THE MING AN INSURANCE CO (HK) LTD v. CHAN MAN DUN AND ANOTHER

  CACV 96/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 96 OF 2005

(ON APPEAL FROM HCMP 2437 OF 2004)

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J U D G M E N T

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Hon Cheung JA :

Facts

1. The 1^st defendant was the owner of a vehicle with registration mark JB 4251 (‘the vehicle’) for which the plaintiff had provided a private motor car insurance policy.

Proposal form

2. On 17 May 2002 with a view to obtaining insurance coverage on the vehicle with the plaintiff, the 1^st defendant signed a Motor Vehicle Insurance Proposal Form (‘the form’).  Under the ‘Particulars of Vehicle to be insured’, the following details were provided by the 1^st defendant :

(1)	Registration mark : JB4251;
(2)	Make & Chassis No. : Mitsubishi : CONV240NJ-00106;
(3)	Type of Body : van;
(4)	Cylinder Capacity (cc) : 2,477;
(5)	Year of Manufacture : 1991;
(6)	Seating Capacity including Driver : 7.

3. On this form the 1^st defendant also signed a declaration stating that ‘all the particulars of the proposals are true and I/We agree that this proposal shall be the basis of contact between myself/ourselves and The Ming An Insurance Company (H.K.) Limited’. 

Vehicle Registration Document

4. The 1^st defendant also provided a ‘Vehicle Registration Document’ of the vehicle to the plaintiff which stated :

1)	Registration mark : JB4251
2)	Make : Mitsubishi;
3)	Model : Pajero;
4)	Chassis No./V.I. No. : CONV240NJ-00106;
5)	Engine No. : 4D56-ED8179;
6)	Cylinder Capacity (Diesel) : 2,477;
7)	Colour : Purple/Silver
8)	Type of Body : Van;
9)	Year of Manufacture : 1991;
10)	Seating capacity excluding driver : 6.

Schedule to the policy

5. The plaintiff duly effected insurance coverage for the 1^st defendant in respect of the vehicle.

6. In the schedule to the policy, the particulars of the vehicle were described as follows :

Registration Mark	JB4251
Chassis No.	CONV240NJ-00106
Engine No.	4D56-ED8179
Make	MITSUBISHI
Model	PAJERO
Type of Body	VAN
Gross Vehicle Weight
Cylinder Capacity	2,477.00 cc
Seating Capacity (including driver)	7
Year of Manufacture	1991

The accident

7. On 19 August 2002, during the currency of the policy, the 1^st defendant authorised his son, the 2^nddefendant to drive the vehicle.  The vehicle was involved in a collision with a motor cycle bearing registration number JF197.  The driver of the motor cycle was killed in the accident. 

The criminal trial

8. As a result of the accident the 1^stand 2^nddefendants were charged and convicted of the following offences.  In respect of the 1^st defendant, 

1)	permitting an Unregistered/Unlicensed Vehicle to be Driven or Used on a Road contrary to Section 52(1)(b) of Road Traffic Ordinance (‘the RTO’);
2)	permitting any Other Person to Use a Motor Vehicle on a Road Without Third Party Insurance contrary to Section 4 of the RTO; and in respect of the 2nd defendant,
	(i)	driving an Unregistered/Unlicensed Vehicle contrary to Section 52(1)(a) of the RTO;
	(ii)	using a Vehicle Without Third Party Risks Insurance contrary to Section 4 of the RTO;

9. At the trial of the defendants, a M. V. E. Accident Report was produced in respect of the vehicle involved in the accident.  The report stated that

‘	Vehicle chassis number, engine number and colour don’t match with TD record (Valid III print out) :
	(i)	chassis number stamped:	V24-4020549
	(ii)	engine number stamped:	4D56-EK2099
	(iii)	body colour:	grey’

10. The agreed facts between the prosecution and the defendants stated that according to records, in respect of vehicles that had been registered, none matched the chassis number and the engine number of the vehicle driven by the accused on the day of the accident. 

