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

Amira Furnishing Company Ltd v New India Assurance Company Ltd [2011] FJHC 794; HBC41.2005L (8 December 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 41 of 2005L

BETWEEN:

AMIRA FURNISHING COMPANY LIMITED
Plaintiff

AND:

NEW INDIA ASSURANCE COMPANY LIMITED
Defendant

JUDGMENT

Judgment of : Ms Dias Wickramasinghe J.
Counsel : Mr Peter Lowing for the plaintiff
Mr A.K. Narayan for the defendant
Solicitors : Lowing & Associates for the plaintiff
AK Narayan Lawyers for the defendant
Date of Judgment : 8 December 2011

INTRODUCTION

[1] The plaintiff, by its writ of summons seeks inter alia for a declaration that the defendant is liable to indemnify the plaintiff under two fire policies for loss and damage caused by a fire that occurred on 16 November 2002.

[2] The alleged causes of action arise, pursuant to refusal by the defendant to indemnify the plaintiff on the insurance policies by its letter of 4 May 2004[1].

BACKGROUND

[3] The plaintiff-company carried on a furniture business at Lot 18 Nasilivata Road, Namaka Industrial Sub division, Nadi (the property). The plaintiff alleges that on 16 November 2002, around 10 pm, an unknown gang entered the plaintiff’s property and set it on fire.

[4] Six months prior to that fire, on 16 May 2002, the plaintiff’s furniture business caught fire from an electrical fault. The defendant indemnified the plaintiff for the first fire in the sum of $800,000.00 and also gave an undertaking that it will continue to insure the plaintiff’s business[2]. After the first fire, the plaintiff relocated its business at the location where the second fire erupted, which is said to be the place it commenced its business.

[5] The defendant admits that both policies of insurance, bearing numbers 922626-1111-011289 and 922626-1111-000679 were in force at the time of the fire (Policies)[3].

PLEADINGS

[6] The plaintiff amended the statement of claim on 1 June 2011 and the amended statement of defence was filed on 3 June 2011. The reply to the statement of defence was objected to by the defendant but was subsequently filed by the plaintiff with consent on 8 June 2011.

[7] The defendant in the statement of defence denied liability and raised a number of defences including a general defence; arson; false statements; fraud; fraudulent exaggeration; limitation under an arbitration clause and non-cooperation. The plaintiff objects to the defence on the basis of waiver and promissory estoppel.

HEARING

[8] On the morning of the date of hearing the defendant informed court that it will not pursue with the defence of arson.

[9] Both counsel also requested court to disregard the original agreed bundle of documents which was filed on 20 July 2010, and submitted two new bundles of agreed documents, marked exhibits A (titled as ‘List of Correspondence for year 2002’ consisting of 92 documents) and B (titled as ‘Missing enclosures/letter for year 2002 consisting of 5 documents). In addition to the agreed bundle, the plaintiff produced documents P1; A 18(b) and A98 and the defendant D1 to D3.

[10] The plaintiff led the evidence of three witnesses. PW1- Mr. David Robertson; PW2- Vijaya Krishnan; PW3- Michael Makki. The defendant led the evidence of Garry Luff (DW1). Both counsel also made oral submissions and filed written submissions.

THE PLAINTIFF’S CASE

[11] The alter ego of the plaintiff, Mr Michael Makki, is a Lebanese national who alleged that he left Lebanon at the age of 15 and travelled to Australia where he had worked in the furniture industry. In 1992, he arrived in Fiji as a consultant to Burns Philip (Fiji) Ltd and thereafter had commenced his furniture business, where the sales had first been locally and then expanded to Australia and Pacific Islands. He is an artisan, specialising in manufacturing furniture using cut timber as raw material which he states has no value to other furnishing manufacturers, thereby yielding high profit margins relative to similar businesses. He is illiterate in the English language in writing, and had therefore engaged the services of Mr David Roberson who assisted him pro bono with his correspondence and negotiations. Mr Robertson also assisted the plaintiff to submit documentation on both fires to the defendant. Mr Makki and his wife are the shareholders of the plaintiff company.

[12] The plaintiff alleged that it operated as a modest company; met its commitments; and provided a living for its staff and the principal owners[4]. Its business generated income from local sales and exports to Australia and Pacific Island. The plaintiff further alleged that between 1998 to May 1999, it built a new factory at the cost of $800,000.00. It is this factory that was destroyed by the first fire. Despite the downturn faced by many businesses in Fiji due to the coup in May 2002, the plaintiff states that it retained its staff in employment during that period.

[13] The letter of Mr Roberson dated 10 March 2003, which was submitted as an agreed document (Exhibit A-document 28) sets out in detail the financial status of the plaintiff-company up to the second fire. It appears that the plaintiff re-established itself after the first fire with the support he received from his Australian partner and the indemnity of $800,000.00 paid by the defendant-insurance company, which paid most of the outstanding debts of the plaintiff when the first fire broke out.[5]

[14] After the first fire, the plaintiff had borrowed a sum of $200,000.00 as working capital from Colonial Mutual Life, securing the property as collateral. It had also borrowed machinery and equipment from various sources in order to resume its business. In 2006, Mr Makki said he sold the business for $135,000.00 to settle the outstanding sum to Colonial. Some photographs were produced in court marked P1, of the burnt machinery which had been stored in a yard and taken just before the hearing. He also said that he would not use the equipment again as they are made of cast iron which is easily destroyable at high temperature and the usage of the machineries such as heavy knives or saw could endanger safety of the plaintiff’s employees.

