CHINA PING AN INSURANCE (HONG KONG) COMPANY LTD v. VICKEI GROUP LTD

HCMP 207/2023

[2023] HKCFI 1647

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 207 OF 2023

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REASONS FOR JUDGMENT

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A. INTRODUCTION

Introduction

1.  By an originating summons filed on 9^th February 2023, as amended on 1^st June 2023 and re-filed on 2^nd June 2023, the Plaintiff (“China Ping An”)  seeks a declaration that it is entitled to avoid the private motor vehicle insurance policy (“the Policy”)  No.HKO/MPC/2020/68919, issued by it to the Defendant (“VGL”)  in respect of a motor vehicle with registration number WK370 (“the Vehicle”).

2.  China Ping An relies on s.10(3)  of the Motor Vehicles Insurance (Third Party Risks)  Ordinance (Cap.272)  (“the Ordinance”).  It says that the Policy was obtained by non-disclosure of a material fact and/or misrepresentation of facts which were false, namely, that the Vehicle was not for or intended for private use but was for hire at all material times.

3.  At the hearing, I gave judgment in favour of China Ping An, having been satisfied that amongst other documents, the Amended Originating Summons and supporting affirmations have all been properly served on VGL, and that VGL has notice of today’s hearing through China Ping An’s solicitors’ letter of 1^st June 2023.  VGL has not filed any acknowledgment of service and was not present at the hearing.  I now set out the reasons for my judgment.

Background

4.  Given the absence of VGL, there is no challenge to the following facts.

5.  Under the Policy, VGL was the Insured.  A Mr Tse Wing Kei (“Mr Tse”)  was the only named driver under the Policy Schedule of the Policy.

6.  The Vehicle is a Toyota Prius private car.  At the time that the Policy was issued, Mr Tse was the company secretary, one of the two directors, and one of the two shareholders holding 9,000 out of 10,000 shares of the Insured.

7.  For the purpose of applying for the Policy, the Insured had to fill in a Motor Vehicle Insurance Proposal Form (“the Proposal Form”).  In the Proposal Form:

7.1  the Insured was required to state the particulars of drivers who would regularly drive the Vehicle.  The only driver stated was Mr Tse;

7.2  the Insured was also required to declare the use of the Vehicle.  Four options were given, and the Insured could select more than one if applicable.  The four options were (1)  for social domestic and pleasure purposes, (2)  in connection with the motor trade, (3)  for business professional use or for use by employees, (4)  for hire or reward.  The Insured ticked the first option (for social domestic and pleasure purposes)  only;

7.3  the Insured was asked to give information as to the driving experience of persons which to its knowledge would be driving the Vehicle.  The questions included (1)  whether such persons had had any accidents, losses or claims in the past three years, or any police enquiries or prosecutions pending in respect of them, (2)  whether such persons had been disqualified from driving, (3)  the number of demerit points in total in respect of such persons due to any traffic offence during the past two years, (4)  whether such persons had suffered or been suffering from any heart disease, epilepsy, defective vision or hearing, or physical or mental infirmity, (5)  whether such persons had been declined any applications for motor insurance, or renewal of such insurance, had had special terms imposed on their policies for such insurance, or had had such insurance terminated, and (6)  whether such persons had made any motor claims insurance against other insurance companies in the past three years.  The Insured answered “no” in respect of questions 1 to 2 and 4 to 6, and “0” in respect of question 3;

7.4  the Insured was asked to declare that the particulars given in the Proposal Form were true and that it had not failed to disclose any matters which might materially affect the insurance, and that all particulars or answers in the Proposal Form were true and complete to the best of its knowledge and belief.

8.  Clause 4 of the Policy stated, inter alia, that “This Policy will not operate when the [Vehicle] is used for hire or reward…”.

9.  The Policy Schedule also stated that “This policy is only valid for the [Vehicle] as private use only.”

10.  A traffic accident took place outside Sheraton Hong Kong Hotel & Towers, Middle Road, Kowloon between the Vehicle and a taxi driven by a Mr Mok Pui Ki (“Mr Mok”)  on 1^st June 2021 (“the Accident”).  At the time of the Accident, the Vehicle was being driven by a Mr Li Siu Kei Tommy (“Mr Li”).

