Lee on Realty (Property Management) Ltd v. Kwok Lai Cheong and Others

HCA004292/1983

No. 4292 of 1983

Motor accident. 1st defendant's lorry strikes 2nd defendant's bus and forces it into plaintiff's property. On facts held plaintiff's managers had sufficient authority to sue; and 1st defendant wholly to blame.

On claim by 1st defendant for indemnity under policy of motor insurance, insurers alleged two breaches of condition precedent namely:-

No. 4292 of 1983

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: The Hon. Mr. Justice Hunter.

Dates of Hearing: 27 - 29 February, 1, 2, 5 & 6 March 1984

Date of Delivery: 6 March 1984

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JUDGMENT

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1. On the 8th October 1982, an accident occurred in the Clear Water Bay Road immediately outside some premises known as Las Pinadas. There were two vehicles involved. The first was a truck owned and driven by the 1st defendant. The second was a bus owned by the 3rd defendant and driven by the 2nd defendant. At this point the Clear Water Bay Road is dual carriage way. It is apparently a new piece of road, constructed in the interest of safety, at this particular point, which has two down hill traffic lanes in which these two vehicles were proceeding. The leading vehicle initially was the bus. That was travelling in the inner or slow lane. The truck immediately before the impact was travelling in the outer or fast lane. What happened was that the front near side of the truck hit the rear off side of the bus quite hard, and bus was, one might almost say, catapulted into the property Las Pinadas. The truck bounced off, hit the embankment on the other side, and continued down the road for something like 50 metres.

2. The first question which arises in this case is whether either of the defendants is liable to the plaintiffs in respect of the damage done to this property. Now when the case was first came on, a preliminary point was taken by the 1st defendant that the plaintiffs had no right to sue; that the action can only be brought by the owners of Las Pinadas collectively or, by one of the owners as a representative; and that the same result could not be achieved by the plaintiffs suing as they sought to do as estate managers.

3. Now this is one of those points which one can say without any hesitation, has absolutely no merit. It is an obvious convenience in a case of this nature for someone to be there as a representative plaintiff acting on behalf of the owners, so that the case is not bogged down at the outset as to who owns which brick in which of the external walls, and who owns what in the shed where the bus finally arrived. The wrong doers, if any, are fully protected by this sort of proceedings. There would be no question of anybody being able to sue them again in the hereafter. The res judicata principle would plainly apply. But the point was raised and I must deal with it or rather I must give my reasons for rejecting it at the time.

4. Two grounds were relied upon. First it was suggested that this was wrong in principle, because the only duty of care owed by either defendant was to the owners and only the owners had suffered damage. I agree entirely. Those are the only persons to whom the duty was owed, and they are the only persons to have suffered damage. But the plaintiffs do not purport to claim as owners or as the persons suffering damage. They claimed as estate managers. Now if the law had taken a strict line on this that only the owners in these sort of circumstances could sue, and the representative plaintiff was quite unknown, then I would understand the point. As far as I am concerned the law never has taken that stand. The simplest example is the attorney suing. There are all sorts of other examples, executors are another of people suing in representative capacities. The whole concept of the representative plaintiff or the representative defendant is intended to insure that justice is done between parties in the most convenient form. The most convenient form here is plainly that there should be a representative plaintiff, and it seems to me that the actual plaintiffs fit that bill very neatly.

