[2004] UGCA 44

#### THE REPUBLIC OF TI(;ANI)A

#### IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

## CORAM: HON. MR. J[ISTICE G. M. OKELl. O..fA HON. MR. . IT]STICE A. TWINOM TJ,IT]NI, . IA HON. LADY . IUSTICE C. N. B. KITT]MBA, . IA

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## CIVIL APPEAL NO. I3 OF 2OO2

## NATIONAL INSURANCE CORPOIIATION ,,\PI'ELLAN'I'

## VERSTJS

#### SPAN INTEITNATIONAL LTD RI]SI'oNDENT

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lc) lAppcal fronr thc j udgmcnt of the High ('ourt at Kampala (Okumu \\iengi,.l) dated 2915/2001 in lI('('S \o.29 of ¹⁹⁹⁹¹

# ]5 JUDGMENT OF TWINOMUJUNI .lA

This is an appeal against the judgment of the High Court of Uganda in which the appellant was ordered to pay Ug.shs.58,000,000/: (Fifty eight million shillings only.) to the respondent as indemnity arising frorn a contract of insurance plus the costs of the suit and interest on the decretal amount of ^I8% from the l4th January 1999 till payment in full.

The brief background to the case is that on 9'h Septerrber 1996, the parties to this suit entered into a contract of insurance whereby the appellant agreed to insure printing machines and other office equiprnent at the olfices of the respondent at Plot 4 Pilkington Road in Kampala. They signed a Fire Insurance Policy and the insured sum was agreed at Ug.shs.95,000,000/= (Ninety five million only). The respondent was asked and he paid ^a premium of shs.191,000/:. On 21" October 1996 at 7.00 p.m. there was an outbreak of fire at the respondents business prenrises which caused extensive damage to the printing machines whose ensured value was Ug.shs.58,000,000/: (Fifty eight million shillings only ) The respondent lodged an indemnity claim which was rejected by the appellant' The respondent filed this suit in the High court where the following issues were agreed upon for determination:-

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- ^I. Whether there was a contract of insurance' - 2. Whether the suit was barred by limitation' - 3. Whether the plaintiffs claims were properly rejected by the defendant' - 4. The remedies.

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The issues were resolved in favour of the respondent in terms already stated above, hence this aPPeal.

The appellant's Mernorandum of Appeal contains five grounds of appeal as 2o follows:-

# l) The learned judge erred in law in not holding that plaintiffs suit was time barred.

2)Thelearnedtrialjutlgeerredinlalvandinfactinholdingthat plaintiff had an insurable interest in the machincs'

- 3) The learned trial judge erred in lat, in not holcling that plaintiff was guilty of breach of the insurance obligation of utmost good faith and/or m is representations. - 4) The learned trial judge erred in law in anarding plaintiff shs.58,000,000/: rvhich rvas far in excess of the valuc of the insured su bject matter. - 5) The learned judge erred in law in awarding the very high interest of l87o per annum form 14.1.1995. - Dr. Joseph Byamugisha argued the appeal on behalf of the appellant. Mr. Mubiru Kalenge represented the respondent. Dr. Byamugisha argued the above five grounds ofappeal in the order in which they appear and I propose to deal with them in the same order. t0

## t: GROUND ONE: 'l'lME BAII

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The complaint on this ground is that the learned trial .iudge erred in law in not holding that the plaintiffs suit was time barred. Dr'. Byamugisha subrnitted that under clause 188 and l9 ofthe Insurance Policy binding the parties, the suit should have been filed within twelve uronths fiorn the time the insured event occurred. The two clauses states:-

> "l88 If any differences and disputes arise out of this Insurance Policy Contract with regard to Liability and amount for compensation, such differences and disputes shall be directly referred to the decision of the Court of Law in Uganda.

