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2014 MarsdenLR 1968
COURT OF APPEAL KUCHING
CMS CLINKER SDN BHD – Appellant
Versus
ALLIANZ GENERAL INSURANCE COMPANY (MALAYSIA) BERHAD – Respondent
[Civil Appeal No: Q-02-2289-09-2012]
Under an 'all risks' marine insurance policy, the insured must only prove loss caused by a fortuitous event, shifting the burden to the insurer to demonstrate inherent vice if asserted. Failure to provide such evidence leads to a ruling in favor of the insured.
Headnote:(A) Marine Insurance Act - All risks policy - The appellant initiated a claim against the respondent for cargo damage during transport. The High Court dismissed the claim citing insufficient proof of damage due to accident or casualty. The appellate court found the appellant proved the loss was not due to inherent vice. (Paras 1-31)
(B) Burden of Proof - The plaintiff bears the duty to prove loss under an all-risk policy by demonstrating it occurred from a fortuitous event, not necessarily detailing the specific cause. (Paras 20-24)
(C) Inherent Vice - The court reinforced that inherent characteristics of goods, like moisture absorption in coal, do not constitute insurable loss unless proven by the insurer. (Paras 11, 27)
Facts of the case:
The appellant insured a shipment of 7,350,615 metric tonnes of coal valued at USD792,000. Upon arrival, the coal's quality significantly differed from expectations, leading to a claim of damage under the insurance policy. Discrepancies in quality were noted in surveys before and after the shipment. (Paras 3-12)
Findings of Court:
The court concluded that the appellant successfully demonstrated a change in coal quality, compelling the respondent to prove their claim of inherent vice, which they failed to do. The burden of proof shifted to the respondent after the appellant's initial case was established. (Paras 25-28)
Issues: The core legal question revolved around whether the appellant proved the loss arose from an event covered by the 'all risks' insurance policy and whether the burden of proof shifted appropriately. (Paras 14-20)
Ratio Decidendi: The court stated that the 'all risks' policy provides coverage unless the respondent proves the cause of damage was due to inherent vice. The appellant met their burden of proof, demonstrating the loss was due to an accidental event. (Paras 25-26)
Result: Appeal allowed. Judgment of the High Court set aside, damages awarded along with interest and costs. (Paras 30-31)
| Table of Content |
|---|
| 1. issues surrounding marine cargo insurance claims. (Para 1 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. surveys and observations from various inspections. (Para 9 , 10 , 11 , 12) |
| 3. burden of proof in insurance claims. (Para 14 , 18 , 19 , 20) |
| 4. interpretation of 'all risks' insurance policies. (Para 15 , 21 , 22 , 23) |
| 5. ruling on burden of proof and appeal decision. (Para 25 , 26 , 27 , 28 , 29) |
[1] This is an appeal by the appellant/plaintiff against the decision of the High Court in which the learned judge dismissed a marine insurance claim against the respondent/defendant for loss of cargoes damaged during the voyage from Indonesia to Sarawak.
[2] We heard the appeal and after giving due consideration to the evidence adduced in the trial Court and submissions by respective counsel, we allowed the appeal and now give our grounds for that decision.
Background Facts
[3] The appellant took out an insurance policy in respect of a shipment of 7,350,615 metric tonnes of steam bulk coal (coal) for a voyage from S Suai, South Kalimantan, Indonesia to Kuching. The insured amount is USD792,000.00.
[4] The crucial term of the insurance policy for this appeal is that of cl 1 which provides for all risks of loss or damage to the coal.
[5] Prior to the shipment from Indonesia, a survey report was commissioned and the report confirmed that the quality of the coal complied with the specification of the purchase order and that the quantity was 7,350,615 metric tonnes. PT SGS Indonesia did the survey report.
[6] Upon arrival at the Kuching port on 17 April 2010, another survey was commissioned and the report stated that the quality and quantity of the coal were different from that of the report done in Indonesia and hence did not comply with the specification of the purchase order. Particulars of the differences are not disputed and they are as set out in the submission of learned counsel for the appellant:
(a) The total moisture went up from 14.61% to 27.7%;
(b) The ash content went up from 12.49% to 16.7%;
(c) The inherent moisture went up from 5.23% to 6.5%;
(d) The volatile matters went up from 38.5% to 39.4%;
(e) The gross calorific value dipped to 5594 from 6582;
(f) The weight of the Cargo increased from 7350.615 MT to 7550 MT.
The aforesaid report was done by SGS (Malaysia) Sdn Bhd (SGS).
[7] In view of these differences, the coal had become useless for use to the appellant in that the quality of the coal that had arrived in Kuching was inferior than the specifications stated in the purchase order. The use of the coal by the appellant is for fuel burning at the clinker plant at Mambong without the need of mixing with other coal.
[8] To comply with the terms of the insurance policy for the purpose of making a claim, the appellant on 5 May 2010 lodged a police report of the variance of the two commissioned reports. The appellant also informed the respondent on 4 May 2010 of the just mentioned differences of the two reports and also made the claim on the policy. SGS was also informed of the differences.
[9] Upon being informed, SGS did another survey on 5 May 2010 by way of comparison between the two reports and came to this conclusion:
"Based on the above analysis results comparison (mainly TM, GCV, HGI, Ash) indicates the coal inspected during loading at Sg Salai-Indonesia and the coal inspected during discharge Kuching-Malaysia are of different coal. Also the cargo quantity does not correspond between loadport & discharge port."
[10] The respondent in response to the appellant's claim on the insurance policy commissioned another surveyor by the name of Kasi Marine-Technical Inspection Sdn Bhd on 21 May 2010 which in substance found as follows:
"PROBABLE CAUSE
Based on the foregoing, the Insured goods could have absorbed moisture at some stage during transit resulting the quality of Insured's goods to be not within Assured's specification. The nature of abovementioned damage is classified as inherent vice."
[11] Premised on that report, the respondent throu
