News
Events //
Submitted by // H Rogers, COO
13 March 2018

 

HWB Partner, Kevin Bowers, and HWB Associate, Viviane Lok, presented a legal seminar on Hong Kong Residential Tenancy Law at Knight Frank's Hong Kong office on 7th March 2018.  The seminar was repeated on 13th March 2018 by popular demand.

About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; and financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

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News //
Submitted by // K Bowers, Partner; M Withington, Partner
13 March 2018


Getting Out of the Deep End
Court Decision on Assessing the Scope of Notification under a Professional Indemnity Insurance Policy

Euro Pools PLC v RSA and Sun Alliance Insurance Plc [2018] EWHC 46 (Comm)

Introduction

In a claims-made policy, the insurer's obligation to indemnify is triggered not by the occurrence of a loss, but by a third party making a claim against an insured. The insured is also normally obliged to notify the insurer of 'circumstances' which may give rise to a claim in the future. So, if the insured notifies the insurer of the relevant 'circumstances' in year 1, the resulting claim will be deemed to have been made in year 1. Consequently, the year 2 policy will exclude claims that arise from those 'circumstances' (which were notified in year 1).

In this recent English decision, the court had to decide which of two policy years a claim fell under.

Facts

The Claimant, Euro Pools, is a company which specialises in the design and outfitting of swimming pools. The pools were designed with movable floors, so that the depth can be increased and decreased. The design was insured under a "Design and Construct" professional indemnity insurance policy provided by RSA which renewed annually. This case concerns the policies for the period between June 2006 - June 2007 (1st Policy) and June 2007 - June 2008 (2nd Policy). Both policies had a limit of indemnity of £5 million. The policies contained a clause requiring notification to be given "…as soon as possible after becoming aware of circumstances…which might reasonably be expected to produce a Claim…Any Claim arising from such circumstances shall be deemed to have been made in the Period of Insurance in which such notice has been given."

During February 2007, Euro Pools discovered a major design fault with the "booms" (vertical walls used to divide a pool into different swimming areas), where the bottom of the tank was not airtight, resulting in the booms not raising and lowering as intended. This design fault was discussed with RSA during a meeting at which it was recorded that "…the bottom of the ballast tank in the booms has failed…looks like a failure is of original bracing…other options is to install what looks like a balloon/bag into tanks." This was noted in Euro Pools Proposal Form (during policy renewal) as circumstances which may give rise to a claim, which could be resolved within the policy excess by fixing the problem with inflatable bags.

During May 2008, Euro Pools experienced problems with the inflatable bags which led to Euro Pools informing RSA that they would need to redesign using a hydraulic system (rather than one using air in inflatable bags) and sought cover for the cost of doing so. Euro Pools notified this new issue as a circumstance under the 2nd Policy year.

As the 1st Policy was already exhausted, it was in RSA's interest for the claim to attach to the 1st Policy. The Court had to consider which of the two policy years the claim fell under.

Decision

Moulder J decided that Euro Pools' claim in relation to the change to the hydraulic system which was validly notified in the 2nd Policy year, did not fall within the scope of the 1st Policy in circumstances where Euro Pools "…was not aware in February 2007 of problems with the air drive system such that it could not notify the circumstances which led to a claim for the expenses of the move to a hydraulic system."

The Court relied on Kajima UK Engineering Limited v The Underwriter Insurance Company Limited [2008] EWHC 83(TCC) where Akenhead J set out the principles in relation to notification:-

(1) "…it is only circumstance of which the Insured is actually aware which can be the subject matter of a notification…the factual context is important, not only as a matter of interpretation of the notification but also, because it is only matters of which the insured is aware that can form the basis of a valid notification…" and

(2) "...there must be some causal, as opposed to some coincidental, link between the notified circumstances and the later claim…the claim which is later pursued must arise not only from the notified circumstances but also only from the circumstances of which the Insured was aware. It cannot arise from any other circumstances which may have happened or been discovered either after the notification or in any event after the expiry of the insurance cover."

