Siu Yin Kwan and Another v Eastern Insurance Company Ltd (The Barquentine Osprey)

JurisdictionUK Non-devolved
Judgment Date09 December 1993
Date09 December 1993
CourtPrivy Council
[PRIVY COUNCIL] SIU YIN KWAN (ADMINISTRATRIX OF THE ESTATE OF CHAN YING LUNG, DECD.) AND ANOTHER APPELLANTS AND EASTERN INSURANCE CO. LTD. RESPONDENTS [APPEAL FROM THE COURT OF APPEAL OF HONG KONG] 1993 Oct. 25, 26; Dec. 9 Lord Templeman, Lord Mustill, Lord Woolf, Lord Lloyd of Berwick and Sir Thomas Eichelbaum

Insurance - Third parties' rights - Employer's indemnity insurance - Employees' dependants obtaining statutory compensation and common law damages against employers - Employers wound up before payment made - Employers' rights under indemnity policy vesting in employees' dependants - Policy effected by agents without naming employers - Whether employers having rights under policy as undisclosed principals - Whether failure to insert name invalidating policy - Life Assurance Act 1774 (14 Geo. 3, c. 48), s. 2

The plaintiffs, the personal representatives of two seamen who had been killed on board their vessel, obtained a judgment in Hong Kong for damages for negligence at common law, and an award of compensation pursuant to the Employees' Compensation Ordinance, against the seamen's employers, the owners of the vessel. The employers were wound up before any payment was made and the plaintiffs thereupon claimed an entitlement to payment under the employers' indemnity insurance policy in reliance on the employers' rights against the insurers under the policy having vested in the plaintiffs on the winding up, as third parties to whom liability had been incurred, pursuant to section 2(1) of the Third Parties (Rights against Insurers) Ordinance. The cover having been obtained on the employers' behalf by shipping agents, who were described in the policy as the insured, the insurers denied liability. The judge held that the employers could not have sued on the policy as unnamed and undisclosed principals and dismissed the plaintiffs' claim. On the plaintiffs' appeal, the Court of Appeal of Hong Kong, by a majority, upheld the judge's finding and held, further, that even if the employers had been entitled to claim under the policy as undisclosed principals, the policy, by virtue of being payable on the happening of an event, namely the employers' liability to pay compensation in respect of injury to their employees, fell within the ambit of section 2 of the Life Assurance Act 1774F1 which required that the name of the person interested be inserted in the policy, and that, accordingly, the failure to name the employers made the policy unlawful and void.

On appeal by the plaintiffs: —

Held, allowing the appeal, that, although the terms of a contract or its surrounding circumstances might exclude an undisclosed principal's right to sue, there was nothing in the terms of the proposal form or the policy effected by the shipping agents which expressly or by implication excluded the employers' right to sue; that an employer's liability policy, although a contract of personal indemnity, was capable of being enforced by an undisclosed principal; that the provision of section 2 of the Life Assurance Act 1774 requiring the insertion in insurance policies of the names of beneficiaries was not intended to apply to indemnity insurance, so that the failure to name the employers in the policy did not affect its validity; and that, accordingly, since the employers would have been able to claim under the policy as undisclosed principals, the plaintiffs were entitled to payment under section 2(1) of the Third Parties (Rights against Insurers) Ordinance and the case would be remitted for assessment of the amount due (post, pp. 207C–E, 209C, 210B–D, 211B–C, E–G, 212A).

Mark Rowlands Ltd. v. Berni Inns Ltd. [1986] Q.B. 211, C.A. approved.

Dicta of Lord Denning M.R. in In re King, decd. [1963] Ch. 459, 485 disapproved.

Decision of the Court of Appeal of Hong Kong [1993] 2 H.K.L.R. 101 reversed.

The following cases are referred to in the judgment of their Lordships:

Armstrong v. Stokes (1872) L.R. 7 Q.B. 598

Browning v. Provincial Insurance Co. of Canada (1873) L.R. 5 P.C. 263, P.C.

Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1, C.A.

Drughorn (Fred.) Ltd. v. Rederiaktiebolaget Transatlantic [1919] A.C. 203, H.L.(E.)

Formby Brothers v. Formby (1910) 102 L.T. 116, C.A.

Humble v. Hunter (1848) 12 Q.B. 310

King, decd., In re [1963] Ch. 459; [1963] 2 W.L.R. 629; [1963] 1 All E.R. 781, C.A.

Peters v. General Accident Fire & Life Assurance Corporation Ltd. [1937] 4 All E.R. 628; [1938] 2 All E.R. 267, Goddard J. and C.A.

Rowlands (Mark) Ltd. v. Berni Inns Ltd. [1986] Q.B. 211; [1985] 3 W.L.R. 964; [1985] 3 All E.R. 473, C.A.

Teheran-Europe Co. Ltd. v. S. T. Belton (Tractors) Ltd. [1968] 2 Q.B. 545; [1968] 3 W.L.R. 205; [1968] 2 All E.R. 886, C.A.

