HANG SENG GOLDSMITH COMPANY (a firm) v. AMERICAN INTERNATIONAL ASSURANCE COMPANY LIMITED

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. This is a claim by  a goldsmith and jewellery business under a policy of insurance. The policy was issued by the defendant, American International. The claim is for loss arising out of a robbery which occurred on the 5th February 1982. The loss has been agreed at $1.7 m. However, the defendant denies liability on the ground of breach by the plaintiff of condition precedent in the policy.

2. The facts are not in dispute. Mr. Leung Wing, the 1st witness, and his partner run two shops in Kwun Tong. On the day in question, Mr. Leung went to the shop in Mut Wah Street in accordance with his usual practice at about 7.30 p.m. to close the shop. This he did by having jewellery, which was on display, put in the safe which he then locked. Mr. Leung left the shop and a foki, who was one of four left there playing mahjong, closed the front metal gate behind him.

3. Mr. Leung then went to his shop in Fu Yan Street nearby to close up there in a similar fashion. After leaving that shop, Mr. Leung was accosted by two robbers who showed him a gun and forced him to return to the Mut Wah Street shop. At that shop Mr. Chan Kwai Sang, who was the 2nd witness, recognized Mr. Leung's voice and opened the gate. The robbers were thus able to enter and force Mr. Leung and his fokis up to the cock-loft where they ties them up. Mr. Leung himself was brought down again in order to open the safe and then returned to the cock-loft. After about 20 minutes the robbers left. Mr. Leung and his fokis freed themselves. The police arrived shortly after having been summoned by someone else.

4. According to Mr. Leung's evidence, the shop's alarm system appears to be in four parts. There are panic buttons on the counters for staff to press in case of trouble during the day. There is a magnetic sensor attached to the gate which is switched on in the cock-loft. There is an infra-red beam controlling the entrance which is also switched on in the cock-loft. The evidence was not entirely clear but it appears that anyone entering the shop would have to pass through this beam. There is also a closed-circuit television but its real function and how it worked was not explained.

5. The panic buttons appeared to be left on at all times. The gate sensor and the infra-red beam are switched on at night by a foki. It is this foki's duty to sleep in the shop and to switch on these two systems just before going to sleep. This foki does not necessarily work in the Mut Wah Street shop. Indeed, on the day in question he was working at the Fu Yan Street shop. When he arrives at the shop he will either be admitted by fokis who are still there or use his own key to get in if no one has remained behind. At the time of the robbery neither the gate sensor nor the infra-red beam had been switched on.

6. The special conditions in the insurance policy which lead to this dispute read as follows:

7. On behalf of the plaintiff Mr. van Buuren has three principal arguments. First, he says that there is no evidence that the plaintiff's alarm system was approved by the defendant. As I suggested and as Mr. Sakhrani for the defendant has submitted, the issue of the policy must signify approval; otherwise the policy would not have been issued. So I am against Mr. van Buuren on this point.

8. Next Mr. van Buuren sought to argue that until the foki switched on the alarm the shop was not closed for business. He suggested that Mr. Leung or his partner might wish to enter the shop and do something in the course of their partnership. This he suggested would be business. Indeed, even the act of the foki letting himself into the shop and later switching on the alarm might constitute the shop's business. I have no difficulty in rejecting this argument. First, it flies in the face of Mr. Leung's own evidence. His evidence was quite clear; he went to the Mut Wah Street shop and closed for business on the day in question. It also flies in the face of the ordinary meaning of the phrase. It is a phrase which in substantially similar terms is commonly used in insurance policies. Examples of this are: Shoot v Hill ⁽¹⁾, and Roberts v Eagle Star Insurance Co. ⁽²⁾.

9. Finally Mr. van Buuren submits that even if the term in the policy had been observed it would not have avoided the loss. It cannot be suggested, Mr. van Buuren says, that Mr. Chan, the 2nd witness, should have switched on the alarm system before opening the gate for Mr. Leung. The answer to this, as Mr. Sakhrani argues, is that it is irrelevant. If there is a condition precedent in an insurance policy and the insured is in breach of that condition, the effect or lack of effect of the breach is irrelevant. Authority for this proposition may be found in the case of Conn v Westminster Motor Insurance Association Ltd. ⁽³⁾.

10. I find, therefore, that there is a valid condition precedent in the policy. I also find that the plaintiff had no proper arrangement for the alarm system to be switched on once it closed for business. The arrangement obtaining on the 5th February 1982 was haphazard. It led directly to the system not being put in effective operation after the plaintiff had closed for business. This was a clear breach of condition.

11. In the circumstances, the defendant is not liable under the policy and the plaintiff's claim must be dismissed with costs.

(1)   [1936] 2 Lloyd's L.R. 29

(2)   [1960] 1 Lloyd's L.R. 615

(3)   [1966] 1 Lloyd's L.R. 407