11. The Motor Vehicle Examiner also gave evidence at the trial.  He stated that Vehicle JB 4251 registered under the particulars of registration was a long wheel base vehicle which allowed six passengers to sit whereas the vehicle that was involved in the accident was a short wheel base vehicle. 

12. The two defendants did not give evidence at the trial but relied on the records of interviews they had given to the police. 

13. According to the Decision of the magistrate, the 1^st defendant claimed that he bought the vehicle from a second-hand car company; he noticed that the vehicle was a short wheel base vehicle but he also noticed there were seven seats in the vehicle; he did not know that the chassis number and the engine number of the vehicle were different from those set out the particulars of registration.  The 2^nd defendant claimed that when the vehicle was bought there were six seats and two of them were removed subsequently.

The civil action

14. The administrators of the deceased driver of the motor cycle issued proceedings in the High Court (HCPI 724 of 2004) against the 1^st and 2^nddefendants.  They also served notice on the plaintiff under the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap. 272.

15. The plaintiff denied liability under the insurance policy.

The present proceedings

16. By an originating summons the plaintiff in the present proceedings sought the following relief against the two defendants : 

‘	1.	A declaration that the vehicle displaying a registration mark JB 4251 (“the Vehicle”) was not the insured vehicle under policy no. PMPG-02-00506-8 issued by the Plaintiff to the 1st Defendant (“the Policy”) at the time of the accident which occurred on or about 19th August 2002 at Tai Mong Tsai Road, Sai Kung, New Territories, Hong Kong involving the Vehicle driven by the 2nd Defendant and a motorcycle bearing registration mark JF 197 driven by Wong Wing Wah, deceased.  (Order No. 1)
	2.	A declaration that the Plaintiff is and was at all material times entitled to avoid the Policy irrespective of any provisions contained therein on the ground that the Policy was obtained by non-disclosure and/or by misrepresentation of facts which were false in some material particular.  (Order No. 2)
	3.	A declaration that the Plaintiff is not liable to indemnify the 1st and the 2nd Defendants under the Policy in respect of any liability which the Policy purports to cover or to satisfy any judgment which Woo Shui Oi and Wong Wing Choi, the Administrators of the estate of Wong Wing Wah, deceased may have against the 1st and the 2nd Defendants in HCPI 734 of 2004.  (Order No. 3)
	4.	An order that the 1st and the 2nd Defendants or each of them do pay to the Plaintiff costs of and incidental to this application.  (Order No. 4)’

17. The transcript of evidence of the trial was produced as supporting evidence for the plaintiff’s claim.

18. Deputy High Court Judge Barnabas Fung (as he then was) found for the plaintiff and granted the relief as sought.

The appeal

19. The 1^st defendant lodged an appeal against the judgment.  He, however, failed to comply with an order to provide security for the costs of the appeal.  As a result the 1^st defendant’s appeal was dismissed. 

20. Before the appeal was dismissed, the Motor Insurers’ Bureau (‘MIB’) applied to be joined as a 2^nd respondent and asked for leave to cross appeal out of time against the judgment.  It was allowed to be joined as a party to this appeal and to cross appeal out of time.

21. Although the appeal by the 1^stdefendant had been dismissed, this does not affect MIB’s cross appeal : see paragraph 59/1/13 of the Hong Kong Civil Procedure 2007.  No issue was taken on this point.  We are concerned solely with MIB’s cross appeal. 

Sections 10(1) and (3)

22. The liability of the plaintiff to satisfy judgments against persons insured in respect of third party risks is covered by section 10(1) of theMotor Vehicles Insurance (Third Party Risks) Ordinance, Cap. 272 :

‘

(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.’

23. The exception to this obligation can be found in section 10(3) which provides that :

‘	(3)	No sum shall be payable by an insurer under the foregoing provisions of this section, if, in an action commenced before, or within 3 months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy, he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:
		Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this subsection as respects any judgement obtained in proceedings commenced before the commencement of that action, unless before or within 7 days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such an action is so given shall be entitled, if he thinks fit, to be made a party thereto.’  (emphasis added)

Argument of MIB

24. MIB in its Respondent’s Notice asked for the judgment to be set aside and the plaintiff’s application against the defendants be dismissed.  It also asked for a declaration that in the event a judgment is obtained by the administrators against the defendants and if such judgment is not satisfied the plaintiff will be liable to satisfy it.

