China Insurance (Holdings) Co Ltd v. China Link Construction Co Ltd
Read the full judgment text of CACV 306/2003 on BabelCite. This Court of Appeal judgment was delivered on 27 May 2004.
1. In 1996 the appellant ("China Link") claimed under insurance policies issued by the respondent to this appeal, China Insurance. One claim was in respect of a fire and the other related to personal injuries suffered by an employee. The employees' compensation claim was settled. The fire claim was not, and became the subject of arbitration. China Link was unsuccessful in the arbitration and an award was made by which China Link was required to pay in excess of $6m for the costs of the arbitrati
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CACV000306/2003 CACV 306/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 306 OF 2003 (ON APPEAL FROM HCCT 50 OF 2003) ---------------------
---------------------- Coram : Hon Stock JA and Le Pichon JA in Court Date of Hearing : 27 May 2004 Date of Judgment : 27 May 2004 Date of Handing down reasons for judgment: 4 June 2004 ----------------------- J U D G M E N T ---------------------- Hon Stock JA (giving the reasons of the Court): Introduction 1.In 1996 the appellant ("China Link") claimed under insurance policies issued by the respondent to this appeal, China Insurance. One claim was in respect of a fire and the other related to personal injuries suffered by an employee. The employees' compensation claim was settled. The fire claim was not, and became the subject of arbitration. China Link was unsuccessful in the arbitration and an award was made by which China Link was required to pay in excess of $6m for the costs of the arbitration as well as arbitrator's fees in the sum of $507,751.50. An application was made to the court under section 2GG of the Arbitration Ordinance, Cap. 341 for leave to enforce the final award of costs, and on 10 June 2003 leave was given ex parte. On 27 June 2003 China Link filed an application to set aside the leave thus granted, but that application was dismissed by Burrell J on 4 September 2003. 2.China Link now appeals to this Court against the decision of Burrell J. The ground canvassed on appeal for setting aside the ex parte order is entirely new. It is, in essence, that the arbitration award was a nullity because between the date of the hearing and the award, the rights and obligations of the insurer, China Insurance, under the relevant policy, were assigned to another company, Ming An Insurance Company Limited ("Ming An"). 3.After hearing counsel on 27 May 2004 we dismissed the appeal and said that we would give our reasons later. This we now do. The arbitration 4.The relevant history of the matter is as follows. 5.Under a contractors all risks policy dated 14 May 1996, China Insurance were the insurers and China Link the insured in respect of a redevelopment project in Hung Hom. China Link is a construction company and was employed at that site as a subcontractor to execute certain works. By clause 5.12 of the contract of insurance, it was agreed that all differences arising out of the policy would be referred for the decision of an arbitrator. 6.There was a fire at the site in respect of which China Link made a claim under the policy but, the claim being disputed, China Link referred the dispute to an arbitrator. The notice of arbitration was served on 26 February 1998. Ms Teresa Cheng SC was appointed as sole arbitrator but her appointment was challenged on the basis that there was, in the arbitration, an allegation of fraud. An application to revoke the arbitrator's authority was dismissed and the arbitration proceeded. In the course of 1999 and 2000 pleadings were exchanged and there were issued a number of directions, primarily relating to discovery. 7.Oral hearings commenced on 1 June 2000, resumed on 1 July 2000 and concluded on 7 July 2000. The last of the written submissions, presented by China Link, were dated 24 November 2000. 8.On 24 May 2001 the arbitrator issued an interim award by which she dismissed China Link's claim and, at the request of the parties, reserved the issue of costs. By summons dated 14 December 2001, China Link sought leave to appeal the interim award (an application that was ultimately dismissed by Ma J, as he then was, on 26 April 2002). China Link attempted to have determination of the final award, that is, the issue of costs, delayed until determination of the proposed appeal on the interim award. 9.In the event, the final award was published on 5 February 2002 and it was that China Link should pay China Insurance costs of the reference, including the application for costs, on a party and party basis to be taxed if not agreed; and an award was also made as to the arbitrator's fees. The transfer of business 10.By an instrument dated 31 October 2000 - that is after the arbitration hearings but before the interim award - China Insurance transferred all its business to Ming An with effect from 30 September 2000. This transfer received the approval of the Insurance Authority and, pursuant to the provisions of section 25D(9) of the Insurance Companies Ordinance, Cap. 41, the Authority's decision was gazetted on 9 March 2001. 11.The effect in law of that instrument is prescribed by section 25E of the Insurance Companies Ordinance, which provides that:
The reaction of the parties 12.As a result of the transfer of business, the solicitors acting for China Insurance and Ming An, Messrs Masons, issued a summons on behalf of Ming An dated 12 March 2003 seeking leave to enforce the final award of costs under section 2GG of the Arbitration Ordinance. The affidavit in support of the summons recited the fact of the transfer. On 17 March 2003 Burrell J gave leave. However, China Link then applied to have the leave set aside on the footing that Ming An was not the proper party since, so it was asserted, China Link had never received notice of transfer of the policy. In an affirmation dated 1 April 2003, the General Manager of China Link said that the first notice received by the company of the transfer was in March 2003. 13.In the light of that affirmation, the solicitors acting for the two insurance companies made inquiries but no copy of a notice to China Link was found. The person responsible for sending the notice had left the employment of China Insurance. In the result, there was an exchange of correspondence between solicitors for China Link, on the one hand, and Messrs Masons, for China Insurance and Ming An, on the other. In a letter from Ho & Ip, solicitors for China Link, dated 20 May 2003, they said:
14.Masons replied on 21 May 2003:
The proceedings below 15.It was against that background that the enforcement proceedings were then issued by China Insurance, with disclosure to the court of the transfer of business and its history, and the order of Burrell J was made on 10 June 2003. 16.In the application before Burrell J to set aside leave, the suggestion which is now made, that China Insurance was not a proper party to the award, was never advanced. Instead, it was said that China Link was entitled to set off as against the award a sum due from China Insurance in respect of the personal injuries claim and that, although that sum had been paid, it had been paid by Ming An and, so in the affirmation of the solicitors for China Link it was stated that:
17.It was thus suggested that China Insurance's obligation under the Employees' Compensation Policy had not been discharged, so that leave to enforce should be set aside. 18.In response to that affirmation, the insurer's solicitors said that whilst the insurance company was not able to confirm whether or not the notice was sent, nonetheless since China Link said they had not received notice they, the insurers, were "willing to accept, for these proceedings, that the EC policy remains with China Insurance and was not transferred to Ming An". The solicitors added the note that despite the assertion that notice of transfer had never been received by China Link, China Link had nonetheless been content to cash the cheque drawn by Ming An in settlement of the personal injury claim. 19.The application to set aside was rejected by Burrell J on grounds which it is not, for the purpose of this appeal, necessary to recite. This appeal 20.The ground of appeal maintained before us contended that at the time the final award was published on 5 February 2001, China Insurance "had ceased to be a party to any arbitration agreement and/or proceedings" and it was asserted that "written notice of the transfer dated 15 March 2001 was sent by Ming An to the insurance brokers acting for the applicant". Accordingly, it was said that at the time the award was published, China Link had "ceased to be a party to the arbitration agreement and/or to the proceedings". 21.Whereas China Link's position in the enforcement proceedings prior to the order of 4 September 2003 by Burrell J had been that no notice of transfer of rights and obligations had been sent, it was now said that a notice of the transfer was after all received. There is an affirmation from the general manager of China Link dated 7 April 2004 in which he says that it did not occur to him until after the hearing before Burrell J in September 2003 that notice of transfer might have been given to China Link's insurance brokers and that "following my inquiries on 8 September 2003" (only four days, be it noted, after the dismissal by Burrell J of the application to set aside leave to enforce the award), he discovered that the notice had indeed been received by the broker and was dated 15 March. This was the broker who had arranged the employees' compensation insurance policy. The broker who had arranged the contractor's insurance says, according to this affirmation, that it "must have" received a notice although that cannot now be found. 22.The argument was that this new discovery is material in the sense that, as a result, China Link was never entitled to the award, that the rights and obligations under the policy that was transferred to Ming An include the right to arbitrate and to defend proceedings, so that after the transfer, the proceedings could not properly continue; alternatively, that if China Insurance retained the right to continue with the proceedings, then China Insurance was entitled to nothing under the award. Analysis 23.We adjudge this argument to be misconceived. The short answer is that the proceedings were properly instituted as between the correct parties, both of which parties were extant at the date of the award. No steps had been taken to substitute any party and there was no issue in the arbitration as to the identity of the parties. The arbitration was instituted by China Link, wherefore China Insurance had no choice, unless it was to concede the claim, but to defend its position in the arbitration and to incur costs in doing so. All interlocutory applications and determinations were made before the transfer; all the oral hearings took place before the transfer; and the only costs incurred after the transfer were those incurred in relation to written submissions. We see no basis for saying that the arbitrator had not the jurisdiction to entertain the arbitration as between the two parties before her, or to publish the award of costs in favour of one of the parties that had incurred costs in the arbitration. That being so, the award cannot be said to have been a nullity. Whether, as a result of the transfer of rights and obligations under the policy, the costs received by China Insurance are held on trust for Ming An is another matter, and does not affect the central issue. 24.There is a further basis upon which this appeal was dismissed, and it is that China Link is, in our judgment, estopped from raising the issue which it was now sought for the first time to canvass. It is not the case, as was suggested in argument, that both China Insurance and China Link agreed that no notice had in fact been received. The history of this matter shows that as a result of the representation by China Link that it had not received notice of transfer, Ming An and China Insurance were prepared to proceed on the assumption that no such notice had been served. In an affidavit of 5 June 2003, Mr Cohen of Messrs Masons explained that it was as a result of an affirmation from China Link asserting that no notice had been received that he caused inquiries to be made, and was told by the insurers that the company could not locate a copy of a notice and that the person responsible in the company for the transfer had left China Insurance's employ. It was in those circumstances only that Ming An's application was withdrawn, a withdrawal encouraged and, indeed, insisted upon by virtue of the application to set aside leave given to Ming An to enforce the award. In their letter of 21 May 2003, Masons had said that their acceptance that the transfer of business was not effective as against China Link was premised on the "facts that your client has given affirmation evidence that it received no notification, and our client cannot locate a copy of a notification sent". There then followed a representation by China Link to China Insurance, which was unambiguous in its effect, namely, that in the event of China Insurance commencing proceedings to enforce the final award, no point would subsequently be taken that the applicant for enforcement should be Ming An. That representation was not qualified by any hint that the position might be different if subsequently it transpired that the assumption under the parties were proceeding turned out to be incorrect. To the contrary, the nature of the representation was that, whatever the position was in fact, the point would not thereafter be taken. That representation was acted upon by Ming An's abandonment of the section 2GG application and the launching of China Insurance's application to enforce the award. Four days after Burrell J dismissed China Link's application to set aside the leave granted under section 2GG, China Link suddenly discovered the notice and seek now to resile from their undertaking, a course which, we hold, cannot be permitted. Conclusion 25.For these reasons, the appeal was dismissed, with costs to China Insurance, to be taxed if not agreed.
Representation: Mr Russell Coleman instructed by Messrs Masons for the Applicant (Respondent) Mr Anthony Houghton instructed by Messrs Ho & Ip for the Respondent (Appellant) |