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Sealegend Holdings Ltd v China Taiping Insurance (Hk) Co Ltd And Others

Judgment Cited authorities 7 Cited in Precedent Map Related
Vincent
Judgment Date24 October 2014
Subject MatterAdmiralty Action
Judgement NumberHCAJ95/2012
CourtHigh Court (Hong Kong)
HCAJ95A/2012 SEALEGEND HOLDINGS LTD v. CHINA TAIPING INSURANCE (HK) CO LTD AND OTHERS

HCAJ 95/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 95 OF 2012

____________

BETWEEN
SEALEGEND HOLDINGS LTD Plaintiff

and
CHINA TAIPING INSURANCE (HK) CO LTD 1st Defendant
QBE HONGKONG & SHANGHAI INSURANCE LIMITED 2nd Defendant
CATHAY CENTURY INSURANCE CO., LTD 3rd Defendant
BANK OF CHINA GROUP INSURANCE CO., LTD 4th Defendant
____________
Before: Hon Au-Yeung J in Chambers
Date of Hearing: 30 September 2014
Date of Decision: 24 October 2014

______________

D E C I S I O N

______________

INTRODUCTION

1. This is an application by the 1st, 2nd and 4th defendants (collectively “the defendants”) to strike out the plaintiff’s claims.

BACKGROUND

2. The plaintiff was the registered owner of MV Princess Rowena (“the Vessel”). The defendants were and are insurance companies. The 3rd defendant has ceased to be a party as the court has refused to extend the validity of the writ for service on it.

3. The hull and machinery of the Vessel (“H&M”), originally valued at US$4,000,000, was insured as to US$2,400,000 from 4 August 2004 to 4 August 2005 by Dongbu Insurance Co Ltd (“Dongbu”).

4. In 2005, as a result of refitting, the value of the H&M was increased to US$8,000,000. The plaintiff sought additional insurance cover in respect of the increased value (i.e. 50% of US$8,000,000) through its broker COSCO (Hong Kong) Insurance Brokers Ltd (“CIBL”).

5. The insurance policy governing the relationship between the plaintiff and the defendants (“the Governing Policy”) was Policy No, PHHH-05-00055-3, evidenced by the following documents:

Date Document Defendants involved Insurance cover
26.05.2005

21.06.2005 (according to P)		 Agreement by email

Additional cover by emails		 D1

D1		 50% of value of H&M up to 4.8.2006.
Additional 20%
28.06.2005 1st over Note
No. 2005DHNM000040HM/C001 issued by CIBL		 D1 50% of value of H&M for 12 months from 23.5.2005
04.08.2005 Endorsement to 1st Cover Note D1 To evidence extension of the original 50% insurance to 4.8.2006
04.08.2005 2nd Cover Note
No. 2005DHNMC000043HM/C001 issued by CIBL		 D1 (20%)
D2 (15%)
D3 (10%)
D4 (5%)		 50% of value of H&M for 12 months from 4.8.2005

6. The Governing Policy incorporated the Institute Time Clauses Hulls 1.10.83 and the Institute Machinery Damage Additional Deductible Clause. Under clause 6.2 thereof, the insurance only covered “loss of or damage to the subject-matter insured caused by… negligence of Master Officers Crew or Pilots… provided such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers.” (“Clause 6.2”)

7. On 1 July 2006, the Vessel allegedly sustained damage to her starboard main engine (“the Damage”). The plaintiff informed CIBL, which in turn informed the defendants.

8. The 1st defendant appointed Peter Y C Ng & Associates Ltd (“PNA”) to survey the Damage. PNA issued 2 reports to the 1st defendant in July 2006. The 1st defendant also issued a Claim Advice (via CIBL) to its reinsurer, Swiss Re.

9. The plaintiff’s initial estimate of repair cost was less than or only slightly over the amount of deductible (US$325,000) under the Governing Policy. As a result, the plaintiff decided not to lodge any claim.

10. On 31 July 2006, CIBL emailed the 1st defendant to request a quotation for the renewal of the H&M insurance.

11. On 1 August 2006, the 1st defendant offered to CIBL to renew such that the 1st defendant “would like to quote at premium rate 0.70% in TLO basic, with deductible USD150,000.00 applied to Salvage, Salvage Charges and Sue and Labour, provided that the outstanding premium to be cleared off prior to expiry and the claim on starboard main engine damage on 1/July/2006 to be closed at Nil claim” (emphasis added).

