Far East Hairgoods Mfty Co Ltd v. Grand Union Insurance Co Ltd

HCA001243/1975

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 1243 OF 1975

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Coram: Cons, J.

Date of Judgment: 13 July 1976

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JUDGMENT

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1. The plaintiff is a limited company apparently engaged in the manufacture of plastics. It carries on its business at two premises in a factory building in Kowloon. One is on the second floor of Block C and the other on the fifth floor of Block B.

2. As a plastics manufacturer it was not easy for the plaintiff to obtain insurance cover on its stock-in-trade, machinery, and so on. Eventually the defendant company agreed to provide that cover. Two separate policies were issued in respect of the two separate floors. While the policies were in force a fire broke out in the factory building and damage was caused to the plaintiff's property on both floors. The amounts of the damage are not in dispute. They are $33,758.50 for the second floor and $170,873.13 for the fifth floor. Yet the defendant company declines to pay.

3. The two policies, like most if not all insurance policies, contain many things that the plaintiff warrants he will either do or not do in relation to the premises. There is also a proviso of course that due compliance with the terms of the policies is a condition precedent to payment out by the company.

4. One of the warranties common to both policies runs as follows:

Despite this there were goods in the lift lobbies outside each of the plaintiff's premises. In one case they did not belong to the plaintiff. It is said therefore on his behalf that he should not be held responsible, as it was impossible for him to ensure that the warranty was complied with. I do not think there is anything in this point. There was no evidence to support the suggestion of impossibility. And even if it were impossible, no authority was shown to me which would have excluded the effect of the clear words of the policy. Then it was said that the goods were not "stored". It would seem that it was the common practice of all the tenants of that building to put out their rubbish at the lift lobbies at the end of the day's business and that cleaners would come round early next morning and remove it. That was what the plaintiff had done that night on the fifth floor. It had put out some waste PVC in a few gunny sacks and some old iron machinery that was no longer required. The goods on the second floor lift lobby were probably someone else's rubbish. It was suggested that as the goods were left there only overnight it was not a sufficient length of time to justify the use of the word "stored". I was referred to Thompson v. Equity Fire Insurance Co.⁽¹⁾. That is a case where their Lordships of the Privy Council refused to accept that "stored" applied to a small amount of petrol contained in the selfsame household stove in which it would be used. The facts in themselves were not relied upon, but counsel drew my attention to the words (at 596):

Pausing there I do not think those words would necessarily exclude the notion of depositing for collection later on. Then their Lordships continue

I find no difficulty in the present instance. The goods in the lift lobbies were "stored" within the normal meaning of that word.

5. Then it was said that the machinery left there was neither "waste material" nor "goods". I fail to see the use of this submission when there was obvious and admitted waste material in the form of sacks of PVC and goods in the form of printed matter. But for the sake of the record I should say that I see nothing illogical in calling thrown away machinery "waste material".

6. Finally, and in this the plaintiff is successful, it was said that a lift lobby is neither a "staircase", "landing" nor "passageway". The most apposite would be "landing" but I agree with counsel that "landing" properly connotes a stop or resting place in a staircase. The omission of the word "any" before "landing" in the phrase "any staircase or landing", but its inclusion in the following phrase, "or on any passageway" may indicate that the person who drafted the policy thought likewise. Be that as it may, I am not satisfied that the goods in the lobbies were in breach of that particular condition.

7. The next warranty reads

It is admitted that none of the goods in the lobbies was in a retal receptacle but it is argued that the "building" referred to there means the plaintiff's own particular premises. I accept that as the correct construction. If the draftsman had intended it to mean the common part of the building as a whole he would have been as specific there as he was in the preceding warranty.

8. These are the only two warranties upon which the defendant company relies in relation to both floors. But the policy for the second floor contains an extra warranty that "no process of manufacture be permitted on the within described premises". Unfortunately for the plaintiff about nine months before the fire its managing director had rented part of the second floor to his brother-in-law. He was using it as an electro-plating factory. That is clearly in breach of the warranty. In the pleadings it was said that the defendant, by reason of the prior knowledge of its agent, one Jackson Lam, and his acquiescence therein, was estopped from enforcing that warranty. But the argument, if not completely abandoned, was not seriously pursued at the trial. I have great doubt that Jackson Lam was in fact an agent of the plaintiff company. Even if he were, however, his evidence was not of assistance to the plaintiff. It has not been suggested by the defendant that the electro-plating business in any way caused or assisted the spread of the fire or aggravated the damage suffered by the plaintiff. Nevertheless it was in breach of the warranty and the defendant company is entitled to refuse payment of the claim relating to the second floor. It has no reason to withhold payment in respect of the fifth floor.

9. For these reasons judgment is entered for the plaintiff in the sum of $170,873.13 with interest at 8% per annum from 18th April 1975 to the date hereof, with costs to the plaintiff and a stay of execution for fourteen days and if a notice of appeal be lodged within that time, until the hearing of the appeal or further order of this Court.

Representation:

K.H. Woo (Chan & Ho) for plaintiff.

Kemal S. Bokhary (Vincent Lo & Co.) for defendant.

(1) [1910] A.C. 592