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Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029; [2008] SGCA 27

Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029; [2008] SGCA 27
Table of Contents

Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029; [2008] SGCA 27

Suit No: CA 48/2007 Decision

Date: 27 Jun 2008

Court: Court of Appeal

Coram: Andrew Phang Boon Leong JA, Chan Sek Keong CJ, V K Rajah JA

Counsel: Eu Hai Meng (United Legal Alliance LLC) for the appellant, Philip Ling (Wong Tan & Molly Lim LLC) and Belinda Ang Choo Poh (Belinda Ang Tang & Partners) for the respondent

Subject Area / Catchwords

27 June 2008                                                                                                                                                                                   Judgment reserved.

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


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

2 A central question in the inquiry is the admissibility of extrinsic evidence which may affect the meaning and effect of the words and expressions used in a document – a particularly difficult branch of law which has vexed many an esteemed jurist (see, inter alia, John Pitt Taylor, A Treatise on the Law of Evidence (A Maxwell & Son, 1848) (“Taylor”) at para 810 and Sripada Venkata Joga Rao, Sir John Woodroffe & Syed Amir Ali’s Law of Evidence (Butterworths, 17th Ed, 2001) (“Woodroffe”) at p 3225). Contracts do not exist in a vacuum. Contracts are constituted by words, and, as Oliver Wendell Holmes J famously said in Towne v Eisner 38 S Ct 158 (1918) at 159:

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

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

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

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

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

Introduction..................................................................................... [1]–[6]

The facts
The Contract......................................................................... [7]–[10]
The events leading up to the Policy......................................... [11]–[16]
The terms of the Policy.......................................................... [17]–[22]
The Fire and the Main Action................................................ [23]–[25]

The Third-Party Action
The parties’ arguments.................................................. [26]–[28]
The District Judge’s decision......................................... [29]
The appeal to the High Court........................................ [30]–[31]

Our analysis of the Judge’s decision

The use of extrinsic evidence to affect written contracts

The law in England
The common law rule against parol evidence..….. [32]–[33]
The thin definition of the parol evidence rule…..... [34]–[40]
The English court’s use of extrinsic evidence in aid of interpretation
The concept of "interpretation”.................. [41]–[46]
The traditional approach............................ [47]–[52]
The shift to the contextual approach........... [53]–[59]
The impact of the Investors Compensation Scheme restatement.................................. [60]–[66]

The law in Singapore
The statutory framework
Overview.................................................. [67]
Sections 93–94 of the Evidence Act.......... [68]–[74]
Sections 95–100 of the Evidence Act….... [75]–[80]
The case law...................................................... [81]–[108]
Summary of the applicable principles in Singapore.. [109]
Attributes of the document in question........ [110]
The parol evidence rule............................. [111]–[113]
Admitting extrinsic evidence in aid of interpretation……...................................... [114]–[124]
The approach under proviso (f) to section 94.. [125]–[130]
Continuing relevance of canons of interpretation................................................ [131]
Synopsis...................................................... [132]–[133]

The Judge’s reliance on extrinsic evidence in the present case…............................................................................ [134]–[149]
Arguments based on justice and fairness.................................. [150]–[164]

Our interpretation of the Policy
Whether B‑Gold’s claim falls under Section II......................... [165]
Whether Special Exclusion 2 applies....................................... [166]–[169]
Whether Special Exclusion 4(b) applies.......................... [170]–[171]
Conclusion.......................................................................................... [172]

The facts

The Contract

7 Pursuant to the Contract, B‑Gold was engaged by MediaCorp as a term contractor to carry out the Works at Caldecott Broadcast Centre from 1 October 2002 to 30 September 2004. Clause 1 of the Contract stipulated that the Works were to be carried out by B‑Gold as and when ordered by MediaCorp pursuant to a signed works order.

