EURO-AMERICA INSURANCE LIMITED v. SPEEDBIRD TOURS LIMITED

1992, No.A6915

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiff is an insurance company. At the commencement of this trial, the plaintiff was granted leave to amend and then to re-amend the Statement of Claim. The eventual version, the Re-Amended Statement of Claim, claims against the defendant, an assured, for money had and received or damages based on the defendant's breaches of conditions of an insurance policy, and for a declaration that the plaintiff is entitled to repudiate liability under the policy.

2. For considerations paid, the defendant took out a private motor-car comprehensive insurance policy, numbered 91MP2DK0169 and dated 25th May 1991 ("the Policy") with the plaintiff, to cover any loss of or damage to a vehicle bearing registration No. EJ8239 ("the car") owned by the defendant and all possible loss and liability caused by or in connection with the use of the car.

3. The car was on hire purchase with one InchRoy Credit Corporation Limited ("InchRoy").

4. The relevant conditions of the Policy are conditions 2, 3, 5 and 6, set out below:

"2. The Due observance and fulfilment of the Terms of the Policy in so far as they relate to anything to be done or not to be done by the Insured (i.e., the defendant) or any person claiming to be indemnified ... shall be conditions precedent to any liability of the Company (i.e., the plaintiff) to make any payment under this Policy.

3. Every notice or communication to be given or made under this Policy shall be delivered in writing to the Company.

4. ...

5. In the event of any occurrence which may give rise to a claim under this Policy the Insured shall as soon as possible give notice thereof to the Company with full particulars Every letter claim writ summons and process shall be notified or forwarded to the Company immediately on receipt Notice shall also be given to the Company immediately the Insured or any person claiming to be indemnified shall have knowledge of any impending prosecution inquest or fatal inquiry in connection with any such occurrence. ...

6. No admission offer promise or payment shall be made by or on behalf of the Insured or any person claiming to be indemnified without the written consent of the Company which shall be entitled if it so desired to take over the conduct in the name of the Insured or such person the defence or settlement of any claim ... and shall have full discretion in the conduct of any proceedings and in the settlement of any claim and the Insured and such person shall give all such information and assistance as the Company may require." (emphasis added)

5. On 2nd November 1991, while Mr. YANG Chung Sing ("YANG") was driving the car, an accident occurred. YANG was not employed by the defendant. He was a friend of Mr. Cheung Chi Yung, the assistant manager of the defendant. The defendant permitted Mr. Cheung to lend the car to YANG to drive for pleasure, and Mr. Cheung was a passenger in the car. YANG drove the car in the wrong lane of a road and collided head-on with a private vehicle, registration No. EV337. Another motor car, registration No. CM6555, which followed EV337 and could not stop in time, collided with EV337. As a result, all the three cars were severely damaged and the driver of EV337 was killed.

6. The evidence of Madam Li Lee, the administrative manager of the defendant, who was responsible for handling the matters arising out of the accident on behalf of the defendant, is to the effect that on or about 4th November 1991, she obtained from the plaintiff a Motor Claim Form and Notice of Accident and she invited YANG to her office to assist her to fill it out. On or about 7th November 1991, she faxed the same as completed to the plaintiff.

7. By a letter dated 8th November 1991 addressed to the defendant and carbon copied to YANG, the plaintiff wrote:

"We ... wish to advise you that in the event of receiving any Writ Summons and Process, you and your permitted driver should notify the Company IMMEDIATELY. We shall be pleased under no circumstances should you and/or your permitted driver admit any liability concerning the captioned accident, all correspondence in respect of the accident should be unanswered and forwarded to this office for our direct handling. Please be advised that failure to comply with the procedure may prejudice the rights under the terms and conditions of the said Insurance Policy." (emphasis added)

8. By another letter dated 8th November 1991 addressed to the defendant, the plaintiff informed the defendant that Mr. Andrew LEE ("LEE") of Messrs. Lee Ng and Lam, solicitors, was instructed to handle the case and asked the defendant to contact LEE. By another letter of the same date, the plaintiff also asked the defendant to contact a Miss Chow of the plaintiff. Madam Li Lee asked YANG to do so.

9. By a further letter of 8th November 1991, the plaintiff advised the defendant to send a letter to the driver by registered post to warn the driver that in the event of failure to give the summons or correspondence relating to third- party claims to the insurance company or the owner thereby rendering the owner in breach of the terms of the Policy, resulting in the owner's claim for damages refused by the insurance company, the owner reserve all rights to claim against the driver for loss and damages. YANG admitted in the witness box that the defendant gave him a copy of this letter at the material time whereby he learned of his duty to notify the defendant or the plaintiff upon receipt of a summons for criminal charges against him in connection with the accident.

