Sakura Ferroalloys Sdn Bhd v Allianz General Insurance Company (Malaysia) Berhad (WA-27NCC-52-11/2022)

This judgment deals with the interpretation to be given to a Bulk Shipment Clause in a Marine Open Cover where the assured had warranted to procure certified surveys of the cargo for shipment at both the loading and the discharge ports.

The dispute concerned the use of draught survey which is a process used in the marine industry to measure and verify the quantity of cargo loaded or unloaded from a vessel, typically bulk cargo. The S/N 6DkspudWkaU5h3Q8qbPfw **Note : Serial number will be used to verify the originality of this document via eFILING portal 2 survey involves measuring the vessel’s draft, namely, the vertical distance between the waterline and the bottom of the hull before and after loading or unloading.

The issues for determination were whether the forms of certified surveys at both the loading and discharged ports must be by draught surveys only and if not, whether the same or equivalent method of calculation should be used at both the port of loading and discharge port. Further, since the method of survey at the port of discharge differed from the loading port, whether there was any customary practice that had prevented the same or equivalent method of survey calculation to be procured.

Allianz General Company Insurance (Malaysia) Berhad (“Allianz”) issued a Marine Open Cover (reference no. Allianz/MR2043/19) dated 13.9.2019 (“Open Cover”) in favour of Sakura Ferroalloys Sdn Bhd (“Sakura”), covering the exports / imports of High Carbon Ferro-Manganese (“HCFeMn / Cargos”).

Subsequently, Sakura entered into agreements with third parties for the export of HCFeMn. The details are as follows:

agreements with one Minerais US LLC for the sale of 3 shipments of HCFeMn to New Orleans Port, USA, with the final destination at Inland Warehouses, USA, namely: S/N 6DkspudWkaU5h3Q8qbPfw

(a)

6500.03 MT of HCFeMn to be shipped by vessel named

(b)

5200.03 MT of HCFeMn to be shipped by vessel named

(c)

5200.30 MT of HCFM and 6500.09 MT of HCFeMn, among others, to be shipped by vessel MV Alam Mutiara (“Alam Mutiara Cargo”).

agreement with Sumitomo Corporation for the sale of 2500.87 MT of HCFeMn to Kawasaki Port in Japan (“Thailine 5 Cargo”). [6] Allianz provided insurance to Sakura for the export of the Cargos, in that:

a total of three certificates of insurances were issued under the Open Cover and to be read together with the Open Cover:

Marine Cargo Certificate of Insurance ALLIANZ/MR2043/19-200202 dated 30.8.2020 for the exports of Alam Madu Cargo (referred together with the

Marine Cargo Certificate of Insurance ALLIANZ/MR2043/19-200261 dated 13.10.2020 for the exports of Ikan Pulas Cargo (referred together with the

Marine Cargo Certificate of Insurance ALLIANZ/MR2043/19-200323 dated 21.11.2020 for the exports of Thailine 5 Cargo (referred together with the Open Cover as “Thailine 5 Policy”).

Separately, Allianz also issued a separate Marine Policy No. 20MMR0000381-00 in favour of Sakura on or about 9.12.2020, for the exports of Alam Mutiara Cargo (“Alam Mutiara Policy”). [7] At all material times, Sakura was the insured entity under the Alam Madu Policy, Ikan Pulas Policy, Thailine 5 Policy and Alam Mutiara Policy ("the Insurance Policies”). [8] When the Cargos arrived at the respective destinations, it was found that the quantity of the Cargos delivered to the final destinations was less than the quantity delivered from Sakura’s warehouse. As a result, Sakura had suffered total losses of 1,812.81MT of HCFeMn with the breakdown as follows:

286.03 MT for Alam Madu Cargo;

481.32 MT for Ikan Pulas Cargo;

239.48 MT for Thailine 5 Cargo; and

805.98 MT for Alam Mutiara Cargo. [9] The extent of Sakura’s Cargo shortage is supported by the documentary evidence and has never been disputed by Allianz. S/N 6DkspudWkaU5h3Q8qbPfw [10] On or around January 2021, Sakura notified Allianz of the losses in relation to the Cargos and provided the necessary documentation and information requested. [11] However, Allianz failed and or refused to allow Sakura’s claim for the full outstanding sum claimable, on only one basis, i.e. “there is no draught survey conducted to determine the consignment quantity that were loaded onboard the vessel” and this is in breach of the following clause: “Bulk Shipment Subject to the survey warranties as follows: a) Warranted surveyor to certify the loading and discharge weight b) Warranted that the same or equivalent method of calculation should be used at both the Port of loading and discharged unless prevented by customary practice” (“Bulk Shipment Clause”) [12] Therefore, Sakura filed the current claim against Allianz to claim for the Cargo shortage, in the sum of USD1,589,881.61. Allianz’s Contention [13] It was Allianz’s contention that Sakura had breached the Bulk Shipment Clause which permits for only draught surveys at both the loading and the discharge ports. S/N 6DkspudWkaU5h3Q8qbPfw Sakura’s Contentions [14] In response to Allianz’s allegation that Sakura had breached the Bulk Shipment Clause, Sakura contended that:

the Bulk Shipment Clause only requires surveyor to certify the loading and discharge weight. In this regard, Sakura had complied with the Bulk Shipment Clause because:

in terms of Limb (a) of the Bulk Shipment Clause, Sakura’s surveyor had certified the loading and discharge weight;

in terms of Limb (b) of the Bulk Shipment Clause:

For Japan shipment (Thailine 5) Sakura’s surveyor in Malaysia (SGS) used weighbridge for calculation at the port of loading (Samalaju Port) and Sakura’s surveyor in Japan (All Nippon Checkers) also used weighbridge for calculation at the port of discharge (Kawasaki Port, Japan). Therefore, the same method was used for calculation at the port of loading and discharge.

(ii) For the USA shipments (Alam Madu, Ikan Pulas and Alam Mutiara shipments), Sakura’s surveyor in Malaysia (SGS) had used weighbridge for calculation at the port of loading (Samalaju Port). Sakura was prevented by customary practice to S/N 6DkspudWkaU5h3Q8qbPfw use weighbridge at the port of discharge (New Orleans Port) because there was no weighbridge there and the transport of Cargos from New Orleans Port to the final destinations was by water through the Mississippi River. The customary practice in New Orleans Port, USA was not disputed. Therefore, Limb (b) of the Bulk Shipment Clause is fulfilled.

(iii) Further and or in the alternative, Limb (b) of the Bulk Shipment Clause was fulfilled for Alam Madu and Ikan Pulas shipment because Sakura’s surveyors had conducted draught survey at the port of loading and port of discharge for the same.

In any event, any alleged breach of the Bulk Shipment Clause would have happened at the port of discharge. Sakura’s loss of Cargo took place before the Cargos arrived at the port of discharge (i.e. at the port of loading stockpile or during the sea voyage). Therefore, Allianz cannot rely on Section 10 of the UK Insurance Act 2015 to avoid its liability to pay Sakura for its loss.

Even if Limb (b) of the Bulk Shipment Clause was breached (which Sakura denied), such breach did not increase the risk of the loss occurring. Allianz would still be liable under Section 11 of the UK Insurance Act 2015 to pay Sakura for its loss. S/N 6DkspudWkaU5h3Q8qbPfw Court’s Considerations [15] At the outset, it should be stated that the fact that the insurance coverage took effect from Sakura’s warehouse to the respective final destinations was not disputed:

for the three USA shipments (Alam Madu, Ikan Pulas and Alam Mutiara shipment) that were shipped on the basis of “DAT USA inland warehouses (including barging, delivery and offloading into warehouse), the final destinations were at the inland warehouses in USA; and

for the Japan shipment (Thailine 5 shipment) that was shipped on the basis of “CIF Kawasaki, Japan”, the final destination was Kawasaki, Japan. [16] Based on the undisputed documentary evidence, Sakura suffered Cargo shortages for all four shipments, and such loss took place within the coverage of the Insurance Policies. [17] The extent of loss can be ascertained by comparing the weight of Cargos measured at Sakura’s weighbridge versus the weight of Cargos received at the final destinations (Inland Warehouses, USA or Kawasaki Japan). Shipment Sakura Weighbridge Weight Final Destination Weight Difference

Alam Madu 6500.03 6214.00 -286.03 2. Ikan Pulas 5200.03 4718.71 -481.32

Thailine 5 (Lumpy only)

2500.87

2261.39 -239.48

Alam Mutiara (Lumpy only)