8 B‑Gold’s liability to MediaCorp in respect of injury or damage to property was provided for in cl 19.2 of the conditions annexed to the Contract (“the Conditions of Contract”) as follows:


… 19.2 Injury or Damage to Property

The Contractor [ie, B‑Gold] shall be liable for and shall indemnify MediaCorp in respect of any liability, loss, claim or proceedings arising under any statute or at common law in respect of any injury or damage whatsoever to or any property real or personal arising out of or in the course of or by reason of the execution of the [W]orks provided that the same is due to any negligence, omission or default of the Contractor, his servants or agents or of any sub-contractor, his servants or agents. …

9 Clause 18 of the Conditions of Contract stipulated B‑Gold’s obligation to procure certain insurance policies before commencement of the Works. It stated:


The Contractor shall before commencement of any work under [the] Contract ensure that there [are] in force policies of insurance indemnifying MediaCorp, the Contractor and all sub-contractors against damage to persons and property, for Workmen’s Compensation and fire. All policies shall be retained by the S.O. [ie, the superintending officer, who was stated in the Conditions of Contract to be MediaCorp’s “Group Chief Executive Officer”] who shall on request and without charge supply the Contractor with a copy.
[emphasis added]

10 The Conditions of Contract did not specify the particular type of insurance policy which B‑Gold should obtain in order to indemnify itself, MediaCorp and all subcontractors against “damage to persons and property” as required by cl 18 thereof. Certainly, no reference was made to a CAR policy. In contrast, cll 20 and 21 of the Conditions of Contract expressly set out the requirements relating to insurance for workmen’s compensation and for loss or damage by fire as follows:


The Contractor shall before commencement of any work under [the] Contract ensure that there is in force a policy of insurance indemnifying MediaCorp, the Contractor and all sub-contractors from all liabilities under the Workmen’s Compensation Act or any statutory modification or reenactment thereof and from all costs and expenses incidental or consequential thereto.


The Contractor shall before commencement of any work under [the] Contract ensure that there is in force a policy of insurance indemnifying MediaCorp, and the Contractor against loss or damage by fire of all works and buildings constructed or in the course of construction in pursuance of or for the purposes of [the] Contract and all materials and other things delivered on to the site.

The events leading up to the Policy

11 The events leading up to B‑Gold taking out the Policy with Zurich Insurance are crucial. Before elaborating on them, it is pertinent to note that, for the purposes of the Third-Party Action, the parties had agreed before the District Judge to admit in evidence the affidavits of evidence-in-chief (“AEICs”) of their respective witnesses without cross-examination on the basis that B‑Gold would not rely on any arguments based on misrepresentation or breach of duty against Zurich Insurance. The implications of this are discussed at [28] and [150] below. As a result of such agreement, the following facts are now not in dispute.

12 The person attending to the financial and insurance requirements of B‑Gold at the material time was Yeo Hong Seng (“Yeo”), a director of the company. In late August 2002, Yeo contacted Willy Lee (“Lee”), a general insurance agent with American International Group (“AIG”), who had been attending to the insurance requirements of B‑Gold since 1985. Lee was requested to arrange for the necessary insurance cover in accordance with the requirements under the Contract. This request was effected through Lee’s wife (“Jacqueline”), who would normally liaise with Yeo on Lee’s behalf. On 28 August 2002, Yeo faxed a copy of all the documents relating to the Contract to Lee, together with a cover note which read:


Refer to our telephone conversation yesterday regards [sic] the above mention [sic] project. Appreciate if you could give me the quotation based on the following information.

Term Contract for the above project: (2) years

Duration for the project: From 01 October 2002 to 30 Sept 2004

Attached a copy of Contract Condition [sic] for your reference.

13 After checking with Lee, Jacqueline informed Yeo that the type of insurance cover required under the Contract was not available through AIG and suggested that Yeo approach other insurance companies to inquire about the insurance cover needed. Yeo, citing her lack of familiarity with the insurance industry, requested that Lee assist her in this regard. Lee (through Jacqueline) told Yeo that he would look into the matter and get back to her.

14 Lee later contacted Manfred Long (“Long”), a former colleague from AIG who had since joined Zurich Insurance, and inquired whether Zurich Insurance “could provide the kind of insurance coverage required by [B‑Gold]”. Long replied in the affirmative. On 3 September 2002, Zurich Insurance received initial instructions via a fax (which was dated 30 August 2002) from Lee addressed to Long (“the 3 September 2002 Note”), which read:

Duration for the project is from 1 Oct 2002 to 30 Sept 2003. Would appreciate if you could provide us the information as soon as possible. Thank you.

