Lombard Insurance Co Ltd v. Yue Yung Hing
Read the full judgment text of CACV 3/1979 on BabelCite. This Court of Appeal judgment was delivered on 29 May 1980.
1. The appellant (the plaintiff in the case) is an insurance company incorporated in Hong Kong. It has branch offices in Singapore and Sabah.
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CACV000003/1979
----------------- Coram: McMullin & Li, JJ.A. and O'Connor, J. Date of Judgment: 29 May 1980 ----------------- JUDGMENT ----------------- McMullin, J.A. : 1. The appellant (the plaintiff in the case) is an insurance company incorporated in Hong Kong. It has branch offices in Singapore and Sabah. 2. The respondent (the defendant in the case) is a partner in a firm carrying on business under the style of Wo Hing and Winley Engineering Company. 3. The defendant's firm secured a contract from the Government of Brunei to build a waterworks, in that territory. The Government wished to be indemnified against possible miscarriage by the contractor and the parties agreed that the latter should give a bond for the due performance of the contract, in the sum of B$364,000. 4. The defendant approached the Chartered Bank and requested it to join with the firm in executing this bond in favour of the Brunei Government. The bank was agreeable, but to cover its own risks sought an indemnity from the plaintiff company to secure itself against the possible discharge of its obligation to the Brunei Government. The plaintiff company was also agreeable to this proposal but in its turn, sought to protect its own interests. It did so by securing a written undertaking from the defendant, the terms of which constitute the matter principally in dispute between the parties to this action. 5. I have put the matter in this way because, although we do not know the precise order in which the preliminary steps were taken which led to these arrangements, the order is not of importance and the manner in which I have described it would seem to be the probable sequence. It matters not. Whether events ran in this order, and whether the approaches were made in the way I have described, it is common ground that three documents were executed which are interconnected in the sense that each has reference to the payment of the same sum of B$364,000 and each looks to the due performance by the defendant of its contract with the Brunei Government for a painless defeasance of the promise contained in it. 6. Unfortunately, the contract with the Brunei Government broke down, and with it this covenantal merry-go-round resulting in the present action. The documents are, respectively : (1) the performance bond between the Brunei Government on the one hand and the Chartered Bank and the defendant firm on the other; (2) the letter of indemnity whereby the plaintiff company agreed to indemnify the Chartered Bank and (3) the undertaking to indemnify given by the defendant to the plaintiff company. 7. For convenience of identification, I will adopt the nomenclature attached to these documents in the hearing of the appeal and I shall throughout refer to them respectively as "the bond", "the indemnity", and "the undertaking". 8. These three documents were executed in the reverse order to that which might have been expected, if events had followed the outline of preliminary approaches which I have given above. Because of the course which the proceedings have taken, we are not in possession of the detailed circumstances under which these various documents came to be signed. But the history of the matter appears to be as follows. 9. The contract for the construction of the bridge was awarded to the defendant firm in August 1969. Between then and February 1970, the arrangements were made to procure a performance bond. On the 16th February, 1970, the contract was actually signed. The written undertaking given by the defendant and his co-signatories to the plaintiff company is dated 18th September, 1969; the indemnity given by the plaintiff to the Chartered Bank is dated 7th October, 1969; and the primary document in the series, the performance bond itself, was executed on the 20th February, 1970. 10. When the contract between the defendant firm and the Brunei Government went off, the Brunei Government, by letter dated 3rd October, 1972, demanded payment under the performance bond. On the 12th October, 1972, the Chartered Bank paid up that sum in full. The bank then turned to the plaintiff company for reimbursement in the like amount and was likewise paid under the written indemnity. The plaintiff company thereupon, through its solicitors, demanded payment of the same sum under the written undertaking. When payment was not forthcoming the action was commenced by writ dated the 8th September, 1975. 11. The claim is based on the foregoing circumstances and the terms of the defendant's undertaking. The defendant answers that he is not obliged to pay upon his undertaking. He claims that the failure of his contract was the fault of the Brunei Government and that his firm was in no way in default under the engineering contract. It is pleaded as part of the defence that proceedings under an arbitration clause in the contract have actually been commenced with the Brunei Government. 12. The defendant maintains that his firm has been discharged from its obligation under the performance bond by virtue of this alleged breach of contract on the part of the Brunei Government. The defendant does not admit that the Chartered Bank was under any obligation to pay the Government upon demand under the performance bond. Consequently, the defendant denies that his firm is indebted in the sum claimed to the plaintiff company. 13. The plaintiff applied to have certain questions of law and fact tried as preliminary issues in the case. This was strongly resisted, but on the 4th April, 1977 Mr. Registrar Cameron made an order for the trial of such issues in the following terms -
