Angela Maria Dias t/a Crowden Trading Corporation v. National Insurance Co Ltd

HCA002474/1972

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 2474 OF 1972

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Coram: LI, J. in Court

Date of Judgment: 30 June 1973

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JUDGMENT

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1. In this action the dispute between the parties is the terms and effect of an insurance policy No.58/2/51540 dated the 24/4/71a copy of which is exhibited in the agreed bundle of documents Nos.10 to 15 (incl.) I shall refer to all documents in the said bundle in accordance with their respective numbers.

2. It is an agreed fact that by virtue of the aforesaid policy the defendant agreed to insure the plaintiff against loss and damage by all marine risks at and from Italy to Hong Kong of a cargo of 23 crates containing marble slabs for a sum of US$5,845 (HK$35,420.70). It is also agreed that the said cargo were duly shipped and did arrive in Hong Kong on or about the 15/5/71 during the currency of the said policy.

3. The plaintiff alleges that upon examination of the said cargo on or about the 18/5/71 5 crates were found to contain damaged goods in varying quantities to the total value of HK$6,239.32. Another 6 crates of the said cargo whilst being transported on a lorry along the praya at Holt's Wharf dropped off damaging varying quantities of the slabs therein to a value of $11,480.67. The defendant refused to pay the whole or any part of the sum of $17,720 being the total sum of the damages sustained.

4. Originally the defendant contends that the 6 crates alleged to be damaged in the course of loading on to the lorry were damaged when the currency of the policy has expired. They have since abandoned this defence However, the defendant maintains that of the 10 crates only 4 crates numbering 16, 13, 3 and 9 were damaged during the transit. Generally they deny there had been any damage to the other 6 crates numbering 8, 10, 15, 17, 18 and 20. The defence further rely on the failure on the part of the plaintiff to comply with the terms of the insurance policy on the following grounds:-

1. The policy provides that -

"In the event of damage arising under this policy, no claim will be admitted unless notice of damage is given to the Carrier's Agents in accordance with the Bill of Lading provisions, and a Survey Report obtained from Lloyd's Agents at destination."

The plaintiff has failed to notify the carriers or its agents and failed to obtain a survey report from Lloyd's agents.

2. The Institute Cargo Clause (All Risks) provides that -

"It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control."

The plaintiff has failed to act with reasonable despatch because no notice was given to the defendant until the 12/8/71.

3. The policy provides that -

"Warranted free from liability for loss of or damage to merchandise whilst in the custody or care of any carrier or other bailee who may be liable for such loss or damage thereto but only to the extent of such bailee's liability."

and that

"It is the duty of the Assured and their Agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss and to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised."

and in addition the "Sue and Labour" Clause.

By an Important Notice the policy also provides that-

"Consignees or their agents are required: -

	To claim immediately on the carriers for any packages discharged defective.
	To apply immediately for steamers survey in the docks if any loss or damage be apparent.

Failure to comply with these instructions will prejudice any claim under the policy."

5. The plaintiff has failed to make claims on the shipping company or the transportation company for damage to cargo sustained in the course of the sea voyage and in the course of loading to the lorry respectively. The plaintiff has failed to apply for a steamer's survey and is in breach of Section 78(4) of the Marine Insurance Ordinance.

6. In reply the plaintiff joins issue with the defendant and contend that whilst it is admitted that the survey report was sent to the defendant on the 12/8/71 the plaintiff did inform the defendant of the damage and the fact that the plaintiff was about to appoint a surveyor to inspect the damaged goods. The defendant raised no objection. Whilst admitting the various clauses contained in the policy the plaintiff denies any breach of any of them. The plaintiff contends that even if there has been any breach of the terms the defendant, by sending the plaintiff a claim form on the 25/8/71, by its subsequent correspondence with the plaintiff and by its pleading, has waived such breaches or led the plaintiff to believe that the defendant did not insist on the conditions or terms to be fulfilled. Further by wrongfully repudiating the said policy and its liability the defendant has discharged the plaintiff from its obligations to fulfil the terms or is estopped from relying on the failure of the fulfilment of them.

