New India Assurance Company Ltd v D Gokal and Company Ltd [2004] FJSC 10; CBV0009.2002S (10 September 2004)

IN THE SUPREME COURT OF FIJI ISLANDS
AT SUVA

CIVIL APPEAL NO CBV0009 OF 2002S
[On appeal from the Fiji Court of Appeal
Civil Appeal No ABU 0035 of 2001S andHigh Court of Fiji Civil Action No. HBC
311 of 200S]

BETWEEN:

NEW INDIA ASSURANCE COMPANY LIMITED
[A Government of India undertaking having itsprincipal office in Fiji at Suva]
Petitioner

AND:

D. GOKAL AND COMPANY LIMITED
[A limited liability company having itsregistered office in the Republic of
Fiji Islands]
Respondent

Coram: The Hon Chief Justice Daniel Fatiaki, President of Supreme Court
The Hon Justice Sir Kenneth Keith, Judge of Supreme Court
The Hon Justice Robert French, Judge of Supreme Court

Hearing: Tuesday, 7th September 2004, Suva

Counsel: Mr Nagin for the Petitioner
Mr Lateef for the Respondent

Date of Judgment: Friday, 10th September 2004, Suva

JUDGMENT OF THE COURT

Introduction

1. In February 1994, Rajesh Prakash was a passenger in a motor vehicle owned by D Gokal & Company Limited ("Gokal") and driven by one of its employees. Mr Prakash was an employee of another company called Homelco Limited ("Homelco") which had some common shareholders with Gokal. The driver of the vehicle lost control, it veered off the road and hit a telephone pole and Mr Prakash was injured. He sued Gokal for the negligence of its employee. He obtained a judgment for damages in the sum of $121,224.50. Gokal’s insurer, New India Assurance Company Limited ("New India") declined cover on the basis that its Comprehensive Motor Vehicle Policy did not cover Gokal for liability for injuries sustained by the employees of "Associated and/or Subsidiary Companies" of Gokal and that Homelco was an associated company. Gokal took proceedings in the High Court and obtained a declaratory judgment that New India was obliged to indemnify it under the policy. The Court of Appeal dismissed an appeal against the decision and New India petitions for special leave to appeal against the judgment of the Court of Appeal.
   
2. The entire litigation has proceeded on a misconception as to the terms of the policy. Although the original policy, issued in 1992, had the effect that the liability to employees of "Associated Companies" of Gokal was excluded from its cover the renewed policy, applicable in 1994, referred only to "Subsidiary Companies". It had dropped the reference to "Associated Companies". It was not suggested that Homelco was a subsidiary of Gokal.
   
3. The Court is of the opinion however that even were it the case that the exclusion extended to employees of Associated Companies, it would not have granted special leave.
   
4. For reasons which are set out at greater length below, the petition for special leave to appeal must therefore be dismissed.
   

Gokal, Homelco and the Policy

5. Gokal and Homelco are companies incorporated in Fiji under the Companies Act No 5 of 1983. In 1994 the companies had some common shareholders and one of the directors of Gokal was an alternate director of Homelco.
   
6. In February 1994, Gokal was the registered proprietor of a 1991 Mitsubishi van, registered number CK588. Gokal at that time carried a Comprehensive Motor Vehicle Insurance Policy in respect of the vehicle from New India. The policy originally covered the period from 4 June 1992 to 4 June 1993. It was renewed for a further year to 4 June 1994.
   
7. The name of "The Insured" on the original 1992/1993 policy was as follows:
   

"D Gokal & Company Limited and/or McGregor Investments Limited and/or Gordon Investments Limited and/or Toorak Investments Limited and/or Gokal’s Tea Company and/or Rakdev Holdings Limited and/or MB and VB Gokal and/or Levu’s Clothing Company Limited and/or Bob Gokal and Sons Limited and/or McGregor Garments Limited and/or Kamjit Holdings Limited and/or Associated and/or Subsidiary Companies."

The name of "The Insured" on the 1993/1994 renewal endorsement did not include the words "and/or Associated", a fact which seems to have escaped the attention of the parties and the courts below.

8. Under the original policy there was a passenger risk cover in the following terms, which excluded certain categories of passenger:
   

"PASSENGER RISK

Section 2 of this Policy is extended to indemnify the Insured against liability for -

(a) death or bodily injury happening to any person whilst being conveyed by or entering or alighting from or about to enter or alight from any insured Vehicle; and

(b) loss or damage to the wearing apparel and personal effects of any such person

Provided that this extension of cover does not apply to death, injury, loss or damage sustained by any person who, at the time of the event, was –

1) driving the insured Vehicle

2) a relative or friend ordinarily residing with the Insured

3) engaged in and upon the service of the Insured

The liability of the Company under this clause for each claim or series arising out of any one event is limited to $500,000."

