Home | Databases | WorldLII | Search | Feedback High Court of Fiji

Naqova v Blue Shield (Pacific) Insurance Ltd [2002] FJHC 287; HBC0257.1997 (21 March 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 0257 OF 1997

BETWEEN:

VASITI NAQOVA
Plaintiff

AND:

BLUE SHIELD (PACIFIC) INSURANCE LIMITED
Defendant

Mr. D. Sharma for the Plaintiff
Mr. M.B. Patel for the Defendant

JUDGMENT

In this action the plaintiff who is the widow and administratrix of her late husband’s estate claims `by way of special damages interest computed on the sum of $500,000 at the rate of 7.5% per annum compounded from 26th September 1994 to 13th March, 1997.’ She also claims interest from the date of issuance of the Writ and general damages, interest on general damages and costs.

The defendant insurer for its part denied liability and averred that: `...... the claim was paid out in the sum of $500,000 and the said sum was accepted in full and final settlement by the defendant (sic) through her solicitors.’

The brief background to the case is as follows. On the date of his death Emori Naqova (the `deceased’) was the Managing Director of Fiji Post and Telecommunication Limited (`FPTL’) and was covered under a group insurance scheme issued by the defendant insurer to FPTL. The total sum in respect of which the deceased was insured under the group insurance scheme was $500,000.

The policy which is described as a `Group Term Life’ was first issued on 9th September 1993 and insured the named group members in the event of `Death Only’. On 26th September 1994 the deceased died as a result of `severe third degree 100% burns’ he sustained in a widely-publicised fire at his residence in the Domain. It is common ground that on that date the `Group Term Life’ policy under which the deceased was covered was valid and current.

The payment clause of the policy document reads :

`...... upon receiving this Policy at its Head Office together with evidence satisfactory to the Company of -

1. The happening of an event in respect of which the Sum Assured is payable,
   

The Company will pay the Sum Assured to the Policy owner or his executors, administrators or assigns or as may be otherwise provided in the schedules.' and Schedule 1 of the policy document identifies the `Policy Owner’ as: `Fiji Posts & Telecommunications Limited’.

Shortly after the deceased’s death there was an initial exchange of correspondence between the plaintiff’s solicitors and FPTL and the defendant insurer, seeking details of insurance policies that covered the deceased but these enquiries met with little or no success. For its part the defendant insurer admitted in a letter dated 21st December 1994 that it held two (2) relevant policies in the name of FPTL but refused to release any details `unless an approval is received from the policy holder.’ No such approval was ever obtained.

On 23rd March 1995, Letters of Administration in the deceased’s estate was issued in favour of the plaintiff and on producing this authority to FPTL the proceeds of two (2) insurance policies, one issued by Queensland Insurance in the sum of $200,000 and the other by the defendant insurer also for the sum of $200,000 was paid out to the plaintiff after a deduction was made for funeral and related expenses which had been incurred by FPTL on behalf of the deceased’s estate. These payments and deductions were referred to and evidenced by a Deed of Release executed between FPTL and the plaintiff on 22nd August 1995.

Plainly neither payment included or was referable to the `Group Term Life’ policy issued to FPTL under which the deceased was insured for a sum of $500,000 in the event of his death and nothing more was heard of the policy until the plaintiff’s solicitors wrote to the defendant insurer on 30th January 1997 pointing this out and enclosing a copy of the Letters of Administration of the deceased’s estate. The solicitors also expressed their concern at the absence of `...... (any) effort (by the defendant insurer) to take proper and reasonable steps to ensure that payment under the cover is made to the estate in time’ and sought `an explanation of the delay in paying monies due ......’

The defendant insurer replied by letter dated 11th February 1997 pointing out that since their earlier revelation (in December 1994) `...... there was no follow-up being made from (the plaintiff’s solicitors) ‘ and, in any event, company practice was to only release funds on production of Letters of Administration of the estate of an assured.

