QBE Insurance (International) Limited v USL Asia Pacific Pte Ltd

• Jurisdiction: Singapore
• Judge: Leslie Chew
• Judgment Date: 12 July 2011
• Neutral Citation: [2012] SGDC 84
• Citation: [2012] SGDC 84
• Docket Number: No. 791 of 2009
• Published date: 30 March 2012
• Hearing Date: 31 January 2011
• Plaintiff Counsel: Mr Rama (M/s M Rama Law Corporation.)
• Defendant Counsel: Mr Lai Kwok Seng (M/s Lai Mun Onn & Co.)
• Court: District Court (Singapore)

District Judge Leslie Chew: Background

This was a case in which the Plaintiff insurers, having paid out on a Commercial Package Policy (‘the Policy’) sued the Defendant insured, to recover the payment made to the injured party under the Policy. The Policy covered the Defendant for Work Injury Compensation which the Defendant may have to pay out to meet any such claim.

The case involved the death of the Defendant’s worker who died in an explosion at the Defendant’s factory. The incident took place on 12 March 2008. The deceased worker had apparently worked on a modification to the delivery pipe of a tank used in the blending of asphalt. The work involved inflammables. The deceased worker was apparently doing some cutting with an acetylene torch, when an explosion occurred which caused his death.

As a result of the accident, deceased’s family made a claim with the Ministry of Manpower (MOM) for Workmen’s Compensation. The Defendant lodged a claim under the Policy. The claim was assessed by MOM and eventually a Notice of Assessment was issued on 12 Mar 2008. The Notice of Assessment assessed the quantum of the compensation as $108,857.52 the Sum (‘the Sum’).

The Plaintiff insurers, ultimately paid out under the Policy based on MOM’s assessment.

On 6 Mar 2009 the Plaintiff insurers, in exercise of their rights under the Policy instituted the present Action to recover the Sum.

At the trial 6 witnesses gave evidence, all of whom had Affidavits of Evidence in Chief duly filed and admitted. At the end the trial, parties were given time to make written submissions and this was duly done. On 16 May 2011, I gave my decision and brief oral grounds.

I now provide the Grounds for my decision.

The Case

The Plaintiff’s case was put in a simple way. Both in oral and written evidence, the case for the Plaintiff was that it was discovered subsequent to the accident upon which the Policy was engaged, that the Defendant insured was in breach of relevant terms of the Policy. In their closing submission, the Plaintiff insurers claimed that the Defendant had committed a breach of each of the following Policy terms: (1) Special Condition 1: The insured shall take reasonable precautions to prevent accidents and diseases to the Insured’s employee and shall comply with all statutory obligations and requirements (emphasis added by Plaintiff). (2) General Conditions 4: Precautions: The insured shall take all reasonable precautions to avoid and minimize injury, loss and or damage and to comply with all the statutory obligations and by-laws or regulations imposed by any public authority for the safety of persons or property (emphasis added by Plaintiff). (3) General Condition 5: Observance of Terms and Conditions: The due observance of these conditions and legislation applicable and other terms of the contract by the insured are conditions precedent (emphasis added by Plaintiff) to any liability of the Company to make payment under the contract. (4) Avoidance of Certain Terms and Right of Recovery: The Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the Legislation.

The Plaintiff insurers contended in their submissions that the Defendant has breached the above policy conditions, in particular Special Condition 1 and General Condition 4 by failing to comply with the Fire Safety Act and Regulations.

In their pleadings, the Plaintiff insurers pleaded that “By virtue of the aforesaid breaches, and by virtue of the “Avoidance of Certain Terms and Right of Recovery Clause read with Clause 1(a) Conditions Precedent to Liability, and Clauses 4 and the General Conditions Applying to All Sections”, the Plaintiffs are entitled to recover the aforesaid the Sum from the Defendant.

While the contentions put forth by the Plaintiff insurers as I have referred to above, appear to be ‘blanket allegations’ as to the breaches of Policy conditions, in reality much of the case and the evidence were directed to the Plaintiff insurers’ claims that the Defendant had breached Special Condition 1 and General Condition 4.

Again the bases or grounds upon which the Plaintiff insurers contend that the Defendant had breached both the aforesaid Conditions of the Policy is set out in their Closing Submissions: (1) The Defendant was in breach of the following – (a) Unauthorized storage of the following regulated chemicals in the Defendant’s premises: - LPG Cylinders - Acetylene cylinders - Diesel - Xylene - Kerosene

The above being a breach of s 35 of the Fire Safety Act (Cap. 109A)

(b) Unauthorized storage along the perimeter fence and driveway: storage of items (including containers, drums equipment, container tanks, ISO tanks etc) along the perimeter fencing and driveway which constituted a change of use of the premises under s 30(1) of the Fire Safety Act.

