QBE HONGKONG & SHANGHAI INSURANCE LTD v. SINOCITY INDUSTRIES LTD

DCCJ 2024/2022

[2025] HKDC 1849

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2024 OF 2022

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DECISION

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Introduction

1.  For the procedural background of this action, reference can be made to [2025] HKDC 1376 (“the August Decision”). In this Order 14A Decision, I shall adopt the abbreviations used in the August Decision. By parties’ consent, I shall dispose of this action by construing the employees’ compensation insurance policy QG1-W0106819-WCA issued by P to D on 27 July 2016 (“the Policy”) pursuant to Order 14A of the RDC.

Agreed Facts

2.  Under Section 40 of the Employees Compensation Ordinance (Cap 282), an employer must purchase employee compensation insurance policies for its employees. D was an employer in the business of importing and selling Apple products in Hong Kong. D purchased the Policy to cover its liability for the period from June 2016 to June 2017. Within that period in question, on 23 December 2016, Mr Yeung Man Wai (“Mr Yeung”), a driver employed by D, sustained injuries whilst at work, and the issue as to whether, on a true and proper construction, the liability vis-à-vis Mr Yeung was covered by the Policy arose.

The Policy

3.  The insuring clause of the Policy reads as follows: -

“… if any Employee in the Insured’s immediate employ shall sustain bodily injury… THE COMPANY WILL subject to… the terms exceptions and conditions contained in or endorsed on this Policy… indemnify the Insured against his legal liability in respect of such bodily injury… under the Ordinance and independently of the Ordinance to pay compensation and damages and the claimant’s costs and expenses…”

4.  The definition clause of the Policy reads as follows: -

“For the purposes of this Policy… (g) “Employee” has the same meaning as assigned to that expression in the Ordinance… (j) “The Ordinance” means the “Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)…”

5.  The Policy has a schedule which reads as follows: -

“… Occupation – Director/Product & Service Manager/Sales & Marketing Manager – Earnings (HKD) 8,504,450 – Headcount 55…”

6.  I have, of course, read the rest of the Policy, but in my view it would be wholly unnecessary to set out the rest of the terms in it, especially since they had never been properly pleaded by either party.

7.  The word “driver” does not appear in the Policy, whether by way of express inclusion or express exclusion.

The Law

8.  As I had mentioned in Chiu Chung Wah Warren v Lee Sheung Yan Lester [2023] HKDC 1008 (§§27 & 28): -

“I have, of course, considered all well-known authorities on the interpretation of contracts. Of all that had ever been said on the topic, I find what was stated by Lord Hodge JSC in Wood v Capital Insurance Services Ltd [2017] AC 1173 (§11 to §14), which had been applied in Hong Kong in Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 [2020] HKCFA 38 (§42 to §46, per Ribeiro PJ and Lord Collins NPJ), to be most helpful in the present scenario. In gist, this court should look at (1) the ordinary and natural meanings of those words chosen by the parties; and (2) the context. Where there are rival meanings, this court should give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. What was stated above is binding on me and is in any case correct… I have also reminded myself that as a matter of law my task is to determine what a hypothetical reasonable person would have understood the parties to have meant by using the language which they did, bearing in mind (1) the factual background known to both parties; and (2) the practical objects which the Contract was intended to achieve. The test is objective. See, eg, Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 (§20, per Coleman J), upheld on appeal [2021] HKCA 1456 (per Kwan V-P). In performing this task, I must be careful not to rewrite the Contract for the parties. See, eg, Champion Concord Ltd v Lau Koon Foo (No 2) (2011) 14 HKCFAR 837 (at §69 to §76 per Ribeiro PJ) and all authorities in turn cited therein, including Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101.”

9.  What I had said in that case is of course also applicable in the present case, but I have considered additional authorities specifically drawn to my attention by Counsel for P & D in the present case as well.

10.  My attention had been drawn to a specific passage in Jumbo King v Faithful Properties (1999) 2 HKCFAR 279, where Lord Hoffmann NPJ famously said this (296D-I): -

“The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement - evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

11.  My attention had also been drawn to a specific passage in New World Harbourview Hotel v ACE Insurance Ltd (2012) 15 HKCFAR 120, where Sir Anthony Mason NPJ said this (§34): -

“The interpretation which should be adopted in the case of an insurance contract, as with other commercial contracts, is that which gives effect to the context, not only of the particular provision but of the contract as a whole, consistently with the sense and purpose of the provision. In arriving at the true interpretation, the court will read the words and expressions of the contract as ordinary commercial people would understand them in their context, preferring in appropriate cases that understanding to any technical legal meaning that the words or expressions may otherwise have. This proposition might be re-stated in terms of the passage in the judgment of Lord Hoffmann NPJ in Jumbo King Ltd v Faithful Properties Ltd without producing a different outcome in this case. And, certainly in cases of ambiguity, the courts will construe the relevant provision contra proferentem. Indeed, it has been said that this principle “strongly applies” to insurance policies.”

