Axa General Insurance Hong Kong Ltd v. Chun Hing Geotechnical Engineering Ltd

HCA 2228/2015
[2018] HKCFI 122

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2228 OF 2015

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Before: Deputy High Court Judge Kent Yee in Court

Dates of Hearing: 10, 13 and 14 November 2017

Date of Judgment: 24 January 2018

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J U D G M E N T

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Introduction

1.The plaintiff (“AXA”) brought this action to recover from the defendant (“the Company”) an aggregate sum of HK$1,338,561.21 with interest comprising the judgment debt, taxed costs and its own legal costs in a personal injury action under HCPI 149/2013 (“the PI Action”) commenced by Mr Chan Siu Yerk (“the Injured”) against Mr Chan Kwan Pang (“the Driver”).

2.The Driver was involved in an accident on 8 March 2010 (“the Accident”). He drove a van with registration number NE 1718 (“the Van”) allegedly in the course of his employment with the Company collided with a private car driven by the Injured (“the Private Car”). The Injured suffered bodily harm as a result.

3.The Company is the registered owner of the Van. AXA and the Company entered into a motor vehicle insurance policy on 29 April 2009 (“the Policy”) in respect of the Van for a term of 1 year starting on 9 April 2009. The Accident took place during the currency of the Policy.

4.On account of the Accident, without the knowledge of AXA, the Driver was charged with an offence of careless driving by way of a traffic summons (“the Summons”) and eventually he was convicted of the charge on his own plea acting in person on 17 June 2010 (“the Offence”). The Injured further commenced the PI Action against the Driver for damages in March 2013. AXA defended the PI Action pursuant to section 10 of the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap. 272 (“the Ordinance”) and eventually judgment was entered by consent against the Driver on 7 August 2013. 

5.Pursuant to the judgment, damages payable by the Driver was agreed to be HK$780,000 and the costs payable was taxed at HK$404,979.26. Apart from these two sums plus interest thereon in the sum of HK$26,931.95, which AXA has paid to the Injured, AXA has also incurred its own legal expenses in the PI Action in the sum of HK$127,650.

Overview of the parties’ respective cases

AXA’s case

6.The primary case of AXA is based on Clause 15 of the Policy. Clause 15, entitled “Avoidance of Certain Terms and Rights of Recovery”, provides,

“If AXA is obliged by the laws of any country within the Geographic Area or by virtue of any agreement between AXA and the Motor Insurers’ Bureau of Hong Kong to pay an amount for which AXA would not otherwise be liable under this Policy, the Company and any other person on whose account the payment is made shall forthwith we pay such amount to AXA.”

7.It is not pleaded that AXA and the Motor Insurers’ Bureau of Hong Kong have ever entered into any specific agreement. Nor has such an agreement ever been disclosed. No mention was made of such an agreement in the course of the opening submissions of Mr Cheung appearing for AXA. None of the witnesses of AXA referred to such an agreement. It was not until his closing submissions that Mr Cheung enclosed with his written submission a copy of a written agreement entitled “The Domestic Agreement” dated 1February 1981 between Motor Insurers’ Bureau of Hong Kong and authorised motor insurers. In the Domestic Agreement, I am unable to find any reference to AXA though I have no doubt that AXA is one of the authorised motor insurers in Hong Kong. Mr Cheung submits that AXA relies on the Domestic Agreement in this action.

8.Mr Cheung further submits that by reason of the Domestic Agreement, AXA was obliged to satisfy the judgment debt payable to the Injured regardless of whether the Driver was an employee of the Company or driving for the purpose of the Company at the time of the Accident. This position effectively disposes of the heated controversy about the actual status of the Driver at the time of the Accident.

9.Under the Domestic Agreement, AXA is an Insured Concerned, which is defined to be an insurer at the time of the accident giving rise to a bodily injury liability providing insurance against such liability in respect of their vehicle use of which gave rise to the liability in respect of which the judgement was given.

10.To make good its primary case, AXA relies on the alleged breach of the condition precedent in Clause 18(b). It provides,

“In the event of any occurrence which may give rise to a claim under this Policy the Company shall immediately give notice thereof to AXA with full particulars. Every letter claim writ summons and process shall be notified to or forwarded to AXA immediately on receipt by the Company. Notice shall also be given in writing to AXA immediately the insured or any person claiming to be indemnified shall have knowledge of any impending prosecution inquest or fatal enquiry in respect of any occurrence which may give rise to a claim under this Policy. In case of theft or other criminal act which may be the subject of a claim under this Policy the Company shall give immediate notice to the police and shall cooperate with AXA in securing the conviction of the offender.”

11.The pleaded breach is that the Company failed to give notice of the Summons or any information relating to the Offence. Thus, AXA by its letter dated 6 December 2010 to the Company (“the December Letter”) advised the Company that it had received a letter before action dated 18 November 2010 (“the Letter before Action”) from Messrs Mandy Wan & Co. (“MWC”), the solicitors of the Injured and that AXA would not provide indemnity to the Company and the Driver under the Policy in respect of the Driver’s claim arising from the Accident on the ground that the Company had been in breach of the condition precedent.

