Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/ghanalegal/domains/ on line 101 KOUSAIFI v. NORWICH UNION FIRE INSURANCE SOCIETY LTD. | GhanaLegal - Resources for the legal brains


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  • 1962-06-25
  • 1 GLR 501506
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Arbitration?-Setting-aside award?-What constitutes error in law?-Supreme [High] Court (Civil Procedure) Rules 1954, Order 64, r. 13.


The respondent, Kousaifi, had insured the goods in his store with the applicants against theft. A warranty clause in the policy of insurance read:?"That the assured keeps and during the whole of the currency of the policy shall keep a complete set of books, accounts and stock sheets or stock books showing a true and accurate record of all business transactions, and stock in hand.?"The store was burgled, and, pursuant to the arbitration clause in the policy, both parties referred the matter to an arbitrator for the purpose of determining liability and the quantum of damages. In the course of the arbitration, an accountant a Mr. Rockson, an employee of the assured, submitted a report, exhibit F, based on the stock books, showing the goods that ought to have been in the shop and those that were actually there the morning after the theft, i.e. the amount of loss.The report showed that some of the goods, to the value of G2,656 16s. 4d., although appearing in the stock books, were not supported by any invoices whatever; the rest valuing G2,297 10s. were duly authenticated by invoices. The arbitrator accepted both figures as representing the quantum of loss and awarded G4,954 4s. damages to Kousaifi. The insurance company applied to the High Court under Order 64, rule 13 of the Rules of Court to set aside the award in whole on the ground that there is an error of law on the face of it, in that (a) the arbitrator had failed to decide whether the insured did not commit a breach of the warranty clause and therefore absolved the company from all liability; and (b) the insured failed to prove his loss.


APPLICATION to set aside an arbitration award.

The applicants, an insurance company, hereinafter called the company, have moved the court to set aside an award made by A. M. Akiwumi, Esq., a sole arbitrator appointed by them and the respondent, in a dispute arising out of an insurance policy taken by the respondent. The application was made under Order 64, rule 13 of the Supreme [High] Court (Civil Procedure) Rules, 1954.

In order that an award may be set aside by the court, it must be shown that an error in law exists on the face of it; this includes an error on the face of any document incorporated therewith, attached thereto, or referred to therein. See Halsbury's Laws of England (3rd ed.) Vol. 2, page 60 [p.503] paragraph 127. In Hitchins v. British Coal Refining Processes Ltd.,1 an arbitrator in his award referred to certain paragraphs of pleadings and used them as part of the basis of his award. It was held that the court had to look at those paragraphs of the pleadings together with the award itself to determine whether there was error on the face of the award.

The errors alleged on the face of the award in this case are: (1) that the arbitrator failed to consider the defence put up by the applicant' s, and (2) that he failed to properly construe a warranty clause in the insurance policy out of which the dispute arose.

The defences raised at the arbitration as stated by counsel in his opening are two: (a) that the assured, respondent herein, had committed a breach of the warranty clause consequently the company are entitled to repudiate liability; and (b) that stock records produced do not satisfy the standard of proof required for the determination of the quantum of damages suffered by the assured to warrant any award in his favour.

On the defence of breach of warranty the arbitrator said:

"The question as to the breach of warranty contained in the policy, exhibit A, was not at any time raised during the negotiation between the parties; they were only concerned with the quantum of loss. Indeed all the evidence adduced before me was mainly concerned with the quantum. The question of warranty came in as an alternate defence by the company."

Later on he said:

"Referring to the question of warranty, the terms of the warranty are contained in exhibit A and taking them altogether I am of opinion that the reason for the warranty is that in event of any claim for loss it would be easy to calculate the same if the assured kept a set of books from which it would be easy to ascertain the loss. From the evidence on record I am satisfied that exhibits B and C are the proper books necessary to be kept in respect of goods in the wholesale. Invoices of goods therein may be helpful, but in as much as the wholesale store is only a depository for goods which are later issued out, exhibit B is a complete answer for those goods and exhibit C is the proper record as to the movements of goods from the wholesale store. This answers the question of warranty which as I have said is an after-thought."

