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ABBCO Builders Ltd v New India Assurance Company Ltd [2016] FJHC 204; HBC327.2009 (29 March 2016)

THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

CIVIL APPEAL NO.: HBC 327 of 2009

BETWEEN:
ABBCO BUILDERS LIMITED
Plaintiff
AND:
NEW INDIA ASSURANCE COMPANY LIMITED
Defendant

COUNSEL: Mr. B.C. Patel & Mr. C.B. Young for the Plaintiff
Mr. F. Haniff for the Defendant

Date of Hearing: 01st February, 2016
Date of Judgment: 29th March, 2016

JUDGMENT

[1] The plaintiff instituted these proceedings by writ of summons claiming $128,635 (VEP), value added tax on the said sum and interest at the rate of 10% per annum in terms of Insurance Law Reform (Interest Rates) Regulations 2004 on the ground that the defendant wrongfully repudiated its claim made on the contract of insurance entered into between them.

[2] The defendant repudiated the claim of the plaintiff under Section 1 Memo 8 of the contract of insurance bearing No. 922626/4415/100156.

[3] The first paragraph of Section 1 is as follows;

The Company hereby agrees with the insured (subject to the exclusions and conditions contained herein or endorsed hereon) that if, at any time during the period of insurance stated in the said schedule, or during any further period of extension thereof the property (except packing materials of any kind) or any part thereof described in the said schedule be lost, damaged or destroyed by any cause, other than those specifically excluded hereunder, in a manner necessitating replacement or repair the Company will pay or make good all such loss or damage up to an amount not exceeding in respect of each of the items specified in the Schedule the sum set opposite thereto and not exceeding in the whole total sum insured here by.(Emphasis is mine).

Memo 8 – MAJOR PERILS/AOG Perils –

The Major peril / Acts of God claims shall mean claims arising out of –
Earthquake – Fire and shock
Landslide/Rockslide/subsidence
Flood/inundation
Storm/Tempest/Hurricane/Typhoon/Cyclone/Lightning or other atmospheric disturbances
Collapse
Water damage for 'wet' risks i.e. contract involving works in rivers, canals, lakes or sea.
(Emphasis is added).

[4] Under the Policy Details (Page 5 of the plaintiff's bundle of documents) it is stated as follows;

This insurance does not cover the risk of Flood/Inundation and burglary.

[5] The position of the plaintiff is that the damage to the retaining wall in question was caused by the heavy rain and run-off surface water whereas the defendant's position is that it was due to flood. It is thus clear the main issue for determination is whether the damage was caused by flood or due to the run-off surface water hitting hard on the retaining wall as claimed by the plaintiff.

[6] Before determining the cause of the damage the Court must ascertain the manner in which the damage was caused to the retaining wall in question and for that I will now consider the evidence adduced by the parties. It is undisputed that the burden of proving that the damage to the retaining wall was caused by flood is on the defendant.

[7] On behalf of the plaintiff the Managing Director of the company and two other witnesses testified and for the defendant the Project Manager for Engineered Building Systems Limited, who was given the contract for precast components by the plaintiff, testified.

[8] Mr. Vijay Krishnan, the Project Engineer testified that the retaining wall in question was constructed along the Mitchell Road and part of it collapsed. At the time he went to the site the rain had ceased and the damage to the retaining wall had already been done. He is not an eye witness to the incident but stated that it was obvious that the water had come from Upper Mitchell Road. It is his evidence that there was no room behind the retaining wall for the water to collect. According to this witness the distance between the road and the retaining wall in question was about 1 to 1½ meters.

[9] Mr. Chandrika Prasad, the foreman of the building project and the only witness who could speak as to what transpired at the site on the day of the incident which led to the institution of these proceedings. According to him on that day at about 2.00 p.m. the water came along the Upper Mitchell Road and started hitting the retaining wall. He testified further that the rain was so heavy and that was enough even to sweep away a small child. It was his position that the distance between the road and the retaining wall was only about 1½ feet.

