Marquis Trading Co (A Firm) and Others v. Associated Bankers Insurance Co Ltd and Others
Read the full judgment text of CACV 68/1981 on BabelCite. This Court of Appeal judgment was delivered on 4 June 1982.
1. In these consolidated actions there were before us four appeals, three by the Plaintiffs and one by the Defendants. However, at the outset Mr. Phillips, who appeared for the Plaintiffs, elected not to pursue Civil Appeal No. 68 of 1981.
Cited by 1 case
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CACV000068/1981 Consolidated actions under marine insurance policies. Re-amendment of Points of Defence to allege scuttling and fraud. Lateness of the reamendment and want of particularity. Striking out of allegations in the Amended Points of Defence for want of particularity. Order for ship's papers - whether allowable where no allegation of scuttling made in the Amended Points of Defence.
ON APPEAL FROM COMMERCIAL LIST
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___________________________________ Coram: Roberts, C.J., Silke and Barker, JJ.A. Date: 4 June 1982 ___________ JUDGMENT ___________ Barker, J.A.: Background 1. In these consolidated actions there were before us four appeals, three by the Plaintiffs and one by the Defendants. However, at the outset Mr. Phillips, who appeared for the Plaintiffs, elected not to pursue Civil Appeal No. 68 of 1981. 2. The actions arise out of claims by the Plaintiffs, who are two closely associated firms, under marine insurance policies which they affected with the two Defendants. The Plaintiffs claim that they insured with the Defendants electronic goods of a total value of in the region of HK$5 million which were placed on board the ship "Amelia", due to sail from Singapore to Hong Kong; and that on the 12th November 1978, whilst the policies were in force, the goods became a total loss by the perils insured against in that the "Amelia" sank in heavy weather. The Defendants, who were notified of the Plaintiffs' claims by letter dated the 1st December 1978, proceeded to investigate them, but did not satisfy them. 3. Consequently, letters before action were sent by the Plaintiffs' solicitors to the Defendants on the 17th August 1979. By letter dated the 23rd October 1979 the Defendants' solicitors requested a great deal of further information and documentation from the Plaintiffs in relation not only to the "Amelia" but also to a ship called the "Starter". The supposed justification for the latter request was that the Plaintiffs in the present action allegedly shipped electronic goods on the "starter" from Hong Kong to four consignees in Singapore, by virtue of a C & F contract, the consignees effecting the insurance thereon. This ship was, apparently, abandoned by the master and crew as a total loss on the 30th August 1978. It did not in fact sink, and was salted by Chinese fishermen into Whampoa, China where it was found to be carrying virtually no cargo. 4. On legal advice, the Plaintiffs by their solicitors gave some, but by no means all, of the information and documents requested in relation to the "Amelia", but gave no information or documents in relation to the "Starter". History of pleadings in actions 5. Specially endorsed grits were issued on the 22nd October 1979, and the Defendants asked for particulars and discovery before Defence, which were not forthcoming. Thereupon the Defendants took out summonses asking that the actions be transferred to the Commercial List and be consolidated, and that discovery be ordered under Order 72 Rule 10 of the Rules of the supreme Court (what is known as an "order for ship's papers"). The Plaintiffs meanwhile took out summonses under Order 14 of the aforesaid Rules, seeking summary judgment against the Defendants. All these summonses were heard by Zimmern J. on the 18th July 1980. He dismissed the Order 14 summons, transferred the actions to the Commercial List, ordered that the three actions be consolidated, ordered that the Defendants should deliver Points of Defence and adjourned the Defendants' application for discovery under Order 72 Rule 10 sine die with liberty to restore. 6. Points of Defence were served on the 18th September 1980. These put the Plaintiffs to proof of everything, and in particular that the goods were ever loaded on the "Amelia" and that "Amelia" was lost by perils of the sea. The Defendants alleged non-disclosure, inter alia, of the alleged shipments by the Plaintiffs on board the "Starter'', and (in paragraph 7) that there was no bona fide loss of the goods. 7. The Points of Defence did not allege scuttling of the "Amelia" nor that there was a conspiracy to defraud underwriters to which the Plaintiffs were parties. They did allege, as a particular of the no bona fide loss allegation, that the "Starter" was the subject matter of a conspiracy to defraud underwriters, but did not expressly allege that the plaintiffs were parties thereto. Consequently the Plaintiffs requested further and better particulars, which the Defendants on the 20th May 1981 were ordered by Zimmern J. to give. These were served on the 28th May 1981, expressly pleaded that the Plaintiffs were party to the alleged "Starter" conspiracy and gave certain other particulars which the Plaintiffs considered to be inadequate. 