HILA – 2nd essay competition

Hong Kong Insurance Law Association Limited – Essay Competition

Insurance law has become increasingly important in Hong Kong, both in practice and as part of the legal education system, in recent years. To foster students’ interest in insurance law, the Hong Kong Insurance Law Association Limited (HILA) is holding this essay competition for the second time.


The competition is open to undergraduate law students (LLB), students on the Juris Doctor (JD) progamme and undergraduate students of other insurance-related disciplines (such as transport and logistics). To be eligible, participants must be enrolled as full-time students at universities in Hong Kong. Please submit a copy of your proof of enrollment on an eligible course together with your essay submission.

The topic

Students are invited to submit an essay of no more than 5,000 words (including footnotes, excluding table of contents and bibliography) on the following topic:

From a pre-contractual duty of disclosure to a duty of fair presentation in the Insurance Act 2015: Should Hong Kong adopt the same approach?

The essay should demonstrate originality of ideas and quality of research with proper citations and no plagiarism.

The Prizes

HK$5,000 for the winner

HK$3,000 for the first runner-up

HK$2,000 for the second runner-up

The winner of this essay prize will be considered for a one-week internship opportunity at the Hong Kong office of the Lloyd’s of London and the runner-ups will be provided with the guaranteed interviewing opportunity for an internship position at Zurich Insurance Company Limited or any other company to be announced by the HILA.

The result of the essay prize competition will be announced at the next ‘speed-dating’ event to be organised by the HILA, the exact date is to be confirmed, but it is likely to be in early March 2016. custodia cover iphone The awards will be presented at the HILA’s next Annual Dinner which is likely to take place in late May or early June. fundas iphone 7 8 plus Recipients of the award will be invited to attend this prestigious dinner for free.


1. The essay must be no more than 5,000 words (including footnotes, excluding table of contents and bibliography), typed and in double-line spacing. fundas huawei p smart 2019 No type style smaller than Times New Roman 12 is to be used, except for footnotes. Citations must be in footnotes (not endnotes).


2. fundas samsung galaxy a5 Footnoting and citation styles should comply with the Oxford University Standard for the Citation of Legal Authorities (OSCOLA 4th edn) available at http://www.law.ox.ac.uk/published/OSCOLA_4th_edn_Hart_2012.pdf


3. fundas huawei p10 lite No person can submit more than one essay in this competition.


4. fundas huawei p8 lite The essay must be the sole creation and original work of the author. Any form of plagiarism will result in automatic disqualification.


5. fundas samsung galaxy j3 The essay must contain a cover page stating your name, your university, programme which you are studying, and also the word count.


6. Winners and runner-ups are entitled to refer to this achievement in their CV.


7. One soft copy in PDF format must be sent by e-mail by 6 p.m. fundas samsung galaxy s10 Hong Kong time on the deadline for submission to publications-officer@hila.com.hk


8. fundas huawei p8 By submitting an essay in this competition, the author irrevocably consents to his or her essay being forwarded to the judges and HILA board members and uploaded onto the HILA website. fundas huawei p10

Deadline for submission: 20 December 2015


Judging Panel

1. fundas huawei p9 custodia cover samsung Professor Robert Merkin – Lloyd’s Professor of Commercial Law, University of Exeter

2. Ms. Joanie Ko – Partner, Kennedys

3. fundas huawei p10 lite fundas samsung galaxy s9 Mr.

Update of the court’s role in sanctioning a transfer of insurance business

The December 2012 Update examined the role of the court in sanctioning a transfer of insurance business in Hong Kong. fundas samsung galaxy j3 Subsequent to the October 2012 Judgement of the Court of First Instance in Re AXA (Hong Kong) Life Insurance Co. Ltd. [2012] HKCU 2197 , the transfer of insurance business from one insurer to another has once again fallen under the spotlight in the Judgement in Re Transamerica Life Insurance Co. [2013] HKCU 709. fundas huawei p smart 2019 In exercising its discretion to sanction the transfer, the court reaffirmed the principles laid down in the leading English authority of Re London Life Association Ltd. custodia huawei which has been applied in a series of similar petitions in Hong Kong (e.g. coque samsung a70 Re AXA). The court also discussed several concerns of the policyholders which the court did not address in Re AXA, with particular significance for cases which transfer long-term business from one jurisdiction to another.


The facts of the case are similar to the Re AXA case. It concerns a joint petition presented by Transamerica Life Insurance Company (“TLIC”) and Transamerica Life (Bermuda) Limited (“TLB”), seeking sanction of a scheme to transfer the whole of TLIC’s long-term business under section 24 of the Insurance Companies Ordinance (Cap. 41). As both TLIC and TLB are insurers authorised to carry on the same classes of long-term business in Hong Kong, the object of the scheme was to provide greater efficiencies for the business by transferring from TLIC to TLB all of the long-term business then carried on by TLIC in or from Hong Kong, which included around 13 million ordinary life insurance policies and contracts of insurance.

Under the scheme, there was no provision of any right or option for the policyholders to opt out of the policies, and the insurance companies had agreed to ensure that the policyholders would not be adversely affected by the transfer. Despite the protection that TLIC and TLB seemingly offered to the policyholders, (discussed below), two policyholders lodged their written objections with the court.
Legal Principles
Similar to the Re AXA case, the court followed the principles set out in Re Winterthur Life [2005] 3 HKC 34, which were established by the English authority of Re London Life Association Ltd (21 February 1989, unreported) and which (as summarised in the December 2012 Update) by reference to the same authorities, are as follows:-

  • the court has an absolute discretion whether or not to sanction a scheme, but it must exercise such discretion by giving due recognition to the commercial judgment entrusted by the company’s constitution to its directors;
  • the court is concerned whether a policyholder, employee, other interested person or any group of them will be adversely affected by the scheme;
  • the court will pay close attention to the views of the independent actuary and the Hong Kong Insurance Authority on the likely impact of the scheme on policyholders;
  • the fact that individual policyholders or groups of policyholders may be adversely affected does not mean that the scheme has to be rejected by the court. The fundamental question is whether the scheme as a whole is fair as between the interests of the different classes of persons affected;
  • it is not the function of the court to produce what, in its view, is the best possible scheme;
  • the details of the scheme are not a matter for the court provided that the scheme as a whole is found to be fair; and
  • in arriving at its conclusion, the court should first determine what the contractual rights and reasonable expectations of policyholders were before the scheme was promulgated and then compare those with the likely result on the rights and expectations of policyholders if the scheme is put into effect.

