Insurance Law Prewrites PDF

**Insurance Law Prewrites** I. Formation of Insurance Contracts +-----------------------------------------------------------------------+ | [Step 1: Offer] | | | | - Offer is made by...

**Insurance Law Prewrites** I. Formation of Insurance Contracts +-----------------------------------------------------------------------+ | [Step 1: Offer] | | | | - Offer is made by the assured or offer is made by the insurer | | | | - Check if it is an Invitation to Treat (IOT): An IOT is a | | preliminary statement expressing willingness to receive | | offers. | | | | - Check that there are no introduction of new terms while | | purporting to accept the offer ⇒ counter offer is an offer | | itself | | | | - In policy renewals where the insurer sends renewal notice, | | depending on the wording of notice, it may be construed as an | | offer to grant a further policy on the same risk, or a | | conditional offer | | | | [Step 2: Acceptance] | | | | - Acceptance by insurer or by the assured | | | | - Must be unqualified | | | | [Step 3: Intention to Create Legal Relations] | | | | [Step 4: Consideration] | | | | [Step 5: Certainty] | | | | [Step 6: Not vitiated] | +-----------------------------------------------------------------------+ II. Insurable interests +-----------------------------------------------------------------------+ | ***Defining insurable interest*** | +=======================================================================+ | [Statute] | | | | -------------------------------- | | **Insurable interest defined** | | -------------------------------- | | | | +------------------------------------------------------------------+ | | | **5.**---(1)  Subject to the provisions of this Act, every | | | | person has an insurable interest who is interested in a marine | | | | adventure. | | | | | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------- | | | | (2)  In particular a person is interested in a marine adventur | | | | e where he stands in any **legal or equitable relation** to the | | | | adventure or to any insurable property at risk therein, in conse | | | | quence of which he may **benefit** by the safety or due arrival | | | | of insurable property, or **may be prejudiced** by its loss, or | | | | by damage thereto, or by the detention thereof, or may incur lia | | | | bility in respect thereof. | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ---------------------------- | | | +------------------------------------------------------------------+ | | | | ------------------------------- | | **When interest must attach** | | ------------------------------- | | | | +------------------------------------------------------------------+ | | | **6.**---(1)  The assured must be interested in the | | | | subject-matter insured at the time of the loss though he need | | | | not be interested when the insurance is effected: | | | | | | | | +-------------------------------------------------------------+ | | | | | --------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ------------------------------------------------ | | | | | | Provided that where the subject-matter is insured "lost o | | | | | | r not lost", the assured may recover although he may not ha | | | | | | ve acquired his interest until after the loss, unless at th | | | | | | e time of effecting the contract of insurance the assured w | | | | | | as aware of the loss, and the insurer was not. | | | | | | --------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ------------------------------------------------ | | | | | +-------------------------------------------------------------+ | | | | | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | -------------------- | | | | (2)  Where the assured has no interest at the time of the loss | | | | , he cannot acquire interest by any act or election after he is | | | | aware of the loss. | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | -------------------- | | | +------------------------------------------------------------------+ | | | | **[Common Law]** | | | | Following *Lucena v Craufurd*, an insurable interest is a right in | | the property, or a right derivable out of some contract about the | | property, which in either case may be lost upon some contingency | | affecting the possession or enjoyment of the party. To be interested | | in the preservation of a thing is to be so circumstanced with respect | | to it as to have benefit from its existence, prejudice from its | | destruction. | | | | - This right includes contractual rights/ property rights. Don't | | have to be legal/equitable owner | | | | - There must be some sort of legal relationship with what you are | | seeking to be insured -- security interests; contingent interests | | | | **[OBJECTIVE: show that you have a REAL INTEREST]** | | | | Justify assured getting paid by the insurer in the event of a loss or | | damage if not then the law doesn't recognize such contracts because | | it's like a wager. | | | | Following *Moonacre*, the essential question to test the existence of | | an insurable interest has been [whether the relationship between the | | assured and the subject matter of the insurance was sufficiently | | close to justify his being paid in the event of its loss or damage, | | having regard to the fact that, if there were no or no sufficiently | | close relationship, the contract would be a wagering | | contract.] ⇒best definition | | | | +------------------------------------------------------------------+ | | | ----------------------------------------------- | | | | **Avoidance of wagering or gaming contracts** | | | | ----------------------------------------------- | | | | | | | | +-------------------------------------------------------------+ | | | | | **4.**---(1)  Every contract of marine insurance by way of | | | | | | gaming or wagering is void. | | | | | | | | | | | | +--------------------------------------------------------+ | | | | | | | (2)  A contract of marine insurance is deemed to be a | | | | | | | | gaming or wagering contract --- | | | | | | | | | | | | | | | | (*a*) where the assured has not an insurable inter | | | | | | | | est as defined by this Act, and the contract is entere | | | | | | | | d into with no expectation of acquiring such an intere | | | | | | | | st; or | | | | | | | | ------- -------------------------------------------- | | | | | | | | ------------------------------------------------------ | | | | | | | | ------------------------------------------------------ | | | | | | | | ----------------------------------------------- | | | | | | | | (*b*) where the policy is made "interest or no int | | | | | | | | erest", or "without further proof of interest than the | | | | | | | | policy itself", or "without benefit of salvage to the | | | | | | | | insurer", or subject to any other like term: | | | | | | | | | | | | | | | | +---------------------------------------------------+ | | | | | | | | | ----------------------------------------------- | | | | | | | | | | ------------------------------------------------- | | | | | | | | | | ------------------------------ | | | | | | | | | | Provided that, where there is no possibility of | | | | | | | | | | salvage, a policy may be effected without