Chan Lam-chun v. The National Insurance Co Ltd
Read the full judgment text of CACV 57/1976 on BabelCite. This Court of Appeal judgment.
1. The plaintiff was seriously injured in an accident on June 30th, 1970. At the time she was a passenger in a car which was being driven by Lam shui Keung. The car was owned by Chan Ying and was insured with the defendants. The policy covered third parties which by an express term in the policy covered a passenger in the car.
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CACV000057/1976
Coram: Briggs, C.J., Huggins, J.A. and Leonard, J. Date of Judgment: 26th July, 1977. ----------------- JUDGMENT ----------------- 1. The plaintiff was seriously injured in an accident on June 30th, 1970. At the time she was a passenger in a car which was being driven by Lam shui Keung. The car was owned by Chan Ying and was insured with the defendants. The policy covered third parties which by an express term in the policy covered a passenger in the car. 2. The plaintiff brought an action for damages against Chan Ying and Lam Shui Keung, the owner and driver of the car respectively. On April 30th, 1973 she was awarded $164,760 damages with interest at 8% and costs. On September 17th, 1974 Receiving Orders in bankruptcy proceedings were made against the owner and driver of the car, leaving the plaintiff with an empty judgment. 3. The plaintiff brought this action against the defendants as the insurers of the car in which she was travelling at the time of the accident. It is brought under the provisions of section 2 of the Third Parties (Rights Against Insurers) Ordinance (Cap. 273). Judgment was given against her in the High Court and against that judgment she now appeals. 4. The defendants' case is that both the owner, Chan Ying, and the driver, Lam Shui Keung, were in breach of the conditions of the insurance policy and that therefore the defendants are not liable under the policy. 5. The two relevant conditions read as follows:-
6. What happened was this. As I have said the accident occurred on June 30th, 1970. On February 6th, 1971 the plaintiff solicitors wrote to the defendants claiming damages for the injuries suffered by the plaintiff and suggesting that her claim could be settled by negotiations. 7. On February 10th, 1971, the defendants, through their solicitors, sent the following letter to the driver by registered post, a copy was sent to the owner:-
There was no reply from either the owner or the driver, so the defendants, again through their solicitors, sent two further letters to the owner, Chan Ying. These letters were sent by ordinary post. They were not registered. They were dated 8th and 20th March, 1971. Copies were not sent to the driver. In these two letters Chan Ying, the owner, is requested to attend at the office of the solicitors for the defendants along with the driver. The letter of March 20th gives the owner three days in which to attend and the last sentence reads as follows:-
8. Neither the owner nor the driver answered these letters and no conference or interview was held with either the owner or the driver. No explanation has been given why Chan Ying did not comply with the request contained in the letters. At a much later date the driver stated that he could not understand English and when he received "some letters" he did not know what to do because there was no one to explain their contents to him. 9. The defendants' case is that this conduct on the part of the owner and driver is in breach of the conditions I have quoted earlier in this judgment. 10. Nothing was heard from the owner or the driver. The writ was issued on November 26th, 1971. An order was made for substituted service on the owner and driver. The defendants, the National Insurance Company, exercised their right "to take over and conduct in the name of the Insured the defence ..... of any claim" under the policy. And they filed a defence in answer to the statement of claim relying upon various statements made by the owner, the driver and another passenger which had been supplied to the police. At a later date, in or about the month of August 1972, the defendants enlisted the services of a private detective agency in order to trace the two men but without success. 11. On February 14th, 1973 during the trial of the action the driver, Lam Shui Keung, appeared in court in answer to a subpeona and he actually gave evidence in his own defence. His explanation why he had not appeared at the defendant solicitors' office in answer to their letter was not very convincing. He said that he or his wife had received "letters" but he does not read English and there was no one there to explain the contents. 12. The first question to ask is: Did the defendants make a reasonable request to the owner and driver? The request was that both should give their version of the accident to the defendant solicitors at their office. The owner was, of course, not at the scene when the accident occurred but his presence at the office might well be required and, indeed, reasonably required, because the question of liability under the policy might have depended upon the relationship in law of the driver to the owner. The original letter of the defendants dated February 10th, which is quoted above, is vaguely worded. It was written in English, as were the other two letters to the owner. No reminder was sent to the driver. The defendants had elected to undertake the conduct of the proceedings against the owner and driver and in my view once that election had been made it was their duty to do all that was in their power to conduct those proceedings properly. They had the addresses of the owner and driver and merely to send at most three letters to the owner's address and one to that of the driver is not enough. It does not appear to me that the defendants made a real attempt to seek out the owner and driver. The last letter to the owner was despatched on March 30th, 1971. They did not seek the assistance of the private detective agency until August 18th, 1972 well over a year later. In the circumstances, I consider that the defendants did not act reasonably. It is not enough in my opinion to send one letter to an owner asking for an interview. The owner should have been sought for at the earliest possible date. And if the mountain refused to go to Mohamed, Mohamed should have gone to the mountain. As to the driver, the position is different. In my view, any letter addressed to him should have been in Chinese and he should also have been contacted in person. It would appear from the evidence that this would not have been difficult for when Lam Shui Keung was eventually summoned, he was still at the address to which the single letter, the letter of February 10th, 1971 was sent. I think, therefore, that the defendants acted unreasonably in that they did not make a proper attempt to contact the owner and driver who were maintaining silence, conduct of course which cannot be condoned in any event. 