5. The second point taken was that they have not got their tackle in order. Now there is a Deed of Mutual Covenant produced in this case and the relevant paragraph is, in fact, set out in extenso in this Statement of claim. It records that the managers should have "the power and authority", those are the governing words in clause 3(1), and then one had to turn on to 19 to find amongst other things, ''power and authority to commence conduct and carry on proceedings touching or concerning the estate or the management thereof on behalf of all the owners". Now those words plainly entitle them to do what they are doing here. There is no substance as I see it in the suggestion that this entitles them to sue in contract and not in tort. The only reason which gave me a pause for thought at the time that this submission was being made, was that on the same date as Deed of Mutual Covenant was entered into, there was another Deed of Appointment of these self-same managers. For reasons which I am totally unable to understand the draftsman of that document did not refer to the Deed of Mutual Covenant. He picked up about 50% of the Deed of Mutual Covenant and then reproduced that in the actual Deed of Appointment under the preamble: "the duties of the managers shall be generally to manage and provide services to the satisfaction of the owners and at particular but without derogating from the generality of the foregoing to do the following". So this was for reasons which I do not understand, drafted by way of example, and it does not seem to me that I have got to make a nonsense of this situation by treating that Deed as emasculating the Deed of Mutual Covenant, and cutting down the powers to those which are expressly set out in the second document, when that second document is drafted in that form. So for those reasons I rejected the basic submission. I will therefore now turn to the question of liability.

6. Now this is a fairly classic case of res ipsa loquitur. Properly controlled buses do not effect entry through brick walls and into L. P. Gas stores. Properly controlled lorries do not run into the back of buses. In these sort of circumstances the law takes simple pragmatic line. It says that the fact that you have hit something in this way is a prima facie case of negligence, and the person concerned has to show that this happened without negligence on his part. The principle was most recently expressed in the decision in the House of Lords in Henderson v. Jenkins (1970) A. C. 282 which followed and applied Barkway v. South Wales Transport (1950) 1 All E. R. 392.

7. Now as far as the 2nd defendant is concerned it seems to me that he can very simply explain that this happened without negligence on his part, because all that happened was that he was hit in the rear by this truck and pitched into this property. Immediately before this, the 2nd defendant was driving his bus at what seems to me to be a perfectly proper speed, in the order of 30 miles an hour, on his own side of the road; obviously keeping pretty close to the near side edge of the carriage way; running quietly down this hill, applying his brakes periodically to maintain an overall speed of about 30. There is no way that I can see in which he can be said to have been negligent in doing that; no way that I can see in which he could possibly have avoided this accident. Various interesting hypotheses were put to him in cross examination, and rather to my surprise, were accepted by him. He was maintaining that he could have done all sorts of things to have avoided this accident. I found the whole exercise both question and answer totally unreal. As far as I am concerned I acquit this 2nd defendant of any degree of negligence at all.

8. The 1st defendant is in a very different position because he was the one who actually struck the bus. He seeks to explain that fact by a total loss of braking. What he said in evidence was this: he was proceeding down the left hand lane of this carriage way at 25 mph in second gear. When he was some three or four lengths away (that mathematically put him between 25 and 35 metres away) he first saw this bus. He then applied his brakes. Nothing happened, and there was a "sudden total loss of brake function" in the words of the pleading. He swung his vehicle to the right to endeavour to avoid the bus. He failed to do so, and instead ran on down the hill, he said, faster and faster. He sought to attribute the whole of the fault for this accident to a complete loss of braking function. I regret to say that I am totally unable to accept that account or that explanation for this accident.

9. First and foremost I cannot accept the hypothesis that his starting speed was 25 mph or that he was proceeding in second gear. In my judgment he was much more likely to have been doing at least 40 mph and was almost certainly in fourth, if not fifth gear. My reasons for so concluding are these: First of all I have heard a good deal about this lorry in the course of this trial: Its engine is capable of 2,400 revolutions a minute. Second gear is a very low gear indeed, it is the ordinary starting gear. It was common ground amongst all of the experts that the maximum speed of this vehicle in second gear was between 20 and 25 mph. Now let us assume that he was coming down this hill at 25 mph in the second gear, which would have required a considerable degree of throttle on his part having regard to the gradient. He then takes his foot off the accelerator and applies his brake. Assume again total failure of brakes. It seems to me from what I have heard of this vehicle, that as soon as this defendant took his foot off that accelerator, and the rear wheels started to be effected by the compression of the engine in the second gear as they would have been, then he would at once have started to slow down. There is no possible way that I can see, that he would then have gained speed, and rushed down faster and faster, which is what he said happened and what in fact must have happened.

