SUNNY IJAZ SALEEM t/a TIME PASIFIC INTERNATIONAL v. ZURICH INSURANCE CO (ASIA) LTD

IN THE HIGH COURT OF HONG KONG SAR

COURT OF FIRST INSTANCE

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JUDGMENT

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1. In the early afternoon of 20th March 1993, there was a fire at Room 606 of Mohan Building, Hankow Road, Kowloon at the office of Time Pasific International which was a sole proprietorship of Sunny Ijaz Saleem ("Saleem"), the Plaintiff in this Action. As result of the fire, Saleem made a claim under a fire policy against the Defendant underwriter for some $2 million as the value of alleged stock of Saleem lost because of the fire. The claim was investigated by the Loss Adjusters appointed by the Defendant underwriter, Graham Miller (Hong Kong) Ltd. ("GML") and the claim was rejected. This Action was therefore brought by Saleem to recover the loss under the fire policy alleged to have been suffered. The claim was resisted by the Defendant underwriter on two basis, firstly that the fire was not a natural fire but was deliberately set by the Plaintiff and secondly that the claim was fraudulent in one or more than one respect so that all benefits under the policy are forfeited as provided by the Policy, clause 8 of which reads:-

          "All benefits under this Policy shall be forfeited if

HISTORY OF SALEEM BUSINESS LEADING TO POLICY & FIRE

2. Saleem was born in Pakistan in 1967 and without advancing very far in his education in Pakistan, he came to Hong Kong as a young man in 1982 and worked for various companies connected with the watch business until he established his own business, Time Pasific International in 1990. His first office in his own business was at Chung King Mansions, Tsim Sha Tsui, Kowloon and in December 1991 he moved his office to 606 Mohan Building, Hankow Road, Kowloon ("Office"). The business as a sole proprietorship employed only one person, Mr. Idress Ahmad Ansari ("Idrees").

3. Saleem's business was trading in watch parts, namely the buying and selling of watch parts. He also had a small sideline of cassette tapes and leather garments but these took up a very small part of his business in terms of value and activities. So far as buying of watch parts was concerned, most of the buying was done in Hong Kong with very occasional buying also done abroad in Pakistan. The selling was all done in Hong Kong.

4. The watch parts which Saleem engaged in consisted of watch bands (the straps), watch cases (the casing), watch dials (face of the watch), watch hands (hour, minute and second hands), watch crowns (little knobs on the side of the cases). These were the regular watch parts which were kept by Saleem and which he traded in.

5. Saleem's business had one unique feature, namely the business was conducted largely by cash as said by Saleem. The other somewhat unusual feature of the Saleem business was that he went from a position of no insurance cover until September 1992 and then suddenly taking out cover first for $1,550,000 followed by doubling the cover within a matter of days. The fire took place 6 months after the fire policy of $3 million was issued. It is not disputed that normally the amount of stock in the Office was very much less than $3 million.

6. 20^th March 1993 was a Saturday and Saleem's case is that he left the Office at about I p.m. after having turned everything off and locked the door. Saleem and Indrees were both non-smokers so there was no question of leaving behind any loose lit cigarette that day. At about 2 p.m. Saleem was notified that there was a fire at his Office and he rushed back to the Office where firemen were already putting out the fire which was not a serious fire, being confined to the storage are at the back of the Office where all the watch parts were stored. It took the firemen less than half an hour to put out the fire and water used in fighting the fire was taking with it, some of the stocks out of the Office onto the corridor and then down the stairs as the Office was on the 6th floor and the door of the Office was not far from the stairs.

7. As Saleem could not get in touch with the Defendant underwriters that Saturday, he locked up the Office that afternoon and then on Monday morning notified the Defendant underwriters who sent Mr. Mathew Li of GML to investigate the fire and the alleged loss of Saleem. There then followed fairly detailed investigation by Mathew Li ("Li") as the claim of Saleem involved some 18 Items of different pieces of different unit prices. A number of signed statements were made by Saleem and Indrees but eventually Li was not satisfied that there had been a genuine fire or that the loss claimed by Saleem had been suffered and the claim was therefore rejected.

ISSUES FOR DETERMINATION

8. At the trial it was agreed that there are really only two substantial issues namely:-

It was agreed at the Trial that the burden on both issues being on the Defendant underwriters and that the degree of proof required must be sufficiently high to reflect the seriousness of the allegations. It will be seen that by reason of the high requirement of Clause. 8, the Plaintiff claim will fail, if in respect any Item claimed by Saleem (even one Item), the Defendant underwriters succeed in showing either (1)(a) above, namely there was no such purchase of that Item or (1)(b), namely the purchased Item in the quantity claimed were not destroyed by fire because they were not all on the premises or were not all destroyed and that Saleem knew this when he made the claim. For the sake of convenience I will hereinafter refer to (1)(a) as the Not Purchased Defence and (1)(b) as the Not Destroyed Defence. Whereas Issue (2) turns largely on technical expert evidence of a complicated nature, Issue (1) in relation to both questions of Not Purchased Defence and Not Destroyed Defence turned largely on factual evidence and on my assessment of the factual materials presented to me.