13. It follows that in my view the judge was wrong when he found that the owner and driver were in breach of the conditions of the policy. 14. In their possession, the defendants had at least one statement made by the driver as to the cause of the accident. He said, in effect, that the accident occurred because being a Kowloon man he was unfamiliar with the road. It seems to me that this statement was a clear indication that the driver was to blame. It may well be that it was thought that liability should be admitted, and the action be fought on the issue of damages only. There is nothing to this effect in the papers before the court but that might explain why the defendants pursued such a half-hearted course. 15. Mr. Litton's second point was that even if the owner and driver were in breach of the conditions of the policy the plaintiff must succeed because the defendants had waived that breach by their conduct in defending the action on behalf of the insured. 16. Before receiving the request from the solicitors for the plaintiff to consider the settlement of the plaintiff's claim, the defendants paid a garage for repairing the damage to the car caused by the accident. This was in October 1970. 17. After the writ had been issued in November 1971 the defendant solicitors communicated with the police and were supplied with a statement of the driver and the names of the witnesses and a report of the inspection of the vehicle. The defendant solicitors entered an appearance for the owner and driver and on April 12th, 1972 filed a defence. 18. The case came before a judge in Chambers and an order was made to amend the defence on November 15th, 1972. An order was made for costs to be paid by the defendants, i.e. the owner and the driver. 19. The action was set down for trial on February 14th, 1973. But two days earlier counsel applied to a judge in Chambers on behalf of the solicitors for the defendants to withdraw from the action as they had received no instructions. The matter was adjourned until February 14th and an order was made for the costs of the adjournment to be paid by the defendants i.e. the owner and driver. The reason for the adjournment was so that the solicitors could summons the owner and driver. 20. The matter then came before the judge in open court. Counsel for the defendants applied for an adjournment which was refused. He was then permitted to withdraw. The case then proceeded and various witnesses were called by the plaintiff. There was no cross-examination of those witnesses of course. 21. At 2.30 p.m. on the same afternoon, the solicitors for the defendants and the first defendant, the driver, appeared before the judge in Chambers. It appeared that on the previous occasion when Mr. Chang, counsel for the defendants, was allowed to withdraw from the case only "the order" had been served on the driver. But since then the driver had been properly served with a summons which he had answered. The judge saw the solicitors for the defendants and the driver in Chambers and it was explained to the driver that this was an application by the solicitors to withdraw. As I have said above, the driver gave his explanation why he had not answered the letter of the defendants. This was at a time when the judge had heard no less than seven witnesses for the plaintiff. 22. The driver made it perfectly clear that he wished to be represented by the lawyer of the insurance company. However, the solicitor was given leave to withdraw, which he did. The driver also applied for an adjournment to enable him to apply for legal aid. This was refused. 23. It will be noted that the defendants gave as the reason for withdrawal the lack of instructions. This was in February 1973. Nothing new had occurred since the expiry of the period of three days mentioned in the third letter of March 20th, 1971. This is what is relied upon, the failure to communicate and that must have crystallized sometime in March 1971. 24. The defendants asserted their right to take over and conduct the proceedings for the owner and driver. And they asserted those rights under the terms of the policy: they filed a memorandum of appearance and a defence. But they went much further than that for they asserted their rights under the policy in such a way that it was to the detriment of the owner and driver. On two occasions, the court made an order against the owner and driver to pay costs: once when the defence was amended and once when an adjournment was sought. 25. On February 10th, 1973, the defendants wrote a letter to the owner telling him that the court would be asked to allow the defendants to withdraw. I do not think that this letter helps the defendants, it was sent to an address which they had very good reason to know that the owner had long left. And there is no evidence that he received it. 26. When the defendants had asserted their rights under the policy to conduct proceedings on the owner and driver's behalf and asserted them as fully as they did in this case, it is clear to me that they have waived any supposed breach of conditions which the owner and driver may have committed. And I do not think it was a proper exercise of the discretion of the judge to allow the solicitors for the defendants to withdraw at such a very late stage for the reason given. 27. It follows therefore that I would allow the appeal, set aside the judgment of the court below and enter judgment for the plaintiff with costs here and below. I agree that our order should be in the terms proposed by Leonard, J. in his judgment.
