Summary of facts
On September 17, 2018, the Insured (Claimant) signed with the Insurer (Respondent) an insurance contract of goods (“Contract”) for medical equipment (100% new), which was a Veraview IC5 HD dental X-ray machine (“Shipment”) transported from an overseas port/warehouse to a port/warehouse in Vietnam, the insured amount was VND 1,387,705,805. On June 24, 2020, the shipment was forwarded from Hai Phong to the Claimant’s warehouse and there were signs that the cartons No. 7/15, 9/15 and 15/15 were dented and skewed. On June 25, 2020, Claimant sent a Notice of Loss, and on the same day, Respondent appointed CTS Company (“CTS”) to inspect to determine the cause and extent of the loss.
CTS issued the Inspection Report No. CTS 20011 dated October 14, 2020. Accordingly, the goods in the cartons No. 9/15 and 15/15 were not damaged. Packing of carton No. 7/15 was affected by external force during transportation. However, the inspector could not collect information and evidence on the influencing factors, time and place, remedial measures, etc., to serve as a basis for determining the direct causes and responsible subjects for the damage. Regarding the carton No. 7/15, the inspector determined that there were no signs of scratches, flattened, broken or deformed; the performance status of the device was not been recorded because it had not been tested.
On November 18, 2020, the Claimant sent a written request to the Respondent, asking for confirmation of the selection of Morita Factory in Japan as an independent inspection unit and acceptance of the estimated cost of shipping the goods to and from the factory mentioned in the CTS Inspection Report, but it was not accepted. On January 18, 2021, the Claimant sued the Respondent at Arbitration, demanding to pay the inspection costs and interest from October 14, 2020 to January 13, 2021. At the end of the Hearing, the Claimant submitted the Amendment and Supplement to the Request for Arbitration with a new claim that the Respondent: (i) to settle the loss of the Shipment in the amount of VND 248,400,000; and (ii) to pay interest from October 14, 2020 to October 22, 2021 (round up for one year) of VND 248,400,000 x 9%/ year = VND 22,356,000.
CLAIMANT’S POINT OF VIEW AND CLAIM
Claimant claimed that (i) X-ray machine with radiation might cause unpredictable consequences if put into operation after being skewed, (ii) technical conditions in Vietnam were not sufficient to determine the extent of damage. Therefore, on September 21, 2020, the Claimant requested to bring the goods in the carton No. 7/15 to a manufacturing factory in Japan to determine the extent of the loss. The Claimant found that, based on Article 48 of the Law on Insurance Business (“KDBH Law”): “1.When an insured event occurred, the insurer or the person authorized by the insurer shall carry out the loss inspection to determine the cause and extent of the loss. The cost of damage inspection shall be borne by the insurance enterprise; 2. In case the parties do not agree on the cause and extent of the loss, an independent inspector may be requested, unless otherwise agreed in the insurance contract. In case the parties cannot agree on soliciting an independent inspector, one of the parties may request the Court where the loss occurred or the place of residence of the insured to appoint an independent inspector. The conclusion of the independent inspector is binding on the parties”, in this case, the CTS was not qualified to determine the cause and extent of the loss. In addition, CTS also required the Claimant to operate a machine containing X-rays, which was extremely dangerous. Therefore, it was necessary to bring the goods in carton No. 7/15 to a third party with adequate equipment for inspection of loss. In addition, Clause 1, Article 48 of the KDBH Law also stipulated that the Respondent bore the costs of the first inspection. Claimant requested Respondent to compensate VND 248,400,000, and VND 22,356,000 as interest due to late payment.
Respondent's point of view
The Respondent said that according to the Inspection Report No. CTS 20011 "... there was damage to the packaging of carton No. 7/15. The goods inside the carton were X-ray equipment belonging to the dental X-ray machine - Veraview IC5 HD ... there were no signs of scratches, flattened, broken, deformed, operation features of the device had not beenrecorded due to the equipment has not been tested for operation” and, the causes of loss were as follows: “The shipment of 05 sets of Veraview IC5 HD dental x-ray machines ... with carton No. 7/15 ... was affected by external forces to the packaging in the process of being transported from the port of Kobe, Japan to the warehouse of the Company [Claimant] in Hanoi.