8. The Plaintiffs therefore applied to strike out paragraph 7 of the Points of the Defence. This application was heard on the morning of the 10th June 1981 when Zimmern J. struck out paragraph 7 and particular (ii) thereunder (which was the sub-paragraph which contained the "Starter" conspiracy allegation) but allowed sub-paragraph 7(1) to be transferred by amendment to paragraph 4. During the adjournment of that application, counsel for the Defendants drafted an amended paragraph 7, which in effect incorporated the further and better Particulars already served into the body of the pleadings. In the afternoon, he applied to Zimmern J. for leave to amend accordingly. Although the order as drawn up makes no reference to it, it is common ground that Zimmern J. refused leave. From the order to strike out and from the refusal of leave to amend, the Defendants now appeal. 9. The Defendants meanwhile had renewed the application for an Order for ship's papers under Order 72 Rule 10. It was, apparently, intended that this application would be heard at the same time as the application to strike cut but in fact it was heard subsequent thereto. On the 25th November 1981 Zimmern J., in a reasoned judgment, ordered the Plaintiffs to give certain categories of ship's papers. From that order the Plaintiffs appeal. 10. By summons dated the 7th day of April 1982 the Defendants sought leave to re-amend the Points of Defence, in the following respects, inter alia,
11. On the 4th May 1982, after a lengthy hearing, Rhind. J. allowed the Defendants to make these amendments, and from this order the Plaintiffs appeal. I should add that the Plaintiffs do not object to the re-amendment sought in paragraph 5(A)(aa), which alleges that the "Amelia" never existed at all, nor to that sought in Paragraph 8(A) in relation to the Bailee clause of the Policies. Appeal from Order of Rhind J. 12. Notwithstanding that it comes last chronologically, it is convenient to deal first with the appeal from the Order of Rhind J. 13. Complaint was made against the Judgment on two main grounds. The first was the lateness of the application to amend to Plead fraud. As a general rule, a party alleging fraud must do so at the earliest opportunity. As Lord Esher M.R. said in Bentley and Co. Limited v. Black (1):-
14. This observation has to be understood in its context. An amendment to allege fraud will not normally be allowed when such allegation is being raised for the first time. The position in the present actions is quite different. It is quite true that the explicit allegation of fraud in scuttling the "Amelia" and not loading the alleged cargo on board her was fully pleaded for the first time only in the draft Re-Amended Points of Defence. But it had been made plain to the Plaintiffs almost from the outset that the Defendants were highly suspicious of the claims, witness the request for full information and documents, not only in relation to the "Amelia" but also to the "Starter", contained in the letter of the 23rd October 1979 already referred to. And the various affidavits sworn by Mr. Robin Healey must have put the Plaintiffs on notice that fraud was likely to be alleged. In my judgment, Rhind J.'s conclusion that lateness, by itself, was no bar to allowing the amendment was correct, and I would not interfere on that ground. 15. The Plaintiffs' second, and more formidable, complaint against the allowance of the amendment was that the Re-Amended Points of Defence lacked particularity. The Judge took the view that both the "Starter" conspiracies and the "Amelia" conspiracies were adequately pleaded as they stand. In order to test this conclusion it is necessary to examine the law. 16. In a case where it is alleged that there was a scuttling and that the Plaintiffs were privy thereto, a bare allegation of scuttling is a sufficient particularisation if the underwriters have no theory as to how the scuttling occurred. If, on the other hand, the underwriters do have a theory, they must give the best particulars of it they can. (See Astrovlanis Compania Naviera S.A. v. Linard(2) and Palamisto General Enterprises S.A. v. Ocean Mauri Insurance Co. Ltd.(3)) 17. Rhind J. appears to have regarded the present defence as being based solely on scuttling. If that were correct, his conclusion as to the adequacy of the pleading would be unassailable. Naturally, counsel for the Defendants was at pains to seek to uphold this conclusion. He argued that the allegation made against the Plaintiffs was one of wilful misconduct within the meaning of section 55(2)(a) of the Marine Insurance Ordinance Cap. 329, which reads ''The insurer is not liable for any loss attributable to the wilful misconduct of the assured .......". 18. This argument is, in my view, misconceived. It is clear that the case for the Defendants is the Plaintiffs' goods were never loaded at all on the "Amelia" that the Plaintiffs never Buffered any loss, though they are fraudulently claiming that they did, and that therefore, there was no loss 'attributable to the wilful misconduct of the assured'. This is the core of the Defendants' case. 19. The Judge said, at page 10 of his Judgment, "Unlike a plea of scuttling which is demonstrated by the Dias to be a positive averment, I think the Defendants' contention that the Plaintiffs never put the goods aboard might well be a true example of an immaterial averment in an action where a plaintiff is claiming under an insurance policy for goods he says he put on board." Counsel for the Defendants does not seek to support this passage, and it would appear that the Judge misunderstood the thrust of the Defendants' case, which was that then was a conspiracy to defraud -