Representation: Litton, Q.C. & M. Asome (D.L.A.) for appellant. Ching, Q.C. & Bokhary J.S.M. for respondent.
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----------------- Coram: Briggs, C.J., Huggins, J.A. and Leonard, J. Date of Judgment: 26th July 1977. ----------------- JUDGMENT ----------------- Huggins, J.A.: The driver and the owner having both been adjudicated bankrupt the Plaintiff sued the insurers of the motor-car under s.2 of the Third Parties (Rights against Insurers) Ordinance, which applies to any contract of insurance under which a person is insured against liabilities to third parties and not merely to such contracts as are compulsory under the Motor Vehicles Insurance (Third Party Risks) Ordinance. Cons, J. dismissed her claim on the ground that neither the driver nor the owner could have claimed successfully against the insurers and the Plaintiff appeals against that decision. 2. The Plaintiff was a passenger in the Owner's motor-car and the accident occurred in 1970. There was therefore no question of compulsory insurance against the risk of damage to the Plaintiff. Nevertheless it was argued that the court would be slow to interpret the policy and the facts so as to deprive the Plaintiff of her remedy. I do not accept that. The case raises a question of law and sympathy for the Plaintiff does not enter into the picture. She has suffered grievous damage but, if we reverse the decision of the judge, the Insurers will suffer an equally grievous loss in so far as the Plaintiff's loss can be assessed in terms of money. The Insurers are as much deserving of our sympathy as the Plaintiff, who personally has no contractual rights against them. It is true that if she fails to recover it will be through no fault of hers, but if she succeeds in recovering it will be through no merit of hers. Her statutory interest is irrelevant to the construction of the policy. 3. I shall now attempt to consider the matter coldly and dispassionately. The owner was the only person to enter into a contractual relationship with the Insurers. It is a fact of history that motor insurances are taken out not for drivers but for vehicles. The Owner insured his private motor-car No. AR 9061. The policy contained limitations both as to use and as to the persons whose driving was covered. When, therefore, an accident occurred it was material for the Insurers to obtain information of three kinds, (1) as to the qualification of the Driver to drive (a) private motor-vehicles generally and (b) the Owner's vehicle; (2) as to the use being made of the vehicle at the time; and (3) as to the reasons for, and circumstances of, the accident. The persons from whom they could most conveniently obtain such information were the Owner and the Driver. Unless the Driver was committing a criminal offence the Owner ought to have been able to give information of types (1) and (2) but as he was not present he was unable to give information of type (3) otherwise than in the form of a report from someone who was present. However, a driver who is not in the owner's employment may be uncooperative. Whether or not it is with this in mind, insurers commonly agree not only to indemnify the owner but also to indemnify the driver, provided that he observes specified conditions, one of which is to give information and assistance. Thus in the present case Condition 2 of the indemnity given to the Owner and to the Driver provided that each.
