Keppel Cebu

Shipyard vs.
Pioneer Insurance
and
SuretySeptember
25, 2009Facts
KCSI and !"#$
%ebsens

Shipmana&ement
, Inc. '!"#$
( e)ecuted a
Shiprepair
$&reement
*hereinKCSI
*ould renovate
and

reconstruct !"#$
+s -
/Supererry 1
usin& its dry
doc3in&
acilities
pursuant toits
restrictive

saety and
security rules and
re&ulations. Prior
to the
e)ecutiono the
Shiprepair
$&reement,/Supe
rerry 1 *as

already insured
by !"#$ *ith
Pioneer or
4S6,782,56.8
6. :he Shiprepair
$&reementprovid
es, amon&
others, or the

ollo*in&
terms'( that
the o*ner shall
inorm its
insurer and shall
include Keppel
Cebu Shipyard as
a co;assured inits

insurance
policy<'2( that
the o*ner shall
*aive its ri&ht to
claim or any
loss o pro=t or
loss o use or
dama&esconse>u

ential on such
loss o use
resultin& rom
the delay in the
redelivery o
the above vessel<
'1( that the o*ner
shall indemniy

and hold Keppel

Cebu Shipyard
harmless rom
any or all
claims,dama&es,
or liabilities
arisin& rom
death or bodily

in?uries to
@*ner+s *or3ers,
or dama&es to
thevessel or other
property ho*ever
caused.In the
course o its
repair, -

/Supererry 1
*as &utted by
=re. Claimin&
that the e)tent o
thedama&e *as
pervasive, !"#$
declared the
vessel+s dama&e

as a /total
constructive
loss and, hence,
=led aninsurance
claim *ith
Pioneer. Pioneer
paid the
insurance claim

in the amounto
4S6,782,56.8
6. !"#$, inturn,
e)ecuted a Aoss
and Subro&ation
Beceipt in avor
o Pioneer.
Pioneer then tried

to collect rom
KCSI, butthe
latter denied any
responsibility
or the loss o
the sub?ect vessel
despite repeated
demands. ence,

Pioneer,=led a
Be>uest or
$rbitration
beore the
Construction
Industry
$rbitration
Commission

'CI$C( prayin&
or thepayment
o the amount
paid to !"#$, the
e)penses o the
arbitration 'P500
million(, and
dama&es. It

urtherprayed
that Clauses
and 2 on the
unsi&ned pa&e
o the
/Shiprepair
$&reement as
*ell as the hardly

le&ibleClauses
20 and 22 'a( and
other similar
clauses printed in
very =ne print on
the unsi&ned
dorsal pa&e
thereo, beall

declared ille&al
and void ab
initio.KCSI
and !"#$ reached
an amicable
settlement,
leadin& to the
dismissal o the

claim
o !"#$a&ainst
KCSI and the
arbitration to
proceed *ith
Pioneer as the
remainin&
claimant. Pioneer

alle&es that it is
the

eal party in interest and that Keppel had custody o and control over

the - /Super erry 1 *hile said vessel *as in Bespondent Keppel+s premises. It
li3e*ise alle&ed that the essel+s Sa ety a nual cannot be reliedupon as proo o
the a ster+s continuin& control over the vessel < Dard is liable under the Eoctrine
o Bes IpsaAo>uitur. oreover , the liability o Bespondent does not arise merely rom
the application o the Eoctrineo Bes Ipsa Ao>uitur, but rom its ne&li&ence in
this case. It uther all&ed that the shipo*ner had no le&al duty toapply or a
hot*or3s permit since it *as not re>uired by the yard, and the o*ner+s hot*or3s *ere
conducted by*elders *ho remained employees o the yard. In supplyin& *elders
and e>uipment as per :he !or3 @rderEated 2

%anuary 2000, the Dard did

so at its o*n ris3, and acted as a Aess :han Prudent Ship Bepairer.KCI on the other
hand all&ed . that pioneer as claimant has no standin& to =le the Be>uest or
$rbitrationand the :ribunalhas no ?urisdiction over the case. 2. :he Ship GBHepair
$&reement *as not imposed upon the essel. :he essel3no*in&ly andvoluntarily
accepted that a&reement. o reover, there are no si&nin& or other ormal
de ectsthat can invalidate the a&reement.1. :he pro)imate cause o the =re and
dama&e to the essel *as not any ne&li&ence committedby $n&elino Seville?o in
cuttin& the bul3head door or any other shortcomin& by the Dard. @nthe contrary, the
pro)imate cause o the =re *as Er. %oni&a+s and the essel+sdeliberatedecision to have
$n&elino Seville?o underta3e cuttin& *or3 in inherently dan&erousconditions
created by them.

real party in
interest and that

Keppel had
custody o and
control over the
/Supererry
1 *hile said
vessel*as in
Bespondent

Keppel+s
premises. It
li3e*ise alle&ed
that the essel+s
Saety anual
cannot be
reliedupon as
proo o the

aster+s
continuin&
control over the
vessel < Dard is
liable under the
Eoctrine o Bes
IpsaAo>uitur.
oreover , the

liability o
Bespondent does
not arise merely
rom the
application o
the Eoctrineo
Bes Ipsa
Ao>uitur, but

rom its
ne&li&ence in
this case. It
uther all&ed
that the shipo*ner
had no le&al duty
toapply or a
hot*or3s permit

since it *as not

re>uired by the
yard, and the
o*ner+s hot*or3s
*ere conducted
by*elders *ho
remained
employees o

the yard. In
supplyin&
*elders and
e>uipment as
per :he !or3
@rderEated 2
%anuary 2000,
the Dard did so at

its o*n ris3, and

acted as a Aess
:han Prudent
Ship
Bepairer.KCI on
the other hand
all&ed. that
pioneer as

claimant has no
standin& to =le
the Be>uest or
$rbitrationand the
:ribunalhas no ?
urisdiction over
the case. 2. :he
Ship GBHepair

$&reement *as
not imposed upon
the essel. :he
essel3no*in&ly
andvoluntarily
accepted that
a&reement.
oreover, there

are no si&nin&
or otherormal
deectsthat can
invalidate the
a&reement.1. :he
pro)imate cause
o the =re and
dama&e to the

essel *as not

any ne&li&ence
committedby
$n&elino Seville?
o in cuttin& the
bul3head door or
any other
shortcomin& by

the Dard. @nthe

contrary, the
pro)imate cause
o the =re *as
Er. %oni&a+s and
the
essel+sdelibera
tedecision to have

$n&elino Seville?
o underta3e
cuttin& *or3 in
inherently
dan&erousconditi
ons created by
them.7. ven
assumin& that

$n&elino Seville?
o cut the
bul3head door
close to the dec3
Joor, andthat this
circumstance
rather than the
e)tremely

haardous
conditions created
by Er. %oni&aand
the essel or
that activity
caused the =re,
the Dard may still
not be held liable

or theresultin&
dama&e.5.
$ssumin& that
the Dard is liable,
it cannot be
compelled to pay
the ull amount
o P10million

paid by the
Claimant as
subro&ee, or
an amount
&reater than that
*hich the essel