IN THE HIGH COURT OF FIJI
(AT SUVA)
CIVIL JURISDICTION

ACTION NO. 200 OF 1993

BETWEEN:

CHIMAN LAL JAMNADAS Solicitor of
Adelaide, South Australia, Australia
as Trustee of the Estate of JAMNADAS Kalidas, Deceased
Plaintiff

AND

DOMINION INSURANCE LIMITED
a limited liability Company having its registered
office at Level 2, Civic House, Victoria Parade, Suva
Defendant

N.S. Arjun for the Plaintiff
R.A. Smith for the Defendant

Dates of Hearing: 9th, 10th May 1994, 31st July, 1st, 3rd August 1995, 30th May 1996
Date of Judgment: 31st July 1996

JUDGMENT

This is a dispute about the amount payable to the Plaintiff under a Fire Insurance Policy issued originally by the Defendant on the 13th of January 1989 for the insured sum of $125,000.00 and renewed on the 12th of January 1991 at a higher premium for the insured sum of $150,000.00 on a property owned by the Plaintiff which was completely gutted by fire on 24th October 1992. The facts are not in dispute and the only question which the Court has to decide is the amount to which the Plaintiff is entitled under his policy - whether it is the sum of $60,000.00 which the Defendant after numerous delays paid to the Plaintiff through its solicitors on 31st December 1993 or as claimed by the Plaintiff the amount of $150,000.00 being the sum insured under the renewed policy or any other sum. The premises insured were at 41 Vitogo Parade, Lautoka and consisted of two shops and flats behind them which were built in approximately 1947.

The parties called evidence, the Plaintiff and Mr. Hamendra Jeewan Lodhia a Structural Engineer and former City Engineer for Lautoka and Robert John Pole a Civil Engineer of Samabula and Keni Dakuidreketi a Valuer of Suva. Numerous exhibits were tendered by consent and I have received written and oral submissions.

I now pass to consideration of the relevant evidence beginning with the Plaintiff who said that on the 12th of January 1989 he signed a Proposal for Fire Insurance of the premises in Lautoka of which he is the Trustee. With the Proposal he submitted a Certificate from the Fiji Institution of Engineers signed by Mr. Hamendra Lodhia of Hamen Lodhia Consultants Limited. This Certificate described the premises as being a single storey reinforced masonry structure with timber and iron roof containing two shops and two flats at the rear. The Certificate also said that the roof structure of the building had been upgraded in December 1985 when the truss members had been strengthened and new roof cladding complete with cyclonic fasteners had been provided.

In return the Plaintiff was issued with a Fire Insurance Policy for $125,000 from 12th January 1989 to 12th January 1990 for total premium of $912.50. I am satisfied that this policy although for an increased sum insured for $150,000.00, was in force at the time the premises were destroyed on 24th October 1992. The policy is typical of many such policies, the most important part for present purposes being the first in which the Defendant agreed on payment of the first premium that if the property insured or any part of it were to be destroyed by fire, lightning or explosion the Defendant would pay the Insured the value of the property at the time of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof. As will be seen later the amount to which the Plaintiff is entitled depends on the construction the Court places on the phrase "the value of the property at the time of its destruction".

As at 29th October 1990 Primetime Properties Limited, a Company owned by Mr. Jamnadas had mortgaged two properties in Suva, one known as Sabrina Building and the other at MacGregor Road to the National Bank of Fiji. On the 1st of November 1990 the Bank wrote to Primetime Properties Limited in a letter tendered in evidence exhibit P.4 stating as far as relevant the following: The Bank agreed to the partial discharge of the Mortgagors and all insurance over them against a payment of $1,250,000.00. It is also advised that the limits on the accounts of Grahame & Co solicitors would be cancelled and those accounts were to be operated on a credit basis.

Approval was given to Primetime Properties Limited for a further overdraft facility of $75,000.00 on a fully fluctuating basis which would be subject to annual reviews. All conditions pertaining to previous approvals would remain and the facility would be secured by:

(a)	Mortgage over the commercial property at Lautoka.

(b)	Unlimited guarantee of Directors.

(c)	A registered Debenture over the company's assets and undertakings.

(d)	An insurance cover over the Lautoka property for at least $150,000.00 with NBF's interest noted.

Shortly it will be seen the importance which both sides attach to sub-paragraph (d).