7. The issue between the parties are that on the 12/8/71 - whether the damages are as alleged in statement of claim.

8. The plaintiff called two witnesses and the defendant elected to adduce no evidence at all. Upon hearing the witnesses I find the facts as follows:-

9. Of the 23 crates of the said cargo of slab 11 crates sustained damage. Such damage occurred during the currency of the policy. Mr. Ho Hok Leung, surveying inspector of P. Younghusband Ltd., marine surveyor, gave evidence and identified documents Nos.17 to 23 (incl.) as a copy of the report of his survey. His evidence has not been challenged at all. I accept his evidence and the findings in his report in total. The survey took place on the 18/5/71 and the 29/5/71 and the survey report was sent to the plaintiff on the 21/6/71. I also accept the evidence of Fan Yuk Kei senior clerk of the plaintiff's company that on the 18/5/71 he telephoned one Mr. Lam of the defendant and informed Mr. Lam of the damage to the cargo and gave Lam the insurance number. He was told by Lam to appoint a surveyor. I find as a fact that the plaintiff had informed the defendant with reasonable despatch and in time as soon as the damage was known to the plaintiff. According to Fan, he telephoned the defendant first before he contacted P. Younghusband. Mr. Ching for the defendant contends that there is no evidence that Mr. Lam was a person in authority to receive insurance claims for the defendant. However, this was never put to the witness in cross-examination. On the contrary, Fan gave evidence in cross-examination that on 2 previous occasions he informed the defendant of an insurance claim by telephone. Mr. Lam was the person in the defendant's company to receive the call on this occasion. A limited company as the defendant can only act through its officers. On the balance of probability and common sense I am satisfied that Mr. Fan has contacted the right person.

10. I further find that having received the report of damage on the telephone the defendant took no step whatever to investigate the claim apart from suggesting that the plaintiff should appoint a surveyor. The plaintiff took some time to calculate the actual loss in terms of money. It was not until the 12/8/71 that the plaintiff formally wrote to the defendant in terms of document No.25. To this letter the defendant replied in the following terms:-

"Dear Sirs,

____________________________________________________________

11. It will be observed that the defendant's complaint at that stage was the delay in reporting the damage and that the plaintiff had not held the carriers responsible for the loss. However, the defendant sent a claim form to be completed by the plaintiff for their attention despite the aforesaid complaint. On the 3/9/71 the plaintiff completed the claim form and returned it to the defendant with a denial of any delay in appointing a surveyor in terms of document No.27. There were further exchanges of correspondence leading to a letter from the defendant dated the 27/9/71 in the following terms:-

"Dear Sirs,

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12. It is observed that up to that date the defendant only reiterated its former complaints.

13. On these facts Mr. Ching for the defendant relies practically on the non-compliance of the terms of policy. He contends that the Bailee clause and the Sue and Labour clause are designed for the protection of the insurers. This required that an assured must act as if he is uninsured. As a result of the delay the plaintiff's interest is prejudiced by virtue of the Hague Rules in that the plaintiff is barred from suing the shipping company and the transportation company. He further challenged the sending of a claim form can operate as a waiver.

14. I shall now consider the various clauses in the policy with which the plaintiff is alleged to have failed to comply. It is alleged that the plaintiff failed to notify and make claims on the shipping company in accordance with the terms in the bill of lading. As such the plaintiff has committed a breach of the Important Notice Clause which is sometimes referred to as the Red Line Clause. This may well be considered together with the plaintiff's failure to comply with the Bailee Clause. The purpose of the Red Line Clause is to emphasize the assured's common law duty to take such steps as may be necessary and appropriate in case of loss or damage to minimize the claim under the policy. The duty of an assured under both clauses is to conduct himself as if uninsured. - See Dover an Analysis of Policy Forms and Claims P33. One of such duties is to take appropriate measures within such time so as to prevent recoveries from becoming statute barred - see Dover's handbook to Marine Insurance P.467 - 468. Article 25 of the Bill of Lading relating to the plaintiff's cargo - document No.2 provides:-

15. There is no evidence of the plaintiff obtaining the master's acknowledgment or submitting his claim to the ship owner relating to the 5 crates damaged in the course of transit by sea within one month. Thus the defendant's right to claim in subrogation in respect of the said 5 crates must have been prejudiced if the plaintiff only informed the defendant of the claim. As to the claim for the 6 crates damaged by the transportation company in the course of loading I have no evidence before me as to the terms of carriage by the transportation company. A delay of 3 months does not cause the claim against the transportation company to be statute barred.

