Samoa National Provident Fund Board v Progressive Insurance Co Ltd [2011] WSSC 93 (29 July 2011)

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

BETWEEN:

SAMOA NATIONAL PROVIDENT FUND BOARD
a corporate body established under the National Provident Fund Act 1972 and carrying on business in Apia
Plaintiff

AND:

PROGRESSIVE INSURANCE CO LTD
a duly incorporated company having its registered office at Apia, Samoa
Defendant

Counsel: Mr. Leslie Petaia and Mr. Su'a for Plaintiff
Mrs. Ruby Drake for Defendant
Hearing: 23rd September 2010
Submissions: 22nd October 2010
Decision: 29th July 2011

DECISION OF THE COURT

Introduction

1. A business insurance policy taken out by the plaintiff with the defendant insurers to cover the plaintiff's business premises provided the plaintiff with cover against loss or damage to property on the premises resulting from inter alia burglary accompanied by violence or threat of violence to persons or by violent and forcible entry to or exit from any enclosed building.
   
2. The policy specifically excluded any loss arising out of the infidelity or dishonesty on the part of the insured or any employee but burglary by an employee outside of business hours is not excluded.
   
3. In respect of cash the liability of the Insurer was limited to money in locked safe or money in transit.
   
4. Monies were stolen in or about the 20th October 2008 from the plaintiff's premises by a thief who was given a key to the main entrance of premises by an employee (an accomplice of the thief) of the plaintiff which enabled the thief to enter the premises at night by simply using the key in the normal way to unlock the main door. The thief then walked as previously counseled by his accomplice to the locked filing room where the money boxes were stored. Using a pinch bar to damage the lock and bolt of the door, he entered the room and using the screw driver, he unscrewed the screws that attached the latches which padlocked the money boxes, removed the cash and left the premises.
   
5. The thief has since confessed to his criminal activity, sentenced, testified against the employee and both are currently in prison. Some of the money has been recovered.
   
6. The defendant insurer refused to indemnify the plaintiff for the balance of the stolen cash. By letter dated 5th August 2009 the defendant insurer refused the plaintiff's claim for indemnity. The relevant part of the refusal letter reads:
   

"The money which was taken during the 20th October 2008 burglary was, as we understand it, contained within cash boxes within a stationary room within the Fund's offices.

Whilst we understand the point raised in your 29 July letter that Burglary by an employee outside of business hours was covered, the money had to be either in a locked safe or in transit for there to be coverage."

The Plaintiff

7. The plaintiff is a statutory corporation established pursuant to the provisions of the National Provident Fund Act 1972; one of its functions being the payment of pensions, on a monthly basis to the senior citizens of Samoa. Some of the pensioners collect their pensions from the plaintiff's office at Apia while the majority awaits the distribution teams which travel by vehicles throughout Upolu and Savaii with labeled envelopes of cash for each village placed in secured cash boxes.
   
8. On the Friday preceding the week of distribution, the money is collected from the ANZ Bank by employees of the plaintiff and the entitlements are then processed after work hours by the several teams and placed inside individual envelopes in accordance with the computer generated pay sheet containing the names of the beneficiaries. The sorting and distribution are supervised by a senior officer. The envelopes are then placed inside secured boxes which are labeled for each district. Locked cash boxes are then stored in a secured filing room which was separately padlocked.
   
9. Money boxes for Savaii are removed on Sunday morning. Either the Manager or the Assistant Manager of the Senior Citizens Benefit Fund (SCBF) opens the filing room and secures the room after the removal of the Savaii boxes for transportation to Savaii on the 12 noon or 4pm voyage of the vehicular ferry. The money boxes for Upolu remain in storage until Monday morning.
   

The Burglary

10. On Friday the 17th October 2008 the plaintiff withdrew from the ANZ Bank a large amount of money, in excess of $1,000,000 for distribution to the beneficiaries of the SCBF. The sorting and distribution was effected on Friday afternoon in accordance with the procedures set out in paragraphs 8 and 9 above so that on Friday evening the secured money boxes containing cash for the senior citizens of Samoa were locked inside the filing room at the plaintiff's premises.
    
