Liberty International Nsurance Ltd v. Richina Development Ltd.

DCCJ 5111/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5111 OF 2009

____________

BETWEEN

____________

Coram:     H.H. Judge Chow

Hearing date:   11^th March 2010

Date of handing down Decision :     18^th March, 2010

Decision

1.This is an application taken out by the Defendant pursuant to Order 12 rule 8 (1) and (2) of the Rules of the District Court (“RDC”).  It applies for the following orders:-

“1.   A Declaration that the Court has no jurisdiction, or alternatively the court should not exercise jurisdiction over the present proceedings, on the grounds that in the circumstances of the present action the Court has no jurisdiction over the Defendant in respect of the subject matter of the claim or the relief or remedy sought in that:-

(1)     the Defendant is entitled to rely on the terms of the Insurance Policy which excludes the jurisdiction of the Court; and

(2)     the terms of the Insurance Policy require all differences arising out of the Policy to be determined by arbitration.

2.    An order that the Writ of Summons against the Defendant be set aside.”

2.The Plaintiff is an insurance company whereas the Defendant is an insured under an insurance policy (“the Policy”) taken out from the Plaintiff.  In this action the Plaintiff claims against the Defendant for an indemnity in respect of a sum paid pursuant to the Policy.  The Defendant alleges that by reason of an arbitration clause (“Arbitration Clause”) in the Policy, the jurisdiction of this Court has been excluded.  Clause 18(g) of the Arbitration Clause reads:-

“All differences arising out of this Policy shall be determined by arbitration in accordance with the prevailing Arbitration Ordinance…… It is expressly stipulated that it shall be a condition precedent to any right of action or suit upon this Policy that an arbitration award shall be first obtained…..”

The Plaintiff submits that the Defendant, by its conduct, has waived its right to rely on submitted to the jurisdiction of this Court.  The conduct comprises: (1) the Defendant’s making of a sanctioned offer pursuant to O.22, r.5 of the RDC, and (2) the Defendant’s request for discovery pursuant to O. 24 r 10 of the RDC.

The sanctioned offer

3.On 11 December 2009, the Defendant’s solicitors served a letter on the Plaintiff’s solicitors.  The letter reads:-

“Please note that under Order 22 Rule 5(7) of the Rules of the District Court (Cap. 336), if the Defendant’s offer herein is not accepted with 28 days from the date hereof, the Plaintiff may only accept the Defendant’s said offer if (a) the parties agree on the liability for costs; or (b) the Court grants leave to accept it.”

O.22, r.3 (1) of the RDC provides that, “An offer by a defendant to settle the whole or part of a claim or an issue arising from the claim does not have the consequences specified in this Order unless it is made by way of a sanctioned offer or a sanctioned payment or both”.  No doubt the Defendant intended to settle the Plaintiff’s claim by serving on the Plaintiff the above letter, which contained a sanctioned offer.  If the Plaintiff accepts the sanctioned offer, the claim will be stayed (see O.22 r.22(1)).  It desired the Plaintiff’s acceptance of the sanctioned offer, by bringing to the Plaintiff’s attention the consequence of not accepting it within the time stipulated by O.22, r.5(7).  This demonstrates that there is no intention on the part of the Defendant to solve the dispute by way of arbitration.

4.O.22 sets out, inter alias, the mechanism under which the parties of a legal dispute can settle the disputes between them.  This mechanism operates under the jurisdiction of the District Court.  The Defendant manifested its intention to settle the dispute by making use of this mechanism. In doing so, the Defendant submitted itself to the jurisdiction of the District Court, and waived its right to make use of the Arbitration Clause.

5.The Defendant argues that the letter dated 11 December 2009 is only a response to the Plaintiff’s offer, and it is the Plaintiff who initiated the settlement proceedings pursuant to Order 22.  It is not one that is made in the course of proceedings.  This is not correct.  The course of proceedings in an action cover the steps taken by the parties, which lead to the settlement of that action.  What is material is that the response contained a sanctioned offer.  The making of the sanctioned offer is part of the proceedings, because the effect of this step is to bring the litigation to an end.

The Defendant’ s request for discovery

6.On 16^th December 2009, the Defendant’s solicitors requested by letter for discovery of the Policy pursuant to O.24, r.10 of the RDC.  The relevant part of the letter reads:

“Pursuant to Order 24 Rule 10(1) of the Rules of the District Court (Cap. 336), we hereby giving you notice to produce the Policy……

Should the Plaintiff fail to comply with the Defendant’s request for document herein in accordance with Order 24 R.10(2), we have standing instructions to apply to the Court for the document and/or to dismiss the Plaintiff’s claim herein, in accordance with Order 24 R. 16(1) of the said Rules”.

7.The Defendant backed up its request by making use of O.24 r. 16(1) of the RDC, threatening to apply to the Court for the document requested and/or to dismiss the Plaintiff’s claim.  O. 24 r. 10 operates under the jurisdiction of the District Court, because parties can apply to the District Court for enforcement of their rights under these rules pursuant to O.24 r.16(1) of the RDC.  By making use of the procedures under O.24 r.10 the Defendant intended to make use of the District Court, it necessary, to enforce its rights, should the Plaintiff fail to meet its request.  Hence it has submitted to the jurisdiction of the District Court.

8.Having submitted to the jurisdiction of the District Court, the Defendant is misconceived to have taken out the present application. Accordingly I dismiss the Defendant’s summons.

Costs

9.I make an order nisi, to be made absolute in 14 days’ time, that the Defendant do pay costs of this application to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel.

The Plaintiff:   represented by Mr. Herbert Au-Yeung, instructed by Messrs. Cheng, Yeung & Co., Solicitors.

The Defendant:   represented by Mr. Earl Deng, instructed by Messrs. Rowdget Young & Co., Solicitors.