On receipt of that letter the Plaintiff spoke to one Sayed Aiyaz Khaiyum the Defendant's agent who referred the Bank's letter to the Defendant and said he was later informed by Mr. Khaiyum that provided he paid an increased premium the Defendant would increase its cover to $150,000.00. The Plaintiff accepted that offer and on 4th January 1991 paid an increased premium of $1,095.00 which included stamp duty. The Plaintiff did not fill in any new Proposal Form. A Renewal Certificate was issued extending the insurance on the property to the 12th of January 1992 and a further Renewal Certificate was issued by the Defendant on the 14th of January 1992 extending the cover until the 12th of January 1993.

On 17th March 1992 the Defendant wrote to the National Bank of Fiji confirming renewal of the insurance cover until the 12th of January 1993 and enclosed a copy of the Renewal Certificate as requested by the Bank.

The Plaintiff stated that during his practice as a solicitor in Fiji he looked after a large number of properties in the course of the administration of various estates. His firm administered large estates in Suva and properties all over Fiji including the Bayly Trust, the Barker Estate, the McGowan Estate and other large companies. It also acted for the Suva City Council for a number of years.

Mr. Jamnadas said that the Bayly Estate lent money on properties all over Fiji. Before the money was lent they ordinarily had valuations made but in Suva inspected the properties themselves. He said with his years of commercial experience (the firm dealt mostly with commercial and conveyancing matters) he was very familiar with the various transactions in which his firm was acting and had a very good idea of the values of land and buildings.

He said that when he renewed the policy for $150,000.00 he did not think that sum was an over-valuation of the building. So in 1990 when the National Bank of Fiji wanted a minimum cover of $150,000.00 Mr. Jamnadas considered that to be the market value because with his experience he knew building costs had escalated substantially because of the devaluation of the Fiji dollar and the increased costs of building materials. He said a number of properties in Suva rose substantially in value.

On the 3rd of September 1992 a fire in the insured premises damaged the rear of the building and he made a claim for the cost and repairs which had been effected by his tenant Mr. Hussain of Star Motor Traders, Lautoka. That claim was paid by the Defendant reimbursing the Plaintiff who had earlier paid Mr. Hussain. Then the second fire occurred and Mr. Jamnadas made a claim for $150,000.00 on the 2nd of November 1992. This was in the form of a statutory declaration. On a form provided by the Defendant entitled "Commercial Loss Notice" Mr. Jamnadas declared that the particulars appearing in the Schedule on the back of the Notice were true and represented a faithful account of the actual loss and damage sustained by him.

Among other things the Schedule contained columns headed "Original Value", "Value at time of Loss - allowing for reasonable Depreciation", "Value of Salvage (if any) and Amount of loss of Damage Claimed". None of these columns was completed by the Plaintiff but at the end of the Schedule under the heading "Amount of Loss Claimed" the Plaintiff typed $150,000.00.

On 5th November 1992 Mr. Jamnadas wrote to the Bank inter alia reminding it that the insurance cover on the building had been increased to $150,000.00 from 12th January 1991.

On the 9th of November 1992 Mr. Jamnadas had a discussion in the Suva Travelodge with Mr. Gary S. Callaghan the Managing Director of the Defendant which was followed by a letter of the same date by the Defendant to Mr. Jamnadas informing him that the Defendant had appointed the firm of Toplis & Harding International Adjusters to adjust the Plaintiff's claim on behalf of the Defendant.

Paragraph 2 of the letter stated that Toplis & Harding had appointed Rawlinson Jenkins, Quantity Surveyors to advise the Defendant on the estimated cost of repairs, the value of any betterment which might result and the existing (pre-fire) indemnity value of the building.

The third paragraph of the letter stated that the Defendant had asked Toplis & Harding to make every effort to finalise the claim that week and make an offer of full settlement to the Plaintiff. In making that offer they were to provide the Plaintiff with details of their calculations and the basis of their offer.

The letter concluded by saying (in the event unduly optimistically) that the Defendant had no reason to think that the policy would not respond to the Plaintiff's claim.

The Plaintiff received a letter from Toplis & Harding requiring two quotations for repairs to the building to enable them to arrive at a settlement favourably. Later Mr. Jamnadas said a Mr. Brown of Toplis & Harding rang him in Suva and told him that the property was repairable which amazed the Plaintiff because he had seen the property after the fire and believed that it would cost more than $150,000.00 to repair and re-instate. He remarked on this in a letter which he wrote to the Defendant on 13th November 1992 in which he agreed to provide two quotations and for this purpose had engaged the service of a consulting structural engineer to provide the necessary documentation. On the 17th of November 1992 a company called Pacific Risk Consulting Engineers Ltd. wrote to Toplis & Harding (South Pacific) Ltd. which had instructed them, stating that Pacific Risk had inspected the premises in Vitogo Parade and described the damage which had been caused. They said that they had been unable to have the walls washed and carry out a full visual examination and therefore had concentrated on areas where the damage appeared to be the greatest. When giving evidence later Mr. Hamendra Lodhia commented on this remark and that for the purpose of his inspection he had been able to have the walls washed down.

