JUDGMENT OF PHOENIX INSURANCE COMPANY FINAL

THE UNITED REPUBLIC OF TANZANIA JUDICIARY IN THE HIGH COURT OF TANZANIA MBEYA SUB - REGISTRY AT MBEYA CIVIL APPEAL NO. 000001061 OF 2024 CASE REFERENCE NO. 20240119000001061 (Originating from Civil Case No 6 of 2021 in the district court of Mbozi at Vwawa) PHOENIX OF TANZANIA ASSURANCE CO.LTD .......................... APPELLANT VERSUS CALLYXTUS PASCHAL MPONZI ........................................ 1ST RESPONDENT CRDB INSURANCE BROKER LIMITED ...............................2ND RESPONDENT JUDGMENT Date of hearing: 23/4/2024 Date of judgment: 16/7/2024 NONGWA, J. In the District court of Mbozi in Civil Case No. 6 of 2021, the first respondent successfully sued the appellant on a claim of indemnity under the insurance contract. He was awarded Tsh. 15,000,000/= should the appellant remain with the damaged motor vehicle or Tsh. 11,225,000/= upon taking the vehicle, interest at court rate of 7% from date of 1 judgment to full payment, general damage of Tsh. 20,000,000/= and costs of the suit. Aggrieved the appellant has filed the instant appeal. Brief background of the case is that, the appellant is an insurance company dully incorporated under the laws of Tanzania, the 2nd respondent is the broker also registered under the laws of Tanzania, whereas the first respondent is natural person who owned a motor vehicle with registration Number T.404 DNU make BMW. On 27/4/2020 the appellant entered into contract of insurance with first respondent, the second respondent acting as insurance broker and the appellant insured his vehicle under comprehensive policy. On 31/7/2020 at Nselewa area within the district of Mbozi in Songwe region, the motor vehicle was involved in the accident leading to its damage beyond repair. The accident was communicated to the appellant but refused to compensate. This forced the first respondent to write demand notice and eventually filed the suit in the district court for amongst others, payment of special damage of Tsh. 55,000,000/= being costs for buying another car and renting, general damage at Tsh. 50,000,000/= and other ancillary reliefs. The appellant (as first defendant by that time) in her written statement of defence admitted the vehicle to have been insured by her, however disputed the occurrence of accident and stated the claimed amount was inflated. She added that the accident was a result of exclusive 2 cause based on breach of good faith and that the vehicle was insured for private use as opposed to business. During hearing it was stated that they offered the first respondent Tsh. 150,000,000/= or Tsh. 11,250,000/= if the respondent would take the motor vehicle. At the end she prayed the suit to be dismissed. On part of the second respondent, disputed each and every allegation contained in the plaint, she stated that was not liable for compensation as she just acted as insurance broker to the appellant and not the insurer, thus distanced from any liability. At the conclusion of hearing the first respondent was granted the reliefs already cited at the beginning of this judgment. The decision aggrieved the appellant who has filed memorandum of appeal on three substantive grounds lodged on 17/1/2024 that; 1. The trial court erred in law and fact when it entered judgement in favour of the 1st respondent while he is the one who breached the contract of insurance; 2. The trial court erred in law and fact when it awarded the 1st respondent the sum of Tsh. 20,000,000/= as general damage contrary to the law and principles governing award of general damage. 3 On 1/3/2024, the appellant lodged a supplement memorandum of appeal on one ground that; 1. The trial court erred in law in overruling the preliminary objection that the trial court had no jurisdiction to entertain the suit as the matter ought to have been referred to arbitration. On the hearing date on attendance were Mr. Michael Kabekenga, learned counsel for appellant and holding brief of Mr. Jovinson Kagirwa for 2nd respondent. The first respondent appeared in person. Parties prayed and were granted leave to file written submission. Submission of the appellant drawn by Ms. Lulu Mbinga, advocate of Kobas, O.J. Attorneys and that of the first respondent by Mr. Iman Mbwiga, also learned advocate of Chosen Law Firm. The second respondent did not file her written submission. On the first ground it was submitted that the first respondent breached the contract for not disclosing that he had no valid license and existing contract with Britan Insurance company. Counsel stated it was conditional precedent that the insured vehicle was to be driven by the first respondent or any authorised person under his instruction who was eligible for diving under the laws of Tanzania. He said that such condition is laid in exhibit D1, comprehensive insurance policy. Further argument 4 was that the first respondent admitted that at the time of accident had no valid driving licence, and therefore was in breach of cover note and section 19 of the Road Traffic Act which requires a driver to have valid driving licence. On breach of principle of utmost good faith, it was submission of Ms. Lulu that at the time of ensuring the vehicle, the first respondent did not disclose the information that the same vehicle was insured with Britan Insurance Company through exhibit D3 which was valid up to the time of accident. That non disclose contravened the principle of uberrimae fidei and under clause 8 of exhibit D1 the first respondent was not entitled to