BRUCE PORTER BARON v. HARTFORD FIRE INSURANCE CO. and Others

IN THE COURT OF APPEAL

1994, No. 86
(Civil)

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J U D G M E N T

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Nazareth, V.-P.:

1. This is an appeal against the order of Barnett J upholding the decision of a master to strike out the plaintiff's statement of claim against the 2nd and 3rd defendants. The facts for the purpose of the appeal can be quite shortly stated.

2. On 31st December 1972 the plaintiff's father was found shot dead in Tsim Sha Tsui. It is not clear whether he was murdered. No one has ever been arrested. Two days later, on 2nd January 1973, the plaintiff spoke to the 2nd defendant on the telephone. The 2nd defendant was a director of the 3rd defendant, an insurance agent which arranged policies of insurance for and on behalf of the 1st defendant. The plaintiff asked the 2nd defendant about an accident policy which the 2nd defendant had arranged for his father in 1970. According to the plaintiff, the 2nd defendant represented that no claim could be made under the policy because it had not been paid up and, in any event, did not cover murder.

3. According to the 2nd defendant's version, he told the plaintiff he was not sure whether the policy was still active, i.e. whether it had been paid up and if it had, it would not cover murder. The 2nd defendant's version of that telephone call appears in a statement which he made to Police Inspector Carroll, on 10th January 1973, about a week later. Also what similarly figures in this case is an article which appeared in the South China Morning Post on 30th April 1991, which the plaintiff says was not accurate.

4. The plaintiff's case was that he endeavoured without success to obtain a copy of the insurance policy from the police. He says he received no information or help from the police. Neither he or his mother, the beneficiary whom he was assisting took any steps to pursue a claim under the policy. It was then, not until 1990, when he had a casual conversation with a friend in the insurance world, that the plaintiff learnt that an accident policy should have covered murder. Enquiries he then made revealed that the deceased had paid the premium, albeit late on 31st July 1972 when it was renewed. Also the information he received was that the insurer had probably removed the murder exclusion from such policy round about July 1972.

5. The plaintiff instituted these proceedings in October 1993, claiming damages in the amount of the policy, i.e. US$110,000. Following that, the 2nd and 3rd defendants applied to the master to strike out the statement of claim with the result I have indicated.

6. A number of grounds were advanced. The one that found favour with the master was that the plaintiff was time-barred by the provisions of the Limitation Ordinance, Cap.347, s. 6 of which provides a 6-year period within which such claims have to be made. But under s.26(1) the period of limitation does not run until the plaintiff could with reasonable diligence have discovered the fraud, concealment or mistake.

7. It is not in dispute that the judge applied the right strike-out principles which he detailed by reference to the following passage from the judgment of Millett J, as he then was, in Lonrho PLC v Fayed & Others (No. 2) [1992]1 WLR 1 at p. 5:

"Where, however, the application is made under R.S.C., Ord. 18, r.19(1)(b),(c) or (d) or the inherent jurisdiction of the court, on the ground that the claim is 'vexatious' or an abuse of the process of the court, evidence is admissible to show that this is the case. But the test is a high one. A plaintiff is entitled to pursue a claim in these courts however implausible and however improbable his chances of success. Unless the defendant can demonstrate shortly and conclusively that the plaintiff's claim is bound to fail or is otherwise objectionable as an abuse of the process of the court, it must be allowed to proceed to trial."

8. The judge then identified three grounds which the defendants pursued before the master. He outlined them in the following way:

1. That the plaintiff's case in misrepresentation is without any solid foundation and bound to fail;

2. That the plaintiff has failed to plead or state with the requisite particularity his case on fraudulent concealment for the purpose of s.26 of the Limitation Ordinance and, in any event, is unable to discharge the burden of showing that he could not with reasonable diligence have discovered the alleged misrepresentations within the primary limitation period; and

3. That the insurance policy was voidable for non-disclosure by the deceased of a material fact and would have been avoided in any event.

It is not disputed before us that this was the basis on which the case proceeded before Barnett J.

9. The judge rejected the first ground. It seemed to him essentially a matter where the trial judge would have to make findings of fact before attempting to apply the legal principles. He felt unable to say that the plaintiff was incontestably wrong or bound to fail.