[15] The plaintiff had reconstructed some of the documents that were destroyed by the fire and submitted same to the defendants with covering letters dated 4 December 2002[6] and 20 December 2002[7]. The plaintiff also said that most of the records were destroyed in the first fire and what was not destroyed in the first fire was destroyed in the second fire.

DEFENDANT’S CASE

[16] The letter of declinature dated 4 May 2004, which consisted of 4 pages finally declined the claim inter alia stating;

‘Your allegations that your client has been co-operative are denied. He hasl not signed and retd returned the interview. His non-co-operatttitude hude has continued to date. We have been instructed to inform you and your client through your office that our client declines your clients claim othis ground as also on the grounds that your client hast has provided false information in support of its claim and the claim is false, fraudulent and fraudulently exaggerated. Oient also has reasonable able cause to decline the claim on the grounds that your client by its servants and/or agents deliberately set fire to the insured premises to obtain the insurance monnder the policy of insurancurance issued by our client’ (emphasis added)

[17] The defendant appointed McLarens Young International (formally McLarens Topils) as assessors and loss adjusters and GAB Robins Investigation to investigate the claim.

[18] Whilst McLarens Topils submitted a report,[8] GAB Robins Investigation had not submitted a report. In evidence, Mr Luff on behalf of GAB Robins Investigation informed court that the plaintiff gave letters of authorization for him to carry out investigations with the financiers but due to non cooperation of the plaintiff he was unable to complete his investigations.

[19] When evaluating the evidence there was a reference to two reports of McLarens. When counsel made oral submissions, I requested the counsel to draw my attention to the first report and Mr Lowing in his final submissions informed court that they are unaware of such report. Mr Narayan however attached a copy of the report to his final submissions. The said report was not adduced into evidence and therefore I will not consider the report or any submissions made relating to the McLaren’s report dated 2 December 2002.

[20] The letter of declinature dated 4 May 2004[9] confirms that the primary reason for refusal to indemnify the plaintiff was non cooperation and making false statement. It is also apparent from the documentation[10] that the defendant was of the view that the plaintiff-company was experiencing severe financial hardships and therefore had difficulties to remain financially buoyant in the long term.

DEFENCES

[21] The defendant submits several defences on the basis of (i) false statements, (ii) fraud or fraudulent exaggeration, (iii) non- cooperation and (iv) limitation.

[22] Let me now examine these defences under the separate headings for convenience.

(i) False Statements

[23] In insurance contract, it is a fundamental principle that both insured and the insurer must act in utmost good faith. This principle is intrinsically interwoven in the field of insurance that it should be followed by both parties before the commencement of the contract, i.e., before the insurer accepts liability; throughout the contract period; during its renewals; and finally when claims are considered by the insurer. If the insured at any point of time makes a false statement, despite whether the contract of policy has specific terms to address the issue or not, the insurer can determine and decline the claim against the insured.

[24] When the defendant is relying on ‘false statement’ as a defence, then, the defendant must prove that the plaintiff made false statement at the investigation stage to succeed in this defence. The defendant cannot rely on the false statements made by the insured at the hearing in support of the defence, if such statements were not made at the investigation stage. The rationale is based on the rights exercised by the insurer to decline the claim if the insured had made false statements. The insurer must therefore satisfy itself after careful investigation that the statement is false and in fact, the statement was designed by the plaintiff to conceal a particular fact whereby the insurer would have otherwise been misled to pay the claim. When the insurer decline the claim based on false statement, the court would then consider whether the declinature made on such false statement is justifiable. In contrast to this situation, the trial judge would consider any false statements made at the hearing to determine the credibility of the witness.

[25] I have considered at length the legal position of all defences of false statement and non cooperation in my judgment-G.P. Reddy & Company Ltd v New India Assurance Company Ltd [2011] FJHC 680; HBC48.2008L (31 October 2011) with relevant authorities. I will therefore not repeat myself with the relevant authorities unless I wish to address further on a particular issue.

[26] The alleged false statements as set out in the amended statement of defence at paragraph 3.2 are as follows:

1. The plaintiff was financially sound at the time of the subject fire and the one that occurred earlier in May 2002
   
2. The plaintiff had suffered plant and equipment loss in the fire valued at $118,043.30
   
3. The plaintiff had acquired machinery from John Grey Designs for $40,000.00 of which it had paid $20,000.00 before the fire.
   
4. The plaintiff had acquired machinery from John Grey Designs for $60,000.00
   
5. The plaintiff did not owe any money to the tax department
   
6. There had not been a down turn in the plaintiff’s business from 1999 to the date of the first fire
   
7. The plaintiff’s business from 1999 to the time of the first fire was good.
   
8. VAT records were lost by the Inland Revenue Department
   

False statement on (i), (vi) and (vii) and VAT returns

[27] The defendant contends that the false statements in respect of (i), (vi) and (vii) above are to be found in the interview given by Mr Makki (PW3) to Mr Gary Luff (DW1)[11]. The defendant further submits that the combination of the statements together with the evidence given by Mr Makki in court were designed to paint a false picture that the business up to the first fire and subsequently leading to the second fire was doing well and there hadn't been a decline.