indemnity. Another limb of argument was on use of the insured vehicle, counsel for the appellant submitted that the first respondent through pleading and evidence admitted that the vehicle was being used for business purpose, which was contrary to cover note exhibit P1 and insurance policy, exhibit D1 both showing the vehicle was insured for private use. Submitting in the second ground on award of general damage, counsel for the appellant restated the law on award of general damage and the limit imposed on the appellate court to interfere with the award save to the extent allowable. Ms. Lulu submitted that because the first 5 respondent breached the insurance contract and the fact that the appellant offered settlement, the first respondent was not entitled to general damage. The case of Alliance Insurance Corporation Ltd and Another vs Tirima Enterprises Limited, Civil Appeal No. 290 of 2020 [2021] TZHC 6475 (10 September 2021; TanzLII) was referred to support the argument. It was further submitted that the vehicle was insured at Tshs. 16,000,000/= the maximum the first respondent would be entitled at the happening of event, awarding general damage at the exorbitant amount of Tshs. 20,000,000/= will discourage insurance company and lead to unnecessary raising of premium. The argument was supported by citing the case of SANLAM General Insurance Tanzania Ltd vs Dennis Charles & Another, Civil Appeal No. 51 of 2021 [2024] TZCA 105 (23 February 2024; TanzLII). Counsel submitted that Tsh. 3,000,000/= would have met end of justice as the appellant committed no wrong. On supplement ground that the trial court had no jurisdiction, it was submitted insurance policy, exhibit D1 contained arbitration clause in case dispute arose between the parties, reference was made to clause 12 of exhibit D1. Counsel added that section 14 of the Arbitration Act, requires the court to refers parties to arbitration first. Counsel stated, parties agreed to submit their dispute to arbitrator, thus trial court had no 6 jurisdiction. The case of Construction Engineers and Builders Ltd vs Sugar Development Corporation [1983] TLR 13 and Sunshine Furniture Co. Ltd vs Maersk China Shipping Co. Ltd & Another, Civil Appeal 98 of 2016 [2020] TZCA 1934 (23 January 2020; TanzLII) were cited to advance the argument. Counsel argued that the court was supposed to advice or order the appellant to file stay of proceedings for the interested party to refer the matter to the arbitrator and not overrule it on ground that it was not raised on early stages. From the submission above, the appellant prayed the appeal to be allowed. In response to the above, Mr. Mbwiga, on having valid driving licence submitted that, the fact the first respondent had no valid licence it cannot be a ground to repudiate liability of the appellant to compensate, and that it was not clearly stated in the insurance policy. Here the case of Bhanji Logistics and Others vs Doreen Ruben Towo, Civil Appeal No. 192 of 2020 [2021] TZHC 6481 (17 September 2021; TanzLII). On non-disclosure of having insurance policy with Britan Insurance Company, it was submitted that, the appellant was liable to compensate the first respondent as per the policy. He added that although the appellant was informed of the accident but has denied to compensate 7 which indicates is the one who has failed to act in utmost good faith. He said that there was no proof that the first respondent insured the vehicle with another insurance company. Regarding unauthorized use of the vehicle, Mr. Mbwiga submitted that the first respondent is an entrepreneur and insured the vehicle to facilitate in his business of video shooting and other movements. Replying on the second ground regarding award of general damage, it was submitted that the trial court considered all facts and gave reason for award general damage, thus it cannot be interfered by this court. Reliance was placed on the case of Reliance Insurance Company (Tanzania) Limited vs Jenesca Johansen Bwahama and Another, Civil Appeal No. 17 of 2020) [2021] TZHC 6903 (22 October 2021; TanzLII). Further submission was that it was misleading that the value of the vehicle was Tsh.16,000,000/= and general damage was not supposed to be above that amount as general damage cannot be quantified in sum. Reference was made to the case of P.M. Jonathan vs Athuman Khalfan [1980] TLR 175. In respect of third ground that the trial court was supposed to enforce the arbitration clause, counsel for the first respondent submitted that the suit filed in contravention of arbitration clause do not become 8 void or defective, but a competent suit and the court may employ certain consideration on how to enforce the arbitration clause. Counsel said it was wrong for the appellant to raise preliminary objection by separate notice of objection but by way of petition in accordance with section 13(1) of the Arbitration Act. He added that the court was not precluded in trying the case by mere presence of arbitration clause. The case of Queensway Tanzania (EPZ) Ltd vs Tanzania Tooku Garments Co. Ltd, Misc. Cause 43 of 2020 [2021] TZHCComD 3407 (29 March 2021; TanzLII) was referred to bolster the point. Counsel went on to submit that clause 12 was defective and incapable of being enforced as the chosen tribunal, law and venue were non-existence. Further that presence of arbitration clause did not oust jurisdiction of the court. Counsel supported the argument with the case of Scova Engineering S.P.A & Another vs Mtibwa Estates Ltd & Others, Civil