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National Teachers Insurance Ltd v Tet [2017] PGSC 49; SC1647 (22 December 2017)

SC1647

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 125 OF 2014

BETWEEN:
NATIONAL TEACHERS INSURANCE LIMITED

Appellant

AND:
JOHN TET trading as JAYS RENTAL

First Respondent

AND:

KABUA TAUEDEA

Second Respondent

AND:

PACIFIC ASSURANCE GROUP LIMITED

Third Respondent

Waigani: Kirriwom J, Kassman & Kangwia JJ
2016: 30^th August
2017: 22^nd December

Cases Cited:

Nil

Legislation cited:

Insurance Act 1995 Sections 31, 39

Counsel:

B S Paita, for the Appellant
N Tenige, for the First Respondent
No appearance for the Second Respondent
J Naphal, for the Third Respondent

22^nd December, 2017

DECISION

1. BY THE COURT: This is an appeal from the decision of National Court of 22 August 2014 in National Court proceedings WS No. 451 of 2010 John Tet trading as Jays Rentals v National Teachers Insurance Limited. That is the decision of His Honor Justice Sawong (hereinafter "the learned primary judge").
   
2. For the purposes of this judgment, the Appellant National Teachers Insurance Limited will be referred to as "NTIL", the First Respondent John Tet trading as Jays Rental as "Jays", the Second Respondent Kabua Tauedea as "KT" and the Third Respondent Pacific Assurance Group Limited as "PAG".
   
3. KT passed away in the year 2012 which was a date prior to the trial conducted on 7 April 2014. The estate of KT was not represented at the trial or in the appeal. There was no appearance for PAG at trial but PAG did appear at the hearing of this appeal. Neither was there any pleading filed by or on behalf of KT and PAG in the National Court.
   

BACKGROUND

4. The essential facts are clearly set out on the first page at paragraphs 3 and 4 of the learned trial judge's decision which we repeat:
   

"3. The plaintiff was carrying on business under a registered business name of Jays Rentals. On 29th day of May 2008, he bought a 16 seater Toyota Hiace Bus from Ela Motors for K65,000.00. This was partly financed by the Nationwide Micro Bank and partly from equity contribution. It was a term of the loan that the plaintiff must take out a comprehensive insurance cover before the bank would release the funds to the motor dealer to release the vehicle. He therefore sought the assistance of KT to obtain a quote. KT obtained a quote for insurance cover from the third defendant as its agent. KT obtained a quote for insurance cover from the third defendant for the sum of K5,759.81. The plaintiff rejected this quote as being expensive. He then deposited the sum of K4,000.00 with the second defendant on the basis that KT would find a cheaper insurance cover.

4. Without facilitating an insurance cover, KT left the employment of PAG and commenced employment with the NTI. On or about 2 June 2008, and upon commencing employment with the NTI, KT processed and placed with the NTI an insurance cover and the first defendant issued a Certificate of Currency on 2 June 2008. That certificate was sent to the bank. The bank then acting on the strength of that certificate authorized Ela Motors to release the vehicle to the plaintiff. The plaintiff operated the vehicle for some time and in December 2008, the vehicle was involved in an accident. As a result the plaintiff submitted a claim to the NTI but the NTI denied liability.
   
5. The Writ by Jays against NTIL was filed on 29 April 2010 and the amended statement of claim was filed on 5 October 2010 with the inclusion of KT and PAG. NTIL then applied for extension of time to file its defence but that application was refused by Justice Batari on 23 August 2010. Despite this, NTIL appears to have filed a Defence on 26 October 2010. On 24 February 2011, NTIL's Defence filed 26 August 2010 was struck out by Justice Gabi. It is arguable the striking out of NTIL's defence entitled Jays to summary judgment on its claim but that appears to have been overlooked by counsel for the parties and the court.
   
6. Interestingly, a further amended statement of claim was filed on 21 February 2012. There was no defence filed by any of the defendants NTIL, KT and PAG. Neither did NTIL file a cross-claim against KT on its claim that KT acted fraudulently and, to that extent, this was confirmed at the commencement of trial by counsel for NTIL.
   
7. The trial proceeded with the court being asked to deal firstly with the issues of liability. Jays and NTIL filed affidavits. A Statement of Agreed and Disputed Facts and Legal Issues was endorsed by Jays and NTIL. The deponents of the affidavits filed by Jays and NTIL gave evidence and were cross-examined. Lawyers who appeared at the trial were Mr Tenige for Jays and Ms Suelip for NTIL.
   
