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www.ipsofactoJ.com/archive/index.htm [1997] Part 3 Case 11 [CAM] |
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Judgment
Abdul Malek Ahmad JCA
We heard and decided on this appeal in Penang on 16 June 1997 and now give our reasons for dismissing it with costs and ordering the deposit to go to the respondent to the account of their taxed costs.
The appellant, as plaintiff and the widow of Chye Kee Jin, deceased, claimed a sum of $20,000, which was the Malaysian currency at the time the statement of claim was filed in 1979, interest and costs, as the lawful nominee of the deceased under a Personal Accident Insurance Policy No P57-0009117 dated 24 June 1977 allegedly issued by the respondent, who was the second defendant in the trial court. The first defendant was Boo Teng Chuan (‘Boo’) who according to the appellant was at all material times the respondent’s employee, servant and agent.
As pleaded in the appellant’s statement of claim, on 24 June 1977, the employer of the deceased paid the premium of $195 by cheque which sum was accepted by the respondent through Boo on the same day. On 26 June 1977, the deceased met with a fatal road accident in Dungun, Terengganu.
As nominee and beneficiary, the appellant had claimed the insured sum from Boo and the respondent. By letter dated 14 October 1977, they admitted liability and agreed to advance the sum of $10,000 on approval of the claim and the balance upon extraction of the letters of administration. However, by letter dated 21 December 1977, they refused to pay the insured sum. Accordingly, on 12 May 1978, the appellant through her solicitors demanded the insured sum.
The respondent denied the issue of the policy and alternatively, if it was issued, it was conditional that no liability was undertaken until the proposal had been accepted and the premium paid in full. The said condition was stated on the proposal form submitted by the deceased.
The respondent had also pleaded in their statement of defence that the premium was received one day after the death of the deceased and payment was by cheque not issued by the deceased himself. Further, the proposal form was received by the respondent only on 30 June 1977, four days after the death of the deceased. There was, therefore, no contract of insurance between the deceased and the respondent on the date the deceased passed away. Also, the appellant was neither a trustee under the alleged policy nor a personal representative of the estate and was not, therefore, competent to bring the action.
As regards the letter dated 14 October 1977, the respondent had explained that upon learning of the death of the deceased, they had written to the solicitors of the appellant and one Voon Swee Yew, alleged to be the administratrices of the deceased’s estate, enclosing a certain form known as the claimant’s statement to be completed by the appellant and requesting for certain documents in order for them to consider the claim by the appellant. They had never admitted liability at any stage especially when the signature on the proposal form was not similar to the specimen signature of the deceased. After considering the claim, they wrote to the appellant’s solicitors on 21 December 1977 stating that they were not liable.
The learned sessions court judge had dismissed the claim after a full trial and on appeal, the learned High Court judge had dismissed the appeal with costs.
The policy document was never produced at the trial and the learned sessions court judge held that although a policy number was given, it was never issued. However, on the date fixed for decision, learned counsel for the appellant had sought to adduce further evidence to produce the policy document. The application was oral and not supported by any affidavit. It was refused by the learned sessions court judge following Ladd v Marshall [1954] 1 WLR 1489 primarily on the consideration that there was no evidence to show that the policy document, presumably to be believed, could not have been obtained with reasonable diligence for use at the trial and which, if it had been produced, would probably have an important influence on the result of the case though it need not be decisive. Further, the appellant had not earlier sought any adjournment to enable her to produce the policy document.
The learned sessions court judge also found, following Canning v Farquhar (1885-86) 16 QBD 727, that if the premium is offered and accepted, there is at once a contract of insurance. Here, she held that the offer came from the deceased but there is yet to be an acceptance from the respondent. We would like to pause here to state the circumstances in Canning’s case. There, the proposal was accepted at a specified premium but upon the terms that no insurance should take effect until the premium was paid. Before tender of the premium, there was a material alteration in the state of the health of the proposer and the company refused to accept the premium or to issue a policy. It was held that the nature of the risk having been altered at the time of the tender of the premium, there was no contract binding the company to issue a policy. The question was, however, left open as to whether if there had been no alteration in the risk, the company would have been legally entitled to refuse to accept the premium and to issue a policy.
