Lord Lloyd J:

On 8 September 1983 the "Barquentine Osprey" was moored in Repulse Bay, Hong Kong, when she was hit by the typhoon "Ellen". As a result, she became detached from her moorings, and capsized the following day. Several members of the crew lost their lives, including Chan Ying Lung, the cook, and Sae Heng Hai, an able seaman. They were employed by Axelson Company Limited, the owners of the "Osprey". In September 1984 their personal representatives brought proceedings in the District Court of Hong Kong claiming compensation under the Employees Compensation Ordinance. They were awarded HK$242,000. On 27 May 1986 they brought further proceedings against Axelson claiming damages for negligence. On 20 November 1986 they were awarded HK$589,081 and HK$443,000 respectively. Meanwhile Axdson had been would up by order of the Supreme Court of Hong Kong. The judgments in favour of the plaintiffs were never satisfied.

Accordingly on 19 January 1988 the plaintiffs commenced the current proceedings against the respondents, Eastern Insurance Company Limited, claiming payment under the Third Parties (Rights Against Insurers) Ordinance. Section 2(1) provides:

Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then ... in the case of the insured being a company, in the event of a winding-up order being made, ... if ... any such liability ... is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall ... be transferred to and vest in the third party to whom the liability was so incurred.

By their defence, the respondents say that the persons named as insured were M/s. Richstone Industries Limited, and not Axelson. There was nothing in the proposal to indicate that Richstone were acting as agents for Axelson. Even if Axelson had been entitled to claim under the policy as undisclosed principals, the policy was unlawful by virtue of the Life Assurance Act 1774.Section 2 of the Act provides:

And ... it shall not be lawful to make any policy or policies on the life or lives of any person or persons, or other event or events, without inserting in such policy or policies the person or persons' name or names interested therein, or for whose use, benefit, or on whose accounts such policy is so made or underwrote.

The case came before Keith J on 17 February 1992. He made a number of findings of fact which are favourable to the plaintiffs, and in particular that Richstone had actual authority to effect the insurance on behalf of Axelson. Nevertheless he held that Axelson had no right to claim under the policy. Accordingly the plaintiffs could derive no rights under the Third Parties (Rights Against Insurers) Ordinance. Had he been in favour of the plaintiff on that point, he would not have regarded the Life Assurance Act 1774 as standing in their way. In his view, the Act is not applicable to indemnity insurance.

The plaintiffs appealed to the Court of Appeal. On 21 October 1992 the appeal was dismissed. The majority judgment was given by Kempster JA. He agreed with Keith J that the terms of the proposal were inconsistent with Axelson having the right to sue. He would also have decided against the plaintiffs on the Life Assurance Act point. In his view the Act applies to indemnity insurance as well as life insurance and, since Axelson was nowhere named in the policy, the insurance was unlawful and void. Sir Derek Cons VP agreed with Kempster JA. Litton JA dissented on both points.

The plaintiffs now appeal to Her Majesty in Council by leave of the Court of Appeal. It is regrettable that a case which is comparatively simple, both factually and legally, should have taken over ten years to be resolved.

Richstone Industries Limited was formed in Hong Kong in the early part of 1980 to carry on business as shipping agents. The managing director was Pak Chung King ("Mr. Pak"). The managing direc