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Sun Insurance Company Ltd v Public Trustee of Fiji [2010] FJHC 213; HBC028.2007L (25 June 2010)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION


Civil Action No: HBC 28 of 2007L


BETWEEN:


SUN INSURANCE COMPANY LIMITED
Plaintiff


AND:


THE PUBLIC TRUSTEE OF FIJI on behalf of the ESTATE OF BISSUN DAYAL
1st Defendant


AND:


RAJESHWAR PRASAD and ANJINI PRASAD
2nd Defendants


AND:


PALANIAPPAN SUBBAIAH
3rd Defendant


FINAL JUDGMENT


Judgment of: Inoke J.


Counsel Appearing: Mr. S. Nandan for the Plaintiff
Mr. S. K. Ram for the 2nd Defendants
Mr. A. K. Narayan for the 3rd Defendant


Solicitors: Messrs Suresh Maharaj & Associates for the Plaintiff
Office of the Attorney General for the 1st Defendant
S. K. Ram Esquire for the 2nd Defendants

  1. K. Lawyers for the 3rd Defendant

Date of Hearing: 30 March 2010
Date of Judgment: 25 June 2010


INTRODUCTION


[1] In this case, the Plaintiff insurance company claims that it is not liable to pay out on a third party insurance policy covering a motor vehicle which was involved in a head-on collision with another vehicle in which both drivers and some of the passengers were killed and others were seriously injured.

THE CLAIM


[2] This action was brought by way of originating summons filed on 2 February 2007 seeking the following orders:
  1. A Declaration that Sun Insurance Company Limited, the Plaintiff herein, is entitled to avoid liability to provide indemnity to the First and the Second Defendants in respect of the claim by the Third Defendant under Third Party insurance Policy number 116557 on the grounds that the First and the Second Defendants have breached the terms and conditions of the Policy.
  2. A Declaration that Sun Insurance Company Limited, the Plaintiff herein, is not liable to satisfy any judgment that may be entered against the First and the Second Defendants arising out of a Motor Vehicle collision on the 8th day of July, 2003 involving Motor Vehicle registration number’s CE752 driven by Bissun Dayal father’s name Bechu, deceased and DP195 driven by Avinesh Goundar father’s name Arjun Goundar, deceased, being the subject of the Third Defendants’ claims in Lautoka High Court Civil Action Number HBC 168 of 2006L and any further actions to be issued relating to the same collision involving Motor Vehicles registration numbers CE752 and DP195.
  3. That alternatively, if this Honourable Court were to hold that the abovenamed Plaintiff could not avoid liability or were held liable to satisfy any judgment that may be entered against the First and the Second Defendants in Civil Action No. HBC 168 of 2006L, then the Plaintiff seeks a declaration that the same be paid and satisfied by the First and the Second Defendants or that they indemnify the Plaintiff wholly to the extent of the judgment pursuant to Section 10 of the Motor Vehicle (Third Party Insurance) Act, Cap 177 and costs thereof and the same be recoverable from the First and the Second Defendants by way of process of execution forthwith.
  4. That the declarations sought herein be determined as a preliminary issue before the substantive hearing of Civil Action No. HBC 168 of 2006L.
  5. For an order that the First and the Second Defendants do pay all the costs of these proceedings to the Plaintiff.
  6. Such further and/or other relief as to this Honourable Court may deem just.

[3] The application is said to be made under s 11(3) of the Motor Vehicle (Third Party Insurance) Act [Cap 177].

[4] For convenience, I set out s 11 of the Act in full:

11.-(1) If, after a certificate of insurance has been delivered under the provisions of subsection (4) of section 6 to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under the provisions of paragraph (b) of subsection (1) of section 6, being a liability covered by the terms of the policy, is obtained against any person insured by the policy, then, notwithstanding that the insurance company may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurance company shall, subject to the provisions of this section, pay to the persons entitled to the benefit of such judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable by virtue of any written law in respect of interest on that sum.


(2) No sum shall be payable by an approved insurance company under the provisions of subsection (1)-


(a) in respect of any judgment unless before, or within 7 days after the commencement of the proceedings in which the judgment was given, the insurance company has notice of the bringing of the proceedings; or


(b) in respect of any judgment so long as execution thereon is stayed pending an appeal; or


(c) in connection with any liability if, before the happening of the event which was the cause of the death or bodily injury giving rise to the liability, the policy was cancelled by mutual consent or by virtue of any provisions contained therein and either-


(i) before the happening of such event, the certificate of insurance was surrendered to the insurance company or the person to whom the certificate of insurance was delivered made a statutory declaration stating that the certificate of insurance had been lost or destroyed and so could not be surrendered; or


(ii) after the happening of such event but before the expiration of 14 days from the taking effect of the cancellation of the policy, the certificate of insurance was surrendered to the insurance company or the person to whom the certificate of insurance was delivered made a statutory declaration that the certificate of insurance had been lost or destroyed and so could not be surrendered; or


(iii) either before or after the happening of the event but within a period of 14 days from the taking effect of the cancellation of the policy, the insurance company had commenced proceedings under this Act in respect of the failure to surrender the certificate of insurance.