Boo was only an ordinary agent of the respondent. The learned sessions court judge had referred to Linford v Provincial Horse & Cattle Insurance Co (1864) 10 Jur NS 1066; 11 LT 330 where it was held that an ordinary local agent of an insurance company is not, without special authority, authorized to bind the company by a contract to grant a policy. In that case, the London agent of a country insurance company accepted the premium from the proposer together with the proposal form, both of which he never tendered to the insurance company as he had misapplied the money. When the plaintiff incurred loss, the company repudiated liability.
It was decided that there was no contract binding on the company and that it was not the ordinary duty of such an agent to grant, or contract to grant, policies of insurance and that no special authority had been proved. What the plaintiff had done was to make a proposal with a deposit which the company was entitled either to accept or reject, and since the company had never accepted it, they were not bound. In fact, there is the footnote on the proposal form in the instant case that ‘no liability is undertaken until the proposal has been accepted and premium paid in full’.
The learned sessions court judge went on further to say that the appellant had no capacity to sue as she was never appointed trustee under the policy as provided under sub-s (3) of s 23 of the Civil Law Act 1956 (‘the Act’). She also did not sue as a personal representative of the estate. On her behalf, it was argued that the money claimed did not form part of the estate and no grant of letters of administration was required.
For ease of reference, s 23 of the Act reads:
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23. |
Moneys payable under policy of assurance not to form part of the estate of the insured
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Pursuant to sub-s (4) of s 23 of the Act, in default of the appointment of a trustee, the policy on its being effected vested in the insured and his legal personal representative in trust for the appellant. On the death of the deceased, there was no application of a trustee under sub-s (5) of s 23 of the Act and the policy remained vested in his legal personal representative. All these, of course, become academic if there is no contract of insurance in the first place.
In the appeal at the High Court, learned counsel for the appellant raised a number of issues but learned counsel for the respondent concentrated on only one and that is that there was no acceptance of the proposal on the part of the respondent. There was, therefore, no contract of insurance between the deceased and the respondent on the date the deceased died and as the appellant was not nominated as a beneficiary of the deceased, she was not competent to commence the action.
The learned High Court judge on appeal in his judgment had cited s 4 of the Contracts Act 1950 which states:
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4. |
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The learned High Court judge went on to say:
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From the facts of this case, it is clear that the proposal had not come to the knowledge of the second defendant, because the proposal was only received at the second defendant’s office on 30 June 1977, whereas the deceased had died on the 26 June 1977. Furthermore, even if the proposal had come to the knowledge of the second defendant (which in my judgment it had not) there would still be no contract as against the second defendant until the acceptance had come to the knowledge of the deceased. Here, on the facts, the proposal did not reach the second defendant until after the deceased had died, no acceptance was ever made, nor was it communicated and it could never had come to the knowledge of the deceased because the deceased had died earlier. So, according to the provisions of s 4(1) and (2) of the Contracts Act 1950, no contract was formed as between the deceased and the second defendant. |
He had also distinguished the case of Borhanuddin Jantara v American International Assurance Co Ltd [1987] 1 MLJ 22 which was referred to him but found that on the facts in that case, the matter turned on the provision of declaration (c) of the proposal form and the conditions of payment stated on the receipt.
In Borhanuddin’s case, the deceased was a flight stewardess who died in a plane crash on 4 December 1977. She had submitted a proposal form completed and duly signed by her to the respondents on 21 November 1977 proposing to insure her life for a sum of $50,000 with an additional accident benefit of another sum of $50,000. She paid a $118 on 2 December 1977 in cash and a receipt was issued by the respondents.
Declaration (c) of the proposal form stated that the assurance takes effect only after a policy is issued and the first premium paid. The receipt by the respondents for the cash sum paid did not state whether the payment was a deposit or a premium. No policy was ever issued to the deceased although a policy number was assigned to the documents in question. The respondents relied on declaration (c) and said that they did not have to pay the assured sums to the deceased contending that no contract was ever concluded. The estate of the deceased argued that acceptance of the payment of the cash sum two days before the death of the deceased was acceptance of the proposal. The High Court decided in favour of the respondents.
On appeal, the Supreme Court held that the terms of the receipt were not binding since it was not issued contemporaneously as required by the terms of the declaration in the proposal form and that the payment of the cash sum was for the first premium and since the respondents would have issued the policy if the deceased had not died, a contract of assurance was concluded when the respondents accepted payment of the premium from the deceased on 2 December 1977.
