Home | Databases | WorldLII | Search | Feedback National Court of Papua New Guinea

Kumul Builders Pty Ltd (In Liquidation) v MBF Assurance Pty Ltd [1995] PGNC 16; N1319 (2 May 1995)

Unreported National Court Decisions

N1319

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS 223 OF 1993
KUMUL BUILDERS PTY LTD (In Liquidation) - Plaintiff
And:
MBF ASSURANCE PTY LTD - Defendant

Waigani

Salika J
April 1995
2 May 1995

INSURANCE CONTRACT - Insurer - Insured - Contract of good faith - duty to disclose material facts - what is material fact - Adoption of common law principles under Schedule 2:2 of the Constitution.

WHETHER WINDING UP PETITION IS A MATERIAL FACT - whether alteration in trade and manufacture - risks covered by the contract.

Counsel:

Mr G Sheppard for the Plaintiff

Mr J Baker for the Defendant

JUDGMENT

2 May 1995

SALIKA J: The Plaintiff filed a Wf s of summons against the defendant claiming the following:

1. & T60;plae tiffnis a companompany incorporated under the Companies Act in Papua New Guinea which is subject of a winding up orderd 5thuary and wsues s official Liquidator, Anthony Lawrence Hamilton Bion Birch.

2.&p>2. #160;ـ The defendant is and t allt all material times a Company incorporated in Papua New Guinea.

3. ټ&#l6e pllf allthat phat policy of insurance numbered ered H00131/93 and dated 10th December 199r 1992 (he2 (hereinareinafter called the policy) made by the dant isider of premiums paid by the plaintiff the the defendefendant dant insured the plaintiff against loss or damages by fire and extraneous perils namely K240,000 on the office/workshop/warehouse situated at Lot 33 Section 32 Curtis Street Six Mile on the joinery machinery located therein (subject to deductibles set out in the Schedule to the policy).

4. Tae plffntis awathe ateriaterial times the registered owner of the premises and owner of the joinery machinery located thernd waerest the ses ae saihinery to the extent of the amounts so inso insuredsured resp respectivectively.

5. Tae plffntilegal thas on o on or about 15 January 1993 and at various times during the two days thereafter the premises and aid jy macy cond thewere ed and or physically removed whethehether by r by persopersons tans taking king part part in a riot or civil commotion or maliciously by persons unknown within the terms of item 5 (i) and (ii) respectively of appendix A of the policy, by reason whereof the plaintiff has suffered loss and damage.

6. ;ټ The plae plaintiffntiff notified the defendant of the loss and damage but the defendant has failed or neglected to pay to the plaintiff the total loss and damage suffered.

The dant s thes an inan insuransurance poce policy made between the parties that it agreed to provide cover in respect of property located at Lot 33 Section 32, Curtis Street, Six Mile Port Moresby.

The defendant admits that it has refused to pay the alleged or any sum at all.

The defendant relies on the terms of the policy in its refusal to pay any amounts. I will refer to the prons ions of the policy later in the judgment.

I have heard evidence from both the plaintiffs and the defendant. The not contest in the evie evidence in relation to the fact that the buildings in the premiseemises were damaged or destroyed. Sootogrtendered into evideevidence by consent clearly show that the building in the premises ises were damaged and destroyed and that sarts of the building were removed and are no longer there. The graphs show paperpaperpapers strewn all over the floor of the buildings and broken furniture and papers all over the premises.

The defence raises three defences to the claim. Thosences

a) &160;&160; ـ &#The plae plaintiff failedailed to disclose a material fact namely, that a windingetition had been presented against it.

b) There here was an atteramaon made in the trade or manufacture carried on by the plainti that thet the risk of destruction or damage was increased and no notice of that change was given e deft.

In answer to the des raihe plff sued the mere fact to a winding up petition to be discloseclosed is d is not anot a mate material rial fact. It submitted that the fact that the insurers were not told that the insured was in liquidation was not a vital fact.

There is no reported case lawhis point in this Country and so I look to the common law for some guidance. The comm common laition ison is that a contract of insurance is a contract based on the utmost good faith of the parties and if the utmost good faith is not observed by either pahe contract may be avoided by the other party (see Halsburysbury Volume 25 paragraph 365). The ed is under a duty to y to disclose all material facts relating to the insurance he wishes to effect. Furthermore he must make so misrepresentation regarduch facts. Good faith requires that nhe insured shoulshould not by his silence mislead the insurers into believing that the risproposed differs to their detriment from the risk which theh they will actually run. He must help thurer by evey every means in his power to estimate the risk at its proper value. The insured in words must must disclose every material information that hws or ought to in the ordinary course of business to have kave known. He however has no duty to disclose facts which he did not and which he could not be t be reasonably expected to know at any material time.

As to what is a material fact the common lawtion is this:

A fact is material for the purpose of e of the duty to disclose it if it is one which would influence the judgement of a reasonable or prudent insurer in deciding whether or not to accept the risk (see Lambert v Co-Operative Insurance Society (1975) 2 Lloyds Reports 485).

