LIU SUET UN AND ANOTHER v. ANGLO STARLITE INSURANCE CO. LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. This is an appeal against a decision of Master O'Donnell, given on 22 February 1988, granting the declarations and making the orders sought by the plaintiff in an Originating Summons dated 27 November, 1987.

2. The matter arose in the following way. In October 1983, one Sin Yan Ming (hereinafter referred as Sin) purchased a motorcycle which was comprehensively insured by the Defendant. It is not in dispute that in November 1983 Sin sold this motorcycle to Yu Man Far (hereinafter referred to as Yu) for $4000, half of which was paid at the time of delivery of the motorcycle to Yu. However, the plaintiff, in answer to a notice to admit facts, claimed that pursuant to the terms of sale, Yu was not to become the owner until he was registered as such.

3. On 1 December 1983, there was an accident, and the plaintiff was struck by the motorcycle, which was then driven by Yu.

4. The plaintiff took action against both Sin and Yu, alleging that Sin was the owner, and Yu the driver, driving as the servant or agent of Sin, and with his consent. Service was acknowledged by both Sin and Yu, but no defences were filed, and interlocutory judgments against both of them were obtained in default of defence in November 1985.

5. In March 1988, Master Perrier (as he then was) assessed damages, and in June 1987, final judgment was entered in favour of the plaintiff.

6. In November 1987, an Originating Summons was issued, seeking a declaration that the Defendant, as insurer, was liable to pay the Plaintiff the amount of the final judgment and costs.

7. Master O'Donnell ruled as follows:

"Following submissions from solicitors for the parties on the effect of section 10 of Motor Vehicles insurance (Third Party Risks) ordinance, Master satisfied that the Court of Appeal decision in Peters v. General Accident Assurance Lloyds L.R. 1938 Vol. 60 311 can be distinguished on its facts. Judgment has been obtained against the insured under the insurance policy in this case to give effect to the statutory provisions of s.10 of Motor Vehicles Insurance (Third Party Risks) Ordinance.

 

        Plaintiff grated declaration and order sought under Paragraphs 1 and 2 respectively of the Originating Summons. Costs of this application and the proceedings to the Plaintiff. Plaintiff's own costs to be taxed in accordance with Legal Aid Regulations."

8. The defendant now appeals against this decision on the ground that since Sin had sold the motor cycle to Yu before the accident, he was no longer a "person insured" within section 10(l) of the said Motor vehicles insurance (Third Party Risks) Ordinance, Cap. 272, and that the judgment obtained against him, did not render liable the defendant, his former insurer.

9. Section 10(l) of Cap. 272 reads as follows.

"10. (1) If, after a certificate of insurance has been issued under Section 6(3) in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under section 6(1)(b) (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any law relating to interest on judgments."

10. This section is virtually identical to section 10(1) of the English Road Traffic Act, 1934.

11. In Shawcross on The Law of Motor Insurance, Second Edition, 1949, there is a commentary on this section, and the following is found at page 287:

"The circumstances in which insurers are entitled to avoid the policy have been explained. The words 'is entitled to' are vital. They show that the section has no application to a policy which has been automatically avoided as when the assured dies, becomes bankrupt, or parts with the insured vehicle."

12. In a footnote (p.287) to the passage which states that the section does not apply when a person has parted with the insured vehicle, the author states that "in all these cases the policy comes to an end willy nilly and cannot be revived."

13. This is the defendant's submission in a nut-shell.

14. In Peters v. General Accident, Fire and Life Assurance Corporation Ltd. ⁽¹⁾, the insured, Coomber, took out a policy covering himself and any person driving the insured car with his permission. Some months later, he sold the car to Pope. Later still, Pope was involved in an accident, and a third party, Peters, suffered injury. Peters eventually brought action against the insurer under section 10(4) of the Road Traffic Act 1934, for the amount awarded to him against Pope. The action was dismissed, the defence being that the policy was not in force at that time of the accident i.e. that it lapsed when Coomber sold to Pope.

