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Mohawk Incorporated And Others v Swire Insurance Ltd.

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
Judgment Date29 July 1997
CourtHigh Court (Hong Kong)
Judgement NumberHCCL81/1987
Subject MatterCommercial Action
HCCL000081A/1987 MOHAWK INCORPORATED AND OTHERS v. SWIRE INSURANCE LTD.

HCCL000081A/1987

1987, No. CL-81and
1988, No. CL-247

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

COMMERCIAL LIST

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BETWEEN
MOHAWK INCORPORATED 1st Plaintiff
YI CHUN NAVIGATION, INC. 2nd Plaintiff
WAN HAI STEAMSHIP CO., INC. (A body corporate pursuant to the Laws of Liberia) 3rd Plaintiff
TAIWAN CONTAINER EXPRESS, INC. 4th Plaintiff
CHINA CONTAINER EXPRESS LINE, INC. 5th Plaintiff
WAN HAI STEAMSHIP CO., INC.(a body corporate pursuant to the Laws of the Republic of China) 6th Plaintiff
AND
SWIRE INSURANCE LIMITED Defendant

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Coram: The Hon. Mr. Justice Stone in Chambers

Date of Hearing: 23 June 1997

Date of Handing Down of Judgment: 29 July 1997

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J U D G M E N T

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1. By a summons dated 27th March 1997 the Defendant moves to dismiss this consolidated action for want of prosecution on the well-known grounds adumbrated in Birkett v. James, [1978] AC 297, namely, that there has been inordinate and inexcusable delay in this action on the part of the Plaintiffs or their lawyers, such that there is a substantial risk that it is not possible to have a fair trial of the issues in the action or such that it is likely to cause or to have caused serious prejudice to the Defendant either as between it and the Plaintiffs or between it and a Third Party.

2. As the title indicates, these cases are of some age; they were consolidated by Order of Mr. Justice Mayo dated 17th January 1992 and, individually and in consolidated form, have been the subject of considerable interlocutory activity. The present application is extensively documented and has attracted lengthy and tightly argued affidavits from Miss Sumption on behalf of the Defendant and from Mr. Sheppard on behalf of the Plaintiffs; indeed the significant amount of detail contained in this application provides the ever present danger that the shape of the proverbial wood will be all but obscured by the forensic trees, and I have been much assisted by Mr. Fok, Counsel for the Defendant, and Mr. Griffiths Q.C. for the Plaintiffs in my attempt to come to grips with the case.

3. The dispute has its factual origins in a fire which took place aboard a vessel owned by the 1st Plaintiff, the "American Mohawk", on 10th May 1981 in the Malacca Straits. This vessel, later renamed the "Tai Chun", was one of a fleet of vessels which formed what was known as the Wan Hai fleet; at the time of the fire this vessel was insured by Tokio Marine & Fire Insurance Co. Ltd. However, in October 1981 the Defendant, Swire Insurance Ltd., was approached by personnel of the fleet manager, the 6th Plaintiff herein, with a request for an insurance quotation on what had by then had become the vessel "Tai Chun", and a primary focus of this consolidated action involves examination of what transpired in the discussions between one Steve Lan of the Defendant, the broker dealing with Wan Hai's insurance, and Dr. C.C. Chen and Captain Liu of Wan Hai regarding the insurance cover to be so provided.

4. Policy cover was initially effected through Swire Insurance Ltd. from 30th November 1981 to 10th September 1982; prior to such cover Steve Lan of the Defendant was told that the fire aboard the "American Mohawk" had resulted in a claim in respect of damage to the vessel of approximately S$105,000.00. It was not until the time of the 1984/85 renewal of the insurance that the Plaintiffs requested several other brokers to obtain quotations for the insurance renewal; part of this process consisted of providing those brokers with the fleet claims record, and the figures then provided disclosed the existence of a substantial claim in general average. It was in this way that underwriters first learned that the fire on board the "American Mohawk" in the Malacca Straits had given rise both to the known damage claim and to the significant liability in general average, which claim in fact had already been met by the vessel's previous insurers, Tokio Marine & Fire.

