Sunrise Entity Sdn. Bhd. v Etiqa General Insurance Berhad (WA-27NCC-31-05/2024)

This is an admiralty in personam action commenced by the Plaintiff P against the Defendant D . This action arose of liability under a marine hull and machinery policy issued in respect of vessel After a full trial, I allowed s claim. Here are my reasons. Background facts The marine insurance policy

By a hull and machinery policy issued on 5.10. policy insured the vessel for an agreed value of RM 4.8 million for the period from 3.10.2022 to 2.10.2023. The policy incorporates the Institute Time Clauses (Hulls) 1 / 10 / ITC Hulls Hulls provides cover for loss of or damage to the vessel caused by fire (clause 6.1.2) and by the negligence of repairers (clause 6.2.4), subject to the terms and warranties of the policy.

It is common ground, and recorded in the statement of agreed facts, that:- (a) a valid marine hull and machinery policy existed between the parties at all material times; (b) the policy incorporates the ITC Hulls; and

the policy is subject to English law and practice. The fire incident

During the life of the policy, on 11.11.2022 at approximately 4:30 p.m. to 4:50 p.m., a fire broke out on board the vessel whilst she was docked at Lunas Langkawi shipyard. Thereafter, by email dated 19.1.2023, P formally submitted its insurance claim for a total loss of the vessel arising from the fire. It is not disputed that P had an insurable interest in the vessel at all material times. repudiation

By a letter dated 10.7.2023, D repudiated liability under the policy. This was misconduct. D has maintained that position at paragraph 20 (i) of the statement of defence, wherein it relies upon wilful misconduct and breach of warranty under the policy. In its repudiation and defence, D relies upon section 55 (2) (a) of the Marine Insurance Act 1906. D avers that the loss is not recoverable if proximately caused by the wilful misconduct of the insured. Issues to be tried

The agreed issues to be tried are as follows : 1) 4,629,000.00 under the Marine Insurance Policy No. CHH - M0124760 - S3 and Marine Insurance Act 1906. 2) Whether the Defendant is liable to indemnify the Plaintiff as the Insured for 4,629,000.00 under the Marine Insurance Policy No. CHH - M0124760 - S3 and the Marine Insurance Act 1906. 3) Whether there is a breach of warranties by the Plaintiff under the Marine Insurance Policy No. CHH - M0124760 - S3 and whether the said breach (if any) has the effect of repudiating the claim. 4) Whether there is any wilful misconduct on the part of the Plaintiff. 5)

.

Fire, being the named peril under the ITC Hulls (clause 6.1.2) is an insured marine risk under the policy. The fire was the proximate cause of the incident, which resulted in the total loss of the vessel.

The damage to the vessel was proximately caused by fire, being a peril insured against under the policy. P relies on section 55

of the Marine Insurance Act 1906, which provides that the owner is entitled to be indemnified if the loss was itself not assured, owners or managers.

The total loss of the vessel was accidental, and not caused by or wilful misconduct.

.

The f own wilful misconduct and want of due diligence.

P had breached the warranty under the policy, i.e. warranted that the vessel be properly and reasonably maintained, equipped, kept - up, officered and manned during the currency of this p .

The f . Pursuant to section 55 (2) (a) of the Marine Insurance Act 1906, D is not liable for any loss attributable to such wilful misconduct.

P is not entitled to rely on clause 6.2 of the ITC Hulls, as the fire of P, being the assured. Accordingly, the claim is not payable by virtue of the proviso to clause 6.2 of the ITC Hulls.

Based on the above, D is not liable to indemnify P under the policy. D .

Having regard to section 55 of the Marine Insurance Act 1906 and clause 6 of the ITC Hulls, the court has to first identify the proximate cause of loss, before considering any alleged exclusion or exception. P bears the initial burden of establishing a prima facie case by proving the existence of a valid policy, an insurable interest, and loss proximately caused by an insured peril. Once that prima facie case is established, the burden shifts to D to prove any exclusion, exception or defence relied upon.

D bears the burden of establishing any exclusion or exception relied upon, and of proving that wilful misconduct or want of due diligence was the proximate cause of the loss. I find that D has failed to discharge that burden, and that the loss falls within the cover afforded by the policy. case, at its highest, alleges negligence and operational shortcomings. Such matters, even if established, do not constitute wilful misconduct and do not defeat cover under the policy. Clause 6 of the ITC Hulls expressly contemplates negligence without excluding cover.

My findings are that :

the loss of the vessel was proximately caused by fire, an insured peril under the policy;

D has failed to prove wilful misconduct or want of due diligence within clause 6.2 of the ITC Hulls;

there is no breach of warranty by P under the policy;

the loss caused by negligent repairers remains covered under clause 6.2.4 of the ITC Hulls; and

P is therefore entitled to recover RM 4,629,000 under the policy.