benefi | | | | | | | | | | t of salvage to the insurer. | | | | | | | | | | ----------------------------------------------- | | | | | | | | | | ------------------------------------------------- | | | | | | | | | | ------------------------------ | | | | | | | | | +---------------------------------------------------+ | | | | | | | +--------------------------------------------------------+ | | | | | +-------------------------------------------------------------+ | | | +------------------------------------------------------------------+ | +-----------------------------------------------------------------------+ | ***Types of insurable interest*** | +-----------------------------------------------------------------------+ | 1. [Ownership and Profit] | | | | - Ownership of property carries with it an insurable interest | | | | - In sale of goods, existence of a legally binding contract of sale | | is required | | | | - Profits may also be insured. Forms an additional part of the | | value of the goods in which the party has already an interest. So | | owner of cargo on board a vessel may insure the profits to arise | | from them | | | | - **Profit alone not sufficient**: profit or potential profit | | from an investment or commercial transactions is generally | | not considered sufficient for an insurable interest if there | | is [no direct or legal or equitable ownership] of | | the property | | | | Following *Stockdale v Dunlop*, if there is [no legally binding | | agreement] upon which the assured agreed to buy goods, he | | [has no insurable interest to insure the goods and the | | profit] thereon. | | | | - Plaintiffs had no present interest -- if contracts for goods to | | be purchased in future were allowed to be the subject of | | insurance, it would be allowing a wager policy to be made -- this | | creates an imaginary interest | | | | - **Direct interest required:** insurable interest must be | | rooted in a direct connection to the property, whether | | through ownership or other legal rights. Simply having a | | financial stake in the potential profit from the property | | does not meet this requirement if the party does not have | | **actual ownership or control** | | | | 2. [Contingent interest] | | | | - Where A sells goods to B and title passes to B before payment, A | | has a contingent interest in the goods. A's interest is | | contingent upon B rejecting the goods | | | | In *Anderson v Morice*, the insurance policy covered the cargo but | | the plaintiff's interest in the cargo was contingent upon the cargo | | being successfully completed. At the time of the casualty, neither | | the risk nor title had passed yet to the buyer, and thus he had no | | insurable interest and the payment he made was voluntary. Since the | | interest was contingent upon the completion of the cargo, the | | plaintiffs had no interest arising from this at the time of the loss | | | | 3. [Mortgagor and mortgagee] | | | |  | | | | Following *Hepburn*, a bailee or mortgagee has by virtue of his | | position and his interest in the property, a right to insure for the | | whole of its value, holding in trust for the owner or mortgagor the | | amount attributable to their interest. The hold otherwise would be | | commercially inconvenient and would have no justification in common | | sense and there is no burden on him to prove his intention to insure | | their interest on their behalf | | | | - Mortgagee's interest is protected even if they are not explicitly | | named on the policy, sine their financial stake in the property | | provides them with an insurable interest | | | | 4. [Pervasive interest] | | | | Following *Petrolina v Magnaload*, there is an insurable interest in | | the potential liability to property owners for loss or damage. | | | | - While insurance in question is on property and not liability, | | insurable interest finds it source in the contractual | | arrangements | | | | - A party may have an insurable interest if it has a significant, | | ongoing concern in the property such as being responsible for its | | loss or having an economic relationship that would be negatively | | impaced by damage to the proeprty | | | | - Petrofina had a pervasive interest because it was ultimately | | responsible for the completed tanks and would suffer a loss if | | they were damaged or destroyed | | | | 5. [Shareholder] | | | | (-): Shareholder does NOT have insurable interest in property owned | | by the Co. | | | | In *Macaura v Northern Assurance Company*, the timber was owned by | | the company, not the assured who owned almost all the shares in the | | company, and the company owed him a good deal of money, but the debt | | was not exposed to fire nor were the shares. Hence, he stood in no | | legal or equitable relation to the timber at all. He had no concern | | in the subject matter insured. His relation as to the company, not to | | its goods, and after the fire he was directly prejudiced by the | | paucity of the company's assets, not by the fire itself. | | | | 6. [Valuable benefit] | | | | In *Wilson v Jones*, the courts found that the shareholder had no | | direct interest in the cable, which was the subject matter of the | | insurance, but his interest lied in the profit derived from his share | | if the cable was successful. He could not have an insurable interest | | on the cable simply by virtue of him being a shareholder. The subject | | matter here was not so much the property but the success he had on | | the venture pegged to the value of the shares he owned in the | | company. | | | | In *Sharp v Sphere*, the courts found a valuable benefit in that | | Sharp would benefit from either presentation of the vessel and | | conversely he would suffer a loss for its damage, thus he had | | insurable interest. | +-----------------------------------------------------------------------+ III. Duties of the Insured +-----------------------------------------------------------------------+ | ***Duty of Utmost Good Faith*** | +=======================================================================+ | ---------------------------------- | | **Insurance is uberrimae fidei** | | ---------------------------------- | | | | **17.**  A contract of marine insurance is a contract based upon th | | e utmost good faith, and, if the utmost good faith is not observed by | | either party, the contract may be avoided by the other party. | | ------------------------------------------------------------------- | | --------------------------------------------------------------------- | | ---------------------------------------------------------------- | | | | - Not limited to the insured nor by reference in time to | | pre-contractual duties | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | ***Duty of Disclosure*** | +=======================================================================+ | Before a contract of insurance is entered into, duty is on the | | assured to make voluntary disclosure of all material information, | | even if no questions are asked. | | | | [Statute] | | | | --------------------------- | | **Disclosure by assured** | | --------------------------- | | | | +------------------------------------------------------------------+ | | | **18.