Everbright v AXA: Marine Insurance, 'Approved Vessel' & Phantom Ships

In Everbright Commercial Pte Ltd and Another v AXA Insurance S`pore Pte Ltd, the Singapore High Court addressed a dispute over marine insurance coverage. Everbright Commercial, the plaintiff, sought to recover losses for cargo shipped on the Sirena 1, a vessel later found to be a phantom ship, under a cargo cover note issued by AXA Insurance. The HongKong and Shanghai Banking Corporation Ltd was the second plaintiff. The court, presided over by Judith Prakash J, ruled in favor of AXA Insurance, holding that the cargo cover note did not cover shipments on board a chartered vessel that was not classed in accordance with the Institute Classification Clause (ICC). The court also rejected the plaintiffs' claim of estoppel and found that the defense of illegality was not proven.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiffs' claim dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case regarding marine insurance coverage for cargo lost on a phantom ship. The court considered the meaning of 'approved vessel'.

1.7 Decision Date

27 June 2000

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Everbright Commercial Pte Ltd	Plaintiff	Corporation	Claim Dismissed	Lost	Brij Raj Rai of Rajah & Tann Gavin Khoo of Rajah & Tann
AXA Insurance S`pore Pte Ltd	Defendant	Corporation	Judgment for Defendant	Won	Richard Kuek of Gurbani & Co. R Govintharasah of Gurbani & Co.
The HongKong and Shanghai Banking Corporation Ltd	Plaintiff	Corporation	Claim Dismissed	Lost	Brij Raj Rai of Rajah & Tann Gavin Khoo of Rajah & Tann

3. Judges

Judge Name	Title	Delivered Judgment
Judith Prakash	Judge	Yes

4. Counsels

Counsel Name	Organization
Brij Raj Rai	Rajah & Tann
Gavin Khoo	Rajah & Tann
Richard Kuek	Gurbani & Co.
R Govintharasah	Gurbani & Co.

4. Facts

Everbright insured marine transit of cargo with AXA through Wilcom from 1993.
Everbright purchased vitex logs from Mbaeroko Timber in the Solomon Islands.
Everbright obtained Cargo Cover Notes from Wilcom to cover the shipment.
The HongKong and Shanghai Banking Corporation Ltd financed the purchase with a letter of credit.
Everbright chartered the Sirena 1 to carry the logs to Tuticorin, India.
The Sirena 1 was a phantom ship with no valid classification or trading certificates.
The Sirena 1 disappeared with the cargo on board.

5. Formal Citations

Everbright Commercial Pte Ltd and Another v AXA Insurance S`pore Pte Ltd, Suit 470/1999, [2000] SGHC 119

6. Timeline

Date	Event
1993-01-01	Everbright Commercial Pte Ltd began insuring marine transit of cargo with AXA Insurance through Wilcom Underwriting Agency Pte Ltd.
1997-01-01	Everbright Commercial Pte Ltd discovered commercial possibilities in the trade of vitex round logs from the Solomon Islands.
1997-08-01	Mr. Tadjoudine met with Dr. Ziru of Mbaeroko Timber Co Ltd to negotiate a contract for the purchase of vitex logs.
1997-09-09	Contract between Everbright Commercial Pte Ltd and Mbaeroko Timber Co Ltd was dated.
1997-05-09	Everbright Commercial Pte Ltd obtained Cargo Cover Note No 03019 from Wilcom.
1997-09-10	Everbright Commercial Pte Ltd procured Cargo Cover Note No 00515 from Wilcom.
1997-09-01	The HongKong and Shanghai Banking Corporation Ltd established a letter of credit for US$500,000 in favor of Mbaeroko.
1998-02-01	Mbaeroko informed Everbright Commercial Pte Ltd that it could only provide about 3,600 cubic metres of cargo for the first shipment.
1998-03-01	Everbright Commercial Pte Ltd started looking for a vessel to charter to carry the vitex logs to India.
1998-04-01	Everbright Commercial Pte Ltd was offered a vessel named Sirena 1 but declined it.
1998-05-01	Everbright Commercial Pte Ltd resumed their search for a vessel.
1998-06-04	Everbright Commercial Pte Ltd entered into a charterparty agreement with Nova Shipping Corp Ltd for the vessel Sirena 1.
1998-06-13	The Sirena 1 arrived in Honiara, Solomon Islands.
1998-06-30	The Sirena 1 proceeded to Dhora Island to load the cargo.
1998-07-02	Loading commenced on the Sirena 1.
1998-07-02	Everbright Commercial Pte Ltd sent a fax to Wilcom notifying them about the loading of the cargo and giving details of the carrying vessel.
1998-07-21	Loading was completed on the Sirena 1.
1998-08-02	The arrest of the Sirena 1 was lifted.
1998-08-11	Customs clearance took place in Honiara.
1998-08-12	The Sirena 1 departed the Solomon Islands.
1998-08-17	Everbright Commercial Pte Ltd sent another fax to Wilcom with details of the shipment on MV Sirena 1.
1998-09-02	Estimated date of arrival of the Sirena 1 at Tuticorin.
1998-09-03	Wilcom responded to Everbright Commercial Pte Ltd's correspondence.
1998-09-21	Everbright Commercial Pte Ltd notified Wilcom of a dispute between the owners of Sirena 1.
1998-09-24	Everbright Commercial Pte Ltd notified Wilcom that the Sirena 1 could not be located.
1998-09-25	Mr. William Wong of Wilcom reported the receipt of the notice of probable loss of the cargo to AXA Insurance.
1998-09-28	The International Maritime Bureau reported to AXA Insurance that they could not trace any current record of a vessel by the name of Sirena 1.
1998-10-02	AXA Insurance informed Everbright Commercial Pte Ltd through Wilcom that the first plaintiffs should act as a prudent uninsured would.
1998-10-06	AXA Insurance instructed Wilcom not to issue a policy in respect of this cargo.
1998-10-07	AXA Insurance informed Wilcom that their insurance cover was subject to the Institute Classification Clause and that the Sirena 1 did not conform to the requirements of that clause.
1998-10-26	AXA Insurance reiterated their position that there was no cover.
1999-03-01	Everbright Commercial Pte Ltd started this action.
2000-06-28	Decision Date

