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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL APPEAL NO. HBA 19 OF 2007
[Magistrates Court Action No. 134 of 2004]
BETWEEN
HEM RAJ f/n Ram Sumer trading as
POTENT ELECTRIC COMPANY
Appellant
AND
PARVEEN CHAND f/n Meg Nath &
VENITA WATI PRASAD f/n Ambika Prasad
1st Respondents
AND
SUN INSURANCE COMPANY LIMITED
2nd Respondent
Appearances: Yash Law for the appellant
Suresh Maharaj & Associates for the respondents
Date of Hearing: 6 May 2008
Date of Judgment: 22 August 2008
JUDGMENT
[1] This is an appeal against a decision of a Magistrate.
Background
[2] In October 2004 the 1st respondents, original plaintiffs in the Magistrates Court action, (Parveen Chand) filed a claim in the Lautoka Magistrates Court for damages against the appellant, the defendant in the lower court proceedings (Hem Raj). The action was grounded in negligence. The 2nd respondent, the insurer (Sun), was joined as third party in the action. The brief facts giving rise to the claim are that on 15 October 2003 Parveen Chand’s vehicle, registration no. ED070, was involved in a collision with Hem Raj’s vehicle, registration no. ED562 (the accident). Both vehicles were covered by a Motor Vehicle Insurance Policy with Sun. On 17 October 2003 Parveen Chand lodged a claim with Sun notifying the insurer of Hem Raj’s vehicle number and that Sun was also his insurer. Sun subsequently paid for the cost of repairs to Parveen Chand’s vehicle in respect of damages sustained arising from the accident.
[3] The appellant had earlier lodged a motor vehicle claim form with Sun on 7 January 2004. The claim was declined on the basis that the appellant had failed to notify Sun of the claim within the time specified in the insurance contract which required that the form be lodged ‘as soon as possible but no later than 30 days from the date of accident or loss’.
[4] The claim in the Magistrates Court was for damages against Hem Raj for the cost of repairs to Parveen Chand’s vehicle which had been paid by the insurer and also damages for loss of use at the rate of $50.00 per day from 15 October 2003 to 27 April 2004. Hem Raj informed the insurer of the 1st respondents’ claim. On 21 December 2004 Sun responded. It’s letter stated that all rights of recovery lay with it, as the insurers and in that letter it claimed from the appellant the sum of $6,803.00 which included repair costs of $5,750.00 which it had paid to Parveen Chand. In a subsequent letter of 18 May 2005 it reiterated the basis for declining the appellant’s claim, for breach of the contract policy conditions in failing to lodge the claim in terms of what the contract provided, and stated that the appellant was liable for Parveen Chand’s claim for loss of use in the event that it was established that the appellant was responsible for causing the accident. It maintained that it was not liable to indemnify the appellant for any judgment that may be awarded against the appellant in the Magistrates court action.
[5] On 26 November 2006 the parties agreed to have preliminary issues determined by the learned Magistrate. The agreed issues for determination before him were:
(1) Whether the 3rd party is liable to honour the defendant’s claim when it was lodged after the 30 days period?
(2) Whether the 3rd party is liable to pay the plaintiff
for the loss of use of the motor vehicle?
[6] In his judgment dated 15 May 2007 the learned Magistrate determined the issues put before him in favour of the third party, Sun. He held that Sun was entitled to decline Hem Raj’s claim and further that the claim against Sun be struck out. In respect of the claim for loss of use, he held that loss of use was encompassed within the definition of the word ‘damage’ in the insurance contract. The appellant has appealed that judgment.
Ground 1
The learned Magistrate erred in law and in fact not following and/or applying the principles of the Insurance Law Reform Act 9 of 1996 and in particular Section 26 therein coming to his conclusion
[7] Mr. Maharaj for Sun submitted that the learned Magistrate was not obliged to consider section 26 of the Insurance Law Reform Act because it was not an issue for determination. He submitted that the issue of the Insurance Law Reform Act was only made in the appellant’s submissions and was not an issue agreed by the parties for preliminary determination. He submitted further that in any event Sun had produced evidence establishing that as a result of the delay by Hem Raj in failing to lodge a claim within the 30 days period prescribed in the insurance contract, Sun had been prejudiced by the delay. He submitted that prejudice had been established.