[28] In support of this defence, the defendant highlights at paragraph 4.8 and 4.9 the alleged false statements that were made by Mr Makki and Mr Roberson in court. Due to the reasons given above, I will not consider those statements when I determine the justification of this defence. The defendant also relies on documents 27 to 29 in the agreed bundle of documents in support of this defence (Exhibit A).

[29] A statement given that the company is doing financially well is subjective. An interpretation to such a statement requires a full build up of the entirety of the background than an isolated questioning as found in the instant case. The plaintiff witnesses at the hearing and in the audio record states that the plaintiff’s company was a profitable business before the first fire but the 2000 coup affected its business, yet it was able to sustain in the market due to the exports thereby not retrenching the staff. Both Mr Makki and Mr Roberson said they had just started rebuilding the business when the second fire broke out. Documents 27 to 29 do not depict a contrary view. I have no doubt that after the first fire the plaintiff would have undergone some financial difficulties but the insurance payout from the first fire would have cushioned most of it. It is evidence from the bank reconciliation documents read together with the payment breakdown that the plaintiff had attempted to re-establish itself.

[30] The financial position of the plaintiff could be considered by the defendant to determine a possible situation of arson. The defendant itself had concluded that the plaintiff did not commit arson. I am unable to conclude that the plaintiff deliberately attempted to mislead the defendant to indemnify itself. I therefore conclude that the plaintiff did not attempt to falsely mislead the defendant of its financial status.

[31] I use the same reasons stated above relating to VAT payments. The plaintiff only submitted accounts for the years 1998 to 2001. On a perusal of those accounts, it appears that the plaintiff had to pay VAT. The plaintiff says he has paid VAT. I have no evidence before me to determine whether the plaintiff paid VAT after the fire. Nor do I have VAT documents or evidence by a FIRCA official before me to make a finding whether the plaintiff made a false statement. After the defendant dropped the arson defence, I am also of the view that the financial position of the company seems insignificant.

Machinery purchased from John Grey Designs

[32] The defendant alleges that the plaintiff made false statement for some 10 items of equipment purchased from Grey Project Designs. The defendant had included this defence under false statement and non cooperation. I will therefore discuss both of these issues later in my judgment.

NON COOPERATION

[33] The defendant alleged that the plaintiff failed to cooperate and provide assistance that was required of it to Mr Gary Luff (DW1) and Mr Reginald Woods. The duty to render assistance is provided under clause 6 in the conditions of the policies.[12] The policies required the plaintiff to “give such proofs and information with respect to the claim as may be reasonably required together ....... no claim under the policy shall be payable unless the terms of this condition have been complied with.” The compliance with the conditions of the policy is a condition precedent to the right of recovery by the plaintiff.[13]

[34] The details required to be given to an insurer will vary according to facts of each case, depending on the nature of the claim, the nature of the trade and the nature of the goods involved.[14] The details called for by the defendant or on its behalf must be reasonable as envisaged in condition 6 of the policy. Where the insured fails to fully comply with all reasonable requests the insurer succeed in this defence[15].

[35] Mr Lowing submits that in requiring the proof of a claim or in deciding whether the proof given is sufficient the insurers cannot act capriciously, unreasonably, or unjustly, by requiring evidence which is not necessary to satisfy them on any reasonable view of the case. It is sufficient if the assured lays before the insurer evidence with which reasonable man would be satisfied, and it is unnecessary to show that the insurers have in fact been satisfied. I agree with Mr Lowing on this point.

[36] The defendant- New India had set out the particulars of non cooperation in paragraph 5.2 of the statement of defence. The defendant in its written submissions informed court that they are not pursing the particulars set out in sub paragraphs 9, 10, 11 and 12 in paragraph 5.2.

[37] The defendant’s allegation of non cooperation is predominantly based on (i) the failure to provide VAT Returns, income tax returns and financial statements for the prior three years (as at the date of request on the 26 November 2002); (ii) the failure to sign the transcript and failure to give further interview to clarify matters; (iii) failure to comply with the request to obtain a ‘core test’ for the building; (iv) the failure to provide documents to support purchase of machinery; (v) failure to obtain quotations from builders for the repairs to the building; (vi) failure to supply bank statements; and (vii) failure to obtain a report and quotation for repairs to machinery that was partially damaged by the fire.

[38] I will now examine these issues under those headings.

(i) VAT returns

[39] When FIRCA was subpoenaed to come before court to give evidence, they wrote to the Deputy Registrar of their inability to provide the tax returns due to the secrecy provision in section 52 of the Fiji Revenue and Customs Authority Act. The evidence of the plaintiff was that it had delivered the documents to FIRCA and they had lost them. The defendant was appraised during the investigation stage of these difficulties. In the circumstances, I am unable to conclude that the plaintiff is in breach of non cooperation.

(ii) Transcript

[40] The fire occurred on 16 November 2002. On 22 November 2002, Mr Luff- the fire investigator interviewed Mr. Makki with his consent. This interview was audio recorded. The audio recording clearly reveals that Mr Makki willingly gave the interview and at one point, he even stated that he had no objection to the manner in which the interview was carried out.

[41] On or around 25 March 2004[16]; one year and four months after the first interview Mr Luff requested Mr Makki to sign the transcript of the audio recording of the first interview and also requested for another interview. It is admitted that Mr Luff did not provide a copy of the audio recording when he requested Mr Makki to sign it. Mr Makki refused to sign the transcript or give another interview, which is construed by the defendant as non cooperative.

