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Bandi v Asia Pacific Insurance Brokers Ltd [2012] PGNC 135; N4850 (24 October 2012)

N4850

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 62 OF 2010

LAWRENCE BANDI
Plaintiff

V

ASIA PACIFIC INSURANCE BROKERS LIMITED
Defendant

Madang: Cannings J
2012: 24 August, 5, 24 October

INSURANCE – period of insurance – commencement date of 12-month policy cover: whether the date immediately after the expiry of the last period of insurance or the date of payment of premium

The plaintiff (the insured) on 9 January 2008 entered into a motor vehicle insurance contract with the defendant (the insurer), under which cover was provided for a period of 12 months, expiring on 9 January 2009. The defendant failed to notify the plaintiff of expiry of cover and the plaintiff failed to renew the policy until 12 February 2009, when he paid for cover for a period of 12 months. The vehicle that was the subject of the policy was on 21 January 2010 involved in an accident and written off as being beyond economic repair. The plaintiff made a claim on his policy but the defendant refused the claim on the ground that the policy had expired on 9 January 2010 and not been renewed. The plaintiff commenced proceedings against the defendant for breach of contract, seeking a declaration that the vehicle was insured by the defendant at the time of the accident and orders that the defendant honour the policy by paying the plaintiff the insured value of the vehicle (K64,000.00) and in addition pay general damages and damages for economic loss. At the trial the insurance policy was not adduced in evidence, but there was adduced a 'certificate of currency' issued the day after payment of the premium, showing that the period of cover was from 9 January 2009 to 9 January 2010.

Held:

(1) In the absence of the insurance policy the court must in order to ascertain the terms of the contract of insurance including the commencement date of the period of cover draw inferences from the best evidence available, which in this case is the certificate of currency and evidence as to the conduct of the parties and their legitimate expectations.

(2) The certificate of currency created a presumption that the period of cover commenced on 9 January 2009, however the presumption was rebutted by the reasonable expectation of the plaintiff that, having paid a premium in respect of a 12-month period of insurance, the 12-month period would commence on the date of payment: 12 February 2009.

(3) Any doubt that 12 February 2009 was the date of commencement should be resolved in favour of the plaintiff by invoking the doctrine of rectification to give effect to the real intention of the parties, which was that the period of cover would commence on 12 February 2009.

(4) It was accordingly declared that the vehicle was insured at the time of the accident and that the defendant was obliged to comply with the terms of the policy.

(5) The court declined to grant other relief sought by the plaintiff, entitlement to which could only be properly determined by reference to the terms of the policy (which was not in evidence); and all claims for consequential relief were referred to mediation.

Case cited

The following case is cited in the judgment:

Alotau Enterprises Pty Ltd v Zurich Pacific Insurance Pty Ltd (1999) N1969

STATEMENT OF CLAIM

This was the trial of an action for breach of a contract of insurance.

Counsel

B W Meten, for the plaintiff
Y Wadau, for the defendant

24th October, 2012

1. CANNINGS J: The plaintiff's motor vehicle, a 15-seater Toyota Hiace, was involved in an accident on 21 January 2010. Two motor vehicle repairers declared that it should be written off as beyond economic repair. The plaintiff (the insured) lodged a claim with his insurer, the defendant, but the claim was refused on the ground that the plaintiff's policy had expired on 9 January 2010 and not been renewed. The plaintiff's attempts to convince the defendant that his policy was current were unsuccessful, so he commenced proceedings against the defendant for breach of contract seeking a declaration that the vehicle was insured by the defendant at the time of the accident and orders that the defendant honour the policy by paying the plaintiff the insured value of the vehicle (K64,000.00) and in addition pay general damages and damages for economic loss. The central question is whether the plaintiff had a current policy on 21 January 2010.

2. The plaintiff had on 9 January 2008 entered into a motor vehicle insurance contract with the defendant under which cover was provided for a period of 12 months, expiring on 9 January 2009. The defendant failed to notify the plaintiff of expiry of cover and the plaintiff failed to renew the policy until 12 February 2009, when he paid for cover for a period of 12 months.

COMPETING ARGUMENTS

3. The plaintiff argues that the period of cover commenced on the date of payment of the premium, 12 February 2009, and ran until 12 February 2010. The date of the accident, 21 January 2010, fell within the period of cover. So he was insured and the defendant is obliged to honour the policy.

4. The defendant argues that the 12-month period of cover commenced immediately after the expiry of the first period of insurance: it commenced on 9 January 2009 and expired on 9 January 2010. The date of the accident, 21 January 2010, fell 12 days outside the period of cover. So the plaintiff was not insured and the defendant, which was under no obligation to remind the plaintiff of the need to renew the policy, was not obliged to meet the claim.

EVIDENCE

5. The insurance policy has, unfortunately, not been admitted into evidence. The plaintiff failed to introduce it into evidence and the defendant did not produce any evidence at all. The defendant argues that in these circumstances the plaintiff cannot prove his case but I am not persuaded that that is so. There is ample evidence and it is undisputed that the plaintiff paid two separate premiums, in January 2008 and in February 2009, and that he was in fact covered for two 12-month periods. The only issue in dispute is: when did the second period commence, 12 February 2009 or 9 January 2009?

