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Chandra v Courts Fiji Ltd [2011] FJHC 638; HBA004.2009 (6 October 2011)

IN THE HIGH COURT OF FIJI AT LABASA
CIVIL APPELLATE JURISDICTION

CASE NUMBER:
HBA 004 OF 2009

BETWEEN:

RAMESH CHANDRA
APPELLANT

AND:

COURTS FIJI LIMITED
RESPONDENT

Appearances: Mr. Amrit Sen for the appellant.
Mr. Mohammed Saneem for the respondent.

Date/Place of Judgment: Thursday, 06th October, 2011 at Labasa.
Judgment of: The Hon. Justice Anjala Wati.

JUDGMENT

APPEAL – parties entered into a hire purchase agreement – item purchased was covered by insurance against loss by fire and other perils – item damaged by fire – hirer sued for monies due and owing under the account- lower court held that customer obliged to pay as the loss was not covered for two reasons, being that the customer was in arrears of payment and that the customer had left the item at a place other than that specified – HELD- that the insurers defence was not available to the hirer until such time it had exhausted its avenues by claiming the loss from the insurer – in any event, the insurance cover for fire did not require that the items be kept at a place specified by the hirer and no findings of arrears of instalment made, even if there was arrears, that did not permit the hirer to omit the lodgment of the claim – the only advantage the insurer could have obtained from the arrears was that it would be exempted from covering the loss for arrears or overdue payments – appeal allowed- judgment entered against appellant set aside with an order for costs of appeal in favour of the appellant.

The Appeal

1. The appeal is against the decision of the magistrate delivered on the 29th day of April, 2008.
   
2. The appellant has raised 6 grounds of appeal:-
   
   1. "The Learned Trial Magistrate erred in law and in fact in holding that the insurance policy did not cover the loss sustained by the defendant notwithstanding the fact that the plaintiff had failed to lodge the claim which it was obligated to do and further did not allow the underwriters to determine upon such claim.
      
   2. The Learned Trial Magistrate erred in law and in fact in holding that the insurance policy did not cover the loss when the plaintiff had refused to allow the indemnity to be determined in accordance with the policy.
      
   3. The Learned Trial Magistrate erred in law and in fact in holding that the chainsaw had to be kept inside his house in Patandova when an agreement pursuant to which the advances were made, had a specific schedule of keeping of the items and which was open.
      
   4. The Learned Trial Magistrate erred in law in failing to appreciate that chainsaw is not an item to be kept inside a side board in a dwelling house but rather is a machine used in the bush to cut logs and trees.
      
   5. The Learned Trial Magistrate erred in law and in fact in failing to analyse the evidence and appreciate the defence case and accordingly his judgment is erroneous and ought to be set aside.
      
   6. The Learned Trial Magistrate erred in law and in fact in failing to understand the defence case as reflected in his several adjournments where he could not deliver the ruling which were on very basic facts".
      

Magistrates' Court Claim

3. The respondent, Courts Fiji Limited, had made a claim for balance monies due and owing under a hire purchase agreement dated the 3rd day of March, 2005. The subject item was a chainsaw. The amount claimed was a sum of $853.22 as balance due and owing under the agreement and interest at 20.4% pursuant to the agreement.
   
4. The appellant's main point of contention was that he did not owe any money to the respondent because the chainsaw was destroyed by fire and he had paid insurance to cover for such a peril. The appellant further contended that he informed the respondent of the loss by fire but the respondent refused and/or neglected to provide the appellant with indemnity under the insurance cover. Any loss, thus, is through the fault and neglect of the respondent itself, as it did not care to lodge an insurance claim with its underwriters.
   

The Ruling

5. His worship held that the appellant was liable to pay a sum of $853.22 to the respondent together with the costs of $250.00. Interest claim was refused by his worship. There were two reasons why his worship found the appellant liable. The first was that the appellant had kept the chainsaw at a place other than a known location and when it consequently got destroyed by fire at the unknown location, the loss was not covered by the insurance policy. Secondly, his worship reasoned that the appellant was in arrears of payment as a result of which his insurance premium was in arrears, thus, no insurance could be given for the loss.
   

The Submissions

6. Mr. Sen submitted that the basis of his defence was that the respondent had not exhausted its avenues in recovering the monies for an item which was destroyed in a peril covered by an insurance policy. If the respondent had lodged a claim with the insurance company to cover the loss, and the insurance company had refused, then his worship was entitled to analyse the terms and conditions of the insurance. Here, his worship prematurely decided that the insurance was not covering the loss as the item was located at an unknown place when the schedule which was to stipulate where the item was to be kept was blank and did not name the place where the item was to be kept. The appellants account, further, was not in arrears, and even if it was, the insurance was still liable to indemnify the loss because the premiums are paid in advance.
   