12.It should be noted that in the December Letter, AXA advised the Company that it might be obliged to pay the Driver damages according to section 10 of the Ordinance and/or the Domestic Agreement and that AXA reserved is rights to claim reimbursement from the Company and/or the Driver.

13.Therefore, AXA contends that it was not liable under the Policy to pay the Injured but nevertheless it did so due to the Domestic Agreement. Clause 15 is engaged and the Company should repay AXA.

14.The alternative case is that the Company was under an obligation implied by law to indemnify AXA which had performed an obligation imposed under section 10 of the Ordinance for which the Company was primarily responsible.

15.The further alternative case is that AXA is entitled to recover from the Company the sum so paid to the Injured under a judgement by virtue of Section 10(4) of the Ordinance. Section 10(4) reads,

“If the amount which an insurer becomes liable under this section to pay in respect of a liability of a person insured by a policy exceeds the amount for which he would, apart from the provisions of this section, be liable under the policy in respect of that liability, he shall be entitled to recover the excess from that person.”

The Company’s case

16.The Company has adopted a shatter-gun approach and raised a number of issues in its Defence written in an essay format. The document drafted by the solicitors for the Company is not easily comprehensible.

17.The primary positive case of the Company is that the Driver was an employee of a garage by the name Chit Shing Engineering Company (“the Garage”), which was an independent contractor of the Company at the material time. The Driver was not driving the Van with its permission for its purpose or in connection with its business. It follows that the Driver was not an insured driver within the meaning of the Policy. Nor is the Company vicariously liable for any tort committed by the Driver.

18.It is pertinent to take note of the definition of an insured driver in the Policy. In the Policy, M104 provides the definition of insured driver as follows,

(1) Whilst the vehicle is being used in connection with the Company’s business or …

(I) Any person who is in the Company’s employ and is driving on the Company’s order or with its permission.

(II) …

(2) Whilst the vehicle is being used for social, domestic or pleasure purposes – any person who is driving on the Company’s order or with his permission.

19.The omitted part including the proviso is irrelevant.   

20.The Company alleges that one week before the Accident, the Company handed over the Van to the Garage. About ten odd days, Mr Chin, the person-in-charge of the Garage, told Mr Lee, one of the directors of the Company, that it was not worthwhile to repair the Van and it should be scrapped instead. Thereafter the Van had never been returned to the Company and the Company genuinely believed that it had been scrapped. Mr Lee and Mr Chin have long been very close friends.

21.The Company alleges that it had not been aware of the Accident until MWC sent it a letter dated 22 December 2011. It alleges that the Driver lodged a report with the police without its knowledge.

22.The Company further alleges that it purchased the Policy from AXA through an agent/broker, namely, Gibson General Agency Ltd (“Gibson”) and Gibson merely faxed the cover note of the Policy to the Company. The Policy containing Clause 15 has never been sent to the Company. Mr Lee had purchased from AXA other insurance policies for his Mercedes Benz private car and no similar provision could be found in such policies. Therefore, the Company is estopped from denying the applicability of such policies to the present case. I pause to note that I cannot understand the legal basis and indeed the logic of this plea.

23.The Company even alleges that AXA has never issued the Policy.

24.In the circumstances, the Company contends that it has not breached Clause 18(b), the condition precedent in that it was not in a position to make any report to AXA given its lack of any knowledge about the Accident.

25.As to the allegation of the breach of the condition precedent, the Company’s further answer is that the Letter before Action contained all the information necessary for a follow-up investigation by AXA. Any notification by the Company would be superfluous. Ms Bu, for the Company, explained in her opening submissions that AXA received all the necessary information and it was unnecessary for the Company to provide the same information to AXA and AXA could not rely on the condition precedent in the Policy.

26.On the other hand, the Company makes a number of allegations of negligence against AXA in its handling of the PI Action in breach of the express and/or implied terms of the Policy. It, however, does not plead any specific express terms allegedly breached by AXA. In respect of the alleged implied terms, it is alleged that, due to absolute necessity and to make the Policy commercially workable, there are implied terms that AXA must provide reasonable standard of services to the Company and to mitigate the losses of the Company if AXA intends to hold the Company liable for such losses.

27.There was a counterclaim on the part of the Company but it has been abandoned by way of amendment to the Defence.

28.Notwithstanding the primary position of AXA, I am minded to approach this matter by first resolving the relevant factual disputes and then, based on my factual findings, proceed to consider their respective legal positions.

29.The major factual issues calling for my resolution are:

(1) What the involvement of the Company in the Accident including the question as to whether the Driver was driving the Van with its permission was and whether or not the Company had all along been aware of the Accident;

(2) What the status of the Driver at the time of the Accident was;

(3) Whether or not the Company was in breach of Condition 18(b) of the Policy; and

(4) Whether or not AXA was itself negligent.

