QBE Insurance Ltd v Sim Lim Finance Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong JC
• Judgment Date: 19 January 1987
• Neutral Citation: [1987] SGCA 2
• Docket Number: Civil Appeal No 77 of 1985
• Date: 19 January 1987
• Year: 1987
• Published date: 19 September 2003
• Plaintiff Counsel: Harry Elias (Drew & Napier)
• Citation: [1987] SGCA 2
• Defendant Counsel: B Ganesh (Lim Ganesh & Liu)
• Court: Court of Appeal (Singapore)
• Subject Matter: Credit and Security,Fire,Constructive trusts,Trusts,Whether application should be allowed,Circumstances in which appellate court may interfere,Goods acquired on hire purchase and insured against fire,Civil Procedure,Insurance company releases money to hirer of goods,Property insurance,Whether insurance company liable to owner of goods for releasing sum insured to hirer,Goods damaged by fire,Goods acquired on hire purchase destroyed by fire,Goods insured,Application to strike out action for want of prosecution within currency of limitation period,Limitation,Rights,Appeals,Whether constructive trust reflected in pleading,Claim by owner of goods against insurers for negligence and conspiracy,Hire-purchase,Insurance

Cur Adv Vult

(delivering the judgment of the court): This is an appeal against the order of Lai Kew Chai J dismissing the appellants` application to dismiss the action in Suit No 3309 of 1980 for want of prosecution. [See [1986] SLR 185 .]

The respondents, a finance company, had on 26 December 1978, entered into a hire purchase agreement with a company called Highlight Industry Pte Ltd (formerly known as Highlight Trading Pte Ltd) (Highlight), the first defendants, by which Highlight agreed to acquire on hire purchase 74 sets of industrial sewing machines and to pay to the respondents monthly instalments totalling $105,000. On 24 March 1979 the appellants, an insurance company, issued a fire policy in favour of Highlight insuring, inter alia

, its interest or property in `machinery and utensils` in the sum of $140,000 against loss or damage by fire. The policy contained the following condition:

The above are the property of the Insured or held by them in trust or on commission for which they are responsible, whilst contained in the building built of and roofed with concrete throughout, occupied as Garment Factory, situate No 315, Alexandra Road, Second Floor, Singapore Paper Product Ltd Building, Singapore 3.

In early July 1979 a fire occurred in the factory of Highlight and all its machinery was destroyed. On being informed of this by Highlight on 5 July 1979 the respondents wrote to Highlight on the same day claiming an interest in the machinery and requesting Highlight to instruct the appellants to pay the proceeds of insurance to the respondents. The letter was carbon-copied to the appellants. The appellants did not acknowledge or reply to this letter. On 22 October 1980 the respondents commenced proceedings in Suit No 3309 of 1980 claiming against:

(a) Highlight, as first defendants, the sum of $140,000 received by it and damages for conversion and conspiracy;

(b) one Tan Kah Hwee, a director of Highlight, as second defendant, the sum of $140,000 received by him, damages for conversion, compensation for breach of fiduciary duty and/or duty of care and for damages for conspiracy;

(c) the appellants, as third defendants, damages for negligence and conspiracy.

The conspiracy as described in para 8 of the statement of claim and alleged to have been carried out in July 1979 in para 9 thereof was that all the defendants conceived and carried out a fraudulent and dishonest design whereby they and each of them intended that the first defendants would gain by (a) the first defendants lodging a claim for loss of the machinery by fire; (b) the third defendants processing the claim; (c) the first and third defendants would ignore the respondents` interest in the said machinery; (d) the appellants would release at least a sum of $140,000 to the first defendants.

Although the respondents did not claim any relief against the appellants as constructive trustees, they have pleaded that the insurance policy, was effected by the first defendants at their direction as their agents or trustees and Lai Kew Chai J held that such cause of action had been sufficiently pleaded for the purpose of considering the merits of the appellants` application.

The negligence of the appellants as pleaded in para 15 of the statement of claim was alleged to have occurred when they failed to enquire from or inform the respondent about the release of the $140,000 to the first defendant and to instruct the first and second defendants to forward the sum of $140,000 to the respondents.

On 25 July 1980 the respondent entered judgment against the first defendants on their failure to file their defence. The first defendants were wound up by the order of court on 24 July 1981.

