Lee Hun Hoe CJ (Borneo):

This appeal against the decision of the learned Judge is concerned with the construction of an insurance policy based on the particular facts of the case. The appellant/defendant is an insurance company. The respondent/plaintiff is a corporation (known as MARDEC) incorporated under the Malayan Rubber Fund (Research and Development) Ordinance, 1958. The respondent had thirteen rubber factories throughout Peninsular Malaysia. The processed rubber goods, mainly in the form of SMR, were exported through Port Klang. The goods on the way to Port Klang for shipment were temporarily housed at the respondent's godown at Sungei Way. The goods arrived in a one-ton pallet. At the godown the goods did not undergo any further process as they were already packed for export. The goods were kept at the godown awaiting the vessels to call at Port Klang. The normal waiting period could be two or three days but at times due to congestion at the port the waiting period would be longer - as long as three months.

The respondent took out a policy insurance with the appellant to cover the goods while in transit. For this purpose the appellant issued the respondent with goods in transit insurance policy no. G.T./0010 covering the period from 1 October 1975 to 30 September 1976. While the policy was in force, on 4 October 1975 a fire broke out at the godown at Sungei Way destroying the goods kept there. The respondent claimed indemnity for the loss of the goods amounting to RM1,952,864.54 from the appellant under the policy. The appellant denied liability contending that the goods destroyed by the fire were being housed in the godown for the purpose of storage, making up, packing or processing. Under the policy, the appellant was only liable if the goods were lost, damaged or destroyed by fire while temporarily housed in the ordinary course of transit otherwise than for the purpose of storage, making up, packing or processing. The learned Judge gave judgment for the respondent for the sum claimed with interest at 12% per annum and costs. The appellant appealed.

There are six grounds of appeal. The last ground relates to interest. As the parties had agreed on the question of interest this ground was not proceeded with. The first two grounds are concerned with the question whether the rubber and the latex destroyed in the fire were in the ordinary course of transit "within the meaning of the policy of insurance". The policy sets out very clearly that the appellant agrees to indemnify the respondent in respect of loss, destruction or damage to the property by fire or accidental means, whilst "in or on or being loaded on or unloaded from any road vehicle or passenger or goods trains or whilst temporarily housed in the ordinary course of transit whether on or off the paid conveyances within the territorial limits" but not exceeding a specific limit of liability. The property insured and the type of journey intended to be covered by the term "transit" are described under the schedule attaching to the policy as follows:

On processed SMR rubber packed in 1 metric ton ISO pallets and concentrated latex whilst in transit by road and/or rail from Insured's various factories in West Malaysia to Port Klang ...

To succeed in the claim the respondent must prove that goods were in transit from its various factories to Port Klang and that the goods were destroyed by fire while being "temporarily housed in the ordinary course of transit" in the godown at Sungei Way. To avoid liability the appellant must bring its case within any of the ten Exceptions set out. In this case the appellant is relying on exception No. 6 which states that the appellant is not liable in respect of:

lost destruction or damage whilst the property is temporarily housed in the course of transit for the purpose of storage making up packing or processing.

The appellant claimed the goods were sent to the godown to be made up. Hence the goods sent in and out did not ba