11700.39 10,894.41 -805.98 Total 1,812.81 [18] The weight set out above were supported by undisputed documentary evidence:

for all four shipments, the loading weight of the Cargos measured by Sakura’s weighbridge and were certified by a surveyor in Malaysia, SGS Malaysia Sdn Bhd (“SGS”);

the discharging weight of the Thailine 5 Cargo at the final destination of Kawasaki Japan was measured and certified by a surveyor in Japan, All Nippon Checkers Corporation (“All Nippon Checkers”);

the discharging weight of the Alam Madu Cargo, Ikan Pulas Cargo and Alam Mutiara Cargo at the final destinations at Inland Warehouses, USA were measured by the weighbridge of the respective warehouses and supported by the warehouse receipts. [19] In fact, Sakura’s service manager, Mr. Botha (PW5) testified on the extent of the losses in his witness statement at Q&A10, Appendix 1 and Appendix 2 of WSPW5, both in terms of weight (in MT) and in monetary terms (in USD). Pertinently, Allianz’s counsel did not cross examine Mr. Botha (PW5) to challenge the extent of Sakura’s losses. S/N 6DkspudWkaU5h3Q8qbPfw [20] It is trite that failure to cross-examine a witness on a crucial part of the case will amount to an acceptance of the witness’s testimony: see Federal Court case of Wong Swee Chin v Public Prosecutor [1981] 1 MLJ 212 at 213. Therefore, Allianz must have accepted PW5’s testimony as to the extent of Cargo shortage suffered by Sakura. [21] Thus, Sakura has suffered shortage of a total of 1,812MT of Cargos which translates to sum claimable under the insurance of USD1,589,881.61. [22] As is apparent from the same documentary evidence, such Cargo shortage took place between Sakura’s warehouse (as evidenced from Sakura’s weighbridge tickets) and the respective final destinations (i.e. Inland Warehouses, USA or Kawasaki, Japan) (as evidenced from the warehouse receipts). Such loss thus occurred while the Insurance Policies were attached. [23] There is no dispute that the Insurance Policies for all four shipments are all-risk policies. In this regard, it is trite law that:

under an all-risk policy, an assured need only give evidence reasonably showing that the loss was due to a casualty. The burden of proof of an assured averring a loss is discharged by proving that the loss was caused by some event covered by the general expression. He is not bound to go further and prove the exact nature of the accident or casualty which, in fact, occasioned his loss; S/N 6DkspudWkaU5h3Q8qbPfw

the assured is also considered to have discharged its burden of proof by showing that the cause of loss was one insured against, although he is unable to point to a particular cause, provided it has occurred during the currency of the policy. [See: Court of Appeal case of CMS Clinker Sdn Bhd v Allianz General Insurance Co (M) Bhd [2014] 6 MLJ 397 at para [22]- [24] (“CMS Clinker”)] [24] More specifically, in the CMS Clinker case, the assured claimed for loss under an all-risk policy, which provides that “This insurance covers all risk of loss of or damage to the subject matter insured except as provided in clauses 4,5,6 and 7.” (para [15]). In that case:

the loss occurred because the quality of the cargo (coal) transported from Indonesia to Kuching had changed. When it arrived at the destination, it was found that the coal did not comply with the specification of the purchase order.

in support of its claim, the assured submitted two surveyor reports on the quality of the coal:

one survey report by surveyor in Indonesia, which showed that the quality of the coal had complied with the specification (para [5]); and

another survey report by surveyor in Kuching, Malaysia, which showed that the quality of the coal was different than the one in Indonesia (para [6]).

in the High Court, the Judge found that the assured failed to discharge its burden of proof under an all-risk policy to show that the loss was due to a fortuitous event and or casualty and or accident. This was because there was no proof of theft, switching during the voyage, bad weather or adverse sea condition which had cause damage to the coal (para [18]). The High Court therefore dismissed the assured claim.

on appeal, the Court of Appeal held that the assured had discharged its burden under an all-risk policy by producing the two surveyor reports which showed the change in quality of the coal. This was sufficient to show that the loss was caused by a fortuitous event and or casualty and or accident. The burden was then shifted to the insurance company to prove otherwise. See para [26]: “[26] It is undisputed that the comparative report of SGS and its earlier report on the coal show conclusively that there has been a change in the quality of the coal. This change in quality, and in the absence of any allegations of bad faith or fraud against the appellant in their claim by the respondent, in our view, is enough to show that the loss had been caused by a fortuitous event and/or casualty and/or accident. Hence the appellant had discharged the burden of proof and with that, the burden then shifted to the respondent to prove that the change in the quality of coal was due to ‘inherent vice’ of the coals. In simple language, we found that the appellant had proven their case and to escape liability, the respondent who had asserted that the coal's deterioration was due to ‘inherent S/N 6DkspudWkaU5h3Q8qbPfw vice’ must bear that burden of proof to so prove, as required under the law.” [25] Applying the above principles to this case, the four shipments were also insured under an all-risk policy under ICC(A). In support of its claim under an all-risk policy, Sakura had produced the following documentary evidence:

for Thailine 5 shipment:

certificates by surveyor in Malaysia (SGS) to prove the weight of the Cargo moved from Sakura’s warehouse and onboard vessel; and

certificates by surveyor in Malaysia (All Nippon Checkers) to prove the weight of the Cargos arrived at the final destination (Kawasaki Port, Japan); and

for USA Shipments (Alam Madu, Ikan Pulas and Alam Mutiara shipments):

certificates by surveyor in Malaysia (SGS) to prove the weight of the Cargos moved from Sakura’s warehouse and onboard vessel:

warehouse receipts by the respective Inland Warehouses, USA to prove the weight of the Cargos arrived at the final destination (Inland Warehouses, USA). S/N 6DkspudWkaU5h3Q8qbPfw [26] Just like the CMS Clicker case, where the proof of “change” in quality of the cargo is sufficient, Sakura had produced documentary evidence to show the “change” in weight of the total Cargos, i.e. the decrease of 1,812.81MT when the Cargos arrived at the respective final destinations. [27] The breakdown of change in weight of the Cargos is shown in the table below:

Alam Madu 6500.03 6214.00 -286.03 2. Ikan Pulas 5200.03 4718.71 -481.32 3. Thailine 5 (Lumpy only)

2500.87

2261.39 -239.48

Alam Mutiara (Lumpy only)

11700.39 10,894.41 -805.98 Total 1,812.81 [28] Therefore, the Cargos shortages must have been lost due to a fortuitous event and or casualty and or accident that had taken place between Sakura’s premises and the respective final destinations (i.e. Inland Warehouses, USA for the USA shipments and Kawasaki Port, Japan for the Thailine 5 shipment). [29] To my mind, applying the CMS Clicker case, Sakura had discharged its burden of proving that the Sakura’s losses occurred due to a fortuitous event and or casualty and or accident. S/N 6DkspudWkaU5h3Q8qbPfw [30] Further, the process transit of Cargos from Sakura’s warehouse to the respective final destinations were explained in Q&A5 of WSPW5. [31] Sakura’s service manager, Mr. Botha (PW5) testified that the reason for the shortage was likely to be that:

the Cargos were stolen from the Samalaju stockpile, before being loaded onto the vessels; or

the Cargos were lost during sea voyage. [32] Throughout the process of transit from Sakura’s warehouse to the vessel, the cargo for four shipments remained supervised by the surveyor, SGS and or the Samalaju port authority.

from Sakura’s premises to Samalaju Port stockpile – supervised by SGS (surveyor);

at Samalaju Port stockpile (10am-7pm) – supervised by SGS (surveyor);

at Samalaju Port stockpile (7pm-10am) – supervised by Samalaju Port authorities; and

from Samalaju Port stockpile onto the vessel – supervised by SGS (surveyor). [33] The only time the Cargos were not monitored by SGS (surveyor) was when the Cargos were at Samalaju Port stockpile (7pm-10am). Therefore, the Cargos might have been stolen when it was placed at the Samalaju port stockpile. [34] Unfortunately, the CCTV recordings of the Port stockpile was not available as evidence in Court as the CCTV recordings were only available for one month. S/N 6DkspudWkaU5h3Q8qbPfw [35] However, Sakura did lodge police reports for the loss of cargo and in the police reports, Sakura mentioned theft of Cargos at stockpile to be the suspected reason for the Cargo shortage. [36] Allianz seem to be taking the same position that the goods were stolen at the stockpile as well because Allianz placed a lot of emphasis in advancing its case that the security at the Samalaju Port was allegedly “not good”. [37] Another possibility canvased was that the cargos were loss during the sea voyage. This was because the quantity of cargo loaded onboard the vessels as certified by SGS (Sakura’s surveyor in Malaysia) was the same as the quantity of cargo recorded at Sakura’s weighbridge. Whereas the quantity of cargo discharged from the vessels as recorded by Campana Marine Services Inc (“Campana”) (Sakura’s surveyor in USA) and All Nippon Checkers (Sakura’s surveyor in Japan) was significantly lower than the quantity loaded onto the vessel. [38] The fact that there was a material difference in the weight between the port of loading and the port of discharge meant that the loss could have occurred during the sea voyage. [39] Regardless of whether the Cargo shortages happened at the Samalaju Port stockpile or during sea voyage, such shortages took place while the Insurance Policies were attached. [40] On this basis, Allianz would be liable to pay Sakura for the loss of Cargos. S/N 6DkspudWkaU5h3Q8qbPfw [41] During oral submission after trial, Allianz raised only one ground to justify its rejection of Sakura’s claim on the Insurance Policies, i.e. that Sakura had breached the Bulk Shipment Clause because:

