ICEA General Insurance Co. Limited v Kiganda (Civil Suit 993 of 2017) [2023] UGCommC 286 (12 April 2023)

Full Case Text

## THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA ICOMMERCTAL DrVrSrONl CIVIL SUIT NO. 993 OF 2OI7 ICEA GENERAL INSURANCE CO. LTD: : : : : : : : : : : : : : : : :: : : PLAINTIFF VERSUS

## PETER KIGANDA:::::::::::::::::33::::::::::::3:3::::::::::::: DEFENDANT BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI JUDGMENT

The Plaintiff filed this suit against the Defendant for a subrogation claim for a sum of USD 30,007, interest and costs of the suit. The brief facts constituting the Plaintiffs case are that on or about the l't day of January 2013, the plaintiff entered into an insurance policy of risks and losses with spEDAG INTERFREIGHT (u) LIMITED, (SPEDAG), covering all risks ro their property. on 100' February 2013, SPEDAG (lnsured) entered into a transportation agreement with the Defendant wherein the Defendant was supposed to transport and deliver cargo at designated destinations without any damages or shortages.

That on 12th April 2013, a container No. MRKU 724213-9 loaded with 320 bags carried by truck No. UAB 617Y belonging to the Defendant was reported empty thereafier the insured made a claim which prompted the plaintiff to instruct a company of loss adjusters to investigate the loss. It was established that the Defendant was liable for the loss and theft of the cargo amounting to usD 28,362.00. That following the advice of the loss adjusters, the plaintiff issued a discharge voucher to the insured on 41h April 2014 effecting payment for the theft

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of usD 28,362.00 and that due ro the Defendant's negligence, the plaintiff incurred more USD 1,645 and USD 153 for the adjusters.

That the insured then issued a letter of subrogation in favour ofthe Plaintiff against all who are liable to make good payment that was made by the plaintiff. on 4th July 2013, the Plaintiff communicated to the Defendant demanding he makes good the default he caused by detailing the circumstances under which the events happened but he did not which was an indication of unwillingness to make good the bad. That the Defendant was informed of his liability and all attempts to obtain money from him have been futile. hence this suit.

In reply, the Defendant filed his written statement of Defence and Counterclaim wherein he denies the claims. He avers that his vehicle has never carried the 320 bags ofcoffee on l2th April 2013 as alleged. He added that the insured does not rely on the Defendant's vehicle for its transportation works but used several others. That he has never executed any agreement with the insured to carry the said bags, and therefore that the Plaintiff was personally liable for the loss. He added that the insured had preferred criminal charges against the Defendant's driver but that the same had been dismissed; and that the Plaintiff is not entitled to any subrogation from the Defendant.

By way of counterclaim, the counterclaimant/Defendant claims for recovery of ucx 14,000,000/ being loss of profit owing to the counter Respondent,s actions of unlawfully impounding and detaining his vehicle, general damages, interest and costs of the suit. That the said vehicle was impounded on l2th April 2013 and yet the truck never carried the said 360 bags.

In their reply to the counterclaim, the counter Respondent/plaintiff denied the claim and averred that the Counterclaimant is not entitled to the remedies sought.

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They specifically reply that the vehicle was lawfully impounded because the counterclaimant caused the loss of the coffee, and that the allegations are baseless. They then prayed that the Counterclaim be dismissed with costs.

During the hearing, the Plaintiff presented three witnesses namely; Juliet Kyembabazi (Pw1), Harmon opio (pw2) and ritus Kiragu (pw3). The Defendant himself was DWl. counsel for the parties agreed to file written submissions which have been considered in this Judgment.

## JUDGMENT

The parties agreed on the following issues for determination by this court during the scheduling conference:

- Whether the Plaintiff has a cause of action against the Defendant? - 2. whether the Defendant is indebted to the plaintiff in the sum claimed? - 3 Whether the Defendant's vehicle was unlawfully impounded? - I What are the remedies available to the parties?

## Issues I and 2

counsel for the Plaintiff cited the case of Karuhonga v NIC & Another t200sl HCB l5l where it was held that the plaintiff is at liberty to sue anybody that he thinks he has a claim against. He then defined the phrase ,cause of action' and submitted that it is not in dispute that the plaintiff had entered into an insurance contract with SPEDAG INTERFREIGHT(U) LIMITED, (spEDAG), for cover of risks and losses of goods in transit. That the only contention is the Defendant's denial of carrying that particular consignment.

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He added that both PWI and PW2 testified that container number MRKU 724213- 9 was loaded with 320 bags of coffee and handed to the Defendant's agent, the driver; and that it was subsequently found empty. That during cross examination, the Defendant confirmed that the said driver was at all times in his employment and direction. PW3 said he investigated and found that it was the transporter's duty to deliver goods safely.

Counsel added that the Defendant confirmed having a contract with SPEDAG, and that it was the police that impounded the vehicle when his driver was arrested and prosecuted in Nakawa Chief Magistrates' Court, where he was a prosecution witness. He added that paragraph 1 (e) of the Transport Contract provided that losses caused by negligence would be bom on the transporter. counsel said in this case, the goods were loaded with the Defendant through his employee the driver, and that the truck was found abandoned and empty, the reason police towed it away; after the driver had received the goods and connived to have them stolen to the detriment of the Plaintiff, who had to compensate for them.