15. On appeal, Sir Wilfred Greene, M.R. said that it was "a perfectly clear case" (p.312). He went on, at p.313:

"Under sect. 10 of the Road Traffic Act of 1934 it is provided that if, when a certificate of insurance has been issued, Judgment is recorded in respect of a liability covered by the policy against any person insured by the policy, then the insurer is liable to pay the person entitled to the benefit of the judgment any rum payable thereunder in respect of the liability, subject to certain exceptions which need not be stated as they are not material to the facts of this case.

 

        What happened here was that Peters obtained a judgment against Pope, and he seeks under section 10 to make the present respondents, the insurance company, liable upon the ground that he has obtained a judgment against a person insured by the policy. He rays that Pope is a person insured by the policy because Pope on the true construction of the policy is a person who was driving the car with Coomber's permission. The answer to this is, in my opinion, short and clear. At the date when the accident tool place the entire property in the car was vested in Pope. He had bought the car. On the sale of the car, the property passed to him ....... long before this accident took place. The circumstances that he had not paid the Whole of the purchase price is irrelevant for that purpose, because that circumstance does not leave in the vendor, Mr. Coomber, any interest in the car. There is no vendor's lien, or anything of that sort. The car had become the out-and-out property of Pope. Now, when Pope was using that car, he war not using it by the permission of Coomber. ....... He war using it as owner and by virtue of his rights as owner and not by virtue of any permission of Coomber."

16. The Marter ruled that Peters could be distinguished on its facts. Possibly he had in mind the fact that in Peters, there was no judgment against the seller of the car, Coomber. But the principle which emerges is that once Coomber sold to Pope, the policy was at an end, it had lapsed. That appears to have been the finding of Goddard, J., at first instance, as indicated in the head note. The appeal was therefore dismissed.

17. It appears that while the facts of Peters may be distinguishable, the principle that once a vehicle is sold, the seller is no longer a "person insured" under section 10(l) of Cap. 272, is applicable in the present case.

18. In Rogerson v. Scottish Automobile & General Insurance Co. Ltd. ⁽²⁾, a decision of the House of Lords, the policy covered the insured's liability in respect of the use of any car (except a hired one) provided it was used instead of the insured car. The insured changed cars, and then had an accident. A third party obtained judgment against him. The insurer claimed that the protection only extended to the first car and to the temporary use of another car, but not to a permanent replacement for the insured car. The House of Lords accepted this argument. Lord Buckmaster said (p.2):

"When once the car which is the subject of the policy is sold, the owner's rights in respect of it cease and the policy so far as the car is concerned is at an end."

19. Nothing could be clearer than that. When an insured ear is sold, the insurance policy comes to an end, in the absence of provisions to the contrary in the policy itself.

20. The same principle emerges from Tattersall v. Drysdale ⁽³⁾. In that case the insured had a policy which provided cover for anyone driving with his permission, "provided that such person is not entitled to an indemnity under any other policy". The insured lent a car to a customer, who had traded in an old car, and awaiting delivery of anew one. The customer had an accident and claimed that he was not entitled to an indemnity under any other policy. Goddard J. held that the claim succeeded, because he had sold his old car and was no longer interested in the policy in relation to it. He said (at p. 24) as follows:

"I think that both in the Court of Appeal and the House of Lords the decisive factor was that the subject matter of the insurance was the specified car, and that as the assured had parted with it, he no longer was interested in the policy.

 

        The true view, in my judgment, is that the policy insures the assured in respect of the ownership and user of a particular car ...... It gives the assured by the extension clause a privilege or further protection while using another car temporarily, but it is the scheduled car which is always the subject of the insurance."

21. In MacGilliviary and Parkington on Insurance Law (7th Edition), there appears this foortnote on page 190:

"So where a car owner indemnifies himself as owner in respect of third party risk, the policy lapses when he sells the car" (and he cites Rogerson, Tattersall v. Drysdale, & Peters).

