Kowloon Shipping Ltd ("Kowloon Shipping") purchased a steel-hulled coastal tug, "Blue Sea". The tug was insured by China Insurance Co (Hong Kong) Pte Ltd ("CIC"). The period of insurance was for one year, "from 24 December 2017 to 23 December 2018, both dates inclusive". The policies incorporated the Institute Time Clauses- Hulls 1.10.83 and the trading limits were "Hong Kong home trade including, Guangdong-Hong Kong-Macao Greater Bay Area waters and inclusion of one voyage risk from Kobe, Japan to Hong Kong". This policy is subject to the Hong Kong Law.

The tug was constructed as a coastal vessel and not as an ocean-going one. Prior to the finalisation of the purchase, Kowloon Shipping instructed ABC Marine Services Pte Ltd ("ABC") to conduct a pre-purchase condition survey while the "Blue Sea" was in Kobe. The ABC report set out a fairly comprehensive list of matters that required Kowloon Shipping's attention before the"Blue Sea" could begin trading operations in Hong Kong or within Guangdong-Hong Kong-Macao Greater Bay Area. Kowloon Shipping decided to have a large part of the repair work done in Hong Kong. Instead of being shipped on board a carrier, Kowloon Shipping decided that the "Blue Sea"was to sail on her own propulsion from Kobe across the Pacific Ocean to Hong Kong during the December monsoon.

The insurance cover included the delivery voyage from Kobe to Hong Kong. CIC required a condition survey to be carried out before the"Blue Sea"sailed from Kobe. ABC was designated to carry out this survey as "warranty surveyor". The condition survey contained six recommendations, one of which consisted of the route of the voyage from Kobe to Hong Kong in fair weather conditions. "Route to follow to be tracking long nearest coast of Japan, China unless weather permitted, and to seek shelter if weather is bad..."

"The following clauses and conditions apply to this policy" and that is followed by a long list of clauses and conditions. The relevant ones are:

Institute Time Clause - Hulls 1.10.83 with clause 8 and clause 1.2 deleted.

...

Warranted satisfactory vessel seaworthiness/condition survey for her safe voyage to Hong Kong by appointed surveyor-ABC Marine and all recommendations to be complied at owner's expenses before her sailing from Kobe to Hong Kong.

...

The "Blue Sea"left Kobe on 26 December 2017 with 6 crew members. A vessel must have a competent master and a sufficient number of competent crew. The "Blue Sea" was reported to have "three masters" but none of them possessed the necessary qualifications to be a master of the ship for the delivery voyage from Kobe to Hong Kong. However, the surveyor from ABC, after investigation, found the crew to be adequate for the voyage. In addition, Kowloon Shipping considered that the lack of certification was not fatal based on enquiries made with the Kobe port authorities.

In terms of the weather, when the "Blue Sea" left, gale warnings had been issued. The gale warnings were common during this period. In this voyage, the expert witness had downplayed those warnings and said that the master had acted correctly in leaving Kobe at the material time. During the voyage, the tug sank sometime in the early hours of 27 December 2017 only 50 miles from Kobe. All 6 crew members perished. According to weather reports made by the Observatory, from 1400hrs on 26 December 2017 to 0200hrs on 27 December 2017, the wind speed ranged from 8-15m/s (metres per second) with the wind speed hitting its highest at around 0200hrs on 27 December 2017. According to the witness, winds of 14 m/s would be equivalent to 28 knots and this would be considered a Force 7 gale.

Kowloon Shipping claimed an indemnity against CIC, on the grounds that the ship had been lost by the insured risk of "perils of the sea". The insurers denied liability based on the assured's breach of warranty by not complying with the surveyor's recommended route and the cause of loss was unseaworthiness of the tug rather than the insured risk of "perils of the sea"

(1)What was/were the proximate cause(s) of the loss? Perils of the sea or unseaworthiness? Was the insurer liable for the damages? (20 Marks)