[42] I have carefully considered the documents leading to this request. I am of the view that Mr Luff’s request to sign the transcript without providing the audio record after one year and four months is unreasonable. In any event, I do not see the need to have the transcript signed by Mr Makki when the audio record was available.

[43] I find that the relationship of the parties subsequently soured and Mr Makki says that Mr Luff treated him like a common criminal. Mr Roberson also wrote to New India of this fact and it appears that the plaintiff formed the view that the entire investigation was aimed at finding avenues not to indemnify the plaintiff. It is admitted that some unknown group deliberately lit the fire, but Mr Luff suspected Mr Makki to have had a hand in it. Even in his evidence before court, Mr Luff admitted that he was suspicious of Mr Makki as the originator of the second fire as the second fire occurred within 6 months from the first. I cannot fault the plaintiff’s attitude towards Mr Luff as unreasonable or inappropriate considering the manner in which Mr Luff had conducted the investigation for one and a half years. Exhibit A -docs 64 to 68 amply reveal, the manner in which the relationship between the parties had further deteriorated. I am unable to accept that the plaintiff’s refusal to sign the transcript can be construed as non cooperation given the circumstances of this case.

(iii) Core tests and (iv) Ownership of machinery

[44] I will discuss both of these issue when I consider the plaintiffs claims in order to avoid being repetitive.

(vi) Quotations for repair of the building

[45] The plaintiff submitted a report from Engineered Design to assess the damages caused to its building by the fire. The Engineered Designs after inspection prepared the report with estimated repair costs. The defendant appointed McLarens to assess the loss and after due consideration McLarens recommended the repair costs recommend in the report of Engineered Designed except the repair cost for structural upgrading and the cost of $10,000.00 recommend as unknown costs.

[46] The allegation on non cooperation arises due to the plaintiff not submitting two quotations to the defendant justifying the repair costs. The defendant did not adduce evidence to justify the request for two quotations. Mr Roberson at the hearing confirmed that obtaining the quotations were not difficult, as undertaken in document 36, but informed that plaintiff wanted the defendant to at least admit liability before providing further documents.

[47] The issue for determination by this court at this point is non cooperation. The defendant appointed McLarens to assess the claim. The plaintiff submitted a report and the repair cost for the building through a report it obtained from Engineered Designed. In doing so, I am of the view that the plaintiff complied with its obligation. It was the defendant’s obligation thereafter to either accept or reject it. I am not convinced that without taking a decision, the defendant could have persistently requested for two more quotations from the plaintiff to make a final decision. I could accept non cooperation of the plaintiff if it had not produced the report from Engineered Designs. I am not convinced that the request for further quotations were reasonable when the plaintiff had already submitted a report in support of its claim.

(vii) Financial statements and bank statements

[48] The plaintiff provided the defendant with its financial statements from 1998 to 2001. The defendant requested further financial statements from June 2001 to June 2002 and from June 2002 to November 2002[17]. The plaintiff contends that the balance financial statements could not be reconstructed and therefore could not be produced. The plaintiff states that it provided the bank statements up to November 2002[18] and gave Mr Luff unlimited authority to obtain documents from the source, i.e., from KPMG, Banks, etc.

[49] Mr Luff in his evidence said he was unable to complete the investigations as the plaintiff failed to provide the required documentation. It appears to me that Mr Luff simply awaited the plaintiff to provide all the documentation at his table without conducting independent investigations despite receiving unlimited authority from the plaintiff, to obtain any information as he pleases from the bankers, supplier and other business associates including the plaintiffs’ accountants KPMG.

[50] I have carefully considered the correspondence dated 14 February 2003[19], 25 February 2003[20], 3 March 2003[21], 10 March 2003[22], two letters dated 11 March 2003[23], between GAB Robins Investigations and Viti Property Management Services Limited.

[51] Mr Luff explicitly informed the plaintiff that his investigations reveal that the plaintiff was facing severe financial hardships. His subsequent reply dated 11 March 2003 is also evidence that he had reached a decision after investigations that the plaintiff was in severe financial hardships. Considering this conclusion, I am not convinced that the plaintiff did not cooperate with Mr Luff as alleged. In fact, I find that some of the requests made by Mr Luff, as set out in my judgment were unreasonable, and the plaintiff had provided the documents to the best of its ability and the defendant should have therefore made a decision to either accept or reject the claim.

[52] The defendant did not lead evidence to justify the reasons for requesting for Telecom and Vodafone` statements or how the investigations got hampered due to not providing these documents. I am therefore unable to make a finding.

Fraud and fraudulent exaggeration

[53] The plaintiff sets out 3 separate particulars of fraud in paragraphs 4 of the statement of defence. However, in its written submissions, the defendant limited the particulars relating to this to the following[24].

• (a) The plaintiff did not own machinery of the value of $118,043.30
  
• (b) The plaintiff did not suffer loss to its building in the sum of $350,000.00 as submitted on 6th December 2002.
  

[54] The facts of these two issues overlap with some of the other defences which I will discuss in detail elsewhere in my judgement. Suffice to say at this moment that the defendant must prove fraud and it had not proved this defence.

Defence of Limitation

[55] The defendant alleged that clause 12 of the insurance policy contained a limitation period, which required the defendant to refer the matter for arbitration within one year. I already construed the identical insurance policy clause relating to the arbitration clause at length in the case of G.P. Reddy & Company Ltd v New India Assurance Company Ltd [2011] FJHC 680; HBC48.2008L (31 October 2011) and do not therefore wish to be repetitive except to the extent necessary to determine this issue in this case.

