Background

Argoglobal Underwriting Asia Pacific Pte Ltd and others v. Overseas-Chinese Banking Corp Ltd [2026] SGCA 14

The respondent, Overseas-Chinese Banking Corp Ltd (OCBC), was the mortgagee of the jack-up rig Teras Lyza (the Vessel). The five appellant insurance companies (the Insurers) were hull and machinery underwriters who issued a hull and machinery insurance policy (the H&M Policy) in respect of the Vessel. OCBC was the co-assured, together with the Vessel’s owner and manager.

On 30 May 2018, the Vessel (towed by the tug Teras Eden) embarked on a voyage from Vietnam to Taiwan. On 5 June 2018, the Vessel developed a list to port and stern trim, and capsized on the same day.

OCBC, the Vessel’s owner, and the Vessel’s manager brought a claim under the H&M Policy.
At first instance, a judge of the General Division of the High Court (the Judge) found in favour of OCBC. Among other things:

1. The Judge found that OCBC had proved that the loss was caused by a peril of the seas (the Peril of the Seas Issue), being satisfied that there was unexpected seawater ingress into the Vessel’s hull. OCBC did not bear the burden of showing that there was an aperture that permitted water to enter the Vessel in the first place, and what created it. The Insurers would only have a defence if they could show that the Vessel was decrepit. The Judge also found that there was insufficient evidence to demonstrate that the Vessel was inherently unstable or unseaworthy. The Judge preferred the expert evidence of OCBC’s expert that the Vessel’s capsize resulted from an ingress of an estimated 450 tonnes of water, although OCBC’s expert could not identify the cause of the initial seawater ingress.
2. The Judge found that OCBC had proved that the Vessel was a constructive total loss (CTL), i.e. where the costs of repair and/or recovery exceed its insured value (the CTL Issue). In this regard, OCBC relied on a number of documents, including correspondence between the Vessel’s owner and the Insurers, quotations and emails from third parties, and reports on the Vessel’s condition post-capsize (the CTL Documents). The Judge also found that the CTL Documents fell under the “business records exception” to hearsay and declined to exclude the CTL Documents in the interests of justice. Finally, the Judge found that the CTL Documents were sufficient to make out a prima facie case of a CTL, and that the Insurers failed to adduce evidence to rebut this prima facie case.
3. The Judge also found that OCBC (a) did not breach any warranty in the H&M Policy (the Warranty Issue); (b) did not breach its duty of fair presentation (the Fair Presentation Issue); and (c) had discharged its burden of proving its entitlement under the H&M Policy to a debt of at least US$70 million (the Entitlement Issue).

The Insurers appealed against the Judge’s findings on the Peril of the Seas Issue, the CTL Issue, the Warranty Issue, the Fair Presentation Issue, and the Entitlement Issue.

Key holdings

This article focuses on the Peril of the Seas Issue and the CTL Issue, because the Court of Appeal’s decision to allow the appeal on these issues effectively determined the appeal in favour of the Insurers. The Court of Appeal did not disturb the findings of the Judge on the Warranty Issue, the Fair Presentation Issue, and the Entitlement Issue.

The Peril of the Seas Issue

In summarising the applicable law, the Court of Appeal held that an insured may have recourse to circumstantial proof and rely on a rebuttable presumption that the vessel was lost by a peril of the seas if it can prove the following conditions: (1) that the vessel was seaworthy at the commencement of the voyage and (2) that the vessel was lost in wholly unexplained circumstances (i.e. the insured is not in a position to investigate or determine the cause of the casualty) (the POS Presumption). The POS Presumption is to assist an insured shipowner who is unable to identify the actual cause of the loss to discharge its burden of proof. In this regard, where a vessel is lost at sea, the law allows the insured shipowner to rely on the POS Presumption if the two aforesaid conditions are fulfilled.

However, where there is sufficient direct evidence of the cause of the loss such that the loss is capable of being explained, the POS Presumption cannot be raised; it is incumbent on the insured shipowner to prove a peril of the seas by establishing and proving the cause on a balance of probabilities, with the available evidence. It would be insufficient for the insured shipowner to simply assert that the cause of the loss is unknown.