**---(1)  Subject to this section, the assured must | | | | disclose to the insurer, before the contract is concluded, every | | | | material circumstance which is known to the assured, and the | | | | assured is deemed to know every circumstance which, in the | | | | ordinary course of business, ought to be known by him; and if | | | | the assured fails to make such disclosure, the insurer may avoid | | | | the contract. | | | | | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ----------------------------------- | | | | (2)  Every circumstance is material which would influence the | | | | judgment of a prudent insurer in fixing the premium or determini | | | | ng whether he will take the risk. | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | ----------------------------------- | | | | | | | | +-------------------------------------------------------------+ | | | | | (3)  In the absence of inquiry, the following circumstances | | | | | | need not be disclosed: | | | | | | | | | | | | (*a*) any circumstance which diminishes the risk; | | | | | | ------- ------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | ----------------------------------------------------------- | | | | | | -------------- | | | | | | (*b*) any circumstance which is known or presumed to be | | | | | | known to the insurer. The insurer is presumed to know matt | | | | | | ers of common notoriety or knowledge, and matters which an | | | | | | insurer in the ordinary course of his business, as such, ou | | | | | | ght to know; | | | | | | (*c*) any circumstance as to which information is waive | | | | | | d by the insurer; | | | | | | (*d*) any circumstance which it is superfluous to discl | | | | | | ose by reason of any express or implied warranty. | | | | | +-------------------------------------------------------------+ | | | | | | | | -------------------------------------------------------------- | | | | -------------------------------------------------------------- | | | | (4)  Whether any particular circumstance, which is not disclos | | | | ed, be material or not is, in each case, a question of fact. | | | | -------------------------------------------------------------- | | | | -------------------------------------------------------------- | | | | | | | | +-------------------------------------------------------------+ | | | | | (5)  The term "circumstance" includes any communication | | | | | | made to, or information received by, the assured. | | | | | | | | | | | | +--------------------------------------------------------+ | | | | | | | [KEY POINTS] | | | | | | | | | | | | | | | | 1. **Timing**: before the contract is concluded | | | | | | | | | | | | | | | | 2. **Materiality**: every material circumstance | | | | | | | | | | | | | | | | 3. **Knowledge**: known to the assured | | | | | | | +--------------------------------------------------------+ | | | | | | | | | | | | ***Knowledge*** | | | | | | | | | | | | +---------------------------+---------------------------+ | | | | | | | Actual knowledge | Constructive knowledge | | | | | | | +===========================+===========================+ | | | | | | | - What the assured | - What the assured is | | | | | | | | actually knows | deemed to know | | | | | | | | | | | | | | | | | - For corporate insured | - Every circumstance | | | | | | | | -- not just limited | which in the ordinary | | | | | | | | to alter ego test, | course of business | | | | | | | | but whether the facts | ought to be known by | | | | | | | | are known to a | him | | | | | | | | director or employee | | | | | | | | | at an appropriate | - Think about the | | | | | | | | level | subject matter being | | | | | | | | | insured, industry | | | | | | | | | specific knowledge, | | | | | | | | | find an expert in | | | | | | | | | that area who can | | | | | | | | | provide information | | | | | | | | | on what merchants or | | | | | | | | | traders who do this | | | | | | | | | day in day out on | | | | | | | | | what they do in the | | | | | | | | | ordinary course of | | | | | | | | | business (e.g. hull | | | | | | | | | and machinery | | | | | | | | | industry) | | | | | | | +---------------------------+---------------------------+ | | | | | | | | | | | | +--------------------------------------------------------+ | | | | | | | ### **Rules of attribution** | | | | | | | | | | | | | | | | - A company exists because there is a rule whih says | | | | | | | | that a *persona ficta* shall be deemed to exist | | | | | | | | and to have certain of the powers, rights and | | | | | | | | duties of a natural person | | | | | | | | | | | | | | | | - It is therefore a necessary part of corporate | | | | | | | | personality that there should be rules by which | | | | | | | | acts are attributed to the Co | | | | | | | | | | | | | | | | - These may be called rules of attribution | | | | | | | | | | | | | | | | +-------------------------+-------------------------+ | | | | | | | | | Primary rules of | - Found in **Co's | | | | | | | | | | attribution | constitution or | | | | | | | | | | | CA** | | | | | | | | | | | | | | | | | | | | | | - E.g. Co's | | | | | | | | | | | constitution | | | | | | | | | | | may state that | | | | | | | | | | | SHs may by an | | | | | | | | | | | ordinary | | | | | | | | | | | resolution | | | | | | | | | | | appoint a new | | | | | | | | | | | director, or | | | | | | | | | | | that mgmt. | | | | | | | | | | | powers are | | | | | | | | | | | vested in the | | | | | | | | | | | BOD ⇒ | | | | | | | | | | | attributes the | | | | | | | | | | | acts of the DM | | | | | | | | | | | organs to the | | | | | | | | | | | Co | | | | | | | | | | | | | | | | | | | | | | - May also be implied | | | | | | | | | | | by law | | | | | | | | | | | | | | | | | | | | | | - Under the | | | | | | | | | | | unanimous | | | | | | | | | | | consent rule, a | | | | | | | | | | | Co is bound by | | | | | | | | | | | an informal | | | | | | | | | | | agreement of | | | | | | | | | | | its members so | | | | | | | | | | | long as it is a | | | | | | | | | | | matter | | | | | | | | | | | unanimously | | | | | | | | | | | assented to | | | | | | | | | | | | | | | | | +=========================+=========================+ | | | | | | | | | General rules of | - Principles of | | | | | | | | | | attribution | agency and | | | | | | | | | | | vicarious liability | | | | | | | | | | | | | | | | | | | | | | - Rules are | | | | | | | | | | | applicable when the | | | | | | | | | | | company acts | | | | | | | | | | | through its | | | | | | | | | | | officers, employees | | | | | | | | | | | or agents | | | | | | | | | | | | | | | | | | | | | | - A Co is liable for | | | | | | | | | | | those **acts of its | | | | | | | | | | | agent that are | | | | | | | | | | | within the scope of | | | | | | | | | | | his authority** | | | | | | | | | | | | | | | | | | | | | | - Also **vicariously | | | | | | | | | | | liable for torts | | | | | | | | | | | committed** by an | | | | | | | | | | | employee in the | | | | | | | | | | | course of his | | | | | | | | | | | employment | | | | | | | | | +-------------------------+-------------------------+ | | | | | | | | | Special rule of | - By interpretation | | | | | | | | | | attribution (if | of the substantive | | | | | | | | | | previous two is | rule (in the | | | | | | | | | | inappropriate) | statute) in | | | | | | | | | | | question, taking | | | | | | | | | | | into account the | | | | | | | | | | | language as well as | | | | | | | | | | | its content and | | | | | | | | | | | policy | | | | | | | | | | | | | | | | | | | | | | - **Whose act (or | | | | | | | | | | | knowledge or state | | | | | | | | | | | of mind) was for | | | | | | | | | | | this purpose | | | | | | | | | | | intended to count | | | | | | | | | | | as the act of the | | | | | | | | | | | company?