12.  In terms of overseas authorities, my attention had been drawn to FCA v Arch Insurance [2021] AC 649, where the joint judgment of Lord Hamblen and Lord Leggatt JJSC of the UKSC said this (§77): -

“… the overriding question is how the words of the contract would be understood by a reasonable person. In the case of an insurance policy of the present kind, sold principally to SMEs, the person to whom the document should be taken to be addressed is not a pedantic lawyer who will subject the entire policy wording to a minute textual analysis…”

13.  Finally, my attention had been drawn to the case of Lo Siu Wa v Employees Compensation Assistance Fund Board (2018) 21 HKCFAR 8 [2018] HKCFA 3, where Lord Hoffmann NPJ, looking at the phrase “any Employee” as had been used in the employees compensation policy placed before him, said this (§§20 & 29): -

“… The scope of the cover under Section 5 of the Policy seems to me perfectly clear. It covers “any Employee”… The Deputy Judge went on to say that, in context, “immediate employ” can only mean those clerical jobs listed in the Schedule. I do not see why this should be so. It would have been easy for the “Scope of Cover” clause to have been limited in this way, but it says “any Employee”…”

My View

14.  In my view, applying the well-known principles of contractual interpretation as set out above to the Policy, it is crystal clear that the Policy covered all employees, including Mr Yeung the driver. I shall explain.

15.  Firstly, the insuring clause did say “any Employee” instead of “an employee described in the schedule” or anything to that effect. In my view, “any Employee” meant exactly that and that covered Mr Yeung. The ordinary and natural meaning of “any Employee” is “any Employee”.

16.  Secondly, I agree this is an appropriate case to use the contra proferentem rule against P. The Policy was a standard contract created by P and P had all the opportunity in the world to adopt any phrase they prefer. Since P chose the wide language of “any Employee” instead of a restrictive phrase like “an employee described in the schedule”, we can safely assume the use of the wide language by P was deliberate and hold P to the same in interpreting the Policy. In any case, any reasonable customer who buys an insurance policy would expect the policy to mean what it says.

17.  Thirdly, as had been orally discussed during the hearing on 6 August 2025, this interpretation does not render the schedule to the Policy pointless. The schedule does not affect the interpretation of the Policy but it may, depending on the circumstances, still give rise to separate causes of action in misrepresentation, mistake, deceit, rectification or breach, etc. It is common ground, after oral discussions at the hearing on 6 August 2025, that P was not pursuing those potential causes of action at all, and none of those potential causes of action had ever been pleaded. Had there been a fully particularized allegation of fraud, for example, that allegation would be dealt with accordingly. There was no such, or any similar, allegation in this case.

Disposition

18.  The parties agreed to use the Order 14A procedure because all legal consequences which should flow from my ruling on meaning can be and had been agreed. Based on parties’ agreement, I dispose of the entire action by making the following order: -

(1)  P’s claims are dismissed.

(2)  Judgment be entered against P on D’s counterclaims.

(3)  It is hereby declared that on a proper interpretation of the employees’ compensation policy QG1-W0106819-WCA issued by P to D on 27 July 2016 (“the Policy”), the Policy covered the relevant legal liabilities vis-à-vis Mr Yeung Man Wai (“Mr Yeung”), a driver employed by D who sustained injuries whilst at work.

(4)  P shall pay the sums of HK$266,454.15 + HK$70,000 + HK$56,000 = HK$392,454.15 to D forthwith.

(5)  P shall pay interests on the said sums at the rate of 1% over the HSBC Prime Lending Rate during the period from 6 September 2022 to 6 November 2025, and at the judgment rate thereafter until full payment, to D.

(6)  There be an order nisi that costs of this action and this counterclaim, including all costs previously reserved if any, be paid by P to D, to be taxed with Certificate for Counsel if not agreed, and this order nisi shall become absolute without further order if neither party takes out any summons, by 4pm on Thursday 20 November 2025, for it to be varied.

Final Remarks

19.  I do thank Ms Julia Lau and Mr Kwan Ping Kan for their most able assistance.