10. At the request of the plaintiff, on 12th November 1991, the defendant through YANG submitted to the plaintiff the original of the Motor Claim Form which included a Declaration and Undertaking containing details of how the accident occurred. The document was signed by both the defendant and YANG. It is clear from the contents of this document that YANG was wholly to blame for the accident. On the same day, pursuant to Madam Li Lee's request, YANG with Mr. Cheung Chi Yung also attended a conference with LEE. At the meeting, YANG described how the accident occurred and produced a Notice of Intention to Prosecute given by the police to YANG warning him of possible prosecution for traffic offences connected with the accident. LEE advised that there was no defence to the possible prosecution which was believed to be for careless driving.

11. By their report on the conditions of car, the adjusters recommended to the plaintiff that the car should be treated as a total loss. Pursuant to a Loss Discharge Voucher dated 15th November 1991 signed by the defendant, on 16th December 1991, the plaintiff paid a sum of $65,000 to cover the loss of the car to InchRoy, who received the same on behalf of the defendant. The relevant part of the document states that the defendant and InchRoy confirmed their willingness to accept from the plaintiff the sum of $65,000 after deduction of policy expenses of $10,000 "being in full and final settlement" of its claim for total loss of the car, that in consideration of the payment, the defendant relieved the plaintiff from any liability in regard to such damage or loss and abandoned to the plaintiff its rights, title and interest in the car, and that the defendant also undertook and agreed to allow any proceedings to be taken in its name in respect of the damage or loss or recovery of the said interest, if required, and to assist unconditionally in such proceedings in any form that might be required.

12. By a letter dated 18th December 1991 written by Messrs. Lee, Ng & Lam, solicitors for the plaintiff, and sent to the defendant, the plaintiff stated its understanding that YANG would be prosecuted for the offence of careless driving relating to the accident, and reminded the defendant of the provisions of condition 5 of the Policy. The letter went on:

"In the circumstances, please ensure that you and the driver will notify us forthwith upon the receipt of the Summons for the 'careless driving' charge or any claim arising from the captioned accident, failing which may render you liable for breaching the terms of the policy resulting in inter alia, our clients not being liable to make payment thereunder." (emphasis added)

13. Despite this letter, the defendant and YANG never notified the plaintiff of YANG's being charged with any traffic offence relating to the accident. Nor indeed, did the defendant or YANG ever forward any summons to the plaintiff.

14. On 30th January 1992, when YANG attended the Sai Kung Police Station to report bail, he was furnished with a summons charging him with the offence of reckless driving causing death. He was to appear before a magistrate's court at Kwun Tong the next day.

15. On 31st January 1992, without notification to or knowledge or consent of the plaintiff, YANG pleaded guilty to the charge of reckless driving causing death before that court.

16. Madam Li Lee told me that the defendant did not have any knowledge of the charge or the conviction at the end of January 1992, nor indeed, before she received the letter of 18th June 1992 from the plaintiff's solicitors. I shall return to this matter in due course.

17. The facts stated above are my findings.

18. After all evidence had been adduced and at the close of the final submissions made by Mr. Lin on behalf of the defendant, Mr. Leong on behalf of the plaintiff sought to make further amendments to the statement of claim. I disallowed them. In the middle of his own final address, Mr. Leong again applied to amend the statement of claim, which was also refused. The crux of the amendments sought was to plead that YANG was " a person claiming to be indemnified under the Policy", and that his breaches of conditions 5 and 6 entitled the plaintiff to repudiate all liabilities for payment under the Policy, by virtue of condition 2. This point was never specifically pleaded in the Re- Amended Statement of Claim (which was formulated before evidence was called), although it was pleaded that YANG had despite repeated requests and demands, persistently failed and/or refused to inform the plaintiff about his prosecution for the offence of reckless driving causing death and had thus failed to render any assistance in relation to the accident, which constituted a breach of condition 6 (paragraph 9 of the Re-Amended Statement of Claim). Apart from the factual basis sought to be pleaded by way of the proposed amendments that were disallowed, Mr. Leong frankly conceded, and properly so, that there was no contractual basis per se to make YANG, a permitted driver, a person claiming to be indemnified under the Policy.

19. The only factual basis on the evidence that can be relied upon by the plaintiff is that YANG had signed on the Claim Form. But not even this was pleaded. There is no evidence led by either party as to whether YANG did make a claim to the plaintiff to be indemnified for any liability arising out of the accident. Madam Li Lee's evidence was that the defendant obtained the Motor Claim Form from the plaintiff, and YANG was just requested by the defendant to assist in filling it out. That at most is equivocal evidence. Indeed, apart from one or two letters dated 8th November 1991 that were carbon copied to YANG, all subsequent correspondence from the plaintiff was not copied or sent to YANG. YANG's statement, which was treated by agreement as part of his evidence in chief, did not deal with whether he was claiming, and he was not asked any questions in this regard by both counsel. In the circumstances, even if there had been an effective pleading that YANG was such a person, I find as a fact on the evidence before me that YANG was not a person claiming to be indemnified under the Policy.

