Wilson Limited v Queensland Insurance Company Limited (Civil Case No.,192 of 1951 (Mombasa)) [1952] EACA 283 (1 January 1952)

# ORIGINAL CIVIL

## **CALLER TRACE** Before CONNELL, J.

### KETTLES-ROY & WILSON, LIMITED, Plaintiffs

#### v.

## QUEENSLAND INSURANCE COMPANY, LIMITED, Defendants

# Civil Case No. 192 of 1951 (Mombasa)

Sea insurance—Stamp Ordinance, section 8 (1)—Necessity for sea policy—Nondisclosure of plaintiffs' interest—Whether material.

The plaintiffs asked the defendants for an insurance rate quotation in respect of the shipment of a cargo of Mangalore tiles from "India by steamer to landed Mombasa" the cover to include breakage. The defendants quoted £3 per cent and this was accepted. The plaintiffs required the policy for a client and on receiving the defendants' quotation, in turn quoted their clent £15 per cent. The issues before the Court were: -

- (1) Do the two letters of 11th November, 1949, amount to a contract for sea insurance? If yes, are they invalid and unenforceable under section 8. Stamp Ordinance (Cap. 299, Laws of Kenya) as not being expressed in a sea policy? - (2) Was there on the part of the plaintiff a wrongful concealment of a material fact, viz. that he had entered into a contract with Rambhai & Company and that the plaintiff company was making a personal profit on the transaction?

(3) Did the plaintiffs have an insurable interest in the subject matter insured?

- Held $(24-7-52)$ .—(1) The contract was not one of sea risk but sea insurance and the description in the Stamp Ordinance at page 3285, Volume III, Revised Laws, was not exhaustive as to what constitutes a contract for sea insurance. - (i) There being no marine policy or sea policy by section 8 (1) of the Stamp Ordinance the contract was invalid. - (ii) The concealment by plaintiffs of the rate they had quoted to his client was not of a material fact. - (iii) The plaintiffs had no insurable interest in the subject matter insured.

Cases referred to: Thames & Mersey Marine Insurance Co. v. Gunford Ship Co. (1911) A. C. 529; Glasgow Insurance v. Simonson, 104 L. T. R. 254. $\begin{array}{c} \mathcal{L}_{\text{max}} = \mathcal{L}_{\text{max}} \end{array}$ ت المتوسدة با

A. B. Patel for plaintiffs.

Cleasby for defendants.

JUDGMENT.—The issues in this case have been very much narrowed down by learned Counsel in their final arguments and the sole questions for decision $are:$ —

- $(1)$ Do the two letters of 11th November, 1949, amount to a contract for sea insurance? If yes, are they invalid and unenforceable under section 8, Stamp Ordinance (Cap. 259, Laws of Kenya) as not being expressed in a sea policy? - (2) Was there on the part of the plaintiff a wrongful concealment of a material fact, viz. that he had entered into a contract with Rambhai & Company and that the plaintiff company was making a personal profit on the transaction?

(3) Did the plaintiffs have an insurable interest in the subject matter insured? For convenience I set out the two letters of 11th November hereunder: —

"Messrs. Kettles Roy & Wilson, Ltd.,"

$\mathbb{R}^{n+1} \times \mathbb{R}^{n+1}$

Nairobi.

Dear Sirs.

INSURANCE OF MANGALORE TILES FROM INDIA TO LANDED MOMBASA

We confirm telephone conversation when you asked us for quotation for a rate on £70,000 value on Mangalore Tiles, for shipment from India by steamer to Landed Mombasa.

We confirm our advice that our Mombasa Office had quoted Sh. $60\%$ and thank you for your acceptance. $\mathcal{F}^{\mathcal{A}}_{\mathcal{A}}(x) = \mathcal{F}^{\mathcal{A}}_{\mathcal{A}}(x) + \mathcal{F}^{\mathcal{A}}_{\mathcal{A}}(x) = \mathcal{F}^{\mathcal{A}}_{\mathcal{A}}(x)$ $\mathcal{L}_{\text{max}}(x) = \mathcal{L}_{\text{max}}(x)$

As advised you, we will issue the assured with a Queensland Policy, and have taken due note that you wish the Insurance Premium to be debited direct to yourselves.

We have advised our Mombasa House accordingly, asking them to make no mention of the Premium Rate on the Policy.

We have also taken note that you will require a letter to the Bank, advising them that we are effecting this insurance and this will be handed to you as soon as we are in possession of the relevant details.

In the meantime, we have asked Mombasa to issue you with a Policy, in accordance with your request, and we would thank you to declare the name of the steamer as soon as this is known.

Yours faithfully,"

"Messrs. Kettles Roy & Wilson, Ltd., $\mathbf{N} \mathbf{a} \mathbf{r} \mathbf{c} \mathbf{b}$

Dear. Sirs, $\cdots$

MANGALORE TILES FROM INDIA TO LANDED MOMBASA

With reference to our telephone conversation of this afternoon, we confirm that the quoted rate is £3 per £100. We have also taken due note that the cover is for tiles and ridges and is to include W. A. and breakage. We have taken due note that the sum to be assured is now reduced to £65,000.

## Yours faithfully,"

In dealing with point (1) Mr. Patel argued that the contract was merely one of sea risk and did not constitute a contract of sea insurance; in his submission if the oral evidence in the case be examined it is clear that the contract is to cover risk both at sea and at port including off-loading handling and stacking, that the greater part of the premium is chargeable or allocated towards the risk of damage or breaking whilst off-loading or handling at port and that under those circumstances the contract cannot be deemed to be "a contract of sea insurance" as described at the foot of page 3285, Stamp Ordinance.

$\ldots$ 1 recite hereunder the relevant passage: $\ldots$ $\ldots$ $\ldots$

Where any person, in consideration of any sum of money paid or to be paid for additional freight or otherwise agrees to take upon himself any risk attending goods, merchandise, or property of any description whatever while on board of any vessel, or engage to indemnify the owner of any such goods, merchandise or property from any risk, loss or damage, such agreement or engagement shall be deemed to be a contract for sea-insurance;"

Now to my mind the passage I have just quoted was never intended to be exhaustive as to what constitutes a contract for sea insurance. Read in the ordinary sense it seems to me that it deals only with the type of contract where a person either takes on a risk covering the shipment of goods for "additional freight or engages to indemnify the owner of the goods by the latter's payment of additional freight"; in those types of cases which cover only risk while on board the contract is to be deemed one of sea insurance.

Section 8 (1) appears to me to be a wide section leaving it to be decided by the Courts what is a contract for sea insurance. I set it out hereunder: $-$

"No contract for sea-insurance (other than such insurance as is referred to in Section 506 of the Act of the Imperial Parliament shortly entitled 'The Merchant Shipping Act, 1894') shall be valid unless the same is expressed in a sea-policy.'

To my mind from the evidence of the case as a whole and from the correspondence it could not be argued otherwise than that the whole intention of Mr. Desai, the managing Director of the plaintiff company, and of Mr. Wheeler, representing the defendant company, was that a marine policy or sea policy should be drawn up. What other construction can possibly be drawn from the letters of 11th November, 15th November and 16th November, which I need not set out in full.

$\ddot{\phantom{0}}$

Furthermore, when section 8 by its very words indicates that no contract for sea insurance shall be valid unless the same is expressed in a sea policy I think it is quite legitimate to call in aid paragraph $(b)$ of the definition of "policy of sea insurance" or "sea policy" which includes any "other risk" incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the insurance. If sea policy or policy of sea insurance covers breakage whilst off-loading and handling I do not see how it can be argued that there could be a sea policy or policy of sea insurance without presupposing a "contract for sea insurance".

In my view the whole of the evidence and correspondence discloses a contract for sea insurance and I must hold that as the contract was not expressed in a sea policy the contract is invalid and cannot be sued on.

Although my judgment might stop here a great deal of evidence was led on to the second issue, so I will deal with it.

Regarding the second issue of non-disclosure, the material facts which I find are these:-

"Mr. Wheeler, who I find is a more reliable witness than Mr. Desai, had obtained the quotation of £3 per £100 from Queensland Insurance Company, Mombasa, on 10th November and had communicated this rate to Mr. Desai on the same day. On the next day, as I find, Mr. Desai obtained the final letter (exhibit 1) from P. W.1, Motibhai Patel, who was the manager of Rambhai and<br>Company, agreeing that Mr. Desai should insure his shipment of Mangalore tiles for £65,000 at £15 per £100 including breakage. I also find that it was on

11th November that Mr. Wheeler was first informed by Mr. Desai that the latter required a policy for a client of his. I find also that it was not until very recently that Mr. Wheeler got to know that Mr. Desai had entered into the abovementioned contract of 11th November with Rambhai & Company. The question is whether the hiding of this contract from Queensland Insurance Company vitiated the contract to insure between Queensland Insurance Company and the plaintiff company.

Mr. Wheeler stated: "I think it is their (i.e. plaintiffs') duty to disclose what the contract is". Likewise Mr. Relph stated: "in my opinion the premium which a broker had arranged with his client would form the basis on which I accepted the insurance".

I have found the answer to this issue presents some difficulty. Mr. Salter has referred to the 2nd volume of Arnold on Marine Insurance, 13th Edition, paragraph s.589, states: "All facts are material which would affect the mind of a rational underwriter governing himself by the principles on which underwriters in practice act, as to either of the following points: First, whether he will take<br>the risk at all; second, at what premium he will take it". The cases referred to in Arnold immediately succeeding to this passage refer to cases of over-valuation or under-valuation of cargoes and it was held that this was a material fact which the underwriters should know. Another case referred to non-disclosure of a policy in respect of disbursements which the company manager purported to insure as being moneys owing to him by the company in respect of which the manager had no insurable interest. It was held by the House of Lords that the disbursement policies ought to have been disclosed. The case referred to is the Gunford $(1911)$ A. C. 529.

On the other hand Mr. Patel quoted the case of Glasgow Insurance v. Simonson, 104 L. T. R. 254; the facts were somewhat complicated but substantially it was alleged that the defendants, who were underwriters and had re-insured risks with the plaintiffs, had not disclosed to the plaintiffs that the defendants had a system of themselves underwriting and then re-insuring their risks; Scrutton, J., held that "the material facts are the subject matter, the ship, and the perils to which the ship is exposed; knowing these facts the underwriter must form his own judgment of the premium and other peoples' judgment is quite immaterial". Arnold in his commentary stated at page 589 "The learned judge cannot have intended in all cases to limit material facts in any such way as the words which we have quoted, if taken by themselves, would suggest. Any such limitation appears to be inconsistent with the express words of section 18 (2) of the Marine Insurance Act, 1906".

There is no doubt Mr. Desai was in a sense going round "from pillar to post" trying to get "cover" for Rambhai; two or three companies would not "touch it" until the defendant company, through Mr. Wheeler, then took it up and in Mr. Desai's own words "I did feel surprised at this quotation". It is true Mr. Desai gave in evidence that "Weir told him he could charge whatever rate he liked" for his client; it is, however, in evidence that Mr. Weir was never in Nairobi at all and that the sole conversations were between Mr. Wheeler and Mr. Desai. I cannot therefore accept that any such conversation with Mr. Weir ever took place; and it is afterwards fully admitted by Mr. Desai that he never told Queensland Insurance Company that he had entered into the £15 per £100 contract with Rambhai & Company.

I should have thought myself, though I speak with some diffidence over a matter of specialized commercial law, that the special fact that it was only (as I have found) after Mr. Desai was aware of the favourable (to say the least of it) quotation from Queensland Insurance Company that he finalized the "far

less favourable rate" with Rambhai & Company; I should have thought that that fact at that particular stage was not such a material fact as had to be disclosed to the defendant company. No doubt the defendant company had made a mistake in quoting so low a premium: no doubt from what he calls "a business point of view" Mr. Desai took full advantage of this low quotation to enter into (on the face of it) a large profitable transaction with Rambhai & Company. I cannot, however, myself find that the fact that Mr. Desai was negotiating at the material time and had on the 11th completed a negotiation with Rambhai and Company with such potential profit to himself was a matter affecting the question as to whether the defendant company would undertake the risk at all, or was such a matter affecting the subject matter insured as would affect the premium which (as I have found) had clearly been quoted by the defendant company.

$\sim$ For these reasons 1 decide issue No. 2 in favour of the plaintiff.

As to the third issue I need say no more than that I find as a fact that the plaintiffs had no insurable interest in the subject matter insured.

$\cdot \cdot \cdot$

I have considered the matter of costs. The suit, as I have already indicated, must be dismissed. The defendants are entitled to the general costs of the suit. They are entitled to costs on the first and last issues; the plaintiffs are entitled to costs on the issue raised on the pleadings alleging fraud; there is no doubt that a large part of the hearing consisted of the answer to the second issue and on that issue costs must be awarded to the plaintiff. Other points raised in the defence were not seriously argued and little or no evidence was led on their behalf. I propose to make no order as to the other issues raised in the defence.