Overseas Union Insurance Ltd v Home and Overseas Insurance Co Ltd (No 2)

CourtHigh Court (Singapore)
JudgeWoo Bih Li JC
Judgment Date20 May 2002
Neutral Citation[2002] SGHC 109
Citation[2002] SGHC 109
Subject MatterPlaintiffs entering into commutation agreement with reinsured,Nature of commutation agreement,Whether such failure entitles party to rely on contractual provision,Plaintiff reinsurer entering into reinsurance contract,Pleadings,Civil Procedure,Failure to plead contractual provision,Plaintiffs entering into retrocession contract with defendant retrocessionaire,'Commutation agreement',Reinsurance,Insurance,Defendants not participating in commutation negotiations,Nature of compromise settlements,General principles,'Compromise settlements',Retrocession,Whether commutation agreement binds defendants,Words and Phrases,'Loss settlements'
Docket NumberDistrict Court Appeal No 600020
Plaintiff CounselLiew Teck Huat (Niru & Co)
Defendant CounselP Jeya Putra and Wendy Leong (Joseph Tan Jude Benny)
Published date19 September 2003
Date20 May 2002

Judgment Cur Adv Vult



1. Overseas Union Insurance Limited (‘OUI’) is the Plaintiff in DC Suit No 51197 of 1999. It is an insurance company incorporated in Singapore and at all material times was engaged in business as general insurers and reinsurers.

2. Home And Overseas Insurance Company Limited (‘Home’) is the Defendant. It is an insurance company incorporated in the United Kingdom and is engaged also in business as general insurers and reinsurers.

3. Between 1980 and 1984, OUI entered into various insurance and/or reinsurance contracts with C.J. Warrilow (‘CJW’) Syndicate No 553. One of these contracts was NM 8100270 dated 18 August 1981 and was for Excess of Loss (or ‘XOL’) Reinsurance in respect of So-Called ‘Casualty Account’ (‘the XOL contract’). OUI’s liability under this contract was in turn reinsured with or retroceded to Home (‘the Retrocession contract’).

4. Although para 4 of OUI’s Statement of Claim stated that part of the risk in the XOL contract was retroceded to Home, it was common ground that 100% of the risk was retroceded to Home subject to a qualification from Andrew Tang Ming Leung (PW1) at NE 41 which is not important for present purposes.

5. From 1984, OUI suffered losses and began to run-off its XOL reinsurance business.

6. In 1995, OUI commenced negotiations with CJW to commute all reinsurance claims under various contracts between them and on or about 5 December 1995, a commutation agreement was achieved in respect of ten such contracts. Under the commutation agreement, OUI was to pay CJW US$625,650 and OUI would be released from all claims by CJW.

7. Pursuant to this commutation agreement and OUI’s payment to CJW, OUI then sought payment of US$74,773 from Home under OUI’s contract with Home. The US$74,773 was derived purely from a mathematical formula of apportionment used by OUI.

8. Home disclaimed liability on the basis that the sum claimed represented loss in respect of which liability had not attached yet and for which the loss had not crystallised and that it was not liable to indemnify OUI for Home’s share of the aggregate commutation sum ‘as such sums do not fall within the risks covered’ by the Retrocession contract or the XOL contract. Home also said it did not participate in the commutation negotiations.

9. OUI’s claim was dismissed by the District Court after trial. OUI then appealed to the High Court.

Basis of OUI’s claim

10. Before the trial judge Mr Zainol Abeedin Bin Hussin and before me, OUI had sought to rely on Article XVIII of the XOL contract to bind Home to the commutation agreement OUI had reached with CJW. Article XVIII states:



All loss settlements made by the Reinsured, including compromise settlements, shall be unconditionally binding upon Reinsurers provided such settlement are within the conditions of the original policies and/or contracts (other than as provided for in Article V hereof) and within the terms of this reinsurance, and amounts falling to the share of the Reinsurers shall be payable by them upon reasonable evidence of the amount paid being given by the Reinsured.

In the event of a claim arising hereunder notice shall be given to the Reinsurers through Butcher, Robinson and Staples Limited, London House, 6 London Street, London EC3R 7LQ, as soon as practicable, and all papers in connection therewith shall be at the command of the Reinsurers on this reinsurance or parties designated by them for inspection.’

Trial Judge’s Reasons

11. The trial judge decided that OUI was not entitled to rely on Article XVIII of the XOL contract because Article XVIII was not pleaded. In any event, Article XVIII did not apply to a commutation agreement.

Whether OUI might take the position that Article XVIII was applicable

12. OUI had a number of difficulties in seeking to establish that Article XVIII was applicable.

13. First, in para 4 of its Statement of Claim, it pleaded that the terms of the Retrocession contract were set out in the reinsurance slip executed by OUI and acknowledged by Butcher Robinson & Staples Ltd (‘BRS’) for and on behalf of Home. This plea was repeated in para 2 of its Reply which stated that the Retrocession contract ‘was contained and/or (sic) in a evidenced by and/or to be inferred from the slip issued by’ BRS.

