QBE Insurance (Singapore) Pte Ltd and another v Relax Beach Co Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 21 December 2023
• Neutral Citation: [2023] SGCA 45
• Hearing Date: 15 November 2023
• Docket Number: Civil Appeal No 3 of 2023
• Citation: [2023] SGCA 45
• Court: Court of Appeal (Singapore)
• Year: 2023
• Subject Matter: Civil Procedure,Costs,Principles,Discontinuance of appeal,Courts and Jurisdiction,Court judgments,Parties settling before court hearing,Insurance,General principles,Business interruption policies covering loss resulting from outbreak of disease at the premises,Claims for loss suffered in the context of COVID-19 pandemic and Government measures in response,Contract,Contractual terms,Notification of claim as condition precedent
• Published date: 21 December 2023

[LawNet Admin Note: The following judgment is displayed as received from source]

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

When parties enter into a contract, they do so in order to record the terms of the bargain they have struck and the way in which they have agreed to allocate the risks between them. When a dispute arises in connection with a contract, one must therefore pay close attention to the precise words used in the contract to ascertain the meaning that the parties intended. The courts search for this meaning by undertaking an objective interpretive exercise of the text and the surrounding context. In doing so, the courts are guided by the language that the parties have chosen to capture their agreement and by other admissible extrinsic evidence, rather than by embarking on the endeavour to discover the parties’ actual or subjective intentions (The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2nd Ed, 2022) at paras 06.091–06.092). The present appeal concerns a particular species of contract which is the quintessential model of risk distribution – an insurance contract. In particular, the dispute centres around the interpretation of two specific clauses in the insurance contract. One clause relates to the proper notification of the details of the insurance claim as a condition precedent to obtaining compensation. The second clause describes the insured peril upon which the insured based its business interruption claim. These questions were tried in the General Division of the High Court and certain conclusions were reached in favour of the insured. The insurers appealed.

This court ultimately did not have to decide the merits of the appeal because the insurers withdrew their appeal on the eve of the scheduled hearing. The parties agreed that the appeal could be withdrawn save that they were unable to agree on costs and have made submissions on this. Hence, the only live issue left to be determined is what the appropriate costs order ought to be. This is the subject matter of the present judgment. However, as we will shortly explain, we also find it appropriate to provide our initial views on the merits of the appeal despite its discontinuance. This is because these views are relevant to the question of costs, and also pertain to a matter of public interest in the wider insurance market, namely, insurance claims arising out of the COVID-19 pandemic.

With this broad overview and context in mind, we first outline the relevant factual matrix.

Factual background Parties to the appeal and the insurance contract

The respondent, Relax Beach Co Ltd, is a company incorporated in Thailand which owns and operates a luxury hotel in Phuket known as Le Meridien Phuket Beach Resort (“the Insured Premises”). The respondent is a named insured under the Insurance Policy No 8-F0005135-ISR-R004 (“the Policy”) which provides coverage for the Insured Premises.

The first appellant, QBE Insurance (Singapore) Pte Ltd, and the second appellant, MS First Capital Insurance Limited, are co-insurers under the Policy and they agreed to indemnify the respondent in respect of business interruption losses suffered at, among other places, the Insured Premises. The period of insurance coverage under the Policy was between 1 January 2020 and 1 January 2021.

In particular, under s 2 of the Policy, the appellants agreed to provide the following indemnity:

THE INDEMNITY

In the event of any building or any other property or any part thereof used by the Insured at the Premises for the purpose of the Business being physically lost, destroyed or damaged by any cause or event not hereinafter excluded (loss, destruction or damage so caused being hereinafter termed ‘Damage’) and the Business carried on by the Insured being in consequence thereof interrupted or interfered with, the Insurer(s) will, subject to the provisions of this Policy including the limitation on the Insurer(s) liability, pay to the Insured the amount of loss resulting from such interruption or interference in accordance with the applicable Basis of Settlement.

