[2022] KEHC 17257 (KLR)

Britam General Insurance Co. (K) Ltd v Nduku & 2 others (Civil Appeal E028 of 2021) [2022] KEHC 17257 (KLR) (10 November 2022) (Judgment)

Neutral citation: [2022] KEHC 17257 (KLR)

Republic of Kenya

In the High Court at Kajiado

Civil Appeal E028 of 2021

SN Mutuku, J

November 10, 2022

Between

Britam General Insurance Co. (K) Ltd

Appellant

and

Ukwale Agnes Nduku

1st Respondent

Desert Runner Services Co. Ltd

2nd Respondent

Stephen Gakere Macharia

3rd Respondent

(Being an appeal from the judgement of Hon. Kahuya I.M., Principal Magistrate, delivered on 19{{^th}} May, 2021 in Kajiado Cmcc No. 8 of 2018)

Judgment

Introduction 1. This appeal arises out of the declaratory suit filed by the 1st Respondent against her Insurance Company (the Appellant), arising from the Kajiado CMCC No 623 of 2016. In that matter the Appellant failed to settle the claim on the ground that the 1st Respondent had failed to serve the Appellant with the summons. The matter proceeded undefended and a judgment was entered against the 1st Respondent/Insured.

2. The Appellants has raised the following grounds of appeal:i.That the Learned trial Magistrate erred in law and fact by failing to distinguish between such liability as is covered under section 10 of the Insurance Motor vehicle Third Party Risks Actand contractual obligations arising out of an insurance contract.ii.That the Learned Trial Magistrate failed to take note of the fact that the liability that is covered under Section 5(b) of the Insurance Motor vehicle Third Party Risks Actrelate to claims for death or bodily injury and not material damage.iii.That the learned trial magistrate erred in law and fact in the manner that she interpreted section 5(b) of the Motor vehicle Third Party Risks Act and in failing to adhere to the established rules of statutory interpretation.iv.That the Learned Trial Magistrate misapplied the dicta in the case of The Monarch Insurance Company Ltd v Margaret Mutave Peter[2020] eKLR And Shadrack Amakobe Techera v United Insurance Co. Ltd [2005] eKLR since the said cases were distinguishable from the facts of this case as the said decisions related to liability of an insurer for claims for death or bodily injury and the notices therein referred to were statutory notices.v.That the Learned Trial Magistrate erred in law and fact by ordering a refund of excess of Kshs 96,500/- and in failing to note that the policy that was in place did not contain an excess protection clause.vi.That the Learned Trial Magistrate erred in law and fact in ordering the Appellant to pay auctioneers charges and interest when these claims were outside the scope of insurance policy that had been taken and related to consequential losses which were not covered under the policy.vii.That the Learned Trial Magistrate erred in law and fact in failing to address the issue that the parties are bound by their contracts and obligations in a contract cannot be transferred or performed by third parties to the contract.viii.That the Learned Trial Magistrate erred in law and fact in failing to consider adequately, or at all, the submissions that had been tendered by the Appellant and the authorities therein submitted.

3. The Appellant is seeking to have the appeal allowed and to set aside the judgement of the lower court with costs to the Appellant.

Appellant’s submissions 4. The appeal was canvassed by way of written submissions as directed by this court.

5. The Appellant filed its submissions dated January 18, 2022. The Apellant argued grounds 1, 2, 3 and 4 together and submitted that the Appellant denied liability on the basis that the 1st Respondent had breached the Insurance contract by failing to serve it with the pleadings in the lower court case to enable it to defend the suit. It was submitted that the case in the lower court was not one in which a declaratory order may be issued under Cap. 405given that the case in the lower court was a material damage claim and not a death or personal injury claim.

6. The Appellant distinguished The Monarch Insurance Company Ltd v Margaret Mutave Peter [2020] eKLR and Shadrack Amakobe Techera v. United Insurance Co. Ltd[2005] eKLR cases with the case under determination for the reasons that the latter two cases related to claims for death and bodily injury and the notices therein were statutory notices.

