Liberty International Insurance Ltd v. Chan Shuk Fan

HCMP 988/2024

[2025] HKCFI 1178

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 988 OF 2024

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DECISION

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Introduction

1.By originating summons filed on 12 June 2024 (the “OS”), Liberty International Insurance Limited (“the Plaintiff”) seeks a declaration pursuant to section 10 (3) of the Motor Vehicles Insurance (Third Party Risks) Ordinance Cap 272 (the “Ordinance”) that the plaintiff is entitled to avoid the private motor car insurance policy (the “policy”) issued by the Plaintiff to Chan Shuk Fan (“the Defendant”) on the ground that the policy was obtained by non-disclosure of a material fact or a representation of fact which was false in some particulars or both.

Relevant background

2.The Defendant applied for a private motor car insurance policy by completing the Plaintiff’s proposal form dated 23 March 2022 for her vehicle. The named drivers were the Defendant and her husband Mr Yip Chun Cheong (“Mr Yip”). Based on the information provided the Plaintiff approved the application and issued a policy to the defendant for the period from 13 April 2022 to 12 April 2023 (the “Old Policy”).

3.When the Old Policy was about to expire, the Plaintiff extended a renewal offer to the Plaintiff by email on 3 March 2023 which contained a hyperlink for the Defendant to access the online portal for the renewal process (the “Portal”).

4.On 11 April 2023 the Defendant accessed the Portal and activated the renewal process. The instructions for renewal set out 6 steps for renewal[1].

(a) Under the “Declarations” section, the Defendant answered “No” to each of the questions posed[2] including the following:

“Has any named driver(s) in this renewal application been charged with or received notice of intention to prosecute issued by the police regards to criminal driving offence (including Careless Driving, Dangerous Driving, Driving under the Influence, or Drug-impaired Driving) in the existing policy period?”

“Has any named driver(s) accumulated more than 8 driving offence points (including incurred/deducted points) within the past 2 years?”

(collectively, the “Questions”).

(b) The Defendant was then automatically directed to the next page where she was able to choose the renewal plans under the “Quote” section.

(c) After choosing the desired renewal plan, the Defendant was directed to the “Verify” section of the Portal where, according to the Plaintiff, the Defendant had an opportunity to review and reconfirm the information submitted before proceeding with payment. A copy of the screen-capture[3] was exhibited in support.

(d) There is a “Proceed to Payment” button at the bottom of the “Verify” page. Immediately above the “Proceed to Payment” button, there are 2 important reminders stating the following:

(i) Any mistake or wrong declaration could affect this process or any potential claim(s) in the future. Please refer to the Statements. A hyperlink was provided for accessing the Statements known as the “Applicant Statements & Authorisations”[4].

(ii) By clicking the “Proceed with Payment” button, I hereby confirm my agreement to these Statements:

"1. I/We acknowledge and agree that the facts, answers and information provided during the application process, electronically, under the proposal, renewal forms or otherwise, including all declarations, are true and complete and all related facts I/We know or ought to know have been honestly expressed and disclosed and I/We have the duty to immediately inform Liberty International Insurance Limited ("Liberty Insurance") and correct the facts and information if they have become incomplete, untrue and inaccurate.

2. I/We have not withheld any material facts i.e. facts relevant to an insurer's decision whether to provide coverage or not or for a certain amount/premium) from Liberty Insurance and I/We understand if material facts have been withheld or not truly or fairly stated this insurance policy shall be null and void."

(referred to respectively as “Clause 1” and “Clause 2”).

(e) Upon completion of the above steps, the Defendant proceeded with payment by credit card.

5.The Plaintiff received 3 emails from the Defendant on 11 April 2023:

Email 1

At around 2:01/2:02 pm, the email entitled “Thank you for your payment. You’re on your way to renew your Tesla policy” was sent to the Defendant, requesting her to review the PDF attached with the description “Named Driver Declaration Record[5]” (the “verification email”).

Email 2

An email entitled “Tesla Mileage-Based Policy [policy number no]” was sent by the Plaintiff around 2:09 pm to [email protected] and copied to the Defendant enclosing “Full set policy as per attached for your handle (sic)”.

