JUDGMENT

Mohd. Eusoff bin Chin SCJ:

The respondent operated a plant at PLO/23 Jalan L, Pasir Gudang, Johor, for the purposes of refining edible palm oil. The plant included a steam boiler known as Wanson Vaporax Model 1000 HP Steam Generator (hereinafter referred to as the boiler).

By a Boiler and Machinery Policy of Insurance valid between 1 November 1982 to 31 December 1983, the respondent insured its plant and machinery including the boiler, with the appellant, against the risk of loss resulting from any "accident" as defined in the policy while the said plant and machinery were in operation.

On 28 November 1982 a rupture in the upper coil of the boiler caused a leakage of water which in turn resulted in the whole plant being shut down. The appellant was immediately informed of the failure. Temporary repair work was carried out pending the arrival of a new coil. The plant was started up on 5 December 1982. But on 12 December 1982, the repaired coil failed again when another rupture occurred diametrically opposite the first rupture. The plant was shut down. The new coil arrived from the manufacturers in Belgium on 17 December 1982, and the plant started operation on 21 December 1982.

On 5 April 1983 the respondent submitted to the appellant its claim for losses suffered due to the shut down of operation. A series of correspondence, discussions, and meetings between the parties followed. Then by a letter dated 7 November 1983, the appellant repudiated its liability to the respondent. On 23 January 1984 the respondent issued its Writ of Summons against the appellant.

The High Court heard the issue on liability and decided, on 7 March 1991 that the appellant was liable to the respondent for the losses under the insurance policy, and hence this appeal.

The boiler is of a closed circuit type which means that when a certain quantity of water is filled into the coils of the boiler, it is sealed off, and the boiler is operated with that same quantity of water throughout its operation. The equipment consists of one double helical coil of low carbon steel enclosed in a cylindical outer jacket of mild steel plates.

The purpose of the boiler is to generate steam. Once the boiler is started up, or fired, the water in the coils is heated, steam is formed and the steam is passed into another section of the plant called the deodoriser. In the deodoriser, the steam condenses into water and returns to the boiler where the process is repeated. This means that at all times there will be steam generated in the boiler; there will be steam in the deodoriser and there will be water returning to the boiler.

The evidence shows that the respondent had installed the boiler in accordance with the manufacturers' operating manual. The oxygen in the feed water was removed by subjecting it to a vacuum prior to introducing it into the boiler. This process was known as deaerading the system and was an effective method of removing oxygen from water. The recommended amount of water was 285 litres which was about 45 gallons. After the last bursting of the coil, the boiler's manufacturer and suppliers sent their engineers to supervise the repairs. Tests carried out showed that the minimum amount of water required to operate that boiler properly was 200 gallons. However, 210 gallons of water was introduced into the boiler after it was repaired in December 1982, and since then the boiler had been running without any breakdown till the date of hearing in December 1986. Indeed, the learned Counsel for the respondent informed us that it is still running without complaint up to the date of the hearing of this appeal, that is, for the last 11 years.

The respondent's claim is that the rupture or failure of the coil in the boiler on 28 November 1982 was an accident within the terms of the insurance policy and consequently, the losses suffered as a result of the shut down of the plant are recoverable losses under the insurance policy.

The appellant's defence as pl