[8] Section 26(1) and (2) of the Insurance Law Reform Act of 1996 (ILRA) provides:
"26 (1) A provision of a contract of insurance prescribing
any manner in which or any limit of time within which notice of any claim by the insured under such contract must be given or prescribing any limit of time within which any suit or action by the insured must be brought shall –
(b) in any other case, bind the insured only if in the
opinion of the arbitrator or court determining the claim the insurer has in the particular circumstances been so prejudiced by the failure of the insured to comply with such provision that it would be inequitable if such provision were not to bind the insured.
Where –
(a) the insured under any contract of insurance to
which subsection (1)(b) of this section applies fails to give notice of any claim in any manner or within any limit of time prescribed by the contract; and
(b) the cost of repairing, replacing, or reinstating any property when
it fails to be met is greater than that which would have applied if the notice had been given in the manner or within the time so prescribed,
That greater cost shall not constitute prejudice to the insurer shall not be obliged to apply or pay in repairing, replacing or reinstating the property a greater sum then that for which he or she would have been liable if the notice of claim have been given in the manner or within the time so prescribed."
[9] In my view the learned Magistrate erred in law in considering the first issue before him which was whether the third party was liable to honour the defendants claim when it was lodged after 30 days period without turning his mind to section 26 of the ILRA. Consideration of section 26(1) was essential before arriving at a finding of whether the insurer could avoid, on a time point, a liability which it would otherwise have. Comprehensive submissions on section 26 had been made by the appellant. However the learned Magistrate did not consider this aspect of the submission in his judgment and did not consider the relevancy of section 26 before holding that the insurer was entitled to decline the appellant’s claim. The insurer had relied on a time point in declining the appellant’s claim. Sun had maintained that because the claim was not lodged within the 30 days period as stipulated in the insurance contract, it was not liable to indemnify the appellant or consider the appellant’s claim lodged. The learned Magistrate referred to the condition in the insurance contract requiring that a claim be made as soon as possible but no later than 30 days from the date of accident or loss. He held in effect that the appellant’s claim, having not been lodged within the 30 days period, entitled the insurer to decline the claim and the claim to be indemnified against any judgment which Hem Raj may have obtained. What he failed to consider was that superimposed upon that 30 days period condition was a statutory provision which prevented an insurer from avoiding a policy in reliance on a time limitation contained in the insurance contract, unless prejudice was established.
[10] Section 26(1)(b) clearly applied to the insurance contract in question. It contained a limitation of time within which notice of any claim by the insured under such contract must be given. Subsection 1(b) prescribed that the time limitation could only bind the insured if in the opinion of the court determining the claim, the insurer had in the particular circumstances been so prejudiced by the failure of the insured to comply with such provision, that it would be inequitable if such provision were not to bind the insured. It was a condition precedent to the learned Magistrate’s ultimate finding that the insurer was not liable, that he determine first whether the insurer had been so prejudiced by the insured’s failure to give notice within the time limitation contained in the contract of insurance, that it would be inequitable that the time limitation were not to bind the insured. He erred in law in arriving at his finding without considering section 26 of the ILRA. Only if he was satisfied that the insurer had been so prejudiced by the appellant’s delay could he conclude that the insurer was entitled to avoid he policy. He made no findings in this regard.
[11] Section 26(1) of ILRA is almost identical to section 9 of the Insurance Law Reform Act 1977 in New Zealand. Section 9 (1)(b) of the New Zealand legislation provides:
"9. Time limits on claims under contracts of insurance – (1) A provision of a contract of insurance prescribing any manner in which or any limit of time within which notice of any claim by the insured under such contract must be given or prescribing any limit of time within which any suit or action by the insured must be brought shall –
(b) in any other case, bind the insured only if in the opinion of the arbitrator or Court determining the claim the insurer has in particular circumstances been so prejudiced by the failure of the insured to comply with such provision that it would be inequitable if such provision were not to bind the insured."
