COURT OF APPEAL, ACCRA
Date: 20 JANUARY 1975
APALOO ANIN AND KINGSLEY-NYINAH JJ A
CASES REFERRED TO
(1) Monk v. Warbey [1935] 1 K.B. 75; [1934] All E.R. Rep.. 773; 104 L.J.K.B. 153; 152 L.T. 194; 51 T.L.R. 77; 75 S.J. 783, C.A.
(2) Hadley v. Baxendale (1854) 9 Exch. 341; 23 L.J.Ex. 179; 23 L.T. (o.s.) 69; 81 Jur. 358; 2 W.R. 302; 2 C.L.R.517.
NATURE OF PROCEEDINGS
APPEAL from the judgment of Annan J. (as he then was) dismissing the appellant’s action against the respondent, for a breach of warranty for seizure of vehicle acquired by the appellant from the respondents on hire-purchase. The facts are sufficiently stated in the judgment of Apaloo J.A.
COUNSEL
E. O. Appiah for the appellant.
Mensah-Bonsu for the respondents.
JUDGMENT OF APALOO J.A.
The appellant (hereinafter called the plaintiff) was at the time material to this case, a licensed lorry driver and transport owner. The respondents are a limited liability company and carried on business, among
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other things, in the sale and hire of motor vehicles. I shall hereafter refer to them as the company. Some time in 1963, the plaintiff, who was minded of buying a Mercedes Benz bus, called at the company’s office in Tamale. He there made his intention known to the company. The plaintiff did not apparently have sufficient funds to buy the vehicle offhand but the company were willing to hire out one to him with a view to purchase. He and the company accordingly entered into a hire-purchase agreement.
One of the terms of that agreement was that the plaintiff shall insure the vehicle in such manner and against such risks as the company may require. Subsequent to the signing of this contract, the company requested him in writing to insure the vehicle under comprehensive cover. The plaintiff did so. This agreement was breached by the plaintiff and the company accordingly exercised their right under the contract and re-possessed the vehicle. This brought that agreement to an end.
The evidence shows that at the request of the plaintiff, the company were agreeable to re-letting to the plaintiff the self same vehicle on hire-purchase terms. Instead of letting the 1963 agreement continue, the company, for reasons of their own, preferred to enter into a fresh hire-purchase agreement with the plaintiff. This new agreement was entered into in August 1965 and the rights and obligations of the parties fall to be decided by this agreement. The previous business activities of the parties were irrelevant for the determination of this case but owing to the circumstance that the learned judge used that fact in construing a very crucial clause of the 1965 agreement, the previous business dealings of the parties would have been unworthy of mention.
The 1965 agreement did not determine according to its tenor. It was again brought to an end by the company which on 29 October 1965 repossessed the vehicle. They justified this act on the ground that the plaintiff committed a breach of, what I would call, the insurance clause of the contract. The plaintiff in fact applied to the Royal Exchange Assurance for comprehensive cover of this vehicle on 24 September 1965. He was given a provisional cover note which provided cover for 30 days—that is up to 23 October. The insurance was effective only when the vehicle was driven by the plaintiff personally. It is the type ofcover known in insurance parlance as a “named driver clause.”
The evidence shows that on 21 October 1965, this vehicle was involved in an accident. On that date, the vehicle was driven not by the plaintiff but by one Adam Dagomba, his paid driver. He drove with the plaintiff’s permission. If the plaintiff had made a claim on the insurers to indemnify him for any loss he sustained by reason of this accident, the insurers would, in view of the present state of the law, have been justified in repudiating liability. The plaintiff did not in fact make any claim. Basing themselves on the fact that at the date of the accident, the vehicle “was driven by an unauthorised driver,” the insurers invited the company to seize the vehicle so that the former may be enabled to cancel the policy. The company did so and this seizure provoked the action which culminated in this appeal.
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The plaintiff asserted that by hiring the vehicle to him with a view to purchase, the company impliedly warranted that he would have and enjoy quiet possession of the same and this warranty was broken by the unjustifiable seizure of the bus. The company did not contest the existence of the implied warranty but contended that they exercised their summary right of re-possessing the vehicle because the plaintiff breached a named clause of the agreement inasmuch as he did or allowed to be done an act “whereby the insurance effected in relation to the said vehicle was invalidated.” The plaintiff disputed this and claimed that he was entitled to damages for breach of warranty or for trespass to the vehicle. In a full and closely reasoned judgment, the learned judge, Annan J. (as he then was) held that the plaintiff was in breach of a clause of the hire-purchase agreement and that this entitled the company to seize the vehicle and that the right of seizure was lawfully exercised. He therefore dismissed the action. The plaintiff contests his conclusion by this appeal.