16. The effect of the Sue and Labour Clause is subject matter of statutory provisions in Section 7 of the Marine Insurance Ordinance which section is in pari materia with Section 78 of the Marine Insurance Act 1906. The effect of this clause is to be found in a note in Chalmers' on Marine Insurance Act 1906 7th edition P.123 which reads :-

"It appears to me that this clause merely enables the assured to recover expenses involved in the effort to avert or minimise the loss from the insurer. It imposes no further duty on the plaintiff other than that by virtue of the Bailee Clause."

17. Regarding the Reasonable Despatch Clause it is provided that:-

"It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control.

18. If it is said that the plaintiff had not acted with reasonable despatch it means therefore the plaintiff had not made a claim in respect of the damaged crates. I have found as a fact that the plaintiff informed the defendant of the claim by the 18/5/71. My attention has not been drawn to any provision in the policy requiring any formal notice to the insurers. I find that notice of the claim had been given with reasonable despatch to the defendant.

19. Finally I come to the question of waiver and estoppel raised by the plaintiff. In this connection it is to be observed that if any breach of the terms was committed by the plaintiff such breach occurred before the 25/8/71 when the defendant sent to the plaintiff a claim form. At that time the defendant was fully aware of the facts relating to the breach including that P. Younghusband was appointed by the plaintiff as surveyor. The defendant took no action apart from raising certain queries. I have found as a fact that the plaintiff had telephoned the defendant of their claim on the 18/5/71. If the plaintiff was complacent equally was the defendant who sent a claim form without denying liability. They did so in terms that "your claim will have our further attention". The furnishing of a form with knowledge of a breach of warranty, and without notice to the assured that a forfeiture would be claimed, has repeatedly been held to be a waiver - McGillivary on Insurance Law Vol.1 para 971 5th edition. The taking of objection on other grounds may be a waiver on the ground of objection which is not specifically raised - Ivamy on General Principles of Insurance Law p.236. In this action the defendant, knowing that the plaintiff had not complied with the term in obtaining the master's acknowledgment and making a claim against the shipping company and the Transportation Company, saw fit to issue the plaintiff a claim form with the undertaking to give it further attention. It is said:

"Thus, conduct by the insurers making performance of a condition either impossible or unnecessary can be set up as a waiver if there is the requisite assent to or consideration for it. Alternatively the same conduct can be relied on as an estoppel if it has induced the assured to believe that the condition need not be performed, or that accrued rights are not going to be enforced, and to act accordingly. The conduct must, however, if it follows a breach of a condition, be such as to lead the assured to suppose that the contract is being treated by the insurers as valid notwithstanding the breach, as where they accept a renewal premium, or do or demand something without any justification except the policy." [22 Hals Laws 229 para 432]

20. When the defendant was informed on 12/8/71 it was obvious that the plaintiff had not complied with the Bailee clause in respect of 5 crates of the cargo. The defendant made no requirement on the telephone conversation on the 18/5/71 but sent a claim form on the 25/8/71. I am of the opinion that by its conduct the defendant waived the performance of such terms or alternatively led the plaintiff to believe that the performance of such term was not required.

21. In view of the aforesaid my findings on the issues between the parties are:-

22. In the circumstances I must find for the plaintiff in respect of the question of liability. As to the quantum of damages, however, Mr. Ching raises the objection as to the discrepancies in the unit price between the invoice - document No.5 and the debit note sent by the plaintiff - document No.24. One can readily observe that the unit at 60¢ has been inflated to 66¢ and at 82¢ to 90¢. The plaintiff may have a reason to do so because of freight. But they have not adduced evidence on this point.

23. The judgment of this Court is that the sum payable by the defendant to the plaintiff shall be such as found after proof of the unit price in document No.24 before the Registrar who shall take into consideration of freight and insurance thereof. The cost to prove such damages to be paid by the plaintiff. But the cost of this action to be paid by the defendant. On interest due at 8% on the damages found by Registrar from 15.5.71.

Representation:

William Waung (Brutton & Stewart) for Plaintiff.

Charles Ching (H.A. Hoosenally & Co.) for Defendant.