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Khan v Fiji Development Bank [2012] FJHC 1273; Civil Action 414.2001 (10 August 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. 414 of 2001

BETWEEN:

NASRA KHAN
Plaintiff

AND:

FIJI DEVELOPMENT BANK
Defendant

Appearances: Mr Suresh Chandra for the plaintiff
Mr P. Sharma for the defendant

Date of hearing: 26th January, 2012

JUDGMENT

1. The plaintiff her husband had obtained a housing loan from the defendant Bank(Bank) in 1997, in respect of a property at 23,Volavola Road, Tamavua, Suva. They were the joint registered proprietors of that property. In order to secure the loan under a mortgage debt, the property was insured with the Bank under a Mortgage Protection Insurance (MPI) scheme.The MPI policy was issued by Colonial Health Care Fiji Limited, for the insured sum of $71,000. The policy owner was the Bank. Under the MPI scheme, upon the death or permanent disability of any one of the mortgagors, the total loan amount outstanding was to be fully paid by the insurers and the mortgage over the property would be discharged.The premium was paid directly by the Bank in terms of a standing order, and was debited to the accounts of the plaintiff and her husband.
   

The statement of claim proceeds to state that the plaintiff and her husband informed the Bank that they intended to withdraw from the MPI scheme,in future. The Bank was however, not willing to do so, without adequate alternative protection. Meanwhile, on 3rd September, 2000, the plaintiff's husband died. The plaintiff discovered that the Bank had failed to pay the premium, in time. The plaintiff alleges that she suffered loss and damages, as a result of the Bank's negligence in failing to keep the MPI scheme current, at the time of the death of her husband.

The primary facts are undisputed. In its statement of defence, the Bank states it had advised its brokers to cancel the insurance,pursuant to the plaintiff and her husband's written notice to the Bank that they desire to withdraw from the MPI scheme. The defendant denies that it was negligent in failing to keep the insurance policy current and states " the premium, for the year 2000 was paid by the Defendant, but the policy was cancelled on the instructions of the Plaintiff and the deceased".

In her reply to the defence, the plaintiff reiterates that she expected that their joint request to cancel the MPI policy to take effect, in future. The Bank had not accepted her offer to cancel the policy and had requested her to provide further particulars, in order to cancel the insurance. This, she had not complied with.

2. The hearing
   

The plaintiff, in her testimony, stated that she had met Roshni Singh, Loan Officer, of the Bank on 15 August,2000, and expressed her desire to withdraw from the MPI scheme. Roshni Singh had advised her to register her withdrawal in writing and informed her that the Bank will consider her request, after they bring additional security.This is reiterated in the Bank's response of 28 August, 2000,which the plaintiff stated she received, after her husband had died.

Mr Tubuna, Insurance Officer of the Bank testified. He stated that the Bank had many clients who had entered into mortgage protection schemes. The Bank had an agreement with the insurance broker to pay the premiums of their clients in "batches", subsequent to the expiry date of the annual insurance policy. The MPI policy of the plaintiff and her husband were cancelled on 24 August,2000, pursuant to the written request of the plaintiff and her husband and the decision made by Roshni Singh and their Manager Industrial, Ms Leqa.

Mr Tubuna also referred to a document sent by Mohinish Singh of the Bank to the insurance brokers, Marsh Limited to delete the plaintiff and husband from the listing. By letter dated 21 September,2000, Marsh Limited had acknowledged the Bank's written request and confirmed that the policy was cancelled with effect from 30 June, 2000. The premiums for several of the Bank's clients, excluding the plaintiff and her husband for the period 30 June,2000, to 30 June, 2001, were sent to the insurance brokers, Marsh &Mclennan Limited on 19th October,2000.

3. The determination
   

The disputed facts, as recorded at the pre-trial conference, are as follows:

Whether the Defendant kept up with the MPI premium payments to the Plaintiff's insurer, up until the deceased's death?

Whether the Plaintiff and the deceased, instructed the Defendant to cancel the MPI, prior to the deceased's death?

Whether the Defendant is responsible for the loss and damage suffered by the Plaintiff?

The starting point of this dispute is the written request made by the plaintiff and her husband by their letter dated 16th August,2000, to the Bank to withdraw from the MPI scheme, which reads as follows:

" I refer to my conversation(Singh/Khan) of 15/8/00 with regards...

I wish to advise you that we the joint owners of the above property would like to withdraw from the mortgagee protection insurance scheme.Insurance payments have been deducted from the mortgage repayments to the Bank. This has added to the mortgage and we have had to pay additional interest to the Bank.

With the paycuts for the Civil Servants and downturn in business, we feel that the Mortgage Protection Insurance is an additional burden.........

I would like to add that in the event of the demise of one of the property owners, we have other securities such as FNPF and other insurance policies that would cover the cost of the mortgage.

I request that this matter be treated urgently." (emphasis added)

The Bank responded by their letter dated 28 August, 2000, in these terms:

"Your letter dated 16 August, 2000 and our telephone conversation (Nazra/Roshni) of 28/8/2000 refers.

We advise that the Bank is considering your request for excluding Mortgage Protection Insurance and request if you could provide the Bank with your Life Insurance Policy ( for a sum of at least $ 62,000) in lieu of Mortgage Protection Insurance.

We look forward to your co-operation.

KIJI LEQA(MRS)

MANAGER INDUSTRIAL"

(emphasis added)

In my judgment, this document manifests that the Bank was considering the request and had asked for a life insurance policy, in lieu of the MPI. I consider that it is acte clair that there has been no acceptance by the Bank . The Bank's reply constitutes a counter-offer,which was not accepted by the plaintiff.

