Chan Hung-wing and Another v. Lam Kam-ching and Others

HCA001930A/1973

IN THE HIGH COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1930 OF 1973

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Coram : Li, J. in Court

Date of Judgment: 1st June 1977

O.Cheung, Q.C.. Miss J.J. McGrowther (Edmund Cheung & Co.) for plaintiffs

Mills-Owens (H.H. Lau & Co.) for 3rd Party

J. Chan (Lai & Li) for 2nd defendant

E. Chan Fairbairn Kwok & wang) for 1st defendant

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JUDGMENT

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1. In this action the plaintiffs, the 1st defendant and the 2nd defendant claim against the Granite State Insurance Company (hereinafter referred to as the 3rd Party) for a declaration that they are entitled to be indemnified by the 3rd Party in respect of the judgment given against the 1st defendant and the 2nd defendant for negligence in a fatal accident on 14th September 1972. The facts giving rise to this action are as follows:-

2. The plaintiffs are the administrators of the estate of one Cheung Kit Yu who was killed in the accident on the 14th September 1972. The 1st defendant was the owner of the vehicle involved in the accident of which the 2nd defendant was the driver at the material time. The 3rd Party was the insurers of the said vehicle under a current insurance policy of which the 1st defendant was the insured. The plaintiffs instituted proceedings against the 1st defendant and the 2nd defendant under the Fatal Accidents Ordinance and the Law Amendment and Reform (Consolidation) Ordinance. The 2nd defendant issued a third party notice against the 3rd Party claiming for an indemnity to which notice a defence was filed by the 3rd Party denying liability. For convenience the action between the plaintiffs and the two defendants were tried first separately before the action between the 2nd defendant and the 3rd Party. In exercise of its rights under the insurance policy the 3rd Party defended, by subrogation, the former action against the 1st defendant without prejudice to its denial of liability under the insurance policy. Pausing at this stage, I can't help passing the remark that the 3rd Party was in fact having two bites of the cherry. If it denied liability to indemnify the defendants it had no interest in the proceedings between the plaintiffs and the defendants. If it exercised its right to subrogate it impliedly admitted the validity of the said insurance policy. But I shall not found my judgment on such a reason. In any event on the 25th March 1977, having heard the evidence in the proceedings between the plaintiffs and the 1st defendant and the 2nd defendant, I held that the 2nd defendant was liable in negligence and that the 1st defendant was vicariously liable for the 2nd defendant's negligence on the basis that the 2nd defendant was the 1st defendant's agent. Accordingly I awarded the sum of $182,662.40 with interest and costs to the plaintiffs as against the 1st defendant and the 2nd defendant. After judgment was given the plaintiffs and the 1st defendant applied for leave, which was granted, to join the 2nd defendant as co-plaintiffs in the third party proceedings against the 3rd Party.

3. The plaintiffs' claim is based on the fact that the 3rd Party was the insurer of the vehicle involved in the accident under an insurance policy No.59-22370-KCM which was issued by the 3rd Party to the 1st defendant and was in force on the 14th September 1972. As such the plaintiffs claim that the 3rd Party is liable to satisfy the judgment entered against the 1st defendant and the 2nd defendant and that the 3rd Party is liable to pay the plaintiffs the said damages awarded by virtue of Section 10(1) of the Motor Vehicles, Insurance (Third Party Risks) Ordinance. The 1st defendant and the 2nd defendants' claims are founded generally on the same basis.

4. The 3rd Party filed separate defences in respect of each of the claims by the plaintiffs, the 1st defendant and the 2nd defendant. But the basic ground of defence is the same. Its defence to the plaintiffs' Statement of Claim admits that at the material time the 2nd defendant was in the employ of the 1st defendant and was driving the said vehicle with the permission of the 1st defendant that the deceased was killed as a result of the negligence of the 2nd defendant and that the 1st defendant was vicariously liable. The main defence is that at the material time the 2nd defendant was driving the said vehicle for the purpose of his (the 2nd defendant's) business or alternatively the said vehicle was not being used within the ambit of the limitation as to use as set out in the Policy.