The letter of the 17th of November continued that areas of blockwork and reinforced concrete which had probably some permanent strength reduction should be broken out and replaced as a minimum.

Mr. Jamnadas said that he concluded from that letter that the Defendant was going to re-instate the building.

On the 19th of November 1992 Rawlinson Jenkins Ltd. reported to Toplis & Harding on their inspection of the property. They said that based on their observation and information provided to them by Pacific Risk Consulting Engineers Ltd. they assessed the replacement, indemnity and repair costs as follows:

(1)	Estimated Replacement Valuation	$148,845.00

(2)	Estimated Indemnity Valuation	$ 60,000.00

(3)	Estimated Repair Cost		   93,546.00 (details given)

which excluded such items as furniture and loose fittings, stock, appliances, professional fees and charges and VAT allowance.

It should be mentioned here that all the documents to which I have just referred and those to which I will subsequently refer were tendered by the Plaintiff without objection from the Defendant.

On the 4th of December 1992 the Plaintiff received a letter from Toplis & Harding offering him $60,000.00 as the indemnity value of the property.

They also said that they were awaiting a second valuation which they had requested South Pacific Rolle Evaluations to provide.

In response to this letter Mr. Jamnadas offered to accept the sum of $60,000.00 without prejudice and asked for particulars of how Rawlinson Jenkins Ltd. had assessed the replacement valuation of $148,845.00 and estimated indemnity valuation of $60,000.00.

On 8th December 1992 Toplis & Harding forwarded Mr. Jamnadas a release for the sum of $60,000.00 which he was asked to sign in full and final settlement of all claims and costs arising out of the fire.

On 12th December 1992 Mr. Jamnadas had written to the Defendant in which among other things he claimed that the Defendant had accepted the valuation of the property of $150,000.00 by the National Bank of Fiji and increased the insurance cover of $150,000.00.

This drew a response from the Defendant through Toplis & Harding who said that the Defendant had never accepted any valuation in respect of the property but had only agreed to provide a policy of indemnity with the sum insured limited to $150,000.00. They could not obtain detailed calculations of Rawlinson's valuations but they had another professional valuation which was less than the Rawlinson.

On the 3rd of February 1993 after the Plaintiff's solicitors had been consulted Toplis & Harding wrote to the Plaintiff's solicitors stating that the Defendant relied on the insured to "give a reasonably accurate valuation of any property insured" but that there was no onus on Dominion Insurance Company to verify this or to have a valuation made. They said the sum of $150,000.00 represented the limit of indemnity under the terms of the policy only and did not indicate an acceptance of value. The letter then continued, "as we note that there is a considerable salvage value to the property and your client refuses to accept our offer in full settlement, then our principals wish to advise that this offer is now withdrawn."

On the 12th of February 1993 Mr. Lodhia through his firm H.L. Consultants Limited sent his report on the extent of fire damage to the premises. He later repeated this in evidence and I shall only mention one part of it here which is noteworthy. He said that it apparently took the Lautoka Fire Brigade over four hours to put out the blaze and that this long period and the high temperatures evident from the damage he saw, confirmed his view that the structural integrity of some of the masonry walls had been reduced. He estimated surface temperatures were in excess of 300C and that the distortion of the steel grills in the windows indicated that the peak temperatures could have reached well over 500C. He said these high temperatures together with the duration of the fire indicated that the strength of the concrete units and the mortar had been reduced by the heat. This was confirmed on site by the examination of the mortar joints which had become weak and friable. He said that such high temperatures are also known to reduce the bond of steel reinforcement by up to 30%.

The Plaintiff sent a copy of Mr. Lodhia's report to Toplis & Harding and expected to receive a copy of South Pacific Rolle's report in return but he did not.

On the 25th of February 1993 the Plaintiff's solicitors wrote to Toplis & Harding complaining about the continued inordinate delay by the Defendant in settling the claim. Here for the first time there is a reference by the Plaintiff to a valuation of the property by the National Bank of Fiji. The solicitors allege that the Defendant was estopped from saying that the increase in the insurance cover on the property was not made pursuant to the valuation of the property by the Bank. They allege that when professional fees and charges and VAT were added to the amount of $148,845.00, the estimated replacement valuation of Rawlinson Jenkins, the final amount would be considerably higher than the amount of $150,000.00 being the valuation of the property by the National Bank of Fiji.

