Grace Electrical Engineering Pte Ltd v EQ Insurance Co Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 19 October 2016
• Neutral Citation: [2016] SGHC 233
• Citation: [2016] SGHC 233
• Date: 2016
• Published date: 22 October 2016
• Hearing Date: 01 August 2016,29 July 2016
• Plaintiff Counsel: Ranvir Kumar Singh and Cheah Saing Chong (Unilegal LLC)
• Docket Number: HC/S No 565 of 2016
• Defendant Counsel: Ramasamy K Chettiar and Wee Qianliang (Central Chambers Law Corporation)
• Court: High Court (Singapore)
• Subject Matter: Words and Phrases,Contract,Insurance,General principles,Contractual terms,Public,Conditions,"any claim hereunder",Construction of policy,Liability insurance,Claims

Belinda Ang Saw Ean J: Introduction

The plaintiff, Grace Electrical Engineering Pte Ltd (“Grace Electrical”), has sued the defendant, EQ Insurance Company Ltd (“EQ Insurance”), for an indemnity under a public liability policy DLPAHQ12-000146 issued on 15 March 2012 (“the Policy”), following a fire at No 141, Kallang Way 1, Singapore (“Unit 141”), on 6 September 2012.

In 2014, Grace Electrical was sued for fire damage arising from the same fire in Suit No 697 of 2014 (“S 697/2014”) brought by Te Deum Engineering Pte Ltd (“Te Deum”) as the lessee and occupier of the adjacent property known as No 143, Kallang Way 1, Singapore (“Unit 143”). The neutral citation of the judgment in S 697/2014 is [2016] SCHC 232.

Counsel for EQ Insurance, Mr Ramasamy s/o Karuppan Chettiar, explains, at the outset of his oral submissions, that this present action is not dependent on the outcome of S 697/2014 because EQ Insurance’s refusal of Grace Electrical’s claim to an indemnity is on the basis that Grace Electrical failed to comply with what EQ Insurance asserts are conditions precedent set out in the Policy. In contrast, the position advanced by counsel for Grace Electrical, Mr Ranvir Kumar Singh (“Mr Singh”), is that the contractual provisions relied on is not conditions precedent to liability, and the EQ Insurance’s refusal of Grace Electrical’s claim is wrongful. EQ Insurance is thus liable to indemnify Grace Electrical for all damages or sums payable in relation to S 697/2014 up to the policy limit of $1 million (less the applicable policy deductible).

The main issue in this action is on the construction of three general conditions in the Policy, namely general condition 4 (“GC4”), general condition 9 (“GC9”) and general condition 12 (“GC12”). GC4 and GC9 are to be read with general condition 13 (“GC13”). Besides a determination of which of the three conditions is applicable to the particular claim, the primary argument of construction in respect of GC4 and GC9 is whether these conditions are capable of being conditions precedent and if their non-compliance will prevent an indemnity claim under the Policy. In the case of a condition precedent, the insurer is simply not liable to meet the insured’s claim as the insured has failed to carry out the steps required of him to establish the insurer’s liability. If this court rules that neither GC4 nor GC9 is a condition precedent, the question which naturally arises is whether a non-compliance breach of either as contractual terms is repudiatory of the claim to which the breach related. The parties did not deal with and examine the nature of such a breach, or inquire into the seriousness of such breach and the consequences thereof. Instead, EQ Insurance’s approach was ostensibly this: if the conclusion of this court is that GC4 and GC9 are not conditions precedent, Grace Electrical’s claim to an indemnity should succeed unless it is adjudged that GC12 applies to render the action contractually time-barred.

Undisputed facts

Grace Electrical was at all material times the occupier of Unit 141, and it was and still is in the business of an electrical contractor. Unit 141 was used by Grace Electrical to assemble, test and commission electrical cables and equipment as well as to repack electrical cables. The mezzanine floor was its office. Unit 141 was also used as a “dormitory” for its foreign workers. I will adopt the expression “workers’ quarters” in this judgment as it was a phrase used in various summonses issued against Grace Electrical for fire safety violations. The workers were spread out in different parts of Unit 141. There were electrical cooking appliances, fans and refrigerators in the backyard for the workers’ use. It is not disputed that the workers cooked their meals in Unit 141. It is also not disputed that cooking in Unit 141 was known and permitted by Grace Electrical.

It is common ground that after the outbreak of the fire on 6 September 2012, EQ Insurance appointed Approved Forensics Sdn Bhd (“Approved”) to investigate the fire. Thereafter, Approved issued its report dated 15 January 2013. Prior to the appointment of Approved, EQ Insurance through its loss adjusters, Insight Adjusters and Surveyors Pte Ltd (“Insight”) reminded Grace Electrical in a letter dated 11 September 2012 not to discuss liability with any third party(s) and to forward any third party(s) correspondence in respect of fire damage to any third party’s property to Insight.