10. Secondly the bus itself was travelling, as I find, at about 30 mph. This truck gained on this bus in a very short space of time immediately before the collision and I believe must have been doing at least 10 mph faster than the bus.

11. Thirdly, there was a considerable tyre mark left on this road, which was some 98 metres in length that in over 100 yards. That tells its own story for a number of reasons. First of all, consider the length of that trey mark. That is the distance this vehicle required to stop. It is very difficult to reconcile that with a starting speed of 25 mph in second gear, but you have to throw in one or two other things as well. First you have to throw in the impact with the bus; secondly you have to throw in the impact with the embankment wall which the photographs showed to have been quite considerable; and thirdly you have to throw in another 32½ metres from the point where it struck the embankment wall while it bounced along with one set of wheels on the road and the other set of wheels on the verge depositing mud all down the roadway. Now put all those factors together, and in my judgment they are flatly inconsistent with a starting speed of 25 miles an hour.

12. The second thing about the mark is its location. This starts almost in the middle of the road. It then swings into the near side carriage way, and explains the impact as this lorry veered across the road. Then it swings back following the course the lorry took after impact. It is perfectly obviously that when that braking action started the vehicle was in the fast lane not in the near side lane, as this defendant was seeking to assert.

13. Thirdly, the width of this tyre mark is instructive. It is a very narrow mark indeed, and is in my judgment totally consistent with a vehicle tending to veer across the road because it was travelling too fast in those conditions, and was attempting to break away. There must have been much greater adhesion between the road and the near side wheels that left this mark, than the off side wheels at that time, which could well have resulted in considerably reduced braking adhesion. This may explain why this defendant thought that his brakes were at fault, when at the last moment he applied them, as this bus first came into view.

14. Putting these facts together as best I can, I am totally satisfied that he rounded this corner at a speed much in excess of 25 miles an hour: was somewhat alarmed to find that he was then faced with a bus occupying the whole of the near side carriage way. He tried to steer past it, but having regard to his speed, the loading of his vehicle (I have there the crane in mind) and the gradient of the road, he was unable to maintain his course in his carriage way. In the more colloquial terms of the motorist, he "ran out of corner". That was, in my judgment the predominant cause of this accident. The quality of his brakes had very little to do with it.

15. I turn now to the defense of latent defect, and the condition of the brakes themselves.

16. My findings on the evidence are these. First it is quite apparent that there was no total failure of these brakes at all. This could only have come about on this vehicle if there had been not one but two major leakages of brake fluid, because there are two master cylinders and two quite separate system, one for the rear wheels and one for the front wheels. There was no major leakage of any sort at all. I am certainly not prepared to speculate on the possibility that something might have happened like that, which was totally undetected by the vehicle examiner. As far as the efficiency of the brakes themselves go, I have found this a rather more difficult matter. Making the best estimate I can I would say they were not 100% but they were somewhere between 80% and 90%.

17. There were three things. First they needed adjustment. What I am quite unable to find is by how much they needed adjustment. They were looked at on the site and again in a vehicle pound by the vehicle examiner after the accident. Unfortunately he did not try either on the site, when it might well have been impossible, or later when it certainly would have been possible, to take any precise measurements of the actual clearances. What he did was to put a ruler in through the inspection hole in the wheels, and try to assess the clearances. I emphasise the word "assess", because he repeatedly told me in this part of his evidence that he was relying on his experience, and that his experience enabled him to make this assessment. Now experience is one thing, precise measurement is something in my judgment rather different. So I am certainly not prepared to find that the clearances were of the sizes which he gave me in evidence. I am satisfied that they needed adjustment and possibly that the setting was some way out. I am not prepared to go any further.