20. Order 18 Rule 12(1) of the Rules of the supreme Court reads, so far as is relevant: -
21. In the notes to Order 18 Rule 8 of the Annual Practice 1982, the following appears at 18/8/4 "Any charge of fraud or misrepresentation must be pleaded with the utmost particularity''. I agree. As Thesiger L.J. said in Davy v. Garrett(4) at p. 489: -
22. In Bullen and Leake and Jacob's Precedents of Pleadings, Twelfth Edition the following appears at p. 341 "The Statement of Claim (i.e. in a case where the Plaintiff is alleging conspiracy to defraud) should describe who the several parties are and their relationship with each other. It should allege the agreement between the Defendants t conspire and state precisely what was the purpose or what were the objects of the alleged conspiracy, and it must then proceed to set forth, with clarity and precision, the overt acts which are alleged to have been done by each of the alleged conspirators in pursuance and in furtherance of the conspiracy." In my judgment similar principles apply where a conspiracy to defraud is set up as a defence. 23. Before embarking upon a consideration of the Re-Amended Points of Defence, I must advert to the argument, oft reiterated by Counsel for the Defendants, that, in the absence of compliance with the order for ship's papers, the Defendants have pleaded the best particulars of fraud they can on the information available to them. The answer to this argument is that if the Defendants do not have at their disposal sufficient information to plead fraud with proper particularity, they ought not to Plead it at all. 24. I turn then to consider the Re-Amended points of Defence. It is convenient to deal first with paragraph 5(B) (ix) - the allegations in relation to the "Starter". (ix)(a) reads: -
25. No difficulties arise as to (ii). It is conceded that proper particulars of the alleged scuttling have been pleaded. 26. But when I turn to see what particulars pleaded under (i) I read: -
27. The Defendants argued that these were positive allegations that the Plaintiffs issued forged Bills of Lading and negotiated thereon. But the Pleading does not say so. 28. Then (b)(3) goes on: -
29. But what does this mean? There were 25 different consignors. Is it being alleged that all 25 were party to the conspiracy? If it is, then this should be pleaded. If it is alleged that some of the transactions were genuine, why is it alleged that the Plaintiffs' transactions were fraudulent? Or is it alleged that some genuine consignors sent goods to the dock where they were stolen? The Plaintiffs simply cannot tell what the case against them is, and they are entitled to know. 30. I consider next the particulars pleaded under (iii) - i.e. the alleged defrauding of the Singapore underwriters. (ix)(b) (5) reads: -
31. It has to be remembered that the Plaintiffs did not insure these goods nor did they make the claims in respect thereof. Such insurance was effected and the claim made by the four consignees in Singapore. Is it alleged that they were parties to the conspiracy? If so, it should have been pleaded since their identities are well known to the Defendants. 32. In my judgment the allegations as to the alleged conspiracy affecting the ''Starter" (save those relating to the alleged scuttling) are lacking in the requisite particularity. 33. I pass then to consider the allegations in relation to the "Amelia". Here there is not even any positive allegation that the Plaintiffs purported to load the goods on board; there is merely a denial in paragraph 4(a) that the goods were loaded. In other words, the first stage of the fraud is not positively alleged. It has to be inferred - precisely what Davy v. Garrett (4) (op. cit) says is incorrect. 34. If Underwriters are alleging that there was a faking of the loading of the goods in Singapore, is it alleged that the shippers were a party to this although the goods were shipped under C & F contracts and the plaintiffs had nothing to do with the shipper of the goods nor with the choice of vessel? 35. Such particulars as are given of the plaintiffs' alleged complicity in the "Amelia" conspiracy are contained in 5(B)(vi), (vii) and (viii). It is first alleged that the Plaintiffs did not have the financial ability to finance the relevant transactions - a plea difficult to understand since they obtained Letters of Credit in respect thereof from Banks. Secondly it is alleged that the goods alleged to be lost on board the "Amelia" were not part of the ordinary commercial transactions of the Plaintiffs. But no particulars whatsoever are given of this bare allegation. Thirdly the Defendants rely upon the alleged non-disclosure by the Plaintiffs of material facts, but no particulars are vouchsafed as to why what was previously described as mere non-disclosure is now elevated into fraudulent non-disclosure. 