** | | | | | | | | | | | | | | | | | | | | | | - Applicable rule | | | | | | | | | | | will likely vary | | | | | | | | | | | from one context to | | | | | | | | | | | another, depending | | | | | | | | | | | on what policy and | | | | | | | | | | | purpose is to be | | | | | | | | | | | achieved | | | | | | | | | | | | | | | | | | | | | | In the case of | | | | | | | | | | | Meridian, special rules | | | | | | | | | | | of attribution apply | | | | | | | | | | | where the rule of law | | | | | | | | | | | expressly or by | | | | | | | | | | | implication, excludes | | | | | | | | | | | the attribution on the | | | | | | | | | | | basis of the general | | | | | | | | | | | principles of agency or | | | | | | | | | | | vicarious liability. An | | | | | | | | | | | example being a rule | | | | | | | | | | | which requires **some | | | | | | | | | | | act or state of mind on | | | | | | | | | | | the part of the person | | | | | | | | | | | himself** as opposed to | | | | | | | | | | | his servants or agents. | | | | | | | | | | | This is especially | | | | | | | | | | | pertinent in the rules | | | | | | | | | | | of criminal law, which | | | | | | | | | | | ordinarily imposes | | | | | | | | | | | liability for the actus | | | | | | | | | | | reus and mens rea of | | | | | | | | | | | the defendant himself. | | | | | | | | | | | | | | | | | | | | | | **CRIME/CIVIL LAW THAT | | | | | | | | | | | REQUIRES IMPOSITION OF | | | | | | | | | | | MENTAL STATES** | | | | | | | | | | | | | | | | | | | | | | *[Tesco approach: | | | | | | | | | | | Directing mind and will | | | | | | | | | | | of the company | | | | | | | | | | | ]* | | | | | | | | | | | | | | | | | | | | | | Prior to Meridian, the | | | | | | | | | | | courts in Tesco | | | | | | | | | | | Supermarkets held that | | | | | | | | | | | the company's directing | | | | | | | | | | | mind and will would | | | | | | | | | | | usually comprise | | | | | | | | | | | persons at or near the | | | | | | | | | | | company's reporting | | | | | | | | | | | hierarchy, for | | | | | | | | | | | instance, the | | | | | | | | | | | directors, senior | | | | | | | | | | | officers and persons to | | | | | | | | | | | whom the directors have | | | | | | | | | | | delegated | | | | | | | | | | | decision-making | | | | | | | | | | | authority. | | | | | | | | | | | | | | | | | | | | | | - In Tesco | | | | | | | | | | | Supermarkets, the | | | | | | | | | | | Co was prosecuted | | | | | | | | | | | under s 11(2) for | | | | | | | | | | | displaying a notice | | | | | | | | | | | that goods were | | | | | | | | | | | being "offered at a | | | | | | | | | | | price less than | | | | | | | | | | | that which they | | | | | | | | | | | were in fact being | | | | | | | | | | | offered.." It | | | | | | | | | | | supermarket had | | | | | | | | | | | advertised that it | | | | | | | | | | | was selling washing | | | | | | | | | | | power at a reduced | | | | | | | | | | | price, but a | | | | | | | | | | | customer who asked | | | | | | | | | | | for one was told | | | | | | | | | | | that he had to pay | | | | | | | | | | | the normal price. | | | | | | | | | | | This was because | | | | | | | | | | | the shop manager | | | | | | | | | | | had negligently | | | | | | | | | | | failed to notice | | | | | | | | | | | that he had run out | | | | | | | | | | | of the specially | | | | | | | | | | | marked low-price | | | | | | | | | | | packets. | | | | | | | | | | | | | | | | | | | | | | - There was a defence | | | | | | | | | | | if the Co could | | | | | | | | | | | prove that the | | | | | | | | | | | offence was caused | | | | | | | | | | | by "another | | | | | | | | | | | person". | | | | | | | | | | | | | | | | | | | | | | - The court held that | | | | | | | | | | | since the store | | | | | | | | | | | manager who was at | | | | | | | | | | | fault occupied a | | | | | | | | | | | relatively | | | | | | | | | | | subordinate | | | | | | | | | | | position in the | | | | | | | | | | | company's authority | | | | | | | | | | | structure, this | | | | | | | | | | | meant that he could | | | | | | | | | | | not be identified | | | | | | | | | | | with the company | | | | | | | | | | | and was therefore | | | | | | | | | | | "another person", | | | | | | | | | | | relieving the | | | | | | | | | | | company from | | | | | | | | | | | liability. | | | | | | | | | | | | | | | | | | | | | | As per *Ho Kang Peng,* | | | | | | | | | | | the mere fact that | | | | | | | | | | | someone is identifiable | | | | | | | | | | | as a Co's "directing | | | | | | | | | | | mind and will" may not | | | | | | | | | | | be sufficient for | | | | | | | | | | | determining an issue of | | | | | | | | | | | attribution. What is | | | | | | | | | | | often needed is a | | | | | | | | | | | careful examination of | | | | | | | | | | | the purposes underlying | | | | | | | | | | | the substantive rule | | | | | | | | | | | that is being applied | | | | | | | | | | | | | | | | | | | | | | *[APPLICABLE Meridian | | | | | | | | | | | approach: Purposive | | | | | | | | | | | approach ]* | | | | | | | | | | | | | | | | | | | | | | As held in the case of | | | | | | | | | | | Meridian, the question | | | | | | | | | | | is whose act or | | | | | | | | | | | knowledge or state of | | | | | | | | | | | mind is *for the | | | | | | | | | | | purpose of the relevant | | | | | | | | | | | rule* to count as the | | | | | | | | | | | act, knowledge or state | | | | | | | | | | | of mind of the company. | | | | | | | | | | | Merely because someone | | | | | | | | | | | is the directing mind | | | | | | | | | | | and will of the company | | | | | | | | | | | may not be sufficient | | | | | | | | | | | for determining an | | | | | | | | | | | issue of attribution. | | | | | | | | | | | | | | | | | | | | | | One would find the | | | | | | | | | | | answer to the question | | | | | | | | | | | by applying the usual | | | | | | | | | | | canons of | | | | | | | | | | | interpretation, taking | | | | | | | | | | | into account the | | | | | | | | | | | language of the rule | | | | | | | | | | | (if it is a statute) | | | | | | | | | | | and its content and | | | | | | | | | | | policy. The special | | | | | | | | | | | rule of attribution is | | | | | | | | | | | therefore, also | | | | | | | | | | | context-specific. | | | | | | | | | | | | | | | | | | | | | | ESSENTIALLY: first | | | | | | | | | | | identify the purpose | | | | | | | | | | | for which the | | | | | | | | | | | substantive rule was | | | | | | | | | | | designed to serve and | | | | | | | | | | | then to apply a rule | | | | | | | | | | | attribution that would | | | | | | | | | | | further that purpose. | | | | | | | | | | | | | | | | | | | | | | - In