19. In no case whatever shall thc company be liable for any loss or damage after the expiration of twelve months from the happening of thc loss or damage unless the claim is the subject of pcnding action or ^arbitration. "

Dr. Byamugisha contended that fire occurred on 21" October 1996. The respondent made an indemnity claim which was rejected by the appellant in a letter dated 27th December 1996. According to learned counsel, the latest date the suit should have been filed was the 27'r' December 1997. The suit was actually filed on l4I'January 1999 which was over one year out of time. He submitted that although the trial judge relied on the doctrine of waiver in holding that the suit was not time barred, counsel did not see any evidence on record to justifu the application ofthe doctrine, which was in any case not pleaded by the plaintiff. He relied on the Supreme Court decision in Peter

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- Mangeni vs. l)errarted Asians Pro perty Custodian l}rrartl Cir il Appeal No. l3 of 1995 in general and the judgment of Hon. Justice Kanyeihamba, JSC in particular. - 20 In reply, Mr. Mubiru Kalenge submitted that the suit rvas not tirne barred and that the trial judge was right to so hold. He conrended that the fire occurred on 2l'1 October 1996. Protracted negotiations started and were not concluded till 26th June 1998 when the appellant in its letter dated on that day finally rejected the respondent's claim. In his view, the twelve months - stipulated in clause l9 of the Insurance Policy could not have begun to run till that day. In January 1999 when this suit was filed, the respondent was 25

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still within the stipulated twelve months. Therefore, the suit was not time barred.

In order to determine whether this suit was time barred or not, it is necessary to determine when the twelve months stipulated under clause 19 (supra) began to ran. It is now necessary to narrate the sequence of events that led

(a)On9l9ll,996 a Fire Insurance Policy was signed.

to the filing of this suit:

(b)On 2ll10/1996 fte destroyed the respondent's machines.

(c)On 2211011996 the respondent reported the fire to the appellant and shortly after lodged his indemnity claim. l0

- (d)On 2711211996 the appellant wrote to the respondent rejecting the claim. - (e)On 271611997 the advocates of the respondent wrote to the appellant making a special appeal to him to reconsider its earlier rejection of their

client's claim. t5

- (0 On 917197 the appellant wrote to the respondent's advocates acknowledging receipt of their special appeal and promised to consider it. - (g)On l318/1997 the appellant wrote to the respondent's advocates inviting them to contact it for an appointment to discuss the special appeal. - (h)On 271811997 a meeting took place between the parties to discuss the appeal. It was agreed that the appellant u'ould carry out further investigations and communicate his final decision latter. l0 - (i) On2616l1998 the appellant wrote to the respondent formerly rejecting the respondent's claim for the reasons he had cornmunicated to the respondent in his first letter ofrejection dated 2711211996. - () On l4ll/1999 the appellant filed High Court Civil Suit No.29 of ¹⁹⁹⁹ 25 - from which this appeal arises.

Clause l9 of the Fire Insurance Policy states:-

"ln no case whatsoever shall the company be liable for any loss or damage after the expiration of tlvelve months unless the claim is the subiect of rrendins action or arbitration. IEmphasis mine]

Dr. Byamugisha argued that the Fire Insurance Policy did not provide any right to appeal against the decision of the Insurance Cotnpany and therefore the twelve months started to run on 27tr' December 1996 when the flr.st letter rejecting the Insurance claim was written. Mr. Mubiru Kalenge on the other hand argues that the claim was rejected on 261611998 and that is when tirne began to run. l0

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The learned trial judge held that by his own conduct the appellant waived the twelve months time bar and therefore the claim was properly filed. It is significant to note that in its letter dated 261611998, the appellant did not give time bar as one of the reasons for rejecting the respondent's claim. Between the 271611997 and 261611998 the appellant indicated to the respondent that it was willing to reconsider the earlier rejection of the claim. It asked the respondent to wait for their final decision. Later on they invited them for discussions of the matter, which discussions duly took place in August 1997. h took the appellant another ten months befbre they finally wrote rejecting the claim. Did this conduct constitute a waiver?

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A rvaiver is defined in WORDS AND PHRASES LEGAI-l-Y DEFINED VOL.4 at page :104 as:-

"The abandonment of a right in such a way that the other is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted, and is either express or implied from conduct."

In Kammius Ballrooms Co. Ltd vs. Zenith lnvestnrcnts Ltd Il9701 ² ALL. ER 871 at 894, HL, Lord Diplock stated the principle of Waiver as fo Ilows:-

"lf one party by his conduct leads another to believe that the strict rights arising under the contract lvill not be insisted on, intending that the other should act on that belief, and he does act on it, then the first parg' will not afterwards be allowed to insist on the strict legal rights when it would be inequitable to do so, There may be no consideration moving from him rvho benefits from the waiver, There may be no detriment to him by acting on it. There may be nothing in writing. Nevertheless, the one who waives his strict rights cannot afterrvards insist on them. His strict rights are at any rate suspended so long as the waiver lasts."