7. Legal Issues

Validity of Marine Insurance Contract
- Outcome: The court held that the cargo cover note did not cover shipments on board a chartered vessel that was not classed in accordance with the Institute Classification Clause (ICC).
- Category: Substantive
- Sub-Issues:
  - Interpretation of 'approved vessel' clause
  - Applicability of Institute Classification Clause
  - Invocation of 'held covered' clause
Estoppel
- Outcome: The court held that the defendants were not estopped from contending that the cover note never attached to the plaintiffs' cargo shipped on board Sirena 1.
- Category: Substantive
- Sub-Issues:
  - Duty to speak
  - Reliance on representation
  - Detriment suffered
Illegality
- Outcome: The court found that the defendants had not proved their allegation that the shipment and carriage of the goods on board the Sirena 1 was an unlawful adventure.
- Category: Substantive
- Sub-Issues:
  - Breach of warranty of legality
  - Contravention of foreign laws
  - Evasion of customs duties

8. Remedies Sought

Declaration that plaintiffs are entitled to receive policies of insurance
Payment of US$1.3 million as the insured value of the cargo

9. Cause of Actions

Breach of Contract
Claim for insurance coverage

10. Practice Areas

Commercial Litigation
Insurance Litigation

11. Industries

Shipping
Insurance
Commodities Trading

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Thames and Mersey Marine Insurance Co Ltd v HT Van Laun & Co	N/A	Yes	[1917] 2 KB 48	N/A	Cited for the principle that an assured must give reasonable notice to the underwriter of facts that take the insured interest out of the scope of the insurance cover.
Liberian Insurance Agency Inc v Mosse	N/A	Yes	[1977] 2 Lloyd`s Rep 560	N/A	Cited to explain the requirements for an assured to be protected by a held covered clause, including reasonable notice and the possibility of obtaining a reasonable commercial rate of premium.
Greenwood v Martins Bank	N/A	Yes	[1933] AC 51	N/A	Cited for the principle that silence is generally insufficient to constitute the kind of representation that is necessary for a plea of estoppel to succeed, unless there is a duty to speak.
Spiro v Lintern	N/A	Yes	[1973] 3 All ER 319	N/A	Cited to illustrate the principle that a duty to speak will arise where silence would create an erroneous impression which leads the prospective representee to alter his position for the worse.
Regazzoni v KC Sethia (1944) Ltd	N/A	Yes	[1958] AC 301	N/A	Cited regarding whether a contract for the performance of an adventure which involves contravention of the laws of a foreign and friendly state may be unenforceable.
Euro-Diam v Bathhurst	N/A	Yes	[1990] 1 QB 1	N/A	Cited regarding whether the term to be implied by s 41 of the Marine Insurance Act should embrace foreign illegality as well as illegality by English law.
Royal Boskalis Westminster NV v Mountain	N/A	Yes	[1997] LRLR 523	N/A	Cited regarding the warranty contained in s 41, if it applied to foreign law would be extremely wide.
Royal Boskalis Westminster NV v Mountain	N/A	Yes	[1999] QB 674	N/A	Cited regarding the warranty that the adventure shall be lawful and carried out in a lawful manner probably refers to English law, not foreign law.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Marine Insurance Act 1906	N/A
Marine Insurance Act 1906, s 41	N/A
Solomon Islands Customs and Excise Act	Solomon Islands
The Exchange Control (Foreign Exchange) Regulations	Solomon Islands

15. Key Terms and Keywords

15.1 Key Terms

Marine insurance
Cargo cover note
Institute Classification Clause
Approved vessel
Held covered clause
Phantom ship
Estoppel
Illegality
Warranty of legality
Vitex logs
Charterparty agreement

15.2 Keywords

marine insurance
cargo
phantom ship
approved vessel
Everbright
AXA
Singapore
insurance claim

17. Areas of Law

Area Name	Relevance Score
Marine Insurance	95
Insurance	85
Shipping Law	70
Contract Law	60
Estoppel	50

16. Subjects

Marine Insurance
Contract Law
Shipping Law