Here is my explanation. The applicable law

By virtue of section 5 (1) of the Civil Law Act 1956, the law to be administered in Malaysia in relation to marine insurance is the same as that administered in England. The policy is expressly subject to English law and practice, and incorporates the ITC Hulls. The ITC Hulls has an express choice of English law clause at the beginning of the policy - This insurance is subject to English law and practice Accordingly, the Marine Insurance Act 1906 and the English authorities interpreting that statute form part of Malaysian law, and are applicable to the present dispute. Structure of cover under clause 6 of the Institute Time Clauses (Hulls) 1 / 10 / 83

Clause 6 of the ITC Hulls sets out the perils insured against and the structure of cover under the policy. Clause 6.1.2 expressly provides cover for loss of or damage to the vessel caused by fire or explosion. In this regard, the evidence of the witnesses at the trial was that the cause of fire was accidental. There was no allegation of arson or any illegal act as the cause of the fire.

Clause 6.2 of the ITC Hulls provides additional insured perils, subject to a proviso excluding loss attributable to want of due diligence by the assured, owners or managers. The perils enumerated under clause 6.1, including fire, are not subject to the due diligence proviso contained in clause 6.2. Thus, damage to the vessel by fire is not subject to there being no want of due diligence by P, which is the proviso in the perils under clause 6.2 of the ITC Hulls. Clause 6.1 perils, of which fire or explosion is part of, are not subject to the due diligence proviso, which only applies to clause 6.2 perils.

Exclusions operate as exceptions to the primary grant of cover, and must therefore be construed strictly. Where ambiguity arises, the construction most favourable to the assured must be adopted. In Malaysia National Insurance Sdn Bhd v Abdul Aziz bin Mohamed Daud [1979] 2 MLJ 29, the Federal Court applied the contra proferentum rule to an exemption clause in an insurance policy. The Federal Court said (at page 32) : It also seems to me that as between the assured and the insurers, the exception clause in the proviso, on the ordinary principles of construction has, as far as possible, to be read against the insurance company, that is to say, if there is a doubt as to its extent, and the question were to arise as to the liability of the insurers, the construction most favourable to the assured must be given to him Proximate cause : the legal test

Section 55 (1) of the Marine Insurance Act 1906 provides that, subject to the provisions of the Act and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against. The concept of proximate cause in marine insurance does not refer to the last cause in time but to the dominant, effective or operative cause of the loss. The classic formulation of the test appears in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350, where the UK House of Lords held that the proximate cause is the real and efficient cause of the loss and not necessarily that which is nearest in time.

The law further recognises that more than one proximate cause may operate concurrently. In J.J. Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) Court of Appeal affirmed that where two causes of loss operate with equal efficiency, both may constitute proximate causes. The court made clear that where one proximate cause falls within the insured peril and the other is not expressly excluded, the insurer remains liable.

Accordingly, once the court is satisfied that fire was the dominant and effective cause of the loss, the claim falls within clause 6.1.2 of the ITC Hulls. This is unless D discharges the burden of proving that an applicable exclusion operates to defeat the claim. The proper approach is first to identify the proximate cause of the loss. Only thereafter does the court consider whether liability is displaced by negligence, want of due diligence or wilful misconduct. Burden of proof in marine insurance and exclusions

Once the assured establishes that the loss was proximately caused by a peril insured against, the burden shifts to the insurer to prove that the loss falls within an exclusion or exception relied upon to avoid liability. This principle was affirmed by the Federal Court in Malaysian National Insurance Sdn Bhd v Malaysia Rubber Development Corporation [1986] 2 MLJ 124 at 126 : burden of proving the exception was on the appellant who was relying on the exception to escape liability

The position reflects orthodox marine insurance law. The assured must establish that the loss was proximately caused by an insured peril. The insurer who seeks to avoid liability must then bring itself strictly within the terms of any exclusion upon which it relies.

The same principle has been articulated in English law. In Cape Distribution Ltd v Cape Intermediate Holdings plc; Cape Intermediate Holdings plc v Aviva plc, [2016] EWHC 1786, the English High Court explained that once the insured establishes that the loss was caused by the general peril insured against, it is for the insurer to bring itself within any exception in the insurance policy on which it relies. The court referred to MacGillivray on Insurance Law as follows :

This is made clear in MacGillivray on Insurance Law (13th Ed., 2015) at paragraph 21 - 007, as follows : Once the insured has proved that the loss was caused by the general peril insured against, it is for the insurer to bring himself within any exception in the policy on which he relies where an exception is itself subject to an exception, e.g. where it is in the form, '[t]his insurance does not cover [risk X] except [where Y applies]'. In Omega Proteins Ltd v Aspen Insurance UK Ltd [2011] Lloyd s Rep. I. R. 183 at 197, Christopher Clarke J, citing this paragraph in the 11th edition of this work as identifying the problem of construction to be addressed, held exclusion clause within an exception , the insurer bore the burden of establishing the exclusion from cover, including the burden of proving

The burden of proving the applicability of an exclusion lies upon the insurer. This was reiterated by the High Court in Mainline Enterprise Sdn Bhd v Tahan Insurance Malaysia Bhd [2009] MLJU 71 : I am mindful of the fact that the respondents have relied on the exclusion clause. It is trite that the burden of proof is on the insurer to prove an exception, which would relieve them of liability in respect of a particular loss.

Where an exclusion clause is itself subject to a proviso or saving exception, the insurer bears the burden not only of establishing the applicability of the exclusion, but also of proving that the exception to the exclusion does not restore cover. This was confirmed by the English High Court in Omega Proteins Ltd v Aspen Insurance UK Ltd [2011] 1 All ER (Comm) 313 at [90] - [91].