The fulfilment of that and the other conditions was expressed to be a condition precedent to any liability of the company to make any payment under the policy. It is breaches of that condition precedent by both the Owner and the Driver (to whom I shall hereinafter refer jointly as "the Insured") which the Insurers allege as excusing them from meeting the Plaintiff's claim. 4. After some considerable delay, of which the Insurers do not complain, the Owner submitted a Motor Accident Advice Form in which he gave all the information for which the form asked. I am prepared to assume that it contained all the information he was then able to give about the accident itself. Clearly it did not give all the information which the Insurers would require although, again, I will assume that the Owner was unaware of that fact. 5. The next stage arrived when on 10th February 1971 the solicitors for the Insurers wrote to the Driver by registered post the letter the full terms of which have been set out by the Chief Justice. A copy of that letter was sent, also by registered post, to the Owner. Three and a half weeks later the solicitors wrote to the Owner to ask him to attend with the Driver to give "your and your driver's version leading into the circumstances of the accident", that being "very essential" as a third party claim had been lodged against both the Insured by a passenger. The letter ended
Twelve days later a reminder was sent in these terms:
Neither the Owner nor the Driver attended at the solicitors' office. Neither so much as acknowledged receipt of the letters sent to him. There has been some discussion whether these three letters were received by the addressees. As to that the learned judge said:
He also said that the addressees "ignored" the letters, which implies that they were aware of them. The Driver did eventually appear half way through the trial and in his evidence he admitted receipt of the letter sent to him, though he maintains that he did not know what it said. In my view it was open to the judge to find, as he did, that the letters were received. 6. The basis of the Driver's contention that he did not know what the letter to him said is that he does not know the English language. English is not only an official language in this Colony: it is the language of the law. Anyone who receives a letter in an official language (other, possibly, than a printed or duplicated letter which may reasonably be assumed to be an advertisement of some kind) and who fails to ascertain the contents does so at his peril. No doubt it is an inconvenience if one has to find a person able and willing to translate a document written in a foreign language, but that has been an unavoidable necessity since the building of the Tower of Babel (Genesis 11.9). It applies equally in a case where the document is in the recipient's native language but where, as he is illiterate, he cannot read it. 7. It is argued on behalf of the Plaintiff that the Insured were under no obligation to attend the solicitors' office and that as the owner had given all the information asked for by the Motor Accident Advice Form they were not in breach of Condition 2. I fully accept that the burden is on the Insurers to show that there were breaches which absolved them from liability (Bond Air Services Ltd. v Hill 1955 2 Q.B. 417), but in my view that burden can be discharged by showing a failure to comply with a request which, when reasonably interpreted, conveys notice of the desire of the Insurers to have information and assistance. The three letters are not to be construed like statutes. No doubt they could have been better drafted, but that is neither here nor there: they were obviously not written by a person whose native tongue was English and I see no reason to conclude that the form of the letters was made deliberately less frank in the hope that it would lead to a breach of condition on which the Insurers might later rely. In my view they indicated with reasonable clarity that the Insurers required from both the Insured information and assistance. The precise nature of the information and assistance could have been spelled out in detail, but failure to do that does not alter the fact that the Insured were told that information and assistance were required. Nor can it be fairly said that the Insurers had already received all the information they required so that their request was not made bona fide: the information required by the Motor Accident Advice Form did not reveal whether the Driver was a "qualified" driver or whether the use being made of the vehicle was within the terms of the policy, nor was it unreasonable that the solicitors should wish to see the Insured to enable them to decide both as to their reliability and as to the impression they would be likely to make as witnesses if called. It is said that this is to conjecture at the nature of the information and assistance required. Even if it is (and I think it is rather more than a conjecture) I do not see that that is material: the Insurers were not bound to give particulars at that stage. Nor is it a fair inference from the terms of the two letters addressed to the owner that the only assistance required of him was that he should act as a bailiff to procure the attendance of the Driver. 8. Much has been made of the fact that no subpoena was taken out to compel the attendance of the Owner at the trial, but there was no issue upon which he could give material evidence. It does not necessarily follow that he had been unable to give information or assistance which would have been material to the decision of the Insurers whether they would exercise their right to take over and conduct the defence of the action in the name of the Insured. 