Carter Textiles (A Firm) v. China Insurance Co Ltd

HCA000589/1976

IN THE HIGH COURT OF JUSTICE

ORIGINAL JURISDICTION

ACTION NO. 589/76

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Coram: Li, J.

Date of Judgment: 12th November, 1976 at 4.20 p.m.

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JUDGMENT

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1. In the early hours on the 28th November last year a fire broke out on the 2nd floor of the building at 40-42 Ta Chuen Ping Street, Kwai Chung. That was about 5 a.m. in the morning. As a result of this fire a certain unit on that floor, namely, Unit D, suffered severe damage in the form of burnt cloth materials, finished products and machinery. At the time of the fire Unit D was the premises used by a firm by the name of Carter Textiles which insured with the defendant, China Insurance Company Limited, in respect of goods, furniture and machinery.

2. The plaintiff put in his claim for compensation under the policy. The defendant denied liability on the principal ground that the plaintiff committed a breach of warranty. It is alleged in the defence that in breach of Storage Warranty (Industrial Risk) No. 86 the plaintiff had stored, or permitted or allowed waste materials and/or semi-finished products to be stored, temporarily or otherwise, in a passageway in common use with the plaintiff's premises in the said building. The Storage Warranty (Industrial Risk) Clause contained in the policy reads as follows:-

"Warranted that during the currency of this policy no waste material or goods of any description whatsoever whether belonging to the insured or not shall be stored temporarily or otherwise on any staircase or landing or in any passageway within or in common use with the premises described in the policy. Warranted also that all waste materials will be kept in metal receptacles and removed from the building daily."

3. The defendant also dispute the plaintiff's insurable interests over these goods and the quantum of damages.

4. In view of the pleadings the one outstanding issue is whether there was waste materials or semi-finished goods placed on the landing in breach of the warranty. The defendant, being the person who alleges breach of warranty, is obliged to open the case and the burden of proof lies on the defendant. At the commencement of the proceedings I am informed that, subject to the question of liability, the parties agree that they accept the assessment of the assessors as to the quantum of damages to the sum of $310,379.58. Thus evidence is called only on the issue of liability.

5. The defendant relied entirely on the evidence of the Fire Services Department, in the fire reports as well as the evidence of Divisional Superintendent LEE and Mr. KWOK the fire officer in charge of the fire fighting team.

6. According to Divisional Superintendent LEE he arrived shortly after the fire appliances were on the scene. He went up to the second floor, the floor in question, and he found that the smoke was so intense that he could not go near to the end of the corridor. Perhaps I should add that the plan of the second floor has been admitted in evidence and incorporated in the fire report. A non-scale sketch and outlaying plan of the floor has been produced in Exhibit 2. The superintendent says that as one enters the building and goes up the stairs one faces a sub-division of the 2nd floor, division at Unit A. It is a straight corridor where, when one walks further in, one will get into Units B, C eventually D and E. He could go nowhere past the point between Units B and C. The smoke was so very intense that he could not see much. As a result, he had to use a breathing apparatus (and with a jet of water spraying over his back to keep him cool) to move down past Unit D where the corridor took a right turn. As soon as he reached that point, at the turning point, he saw flames burning on a pile of material in two spots - one spot at the turn of the corner and another spot further in which was near the doorway of Unit F. He said that the smoke and the heat was so intense that he had to adopt that method to move close to the fire.

7. Fire Officer KWOK, who arrived at the scene a bit earlier, gave evidence that, on arrival, he saw a few persons in the corridor of the second floor. The smoke and the heat was so intense that he would not expect any person unaided by anything could have gone beyond Unit C. After the fire was brought under control and still smouldering he and the superintendent went through an inspection of the burnt portion of the premises. They discovered that there were piles of semi-finished products in the form of garments, and waste materials in the form of rags, scattered in that part of the common passageway, the corridor between Unit D and Unit E. He marked the spot on the plan. Incidentally, Superintendent LEE also marked the spot where he first saw the two places of fire that was in flame. Both of them said that at the time the smoke was so thick that it was difficult to see anything that was burning.

8. There is also evidence that Mr. KWOK had to go up to the third floor to look down to the second floor through the light well. He saw flames bruning fiercely on the second floor along that part of the corridor. He also organised a team of personnel to go into the building through the rear door which was located at the end of the corridor near to Unit E and F. He had to send two men to the third floor to make their way from the third floor down the stairs to the ground floor and cut open the rear door. Then through the rear door they put in a fire hose along the staircase from the rear door up to the second floor to put jets of water on to the fire. He also alleged that on the landing between the second and third floor there were obstructions. At the time it was so dark he could not see what the obstructions were.

