HCA4246/2002 KANSON CRANE SERVICE CO LTD v. BANK OF CHINA GROUP INSURANCE CO LTD - LawHero
HCA4246/2002
高等法院（民事訴訟）Deputy High Court Judge Lam31/7/2003
HCA4246/2002
由此
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A A
B
HCA 4246/2002 B
IN THE HIGH COURT OF THE
C C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D COURT OF FIRST INSTANCE D
ACTION NO. 4246 OF 2002
E E
____________
F F
BETWEEN
G G
H KANSON CRANE SERVICE COMPANY LIMITED Plaintiff H
I and I
J BANK OF CHINA GROUP INSURANCE Defendant J
COMPANY LIMITED
K ____________ K
L L
Coram: Deputy High Court Judge Lam in Chambers
M Date of Hearing: 16 July 2003 M
Date of Decision: 1 August 2003
N N
O _______________ O
P DECISION P
_______________
Q Q
R R
1. The Plaintiff was previously known as Lik Ying Crane Hire
S
Company Limited. It was and still is an owner of what Mr Bharwaney, S
counsel for the Defendant, called a super crane. It was a valuable piece
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V V
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A A
B
of equipment and its proper description was, as stated in the pleadings, B
“Liebherr” LTM 1500 mobile crane [“the Crane”]. I was told that there
C C
are not many cranes of this type in Hong Kong. It was made in 2001 and
D the Plaintiff purchased the same at the price of EUR 950,195.79. D
E E
2. The Defendant carried on business as insurer. By a
F Contractors’ Plant and Machinery Insurance Policy dated 14 February F
2001 [“the Policy”], the Plaintiff insured the Crane at an annual premium
G G
of $120,000 from 24 December 2000 to 23 December 2001.
H H
3. The Policy contained, inter alia, the following provisions,
I I
“Exclusions
J The Insurers shall not be liable for … J
K
(k) loss or damage occurring whilst any Insured item … is K
being used in any manner or for any purpose other than
that for which it was designed;
L L
(p) loss or damage directly or indirectly caused by, or arising
out of, or aggravated by the wilful act or willful
M negligence of the Insured or his representatives. M
N
… N
Conditions
O O
1. The due observance and fulfillment of the terms of this
Policy in so far as they relate to anything to be done or
P complied with by the Insured … shall be a condition P
precedent to any liability of the Insurers.
Q Q
5. In the event of any occurrence which might give rise to a
claim under this Policy, the Insured shall
R R
a. immediately notify the Insurers by telephone or
telegram as well as in writing, giving an indication as
S to the nature and extent of the loss or damage; … S
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A A
d. furnish all such information and documentary evidence
B B
as the Insurers may require; …
C The Insurers shall on no account be liable for loss or damage of C
which no notice has been received by the Insurers within 14
days of its occurrence. Upon notification being given to the
D Insurers under this condition, the Insured may carry out repairs D
of any minor damage or replace items which have sustained
any minor damage; in all other cases a representative of the
E E
Insures shall have the opportunity of inspecting the loss or
damage before any repairs or alterations are effected. …
F F
8. a. If the proposal or declaration of the Insured is untrue in
any material respect, or if any claim made is fraudulent or
G substantially exaggerated, or if any false declaration or G
statement is made in support thereof, then this Policy shall
H be void and the insurers shall not be liable to make nay H
payment hereunder.
I b. In the event of the Insurers disclaiming liability in respect I
of any claim and if an action or suit is not commenced
within three months after such disclaimer or (in the case
J J
of arbitration taking place in pursuance of Condition 7 of
this Policy) within three months after the arbitrators or
K umpire have made their award, all benefit under this K
Policy in respect of such claim shall be forfeited.”
L L
4. Clause 8(b) is the key provision relied on by the Defendant
M M
in this application and I shall call this “the Limitation Clause”. There is
N no term or condition in the Policy prescribing the format under which a N
claim should be made to the Insurer. Memo 2 at page 2 of the Policy
O O
stipulated that the Insurer would only make payments after being satisfied
P by production of the necessary bills and documents that the repairs have P
been effected or replacement has taken place.
Q Q
R 5. On 2 August 2001, the Crane toppled and was damaged as a R
result. Notice in writing was given to the Defendant on the same day. A
S S
loss adjuster attended the scene of accident on 3 August 2001. The Crane
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A A
B
was salvaged and repaired at Liebherr Hong Kong Limited’s workshop. B
Repair works were completed in November 2001. The relevant invoices
C C
concerning the salvage and repair of the Crane were sent by the Plaintiff
D to the surveyor appointed by the Defendant on 24 October and 27 D
November 2001. The respective sums were $408,800 and EUR
E E
660,187.84.
F F
6. On 8 March 2002, the Plaintiff wrote to the Claims
G G
Department of the Defendant asking for a response to the Plaintiff’s claim.
