XCHRX EURO-AMERICA INSURANCE LIMITED v. WONG WING TAK trading as LOI KEE MARINE STORE

1993 M.P. No.2821

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. On the 6th day of October 1993, Deputy Judge Yam (as he then was) made an Order ("Judgment") in favour of the Plaintiff against the Defendant in this Originating Summons, the Defendant having failed to enter any Acknowledgment of Service or sought to defend the proceedings. The Judgment, inter alia, made a declaration that the Plaintiff underwriter was entitled against the Defendant to repudiate liability under an Employees' Compensation Policy dated 23rd May 1991.

2. On the 3rd day of August 1994, the Defendant having been granted legal aid in November 1993, applied to set aside the Judgment of Deputy Judge Yam. The Defendant relied on the following for the hearing of his application to set aside Judgment:

(1) Affirmation of the Defendant, Wong Wing Tak filed on 3rd August 1994 ("Wong Affirmation");

(2) Affidavit of Bella Peck Lim Chhoa filed on 24th September 1994; The Plaintiff relied on the following for the hearing:

(3) Affirmation of Chan Ching Yin filed on 4th August 1993 ("Chan Ching Yin Affirmation");

(4) Affidavit of Horatio Joseph Lynn filed on 24th August 1994 ("Lynn

(5) Supplementary Affidavit of Horatio Joseph Lynn filed on 28th September 1994 ("Lynn Second Affidavit");

3. The story in this drawn out case can be shortly stated. The Defendant, Mr. Wong Wing Tak was the sole proprietor of Loi Kee Marine Store of Tsuen Wan, New Territories being engaged in the waste paper and materials packing business. Through an insurance broker, Mr. Chan Tat Ming ("Chan"), the Defendant took out an Employees' Compensation Insurance Policy No. 91EC7DK0060 ("Policy") on 23rd May 1991 with the Plaintiff, Euro-America Insurance Ltd. The Policy was to cover the usual liability of the employer Defendant for his liability to his workers for injuries suffered in the course of employment, including in particular the liability of the Defendant under the Employees' Compensation Ordinance. Under the Policy, written notice of any accident must be delivered to the Plaintiff as soon as possible. On the 12th day of November 1991, an employee worker of the Defendant, Mr. Wong Tse Chiu ("Injured Worker") while working on the packing machine injured his hand ("Accident"). The Defendant that same day telephoned Chan and informed him of this Accident. The next day 13th November 1991, Chan came to the factory and filled in a Form which the Defendant signed. Chan orally informed Wong that Chan would deal with the matter and that on behalf of the Defendant, he would fill in all necessary forms and notify the Plaintiff of the Accident.

4. The Plaintiff did not receive any notice, written or oral from anyone about the Accident in either November or December 1991 or even in the months of 1992 and the first time the Plaintiff knew about this Accident was on 11th February 1993 when the Legal Aid Department telephoned and informed the Plaintiff that the Legal Aid Department was processing a workman's compensation claim against the Defendant arising out of the November 1991 accident. Apparently very shortly thereafter there was a meeting attended by the Defendant, his brother, Chan and Mr. Horatio Lynn, the General Manager of the Plaintiff ("Lynn"). There was no agreement in the evidence filed by the parties as to what happened at that meeting ("February Meeting"). On the 16th February 1993, the Plaintiff received from Chan a copy of the completed Form 2 dated 18th November 1991 which was a notice of accident by employer to the Commissioner for Labour. By letter dated 18th February 1993, the Plaintiff instructed its solicitors, Raymond Ho & Koo ("Plaintiff's Solicitors") to write a letter to the Defendant inter alia, to decline liability as the late purported report of the accident by the Defendant had constituted a breach of the Policy conditions. It would seem that the Plaintiff's Solicitors drafted such a letter as instructed and this was then sent by the Plaintiff's Solicitors to the Defendant being the letter dated 23rd February 1993 ("Plaintiff's Repudiation Letter"). By this Plaintiff's Repudiation Letter, the Plaintiff repudiated liability under the Policy on the ground that the Defendant was in breach of the immediate written notice condition of the Policy. The right to claim an indemnity from the Defendant for any compulsory payment which the Plaintiff might have to make to the Injured Worker was also expressly reserved in that Letter.