Analysis

General Observations about witnesses

30.The parties have presented their respective cases which are diametrically opposite to each other. Whilst the fact-finding exercise to be undertaken by this court is substantially assisted by contemporaneous documents, credibility of witnesses has also to be assessed. In this connection, this court has regard to the following instructive guideline set out by DHCJ Au (as he then was) in Lee Fu Wing v Yau Po Ting Paul [2009] 5 HKLRD 513 at §53,

“In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following:-

(1) Whether the party’s case is inherently plausible or implausible.

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable.

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility.

(4) The demeanour of the witnesses.”

31.AXA has called two witnesses, namely, Mr Fung and Ms Cheng. Mr Fung is an administrative officer of Gibson. Gibson was appointed by Pacific Union Agency Ltd (“Pacific Union”) to be its agent in respect of general insurance products including the motor insurance policies of AXA. He was responsible to handle the Policy and liaise between the Company and Pacific Union. Pacific Union would pass the information to AXA.

32.Ms Cheng is senior claims officer of AXA. She took over the claim relating to the Accident from her colleague Ms Yeung in around June 2010 and she had access to all the relevant documents in the possession of AXA. She further handled the PI Action with the assistance of the solicitors of AXA, i.e. Messrs Winnie Leung & Co (“WL”).

33.I find both Mr Fung and Ms Cheng to be honest and reliable witnesses. Their evidence, supported by documentary evidence, was not shaken at all under the vigourous cross-examination conducted by Ms Bu. They readily accepted that they did not have personal knowledge of certain matters and that they had forgotten certain details. They tried their best to be truthful. Mr Fung has no reason to lie at all and what he told this court makes perfect sense. Ms Cheng was also impressive. I have no hesitation in accepting their evidence.

34.The same cannot be said about the three witnesses of the Company. Each of Mr Chan who is clerical worker of the Company and Mr Lee who is the director of the Company filed a 2-page witness statement and told the minimal account in support of the purported defence.  

35.Mr Ng, the manager of the Company taking care of the day to day business of the Company, also testified for the defence. He was responsible for the insurance matters of the Company and he had previously made two claims to AXA under the Policy.  

36.None of them impressed me as a truthful witness. Mr Chan made an obvious effort to say very little under cross-examination. Mr Lee and Mr Ng fared no better. I have a distinct feeling that all of them had not been frank with AXA and now made a concerted effort to conceal the true picture from this court. I have no confidence in their evidence at all, especially those not supported by any documentary evidence.

Issue I: Involvement in and Knowledge of the Accident and the Claim

37.The lynchpin of the defence is their alleged ignorance of the Accident against a wealth of documentary evidence including a claim form submitted to AXA six days after the Accident (“the Claim Form”). They even sought to convince this court that the Claim Form was not sent by the Company at all. Mr Lee denied that it bore his signature though Kenny was his English name. Mr Ng gave his observations about the allegedly suspicious features of the Claim Form. Mr Chan in his witness statement says that Mr Chin had access to the fax machine in the office of the Company and walked around the office of the Company where the chop could be easily accessible. Though not explicitly put forward, the defence case is that Mr Chin sent the Claim Form without the knowledge of the Company. On this importance issue, this court is not assisted by testimony of Mr Chin and any expert evidence on the authenticity of the Claim Form.

38.Accepting the evidence of Mr Fung and Ms Cheng and the relevant documentary evidence, I make the following factual findings:

(1) The Van was covered by the Policy April 2009 and Mr Fung was all along the agent handling the Policy.

(2) Mr Fung sent the Certificate of Insurance and a jacket containing the Policy prepared by Pacific Union with a debit note issued by Gibson to the Company allotted with a number VCB/Z036240610/CLA4 (“the Policy Number”) to the Company by courier. The Company duly made payment by a cheque in favour of Gibson dated 27 May 2009.

(3) Prior to the Accident, Mr Ng on behalf of the Company made two claims to AXA through Mr Fung pursuant to the Policy. The two claim forms submitted were faxed to Gibson involving the same driver Mr Law. The claim relating to the Accident (“the 3^rd Claim”) involved a different driver.

(4) For the Accident, Mr Fung received a phone call from a representative of the Company asking for a copy of claim form.  Mr Fung was asked to fax the copy to Mr Chin and gave Mr Fung the fax number of Mr Chin. Mr Fung then faxed a copy of the claim form to Mr Chin and it was marked in the copy “Mr Chin to receive Fax: 2443XXXX. According to the header of the faxed copy, it was faxed on 24 March 2010 at 1227 hours.

(5) Mr Fung altogether received two copies of the completed Claim Form. First, on the same day at about 1607 hours, a copy was faxed to Gibson by the use of the fax machine of the Company (“the Faxed Copy”). The header of the Faxed Copy shows that it came from the same fax machine by which the two previous claim forms had been sent to Gibson.

(6) On the following day, Mr Fung received a bundle of documents (“the Bundle”) from the Company. They included the original of the claim form (“the Delivered Copy”), a copy of the ID card of the Driver, a letter of consent signed by the Driver authorising the Police to release all the statements and documents relevant to his criminal prosecution to AXA and an interview record/cautioned statement of the Driver dated 22 March 2010 (“the Cautioned Statement”).