9. Failure to attend at the solicitors' office would not of itself necessarily be a breach of Condition 2, provided that the Insured were prepared to suggest reasonable alternative arrangements. That they did not do. They did absolutely nothing. The question is not whether the Insurers ought to have done more to ensure that they obtained what they had already asked for but whether the Insured failed to give what had been asked for: if there was a breach of condition it does not lie in the mouth of the Insured to say that they might have done what they had been asked to do if they had been pressed harder. Nor would it be sufficient answer that they might not have appreciated the consequences of their failure to give the information and assistance sought, although in my view it was made plain to the Owner in the third letter what the consequences might be. 10. It has been sought to justify the attitude of the Insured on the basis that there was a clear possibility of a conflict of interest between them and the Insurers. There may in theory be such a possibility in that the Insurers might have wished to admit liability when the insured did not. Fundamentally, however, there was no conflict and the possibility of conflict does not justify a breach of condition by the Insured. 11. It was also argued in the court below - and the point, although not pressed, was not abandoned before us - that no duty arose to give information or assistance until a claim had been lodged. The trial judge accepted that contention but decided that the claim need not be "a claim by way of formal process" and that a claim had been made before the information and assistance were sought. I think his conclusion was right but would go further and hold that upon the true construction of the policy a request made before the receipt of a claim could, if not complied with, be the basis of a breach of condition if a claim were eventually made. Of course, if no claim were subsequently made, no question of indemnity would arise and the failure on the part of the Insured would have no effect upon the rights under the policy. 12. There remains the issue of waiver, which, though raised by the Appellant's Reply, was not mentioned by the learned judge in his judgment. In the notes of proceedings appears the following entry:
Counsel for the Appellant apparently made no protest, although I do not think there can be any real doubt but that Mr. Bokhary was saying that he had been told waiver was no longer relied upon. So far as I am able to read the appalling copies of the closing pages of the notes of proceedings, counsel for the Appellant did not address the judge on the issue of waiver and the judge also must have assumed that the point raised by the Reply had been abandoned: that would account for our not having the advantage of his views upon the issue. We have been told that what in fact was abandoned was only the second of the three matters which had been pleaded as constituting a waiver and I understand that to be the basis on which the 12th additional ground of appeal has been argued. No objection has been taken to our hearing this argument, but for my part I think it is most unsatisfactory that the point should be resurrected at this stage, the more so since, in the event, it is the only point upon which the Appellant will succeed. The 12th additional ground reads:
The material part of paragraph (b) reads:
As to (i) there was an obvious failure to distinguish between the Insurers and the solicitors whom they instructed to represent the Insured. What happened was that on the first day of the trial the Insurers sought to abandon the conduct of the defence, their solicitors then applying for leave to have their name removed from the record. Because that application was not in proper form it was adjourned and the trial appears also to have been adjourned with costs against the Defendants. I am not sure that the two separate matters received the separate consideration which they deserved, but the Defendants' complete lack of interest in the proceedings up to that time would make it difficult for them to complain that the costs of the adjournment could have been avoided and the trial have been started at once. Had they been present and been able to show that they had not been in default, then, when the solicitors applied to withdraw, the learned judge would if asked probably have granted an adjournment for them to apply for legal aid. They were not personally present and they had not cooperated and it was largely by reason of their default that the Insurers withdrew their solicitors' instructions. How did the matter appear to the judge? His notes indicate that Mr. Denis Chang appeared for the Defendants, but we are told that Mr. Chang's instructions were to appear only for the solicitors on their application to withdraw and not for the Defendants in the action. There does appear a note that Mr. Chang said:
and he did subsequently submit that
The second of these submissions was hardly any concern of counsel appearing only for the solicitors and it may well have misled the judge as to Mr. Chang's authority. Again, the notes of the adjourned hearing on 14th February 1973 indicate Mr. Chang as having appeared to represent both Defendants, but we are told that this was wrong. Clearly the judge did not appreciate the true position. But even assuming that the judge did treat Mr. Chang as counsel for the Defendants and thought that he was asking for an adjournment in that capacity, and even assuming that that had been the true position, would this mean that the Insurers were waiving their right to rely upon the breaches of condition? It is said that if they intended to repudiate liability they were wrong to continue in the conduct of the action and that, putting it in another way, by continuing with the conduct of the action they deprived themselves of their right to repudiate liability under the policy. In the case of the Driver it is said that clearly he never had