1 The appellants are a company involved in the business of leasing or hiring cranes to third parties. On 27 March 1984, they leased a crane to Shinei Engineering Pte Ltd (`Shinei`) using their standard form of lease agreement but with some modifications incorporated in a side letter dated 28 March 1984. Clause 2 of their standard contract provided that all repairs, maintenance, fuel and transportation costs would be borne by the lessee and cl 5 provided that the lessee would be responsible for all damages and losses save for fair wear and tear sustained by the machine, such losses to be made good by the lessee at their own expense. Clause 6 provided that:

2 By the side letter dated 28 March 1984, the following amendments to the standard contract were agreed to:

3 Clause 2 - lessor shall be responsible for all repairs and maintenance. Lessee shall be responsible for fuel and transportation.

4 Clause 5 - Shall be deleted.

5 Clause 6 - The lessor shall lease the machine with operator. lessor shall take up all insurances.

6 The appellants then insured the crane with the respondents by an insurance policy dated 5 April 1984. The appellants were not required to fill in any proposal form as they were such long-standing customers of the respondents. The only information asked for was the particulars of the machinery. Hence the respondents had no knowledge of the specific terms under which the crane was hired out.

7 Initially, in the schedule to the policy, the persons insured were stated to be `Tat Hong Plant Leasing Pte Ltd and/or Hirer`. By an endorsement dated 16 April 1984 it was agreed that the insured named in the schedule of the policy should with effect from 11 April 1984 be `Citibank, NA as the Owner and Tat Hong Plant Leasing Pte Ltd as the Hirer.`

8 On 22 June 1984, the crane was damaged. Pursuant to a claim by the appellants under the policy, the respondents engaged surveyors and adjustors to survey and adjust the appellants` claim. The surveyors asked for and obtained from the appellants a copy of the lease agreement between the appellants and Shinei but were not given a copy of the side letter.

9 On 29 November 1984 the respondents paid to the appellants a sum of $78,287.35 in satisfaction of the appellants` claim. Pursuant to their rights of subrogation under cl 4 of the policy (which was a standard policy term of the respondents), they commenced proceedings against Shinei. In the course of the proceedings, they discovered that the terms in the lease agreement had been amended by the side letter. Taking the view that their suit against Shinei was no longer tenable, they discontinued the proceedings on 7 November 1985.

10 On 19 July 1986 the respondents commenced an action against the appellants seeking a declaration that they were entitled to avoid the policy on the ground of non-disclosure of a material fact. The alleged non-disclosure was that the appellants had not disclosed the side letter to Shinei which had extinguished the respondents` right of subrogation. They also sought the return of the sum of $78,287.35 as money paid under a mistake of fact. The learned judge found in their favour, holding that the appellants were under an obligation to disclose material facts; that, but for the side letter, the respondents would have had a right of subrogation as against Shinei; that, accordingly, the side letter was material and should have been disclosed; and that there was no evidence of waiver of the disclosure of the side letter by the respondents.

11 The appeal

12 On appeal, the appellants contended that the learned judge erred in holding that the appellants were under an obligation to disclose the side letter as:

13 the respondents had waived all obligations of disclosure of such facts;

14 no question of subrogation arose at all since Shinei was a co-insured under the policy and thus the side letter could not be said to affect the respondents` subrogation rights;

15 if there was any duty to disclose the facts, such duty ceased in law at the date of acceptance of the proposal or at least when the respondents initialled the `slip` and there was no continuing duty to disclose once the proposal was accepted; and

16 there was insufficient proof on the facts to sustain a plea of non-disclosure on making a claim as opposed to non-disclosure in effecting an insurance policy.

17 Did the respondents waive the obligation to disclose?

18 The appellants relied upon the fact that the respondents knew that the subject matter of the insurance was under hire and yet chose not to enquire about the terms of the hire or call for sight of the lease agreement. Under such circumstances, there was no duty of disclosure and the following cases were cited in support.

19 In Carter v Boehm , the insurance policy was for the benefit of the governor of Fort Marlborough in Sumatra against the loss of the fort should it be taken by foreign enemy. It was in fact captured by the French, whereupon the governor claimed on the policy. The insurers put forward a defence of non-disclosure, viz that the weakness of the fort and the probability of it being attacked were not disclosed. It was established that the fort was not designed to resist European enemies but was only for defence against the natives of Sumatra. The appellants cited the following dicta of Lord Mansfield CJ at p 189:

20 Then in Asfar & Co v Blundell , in which Mathew J stated that:

21 In Mann Macneal and Steeves Ltd v General Marine Underwriters, , a wooden ship was insured for voyage to and from France. Part of the cargo carried was petrol but the assured did not disclose this fact. It was held that in the circumstances the insurers had waived disclosure of the fact that the ship was carrying petrol by not making inquiry.

22 Lastly, we considered Inman Steamship Co Ltd v James Bischoff & Ors , in which notice was given to the insurers that the vessel insured was chartered to a third party under a charter party. The insurers did not ask for particulars of the charter party. It was held that there was no duty of disclosure as, on the facts, information about the charter party had been waived.