Once the scheme has been sanctioned by the court, it will become binding on the transferor, the transferee and the policyholders.

Issues and Decision
The policyholders challenged the scheme under a few heads. Some of them were not been discussed in Re AXA including, among others, the financial security of policyholders, expectation on the discretionary dividends and charges, and the tax payable by policyholders due to a change in issuer’s place of incorporation.

Firstly, the policyholders were concerned that TLB’s financial position was not as strong as TLIC’s financial position and hence, that their financial security may be adversely affected by the transfer. fundas huawei p30 lite fundas iphone 7 8 plus Under the scheme, TLIC would issue a claims payment guarantee to each policyholder whereby TLIC would pay directly to the holder if TLB failed to pay a valid claim solely by reason of becoming insolvent. fundas huawei y6 2017 The
court was of the view that such undertaking provided sufficient safeguard to the policyholders’ financial security.

Secondly, although TLB undertook under the scheme that it would, for 10 years afterthe sanction of the scheme, exercise the same level and extent of discretion as TLIC in relation to all dividends, credited rates, premium rates or charges under the policies, the policyholders were concerned about any adverse effect that they may potentially face after 10 years. The court was satisfied that the future benefits and charges of the policies would not be adversely affected as TLB would be under an obligation to use similar setting practices and methodologies after the initial 10 years.

Thirdly, as a result of the transfer, the policyholders and TLB would become jointly and severally liable for a US exercise tax at 1% per annum. Although TLB agreed to pay the tax at no cost for the policyholders, the policyholders remained concerned about the risk of future tax, charge or levy imposed on them by the US tax authorities and suggested that the insurance companies should provide a “blanket
indemnification” to the policyholders. Although the court rejected this notion, it did impose a condition on the sanctioning of the scheme that the insurance companies must agree to provide a limited tax indemnity for any additional tax liability should the policies be issued by a non-US issuer.

Re Transamerica Life involved a transfer of insurance business from the US to Bermuda. Unlike Re AXA, the issue of a potential tax, charge or levy liability was raised by the dissenting shareholder and addressed by the court. fundas huawei p smart fundas samsung galaxy s20 Although the court ordered a limited indemnity to be provided, the case serves to reinforce the view that the court is reluctant to interfere with or perfect a scheme to give better protection to the policyholders. Critics challenge the court’s view on fairness, as it requires the policyholders to show nothing less than an obvious and material detriment in order for the court to refuse to sanction the scheme, which is illustrated by the court’s ready acceptance of the insurance companies’ submission that the future financial position of the policyholders would not change materially, or adversely. fundas huawei mate 10 lite The policyholders bear a heavy burden of proof in respect of their potential detriment in order for the court to refuse such a sanction.


(1) The editor would like to thank Mr. Kevin Bowers of Howse Wiliams Bowers who contributed this article.

Hong Kong Court of Appeal’s ruling on ‘deadweight’ warranty and duty of disclosure


In Hua Tyan Development Limited v Zurich Insurance Company Limited [2012] HKCU 1632 the Court of First Instance decided in favour of the insured in respect of the duty of disclosure under an insurance policy. fundas samsung galaxy s7 More than a year later, the Court of Appeal handed down a judgment [2013] HKCU 1858 that overturned the lower court’s decision and which should provide a degree of comfort to insurance companies in Hong Kong.


A vessel carrying cargo belonging to Hua Tyan (the insured) sank during a voyage and the cargo was lost. fundas huawei p20 The insured claimed $1.5 million from Zurich Insurance (the insurer) and Courtesy Insurance (the broker), representing the value of the cargo insured under the policy. fundas samsung galaxy s6 edge plus The policy contained a deadweight tonnage warranty that provided coverage for a vessel with a deadweight tonnage of no less than 10,000 tonnes. The vessel named
in the policy did not fulfil the deadweight tonnage warranty requirement and the insurer thus refused to pay the claim.

Court of First Instance decision
The Court of First Instance dealt with the construction of the contract and held that there had been an inconsistency in the contract because although the cover sheet provided that the vessel named Ho Feng 7 was covered, the policy incorporated the deadweight tonnage warranty. Reaching his decision on the facts, the judge held that the policy was intended by the parties to cover the named vessel, notwithstanding the existence of the deadweight tonnage warranty.

In respect of the insured’s obligation to disclose material information, the insurer contended that an insurance contract imposed a duty on the insured to make full and frank disclosure, and claimed that the insured merely disclosing the vessel’s name and not its deadweight tonnage was insufficient to discharge that duty. The judge held that as the deadweight tonnage information was readily available on the Internet, and as the insurer was experienced in the marine insurance business, it could easily have obtained the relevant information which “cannot be regarded as outside the knowledge of the insurer”.Also in the Court of First Instance, the insured had pleaded an alternative claim against the broker. Although the court held that the insurer was liable, it discussed the liability of the broker. The broker would also be liable for the failure of the policy, as it is the broker’s duty (under the insured’s instructions to the broker) to secure an effective marine insurance coverage and reasonably ensure that the policy meets the needs of the insured.

Court of Appeal decision
The appellate court overruled most of the trial judge’s findings. It held that the judge had been wrong in his construction of the policy, and that the insurer was to provide the coverage subject to the insured giving the warranty that the vessel’s deadweight tonnage was no less than 10,000. fundas huawei y6 2017 In order to sustain the insured’s case on the inconsistency of the terms of the policy, it had to be established that at the time of issuance of the policy, both parties had actual knowledge of the vessel’s deadweight tonnage. The Court of Appeal went on to discuss the insurer’s presumed knowledge. The insurer is presumed to know only matters which it should know in the ordinary course
of business. fundas huawei p10 iphone hoesjes The court distinguished between whether the insurer could have inquired into the matter and whether it should have. coque samsung j3 In order to establish the latter, the court suggested that the insured would have to adduce evidence from the marine insurance trade about its practice on inquiry, instead of merely relying on evidence that shows the availability of the information on an internet website. The court was
not satisfied that in this particular case, the insurer should have inquired into the information merely because of its availability on the Internet.