25. MIB, however, does not pursue these orders in this appeal.  The argument of Mr. Burns, counsel for MIB, is that for the purpose of availing itself of section 10(3), it is sufficient for the plaintiff to obtain Order No. 2 and the first part of Order No. 3 from the judge.  He submitted that it is not necessary for the judge to make a finding as he did in this case that the vehicle that was involved in the accident was not the insured vehicle under the insurance policy issued by the plaintiff to the 1^st defendant.  Likewise it was not necessary for the judge to make a declaration in terms of Order No. 1 of his orders.

26. He further argued that the finding by the judge and the declarations he made would prejudice MIB’s case in respect of a dispute between MIB and the plaintiff under an agreement dated 1 February 1981 (‘the Domestic Agreement’) in which all motor insurers in Hong Kong (as members of the MIB) are bound.  Under the Domestic Agreement all the insurers bound themselves to abide by the ‘Insurer Concerned’ principle which provides that ‘an Insurer Concerned will satisfy claims for bodily injury or death out of its own funds even in cases where there has been a breach of the insurance policy conditions and where otherwise the insurer would be entitled to avoid the policy’.  An ‘Insurer Concerned’ is defined in the Domestic Agreement as ‘the insurer who at the time of the accident which gave rise to a bodily injury liability was providing insurance against such liability in respect of the vehicle the use of which gave rise to the liability in respect of which the judgment was given’. 

Issue in this appeal

27. This appeal is not concerned with whether the plaintiff is an ‘Insurer Concerned’ within the meaning of the Domestic Agreement.  Likewise, despite Mr. Burns’ submission, whether the finding by the judge that the vehicle involved in the accident was not the insured vehicle has any effect on the meaning of Insurer Concerned is also not an issue before us.  This is because the judge was not seized with either of these two issues and no adjudication had been made on them.  As far as the 1^st defendant was concerned, when he lodged the notice of appeal, he was not concerned with these two issues at all.

Academic concern

28. These two issues would only become relevant when the plaintiff and MIB arbitrate under the Domestic Agreement.  Miss Mok S. C., counsel for the plaintiff, informed the Court that the plaintiff will not rely on any estoppel in the arbitration proceedings with MIB in relation to any finding by the judge. 

29. This being the case the concern of MIB at this stage of the proceedings of any likely prejudice in the arbitration proceedings is entirely academic. 

Issue of identity of vehicle

30. In any event I am not convinced that it was not necessary for the judge to make a finding on whether the vehicle involved in the accident was the insured vehicle or to grant a declaration to that effect.  This is because this issue had been squarely raised before him.  Paragraph 9 of the supporting affirmation of the plaintiff expressly stated that

‘	9.	Contrary to the answers and representation of facts set out in paragraphs 4 and 5 above, JB4251 was not the insured vehicle under the Policy issued by the Plaintiff to the 1st Defendant.
		Particulars
		At the material time, JB4251 was having a different chassis of no.V24-4020549 and a different engine of no. 4D56-EK2099 and was a shorter vehicle with a seating capacity for only 4 passengers.  With such particulars, there is no vehicle registered with a registration mark JB4251 and licensed in accordance with the Road Traffic (Registration and Licensing of Vehicles) Regulations.’  (emphasis added)

31. As can be seen from the judgment, counsel for the defendants refuted the plaintiff’s case that the vehicle involved in the accident was not the insured vehicle.  This being the case the judge had to adjudicate on this issue.  Having found that the vehicle involved in the accident was not the insured vehicle he was clearly entitled to make the declaration. 

32. While for the purpose of avoiding the policy, section 10(3) of the Ordinance referred to misrepresentation and misstatement, it does not mean that the parties were somehow precluded from raising this particular issue. 