20. The plaintiff's complaints against the defendant are contained in paragraphs 8 and 9 of the Re-Amended Statement of Claim, as follows:

(1) the defendant failed to give notice to the plaintiff with regard to the charge of reckless driving causing death (a breach of condition 5);

(2) despite requests and demands from the plaintiff, the defendant failed or refused to inform the plaintiff about the said charge and had thus failed to render any assistance in relation to the accident (a breach of condition 6);

(3) despite requests and demands from the plaintiff, YANG failed or refused to inform the plaintiff about his said charge and had thus failed to render any assistance in relation to the accident (a breach of condition 6); and

(4) the defendant caused or permitted YANG to plead guilty to the said charge without any express consent of the plaintiff (a breach of condition 6).

21. It was contended that these omissions on the part of the defendant and YANG deprived the plaintiff of an opportunity to minimise loss. The breaches of conditions 5 and 6 deprived the plaintiff of an opportunity to study the case in detail and tender advice to YANG regarding the said charge and also deprived the plaintiff of its entitlement to have the conduct of the criminal proceedings on behalf of YANG. The plea of guilty had also taken away the opportunity for the plaintiff to deny or lessen liability or to negotiate a settlement with any claimant on the basis of liability not having been determined. The breaches had given rise to the operation of condition 2 which entitled the plaintiff to repudiate any liability to make payment under the Policy.

22. The argument went on that the compliance with conditions 5 and 6 was a condition precedent for any liability on the part of the plaintiff to make any payment under the Policy, and that as the breaches of conditions 5 and 6 of the Policy excluded any liability on the part of the plaintiff under the Policy towards the defendant and YANG, its payment of $65,000 was made without consideration and was money had and received by the defendant to its use. Further, by reason of the breaches, the plaintiff was entitled to recover the expenses that it had incurred, for surveying the car after the accident and assessing its value, and for the photocopying charges in respect of documents obtained from the police, which expenses came to $872.

23. The plaintiff, moreover, contended that by reason of the breaches, it was entitled to and did repudiate liability under the Policy by letter dated 18th June 1992. It seeks a declaration to that effect.

Condition 6 - Public Policy

24. The defendant raised a number of defences. It was submitted that condition 6 of the Policy was void and unenforceable in that it was against public policy to require YANG to obtain a written consent from the plaintiff before he could plead guilty to a criminal charge and such would deprive YANG of his unrestricted rights in conducting the criminal proceedings in which he was an accused and/or protecting his own interests therein. The argument can be seen in its best light on the basis that YANG was the only one to blame for the accident and he was responsible to the damage done to all the cars involved and the injuries suffered by the persons involved. What was only open to him was to plead guilty, or else he would be telling a lie or concealing the truth. If he pleaded guilty at the earliest opportunity, that would probably reduce the sentence that the court would mete out to him. He had his own interest to look after by entering the guilty plea, and his right in doing so should not and cannot be circumscribed by the Policy or by any agreement.

25. I set out Condition 6 of the Policy for closer examination:

"No admission offer promise or payment shall be made by or on behalf of the Insured or any person claiming to be indemnified without the written consent of the Company which shall be entitled if it so desired to take over the conduct in the name of the Insured or such person the defence or settlement of any claim or to prosecute in the name of the Insured or such person for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings and in the settlement of any claim and the Insured and such person shall give all such information and assistance as the Company may require."

26. The plaintiff contended that the guilty plea made by YANG amounted to an admission within the ambit of condition 6. What has to be determined first is whether this condition applies to criminal proceedings or its application is only limited to civil matters.

27. The word "admission" can generally be used in both criminal and civil contexts where liability or a certain fact is accepted. Apart from the word "admission" which is ambivalent, the language of the whole of the condition deals with claims or proceedings or matters in connection with claims. The words "offer promise and payment" used in conjunction with "admission" all relate to civil claim or liability. I have come to the conclusion that the proper construction of "admission" in the context should be limited as relating to civil claims and civil proceedings, and has nothing to do with criminal charges or criminal proceedings.

28. My view is supported by Garcia J.'s judgment in David Shuai v. Chan Tim Wo (H.C. A1544/78, May 9, 1979, unreported) where a condition in a motor insurance policy in almost identical terms as condition 6 was considered by the learned judge. He said that the word "admission" in the condition referred only to claims for damages or indemnity in civil proceedings and had no application whatsoever to criminal proceedings.

29. In the premises, there is no connection between YANG's guilty plea and condition 6, and there was no breach of condition 6 by reason of the plea.