10. The judge then addressed the third ground, i.e. material non- disclosure by the plaintiff's father. This turned upon the newspaper article mentioned earlier in which it was stated that in the deceased's diary, which was in the possession of the plaintiff, the deceased recorded that he had learnt he was suffering from cancer and had no more than a year to live. This was, it was said, at a time immediately before he had paid the premium and renewed the policy.

11. The judge held it to be a thoroughly bad point at that stage. He observed that if the matter proceeded to trial, it would be for the defendant to seek to avoid the policy and plead accordingly. It was, in his judgment, not a point of debate at the stage before him. He was reluctant in the extreme to strike out a claim on the basis of an abbreviated newspaper report.

12. He then turned to the second ground, which was the limitation point under s.26. He dealt with it after recounting the submissions on each side in the following way, addressing the question asked by counsel for the plaintiff which was what more the plaintiff could have done:

"At the time, the Plaintiff was acting on behalf of his mother who was beneficiary of the deceased's estate. Doubtless the Plaintiff was in a somewhat uncomfortable position because of the police investigations. There is, however, no information as to his mother's position although doubtless she was in a distressed state of mind. There was, however, an estate to be wound up and it included a possible claim against an insurance company for a sum which, even today, is not insignificant. The test is whether the Plaintiff should have done that which an ordinary prudent person in his position would have done. It is with regret that I have to say he did not exercise reasonable diligence. It seems to me elementary that in the circumstances then obtaining an ordinary prudent person in the position of the Plaintiff would have made further enquiry, probably through a solicitor, in order to satisfy himself that to make a claim would be hopeless. It seems to me to be such an obvious step that I am constrained to say that the Plaintiff cannot hope to overcome the time-bar against him Put another way, he is bound to fail."

13. The plaintiff appeals against that finding. He concedes that the test the judge applied is correct; in any case it is spelt out clearly in s.26(1). But he submits that the judge was wrong in holding that an ordinary prudent person in his position would have unquestionably made further enquiry probably through a solicitor, and that he was not reasonably diligent in failing to do so.

14. The plaintiff, who appears in person before us, his legal aid certificate having been withdrawn on 5th December, i.e. the beginning of this week, points out that at that time he was just 23 years of age. The loss of his father was a traumatic experience for him and for his mother. It was clear that he had come under suspicion by the police. He turned to the 2nd defendant who was a friend of his father. He had seen his father over years associating with him at lunch time. Moreover he was his father's insurance broker, having arranged for several insurance policies. So he went to him to enquire about the policy. He was told in effect that it had not been renewed; moreover, if it had been renewed, that murder was not an accident and so would not be covered under the policy. In those circumstances, he submits that he had in fact done what a prudent person would do. He had also been to the police. He did not manage to obtain the policy from them. He saw there the statement that had been made by the 2nd defendant.

15. In this regard one must also consider Mr Clifford Smith's submission. He has submitted that it is not only the position of the plaintiff that has to be considered, but also that of his mother, who was the beneficiary. That may be true, but she was acting through the plaintiff at the time, which could not have been other than a distressing situation. The judge rightly referred to the fact that she must have been in a distressed state of mind.

16. Mr Clifford Smith also points out that in the evidence there is the statement of a witness, Mr Yau, who says that the plaintiff produced to him a copy of the policy. Yet in a statement of claim made about the same time, 1992/1993, he said that in effect he did not have the policy. The thrust of Mr Clifford Smith's submission is that this must discredit the plaintiff's case to the point that this Court might take the view that it is bound to fail. It does not seem to me that conclusion necessarily follows. Moreover, we did not call on the plaintiff to reply, and he would no doubt have something to say. Be that as it may, looking at all the evidence now before this Court, it seems to me that the judge was wrong in coming to the conclusion that it was elementary in the circumstances then obtaining that an ordinary prudent person in the position of the plaintiff would have made further enquiry probably through a solicitor. It seems to me that criteria has to be applied in the situation in which the plaintiff found himself, and addressing that criteria in the circumstances which the plaintiff has described, I do not think it can be said that the plaintiff's contention is incontestably bad and bound to fail. He went to the obvious source of information. He was given information and he accepted it. Viewed in that context of the reasonable acceptance of that information, it seems to me that it could not be said that he was bound to fail the test in s.26(1), i.e. that he could not with reasonable diligence have discovered the situation. I conclude, therefore, that the judge was wrong in his conclusion on the second ground.

