Tat Hong Plant Leasing Pte Ltd v Asia Insurance Co Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin J
• Judgment Date: 05 May 1993
• Neutral Citation: [1993] SGCA 33
• Date: 05 May 1993
• Subject Matter: Whether insurer entitled to avoid the policy,Whether obligation to disclose waived by insurer,Insurance,Non-disclosure of material facts,General principles,Non-disclosure,Extent of obligation to disclose
• Docket Number: Civil Appeal No 134 of 1991
• Published date: 19 September 2003
• Defendant Counsel: Peter Madhavan (Madhavan Louis & Pnrs)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Joseph Chellappan (WT Woon & Co)

The appellants are a company involved in the business of leasing or hiring cranes to third parties. On 27 March 1984, they leased a crane to Shinei Engineering Pte Ltd (`Shinei`) using their standard form of lease agreement but with some modifications incorporated in a side letter dated 28 March 1984. Clause 2 of their standard contract provided that all repairs, maintenance, fuel and transportation costs would be borne by the lessee and cl 5 provided that the lessee would be responsible for all damages and losses save for fair wear and tear sustained by the machine, such losses to be made good by the lessee at their own expense. Clause 6 provided that:

The lessor lease the machine without operator. Lessee shall insure each of the machine for the value stated overleaf and the lessor shall be stated in the policy as beneficiary. In the event that the insurance company declines to pay the claims ... the lessee shall compensate the lessor for the full value of the machine or balance thereof ...

By the side letter dated 28 March 1984, the following amendments to the standard contract were agreed to:

Clause 2 - lessor shall be responsible for all repairs and maintenance. Lessee shall be responsible for fuel and transportation.

Clause 5 - Shall be deleted.

Clause 6 - The lessor shall lease the machine with operator. lessor shall take up all insurances.

The appellants then insured the crane with the respondents by an insurance policy dated 5 April 1984. The appellants were not required to fill in any proposal form as they were such long-standing customers of the respondents. The only information asked for was the particulars of the machinery. Hence the respondents had no knowledge of the specific terms under which the crane was hired out.

Initially, in the schedule to the policy, the persons insured were stated to be `Tat Hong Plant Leasing Pte Ltd and/or Hirer`. By an endorsement dated 16 April 1984 it was agreed that the insured named in the schedule of the policy should with effect from 11 April 1984 be `Citibank, NA as the Owner and Tat Hong Plant Leasing Pte Ltd as the Hirer.`

On 22 June 1984, the crane was damaged. Pursuant to a claim by the appellants under the policy, the respondents engaged surveyors and adjustors to survey and adjust the appellants` claim. The surveyors asked for and obtained from the appellants a copy of the lease agreement between the appellants and Shinei but were not given a copy of the side letter.

On 29 November 1984 the respondents paid to the appellants a sum of $78,287.35 in satisfaction of the appellants` claim. Pursuant to their rights of subrogation under cl 4 of the policy (which was a standard policy term of the respondents), they commenced proceedings against Shinei. In the course of the proceedings, they discovered that the terms in the lease agreement had been amended by the side letter. Taking the view that their suit against Shinei was no longer tenable, they discontinued the proceedings on 7 November 1985.

On 19 July 1986 the respondents commenced an action against the appellants seeking a declaration that they were entitled to avoid the policy on the ground of non-disclosure of a material fact. The alleged non-disclosure was that the appellants had not disclosed the side letter to Shinei which had extinguished the respondents` right of subrogation. They also sought the return of the sum of $78,287.35 as money paid under a mistake of fact. The learned judge found in their favour, holding that the appellants were under an obligation to disclose material facts; that, but for the side letter, the respondents would have had a right of subrogation as against Shinei; that, accordingly, the side letter was material and should have been disclosed; and that there was no evidence of waiver of the disclosure of the side letter by the respondents.

The appeal

On appeal, the appellants contended that the learned judge erred in holding that the appellants were under an obligation to disclose the side letter as:

the respondents had waived all obligations of disclosure of such facts;

no question of subrogation arose at all since Shinei was a co-insured under the policy and thus the side letter could not be said to affect the respondents` subrogation rights;

if there was any duty to disclose the facts, such duty ceased in law at the date of acceptance of the proposal or at least when the respondents initialled the `slip` and there was no continuing duty to disclose once the proposal was accepted; and

there was...