(3) No sum shall be payable by an approved insurance company under the provisions of this section if, in an action commenced before or within 3 months after the commencement of the proceedings in which the judgment was given, the insurance company has obtained a declaration that, apart from any provision contained in the policy, the insurance company is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in a material particular or if the company has avoided the policy on the ground that it was entitled to do so apart from any provision contained in it:


Provided that an insurance company which has obtained such a declaration in an action shall not thereby be entitled to the benefit of the provisions of this subsection in respect of any judgment obtained in any proceedings commenced before the commencement of that action unless, before or within 7 days after the commencement of that action, it has given notice thereof to the person who is plaintiff in the action under the policy specifying the non-disclosure or false representation on which it proposes to rely and that it intends to seek a declaration and any person to whom notice of such action is given may, if he desires, be made a party thereto.


(4) If the amount which an approved insurance company, under the provisions of this section, becomes liable to pay in respect of the liability of a person insured by a policy exceeds the amount for which it would, apart from the provisions of this section, be liable to pay under the policy in respect of that liability, it shall be entitled to recover the excess from that person.


(5) In this section-


"liability covered by, the terms of the policy" means a liability which is covered by the policy or which would be so covered were it not that the insurance company is entitled to avoid or cancel or has avoided or cancelled the policy; and


"material" means of such a nature as to influence the judgment of a prudent insurer in determining whether he will accept the risk and if so at what premium and on what conditions.


THE FACTS


[5] The affidavit in support sets out the following facts. The First and Second Defendants are husband and wife and were the registered owners of a Toyota Hilux pick-up van registered number CE752. The Plaintiff, Sun Insurance Company Limited, issued a third party insurance policy number 116557 for the van valid for a year from 23 August 2002 to 23 August 2003. On 8 July 2003, the van, driven by Bissun Dayal, collided head-on with another vehicle registration number DP195, driven by one Avinesh Goundar. Both drivers and three passengers died from their injuries.

[6] The third Defendant, who was a passenger in vehicle DP195, was injured but survived the accident. On 22 June 2006 he sued the Second Defendants (as the registered owner of the van CE752) and the First Defendant (as the trustee/executor of the deceased driver Bissun Dayal of the van) in this Court in another civil action, HBC 168 of 2006L, for damages for the injuries that he suffered.

[7] The insurance company commissioned a private investigator to investigate the circumstances of the accident. He found that one Subhas Chand had hired van CE752 and paid $50 to Bissun Dayal to drive him to Rakiraki and back. It appears from the statements that were taken by the Police in July 2003 that Subhas Chand was a joiner by profession and had hired the van to take him, some carpentry items and his tools to Rakiraki to fix a counter in one of the shops there.

[8] The solicitors acting for Sun Insurance then wrote to the Second Defendants in respect of action HBC 168 of 2006L on 13 December 2006 and said:

We advise that on the instructions of the Third Party Insurers, we filed Acknowledgment of Service and Statement of Defence on your behalf. We have continued to represent you to protect your interest in this action so far. We have now received instructions from Sun Insurance Company Limited to make an application to the High Court seeking leave to withdraw as Solicitors representing your interest in this action.


We advise that Sun Insurance Company Limited appointed an investigator and had the accident investigated involving the insured vehicle and another vehicle registration number DP195.


The investigation revealed that your authorised driver at the material time namely, Mr Bissun Dayal was driving the insured vehicle for hire and reward. The vehicle was hired by one Mr Subhas Chand who had paid $50.00 to Mr Bissun Dayal for a trip to Rakiraki on the day of the accident.


You and your driver have breached the Third Party Policy conditions issued by the Third Party Insurers. In the event of the breach of policy conditions by the insured, the Third Party Policy Insurers are denying liability to indemnify you against the Plaintiffs claim in this action.


In the circumstances our client does not propose to have further conduct of your defence. You are hereby advised to make your own arrangement for alternative legal representation at your own cost in order to protect your interest against the Plaintiffs claim in this action. We will shortly be making an application to the High Court seeking leave to withdraw as your Counsel as instructed by the Third Party Insurers.


[9] The Second Defendants in reply alleged that the insurance company had paid out on the policy on other claims by other persons injured in the same accident (HBC 437 of 2003L filed on 10 December 2003) and is therefore estopped from now denying liability in HBC 168 of 2006L under the policy. The insurance company’s response was that it had settled claims on a commercial basis and nothing that it had done amounted to estoppel.

