Argoglobal Underwriting Asia Pacific Pte. Ltd. & 4 Ors v Overseas-Chinese Banking Corporation Limited

Facts

Oversea-Chinese Banking Corp Ltd (OCBC) was the mortgagee of the jackup rig TERAS LYZA and a co-assured, with the owner and manager, under a hull and machinery policy written by five insurers, the appellants. Section A insured the rig for US$56m. On its maiden voyage, a wet tow from Vung Tau, Vietnam to Taichung, Taiwan, the rig developed a list and capsized on 5 June 2018. It stayed afloat upside down and was towed by salvors to Batangas Bay, where divers inspected it in late July 2018. The owners served a notice of abandonment claiming a constructive total loss, which the insurers rejected. After brokers reported no scrap buyers, the salvors scuttled the rig in deep water on 20 August 2018.

OCBC sued on the policy in Suit No 814 of 2021, relying on the cover for perils of the seas. The High Court judge found that the capsize was caused by perils of the seas and that the rig was a constructive total loss, admitting the owners' correspondence, quotations and reports as business records although no witness proved them. The insurers appealed in Civil Appeal No 18 of 2025.

Issues

1. Whether OCBC proved that the loss was caused by perils of the seas, including whether the presumption of loss by perils of the seas applied
2. Whether OCBC proved that the rig was a constructive total loss on admissible evidence
3. Whether there was a breach of warranty or of the duty of fair presentation
4. Whether OCBC proved its indebtedness under the mortgage

Holding

The Court of Appeal allowed the appeal, holding that OCBC had failed to prove either loss by perils of the seas or a constructive total loss, and that either finding alone sufficed. It upheld the judge's findings on warranties, fair presentation and indebtedness. Costs of the appeal were fixed at $100,000 inclusive of disbursements, payable by OCBC to the insurers, with submissions to follow on the costs below.

Reasoning

An insured must prove a fortuity, and showing that seawater entered the vessel only proves that the peril was maritime. There are two routes. Direct proof requires the insured to put forward a cause of the ingress, or at least a set of possible causes that are all fortuitous, and to prove it on a balance of probabilities. Alternatively, a rebuttable presumption applies where a seaworthy vessel is lost in wholly unexplained circumstances. Drawing on The Popi M and The Marel, and comparing the res ipsa loquitur rule in Grace Electrical Engineering Pte Ltd v Te Deum Engineering Pte Ltd, the court held that the presumption is available only where the insured genuinely cannot find out the cause. It does not cover gaps created by the way the insured chose to run its case.

The judge had effectively reversed the burden by treating rejection of the insurers' theory as proof of OCBC's case. OCBC's expert estimated about 450 tonnes of ingress but offered no likely cause, and its own expert ruled out wind and waves. The rig was seaworthy at the start of the tow, but its loss was not wholly unexplained. It stayed afloat for around 76 days, the tug crew survived, and no one was instructed to investigate the cause. As mortgagee, OCBC stood in the owner's shoes. Inferring a peril of the seas by elimination would mean accepting an improbable case.

On constructive total loss, OCBC pleaded no facts showing that recovery and repair costs exceeded the insured value and called no witness on the point. It relied on documents first raised in closing submissions. The owners' correspondence, the notice of abandonment, the quotations and the brokers' replies were prepared with the claim in view and were not business records. The quotations were also opinion evidence from unidentified makers. Only the salvors' dive report and the casualty reports qualified, and they contained no costs. Excusing the missing hearsay notice prejudiced the insurers, who could not cross-examine on the documents. In any event, the documents did not prove that costs exceeded the insured value: one quotation was for a new rig, another assumed wholesale replacement before the damage was surveyed, and the insurers' email was not an admission. SCOPIC salvage costs, following Connect Shipping Inc v Sveriges Angfartygs Assurans Forening, were probably not recoverable costs at all.

From the judgment