5. Upon receipt of that Plaintiff's Repudiation Letter, there was another meeting on the 4th of March 1993 ("March Meeting") attended by the Defendant, his brother, Chan and Lynn. Again there was no agreement in the evidence filed by the parties as to what happened at this March Meeting. Following the March meeting there was a letter dated 20th March 1993 from the Plaintiff's Solicitors to the Defendant ("Plaintiff's Second Repudiation Letter") in which the Plaintiff's Solicitors reiterated that the Policy had been repudiated by the Plaintiff and that the Plaintiff had reserved its right to seek indemnity from the Defendant. Notice was given by that letter that the Plaintiff was applying to the Court for a declaration of rightful repudiation of the Policy and for an indemnity against the Defendant.

6. There then followed some peripheral matters relating to the EEC proceedings including an order made by the District Court on the 23rd June 1993 for the Plaintiff to be added as an additional party in the Employee Compensation Case No. 254 of 1993 brought by the Injured Worker against the Defendant for employee compensation. By its Originating Summons dated 4th August 1993, the Plaintiff sought, inter alia, a declaration that it was entitled to repudiate liability under the Policy and an indemnity from the Defendant for all sums which the Plaintiff would be compelled to pay to the Injured Worker arising out of the Accident. There is no dispute that the Defendant had received this Originating Summons. There was a meeting in August 1993 following upon the Defendant's receipt of this Originating Summons ("August Meeting"). Attending the meeting was the Defendant, his brother and sister, Chan and Lynn. Again there was no agreement in the evidence filed by the parties as to what happened at that August Meeting. The Defendant said that he took no action as result of the assurances and representations made to him by Lynn at that August meeting which allegations were denied by Lynn. No action having been taken by the Defendant to defend the proceedings or even to enter acknowledgment of service, the Plaintiff proceeded to serve on the Defendant the Notice of Appointment to Hear Originating Summons dated 7th September 1993 and on the 6th of October 1993 at the appointed time of the hearing of the Originating Summons, Deputy Judge Yam upon reading apparently, the Chan Ching Yin Affirmation, the Affirmation of service of Mr. Shum Sik Ho dated 7th September 1993 and the Affirmation of service of Mr. Shum Sik Ho dated 5th October 1993, entered Judgment on the 6th of October 1993 against the Defendant.

7. The Defendant said that he applied for Legal Aid in November 1993 and eventually upon receiving positive advice from Counsel assigned by Legal Aid, the present application to set aside Judgment was issued on the 3rd of August 1994.

ISSUES FOR DETERMINATION

8. Although the arguments before me took some time and were supplemented by further Skeleton Arguments (received on the 26th and 27th October 1994) on the question of appropriate standard of proof, at the end of the day it was agreed by Counsel for both parties that there are effectively only 3 issues which require determination on this application. The three issues are:

(1) What is the appropriate test of defence on the merits to be shown by the defendant in an application to set aside judgment;

(2) Whether an appropriate defence had been shown by the Defendant that immediate written notice had been given to the Plaintiff-the Agency Point;

(3) Whether an appropriate defence had been shown by the Defendant that the Plaintiff had waived its right of repudiation or is estopped from asserting such right-the Waiver Point.

APPROPRIATE TEST OF DEFENCE ON MERITS

9. Although considered strictly, this ought to be an application to set aside an Originating Summons Judgment under Order 28 rule 4(1), the parties agreed that my approach to the setting aside of the Judgment should be on the generally well-known principle under Order 13 rule 19 and in this Judgment I will therefore adopt such principle for my determination.

10. The parties however have urged me to adopt two very different tests of the principle to be applied. The modern generally accepted approach to setting aside judgment is set out in the 1995 White Book, Volume 1 at page 142 under Note 13/9/14:-

"The discretionary power to set aside a default judgment which has been entered regularly is unconditional, and the court should not lay down rigid rules which deprive it of jurisdiction. The purpose of the discretionary power is to avoid the injustice which may be caused if judgment follows automatically on default. The primary consideration in exercising the discretion is whether the defendant has merits to which the court should pay heed, not as a rule of law but as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence, and because if the defendant can show merits, the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication. Also as a matter of common sense the court will take into account the explanation of the defendant as to how the default occurred. The foregoing general indications of the way in which the court exercises discretion are derived from the judgment of the Court of Appeal in Alpine Bulk Transport Co. Inc. v Saudi Eagle Shipping Co. Inc. The Saudi Eagle [1986] 2 Lloyd's Rep. 221 C.A. at p. 223 where the earlier cases are summarised. From that case the following propositions may be derived:

(a) It is not sufficient to show a merely "arguable" defence that would justify leave to defend under Order 14; it must both have "a real prospect of success" and "Carry some degree of conviction". Thus the court must form a provisional view of the probable outcome of the action.