(7) The documents in the Bundle save one page were printed on recycled papers. They were tender documents relating to an engineering/construction project with a contract number DC/2007/06. Mr Ng accepted that in the course of the business of the Company, he dealt with this kind of tender documents though he did not accept any involvement in the said engineering/construction project.

(8) The Faxed Copy and the Delivered Copy are identical in their contents. I believe that they are originated from the same document. They merely differ from each other in two respects. First, the Faxed Copy was undated and the Delivered Copy was dated 24 March 2010. Second, the Faxed Copy bore a purported signature of the Company and its chop whereas the Delivered bore a signature in the form of an English name “Kenny” and a blurry chop.

(9) On balance of probabilities, I am convinced that Gibson, and hence AXA, received both the Faxed Copy and the Delivered Copy from the Company. The Company should have endorsed their contents and caused the same to be sent to AXA. The Company throughout has had the knowledge of the Accident and the 3^rd Claim and I reject the allegation that the Company only became aware of the Accident when it received the letter from MWC in December 2011. My conclusions are based on the following reasons:

(a) First, it is remarkable that the unchallenged evidence is that Mr Fung mostly dealt with Mr Chan in respect of the Policy. For the 3^rd Claim, Mr Fung was adamant that he did contact Mr Chan to ask for supporting documents after receipt of the Faxed Copy. The knowledge of the Accident and the 3^rd Claim on the part of the Company is clearly established.  

(b) I reject the evidence of the defence that Mr Chin took care of the insurance matters and vehicle licence renewal for the Company and hence knew the details including the Policy Number. This allegation was made for the first time under cross-examination and was not supported by any corroborative evidence. It is a contrived attempt to explain why the details of the Policy and the Van appeared in the Claim Form. Even if the Garage did assist the compulsory annual vehicle examination for the purpose of the licence renewal, there was no need for the Garage to get involved in any insurance matters.

(c) Though the Van might have been purchased from the Garage as alleged by Mr Ng, the vehicle registration document shows that the Company already became its registered owner in April 2008. The Policy, effective from 9 April 2009, was not a renewal of an earlier insurance policy relating to the Van. The proposed form for insurance was signed by Mr Law of the Company with the chop. No involvement of the Garage was discernible. I accept Mr Fung’s evidence that he dealt with Mr Chan in respect of the Policy. There is no allegation and evidence to the effect that the Garage was in any way involved in the two previous claims made under the Policy. It is indeed the evidence of Mr Ng and Mr Lee that those two previous claims were handled by Mr Ng personally and Mr Ng prepared the relevant claim forms to be dispatched by Mr Chan. There is no way the Garage had been aware of the Policy Number but for the provision of the same by the Company for the purpose of the Claim Form. The Company must be involved in the making of the 3^rd Claim. 

(d) Mr Lee sought to explain the knowledge of the Policy Number of Mr Chin by saying that he assisted the renewal of vehicle licence and thus he came across the Policy. First, I have doubt whether he needed the Policy to renewal the licence of the Van. The cover note which did not have the Policy Number should suffice. In any event, even he had the Policy in his possession for the purpose of licence renewal, I am unable to accept that he was allowed to keep this important document as alleged by Mr Lee. After all, he was not a staff of the Company and could not have assumed any duties in respect of the insurance of the Van. The clear evidence is that Mr Ng handled insurance matters relating to the Van.   

(e) I can accept that the correspondence address stated in the Faxed Copy and the Delivered Copy is different from the business address of the Company stipulated in the Policy. The former is Flat B, 9/F, Hang Fat Mansion, 8-18 Castle Peak Road, Kowloon (“the Hang Fat Address”) whereas the latter is Room D5, 21/F, Gold King Industrial Building, 35-41 Tai Lin Pai Road, Kwai Chung (“the Gold King Address”). I note the evidence of the defence that the residential property at the Hang Fat Address belonged to Mr Lee until 1995 and the Company used the Gold King Address to be its correspondence address since 2002. I cannot see how Mr Chin used the Hang Fat Address in the Claim Form for any ulterior motive. No doubt the whole point of sending out the Claim Form was to make the 3^rd Claim. Mr Chin could not have intended to use an invalid address, which could only cause hindrance to the 3^rd Claim. There is also no reason why he did not use the Gold King Address, of which he must be well aware given the business tie between the Company and the Garage.

(f) Moreover, it is noteworthy that Mr Ng accepted the contact number of 27XX X089 stated in both the Faxed Copy and the Delivered Copy did belong to the Company. I also note that this number appeared in the claim form for the first claim dated 1 February 2010. According to Mr Mr Ng, this number would appear in the phone of the recipient if the call was made by the Company. Though Mr Ng alleges that the Company did not use this number as the contact telephone number, whoever dials this number would inevitably reach the Company. It means that that the Company was expected to be contacted in respect of the Claim Form. It follows that Mr Chin could not have intended to conceal the 3^rd Claim from the Company when he actually used the telephone number of the Company as the contact number. 