I must state here that there is no evidence that the National Bank of Fiji ever obtained any valuation of the property although it may well have thought that to protect its interest the insurance cover should be increased to that amount. The Plaintiff may also have honestly believed that the Bank had obtained a valuation first before requiring the cover to be increased. This bears on the amount to which the Plaintiff is entitled based on the relevant law to which I shall refer later.

Following this the Plaintiff obtained two quotations for repairs to the premises, one from Satendra Prasad Construction Limited for $148,000.00 and the other from Ram Lal Construction for $154,800.00.

On the 22nd of March the Defendant replied to the Plaintiff's solicitor's letter mentioning what has become the fundamental difference between the parties in this case. The Defendant said that whereas it believed the policy of insurance issued to the Plaintiff was one of indemnity the Plaintiff seemed to believe that it was either "a replacement value policy" or "one of agreed value". As will be seen later these three terms have different meanings in law.

On the 3rd of June 1993 the Plaintiff received a Closing Order from the Lautoka City Council stating that it considered the damaged building to be unfit and unsafe for human habitation and occupation. To this the Plaintiff's solicitors replied that the Defendant and not the Plaintiff was to be blamed for this situation.

On the 20th of September 1993 the Defendant's solicitors sent the Plaintiff's solicitors a copy of the valuation of South Pacific Rolle dated 17th December 1992. Later Mr. Keni Dakuidreketi who prepared the report gave evidence for the Defendant so I shall only state here the relevant amounts making up his valuation. These were:

(i)	Replacement Cost			- $158,000.00

(ii)	Indemnity Value			- $ 58,500.00

(iii)	Market Value of the Leasehold
interest in the Property		- $120,000.00

The next relevant correspondence is a letter the Defendant's solicitors wrote to the Plaintiff's solicitors on the 31st of January 1994 which stated that the Defendant had by then agreed that the Plaintiff's property at Lautoka was totally destroyed by the fire and that the question of any salvage value was of no relevance in the determination of the issues in the action.

At the end of his evidence-in-chief the Plaintiff claimed that the Defendant had failed to honour its obligation under the policy - i.e. its contract of utmost good faith. Mr. Jamnadas also said that the policy was for $150,000.00 and the pre-fire value of the premises was not less than $150,000.00. 

When he was cross-examined the Plaintiff repeated the belief which he held originally based on the letter of Toplis & Harding that there was substantial salvage value in the property and that the building was repairable. He also believed that the Defendant had undertaken to re-instate the building. He said that the land was held under a Crown Lease which was for 75 years from about 1944 so that it had 27 years to run on the date of the fire. He said that although there is no right of renewal in any Crown Lease, generally all Crown and even Native Leases where there is a commercial development have been given new terms subject to much increased rentals.

He said he knew of no case in Lautoka or Fiji where when a lease expired the lessee had been asked to remove any buildings on the property. He was then questioned as to why he had engaged Mr. Lodhia to report on the property and he replied that as a former City Engineer he probably knew more about the property than the Plaintiff. He said that he considered Mr. Lodhia who was so familiar with the building would have the best idea of its value rather than a registered valuer.

The only other witness called by the Plaintiff was Hamendra Jeewan Lodhia a Structural Engineer, who now lives in Guam and who is the nephew of the Plaintiff. He said that he knew the property well because for over 13 years from 1976 to 1989 he was based in Lautoka and was the Building Surveyor and City Engineer for Lautoka City Council. He was then the Chief Civil Engineer for Fiji Sugar Corporation. Mr. Lodhia holds a degree of Bachelor of Civil Engineering from the University of Tasmania and is a member of the Fiji Institute of Engineers and the Institute of Engineers of Australia. He has had very wide work experience particularly since 1990 in the repair of earthquake damage, concrete and masonry building. After the devastating cyclone in January 1985 he was appointed by the Commissioner of Insurance and Insurance Companies to provide a report on what building standards should be adopted in Fiji to resist cyclones. The report was accepted by the Insurance Companies and is still the standard. He said he had looked after the building in Lautoka for the Plaintiff while he was there. Numerous repairs and up-grading had been carried out on the building. He gave technical evidence as to the damage to the building and his estimate of the temperatures reached during the fire which I have already mentioned. He said that all the walls damaged in the fire should be demolished and re-built. He said that he had experience in costing and regularly provides valuations for insurance purposes of buildings. He was asked to comment on Rawlinson Jenkins' report and said that there was no structure in the building that could be strengthened because of the timbers which had been burnt and the concrete which cannot be re-strengthened. He said regardless of what Rawlinson said, there cannot be re-strengthening. The only way to attend to the structure is to start from the foundation and completely re-build. He then made comments on the report of Pacific Risk Consulting Engineers Ltd. He said that although they claim they had been unable to have the walls washed down and carry out a full visual examination, Mr. Lodhia had done this and carried out a visual examination. He disagreed with the opinion expressed by Pacific Risk that "there did not appear to be any structural damage to any of the walls or beams in any of the other areas". Mr. Lodhia said it was quite clear from the report which he prepared that there were walls which were damaged which were not mentioned by Pacific Risk. Only the walls and beams in the second flat and toilets can be used and he marked them clearly in the plan he annexed to his report. He expressed the opinion that the whole wall panel from the floor level must be demolished and re-built. He said in-fill wall panels are so designed that it would cost more to re-build only half the panel. The author of the report, one Ray Paris, stated that he did not have an opportunity to fully investigate the damage but Mr. Lodhia said he did and he said that the damage was far more extensive than stated in Pacific Risk's report.