(b) If proceedings are deliberately ignored this conduct, although not amounting to an estoppel at law, must be considered "in justice" before exercising the court's discretion to set aside.

...... The preferred view is that unless potentially credible affidavit evidence demonstrates a real likelihood that a defendant will succeed on fact no "real prospect of success" is shown and relief should be refused."

This is the approach that the Plaintiff urged me to adopt.

11. In Hong Kong, on at least two occasions the Court of Appeal adopted this modern, robust and what seems to me to be a plainly sensible approach. First in the much contested case of Fountain v Bank of America National Trust and Savings Association [1990] 2 HKLR 158, Clough, J.A. expressly approved and followed the "reasonable prospect of success" test explained in The Saudi Eagle and rejected the argument of Mr. Barlow, Counsel for the defendant for a lower standard. In the very recent Court of Appeal judgment of Premier Fashion Wear and Broadway Sportswear Ltd. v Chow Cheuk Man and Li Hing Chung now reported at [1994] 1 HKLR 377, both Bokhary J.A. (at page 380) and Godfrey, J.A. (at page 383) adopted the "real prospect of success" test and Godfrey, J.A. in fact singled out The Saudi Eagle as providing the correct approach and rejected the erroneous approach of Deputy Judge Griffiths Q.C. based on an arguable defence with an unusual reverse burden on the plaintiff.

12. In a brave attempt to salvage a sinking ship, Mr. Charles Wong for the Defendant asked me not to follow The Saudi Eagle of the English Court of Appeal or the Fountain judgment of the Hong Kong Court of Appeal or the Premier Fashion judgment of the Hong Kong Court of Appeal. He contended that the correct law is that stated by Deputy Judge Tong Q.C. in the unreported judgment dated 30th June 1992 of Madame Lam Fung Ying v Ho Tung Sing and Madam Li Kam Lan (HCA 2329 of 1992) and that according to the Lam Fung Ying judgment, the standard of proof required from a defendant is the very low threshold of a "not bound to fail" defence. In a long and elaborate judgment, Deputy Judge Tong analyzed the authorities and concluded by formulating at page 16 a somewhat different test of "bona fide defence which raises a serious question to be tried" for setting aside judgment. With great respect to the learned Deputy Judge, I am unable to associate myself with his approach.

13. Firstly, as a matter of hierarchical system of the Hong Kong courts, it is necessary for a lower tier to accept loyally the decisions of the higher tier (Broome v Cassell [1972] A.C. 1027, at 1054E). I am therefore bound to follow decisions of the Hong Kong Court of Appeal on the point and I do not see therefore as a matter of judicial precedents how I am at liberty to ignore the Court of Appeal decisions of Fountain or Premier Fashion.

14. Secondly, as a matter of persuasive value of the four judgments before me, all three of the Court of Appeal judgments (two of Hong Kong and one of England) apart from other virtues, can at least claim to be the result of contested arguments on the proper test to be adopted. Lam Fung Ying judgment was, on my reading of the judgment, not prompted by any argument by the defendant of a lower applicable standard (see page 7).

15. Thirdly, in my view proper weight should be given to the approach for setting aside of judgment set out in the notes cited at page 142 of the White Book, 1995. Unless a higher court holds this passage to be wrong or misleading, I would be doing a disservice to the legal profession if I depart from it without powerful reasons.

