Insurance Law
| Author | LEE KIAT SENG LLB (NUS), LLM (Lond), Advocate & Solicitor (Singapore) |
| Published date | 01 December 2001 |
| Date | 01 December 2001 |
| Citation | (2001) 2 SAL Ann Rev 272 |
15.1 When a loss occurs and a claim is made under the insurance policy, a whole series of correspondence will normally ensue. The insurers will appoint loss adjusters to assess the loss and the claim. The insured, where it is a business, will correspondingly appoint its own loss consultants to represent its interests. The insured”s brokers may also take a role in the negotiations undertaken with a view to the settlement of the claim. In this flurry of correspondence flying between various parties, it can sometimes be difficult to discern whether and when an agreement has been entered into between the insurer and the insured. The Court of Appeal decision of Projection Pte Ltd v The Tai Ping Insurance Co Ltd[2001] 2 SLR 399 is particularly instructive on how the local courts will consider and analyse the parties” correspondence in order to determine if indeed an agreement has been made out.
15.2 The insured, Projection Pte Ltd, was employed by the Singapore Sports Council (“SSC”) as main contractors for a project. The insured took out a Contractor”s All Risks Policy with the insurer, Tai Ping. The policy named the insured, SSC and the sub-contractors as the assureds. In July 1997, the retaining wall of the project collapsed. This caused damage to a third party canal. The insured claimed under the policy. SSC did not file any claim.
15.3 Nothing of significance occurred until the loss adjusters wrote to the insured”s consultants in October 1998 wherein the former assessed the claim at $679,065.95, subject to the approval of the insurers and the terms of the policy. Thereafter, the insured did not hear anything or receive any payment from the insurers despite repeated requests made through their brokers, OCW Insurance (Brokers) Pte Ltd (“OCW”). In a December 1998 report from the loss adjusters to the insurers, taking into account the professional engineer”s report on the cause of the damage, the Section I loss (relating to liability for material damage) was assessed at $332,374.58 while the Section II loss (pertaining to third party liability) was assessed at $296,483. It was further suggested that the insured could bear 20% or 30% of the Section II loss “subject to negotiations”. Thus, the assessed loss would be $532,912.68 or $553,560.98 respectively if the insured bore 30% or 20% as suggested.
15.4 In December 1998, the insurers wrote to OCW to say that they would pay the insured $532,912.68 on the claim. However, before payment,
the insurers would require written confirmation from SSC that they had no objections to the payment arrangement. The Insured thereafter wrote to the Insurers to seek the reasons for paying out a sum less than that assessed by the loss adjusters, to which they received no response. On 9 March 1999, representatives of the insurers and the insured held a meeting, at which OCW was also in attendance. At this meeting, the insured requested a higher settlement sum. The figure of $553,560.98 was discussed but no agreement was reached. OCW made another suggestion that the insurers should increase their offer by adjusting the Section II sum.
15.5 On 31 March 1999, the insurers wrote to OCW, referring to the previous series of correspondence and discussion. The letter stated the insurers would agree to adjust the proportion of the Section II loss which the insured would have to bear from 30% to 20% and the final sum thus payable would be $553,560.98. A discharge voucher was attached thereto. The insured duly signed and returned the voucher stating that SSC need not sign as they were not the claimants and were only nominees for the receipt of the moneys. The insured also saw fit to insert in the voucher: “This full and final settlement shall be limited to the aforesaid accident only”. Despite repeated requests, the insurers did not make any payment nor did they respond in any way to the insured.
15.6 In July 1999, the insurers informed the insured that they had been legally advised to disclaim liability and offered a goodwill settlement. This was rejected by the insured who proceeded to commence legal proceedings for payment of the sum of $553,560.98. The insured based their case on there being a compromise agreement in place based on the March 1999 discussions and the letter of 31 March 1999 which was accepted when the insured duly signed and returned the discharge voucher. The insurers denied liability on the basis that the damage claimed for was caused by a design error which was excluded under the policy. They contended that there was a common fundamental mistake which rendered the alleged agreement void for want of consideration. An alternate argument was that no agreement was concluded as the offer constituted in their letter of 31 March 1999 was not accepted according to its terms which required the voucher to be signed by both the insured and SSC.
