Madison Insurance Company Limited v Mwai [2022] KEHC 9862 (KLR)

Madison Insurance Company Limited v Mwai (Civil Appeal 30 of 2019) [2022] KEHC 9862 (KLR) (Civ) (8 July 2022) (Judgment)

Neutral citation: [2022] KEHC 9862 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal 30 of 2019

JK Sergon, J

July 8, 2022

Between

Madison Insurance Company Limited

Appellant

and

Michael Gitonga Mwai

Respondent

(Being an appeal under Section 65 1(b) of the Civil Procedure Act Cap 21 Laws of Kenya and Order 42 Rule 1 of the Civil Procedure Rules 2010 against the Judgment of Hon. Orenge K.I (SRM) Milimani delivered on 25. 01. 2019 in Nairobi CMCC No.3734 of 2018)

Judgment

1. The respondent herein instituted a suit before the Chief Magistrate’s Court by way of the plaint dated April 13, 2018 and sought for the following:a.Special damages Kshs.2,005,497/=b.Damages for loss of the vehicle at Kshs.12,000/= net daily for 11 months plus interests thereon.c.General damages for breach of contract, plus interests at court rates.d.Costs.

2. The respondent averred in his plaint that he is the beneficial owner of motor vehicle of KCA 677Z Isuzu the subject vehicle which was comprehensively insured by the appellant and valid before November 14, 2015 and November 13, 2016 which he had taken cover through Insurance Premium Financing with NIC Bank.

3. The respondent pleaded in his plaint that he had given the appellant ten postdated cheques being payment of the premium but for the reasons unknown by the respondent the appellant only banked two cheques and no reason given to the respondent as to why the rest of the cheques were not banked.

4. The respondent further pleaded that on August 3, 2016, the subject motor vehicle was involved in an accident and as a result of the said accident the said vehicle was extensively damaged and when the respondent reported the same to the appellant who maintained that there were arrears which inspite the appellant having the post dated cheques but the respondent nevertheless paid the arrears under duress which was illegally demanded.

5. The respondent avers that following the aforesaid accident the respondent had an assessment report which was shared with the appellant providing the costs of repairing the subject vehicle at Kshs.2,005,497/= and a daily loss of use of the vehicle at Kshs.12,000/= net daily for 11 months approximately as a result of the accident.

6. The appellant filed its statement of defence denying the entire claim. The matter proceeded for hearing and judgment was eventually delivered in favour of the respondent in the sum of Kshs.4,404,269/=.

7. The appellants being aggrieved preferred this appeal and put forward the following grounds:a.That the learned trial magistrate erred in law and in fact by finding that the appellant was liable to compensate the respondent for the damage caused to the respondent’s vehicle as a result of the accident that occurred on August 3, 2016 contrary to the evidence that was adduced.b.That the learned trial magistrate erred in law and in fact by awarding the respondent special damages and lose of use contrary to the respondents’ pleadings and the overwhelming evidence adduced by the appellant.c.That the learned trial magistrate erred in law and in fact by applying the wrong statute and the wrong statute and the wrong section of the law in arriving at his decision.d.That the learned trial magistrate erred in law and in fact by disregarding the appellant’s evidence and submissions and wholly relying on the respondent’s insufficient evidence and submissions in arriving at his decision.e.That the learned trial magistrate erred in law and in fact by misinterpreting and misapplying the authorities quoted in his judgment.f.That the learned trial magistrate erred in law and in fact by considering irrelevant factors while leving out relevant ones in arriving at his judgment.g.That the learned magistrate judgment was arrived at in a cursory and perfunctory manner without properly analyzing the legal issues and evidence presented in the suit.

8. Directions were given that the appeal be canvassed by way of written submissions. Accordingly, the parties complied and filed their respective submissions.

9. The appellant vide its submissions dated April 7, 2022, the appellant has pointed out that the provision premium payment warranty was and is to the effect that for indemnity to be provided the same would only apply upon full payment of the premiums as per the Insurance Act. The provision of section 156 of the Insurance Act provides thus:“No insurer shall assume a risk in Kenya in respect of insurance business unless and until the premium payable thereon is received by an insurer. An intermediary shall not receive any premiums on behalf of an insurer”

10. The appellant further pointed out that the respondent did not pay his premiums nor were they guaranteed to be paid by any person since the bank did not pay since the respondent did not honour his obligation.

