SAIBO v. NEW INDIA INSURANCE CO., LTD

049-NLR-NLR-V-39-SAIBO-v.-NEW-INDIA-INSURANCE-CO.,-LTD.pdf


Saibo v. New India Insurance Co., Ltd.
153
Present: Abrahams CJ. and Soertsz AJ.
SAIBO v. NEW INDIA INSURANCE CO., LTD.
133—D. C. Colombo, 51,899
Insurance—Damage caused by fire—Action for recovery of loss—Failure to-disclose material facts—Burden of proof.
Where in an action to recover the loss caused to the insured in termsof an insurance policy, the claim was resisted by the Insurance Companyon the ground that the plaintiff in making his proposal for insurancehad concealed material facts which it was his -duty to disclose to theCompany,—
Held, that the burden of proving non-disclosure was upon the In-surance Company.
T
HIS was an action brought by the plaintiffs-respondent to recoverdamages in terms of a policy of insurance by which the first plaintiff
insured a tea factory of which he was owner with the defendant-Company..First plaintiff subsequently leased the factory to the second plaintiff.The claim was resisted by the defendant-Company on the followinggrounds : —
that the first plaintiff in making his proposal for insurance unlaw-fully concealed certain material facts which it was his duty todisclose ;
that the claim was fraudulent and that an untrue and excessivevalue was placed on the stock, which was damaged ;
that the first plaintiff had failed to obtain the sanction of thedefendant-Company to the transfer of his interest in the in-surance property to second plaintiff according to the conditions'of the insurance policy.
The learned District Judge held that plaintiff had not concealed materialfacts, that he had obtained the sanction of the Company for the transferto second plaintiff, and awarded the plaintiffs the sum of Rs. 41,048.60damages.
N. E. Weerasooriya (with him Canakeratne and Dodwell Goonewardene),for defendant, appellant.—The learned Judge did not give us an oppor-tunity to meet plaintiffs’ evidence, although we had objected to their-leading evidence piecemeal and the learned Judge had said that he-wouldconsider the objection later. His findings are vitiated .by reason of thefact that we were not allowed to meet the case of the plaintiffs on matters .on which the burden was on plaintiffs. We have not been heard onmaterial issues on one of which the learned Judge has found against us ;•and consequently the whole judgment is bad.
The first plaintiff had signed a proposal form. He was under a- duty todisclose. The contract is formed on the basis that there has been infact a disclosure. The rights on the contract would arise only if theparties enter into the. contract on that basis. If a condition precedenthas -not been performed, there is no contract. There are certain factswhich first plaintiff must disclose. He says he has disclosed. We denyit. In regard to those facts he must prove them, this being a contractof good faith.
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ABRAHAMS C.J.—Saibo v. New India Insurance Co., Ltd.
We gave the terms of the proposal in the answer. In the first paragraphof the replication, those terms of the proposal are admitted. My sub-mission is that on the pleadings the burden was on the first plaintiff toprove that he had given information of the cancellation of MohamedAlly's policy and of the refusal by the two insurance companies. Theinterrogatories served by him clearly show that he took up the position•that information had been given certainly in regard to the cancellation•of Mohamed Ally’s policy. So that plaintiff was aware that he had•signed a proposal in which he had said “ No ”. Then his case was goingto be that although he had omitted to disclose he had orally disclosed.'The burden was clearly on him in those circumstances to lead evidenceof the fact that he made oral disclosure.
Counsel cited Glickman v. Lancashire and General Assurance Co., Ltd.1
H. V. Perera (with him Cyril E. S. Pereira), for plaintiff, respondent.—At the very beginning of the trial Counsel proposed to lead evidence onthree issues only. He undertook to prove—
that there was a policy,
that there was a fire,
that his loss was so much.
