ZURICH INSURANCE COMPANY LTD v. YEUNG SING HEI

HCMP 1143/2023

[2023] HKCFI 2394

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1143 OF 2023

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REASONS FOR JUDGMENT

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A. INTRODUCTION

1.  By an originating summons filed on 20^th July 2023, the Plaintiff (“Zurich Insurance”) seeks a declaration that it is, and was, entitled to avoid the private motor vehicle insurance policy numbers ZPP3122302ZC and ZPP0157278ZC (“the 1^st Policy”, “the 2^nd Policy” and collectively “the Policies”), issued by it to the Defendant (“Yeung”) in respect of a motor vehicle with registration number SS1489 (“the Vehicle”), irrespective of any provisions contained in the Policies.

2.  Zurich Insurance relies on s.10(3) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap.272) (“the Ordinance”). It says that the Policies were obtained by non-disclosure of material facts and/or misrepresentation of facts which were false in some material particular, 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 Zurich Insurance, having been satisfied that the Originating Summons, supporting affirmation and notice of appointment to hear originating summons have been properly served on Yeung, and that Yeung has notice of today’s hearing. Yeung did not file any acknowledgment of service. He appeared at the hearing after I had already pronounced declaratory relief in favour of Zurich Insurance. He was asked whether he had any submissions to make in relation to Zurich Insurance’s application and he indicated that he did not.

4.  I now set out the reasons for my judgment.

Background

5.  There is no challenge to the following facts.

6.  Under the Policies, Yeung was the Insured, and the only named driver.

7.  For the purpose of applying for each of the Policies, Yeung had to fill in an enrollment form (respectively, “the 1^st Enrollment Form” and “the 2^nd Enrollment Form”). In the 1^st Enrollment Form:

7.1  Yeung was asked to fill in the details of regular drivers of the Vehicle. The only driver named was Yeung;

7.2  Yeung was asked to provide information regarding the driving experience of persons who to his knowledge would be driving the Vehicle. These questions included (1) whether there had been any accidents or losses in the past five years and whether there were any police enquiries or prosecutions pending in respect of the drivers, (2) whether the drivers had been prosecuted or had had deducted more than five driving offence points in the previous two years; (3) whether the drivers had been refused any motor insurance; and (4) whether any of the drivers suffered from any heart disease, diabetes, epilepsy, defective vision or hearing, or any physical or mental infirmity;

7.3  Yeung was asked to declare that to the best of his knowledge and belief, the information on the form was true and complete in every respect.

8.  In the 2^nd Enrollment Form:

8.1  Yeung was asked to state the name of the owner of the Vehicle. The owner was named as Yeung;

8.2  Yeung was asked to fill in the details of “named drivers” of the Vehicle. The only driver named was Yeung, and it was stated that he had over five years’ driving experience;

8.3  Yeung was asked to state whether he had suffered from defective vision or hearing or any mental infirmity; how many driving offence points he had incurred in the last two years; and how many motor car non-windscreen claims had been reported by him in the last twelve months. Whilst it was not expressly stated, it was implicit that the information was sought on the basis that Yeung was to be the driver of the Vehicle;

8.4  Yeung was asked to declare that to the best of his knowledge and belief, the information on the form was true and complete in every respect.

9.  On 14^th November 2020, whilst the 2^nd Policy was in effect, a traffic accident (“the Accident”) took place in Wong Tai Sin in which a Mr Lam Man Yin (“Mr Lam”) and a Mr Chui Chi Wah (“Mr Chui”) were injured by the Vehicle. At the time, the Vehicle was being driven by a Mr Wong Wai Chun (“the Driver”).

10.  Yeung was questioned by the police. In his statement, he said that:

10.1  in or about mid-2018, he agreed to help his friend (“Chan”) by becoming the registered owner of the Vehicle on Chan’s behalf;

10.2  he had not himself used the Vehicle in the past two-odd years;

10.3  Chan was the one who maintained and repaired the Vehicle. He (Yeung) merely provided his details to Chan each year to facilitate the obtaining of a licence and purchase of insurance;

10.4  he did not know to whom Chan had lent the Vehicle;

10.5  he did not have the key to the Vehicle.

11.  On 26^th November 2020, Yeung submitted to Zurich Insurance a “Motor Insurance claim form” in relation to the Accident. In this form, he identified the Driver as the driver concerned, and in answer to the question of “Had the driver’s license ever been disqualified because of careless or dangerous driving and have points ever been deducted due to such offence(s) in the past three years?”, he stated “yes” and “speeding”.

12.  On 29^th January 2021, Zurich Insurance gave written notice to Yeung that it had decided to avoid the Policies on the grounds of misrepresentation and/or material non-disclosure.

13.  On 16^th May 2022, the Driver pleaded guilty to the offences of (1) causing grievous bodily harm by dangerous driving, (2) failing to report an accident involving personal injury to another person, (3) using a motor vehicle which failed to display a standard registration mark, and (4) using a motor vehicle failing to comply with safety glass or safety glazing regulations. The Driver was convicted accordingly.

14.  On 2^nd August 2022, Mr Lam’s solicitors wrote to Zurich Insurance, Yeung and the Driver, indicating Mr Lam’s intention to commence proceedings claiming for damages in respect of the Accident.

15.  On 11^th November 2022, Mr Chui’s solicitors wrote to the Driver, indicating Mr Chui’s intention to commence proceedings claiming for damages in respect of the Accident.

16.  By the time of commencement of the current action, no proceedings had yet been commenced by Mr Lam or Mr Chui in relation to the Accident.

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

17.  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.

18.  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.

19.  In view of the unchallenged evidence as set out above, I was satisfied that the Policies were obtained by the non-disclosure of material facts, or by representations of fact which were false in some material particular. In the 1^st Enrollment Form and the 2^nd Enrollment Form, Yeung had represented that he was the only regular or named driver of the Vehicle, when in fact, he was not the user of the Vehicle, he did not have keys to it, had only become the registered owner of the Vehicle on Chan’s behalf, and did not know to whom Chan would lend the Vehicle. These facts, which were not disclosed, were material, as a prudent insurer’s consideration of whether he should take on the risk of an applicant for motor vehicle insurance, and on what terms, would no doubt involve a consideration of the risk profile of the drivers of the vehicle. The non-disclosure meant that this risk could not have been properly assessed.

20.  Indeed, the evidence of Zurich Insurance is that these matters would have affected its decision as to whether to accept the risk in question. Furthermore, Zurich Insurance would not have approved the Policies had it known that the Vehicle would be lent to other persons independent of Yeung, and for purposes unknown to Yeung and Zurich Insurance.

Conclusion

21.  I therefore made a declaration in terms of paragraph 2 of the Originating Summons, and ordered that the costs of these proceedings are to be paid by Yeung, summarily assessed at $100,000.