Kan Kin Man, Vivian, t/a Yuen Long Eyewear Service v. Min Xin Insurance Co. Ltd.

DCCJ24037/1999

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 24037 OF 1999

_________________

_________________

__________________

J U D G M E N T

__________________

1. This is an action on an insurance policy dated 15 May 1996. Under that policy, the Plaintiff, who operated an opticians from ground floor premises at 228, Castle Peak Road, Yuen Long, sought to insure, inter alia, losses to the stock kept at the shop premises.

2. On 27 May 1996, a burglary took place and just over $149,000 of stock went missing and she now seeks to recover that sum under the policy.

3. The Defendants, the insurance company, have repudiated liability, that having been done very early on, on the basis that there had previously been a burglary at the premises which had not been disclosed by the Plaintiff in her Proposal.

4. There is an issue of fact as to that which may need to be gone into. Nevertheless, in their defence, the Defendants have also pleaded the effect of the Scott v Avery clause in the policy which purports to require arbitration to be resorted to as a condition precedent to any action in the courts.

5. As a matter of convenience, I have taken this issue as a preliminary one because if the Defendants were to succeed, that would have the effect of disposing of the entire action. If they fail, the trial must proceed in the conventional way.

6. The arbitration clause is condition 10 of the policy and it is set out at page 6 of the Documents Bundle. It is in these terms:

"All differences arising out of this policy shall be referred to the decision of an arbitrator to be appointed by both parties or if they cannot agree upon a single arbitrator, to the decision of two arbitrators, one to be appointed in writing by each party, and in case of disagreement between the arbitrators, to the decision of an umpire which shall have been appointed in writing by the arbitrators before entering on the reference and an award shall be a condition precedent to any liability of the company or any right of action against the company. If the company shall disclaim liability to the insured for any claim hereunder and such claim shall not within 12 months from the date of such disclaimer have been referred to arbitration under the provisions herein contained, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."

7. Mr Ling, who appears for the Defendants, says that brings about two consequences. Firstly, that the action is not maintainable, and secondly, that the action falls to be dismissed given the effect of the 12 month limitation period. He relies on the case of Scott v Avery itself, which is authority for the proposition that an arbitration clause of this sort imposes a requirement to go to arbitration before the courts are resorted to.

8. He also relies on the case of Guangdong Water Conservancy Hydropower Engineering Development Company Limited v Ming An Insurance Company (Hong Kong) Limited [1985] 1 HKC 177, a decision of the late Jones J, where an almost identically drafted clause was held to impose arbitration as a condition precedent to an action in the courts and that the court had no discretion when faced with such a clause as to whether it would stay the action or not.

9. Mr Au, for the Plaintiff, submits that his client, who knows nothing about such matters, was told of the repudiation by the Loss Adjuster and did not realise the effects of the arbitration clause. She went to solicitors before the expiry of the 12 months limitation period, but they did not seek to apply the arbitration clause in time. This action was in fact started well afterwards.

10. I am afraid, as so often happens, lay people know little of these matters, but the policy does allow a year in which to take appropriate action. In my judgment, clause 10 bites in these circumstances. The Plaintiff was bound to arbitrate first and now that 12 months have elapsed, Mr Ling is right that on a true reading of the clause, it is not just a case of a stay but she is to be taken to have waived her rights under the policy.

11. And so I propose to dismiss the action, which I do with the inevitable consequences, I suspect, that costs must follow the event.

(Submissions re certificate for counsel)

12. I am bound to say, I am usually sympathetic to application of this sort, but I really think that as a matter of discretion, I ought to refuse it, and I do not do that only as an act of mercy! I think this case is the sort of case that could just as easily have been dealt with by solicitors on both sides.