Industrial And General Insurance Company Limited V. Kechinyere Adogu (Mrs.) (2009)

LawGlobal-Hub Lead Judgment Report

UWANI MUSA ABBA AJI, J.C.A.

This is an appeal against the decision of Honourable Justice O.O. Goodluck, of the High Court of the Federal Capital Territory, Abuja, delivered on the 6th of November, 2006 whereby the Court refused to set aside the arbitral award made by an arbitral panel, thereby affirming the arbitral award.
The facts of the case can be summarized as follows:
On the 18th of December 2002, the Respondent entered into a contract of insurance with the Appellant to cover her Mercedes E240 against the incidence of loss of Seven Million, Eight Hundred Thousand Naira (N7, 800,000.00) only.  The premium was fixed at Five Hundred and Twenty Thousand Naira (N520, 000.00) only.  On the same day, the Respondent paid the sum of Two Hundred and Twenty Thousand Naira (N220, 000.00) only, leaving out the balance of Three Hundred Thousand Naira (N300, 000.00) only.
However, on the 15th of February, 2003, the said insured car was robbed at gun point in front of the Respondent’s residence.  A formal complaint was lodged with the police and thereafter, on the 17th of February, 2003, two days after the robbery, the Respondent paid the balance of Three Hundred Thousand Naira N300,000.00) only to the Appellant, after which she put her claims for indemnity against the loss of her said car.
It is the case of the Appellant that it commenced the processing of the Respondent’s claim but discovered some irregularities as to the engine/chassis number of the said vehicle.  Based on the above, the Appellant stopped the processing of the Respondent’s claim and made enquiries from the relevant government agencies, (Vehicle Inspection Officer as well as the Nigeria Police), who confirmed that the vehicle alleged to have been stolen was not registered by them i.e. the V.I.O. as nowhere in their information data was the vehicle with chassis No: AO88968 registered.  The Appellant thus stayed action on the processing and payment of the Respondent’s Insurance claims.
It is the case of the Respondent that after the loss of the car on the 15th February, 2003, a formal complaint was lodged with the police and thereafter, the Respondent approached the Appellant, who directed that the balance of the N300,000.00 be paid.  This was done and following a series of demands made on the Appellant by the Respondent, it agreed to pay the sum of Six Million, Three Hundred and Eighteen Thousand Naira (N6,318,000.00) only to the Respondent but this the Appellant failed to do.

Aggrieved by the non-payment of her claims, the Respondent applied to the trial Court for the appointment of an arbitrator upon which the Learned Senior Advocate Chief J.K. Gadzama, SAN, was appointed on the 8th of February, 2005.
By the Respondent’s claim, she sought for the following reliefs to wit:-
i) The sum of Six Million, Three Hundred and Eighteen Thousand Naira (N6,318,000.00) only
ii) Interest accruing on the said sum of Six Million, Three Hundred and Eighteen Thousand Naira (N6,318,000.00) only, at the rate of 25% per annum from 15th of February, 2003, till an award is made in the matter and thereafter, at the rate of 12% per annum until final liquidation of the award sum.
iii) The sum of One Million Naira (N1,000,000.00) only being the cumulative cost of engaging counsel right from the 2nd day of September, 2003 when the first letter of payment was written at the inception of the transaction contained in the verifying affidavit as well as the cost of arbitration.
Similarly, the Appellant who opposed the claims of the Respondent filed her point of defence to wit:-
i) The transaction leading to the arbitration was tainted with fraud;
ii) The material condition precedent: a sine qua non to the contract of insurance was never met i.e. the payment of premium.
iii) The contract is tainted with irregularities, as requirement necessary for entering into a proper contract of insurance were not met.
At the close of pleadings, the parties called a witness each, tendered some documents in evidence and adopted their written address.
At the close of address, the arbitrator in a judgment dated 20th September, 2005, made his award in favour of the Claimant/Respondent to wit:-
1. The Appellant shall pay to the Respondent within 21 days (Twenty-One) days of this award, the sum of Six Million, Three Hundred and Eighteen Thousand Naira (N6,318,000.00) only.
2. The Appellant shall pay to the Respondent interest on the said sum of Six Million, Three Hundred and Eighteen Thousand Naira at the rate of 14% per annum from the date of this award until full payment is made.
3. Parties shall bear their costs.