8. The witnesses for Jays were the plaintiff himself John Tet and Gerard Amdi a loans officer with Nationwide Micro Bank in Lae. The learned primary judge set out in full in the decision of the court the contents of the affidavits. We are of the view the learned primary judge carefully considered and accepted their evidence and we note the learned primary judge said their evidence was not discredited in any shape or form.
   
9. For NTIL, the General Manager Ure Rauka and Senior Account Executive Sam Imatama gave evidence. The learned primary judge sets out in full in the decision of the court the contents of the affidavits. We are also of the view the learned primary judge carefully considered that evidence. We note the learned primary judge rejected much of their evidence on the essential issues as to the actions of KT in his dealings with Jays and the validity and effect of the Certificate of Currency issued by NTIL and copied to Jay's bank Nationwide Microbank.
   
10. The parties then filed written submissions. We note those documents were not included in the Appeal Book and that has a bearing on the issues now raised in the appeal. The court was asked to determine the issue of liability without the benefit of oral submissions from the parties.
    
11. The learned primary judge then carefully sets out the issues for determination and draws his conclusions on the evidence for Jays and NTIL that was adduced and tested in cross-examination. We set out in full the essential parts which are contained in paragraphs 25, 26 and 27 of the learned primary judge's decision.
    

"25. The only evidence of the arrangement between the plaintiff, the first defendant and the third defendant is from the plaintiff. His evidence is that he approached the first defendant who was an employee of the third defendant for quote for insurance cover. A quote was issued by the third defendant. This was however rejected by the plaintiff as being expensive. Thereafter the plaintiff deposited the sum of K4,000.00 with the first defendant on the basis that the first defendant would try to find an alternative insurance cover with another insurance company. This piece of evidence has not been destroyed nor contradicted. In my view, the essential element of an insurance contract between the plaintiff, the first defendant and the third defendant is not there. There was no offer and acceptance. There was no privity of contract between those two critical parties. I find that on the balance of probabilities there was no contract of insurance between the plaintiff and (PAG) at the relevant material time.

26. The second issue is whether there was a valid contract of insurance between the plaintiff and NTIL. Again in my view the answer to this is to examine closely the facts as revealed by the evidence. The evidence so far s that soon after receiving deposit from the plaintiff, KT left the employ of PAG and joined NTIL in mid May 2008. Whilst in the cause of his employment and in conjunction with Sam Imatana, Sam Imatana issued a Certificate of Currency. It is also a fact that the employee of the bank was also dealing with Mr Imatana of NTIL. Mr Imatana then on basis of his discussions with KT and the bank's employee issued the Certificate of Currency. The principle of utmost good faith was relied on when the certificate was issued.
    

27. All the other evidence of non-payment of premium, no policy being issued etc was discovered after the event. In fact as the evidence reveals and which evidence has not been contradicted is that, upon issuance of the Certificate of Currency, the bank authorized Ela Motors to release the vehicle to the plaintiff. On the basis of the evidence I tried to summarize, I come to the firm conclusion that there was a valid and binding contract of insurance between the plaintiff and NTIL.

12. The learned primary judge determined the issue of liability in finding; (a) there was no contract of insurance between Jays and PAG; (b) there was a contract of insurance between Jays and NTIL; (c) the allegation of fraud may be one directed at KT in his own dealings but was not established against Jays and is dismissed; and (d) NTIL is liable to the claim by Jays. The learned primary judge entered Judgment for Jays against NTIL for damages to be assessed.
    
13. Being aggrieved with the decision on liability of the learned primary judge, NTIL filed this appeal.
    

GROUNDS OF APPEAL

14. There are three grounds of appeal contained in the Amended Notice of Appeal filed 23 October 2014. We deal with each ground separately.
    

"3(a) The National Court erred in fact and in law in finding that the essential element of an insurance contract between the first respondent, the second respondent and the third respondent was not there as there was no offer and acceptance. On the balance of probabilities, the Court erred when it found there was no contract of insurance between the first respondent and the third respondent at the relevant material time and the same finding ought to have been given to the first respondent, the second respondent and the appellant where there was in fact no offer and acceptance to constitute an insurance contract."

15. In this ground, NTIL merely says the learned primary judge erred in finding that there was no contract of insurance between Jays and PAG but NTIL fails to clearly state in the ground why it says that was an error.
    
16. In submissions, NTIL advances the argument by reference to Sections 31 and 39 of the Insurance Act 1995 and legal principles applicable. Our first comment is reliance on these statutory provisions was not raised in pleadings filed by NTIL although we remind ourselves that NTIL's defence was struck out by the Court. Further, our examination of the transcript confirms that NTIL did not refer to these statutory provisions at the trial. Further, as we noted above, there were no written submissions included in the Appeal Book however we note the learned primary judge confirms at paragraph 19 of the decision that he had before him written submissions and we presume those were filed by Jays and NTIL.
    
