John Mbita and Anor v Ndola Lime Comapany Limited and Anor (Appeal No.166/2010) [2023] ZMSC 19 (20 April 2023)

IN THE SUPREME COURT FOR ZAMBIA ·SCZ/8/205/2010 HOLDEN AT LUSAKA (Civil J u risd iction) BETWEEN: JOHNMBITA JOHNCHUSHI AND ,.\Pl>EAL N().166/2010 . . :.. 2 0 APR 2023 isT APPELLANT 2ND . APPELLANT NDOLA LIME COMPANY LIMITED lST RESPONDENT BARCLAYS BANK PLC 2ND RESPONDENT CORAM: Wood, Mutuna, Chisanga, JJS On 4th April, 2021, and 20th April, 2023 For the Appellants: For the l s:t Respondent: For the 2 nd Respondent: Mr Chabu, on behalf of Messrs Robert and Partners Messrs V K Mwewa and Company NIA JUDGMENT CHISANGA, JS delivered the Judgment of the Court. Cases referred to: 1. LUCENA V. CRAUFURD (1806) 2 B & P (NR) 269 HL 2. PRUDENTIAL INSURANCE CO. V. INLAND REVENUE COMMISSIONERS (1904) 2 KB 658 3. McCUNN ESTATE V. CANADIAN IMPERIAL BANK OF COMMERCE (2001) 140 O. A. C. 151 (CA) 4. INVESTORS COMPENSATION SCHEME LIMITED V. WEST BROMWICH BUILDING SOCIETY (1998) 1 WLR 896 5. RE LAWTON 1945 CAN Lll 291 (MBCA) 6. V,AN HUIZEN V. TRISURA GUARANTEE INSURANCE CO. 149 O. R. (3D) 589 2020 ONCA.222 . 7. CLEAVER V. MUTUAL RESERVE FUND ASSOCIATION (1892) 1 QB 147 8. RE ENGELBACH'-$ ESTATE (1924) 2 CH P 348 Jl .... '\ INTRODUCTION J. Banks are in the bu siness of offering loan -fa cilities to variou.s entities ·and individua ls . Personal loans, tailored for those in regular employment, are an example. The,-risk of-faflure by ,a debtor to liquidate the loan due to death or inability to work as a result of a total permanent disability is very real. Credit life insurance is the means by which this risk is addressed. The issues that arise in this case revolve around a Master Policy of Credit Life Insurance between Barclays Bank Zambia Limited and African Life Assurance Company Zambia Limited and the appellants, who obtained loans from Barclays Bank Zambia. BACKGROUND 2. Both appellants were employees of the 1st respondent {Ndola Lime). They obtained individual loans from the 2 nd respondent (Barclays). These loans were to be recovered through monthly <led uctions from their salaries by N dola Lime, who would remit the·recoveries ·to Barclays. The loans were-insurecf in"-the event .. of 4ea th, sickness _or medical discharge. After-a -.while, the pt appellant (John Mbita) ~as medically discharged-on 2()1h April,. 2009, while the 2 nd appellant {John Chushi) was medically discharged on 24th March, 2009. Ndola Lime deducted the sum of K:33,335,993.00· (old currency) from John Mbita's ·termin'al dues and remitted this sum to Barclays, to'.settle his outstanding the bank. Similarly, '·tne·•·· sum ·of loan ... balance- -with K48,784,385 .. 00 (old currency) was deducted· from John Chushi's dues and remitted to Barclays accordingly. . - - --- -- .. 3. The appellants were aggrieved that a substantial portion of their dues had been deducted and remitted to Barclays in this manner, despite the insurance. They took out an action to recover the deduction from Barclays. Ndola lime was 1st defendant while Barclays was 2nd defendant to the action. 4. Their contention, as revealed in the pleadings, was that having left employment through sickness, the outstanding balance on their respective loans were supposed to be redeemed by African Life Assurance Company Zambia Limited (AFLIFE) as agreed with Barclays, and not deducted from their terminal dues. They claimed they had suffered loss and damage as a result, and sought recovery of their.dues. 5. In resisting this claim, Ndola Lime averred that it deducted the outstanding balances and remitted them to Barclays on the - latter's instruction. Barclays informed it that a certain procedure was to be followed to ensure that the insurance held good before lhe rr~onies could be released to the two individuals. It denied liability on this basis .. 6 . 0 11 its. 9~t_:~,. Barclays asserted that the insurance Was not .. =~·--: ·· 1 aut~.ma ~i(;ally triggered by a medical discharge, because the -· ·~ - J ' . ' . Master ·Policy of Credit Life Insurance agreement between AFLIFE and itself stipulated conditions precedent for benefits under the scheme to be accessed. 7. It averred that John Mbita and John Chushi had not complied with the requirements under the Master Policy of Credit Life Insurance on Total Permanent disability and Total Temporary Disability so as to prevent it from deducting the outstanding loans from their accounts. It too denied liability. 8. When the matter was called for trial, the parties informed Siavwapa J 'as he then was' that they had identified the issues that arose in the matter, a s : i. Whether the 2-td defendant was entitled to recover the outstanding loans directly from the plaintiffs or the plaintiffs were entitled to be indemnified pursuant to the loan Agreement and Master Policy entered into by the parties. ii. Was the loss suffered by the 2 nd defendant to be directly claimed from the plaintiffs or from the Insurance Company which covered medical discharge as it pertained to the loans? I iii. Was the J>rocedure followed when the plaintiffs were put on medical. discharge by the 1st defendant? 9 . ~he. argument preferred on behalf of the plaintiffs in the cm.irt below . was that . .as they had undergone valid medics. I examination and medically discharged on the reconimendation of the medical board, they were entitled to the monies deducted I ' from their terminal benefits. This was on account of clause 17 of the loan agreement, and the restriction in clause 7 of the Master Policy, whereby they were not allowed to deal with the insurer directly. Instead, the obligation to lodge a claim with the insurer lay with Barclays, which had to do so on receipt of the relevant documents from the Ndola Lime. Having not done so, Barclays could not benefit from its own default, to the plaintiff's detriment. DECISION OF THE COURT BELOW 10. Upon considering the documents before him, the learned Judge formed the view that the Master Policy of Credit Life Insurance between Barclays and .