the case of | | | | | | | | | | | *Meridian*, the | | | | | | | | | | | court took into | | | | | | | | | | | account the policy | | | | | | | | | | | considerations | | | | | | | | | | | behind section 20, | | | | | | | | | | | which was to | | | | | | | | | | | compel, in | | | | | | | | | | | fast-moving | | | | | | | | | | | markets, the | | | | | | | | | | | immediate | | | | | | | | | | | disclosure of the | | | | | | | | | | | identity of persons | | | | | | | | | | | who become the | | | | | | | | | | | substantial | | | | | | | | | | | security holders in | | | | | | | | | | | public issuers. The | | | | | | | | | | | person would be the | | | | | | | | | | | person, who with | | | | | | | | | | | the authority of | | | | | | | | | | | the company, had | | | | | | | | | | | acquired the | | | | | | | | | | | relevant interest. | | | | | | | | | | | If it was confined | | | | | | | | | | | to the Board of | | | | | | | | | | | Directors, | | | | | | | | | | | companies would be | | | | | | | | | | | able to allow their | | | | | | | | | | | employees to | | | | | | | | | | | acquire interests | | | | | | | | | | | on their behalf | | | | | | | | | | | which made them | | | | | | | | | | | substantial | | | | | | | | | | | security holders, | | | | | | | | | | | but would not have | | | | | | | | | | | to report them | | | | | | | | | | | until the board or | | | | | | | | | | | someone else in | | | | | | | | | | | senior management | | | | | | | | | | | got to know about | | | | | | | | | | | it. | | | | | | | | | | | | | | | | | | | | | | LINK: The Meridian | | | | | | | | | | | approach deals with the | | | | | | | | | | | criticisms against | | | | | | | | | | | Tesco which has the | | | | | | | | | | | effect of limiting | | | | | | | | | | | relevant mental states | | | | | | | | | | | to senior officers, | | | | | | | | | | | which would have the | | | | | | | | | | | effect of insulating | | | | | | | | | | | the company from | | | | | | | | | | | liability. This is due | | | | | | | | | | | to the fact that | | | | | | | | | | | managerial authority in | | | | | | | | | | | mid-sized and large | | | | | | | | | | | companies are usually | | | | | | | | | | | diffused, with senior | | | | | | | | | | | officers being inactive | | | | | | | | | | | in day to day | | | | | | | | | | | operations. However, | | | | | | | | | | | the Meridian approach | | | | | | | | | | | likely requires much | | | | | | | | | | | more attention to each | | | | | | | | | | | specific rule which may | | | | | | | | | | | give rise to | | | | | | | | | | | uncertainty. However, | | | | | | | | | | | in most cases, both | | | | | | | | | | | approaches would likely | | | | | | | | | | | lead to the same | | | | | | | | | | | result. | | | | | | | | | +-------------------------+-------------------------+ | | | | | | | | | | | | | | | | +---------------------------------------------------+ | | | | | | | | | Meridian Global Funds Management v NZ Securities | | | | | | | | | | Commission: | | | | | | | | | | | | | | | | | | | | Facts: | | | | | | | | | | | | | | | | | | | | - K was the Chief Investment Officer of an | | | | | | | | | | investment management company. N was the | | | | | | | | | | senior portfolio manager. Unknown to the | | | | | | | | | | board of directors and managing director, | | | | | | | | | | used funds managed by the company to acquire | | | | | | | | | | shares in a public issuer. | | | | | | | | | | | | | | | | | | | | - Securities Commission instituted proceedings | | | | | | | | | | against the company for failing to comply | | | | | | | | | | with section 20(3) of the Securities | | | | | | | | | | Amendment Act. | | | | | | | | | | | | | | | | | | | | - Section 20(3) of the Securities Amendment | | | | | | | | | | Act stipulated that, "Every person, who | | | | | | | | | | after the commencement of this section, | | | | | | | | | | becomes a substantial security holder in | | | | | | | | | | a public issuer shall give notice that | | | | | | | | | | the person is a substantial security | | | | | | | | | | holder in the public issuer........ Every | | | | | | | | | | notice under the subsection shall be | | | | | | | | | | given as soon as the person knows, or | | | | | | | | | | ought to know, that the person is a | | | | | | | | | | substantial security holder in the public | | | | | | | | | | issuer. | | | | | | | | | | | | | | | | | | | | - The issue here is whether the "knowledge" | | | | | | | | | | of Ng and Khoo, can be attributed to the | | | | | | | | | | company. | | | | | | | | | | | | | | | | | | | | Special rules of attribution: | | | | | | | | | | | | | | | | | | | | - Where rules of law, either expressly or by | | | | | | | | | | implication, excludes attribution on the | | | | | | | | | | basis on the general principles of agency or | | | | | | | | | | vicarious liability. A rule may be stated in | | | | | | | | | | a language primarily applicable to a natural | | | | | | | | | | person, and require some act or state of mind | | | | | | | | | | on that person "himself", as opposed to his | | | | | | | | | | servants or agents. This is particularly | | | | | | | | | | pertinent in the rules of criminal law, which | | | | | | | | | | ordinarily imposes liability for the actus | | | | | | | | | | reus and mens rea of the defendant himself. | | | | | | | | | | | | | | | | | | | | - Agency Involves primary liability. The | | | | | | | | | | agent is acting on behalf of the Co, and | | | | | | | | | | therefore the Co is liable for the | | | | | | | | | | contract/tort. | | | | | | | | | | | | | | | | | | | | - Vicarious liability Secondary liability. | | | | | | | | | | The employee has committed the | | | | | | | | | | tort/crime, and therefore the Co is | | | | | | | | | | liable for the tort/crime due to policy | | | | | | | | | | reasons. | | | | | | | | | | | | | | | | | | | | You look at the rule that is to be applied What | | | | | | | | | | is the Co being held liable for? If the offence | | | | | | | | | | requires the mens rea of the person himself, then | | | | | | | | | | conclude that agency and vicarious liability does | | | | | | | | | | NOT apply. | | | | | | | | | | | | | | | | | | | | The approach would be a matter of interpretation, | | | | | | | | | | given that it was intended to apply to a company, | | | | | | | | | | whose act (or knowledge, or state of mind) was | | | | | | | | | | for this purpose intended to count as the act of | | | | | | | | | | the company. One would find the answer to the | | | | | | | | | | question by applying the usual canons of | | | | | | | | | | interpretation, taking into account the language | | | | | | | | | | of the rule (if it a statute) and its content and | | | | | | | | | | policy. | | | | | | | | | | | | | | | | | | | | - The interpretation of section 20 and its | | | | | | | | | | policy was that it was to compel, in | | | | | | | | | | fast-moving markets, the immediate disclosure | | | | | | | | | | of the identity of persons who become | | | | | | | | | | substantial security holders in public | | | | | | | | | | issuers. The issue was whose knowledge for | | | | | | | | | | this purpose, is to count as the knowledge of | | | | | | | | | | the