[10] Subsequent searches of the Land Transport Authority records in August 2008 showed that van CE752 was registered and licensed for "commercial use".

[11] Condition 1(c) of the policy stated:

The person insured shall not use the motor vehicle nor shall the owner permit or suffer any person to use such motor vehicle

.

.

(c) to carry such passengers for the hire or reward or in pursuance of a contract of employment in contravention of the licence issued for the vehicle described herein.


[12] The premium paid for van CE752 was $90 and clause 5 of the policy stated:

LIMITATIONS AS TO USE –


Premium has been paid for only for the use of the motor vehicle for the purposes set out in item No 3(A) of the schedule on back hereof, provided however that a premium paid for the use of the motor vehicle for the purpose set out in item No 2, 3, 4, 5, or 10 of the schedule shall also cover use of the motor vehicle for social domestic or pleasure purposes, or for the Owner’s business within the limits set out in item No 1(b) of the schedule, or, in the case of a hire car or rental car, for the hirer’s business. The motor vehicle must not be used for any other purpose unless the policy is endorsed and extra premium (if any) paid.


[13] Item No 3(a) of the schedule is defined as "Light goods vehicle with a carrying (capacity) up to 2 tons" and a "goods vehicle" is defined as "a motor vehicle which is constructed or adapted or primarily used for the conveyance of goods or merchandise of any description in connection with trade, business or agriculture".

THE HEARING OF THE ORIGINATING SUMMONS


[14] The application eventually came before me on 1 December 2009. Since the filing of the originating summons in February 2007, the matter had been called on several occasions with three affidavits filed by the insurance company and in the process the case changed from one of breach of clause 1(d) to 1(c). It was set down for hearing on 30 March 2010. I refused the Plaintiff’s application for an adjournment on that morning because of the long delays so far and heard the substantive application.

[15] I am very grateful for counsels’ very helpful written submissions and the case authorities cited by them without which my task would have been much more time consuming and difficult.

THE PRIMARY ISSUE FOR DETERMINATION


[16] The primary issue in this case is whether the insurance company can escape liability to a third party on a third party policy of insurance simply because the insured had used his vehicle for a journey in which such use is not permitted under the terms of the policy.

[17] Counsel for the Second Defendant argued that the Plaintiff could not bring itself within the ambit of s 11(3). He submitted that there are 3 limbs, the third of which is to the point here, which was that Sun Insurance had to show that it had "avoided the policy the policy on the ground that it was entitled to do so apart from any provision contained in it". I do not agree with what seems to be his interpretation that s 11(3) excludes an action based on a breach of a provision in the policy. That does not seem to be the court’s interpretation in the leading case in this area which I refer to below, although the point was not argued. The Court of Appeal accepted that the application, similar to the one in this case, was properly brought.

CONSIDERATION OF THE PRIMARY ISSUE


[18] The primary issue has been authoritatively decided by the Court of Appeal in Chand v Sun Insurance Company Ltd [2008] FJCA 113; ABU0042.2006S (11 July 2008). Counsel for the Third Defendant informed me that this decision is on appeal to the Supreme Court but until that Court decides otherwise, the state of the law remains as decided by the Court of Appeal. The facts of this case are similar to the present case in that the van was driven for payment of $35 by the plaintiff. The Court of Appeal[1] held that the insurer was liable to pay on a judgment entered against the insured by a third party that was injured in an accident involving the insured vehicle. The reasoning of the Court is reproduced here for convenience:

Third Finding - Use of the Vehicle

17. The trial judge found that there was "insufficient evidence to make a finding about what use he (Mr Bala) made of the vehicle, except for the occasion when he carried Prem Chand in return for the agreed payment of $35.00".


18. The trial judge was entitled to proceed on the basis that on the occasion of the accident the vehicle was being used to carry the passenger for the $35 payment because the second question the trial judge was asked to answer assumed that matter.


19. The real issues that this Court must determine are whether the Policy properly construed excluded cover to the vehicle on this occasion (because of that use) and, if so, was the Insurer prevented from relying on such exclusion by the Motor Vehicles (Third Party Insurance) Act Cap 177 ("the Act").


The Motor Vehicles (Third Party Insurance) Act

20. Section 6(1) of the Act provides:


"In order to comply with the provisions of this Act, a policy of insurance must be a policy which-


(a) is issued by an approved insurance company;


(b) insures such person, persons or classes of person as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of that vehicle:


Provided that ..."


The proviso is to the effect that the Insurer shall not be required to cover the matters that have been picked up in Exclusions 1 & 2 of the Policy (workers compensation, contractual liability, relatives, getting onto or alighting from a motor vehicle).


21. Section 6(3) of the Act provides:


"An approved insurance company issuing a policy of insurance under this section shall be liable to indemnify the persons or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of person."