The broker, in contrast, did not appear at the appeal hearing. fundas huawei p20 lite As the insured claimed damages against the broker in the alternative and the insurer was held not to be liable, the court made order against the broker for the full amount claimed.

The parties’ knowledge of the vessel’s deadweight tonnage was the key issue in the case. fundas iphone fundas huawei p8 The Court of First Instance placed the burden of due diligence firmly on the insurer’s shoulders and the fact that the information was accessible on the Internet would not relieve the insured from disclosing the information. fundas iphone 7 8 plus The Court of Appeal significantly departed from the first-instance judgment and held that the insured was
still required to disclose information so long as it was material to the risk. fundas samsung galaxy s7 The fact that the material information was available and accessible on the Internet did not exempt the insured’s duty to make disclosure.
The Court of Appeal did not explore deeply the broker’s liability in its failure to facilitate an insurance contract that fit the insured’s specific requirements. Judgment was entered against the broker simply because it was absent from the hearing and did not have its case properly argued before the court. The Court of Appeal decision has been welcomed by insurers in Hong Kong. The Court of First Instance decision cast doubts on the level of due diligence required of insurers and the extent to which insured parties can avoid their duty of disclosure. The responsibility of disclosing material facts, regardless of whether they are available on the Internet or other public domain, is now shifted back to the insured, whereas insurers are not expected to undertake inquiries in relation to every material fact that may be known to the insured. However (and as a note of caution), if the material information should have come to the insurer’s knowledge in the ordinary course of its business, it should retain the responsibility for making relevant inquiries.

(1) The editor would like to thank Mr. Kevin Bowers of Howse Williams Bowers who contributed this article.

Final word from the Court of Final Appeal on the ‘deadweight’ warranty

On 10 September 2014, fundas samsung galaxy s6 edge plus bague homme the Court of Final Appeal in Hong Kong handed down its judgment in Hua Tyan Development Ltd v Zurich Insurance Co. coque iphone 7 fundas huawei p10 lite Ltd and Another (The “Ho Feng 7″) [2014] HKCFA 72. iphone 7 hoesjes fundas samsung galaxy s9 The full text of the case can be accessed via the following link:


In summary,

“The DC Merwestone” in the Court of Appeal

On 16 October 2-14, fundas samsung galaxy s9 the Court of Appeal in the United Kingdom has handed down its judgment in Versloot Dredging BV; SO DC Merwestone BV v HDI Gerling Industrie Versicherung AG and the others (The “DC Merwestone”) [2014] EWCA Civ. fundas huawei p30 pro samsung hoesje 1349. fundas iphone fundas iphone 7 8 se2020 The full text of the judgment can be accessed here.

In summary, fundas samsung galaxy s10 plus the Court of Appeal prefered the view propounded by Mr. fundas huawei p smart coque iphone xr Popplewell QC (as he then was) in Agapitos v Agnew [2002] EWCA Civ. custodia cover iphone fundas huawei y6 2019 247 to that of the tentative view of Popplewell J.

Publishing of Insurance Bill

The English and The Scottish Law Commissions have published its report on ‘Insurance Contract Law: Business Disclosure; Warranties; Insurers’ remedies for Fraudulent Claims; and Late Payment’. fundas huawei p30 pro fundas huawei mate 20 pro The full report can be found athttp://lawcommission.justice.gov.uk/docs/lc353_insurance-contract-law.pdf

The report contained the draft ‘Insurance Bill’ which is now in the House of Lords.

“Perils of the Sea” and “Fraudulent Devices” – The DC Merwestone” [2013] EWHC 1666 (Comm)

The recent decision of Mr Justice Popplewell in Versloot Dredging BV v. HDI Gerling and others (The DC Merwestone) [2013] EWHC 1666 (Comm)) in the Commercial Court is of considerable significance to marine insurers and non-marine insurers alike, since it involves a detailed examination and hostile critique of the development and application of the concept of “fraudulent devices” in the context of an insurance claim.

The case involved the defence by hull and machinery underwriters of a claim for the cost of replacing a vessel’s engine following a flooding incident in the Baltic in January 2010. fundas samsung galaxy s20 plus The policy was on the Institute Time Clauses – Hulls 1.10.83, with the Additional Perils Clause. Underwriters ran three defences, namely (1) that the damage to the engine was not caused by an insured peril; (2) that the damage to the engine was attributable to the unseaworthiness of the vessel on sailing, with the privity of the assured; and (3) that, in any event, even if the claim was recoverable in principle, the assured had forfeited its claim by reason of the employment of fraudulent devices in the presentation of the claim.

Overview of the Casualty

The circumstances of the casualty were stark. The vessel called at Klaipeda, Lithuania to load a cargo of scrap metal in January 2010. Whilst she was there, the crew used the vessel’s emergency fire pump and, having done so, negligently failed to purge the pump of water and close the sea valve. In consequence, water remained in the pump. Due to the extremely low ambient temperature (minus 35°C), the water in the pump froze, and expanded as it did so, thus causing the pump casing to crack and the strainer lid in the pump housing to become distorted. The crack and the distortion created a direct opening between the sea water outside the vessel and the interior of the vessel’s bowthruster space, a supposedly watertight compartment at the forward end of the ship. Whilst the vessel remained at the loadport, there was no ingress of water into the bowthruster space because the ice created a watertight barrier. However, when the vessel sailed from the loadport en route to Bilbao, she passed through warmer waters, and the ice melted, with the inevitable consequence that there was an ingress of water into the bowthruster space.

The ingress into the bowthruster room should not have been a problem because that space was supposed to be a watertight space fitted with a bilge alarm which, all being well, should have alerted the crew to any water ingress. Unfortunately, however, the bulkhead between the bowthruster space and the duct keel (a tunnel running the length of the vessel) was not watertight. The water was therefore able to enter the duct keel. fundas samsung galaxy s4 The duct keel itself should have been watertight at the aft end of the vessel but, again, it was not, with the consequence that the water was able to enter the engine room. fundas samsung galaxy a70 It was admitted that the vessel was unseaworthy with regard to the lack of watertight integrity at both ends of the duct keel. Due to the positioning of the alarms, the crew was not alerted to the ingress of water into the engine room until it had reached a level of about one metre or more above the floor plates in that space.