5. For the purpose of this action the parties agreed upon the following facts: -

"Without prejudice to or exclusion of evidence called by the Plaintiffs and the findings in the judgment in the action between the Plaintiffs and the 1st Defendant and 2nd Defendant, it is agreed that at the time that the said accident occurred on 14th September 1972 the said goods vehicle 6748 was being driven by the 2nd Defendant at the request and with the permission of the 1st Defendant for the purpose of moving the said vehicle from the 2nd Defendant's old garage premises at Lei Yue Mun to his new garage premises at Tung Ming Street and that the 1st Defendant permitted the 2nd Defendant to carry and 2nd Defendant did carry the following items from the 2nd Defendant's said old garage premises to his said new garage premises, namely: (l) Garage Equipment, (2) Repair Equipment, (3) Engine parts, (4) Bench and Trestle, (5) Tools, being items owned and used by the 2nd Defendant in connection with and for the purpose of his garage repair business not exceeding 800 lbs, in weight and this cargo in no way contributed to the accident."

6. Having heard the evidence I find as facts at the material time the 1st defendant was an owner of four lorries which he hired out to people. It was his practice to hire out only three of his four lorries. He always kept one in reserve with the 2nd defendant in order to relieve any one of the three lorries which might break down in the course of being hired out. The 2nd defendant ran a repair garage. The 1st defendant had known the 2nd defendant for years and sent his lorries for repairs as the occasion required. After repair the repaired vehicle would be left in the 2nd defendant's garage yard for reserve. If anyone of the other three lorries in the hiring service broke down he would telephone the 2nd defendant to drive the reserve lorry to relieve the broken down vehicle which the 2nd defendant would tow back to his garage for repairs. After that the repaired vehicle would be left in the 2nd defendant's garage as a reserve until another of the three vehicles in service broke down. For this service the 1st defendant paid the 2nd defendant for the repairs done another $15 for driving the relief vehicle to the broken down vehicle and a separate towing fee for towing away the broken down vehicle for repairs. On the day of the accident the vehicle so involved was driven by the 2nd defendant at the request and with the permission of the 1st defendant from the 2nd defendant's old garage premises to the 2nd defendant's new garage premises as the 2nd defendant was moving his place of business. The said vehicle was to be kept in the 2nd defendant's new garage as a reserve lorry for the same purpose as aforesaid. In the course of asking the 2nd defendant to drive the said vehicle to the new garage the 1st defendant also permitted the 2nd defendant to carry on the said vehicle, some of the 2nd defendant's machine parts and equipments as set out in the agreed facts.

7. In view of the foregoing I am of the opinion that on the occasion the 2nd defendant was driving the 1st defendant's said vehicle in connection with the 1st defendant's business. It was part of the 1st defendant's business to keep the vehicle in the 2nd defendant's garage as a reserve for his (the 1st defendant's) business. I am further of the opinion that the carrying of the 2nd defendant's equipments in the said vehicle could only be for the 2nd defendant's business even though the carriage of such equipments was done without payment. It could not be said to be for pleasure, domestic or social purpose. The only issue, therefore, is whether such use of the said vehicle at the time of the accident contravened the clause for limitation of use in the Policy.

8. I shall dispose first of the plaintiffs' claim under Section 10(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance Cap.272. There is no dispute that at the time a Certificate of Insurance had been issued by the 3rd Party to the 1st defendant in respect of the said vehicle. Section 10(1) provides:

"If, after a certificate of insurance has been issued under subsection (3) of section 6 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of subsection (1) of section 6 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any law relating to interest on judgments."

The words in brackets are significant. Despite the issue of a Certificate of Insurance liability still depends on whether the liability is one covered by the terms of the policy. Thus we are back to the original question - viz whether the Policy covers liability when the said vehicle was used in connection with not only the 1st defendant's (the insured's) business but also with the 2nd defendant's business.

9. Clause (3) of the General Exception Clause of the Policy - Exhibit 1 provides:-

10. In view of my findings and the agreed facts there can be no doubt that the 2nd defendant was a "driver" within the term in the Policy. The only point to be considered is the Limitations as to Use which is defined in the policy as "Use in connection with the Insured's business."

11. Learned counsel for the 3rd Party has brought my attention to a fair number of English authorities in support of the contention that the Insurance Company is not liable when the use of the vehicle is in connection with not only the business of the insured but also that of another person. The first is Passmore v. Vulcan Boiler and General Insurance Co. Ltd. (1936) 54 Lloyd's List Law Reports 92.