7. Mr. Saneem first raised the issue that the appeal is out of time. The Judgment was delivered on the 29th day of April, 2008 and the notice and grounds of appeal was filed on the 22nd day of May, 2008. The Notice of Appeal indicates that the cost for the filing fee was paid on the 17th day of June, 2008.
   
8. On the substantive appeal, Mr. Saneem raised the opposition that the appellant was in arrears of $784.71 when the loss occurred. The appellant was to pay all the monies by January, 2006. The statement of account tendered by the respondent was never challenged in evidence and so pursuant to clause h.4 of the hire purchase agreement; the insurance was not obliged to cover any arrears or overdue payments. In the monthly repayment, an amount of insurance premium was also included and when the principal installment fell in arrears, the premiums also fell in arrears and the insurance cover was not available then. The respondent did not need to apply for the insurance. The insurance company would have paid the last repayment and not the arrears at as the date of the loss by fire and this is very clearly stipulated in clause h.6 of the hire purchase agreement. In respect of where the item was to be located, the address of the appellant was listed and so it was not necessary to write the same thing in the schedule. If the chainsaw is used somewhere apart from the known location then the appellant was to keep it at his place and not leave the same at an unprotected place and go visiting.
   
9. Mr. Sen's argument was maintained that the respondent cannot raise any argument regarding the insurance cover when it failed to lodge a claim for the insurance. There is no issue of arrears, and the issue of arrears was never part of the pleadings and that could not have been raised in the claim from nowhere. The respondents counsel is using his own calculation of what the arrears was until January, 2006 when the item was destroyed by fire which calculation is not correct by any standards.
   

The Determination

10. I firstly need to address the issue of the appeal being out of time. The issue raised is baseless as the filing date of the appeal clearly indicates that the same was filed within time.
    
11. Grounds 1, 2, and 5 overlap and so can be dealt with together. Similarly, grounds 3 and 4 overlap and can be dealt with together.
    
12. Grounds 1, 2 and 5 basically state that the appellant's defence at all times was that the respondent had failed to lodge an insurance claim to indemnify the appellant of the loss and that omission was the fault of the respondent and thus any money that is outstanding has to be suffered by the respondent. His worship did not analyse the evidence and the defence on this aspect and thus the judgment is erroneous.
    
13. I have perused the defence and the evidence which is very clear from the records. The appellant's only defence was that the item was insured and lost in fire and the insurance policy had covered this peril of fire. It was thus incumbent on the respondent to have lodged an insurance claim to have the loss indemnified and not to seek payment from the appellant.
    
14. His worship, in his judgment did not cast his mind to this defence. Instead he analysed whether or not the insurance covered the peril of fire on the facts of the case.
    
15. The basic aspect that was overlooked by his worship was that the insurance company named as Aon Risk Services (Fiji) Limited via clause h. 2 of the hire purchase agreement has never refused to pay the claim on the grounds raised by the respondent.
    
16. The insurance company was never given an opportunity to consider the claim as the respondent never lodged the claim because it arbitrarily analysed the insurance company's defence and reached a conclusion that the claim would be unsuccessful.
    
17. It is crystal clear that the respondent acted as the broker by taking the premiums, finding an insurance company, having a master agreement between it and the insurance company, retaining the master insurance policy and not disclosing the same to the appellant and reserving the right to lodge the claim. The onus to lodge the insurance claim as apparent from the evidence and conduct of the parties was thus on the respondent. So what the respondent ought to have done was to have all the necessary documents gathered and filled and lodged a claim to cover the loss. Upon the assessment of the claim, if the insurance company refused to cover the loss for any of the defences available to it, the respondent was then at liberty to pursue the claim against the appellant and this would have also given the appellant an opportunity to seek an indemnity from the insurance company after a trial in court.
    
18. The defences that the respondent has raised in this court was not available to the respondent without it having exhausted all the avenues to recover the loss from the insurance company. His worship thus should have first dealt with the obligation of the respondent before analyzing the terms of the insurance policy.
    
19. It is clear from the evidence that the respondent has not fulfilled its obligation to have first recovered the loss from the insurance company. Having failed to do that, it cannot rely on the defence that was available to the insurance company to call for the balance of the monies due and owing to it under the hire purchase agreement.
    
