Bruce Porter Baron v. Hartford Fire Insurance Co. And Others

CACV 11/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 11 OF 1999

(On appeal from HCA No. A9031 of 1993)

----------------------

----------------------

J U D G M E N T

----------------------

Rogers, J.A. :

Introduction

1. This is an appeal by the Plaintiff from a Judgment of Seagroatt J. given on the 18th December 1997 whereby he dismissed the Plaintiff's claims against all 4 Defendants in the Action and there is an appeal by the 2nd and 3rd Defendants in the Action against the costs order absolute made on the 6th March 1998 whereby the Judge ordered those Defendants to pay the costs of the Action of the Plaintiff and of the 1st and 4th Defendants.

2. This judgment relates to the first matter only.

The History

3. The Plaintiff's father was found dead in his office in Kowloon with gun shot wounds on 31st December 1972. He had been shot with a revolver at very close quarters. No weapon was ever found. Because of that and the nature of the wounds, the only conclusion that has ever been drawn is that he was murdered. In these proceedings, the Judge found that that was the only conclusion that could be reached. Despite an investigation which continued for the next 10 years, no person was ever charged with committing the crime. The Plaintiff's father left behind him a widow and a daughter as well as the Plaintiff.

4. The widow was living in California. She died in 1985. Apparently, she knew or suspected that her husband might have taken out insurance policies but apparently had nothing else, to work on at the time. She thought that the 2nd Defendant might be able to assist as she had met the 2nd Defendant and knew that her husband had had dealings with him and that the 2nd Defendant was involved with insurance matters. She tried to telephone the 2nd Defendant on a person to person call on the 2nd January 1973 but was unable to contact him. She asked the Plaintiff to contact the 2nd Defendant. At the time, the Plaintiff was a young man who had just left university in the United States and, in his own words, he had led a very sheltered existence. He managed to contact the 2nd Defendant on the 2nd January 1973. The Judge noted that there was a divergence in the evidence of the Plaintiff and the 2nd Defendant as to what was actually said on that occasion. Both parties agreed that the 2nd Defendant revealed that there had been a personal accident policy. The Plaintiff says that he was told that the policy was not paid up and that in any event it did not cover murder. The 2nd Defendant told Inspector Carroll, who was investigating the father's death at the time that he was not sure whether the policy was paid up but that it would not cover murder.

5. The Plaintiff instructed solicitors to sort out his father's affairs. Apparently, they wrote to the police to enquire as to assets and liabilities, but they learnt nothing of the policy which was the subject of this Action.

6. The facts as found by the Judge were that there had been a personal accident insurance policy No. 1862 which had been taken out by the Plaintiff's father through the 2nd Defendant. The policy was effected through AFIA Worldwide Insurance Co. and issued by Hertford Fire Insurance Co. It would seem that if liability under the policy existed that would be met by the 4th Defendant. The policy was dated the 25th March 1970. The cover was US$100,000, which the Judge observed was no mean sum for the time. The 2nd Defendant said, and the Judge accepted, that he had copies of relevant documents at least up to 1971 relating to that policy in 1973. Those documents show that when the policy was renewed in 1971, it was given the new number 0037 and the cover was increased to US$100,000 plus bonus. It seems that the policy was cancelled in May 1972 but was reinstated at the behest of the Plaintiff's father on the 31st July that year. That was within 4 or 5 days of the Plaintiff's father being told that he had terminal cancer and had between 6 months to a year to live.

7. Although the policy is no longer in existence, a copy of the Schedule of the policy for the year 1971-2 was obtained from the police files and it is clear that it indicates that the Plaintiff's father had had no relevant medical problems or treatment. Quite simply, that was highly inaccurate. Not only was the cancer of which he was diagnosed a development from a pre-existing condition for which he had had to have a major operation but he had also had a heart by-pass operation. Again, perhaps not so common in those days as they are now.

8. The Judge accepted the evidence from the 1st and 4th Defendants' witness that that information had been copied from the insurance proposal form.

9. The specimen form of insurance contract issued by AFIA provided that the policy was conditional upon the accuracy of the answers in the declarations forming the basis of the insurance and that if any material fact touching the health of the insured had been, or should be, on any renewal suppressed or concealed from the knowledge of the company, the policy would be void. The Schedule to the 1971 renewal contained statements that the Deceased had never been treated for heart disease nor during the past 5 years received medical or surgical treatment or advice.

10. In those circumstances, the Judge was of the view that the 1st and 4th Defendants were clearly entitled to and would have repudiated liability under the policy.

11. The non-disclosure of the medical history was something which could not be avoided. That is, that a false declaration as to the Deceased's statement of health was made and that was sufficient for the 1st Defendant to repudiate liability.