He then began to give a valuation of the premises before and after the fire to which counsel for the Defendant objected on the ground that valuation is a recognised professional field and that Mr. Lodhia was not appropriately qualified to give an opinion on valuation. I allowed the witness to continue stating that I would defer my ruling on the admissibility of Mr. Lodhia's report until after his cross-examination. Mr. Lodhia then stated that he based his report in Exhibit P.64 on no less an authority than MacGillivray on Insurance Law particularly paragraph 1791 of the 5th Edition. In that paragraph the learned author gives two examples which are set out here for the purpose of illustration and so that Mr. Lodhia's evidence can be understood. MacGillivray states:

"Where the property is capable of repair or reinstatement the damaged value may be estimated by deducting the cost of repair from the repaired value, and the damage payable is then arrived at by taking the difference between the damaged value and the damaged value thus -

Undamaged value	£100
Repaired value	£110
Cost of repair		 70

Damaged value	 40

Amount recoverable	 60

or in a case where the repaired value is less than the undamaged value -

Undamaged value	£100
Repaired value	£90
Cost of repair		 70

Damaged value	 20

Amount recoverable	 80"

Adopting those examples to the instant case Mr. Lodhia then provided this calculation:

Undamaged value before the fire 	 $45,470.00
Repaired value after the fire 		5,500.00
Cost of repairs				8,730.00
----------
Damaged Value			 6,770.00
----------
Amount recoverable	 		$138,700.00
=========

He then continued to give evidence in accordance with his report of the 9th of May 1994 (Exhibit P.64) and which I set out herein fully because it seems to me to go a long way to answering criticisms of Mr. Lodhia's qualifications to express an opinion on the amount recoverable by the Plaintiff.

A.	Undamaged value before the fire

The undamaged value of the premises before the fire is taken as the market value at the time and place of fire. The premises, though 40-45 years old were in a very sound structural condition considering its age. This was due to the regular upgrading and refurbishments that were carried out till the time of the fire. A brief history of these works are given below:

(1)	The concrete structure at the front of the premises containing the shops consists of a single storey reinforced concrete frame with infilled masonry walls. Such a structural system is strong and durable even by today's building standards and is only seen in multistorey frame construction.

(2)	About 15 years ago, the original cantilevered canopy was replaced with a new structure complete with awning rods, new roof sheeting and timber lining.

(3)	About 12 years ago, the complete shopfront was refurbished with new chrome frames and plate glass and mosaic tiles over the whole front elevation. The shopfront design was as good or better than many modern shopfronts built today and was in good condition at the time of the fire.

(4)	In December 1985, the complete roof over the main building was structurally strengthened to comply with the new cyclone upgrading standards that were stipulated by the Fiji Building Standards Committee as a condition prior to obtaining insurance cover for cyclones. Even though the existing roof sheeting was in sound condition, the opportunity was taken to provide new Lysaght Colorbond roof sheeting complete with cyclonic fasteners over the whole roof of the main building at a cost of about $12,000.00.

Based on the structural conditions as outlined above, the market value of the premises has been determined as follows:

$

Reinstatement estimate of premises	156,470.00
with a floor area of approximately
252m2

Less cost of maintenance due to wear
and tear 				     1,000.00
--------------
Market value				$145,470.00
=========

In cross examination Mr. Lodhia continued to give much technical evidence based on his engineering knowledge which I need not detail here.