H On 2 May 2002, the Plaintiff wrote to the Defendant again and said, inter H
alias,
I I
“We are greatly disappointed with your handling practice for a
claim that occurred over 9 months ago. You have failed to
J J
affirm or deny coverage within a definite time after the proof of
loss statements has been completed. … We are unable to
K tolerate your slow action in dealing with this matter without K
providing us with a valid solution. Unless we receive your
response within the next fortnight, we will be forced to put this
L matter with our solicitor for handling without further notice.” L
M M
7. On 10 May 2002, the Defendant instructed its solicitors to
N reply. After referring to how the accident happened, the operation N
manual and the proper operation procedure for the Crane, the Defendant
O O
came to a conclusion that the case came within Exclusions (k) and (p) of
P the Policy. The solicitor concluded by saying, P
Q “Based on the above reasons, we are instructed to decline your Q
claim on behalf of our clients. All of our clients’ rights are
expressly reserved. In particular, we reserve our clients’ rights
R to raise further grounds to decline your claim should further R
evidence surface.”
S S
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A A
B
It is the defence case that this letter constituted a disclaimer of liability B
and triggered the time limit under the Limitation Clause.
C C
D 8. The Plaintiff engaged a solicitor firm to act for it in the D
matter. On 13 June 2002, Messrs Yu & Associates [“Y&A”] wrote to the
E E
solicitors for the Defendant asking for copies of statement obtained by the
F Defendant from the Plaintiff’s employees and other witnesses. The F
declared purpose of such request was “to enable us to advise our client on
G G
the matter”. On 21 June 2002, solicitors for the Defendant wrote back
H inviting Y&A to identify the witness statements they asked for and H
stating that witness statement or expert statement are “privileged in
I I
contemplation of legal proceedings”. Y&A replied on 24 June 2002
J asking for all witness statements and documents which are now in the J
other side’s possession. Y&A also stated that if privileged documents are
K K
withheld, they were at least entitled to have copies of statements given by
L the Plaintiff’s employees. L
M M
9. Pausing here, it seems that both side envisaged that there
N would be legal proceedings. There were further correspondences on N
witness statements. On 1 August 2002, the solicitors for the Defendant
O O
wrote to Y&A saying as follows,
P P
“…Before we spend time on correspondence regarding
discovery of witness statement, would you please let us know
Q your client’s position in response to our letter dated 10 May Q
2002 to your client. We are also instructed that the
investigation carried out by our clients’ loss adjuster was with
R your client’s knowledge. Therefore, your client should be able R
to know what investigation was carried out.”
S S
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A A
B
10. According to the Defendant’s reckoning, the time limit for B
commencement of action expired on 9 August 2002. Y&A did not
C C
respond nor issue a writ on behalf of the Plaintiff prior to such deadline.
D D
11. Y&A replied on 2 September 2002 and set out in that letter
E E
the arguments of the Plaintiff as to why Exclusions (k) and (p) were not
F applicable in the present case. Reference was made to a statement by one F
Leung Ming Ho to the loss adjuster. Hence, the Plaintiff did have access
G G
to the witness statement of the crane operator and was able to give a
H substantial reply basing on such information. It was therefore H
unnecessary for the Plaintiff to ask for statements to be supplied through
I I
the Defendant’s solicitors.
J J
12. The Writ was eventually issued on 8 November 2002. The
K K
Statement of Claim was filed on 17 December 2002 and on 30 December
L 2002, the Defendant took out a summons to strike out the Plaintiff’s L
claim on the basis that the claim was time barred by reason of the
M M
Limitation Clause. The matter was heard by me on 16 July 2003.
N N
13. I agree with Mr Bharwaney that in a case where it is clear
O O
that a defendant would rely on a limitation defence and it is plain that the
P plaintiff could not overcome such plea, the court can strike out the claim P
on the basis that it is frivolous, vexatious and an abuse of the process of
Q Q
the court (see Riches v. DPP [1973] 1 WLR 1019 and Ronex Properties v.
R John Laing [1983] 1 QB 398). The question is whether the present case R
is such a clear case.
S S
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A A
B
14. Mr Bharwaney took me through a number of authorities B
showing that it has been a long standing commercial practice for
C C
contractual provision imposing a time limit for the commencement of
D action to be included and such time limit could be shorter than the time D
allowed under the Limitation Ordinance. The cases also showed that the
E E
court always gave effect to such a clause and did not regard the same as
F against public policy. I do not doubt this principle applied to insurance F
contracts although a lot of the cases cited by Mr Bharwaney concern
G G
claims under charterparties, sale of goods contracts instead of insurance
H policies. Walker v. Pennine Insurance Co. Ltd [1980] 2 Ll Rep 156 was a H
decision in respect of a motor insurance policy and the Court of Appeal
I I
upheld a decision rejecting a claim by the insured because it was out of
J time in accordance with the terms of the policy. J
K K
15. An insurance contract is a contract for indemnity. It is a
L commercial transaction and an insurer is entitled to offer such indemnity L
solely on the basis of the terms and conditions set out in the policy.
M M
Hence, in the present case, under Condition 1, it is stipulated that the due
N observance and fulfillment of the terms of the Policy by the Plaintiff is a N
condition precedent to the liability of the insurer. The Limitation Clause
O O
is one of the terms of the Policy. Before the Plaintiff could establish the
P liability of the Defendant to indemnify it, it is necessary to show that it P
has complied with the terms of the Policy, including the Limitation
Q Q
Clause.
