Garnat Trading & Shipping (Singapore) PTE LTD (Garnat) and Vung Tau Shipbuilding Industry Joint-Stock Company (Vung Tau) v Baominh Insurance Corporation (Baominh) [2010] EWHC 2578 (Comm), concerned the loss of a floating dock (carrying a floating workshop) which sank in the course of being towed on a voyage from Vladivostok in Russia to Vung Tau in Vietnam.

Garnat and Vung Tau were insured for the floating dock and workshop under a contract of hull insurance for a single voyage from Vladivostok to Vung Tau. After the floating dock sank, Garnat and Vung Tau gave notice to Baominh of the loss of the floating dock and workshop but Baominh purported to avoid the insurance policy for alleged non-disclosure and breach of the implied warranty of seaworthiness. Garnat and Vung Tau brought a claim against Baominh for damages in the sum of $8m for the loss of the floating dock and workshop. Baominh raised two defences. The first defence was that Garnat and Vung Tau should have disclosed, but failed to disclose, a document assessing the strength, stability and unsinkability of the floating dock during the forthcoming voyage (the Assessment), which had concluded that it would be permissible to tow the floating dock in certain wave force and wave height conditions, and therefore Baominh was entitled to avoid the insurance policy. The second defence was that the floating dock was unseaworthy at the time that it left Vladivostok and therefore Baominh was not liable because Garnat and Vung Tau had breached the implied warranty of seaworthiness.

In relation to the first defence raised by Baominh, the Court accepted Garnat and Vung Tau’s submission that section 18 of the Marine Insurance Act 1906 (MIA) (which requires that the insured disclose to the insurer, before the contract is concluded, every material circumstance known to it) did not require a “minute” disclosure of every material circumstance. Rather, it required the insured to call the attention of the underwriter to the relevant facts and matters in such a way that, if the underwriter desires further information, he can ask for it. This would be a fair and accurate presentation of the risk by the insured to the insurer. Applying that test, the Court found that the Assessment had been disclosed by Garnat and Vung Tau to Baominh and that Baominh was not therefore entitled to avoid the insurance policy.

In relation to the second defence raised by Baominh, the Court noted that, pursuant to section 39 of the MIA, there was an implied warranty in the insurance policy that, at the commencement of the voyage, the floating dock would be seaworthy for the purpose of the contemplated voyage. This meant that the floating dock would be deemed to be seaworthy if it was in a reasonably fit state as to repairs, equipment, crew and all other respects to encounter the ordinary perils of the voyage insured at the time of commencing the voyage. Applying that test, the Court found that the floating dock was seaworthy at the commencement of the voyage.

The defences raised by the insurer in this case are common in disputes concerning marine insurance policies. The case confirms the nature and extent of the insured’s duty of disclosure and the implied warranty of seaworthiness.