Fiji Development Bank v New India Assurance Company Ltd [2011] FJHC 428; HBC299.2003 (10 August 2011)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBC 299 of 2003

BETWEEN:

FIJI DEVELOPMENT BANK
a body corporate duly established under the Fiji Development Act.
PLAINTIFF

AND:

THE NEW INDIA ASSURANCE COMPANY LIMITED
a duly incorporated insurer having its head office at Level 2,
Harifam Centre, Greig Street, Suva.
DEFENDANT

BEFORE: Master Deepthi Amaratunga

COUNSELS: Mr M. Prakash for the Applicant
Mr R. Nand for the Plaintiff
Mr A. K. Narayan for the Defendant

Date of Hearing: 21st June, 2011
Date of Ruling: 10th August, 2011

RULING

1. INTRODUCTION
   

1. On 23rd July, 2003, the Fiji Development Bank (FDB) filed a Writ and Statement of Claim claiming under a Fire and Other Perils Insurance Policy held with New India Assurance Company Limited (NIA) for damage done to a property in Rakiraki owned by Brightspot Fashions Limited (BFL) which was mortgaged to the FDB at the time of the 'fire'. The policy of insurance had FDB listed as an interested party. NIA filed a defence denying liability relying on the policy conditions and the fact that BFL had accepted an ex-gratia payment of $133,000.00 in full and final settlement and signed a discharge and subrogation stating 'in full satisfaction, compromise and discharge of all claims for loss and expense sustained to property insured". BFL now allege that the discharge is only for the stock in trade that was destroyed due to fire and not for the building, but it did nothing to file an action against the insurance company and BFL did not even make an application to intervene in this action till the expiration of limitation period for the alleged cause of action. The said application to intervene was rejected in the Fiji Court of Appeal. At the moment that decision is being subject to a leave application in the Supreme Court of Fiji. While it is pending in Supreme Court, the BFL made this application for substitution. The issue is whether a court can allow substitution outside the limitation period in terms of Order 15 rule 6(5) and 6(6). Such an application outside the limitation period is allowed under limited circumstances if the court thinks the intended party (BFL) is a necessary party for the determination of the action and the word 'necessary party' is interpreted in an exclusive manner in Order 15 rule 6(6), no other circumstance can be considered as 'necessary' as the interpretation is excusive to the instances referred in Order 15 rule 6(6). BFL has to establish that they are within the ambit of Order 15 rule 6(6) to allow the substitution.
   

2. FACTS
   

2. On 23rd July, 2003, the Fiji Development Bank (FDB) filed a Writ and Statement of Claim claiming under a Fire and Other Perils Insurance Policy held with NIA for damage done to a property in Rakiraki owned by BFL. This property was mortgaged to the Plaintiff (FDB). The policy of insurance had FDB listed as an interested party.
   
3. The said insurance policy state that 'Loss if any payable to Fiji Development Bank (Rakiraki) as mortgagee whose discharge shall be sufficient and binding to the company'.
   
4. On 20th May, 2000, Brightspot building which is the subject matter of this action was destroyed due to a 'fire'.
   
5. On 8th May, 2001, BFL accepted a sum of $133,000.00 and signed a discharge, a loss and subrogation receipt, stating "in full satisfaction, compromise and discharge of all claims for loss and expense sustained to property insured".
   
6. The said Loss and Subrogation Receipt signed and discharged by the Defendant (NIA) and BFL state inter alia
   

'RECEIVED FROM THE NEW INDIA ASSURANCE CO LTD DOLLARS OFNE HUNDRED THIRTY THREE THOUSAND ONLY in full satisfaction, compromise and discharge of all claims for loss and expenses sustained to property insured under Policy No....... Renewal Certificate No........ by reason of DAMAGE DUE TO FIRE which occurred ON 20TH MAY 2000 and in consideration of which the undersigned hereby assigns and transfers to the said Company each and all claims and demands against any person, persons, corporation or property arising from or connected with such loss or damage and the said Company is subrogated in the place on and to the claims and demands of the undersigned against said person, persons, corporation or property in the premises to the extent of the amount above named."