6. In support of the contention that it was 9 January 2009 the defendant points to the 'certificate of currency' (which was admitted into evidence) issued on 13 February 2009 (the day after payment of the premium), which states:

PERIOD OF COVER: From 09/01/09 to 09/01/10 (4.00 pm)

7. The defendant argues that as the plaintiff was renewing a policy and he was given notice through the certificate of currency as to the period of cover it was his duty, as an insured, to correct any statements which he regarded as inaccurate. Apart from a rather vague reference to Halsbury's Laws of England, no authority for this proposition was provided, and I have great difficulty in accepting it as a valid principle of law.

8. In the absence of the insurance policy, I consider that the court must in order to ascertain the terms of the contract of insurance including the commencement date of the period of cover draw inferences from the best evidence available, which in this case is the certificate of currency and evidence as to the conduct of the parties and their legitimate expectations.

9. I agree with the defendant that the certificate of currency is a significant document and that it creates a presumption that the period of cover commenced on 9 January 2009, especially as it appears that the plaintiff was renewing a policy rather than entering into a new policy. However I reject the argument that the plaintiff was obliged to notify the defendant that 9 January 2009 was not in fact the date of commencement. The presumption is rebutted in this case by the reasonable expectation of the plaintiff that, having paid a premium in respect of a 12-month period of insurance, the 12-month period would commence on the date of payment: 12 February 2009. This, to me, seems common sense.

DOCTRINE OF RECTIFICATION

10. Any doubt that 12 February 2009 was the date of commencement should be resolved in favour of the plaintiff by invoking the doctrine of rectification to give effect to the real intention of the parties. That equitable doctrine, which was applied by Sevua J in the leading case Alotau Enterprises Pty Ltd v Zurich Pacific Insurance Pty Ltd (1999) N1969 provides that where either party to a contract of insurance establishes that the policy formally embodying the terms of the parties' contract does not record the real agreement of the parties it is entitled to have the policy rectified by the court so that it properly expresses their true agreement.

11. I have determined that as a matter of law, on the best evidence available, the 12-month period of cover commenced on 12 February 2009. However, if I am wrong in drawing that conclusion and it transpires that as a matter of law the terms of the contract of insurance were such that the 12-month period of cover commenced on 9 January 2009, I am satisfied that those terms did not record the real agreement of the parties. I am also satisfied that as a matter of equity and fairness the policy should be rectified so that it properly expresses the true agreement of the parties and the reasonable expectation of the plaintiff. Therefore, for the avoidance of doubt and to the extent that it is necessary, I will rectify the policy by declaring that the 12-month period of cover commenced on 12 February 2009.

WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?

12. I will grant declarations to give effect to the conclusions outlined above and to declare that the vehicle was insured at the time of the accident and that the defendant is obliged to comply with the terms of the policy.

13. I decline at this stage to grant the other relief sought by the plaintiff (including an order for payment of the sum insured and damages) as entitlement to those remedies can only be properly determined by reference to the terms of the policy. This raises the question of how those claims should be determined. There are at least three options available to the court: (1) give directions for setting down a trial on the remaining claims for relief or (2) let the parties resolve the matter or (3) order mediation.

14. Under the ADR Rules the National Court is empowered by Rule 5(2), of its own motion, to order mediation for a resolution of any part of any proceedings provided that at the time of considering whether to order mediation it has regard to the factors prescribed by Rule 5(3). I have had regard to those matters. I consider that: (a) mediation will not result in prejudice to the rights of either party; (b) it is reasonably within the ability and power of both parties to comply with a mediation order; (c) mediation will not entail substantial work for either party; (d) the nature of the relief sought lends itself to mediation; (e) a mediation at Madang can be set up very soon and this should be convenient to both parties; (f) neither party has expressed opposition to the prospect of mediation; (g) mediation has not yet been attempted and it should be attempted at least once before consideration is given to setting down another trial; (h) neither party loses the right to have the remaining claims tried in court; and (i) it is in the interests of justice to attempt mediation as a method of resolving disputes such as this.

15. I conclude that option (3) is the most appropriate as it is the option that has the greatest prospect of finally and quickly determining the dispute. I will therefore make an order for mediation.

16. As to costs, the general rule is that costs follow the event, ie the successful party has its costs paid for by the losing party on a party-to-party basis. I see no reason to depart from the general rule in this case.

ORDER

(1) It is declared that:

• (a) the terms of the contract of insurance were such that as a matter of law the 12-month period of cover commenced on 12 February 2009; and
  
• (b) for the avoidance of doubt and to the extent that it is necessary, the policy is rectified, in that the 12-month period of cover is deemed to have commenced on 12 February 2009; and
  
• (c) the plaintiff's vehicle was insured by the defendant at the time of the accident, 21 January 2010; and accordingly
  
• (d) the defendant is obliged to comply with the terms of the policy.
  

(2) All other claims for relief shall under Rule 5(2) of the ADR Rules, on the court's own motion, be referred for mediation pursuant to a separate mediation order under Rule 5(4) of the ADR Rules.

(3) The defendant shall pay the plaintiff's costs of the proceedings to date, on a party-party basis, which shall if not agreed be taxed.

(4) Time for entry of this order is abridged to the time of settlement by the Registrar, which shall take place forthwith.

Ordered accordingly.
____________________________
Meten Lawyers: Lawyers for the Plaintiff
Sirigoi Lawyers: Lawyers for the Defendant