company. | | | | | | | | | | | | | | | | | | | | - The court held that it would be the person, | | | | | | | | | | who, with the authority of the company, had | | | | | | | | | | acquired the relevant interest. If it was | | | | | | | | | | confined to the Board of Directors, companies | | | | | | | | | | would be able to allow their employees to | | | | | | | | | | acquire interests on their behalf which made | | | | | | | | | | them substantial security holders, but would | | | | | | | | | | not have to report them until the board or | | | | | | | | | | someone else in senior management got to know | | | | | | | | | | about it. | | | | | | | | | | | | | | | | | | | | - However, the court cautioned against the | | | | | | | | | | approach that whenever a servant of a company | | | | | | | | | | has authority to do an act on its behalf, | | | | | | | | | | knowledge of that act will for all purposes | | | | | | | | | | be attributed to the company. It is a | | | | | | | | | | question of construction in each case as to | | | | | | | | | | whether the particular rule requires the | | | | | | | | | | knowledge that an act has been done, or the | | | | | | | | | | state of mind, should be attributed to the | | | | | | | | | | company. | | | | | | | | | | | | | | | | | | | | - For instance, the fact that the company's | | | | | | | | | | employee is authorised to drive a lorry, | | | | | | | | | | does not in itself lead to the conclusion | | | | | | | | | | that if he kills someone by reckless | | | | | | | | | | driving, the company will be guilty of | | | | | | | | | | manslaughter. | | | | | | | | | +---------------------------------------------------+ | | | | | | | +--------------------------------------------------------+ | | | | | | | | | | | | | | | | | | | | | | | | +---------------------------+---------------------------+ | | | | | | | **Corporate liability for | | | | | | | | | Tort** | | | | | | | | +===========================+===========================+ | | | | | | | **Who's liability?** | | | | | | | | +---------------------------+---------------------------+ | | | | | | | Primary liability | Vicarious liability | | | | | | | +---------------------------+---------------------------+ | | | | | | | Co is regarded as having | Co may incur vicarious | | | | | | | | committed the tort itself | liability for torts | | | | | | | | | committed by its | | | | | | | | - Co has **specifically | employees. | | | | | | | | authorized** the | | | | | | | | | commission of the | - Vicarious liability | | | | | | | | tort | is a form of | | | | | | | | | secondary as well as | | | | | | | | - A Co that | strict liability | | | | | | | | publishes a | | | | | | | | | defamatory | - Secondary bc | | | | | | | | statement with | liability is | | | | | | | | the authority of | **contingent | | | | | | | | its BOD will | upon** a tort | | | | | | | | itself be liable | having been | | | | | | | | for the tort of | committed by a | | | | | | | | defamation | **pri | | | | | | | | | tortfeasor** (the | | | | | | | | - Publication is, | employee) ⇒ both | | | | | | | | by reason of | the Co and | | | | | | | | Board's approval, | employee are | | | | | | | | attributed to the | joint tortfeasors | | | | | | | | Co as its own act | for the same tort | | | | | | | | | | | | | | | | | - Primary liability may | - Strict bc | | | | | | | | also arise if the | employer may be | | | | | | | | duty in question is a | vicariously | | | | | | | | **non-delegable | liable even if he | | | | | | | | duty** | is not otherwise | | | | | | | | | at fault | | | | | | | | - Co has failed to | | | | | | | | | provide a safe | - Attribution of | | | | | | | | working | **employee's | | | | | | | | environment for | liability** to the Co | | | | | | | | its employees | | | | | | | | | primary liability | ***Elements*** | | | | | | | | for breach of DOC | | | | | | | | | towards the | a. The commission of a | | | | | | | | employee | tort | | | | | | | | | | | | | | | | | - **Attribution of an | b. By an employee | | | | | | | | act or other element | | | | | | | | | of the tort** to the | c. In the course of his | | | | | | | | Co | employment | | | | | | | | | | | | | | | | | ***Elements*** | [In the course of | | | | | | | | | his] | | | | | | | | - A Co that has | [employment] | | | | | | | | **specifically | | | | | | | | | instigated, | - CA in *Skandinaviska* | | | | | | | | authorized or | endorsed the close | | | | | | | | ratified the | connection test: | | | | | | | | commission of a | whether the fraud of | | | | | | | | tort** by its agent | the employee is **so | | | | | | | | is liable as a | closely connected | | | | | | | | primary tortfeasor | with his employment | | | | | | | | | that it is fair and | | | | | | | | - Such authority may be | just that the | | | | | | | | conferred through | employer should be | | | | | | | | exercise **by one of | held vicariously | | | | | | | | its primary organs** | liable** for the | | | | | | | | or by one of its | employee's fraud | | | | | | | | **authorized agents | | | | | | | | | acting within his | - court here | | | | | | | | delegated authority** | accepted that | | | | | | | | | **victim | | | | | | | | - Co can be liable so | compensation and | | | | | | | | long as it is shown | deterrence of | | | | | | | | that the employee | future harm** are | | | | | | | | acted within his | relevant and | | | | | | | | **actual or | desirable policy | | | | | | | | ostensible | considerations | | | | | | | | authority** | for deciding | | | | | | | | | whether or not | | | | | | | | | vicariously | | | | | | | | | liability ought | | | | | | | | | to be imposed | | | | | | | | | | | | | | | | | | - rests on | | | | | | | | | assumptions such | | | | | | | | | as that employer | | | | | | | | | who is forced to | | | | | | | | | bear victim's | | | | | | | | | loss will take | | | | | | | | | steps to prevent | | | | | | | | | similar harm from | | | | | | | | | occurring in the | | | | | | | | | future | | | | | | | | | | | | | | | | | | Ultimately, question is | | | | | | | | | whether it is **[fair and | | | | | | | | | just]** to | | | | | | | | | impose vicarious | | | | | | | | | liability on the employer | | | | | | | | | | | | | | | | | | [Ostensible authority | | | | | | | | | ] | | | | | | | | | | | | | | | | | | - in *The Ocean Frost*, | | | | | | | | | the HoL held that in | | | | | | | | | a case where third | | | | | | | | | party had suffered | | | | | | | | | loss in reliance on | | | | | | | | | employee's fraudulent | | | | | | | | | representations, the | | | | | | | | | employer would only | | | | | | | | | be vicariously liable | | | | | | | | | if it had, **by words | | | | | | | | | or conduct, induced | | | | | | | | | the 3P's reliance on | | | | | | | | | those | | | | | | | | | representations**. | | | | | | | | | The employer must in | | | | | | | | | some way have | | | | | | | | | **represented or held | | | | | | | | | the employee out as | | | | | | | | | having the authority | | | | | | | | | to do what he did** | | | | | | | | | | | | | | | | | | - thus the question | | | | | | | | | whether the employee | | | | | | | | | was acting in the | | | | | | | | | course of his | | | | | | | | | employment is, in | | | | | | | | | this specific | | | | | | | | | context, answered by | | | | | | | | | **examining the scope | | | | | | | | | of his ostensible | | | | | | | | | authority** | | | | | | | | | | | | | | | | | | - here, Lord Keith | | | | | | | | | explained that | | | | | | | | | the vicarious | | | | | | | | | liability here is | | | | | | | | | founded on **3P's | | | | | | | | | detrimental | | | | | | | | | reliance on the | | | | | | | | | employer's | | | | | | | | | representation** | | | | | | | | | | | | | | | | | | - seems like | | | | | | | | | liability for | | | | | | | | | deceit is no | | | | | | | | | longer contingent | | | | | | | | | on employer | | | | | | | | | having induced | | | | | | | | | 3P's reliance | | | | | | | | | ⇒close connection | | | | | | | | | test instead | | | | | | | +---------------------------+---------------------------+ | | | | | | | **Director's personal | | | | | | | | | liability for torts⇒LINK | | | | | | | | | WITH D.D.