Dissatisfied with the arbitral award, the Appellant filled a Motion on Notice at the trial Court seeking to set aside the award, which application to set aside was refused by the trial judge on the 6th November, 2006 and the arbitral award affirmed.
Aggrieved still by the ruling of the Honourable Trial Judge, the Appellant has vide a Notice of Appeal dated 27th November, 2006 and filed on the 28th November, 2006, filed four (4) Grounds of Appeal and raised four (4) issues for determination in this Appeal before this Court.
The Grounds of Appeal, without their particulars are hereby reproduced;

GROUNDS OF APPEAL
Ground One:
The trial Court erred in law when it affirmed an invalid contract of insurance between the parties thus allowing the Claimant/Respondent to benefit from a void transaction.

Ground Two:
In the face of clear evidence of only a part payment of the premium in contradiction with Section 50 of the Insurance Decree 1997, the trial court erred in law in affirming the award erroneously made by the arbitrator. Thus affirming an obvious error in law.

Ground Three:
The trial court erred in law when it affirmed the arbitral award on the interest even when it held that such award of interest is not provided for by the Arbitration and Conciliation Act.  Thus affirming an illegality or an ward made in excess of the powers conferred on the Arbitrator.

Ground Four:
The trial court of law erred in law when it affirmed the award of interest, even when the said award was based on speculation and illegality.
In compliance with the rules and practice of this court, Parties filed and exchanged briefs of argument. In the Appellant’s brief settled by James Ocholi, SAN, four (4) issues were raised for determination of the appeal namely:
i) Whether or not payment of premium in advance is a condition precedent to an insurance contract in Nigeria, without which a contract of insurance is rendered void.
ii) Whether or not material misrepresentations made by a party to an insurance contract can vitiate the said contract.
iii) If the answers to issues (i) and ii) above are in the positive, can a party be said to have waived his rights with regard to them upon deceit practiced on him by the other party.
iv) Whether or not interest on judgment sum must be an integral part of the contract giving rise to the suit or part of the custom of trade of the said business as well as proved strictly before it can be awarded to a party to the said contract.
The Respondent’s brief, settled by Chris Ewere Onwugbonu, Esq, formulated three (3) issues for determination to wit:-
1. Whether or not there was a valid insurance contract between the Appellant and the Respondent?
2. Whether or not there was misrepresentation in the formation of the contract between the parties.
3. Whether or not the Respondent was entitled to interest on the sum of Six million, Three Hundred and Eighteen Thousand Naira (N6,318,000.00) only awarded.
At the hearing of the appeal, on the 18th March, 2009, learned senior counsel for the Appellant, James Ocholi, SAN adopted and relied on the Appellant’s Brief of Argument dated 30th July,2007 and filed on the 31st July, 2007 and deemed properly filed on the 11/12/2007.  He also relied on the Appellant’s Reply Brief, dated and filed on the 19th December, 2008.
He referred to paragraph 3.7 to 3.10 of the Respondent’s Brief and urged the court to discountenance same as it is at variance with their position at the arbitration panel.  He also urged the Court to disregard the interpretation of the word “shall” by the Respondent under the Fundamental Human Rights.  He urged the Court to allow the appeal and set aside in its entirely, the award made by the Arbitrator which was erroneously affirmed by the trial Court.
The Respondent counsel, Chris Ewere Onwugbonu Esq, also adopted and relied on the Respondent’s Brief of Argument, dated and filed on the 10th of October, 2008 and deemed properly field on the 10th of December, 2008.  He urged the Court to discountenance Appellant’s issue 4 particularly paragraphs 7.0 to 7.10 therein as same goes to no issue, that interest awarded was based on a pre judgment while same is post judgment interest.  He urged the Court to dismiss the appeal.