The following additional cases were cited in argument:

Jenkins v. Deane (1933) 47 Ll.L.Rep. 342

Paterson v. Powell (1832) 9 Bing. 320

Provincial Insurance Co. of Canada v. Leduc (1874) L.R. 6 P.C. 224, P.C.

Reliance Marine Insurance Co. v. Duder [1913] 1 K.B. 265, C.A.

Sunderland Marine Insurance Co. v. Kearney (1851) 16 Q.B. 925

Transcontinental Underwriting Agency S.R.L. v. Grand Union Insurance Co. Ltd. [1987] 2 Lloyd's Rep. 409

Watson v. Swann (1862) 11 C.B.(N.S.) 756

APPEAL (No. 16 of 1993) with leave of the Court of Appeal of Hong Kong by the plaintiffs, Siu Yin Kwan (administratrix of the estate of Chan Ying Lung, deceased) and Wang Chang Seu Ying (administratrix of the estate of Sae Heng Hai (alias Wang Poa Tsing), deceased), from the judgment of the Court of Appeal of Hong Kong (Sir Derek Cons V.-P. and Kempster J.A., Litton J.A. dissenting) on 21 October 1992 dismissing the plaintiffs' appeal from the judgment of Keith J. on 17 February 1992 that the plaintiffs were not entitled under section 2(1) of the Third Parties (Rights against Insurers) Ordinance (c. 273) to recover an award of statutory employees' compensation under the Employees' Compensation Ordinance (c. 282) and an award of damages for negligence at common law from Eastern Insurance Co. Ltd., the insurers of the former employers, the employers having been wound up without any payment under the awards having been made.

Christopher Clarke Q.C. for the plaintiffs. An undisclosed principal may sue on a mercantile contract made in the name of an agent even if the agent is not described therein as such: Provincial Insurance Co. of Canada v. Leduc (1874) L.R. 6 P.C. 224 and Browning v. Provincial Insurance Co. of Canada (1873) L.R. 5 P.C. 263. [Reference was also made to Watson v. Swann (1862) 11 C.B.(N.S.) 756 and Transcontinental Underwriting Agency S.R.L. v. Grand Union Insurance Co. Ltd. [1987] 2 Lloyd's Rep. 409.] He may not, however, sue on a contract of insurance if it is a term of the contract that the named party alone is the principal and has rights and liabilities under it: see Tehran-Europe Co. Ltd. v. S. T. Belton (Tractors) Ltd. [1968] 2 Q.B. 545; Fred. Drughorn Ltd. v. Rederiaktiebolaget Transatlantic [1919] A.C. 203 and Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1. There is nothing in the contractual documents, express or implied, designating the shipping agents the real and only principal insured. The proposal form and the policy show that the insurers were willing to, and did, cover the employer of the crew of the vessel whoever he might be. Accordingly, the Court of Appeal of Hong Kong should have held that as a matter of construction the employers were not deprived of the benefit of the insurance effected on their behalf.

In contracts of insurance the personality of the parties is not so critical that an undisclosed principal cannot intervene. Such contracts are often made by agents with the name of the principal undisclosed. [Reference was made to Sunderland Marine Insurance Co. v. Kearney (1851) 16 Q.B. 925.] Nothing turns on the shipping agents' declaration in the proposal form that all the statements therein were true. Thus the use of phrases such as “my liability” and “my employees” in the proposal form do not help the insurers' case. The form must be construed in the knowledge that it may have been completed by an agent. In any event, the proposal form was neutral as to whether the shipping agents had answered the questions and made the declaration in their own name or as the agent of the employers. [Reference was made to Reliance Marine Insurance Co. v. Duder [1913] 1 K.B. 265, 274.]

The Court of Appeal of Hong Kong held that even if the employers were entitled to claim under the policy, that policy was void under section 2 of the Life Assurance Act 1774. But section 2 does not apply to contracts of indemnity insurance. The preamble to the Act shows that it was meant to eliminate “a mischievous kind of gaming.” Parliament must have had in mind not just the immorality of gaming on lives, but also the power of life policies to attract potential beneficiaries to homicide: see Paterson v. Powell (1832) 9 Bing. 320. In contracts of indemnity insurance, however, the assured by definition receives compensation for the actual loss in respect of which he has an insurable interest. A literal application of the language of section 2 would create havoc in much of our modern insurance law: see Mark Rowlands Ltd. v. Berni Inns Ltd. [1986] Q.B. 211, 227, per Kerr L.J.

R. Neville Thomas Q.C. and Mohan Bharwaney, of the Hong Kong Bar, for the insurers. On a true construction of the contract, which was entirely contained in the proposal form and in the policy, the shipping agents were the real and only principal. Accordingly, the employers acquired no rights under the contract. Absent any ambiguity in the contract documents, it is not proper to resort to the surrounding circumstances to construe the same. In any event, the surrounding circumstances were neutral. The phrases “my employees” and “my liability” in the context of the proposal form and the policy cannot be construed as “my principal's employees” and “my principal's liability.” If the insurers would have accepted...

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