Cold Storage Holdings Plc and Others v Overseas Assurance Corporation Ltd and Another

• Jurisdiction: Singapore
• Judgment Date: 29 March 1988
• Date: 29 March 1988
• Docket Number: Suit No 1752 of 1983
• Court: High Court (Singapore)

Cold Storage Holdings plc and others

Plaintiff

and

Overseas Assurance Corp Ltd and another

Defendant

[1988] SGHC 27

Lai Kew Chai J

Suit No 1752 of 1983

High Court

Equity–Remedies–Rectification–Conditions for rectification–Whether convincing proof of parties' outward expression of accord or common intention–Whether insured precluded from claiming rectification by reason of estoppel–Insurance–General principles–Formation of contract–Cancellation clause in policy–Whether parties agreed on cancellation clause–Right of rectification–Whether broker knew of cancellation clause–Whether insured precluded from claiming rectification by reason of estoppel

The plaintiffs planned to redevelop their building, and employed the second defendant as their broker to advise and effect the necessary insurance covers. The first defendant agreed with the second defendant that it would hold the plaintiffs covered for a period of four years, plus one year's maintenance in respect of the complex. The cover was to extend to third-party liability, construction risks, workmen's compensation, common law liability, loss of rental and consequential loss due to damage to tenants' property.

The first defendant subsequently gave the plaintiffs seven days' notice of its intention to cancel certain aspects of the insurance coverage, pursuant to condition 3 of the insurance policies. At the plaintiffs' request, the insurance coverage was extended for a short period of time.

The plaintiffs commenced an action against the first defendant, claiming rectification of the policy documents on the basis that there was an agreement for a four-year plus one-year insurance cover. The plaintiffs argued that (a) condition 3 of the policies, in so far as it purported to confer a right on the first defendant to cancel the policies, was not a correct reflection of the agreement and must be rectified in equity by its deletion; (b) the policies should be construed or have a term implied therein that any right of cancellation should only be exercised for reasonable cause; or (c) the first defendant was estopped from relying upon any right of cancellation which it might otherwise have had.

The first defendant argued that (a) it was entitled to cancel the policies pursuant to condition 3; (b) by requesting a postponement of the cancellation and requesting a return of the premium, the plaintiffs had acknowledged and affirmed the contracts of insurance, including condition 3; and (c) the plaintiffs were estopped from claiming that condition 3 was not applicable.

Held, allowing the plaintiffs' claim for rectification:

(1) In this case, there was more than a common antecedent accord between the parties that the agreed period of insurance cover would be four years from 25 September 1979 plus another year's insurance against stipulated risks. There was an antecedent concluded verbal contract which was reduced into and evidenced by the second defendant's letter dated 25 September 1979: at [29]and [37].

(2) The court's task was to ascertain objectively what the parties intended. Bearing in mind the expressly agreed period of cover, the fact that the first defendant had a form of policy which was most appropriate and another which would have derogated from the period of cover as agreed, it was eminently reasonable that both the first and second defendants would have intended and agreed that that form of policy that best fitted the bargain would be used: at [42] and [43].

(3) The court was satisfied that the second defendant had no direct or constructive knowledge of condition 3 before its invocation by the second defendants. That being the case, the plaintiffs could not be taken to have had knowledge of condition 3. The first defendant's argument that the plaintiffs had affirmed the policies which included condition 3 when they requested an extension of insurance cover was without merit: at [44].

(4) In light of the finding that the plaintiffs had not known of the existence of condition 3, it was not tenable to conclude that they had consciously represented to the first defendant that they were content with the inclusion of condition 3 in the polices. There was no unequivocal representation giving rise to an estoppel against the plaintiffs precluding them from claiming rectification: at [45].