36. In my judgment the allegations as to the alleged "Amelia" conspiracy are also lacking in particularity. 37. It follows that the re-amended particulars under paragraph 6 are tainted with the same vice. 38. The plaintiffs are entitled to have a pleading to which they can fairly plead. In my judgment the Re-Amended Points of Defence is not such a pleading, because of its woeful lack of particularity. I am of the opinion that Rhind J. was wrong to allow the Re-Amendment and I would allow that' appeal. It follows that the Plaintiffs are entitled to the costs of the hearing before him. Order of Zimmern, J. 39. I turn next to the order of Zimmern J. striking out paragraph 7(ii) of the Points of Defence. I can deal with this matter quite shortly. Without further and better particulars, the allegations particularized under 7(i) and (ii) were clearly not sufficient to support the plea of no bona fide loss. The particulars served are subject to the same criticisms as those which I have set out in relation to the Re-Amended Points of Defence as is the proposed amendment which was tendered by counsel for the Defendants on 10th June 1981. I would dismiss this appeal. Order for ship's papers 40. I turn finally to the order for ship's papers. In this connection it has to be borne in mind that, by taking the view that Rhind J. was wrong in allowing the Re-Amendment, I must approach the pleadings on the basis that there remains no allegation that the Plaintiffs were privy to the scuttling of the "Amelia". It is argued, on behalf of the Plaintiffs, on the basis of the Probatina Shipping Co. Ltd. v. sun Insurance Office Ltd. (5) (at first instance before Kerr J.) and (6) (in the Court of Appeal) that, although where scuttling is alleged an order for ship's papers will usually be made (though not as a matter of course), where scuttling is not pleaded the practice is not to make such an order. It is further argued that an order for ship's papers should not be made since it is not relevant to any issue on the pleadings. 41. I reject both these arguments. As to the first, although scuttling is not at present pleaded, leading counsel for the Defendants has assured the Court that in his view it is a proper case to plead scuttling, and no doubt a further application to re-amend the points of Defence to that effect will be made in due course. 42. As to the second, whilst it may be true that the discovery requested does not go to the issues at present pleaded, an order for ship's papers is regularly made before Defence, when no issues have yet been raised on behalf of the Defendants. The making of such an order is a matter entirely in the discretion of the Judge. Having regard to the various matters deposed to in the affidavits filed on behalf of the Defendants, which disclose grounds on which the Defendants may reasonably suspect fraud, I cannot say that Zimmern J. exercised his discretion wrongly. 43. Counsel for the Plaintiffs, as a matter of last resort, argued that, if we were minded to confirm the order for ship's papers, we should nevertheless at this stage vary the order in respect of Items 2, 5 and 12 set out in the Schedule to the Notice of Appeal (which schedule it is common ground accurately reflects the Judge's order) by limiting it to documents in the possession, custody and control of the Plaintiffs, with liberty to the Defendants to apply. 44. I reject this argument for a number of reasons. First, this argument was not set out in the Notice of Appeal and since it was raised for the first time in the Reply, counsel for the Defendants had no opportunity to deal with it. Secondly, as a matter of reality, the Defendants would be virtually certain to be dissatisfied with the limited discovery proposed and would therefore restore the matter. This would have the effect of further prolonging causes which have already suffered too much delay. I would dismiss the appeal from Zimmern J.'s order as to ship's papers. 45. It was argued strenuously before us that it would be against the public interest if we were to prevent the Defendants from alleging and pursuing a case of fraud. My judgment does no such thing. If, as a result of the discovery ordered, or of further investigation, the Defendants find themselves able to plead fraud with the requisite particularity, there is nothing to preclude them from making a further application to re-amend the Points of Defence to this effect. (1) 9 T.L.R. 580 (2) (1972) 2 Q.B. 611 (3) (1972) 2 Q.B. 625 (4) (1877) 7 Ch. D. 473 (5) (1973) 2 L1. L.R. 520 (6) (1974) 1 Q.B. 635 Representation: N. Philips, Q.C. and W. Lane instructed by Messrs. Robert W.H. Wang & Co. for the Plaintiffs. I. Hunter, Q.C. and W. Waung instructed by Messrs. Ince & Co. for the Defendants. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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