17. We will in any event address the arguments raised in reliance on these statutory provisions. Sections 31 and 39 of the Insurance Act 1995 provide:
    

31. Insurance of policies and renewals, etc.

(1) A licensed insurer, either itself or through its agent or broker, is responsible for ensuring that a policy document is issued to the insured in respect of each separate contract of insurance within 30 days of inception of the insurance risk by the insurer and the policy issued shall—

(a) constitute the contract between insurer and insured; and

(b) define the terms and conditions and provisions of the contract of insurance specifically for each risk insured.

(2) A licensed insurer, either itself or through its agent or broker, is responsible for ensuring that a renewal certificate confirming the renewal of insurance is issued within thirty days of inception of the renewal and the renewal certificate issued shall confirm the period for which the insurance contract has been renewed, and where any terms or conditions or provisions of contract have been varied, the variation shall be defined as an endorsement to the policy and a copy of that endorsement shall be attached to and form part of the renewal certificate.

(3) Where a policy document or renewal certificate has not been issued to the insured in accordance with Subsections (1) and (2), in the event of a dispute the insurer shall be required to prove that the insured person was aware of and accepted the specific terms and conditions or provisions on which the insurer seeks to rely to avoid or reduce or limit its liability.

39. Responsibility of licensed insurers, licensed brokers and licensed loss adjusters for their agents.

(1) A licensed insurer, licensed broker or licensed loss adjuster is responsible for the financial affairs of his or its agents (and any sub agents) with regard to transactions entered into by an agent on behalf of the licensed insurer, licensed broker or licensed loss adjuster.

(2) In all cases agents shall be agents of the licensed insurer, licensed broker or licensed loss adjuster and not agents of the insured, and the licensed insurer, licensed broker or licensed loss adjuster shall be directly responsible for negligence, default or professional misconduct of an agent, including failure to pay over money paid to an agent by an insured person.

(3) No licensed insurer, licensed broker or licensed loss adjuster shall utilise the services of an agent without first having entered into a formal agreement with such agent using an agreement form which, on written request by the Commissioner, shall be subject to his inspection and approval.

(4) In the case of multi-agents, separate formal agreements shall be concluded and executed by the agent and each relevant licensed insurer, licensed broker or licensed loss adjuster, and in all cases, including cases where an agent represents more than one licensed insurer, licensed broker or licensed loss adjuster, receipts and other documentation shall clearly specify the name of the licensed insurer, licensed broker or licensed loss adjuster ultimately responsible for the transaction.

(5) Moneys by way of premiums for insurance cover which are paid by a person to a broker or agent of a licensed insurer shall be deemed to have been paid to the licensed insurer at the time and in the amount that the moneys were paid to that broker or agent.

(6) A licensed insurer shall not deny liability under any contract of insurance on the basis that moneys paid to a broker or agent have not been paid to the licensed insurer, and a licensed insurer shall not seek payment from an insured person where such payment has been made to a broker or agent.

(7) Notwithstanding this section, a licensed insurer and broker or agent may agree upon the credit terms which will apply as between the broker or agent and the insurer for remitting of premium moneys to the licensed insurer.

(8) Any agent or licensed insurer, licensed broker or licensed loss adjuster, who fails or neglects to comply with the provisions of this Part relating to responsibility for agents, is guilty of an offence.

Penalty: A fine not exceeding K25,000.00.

18. We understand NTIL to be arguing that on the court finding Jays paid to KT cash of K4,000, the payment was made to KT when KT was an employee of PAG and therefore a contract of insurance was entered into between Jays and PAG through KT being the agent of PAG and that is as provided under Section 39(5). In our view, the learned primary judge was satisfied that PAG's quotation was rejected by Jays who had said it was expensive and Jays clearly said that in evidence which was not refuted by NTIL. Further, the learned trial judge was satisfied the cash of K4,000 that Jays gave to KT was put in KT's hands to secure a "better deal". Neither Jays nor his financier Nationwide Microbank in Wau acted on the quotation from PAG. We find no error in these findings by the learned primary judge. This ground of appeal is dismissed.
    