there was no draught survey carried out to certify the weight of goods loaded onto the vessels Ikan Pulas, Thailine 5 and Alam Mutiara; and

there was no draught survey carried out to certify goods discharged from vessels for Alam Madu, Ikan Pulas, Thailine 5 and Alam Mutiara. [42] Allianz’s contention was that under the Bulk Shipment Clause, not only should there be a certified survey for the loading and discharge weight, the certified survey should be in the form of a draught survey only. [43] With respect, under the Bulk Shipment Clause, there was no requirement that the survey on the Cargoes at the loading and discharge ports must be by draught survey only. In fact, the word “draught survey” was never even mentioned in the Bulk Shipment Clause at all. [44] To my mind, based on the plain and ordinary meaning of the Bulk Shipment Clause, the Bulk Shipment Clause was fulfilled so long as:

there were surveyors to certify the weight of the Cargos loaded and discharged; and S/N 6DkspudWkaU5h3Q8qbPfw

the same or equivalent method of calculation was used at the port of loading and discharge or if different method of calculation was used at the port of loading and discharge, it was because of some customary practice. [45] It is trite law when interpreting the meaning of the words used in a contract they should be construed in their grammatical and ordinary meaning [See: the Court of Appeal’s decision in Malaysian Newsprint Industries Sdn Bhd v Perdana Cigna Insurance Bhd & Ors [2008] 2 MLJ 256 at para [26]; Kee Keng Mow v Setapak Garden Estate Ltd [1975] 2 MLJ 102 at 103F-H right, where the Court rejected the plaintiff’s interpretation of contract because it was inconsistent with the plain and ordinary meaning of the words in the agreement]. Limb (a) Bulk Shipment Clause

Certified Survey for the Loading Weight using weighbridges [46] In the present case, for loading weight, SGS Malaysia Sdn Bhd (“SGS”), a surveyor company in Malaysia, had certified the loading weight for all four shipments using weighbridges, as follows:

Quantity Certificate dated 30.8.2020 and Certificate of Weights dated 17.9.2020 to certify that 6,500.03 MT was loaded onto vessel Alam Madu;

Quantity Certificate dated 25.10.2020 and Certificate of Weights dated 5.11.2020 to certify that 5,200.03 MT was loaded onto vessel Ikan Pulas; S/N 6DkspudWkaU5h3Q8qbPfw

two Quantity Certificates dated 23.11.2020 and two Certificates of Weight dated 2.12.2020 to certify that 2,500.87 MT (lumpy) and 500.01 MT (small lumpy) (total 3,000.88 MT) were loaded onto vessel Thailine 5; and

three Quantity Certificates dated 10.12.2020 and three Certificates of Weight dated 30.12.2020 to certify that 5,200.30 MT (Lumpy), 6,500.09 MT (Lumpy) and 2,600 MT (small lumpy) (total 14,300.39 MT) were loaded onto vessel Alam Mutiara. [47] During trial, Allianz’s witness admitted candidly that SGS (surveyor) had certified the loading weight of the Cargos:

Allianz’s surveyor, Ms. Soh (DW2) admitted that SGS certified the loading weight for Alam Madu: Yes, B1 now. Enclosure 16, B1, page 306. Again, this is also by SGS. They issued another certificate called quantity certificate and they have also then confirmed and certified that they have confirmed the tallying of truck loaded into the vessel cargo hold, and this is the figure, isn't it? Yes. As per the certificate weight, yes, SGS mentioned that. Yes. And I'm suggesting to you therefore, there is independent surveyor certification of loading of the goods onto the vessel. Agree? Yes, agree. S/N 6DkspudWkaU5h3Q8qbPfw

Allianz’s surveyor, Ms. Soh (DW2) also admitted that SGS had certified the loading weight for Ikan Pulas: Yes. Now, in fact, that is for Alam Madu. Now let's look at Ikan Pulas. Ikan Pulas also you have the same thing, Enclosure 41, C3, page 11. SGS and this is also for Ikan Pulas and the same confirmation, tally truck during loading into vessel hold. Correct? Yes. And turn to Enclosure 16, B1, page 390 for Ikan Pulas, there is also a similar confirmation in the quantity certificate that they have certified the tallying of truck loaded into vessel hold. Correct? Yes.

