ASSIA PHARMACEUTICALS LTD v KENYA ALLIANCE INSURANCE CO. LTD [2004] KEHC 69 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI (MILIMANI COMMERCIAL COURTS)

Civil Case 1605 of 1999

ASSIA PHARMACEUTICALS LTD………………………..PLAINTIFF

-VERSUS-

KENYA ALLIANCE INSURANCE CO. LTD………...…DEFENDANT

JUDGEMENT

The plaintiff in this case prays for judgment against the defendant for the sum of Ksh.8,291,583. 20 plus general damages for breach of contract; costs and interest of the suit at 21%, and any other relief that the court may deem fit and just to grant in the circumstances. The plaintiff's claim arises out of a policy of insurance    being policy No.01/BY012176 issued to the plaintiff by the defendant and in force in 1998, and further renewed through the defendant's insurance brokers M/S AON Minet Insurance Brokers Limited on 1st  January 1999 to 31st December, 1999.  By that policy the defendant, in consideration of a premium payable to the defendant, agreed to insure the plaintiff in respect of burglary or theft that may occur in the plaintiff's premises covering pharmaceuticals, veterinary products .plus animal feeds and other stocks to the tune of Ksh.55,200,060/=and for any loss that the plaintiff might incur at any one loss to thetune of Ksh.8,000,000/=.

It is the plaintiff's case that between the nights of December31, 1998 and January 4, 1999, and during the currency of the saidpolicy of insurance, the plaintiff's premises were broken into andpharmaceutical veterinary products and stocks worthKsh.8, 291,503/20 were stolen  by virtue of the said theft, theplaintiff alleges that it suffered actual loss for which it seeksindemnity from the defendant and that the defendant is statutorilyobliged to make good that loss.

While admitting that there was an insurance contract betweenthe parties, the defendant avers that the plaintiff was in breach oftwo (2) policy conditions at the time of the alleged loss. Thedefendant's case is that one of the conditions in the policy was thatthe defendant would not be liable in respect of loss or damageexpedited or in any way brought about by any member of theinsured's household or business staff.  It is also their case that the plaintiff breached the security guard  Warranty  by which it  waswarranted that a security guard was employed to patrol the insured'sportion of the premises referred to in the schedule throughout theperiod of the day or night when such premises are not open forbusiness.

Arising out of the positions taken by the respective parties, theissues between them are-

1.  Did the plaintiff suffer any loss pursuant to the theft whichoccurred between 31. 12. 98 and 4. 10. 99 and if so What was thequantum of the loss suffered.

2.  Was the plaintiff in breach of any terms of the policy conditionsexisting between the parties.

3.  Was the defendant entitled to repudiate liability.

4. If issues (2) and (3) above are answered in the negative, was the defendant obliged to indemnify the plaintiff for losssuffered.

5.  Who is to bear the costs of this suit.

Four witnesses gave evidence for the plaintiff.  In so far astheir testimony relates to the issues between the parties, P.W.I, Mr. Rami Moskovitz, the managing director of the plaintiff company,stated that they had a day watchman and a night watchman. Theday guard was called Nyongesa while the night guard was Morris.Nyongesa was still working with the plaintiff company when thewitness was being cross examined on 6th March, 2001 but Morris wasno longer in the employment of the plaintiff, and the witness' standthat there was a day watchman was not shaken.

P.W.2, Mr. Michael Greenwood, said that his firm wascontracted by AON Minet to investigate the theft which took placebetween December 31, 1998 and January 3, 1999. What wasrequired of them was a second opinion on the matter since theplaintiff's claim for indemnity by the defendants had been rejectedfollowing an earlier report by General Adjuster (Kenya) Limited whohad been commissioned by the defendants. The witness stated onoath that his investigations showed that there was a watchman onduty privately employed at the time of the theft. In crossexamination, he said that he could not remember whether he got the name of the day guard as the witness was not so much concerned about the day guard once he learned that the alarm was activated inthe evening.

P.W.4 was Chrisandu  Nyongesa Momanyi. He stated in hisevidence in chief that he was a guard with the plaintiff company. Hewas working a day shift starting at 6. 00am and signing off at6. 00pm. Morris Musembi was the night guard. The witness testifiedthat he was on duty from December 31, 1998 to January 4, 1999. Hewas patrolling the front gate of the premises as access to the otherside was blocked. When he came on January 2, 1999 he found thesiren ringing but could not establish the cause. On January 4, 1999he was interviewed by the police along with Morris. Morris wasarrested and charged. Anyone saying that the witness was not onduty during that period would be misleading the court.