(highlighting with bold is added)

7. Upon the Writ being filed on 23rd July, 2003 by FDB in this action, NIA filed a defence denying liability relying on the policy conditions and the fact that BFL had accepted an ex-gratia payment of $133,000.00 in full and final settlement.
   
8. BFL had filed an application on 2nd May 2007 seeking to be added as a co-plaintiff or alternatively an interested party. After hearing argument Singh J. did not allow the joinder as a co plaintiff but allowed BFL to be an interested party. This decision was appealed by NIA to the Fiji Court of Appeal which on 10th November 2008 allowed the appeal and ordered costs against FBL in favour of both FDB and NIA for the application for joinder in the High Court and the Court of Appeal. BFL has made an application for Special Leave to Appeal to the Supreme Court. While this application is pending, BFL has made this application for substitution of them in place of the Plaintiff and the Plaintiff, FDB supports the present application.
   
9. The Plaintiff opposed the earlier application, made by BFL to add them as co-plaintiff or interested party to present proceedings, but they do not oppose the present application for the substitution. The Plaintiff did not file any affidavit in support explaining the circumstance that changed their stance, but the affidavit in support filed by the BFL state that the mortgage is fully settled, but no date of such settlement or any evidence for the said full settlement has not been submitted.
   
10. The Defendants oppose both applications made by BFL in this action, and state that the present application to substitute is brought to this Court seeking very similar relief to the application being the subject matter of the Leave application before Supreme Court.
    
11. The Defendants object to this application on three grounds and they are:
    
    1. Abuse of Process - while the appeal to the Supreme Court is pending this application seeking similar relief is duplication.
    2. Prejudice and Limitation - if substitution is allowed they will be deprived of the plea of limitation which is normally available to any party to an action.
    100. Compromise and Discharge - the acceptance of payment as full and final settlement, by BFL put to the rest of the issue of claim in terms of the Policy of Insurance and cannot be a party.
         
12. The Defendants submitted that should either Brightspot or the Defendant win on the facts of the trial, if an order of substitution is made, there will be a complete resolution of all issues before the Court.
    
13. BFL have provided a copy of the proposed amended claim in the affidavit of Mr Jitendra Kumar filed on the 5th of June, 2011, in support of this application for substitution and state that the Court ought to give leave for to Brightspot to substitute itself as the Plaintiff in place of the present plaintiff, the FBD.
    

100. LAW AND ANALYSIS
     

14. Order 15 Rule 6 empowers the court to make an order for substitution of a party. The said provision states as follows:-
    

"2) Subject to the provisions of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application-

(a) .......;

(b) Order any of the following persons to be added as a party, namely-

• (i) Any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon; or
  
• (ii) Any person between whom any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.
  

15. The 'opinion of the court' and 'just and convenient to determine' refers to in the above provision grants the court a discretion, but this discretion is only relating to the addition or substitution before the expiry of the limitation period in terms of the limitation act.
    
16. It is to be noted that if the claim is already statute barred in terms of the Limitation Act as against the party who is intending to be added or substituted, the provisions contained in the Order 15 rule 6(5) and 6(6) applies and discretion granted in the Order 15 rule 6(2) is curtailed. The provision that has to be fulfilled in those circumstances are different from a person who intends to be added when the application is made with in the limitation period.
    
17. The above distinction for applications made before and after the limitation period, is done with a very sound reasoning, as a person who intends to intervene in an action before the expiry of limitation can always file a separate action as oppose to a person who makes an application to intervene after the expiration of the limitation period. So a less stringent attitude is observed for the parties who come before the court seeking intervention before the expiry of the limitation period as oppose to the more restrictive attitude against the person who seeks addition or substitution after the expiry of the limitation period.
    