That is his only obligation at that stage. If no further evidence is"led, plaintiff is entitled to succeed. If the insurer alleged faudulentnon-disclosure or breach of contract, it would be his duty to prove thoseallegations. There was at the beginning of the case a burden resting onthe defendant to prove their plea of non-disclosure. Then under ourlaw a person who has burden of proving a fact has only one opportunity.He cannot have a second opportunity. The process might go on in-definitely.'-When burden rests on one, one has to lead all the evidence.The fact that the duty was on us to disclose does not show that theburden of proving disclosure is on us. Machinery is provided by law toget material to meet case for the other side, when the law gives him theopportunity of doing so, which the law gives only once.
One need not prove an admitted fact. A person might admit theexistence of a certain fact but not its truth. There is no admission ofnon-disclosure on the pleadings.
Counsel cited Weldon on Fire Insurance (3rd ed.) p. 138.
Cur. adv. vult.
'November 13, 1936. Abrahams C.J.—
In July, 1929, the first plaintiff-respondent insured “ Westhill ” TeaFactory, Gampola, of which he was the owner, with the defendant-appellant Company through their agents, Henry de Mel & Company,•Colombo. Subsequently he leased the factory to the second plaintiff-respondent who worked it as a bought leaf factory. In the early morning•of December 12, 1932, the factory and its contents, whatever they were,were completely destroyed by fire, and a claim was made on the Companyfor something over Rs. 70,000 being the alleged damages sustained bythe plaintiffs-respondents by reason of this fire. The claim was resisted,.and in the ensuing action the plaintiffs were awarded the sum ofRs. 41,048.60, which included a sum of Rs. 3,333 the value of 14,000 lb. oftea held by the learned District Judge to have been on the premises
1 (1925) 2 K. B. 593 at p. 605.
ABRAHAMS C.J.—Saibo v. New India Insurance Co., Ltd.
15S
at the time of the fire and to have been destroyed thereby. The com-pany resisted the claim on the following grounds. Firstly, that the firstplaintiff-respondent in making his proposal for insurance unlawfullyconcealed certain material facts which it was his duty to disclose,namely, that his predecessor in ownership of the factory, one MohamedAlly, had insured the factory with the Commercial Insurance Company,which insurance had been cancelled by the Company in January, 1929,to the knowledge of the plaintiff, and that also other Insurance Com-panies had refused to insure the factory. Secondly, that the claim wasfraudulent and that an untrue and excessive value was sought to be placedon the stock which was damaged and a false declaration as to the valuehad been made, and thirdly, that the first plaintiff respondent had failedto obtain the sanction of the defendant-Company to the transfer of hisinterest in the insured property to the second plaintiff-respondent interms of one of the conditions attached to the policy.
The Company appeals against the finding of the learned DistrictJudge that the first plaintiff-respondent had not concealed the cancellationof Mohamed Ally’s policy and the refusal of the other insurance com-panies to insure the factory, and also against the finding of the learnedDistrict Judge that 14,000 lb. of tea were proved to have been destroyedin the fire, and they also contended that the plaintiffs’ case should have-been dismissed on the ground that the Company’s sanction had not beenobtained to the lease by the first plaintiff-respondent to the secondplaintiff-respondent. The appellant also complains that the learnedDistrict Judge was wrong in taking the view that the burden was on theappellant and not on the respondents to show that disclosure was madeof the cancellation of Mohamed Ally’s policy and of attempts to insurethe premises by the first plaintiff-respondent, and that the learnedDistrict Judge was wrong in allowing the plaintiff-respondents, afterthe appellant had closed his case, to lead evidence to show that there wasa disclosure, and was also wrong, after allowing this evidence to be led, inrefusing to permit the appellant to adduce evidence in rebuttal thereof.