(g) Mr Ng says that the chop is different from that of the Company in that the rim is too thick. I do not know which chop he refers to. There is no complaint about the chop appearing in the Faxed Copy, which looked identical to that appearing in the two previous claim forms. As regards the blurry chop appearing in the Delivered Copy, it seems to me more likely than not that the thickness of the rim is due to the repeated stamping of the same chop. Mr Ng also accepts that the chop was applied more than once there. The design of the chop looks more or less the same. I should also point out that Ms Bu after reading the original copy of the Delivered Copy at trial accepts that the blurry chop should be the same chop of the Company being stamped twice such that the name of the Company inscribed therein is hardly legible. Indeed if Mr Chin could use the genuine chop for the Faxed Copy, there is no reason why he could not use the same chop for the Delivered Copy shortly afterwards when it was freely available to him and instead he had to resort to a counterfeit chop of poor quality and make a blurry stamp only.

(h) On the other hand, after trial, curiously enough, I discovered that on the reverse side of page 2 of the Delivered Copy about one third of page 2 appearing with a less blurry chop of the Company was printed. No evidence was adduced about this and I do not wish to surmise how this came about. I believe the Company should have an explanation for this.

(i) The signature of “Kenny” may not belong to Mr Lee. This does not mean that the Delivered Copy did not come from the Company. Further, I note that in the two previous claim forms, they did not bear any signature of the Company in addition to the chop at all.

(j) The Faxed Copy came from the fax machine of the Company and the documents of the Bundle were printed on the recycled papers found in the Company. This strongly points to the conclusion that the Company agreed to the submission of the Claim Form. I am not impressed by the half- hearted effort of the defence to lead me to conclude that Mr Chin secretly sent the Claim Form and wished to be covered by the Policy without the knowledge of the Company. In addition to the reasons given above, it seems inexplicable to me that there is no evidence that the Company has ever made enquiries, let alone having any confrontation, with Mr Chin for his unauthorised submission of the Claim Form purportedly on its behalf. Mr Ng could not give any explanation for this inaction at all. If what the defence now alludes is true, Mr Chin no doubt had committed a serious wrong to the Company and it is hard to believe that the Company has not taken any legal action against him and/or the Garage.

(k) As rightly pointed out by Mr Cheung, in the letter of Messrs S.C. Chan & Co dated 1 December 2014 sent to WL on behalf of the Company, it was said that the Company had been advised to report the forged documents to the police. There is no evidence that the Company has paid heed to this advice and it speaks volume for its conviction (or lack of it) in its serious allegation of forgery. I should add that Mr Lee even asserted that the legal advisors of the Company had never advised to make a report to the police.

(l) The Company did not even call Mr Chin to testify. I do not accept Mr Ng’s causal suggestion that Mr Chin has gone missing and the Company could not locate him at all. Mr Lee even said Mr Chin was rumoured to be imprisoned in 2014 and the Garage has closed down but this did not mean Mr Chin could not be contacted. I believe an adverse inference should be drawn against the Company for its failure to do so without a sound explanation. The maxim omina prasesumuntur contra spoliatorem applies. In Telings International Hong Kong Limited v John Ho & Ors, unreported, CACV 10/2010, 22.10.2010, Le Pichon JA gave an explanation of the maxim in the following terms at §79:

“It is contrary to the well-established maxim, omnia praesumunter contra spoliatorem, sometimes referred to as the principle in Armory v Delamirie (1722) 1 Str 505. In Hong Kong and Shanghai Banking Corporation v Chan Yiu Wah [1988] 1 HKLR 457, Fuad JA expounded that principle (at 467). That passage is quoted in full in my judgment in Tullett & Tokyo International Securities Ltd v APC Securities Co Ltd [2001] 2 HKC 713 at 723B-E:

“285. Failure to produce evidence, as indicating unfavorable tenor of evidence: (1) In general. … The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so; and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavorable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.

The non-production of evidence that would naturally have been produced by an honest and therefore fearless claimant permits the inference that its tenor is unfavorable to the party’s cause.  Ever since the case of the Chimney Sweeper’s Jewel [Armory v. Delamirie] this has been a recognised principle.”

See also Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434 at 443I-444B.”

(10) The knowledge of the 3^rd Claim on the part of the Company can further be evidenced by the following matters.

(a) Gibson faxed a copy of AXA’s written request for the screening breath test result of the Driver dated 29 March 2010 to the Company at 1505 hours on the same date (“the 1^st Fax”).

(b) Gibson faxed a copy of AXA’s written reminder to the Company dated 27 April 2010 (“the 2^nd Fax”) to comply with its obligations under the Policy to forward or summons, letters, prosecution or correspondence regarding the likely persecution of the Driver. It was expressly stated that any non-compliance would constitute a breach of the Policy and any rights of the Company under the Policy might be prejudiced.

(c) Lastly Gibson faxed a copy of the December Letter to the Company on 8 December 2010 at 1101 hours. Actually, AXA first sent the December Letter to the Company at the Hang Fat Address and that might not reach the Company. 

(d) The headers of the three faxes show the dispatch information including the fax number of the Company and that they reached the fax machine of the Company.