I have considered the issues formulated by the respective counsel and it is my view that the issues formulated by the Appellant are apt as they focused more on the areas in controversy between the parties, I will therefore adopt same in the determination of the appeal.
In arguing his issue one to wit:
“Whether or not payment of premium in advance is a condition precedent to an insurance contract in Nigeria, without which a contract of insurance is rendered void.”
Learned senior counsel for the Appellant submitted that payment of premium in advance by the insured is a condition precedent to an insurance contract in Nigeria without which a contract of insurance is rendered void.  Learned senior counsel relied on Section 50 (1) of the Insurance Act, 2004 as well as the case of; BAKOSHI VS. CHIEF OF NAVAL STAFF (2004) NWLR (PT. 896) 268 AT 291, to the effect that in statutory interpretation, the word shall is a word of command and it denotes an obligation and gives no room for discretion.  He submitted that for any insurance contract to be valid, full premium must be paid by the insured.  He cited the case of LEADWAY ASSURANCE CO. LTD VS. J.U.C. LTD (2005) 5 NWLR (PT. 919) 539 AT 555-556.  He therefore contended that non-payment or part payment of premium in an insurance contract renders the said contract void abinitio and no amount of action or inaction on the part of the parties can breath life into the said void contract.
The learned senior counsel submitted further that since the Respondent only paid two hundred and twenty thousand naira (N220,000.00) out of the Five hundred and twenty thousand naira (N520,000.00) premium as at the time of loss of the vehicle, this fall short of the statutory provisions of section 50(1) of the Insurance Act, 2004, which stipulates that premium must be paid in advance.  Learned senior counsel referred to a book titled “Nigeria Insurance Law” By Funmi Adeyemi, published in 1992, paragraph 7 of page 48, paragraphs 1 and 2 of 49; and submitted that payment of premium in advance and in full is a condition precedent and failure to adhere to this statutory provision by the Respondent rendered the contract void, illegal and unenforceable.  Reliance was placed on the case of AJAOKUTA STEEL CO. NIG. V. CORPORATE INSURERS LTD (2004)  PT. (235) 189 AT 211 -214. Based on the above, it is submitted that no party to the said contract can waive this statutory provision as it is based on public policy of the state, citing the case of MENAKAYA VS. MENAKAYA (2001) FWLR (PT.76) 742 AT 748.  He argued that Courts do not make it a practice to aid the parties by enforcing contracts which are void ab initio.  He referred to the case of ROYAL EXCHANGE ASSURANCE COROPORATION VS. STOFORSAKRINGS ATKIEBOLAGET VEGA (1902) 2 KB 384.  It is his further contention that where the consideration for a contract is not furnished in line with a statutory provision, that contract will be contrary to public policy and thus illegal.  He referred to AJAOKUTA STEEL CO. NIG. VS. CORPORATE INSURERS LTD (PT. 899) 369 AT 399.
He concluded on this issue by submitting that payment of premium in advance is a condition precedent to an insurance contract without which the said contract is rendered void and unenforceable and urged this Honourable court to resolve this issue in favour of the Appellant.
In his response learned counsel for Respondent opined that the cardinal principle in our judicial process is that each case or matter is determined in accordance with its peculiar facts.  It is therefore his submission that on the facts of this case, the two principal cases to wit: LEADWAY ASSURANCE CO. LTD VS. J.U.C. LTD (Supra); and AJAOKUTA STEEL CO. NIG VS. CORPORATE INSURERS LTD (Supra); do not apply to the facts of the instant case.  It is his view that, in the AJAOKUTA STEEL CO. NIG VS. CORPORATE INSURERS LTD (2004) 16 NWLR premium was not paid at all while in the LEADWAY ASSURANCE CO. LTD VS. J.U.C. LTD (Supra) the premium and Certificate of Insurance were paid and issued respectively in respect of a non-existent subject of insurance, because the entire transactions were built on nothing.  It is therefore submitted that, in the instant case the Respondent paid the premium as evidenced by the receipt issued by the Appellant in pages 217 and 219 of the Records and by section 132 of the Evidence Act, the document speaks for itself and documentary evidence cannot be varied, altered or added to by oral evidence he contended.