In the appeal before us, unlike Borhanuddin’s case, the payment was received by the agent before the deceased died but it was received by the respondent and the receipt issued one day after the date of the death of the deceased and the relevant proposal form was received only four days after the deceased died thus on the date of death of the deceased, the contract of insurance had not come into being. We, therefore, agreed with the learned High Court judge that the facts here were not quite the same.
The learned High Court judge also agreed with the finding of the learned sessions court judge that Boo was an ordinary agent of the respondent and had no special authority to bind the latter to grant a policy. There was also no proof of any special authority for Boo to accept the proposal on behalf of the respondent. This is strengthened by the clear words in the lowest column in the proposal form which states:
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I hereby warrant the above particulars are true and I agree that this proposal shall be the basis of the contract between myself and the company. Date 24 June 1977 Agent or broker (Sgd) Proposer’s signature (Sgd) Note: No liability is undertaken until the proposal has been accepted and premium paid in full. |
As such, it is only the respondent who can accept the offer.
Learned counsel for the appellant, in asking the court to apply the decision in Murfitt v Royal Insurance Co Ltd (1922) 38 TLR 334, submitted that the respondent was estopped from denying liability as judgment had been entered against Boo as agent of the respondent. Boo was in fact subpoenaed by the respondent for the trial but was not called.
In Murfitt’s case, the plaintiff was the owner of an orchard and nursery garden in Cambridgeshire. Alongside his ground, there was a railway belonging to the Great Eastern Railway Company. Owing to the hot and dry weather during the summer of 1921, many fires were caused by sparks from locomotives and the plaintiff insured his trees and growing fruits against damage by fire. He was acquainted with one Allwood, a local agent of the defendants, and he submitted to him a proposal for an insurance for £3,000. On 17 July 1921, Allwood said that if the plaintiff did not effect any other insurance meanwhile, he could send in the proposal to the defendants and would hold the plaintiff covered pending a decision by the defendants whether they would accept the proposal or not.
On 22 July 1921, before the defendants had come to a decision, there was a fire in the nursery and the plaintiff’s trees and fruits were damaged to the extent of slightly over £664. Subsequently, the defendants refused to accept the proposal, and they declined also to pay anything to the plaintiff on the ground that Allwood had no authority to undertake that the plaintiff should be held covered. Allwood was a subordinate agent of the defendants and the dispute turned on the extent of his authority. On the head of holding out, the evidence showed that on two previous occasions, the plaintiff had insured motor-bicycles with the defendants through Allwood, and on each occasion Allwood had given him cover in the same way as in the present case and his action had been ratified by the defendants.
In his submissions, learned counsel for the respondent agreed with learned counsel for the appellant that the decision in Murfitt’s case is good law but then the special facts in that case was that the agent occupied a position in which he might well have been authorized to give oral cover, and he had been habitually given it twice before, to the knowledge of his superiors and with their consent. In the instant case, the respondent had no knowledge that Boo was their agent and no consent was ever given by them.
Learned counsel for the appellant had also brought to our attention General Principles of Insurance Law (6th Ed) by ER Hardy Ivamy at p 111 where the author states:
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Thus, where the premium to be charged has to be settled by the insurers after consideration of the particulars furnished by the proposer, the offer to enter into a contract of insurance is made by the insurers when they settle the premium and inform the proposer of this fact, whilst the proposer, by tendering the premium, accepts their offer and does not merely offer to contract with them upon their terms. |
The author further states at p 117:
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Since the proposal form, in practice, proceeds from the insurers, it further shows the terms upon which they too are willing to contract. They are bound, therefore, after acceptance, to issue a policy in accordance with the proposal. |
Then, at p 128, he states:
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Where no policy has been issued to the proposer before the loss, the receipt of the premium and its retention by the insurers, though by no means conclusive, may raise the presumption, in the absence of any circumstances leading to a contrary conclusion, that the insurers have definitely accepted his proposal. In such a case, they are not entitled to refuse to issue a policy to him, and they are, therefore, liable to him in the event of a loss. |
A careful check of the relevant text shows that learned counsel had only chosen the excerpts which sound favourable to him. As for the first excerpt, it is actually preceded by the following passage at p 110:
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The offer to enter into a contract of insurance may, as a general rule, be considered as addressed to the insurers by the person who is seeking to protect himself by insurance against loss. He may have been invited by the insurers to put himself into communication with them; but, whether the invitation comes to him from the insurers direct, or through the medium of an agent, or whether it is given to him personally, or only as a member of the public through an advertisement, the position remains unchanged, and he must submit his proposal, which they may accept or decline at their pleasure. The offer, therefore, proceeds from the proposed assured when he has filled up the proposal and forwarded it to the insurers. |
The second excerpt is also preceded by the following extract which appears at the bottom of p 116 and the top of p 117:
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The proposal form, when duly filled in and signed by the proposed assured and forwarded to the insurers, operates as a formal offer by the proposed assured to the insurers to enter into a contract of insurance. The proposal form shows the terms on which he is willing to contract, and if the offer is accepted, he cannot insist on having an insurance differing in its terms from those specified in the proposal. |
Eventually, we found that these excerpts cited by learned counsel for the appellant do not actually assist the appellant in any way as, read with the other passages, the respondent, on the facts of the instant case, had yet to accept the proposal of the deceased.