(AFLIFE) gave cover to Barclays on the conditions stipulated in it. Barclays' debtors were not parties to the Master Policy, but by virtue of clause 17 of the terms and conditions of the credit agreement between Barclays and its borrowers, the cover p rovided to Barclays by AFLIFE, flowed to JS the borrowers. He opir~edthat clause 1 iridicaied that the Mast er Policy was designed: to make lending to natural persons more attractive to Barclays by defining "Life Assured'' as "a person who effected the· Loan · Agreement with the creditor and whose life would be assured under the policy." 11. Noting that the assured was, in terms of the policy requested to undergo further medical tests at the insurer's behest, the learned Judge concluded that Ndola Lime brought John Chushi's and John Mbita's medical discharge to AFLIFE's attention. 12. He went on to observe that under paragraph (b) of clause 3 of the Master Policy, the life assured benefited directly from the insurer, which was to deposit the lump sum, being the outstanding amount on the loan into the account of the life assured. He concluded that the outstanding sum on the loan must have been deducted by Ndola Lime from the life assureds' benefits. Therefore, AFLIFE's duty, under the Master Policy, was to reimburse the life assured the sum that was oufstanding on the loan from Barclays, which would have already been deducted from the terminal benefits. Neither Ndola lime nor Barclays . I offended the spirit of the Master Policy in remitting, and J6 accepting respectively, the sums outstanding -on the "loan accounts for the plaintiffs, as the duty to re~bur~~ the deductions was borne by AFLIFE. 13. The le~/ned Judge stated that AFLIFE had commenced the process of assessing John Mbita and John·Chushi to ensure that the conditions of the cover were met in accordance with the Master Policy, but the process was halted by their letter through their legal counsel. It was his view that they had failed to appreciate clause 3 of the Master Policy. In the result he determined the issues before him as follows: 1. Barclays was entitled to recover the balance on the loans. 2. AFLIFE bore the duty to reimburse the two individuals on fulfilment of the conditions stipulated in the Master Policy. 3. Ndola Lime properly discharged them on recommendation of the medical board. 4. AFLIFE reserved the right to subject them to another medical test by its own doctor at its expense. GROUNDS OF APPEAL 14. Dissatisfied with this outcome, Mbita and Chushi appealed on two grounds as follows: 1. The honourable Judge in the Court below erred in law and fact when he held that Barclays was entitled to J7 recover 1:he outstanding amounts on the loans from the appellants. 2. The honourable Judge in the Court below erred in law and fact when he held that the appellants did not comply with the procedure for making claims. APPELLANTS' HEADS OF ARGUMENT 15. When the appeal was called for hearing, both parties relied on their respective heads of argument filed into Court. In relation to ground 1, it was contended on the appellants' behalf that the learned trial Judge erred in holding that Barclays was entitled to directly- recover the outstanding loans from the appellants upon their medical discharge because they did not follow · the established procedure. Learned counsel identified the issues to be resolved as being: (i) what the subject matter of the insurance cover between Barclays and AFLIFE was; (ii) who was insured; (iii) and for whose benefit was the said cover. 16. According to learned counsel, the appellants were the subject matter of the insurance cover. Barclays had insurable interest in them in the sense that should they fail to settle outstanding loans on account of death or illness, Barclays would recover the JS likeiy . loss from the Insurance Company. Learned couns el enlisted the definition of insurable interest espoused in LUCENA V. CRAUFURD 1 . cited by R Hardy Ivanny in the book General Principles of Insurance Law, 3 rd Edition, at pages 18 and 19." 17 . . This insurable interest would enable Barclays to benefit from the contract of insurance. After all, it was Barclays who would suffer loss in the event of failure on the appellants' part to settle their indebtedness on account of death or illness. It was therefore erroneous to suggest that Barclays was entitled to recover the outstanding loans from the appellants when they were insured, and the risk covered. 18. In relation to the second ground, learned counsel posed the question as to who between the appellants and Barclays was required to comply with the procedures relating to making a claim on the insurance. He argued that since it was Barclays that had insured the appellants against potential loss resulting from death or sickness, it was the right party to lodge the claim. 19. In this connection, we were referred to clause 4.1 of the Credit Life Master Policy which placed a mandatory obligation on J Barclays to adhere to the claims, procedures and requirements in the insurance policy, that is, as creditor, to complete and sign a claim form, provide identification of the life assured, the loan account of the assured and all other necessary docum~nts arid other details. 20. It was submitted that the insurance claim in this matter fell r . • under clause 4. 2 of the Master Policy. Ref erring to the said clause, learned counsel argued that no obligation was placed on the life assured himself to lodge a claim with the insurer. Therefore, one could only assume that the procedure applicable on death, which placed an obligation on Barclays to lodge the claim and submit all requisite and necessary documentation equally applied to clause 4.2. Clause 6 and 7 of the Master Policy fortified this argument. 