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SFARJILANI v. ROYAL EXCHANGE ASSURANCE


  • New
  • 1961-12-08
  • HIGH COURT
  • GLR 768-773
  • Print

OLLENNU, J.


Summary

Insurance?-Whether defendant company estopped by a step in the proceedings from taking advantage of arbitration clause in insurance policy.Insurance?-Loss resulting from burglary?-Discrepancy between claim submitted and stock book as to stock on hand prior to burglary?-Whether breach of warranty to keep a "true and accurate record of . . . stock in hand"?-Whether insurance company relieved of liability to indemnify insured. [p.769]

Headnotes

At all times material to this case, the plaintiff's goods and stock in trade were insured with the defendants against burglary. The plaintiff said the insurance cover was G4,500; the defendants said it was G2,500. The court resolved this issue in favour of the defendants. Clause II of the policy of insurance provided that any dispute as to the quantum of the loss or damage should be referred to arbitration. In the instant case, however, the defendants denied that they were liable to indemnify the plaintiff at all, because, they said, the plaintiff had broken the warranties in the policy which required him to "produce documentary evidence in English of the amount of value of stocks held immediately prior to the happening of the loss" and to keep "during the whole of the currency of the policy...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." This contention was based on the fact that two days after the burglary the plaintiff submitted a claim to the defendants, exhibit I; this contained particulars of his stocks immediately prior to the burglary. Three months later he submitted another claim, exhibit E, prepared by his accountant. There were slight differences between exhibit I and exhibit E. The defendants contended therefore that neither exhibit I nor exhibit E could be a "true and accurate record" of the plaintiff's stock in hand, that the plaintiff had broken the warranty in that behalf, and they are relieved of liability. The two parties agreed that the issue of liability was outside the scope of the arbitration clause, and therefore it should be taken to the court for determination before the question of the quantum of damages could be gone into. At the trial the plaintiff raised the point that having taken some steps in the action the defendants were precluded from insisting that the question of quantum be referred to arbitration.

Judgement

ACTION by an insured to recover on a burglary policy

The plaintiff was insured with the British Commonwealth Insurance Company Limited under a policy of insurance No. BB1123664. The defendant-company, with the consent of the plaintiff, took over all the rights, interests and liabilities of the said British Commonwealth Insurance Company Ltd. under the said policy. The policy was in respect of the plaintiff's textile retail store situate on plot D.975/3, Boundary Road, Accra. The said retail store of the plaintiff was broken into during the night of the 28th January, 1961, and some of the insured goods stolen therefrom. The plaintiff estimated the loss he suffered in consequence of the burglary at G3,874 11s. 7d., and claims the said amount against [p.770] the defendant-company under the virtue of the indemnity under the said policy. The sum covered by the covered by the policy is G2,500. But the plaintiff pleaded that that original sum was increased to G4,500 in consideration of his agreeing to pay a premium of G18 15s. Od. instead of a premium of G15 stipulated under the original policy.

Clause 11 of the policy, exhibit E stipulates that in case of any difference arising as to the amount of any loss or damage, arbitration shall be a condition precedent to an action or suit upon the policy.

It was pleaded by the plaintiff in paragraph 8 of the statement of claim that the defendant-company disputed the quantum of the loss or damage, but have failed to comply with the request of the plaintiff that that dispute be submitted to arbitration; and in paragraph 9 of the said statement of claim it was pleaded that the defendant-company have agreed that the question of liability should be submitted to the court for determination.

The defendant-company denied liability under the policy on the grounds that the plaintiff has committed a breach of the express warranty in the said policy and thereby discharged them from liability. The acts relied upon as constituting the breach are that: (a) the plaintiff failed to produce documentary evidence of the amount of value of the stock held immediately prior to the happening of the loss, and (b) they failed to keep proper books, accounts, stock sheets or stock books showing a true and accurate record of all business transactions and stock in hand, etc.

The defendant-company denied doing anything to frustrate arbitration, and pleaded that it had been agreed - between them and the plaintiff that the issue of liability should be determined first. Apart from the evidence that the defendant-company denied liability on the policy, no evidence was led by the plaintiff to establish his allegation that the defendant-company did all they could to frustrate a reference of the issue of amount of loss to arbitration. The following issues were set down for trial:

(a) whether or not the goods in the plaintiff's retail store at Accra were insured with the defendants in the sum of G2,500 or G4,500 at the material time;

(b) whether or not the plaintiff is guilty of any breach of warranty of the said policy, and

(c) whether or not the defendants are liable to indemnify the plaintiff under the policy of insurance, and if so, in what sum.

At the onset, counsel for the plaintiff submitted that once the case on the policy has come before the court, and the defendant-company had taken some steps in the proceedings, the court should rule that a submission to arbitration as provided by clause II of the policy ceased to be a condition precedent to an action or a suit for determination of the quantum of the loss, and that before evidence was taken the court should rule that if it should find the defendant-company liable to indemnify the plaintiff it would proceed to determine the quantum of the loss, and would not direct to resort to arbitration on that issue. In support of that submission counsel referred the court to The County Theatres [p.771] Hotels Ltd v. Knowles1 and Charlesworth on Commercial Law, (9th ed.) p. 326, para 2. The court indicated that its ruling on that point would be incorporated in this judgment. In his final address to the court, counsel further stressed that point, and referred to Ochs v. Oches Brothers2 and MacGillivray on Insurance Law (4th ed.) para. 1783.

