XCHRX WONG BIK LING KITTY v. CROWE INSURANCE GROUP (HONG KONG) LTD.

1999, No. CT 30 & 31

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. On 15 July 1997, the plaintiff damaged her motor car. The plaintiff's husband arranged for the car to be towed to Hing Lung Perfect Motor Service (Hing Lung). On 29 July 1997, the defendant, who was the plaintiff's motor insurer, received certain documents, including a claim form and an estimate of the cost of repairs. The defendant then wrote to the plaintiff, although the plaintiff cannot recall seeing this letter, saying that the car should be taken to Dah Chong Hong (Motor Service Centre) Limited (Dah Chong) for a quotation "and we will arrange the vehicle to be repaired at the said garage once we have determined our policy liability." Thereafter, the plaintiff and her husband had discussions with the defendant. The defendant insisted on the vehicle being taken to Dah Chong, but the plaintiff refused to do this without the defendant agreeing to pay towage charges and the charges of Hing Lung. Hing Lung went ahead with the repairs without the defendant's agreement, and the plaintiff paid $130,000 for this. The plaintiff claimed this sum from the defendant, but the defendant refused to pay.

2. The dispute between the parties was referred to arbitration. The arbitrator was experienced and legally-qualified. The arbitrator recited the relevant parts of the insurance policy as follows -

"1. The Company will indemnify the Insured against loss of or damage to the Motor Vehicle and its accessories and spare parts whilst thereon.

At its own option the Company may pay in cash the amount of the loss or damage or may repair reinstate or replace the Motor Vehicle or any part thereof or its accessories or spare parts.

The liability of the Company shall not exceed the value of the parts lost or damaged and the reasonable cost of fitting such parts it being understood that the Company's liability shall be limited to the reasonable market value of the Motor Vehicle at the time of the loss or damage but not exceeding the Insured's estimate of value stated in the Schedule.

4 If the Motor Vehicle is disabled by reason of loss or damage insured under this Policy the Company will subject to the Limits of Liability bear the reasonable cost of protection and removal to the nearest repairers and of delivery within the country where the loss or damage was sustained.

5 The Insured may authorise the repair of the Motor Vehicle necessitated by damage for which the Company may be liable under this Policy provided that: -

(a) the estimated cost of such repair does not exceed the Authorised Repair Limit.

(b) a detailed statement of the cost is forwarded to the Company without delay."

3. The "Authorised Repair Limit" was $1000.

4. Before the arbitrator, the defendant argued that, by the terms of Section 1 of the policy, the plaintiff was obliged to deliver the vehicle to a repairer nominated by the defendant. Since the plaintiff refused to do this, it was in breach of the policy and the defendant could avoid it.

5. The arbitrator found that there were no specific words in the policy requiring the plaintiff, when requested by the defendant to do so, to send the vehicle to the defendant's chosen repairer. He said that all that the policy gives the defendant is an option to repair or reinstate "which must be read with Clauses 4 and 5". Clause 4, the arbitrator said, suggests that the plaintiff is entitled to send the car to the nearest repairer rather than the repairer chosen by the defendant. The arbitrator then said "Furthermore Clause 5 is ambiguous but must be a modification of the option given to the [defendant] in Clause 1". He found that -

"It makes little commercial sense for the [plaintiff] only to be entitled to do repairs if those repairs are both estimated to be under HK$1,000 and are the subject matter of a detailed repair estimate. It makes much better commercial sense for the [plaintiff] to be entitled to authorise repairs either:-

(i) without a detailed estimate where those repairs are under HK$1,000; or

(ii) where those repairs are the subject matter of a detailed estimate which is sent to the [defendant] without delay."

The arbitrator awarded $130,000 to the plaintiff."

6. I have before me now an originating summons by the plaintiff seeking leave to enforce the arbitrator's award under section 2H of the Arbitration Ordinance (Cap. 341). This should refer to section 2GG, section 2H having been repealed. I also have before me an originating motion by which the defendant seeks leave to appeal against the arbitrator's award on the grounds that the arbitrator misdirected himself in relation to the construction of the policy.

7. It is convenient to deal with the application for leave to appeal firstly. If this fails, there is no reason why the plaintiff should not have leave to enforce the award. If the application for leave succeeds, Mr Tracy suggests that the amount of the award, and some amount by way of costs, should be paid into court pending the outcome of the appeal.

8. It is accepted by Mr Tracy that this is not a "one-off" type of case; he accepts that the form of the policy is one issued by Lloyd's and is commonplace.

9. I repeat the first relevant provision of the policy -

"At its own option the Company may pay in cash the amount of the loss or damage or may repair reinstate or replace the Motor Vehicle or any part thereof or its accessories or spare parts."