Section 6(4) of the Act provides that a policy shall be of no effect until a certificate of insurance in the prescribed form is delivered to the person by the whom the policy is effected.


22. Section 11(1) of the Act provides:


"If, after a certificate of insurance has been delivered under section 6(4) to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under the provisions of section 6(1)(b), being a liability covered by the terms of the policy, is obtained against any person insured by the policy, then, notwithstanding that the insurance company may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurance company shall, subject to the provisions of this section, pay to the persons entitled the benefit of such judgment any sum payable thereunder in respect of liability, including any amount payable in respect of costs and any sum payable by virtue of any written law in respect of interest on that sum."[emphasis added]


23. Sections 11(2) & (3) of the Act provide, in essence, that no sum shall be payable by an approved insurance company under ss1 unless the insurance company was given notice of the proceedings in which the judgment was given within 7 days of the commencement of the proceedings and if the insurance company has, in an action commenced before or within three months after the commencement of the proceedings in which the judgment was given, obtained a declaration that:


"apart from any provision contained in the policy, the insurance company is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in a material particular or that if a company has avoided the policy on the ground that it was entitled to do so apart from any provision contained in it.."


24. Mr Chand's primary submission is that because he gave notice to the Insurer of his proceedings against the Owner and Mr Bala, and because the Insurer did not obtain a declaration under section 11(3), the Insurer was obliged to pay Mr Bala the judgment (the moneys) whatever the Policy might provide as between the Insurer and the Owner.


Put more generally, the submission was that when a judgment against an Insured is obtained by a third party, a legal relationship is created between the person who obtains the judgment and the Insurer obliging the insurer to pay the judgment unless the Insurer obtains a declaration under section 11(3).


Liability, it was put, was created by the injury to the third party by a vehicle the subject of a Third Party Insurance Policy.


25. This construction of section 11(1) would have a great deal of force except that the words being a liability covered by the terms of the policy have to do some work. It seems to this Court that section 11 will operate as Mr Chand contends provided there is cover under the Policy. In this case the combined effect of clauses 5 & 6 of the Policy, and in addition Exclusion 3 of the Policy, is that unless the vehicle is being used as a "Light goods vehicle" at the time of any accident, or for social or domestic purposes, there will not be a liability under the Policy.


26. That is what the policy says. The question is does the Act permit such liability to be excluded.


27. Section 10 of the Act provides:


"Where a certificate of insurance has been delivered under the provisions of subsection (4) of section 6 ..., so much of the policy as purports to restrict the insurance of the person insured thereby in respect of the following matters-


(a) the age of physical or mental condition of the persons driving the motor vehicle; or


(b) the condition of the motor vehicle; or


(c) the number of persons the motor vehicle carries; or


(d) the weight or physical characteristics of the goods that the motor vehicle carried;


(e) the times at which or the areas within which the motor vehicle is used; or


(f) the horse power or value of the motor vehicle;


(g) the carrying on the motor vehicle of any particular apparatus;


(h) the carrying on the motor vehicle of any particular means of identification other than any means of identification required to be carried under the provisions of the Traffic Act,


shall, in respect of such liabilities as are required to be covered under this Act, be of no effect:


Provided that nothing in this section shall require an approved insurance company to pay any sum in respect of the liability of any person other than in or towards the discharge of that liability and any sum paid by an approved insurance company in or towards the discharge of the liability of any person which is covered by the policy by virtue only of this section shall be recoverable by the approved insurance company from that person."


28. There is nothing in section 10 that specifically prevents an insurer from restricting liability based on the purpose for which a vehicle is used.


29. It seems to this Court that an exclusion based on the purpose for which a vehicle is being used offends section 6(1) of the Act which provides that the policy must be a policy which insures the person, persons or classes of person "in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of that vehicle", and which section specifies the liability that can be excluded, which does not include an exclusion based on the purpose for which the motor vehicle was being used.


30. Any other construction would subvert the scheme and policy of the Act. A vehicle could be in and out of cover during the course of a morning, depending on whether goods were being carried or whether passengers were being conveyed. In the Policy clause 5 provides that the motor vehicle can also be used for "social, domestic or pleasure purposes", but on the Insurer's case there would be no reason why an insurer has to offer cover for that extended purpose.


31. The scheme of the Act is this. Section 6 mandates that a third party insurance policy must cover any liability arising out of the use of the insured vehicle, apart from specified matters. Section 10 permits an insurer, as between the insurer and the insured in relation to eight specified matters, to restrict the insurer's liability to the insured, but provides that those restrictions will be of no effect as between the insurer and the injured third party.


So for example a policy could provide that cover will only be extended to a vehicle if the number of passengers for which the vehicle was licensed to carry was not exceeded. Such a restriction on cover offends section 6(1) and an insurer cannot escape liability to a third party injured by such a vehicle. However the insurer is permitted by section 10(c) to recover from the insured the amount the insurer has had to pay to the third party.