It is also the contention of learned counsel that assuming without conceding that premium was not paid in full as at the date of constituting the contract, being on the 18th December, 2002, it is submitted that the sum of N220,000.00 effectively covered the period between the formation of the contract and the occurrence of the event insured against.  It is his submission that monies paid to the Appellant could actually be prorated.  He relied on clause 5 of the specimen of the Insurance Policy captioned “conciliation of policy” and submitted that short period rates is an integral part of the contract between the parties.  He submitted further that when the total premium is divided by the period covered i.e. 12 months (N520,000.00/12), an approximate sum of N43,333.33 is gotten and that if the sum of N220,000.00 be divided by N43,333.33, it gives cover for a period of five months.  It is his argument therefore that the sum of N220,000.00 effectively covers the period between payment and occurrence of the event and so section 50 of the Insurance Act, 2004 was fully complied with.  He further argued that there was nothing in the language of section 50(1) of the Insurance Act, prohibiting payment of premium in part or in installments; and submitted that the book Nigeria Insurance Law by Funmi Adeyemi is only an opinion.  He relied on the authority of BROAD BANK VS. OLAYINWOLA & SONS & ANOR (2005) 21 NSCQR 594 to posit that the courts have long moved away from technicalities to doing substantial justice and that the word “shall” has been given such interpretations with the intention of doing justice.  See also MONYE VS. P.T.F.T.M (2002) 15 NWLR (PT. 789) 209.  He therefore urged this Honourable Court to hold based on the foregoing that there was full compliance with the provisions of section 50(1) of the Insurance Act and that therefore a valid contract existed between the parties and the court should resolve this issue in favour of the Respondent.
In his Reply Brief, learned counsel for the Appellant submitted that there was no valid and enforceable contract between the parties because section 50(1) of the Act does not contemplate installmental payment of premium otherwise payment of premium will be a condition subsequent and not a condition precedent as provided by the Act.  He relied on the authority of SUBERU VS. A.I.S.L LTD (2007) 10 NWLR (PT. 1043) 590 AT 612.  He referred this Honourable Court to pages 14 and 91 of the Records and posited that as at the date the insurance agreement was entered between the Appellant and the Respondent, the payment of premium was partially fulfilled by the Respondent.  The contract was therefore inchoate, incomplete and unenforceable under any law.  He placed reliance on the case of BANQUE GENEVIOSE DE COMMERCE ET DE CREDIT VS. CIA MAR DI ISOLA LTD (NO.2) (1962) ALL NLR 565 AT 569.
It is also the submission of learned senior counsel that the contract between the parties was completed and became enforceable on the 17th of February 2003; i.e. the day the Respondent fully paid the balance of the premium and that since, by that day, the subject matter of the contract was already lost, she had no legal capacity to conclude the said contract and she acted contrary to the utmost good faith principle of insurance contact. He relied on the case of LEADWAY ASSURANCE CO. LTD VS. J.U.C. LTD (supra).  It is further argued that a contract of insurance is meant for unforeseen future occurrence and not for an incident that has occurred as in the instant case.  He also argued that clause 5 of the Insurance policy does not apply in the instant case and cannot be subjected to mathematical calculation and deductions as the Respondent had done.  This he said, amounted to re-writing the agreement for the parties and the Respondent has no power to do so.  He relied on AGBAREH VS. MIMRA (2008) 3 FWLR (PT. 426) 3595 AT 3633 and urged this court to discountenance all the arguments canvassed by the Respondent in this issue and to allow the appeal.
I have given due consideration to all the arguments of both counsel on this issue and in my view the question that needs to be answered here is:- whether or not payment of premium in advance is a condition precedent to an insurance contract without which a contract of insurance is rendered void. The provisions of section 50(1) of the Insurance Act provides as follows:
“The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium is paid in advance.”
It is a cardinal principle of interpretation of statues that where in their ordinary meaning, the provisions of an enactment are clear and unambiguous, effect must be given to them without recourse to any aid internal or external.  It is the duty of the court to interpret the words of the lawmakers as used, see SPDC (NIG) LTD VS. F.B.I.R. (1996) 8 NWLR (PT. 466) 256 AT 286; A.G. ONDO STATE VS. A.G. EKITI STATE (2001) 17 NWLR (PT. 743) 706.  The primary duty of a court in the interpretation of a statutory provision is therefore to give effect to the words used.  See ROSSEK VS. ACB LTD (1993) 8 NWLR (PT. 312) 382.  Therefore, in the construction of a statutory provision, where a statute mentions specific things or persons, the intention is that those not mentioned are intended to be excluded.  The Latin maxim is “expression unius personae est exclusion alterrrius” that is, the expression of one thing is the exclusion of another.  If there is nothing to modify, alter or qualify the language of a statute, it must be construed in the ordinary and natural meaning of the words and sentences used.  In the instant case, Section 50(1) of the Insurance Act is clear and unambiguous.  It is simply to the effect that the receipt of an insurance premium is a condition precedent to a valid contract of insurance, and there is not cover in respect of an insurance risk unless the premium is paid in advance.  In other words, a valid insurance contract is made when a premium for the insurance is paid in advance by the insured.

