Canasal Ltd v. Sun Hung Kai Insurance and Another

HCA003169/1984

1984, No. 3169

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Macdougall, J.

Dates of hearing: 16, 17 and 18 April 1985

Date of judgment: 18 April 1985

Date of handing down: 2 May 1985

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JUDGMENT

1. On 9th September 1983 typhoon "Ellen" paid an unwelcome visit to Hong Kong. One of the casualties was the speedboat "Sexy" which was irreparably damaged while secured to a slipway in a shipyard.

2. At the time that the damage was sustained there was in force a policy of marine insurance taken out by the plaintiff with the defendant in the sum of $800,000 in respect of the vessel.

3. The proposal form dated 3rd June 1983 was filled out by Mr. Leung Man-Kai, an employee of the defendant on the basis of information largely provided by a Miss Law employed by the plaintiff and authorised by it to provide such information and to sign the proposal form on its behalf. Miss Law was required to report to her boss on what had been done and, on occasions when tie was unavailable, she was authorised to sign insurance documents on his behalf for the plaintiff. Her authority extended no further.

4. In answer to questions in the proposal form the plaintiff declared that the vessel would be moored either at the Aberdeen typhoon shelter or the Causeway Bay typhoon shelter and that it would not be "removed out of the water and properly secured ashore above the normal typhoon high water line". A policy of insurance was issued shortly afterwards. It stated that it was subject to general conditions and to an endorsement No. A attached to it.

5. One of the warranties in endorsement No. A states:

6. Sometime after the issue of the policy the vessel was moved to the shipyard of China Marine Service at Aberdeen where it was kept on a slipway when not in use.

7. Miss Law testified that Mr. Leung later telephoned her and informed her that he had visited the shipyard and had viewed the vessel on the slipway. He suggested that an endorsement should be added to the policy to the effect that the vessel had been placed on a slipway but did not mention any specific terms or conditions referable to the endorsement. Miss Law told him that if an alteration to the endorsement was really necessary he should proceed with it.

8. Subsequently an endorsement dated 8th August 1983 and amending endorsement No. A under the policy was sent by the defendant to the plaintiff. It states that its effective date was 30th June 1983 and that there would be a return premium of $712.60. The endorsement reads as follows :

9. According to Miss Law she did not scrutinise the terms of the endorsement with any degree of particularity but merely assumed that they accorded with what Mr. Leung had told her earlier in the telephone conversation.

10. It was not until the day on which she resumed work after typhoon Ellen had struck that Miss Law had any further contact with Mr. Leung. On this occasion she telephoned him to inform him that the vessel's coxswain had told her that it had sunk. She requested him to send her an insurance claim form and to carry out a survey. Mr. Leung agreed to meet with both requests.

11. After her boss had completed and signed the claim form and had remitted it to the defendant, Mr. Leung requested Miss Law to arrange to have the vessel winched out of the water and placed on dry land so that a survey could be performed. This was done. Subsequently Mr. Leung informed her that the vessel could not be repaired and that there was no point in retaining it. Ultimately the vessel was disposed of.

12. At the very outset counsel for the defendant conceded that the plaintiff's claim for the cost of salvaging the vessel, the slipway charges incurred for the purpose of the survey and the cost of disposing of the vessel would stand or fall with the claim for the sum for which the vessel was insured abated by an amount deductible in respect of the insurance claim and for which provision was made under the policy.

13. He also announced that he would not contend that the vessel had not been taken out of the water nor that it had not been secured above the normal typhoon high water line. His sole contention in this regard was that the vessel had not been "ashore" at the relevant time. The gist of his argument was that it could not be said to have been "ashore" unless it had been drawn up beyond the shore line. He sought to demonstrate from the evidence that although the vessel might well have been drawn up the slipway clear of the water level, part of it had remained projecting over the shore line.

14. Counsel for the defendant also accepted that the onus of proving that the plaintiff had committed a breach of the warranty in the amended endorsement rested on the defendant.

15. I now turn to a consideration of the evidence relating to the location of the vessel at the relevant time.

16. Mr. Chan Chi-ming a partner in China Marine Service, testified that the vessel had been stored at slipway No. 3 at his shipyard since about May or June 1983. Two of the three slipways in the yard were used for the storage of boats while the remaining one was used to effect repairs.

17. Slipway No. 3 consisted of a wooden structure erected on a rock outcrop on dry land at the base of a hillside. Two wooden sliprails rested on the top of the structure and ran into the water. At the time of the typhoon the vessel had been winched up to the highest point of the slipway by means of an electric winch and rested on a wooden cradle to which it was secured with nylon ropes. The platform itself was chocked into position by a piece of timber.