The Plaintiff insurers relied specifically on the letter dated 17 Mar 2008 from the Singapore Civil Defence Force (SCDF) in which the SCDF notified the Defendant that enforcement Action will be taken for the breaches of fire safety offences. The offences that the SCDF referred to in the said letter are in turn based on the SCDF’s discovery during an inspection of the Defendant’s premises on 13 Mar 2008 that there was unauthorized storage of petroleum and flammable material and unauthorized storage along the perimeter fence (as set out in paragraph 12).

As to these alleged breaches of fire safety, upon which the Plaintiff insurers ground their claim based on the breach by the Defendant of the stated Policy conditions, the evidence of the Defendant’s Safety Officer, DW 1 Chong Kwang Yee is crucial. Here it is beyond dispute that Chong conceded during cross-examination that the Defendant did not have the licence to store the offending materials as pointed out by SCDF in the letter of 17 Mar 2008 (‘ the SCDF Letter’). He also conceded that there was as noted by the SCDF storage of offending materials along the Defendant’s perimeter fence. Chong further conceded that the Defendant were not, at the material time, aware that they required a licence as indicated by SCDF for storage of these offending material on their premises.

There was therefore evidence of admission on the part of the Defendant as to the breaches noted by the SCDF, which was detailed in the SCDF letter. According to the Plaintiff insurers, based on this, and by its own admission the Defendant had breached Special Condition 1 and General Condition 4 of the Policy. Stating the obvious, the Plaintiff insurer’s contentions are premised on the Defendant’s failure to comply with the Fire Safety Act and its regulations which amounted to the Defendant’s failure to comply with ‘statutory obligations, requirements and regulations”.

On the face of it and prima facie, it appears that the Plaintiff insurers have made good their claim. In that case, their reliance on their apparent right to recover the Sum they paid out under the ‘Avoidance of Certain Terms and Right of Recovery’ Section of the Policy as set out in paragraph 8, is justified.

Based on the above, and as I have mentioned previously, the Plaintiff’s case appear to be a straightforward one. The Defendant’s’ case however, is a more complex one. I now turn to the Defendant’s position.

Based on their Closing Submissions, the Defendant’s position with respect to the claim is on the following bases: (1) There is no clause in the Policy that entitles the Plaintiff insurers to recover from the Defendant the Sum without showing cause. (2) The Plaintiff insurers had no liability to pay out under the Policy and ought to have repudiated liability instead of engaging liability (3) The Plaintiff insurers did not accept the repudiation of the Policy contract by the Defendant (4) The Defendant did comply with relevant law and safety standards (5) In any event, the alleged breaches did not cause the accident which resulted in the death of the worker. (6) The Defendant is entitled to rely on Clause 7 of the Policy (7) The Defendant is entitled to rely on a defence based on estoppels and/or waiver premised on a course of dealing with the insurers.

The Court’s Decision

The Plaintiff insurers’ factual basis for their claim which is based on the breaches of fire safety laws is, on the evidence, made out. As noted, previously the evidence according to DW 3 Chong, showed that the Defendant did store flammable material on their premises without the requisite clearances from the SCDF.

Factually, on the evidence, therefore, the Defendant is in no position to dispute that they had breached Fire safety. That leads to the legal questions arising from the terms of the Policy which must be determined against the Defendant’s present case, to see if the Plaintiff insurers are entitled to succeed in their claim or that the Defendant can maintain successfully their various defences.

Based on what I have alluded to so far, it is now convenient to consider the evidence and the various contentions relied upon by the Defendant in their defence of the present claim.

There is no clause in the Policy that entitles the Plaintiff insurers to recover from the Defendant the Sum without showing cause.

This premise relied upon by the Defendant is perhaps a little simplistic in approach. In my view, it is quite clear and obvious that the Policy does indeed contain provisions which at least suggest that the Plaintiff insurers may recover monies paid out under the Policy for the benefit of the insured.

While I would accept that the language used in the Policy, that is to say the manner in which the various terms of the Policy have been drafted, leaves much to be desired, at the same time, I am of the view that part of the Policy under ‘Section 4 – Workmen’s Compensation’ which provides for the ‘Avoidance of Certain Terms and Right of...