In the instant case, the car was insured for Seven Million, Eight Hundred Thousand Naira (N7,800,000.00) and the premium payable was fixed at Five Hundred and Twenty Thousand Naira (N520,000.000 for a period of 12 months and the Respondent on that same day, 18th December, 2002 paid the first installment of Two Hundred and Twenty Thousand Naira (N220,000.00) and was presented with an insurance certificate and receipt, Exhibit N and O . On 15th February, 2003, the car was robbed at gun point.  The Respondent approached the Appellant who directed that the second installment of Three Hundred Thousand Naira (N300,000.00) be paid and this was done and Exhibit P was issued.
Now the question is, whether there has from the facts of this case been full compliance with the provisions of Section 50(1) of the Insurance Act, 2004 and if so, whether a valid contract of insurance exists between the parties?
A contract of insurance should be one of utmost good faith, “uberima fidei”.  To constitute a contract of insurance therefore, there must be an unqualified acceptance by the other party.  In other words, a prima facie contract of insurance only comes into existence the moment an insurance proposal in the normal form is accepted unequivocally without qualification by the insured.

In the instant case, the Mercedes Benz Car was insured on the 18th December, 2002 for a period of twelve months for a premium of N520,000.00.  A deposit of N220,000.00 was paid.  See Exhibit N and O, the receipt and Insurance Certificate. The car was then robbed at gun point on the 15th February, 2003.  It is a fact not in dispute that at the time the car was robbed the Respondent has not paid up the premium of N520,000.00 she was to pay at the time the contract was entered into.  It is also not in dispute that it was two days after robbery incident that the Respondent went back to the Appellant to pay the second installment of N300,000.00 to complete the payment of the premium.  From the facts as stated above, it is clear that, at the time the car was robbed the premium has not been fully settled by the Respondent and the contract was therefore incomplete.  The condition precedent to a valid contract of service has not been established between the parties because the receipt of an insurance premium is a condition precedent to a valid contract of insurance and there shall be no cover for an insurance risk unless the premium is paid in advance.  What this means is that, a valid insurance contract is made when a premium for the insurance is paid in advance.  See also Section 50(1) of the Insurance Act.

It is contended by the learned counsel for the Respondent that the contract between the parties was completed and become enforceable on the 17th February, 2003, i.e. the day the Respondent fully paid for the balance of the premium.  It is in evidence borne out from the records of the court that at the time the premium was fully paid on the 17th February, 2003, the car the subject of insurance ceased to exist as a result of theft of same by armed robbers and the Respondent has no legal capacity to conclude the contract and therefore the Respondent had acted contrary to the utmost food faith principle of Insurance Contract.  It is trite that a contract of insurance is meant for unforeseen future occurrence and not for an incident that has occurred as in the instant case.  See LEADWAY ASSURANCE CO. LTD VS. J.U.C. LTD (Supra) and AJAOKUTA STEEL CO. NIG VS. CORPORATE INSURERS LTD (SUPRA), it is argued by the learned counsel for the Respondent that the facts of these cases do not apply to the facts of the present case.
I have read through the facts of these two cases and I agree with the learned counsel for the Respondent that the facts are not similar; in fact no two cases are entirely the same so each is decided on its own peculiar circumstances.  However, these two cases decided the position of the law on insurance practice generally and are therefore relevant in the determination of the present appeal.