The appellants filed a defence on 16 February 1981 in which they denied all the allegations of conspiracy, breach of trust and negligence made by the respondents against them and averred that in law (a) they were under no duty to the respondents, that the latter did not have at any time an interest in or claim to the $140,000 or any other sum and that, therefore, they were entitled to make payment of the insurance claim to the first defendants; and (b) that the allegations of the respondents did not constitute a cause of action nor was it incumbent upon the appellants in law to make any inquiry in regard to the matters contained in such allegations. The appellants also pleaded that the insurance policy was null and void for non-disclosure by the first defendants and that, if any money were payable thereunder, it was limited to $44,461.37 after taking into account a claim by way of a set off against the first defendants.

After the filing of the defence, the action went to sleep until 10 April 1985 when the respondents gave notice of their intention to proceed after the expiration of one month thereof. The summons for directions was filed on 13 May 1985 and was fixed for hearing on 29 July 1985. On 2 July 1985 the appellants filed an application to dismiss the action for want of prosecution and this application was also fixed for hearing on 29 July 1985. By this time, the respondents had also discontinued their action against the second defendants.

Both applications were adjourned for hearing to 19 August 1985 when Lai Kew Chai J dismissed the appellants` application with costs and immediately gave the usual directions for trial. Hence this appeal.

Lai Kew Chai J in his grounds of judgment, gave two grounds for dismissing the appellants` application: (1) in their statement of claim the respondents had pleaded a cause of action based on fraud and fraudulent breach of trust against the appellants as constructive trustees and that this cause of action had not been barred by limitation, and (2) the flagrant and inordinate delay of the respondents did not give rise to a substantial risk that it would not be possible to have a fair trial of the issues in the action and was not likely to cause serious prejudice to the appellants. As to the law, Lai Kew Chai J applied, firstly, the general principle laid down by the House of Lords in Birkett v James [1978] AC 297 at p 317; [1977] 2 All ER 801 at p 804 that the power to dismiss an action for want of prosecution in the words of Lord Diplock (at p 805):

... should be exercised only where the court is satisfied either (1) that the default has been intentional and contumelious, eg disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; or (2)(a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party. and secondly, the corollary to principle 2(b) that was applied in Birkett v James[1978] AC 297 at p 317; [1977] 2 All ER 801 at p 804 itself, iethat a court should not normally exercise such power on the ground of inordinate and inexcusable delay (and not contumelious default) where the plaintiff`s claim would not be barred by limitation, as to do so in such a case would merely mean that the plaintiff would issue a fresh writ and aggravate the prejudice to the defendant from delay and add to the costs.

Counsel for the appellants sought to attack Lai Kew Chai J`s decision on the following grounds:

(i) In respect of constructive trust: first, the judge was wrong in finding that the respondents` pleadings reflected a claim based on constructive trust and that no relief in respect of such claim had been asked for; secondly, on the authority of Maurice v Goldsbrough Mort Co Ltd [1939] AC 452 the first defendants did not insure the machinery as agents or trustees for the respondents but on account of their own insurable interest therein, that the appellants owed no duty or responsibility to the respondents in respect of such insurance and that therefore the insurance proceeds were not trust moneys of which the appellants had notice or were under any obligation to the respondents; and thirdly, that even if there were a claim based on constructive trust that cause of action would have been time-barred at the date of hearing of the appellants` application, as s 22(1) of the Limitation Act did not exclude a claim based on constructive trust from the limitation period of six years; the authorities for this submission were Soar v Ashwell [1893] 2 QB 390 and Re Robinson [1911] 1 Ch 502.

(ii) In respect of the claims based on conspiracy and negligence, that the said claims were also time-barred and that inordinate and inexcusable delay on the part of the respondents or their lawyers had given rise to a substantial risk that it was not possible to have a fair trial or was such as was likely to cause or to have caused serious prejudice to the appellants for the following reasons: first, it was extremely difficult to locate the directors and officers of the first defendants which had already been compulsorily wound up in September 1979; secondly, the right of indemnity of the appellants against the respondents had been extinguished; thirdly, the claims against the first and second defendants had been discontinued; fourthly, the mere lapse of time on issues of fraud, conspiracy and professional negligence could not fail to give rise to a substantial risk that a fair trial of those issues would no longer be possible, citing the dictumof Diplock LJ (as he then was) in Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at p 265 as follows:

But on the issues of fraud, conspiracy and professional negligence, the lapse of time cannot fail to give rise to a substantial risk that a fair trial of these issues will be no longer possible.

Fifthly, there was much prejudice to a...