Allianz’s surveyor, Ms. Soh (DW2) again admitted that SGS had certified the loading weight for Thailine 5: And we can look at, for Thailine 5, Enclosure B2, page 57 to 60, this is for Thailine 5, you can see Thailine 5 here. Again the same confirmation, tally truck during loading into vessel, correct? Ms Soh, can you confirm that? Yes, correct.

Allianz’s surveyor, Ms. Soh (DW2) also admitted that SGS had certified the loading weight for Alam Mutiara: Yes. And page 202, Bundle B2, also a further certificate for Alam Mutiara by SGS confirming the loading onto the vessel. Ok? Right? S/N 6DkspudWkaU5h3Q8qbPfw Yes. Yes. And the same certificate can be found at 202 to 204, I suppose your answer will be the same, right? Yes.

Additionally, Allianz’s surveyor, Ms. Soh (DW2) also confirmed that there was a surveyor who certified the loading weight for all four shipments: Alright. Now therefore, there is at the very least a surveyor confirming the quantity loaded onto the vessel, isn't it, based on those certifications for all four shipments? Ms Soh? Yes. [48] Therefore, it is undisputed that Limb (a) was complied with insofar as loading weight was concerned, i.e. there were surveyors who had certified the loading weight.

(ii) Certified Survey for Discharge Weight [49] In the present case, Campana (a surveyor in USA) had certified the discharge weight for the USA-bound shipments, i.e. Alam Madu, Ikan Pulas and Alam Mutiara shipments using draught surveys. [50] As regards the Japan-bound shipment, All Nippon Checkers (a surveyor in Japan) had certified the discharge weight for the Thailine 5 shipments using weighbridges. S/N 6DkspudWkaU5h3Q8qbPfw [51] In fact, even Allianz’s expert (DW4) admitted that all that was required under Limb (a) was for a surveyor to certify the loading and discharge weight: Yes, I was trying to take it a step by step but if you want. All that is required under (a) is for there to be a surveyor to certify the loading and discharge weight. Would that be correct? AK Yes, surveyor certifying the loading and discharge weight. [52] Based on the aforesaid, Sakura had fulfilled the requirement under limb (a) of the Bulk Shipment Clause. Limb (b) of Bulk Shipment Clause [53] Limb (b) of the Bulk Shipment Clause provides that: “b) Warranted that the same or equivalent method of calculation should be used at both Port of loading and discharged unless prevented by the customary practice” [54] Insofar as limb (b) was concerned, there was no issue in respect of the Thailine 5 shipment (the Japan-bound shipment). This was because:

SGS (surveyor) had used weighbridge to calculate the weight of HCFeMn loaded onboard the vessel at Samalaju port (port of loading): and S/N 6DkspudWkaU5h3Q8qbPfw

All Nippon Checkers (surveyor) had also used weighbridge (which is also known as truck scale) to calculate the weight of HCFeMn discharged from the vessel at Kawasaki port, Japan (port of discharge). [55] Therefore, limb (b) of the Bulk Shipment Clause was clearly being complied with insofar as Thailine 5 was concerned. [56] However, for Alam Madu, Ikan Pulas and Alam Mutiara shipment (the USA-bound shipments):

SGS (surveyor) had used two methods of calculation to calculate the weight of HCFeMn loaded onboard the vessel:

Sakura’s weighbridge;

draught surveys conducted by SGS (except for Alam Mutiara shipment, due to concurrent loading of goods by different shippers);

Eventually, SGS (surveyor) had certified the HCFeMn loaded onboard using Sakura’s weighbridge figures instead of the draught survey figures. This meant that the ‘certified survey’ for the loading weight was based on the weighbridge figures.