[12] The New Zealand Court of Appeal in Sinclair Horder O’Malley v National Insurance[1] held that by section 9(1) the time limitation in the insurance contract in issue in that case did not bind the insured unless the court was satisfied that the insurer had been prejudiced by the failure to make a claim within the specification of the insurance contract. Justice Richardson held at page 262 that section 9 (1)(b) protects the insured unless in the opinion of the court ‘the insurer has in the particular circumstances been so prejudiced by the failure of the insured to comply with such provision that it would be inequitable if such provision were not to bind the insured’. Justice Hardie Boys held at page 265 that section 9(1) qualifies the time limitation condition in the insurance contract. By reason of section 9(1), the insurer in the absence of prejudice cannot rely on the lack of immediacy. The same principles apply to section 26 of the ILRA. Clearly under section 26 an insurer claiming prejudice must demonstrate on the balance of probabilities that its position has been materially disadvantaged in the particular case by late notification. Specific prejudice must be established. Section 26 prevents an insurer from avoiding, on a time limitation, a liability which it would otherwise have. It can only avoid liability if prejudice caused by the failure of the insured to comply with the relevant time provision is established. It is designed to protect the insured. The onus of proof of sufficient prejudice rests on the insurer. The learned Magistrate was required to consider section 26 before arriving at his determination that Sun was entitled to decline the claim thus avoiding the policy. In failing to do so and in arriving at his finding without determining first the question of prejudice he erred in law. I have upheld the first ground of appeal.
Ground 2
The learned Magistrate erred in law and in fact in applying the principles in Dilip Kumar Jyoostua Dilip Kumar trading as Bninaco Textiles – National Insurance Company (Fiji) Limited FCA Civil Appeal No. ABU 0056 of 2006S, when the same is distinguishable in that the Insurance Law Reform Act 9 of 1996 was not argued, applied and/or tested in that case
[13] The Dilip case was clearly distinguishable. In basing his finding on the principles enunciated in Dilip the learned Magistrate erred. Section 26 of the ILRA was not considered and was not part of the Court of Appeals judgment. It could not have been. The Act does not apply in relation to a contract of insurance entered into before the commencement date of ILRA. The insurance policy in Dilip was applicable over the period 1994. The ILRA came into force in 1996. The court in Dilip did not deal with the ILRA and as such the learned Magistrate fell into error when he decided that the principles of that case were applicable to the issues that he had been asked to determine, in isolation and without taking into consideration section 26 of the ILRA.
Ground 3
The learned trial Magistrate erred in law and in fact in applying the decision in Investors Compensation Scheme Ltd v West Brounwich Building Society [1997] UKHL 28; (1998) 1 All ER 98 when the Insurance Act in that instance is different from the one in this case
[14] The principles of construction enunciated in the above case are also applicable in Fiji. Those principles were considered by the learned Magistrate. There was nothing wrong in considering the contract on the basis of those principles. His mistake was failing to have regard to section 26 of IRLA.
Grounds 4, 5 and 6
[15] I have upheld the appellant’s submissions on these grounds for the same reasons for upholding ground 1.
Orders
(i) The appeal succeeds.
(ii) The judgment of the learned Magistrate given on 15 May 2007 is set aside.
(iii) The file is to be remitted to the Magistrates Court at Lautoka for re-consideration of the preliminary issues afresh before another Magistrate.
(iv) The appellant is to have costs of the appeal and costs of the Magistrates court proceedings assessed in the sum of $1,500.00 to be paid by the 2nd respondent within 28 days.
Gwen Phillips
Judge
At Lautoka
22 August 2008
[1] [1995] 2 NZLR at 257
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