(e) Mr Chan, taking care of the incoming faxed documents of the Company, confirmed that these faxes were indeed received by the Company from Gibson. The allegation that AXA was negligent in that it had posted all these faxes to the Hang Fat Address does not assist the defence at all. To start with, AXA was entitled to rely on the correspondence address provided in the Claim Form and the correspondence address is not necessarily identical to the business address. For the purpose of the 3^rd Claim, the Company should be at liberty to provide another address to AXA. I do not find the criticism to be valid. In any event, these faxes did reach the Company and I do not understand why considerable time was still spent on the allegation of negligence.

(f) The Company did not respond to the 1^st and 2^nd Faxes at all despite the likely legal liability arising from the Accident that the Company might have to shoulder. Nor had it raised any queries about the 3^rd Claim with Gibson or AXA. These two faxes should be particularly alarming to the Company when it alleges that it has never had any record of the 3^rd Claim, which I do not accept. Mr Ng explained that he did not pay any attention to these faxes because he was too busy. This is an obviously unacceptable excuse.

(g) Ms Cheng with the assistance of the record of AXA relating to the 3^rd Claim told the court that on 16 December 2010 she received a call purportedly from Mr Lee and his number was observed to be 6178 XXXX.  He told Ms Cheng that he had faxed the Summons to the insurance agent before the hearing of the Summons. She then requested him to provide a detailed explanation with supporting documents for the consideration of AXA. However, the Company did not follow up. Ms Cheng made a contemporaneous record of this conversation. I accept her evidence.

(h) Mr Lee denied having made the phone call. Mr Lee says that the number belonged to Mr Chin. I am not sure whether it was Mr Lee or Mr Chin who actually made the call to Ms Cheng. If it was made by Mr Lee using the phone of Mr Chin, there can be no ignorance and/or disapproval of the 3^rd Claim on the part of the Company. If it was made by Mr Chin instead, it is clear that the Company, after receiving the December Letter, turned to Mr Chin and asked him to deal with AXA. Mr Chin could not have been aware of the contents of the December Letter but for the disclosure of the same to him by the Company. The Company must be well aware of the 3^rd Claim and the 3^rd Claim must have been submitted by Mr Chin on its behalf with its permission.

Issue II: the Status of the Driver

39.As regards the occurrence of the Accident, AXA had no personal knowledge of the Accident and could only rely on the account given by the Company in the Claim Form. In the Claim Form, it was stated that the purpose of use of the Van at time of accident was “返工場” (returning to the work site).

40.For the details of the Driver, it was stated that the Driver’s occupation was a repair technician and his relationship with the owner of the Van was “伙記”(employee).

41.A brief account of the Accident was given. On 8 March 2010 at 2111 hours, near the lamp-post FA 1400 on Long Ping Road, Yuen Long, the Private Car collided into the right side of the Van when it was just about to join the main road from an exit from Long Ping Village Road. A similar account was given in the Cautioned Statement. The Driver made no mention about the Company or the Garage at all. He merely said in the Cautioned Statement that he was on his way to Fuk Hi Street, Wang Chau, Yuen Long. Mr Lee said that it was the work site of the Garage.

42.nbsp;   This is all hearsay evidence. This court does not have the benefit of the testimony of the Driver and the accounts given in the Claim Form and the Cautioned Statement were untested. Prima facie, the defence is bound by the account in the Claim Form since the Company provided the Claim Form to make the 3^rd Claim and must be taken to accept the account given therein.

43.nbsp;   The defence now asserts that the Driver was in fact an employee of the Garage and was never employed by the Company and that he drove the Van without its permission. This assertion only appeared for the first time in the reply letter of the Company to WL dated 7 January 2013. It had taken the Company more than two years after the December Letter to make this convenient assertion. I cannot lightly accept this. I also wish to point out that it is inexplicable that the Company did not complain that the 3^rd Claim had never been made by the Company if it had been made without the authorisation and knowledge of the Company.

44.nbsp;   To argue against the contents of its own documents, viz, the Claim Form, the Company should make its best endeavour to procure the attendance of the Driver. All the contact information of the Driver was set out in the Claim Form and the Cautioned Statement. There is no evidence that any effort has been made to call the Driver to testify and the Company did not find it necessary to issue a writ of subpoena against the Driver to secure his attendance at trial. Again the maxim applies and an adverse inference that the evidence of the Driver is unfavourable to its case can be drawn against the Company.

45.nbsp;   I cannot be convinced that the Driver was the employee of the Garage just because of the involvement of Mr Chin in the making of the 3^rd Claim in the absence of direct evidence of Mr Chin and the Driver.

46.nbsp;   Ms Bu relies strongly on a remittance statement relating to the MPF scheme of the Company known as BCOM Joyful Retirement for the period from 1 March 2010 to 31 March 2010 (“the Statement”). The Statement contained the MPF information of the 12 employees of the Company and they did not include the Driver. On that basis, Ms Bu submits that the Driver could not be the employee of the Company at the material time.

