Chan Chi Kuen t/a Ming Hing Construction Co v. Grand Union Insurance Co Ltd

HCA003555/1984

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

BETWEEN

___________

Coram: Master Betts in Chambers

Date: 8 August 1984

__________

JUDGMENT

__________

1. On the plaintiff's summons under Order 14 Rule 1 I ordered judgment be entered for the sums claimed. I undertook to give my reasons in writing and now do so.

2. The claim is made under a policy of insurance purporting to cover any liability the plaintiff might incur, in respect of his employees, under the Employees' Compensation Ordinance and the Workmens' Compensation (Amendment) Ordinance 1980.

3. The policy was issued on 4 March 1981 and it will be necessary to refer to it in some detail in due course.

4. In that same month one of the plaintiff's workers was injured. In August two were injured. In October three were injured, one fatally. In December one further worker was injured.

5. Of these incidents two are of particular importance in this action.

6. The fatal injury in October was to one Wong Kwok Cheung. On inquest into his death was held in December the same year. Evidence was given at the inquest that, at the time, the plaintiff employed some 20 workers on the site in question. In January 1983 the then solicitors for the defendant obtained a copy of that evidence and by the end of the month that evidence was in the hands of the defendant's claims manager.

7. In the meantime Chan Hin, one of the workers injured in October 1981 made a claim for compensation. That application (VECC No. 145 of 1983) was lodged in October 1983 and an award was made on 2nd March 1984. In respect of that claim the present defendants dealt with the matter through their then solicitors as they were entitled under the terms of the policy.

8. Two weeks after that award the defendants purported to repudiate liability under the policy.

9. The ground on which the repudiation was based was failure by the plaintiff to supply to the defendant a correct account of all salaries, wages and earnings paid during the period of insurance within one month of the expiration of the period covered. This, it was said, was a breach of Condition 8 of the Policy.

10. Apart from certain details which do not affect the question in any material way the facts and events I have recited are common ground between the parties.

11. Two particular clauses under the heading "Conditions" in the policy must be set out in full:-

"2.         The due observance and fulfilment of the Terms at this Policy in so far as the relate to anything to be done or not to be done by the insured and the truth of the statements and answers in the proposal shall be conditions precedent to any liability of the Company to make any payment under this Policy", and "8.         The first premium and all renewal premiums that may be accepted are to be regulated by the amount of salaries and wages and other earnings paid by the insured to employees during each Period of Insurance The name of every employee together with the amount of salary wages and other earnings shall be properly recorded and the insured shall at all times allow the Company to inspect such records and shall supply the Company with a correct account of all such salaries wages and other earnings paid during any Period of Insurance within one month from the expiry date of such Period of Insurance if the amount so paid shall differ from the amount on which premium has been paid the difference in premium shall be met by a further proportionate payment to the Company or by a refund by the Company as the case may be".

12. The defendant's contention is that the plaintiff grossly understated total salaries paid to employees in order to pay a lower premium. This was in breach of Conditions 2 and 8. The contract is uberrime fides and consequently the defendant may repudiate.

13. Mr Yeung for the plaintiff argues that any breach of Condition 8 merely entitles the defendant to demand on adjusted premium. It is not a condition precedent to the defendant's liability. In support he cites in Re Brodley and Essex and Suffolk Accident Indemnity Society reported in [1912] 1 K.B. 415 where the words of the "Condition" were almost exactly similar.

14. Mr Wong for the defendants seeks to distinguish in Re Brodley on the grounds it was decided on unchallenged findings of fact different from the disputed facts in this case.

15. However, accepting as I must, the defendant's version of the facts I find this case falls entirely within the principles set out in In Re Brodley.

16. Indeed it is difficult to see how it could be otherwise if the test is applied of considering what the position would have been had the plaintiff over stated the salaries paid.

17. Quite clearly, to my mind, condition 8 simply provides a method by which at the end of the period insured the premium is adjusted up or down.

18. Mr Yeung also contends that even if the defendant is right on the first point it has waived it right to repudiate. He says details of the actual number of employees was contained in the transcript of the evidence given at the inquest into the death of Wong Kwok Cheung. That transcript was in the hands of the defendant's solicitors and the defendant's claims manager by the end of January 1983. The claim by Chan Hin was not made till October that year and was taken over by the defendant who did not purport to disclaim until two weeks after an award was made.

19. It is common between the parties that if adoption of the conduct of that matter by the defendant was made with knowledge of the plaintiff's breach of condition then waiver of the right to repudiate will have taken place. The difference between them is what amounts to knowledge for this purpose.

20. The law is succinctly set out in MacGilliary & Parkington on Insurance Law (7th edition) para. 784:-

''Knowledge. A waiver involves the idea of assent and a meaningful assent presupposes that the person affected by a breach of contract has knowledge of his rights and that the contingency upon which they can be exercised has come abou. The assured should prove, therefore, that the insurers had full knowledge of the breach or at least sufficient knowledge to put them on enquiry as to the extent of a breach which is known to have occured; being put on enquiry as to the possible commission of a breach of warrants is not enough to ground waivers."

21. The defendant's evidence is that the transcript from the Coroner's enquiry was obtained solely for the purpose of considering the possibility of proceedings against a third party. The significance of the total number of employees shown in that evidence compared with the total salaries certified to have been paid was not appreciated until after the award to Chau Hin.

22. The defendant's claims manager, and their solicitors cannot be regarded in the same was as laymen. They are experts. Months before dealing with Chau Hin's claim they were in possession of all the facts on which disclaimer was later based. They say they did not appreciate the significance of those facts and therefore did not have the necessary knowledge to found a waiver.

23. At the hearing of this matter I said I was finding for the Plaintiff on the first point dealt with and on the ground of waiver. On further consideration, and however unsympathetic I may feel to the assertion "I did not appreciate the significance of the facts." (my precis) I have to accept it for the purpose of this summons and find that if I am wrong on the first point there would be a triable issue on waiver.

24. For the purpose of completeness Mr Yeung made a third submission based on alleged lack of bona fides by the defendant. I will not analyse his argument in full but as on this summons he asks me to draw inferences adverse to the defendant from facts which are disputed it cannot suffice to ground summary judgment.

25. I therefore ordered that judgment he entered for the Plaintiff for the sums of $177,600 and $3,350 with interest thereon from 5 April 1984 to the date of judgment at 1% over prime rate and costs.

Representation:

B. Yeung, Esq. of Messrs Cheng, Yeung & Co for the Plaintif

Mr H.L. Wong instructed by Messrs C.T. Chan & Co for the Defendant.