12. In this case the Insurance Company was held not liable to indemnify the insured on the ground that the insured vehicle was used not only for the business of the insured but also for that of her friend and colleague. In his judgment which has not been upset for the last 40 years. Du Parcq J. as he then was said:-

13. His Lordship said later:-

"The words of the policy are that the insurers shall not be liable in respect of any accident caused while the insured motor vehicle is being used otherwise than in accordance with the "description of use." Was it being used otherwise than in accordance with the description - otherwise than for social, domestic and pleasure purposes and use for the business of the insured? It was not being used for social domestic or pleasure purposes. Was it being used otherwise than for the business of the insured? I do not think one can answer that question otherwise than in the affirmative. It was. It was being used for the business of Mrs. Cooke. I see no escape from that. It is immaterial to consider whether Mrs. Cooke's business is similar to or identical with the business of Miss Passmore. The insurers are entitled to know what the business is for which a car is going to be used, and they are entitled to say that before they cover a risk they must have an opportunity of judging what the risk is. Mr. Cave says quite truly that the principle would be the same if Mrs. Cooke had been travelling in some quite different goods. There may be cases where the nature of the goods and the district to be covered may be of vital importance. I think, therefore, that I should be doing an injustice to the insurance company in coming to any other conclusion than that there is noescape from the words of the policy."

14. In my opinion the reason for this decision lies in the words in the schedule viz:-

"Carrying on or engaged in the business or profession of representative and no other for the purposes of this insurance."

15. The underlining is mine. Thus the engagement or carrying on of another's business brings the purpose of use outside the schedule. In the present case no such further limitation has been included n the Policy - Exhibit 1. In the Passmore's case Du Parcq J. said:-

"If the policy only said that Miss Passmore was to benefit by it so long as the car was being used for the purposes of her business, I think her position would be unassailable, because it was being used for the purposes of her business; but that is not what the policy says, and though it is true that when words are ambiguous they must be construed contra proferentem against that party to the contract who is responsible for the drafting of it, that principle cannot be prayed in aid unless the words are of real ambiguity."

16. I am of the opinion that the principle in Passmore's case does not apply to the case before me because the Policy here (Exhibit 1) does not contain such strict limitations as to use

17. In Browning v. Phoenix Assurance Company, Ltd. (1960) 2 Lloyd's List Law Reports 360 the exemption clause provided that:-

"Insurers exempted from liability under policy if car used otherwise than in accordance with "Description of Use" which stated:

18. Accordingly Pilcher J. said in obiter:-

"If the plaintiff had in fact been requested and authorized by Mr. Battersby to take this car out in his own time with his family as passengers and to give it the general test to which the plaintiff spoke, this car would have been used by this plaintiff at the time of the accident for two purposes: (1) the permitted social purpose of taking his family for a prolonged drive and 920 a second purpose which would, in my view, have been a purpose in connection with the motor trade, which is a purpose excluded by the "Description of Use" clause in the policy."

19. In the case of Wood v. General Accident Fire and Life Assurance Corporation Ltd. (1949) 82 Lloyd's List Law Reports 77, the vehicle was insured for pleasure and social purposes. Accordingly the Insurance Company was held not liable when the car was used for a trip to take the insured for a business trip.

20. In the case of McGoona v. Motor Insurers' Bureau and Marsh (1969) 2 Lloyd's Law Reports 34, the terms as to use in the policy were that "the indemnity granted by this policy is limited to Use for Social Domestic and Pleasure and use by the Policy holder in person in connection with his business or profession as stated herein". Again I underline the words "the Policy holder in person". For this Lawton J. said in page 40:

"It follows, say the insureres, that Mr. Kelsey was only entitled to use the car for his own business purposes and for social, domestic and pleasure purposes, and that he should fail in this claim because, on the day when the plaintiff in this action sustained his injuries, the motor car was not being used solely for Mr. Kelsey's own purposes but was being used for his own purposes and the purposes of Breeze-Cast, Ltd."

