ROYAL AND SUN ALLIANCE INSURANCE (SINGAPORE) LIMITED V. METICO MARINE PTE LTD AND WECOY MARITIME PTE LTD  SGHC 97 December 31, 2006Posted by angpartners in Case Notes.
Tags: Marine Insurance, Salvage, Singapore High Court
Judith Prakash J
6 June 2006
Marine insurance – Insurers who paid for salvage of vessels owned by assured claimed reimbursement from assured on the ground of breach of warranty that avoided cover – Whether warranty part of policy of marine insurance – Whether warranty breached – Whether insurers entitled to reimbursement of salvage expenses from assured.
In this case, the insurers sued the insureds for salvage and towage expenses incurred by the insurers in recovering an insured barge, before the insurers discovered that the insureds were in breach of a warranty.
Metico Marine and Wecoy Maritime, related companies, respectively bought a tugboat “WECOY 7” and two barges “BINTANG 9” and “BINTANG 10” in Shanghai. They were intended for Singapore home trade waters. Metico and Wecoy insured the barges under a time hull policy with Royal & Sun Alliance (“RSA”), which covered the voyage from Shanghai to Singapore.
The policy contained a warranty which reads as follows: “Warranted towage approval survey by CCS at the insured’s expenses, with all recommendations, if any, fully complied with prior to sailing.”
CCS were the China Classification Society, which carried out a pre-towage survey. The towage survey certificate issued by the China Classification Society (“CCS”) contained the following recommendations: “The towing vessel is to depart from any port during voyage in day time on receipt of a favourable weather forecast for local area in 48 hours and under VI wind force of Beaufort scale. If the wind force of Beaufort scale is more than VI, the towing vessel shall seek refuge.”
The owners obtained weather forecasts in the days before departure from Shanghai, but the last forecast was obtained 30 hours before departure, at 0800 hours on 16 December 2003. The vessels departed at 1400 hours on 17 December 2003. No forecast was obtained on the day of the departure. In the early hours of 21 December, the towline parted and the barges were lost.
The owners’ broker contacted the insurer, who engaged salvors for a search and recover mission. These salvors recovered one barge on 24 December and the tug herself recovered the other barge on 26 December.
Subsequent to the recovery, the insurer discovered that:-
(a) The owners had not obtained any forecast at all, much less a favourable forecast, on the day of departure
(b) The vessels departed in wind of Force 6 and above.
(c)The vessels did not seek shelter during the voyage even though they encountered wind force above 6 for several days before the towing rope broke.
The insurer claimed breach of warranty, discharging it from liability under the policy, and recovery of the salvage and towage expenses.
The owners argued that, first, there was no warranty because the negotiations leading up to the issue of the policy did not mention that the pre-towage survey would be a warranty, and that the warranty was inserted into the policy contrary to the parties’ true intention. Secondly, the owners argued, if there was a warranty, there was no breach. The owners counterclaimed for an indemnity under the policy for its own expenses.
In the voyage from China to Singapore, the towrope connecting the barges to the tugboat parted, and the barges drifted off. This voyage was covered by the policy issued by the plaintiff insurers.
Judith Prakash J gave judgment for the insurer and dismissed the owners’ counterclaim. She held that:
The policy prima facie contained the terms of the contract of insurance. Even in ordinary contracts whose terms are reduced to writing, evidence of previous drafts and negotiations is not admissible to vary or add to the terms of the contracts. This must be all the more so in a contract of insurance which is inadmissible in evidence unless it is embodied in a marine policy in accordance with the Marine Insurance Act (section 22).
Furthermore, the correspondence and the examination of the broker showed that, before the policy was issued, the broker was fully aware that the towage survey requirement was material to minimize the risk covered by the policy and that it was intended for the purpose of the policy. She herself inserted the warranty into the signing slip which formed the basis of the policy, from samples of standard clauses she had in her possession from her long experience as a broker. There was no mistake, much less a common mistake, justifying a rectification of the policy.
The wording of the warranty was read strictly and any ambiguity was construed against the insurer. Compliance with recommendations “prior to sailing” meant that the recommendations that pertained to post-departure, like seeking shelter in bad weather, were not part of the warranty.
Nonetheless, the owners had breached the warranty in two ways. First, in not departing on receipt of a favourable weather forecast for local area in 48 hours. The learned judge reduced this recommendation to four elements:-
(a) To depart on receipt of a particular forecast;
(b) The forecast must be favourable;
(c) The forecast should cover the local area; and
(d) The forecast should be for 48 hours.
Given that the survey was specifically required for the safety of the tow during voyage south in the monsoon season, this recommendation meant the tug should depart within a reasonable time of a weather forecast. Given that weather forecasts were available every morning at 0800 hours and the vessel was required to sail in daylight, the vessels would have to depart by 1800 hours on the day of issue and receipt of the weather forecast. This meant within daylight hours of the same day and not 30 hours later. On the second element, there was no forecast obtained on the day of departure, but the judge accepted evidence from the insurer’s expert that it was unlikely a favourable forecast would have been issued on that day. The 3rd and 4th elements meant that the forecast should cover the local area for the 48 hours from departure. The owners’ contention that the forecast had to be obtained within 48 hours prior to departure did not make sense because that would not give the Master the benefit of knowing what weather to expect on the voyage.
The judge also accepted evidence in the master’s report on the day of departure that the wind speed was 25 knots (Force 6). This was in breach of the recommendation that the vessel was only to depart in wind force below 6.
The owners’ appeal was dismissed in November 2006.