Singh v Sovereign Assurance Company Limited HC Auckland CIV 2009-404-2779

[2010] NZHC 165

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2009-404-002779

BETWEEN  RAJESH BALI SINGH

Plaintiff

ANDSOVEREIGN ASSURANCE COMPANY LIMITED

First Defendant

ANDBRUCE MCCARROLL INSURANCES LIMITED

Second Defendant

Hearing:         26 January 2010

Appearances:  M Salmen for the Plaintiff

S Hamilton for the Second Defendant

Judgment:      26 January 2010

ORAL JUDGMENT OF

ASSOCIATE JUDGE CHRISTIANSEN

Solicitors/Counsel:

M Salmen, Fortune Manning, Auckland – Email: myriam[email protected]
S Hamilton, Kennedys, Auckland – Email: [email protected]

S Dench, Barrister, Auckland – Email: [email protected]

S Pond, ASB Legal, Auckland – Email: sim[email protected]

RAJESH BALI SINGH V SOVEREIGN ASSURANCE COMPANY LIMITED AND ANOR HC AK CIV

2009-404-002779  26 January 2010

[1]      On  26  April  2001  the  first  defendant  (Sovereign)  issued  a  life  insurance

policy to the plaintiff (Mr Singh) as owner.  The life insured was Mr Singh’s mother Ms  Wati.   Earlier  Mr  Singh  had  met  with  Mr  McCarroll  of  the  second  defendant (BMI).  Through him Sovereign’s life policy was arranged.

[2]      Mr Singh and Mr McCarroll provide different accounts of their discussions at the time insurance cover was being arranged.   Mr Singh asserts Mr McCarroll was advised the life cover was being arranged in anticipation of Ms Wati obtaining New Zealand residency and moving to New Zealand.  Mr McCarroll states that he assisted Mr Singh with the policy proposal documents before he sent them to Ms Wati in Fiji,

he being told she was holidaying there.

[3]      Ms Wati died on 6 June 2004.   Mr Singh applied for payment of the policy proceeds.   Subsequently  in  response  to  requests  for  information  he  confirmed  Ms Wati had not obtained New Zealand residency.  I infer that indeed she had not been

to New Zealand since the life insurance cover had been obtained.

[4]      By letter  dated  24  September  2004  Sovereign  declined  the  claim  under  the policy because, it asserted:

1.        Sovereign did not insure non-New Zealand residents;

2.Mr   Singh   and/or   Ms   Wati   failed   to   disclose   material information  namely  that  Ms  Wati  was  not  a  New  Zealand resident.

[5]      On 12 May 2009 Mr Singh commenced this proceeding as against BMI.  He says it owed him a duty to:

(1)Advise  him  on  the  nature  of  cover  available  under  Sovereign’s policy;

(2)Advise him whether that cover would be suitable for him and his mother;

(3)Ensure that the nature of the cover that Sovereign provided under the policy was not misrepresented to him;

(4)Ensure  that  he  did  not  give  any  information  on  the  application which would adversely affect payment under the policy;

(5)Advise Sovereign of all information given to BMI by him about his parents.

[6]      In its statement of defence BMI admits it owed Mr Singh a duty to exercise reasonable  care  but  denies  that  it  owed  Mr  Singh  the  specific  duties  pleaded.   In addition  BMI pleaded  an  affirmative  defence  relying on  s  4  of  the  Limitation  Act

1950.

[7]      BMI alleges that the cause of action accrued on or about 26 April 2001, and therefore is time barred because Mr Singh did not file his claim within six years of that  date.   In  support  of  that  position  BMI  has  filed  a  strikeout  application.   This judgment deals with that application.

Principles

[8]      For the purposes of a strikeout application the Court should assume pleaded facts,  whether  admitted  or  otherwise,  are  true.  The  Court  should  not  strikeout  a claim  summarily  unless  certain  it  could  not  succeed.       In  cases  concerned  with  a developing area of law a Court should be slow to invoke its strikeout jurisdiction.

[9]      In  this  case  BMI  accepts,  as  it  must,  that  Mr  Singh’s  pleading  discloses  a reasonable cause of action.  But if the Court is of the view that a claim is time barred, and  therefore  cannot  succeed,  it  may  strike  out  that  claim  as  being  vexatious, frivolous or an abuse of the Court’s process.