18. I am certainly not prepared to find that this itself constituted a grave impairment of the braking system of this lorry. Because this lorry has not got a simple hydraulic braking system. It has got what is called an "air over hydraulic" braking system. Unlike the old fashioned hydraulic braking system, you cannot tell by the travel of the brake pedal what the state of your brake linings are. You cannot feel the dead part of the travel as you depress the brakes until the linings start to take effect on the brake drumps, because on this system as soon as you press the pedal compressed air is released and that does all the work for you. It is power assisted braking. This mean that if there is a consistent pressure from the air, and if your clearances are too great, it takes slightly longer for the brakes to operate. But once they operate, there is no very grave impairment of their braking capacity. Now that is the effect of the evidence about this system as I understand it. So that the first thing wrong was that they needed adjustment, but this did not gravely affect or seriously affect their capacity as brakes.

19. Secondly they needed bleeding. There was air in the system. Again I have no idea how much air there was and how serious this was at the time. Normally air in the system produces a tendency to sponginess in the brakes. It does not so much affect their actual capacity. It delays the time in which they take to operate. The compressed air which operates the system has not only to force the brake fluid through to the slave cylinders on the wheels themselves. It also has to go through the motions of compressing the intrusive air. So again this diminished their capacity, it did not make the brakes useless by a very long way. The extent to which it did this I still do not know, because it all depends on the quantity of air there, and as to that the vehicle examiner was completely silent.

20. Thirdly the brake reservoir needed topping up. This is one of the more bizarre parts of the case in some respects because the brake fluid was found to be at a surprisingly low level. It is some-thing of a mystery as to how it reached that level. I am minded to think that one of the principle causes for that is the fact that this defendant chose to test the level of the brake fluid, not by reading the level through the transparent covering to the cylinder and seeing where the line was, but by taking the cap off, and inserting the index finger of his left hand into the liquid. The index finger of his left hand has plainly suffered an accident, the top, the outer phalanx, having been lost. That necessarily meant that every time he did this a piece of brake fluid was removed from this reservoir. When the experts were telling me firmly that there is no great loss of brake fluid and there is no evaporation, none of them was considering a loss from this particular source, because I do not think any of them considered that this was a likely method of inspecting. But that, I am quite satisfied in what this defendant was doing, and this, I believe, if continually down, as he said, day after day, may well have had a major hand in reducing this level. Now the level was low. It needed topping up. It was not so low that there was a shortage of brake fluid. It was low enough probably to allow air into the system at a sharp angle or over rough ground. It may have been the cause of the air that was in the system. That is all.

21. It is with those consideration in mind that I have suggested the brakes in this case were between 80 and 90% efficient not 100%, as being the best figure that I can put on the rather tangled evidence that I have heard. I believe that this defendants account that it was brake failure which brought about this accident is really totally unrealiable and I reject it.

22. Before leaving the question of brakes I should also refer to the question of maintenance. Here I am bound to say that I think I have heard a good deal of exaggeration from the 1st defendant. It often happens, where an accident occurs like this, and a man has convinced himself that it was the failure of brakes, then the story about the attempts made before the accident to look after the brakes tends to get magnified out of all reality.

23. First of all I am quite satisfied that he was by no means a reckless man when it came to brakes. He emphasised on several occasions in his evidence, and I have no difficulty in believing, that he was very conscious of the significance of brakes, and the importances of brakes both for the safety of himself, his son along side him in the cab and others on the road.

24. Secondly I am quite satisfied that he was not conscious himself before this accident of any imperfections such as I have tried to describes in the braking system itself. Because it is power assisted as I have tried to explain, the old fashioned guides to the quality of the brakes have been either lost altogether or very substantially masked. The expert engineer getting into this cab might have been able to say: Ah! Yes, you need adjustment. Ah! Yes, there is some sponginess in these brakes. I do not think it by any means follows that this defendant could have reached the same conclusion, and I am satisfied on the facts that I have heard, that he did not.

25. Thirdly, what he did was to entrust to a Mr. Lau, who runs Ting Hing Motors, the maintenance of his vehicle. I am satisfied having heard evidence from both him and the defendant that in August 1982 a service was done by Lau on this vehicle which included a checking of these brakes. This was a reasonable step for the defendant to take, and I do not believe that there is anything else that he should then have done. At the time of the accident he was coming up for his next service, but only just under two months had elapsed since the last. There was no sign on that account, which I accept, of obvious neglect.