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It is my considered opinion that by his conduct, which l have at length described above, the appellant waived the right that it woLrld not be liable for any loss or damage after the expiration of twelve months fiorr the happening of the loss or damage. It cannot now be allowed to insist or asseft that right. 25

Dr Byamugisha alluded to the fact that waiver was not pleaded by the respondent. Waiver being a legal issue need not be pleaded. All that is required is to plead f'acts from which it can be inferred. In the instant case, pleadings contain facts from which the learned trial judge was.iustified to conclude that the doctrine of waiver applied to this case.

There is yet another angle to clause l9 of the Fire lnsurance Policy. It is not absolute. The rider is "unless the claim is the subject of a pending action or arbitration." lt is clear that in the instant case there was no arbitration proceedings in progress or contemplated. However, what is the rneaning ol the phrase "pending action"? The word "action" is deflned in WEBSTER'S NEW WORLD DICTIONARY. It has many rreanings rvhich include couft action and rnilitary action. However, its sirnple English meaning is:-

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#### "The doing of something, state of being in motion or working."

The Fire Insurance Policy does not give its own definition of the word action. The court must construe it by its natural and ordinary rneaning and at any rate its natural and ordinary English rneaning is not excluded. The relevance ofthe above definition is that between June 1997 and June 1998 the claim of the respondent was being acted upor.r. lt u ls Dending action. There is no way the respondent would have gone to court when there was all the hope that its disagreement with the appellant would be resolved. By accepting to reconsider their rejection of the respondent's claim, the appellant waived the right to insist on twelve months. By their letter of rejection on2616l1998, they brought "pending action" to the end. lt is then that time begins to run. It follows therefore, that on l4llll999 when the

respondent filed this suit in the High Court, it was still very rruch within the prescribed twelve months. This ground of appeal should fhil.

GROUND TWO: INSURABLE INTEREST.

- The complaint here is that the trial judge erred to hold that the respondent had no insurable interest in the machines. Dr. Joseph Byarnugisha contended that the machines did not belong to the respondent company. He pointed out pieces of evidence on record which showed that the machines belonged to PWl, Eria Muwanga, his wife and a third person called Semulangira. He submitted that there was no evidence on record to support any contention that the machines were either owned by or in possession of the respondent. Mr. Mubiru Kalenge conceded that the respondent did not own the machines. They belonged to Mr. Eria Muwanga (PWl) and his wife. The third owner Semulangira died before the suit was flled in the High Court. Mr. Kalenge submitted that there was more than ample evidence to l0 t5 - show that the Eria Muwanga and his wife were the Directors of the respondent company. It was the respondent cornpany which hired the premises where the machines were installed and therefbre it was at all material times in possession of the machines. Mr. Eria Muwanga was employed by the company and the company operated the machines for its own benefits. There is a lot of authorities to the effect that possession of property is enough to bestow an insurable interest on the p(ossessor. l0

l5 ^Aclassic definition of the term Insurable Interest is qiven in GENERAL Ncr PRICIPLES OF INSURAEEE= LAW by E. R. HARDY IVAMY 6'h Edition at page l9 as follows:-

t) "The classic definition of insurable interest was given by Lawrence J in *Lucena v Craufurd:*⁶

'A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it..... and whom it importeth that its condition as to safety or other quality should continue: interest does not necessarily imply a right to the whole or a part of a thing, nor necessarily and exclusively that which may be the subject of privation, but the having some relation to, or concern in the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce a damage, detriment, or prejudice to the person insuring; and where a man is so circumstanced with respect to matters exposed to certain risks or damages, or to have a moral certainty of advantage or benefit, but for those risks or dangers, he may be said to be interested in the safety of the thing. To be interested in the preservation of a thing, is to be so circumstance with respect to it as to have benefit from its existence, prejudice from its destruction. The property of a thing and the interest devisable from it may be very different; of the first the price is generally the measure, but by interest in a thing every benefit or advantage arising out of or depending on such thing may be considered as being comprehended'

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$15$

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In the same book at page 21, the learned author states:

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"A part from any question of contract, the mere fact of possession, if lawful, is sufficient to give an insurable interest.tt

On this issue, the learned trial .judge made the lbllowing findings and conclusion: 5

> "lt was submitted for the defendant that u.hereas the plaintiff was the insured, it did not own the machines that had been recovered. That though the owners could be shareholders or directors of the plaintiff this coulcl not give the plaintiff an insurable interest.

