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Clare v QBE Insurance (Vanuatu) Ltd [2012] VUSC 101; Civil Case 161 of 2009 (16 March 2012)

IN THE SUPREME COURT
OF THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 161/2009

BETWEEN:

GRAY CLARE and JULIET CLARE
Claimant
AND:

QBE INSURANCE (VANUATU) LTD
Defendant

Hearing: 16 March 2012
Before: Justice RLB Spear
Distribution: Juris Ozols for the Claimants
Mark Hurley for the Defendant

JUDGMENT OF THE COURT

Ex Tempore

Spear J (16 March 2012)

1. This is a claim for indemnity under an insurance contract following a substantial theft of items from Mr and Mrs Clares' home in Port Vila.

2. QBE have rejected the claim relying in particular on an exclusion clause which arises if the property "is left uninhabited for more than 60 days except where the loss or damage is attributable to lighting or earthquake ".

3. Mr and Mrs Clare arrived in Port Vila in 2003 and purchased a substantial property known as Xanatu which is on the Port Vila waterfront. They resided in the house right through until February 2007 when they left Vanuatu under pressing circumstances. They had apparently been subjected to real and significant threats to their lives because of other business dealings.

4. Mrs. Clare returned to Port Vila the following month (March 2007) apparently to tidy up some of their affairs. She stayed for several days in Xanatu. She then left Vanuatu again. The undisputed evidence is that neither Mr nor Mrs Clare has resided in Xanatu since March 2007. Xanadu was eventually sold in or about March 2008.

5. At some stage between March 2007 and March 2008, a substantial amount of the Clare's chattels were stolen. This included an extensive and expensive stock of wine and whiskey. The claim asserts that the loss sustained by Mr/Mrs Clare amounts to Vt 8,690,732.

6. Mr and Mrs Clare employed two staff members during their time in Vanuatu; a house girl and a gardener. When they left Vanuatu in February 2007/ March 2007, Mrs Clare made arrangements for the house girl and the gardener to continue working five days a week, Monday to Friday and during the normal working day from 7:30 am or 8:00am through to 4:30 pm. The initial arrangement made by Mrs Clare was for a Mrs Leanne Collette (who had a business close by) to hold the security remote controls. The arrangement was that when the house girl and gardener arrived for work, they would first collect the remote controls from Mrs Collette. Those remote controls raised the security shutters on the house. That gave access to the house through the front door which was additionally secured by a lock with digital key known to both the house girl and the gardener. At the end of the working day, they were to lower the shutters and return the remote controls to Mrs Collette.

7. Mrs Collette also paid the house girl and the gardener their wages from funds provided by Mrs Clare.

8. For the few months that Mrs Collett was so involved, she carried out only the occasional check at the end of each day that the house had been secured by the house girl and the gardener. Such inspections or checks formed no part of her arrangement with Mrs Clare and were entirely voluntary on Mrs Collette's part.

9. Xanadu is a house with significant security which is hardly surprising given the value of the Clare's possessions kept inside. As I understand the evidence, the house was very secure when the shutters were down and in the closed and locked position. What these security measures did not guard against, however, was theft from within.

10. The evidence is that over a period probably of some months, the gardener stole various items from the house as well as an outboat motor attached to a small boat kept on the grounds. The evidence from the house girl, presented by QBE, is that she had nothing to do with the theft of any items from the house. Indeed, she resigned a few months after Mrs Clare left leaving the gardener as the only on-site employee and thus the only person who had day-to-day access to the house during the working week. The gardener was eventually apprehended with some of the stolen items and he additionally confessed to the theft although there remains a discrepancy (not specified by the evidence) as to what he admits he stole and what the Clares assert was stolen.

11. Douglas Patterson is a local real estate agent and he was a friend of Mr and Mrs Clare during their time in Vanuatu. Mr Patterson did not give evidence although his statement to QBE's loss adjuster, David Conwell, was to the effect that, after the Clares left, Mr Patterson took it upon himself to have a look around Xanadu on the odd Saturday just to check that all was in order. At that time, Mr Patterson did not have access to the interior of the house. Mr Patterson was eventually engaged by the Clares as the property manager after Mrs Collette brought an end to her involvement. Additionally, Mr Patterson was eventually engaged by the Clares to act as their real estate agent on the sale of Xanadu.

12. The case for indemnity by Mr and Mrs Clare has some difficulties. First and foremost, there is the unsatisfactory evidence before the court as to actual loss. There was no satisfactory evidence from Mrs. Clare, or any other witness, as to exactly what items were stolen and what the value of those items was at the time. All that is before the court is a list of missing items that was prepared apparently by Mrs Clare and submitted to QBE through the Clare's broker, AON. That list, with loss values assigned by the author of the list, was then passed on to the loss adjuster (Mr Conwell) who had been engaged by QBE to investigate the claim and to provide a report on it.