9. Under the renewed policy the passenger liability limit was reduced from $500,000 to $250,000. The effect of the passenger risk exclusion was to exclude any employee of the named insured companies and, in the period 1992-1993, their "Associated and/or Subsidiary Companies". In 1993-1994, because of the change in the definition of the insured in the renewal, the employee exclusion related to employees of "Subsidiary Companies" and did not extend to employees of "Associated Companies".
   

The Accident

10. On 22 February 1994, the vehicle the subject of the New India policy was being driven by Kamlesh Armesh Parmar, an employee of Gokal, along Queens Road at about 12.35am. The vehicle was returning to Suva after completing work installing satellite dishes at Ba and Rakiraki. It was about half way between Suva and Navua. There were three passengers in the vehicle including Rajesh Prakash, a technician employed by Homelco.
    
11. In circumstances which are not now relevant, the driver lost control of the vehicle which veered off the road and hit a lamp post. One of the passengers was killed. Mr Prakash was seriously injured. A claim form was lodged with New India by Gokal on 28 February 1994. It appears that the driver was convicted, on 26 June 1996, for the offence of causing death by dangerous driving.
    
12. Mr Prakash was, at all material times, in the employ of Homelco. Homelco carried a Workmen’s Compensation Policy with Dominion Insurance Limited. It also carried a "Commercial Type Motor Policy" with Dominion which included personal injury cover but only in respect of injury associated with the use of Homelco’s vehicle.
    

The Procedural History

13. Mr Prakash commenced proceedings in the High Court in 1996 against Gokal and the driver of the vehicle, Mr Parmar. He claimed damages for negligence and, in the alternative, made a general claim for compensation under the Workmen’s Compensation Act.
    
14. New India took over the defence of the action as Gokal’s workmen’s compensation insurer on the wrong assumption that Mr Prakash was an employee of Gokal. Subsequently, New India discovered that Mr Prakash was an employee of Homelco whose workmen’s compensation insurer was Dominion. It then took the position that it had no liability under its Workmen’s Compensation Policy nor under the Comprehensive Motor Vehicle Insurance Policy. It evidently took the latter position on the basis that Mr Prakash was en employee of Homelco which it regarded as an "Associated/Subsidiary Company" of Gokal.
    
15. On 5 September 1997, no defence to the claim having been filed, an interlocutory default judgment for damages to be assessed was entered in the High Court proceedings. The hearing of the assessment of damages did not take place until 13 May 1999. Gokal did not appear, nor was it represented at the hearing. On 19 November 1999, Pathik J assessed damages in favour of Mr Prakash in the amount of $119,724.50 and awarded him costs of $1,500 making a total judgment of $121,224.50. The various failures of Gokal to take steps in the proceedings and to appear at the assessment were apparently related to a kind of stand off with New India’s solicitors, the detail of which need not concern the Court.
    
16. On 13 October 2000, the judgment not having been satisfied, Mr Prakash’s solicitor served a winding up order on Gokal. On 16 October 2000, Gokal applied for an order setting aside the final judgment against it so that it might contest the assessment of damages.
    
17. By a judgment given on 15 February 2001, Pathik J dismissed the application. The judgment therefore stood.
    
18. Gokal instituted proceedings in the High Court, by originating summons, seeking a declaration that it was entitled to be indemnified by New India in respect of the damages awarded to Mr Prakash. That action was heard by Scott J (as he then was). On 20 June 2001, his Honour made a declaration that Gokal "... be indemnified by [New India] in civil action number HBC 350 of 1996". Costs of $1,500 were awarded against New India.
    
19. Scott J proceeded upon the basis that the definition of "The Insured" under the policy covered "Associated Companies" and that the passenger risk exclusion extended to employees of such companies. His Honour held, however, that Homelco was not an "Associated Company". He was satisfied that "... mere common membership or even regular cooperation between 2 companies does not in law amount to their being "associated"." His Honour dealt with other arguments which are not material for present purposes.
    
20. New India appealed against the decision of Scott J to the Court of Appeal. The appeal was heard on 12 August 2002 and dismissed on 16 August 2002.
    

The Judgment of the Court of Appeal

21. In its judgment the Court of Appeal referred to the New India Comprehensive Motor Vehicle Insurance Policy and to the definition of "The Insured" as it stood when the policy was issued in 1992. It was not contended before the Court of Appeal that Homelco was a subsidiary of Gokal. Nor could it have been. There was no factual basis for such a characterisation.
    
22. The judgment proceeded on the erroneous premise that the exclusion extended to the employees of associated companies. The Court referred to the basis upon which it was said that Homelco was an associated company of Gokal. The sole justification advanced for that characterisation was the existence of shareholders common to both. The Court referred to various statutory definitions of "Associated Company" which had no direct application to the case in point but might have been a legitimate source of interpretive inspiration.
    