30. Nowhere in condition 6 does it require or imply to require the defendant or YANG not to tell the truth regarding an accident or to act in anyway contrary to law. What it requires is that no admission is to be made and that the plaintiff be given the conduct of civil claims and proceedings and the power to settle the same. As such, condition 6 and its operation cannot be viewed as being contrary to public policy. In Terry v. Trafalgar Insurance Co. Ltd. [1970] 1 Lloyd's Rep. 524, where a similar condition was at issue, Judge Graham Rogers at p.526 observed:

"[Counsel] contended that that condition was an agreement prejudicial to the administration of justice, tending to cause the insured to lie about what had happened, or at least conceal the truth. In my view this is a fanciful argument; the condition does not require the insured to lie, but to refrain from admissions of liability. There is a world of difference between giving a factual account of what happened, without giving any expression of opinion as to blame, and an admission of liability. This is and has been for many years a standard condition of motor insurance policies, and in my view it is clearly a necessary and proper one for the protection of insurance companies."

31. In view of my ruling that "admission" in condition 6 does not include a guilty plea, I do not need to decide whether condition 6 is against public policy in the context of the facts of this case. If the word "admission" in condition 6 includes pleas of guilty in criminal proceedings, then I am of the view that condition 6 is contrary to public policy because it affects the right of the assured or the driver to act according to his best interest in criminal proceedings brought against him. Even an agreement to deprive a person of his right to have legal representation of his own choice in criminal proceedings is against public policy. In Lickis v. Milestone Motor Policies at Lloyd's [1966] 1 W.L.R. 1334, CA, @ 1338H-1339A, Lord Denning M.R. had this to say:

"[The insurers] said they were entitled to insist on conducting the defence of the motor cyclist at the magistrates' court by their own solicitor. They were entitled to represent him. It was in 'their option' under s. 1(b) [of the policy]. The judge rejected that contention. He said it was contrary to public policy. A man who is accused is entitled to have a solicitor of his own choice: or to defend himself if he likes. The insurers cannot compel him to have their own solicitor. I think that that is clearly right. Before us Counsel for the insurers did not dispute the validity of the Judge's ruling. He further doubted whether the clause, on its true construction, would have given them the right which they claimed to represent him."

32. Garcia J. in David Shuai v. Chan Tim Wo, supra, stressed the importance of an accused's right to defend himself. He said:

"... the defendant's right to defend himself, or conduct the proceedings in any way he wishes, in a criminal action, cannot be interfered with, as to do so would be against public policy. It follows therefore that any admission of guilt in criminal proceedings brought against the defendant could not be subject to the written consent or control of the third party [the insurance company] ..."

33. If "admission" in condition 6 applied to a plea of guilty, and therefore void for being contrary to public policy, the defendant cannot be held to be in breach of it even if it had caused or permitted YANG to enter the guilty plea. Moreover, on the evidence, there is nothing to show that the defendant caused or permitted YANG to do so. The plaintiff has simply failed to prove this complaint against the defendant.

Condition 6 - Information and Assistance

34. One of the plaintiff's complaints is that despite repeated requests and demands, the defendant failed to notify the plaintiff of the criminal charge against YANG, and therefore the defendant was in breach of condition 6. This complaint differs from that as the basis for breach of condition 5. The obligation to notify the plaintiff of the charge under condition 6 only arose after a request was made and requests had been made, but a request was not necessary, so the plaintiff contended, under condition 5.

35. My view is that the duty to provide information and assistance under condition 6 arises only when there is a civil claim or civil proceedings. On the evidence before me, at the time when the charge and the conviction of YANG took place, no civil claim by any third party had come into existence.

The plaintiff had not taken over any proceedings in the name of the defendant or YANG, pursuant to condition 6 or at all. My interpretation of the ambit of condition 6 is further supported by the fact that condition 5 deals specifically with notices relating to civil and criminal matters alike. If both of conditions 5 and 6 were intended similarly to deal with notices, then it is surprising that condition 6 only imposes an obligation on the assured and any person claiming to be indemnified to give information and assistance to the insurer as it may require, but not otherwise, whittling down the effect of condition 5. In the circumstances of this case, by the time when YANG pleaded guilty, condition 6 in its limited ambit as construed by me had not come into play and there could not be a breach of it by the defendant. By the same token, YANG could not be in breach of condition 6 regarding his being required to give information and assistance to the plaintiff.

36. Even if I am wrong in my view in the preceding paragraph, I am satisfied that on the evidence, the defendant did not know about the charge or the conviction and therefore the duty to give information or assistance to the plaintiff did not arise. I shall deal with this point more fully under Condition 5.

