UNISTRESS LIMITED AND ANOTHER v. KAI SHING TRANSPORTATION CO.(a firm)

IN THE COURT OF APPEAL

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JUDGMENT

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Fuad, J. A.:

1. The 1st Plaintiff, Unistress Limited, is a construction company and in September 1983 they were engaged in site formation and slope stabilization work at Sai Wan Ho under a Government contract. The 2nd Plaintiff, Wing Kee Engineering Transpo Co. ("Wing Kee") were their sub-contractors.

2. Wing Kee employed the Defendant, Kai Shing Transportation Co. ("Kai Shing") to lift a 16 ton excavator about 70 feet up a hill on the site. The excavator was the property of Wing Kee. The arrangements under which this work would be done were embodied in a written agreement between Kai Shing and Wing Kee, dated 15 September 1983. The true construction of this agreement is the controversy which still divides Kai Shing and Wing Kee.

3. On 22 September 1983, Kai Shing used two mobile cranes to lift the excavator. The jibs of the cranes collapsed, the excavator fell to the ground and it was damaged beyond economic repair. In falling, the excavator caused considerable damage to some scaffolding, the property of Unistress Limited.

4. Unistress Limited and Wing Kee joined in an action in negligence against Kai Shing - Unistress claiming damages in respect of their scaffolding, and tiding Kee in respect of their excavator.

5. When the hearing of the action began before O'Connor J., Kai Shing admitted that "the accident" had been caused by their negligence and accepted liability to Unistress Limited for the $13,550 they had claimed for their damaged scaffolding. While acknowledging that Wing Kee's excavator was also damaged by their negligence, they contended that they were relieved from liability in the light of the terms of the agreement of 15 September 1983. The clause upon which they relied for their stand was in these terms:

6. O'Connor J. dismissed Wing Kee's claim and they now appeal to this Court.

7. Wing Kee had submitted that clause (5) did not oblige them to insure, but merely permitted them to do so, and that even if it did impose such an obligation, it did not follow that Kai Shing were thereby to be exempted from liability. The clause did not, in any event, make it clear that if Wing Kee were bound to insure, the insurance should be without recourse to Kai Shing.

8. In an extempore judgment, the learned judge remarked that the contract had not been professionally drafted. It had been drafted by Kai Shing who had submitted it to Wing Kee, and Wing Kee had added something to clause (5) before the parties signed the agreement. He said he would infer that the parties must have considered that the insurance was a matter of joint concern to them. If it were not so, he asked himself, why was clause (5) in the contract at all? He felt that even a layman would appreciate that Wing Kee needed no permission to insure, so the clause could not mean that. The judge then said this:

9. I note in passing that it appears from the papers before us, that Wing Kee were in fact insured for damage to their excavator on the material day under an "all risks" policy, and were adequately covered for their entire loss; and it was the loss adjusters who suggested in their report dated 3 November 1983 to the insurance company ".... we feel that initially we should hold 'Kai Shing' responsible for the loss unless they can prove they were not negligent."

10. By their Notice of Appeal, Wing Kee say that the judge erred in law when he found clause (5) to be an exemption clause, whereas it dealt only with the duty to insure. It is then said that even if clause (5) bore the meaning contended for by Kai Shing, since there was no specific mention of their own negligence being excluded as a cause of action, the clause should be strictly construed against Kai Shing, and if there were a doubt, the contra proferentem rule should be applied against them.

11. A number of authorities were cited to us but, with respect, I do not think they are of great assistance. It is common ground that the decision on this appeal must turn on the proper interpretation of clause (5). One thing the cases do make clear, I think, is that a defendant has a heavy onus cast upon him if he seeks to show that the terms of an agreement of the kind before us effectively exempt him from liability for his own negligence.

12. So what did the parties mean by the words they used in clause (5)? The cardinal principle is that they intended what they in fact said. There is no doubt that the contract imposed an obligation upon Wing Kee to insure their excavator during the lifting operation, and so much is now conceded by Mr. Pirie who represented Wing Kee before us, but not in the lower Court.

13. It seems to me important first to construe what was meant by the words "for accident" in the clause. The word "accident" has no technical legal meaning. Broadly speaking, it means an unintended and unexpected happening which produces loss or injury. I see no reason to assume that the parties meant to restrict its meaning to an event occurring without negligence. In the context of insurance, surely they must have had in mind that many so called "accidents" are the result of carelessness. It is difficult to see why Kai Shing's concern, evidenced by the inclusion of clause (5), should not have been about the very sort of accident for which they would certainly be held liable in law.

14. I think that a fair reading of the clause must lead to the conclusion that the parties were stipulating upon whom the risk should lie when the excavator was being lifted to its new position, and I find no difficulty in importing the implication that the insurance cover would be such that there would be no possibility of recourse to Kai Shing. It would be no comfort to them to know that Wing Kee had met their contractual obligation to insure, only to be told that the insurance company could claim from them any sum that they had paid out to Wing Kee. This could not have been the true commercial basis of the transaction. We are not concerned with any difficulties that Wing Kee might have with their insurance company over any omission to inform the company of the contractual arrangement which I find must be inferred to give business efficacy to the contract of 15 September 1983.

15. I do not propose to make a juristic analysis of the matter for I think it is unnecessary. I content myself by saying that I respectfully agree with the conclusions reached by O'Connor J., that in terms of the  first part of clause (5), Wing Kee had no right of recovery against Kai Shing in negligence.

16. In my judgment, the appeal fails.

Cons, V.-P.:

17. I agree with my Lord and would only add briefly that a certain amount of the argument in this appeal has been directed to the proper approach to the construction of exemption clauses and we have been referred to various authorities.

18. In my view, this appeal is not about the construction of exemption clauses at all. By no stretch of imagination can the words of clause (5) themselves be construed to confer exemption. As I read his judgment, the learned judge below did not do so. He found himself compelled by the presence of clause (5) in the circumstances of the contract to imply a further clause. He did not give the details of the clause he had in mind but he gave the substance as being a clause exempting the Defendant "from all liability in respect of damage to the goods for accident during the process of lifting''', and he construed the word "accident" widely to cover the Defendant's negligence. The question for this Court is whether he was right to do so and what would be the extent of the implied clause if he were. The judge below referred to the case, to which our attention has also been, directed of Coupar Transport (London) Limited v. Smith's (Acton) Limited [1959] 1 Lloyds Rep. 369.

19. The circumstances of that case were, in some respects, similar to the present and Winn, J. felt himself compelled to accept the submission that there was an implied term of the contract that "either the plaintiff would insure the equipment for its full value or that the defendant's liability would be wholly excluded." In my view, that is the sort of clause that the judge below had in mind. In the circumstances, that seems to me an inexcapable implication in the context of the contract. For these reasons, I, too, would dismiss the appeal.

Clough, J.A.:

20. I agree with the conclusions in the two judgments that have just been delivered and have nothing to add.