14. The case before Cons, J., in Chambers, was argued on the basis that there had been no default on the part of the defendant and his partners in the performance of their contract with the Brunei Government. And we are dealing with the matter upon the same understanding. That is, of course, a matter still to be decided in the Brunei proceedings. We understand that the legislative situation in Brunei may make it a difficult case to pursue. But we are not concerned with that. The task of this court is the construction of the terms of the three documents linking the defendant, the plaintiff and the Chartered Bank and, in particular, the terms of the undertaking between the plaintiff and the defendant. 15. In order to understand the issues as framed and the answers given to them by the learned judge below, it is necessary to look first to the language used by the parties in these three documents. Of the performance bond itself, all that need be said is that payment of the sum secured by it is conditioned upon default by the contractor in carrying out the terms of his contract with the Brunei Government. 16. The indemnity given to the Chartered Bank by the plaintiff company is in the following terms -
17. The undertaking by the defendants to the plaintiff company is in these terms :
18. I do not think that it over-simplifies the matter to say that the crux of the present dispute upon these preliminary issues before us is to be found in the fact that although the general words of indemnification which appear in the undertaking and in the indemnity are very similar in their reach of intendment there is absent from the undertaking any formula equivalent to that which is appears in paragraph (c) of the indemnity. It is that clause which is referred to in paragraph 8 of the amended Statement of Claim, and paragraphs 7 and 8 of the amended defence, and which forms the subject matter of the three questions posed in the third of the issues set out above. 19. The learned judge in Chambers answered the question posed by the first issue in the negative and by the second, in the affirmative. There has been no appeal from this part of his decision and we are not now concerned with any challenge to the rightness of those answers, but the reasons supporting those answers do reflect upon the remaining two issues with which we are concerned. The judge said, in effect, that the Chartered Bank had not been justified in paying B$364,000 to the Brunei Government because that payment would only be justified on default being shown on the part of the defendant firm and the matter was argued before him on the basis that there had been no such default. Secondly, however, he said that the plaintiff company was liable to pay that sum to the Chartered Bank because the terms of clause ( ...(illegible) ) in the indemnity, read together with the terms of clause (a), obliged the plaintiff company to reimburse the Chartered Bank if the latter had, in fact, paid the Brunei Government pursuant to a request made by that Government for such payment. 20. What the plaintiff claims here, as before the judge in Chambers, is that notwithstanding the absence from the undertaking between itself and the defendant of any specific provision in terms equivalent to those in clause (c) in the indemnity the obligation imposed upon it by clause (c) to pay the Bank is to be regarded as a loss or damage coming within the reach of the words in the undertaking "any loss an/or damage whatsoever which you may sustain by reason of the issue of the said indemnity of guarantee at our request." It was to meet this contention (paragraphs 8, 9 and 10 of the Statement of Claim) that the defendant pleaded (paragraphs 7 and 8 of the Defence) that clause (c) in the indemnity was an unusual term which had not been brought to its notice and which had not been within the contemplation of the parties to the undertaking. 21. In returning his answers to the three questions posed in the third issue, however, the judge held that clause (c) did not constitute an unusual term in such contracts (i.e. contracts of indemnity); but nevertheless such a term had not been within the contemplation of the parties to the undertaking. He also found that such a term had not been notified by the plaintiff to the defendant. 22. The only one of these three findings which the plaintiff company (the appellant) now seeks to dispute is the second, viz. that the term was not within the contemplation of the parties. 23. This, however, constitutes only a subsidiary point in the argument of Mr. Dicks and he regards it as subordinate to his principal contention which is directed at the finding on the fourth issue. Counsel's complaint about this finding on the third issue is that the judge, who had expressly discounted the suggestion that any term similar to clause (c) in the indemnity should be implied into the undertaking, had, nevertheless, himself subconsciously implied a term excluding from the wide ambit of the words upon which counsel relies in the undertaking, anything which may be said to be covered by clause (c). If such a term is a usual term, as the trial judge found then, counsel said, it must necessarily fall within that wide formula. This, in effect, is his argument also in relation to the fourth issue. 