32. The words in section 11(1) "being a liability covered by the terms of the policy" have to be read as being a liability covered by the policy in accordance with the Act.


33. The Court of Appeal in Ashok Kumar & Chandra Mati Singh v Sun Insurance Company Limited [2005] ABU0072.04S considered policy wording that sought to restrict cover to the owner and any person driving with the owner's permission provided that the person driving held a licence. The Court of Appeal held that such restriction was not in breach of section 6(1)(b) because the section permitted the insurer to insure such person, persons or classes of persons as may be specified in the policy.


That must be correct but the case is not authority that an insurer may make restrictions as to the purpose for which a vehicle can be used.


34. Ashok Kumar also makes the unanswerable point that once the person, persons or classes of persons are specified:


"then the effect of the section is to ensure that their potential liability, in respect of bodily injury or death connected with the use of the vehicle is fully covered, save for the permitted exceptions noted in the proviso (a) and (b) to s6(1) of the Act".


The Court also cited with approval earlier observations of the namely:


"The purpose of the statute is to protect the public against the consequences of negligence in the driving of motor vehicles by persons unable to meet substantial claims. That purpose may be defeated if approved insurers are permitted to avoid their liability to compensate the victims of road accidents by reliance upon this term of the policies issue."


35. It follows from the foregoing that the use that was being made of the Van at the time of the accident is irrelevant to Mr Chand's claim against the Insurer and, section 11 of the Act having been complied with, the Insurer is obliged to pay Mr Chand the moneys. The trial judge ought to have answered the three questions Yes, No and No.


[19] I felt bound by this Court of Appeal decision and applied it in Chandra v Sun Insurance Company Ltd [2009] FJHC 200; HBC42.2009L (10 September 2009).

[20] Likewise I feel bound to apply Chand (supra) to the present case and to find that Sun Insurance is not entitled to avoid the policy as against the Third Defendant.

[21] The solicitors for Sun Insurance also acted for the First and Second Defendants in HBC 168 of 2006L and defended them until the solicitors wrote their letter of 13 December 2006. In any event, no issue was raised as to the need to notify the insurer of the proceedings. The insurer must be taken to have notice under s 11(2)(a) of the proceedings. It therefore cannot avoid payment under s 11(1).

[22] The law in this area seems to be that the only instances where the insurer can avoid liability to a third party are where the driver is either unlicensed or otherwise unauthorised to drive or where the driver is under the influence of liquor: Kumar v Sun Insurance Company Ltd [2005] FJCA 63; ABU0072 of 2004S (11 November 2005)[2]. Such is not the case here.

FAILURE TO BRING THIS ACTION WITHIN 3 MONTHS


[23] The Defendants also argue that Sun Insurance cannot avoid the payment because it had not brought this action within the 3 months required by s 11(3) of the Act. Civil action HBC 168 of 2006L in respect of which this application was brought as a preliminary issue was commenced on 22 June 2006. The present action was brought on 2 February 2007 more than 3 months after HBC 168 of 2006L was commenced so it is out of the time required by s 11(3). Such a failure, it is submitted, is fatal because the time limit is mandatory.

[24] The case authority for the submission is the Supreme Court[3] decision in Dominion Insurance Ltd v Bamforth [2003] FJSC 3; CBV0005.2002S (24 October 2003) on the effect of the 7 day limit set by s 11(2)(a) of the Act:

Section 11(1) of the Act imposes a statutory liability on the Insurer to pay the sum of a relevant judgment against a person insured to the person in whose favour the judgment has been awarded. That liability is extra-contractual although necessarily conditioned upon the existence of a policy of insurance. It is important therefore, when looking to the provisions of s.11(2), to bear in mind that the section is concerned with the imposition and the conditions of the imposition of a special statutory liability. It is not concerned with the plaintiff’s cause of action against the insured person which arises at common law. Nor is it concerned with an insured person’s right of indemnity under the policy.


Subsection 11(2) sets the boundaries of this special statutory liability by setting out the conditions under which "No sum shall be payable by an approved insurance company under the provisions of subsection (1)". There is no relevant leeway of choice in these words. They define the boundaries of the liability imposed by s.11(1) by reference to various circumstances in which "No sum shall be payable" under that subsection.


The Court of Appeal observed:-


"Section 11(2)(a) imports into the policy what is in effect a condition precedent to the liability of Dominion Insurance to make the payment it would otherwise be required to make by s.11(1)."


That observation, with respect, is not strictly correct. The condition precedent specified in s.11(2)(a) applies to the statutory liability created by s.11(1). It is not imported into the policy. In this connection also the submission made for Dominion Insurance that the Act has been "incorporated into the policy by reference" is not apposite as the liability created by s.11(1) is between the insurer and the injured party who was not a party to the policy or covered by it.