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I would, however, accept the argument h1, the plaintiffs counsel to the effect that the plaintiff was in actual possession of the machines rvhich it hcld in its prenrises and it used for its benefit. In these circumstances, it is m1'vierv that the plaintiff would have an insurable interest in these machines to protect itself fronr firc h:rzard as it did b.v' taking this policy. The plaintiff clearly had rcsponsibility over the machines entrusted to it by its owners. In the result, I would hold that the plaintiff had the insurirble interest and that there lvas a valid contr:rct of insurance answering the first and second issues in the affirmative."

25 I have not been able to find anything on record to fault the above findings and conclusions of the leamed trial judge. This ground of appeal must therefore fail.

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# GROUND THREE: UTMOS'| GOOD FAITII

The complaint here is that the trial judge should have found the respondent guilty of breach of the insurance obligation of utmosr good faith and or misrepresentation Dr. Byamugisha named the breaches and misrepresentations as:-

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- (a) Misstating the value of the machines. - (b) Failure to reveal that they were absolute. - (c) Claiming that the cause of fire was electric circuit fault whereas not. - (d) Misrepresenting the age of the machines. - l5 (e) Failure to report the fire to UEB.

He mostly relied as proof of the above on statements made in the fire claim fbrm (Exhibit P4) and a number of letters (Exhibit P5, P6 and P7) written on behalfofthe respondent after the fire had occurred. Throughout this trial, the Insurance proposal form which must be exclusively in possession of the appellant, has never surfaced. The person, named by Mr. Eria Muwanga (PWl) as Kakuyo who inspected the premises and the rnachines before the insurance applications forms were filled, was never called to give evidence on behalf of the appellant.

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Mr. Mubiru Kalenge pointed out, correctly in my view, that if any breaches of utmost good faith or misrepresentations were rlade, the insurance application forms would have been produced to show what the respondent declared therein. He further argued that the appellant fhiled to prove all the allegations made on this matter.

) The learned trial judge considered this complaint at length. -l'his is horv he handled the matter:-

"The plaintiffs claim has been also challenged on the grounds that plaintiff was guilty of breach of utmost good faith and making misrepresentations. Specifically, thc v:rlue and condition of the insured machines have been challenged. Also the issue of causes of fire irnd whether UEB was notified of the fire have been argued. The plaintiff insured the machines and gave their value as shs.58 million, whereas, he did not fill in the cost price, market value time of fire or that the cause was electricity. As such, it rvas contended the plaintiff was in beach of the policl .(sic)

According to thc plaintiffs witncss Muwanga, he paid for the machines in 1995. He provided the cost, sec exhibits D.l, P.l2 and P.13. The figure given as thc value of the machines were gootl ftr r thc purpose of insurance of the machines in Uganda. There is no cvidence to indicatc thnt the plaintiff intentionalll, withhcld the information rvhich was requircd before the inssuance of thc polic.v-. [Ie gave the information as he knew it and the dcfendant did not require him to give him the details of purchase price, rnodel, the vendor, customs papers etc before issuing thc policv. This

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means that the defcndant was satisfied lr,ith thc machines and the values being insured before it issuetl the policy.. lt was incumbent upon the insurer to require the disclosure beyond merely disclosing the possible questions to which answers could be given in the claim form in the circumstances of this case. From the cvitlencc. it is atso clear that fire was ignited in the plaintiffs prenriscs, put out and reported to both Fire Brigade and tlEB. It is my.r'iew that the c:rreless manner in which the defendant handled thc salc of the policy and investigations of the fire should not be blamed on the plaintiff who insuretl a value, claimetl a value and did so after doing what was in his ability rvithout any, suggestion of fraud. I have not seen anv material concealment or non-disclosu re at the timc that u :rs matcri:rl to the issuance of the policy."

I entirely agree rvith the t'indings and conclusions of the trial jLrdge on this ISSTIC.

# ro CRO[IND FOtrR: QUANTUM OF DAMAGES:

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The complaint is that the trial judge erred to award the plaintiff shs.58,000,000/: which was far in excess ofthe value ofthe insured subject matter. Dr. Byamugisha's main argument on this rvas that the rnachines were not completely destroyed and that therefore it was not correct to award the insured sum as if the machines were totally destroyed. In repty, Mr. Mubiru Kalenge submitted that the insured value ol the machines was

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shs.58,000,000/:. The expert who carried out the assessrnent of the damage found that two of the machines were damaged beyond repair and the third machine was 45%o darnaged. In his view, the insured value should be reduced by 55% of the third machine.