He was then asked about his estimate of $11,000.00 in paragraph A(4) of his report as the cost of maintenance due to wear and tear. He said that depreciation seemed to be 7% so that in his view the building had depreciated by $11,000.00 since it was last refurbished. He said that regular depreciation principles assumed a life expectancy of 50 years after which the structure is re-valued. He said that he already knew the approximate age of the building and realised that this was significant; Mr. Jamnadas had told him it was about 40 - 45 years old. He knew the building was on a Crown Lease title but did not know the lease expiry date. Mr. Jamnadas did not tell him and Mr. Lodhia never discovered this from any other source. He said a professional valuer would have enquired about this. He said he did not know whether the lease had a right of renewal because he did not ascertain this. He agreed a professional valuer would have done this also.

It is interesting to note here that Mr. Keni Dakuidreketi the professional valuer called by the Defendant made no mention of whether the lease had a right of renewal and that although Mr. Lodhia said that he made no enquiry about the term and conditions of the tenancy of the premises nor about the rent, and that a professional valuer would have seen it as his duty to obtain this information, I note that Mr. Dakuidreketi did not do so either. He said that he assessed what probably would have been a fair rent of a property in that location and had assumed a reasonable rent. He was further questioned about his assessment of the market value of the premises of $145,470.00 and said that his understanding of market value was that it was the value of the building that he thought the market would pay for it. He then referred to the definition of value given in the High Court of Australia case Spencer v. The Commonwealth of Australia (1907) 5 CLR 418, the headnote to which reads:

"In assessing the value of land resumed under the Act, the basis of valuation should be the price that a willing purchaser would at the date in question have had to pay to a vendor not unwilling, but not anxious, to sell."

In giving this answer I formed the opinion that Mr. Lodhia was no stranger to estimating values of property or buildings. I have never previously heard an engineer or even a registered valuer quote the law accurately to support evidence he is giving. To be able to cite Spencer's case which is a well known authority on land valuation it seemed to me that Mr. Lodhia's expertise fell not only within the field of engineering but to some degree at least in that of property valuation, particularly in an area with which he was very familiar. I shall say more about this later.

He also again ventured into the law by referring to the judgment of Swinfen Eady L.J. in Inland Revenue Commissioners v. Clay (1914) 4 K.B. 466 at 475 who said:

"The local conditions and requirements, the advantages of the situation of the property for any particular purpose, and the names of the persons who are probable buyers, would ordinarily be matters of local knowledge to the property broker and agents and speculators. In order to arrive at the amount which land might be "expected to realise," all these matters ought to be taken into consideration."

That passage only serves to further confirm the favourable opinion I formed about Mr. Lodhia's qualifications to express an opinion on the pre and post fire value of the property and the amount to which the Plaintiff was entitled to be paid. That concluded the evidence for the Plaintiff.

The Defence then went into evidence. I find it unnecessary to refer to the short evidence of its first witness Robert John Pole a Civil Engineer of Samabula who is President of the Fiji Institute of Engineers who inspected the property for the Defendant. The last and main witness was Mr. Dakuidreketi who said in evidence-in-chief he was not specifically instructed to assess the market value of the property immediately after the fire but that as only the land was left the value of the property was $70,000.00. He said that in estimating the pre-fire value as $120,000.00 he took into account the following factors: the building was commercial and primarily he considered the renewal value of the property. He assessed what probable value would have been a fair rent of a property in that location and based his valuations purely on the investment approach valuation which involved the capitalisation of rentals to arrive at the market value. He assessed what he perceived the potential rental based on the rent of a comparable space in Lautoka. He assessed total rentals at $15,900.00 p.a. and a reasonable rent for the commercial section as $13,500.00 p.a. or $1,125.00 p.m. He used his knowledge of rent of similar space in Lautoka at that time. The area of the building was relevant. He adopted a unit rate in dollars per square metre p.a. of $90.00 per square metre and calculated the rent for the residential rear for $100.00 for each of the two units.

When he capitalised the gross rental of $15,900.00 p.a. he assumed an annual capitalisation rate of 12%. He said that there was evidence that the gross rental of the property was $10,500 p.a. and that he thought it was possibly being rented below what it should have been getting which might indicate demand. He said he took into account access to a property when deciding its valuation. In cross-examination he said he did not think the building was worth salvaging and that he did not have a complete picture of the building before the fire but this was not hard to imagine. He had been told the property was rented out but he did not know the amount. He said he would have done a better job if he had known the property before the fire. He later said when re-examined that he thought the best thing was to say the property was not worth re-building and that being an old building regardless of its quality there was very little market for such in Fiji.

Counsel for both parties seemed strangely reluctant to ask Mr. Dakuidreketi how he assessed the indemnity value of $58,500.00. This was left to me and he replied that indemnity value was the replacement cost less depreciation.

I come now to the last part of this judgment, the submissions of counsel and consideration of the relevant law. Mr. Smith for the Defendant began his address with a sustained attack on the credibility of the Plaintiff. He said "his whole modus operandi has been to establish unsupported insinuations, occasionally descending to simple mis-representations".

The first of such examples counsel said appears in the Statement of Claim and Mr. Smith then proceeded to quote paragraphs 1, 7, 9, 11 and 12 which all refer to a fire insurance policy on the property to a value of originally $125,000.00 and later $150,000.00. Then, said counsel there was paragraph 10 which says "the fire insurance policy on the said property issued by the Defendant in favour of the plaintiff and referred to in paragraph 9 thereof became a valued policy for $150,000.00 from the 12th of January 1991". All these paragraphs said Mr. Smith amount to one thing only that the Plaintiff is here alleging the fire insurance policy was a "valued policy" which the Defendant denies in paragraph 4 of its defence.

Counsel then said that there was no suggestion in the Statement of Claim that the National Bank of Fiji had ever provided a valuation. As I said earlier I agree because there is no evidence of this.

Counsel described the Plaintiff as a thoroughly intransigent witness so lacking in his judgment as to completely belie his professional background. Counsel then said that it was utterly patent that the Plaintiff had manufactured this claim and in so doing revealed his ignorance of the meaning of the term "indemnity policy". Mr. Smith then referred me to what is probably one of the most comprehensive statements of the law on indemnity policies found in the judgments of Megaw L.J. and Geoffrey Lane L.J. in Leppard v. Excess Insurance Co. Ltd. (1979) 2 ALL E.R. 668. He said that it was held that the quantum of the loss of an owner who had an indemnity insurance policy was arrived at by comparing the market value after the fire with the market value before the fire. With respect to counsel, and although I agree with this as settled law, this is not what Leppard's case held. Paragraph 1 of the headnote reads in part:

"Under an indemnity insurance policy the insured could not recover more than the actual loss suffered."

Reading the judgments particularly that of Geoffrey Lane L.J. I take Leppard to be authority for the proposition that under an indemnity policy the amount recoverable by a Plaintiff is the market value of the property at the date of the fire and not the cost of re-instatement.

Geoffrey Lane L.J. at page 675 quoted with approval from the Australian High Court case of British Traders' Insurance Co. Ltd. v. Monson (1964) 111 CLR 86 at 92-93 where the Court said inter alia:

"All its provisions, even the very words that are relied upon for their literal meaning, are characteristic of fire insurance policies. It is far too late to doubt that by the common understanding of business men and lawyers alike the nature of such a policy controls its obligation, implying conclusively that its statement of amount which the insurer promises to pay merely fixes the maximum amount which in any event he may have to pay, and having as its sole purpose, and therefore imposing as its only obligation, the indemnification of the insured, up to the amount of the insurance, against loss from the accepted risk."

I accept that as the law in Fiji so that despite some apparent ambiguities in the Commercial Loss Notice Exhibits 10-11 I consider the only amount the Plaintiff is entitled to recover is the actual loss suffered by the estate in the fire and not the sum insured by the policy.

Here I may say that I reject the Plaintiff's claim in paragraph 10 in the Statement of Claim that the policy here was ever a valued policy for $150.000.00. Section 28(2) of the Marine Insurance Act Cap. 218 defines a valued policy as a policy which specifies the agreed value of the subject-matter insured.

The policy in question in this case does not do that although it would have been simple for the parties to have included such value if they could agree.

Finally Mr. Smith renewed his criticism of the evidence of Mr. Lodhia saying that it was almost ludicrous for the Plaintiff to call his nephew. I find this and some of the other criticism levelled by the Defendant at Mr. Lodhia as a little odd considering the fact that no objection was taken to the tendering on behalf of the Plaintiff of the report of Rawlinson Jenkins Ltd. to Toplis & Harding (South Pacific) Ltd. In that report the author seems to do very much the same as Mr. Lodhia except of course that no attempt was made in the report to explain the various terms used.

