B-Gold Interior Design & Construction Pte Ltd v Zurich Insurance (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 03 August 2007
• Neutral Citation: [2007] SGHC 126
• Date: 03 August 2007
• Subject Matter: General principles,Whether damage arising from insured risk covered by operative clause of policy,Rules of interpretation,Circumstances where court will intervene to deny efficacy of exclusion clause in policy,Insurance,Claims,Scope of all-risks policy,Contractors' all-risks policy,Whether exclusion clauses in policy excluding liability of insurer
• Docket Number: District Court Appeal No 50 of 2006
• Published date: 14 August 2007
• Defendant Counsel: Eu Hai Meng (United Legal Alliance LLC)
• Court: High Court (Singapore)
• Plaintiff Counsel: Philip Ling (Peter Low Partnership)

3 August 2007

Andrew Ang J:

1 This was an appeal by B-Gold Interior Design & Construction Pte Ltd (“the appellant”) against the decision of the district judge made on 13 November 2006 dismissing the appellant’s claim in a third party action against Zurich Insurance (Singapore) Pte Ltd (“the respondent”) – the third party in DC Suit No 2126 of 2004 (“the main action”).

2 At the conclusion of the hearing, I allowed the appeal. I now give my reasons.

Background

3 The plaintiff in the main action was MediaCorp Pte Ltd (“MediaCorp”), a broadcasting company.

4 The appellant (the first defendant in the main action) was in the business of interior design services and general building construction and upgrading work whereas the respondent (the third party in that action) was in the business of general insurance.

5 By a contract in writing on 27 September 2002 (“the Contract”), the appellant was engaged by MediaCorp as term contractor in respect of repair and renovation works at the latter’s Caldecott Broadcast Centre. The Contract was for a period of two years from 1 October 2002 to 30 September 2004 (“Period of Cover”). The contract works entailed routine maintenance, repairs, minor additions and alterations to MediaCorp’s property upon receipt of instructions from MediaCorp from time to time.

6 The Contract required the appellant, before commencement of work, to take out policies of insurance insuring MediaCorp, the appellant and sub-contractors in the following terms:

18 INSURANCE GENERALLY

The Contractor shall before commencement of any work under this Contract ensure that there is in force policies of insurance indemnifying MediaCorp, the Contractor and all sub-contractors against damage to persons and property, for Workmen’s Compensation and fire. All policies shall be retained by the S.O. who shall on request and without charge supply the Contractor with a copy.

19 DAMAGE TO PERSONS AND PROPERTY

19.1 Injury to Persons

The Contractor shall be liable for and shall indemnify MediaCorp in respect of any liability, loss, claim or proceedings whatsoever arising under any statute or at common law in respect of personal injury to or the death of any person whomsoever arising out of or in the course of or by reason of the execution of the works provided that the same is due to any negligence, omission or default of the Contractor, his servants or agents or of any sub-contractor, his servants or agents.

19.2 Injury or Damage to Property

The Contractor shall be liable for and shall indemnify MediaCorp in respect of any liability, loss, claim or proceedings arising under any statute or at common law in respect of any injury or damage whatsoever to or any property real or personal arising out of or in the course of or by reason of the execution of the works provided that the same is due to any negligence, omission or default of the Contractor, his servants or agents or of any sub-contractor, his servants or agents. …

7 As required by the Contract, the appellant took out a Contractors’ All Risk Policy of Insurance dated 23 September 2002 (“the Policy”) with the respondent.

8 The events leading to the appellant taking out the Policy with the respondent is of some significance. Accordingly, I set out the same in some detail based on the affidavit evidence of the appellant’s witnesses. (It was agreed between counsel for the parties that the affidavits of evidence-in-chief of their respective witnesses would be admitted without cross-examination. This was on the bases set out in [21] below.)

9 The Policy was taken out by one of the appellant’s directors, Yeo Hong Seng (“Yeo”) with the assistance of one Willy Lee (“Lee”) who was a general insurance agent with the American International Group (“AIG”). Lee had been serving and attending to the insurance needs of the appellant since 1985. The appellant took out personal, fire, Workmen’s Compensation and other general insurance policies with AIG through Lee. Lee was assisted by his wife, Jacqueline, who would normally be the one to liaise on his behalf with Yeo.

10 Some time in late August 2002, Yeo contacted Jacqueline requesting Lee to arrange for the necessary insurance coverage required under the Contract. At the same time, Yeo faxed across a copy of the Contract documents. Through Jacqueline, Lee informed Yeo that the scope of his services in AIG did not include arranging for insurance policies of the kind required under the Contract and suggested that Yeo look for the necessary coverage from other insurance companies. Yeo, however, did not know which companies offered such insurance coverage and requested Lee’s help.