It is correct to say, as the Court of Appeal said, that s.11(2)(a), as a matter of construction in accordance with the unambiguous opening words of s.11(2), defines a condition precedent to the liability imposed by s.11(1). When that point is reached no question of characterisation of the condition as mandatory or directory arises even if that characterisation were still useful in statutory construction - see Project Blue Sky Inc. v. Australian Broadcasting Authority [1998] HCA 28; (1998) 153 ALR 490 at 516; Hawkes Bay Hide Processors of Hastings v. Commissioner of Inland Revenue [1990] 3 NZLR 313 at 316. For the construction question – what is the effect of non - compliance with the condition? - is answered, not by the words of the condition itself but by the clearly defined consequences of the failure to satisfy it – "No sum shall be payable."

...


The nature of the notice condition as a condition precedent was confirmed recently in the Court of Appeal in Wake v. Wylie (2001) RTR 20. Kennedy LJ referred to s.152(a) of the Road Traffic Act 1988 as "not a statutory defence" but "a condition precedent to liability," and "not a statutory time limit, but a state of affairs which by statute had to exist before the relevant insurers became liable to pay"(para. 34 and 38). The judgment of Kennedy L.J., with which Laws and Rix LJJ agreed, also provides a helpful review of case law on the section which it is not necessary to reproduce here.


The task that remains is to define the content of the condition. There is room for debate about the way in which an insurer may have notice of proceedings in which the relevant judgment is given. That was the approach taken by the Court of Appeal in Desouza v. Waterlow [1999] RTR 71 (C.A.) in relation to the like provision of s.152(a) of the Road Traffic Act 1988. Cazalet J., at 81, identified "the essential purpose" of the required notice thus:-


"...that the insurer is not met with information, out of the blue, that his insured has had a judgment obtained against him."


Roch LJ at 82 said:-


"The purpose of the provision is to avoid insurers being asked to satisfy a judgment against their insured in respect of a claim of which they knew nothing, obtained in proceedings of which they had no notice or warning."


In that case the object of the notice requirement had been met. The plaintiff had provided the insurer with a detailed plan and account of the accident within one month of its occurrence. The insurer’s engineer had inspected the plaintiff’s car and had authorised work to be carried out. There was a sequence of letters between the plaintiff and the insurer in which the plaintiff made clear that unless his claim was settled he intended to take proceedings. In that case the Court adopted a purposive approach where the language of the section permitted it to do so. The requirement of notice can be met in a variety of ways. Cazalet J. observed that notice could be given orally and could be given prior to the commencement of the proceedings. This was also the approach of the Privy Council in the earlier case of Ceylon Motor Insurance Association Limited v. Thambugala [1953] A.C. 584 concerning s.134 of the Motor Car Ordinance of Ceylon (No. 45 of 1938). Notice was held not to require precise identification of the particulars of the action instituted given that it could be provided prior to commencement of the action.


It is possible, with a purposive approach to the construction of s.11(2)(a) to eschew formality in the kind of notice required provided that it meets the substantive object of the provision. That object is to make the insurer aware, one way or the other, of the proceedings which are contemplated or have been commenced against a person covered by the policy. The term "notice" is sufficiently wide to allow a wide construction to be adopted which serves the purposes of the section. The language of s.11

(2)(a) itself supports a wide construction as it matters not how the insurer gets notice of the proceedings as long as it "has notice" within the requisite time.


But the nature of the condition in s.11(2)(a) as a condition precedent which marks out the boundary of the insurer’s liability does not allow any "substantial compliance" construction. The condition is either met or not. No question of "compliance" arises for, unlike section 16, it does not purport to impose any duty on any person to notify. It simply requires that the insurer "has notice." Who then is to comply? "Substantial compliance" in this context must equate to "substantial fulfilment" of the requirement. So far as the time limit is concerned a construction which permits fulfilment after the expiry of the time limit is a construction which involves a legislative redrafting of the provision. This is not a function which the Court is authorised to undertake. In some jurisdictions the Court is empowered to relieve a party from the effects of non-satisfaction of the condition where no prejudice is suffered by the insurer as the result of the delay – see for example s.29A of the Motor Vehicle (Third Party) Insurance Act (W.A.). To so provide is to provide for the enlargement of the statutory liability imposed on the insurer by the section.


There is also a relationship between the 7 day time limit set out in s.11(2)(a) and the 3 months time limit specified in s.11(3). If the 7 day time limit in s.11(2)(a) is able to be extended then there would be a reasonable constructional argument for extending the 3 months period by a corresponding amount to avoid prejudicing the position of the insurer.