23 At the hearing below, the learned judge relied on Tate & Sons v Hyslop . In that case the plaintiffs had an arrangement with one Hooper under which Hooper was to do all the plaintiffs` lighterage on the term that he was only liable for negligence. The plaintiffs took out a marine insurance policy with the defendant which included risks on crafts and lighters and was not with no recourse against lightermen. It was held that the term of the agreement with Hooper that the latter was liable only for negligence was a material fact and that the jury was justified in finding that non-communication of that term vitiated the policy. The appellants sought to distinguish the case on the basis that in it, there was evidence that the assured knew that the insurers had two different rates of premiums according to whether or not the carriages was subject to limited liability of negligence. In contrast there was no evidence in this case that different rates of premium would be charged by the respondents according as to whether the hirer`s liability was excluded or not. The evidence indicated contrariwise as could be seen from the fact that (i) the hirer was covered under the policy, (ii) the respondents were not at all concerned about the terms of the lease agreement, and (iii) the premium charged was purely based on the contingency of damage to the particular crane and nothing more.

24 On behalf of the respondents, it was pointed out that the appellants never pleaded the defence of waiver. Furthermore, the plea was not made out on the facts. Such a plea could only be maintained where the insured proved that he was misled by the insurer: see Macgillivray and Parkinson on Insurance Law (8th Ed) at p 291, para 713. In addition, the doctrine of waiver could not be applied to undisclosed facts which are unusual or special so that their non-disclosure distorts the presentation of the risk: Container Transport International Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd , at p 498. There being no waiver, there was a positive duty on the part of the appellants to disclose the side letter as it was a material fact, ie a fact which a prudent insurer would take into account when reaching his decision whether or not to accept that risk or what premium to charge.

25 We were of the view that the respondents did not waive the appellants` duty to disclose material facts. Was Shinei covered under the policy as co-insured and to what extent did the duty of disclosure apply?

26 The named beneficiaries in the policy dated 5 April 1984 were the appellants and/or hirers. By a subsequent endorsement dated 16 April 1984 the named beneficiaries were changed to `Citibank, NA as the owner and Tat Hong Plant Leasing Pte Ltd as the hirer`, such endorsement to take retrospective effect from 11 April 1984. The appellants submitted that the alteration of named beneficiaries was simply to reflect the financing arrangement whereby the subject matter of the policy was mortgaged to Citibank NA and that this was known to the respondents before the endorsement was made. In reality, the policy was the same and there had been but a mere change in names. Hence, in all the circumstances, it was clear that the policy was intended to cover owner and hirer.

27 It was further submitted for the appellants that, at any rate, the question was whether at the date of conclusion of the insurance contract, the respondents had a right of subrogation against the appellants` hirer. It was the date of conclusion of the insurance contract (5 April 1984) that was relevant as thereafter, there was no continuing duty of disclosure, save for a residual duty of good faith when making a claim under the policy. In the case of insurance contracts, the date of conclusion of the contract was the date of acceptance of the proposal or the date when the `slip` was initialled by the insurers: see s 18(1) of the Marine Insurance Act 1906, applicable by s 5 of the Civil Law Act (Cap 43). Since, under the policy as at 5 April 1984, the appellants` hirer was a beneficiary and co-insured, the respondents had no right of subrogation against the hirer. Counsel cited Petrofina (UK) Ltd & Ors v Magnaload Ltd & Ors , in support.

28 In the Petrofina case,7 the `insured` in the insurance policy was defined as `... Lindsey Oil Refinery and/or Foster Wheeler Ltd and/or ... sub-contractors`. One of the preliminary issues that arose was whether Magnaload Ltd was a `sub-contractor` within the terms of the policy. It was held that they were and that accordingly, the insurers would have no right of subrogation since Magnaload was fully insured under the policy.

29 The respondents argued that the operative date of the contract of insurance was 11 April 1984. They relied on the case of Cornhill Insurance Co Ltd v L & B Assenheim , in which it was held that the plaintiffs were entitled to avoid the insurance policy on the ground of material non-disclosure. In that case, the defendants, in signing a proposal form on 3 April 1935 with the plaintiffs in respect of a Chevrolet lorry, stated that no company or underwriter had refused to renew their policy with the defendants. As at that date, the answer was correct but soon after another insurance company refused to renew the defendants` policy with them. Subsequently, the defendants made additions and substitutions for the vehicles covered by the plaintiffs` policy, each new proposal containing a declaration that the proposal, in conjunction with the original proposal of 3 April 1935, would form the basis of the contract between the plaintiffs and the defendants. Nevertheless, the learned judge found that the defendants had failed to tell the plaintiffs of the refusal to renew and accordingly, the plaintiffs were granted a declaration that they were entitled to avoid the insurance policy on the ground of material non-disclosure. By analogy with that case, the respondents argued and we accepted that there was a new contract formed when there was a change in the assured and accordingly, there should have been full disclosure.

30 Was there insufficient proof on the facts to sustain a plea of non-disclosure on making a claim?

31 The appellants contended that whilst a failure to disclose a material fact prior to the conclusion of the insurance contract entitled the insurer to avoid the contract, the same could not be said where the non-disclosure occurred when making a claim under the policy. In the latter type situation, there must be evidence of such a weighty nature as to support a plea analogous to fraud, deceit or bad faith: see `The Litsion Pride`; Black King Shipping Corp v Massie , and `The Good Luck`; Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) . However, the respondents pointed out that the relevant failure of the appellants was that prior to the conclusion of the contract of insurance. Hence, there was no misdirection as alleged. We concluded that this ground of appeal also failed.

32 For the above reasons, we dismissed the appeal with costs.

33 Appeal dismissed.