20. Having said the above, I will still go a step further and see the merits of the two issues raised by the respondent.
    
21. At the outset, I must say that the respondent had never raised in the pleadings that the insurance did not cover the loss for want of up to date payments or for want of keeping the items at the known location. It had an opportunity to file a reply to the defence raised, but it failed to raise the same via its reply and only brought these issues during the trial. The Court had considered the respondents claim outside the pleadings.
    
22. Every party is bound by the pleading and in this case, a permission to the respondent to raise issues outside the pleadings was not justified by any reason or ground.
    
23. The first issue outside the pleading was that the appellant was in arrears and so the insurance would not be covering the loss.
    
24. In the examination in chief, the respondent's witness is recorded to have said:-
    

"Items delivered. Then according to him item brought at Seaqaqa at someone else home. He told me about it I noted. Insurance not covered. After that he wasn't paying arrears and amount. Arrears was $495.00 Till today, $853.22 as at 22.04.06 – Customers Account kept in System. Yes we able to print. Yes this is Customers Account. Confirm $853.22 owing at 22.04.06. Statement of Account – Exhibit 3."

25. From the above evidence, the respondent appears to say in one breath that the appellant stopped paying maintenance after the item was lost in fire and in the same vein saying that there was arrears of $495.00. I do not know whether that arrears of $495.00 was until the date of trial as the witness said "$495.00 till today" or was it arrears as at the date of loss. If it was arrears as at the date of loss, then it is only that amount that the insurance company would not have paid under clauses h.4 and h. 6 of the hire purchase agreement. The insurance company would have paid the balance. Clauses h.4 and h.6 reads as follows:-
    

"(h.4) In any of the circumstances set out at Clause h.3 above, all outstanding payments due under this agreement (apart from any arrears or overdue payments) will be met by the Insurers on your behalf and paid direct to Courts Homecentres. That payment will be credited to your account with Courts Homecentres and, subject to Clause h.6 below, will release you or your estate from your obligations to make further payments under this Agreement.

(h.6) The Insurers Policy taken out under Clause h.2 above will not pay out in respect of any arrears or overdue payments outstanding at the date of loss of goods or your death, and you or your estate will remain liable to pay all such outstanding sums. Under the terms of the Insurance policy (a copy is available on request) all sums are paid directly to Courts Homecentres and not to you or your estate"

26. The above clauses also indicate that despite the fact that the payment was in arrears, the claim for the insurance should have been lodged as the insurance only excludes the arrears and outstanding payment when arrears is due. It was definitely going to honour the policy for the balance due and owing after the loss.
    
27. However, I reiterate that there was no cogent evidence as to what the arrears was at the time of the loss, that is, on or about the 26th day of January, 2006, when the chainsaw caught fire, although it was stated in the cross-examination that the arrears was $495.00.
    
28. The statement of account was tendered but that in itself does not show the arrears as at the date of loss. Mr. Saneem tried to use his calculation to say that there was arrears which calculation is not even sound. He stated that the payment should have been cleared in 11 months. The amount outstanding was $2,063.66. The purchase was made on 3rd March, 2005. A monthly payment was agreed to be $172.00. With 11 payments, the total would have only come to $1892.00. A sum of $171.66 would still be left to complete the balance of $2,063.66. I therefore do not accept Mr. Saneem's calculation of the arrears. This aspect should have been clearly outlined in the evidence and it was not.
    
29. Mr. Sen had vehemently opposed the aspect of arrears and so this aspect should have been clarified.
    
30. I wish to independently examine the account. Before I do that I must state the appellant's obligation on payment. The appellant was to pay from 3rd April, 2005 a sum of $172.00 for 11 months and a final payment of $171.66 to cover the total of $2,063.66.
    
31. The statement of account shows that the appellant made the following payments:-
    

32. The appellant was obliged to pay 10 payments of $172.00 by January, 2006, being the month in which the chainsaw caught fire. Specifically, the appellant ought o have paid a sum of $1720.00. The statement shows that a sum of $1760.00 was paid up till January. The statement also shows that the payments were made in advance and so in fact the statement on the face of it does not show any arrears at all.
    
33. Even if there was any arrears, the respondent was still obliged to either ask the appellant to pay up the arrears before lodging the claim or lodged the claim without asking for the arrears to be cleared and left it to the insurance company to decide on whether and what amount it would cover. The balance, if any, could have then been proceeded with, against the appellant and/or the insurance company as the respondent deemed appropriate.
    
34. Having not made a claim for insurance, it was not at all proper for an action to be filed against the appellant and I am of the judgment that if the defence as pleaded was carefully analyzed, then his worship would not have come to the conclusion that he did.
    