21. In terms of clause 6, the life assured undertook to irrevocably cede all their rights, interests, and title under the policy to the creditor as security for the facility or any balance. This, in learned counsel's view, meant that all the appellants' rights were surrendered to Barclays. Moreover, the argument proceeded, clause 7 stated that enquiries from the assured in respect of the policy were to be· addressed to the· creditor which would in turn be assisted to" answer those enquiries by AFLIFE. AFLIFE was not to correspond directly with the life assured. Therefore, the JlO - - - - - - - - - - - - - - - - - - - attempt by AFLIFE to correspon d d irectly with J ohn Chush i was ~ontrary to and in brea~h of both clause 6 and 7 of the Insurance ,:, .. Contract. 22. Barclays, having insured the appeltants ·against death and sickness to guard against a potential loss· in the event of death or sickness, should have lodged a claim with AFLIFE, and not received moneys deducted from the appellants' terminal dues. RESPONDENTS' HEADS OF ARGUMENT 23. Ndola Lime did not appear, nor file any arguments to oppose the appeal. Barclays resisted the appeal in the heads of argument filed on its behalf by learned counsel. Barclays agreed with the reasoning of the learned trial Judge, arguing that he directed himself properly on the evidence and in law. Learned counsel submitted that the matter rested on interpretation and construction of the Master Policy of Credit• Life Insurance. In learned counsel's view, although the parties to this document were Barclays and AFLIFE, the appellants were affected by its terms and obligations by virtue of clause 17 of the credit agreement between Barclays and the appellants respectively. All the affected parties signified knowledge about the applicability J11 of the Master Pol.icy of Credit Life Assurance to the appellants' loans. 24. Learned counsel contended that remittance of the respective sums of K33,335,995.00 and K48, 784,386.00 by Ndola Lime to Barclays was premised on agreement between the appellants and Ndola Lime. Under the Master Policy, the appellants were not to receive any benefit from either Ndola Lime or Barclays, but from AFLIFE, which would pay these benefits directly into their accounts. It was submitted that AFLIFE had not refused to pay the appellants under the Master Policy, but the appellants had refused to submit to any tests in accordance with the policy. We were urged to uphold the decision of the trial Judge. CONSIDERATION BY THE COURT 25. We have duly considered this appeal, and the entire record on which it arises. The issues that arise revolve around the contract of Insurance, and the terms of the Master Policy. The crucial questions to be addressed at this point are: who were the parties to the Insurance contract, and who was required to lodge a claim for the balance on the loans outstanding on the appellants' respective accounts, following their medical discharge? The respon.se to these questions will determine the issues whether J12 eirclays was entitled to recover the outstanding loans from the itppellants and whether the appellants complied with the procedure for making claims. 26. According to the learned judge, the Master Policy gave cover to Barclays. The appellants were not parties to the Master . Policy, but the cover provided to Barclays flowed to them by virtue of clause 17 of the loan agreement. According to the appellants' learned counsel, they were the subjects of the Insurance cover. Barclays had insurable interest in them, in that on their failing to settle their indebtedness on account of death or illness, Barclays would recover what it would lose from the insurance. The arguments tendered on behalf of Barclays ~ign with the learned judge's views. It is argued that tinder the Master Policy the appellants would receive a benefit from AFLIFE which would make a payment into their accounts. 27. Insurance in this jurisdiction is governed by the INSURANCE ACT 1997. The term ~contract of insurance' is not defined in the Act. Be that as it may, the essential elements of Insurance are established by common law. In PRUDENTIAL INSURANCE CO. V. INLAND REVENUE COMMISSIONERS.2 Channell J gave a useful definition, in which he described a contract of Insurance as one J13 whereby one party (the insurer} promises in· return for a money consideration (the premium) to pay to the other par-ty (the assured) a sum of money or to provide hinf with a corresponding benefit upon the occurrence of an event more or less adverse to the· interests of the person effecting the Insurance. 28. Like any other contract, a contract of insurance is created on unqualified acceptance of an offer made by one party to the one accepting the offer. Where the contract is not created by acceptance of a written proposal, it must be shown that the parties have agreed on the fundamentals of the insurance it is proposed to effect. These include the subject matter of the insurance, the amount of insurance if unlimited, the nature of the risk insured against, the period for which the insurance is to last and the rate of premium to be charged, or to be calculated. See Halsbury's Law of England 4 th Edition Vol. 25 para. 382. 29. The requirements of an insurance contract were restated in McCUNN ESTATE V. CANADIAN IMPERIAL BANK OF :coMMERCE3 by the Court of Appeal for Ontario by Borins J. A. in paragraph 19 as follows: " ... the material terms of a contract of insurance are: the deilnition of the risk to be covered, the duration of the insurance cover, the amount and mode of payment of the premium and the· J14 .. amount of insurari~f payable in the event of loss. As to all these there must be consensus ad idem, that is to say, there must ---- - e ither be an expreS$ agreement, or the circumstances must be ~~CQ as to admit of .a reasonable inference that the parties were tacitly agreed. Without such agreement, it would be impossible- :· for the courts to give effect to the parties' contract · except by .. virtually writing the contract for them, which is not the function of the court to do. 30. When interpreting a contract of Insurance, a court is required to discover the meaning of the agreement from the document and the available factual background. The Court examines how a reasonable person in the position of the parties would have understood the words in the contract to mean. 31. It is understood that the agreement must speak for itself, and the wording employed taken to bear the meaning they would convey to a reasonable person, equipped with all the background knowledge, which would reasonably have been available to the parties in the situation in which they were at the time of the contract . 