I am inclined to deal first with the submission relating to the sanctionof the lease to the second plaintiff-respondent. This of course can bedisposed of in a few words. Condition 7 of the policy would have in-validated the insurance if the insured party before the occurrence of anyloss or damage transferred the interest in the property without havingobtained the sanction of the Company, signified by endorsement on thepolicy. By a letter dated May 30, 1932, P. 6, on page 226 of the record,a Mr. M. Ameen, Proctor, informed the Company through Messrs. De Me!& Company, that the premises had been leased for a period of five years tothe second plaintiff-respondent. On July 9, the Company wrote to thefirst plaintiff-respondent reminding him that the renewal premium ofRs. 593 in respect of his policy would fall due on the 25th of the month,and they asked him for a remittance. They went on to inform him thatas regards the lease of the premises to the second plaintiff-respondentthey would send him an endorsement to be attached to the policy. Thispremium was sent and it was acknowledged by a letter of the 28th of thesame month, in which a copy of the lease was asked for and also the nameof the Bank in which the second plaintiff-respondent kept his account,
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ABRAHAMS C.J.—Saibo v. New India Insurance Co., Ltd.
n™“_ " • " •
as the Company required satisfactory information on these points beforemaking any endorsement on the policy. The first plaintiff-respondentalleged at the trial that he never received that letter. Whether he didor not, I share the surprise of the learned District. Judge that afterpromising an endorsement if the premium was sent, and accepting thepremium when sent, the Company can claim that their sanction had notbeen obtained to the lease. It is very much like the story of the schoolboy who wanted both the bun and the penny with which he had boughtthe bun.
Next, as to the submission of the appellant that the burden of provinga non-disclosure was wrongly placed upon him, and that the learnedDistrict Judge was wrong in refusing to permit him to rebut the evidenceof the respondent that there had been a disclosure, what seems to havehappened is this. Leading Counsel for the plaintiff-respondent ledevidence that there had been a fire, and that certain damage had resultedfrom the fire, and that the amount of that damage was covered by thepolicy of insurance with the appellant Company. He then closed his case,saying that he reserved his right to call evidence in rebuttal on the otherissues. Leading Consel for the appellant said that if that procedure wasadopted it might mean that he might have to call evidence in rebuttal ofthe evidence led by the plaintiff on certain issues, and the learned DistrictJudge noted on the record that that was a point he would consider later.Counsel for the plaintiff-respondent then closed his case after readingcertain documentary, exhibits, and reserved his right to call evidence inrebuttal.
The appellant then called the surveyor who reported on the result ofthe fire. There was also called a number of witnesses who gave evidenceregarding the cancellation of Mohamed Ally’s ■ policy by Messrs. Lee,Hedges & Company, Agents for the Commercial Insurance Company,and certain other witnesses who gave evidence that the first plaintiff-respondent had signed a proposal of insurance with Messrs. Bosanquet ftSkrine,' Agents for the Liverpool, London ■ ft Globe Insurance■Company; which proposal was refused, and also that he made anapplication in person to Messrs. Shaw, Wallace & Company, Agentsfor the Bankers & Traders Insurance Company, for fire Insurancewhich application was refused then and there. Leading Counsel for theAppellant then closed his case after reading certain documentary exhibits,and Counsel for the plaintiffs-respondents then called further evidence,including the first plaintiff-respondent himself, for the purpose of showingthat ,he had made a disclosure of the cancellation of Mohamed Ally’s.policy and also of his negotiations with Messrs. Bosanquet & Skrine andMessrs. Shaw, Wallace ft Company. At the conclusion of this evidence,leading Counsel for the appellant proposed to call evidence to rebut thatevidence given on behalf of the plaintiffs-respondents. This was refusedby the learned District Judge on the ground that the onus of proving anon-disclosure of those material facts relating to the insurance was reallyupon the Company, and that the evidence of non-disclosure should have fcieengiven during the case for the appellant, and the appellant having■closed his case ought not to be allowed to reopen it after the plaintiffs-xespondents had themselves given evidence of disclosure. There is no
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ABRAHAMS CJ.—Saibo v. New India Insurance Co., Ltd.
doubt, to my mind, tbat Counsel for the appellant thought he had reservedhis right to call evidence to rebut any evidence of disclosure given by theplaintiffs-respondents. That does not confer upon him the right to do so,if the onus is upon him to prove non-disclosure.