Lee also faxed to Long all the documents relating to the Contract which he (Lee) had earlier received from Yeo (see [12] above).

15 Subsequently, Lee faxed a further undated note to Long (“the Undated Note”), which read:

Hi Brother: These are the in formations [sic] that you required[.] Kindly advice [sic] for additional attention. 

Contractor:         B‑Gold Interior & [Construction] Pte Ltd.

Location Risk:    Caldecott [B]roadcast Centre
                            Andrew Road
                            Singapore 299939

Type of risk:       Contractor All Risks
                            Public Liability – 1,000,000

Nature of work: Repairs and Renovations
                            Occasional manual digging for poles and temporary supports.

Duration:            2 Years

[emphasis added]

The “Type of risk” section of this note also included the handwritten words “& Workmen [sic] Compensation” next to the words “Contractor All Risks”, as well as the handwritten remarks “(All policies excess: $3500)” next to the words “Public Liability – 1,000,000”.

16 It is pertinent to emphasise that it was Lee who required Long to obtain a CAR policy for B‑Gold, as evinced by the Undated Note. However, it is far from clear why this request was made, given that there was no specific reference to a CAR policy in the Contract (see [10] above). Long subsequently called Lee to inform him that Zurich Insurance was able to offer insurance cover to B‑Gold. The Policy was eventually issued by Zurich Insurance on 23 September 2002. A few days later, on 27 September 2002, MediaCorp and B‑Gold executed the Contract (see [5] above). 

The terms of the Policy

17 Turning to the terms of the Policy, Section I thereof (“Section I”) read as follows:


The Company [ie, Zurich Insurance] hereby agree[s] with the Insured [ie, B‑Gold] that if at any time during the period of cover the items or any part thereof entered in the Schedule shall suffer any unforeseen and sudden physical loss or damage from any cause, other than those specifically excluded, in a manner necessitating repair or replacement, the Company will indemnify the Insured in respect of such loss or damage as hereinafter provided by payment in cash, replacement or repair (at their own option) up to an amount not exceeding in respect of each of the items specified in the Schedule the sum set [out] opposite thereto and not exceeding in ant [sic] one event the limit of indemnity where applicable and not exceeding in all the total sum expressed in the Schedule as insured hereby.

[emphasis added]

18 After a series of special exclusions to Section I (none of which are relevant for the purposes of this appeal), the Policy set out, under the heading “PROVISION APPLYING TO SECTION I”, the following memorandum (“Memo 1”):

Memo 1 – Sums Insured:

It is a requirement of this Insurance that the sums insured stated in the Schedule shall not be less than for

Item 1          the full value of the contract works at the completion of the construction, inclusive of all materials, wages, freight, customs duties, dues and materials or items supplied by the Principal [ie, MediaCorp];

Items 2 & 3   the replacement value of construction plant, equipment and construction machinery; which shall mean the cost of replacement of the insured items by new items of the same kind and same capacity;

and the Insured undertakes to increase or decrease the amounts of insurance in the event of any material fluctuation in wages or prices provided always that such increase or decrease shall take effect only after the same has been recorded on the Policy by the Company.

If, in the event of loss or damage, it is found that the sums insured are less than the amounts required to be insured, then the amount recoverable by the Insured under [the] Policy shall be reduced in such proportion as the sums insured bear to the amounts required to be insured. Every object and cost item is subject to this condition separately.

19 Next came Section II of the Policy (“Section II”), which provided, inter alia:


The Company will indemnify the Insured up to but not exceeding the amounts specified in the Schedule against such sums which the Insured shall become legally liable to pay as damages consequent upon

(b) accidental loss of or damage to property belonging to third parties

occurring in direct connection with the construction or erection of the items insured under Section I and happening on or in the immediate vicinity of the site during the Period of Cover.

20 Section II had its own set of special exclusions, as follows:


The Company will not indemnify the Insured in respect of

2. the expenditure incurred in doing or redoing or making good or repairing or replacing anything covered or coverable under Section I of [the] Policy;

4. liability consequent upon

b) loss of or damage to property belonging to or held in care, custody or control of the Contractor(s), the Principal(s) or any other firm connected with the project which or part of which is insured under Section I, or an employee or workman of one of the aforesaid … 

[emphasis added]

21 The schedule to the Policy (“the Schedule”) contained the following clauses:

Name of Insured:    [B‑Gold] as Contractor and/or [MediaCorp] as Principal for their respective rights and interests.