Appeal No. 133 of 2017 [2021] TZCA 74 (12 March 2021; TanzLII) and Tanzania Electric Supply Company (TANESCO) vs Independent Power Tanzania Ltd (IPTL) and Two Others [2000] TLR 324. Finally, counsel prayed the appeal be dismissed with costs. On rejoinder it was submitted that driving the insured vehicle with the valid driving licence was contained in the insurance policy and the 9 case of Bhanji Logistics was distinguished. Counsel insisted that terms and condition in exhibit D1 was to be observed. Having considered record of appeal and rival submission of parties, I propose to start with the ground in the supplement memorandum of appeal as it touches jurisdiction of the trial court on the matter. For the appellant it was argued that parties agreed to submit their indifference in the contract to arbitration, adversely it was submitted that that clause did not oust jurisdiction of the court and there was no such effective mode. The insurance policy the parties entered contain arbitration clause whereby they agreed that all indifference arising in the policy would be referred to the decision of arbitrator to be appointed in writing by the parties. Relevant to the case at hand is section 9 of the Arbitration Act [Cap 15 R: E 2022], it provides ‘The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the arbitration agreement.’ The true nature and function of an arbitration clause was well- explained by Lord Macmillan in the case of Heyman vs Darwins Ltd (1942) AC 356 at page 375 cited in Tanzania Motor Services Ltd & 10 Others vs Mehar Singh t/a Thaker Singh, Civil Appeal No. 115 of 2005 [2006] TZCA 5 (21 July 2006; TanzLII) as follows; ‘I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from other clauses. The other clauses set out the obligations which the parties undertake towards each other but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that if any dispute arises with regard to the obligation which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. And there is this very material difference, that whereas in an ordinary contract the obligation of the parties to each other cannot in general be specifically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts. The appropriate remedy for breach of the agreement to arbitrate is not damages, but is enforcement.’ In principle, in looking whether the arbitration clause constitutes a separate agreement and intention of parties to refer their dispute to the mechanism chosen there are various factors which must be considered in construction of such clause. These were laid in the case of Dominion Oil & Gas Ltd vs Logistics T. Ltd, Civil Appeal No. 132 of 2008 [2015] TZCA 272 (7 October 2015; TanzLII) cited with approval a passage in the Indian 11 case of JAGDISHCHANDER vs. RAMESH CHANDER AND ORS (2007) 5 SCC 719 in which the Supreme Court of India laid fundamental guidelines relating to a valid arbitration agreement as follows; ‘1. Where the clause provides that in the event of disputes arising between the parties/ the disputes shall be referred to arbitration it is an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. 2. Mere use of the word 'arbitration' or 'arbitrator' in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example/ use of words such as ''parties can, if they so desire, refer their disputes to arbitration" or "in the event of any dispute, the parties may also agree to refer the same to arbitration" or "if any disputes arise between the parties, they shall consider settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. 3. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses 12 require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.’ Emphasize supplied. In this appeal the arbitration clause has other conditions on which parties were supposed to adhere first, for instance the use of arbitrator to be appointed in writing by parties, is clear that the intention of parties did not agree arbitration to be the sole forum to resolve their dispute. Assuming the arbitration clause constituted an arbitration agreement, there was evidence from PW1 that he served the appellant with demand notice for payment of compensation the fact which was not denied. However, the appellant apart from denying liability to compensate, did not show willingness to refer the matter to the arbitrator as agreed. Furthermore, after the proceedings being instituted, the appellant did not utilize section 13 of the Arbitration Act instead rushed to raise preliminary objection. In Dominion Oil & Gas Ltd (supra) the court stated; ‘... the appellant did not utilise the opportunity through overt acts/conducts to instigate the trial court to refer the dispute to 13 arbitration because paragraph 4.2 contains a mere allegation with bare assertion not supported by any proof which at any stretch of imagination, could not sufficiently make a Court of law rely on such assertions. Moreover, mere lodging of the petition is not evidence to substantiate willingness and readiness to refer the dispute to arbitration. Besides; there was no affidavit to that effect and at least, the appellant could have lodged copies of for instance, correspondences relating to communication with the arbitrator on the intended reference (if any) of the dispute to arbitration...’ In this case the arbitration clause did not form the binding intention of the parties, the clause was subject to willingness of parties after some communication, which in this case is lacking. Further, no evidence that the appellant though was served with demand notice for payment of compensation did take steps to initiate the process of referring the dispute to arbitrator as required by Clause 12 of the insurance policy, thus the trial court had jurisdiction over the matter. That said, the supplement ground fails. Coming to grounds in the substantive memorandum of appeal, the first ground is that the first respondent breached the insurance contract, the argument was on three limbs. One, driving without driving licence, two, non-disclosure of material facts, and three, unauthorised use of the vehicle. 14 Staring with driving without licence, counsel for the appellant argument was that at the time of accident the driving licence of the first respondent had expired, he relied on exhibit P1. There is no dispute that at the time of ensuring the vehicle the first respondent had valid driving licence, the only dispute is that at the time of accident driving licence had expired. It is noteworthy contract of insurance is attached to the property being insured and not the owner, in this case to the car and not driver. Liability in a car accident is primarily determined based on factors such as negligence, recklessness, and adherence to traffic laws rather than the validity of the driver’s license at the time of the accident. Driving without valid licence is only criminalised under traffic laws and not in insurance claim, though sometimes may be relevant if it is proved that an accident was due to negligent or reckless behaviour, such as speeding, running a red light, or failing to yield. In this case it was not proved that the accident was the result of negligence or reckless of the driver for the court to exonerate the appellant from paying compensation as per the insurance policy. I, thus find that by driving the insured motor vehicle with expired driving licence did not affect the insurance policy. In the second limb that the first respondent did not disclose that the motor vehicle was insured with Britan Insurance company, I find this 15 complaint has no basis, the non-disclosure is attached to defects in the ensured motor vehicle. Under insurance law it is legal and possible to have two insurance policies on the same vehicle with different insurance companies except that upon the occurrence of event the liability is shared equally between the two insurers based on the principle of “restitution in full” so if the car is involved in the accident, the insurance company will aim to put the assured back into the position he was before the accident. In the UK case of Legal and General Assurance Society Ltd v Drake Insurance Co Ltd [1992] 1 All ER 283, Ralph Gibson LJ held that; ‘Where one of two insurers who were independently and unconditionally liable to the same assured for the whole of his loss accepted sole liability for settling the claim, that insurer had an undoubted right of contribution in equity against the co- insurer for half the amount for which the claim was settled....’ Applying the above to the case at hand, fact that the first respondent was insured with another insurance company is not non disclosure and does not affect the policy except that the appellant may be absorbed from paying full compensation to the assured and the agreed amount of compensation be shared between the insurers. The third limb is that the vehicle was ensured for private use and not business, from the available evidence the motor vehicle was not converted 16 to business as the appellant wants this court to hold. The first respondent was using it in his journey for video shooting and production, did not convert it into being a business vehicle. This limb fails. Moving to the second ground on award of general damage, it was submitted that principles was not considered and it was at the high side. The position of law in regard to an award of general damages is settled that it is normally awarded at the courts discretion and need not to be specifically proved. It is also trite law that, the appellate court cannot interfere with award of general damage unless the magistrate or a judge assessed the said damages by using a wrong principle of the law. If it happens so, the appellate court should disturb the quantum of damages awarded by the trial court. In awarding general damage, the magistrate did not provide any reason contrary to the law. That alone requires interference of the same by this court. There is no dispute that the motor vehicle was insured by the appellant. That, the appellant although disputed occurrence of accident was read to compensate the first respondent but did not reach the agreement on the amount. The aim of insurance contract is a contract of indemnity by which the insurer contracts to indemnify the insured for what he may actually lose by the happening of the event upon which the insurer's liability is to arise. 17 In this appeal, considering that compensation awarded by the trial court has not been challenged, I find the amount of Tsh. 20,000,000/= awarded was too high and set it aside. Considering that the vehicle was for private use, in the interest of justice Tsh. 5,000,000/= will meet the end of just on both parties. In final and for the above reasons, I allow the appeal by the appellant to the above extent only. Following the above result, I order each party to bear its own costs. V.M. NONGWA JUDGE 16/7/2024 Dated and Delivered at Mbeya this 16th July 2024 in presence of the 1st Respondent, Mr. Ntegwa for the 2nd Respondent, Mr. Michael Kabekenga for the appellant. V.M. NONGWA JUDGE 18