At that point in time, the crew sought to deploy the vessel’s pumps, which had a theoretical pumping capacity of the order of 300 tonnes per hour, and as such, should have been capable of stemming the ingress (determined to be of the order of 60 tonnes per hour) without difficulty. However, there were a number of deficiencies in the vessel’s pumping system, the combined effect of which was to reduce dramatically the vessel’s actual pumping capacity. fundas iphone In the event, therefore, the crew was unable to stem the ingress using the vessel’s pumps and the ingress continued until such time as the engine was completely submerged.

The assured sought to recover the cost of replacing the engine.

Standing back from the casualty, it will be noted that the critical aspects of the vessel’s flooding defences were deficient (the bilge alarms did not give timely warning of the ingress, bulkheads were not watertight as required and the vessel’s pumping arrangements were seriously deficient and inadequate), with the result that what should have been an inconsequential ingress into the forward space became a major flooding incident which could have led to the vessel’s sinking.

Coverage Issues

The underwriters’ primary case with regard to coverage was that the proximate cause of the ingress and the damage to the engine was crew negligence in terms of the failure to drain the emergency fire pump and to close the sea valve, which negligence caused the crack in the emergency fire pump and the distortion of the strainer cap, and rendered the ingress inevitable. Underwriters argued that although crew negligence was an insured peril under the Inchmaree clause, there had been various respects in which the Assured/Owners/Managers had failed (in a causatively relevant way) to exercise due diligence, such that the due diligence proviso in the Inchmaree clause precluded recovery.

The assured’s primary case was that the proximate cause of the loss was “perils of the seas” on the basis that the ingress was “fortuitous” by reason of the pre-sailing crew negligence that led to the damage that led to the ingress. The assured also contended that crew negligence was a proximate cause of the loss and that there had not been a causative want of due diligence on the part of the Assured/Owners/Managers. Finally, the assured contended that a proximate cause of the loss was repairers’ negligence in terms of their failure in 2001 to seal both ends of the duct keel to make them watertight.

Mr Justice Popplewell held that each of the assured’s contended for perils were proximate causes of the loss. In the writer’s opinion, the most significant aspect of his judgment in this respect is his determination that although the ingress was inevitable from the moment that the fire pump cracked and its strainer lid became distorted, and, as such, was inevitable prior to the vessel sailing from the loadport, the post-sailing ingress was nonetheless “fortuitous” on the basis that the pre-sailing crew negligence provided the requisite element of fortuity. The judge held that “at the time of the commencement of the voyage the ingress of water was an inevitable certainty” but he held that the dicta of Viscount Finlay Lord Sumner in the House of Lords in Samuel v. Dumas to the effect that “…it is always open to the underwriter on a time policy to show that the loss arose not from perils of the seas but from the unseaworthy condition in which the Vessel sailed” was restricted to circumstances where the unseaworthiness at the point in time of sailing was due to the vessel “debility” (due to wear and tear) as opposed to unseaworthiness caused by some fortuitous pre-sailing act or omission.

We believe this decision represents the only case in which it has ever been decided by an English Court that a loss can be recovered as caused by perils of the sea in circumstances where the vessel sustained damage by an ingress of water that was inevitable at the point of setting sail, due solely to her pre-sailing unseaworthy condition, without the intervention of any subsequent accident or fortuity.

Having determined that the loss was proximately caused by perils of the seas, the issues with regard to the other perils and as to due diligence ceased to be relevant. fundas huawei y5 2019 The judge went on to find, however, that if he were wrong on his finding that the loss was proximately caused by perils of the seas, there had not on the facts been a causative want of due diligence on the part of the Assured/Owners/Managers. He made this finding notwithstanding the fact that the evidence demonstrated that no formal guidelines, procedures or checklists had been put in place by the Assured/Owners/Managers to give the crew guidance and a means of reducing the risks posed by the extreme cold weather conditions to which the vessel would be exposed, and notwithstanding the critical and causative respects in which the vessel was unseaworthy. This case exemplifies the considerable difficulty faced by underwriters in making good a defence based on the due diligence proviso.

Other significant aspects of the judgment on coverage, whilst strictly speaking obiter (on the basis that they were not essential to his decision), include dicta with regard to the proper construction of the due diligence proviso in the Inchmaree clause and an implicit finding (the point was not argued) to the effect that, under the Additional Perils Clause, it is not necessary for the peril (repairers’ negligence in this case) and the damage to occur in the same policy year. This is significant because it has been a point of some controversy as to whether under the Additional Perils Clause, it is necessary to have coincidence of peril and damage within the same policy year or whether a peril occurring in a prior policy year which leads to damage in a subsequent policy year, might lead to a recoverable claim on the latter policy.

Underwriters’ defence based on unseaworthiness with privity (s.39(5) of the Marine Insurance Act) failed, on the basis of lack of privity of the unseaworthiness and lack of causation.

In the circumstances, the Court determined that the assured’s claim for the cost of repairing the engine was in principle recoverable in full, having been caused by perils insured against under the Hull and Machinery Policy.

Fraudulent Devices

Underwriters’ final argument, that the claim had been forfeit by reason of the assured’s employment of a fraudulent device or devices, was, however, successful.

Following the casualty, underwriters’ solicitors sought the assured’s input with regard to its case as to the cause of the ingress, its spread and why it could not be controlled by the vessel’s pumps. coque iphone x These questions were asked because underwriters were concerned as to how a minor ingress into the forward space would have led to a major casualty in which the vessel was almost lost.

The assured responded by letter dated 21 April 2010 indicating that its internal investigations had revealed that although a bilge alarm had sounded at noon, this had not been investigated at the time because the vessel was rolling in heavy weather, with the effect that the flooding was not noted until approximately nine hours later. fundas huawei mate 20 When underwriters’ solicitors asked for details as to the evidence of the noon alarm, the assured responded on 27 July 2010 in terms that it had been informed by the Master that the alarm had sounded at noon but that it had not been investigated because the vessel had been rolling.