Counsel then cited authorities on negligence and submitted that the plaintiff is entitled to compensation for negligence and breach of contract by failing to fulfil a contractual obligation. That the Defendant was supposed to send the truck with an escort but he did not.

In reply, counsel for the Defendant handled issue I and 2 together. He submitted whereas the Defendant was called about the coffee, no actual loading of the coffee was done. That the Plaintiffs witnesses failed to explain how the coffee was loaded as the driver did not even sign the loading documents relied on. He said this was supported by the dismissal of the criminal charge against the driver in Nakawa Chief Magistrates'court as the insured failed to prove that coffee was loaded and

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stolen by the Defendant's driver. Counsel therefore submitted that the plaintiff cannot base his claim for compensation of stolen goods when he failed to establish acriminal case, and that PW2 and pw4 admitted that the plaintiff would have waited for the outcome of the criminal case before paying.

He added that PE 4 lacked on accuracy and factual procedures between the insured and Defendant, and that PW4 hurriedly advised the plaintiff to pay despite the criminal charges. That the insured is supposed to act in utmost good faith by disclosing existence of the charges. He cited the case of NIC v Kakugu sylvan HCCA No.040 of 2015 on the higher standard of urmost good faith required in insurance contracts. In addition, he also cited, section 20 of the Insurance Act 2002. He concluded by saying the plaintiff has no cause of action against the Defendant under the principle of subrogation and therefore that the Defendant is not indebted to the Plaintiff in the sum of USD 30,007.

As was agreed during case scheduling, I will handle issues one and two together because resolution of one almost automatically leads to resolution of the next one. The law on cause of action is well settled, and where a plaint does not disclose a cause of action, it is rejected under order 7 Rute t I (o) of the civil procedure Rules sI 7I. The meaning of the phrase 'cause of action'was explained in the case of Auto Gorage v Motokov (NO. 3) t I 971 I EA 514, where it was held that;

"A plaint discloses a cause of action if its averments show that the plaintiff enjoyed a right which has been violated and the Defendant is responsible for that violation. "

As counsel for the Plaintiff submitted, it is true that a plaintiff is at liberty to sue anybody that they think they have a claim against, however, the test in the Auto Garage case (supra) must be present for a case to stand. This is a subrogation

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claim brought against the Defendant, and the Defendant denies transporting the said coffee bags, which when proved would seftle the two issues, and also conclusively settle the case.

'subrogation' was defined by Justice oder in the case of sufJish International Footl Processors (u) Lttl & Anor v. Egltpt Air corporation sccA No. I S of 200r to mean:

"..... the right of an insurer who has paidfor a loss to receive the benefit of all the rights and remedies for the insured against the third parties which, if satisfied, extinguish or diminish the ultimate loss sustained. The insurer who has paid for a loss, may thus exercise the rights of the insured to recover from the third party, or if the insured has already exercised that right, the insurer will be entitled to repayment from him. "

However, the right of subrogation is not automatic, it is only available for rights which the insured is entitled to.ln Halsbury,s Laws of England, vot. 2s (4th Ed), para 3l 7, it was stated that;

"According to the doctrine of subrogation, the insurer is entitled only to those remedies, rights or other advantages which are available to the assured himself ',

In addition, the doctrine operates where a valid and operative contract exists between the insurer and the insured, being the basis ofpayment by the insurer upon the loss by the insured. See salish Internotionol Food processors (u) Lrd & Anor v. Egtpt Air Corporation (supra).

In this case, it follows that there was an existing insurance contract between the Plaintiff (insurer) and SpEDAG (insured) as evidenced by pE l, which was a renewal of an existing policy between them, under insurance policy No.

s 120106211100481612009. This fact is not disputed by either party. It is also not in dispute that the insurer (Plaintiff) paid out USD 28,362 in settlement of the claim made for loss of the consignment to the insured, evidenced by the discharge voucher (PE 4) and cheque (PE 5). Further, it is also not in dispute that there existed a transport contract between the insured (SPEDAG) and the Defendant, which is PE 3 dated 4th February 2013, on page 8 of the Plaintiff s Trial Bundle.

The only issue then is whether or not, the insured is entitled to recover from the Defendant, which would in turn give the Plaintiff the right to recover under the doctrine of subrogation. In this case, it is the considered opinion of this Court that the Plaintiffs case against the Defendant only stands ifit is indeed proved that the said 320 bags of coffee were indeed loaded on the Defendant's truck in accordance with the transportation contract and that they went missing while in the Defendant's custody, as alleged. I will now tum to the evidence on record.

The Defendant has persisted that the said coffee bags were not loaded on his truck on the day the Plaintiff claims the same was done. I have noted that the Plaintiff has not produced any loading documents in that regard. However, even without dwelling so much on whether or not the coffee bags were loaded, there is an issue regarding the legality of settlement of the claim. Although the Plaintiff already paid for the loss, it is also important to consider whether the loss was covered by the insurance policy, because this will also determine whether or not the subrogation claim can stand.

