Chan Lam-chun v. The National Insurance Co Ltd

HCA001516/1975

IN THE HIGH COURT OF HONG KONG

ACTION NO. 1516 OF 1975

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Coram: Cons J.

Date of Judgment: 25 October 1976

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JUDGMENT

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1. The plaintiff in this action is a young lady and was, until the 30th June 1970, a professional singer. On that day she was a passenger in a private car owned by one CHAN Ying, and driven at the time by one LAM Shui-keung. I shall call them respectively the "owner" and the "driver". There was an accident. The plaintiff was seriously injured. In due course she sued the owner and the driver and recovered judgment against them both. The damages and costs together with interest up to just after the present writ was taken out amount to $220,000. She has not been paid one single cent. The owner and driver have since been made bankrupt.

2. When this happens to a person liable for damages in a traffic accident the victim can usually recover from the appropriate insurance company. He has the right to step into the shoes left by the person liable. This is provided by the Third Parties (Right Against Insurers) Ordinance, Cap. 273. In this instance the owner was insured with the National Insurance Co. Ltd., whom I will call "the company". His policy covered the driver as well. The plaintiff therefore now sues the company under the Ordinance. But the company declines to pay. It says that in the particular circumstances the owner and the driver have left no shoes for the defendant to step into.

3. The insurance policy, like most of its kind, contains conditions. Due observance of those conditions is a condition precedent to any liability upon the company to pay. Condition 2 is material in this case:

"No admission offer promise payment or indemnity shall be made or given by or on behalf of the Insured without the written consent of the Company which shall be entitled if it so desire to take over and conduct in the name of the Insured the defence or settlement of any claim or to prosecute in the name of the Insured for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings or in the settlement of any claim and the Insured shall give all such information and assistance as the Company may require."

4. The company says that both the owner and the driver were in breach of that condition. What happened was this. The accident occurred in June 1970. Shortly afterwards the owner filled in the usual accident advice form. He set out what he said he understood from the driver to be the circumstances of the accident. The company took no action until the following year. On the 10th February its solicitors wrote to the driver, referred to the accident and asked him to call at their office to give them his version of the circumstances that led up to it. The solicitors copied that letter to the owner. The driver did not go to the office nor even acknowledge the letter. On the 8th March the solicitors wrote again, this time direct to the owner. They asked him to attend their office for the same reason and to bring the driver along with him. They added that a third party claim had been lodged. The owner ignored that letter and a reminder which was sent twelve days later. That was all the company did at the time. Much later they made other attempts to get in touch with both the owner and the driver, but those attempts are irrelevant because it is only the three letters which I have just mentioned that are pleaded by the company. There is actually one other matter pleaded - an express refusal by the driver to assist - but this has not been proved.

5. It is no longer disputed that the three letters were sent. I am not sure if it is disputed that they were ever received. Counsel for the company says that so far as the driver is concerned the matter is res judicata, that I am bound by the decision of Mr. Commissioner Morley-John, as he then was, in the original action. I am not sure that I agree with him but this does not matter. The letters were dispatched in the normal course of the post to addresses which were, in the case of the owner, the address given in the policy, and in the case of the driver, the address which he still gave as his own some two years later. There is nothing to suggest that the letters did not duly arrive. I am satisfied that they did.

6. Counsel for the plaintiff has put forward several arguments. He refers first to the general wording of the policy. It is expressly made "subject to the terms exceptions and conditions contained herein or endorsed or otherwise expressed hereon". But counsel points out that these words appear on the front of the policy whereas the conditions appeared on the back. Thus the conditions were not contained thereon or endorsed or expressed thereon. Alternatively the conditions were not sufficiently brought to the attention of the policy holder. He would expect to find all the conditions on the front or on the inner pages, and not on the back. A duplicate copy of the policy has been shown to me. I must confess to some doubt which actually is the front and which the back. It is the kind of policy that appears to be designed to be folded in four. This gives a title page which, incidentally, instantly requires, in fairly bold type, that the holder read the conditions of the policy. But whichever way one looks at it the conditions are "endorsed" on the policy. The fact that there is writing on the back page is obvious to anyone who looks at the inner pages and there are no other conditions printed elsewhere. The holder should find them. I am satisfied that they are binding.

7. As a refinement of this argument counsel suggests that the conditions, even if they should apply to the owner, need not necessarily apply to the driver. The cover extends to the driver provided that he "as though he were the (owner) fulfil and be subject to the terms exceptions and conditions of this Policy in so far as they can apply". With respect I cannot follow this argument. Condition 2 calls for the giving of information and assistance. There is no reason why that cannot apply to the driver.