[56] The defendant took up this defence only in the amended statement of defence filed on 3 June 2011, just one week prior to the hearing. The plaintiff relies on the principle of waiver and promissory estoppel to defend this issue.

[57] It is my judgment that if the defendant intended to rely on the limitation period of one year, then it was incumbent upon the defendant to make an application under section 5 of the Arbitration Act to stay the proceedings in the High Court.

Section 5 of the Arbitration Act stipulates:

'If any party to a submission, or any person claiming through under him, commences any legal proceedings in any court against any other party to the submission, or any other person claiming through or under him, in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings, and that court, if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission and that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the proceedings. (Emphasis added)

[58] Section 5 of the Arbitration Act is explicit that the defendant should have made an application to stay the proceedings before a 'step' of the instant action. The plaintiff's action was filed in 2005 and the defendant did not make an application under section 5 of the Arbitration Act. To me, the provision in section 5 of the Arbitration Act is a positive rule of law, where strict compliance is necessary. In the circumstances I conclude that the defendant had not taken the appropriate steps to reap the benefits of this issue.

INSURANCE POLICES

[59] The plaintiff is relying on two policies; policy numbers 922626-1111-011289[25] and 922626-1111-000679[26]. These two policies cover the following perils.

Policy numbers property insured Sum insured

• 922626-1111-011289 (i) Building $350,000.00

at Namaka Nadi

• 922626-1111-000679 (ii) Finish and in process $100,000.00

furniture and fabric material

(iii)Furniture manufacturing $100,000.00

Equipment and other equipment

(i) Fire policies no 922626-1111-011289 for building- $350,000.00

[60] The defendant states that the plaintiff had fraudulently exaggerated the value of the building by claiming a sum of $550,000.00 as depicted in the claim form at Exhibit A document 97. Having carefully considered the claim form, I find that the claim of $550,000.00 is inclusive for stock and trade and machinery. The claim form which was prepared soon after the fire has set out the claim on the full extent of the cover. The amount claimed for the building is $350,000 and not $550,000 as stated by the defendant.

[61] It also appears to me the sum of $350,000 had been put in for the full amount of the insured sum and the plaintiff had only claimed $87,997.57 as repair cost. The defendant alleged fraud or fraudulent exaggeration of the claim. I see no merit whatsoever in the allegation.

[62] The fire did not destroy the entirety of the building. The plaintiff must therefore prove the repair cost based on market value. The plaintiff obtained a report from Engineered Designs in December 2002. The said report suggests a sum of $187,997.57 as estimated costs for repair, which had been itemized as follows.

[63] McLarens Toplis- the loss assessors, investigated the scene and submitted its report dated 25 February 2003, which was attached marked "RCW-1' to the affidavit of Reginald Claude Woods marked A 98. The loss assessors found the cost of repairs for building and electrical work to be reasonable but did not recommend the sums claimed for structural upgrading and other unknown amounting to $35,000.00 and $10,000.00 respectively. The report submitted by Engineered Designs states that the inspection of the upper level was not conclusive due to the inability of the engineer to gain access; but states that it witnessed that the upper floor required repairs. Having considered both reports, I award the sum of $118,406.89 for building repair and $7500.00 for electrical works as recommended by Engineered Designs and concurred by McLarens Toplis.

Structural upgrading/ Core tests

[64] Let me now examine the sum of $35,000.00 recommended for structural upgrading. Engineered Designs recommended $35,000.00 as repair cost on an exterior investigation of the building and recommended a core test to be carried out to determine the extent of structural damage to the building. The plaintiff did not conduct core tests.

[65] Witness Vijay Krishnana (PW2) who gave evidence before this court said the purpose of the core test is to determine any loss of strength in the concrete compared to what it was used to be in the design. He also said that doing a core test is prudent as it is required when giving subsequent structural certification with confidence. According to the witness, the test is expensive, each costing about $2000.00 for each test and several such tests have to be conducted to come to a final finding. As for plaintiff's building he said about 10 such core tests would be required. In his evidence, Mr Krishna also confirmed the difficulty in conducting core test as only one company conducts such test in Fiji and therefore explained the problems to carry out such tests due to the dearth of its availability. He also said the bulkiness of the test equipment also restrict it to be moved to the upper floors. Mr Roberson in his cross-examination said he attempted to obtain a core test but was unable to do so due to some problem which he could not remember. Mr Makki in his oral testimony said he was unable to carry out the core test due to its heavy costs and the defendant had refused to pay for it.

[66] The defendant submits that any structural upgrading should be limited to the fire damage and not to any pre-existing structural problems. I agree with the defendant's submissions. The defendant states that it, therefore, requested the plaintiff to submit core test reports to determine the claim submitted for structural damage, which had not been heeded to by the plaintiff and its failure amounts to non cooperation.

[67] I am mindful that the defendant could not have paid $35,000.00 for structural damage to the building without adequate proof. The plaintiff must prove that the building suffered structural damaged due to the fire. However, defendant being in the insurance business in Fiji for a considerable time should have known or ought to have known the difficulties encountered by parties to obtain core tests. Considering the difficulties and the costs involved in conducting core tests, I see no justification for the defendant to have insisted on the plaintiff to carry out the core test and decline the claim based on non cooperation.