24. Before I turn to consider that issue, however, I think I should deal with the suggestion by Mr. Dicks that there is something in the nature of a contradiction between these two findings of the learned judge. A term may be said to be a "usual term" in the sense that it is a term which very frequently appears in contracts of a certain kind without its being the kind of term which in the absence of express words the law will imply into a contract of that description. A covenant in a lease against subletting would be an example of the kind of term I mean. Nevertheless, in making their contract the parties may not have such a term in contemplation or may even wish positively to exclude it. Where it does not appear and there is no general formula relating to the inclusion of usual terms or the like, it would I think be wrong to say that such a term, though usual, i.e. not uncommon, must be implied into the contract. 25. Again it must be remembered that in saying that this was a usual term, the learned judge was considering the terms of the indemnity between the plaintiff company and the Chartered Bank. What is usual between two experienced financial houses may not necessarily be usual between an individual or firm and any other party, even if it be a financial house. In these latter circumstances, it might be said that it would be particularly dangerous to imply such a term into any agreement between such parties. The judge, in looking at the indemnity, had every reason to say that such a term was not an unusual term since the parties in that case were both financial houses which had actually included it in their agreement. If it be right to say that a term may be usual and yet not adverted to, i.e. not intended, by parties to a contract of a kind which is familiar in the experience of both of them, then, a fortiori, it must be so where one of the parties only is familiar with such a contract. This is a point that touches upon the case law upon which Mr. Dicks relied in presenting the major submission in his appeal i.e. that relating to the fourth issue. 26. As to this issue, Mr. Litton sought a quick answer to the appeal in the manner in which the issue had been framed. He points out that it is by virtue of the terms of the indemnity between the bank and the insurance company that, as the judge found, payment by the plaintiff to the Chartered Bank was justified. His clients are in no sense parties to that arrangement and how, therefore, counsel asks, can it be said that anything in the arrangement between the Chartered Bank and the plaintiff - to which the defendant is not a party - can be said to justify the payment by the plaintiff to that Bank. His clients were wholly unwilling that these matters should be tried as preliminary issues at all. The judge himself was in some difficulty as to the meaning of this issue, but was constrained to answer it as best he could within his understanding of its intention. He took it that he was being asked whether Lombards (the plaintiff company) could recover under their undertaking to the defendant
27. He found the first question to be immaterial because he had already said that the absence of anything like clause (c) in the undertaking meant that nothing of that kind was contemplated by the parties. He said that the second question answered itself because the defendant had undertaken to indemnify against losses incurred upon the bond. 28. This latter conclusion is not so, however, because although the undertaking makes reference to the bond, what is actually undertaken by the defendant is to indemnify the plaintiff company against any loss etc. which it may sustain by reason of the issue of the indemnity. It may be that the learned judge is there casting back to his answer to the first issue and what he may be saying is that there is no claimable loss deriving from the indemnity because there has been no default under the bond. If that, or something like it, is what he meant then this is precisely what Mr. Dicks objects to since it has been the main burden of his submission that the indemnity and the undertaking (itself a form of indemnity) are, upon the many authorities which he cited, transactions of a kind which must be regarded in total isolation from the construction contract and the bond conditioned upon its due performance. 29. The manner in which this issue has been framed does undoubtedly raise some difficulty. Mr. Litton maintains that, however the judge dealt with it in answering "No", as presently framed the answer likewise must be "No". The plaintiff company, he says, has been at pains to have these issues framed and although they were framed by the Registrar the plaintiff must not be allowed, at this late stage, to re-frame them. He suggests that this is a thrust going to the very heart of the appeal and that we have in fact no jurisdiction to give any answer to issue (iv) as it presently is framed other than the answer "No". 30. For my own part, I do not think that the matter can be so readily disposed of. I think the fourth issue can be interpreted as raising the point which is primarily in contest here. What we are really being asked is whether the payment of B$364,000, which is undisputedly due from the plaintiff company to the Chartered Bank under the terms of the agreement between them, is a lose falling within the wide words in the undertaking quoted earlier. 31. This is the substance of the appeal. Mr. Dicks denies that he is implying any term into the undertaking. What he says is that the terms of the undertaking are on their own wide enough to include the substance of what is contained in clause (c) of the indemnity and much else besides. His complaint is that the judge has simply not perceived how wide and embracing those words are. 32. Mr. Litton takes his stance on Prenn v. Simmonds(1) and, in particular, upon the well-known words used by Lord Wilberforce (p.239) :-