In this case, although certain problems were known and notified by Euro Pools to RSA during the 1st Policy year, other problems only came to light during the 2nd Policy year and those problems were validly notified under the 2nd Policy. Furthermore, expert evidence confirmed that there was no causal link found between the different issues (i.e. between the failures in the tanks which arose as a result of the failure of the welds in the tanks, and the decision to abandon the "air drive system" to the hydraulics system).

Comment

This case illustrates the difficulties that can arise when notification takes place during the course of a developing problem (notifiable event). It is possible to notify an awareness of a general problem at the time of the first notification (i.e. with one aspect of the swimming pool design) but only become aware of problems with another aspect when changes to rectify the first problem are introduced (i.e. change to hydraulics systems).

On the basis of this decision, the insured should notify the insurer of circumstances which might reasonably give rise to a claim in general terms, and be careful to make separate notifications (under a subsequent policy) in case the subsequent problem (notifiable event) turns out to be different. The principles in this case are likely to impact upon the interpretation of the notification of circumstances under professional indemnity policies in Hong Kong.


About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; intellectual property; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.


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News //
Submitted by // K Bowers, Partner / Solicitor Advocate
13 March 2018


嚴順意v圖置有限公司(Macro Land Limited[2018] HKCU 626

"Clean Hands" Needed for Removal Orders

Introduction

This recent Lands Tribunal case involved an application for the removal of a business sign ("Sign") and an exhaust system ("Exhaust System"), both of which were fixed to the external wall of a building, which had three floors, with one unit on each floor ("Building"). The ground floor unit was for commercial use, and the first and second floor units were residential.

The Applicant was the owner of the first floor residential unit ("First Floor Unit"). The Respondent was the owner of the ground floor commercial unit ("Ground Floor Unit"). The Applicant applied for the removal of the Sign and Exhaust System from the external walls on the basis that the Respondent was in breach of the Building's Deed of Mutual Covenant ("DMC").

Background

The Applicant purchased the First Floor Unit in March 2011 by a sale and purchase agreement which incorporated an express term that the external wall of the First Floor Unit was being rented out to the tenant of the Ground Floor Unit for the purpose of hanging the Sign. The Applicant continued to rent the external wall of the First Floor Unit to the tenant of the Ground Floor Unit up until June 2014.

During June 2014, the Ground Floor Unit was rented out to a new tenant, IGL. IGL was in the food industry business. It was at this time when the Exhaust System was installed and fixed onto the external wall of the Ground Floor Unit.

Decision

Despite the Tribunal deciding that the fixing of the Sign and Exhaust System to the external walls was in breach of the DMC, the Tribunal determined that the Applicant was 'estopped' (prevented) from obtaining an order requiring the removal of the Sign (the applicant succeeded in obtaining an order for the removal of the Exhaust System).

The Tribunal explained that the Applicant was made aware of the existence of the Sign when he purchased the First Floor Unit. The Applicant received rent for the Sign fixed to the external wall of the First Floor Unit between March 2011 and June 2014. The Tribunal found that it would be unjust to allow the Applicant, having first made a monetary gain from the rent of the external wall, to then seek a removal order based on a breach of the DMC.

Comments

When seeking equitable relief from a Tribunal or Court such as declarations or injunctions (e.g. a removal order), applicants must recognise that failing to come with "clean hands" may give rise to a valid defence. Applicants should be 'estopped' (prevented) from obtaining equitable relief if they have knowledge of, derived benefit from, or encouraged the performance of the unlawful act.

 

About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

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News //
Submitted by // K Bowers, Partner / Solicitor Advocate
13 March 2018


Arjowiggins HKK2 Ltd v Shandong Chenming Paper Holdings Ltd [2018] HKCFI 93

Introduction

In the recent case of Arjowiggins HKK2 Ltd v Shandong Chenming Paper Holdings Ltd [2018] HKCFI 93, the Court of First Instance ("CFI") granted an application for an anti-suit injunction to restrain the Respondent from pursuing proceedings in Mainland China as this would have amounted to a breach of an arbitration clause contained in the JV Contract between the parties. The CFI held that as the claims made in those PRC proceedings had already been determined in previous arbitral proceedings, to allow the foreign proceedings to continue would effectively be permitting the determined issues to be re-litigated, and could also discredit the findings made by the arbitration tribunal.

