Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 27 June 2008
• Neutral Citation: [2008] SGCA 27
• Date: 27 June 2008
• Subject Matter: Insurance,Contractor obtaining contractors' all-risks policy through agent,Insured making claim under policy,Sections 94, 95, 96, 97, 98, 99 Evidence Act (Cap 97, 1997 Rev Ed),Whether common law contextual approach to contractual interpretation applicable in Singapore,Interpretation of contracts,Duties of gratuitous insurance agents,Contractor having contractual obligation to procure insurance coverage for employer,Agent's insurance company unable to provide requisite coverage,Exclusion clause applicable,Brokers,Whether judge interpreting or varying policy,Contract,Whether agent considered insured's insurance agent,Parol evidence rule,Whether reference to extrinsic evidence permissible,Contractual terms,Admissibility of extrinsic evidence to affect written contracts,Whether agent potentially liable for breach of duty,Judge referring to contract and genesis of policy to construe its terms,Agent agreeing to gratuitously assist in procuring policy from other insurance companies
• Docket Number: Civil Appeal No 48 of 2007
• Published date: 02 July 2008
• Defendant Counsel: Philip Ling (Wong Tan & Molly Lim LLC) and Belinda Ang Choo Poh (Belinda Ang Tang & Partners)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Eu Hai Meng (United Legal Alliance LLC)

27 June 2008 Judgment reserved.

V K Rajah JA (delivering the judgment of the court):

Introduction

1 This appeal concerns the scope of a contractors’ all-risks (“CAR”) insurance policy. Such a beguilingly simple description will often understate the intricacy and complexity of the task confronting the court each time it approaches a contractual document, which is to give effect to the parties’ intentions objectively in the face of conflicting subjective interpretations advanced by ingenious counsel. It is a task further complicated by the inherent richness and nuances of the English language and, unfortunately, sometimes by deficient drafting.

2 A central question in the inquiry is the admissibility of extrinsic evidence which may affect the meaning and effect of the words and expressions used in a document – a particularly difficult branch of law which has vexed many an esteemed jurist (see, inter alia, John Pitt Taylor, A Treatise on the Law of Evidence (A Maxwell & Son, 1848) (“Taylor”) at § 810 and Sripada Venkata Joga Rao, Sir John Woodroffe & Syed Amir Ali’s Law of Evidence (LexisNexis Butterworths, 17th Ed, 2002) (“Woodroffe”) at p 3225). Contracts do not exist in a vacuum. Contracts are constituted by words, and, as Oliver Wendell Holmes J famously said in Towne v Eisner 38 S Ct 158 (1918) at 159:

A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.

3 The surrounding circumstances or context of a contract, therefore, are integral to our understanding of its words. However, in more recent times, where legal transactions are not merely proved but also constituted by documents, the courts have evinced considerable anxiety about being overwhelmed by extrinsic evidence of such circumstances, which may sometimes lead them astray from the path of objective inquiry. At this juncture, it is helpful to go back very briefly to the historical origins of this mistrust of context. Centuries ago, in the nascent European legal systems in place prior to the vogue of the seal, the tradition of formal oral transactions (in which documents were purely symbolic rather than constitutive) meant that judicial mistrust was attached not to the oral evidence, but, ironically, to the written document itself. Thereafter, until the 1400s, the written document was, in England, regarded merely as a mode of proof and had none of the pre-eminence that it is presently accorded (for an arresting account of the historical evolution of the legal roles of written and oral evidence, see John H Wigmore, “A Brief History of the Parol Evidence Rule” (1904) 4 Colum L Rev 338). However, in the more recent past, given the pervasiveness of the written word as the preferred form of record-keeping, all sorts of artificial legal barriers in the form of restrictive rules have been erected to impede the admissibility of extrinsic evidence that might affect a written contract. Yet, often, despite rejecting such evidence, the consciousness of the court is affected by that very evidence; this in turn may actually affect the ultimate interpretation of the document at hand. In maintaining otherwise, the law is often perceived as obfuscated, obscure and opaque.

4 Clarity in this area of the law will enable lawyers to advise their clients with far greater confidence. It would clearly be in the wider public interest if parties, especially those engaged in commerce, are able to predict securely how the courts will resolve a particular dispute. Indeed, this is a hallmark of every mature system of commercial law. Parties must know where they stand, and the law would do them a great disservice if the advance from literalism to pragmatic rationalism in the interpretation of contracts becomes, in practice, an unintended retreat to uncertainty. The present appeal provides this court with an opportunity to clarify the position under Singapore law in this fundamentally important area of legal and commercial practice.

