CHENG YUN TUNG v. TUGU INSURANCE CO. LTD.

DCCJ 8099/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 8099 OF 2001

____________________

___________________

______________

JUDGMENT

______________

1. This is an application by the Defendant to strike out the Plaintiff's claim under O. 18 r. 19 of the Rules of the District Court.

2. By a motor insurance policy made between the Plaintiff as the insured and the Defendant as the insurer ("the Policy"), the Defendant agreed to, inter alia, indemnify the Plaintiff of the loss and damage to the Plaintiff's vehicle with the registration number "JC799" ("the Vehicle"). The Plaintiff completed the proposal form ("the Proposal Form") on 24 March 2000, and a cover note was issued on the same day. The formal policy was issued subsequently on or about 3 May 2000 with the period of coverage of risk from 24 March 2000 to 23 March 2001.

3. The Vehicle was damaged in a motor accident on 17 August 2000. However, the Defendant refused to indemnity the Plaintiff of such loss on the ground that the information supplied by the Plaintiff in the Proposal Form was incorrect, or the Plaintiff was in breach of the duty of non-disclosure. Hence the Plaintiff brings the present action against the Defendant.

4. Under Clause 1 of the Policy, the answers supplied in the Proposal Form were incorporated in and were the basis of the Policy. The following question was asked in the Proposal Form ("the Question"):

"State whether you and/or any person who to your knowledge will drive the vehicle:

1. have accumulated 8 or more driving offence points or had driving licence suspended in the past 2 years?"

"過去兩年內曾否在交通違例事件中已被累積８分或以上，或曾被停牌?"

The Plaintiff ticked the box "No".

5. It was later revealed that the Plaintiff committed the following driving offences in the relevant period:

Offence in code	Date of commission of offence	Date of conviction/ becoming liable to fixed penalty	Driving-offence  points incurred
crossing double white line	10/03/1998	14/04/1998	3
driving in excess of speed limit by more than 15 km/h but less than 30 km/h	11/10/1998	11/11/1998	3
driving in excess of speed limit by more than 15 km/h but less than 30 km/h	04/09/1999	07/10/1999	3

It is therefore the Defendant's case that the answer supplied by the Plaintiff in reply to the Question was wrong, and so the Defendant is entitled to avoid liability in the present case.

6. In reply, the Plaintiff claims that one should only regard to the points which are operative under the Road Traffic (Driving-offence) Points Ordinance, Cap. 375 in calculating the points accumulated in the 2 years' period. It is common ground that, according to the disqualification scheme under the said Ordinance, driving-offence points become spent 2 years after the date of the commission of the relevant offence. In other words, the operative date for the calculation of driving-offence points is the date for the commission of the offence, and not the date of conviction. As the Proposal Form was completed by the Plaintiff herein on 24 March 2000, the 3 driving-offence points incurred under the first aforesaid offence, which was crossing double white line, should not be counted towards the accumulated points, as the operative date for such offence was more than 2 years prior to the completion of the Proposal Form by the Plaintiff on 24 March 2000. For this reason, the answer supplied by the Plaintiff was correct.

7. Obviously, the central issue in the present case is how the Question in the Proposal Form should be construed. In my judgment, the Question is capable of carrying the following 3 different meanings:

(a) have you accumulated 8 or more driving-offence points for any driving offences in the past 2 years, with such points be calculated by reference to the date of the commission of the offence?

(b) have you accumulated 8 or more driving-offence points for any driving offences in the past 2 years, with such points be calculated by reference to the conviction date?

(c) whether the points are calculated by reference to the date of the commission of the offence or the date of conviction, have you at any point in time in the past 2 years accumulated 8 or more driving-offence points?

8. The Defendant would be able to succeed in defending the claim if the court were to adopt the two or the third meaning above. However in my judgment, there is certainly room for the Plaintiff to argue that the points should have been calculated in the same manner as the calculation of points under the statutory disqualification scheme. Indeed with the existence of such a scheme, it is quite reasonable for an ordinary driver to interpret the Question in such manner. It is also not clear whether the Question refers to the accumulation of points for offences during a period of 2 years prior to the completion of the Proposal Form, or to the accumulation of points at any point in time in the past 2 years. As it was the Defendant who drafted the Question and its exact meaning was by no means clear, the Plaintiff may also rely on the principle of contra proferentem, and ask the court to construe the Question in a way which is against the interest of the Defendant.

9. Mr. Ching for the Defendant also submits that, apart from the duty on the part of the Plaintiff to answer all the questions in the Proposal Form correctly, the Plaintiff also had a duty to disclose other material information which would have influenced the judgment of a reasonable or prudent insurer in deciding whether or not to accept the risk or what premium to charge. This is based on the principle of uberrima fides. In the premises, the Defendant says, the Plaintiff had a duty to disclose all his driving-offence points irrespective of the answers supplied by him in the Proposal Form.

10. However under the law of insurance, it is generally accepted that an insured is not obliged to disclose facts of which the insurer waives disclosure. In the present case, it is certainly arguable for the Plaintiff to say that the disclosure of other details has been waived. As a specific question was asked relating to the accumulation of driving-offence points, it may be felt that a reasonable man reading the Proposal Form would have considered that the Defendant did not seek other details relating to such issue. Further, if the Defendant has to rely on the breach of duty of non-disclosure for the purpose of this application, there are certainly issues of facts involved which need to be decided by the court in the trial. For example, in deciding question about the materiality of the alleged non-disclosed fact, the court has to examine whether such fact would have influenced the judgment of a reasonable or prudent insurer in deciding whether or not to accept the risk or what premium to charge. In such circumstances, it would be not appropriate for the court to strike out the claim summarily without a proper trial.

11. It is trite law that the court would only strike out a claim in a "plain and obvious" case. Such kind of application is a summary process, and so it should be reserved for limited cases that the court can safely dispose of the case without a trial. In my judgment, there are certainly various interpretations that one can adopt in construing the Question, and the Plaintiff should be given the opportunity to further explore the significance of the disqualification scheme, and how the calculation of points under such scheme would have influenced the mind of a reasonable driver in understanding the meaning of the Question. Hence I do not accept that it is "clear and obvious" case, and the Plaintiff's claim should not be struck out at this stage.

12. Based on the aforesaid, I dismiss the Defendant's application. I also make the following order nisi:

(a) costs of this application be to the Plaintiff with certificate for counsel; and

(b) leave to the Plaintiff to file and serve a reply, if any, within 14 days after this order is made absolute.

The said order nisi is to be made absolute 14 days after the date of the handing down of this judgment.