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Bouygues S A And Others v Red Sea Insurance Ltd

Judgment Cited authorities 7 Cited in Precedent Map Related
Vincent
Judgment Date24 July 1992
Year1992
Citation[1993] HKLR 161
Judgement NumberCACV3/1992
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV000003A/1992 BOUYGUES S A AND OTHERS v. RED SEA INSURANCE LTD.

CACV000003A/1992
IN THE COURT OF APPEAL

1992, No 3
(Civil)

BETWEEN

BOUYGUES S A

1st Plaintiff/
Respondent

BLOUNT, INC

2nd Plaintiff/
Respondent

BLOUNT INTERNATIONAL, LTD

3rd Plaintiff/
Respondent

LOCHER & CIE AG

4th Plaintiff/
Respondent

UNIVERSAL ENGINEERING AG

5th Plaintiff/
Respondent

FRUTIGER SOEHNE AG

 6th Plaintiff/
Respondent

AG HEINRICH HATT-HALLER

7th Plaintiff/
Respondent

PREISWERK & CIE AG

8th Plaintiff/
Respondent

AG CORAD ZSCHOKKE

9th Plaintiff/
Respondent

ED ZUEBLIN AG

10th Plaintiff/
Respondent

WAYSS & FREYTAG AG

11th Plaintiff/
Respondent

WALTER THOSTI BOSWAU

12th Plaintiff/
Respondent

ED ZUEBLIN & CIE AE

13th Plaintiff/
Respondent

HELLMUTH, OBATA & KASSABAUM INC

14th Plaintiff/
Respondent

CRS SIRRINE INC
(Formerly known as Caudill Rowlett Scott)

15th Plaintiff/
Respondent

SYSKA & HENNESSY INC

16th Plaintiff/
Respondent

DAMES & MOORE INC

17th Plaintiff/
Respondent

W R HEADLEY

18th Plaintiff/
Respondent
B J MAYES

19th Plaintiff/
Respondent
A W SMITH

20th Plaintiff/
Respondent
J C RYDER RICHARDSON

21st Plaintiff/
Respondent

N L F SOUTHAM

22nd Plaintiff/
Respondent

A I G GREGSON

23rd Plaintiff/
Respondent

AND

RED SEA INSURANCE LTD

 Defendant/
Appellant

------------

Coram: Hon Sir Derek Cons, VP, Power & Nazareth, JJA

Date of hearing: 1st, 2nd, 3rd & 7th July 1992

Date of handing down judgment: 24th July 1992

------------------------

J U D G M E N T

------------------------

Sir Derek Cons, VP:

1. The forensic battle lines in the court below are somewhat curiously drawn. The plaintiffs, who are numerous and come exclusively from jurisdictions other than Hong Kong, fall conveniently into three groups. The first comprises three parties to a joint venture formed for the construction of the academic area of a new university in Riyadh in the Kingdom of Saudi Arabia ("the Contractors"). The second group form a consortium ("the Precast Construction Group") which supplied the precast prime building units required for the project. The remaining 10 plaintiffs were the architectural and engineering consultants and form a consortium known, for some reason, as "the HOK + 4 Consortium".

2. The plaintiffs' claim is based on an All Risks insurance policy taken out in 1981 with the defendants, the Red Sea Insurance Company Ltd, a company incorporated in Hong Kong although they are said to have their head office in Saudi Arabia.

3. The statement of claim alleges that during the currency of the policy structural damage occurred to the property insured, being made manifest over the period May 1983 to May 1984. The damage was made good by the plaintiffs at a cost of a little under US$6 million, but the defendants refuse to indemnify.

4. The defence in general is that the costs incurred by the plaintiffs were for correcting bad design or workmanship, risks specifically excluded from the policy. A particular defence against the Precast Construction Group is that those plaintiffs were not covered by the policy, or alternatively, by refusing to pay the premium, they are estopped from relying on the policy. The pleader then refers to various other matters, such as the failure of the Precast Construction Group to notify the defendants of the damage or to cooperate with them and the need of the other plaintiffs to give credit for monies received and so on. He finally adds a counterclaim. This is directed only against the Precast Construction Group, alleging breach of a duty of care owed by that group to the other plaintiffs in the design and manufacture of the particular elements of the building, which breaches caused the damage complained of and for which the defendants are entitled to recover "by way of subrogation" of the other plaintiffs' rights. The prayer is for an order that the defendants recover from the Precast Construction Group whatever they may be found liable to pay to the other plaintiffs, or a declaration to similar effect.