The issue raised on the warranty is: whether or not there has been a breach of it, and if there has, whether that breach entitles the company to repudiate the claim. Nowhere in the award did the arbitrator consider that issue. He simply dismissed it as an after-thought. If the arbitrator had considered it and given a decision on it which is erroneous the court will not interfere. But where an issue was raised before an arbitrator and he failed to decide it, there is an error apparent on the face of the award.

The question whether or not there was evidence which under the policy was sufficient to enable the arbitrator to assess the quantum of loss is a question of mixed law and fact. In deciding that issue, the arbitrator relied entirely upon a report exhibited to the affidavit in support of the application, and marked B. That report was prepared by one Mr. Rockson, an accountant, employed for the assured. It was admitted in the proceedings before the arbitrator, and marked exhibit F. The arbitrator accepted the said report, and based his award, the quantum of damages upon it. In the course of his award he said: "I have carefully examined and considered Mr. Rockson's report exhibit F and in the light of the evidence adduced before me I accept the findings in that report as the true quantum to which the claimant is entitled". It would [p.504] be seen upon examination that the said report of Mr. Rockson is inconclusive, it left a most important question to be decided, namely, whether apart from an amount of G2,297 10s. 0d. any other amount of loss was proved with the degree of proof required by law in cases of this nature having regard to the warranty. The report said, inter alia:

"In the first place we attach herewith a comprehensive analysis of the stock ledger and the invoices, which are self-explanatory, and would add the following . . . .

Actually I have not seen the policy of the assured, and according to your statement he is requested to keep stock records, and if this is so, then the stock ledger clearly gives the following information:

(a) the description of the goods;

(b) the quantity of the goods;

(c) the rate of cost per article;

(d) the total cost per each quantity of goods;

(e) the issues therefrom;

(f) the balance remaining in stock both in quantities and values.

The above information in our opinion appears to be adequate for a warehouse, with the exception of the invoice numbers which were not quoted in a large number of cases, thus rendering checking and verification a tedious job.

In our analysis we were able to obtain an amount of G2,297 10s. being actual invoices agreeing with ledger entries (the stock book), and to these must be added the following under the reasons given below."

In the penultimate paragraph the report said:

"It would appear that your client has a strong case for his claim as the surveyor has committed himself by accepting stock which are not supported by invoices but in the stock ledger. This we will leave to you to argue out with the insurers."

In this last paragraph the accountant in effect suggested that the conduct of the surveyor in including those items in the stock should operate as estoppel against the company.

Applying the general principles of construction of documents that where words are unambiguous, they must be given their plain and ordinary meaning, I would say that the only proper construction which the report permits of, in simple language, is as follows: the evidence supporting the amount of G2,297 10s. 0d. loss is adequate, but since there are no invoices to support the other amounts, the evidence supporting those other amounts is not sufficient, therefore counsel for the assured should argue that the fact that the Surveyor included stock in his calculation which were not supported by invoices is an admission by the company against their interest.

Clause (b) of the warranty provided as follows:

"That the assured keeps and during the whole of the currency of the policy shall keep a complete set of books, accounts and stock sheets or stock books showing a true and accurate record of all business transactions, and stock in hand."

By that clause the assured warranted that he would keep the set of books stipulated, which by the custom of the trade must denote specific documents. By clause (a) of the warranty, the parties agreed that in the case of loss, the said set of books and documents would constitute the evidence upon which the loss should be estimated. The accountant who should understand the denotation of the term "stock record", realised that without invoices to support entries in them, the books produced did not form "a complete set of books, accounts and stock sheets or stock books".

Now even though the accountant pin-pointed the question, the arbitrator evaded that all-important question of construction of the warranty clause to decide whether or not the documents produced by the assured satisfied the requirements of the policy, as in law is necessary to constitute the relevant evidence in proof of the loss. In other words, is there sufficient admissible evidence in proof of loss other than G2,297 10s. 0d.? Put in another form the question for determination is should any entries in the stock book be admitted as part of the stock in the wholesale when there are no invoices vouching for their authenticity ?