** | | | | | | | | +---------------------------+---------------------------+ | | | | | | | ***[Directors commit the | | | | | | | | | tort]*** | | | | | | | | | | | | | | | | | | **Primary corporate | | | | | | | | | liability does not, in | | | | | | | | | and of itself, offer | | | | | | | | | immunity to directors | | | | | | | | | guilty of tortious | | | | | | | | | conduct**. Were it | | | | | | | | | otherwise, the law would | | | | | | | | | perversely encourage the | | | | | | | | | abuse of the corporate | | | | | | | | | structure by allowing | | | | | | | | | directors to commit torts | | | | | | | | | with impunity | | | | | | | | | | | | | | | | | | (-): Following *Standard | | | | | | | | | Chartered Bank*, if a | | | | | | | | | director is sued for his | | | | | | | | | own deceit, it is | | | | | | | | | irrelevant that he had | | | | | | | | | made the fraudulent | | | | | | | | | representation in his | | | | | | | | | capacity as an agent of | | | | | | | | | the Co. no person who | | | | | | | | | practiced deceit on | | | | | | | | | another could escape | | | | | | | | | liability by declaring | | | | | | | | | that he did so on | | | | | | | | | another's behalf. **It | | | | | | | | | mattered not that the Co, | | | | | | | | | as the principal, was | | | | | | | | | also liable for the same | | | | | | | | | tort because it was | | | | | | | | | committed by the agent, | | | | | | | | | in the ordinary course of | | | | | | | | | business**. | | | | | | | | | | | | | | | | | | (+): in *Williams,* the | | | | | | | | | MD and principal | | | | | | | | | shareholder, M, was not | | | | | | | | | liable because he **did | | | | | | | | | not personally assume | | | | | | | | | responsibility** for the | | | | | | | | | statements made. Here, | | | | | | | | | there were insufficient | | | | | | | | | facts to infer M had | | | | | | | | | assumed personal | | | | | | | | | responsibility. Further, | | | | | | | | | at no material time was | | | | | | | | | there any **personal | | | | | | | | | dealing between Pf and M, | | | | | | | | | nor had M intimated his | | | | | | | | | willingness to assume | | | | | | | | | personal responsibility** | | | | | | | | | in any other way. | | | | | | | | | Additionally, it was | | | | | | | | | clear that | | | | | | | | | misrepresentations were | | | | | | | | | made **solely to induce | | | | | | | | | Pf's contract with the | | | | | | | | | Co** and **Pf had | | | | | | | | | intended from the | | | | | | | | | outset** to contract only | | | | | | | | | with the Co. hence, | | | | | | | | | contractual context | | | | | | | | | should take precedence, | | | | | | | | | so M is prima facie | | | | | | | | | assumed to have **acted | | | | | | | | | solely as an agent** | | | | | | | | | without intending to | | | | | | | | | assume personal | | | | | | | | | responsibility. | | | | | | | | | | | | | | | | | | ***[Authorizing, | | | | | | | | | directing and procuring | | | | | | | | | Co's | | | | | | | | | torts]*** | | | | | | | | | | | | | | | | | | Personal liability can be | | | | | | | | | incurred by a director | | | | | | | | | who has authorized, | | | | | | | | | directed or procured the | | | | | | | | | commission of Co's torts | | | | | | | | | | | | | | | | | | - where his personal | | | | | | | | | liability is | | | | | | | | | established, the | | | | | | | | | director is jointly | | | | | | | | | liable with the Co | | | | | | | | | for one and the same | | | | | | | | | tort | | | | | | | | | | | | | | | | | | [habitual practice | | | | | | | | | ] | | | | | | | | | | | | | | | | | | in *Wah Tat Bank*, a | | | | | | | | | director was personally | | | | | | | | | liable for having | | | | | | | | | procured the Co's | | | | | | | | | conversion of goods to | | | | | | | | | which the claimant bank | | | | | | | | | had good possessory title | | | | | | | | | because he had | | | | | | | | | **deliberately and | | | | | | | | | habitually pursued** a | | | | | | | | | policy of dealing with | | | | | | | | | such goods **without | | | | | | | | | first obtaining the | | | | | | | | | consent** of the claimant | | | | | | | | | bank | | | | | | | | | | | | | | | | | | [level of director's | | | | | | | | | participation]{.underline | | | | | | | | | } | | | | | | | | | | | | | | | | | | in *Gabriel Peter*, Yong | | | | | | | | | CJ said that the question | | | | | | | | | is one of fact and degree | | | | | | | | | to be determined by | | | | | | | | | examining the level of | | | | | | | | | director's participation | | | | | | | | | in each case. | | | | | | | | | | | | | | | | | | As suggested in *TV | | | | | | | | | Media*, director need not | | | | | | | | | have 'total' involvement | | | | | | | | | and be the 'controlling | | | | | | | | | mind and spirit'. If the | | | | | | | | | basis of liability is, as | | | | | | | | | suggested by the CA in | | | | | | | | | *Gabriel Peter*, the | | | | | | | | | director's own | | | | | | | | | involvement in bringing | | | | | | | | | about the Co's tort, then | | | | | | | | | it would follow that | | | | | | | | | proof of the relevant | | | | | | | | | degree of involvement | | | | | | | | | should suffice. It is not | | | | | | | | | strictly a case where | | | | | | | | | corporate veil is lifted. | | | | | | | | | | | | | | | | | | Admittedly, this test may | | | | | | | | | potentially be too broad. | | | | | | | | | Since a Co can only act | | | | | | | | | through human agents, all | | | | | | | | | its acts are, in a sense, | | | | | | | | | authorized, directed or | | | | | | | | | procured by someone. To | | | | | | | | | hold a director liable | | | | | | | | | for every one of the Co's | | | | | | | | | torts will create too | | | | | | | | | expansive a regime of | | | | | | | | | personal liability and | | | | | | | | | hence too hostile a | | | | | | | | | business environment | | | | | | | | | | | | | | | | | | *Gabriel Peter* appears | | | | | | | | | to require the director's | | | | | | | | | personal involvement in | | | | | | | | | the **specific elements** | | | | | | | | | constituting the tort, so | | | | | | | | | that the authorization of | | | | | | | | | the Co's general business | | | | | | | | | activities would not | | | | | | | | | suffice. Even on this | | | | | | | | | narrower view, this test | | | | | | | | | is not wholly | | | | | | | | | satisfactory in that it | | | | | | | | | may operate more harshly | | | | | | | | | against proprietors of | | | | | | | | | small or one-man | | | | | | | | | companies, who are | | | | | | | | | frequently also the | | | | | | | | | directors and employees | | | | | | | | | of the companies | | | | | | | | | | | | | | | | | | (+): principle that | | | | | | | | | everyone **should answer | | | | | | | | | for his tortious acts**. | | | | | | | | | A director of a Co should | | | | | | | | | not be allowed to escape | | | | | | | | | personal liability to 3P | | | | | | | | | for torts which he | | | | | | | | | personally committed by | | | | | | | | | his own hand or mouth | | | | | | | | | merely because he | | | | | | | | | committed the tort in the | | | | | | | | | course of carrying out | | | | | | | | | his duties as a director | | | | | | | | | of the Co. | | | | | | | | | | | | | | | | | | (-): a Co is separate and | | | | | | | | | distinct in law from its | | | | | | | | | SHs and directors, and it | | | | | | | | | is in the interests of | | | | | | | | | the commercial purposes | | | | | | | | | served by the | | | | | | | | | incorporated enterprise | | | | | | | | | that **they should as a | | | | | | | | | general rule enjoy the | | | | | | | | | benefit of the limited | | | | | | | | | liability** afforded by | | | | | | | | | incorporation. If the | | | | | | | | | directors are made liable | | | | | | | | | too easily, many | | | | | | | | | commercial decisions will | | | | | | | | | be fraught with the | | | | | | | | | danger of personal | | | | | | | | | liability being imposed | | | | | | | | | on the directors, who | | | | | | | | | might then become | | | | | | | | | **overcautious in making | | | | | | | | | management decisions** | | | | | | | | | lest it render them | | | | | | | | | vulnerable to legal | | | | | | | | | suits. | | | | | | | | +---------------------------+---------------------------+ | | | | | | | | | | | | +--------------------------------------------------------+ | | | | | | | **Criminal liability** | | | | | | | +========================================================+ | | | | | | | given that the course of conduct constituting the | | | | | | | | actus reus of the offence may be caused or carried out | | | | | | | | by numerous human actors, which of their minds should | | | | | | | | count as the Co's mind? | | | | | | | | | | | | | | | | ***Legislation*** | | | | | | | | | | | | | | | | - *where a statutory offence or rule applies to | | | | | | | | companies, the relevant legislation may sometimes | | | | | | | | prescribe specific rules of attribution* | | | | | | | | | | | | | | | | - *s 226 SFA sets out the conditions upon which | | | | | | | | an officer's knowledge is attributed to his Co | | | | | | | | for purposes of deciding whether the Co is | | | | | | | | liable for the offence of insider trading* | | | | | | | | | | | | | | | | ***Common Law*** | | | | | | | | | | | | | | | | - *there are generally thought to be two principal | | | | | | | | means of attributing mental states to companies, | | | | | | | | viz, the **general rules of agency** and **the | | | | | | | | "doctrine" of identification (found within special | | | | | | | | rules of attribution)*** | | | | | | | | | | | | | | | | *[agency]* | | | | | | | | | | | | | | | | - *knowledge that an agent acquires whilst acting | | | | | | | | outside the scope of his authority is not imputed | | | | | | | | to his principal* | | | | | | | | | | | | | | | | - *\[exception\]: an agent's knowledge may be | | | | | | | | imputed to the principal if it is material to | | | | | | | | the transaction that he is authorized to enter | | | | | | | | into* | | | | | | | | | | | | | | | | - *\[exception\]: a principal who is under **a | | | | | | | | duty to investigate or to make disclosure** | | | | | | | | and who engages an agent to discharge that | | | | | | | | duty will be imputed with the agent's | | | | | | | | knowledge even if it is acquired outside the | | | | | | | | course of his agency* | | | | | | | | | | | | | | | | *[Hampshire]* *[Land | | | | | | | | principle]* | | | | | | | | | | | | | | | | - *Hampshire Land **prevents the imputation of an | | | | | | | | agent's guilty knowledge to his principal** | | | | | | | | because one would not expect the agent to disclose | | | | | | | | his wrongdoing to the principal* | | | | | | | | | | | | | | | | - *Thus, it has no application to one-man | | | | | | | | companies controlled by the fraudster since | | | | | | | | there is no innocent constituent who could | | | | | | | | have been informed or been protected by the | | | | | | | | non-imputation of the agent's guilty | | | | | | | | knowledge* | | | | | | | | | | | | | | | | - *Rule in Hampshire land only applies when the **Co | | | | | | | | is a primary victim** of the agent's wrongdoing.* | | | | | | | | | | | | | | | | - *It is not sufficient if the wrongdoing is | | | | | | | | targeted at a third party but the Co suffers | | | | | | | | loss in consequence of having to compensate | | | | | | | | the third party* | | | | | | | | | | | | | | | | - *However, as per Bilta, the Co is a victim | | | | | | | | whenever it seeks redress against its | | | | | | | | offending officers and for this purpose it is | | | | | | | | immaterial whether the Co suffered loss as a | | | | | | | | primary or secondary victim* | | | | | | | | | | | | | | | | - *In Ho Kang Peng, When a company makes a claim | | | | | | | | against a director premised on the latter's breach | | | | | | | | of duty, the company is the victim, and the law | | | | | | | | will not allow the enforcement of that duty to be | | | | | | | | compromised by the director's reliance on his own | | | | | | | | wrongdoing.* | | | | | | | +--------------------------------------------------------+ | | | | | +-------------------------------------------------------------+ | | | +------------------------------------------------------------------+ | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | ***Misrepresentation*** | +=======================================================================+ | ----------------------------------------------------- | | **Representations pending negotiation of contract** | | ----------------------------------------------------- | | | | +------------------------------------------------------------------+ | | | **20.**---(1)  Every material representation made by the assured | | | | or his agent to the insurer during the negotiations for the | | | | contract, and before the contract is concluded, must be true; | | | | and if it is untrue, the insurer may avoid the contract. | | | | | | | | -------------------------------------------------------------- | | | | ---------------------------------------------------------------- | | | | --------------------------------- | | | | (2)  A representation is material which would influence the ju | | | | dgment of a prudent insurer in fixing the premium or determining | | | | whether he will take the risk. | | | | -----------------------------