Email 3

An email entitled “Congratulations! Your Tesla is Now Insured [policy number]” was sent by the Plaintiff to the Defendant also at around 2:09 pm requesting the Plaintiff to review her new policy schedule and attaching a certificate of insurance.

6.The 3 emails are exhibited as “CSF 5” (B/218-247). Emails 2 and 3 were sent at around 2:09 pm on 11 April 2023. While email 1 corresponds to B/218, it is unclear to which of the emails the document entitled “InsureMyTesla Renewal Confirmation” (B/219-223) belong. The Renewal Confirmation is relevant because the section headed “Driver Declarations” replicates the questions and answers given by the Defendant.

7.In any event, emails 2 and 3 were sent consecutively, one of which enclosed the “Policy Jacket” containing the schedule, the certificate of insurance and the terms and conditions (“T & C”) in relation to the Policy.

8.The foreword of the T&C states:

“Please read this policy carefully and have it reported and returned no later than 14 days from its date of issuance for any amendment, error and/or mis-description: otherwise this policy will be treated as correct and intended as proposed. It is emphasised that any non-disclosure and/or mis-representation, deliberate or negligent of a material fact in the proposal of this insurance and/or breach of any warranty or condition(s) of this policy will render this policy void or voidable depending on the extent of the non-disclosure, mis-representation and/or breach.”

9.Clause (1)(a) and (d) of the T&C reads:

“(1) Insuring Clause

The Insured and the company agree that

(a) the Proposal and Declaration are incorporated in and are the basis of the insurance contract;

(b) ...

(c) ...

(d) the following shall be conditions precedent to any liability of the Company:

(i) observance of the terms and conditions of this Policy relating to anything to be done or not to be done or to be complied with by the Insured or any other person claiming to be indemnified; and

(ii) the contents and statements in the Proposal and Declaration

...”

10.The Plaintiff did not receive any request for amendment from the Defendant within 14 day period.

11.On 30 May 2023, the Defendant filed a claim form to report an accident which took place on 27 May 2023 between the vehicle driven by Mr Yip and another vehicle driven by Mr Leung Kai Chat who sustained injuries.

12.The police investigation that followed disclosed the traffic offence record (up till 19 July 2023) of Mr Yip to the Plaintiff who discovered that

(a)  on 6 April 2022, Mr Yip had committed an offence of driving in excess of the speed limit by more than 15 km/h but not more than 30 km/h and incurred 3 driving offence points on 23 May 2022; and

(b)  on 7 May 2022, he had committed an offence of careless driving and was convicted of that offence on 17 October 2022. He was fined $1000 and incurred 5 driving offence points.

(collectively, the “previous offences”).

13.On 24 July 2023, the Plaintiff issued a formal letter for the repudiation of the Policy because of the material non-disclosure of the previous offences.

14.In relation to the accident described in §10 above, Mr Yip was convicted of the offence of careless driving on 31 August 2023 and was fined $1000.

15.Solicitors for Mr Leung notified the Plaintiff on 22 March 2024 that a writ (DCPI 874/2024) had been served on Mr Yip. On 12 June 2024, the Plaintiff took out the present application pursuant to section 10 (3) of the Ordinance for a declaration that it is entitled to avoid the Policy. Without such a declaration, it would remain liable for third-party claims.

16.Section 10 (3) of the Ordinance provides as follows:

"No sum shall be payable by an insurer under the foregoing provisions of this section, if, in an action commenced before, or within 3 months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy, he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:…"

This application

17.Mr Vincent Kee, counsel for the Plaintiff, submits that the previous offences constitute a material factor when the Plaintiff is considering whether a vehicle insurance risk should be accepted or not. Traffic offence convictions and/or traffic violation points are material factors which would affect the Plaintiff’s decision to accept the risk and/or to determine the appropriate premium or loading or excess.

18.Mr Kee accepts that the Plaintiff is unable to retrieve and produce the original digital page of the proposal form in the Defendant’s renewal application.