Condition 5

37. I would scrutinise condition 5 by setting out the relevant parts of it first:

"In the event of any occurrence which may give rise to a claim under this Policy the Insured shall as soon as possible give notice thereof to the Company with full particulars Every letter claim writ summons and process shall be notified or forwarded to the Company immediately on receipt Notice shall also be given to the Company immediately the Insured or any person claiming: to be indemnified shall have knowledge of any impending prosecution inquest or fatal inquiry in connection with any such occurrence. ... " (emphasis added)

The quoted part consists of three obligations, namely,

(a) the assured shall as soon as possible give notice of the occurrence to the insurer with full particulars;

(b) every letter claim writ summons and process shall be notified or forwarded to the insurer immediately on receipt; and

(c) notice shall also be given to the insurer immediately the assured or any person claiming to be indemnified shall have knowledge of any impending prosecution inquest or fatal inquiry in connection with the occurrence.

38. As there is no allegation of breach of the obligation under (a), I do not propose to deal with it, save for the purpose of viewing condition 5 in its entirety in arriving at the true construction of the obligations under (b) and (c).

39. Regarding obligation (c), unlike obligation (a), the identity of the person who is obliged to give notice is not clear. Where the person claiming to be indemnified is not the assured, then there can be at least two possible interpretations as to under what circumstances this obligation will arise. Where such person comes to know an impending prosecution, then he is obliged to notify the insurer; and where the assured comes to know an impending prosecution, he is obliged to notify the insurer. Another permutation is that insofar as one of the two has knowledge of an impending prosecution, not only he, but also the other person who has no knowledge, is each bound to notify the insurer. This permutation is hardly fair because without knowledge, a duty imposed upon a person to notify the insurer of something which he does not know must be unreasonable, and I do not think that that was the intention of the parties to the Policy. The only fair interpretation is therefore that the person who has knowledge, but not the other who does not, is obliged to notify the insurer.

40. As I have found that the defendant did not know of the summons and the conviction prior to 18th June 1992, long after the plaintiff itself had known of them, there was no breach of this obligation (c) in condition 5 committed by the defendant.

41. Had it been pleaded that YANG was a person claiming to be indemnified under the Policy together with a contractual or a factual basis for classifying him as such a person, and such proven, then YANG would have been in breach of obligation (c). However, this is not the case.

42. The plaintiff's contention was that obligation (b) required the defendant forthwith upon YANG's receipt of the summons to itself forward or cause YANG to forward it to the plaintiff or to notify the plaintiff. By not furnishing the summons or a copy of it to the plaintiff or its solicitors, or notifying them, the defendant had deprived the plaintiff of its contractual right. I must say that condition 5 is there for good reasons. Upon receipt of a summons or charge against the driver by the insurance company or their legal advisers, they may investigate or further investigate the matter as to whether there can be a defence to the charge, and with the details they may obtain from various sources, like evidence of the accident from the assured, the driver or other witnesses, they may form a certain view over the matter, and advise the assured or the driver accordingly. They may also advise them of the right to remain silent and let the prosecution prove its case. The assured or the driver may not accept the advice and may not take up any offer of legal representation by the insurers' lawyers in the criminal proceedings: that is the option opened to the assured and the driver. However, not providing the plaintiff with the summons in this case did deprive the plaintiff of any opportunity to consider the accident in greater detail and offer the advice which might help to avoid or reduce its liability in any civil claims. Without the information required by condition 5 from the defendant or YANG, the plaintiff would not have sufficient information as to what kind of liability it would face, and would be disadvantaged in considering how best it should act to avoid or reduce claims.

43. However, the wording of condition 5 to impose obligation (b) is not at all clear. Obligation (a) clearly requires the assured to give notice to the insurers as soon as possible in the event of a possible insured occurrence. That obligation is specifically stipulated to rest on the assured, and not on anybody else. On the other hand, the identity of the recipient under obligation (b) is not specified. Is it receipt by the assured or receipt by someone else, such as the permitted driver or the person claiming to be indemnified, that will give rise to this obligation to forward the covered documents to the insurer or to notify the insurer of the same? If the permitted driver, who is not a servant or agent of the assured for the purpose of handling the claim or for complying with the obligation, as opposed to the assured himself, received a summons, does it give rise to the obligation for the assured to forward the same to the plaintiff or notify the plaintiff? Further, if the assured does not have any knowledge of the summons or even any inkling about the charge on the summons, is he obliged to notify the plaintiff of something of which he does not know? To each of these questions, I think the proper answer is "No". Unless expressly and unequivocally provided for in the insurance policy, there is no valid reason why the assured who has not personally received the summons will be required to forward it to the insurer. And without knowledge of the summons, there is no conceivable reason how the assured can be required to notify the insurer of the summons or its contents. The two authorities cited by Mr. Lin, namely, Baltic Insurance Assoc. of London, Ltd. v. Cambrian Coaching & Goods Transport, Ltd. (1925) 21 Ll. L. Rep. 195 and Verelst's Administratrix v. Motor Union Insurance Co., Ltd. [1925] 2 K.B. 137, albeit decisions on facts, are illustrations that an obligation to give notice does not arise without knowledge.