Facts

The Claimant and Respondent entered into a JV Contract on 27 October 2005 in which the Claimant held a 70% stake and the Respondent 30% of the JV entity which was formed to manufacture paper products. The JV Contract contained an arbitration clause which provided that any dispute arising out of or in connection with the JV Contract "…shall be referred to and finally resolved by arbitration in Hong Kong in accordance with the Arbitration Rules of the Hong Kong International Arbitration Centre…The arbitral award shall be final and binding on the parties".

During November 2015, the Claimant obtained an arbitral award against the Respondent for payment of RMB167.9m (with interest and costs) ("Award"). Leave was then granted by the Court for the Claimant to enforce the Award as a judgment in Hong Kong.

The Respondent then commenced further proceedings in both Hong Kong and Mainland China:-

i) February 2016 - applied to set aside the order granting leave to the Claimant to enforce the Award, which was dismissed;

ii) November 2016 - sought to restrain the Claimant from petitioning for its winding up, following a statutory demand served by the Claimant on the Respondent for RMB310m which included the amounts due under the Award and other judgments and orders made by the PRC Courts ("Winding Up Proceedings"); which was dismissed; and

iii) July 2017 - commenced proceedings before the Weifang Court in Mainland China, against the Claimant and a director of the JV Company formed by the Respondent and the Claimant. It is noteworthy that the claims made in and parties to this action were the same as in proceedings previously commenced by the Respondent, also before the Weifang Court in 2013, which were withdrawn.

The proceedings commenced before the Weifang Court gave rise to the Claimant's application for an anti-suit injunction. The Claimant's application was based on the following grounds:-

i) commencing the foreign proceedings amounted to a breach of the arbitration agreement; and

ii) the claims in the foreign proceedings had already been determined in the arbitration as well as in previous Hong Kong proceedings when the Respondent attempted to set aside the Award, meaning that the foreign proceedings were merely an attempt to re-litigate issues that had already been determined.

Respondent is bound by arbitration tribunal's findings and any new claims must be arbitrated

In granting the injunction against the Respondent, the Court considered the claims made in the foreign proceedings and held that these proceedings fall within the scope of the arbitration clause in the JV Contract, entitling the Claimant to apply for a stay of the proceedings as provided under the JV Contract. The CFI also held that the claims made by the Respondent had already been determined by the arbitration tribunal and that it was consequently, bound by these findings. It would have been "vexatious and oppressive" for the Respondent to have reopened these determined issues. Should there be any new claims brought by the Respondent, the Court found that they should be brought by way of arbitration proceedings as provided for by the arbitration clause in the JV Contract.

Respondent's conduct found to be unconscionable

The CFI repeated the long-standing principle that in exercising its discretionary powers to grant an injunction, the conduct of the parties is a relevant factor for the Court's consideration.

In the Winding Up Proceedings, the presiding Judge noted that the conduct of the Respondent was "unethical, reproachable and unacceptable, as showing disregard and contempt for the Hong Kong court and the integrity of the financial and legal system", as it attempted to argue that as a foreign company, the Hong Kong Court had no jurisdiction to make a winding up order against it, and that it could not be demonstrated that the Claimant would derive sufficient benefit from the making of the winding up order in Hong Kong. The CFI further held that the Respondent showed "complete disrespect for the arbitration agreement and the arbitral process to which it had voluntarily agreed under the JV Contract".

Comment

This case reflects the Hong Kong Courts' willingness to grant anti-suit injunctions to uphold the validity of arbitral awards and arbitration clauses. It is a welcome decision as it demonstrates that the determination of an arbitration tribunal is final and parties are prohibited from making attempts to re-litigate issues that have already been determined or by litigating fresh claims, if that would contravene an arbitration clause in the underlying agreement.

 

About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

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