Siang Hoa Goldsmith Pte Ltd v The Wing On Fire & Marine Insurance Co Ltd

JudgeChao Hick Tin J
Judgment Date15 May 1998
Neutral Citation[1998] SGCA 31
Citation[1998] SGCA 31
Defendant CounselMichael Eu (Cooma Lau & Loh)
Published date19 September 2003
Plaintiff CounselLok Vi Ming and Lim Tchuang Cheio (Rodyk & Davidson)
Date15 May 1998
Docket NumberCivil Appeal No 88 of 1997
CourtCourt of Appeal (Singapore)
Subject MatterRisk,Exclusion clause,Proximate cause of loss,Theft and fraud,Whether respondent liable to compensate appellant for loss,Whether fraud by insured's customer the proximate cause of loss,Competing causes of loss and one cause of loss excluded by policy,Policy excludes loss caused by fraud, dishonesty or dishonest deception of customer of insured,General principles,Property insurance,Whether person who orders goods from appellant a customer or his company the customer,Insurance,Whether an all risks policy should cover forseeable and unforseeable risks,Whether appropriate to lift corporate veil
Judgment:

LAI KEW CHAI J

(delivering the grounds of judgment of the court):

1. Introduction

This was an appeal against the decision of the learned judge in the court below dismissing the appellants` claim against the respondents under an insurance policy. The respondents were an insurance company. The appellants were a company in the business of purchasing and selling gold jewellery. This insurance claim and appeal raised the questions whether there was a loss within the meaning of the policy and whether such loss was excluded by the exclusion clause. We dismissed the appeal and upheld the learned judge`s decision. We now give our reasons for so doing.

2. The brief facts

The facts pertaining to the action below were agreed. In August 1992, an all risks insurance policy (the policy) was granted by the respondents in favour of the appellants. Under the policy, the respondents agreed to indemnify the appellants for `loss or damage arising from any cause whatsoever`. The property insured were various but of relevance to the present appeal were gold stock and merchandise with an insured sum of S$3,500,000.

3.By cl 1 under the exclusion conditions, it was expressly stated that the policy excluded cover for `loss or damage caused by fraud, dishonesty or dishonest deception committed by the [appellants], and of the [appellants`] servants, agents or representatives or any traveller or messenger in the exclusive employment of the [appellants] or any customer, broker or repairer or craftsman of the [appellants] or any customer of the [appellants`] broker`.

4.On 11 June 1993, the respondents granted an extension of the policy to include a one-off overseas sending of one carton of 18K gold jewellery weighing 23,717.55g. It involved a journey from Singapore to Miami, Florida, USA by airfreight on board British Airways Flight No BA 12 under an air waybill for an insured sum of S$380,000, subject to the terms and limitations of the policy. According to the appellants, and this was not disputed by the respondents, the need for this one-off extension, executed by an endorsement No E4756/1, came about in this way.

5.On or about 8 May 1993, a person by the name of Samuel Lustig came to the appellants` showroom located at Block 71 Redhill Close, #01-17, Singapore 0315. He identified himself as representing Italgold Inc (Italgold), a wholesaler of gold with its base in the US. He wanted to purchase some products from the appellants with the intention of airfreighting them back to the US for sale. After having browsed through the appellants` collection of stock, he placed a large order of 18K jewellery (the goods) with the appellants under the name of Italgold. The estimated price of the purchase was US$220,000. In accordance with the appellants` policy, he paid a deposit of 10% of the estimated value of the purchase, first by way of US$5,000 in cash and the remainder of US$17,000 by telegraphic transfer on 19 May 1993.

6.The appellants, upon receipt of the 10% deposit, thereafter arranged for delivery of the goods purchased to an address in Miami, Florida which Samuel Lustig gave. Insurance for the delivery of the goods was procured, and this was by an endorsement of the policy.

7.On 9 June 1993, the appellants duly delivered the goods on board British Airways Flight No BA 12. They also rendered two invoices dated 8 June 1993 for the agreed balance amount of US$224,454 for the goods to Italgold. At all material times, the appellants did not suspect that either Samuel Lustig or Italgold were fake identities. Right up to the delivery of the goods to its destination in the US, the appellants had even been communicating with Italgold through Samuel Lustig.

8.On 10 June 1993, the goods arrived in Miami, Florida. British Airways then released the goods to one Mike Delgado on 11 June 1993 against a letter of indemnity purportedly issued by Capital Bank, the consignee under the air waybill and the American bank which Samuel Lustig promised would reimburse the appellants for the purchase of the goods. It was subsequently discovered that although Italgold had some prior dealings with Capital Bank, no representative of Italgold had attended at Capital Bank at any time before or after the delivery of the goods so as to enable Italgold to collect the goods. Further, it was also established by the appellants` investigators that the letter of indemnity purportedly issued by Capital Bank was forged and that Capital Bank had for some time stopped using that type of letter of indemnity. Consequently, Capital Bank returned all the original shipping documents to the appellants` bankers in Singapore, United Overseas Bank, which had previously forwarded to them for delivery against payment.