In fact, it was subsequently admitted by the assured that the forward bilge alarm had not sounded at noon. It followed that the explanation for not investigating the alarm (i.e. coque samsung j3 because the vessel was rolling) was also untrue. fundas huawei p8 lite 2017 Material emerged during disclosure to indicate that the assured had no basis for asserting as a fact, as at 21 April 2010, that the alarm had sounded at noon. Underwriters amended their defence to plead that the letter of 21 April 2010 (among other things) was a “fraudulent device”, employed in connection with the claim, and that the claim was therefore forfeit.

The General Manager of the assured, who issued the 21 April 2010 letter, gave evidence to the Court to the effect that he had spoken to the Master on 20 April 2010 and that therefore he had an honest basis for putting forward the narrative relating to the noon alarm the following day. That evidence was rejected by the judge as an “invention”, and the judge concluded that the letter of 21 April was “false and misleading” and that in that respect the Manager had no grounds to believe it was true and was reckless. It was held that this was “an untruth told recklessly in support of the claim”. The judge held that the Manager suspected that the noon alarm narrative might not be supported by the crew and that he did not ask the crew because “he did not want the absence of confirmation from the crew to get in the way of an explanation which involved no fault on the part of the Owners or managers”. In the circumstances the judge found that the statements were put forward by the assured recklessly and without grounds for belief as to their accuracy. fundas huawei p10 The judge further held that the letter was intended by the assured to promote the claim in the hope of prompt settlement and that the false statements met the materiality test (“not insubstantial”, “not immaterial, “not de minimis”) propounded by Mance LJ in Agapitos v. Agnew. bague femme On this basis the judge ruled that, applying Agapitos v. Agnew, the assured had deployed a fraudulent device and that its claim was therefore forfeit.

The judge therefore dismissed the assured’s claim.

In doing so, however, the judge expressed regret in reaching this conclusion. He considered that the assured’s fraudulent conduct lay at the lower end of the culpability scale; on the basis that it was “a reckless untruth, not a carefully planned deceit”, and was told on only one occasion and not persisted in at trial (though the Manager did give false evidence about his “invented” conversation with the Master that was said to have taken place on 20 April 2010). The judge considered that the forfeiture of the claim in the circumstances was “disproportionately harsh”.

Although the judge adopted and applied Mance LJ’s dicta in Agapitos v. Agnew (which being obiter was, technically, not binding on him) in the absence of submissions that he should adopt a different approach, the judge did indicate that he considered that “the low and relatively inflexible threshold which is the test of materiality” propounded in Agapitos v. Agnew was “in a number of respects unsatisfactory”. He considered that “if the anomalous [fraudulent claim] rule is to be extended to fraudulent devices used in support of valid claims, it is to my mind important that it should not itself be allowed to be used as an instrument of injustice”

The judge went further to say that he “would be strongly attracted to a materiality test which permitted the court to look at whether it was just and proportionate to deprive the assured of his substantive rights taking into account all the circumstances of the case”. However, as noted, the judge nonetheless determined to apply the test propounded by Mance LJ in Agapitos v. Agnew despite his stated regret at the consequent result, namely the forfeiture and dismissal of the claim.


The judge has since given the assured leave to appeal to the Court of Appeal concerning the dismissal of the claim on the basis of the fraudulent device rule. fundas iphone 7 8 se2020 Permission to appeal has not been limited simply to the issue of “materiality” and it will be interesting to see how the assured’s case is developed in the appeal given that the judge recognised that the fraudulent claim rule (and the fact that forfeiture is the appropriate sanction) is established at the highest judicial level and that the extension of that rule to fraudulent devices in Agapitos v. fundas huawei p30 pro Agnew “has been recognised by the Supreme Court in Summers v. Fairclough and applied by the Privy Council in Stemson v. AMP General, and recognised or applied in a number of first instance decisions…”. In a very real sense, therefore, if the appeal involves an attempt to overturn the fraudulent devices extension or to introduce a sanction other than forfeiture, it will involve a challenge to what has been viewed and applied as settled law.

The appeal will also proceed in the interesting context of the work currently being undertaken by the Law Commissioners in terms of “Post Contract Good Faith and other Issues” following their recent consultation.

The Law Commissioners accepted the view of the overwhelming majority of respondents; and their recommendations include a proposal for statutory reform to establish forfeiture as the statutory remedy for fraud in the insurance claims context. It will be interesting to see the extent to which the Court of Appeal will take into account the results of the Law Commissioners’ consultation and their recommendation for statutory reform when the case comes before them.


[1] The editor would like to thanks Mr. Kelvin Lee of Ince & Co who contributed this article which was published in Ince & Co Insurance & Reinsurance.

Briefing on the new Hong Kong Companies Ordinance and its Impact on Directors’ duties and liabilities

Peter Gregoire
General Counsel, AIG Insurance Hong Kong Limited

The new Hong Kong Companies Ordinance (CAP. 622) (“New Ordinance”) which came into force on 3rd March 2014, seeks to provide a modernized legal framework for Hong Kong companies. fundas iphone 11 The objectives of the New Ordinance are to enhance corporate governance, ensure better regulation, facilitate business and modernize the corporate legal framework.

The New Ordinance impacts and clarifies:
• the duties of care which company directors owe at law;
• the extent to which directors can be indemnified by their company for their liabilities; and
• the ability of a company to buy insurance covering directors against these liabilities.

As a result, Hong Kong companies should review the indemnity provisions in their articles of association and their Directors and Officers (“D&O”) insurance requirements in light of the New Ordinance (a practice which, it is recommended, should be completed on a regular basis in any event). custodia cover iphone This briefing is written with such review in mind.


Why do company directors need protection by way of company indemnities and insurance?

The simple answer is that being appointed as a director of a company is a significant responsibility. As a director, you serve as a custodian, placed in a position of trust by the shareholders to run and look after the company. Out of that trust emerge the legal duties you owe: to the company, to shareholders, to potential investors, to third parties and to regulators watching over the company’s business. And from these legal duties springs a director’s personal exposure to liability which (as we shall see in Section C.) the director cannot be shielded from, or be indemnified for by the company.

The duties and legal obligations which give rise to a director’s personal liability emerge from various legal sources:

i) The new statutory duty of reasonable care skill and diligence

The New Ordinance (CAP. 622) introduces a new statutory duty, requiring a director to exercise reasonable care skill and diligence in his/her role as a director.