In the proceedings no Papua New Guinea case was cited. This is because no cases have been reported on the issues raised here. I am of the view the commocommon law principles and rules relating to the issuecifically raised in this case be adopted pursuant to schedule 2:2 of the Constitution.&#16. I do nosider the common laon law pples and rules inconsnconsistent wit cons constitutional law or any other law, nor are they inapplicable or inappropriate to thcumstances of the country from time to time, nor is their aeir application inconsistent with customs. I am of the view that the common law principles and rules relating to the issues in this case are appropriate for application in the country because they potrod common sense in their application. I so adopt those principlds and rules in this chis case.

The insurance cover was taken out for the period from 10/12/92 to cover 10/12/93. The int giving rise to theo the claim arose between the 13 and 15ary 1993. The petitiotition to wind up the plaintiff company was served at the plaintiff's registered office on the 18th Decemb92. etition was was advertisertised in the Post Courier newspaper on 22 December, 1992 and in the National Gazette on the 24th Dece1992. The winding up order was aade against the plaintiff company on the 23rd Februarbruary 1993 and a claim was made under the policy on the 1st March 1993. those set of facts it is c is clear that the plaintiff knew or ought to have known that there was a winding up petition against it on the 18th December 1992 some 8 days after a contract of insurance had been entered. From vidence it became clee clear that from the 18th December 1992 to the 1st March 1993 the plaintiff company did not disclose e deft the fact that that there was a winding up petition against it. The question is was was the failure to disclose the winding up petition against it a material omission by the plaintiff company. The fact that there was a winding up petition against laintiff is in my view not a material fact. Firstly btly because on ate date of the contract there was no winding up petition at the plaintiff. Once the contract wecuted uted therethere was no obligation a week later for the plaintiff to go back to the ir and disclose to it that that there was a winding up petition against it. Secondly because often wi ding up petitions are used as a threat to the debtor to pay up its debts. Thirdly, even if thentiff tiff company was in the process of being wound up, itd still be operating under a new arrangement normally a liqa liquidator, a process usually associateh a windiwinding up process0; The question of whether ther a prudent or a reasonable insurer might have been influenced had that fact been disclosed does not arn this case because on the date of contract there was no wino winding up petition against the plaintiff.

And so I find that there was no material fact for the plaintiff to disclose at the time of the entering of the contract.

The next question is whether there was an alteration in trade or manufacture made by the plaintiff such that the risk of destruction or damage was increased. Evidence is that workers wers were stood down until the start of a new contract. However there is no evidence that a new contract had been secured. The plaintiffs evidence was that the workers were laid off for two weeks initially but in that two weeks period the plaintiff was given the notice of winding up. The plainplaintiffs evidisce is that it still had ws employed by it. The; There is no ece to thto the contrary and so I accept the evidence as the state of things at the material. Fumore I note from the phoe photographs that some oome of the machinery for its trade manufacture were still in the building untilged.

My view on the situation was that it was still too early in the winding up proc process to suggest that there was a change in trade. My view and fi from from the evidence is that there was still some activity in the trade of the plaintiff and that there was no alteration in trade or manufacture. I would rd this argument.

The final argument is whetheralleged loss or damage was was covered by the risks insured against. The plaintiff asserts that the loss was caused by personsng part in a riot or a civi civil commotion or maliciously by unknown persons with in the terms of item 5 (1) and (ii) of appendix A e Policy.

Item 5 (i) and (ii) are in the following ting terms:

“5 ټ&##160; R60; RIOTS, OTS, STRIKES, MALICIOUS DAMAGE

tly c by the Ache Acts of:s of:

(i) &#p60; nsrsopa g ots ir Civr Civil Commotions or strikers or locked cked out wout workers or persons taking part in labour or malicious persons acting on behalf oin coion wny poal oration but excludinguding dest destructiruction oron or dama damage caused directly on indirectly by total or partial cessation of work or the retarding or interruption or cessation of any process or operation.

(ii) &##160; other mher malicious per nn s not being tenants provided that:

(a) &##160;inse er srer shall ball bear the K2,000.00 oh andy clad or series of claims arising out of onof one event and or 10% final adjusted vald value ofue of RSMD; and

(b) ټ&#the p are imre iamediamediately tely informed of any malicious damage.”

The evidence is that there was no riot, and no strike0; Soknown persons came from all directions, laughing and shouting and began strippingpping it a it apart. They took away what they ould lay their hands on and in a matter of 2 to 3 days the building was gone. The question thediscountinunting a riot andrike could the actions of those people amount to malicious damage. Tfendant subm submits that that their actions amount to thef as such is not covered under the risk. The plaintiffntiff submits that their actions amount to malicious damage in that the reng loss and damage to the pthe premises was done intentionally without just cause or excuse. In law t is malicious if d if donentionally without just caus cause or excuse. Stealing or theft are iviey view malicious acts as they involve the intention to pently deprive someone of his property without just cause orse or excuse.

In my view the acts of the unknown people amounted noy to a theft but also to mato malicious damage. I note that thes of the inhe insurance risk do not include theft. Normally a his not easy tosy to steal but can be easily damaged and this is probably why it is not normal to insure a building against .

As to what caused the un persons to remove parts of the buildings there is no evideevidence for the court to make any definite finding on that aspect. have a good guess though.ough.

In the circumstances I find for the plaintiff for the amount that it was insured for withrest and costs.

Lawyers for the plaintiff: Maladina Lawyp>

Lawyerswyers fors for the defendant: Henao Lawyers