He asks us to regard the arrangements made by the defendant with the bank and with the insurance company as a chain of interlinked obligations, the first link of which is the performance bond, itself embedded in the engineering contract. Since the undertaking opens with the recital of the fact that it is related to the obligation assumed by the Chartered Bank in respect of the performance bond, he would have us say that as a matter of common-sense Lombard Insurance Company and the defendants must have had regard to the terms of that bond. There is annexed to the engineering contract a specimen bond in terms identical with that which was eventually executed. Although the bond was not executed until long after the undertaking had been given, and although the engineering contract was not signed until several months later still, it is common ground that the contract, in the form in which it is before us, was in existence in 1969 and that the defendant and his firm were aware of its contents, and presumably aware of the nature of the bond which would be required of them. 33. Thus far there is no difficulty. If there were evidence to show that in discussing the undertaking the insurance company and the defendant had before them the terms of the contract with the bond annexed, then the reference to the bond in the undertaking would make it clear that both parties had in mind that their mutual obligations were predicated upon a guarantee to the Brunei Government which would only be come enforceable upon default by the contractor. It may well be that there is such evidence, but if there is we know nothing of it. We cannot presume that the plaintiff company inspected the bond or that the bond was discussed or referred to in any way. 34. On the other hand, less than three weeks later we have the plaintiff company issuing its indemnity to the bank and that document is headed with a specific reference to the performance bond for B$364,000, although the number of that document is left blank. The bond is there referred to as "Letter of Guarantee" but it is common ground that that is a reference to the performance bond. The indemnity then commences with the words "In consideration of your issuing, at our request, the above-mentioned letter of guarantee, we hereby undertake and agree etc." It seems very unlikely that the plaintiff company had not by then seem and considered the bond so that it must by then have been aware that it was conditioned to payment upon default by the contractor. If we now examine the two principal documents with which we are concerned, a point which is, I think, of great significance emerges. In the indemnity given by the insurance company to the bank, immediately following upon the words which I have just now quoted, the first part of the agreement is an undertaking in the following terms :-
35. If this is compared with the opening words of the undertaking given by the defendant to the insurance company, it will be seen that language of a very similar compass is employed. Thus, excluding unnecessary words, what the defendant undertakes to do is described as follows:
36. In other words, whatever the plaintiff company thought it was securing to itself by the language used in the undertaking from the defendants given on the 18th September, by its own document of the 7th October, when it came to secure itself in respect of its indemnity to the bank, it was apparently of the view that the wide words used in the undertaking given three weeks earlier would not be sufficient to secure to the bank a recourse to that indemnity upon a showing merely that the Brunei Government had requested payment under the bond and in the absence of any showing of default on the part of the contractor. Hence, the inclusion of the provision in the specific terms of clause (c) in the indemnity. We thus have one of the parties (the defendant) to the undertaking of the 18th September consenting to the use of a formula which it is most unlikely that he regarded as intended to impose liability upon him in anything other than a situation of default under the engineering contract and the other party to that agreement (the plaintiff company) showing by a careful choice of language in its own indemnity on the 7th October, that it likewise regarded that formula as insufficient to cover a situation of payment on demand. In these circumstances and notwithstanding the want of evidence to which I have alluded, I think Mr. Litton was justified in resorting to the concept of the matrix of circumstances. It is conceded that, wide though they are, the words of the undertaking could not support a claim by the insurance company for any conceivable sort of damage that might result to it as a result of its issue of an indemnity to the bank. If, for example, the undertaking in the indemnity given to the bank were to be fraudulently activated by some officer of the bank for his own purposes, and the cash paid over by the insurance company on the false allegation that a request had been made by the Brunei Government, such a loss would clearly not be recoverable from the defendant firm under its undertaking. But even that exception, and there might be others of a different kind, would require the importation into the words of the defendant's undertaking of something which does not appear in it. The words "any loss ...... which you may sustain by reason of etc. ...." would have to be read as meaning: "any loss .... which you may sustain by reason of any legitimate demand for payment arising out of the issue of the said indemnity ....." or something of that kind. 37. If it were not for the existence of clause (c) in the indemnity the bank could not claim to be covered against its loss in paying promptly upon the demand of the Brunei Government without the consent of the contractor, the other party to the performance bond. It is no doubt because the parties to the indemnity percieved that the wide words of the indemnification in paragraph (a) would in their natural interpretation insure indemnity to the bank only in respect of payments legitimately exacted from it by the Brunei Government under the bond, i.e. payments demanded because of default in the contract, that it was thought necessary to insert provision (c). 