Sitra Wood Products v Royal & Sun Alliance: Insurable Interest & Pecuniary Loss in FOB Contract
In Sitra Wood Products Pte Ltd v Royal and Sun Alliance Insurance (S) Pte Ltd, the High Court of Singapore dismissed Sitra Wood's claim against Royal & Sun for insurance coverage on goods lost at sea. The court, presided over by Justice S Rajendran, ruled on July 30, 2001, that payments made by the buyer, SAS Ravate Distribution, to Sitra Wood were not a gift or windfall but rather a contractual obligation under the FOB terms, thereby negating Sitra Wood's insurable loss. The court also found that Sitra Wood had prejudiced Royal & Sun's right of subrogation by failing to commence proceedings against the carrier within the stipulated time limit.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Claim dismissed with costs.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Sitra Wood Products' insurance claim denied. Court held payments from buyer were not a gift, negating insurable loss under FOB contract.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Sitra Wood Products Pte Ltd | Plaintiff | Corporation | Claim Dismissed | Lost | Govin Asokan, Henry Heng |
| Royal and Sun Alliance Insurance (S) Pte Ltd | Defendant | Corporation | Judgment for Defendant | Won | R Govintharasah |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| S Rajendran | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Govin Asokan | Rodyk & Davidson |
| Henry Heng | Rodyk & Davidson |
| R Govintharasah | Gurbani & Co |
4. Facts
- Sitra Wood sold timber and plywood to Ravate on FOB terms.
- The contracts incorporated Sitra Wood's General Terms and Conditions of Sale.
- Sitra Wood insured the cargo with Royal & Sun Alliance.
- The vessel carrying the cargo sank in the Indian Ocean.
- Ravate paid Sitra Wood for the cargo despite the loss.
- Ravate also claimed and received reimbursement from its own insurers.
- Sitra Wood initially claimed only the 10% uplift from Royal & Sun.
5. Formal Citations
- Sitra Wood Products Pte Ltd v Royal and Sun Alliance Insurance (S) Pte Ltd, Suit 233/2000, [2001] SGHC 204
6. Timeline
| Date | Event |
|---|---|
| Sitra Wood sought to insure the cargo. | |
| Loading of the vessel was completed. | |
| The vessel sank in the Indian Ocean. | |
| Sitra Wood submitted a claim to Royal & Sun. | |
| Ravate's insurers made the first payment. | |
| Sitra Wood received payments from Ravate in respect of invoices 2, 3 and 5. | |
| Ravate's insurers made the second payment. | |
| Webster rejected the claim by Sitra Wood on behalf of Royal & Sun. | |
| Payments under the LCs were effected. | |
| Payments under the LCs were effected. | |
| Sitra Wood issued a credit note to Royal & Sun. | |
| Rodyk & Davidson sent a letter to Webster. | |
| Webster sent a letter to Rodyk & Davidson. | |
| Rodyk & Davidson responded to Webster. | |
| Webster responded to Rodyk & Davidson. | |
| Ravate provided a letter to Sitra Wood. | |
| Rodyk & Davidson made a claim against Royal & Sun. | |
| Webster responded to Rodyk & Davidson. | |
| Sitra Wood commenced proceedings against Royal & Sun. | |
| Judgment was delivered. |
7. Legal Issues
- Insurable Interest
- Outcome: The court held that Sitra Wood did not have an insurable interest at the time of the loss because it had been fully paid by Ravate for the cargo.
- Category: Substantive
- Pecuniary Loss
- Outcome: The court held that Sitra Wood did not suffer a pecuniary loss because the payments made by Ravate were not a gift or windfall but rather a contractual obligation under the FOB terms.
- Category: Substantive
- Breach of Sue and Labour Clause
- Outcome: The court found that Sitra Wood had breached clause 16 of the ITTF Clauses by failing to take reasonable measures to ensure that all rights against carriers were properly preserved.
- Category: Substantive
8. Remedies Sought
- Monetary Damages
9. Cause of Actions
- Breach of Insurance Contract
10. Practice Areas
- Commercial Litigation
- Insurance Litigation
11. Industries
- Timber
- Insurance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Mitsui & Co Ltd & Anor v Flota Mercante Grancolombiana SA, The Ciudad de Pasto, The Ciudad de Neiva | N/A | Yes | [1989] 1 All ER 951 | N/A | Cited regarding the presumption in overseas sales that the seller reserves the right of disposal until full payment is received. |
| Castellain v Preston & Ors | Court of Appeal | Yes | (1883) 11 QBD 380 | England | Cited for the principle that insurance is a contract of indemnity, ensuring the insured is fully indemnified but not profiting from the loss. |
| Malayan Motor and General Underwriters (Pte) Ltd v Abdul Karim & Anor | Court of Appeal | Yes | [1982] 1 MLJ 51 | Singapore | Cited regarding whether payments ought to be taken into account in diminishing the loss against which the contract of insurance was given. |
| Stearns v Village Main Reef Gold Mining Co Ltd | N/A | Yes | (1905) 21 TLR 236 | N/A | Distinguished from the present case regarding compensation by the party that caused the loss. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Hague Rules Article 111, rule 6 | N/A |
15. Key Terms and Keywords
15.1 Key Terms
- Free on Board (FOB)
- Insurable Interest
- Pecuniary Loss
- Contract of Indemnity
- Sue and Labour Clause
- Subrogation
- Letter of Credit
- Bill of Exchange
- General Terms and Conditions
15.2 Keywords
- insurance
- FOB
- insurable interest
- pecuniary loss
- timber
- Royal & Sun Alliance
- Sitra Wood
- contract of indemnity
16. Subjects
- Insurance
- Contract Law
- Shipping Law
17. Areas of Law
- Insurance Law
- Contract Law
- Marine Insurance