14. The reinsurance slip referred to by OUI is dated 24 March 1981. It does not contain or refer specifically to the XOL contract, let alone Article XVIII thereof. OUI sought to rely on the sentence, ‘All other terms and conditions as Original’ in the reinsurance slip to incorporate Article XVIII of the XOL contract. I will refer to this as ‘the Sentence’.

15. However, it had not pleaded that Article XVIII of the XOL contract had been incorporated by the Sentence.

16. Mr Liew Teck Huat, for OUI, sought to avoid this obstacle by relying on a number of cases.

17. In The Geo W McKnight [1947] 80 Lloyd’s Rep 419, Lord Normand said, at p 423 to 424:

‘Counsel for Geo W McKnight naturally founded on this evidence and on the rule that a party is not to be allowed to contradict his preliminary act. Yet the court is not bound by the pleadings of parties and must proceed upon the evidence which it deems to be most accurate and trustworthy, and Mr Justice Pilcher has found that there is no evidence more accurate and trustworthy than the letter written by the master of the Geo W McKnight to her owners…’
[Emphasis added.]

18. This passage was cited with approval by K S Rajah JC in Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd [1993] 1 SLR 92 at p 105.

19. Mr Liew also relied on K.E.P. Mohamed Ali v K.E.P. Mohamed Ismail [1981] 2 MLJ 10. In that case, Rajah Azlan Shah CJ said, at p 11 and 12:

‘…. Since the material facts and circumstances were not pleaded in the statement of claim, it should have been pleaded in the reply. Be that as it may, this aspect of the case has been satisfactorily presented and developed in the proceedings before the High Court and we think there are materials on the record from which a decision to that effect could be arrived at. As one of the objects of modern pleadings is to prevent surprise, we cannot for one moment think that the defendant was taken by surprise. To condemn a party on a ground of which no material facts have been pleaded may be as great a denial of justice as to condemn him on a ground on which his evidence has been improperly excluded.’

20. Mr P Jeya Putra, Counsel for Home, in turn cited The Ohm Mariana [1993] 2 SLR 698. In that case, L P Thean J, delivering the judgment of the Court of Appeal, said at p 714 to 715:

‘There is yet another objection to the finding made by the learned judicial commissioner. On the pleadings no issue was raised whether the management agreement had been tampered with or fabricated and also no issue was raised as to malice in the arrest of the vessel based on the tampering or fabrication of the management agreement. The learned judicial commissioner, as stated above, found malice on the ground that the appellants had fabricated the first four pages of the management agreement.

The issue of the authenticity of the management agreement produced by the appellants had been raised in the trial, but that was in the context of the case that had been pleaded, ie the claim for reimbursement of the expenses and the counterclaim for an account. The allegation of wrongful arrest was made on the basis that there was no sum due to the appellants. The issue of malice in the arrest was never raised, either in the pleadings or in evidence. In finding that the appellants had fabricated the management agreement in order to sustain the arrest, the learned judicial commissioner had decided an issue not raised in the pleadings. Under O 18 r 12(1) of the Rules of the Supreme Court particulars of fraud and malice relied upon by a party are required to be specifically pleaded.

In Blay v Pollard and Morris, the trial judge decided the case on issues not raised in the pleadings and on appeal the Court of Appeal held that he was not entitled to do that. Scrutton LJ said, at p 534:

… Cases must be decided on the issues on the record; and if it is desired to raise other issues they must be placed on the record by amendment. In the present case the issue on which the judge decided was raised by himself without amending the pleadings, and in my opinion he was not entitled to take such a course.

In Kiaw Aik Hang Co Ltd v Tan Tien Choy, this court held that the trial judge had decided on issues not raised in the pleadings and ordered a new trial. Buttrose J in his judgement (with whom Wee Chong Jin CJ and Tan Ah Tah J concurred) said, at p 101:

While one can appreciate the dilemma in which the learned trial judge found himself as the result of his findings he has, with the greatest respect, in my opinion, decided the case on issues not raised by the pleadings and against the admissions contained in them and the evidence.

The case, in my view, must be decided on issues raised by the pleadings which bind the parties. If other issues are desired to be raised or come to light during the trial they must be pleaded by way of amendment.

For these reasons alone, in my judgment, this decision cannot be allowed to stand and in the circumstances of this case I have come to the conclusion that in order to do justice between the parties a new trial must be ordered.

More recently, Lord Edmund-Davis in Farrell v Secretary of State, at p 180 said:

… pleadings continue to play an essential part in civil actions, and although there has been since the Civil Procedure Act 1833 a wide power to permit amendments, circumstances may arise when the grant of permission would work injustice or, at least, necessitate an adjournment which may prove particularly unfortunate in trials with a jury. To shrug off a criticism as ‘a mere pleading point’ is therefore bad law...

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