[10] Mr. Lekh Ram Narayan, the Managing Director of the plaintiff company was not an eye witness to the incident. According to his evidence he had made the claim to the defendant by letter dated 08th April 2009 (P3) and the defendant by its letter dated 07th July 2009 repudiated the claim.

The claim of the plaintiff according to the letter "P3" is as follows;
Remove damaged panels from site $11,820.00
Replacing precast panels by Engineered Building Systems $31,900.00
Water proofing and stitching done by Concrete Solutions $39,095.00
Works done by Abbco $18,790.00
P&G –Preliminaries and Generals $15,300.00
Profit $11,730.00

[11] In cross-examination when the witness was referred to the document "P3" and questioned him whether he has any documents or other evidence to prove that the above payments have in fact been made, his response was that he had no documents to substantiate the claim of $11,820.00, $18,790.00 and $31,900.00. He also stated that he was not aware whether he had a right to claim for "Preliminaries and Generals".

[12] Mr. Bevin Severinson, the Project Manager for Engineered Building Systems Limited testified that he went to the site after rain ceased and the same day after he left the site the retaining wall had collapsed. It is his evidence that the distance between the road and the retaining wall would have been two to three meters and the water that came along the road and from the adjoining land had gone into the trench between the road and the retaining wall and that he had two options either to pump the water out from the trench or to remove precast panels and he testified further that the following Monday they had to hire a pump to remove the water.

[13] On behalf of the defendant two reports regarding the weather prevailed on the day of the incident were tendered in evidence marked as "D1" and "D2". These documents show that the area had experienced very heavy rain on the relevant day and this fact has not been disputed by the plaintiff.

[14] There is contradictory evidence adduced by the parties as to the distance between the retaining wall in question and the road. It is not a disputed fact that immediately before the incident the precast panels were being stitched by the workers and they worked behind the retaining wall that is, in the trench between the wall and the road. Therefore, the trench between the road and the wall should be something that is sufficient for the workers to remain in and work. One does not have to have an expert opinion to ascertain whether a person could work within a space of 1 to 1½ feet. Such a space is hardly sufficient for a person even to move his arms and legs leave alone stitching precast panels. According to the other witness for the plaintiff, Vijay Krishnan, the gap was about 1 to 1½ meters that is more than three times the distance stated by witness Chandrika Prasad. The plaintiff's own witnesses could not agree as to the distance between the wall and the road. The learned counsel for the plaintiff submitted that Mr. Bevin Severinson retracted in cross examination when he was suggested that the gap between the road and the retaining wall at present is a footpath of 1.2 meters and a small open V-drain. The witness did not deny this position of the counsel. If this position is accepted by the Court, the gap between the wall and the road would have been something more than 1.2 meters.

[15] Having considered the evidence adduced by both parties I will now move on to consider the main issue between the parties, which is the meaning of the word "flood" in the context of the contract of insurance.

[16] In interpreting the terms of the contract of insurance the Court is primarily governed by the principles laid down in section 29 of the Insurance Law Reform Act 1996 which provides as follows;

Notwithstanding any law or agreement to the contrary, the following rules of construction shall be observed in the interpretation of any proposal for insurance or any policy of insurance or endorsement on a policy of insurance:

the intention of the parties, ascertained from the face of the documents, documents incorporated therewith and surrounding circumstances, shall prevail;
the whole of a document shall be looked at and not a particular clause;
written words shall ordinarily be given more effect than printed words;
wherever possible, the grammatical construction shall be adopted, but the intention of the parties shall be of paramount consideration;
words shall be construed in their plain, ordinary, popular, commonsense and natural meaning except that terms of art or technical words shall be understood in their strict, technical and proper sense unless the context controls or alters the meaning;
the meaning of a word is to be ascertained with reference to its context and may be restricted or modified thereby, and where, from the context, it appears that the parties intended to use the word in a special and peculiar sense, and not in a meaning which it might otherwise bear, the word shall be construed in accordance with their intention;
subject to the precise terms, subject matter and context of a clause, where specifications of particular things belonging to the same genus precede a word of general signification, the latter word of general signification, shall be confined in its meaning to things belonging to the same genus and shall not include things belonging to a different genus;
where a word of general signification is followed by words of limitation or definition, which introduce words of narrower signification, the first word shall not be taken in its full sense but shall be construed as limited by and applying only to the particulars specified;
words shall be construed to mean what they say, unless there is some strong ground for placing a different construction on the words from what they naturally import;
words shall be construed liberally so as to give effect to the real intention of the parties and the document shall not be so construed as to defeat the object of the transaction or as to render it illusory;
in any case of ambiguity, where words are capable of more than one construction, the reasonable construction shall be taken to represent the intention of the parties;
the language of a document shall not be strained in favour of or against any party but if there is any ambiguity, the ambiguity shall be resolved in favour of the person insured;
every effort shall be made to reconcile inconsistencies, but where there is an inconsistency between the wording of a policy and that in the proposal or any earlier document, the policy shall be regarded as expressing the true intention of the parties in the absence of sufficient evidence to the contrary;
an express term shall override any implied term inconsistent with it.

[17] In the case of Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & 2 Ors [2005] NSWCA 66 it was held:

As a matter of principle, the policy is to be construed in accordance with the principles which apply to the interpretation of contractual documents: Australian Casualty Co Ltd v Federico [1986] HCA 32; (1986) 160 CLR 513 at 520. The primary duty of the court was to endeavour to discover the intention of the parties from the words of the policy: Australian Broadcasting Commission v Australian Performing rights Association [1973] HCA 36; (1973) 129 CLR 99 at 109. Its interpretation requires attention to the language used by the parties, the commercial circumstances which the documents addressed and the objects which it was intended to secure: McCann v Switzerland Insurance Australia Limited [2000] HCA 65.
Before leaving the construction of the policy, I should note that, in my view, the error into which the primary judge fell was to rely upon the dictionary definition of "directly" at the expense of looking the word in context. The linguistic approach inherent in the use of dictionaries as an aid in contractual construction has been criticised as tending to distract from the exercise of discerning the intention of the parties from an examination of the context in which the words under consideration appear. In Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60 at 78 Isaacs J said dictionaries are not substitute for judicial determination of the interpretation and then construction of statutes and other documents.

[18] In the case of Investors Compensation Scheme Limited v West Bromwich Building Society (1988) All ER 98 it was held:

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its word. The meaning of the words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.

[19] In this regard both parties relied on the decision in the case of Young v Sun Alliance and London Insurance Ltd [1976] 3 All ER 561. In that case the plaintiff occupied a house built on what had been meadow land. In 1972 ingress of water caused damage to a lavatory on the ground floor of the house. In 1973 more serious damage occurred after heavy rain. Towards the end of the year further water entered and accumulated until it was standing three inches deep on the lavatory floor. Under clause 8 of the Policy, the protection afforded to the plaintiff included loss, destruction or damage from storm, tempest or flood.

Show LJ at page 563:

But on further consideration it seems apparent that what the policy was intending to cover, whatever may be the colloquial use of the word 'flood' in common parlance, were three forms of natural phenomena which were related not only by the fact that they were natural, but also that they were unusual manifestations of those phenomena: that is to say, 'storm' meant rain accompanied by strong wind; 'tempest' denoted an even more violent storm; and the 'flood' was not something which came about by seepage or by trickling or dropping from natural source, but involved 'a large movement, an irruption of water', as one of the Oxford Dictionary puts it. .....

It is because the word flood occurs in the context it does, that I have come to the conclusion that one must go back to first impression, namely that it is used there in the limited rather than the wider sense; that it means something which is a natural phenomenon which has some element of violence, suddenness or largeness about it.