11. The appellant contends that the respondent claimed that he paid Kshs.150,000/= said to be arears after the event and that appellant forced him to pay a further Kshs.150,000/= as premiums under duress which he paid after the accident.

12. The appellant pointed out that this was a clear indication that the respondent had acknowledged that he had not paid the premiums to the appellant in respect to the policy he was issued by them and that if he had issued the said postdated cheques the same would have been cleared ,then why did he agree to pay the Kshs.150,000/= to the appellant which clearly shows that he was in breach of policy terms hence the reason he was trying to rectify that breach after the accident had already occurred.

13. The appellant contends that it was claimed that the respondent was never informed of the cancellation of the policy which has been addressed that once a party changes their address they ought to notify the insurer that they have done so for purposes of communication and that it was proven then without a doubt that the address that was used belonged to the respondent and that its unfortunate that the appellant cannot file the certificate of postage at this instance.

14. The appellant relied on the case of Insurance Company of East Africa v Marwa Distributors Limited (2015) eKLR in which upon quoting the foregoing Court of Appeal Case, Justice Majanja went on to elaborate the requirements as follows;“In my understanding, the case does not set out a hard and fast rule that failure to pay premium does not invalidate the policy but underpins the general contract principle that parties are bound by their obligations recorded in the agreement. It means that if the parties do not make provision for the effect of non-payment of the premium, the court will not necessarily imply that the policy is invalid. The effect of non-payment of premium on the policy depends on the intention of the parties expressed in the contract.The recital of the policy subject of the suit states as follows;Now therefore in consideration of the payment to the company of the premium for the period of insurance mentioned in the schedule and for any subsequent period for which the Company shall accept renewal premium the Company agrees to pay or make good to the Insured or otherwise compensate or indemnify the Insured as hereinafter provided ……[Emphasis mine]”

15. It is the appellant’s submissions that the respondent was aware that non payment of premiums would amount to the policy itself being void and that the cancellation was done procedurally as per the terms of the policy itself which was signed by the respondent.

16. On the issue of quantum of damages, the appellant submitted that the respondent was awarded an exponential sum of Kshs.4,415,269/= made up Kshs.3,146,000/= for loss of user plus costs for repairs at Kshs.1,258,269/= and a further special damage of Kshs.11,000/= was also made.

17. The appellant further submitted that the respondent ought not to have been awarded anything at all as he did not prove his case on the loss of user, special damages or even the costs of repairs as his assessors testified that the only amount, he could directly link to the accident was Kshs.754,768/= and not Kshs.2,005,497/=.

18. In retort, the respondent submitted that the appellant was duty bound under their agreement to present the cheques to the bank for processing towards satisfaction of the premium obligations and that there was no evidence at the trial that led to demonstrate that these postdated cheques by the respondent were presented to the bank or that the same had been rejected.

19. The respondent argued that the term of payment being within three months as emphasized by the appellant was an afterthought and that the appellant having received the postdated cheques beyond the three months without protest.

20. On this argument, the appellant relied on the case of Daniel Otieno Migore v South Nyanza Sugar Co. Ltd (2018) eKLR:“It is by now well settled by precedent that parties are bound by their pleadings and that evidence which tends to be at variance with the pleadings is for rejection. Pleadings are the bedrock upon which all the proceedings derive from. It hence follows that any evidence adduced in a matter must be in consonance with the pleadings. Any evidence, however strong, that tends to be at variance with the pleadings must be disregarded.”

21. The respondent contends that upon receipt of that claim for indemnity by the respondent, the appellant demanded and received Kshs.150,000/= as further condition for admission of the liability. On this the respondent relied on the case of Panchuad Freres SA v ET General Grain Co.(1970) 1 Lloyd’s Rep53 at page 57 Lord Denning MR stated:If a man who is entitled to reject goods conducts himself as to lead the other to believe that he is not relying on that ground, then he cannot afterwards set it up as ground for rejection, when it would be unfair or unjust to allow him to do so.