It is further contended by the learned counsel for the Respondent that even though premium was not paid in full as at the date of constituting the contract, being 18th December, 2002, the sum of N220,000.00 paid covered the period between the formation of the contract and the occurrence of the event insured against and that monies paid could actually, be prorated as provided in clause 5 of the agreement.  With due respect to the learned counsel, that was not the intention of the parties at the time the contract was entered into.  It was not stated anywhere that the insurance cover was for any shorter duration of time and I agree with the submission of the learned senior counsel for the Appellant that the contract cannot be subjected to mathematical calculations and deductions as this will amount to rewriting the agreement for the parties which neither the parties nor the Court has power to do.  It is trite that the parties are bound by the terms of agreement that they have freely entered into and the parties or the Court cannot legally read into the agreement the terms on which the parties were not agreed and did not agree to.  See AGBAREH VS. MIMRA (Supra) and EVBUOMWAN VS. ELEME (1994) 7 – 8 SCNJ (PT. 11) 243.

Learned counsel for the Respondent also argued that Section 50(1) of the Insurance Act does not prohibit payment of premium in part or by installment.  With respect to the learned counsel, this argument is also misconceived.  If the Section intends to make payment of premium in part or by installment, it would have stated so as what is not stated it is meant to be excluded.  Section 50 of the Act therefore does not contemplate installmental payment of premium in an insurance contract.  The payment of premium is a condition precedent to the contract of insurance and where parties have entered into a conditional contract, the condition precedent, like in the instant case, that is, the full payment of premium must happen before either part become bound by the contract.  In the instant case, by the time the full premium was fully paid, the subject insured has ceased to exist and there is therefore no enforceable contract between the parties. See SUBERU VS. A.I.S.L LTD (Supra)

When the first premium of N220,000.00 was paid on the 18th December, 2002, when the contract was constituted, even though on the face of the receipt there was nothing to show that there was balance to be paid by the Respondent, it is clear to both parties that the amount contained in the first receipt issued on the 18/12/2002 was not the total amount of premium to as be agreed between the Appellant and the Respondent, when the Respondent paid the second installment of N300,000.00 on the 15th February, 2003.  When the Respondent paid the balance of the N520,000.00 of the subject matter of the contract, the Mercedes Benz Car was no longer in existence due to the loss of the car to armed robbers. It is trite that a contract of insurance should be of utmost good faith “uberrima fidei”, where therefore the subject matter of the contract of insurance had ceased to exist before the contract of insurance is concluded, the contract is void.  See LEADWAY ASSURANCE CO. LTD VS. J.U.C LTD (Supra).

The fundamental purpose of an insurance contract is to give cover to an insurance risk.  Section 50(1) and (2) of the Insurance Act makes payment of insurance premium a condition precedent to a valid contract of insurance.  In the instant case, the condition precedent for insurance contract has not been satisfied by the Respondent, that is, the payment of premium in advance.  At the time the parties entered into the contract on the 18/12/2002, the contract was conditioned on the payment of N300,000.00 before either parties becomes bound by the contract.  In other words, the payment of N300,000.00 must be fulfilled before the effect can flow.  When the balance of N300,000.00 was paid on 17/2/2003, the subject of insurance has ceased to exist and the effect is that there is no valid and enforceable contract between the parties.  See SUBERU VS. A.I.S.L LTD (Supra).
The effect is that the contract is void since no premium was paid in advance by the Respondent.  The conclusion therefore is that there is no full compliance with the provisions of Section 50(1) of the Insurance Act in the instant case and the effect is that a valid and enforceable contract does not exist between the parties.  This issue is therefore resolved in favour of the Appellant against the Respondent.

Having found that there is no legally binding and enforceable contract between the parties, it is therefore unnecessary in the circumstances to delved into the other issues for determination as doing so will amount to an academic exercise and this court will not venture into this as the court will not dissipate its energy on academic issues.  Consequently, the appeal succeeds and it is hereby allowed.  The judgment of the lower Court delivered on the 6th November, 2006 refusing to set aside the arbitral award made by an arbitral panel is hereby set aside.  

There shall be no order as to costs.

Other Citations: (2009)LCN/3299(CA)