11.  It has since subsequently transpired that Mr Li had rented the Vehicle from VGL pursuant to a rental agreement dated 19^th April 2021 (“the Rental Agreement”).  Pursuant to the Rental Agreement, an entity named “Let’s Drive 租返駕” of VGL rented the Vehicle to Mr Li for the period from 19^th April 2021 to 19^th July 2021, for $5,800 and a deposit of $5,000.

12.  The solicitors for China Ping An have tried to contact Mr Tse of the Insured through the insurance broker of the Insured.  The broker replied by email of 16^th September 2022 saying that Mr Tse claimed that “我交比公司其他人處理了” “因為我只是記名 driver”.  The solicitors were unable to contact Mr Tse further.

13.  Based on the information provided by Mr Li, the solicitors for China Ping An found a Facebook page in the name of “Let’s Drive 租返駕”, showing a Toyota Prius car available for rental.  The Motor Operation Team Manager for China Ping An, a Mr Tsang, has deposed to his belief that this is the Vehicle.

14.  Mr Tsang has also deposed to the fact that he was at all material times the person who approved the algorithms of China Ping An in calculating the insurance premiums applicable to motor vehicle insurance policies issued by China Ping An, based on the information stated in insurance proposal forms filled out by applicants for insurance, including the purposes to which the vehicles are to be used.  He says that vehicles intended for social domestic and pleasure purposes are normally driven by one or more specifically identified drivers, whereas vehicles intended for hire can be driven by anyone with a driving licence, so that there is no reliable way to know in advance the driving record and experience of such drivers; that vehicles intended for social domestic and pleasure purposes are normally used less frequently than vehicles intended for hire; that drivers of vehicles for hire normally do not own them and have less incentive to keep them in good condition; that the Insured has no track record enabling a prudent insurer to assess the risk of its business; that vehicles intended for social domestic and pleasure purposes are generally less likely to be involved in traffic accidents than vehicles intended for hire, and that even if a prudent insurer agrees to offer insurance policies for the latter, a higher level of premium and different conditions would apply.  He further states that in the present case, had the Insured disclosed to China Ping An that the Vehicle was to be used for hire, China Ping An would have declined to provide any insurance for the Vehicle.

15.  Mr Mok commenced DCPI 4200/2022 against Mr Li as the 1^st Defendant and the Insured as the 2^nd Defendant on 8^th December 2022.

The application under s.10(3)  of the Ordinance

16.  Section 10(3)  of the Ordinance provides as follows.

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.

17.  Section 10(5)  of the Ordinance provides as follows.

In this section, the expression material (具關鍵性)  means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk, and, if so, at what premium and on what conditions; and the expression liability covered by the terms of the policy (保險單條款承保的法律責任)  means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel, or has avoided or cancelled, the policy.

18.  The present proceedings were commenced within three months after Mr Mok commenced DCPI 4200/2022.

19.  Notice of these proceedings was given by letter of 13th February 2023 to Mr Mok Pui Ki through his solicitors, which was within 7 days after commencement of the present proceedings on 9^th February 2023.

20.  In view of the unchallenged evidence as set out above, I was satisfied that the Policy was obtained by the non-disclosure of material facts, or by a representation of fact which was false in some material particular.  There was no disclosure that the Vehicle was to be used for hire, and the representation that the Vehicle was for social domestic and pleasure purposes was false.  Mr Tse was not a regular driver of the Vehicle, so the representation that Mr Tse would regularly drive the Vehicle was false.  As the Vehicle was for hire, the Insured could not possibly have known the driving experience of the persons who would drive the Vehicle.  The answers given by the Insured in relation to the driving experience of the persons who would be driving the Vehicle could not have been declared to be true and complete.  The evidence of China Ping An is that had it been disclosed that the Vehicle was to be used for hire, China Ping An would have declined to provide any insurance for the Vehicle.

Conclusion

21.  I therefore made a declaration in terms of paragraph 1 of the Amended Originating Summons. I further order that the costs of these proceedings are to be paid by VGL, to be taxed if not agreed.