Takaful Insurance Of Africa VS Beyond Bush Adventures Limited

(Being an Appeal from the Ruling of the Small Claims Court at Nairobi Hon. V. M. Mochache Adjudicator dated 28^th February 2023 in Nairobi SCCC No. E3969 of 2022)

1. This appeal by way of a memorandum of appeal dated 7/3/2023 arises from a preliminary objection by the appellant (respondent in the SCC) dated 22/12/2022 against a claim by the respondent (claimant in the SCC) dated 9/12/2022. The claim in the trial court by the respondent herein against the appellant herein is for a declaration that the appellant is under a duty to settle the decree issued in Nairobi SCCCC No. 2069 of 2022, Beyond Bush Adventures Ltd versus Adam Sadique Mohamed pursuant to the provisions of the Motor Vehicle (Third Party Risks) Act (Cap. 405) Laws of Kenya (hereinafter the Act) for material damage to the respondent’s motor vehicle registration number KAC 181C. The respondent (being the claimant in the primary suit Nairobi SCCCC No. E2069 of 2022 (Beyond Bush Adventures Ltd versus Adam Sadique Mohamed) obtained judgment against the appellant’s insured one Adam Sadique Mohamed (the respondent in the primary suit) in the sum of KShs 358,146/= following a road traffic accident in which Adam’s motor vehicle registration number KAH 882T insured by the appellant was involved with the respondent’s vehicle.
2. The respondent herein filed suit the SCC against the appellant herein as the insurer of Adam’s vehicle registration number KAH 882T (under policy number P/CBD/20220/1001/120049 (TPO)) to enforce the judgment in the primary suit. It is the respondent’s claim that it is a third party within the meaning of the Motor Vehicle (Third Party Risks Insurance) Act (Cap. 405) Laws of Kenya and the appellant has an obligation to settle the decretal sum against its insured in the primary suit.
3. The appellant in a response dated 22/12/2022 denied the respondent’s claim for compensation first on grounds that it was not the insurer of Adam’s vehicle and secondly that it is not liable to settle the decretal sum, it arising from a material damage claim which the appellant is not obligated under the law to settle.
4. In the statement of response, the appellant averred that it would raise a preliminary objection against the respondent’s suit. It indeed filed a preliminary objection at the same time of filing the statement of response. The grounds of the preliminary objection were that the claim violates the provisions of sections 5 and 10 of the Act which only allow for a declaratory suit against an insurer in respect to death or bodily injury in a primary claim, while the claim by the respondent is for material damage.
5. Upon hearing the preliminary objection by way of written submissions the learned trial Adjudicator dismissed the same on grounds that it was not based on pure points of law because the court would be required to consider the terms of the policy of insurance between the appellant and Adam which might have included material damage. She also found that section 5 of the Act provides for the bare minimum that a policy of insurance under the Act must contain. The learned trial Adjudicator relied on the case of Phoenix of East Africa Assurance Co. Ltd v Alfred Onyango Obondo [2011] eKLR where the High Court said that:

“The appellant may perhaps be right in saying that a claim anchored on material damage to a motor vehicle may perhaps not have been one of the risks contemplated by Cap 405. However, this issue was never raised in the pleadings of the appellant in the parent suit nor the instant suit. It was only raised in its written submissions. Written submissions are no replacement for evidence. Indeed, in so saying in its written submissions, the appellant was introducing evidence from the bar which is not permissible. Besides, the cover itself was not tendered in evidence so that the court could appreciate its tenor and meaning. It may well be that it had a clause extending to material damage claims.” 