26. In those circumstances I think that the brakes played a fairly minor part in this whole story, and would have played such a minor part but for the explanation that the 1st defendant chose to give. I think that he has totally failed to explain the circumstances of this accident, and so has failed to show that it occurred without negligence on his part. More positively I find it was caused by his speed on the road.

27. Now as far as quantum is concerned the claim as pleaded is for $66,220. There was no serious issue about that save in respect of one sum which was part of the claim made by Hong Kong L. P. Gas for the damage they suffered in putting things right after the accident.

28. It is common ground that he bus went straight into the hut where the L. P. cylinders were kept, and that prior to the accident L. P. Gas was being supplied to the owners of these properties out of large cylinders which were in fact in that hut. Fortunately for everybody, those cylinders although damaged proved to be repairable. After the whole thing was over, Hong Kong L. P. Gas submitted its own bill to the plaintiffs in the sum of just over $32,000 as being its damage suffered from this incident. What is suggested is that one of these items is bad, and that what L. P. were doing, was not charging the cost to them of providing gas for the customers in the interim period, but were including in that the cost of the gas itself, and looking for recovery twice, i.e. the cost of the gas from the plaintiff and the cost of gas from the consumers. I do not so read this bill. I can see no good reason from making that assumption against Hong Kong L. P. Gas Company Limited. For my part, I think that this claim is made out for the sum claimed. In those circumstances there must be judgment for the plaintiff against the 1st defendant for that sum, whereas correspondingly there must be judgment for the 2nd defendant against the plaintiff.

29. I then turn to the more interesting and somewhat more difficult issue in the case which arises on the 1st defendant's claim in the third party proceedings. He now seeks an indemnity against his insurers, the Pacific Insurance Co., the third party, under the policy which was then in force. Now this was a typical commercial vehicle policy. It provided in section 1 for insurance of the motor vehicle itself; the material terms being "the company will indemnify the insured against loss of or damage to the motor vehicle".   It then goes on in section 2 to provide third party cover. The material words are: "the company will indemnify ..... the insurer against all sums ....... which the insurer shall become legally liable to pay in respect of (a) death of or bodily injury to any person and (b) damage to property, where such death or injury or damage arises out of an accident caused by or in connection with the motor vehicle". Now the important words are "legally liable to pay" arising out an incident concerning the motor vehicle.

30. Two points are taken by insurers under this policy. They both arise under the policy conditions. The policy conditions are introduced by this (which is in fact condition 2): "the due observation and, fulfilment of the terms of this policy in so far as they relate to anything to be done or not to be done by the insured ..... shall be Conditions precedent to any liability of the company to make any payment under this policy". So what follows are conditions precedent. It is important to make that point because it means that if there is any breach of these conditions then no payment need be made under the policy, regardless of whether there is any causal connection between the breach of the condition and the accident itself. That is the difference in insurance parlance between a condition and a warranty.

31. Now the first condition which is said to be breached is condition 5 which amongst other things requires this" " every writ, summons and process shall be notified or forwarded to the company immediately on receipt". Now that arises in this way. Some time on or before 26th January 1983, the 1st defendant received a message that his presence was required at the Argyle Street Police Station in the afternoon of the 26th. He duly attended. A document has been put before me showing that I think on something like 1405 hours on that day, he was then served with a summons returnable the next day and charging him with having had a vehicle on the road, the brakes of which were in a defective condition. I am paraphrasing because I have not got the document in front of me. What the 1st defendant tells me is that he had some discussion about this at the time as to what he was going to do. He was then asked to wait; as he had to put up $500 bail. By the time he put up bail, it was something like half past five in the afternoon. He then went home. He duly attended the Court the next day, sat around all day waiting for his case to come on and then he was duly charged, pleaded guilty and was fined $500.