In cross examination, the witness testified that he startedworking with the plaintiff on 1st January, 1997 and his letter ofappointment stated that he was being employed as a security guard.The witness used to work during the day from 6. 00 am to 6. 00pmseven days a week and that even though he used to go on off dutythis was not on a regular basis.  He also said that Morris Musembi was the night security guard. He repeated that when he reported onduty on 2nd January, 1999, he heard the alarm and he was told thatthe alarm started at night. It was stopped by securicor peoplearound 8. 00am and never started again. After the theft wasdiscovered, the police visited the scene, interrogated him andrecorded a statement from him. They also recorded a statementfrom Morris Musembi. While Morris was charged, the witness wasnot so charged. When counsel for the defendant put to him that theonly reason why he was not charged was that he was not a securityguard, the witness answered that that was not the reason. He alsosaid that in his statement to the police, he had said he was a securityguard. At the time of the theft he was the only day security guard,but after the theft the plaintiff engaged two day guards inclusive ofhimself. In re-examination, the witness said that the practice ofhaving two day guards started after the theft.

The defendants first witness I was its assistant claim manager,Janerose Gitonga. She said that the reasons why the defendantsrepudiated liability was due to a breach of two conditions in thepolicy, and that they discovered that the terms were breached through reports by a loss adjuster and investigation. The investigatorwas a member of staff, of the defendant. On March 29, 1999 AONMinet the plaintiff’s agents wrote to the defendants to the effect thatthe policy conditions were breached and the plaintiff did not qualifyto be compensated. They thereupon appealed for payment on an exgratia basis. This was declined.

In cross examination, the witness said that they relied on boththe adjuster report and the investigation report to repudiate liability,and that they got the investigation report on 3rd March, 1999 and theadjuster's report on 24th March, 1999. Judgment in the case againstMorris Musembi is dated 1st July 1999 but by that time they hadalready decided to repudiate liability, and the decision of the courtwas not brought to their attention. They did not deem it fit to followthe matter. Although they received a letter from AON Minetadmitting breach, they never received any letter of admission fromthe plaintiff. In re-examination, she said that after the acquittal ofthe watchman, the admission of breach was not changed, and itmatters not whether the theft took place during the night or day.

AON Minet were the plaintiff’s agents  and all the defendants communication was with those agents.

D.W.2, Mr. Anthony Gatungo Migwi, an in-house investigatorwith the defendant company, said that he compiled a report afterinterviewing witnesses. He talked to P.W.4, Mr. Momanyi, but thelatter's name does not feature in the former's report because he did  not think Mr. Momanyi's evidence was important. The witness waslooking for the watchman who was working for the insured, and theinformation he got from Mr. Momanyi was that he was a doormanwho worked only when the shop was opened. The witness also saidthat his finding was that the insured's watchman was party to thetheft in cross examination, the witness said he had not mentioned. P.W.4 in his report because his interest was in the other watchman, P.W.4 according to Mr. Migwi, was a day time doorman. At the timeof compiling his report, Musembi was facing criminal charges atMakadara Law Courts in connection with the theft. In re-examination, Mr. Migwi said that the conditions of the policy requireda watchman at all times, and his finding was that there was no dayguard.

D.W.3 Mr. Stephen Gitau Kiarie, said he was a loss adjusterworking for insurance companies. In terms of the securityarrangements in this case, he said that the insured had employed anight watchman by the name of Morris Musembi, but there was noday watchman. His statement to that effect was derived from hisinvestigations, and that he got the information from Mrs. Suraiya. Inaddition, Mr. Musembi also confirmed that there was no daywatchman, and that this was in Musembi's statement. The witnessalso said that to his understanding, P.W.4 was the person whoushered him into the premises. The witness understood that P.W.4was not working as a watchman and in any case he would only bethere when the premises were open forbusiness. Thisunderstanding arose from his interviews with Mrs. Suraiya and Mr.Musembi, and he further understood that P.W.4 was not workingduring the new year break. In cross examination, he said that hecould not remember whether P.W.4 was in uniform or not, but hewas manning the door to the premises. A watchman would only beable to man the front, and the witness admitted that he would notexpect a day guard to be anywhere but at the place where he found P.W.A The witness did not record a statement from Mrs. Suraiya ashe did not think it was necessary. But by the time he compiled thereport, the case against Musembi was still going on.

In re-examination, Mr. Kiarie said that the policy required dayand night watchman when the premises were closed for business.There was no day watchman because the doorman was only presentwhen the premises were open.

This is all there was in terms of oral evidence by witnesses.

Thereafter the counsel  for the  respective  parties  filed  written submissions both of which were filed in court on 30th April, 2003. At the end of the day, all that remains to be considered is whether the two alleged conditions in  the policy were breached. Memorandum of the memoranda attaching to and forming part of the insurance was a security guard warranty. It stated-

"It is warranted that a security guard isemployed to patrol the insured's portion ofthe premises referred to in the schedulethroughout the period of the day or nightwhen such premises are not open forbusiness."

As expected , the evidence adduced by the rival parties is inconflict. P.W.I , the plaintiff's managing,  director  maintained thatthey had a day watchman and a night watchman, and he gave thename of the day watchman as Nyongesa. That evidence was notshaken in cross examination. Mr. Nyongesa himself testified asP.W.4. He said that he was given a letter of appointment on 1stJanuary, 1997 stating that he was employed as a security guard andthat his working hours as stated therein were from 6. 00am to6. 00pm for 7 days a week. He also said that he was on duty duringthat fateful weekend. He testified that when he reported on duty on2nd January, 1999, he found the alarm on. In his words, "it wasstopped by securicor people around 8. 00am" and in re-examination,he said the police came to the scene at 9. 30am by which time MorrisMusembi had already gone.