16. Fourthly, as a matter of analysis of the decisions, I find that I am neither convinced by Deputy Judge Tong's narrow reading of Evans v Bartlam [1937] A.C. 473 nor by his interpretation of The Saudi Eagle and the Foundation judgment. In particular, I find his approach at the final paragraph of page 16 of his Judgment to be out of line with the modern robust approach of the English and Hong Kong Courts as shown in the three cases referred to earlier. In my view the "real prospect of success" is a true modern extension of the Evans v Bartlam principle whereas the approach adopted at page 16 of the Lam Fung Ying judgment is in fact to take the heart out of the real discretion purportedly conferred by Evans v Bartlam. The touchstone test in my view is "real prospect of being believed" per Bokhary, J.A. in his Premier Fashion judgment. Factual allegation which does not pass that "touchstone" test ought to be properly rejected.

17. Fifthly, it is to be noted that in the recent trend of Order 14 decisions of the Hong Kong Court of Appeal such as Murjani v Bank of India [1990] 1 HKLR 586, Ng Shou Chun v Hung Chun San (unreported Judgment in Civil Appeal No. 182 of 1993) and of the English Courts (see page 156, Volume 1 of White Book 1995 and National Westminster Bank v Daniel [1993] 1 W.L.R. 1453), the onus of believable evidence for leave to defend being required by the Courts, has the same characteristics of the "touchstone" test of credibility.

18. In conclusion, I am therefore firmly of the view that the proper approach I should adopt is to ask whether the Defendant has by his evidence shown "a real prospect of success" on his alleged defence and whether the same "carry some degree of conviction".

DEFENCE OF IMMEDIATE NOTICE GIVEN -- THE AGENCY POINT

19. It is common ground between Mr. Charles Wong for the Defendant and Miss Anita Yip for the Plaintiff that in order for the Defendant's application to succeed, it is necessary for the Defendant to show there is defence on the merits. In the context of the claim by the Plaintiff in the Originating Summons that the Plaintiff was entitled to repudiate the Policy, it means that the Defendant would have to show a defence on the merits which will defeat such claim.

20. Clause 4 of the Conditions of the Policy provides:-

"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 ......"

Clause 2 of the Conditions of the Policy provides:-

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

Clause 12 of the Conditions of the Policy provides in essence that the fulfilment of Clause 4 is a condition precedent to the liability of the Company. These are fairly standard clauses which one often finds in insurance policies and the authorities show that as a general rule the Courts give effect to these policy conditions.

21. As was said by Bingham, J. (as he then was) in Pioneer Concrete v National Employers [1985] 1 Lloyd's Rep. 274 at page 278, the obvious commercial purpose of the immediate written notice clause is to enable the insurer to perform his role as dominus litis and to investigate accidents and claims at the earliest possible opportunity. In the Pioneer case it was held that there was a breach of this condition and the claim failed. In the unreported Judgment dated 12th October 1990 of Ryan, J. in Chan Yiu Sun Yip Kim Cheung & others and Euro-America Insurance Ltd. (HCA2306 of 1986) and in Farrell v Federated Employers Insurance Association Ltd. [1970] 1 W.L.R. 1400, the Courts held on similar insurance conditions that there had been breaches of these conditions and the underwriters were entitled to repudiate their liabilities.

22. Before me, Mr. Wong does not dispute the applicability of this immediate written notice condition. He seeks to escape it in two ways. First by way of his agency point he says that there was in fact no breach of this condition and secondly, by way of his waiver point, he says that if there was any breach, the Plaintiff had waived the breach.

23. So far as the agency point is concerned, the defence is put by Mr. Wong on the basis that either Chan was an agent of the Plaintiff and so immediate notice of Accident had been given to the Plaintiff or alternatively, that Chan on behalf of the Defendant must have given written notice to the Plaintiff.

24. The Lynn Affidavit (paragraph 3) shows that Chan was not and had never been an agent of the Plaintiff or authorised by the Plaintiff as agent or otherwise to handle any claim procedure for any policyholder. Chan was what is well known in the insurance industry as an insurance broker whose role is thus described in MacGillivray & Parkington on Insurance Law, 8th edition at paragraph 839:-

"Insurance broker. An independent broker who negotiates an insurance between the assured and underwriters at Lloyd's or an insurance company is prima facie the agent of the assured and not of the insurers. The fact that he places most of the business entrusted to him with underwriters at Lloyd's or with the same group of companies and is remunerated by way of commission out on the premiums received by him and deducted in his account with the insurers does not affect the relationship. The fact that a broker solicits business from prospective applicants for insurance does not constitute him an agent for the insurers if the solicitation is done on his own initiative and not on the instructions, express or implied, of the insurers with whom he places the risk."