[68] Although I concluded that not providing the core test would not amount to non cooperation, the plaintiff is however not automatically entitled to the $35,000.00 recommended by Engineered Design. As I said earlier the plaintiff must prove that the fire caused structural damage to the building. I have no evidence before me to determine that the fire damaged the structure of the building. In court, Mr Roberson said the plaintiff would have undertaken the repair work himself. I am ready to accept that evidence, especially in the light of the unchallenged evidence that Mr Makki constructed the building himself using his workforce. However the plaintiff's own consultant, Engineered Designs recommended a core test and did not explain the basis of calculating the amount of $35,000.00. In the absence of evidence to the contrary that the fire damaged the structure of the building, I am unable to consider $35,000.00 recommended in the Engineered Designed report. Accordingly I disallow the sum of $35,000.00 claimed for 'structural upgrading following core tests'.

Contingency sum – other unknown

[69] The plaintiff is also claiming $10,000.00 as contingency sum for unknown works. McLarens Toplis refuses this claim on the basis for want of better particulars.

[70] It is common in building contracts to have a set percentage figure as construction contingency for unforseen emergencies or for design short falls identified after a construction project commences. Generally the contingency is included in the budget so that the project can proceed with minimal administrative delays or interruption for small non-scope changers or cost overruns. Generally construction contingencies are limited to 5% of the construction estimates for new works and 7% of the construction estimates for renovation projects[27].

[71] I have carefully examined the repair costs to the building set out in the report submitted by Engineered Designs in the instant case. In summary, the following repairs have to be carried out as depicted in the report.

• The entire roof structure will need to be replaced.
  
• The timber mezzanine areas at the front and rear will need to be replaced
  
• There have been some strength degradation to concrete and masonry components suspended slab to assess the extent of any strength loss.
  
• All internal finishing and fit out will be required.
  

[72] Considering the nature of the repairs, I am of the view that it is reasonable to fix a contingency for the unforeseen repair work. I accordingly award 7% on the repair costs of $118,406.89 as contingency sum.

Betterment factor

[73] McLarens report recommends a reduction of 15% betterment factor on the total repair sum. This amount is considered on the basis that the building is 17 years old and will last 80 years. The betterment factor in the present context has been used on the basis of calculating depreciation, a method used in accounting to value the buildings.

[74] Both counsel filed comprehensive written submissions on the betterment factor in their respective final submissions filed on 2 December 2011 and 6 December 2011 respectively. I am thankful to both counsel for their well researched submissions.

[75] The defendant in the policy of insurance at page 1 of second last paragraph agreed to indemnify the plaintiff on either of the following basis:

"...the Company will pay the Insured the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such Property or any part thereof." (emphasis added)

[76] It is evident from the above that the insured after accepting liability could either pay the value of the property, damages as calculated or reinstate/replace the property or part thereof.

[77] The defendant contends that when payment is made it is entitled to reduce a percentage as betterment. The plaintiff states that the insurance policy does not provide for the reduction of betterment, especially in clause 8 which deals with reinstatement; therefore the defendant is not entitled to reduce a percentage as betterment.

[78] The application of betterment in insurance contract was dealt in detail in the cases of J & B Caldwell Limited v Logan House Retirement Home Limited[28]; Harbutt's Plasticine Ltd v Wayne Tank and Pump Co Ltd[29]; General Accident Insurance Asia Ltd v Sakr & Ors[30]; in Vintix Pty Ltd v Lumley General Insurance Ltd[31]; Reynolds v Phoenix Assurance Co Ltd[32]; Vance v Forster[33]; Ewer v National Employers' Mutual General Insurance Association Ltd[34]; Byrne v JS Hill & Associates Ltd[35]; Gwam Investments Pty Ltd v Outback Health Screenings Pty Ltd[36] which were referred to in the written submissions of the parties.

[79] The rationale for reducing a percentage for betterment is that the insured should not receive more than the indemnity for its loss, as a result of replacement of equipment with new ones or rebuilding damaged property with new materials. A consideration of these judgements seems to be centred on the same factors such as (1) the betterment could be reduced when replacement of equipments are made with new items; (2) when a building is constructed using new material; (3) the onus of proving the quantum of any betterment is on the defendant with adequate evidence.

[80] In my judgment, the defendant is entitled to reduce a sum or percentage as betterment if it can be proved with evidence that the building or the equipment that are to be purchased or replaced are new or modernised or in much better condition than the building or machinery that was destroyed by fire. "A better building does not necessarily mean a building of greater value"[37]. In other words if the building is rebuilt using old material or if the equipment are replaced using second hand equipment, then a reduction for betterment cannot be made. The replaced article must envisage being modernised to the extent of being superior to the reconstructed or replaced equipment. The court would then be required to consider the betterment on the evidence before it.

[81] In the instant case, McLarens report does not provide evidence to show how the plaintiff's reconstruction of the building or replacement of items would ensure betterment. The defendant must adduce specific evidence in this regard such as calling a report of the new items that would be purchased to replace the damaged equipment or evidence to demonstrate that an old dilapidated building is modernised to be superior after the reconstruction.

[82] The defendant had not provided any evidence before me to conclude that it is entitled to reduce a percentage for betterment. It is also noteworthy that the plaintiff did not reconstruct the building or replace the equipment. In fact, in 2006 the plaintiff sold its business. In any event, Mr Wood justifies the reduction of 15% on a depreciation scale, which in my mind has no relevance to determine betterment. Accordingly, I disallow the 15% recommended as betterment factor.