5. The total value of the claims made in respect of the May 1981 fire incident exceeded US$1 million. Underwriters apparently took the view that this provided a significantly different claims history for the vessel and the fleet from that which had been originally presented to them at the inception of the insurance; and, as a result, although cover was maintained, an additional premium was charged. And it is this which is the nub of this case. The Defendant says that underwriters simply levied an additional premium to represent the amount they would have charged had they been made aware of the true nature of the risk from the outset; to the contrary, the Plaintiffs say that the additional premium charged was in fact a penalty imposed by underwriters who, had they been made aware at the outset of the correct claims figures, would not have charged premiums as high as were eventually charged upon discovery of the non-disclosure. In summary, the Plaintiffs say that Swire should have made sure it found out about the outstanding claim in general average and told the underwriters, or at least, advised Wan Hai that there would be severe consequences flowing from any non-disclosure. This, in essence, is what may conveniently be termed the non-disclosure element of the case.

6. That however is not the entirety of the dispute, for the case also involves an issue in negligence regarding a warranty given to underwriters in connection with the chartering of vessels in the Wan Hai fleet. This arises as follows. The insurance of the Wan Hai fleet was placed through sub-brokers in the London market, Willis Faber. At various points during the currency of the policies written in relation to the fleet, some only of the vessels were under charter to John Swire & Sons (Japan) Ltd., and it appears that a warranty was given to the underwriters by the London brokers to the effect that all the vessels were so chartered. This discrepancy emerged during the negotiations following the discovery by underwriters as to the different fleet claims record, and this, the Plaintiffs claim, gave underwriters further reason to charge increased premium(s). Against this, the Defendant's case is that the increase in premium simply represented the actual level of risk; at no stage had all vessels been on charter, and if in so far as this was a relevant factor in determining premium, it was clear that premiums previously levied in the absence of that knowledge were lower than should have been the case. This encompasses what has, during argument, been generally referred to as the breach of warranty point.

7. As the result of these matters the Plaintiffs assert that by reason of the non-disclosure of the true extent of the casualty on board the "American Mohawk" and/or by reason of the negligent misrepresentation by the Defendant that the Plaintiffs' vessels would be on charter whilst insured, the Plaintiffs had to pay additional premium of US$402,285.11 for past years and an extra US$200,000.00 in each subsequent year.

8. So much, therefore, for the broad shape of the case, against the backdrop of which Mr. Fok helpfully has identified three principal factual questions arising in the case which are of particular relevance to the application, viz.:

(1) What was Steve Lan told about the casualty on board the "American Mohawk" during an alleged conversation with Dr. C.C. Chen on 5th November 1981?

(2) Was a general average claim disclosed to Steve Lan during a meeting in Taiwan in early September 1982 between himself and Dr. C.C. Chen and Captain Liu?; and

(3) What was the reason for the increased premiums demanded by the underwriters as from the year of renewal 1984/85?

9. I turn now to consider the particular arguments advanced. In doing so, I bear in mind particularly the fourteen-point summary in the judgment of Neill L.J. in Trill v. Sacher, [1993] 1 WLR 1379, (at 1398-1399), which if I may respectfully say so, provides invaluable contemporary guidance from high authority as to the applicable principles for use in an application to strike out for want of prosecution.

Inordinate and inexcusable delay

10. Mr. Fok reminds me that inordinate delay is delay which is "materially longer than the time which was usually regarded by the courts and the profession as an acceptable period of time": see Tabata v. Hetherington, The Times, 15.12.83, CA. He points out that this action was a "late start" action, in that the writs in each of the two separate actions were not served until almost the expiry of the one-year period of validity of the respective writs, and the actions themselves were commenced shortly before the expiry of a relevant six-year limitation period; accordingly it was all the more incumbent upon the Plaintiffs to proceed with expedition. He reminds me also that the time elapsed after the issue of the writ and before the expiry of the limitation period is relevant delay: see Rath v. C.S. Lawrence & Partners [1991] 1 WLR 399 at 406-407; and that the whole period of delay will be considered by the Court: see Trill v. Sacher, op. cit. at 1388-9.

11. As a matter of history, Mr. Fok submits that there have been four distinct periods of delay by the Plaintiffs:

(a) from October 1988 and October 1989 respectively to November 1990, periods of respectively 2 years (in CL 81 of 1987) and 1 year (in CL 247 of 1988);

(b) from 17th January 1992 to 14th July 1994, a period of some 21/2 years;

(c) from 23rd May 1995 to 7th February 1996, a period of over 8 months (for 7 months of which the action was stayed); and

(d) from 24th February 1996 to 22nd February 1997, a period of just under 1 year.

12. Mr. Fok submits that each of...

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