23. Their Honours observed that "control" was "a frequent if not dominant feature" in most of the definitions. The use of the term "Associated Companies" in the policy was "at least equally open to a requirement of control as opposed to a common shareholding among some shareholders". The Court considered the control requirement to be "the stronger contention". Their Honours held that in the event of a genuine ambiguity in the policy the words should be construed contra proferentem. On that basis the principal argument advanced in the appeal failed. They also rejected an argument that Gokal, having failed to appear at the hearing of the assessment of damages, was negligent. There was no material upon which the court could find that Gokal’s appearance would have made any difference to the outcome. In any event, New India had not alleged any breach of the contract of insurance by Gokal. On this second issue also the appeal failed.
    

The Petition for Special Leave

24. New India seeks special leave to appeal from the judgment of the Court of Appeal. The proposed grounds of appeal as set out in the Notice of Appeal are as follows:
    

"(a) The Fiji Court of Appeal erred in law in not properly applying the plain meaning of the word "associated" company used in the insurance policy.

(b) The Fiji Court of Appeal erred in law and in fact in not holding that Homelco Limited was an associated company of the Respondent and Mr Vinod Gokal.

(c) The Fiji Court of Appeal erred in law in applying a contra proferentem rule when there was no genuine ambiguity.

(d) The Fiji Court of Appeal erred in law in failing to properly consider that Mr Vinod Gokal was himself named as an insured and he held shares in both the D Gokal & Company Limited and Homelco Limited.

(e) The Fiji Court of Appeal erred in law in not holding that the Appellant’s liability was excluded because Homelco Limited was an associated company."

The Criteria for the Grant of Special Leave

25. The Supreme Court Act 1998 sets out the criteria applying to the grant of special leave in civil and criminal matters. Relevantly, s 7(3) of the Act provides:
    

"In relation to a civil matter (including a matter involving a constitutional question), the Supreme Court must not grant special leave to appeal unless the case raises –

(a) a far-reaching question of law;

(b) a matter of great general or public importance;

(c) a matter that is otherwise of substantial general interest to the administration of civil justice."

Whether Special Leave Should be Granted

26. The petition for special leave sets out the grounds of the proposed appeal but no justification for the grant of special leave by reference to the criteria in s 7(3) of the Supreme Court Act. In an affidavit in support of the petition it is asserted that the appeal "deals with the issue of the contra proferentem rule", which, it is said, is a far-reaching question of law, a matter of general and public importance and a matter of substantial general interest to the administration of civil justice.
    
27. Even assuming that the policy exclusion extended to the employees of "Associated Companies" of Gokal, the appeal would not, in our opinion, raise any of the matters set out in s 7(3).
    
28. There may be debatable questions about the interpretation of "Associated Company" in the policy and whether or not the first approach to that interpretation should have been the dictionary rather than various statutes. The interpretation of the words "Associated Company" in this context and the particular factual matrix in which it was considered would not, in our opinion, meet any of the criteria in s 7(3). We express no concluded view on the correctness of that interpretation adopted by the Court of Appeal because, in the end, that question is moot.
    
29. The application of the contra proferentem rule by the Court of Appeal was questionable. Although applied by the Court to read the exclusion clause against the Insurer it was applied to the construction of a term "Associated Companies" thought (wrongly as it has turned out) to be part of the definition of "The Insured". Yet in determining who was entitled to benefits as a member of the group of companies comprising "The Insured" there would be no basis for applying the contra proferentem rule. For that is a rule of construction against the Insurer. The definition of "The Insured" and the terms used in that definition cannot be construed one way for the purpose of establishing entitlement to a benefit and another way for the purpose of defining the scope of an exclusion clause. There can only be one interpretation which must be good for all purposes in the policy.
    
30. The term "Associated Company" was not part of the definition of "The Insured" in the policy as renewed for the period June 1993 to June 1994. The litigation has proceeded, to this point, on an incorrect assumption to the contrary. On the basis of that incorrect assumption the Court of Appeal held the exclusion not to apply. On the correct terms of the policy as renewed the exclusion plainly does not apply. The appeal would therefore have no prospect of success. The petition for special leave should be dismissed. Having regard to the failure of either party to address the true issue at any stage of the proceedings, there should be no order as to costs.
    

Orders

1. The petition for special leave is dismissed.

2. There be no order as to costs.

Chief Justice Daniel Fatiaki
Presiding Judge of Supreme Court

Justice Sir Kenneth Keith
Judge of Supreme Court

Justice Robert French
Judge of Supreme Court

Solicitors:
Messrs. Sherani & Co, Suva for the Petitioner
Messrs. Lateef & Lateef, Suva for the Respondent