For the Plaintiff I was provided with a helpful written submission in addition to an oral address by Mr. Arjun. First of all I am satisfied as he submits that the increase in the insurance cover from $125,000.00 to $150,000.00 was made pursuant to one of the terms and conditions stipulated in the letter dated 1st November 1990 from the National Bank of Fiji to Primetime Properties Ltd. but I do not agree for reasons which I have just stated with his submission that the Defendant by the issue of Renewal Certificate for $150,000.00 on the property issued a valued policy for $150,000.00 on the property to the Plaintiff and that this conclusively establishes the sum required to be paid by the Defendant to the Plaintiff for the purpose of a full indemnity. Counsel referred me to MacGillivray On Insurance Law (supra) paragraph 1794 but in my view this does not help the Plaintiff because the author says:

"A valued policy is an ordinary feature in marine insurance. It is not usual in fire insurance: but it is not unknown, more particularly in policies issued by Lloyd's underwriters."

Then counsel cites the case of Elcock and Others v. Thomson (1949) 2 K.B. 755, a decision of Morris J., as he then was. That case is distinguishable from the present case in as much as in a schedule to the fire insurance policy in question the property which was a mansion was insured against fire for an agreed value of £100,000 whereas here as I have found there was no agreed value. In addition the mansion was only partly damaged by fire.

I accept Mr. Arjun's alternative submission that the property was regularly maintained and upgraded but I do not agree that its value was $150,000.00. Counsel then submits that it is clear from the evidence of Keni Dakuidreketi that he arrived at the indemnity value of $58,500 by taking the replacement cost of $158,000.00 less depreciation and that such an appraisement of indemnity value is clearly invalid. MacGillivray at paragraph 1792 quotes two New York Court of Appeals decisions the first of which McAnarney v. Newark Fire (1928) 159 N.E. 902 held that every fact and circumstance, which would logically tend to the formation of a correct estimate of loss must be taken into account. In the other case Gervant v. New England Fire (1954) 118 N.E. 2d 574 the Court set aside a valuation when replacement value less depreciation was the only factor taken into account by the appraiser. In McAnarney's case the Court stated that factors in arriving at a correct estimate of loss were original cost and cost of reproduction; the opinions upon value given by qualified witnesses; the gainful uses to which the building might have been put; as well as any other fact reasonably tending to throw light upon the subject.

In fairness to Mr. Dakuidreketi he did not give depreciation only as his ground for arriving at the indemnity value of $58,500.00 but neither did he consider the original cost and cost of reproduction and he did not venture any opinion as to how he arrived at the figure of $58,500.00. As a professional Valuer I would have expected him to do so. It is for these reasons that despite the fact that he is not a registered Valuer I prefer the opinion of Mr. Lodhia at page 1 of his report of the 9th of May 1994 that the amount recoverable in this case is $138,700.00 less the amount of $60,000.00 already paid by the Defendant. Mr. Lodhia was familiar with the property and knew it particularly well during his term as City Engineer of Lautoka. In my view he gave his evidence in an objective rather than biased manner and I was very impressed by him although, it must be said as far as Mr. Dakuidreketi was concerned he too impressed as a good expert witness without any obvious bias to one side or the other. I therefore give judgment for the Plaintiff against the Defendant in the sum of $78,700.00 plus costs. The Defendant must also pay interest on that amount at the rate of 8.5% from the date of the Writ was issued, 22nd April 1993 until the date of this judgment. I further order that if any VAT under the Value Added Tax Decree is payable on the amount of this judgment the Defendant must pay that to the Plaintiff.

JOHN E. BYRNE
JUDGE

Legislation and authorities mentioned in judgment:

Marine Insurance Act Cap. 218.
Valuers Registration Act 1986.
MacGillivray on Insurance Law Fifth Edition.
Inland Revenue Commissioners v. Clay (1914) 4 K.B. 466.
Gervant v. New England Fire (1954) 1188 N.E. 2d 574.
McAnarney v. Newark Fire (1928) 159 N.E. 902.
Leppard v. Excess Insurance Co. Ltd. (1979) 2 ALL E.R. 668.
Spencer v. The Commonwealth of Australia (1907) 5 CLR 418.
Elcock and Others v. Thomson (1949) 2 K.B. 755.

The additional authorities were mentioned in argument:

Re Bradley and Essex and Suffolk Accident Indemnity Society (1912) 1 K.B. 415.
Bhugwandass v. Netherlands India Sea and Fire Insurance Co. of Batavia (1888) 14 App. Cas. 83 P.C.
Canning v. Farquhar (1886) 16 Q.B.D. 727.
E.R. Hardy Ivamy General Principles of Insurance Law 6th Edition.
Maurice v. Goldsbrough Mort & Co. Ltd. (1939) A.C. 452.
Westminster Fire v. Glasgow Provident (1888) 12 App. Cas 699.
Halsbury's Laws of England Third Edition Vol. 22 p.319.
Re Yager and Guardian Assurance Co. (1912) 108 L.T. 38.
HBC0200J.93S