5 But, first, a brief overview of the background of this case. The respondent, B‑Gold Interior Design & Construction Pte Ltd (“B‑Gold”), was engaged by Mediacorp Pte Ltd (“MediaCorp”) under a contract dated 27 September 2002 (“the Contract”) as a term contractor to carry out maintenance, repair as well as addition and alteration works (“the Works”) at Caldecott Broadcast Centre. Pursuant (allegedly) to its obligations under the Contract, B‑Gold obtained a CAR policy (No 02 ZS‑CAR‑1129958) (“the Policy”) from the appellant, Zurich Insurance (Singapore) Pte Ltd (“Zurich Insurance”). On 21 March 2003, a fire caused by the negligence of one of B‑Gold’s subcontractors, Regius Engineering Pte Ltd (“Regius”), broke out at MediaCorp’s premises (“the Fire”). MediaCorp sued both B‑Gold and Regius via District Court Suit No 2126 of 2004 (“DC 2126/2004”) for the damage caused by the Fire. After MediaCorp successfully obtained judgment as far as its claim against B‑Gold (“the Main Action”) was concerned (see Media Corp of Singapore Pte Ltd v B‑Gold Interior Design & Construction Pte Ltd [2006] SGDC 132 (“MediaCorp (No 1)”); see also [24]–[25] below), B‑Gold commenced third-party proceedings (also under DC 2126/2004) against Zurich Insurance based on the Policy (“the Third-Party Action”). The Third-Party Action was heard by the same district judge who had heard the Main Action (“the District Judge”). The District Judge dismissed B‑Gold’s claim against Zurich Insurance (see Media Corporation of Singapore Pte Ltd v B‑Gold Interior Design & Construction Pte Ltd [2007] SGDC 7 (“MediaCorp (No 2)”). On appeal, the High Court judge (“the Judge”) set aside the District Judge’s decision (see B‑Gold Interior Design & Construction Pte Ltd v Zurich Insurance (Singapore) Pte Ltd [2007] 4 SLR 82 (“B‑Gold Interior Design”)). Zurich Insurance in turn brought the present appeal against the Judge’s decision.

6 We have decided to allow the appeal on the ground that the damage caused to MediaCorp’s property by the Fire is not covered by the Policy. We now explain the reasons for our decision. To facilitate the understanding of this judgment, we set out below the schematic layout of our reasoning:

INTRODUCTION......................................................................................	1
THE FACTS...............................................................................................	5
The Contract......................................................................................	5
The events leading up to the Policy......................................................	7
The terms of the Policy.......................................................................	10
The Fire and the Main Action.............................................................	14
The Third-Party Action.......................................................................	16
The parties’ arguments..............................................................	16
The District Judge’s decision.....................................................	18
The appeal to the High Court....................................................	19
OUR ANALYSIS OF THE JUDGE’S DECISION....................................	22
The use of extrinsic evidence to affect written contracts.......................	22
The law in England....................................................................	22
(1) The common law rule against parol evidence..............	22
(2) The thin definition of the parol evidence rule...............	23
(3) The English courts’ use of extrinsic evidence in aid of; interpretation..................................................................	26
(a) The concept of “Interpretation”........................	26
(b) The traditional approach..................................	30
(c) The shift to the contextual approach.................	33
(d) The impact of the Investors Compensation; Scheme restatement..............................................	38
The law in Singapore................................................................	43
(1) The statutory framework...........................................	43
(a) Overview........................................................	43
(b) Sections 93–94 of the Evidence Act................	43
(c) Sections 95–100 of the Evidence Act..............	48
(2) The case law.............................................................	53
(3) Summary of the applicable principles in Singapore......	73
(a) Attributes of the document in question..............	74
(b) The parol evidence rule...................................	75
(c) Admitting extrinsic evidence in aid of; interpretation........................................................	76
(d) The approach under proviso (f) to section 94...	83
(e) Continuing relevance of canons of; interpretation.......................................................	86
(f) Synopsis........................................................	88
The Judge’s reliance on extrinsic evidence in the present case....	91
Arguments based on justice and fairness..............................................	101
OUR INTERPRETATION OF THE POLICY............................................	110
Whether B Gold’s claim falls under Section II......................................	110
Whether Special Exclusion 2 applies....................................................	111
Whether Special Exclusion 4(b) applies...............................................	113
CONCLUSION..........................................................................................	114

The facts

The Contract

7 Pursuant to the Contract, B‑Gold was engaged by MediaCorp as a term contractor to...