This was a claim by Bayswater Carriers Pte Ltd (Bayswater) as plaintiff against their hull and machinery insurer, QBE Insurance (International) Pte Ltd (QBE) as defendant. Bayswater was the registered owner of a Singapore registered tug (BW Wisdom) which was insured for SGD 730,000. The policy included cover for loss by piracy or violent theft by persons from outside the tug. The policy was subject to the Institute Time Clauses Hulls (1.10.83) (ITC).

On 28 January 2003 BW Wisdom towed the cargo laden barge Bayswater 228 from Jurong in Singapore to Batam in Indonesia. After discharging cargo at Batam, the tug and barge waited at anchorage for loading of cargo the next day. The master, second engineer and two able-bodied seamen remained on board while the chief engineer and chief officer left the tug on shore leave. Around 1900 hours, men armed with parangs (a type of machete) and with their faces covered boarded the tug. The master heard the second engineer shouting ‘rambok’ (‘pirates’ in Bahasa Indonesia). The master tried to reach the bridge to call for help but was stopped by one of the men who held a parang to the master’s throat. The crew were then tied up in the mess room and ordered to lie face down. The intruders then started the tug and sailed away. The crew were held captive for two days before being released on Pulau Penggegar from where they were rescued by the Indonesian navy.

Bayswater claimed against QBE under cls 6.1.5 and 6.1.3 of the ITC. QBE denied liability, arguing, among other things, that the tug was not on the high seas for an act of piracy to be committed. Alternatively, the loss was the result of want of due diligence on the part of Bayswater and/or that Bayswater had breached the sue and labour clause in the policy by failing to actively pursue the recovery of the tug through various channels as a prudent uninsured party would have.

Held: Bayswater’s claim was allowed, and QBE’s counterclaim was dismissed.

Ang J began by construing the insurance policy before considering causation.

Construction of the policy

Ang J was satisfied that on the facts and evidence before the Court:

(1) force or threat of force had been applied;

(2) the tug was obtained for the personal gain of the perpetrators; and

(3) the act took place at sea.

Her Honour held the word ‘piracy’ had not acquired a technical meaning in the context of a marine insurance policy. A marine policy like any commercial contract had to be construed so as to give effect to the parties’ intention as expressed in the written contract. As a general rule of construction, the terms must be understood in their plain, ordinary and popular sense. Clause 6.1.5 of the ITC simply used the word ‘piracy’.

Thus, it was not necessary for the act of piracy to have taken place on the high seas. The act could occur within territorial waters or on the high seas. Her Honour held that the loss of the BW Wisdom was from piracy within the meaning of cl 6.1.5 of the ITC. 

As the point was raised by QBE, Ang J considered the definition of ‘piracy’ in UNCLOS, holding that it is essentially any illegal act of violence or depredation, which is committed for private ends on the high seas or without the territorial control of any state (see art 101 UNCLOS). According to this definition, piracy requires two ships to be involved and any ‘private ends’ are sufficient. Piracy must also occur on the high seas and be committed by the crew or passengers of one of the vessels. Piratical acts within territorial waters are outside the definition.

However, Ang J went on to explain that it was important to recall that in international law, the distinction between the ‘high seas’ and ‘territorial waters’ was a matter of jurisdiction. If the piratical act was committed in territorial waters, there was automatic jurisdiction. If it took place on the high seas, then jurisdiction would be assumed if the qualifying conditions were satisfied. The implication was that the definition of piracy in UNCLOS was not suitable for, and could not be taken wholesale for, the construction of the insurance policy.

Singapore law (s 130B of the Penal Code) provides that a person commits piracy when that person does any act that, by the law of nations, is piracy. By s 130C(a) of the Penal Code, a piratical act is committed when ‘whoever, while in or out of Singapore, steals a Singapore ship’.

Under customary international law, the crime of piracy has long been recognised as one over which all States may exercise jurisdiction provided that the alleged offender is apprehended either on the high seas or within the territory of the State exercising jurisdiction. The arresting State can also legitimately punish the pirates. This rule of customary international law was reaffirmed in art 105 of UNCLOS which provides that ‘every State may seize a pirate ship … or a ship … taken by piracy and under the control of pirates, and arrest the persons and seize the property on board'.

Further, under UNCLOS the definition of high seas was extended with the advent of the Exclusive Economic Zone (EEZ) and the archipelagic waters. Waters not included in the EEZ, the waters of an archipelagic State (such as Indonesia), and the territorial waters (internal waters and territorial sea) of a State, could (in some circumstances) constitute the high seas.

Therefore, it could not be right that piracy as an insured peril was intended to be limited to piracy committed in the (restricted definition of) high seas (contended for by QBE) given the extended definition in UNCLOS. The concept of the peril under review had to be understood in the sense in which ordinary commercial parties would understand the term in its context. The policy here contained an express warranty of the tug’s trading limits. The tug’s trading pattern was mainly between Singapore and Batam and the tug was insured on that basis. The ‘maritime perils’ the tug was exposed to in the marine adventure included piracy which is a peril consequent on, or incidental to, the navigation of the sea: see s3(3) of the Marine Insurance Act. Thus, QBE could not contend that the insured peril ‘piracy’ was confined to the high seas because that meaning would be inapplicable to the maritime adventure covered by the policy.

Finally, the distinction which QBE tried to make between a vessel being ‘at sea’ as compared to ‘in port’ or ‘in harbour’ was of no merit or consequence. All that had to be established was that the act of piracy was committed on the sea, and it was immaterial that the insured vessel, as a physical proposition, was lying at anchor or moored, as in this case. In the circumstances of the present case, the tug was in a place where piracy under cl 6.1.5 of the ITC could be committed.

Alternatively, the Court held that if the present case was not a loss by piracy, it was violent theft by persons outside the tug under cl 6.1.3 of the ITC.

Both were marine perils and today they overlapped. The distinction between the two perils was necessary in the past when piracy was excluded as a marine peril and was insured by the war risk underwriter under a war risk cover. As this was no longer the case, today the two perils overlapped.

Therefore, alternatively, on the same facts there was violent theft by persons outside the tug.

Causation

QBE contended that the loss of the tug was due to the negligence of the crew and that the failure to ensure adequate manning levels rendered the tug technically unseaworthy, which entitled QBE to repudiate liability.

The Court found that the crew’s failure to keep watch was not a cause of the loss but merely part of the surrounding circumstances that brought about the events that followed. The omission might be regarded as a combination of circumstances that fell short of being the proximate cause of the loss.

Negligence of the master was not a bar against liability under s 55(2)(a) of the Marine Insurance Act given that the loss of the tug was predominantly caused by piracy or, in the alternative, violent theft by persons outside the tug.

Finally, the Court was not persuaded that the owners’ failure to respond in a positive manner in April 2004 was a breach of the contractual or statutory duty of sue and labour. There was no evidence to show that a reasonable, prudent uninsured in the position of Bayswater would have acted differently. Further, QBE had not made out a case that the alleged pre-action failures constituted a failure to avert or minimise the consequences of an insured peril that had already occurred. In short, QBE’s complaints were rejected, which even if valid, could not be categorised as the proximate cause of the loss.

For the above reasons, judgment was given to the plaintiff in the sum of SGD 730,000 with interest. QBE’s counterclaim was dismissed.