The first ground of appeal strenuously questioned the construction which the learned judge placed on clause 5(e) of the hire-purchase agreement. As the gravamen of the plaintiff’s complaint is founded on the construction of that clause, it is necessary to set it out, namely:
“The buyer . . . shall keep the goods insured in such manner and against such risks as the seller may reasonably require and on demand, show to the seller, the policy of insurance, premium receipts, and insurance certificate and not to use or allow the goods to be used for any purpose not permitted by the terms and conditions of the policy of insurance or do or allow to be done any act or thing whereby the insurance may be invalidated.”
The learned judge was not able to find that the company required the plaintiff to insure the bus against any specified risks but he felt that as the plaintiff had had one previous dealing with the company and as at that time, he was specifically required to insure the vehicle under comprehensive cover, he concluded that the plaintiff “must have understood that he was required to insure the vehicle on the basis of comprehensive insurance.” The judge himself must have felt some doubt about the soundness of this holding so he proceeded to express his view on the correct interpretation of the clause. He said:
“I interpret clause 5 (e) [that being the clause in question] to mean that it imposed a duty to insure in any event whether or not specified instructions were given by the sellers. The obligation to insure … is two fold: There is the obligation to take out a policy of insurance which reasonably affords protection for the seller in the vehicle. There is also a further obligation to comply with any specific instructions as may be given by the seller provided such instructions are reasonable. The first obligation, that of reasonable insurance, arises as soon as the hire-purchase agreement is entered into. The second obligation to comply with reasonable instructions of the seller as to the manner of the insurance only arises upon the request direct or implied of the seller and not otherwise.”
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I appreciate that construction of written instruments is sometimes attended with great difficulty especially where the parties’ intention is obscured by the language they have used, or where the language is capable of more than one meaning. But I see no such difficulty in this case. The natural and primary meaning of the clause is, that the plaintiff incurs an obligation to insure the vehicle only at the express request of the seller and against such risks as the latter may specify. The seller is under no obligation to make a request and if he omitted to make one, the plaintiff, for his part, is not bound by the contract to insure.
I cannot read the words of the clause as imposing an obligation “to insure in any event whether or not specific instructions were given by the seller.” If that were the intention of the parties, I see nothing which prevents them from saying so. Irrespective of the contract, the Motor Vehicles (Third Party) Insurance Act, 1958, imposed an obligation on the plaintiff as user of the bus to insure it against injuries to third parties. If he commits a breach of that duty, he incurs criminal penalties and may also be civilly liable to any person who suffers injury as a result of his breach of that duty: see Monk v. Warbey [1935] 1 K.B.,75, C.A. But such obligation is imposed by the compulsion of law, the volition of the parties notwithstanding.
True, the construction put on the clause by the judge is one that protects the interest of the seller. And at least in imposing an obligation on the plaintiff to insure at their request, this is what the company had in mind. But the issue of construction is not resolved by considering what the company had in mind or what reasonably protects their interest. The important question is: what language did they use to impose this obligation? The words used in clause 5 (e) were used by the company and in case of difficulty, should be construed contra proferentem. I do not however think that a fair construction of this clause gives rise to any difficulties or is such as to attract the application of the contra proferentem rule. In my opinion, only one obligation was imposed on the plaintiff by the clause under consideration, and that is, to insure the vehicle only at the request of the company and against such risks as the latter may specify. The judge’s finding makes it plain that the company did not request the plaintiff to insure, much less specify any risks and I do not see how the plaintiff can be said to be in breach of that clause.