12. By dint of comparing the statements which had been made by the 2nd Defendant at various times and, in particular, his statement to the police which was made on 10th January 1973, the undisputed parts of what was said to the Plaintiff on 2nd January 1973, what had been said to the Plaintiff over the telephone as recorded in transcripts of conversations which the Judge had, the witness statements and affidavits which the 2nd Defendant had made on different occasions and the 2nd Defendant's evidence, the Judge concluded, amongst other things, that the 2nd Defendant had acted as the Deceased's agent in effecting the personal accident insurance policy and that he was thus under a duty of care to the Plaintiff and the Plaintiff's mother at the time to give them proper information when inquiries were made in January 1973. The Judge held that the Deceased had had a conversation with the 2nd Defendant in the autumn of 1972 in which the Deceased had asked the 2nd Defendant about war risks in relation to personal accident policies. The 2nd Defendant had then inquired of senior management in the offices of AFIA and had been told that the Deceased had written to them about it but that they had not replied.

13. From this, may be derived the conclusion that prior to the 31st December 1972, the 2nd Defendant was almost certainly aware that the personal accident policy was still in effect.

14. The 2nd Defendant was informed by the police on 10th January 1973 that the murder restriction might have been removed. The Judge found that the 2nd Defendant failed to inform the Plaintiff or his mother of that or alert them to the fact.

15. In March 1973, the 2nd Defendant received the renewal notices for the insurance policy and, again, he failed to inform the Plaintiff or the Plaintiff's mother that not only had the murder restriction been removed but the insurance was paid up. The Judge drew severe adverse inferences against the 2nd Defendant in that respect feeling that it was highly likely that the 2nd Defendant had reasons of his own for trying to arrange that neither the Plaintiff nor his mother would claim under the policy.

The Plaintiff's appeal

16. The Plaintiff appeals against the holding of the Judge on liability. As against the 2nd and 3rd Defendants, it is contended that the Judge wrongly failed to hold that the 2nd and 3rd Defendants were liable to re-imburse the costs of the premiums which had been paid for the previous 3 years. The Judge said that if the 2nd Defendant had acted on his own in forwarding the proposal form with incorrect information, the Plaintiff would have been so entitled to recover. He went on to say, however :-

"Because I cannot be satisfied on the balance of probabilities, that the former situation obtained, the Plaintiff cannot prove any loss."

17. In respect of the 1st and 4th Defendants, the Plaintiff contends that the insurers had, at least, since the date of the inquest, namely 16th February 1973, knowledge of the facts which would have entitled them to avoid liability under the policy on the basis that the policy was void from the beginning. It was held by the Judge that the insurers would have been entitled to and would have avoided the policy on those grounds. The Plaintiff avers that in the light of that knowledge, the insurers never elected to avoid the policy and elected to stay silent. That course caused prejudice to the Plaintiff and the 1st and 4th Defendants should be taken to have affirmed the policy.

18. In my view, unfortunately, both arguments fail.

2nd and 3rd Defendants

19. It is said that the basis upon which the 2nd and 3rd Defendants could be held liable for the amount of the premiums paid for the policy was one which would have arisen from the findings of fact but it has to be noted that it was not the primary case of the Plaintiff and indeed was not the Plaintiff's pleaded case. The basis of the claim would have to be that the Plaintiff's proposal form had been filled in inaccurately by the 2nd Defendant or the employees of the 2nd or 3rd Defendants and that the Deceased had been unaware that any misrepresentation had been made and that he was unaware that disclosure of medical illness was obligatory on renewal of the policy.

20. The Plaintiff submitted that on the basis of the findings which the Judge had already made in his judgment that he should have come to the conclusion that on a balance of probabilities, the 2nd Defendant had acted on his own. Our attention was drawn, in particular, to the passage of the judgment which started at page 10 letter G and continued to page 11 letter L. In that passage, one of the matters with which the Judge was dealing was the 2nd Defendant's evidence which the Judge records at page 10 letter E to F :-

"He says Mr. Baron actually gave oral answers to him, and that he read back the questions and answers to Mr. Baron."

21. It is unnecessary to repeat the Judge's reasoning here but he starts on the basis that given the Deceased's frankness about the state of his health, he does not accept that the Deceased would have given an untruthful answer unless he was encouraged to do so. On that basis, at the top of page 11 of the judgment, the Judge rejected that part of the 2nd Defendant's evidence. He went on to hold that it was more likely that the untruthful statements emanated from the 2nd Defendant. In this careful and analytical passage, the Judge considers that there was sufficient benefit for the 2nd Defendant to have acted in that manner. The Judge considered that on the facts as he saw them, there were 2 possible explanations that either the Deceased and the 2nd Defendant had acted in collusion in giving untruthful answers to the insurance company or that the 2nd Defendant had acted on his own in order to secure the policy cover. The Judge however does not resolve that question at that stage.

22. From pages 35P to 36E of the judgment, the Judge considers what the position might have been had the Plaintiff had the knowledge of the policy which he should have been given back in 1973. He points out that the necessary documents which would have had to be scrutinised including in particular the original declaration or proposal form would have been available at that time and he says that as a result how the non-disclosure came about would have been far easier to ascertain than it is now and he concludes the passage by saying :-

"To do that it would have been necessary to show that Mr. Fredricks was solely responsible for that non-disclosure. There would have been a good argument to that effect."

23. This passage comes close to indicating a suspicion as to what the Court might have held, nevertheless "a good argument" does not amount to "a balance of probabilities".