15.7 At trial level, the court found in favour of the insurers. The offer of 31 March 1999 was found not to have been accepted by the insured as the wording of the voucher was amended and returned without the signature of SSC. In any event, no consideration had been furnished for the compromise agreement. The insured appealed.
15.8 The central issue on appeal was the existence of a compromise agreement between the parties on 31 March 1999. It was held by the trial
court and it was not disputed on appeal by the Insured that no compromise agreement arose out of the 9 March 1999 meeting. The Court of Appeal found that, based on the series of correspondence between the parties, what transpired at the 9 March 1999 meeting, and finally the 31 March 1999 letter from the insurers, there was a clear compromise reached with the receipt of the letter of 31 March 1999.
15.9 The Court of Appeal pointed out that it is settled law that in determining whether the parties have arrived at an agreement, the objective test is to be applied. L P Thean JA, delivering the judgment of the Court, cited two local decisions for the proposition: Aircharter World Pte Ltd v Kontena Nasional Bhd[1999] 3 SLR 1 and Tribune Investment Trust Inc v Soosan Trading Co[2000] 3 SLR 405. It was observed by Karthigesu JA in the Aircharter case (at 13, para 30) that:
“Under this test, once the parties have to all outward appearances agreed in the same terms on the same subject-matter, then neither can, generally, rely on some unexpressed qualification or reservation to show that he had not in fact agreed to the terms to which he had appeared to agree. Such subjective reservations of one party, therefore, do not prevent the formation of a contract.”
15.10 Thean JA also pointed out that the traditional analysis of offer and acceptance would be of limited utility where the factual matrix in issue revolves around continuing negotiations, as it did in the present case. In such a situation it would be difficult to discern precisely when an offer was made and when it was accepted and whether there were any counter-offers. The court quoted from the decisions of Lord Denning MR in the cases of Port Sudan Cotton Co v Govindaswamy Chettiar & Sons[1977] 2 Lloyd”s Rep 5 and Butler Machine Tool Co v Ex-Cell-O Corporation (England)[1979] 1 All ER 965 where his Lordship pointed out that it is nigh impossible to apply such analysis and it would be far better to look at all the documents passing between the parties and the conduct of the parties, take stock of the general overall view of the facts and discern from them if the parties have reached agreement on all material terms such that the inference must be that they have agreed to be bound by those terms. A passage in Chitty on Contracts Vol 1 (27th Ed, 1994) at para 2-017 which was referred to by Thean JA, best sums up the approach to be adopted when attempting to analyse continuing negotiations:
“The court must then look at the whole correspondence and decide whether, on its true construction, the parties had agreed to the same terms. If so, there is a contract even though both parties, or one of them, had reservations not expressed in the correspondence.”
15.11 On the facts, from the time of the report rendered by the insurers” loss adjusters that the variation would depend on whether the insured was made to bear 20% or 30% of the Section II loss to the 9 December 1998 letter from the insurers to OCW where they made an unequivocal offer
which would result in the insured bearing 30% of the Section II loss, there was no doubt that the parties wished to settle the matter. The only dispute revolved around the quantum. A letter was written by the insured on 18 December 1998 to enquire as to the reasons for the low offer to which there was no response. The 9 March 1999 meeting involved negotiations over whether the insurers could increase their offer. It is in this light that the letter of 31 March 1999 has to be viewed.
15.12 As early as 9 December 1998, the insurers had made an unequivocal offer to settle the claim. The letter also asked for confirmation that SSC had no objections and for the insured”s confirmation of payment. All subsequent correspondence and meetings only involved the negotiations for the offer to be increased. After the meeting of 9 March 1999 OCW again requested that the insurers reduce the proportion which the insured would have to be bear of the Section II loss from 30% to 20%. It was in this factual matrix and historical setting that the offer of 31 March 1999 came. The letter clearly made reference to the adjustment of the proportion of the Section II loss to be borne by the Insured and unequivocally stated that they agreed to the adjustment and the sum of $553,560.98. In the premises, the court took the view that this had to be taken that there was a...
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