R R
16. Mr Gidwani, counsel for the Plaintiff, argued that the
S S
Limitation Clause was not necessarily fatal to the Plaintiff’s claim based
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A A
B
on a number of points. The first point was that the Limitation Clause was B
not engaged because there had not been any effective disclaimer by the
C C
Defendant on 10 May 2002. Relying on two Singaporean authorities
D (Federal Insurance Co. v. Nakano Singapore (Pte) Ltd [1992] 1 SLR 390 D
and Shimizu Corporation v. Lim Tiang Chuan [1993] 3 SLR 77), Mr
E E
Gidwani submitted that a claim is not made by mere notification of the
F occurrence of an event, it was made when a demand for payment is made. F
The English Court of Appeal’s decision in Walker v. Pennine Insurance
G G
Co. Ltd [1980] 2 Ll Rep 156 suggested otherwise. For reasons given
H below, it is not necessary for me to decide whether Mr Gidwani’s H
submission is correct as a matter of law. Although in an affidavit filed on
I I
behalf of the Plaintiff, Mr Yu of Y&A suggested that no claim had been
J made by the Plaintiff, Mr Gidwani was unable to support this stance. J
Instead he accepted in Paragraph 7 of his skeleton submission that a claim
K K
was made by the Plaintiff when the invoices were sent to the Defendant’s
L loss adjuster in November 2002. In my judgment, that concession was L
made properly. In view of the indisputable facts of this case as set out
M M
above, it is impossible to argue that no claim had been made by the
N Plaintiff prior to 10 May 2002. N
O O
17. Mr Gidwani contended that the disclaimer was ineffective
P because the Defendant wrongly identified the notification of the accident P
on 2 August 2001 as the claim. I do not accept this submission. There
Q Q
was no reference in the letter of 10 May 2002 to the claim as being a
R claim made on 2 August 2001. The so-called wrong identification of the R
claim was a reference to a paragraph in the affirmation of the Defendant’s
S S
solicitors. In my judgment, reading the letter of 10 May 2002 in context,
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B
there cannot be any doubt to any reasonable recipient of the letter that the B
Defendant was rejecting the Plaintiff’s claim arising out of the accident of
C C
2 August 2001.
D D
18. Mr Gidwani referred to the reservation of right to rely on
E E
further grounds by the Defendant in the letter of 10 May 2002 and argued
F that the disclaimer was not clear and unequivocal. I am of the view that F
this point is without merit. The reservation did not detract from the fact
G G
that the Defendant’s solicitors clearly stated that the Defendant declined
H the claim. H
I I
19. Counsel then argued that the conduct of the Defendant’s
J solicitors after 10 May 2002 constituted waiver and representation to the J
effect that negotiations were still ongoing. Mr Gidwani submitted that
K K
the Defendant was estopped from relying on the Limitation Clause in
L these circumstances. I fail to see how the post 10 May 2002 L
correspondence can be read as containing a representation (whether by
M M
words or by conducts) by the Defendant that it would not rely on the
N Limitation Clause. In the absence of such a representation, there is no N
basis to support any waiver or estoppel. Neither do I see any basis to
O O
suggest that the letters written by the solicitors for the Defendant after 10
P May 2002 had the effect of inducing the Plaintiff not to issue a writ P
within the three months’ limit. The Plaintiff was represented by Y&A
Q Q
and there was no duty on the part of the Defendant to remind the Plaintiff
R to issue legal proceedings. Whether Y&A had reasons to believe that R
negotiation was still ongoing is beside the point. It is trite law that the
S S
fact that negotiating was ongoing did not stop time from running.
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A A
B
20. Mr Gidwani’s next point was that the Limitation Clause B
should be construed strictly and contra proferentem against the
C C
Defendant. I agree that this should be the approach adopted by the court
D in construing the Limitation Clause (see Chitty on Contracts, 28th Edn., D
Para. 29-116). However, if the court reaches a conclusion on the proper
E E
construction of an exemption clause which have sweeping effects, it has
F no power to rewrite the contract for the parties. In Yien Yieh Commercial F
Bank Ltd v. Kwai Chung Cold Storage Co. Ltd [1989] 2 HKLR 639 at
G G
p. 646H to I, Lord Goff said,
H “True, exemption clauses will be scrutinized with some H
stringency, with the effect (for example) that, in accordance
with the established principle, a party will not be held to have
I I
contracted out of liability for negligence except upon clear
terms; but principles such as these are designed to do no more
J than to assist in ascertaining the intention of the parties from J
the contractual documents. Where the contractual intention is
plain it should, in their Lordships’ opinion, be given effect to,
K K
even though this may result in a very restricted obligation
resting upon the party relying upon the exemptions in the
L contract.” L
M To the same effect is the judgment of Lord Oliver in Coughlan v. SH M
Lock (Australia) Ltd (1987) 3 BCC 183
N N
“At the outset [counsel] has reminded their Lordships of certain
well-known principles of construction in relation to guarantees.
O Such a document falls to be construed strictly; it is to be read O
contra proferentem; and, in case of ambiguity, it is to be
P construed in favour of the surety. But these principles do not, P
of course, mean that where parties to such a document have
deliberately chosen to adopt wording of the widest possible
Q import that wording is to be ignored. Nor do they oust the Q
principle that where wording is susceptible of more than one
meaning regard may he had to the circumstances surrounding
R R
the execution of the document as an aid to construction.”
