QBE Insurance (Singapore) Pte Ltd and another v Relax Beach Co Ltd

Relax Beach Co Ltd owns Le Meridien Phuket Beach Resort in Thailand. QBE Insurance (Singapore) Pte Ltd and MS First Capital Insurance Limited insured it against business interruption. An infectious disease extension covered closure of the premises by order of a public authority as a result of an outbreak of a notifiable disease, followed by the words at the premises. A notification clause, accepted to be a condition precedent, required the insured to provide information reasonably needed to investigate and verify a claim. On 2 April 2020 the Governor of Phuket ordered all hotels closed because COVID-19 cases were rising fast, and the resort closed by 7 April 2020.

The hotel claimed on 26 May 2020 and told the insurers there had been no COVID-19 outbreak at the premises. On 29 May 2020 the insurers asked for further information within 21 days, failing which they would close the file. None was provided. In High Court proceedings begun in 2021, the hotel disclosed for the first time that an employee had tested positive around 26 March 2020. The judge held the insurers liable, finding the employee's case one of many concurrent causes of the closure order. The insurers' appeal, Civil Appeal No 3 of 2023, was transferred to the Court of Appeal as raising points of public importance, but they withdrew it on 13 October 2023, shortly before the hearing on 16 October 2023. The parties agreed the insurers should pay costs but could not agree the amount. The hotel sought S$279,886.17, including S$15,722.85 for a legal opinion from an English King's Counsel. The insurers offered S$40,000 on the standard basis plus undisputed disbursements.

1. Whether the court may consider the merits of a withdrawn appeal in deciding whether to award indemnity costs.
2. Whether indemnity costs were justified because the insurers' appeal lacked merit or was pursued unreasonably.
3. What costs and disbursements should be ordered, including whether the King's Counsel opinion was recoverable.

On the first issue, the court held that under the Rules of Court 2021 it must consider all relevant circumstances when fixing costs, and that can include the merits of a discontinued case. Indemnity costs are exceptional and turn on unreasonable conduct, such as pursuing a case that is wholly without basis. A late withdrawal does not by itself justify them. The court also decided to give its preliminary views on the merits because the issues mattered to the insurance market and media reports may have left the impression that the High Court decision was correct.

On the second issue, the court's preliminary view was that the judge had probably erred in two material respects. First, notice of the facts said to give rise to the insured peril, including the employee's infection, was likely required so the insurers could investigate the claim promptly. The 29 May 2020 letter was a request for information, not a summary rejection, and the hotel's failure to answer it would likely have been a complete defence. Second, a single infection was unlikely to be an outbreak in the ordinary meaning of that word. The words at the premises applied to the disease limb as well, so cases elsewhere in Phuket could not be relied on. The court thought it unlikely the parties had ever contemplated that a pandemic lockdown together with one case at the hotel would be covered. The appeal therefore had real merit, was not a delaying ploy, and indemnity costs were not appropriate.

On the third issue, the insurers' proposed figures were reasonable in light of the costs guidelines and the narrow legal issues involved. The policy was governed by Singapore law, so English authorities were persuasive at most and an English opinion was not needed.

Sundaresh Menon CJ, delivering the judgment of the court, refused indemnity costs and ordered the insurers to pay standard costs of S$40,000 for the appeal and the transfer application, plus disbursements of S$4,629.30. The S$15,722.85 for the King's Counsel opinion was disallowed.