[83] The McLaren's report states that the VAT was increased to 12.5% from 1 January 2003. Accordingly under the fire policy for building repairs I award a sum of $150,969.79, on the following basis.

(ii) Fire policy number 922626-1111-000679 - Finish and in process furniture and fabric material -$100,000.00.

[84] At the commencement of the hearing both counsel informed me that they are agreeable to accept the sum of $90,813.00 assessed in the McLarens report at RCW1 as value of the loss of the stock at the time of the fire.

[85] I find that the McLarens had arrived at the figure after proper investigation. In any event, since the parties are in agreement on the value of the stock at the time of fire, without further dwelling on this issue I award the plaintiff a sum of $90,813.00 under this policy of insurance.

(iii) Fire policy number 922626-1111-000679 - Furniture manufacturing Equipment and other equipment -$100,000.00

[86] The fire policy provides cover for furniture manufacturing equipment and other equipment for $100,000.00.

[87] The plaintiff claims a sum of $118,043.3 plus, and itemized same as stated below:

[88] Let me now examine these items under the same heading.

Grey Project Designs- $60,000.00

[89] The defendant strongly resisted the defence of non cooperation and false statement under this heading.

[90] The plaintiff submitted a claim for $60,000.00 for ten items of equipment that it had purchased from Grey Project Designs, which it says, was destroyed in the fire. In support of its claim, the plaintiff submitted a reconstructed document from Grey Project Designs that it sold the items for $60,000.00.[38] Grey Project Design by its letter of 3 December 2002 states that the plaintiff had to pay a balance sum of $45,000.00 for the equipment.

[91] Mr Makki in his oral testimony informed court that he paid $25,000.00 to John Grey when he picked up the equipment. He then says he paid twice $10,000.00 each and finally the total balance sum minus $1000.00, which was accepted by Mr. Grey as a final figure. However, Mr Makki was unable to submit any bank statements, or another supporting document to corroborate the payments or least state the dates of making such payments.

[92] Mr Robertson in his evidence said Mr Makki and Mr John Grey, Managing Director of Grey Project Designs negotiated the price for the machines and agreed a bulk payment of $60,000.00. After the fire when the assessors requested a breakdown of the figures Mr Robertson had prepared the list that was provided to McLarens as per the prices told to him by Mr Makki. It was Mr Roberson's evidence that Mr Makki was well conversant with the equipment and he knew the value of each item. Mr Roberson also said that the machines were old fashioned, but was of very good manufacturing reputation and was made out of cast iron.

[93] Grey Project Designs has its business adjacent to the plaintiff's property, separated by a masonry wall. When the fire fighters came to defuse the fire, Grey Project Designs alleged that its property was also damaged and they too lodged a claim with the defendant on 22 November 2002. (Doc 6 in Exhibit A). Schedule 2 of the said letter contains a list of items that was sold to Amira Furnishing factory under a sales and purchase agreement. It is also documented in the schedule that 'All transferred to Amira Furnishing Factory under Sales and Purchase Agreement which to date, is still incomplete' and declared the value as $30,000.00

[94] It was two weeks thereafter that Grey Project Designs, wrote to the plaintiff the aforesaid letter of 3 December 2002, demanding the full settlement of the balance sum of $45,000.00 on the equipment sold to the plaintiff. (Doc 10 in Exhibit A).

[95] Evidently, there is a disparity in the value of the ten machines declared by the plaintiff and Grey Project Designs, in their respective documents. Grey Project Designs, in doc 6[39] declared the value of the ten machines as $30,000.00, but two weeks later demanded $45,000.00 from the plaintiff. The plaintiff declared the value of the equipment as declared as $60,000.00 in Exhibit A- doc 10 and doc 13(xii).

[96] It appears to me that when the insurer (McLarens) discovered the inconsistency of the values declared by both parties, without disclosing that fact, McLarens requested the plaintiff to provide documents in support of ownership for all machinery purchased from all three different parties (doc 26 of Exhibit A and RCW2). The plaintiff by that time had reconstructed the documents from the source and submitted same to McLarens by its letter of 10 December 2002 -A18 (b).

[97] It appears from the correspondence before me that the defendant first discovered Grey Project Design's letter of 22 November 2002 only on the date of hearing i.e 8 June 2011, when the parties requested for a short adjournment informing court that the counsel wishes to agree to more documents. The affidavit verifying the defendant's list of documents dated 9 August 2007 does not discover the letter of Grey Project Design dated 22 November 2002[40]. The said letter is not included in the agreed bundle of documents filed on 22 July 2010.

[98] McLarens persistently requested for documentary proof of ownership and the correspondence discloses that the plaintiff was unaware that the investigation was pointing towards a doubt on the ownership of the equipment sold by Grey Project Designs. Upon examination of letters dated 3 March 2003, 25 March 2003[41], 15 April 2003[42] sent by McLarens to Viti Property Management Services Ltd[43] and the replies thereto by letters dated 24 March 2003[44] and 26 March 2003[45], it is also apparent that the plaintiff was totally oblivious to the declaration made by Grey Project Design as the value of the items as $30,000.00. I am convinced that the plaintiff had no knowledge of the declaration made by Grey Project Designs.