S S
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A A
B
21. In his oral submission, Mr Gidwani invited this court to B
construe the Limitation Clause by reading the same together with Clause
C C
8(a). He submitted that the disclaimer for liability in the Limitation
D Clause should be construed as a disclaimer based on the grounds set out D
in Clause 8(a). Hence, it does not apply to a denial of liability on the
E E
basis of the Exclusions in the Policy. On the other hand, Mr Bharwaney
F argued that there was no ambiguity in the Limitation Clause and it clearly F
encompassed a disclaimer by reason of the Exclusions. He submitted that
G G
the two clauses were placed together for convenience, Clause 8(a) dealt
H with situations where the Policy would be rendered void ab initio whilst H
the Limitation Clause dealt with forfeiture of benefit.
I I
J 22. In my judgment, although I can have regard to the fact that J
the two clauses were placed together, my primary duty is to give effect to
K K
the clear meaning of the Limitation Clause. I am of the view that there is
L no ambiguity in respect of the phrase “in the event of the Insurers L
disclaiming liability in respect of any claim”. Read in the context of the
M M
Policy as a whole, the time limit of 3 months was clearly intended to
N govern all sorts of claims under the Policy instead of just confining to the N
rejection of claims under Clause 8(a). The reference to the arbitration
O O
award pursuant to Clause 7 in the Limitation Clause makes this clear. I
P therefore reject the submission of Mr Gidwani as to the construction of P
the Limitation Clause.
Q Q
R 23. Mr Gidwani further submitted that an implied restriction R
should be added to the Limitation Clause. He formulated the implied
S S
restriction as “subject to a right of relief against such forfeiture in
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A A
B
appropriate circumstances”. He submitted that this was necessary to give B
business efficacy to the Limitation Clause. Whilst in some cases the
C C
court will exercise its equitable jurisdiction to grant relief against
D forfeiture, one should be cautious against extending such power to D
intervene in commercial transactions generally when the exercise of such
E E
power tantamount to rewrite a contract for the parties. We have been
F reminded about that in the context of charterparty in Scandinavian F
Trading Tanker Co. v. Flota Petrolera Ecuatoriana [1983] 2 AC 694, see
G G
in particular the dicta of Robert Goff LJ cited with approval by Lord
H Diplock at p. 703-4. Similar sentiment was expressed by Lord Hoffmann H
in Union Eagle Ltd v. Golden Achievement Ltd [1997] HKLRD 366, in
I I
particular at p. 370D to F,
J “The principle that equity will restrain the enforcement of legal J
rights when it would be unconscionable to insist upon them has
K an attractive breadth. But the reasons why the courts have K
rejected such generalizations are founded not merely upon
authority (see Lord Radcliffe in Campbell Discount Co Ltd v
L Bridge [1962] AC 600, 626) but also upon practical L
considerations of business. These are, in summary, that in
many forms of transaction it is of great importance that if
M M
something happens for which the contract has made express
provision, the parties should know with certainty that the terms
N of the contract will be enforced. The existence of an undefined N
discretion to refuse to enforce the contract on the ground that
this would be “unconscionable” is sufficient to create
O uncertainty. Even if it is most unlikely that a discretion to grant O
relief will be exercised, its mere existence enables litigation to
P be employed as a negotiating tactic. The realities of P
commercial life are that this may cause injustice which cannot
be fully compensated by the ultimate decision in the case.”
Q Q
R 24. As I said, the contract for insurance in the present case is a R
contract for indemnity and it is a commercial transaction. As Mr
S S
Bharwaney pointed out, similar type of time limits have been inserted in
T insurance policies for many years. There is a good reason why such time T
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A A
B
limits are important for the insurance industry since an insurer has to B
maintain the necessary reserve for potential liability under disputed
C C
claims. I am not aware and counsel have not referred me to any case
D where relief against forfeiture was granted in respect of such time limit. D
E E
25. Mr Gidwani submitted that this time limit imposed under the
F Limitation Clause is very harsh and unreasonable and if the Policy is F
governed by the consumer protection legislations, this clause is likely to
G G
be struck down. However, he accepted that the Policy does not fall
H within the scope of these legislations. I note that in Schedule 1 to the H
Control of Exemption Clauses Ordinance Cap. 71, the legislature
I I
specifically stipulated that the ordinance is not applicable to contracts of
J insurance. In the light of that, it would require at least very strong and J
cogent grounds before equity should provide similar relief. Mr Gidwani
K K
was unable to convince me that such strong and cogent reasons existed.
L L
26. I therefore come to the conclusion that equity should not
M M
intervene to alter this time limit set by the parties under the Limitation
N Clause. Hence, even if there were an implied term as argued by Mr N
Gidwani, it could not have assisted his client. In fact, I will go further to
O O
say that in view of my above analysis, there is simply no basis for such a
P term to be implied into the Policy to cut down the scope of the Limitation P
Clause. I cannot see how such a term could be said to be necessary for
Q Q
business efficacy. To the contrary, for the reasons given by Lord
R Hoffmann, I think the addition of such an implied term would defeat the R
business purpose for inserting the Limitation Clause in the first place.