38. Even though it may not have been aware of the exact terms of the contract and the bond annexed to it on the 18th September, when taking the undertaking from the defendant firm, the plaintiff company can scarcely have been unaware that what was being discussed was a chain of obligations stemming from an engineering contract, the due performance of which was to be guaranteed by the contractor in a manner satisfactory to the Brunei Government. It would, in other words, be plain to the insurance company that the firm of contractors was hoping to secure itself against the results of its own default. 39. In those circumstances, it is only realistic to assume that both parties regarded the opening words of the undertaking "In consideration of your indemnifying the Chartered Bank, Brunei, who are issuing a performance bond/obtaining Lee Wah Bank Ltd., Letter of Guarantee on behalf of etc." as meaning "In consideration of your indemnifying the Chartered Bank, Brunei, against any demand legitimately made under a performance bond which the said bank is issuing etc." That, I think, must have been the understanding of the parties on the 18th September. It was therefore incumbent upon the insurance company if it wished to avoid difficulty, to make it clear by the inclusion in the undertaking of some such formula as is contained in clause (c) of the indemnity that neither itself nor the bank were to be concerned with the legitimacy of any claim which might be made by the Brunei Government under the bond. 40. I conclude therefore with the learned judge in chambers that when the insurance company and the defendant firm settled upon the form of words employed in the undertaking it was within the contemplation of neither party that the defendant firm was agreeing to accept a liability as absolute as that undertaken by the insurance company when it entered into the agreement with the bank three weeks later. 41. For these reasons I do not think that the several cases upon which Mr. Dicks relied support the interpretation of these documents which he has sought to give to them. 42. There was firstly Gooch v. Clutterbuck(2). In that case the plaintiff Gooch was the reversioner under a lease for a long term. The lease contained a covenant to keep the premises in repair. A notice to carry out repairs was directed to the defendant who with another person was the executor of the then latest assignee of the premises. On the same date the defendants entered into an agreement for the sale of the residue of the term to another person. This person, Davis, was then joined as a third party in the action. The assignment to the third party included a clause obliging him to observe that covenant and to keep the vendor indemnified in respect of it. The third party had taken the assignment in the knowledge that the defendant had not performed his duty under the covenant. In the action for breach of covenant judgment was given for the plaintiff against the defendant and the court ordered that the defendant should recover from the third party the amount of the damages found to be due. That order was upheld upon appeal. As I understand it the case was cited to show how wide words, provided they are clear, will be implemented by the court. A similar point is made upon the decision in Wright v. Tyne Improvement Commissioners and Another(3). Well and good, but neither case involved a consideration of any circumstances affecting the parties which might require the court to impose a limitation upon the width of the language used. In Gooch the third party knew the terms of the covenant when he took the assignment and he knew that the defendants were in default under it. In Wright v. Tyne although the indemnor was without any blame for the accident which had occurred the terms of his undertaking could not be construed otherwise than as fixing him with the obligation to pay up for the other defendant's negligence. 43. Mr. Dicks then referred the court to four very recent cases for the purpose of establishing that in modern commercial practice guarantees of the type of this performance bond are assimilated to confirmed letters of credit so that any financial house which is called in by the parties to a contract to underwrite the obligations of one of the parties in this way is not obliged to enquire into the terms of the contract and is not concerned with any dispute as to liability between the contracting parties but is concerned only with the terms of his guarantee. This segregation of the performance bond from the engineering or other contract would apply, Mr. Dicks says, a fortiori to the indemnities in the present case each of them standing at one remove further still from the engineering contract itself. Striking examples of the operation of this principle can be found in R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank and Others(4); Edward Owen Engineering Ltd. v. Barclays Bank International Ltd. and Another(5); Howe Richardson Scale Co. v. Polimex-Cekop(6); and Wood Hall v. Pipeline Authority(7). I do not find it necessary to refer to those cases in detail. In each case a bank or banks had given guarantees in the form of performance bonds to secure the discharge of contractual obligations. A good example of the operation of this principle at its clearest is to be found in Edward Owen Engineering Ltd. where the plaintiffs who were not in default under their contract with customers in Libya endeavoured to get injunctions preventing the guaranteeing bank from paying the sums payable under the guarantee on receiving a demand by the buyers, the potential defendants, who were themselves in default under the contract. The injunctions were refused and the order of the judge at first instance was upheld upon appeal. The Court of Appeal held that a performance bond stood upon a similar footing to a letter of credit and that a bank giving such a guarantee must honour it according to its terms unless it had notice of clear fraud. 