32. It was the next day, the 28th, that he wrote to insurers telling them what had happened. The point is taken against him that he did not deal with this "immediately". Now I have no doubt in my own mind that the draftsman of condition 5,(it was no doubt done in London many years ago), never in his wildest imagination expected a summons to be served in the afternoon of day 1, returnable on the morning of day 2. Certainly I have never heard of anything like that ever happening in the U.K. and I do not suppose it ever will happen. But it is that simple event in this case, which seems to me to have totally emasculated this condition. The condition required that the summons "be forwarded immediately on receipt". If this defendant had remembered all this when he left the police station about 5.30, had got himself a photostat copy of the summons and had put it in the post that night, is still would not have reached the insurers, I suspect, until at least the morning after. It would certainly have been much too late for them to have taken any effective steps to influence the course of events that day at the magistrate court.

33. I think the short answer to this is in fact be found in what I suppose it might called a definition of the word "immediate" in this context in the judgment of Fletcher Moulton L. J. in Re Coleman's Depositories (1907) 2 K. B. 798, where at page 807 he said this: " The courts have not always considered that they are bound to interpret provisions of this kind with unreasonable strictness, and although the word "immediately" is no doubt a strong epithet, I think it might reasonably be construed as meaning with all reasonable speed considering the circumstances of the case". I think "all reasonable speed considering the circumstances" in this case was the 28th, the day after his conviction when eventually this defendant had time to get around to notifying the insurers as to what was happening.

34. I therefore turn to the much more interesting point which arises under condition 4. Condition 4 is in these terms: "The insured shall take all reasonable steps to safeguard the motor vehicle from loss or damage" (that is plainly going back to section 1 of the policy) "and to maintain the motor vehicle in efficient condition". What is said here is this; first this motor vehicle was not in efficient condition and secondly the insured failed to take all reasonable steps to maintain it in efficient condition. It is convenient, I think, to deal with the two questions which arise in that order.

35. Now what is meant by "efficient condition" in these circumstances has been most usefully dealt with by Sellers L. J. who was the trial judge in a case called Conn v. Westminster Motor Insurance Association (1966) 1 L. L. R. page 123. Sellers L. J. dealt with this on page 127, and he made a number of points. First, he said, that efficient does not mean perfect condition. Secondly he said, it has got to be construed in the context of the policy, which is the contract between underwriters and the insured, and pointing out that it does not necessarily bear the same meaning in other context as for example between owner and motor dealer. He then goes on to say; "I think what the policy requires, is that the vehicle should be in a sufficiently efficient condition to be suitable for the purpose for which it was to be used, that is to say used upon the roadway". He is refining a little upon what he had said in an earlier case Brown v. Zurich Insurance Company (1954) 2 L. L. R. 243 where he had likened the expression to "roadworthy".

36. Therefore, the question I think I have to ask myself in this case is: (it being accepted that the onus is on the insurers) have the insurers proved that this vehicle was unroadworthy on the day of the accident by reason of its brakes: Was it not in a sufficiently efficient condition to be suitable for its use on the road? I confess I have found this is a difficult decision in view of the ambiguities which I have already referred to about the actual state of the brakes. I ask myself this: what would have happened if some mechanical engineer had got into the cab of this vehicle on the morning? Would he have said, "No, this vehicle must be taken straight into the garage, it is not fit to be driven?" Am I satisfied that this is what he would have said? Having regard to the evidence that I have heard from this defendant, and from Mr. Lau, I am not satisfied that he would have said that. In other words I am not satisfied that insurers have in this context made out that this vehicle at the time was in an inefficient condition within the meaning of the policy.

37. But that is very much a knife edge decision. Therefore I am going on to deal with the second matter, upon the assumption that my finding there is wrong, and I should have concluded that this vehicle was not in an efficient condition; and in fact that I should have totally accepted what the vehicle examiner said about it i.e. that it should have its license suspended. That involves deciding what is meant within the context of this policy by taking "reasonable steps to maintain the vehicle in an efficient condition". This is not an absolute condition: the insured is not under an absolute or an unqualified obligation to keep the machine in efficient condition. He has to take reasonable steps to maintain it, and the meaning of that phrase "reasonable steps" has been the subject matter of quite a lot of authority.