19.The Plaintiff initially put into evidence a screen-capture of the mandatory questions in the “Declarations” section of the portal[6] that contained 5 questions exhibited to Hung 1^st. Subsequently, in her 2^nd affirmation filed on 21 August 2024 (“Hung 2^nd”) Ms Hung exhibited a later version extracted from the policy of a different policyholder (whose coverage was for the period from 16 November 2023 to 15 November 2024) showing 6 mandatory questions in the “Declarations” section of that portal[7].

20.Since the Renewal Confirmation[8] shows that the Defendant answered 6 questions rather than 5, it is clear that it is the version exhibited in Hung 2^nd[9] that the Defendant used when renewing her policy online. Relevantly, the Questions[10] appear in both versions.

21.The answers “No” to the Questions in the “Declarations” section of the proposal form are obviously untrue and incorrect given the traffic offence record of Mr Yip set out in §12 above.

22.Ms Sezen Chong, counsel for the Defendant, opposes the application on various grounds but did not challenge the Plaintiff’s submission that Mr Yip’s previous offences are material factors.

“Non-disclosure” and “representation”

23.Ms Chong focused on the words “non-disclosure” and “representation” in section 10 (3) of the Ordinance and the fact that they are not defined in the Ordinance. However, as definitions of those words may be found in sections 18 and 20 of the Marine Insurance Ordinance, Cap 329 (“MIO”) [11](which is almost identical to the Marine Insurance Act 1906 of the United Kingdom (“MIA”)), the Defendant considered that the same words in section 10 (3) of the Ordinance have a similar meaning.

24.Reference was then made to Economides v Commercial Assurance Company PLC [1998] QB 587 which concerned a policy insuring the value of household contents. The total sum insured was £16,000. That sum had been increased from £12,000 after the assured’s parents came to live with him and brought their chattels which they suggested had a value of £4000. A robbery occurred and it turned out that the value of the contents were some £40,000. The plaintiff brought an action against the insurers who sought to avoid liability on grounds of misrepresentation and non-disclosure. The judge dismissed the action, holding that the plaintiff did not have objectively reasonable grounds for his statement of belief that £16,000 was the total value of the property insured.

25.The Court of Appeal (“CA”) allowed the assured’s appeal, holding that the requirement under section 20 (5) of the MIA[12] is solely one of honesty, although there must be some basis for his statement of belief before it can be said to be made in good faith[13].

26.The basis of belief does not have to be an objectively reasonable one. The CA rejected the suggestion there must be reasonable grounds for that belief such as requiring an obligation to carry out specific enquiries or otherwise take steps to provide objective justification for the valuation[14]. The assured is not to have ascribed to him any form of deemed or constructive knowledge[15]. Nevertheless, he could not simply make a blind guess: one cannot believe to be true that which one has not the least idea about[16].

27.The test for non-disclosure is the same as that for misrepresentation: that of honesty which requires that the assured does not wilfully shut his eyes to the truth, sometimes called Nelsonian blindness[17] and have some basis for his statement of belief.

28.On that authority, Ms Chong submits that unless the Plaintiff can prove that there is dishonesty on the part of the Defendant, it cannot repudiate the policy.

29.Mr Kee invited attention to the difference in wording between section 10 (3) of the Ordinance on the one hand and sections 18 and 20 of the MIO of the other. He submits that the mechanism prescribed for the insurer to avoid a motor vehicle insurance is very different from that under the MIO. ‘Dishonesty’ does not feature in section 10 (3) of the Ordinance at all. For that reason, the MIO provisions are not applicable to the present case. Nor, Mr Kee submits, is the Economides case (to which the Defendant attached heavy reliance) relevant.

30.The Plaintiff submits that once the Court is satisfied that there is material non-disclosure of a fact or a representation of fact that is false, the Plaintiff is entitled to the declaration sought. As I understand it, in such a situation, the Plaintiff’s stance is that its entitlement is absolute, admitting of no exceptions and how or why the Defendant answered the Questions in the manner that she did is irrelevant.

31.I accept that the Ordinance and the MIO are quite different and the fact that certain terms are defined in one does not mean that those terms appearing in the other bear a similar meaning.

32.Assuming, for present purposes, that the Economides case remains relevant, can it assist the Defendant? The key factor is whether when renewing her policy, the Defendant had “some basis for [her] statement of belief” in answering “No” to the Questions in relation to Mr Yip.