22. The respondent pointed out that no evidence was led by the appellant to prove that the policy was cancelled in terms of the insurance contract between the parties but on the contrary the appellant failed to demonstrate that notice of cancellation was sent to the respondent as provided under the insurance contract.

23. The respondent has relied on the finding in Amirah Hassanali Mohammed Mapara v Commissioner of Insurance :AAR Insurance Kenya Limited (Interested Party)(2020)eKLR where it was held that:“In this matter, the issue of cancellation of the policy for non-payment of premium does not even arise. This is because the premium was duly paid and acknowledged in the policy document itself. This Tribunal finds and holds that the Interested Party was wrong to purport to cancel the policy on the strength of a notice of cancellation issued by a third party. To this end, the Tribunal hereby finds and holds that the insurance policy was not properly cancelled by the Interested Party for non-payment of premiums or for any other reason since no evidence of such cancellation was given to the Appellant, the Respondent and/or the Tribunal.”

24. The respondent submitted that the appellant failed to demonstrate that it had posted the cancellation notice as provided or required under the contract of insurance and for that reason on the proof of service, the respondent contends that the appellant ought to have produced a certificate of postage. On this the respondent relied on the case of Stephen Boro Githia v Nicholas Rithiru Gatoto & 2 Others(2017) eKLR the court held as follows albeit in respect of statutory notices in equity of redemption:It was his testimony that a notice had been posted to the plaintiff’s address.However, he did not produce a certificate of posting or any documentary evidence to show that the statutory notice was indeed served on the plaintiff.

25. It is the respondent’s submissions that no evidence that the payment of the Kshs.150,000/= was rejected by the appellant impliedly in protest of the allegedly cancelled policy and that the conduct of receiving the money was illustrative of subsisting obligations that existed at the material time.

26. On damages, the respondent submitted that the supporting documentation relating to the damages were adduced at the trial and were unchallenged and that the appellant’s submissions that the damages were not substantiated or proved is an afterthought that should be rejected.

27. The respondent relied on the case of Kemfro Africa Limited t/a Meru Express Services (1976) & another v Lubia & another(No.2) (1985) eKLR also expressed itself thus:The principles to be observed by an appellate court in deciding whether it is justified in disturbing the quantum of damages awarded by a trial Judge were held by the former Court of Appeal of Eastern Africa to be that it must be satisfied that either that the Judge, in assessing the damages, took into account an irrelevant factor, or left out of account a relevant one, or that, short of this, the amount is so inordinately low or so inordinately high that it must be a wholly erroneous estimate of the damage.

28. After perusal of the record of appeal, submissions from the appellant and pleadings, I have identified the following issues for determination;1. Whether the respondent had a valid policy at the time of the accident?2. Whether the insurance policy was properly cancelled for non-payment of premiums;3. Whether the trial Court erred in awarding Kshs.4,415,269/= in damages

29. On the first issue, the appellant submitted that respondent in this appeal approached the appellant and gave a proposal to seeking a motor asset insurance policy to cover his motor vehicle of registration number KCA 677Z and proposed to take a cover through Insurance Premium Financing with NIC bank and that the total premium to be paid was Kshs.244,800/=.

30. The appellant contends that the Insurance Premium financing means the respondent would draw post dated cheques for the premium to NIC Bank then draw one cheque of Kshs.244,800/= to the appellant as full payment.

31. The appellant further contends that the respondent drew ten (10) postdated cheques in favour of NIC Bank and that all these cheques were dishonored but not before the respondent had been issued with a policy.

32. That on the understanding and hope that the premiums would be received from the bank, the appellant issued a policy No. IND/707/096587/2015 in favour of the respondent’s vehicle and that the said cover commencement date on 14th November 2015 and expire on the 13th November 2016.

33. The respondent on the hand stated that the appellant admitted he proposed to take the impugned cover through insurance premium financing and that the appellant was duty bound under this agreement to present the cheques to the bank for processing towards satisfaction of the premium obligations.

34. The respondent submitted that the term of payment being three months as emphasized by the appellant was an afterthought raised in their submissions and that the appellant also received the post-dated cheques beyond the three months without protest.

35. I equally rely on the Court of Appeal case of Independent Electoral and Boundaries Commission & Ano. vs. Stephen Mutinda Mule & 3 others (2014) eKLR which cited with approval the decision of the Supreme Court of Nigeria in Adetoun Oladeji (NIG) vs. Nigeria Breweries PLC SC 91/2002 where Adereji, JSC expressed himself thus on the importance and place of pleadings:“…..it is now trite principle in law that parties are bound by their pleadings and that any evidence led by any of the parties which does not support the averments in the pleadings, or put in another way, which is at variance with the averments of the pleadings goes to no issue and must be disregarded………In fact, that parties are not allowed to depart from their pleadings is on the authorities basic as this enables parties to prepare their evidence on the issues as joined and avoid any surprises by which no opportunity is given to the other party to meet the new situation.”

36. The respondent also submitted that upon receipt of that claim for indemnity by the respondent, the appellant demanded and received Kshs.150,000/= as further condition for admission of the liability.

37. It is quite clear from the above that indeed there existed a contract insurance between the appellant and the respondent at the time of the accident which occurred on 3rd of August 2016, which falls in between when the said cover commenced on the November 14, 2015.

38. It is also clear that there is no evidence before this court that the appellant had banked the said post dated cheques and the same rejected by the bank. The appellant on the basis of this arrangement issued a policy to the respondent.

39. I do therefore find that there was a subsisting policy as at the time of the accident.

40. On the second issue, the appellant submits that the respondent was never informed of the cancellation of the policy and that once a party changes their address, they ought to notify the insurer for purposes of communication

41. On the other hand, the respondent submitted that the appellant failed to demonstrate that it had posted the cancellation notice as provided or required under the contract of insurance and that the appellant ought to have produced a certificate of postage.

42. The respondent further submitted that the fact in issue was the currency of the policy at the time of the accident and that under clause 7 of the policy states that the appellant could cancel the policy by sending seven days notice by registered letter to the respondent to his last known address and in such event would return to respondent the premium paid less the pro rata portion thereof for the period of policy has been in force or the policy may be cancelled at any time by the insured on seven days’ notice.

43. That the appellant did not lead any evidence to demonstrate that the foregoing clause 7 was complied with as to warrant the disturbance of the finding by the trial court and that there was no evidence that the Kshs.150,000/= was rejected by the appellant impliedly in protest of the allegedly cancelled policy.

44. In the present case, I find that it means that parties do not make provisions for the effect of non-payment of the premium and the trial court also decided not to imply that the policy is invalid and that the effect of non-payment of the premium depends on the intention of the parties expressed in the contract.

45. In the case of Liki River Farm Limited v Tausi Assurance Co. Ltd [2018] eKLR where the court stated as follows:“The true effect of non-payment of premium will therefore have to turn on the terms of the Insurance Contract and the language used. The Policy commences with this recital,“whereas the Insured by a proposal and declaration which shall be the basis of this Contract and is deemed to be incorporated herein has applied to the Tausi Assurance Company Ltd (hereinafter called the Company) for the Insurance hereinafter contained and has paid or agreed to pay the premium as consideration for such Insurance”.The important words would be, has paid or agreed to pay the premium. The Finance Agreement referred to by the witness is an Insurance Premium Broker Finance Agreement dated June 29, 2007. It was intended to be a tripartite agreement involving NIC Bank, Crownscope and Tausi. Although dated June 29, 2007, the Agreement appears to have been signed by only the representatives of Crownscope and Tausi. A Copy of that Agreement produced in Court shows that the Bank (The financier) did not execute the Agreement. It must follow that the document cannot be a proper undertaking/guarantee for payment of the premium because the financier (who is a Primary party to such an arrangement) had not executed the agreement”.

46. The fact the appellant never demonstrated that the notice for cancellation was served and that the same was sent through registered post to the last known address and that the appellant had not shown the certificate of posting, I do therefore find that the respondent was entitled to the compensation as per the policy.

47. For the above reasons, I come to the conclusion that this appeal lacks merit. The same is hereby ordered dismissed with costs to the respondent.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 8TH DAY OF JULY, 2022. J. K. SERGONJUDGEIn the presence of:...................for the Appellant..................for the Respondent