The learned judge in an apparent attempt to buttress his interpretation of the clause, referred to the established fact that the plaintiff took out a comprehensive cover on the vehicle on 24 September 1965 and concluded that he did this in discharge of his contractual obligation to the company. I profoundly disagree. The plaintiff was a bailee of the vehicle and had himself an insurable interest in it. If, as I think, he owed no contractual duty to the company to insure by reason of the fact that the latter did not request him to insure, then the fact that he took out a policy of comprehensive insurance, is explainable on the footing that he did this to protect his own interest in the vehicle. On this aspect of the case the judge noted that the plaintiff was already au fait with the “business policy” of the
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company inasmuch as he had had one previous dealing with them two years earlier. From this, the judge felt able to conclude that:
“ . . . when the plaintiff went to the insurers to insure the vehicle in 1965, he did so in the full awareness that the business relations between him and the defendants in terms of the hire-purchase agreement obliged him to take out a comprehensive policy of insurance.”
One may be permitted to doubt the relevance of the 1963 hire-purchase agreement and the action taken on it to the question in controversy in this case, namely, whether the plaintiff incurred an obligation to insure in any event or to do so only at the request of the company. Although the insurance provision of the 1963 hire-purchase agreement is in the same terms as the one under consideration, it is common ground that in 1963 the company made a written request to the plaintiff to insure. It is equally established that in this case the company made no such request either in writing or in any other form. The fact that the plaintiff may well have believed that the company would, under the 1965 agreement, ask him to insure the vehicle under comprehensive cover as they did in 1963, is no ground for imposing liability on him if the company themselves omitted to make the demand. In my judgment, the previous dealings between the parties sheds no light on the question of construction debated in this case.
I feel no doubt that the insurance obligation which breach, the company can justly complain of, is the one that was taken at their specific request. It is the policy of that type of insurance that the plaintiff is obliged by clause 5 (e) to show to the company on demand. It is that type of insurance that the clause 5 (e) enjoins the plaintiff not to put at risk by prohibited user. One cannot help being struck by the fact that the clause consistently used the words “the policy.” It must be sense and not nonsense that the definite rather than the indefinite article was used to describe the policy. There can be no doubt in the mind of the company as to what policy they meant. I think therefore that the company cannot justly complain that the plaintiff failed to conform to the conditions of a policy which he took otherwise than upon their asking, much less use that fact as a basis for determining the contract of hiring.
The company put forward as justification for the seizure, the fact that the plaintiff “did or allowed to be done as act or thing whereby the insurance effected in relation to the said vehicle was invalidated.” The fact on which this averment was grounded, is that although the policy provided cover for the vehicle only while being driven by the plaintiff personally, he allowed his driver to drive it on 21 October and he met with an accident. Although this fact was admitted by the plaintiff and although it is conceded that this act entitled the insurers to repudiate a claim based on this accident, it was argued that nevertheless the policy was not invalidated and was at best only temporarily suspended. I think the contention raised on behalf of the plaintiff on this part of the case, is more of semantics than substance.
In my opinion, the word “invalidate” as used in the hire-purchase agreement, is not a term of art and one must determine what the parties
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meant by it. It is obvious that the object of the company in seeking the right to oblige the plaintiff to insure the vehicle is to protect their interest. In view of the unauthorised use of the vehicle on the date of the accident, the insurers would have been within their rights to repudiate a claim if one were made on them by the plaintiff. To that extent, it can accurately be said by the company that the plaintiff had or allowed to be done an act by which the insurance was invalidated. If “invalidate” means otherwise in this context, then the insurance would have been illusory, at least from the point of view of the company.
The same word may bear different meanings in different contexts, and as between the plaintiff and the insurers, the latter cannot, with accuracy, say that the driving of the vehicle on 21 October by a person other than the named driver, invalidated the policy in the sense that the policy came to an end. As a matter of language, it would be more accurate to say that on that date, the vehicle was off cover. The cover would again re-attach if the steer was taken over by the named driver, namely, the plaintiff. That this is how the insurers themselves understood the clause, is shown by the fact that they did not seek to avoid the policy although they knew the vehicle was driven by a person other than the insured. It was only after the company seized the vehicle and the plaintiff had no longer any insurable interest in it, that they proceeded to cancel it. But the contract whose construction was in issue, was entered into between the plaintiff and the company and the word “invalidate” must be construed in a manner that makes business sense out of their bargain. I think that word was interpreted correctly by the judge and had that been the only question for consideration in this case, I should find no ground to differ from the learned judge’s conclusion.