11. Early Sunday morning, 19th October, the money boxes for Savaii were removed by the Assistant Manager (who unlocked the filing room), the driver and other employees of the plaintiff. The rest of the cash boxes remained in the locked room. Nothing was amiss.
    
12. On Monday morning, 20th October, the Assistant Manager arrived at work to find not only the main entrance door was unlocked but she also saw a number of cash boxes on the floor in the main office were forced open and contents removed. There has been a burglary and theft. The door to the filing room had been forced open. Police were called. Evidence suggests that the burglary and theft occurred at sometime between the evening of Sunday the 19th and Monday morning the 20th.
    
13. A man known to the police was soon after arrested and subsequently admitted to being the burglar and has been sentenced for his crimes. The driver of the plaintiff who was one of the employees who removed the cash boxes for Savaii on the Sunday morning has been convicted of theft and of aiding and abetting in the burglary. He has also been sentenced for his involvement.
    
14. It is common knowledge that the driver gave the key of the main entrance door to the burglar so that the main entrance door was opened with the appropriate key. The burglar then walked direct to the locked filing room as planned and advised by the driver. He was in possession of a pinch bar, screw driver and mobile phone. His mobile phone was used as the source of light. He used the pinch bar to break the lock. In the process of breaking the lock there was a mark on the door. He moved the cash boxes to the main office and used the screwdriver to unscrew the screws that attached the latch which padlocked the cash boxes. He then removed the cash and left. About $430,250 was stolen.
    

The Insurance Policy

15. In 2004 while the offices of SCBF were located at the Morris Hedstrom building at Savalalo (Savalalo premises) the defendants underwriter conducted an inspection of the Savalalo premises in response to a request from the SCBF for insurance cover in respect of cash held pending distribution to the pensioners. A proposal for Physical Loss and Damage Insurance was prepared and given to the plaintiff. The proposal was originally to indemnify but subsequently changed to a replacement cover of $800,000. The safe at the Savalalo premises was inspected and approved by the defendant's underwriter.
    
16. The original policy specifically excluded perils, such as loss or damage caused by theft; infidelity or dishonesty on the part of insured or any of its employees or others to whom the property may be delivered or entrusted. Property in transit was also excluded.
    
17. The same policy was renewed for the following years up to March 2008. In March 2007 the plaintiff requested the defendant to extend the scope of the insurance cover to include the money in transit which was done so that the policy now covered money in storage at the office and monies in transit from the bank to the plaintiff's premises, from the premises to the designated payout villages, and any undisbursed money taken back to the premises.
    
18. A coverage summary was issued to accommodate the plaintiff's request. The relevant part of coverage summary reads:
    

EXTENSION OF COVER	Money – Upolu & Savaii
SCOPE OF COVER	Burglary accompanied by violence or threat of violence to persons or by violent and forcible entry to or exit from any enclosed building (as per policy)
LIMIT OF LIABILITY	Money in Locked Safe/ Money in Transit
POLICY EXCLUSIONS	Arising out of infidelity or dishonesty on the part of the insured or any employees but Burglary by an employee outside of business hours is not excluded hereunder (Refer Policy Document for

details)

The same Coverage Summary was renewed for the period June 2008 to June 2009. The only change that was subsequently made was the location of the insure premises from the Morris Hedstrom building to the National Provident Fund building.

19. By letter dated 3rd July 2008 the plaintiff requested the defendant to include in the insurance cover the infidelity and dishonesty by employees of the plaintiff. After discussions the insurance cover remained unchanged but the plaintiff's request was accommodated by a Fidelity Guarantee Policy which was issued without any increase to the premium.
    

The Statement of Claim

20. The plaintiff claims that the money stolen from its premises as a result of the burglary was covered under its policy with the defendant as:
    
    • (i) Money lost through burglary accompanied by violence or threat or violence to persons, or by violent and forcible entry to or exit from any enclosed building; or
    • (ii) The money was in transit between the ANZ Bank and the payout destinations; or
    • (iii) The burglary was committed by an employee, outside of business hours.
      