While construction by reference to contrasting provisions of the same statute is not always a reliable technique there is a significant contrast to be drawn between the structure and language of s.11 and that of s.16. Section 16 imposes a duty of notification upon the owner and the driver of a vehicle involved in an accident. The notice must be given "forthwith after the accident", a term which does allow some room for movement by reference to criteria such as reasonableness and practicability. It does not define a condition precedent to the contractual right of indemnity against the insurer. But it gives the insurer a right to recover, from the insured, where notice has not been given, any amount paid by the insurer in respect of a claim in relation to the matter. This is a provision which operates upon the contractual relationship between insurer and insured. It does not condition a freestanding statutory liability imposed on the insurer by the Act as is the case with s.11(2)(a).


The nature of s.11(2)(a) as a condition precedent to the insurer’s statutory liability suggests that its satisfaction is a matter to be demonstrated by a plaintiff seeking recovery against the insurer rather than its non-satisfaction being a matter which the insurer must show in order to resist a plaintiff’s claim against it. This appears from decision of the Court of Appeal in Wake v. Wylie. The Court held the insurer entitled to defend the action on behalf of the insured right up to the judgment and then, when the plaintiff turned to the insurer for recovery, to raise the point for the first time. In the present case Dominion Insurance amended its defence to take the time limit point on 16 November 1999 which was the fourth day of the trial. The judge’s notes record that the amendment was opposed by counsel for Mr Shameem and not opposed by counsel for Fuel Supplies. There is no record of any opposition from counsel for Mr Bamforth and Mrs Wilson. There was an argument of a general character reflected in written closing submissions from counsel for Mrs Bamforth and Mrs Wilson, that the insurer was estopped from contending as it did that the policy was avoided on account of alleged fraud by Fuel Supplies. It was said that, as the insurer had taken part in the proceedings, it was estopped from denying liability assuming that judgment were awarded against Fuel Supplies. There was no argument at any stage of the proceedings that the insurer had waived the time limit requirement or was estopped from relying on it. We express no concluded view on whether these preclusionary doctrines are available in relation to s. 11(2)(a) or would have been available in the circumstances of this case. In Wake v. Wylie, Kennedy L.J. adverted to the possibility that a plaintiff could rely upon estoppel where some relevant representation had been made but none could be identified in that case. In some cases a defendant may be estopped from making a late amendment to its defence where to do so would, by reason of the delay, cause irremediable prejudice to the plaintiff – e.g. Steward v. North Metropolitan Tramways Company [1885] 16 Q.B.D 178; Joint Coal Board v. Adelaide Steamship Co. Ltd. [1965] NSWR 143 and compare Wright v. John Bagnall & Sons Limited [1900] UKLawRpKQB 68; [1900] 2 Q.B. 240.


There was some debate on the hearing of the appeal about the feasibility of effectively requiring plaintiffs to ascertain the identity of the insurer and notify the insurer of proceedings within the time limited by s.11(2)(a) having regard to the nature of the records of Third Party insurance cover and the time taken to obtain information in Fiji.


Whatever may have been the problems at the time of the proceedings which have led to this appeal it does not appear, at least upon the basis of what the Court was told from the bar table, that these problems exist to the same extent now. While Courts should construe legislation, where possible, in a way that renders it workable rather than unworkable they must accept that the language may in some cases not permit a construction preferred on that basis. In such a case the legislature has made the judgment as to workability and the Court cannot substitute its own judgment to rewrite the Act.


[25] The wording of s 11(3) is different from that of s 11(2)(a) in that the subsection required certain actions to be taken and notice to be given within specified times. S 11(3) states:

(3) No sum shall be payable by an approved insurance company under the provisions of this section if, in an action commenced before or within 3 months after the commencement of the proceedings in which the judgment was given, the insurance company has obtained a declaration that, apart from any provision contained in the policy, the insurance company is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in a material particular or if the company has avoided the policy on the ground that it was entitled to do so apart from any provision contained in it:


Provided that an insurance company which has obtained such a declaration in an action shall not thereby be entitled to the benefit of the provisions of this subsection in respect of any judgment obtained in any proceedings commenced before the commencement of that action unless, before or within 7 days after the commencement of that action, it has given notice thereof to the person who is plaintiff in the action under the policy specifying the non-disclosure or false representation on which it proposes to rely and that it intends to seek a declaration and any person to whom notice of such action is given may, if he desires, be made a party thereto.

(emphasis added)


[26] It is clear that I do not need to decide whether s 11(3) is mandatory or not. The requirement is a condition precedent to the insurer’s right to bring its action for avoidance of the policy according to the principle in Dominion Insurance Ltd v Bamforth (supra). The 3 months time limit has simply not been complied with. Civil action HBC 168 of 2006L was commenced on 22 June 2006 so the current application had to be filed no later than 22 September 2006. It was not in fact filed until 2 February 2007. The result is therefore the insurer is not able to obtain a declaration that "No sum shall be payable" by the insurer.