18. There was some early confusion in Mr. Chan's evidence because of a misunderstanding as to what the words "above water" or "above water level'' meant when used in connexion with the position of the vessel, that is to say, whether they referred to the vessel as being above water level but projecting from land over the water or whether they signified that the entire vessel was located above the shore line. Indeed, similar confusion arose during the course of the evidence of another witness for the plaintiff, one Captain Gardner. Ultimately however Mr. Chan made it clear that the position of the vessel was such that by standing on the rocky outcrop and raising his arm directly above his head he would have been able to touch the tip of its stern after it had been winched into position on the slipway. It was therefore plain to me that when in his earlier evidence he had said that the vessel's stern had been 5 or 6 feet above water he had in mind the height of the stern above water level at high water and was not referring to the distance the stern had been projecting from the slipway over the shore line.

19. Counsel for the defendant conceded that if I accept Mr. Chan's evidence the plaintiff must succeed. However, he submitted that I should place no reliance on that evidence. In particular, he argued that estimates which Mr. Chan gave as to the length of the slipway were inconsistent not only with Mr. Chan's own evidence that he would have been able to reach directly above his head and touch the tip of the stern while standing on land, but also with the testimony of Captain Gardner, who testified as to the dimensions of the slipway as he recalled them when he had performed work there on a vessel some 3 or 4 years before the arrival of typhoon Ellen.

20. Although I have no doubt that Captain Gardner was a truthful and reliable witness I am unable to say that his evidence causes me to doubt the accuracy of Mr. Chan's testimony. Captain Gardner freely conceded that the entire area around the shipyard had changed considerably during the last three to four years, that the shipyard itself had changed hands and that it was entirely possible that slipway No. 3 had been reconstructed after his last visit to the yard before September 1983.

21. I do not consider that the imprecise nature of the evidence given by Mr. Chan about the length of the slipway platform is sufficient to displace his positive testimony that he would have been able to touch the stern of the vessel while standing on the rock outcrop above the water line. Moreover I do not gain any real assistance from photographs taken after the event of the location where the slipway stood prior to its destruction in the typhoon. From the two dimensional views depicted in these photographs, which were taken from directly in front of the rock outcrop on which the slipway had been constructed, I am unable to form any reliable impression as to how far it would have been possible for the slipway to have extended inland from the water line.

22. I find it significant that the defendant called no evidence either as to how far inland the slipway extended at the time of the typhoon or, bearing in mind the proximity of a steep hillside, as to the furtherest point inland that it was possible for a slipway constructed on that location to have extended. In particular, Mr. Leung, who had told Miss Law that he had visited the location and had seen the vessel on the slipway shortly before the typhoon, did not give evidence on this or any other matter. It was never suggested to Miss Law in cross-examination that Mr. Leung had not in fact told her what she claimed he had said to her. Nor did counsel for the defendant challenge Mr. Chan as to his claim that he would have been able to touch the stern of the vessel while standing below it on the rock outcrop.

23. The agreed bundle of documents contained a sketch drawn by an unknown person which purported in a rough and ready way to depict certain aspects of the location. No evidence was called to prove its accuracy. Moreover it did not accord either with the evidence of Mr. Chan or that of Captain Gardner.

24. It seems to me as a matter of commonsense that the word "ashore" when used in the context in which it appears in the amended endorsement means a place on dry land. For a vessel to be ashore it is not necessary that its hull must actually rest on dry land. It is enough that the vessel should rest on a structure erected on dry land. The mere fact that part of the structure consists of a pair of rails which extend into the water to facilitate both the slipping and the launching of vessels seems to me to be irrelevant. Likewise it seems to me to be irrelevant that part of a vessel that has been winched completely clear of the water and secured on that structure might overhang the shore line.

25. Both counsel referred me to the meanings given to the words "shore" and "ashore" in the Oxford English Dictionary Vol. IX. In particular counsel for the defendant drew attention to the following definitions:

"Shore

26. I do not find the latter definition to be of any assistance to the defendant as it seems inconceivable in the context of the amended endorsement that the parties had in mind that the vessel must be kept on the narrow tract of land lying between the ordinary high and low water marks.

27. The definition of "shore" that more reasonably accords with the sense of the word "ashore" in the amended endorsement is the third definition given in the dictionary, namely,

28. The relevant definition given to the word "ashore" is

29. "2. Of position: On shore, on the land."

