Lonpac Insurance Bhd v American Home Assurance Company

• Jurisdiction: Singapore
• Judgment Date: 30 November 2011
• Date: 30 November 2011
• Docket Number: Originating Summons No 100 of 2011
• Court: High Court (Singapore)

Lonpac Insurance Bhd

Plaintiff

and

American Home Assurance Co

Defendant

[2011] SGHC 257

Judith Prakash J

Originating Summons No 100 of 2011

High Court

Contract—Contractual terms—Admissibility of extrinsic evidence to affect written contracts—Parol evidence rule—Interpretation of contracts—Whether or not third party could rely on parol evidence rule to prevent use of extrinsic evidence to construe terms of contract as agreed between contracting parties—Sections 93 and 94 Evidence Act (Cap 97, 1997 Rev Ed)

Insurance—General principles—Contribution and average—Plaintiff insurer and defendant insurer having common insured under separate insurance policies—Defendant insurer claiming that plaintiff insurer legally obligated to contribute towards any payment made by defendant to common insured—Whether doctrine of double insurance applied

Lonpac, the plaintiff, and AHA, the defendant, are insurance companies who issued workmen's compensation policies covering the liability of Rotary Engineering Ltd (‘REL’) for work related injuries. Lonpac's workmen's compensation policy covered an entire corporate group, known as the Rotary Group of Companies (‘the Group’), of which REL was a part. This policy was issued on an annual basis and covered the calendar year (‘the annual policy’). AHA's workmen's compensation policy only covered REL's liability specifically, arising in connection with a specific construction project (‘the project’) in which REL was the main contractor employed by Universal Terminal (S) Pte Ltd (‘UT’) (‘the project policy’).

On 29 November 2008, an employee of REL, Ganesan a/l Subramaniam (‘the claimant’), was injured whilst engaged in work on the project. The claimant applied for compensation under the Work Injury Compensation Act (Cap 354). The Ministry of Manpower (‘MOM’) served a notice of assessment on AHA requiring it to pay the sum of $54,900 to the claimant. AHA objected to the notice of assessment and argued that it was only liable to pay 50% of the sum and Lonpac was liable to pay the other 50% under the doctrine of double insurance.

The Assistant Commissioner of Labour (‘the Assistant Commissioner’) ordered Lonpac and AHA each to pay 50% of the compensation sum. Lonpac was dissatisfied with the decision and lodged an appeal. Lonpac sought to adduce extrinsic evidence by way of affidavits from the Group employees and its insurance broker to construe the annual policy such that it did not provide cover for employees engaged in specific projects, but only for general employees of the company. AHA argued that such extrinsic evidence was inadmissible because the terms of the annual policy were complete and unambiguous on their face. Lonpac argued that the parol evidence rule was only relevant as between the contracting parties, Lonpac and the Group, and AHA as a third party could not rely on the rule to exclude evidence supporting an interpretation as agreed upon by the contracting parties.

Held, setting aside the Assistant Commissioner's decision and remitting the matter back to the Commissioner of Labour for re-hearing and consideration of any extrinsic evidence:

(1) There was a difference between s 93 of the Evidence Act, which was about proving the terms of a contract which had been put into documentary form; and s 94, which addressed the question of how, having proven the terms of a written document, these terms were to be construed: at [22].

(2) The terms of the annual policy were not disputed, and the issue was how the terms were to be construed. Therefore the parol evidence rule in s 93 did not assist in this case and would not assist in any case where the construction rather than the proof of terms of a document was in issue: at [23].

(3) It was well established that the application of s 94 was restricted to the parties to the particular contract to be construed. There was no legal restriction on the admission of oral evidence to explain or even vary or contradict the written terms of a contract when the issue was between persons who were essentially strangers to the contract: at [26].

(4) AHA was a stranger to the contract/policy which Lonpac had with REL. There was nothing therefore to stop Lonpac from introducing extrinsic evidence to explain what risks that policy was intended, as between Lonpac and REL, to cover: at [26].

China Insurance Co (Singapore) Pte Ltd v Liberty Insurance Pte Ltd [2005] 2 SLR (R) 509; [2005] 2 SLR 509 (refd)

Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR (R) 1029; [2008] 3 SLR 1029 (distd)

Evidence Act (Cap 97,1997 Rev Ed) ss 93, 94

M Ramasamy and Nagaraja S Maniam (M Rama Law Corporation) for the plaintiff

Hong Heng Leong and Sunita Carmet Netto (Ang & Partners) the defendant.

Judgment reserved.

Judith Prakash J

Introduction

1 The plaintiff (‘Lonpac’) and the defendant (‘AHA’) are insurance companies operating in Singapore. Both of them issued workmen's compensation policies covering, inter alia, the liability of Rotary Engineering Ltd (‘REL’) to compensate its employees who suffered work related injuries. The main question is whether there is double insurance so both Lonpac and AHA have to contribute to the compensation ordered to be paid to an injured worker. The answer to this question may, however, be dependent on whether extrinsic evidence can be admitted to help the court in the task of construing the policy issued by Lonpac.

2 REL is part of a corporate group known as the Rotary Group of Companies (‘the Group’). Lonpac has, for a number of years, issued a workmen's compensation policy to the Group. This policy (‘the annual policy’) is issued on an annual basis and covers the calendar year. Among other things, it covers the liability of REL to its employees for work-related injuries. The annual policy has been issued in 2006, 2007 and 2008 (to specify only the material years) and if Lonpac is liable under the annual policy, its liability will arise in respect of the annual policy for the period 1 January 2008 to 31 December 2008. The wording of the annual policy in each year has been more or less identical.

3 AHA also issued a workmen's compensation policy but only in respect of...