In exercising this duty, the director is to be tested against both the standard of a reasonable hypothetical diligent director (the “Objective Test”) and a subjective standard which takes account of the director’s own actual general knowledge, skill and experience (the “Subjective Test). Essentially, the Objective Test sets a minimum standard which all directors must meet. The Subjective Test raises that standard for the particular director based on his/her actual professional experience and qualifications. For example, a director who is a qualified accountant may be held to a higher standard when a matter of the company’s accounting practices comes before the board, when compared with a director without such accounting qualifications.

The director owes this new statutory duty to the company and the principal remedy if a director breaches this duty is compensation by damages.

This new codified duty of care is not entirely new. It replaces the duty of “reasonable skill and care” which a director used to owe at common law. However, the codification of the duty in the New Ordinance clarifies the standard of care (by reference to the mixed Objective/Subjective test) which a director must meet.

As a matter of good practice, therefore, directors should give thought to the higher standard to which they will be held by reason of their specific expertise, qualification and experience and ensure their focus and contribution in and outside board meetings on issues in which they have such expertise, reflects this higher standard.

ii) Common law and equitable duties

Directors also owe legal duties at common law and in equity (essentially the precedents set by judges in the judgments on cases that go to court). fundas samsung galaxy s10 These duties include:

• a duty to act in good faith and for the benefit of the company;
• a duty to avoid conflicts between the director’s personal interests and the interests of the company;
• a duty not to make “secret profit” (i.e. fundas huawei p30 pro fundas huawei p20 pro using his position as a director to obtain a benefit for himself from a third party, without the company knowing);and
• a duty to exercise his powers as a director for the benefit of the company and to comply with the company’s articles of association and resolutions.

If a director breaches any of these duties he/she may be sued for damages by the company.

In addition, a director may be liable for negligent misstatement at common law, effectively by making a false representation to a third party in which the director indicates that he assumes personal responsibility for the representation and the third party relies on such representation to his detriment. fundas iphone x xs In these circumstances, the director may be sued for damages by the third party.

iii) Other statutory duties

Legislation in Hong Kong with which all companies must comply, contains provisions penalizing directors if the company fails to comply with requirements in the legislation. This is due to the notion that imposing civil or criminal liability on a director personally, is the principal means by which legislation can ensure a company complies with the law. It is for this reason alone, that exposure of directors to both civil and criminal liability (and criminal fines and imprisonment) is constantly increasing.

One can see this notion in section 101E of the Criminal Procedure Ordinance (Cap 221) (“CPO”) which provides that where an offence under any Ordinance is committed by a company and it is proved that the offence was committed with the consent or connivance of a director or other officer concerned in the management of the company, the director or other officer is guilty of the like offence.

Common examples of such penalties which could be imposed on directors in legislation which applies to all companies are set out in the table on the following page.

Common Examples of Directors’ exposure to personal liability in Hong Kong legislation

Legislation Directors’ potential exposure to personal liability
Companies Ordinance In addition the statutory duty of reasonable skill care and diligence, the New Ordinance also imposes personal liability on directors to take all reasonable steps to ensure the company keeps proper accounting records. Further a director can be liable for fraudulent trading under section 275 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance for allowing the company to incur further credit knowing there is no reasonable prospect of avoiding insolvency.
Employment Ordinance Directors can be personally liable for a fine if they employ someone or fail to terminate someone where they know the person’s wages cannot be paid (sections 31 and 63A). Further, failure to pay wages to an employee in breach of the wage provisions under this Ordinance can attract a fine or imprisonment.
Mandatory Provident Fund Scheme Ordinance Directors can be personally prosecuted for various offences, such as failing to enroll employees in an MPF scheme, failing to pay mandatory contributions etc.
Occupational Safety and Health Ordinance This Ordinance requires every employer, so far as reasonably practicable, to ensure the safety and health at work of all employees in the company. Failure to do so attracts fines and imprisonment and the Ordinance provides for directors being personally liable.
Factories and Industrial Undertaking Ordinance This Ordinance applies minimum health and safety requirements to companies in the industrial sector and breaches attract fines and imprisonment. coque iphone 8 Again the Ordinance makes provisions for directors to be guilty if the offence is committed with their consent, connivance or attributable to their neglect.
Bribery Ordinance If a director (as agent of the company) accepts an “advantage” from a third party in connection with doing something in relation to the company’s affairs, he will be subject to ICAC investigation and potentially guilty of an offence and liable to fines and imprisonment.
Discrimination Legislation Hong Kong has anti-discrimination legislation against discrimination on grounds of disability, sex, family status and race discrimination. fundas iphone 7 8 plus If a director commits any unlawful discriminating act himself, he can be personally made liable to pay damages to the victim and be prosecuted.
Securities and Futures Ordinance (Listed Companies only) Directors of listed companies are also exposed to various liabilities under the Securities and Futures Ordinance in relation to the issue and dealings in their company’s securities and in providing information in relation to this. In particular, directors could be liable for market misconduct, failing to disclose inside information, providing false or misleading representations or information to regulators issuing false or misleading public communications or failing to disclose a director’s interests in shares or debentures of the company.


Old-school thinking had it that protecting directors’ exposure to personal liability might be against a company’s interests, as it may reduce their incentive to act with care. However, as corporate governance standards and theories have advanced, so has the realization that protecting the company’s directors benefits all the key stakeholders in a company:

Directors – Directors are the first obvious beneficiaries of being protected. Faced with personal exposure to liability, directors are under pressure to ensure their companies adopt and maintain robust corporate governance, compliance and risk management processes throughout its business practices. However, even the best governance frameworks cannot eliminate altogether a director’s exposure to investigation, civil suit or prosecute on. Only ceasing to do any business at all can achieve elimination of exposure altogether! Protecting directors is therefore a vital part of enabling the directors to run the company as a business.

Human resources – The most accomplished directors have a full appreciation of their responsibilities and personal exposures and will make it a condition of their appointment that they are given protection by the company (by way of indemnity and D&O insurance). Accordingly, human resources departments tasked with finding directors to serve, can only ensure suitably accomplished individuals are found, if the company offers suitable protection to directors.

Existing shareholders and investors – Shareholders and investors also benefit from having suitably accomplished directors to run the company into which they have invested their capital. As stated, offering suitable protection to candidates for directorships is often a condition of getting the best candidates for directorships to serve. Further, directors who face unlimited personal liability exposure may be incentivized to adopt excessively low-risk business strategies which would essentially lower the returns afforded to shareholders and investors. Shareholders and investors, therefore, directly benefit from directors being protected by way of indemnities and D&O insurance.