30. The word "land" is defined in Words and Phrases Judicially Defined (2nd Edn.) as

"The term 'land', in its legal signification, includes any ground, soil, or earth, such as meadows, pastures, woods, moors, waters, marshes, and berth; houses and other buildings upon it ....."

31. Counsel also cited several authorities to me but I did not find them to be of any further assistance in resolving this matters.

whether the stern had been on the land side of the shore line or had projected over it at the relevant time I am satisfied that as the vessel had been secured on a slipway constructed on dry land above the shore line it was ashore within the meaning of that word in its context in the amended endorsement. Moreover I find on the evidence of Mr. Chan, that the whole of the vessel lay on the land side of the shore line at the relevant time. Either of these two reasons would be sufficient for me to give judgment for the plaintiff.

32. For the sake of completeness, however, I propose to deal with two other matters raised by the parties. In its reply the plaintiff pleaded that because it had relied on the skill, judgment and expertise of the defendant in issuing the appropriate amended endorsement to cover the risk, and the defendant had not complained to the plaintiff about the slipway or suggested to it that it was unsafe or insecure, the defendant was therefore estopped from alleging that the slipway was not secure or safe enough to protect the vessel from the perils of the sea or from a typhoon. Alternatively, the plaintiff pleaded that it would be inequitable in all the circumstances for the defendant to allege a breach of the warranty in the amended endorsement.

33. The sole contention made by the defendant at the trial as to breach of warranty was that the plaintiff had failed or neglected to secure the vessel ashore either properly or at all. The plea of estoppel or alternatively the plea in equity was based on the unchallenged evidence that after Mr. Leung had visited the shipyard before the typhoon and had seen the vessel on the slipway he had proposed the amendment to the endorsement. Counsel for the plaintiff submitted that the defendant by its conduct had impliedly accepted that the placement of the vessel on the slipway accorded with the requirements of the amended endorsement.

34. However, it may well have been that the stern of the vessel lay inland beyond the shore line at the time that Mr. Leung made his inspection. If that be so - and the plaintiff has not proved it to be otherwise - I do not see how an estoppel can arise or a plea in equity be made out. There was no evidence as to either the manner in which the vessel had been attached to the cradle or the position of the cradle on the slipway relative to the water at the time of Mr. Leung's visit. Moreover, since the terms of the amended endorsement had been conveyed to the plaintiff the defendant was entitled to assume that the plaintiff would read and understand them. In my view it was not incumbent on the defendant to inform the plaintiff at the time of the issue of the amended endorsement that the vessel had on a previous occasion been located on the slipway otherwise than in accordance with that endorsement.

35. Finally, the plaintiff contended that the amended endorsement did not accord with the terms which Mr. Leung had proposed to Miss Law and that there was no evidence that the plaintiff had accepted it so as to make it binding on the plaintiff.

36. I do not agree. There was evidence that the plaintiff had been granted a return premium of $712.60 in connexion with the amended endorsement. A credit note had been issued by the defendant to the plaintiff which was clearly referable to a return premium relating to the speedboat "Sexy", and the plaintiff accepted the return premium by setting it off against an amount due by it to the defendant concerning an account payable on another speedboat.

37. Furthermore, after the defendant had rejected the plaintiff's claim on the policy the plaintiff's agents wrote to the defendant setting forth its contentions as to why the defendant should reconsider its decision. In this letter which actually quoted the words of the amended endorsement, there was no suggestion that it had not been accepted by the plaintiff. Finally although the plaintiff's solicitors in their letter before action expressly stated that they were in possession of copies of the correspondence exchanged between the plaintiff's agents and the defendant, they also did not advert to this crucial matter.

38. I was satisfied that at all relevant times the plaintiff had knowledge of the amended endorsement and that by its acceptance of the return of premium did in fact accept the terms of that endorsement. I therefore found that it was effective and binding on the plaintiff. Had there been any validity in the plaintiff's contention I would have expected it to have raised it with the defendant at a much earlier stage.

39. However, for the reasons I have already given, I give judgment for the plaintiff in the sum claimed, namely $805,040. At the request of both counsel I order that interest be paid on the judgment sum from the date of service of the writ at such rate as may be agreed between the parties and that in the event of failure to agree, the matter be referred to a Master for determination.

40. I further order that the defendant pay the plaintiff's costs.

Representation:

Mr. R. Tong instructed by Stevenson Wong & Co. for Plaintiff

Mr. K.B. Ng instructed by Woo, Kwan, Lee & Lo for Defendant