Contract Title:         Repairs and Renovations
                              Occasional manual digging for poles and temporary supports.

Contract Period:      From 01/10/02 to 30/09/04 plus 12 months maintenance period.

Location of Risk[:]   Caldecott Broadcast Centre
                              Andrew Road
                              Singapore 299939

CAR – Contractors All Risk

Town Class:…………..01                Town Class 01

Material Damage
Permanent & temporary work including all materials to be incorporated therein

Sum insured…………………………………… SGD 500,000

Total Sum Insured:                                  500,000

Deductible A………….All Claims           SGD 3,500

ELB – Engineering Liability

Geographical Limits As per Location of Risk

Public Liability Combined Limit Limit  
Limit of Liability (Any one Occurrence) SGD 1,000,000
Limit of Liability (In the Aggregate) SGD UNLIMITED
Excess A Third Party Property Damage SGD 3,500

It bears mention that it was only on 18 August 2003 that the name of the insured under the Policy was amended to include B‑Gold’s subcontractors by an endorsement having effect from 22 August 2003.

22 In the course of this appeal, counsel for Zurich Insurance clarified that the words “ELB – Engineering Liability” in the Schedule were meant to cover engineering works and should be read together with the words “[p]ermanent & temporary work [etc]” to fall within that category. Thus, the Schedule essentially covered (a) “[p]ermanent [and] temporary work including all materials to be incorporated therein” and (b) third-party liability (or, to use the terminology of the Schedule, “[p]ublic [l]iability”), with the scope of the insurance cover for these two items delineated by Section I and Section II respectively.

The Fire and the Main Action

23 In March 2003, MediaCorp instructed B‑Gold to carry out, as part of the Works, spalling concrete repair works (“the Repair Works”) on the ceiling of an air-handling unit (“AHU”) room located on the fourth floor of MediaCorp’s television building (“the Television Block”). On 19 March 2003, B‑Gold engaged Regius as its subcontractor for the Repair Works.

24 On 21 March 2003, the very date on which the Repair Works were scheduled to commence, the Fire broke out in the AHU room where the repairs were to be carried out (“the AHU Room”). As a result, one of the AHUs (“AHU No 17”) was damaged. Furthermore, water used to put out the Fire cascaded down through the air supply ducting and through the porous ceiling tiles to the first, second and third floors of the Television Block, causing serious damage to MediaCorp’s production equipment, studios and electrical control cabinets (these damaged items, together with the AHU room and AHU No 17, will be referred to collectively as “the Damaged Property”). A report subsequently prepared by Dr J H Burgoyne & Partners (International) Ltd (a company of consulting scientists and engineers instructed on behalf of MediaCorp) concluded that the Fire had been caused by “smokers’ materials discarded by the subcontractors Regius … who were working to repair spalled concrete at the ceiling of the AHU [R]oom”. On 10 May 2004, MediaCorp commenced the Main Action against B‑Gold and Regius claiming a sum of $177,330.55, which consisted of:

(a) $34,000 for the repair of AHU No 17;

(b) $5,877 for the repair and/or replacement of various items and/or equipment;

(c) $113,136, being payment to Disaster Restoration Pte Ltd for “drying, testing, and carrying out repairs to water-affected broadcasting equipment”;

(d) $11,087 for MediaCorp’s “staff hours for cleaning”; and

(e) $13,230.55 for survey fees and expenses.

It was common ground in the appeal before us that the Damaged Property did not form part of the Repair Works.

25 Interlocutory judgment was entered against Regius in default of its entering an appearance in the Main Action, but, thereafter, MediaCorp took no steps against it. The case between MediaCorp and B‑Gold proceeded to trial, and, on 1 March 2006, the District Judge found B‑Gold to be in breach of both the Contract and its common law duty to take reasonable care for the safety of MediaCorp’s property (see MediaCorp (No 1) ([5] supra)). The District Judge entered interlocutory judgment in favour of MediaCorp against B‑Gold with damages to be assessed. Damages have been assessed on 7 March 2008 at $177,330.55 with interest thereon. B‑Gold has not appealed against either the decision on liability or that on quantum in the Main Action.