11 Lee then contacted one Manfred Long (“Long”), an ex-colleague in AIG who had since joined the respondent, to ask if the respondent could provide the kind of coverage required. Long replied in the affirmative. Lee then faxed to Long the Contract documents which he had received from Yeo. Thereafter, as a goodwill gesture, Lee acted gratis as a facilitator between the appellant and the respondent on the terms of the insurance policy.

12 Lee faxed a note to Long in which he informed Long that the insurance coverage requested was a contractors’ all risks (“CAR”) policy. Lee averred that in that note he also requested from Long the latter’s professional advice on the appropriate insurance coverage to be given to the appellant under the Contract.

13 Long subsequently reverted over the phone to advise that the respondent was able to offer the insurance coverage required by the appellant, and the appellant then took out the Policy with the respondent.

14 None of the above was controverted by the respondent. (Instead, the respondent contested the claim purely on the basis of its construction of the terms of the Policy.) For purposes of this appeal, I therefore proceed on the basis that the facts deposed to are true.

15 MediaCorp subsequently instructed the appellant to carry out spalling concrete repair works on the ceiling of the air handling unit (“AHU”) room located on the 4th storey of MediaCorp’s television building; in turn, on 19 March 2003, the appellant engaged Regius Engineering Pte Ltd (“Regius Engineering”) as its sub-contractor to carry out the spalling concrete repair works. Regius Engineering was the second defendant in the main action.

16 However, on 21 March 2003 a fire broke out at the AHU room. As a result of the fire, one of the AHUs was damaged. Further, water used to put out the fire had cascaded down through the air supply ducting and through the porous ceiling tiles to the 1st, 2nd and 3rd floors of the television block, resulting in damage to MediaCorp’s production equipment, studios and electrical control cabinets (“the Damage” – such expression including the damage to the AHU room and the AHU).

17 A report prepared by MediaCorp’s consulting scientist and engineers concluded that the fire was caused by “smokers’ materials discarded by the subcontractors Regius Engineering Pte Ltd who were working to repair spalled concrete at the ceiling of the AHU room”.

18 Consequently, MediaCorp commenced proceedings against the appellant and Regius Engineering in respect of the Damage. Although interlocutory judgment was entered against Regius Engineering in default of entering an appearance, no further action was taken by MediaCorp against Regius Engineering. However, the case as between MediaCorp and the appellant proceeded to trial (ie, the main action) and the district judge found the appellant to be in breach of its contract with MediaCorp and of its common law duty to take reasonable care for the safety of MediaCorp’s property. This led to the third party proceedings by the appellant against the respondent under the Policy.

The relevant Policy provisions

19 The relevant provisions of the Policy were as follows:

(a) Total Premium:

$2,575 including Goods and Services Tax.

(b) Name of Insured:

B-Gold Interior & Construction Pte Ltd as Contractor and/or Media Corporation as Principal for their respective rights and interest.

(c) Contract Period:

From 1 October 2002 to 30 September 2004 plus 12 months maintenance period.

(d) Location of Risk: Caldecott Broadcast Centre.

(e) Section I – Material Damage:

The Company hereby agree with the Insured that if at any time during the period of cover the items or any part thereof entered in the Schedule shall suffer any unforeseen and sudden physical loss or damage from any cause, other than those specifically excluded, in a manner necessitating repair or replacement, the Company will indemnify the Insured in respect of such loss or damage as hereinafter provided by payment in cash, replacement or repair (at their own option) up to an amount not exceeding in respect of each of the items specified in the Schedule the sum set opposite thereto and not exceeding in ant [sic] one event the limit of indemnity where applicable and not exceeding in all the total sum expressed in the Schedule as insured hereby. [emphasis added]

(f) Provision Applying to Section I:

Memo 1 – Sums Insured:

It is a requirement of this insurance that the sums insured stated in the Schedule shall not be less than for

Item 1 the full value of the contract works at the completion of the construction, inclusive of all materials, wages, freight, customs duties, dues and materials or items supplied by the Principal;

Items 2 & 3 the replacement value of construction plant, equipment and construction machinery; which shall mean the cost of replacement of the insured items by new items of the same kind and same capacity;

and the Insured undertakes to increase or decrease the amounts of insurance in the event of any material fluctuation in wages or prices provided always that such increase or decrease shall take effect only after the same has been recorded on the Policy by the Company.

If, in the event of loss or damage, it is found that the sums insured are less than the amounts required to be insured, then the amount...