Garnat Trading & Shipping (Singapore) PTE Ltd & Anor v Baominh Insurance Corporation

For a voyage policy, seaworthiness is assessed at commencement against the contemplated adventure insured. Where the parties contemplate a maximum wave height, the vessel must be reasonably fit to meet the ordinary perils of that adventure, rather than a more severe voyage. A fair presentation of the risk may arise from the totality of documents, meetings and explanations. Where a material limitation is disclosed, the insurer bears the risk of conditions outside that limitation. An allegation that disclosed documents are fabricated must be put fairly and completely to the relevant witness before fraud may be inferred. The appeal therefore failed on both non-disclosure and seaworthiness.

The Owners claimed under marine insurance after a floating dock, being towed from Vladivostock to Vietnam, was abandoned following encounters with severe weather. The insurers denied liability, alleging that the Owners had failed to disclose limits in the towage plan and had breached the implied warranty of seaworthiness under section 39 of the Marine Insurance Act 1906.

Christopher Clarke J held that the towage limitations had been disclosed and that the Dock was seaworthy at the commencement of the voyage: [2011] 1 AER Comm 573. The insurers appealed, challenging the judge’s factual findings, the authenticity and receipt of disclosure documents, and the condition of the Dock. The central issues were whether there had been a fair presentation of the risk and whether the Dock was seaworthy for the contemplated voyage.

Appeal dismissed. The Court of Appeal upheld the judge’s conclusions on both non-disclosure and seaworthiness.

1. Non-disclosure. The relevant towage limitations were disclosed through the towage documents, meetings, explanations and subsequent communications. The court accepted that the fax of 10 June was sent and received, and that the Vietnamese translation sent by email on 12 June was genuine. Considering the evidence as a whole, there had been a fair presentation of the risk. The insurers therefore bore the risk of encountering conditions exceeding sea force 5 and wave heights of 3.5 metres.
2. Fabrication allegations. A serious allegation of fraud or fabrication must be put fairly and completely to the relevant witness before the court is invited to infer that it occurred. The insurers had failed to put their suggested circumstances of fabrication to the material witnesses. Those allegations could not properly support the appeal.
3. Seaworthiness. For a voyage policy, the implied warranty required the Dock, at commencement, to be reasonably fit in all respects to encounter the ordinary perils of the contemplated adventure. The relevant adventure was one in which the parties contemplated a maximum wave height of 3.5 metres. The court did not decide whether the doctrine of stages under section 39(3) of the Marine Insurance Act 1906 applied.
4. Application to the evidence. The Dock could achieve, and did achieve, a draft of about 2.8 metres before departure. Its temporary increase to 4.4 metres while passing through calm harbour waters reduced windage and did not make it unseaworthy. The evidence supported the finding that ten steel lashings were used, all six ballast pumps were operational at commencement, and the alleged leaks and defects were either unproved, equivocal or minor. Later use of only three pumps did not itself establish unseaworthiness at commencement.
5. The court applied the required appellate restraint to the judge’s assessment of witnesses and the evidence as a whole. The insurers’ challenges disclosed no basis for intervention. The appeal failed and was dismissed.

• Court of Appeal (Civil Division): On 6 July 2011, dismissed the insurers’ appeal and upheld the findings that the risk had been fairly presented and that the Dock was seaworthy.
• High Court, Queen’s Bench Division: Christopher Clarke J held that the towage limitations had been disclosed and that the Dock was seaworthy at the commencement of the voyage: [2011] 1 AER Comm 573.