38. It goes back, I think, first of all to a case called Woolfall & Rimmer v. Moyle (1942) 1 K. B. 66. This was a claim arising under a Workman's Compensation Policy. In dealing with that case, Goddard L. J. in the Court of Appeal particularly made two points. The point at issue in the case was the construction of the phrase "the assured shall take reasonable precautions to prevent accidents and to comply with all statutory obligations". The first point he made is that this phrase is found in the underwriting contract, in a contract between underwriter and assured and not in a contract between an employer and the employed, and must be read and construed in that context. Secondly, a construction had to be avoided which would involve "granting an indemnity with one hand and taking it away with another".

39. This reasoning was taken up by the Court of Appeal in the case of Frazer v. Furman Productions (1967) 1 W. L. R. 898. This was another employer employee workmen's compensation type policy. The position was very closely analysed in an invaluable judgment by Diplock L. J. in the Court of Appeal. He started by setting out the terms of the indemnity in that case, which was "against liability at law for damages and injury or disease" arising out of or in the course of the employment". He also pointed out that, as in this case, he was dealing with a condition precedent: His first point was that the condition has to be read in that context. He said this: "When one approaches the construction of the condition one does so in this context; and applies the rule that one does not construe a condition as repugnant to the commercial purpose of` the contract". I can see no obvious difference between that case and this, and between the terms of the indemnity in that case and this. Both indemnities relate to liability at law, and both conditions deal with a situation which could give rise to a claim under that indemnity i.e. personal negligence.

40. From that starting point Diplock L. J. then goes on to say that three considerations have to be borne in mind on the wording of such a condition. He refers first to the personal negligence principle established in the Woolfall & Rimmer case. He then says that the obligation was to take measures to avert dangers in exactly the same way as the obligation here was to take measures to prevent the vehicle falling into a dangerous condition. Then thirdly, "the third word to be construed in this context is "reasonable" ...... "reasonable" does not mean reasonable as between the employer and the employee.   It means reasonable as between the insurer and the insured having regard the commercial purpose of the contract which is inter alia to indemnify the insured against liability for his, ( the insured's) personal negligence". Now it seems to me the precisely the same considerations apply here. Then having framed the test in that way the conclusion that he draws is this: "What in my judgment is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger, should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words it is not enough that the employer's omission to take any particular precautions to avoid accident should be negligent; it must be at least reckless, i.e. made with actual recognition by the insured himself that the danger exists, and not caring whether or not it is averted. The purpose of the condition is to insure that the insured will not, because he is covered against loss by the policy refrain from taking precautions which he knows ought to be taken".

41. That is the clearest possible statement where you have an overlap or potential overlap between the cover and the condition, as to the way in which the two should be read to bring about a reconciliation. I find it very compelling, not surprising because Roskill J. came to exactly the same conclusion in Lane v. Spratt (1970) 2 Q.B. 480. This was not a workmen's compensation case. This concerned goods in transit cover. The cover was "against the insured's legal liability as carrier for loss of or destruction of or damage to goods" Roskill J. was there construing a due diligence clause which required the insured "to take all reasonable precautions for the protection and safeguarding of the goods". He concluded that the insured there were negligent in the sense that they failed to take the precautions normally taken in the trade when taking on a driver, but that they would not reckless in the sense that that word is used by Diplock L. J. He directed himself in accordance with Diplock L. J. 's judgment.