On the other hand, Campana (surveyor) had used the barge draught surveys to calculate the weight of HCFeMn that was discharged from the vessel at New Orleans Port, USA (port of discharge). S/N 6DkspudWkaU5h3Q8qbPfw [57] Based on limb (b) of the Bulk Shipment, Sakura would have to satisfy this Court that it was prevented by customary practice to use the weighbridge to calculate the weight of the HCFeMn at the discharge port. [58] To be clear, given the high value of the Cargos, Sakura had relied on the weighbridge figures of the Cargos (instead of the draught survey figures) at the port of loading (Samalaju Port):

HCFeMn was an expensive material with the price of USD700- 900 per MT. In Malaysia, therefore, the loading weight for HCFeMn was calculated using weighbridge. This was the testimony of multiple witnesses:

Mr. Robert Lau’s (Owner, Director and Shipping Manager of Shipflag the shipping agent);

Mr. Ting’s (SGS Surveyor); and

Mr. Botha’s (Sakura’s manager).

This was because as compared to draught survey, weighbridge was a more accurate method of weighing. Draught survey weighing results were susceptible to various factors such as weather conditions, swells and accuracy of the draught marks. This was based on testimony of multiple witnesses:

Mr. Robert Lau’s (Owner, Director and Shipping Manager of Shipflag the shipping agent);

Mr. Ting’s (SGS Surveyor); and

Mr. Botha’s (Sakura’s manager).

During cross examination, Allianz’s surveyor, Ms. Soh (DW2) also admitted that draught surveys are not very accurate: Ok, yes. Sorry, Ms Soh. Ok, I have given you some explanation of what hogging is. Would you agree with me that draft surveys are not very accurate because you can have issues like hogging? There are instances for bulk shipment that there will be issue with quantifying the draft survey and yes, sometimes it could be due to rough sea and yes, it could happen.

In this case, Mr. Ting (SGS Surveyor) also testified that for Alam Madu, Ikan Pulas and Thailine 5 shipments, draught surveys were conducted but they were inaccurate due to excessive sea hogging, the fact that other holds on the ship were empty and or vessel conditions. This was why letters of protest were issued by SGS to highlight the inaccuracies of the draught survey results and to recommend using Sakura’s weighbridge figures as the bill of lading figure. [59] However, Sakura was prevented by customary practice to use the same or equivalent method of calculation (i.e. weighbridge) at the port of discharge (New Orleans Port, USA). [60] Evidence was adduced to show that based on customary practice in New Orleans Port, USA: S/N 6DkspudWkaU5h3Q8qbPfw

upon the discharge of cargo from the vessel, the cargo was moved to barge fleets to be transported by water through the Mississippi River to the respective inland, which were all located by the water. There was no weighbridge at the New Orleans Port, USA;

upon being loaded onto the vessel, the cargo would not go through land transport until it arrived near the inland warehouses in USA;

under such circumstances, even though the cargo was HCFeMn, it was the customary practice to weigh the cargo using barge draught surveys (which was to be conducted in water), instead of weighbridges (which was to be conducted on land). [61] The aforesaid were based on the testimonies of the following witnesses in support of the customary practice in New Orleans Port, USA:

Ms. Labuta’s (Logistics Manager at Minerais, buyer of the Cargo for USA shipment);

Captain Ronald’s (USA Surveyor); and

Mr. Botha’s (Sakura’s manager). [62] In fact, Allianz also agreed that it was the customary practice in New Orleans Port, USA, to do draught survey on barges: S/N 6DkspudWkaU5h3Q8qbPfw Alright. And whereas in New Orleans, USA, it is customary practice to conduct draft survey on barges. Are you aware of that? Based on geographical, that's why there was multiple barges being used to receive the cargo. That's right. Yes. [63] Therefore, Sakura had shown that it was indeed prevented by customary practice in New Orleans Port, USA to use the same or equivalent method to calculate the loaded weight and discharge weight. Indeed, there was no rebuttal evidence adduced by Allianz at all to contradict the testimony of Sakura’s witnesses on the customary practice. [64] Based on the aforesaid, it is my judgment that limb (b) of the Bulk Shipment Clause had been complied with. [65] Based on the above, it is my judgment that Allianz’s purported repudiation of the Insurance Policies on the ground that Sapura had breached the Bulk Shipment Clause has no merits at all. [66] In the light of my findings in favour of Sakura, there is no need for me to consider the issues relating to application of sections 10 and 11 of the UK Insurance Act 2015. This is more so when the question as to the application of the said Act in Malaysia pursuant to section 3 and 5 of our Civil Law Act 1956 was not canvassed before this Court. S/N 6DkspudWkaU5h3Q8qbPfw [67] Based on my reading of section 5 of the Civil Law Act 1956, the law applicable with respect to marine insurance is the law as would be administered in England as at 7.4.1956. This means that the applicable statute relating to marine insurance applicable to Malaysia is the Insurance Act 1906. The said section 5 is reproduced below: Application of English law in commercial matters