44. In the present case, Madam Li Lee's evidence, which I accept, is that she had had no knowledge of the charge of reckless driving causing death against YANG and his conviction in respect of that charge until reading the letter of 18th June 1992 from the plaintiff's solicitors. YANG was served with the summons on 30th January 1992 and he went to the magistrate's court to plead guilty to the charge on 31st January 1992. Whether he acted rightly or wrongly, he did not inform the defendant about these events. All the reminders or warnings from the plaintiff to the defendant, insofar as they required the defendant to ensure that YANG would provide the defendant or the plaintiff with any summons or information on criminal charges against him, were not based on the true construction of condition 5. There is no condition or warranty in the Policy on which the plaintiff relies to impose upon the defendant an obligation to ensure that YANG will forward all such information to the defendant. Any such obligation or any obligation that the plaintiff contended as being included in condition 5 to oblige the defendant to forward a summons to the plaintiff or to notify the plaintiff of the same notwithstanding the absence of receipt or knowledge of the summons, if so intended, must be provided for expressly and clearly. As there is no such provision in the Policy, I am of the opinion that no such obligation can be imposed on the defendant. In the circumstances, there was not breach of condition 5 of the Policy by the defendant.

45. I pause here to deal with an issue of fact raised as to what was said at the conference on 12th November 1991. LEE told me that he asked YANG to inform him or the plaintiff when YANG received any summons for careless driving. YANG's evidence is to the contrary. He said that LEE advised him that there was no defence to the impending charge and that LEE did not ask him to inform the plaintiff or LEE upon his receipt of any summons for careless driving. Relying on this advice and absence of request, YANG thought it unnecessary to inform either the plaintiff or the defendant when he received the summons on 30th January 1992 and consequently he pleaded guilty to reckless driving causing death the next day. It is difficult to decide which version is true. On the balance, however, I prefer YANG's evidence. The offence with which he was charged was a serious one. If he believed he had any chance of an acquittal or being convicted of a lesser offence, he would reasonably have explored it. For him, knowing the requirement that he should notify the plaintiff or the defendant of the summons by reason of being furnished with a copy of the letter of 8th November 1991, I would have thought that he would comply with such a requirement, but for his misunderstanding (dealt with below under Waiver and Estoppel). He had taken the time and trouble to assist the defendant to fill in the claim form with the details of the accident, and further to attend a conference with the plaintiff's solicitors. It is therefore improbable that he would not incur the slight inconvenience to himself by reporting the summons to the plaintiff or the defendant. Getting a chance to avoid a conviction, if at all possible, must have been very much alive in his mind, and but for his misunderstanding of the situation, he would most probably have informed LEE or the plaintiff of the charge that he was facing so that at least he would be able to obtain free legal advice at the expense of the plaintiff. He had nothing to hide, since he had already in his description of the accident in the claim form and also to LEE at the conference told the events that were detrimental to his interest.

46. Returning to condition 5, if I am wrong on its interpretation in respect of obligation (b), and the plaintiff is right in its contention that obligation (b) requires the defendant forthwith upon receipt of the summons by YANG to itself forward or cause YANG to forward any writ or summons or process to the plaintiff or to notify the plaintiff of the same, then I would be of the opinion that the defendant was clearly in breach.

47. As the plaintiff has failed to plead and prove that YANG was a person claiming to be indemnified, whether YANG was in breach of condition 5 is irrelevant, and the plaintiff cannot rely on condition 2 to use YANG's breach, if at all, as a ground for avoiding liability to make any payment under the Policy.

Waiver and Estoppel

48. In view of my rulings on the true constructions of conditions 5 and 6, and my conclusion that there was no breach by the defendant and YANG of the conditions as properly understood, I do not need to deal with the questions of waiver and estoppel. However, if I am wrong in my interpretation, then these equitable defences should be considered.

49. The defendant relies on LEE's advice given at the conference on 12th November 1991 as constituting waiver and estoppel. LEE's advice, to put it at the highest, was simply that there was no possible defence available to YANG to any criminal charge of traffic offences in connection with the accident that might be brought against him. Although, as I find, LEE did not tell YANG that the plaintiff still required the summons or notice of it, LEE did not say that the plaintiff did not need to be notified of actual criminal charges or that the plaintiff did not wish to conduct the proceedings in that respect for YANG. On the contrary, by correspondence culminating in the letter of 18th December 1991, the plaintiff's solicitors reminded and warned the defendant of its obligations under conditions 5 and 6, albeit the plaintiff did not send a copy of these warnings to YANG and the defendant did not pass them onto YANG. LEE's advice of no defence to the anticipated charge of careless driving is not tantamount to giving up the plaintiff's right to receive the actual charge or summons, or to be notified of it. Taking the advice as equivalent to the plaintiff not requiring notice of the summons when YANG received it was a misunderstanding on YANG's part, not induced by the advice itself. The advice can in no circumstances be interpreted or understood to have meant that "you don't need to give us the summons, you don't need to tell us whether you are in fact charged, and if you are charged, you go ahead to plead guilty to whatever charge that the police will bring against you." No heed was paid to the reminders and warnings in the correspondence by the defendant and no steps were taken by the defendant to remind YANG. I must say that there would be no sound basis to ground waiver and estoppel, as alleged or at all, if I had found that condition 5 or 6 were breached.