The burden of proving the applicability of an exclusion rests upon the insurer. This was reaffirmed by the English High Court in Encia Remediation Ltd v Canopius Managing Agents Ltd [2007] 2 All ER (Comm) 947 at [157], where the court held that the burden of proof falls upon insurers in respect of the whole of the exclusion relied upon.

Accordingly, once P establishes that the loss was proximately caused by fire, an insured peril under clause 6.1.2 of the ITC Hulls, P will have satisfied the legal burden of proving the claim under the policy. The burden then shifts to D to prove that the proximate cause of the damage to the vessel was not due to the perils under clause 6 of the ITC Hulls, but that it was due to the wilful misconduct on the part of P within section 55 (2)

of the Marine Insurance Act 1906. Fire as the dominant and effective proximate cause of loss

The evidence of PW4 (Ketua Cawangan Penyiasatan Kebakaran, Jabatan Bomba dan Penyelamat Malaysia) is this. The investigation commenced while the fire was still being extinguished; the fire origin was determined to be the engine room; the ignition source was identified as welding activity; and the official classification by the Fire Department was not arson.

PW4 testified : Bila kamu ke tempat itu, kapal masih terbakar atau bagaimana? Semasa saya hadir pada 12 haribulan, keesokan harinya, awal pagi, setelah saya naik feri daripada Kuala Kedah pada pagi 12 haribulan, proses pemadaman masih di lakukan. Ini bermakna, belum sepenuhnya di padamkan. Masih ada kalau peringkat bomba ini, di maklumkan proses overhaul. Dalam proses overhaul untuk memastikan semua sisa-sisa api telah di padamkan. Jadi, selepas api telah di padamkan, boleh tolong terangkan macam mana proses penyiasatan jabatan bomba? Semasa api belum di padamkan pun kami telah memulakan proses siasatan. Di mana kami telah memanggil beberapa saksi untuk di ambil keterangan dan kita juga melihat keadaan semasa proses pemadaman. Selepas proses pemadaman, kita akan menentukan lokasi api itu mula berlaku, ataupun fire origin. Di mana kami telah mendapati fire origin berlaku di bilik enjin feri tersebut. [English translation : Even before the fire was fully extinguished, we had already commenced our investigation process. We called several witnesses to record their statements, and we also observed the situation during the extinguishing process. After the extinguishing process, we determined the location where the fire originated, or the fire origin. We found that the fire originated in the engine room of the ferry.] Saya akan rujuk kepada satu dokumen. My Lord, this is Volume 4 Enclosure 27. Encik Firdaus, dokumen dalam muka sini, adakah dokumen ini di keluarkan oleh Encik Firdaus sendiri? Gambar ini? Ya, saya mengaku dokumen ini telah saya tandatangani untuk LPK1 tersebut. Tolong terangkan kepada kami semua, apa dokumen tersebut? Untuk makluman Yang Arif, dokumen ini adalah LPK1 iaitu laporan mengenai punca kebakaran di mana di sini, terdapat tarikh kejadian dan perihal kemalangan iaitu Star City Express No. 3. Di sini juga kita memaklumkan sumber nyalaan dan juga punca kebakaran. Termasuk juga anggaran bagi harta diselamatkan dan anggaran kerugian. Kesimpulan, punca kebakaran, cause of fire, boleh tolong terangkan macam mana kamu mendapati kesimpulan itu? Untuk makluman Yang Arif, pasukan kami yang di ketuai oleh saya telah bersependapat untuk mengatakan punca kebakaran ini adalah di sebabkan kemalangan. Itu di mana sumber nyalaan adalah di sebabkan oleh aktiviti kimpalan pada bahagian enjin room feri tersebut. [English translation : For your information, My Lord, our team, led by myself, unanimously concluded that the cause of the fire was due to an accident. The ignition source was welding activities carried out in the engine room of the ferry.] Kemalangan itu, dalam English boleh kata accident? Yes, accident. Dalam kes ini, adakah apa-apa kesimpulan dan penyiasatan kamu, ini adalah kes jenayah atau arson? Untuk makluman Yang Arif, punca untuk bomba terdapat tiga. Yang pertama kemalangan, yang kedua adalah sengaja di bakar, dan yang ketiga adalah semua jadi. Kalau sekiranya untuk arson, kami akan nyatakan sebagai sengaja di bakar dan kita akan berhubung dengan pihak PDRM untuk siasatan selanjutnya untuk sama ada arson ataupun tidak. [English translation : For your information, My Lord, from the Fire accident; second, deliberately set fire; and third, natural causes. If it were the Royal Malaysia Police (PDRM) for further investigation to determine whether it was arson or otherwise.]