This conclusion suffices to decide this case. However, I proceed to consider the arguments of counsel for the Bank, Mr Sharma. Mr Sharma, in his closing submissions, has contended that the plaintiff's assertion that she intended that the MPI policy be cancelled from 30th June,2001, to 30th June,2002, is inconsistent with the written request of the plaintiff and her husband, which provides that the plaintiff and her husband had financial difficulties. Akin to this, it was submitted that the plaintiff and her husband had also requested that this matter be treated urgently, in order that they could save the premium for the period 30th June,2000, to 30th June,2001.Reliance was placed on the plaintiff's evidence, that Roshni Singh had informed her,that the premium for that period had not been paid.

I find these contentions irrelevant. The material circumstance is that the written request of the plaintiff and her husband was not accepted by the Bank. The contention that Roshni Singh had informed that the premium for the period in dispute had not been paid, has been taken out of context. In her immediately preceding answer to that statement,the plaintiff unequivocally stated that she understood that the insurance policy was current for the period 30th June,2000, to 30th June,2001.

On the question of urgency, the plaintiff, in cross-examination, stated that she had made request that the matter be treated "urgently", in order that Roshni Singh could process their application prior to her resigning, since she was familiar with the plaintiff's account. Roshni Singh was in fact, no longer employed by the Bank .

The letter dated 16th August,2000, does not set out the period from when the plaintiff intended to withdraw from the MPI scheme. In the ordinary course of things, the MPI premium for the period 30th June,2000, to 30th June,2001, should have been paid at the commencement of this period. It transpired in Mr Tubuna's testimony that the premium was admittedly not paid by the Bank, in terms of a private arrangement it had with the insurance brokers.

Mr Sharma has also founded an argument on an endorsement on an internal report of forwarded by Roshni Singh to the management. This was produced by Mr Tubuna. Mr Sharma contended that irrespective of whether the plaintiff and her husband provided a life insurance policy to replace the MPI policy, Roshni Singh had recommended the exclusion of the MPI policy, and this was endorsed on 23rd August,2000, by the Manager, Industrial of the Bank. The Bank had then, advised the insurance brokers to cancel the MPI scheme on 24th August,2000.The answer to this submission firstly, is that Roshni Singh's recommendation was made on an internal report to the management dated 17th August,2012. Secondly, it was the following recommendation of Roshni Singh that was endorsed on that report:

1. We accede to client's request and exclude MPC from our securities.
   
2. Advise client of (a) above via security variation letter.(emphasis added).
   

The subsequent endorsements on the report under review begged the question whether the MPI can be replaced with a deed of defeasance, and required that the matter be discussed with the client. Mr Tubuna explained that a deed of defeasance was a life insurance policy .Roshni Singh, in her reply to this minute, states that she had spoken to the client(the plaintiff) regarding this matter. The client had advised her that she would revert to the Bank, after discussing the matter with her husband. Roshni Singh had concluded her minute to the Manager, Industrial by stating "Follow up with client on 30/08/00"(emphasis added). The final endorsement demonstrates the fallacy of the argument propounded.

The theme that runs through the internal report is that the MPI could be excluded,provided alternative security was given. This is consistent with the Manager, Industrial's response to the written request of the plaintiff and her husband. Accordingly, I fail to see how the Bank can possibly advance the contention, that it had acted in accordance with the client's letter dated 16th August,2000, and requested the insurance brokers to cancel the policy of the plaintiff and her husband, as it did, by its letter dated 24th August, 2000.

The internal report dated 8 November, 2000, made to the management consequent to the plaintiff's letter dated 1 November,2000, seeking redress, is also illuminating. This report comments at the outset with the words in "the absence of Roshni the following could be deduced". It is noted that there was no record of the conversation between the plaintiff and Roshni Singh on 15th August,2000.The report then begs the following question:

"why would Roshni request Mohinish not to renew when she indicated earlier in the schedule to renew? My view of this is only after Khan's request of 15/8 and follow up letter of 16/8 requesting not to renew..."

It would appear that the Bank had no record of Roshin Singh's decision to cancel the insurance policy of the plaintiff and her husband. In order to justify its action, the Bank, had to figure out how Roshni Singh reached this decision This, in my view,is most unsatisfactory.

In terms of the MPI scheme, upon the death of the plaintiff's husband, the total loan amount outstanding was admittedly to be fully paid by the insurers. The MPI scheme was negligently cancelled by the Bank. Accordingly, in my judgment, the plaintiff is entitled to claim the loss and damages she suffered, as a result of the Bank's negligence. The plaintiff stated the debt due to the Bank, at the time she and her husband made the joint request to the Bank to withdraw from the MPI scheme, was $62,612.37. After the cancellation of the MPI by the Bank, the plaintiff states she had paid a sum of $132,247.47, including interest to the Bank. The Bank did not dispute that the plaintiff paid this sum to discharge the mortgage. There will therefore be judgment for the plaintiff against the Bank for the sum owed under the mortgage debt.

4. Orders
   

The plaintiff is entitled to the following reliefs:

1. a declaration that the defendant Bank has been negligent in not keeping the MPI policy current.
   
2. judgment against the defendant Bank for the sum owed under the mortgage debt.
   

100. the defendant Bank is not entitled to interest, since the plaintiff's husband's death on 3rd September,2000,
     

4. a sum of $ 3000 is payable by the defendant Bank to the plaintiff as costs, summarily assessed.
   

A.L.B.Brito- Mutunayagam
Judge

10 August, 2012