Delay Grounding Waiver

50. The defendant also relied on the delay between the time the plaintiff's solicitors learned of YANG's plea of guilty and the time when they gave notice to the defendant repudiating liability under the Policy as the basis for alleging that the plaintiff had waived its right to do so. By another letter also of 18th December 1991, the plaintiff's solicitors requested the police to provide them with details of any contemplated criminal charges against YANG. It was only on 12th March 1992 that the police replied informing them that YANG had been charged with reckless driving causing death and so convicted on 31st January 1992. LEE arranged for paying the police the copying and miscellaneous charges for obtaining copies of the sketch of the scene of the accident, brief facts and statements of witnesses. He advised the plaintiff of the situation: On 8th April 1992, he advised the plaintiff that it was entitled to repudiate liability under the Policy. He also wrote to the Registrar of the Kwun Tong Magistracy to seek a copy of the notes of proceedings. On 18th June 1992, he sent a letter of that date to the defendant notifying it of the plaintiff's repudiation of liability and also claiming recovery of the $65,000 paid to the defendant and the expenses incurred for the survey and photocopying charges. I accept LEE's evidence in this regard.

51. The delay complained of by the defendant is in the period between 12th March and 18th June 1992. This is not an unduly lengthy period for the performance of the matters that LEE told me. An advice to repudiate liability should not be lightly given and could only have been arrived at after close examination of the documentation, evidence and law, and deliberation of various possible ramifications. Similarly, a decision to repudiate liability would involve careful consideration. I am of the view that the time taken for the notification of repudiation to issue on 18th June 1992 was not unreasonable in all the circumstances.

52. Moreover, delay per se does not ground any waiver. In Allen v. Robles, Compagnie Parisienne de Garantie (Third Party) [1969] 2 Lloyd's L. R. 61, it was held by the Court of Appeal that mere lapse of time did not, o f itself, lose the insurer the right to refuse to indemnify unless the lapse of time was so long as to be evidence of an intention to affirm the insurance policy or it caused prejudice to the assured. No prejudice caused by the alleged delay has been pleaded or proved by the defendant, and as I have held, the lapse of time was not unreasonable. The delay, if at all, cannot in the circumstances amount to evidence of an intention on the part of the plaintiff to affirm the Policy.

53. Notwithstanding, as I have ruled that conditions 5 and 6 do not cover the circumstances of this case, delay has become a non-issue.

No Damage

54. The defendant also contended that the plaintiff had not suffered any loss or prejudice even if there had been breaches of conditions 5 and 6. Were conditions 5 and 6 applicable to cover the situation, as I said before, the plaintiff would have been prejudiced, and I would decide this point in favour of the plaintiff and order that damages be assessed.

55. In the context of this case, however, it is not a matter of loss and damage for breach of contract that the court should be dealing with. The consequence of breach is expressly provided for in condition 2, which is that the compliance with all terms is a condition precedent to any liability of the plaintiff to make any payment under the Policy. The court is obliged to give effect to this agreement between the parties, and the questions of the liability for and amount of damages, matters catered for by the common law, have been replaced by the agreement and do not arise for consideration. However, my decisions on the constructions of conditions 5 and 6 render my view on this matter mere obita.

Declaration

56. In the circumstances, I dismiss the plaintiff's claim for declaration.

Recovery of Payments

57. I would also deal with the question of recovery of the payments as if my constructions of conditions 5 and 6 were wrong.

58. The plaintiff made a payment of $65,000 to InchRoy who received the same on behalf of the defendant. The $65,000 was to cover the loss of or damage to the car suffered by the defendant. The plaintiff has also incurred the following expenses, namely,

59. Because of the breach of conditions by the defendant, the plaintiff seeks to recover these sums from the defendant.

60. The three items of expenses can be disposed of immediately. Although they were expenses incurred by reason of the occurrence of the accident and the Policy and for investigating the consequences of the accident, they were not payments made by the plaintiff under the Policy or for indemnifying the defendant under the Policy. They were not liability of the plaintiff under the Policy. As such, breach or no breach of conditions, the plaintiff is not entitled to recover these expenses from the defendant.

