Developed

This Case Note was contributed by Ang & Partners, the Website’s International Contributors for Singapore

Facts
Bayswater Carriers Pte Ltd ("Bayswater") was the registered owner of the tug, the "BW Wisdom" (the "tug"). Bayswater insured the tug with QBE Insurance (International) Pte Ltd ("QBE"). The marine hull policy was largely subject to the Institute Time Clauses, Hulls (1.10.83) ("ITCH"). Pursuant to this policy, the tug was insured for S$730,000 against, amongst other perils, loss by piracy or violent theft by persons from outside the tug. On 28 January 2003, the tug was lost to armed intruders within the port limits of Batu Ampar, Batam. QBE denied liability under the policy on the grounds that a) there was no "piracy" as the tug was not "at sea" at the material time and b) no force was used to steal the tug, the theft being therefore "non-violent". QBE also argued that, whilst the predominant cause of the loss was the negligence of the master, there was no liability under the policy as the loss resulted from want of due diligence on the part of the assured.

Judgment
(1) The Judge found that the loss of the tug was from piracy within the meaning of Clause 6.1.5 of the ITCH and that QBE were accordingly liable under the policy. To constitute a piratical act under the policy, there must be force or the threat of force directed at the person or property. The Judge found on the facts that the theft of the tug was obtained forcibly. The intruders had threatened the crew with parangs (a type of sword) and tied their hands together. The master had also testified that the intruders had "locked up the bridge" meaning that force would have been needed to gain access to the bridge. The tug’s mooring ropes had been severed. The Judge thus found that there was a direct causal connection between the use of force or threat of force and the dispossession of the tug out of the control of the master.

(2) The tug had also been obtained for the personal gain of the perpetrators. This is where piracy differs from maritime terrorism, which is unlikely to be for "private ends".

(3) The Judge also found that it was not necessary that the piratical act take place on the high seas. It may occur within territorial waters or on the high seas. All that has to be established is that the act of piracy was committed on the sea and it is immaterial that the insured vessel was lying at anchor or moored as in this case. Thus, the fact that the theft of the tug occurred within the port limits of Batu Ampar, Batam, was immaterial. In any event, the expression "port limits" in this case was at best ambiguous as there was no evidence as to where exactly the tug was at the time of the attack.

(4) The Judge then went on to also consider whether the loss could also have been due to violent theft by persons outside the tug under Clause 6.1.3 – another ground for engaging policy liability. QBE’s position on this point was that the tug was lost due to the negligence of the crew, in that there was no watchkeeping at the relevant time and that Bayswater, by allowing two key crew members to take shore leave, had contributed to the inability of the crew to keep a proper watch over the tug. The Judge however found that these omissions fell short of being the proximate cause of the loss.

(5) QBE had a counterclaim against Bayswater on the ground of breach of Bayswater’s obligations to take such measures as may be reasonable to avert or minimise the loss. Some criticisms lodged against Bayswater included failure to offer rewards; failure to subscribe to International Maritime Bureau Special Alert; and failure to actively pursue/search for the tug through its own contacts. The Judge found that whatever evidence QBE led as to what a prudent insurer expected of its assured was irrelevant. The important point was what an insured, acting as a prudent uninsured, would have done but there was no evidence as to how a reasonable prudent uninsured would have acted. In any event, the judge found QBE’s complaints against Bayswater unwarranted and dismissed its counterclaim.

Comment
This is a landmark case. It examines the various definitions of the term "piracy" available internationally. The Judge’s finding that piratical acts need not take place on the high seas will have an important impact on shipowners and marine underwriters doing business in this region where piracy is a real and serious menace to shipping in the Straits of Malacca and Singapore.

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