OCBC cannot claim US$56 million from insurers for the capsized vessel it funded: Court of Appeal

[SINGAPORE] OCBC is unable to claim US$56 million from a group of insurers for a vessel that it offered mortgage after the Court of Appeal allowed the five insurers’ appeal on Thursday (Mar 19).

Earlier in April, OCBC was awarded US$56 million under a marine insurance policy by the High Court, after the judge ruled that the lender had proved that the vessel was lost to perils of the seas and was a constructive total loss (the cost of the recovery and repair of the vessel exceeding her insured value).

Argoglobal Underwriting Asia Pacific, China Taiping Insurance (Singapore), Great American Insurance, MS First Capital Insurance and QBE Insurance (Singapore) are the insurers that won the appeal.

The insured vessel, a jack-up rig, capsized en route while it was on a tow voyage – its maiden voyage – to Taichung, Taiwan, from Vung Tau, Vietnam, on Jun 5, 2018. It was then disposed of and submerged by the salvors 76 days later.

The Court of Appeal, in overturning the lower court’s judgement, pointed out that OCBC had not proved the rig was lost by peril of the seas as it did not offer a cause of seawater entering the vessel by chance. The bank had not shown as well that the vessel sank in wholly unexplained circumstances.

OCBC had said the underwater inspection done six weeks after the rig had capsized was unhelpful in ascertaining the flooding scenario considerations.

Neither did OCBC establish that the rig was a constructive total loss, the apex court found.

The Court of Appeal, comprising Chief Justice Sundaresh Menon, Justice Steven Chong and Justice Hri Kumar Nair, pointed out that OCBC had belatedly relied on some documents in its attempt to prove constructive total loss, but it had not complied with the rules in admitting these documents.

“This resulted in real prejudice to the insurers’ case,” the apex court said.

The insurers were deprived of an opportunity to cross-examine on these documents or adduce evidence to challenge the contents of the documents.

Nonetheless, the documents did not prove that the costs of repair and/or recovery exceeded the insured value of the vessel.

Hence, OCBC cannot be compensated for the loss of the jack-up rig. It was ordered to pay the costs of the appeal of S$100,000 to the insurers because they won their appeal.

Senior Counsel Chan Leng Sun argued for the insurers in the appeal.

The bank’s counter fell 0.6 per cent or S$0.13 to S$21.37 on Friday.