After the outbreak of the fire on 6 September 2012, the Singapore Civil Defence Force (“SCDF”) conducted investigations and subsequently issued Summons No SCDF000040-2012 against Grace Electrical on 8 October 2012. Eight charges were levelled against Grace Electrical: Five charges under s 30(1) of the Fire Safety Act (Cap 109A, 2000 Rev Ed) (“FSA”) for unauthorised changes of use of space to accommodation, pantry and storage areas; and Three charges under s 24(1) of the FSA for carrying out fire safety works without plan approval from SCDF.

Grace Electrical’s insurance broker, Jackson Clark Insurance Brokers Pte Ltd (“Jackson Clark”), notified Insight of the post-fire summonses, and in a letter dated 30 October 2012 asked Insight to recommend a lawyer to represent Grace Electrical to defend the post-fire summonses. The suggestion then was to appoint “one common lawyer” who could also be instructed to defend any third party claim; and the broker, mindful that if “the charges succeeded it might impact on third party claim”, expressed its concern to Insight in plain language.

On 17 March 2013, Insight wrote to Jackson Clark to advise that the Policy would not respond to any claim for fire damage to third party property since Grace Electrical had been charged by SCDF for “several violations of the fire safety regulations”, and those violations were in breach of GC9 of the Policy. It is useful to set out the letter in full:

17 March 2013

Jackson Clark Insurance Brokers Pte Ltd

10 Jalan Besar

#07-04 Sim Lim Tower

Singapore 208787

Attention: Mr Jack Lim

Dear Sirs

INSURED: GRACE ELECTRICAL ENGINEERING PTE LTD PUBLIC LIABILITY POLICY NO: DLPAHQ12-000146 FIRE DAMAGE TO THIRD PARTIES PROPERTIES ON 6 SEPTEMBER 2012

The above matter refers.

Our investigation revealed that your client had been charged by the Singapore Civil Defence force (“SCDF”) for several violations of the fire safety regulation.

We draw your attention to the Policy Conditions (9) which states that:- “The Insured shall exercise reasonable care that only competent employees are employed that all buildings ways work plant machinery furniture and fittings are substantial and sound and in proper order and fit for the purposes for which they are used and that all statutory requirements and by-laws and regulations imposed by any public authority are duly observed and complied with .”

Your client appear(sic) to have breached the aforementioned policy condition as they had failed to comply with statutory requirements, by-laws or regulations. This breach of statutory requirements by your client would also put them in a difficult position to defend the Third Parties’ claims.

Having carefully considered the circumstances surrounding this matter, we regret to advise that policy liability is not engaged. You may wish to advise your client to deal with the respective Third Parties directly. We will also forward the Third Parties claim, if any received, to your client for their proper handling.

We trust that you are accordingly advised.

Yours faithfully

INSIGHT ADJUSTERS AND SURVEYORS PTE LTD

-Sgd-

Director

[emphasis in original]

On 13 May 2013, UniLegal LLC (“UniLegal”), solicitors for Grace Electrical, wrote to Insight denying that the latter had breached GC9 and stated that Grace Electrical would claim against EQ Insurance under the Policy. Insight replied on 28 May 2013 and repeated EQ Insurance’s position which was to deny liability under the Policy. In the same letter, UniLegal was told that the breach of GC9 had prejudiced Grace Electrical’s position.

On 15 August 2013, UniLegal informed EQ Insurance that Grace Electrical had received fire damage claims from: (a) Te Deum, the lessee of Unit 143; and (b) Tong Hong Industries Pte Ltd. Essentially, Grace Electrical was giving notice to claim an indemnity under the Policy if found liable. Te Deum’s solicitors, Tan Kok Quan Partnership, issued a letter of demand on 5 November 2013, and this letter of demand was notified to EQ Insurance on 7 November 2013, and Grace Electrical repeated its intention to look to EQ Insurance for indemnity, if found liable. On 2 July 2014, UniLegal informed EQ Insurance of the action filed by Te Deum and that whilst Grace Electrical would be defending the action, it would claim against EQ Insurance under the Policy should Grace Electrical be found liable to Te Deum.

As regards the post-fire summonses, Grace Electrical pleaded guilty to five of the eight charges, and admitted without qualification to SCDF’s Statement of Facts. This was on 16 April 2013. Previously, Grace Electrical had also paid composition fines for similar offences under ss 24(1) and 30(1) of the FSA. The first time such offences were committed was in October 2009 and, then again in May 2012. The relevance of the past offences was in the unauthorised change of use of Unit 141 of parts of factory space to accommodation on both occasions.

In its Mitigation Plea dated 16 April 2013, Grace Electrical acknowledged that the fire occurred in Unit 141, and cited “administrative oversight” as an excuse for not seeking approval to use Unit 141. In mitigation, Grace Electrical claimed that its failure to obtain approval was not deliberate. This excuse was made despite Grace Electrical’s antecedents recounted in the Statement of Facts.

The Policy

The relevant provisions of the Policy provided, as far as material, are as follows:

THIS POLICY...