18. It is also to be noted by addition or substitution of a party after the expiry of limitation period, will effectively deprive the other party's right to plead the limitation against the said added or substituted party and the plea of limitation is generally available to all the parties who come before it except in the special circumstance that are laid in the Limitation Act itself. So, allowing a substitution or addition of a party after the expiration of the limitation period effectively deprives the other party's plea of limitation and High Court Rules of 1988 specifically indicates the instances where such an addition or substitution after the expiry of the limitation period is allowed. The general rule is that such additions or substitutions should not be allowed after the expiration of the limitation period, but the exceptions are specified very restrictively in Order 15 rule 6(5) and 6(6).
    
19. Order 15 rule 6 (5) states as follows:
    

'No person shall be added or substituted as a party after the expiry of any relevant period of limitation unless either –

1. The relevant period was current at the date when proceedings were commenced and it is necessary for the determination of the action that the new party should be added, or substituted, or
   
2. The relevant period arises under the provisions of sub paragraph (i) of the proviso to paragraph 4(1)(d) of the Limitation Act and the Court directs that those provisions should not apply to the action by or against the new party.
   

(emphasis is added)

20. It is clear that the Court no longer exercises the discretion granted in the Order 15 rule 6 (2) when the party who intends to substitute makes the application after the expiry of the limitation period and the party who is making the application has to satisfy the court that it is necessary for the determination of the action that the new party should be added, or substituted. This is a qualification that has to be fulfilled before it is substituted as in this case. The cause of action has arisen in 2000 and the application for substitution is made only in 2011, that is eleven years after the incident and clearly out of the limitation period for BFL. So, in order to allow the substitution the court must be satisfied that BFL is a 'necessary party' to the action.
    
21. The word 'necessary party' is interpreted in an exclusive and very restrictive manner in the Order 15 rule 6 (6) and it states as follows:
    

"(6) The addition or substitution of a new party shall be treated as necessary for the purposes of paragraph (5)(a) if, and only if, the Court is satisfied that-

1. The new party is a necessary party to the action in that property is vested in him at law or in equity and the plaintiff's claim in respect of an equitable interest in that property is liable to be defeated unless the new party is joined; or
   
2. The relevant cause of action is vested in the new party and the plaintiff jointly but not severally; or
   

100. The new party is the Attorney-General and the proceedings should have been brought by relator proceedings in his name; or
     

4. The new party is a company in which the plaintiff is a shareholder and on whose behalf the plaintiff is suing to enforce a right vested in the company; or
   
5. The new party is sued jointly with the defendant and is not also liable severally with him and failure to join the new party might render the claim unenforceable."
   

(emphasis is mine)

22. In the affidavit in support of this application for substitution, there is no clear indication as to which scenario described in the Order 15 rule 6(6) (a) to (e) the applicant, BFL can be included. The written submissions filed by both parties do not address this point and perhaps missed the vital point, in their eloquent oral submissions made at the hearing. Nevertheless, it is my duty to ascertain whether the present application for substitution of BFL can be included to any of the instances described in Order 15 rule 6(6) (a) to (e). I could not find one as done in the following paragraph and since the list (a) to (e) contained in Rule 6(6) of Order 15 is exhaustive, the application for the substitution of BFL should fail in limine, on that ground alone.
    
23. The scenario described in Rule 6 (6)(c) is clearly not applicable as the new party is not AG. The scenario in (d), does not apply as the plaintiff is not shareholder of BFL. The situation contained in (e) applies when the new party is sued jointly with the Defendant, which again not applicable to this case before me. The situation described in (b) above does not arise as it refers to vesting of property jointly, but not severally. The scenario described in (a) is also not applicable as there are two requirements to fulfill and they are, that the property should be vested in law or equity and also the plaintiff's claim in respect of an equitable interest in that property is liable to be defeated unless the new party is joined, there is no such situation in this case. There is no such averment in the affidavit in support filed by BFL and in any event Plaintiff has not indicated such a scenario and factually it is not so, on the materials available to court at this time.
    