1. Dissatisfied with the learned Adjudicator’s decision the appellant now appeals to this court setting out some six grounds of appeal in their memorandum and praying that the appeal be allowed and the ruling of the learned Adjudicator be set aside and the respondent’s suit be struck out with costs to the appellant and the appellant be awarded the costs of this appeal.
2. The appeal was canvassed by way of written submissions filed by both parties.
3. I have considered the grounds of appeal raised in the memorandum of appeal, the record of appeal and the submissions by learned counsels for the parties.
4. An appeal to this court from the SCC is on points of law only as provided for under section 38 of the SCC Act.
5. The Court of Appeal in M’Riungu v. Republic [1983] KLR 455, has given guidance on how to proceed to determine an appeal on points of law only, thus:

“where a right of appeal is confined to question of law, an appellate court has loyalty to accept the findings of fact of the lower court(s) and resist the temptation to treat findings of fact as holdings of fact and law and it should not interfere with the decision of the trial court or the first appellate court unless it is apparent that on evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding that the decision is bad in law”.

1. The appellate court may however interfere with the findings of the trial court where it is demonstrated that there was no evidence at all upon which such findings were based or that the evidence relied upon was of such a nature that no reasonable tribunal, properly addressing its mind on it, could have made such findings as has been held in numerous decisions. (see for instance Bashir Haji Abdullahi v Adan Mohammed Nooru & 3 others [2014] eKLR.
2. So, the first issue for this court to consider is whether the grounds of appeal raised by the appellant are on points of law only.
3. There is for me basically one issue of law raised by the appellant in the memorandum of appeal and that is that the learned trial Adjudicator erred in law in failing to uphold the preliminary objection raised by the appellant that a declaratory suit cannot be filed in respect of a material damage claim.
4. The preliminary objection was based on sections 5 and 10 of the Act.
5. Section 5 of the Act requires that all vehicles classified under the Act to take out insurance against liability by 3^rd parties as follows:

“In order to comply with the requirements of section 4, the policy of insurance must be a policy which—

1. is issued by a company which is required under the Insurance Act, 1984 (Cap. 487) to carry on motor vehicle insurance business; and

(b)   insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of, or bodily injury to, any person caused by or arising out of the use of the vehicle on a road.”

25. Section 10(1) of the Act obligates an Insurance Company to compensate any 3^rd party who is injured or dies as a result of any accident involving its insured. It is this section upon which a declaratory suit against an insurance company is usually based.  It provides as follows;

      “Duty of insurer to satisfy judgments against persons insured

1. If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of section 5 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.”
2. In considering these provisions of the Act, the learned trial Adjudicator held that section 5 only sets out the bare minimum that a policy issued by an insurer must contain for it to satisfy the requirements of section 4 of the same Act. She went ahead and said that the issue of whether section 10(1) of the Act does not apply where the primary suit was a material damage claim will require the court to consider the policy document that was signed by the parties because the same might have included a claim for material damage. According to the learned trial Adjudicator, the issue calls for arguments by parties and therefore fails to meet the threshold of being a pure point of law as enunciated in the case of Mukisa Biscuit Manufacturing Co. Ltd vs West End Distributors Ltd [1969)EA 696 at page 700 paragraphs D-F where Law JA (as he then was) said that:

“...A Preliminary Objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the Jurisdiction of the court or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.”

1.  At page701 paragraph B-C Sir Charles Newbold, P. added the following:

“A Preliminary Objection is in the nature of what used to be a demurrer. It raises a pure point of law which is usually on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion...”

1. The learned authors of Halsbury’s Laws of England, Third Edition, Volume 22 on page 360 (paragraph 740) explaining the effect of mandatory insurance state as follows:

“…It is, however, now laid down by statute that insurers, if they issue a motor policy covering compulsorily insurable risks, are liable to indemnify any persons or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of persons…”