Even a fire which is negligently started is covered. In the textbook Law of Marine Insurance by Susan Hodges, 1st edn, Cavendish Publishing Ltd, 1996 at page 202, it is stated : was examined in Busk v Royal Exchange Assurance Co by Mr Justice Bayley, who observed that : loss, the proximate cause of which is one of the enumerated risks, but the remote cause of which may be traced to the misconduct of the master and Applying the same principle, the judge in The Belle of Portugal held that the the policy. These cases have demonstrated that if a fire has proximately caused a loss, any negligence committed by the master or crew is irrelevant. This rule is now encapsulated in s 55 (2) (a). A shipowner could also rely on cl 6.2.2 of the ITCH (95) 151 and cl 4.2.2 of the IVCH (95) to claim for such a loss. However, if he wishes to plead that the loss The hot work permit system and shipyard safety control

PW2, the head of Lunas Langkawi shipyard, confirmed that hot works could not commence unless a hot work permit had first been approved by the shipyard. PW2 further confirmed that vessels undergoing repair were .

PW3, the project manager of Lunas Langkawi shipyard, confirmed that he personally approved hot work permits subject to inspection by the safety and health officer. PW3 further confirmed that the hot work permit Delegation by the owner to a professional shipyard

PW1 (director of P) testified that the vessel was delivered to Lunas Langkawi shipyard, an established and experienced dry - docking facility. This was for the purpose of undergoing a mandatory special annual survey, together with necessary maintenance and repair works. The shipyard was selected because of its experience in dry - docking and repair works and its satisfactory track record, with no prior incidents Under the docking agreement, the shipyard was expressly identified as the contractor during the docking period. Responsibility for safety matters, hot works and safety supervision during docking rested with the shipyard.

PW5 (ship manager of the vessel) likewise testified that during dry - docking, the shipyard had control over safety procedures at the yard premises. He did not manage the vessel during maintenance and docking services.

The evidence therefore establishes that repair works, including welding and hot works, were carried out under the control and supervision of the shipyard and its personnel, and not by P or the v There was no suggestion that it was improper for P to send the vessel to Lunas Langkawi shipyard. On the contrary, DW1 (Vice President and Heads of Claims of D) accepted in cross - examination that it was routine for vessels to undergo annual survey and repair works at shipyards. Causation by hot works confirmed by the D

engaged to determine the origin and possible cause of the fire on board the vessel. He concluded that the fire originated in the engine room, and was caused by hot works conducted therein.

engaged to conduct a hull and machinery survey to investigate the incident. Based on his findings and the final survey report dated 29.5.2023, he concluded that the probable cause of the fire was hot works. Namely, welding spatter coming into contact with combustible material.

The evidence is therefore consistent. PW4 (Ketua Cawangan Penyiasatan Kebakaran, Jabatan Bomba dan Penyelamat Malaysia), DW3 ( appointed forensic fire engineer) and DW2 ( surveyor and loss adjuster), all reached the same conclusion. To wit, the fire originated in the engine room and was caused by welding or hot works carried out during repair operations. None identified arson, deliberate ignition or criminal conduct. That convergence of independent and defence - appointed experts .

evidence. . It accepts that fire was the cause, accepts that fire is insured, yet seeks to avoid liability without any evidential basis for displacing that insured peril. Evidence of DW1 on the basis of repudiation

DW1 (Vice President and Head of Claims of D) was responsible for matters concerning the policy, and for giving evidence on the reasons for She confirmed that, upon being notified of the fire, D appointed SU Marine (AG) Sdn Bhd ( SU Marine ) and Approved Forensics Sdn Bhd ( Approved Forensics ) to investigate the incident and determine its cause. D relied on the reports issued by those two firms in making its repudiation decision. It is apparent that the reports of these two parties are the only investigation reports assigned by D. The findings in the reports were the basis which D and DW1 relied upon policy.

DW1 confirmed, based on the reports relied upon by D, that the fire occurred on 11.11.2022 while the vessel was undergoing maintenance and repair works. The engine room was identified as the location where the fire originated. She further confirmed that the approved forensics passenger vessel fire investigation report concluded that the fire originated at the aft region of the port main engine, and was caused by hot works being carried out in the engine room of the vessel.

During cross - decision was founded on the reports of SU Marine and Approved Forensics, and that those reports do not conclude that P committed any wilful default or wilful misconduct. DW1 further accepted that the damage to the vessel was caused by fire. caused by fire and that the reports relied upon do not conclude any wilful default or wilful misconduct, necessarily engage clause 6.1.2 of the ITC Hulls (fire as an insured peril) and leave intact clause 6.2.4 of the ITC Hulls, which preserves cover for loss caused by negligence of repairers who are not assureds.

Taken together, the evidence of DW3 ( engineer), DW2 ( ) and DW1 (Vice President and Head of Claims of D) confirms that the fire was accidental in nature and arose from hot work activities carried out during repair works. Further reports which do not allege intentional ignition or wilful misconduct. In these circumstances, D has failed to establish any factual basis for its allegation of wilful misconduct.

DW1 explained that as an insurance claims manager, she followed the industry practice of relying on the insurance adjusters report for the evidential basis to process claims. S claim after the SU Marine final survey report. When asked to read the report in cross - examination, she agreed that the report did in fact confirm claim was covered by the insured perils, instead of raising grounds to allow her to repudiate.

Once fire is determined as the cause of the damage to the vessel (which I find has been established at the trial), then the burden shifts to D. It will be for D to prove that the fire was caused by the wilful misconduct of P. Wilful misconduct : legal threshold and burden of proof

Wilful misconduct within the meaning of section 55 (2) (a) of the Marine Insurance Act 1906 requires proof of intentional wrongdoing, or conduct amounting to a conscious and reckless disregard of a known and obvious risk with knowledge that loss will probably result. Mere negligence, however serious, does not satisfy this threshold. The burden of proving wilful misconduct rests on D.