The authorities cited were not of much assistance to the court on the point raised. Each of them dealt with a case where the whole question before the court was covered by a provision for arbitration and whether or not the proceedings should be stayed by reason of the fact that the defendant had or had not taken some steps in the proceedings before raising the arbitration clause. In this case both parties pleaded an agreement between them that the issue of liability should be determined by the court before anything else. The plea made by the defendant-company in that behalf appears in paragraph 7 of the statement of defence, and is as follows:

"7. In further reference to paragraph 8 the defendant-company denies that it has done anything to frustrate the parties going to arbitration but has all along insisted that the issue of defendant's liability should first be tried. Both the plaintiff and the defendant agreed that the issue of liability was one outside the ambit of the arbitration clause".

That plea in my opinion excepts and preserves the arbitration clause in the steps the defendant-company took in the suit, therefore such steps taken by them in the suit cannot affect their right to ask for a stay of proceedings on the issue of the quantum of loss suffered by the plaintiff.

Having heard the whole evidence in the case, I am more convinced than ever that if the defendant-company should be held liable on the policy, it would be in the best interest of the plaintiff, and certainly in the interest of justice, that the quantum of his loss be settled at an arbitration under clause 11 of the policy.

The next question is, what amount does the policy cover at the date of the burglary, is it G2,500 or is G4,500? It is agreed by both sides that the policy was taken out for G2,500. The plaintiff however pleaded that upon a proposal made by him and accepted by the defendant-company the policy was extended to cover a further sum of G2,000 increasing the total limit of the cover to G4,500 in consideration of the premium being raised from G15 to G18 15s. Od. The onus is upon the plaintiff to prove the increase of the limit as pleaded by him.

The plaintiff produced exhibit I copy of a letter dated the 19th October, 1960, which he said he wrote and sent to the defendant-company requesting them to increase the sum for which he was insured from G2,500 to G4,500 and exhibit H, Messenger's Receipt Book, containing a record of the said letter having been received. His store boy, P.W. 2, testified that he delivered that letter to someone in the office of the defendant-company. The plaintiff was unable to produce any letter from the [p.772] defendant-company to show their agreement to increase the amount of the cover, and there has never been any endorsement on the policy indicating such alteration. In pursuance of his plea, the plaintiff gave evidence that the premium payable under the policy was increased from G15 to G18 15s. 0d. in consideration of the increase made pursuant to his letter exhibit I. But this evidence of his was flatly refuted by an endorsement on the said policy which showed that the increase in the premium from G15 to G18 15s. 0d was made as far back as the 31st October, 1958, and not on or after the 19th October, 1960, the date of exhibit I. I find upon the evidence that the amount of the policy as originally taken has remained unchanged and that it is G2,500 , and not G4,500.

The next question is, has the plaintiff committed a breach of the express warranty in the policy? The said warranty is as follows:

"(a) That in the event of claim for loss arising under Item 1 of this Policy, it is warranted by the Assured that he/they will produce Documentary evidence in English of the amount of value of stocks held immediately prior to the happening of the loss.

(b) 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, and that such Books, Accounts and Stock Sheets or Stock Books shall be locked in a fire-proof safe or removed to another building at night, and at all times when the premises are not actually open for business".

That facts which are relied upon by the defendant-company as constituting the breach are that there are discrepancies in exhibit I, the claim which the plaintiff submitted to the defendant-company two days after the burglary, and exhibit E, the claim which he submitted about three months later, prepared by his accountant P.W.3.

It has been proved that the plaintiff did produce documentary evidence in English of the amount of value of stock he held immediately prior to the loss, and it has also been proved that he kept a complete set of books, accounts, stock sheets or stock books. In my opinion the discovery of a few discrepancies in the claims made by the plaintiff as compared with one or two of the books he kept does not prove that the said books, accounts, stock sheets or stock books kept do not show a true and accurate record of all business transactions and stock in hand.

The emphasis is on "true and accurate record of all business transactions and stock in hand". In my opinion mistakes and discrepancies do not necessarily prove that a true and accurate record is not kept of all business transactions and stock in hand. Record of business transaction and of stock in hand could show a true and accurate record in spite of clerical errors. I hold therefore that the plaintiff did not commit a breach of the express warranty so as to discharge the defendant-company from their liability under the policy.

On the question of the loss suffered, the evidence led by the plaintiff and the defendant-company show that quite apart from the arbitration clause, a more detailed examination of the figures is required than can be done in court for the assessment of the amount of the loss [p.773]

There will be judgment for the plaintiff for a declaration that the defendant-company are liable to indemnify him under the policy, and the amount covered by the said policy is G2,500. Proceedings are stayed on the claim for the quantum of the loss. The plaintiff will have his costs fixed at 75 guineas inclusive.

Decision

<P>Judgment for the plaintiff.</P>

Plaintiff / Appellant

I. Amissah-Aidoo (with him Cole)

Defendant / Respondent

J. Quashie-Idun

Referals

(1) The County Theatres & Hotels Ltd. v. Knowles [1902] 1 K.B. 480

(2) Ochs v. Ochs Brothers [1909] 2 Ch. 121

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