Camayenter Corporation Ltd v. China Underwriters Life & General Insurance Co Ltd

HCA001366/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 1366 OF 1977

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Coram: Mr. Commissioner de Basto, Q.C.

Date of Judgment: 31st January 1980

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JUDGMENT

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1. By a fire insurance policy the defendant company (the insurers) insured the contents of factory premises belonging to the plaintiff company (the assured) situated in Unit No. 3 on the seventh floor and Units Nos. 1 and 3 on the eighth floor of Harriman Factory Building at 95 How Ming Street, Kwun Tong in Kowloon.

2. At about 4 p.m. on the 21st December 1976, during the currency of the said policy, a fire broke out in the passage way and/or landing adjacent to the lift on the eighth floor of the said factory building (the lift lobby). It is not in dispute that, at the time of the fire and immediately before, the lift lobby contained a not inconsiderable quantity of goods which had been ordered and were intended for use by the assured. It is also not in dispute that some of these goods were stacked from floor to ceiling in the lift lobby.

3. In the course of the fire fighting operations in the lift lobby some of the assured's goods inside the assured's premises on the eighth floor were damaged by water and it is in respect of those damaged goods that the assured claims to be indemnified.

4. Station Officer Kwok Wing-kwok of the Fire Services Department was the officer-in-charge of the fire fighting operation. He testified that during the fire the lift lobby was severely smoked logged. All the articles stored in the lift lobby were superficially alight so that the firemen were obliged to direct their water jets in all directions. The officer testified that the situation in the lift lobby just after the fire was worse than that shown in the photographs produced by the assured, Exhibit D1. The officer testified that in his experience goods left in lift lobbies create a fire risk by causing obstruction and increasing the 'fire loading' of the area. The officer referred to the fire incident report he made in respect of this fire (at pages 35 and 36 of the Defendant's bundle). In that report the officer states that the "believed cause" of the fire was the "careless disposal of lighted cigarette end ignited nearby combustible material". The officer said that investigation after the fire revealed that the fire had not originated from any electrical source. The officer said (and it does not appear to be in dispute) that smoking was prohibited inside the assured's premises but no such prohibition applied in the common areas like the lift lobby and lavatories. The officer said the materials which caught fire were the polystyrene and some of the cardboard boxes. The officer said that if the cause of the fire was the careless disposal of a lighted cigarette it would take approximately 30 minutes to cause a fire. He rejected a suggestion it could have started 'more quickly'. He said the goods in the lift lobby 'slightly obstructed' a water hose reel. The officer said he did not see a fire extinguisher and/or fire bucket at the scene of the fire. He was referred to the photograph at page 17 of Exhibit D1 which shows a fire extinguisher and fire bucket. The officer said he presumed that at the time of the fire the fire extingusiher and fire bucket were hidden behind articles involved in the fire because the fire extinguisher and fire bucket appeared in the photographs to have sustained a degree of fire damage.

5. Mr. Yeung Sai-on an employee of the assured, gave evidence on behalf of the plaintiff. His responsibilities in December 1976 were to issue and collect goods on behalf of his company. His "office" was inside the assured's premises on the eighth floor.

6. He testified that between about 1 p.m. to 1.30 p.m. and about 4 p.m. (when the fire broke out in the lift lobby) he had taken delivery, in the lift lobby of 65 boxes (in two sizes) containing over 6,000 polystyrene packaging boxes (in two sizes), 300 flattened cardboard boxes and 28 bags containing vacuum cleaner parts. He said he took delivery in the lift lobby on the eighth floor because that was the floor on which his "office" was situated. The premises on the seventh floor were for assembly and packaging of goods (the packing section). He said that the eighth floor premises were used primarily or mostly for storage. When the goods were delivered to the lift lobby he directed where they should be stacked. He said the goods were stacked "very high".

7. At about 4 p.m. he heard an alarm and he and his colleagues "ran away" through the rear staircase. No steps were taken to deal with the fire because the smoke was "very serious". Before the fire started, or more accurately, before the alarm was raised, Mr. Yeung had been away from the lift lobby for about 15 minutes. When the alarm was raised Mr. Yeung was inside the factory premises issuing some "metal parts" which were required downstairs in the packing section. He was asked whether he considered issuing those metal parts more urgent than his "duty" to remove the goods from the lift lobby into the factory premises. He replied in the affirmative and he gave as his reason that the workers on the seventh floor were waiting for those parts.

8. The lift or lifts that served the seventh and eighth floors were not automatic nor could one summon a lift by pressing a button. If Mr. Yeung required a lift to take goods, for example from the eighth floor to the seventh floor, he would have had to go down to the ground floor and ascertain from the caretaker whether a lift was available. Each lift had a lift operator.

9. None of the goods delivered that afternoon had been moved into the factory before the fire broke out although Mr. Yeung had taken delivery, and he (or his assistant) had signed the relevant delivery orders. Mr. Yeung said the fire did not start while the goods were "being moved".