1. I agree with the learned trial Adjudicator’s holding that section 5 of the Act only sets out the bare minimum that a policy issued by an insurer must contain for it to satisfy the requirements of section 4 of the same Act. This is the compulsory aspect of third party insurance under the Act.  It is true that parties may in their contract of indemnity include a material damage clause which either excludes or includes cover for material damage. Where that is the case then it becomes an issue of proof by the party that wishes to rely on the clause.
2. In Jubilee Insurance Co Ltd v Walter Tondo Soita [2021] eKLR the High Court addressed itself directly to the issue of whether or not material damage claims are covered under the provisions of the Insurance (Motor Vehicles Third Party Risks) Act and whether an insurer is bound to settle a decree on behalf of their insured by way of a declaratory suit. The High Court held that if the appellant (insurer) wanted the court to believe that material damage is not covered by the policy, it was duty bound to adduce evidence for the court to find in its favour. This means the court was convinced that a material damage claim falls within the purview of the Act save that the insurance company wishing to deny that such risk was covered by the insurance has to produce the insurance policy in court. This is the decision relied upon by the learned trial Adjudicator in arriving at her decision in appealed herein.
3. I would pose here and ask what would be so difficult in an insurance company producing the insurance policy to the claimant and pointing out that in fact material damage was excluded from the cover and therefore that it was not bound to settle the decretal sum in the primary suit?
4. All the same, I am not being called upon in this appeal to decide whether or not the insurer is liable to satisfy the decree for the material damage. The issue is whether or not the learned trial Adjudicator correctly found that this was not a pure point of law but it depended on the facts of the case.
5. From the finding of the learned judge of the High Court in the case of Walter Tondo Soita cited above, it is clear that it is not a pure point of law whether or not material damage is recoverable under the Act as the appellant herein whishes to put it. I therefore with respect do not agree with learned counsel for the appellant that the law precludes parties from including a material damage clause in their contracts of insurance under the (Motor Vehicle Third Party Risks) Insurance Act. I think they can do so as an additional cover to the compulsory cover for death and bodily injury.
6. Arising from that finding, which I agree with, I also agree with the learned Adjudicator that that is a point that requires a consideration of the policy of insurance between the insurer and the insured in order to decide on the viability of the defence raised by the appellant.
7. However, the issue does not end there. There is another issue of whether a third party can seek to enforce such a contract by way of a declaratory suit under the Act. Section 10(1) of the Act in part provides that … “If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of section 5 (being a liability covered by the terms of the policy)…” emphasis mine. Clearly, material damage is not any such liability as is required to be covered by a policy under paragraph 5. In my understanding the section seeks to ensure enforcement of the compulsory insurance cover for third parties in respect to death or bodily injury provided for under section 5 of the Act and not any other optional cover such as material damage that may be agreed upon by the parties through the terms of the policy of insurance to be covered. Therefore, the obligation of an insurer under the Act to settle any liability arising out of a judgment only arises if the judgment was entered with respect to such liability that is required to be covered under the Act. That is liability in respect of bodily injury or death. Property damage is not such liability. I am inclined to believe that is why the learned judge Majanja, J. observed obiter in the case of Republic v Commissioner of Insurance & 3 others Ex-parte Martin K Ngari [2014] eKLR that “…the decree arises from a material damage claim which is outside the purview of the Insurance (Motor Vehicle Third Party Risks) Act and which United Insurance would not be required to settle.”
8. To that extent, I wish to respectively depart from the finding of the High Court in the case of Jubilee Insurance Co Ltd v Walter Tondo Soita that it is then upon the insurance company to tender the policy before the court for the court to consider its terms. A suit to enforce the contract of insurance would be properly filed by the insured who was a party to the contract and has the duty to tender the policy of insurance before the court for its meaning and purpot. In this case, the court is looking at a mandatory statutory provision requiring the insurer to settle the claim. That claim must be in respect of the compulsory insurance for bodily injury and death and not property damage. It is therefore a pure point of law and subject to a preliminary objection as properly taken by the appellant herein.
9. Consequently, I find the appeal has merit and the same is allowed. The order of the learned trial Adjudicator dismissing the preliminary objection is set aside and substituted with an order allowing the preliminary objection. The suit against the appellant is incompetent and must be and is hereby struck out with costs to the appellant.
10. The appellant will also get the costs of this appeal.
11. Dated, signed and delivered, at Milimani on the Virtual Platform, Teams this 29^th day of July 2024.

In the presence of:

Burugu for the Appellant.

Kariuku (Ms) holding brief for Rieyi for the Respondent.

Eutropia Court Assistant.