[27] The same conclusion was reached by Jitoko J in Sun Insurance Company Ltd v Bibi [2005] FJHC 484; HBC0216D.2005S (15 September 2005). Jitoko J had to consider the operation of s 11(3) as a preliminary point to the insurer’s application for a declaration of entitlement to avoid liability under the third party policy. The negligence proceedings by the third party against the insured were commenced in 2004. Judgment in default was entered in those proceedings on 10 February 2005. The insurer’s action was commenced in 2005. His Lordship held that the insurer did not comply with both the 3 months time limit and the 7 day notice requirement which were fatal to its right to avoid the policy. His Lordship rejected the insurer’s argument that the 3 months ran from the date the judgment was entered for the plaintiff rather than the date he commenced his action for negligence. I respectfully agree and adopt his Lordship’s findings:

In my view there can be no other interpretation of when the 3 months notice required of section 11 (3) begins to run. The computation of the 3 months starts at the commencement of the action by the Third Defendants.


Similarly, the 7 days notice stipulated under the proviso to s. 11 (3) applied in that the Plaintiff is required to give to the Third Defendants notice within 7 days of its avoidance action. A declaration of avoidance is defeated if this prior notice is not given.


In the end, the Plaintiff having failed to meet or comply with the statutory time requirements under section 11 (3) of the Act and this Court, having found therefore in favour of the Third Defendants’ preliminary objections, the Plaintiff’s Summons is dismissed.


ESTOPPEL


[28] However, I do not accept the Defendants argument that the insurer is estopped from denying liability because it had paid out on other claims in respect of the same accident. I accept instead the insurer’s submission that it had settled those cases for commercial reasons. I do not think any such settlement can be said to be a representation to the Defendants that the insurer would make good any other claims.

[29] Nor do I find that having initially defended the First and Second Defendants, the insurer is now estopped from denying liability to indemnify them. The insurer should be allowed to withdraw without penalty if it later finds out that it may not be liable because of breach or otherwise or it is in a position of conflict of interests. Considerations of liability as between the insurer and the insured and as between the insurer and the third party are different but the insurer may not be able to avoid the policy as against the insured.

[30] I do not think there is anything in the conduct of the insurance company that could amount to "unconscionable conduct" of the type that would attract the doctrine of estoppel, as was in Public Trustee of Fiji v Krishna Nair [1996] FCA; ABU 10 of 1996S (21 April 1997), an unreported decision of the Court of Appeal[4].

FINAL OUTCOME


[31] In summary, the Plaintiff’s application for declarations of avoidance fails because of non compliance with the 3 months notice requirement under s 11(3) of the Motor Vehicle (Third Party Insurance) Act [Cap 177] and under the principle in Chand v Sun Insurance Company Ltd [2008] FJCA 113; ABU0042.2006S (11 July 2008).

[32] Prayers for relief (1) and (2) of the Originating Summons filed on 2 February 2007 are therefore refused.

[33] As for Prayer (3), it is not automatic that the insurer is entitled to indemnity from the First and Second Defendants insured. The insurer has to prove its entitlement in a separate action altogether so that prayer too is refused. I agree with both counsels for the Defendants that this claim is premature and I therefore dismiss it.

[34] No order is required to be made for Prayer 4.

COSTS


[35] The Defendants have asked for indemnity costs. Chand was decided by the Court of Appeal on 11 July 2008. This application was brought before that on 2 February 2007 but heard after that on 30 March 2010. The argument for indemnity costs is that this action should have been withdrawn soon after the Chand decision on 11 July 2008. I think there is some merit in the argument for attendances after that date. I note that counsel for the Plaintiff filed his submissions on 28 August 2008 without reference to Chand and all but one affidavit was filed after 11 July 2008. Submissions by counsels for the Defendants were filed after that. In the circumstances, I am prepared to award indemnity costs only for the attendances and the hearing subsequent to 11 July 2008 but party-party costs on attendances prior to that date. I summarily assess costs as $4,000 to each of the Second and Third Defendants as each participated equally in this action. I make no order as to the costs of the First Defendant as it appeared to be mere nominal defendant and took no part in the hearing.

THE ORDERS


[36] The Orders are therefore as follows:

1. The Plaintiff’s Originating Summons filed on 2 February 2007 for declarations 1, 2 and 3 are dismissed and no order is made in respect of declaration 4.


2. The Plaintiff shall pay to each of the Second and the Third Defendants $4,000 each for their costs of this action within 28 days.


Sosefo Inoke
Judge

[1] Randall Powell, Andrew Bruce, Izaz Khan, JJA
[2] Ward PA, Wood and Ford JJA
[3] D Fatiaki P, R French and P Blanchard SCJJ
[4] Sir Maurice Casey, Ward and Hillyer JJA

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