I agree with counsel for the defendants when he invites thecourt to consider the testimony of plaintiff witness with great caution.However, it is not correct when learned counsel says that in histestimony in chief, P.W.4 alleges that he never saw anyone come toswitch off.  The witness is recorded as having said, "I could not establish why it was ringing. I didn't see any one turn out. Securicorin the evening." Whereas this does not make a great deal of sense the witness is also recorded as having said in cross examination  ltook over from Morris on that day. He informed me that the alarmstarted at night but he did not say exactly at what time. It wasstopped by securicor people around 8. 00am. It did not start again..."I don't think that much mileage would be made out of the evidenceof P.W.3 Paul Muiruri, because he flatly admits - "I am not sure whatmy people saw when they got there." And in cross examination hesaid, "... I do not know who went there..." Clearly, the witness wouldnot be aware if there was a day guard or not Learned counsel forthe defendant also states in his submission that P.W.2, Michael Greenwood ended his testimony in cross examination by saying he could not confirm that there was a day watchman. According to thecourt record, he ended that testimony by saying  “We found therewas a night guard there when alarm went off. My report is notbased on the presence for a day guard."

Both D.W. 2, Mr. Migwi and D.W.3, Mr. Kiarie testified that theirfindings were that there was no day watchman and that P.W.4 was in fact a door man  who  they said would work only when the  business was open for the “purpose of opening and Closing the door for customers.  The Oxford Advanced Learner's Dictionary of current English defines doorman as a man employed to stand at the entrance toa large building e.g. a hotel or a theatre toassist visitors."

I doubt that the plaintiff's business premises at Kijabe Street would measure up to the grandeur of engaging a security officer towork exclusively as a doorman. However, I can understand themengaging a doorman who doubles up as a day watchman. And thatis probably what P.W.4 was. His evidence was not shaken, and thebest way to do so, I think, would have been to challenge him toproduce his letter of appointment. This was not done. On a balanceof probability  I find that the plaintiffs had employed a daywatchman.

With regard to Morris Musembi's exploits, it is clear that underthe policy the defendant was exempted from liability in respect ofloss or damage-expedited or in any way brought, about byany member of the Insured's household orbusiness staff."

It is common ground that Mr. Musembi was charged with pharmacy breaking and stealing contrary to s.306 (a) of the Penal Code, and also with failing to prevent a felony c/s 392 of the Penal Code. He was acquitted for lack of sufficient evidence under s.215 of the Criminal Procedure Code.  In his submission, the defendant's advocate said-

"It is not contested that the insured's nightwatchman, one MORRIS MUSEMBI wasarrested after the police investigations andcharged with involvement in the theft whichis the loss in this cause of action. This issufficient proof that in fact the plaintiffcontravened provisions of clause 1 (c)."With respect, I won't share such a view.  The truth of the matter is that mere arrest and being charged with an offence does not mean that the accused is guilty as charged.  For one, it could be a frame up.  In the instant case, it should be remembered that the defendant made up its mind to repudiate liability soon after receipt of the reports by its adjuster and investigator. In her testimony in cross examination, Ms. Janerose Gitonga (D.W.I) said

“judgment in the case is dated 1. 7.99. By thattime we had already decided to repudiateliability. The decision of the court was notbrought to our attention...”

It seems to me that the defendant had already made up its mind, and it made no difference whether Mr. Musembi was acquittedor not. To the defendant, he was as guilty as they come. What,then  was the point of suffering him to be  prosecuted? Since thecourt cleared him for want of sufficient evidence, why should thedefendant cast any stone against him? The fact of the matter is thatthere was no sufficient evidence that Musembi expedited or in anyway brought about any loss or damage. It was premature to judgehim and to repudiate liability.

For the above reasons, I answer the issues between the partiesas follows-

Firstly pursuant to the theft which occurred betweenDecember 31, 1998 and January 4, 1999, the plaintiff suffered loss tothe extent of Ksh.7, 507,243/= being the final figure agreed upon between the parties being the value of the goods lost/stolen after thefinal adjustment and not  the Ksh.8, 291, 58120 as claimed in theplaint. Secondly, the plaintiff was not in breach of any terms of thepolicy conditions existing between the parties, and that; thirdly, thedefendant was not entitled to repudiate liability. On the contrary,fourthly, the defendant was obliged to indemnify the plaintiff for loss suffered.

In the circumstances, judgment is hereby entered for theplaintiff against the defendant of-

(a)    The said sum of Ksh.7,507,243/=

(b)   Interest thereon at 21% from the date of filing of the suituntil payment in full.

(c)   Costs of the suit.

Dated and delivered at Nairobi this 2nd day of June 2004

L. NJAGI

JUDGE