24. At page 39M onwards, the Judge returns to the questions as to how the boxes on the proposal form came to be completed. He repeats that he does not think that the Deceased gave the false information and he rejects it on the basis that the 2nd Defendant knew enough of the Deceased's medical history to have stopped the Deceased having the form completed inaccurately if the desire to do so had come from the Deceased.

25. On the assumption that the proposal form contained the Deceased's signature appended to it which contained inaccurate information, the onus would clearly have been upon the representatives of the Deceased, namely in this case the Plaintiff, to show that the Deceased was in no way responsible for and ignorant of the inaccuracies and mis-statements in the proposal form. Given the background circumstances to which we have been referred, including the evidence of a Mr. George Yau to the effect that it might have been possible to secure a personal accident policy despite health problems and the existence of another personal accident policy written by Norwich Union in respect of the Deceased that might have been the case. Unfortunately, I do not consider that the facts which have been brought to our attention and the findings in the judgment could lead to the conclusion that on a balance of probabilities, the Court should be satisfied that the 2nd Defendant acted entirely on his own without the knowledge of the Deceased. Although the standard of proof is a balance of probabilities, the onus is a high one in respect of a document which has been signed by the person seeking to disclaim responsibility.

26. The Plaintiff complained that in referring to the possible conclusion by the Deceased with the 2nd Defendant, the Judge had considered a defence which had never been pleaded. As I have pointed out, one of the difficulties is that this claim was not itself pleaded. Despite that, however, I do not consider that this aspect is a defence of collusion. It is a necessary part of the Plaintiff's case to prove innocence and lack of knowledge.

1st and 4th Defendants

27. In order for the Plaintiff to succeed on the basis argued against the 1st and 4th Defendants, the Plaintiff would have to show 2 things. First that the insurer, either directly or through its local agent, had knowledge of the relevant facts which would have entitled it to repudiate liability and secondly that the insurer had affirmed the policy.

28. In respect of the latter requirement, the Plaintiff relies upon the delay which occurred after the date of the inquest. It is said that the enormous delay of 17 years between 1973 and 1990 was so long as to bring the matter within the category of cases where the delay alone was sufficient to show that there had been affirmation of the policy. Reliance was placed in particular upon the judgment of Mellor J. in Clough v LNWR (1871) 7 Ex 26 @ 35:

" We think that so long as he has made no election he retains the right to determine it either way, subject to this, that if in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if in consequence of his delay the position even of the wrong-doer is affected, it will preclude him from exercising his right to rescind.

And lapse of time without rescinding will furnish evidence that he has determined to affirm the contract, and, when the lapse of time is great, it would probably in practice be treated as conclusive evidence to shew that he has so determined."

29. In my view, other things being equal, I would see that there is a strong argument for saying that the delay of 17 years has caused prejudice to the Plaintiff. Apart from anything else, all the relevant documents have been destroyed and all that is now available are the microfiche copies of such documents as were recorded by the police at the time.

30. The real difficulty however, seems to me to be that it is impossible to say that the insurers had the relevant knowledge. It is clear that AFIA took an interest in the Deceased's death right from the beginning. A letter was written to the police enquiring as to the circumstances in which the murder occurred as early as the 2nd January 1973 and thereafter AFIA no doubt gave the police such assistance as they required. Furthermore, it seems that at some stage the 2nd Defendant was in contact with AFIA although the Judge expressed scepticism as to whether the full details of the communications had emerged in evidence. Those facts, although perhaps giving rise to suspicion that the 2nd Defendant may have imparted relevant information to AFIA, go no way to establishing that. Although sufficient details of the Deceased's ill health emerged at the inquest which would have enabled the insurance company to repudiate liability, there is no evidence that AFIA or the 1st Defendant became aware of either the autopsy report revealing cancer or the details which emerged at the Inquest. The report of the Inquest which appeared in the South China Morning Post, again, carried sufficient details to at least put the insurer on enquiry, but without being able to draw the conclusion that the insurer had seen the report, such knowledge cannot be imputed. In the circumstances, it is impossible to hold in the Plaintiff's favour.

31. For those reasons, I would dismiss this appeal.

Godfrey, J.A. :

32. I agree.

33. As to the plaintiff's claim against the 2nd and 3rd defendants, at one stage in the argument on this appeal I was disposed to think that the judge's conclusion, that the appellant had not proved that, on a balance of probabilities, the responsibility for the non-disclosure here was that of the 2nd defendant alone, was inconsistent with his earlier findings of fact. But having had the benefit of the argument of Mr. Egan for the 2nd defendant, and having had an opportunity of considering in draft the judgment of Rogers, J.A. just delivered, I am left in doubt as to whether there really is sufficient of an inconsistency between the judge's findings of fact, and his conclusion, to justify an interference by this court with that conclusion.

34. As to the plaintiff's claim against the 1st and 4th defendants, it seems to me impossible to hold that on the facts here the insurers accepted, or must be treated as having accepted, liability under the policy. Accordingly, we cannot disturb the conclusions of the judge on the plaintiff's claim against the 1st and 4th defendants.

35. For these reasons, I, too, would dismiss this appeal.

Mortimer, V.-P. :

36. For the reasons that have been given, I also would dismiss this appeal.