7. The Appellant argued grounds 5 and 6 together. It is argued that the 1st Respondent executed the discharge voucher voluntarily and that voucher discharged the Appellant from liability and that the risk note does not form part of the insurance policy, which policy did not contain an excess protection clause hence the appellant should not be liable to refund Kshs 96,500. It is submitted that the auctioneer’s charges and interest were outside the scope of the insurance policy and hence the Appellant was not to pay such costs. The Appellant relied on the case ofFive Forty Aviation Ltd v. Erwan Lanoe[2019] eKLR to emphasize the point that courts should not rewrite agreements by parties.

8. The Appellant argued grounds 7 and 8 together and submitted that it is not disputed that the 1st Respondent entered into an insurance contract with the 1st Respondent and the terms of the contract were agreed; that the 1st Respondent testified that she benefited from the policy when her claim for loss of her car was paid and when the Appellant settled the two suits filed against her by the persons who had been injured.

9. It was submitted that the main issue is whether the 1st Respondent breached the contract by failing to serve the Appellant with the pleadings in relation to Kajiado CMCC No 623 of 2016; that parties are bound by their contracts and that the 1st Respondent was under a duty under the contract to take the writs, summons or court process to the Appellant; that the 1st Respondent has confirmed that the pleadings in the lower court case was served on the Appellant by 2nd and 3rd Respondents and not on her instructions, which the trial magistrate failed to consider and that the Appellant is not liable to pay the decretal amount due to that breach of contract.

Respondent’s submissions 10. The Respondents filed their submissions dated April 25, 2022. They argued that according to their understanding of section 10(1) ofCap 405, parties can extend liability covered under the policy by entering into any such contract of insurance and therefore, liability to the insured arises not only from the Provisions of the Act but from all liabilities covered by the terms of the Insurance policy.

11. They argued, further, that the Appellant despite service of summons and all pleadings and notices in the primary suit, did not file a declaratory suit as required under Section 10(4) of the Act. They relied on the case of Kisii HCCA No 18 of 2018 Geminia Insurance Company Ltd v EN (minor suing through father and next friend AAO).

12. On grounds 5 and 6 they submitted that the findings of the trial magistrate were corroborated by the policy schedule and the risk note issued to the 1st Respondent. It was their argument that once the 1st Respondent took out the policy excess protector she covered herself from making any policy excess hence the appellant was expected to not only include in the policy of insurance that the 1st Respondent was excess protected but to also refund Kshs 96,500/- in policy excess as per their policy regulations.

13. On the issue of the auctioneer charges they argued that the same was as a result of the failure by the Appellants to perform their statutory obligations to settle the decree as against the 1st Respondent.

14. In addressing grounds 7 and 8, the Respondents relied on the case ofPaulina Wanza Maingi v Diamond Trust Bank Limited & Another [2015] eKLR, and argued that the object and scope of summons to enter appearance is to make the Defendant aware of the suit filed against him and to afford him time to appear and follow the process and that in this case the 2nd and 3rd Respondents served the Appellant but even after service the Appellants failed to act. They reiterated that if the Appellant felt that the 1st Respondent was in breach of the contract and having timely received the pleadings from the 2nd and 3rd Respondents, it ought to have filed a declaratory suit as against the 1st Respondent avoiding the policy which they did not.

Determination 15. It is my duty to read the entire record of proceedings from the lower court, consider and analyze the same afresh in order to make my own independent conclusions.

16. I have accordingly considered the record, the grounds of appeal, submissions and authorities cited and the evidence adduced before the lower court. The Appellant has raised 8 grounds for appeal which have been argued in clusters as shown on the proceedings.

17. In considering the liability payable by the Appellant, I have read the relevant provisions ofInsurance (Motor Vehicles Third Party Risks), Cap. 405. Section 4 of the Act provides that;Subject to this Act, no person shall use, or cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Act.

18. Section 5 of the Actrequires that:

In order to comply with the requirements of section 4, the policy of insurance must be a policy which (b) insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of, or bodily injury to, any person caused by or arising out of the use of the vehicle on a road. 19. I have also read section 10 (1) ofThe Third-Party Motor Vehicle Risk Act on the duty of insurer to satisfy judgments against persons insured, which provides that:If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of section 5 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

20. To my understanding, section 10 (1) of the Actshould not be read in isolation. It should be read together with section 5 (b) of the Act. The liability covered under section 5 (b) is death or bodily injury. It is worth noting, however, that in addition to the provisions of the Act as specified above, there is the Policy document between the Appellant and the 1st Respondent. This is a contract between the parties. I have read the contents of the document.