S S
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A A
B
27. In the circumstances, I see no prospect whatsoever on the B
part of the Plaintiff to overcome the limitation defence which the
C C
Defendant indicated clearly that it would rely upon. Therefore, the claim
D should be struck out as being frivolous, vexatious and an abuse of the D
process of the court and the action should be dismissed. I order
E E
accordingly. I also make an order nisi that the Plaintiff pays the
F Defendant the costs of the action. F
G G
(M H Lam)
H H
Deputy High Court Judge
I Mr Victor Gidwani, instructed by Messrs Fairbairn Catley Low & Kong, I
for the Plaintiff
J J
Mr Mohan Bharwaney, instructed by Messrs Deacons, for the Defendant
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
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KANSON CRANE SERVICE CO LTD v. BANK OF CHINA GROUP INSURANCE CO LTD
由此
-1-
A A
B
HCA 4246/2002 B
IN THE HIGH COURT OF THE
C C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D COURT OF FIRST INSTANCE D
ACTION NO. 4246 OF 2002
E E
____________
F F
BETWEEN
G G
H KANSON CRANE SERVICE COMPANY LIMITED Plaintiff H
I and I
J BANK OF CHINA GROUP INSURANCE Defendant J
COMPANY LIMITED
K ____________ K
L L
Coram: Deputy High Court Judge Lam in Chambers
M Date of Hearing: 16 July 2003 M
Date of Decision: 1 August 2003
N N
O _______________ O
P DECISION P
_______________
Q Q
R R
1. The Plaintiff was previously known as Lik Ying Crane Hire
S
Company Limited. It was and still is an owner of what Mr Bharwaney, S
counsel for the Defendant, called a super crane. It was a valuable piece
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A A
B
of equipment and its proper description was, as stated in the pleadings, B
“Liebherr” LTM 1500 mobile crane [“the Crane”]. I was told that there
C C
are not many cranes of this type in Hong Kong. It was made in 2001 and
D the Plaintiff purchased the same at the price of EUR 950,195.79. D
E E
2. The Defendant carried on business as insurer. By a
F Contractors’ Plant and Machinery Insurance Policy dated 14 February F
2001 [“the Policy”], the Plaintiff insured the Crane at an annual premium
G G
of $120,000 from 24 December 2000 to 23 December 2001.
H H
3. The Policy contained, inter alia, the following provisions,
I I
“Exclusions
J The Insurers shall not be liable for … J
K
(k) loss or damage occurring whilst any Insured item … is K
being used in any manner or for any purpose other than
that for which it was designed;
L L
(p) loss or damage directly or indirectly caused by, or arising
out of, or aggravated by the wilful act or willful
M negligence of the Insured or his representatives. M
N
… N
Conditions
O O
1. The due observance and fulfillment of the terms of this
Policy in so far as they relate to anything to be done or
P complied with by the Insured … shall be a condition P
precedent to any liability of the Insurers.
Q Q
5. In the event of any occurrence which might give rise to a
claim under this Policy, the Insured shall
R R
a. immediately notify the Insurers by telephone or
telegram as well as in writing, giving an indication as
S to the nature and extent of the loss or damage; … S
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A A
d. furnish all such information and documentary evidence
B B
as the Insurers may require; …
C The Insurers shall on no account be liable for loss or damage of C
which no notice has been received by the Insurers within 14
days of its occurrence. Upon notification being given to the
D Insurers under this condition, the Insured may carry out repairs D
of any minor damage or replace items which have sustained
any minor damage; in all other cases a representative of the
E E
Insures shall have the opportunity of inspecting the loss or
damage before any repairs or alterations are effected. …
F F
8. a. If the proposal or declaration of the Insured is untrue in
any material respect, or if any claim made is fraudulent or
G substantially exaggerated, or if any false declaration or G
statement is made in support thereof, then this Policy shall
H be void and the insurers shall not be liable to make nay H
payment hereunder.
I b. In the event of the Insurers disclaiming liability in respect I
of any claim and if an action or suit is not commenced
within three months after such disclaimer or (in the case
J J
of arbitration taking place in pursuance of Condition 7 of
this Policy) within three months after the arbitrators or
K umpire have made their award, all benefit under this K
Policy in respect of such claim shall be forfeited.”
L L
4. Clause 8(b) is the key provision relied on by the Defendant
M M
in this application and I shall call this “the Limitation Clause”. There is
N no term or condition in the Policy prescribing the format under which a N
claim should be made to the Insurer. Memo 2 at page 2 of the Policy
O O
stipulated that the Insurer would only make payments after being satisfied
P by production of the necessary bills and documents that the repairs have P
been effected or replacement has taken place.
Q Q
R 5. On 2 August 2001, the Crane toppled and was damaged as a R
result. Notice in writing was given to the Defendant on the same day. A
S S
loss adjuster attended the scene of accident on 3 August 2001. The Crane
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A A
B
was salvaged and repaired at Liebherr Hong Kong Limited’s workshop. B
Repair works were completed in November 2001. The relevant invoices
C C
concerning the salvage and repair of the Crane were sent by the Plaintiff
D to the surveyor appointed by the Defendant on 24 October and 27 D
November 2001. The respective sums were $408,800 and EUR
E E
660,187.84.
F F
6. On 8 March 2002, the Plaintiff wrote to the Claims
G G
Department of the Defendant asking for a response to the Plaintiff’s claim.
H On 2 May 2002, the Plaintiff wrote to the Defendant again and said, inter H
alias,
I I
“We are greatly disappointed with your handling practice for a
claim that occurred over 9 months ago. You have failed to
J J
affirm or deny coverage within a definite time after the proof of
loss statements has been completed. … We are unable to
K tolerate your slow action in dealing with this matter without K
providing us with a valid solution. Unless we receive your
response within the next fortnight, we will be forced to put this
L matter with our solicitor for handling without further notice.” L
M M
7. On 10 May 2002, the Defendant instructed its solicitors to
N reply. After referring to how the accident happened, the operation N
manual and the proper operation procedure for the Crane, the Defendant
O O
came to a conclusion that the case came within Exclusions (k) and (p) of
P the Policy. The solicitor concluded by saying, P
Q “Based on the above reasons, we are instructed to decline your Q
claim on behalf of our clients. All of our clients’ rights are
expressly reserved. In particular, we reserve our clients’ rights
R to raise further grounds to decline your claim should further R
evidence surface.”