9. On such evidence the defendant contends that there was, first of all, obstructions on the common passageway, the corridor between Unit D and Unit E, and also obstructions on the landings of the staircase. I shall dispose of the obstructions on the landing of the staircase first. It is quite correct that it has not been pleaded in the defence as part of the facts relied upon by the defendant as obstructions. However evidence was adduced no objection was raised against it. Since it has not been pleaded, I shall ignore that bit of evidence and I will not consider whatever obstruction there might have been placed on the landing as an obstruction. My sole concern is to find out whether there was, indeed, any satisfactory evidence that there were obstructions in the corridor between Unit D and Unit A.

10. Encountering this defence, the plaintiff's evidence is that, the second floor premises were in fact, part of the factory premises of the plaintiff firm. Their Manager, Mr. LEE Chi-ping, (I will refer to him as Manager LEE) gives evidence that the firm has its workshop on the 6th floor. When the products were all completed, practically completed, they would be sent down to the second floor to Unit D for finishing work, like bar tabbing, buttoning, and if there's any rectification work to be done, any faulty work, it would be corrected in Unit D on the second floor. Then they would be packed in the paper cartons, ready for shipment. There was no question of any semi-finished product on the second floor. He also says that as the second floor was not used as a workshop there was no question of any cloth rag being there. It was used as a packing centre. When the goods were packed the only waste material that could be found on the second floor in Unit D was some of the waste paper tapes. Unit D was also used as a store room to store raw materials in the form of clothing materials. He says that on the evening before the fire he left the factory at about 9.50 p.m. and he did not see anything at all on the corridor at the time he left. In any event, there were strict instructions to the employees that they should not leave any rags or put anything in the corridors. There was a person with a garbage van coming in daily between 5 to 7 p.m. to collect the waste material and take them away.

11. A work manager who was at the time in Unit B also gives evidence for the defence. His evidence is that at about 5 o'clock on the morning of the 28th November he was wakened by the watchman of the building. He was told that there was a fire in Unit D and he at once went to try and help put out the fire. He emptied three of his fire extinguishers through the windows from the corridor into Unit D premises. He said that, as he came out from Unit B into the corridor he could see flames coming through two windows of Unit D into the front corridor. Having exhausted the three extinguishers he went on to another unit premises, Unit A, and called out persons to help him to empty three more fire extinguishers. These efforts did not meet with much success. He then went to the other end of the corridor, turned round to somewhere opposite Unit E, outside of Unit E, to fetch a fire fighting hose and drag it along to inject water into Unit D so as to put out the fire. That, again, had not achieved much. By that time the fire officers arrived. He and his friends were told to evacuate the building. Before he did so he helped the fire officers to put up or pull up fire fighting water hoses onto the second floor. While he went through the corridor, from one end to another, down to the spot where the firs hose of the building was (just near the light well) as indicated in Exhibit 2, he never saw any obstruction. Nor was he obstructed by anything.

12. Such is the sum total of the evidence of the two parties over this issue. They are diametrically opposite. First of all, I have the evidence of the plaintiff that it is most unlikely that there could be any unfinished goods on the second floor, because all goods that were moved to Unit D on the 2nd floor were completely finished except for bar tabbing and buttoning. Secondly, there couldn't have been any rag or cloth materials on the second floor because the workshop was not there. It was used as a packing room and a storage room. We have the evidence of Mr. Ho, the metal workshop manager who went to the end of the corridor to drag out the fire hose. He said that he did not encounter any obstruction whatever. Nor did he see any waste material or anything of that nature along the corridor.

13. On the other hand, we have the evidence of the Fire Officers who said in so many words, that they had seen these obstructions already in flames when they went near the end of the corridor. In the fire report signed by superintendent LEE paragraph 17 states the opposed cause of fire as : "Believed to have been lighted cigarette end thrown away by a workman ignited accumulated rags in the common corridor which, in turn, set fire to the semi-finished products placed nearby." Admittedly the supposed cause of the fire is a mere matter of speculation. It does say, in so many words, that he found semi-finished products placed nearby and accumulated rags found in the common corridor.

14. According to Superintendent LEE, when he eventually reached that end of the corridor he saw two piles of this sort of material in the corridor, burning, and they were stacked about waist high. It may well be that at the time when Mr. Ho went to fetch the hose there was no obstruction there, but by the time when Mr. LEE went which was some 5 or 10 minutes later, the fire had become so intense and so severe that it had damaged a door, or a blocked door between Unit D and the common corridor, and a lot of goods spilled out into the corridor and were found burning.