On 12th March 1997 (i.e. 2½ years after the deceased died) the defendant insurer paid out $500,000 to the plaintiff’s solicitors. A subsequent request by the plaintiff’s solicitors `...... to cite (sic) the original Insurance policy ......’ went unanswered as did a request for the payment of interest.

On 4th July 1997 the plaintiff’s solicitors issued the present proceedings. On 26th November 1998 after all pre-trial steps had been completed the judge to whom the matter was assigned was unable to deal with the matter and the case was reassigned.

Thereafter the action was adjourned on numerous occasions over a period of thirteen (13) months for one reason or another including to accommodate the Court’s prior commitments, defence counsel’s illness and medical treatment overseas, and more importantly, to allow settlement talks to proceed between the parties.

When settlement talks proved fruitless plaintiff’s counsel sought to invoke Order 33 r.3 of the High Court Rules with a view to having the defendant’s liability first determined by way of written submissions. This procedure although initially agreed to by both counsels was subsequently doubted in defence counsel’s written submission as an `oversight in hastily agreeing to follow a course.’

In this latter regard however it is common ground that the defendant insurer in fact paid out the proceeds of the `Group Term Life’ policy on 13th March 1997 to the plaintiff’s solicitors, and accordingly, there can be no question of any dispute arising as to the defendant’s liability to pay under the policy nor can the date of payment be seriously disputed.

The sole remaining issue therefore that defence counsel helpfully framed in his written submissions and to which in counsel’s words : `the answer will finally determine the whole action’, was :

`Is the Plaintiff entitled to interest on a debt already paid before the institution of an action ?’

and counsel writes :

`if the answer is in the affirmative there be judgment for the plaintiff for interest at a rate to be assessed together with costs.’

Finally on 29th September 2000 the Court, with the agreement of counsels, formulated the following question to be dealt with as a preliminary issue, namely:

`Is there a cause of action for damages (special or general) in respect of the late payment of a contractual debt e.g. life insurance?’

Written submissions were ordered and these were finally completed on 18th October 2000.

In brief, defence counsel, relying on the decisions of the House of Lords in London, Chatham & Dover Railway Co. v. South Eastern Railway (1893) A.C.429 and President of India v. La Pintada Compania Navigation SA (1985) 1 A.C.104, submits that `The general common law approach is that interest is not payable for the late payment of a debt unless expressly provided for by agreement, statute or by usage. The Plaintiff does not come within this ambit.’

In reply plaintiff’s counsel writes:

`The Plaintiff’s claim is made up of the following components in the Statement of Claim, Special Damages for the period 26th September 1994 to 13th March 1997, General Damages, Interest and Costs. The Plaintiff has alleged that the Defendant acted in breach of the Life Insurance Policy i.e. the contract by not paying out when the monies were due i.e. upon the death of Mr. Emori Naqova.

The Defendant has submitted that the Plaintiff does not have a cause of action and the Plaintiff is prevented from claiming interest on a debt that has already been paid.

It is true that at the time of filing the Writ the Defendant had paid out the monies under the Life Insurance Policy. The Defendant says that the Plaintiff’s claim is prevented under the principles espoused in the Dover and Pintada case.

With respect, it is submitted that the Plaintiff’s claim is not prevented under these two cases, in Dover’s case, their Lordships reluctantly disallowed a claim for interest for late payment saying that there was no written instrument for the Plaintiff to rely upon to bring its claim. There were three major amendments to the principles laid down in Dover, the first being the 1934 UK Law Reform Act. This Act allowed a Court to grant interest in any proceedings for any judgment on a debt or damages. This provision is also found in Section 3 of the Law Reform (Miscellaneous Provisions) (Interest) Act. The second intervention was Section 35A of the Supreme Court Act 1981. Section 35A allowed a Court to award simple interest on debts and damages even where the debt was paid before the judgment was given. There were a number of excursions made by Ld Denning to distinguish Dover, the most prominent case being Trans Trust SPRL - v - Danubian Trading Co Ltd (1952) 2 QB 297. However, the third major deviation from the Dover principles was laid down by the English Court of Appeal in Wadsworth - v - Lyall (1981) 1 WLR 604. In Wadsworth, the Court of Appeal stated that in cases concerning breach of contract a Plaintiff is entitled to claim special damages for a late payment of a debt. The Special Damages claimed must not be too remote. Wadsworth covered the scenario where a debt had already been paid before the commencement of proceedings.

