Read the full judgment text of CACV 000008/1995 on BabelCite. This Court of Appeal judgment was delivered on 21 July 1995 before Mortimer JA, Liu JA, Ching JA.
Civil procedure – joinder of parties – O.15 r.6(2)(b)(i) of the Rules of the Supreme Court – whether insurer with contingent liability may be joined as second defendant – Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap 272) s.10(1) and s.10(3) – insurance – avoidance of policy for misrepresentation and non-disclosure – whether rescission operates ab initio – whether taking over defence under policy clause constitutes approbation precluding reliance on rescission – collusion between husband and wife in road accident claim. A wife sustained serious injuries as a passenger in a car driven by her husband. The writ claiming damages for negligent driving was issued out of time. A notice was given to the insurer under s.10(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap 272. The insurer alleged the policy was obtained by misrepresentation and non-disclosure relating to the husband's driving experience and accident record, gave notice avoiding the policy, and commenced s.10(3) proceedings for a declaration that the policy was avoided. The insurer applied to be joined as second defendant under O.15 r.6(2)(b)(i) of the RSC to protect its contingent liability. The application was refused by Keith J on the basis that the insurer could take over the husband's defence under clause 6 of the policy without prejudice to its rescission contention. Held, allowing the appeal: (1) A valid rescission of an insurance policy for misrepresentation or non-disclosure avoids the policy ab initio, and not merely from the time of the decision or declaration, following Abram Steamship Co Ltd v Westville Shipping Co Ltd [1923] AC 773. The Oriental Fire & General Insurance Co Ltd v Cheuk Ma-yee [1981] HKLR 41 and Cheung For Kuen v Tang Wai Kwong are distinguishable. (2) Taking over the defence under clause 6 of the policy would be an approbation of the contract, precluding the insurer from subsequently arguing rescission, following Clough v The London and North Western Railway Co [1871] Ex 7 LR 26, George Urquhart v Duncan Macpherson [1878] 3 AC 831, and West v National Motor & Accident Insurance Union Ltd [1955] 1 Lloyds LR 207. (3) The court has jurisdiction under O.15 r.6(2)(b)(i) to join a party whose liability is contingent on the outcome of other proceedings. The test in Gurtner v Circuit & another [1968] 2 QB 587 and Pegang Mining Co Ltd v Choong Sam & others [1969] 2 MLJ 52 does not require certainty of liability. (4) The insurer is not required to elect between its contentions as a condition of joinder. The undertaking in Gurtner was specific to the unusual circumstances of the Motor Insurance Bureau's moral obligation. (5) In the circumstances, the insurer should be allowed to join as second defendant to prevent the likely collusion between the husband and wife and to protect its legitimate interests.
Legal issues: Whether taking over defence under policy clause constitutes approbation · Whether rescission of insurance policy operates ab initio · Jurisdiction to join insurer with contingent liability under O.15 r.6(2)(b)(i) · Whether election required before joinder
Outcome: Appeal allowed; leave granted for the insurer to join the action as second defendant