Now, in Welford & Otter-Barry’s. Fire Insurance (3rd* e'd.) at page 138,we find the following passage :—
“ The onus of proving concealment rests on the insurers, since, thepolicy being proved, the presumption is that everything was rightlydone. In order to establish the defence of concealment the insurersmust prove that the facts alleged to have been concealed by the assuredwere true, that they were material, that they were within his knowledgeand were not disclosed. Where the assured admits that the facts oughtto have been disclosed, and the only question in issue is whether adisclosure of them was in fact made, slender evidence is all that isrequired to show that it was not made. ”
It was argued before us, on behalf of the appellant, that the appellantcould not be expected to give evidence rebutting in advance the detailsof a disclosure of which the appellant was entirely unaware. But theanswer to that is, I think, that adequate machinery is provided in theshape of a demand for particulars or by means of interrogatories, so thata party in the position of the appellant would come into Court well armedwith evidence to the effect that no communication of the sort allegedby the opposite side was ever communicated to the persons mentionedby the appellant in his particulars or answers to interrogatories, as thecase may be. That being so, in my opinion, the appellant fails on thatground of appeal._-
The next question for decision is whether the learned District Judgewas slight in coming to the conclusion on the evidence that the firstplaintiff-respondent had disclosed to the Company the cancellation ofMohamed Ally’s insurance policy by Lee, Hedges & Company, and therefusal to insure the factory by Bosanquet & Skrine & Company, andShaw, Wallace & Company. As I have said, the burden of proving non-disclosure was placed upon the Company, but it would appear that thatburden had been shifted to the first plaintiff-respondent by' the pro-duction of the proposal form which he signed and in which it appears thatcertain questions relating to the previous history of dealings with otherinsurance companies in respect of the factory had been wrongly answered.These were the questions which had to be-answered : —
6. A.—Are any other insurances on the same property in force withthis or other offices ?
The answer to that was “ No
—If so, state the amounts and names of the Offices.
No answer was assigned to this.
—Has this risk, or any part thereof, been declined by any other
Company ? If so, give name of Company. ”*
No answer was assigned to this.
Hawe you at any time^iad occasion to make a claim for loss ordamage by fire ? If so, give details below.r.rhe answer to this was “ No ”.
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ABRAHAMS C.J.—Saibo v. New India Insurance Co., Ltd.
12. Has any fire insurance proposed or effected by you ever beendeclined ? If so, state particulars below.
The answer to this was “'No ”.
It was therefore, in my opinion, for the first plaintiff-respondent to explainwhy those questions were not answered as they ought to have beenanswered.
The first plaintiff-respondent himself gave evidence. He said that he-could not read or write English (and this fact is not disputed), and thattherefore the proposal form was filled up by one Kulatunge. Kula-tunge was an insurance canvasser, and it was he who introduced thefirst plaintiff-respondent to Sir Henry de Mel & Company. The firstplaintiff-respondent said that the proposal form was filled up in the officeof De Mel'& Company, in the presence of Sir Henry de Mel, Sir Henry deMel’s son, and Mr. Jayewickreme who was in the employment of the Com-pany. He said he disclosed the fact of the cancellation of MohamedAlly’s policy and that he produced a letter from Bosanquet & Skrine.and that he also said that Shaw, Wallace & Company had declined hisproposal but at that time he did not know the reason why. This evidencewas substantially corroborated by Kulatunge who said that when the firstplaintiff-respondent was giving information according to the questionon the proposal form, he took the answers down on a piece of paper andafterwards transferred them to the proposal form. He said most em.-phatically that the “ No ” in answer to Question 11 and the “ No ” inanswer to Question 12 were not in his handwriting and that he had in factwritten something in answer to Question 11 which had been subsequ.entlyerased, not by himself, and the word “ No ” placed above the erasure.An examination of the original proposal form certainly shows that therehas been an erasure, but it is not possible to say what the erased wordsactually were.
