M & A Construction Heavy Equipment Company Ltd v Globe Insurance Company of Jamaica Ltd
| Jurisdiction | Jamaica |
| Judge | Sinclair-Haynes J |
| Judgment Date | 22 March 2013 |
| Neutral Citation | [2013] JMSC Civ 50 |
| Court | Supreme Court (Jamaica) |
| Docket Number | CLAIM NO.2012 CD00138 |
| Date | 22 March 2013 |
[2013] JMSC Civ. 50
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
CLAIM NO.2012 CD00138
Mr. Franklyn Halliburton for the claimant
Mr. Patrick Foster QC & Mrs. Camille Wignall-Davis for the defendant
Whether arbitrator misconducted himself — whether misconstruction of clauses constitute misconduct — whether matter should be set aside or remitted
These proceedings arise out of an arbitral award of fifty three million nine hundred and forty six thousand dollars made by the arbitrator Mr. Justice Roy Anderson (Retired) on the 29 June 2012. The defendant (Globe Insurance Company Ltd) seeks an application to set aside the award or alternatively to have the award remitted to the Arbitrator for his reconsideration. The grounds on which the application is sought are as follows:
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(a) the Arbitrator misconducted himself by misconstruing the relevant terms of the policy and consequently the award is inconsistent with the terms of the said policy; and
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(b) the amount of the award is incorrect.
On the 24 December 2008, the claimant (M&A Construction & Heavy Equipment Company Limited) entered into a Plant and Equipment All Risks insurance policy with the defendant, for the coverage of its bulldozer. The policy was terminated less than a year after but was reinstated seventeen days before the bulldozer was damaged by fire and deemed a total loss. The claimant's claim for indemnity was met with resistance on the grounds that:
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(a) the claimant failed to disclose material facts which were crucial in deciding whether the defendant ought to accept the risk and if so on what terms;
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(b) the policy of insurance was breached by the failure to disclose material facts.
The arbitrator found that there was no non-disclosure which amounted to a breach of contract which would entitle the defendant to deny an indemnity. The defendant accepts that decision of the arbitrator. The sore point lies in the answer to the question which arose as a consequence of the arbitrator's decision: ‘What award should be consistent with the terms of the policy?’ It is his answer that has incurred the ire of the defendant. The defendant asserts that he erred on the face of the award by determining the extent of that indemnity by reference to clause 7 of the insurance policy instead of clause 10.
Examination of the competing clauses is necessary.
Clause 7 provides:
‘It is a requirement of this insurance that the sum insured shall be equal to the cost of replacement of the insured machinery and plant by new machinery of the same specifications and same capacity including all freight costs to the site, erection cost and customs duties and other dues.’
Clause 10 reads:
‘Loss Settlement
…In the case of a total loss, the actual value of the property immediately before the occurrence of loss less the salvage.’
Inexorably, the applicable clause is 10. The question is, which clause did he apply? Mr. Foster QC submits that he relied on clause 7. Mr. Halliburton says his application was hybrid as he applied both. It is helpful to quote the salient portions of his decision. He said:
‘Under item 10, the policy deals with ‘Loss Settlement’. In paragraph 2, it is stated: ‘In the case of a total loss, the actual value of the property immediately before the occurrence of the loss less salvage. The Respondent says that, based on the evidence of Mr. Hucey, it has identified a Komatsu D 475–5 bulldozer in Cleveland Ohio in the United States of America. The machine is being sold for US$198,000.00. The first difficulty with this is that, given the nature of the specific machine in question, I believe that it would be useful and perhaps even necessary to provide some expert evidence as to the comparability of the two bulldozers. There is no such evidence; rather only Mr. Hucey's evidence as a loss adjuster as to how he arrives at a ‘replacement value’. He specifically points out that the identified machine had done some 22,500 hours of work. However, there is no evidence as to the hours logged by the claimant's bulldozer.’
Those comments of the arbitrator demonstrate his appreciation that clause 10 is the applicable clause. The fact that he expressed concern as to the absence of evidence “as to the hours logged by the claimant's bulldozer” seemingly suggests that in quantifying the award, his mind was directed to the actual value of the bulldozer at the time of loss which is contemplated by clause 10, as opposed to a new bulldozer which would be consistent with clause 7.