It is true that the policy covered theft, however, cover of theft in some circumstances were exempted. As rightly pointed out during cross examination of PW 2, Memo 6 set out a scenario of exemption as follows:

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"lt is hereby declared and agreed that this policy will not cover loss or damage by theft or pilferage or any attempt whilst the vehicle is unattended in any public place or which is laid-up overnight or temporarily stored in any garage or similar premises unless the vehicle shall have been securely locked at all points ofaccess and unless such loss or damage results from forcible entry into the vehicle.,'

A similar provision is outlined in paragraphs I (a) and (b) of the Exceptions in the Insurance contract. PWI and PW2 state in paragraphs 6 and 5 of their respective witness statements that the loss was occasioned by the Defendant's negligence in failing to provide an escort to go with the truck. This is an admission on their part that the vehicle was unattended, as required. This in itself would disqualifu their claim. Therefore, it was improper for the Plaintiff to go ahead and settle the claim, knowing that the theft was due to negligence. In my view, the plaintiff cannot benefit from a payment which was wrongfully made on their part. Had they strictly interpreted the contract, such payment would not have been made, therefore the Defendant cannot be held liable for such a claim.

Similarly, there was a breach of contract on the part of the insured by failing to provide a tally clerk to move with the cargo as required and pwl, pw2 and pw3 confirm this. Further, still under the exceptions in the insurance contract, paragraph 1(e) exempts the insurer from covering where there is'dishonesty of the employee or servant of the insured.' During cross examination ofpw 3, he stated that one of the managers had informed him that he believed that there was connivance between the driver and the tally clerk. Dishonesty is sometimes used interchangeably with fraudulent acts. It has been defined to mean .deceitfulness shown on someone's character or behaviour.' connivance is therefore an act of deceit, hence dishonesty in this case, because the tally clerk acted deceitfully contributing to the loss.

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Also, as rightly stated by counsel for the Defendant, the insured failed to act in utmost good faith as it is required in insurance contracts lsee National Insurance corporation Ltd v Kukugu sylvan (supra)], through their failure to disclose to the Plaintiff the existence and details of the criminal case, details of police investigations and their progress. If they had, pw 2 admitted that the plaintiff probably would not have settled the insured's claim. In addition, I find that pw 3's act of giving two varying reports, the first advising the plaintiff not to settle the claim and the second advising them to settle, without any significant change in circumstances was questionable. This ought to have been enough waming for the Plaintiff not to go on with the sertlement.

In conclusion, and in view of all the above eventualities, I am convinced that the Plaintiff acted in haste and error to settle the insured's claim, therefore, they do not have a right to recover under subrogation, since the insured themselves would not have a claim against the Defendant, assuming that there is concrete proof that indeed the 320 bags ofcoffee were loaded onto the Defendant's truck on the l2m of April 2013. Therefore, this answers the first two issues in the negative; thus the Plaintiffhas no claim against the Defendant and that the Defendant is not indebted to the Plaintiff in the sum claimed.

I do not see the need to delve into a discussion of the alleged breach of contract by the Defendant in failing to deliver the goods as they should have, because the insured breached their duty of utmost good faith under the insurance policy, upon which the Plaintifls right of action arises, and the Defendant is not privy to that contract.

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## Issue 3

As to whether the Defendant's vehicle was unlawfully impounded, counsel for the counterclaimant/Defendant submitted that the said motor vehicle was detained following criminal investigations in an alleged false theft, and that the evidence was not rebutted by the Plaintiff, and therefore concluded that the impounding and detention of the vehicle was unlawful.

on the other hand, counsel for the plaintiff submitted that the vehicle was towed away by police, and not the Plaintiff, in the course of their investigations after it had been found empty and abandoned.

In answer to this issue, it is not in dispute that there was an ongoing criminal case against the Defendant's driver, which case was eventually dismissed on a no case to answer in2017 by the Nakawa Chief Magistrates' Court.

It is also not in dispute that the said motor vehicle was impounded by the police during investigations into the case of theft of coffee, and as stated by pw3, some of the coffee was recovered.

In criminal proceedings, the police have the authority to seize and detain vehicles that will aid in their investigations. section 7 of the civil procedure code Act provides:

"Any police oficer may stop, search or detain any vessel, boat, aircraft or yehicle in or upon which there is reason to suspect that anything stolen or unlawfully obtained may be found and also any person who may be reasonabry suspected of having in his or her possession or conveying in any manner anything stolen or unlawfully obtained, and may seize any such thing. "

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Therefore, the impounding of the said motor vehicre by the police was rightfully done and within their mandate; and cannot be imputed on the plaintiff. Therefore, the third issue is also answered in the negative, hence the counterclaim fails.

## Issue 4

on the remedies available, having held as I have above and since both parties have failed to prove their claims, none is entitled to the remedies sought. Therefore, both the suit and counterclaim are hereby dismissed and each party will bear their own costs of their suits.

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HON. LADY JUSTICE ANNA B. MUGENYI 1L l\*.lm\* DATED.,....