“as corporate governance standards and theories have advanced, so has the realization that protecting the company’s directors benefits all the key stakeholders in a company:“

Potential Shareholders and Investors – The fact that a company purchases D&O insurance, may also be an important consideration for potential shareholders and investors. As offering D&O insurance is usually pre-requisite to attracting suitably qualified directors to serve on a company’s board, so the presence of D&O insurance is symbolic that the company is run a suitably accomplished board able to put in place to the proper risk management and compliance procedures (and this is a reason why the Main Board Listing Rules require listed companies to disclose in the accounts if they have not purchased D&O insurance).

For all of the above reasons, properly protecting directors through the proper indemnities and the purchase of D&O insurance has come to symbolize corporate governance best practice.


There are two ways in which a company can provide their directors with a reasonable level of protection. The first is by way of the company providing the directors with an indemnity (i.e. a promise to indemnify the director for liabilities out of company assets). coque iphone 6 The second is by purchasing D&O insurance to cover the directors’ liabilities.

However, it should be emphasized that these two mechanisms are not alternatives. They are complementary and therefore both mechanisims are necessary. fundas huawei mate 20 One of the key reasons for this is that the extent to which a company can provide a director with an indemnity is very limited, thereby making the purchase of D&O insurance an essential consideration for any company in addition to an indemnity from the company.

i) Limits placed on indemnification of directors by companies under the New Ordinance

The New Ordinance clarifies the limits placed on the ability of a company to indemnify a director for his/her liabilities out of company assets, as follows:

No indemnity permitted for a director’s liability to the company – Section 468(3) of the New Ordinance provides a complete prohibition on a company indemnifying a director (or a director of an associated company) for any liability owed by the director to the company (or associated company). So, for example, a company cannot indemnify a director for breach of the new statutory duty of reasonable skill care and diligence which is owed to the company.
Limited indemnity permitted for a director’s liability to third parties – Section 469 of the New Ordinance allows a company to provide a limited indemnity to a director (a “Permitted Indemnity”) for any liability owed by the director to third parties, if two conditions are met:

Primarily, the Permitted Indemnity must not cover a director’s liability for:

a) criminal fines or regulatory penalties,
b) defence costs incurred by the director in defending criminal proceedings in which the director is convicted, or
c) defence costs incurred by the director in defending civil proceedings brought by or on behalf of the company (or associated company) in which judgment is given against the director.

Secondly, the Permitted Indemnity must be disclosed in the Directors’ Report (of the companies report and accounts) and be made available for inspection by any shareholder on request.

ii) Directors & Officers Insurance and the New Ordinance

Section 468(4) of the New Ordinance provides that the prohibitions on a company’s ability to indemnify its directors for liability to the company, do not prevent a company from purchasing and maintaining for a director of the company (or of an associated company) D&O insurance which covers a director’s liabilities. Such insurance may cover:

a) a director’s liability for damages in negligence, default, breach of duty or breach of trust in relation to the company or associated company (except for fraud); and
b) a director’s liability for defence costs incurred by the director in defending any proceedings (whether civil or criminal) taken against the director for any negligence, default, breach of duty or breach of trust (including fraud) in relation to the company (or associated company).

Further, section 468(4) in relation to D&O insurance does not contain any of the restrictions which apply to the Permitted Indemnity.

This means that there is no restriction under the New Ordinance on a company’s power to purchase D&O for its directors. It also means that D&O insurance can cover directors for liability which the company cannot cover by way of indemnity. For example, D&O insurance can cover a director’s liability (including liability for defence costs) for breaches of duty owed to the company (even where the director is indeed found liable – save in the case of fraud).

The only limitations provided on the liabilities which D&O insurance can cover, are those set by common law restrictions based on public policy grounds (which would prevent coverage for liability resulting from any morally culpable behavior by the director, such as dishonesty and fraud).

Further, whilst a Permitted Indemnity provided by the company would need to be disclosed by the company in its Directors’ Report, the same would not be the case as regards D&O insurance purchased by the company.

iii) The New Model Articles of Association under the New Companies Ordinance and D&O Insurance

A company’s ability to purchase D&O insurance is now formally expressly recorded in the new Model Articles of Association for companies, which have been issued under the New Ordinance. These new Model Articles serve as the standard default Articles of Association for a company if the company does not adopt its own. The fact that this provision has been expressly included in the New Model Articles, provides implicit encouragement to all companies (public/ private; listed/ unlisted) to consider purchasing such insurance as corporate governance best practice.

The inclusion of this express power to purchase D&O insurance in the new Model Articles of Association would also appear to complement the Code Provision in the Hong Kong Stock Exchange’s Main board listing rules which requires a listed company to arrange appropriate insurance cover in respect of legal actions against its directors, or to explain why it has not done so in its annual/interim reports. Again this “comply or explain” requirement is indicative of the notion that purchasing D&O insurance represents corporate governance best practice.


A typical D&O insurance policy coverage covers a director for liability which cannot be indemnified by the company (called Side A cover) as well as coverage for the company for its liability to the director in respect of any Permitted Indemnity provided to the director by the company (called Side B cover) (also known as “Company Reimbursement Cover”). D&O insurance often also provides Side C or “Entity Cover”, being coverage provided to the company itself for, say, securities claims or employment practices liability. fundas huawei p30 lite In addition, as directors’ exposures have grown so has the scope of D&O insurance coverage been extended (by way of “Extensions”) to include coverage for a director’s legal costs in responding to regulatory investigations (being a crucial aspect of D&O coverage in Hong Kong, given the investigatory powers of regulators) or a breach of health and safety legislation. D&O insurance also includes risk management add-ons which assist the company in mitigating risks (such as covering the costs of a public relations consultant to “head-off” potential exposure and assisting directors of listed companies meet their training requirements).

“The fact that this provision has been expressly included in the New Model Articles, provides implicit encouragement to all companies (public/ private; listed/ unlisted) to consider purchasing such insurance as corporate governance best practice.”