Notice to MIB

33. When the plaintiff commenced the present proceedings to avoid the policy it had written to MIB to ascertain whether it was prepared to participate in the proceedings.  MIB declined to do so.  If MIB considered that the issue of the identity of the vehicle was unnecessary for the question of avoiding the policy and if it was concerned that the effect of a finding on this issue may prejudice its position under the arbitration in respect of the Domestic Agreement, it ought to have intervened at that stage of the proceedings so that the proper issues could be properly framed and adjudicated upon.  I am not prepared to find that the judge was wrong to adjudicate on this issue or to make an order thereon.

Evidence before the judge

34. In this appeal MIB was, of course, entitled to challenge whether there was evidence to support the judge’s decision.  Mr. Burns submitted that the judge should have heard evidence before he adjudicated on this issue.  He submitted that the vehicle covered by the policy was the vehicle that was involved in the accident.  But as pointed out earlier there were indeed evidence adduced before the judge upon which he could have made the adjudication and order.  He held that,

‘	31.	I find that the chassis number and engine number are material particulars for the registration of a vehicle under the Road Traffic Ordinance, for it is by those particulars a vehicle is registered, and not by the registration mark, which is given only as a result of registration.  Miss Sun's argument that we are looking at the same car is not sound, as the registration is liable to be cancelled for inaccurate particulars.
	32.	It is so obvious that it goes without saying that those particulars would be regarded by a prudent insurer as material in deciding upon the writing of a motor vehicle insurance, as the validity of the registration of the vehicle is liable to be impugned upon material discrepancies such as different chassis and engine number.’

35. As to the second part of Order No. 3, namely ‘or to satisfy any judgment which Woo Shui Oi and Wong Wing Choi, the administrators of the estate of Wong Wing Wah, the deceased may have against the 1^st and 2^nddefendants in High Court Personal Injuries Action No. 734 of 2004’, my view is that the plaintiff is entitled to this relief as well.  Section 10(1) requires the plaintiff to satisfy that judgment unless the policy is avoided under section 10(3).  The relief granted under Order No. 3 deals with the consequence of avoiding the policy.  I cannot see why the plaintiff is not otherwise entitled to this order. 

Conclusion

36. I would dismiss the appeal together with an order nisi for costs in favour of the plaintiff. 

Hon Yuen JA :

37. When the MIB was invited by the Insurer to join as a party in the latter’s proceedings against the Owner (HCMP 2437/2004), the MIB had a choice whether to participate or not.  (Of course the Domestic Agreement provides for arbitration in the event of disputes between the MIB and insurers, but since the Insurer was inviting the MIB to join as a party, the MIB would obviously have been entitled to avail itself of the opportunity to ask the court to resolve any related issues between them). 

38. If the MIB had joined as a party at that stage, it could have participated fully in the proceedings in examining the issue of the identity of the insured vehicle.  The MIB could have explored the evidence of the Owner to the extent it considered necessary, it could have subpoenaed witnesses and it could have made submissions to the judge.  Of course the downside of participation at that stage was that the MIB would have had to incur costs.  The option the MIB took was to adopt a ‘wait and see’ attitude and it declined to join as a party.

39. The Owner lost, but the declarations the judge made would not have been binding on the MIB because it was not a party. 

40. The Owner then lodged an appeal.  It was at that stage that the MIB applied to be joined as a party.  If the Owner succeeded on appeal in overturning the judgment and setting aside the declarations, that would have benefited the MIB.  But as events transpired the Owner could not proceed with his appeal as he failed to provide security for costs.  That left the MIB with what might be described as the worst of both worlds.  It had become a party to proceedings in which the judge had given declarations which (at least) might affect the Insurer’s obligations under the Domestic Agreement.  In that scenario, one can understand the MIB’s attempts to persuade this court that certain parts of the declarations were superfluous to the dispute between the Insurer and the Owner and should be set aside because of reverberations on the Insurer’s obligations under the Domestic Agreement.

