ASIA INSURANCE CO LTD v. BUN KEE (INTERNATIONAL) LTD

HCCT 53/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 53 OF 2004

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J U D G M E N T

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I.    Introduction

1.  On 27 November 2002 there was a fire at Bun Kee's Godown No.1 at a lot known as Section N.  Section N comprised an open yard and a warehouse.  Certain stock stored at Godown No.1 was insured under a fire policy issued by Asia.  The stock was under-insured.

2.  There was a dispute between Bun Kee and Asia on the construction of the policy for the purposes of calculating average.  The dispute went to arbitration.  Asia now seeks leave to appeal against the award of the Arbitrator, Ms. Audrey Eu SC. 

3.  The question is whether it appears that the Arbitrator's award was obviously wrong in any way as a matter of law.

II.    Background

4.  The main issues before the Arbitrator were:-

(1)    whether in referring to "Godown No.1" the policy covered:-

(a)    only property stored inside the warehouse and in the open area under its canopy; or,

(b)    property stored in the entire of Section N.

(2)    whether the property insured was confined to fittings and excluded pipes.

5.  On the 1st issue, the Arbitrator concluded that "Godown No.1" referred only to the warehouse, including the open area under the canopy. 

6.  On the 2nd issue, the Arbitrator held that the policy covered fittings, but not pipes.

III.    Discussion

7.  To obtain leave to appeal, the Applicant must demonstrate a likelihood that the Arbitrator erred on a question of law.  Where the question involves a one-off situation, the Applicant must show that the Arbitrator likely fell into obvious error.  Mr. Warren Chan SC (appearing for the Applicant) accepts that this case concerns a one-off situation.

8.  Mr. Chan firstly argues that, given the overall aspect of Section N (a warehouse next to a large open area where massive pipes are stored in rows), the policy obviously must have been referring to the entire of Section N.  He has taken me in detail through the wording of the Risk Situation and Property Insured clauses of the policy.  All things considered, he suggests that "Godown No.1" must clearly refer to all of Section N.

9.  I do not think that it can be said that the Arbitrator was obviously wrong in her construction of the policy or of the words "Godown No.1".  My impression on perusing the policy is that Mr. Chan's reading of the document is far from compelling or obvious.  If anything, the Arbitrator seems to be right in her approach and conclusion on construction.

10.  Second, the Applicant takes a point made in a Supplementary Notice of Originating Motion filed on 12 November 2004 out of time. 

11.  The Applicant submits that the Arbitrator failed to distinguish between:-

"an agreement to hold covered with effect from 1st April 2002, pending issue of an insurance policy, and the contract of insurance made and evidenced by such policy".

The Applicant says that the insurance was originally of the former type, but in mid-May 2002 became the latter.

12.  This means (according to the Applicant) that, in construing the policy, the Arbitrator should have attached weight on a 15 April 2002 survey of Section N by Asia's Mr. Lee.  The Arbitrator did not.  This may have been because (the Applicant suggests) the Arbitrator believed the policy came into force in March 2002.  But (the Applicant explains) in March 2002 Asia had only effected an initial "holding cover".  The policy only came into being on 13 May 2002.

13.  Much of the Applicant's argument is speculative as to what the Arbitrator may have believed and how she may have treated the evidence of Mr. Lee's survey if she believed otherwise. 

14.  The Applicant itself did not explore the point now being made in cross-examination or submission at the arbitration.  Indeed, the Applicant's Skeleton is tentative on the evidence supporting this ground.  For example, the Skeleton candidly states:-

"Although the evidence was incomplete, such evidence as there was strongly suggested that in March 2002 Asia Insurance agreed to hold Bun Kee covered with effect from 1st April 2002, subject to a physical survey and (probably) a satisfactory proposal form."

15.  I do not think that the Applicant's argument casts any doubt on the correctness of the award. 

16.  What is being submitted in essence is that the Arbitrator misconstrued the evidence.  She is said to have attached no weight, when she should have placed some.  Even if true (which I do not accept), that by itself would be insufficient to found an appeal.

17.  Third, the Applicant complains that the Arbitrator construed the policy with the aid of other policies taken out at about the same time between Bun Kee (or an associated company) and Asia.  The Arbitrator should have looked at the policy on its own terms (the Applicant contends).  Alternatively, if the Arbitrator was going to look into other policies, she ought to have considered the individual factual matrices of those policies.  She did not so consider.

18.  I do not think that the Arbitrator's approach gives rise to any obvious error.  That other policies were concluded at around the same time would have constituted part of the factual matrix for construing the policy at issue.  The Arbitrator was accordingly entitled to have regard to those other policies and (in particular) their wording in resolving the dispute over the one policy.

19.  Fourth, the Applicant contends that the Arbitrator misapplied the "contra proferentem" rule.  She should have (it is said) construed ambiguities (if any) against Bun Kee.

20.  It seems to me that the Arbitrator was correct to hold as she did on "contra proferentem". 

21.  Bun Kee argued at the arbitration that any ambiguity in the policy should be construed against Asia.  The Arbitrator rejected Bun Kee's submission.  She was satisfied that "there [was] no patent or latent ambiguity in the terms of the Policy".  I do not see how she can be faulted in that conclusion.  As far as she was concerned, properly construed, the coverage of the policy was clear.  Indeed, Mr. Chan's primary submission today is that the policy, properly construed, is clear and unambiguous.

22.  Even if there was ambiguity in the word "godown" (which it might be said was capable of embracing open or covered storage or both), it does not follow that there was any lack of clarity in the expression "Godown No.1".  It was the latter words which the Arbitrator was construing and it was those words which, at the end of the day, she thought contained no ambiguity.  In my judgment, she was most likely correct in that view.

23.  Finally, the Applicant disagrees with the Arbitrator's finding on the exclusion of pipes.  It is alleged that her approach was "too narrow".

24.  I do not find that the Arbitrator's reasoning here was obviously or seriously flawed.  Again, having carefully considered the policy and its factual matrix, she arrived at her conclusion.  The Applicant may disagree with her, but that alone cannot justify the grant of leave to appeal.

IV.    Conclusion

25.  The Applicant fails.  Leave to appeal is refused.  The ground raised by the Supplementary Notice of Motion being insufficient to found an appeal, leave to file that Notice out of time is refused.  The Notice of Motion is dismissed.