I do not propose to review the evidence given by the first plaintiff-respondent and Kulatunge because it seems to me that the questionwhich we have to decide is whether the learned District Judge ought tohave held that the evidence given by these two persons, consideredtogether with the numerous documents produced, was so inconsistent andcontradictory or amounted to a story so inherently improbable that heought to have held that it was unacceptable as against the first plaintiff-respondent’s signature to the proposal form which was the only evidencethe Company had produced. The learned District Judge saw the witnessesand, in accepting their evidence in default of contradiction by thosemembers of the Company who were said to have been present when theproposal form was filled in, I really cannot say that he was wrong. Itmay very well have been that Sir Henry de Mel and the other personswould, had they given evidence, have outweighed the first plaintiff-respondent and Kulatunge in the view of the learned District Judge,but I have no right to assume that this result would necessarily have- followed had they been called, and that therefore there was really no needto call them. The learned District Judge was sufficiently impressed bythe evidence of the first plaintiff-respondent and Kulatunge to hold thatthey had successfully explained away the evidence furnished by theproposal form, and I see no reason to disturb that finding.
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There is, finally, the question of the destruction of the 14,000 lb. oftea held by the learned District Judge to have been consumed by thefire. Two days after the fire, a Mr. Armitage was appointed to surveyand report upon the fire. Mr. Armitage appears to have been greatlyimpressed by the fact that there were no signs of any smouldering teaor any heap of ashes to indicate that so large a quantity of tea had beenconsumed. Mr. Armitage has greater experience than anyone in Ceylonof assessing damage by fire done to tea factories. He said he hadassessed 47 tea factories, among which a large number had been burntin 1931-1932. He said that he asked the tea-maker and the lessee (thatis to say, the second plaintiff-respondent), who were present when he sur-veyed the damage, as to where was this large quantity of tea, and theanswer that he got was “ Oh, it is burnt ”. He asked them to show himwhere it was and they said that it was round about near the porticobut there was nothing to .be seen there. He says it struck him at the timethat this was one of the most extraordinary features of this fire. In hisreport, which was produced at the trial, he emphasized that there werenone of the usual signs of smouldering or burnt tea. In writing to theInsurance Company on December 29, he calls attention to that portionof his assessment report which deals with the absence of the “ usualsigns of large quantities of smouldering burnt tea ”. However, in thereport he does assess the quantity of tea at the tea-maker’s figure of14,300 lb. and puts a certain value upon it. Both the tea-maker and thesecond plaintiff-respondent gave evidence that there were indicationsthat the tea had been burnt, and both say that they pointed it out toMr. Armitage. The second plaintiff-respondent went so far as to saythat even at the time of the trial signs were there, and that when Mr.Armitage came the tea was .still smouldering in some places, and thatMr. Armitage’s evidence that there were none of the usual signs ofsmouldering or burnt tea which are present when a large quantity of teawas burnt, was false.
The learned District Judge says, I certainly accept Mr. Armitage’sevidence that there was no smouldering tea at the time he arrived at thespot, but, to my mind, this does not prove conclusively that the quantityof tea alleged by the plaintiff was not there at the time, and theeffect produced on Mr. Armitage himself by the absence of any sign ofsmouldering tea, is I think best appreciated by looking at his own act inallowing the full value of the 14,000 pounds of tea claimed by theplaintiff. If, after the examination he made, Mr. Armitage was stillprepared to allow for that quantity of tea, I do not see how it is possiblefor me to say that he was wrong in making that allowance, merely becauseof the fact that there were no signs of smouldering tea. ” It appears to methat from these words the learned District Judge thought that althoughthere were no signs of smouldering tea at the time that Mr. Armitagearrived at the spot, it was not unreasonable to assume that there had beensigns but they had disappeared, and that that was probably in Mr. Armi-tage’s mind when he made an allowance for the actual quantity of teaclaimed to have been destroyed. I do not so read Mr. Armitage’s mind.He has emphasized the fact that he would have expected to see signs oftea because, in his great experience, there always were signs, and I have
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ABRAHAMS C.J.—Saibo v. New India Insurance Co., Ltd.