61. On the other hand, the $65,000 was in fact paid by the plaintiff under the Policy to indemnify the defendant for its loss of the car. The plaintiff contended that as condition 2 exempted the plaintiff from any liability to indemnify the defendant or to make any payment under the Policy upon breach of any condition of the Policy, the money was paid for no or no valid consideration, and therefore it was entitled to recover the same from the defendant.

62. To this claim, the defendant raised a number of defences.

Policy Not Void ab initio

63. The $65,000 was paid on 16th December 1991 before the defendant broke any condition. The defendant submitted that its breaches of conditions 5 and 6 of the Policy, if at all, took place at the earliest on 30th January 1992 when YANG received the summons from the police but he and the defendant failed to furnish it or a copy of it to the plaintiff or notify the plaintiff before he pleaded guilty on 31st January 1992. The effect of the breaches did not entitle the plaintiff to avoid the Policy ab initio. Until the Policy was avoided, it was valid and afoot and the plaintiff could not retract from what it had done prior to the breach.

64. In Cox v. Orion Insurance Co. Ltd. [1982] R.T.R. 1, where all the conditions of a motor insurance policy were stated to be precedent to the liability of the insurer to make any payment under the policy, the Court of Appeal held that breach of a condition regarding the furnishing of particulars of loss entitled the insurer to repudiate liability.

65. That is a case where no payment had yet been made by the insurers to the assured. In the present case, however, if there had been a breach of condition 5 or 6, it occurred at the earliest on 30th January 1992, long after the payment had already been made on 16th December 1991. Before 30th January 1992, the plaintiff was obliged under the Policy to indemnify the defendant for the loss of the car, and the payment of $65,000 was for that purpose. If there was a breach of condition 5 or 6, the breach had nothing to do with the loss of the car, and it did not give rise to any prejudice to the plaintiff in connection with that loss.

66. There is no express provision in the Policy giving the plaintiff a right to recover payments made under the Policy to the defendant in the event of a subsequent breach. Such a provision would not only exclude liability, but it would also give a further right to the plaintiff to undo what has been done. Had that been the intention of the parties to an agreement of insurance, such a provision with a wider effect and consequence than a simple exclusion clause, in my opinion, should have been expressly made. In the absence of such a provision, and by reason of the fact that even if condition 5 or 6 had been broken, such breach would not cause any prejudice to the plaintiff relating to the loss of the car, I feel that it would be unfair to allow the plaintiff to recover the sum of $65,000 from the defendant.

Consideration and Compromise

67. A further defence raised by the defendant is that the sum was paid by the plaintiff and received by the defendant pursuant to a compromise between the parties whereby the defendant abandoned all its right to claim indemnity under the Policy against the plaintiff and gave up all its right to claim damages against any third party in favour of the plaintiff, both for the loss of the car. A further consideration flowing from the defendant was that it abandoned all its right, title and interest in the car or its scrap value to the plaintiff. The consideration had all been given or performed. Anyhow, failure of consideration has to be total for restitution to apply, and this cannot be the case. Moreover, it is trite that an agreement cannot be interfered with regardless of whether a party had obtained a good bargain.

68. When the plaintiff made the payment, there was no mistake and there was no misapprehension of the situation. The plaintiff was plainly liable to indemnify the defendant for the loss of the car. However, there could be arguments as to the exact value of the car, pre- or post-accident, and whether there could be a claim against any third party for loss of or damage to the car. By signing the Loss Discharge Voucher, the defendant gave up all its rights and interest in the car or in any possible claims against third parties in favour of the plaintiff. The original rights of the defendant, in the form of a claim, had been extinguished. There is no reservation made in the document of any right on the part of the plaintiff to claim the return of the money, and whatever right the plaintiff might have regarding the same subject matter must have been similarly extinguished. Where there is a claim, a compromise reached is always respected, no matter how certain or otherwise the validity of the claim is. Insofar as the consideration was sufficient and not illusory, the court is not to enquire into its adequacy. The defendant has fully performed his part of the bargain, and there is no good reason for the court to interfere and re-open the transaction to enable the plaintiff to recover the $65,000 paid under it.

Conclusion

69. For all the above reasons and for the reason that there was no breach of condition 5 committed by the defendant, I rule that the plaintiff is not entitled to recover the sum of $65,000 or any other sum from the defendant that it has paid or incurred. In the result, all of the plaintiff's claims are dismissed.

70. Regarding costs of this action, the parties have through their counsel agreed that after this judgment "unless the parties agree to the question of costs, the court will hear arguments before making any order in that regard". I therefore so order. If the necessity arises, a date is to be fixed in consultation with counsel's diaries for hearing counsel on the question of costs.

71. May I thank counsel for their assistance in providing me with very detailed written submissions.