9.Mike Delgado, the person who collected the goods upon its arrival in Miami using the aforementioned forged documents, was the President of Lancer International Corporation (Lancer), a customs broker and freight forwarder. In or around May 1993, he received instructions from Samuel Lustig informing him that Italgold wished to appoint Lancer as its customs broker and stocker. He agreed, after several checks on Samuel Lustig and Italgold proved satisfactory.

10.Shortly before the appellants` goods arrived in Miami on 10 June 1993, the relevant documents for the collection and delivery of the goods were delivered by Samuel Lustig to Mike Delgado. Using these documents, which consisted of the forged letter of indemnity from Capital Bank and the air waybill, Mike Delgado collected the goods and delivered them to Italgold`s address in Miami on 11 June 1993. The goods were acknowledged and received by Samuel Lustig.

11.After the goods were delivered to Samuel Lustig, nothing was heard from him or Italgold again. The appellants made several attempts to contact them but all proved fruitless. In fact, Mike Delgado was also not paid for his work, and all the cheques which Samuel Lustig handed over to him for the collection of various consignments of goods were invalid. It was subsequently discovered that the appellants were not the only company whom Samuel Lustig or Italgold had defrauded. Around the middle of June 1993, Mike Delgado collected several consignment of cargo for Samuel Lustig and Italgold using forged documents (which he had no idea of) and on each occasion, the seller of the cargo were not paid. In all these transactions, Italgold was the buyer. Each delivery had its own set of documents and was sent separately by each shipper to arrive on or about 8 to 10 June 1993.

12.The goods were not recovered. The whereabouts of Samuel Lustig had not been ascertained. The appellants therefore instituted the present action in the High Court claiming against the respondents under the policy in the amount of S$380,000, which was the sum insured for the goods. The gist of their arguments was that the goods were in most likelihood irrecoverable, since exhaustive investigations produced no fruitful results and Samuel Lustig could not be found. In that case, there was a `loss` as defined under the all risks policy and so they were entitled to be indemnified by the respondents.

13.Before the trial commenced, both parties agreed that there were only two questions to be considered. The first was whether the goods delivered to Samuel Lustig of Italgold constituted a `loss` within the meaning of the policy, and secondly, if the answer to the first question was yes, whether it was due to the fraud, dishonesty or dishonest deception committed by a customer of the appellants such that cl 1 under the exclusion conditions of the policy applied to prevent the appellants from claiming against the respondents.

14. The learned judge`s decision

The learned judge dismissed the appellants` claim. His reasoning, summarised briefly, was that firstly, the appellants had not shown that the loss occasioned by the fraud of Samuel Lustig amounted to a loss within the meaning of the policy. Although the appellants were, in the technical sense, deprived of their goods which they sold to Samuel Lustig, there was no loss as the goods were delivered to Samuel Lustig. The only problem was that Samuel Lustig failed to pay for the goods, but this had nothing to do with the coverage of the policy.

15.Secondly, even if it could be said that there was a loss within the policy such that the policy prima facie covered the present factual scenario, the appellants were precluded from claiming against the respondents under cl 1 of the exclusion conditions. In the learned judge`s opinion, there was clearly fraud perpetuated in the present case by a customer of the appellants, namely Samuel Lustig, and this was expressly excluded from coverage under the policy`s conditions.

16. The appeal

The issues in the present appeal were substantially the same as those before the learned judge. Additionally, the appellants further challenged two findings which arose out of the learned judge`s judgment. For ease of reference, we set out our consideration of the issues in turn. The issues were: a. Whether the learned judge erred when he held that the goods delivered to the purported Samuel Lustig of Italgold did not constitute a loss within the meaning of the policy?

b. If the answer to `a` was yes, whether the learned judge erred when he found that the loss was due to fraud, dishonesty or dishonest deception committed by a customer of the appellant within the meaning of cl 1 of the exclusion conditions under the policy?

c. Whether the learned judge erred when he found that the proximate cause of the loss was due to the fraud, dishonesty and dishonest deception as in `b` or by the negligence of British Airways? and

d. If the answer to `c` was yes, whether the learned judge was correct when he held that where there were two causes of the loss, one of which came within cl 1 of the exclusion conditions, cl 1 nevertheless applied?

a Whether learned judge erred when he held that the goods delivered to the...

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