…

One of the events covered by the Policy was the closure of the whole or part of the Insured Premises by an order of a public authority as a result of an outbreak of an infectious or contagious disease. In this regard, cl 87 of the Policy (an infectious disease extension, or “the IDE”) states as follows (extending the indemnity coverage provided under s 2 of the Policy):

87. INFECTIOUS DISEASE MURDER AND CLOSURE

Notwithstanding anything contained in the within policy to the contrary including but not limited to the “material damage proviso” the Policy is extended under Section 2 to include loss directly from interruption of or interference with the business carried on by the Insured at the premises in consequence of: (i) Closing of the whole or part of the premises by order of a Public Authority as a result of an outbreak of a notifiable human infectious or contagious disease or consequent upon defects in the drains and/or other sanitary arrangements at the premises. (ii) Murder or suicide occurring at the premises. (iii) Injury, illness or disease arising from or likely to arise from or traceable to foreign or injurious matter in food or drink provided from or on the premises. (iv) Threat of violent damage to the premises and/or injury to person therein.

…

[emphasis added in bold]

Limb (i) of the IDE is referred to as a “composite peril” clause in the insurance industry as it requires successive elements to be satisfied before a claim can be made (these being, business interruption loss arising from closure of the insured premises, by order of a public authority as a result of an outbreak of a notifiable infectious or contagious disease or defects at the premises). As we will explain below, there was some disagreement between the appellants and the respondent on whether the phrase “at the premises” at the end of Limb (i) of the IDE applies only to the immediately preceding words “defects in the drains and/or other sanitary arrangements” (“the Defects Limb”) (the respondent’s position) or whether it also extends to the prior words “outbreak of a notifiable human infectious or contagious disease” (“the Disease Limb”) (the appellants’ position).

Pertinently, the Policy also requires, under Condition 7 (“the Notification Clause”) that the insured notify the insurers of any claim that arises and, importantly, to provide additional particulars of the claim in order to be entitled to be indemnified thereunder:

7. NOTIFICATION OF CLAIMS

On the happening of any loss … the Insured shall forthwith give notice thereof in writing to the Insurer(s) and shall (within thirty (30) days after such loss … or such further time as the Insurer(s) may in writing allow), at the Insured’s own expense, deliver to the Insurer(s) a claim, in writing containing as particular an account as may be reasonably practicableof the several articles or portions of property loss, destroyed or damaged and of the amount of loss, destruction or damage thereto, having regard to their value at the time of the loss, destruction or damage, together with details of any other insurances on any property hereby insured.

The Insured shall use due diligence and do and concur in doing all things reasonably practicable to minimise any interruption of or interference with the Business to avoid or diminish the loss and shall also deliver to the Insurer(s) a statement in writing of any claim certified by the Insured’s auditor, with all particulars and details reasonably practicable of the loss and shall produce and furnish all books of accounts and other business books, invoices, vouchers and all other documents, proofs, information, explanations and other evidence and facilities as may reasonably be required for investigation and verification of the claim together with (if demanded) a statutory declaration of the truth of the claim and of any matters connected therewith. [ie, “Second Condition”]

No claim under this Policy shall be payable unless the Insured has complied with the terms of this condition.

[emphasis added in bold]

It is not disputed between the parties that the Notification Clause is a condition precedent to any liability under the Policy. For convenience, we refer to the second paragraph of the Notification Clause as the “Second Condition”. Closure of the Insured Premises and notification of the insurance claim

On 26 February 2020, COVID-19 was first declared a dangerous communicable disease by the Thailand Government under the Communicable Diseases Act 2015. Following this declaration, businesses were required to notify the health authorities of any cases of COVID-19 at their respective premises.

Thereafter, there was an increase in the number of COVID-19 infections in Thailand (including Phuket). As a result of the outbreak of COVID-19, the Thailand Government and the Governor of Phuket Province (“Governor”) (collectively, “the Public Authority”) implemented a series of escalating measures in Phuket to control the impact of the COVID-19 pandemic. These measures were implemented between 18 March 2020 and 9 April 2020.

Crucially, on 2 April 2020, the Governor observed that “[w]ith regards to Phuket province, it is noticed that the number of cases is increasing at a fast rate” and thus ordered the complete “[c]losure of all types of hotels and similar establishments” in Phuket until further notice (“the Closure Order”). However, occupied hotels were permitted to continue business until such time as all the guests had vacated their rooms. In compliance with this, the Insured Premises were gradually shut down and completely closed by 7 April 2020 (after the last guests vacated their rooms). The respondent’s luxury hotel business was thus shuttered from this point onwards until further notice. This...