13. I mentioned that the inadequacy of the evidence in relation to the actual items claimed to have been stolen and the value assigned to be assigned to them presents something of a difficulty. Of course, that is a difficulty only if QBE is liable under the policy to indemnify the Clares.

14. There are two other issues raised by the case.

15. First, it was a term of the insurance contract that any collection of items had a specified capped indemnity value unless otherwise agreed. In this respect, Mr Hurley points to the stock of wine kept by the Clares and argues that this is a collection and subject to the indemnity cap. Without question, the wine totalling some hundred and twenty-five bottles is of fine quality. The one hundred and twenty-five bottles of wine and the five bottles of whiskey and bourbon are valued by Mrs Clare at NZ $80,545. Some of the individual bottles of wine (particularly the vintage champagne) were given a value by Mrs Clare at well over NZ $1,000 with a particular magnum of 1979 Krug Collection being valued at NZ$5,140.

16. Mrs Clare gave supplementary evidence in relation to the wine. She stated that her husband and she were fortunate to be able to enjoy fine wine and that it was nothing for them to consume a NZ$3,000 bottle of wine as often as once a week although the daily delight would customarily be a bottle of wine of lesser quality purchased from the local supermarket and and at around the NZ $100 value. Clearly, this lifestyle and penchant for fine wine was within the financial reach of the Clares and this court does not need to be more concerned than that. To an extent, it is a question of relativity in relation to an individual's wealth and priorities when assessments are made as to the enjoyment of luxuries. Certainly, bottles of wine of value Vt 2,500 would be considered an unjustifiable extravagance by many.

17. Mrs Clare explained, indeed, that the wine cellar in their home in New Zealand contained anywhere between 10,000 and 15,000 bottles at any one time and that this could be considered a collection as, indeed, some of it was purchased as an investment. However, she was adamant that the wine they kept in Vanuatu was for their personal and regular consumption albeit that it was wine well beyond the financial reach of many people in Vanuatu and, indeed, probably in the rest of the world.

18. Mrs Clare explained that the fine wine was kept in two specialist wine fridges which they had purchased from Vila Distributors here in Port Vila. The fridges had a limited capacity and they were restocked as the wine was consumed. She asserts that the wine was entirely for their personal consumption rather than the gathering of wine for some other purpose such as investment.

19. This is not Mr Hurley's strongest point. I do not consider the stock of wine to be a collection. I accept Mrs Clare's evidence that this was a stock of wine, albeit very expensive wine, kept for for their personal consumption. Accordingly, I find against QBE on that issue.

20. Mr. Hurley also raises an issue as to the excess of Vt 25,000 required for each insurance claim. Mr Hurley argues that it is likely that the theft of so many items would have taken place on different occasions over a period of months and that a separate excess should apply to each theft. However, it is impossible to determine now how many individual occasions of theft there were; there is no satisfactory evidence on this, . Mr Hurley suggests that the case should be treated as involving twenty individual claims but that is simply a stab in the dark.

21. There should only be only one excess that applies to this claim which relates, in my judgment, to theft that took place undetected over a single period of time being while the Clares were away.

22. Mr. Ozols argues that the "uninhabited" exclusion should not apply here as the house was not left unoccupied or uninhabited for more than 60 days. In this respect, Mr.Ozols argues that the purpose of this exclusion is to ensure that there is some reasonably regular presence in the house that would act as a deterrent to thieves and also detect reasonably quickly if theft of any items had occurred and accordingly take the necessary steps to prevent further thieving. Mr Ozols argues that the Clares did everything reasonably possible to ensure the security of the Xanatu while when they were away. The evidence points to the gardener having access to the house each week day between 7.30 am and 4.30 pm which would, in the normal course provide that regular presence, the deterrence to thieves and the detection of any attempt to steal from the house. The irony, of course, is that the thief was the gardener.

23. Mr Ozols argues further that, in those circumstances, if the Clares had been away for only 30 or 40 days, the gardener could still have committed this theft and it would have gone completely undetected until Mr/Mrs Clare returned.

24. But that is not the point. The point is that no one lived in this house from March 2007 through to March 2008. There is some evidence that the gardener spend the odd night on a bed in the laundry and also that the house girl had also stayed in the laundry on one or two occasions with her two children. They could not be considered as residing in the house.

25. In December 2007, QBE renewed the insurance policy and Mr. Ozols places some significant on this. He argues that QBE did so fully aware that the Clares were not residing in the house and that they were living overseas. Mr Ozols points to evidence that he elicited from both Mr Bailey (QBE's General Manager) and Mr. Conwell that they were or became aware that the Clares had left Vanuatu to the extent that this was public knowledge. It appears that it was generally known that the Clares had fled the country in the pressing circumstances that then prevailed and which were played out in the local media.