44. There is however a cardinal distinction to be drawn between the present case and these four decisions of the English and Australian appeal courts and it is this: in every one of those cases the instrument which was the object of an attempt to restrain payment - in each case it was the performance bond and not an associated indemnity - contained a clause providing for payment by the bank upon demand. In each case it was held that such bonds must be honoured by the bank without reference to any dispute between the parties to the contract as to whether the demand upon the bank had been justified. As Denning M.R. put it in Edward Owen Ltd. (p.170):
45. In all but one of these cases (Wood Hall v. Pipeline Authority) there were counter indemnities associated with the performance bond. These were not the documents primarily in issue and the courts in these cases were not considering the rights or liabilities of the parties under any such indemnity. Had they been obliged to do so it is difficult to see how the parties giving the indemnities could have repudiated liability under them, for, in each case, the indemnity, or counter indemnity, provides that payment by the bank under the bond will be conclusive evidence of the bank's liability to pay. In the absence of any such explicit provision in the undertaking between the plaintiff company and the defendant firm I find that the latter is not obliged to honour its undertaking at any rate until the question of its obligation under the engineering contract has been resolved. 46. I would, therefore, dismiss this appeal.
Representation: A. Dicks (Deacons) for appellant. H. Litton, Q.C. and K.H. Woo (C.P. Lai & Co.) for respondent. (1) 1971 3 All E.R. 237 (2) (1899) 2 Q.B.D. 148 (3) (1968) 1 W.L.R. 336 (4) (1978) 1 Q.B. 147 (5) (1978) 1 Q.B. 159 (6) (1978) 1 Lloyd's Rep. 161 (7) (1979) 24 Australian Law Reports 385
----------------- Coram: McMullin & Li, JJ.A. and O'Connor, J. Date of Judgment: 29 May 1980 ----------------- JUDGMENT ----------------- O'Connor, J.: 100. I agree. The from in which the undertaking was given came from the plaintiff. Mr. Dicks says it is reasonable to assume that the intention of the defendant in giving the undertaking, was to assume the burden of indemnifying the plaintiff in respect of any common form of indemnity that the plaintiff had to give the Bank in order to persuade the Bank to put up the bond, and that what the Bank required was an indemnity containing clause (c). The judge found clause (c) to be 'not an unusual term' and therefore, it is said, it is within the common form of indemnity which the defendant must have foreseen. However in my view the undertaking does not disclose any intention that the liability of the defendant will be enlarged beyond what may arise under the bond. I consider the undertaking to envisage back to back indemnities. 100. For the plaintiff it is said that the terms of the undertaking are wide enough to cover, and do cover the indemnity containing clause (c) given by the plaintiff to the Bank. It is said that the reference to the performance bond in the opening words of the undertaking is for the purposes of identification only, and is not to be used for the purpose of construing the extent of the liability that may arise on the undertaking. I do not agree. The scope of the undertaking is defined by the words "indemnify you against any loss and/or damage whatsoever which you may sustain by reason of the issue of the said Indemnity of Guarantee at our request." The 'said Indemnity of Guarantee' referred to is, by the opening words of the undertaking, an indemnity to be issued by the plaintiff to the Bank in respect of the performance bond to be issued by the Bank. In my opinion the basis of the undertaking is to provide cover for an indemnity which is to provide cover for the bond. Construing the undertaking with reference to its objects and all its terms, it does not anticipate either the undertaking or the indemnity providing any greater cover than is required by the bond. I do not consider the terms of the undertaking gave a mandate to the plaintiff to enter into an indemnity on more onerous terms than those in the bond. That the plaintiff chose to do so, without further reference to the defendant, is a matter which enlarges the scope of the plaintiff's liability, but not that of the defendant. 100. I do not consider anything turns on the sequence in which the documents were signed. The primary document is the bond and its terms would appear to have been available before the parties were required to consider the remainder of the chain of indemnities. If it were not available, the plaintiff ought to have taken care not to give an indemnity in terms more onerous than that of the undertaking. In other words the plaintiff ought to have been cautious not to leave itself open to a greater liability than it was covered for in the undertaking.
Representation: A. Dicks (Deacons) for appellant. H. Litton, Q.C. and K.H. Woo (C.P. Lai & Co.) for respondent. |