and later at page 41:-

"I stop there to make this finding. At the very outset, I conclude that the discussion between the managing director, Mr. Gorelli, and Mr. Kelsey was essentially a business arrangement. It was made for the purposes of the business. It was made against the background of the National Working Rules and I have no doubt that at the end of that conversation Mr. Kelsey regarded his employers as having promised to pay him a sum equivalent to four gallons of petrol, plus 4s.6d. a day whenever he carried his mate. I have no doubt either that Mr. Gorelli thought that he was bound to pay that sum. It was something very different from a friendly relationship between employer and employee. It was a practical business arrangement."

and finally he came to the conclusion at page 44 in which he said:-

"It seems to me that I am faced with exactly the same situation here. Once Mr. Kelsey agreed to accept payment to take fellow workmen down, if they wanted to be taken down, to Witley, then he was acting not only for the purposes of his own business as a plumber but for the purposes of his employers' business. The employers, under the working conditions of the National Working Rules, were bound to see that employees got to Whitley, and it was convenient for them that Kelsey should take some of them to Witley. It was in the interests of both the employers and Kelsey because it saved the employers from the trouble of having to pay small sums to workmen and Kelsey got financial benefits as a result of the arrangement which he made with his employers. It seems to me that this case is within the principle laid down by Mr. Justice du Parcq in Passmore v. Vulcan Boiler and General Insurance Company, Ltd., sup. That case having been decided a long time ago. a number of cases have been looked at and, as far as I can see and, as Counsel has pointed out, there is nothing in the reports to show that any Judge has ever disapproved of the principle. Accordingly, I find that at the material time Kelsey was not using this motor vehicle within the description of use covered by the policy. It follows that he was driving uninsured."

21. In the case of Jones v. Welsh Insurance Corporation, Ltd. (1937) 59 Lloyd's List Law Reports 13 Goddard J. as he then was said at page 15:-

"The policy provides that the insurers are not to be liable while the car is "being used otherwise than in accordance with the 'Description of Use' contained in this policy." The description of use was "In respect of vehicles not described in the schedule to this policy use for social domestic and pleasure purposes only." and in the case of vehicles described in the schedule use in addition "by the insured in person in connection with his business or profession as stated in such schedule," which in this case was that of a motor mechanic, and excluding in any case the "use for the carriage of goods or samples in connection with any trade or business". So the point I have to determine is whether the use at the time of the accident was social or domestic or for carrying goods in connection with any trade or business."

Later he said :-

"The truth is that he was a sheep-farmer, though on a very small scale, and think I am bound to hold that he was carrying on that business as a sideline, so to speak, but none the less it was a business. The car at the time of the accident was accordingly being used, not by the insured in person in connection with his business of a motor mechanic, but was being used for the carriage of goods in connection with the business of sheep farming."

22. As can be observed all the English Authorities were decided on the special terms of the policies which are quite different from the terms of the policy now under consideration. They are far more stringent. In the present case the limitation to use is only that of being in connection with the Insured i.e. the 1st defendant's business. It has not provided that it must be in connection solely with the insured's business or in connection with the insured business in the person of the insured. As I have found that at the time of the accident the 2nd defendant was driving the said vehicle in connection with the 1st defendant's business it matters not that he was also using the said vehicle in connection with his own business. That has not been prohibited by the insurance policy. At the risk of repetition I refer to Du Parcq J.'s dictum in Passmore's case in which he said:-

"If the policy only said that Miss Passmore was to benefit by it so long as the car was being used for the purposes of her business, I think her position would be unassailable, because it was being used for the purposes of her business; but that is not what the policy says, and though it is true that when words are ambiguous they must be construed contra proferentem against that party to the contract who is responsible for the drafting of it, that principle cannot be prayed in aid unless the words are of real ambiguity."

23. If no clear words are used I must construe the terms of the policy against the 3rd Party which was responsible for drafting the terms.

24. For these reasons I hold the 3rd Party liable under the Policy to indemnify the plaintiffs and the defendants.

Representation:

O. Cheung, Q.C.M Miss J.J. McGrowther (Edmund Cheung & Co.) for plaintiffs

Mills-Owens (H.H. Lau & Co.) for 3rd Party

J. Chan (Lai & Li) for 2nd defendant

E. Chan Fairbairn Kwok & Wang) for 1st defendant