In this regard, D does not advance any positive case of intentional negligence and operational shortcomings. Such matters are, as a matter of law, incapable of constituting wilful misconduct.

DW3 ( ) confirmed that he found no evidence to suggest that the fire was intentionally set. DW2 ( appointed surveyor and loss adjuster) accepted that his report does not allege wilful misconduct on the part of P. The parties whose fault he identified were the repairers and the shipyard.

the fire or knowingly courted a probable risk of fire. She accepted that the repudiation decision was founded on the reports of SU Marine and Approved Forensics. When pressed in cross - examination, DW1 complaint was that P did not supply the welders tools and the welding equipment, and that was the basis of alleging wilful misconduct.

I consider that D cannot establish any basis to substantiate that P was guilty of any wilful misconduct that led to the damage to the vessel. under the policy. The D misconduct

The meaning and effect of wilful misconduct has been explained in the cases set out below.

In Spread Trustee Co Ltd v Hutcheson and others [2012] 1 All ER 251 at 268, the Privy Council drew a distinction between wilful misconduct and gross negligence : Those examples simply show that English law does recognise gross negligence in some contexts. They also show that English law recognises the difference in legal principle between negligence and gross negligence and between those types of negligence and fraud. To describe negligence as gross does not change its nature so as to make it fraudulent or wilful misconduct

The principle of wilful misconduct was referred to in Kian Ann & Co v Malayan Railway Administration [1971] 1 MLJ 93 at 94, where the High Court, citing Lewis v Great Western Railway Company (1877 - 78) 3 QBD 195 at 206, stated : Company (1877 - 8) 3 QBD 195 at page 206 said : we should hardly be justified, as a Court of Appeal, in departing from them, misconduct to which the will is a party, something opposed to accident or negligence; the misconduct, not the conduct, must be wilful. person guilty of it should know that mischief will result from it. But to my mind ther knowing whether mischief would or would not result from it. I do not mean be a mischievous, and with an indifference to his duty to ascertain whether it was In Forder v Great Western Railway Company [1905] 2 KB 532 Lord Alverstone C.J. at pages 535 and 536 said : with one slight addition, the definition of wilful misconduct given by Johnson J. in Graham v Belfast and Northern Counties Ry Co ([1901] 2 IR 13, where he says Wilful misconduct in such a special condition means misconduct to which the will is party as contradistinguished from accident, and is far beyond any negligence, even gross or culpable negligence, and involves that a person wilfully misconducts himself who knows and appreciates that it is wrong conduct on his part in the existing circumstances to do, or to fail or omit to do (as the case may be), a particular thing, and yet intentionally does, or fails or omits to do it, or persists in the act, failure, or omission regardless reckless carelessness, not caring what the results of his carelessness may In order to establish wilful misconduct, therefore, the court must be satisfied that the person who did the act knew that he was doing something wrong and yet did it notwithstanding that knowledge, or, alternatively that he did it quite recklessly not caring whether it was the right or wrong thing to do, quite regardless of the results of what he was doing. Section 106 of the Evidence Ordinance, 1950 provides that the burden of proving could be and is not produced would if produced be unfavourable to the person burden of proving wilful misconduct in a special condition relating to a contract of within the knowledge of the defendant and no adverse inference could therefore

In Jan De Nul (Malaysia) Sdn Bhd v Berjaya Sompo Insurance Bhd [2019] MLJU 1594, the High Court explained the concept of wilful of Appeal in Re City Equitable Fire Insurance Company Limited (No. 0048 of 1922) [1925] Ch 407, p. 434 - 435 (CA) as follows : If I may say so with respect, the difficulty is not so much in ascertaining the noun to which the adjective is to be applied. An act, or an omission to do an act, is wilful where the person of whom we are speaking knows what he is doing and intends to do what he is doing. But if that act or omission amounts to a breach of his duty, and therefore to negligence, is the person guilty of wilful negligence? In my opinion that question must be answered in the negative unless he knows that he is committing, and intends to commit, a breach of his duty, or is recklessly careless in the sense of not caring whether his act or omission is or is not a breach of duty. This conclusion appears to me to be warranted by at least three authorities [141] a wilful act, which act amounts to negligence, is not wilful negligence unless there be a will to be negligent [142] Pengurusan Danaharta Nasional Berhad v Choo Oh Kim dan lain lain [2010] 3 MLJ 343, at page 357 (CA) where it took a similar approach, although the term the Court of Appeal held : abstention by an obligor from doing that which reasonably and under the terms of the obligation he should have done want of even slight care. Acting, or omitting to act in such a situation where there is a duty to act, not inadvertently but wilfully and intentionally with conscious indifference to consequences so far as other person may be [143] It cannot be gainsaid that from the authorities the threshold to be met in . The burden in the defendant is nothing short of proving that the plaintiff had wilfully and intentionally breached its duty of care with a conscious indifference or that the catastrophic reclamation failure resulting in the collapse of approximately 500

The ground which D has to establish is that there was misconduct by P, and that it was a wilful one. However, the fire was not intentionally set, and that no finding of wilful misconduct was made in D . Further, not supported by any allegation of wilful misconduct in the reports upon which DW1 (Vice President and Head of Claims of D) relied.