32. Where absurdity and inconsistency is the result of this approach, courts heed the caution sounded by Lord Hoffman in INVESTORS COMPENSATION SCHEME Lil\lITED V. WEST. BROMWICH BUILDING SOCIETY4~ at page 913: JlS "The 'rule' that w_ords should be given their 'natural and ordinary meaning reflects the common sense proposition that we do n.ot easily accept that people have made linguistic mistakes particularly in formal documents. On-the--other hand, -if one would nevertheless conclude from the background tliaf something'·must have gone wrong with the language, -the law does not require Judges to attribute to the parties an intention which they plainly could not have had,,. 33. In the instant case, before the appellants had even borrowed from Barclays, a Master Policy of Credit Life Insurance Agreement was executed by Barclays Bank Zambia (the creditor) and African Life Assurance Company Zambia Limited (AFLIFE). 34. In this Master Policy, the 'life assured' was defined as a person who effected a loan agreement with the creditor and whose life would be assured under the policy, and who would not be below 18 years of age or over the age of 62 years when the facility is applied for. 35. The maximum age of cover was fixed' at 65 years, upon whose attainment the life assured would cease to be covered under the policy._ 36. The creditor was defined as Barclays Bank of Zambia. 37. The scope of cover, that is, the insured events for which the benefits under the policy were to become payable included (1) J16 - - - - - - ---- • '· Death (2) Total Permanent Disability (3) Total Temporary Disability and Disappearance/ Abscondment as a Rider Benefit. ·c 38. The total sum assured was the total facility· granted (if not paJd upfront) plus finance charges and premium. The maximum amount payable was the outstanding balance of the facility at · the date of dea,th or total permanent disability or date of disappearance. 39. The free cover limit on personal loans, vehicle asset finance, credit cards and overdrafts was K200,000,000.00 (unrebased) total sum assured on any one life in the case of death benefit or total permanent disability and or K8,500,000 (unrebased) monthly repayment amount in the case of total temporary disability. The free cover limit on the home loans, home improvement loans and mortgages was Kl,500,000,000 (unrebased) total sum assured on any one life in the case of the death benefit or total permanent disability and or K12,000,000 (unrebased) monthly repayment amount in the case of total temporary disability. 40. The limits could be adjusted by AFLIFE annually based on actual experience, a fter giving 30 days ' notice te Barclays:~ J17 41. AFLIFE reserved the right to request for additional information and medical examinations and tests for applicants who fell above the limits on free cover. 42. The date on which a person commenced cover under the arrangement was the entry date, and thH,-fneaht the date on which the .loan was disbursed by the creditor to the life assured. An 'Active at Work Declaration' was required for all applicants. 43 . Under the general conditions were these provisions: 2.1. The provisions and benefits of this policy document together with the application and any declaration made by the Life Assured constitute the entire contract and cannot be waived or modified except by an authorized official of AFLIFE. 2.2 AFLIFE will, in return for payment of the required premiums, pay the benefits specified in this policy on the terms and conditions contained in this policy. 2.3 Any benefits payable in respect of a Life Assured in terms of this policy shall be paid by AFLIFE to the creditor, who will apply the said benefit to settle the Life Assured,s debt that is due. 2.6 Where the creditor applies to AFLIFE for insurance as defined in this policy, the creditor agrees to: ... 3 .7 The premium paid is a true risk premium and the policy will not acquire a surrender value at the end of the term. J18 44. Clause 4 explained ·how Death, Total Permanent Disability, and Total Temporary Disability benefits were to be daimed and disbursed. In clause 4. 1, the creditor agreed to- adhere to the claims proce:du"res''arid }equirements enumerated in 4. l(d}.'· 45. Clause 4.2 addressed the conditions on which-a Total Permanent Disability would become payable. Clause 4.2 (c) read: (c) In order for one to qualify for Total Permanent Disability benefit, the life Assured must be certified by a qualified medical practitioner. A detailed medical report will be submitted to African Life Assurance which wW have a medical history of the life assured, tests being done, results, medication being administered and the doctor's remarks. African Life Assurance has the right to recommend other tests to be done on the life assured at AFLIFE's expense. (d) A letter from the employer confirming that the individual bas been off work due to a Total Permanent disability will be required. (e) Total Permanent Disability claims must be advised to the insurer for settlement within 30 days of assessment and full documentation should be submitted within six months from the date of disablement. Late submissions and claims without full documentation will not be admitted. AFLIFE should pay the outstanding balance on this· account the moment they get the assessment from the patients doctor or the recommended doctor for re-assessment (if need be). J19 -----------------------------~-- --- 46 . By .clause 6, the life assured undertook to irrevocably-cede all of his or her rights, interests and title under the policy to the creditor as security for the facility or any balance thereof. 