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B
It is the defence case that this letter constituted a disclaimer of liability B
and triggered the time limit under the Limitation Clause.
C C
D 8. The Plaintiff engaged a solicitor firm to act for it in the D
matter. On 13 June 2002, Messrs Yu & Associates [“Y&A”] wrote to the
E E
solicitors for the Defendant asking for copies of statement obtained by the
F Defendant from the Plaintiff’s employees and other witnesses. The F
declared purpose of such request was “to enable us to advise our client on
G G
the matter”. On 21 June 2002, solicitors for the Defendant wrote back
H inviting Y&A to identify the witness statements they asked for and H
stating that witness statement or expert statement are “privileged in
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contemplation of legal proceedings”. Y&A replied on 24 June 2002
J asking for all witness statements and documents which are now in the J
other side’s possession. Y&A also stated that if privileged documents are
K K
withheld, they were at least entitled to have copies of statements given by
L the Plaintiff’s employees. L
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9. Pausing here, it seems that both side envisaged that there
N would be legal proceedings. There were further correspondences on N
witness statements. On 1 August 2002, the solicitors for the Defendant
O O
wrote to Y&A saying as follows,
P P
“…Before we spend time on correspondence regarding
discovery of witness statement, would you please let us know
Q your client’s position in response to our letter dated 10 May Q
2002 to your client. We are also instructed that the
investigation carried out by our clients’ loss adjuster was with
R your client’s knowledge. Therefore, your client should be able R
to know what investigation was carried out.”
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B
10. According to the Defendant’s reckoning, the time limit for B
commencement of action expired on 9 August 2002. Y&A did not
C C
respond nor issue a writ on behalf of the Plaintiff prior to such deadline.
D D
11. Y&A replied on 2 September 2002 and set out in that letter
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the arguments of the Plaintiff as to why Exclusions (k) and (p) were not
F applicable in the present case. Reference was made to a statement by one F
Leung Ming Ho to the loss adjuster. Hence, the Plaintiff did have access
G G
to the witness statement of the crane operator and was able to give a
H substantial reply basing on such information. It was therefore H
unnecessary for the Plaintiff to ask for statements to be supplied through
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the Defendant’s solicitors.
J J
12. The Writ was eventually issued on 8 November 2002. The
K K
Statement of Claim was filed on 17 December 2002 and on 30 December
L 2002, the Defendant took out a summons to strike out the Plaintiff’s L
claim on the basis that the claim was time barred by reason of the
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Limitation Clause. The matter was heard by me on 16 July 2003.
N N
13. I agree with Mr Bharwaney that in a case where it is clear
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that a defendant would rely on a limitation defence and it is plain that the
P plaintiff could not overcome such plea, the court can strike out the claim P
on the basis that it is frivolous, vexatious and an abuse of the process of
Q Q
the court (see Riches v. DPP [1973] 1 WLR 1019 and Ronex Properties v.
R John Laing [1983] 1 QB 398). The question is whether the present case R
is such a clear case.
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B
14. Mr Bharwaney took me through a number of authorities B
showing that it has been a long standing commercial practice for
C C
contractual provision imposing a time limit for the commencement of
D action to be included and such time limit could be shorter than the time D
allowed under the Limitation Ordinance. The cases also showed that the
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court always gave effect to such a clause and did not regard the same as
F against public policy. I do not doubt this principle applied to insurance F
contracts although a lot of the cases cited by Mr Bharwaney concern
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claims under charterparties, sale of goods contracts instead of insurance
H policies. Walker v. Pennine Insurance Co. Ltd [1980] 2 Ll Rep 156 was a H
decision in respect of a motor insurance policy and the Court of Appeal
I I
upheld a decision rejecting a claim by the insured because it was out of
J time in accordance with the terms of the policy. J
K K
15. An insurance contract is a contract for indemnity. It is a
L commercial transaction and an insurer is entitled to offer such indemnity L
solely on the basis of the terms and conditions set out in the policy.
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Hence, in the present case, under Condition 1, it is stipulated that the due
N observance and fulfillment of the terms of the Policy by the Plaintiff is a N
condition precedent to the liability of the insurer. The Limitation Clause
O O
is one of the terms of the Policy. Before the Plaintiff could establish the
P liability of the Defendant to indemnify it, it is necessary to show that it P
has complied with the terms of the Policy, including the Limitation
Q Q
Clause.