8. Counsel's second argument depends upon a reading of the second condition itself. He suggests that upon a true construction of that condition the right to require information and assistance only arises once the company has actually taken over the defence of a claim; that in the present instance it did not do so until it entered an appearance for the owner and driver on the 25th March; and that after that date it has not called for any information or assistance, the letters on which it relies were written almost one year before that date. I think counsel is right to some extent. The right to call for information and assistance is not a general right to be exercised as and how the company thinks fit. A claim must first be made. But I think counsel goes too far in assuming that the claim must be a claim by way of formal process. The condition does not say that. The words "defence" and "prosecute" may perhaps be more appropriate for formal rather than informal "proceedings". But "settlement" is equally apt for either. To my mind claim in this context means any intimation, whether formal or otherwise, by a third party that the third party holds the insured liable for damages. This is not a novel construction of the word. It was adopted many years ago in relation to industrial accidents where compensation was sought under the old Workmen's Compensation Acts.

9. There is no direct evidence when the plaintiff first lodged her claim in this sense. The first mention is in the letter of the 8th March. But it is reasonable to assume that the claim had been made earlier. Otherwise it seems most unlikely that the company would have written on the 10th February or at all. The question then is has the company taken over the settlement of the claim? I think it has. It would be unrealistic to confine "settlement" to the actual payment out at the end of negotiations. That is its meaning perhaps in relation to formal claims. But for informal matters it must include the whole process of dealing with the claim. That is its natural meaning in that context. And the company takes over doing that from the moment that it decides to accept responsibility on behalf of the insured. In the present instance it did so upon receipt of the plaintiff's claim. This is shown by its instructing its solicitors to write to the driver.

10. I should add that this argument has caused me considerable concern. It was not dealt with at all by defence counsel and there is the ever-present fear that one may finish up with a condition that the company intended to impose, and could very properly and very reasonably have imposed, but for which it may have failed to find the proper words.

11. The third argument can be quickly disposed of. It is said that the owner did in fact give information and assistance; he filled in the accident report form. That is true so far as it goes. But he did not give all such information and assistance as the company required. The company required a conference. He did not give it.

12. Then it is said that the owner cannot be blamed for the driver's failure to help. That must be so. The driver is, for his own part, also "the insured", but it is a separate and distinct part. The company can reject liability for the owner only if the owner himself is in breach.

13. Next it is said that the driver could not lawfully be required to assist where that assistance would take the form of giving untrue evidence. This argument is based upon two documents: (a) the defence filed which alleged that the accident was caused by the blowing out of a front tyre; (b) the driver's statement to the police that the accident was caused by his unfamiliarity with that particular stretch of road.

14. With respect the argument is irrelevant so far as matters are pleaded in the present action. The driver was not asked to give evidence. He was asked to attend at the solicitors' office to tell them what happened. At that stage the solicitors did not have a copy of his statement to the police and the question of filing a defence had not yet arisen. In like manner it is irrelevant to suggest the driver did comply by ultimately attending court when the trial was half way through. It is correct that he was later, in a way, asked to appear as a witness but that is not the issue. The issue is whether he should have attended at the solicitors' office two years earlier.

15. Finally it is said that the company could only make a request that was reasonable. The authority quoted is Braunstein v. The Accidental Death Insurance Company⁽¹⁾. Then four matters are put forward to show that the letters sent by the company were not reasonable: (1) They requested the recipient to go to the office of the company; (2) the company already knew the version of the driver; (3) there was no possible defence to the claim; and (4) they were in English.

16. I do not think there is anything in these points. It seems to me eminently reasonable that an insurance company faced with a claim on one of its policies should want to discuss the circumstances with those concerned. The company may already have some information as to those circumstances but almost inevitably there will be other matters still unresolved. There may be no complete defence but discussion with an experienced lawyer may well bring out some contributory negligence. A solicitors' office is probably the most convenient place for such a discussion. A man's place of business or his home would almost certainly have distractions or to some witnesses even be thought to place them in a bad light with their associates or neighbours. It may be if either the owner or the driver had replied to the effect that it was not convenient to attend the office then different considerations would have applied. But a request in the first instance to come to the office seems a most sensible course. As to the language of the letters, so far as the owner is concerned English was the medium of the policy and of the accident report form. There is nothing to show that the driver read or understood English. But if the company is expected to behave reasonably so is the driver. The letters could not have looked like advertising circulars. There could have been no insuperable difficulty to find someone to tell him what they were all about. It is unreasonable just to throw them away.

17. I am satisfied that by ignoring those letters both the owner and the driver were in breach of that particular condition. This puts the plaintiff in a most unfortunate situation. It is sad for her. It is not her own fault. Porhaps if the two men on whom she is now forced to rely had realised the ultimate consequence of their action they would have behaved differently at that time. I do not know. Certainly no one would have sympathy with them if somehow or other the plaintiff had squeezed her damages out of them and they were now the plaintiffs in this action instead of her. If so, and for the reasons I have given, they would fail. She unfortunately must do likewise.

18. Judgment is entered for the defendant with costs and the plaintiff's costs are to be taxed in accordance with the Legal Aid Scheme.

Representation:

Henry Litton, Q.C., and Michael Asome (Director of Legal Aid) assigned for the plaintiff.

Kemal Bohkary (Johnson, Stokes & Master) for the defendant.

(1) [1861] 31 L.J. (Q.B.D.) 17