24. It is clear that BFL has taken interest in this action only after expiration of the limitation period, and that seems to be the reason for first application to add as co-plaintiff or as interested party, which was disallowed in the Court of Appeal. After that, this application is made for substitution, 11 years after the incident, in order to circumvent the limitation period, after discharging a loss and subrogation receipt. BFL was not interested in a court action against the insurance company, till the expiration of the limitation period. So, under normal circumstances BFL is statute barred from suing on a claim that is clearly outside limitation period. BFL is trying to do something they could not do directly, in an indirect method and that should not be allowed under the law.
    
25. Without prejudice to the above legal position I now venture to the objections that were eloquently argued and submitted, by the respective parties, which are relevant to the issue before me.
    
26. Compromise/Discharge
    
    1. NIA paid BFL $133,000.00 "in full satisfaction, compromise and discharge of all claims for loss and expense sustained to the property insured". The evidence of this appears annexure SP-2 to the affidavit of Subashni Prasad for NIA. The said loss and subrogation receipt states '......... full satisfaction, compromise and discharge of all claims for loss and expenses sustained to property insured under Policy No....... Renewal Certificate No........ by reason of DAMAGE DUE TO FIRE which occurred ON 20TH MAY 2000' and this is a clear acceptance, without any reservation, on the policy number stated in the said receipt.
       
    2. At the outset the legal consequence of loss and subrogation receipt, needs to be understood and I referred MacGillivray on Insurance (9th Edi)(Sweet and Maxwell) on that and at page 543 it states as follows:
       

"22-29 if an insurer is liable under the policy for different types of loss to the assure, he must pay for all types of damage before he can be subrogated to any particular right of the insured. Thus a motorist may take out a policy covering third party liability, personal injury to himself and injury to his car. The insurer may be liable in all three respects but will not be subrogated to the rights of the assured in respect of damage to the car unless he has made payment in full in respect of each head of liability under the policy."

100. The Plaintiff as well as BFL tries to sever the insurance policy in to two separate policies but if so why did it had only one policy number, and that shows it had only one policy and the discharge and subrogation is for the entire policy. As stated earlier subrogation in Insurance Law cannot be done except the liability as a whole under the policy. This is further evidenced from the subsequent conduct of BFL, who signed the said loss and subrogation receipt, accepted the payment made and did not file an action against the Defendant or did not make any effort to intervene in the already pending action filed by the Plaintiff, till 2007. It is also clear from the above quotation I quoted from MacGillivray on Insurance (9th Edi) that different types of losses do not create separate policies and they are unseverable as regards to the principles of subrogation and subrogation has to be done only after all the claims were made, and in this instance the singing loss and subrogation receipt by BFL, the clear legal consequence is the full discharge of the claim by insurance company to BFL.
     

4. BFL ought to have been aware of this legal position regarding subrogation as they have filed an action against the Plaintiff in the High Court, after the receipt of the money from the Defendant, subsequent to singing of loss and subrogation receipt against the Plaintiff.
   
5. It is also noteworthy, that the Defendant (NIA) did not readily accepted the liability in this instance and negotiations were done before the said subrogation is signed and in such circumstances BFL would have reasonably known the consequences of the signing of subrogation. That can be safely infer from the subsequent conduct of BFL.
   
6. The Court of Appeal in the said appeal of interim order of Justice Singh's ruling in this case on the issue of addition of BFL as interested party, at page 24 paragraph 20 noted the difficulty faced by BFL in view of the Loss and Subrogation Receipt. The Court of Appeal said it was incumbent on BFL to plead how it could get round this with sufficient cogency. The judge ought to have insisted that in addition to a cogent and clear pleading, the prospect of success would have to be demonstrated, possibly by way of affidavit evidence." It should be noted above requirements are more forcefully applicable to a party who intends to be substituted in place of the Plaintiff.
   
7. It is also important to note that discharge of mortgage to the Plaintiff is alleged as the reason for seeking substitution at this late stage. The Plaintiff did not support an affidavit in support of this contention and BFL has not stated when the mortgage was discharged and no evidence of that has been attached to the affidavit in support of BFL.
   