26. What this court must do is determine what is meant by the term uninhabited as found in the exclusion clause. Mr. Hurley refers me to a decision of the Court of Appeal of Fiji - New India Assurance Company Ltd v Prasad [1999] FJCA 13. That case dealt with a similar exclusion clause in an insurance contract, "... being left without an inhabitant therein for more than thirty days... " and it was also in respect of a residential property. The facts of the case do not need to be discussed beyond mentioning that this property was left untenanted but visited from time to time by the owner and workmen. Dealing with the clause before it, the Court said this:

It is well established that in construing the language of a contract of insurance the ordinary meaning of the words used are to be adopted, having regard to the context of the policy and to the surrounding circumstances known to the parties at the time it was entered into. "To inhabit" is defined in the Shorter Oxford English dictionary as "to dwell in; to occupied as an abode" and an "inhabitant" is one "dwelling in a place; a permanent resident ". There is no ambiguity about those words or about the word "uninhabited" derived from them, calling for a construction favourable to the insured.

27. The outcome of that case was in favour of the insurance company.

28. I respectfully adopt and apply this approach to the construction and application of the clause at the centre of this case despite the slight difference in the terminology.

29. I accordingly find that the Xanatu was not occupied from March 2007 through to March 2008. No-one can be considered as having resided in or inhabiting the residence during that 12 month period even taking account of the occasional nights spend in the house by the gardener or the house girl which, indeed, does not appear to have been authorised. Nor does the daily attendance through the working week of the house girl (until about November 2007) and the gardener qualify as amounting to the inhabiting of the home.

30. What occurred in this case is precisely what the exclusion clause was designed to prevent and that is a home being left without anyone living in it for an extended period of time; in this case for more than 60 days The gardener could have confidently expected that the theft from the house would not be detected for some months given the public circumstances in which the Clares left Vanuatu and which would at least have suggested that it was unlikely they would returned for some considerable period of time.

31. So, I find that the house was unoccupied for more than 60 days. In particular, I do not accept Mr. Ozols submission that the staffing arrangements involving Mrs. Collette or Mr Patterson together with the house girl and the gardener were sufficient to establish that the home was occupied or inhabited. That surely required someone to live in the home whether that person was a tenant or a house sitter. Not to make arrangements for someone to live in the house meant that it was uninhabited for a period of approximately 12 Months.

32. What effect then was the decision of QBE to renew the policy for a further 12 months from 23 December 2007. Mr. Ozols argues that this meant that QBE effectively waived compliance with the requirement that the house not be left uninhabited for more than 60 days. I do not accept that arguments. The overwhelming evidence before me is that, while there was an appreciation by QBE through Mr. Bailey that the Clares had left Vanuatu, he did not know what arrangement they had put in place in relation to that house. He did not know whether they had let the house or whether they had brought in a house sitter or whatever. It was not incumbent on QBE to make that enquiry unless it it had been specifically put on notice that the Clares intended to leave the house uninhabited for an extensive period. In that event, to renew the policy might well amount to a waiver of that relevant exclusion clause such that QBE could not claim the benefit of it. However, that did not happen here. Furthermore, while the Clares were overseas, there was nothing stopping them from contacting QBE and explaining their position. QBE could then have decided whether to continue with the policy or not.

33. It is fundamental to any insurance contract that the parties deal with each other in the upmost good faith and that did not occur here. The Clares did not consider the added security risk created by them leaving the home uninhabited. At the very least, it could have been expected that the Clares would have informed their broker AON and explained their predicament. In that case, AON would have surely raised the matter for QBE. The evidence is, however, that even AON did not know what arrangements had been put in place in respect of Xanadu while the Clares were away.

34. Accordingly I find that QBE was lawfully entitled to deny the claim by Mr and Mrs Clare for indemnity and judgment is accordingly entered for QBE on the claim.

35. Mr. Hurley seeks an order that Mr and Mrs Clare pay costs on an indemnity basis given (what he argues) was a claim that was always doomed to fail. Essentially, Mr Hurley attempts to portray the claim as one that was hopeless right from the outset and that this should have been obvious to all concerned.

36. It is always a matter of initial concern where an insurance claim is rejected as the insured is often in a position of comparative weakness because of the loss. It is relatively easy for an insurance company to deny a claim and force the insured to be put to the expense of pursing recovery in the courts or accepting a compromise settlement. Case law from around the world is littered with cases where claims have been rejected without any good cause. While that was not the case here, indeed far from it, I consider that generally costs in unremarkable insurance cases such as this should be on the standard basis either way.

37. The defendant QBE is entitled to costs on the standard basis either to be agreed or taxed.

BY THE COURT