47. The agreement stated in clause 7 that· the.-life'-·as·sured would ~ i . . · • - ~., ~ , j . • - .. ... - • · - r"'t • . ~tr address enquiries in respect of the policy to the creditor. AFLIFE was to assist the creditor in answering enquiries but would not correspond directly with the life assured. Clause 10 provided that the creditor would indemnify the life assured against all losses resulting from the negligence, dishonesty or fraud of any of its officers having the receipt or charge of monies payable in terms of the policy. 48. Both applicants had a credit agreement with Barclays in which clause 17 of the agreement read as follows: 17 - INSURANCE - it is hereby declared and agreed that the loan agreement offered by Barclays Bank of Zambia Plc shall include credit insurance as contained in the Master Policy issued to Barclays Bank of Zambia limited by its insurer. The policy document may be examined by the loan applicant at the Bank's Head Office on request. This condition serves as evidence of the insurance contract between the loan applicant and the insurer under which benefits for death and or sickness automatically extend to the loan applicant at inception of the loan agreement. The insurer agrees to provide insurance in terms of the Master Policy subject to premium having been paid. J20 49. We have examined the terms of the Master Policy and the loan agreement on record. These documents reveal th at once a person effected a loan agreement with Barclays, they ... commenced cover on the date on which the loan was disb'ursed by Barclays to them. This was their entry date. They became the life assured. According to General condition number 2 .1 of the Master Policy, the provisions and benefits of that policy, the application and any declaration they made constituted the entire contract. This clause reveals that a person requiring insurance cover had to apply for it. We say so because the Master Policy indicates that in instances where the applicant fell above the free cover limit of K200,000,000 and Kl,500,000,000 respectively, they would he required to furnish additional information, and undergo any medical examinations and tests as required by AFLIFE. AFLIFE reserved the right to impose special conditions or refuse the application (emphasis ours). Undeniably, the application that could be refused was one for insurance. 50. We have not seen individual applications from the appellants, but perceive that clause 17 of the loan agreement was the avenue through which the insurance cover was secured. By that clause a loan applicant declared and agreed that the loan J21 agreement offered by Barclays included credit insu rance , and th at that condition served a s evidence of the insu rance contract between the loan applicant arid the insurer. The insurer, according to clause 1 7,".\ n turn agreed to provide irisurartce in terms of the Master Policy subject to premium having been paid. (emphasis added) 51. The background to this was that Barclays and AFLIFE had already agreed on the terms on which insurance would be offered to those who procured loans from the Bank. 52. The total sum assured was the total facility that was obtained by a life assured. This was the subject matter of the insurance agreement. The maximum insurance payable was the outstanding balance on a loan contracted by a life assured, who accessed coverage as a 'borrower'. A payment ·ofthe outstanding loan balance would be made on the death or total disability of a borrower who had obtained insurance through the bank. 53. The premium that was paid by an applicant was a true risk premium, with no surrender value at the end of the term, the risk being the failure to liquidate the debt in full due to death or disability. The premium was undoubtedly based on the amount borrowed by the applicant. The sum payable in the event of a J22 claim for an · insurance benefit in the event of death and total permanent di_sability would reduce w.ith every recovery made. The period the insurance cover would last was determined by the period the facility availed to an applicant-would run. These cardinal elements of insurance were met in individual applications for loans, with the premium factored in, and remitted to the insurer. 54. As between Barclays and AFLIFE, no contract of insurance existed. The material terms that require to be agreed upon for an insurance contract to be formed are missing. Specifically, AFLIFE did not agree to insure Barclays for the failure by a particular debtor to liquidate a particular facility availed to them for a specified p~riod. The policy does not indicate the premium that was to be paid by Barclays for this cover, nor does it indicate a period for which the insurance would run. The Master Policy merely stipulated the terms on which insurance was being offered to persons procuring loans from the bank. 55, In RE LAWTON5 the Court of Appeal of Manitoba-was seized with an appeal in which a master policy of insurance was in issue. The court discussed the nature of group insurance, and determined the question whether the master policy or certificate J23 to individual employees was the real contract. In that case; the Shawinigan Water and Power Company applied to~ and obtained from the Sun Life Assurance Company of Canada whose head office was in Montreal, a group policy of life insurance covering· its own employees throughout Canada, and also covering the employees of six subsidiary companies. The application provided that "all employees are to be covered for assurance." With specified exceptions, one of which read: (d) Employees who have not signified in writing their