21. Section II of the Policy on Page 40 of the Record of Appeal is entitled “Liability to Third Parties”. It is stated that:The Company will subject to the Limits of Liability indemnify the Insured in the event of accident caused by or arising from the use of the Motor vehicle or in connection with the loading or unloading of the Motor Vehicle against all sums including claimant’s costs and expenses which the insured shall become legally liable to pay in respect of:a.death or bodily injury to any personb.damage to property

22. It is clear to me therefore that the Appellant was under an obligation, under the contract of insurance covered in the Insurance Policy, to indemnify the 1st Respondent in the event of any claim arising from an accident involving her insured motor vehicle which the 1st Respondent shall become liable to pay in respect of death or bodily injury to any person or damage to property. But the Appellant has raised the issue that the 1st Respondent did not notify it of the filing of the suit in the lower court and that by not doing so, the Respondent breached the contract by failure to notify the Appellant of the claim in the lower court.

23. In regard to this issue, I have read the policy document. Under the conditions applicable to the insurance policy between the Appellant and the Respondent, condition 4 states as follows:In the event of any occurrence which may give rise to a claim under this Policy the Insured shall as soon as possible give notice thereof to the Company with full particulars. Every letter claim writ summons and process shall be notified or forwarded to the Company immediately on receipt. Notice shall also be given to Company immediately the Insured shall have knowledge of any impending prosecution inquest or fatal enquiry in connection with any such occurrence…. (emphasis mine).

24. The gist of the Appellants arguments revolves around the above condition. The Appellant’s main argument is that the 1st Respondent breached the contract between them by failing to comply with the conditions of the Policy by notifying the Appellant of the suit filed in the lower court. The Respondents argue that the Appellant was notified, not by the 1st Respondent, but by the 2nd and 3rd Respondents and that it was not necessary for the 1st Respondent to notify him.

25. The Appellant takes the stand that the parties to the insurance contract are the Appellant and 1st Respondent and therefore the 1st Respondent, and not 2nd and 3rd Respondents who were not parties to that contract, was the one legally bound to notify the Appellant. The Appellant has citedFive Forty Aviation case to the effect that:“The Court of Appeal restated the principle we are alive to the hallowed legal maxim that it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts unless coercion, fraud or undue influence are pleaded and proved.”

26. The Appellant has also cited Aineah Likuyani Njirah v Aga Khan Health Services[2013] eKLR where the court stated that:“Privity of contract is a long-established part of the law of contract. In the earlier part of the last century, it was identified by Viscount Haldane LC as one of the fundamental principles of the English contract law. In Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd, the essence of the privity rule is that only people who actually negotiated a contract are entitled to enforce its terms. Even if a third party is mentioned in the contract, he cannot enforce any of its terms nor have any burdens from that contract enforced against him.”

27. I am persuaded by the arguments by the Appellant and the authorities cited that as long as the 1st Respondent failed to serve the Appellant as the Policy contract mandates her to do, she has breached the contract between them and cannot claim that the 2nd and 3rd Respondents served the Appellant and therefore he was aware of the matter in the lower court. The 1st Respondent was not absolved of that mandate to notify the Appellant just because the 2nd and 3rd Respondents notified the Appellant.

28. I have considered the issue of excess. It is the Appellant’s submission that the 1st Respondent voluntarily executed the discharge voucher, which discharged the Appellant from liability. On the part of the 1st Respondent, she has submitted that she took out the policy excess protector thereby covering herself from making any policy excess. She did not tender evidence controverting that she executed a discharge voucher.

29. In regard to the auctioneer’s charges, it is my considered view that the Appellant is not liable to pay given the circumstances of this case.

30. After careful consideration of rival submissions and the relevant law, I am persuaded that this appeal is merited. I fault the trial magistrate for her failure to carefully consider and appreciate the totality of the issues being canvassed before her leading to erroneous decision. Consequently, the instant appeal is hereby allowed with the effect that judgment delivered onMay 19, 2021 in Kajiado CMCC No 18 of 2018 is hereby set aside with costs.

31. Orders shall issue accordingly.

DATED, SIGNED AND DELIVERED THIS 10TH DAY OF NOVEMBER, 2022. S. N. MUTUKUJUDGE