5. On the 18th April last year the Precast Construction Group took out a summons to strike out the counterclaim as disclosing no reasonable cause of action; on the 28th October the defendants sought leave to amend the counterclaim by adding a new paragraph:

"24. The Defendant will contend in relation to the Counterclaim herein:

(a) that the law governing:

(i) relations between the Precast Construction Group and the Contractors and/or the HOK + 4 Consortium; and

(ii)the claim by the Defendant herein against the Precast Construction Group is the law of and applied in Saudi Arabia;

(b)that by the law of and applied in Saudi Arabia, the Defendant is entitled to and does stand in the shoes of the Contractors and/or the HOK + 4 Consortium insofar as, which is denied, there is any liability by the Defendant to make payments under the claim herein to the Contractors and/or the HOK + 4 Consortium or any of them."

(We have interpolated the names we are using.)

6. The two summonses were heard together before Jones, J. In a reasoned judgment handed down on the 21st November he struck out the counterclaim and dismissed the application to amend. By this appeal this court is asked to rule that the learned judge should have made no order on the application to strike out and have given leave to amend in the terms we have just set out, albeit there is pending below a more recent application to amend by way of a completely re-drafted counterclaim. It is conceded that the pleading, as it stood before Jones, J, was defective and liable to be struck out. But it is contended that it could have been cured by amendment and that therefore that course ought not to have been taken.

7. The new pleading, if we understand the submissions correctly, will put the counterclaim in two ways, both relying on a foundation in Saudi Arabian law. The first, referred to by Mr Tong for the defendants as "a direct cause of action", will rely on what is said to be in that law a right in negligence vested directly in the defendants themselves as insurers. The second, "the indirect cause of action", relies upon a right given by that law to the defendants to enforce for themselves the similar rights of the other plaintiffs.

8. The classic exposition of the law relating to torts committed beyond the jurisdiction is to be found in the judgment of Willes, J, in Phillips v Eyre (1870) LR 6 QB 1. It was considered in depth by the House of Lords in Boys v Chaplin [1971] AC 356. In consequence, the learned editor of the ninth edition of Dicey & Morris on the Conflict of Laws re-formulated what was then rule 172, now rule 205, in these words:

"Rule 205. - (1) As a general rule, an act done in a foreign country is a tort and actionable as such in England, only if it is both

(a) actionable as a tort according to English law, or in other words is an act which, if done in England, would be a tort; and

(b) actionable according to the law of the foreign country where it was done.

(2) But a particular issue between the parties may be governed by the law of the country which, with respect to that issue, has the most significant relationship with the occurrence and the parties."

9. Sub-rule (2) is derived from the speech of Lord Wilberforce, supported by that of Lord Hodson and possibly that of Lord Pearson. Lord Donovan was contrary minded and Lord Guest, with respect, abstained.

10. The position in Hong Kong was considered by another division of this court in The Adhiguna Meranti [1987] HKLR 904. That appeal arose from the grounding in Taiwan of an Indonesian owned vessel and was concerned with an application to stay proceedings here in favour of Jakarta. Hunter, JA, delivering the judgment of the court, said at 914:

" The defendant's alternative formulation is based upon the new sub-rule (2) to Dicey's rule 172. Dicey's hopes here have not yet been fulfilled. The formulation still has the support only of Lord Wilberforce and has not been adopted since in England. In Australia it was rejected in Kolksy v. Mayne Nickless for reasons which carry conviction with us. We do not think that it can yet be regarded as part of the law of Hong Kong."

11. The court took note of their lordships' concern that a strict application of the basic rule might encourage forum-shopping, but was nevertheless satisfied that such conduct could be sufficiently controlled by the discretion to stay proceedings:

" ... we think that the proper exercise of the jurisdiction does provide a more convenient answer to forum-shopping than some uncertain relaxation of the substantive law."

12. We take these passages to be a firm...

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