He continued:
‘More fundamentally, the premise of his calculation is that the insured is entitled to a sum equal to what is termed ‘Replacement Value’. This is not what the policy provides for.’
That statement seems to confirm an acceptance of clause 10 and a rejection of clause 7. His following comments however, suggest otherwise. He seemed to have resiled from his reliance on clause 10 and embraced instead clause 7.
‘Indeed, it must be wrong conceptually that if because of increased demand for an asset, the item becomes more valuable than its cost or the sum for which it was insured, the insured could recover as, ‘replacement value’ such greater sum than that for which he had insured. It seems to me that the basis for this submission is the term of policy found at paragraph 7 of the section entitled, ‘Property Insured’.
That provision is in the following terms .
It is a requirement of this insurance that the sum insured shall be equal to the cost of replacement of the insured machinery and plant by new machinery of the same specifications and same capacity including all freight costs to the site, erection cost and customs duties and other dues. Notwithstanding the above stipulation, the sum insured for camps, hutments, workshops, scaffolding, moulding and shuttering shall be equal to the actual value at the time of concluding the policy .
It seems to me that this clause imposes a requirement that the sum insured (in this case $74,000,000.00) should be at least equal to the cost of replacing the asset. I also take this to mean that the cost of replacing the asset with a new asset of the same type and specifications should not be greater than the sum insured . By way of an aside, it should be noted that the evidence from Mr. Hucey concerning the Komatsu D475–3 which had been identified in Cleveland, Ohio, does not say how that machine compares with the asset which had been destroyed in terms of its performance. In any event however, if the provision quoted above (‘Sums insured’) is to be considered relevant for these purposes, it would seem on its face, to require a computation based on the cost of ‘new’ equipment ‘of the same specifications and same capacity’ rather than the cost of machinery or plant of the same vintage as the destroyed asset’
(Emphasis mine)
By that statement, he seems to have recognized that a computation pursuant to clause 7 required consideration of the sum insured and the replacement of a new machine. His further statements erase any doubt that he misconstrued section 10. He said:
‘Finally the respondent's submissions on the extent of the award, posit that should the arbitrator find in favour of the claimant, such award should be reduced by the 10% Excess stipulation in the policy. Based on the loss adjuster's evidence, the excess is calculated to be $7.4 million, the equivalent of 10% of the sum insured .
He then said this:
‘No evidence has been led for the respondent that the ‘value of the property immediately before the occurrence of the loss’ adverted to in clause 10 paragraph 2 under ‘Loss Settlement’ is other than the ‘sum insured’. The evidence of Mr. Hucey seems to support this proposition.’
Clause 10, however speaks to the actual value Immediately before the loss less the salvage, not the sum insured. It is noteworthy that the sum insured is seventy four million dollars. The arbitrator continued:
‘On the other hand, the claimant points to the total loss provision which I set out above and claims on that basis that the sum due for a total loss is J $74,000,000.00 for which it was insured. This submission does not seem to comport completely with the policy for it does not acknowledge the excess payable by the claimant and the question of ownership of the salvage.’
‘No evidence was led by either side, nor indeed any submission made, as to the proper treatment to be accorded to such salvage as is available. Notwithstanding this apparent shortcoming, I am satisfied that the better view must be informed by the general principle that once the insured has been indemnified under the terms of the insurance policy, the insurer is subrogated to all those rights which the insured may have had. This would seem to me to include the salvage unless the insured agrees to acquire that salvage from the insurer.’
Evidently, the arbitrator regarded clause 7 as the relevant clause as the only issues taken by him with that submission concerned the excess and the salvage. His further comments are helpful in deducing his thought process:
‘Having formed the view that I have on the bases advanced by the respondent to the claim by the claimant, the question of a figure now has to be considered in light of my comments above .
The better view would seem to be and I so rule, that the starting figure is the sum insured, in this case $74,000,000.00. From this figure must be deducted the excess of 10% provided for in the policy to reduce that figure to $66,600,000.00. I also take the view that, just as in awarding damages a court is entitled to take into account taxes for which the beneficiary of the award may be liable, (See BTC Gourley ...
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