ASSESSMENT OF FACTUAL WITNESSES

9. The key witness at the Trial is undoubtedly Saleem himself. While other witnesses such as Mathew Li and the experts gave important evidence, the case cannot be won by the Plaintiff without Saleem persuading the Court that he was a reliable witness and that his evidence should be accepted. Having heard and seen him at close range for a considerable length of time, I have no doubt that I cannot accept his evidence or accept that he was a witness of truth. He was a clever witness, good in assessing the court situation and tailoring his answers accordingly. For me however, he is not a witness of truth and this aspect will have a fatal effect for his case on the Not Purchased Defence.

10. Of the other factual witnesses I am particularly impressed with Mathew Li. He is a careful investigator and a witness not given to exaggeration. I accept his evidence and whenever there is any conflict between the evidence of Li and Saleem, I have no hesitation in preferring the evidence of Li.

NO PURCHASE DEFENCE

11. A glance at the Amended Statement of Claim will reveal that the claim in this Action is made up of some 18 Items, of a total value of some $2.11 million. Three types of Watch Parts however made up the bulk of the claim, namely,

Watch Dials (Items 1,2 and 3 of 180,000 pieces) valued at $960,000;

Watch Hands & Crowns (Item 10 of 1 million pieces each) valued at $500,000;

Watch Dial Stones (Item 14 of 5 million pieces) valued at $400,000.

Dial Stones

12. The purchase of Dial Stones (Item 14) was the subject of heavy dispute and was strongly challenged by the Defendant. Dial Stones are very small decorative stones set on the Dial of watches. Saleem admitted that he had previously never purchased any Dial Stones and that he had no order from any particular customer for the Dial Stones. So why did he purchase them. He said that he was in Pakistan when he decided to purchase them from International Traders and paid with cash. I simply do not believe his story of purchasing these 5 million Dial Stones with cash in Karachi on his trip there in January 1993. It is a very large purchase costing an alleged $400,000 when he had never previously dealt with Dial Stones or could convince the Court how much profit he expected to make from this sudden purchase of Dial Stones. In support of the alleged purchase of these 5 million Dial Stones, a document purportedly from International Traders was produced. The original invoice or receipt was said to have been destroyed in the fire and this document produced is a duplicate furnished by International Traders. I do not accept this document as genuine or proving the alleged purchase of 5 million Dial Stones at 1.5 million Rupees.

13. Reliance was also placed by the Plaintiff on the presence of some loose Dial Stones at the Office and on the stairs outside the Office as tending to prove the existence of Item 14. While it was accepted by Li that some 1,000 pieces of what looked like dial stones were found, Li refused to accept the existence of 5 million pieces of Dial Stones alleged by Saleem. Li recounted in his Witness Statements at paragraph 16 and 17 his efforts to investigate the reliability of the assertion of 5 million pieces being washed away and how he was frustrated in his efforts. I do not accept the story of Saleem of the 5 million pieces of Item 14 being in the Office and were all washed away.

14. I find as a fact that the 5 million pieces of Item 14 Dial Stones did not exist because they were not purchased in Pakistan as alleged by Saleem and it follows therefore that the Defendant's Not Purchase Defence succeeds. I find that Saleem knew that he did not have Item 14 in the Office and it follows that the claim for Item 14 was made fraudulently. In coming to my finding of fact. I have not overlooked the seriousness of the charge against Li and accordingly I have applied the very high standard of proof required for such charge of fraud and on that basis I am in no doubt and I find that Saleem did not buy Item 14.

Dial Hands and Crowns

15. Although it is not necessary for me to consider any other Item in the light of my findings on Item 14, I will briefly just state what are my findings in relation to Item 10 in respect of 1 million pieces each of Watch hands and Watch crowns. I do not accept the evidence of Saleem as to his cash purchase of Item 10 Watch hands and crowns from the relative Paramount Enterprises. I do not accept the documentation furnished in support of the alleged Item 10 purchase and I also do not accept the evidence of Saleem as to these 1 million pieces of each of hands and crowns being washed away (notwithstanding the fact that nearly 17,000 sets of hands and 13,000 pieces of crowns were found at the premises). I am satisfied on the very high standard of proof required for fraud that the Defendant had established that Item 10 had not been purchased by Saleem as alleged by him. It follows therefore that the Defendant also succeeds in its Not Purchased Defence by reason of Item 10.

CONCLUSION

16. As I have found in favour of the Defendant on Issue (1)(a), it becomes unnecessary for me to consider Issue (1)(b) on the Not Destroyed Defence or Issue 2 on the arson defence.

17. In the premises, the claim of the Plaintiff fails and the Action must be dismissed with costs.