R R
16. Mr Gidwani, counsel for the Plaintiff, argued that the
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Limitation Clause was not necessarily fatal to the Plaintiff’s claim based
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B
on a number of points. The first point was that the Limitation Clause was B
not engaged because there had not been any effective disclaimer by the
C C
Defendant on 10 May 2002. Relying on two Singaporean authorities
D (Federal Insurance Co. v. Nakano Singapore (Pte) Ltd [1992] 1 SLR 390 D
and Shimizu Corporation v. Lim Tiang Chuan [1993] 3 SLR 77), Mr
E E
Gidwani submitted that a claim is not made by mere notification of the
F occurrence of an event, it was made when a demand for payment is made. F
The English Court of Appeal’s decision in Walker v. Pennine Insurance
G G
Co. Ltd [1980] 2 Ll Rep 156 suggested otherwise. For reasons given
H below, it is not necessary for me to decide whether Mr Gidwani’s H
submission is correct as a matter of law. Although in an affidavit filed on
I I
behalf of the Plaintiff, Mr Yu of Y&A suggested that no claim had been
J made by the Plaintiff, Mr Gidwani was unable to support this stance. J
Instead he accepted in Paragraph 7 of his skeleton submission that a claim
K K
was made by the Plaintiff when the invoices were sent to the Defendant’s
L loss adjuster in November 2002. In my judgment, that concession was L
made properly. In view of the indisputable facts of this case as set out
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above, it is impossible to argue that no claim had been made by the
N Plaintiff prior to 10 May 2002. N
O O
17. Mr Gidwani contended that the disclaimer was ineffective
P because the Defendant wrongly identified the notification of the accident P
on 2 August 2001 as the claim. I do not accept this submission. There
Q Q
was no reference in the letter of 10 May 2002 to the claim as being a
R claim made on 2 August 2001. The so-called wrong identification of the R
claim was a reference to a paragraph in the affirmation of the Defendant’s
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solicitors. In my judgment, reading the letter of 10 May 2002 in context,
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there cannot be any doubt to any reasonable recipient of the letter that the B
Defendant was rejecting the Plaintiff’s claim arising out of the accident of
C C
2 August 2001.
D D
18. Mr Gidwani referred to the reservation of right to rely on
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further grounds by the Defendant in the letter of 10 May 2002 and argued
F that the disclaimer was not clear and unequivocal. I am of the view that F
this point is without merit. The reservation did not detract from the fact
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that the Defendant’s solicitors clearly stated that the Defendant declined
H the claim. H
I I
19. Counsel then argued that the conduct of the Defendant’s
J solicitors after 10 May 2002 constituted waiver and representation to the J
effect that negotiations were still ongoing. Mr Gidwani submitted that
K K
the Defendant was estopped from relying on the Limitation Clause in
L these circumstances. I fail to see how the post 10 May 2002 L
correspondence can be read as containing a representation (whether by
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words or by conducts) by the Defendant that it would not rely on the
N Limitation Clause. In the absence of such a representation, there is no N
basis to support any waiver or estoppel. Neither do I see any basis to
O O
suggest that the letters written by the solicitors for the Defendant after 10
P May 2002 had the effect of inducing the Plaintiff not to issue a writ P
within the three months’ limit. The Plaintiff was represented by Y&A
Q Q
and there was no duty on the part of the Defendant to remind the Plaintiff
R to issue legal proceedings. Whether Y&A had reasons to believe that R
negotiation was still ongoing is beside the point. It is trite law that the
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fact that negotiating was ongoing did not stop time from running.
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B
20. Mr Gidwani’s next point was that the Limitation Clause B
should be construed strictly and contra proferentem against the
C C
Defendant. I agree that this should be the approach adopted by the court
D in construing the Limitation Clause (see Chitty on Contracts, 28th Edn., D
Para. 29-116). However, if the court reaches a conclusion on the proper
E E
construction of an exemption clause which have sweeping effects, it has
F no power to rewrite the contract for the parties. In Yien Yieh Commercial F
Bank Ltd v. Kwai Chung Cold Storage Co. Ltd [1989] 2 HKLR 639 at
G G
p. 646H to I, Lord Goff said,
H “True, exemption clauses will be scrutinized with some H
stringency, with the effect (for example) that, in accordance
with the established principle, a party will not be held to have
I I
contracted out of liability for negligence except upon clear
terms; but principles such as these are designed to do no more
J than to assist in ascertaining the intention of the parties from J
the contractual documents. Where the contractual intention is
plain it should, in their Lordships’ opinion, be given effect to,
K K
even though this may result in a very restricted obligation
resting upon the party relying upon the exemptions in the
L contract.” L
M To the same effect is the judgment of Lord Oliver in Coughlan v. SH M
Lock (Australia) Ltd (1987) 3 BCC 183
N N
“At the outset [counsel] has reminded their Lordships of certain
well-known principles of construction in relation to guarantees.
O Such a document falls to be construed strictly; it is to be read O
contra proferentem; and, in case of ambiguity, it is to be
P construed in favour of the surety. But these principles do not, P
of course, mean that where parties to such a document have
deliberately chosen to adopt wording of the widest possible
Q import that wording is to be ignored. Nor do they oust the Q
principle that where wording is susceptible of more than one
meaning regard may he had to the circumstances surrounding
R R
the execution of the document as an aid to construction.”
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B
21. In his oral submission, Mr Gidwani invited this court to B
construe the Limitation Clause by reading the same together with Clause
C C
8(a). He submitted that the disclaimer for liability in the Limitation
D Clause should be construed as a disclaimer based on the grounds set out D
in Clause 8(a). Hence, it does not apply to a denial of liability on the
E E
basis of the Exclusions in the Policy. On the other hand, Mr Bharwaney
F argued that there was no ambiguity in the Limitation Clause and it clearly F
encompassed a disclaimer by reason of the Exclusions. He submitted that
G G
the two clauses were placed together for convenience, Clause 8(a) dealt
H with situations where the Policy would be rendered void ab initio whilst H
the Limitation Clause dealt with forfeiture of benefit.