47.nbsp;   I cannot accept her submission. The Statement was not covered by the evidence of the defence save that Mr Lee acknowledged his signature appended thereto. There is no evidence to the effect that the MPF scheme is the only scheme available to all the employees of the Company. The Driver might have joined another MPF scheme or the Company simply omitted him in that month. Further, the Driver might not yet be qualified for MPF even if he was an employee of the Company. Whether he could have MPF also depends on the nature of his employment with the Company, for example, he might only be employed on a part-time basis.  

48.nbsp;   I cannot accept the allegation that the Company had instructed the Garage to dispose of the Van by scrapping prior to the Accident. To begin with, there is a significant discrepancy between the evidence of Mr Lee and that of Mr Ng in regard to the circumstances under which the Van reached the Garage. Mr Ng said that in early March 2010, the Van broke down completely and was towed to the Garage.

49.nbsp;   Mr Lee, on the other hand, was positive that Mr Law found the engine of the Van making too much noise, drove the Van to the Garage for inspection with his permission and no towing was required. A few days later, the Garage reported to him that the repair costs were not justified given its purchase price was only ten odd thousand dollars (HK$18,000 according to Mr Lee) and suggested scrapping. Mr Lee agreed and so he believed that the Van had already been scrapped by 8 March 2010. I have no confidence in either of their versions.

50.nbsp;   Mr Lee said in court that it was agreed between the Company and the Garage that the Company would receive HK$6,000 as a result of scrapping. Mr Lee, however, said that the Garage failed to pay such a sum to the Company and in fact Mr Chin had all along been heavily in debt. I do not believe that there was such an agreement. This was not even mentioned in the witness statement. It also surprised me that an old van purchased at the price of HK$18,000 could yield a net profit of HK$6,000 out of scrapping.

51.nbsp;   Moreover, the Company has done nothing to comply with the statutory requirements for scrapping the Van so as to obtain a scrapping certificate from the Transport Department and to apply for a cancellation of registration of the Van.

52.nbsp;   Taking into account all the evidence in the round, I believe that the alleged scrapping is a mendacity. The Company merely attempted to distance itself from the use of the Van on the day of the Accident as much as possible and avoid liability.

53.nbsp;   I am alive to the allegation in the Cautioned Statement that the Driver had just finished his hotpot dinner before the Accident. I do not think I can attach any weight to this untested evidence. Nor can it sufficiently negative the fact that the Driver was driving the Van for the purpose of the Company at the time of the Accident.

54.nbsp;   Hence, on the evidence, I conclude that the Driver, being in the employ of the Company, drove the Van to the work site of the Garage. He did so in connection with the business of the Company for the Garage to work on the same on the order of the Company and with its permission as stated in the Claim Form endorsed by the chop of the Company. In other words, the Driver was an insured driver under the Policy at the time of the Accident.  

Issue III: Any breach of Condition 18(b) of the Policy

55.The obligations under Clause 18(b) are clear. They amount to a condition precedent to any liability of AXA. Given my finding that the Company had all along been aware of the Accident and made the 3^rd Claim to AXA, its failure to provide the Summons to the Company despite the 1^st Fax and its failure to provide full particulars of the Accident constituted a breach of the condition precedent.

56.On the other hand, before the settlement of the PI Action, the Company was totally unhelpful despite the repeated request for clarification of the position of the Company by AXA. The Company had made no allegation that the Claim Form was a forgery and Mr Chin was the true culprit as now it would like this court to believe. It provided no particulars about the Accident to AXA at all. This constituted a further breach of the condition precedent.

57.In the circumstances, AXA should not be held liable to the Company under the Policy by reason of its breaches of the condition precedent pursuant to Clause 1(d).

58.Ms Bu relies on Barrett Bros (Taxis) Ltd v Davies [1966] 1 WLR 1334. The holding of the report summarised the dictum of Lord Denning MR in the following terms:

“The law never compels a person to do that which is useless and unnecessary. If insurers obtain all material knowledge from another source so that they are not prejudiced at all by the failure of the insured to tell them, they cannot rely on a condition to defeat the claim.”

59.In that case, the insurer was found to have obtained all the relevant information form the police and this absolved the motor-cyclist from sending the same information to the insurer.

60.However, as helpfully pointed out by Mr Cheung, the Barrett Bros (Taxis) Ltd case was not followed by Ryan J in Chan Yiu Sun v Yip Kim Cheung & Ors. [1990] 2 HKC 524. The learned judge noted the disapproval of the majority decision in the Barrett Bros (Taxis) Ltd case by the Court of Appeal in Anglo Starlite Insurance Co Ltd v Wong Ping Fai, unreported, CA 162/83, 14 February 1984. The learned judge preferred the approach adopted by Salmon LJ in his dissenting judgment in the Barrett Bros (Taxis) Ltd case and accepted as the guiding principle that where there is a breach of a condition precedent in an insurance policy, the insurer is, in the absence of waiver, entitled to succeed. I too agree with the approach of Salmon LJ and the learned judge.   