A/S Ocean v Black Sea & Baltic General Insurance Co Ltd (1935) 51 Ll L Rep 305 (distd)

Bartlett & Partners Ltd v Meller [1961] 1 Lloyd's Rep 487 (distd)

Braund v Mutual Life & Citizens Assurance Co Ltd [1926] NZLR 529 (folld)

Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662, Ch D (refd)

Crane v Hegeman-Harris Co Inc [1939] 4 All ER 68, CA (refd)

Eureka Insurance Co v Robinson Reas & Co (1867) 56 Pn 256 (refd)

Hawke v Niagara District Mutual Fire Insurance Co (1876) 23 Grant 139 (refd)

Joscelyne v Nissen [1970] 2 QB 86 (folld)

Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 (folld)

Shipley Urban District Council v Bradford Corporation [1936] Ch 375 (refd)

Trollope & Colls Ltd v NW Metropolitan Regional Hospital Board [1973] 1 WLR 601 (folld)

Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 (folld)

Adrian Hamilton QC, A P Godwin and Dora Cheok (Godwin & Co) for the plaintiffs

Michael Ogden QC and Quentin Loh (Cooma Lau & Loh) for the first defendant

Andrew Rankin QC and N K Pillai (Niru & Co) for the second defendant.

Judgment reserved.

Lai Kew Chai J

1 The plaintiffs either owned or were otherwise interested in or associated with “Cold Storage”, a shopping complex and household name which has been operating a supermarket at Orchard Road, Singapore for many years. In 1979 they had plans to redevelop their building into a bigger and new complex. It was also desired that the development would not result in any interruption to their existing retail business. It was proposed that the new complex, later named “Centrepoint”, would be a five-storey building with two basements for car parks. In order to build the basements, site excavation was necessary and damage might arise to the plaintiffs' existing retail complex and to the neighbouring pre-war buildings, particularly those to the east of the site, and these damages might or might not lead to third-party liability. Insurance against the other usual construction risks of a building project had to be effected. It was estimated that the project would take three and a half years to complete. Given the Contractors All Risks insurance estimated at $50m, the usual risks to the public and to the neighbouring properties and the risks of business interruption if the takeover from the existing to the new premises encountered delays, the plaintiffs employed the second defendants (Lowndes Lambert) as their brokers, to advise and effect the appropriate insurance covers. In due course, Lowndes Lambert arranged the covers.

2 In September 1979 the first defendants agreed with Lowndes Lambert, as brokers of the plaintiffs, that they were holding the contractors and the plaintiffs covered with effect from 25 September 1979 for a period of four years, plus one year's maintenance in respect of the complex and the cover extended to Contractors All Risks and third-party liability in addition to workmen's compensation and common law liability. The first defendants also at the same time agreed to hold the plaintiffs covered for loss of rental and consequential loss due to damage to tenants' property. The first defendants, as was the common practice, spread the risks with reinsurers. The master policies were issued followed by some amendments.

3 The construction of the complex proceeded. During the currency of the cover, claims were made to the first defendants and there were meetings with the contractors convened with a view to minimise damages and losses arising out of the construction.

4 By a letter dated 21 January 1982 the first defendants cancelled the Contractors All Risks and third-party public liability policies of insurance issued to the plaintiffs by giving seven days' notice from receipt of the notice of cancellation, 22 January 1982. The first defendants acted, as they said, under condition 3 of the policies. At the request of the plaintiffs the first defendants extended their notice to expire midnight 12 February 1982. In February 1982 the plaintiffs succeeded in obtaining replacement cover on the London market through the services of another company of brokers, Heath Langeveldt Rollins Pte Ltd.

5 In these proceedings the plaintiffs asserted that in the course of a telephone conversation between the first defendants' Mr Jimmy Lim Teong Keng, assistant manager of the first defendants at the material time, and Mr Tsai Swee Hong of Lowndes Lambert, acting on behalf of the plaintiffs, on 24 September 1979 the first defendants had agreed to hold them covered in respect of the relevant risks for a period of four years from 25 September 1979 plus one-year maintenance. Accordingly the plaintiffs claimed that: (a) condition 3 in the policies, so far as it purported to confer a right on the first defendants to cancel the policies, was not a correct reflection of the agreement and must in equity be rectified by its deletion; or, alternatively, (b) the policies are to be construed or have implied therein a term that any right of cancellation may only be exercised for reasonable cause; or finally, (c) the first defendants are estopped from relying upon any right of cancellation which it might otherwise have had.

6 In their amended defence the first defendants admitted that by four policies of insurance they had agreed to insure the plaintiffs in respect of their legal liability for bodily injury to any person, and damage to property, caused on or about the Centrepoint project by the fault or negligence of the plaintiffs or of any person in the plaintiffs' service whilst engaged in their trade or business but the first...