[10]     Section 4 (1)(a) of the Limitation Act 1950 provides that actions founded in tort shall not be brought after the expiration of six years from the date the cause of action accrues.  Although a limitation defence does not prevent the claim being filed

it will, if successfully pursued, prevent a plaintiff from obtaining the remedy sought. Therefore although a plaintiff’s proceeding discloses an otherwise reasonable claim

it is the defendant and not the plaintiff who will succeed if the limitation defence is proved.

[11]     To obtain judgment against BMI Mr Singh must prove:

a)        BMI owed him a duty of care;

b)        BMI breached that duty;

c)        That breach caused him loss;

d)       That loss was proximate to BMI’s alleged breach.

The strike out application

[12]     In  this  case  BMI  submits  that  any  duty  of  care  arose  when  Mr  McCarroll advised Mr Singh on appropriate life insurance for his mother, and assisted him with completing  the  proposal  form  i.e.  before  26  April  2001.  Clearly  Mr  Singh  has suffered loss for he did not obtain the benefit from his mother’s life insurance policy,

as was  intended.   The  issue upon the  strikeout application concerns when the loss occurred.  BMI says that Mr Singh suffered loss at the latest on 26 April 2001 when

he  became  the  beneficiary  of  an  avoidable  life  insurance  policy  –  one  which  was always going to be avoided by Sovereign.  Mr Singh’s position is that any defect in the  completion  of  the  insurance  policy  application  (which  is  rejected)  was  not apparent  or  manifest  at  the  date  of  inception  of  the  policy  but  only  upon  the purported declinature on 24 September 2004.   Therefore the cause of action did not accrue until that time when Sovereign purported to decline the claim and avoid the policy.  Further, if Sovereign had grounds to decline the claim or avoid the policy it waived its right, or elected not to pursue its right, or is estopped from avoiding the policy by its conduct in having paid out an initial $5,000 bereavement allowance (to assist with funeral and associated expenses) before purporting to avoid the policy.

[13]     In this case and for Mr Singh it is submitted that because the insurance policy application  was  completed  correctly  and  because  it  included  answers  that  would have  allowed  a  prudent  insurer  to  determine  that  the  insured  resided  in  Fiji,  or  at least be put on notice that the insured may reside in Fiji, the cause of action in this case did not accrue at the point of inception of the policy.   There was no apparent

mistake or error in the insurance application at that time.  Therefore as at April 2001 not every fact existed that was necessary to prove the case; there being no defect in the policy application (as completed), there was no loss to Mr Singh, and no accrual

of the cause of action.  The cause of action accrued only when Sovereign purported

to decline the claim and avoid the policy in 2004.

[14]     For Mr Singh it is submitted that because some further investigation of the facts or resolution of factual issues is required before it could be said his cause of action was time barred, it would be inappropriate to strikeout his claim.  Therefore it

is submitted that only upon a Court finding that Sovereign was entitled to decline the claim and avoid the policy, does Mr Singh’s claim against BMI come into existence. Only when every fact exists which it would be necessary for Mr Singh to prove in order to support his right to the judgment of the Court, could the limitation issue be determined and this cannot occur until resolution of his claim against Sovereign – which will not occur until trial.

[15]     Mr Singh’s case is that unlike the authorities of Davys Burton v Thom [2009]

1 NZLR 437, and Knapp v Ecclesiastical Insurance Group plc (1990) Lloyd’s REP

IR  390,  his  does  not  involve  an  instance  where  the  agreement  or  policy  was manifestly defective from the outset, or where there are grounds for proceeding on the assumption that the policy was defective.   In those cases, at the earliest point in time, the plaintiff (in the words of Elias CJ in Davys Burton) “did not get what he should have got”.  Further and to determine whether Mr Singh “did not get what he should  have  got”  there  are  factual  issues  in  evidence  the  Court  would  need  to consider, namely:

a)        The precise instructions provided to BMI by Mr Singh, and when they were provided;

b)Whether   the   questions   asked   in   the   insurance   application   were adequate   to   have   in   regard   to   the   grounds   Sovereign   gave   for declining cover;

c)        Whether   Sovereign   on   receiving   the   completed   application   was alerted  to  the  possibility  the  insured  did  not  reside  in  New  Zealand and  whether  it  should  have  made  enquiry  regarding  the  place  of residence of the insured.