On the facts, the Court of Appeal found that the Judge erred in concluding from OCBC’s expert evidence that the capsize was caused by a peril of the seas.

1. Firstly, OCBC’s expert did not advance a positive cause of the seawater ingress. This was necessary to prove the element of fortuity required to establish a peril of the seas. Therefore, OCBC had not discharged its burden of proof as a matter of direct proof.
2. Secondly, the Vessel did not sink in wholly unexplained circumstances (i.e., circumstances where a shipowner is not in a position to investigate or determine the cause of the casualty). Given that the Vessel remained afloat in a capsized state for around 76 days before it was scuttled, the Court of Appeal was not satisfied that the cause of the seawater ingress was incapable of being explained. The Court of Appeal also observed that OCBC did not provide any expert evidence to show that it would have been impossible to determine the cause of the seawater ingress given the state of the Vessel post-capsize.

The CTL Issue

The Court of Appeal observed that OCBC would need to prove that the Vessel was a CTL in the usual way by adducing admissible evidence through a witness who would be subject to cross-examination. Notwithstanding that the makers of the CTL Documents were not called to testify, OCBC relied on those documents in its closing submissions to prove its CTL claim. In this regard, the Judge had allowed OCBC to rely on the CTL Documents (which were indisputably hearsay evidence) as admissible business records.

The Court of Appeal found that all the CTL Documents (apart from reports on the condition of the Vessel post-capsize) were not admissible business records. In this regard, the relevant correspondence exchanged between the Vessel owner and the Insurers did not constitute business records made with a sufficient degree of routine. Instead, such correspondence was exchanged in contemplation of litigation in light of a potential insurance claim. Similarly, the Notice of Abandonment was made for the purpose of establishing an insurance claim, and not issued in the ordinary course of the Vessel owner’s trade or business. The Court of Appeal also found that cost estimates for repair and salvage may be construed as out-of-court statements of opinion such that those estimates would not be admissible under the business records exception unless the maker of the estimates testified as a witness.

On a related note, contrary to the Judge, the Court of Appeal found that the cost estimates purportedly corroborating the Vessel owner’s estimate of repair and salvage costs, and reports on the Vessel’s condition post-capsize, failed to establish that the costs of repair and/or recovery exceeded the insured value of the Vessel. The Court of Appeal also found that correspondence on the scrap value of the Vessel was irrelevant to proving a CTL and that SCOPIC costs (which protect a shipowner’s potential liability for environmental pollution) do not fall within the scope of the costs of recovery and/or repair. Therefore, the Court of Appeal found that OCBC failed to establish that the Vessel was a CTL.

Avoid a peril: practical implications and takeaways

As an initial step, a shipowner should consider whether it is in a position to investigate or determine the cause of the casualty. If so, it ought to take steps as soon as practicable to investigate the cause of the loss. Not taking steps to investigate without a credible explanation (as opposed to where the shipowner is realistically incapable of providing an explanation) may disentitle the insured shipowner from relying on the POS Presumption.

Under Singapore law, while the business records exception provides for some flexibility to the rule that hearsay evidence is generally not admissible, litigants should be circumspect about the scope of that exception. A litigant would not be able to rely on the business records exception to admit a document as evidence of its contents if that document was created specifically for trial. Where many documents are created following a casualty, the scope of the business records exception may prove to be narrow. Further, opinion evidence is only admissible under the business records exception if the maker of that statement of opinion testifies as a witness concerning that opinion.

In the absence of any actual costs of recovery and/or repair incurred, expert evidence is important to prove that the vessel is a CTL. Cost estimates and contemporaneous evidence of the vessel’s condition (without more) are likely to be insufficient.

Although a decision of the Singapore courts, the H&M Policy was subject to English law. The decisions (both at first instance and in the Court of Appeal) therefore feature detailed examination of the English law tests for peril of the seas, decrepitude, and constructive total loss, based on expert evidence given by English-qualified barristers. The decision will accordingly be of persuasive authority across many common law jurisdictions.

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