In these circumstances, D has failed to discharge its burden of proving wilful misconduct within section 55 (2) (a) of the Marine Insurance Act 1906. Repudiation on this ground cannot be sustained. Want of due diligence under clause 6.2 of the Institute Time Clauses (Hulls) 1 / 10 / 83

Clause 6.2 of the ITC Hulls excludes liability only where loss or damage results from want of due diligence by the assured, owners or managers. The clause is directed against failures at managerial or directing - mind level. It does not extend to operational negligence occurring in the course of repair works.

Here, the loss due to fire is covered by clause 6.1.2 of the ITC Hulls, which is not subject to the proviso of due diligence. Alternatively, P also can bring its claim under clauses 6.2.2 and 6.2.3 of the ITC Hulls, which has the due diligence proviso. This is an alternative basis to claim.

The due diligence proviso requires that the assured exercises reasonable care in appointing competent repairers or shipyards. Where damage occurs in the course of repairs carried out by competent repairers, there cannot be any issue of want of due diligence by P appointing the repairer.

In the present case, the repairers engaged by P were competent. T vessel in the past. They were also engaged by the shipyard to work on other vessels in the shipyard. P therefore cannot be guilty of want of due diligence in engaging these repairers.

When pressed in cross - examination, DW1 complaint was that P did not supply the welders tools and the welding equipment, and that was the basis of alleging want of due diligence : As for terms and conditions, I mean, in executing a job, if you are a professional, you don't just rely just on experience, right? This is a big repair that is undertaken, right? It's a huge repair. We're talking about a vessel. You need to have the relevant experience with proper certification and credentials. Number two I'll stop you there. Langkawi Shipyard said they ve been repairing vessels of Plaintiff for the past 10 years. They have no problem with that? So, if they have no problem, you have a problem. Okay, continue. Number four. They do not have the necessary tools, right? They are welders. Who s going to supply them tools? Would they not have welding tools? Then it s the duty of the Plaintiff to ensure that these necessary tools are also provided. You re the one who engaged. They are May I finish the question? They are the one who appointed the welders or the repairers, as you mentioned. Yes, okay. So, your problem is the Plaintiff didn t buy the welding equipment for them, even though they have their own. Is that your complaint? I said tools. Welders, meaning those people, the repairers. Tools, meaning they must have the necessary tools to undertake the repairs. And safety tools, meaning the wet blankets, the fire - hot blankets, as I say. Those are supposed to be provided by the repairers or the Plaintiff.

Want of due diligence is not established merely because an accident occurred. Or because, with hindsight, additional precautions might have been desirable. Due diligence does not require the assured to personally perform or supervise operational safety functions. In the present case, the appointment of the shipyard and repairer does not require P to dictate as to how they individually perform their roles. Application of clause 6.2 of the Institute Time Clauses (Hulls) 1 / 10 / 83 to the evidence

alleged matters such as deficiencies in welding safety procedures, absence of additional safety equipment, absence of shielding, the presence of combustible materials, housekeeping issues, and supervision at the worksite.

PW2 (head of Lunas Langkawi shipyard) and PW3 (project manager of Lunas Langkawi shipyard) confirmed that hot works could not commence unless a hot work permit had first been approved by the shipyard. Further control. PW1 (director of P) and PW5 (ship manager of the vessel) confirmed that repair works, including welding and hot works, were carried out by the shipyard and the repairers, and not by P or the v

To my mind, placing the vessel at a professional shipyard operating a permit - based hot work and safety system, constitutes reasonable and sufficient due diligence on the part of P. There is no evidence that P procedures, or knew of any dangerous condition and consciously failed to act.

.7.2023 states that supervision and compliance with safety regulations were the responsibility of the shipyard. This admission is inconsistent with any allegation that P failed, at management level, to exercise due diligence. D has failed to adduce any evidence capable of establishing want of due diligence by the assured, owners or managers within the meaning of clause 6.2 of the ITC Hulls. The operation of the due diligence proviso in clause 6.2 of the ITC

It bears reiterating that clause 6.2 perils is an alternative basis for claiming under the policy. The obvious operating peril is damage by fire, which is under clause 6.1.2 of the ITC Hulls, which stands alone and is not subject to the due diligence proviso. Accordingly, having ruled that clause 6.1.2 of the ITC Hulls operates as the proximate cause of the loss, liability on the part of D is already established. Cover for negligence of repairers under clause 6.2.4 of the Institute Time

Clause 6.2.4 of the ITC Hulls expressly preserves cover for loss of or damage to the vessel caused by the negligence of repairers, provided that such repairers are not assureds under the policy.

The modern clause 6.2.4 of the ITC Hulls represents the contractual c . In Thames & Mersey Marine Insurance Co v Hamilton, Fraser & Co (1887) 12 App Cas 484, the House of Lords considered whether loss caused by negligent . The litigation exposed uncertainty as to whether losses arising from negligence of crew or engineers were recoverable under general policy wording.