[20] Computer & Systems Engineering v John Lelliott (Ilford) and Another[1990] BLR 54 is a case where the plaintiff employed the 1st defendant and the 1st defendant subcontracted the 2nd defendant. On 11 December 1983, one of the 2nd defendant's employees let slip a purlin which fell and sheared off part of the existing fire protection system. In consequence 1,600 gallons of water were discharged, damaging plaintiff's property. It was held:

In this context the words, "storm, tempest or flood", appearing in a policy of insurance were construed by this court in Young v Sun Allianceand London Insurance Ltd [1976] All ER 561. The court there held that the juxtaposition of the three words, "Storm, Tempest or Flood" was significant and even though in colloquial parlance "flooding" or "Flooded" might be used to described any substantial ingress of water into a building, in this context "flood" refers to an inundation emanating from a natural phenomenon and which has some element of violence, suddenness or largeness about it.
In the context of this contract "flood", in my view, imports the invasion of the property, which is at the employer's risk, by a large volume of water caused by a rapid accumulation or sudden release of water from an external source, usually but not necessarily confined to the result of a natural phenomenon such as a storm, tempest or downpour. I conclude that the event caused by Mr. Chase was not in flood because neither in extent or origin was it within that meaning.

[21] In the case of The Board of Trustees of the Tate Gallery v Duffy Construction Ltd (2007) EWHC 361 after considering four previous decisions dealing with the definition of "flood" it was held:

I have carefully considered the whole of the judgments in those four cases, not merely the passages quoted above. The three Court of Appeal decisions are binding on this court. The decision of the Inner House of the Court of Sessions, although not binding, is of persuasive authority. Having reviewed those authorities, I derive the following four propositions:

• Earlier judicial decisions on the meaning of the word such as flood" and "burst" constitutes valuable and helpful guidance. Nevertheless, this guidance must be read having regard to (a) the context in which those words appeared and (b) the facts giving rise to dispute about their meaning in the earlier cases. The judgments in the four cases cited do not lay down rules of law as to the meaning of the words "flood" and "burst" in every insurance policy or construction contract.

In determining whether the unwelcome arrival of water upon property constitutes a flood, it is relevant to consider (a) whether the source of the water natural; (b) whether the source of the water was external or internal; (c) the quantity of water; (d) the manner of its arrival; (e) the area and character of the property upon which the water was deposited; (f) whether the arrival of water was an abnormal event. Ultimately, it is a question of degree whether any given accumulation of water constitutes a flood.
In determining whether a pipe or apparatus "burst", it is relevant to consider (a) whether the incident occurred because of internal pressure rather that external intervention; (b) whether the integrity of the pipe or apparatus was broken; (c) whether the incident was sudden and violent.
In construing terms such as "Flood" or "burst", in an insurance policy or a related contract, the court must endeavour to do so in a manner which gives separate content to each term or phrase used by the draftsman.

[22] In Kass v State Farm Fire & Casualty Co (1989) Can LII 3382 the Court made the following observations on the interpretation of the words "flood" and "surface waters", following the American decision in the case of Poole v. Sun underwriters Insurance Co. of New York (1973), 274N.W. Rep. 658 ( Supreme Court of South Dakota):

The court then considered the terms "flood" and "surface waters". In doing so, the court examined and came to the conclusion that:

"Surface waters are those which are produced by rainfall, melting snow or springs ...... such waters are not divested of their character as surface waters by reason of their flowing from the land on which they first make their appearance onto lower land in obedience of the laws of gravity."
The court later quoted at p. 660 as follows:
"To us it is quite clear that the heavy rain which fell, after it reached the ground, was no longer rain, but became water and falls within that classification of waters which is known as surface water, ........

[23] In this case it is a fact admitted by the parties that the rain fall in the area in question on the day of the incident which led to the institution of these proceedings was unusually heavy. It is also a fact admitted by the parties that the rain water that came along the Upper Mitchell Road fell into the construction site which was situated at a lower elevation. From the evidence adduced by the parties it is clear that a very high volume of water had entered the construction site which resulted in the collapse of the retaining wall.

[24] At this stage the Court must determine whether the collapse of the wall was as a result of the water came along the road directly hitting the wall creating a pressure on it or due to the pressure created by the water that was collected in the trench between the wall and the road. As I have stated earlier in this judgment the gap between the road and the retaining wall could not have been 1½ feet as testified by witness Chandrika Prasad. Taking into consideration the evidence adduced by the parties on the breadth of the trench the court concludes that it would have been little over 1.2 meters.