any defence and that it was wrong to attempt to fight the issue of liability in the action in his name. I do not think it was clear, although the suggestions that a burst tyre or a stray dog had caused the accident may not have offered great promise as defences. These were stories which called for investigation and a denial of negligence was proper until the stories had been falsified, although it was wrong to make a positive allegation in relation to the burst tyre without evidence to support it. If, because of the failure of the Driver to assist the Insurers' solicitors, the only opportunity to test these stories was going to be at the trial, the Insurers were entitled to take the matter to trial upon a denial if they wished. They can perhaps be criticised for withdrawing form the conduct of the proceedings at a point when embarrassment was bound to result, but that does not affect their rights under the policy. Mr. Ching (who appears for the Insurers before us) contends that even if the Insurers had conducted the action right through to judgment they could still have repudiated liability on the basis of the prior breaches of condition. He relies upon the following statement of principle in the judgment of Lord Denning, M.R. in Barrett Brothers (Taxi) Ltd. v Davies 1966 1 W.L.R. 1334 at p.1339F:
That was a case where the insured failed to send to the insurers a notice of intended prosecution and a summons both of which had been duly served upon him. However, the police had themselves written to the insurers and given them notice of the date on which the summons would be heard. On receiving that letter the insurers wrote to their insured and demanded an explanation of his failure to comply with the condition of his policy concerning the forwarding of any notice of intended prosecution. On appeal it was held (1) by a majority, that the insured was absolved from his failure to forward the documents because the insurers had obtained from the police reliable notice of the date of hearing of the summons and because the law would not compel a person to do that which was useless and unnecessary; and (2) that by writing to their insured to demand an explanation of his failure to forward the documents and by not then expressly asking for the documents the insurers had led the insured to believe that the documents were no longer required. That is a very different case from the present. Mr. Ching says that there has been no evidence that the Owner or the Driver was led to believe that the Insurers would not insist on their strict rights under the policy or that they have acted upon such belief. I think he is right. What, in effect, is suggested is that by conducting the defence in the name of the Insured the Insurers led the Insured to believe that any claim made under the policy would be met. I am not persuaded that the Insured had any such belief. On the contrary the Owner had been given an express warning that if he did not assist the Insurers' solicitors he might have to pay any damages himself. There is not even evidence that the Insured were aware prior to the hearing of the action that the Insurers had instructed solicitors to conduct the proceedings. The solicitors' refusal to receive instructions direct from the Driver when he did eventually appear on the scene (paragraph (b)(iii) of the Reply) cannot, in my judgment, possibly amount to a waiver. Whether or not it was right for the judge to allow the solicitors to withdraw from representing the Insured at the stage when the application was made is a matter which it is unnecessary for us to decide. The solicitors had a dual responsibility - a responsibility to the Insurers who had instructed them and a responsibility to the Insured, as whose solicitors they appeared on the record. These were not necessarily conterminous. The principal responsibility was that to the Insured and to the court and if the solicitors desired to escape from it they certainly ought to have applied earlier, but that does not affect the rights of the Insured (and consequently the rights of the Plaintiff) against the Insurers. 13. I have the deepest sympathy with the Plaintiff in her predicament but she can only succeed by stopping into the shoes of the Owner or of the Driver and I agree with the judge that they have left no shoes for her to step into. Under the legislation brought into force since this accident she would clearly have been entitled to recover. However, I think Cons, J. came to the right conclusion and I would dismiss the appeal. 26th July 1977. Representation:
----------------- Coram: Briggs, C.J., Huggins, J.A. and Leonard, J. Date of Judgment: ----------------- JUDGMENT ----------------- Leonard, J.: In considering whether or not the driver and the owner have both been guilty of breach of conditions (1) and (9) in the policy, it is, I consider, most favourable for the respondents if I do so on the basis that the respondents assumed that the driver was qualified, had permission to drive the insured's vehicle and that the use which was being made of it was a use covered by the policy. Had the respondent reason to suspect otherwise I doubt if the letters set out in the judgment of the Chief Justice would have been sufficiently clear to constitute an adequate requirement to give information and assistance. They should have been more specific. Although the owner and driver would have been guilty of a breach of other obligations imposed by the policy if such suspicions were well founded I should doubt the adequacy of the requirement. I do however consider it adequate on the assumption that the essential question at issue was how best to settle or defend the claim and that the liability of the respondent to indemnify the owner and driver was not then in question. The respondent in writing the letters set out in the judgment of the learned Chief Justice almost certainly did so on the basis of such an assumption. The letters themselves do not suggest, otherwise, On this basis the action of the driver and owner in ignoring them appears to me to have been quite unreasonable and to have amounted to a failure to give such information and assistance as the respondents should require so that both the owner and the driver were in breach of the policy. 