41. However once the Insurer stated through its leading counsel that it would not hold the declarations against the MIB by way of res judicata or estoppel, then the MIB’s appeal became academic and I can see no reason why this court should revisit the declarations at all when neither of the parties bound by them (the Owner and the Insurer) has asked us to do so.  I would therefore dismiss the appeal with an order nisi that the costs of the appeal should be paid by the MIB.  

Hon A. Cheung J :

42. I agree that MIB’s appeal should be dismissed for the reasons given by Cheung and Yuen JJA.  I only wish to add a few words of my own.

43. MIB’s concerns about declaration (1) and the latter part of declaration (3) have become academic, and the necessity for its appeal gone, once the plaintiff by senior counsel confirmed during her submission that the plaintiff will not rely on issue estoppel or res judicata arising out of the judgment under appeal against MIB in any future arbitration proceedings between them pursuant to the domestic agreement, even though MIB has now become a party.

44. That is a sufficient reason for not entertaining the appeal further, particularly in light of the likely arbitration proceedings.  The appeal should therefore be dismissed.

45. As to the further question of whether the vehicle involved in the accident was the vehicle insured under the policy (the subject matter of declaration (1)), which is now academic for reasons just explained, it is a fact-sensitive one.  I agree it was raised by the plaintiff in the proceedings below, and the Judge was quite right to deal with it.  Indeed without making a finding on the question, it would be impossible to identify what non-disclosure or misrepresentation, if any, was involved in the obtaining of the policy, and determine whether the same entitled the insurer to avoid it (the subject matter of declaration (2)).

46. It was open to the Judge, on the evidence that was placed before him, to find as he did that the vehicle involved in the accident was not the one insured under the policy.  Declaration (1) was therefore rightly made.

47. It may be that if some further or other evidence had been placed before the Court, the finding could or should have been different.  But MIB, having chosen not to take part at the original hearing, cannot now complain about the suggested deficiency in evidence.  The Judge’s role was simply to make findings on the evidence adduced by the parties appearing before the Court, according to the applicable burden and standard of proof.  Once made, his findings cannot be challenged on appeal by reference to some other possible “evidence” that was never there at the hearing, in the absence of any (successful) application to adduce further evidence on appeal (of which there is none).

48. I am inclined to think, although no detailed argument was advanced along the lines and I am therefore reluctant to express a definite view on the point, that the Judge’s finding or declaration (that the vehicle involved in the accident was not the one insured under the policy) is sufficient to take the insurer’s case out of section 10(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance.  For it seems to me that liability under section 10(1) only attaches to an insurer of the vehicle actually driven by the owner/driver in the accident: see section 6 and particularly section 6(1)(b) on what third party risks are compulsorily required to be covered by a policy issued by an authorised insurer.  That being so, with or without obtaining a declaration mentioned in section 10(3) (ie declaration (2) in the present case), the insurer is not liable under section 10(1) for the simple reason that it was not the insurer of the vehicle involved in the accident.

49. In other words, I am inclined to think that declaration (1), which by itself would justify declaration (3), is quite sufficient for the purposes of the plaintiff.  That said, it does not mean that the plaintiff was not entitled to seek declaration (2) as well.  Indeed the Judge granted it and it does not form a subject matter of this appeal.

50. As to the latter part of declaration (3), once the plaintiff has clarified that it will not raise issue estoppel or res judicata against MIB, the concern that the latter part will spill over to affect MIB’s position under the domestic agreement is gone. 

51. Read in context, the latter part of declaration (3) made by the Judge only means that as between the plaintiff and the defendants – they having been the only parties to the proceedings before the Judge, the plaintiff is not liable under section 10(1) to satisfy any judgment which the administrators of the estate of the victim may obtain against the defendants in the personal injuries action, putting to one side the position as between the plaintiff and the administrators, who have chosen not to join in the proceedings despite notice (see section 10(3) proviso).  I see nothing objectionable about that.  It does not affect the position of MIB or the insurer under the domestic agreement.  As regards the position as between the plaintiff and the administrators, it is irrelevant to this appeal.