"3(b) The National Court erred in law and in fact when finding that there was a valid and binding contract of insurance between the appellant and the first respondent when:- (i) the second respondent received the premium deposit from the first respondent whilst still in the employ of the third respondent in his capacity as the acting branch manager, Lae. (ii) four (4) months after receiving the premium deposit from the first respondent in his capacity as the acting branch manager, Lae, the second respondent left the employ of the third respondent and joined the appellant and in conjunction with another employee of the appellant, issued a Certificate of Currency (COC) on utmost good faith, which COC the first respondent's financiers relied on and authorized Ela Motors to release vehicle to the first respondent.

The lower court erred in that finding as there was no offer made by the appellant to the first respondent for insurance cover evidently in a quotation given to the first respondent and furthermore, there was no acceptance of any offer by the first respondent to the appellant evidently in payment of the premium and being issued a receipt."

19. There was no dispute to the fact the Certificate of Currency relied on by Jays was duly issued by Sam Imatama on behalf of NTIL. Both witnesses Ure Rauka and Sam Imatama for NTIL confirmed that in oral evidence. Imatama also confirmed the evidence of Gerard Amdi that they both discussed the Certificate of Currency and Imatama confirmed it was lawfully issued and Nationwide Microbank acted on that document in "good faith" and then proceeded to formally approve the loan to Jays and then authorise the release of the vehicle by Ela Motors to Jay. Further, there was no evidence called or adduced at trial to advance any allegation of fraud on the part of KT. In this regard, the learned primary judge was satisfied that was a matter for NTIL and its employees and internal processes. There was no other evidence adduced by NTIL to refute any of these essential facts. The learned primary judge was satisfied with this evidence. We see no error in the findings in this regard by the learned primary judge.
    
20. We also agree with the learned primary judge that the absence of a policy of insurance document was an error or failure on the part of NTIL for which Jays could not be responsible. The Certificate of Currency was duly issued noting a policy number. Jays had paid K4,000 and was entitled to expect NTIL to issue a policy document. The failure to issue a policy document is a failure or error in the processing and monitoring of its documents and processes by NTIL. Jays was entitled to expect that he had in place a policy of insurance for the period of one year from the date of issue of the Certificate of Currency. The loss he sustained was a risk for which Jay secured insurance with NTIL and it occurred within the period of cover provided in the Certificate of Currency. We note in cross-examination, Sam Imatama said "What we do is that when the banks ask for a certificate of currency, we do this from utmost good faith. We do this from utmost good faith that the Certificate of Currency is given to the banks, to the financiers then the premium is paid by the financiers in normal practice in the insurance industry. And then after the premium payment is received, a policy documentation is issued to the client and a copy to the financier." (see page 177 of the Appeal Book). Sam Imatama obviously suspected things were not in order but he failed to take the issue up with his superiors. That was an error on the part of NTIL with its processes and procedures. In all of what we discuss, in our view sections 31(3) and 39(6) of the Insurance Act 1995 are of no benefit to NTIL but clearly shift the burden to NTIL. We repeat we find no error in the findings in this regard by the learned primary judge. This ground of appeal is dismissed.
    

"3(c) The lower Court erred in law and in fact when finding that the allegation of fraud is not against the first respondent but against the second respondent, who was at the time of issuing the COC, an employee of the appellant, and therefore had nothing to do with the first respondent and thus rejected that defense by the appellant outright. The allegation of fraud, although not against the first respondent, was pleaded with particulars as required by Order 8 Rule 30 of the National Court Rules against the second respondent and that defence by the appellant ought to have remained until determined on its merits."

21. This ground is answered by repeating the fact NTIL's Defence filed 26 August 2010 was struck out on 24 February 2011. We also repeat that there was no evidence called by NTIL to advance this claim. We see no error in the findings in this regard by the learned primary judge. This ground of appeal is dismissed.
    
22. As all grounds of appeal are dismissed, the appeal is dismissed and costs shall follow the event.
    
23. The formal orders of the court are:
    
    1. The appeal is dismissed.
       
    2. The decision of the National Court of 22 August 2014 in WS No. 451 of 2010 John Tet trading as Jays Rentals v National Teachers Insurance Limited is confirmed.
       
    3. The Appellant shall pay the Respondents' costs of the appeal on a party / party basis, to be taxed if not agreed.
       
    4. Parties shall attend in the National Court at Lae at the next available date in 2018 for directions in the civil court and progress the matter to assessment of damages and bring this matter to finality with all due diligence.
       

Judgment accordingly:
____________________________________________________________________
Mirupasi Lawyers: Lawyers for the Appellant
Gamoga & Co. Lawyers: Lawyers for the First Respondent
Lawyers for the Second Respondent : Nil
Bradshaw Lawyers: Lawyers for the Third Respondent