I have studied the record to asceftain the extent of the damage which was caused on the machine. The evidence shows that the two 1250 rnultilith offset machines which were insured fbr shs.30,000,000/: were damaged beyond repair. The evidence shows that the 2000 multilith otfset machine sustained 45Yo d,amage. The machine was insured for shs.28,000,000/=. 45% of this sum is shs. 12,600,000/:. The cortect compensation should have been shs.42,600,000/:(shs.30,000,000/= + shs.12,600,000/=). The result would be the same if the insured sum of the three machines (shs.58,000,000/=) was reduced by 55% of the third machine (shs.15,4000,000/:) as Mr. Mubiru Kalenge wanted. I would therefore award compensation (indemnity) of shs.42,600,000/=. (Forty two rnillion, six hundred thousand only.). This ground ofappeal succeeds only in part. l0 l5

### GROUND FIVf,: RATL OF INTERITST

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The last complaint is that the trial judge awarded a very high rate of interest at 18o/o per annum. Dr. Byamugisha stated that for a plaintifTwho did not even own the machines, a rate of l80Z was too high. ln his judgrnent the trial judge did not show on what basis he arrived at it. In Dr. Byarnugisha's view, the couft rate should have been awarded.

For Mubiru Kalenge, the rate of 18Yo was too low. The respondent was in business to make money and it was only appropriate that a relevant commercial rate be applied. He submitted that given that the respondent was denied use of the money since 1996, even I 8olo rate of interest will not compensate what it has lost over the years. He asked this court to take into account the fact that the respondent was not awarded any damages for breach of contract.

l0 After careful consideration of all the relevant factors i.e. the f'act that this was a business transaction, the fact that no damages for breach of contract were awarded to the respondent, I would not interfere with the award of l8o4 per annum from 14. I .1999.

In conclusion, I find that this appeal has only achieved pallial success which

l5 I assess at l0%o. I would disrniss the appeal and allow the appeal only in part on ground four. I would award 90o/o of the costs of the suit to the respondent.

a\$Il.. Dated at Kampala this .day ol . ....20 l0 IIo II T o AP L \

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## THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### C()RA}I: HON. MR. JT-JSTICE G. M. OKELLO, JA. HON. MR. JUSTICE A. TWINOMT]. IUNI,. IA. HON. LADY. ITISTICE C. N. I]. KITT]MBA,. IA.

#### CIVIL APPEAL NO. I3 OF 2OO2

#### NATIONAL INSLTRANCE CORPOIIA-I'ION : :::: : : : :::: :::::: : : : : :::APPELI-ANT

#### VERSUS

SPAN INTERNATIONAL LTD. ::::::::::::::::::::::::::::::::::::::::RESPONDENT

)Appeal from the judgment of the High Court of kampala (Okumu-Wengi, J) Dated 291512001 in HCCS No.29 of 1999)

#### ,IUDGMENT oF C. N. B. KITTIMI}A.,IA.

I have had the benefit of reading in draft the judgment of Twinomujuni,

JA. I agree with it and the orders proposed therein.

Dated at Kampala this JB,t^.. day ofv 2004.

Cr{.{ C. N. B. Kitum ^a . IUSTICE OF APPEAL

# THE REPUBLIC OF UGANDA IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

#### HON. MR. JUSTICE G. M. OKELLO, JA. CORAM: HON. MR. JUSTICE A. TWINOMUJUNI, JA. HON. MR. JUSTICE C. N. B KITUMBA

### CIVIL APPEAL NO 13 OF 2002

#### BETWEEN

## NATIONAL INSURANCE CORPORATION:::::::::::::::::::::::::::::::::::: AND

SPAN INTERNATIONAL LTD ::::::::::::::::::::::::::::::::::

{Appeal from the judgment of the High Court at Kampala (Okumu-Wengi. J) dated 29/5/2001 in HCCS No 29 of 1999.}

### JUDGMENT OF G. M. OKELLO, JA.

I have had opportunity to read in draft the judgment of my Lord, Justice Twinomujuni, JA and for the reasons he has given, I agree that the appeal be substantially dismissed. I have nothing useful to add. As Kitumba, JA also agrees, the appeal is so dismissed on the terms proposed by Twinomujuni, JA.

Dated at Kampala this ....................................

$\mathbf{M}$ OKFLLO

JUSTICE OF APPEAL.