The marine insurance market responded by introducing the Inchmaree clause, expressly extending cover to loss caused by negligence of the master, crew, engineers or repairers. Clause 6.2.4 of the ITC Hulls is the modern expression of that historical development, preserving cover where the loss is proximately caused by an insured peril, notwithstanding negligence of independent repairers who are not assureds.

The insurer remains liable for loss proximately caused by an insured peril, even though the loss would not have happened but for the negligence of the master, crew or any other person, including repairers. Accordingly, where loss is caused by negligent acts of repairers who are not assureds, the loss remains insured unless the insurer proves wilful misconduct or want of due diligence at managerial level.

A construction which deprives clause 6.2.4 of the ITC Hulls of meaningful effect by allowing insurers to avoid liability whenever repairer negligence is alleged, would be commercially unworkable and cannot reflect the intention of standard hull insurance. Here, the policy identifies P as the sole assured. Lunas Langkawi shipyard and the repairers are not named as assureds or co - assureds under the policy. Clause 6.2.4 of the ITC Hulls is therefore fully capable of operation in the present matter.

The indisputable facts are these.

PW4 (Ketua Cawangan Penyiasatan Kebakaran, Jabatan Bomba dan Penyelamat Malaysia) confirmed that the fire originated in the engine room, and was caused by welding activities carried out during repair works.

PW3 (project manager of Lunas Langkawi shipyard) confirmed that the repair works included welding and hot works carried out by the repairers.

DW3 ( ) accepted that hot works were being carried out onboard the vessel during the repair period.

In its repudiation letter dated 10.7.2023, DW1 (Vice President and Heads of Claims of D) expressly stated that the cause of the fire was the result of hot works conducted by the repairers, who were appointed and permitted under the hot work permit issued by the shipyard.

The evidence therefore establishes that the fire arose from negligent hot works carried out by repairers, who are not assureds under the policy. loss adjuster, DW2, made the following admissions under cross - examination : words gross negligence, reckless disregard, would you agree it falls under the general description as negligence of repairer? Yes or no? Yes. Okay. You agree. Can you look at 675? I see clause 6.2.4. Can you read and explain to us what this wording in the policy means to the court? Negligence of the repairers or charterers provided such repairers or charterers are not as assured hereunder. Is this the one you are referring to? 6.24? Yes. Well, it clearly states that they are not assured under the policy. They are not assured hereunder. Okay, I'll hold on. I put to you, it means Wong and Chia negligence is covered under the policy. You look at the document. You agree or disagree? Yes. You agree? Yes. According to the Boustead witness, ships coming in into their yard, they will only allow work to be conducted, after the Hot Work Permit is issued. Does that coincide with your findings? Yes. My put to you is Boustead Shipyard is also a repairer under the policy. Yes or no? Yes.

Hull and machinery insurance exists to protect shipowners against accidental loss occurring in the ordinary incidents of vessel operation and repair. To permit insurers to avoid liability in circumstances such as the present would undermine the commercial purpose of clause 6 of the ITC Hulls, and deprive clause 6.2.4 of meaningful effect.

Loss caused by negligent repairers falls within clause 6.2.4 of the ITC Hulls. by negligent acts of repairers who are not assureds. Clause 6.2.4 of the ITC Hulls therefore preserves cover. D remains liable to indemnify P under the policy.

PW1, director of P, testified that following the fire the vessel sustained extensive structural and machinery damage rendering the vessel beyond economic repair. Independent surveyors were engaged to assess both the extent of damage and the cost of repair.

s evidence on quantum was not materially challenged in cross - examination. On the totality of the evidence, the vessel constituted a constructive total loss within the meaning of the policy. P is therefore entitled to recover the agreed insured sum of RM 4,629,000 under the policy.

By the letter dated 10.7.2023, D repudiated liability under the policy. Upon such repudiation, I consider that P became entitled to payment, subject only to proof of liability. An award of interest from the date of repudiation would be appropriate in the circumstances. The D documents

Before ending, I will deal with the issue of legal professional privilege raised by D. At the commencement of the trial, D applied to expunge pages 1085 to 1089 of Enclosure 44 (Common Bundle of Documents Volume 21). This was on the ground that those pages allegedly contain solicitor - client communications protected by legal professional privilege. The impugned pages form part of Appendix O to the SU Marine final survey report, a report relied upon by D in justification of its repudiation.

It seems to me that the issue here is not so much as to whether legal professional privilege exists in principle. The real issue is whether, in the circumstances of this case, D may invoke privilege to excise selected portions of a report which it has voluntarily relied upon and caused to be included in the agreed Common Bundle of Documents.

Litigation privilege is recognised in Malaysian law. However, it is not without limits. In Wang Han Lin & Ors v HSBC Bank Malaysia Bhd [2017] MLJU 1075, the Court of Appeal emphasised that the doctrine be applied narrowly, so that the ultimate purpose of litigation, namely, to

The document which D seeks to expunge are the emails relating to the s laim. It clarifies the scope of the s policy, and explains the rationale behind D s letter dated 10.7.2023 repudiating P s claim.

The rationale of privilege is to protect the integrity of adversarial preparation. It is not designed to permit alteration of the evidential record once a party has elected to rely upon it. Importantly, the document is relevant and that was why D chose to include it in Part B of the trial documents.