22. I turn, therefore, to the policy granted to Sin by the defendant. It appears to be an ordinary comprehensive policy, providing indemnity in respect of third party liability and in respect of damages to the vehicle. It is agreed by counsel that there is an endorsement to indemnify other persons driving the motor cycle on the insured's order or with his permission, although this doesn't appear on the photocopy marked "LPC-7" and referred to in the affirmation of Liu Pui Cheung. The policy is thus of a similar kind to those which were under consideration in Peters, Rogerson, and Tattersall.

23. I have therefore concluded that if when din sold to Yu, prior to the accident, the property passed to Yu, then the plaintiff cannot succeed against the defendant, and that the appeal must be allowed. For there would have been no judgment obtained against a person insured within section 10 of Cap. 272 and the defendant's insurer would not be liable to the plaintiff.

24. The difficulty in this case arises from the fact that no oral evidence has been given.

25. To return again to the chronology, I repeat that the originating Summons was issued on 27 November, 1987. On 1 February 1988, the defendant served the plaintiff with an hearsay notice, in relation to separate tape recorded conversations between Mr.Charles C.L. Yuen, solicitor of Johnson, stokes & Master, solicitors for the defendant, and bin and Yu, both on 30 April, 1985. No counter notice was served, and these interview would ordinarily be evidence of such facts as were therein stated, provided they complied with various provisions of the Evidence Ordinance, Cap. 8, and the Rules of the supreme Court, Order 38.

26. On 11 February, the defendant's solicitors suggested in a letter to the plaintiff's solicitors that an application be made to the Master, by consent, that the proceedings before him proceed on the basis of an ordinary trial; in other words, that the proceedings be continued as if the matter had been begun by writ. On 13 February, 1988, the plaintiffs solicitors wrote to the defendant's solicitors in these terms:

"We would emphasize that the plaintiff's cause of action accrues entirely from her statutory right under the ordinance, and it is immaterial whether the alleged sale of the motorcycle took place before or after the accident, or whether, frankly speaking, there was a sale at all. In the circumstances, we cannot see any reason why the proceedings should be continued as if it had been begun by writ, as the matter is really a question of law instead of the question of factual details of the alleged sale of the said motorcycle. Therefore we will resist your application to the Court for an order in the terms stated in your letter."

27. When the matter come before the Master, I am informed by Counsel for the defendant that Mr. Charles Yuen, solicitor for the defendant, submitted that the writ procedure would be more appropriate, but this was opposed on behalf of the plaintiff. It follows that the Master must have ruled in favour of the plaintiff.

28. In my view, the available evidence, (if admissible) is very unsatisfactory. It consists entirely of interviews between the solicitor and Sin and Yu. I say no more than that. It is highly desirable that Sin and/or Yu be called as witnesses, so that the precise terms and conditions of the sale by Sin to Yu can be explored in detail it is a vital matter, and one on which the liability of the defendant ultimately depends. I am most reluctant to decide the issue on the basis of the evidence as it now stands, if there is any chance that Sin and Yu can be brought to testify.

29. I propose, therefore, to adjourn this matter to l0th May, 1988. I direct that every effort be made to locate Sin and Yu and that if located, they be called to give evidence. They will, of course, be witnesses for the plaintiff. I see no need to waste time and money by directing that pleadings be filed and served. The issues could not be more simple. The plaintiff claims that there was no concluded sale such as would cause the policy to lapse; the defendant claims that there was. I therefore order that pleadings be dispensed with.

30. If Sin and Yu cannot be found, I have no choice but to decide the matter on the existing evidence. If forced to do that, I give leave to counsel to address we further on the admissibility of this evidence, and if admissible, the weight to be attached to it.

31. I order that costs be reserved.

(1)    (1938) L.I.L. Rep. 311 C.A.

(2)    (1931) 41 L.I.L. Rep. l, H.L.

(3)    (1935) 52 L.I.L. Rep. 21 K.B.