004-SLLR-SLLR-2007-V-2-JANASHAKTHI-INSURANCE-CO.-LTD-v.-UMBICHY-LTD.pdf
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Janashakthi Insurance Co. Ltd v Umbichy Ltd.
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JANASHAKTHI INSURANCE CO. LTD.vUMBICHY LTD.SUPREME COURTS.N. SILVA, C.J.
JAYASINGHE, J.
SHIRANEE TILAKAWARDANE, J.
SC 26/99
HC CIVIL 187/96(1)
DC COLOMBO 13405/MRJUNE 19, 2006OCTOBER 25, 2006DECEMBER 15,2006JANUARY 26, 2007
Evidence Ordinance, Section 35, Evidence (Sp. Pro.) Act 14 of 1995 — Marineinsurance – Breach of warranty of seaworthiness – Burden of Proof – onwhom? ■ Admissibility of documents – Documents maintained in the ordinarycourse of business – Setting up of a different case in appeal – Permitted?
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The defendant-appellant successor to the original insurer appealed against thejudgment of the Commercial High Court which awarded to the insured, theplaintiff-respondent on two causes of action for breach of contract to pay thesums insured on contracts of Marine Insurance, pertaining to the carriage ofconsignment of cargo.
In appeal it was contended by the appellant that the High Court erred in itsapplication of the presumption, since there was no proof that the vessel hadset sail for Colombo and there was no proof of unauthorized deviation from thenormal route which discharged the insurer of liability and the plaintiff has failedto prove that it complied with the Institution classification clause and as suchthe claim is not maintainable and certain documents – telexes – have not beenproved and as such were inadmissible.
Held:
The evidence on record reveals that the vessel left the Port of Mersinand called at the port in Limersol due to engine trouble and from theresailed to Thessaloki and the documents or record indicate clearly thatthe shipment is to Colombo from Mersin via the Steam M.V. Elliot -which established that the voyage contemplated was in fact thevoyage insured.
Under the general law of insurance the burden of proving that awarranty has been broken ties upon the insurers. The burden of proofof breaches of conditions was on the insurer in accordance with theordinary rule that the onus of proving a breach of a condition of aninsurance policy which would relieve the insurer from liability inrespect of a particular loss was, unless his policy otherwise provided,on the insurer.
Per Shiranee Tilakawardane, J.
“I do not believe there to be any doubt regarding the fundamental positionof Insurance Law that burden of proof related to an alleged breach ofwarranty lies on the insurer alleging it – I cannot accept the contention ofthe defendant-appellant that the burden of proving compliance with the"Institute Classification clause” lies with the plaintiff-respondent".
The law of evidence provides that the documents maintained by theparty in the ordinary course of business can be produced by suchparty as evidence. Section 35 (a) of the Evidence Ordinance permitsa witness who by reference to documents and studying the relevantdocuments learns to speak on the facts disclosed by thosedocuments. The Director of plaintiff-respondent company has certifiedin Court that the documents were maintained in the ordinary course ofbusiness. There is no impediment to the admissibility of this evidencein the light of the provisions contained in the Evidence Ordinance.
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Janashakthi Insurance Co. Ltd v Umbichy Ltd.
(Shiranee Tilakawardane, J.)
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Per Shiranee Tilakawardane, J.
"The defendant-appellant is prohibited from setting up a different case fromthat set up at the trial, he cannot take up a case in appeal which differs fromthat of the trial."
APPEAL from a judgment of the Commercial High Court.
Cases referred to:
Royster Guano Co. v Globe & Rutgers 19230 AMC 11 (St. NY)
The Af Jubail iv 1982 Lloycfs Rep. 637 (Singapore)
Stebbing v Liverpool & London & Globe 1917 2 KB 42323
Marshall v Emperor Life (1865) LR 1QB 235
Parker v Potts – 1815 23 Dow 223
Franco v Natush (18236) Tyr & G v. 401
Pickup v Thames and Mersey Marine Insurance (1876) 23 QBD 594 CA
Bond Air Services Ire v Hill 1955 2 QB 417
Barett v London General Insurance Co. Ltd. (1935) 1KB 238.
Faiz Musthapha PC with DinaI Phillips for defendant-appellants.
K. Kanag-lswaran PC with K.M. Basheer Ahamed for plaintiff-respondent.
Cur.adv.vutt
May 23,2007
SHIRANEE TILAKAWARDANE, J.This is an appeal by the successor to the original insurer, thedefendant-appellant, against the judgment of the Commercial HighCourt dated 22nd April 1999, awarding the insured, the plaintiff-respondent, damages on two causes of action for breach of contractto pay the sums insured on two contracts of marine insurance,pertaining to the carriage of consignments of cargo from Turkey to SriLanka.
The High Court awarded the insured an amount aggregating to Rs.27,323,372.00 with legal interest thereon from 1st September 1987 tothe date of decree and thereafter on the aggregate amount of thedecree till payment in full and taxed costs.
The plaintiff-respondent instituted action against the defendant-appellant on 24th May 1993 for the loss of cargo consisting of 2000metric tons of red split lentils valued at Rs. 25,668,380/- and 200metric tons of chickpeas valued at Rs. 1,654,992/- consigned to the
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plaintiff-respondent on M.V. 'Elitor1 which sailed from the port of Mersinin Turkey on or about 24th May 1987.
The cargo comprising 2000 metric tons of red split lentils valued atRs. 25,668,380/- had been insured on 2nd April 1987 by the policymarked as P1, against total loss of the entire consignment by totalloss of the carrying vessels and the 200 metric tons of chickpeasvalued at Rs, 1,654,992/- was insured on 12th May 1987 by the policymarked as P2 against loss by any risk, except those excepted underthe said policy by Institute Cargo Clause A.
The said policies of insurance were issued by National InsuranceCorporation. The defendant-appellant is the successor to thebusiness of the said Corporation and all its assets and liabilities.
The plaintiff-respondent's version is that after sailing from the Portof Mersin on 24th May 1987, the vessel M.V. 'Elitor' developed enginetrouble and called at its home port in Limersol, and sailed therefromon or about 20th June 1987 and sank with alt its cargo on or about 8thJuly 1987. The entire consignment of the plaintiff-respondent was lost.
The plaintiff-respondent notified the defendant-appellant of itsclaims on the said policies in August 1987. However these claimswere not met by either the defendant-appellant or its predecessor.The plaintiff-respondent states however, that others who hadconsigned cargo on board the same vessel were paid by the NationalInsurance Corporation admitting its liability. A cause of action havingarisen to sue the defendant-appellant for monies due under the abovepolicies, the plaintiff-respondent has instituted this action.
At the trial the defendant repudiated liability on several grounds,including that the vessel never left the port on its voyage to Colombo,the ship was not seaworthy for the voyage to Colombo, the shipsecretly discharged the cargo of red split lentils and chickpeas inLebanon, the plaintiff failed to inform the defendant immediately of thesinking of the ship, and the plaintiff has not suffered any loss ordamage since the equivalent of the consignment said to have beenlost was supplied to the plaintiff by Betas Beton.
S. Ashokan, a director with the plaintiff company gave evidencethat the vessel, 'Elitor* did not arrive at the port of Colombo and thatordinarily the ship would have arrived within two to three weeks. Due
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Janashakthl Insurance Co. Ltd v Umbichy Ltd.
(Shiranee Tiiakawardane. J.)
43
to the non-arrival of the ship, the plaintiff made inquiries throughLloyds and from local agents and the owners. Telexes received fromUoyds of London, marked as P3 and P4 were produced by thewitness. Referring to the originals of these documents the witnessstated that these documents were taken over by the CID as part of anongoing investigation. The witness certified that documents P3 andP4 are copies of the originals and were taken and maintained in theordinary course of business.
The plaintiff-respondent made its claims to the defendant-appellantthrough its letters P8 dated 24th August 1987, and P11 dated 18thAugust 1987. The plaintiff-respondent also produced documentsP9(a) and PlO(a) which are Clean Shipped on Board Bills of Ladingstating that the consignments described therein have been shipped atthe Port of Loading in Mersin, Turkey. Documents P10(b) and P10(c)are certificates issued by the shipping agent in Turkey certifying thatthe shipment has been effected in the vessel ’Elitor' and that thevessel 'Elitor1 is an ocean going seaworthy vessel.
The documents submitted along with claims P8 and P11 establishthat the consignment of red split lentils and chickpeas were shippedon board the vessel 'Elitor' from the Port of Mersin, Turkey. Thesedocuments have not been contested by the defendant-appellant. Asremarked upon by the learned Judge, although the Defendant hastaken several positions against the plaintiff's claim, the defendant hasneither called any witnesses not elicited even under cross-examination the veracity of the position taken by them.
The learned High Court Judge having examined and analysed theevidence in view of relevant legal positions, concluded that '‘theplaintiff has established its claim on the basis that the ship M. V. Elitoron board of which the plaintiff-respondent's consignment of goodscovered by P1 and P2 were legally presumed to be lost and resultedin the actual total loss of goods to the plaintiff which is covered by P1and P2 with the liability of the defendant, having to pay the value thetwo contracts have covered."
Aggrieved by this decision of the High Court, the defendant-appellant has raised this appeal on the following grounds;
Firstly, that the High Court has erred in its application of thepresumption, since there was no proof that the vessel has set sail for
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Colombo and there was proof of unauthorized deviation from thenormal route which discharged the insurer of liability.
Secondly, that the plaintiff-respondent has failed to prove that itcomplied with the institute Classification Clause, and as such theclaim is not maintainable.
Thirdly, that the documents P3 and P4 which are copies of telexessaid to have been received from Lloyds have not been proved and assuch, were inadmissible.
Considering the first ground of appeal, it is the defendant-appellant's contention that the presumption has been incorrectlyapplied in the instant case as for the presumption to operate it isnecessary to establish that the vessel sailed on the voyage insured.The defendant-appellant submits that in the instant case, there is noevidence that the vessel set sail for Colombo.
The evidence on record reveals that the vessel left the Port ofMersin, and called at the port in Limersol due to engine trouble, andfrom there sailed to Thessaloki on or about the 20th of June 1987. Thedocuments submitted together with the claims P8 and P11 confirmthat the consignment of 2000 metric tons of red split lentils and 200metric tons of chickpeas were shipped on board the vessel M.V. Elitoras covered by the policy. Document P4 from Uoyds established thatthe ship has reached the port in Limersol and left the port on the 29thof June and hence no information is available.
There is no doubt that the vessel has in fact left the port of Mersin,and the documents on record indicate clearly that the shipment is toColombo from Mersin via the steamer M.V. Elitor (Vide documents P6,P9(a), which established that the voyage contemplated was in fact thevoyage insured — from Mersin, Turkey to Colombo, Sri Lanka). I findthat the Learned Judge correctly held that vessel did sail from the Portof Mersin on or about 24th May 1987 for the port of Colombo.
As part of the same ground, the defendant-appellant has alsocontended the issue that there has been a deviation from theauthorised voyage and that this discharges the insurer from all liabilityon the policy of insurance. It is unnecessary to examine the merits ofthis argument as this is a new issue which the defendant-appellantfailed to raise at the trial stage. The defendant-appellant is prohibited
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Janashakthi Insurance Co. Ltd v Umbichy Ltd.
(Shiranee TUakawardane. J.)
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from setting up a different case from that set up at the trial. I agree withthe plaintiff-respondenfs submission that deviation is a question offact and the impact of such a deviation upon the insurer's liability mustbe considered in light of attendant circumstances.
The defendant-appellant has also alleged that it is not liable underthe insurance policy since the plaintiff-respondent is in breach of acondition of the policy, namely the Institute Classification Clause. Thewritten submissions of the defendant-appellant clearly mentions thatthe same issue is contained in paragraph 8 of the,answer at page 45and issue 5 of the defendant at page 164.
However a bare reading of both documents does not reveal anyreference to the Institute Classification Clause or a breach thereof. Inparagraph 8 of the answer reference is made to the un-seaworthinessof the vessel and also to the breach of the unseaworthiness andunfitness exclusion clause. No dear mention is made of the breach inthe manner taken up in appeal; that the plaintiff-respondent is inbreach of the conditions of the policy pertaining to the InstituteClassification Clause. There is no doubt that the defendant-appellantcannot take up a case in appeal, which differs from that of the trial.Therefore, where the defendant-appellant has failed to raise thematter clearly at the trial stage, it is prohibited from doing so in appeal.
However, even if this court considers the alleged breach of theInstitute Classification Clause as raised by the defendant-appellant,the contention fails since the defendant-appellant has failed todischarge the burden of proving a breach of warranty by the plaintiff-respondent.
It is the defendant-appellant's position that being a warranty, theburden was on the plaintiff-respondent to establish compliance. Thedefendant-appellant claims that as the plaintiff-respondent has failedto discharge its burden and prove compliance with the conditions inthis clause, the defendant-appellant is discharged from any liabilityunder the policy.
The Institute Classification Clause stipulates that;
"The marine transit rates agreed for this insurance apply only tocargoes and/or interests carried by Mechanically self-propelledvessels of steel construction Classed as below by one of thefollowing classification societies".
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"Provided such vessels are:
(i) Not over 15 years of age or
(it) Over 15 years of age but not over 25 years of age and haveestablished and maintained a regular pattern of trading on anadvertised scheduled to load and unload at specific ports.*
The clause clearly requires that the vessel be classed with aClassification Society agreed by the underwriters, remains in thesame class and also that the Classification Society'srecommendations, requirements and restrictions regardingseaworthiness and of her maintenance thereof be complied with bythe date(s) set by the Society. (Vide, Hodges on Law of marineInsurance at page 113).
The main objective of the clause is to improve safety standardsand ensure the seaworthiness of the vessel through the interventionof a reputed Classification Society agreed by the underwriters.Though not specifically mentioned as such, the clause be consideredas a warranty if there is an intention to warrant. It follows that a breachof this clause would relieve the insurer from all liability under the policyas from the date of the breach.
It is not uncommon that a policy will contain a warranty that thevessel will not be operated without a certificate of seaworthiness orthat the vessel will be surveyed and inspected by an approvedsurveyor and a certificate issued by the surveyor attesting to theseaworthiness of the vessel. (Vide, Parks on the Law and Practice ofMarine Insurance and Average at page 247; Royster Guano Co. vGlobe & Rutgersk^. In 77?e A/ Jubail IV,W it was held that thecompliance with the warranty was a condition precedent to coverage,and the assured failed to recover.
There is little doubt therefore that the Institute Classification Clausein the policy is a warranty which requires compliance by the plaintiff-respondent. However, the question of where the onus of proof lies insuch a case is for the court to consider when coming to adetermination.
Under the general law of insurance the burden of proving that awarranty has been broken lies upon the insurers. (Vide. Colinvaux onThe Law of Insurance at page 115) In Stebbing v Liverpool and
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Janashakthi Insurance Co. Ltd v Umbfchy Ltd.
(Shiranee Tiiakawardane. J.)
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London and Globe®) where a claim by the applicant was challengedby the respondent insurers on the basis that the applicant hadsuppressed materia] facts and had made untrue answers in theproposal form, the court held that the burden of proving the untruth ofthe answers in the proposal, lay on the respondents; if they cannotestablish it, then they fail in the defence. Laying down a test fordetermining the onus of proof in a given case, Lord Reading statedthat, "the burden of proof lies at first on the party against whomjudgment would be given if no evidence at all was adduced."
Similarly in Marshall v Emperor Life,®) where the right of theassured to recover on a policy is disputed on the ground that he hadstated in the proposal that he had not had certain diseases, whereashe in fact had one of them at the time, it was held that the insurer isobliged to give particulars of the symptoms of the disease alleged.
In the case of marine insurance it is well established that theburden of proving a breach of the implied warranty of seaworthinesslies on the insurer where he alleges it. (Vide, Ivamy on MarineInsurance at page 298). Ivamy refers to the decisions in Parker vPottd5) and Franco v Natuscfi6). In Pickup v Thames and MerseyMarine insurance Co.,®) the court upheld the principle that evenwhere a ship springs a leak soon after commencing her voyage, theburden of proof remains on the insurer and there is no shift in theprinciple that the party alleging un-seaworthiness must prove it.
Parks in The Law and Practice of Marine Insurance and Averageat page 249, states conclusively that, "the burden of proving a breachof warranty is on the underwriter, and that is so even wherecompliance is expressed as a condition precedent to recovery underthe policy." The same view is expressed in Arnold on The Law ofMarine Insurance and Average at page 684.
In Bond Air Services Inc v Hill,®) the court clearly held that "theburden of proof of breaches of conditions was on the respondents inaccordance with the ordinary rule that the onus of proving a breach ofa condition of an insurance policy which would relieve the insurerfrom liability in respect of a particular loss was, unless the policyotherwise provided, on the insurer.u Also in Barettv London GeneralInsurance Co. Ltd.®) at 238 it was pronounced that the burden ofproof lies on the insurers.
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I do not believe there to be any doubt regarding the fundamentalposition of insurance law that the burden of proof related to an allegedbreach of warranty lies on the insurer alleging it. I cannot accept thecontention of the defendant-appellant that the burden of provingcompliance with the warranty contained in the Institute ClassificationClause lies on the plaintiff-respondent. In this case the burden ofproving non-compliance with the warranty lies squarely on thedefendant-appellant. It is clear that the defendant-appellant has failedto prove the charge against the plaintiff-respondent.
The final ground of appeal put forward by the defendant-appellantrelated to the admissibility of documents P3 and P4, which wereadmitted by the learned Judge under section 35(1) of the EvidenceOrdinance. The witness, S. Ashokan stated in evidence that due tothe non-arrival of the ship, the plaintiff-respondent Company madeinquiries as to the whereabouts of the ship, through Lloyds by telexand also the local agents and owners of the ship.
The documents P3 and P4 produced by the witness arecommunications from Lloyds to the plaintiff-respondent Company inresponse to inquiries made in the ordinary course of business of theplaintiff-respondent company. With regard to the originals of thesedocuments, the witness stated that these documents were taken overby the CID as part of an investigation on matters concerning thevessel M.V. Elitor. The witness gained access to these documentswhen he became a Director of the plaintiff-respondent companyfollowing the death of both his father and uncle The witness hascertified that these were copies taken from the originals which werehanded over to the CID and they were copies taken in the ordinarycourse of business related to the company.
Section 35(a) of the Evidence Ordinance makes admissible astatement of fact contained in a record compiled,
by a person in the course of any trade or business in which heis engaged or employed or for the purposes of any paid orunpaid office held by such person, and
from information supplied to such person by any other personwho had or may have had personal knowledge of the matterdealt with in that information.
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Janashakthi Insurance Co. Ltd v Umbichy Ltd.
(Shiranee Tilakawardane, J.)
49
The law of evidence provides that the documents maintained by aparty in the ordinary course of business can be produced by suchparty as evidence. Section 34(a) of the Evidence Ordinance permitsa witness who by reference to documents and studying the relevantdocuments learns to speak on the facts disclosed by thosedocuments.
It is contended by the defendant-appellant that the said documentshave not been maintained in the ordinary course of business. Therecord shows that the documents were admitted subject to proof andthat objections were raised by the defendant against their reception inevidence as they had not been proved. However the defendant didnot raise a challenge at the trial to the statement of the witness thatthe documents were maintained in the ordinary course of business.No questions were put to the witness on whether the documents hadbeen maintained in the ordinary course of business of the company.The documents are admissible under 35(a) of the EvidenceOrdinance. The Director of the plaintiff-respondent Company hascertified in Court that the documents were maintained in the ordinarycourse of business.
I find no reason to disbelieve the statements of the witness. I findthat the documents P3 and P4 produced before court weremaintained in the ordinary course of business of the company and findno impediment to the admissibility of this evidence in light of theprovisions contained in the Evidence Ordinance.
The defendant-appellant has also sought to rely on the Evidence(Special Provisions) Act No. 14 of 1995. It was contended that whilethis Act provides for the admissibility of contemporaneous recordingsby electronic means, such evidence would only be admissible if noticeis given to the other party and an opportunity to inspect the evidenceand the machine used to produce the evidence. I find it unnecessaryto comment on the merits of this submission, as this too is a freshsubmission made at the appeal stage which finds no place in the thatproceedings.
It is clear having considered all three grounds of appeal submittedby the respondent that the vessel M.V. Elitor certainly left the port inMersin for Colombo as evidenced by the several shipping documentsand communications produced in Court. It is also clear that the burden
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of proving the breach of warranty lay on the defendant-appellant andthat no evidence has been produced to establish its claim against theplaintiff-respondent. On the admissibility of documents, I find that thedocuments are admissible under section 35(a) of the EvidenceOrdinance as they had been maintained in the ordinary course ofbusiness of the plaintiff-respondent Company.
For these reasons, I find that the judgment of the High Court iscorrect in fact and law and this appeal is refused and dismissed. Iorder that the defendant-appellant pay costs in the sum of Rs.10,000/-to the plaintiff-respondent.
S.N. SILVA, C.J.-I agree.
JAYASINGHE, J.-I agree.
Appeal dismissed.