ASIAN PAINT INDUSTRIES LTD.
INSURANCE CORPORATION OF CEYLON LTD.
COURT OF APPEALW. N. D. PERERA, J. ANDSENANAVAKE, J
A. NO. 697/80(P)
C. COLOMBO NO. A/1050/M14 FEBRUARY, 1991
Insurance – Goods lost in burglary – False statements – Misrepresentation – Non-disclosure – Uberrima tides – Notice of burglary.
Where the insured failed to disclose the disputes that existed between them andthe partners of another company operating from the same premises and falselystated that the premises would be guarded after normal business hours by awatcher employed by the insured, there was. non-disclosure and a false statementthat went to the root of the basis on which the policy was issued. The insured waslacking in uberrima tides.
Even if the suppression was through a mistake yet if the underwriter is deceivedthe policy is void because the risk run is really different from the risk understoodand intended to be run at the time of the agreement.
Notice of the incident should be given to the insurer as soon as possible butwhere the delay was due to the late receipt of the policy, it is excusable.
Cases referred to:
Carter v. Bocha (1766) 2 Burr 1909.
Lee v. British Law Insurance Co., Ltd, (1972)(2) Lloyd's Rep. 49,57.
Verelsts Administratrix v. Motor Union Insurance Co., Ltd., (1925) 2 K.B. 137.
APPEAL from judgment of the District Judge of Colombo.
S. Mahenthiran for plaintiff-appellant.
A. C. Gunaratne Q.C. with Miss S. Jayaratnetor defendant-respondent.
26th September, 1991.
The Plaintiff-Appellant instituted this action against the Defendant-Respondent for the recovery of a sum of Rs. 2,25,000/- being thevalue of goods insured by the Defendant-Respondent on the groundsthat the said goods had been forcibly removed by burglars from thepremises during the subsistence of the policy of insurance.
The Defendant-Respondent in its answer repudiated liability underthe said agreement on the ground that the said loss and damage wasbrought about by persons lawfully on the premises and not by anyburglars after forcible and violent entry into the insured premises.
The Defendant-Respondent further pleaded that the Plaintiff-Appellant did not forthwith give notice of the particulars of theincident to the Defendant-Respondent, that the Plaintiff-Appellantfailed to deliver a final statement of particulars of the loss as rs ::by the conditions in the agreement, that the Plaintiff-AppsTs.v::violated the conditions of the agreement relating to the emp’cy.rof a watcher and .that the incident of 02.01.71, was not a tr.s:; srhouse-breaking and theft.
The parties admitted that the Plaintiff-Appellant carried onbusiness of manufacturing paints in the premises bearing No. 287,Galle Road, Colombo 03 and that the said premises of the Plaintiff-Appellant was insured by the Defendant-Respondent on burglaryand house-breaking Insurance Policy.
The case proceeded to trial on 14 issues and the learned DistrictJudge on 28.11.80 delivered Judgment dismissing the Plaintiff-Appellant’s action.
The learned Counsel for the Plaintiff-Appellant submitted that thelearned District Judge had erred in law when he held that thepartners of Ceylon Paint Manufacturing Company had a lawful right,to stay in the premises of Asian Paint Industries Ltd. He submittedthat they were two different entities. I am unable to accept thissubmission, though in law the two companies were different legal
entities. But factually the two companies were situated in the samepremises 267, Galle Road, Colombo 3. The partnership Ceylon PaintManufactures had commenced business on 26.10.1969; accordingto P5 – the Certificate of Registration, the main business wasmanufacturing of paints. According to P2 the Certificate ofRegistration – Asian Paint Industries was also a partnership carryingon business at premises 267, Galle Road, Colombo 03 tomanufacture paints and allied products and commenced business on05.04.1967. The only common partner of these two partnerships wasSundervelu Selvaraja. The document P3 is the Certificate ofIncorporation of the Asian Paint Industries Ltd., which wasincorporated on 10.05.1979, and this Company-also was situated atthe same premises 267, Galle Road, Colombo 03. The complaint P7made by S. Selvaraja definitely states that he suspects his businesspartners of Ceylon Paint Manufacturing Company and he admittedthat there was a dispute regarding the partnership and the partieshave been enjoined from entering the premises. The Learned DistrictJudge was not incorrect in holding that the partners were legallyentitled to be in the premises. The Plaintiff-Appellant was duty boundto disclose these matters in his proposal. He should have disclosedthe disputes that existed between the partners of Ceylon PaintManufacturing Company. In the circumstances I hold that theLearned District Judge has not erred.