12. On 4 August 2006, CIBL emailed the 1st defendant stating that the above offer was accepted by the plaintiff. CIBL also specifically confirmed that the plaintiff had “settled all o/s premium and confirmed that M/E claim withdrawn”. This was also evidenced by a closing advice dated 17 August 2006 from CIBL to (a) Ming An Insurance Co (HK) Ltd; and (b) the 2nd and 4th defendants, respectively.

13. The 2nd and 4th defendants also renewed their respective insurance cover of the H&M on the same terms as stated in paragraph 11 above. See emails dated 3 and 4 August 2006 between CIBL and the 2nd defendant, and the internal emails of the 4th defendant on 2 to 4 August 2006.

14. On 4 August 2006, the 1st defendant emailed to CIBL a Particulars Slip showing the terms of renewal for the latter’s reference. On 17 August 2006, CIBL issued a Closing Advice to the 1st defendant.

15. On 28 August 2006, the 1st defendant issued the “Marine Hull Policy”, (the “Renewed Policy”), with a schedule setting out the terms of the policy. It was not disputed that the remark therein, “Renewing Policy No. PHHH-05- 00055-3”, was a reference to the Governing Policy.

16. In late 2006/early 2007, the plaintiff discovered that the Damage required more extensive repairs and the estimated costs net of deductibles were about US$1.11 million.

17. Upon request of the plaintiff, on 19 January 2007, CIBL asked the 1st defendant to re-open the case and request PNA to re-attend. Three days later, the 1st defendant did asked PNA to follow up.

18. For over 5 years between January 2007 and March 2012, the defendants had made extensive follow-up inquiries. PNA made 2 more survey reports (in 2009 and 2011) on the cause of Damage. The parties had had many communications. The plaintiff even appointed an average adjuster and its own expert to assist the defendants and PNA.

19. On 9 March 2012, the 1st defendant emailed CIBL stating, amongst others, that,

“Based upon the available information and documentary evidence, we, without prejudice, consider that the damage to starboard M/E caused by alleged crew negligence has resulted from want of due diligence by the insureds.” (emphasis added)

20. The 1st defendant was relying on Clause 6.2 to inform CIBL effectively that the Damage did not fall within the scope of the Governing Policy.

21. On 15 March 2012, CIBL informed the plaintiff, the 2nd and 4th defendants of the 1st defendant’s views in its email of 9 March 2012. The plaintiff strenuously denied that the Damage had resulted from want of due diligence.

22. On 18 May 2012 and shortly before the limitation period was to expire, the plaintiff issued the writ herein. The writ initially only named the 1st defendant as defendant but it was subsequently amended on 12 June 2012 to add the other defendants. The general endorsement only relied on the 2nd Cover Note.

THE APPLICATION AND GROUNDS IN OPPOSITION

23. After the plaintiff filed its statement of claim, the defendants seek to strike out all of the plaintiff’s claims on the grounds that:

A. Under the 1st summons dated 6 November 2013, the claims constituted an abuse of process for exceeding the scope of the writ (“the scope of writ ground”); and

B. Under the 2nd summons dated 21 March 2014, the plaintiff has agreed to relinquish its claims upon renewal of the policy in August 2006 (“the relinquishment ground”).

PRINCIPLES ON STRIKING OUT

24. The court may, either of its own motion or on application, at any stage of the proceedings order to be struck out any claim on the basis, amongst others, that it is scandalous, frivolous or vexatious or is otherwise an abuse of the process of the court: Order 18, rule 19(1)(b) and (d).

25. A proceeding is frivolous when it is incapable of reasoned argument, without foundation or cannot possibly succeed. A proceeding is vexatious when it is oppressive or lacks bona fides. The expression “frivolous or vexatious” includes proceedings which are an abuse of the process: Hong Kong Civil Procedure 2014, §18/19/8.

26. An “abuse of the process of the court” connotes that the process of the court must be used bona fide and properly and must not be abused. The court will prevent the improper use of its machinery, and will, in a proper case (eg where an action is absolutely groundless or time-barred) summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation: Hong Kong Civil Procedure 2014, §18/19/10.

27. The court has inherent jurisdiction to stay all proceedings before it which are obviously frivolous or vexatious or “hopeless” in the sense of being bound to fail: Hong Kong Civil Procedure 2014, §18/19/12, 16 and 21.

28. There should be no trial on affidavit. Disputed facts are to be taken in favour of the party whose pleading is under attack. See Hong Kong Civil Procedure 2014, at §18/19/4, paragraph (1).

29. The power to strike out should only be exercised in plain and obvious cases where the claim is obviously unsustainable. A claim must be so obviously unsustainable, the pleading...

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