In Pintada the English House of Lords reaffirmed the principles laid down in Dover but with two exceptions. Their Lordships recognised the statutory amendments to the Dover principles set out in the Law Reform Act 1934 and the Supreme Court Act 1981 and they also approved the principles set forth in Wadsworth i.e. a Plaintiff is entitled to claim special damages in contract where there has been a late payment of a debt.

Thus the effect of Dover has now been considerably watered down by these subsequent developments.’

In determining this aspect of the case I can do no better than refer to the judgment of Lord Brandon of Oakbrook, who delivered the principal judgment in the La Pintada case and with whom the other Law Lords agreed, where his lordship explained in the later case of President of India v. Lips Maritime Corp. (1988) 1 A.C.395 the effect of the La Pintada case in the following passage at p.423:

`In the La Pintada case the House was invited to depart from its earlier decision in London, Chatham and Dover Railway Co. v. South Eastern Railway Co (1893) A.C.429. In that case it was held that, under English Common law, interest would not be given as damage for late payments of a debt. Two matters were decided by the House in the La Pintada case. The first matter was that the application of the principle established in the London, Chatham and Dover Railway Co. case was limited to claims to recover interest as general damages under the first part of the rule in Hadley v. Baxendale 9 Exch 341 and did not extend to claims to recover interest as special damage under the second part of the rule.’

In this latter regard the House of Lords in the La Pintada case while maintaining the principle of London, Chatham and Dover Railway Co. in respect of claims for general damages nevertheless held by way of an exceptional example, that :

`(2) Where ...... a creditor was able to prove he had suffered special damage (e.g. by himself having to pay interest on say an overdraft) as a result of a debtor’s late payment of a debt the creditor was entitled to claim such special damage notwithstanding that the debt was paid prior to the creditor commencing proceeding for its recovery.’ (1984) 2 ALL E.R.773 at 774.

The rule in Hadley v. Baxendale (op.cit) is encapsulated in the following passage in the judgment of Alderson B. where his lordship states at p.344:

`Where two parties have made a contract, which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either (1) arising naturally, i.e. according to the usual course of things from such breach of contract itself (general damages) or (2) such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it (special damages).’

(The numbering and parenthesis are inserted for emphasis.)

The most often-cited example of a successful claim under the second part of the rule in Hadley v. Baxendale is the case of Wadsworth v. Lydall (1981) 2 ALL E.R.401 where the plaintiff succeeded on appeal, in recovering interest and other charges incurred in respect of a mortgage that he was obliged to take out as a result of the defendant’s non-payment of monies due under a contract on the due date.

In that case Brightman L.J. in distinguishing the London Chatham and Dover Railway Co. case as `an action for an account (where the House of Lords) was concerned only with a claim for interest by way of general damages’, said ibid at p.405 :

`If a plaintiff pleads and can prove that he has suffered special damage as a result of the defendant’s failure to perform his obligations under a contract, and such damage is not too remote on the principle of Hadley v. Baxendale, I can see no logical reason why such special damage should be irrecoverable merely because the obligation in which the defendant defaulted was an obligation to pay money and not some other type of obligation.’

In light of the foregoing the submissions of plaintiff’s counsel are plainly correct and I hold that there is no legal impediment to a claim for special damages for late payment of a contractual debt. That however is not the end of the matter.