come to the conclusion that his allowance for the tea claimed to havebeen destroyed was based upon mere hypothesis and not upon a reason-able possibility. But I fear the learned District Judge has overlookedthe implications in the evidence of the second plaintiff-respondent and the’ tea^maker. They did not say that there had been signs of smoulderingtea and that those signs had disappeared for some reason or another.They flatly contradicted Mr. Armitage and said that there were signs andthat they pointed them out to Mr. Armitage. What do these assertionsmean ? Why is Mr. Armitage given the lie direct ? Mr. Armitage saysthat there ought^to have been signs of tea. What these witnesses sayamounts to this : not only ought there to have been signs of burnt tea,but there were signs of burnt tea, so that the point for decision was really,who was speaking the truth—Mr. Armitage or the second plaintiff-respond-ent or the tea-maker ? The learned District Judge decided in favourof Mr. Armitage, and he cannot take away the effect of his decision bysaying that it is true that .there were no signs of tea at the time Mr. Armi-tage came, but that it does not follow that there were no signs previously.
There is further evidence in support of the appellant Company'scontention that this claim for 14,000 lb. of tea ought not to have been,allowed. It would appear that all the tea from the Wes thill Factorywas sent to Messrs. Somerville & Co., Colombo, for sale. Mr. Armitagerequested this firm to give particulars of the quantity of tea sold since thelessee, the second plaintiff-respondent, took over the factory. The firmsent a list of the quantities of tea sold on this account, and it would appearthat during the month of November over 15,000 lb. of tea had been sold,on December 6, 3;345 lb. had been sold, and on December 20, 2,035 lb.had been sold. . The sales in November took place on the 8th, the 15th,and the 22nd, respectively.. The quantity sold in November was verymuch greater than that sold in any previous month. It is very difficultto see how, if over 15,000 lb. had been sold in November and 5,000 lb. inDecember, there could have been 14,000 lb. in the factory at the time of thefire. This answer of Messrs. Somerville & Co. is attached by Mr. Armi-tage to his report, and both these documents and certain other documentsrelating to the fire are mentioned in the report, and all put in evidence.It is now objected on behalf of the plaintiffs-respondents that this copyof.a letter of Messrs. Somerville & Co. was smuggled in under cover ofthe report.. It was certainly not. submitted in evidence independently,but it was mentioned in the report, and if it was open to any objection,that objection should have been lodged then and there. Either, Counselfor the plaintiffs-respondents at the trial did not read the report at all,which does not seem very likely, or he did read it and thought that it wasnot. worth while making any objection to this document because arepresentative of Messrs. Somerville & Co. could very easily have beencalled and it would therefore be futile and only a technical objection" to} resist its admission. In my opinion, then, the learned District Judge-was wrong in holding that the claim for the destruction of 14,000 lb. of teaTyas sustainable. That is not to say, however, that,we disagree with thefinding of the learned District Judge that the claim was not fraudulent.The first plaintiff-respondent who really made, the claim for resultantdamage did so on tn^faith of information he received from the second
SOERTSZ J.—Nair v. Alexander.
161
plaintiff-respondent, and there is no ground for believing, he did notmake the claim bona fide. The most we will say is that the claim isunsustainable.
I would allow the appeal to the extent of disallowing the claim to thetea, and I would dismiss the appeal on the other grounds. The decreeshould be varied accordingly. As to cost, I think the fairest order tomake would be that the appellant Company should pay two-thirds ofthe costs in both Courts, and the respondents one-third. A great dealof the time taken up in the hearing of the case was devoted to this questionof the destruction of the tea, and I think then that this division ofcosts is fair.
Soertsz A.J.—I agree.
Judgment varied.