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March 22 2006
In Marina Offshore Pte Ltd v China Insurance Co (Singapore) Pte Ltd  SGHC 238 the insurers of a vessel lost at sea denied liability on the grounds that a diversion from the vessel's recommended course constituted a breach of warranty. The Singapore High Court was also asked to consider whether the vessel was unseaworthy at the start of the voyage.
Marina Offshore Pte Ltd purchased a steel-hulled coastal tug, the Marina Iris. The tug was insured by China Insurance Co (Singapore) Pte Ltd and AXA Insurance Singapore Pte Ltd. A pre-purchase survey was conducted before the tug sailed from Kobe in Japan to Singapore.
The tug was constructed as a coastal vessel, not an ocean-going vessel. Before the purchase was finalized, Marina Offshore instructed TG Marine Services Pte Ltd to conduct a condition survey while the Marina Iris was in Kobe. The survey report listed a number of matters which required Marina Offshore's attention before the Marina Iris could begin trading operations in Singapore or elsewhere in Southeast Asia. Marina Offshore decided that a large part of the repair work should be carried out in Singapore. Instead of being shipped on board a carrier, the Marina Iris was to sail under its own propulsion across the Pacific Ocean during the December monsoon.
Marina Offshore insured Marina Iris with China Insurance and AXA for one year. The cover included the delivery voyage from Kobe to Singapore. Both insurers required that a condition survey be carried out before the Marina Iris sailed. TG Marine Services carried out this survey. It was not disclosed to the insurers that the same company had previously carried out the pre-purchase survey. The condition survey contained six recommendations, one of which was the recommended route from Kobe to Singapore in fair weather.
Although gale warnings had been issued, the Marina Iris left Kobe on December 26 2003 with six Indonesian crew members. The tug sank 50 miles from Kobe with the loss of the entire crew.
Marina Offshore claimed an indemnity against the two insurers; both denied liability.
Considering that the insurers were affording cover to an unclassed tug, 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, the recommended route for the voyage was to be regarded as an insurance warranty. The significance of this point was that no question arose as to the materiality of the risk. The survey recommended that the tug navigate along Japan's Inland Sea coast. The tug did not follow this course; it left the Inland Sea and made for the North Pacific Ocean. It was found that Marina Offshore had breached the warranty and was not entitled to an indemnity under the policies.
Not every instance of loss or damage of which the sea is the immediate cause may be attributed to perils of the sea; such an attribution requires an element of casualty arising from something that could not have been foreseen as one of the necessary incidents of the venture. If the ship was seaworthy when it set out, on the balance of probabilities it must have sunk due to perils of the sea. Therefore, the seaworthiness of the Marina Iris had to be considered.
The term 'seaworthiness' refers not to a fixed standard, but to a relative standard which varies according to the ship and the exigencies of the voyage. A seaworthy vessel must have a competent master and a sufficient number of competent crew members. The Marina Iris was reported to have three masters. However, none of them possessed the qualifications required to be a master of the vessel for the voyage in question. As the vessel was improperly manned, it was unseaworthy when it left Kobe. In addition, it was unseaworthy in that its stability was in doubt. The insurers' surveyor expert stated that the tug was unusually high. The master was not provided with the requisite information regarding the stability of the tug and the stability booklet was not on board. The vessel was also found to be unseaworthy on the grounds that:
In light of the tug's inadequate manning and the insufficient attention paid to its stability for the voyage, it was found that it would take far greater evidence to persuade the court that the tug had been lost due to perils of the sea. Marina Offshore had not established that the loss was due to a peril of the sea and its claim was dismissed.
The court also considered whether the warranty of seaworthiness was implied under Section 39(1) of the Marine Insurance Act. Section 39(1) applies only to voyage policies. The court found that the polices in question were mixed policies. They initially covered the voyage from Kobe to Singapore, which met the definition of a 'voyage risk'. The tug was to have been repaired and classed in Singapore and insurance cover had been afforded for trading activities within the limits of the "Singapore home trade including Indonesian waters", a risk covered by the time policies. Therefore, a Section 39(1) warranty of seaworthiness was implied for the voyage from Kobe to Singapore. As the Marina Iris was unseaworthy when it left Kobe, the insurers were entitled to avoid liability. Even if the policies in question were considered to be time policies, the insurers were entitled to rely on Section 39(5) to avoid liability, as the vessel had been sent to sea in an unseaworthy condition with the shipowner's privity and had been lost as a result of its unseaworthiness.
This case serves as a useful illustration of the relationship between seaworthiness and perils of the sea in the context of marine insurance. Given the facts of the case, the decision is not surprising.
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