AFROIL INVESTMENT LTD VS RELIANCE INSURANCE CO T LTD COMM CASE NO

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM COMMERCIAL CASE NO. 15 OF 2015 AFROIL INVESTMENT LIMITED ......... PLAINTIFF VERSUS RELIANCE INSURANCE COMPANY (TANZANIA) LIMITED ......... DEFENDANT JUDGMENT Date of the last order: 18/06/2018 Date of the Judgment: 07/08/20 J 8 SEHEL, J, This judgment is based on Goods-in-transit insurance contract whereby the plaintiff took insurance cover from the defendant through Broker by the name of Lumumba Insurance Brokers in order to cover risks of goods in transit in the sum of Tshs. 70,000,000/= for single load limit and Tshs. 6,000,000,000/= for estimated annual carryings. i It is alleged in the plaint that on 18th April, 2014 while the insurance policy was in force an accident occurred at Vigazwa Kwa Zoka along Dar es Salaam/Morogoro Road on the plaintiff's vehicle with Registration Number T 316 AFU/T 641 AGK resulting into spillage of fuel in the value of Tshs. 66,850,000/=. It is further alleged that the defendant was notified by the Broker, the plaintiff duly filled a claim form but the defendant ignored and/or neglected to indemnify the plaintiff with a defence that the Estimated Annual Carry was undervalued. The plaintiff has therefore decided to file the present suit claiming against the defendant for: 1. Payment of Tshs. 66,850,000/= being the value of the ost fuel and Tshs. 3,150,000/= as costs for making a follow ups; 2. Payment of general damages within the discretion of the Court; 3. Interest at commercial rate of 33% per annum from the date of loss to the date of judgment; 2 4. Interest at the Court rate (12%) from the date of judgment until payment in full; 5. Costs of the suit; and 6. Any other relief as the court may deem fit to grant. The defendant having been served with the plaint filed its written statement of defence. Apart from acknowledging that the plaintiff has insurance cover but also raised a defence of undervaluing the annual carry. It alleged non-disclosure and misrepresentation of facts. At the final pre-trial conference, the following issues were framed by the court for determination: 1. Whether the plaintiff deliberately undervalued its annual freight carry in order to pay less insurance premium; 2. If the answer to issue number 1 is answered in the affirmative, what are the effects of such undervaluation with regard to the goods in transit insurance policy between the plaintiff and the defendant; 3. Whether the defendant was justified in rejecting the claim raised by the plaintiff; 4. Whether the defendant is in breach of the terms of the contract of insurance for goods in transit between the plaintiff and the defendant; and 5. To what reliefs are the parties entitled. In terms of Rule 49 (2) of the Rules both parties filed their witness statements. The plaintiff filed one witness statement of Salmini Ahmed Mbaraka that was admitted to form part of PW1 's testimony in chief and part of proceedings of this case on 18th May, 2018 when the witness was caused to appear for cross examination. PW1 essentially stated that he is the managing director of the plaintiff as such conversant with the facts of the case. He said the plaintiff is a bulk transporter of oil and owns several tankers for that < purpose amongst them is motor vehicle with registration number T 316 AFU and trailer number T 641 AGK with Registration Card number 4486945 and 4487009 for the truck which were tendered and 4 admitted collectively as Exhibit Pl. He said the plaintiff was insured by the defendant under a “goods in transit insurance policy no. RI C/062/1/00203/2003 which was renewed to cover the period from 9th February, 2014 to 9th February, 2015. The renewal premium paid Was Tshs. 24,150,000 to cover the insured risk of Tshs. 70,000,000 for single load limit and Tshs. 6,000,000,000 for estimated annual carrying. It was the testimony of PW1 that the renewal schedule and renewal premium were charged on this basis. The renewal schedule of the policy insurance cover was tendered and admitted as Exhibit P2. PW1 stated that on 18th April, 2014 the truck and the trailer while on route transporting oil, got an accident at Vigwaza Kwa Zoka along the Dar es Salaam/Morogoro Road after the driver had lost Control of the truck as a result of a font tyre bust. PW1 said the vehicle was seriously damage and the oil was spilled. He tendered the vehicle Inspection Report dated 7th May, 2014; PF 90; sketch plan and a copy of driver’s licence that were collectively admitted as Exhibit P3..... 