A director looking to protect his/her liability would usually require coverage under both the Permitted Indemnity from the company and D&O insurance as the two are not alternatives, but complementary. In particular:

• As we have seen, D&O insurance provides coverage which cannot be covered under a Permitted Indemnity (for example coverage for directors liabilities owed to the company);
• D&O insurance also provides more extensive coverage which is not usually covered by the scope of indemnities (such as legal costs incurred in responding to investigations);
• D&O insurance may contain certain exclusions or deductibles which would otherwise be covered within the scope of Permitted Indemnity (hence a director would still want a Permitted Indemnity);
• D&O insurance protects the director against the risk of the company going insolvent rendering the Permitted Indemnity essentially worthless;
• D&O insurance also includes add-ons or extensions which assist the directors in managing and mitigating risk to the company. For example coverage can be provided for the costs of hiring public relations consultants to mitigate potential liability. In addition, panel law firms of the insurer are also often available to assist the directors of listed companies in meeting their training requirements.

For these reasons, in light of the New Ordinance, all companies should go through the process of evaluating their indemnity provisions and D&O insurance requirements.

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Insurance Regulation in Hong Kong: A Paradigm Shift

Hong Kong’s Insurance Companies (Amendment) Bill 2014 was gazetted on Friday 25 April 2014 and presented to the Legislative Council (LegCo) for a first reading on 30 April 2014.

The Legislative Council Brief and Bill are available from the LegCo website at: Brief and Bill. fundas samsung galaxy s4

This new legislation, which follows several years of consultation and drafting, represents a paradigm shift for insurance regulation in Hong Kong in that it will introduce (likely in 2015) a new Independent Insurance Authority (IIA) that will take over the role currently undertaken by three self regulatory bodies (HKFI, CIB and PIBA) in licensing, regulating and disciplining insurance intermediaries. Indeed, the Legislative Council Brief clearly states: “The establishment of the IIA is the most important regulatory reform in the insurance sector in the past 30 years since the passage of the Insurance Companies Ordinance (ICO) in 1983.”

The Legislative Council Brief lists two objectives of the IIA: prudential regulation – to ensure that insurers are financially sound; and conduct regulation – to ensure that sale and after-sale of insurers and insurance intermediaries are conducted honestly, fairly and professionally. fundas huawei mate 10 As regards prudential regulation, the Legislative Council Brief notes: “the challenges in the coming years are to implement a Risk-based Capital framework for insurers and observe the IAIS’s [International Association of Insurance Supervisors’] requirements on macro-prudential surveillance, group-wide supervision and corporate governance of insurers.” As regards conduct regulation, the Legislative Council Brief notes: “there has been rising public expectation of robust oversight of insurance intermediaries, especially when insurance products are getting more sophisticated and diversified (such as … annuities for retirement planning …).”

Some intermediaries, in particular insurance agents, have been apprehensive about the upcoming IIA legislation as the level of regulation of intermediaries is expected not only to be put on a statutory footing, but also to increase with the IIA’s supervisory and investigation powers having been lifted from securities legislation.

Further, during the consultation process there was considerable concern voiced, again in particular by insurance agents, about the maximum level of fines for misconduct – which nonetheless has been fixed in the Bill at the greater of HK$10 million or three times the profit gained or loss avoided, with no requirement that proportionality be taken into account.

The Bill also introduces a requirement on all licensed insurance intermediaries to act “in the best interest of policyholders” (Art. 89). fundas samsung galaxy j5 fundas samsung galaxy j3 During the consultation process, it was pointed out that as a matter of Hong Kong law insurance agents owe a duty to insurers, not policy holders. fundas samsung galaxy a10 fundas samsung galaxy s9 plus The Legislative Council Brief has addressed this concern as follows: “To allay insurance agents’ concern on a possible conflict of loyalty to the insurer and the client, it is specified that any term in an agreement between the insurer and its agent which contravenes the statutory “best interest” duty will be unenforceable” (Art 68A(1)). If this provision of the Bill is passed into law unaltered, it would be a departure from the current law, go over and above the requirement in other jurisdictions of agents to act fairly to their customers, and would have to be taken into account when drafting agency agreements going forward.

The Bill includes three year transitional arrangements relating to how the transition of licences and regulations from the self regulatory organisations to the IIA will be handled in practice – however much of the detail of the transitional arrangements has been left to a Working Group to develop.

Annexe E to the Bill records that at present, there are 150 staff members in the Office of the Commissioner of Insurance (OCI), including the Commissioner of Insurance, 48 Insurance Officers (IOs), 22 officers of the general grades and 79 non-civil service contract (NCSC) staff. fundas samsung galaxy s8 fundas huawei p20 lite It is proposed that to achieve the desired institutional independence and operational flexibility, the IIA should recruit its own staff, with the OCI’s current staff being retired, redeployed to other departments or otherwise (it is expected that some OCI staff will apply for IIA roles). fundas samsung galaxy a40 The IIA is likely to have over 50% more staff than OCI currently has (around 240 staff). fundas iphone xs max This increase is in part explained by the fact that the IIA will take over the regulatory roles of HKFI, CIB and PIBA.

The IIA is to be self-financed (giving rise to savings to the public coffer of HK$110 million per annum, being the recurrent funding for the OCI). fundas huawei y6 2019 iphone custodia The proposal is that the government will make a lump sum provision of HK$500 million to the IIA to facilitate its initial operations and that the IIA will eventually be financed solely by fees payable by insurers and insurance intermediaries, user fees for providing specific services by the IIA, and a levy of 0.1% on insurance premiums. The levy will be introduced over a five year period (Y1 0.04%; Y2 0.05%; Y3 0.06%; Y4 0.07%; Y5 0.085%; Y6 0.1%), subject to caps of HK$100 per life insurance policy and HK$5,000 per non-life insurance policy in a year.


We have been following the evolution of this Bill over the past few years. There is no doubt that the IIA will lead to more regulation of the insurance industry in Hong Kong and may well have repercussions on the structure of the Hong Kong insurance market, in particular if risk-based capital, referred to in the Legislative Council Brief, is introduced by the new IIA, this may trigger a wave of consolidation. fundas iphone 11 pro max That said, IIA is an inevitable development in light of the global trend of increased insurance regulation and in particular the Insurance Core Principles issued by the International Association of Insurance Supervisors (of which Hong Kong is a member).