35. I therefore allow grounds, 1, 2 and 5 of the appeal.
    
36. The second issue raised outside the pleading was that the chainsaw was kept at a location outside that specified by the respondent and as such the insurance does not cover the loss. This forms grounds 3 and 4 of the appeal. In summary Mr. Sen argued that his worship was wrong in holding that the chainsaw was to be kept in Patandova being the address noted on the delivery form when the schedule which was to stipulate the known location was left blank. He further argued that a chainsaw is an item which would hardly be kept in a house at the location noted in the address as there are no trees to cut in Patandova.
    
37. I will examine the clause from which this issue arose and that is clause h.3 of the hire purchase agreement. It reads:-
    

"The Insurance Policy purchased under clause h.2 above is designed to provide you with insurance in the event of your death. In addition Gold and Silver provide you with insurance for total disablement following an accident or sickness, the Goods being destroyed or lost as a result of fire, flood or cyclone or lost as a result of burglary at the known location of the Goods".

38. Firstly, the term "known location" does not apply to all perils listed in the second sentence of clause h.3. It only applies to the peril of burglary. The sentence means that if there is any burglary at the location where the item is specified to be kept and the item is lost then the policy will cover the loss. If the term "known location" was to apply to all perils then it would become meaningless to apply the same to perils like total disablement by accident or sickness. Total disablement can happen by accident anywhere and it is most likely to happen outside the known location.
    
39. In interpreting that the term "known location" applied to the peril of fire, his worship erred on the facts of case.
    
40. His worship did say in his judgment that:-
    

"I have received no submissions on whether the words "at the known location" apply only to a case of loss through burglary or whether it applies equally to loss by fire, flood or cyclone".

41. Having said the above, his worship determined as follows:-
    

"However – clause 3.2 (a) seems to oblige the hirer to keep the goods at the address specified in the Schedule. No specific address is noted in the Schedule but Ramesh's location is identified in the top right hand corner of the Agreement as "Patandova"... The same address is noted in the Delivery Note (Ex 2). I find that the known location of the goods would have to be the residential address of Ramesh in Patandova which Ramesh gave...in my view, the combined effect of H3 and Clause 3.2(a) is that the chainsaw is covered only if were destroyed by fire at/in the known location. Otherwise, if Ramesh were to take the chainsaw out/away of his known location in Patandova, then he does so at his own risk".

42. One must not overlook that this hire purchase agreement is a standard agreement and has been used in all hire purchase cases irrespective of the nature of the item purchased. It was therefore only fair that even if it became necessary for his worship to ascertain what the "known location" should be; his worship should have done the same not only in reference to clause 3.2 (a) of the hire purchase agreement but also in reference to the nature, use and purpose of the item purchased. Chainsaw is a commercially used item. It can never be left at a "known location" other than when the commercial activity ceases for a period.
    
43. If his worship determined the term "known location" in reference to the nature and purpose of the item purchased, it would not have come to the conclusion that the "known location" for the item was the residential address of the appellant.
    
44. Further, it was important for the respondent to have completed the schedule and specify where the item was to be kept, failing which, the appellant cannot be held liable for keeping the goods at a place other than the given address. It is possible that the schedule was left open because the term "known location" could not apply to this item which was to be used at various places and thus impossible to exhaustively list what the locations would be.
    
45. On the above basis, I therefore hold that the appeal in grounds 4 and 5 must be allowed.
    
46. Ground 6 states that his worship did not understand the defence case as reflected in his several adjournments where he could not deliver the ruling which were on very basic facts.
    
47. Mr. Sen seems to think that judicial officers who take out time to deliberate on issues do not understand law. I have not heard of anything more outrageous than this. Indeed his worship did not touch on the defence raised by Mr. Sen but his worship's act of taking adjournments to write a ruling does not at all indicate that he did not understand the defence case. Raising grounds of this nature does not only reflect weakness in counsel but their disregard for judicial officer's duty and workload. I say no more.
    

Final Orders

48. For the reasons stated above, I allow the appeal in grounds 1 to 5. On that basis I set aside the decision of his worship where he awarded judgment and costs in favour of the respondent.
    
49. I award the appellant costs of this appeal in the sum of $1000.00, summarily assessed.
    
50. Orders Accordingly.
    

Anjala Wati
Judge
06.10.2011

To:

1. Maqbool & Company, Counsel for the appellant.
2. Neil Shivam Lawyers, Counsel for the respondent.
3. File: HBA 004 of 2009.