The final survey r evidential basis for repudiation. Appendix O is incorporated within that report, and appears at pages 1085 to 1089 of the Common Bundle of Documents Volume 21. The report, including Appendix O, was included in the agreed Common Bundle of Documents without any reservation of privilege.

No objection was raised at the case management stage. Parties are entitled to prepare and present their cases on the footing of the agreed evidential record. An objection raised only at the commencement of trial, after reliance has been placed on the report, is incompatible with procedural certainty and fairness.

the material into the survey report, relying upon it in support of repudiation, and agreeing to its inclusion in the agreed Common Bundle of Documents is inconsistent with any continuing assertion of privilege.

application to expunge documents does not seek to preserve confidential litigation preparation. It seeks to remove part of a document already deployed before the court. That is not the function of privilege. application to expunge pages 1085 to 1089 of Enclosure 44 (Common Bundle of Documents Volume 21) must therefore be dismissed. Alleged adverse inference

I would also mention that D requested me to draw an adverse inference against P for not calling certain individuals involved in the repair works as witnesses. I declined to do so. An adverse inference arises only at the time of trial. There is therefore no basis for drawing such an inference.

Actually, D themselves intended to call the repairers as witnesses. At the commencement of the trial, D informed me of the following. In the case of the first repairer, D was not able to successfully serve the subpoena on him. In the case of the second repairer, D had successfully served the subpoena on him. However, the second repairer failed to appear in court on the trial date.

D places significant reliance on statements recorded during the investigation, and contained in the final survey report of DW2 ( appointed surveyor and loss adjuster). However, D relies not merely on the surveyor s observations, but on statements attributed to repairers and other individuals recorded during the investigation. None of those individuals were called as witnesses. DW2 had no personal knowledge of the matters asserted, and could only repeat what had been told to him during the investigation.

Testimony which merely repeats what another person said constitutes hearsay, and cannot substitute for direct evidence tested by cross - substantially on such investigation statements. In the absence of the makers of those statements being called as witnesses, their evidential weight is necessarily limited.

In summary :

P has established on the evidence that the loss of the vessel was proximately caused by an accidental fire arising during authorised repair works. Fire is an insured peril under clause 6.1.2 of the ITC Hulls.

D has failed to discharge its burden of proving wilful misconduct within the meaning of section 55 (2) (a) of the Marine Insurance Act 1906. There is no evidence of deliberate wrongdoing, conscious risk - taking, or reckless indifference on the part of P.

D has likewise failed to establish any want of due diligence within clause 6.2 of the ITC Hulls. The evidence demonstrates that operational control of the repair works and hot works rested with the shipyard, and no managerial privity on the part of P has been shown.

Further and in any event, the loss arose from negligent acts of independent repairers who are not assureds. Clause 6.2.4 of the ITC Hulls expressly preserves cover in such circumstances. Negligent welding or repairs does not convert an insured fire into an excluded loss.

e fire originated in the engine room during hot works, and that the case is therefore unsupported by its own evidence.

is entitled to indemnity in the agreed insured value, together with interest from the date of repudiation.

For the reasons above, I I gave judgment in the sum of RM 4,629,000, together with interest at 5 % per annum from 10.7.2023 until full settlement. I awarded costs of RM 100,000 to P. Dated 30 March 2026 Quay Chew Soon Judge High Court of Kuala Lumpur (Commercial Division NCC 2) Counsels Philip Teoh, Nadia binti Razali and Joel Ruben John (Messrs. Abdul, Low & Partners) for the Plaintiff Oon Thian Seng, Tan Hui Ling and Eugene Yeap Zhe Jian (Messrs. T S Oon & Partners) for the Defendant Case reference 1. Malaysia National Insurance Sdn Bhd v Abdul Aziz bin Mohamed Daud [1979] 2 MLJ 29 2. Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 3. J.J. Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay)

Malaysian National Insurance Sdn Bhd v Malaysia Rubber Development Corporation [1986] 2 MLJ 124 5. Cape Distribution Ltd v Cape Intermediate Holdings plc; Cape Intermediate Holdings plc v Aviva plc, [2016] EWHC 1786 6. Mainline Enterprise Sdn Bhd v Tahan Insurance Malaysia Bhd [2009] MLJU 71 7. Omega Proteins Ltd v Aspen Insurance UK Ltd [2011] 1 All ER (Comm) 313 8. Encia Remediation Ltd v Canopius Managing Agents Ltd [2007] 2 All ER (Comm) 947 9.

Spread Trustee Co Ltd v Hutcheson and others [2012] 1 All ER 251

Kian Ann & Co v Malayan Railway Administration [1971] 1 MLJ 93

Lewis v Great Western Railway Company (1877 - 78) 3 QBD 195 Jan De Nul (Malaysia) Sdn Bhd v Berjaya Sompo Insurance Bhd [2019] MLJU 1594

Thames & Mersey Marine Insurance Co v Hamilton, Fraser & Co (1887) 12 App

Cas 484 Wang Han Lin & Ors v HSBC Bank Malaysia Bhd [2017] MLJU 1075 Legislation reference 1. Section 55 (1) and (2) (a) of the Marine Insurance Act 1906 2.