desire to be covered {not exceeding 25% of the total number eligible) 56. Bergman J. A. took these terms to mean that the policy was not to take effect unless at least 75% of the eligible employees entered the scheme, and that no eligible employee was automatically brought into the scheme, but that he must sign a formal written application of some kind to bring himself into the scheme. The application for the group policy expressly declared that the application "shallformpart of the contract or policy to be issued." This referred to the group policy. - 57. Bergman J .. A. opined that the master policy did not insure ·any employee but merely fixed the basis of eligibility and made available to eligible employees a limited amount of life insurance J24 on the terms set out therein. Any eligible employee desiring to participate in the insurance had to bring himself into the scheme by maki,ng aper$ona1 applicationto do so.-The master policy was in effect merely on agreement by the Life Company· With ·the Power Company to insure the individual employees who were eligible, on the terms specified in the master policy. 58. This reasoning accords with ours in the instant case, although in the cited case, the insurance was for employees, while we are here concerned with credit life insurance. The arrangement is similar in that a loan applicant was individually required to access cover when contracting a loan from Barclays, by paying the required premium. 59. We wish to emphasize that in the present case, the insurance for the appellants was arranged at the time they executed the loan agreement. The premiums were added to the loan. This is decipherable from the definition of 'sum assured' in the Master Policy, which states that the facility, finance charges and premiums made up the sum assured. 60. The insurance was designed to settle the balance of the loan in the event of death or permanent total disability. Thus, the beneficiary of the insurance was Barclays, as revealed in clause J25 2-.3 of the Master Policy. ln the event the appeilants died, or were to be totally permanently disabled, the benefits accruing under the contract of insurance would be paid to the Barclays to settle their indebtedness. The insurance was intended to protect the bank. The appellants were the assured and owners of the contracts of insurance, but the beneficiary of these contracts was Barclays. 61. The learned trial judge erroneously understood the Master Policy as being the contract of insurance between Barclays and AFLIFE, with the benefits flowing to the Barclays debtors. This was a misdirection. As stated above, the entire contract between the insurer and an applicant, who included the appellants, was the Master Policy and their applications for cover. Thus, the contracts of insurance the appellants held with AFLIFE were individual. 62. A somewhat similar problem arose in VAN HUIZEN V. TRISURA GUARANTEE INSURANCE. 6 The motion judge misconstrued a Master Policy of Insurance. In that case Trisura Guarantee Insurance Company issued a Professional Liability Insurance Master Policy to the Appraisal Institute of Canada (the "AIC"). It related to claims made against AIC members, as well as their J26 personal corporations, employers and the AIC, for the negligent provision of professional appraisal services by members. Under the policy, the insurer was obligated to defend a claim made against an insured. 63. Coverage under the master policy was extended to individual members of the AIC by way of individual application. On assessment of the individual member's risk, acceptance of the individual's application, and payment of the premium, an individual certificate of insurance was issued to the members. Mr Van Huizen, who was a professional appraiser and member of the AIC, and carrying on business through Inpho limited, which operated under the business style of Hastings Appraisal Services, was insured under the master policy and had an individual certificate. Mr David Barkley was also a professional appraiser and a member of AIC. He was also insured under the master policy and had his own individual certificate of insurance. Mr Barkley appraised a residential property at the request of Sandra Behlok Insurance Agency Limited under the auspices of Hastings Appraisal services. Three Claims were brought in relation to this appraisal. In two actions, Behlok alleged that the respondents 1 as employers or principals of Mr J27 - - - - - - - - - ----- - • Barkley were vicariously liable for his negligently performed appraisal of the property. Mr Barkley, in his third-party Claim., claimed contribution and indemnity from--his employers. 64. Ivir Van Huizen made a claim under the Van Huizen Insurance contract in relation to the claims by Behlok'The Insurer denied coverage, partly because coverage was sought under the Van Huizen Insurance contract and not the Behlok Insurance Contract. An action was commenced for a declaration that the insurer had a duty to defend and indemnify under the Van Huizen Insurance Contract in response to the Behlok proceedings. 65. The judge reviewed the pleadings and interpreted the definitions under the master policy, but did not consider the significance of the separately issued certificate. He determined that the terms "member" and "insured" were broad enough to include both Mr Van Huizen and Mr Barkley who were insured under the same master policy but different certificates. He concluded that Mr Van Huizen had coverage for a legal claim arising from his own actions and also when it flowed from his legal status as an employer of the alleged wrong doer. He also determined that the appellant had a duty to defend Mr Van Huizen in the Behlok J28 proceedings, explaining that this interpretation was necessary if the vicarious liability provision was to have any practical effect. 