However, the inspector could not collect information and evidence on the impact factors, time and place, remedial measures, etc., to serve as a basis for determining the direct causes and the subject to bear responsibility for the case”. Respondent argued that the carton No. 7/15 was only affected by external forces on the packaging according to the CTS's Inspection Report, according to Article 48 of the KDBH Law, the Respondent invited and paid the inspection fee to CTS, fulfilling the obligations under provisions of Clause 1, Article 48 of the KDBH Law. The request to bring the goods in carton No. 7/15 to Japan for re-inspection was groundless according to Clause 2, Article 48 of the KDBH Law. In this case, the Claimant should ask the Court of the place where the loss occurred or the place of residence of the insured to appoint an independent inspector.
The Respondent argued that under Article 304 of the 2005 Commercial Law (“TM Law”), the Claimant had to prove the loss, the extent of the loss, and under Article 303 of the TM Law, the liability to compensate for the damage arose when there was a breach of contract, there was actual damage, and the breach of contract was the direct cause of the damage. However, the transportation and customs costs from the Claimant's company to the factory in Japan (VND 162,121,600) were estimated costs, without actual damage. For the interest amount (VND 6,416,573), Respondent objected because Claimant could not prove that Respondent breached payment obligation.
Regarding “the claim for total loss” (VND 248,400,000) and interest (VND 22,356,000), the Respondent argued that based on Clause 24.1, Article 24 of the General Rules of Cargo Insurance by Sea (QTCB 2004) specified in the Contract (“General Rules”), there was no actual total loss as the carton 7/15 was not completely destroyed or seriously damaged, title to the goods till belonged to the Claimant.
Arbitral award
The Claimant submitted an Amendment and Supplement to the Request for Arbitration, therefore, the Arbitral Tribunal only considered the claim stated in this document. Regarding the claim of "loss settlement" (VND 248.400.000), the Claimant
confirmed that this was a claim for total loss. Pursuant to Clause 24.1, Article 24 of the General Rules, “Actual Total Loss: ... if the subject-matter insured is completely destroyed or so severely damaged that it ceases to be an article in its original character or the Assured loses title to the goods, it shall be deemed to be actual total loss”.
The Claimant confirmed acceptance of inspection results of goods damage stated in the CTS 20011 Inspection Report. The Arbitral Tribunal found that Section 5 of the 2nd Preliminary Inspection Report stated: “...X-ray equipment in carton 7/15 showed no signs of loss of appearance...”. Section 2.2 of the 3rd Preliminary Inspection Report stated: “... about carton No. 7/15, the goods inside have normal appearance, no signs of deformation, being broken or being scratched...”. According to Section 7 of the above Inspection Report: “... there is loss of appearance for the packaging – carton No. 7/15. The goods inside the carton ... has no signs of being scratched, squashed, broken, or deformed...”, Claimant confirmed that the carton No. 7/15 was currently sealed from August 19, 2020, so, the Arbitral Tribunal considered that the goods in carton No. 7/15 showed no signs of actual total loss as stipulated in Clause 24.1, Article 24 of the General Rules. The Arbitral Tribunal found that the loss in carton No. 7/15 was also not considered as a constructive total loss under Clause 24.2. Article 24 of General Rule as there was no possibility of actual total loss as set forth above and no estimated costs of salvage, repair and delivery of the goods to the destination stated in the Contract which might exceed the value of goods upon arrival there. Therefore, based on Clauses 24.1 and 24.2, Article 24 of the General Rules, the Arbitral Tribunal rejected the Claimant's claim for actual total loss as well as constructive total loss in respect of the goods in carton No. 7/15.
Regarding the request to pay the amount of VND 22,356,000, according to Article 306 of TM Law as follows: "In case the breaching party is late in payment ... then the breached party has the right to demand payment of interest on the amount of such late payment...”, the Arbitral Tribunal found that the Respondent was not obliged to pay, so it did not give rise to the responsibility to pay interest. Therefore, the Arbitral Tribunal rejected this claim of the Claimant because it had no basis. In conclusion, the Arbitral Tribunal decided to reject all of the Claimant's claims stated in the Amendment and Supplement to the Request for Arbitration dated October 22, 2021.
(*) VIAC Arbitrator
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