But I am in fundamental disagreement with his construction of clause 5 (e). He was of opinion, that that clause created an obligation on the plaintiff to insure the vehicle in any event and that he would be answerable for breach of contract if he did not. In my view, on a true and proper construction of the clause, the plaintiff’s contractual obligation to insure arose only if a demand to this effect was made to him by the company after the latter had specified the risks intended to be covered. As the company made no such demand, there was, in my judgment, no breach of contract by the plaintiff. I think the judge’s contrary conclusion was erroneous. It follows that the company failed to justify the seizure of the vehicle.
That being so, were the company guilty of any actionable wrong? The plaintiff says there was an implied warranty by the company that he would enjoy quiet possession of the vehicle and that was broken by the unjustifiable seizure entitling him to damages. In my opinion, the plaintiff was right. In Halsbury’s Laws of England (3rd ed.), Vol. 2 at p. 124, para. 238, the law on this is stated as follows:
“The mere fact that an owner enters into an engagement to let a chattel implies a promise or condition on his part to put the hirer into peaceable possession of the chattel hired by him, and to permit him to remain in custody thereof for the purpose of the particular service in respect of which the contract was entered into.”
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The company did not permit the plaintiff to remain in peaceable enjoyment of the vehicle and seized it and put the plaintiff out of possession on grounds which they failed to make good. They are accordingly liable to him in damages. The question is: what is the measure of damages in a case like the present? Under the broad rule in Hadley v. Baxendale (1854) 9 Exch. 341, the damages must be such as follow in the usual course of things from the breach or what may reasonably be supposed to be in the contemplation of both parties at the time of the contract. The company themselves were carrying on business with a view to profit. They cannot have thought the plaintiff ‘s object was any less. At the date of the seizure, the contract had eight months to run and thereafter the vehicle would have become the plaintiff ‘s. The plaintiff says he would, after meeting hire rentals and running expenses, have made an amount certain by way of profits per month. If there is satisfactory evidence of this, the company should be liable to pay this sum to him.
According to the evidence, the vehicle was plying between Tamale and Kumasi and the plaintiff made a gross income of £G300 per month. From this, he paid £G150 to the company as hire-purchase rental. Out of the balance of £G150, one half goes to pay for fuel and other running expenses. The plaintiff said his net profit ranged between £G70-£G75 per month. That was hardly disputed. That sum seems eminently reasonable and the plaintiff is entitled to the sum of £G70 a month for eight months as special damages for loss of profit. The plaintiff also claims as special damages, unexpired part of the insurance premium and the unexpired part of road licence. The evidence led in proof of this is unsatisfactory. These claims could have been proved by more than the plaintiff’s bare declaration. I do not find that the plaintiff proved the other items of special damages which he claimed.
That leaves me with general damages. Although the plaintiff only sought damages against the company, he said in court that he was willing to have the bus back if in satisfactory condition. The company were not interested in returning it. He said at the date of seizure, the bus was worth £G1,600. That estimate was not questioned. Indeed the plaintiff sought before action to agree on that market value of the vehicle with the company and wrote to them to this effect. The company were not interested. The plaintiff offered even at this late stage to have the vehicle back if the company were willing. There was no response from the company to this. If the value placed on the bus were inflated, the company would be the first to question it. I must accordingly find that at the date the bus was seized, it was worth £G1,600. The company wrongfully seized and kept from the plaintiff that chattel. If the plaintiff was awarded that sum, it would, in addition to the special damages, put the parties in the same position as if the contract had been performed: see Hadley v. Baxendale (supra). I accordingly think that the plaintiff should have the sum of £G1,600 by way of general damages. The plaintiff sought leave to amend the writ to claim further loss of use or profit on both. Although this court has power to grant such amendment, I think it is much too late to give permission to enhance the company’s liability. I therefore would refuse leave.
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In my opinion, the plaintiff is entitled to £G560 being special damages and £G1,600 general damages, that is £G2,160. In present currency, the plaintiff should have against the company ¢4,320.00.
I would accordingly allow the appeal and set aside the judgment appealed from. In lieu of it, I would enter judgment for the plaintiff against the defendant company for the sum of ¢4,320.00. The plaintiff will have his costs in the High Court. I would assess this at ¢500.00. Any costs paid pursuant to the judgment of the High Court should be refunded. The plaintiff will also have his costs in this court.
JUDGMENT OF ANIN J.A.
I agree.
JUDGMENT OF KINGSLEY-NYINAH J.A.
I also agree.
DECISION
Appeal allowed.
K. T.