In Brook v Trafalgar Insurance Company Ltd. [1946] 79 Lloyd's Rep. 365 at page 368, Lord Justice Scott said:-

"...... It is common knowledge to everybody that policies are issued at the instance of agents who procure the business and who get a small commission on the premium for doing so. That is the sense which prima facie the printed word "Agent" at the bottom of a policy bears; it serves as a record for the office files of the company as to who was the person entitled to commission. To suggest that the word "Agent" in front of the name there gives the commission agent authority to take the place of the company and waive an express condition requiring written notice should be sent to the head office of the company, when they have dozens of agents all over the country of that type, is, I venture to think, ridiculous."

In Anglo-African Merchants Ltd. v Bayley [1969] 1 Lloyd's Rep. 268 at page 279, Lord Justice Megaw said:-

".... Counsel for the defendant conceded that in all matters relating to the placing of insurance, the insurance broker is the agent of the assured, and of the assured only. I do not think that this proposition of law has ever been in doubt among lawyers. I hope it is not in doubt among insurance brokers or insurers. More than 40 years ago Lord Justice Scrutton said:-

.... I agree, that in the case of marine insurance there is not the slightest doubt, and never has been the slightest doubt, that the broker is not the agent of the underwriters....

The learned Lord Justice then went on to say that in his experience it would be quite wrong to say that this applies merely to marine insurance. See Rozanes v Bowen, (1928) 32 Li. Rep. 98, at p. 101"

The Lynn Second Affidavit shows clearly that Chan was such an independent broker placing insurance business with the Plaintiff and that Chan had been acting as agent for the proposer/insured namely the Defendant and not as agent for the Plaintiff. The Account Code Form signed by Chan and the Clause 2 of Conditions overleaf give ample proof that Chan was no agent of the Plaintiff and was not authorised to bind the Plaintiff.

25. In paragraph 3 and 5 of Wong Affirmation, Wong alleged that he verily believed Chan was the agent of the Plaintiff but he gave no ground or source of information of his alleged belief and as such this evidence is not admissible and I cannot place any credible reliance on it. Apart from these bare assertions of belief of agency, there is actually no evidence placed before me that Chan was in any way an agent of the Plaintiff. The evidence in fact is the other way round, as I indicated earlier and one must not overlook the fact that even the Defendant in paragraph 5 of his Affirmation referred to Chan as his agent, saying he would on behalf of the Defendant fill in all the necessary forms and notify the insurers. In this context it is to be noted that not only is there no evidence from Chan before me, there is even in the Wong Affirmation, no allegation that Chan had any time informed the Defendant that he was the agent of the Plaintiff. Having regard to the undoubted position of Chan as an insurance broker, the general accepted position in law of an insurance broker and the evidence of the Plaintiff filed herein, I have no hesitation in holding that Chan was not an agent of the Plaintiff in any was and had never been an agent of the Plaintiff and was never authorised to act as an agent of the Plaintiff.

26. In fact of course the Defendant's position under this limb is even worse. There is no evidence to suggest even the possibility of any ostensible authority of Chan which the Defendant can rely on. No attempt had been made before me by Mr. Wong to even argue that the Defendant has a case of ostensible authority or holding out by the Plaintiff and this can be readily understood when one takes into account the insurmountable difficulties in his path indicated by Lord Justice Tucker in the second paragraph of his Judgment at page 368 of Brook v Trafalgar Insurance Company Ltd. On the first limb of the agency point, therefore the Defendant must fail because if Chan was not an agent of the Plaintiff, then clearly any notice by the Defendant to Chan given immediately after the Accident affords no credible defence.