10. Mr. Yeung said that the polystyrene delivered that day represented 1½ days' supply, the 300 cardboard boxes (as well as the 28 bags of vacuum cleaner parts) represented a little over one day's supply. Mr. Yeung was asked that his intention had been with regard to the goods delivered on the 21st - to move them to the seventh floor or the eighth floor. He replied that "those goods were required by the seventh floor that day". Then he said that even if some of the goods were required that day they would not have been able to use them all that day down on the seventh floor-"some must be moved into the eighth floor". He also said that if the goods had been delivered earlier, say in the morning, all (sic) the goods would have been moved into the seventh floor from the eighth floor.

11. In chief Mr. Yeung was asked when it was his intention to move the cardboard boxes and polystyrene and Mr. Yeung replied that they were to be moved into the seventh floor in the packing section. He said his company received daily deliveries (sic) of polystyrene from Far East Polyfoam Ltd. He was asked by his counsel whether, if he had been notified the previous day or that morning that deliveries were to be made, he would have been able to accommodate the goods inside the factory and Mr. Yeung replied that that day they were "working under pressure to meet an order so polystyrene was delivered every day so there was no need to have them stored in the factory".

12. Again, he was asked in examination-in-chief what had been the practice regarding distribution in the factory with respect to "this" polystyrene that came every day. Mr. Yeung replied "immediately we would use them in our packing section". Mr. Pirie asked him what he meant by "immediately" and he replied that as soon as they had checked the amount which had arrived they would take them into the packing section.

13. The above is not intended to represent an exhaustive review of Mr. Yeung's evidence but I have considered the whole of the evidence adduced.

14. I found Mr. Yeung an unsatisfactory witness. I thought him evasive. I do not believe his evidence that goods were taken to the lift lobby on the eighth floor merely for checking purposes and then transported either to the seventh floor for immediate use or else into the premises on the eighth floor for storage. I think it is highly probable that the goods in the lift lobby were intended by Mr. Yeung to be left there until they were required on the seventh floor. In other words, I find that the lift lobby on the eighth floor was being used as a "holding area" (to use a neutral expression) for goods which would or might be required on the seventh floor within a day or two.

15. The insurers in their defence pleaded clause 86 of the insurance policy which reads:

"STORAGE WARRANTY (INDUSTRIAL RISKS) Warranted that during the currency of this policy no waste materials or goods of any description whatsoever whether belonging to the insured or not shall be stored temporarily or otherwise on any staircase or in any passage-way within or in common use with the premises described in the policy."

16. The amount of a premium payable in respect of an insurance policy is calculated in reference to the risk incurred by an insurer. Insurance companies are perfectly entitled specifically to limit the scope of the perils sought to be insurred against.

17. Both counsel relied on the Privy Council case of Thompson v. Equity Fire Insurance Company (1910) AC 592 where at 596 Lord Macnaghten said in respect of the construction of the words "stored or kept":

"The expression as used in the statutory condition seems to point to the presence of a quantity not inconsiderable, or at any rate not trifling in amount, and to import a notion of warehousing or depositing for safe custody or keeping in stock for trading purposes".

18. I was referred to various statutory definitions and cases which dealt with the words "store" or "storage". However, I respectfully associate myself with the following comment by Lord Macnaghten (ibid at 597):

"A good many cases were cited in argument from English, Canadian, and American Books. But on such a question as this very little help is to be got from the citation of reported decisions. For the most part the language to be construed was not the same. When the language was similar the circumstances were very different".

19. I also agree with Lord Macnaghten that the word "stored" (or "kept") are common English words with no very precise or exact signification and that "it is difficult, if not impossible, to give an accurate definition of the meaning, but if one takes a concrete case it is not very difficult to say whether a particular thing is 'stored or kept' within the meaning of the condition".

20. As the Court of Appeal said in Grand Union Insurance Co. Ltd. v. Far East Mfty Hairgoods Co. Ltd. (1976) HKLR 974 at 978:

"Words used in a document such as an insurance policy must be given their natural and ordinary meaning in the absence of any evidence as to their secondary meaning. When construing an insurance policy regard had to be paid to the objects of the policy".

And at page 980 the Chief Justice said:

"Again, it is proper to look at the object of the policy. The warranty is surely intended to reduce the risk of fire".

21. Mr. Pirie contended that the goods in the lift lobby were not "stored" within the meaning of Clause 86. Mr. Pirie suggests that if the operative word in Clause 86 had been "placed" instead of "stored" then his client might have been in breach of Clause 86. The Shorter Oxford Dictionary defines "store" as "supply kept for future need; place where things are kept for future use; warehouse, depot, large shop".

22. I am satisfied the goods which were in the lift lobby on the 21st December 1976 were "stored" there within the meaning of Clause 86. I find that the plaintiff company was in breach of Clause 86. I hold that the Defendant company's liability under the policy is discharged. I find for the Defendant with costs.

Representation:

Mr. Nicholas F.F. Pirie, instructed by John, Ip & Co. for the Plaintiff.

Mr. Lester C.H. Kwok, instructed by Deacons for the Defendant.