15. In that event, both versions would have been correct. However, I find it difficult to resolve the differences of the two version. The version given by Superintendent LEE did not stop at para.17 of the fire report. In a letter from the Fire Services Department this allegation is repeated. It is dated the 21st January, 1976, addressed to the firm of Nielsen & Malcolm the assessors of the insurance company. It reads: "The officer in charge of the incident reported that the rags and semi-finished products found in the common corridor at the time of the fire were those of clothing materials." So Superintendent LEE reasserted, in January 1976, what he saw and what he found when he was fighting the fire, and during his investigation on the 28th November, 1975.

16. Unless Superintendent LEE has committed deliberate perjury, there seems to be no reason why he should refer again to semi-finished products. It may well be that as far as the difference in evidence between Manager LEE and Superintendent LEE is concerned, the experienced manufacturer will refer to goods which are practically finished products; whereas, as far as Superintendent LEE is concerned, anything that is not completely finished, not a completed garment, is semi-finished, even though they are without button holes. In any event whatever clothings that are damaged, finished or unfinished, they all look half-finished, because they are, half-damaged. That is not so important. The only important difference is the evidence of Mr. Ho, the metal workshop manager, and that of Superintendent LEE.

17. I do not place too much reliance on Mr. Tam Chak, another of the plaintiff witnesses. According to his own evidence he never went beyond the window of Block D which is near to Block C. I cannot rely on Manager LEE's evidence that on the night before the fire he could see no obstruction. It is clear that, under cross-examinations, he had not been round to that part of the corridor where the stacked material was supposed to have been seen burning by Superintendent LEE. The only difficulty I have is the difference in evidence between Superintendent LEE and that of Mr. Ho. As far as Mr. Ho's evidence is concerned, he could go right into the end of the corridor. Superintendent LEE and Mr. Kwok who arrived at the most only 5-10 minutes after the fire was discovered found the heat was so intense that he could not go very far beyond Unit C. I doubt very much if Mr. Ho. in fact, would go to the extent of the other end, the extreme end of the corridor to fetch a fire hose after he failed to extinguish the fire after using no less than six fire extinguishers. The reason why I say this is that, by the time of arrival of Mr. Kwok the heat was already intense. The fire must have been burning for some time before it was discovered. Otherwise there would not have been such intense heat and smoke. What is rather surprising is this, that Mr. Ho gave a statement to the principal tenant. I understand part of that statement to read: "At that time, 7 or 8 of us were running to and fro the corridor of the third floor, or the passageway of the third floor, picking up fire extinguishers and pulling fire hoses. I clearly observed that the whole corridor was completely unobstructed, there was no miscellaneous material or any goods stacked there. All these are true." This statement is undated. It is alleged by Mr. Ho that he was asked by the principal tenant to give a statement soon after the fire. There and then the principal tenant scribbled something in the form of this statement in Exhibit 9 for him to sign. It is quite obvious, if that were the case, that this piece of evidence is vital to the plaintiff. It would be most damaging to the defence who allege a breach of warranty yet not a single question was put to the fire officers or Superintendent LEE that there had been an extra fire hose, already lined up injecting water into Unit D. It would in turn, establish that Mr. Ho had been to fetch the fire hose at the other end of the corridor. As it was, no question was put. I doubt very much whether Mr. Ho was in a position to go to that end of the corridor to fetch a fire hose.

18. Having considered the evidence, I find on the balance of probability that the evidence given by Superintendent LEE is more acceptable, and I find, as a fact, that at the material time there were goods, or semi-finished goods or waste materials, burning in the common passageway between Unit D and Unit E.

19. I have been asked to say that on the authority of Thompson v. Equity Fire Insurance Company, and on the appeal case of 1910, that in order to prove storage there must be evidence that it was in substantial quantity and there must be someone to put it deliverately there. That, I must confess, I can not read that authority into laying down these conditions. It is true that in order to constitute storage there must be a substantial quantity of substance. There is no guiding line as to what is an amount of substance, considerable substance. I find in the present case that any material or goods stacked up to waist high must be fairly substantial. As far as the question of a person having put them there or not, I would be inclined to follow the judgment of my brother Cons in Far East Hair Goods Manufacturing Company Limited v. Grand Union Insurance Company in Action No. 1243 of 1975, that in the present instance if goods were found then someone must have left them there, and if someone had left them there for some period of time, it must be within the meaning of the word storage. I find, as a fact, that at the material time, someone, it did not matter who, had placed, whether deliberate or not, such material, like semi-finished product, clothing, and/or some rags in the corridor, which were stacked up about waist high. The period of depositing such objects there, or subject matter there, must be between the evening of the 27th November, 1975, up to the time of the fire which was a substantial length of time, and that the materials that were placed there were of substantial quantity, enough to distinguish the present case from that of Thompson's case.

20. As a result there was, indeed, a breach of warranty on the part of the insured, namely, the plaintiff. For these reasons the plaintiff's claim is dismissed with costs which will go, of course, to the defence.

Representation: