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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION HBC 435 OF 2005
BETWEEN
PUNJA AND SONS LIMITED
First Plaintiff
AND
OCEAN SOAPS LIMITED
Second Plaintiff
AND
THE NEW INDIA ASSURANCE
COMPANY LIMITED
Defendant
Mr B C Patel with Mr C B Young for the Plaintiff
Mr F Haniff for the Defendant
JUDGMENT
On 19 February 2003 a fire destroyed buildings situated in Sautamata Street Lautoka (the premises) owned by the First Plaintiff. The Second Plaintiff, a wholly owned subsidiary of the First Plaintiff, carried on the business of manufacturing and distributing amongst other things soap products at the premises.
The First Plaintiff suffered loss and damage as a result of the destruction of the building. The Second Plaintiff suffered loss and damage as a result of the destruction of its business.
At the time of the fire there was in existence a current material damage and business interruption policy of insurance whereby the Defendant insured the First and Second Plaintiffs against risks (insured perils) (including fire) for the amounts stated in the policy. The sums insured were in respect of material damage up to a limit of $9,000,000.00 in respect of anyone loss at any one location and business interruption up to a limit of $3,200,000.00. However it was agreed between the parties in June 2001 that the terms of cover were amended as follows:
"Strike, Riot, Civil Commotion and Malicious Damage cover limit to F$3,000,000.00 (Fiji Dollars Three Million Only) any one loss any one location."
By letter dated 13 June 2003 the Defendant advised Marsh Limited Insurance Brokers as follows:
"We would like to inform you that based on the findings of our Investigations, we have come to the conclusion that the cause of this fire is Malicious Damage. Hence, kindly note that for the Material Damage Section, we are admitting liability up to the sub-limit of F$3 Million (Fiji Dollars Three Million Only) subject to the terms and conditions of the Policy. Kindly advise the Insured suitably."
The Defendant admitted the claim and subsequently paid to the Plaintiffs the sum of $3,000,000 in respect of material damage in accordance with the malicious damage limit and $1,981,359.00 in respect of the business interruption claim.
The Plaintiffs commenced proceedings by Writ dated 29 August 2005 to recover the full amount of their claims under the policy. In the Statement of Claim attached to the Writ the Plaintiff sought judgment for $3,996,472.00 comprising an amount of $2,761,647.00 being the balance of the material damage claim and $1,234,825.00 being the balance of the business interruption claim.
In the Statement of Agreed Facts dated 9 November 2007 the parties agreed that the amount in dispute was the balance of the material damage claim in the sum of $2,761,647.00 and the balance of the business interruption claim in the reduced sum of $253,466.00. In the same document the parties by agreement listed six agreed issues. The issues relating to liability were whether the material damage claim was subject to the $3,000,000.00 malicious damage limit and whether the Plaintiffs' loss was caused by a malicious act.
On 4 February 2011 in interlocutory proceedings I ordered by consent that the question whether the malicious damage limitation pleaded by the Defendant applied to the facts of this case be tried alone at the hearing of the action.
The hearing commenced on 21 February 2011 in Suva and continued for ten days. Following the hearing of evidence Counsel presented oral closing submissions on 8 March 2011. During the course of the hearing the Defendant called two witnesses and the Plaintiff called five witnesses to give evidence.
When the hearing commenced Counsel raised two preliminary issues. The first related to non-disclosure or late disclosure of documents. The second issue related to the order of proceeding.
So far as disclosure of documents was concerned, both Counsel submitted that the other party had failed to disclose documents or had only recently disclosed documents thereby depriving Counsel of adequate time to study the material. Directions were given that all issues relating to discovery were to be resolved by 9.30am the next day.
In relation to the issue as to which party should open its case first, having heard Counsel and perused the pleadings it was apparent that the Defendant should open. The policy had been admitted, the occurrence had been admitted, loss and damage had been admitted and there had already been part payment under the policy. As the Defendant had pleaded the malicious damage limit as the basis of its Defence to the claim, the onus was on the Defendant to establish on the balance of probabilities that the loss suffered by the Plaintiffs was malicious damage and as a result was covered by the $3 million limit. As a result I directed the Defendant to open its case first.
Before discussing the evidence, it is appropriate first to consider the limitation clause and the use of the words "malicious damage" in the contract of insurance. The starting point involves a consideration of the observations of Lord Atkin in Beresford –v- Royal Insurance Company Limited [1938] AC 586 who stated at page 595:
"On ordinary principles of insurance law an assured cannot by his own deliberate act cause the event upon which the insurance money is payable. The insurers have not agreed to pay on that happening. The fire assured cannot recover if he intentionally burns down his house .... This is not the result of public policy, but of the correct construction of the contract."
An insured will not be able to recover at all under the policy if he by his own deliberate act causes the fire which burns down his home (or his factory).
However a fire caused by the deliberate act of a third party, including an employee, an agent or even a relative which cannot be attributed to the insured will be covered. In Halsbury's Laws of England Fourth Edition at paragraph 619 the position is stated as:
"Even the fact that a fire is deliberately lit for the purpose of destroying the property insured does not disentitle the assured from recovering, unless he has lit it (see Upjohn v Hitchens [1918] 2 KB 48 and City Tailors Ltd v Evans (1922) 126 LT 439) or someone acting with his privity or consent has (see Midland Insurance Co –v- South [1881] UKLawRpKQB 49; (1881) 6 QBD 561)."
Lord Atkin in Beresford (supra) described these propositions as being "the correct construction of the contract" (supra at page 595).
The issue then is whether damage caused by a fire that is deliberately or intentionally lit by a person other than the insured or by a person acting without his authorization, connivance, privity or consent is malicious damage for the purpose of restricting the Defendant's liability to $3M.
Since the Defendant had already made payments on the claims for both material damage and business interruption under the policy, the involvement of the Plaintiffs was not in issue. The issue therefore was whether the loss suffered by the Plaintiffs as a result of a fire the cause of which did not in any way involve the Plaintiffs was malicious damage.
The evidence adduced at the trial by the parties was unfortunately directed to the issue of whether the loss sustained by the Plaintiff had resulted from a fire that was deliberately or intentionally lit. It appeared that both parties proceeded on the basis that the words "malicious damage" as used in the policy meant damage that was deliberately or intentionally caused by a fire deliberately or intentionally lit, albeit not by the Plaintiffs nor authorised by them nor with their connivance.
Counsel only briefly addressed the issue of the meaning of the words "malicious damage" in their closing submissions.
What do the words "malicious damage" mean as they are used in the policy. As a general rule it cannot be disputed that the words should be interpreted in light of their context. However the Courts have developed over a number of years guidelines for interpreting commercial contractual documents such as insurance policies. The modern approach to the construction of such a document was set out by Lord Hoffman in Investors Compensation Scheme Ltd –v- West Bromwich Building Society [1997] UKHL 28; [1998] 1 All ER 98. At page 114 Lord Hoffman stated:
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background ... includes absolutely anything which would have affected the way in which the language of the documents would have been understood by a reasonable man.
(3) ....
(4) 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 words. The meaning of 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. ....
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. ....."
This approach was adopted by the Court of Appeal in Hassan Din and Another –v- Westpac Banking Corporation (unreported Civil Appeal No. 66 of 2003 delivered on 26 November 2004). The Court of Appeal in paragraph 26 stated:
"... the interpretation of the clause is to be approached objectively. It is the meaning that the clause would convey to a reasonable person having the relevant background knowledge that is to be determined, not the meaning that the parties to the agreement thought the clause would have."
The task for the Court is to determine what meaning of the words "malicious damage", as they appear in the policy would be conveyed to a reasonable person with the relevant background knowledge.
Such a person would be aware that the clause, in the context of this policy was intended to extend cover up to a limit of $3M for loss (in the form of material damage) that was occasioned by riot strike or civil commotion or that constituted malicious damage. However, the meaning which a clause or document conveys to a reasonable person is not necessarily the same thing as the meaning of its words. The meaning to be attached to the clause must be determined by reading the document as a whole. Whilst some assistance may in this case be derived by reference to the dictionary meaning of the words, it is of more significance that the words have been grouped together in the clause.
A reasonable man with the relevant background knowledge would be aware that riot strike and civil commotion are perils that in ordinary practice are expressly excluded by an exceptions clause in a fire policy (see Halsbury's Laws of England 4th Edition at paragraph 621). However in the policy in this case those perils are not excluded from cover. Instead, cover in respect of such perils is extended to a limit of $3M. On the other hand, as previously noted, loss that resulted from a fire that was deliberately or intentionally lit was, as a matter of construction, fully covered unless it was authorised by the insured or with his connivance, in which case the claim would fail absolutely.
As a consequence it would appear to follow that as the policy in this case extends cover up to $3M for malicious damage (along with strike, riot and civil commotion) loss then it must be in respect of material damage that resulted from a fire that was deliberately or intentionally lit with an additional or aggravating element. A fire that has been intentionally or deliberately lit by a third person without any authorization or connivance by the insured is generally interpreted as being covered on the basis that the loss is regarded as accidental for the purpose of the policy, since from the insured's point of view it was not expected or designed (see Halsburys supra at paragraph 600).
It is also apparent that a reasonable man would conclude that by using the words "malicious damage" with riot strike and civil commotion, the clause was intended to extend cover to a limit of $3M for loss that resulted from perils that were usually not covered at all.
It is also necessary to consider whether there are any other terms of the policy that may provide some assistance in determining the meaning of "malicious damage".
Admitted into evidence as Exhibit 2 was a collection of papers that purported to set out some terms and conditions of the contract of insurance. At no stage was the Court provided with a copy of the complete contract. Page 7 of that bundle was a copy facsimile transmission dated 11 April 2003 addressed to a Mr Peter Faire of Peter Faire Loss Management Limited from "Marsh" on the subject of Punja and Sons Limited. The transmission was brief and stated:
"Dear Peter
Further to my facsimile dated 10 April 2003 attached is copy of standard New India Assurance "Riot, Strike, Civil Commotion and Malicious Damage" wording."
The attached page appeared as page 8 in the bundle and contained, amongst others, the following terms:
"12 Riot Strike or Civil Commotion
B Malicious Damage
Which for the purposes of this Extension shall mean the malicious act of any person (not being a tenant of the insured) not being an act amounting (illegible) nominated in connection with an occurrence mentioned in Special Condition 1 of the Riot Strike or Civil Commotion extension.
Provided that:
Special Condition 1 to which reference is made in the above clauses provided that the policy did not cover "any destruction or damage resulting from any of the following occurrences:
"(a) War, invasion....
(b) Mutiny, Riot, Strike, Lock-out, Civil Commotion each one assuming the proportion of or amounting to a popular rising .... (emphasis added)
(c) Permanent or temporary dispossession ...."
It is significant that the word "extension" appears three times in the "malicious damages" clause. It commences with the expression in these terms:
"Which for the purpose of this Extension means the malicious act of any person ...."
The clause then sets out four circumstances when the malicious damage "extension" does not apply and for which the Defendant will not be liable.
Finally the second part of the "Malicious Damage" clause states that the special conditions of the "riot strike and civil commotion extension" shall apply to the malicious damage "extension".
The effect of the malicious damage clause is that cover is extended for the malicious act of any person with the following exceptions. First, the person cannot be a tenant of the insured. Secondly, the malicious act must not be an act that comes within the description of occurrences that are referred to in special condition 1 to the riot, strike and civil commotion extension. Thirdly, the insurer will not be liable for malicious damage under this policy (being a material damage policy) if the malicious damage was damage or destruction arising out or in the course of burglary, housebreaking, theft, larceny or any attempt thereat.
Just as the policy extended cover for riot strike and civil commotion, subject to certain exceptions that are not relevant, up to a limit of $3M so also did the policy extend cover for malicious damage under circumstances already discussed up to a limit of $3M. Strike, riot and civil commotion are perils that, but for the extension for which provision was made in the policy, would not be covered. Similarly, malicious damage, since the word extension has been used in the clause, can be regarded as a peril which would not normally be covered under the policy but for which cover is extended by this policy up to $3M. However, damage resulting from a fire that was deliberately or intentionally lit by a person without the authorization or connivance of the insured is, as a matter of construction, covered under such a policy. Therefore it would seem that the malicious damage extension must be intended to provide a limited extended cover for damage from a fire caused in circumstances other than those that were, as a matter of construction, already covered. The malicious damage extension applies to material damage caused by the malicious act of a person. Not only must the act be intentional or deliberate, it would seem that there must also be some additional component that can be described as adding malice to the intentional or deliberate act. In other words, the insured is required to establish motive.
As previously noted the hearing before me proceeded on the basis that malicious damage meant damage caused by a fire that had been intentionally or deliberately lit without the authorization or connivance of the insured. The evidence adduced by the Defendant, on whom the burden rested, was directed towards satisfying the burden on the balance of probabilities. The Defendant did not attempt to establish motive. The material did not disclose any possible motive.
As a result, on the basis of the above analysis, it is apparent that the Defendant has failed in its defence. There simply was no evidence adduced that established a deliberate or intentional act coupled with motive that may be said to have caused malicious damage.
However, in the event that the policy was intended to limit recovery for material damage that could be described as malicious because it was the result only of an intentional or deliberate act, I propose now to discuss some aspects of the evidence adduced by the parties during the course of the hearing. Before doing so, I once again point out that if that is the correct position, what the Defendant was required to establish to the appropriate standard was that the fire that caused material damage was deliberately or intentionally lit. The trial proceeded on the basis that there was no evidence to establish that the fire was lit by the insured or was authorised by him or with his connivance. Furthermore, it was apparent that if the Court came to the conclusion that the fire had been deliberately or intentionally lit, then the extension for malicious damage up to $3M would apply and the Plaintiffs' claim on this aspect would fail.
At the outset it was apparent that the possibility of an intruder or a trespasser having entered the premises was not in issue. The only persons present on the premises were employees including security personnel.
The two witnesses called by the Defendant were both experts. The first witness was Mr Garry Luff who carries on a business of specialising in fire cause and origin investigation under the name Luff and Associates Limited. He has had 26 years experience investigating and examining fire scenes to determine the origin and cause of fires. He also has considerable experience in giving expert evidence in court proceedings in Fiji and elsewhere in the South Pacific concerning the cause and origin of fires. He is predominantly instructed by insurance companies and law firms.
Mr Luff prepared a report dated 23 May 2003 which was admitted into evidence as Exhibit 32. On instructions from the Defendant Mr Luff had attended the scene on 22 February 2003 which was some three days after the fire. At the scene he inspected the remains of the burnt out buildings that occupied the southern half of the premises. These buildings ran in an east-west direction. Mr Luff spoke with personnel from the National Fire Authority and the Fiji Police at the scene. He interviewed individually each employee who was present on the premises at the time of the fire. He took a number of photographs. Mr Luff accepted that due to "the contamination of the site" prior to his attendance at the scene, it was not possible to obtain debris samples for the purpose of identifying the possible presence of an accelerant. He concluded this aspect by saying that "whilst we speculate that the fire has been accelerated, we are not in a position to actually identify the substance used."
The thrust of Mr Luff's report is encapsulated in the second paragraph on page 7 where the following appears:
"... the evidence available to us tended to rule out any probability of this fire having an accidental ignition source. Such being the case, we are satisfied that the setting of this fire was a malicious act."
The process by which Mr Luff had reached this conclusion was explained in his oral evidence given at the hearing. His first task was to determine the area of origin and then if possible to determine a point of origin. It is fair to say that having read the reports and having heard the evidence the point of origin has not been determined by any of the experts who gave evidence.
So far as the area of origin is concerned, Mr Luff's report at page 2 states:
"As a result of our scene examination and investigation into the circumstances surrounding this fire, we are entirely satisfied that the fire has commenced within the upper level of the structure, at the north western quarter."
In the same paragraph Mr Luff identified this area as the storage area. The same room was also referred to as the packaging room during the hearing.
In terms of identifying the area of origin it is not entirely clear from the report as to what is meant by "the circumstances surrounding the fire". Mr Luff's report does discuss at some length the scene examination that was undertaken and the methodology of his investigation.
It appears that the area of origin was identified by Mr Luff after examining the scene and observing the extent of damage to various parts of what remained of the building and the debris. He also took into account the observations of one employee Ajay Kumar who was the first employee to see the fire.
At the conclusion of the evidence it was clear that there was not a great deal of difference of opinion amongst the experts that the area of origin of the fire was in the vicinity of the north eastern quadrant of the storage room, being the north western quadrant upstairs of the building as a whole.
The conclusion that the fire had been deliberately lit was based to some extent on conclusions arrived at from his examination of the scene but also on the process of eliminating likely accidental causes. In his report Mr Luff discusses and dismisses cigarette ignition, steam pipe ignition and FEA transformer and electrical wiring.
Having identified the area of origin as the storage room, Mr Luff's report dealt with the possibility of an electrical cause in the storage room in one sentence on page 9 as follows:
"With regard to a potential electrical fault, we point out that based on the evidence before us, there was no energized lighting circuits within the storage area, at the time of the fire."
In the same paragraph Mr Luff points out that the Fiji Electricity Authority had also examined the site and ruled out an accidental electrical cause within the storage area.
At the outset, Mr Luff does not give in his report any indication as to what was the evidence before him that enabled him to arrive at that conclusion. Admittedly he did elaborate at length on this issue in his evidence before me. However that was some eight years later and I was left with the distinct impression that this aspect of his evidence was based more on reconstruction rather than memory.
Furthermore, there was evidence before me given by a Mr Feroz that clearly contradicted Mr Luff's evidence and the bland statement in his report concerning the absence of energized lighting circuits in the storage room. Although there was also an indication that some aspects of the evidence given by Mr Feroz was based on reconstruction rather than memory, his evidence was in my opinion more reliable than Mr Luff's on this point. Mr Feroz had been employed as an electrician who had carried out minor electrical work in the storage area a couple of days before the fire. He was the only witness called by either party who could indicate to the court the wiring installations in the storage area.
Apart from the reference to the Fiji Electricity Authority (FEA) on page 9 of the report, the only other reference to FEA appears on page 6 where it is stated:
"The Police also called in the Fijian Electricity Authority, who examined electrical componentcy and dismissed electrical failure as a probable ignition cause."
However the evidence adduced at the hearing was not consistent with the assertion (without details) made by Mr Luff in his report. In a letter dated 16 February 2011 from the Chief Executive Officer (CEO) of FEA addressed to the legal practitioners acting for the Plaintiffs (Exhibit 55), it was stated, amongst other things, that:
"(i) There is no formal report regarding the Ocean Soaps Limited Fire available in our Central Registry other than the file note retrieved from the Chief Installation Inspector's records and sent to your office by Apenisa Manuduitagi;
(ii) There were no written requests from the Police in our records to undertake the investigation of the above fire,
(iii) There is no written evidence or record of the report (sent by Apenisa) of having being sent to the Police or anyone else for that matter; and
(iv) ...."
The file note referred to in paragraph (i) of the CEO's letter was also admitted into evidence as exhibit 52 and stated:
"Investigation was carried out as requested on the 21.02.03 at 4pm Friday.
We started our investigation from the main switch board which is located at the entrance to the substation within the factory premises.
All subboard switches were still ON at the board and also the subboards on all the individual sections were destroyed by fire. As for the location of where the fire started. We could not determine this because of the damage caused by the fire. We also cannot determine the cause of fire from the damage caused."
Although Mr Manuduitagi was called to give evidence on behalf of the Plaintiff his evidence did not assist the Court any further in relation to the cause of the fire.
Apart from eliminating likely accidental causes Mr Luff also took into account the statement of Satya Nathan and a partially opened sliding door on the northern side of the storage room. He indicated to the Court that he considered Satya Nathan to be telling the truth about his movements in the storage room at about 5.00pm and as a result concluded that the partially open sliding door was indicative of a person having used the door to enter and presumably exit the storage area some time after 5.00pm.
In his report on page 2 Mr Luff described the door in the northern wall of the storage area (room) in the following terms:
"As depicted in the photographs, the entry point at the northern wall has no direct external access and leads predominately to a steel platform which is positioned some three metres from ground level, external of the building. We are advised, this (sliding) door in the northern wall, is used by certain employees who are instructed to refill the fresh water wash down tank, as required."
Whilst the material before the Court was not inconsistent with this general statement, the rest of the paragraph at the top of page 3 of the Luff's report requires further consideration. Later in the same paragraph the report states:
"Throughout the day, for various reasons, water is drawn from the wash down tank and it is therefore checked and filled at the end of the day's shift, normally about 5.00pm."
The statement that the tank is checked and filled at the end of the day's shift is not the same as the earlier statement that employees "are instructed to refill the ... tank, as required".
Furthermore, both Satya Nathan in his statement (Exhibit 42) and Nitya Nand in his statement (Exhibit 40) indicated that their afternoon shift started at 4.00pm on 19 February 2003. There would not have been any worker from the day shift filling the tank after the shift ended at 4.00pm.
At this stage it is appropriate to consider briefly the statements of Satya Nathan and Nitya Nand. Two statements made by Satya Nathan were put into evidence. The first (Exhibit 12) is a Police statement dated 20 February 2003 signed by Satya Nathan. The second statement is a typed statement dated 20 June 2003 (Exhibit 42) also signed by him.
The Police statement was made the day after the fire. The fire was first observed at about 11.15pm on 19 February 2003. The statement was taken by WPC Meena commencing at about 0630 (6.30am) on 20 February 2003. It would be fair to say that the events of the previous evening were able to be recalled with some degree of certainty and accuracy. The second paragraph of his statement states:
"Yesterday 19.2.03 at about 4.00pm I started my work and I was to knock off at 12pm. I was operating the boiling pan. I have to keep watching as the soap boils. At about 11.15pm I heard someone yelling. I saw it was one of the staff namely Ajay."
In that statement he made no reference to entering the storage area during the afternoon nor did he refer to filling the tank on the outside of the northern wall. He concluded his statement with the following:
"I was standing outside with the other staffs and the flames were so high that we all had to stand away from the building near to the popular building. I did not see anything suspicious and also do not know what can be the cause of the fire."
Once again there is no reference to having entered the storage area or having filled the tank.
Nitya Nand also made a Police Statement signed and dated 20 February 2003 (Exhibit 25). His statement was initially hand written and then typed. So far as is relevant his statement was that:
"Yesterday 19 February 2003 at about 4.00pm I start my work. I was with one Satya working together in the same area. There were other people working in different section inside the soap factory."
There is no reference to Satya Nathan entering the storage area nor to his filling the tank during the period before the fire. There is no reference to anything being said by Satya to Nitya after the National Fire Authority arrived at the premises.
In his statement dated 20 June 2003 (Exhibit 42) Satya Nathan stated in the third paragraph:
"On 20 February 2003 I was interviewed by WPC Meena of Lautoka Police Station to whom I gave a written statement of that date. I was further interviewed by Lautoka Police on the Saturday morning following the fire by a CID Officer whose name I cannot recall now. I gave a very detailed interview and signed statement to him about the events of 19 February 2003."
There is a clear reference to two police statements in that paragraph. Only the statement taken by WPC Meena was put into evidence. The second, more detailed statement, was not produced.
Somewhat surprisingly Satya Nathan then states:
"I do not know today if I have already advised the Police about the following matters."
It is surprising that Satya Nathan is not sure about what he is about to state when in the previous sentence he stated that he gave a "very detailed interview and signed statement" to the CID Officer. He then states the following:
"1. As part of my duty for washing and draining I needed to fill the borehole tank and for that purpose I have to go and open the valve which is situated next to the tank outside the storage room on the first floor.
It is significant that this is the first time this information has been stated in writing by Satya Nathan. Furthermore, he does not state the time when he entered the storage room to open the valve at the tank on the other side of the northern wall. He was not called to give evidence or to be cross-examined.
In contrast to his earlier statement to the Police, Nitya Nand's second statement (undated June 2003) (Exhibit 40) not only contains more detail, but some additional information as well. In particular paragraph 10 is relevant to the present discussion:
"I also wish to add that after we had come outside the Soap Factory area when the fire brigade had arrived and all the workers were gathered by the roadside, I heard Satya my assistant say "lucky I went to fill the water (in the tank) at about 5.00 o'clock. I then asked him again "Did you go to fill the water in the tank" and to that he said Yes, I did."
Nitya Nand then explains how he believed it must have been between 5.00pm and 6.00pm when Satya went to fill the tank. There is nothing in Mr Luff's report to indicate the capacity of the tank or how long it would take to fill an empty tank.
These two statements, (Ex. 40 and 42) made some three months after the fire, do cause me some concern. First, even if Satya Nathan is to be believed he clearly indicates that he did not wait to turn the valve off. He simply turned the valve on and then left. Secondly, the alleged comment made by Satya Nathan to Nitya Nand sounds artificial. I can't imagine Satya Nathan saying "open brackets" and then "close brackets." Thirdly, these statements were made about one month after the date of Mr Luff's report being 23 May 2003. These statements must then be compared with the comments made by Mr Luff in his report. In the last paragraph on page 3 he states:
"Prior to the cessation of work at 5.00pm on the day of the fire, one of the employees was assigned the task of refilling the fresh water washdown tank. As normal, this task was undertaken by entering the storage area via the internal access, walking across the room and opening the sliding door at the northern wall, giving access to the external steel platform. That employee opened the valve cocks and refilled the fresh water washdown tank. He is adamant that after filling the tank and walking back through the northern door, that he definitely fully closed that sliding door, however, he did not engage the slidebolt locking mechanism. ... the employee stated that if the door was left open or partially open, rain water could enter the storage area and ruin any packaging material in its path. For this reason he ensures that the door is fully closed. After closing the door, the employee then walks back across the room and exited via the internal door, at the southern wall. He cannot recall whether or not he closed the internal door. During this process of refilling the washdown tank, the employee noticed nothing untoward."
Some aspects of this statement are clearly inconsistent with the subsequent written statements of Satya Nathan and Nitya Nand. First, Satya Nathan states that he opened the valve and then immediately shut the sliding door and walked back through the storage room. He then states that he didn't know whether Nitya or someone else closed the valve later. Secondly, he made it clear that the internal door was open when he entered the storage room and it was open when he left. Thirdly he made no mention in his statement of what, if anything, he had observed in the short time he was in the storage room area. If he did not switch on any lights there is a likelihood that he might not even have noticed if there was anyone or anything out of place in the storage room. Finally, it was not an employee finishing on the day shift who went to fill the tank.
Mr Luff indicated in his evidence that his report was based on brief statements he had taken from the employees during the course of his four day investigation of the scene. His notes of those interviews were admitted into evidence as Exhibit 47. The brief notes relating to the statement made by Nitya Nand to Mr Luff do not disclose any of the relevant material that subsequently appeared in his undated June 2003 statement. So far as the statement by Satya Nathan is concerned, the following appears in relation to the issue presently being considered:
"Did not see anyone go to the storage area that evening. No one needs to go there, because the day shift takes out everything that is needed. Actually I did go to that area about 5.00pm to fill the water tank. I went in via the internal door, then walked across the room and opened the sliding door, so I could walk out onto the platform and fill the water tank by turning the valve on. I definitely closed the outside sliding door when I finished filling the tank. The internal door was left open."
This statement is not dated or signed by Satya Nathan. It is inconsistent with the signed and dated statement that he made on 20 June 2003. In none of his statements is there any reference to rain water entering the storage room if he left the sliding door open. The style of the statement is not consistent with the style of the statement taken by the Police on 20 February 2003.
In view of the inconsistencies that have been identified in the various statements and in respect of the statements and Mr Luff's report, I find that the emphasis placed by Mr Luff on this material renders his conclusion less reliable. Even if it is accepted that Satya Nathan closed the sliding door and left open the internal door, the position is simply that after the fire the sliding door was observed to be frozen in a partly open position. The security guard stated that he thought the internal door was closed when he made a site inspection later in the evening but before the fire.
The possibilities of what might have happened are many and varied. It is possible that Satya Nathan did not properly close the sliding door or simply forgot to close the door. It is possible that some other employee went up later in the evening to close the valve if Satya Nathan's last statement is accepted. Any person entering or leaving the storage room via the sliding door would have to use a ladder affixed to the steel platform outside the northern wall. It seems to me that the possibility that the door may not have been closed properly by Satya Nathan or even by another employee who may have subsequently closed the valve is at least as strong as the possibility that an unknown person either entered and/or left via the storage room sliding door either to deliberately light a fire or after having deliberately lit a fire.
There is a further scenario that was raised during the course of the evidence of Mr Kooren (expert called by the Plaintiff). Mr Kooren raised the possibility that the sliding may have been forced open as a result of water pressure from the hoses being used by members of the Fire Authority to extinguish the flames.
In his report Mr Luff refers to Police investigations and conclusions. Admitted into evidence as Exhibit 34 was a Police Report with the title "Scene of Crime Fire Report. The Report is not dated. The copy that was put into evidence was not signed but the signature block is that of A/SP W Tabakau, Fire Investigator. On page 4 of the Report the following facts are provided:
".... There were about 15 workers working in and out of the building at the time of the fire. Majority of whom were at the bottom floor whilst 3 were at the top floor operating the boiling pans and water tanks. .... It was between 2300 hrs to 2315 hrs that a worker from the coconut milling area who was standing at the back of the factory near the water tanks raised the alarm to the rest. He saw flames coming out from where the wall meets the roofing structure on the side of the building near water tanks. The 3 workers who were operating the boiling pans were also interviewed and confirmed that the fire was coming from the same part of the building. Other workers that were interviewed confirmed this. Also during the interview it was confirmed that some of the workers attempted to put off the fire from the same part of the building. Also basing on the interview it was confirmed that there were some workers working in the candle section room which is directly beneath the top floor from where the fire first seen."
On page 5 of the report, under the heading of conclusion, the following appears in relation to a possible electrical cause:
"That the only source of ignition present within the part of the building where the fire was first seen was electricity. There is absence of the electric appliances which could have been connected to power points and which would switched accidentally or intentionally for the purpose of causing ignition within this part of the building. The electrical wiring in this part of the building is only limited to lighting. FEA electricians have ruled out electricity to be the possible cause of the fire."
There are two comments to be made in relation to this conclusion. First, the statement that FEA electricians have ruled out electricity
as a possible cause is not supported by any details or particulars. The same comment appears in Mr Luff's report. There is no information
as to which officers of FEA inspected the scene, when such inspection took place, who made the comments, to whom they were made and
how they were made.
Secondly, the statement that electrical wiring in this part of the building is only limited to lighting is not correct. The evidence
established that there were roof fans and power points in the storage room.
The final conclusion of the report was that the fire was classified suspicious.
Attached to the Report was a document with the title Report Brief. It was dated 20 February 2003 and signed by A/ASP Luke Rawalau ASP/Crime Lautoka. On the first page the following is stated:
"At about 2315 hrs one Ajay Kumar 37 years Mill Operator saw smoke at the top-flat of the building. Few seconds later he saw fire flames from the same spot. He identified that it was from the package section on the top floor of the building. He raised alarm and all workers ran out of the building as the fire spread quickly and engulfed the whole building. ....."
At the top of the third page of the Report Brief it is stated that:
"Information gathered from the workers who were on duty at that time that no one was seen at the Package Section at the top floor where the fire started.
We cannot rule out "ARSON" at the moment."
A letter dated 26 February 2003 from the National Fire Authority was admitted into evidence as Exhibit 35. It was addressed to the Crime Officer Lautoka Police Station. The third paragraph is relevant to the question of causation.
"Report from our first arriving officer was that the first delivery was directed to the main entry at the factory, as it appeared to be the most affected area. The floor had burnt through and the stock of empty cartons had fallen and it intensified fire. Viewing the damage done to the steel joists, timber flooring and studs during the investigation, it all boils up for someone to think of what were the contributing factors to this fire."
The letter concluded with this statement:
"Suspected Cause: Through the above report, it would appear that the suspected cause of this fire to be suspicious and therefore request your Crime Division to further investigate."
Although there was conflicting evidence as to the status of the police investigation, one matter is beyond dispute, namely that no person has been charged with any offence relating to the fire.
The other expert called by the Defendant was Mr Murray Nystrom. He undertook what was termed as a peer review of the Mr Luff's report. The review took place in Brisbane Australia. Mr Luff and Mr Nystrom discussed Mr Luff's findings. Mr Luff brought photographs, a video tape, a sketch and presented an oral report. Mr Nystrom asked questions during the review. Mr Nystrom prepared a report dated 1 June 2003 which was admitted into evidence as Exhibit 36. Mr Nystrom acknowledged in his report that he had not visited the scene and was limited to the material provided by Mr Luff. He also acknowledged that:
"... we have no way of testing the accuracy of statements purported to have been made by witnesses. The result of this review is therefore dependent on the accuracy of those statements and the information provided."
The issue of an electrical cause was discussed briefly by Mr Nystrom in his report in these terms:
"The writer was not in a position to sift the debris but understands that no evidence was found of any electrical installation in the area of origin. Even given the extent of damage observed in the photographs, the writer would have expected that if an electrical installation were present before the fire, there should still have remained some evidence of it after the fire. It occurs to us that as the area of origin was a storage area, there may have been no need for electrical plant."
It would appear that Mr Nystrom was either not aware of wiring in the storage area for lighting, roof fans and power points or he has omitted to discuss and consider how, if at all, the wiring could have acted as a cause of ignition.
It is in the context of these limitations that the conclusions stated by Mr Nystrom on page 4 of his report must be assessed. The report's discussion of possible causes concluded with this statement:
"There was no physical evidence available that directly identified the fire cause. In this case the evidence was circumstantial and twofold. On one hand there is evidence that a door that would have provided access to or from, or both to and from, the area of origin was open at the time of fire, even though the last employee in the are was said to have secured this opening. Secondly, the circumstantial evidence relating to cigarette smoking and the absence of evidence of an electrical installation in the are of origin tends to vitiate the possibility of an accidental cause. On the basis of these matters, a consideration of the available evidence reviewed indicates that it is likely that the fire was deliberately set."
The two principal witnesses called by the Plaintiff were Mr Feroz and Mr Kooren. Reference has already been made to the evidence given by Mr Feroz. I accept the essential thrust of his evidence that there was wiring installation in the storage room that was at least connected to roof lighting, roof fans and power points.
Mr Kooren's evidence did not differ a great deal from the evidence given by Mr Luff except in relation to the weight to be given to the circumstantial evidence. Mr Kooren appeared not to attach a great deal or even any weight to the circumstantial evidence concerning the partially opened sliding door and the observations of Mr Ajay Kumar who was the first to notice the fire and raised the alarm. He agreed that based upon the documents that he had reviewed the point of origin could not be identified. On page 18 he continues:
"Based upon this evidence or lack thereof it is my opinion that while the fire originated in the west half of the building (i.e. the storage room) on or above the mezzanine level, the exact location could not be identified."
During the course of his evidence Mr Kooren acknowledged that the area of origin may well have been in the north eastern quadrant of the storage room. In other words, he was prepared to particularise the area of origin to a quadrant of the storage room which was located on the first floor (mezzanine level) at the western end of the building.
It must also be noted that Mr Kooren did not attend the scene. He was provided with material and spoke with Mr Feroz over the telephone. His conclusion is stated in the last paragraph of his report on page 18:
"Without a point of origin, all possible causes of this fire could not be identified or eliminated. While the previous investigations have concluded that this fire was intentionally set (malicious) there was no physical evidence to support this conclusion. The conclusion that the structural damage was due to an accelerated fire is without merit. No consideration of fuel loads (normal) inside the building other than the packaging materials were taken into consideration as to their contribution to the fire and the structural damage.
In conclusion, it is my opinion that this fire is undetermined."
The hearing lasted ten days and a great amount of material was put into evidence. I have carefully considered all the evidence and have, in order to avoid confusion and repetition, discussed those matters which are of particular significance. However it is not to be inferred that careful consideration has not been given to all the material that has been adduced.
On the evidence I am satisfied that the area of origin of the fire was in the north eastern quadrant of the storage room which was located at the western end on the first floor of the main building. I am also satisfied that there is insufficient evidence to determine a point of origin. Similarly there is insufficient evidence to determine how ignition was effected.
I am also satisfied that there was wiring installation in the storage room for lighting, roof fans and power points. I make no finding in relation to the existence of a junction box in the storage room.
I have concluded on the evidence that the cause of ignition cannot be determined. This leaves open the possibility that the fire was accidentally ignited and it also leaves open the conclusion that the fire may have been deliberately ignited. To that extent the circumstances of ignition remain suspicious.
The evidence established that more recently the Police classified the fire as accidental. However, there was no reason put forward as to how that conclusion had been determined. There did not appear to be any fresh evidence uncovered. It was more likely that the classification of accidental had been made on the basis that no person had been charged, no new evidence had been uncovered and the passage of time meant that the file had remained open since 2003 without any progress having been made.
Mr Luff's conclusion and Mr Nystrom's concurrence with that conclusion that the fire had been deliberately or intentionally ignited relied not only on the information that Mr Luff was able to obtain as a result of his examination of the fire scene but also upon circumstantial evidence. I accept that it is proper to consider circumstantial evidence in attempting to determine the cause of a fire. However it is necessary to look at the quality of that circumstantial evidence to determine how much weight should be attached to it. The reference to the quality of the circumstantial evidence means its probative value.
It is clear to me that without the circumstantial evidence, the best that Mr Luff could have concluded was that the circumstances as to the cause of the fire were suspicious. For the reasons already discussed in some detail, I have concluded that the circumstantial evidence upon which Mr Luff relied for his conclusion that the fire was deliberately lit was not of sufficient probative value to justify the leap from a suspicion to a deliberately ignited fire. The circumstantial material simply did not support the conclusion that the fire was deliberately lit. It did not go any further than to re-enforce the conclusion that the cause of ignition was unknown but suspicious.
The standard of proof that the defendant had to meet to show that the damage was malicious was the civil standard of the balance of probabilities. In the context of raising a defence that a fire was deliberately lit this standard was described in National Justice Compania S.A –v- Prudential Assurance Co. Ltd (The Ikarian Reefer) [1995] 1 Lloyd's Rep. 455 by Stuart-Smith LJ at page 459:
"On this issue the burden of proof rests unequivocally on the insurers, and the degree or standard of proof which the law requires makes the burden heavier than that which rests upon the ....... Although the same "balance of probabilities" test applies, the standard of proof required is commensurate with the gravity of the allegation made; ....
.... The burden of proof is not discharged, in our judgment, if the evidence fails to exclude a substantial, as opposed to a fanciful or remote possibility that the loss was accidental. But we bear in mind that, on the authorities, the burden which rests upon the insurers is derived from the civil, not the criminal standard, and that its nature is as described above."
In this case the Defendant alleges that the fire was the result of a deliberate act by a person or persons unknown. The issue in this case was not the involvement of the insured. The Court was not required to determine whether the fire had been started deliberately or intentionally by the Plaintiffs or with their authorisation or connivance. The issue was simply whether the fire was the result of a deliberate act. Whilst the involvement of the Plaintiffs as the insured was not in issue, that did not detract from the standard of proof that the Defendant was required to meet. Although that standard is that applicable to civil proceedings, there is ample authority for the proposition that the degree of probability is commensurate with the occasion and subject matter.
In Harnad –v- Neuberger Products Ltd [1957] 1 QB 247 Denning LJ at page 258 said:
"... the standard of proof depends on the nature of the issue. The more serious the allegation the higher the degree of probability that is required: but it need not, in a civil case, reach the very high standard required by the criminal law."
In assessing the evidence adduced by the Defendant it is helpful to keep in mind the observations of Dixon J in Briginshaw –v- Briginshaw and Another [1938] HCA 34; (1938) 60 C.L.R. 336 at 361:
".... When the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as the result of a mere mechanical comparison of probabilities independently of any belief in its reality. .... Except upon ... criminal issues ... it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. .... In such matters 'reasonable satisfaction' should not be produced by inexact proof, indefinite testimony or indirect inferences."
In this case the Defendant relied on direct and circumstantial evidence. The Court was asked to draw inferences from that circumstantial
evidence. The Court was asked to accept the circumstantial evidence and conclude from the totality of the evidence that the fire
had been deliberately lit and that as a result there was malicious damage.
On the basis of what I consider to be inexact proof, indefinite testimony and indirect inference the Court was asked to conclude that
the Defendant had established to the required standard that the fire had been deliberately lit by an unidentified person or persons.
In my judgment the most favourable inference that can be drawn from all the evidence is that the circumstances of the fire are suspicious. I have no hesitation in concluding that suspicion is not sufficient to meet the civil standard commensurate with the gravity of the conduct alleged.
As a result I find that the Defendant has not established the defence that the clause extending cover up to a limit of $3M for malicious damage applies to the Plaintiffs' claim on the policy. The question that was before the Court for determination is answered in favour of the Plaintiffs who are entitled to costs which if not agreed are to be taxed on the standard basis.
W D Calanchini
JUDGE
06 May 2011
At Suva
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URL: http://www.paclii.org/fj/cases/FJHC/2011/252.html