XCHRX NAM KWONG MEDICINES & HEALTH PRODUCTS CO. LTD. v. CHINA INSURANCE CO. LTD. and THE PEOPLE'S INSURANCE CO. LTD. (Third Party)

HCCL27/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.27 OF 1999

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J U D G M E N T

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The action

1. In this action the plaintiff claims against the defendant ("CIC") the sum of US$2,442,000 under a policy of marine insurance issued by the defendant on 1 June 1999.

2. The unusual circumstances surrounding the claim, which involves the disappearance of a mystery vessel named the "Pacifica" - alleged to be a 'phantom ship' used for the purposes of fraud - are set out in the judgment of this court dated 4 October 1999, wherein the defendant's application for a forum non conveniens stay of proceedings was dismissed.

3. As a consequence of that judgment, the defendant insurer applied for, and obtained leave to issue and serve third party proceedings out of the jurisdiction upon the third party insurer ("PIC") in Singapore. By Third Party Points of Claim dated 31 January 2000, CIC claims contribution against PIC pursuant to section 80 of the Marine Insurance Act on the ground that the plaintiff was double insured, PIC having also issued a policy of insurance on 1 June 1998.

The application

4. By summons dated 2 March 2000 PIC applied to strike out and dismiss the third party proceedings under Order 18 rule 19, RHC, alternatively for questions to be determined pursuant to Order 14A, RHC. It is this application which is the subject of this judgment, and for the purpose of argument has proceeded upon the basis of certain assumed facts, namely :-

first, that CIC's policy, although stated to be issued on 1 June, was in fact issued to the plaintiff on 8 June 1998;

second, that PIC's policy was initially issued to Pao Sang Trading on 1 June 1998 and was not assigned to the plaintiff until at least 10 June 1998; and

third, that as soon as the "Pacifica" left port at Pasir Gudang the loss occurred.

The argument

5. There is no dispute between the parties (assuming primary liability to have been established in the head action) that if in fact there was double insurance, CIC has a claim for contribution against PIC based upon section 80 of the Marine Insurance Act. However, PIC's case is that as the result of a particular clause in its policy (the existence of which is not disputed) double insurance does not arise. This clause reads :-

"APPLICABLE TO MARINE CARGO POLICIES

...

This insurance does not cover any loss or damage to the property which at the time of the happening of such loss or damage is insured by or would but for the existence of this Policy be insured by any fire or other insurance policy or policies except in respect of any excess beyond the amount which would have been payable under the fire or other insurance policy or policies had this insurance not been effected.

... "

6. Mr Shieh, on behalf of PIC, the applicant herein, submits shortly that the plain wording of this clause covers the present case. On the assumption that the defendant is liable to the plaintiff (the premise of the third party proceedings), the property in question was plainly covered by the defendant's policy at the time of its loss; and if of course the property was not so covered, the defendant would not be under any liability to the plaintiff, and there would be no question of the defendant claiming any contribution from the third party.

7. In response, Mr Smith for CIC basically took three points :-

first, that the words "any fire or other insurance policy" should be construed eiusdem generis and/or noscitur a sociis, so that, accordingly, the "other" policy in question should be construed as being akin to a fire policy, that is, a non-marine policy;

second, a temporal argument, given that the policy used the term "is insured", and as a matter of fact no other insurance was in place at the time of the occurrence of the loss on 1 June 1998; and

third, that at the time of the loss - assumed for present purposes to be 1 June and not later - in light of the principles of double insurance there was no required correspondence between risk and interest under the two policies until 10 June when Pao Sang assigned its interest under its policy to the plaintiff; in other words, there was no coincidence of such interest until the assignment which (at least for present purposes) postdated "the happening of the loss or damage".

8. In outline, therefore, these were the parameters of a vigorous argument on the basis of which - either by means of Order 18, rule 19 or by the Order 14A route - Mr Shieh maintained that his client was clearly entitled to be removed from these proceedings at this early stage.

Decision

9. I am unable to agree with this submission, and I refuse this application. Persuasively though the argument was crafted, I do not consider that the issues fall within the "plainly and obviously unsustainable" benchmark for an Order 18, rule 19 strike out, whilst in terms of Order 14A, in the exercise of my discretion I decline to proceed to determine the questions posed on the basis of assumed facts and absent the expert evidence that I am told by Mr Smith will be deployed by the defendant at trial upon the construction issue.

10. Notwithstanding the tripartite nature of his submission, it is probably fair to say that Mr Smith's principal contention focused around the construction argument. At bottom, this was that when read as a whole, and looking at the words, including the introductory words, in their proper context, it was strongly arguable that this clause was not intended to exclude the principle of double insurance enshrined in the Marine Insurance Act. Indeed, continued Mr Smith, unless the court presently was minded to construe the words as the third party now would have it, it would be difficult in the circumstances to rule at this stage that the words bore the contrary meaning for which he contended, in that at trial he would wish to lead expert evidence from persons in the marine underwriting profession as to trade usage and practice in terms of the sub-clause "any fire or other insurance policy or policies", and the way in which this is treated in the trade as excluding marine policies. Put another way, said Mr Smith, it was and is not common to find what is a non-contribution clause in marine insurance policies, precisely because such would be in conflict with established statutory principle.

11. Mr Smith supported this argument with reference to insurance texts - see, for example, O'May, Marine Insurance Law and Policy, 1993, at pages 502-503 - and also relied, in part at least, on the lately filed affirmation of Mr Lee Yuen Ki, a marine underwriter in the employ of Tai Ping Insurance Company Limited. This affirmation was received de bene esse in the face of Mr Shieh's objection as to admissibility; for the avoidance of doubt, I admit this evidence subject to the excision of paragraph 3 thereof, which for present purposes I disregard. In addition, Mr Smith proffered a draft reply on the point, noting that the present third party summons had been filed prior to the expiry of the time for the filing of a reply in the third party pleadings, and that the specific point on this clause had been taken for the first time in the third party defence; in fact, he continued, until that defence had been filed, his client had not had sight of this clause.

12. It is abundantly clear that there is going to be a trial of this action, and that on the facts this is going to be a highly contentious case. The defendant's stay application having failed, in the particular circumstances joinder of the third party naturally followed, and it is surprising to say the least that a knock-out blow of the type now said to be decisive was not raised by PIC in an attack on the jurisdiction in terms of an application to set aside the leave granted to the defendant to serve the third party proceedings out of the jurisdiction.

13. Be that as it may. After fully considering the evidence, together with the able submissions of counsel, in my judgment such an attack does not succeed at this juncture either. I am firmly disinclined to permit the third party to depart the proceedings at this early stage via either of the procedural routes suggested. The present application has not been made out. The matter is not so clear that it can fairly and confidently be adjudged in the manner now suggested. There is to be a trial involving all interested parties, and at that trial all relevant facts (such as, for example, the date of the loss) and all relevant issues, including, if appropriate, the contribution issue (one of the various matters pleaded in the third party defence), finally will be determined.

14. I order that the third party's application be dismissed. Absent agreement thereon, I will hear the parties on costs at a date and time to be appointed.