[25] According to Mr. Bevin Severinson, the witness for the defendant, water that came along and also across the road got collected at the construction site and they had to hire pump to remove the water. He testified that the props fixed to the wall to prevent it from collapsing were also under water and could not be seen. Except the evidence that the water also came from across the road the plaintiff did not challenge the rest of the evidence of this witness. On a careful consideration of this evidence the court is of the view that the construction site where the retaining wall in question was, had gone under water.

[26] As correctly submitted by the learned counsel for the plaintiff there is no expert evidence as to the manner in which the retaining wall in question collapsed and therefore the court has to make a finding on the available evidence. The only eye witness to the incident was Mr. Chandrika Prasad but even his evidence was not conclusive. He could only say that the water came along the road hit the wall. This is not sufficient for the Court to conclude that that was the reason for the collapse of the wall. It is also pertinent to note that his evidence that the distance between the wall and the road was only 1½ feet cannot be accepted as correct. The Court has already concluded that this distance should at least have been 1.2 meters. The question then arises whether the flow of rain water was so strong to fly across the distance of 1.2 meters and hit the wall creating that amount of pressure making it collapse. The water may have hit the wall but without evidence that it created such a pressure on the wall the court is unable to arrive at the conclusion that it was the reason for the damage.

[27] There is no doubt that the pressure was created by the rain water and run-off surface water. However, as I stated in the previous paragraph it was impossible for the Court to conclude from the evidence available, especially from the evidence of the witnesses for the plaintiff, that the run-off water directly hit the wall creating a pressure on it. The only possibility is that the pressure was created on the wall by the water that was collected in the trench behind it. The learned counsel for the plaintiff submitted that it is a fair inference to draw that the wall would not have fallen merely by the trench filling up with water. He also submitted that this was a construction site at a slope, the rain was not uncommon in Suva and run off surface water would fill up any trench and also that the wall was built for those conditions. I am not inclined to this argument of the learned counsel for the reason that at the time the wall collapsed the stitching of the precast panels had not been completed. Therefore, this wall cannot be expected to have the same strength of a wall of which the construction is completed.

[28] I will now consider whether the accumulation of rain or surface water in the space between the retaining wall and the road constitutes flood in the context of the contract of insurance, taking into consideration the various interpretations given by the court in the decisions cited above and also with the assistance of the dictionaries. The Cambridge English Dictionary interprets the word "flood" as to cause to fill or become covered with water or a situation in which an area is covered with water, especially from rain.

[29] The Oxford Dictionary interprets "flood" as an overflow of a large amount of water beyond its normal limits, specially especially over what normally a dry land.

[30] According to McMillan Dictionary "flood" is a situation in which water from a river or from rain covered large areas of land.

[31] In this case the source of water was natural and external. According to the witnesses of both the plaintiff and the defendant a large quantity of water had accumulated on both sides of the retaining wall in question but the area that went under water was comparatively small and there is no evidence that the water accumulated outside the trench contributed in any manner to the collapse of the retaining wall. Therefore, the accumulation of rain water in the trench between the road and the retaining wall which caused the retaining wall to collapse does not in my view come within the meaning of "flood".

[32] The learned counsel for the plaintiff submitted that since there is an ambiguity in the contract of insurance the Contra Proferentem Rule should apply. The Contra Proferentem Rule is a rule in contract law which states that any clause considered to be ambiguous should be interpreted against the interests of the party that requested that the clause be included.

[33] I do not see any ambiguity in the relevant clause in the contract of insurance. What the contract of insurance says is that the insurance policy does not cover the risk of Flood/Inundation and burglary. This clause or condition is very clear and there is no difficulty in understanding what it means. The parties to a contract cannot be expected to include in the contract document an interpretation for each and every word used therein. Therefore, the Contra Proferentem Rule has no application to this contract of insurance.