[99] I am unable to determine whether the equipment declared by Grey Project Design and the plaintiff is identical. Whilst both counsel address the matter in their respective final submissions, it appears that the counsel have inconsistent opinion of the items declared even after the trial. The defendant states they are identical and the plaintiff says except for Thicknesser Wodhim Bursgreen" (sic) valued at $10,000.00 the items listed in the Schedule under the heading "Timber Wood Working Machines" (with the exception of one item) is not the same as the equipment claimed by the plaintiff.

[100] I am concerned in the manner McLarens investigated this matter. It appears to me that McLarens was awaiting for the plaintiff to submit some conflicting documents and thereafter trap and ambush it. Although this historical method of investigation is acceptable, when the required information was not forthcoming the investigators should have known to move on and follow the uberrima fide principles, which is of utmost importance in insurance claims, which should necessarily be followed by both the insured and the insurer.

[101] Mr Lowing further contends that if there is any improper claim, it is by Grey Project Designs who had made a claim for a piece of equipment, which by their own admission they sold, to the plaintiff. A witness was not subpoenaed from Grey Project Design to give evidence before court. The defendant alleges that it was the plaintiff who should have led that evidence. I disagree. Explicitly it was the defendant who must prove that the plaintiff had submitted a false claim and not vice versa when it received the reconstructed documents on 10 December 2002. The defendant had not submitted evidence to prove the incongruity of the values of the items and it remains unexplained.

[102] I have no evidence to conclude that the matter was investigated by the defendant or on its behalf. Nor do I have evidence before me explaining the inconsistency of the values declared by Grey Project Designs and the plaintiff. I do not have evidence before me to determine whether the McLarens or the defendant interviewed Mr John Grey on the disparity of the value. Nor do I have any evidence to determine whether there is a nexus between the items declared by Grey projects Design and the plaintiff.

[103] The defendant declined the claim based on non cooperation and false statements. In my mind McLarens should have been forthright at some point and obtain an explanation from both parties regarding the disparity. As I said earlier, both parties are required to act in utmost good faith. I am not convinced that the plaintiff was in breach of non cooperation under this heading of submitting documents for a matter they had no knowledge of. I am also not convinced that McLaren acted in good faith when conducting the investigations relating to the disparity. To me the investigation by McLarens on this matter is disappointing. Explicitly the plaintiff did not make a false statement as alleged by the defendant.

[104] Grey Project Designs in its letter of 3 December 2002 confirms that it sold the equipment to the plaintiff for $60, 000.00. Mr Makki confirmed it purchased for $60,000.00 I am not concerned whether the payment was satisfied as such details would be matters for the buyer and the seller. In any event I have no evidence to say that Grey Project Designs had filed action to recover the balance payment from the plaintiff. In my mind the insurer only had to consider whether the plaintiff had an 'insurable interest' and what was the actual value paid for the equipment.

[105] As stipulated in section 20 of the Sales of Goods Act (division 6), the title to movable property passes upon delivery or when the parties intend title to pass. Upon consideration of documents 6, 10 and 18(b) in Exhibit A, it is evident that ownership of the machinery sold by Grey Project Designs passed when the plaintiff took delivery of the items.

[106] As I said earlier the onus is on the plaintiff to submit supporting documents in respect of its claim. Accordingly, the plaintiff submitted documents 10 and the reconstructed documents at exhibit A 18(b) from Grey Project Designs in support of this claim. In my judgment the letter of 3 December 2002 of Grey Project Designs confirming the sale of the equipment to the plaintiff for a sum of $60,000.00 remains unchallenged. I therefore conclude that the value of the equipment sold by Grey Project Designs to the plaintiff is $60,000.00.

Quotation for repair of the equipment

[107] The plaintiff also provided a schedule of all the machinery as set out in Doc 13(xii)-Exhibit A, which I have reproduced below. McLarens report states that Mr Makki provided a listing of the machinery and their observations of the status of the machinery are set out below as depicted in RWC1[46].

[108] The plaintiff is only entitled to claim for the equipment damaged by the fire. McLarens states that after inspection, they found a number of equipment that was repairable as listed in the last column in the above paragraph. Accordingly, the plaintiff was requested to provide reports from suitable consultants with a quotation of repair costs for those items that were repairable.

[109] The defendant submits that the failure of providing quotations by the plaintiff amounts to non cooperation. The plaintiff rightly or wrongly took a stance that the items are non-repairable. The defendant should have then accepted or rejected the claim without protracting its decision.

[110] The plaintiff is only entitled to claim for the items that are damaged by the fire. McLarens observed certain items are repairable and some are not. In my judgement if the plaintiff disagreed with McLaren's findings, it should submit independent corroborative evidence to challenge McLaren's findings. The plaintiff did not submit such independent corroborative evidence for me to make a finding on the issue.

[111] Accordingly, I only award the value of equipment which is identified as not burnt in the McLaren's report attached to Mr Reginold Wood. The values of the said unburnt items are $28,000.00 as declared by the plaintiff. Accordingly I award $28,000.00 under this claim.

Popular Furniture

[112] The General Manager of Popular Furniture Limited certified the delivery of the below items, valued at $29,590.00 to the plaintiff on ly 2002 2002. [See annexure in A 18(b)].

** &#16ind that the value for for 3 phase wood lathe is inadvertently put as $20,000.00 when in fact it should be $2000.00 as declared in doc 13(xii).
ـ &##60; & ;d ;ɘʔ ـ ;d &##60;&< n&##10;& ҈ ; &#& t&##16; &160; ¦