27. One can however take the matter even further on this first limb of the agency point. On the assumption that somehow the Defendant can establish that Chan was some sort of an agent of the Plaintiff, it would still be necessary for the Defendant to show that:-

(a) the Defendant can overcome the hurdle before him that the notice received by Chan on behalf of the Plaintiff was oral and not in writing. On this, Miss Yip relies on Pioneer Concrete (U.K.) Limited v National Employers Mutual General Insurance Association Ltd. [1985] 1 Lloyd's Rep. 274 and what was said about the absolute obligation of the policy conditions in The Oriental Fire & General Insurance Co. Ltd. v Cheuk Ma-yee [1981] HKLR 41. I agree with Miss Yip that the Defendant would still be in breach of the Condition because what was required by the Policy was a written notice to the Plaintiff;

(b) Chan was an agent who was authorised to accept the required written notice of Accident by way of an oral notice and that Chan was somehow authorised by the Plaintiff to waive the requirement of written notice stipulated in the Policy Conditions. As said by Lord Justice Scott in the case cited of Brook v Trafalgar Insurance Company Ltd., the suggestion is ridiculous.

These are further substantial difficulties which the Defendant has wholly failed to overcome and thereby renders his defence still less credible.

28. The second limb of Mr. Wong's agency point is even more difficult to understand or accept. The argument amounts to this. Because Chan said he would on behalf of the Defendant give notice of the Accident to the Plaintiff (see paragraph 5 of Wong Affirmation), there is no reason why Chan would not do what he said he would do and therefore if allowed to set aside the Judgment, the Defendant would be able by way of discovery and interrogatories to probe and establish that written or oral notice had in fact been given by Chan to the Plaintiff. That is a submission I am obliged to reject as having no substance whatsoever. It is not the function of the Court to allow speculative defences to be mounted. There is no evidence whatsoever (not even an allegation) that the Plaintiff had received any written notice of the Accident from Chan. The evidence from the Plaintiff is clearly all the other way and is to the effect that the first time the Plaintiff learnt of the Accident was when it received a telephone call on the 11th February 1993 (some 15 months after the Accident) from the Legal Aid Department.

This evidence is not denied or even disputed in the Affirmations filed by the Defendant. The Defendant has no credible or bona fide defence on this second limb.

29. Applying the test of real prospect of success, carrying some degree of conviction to the two limbs of the agency point, I must conclude that the Defendant falls far short of the required standard. In fact I would go further and say that having regard to the evidence put before the Court, even on a summary judgment application or on a striking out application, the Defendant would still fail on the agency point as having no defence to the claim.

DEFENCE OF WAIVER OR ESTOPPEL -- THE WAIVER POINT

30. The waiver point as put by Mr. Wong centres on really the February meeting. As I understand it the defence is based on the evidence in paragraph 10 of Wong's Affirmation that at the February meeting Lynn was alleged to have informed the Defendant that the insurance company would find a lawyer to fight the case and that there may be a prospect that the Defendant may have to shoulder part of the claim.

31. Before I discuss in detail the implication of the February meeting, I should first say a word about the timing of that Meeting. At paragraph 10 of Wong Affirmation, he referred to the meeting with the Plaintiff being held in late January or early February 1993. Lynn in paragraph 5 of his Affidavit put the meeting after the 16th February 1993 when the Plaintiff received from Chan a copy of Form 2. Lynn said in paragraph 4 of his Affidavit that it was on 11th February 1993 that the Plaintiff first learnt of the Accident. This evidence was not disputed or challenged by the Defendant and this is not surprising as in the letter dated 18th February 1993 from the Plaintiff to its lawyer for advice, this was already expressly stated. It is therefore clear to me that at the first meeting between the Defendant and Lynn, the Plaintiff had already learnt about the Accident not from the Defendant but from somewhere else, namely from the Legal Aid Department on the 11th February. I find that the first meeting between the Defendant and Lynn must have been after the 11th February and after the 16th February 1993, most probably on or about the 17th or 18th February 1993.

32. What happened at that February Meeting on or about the 17th/18th February 1993 should be viewed in the context of what was happening at that time and by reference to the contemporaneous documents. At that time, the Plaintiff had learnt just a week earlier for the first time, the existence of the Accident and that a E.E.C. claim was being made by the Legal Aid Department on behalf of the Injured Worker. On the 16th February 1993, the Plaintiff was notified by Chan of the Accident and was given by Chan a copy of Form 2. It was at that time, on the 16th February that Lynn told Chan (as set out in paragraph 5 of Lynn Affidavit) that there was a breach of the Conditions because of the late report and there was then the conversation in which Chan explained the reasons why no report of the Accident was made to the Plaintiff. It is to be noted that neither this important paragraph nor any of the allegations of Lynn contained in his two Affidavits were denied or challenged by Wong or by any evidence filed on behalf of the Defendant. So as far as the Plaintiff was concerned, on the 16th February 1993, the Plaintiff was already maintaining the position that there was no immediate written notice and that the Defendant was in breach of the Policy Condition, which had prejudiced the Plaintiff and Chan as the Defendant's agent was well aware of this.