33.Her evidence[18] is that

“I cannot recall the exact questions I was asked ... One thing is for sure, when I was filling out the answers to questions, there was nowhere on the page or in any place near the questions warning me that my answers to the questions would influence the acceptance or assessment of the proposal or even render the policy inoperable. There was no caution whatsoever put to me alarming me of the dire consequences of any inaccuracy in the answers would render My Tesla without insurance cover. Had I been so cautioned I would have spent more time in digesting the questions or even have attended the offence of the Plaintiff for clarifications of the questions and conduct thorough verifications of my answers. On the day, I filled in the answers believing them to be true. I did not know that my husband [Mr Yip], a named driver of My Tesla, had a conviction of careless driving within 2 years of the renewal.”

34.In my view, the Defendant’s evidence does not disclose her basis for her statement of belief when answering the Questions in relation to Mr Yip. Unless she had some basis for believing that Mr Yip did not have previous offences, she could not have answered those questions in good faith.

35.The factual situation in the Economides case illustrates the point. In that case what the assured’s father had told the assured was held to be a sufficient basis for his representation[19]. As earlier noted, one cannot believe to be true that which one has not the least idea about.

36.It must be borne in mind that contracts of insurance require the exercise of utmost good faith on the part of the both parties to the contract. The insurers have no means of knowing the answers to the Questions. They can only rely on the information provided. When answering the Questions, the Defendant must do so honestly which requires that she has some basis for that belief and by not wilfully shutting her eyes to the truth.

37.In my view, the Economides case offers no assistance to the Defendant when there is no basis for her statement of belief. It follows that the Plaintiff is entitled the declaration that it seeks.

38.Given that conclusion, it is not strictly necessary to consider the other grounds raised by the Defendant. They include the following which I outline in brief below.

The “incorporation” argument

39.The Defendant submits that unless Clauses 1 and 2 had been incorporated into the Policy at any of the stages for renewal, they cannot be enforced.

40.While some confusion was caused by the screen-capture in exhibit HYT 4, it is clear from the Renewal Confirmation[20] that the Defendant answered 6 questions which correspond to those shown in HYT 13[21].

41.Relevantly, on the same page as but below “Driver Declarations”, there are 3 boxes relating to the Defendant’s ID that had to be completed. Below that and on the same page the following is stated:

“Any mistake or on declaration could affect this process or any potential future claims. Please refer to Statements.

By “Proceed to Payment” I hereby confirm my agreement with these Statements.

You will be taken to the Liberty Insurance Payment Portal to complete your transaction. Please do not click the back button.”

42.While Ms Chong accepts that the word “Statements” in the 1^st sentence is a hyperlink, her stance, based on a single EU case[22] concerning a “click wrap agreement”, is that unless the Defendant is obliged to click on the hyperlink before she proceeds to payment, it is insufficient to bind the Defendant with those Clauses. The Defendant is unaware of Hong Kong case law of the legal effect of such an agreement. Whether the Hong Kong Courts would adopt the EU position is an open question.

43.However interesting the question may be, it is academic for present purposes, having regard to my conclusion on representation and non-disclosure considered above.

The enforceability argument

44.The Defendant further submits that the effect of Clauses 1 and 2 would render any representation of the insured which eventually found to be untrue, to be a warranty and basis of contract, hence entitling the insurer to avoid the policy. Following the recommendation of the Law Commission in its Report (December 2009), such clauses have been abolished in the UK.

45.There does not appear to be Hong Kong cases decided on the basis of contract clauses. The Defendant invited the Court to follow the UK in this regard and outlaw such provisions. Suffice it to say that it is not the function of the Court to ‘legislate’.

Conclusion

46.Accordingly, I grant the declaration sought.

47.Costs should follow the event. I make an order nisi that the costs of this application be paid by the Defendant to the Plaintiff, such costs to be summarily assessed and payable forthwith.

Mr Vincent Kee, instructed by Messrs. Fairbairn Catley Low & Kong, for the Plaintiff

Ms Sezen Chong, instructed by Messrs. Chan & Associates, for the Defendant