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Sun Insurance Company Ltd v Bibi [2005] FJHC 484; HBC0216D.2005S (15 September 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0216D OF 2005S

BETWEEN:

SUN INSURANCE COMPANY LIMITED
a limited liability company duly incorporated in
Fiji and having its registered office at 1st Floor,
Burns Philip Building, Rodwell Road, Suva.
PLAINTIFF

AND:

SAINAZ BIBI
(father’s name Azim Khan) of
Nadera, Nasinu. Domestic Duties.
1ST DEFENDANT

AND:

AMIT PRASAD
(father’s name Jagdish Prasad)
of Lot 11, Stage 1, Narere, Suva, Driver.
2ND DEFENDANT

AND:

PRANEEL JEET SINGH
(father’s name Jagdish Singh) and
RANJEETA SINGH
(daughter of Kallu Karan Singh) both of Lautoka City,
Lautoka, Dental and Medical Practitioners respectively.
3RD DEFENDANTS

Counsel for the Plaintiff: Mrs. S. S. Devan: G. P. Lala & Assoc.
Counsel for the 3rd Defendant: A. K. Narayan: A. K. Lawyers

Date of Decision: 15 September, 2005
Time of Decision: 9.30 a.m.

DECISION

The third defendant’s had on 10 February 2005 obtained a judgment in default in Civil Action No. 542 of 2004 against the first and second defendants for injuries sustained in a motor vehicle accident on 10 December 2001. The owner of the vehicle is the 1st Defendant, but was being driven by the second Defendant with the consent of the first. The first Defendant had obtained a third party (motor) policy from the Plaintiff which was current at the date of the accident.

The third Defendant’s solicitors on 26 March 2002 wrote to the Claims Manager of the Plaintiff Company claiming compensation in accordance with section 11 (2) (a) of the Motor Vehicles (Third Party) Insurance Act (Cap 177) (“the Act”). The Plaintiff’s solicitors rejected the claim and thereupon, the third Defendant commenced their action (CA. 542 of 2004).

In this proceedings, the Plaintiff by Originating Summons sought the determination by the Court on the following questions:

“ 1. A Declaration that Sun Insurance Company Limited is entitled to avoid liability to provide indemnity against any claim under the Third Party (Motor) Policy No. 00TP/A 51154 on the grounds that the first Defendant who is the insured breached the terms and conditions of the policy.

2. A Declaration that the Sun Insurance Company Limited is not liable to satisfy the judgment that had been entered against the 1^st and 2^nd Defendants arising out of the motor vehicle collision on 10^th December 2001, involving motor vehicles registrations No. DU 437 and AC 263 being the subject of the claim in the Suva High Court proceedings Civil Action No. 542 of 2004 or any further proceedings yet to be issued in relation to the same accident involving the same vehicle.”
   

The Plaintiff’s summons is made pursuant to section 11 (3) of the Act and also rely on the inherent jurisdiction of the Court.

On 4 August 2005 Counsel for the third Defendant’s raised two preliminary issues claiming that:

(i) the Plaintiff’s application under S.11 (3) of the Act is time-barred for non compliance with the 3 months filing period, and

(ii) the Plaintiff had not complied in any case with the requirement of the proviso to S.11 (3), in that it had failed to give the third Defendants’ the 7 days notice of its intention to avoid their claim.

As the fate of the Plaintiff’s Originating Summons depends on these preliminary points, I allowed Counsel time to file submissions and thereafter for the Court to rule on them. Counsel have now filed their submissions.

Evaluation

Section 11 of the Act sets out the scheme under which an insurance company is required to satisfy judgments against persons insured in respect of third party risks. S.11 (1) obligates the insurance company to pay to persons entitled under a judgment such sum as the insured is found liable for, if the insurance certificate or policy is current, and the liability is covered under its terms. This is notwithstanding that the insurance company may be entitled to avoid or cancel or may have avoided or cancelled the policy. S.11 (2) sets out the exceptions to the insurance company’s duty to pay under S.11 (1). These include where no 7 day notice from the commencement of the proceedings is given by the Claimant to the insurance company; judgment being stayed while on appeal; and where prior to the happening of the event, the policy has been cancelled by mutual consent or under any circumstances detailed therein.

S.11 (3) of the Act and upon which this proceeding is based, deals with the procedure required of the insurance company if it intends to avoid payment under the policy. The sub-section reads as follows:

“(3) No sum shall be payable by an approved insurance company under the provisions of this section if, in an action commenced before or within 3 months after the commencement of the proceedings in which the judgment was given, the insurance company has obtained a declaration that, apart from any provision contained in the policy, the insurance company is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in a material particular or if the company has avoided the policy on the ground that it was entitled to do so apart from any provision contained in it

Provided that an insurance company which has obtained such a declaration in an action shall not thereby be entitled to the benefit of the provisions of this subsection in respect of any judgment obtained in any proceedings commenced before the commencement of that action unless, before or within 7 days after the commencement of that action, it has given notice thereof to the person who is Plaintiff in the action under the policy specifying the non-disclosure or false representation on which it proposes to rely and that it intends to seek a declaration and any person to whom notice of such action is given may, if he desires, be made a party thereto.” (emphasis added)

In respect of the 3 months requirement above the Plaintiff submits that it should be interpreted in two ways. First the insurance company may make an application to avoid its liability before the commencement of the action. Or second and alternatively, the insurance company “makes the application within 3 months after the Government of the proceedings in which judgment was given.” According to the Plaintiff, the first option which is taken before the commencement of the action can only be made where the insured complies with S.16 of the Act requiring him to give notice to the insurer of the accident and any consequent action. In this instance, according to the Plaintiff’s argument, the 1^st Defendant should have informed the Plaintiff company of the accident and the possible Writ action. As to the second option or alternative, the Plaintiff argued that the computation of 3 months can only begin to run after a judgment has been entered. This, according to the Plaintiff, is the logical interpretation because the insurer, in a default or interlocutory judgment, would not be aware of the action until judgment is served.

I am not persuaded by the Plaintiff’s submissions on how section 11 (3) should be interpreted. It remains a cardinal rule of interpretation that where an enactment or legislation is unambiguous in content and meaning, then it must be given it effect. The plain and ordinary meaning of sub-section 3 is readily evident. It says that the insurance company is not liable to satisfy a judgment if before or within 3 months of the commencement of such action, insurer has obtained a declaration entitling it to avoid the policy. The need for the insurer to be given notice under S.16 is strictly between the policy holder and the Company. It is separate, as Counsel for the third Defendants’ correctly pointed out, to the notice they gave through their solicitors’ before the commencement of their action as required under S.11 (2) (a).

It is important to note that notices to the Insurance Company, either under S.16 (by the insured) or S.11 (2) (a) (by the claimant) are pre-requisites to any action against the Company. But in either case, the Plaintiff can act to obtain a declaration to avoid liability before any action commences. Should however, it fails to obtain the declaration prior to the commencement of the action, then the insurance Company can still obtain it within 3 months from the date of commencement. From the chronology of the events in this action, the Court is satisfied that the Plaintiff had failed to comply with the statutory 3 months filing period requirement.

The third Defendant’s also submitted that in any case, the Plaintiff had fallen foul of the 7 day notice requirement under the proviso to S.11 (3).

In support, the Plaintiff argued that while the 7 day notice requirement under section 11 (3) proviso applies to where the insurer seeks avoidance of liability on the grounds of non-disclosure and/or misrepresentation, it did not where the grounds relied upon are grounds “other than non-disclosure or misrepresentation, for instance on material breach of policy by the insured owner.” The Plaintiff did not elaborate on this but it seems he is suggesting that there are categories of breaches included in a policy and others that fall outside it.

Again, I do not think that proviso is intended to be interpreted as Plaintiff argued. The requirement for the 7 days notice is for all and every action in which the insurer intends to avoid a policy. In any case material non-disclosure or false representation are factors that are generally included in the provisions of the policy. There is no basis for separating the two. Again the plain and ordinary meaning of the section and its proviso are clear. It cannot be read and interpreted or constructed any other way than what the plain meaning of the provision is. What the proviso says is that unless the Plaintiff has given 7 days notice to the third Defendants after the commencement of its avoidance action against the First Defendant, the declaration the Plaintiff will have obtained, would be rendered invalid.

The whole statutory framework for the third of motor vehicle insurance scheme is discussed fully in the Supreme Court decision of Dominion Insurance Limited v. Kay Lynette Bamforth and Margaret Annette Wilson & Or. CA. No. 0005.2002. While the main consideration of the Court was on section 11 (2) (a) and its requirement of the giving of notice, the Court nevertheless offered its views on the operations of section 11 generally. On S. 11 (3) the Court said, at p. 8

“Subsection 11 (3) provides that the insurer is not liable if, in any action commenced” within 3 months after the commencement of the proceedings in which the judgment was given, the insurer has obtained a declaration that it is entitled to avoid the policy for material non-disclosure or false representation in a material particular. The avoidance of the liability under s.11 (3) is subject to the proviso that notice of the insurer’s proceedings must, within 7 days of their commencement, have been given to the Plaintiff in the action under the policy.”

Findings

In my view there can be no other interpretation of when the 3 months notice required of section 11 (3) begins to run. The computation of the 3 months starts at the commencement of the action by the Third Defendants.

Similarly, the 7 days notice stipulated under the proviso to s. 11 (3) applied in that the Plaintiff is required to give to the Third Defendants notice within 7 days of its avoidance action. A declaration of avoidance is defeated if this prior notice is not given.

In the end, the Plaintiff having failed to meet or comply with the statutory time requirements under section 11 (3) of the Act and this Court, having found therefore in favour of the Third Defendants’ preliminary objections, the Plaintiff’s Summons is dismissed.

Costs of $250.00 against the Plaintiff.

F. Jitoko
JUDGE

At Suva
15 September 2005