61.In any event, the facts in the present case are very different. There is simply no evidence that AXA had, prior to the conviction of the Driver of the Offence, obtained all the information about the Offence. The Letter before Action relied on by Ms Bu in her opening submissions came after the conviction and in fact did not contain all the necessary information. Nor is there evidence that AXA had, prior to the consent order made in the PI Action, obtained all the information about the Accident. AXA did nothing to lead the Company to believe that it no longer insisted on the provisions of information under Clause 18(b) either.

62.In the premises, AXA could still pray in aid the breach of the condition precedent by the Company.

Issue IV: Negligence of AXA

63.In light of the foregoing factual findings, the allegations of negligence are wholly unmeritorious and unsustainable.

64.As observed above, AXA’s use of the Hang Fat Address cannot be faulted and it led to no real consequence at all. The Company in any event received the key documents by fax.

65.AXA was entitled to expect full compliance of the conditions precedent by the Company. It was under no duty to make its own investigation particularly given the total lack of support by the Company.  

Liability of the Company

66.In light of the foregoing factual findings and conclusions reached by this court, I now turn to consider the pleaded claims of AXA.

67.I first examine the alternative case under section 10 of the Ordinance. I am satisfied that the Driver was an insured driver under the Policy and that AXA was obliged to pay the Injured damages plus interest thereon and costs for which the Company was primarily liable though AXA was entitled to avoid or cancel and have avoided and cancelled the Policy.

68.I accept that in law AXA could seek an indemnity from the Company. AXA is entitled to recover from all the payments made to the Injured and its own costs from the Company: Australian & Eastern Insurance Co Ltd v Luen Fat Hong (a firm) [1973-1976] HKC 47. AXA should succeed in the alternative case.

69.Now I turn to the primary case based on Clause 15. Clause 1 of the Domestic Agreement provides the definition of the Insured Concerned which includes an insurer who at the time of the accident which gave rise to a bodily injury liability was providing insurance against such liability in respect of the vehicle the use of which gave rise to the liability in respect of which the judgement was given.

70.I accept Mr Cheung’s submission that under the Domestic Agreement, irrespective of whether the Driver was an employee of the Company or an insured driver under the Policy, AXA was the Insured Concerned within the meaning of the Domestic Agreement.

71.Therefore, under the Domestic Agreement, AXA was obliged to satisfy the judgement in favour of the Injured. This is so notwithstanding the fact that AXA would not otherwise be liable under the Policy by reason of the breaches of the condition precedent by the Company. Clause 15 of the Policy is triggered.

72.I conclude that the primary case is made out. The Company should repay such amount that AXA paid to the Injured in the PI Action (but not including AXA’s own legal costs) to AXA.

73.I am mindful of the unsatisfactory way that this primary case was presented as observed in §7 above. I have seriously reflected whether the Company was prejudiced in its defence to this primary case as a result. AXA indicated its reliance of the Domestic Agreement in the December Letter long before the commencement of this action. The Company cannot not be heard to have been taken by surprise. Ms Bu has also been given an adequate chance to deal with the submissions of Mr Cheung in relation to AXA’s obligations under the Domestic Agreement. In the circumstances, I cannot see why AXA should not be allowed to succeed in its primary case as well.

74.For completeness, I should point out that I am unable to see how section 10(4) of the Ordinance can be engaged in the present case. There is no evidence that AXA paid the Injured any amount exceeding its liability under the Policy. Mr Cheung does not make any submission on this further alternative case at all. I reject this further alternative case.

Conclusion and orders

75.For the reasons given and in light of the analysis above, I come to the conclusion that AXA should be entitled to recover from the Company all the payments made to the Injured and its own costs incurred in the PI Action. Accordingly, I enter judgement against the Company in favour of AXA. Interest on the judgement debt in the sum of HK$780,000 should start to accrue from the date of the completion of the payment to the Injured by AXA at the judgement rate.

76.Mr Ng repeatedly in his testimony impressed this court that Mr Chin was the forger and he felt aggrieved by his betrayal. I must say I have no sympathy with him. Clearly, the Claim Form could not have been submitted to AXA without the cooperation and knowledge of the Company. AXA was misled into thinking that the 3^rd Claim was a bona fide claim made by the Company. The subsequent nonresponse and indifference of the Company were cynical and irresponsible. 

77.It was not until the eleventh hour that, to evade liability, the Company sought to lay all the blame on the doorstep of Mr Chin and claimed that the Driver used the Van without its authorisation. If this court accepts the version of events put forth by the Company, which I do not, it would be a clear case of fraud jointly perpetrated by Mr Chin and the Company on AXA and may attract criminal liability. A fortiori it should indemnify AXA against all losses.

78.Costs should follow the event. I make an order nisi that the Company should pay AXA costs of this action including all costs previously reserved, to be taxed if not agreed.

79.It remains for me to thank both Mr Cheung and Ms Bu for their assistance rendered to this court in this matter. In particular, I am appreciative of the admirable effort of Ms Bu despite the poor state of the pleading and quality of the defence evidence.

Mr Kam Cheung instructed by Winnie Leung & Co for the plaintiff

Ms Annie Bu instructed by S. C. Chan & Co for the defendant