When an arbitrator proceeds upon evidence which is not admissible, or on principles of construction which the law does not countenance, there is an error in law, which may be a ground for setting aside an award. See Halsbury (above) and Kelantan Government v. Duff Development Co.2

Instead of dealing with the legal issue, i.e., whether certain entries are admissible evidence in proof of loss, the arbitrator treated the point raised merely as a question of fact, i.e., whether it was possible to calculate loss from the documents before the court, and went on to accept opinion expressed by the said accountant Mr. Rockson and another accountant on that point, and held: "It proves therefore that some of the entries in exhibit B though not covered by invoices form part of the stock in the warehouse", and that it was therefore easy to calculate the loss as Mr. Rockson did. Thus he accepted those items as part of the stock in the warehouse, without considering whether, without supporting invoices, those entries are properly admissible evidence as to what was in stock at the date of the theft. It means that the arbitrator failed to determine the legal issue of whether or not there was admissible evidence in proof of loss other than the amount of G2,297 10s. 0d. And since the report of Mr. Rockson which the arbitrator accepted showed that there was no such admissible evidence according to the custom of the trade, there is an error which appears clearly on the face of the award taken together with the report exhibit B, which it incorporates.

Furthermore the arbitrator failed to consider the question posed by the arbitrator in the penultimate paragraph of his report, i.e., whether the act of the surveyor in including those items in the account is binding on the company so as to operate as estoppel against the company.

Now when read together with the accountant's report exhibit B which, as already pointed out, it incorporates, the award would be seen to be in two distinct parts, part one is as to loss estimated at G2,297 10s. 0d. and part two is as to loss estimated at G2,656 16s. 4d., the difference between G4,954 4s. 0d. and G2,297 10s. 0d. The legality of the award of G2,297 10s. 0d. is not in dispute. The question therefore is: should the court set aside the whole award because of the illegality of a part of it? I do not think so. If the award had been one indivisible whole an error on the face of a portion of it would vitiate the whole; but where the award is divisible into distinct parts, parts which are legal, while others are illegal, the court will not interfere with those parts which are legal; it will set aside only those parts which are illegal. The principle is the same as in the case of a judgment part of which is warranted by the facts and law and part of which is not. In such a case a court, on appeal, would uphold the part which is right, and set aside the part which [p.506] is wrong. It is the same as the principle applicable to construction of documents. In Pickering Anor. v. The Ilfracombe Railway Co.3 a case of interpretation of an indenture of assignment, Willies, J. stated the principle as follows:

"The general rule is that where you cannot sever the illegal from the legal part of a covenant, the contract, is altogether void, but where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the good."

See also Amoatia, etc. v. The Attorney-General Ors.4

In the present matter the arbitrator proceeded illegally by deciding on evidence which was not admissible. There is, therefore, an error in law but with respect to that part only of the award affecting loss other than the loss of G2,297 10s. 0d. That part of the award must therefore be set aside.

I must make it plain that in holding that part only of the award should be set aside on grounds of error, I have not overlooked the earlier finding I made, namely, that the failure of the arbitrator to consider whether or not there is a breach of warranty which should entitle the company to repudiate liability is an error on the face of the award, and that error alone could avoid the award . I have, however, decided to act upon the second error alone, because it appears to me from the opening of counsel before the arbitrator and from his submission in these proceedings, as also from the whole dispute, that the second error is the main defence, and therefore it would be equitable to act upon that only since upon the facts it appears that if the arbitrator had considered the issue of breach of warranty, he could not have come to the conclusion that there has been a breach in so far as the books kept in respect of the loss of G2,297 10s. 0d. are concerned.

In the circumstances that part of the award with respect to loss other than the G2,297 10s. 0d. is set aside.


Plaintiff / Appellant

Defendant / Respondent


(1) Hitchins v. British Coal Refining Processes Ltd. [1936] 2 All E.R. 191; 80 S.J. 367

(2) Kelantan Government v. Duff Development Co. [1923] A.C. 395; 129 L.T. 356; 39 T.L.R. 337, H.L.

(3) Pickering & Anor. v. Ilfracombe Railway Co.(1868) L.R. 3 C.C. 235; 37 L.J.C.P. 118; 17 L.T. 650

(4) Amoatia, etc. v. Attorney-General & Ors. Land Court, Accra, June 19, 1959, unreported

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