The State of Defence

21. The defendant denies the three grounds upon which the plaintiff based its claim for indemnity under the insurance policy; but it then goes on to allege negligence on the part of the plaintiff, and such negligence facilitated the burglary of its premises which resulted in the loss. The defence of negligence however was not pursued in the written submissions. In any event the evidence does not appear to support any contention that the plaintiff failed to use due diligence to do all things reasonably practicable to avoid or diminish any loss of or damage to the property insured.
    

The Law

22. An insurance policy is a commercial contractual document. The modern approach to the construction of such a document was set out by Lord Hoffman when delivering the judgment of the House of Lords in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1997] UKHL 28; (1998) 1 All ER 98 at 114:
    

"My Lords I will say at once that I prefer the approach of the learned judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 WLR 1381, 1384 – 1386 and Reardon Smith Line Ltd v. Yngvar Hansen-Tangen [1976] 1 WLR 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded. The principles may be summarized as follows:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co. v. Eagle Star Life Assurance Co. Ltd [1997] UKHL 19; [1997] 2 WLR 945.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in The Antaios Compania Neviera S. A v. Salen Rederierna A. B 1985 1 AC. 191, 201:

"... if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."

23. Lord Hoffman's approach was adopted by this court in Samoa Commercial Bank v. Palm Island Traders and Faga Matautia 9unreported 13/2/09), by the New Zealand Court of Appeal in Boat Park Ltd v. Hutchinson (1999) 2 NZLR 24 and the Fiji Court of Appeal in Dilip Kumar and Jyostna Kumar v. National Insurance Company of Fiji Ltd Civil Appeal No. ABU 0056S 10/11/06 (Ward, Eichelbaum and Penlington).
    
24. Bearing in mind the principles set out by Lord Hoffman the essential question for determination is to ascertain the meaning of the words contended by the plaintiff to a reasonable person with the relevant background knowledge which would reasonably have been available to the parties at the time of the contract.
    
25. The critical words must be viewed in the context of the entire contract.
    

Discussion of Burglary accompanied by violence or threat of violence and forcible entry

26. Counsel for defendant contended firstly that there was no burglary as the person who perpetrated the burglary and theft entered the main entrance using the appropriate key so that the entry of the premises was without force or violence. The submission however omitted to address the entrance into the locked filing room where the secured money boxes were kept. A pinch bar which the burglar engaged to break and damage the lock also left a mark on the door. That is sufficient evidence of violent and forcible entry into the filing room. In Re Calf and Sun Insurance office (1920) 2 KB 366 the issue before the court was whether a forcible and violent entry on an inner door of the insured shop premises satisfied the cover which referred to forcible and violent entry of the shop. The thief during the day time entered the insured premises in the normal way without force or violence and concealed himself in the coal cellar in the basement. At night after the shop was closed the thief left the cellar and entered a room in the basement by using an instrument to slid back the catch of the lock to open the door. He took goods from the room and went up the stairs to the shop. He broke down the door leading to the shop, took more goods and left the premises. Atkin LJ at page 383 said:
    

"I think that the view taken by the learned judges in George's case was this: that by the words actual force and violent entry it was intended to mean an entry effected by the exercise of force in a manner that was not customary in order to overcome the resistance of the usual fastenings and protections in the premises."

He went on:

"if a person turns a key he uses force but not violence. If he uses a skeleton key, he uses force but not violence. If on the other hand instead of using a key he uses a picklock, or some other instrument, or a piece of wire, by which as a lever he forces back the lock, it appears to me that he uses force and violence, and in the present case both force and violence were used."

27. Adopting the dicta of Atkins LJ I accept from the physical nature of the act involved in the breaking of the door lock with the pinch bar that the burglary was by forcible entry accompanied by violence.
    

Discussion of Money in Locked Safe/ Money in transit

28. Initially the insurance policy only covered cash in storage. It specifically excluded loss or damage caused by theft as well as loss or damage caused by the infidelity or any dishonesty on the part of the insured or any of its employees. It also specifically excluded cash in transit.
    