5 PW1 explained that the product that was lost was bulk diesel which had been delivered to the plaintiff by M/S Engen vide Truck No. T432 CAJ and Trailer No. T641AGK. He said the plaintiff submitted a “goods in transit claim form claiming for an indemnity of 35,000 litres of diesel fuel worth Shs. 66,850,000". Claim Form; loading order/gate pass and tax invoice were tendered and collectively admitted as Exhibit P4. PW1 explained that after filing the said claim form the defendant disputed the claim and raised an issue on the agreed estimated annual carry of Tshs. 6 billion and tried to unilaterally raise it to 40 billion while at the same time demanding payment of additional premium that had not been agreed. PW1 said the defendant had been inconsistent in the way it has been interpreting the events and papers to be prepared to settle small claims as it previously paid Shs. 16,949,849.44 without any excuse. The discharge voucher that shows payment of Tshs. 16,949,849.44 was tendered and admitted as Exhibit P5 6 The defendant on its part also filed one witness statement of Sanjay Singh that was admitted to form part of DW1 's testimony in chief and part of proceedings of this case on 30th May, 2018 when the witness was caused to appear for cross examination. DW1 said he is the director of operations with the defendant whose duties includes insurance claims management, underwriting and general management of insurance business. DW1 acknowledged that the plaintiff obtained insurance policy for goods in transit from the defendant through insurance Broker by the name of Lumumba Insurance Brokers Ltd. He said at the time of taking the policy the plaintiff declared estimated annual carry at 6,000,000,000 and that a single load limit at 70,000,000. DW1 testified that this was under declaration because the plaintiff had 25 trucks and if each truck makes a single carrying every month in a year then the annual carrying would be more than 6,000,000,000. DW1 further said the single carry every year is the lowest estimation and that the under declaration breached the principle of utmost good faith in that the plaintiff did not disclose all the facts at time of taking the insurance 7 payable. DW1 testified that the plaintiff was supposed to disclose all the facts which was not done and when the defendant discovered after the accident, the defendant refused to honour the claim. DW1 also questioned the occurrence of the accident because he said the truck that carried petroleum from Engen is not the same truck that was involved in the accident at Vigwaza in Kibaha. He also said the police report does not show the spillage of oil. As I said, five issues were framed. I will combine issue number one : whether the plaintiff deliberately undervalued its annual freight carry in order to pay less insurance premium; with issue number two: if the answer to issue number one is in the affirmative what are the effects of such under valuation with regard to the goods in transit insurance policy between the plaintiff and the defendant; because they are intertwined. The plaintiff argued that the defendant has not provided the Court with neither the calculation nor any sort of evidence that can make this Court to come to a conclusion that the plaintiff undervalued its annual freight carry for purposes of paying less premium. It was further argued that the policy cover reflect the value of the goods in transit and not the amount of vehicles that the plaintiff owns as a company. It was submitted that the plaintiff acted in good faith by being specific that the policy covered only the goods in transit and not the vehicle hence the defendant cannot claim that the plaintiff did not disclose the number of vehicles which he owns. On the second issue, the plaintiff argued that if the answer to issue number one is found in the negative then the Court may reduce the cover provided that the parties are placed in the same position as they would have been in, had there not been any misrepresentation and the insured’s duty of disclosure had been complied with; the Court may also cancel the policy; or treat the policy as if it never existed if the misrepresentation of the non­ compliance with the insured duty of disclosure was fraudulent. The defendant opted not to make any final submissions. From the facts of the case, parties are in agreement that there is in place a policy agreement for goods in transit which was renewed to cover a period from 9th February, 2014 to 9th February. 9 2015 as evidenced by exhibit P2. The insured amount for a single load was Tshs. 70,000,000 over estimated annual carry of Tshs. 6,000,000,000 and the plaintiff paid a renewal premium of Tshs. 24,150,000. Though DW1 questioned the occurrence of the accident and the spillage of oil but I decline to entertain such a defence because it is not found in the defendant’s pleadings. It is trite law that parties are bound by their pleadings. The issue of spillage of oil and that the truck that carried petroleum from Engen is not the same truck that was involved in the accident at Vigwaza in Kibaha were not raised in the defendant's written statement of defence. In Charles Richard Kombe t/a Building Vs Evarani Mtungi & 2 Others, Civil Appeal No. 38 of 2012 (Unreported-CAT) the Court of Appeal held: “It is a cardinal principle of pleadings that the parties to the suit should always adhere to what is contained in their pleadings unless an amendment is permitted by the Court. The rationale behind this proposition is to bring the parties to an issue and not to take the other party by surprise. Since no amendment of io pleadings was sought and granted that defence ought not to have been accorded any weight." In that respect, I accord no weight to the arguments advanced by DW1 that there was no spillage and the truck involved in the accident is not the same. Coming back to the issue of whether the plaintiff deliberately undervalued its annual freight carry. It is alleged by the plaintiff that its estimated annual carry is Tshs. 6,000,000,000 and it is over this estimates the renewal premium of Tshs. 24,150,000 was charged to cover the single load of goods in transit. In Pan Atlantic Insurance Co. Vs Pine Top Insurance Co. [1994] 3 ALL ER 581 Lord Templeman stated: "When insurance is under negotiation, the underwriter must decide whether to accept the proffered risk and if so on what terms. In particular, the underwriter must decide the amount of the premium which he considers an appropriate consideration for the risk accepted. If a material fact is undisclosed by the li insured, the insurer may avoid the insurance contract. An undisclosed fact is material if disclosure would have affected the acceptance of the risk or the rate of premium.” Further in the case of United Bus Service Limited Co. v. The New India Assurance Company, Ltd. (1968) HDC 346 Seaton J (as he then was) stated: "Even though the value as stated on the proposal was true as of the date of the proposal, defendant relied upon the truth of the statements in issuing the policy and they were untrue by the date the policy was issued. In view of its intention to build on a bus body to the chassis and cab, plaintiff had a duty to disclose to the defendant the true value of the vehicle as of the date the policy was issued. In failing to do so the plaintiff "misled the defendants into consenting to issuing the policy which they would otherwise have declined to do ..... " The contract of insurance was thus voidable at the option of the insurer under section 19 (1), of the Law of Contract Ordinance." Wk 12 It follows then that the applicant for insurance cover is under a duty to disclose to the insurer all the material facts within his knowledge that would enable the insurer to assess the risk. The duty is imposed upon the insured because the insured is better placed to know all the material facts than the insurer since the contract for insurance is a contract of speculation. On the facts, the premium paid based on the insured risk for a single load limit which is estimated from the annual carrying. As such a true statement of the actual feet which the plaintiff owns is a material fact for the plaintiff to decide the actual amount of the premium to be charged over the single carry load. It be noted that the defendant in its defence raised the issue of the plaintiff owning 25 fleets which issue was not replied by the plaintiff by way of rejoinder. Therefore, the non disclosure of this material fact entitles the defendant to void the contract of insurance. In failing to disclose the actual fleet, the plaintiff misled the defendant into consenting to issuing the policy which it would otherwise have declined to do. As 13 such, issue number one is answered in the affirmative and for issue number two the defendant is entitled to void the contract. Let me now turn to issue number three that is whether the 1b defendant was justified in rejecting the claim raised by the plaintiff. Since I have find that the defendant is entitled to void the contract then issue number three is answered in the affirmative and obviously issue number four dies natural death. Lastly I turn to the reliefs. As I have shown herein the plaintiff prays for Payment of Tshs. 66,850,000/= being the value of the lost fuel and Tshs. 3,150,000/= as costs for making a follow ups; Payment of general damages within the discretion of the Court; Interest at commercial rate of 33% per annum from the date of loss to the date of judgment; Interest at the Court rate (12%) from the date of judgment until payment in full; and Costs of the suit. I have found herein that the Goods-in-transit insurance policy number RIC/062/1/000203/2003 which was renewed under policy number RIC/062/3/000409/2014 was obtained by non-disclosure of material facts and/or by representation of facts which were false^ then the plaintiff is not entitled to any relief as the defendant has a right to avoid the said insurance contract for non-disclosure of material facts. At the end the suit is hereby dismissed with costs. It is so ordered. Dated at Dar es Salaam this 07th day of August, 2018. 07th day of August, 2018 15