42. So if the matter had ended there, there would be ample authority for saying that I should follow the same direction, the same path laid down by Diplock L. J. But it is suggested that the motoring cases specifically have adopted a slightly different approach. Now the first of these I have already referred to, Brown v. Zurich, a decision of Sellers J. (1954) L. L. R. 243.  In that case, the insured sought to rely upon the decision in Woolfall & Rimmer and the dicta of Goddard L. J., but they were put on one side by Sellers J. who said that was a different subject matter, different wording, different type of policy. By a strange coincidence he was the trial judge again, sitting as an additional judge at the Queen's Bench Division, in Conn v. Westminster Motor. He found in favour of the insured taxi driver. That decision was reversed on appeal, and it is the basis of the reasoning in the Court of Appeal which is the most instructive, (1966) 1 L. L. R. 407.

43. Two points were taken in that case against the taxi driver. First it was said that he had a hopeless braking system, and there was a lot of evidence led to this effect. The evidence did not differ materially in kind from the evidence that has been led before me, except that the system, I think, was more obviously worse.

44. Secondly it was said, that he had two bald tyres on the front wheels of his car and those were in themselves dangerous. Now Sellers L. J. found in favour of the taxi driver on both because he accepted in the court below that the taxi driver was unaware of any deficiency in the braking system. With that part of his decision, the Court of Appeal declined to interfere.  But they reversed him on the tyres, and it is instructed to see why they did that.

45. First Wilmer L. J., page 412, having gone through the evidence concluded: "I can see no reason why he should not have known of the state of both of them" and he referring there to both the tyres. Davis L. J. on page 413 poses this question: "Did he know or ought he to have known the condition of those two tyres. Again it appears that the answer to that is inevitably "yes". It was staring him in the face. He must have known the condition of both tyres. He must have known, as any car driver, and particularly someone who has been driving a taxi cab for very many years would know, that front tyres in that condition are unroadworthy and indeed unsafe". One can see the double emphasis; the judge is saying: First, I am quite satisfied that he knew that the tyres were in this condition and secondly that that condition rendered the tyres unsafe.

46. To the same effect is Salmond L. J. at page 414. There he pointed out that Sellers L. J. "accepted the plaintiff's evidence that, although it may be that as a rule the sort of defects from which these brakes suffered would have been all too apparent to anyone driving the car, this plaintiff in fact did not appreciate that the cab was suffering from any such defects and had no reason to do so. It therefore followed on those findings, that although the brakes were inefficient, it could not be said that the plaintiff had failed to take reasonable step to maintain them". Now one starts there with the conclusion that Salmond L. J. thought that a finding of knowledge was implicitly necessary. Having gone through the evidence on the tyres he concludes on page 415: "It seems to me that the plaintiff must have known (or certainly should have known) about the conditions of these two front tyres. They were manifestly dangerous and it was highly riskly to drive a taxi cab around London with tyres in that condition".

47. Now that is the way Salmond L. J. puts it, and I come back to the earlier decision in Frazer v. Furman and ask myself what discernible difference is there between the approach in that case and the approach in this case. My answer is I cannot see one. What Salmond L. J. seems to me to be doing is applying exactly the same test as Diplock L. J. was suggesting should be applied. So I think that although the two lines of authority have yet to be brought together in England, I cannot myself detect any difference between them. I think that where you have (1) cover against legal liability which includes liability in negligence and (2) a condition, an exception which covers part of exactly the same cover, that ones approach to the construction of that condition ought to be that laid down by Diplock L. J. The test is recklessness; refraining from taking precautions against a known danger; or conscious neglect of some patent risk. That is the construction that on these authorities I should put upon this policy.

48. It follows from my findings of fact, that this defense must fail, because I am satisfied that this defendant was not reckless, and he did not appreciate that there was anything materially wrong or indeed anything wrong at all with the braking system of his vehicle on the day in question. In my judgment therefore he is entitled to an indemnity under his policy.

Representation:

Mr. Partick Woo (Tsang, Chau & Shuen) for Plaintiff.

Mr. Thomas Lai (S.T. Poon) for 1st defendant.

Miss Lester Kwok (Deacons) for 2nd & 3rd defendants.

Mr. Denis Yu (Stevenson, Wong & Co.) for Third Party.