The Third-Party Action

The parties’ arguments

26 In the meantime, on 12 October 2004, B‑Gold commenced the Third-Party Action, seeking, inter alia, a declaration that Zurich Insurance was liable under the Policy to indemnify it against all sums which it would become liable and/or be ordered to pay to MediaCorp. It submitted that, on a proper construction of the Policy, the Damaged Property formed part of the property of MediaCorp which was listed in the Schedule and hence fell within the ambit of Section I. Alternatively, the Damaged Property constituted third-party property which was covered under Section II. Furthermore, the damage occasioned by the Fire was “unforeseen”, “sudden” and clearly “necessitate[ed] repair or replacement” within the meaning of Section I; the damage was also “accidental” within the meaning of Section II.

27 Zurich Insurance, on the other hand, submitted that it was not liable to indemnify B‑Gold because:

(a) the Policy did not cover Regius and/or its servants and agents;

(b) Section I had not been extended to cover the Television Block or the contents therein;

(c) the Fire had been caused by the negligent act of Regius and/or its workers and B‑Gold was not liable for the same;

(d) the Damaged Property belonged to MediaCorp and could not be regarded as property belonging to a third party, and hence fell outside the scope of Section II; and

(e) the smoking and discarding of cigarette butts (which had been found to be the cause of the Fire (see [24] above)) could not be considered as “occurring in direct connection with the construction or erection of the items insured under Section I” within the meaning of Section II.

28 As mentioned earlier (at [11] above), for the purposes of the Third-Party Action, the parties agreed to dispense with the cross-examination of all the witnesses who had filed AEICs. B‑Gold agreed to do so on the basis of Zurich Insurance’s acceptance that, at the time B‑Gold took out the Policy, it was not told specifically by Zurich Insurance that it had the option of extending the scope of the CAR insurance cover set out therein. In turn, B‑Gold agreed not to rely on its arguments of misrepresentation or breach of duty by Zurich Insurance (see B‑Gold Interior Design ([5] supra) at [21]). Thus, the parties effectively agreed that they would approach the construction of the Policy on the basis that its terms represented the true agreement between them.

The District Judge’s decision

29 On 13 November 2006, the District Judge dismissed B‑Gold’s claim in the Third-Party Action (see MediaCorp (No 2) ([5] supra)). She gave the following reasons for her decision:

(a) Section I covered “the items or any part thereof entered in the Schedule”. The “items … entered in the Schedule” were “[p]ermanent [and] temporary work including all materials to be incorporated therein”. This description was clear and left no doubt as to its scope. It did not include the physical premises on which the Works might take place or other items within those premises which were not part of the Works (id at [12]).

(b) A CAR insurance policy did not literally cover all risks. The precise ambit of such a policy depended on the construction of its terms and conditions. It had been open to B‑Gold to require the insurance cover under Section I to be extended to the physical premises on which the Works might take place and/or to other items within those premises which were not part of the Works. Neither B‑Gold nor Lee, however, had asked for such an extension (id at [16]–[18]).

(c) The natural and ordinary meaning of the words in Section II, “occurring in direct connection with the construction or erection of [the permanent and temporary works referred to in the Schedule]”, must surely be “in the course of” [emphasis in original] (id at [21]) those works. In the District Judge’s view, the negligent disposal of cigarette butts fell within this description.

(d) The second special exclusion to Section II (“Special Exclusion 2”), which stated that Zurich Insurance was not liable to indemnify B‑Gold for any loss or damage “covered or coverable under Section I” (see [20] above), precluded B‑Gold from making a claim under Section II. The Fire had damaged, inter alia, the physical premises where the Repair Works were to take place (ie, the AHU Room) and other items within those premises. Although those premises and items were not covered under Section I, the parties could have contracted for such cover. Thus, the Damaged Property, being “coverable under Section I”, fell within Special Exclusion 2 (see MediaCorp (No 2) at [25]).

