Marina Offshore v China Insurance (CofA)

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Marina Offshore Pte Ltd v. China Insurance Co (Singapore) Pte Ltd and Another, The "Marina Isis"
Singapore Court of Appeal: Andrew Phang Boon Leong JA, Chan Sek Keong CJ, Judith Prakash J: [2006] SGCA 28: 11 September 2006
The Singapore Court of Appeal overruled the judgment at first instance and found in favour of the assured shipowners, whose tug vessel had been lost in the course of a delivery voyage from Japan to Singapore. The Court held that, on the wording of the policy, there was no express warranty as to the route the vessel should take, neither could any warranty to that effect be implied in the marine policy. The Court further held that the policy was a time policy, not a voyage policy; therefore, it was not subject to the implied warranty under s.39(1) of the Singapore Marine Insurance Act, to the effect that, at the commencement of the voyage, the vessel shall be seaworthy for the purpose of the particular venture insured. Nor had the vessel been sent to sea in an unseaworthy state with the "privity of the assured", under s.39(5) of the Act. Where, as here, one proximate cause of the loss had been perils of the sea, an insured risk, the claim was recoverable under the policy.

DMC Category Rating: Confirmed

This case note has been contributed by Ang & Partners, the International Contributors to this website for Singapore

In November 2003, Marina Offshore bought an old tug, the "MARINA ISIS", which was built for Japan’s coastal waters. The tug was laid up in a shipyard in Kobe and Marina Offshore wanted to bring her to Singapore for completion of repairs. She was out of class. Marina Offshore insured her under hull policies with China Insurance and AXA Insurance. The period of insurance was for one year, "from 24 December 2003 to 23 December 2004, both dates inclusive". The policies incorporated the Institute Time Clauses and the trading limits were "Singapore home trade including Indonesian waters, and inclusion of one voyage risk from Kobe to Singapore".

The policies contained a warranty requiring a seaworthiness/condition survey and compliance with the conditions before sailing from Kobe – "warranted satisfactory vessel seaworthiness/condition survey for her safe voyage to Singapore by appointed surveyor… and all recommendations to be complied with at owner’s expense before her sailing from Kobe to Singapore". The surveyor made six recommendations in the survey, stating that all his recommendations must be complied with, failing which his report would be void. One of these recommendations concerned the voyage route:

"Route to follow to be tracking along nearest coast of Japan, Philippines, Sabah unless weather permitted, and to seek shelter if weather is bad …"

Although gale warnings were given by the Kobe Meteorological Department, the tug departed Kobe in the evening of 26 December 2003. She had gone only 50 miles when she sank. Marina Offshore claimed under the policies. The insurers denied liability.

The main grounds for denial were that:-
a. Marina Offshore was in breach of the warranty by not complying with the surveyor’s recommended route; and
b. the cause of loss was unseaworthiness of the tug rather than the insured risk of "perils of the sea".

The trial judge dismissed the action against the insurers. He held that Marina Offshore was in breach of the warranty by not complying with the surveyor’s recommended route, in heading for the Pacific Ocean via Kii Suido. He also held that the insured had not proved that the loss was caused by a peril of the sea, an insured peril, as there was evidence of unseaworthiness.

The judge also considered the nature of the insurance policies issued, in order to determine whether the implied warranty under s.39(1) of the Marine Insurance Act (the "Act") (namely, that the vessel was seaworthy at the commencement of the voyage) applied to this case. Marina had submitted that this warranty was irrelevant, because the policies were time policies and, under the Act, the warranty applied only to voyage policies. The insurers claimed, however, that the policies were mixed policies, namely that they covered the risks of both a voyage policy, which related to the voyage from Kobe to Singapore, and a time policy that covered the vessel when she began trading activities after reaching Singapore. The judge held that the policies were mixed policies and therefore that the warranty of seaworthiness had been implied under s.39(1) of the Act for the voyage from Kobe to Singapore. As the vessel was clearly unseaworthy when she left Kobe, the insurers were entitled to avoid liability.

The judge also considered what the position would have been under s.39(5) of the Act, the section that would have applied had the policies been found to be time policies. In that connection, the judge held that the vessel had been sent to sea in an unseaworthy state with the privity of Marina, and therefore the insurers were entitled to rely on s.39(5) to avoid liability.

On appeal by the insured, the Court of Appeal reversed the trial judge’s decision and gave judgment for the insured. Prakash J, delivering the judgment of the CA, held that:

  1. The Court could not find in the policy an express warranty on the route to be followed by the vessel. The written warranty (see paragraph 2 above) did not expressly mention the route or contain any language referring to the course of the voyage. The fact that its terms required the recommendations to be complied with before sailing meant that what had to be done en route would not be part of the warranty requirements.
  2. The normal contractual test relating to the implication of terms does not apply to a marine policy, as the Act makes clear that the only warranties to be implied are those that are implied by virtue of the various sections of the Act that impose them. In this case, had the insurers wanted to impose the condition that the vessel should follow a particular route recommended by the surveyor, they should have stated so in clear words as part of the language of the express warranty quoted in paragraph 2 above.
  3. The policies were time policies, not hybrid time-voyage policies, even though they covered the voyage from Kobe to Singapore. Among other reasons, the Court found it important that the policy provided for the duration of the risk to be determined by a period of time beginning and ending on specified dates. There was no indication of a voyage or hybrid cover in the section where the duration of the risk was specified, which was where the coverage would be described. The essential words of a voyage policy, referred to in the Act – "at and from" or "from" a particular place to another, did not appear in the relevant section of the policy. The Court also noted that the policies incorporated the Institute Time Clauses but not even one of the Institute Voyage Clauses [emphasis added].
  4. In a voyage policy, section 39(1) of the Act implies a warranty of seaworthiness at the commencement of the voyage. As the Court found that these were not voyage policies, there was no implied warranty of seaworthiness.
  5. As these were time policies, the insurer would be released from liability under section 39(5) of the Act only if, with the privity of the assured, the ship was sent to sea in an unseaworthy state, and the loss was attributable to unseaworthiness.
  6. The Court found that there was sufficient evidence of adverse weather conditions to establish that perils of the sea were at least one cause of the loss. The fact that bad weather may have been anticipated did not mean there was no element of fortuity when the incursion of seawater which led to the vessel’s sinking occurred.
  7. The Court had then to consider whether another cause of the loss was unseaworthiness, to which the assured, Marina, was privy. Interestingly, the Court accepted that, as there was no competent master on board, the vessel was unseaworthy on sailing. However, the surveyor, after investigation, had found the crew to be adequate for the voyage. Even though this opinion was not binding on the Court, the insured who accepted this expert’s opinion could not be said to have knowingly or recklessly sent the vessel to sea in an unseaworthy state. Furthermore, there was no evidence as to how the incompetence of the crew had on its own operated as a proximate cause of the loss.
  8. The fact that Marina was aware that, on leaving Kobe, the vessel was out of class did not mean that they knew the vessel was unseaworthy on sailing. Classification itself does not equate to seaworthiness or unseaworthiness. Seaworthiness has to be judged in relation to a particular voyage and the fact that a vessel is unclassed does not, of itself, mean that she is unseaworthy for the purposes of the voyage. The lack of classification was known to the insurer and to the surveyor, who approved the vessel’s fitness to sail.

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