2. This breach occurred in March 1971. It was not until the 26th November, 1971 that the writ was issued. Doubtless, in the meantime, the solicitors for the appellant had been in touch with the solicitors for the respondents. I say this because the solicitors for the appellant were unable to effect personal service on the owner and driver and had to obtain an order for substituted service. The order for substituted service was made on the 20th January 1972 and on the 26th January 1972 the solicitors for the respondents were active for on that date they received from the Traffic Police a report concerning the condition of the vehicle involved and a copy of the statement made by the driver shortly after the accident. On the 21st March 1972 they obtained from the Traffic Department a copy of a statement made by an eye-witness to the accident which attributed the blame for it to the driver by ready inference. On the 25th March 1972 the solicitors for the insurance company entered an appearance, presumably in exercise of the entitlement conferred upon them by Condition (2) of the policy:
It will be noted that this Condition (2) gives the insurance company "full discretion in the conduct of any proceedings or in the settlement of any claim" and the obligation is imposed upon the owner and driver to give all such information and assistance as the company may require. I find it particularly noteworthy that the respondents do not rely upon any failure on the part of the owner and driver occurring after the entry of appearance. 3. What then was the effect of entering this appearance? It certainly prevented the appellant from entering interlocutory judgment and indeed from proceedings to final judgment after assessment of damages. It imposed upon the appellant the expense of contested proceedings. It did not however affect the position of either the driver or the owner save insofar as they might ultimately become liable for costs. On the 12th April 1972 the solicitors for the insurance company still acting in pursuance of their rights under Condition (2) of the policy entered a defence. This defence attributed the blame for the accident to a burst tyre on the car in question. There was evidence that a tyre was found to be burst after the accident but no evidence that its bursting had caused the accident and yet this was the fact pleaded by the solicitors for the respondents who were by reason of the appearance then, nominally solicitors for both the owner and the driver. The defence further alleged that immediately after the accident another vehicle registration number AJ910
This defence is dated the 12th April 1972 so that notwithstanding the breach of the driver and owner which I have found took place some 12 months earlier the solicitors for the respondents were actively engaged in defending the negligence action. Their doing so must necessarily have put the appellant to considerable trouble and expense in preparing for trial. Up to 12th April 1972 however the solicitors for the respondents had not taken any step involving either the owner or driver in expense and I have come reluctantly to the conclusion that waiver of the condition must be by conduct affecting the owner and driver. This is because what became vested in the appellant under section 2 of the Third Party (Rights against Insurers) Ordinance was the rights of the insured against the insurer. On the 15th November 1972 however the respondents sought and obtained leave to amend their defence. The order giving leave to amend rendered the owner and driver primarily liable to pay the costs. In the defence as originally filed paragraph 2 of the statement of claim was admitted save that it was denied that the first defendant was driving as the servant or agent of the second defendant. The amendment made involved a denial of paragraph 2 of the statement of claim save that it was admitted that the second defendant was the owner of the said motor car at all material times. Paragraph 2 of the statement of claim had read:
The purpose of this amendment then would not have served the first defendant interests. On the contrary, it was a denial that the vehicle was driven by the driver as the servant or agent of the owner or otherwise with the owner's permission and was tantamount to a plea that the owner was not answerable for the driver's negligence and incidentally that there was under no liability under any insurance policy into which the owner might have entered. It could only have served the interests of the owner and incidentally of the respondents. The owner and driver were ordered to pay the costs of this amendment. In seeking it then the respondents put the owner and driver to theoretical expense. It was made without consultation with the owner and driver to whom the solicitors concerned still owed a duty in contract. The negligence action was to come on for hearing on the 12th February 1973 but it was not until the 10th February 1973 that the solicitors for the respondents saw fit to write to the driver (and to the owner at an address at which they knew he no longer resided) purportedly to inform them that case was to come up for hearing two days later and that:
The case came on for hearing on the 12th February 1973. On the 12th February 1973 the respondents' solicitors instructed counsel to apply for leave to withdraw because of lack of instructions from either of the defendants. Counsel instructed by the respondents' solicitors pointed out that although respondents might appoint counsel to act in law such counsel are "deemed" to be for the defendants. It seems to me clear from all this that throughout the respondents' solicitors were acting as agents for the respondents and ignoring their duty to the owner and driver. Counsel asked for the case to be stood down "for a few days" to that the defendants be given opportunity to conduct their own defence. The order then made was that the matter should be adjourned to the 14th February and that the costs of and thrown away by the adjournment should be paid by the owner and driver in the first instance with liberty on the part of the appellant to apply for payment of costs by the respondents. Time for service of a summons by the solicitors for the insurance company to be discharged from further acting for the driver and owner was abridged and service of the summons was ordered to be made "on the defendants by leaving a copy of summons and affidavit at 10, Canton Road, Kowloon re first defendant and 85, Wai Ching Street, 1st floor, Kowloon re second defendant." The last order was somewhat odd since it is not disputed that it was known to the respondent that the second defendant had not been resident at 85, Wai Ching Street, 1st Floor, Kowloon for many months. On the morning of 14th February 1973 the summons had not been served. No order discharging the respondents' solicitors from acting for the owner and driver was made and counsel acting on the instructions of the respondents' solicitors who were still on record as solicitors for the owner and driver applied for a further adjournment. He was refused it. Though the respondents' solicitors remained on the record as solicitors for the owner and the driver counsel was permitted to withdraw from the case. Evidence was called and the evidence of seven witnesses was given. At 2.30 p.m. on the 14th February, 1973 the solicitor for the respondents was present having served the summons for his discharge in manner ordered by the court but not on the owner personally. Service on the driver had been effective. He appeared and requested that the "insurance company representatives" should continue to act on his behalf. He added that he wanted to be represented by the lawyer of the insurance company and said that he wanted free legal aid "I can't afford to pay." At this stage, the application of the respondents' solicitors to be discharged was granted. Thereafter the driver sought to apply for legal aid and asked for an adjournment for that purpose. This was refused. Other witnesses were called and judgment was reserved. On 30th April 1973 judgment for the sum of $164,760 with interest at 8% per annum from the date of the issue of the writ until payment was given with costs. 4. I have adverted at great length to the behavour of the respondents and their solicitors because I consider it necessary to do so so that a complete picture may be obtained. In summary the owner and driver were in breach of clauses 2 and 9 of the policy at the latest by the end of March 1971, but the respondents a full year later were purporting to exercise their entitlement to take over and conduct in the names of the owner and driver the defence of the claim. They did so without any regard whatsoever for the interests of the driver notwithstanding that the solicitors for the respondents had a duty to the owner and driver. The defence was amended at the expense of the owner and driver although the effect of the amendment was clearly inimical to the interests of the driver. The respondents' solicitors took no step to secure their discharge until two days before the hearing. Then they wrote to the owner at an address where they knew he had not been resident for several months. They obtained an adjournment of the case with the costs of the adjournment payable in the first instance by the owner and the driver. They through dilatoriness in applying for a discharge remained on the record as solicitors for owner and driver while seven witnesses were examined but not cross-examined due to the instructed absence of counsel. 5. The behaviour of the solicitors concerned not only adversely affected the interests of their nominal clients but must necessarily have also so affected the interests of the appellant in these proceedings. That legally is beside the point since estoppel has not been pleaded by the appellant. What has been pleaded and what is relied on before us as a ground of appeal is waiver. I have no doubt but that waiver did take place. In my view it took place as soon as an appearance was entered for by its entry the owner and the driver were placed in a position where they could become liable for costs in the future - a liability which eventually crystallized. Furthermore it is impossible to escape the conclusion that every act in the proceedings done by the respondents' solicitors was done by them as agents for the respondents. They quite forgot their duty to their nominal clients. Clearly in my view the respondents are responsible for the activities of these solicitors as their agents. It follows that right up to the time the solicitors secured their discharge and at the very least right up to the tardy letter to the owner and driver of the 10th February 1973 the respondents concerned themselves in the proceedings and did so to the detriment of the owner and the driver. I have no doubt but that this behaviour constituted waiver which would have entitled the owner and driver to rely on the policy. Since they could the appellant could. 6. I would therefore allow this appeal and enter judgment for the plaintiff/appellant for $164,760 with interest thereon at 8% per annum from 26th November 1971 plus the sum of $9,266.15 (this sum to carry interest at 8% since the date of taxation of costs in O.J. Action No. 2760/71) with costs here and below to be taxed.
Representation: |