17. However, that does not dispose of the matter for the respondents filed a respondents' notice, giving notice that they would seek to uphold the judge's conclusion upon the first and third grounds mentioned. I will deal first with the first ground which was that the plaintiff's claim in misrepresentation is without any solid foundation and bound to fail. It will be recalled that the judge rejected this because he considered it to be essentially a matter where the trial judge should be left to make the findings. Mr Clifford Smith dealt with this ground in the course of his submission on the limitation point. Once one accepts, as I have done, that the plaintiff's claim that he had taken reasonable steps to ascertain the true position and there was not much more that a prudent person would do, is not incontestably bad. It is difficult to see how this first ground of the defendants could be accepted. Indeed, Mr Clifford Smith did not seek to press it independently once it appeared to him that the other two grounds could not be supported. I will say only shortly that I am not persuaded that the first ground is without solid foundation and bound to fail.

18. As to the third ground, as the judge points out, it rests on a newspaper article is not verified in any way. We ruled it inadmissible, and Mr Clifford Smith thereupon very properly recognised that upon that basis he could not seriously pursue the third ground.

19. For those reasons, it follows that the appeal must be allowed. I would accordingly allow the appeal and set aside the judge's order.

Littion, J.A.:

20. At the risk of over-simplification, the plaintiff's case in a nutshell is this: "I was young and gullible. The 2nd defendant was an experienced insurance agent, a friend of my late father's, and had himself arranged the insurance for my father. Therefore, when he told me that my mother had no claim under the policy, I believed him. Belatedly, I realised that I had been grievously and wilfully misled. If I should fail to recover the insurance money from the company, because the claim is now stale, I hold the 2nd defendant responsible".

21. The judge found that the plaintiff has a viable cause of action for damages for misrepresentation against the 2nd defendant and yet he concluded that under no circumstances would the plaintiff be able to show at trial that he could satisfy the requirements of s.26(1) of the Limitation Ordinance, i.e. that he could not with the exercise of reasonable diligence have discovered much earlier that he was in fact misled by the 2nd defendant, within the limitation period. This seems to me to be a curious result. If the essence of the plaintiff's case is that he trusted the 2nd defendant implicitly, it follows logically that he continued trusting the 2nd defendant until he was disabused. If that came years later, how does it fundamentally undermine the plaintiff's case? The judge in his judgment repeated what Mr Bleach, counsel for the plaintiff, had put rhetorically: "What was the plaintiff expected to do after approaching the man who had in fact arranged the insurance policy?" Nothing in the rest of the judgment provides, in my judgment, a satisfactory answer to that question.

22. It seems to me a most curious proceeding to level at the plaintiff at this stage of the litigation the accusation that he should in fact have been disabused of the 2nd defendant's deceit much earlier.

23. This appeal illustrates how the strike-out jurisdiction should only be sparingly used. Nothing has been proved against the 2nd defendant, and yet we in this Court must proceed on the basis that deceit has in fact been established against the 2nd defendant. That may turn out at the trial to be grossly unfair. The sooner this case goes to trial, the better.

24. I, too, would allow this appeal.

Bokhary, J.A.:

25. I, too, would allow this appeal.

26. The judge rejected the 2nd and 3rd defendants' contention that the plaintiff's case in misrepresentation was bound to fail. In my view, the judge was right to reject that contention. What its rejection necessarily involves is that these three things are reasonably arguable. One, the 2nd defendant had told the plaintiff that the policy had not been paid up and that, in any event, it did not cover murder. Two, those representations were false. Three, the plaintiff was taken in by them.

27. That being so, it was inconsistent to hold - as the judge held in striking out the plaintiff's claim against the 2nd and 3rd defendants - that the plaintiff was bound to make enquiries as to the truth of those representations (even though they come from his late father's friend who had arranged the insurance). Throughout, I have not distinguished between the plaintiff himself and his mother, whom the 2nd and 3rd defendants must have known was being represented, albeit informally, by her son.

28. The contention that the policy was voidable for non-disclosure cannot get off the ground because it depends on a newspaper article which is put forward as containing admissible admissions by the plaintiff but which, in truth, contains nothing of the kind.