Lloyd's Maritime and Commercial Law Quarterly
Hong Kong Marine Insurance Law
James Davey*
CASES
219. Hua Tyan Development Ltd v Zurich Insurance Co Ltd & Or (The Ho Feng 7) 1
Deadweight tonnage warranty—inconsistency with cover—rectification—(non-)disclosure of dead-weight capacity
The claimant insured traded in timber and had purchased marine cargo insurance from the second defendant broker since 2004. It was standard procedure for the claimant to submit a completed application form for each cargo of timber. The broker was authorised to issue cover notes and policies binding on the first defendant insurer up to HK$3m, but would seek approval for cargo valued above this threshold. Since 2004, the insured had purchased more than 70 policies through this broker. The cover note and policy at issue were both signed and countersigned by the broker and insurer (the insured value of US$1.5m being above the threshold) and each contained an express deadweight tonnage warranty: “Warranted DWT not less than 10,000”. The timber was shipped on board the Ho Feng 7, a vessel of less than 10,000 tonnes deadweight. This vessel had been used on five previous voyages. When the cargo was totally lost in January 2008, the defendant insurer denied liability on the basis of the express warranty.
The claimant insured sought to recover from the insurer, or in the alternative from the broker. At first instance, Chung J gave judgment against the insurer, but would have found the broker liable had the insurer been able to avoid liability. The Court of Appeal overturned that decision on the basis of breach of warranty.2 The claimant appealed that decision to the Court of Final Appeal.
Decision: The insurer was discharged from liability for the loss by breach of warranty. Decision of the Court of Appeal affirmed.
Held: (1) The fact that the vessel was named (which meant that information might have been discovered about the deadweight tonnage of the vessel) did not prevent the insurer from relying on the breach of warranty or affect the incorporation of the clause into the contract.
(2) The “factual matrix” considered within interpretation of the contract “does not have some separate life of its own to undermine or nullify the effect of a clear term of the contract”.3 (3) There were no grounds for rectification of the contract. (4) There was no basis for a finding of estoppel.4
* Professor of Insurance & Commercial Law, University of Southampton.
1. [2014] HKCFA 72; [2014] 2 Lloyd’s Rep 637.
2. [2013] HKCA 414; [2013] 2 Lloyd’s Rep 468; [2013] Lloyd’s Rep IR 1, noted J Davey [2014] IMCLY § 279.
3. At [49].
4. At [54].