29. In March 2007 the plaintiff requested the defendant to extend the insurance scope of cover to include monies in transit from its premises to the payout stations. The last paragraph of that letter of request lists the 10 payout designations throughout Upolu and Savaii namely:
    

(i) Faleata East 1	-	$62,000
(ii) Faleata East 2	-	$75,875
(iii) Faleata West – Tuamasaga	-	104,750
(iv) Aana – Falelatai	-	105,375
(v) Lefaga – Siumu	-	86,125
(vi) Falealili – Aleipata	-	80,250
(vii) Vaimauga East – Vaa o Fonoti	-	103,250
(viii) Vaimauga West	-	52,000
(ix) Fa'asaleleaga – Papa Sataua	-	129,875
(x) Tafua – Falealupo	-	126,375
			$925,375

This is the amount of cash which leaves the plaintiff's premises on a monthly basis to the payout destinations as at March 2007. As this amount does not include the monies distributed to pensioners who collect direct from the plaintiff's premises, the amount stored at the premises exceeds one million tala. In fact the amount that was sorted and placed into cash boxes on the evening of Friday 19th March before the burglary according to the evidence of the plaintiff at the trial of the plaintiff's employee involved in the burglary and according to the written ruling of the presiding judge was $1,150,000.

30. The manager of the plaintiff under cross examination conceded that following his request to cover money in transit his office was visited by the defendant's manager in 2007. But in relation to the safe he told the court that the steel safe was just for locking small things but referring to this large cash it cannot be locked into one steel safe. He was specifically asked (page 7 of the transcript)
    

Question:	And was that specifically whether it was a strong room or a safe or volt built to keep and lock the money there?
Witness:	it was built to lock the money there.

31. Plaintiff's counsel through his written submissions conceded that the stolen cash was not in a locked safe. The thrust of his argument however was that the money was in transit between the ANZ Bank and the pensioners when it was stolen at the premises of the plaintiff. He says at paragraph 32.1 and 32.2 of his submission:
    

"It is our concession that money locked in cash boxes, which are portable containers, do not qualify within the view as "... in locked safe" because the containers are not a "safe" in its natural and ordinary meaning.

However, as indicated clearly in the Defendant's defence ... the clause means "Money in Locked Safe OR Money in Transit $750,000. This phrasing in our submission is taken to mean the happening of one or either event; Mr Moananu Ioane Filemu also accepted this understanding in his evidence".

32. He has referred to a number of very helpful authorities for the meaning of in transit. I will refer to some of them. In a property insurance which excluded loss or damage to property which was in transit, the NZ Court of Appeal in Kelly v. National Insurance Co. of NZ (1995) 1 NZLR 641 said at page 645:
    

"The judge relied on Sadler Brothers Co. v. Meredith (1963) 2 Lloyds Report 293 and Crows Transport Ltd v. Phoenix Assurance Co. Ltd (1965) Lloyds Report 139 as authority for the proposition that goods are in transit when they leave the customers' premises until they reach their destination. Those cases make it clear that the meaning of transit can include matters incidental to transit, such as the period between receipt of the goods by the hauler and the commencement of the journey, or some temporary interruption of the journey."

It said at page 646:

"All of these cases show that there is no universal answer to the question of what is meant by transit. It is a matter of construing the words in the particular contract and applying them to the facts."

33. In Hepburn v. A Tomlinson Haulers Ltd (1966) AC 451, the House of Lords gave consideration to the meaning of in transit in relation to a policy taken out by carriers on goods, the property of a third party. In the circumstances of that case the carriers made claim against the insurer on an insurance policy taken out by them on goods the property of a third party. The goods were carried by the carrier in lorries hired to the third party and were taken to the third party's warehouse where they arrived after working hours and consequently were not unloaded immediately. The lorries were taken into the charge of third party's night watchman for unloading the next morning. They were stolen during the night. It was held the goods were still in transit when they were stolen because the policy also included loading and unloading. Lord Reid said at page 466:
    

"Counsel attempted to argue that there were two separate periods of risk, the period of transit and the period of loading or unloading and that in this case the period of transit had come to an end and the period of loading had not commenced when the theft took place. But in my opinion this is quite inconsistent with the wording of the policy which must mean that the period of transit during which the goods are on risk is extended so as to include unloading and only comes to an end when unloading is completed."