33. Then came the February Meeting which must have been the next day or following day and it is what were alleged to have been said by Lynn at that meeting which forms the real basis of Mr. Wong's second point on waiver. The alleged waiver conversation at the February Meeting (paragraph 10 of Wong Affirmation) consists of alleged statements made by Lynn that:

(a) the insurance company would find a lawyer to fight the case and;

(b) there may be a prospect that the Defendant may have to shoulder part of the claim. This allegation of the waiver conversation was denied by Lynn at paragraph 6 of Lynn Affidavit. Whether there is any substance in this alleged waiver conversation must however be viewed by reference to the plausibility of such allegation and specially by reference to the contemporaneous documents.

34. By its instruction letter dated 18th February 1993 ("February Instruction Letter"), which must have been written the same day as or the day following the February Meeting, the Plaintiff instructed its solicitors to write to the Defendant to decline liability on the ground of breach of the Policy Conditions due to the late report of the Accident and to reserve the rights of the Plaintiff to claim indemnity against the Defendant. And following upon this February Instruction Letter, the Plaintiff Repudiation Letter dated 23rd February 1993 was sent. Putting the February Meeting in the context of these contemporaneous documents, it is inconceivable and incredible that at the February Meeting, the Plaintiff's General Manager could be waiving the serious breach of the Policy Conditions. If one also further takes into consideration the Plaintiff's Second Repudiation Letter dated 20th March 1993 (in contrast to the allegation made by Wong relating to the March Meeting which was denied by paragraph 8 of Lynn Affidavit), it seems to me that these the contemporaneous documents make the waiver allegation totally untenable. In the circumstances, I hold that there is no substance in the alleged waiver conversation of the February Meeting.

35. But even on the assumption that something like what had been alleged by Wong at paragraph 5 of his Affirmation were said by Lynn at the February Meeting would that help the Defendant. I am of the view they do not. Before I give my reasons for this, I must digress and refer to the matter of the E.E.C. proceeding and its implication.

36. In Hong Kong, to give protection to workers, it is provided by the Employees' Compensation Ordinance under section 43(1) that an underwriter is directly liable to a worker covered by the employer's employment insurance policy notwithstanding that between the underwriter and the assured employer, the underwriter is able to repudiate its liability under the policy. By reason of this well known statutory scheme, underwriters very often find themselves compelled to protect their interests by joining in court proceedings commenced by the workers against the employers and specially the E.E.C. proceedings and the Ordinance made express reference to joinder of the underwriters.

37. This is therefore the background against which the February Meeting should be considered. Here we have a situation, where the Plaintiff was already prejudiced by the late reporting of the Accident and where E.E.C. proceedings were being taken out against the Defendant by the Legal Aid Department for the Injured Worker. It is therefore only natural that notwithstanding its repudiation of the Policy, the Plaintiff wanted to protect its interest and position and to minimise its potential liability to the Injured Worker. In that context, any reference to the Plaintiff finding lawyers to fight the case is not only natural and reasonable but also prudent for the Plaintiff. That is no waiver.

38. The alleged statement by Lynn that the Defendant might have to shoulder part of the claim, if it makes any sense at all, is also to be viewed in the above context. Again that cannot amount to waiver. As had been repeatedly pointed out by authorities from the highest court, in order that they can be waiver or estoppel by conduct, the conduct must be clear and unequivocally pointing to waiver or estoppel. (see for example, Woodhouse A.C. Israel Cocoa S.A. v Nigerian Produce Marketing Co. Ltd. [1972] A.C. 741 per Hailsham, L.C. at page 755F referred to by Parker, J. in Italmare Shipping Co. v Ocean Tanker Co. Ltd. Inc. [1982] 1 Lloyd's Rep. 404). Whatever ambiguity might be contained in the alleged Lynn statement of Defendant's possibly bearing part of the claim, such ambiguity totally disappeared when the Plaintiff Repudiation Letter was sent a few days later. If there might have been any doubt by the Defendant after the February Meeting that the Plaintiff might not be repudiating the Policy and could be adopting the Policy, that Plaintiff Repudiation Letter made it clear that the Plaintiff had expressly repudiated the Policy. I do not see how in these circumstances, the Defendant has a reasonable or real prospect of success on his alleged waiver point defence.