66. On appeal to the Court of Appeal of O.ritario, it was held that the ju~ge erred in his interpretation of the Insurance Contract between the appellant, the insurer, and the respondent; Mr Van Huizen. Specifically, the judge erred by effectively treating a master policy as the entire insurance contract for all members of the Appraisal Institute of Canada. This misconstruction caused the judge to conflate two Insurance Contracts that shared standard terms set out in a master policy. 67. Similarly in the case now before us, as shown above, all loan applicants· who accessed insurance through Barclays via the loan application would have individual insurance with AFLIFE, but would share the terms set out in the Master Policy. 68. It will be observed that Clause 2.6 of the Master Policy indicates that the creditor could apply to AFLIFE for insurance as defined in the policy. The document before us is incomplete, but it appears that the creditor was required to do something if it wished to apply for insurance in its own •right. However, as stated above, the documents before us do not point to a contract of insurance between AFLIFE and Barclays Bank. While we Ii agree that a creditor has insurable interest in the life of a debtor, and rnay take out insurance on their life, that is not the case in this rnatter. 69: When a person who had taken out life insurance dies, their personal representatives bear the responsibility of making a claim with the insurers on behalf of their estate. 70. In CLEAVER V. MUTUAL RESERVE FUND ASSOCIATION,7 it was held that the promise to pay by the insurers was meant to be enforced by the legal personal representatives of the assured who would hold the insurance benefits as part of his estate. The named beneficiary was not party to the insurance contract, and their ineligibility to receive the insurance benefits did not absolve the insurers from paying the benefits to the personal representatives of the deceased assured. 71. To similar effect was the decision in RE ENGELBACH'S ESTATE8 where, Romer J, following Cleaver v. Mutual Reserve Fund Life Association, held that the policy moneys belonged to the estate of the assured and had to be paid to the executors of .., the life assured. In that case, the testator - had taken an endowment policy in his own name, for the benefit of his daughter. It :was to mature on her attaining a specified age. The HO • assured died before the policy had matured. It was held that the 1noneys belonged to the estate of the assured. 72. \Ve endorse these principles. They confirm privity of ·contract between an assured and an insurer, even though the contract is intended to benefit a third party. 73. It is however notable in the instant case that the creditor, that is, Barclays, agreed to adhere to the claims procedures and requirements in clause 4 which was headed, 'SCOPE OF COVER.' Clause 4.1, against the subtitle 'Death' read in clause (d) as follows: (d) The creditor agrees to adhere to the claims procedures and requirements as specified below: • A claim form completed and signed by the creditor • Original or certified copy of the Life Assured's identity Card (NRC or Passport or Driver's License) • Statement of the Life Assured's Loan Account showing the transactions from, the date the loan was issued, the date of death or disability or early settlement • Original or certified copy of 1. The death certificate OR 2. The medical certificate of the cause of Death OR 3. The letter from the chief (if a person died in the village) OR 4. A BID report from the Police {if a person dies out of the hospital) OR J31 5. A Road Trafflc Accident Report from the Police (if a person died in. an accident 6 . T:!!e burial permit. (e} AF. LIFE may request any additional documentation it may requ,ire to assess the validity of any claim submitted. 74 . We also notice that to quality for insurance benefits under Total Permanent Disability, the requirements%umerated in clause 4.2 (c}, (d) and (e) were as follows: i. The life assured had to be certified by a qualified medical practitioner. Submission of a detailed medical report, ·detailing the medical history of the life assured, being tests done, results, medication being administered and the doctor's remarks was required. ii. A letter from the employer confirming that the individual had been off work due to a Total Permanent Disability was required. iil. The claim was to be advised to the insurer for settlement within 30 days of assessment by the individual's doctor. Submission of full documentation was required within six months from the date of disablement. 75. The question now to be addressed is; who was required to make a claim for the Total Disability Insurance benefit? Was it the appellants, or Barclays Bank? Learned counsel for the appellants thinks it is Barclays, on account of clause 6 of the Master Policy. By that clause, the life assured undertook to irrevocably cede all their rights, interests and title under the policy to the creditor as security for the facility or any balance. J32 Equally of importance, according to learned counsel, is clause 7, which stipulated that the life · a·ssured was to address enquiries in respect of the policy to the creditor, and AFLIFE would assist the creditor to answer the enquiries, but would not correspond directly with the life assured. 76. The word 'cede' means 'surrender', 'concede', 'relinquish. ' The life assured was surrendering their rights, interests and title under the policy as security for the facility. To 'enquire' is to 'ask' for information. 77. Our opinion is that the clause on enquiries relates to questions a life assured may have on the contents of the policy. It has no bearing on lodging a claim for insurance benefits. 