8. Even if the mortgage is discharged, this is not an unforeseeable thing and BFL would have made an application to the court before the expiry of the limitation period to intervene in this action, if it needed to protect its interests. It did not make such an application within limitation period, and now seeking substation, contrary to law, not addressing the legal requirements in terms of the High Court Rules, as I have indicated in my ruling before, in order to overcome the issue of limitation in an indirect method.
   

27. BFL has not improved its position in any way since its original application, as I have indicated in my ruling earlier as they have to fulfill the requirements in terms of Order 15 rule 6(6) to add or substitute in this action after the expiration of limitation time period. Since this application as well as the earlier application that was the subject matter of Court of Appeal Decision, were made outside the limitation time the requirements in Order 15 rule 6 (6) is mandatory.
    
28. BFL has said nothing of the Loss and Subrogation Receipt in its proposed Amended Statement of Claim. It has not provided any evidence of how it would overcome the clear words of the discharge, and it has not indicted the legal position of subrogation and it is clear that legally, subrogation means full discharge of all different types of loss and the contention of settling of stocks in trade separately will not arise.
    
29. In the light of the above legal and factual situation and the subsequent conduct of BFL, it is clear that their position in trial as the Plaintiff (if substitution is granted) is not a strong one and in Bank of Credit and Commerce International (overseas) Ltd (in liquidation) v Habib Bank Ltd (1998) 4 All ER 753 it was held in an application for setting aside of default judgment that a court ought to have considered the prospects of the applicants merits in the case, though the judgment was irregular. If the said principle is applied to present case it would seem that the application for substitution should not be allowed, considering the subrogation receipt's legal position and the subsequent conduct of BFL.
    
30. Abuse of Process
    

BFL says at paragraphs 16 of Kumar's affidavit that the appeal to the Supreme Court will be discontinued if there is a substitution as prayed. What BFL is saying is if it loses this application it will pursue its appeal to the Supreme Court. In such an event the Defendant submitted BFL will most probably also seek to appeal the decision if I refuse this application and these are all avenues of due process and any abuse should be treated with appropriate orders as to costs or other remedies available in law.

31. The applicant without addressing the legal position contained in High Court Rules of 1988 made this application to substitute, after the expiration of limitation time can be considered abuse of process. It also failed to elicit the legal position regarding the 'loss and subrogation receipt' and tried to separate the payment accepted under subrogation from the loss of damage to building, but it is clear that subrogation can occur only after the settling of all the damages included in the insurance policy and this is not revealed to the court by BFL in this application and can be regarded as abuse under the circumstances of this case considering the number of litigations instituted by parties and the amount of delay in this action. It is clear that subrogation is regarding the policy and not of each type of loss or damage in a particular incident.
    

4. CONCLUSION
   

32. The application for substitution by BFL should be rejected in limine as they have failed to satisfy that they are a necessary party in terms of Order 15 rule 6 (5) and 6 (6) of the High Court Rules of 1988. This is a paramount consideration as the substitution is sought after the expiry of limitation period. I have also considered sufficiently the legal position regarding the 'subrogation receipt' signed by BFL. This document is an admitted fact between the parties and now BFL seeks to interpret the said document against the accepted legal principles in Insurance Law. The application for substitution is nothing but an indirect method, to make a claim after the expiration of limitation period after accepting a payment by the Defendant 'for full satisfaction, compromise and discharge of all claims for loss and expenses sustained to property insured under Policy'. In the circumstances the application for substitution is rejected and summons for the substitution dated 12th January 2011 is struck out. Considering the circumstances of this case I will order a cost of $1,500.00 against the applicant BFL to be paid to the Defendant.
    

The Court Orders as follows:

1. The application for substitution is struck out.
2. The applicant Brightspot Fashion Limited (BFL) to pay a cost of $1500.00 as the cost of this application assessed summarily.
   

Dated at Suva this 10th day of August, 2011

....................................
Mr. D. Amaratunga
Acting Master of the High Court
Suva