34. Counsel for the defendant in her written submissions contended that the money was not in motion when it was stolen; it was not moving which meant it was not in transit. Counsel relied on the ordinary meaning of the words:
    

"Transit:"	-	going, conveying, or being conveyed, especially over distance
"in Transit:"	-	while going or being conveyed (see Oxford Dictionary).

The submission lacks support of the authorities and the decided cases and the submissions must accordingly fail. The authorities show that it is a matter of construing the words in a particular contract and applying them to the facts. There is no universal answer to the question of what transit means. As stated by Lord Hoffman in Investors Compensation Scheme Ltd v. West Bromwich Building Society (supra), the meaning which a document would convey to a reasonable man is not the same thing as the meaning of its words.

35. In my opinion the contention by counsel for the plaintiff that the money was in transit from the ANZ Bank to the pensioners, the ultimate recipients, is confronted by insurmountable difficulty. The insurance policy as the evidence unfolded was understood by both parties to insure the cash against loss:
    
    • (i) while the cash is in transit from the bank to the plaintiff's premises; from the plaintiff's premises to the payout stations, and from the payout villages to the plaintiff's premises.
      
    • (ii) while the cash is stored at the plaintiff's premises.
      
36. The SCBF was established by section 69 of the National Provident Fund Act 1972 to be administered by the plaintiff's Board and to pay on a monthly basis the benefits at the rates as determined by government from time to time. The point of dispatch of those monthly payments is the premises of the plaintiff where the cash is sorted into envelopes for the individual beneficiaries before they are placed into secured money boxes and locked for safety to await delivery to their destinations. The bank has no statutory obligation to fulfil in the scheme. Its relationship with the plaintiff is simply that of banker and customer.
    
37. When the plaintiff requested the defendant to extend the scope of the policy to include money in transit, it specifically asked for cover to protect cash carried by its distribution teams from its the premises to the payout villages. Inevitably the request was made on the understanding that the point of dispatch of the pensioners benefits was the plaintiff's premises where the monthly benefits is calculated, withdrawn from the bank, sorted into envelopes, secured in money boxes, stored and dispatched. At the instigation of the defendant and at no extra cost the movement of the cash from the bank to the plaintiff's premises was also covered under the extended scope of cover.
    

Burglary committed by an employee outside of business hours

38. The contention of the plaintiff is that in the event of burglary and theft of cash by any of its employees outside business hours, the liability of the defendant is not limited to money in locked safe so that money outside the locked safe is covered. If I read the argument correctly it means that liability of the defendant is limited to money in locked safe if the burglary and theft was committed by a person who is not an employee, but not otherwise if committed by an employee outside business hours.
    
39. While the plaintiff concedes that the insurance policy limits the liability of the defendant, in the event of burglary, for cash kept in a locked safe, and also concedes that the money stolen was not kept in locked safe, it nevertheless argues that monies not kept in a locked is protected under the policy if the burglary was committed by an employee outside office hours. Paragraph 35 of counsels submissions contends that the policy is ambiguous in the sense that it permits in some instances more than one construction of its clauses.
    
40. With respect to counsel I do not see any ambiguity. In terms of the policy and its extension of scope was designed to cover two separate periods of risk, the period of transit and the period of storage at the plaintiff's premises. The responses by the plaintiff's manager to questions under cross examination conveyed not a hint of doubt, ambiguity or confusion as to the purpose, meaning and intent of the proposals for insurance, the policy schedules, coverage summary and the policy.
    
41. This submission also fails. The court records it indebtedness to counsel for the plaintiff for his very helpful submissions.
    

Result

(i) Judgment for the defendant
(ii) If agreement to costs cannot be reached, counsel for the defendant to file memorandum

within 14 days and counsel for the plaintiff to respond 7 days after.

_________________
JUSTICE VAAI