Reasons for decision

[16]     In Davys Burton the Supreme Court held that where a solicitor had drafted a relationship property agreement for his client, which later turned out to be defective

in that it was unenforceable and did not comply with the formal requirements of the then Matrimonial Property Act 1976, time for the purposes of limitation ran against the client from the date that the defective agreement had been executed i.e. not at a later date when it was held the agreement was defective.

[17]     Knapp  concerned  a  strikeout  application  (as  time  barred)  of  the  plaintiff’s cause of action in negligence against an insurance broker after the insurance provider had avoided the plaintiff’s policy for material non disclosure.  In that case the Court struck out the plaintiff’s claim on the basis that an insured suffers actionable loss as soon as he receives a voidable policy i.e. it does not accrue until such time as the decision is made to void the policy.

[18]     In  this  case  the  Court  accepts  the  submission  that  Mr  Singh  suffered  an immediate loss on the inception of Ms Wati’s (voidable) life insurance policy; that Mr Singh “did not get what he should have got” but rather he obtained a policy that would not respond on his mother’s death.  The fact that Mr Singh did not “discover”

his  loss  until  24  September  2004  when  Sovereign  wrote  to  advise  him  it  would decline cover and would avoid the policy, is not relevant to the question of when a cause  of  action  in  negligence  accrues.   There  may not  have  been  a  ‘defect’  in  the form of the policy, but from its inception Sovereign would have avoided it because the life insured was not a New Zealand resident.

[19]     In recent years the doctrine of reasonable discoverability of loss has acted to avoid the sometimes harsh consequences of Limitation Act provisions. Notably, the Supreme  Court  confirmed,  in  Murray  v  Morel  & Co  Limited  [2007]  3  NZLR  721

that  the  doctrine  of  reasonable  discoverability  ought  to  be  confined  to  cases involving latent building defects and historic sexual abuse allegations.

[20]     Mr  Singh  may  not  have  been  aware  until  2004  that  he  had  suffered  loss. Nevertheless time ran against him from April 2001 at which time the loss actually occurred.

[21]     A cause of action accrues from the date of the damage.   Whether the actual damage has happened is a question of fact in each case.   If it has, the objection that the plaintiff does not know that he or she has suffered harm, or does not know that the defendant caused it, has not usually been seen as preventing time from starting to run.   Exceptions  to  this  general  rule  have,  as  previously  noted,  been  admitted  in recent  times in cases involving latent building defects or personal injury.   Beyond this  however  the  Courts  have  been  reluctant  to  admit  a  regime  permitting  the doctrine of reasonable discoverability in other cases where a plaintiff did not know and could not with reasonable diligence have known of the essential elements of a claim.

[22]     I do not consider this case as one where a court could be convinced to grant

an exception in the overall interests of justice as  has been done  with building and sexual abuse cases.  The facts in this case do not disclose suggestions of fraud or the kind to indicate resort to the longer time limitation period permitted under s 28 of the Limitation Act.

[23]     The result may seem unfair to Mr Singh for, on his account, he had no reason

to suspect the life cover purchased was defective until the policy was voided in 2004 but, as pointed out in chapter 26 of “the Law of Torts in New Zealand”, Todd, any sort  of  limitation  area  period  must  strike  a  balance  between  competing  policies  of finality in civil litigation and justice being done in the individual case.

[24]     Submissions   for   Mr   Singh   made   reference   to   an   estoppel   argument concerning Sovereign’s grant of a bereavement allowance.   There is nothing in this which  affects  the  present  strikeout  application,  and  no  further  comment  upon  it  is needed.

[25]     In summary, if the matter of the voidability of Sovereign’s policy proceeds to trial and if the Court  finds that Sovereign  rightfully avoided it, then the limitation defence was always available to BMI if Mr Singh had not filed his claim within six years of the inception of the policy.  Conversely if at trial it was held the policy was incorrectly avoided then Sovereign would be held to account to Mr Singh, but BMI would not likewise be liable for it was not reasonable for that loss.  In this overview,

the Court can safely grant BMI’s strikeout application.

Conclusion

[26]     The application for strikeout is granted.   Mr Singh’s claims against BMI are dismissed.

Costs

[27]     Mr  Singh  is  ordered  to  pay  BMI’s  costs  on  a  2B  basis  together  with disbursements approved by the Registrar.

Associate Judge Christiansen