In order to succeed in such a claim or cause of action the plaintiff must not only, properly plead the facts relied upon as constituting the claim for special damage, but additionally, in the words of Hobhouse J. in International Minerals & Chemical Corp. v. Karl O. Helm A.G. (1986) 1 Lloyds Rep.81 at 104 :

`...... (the plaintiff) must prove not only that he was suffered the alleged additional loss and that it was caused by the defendant’s default, but also that the defendant had knowledge of the facts or circumstances which make such a loss a not unlikely consequence of such a default. In the eyes of the law, those facts or circumstances are deemed to be special, whether in truth they are or not, and knowledge of them must be proved. Where ...... the relevant facts or circumstances are commonplace, the burden of proof will be easy to discharge and the courts may be willing to draw inferences of knowledge.’

The Statement of Claim in the present case merely avers that `...... the monies under the policy were payable once the defendant, knew of Emori Nagova’s death’ (26th September 1994) and the fact that `...... the defendant finally paid the sum of $500,000 to the plaintiff’s solicitors on 13th March 1997.’ If I may say so, these averments merely establish that payment under the policy was made 2½ years after the insured event had occurred and nothing more. Nowhere is it pleaded that the plaintiff incurred any extra financial liabilities or loss as a consequence of the non-payment of the proceeds of the policy or that the defendant insurer `had knowledge of the facts or circumstances which make such a loss a not unlikely consequence of such a default.’

Indeed, as presently pleaded, the plaintiff appears to assume that the mere lapse of 2½ years is `ipso facto’ sufficient to sustain her claim for special damages. Plainly it is not.

In my considered opinion it is quite inadequate to assert without any particulars, that `the plaintiff went into receivership as a result of the estate’s debt’ nor would such an eventuality be described as `common place’, nor, is it enough merely to refer to what the defendant insurer could or should have done and leave it at that.

Furthermore the rule in Hadley v. Baxendale clearly assumes that a party to a contract `has broken (it)’ but nowhere in the Statement of Claim is such an averment to be found. I accept that plaintiff’s counsel’s written submissions makes reference to the defendant insurer not acting `in good faith’ in failing to disclose details of the insurance policies covering the deceased and to a `breach of contract for late payment’. But neither submission which normally sounds in general damages is reflected in the pleadings. To that extent also the plaintiff’s pleadings are deficient.

In this case it is common ground that the policy document is silent on the payment of interest on the sum assured nor is there a date for payment specified in the payment clause. In such circumstances, `...... by implication of law, (the defendant insurer) is deemed to have undertaken to perform his part of the contract within a time, which having regard to all the circumstances, is reasonable.’ (per O’Regan J.A. delivering the judgment of the Fiji Court of Appeal in Ram Jati Singh v. Letama Trading Co. (1987) 33 F.L.R. 158).

In similar vein Lord Watson said in Hick v. Raymond & Reid (1893) A.C.22 at p.32:

`When the language of a contract does not expressly or by necessary implication, fix any time for the performance of a contractual obligation, the law implies that it shall be performed within a reasonable time. The rule is of general application, and is not confined to contractor for the carriage of goods by sea. In the case of other contracts the condition of reasonable time has been frequently interpreted ; and has invariably been held to mean that the party upon whom it is incumbent duly fulfills his obligation, notwithstanding protracted delay, so long as such delay is attributable to causes beyond his control, and he has neither acted negligently or unreasonably.’

In this regard however, no implied terms are pleaded in the plaintiff’s claim nor have any particulars been given that the defendant insurer `acted negligently or unreasonably’ in making the payment having regard to all the circumstances obtaining after the deceased’s death.

I have considered whether or not these deficiencies in the pleadings might be resolved by considering the `Statement of Agreed Facts’ but am regrettably driven to the conclusion that they are not.

The plaintiff is accordingly given leave to amend the Statement of Claim within 14 days and the defendant is given leave to amend its Statement of Defence 14 days thereafter. The plaintiff is to file a Reply within 14 days after receiving the amended defence if considered necessary. The action must then follow its normal course. Liberty is reserved to the parties to make whatever applications they consider will conduce to the speedy finalisation of the case. Costs in the cause.

(D.V. Fatiaki)
JUDGE

At Suva,
21st March, 2002.