As for the default judgment entered against Boo, we were of the view that it cannot act as an estoppel against the respondent. Boo chose not to defend for reasons best known to himself. He probably knew he had nothing to lose even if the judgment is entered against him. Further, the facts and issues had not been adjudicated in the case of Boo as it was only a judgment in default. There is nothing to estop the respondent. Especially so since we had found that Boo had no authority to contract on behalf of the respondent, whatever judgment against Boo cannot bind the respondent.
Learned counsel for the appellant argued that the proposal form is dated 24 June 1977 and so is the cheque given by the employer who had himself testified that he gave the cheque to Boo who took it with the proposal forms for the deceased and four of his colleagues. Learned counsel, however, concedes that policy, when issued, is always dated later than the proposal form.
Despite this concession, he submitted that it is clear that the proposal was accepted on 24 June 1977. The failure by Boo to promptly bank in the cheque cannot affect the appellant’s rights. In any event, the delay in banking in the cheque may be explained by the fact that the proposal form was signed in Bukit Mertajam and the cheque and proposal form had been sent to Kuala Lumpur. Citing Far East Corp Ltd v Shun Cheong Steam Navigation Co Ltd [1962] MLJ 344 and Fielding & Platt Ltd v Najjar [1969] 2 All ER 150, he said that a cheque and promissory note respectively is as good as cash.
Learned counsel for the appellant continued his submissions by saying that in law and in these circumstances, the contract was completed when Boo accepted the filled in proposal form together with the cheque on 24 June 1977. The respondent was, therefore, liable. Since the proposal form describes the appellant as the beneficiary, no grant of letters of administration was necessary and she had the capacity to sue.
We do not dispute the fact that the proposal form and the relevant payment was made on 24 June 1977 to Boo. We were of the view that Boo was authorized to act on the respondent’s behalf only to the extent of collecting the proposal form and payment but he had no authority whatsoever to accept the offer of the proposer. The respondent issued the receipt of the relevant payment on 27 June 1977 and received the proposal form on 30 June 1977. On the latter date, they had yet to accept the proposal. But the deceased had died on 26 June 1977.
We could only conclude that there is as yet no contract of insurance between the deceased and the respondent on the date of the deceased’s death. The respondent cannot be held to be liable. It follows that since there was no contract of insurance and the appellant cannot be a beneficiary, she is not competent to sue.
From the reasons stated above, we had agreed with the learned sessions court judge at the trial stage and with the learned High Court judge at the appeal stage that the appellant had no case against the respondent. This appeal was accordingly dismissed with costs.
Cases
Borhanuddin Jantara v American International Assurance Co Ltd [1987] 1 MLJ 22
Canning v Farquhar (1885-86) 16 QBD 727
Far East Corp Ltd v Shun Cheong Steam Navigation Co Ltd [1962] MLJ 344
Fielding & Platt Ltd v Najjar [1969] 2 All ER 150
Ladd v Marshall [1954] 1 WLR 1489
Linford v Provincial Horse & Cattle Insurance Co (1864) 10 Jur NS 1066
Murfitt v Royal Insurance Co Ltd (1922) 38 TLR 334
Legislations
Civil Law Act 1956: s. 23
Contracts Act 1950: s. 4
Representations
Darshan Singh (Darshan Singh & Co) for the appellant.
Dominic Puthucheary (Skrine & Co) for the respondent.
Notes:-
This decision is also reported at [1998] 2 MLJ 310.
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