The Plaintiff-Appellant in the proposal form had categoricallystated that the premises would be guarded after normal businesshours by a watcher employed by the insured. Whereas this statementwas false to the knowledge of the Plaintiff-Appellant. He had notemployed a watcher. A watcher had been employed by the landlordFonseka who had employed him to look after his interest and not thatof the insured. This statement being false it is a condition which goesto the root of the Plaintiff-Appellant’s statement; the contract being acontract uberrima tides the utmost good faith is required.
In a burglary insurance an important question relates to security.When the Plaintiff-Appellant stated that he employed a watcher in thenight, this was factually false, when he stated that he was the soleoccupier this too was false. He had failed to disclose that CeylonPaint Manufacturing Company was also occupying the said premises
and it is false when he stated that Asian Paint Industries Ltd., wasoccupying this premises for one year. The document D6 signed bythe Plaintiff-Appellant stated that the Asian Paint Industries Ltd.,commenced functioning since 10th May 1990. The Plaintiff-Appellantthough he agreed to the declaration of the proposal being the basisof the contract between him and the Company he was lacking inuberrima tides when he made a patently false statement, and therewas non-disclosure of material facts.
Lord Mansfield in Carter v. Bocha(1) stated “Insurance is a contractupon speculation. The special facts, upon which the contingentchance is to be computed lie more commonly in the knowledge of theinsured only, the underwriter trusts to his representation, andproceeds upon confidence that he does not keep back anycircumstance in his knowledge to mislead the underwriter into abelief that circumstances do not exist to induce him to estimate therisk as if it did not exist. The keeping back of such circumstance, is afraud, and therefore the policy is void. Although the suppressionshould happen through mistake without any fraudulent intentionyet the underwriter is deceived and the policy is void becausethe risk run is really different from the risk understood and intended tobe run at the time of the agreement. The governing principle isapplicable to all contracts and dealings. Good faith forbids eitherparty by concealing what he privately knows to draw the otherto a bargain from his ignorance of that fact and his believing thecontrary.
The principle is followed even today. In Lee v. British LawInsurance Co., LtdP CA Karminski, L.J. stated at page 57 “fulldisclosure is the very essence of the contract.”
It was the duty of the Plaintiff-Appellant to disclose to theDefendant-Respondent all material facts within his actual knowledge.Good faith therefore requires that he should not by his silencemislead the Defendant-Respondent into believing that the risk asproposed differs to their detriment from the risk which they willactually run.
The Learned Counsel for the Plaintiff-Appellant also submitted thatthe Learned District Judge had wrongly decided issue No. 3. Hesubmitted that there was no breach of the condition of the policy, in
failing to inform the Defendant-Respondent about the incident till15.01.1971. His submission was that the Plaintiff-Appellant wasissued the Policy only on 01.03.1971, therefore he was unaware ofthe conditions contained in the policy. There had been a delay insending the policy to the Plaintiff-Appellant. The Learned Counselcited Verelsts Administratrix v. Motor Union Insurance CompanyLtd®. The incident occurred on 14.01.1923 – the insured was killedin a motor accident in India. Knowledge of her death reached herpersonal representative in England within a month but the. personalrepresentative did not know of the existence of the policy ofinsurance till January 1924. Notice was given to the InsuranceCompany as soon as possible thereafter. The Insurance Companyrepudiated liability on the ground that notice was not given “as soonas possible" within the meaning of the condition. Lord Roche held“that in considering whether notice was given as soon as possiblewithin the meaning of the condition, all existing circumstances mustbe taken into account, including the' available means of knowledge ofthe insured’s personal representative of the existence of the policyand the identity of the insurance Company and that the arbitrator towhom the dispute had been submitted was entitled to find that noticehad been given as soon as possible”.
In the instant case the Plaintiff-Appellant was not aware of thecondition as he received the Policy only on 01.03.1971, I accept thesubmission of the learned Counsel, that the learned District Judgehas erred in deciding Issue No. 3. The Plaintiff-Appellant had givennotice in the circumstances as soon as possible.
Though the Learned District Judge had erred in answering issueNo. 3 he has very carefully considered the evidence. He had thebenefit of hearing and seeing the witnesses. He had not beenimpressed by the evidence of the Plaintiff-Appellant. I am of the viewthat he had considered the entirety of the evidence very carefully andcome to a correct finding of fact. I do not see any reason to interferewith the judgment and decree and dismiss the appeal with costsfixed at Rs. 1500/-.
W. N. D. PERERA, J. – / agree.Appeal dismissed.