Bizarre judgment by the High Court likely to affect marine hull underwriting business in Sarawak.
In the unreported judgment of Soon Hai Kee Shipping Sdn Bhd v Tokio Marine Insurans (Malaysia) Berhad released in April 2010 , the Kuching High Court basically concluded that the plain words of an express warranty contained in the usual marine policies did not aid insurers despite clear evidence that the master of the vessel did not possess a re-validated Certificate of Competency under the Merchant Shipping (Training and Certification) Rules 1999, which were made in order to comply with the country's obligations under the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978 and 1995.
The plaintiff was the owner of a ship known as the M.V. Song Kian Baru. The defendant is the insurer. The ship was insured under a Marine Hull and machinery Insurance policy for RM800,000 on 23rd March 2005. The policy insured the ship against the perils of the sea under the usual Institute Time Clauses (Hull) 1983. The policy contained the standardized clauses that were originally developed by the Institute of London Underwriters. The vessel sank the following day (24th March, 2005) when it hit some hard object in the sea. The plaintiff claimed for the insured sum of RM800,000 and RM228,000 as the cost of attempting to salvage the ship.
The sinking of the ship was reported to the defendant on 26th March, 2005. The defendant denied liability on the ground that plaintiff breached expressed warranties in the policy, in particular the warranty that the ship be "properly licensed and/or registered with the appropriate government marine department whose rules and regulations must be complied with at all times" and should be "reasonably and properly officered and manned".
The defendant's case is that the certificate of competency of the Master had expired and therefore the ship was not properly "licensed and registered" and "officered and manned". The entire case turned on two issues, i.e. the applicability of the said warranty and the validity of the certificate of competency of the master. The strange thing is that the Master was endorsed by the Marine Department on the Ship Registration Certificate, although he did not get his certificate of competency re-validated pursuant to the Merchant Shipping (Training and Certification) Rules 1999 ("The MSTC 1999"), which was the applicable written law. It is important to note that apart from the Rules, the requirement for re-validation were brought to the notice of all owners and seamen in Sarawak by the Marine Department themselves.
Notwithstanding, the High Court held that the MSTC 1999 only applies to West Malaysia and does not extend to Sarawak. The Court found that the Master had a valid certificate issued under the Sarawak Merchant Shipping Ordinance 1960, which was not repealed. What is more bizarre is that the Court held that even if the Certificate of Competency was valid, the warranty that required proper licensing and registration of the vessel is not wide enough to include the licensing of the Master or crew. Moreover, "officered and manned" was also not wide enough to cover a situation where a Master's certificate of competency is not re-validated under written law. This means that marine underwriters must now be extra cautious in underwriting business in Sarawak especially when using the ordinary warranty wordings in practice. Now, warranty wordings have to be well defined and specific to include everything that the insurers regard as mandatory for compliance. Common sense did not prevail this time.