[34] The learned counsel for the defendant submitted that the plaintiff failed to prove the amount claimed as damages. The learned counsel for the plaintiff submitted that the plaintiff admits that the contract of insurance does not cover business interruption or loss of profits.

[35] It is the submission of learned counsel for the plaintiff that Mr. Narayan testified that he lodged with the Nadi Manager of the defendant company on 08th April 2009 and receipt of the claim has been acknowledged by the letter dated 07th July 2009 rejecting the claim and that with the claim the plaintiff enclosed two quotations from Concrete Solutions and Engineered Building Systems. The quotations alone do not establish the quantum of damages claimed by the plaintiff and mere acknowledgement of a claim does not mean that the defendant accepted the amount of the damage contained in it and on the other hand since the defendant repudiated the entire claim it would not have any reason to examine the amounts claimed by the plaintiff under each heading.

[36] The learned counsel while admitting that the plaintiff did not produce any document to show that the amounts claimed had in fact been spent submitted that for the following reasons the defendant is deemed to have accepted the quantum of claim;

Paragraph 5(d) of the policy states:

In the event of any occurrence which might give rise to a claim under this Policy, the insured shall

• (d) Furnish all such information and documentary evidence as the company may require.
• (b) The defendant had three months between the lodgement of the claim on 08th April 2009 and the rejection on 07th July 2009 to require documentary proof of any item of the claim but it did not do so.
• (c) The defendant had appointed Loss Adjuster, McLarens Young International, to act for them during this period and it was their job to verify the claim. They too did not raise a query on the claim lodged and must be presumed that their independent inquiries had confirmed the accuracy of the claim.

[37] None of the grounds set out above have the effect of discharging the plaintiff from its burden to prove the quantum of damages claimed. The requirement to furnish documentary evidence as required by clause 5(d) of the insurance policy does not necessarily mean that the insurer is liable to pay the amounts contained therein. This contention is supported, as conceded by the learned counsel, by the fact that the defendant had appointed a Loss Adjuster to estimate the actual loss. It is also important to note that since the entire claim of the plaintiff was repudiated the defendant had no reason to call for documentary proof of the claim.

[38] The learned counsel for the plaintiff also submitted that the Court has uncontradicted sworn testimony of Mr. Narayan that the loss was suffered and that the cost of repairs necessary to restore the property was incurred. In the absence of any evidence by the defendant casting doubt on the amounts claimed, Mr. Narayan's evidence is sufficient proof of the claim.

[39] In support of this contention the learned counsel cited the decision in Narendra Kumar v Sairusi Drawe (1990) 36 FLR 90 at page 95 where it was held:

"Notwithstanding that not a single receipt has been produced in evidence I am satisfied from the plaintiff's evidence that he paid those amounts."

[40] It is correct to say that there is no absolute requirement in law that evidence of a witness should be corroborated by documentary evidence in every instance. It is a question of reliability and trustworthiness of the witness. In the instant case, at the trial the learned counsel for the defendant questioned the witness for the plaintiff as to whether he had any documentary proof of the expenses incurred but his answer was in the negative. The witness also stated in cross examination that he had no receipts to show that he paid the value added tax. As submitted by the learned counsel for the defendant the documentary proof of the payments made is necessary for the defendant's case for the reason that the work of the retaining wall in question had not been completed at the time it collapsed. The workers were in the process of stitching the precast panels. It is also pertinent to note that Mr. Narayan has failed to give a detail account of the expenses incurred by the plaintiff in his oral testimony. It is therefore, incorrect for the plaintiff to say that its witness's evidence on the question of quantum of damages went unchallenged and uncontradicted. I therefore, hold that the plaintiff has filed to prove the quantum of damages claimed and his claim for damages is liable to be dismissed.

[41] For the reasons aforementioned I make the following orders.

ORDERS.

The defendant was wrong in repudiating the claim of the plaintiff on the ground that the damage was caused by flood.

The claim of the plaintiff for damages is dismissed since it has failed to prove the quantum of damages claimed.

Lyone Seneviratne
JUDGE

29th March 2016.