39. On the waiver point, Mr. Wong placed the heaviest reliance on Barrett Bros. (Taxis) Ltd. v Davies [1966] 1 W.L.R. 1334. Barrett is a case in which the defendant taxi was involved in an accident with third party motor-cycle. Under the motor-cyclist's insurance policy with his underwriters, immediate notice of any accident should be given to the underwriters and all notice of intended prosecution and all prosecution summons received should be immediately forwarded to the underwriters. No immediate notice of the accident was given to the underwriters by the motor-cyclist but the solicitors for the taxi did immediately notify the underwriters. And although the motor-cyclist also did not forward to the underwriters the notice of intended prosecution and the summons served on him, the police did inform the underwriters of these matters. By letter dated 23rd June, the underwriters wrote to the motor-cyclist and asked why the underwriters were not notified of the prosecution proceeding which was scheduled for hearing on 2nd July as the underwriters wished to arrange for his defence. There is a dispute as to whether the motor-cyclist answered that letter. He pleaded guilty at the magistrate court hearing and eventually on 10th August the underwriters wrote to the motor-cyclist saying that their position had been prejudiced and repudiated liability under the policy. In the lower court, the underwriters took the point that the motor-cyclist did not send the prosecution documents and was in breach of the conditions and the county judge held in favour of the underwriters on this point. On appeal, the Court of Appeal reversed the judgment of the lower court and held inter alia that there was waiver by the underwriters. In an extempore judgment, Lord Denning at page 1339H said:-

"When the insurers got the letter from the police on June 18, they could have asked for the ice prosecution and the summons if they had wanted them. Instead of doing so, they merely wrote the motor-cyclist on June 23, saying "It would be appreciated if you would let us know why you have not notified us of these proceedings." By not asking for the documents, they as good as said they did not want them. So he did not send them. I do not think they should be allowed now to complain of not receiving them. I think they waived the condition."

Lord Justice Salmon held to the same effect at page 1340F-G and held the letter of 23rd June to be a waiver as on that date the motor-cyclist would still have been in time to give the notice and forward the summons. It can be readily seen from the above account that the waiver judgment in Barrett was entirely based on the special facts of that case which is wholly different from the present circumstances. In Barrett there was a holding of waiver because but for the letter of 23rd June of the underwriters, the motor-cyclist could still send the prosecution documents. In our case, there can be no question in February 1993 of the Defendant still being in time to give written notice of the Accident. That ought to have been done some 15 months earlier and was not done and the Plaintiff had been prejudiced. The Barrett case is just not applicable here and the point is misconceived. It should be noted that the Barrett case is generally and primarily cited for the futility principle and this has really no application to our case.

40. On the basis of the evidence before the Court, specially having regard to the letters in February, March and later sent by the Plaintiff to the Defendant, it seems to me that there is simply no room for any alleged defence of waiver. As was said by the Court of Appeal in The Oriental Fire & General Insurance Co. Ltd. v Cheuk Ma-yee [1981] HKLR 41 "an essential part of the doctrine of waiver as that of estoppel is the occurrence of some detriment to the party whose position has been affected by the conduct which is said to amount to waiver or to raise an estoppel." In this case, by the Plaintiff's Repudiation Letter and Plaintiff's Second Repudiation Letter, it could not be made more abundantly clear to the Defendant that the Plaintiff was insisting on its strict rights, that the Policy had been repudiated by the Plaintiff and that it had reserved its rights to claim indemnity from the Defendant. I hold that there is no credible defence on the waiver point of the Defendant and that by whatever standards this defence is to be measured, it falls far short of the required standard.

41. In summary, on each of the three issues to be determined, I hold against the Defendant. Accordingly, I conclude that this application of the Defendant must fail and the Summons of the Defendant to set aside the Judgment is hereby dismissed with costs to the Plaintiff.