(1) In all questions or issues which arise or which have to be decided in the States of Peninsular Malaysia other than Malacca and Penang with respect to the law of partnerships, corporations, banks and banking, principals and agents, carriers by air, land and sea, marine insurance, average, life and fire insurance, and with respect to mercantile law generally, the law to be administered shall be the same as would be administered in England in the like case at the date of the coming into force of this Act, if such question or issue had arisen or had to be decided in England, unless in any case other provision is or shall be made by any written law.

In all questions or issues which arise or which have to be decided in the States of Malacca, Penang, Sabah and Sarawak with respect to the law concerning any of the matters referred to in subsection (1), the law to be administered shall be the same as would be administered in England in the like case at the corresponding period, if such question or issue had arisen or had to be decided in England, unless in any case other provision is or shall be made by any written law. S/N 6DkspudWkaU5h3Q8qbPfw Conclusions [68] Based on the foregoing, it was the judgment of this Court that Sakura’s claim against Allianz ought to be allowed with costs on the following grounds:

The Insurance Policies attached from the moment the Cargos left Sakura’s warehouse right up to the final destinations;

Allianz provided an all-risk coverage to Sakura, including coverage for Sakura’s cargo shortage by reason of theft at Samalaju Port stockpile or loss at sea voyage. Therefore, Allianz was liable to pay Sakura for Sakura’s cargo shortage.

In response to Allianz’s allegation that Sakura had breached the Bulk Shipment Clause:

The Bulk Shipment Clause only required surveyors to certify loading and discharge weight. Sakura had duly complied with the Bulk Shipment Clause because:

in terms of Limb (a) of the Bulk Shipment Clause, Sakura’s surveyor had certified the loading and discharge weight;

(ii) in terms of Limb (b) of the Bulk Shipment Clause:

For Japan shipment (Thailine 5) Sakura’s surveyor in Malaysia (SGS) had used S/N 6DkspudWkaU5h3Q8qbPfw weighbridge for calculation at the port of loading (Samalaju Port) and Sakura’s surveyor in Japan (All Nippon Checkers) had also used weighbridge for calculation at the port of discharge (Kawasaki Port, Japan). Therefore, the same method was used for calculation at the port of loading and discharge.

For the USA shipments (Alam Madu, Ikan Pulas and Alam Mutiara shipments), Sakura’s surveyor in Malaysia (SGS) had used weighbridge for calculation at the port of loading (Samalaju Port). However, Sakura was prevented by customary practice to use weighbridge at the port of discharge (New Orleans Port) because there was no weighbridge there and the transport of Cargos from New Orleans Port to the final destinations were by water through the Mississippi River. The customary practice in New Orleans Port, USA was not disputed. Therefore, Limb (b) of the Bulk Shipment Clause was fulfilled. [69] Accordingly, it is hereby ordered that the Allianz is to pay the sum of USD 1,589,881.61 (which is equivalent to RM 7,272,118.48 based on the exchange rate as at 23.11.2022, which is at USD 1.00 to RM 4.5740) with interest thereon at 5% per annum on the said S/N 6DkspudWkaU5h3Q8qbPfw sum until full and final settlement with costs fixed at RM 120,000.00 subject to the payment of allocator. Dated the 14th day of March 2025 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel:

Counsel for Plaintiff: Mr. Jack Yow Pit Pin together with Ms. Jasmine Goh Chan Yit (Messrs. Rahmat Lim & Partners)

Counsel for Defendant: Ms. Emily Chong Pei Yen together with Mr. Muhammad Aiman Rahimi Bin Azizan (PDK); and Ms. Liu Poh Yeng (PDK) (Messrs. Othman Hashim & Co.)

Wong Swee Chin v Public Prosecutor [1981] 1 MLJ 212 at 213

CMS Clinker Sdn Bhd v Allianz General Insurance Co (M) Bhd [2014] 6 MLJ 397

Malaysian Newsprint Industries Sdn Bhd v Perdana Cigna

Insurance Bhd & Ors [2008] 2 MLJ 256 Kee Keng Mow v Setapak Garden Estate Ltd [1975] 2 MLJ 102

Sections 10 and 11 of the UK Insurance Act 2015