(e) Item (b) of the fourth special exclusion to Section II (“Special Exclusion 4(b)”) also precluded B‑Gold from relying on Section II. In the District Judge’s view (id at [26]):

… Special Exclusion 4(b) was clearly intended to exclude any indemnity in respect of loss [or] damage to the property owned or possessed by [B‑Gold itself], [MediaCorp] (who [was] indisputably the named [principal] in the [P]olicy), and any other firms involved in the project or works being insured under the [P]olicy.

The Damaged Property belonged to MediaCorp, and thus fell squarely within the ambit of Special Exclusion 4(b) (ibid).

The appeal to the High Court

30 In District Court Appeal No 50 of 2006, B‑Gold appealed against the District Judge’s decision in the Third-Party Action. The appeal was heard on 26 March 2007. The Judge allowed the appeal and ordered that the District Judge’s decision be set aside (see B‑Gold Interior Design ([5] supra)). He further declared (id at [62]) that Zurich Insurance was liable under the Policy to indemnify B‑Gold against all sums, including costs and interest (but less the excess of $3,500), which B‑Gold was liable to pay to MediaCorp in the Main Action and ordered that such sums be paid by Zurich Insurance to B‑Gold (presumably upon assessment). The reasons for the Judge’s decision in B‑Gold Interior Design may be summarised as follows:

(a) B‑Gold’s claim in respect of the Damaged Property was not covered under Section I. The Schedule was clear. The words therein “[p]ermanent [and] temporary work” referred to “work to be erected pursuant to the Contract” (id at [30]), while the words “materials to be incorporated therein” referred to “all materials brought onto the contract site for incorporation into the [W]orks” (ibid).

(b) B‑Gold’s claim was, however, covered under Section II, which dealt with third-party liability or public liability, ie, liability which might be incurred by B‑Gold in the course of its operations (see B‑Gold Interior Design at [31]). The question was whether B‑Gold’s claim under this section was excluded by Special Exclusion 2 and/or Special Exclusion 4(b).

(c) Special Exclusion 2 did not apply. The Damaged Property was clearly not covered under Section I; nor was it “coverable” under that section as the Schedule (which defined the items covered by Section I) had to be read in the light of Memo 1 (reproduced at [18] above). In the Judge’s view, what Zurich Insurance contemplated as being insurable under the Policy was limited to the three items mentioned in Memo 1.

(d) Special Exclusion 4(b) was prima facie applicable as the words therein, “which or part of which is insured under Section I”, described “the project (ie, the … [W]orks) as opposed to the property” [emphasis in original] (see B‑Gold Interior Design at [42]). B‑Gold’s argument that those words qualified the word “property” in Special Exclusion 4(b) instead, such that liability under Section II was excluded only if the damage was to items covered under Section I, was rejected.

(e) However, taking into account the genesis of the Policy, ie, B‑Gold had taken out the Policy in order to fulfil its obligations under cll 18 and 19 of the Conditions of Contract (reproduced earlier at [8]–[9] above), Special Exclusion 4(b) was inoperable (see B‑Gold Interior Design at [55]–[56]). The Judge held that where the insured had relied upon the insurer to provide cover for a specific purpose which was made known to the latter prior to the issue of the policy, but a standard printed exclusion clause in the policy nevertheless purported to take away precisely such cover, the court would be failing in its duty if it did not intervene to deny that exclusion clause efficacy (id at [59]). We shall examine this reasoning in greater detail at [134] et seq below.

31 In our view, the Judge’s reliance on the Contract (including the Conditions of Contract) and the genesis of the Policy in construing the Policy was not legally permissible; nor did arguments based on justice and fairness compel or justify the court’s intervention. If not for the Judge’s impermissible reference to and reliance on these extrinsic materials, Zurich Insurance would not have been liable to indemnify B‑Gold in respect of the damage caused by the Fire. We shall now elaborate on each of these conclusions, beginning with the Judge’s reliance on the extrinsic materials in question to interpret the Policy. This in turn entails a consideration of the legal principles governing the use of extrinsic materials in contractual interpretation.

Our analysis of the Judge’s decision

The use of extrinsic evidence to affect written contracts

The law in England

The common law rule against parol evidence

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