78. As for the clause on the surrender of rights, interests and title, our considered view is that these elements refer to the benefits that were conferred on the life assured by the insurance contract they had with AFLIFE. These are the benefits that they surrendered to the creditor as security for the facility. Clause 2.3 of the policy, expressly stated that any benefit payable to the life assured would be paid by AFLIFE to the creditor, who would apply it to settle the life assured's debt that was due. The two clauses are complementary. The insurance benefits would be J33 .. paid to Barclays because the life assured had ceded their rights to these benefits to Barclays, as security for the facility availed to them by Barclays .. 79. Clause 4.1 (d) obliged the creditor to adhere to the claims procedures and requirements by filling in a claims form and availing AFLIFE the original or certified copy of the life assured's identity card as well as a statement of the life assured's loan account showing the transactions from the date the loan was issued to the date of death, disability or early settlement. 80. Although these requirements are under the portion of the policy that relates to death, our conclusion is that it was applicable in all the instances that would give rise to a claim under the policy. How would AFLIFE know the state of the life assured's loan account if Barclays did not avail the statement as required? This clause was intended to apply in all instances. Moreover, the policy does not stipulate elsewhere that the life assured would fill in a claim form. The fact that a statement of the loan account was required in the case·of disability or early settlement confirms _that a claim would have been filled in by Barclays in relation to disability. • 81. That AFLIFE was notified of the claim for insurance benefits in relation to the account of John Chtishi is ·l. J.ndeniable: Confirrnation of notification of the claim in his respect is revealed by AFLIFE's request that John Chushi undergo further medical tests to ascertain the degree of disability by an African Life Assurance Doctor at AFLIFE's expense. 82. This request was made pursuant to that part of clause 4.2 (c) of the Master Policy, that conferred the right on AFLIFE to recommend other tests to be done on the life assured at AFLIFE's expense. This condition was intended to enable AFLIFE, where in doubt, to ascertain for itself whether the life assured was indeed totally and permanently disabled. In refusing to undergo further tests, John Chushi failed to comply with a binding condition. 83. It is significant that before the request could be triggered, the life assured was required to provide a detailed medical report, and a letter from the employer confirming that the individual had been off work due to a total permanent disability. In addition to this, AFLIFE was to be advised of the claim within 30 days of assessment by the life assured's doctor. Full documentation was J35 required to be submitted within six months from the date of disablement. 84. These documents had to be availed by the life assured. In the present case, it appears they were availed in John Chushi's case. While Barclays was expected to provide· the documents enumerated in 4 .1 {d} of the policy and fill in a claims form, the life assured was obliged to avail the other documents that were required, and transmit them through Barclays to the insurer. 85. On the foregoing observations, it seems to us that the claim was to be made on the life assured's behalf by Barclays. This feature however, does not negate the fact that the contract was between the life assured and AFLIFE. In John Mbita's case, there is no clear indication whether the claim form was filled in or not by Barclays. In his case, there is no evidence that he was requested to undergo further examination by AFLIFE. Barclays bore the burden to prove that it had adhered to the claims procedure in his case. This burden was not discharged. 86. It must be borne in mind that although the right to the benefits had been surrendered to Barclays, it was for the life assured to fulfil the conditions in the Master Policy for the insurance benefits to be realized and applied to settle the life assured's J36 outstandin g indebtedness. In the event the claim failed, nothing wou ld prevent Barclays from pur suing the balance from t~e life a s sured. $7 .. The te.r.ms of the . Master Policy demanded adheren'ce to the condition for independent medical exam{riation of the life assured at AFLIFE's instance should it require that this be done. Once this request was madet AFLIFE was entitled to await the outcome of the medical examination. Settlement of the balance on a life assured's loan account was not as a result automatic. 88. We thus find and hold that by refusing to comply with a condition that conferred the right on AFLIFE to recommend other tests to be done on him at its expense, John Chushi failed to meet a condition of the insurance contract. Nothing prevented Barclays from recovering its dues from his terminal benefits as it did. 89. As for John Mbita, Barclays has placed no evidence signifying that it complied with clause 4.1. (d) on record. The conclusion that it neglected to attend to a crucial part of the process for him to obtain the insurance benefit of having his indebtedness settled by AFLIFE is inevitable. In the circumstances, it cannot retain the monies recovered from his dues, in the sum of J37 K33,335. 99, -for failure to fulfil its obligation. We accordingly enter Judgment for John Mbita in the sum of K33,335.99. (re based) wi-c:h interest at short term deposit from date of writ to date of judgment, and thereafter at average::current bank rate. until liquidation in full. 90. In the result, grounds 1 and 2 succeed in relation to the 1st appellant, John Mbita, but are dismissed in relation to the 2nd appellant. We award costs to the 1st appellant both here and in the Court below against the 2 n d respondent. The 2 nd respondent will have its costs against the 2 nd appellant. The costs will be agreed and in default, taxed. (---; ············~~·-···· A. M. OD SUPREME COURT JUDGE ................... , .................. . . -F . M. CHISANGA - SUPREME COURT JUDGE J38