I I
J 22. In my judgment, although I can have regard to the fact that J
the two clauses were placed together, my primary duty is to give effect to
K K
the clear meaning of the Limitation Clause. I am of the view that there is
L no ambiguity in respect of the phrase “in the event of the Insurers L
disclaiming liability in respect of any claim”. Read in the context of the
M M
Policy as a whole, the time limit of 3 months was clearly intended to
N govern all sorts of claims under the Policy instead of just confining to the N
rejection of claims under Clause 8(a). The reference to the arbitration
O O
award pursuant to Clause 7 in the Limitation Clause makes this clear. I
P therefore reject the submission of Mr Gidwani as to the construction of P
the Limitation Clause.
Q Q
R 23. Mr Gidwani further submitted that an implied restriction R
should be added to the Limitation Clause. He formulated the implied
S S
restriction as “subject to a right of relief against such forfeiture in
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A A
B
appropriate circumstances”. He submitted that this was necessary to give B
business efficacy to the Limitation Clause. Whilst in some cases the
C C
court will exercise its equitable jurisdiction to grant relief against
D forfeiture, one should be cautious against extending such power to D
intervene in commercial transactions generally when the exercise of such
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power tantamount to rewrite a contract for the parties. We have been
F reminded about that in the context of charterparty in Scandinavian F
Trading Tanker Co. v. Flota Petrolera Ecuatoriana [1983] 2 AC 694, see
G G
in particular the dicta of Robert Goff LJ cited with approval by Lord
H Diplock at p. 703-4. Similar sentiment was expressed by Lord Hoffmann H
in Union Eagle Ltd v. Golden Achievement Ltd [1997] HKLRD 366, in
I I
particular at p. 370D to F,
J “The principle that equity will restrain the enforcement of legal J
rights when it would be unconscionable to insist upon them has
K an attractive breadth. But the reasons why the courts have K
rejected such generalizations are founded not merely upon
authority (see Lord Radcliffe in Campbell Discount Co Ltd v
L Bridge [1962] AC 600, 626) but also upon practical L
considerations of business. These are, in summary, that in
many forms of transaction it is of great importance that if
M M
something happens for which the contract has made express
provision, the parties should know with certainty that the terms
N of the contract will be enforced. The existence of an undefined N
discretion to refuse to enforce the contract on the ground that
this would be “unconscionable” is sufficient to create
O uncertainty. Even if it is most unlikely that a discretion to grant O
relief will be exercised, its mere existence enables litigation to
P be employed as a negotiating tactic. The realities of P
commercial life are that this may cause injustice which cannot
be fully compensated by the ultimate decision in the case.”
Q Q
R 24. As I said, the contract for insurance in the present case is a R
contract for indemnity and it is a commercial transaction. As Mr
S S
Bharwaney pointed out, similar type of time limits have been inserted in
T insurance policies for many years. There is a good reason why such time T
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A A
B
limits are important for the insurance industry since an insurer has to B
maintain the necessary reserve for potential liability under disputed
C C
claims. I am not aware and counsel have not referred me to any case
D where relief against forfeiture was granted in respect of such time limit. D
E E
25. Mr Gidwani submitted that this time limit imposed under the
F Limitation Clause is very harsh and unreasonable and if the Policy is F
governed by the consumer protection legislations, this clause is likely to
G G
be struck down. However, he accepted that the Policy does not fall
H within the scope of these legislations. I note that in Schedule 1 to the H
Control of Exemption Clauses Ordinance Cap. 71, the legislature
I I
specifically stipulated that the ordinance is not applicable to contracts of
J insurance. In the light of that, it would require at least very strong and J
cogent grounds before equity should provide similar relief. Mr Gidwani
K K
was unable to convince me that such strong and cogent reasons existed.
L L
26. I therefore come to the conclusion that equity should not
M M
intervene to alter this time limit set by the parties under the Limitation
N Clause. Hence, even if there were an implied term as argued by Mr N
Gidwani, it could not have assisted his client. In fact, I will go further to
O O
say that in view of my above analysis, there is simply no basis for such a
P term to be implied into the Policy to cut down the scope of the Limitation P
Clause. I cannot see how such a term could be said to be necessary for
Q Q
business efficacy. To the contrary, for the reasons given by Lord
R Hoffmann, I think the addition of such an implied term would defeat the R
business purpose for inserting the Limitation Clause in the first place.
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A A
B
27. In the circumstances, I see no prospect whatsoever on the B
part of the Plaintiff to overcome the limitation defence which the
C C
Defendant indicated clearly that it would rely upon. Therefore, the claim
D should be struck out as being frivolous, vexatious and an abuse of the D
process of the court and the action should be dismissed. I order
E E
accordingly. I also make an order nisi that the Plaintiff pays the
F Defendant the costs of the action. F
G G
(M H Lam)
H H
Deputy High Court Judge
I Mr Victor Gidwani, instructed by Messrs Fairbairn Catley Low & Kong, I
for the Plaintiff
J J
Mr Mohan Bharwaney, instructed by Messrs Deacons, for the Defendant
K K
L L
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N N
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P P
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