10. This means what it says. Under this provision, the defendant has the option of deciding whether to pay to the plaintiff the amount of the loss or damage or to repair the vehicle. It follows, of course, that, if the defendant decides to repair the vehicle, it may instruct someone else to effect the repairs. It is not bound to carry out the repairs with its own hands, even if it had any. What this part of the policy does not say is that the plaintiff may repair the vehicle and claim the cost of doing this from the defendant.

11. Clause 4 of the policy does not derogate from the defendant's rights under clause 1. I repeat this clause -

"4 If the Motor Vehicle is disabled by reason of loss or damage insured under this Policy the Company will subject to the Limits of Liability bear the reasonable cost of protection and removal to the nearest repairers and of delivery within the country where the loss or damage was sustained."

12. Again, this means no more than it says. It deals only with the "reasonable cost of protection and removal to the nearest repairers." It has nothing to say about repairing the vehicle, and does not derogate from the defendant's option of paying for the damage or repairing the vehicle.

13. It is so, as the arbitrator said, that this clause says that the plaintiff is entitled to send the car to the nearest repairer, but it goes no further than this. It does not say that the plaintiff is entitled to have the car repaired by the nearest repairer, and recover the cost from the defendant.

I repeat the arbitrator's version of Clause 5 of the policy -

"5 The Insured may authorise the repair of the Motor Vehicle necessitated by damage for which the Company may be liable under this Policy provided that: -

(a) the estimated cost of such repair does not exceed the Authorised Repair Limit.

(b) a detailed statement of the cost is forwarded to the Company without delay."

14. It makes little difference, but, in fact, the policy does not, in this clause, contain a colon and dash after "provided that", and there are no full-stops after "Limit" or "delay". This lack of punctuation is a feature of this policy, and is common in insurance policies, dating back, no doubt, to the days when legal drafters feared the stop and the comma.

15. This clause says that the insured may authorise repair of the vehicle, but only in specified circumstances, and it describes the circumstances. Those circumstances are the circumstances in which the insured may authorise the repair of the vehicle, and I do not see any justification for reading the policy as saying that such authorisation may be given when only one of the circumstances exists, but not both of them. The arbitrator says that the clause is ambiguous, and importation of the word "or" between (a) and (b) is justified because it makes better "commercial sense". One must, I think, be careful in using the tool of "commercial sense" to construe a contract. Certainly, there is no room for using it when there is no ambiguity, and I see none here. A list of circumstances is a list of circumstances, and the natural meaning of such a list is that the circumstances concerned include all the items in that list, not just some of them. In this context, a list is naturally conjunctive without the use of the word "and", but such a list can be made disjunctive only by the use of the word "or".

16. As for commercial sense, it seems to me that, if one were to call in aid this tool, the conclusion should be that it does not make commercial sense for the defendant to expose itself to arguments about whether or not the cost of repairs was reasonable by agreeing that the insured may have the vehicle repaired without the insurer having any say in the choice of repairer.

17. All this seems to me to be abundantly clear, but, if one needs some assurance that what I have said is the way in which the policy should be read, it is readily found, although counsel did not address me on this aspect. Reading through the policy, it quickly becomes apparent that, when the drafter means that a list of situations should be construed as being in the alternative, he says so by using the word "or". When he does not intend that a list should not be read in the alternative, he omits the word "or", but does not use the word "and".

18. Accordingly, I think the arbitrator was wrong in his conclusions on the construction of the policy. I am not sure that it helps to seek to categorise the degree of error that I think was committed by the arbitrator. It is enough to say that I am sufficiently confident that he was wrong to justify the grant of leave to appeal in the circumstances of this case. I was not addressed on the consequences that would follow from an error in construction of the policy, but it seems to have been assumed by counsel that, if the construction point was wrongly decided, the award was wrong. If there is any argument to the contrary, it can be addressed at the appeal. I grant leave to appeal.

19. I turn now to the application for leave to enforce the award. Ordinarily, a judgment creditor is entitled to have the fruits of its victory pending an appeal. The situation here, however, is that, because the defendant has succeeded in overcoming the high hurdle needed to obtain leave, the outcome of the appeal is likely to be that the plaintiff will lose the award in her favour. In these circumstances, it seems to me that it would not be right to give leave to enforce the award. Accordingly, this application is adjourned until the outcome of the appeal is known.

20. The matter of costs has not been argued, but I think that the proper order is that the costs of the defendant's application be costs in the appeal and that the costs of the plaintiff's application should be reserved. I make an order nisi accordingly.