Alw Car Workshop Sdn. Bhd.(Company No.: 684338-H) … PlaintiffAndAxa Affin General InsuranceBerhad(Company No.: 23820-W) … Defendant

  

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IN THE HIGH COURT OF MALAYA IN KUALA LUMPUR IN THE FEDERAL TERRITORY, MALAYSIA CIVIL SUIT NO: 22NCC-351-09/2014

 

BETWEEN

 

ALW CAR WORKSHOP SDN. BHD.

 

(Company No.: 684338-H) … PLAINTIFF

 

AND

 

AXA AFFIN GENERAL INSURANCE BERHAD

 

(Company No.: 23820-W) … DEFENDANT

 

JUDGMENT

 

A. Introduction

 

1. This is a case where an insurance company (Defendant) resisted an insured company’s (Plaintiff) claim for loss suffered by the Plaintiff in a fire (Fire) which has destroyed the Plaintiff’s car repair workshop (Workshop). The following issues arise in this case:

 

(a) the Plaintiff has filed this suit beyond the three-month period (from the date of the Defendant’s rejection of the Plaintiff’s claim for indemnity in respect of the Fire) (Three-Month Limitation Period), as stipulated in the insurance policy issued by the Defendant to the

 

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Plaintiff (Policy). Is the Three-Month Limitation Period valid in view of s 29 of the Contracts Act 1950 (CA)?; and

 

(b) the Defendant has alleged that the Plaintiff has made a fraudulent claim in this case and this entitles the Defendant to repudiate all liability under the Policy to indemnify the Plaintiff (Defendant’s Repudiation). Three issues arise, namely –

 

(i) irrespective of the terms and conditions of the Policy, is there a rule of law established by Malaysian and/or English cases which allows the Defendant to avoid all liability under the Policy due to the Plaintiff’s fraudulent claim?;

 

(ii) whether the Plaintiff has breached an implied duty under the Policy to act in utmost good faith when the Plaintiff made a fraudulent claim; and

 

(iii) whether the Defendant can rely on an express condition in the Policy to avoid liability under the Policy.

 

Related to the above issues are 3 subsidiary questions as follows –

 

(1) could the Defendant’s Repudiation be lawfully made before the Defendant’s receipt of a “final’ report from the loss adjusters appointed by the Defendant to investigate the Fire and the Plaintiff’s claim;

 

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(2) if there is a genuine basis for an insured to make a claim but the insured makes an “exaggerated” or “inflated” claim (by claiming for a sum which exceeds the insured’s actual loss and damage), is such a claim considered to be fraudulent under case law and/or the insurance policy in question (which entitles the insurer to repudiate total liability under the policy)?; and

 

(3) this case was decided on 13.5.2015 based on the then preponderance of decisions of our apex courts which required allegations of fraud to be proven beyond reasonable doubt. On 10.8.2015, the Federal Court decided in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 AMR 497 (Sinnaiyah & Sons Sdn Bhd), that a party asserting fraud need only prove such an assertion on a balance of probabilities. The question then arises concerning the effect of Sinnaiyah & Sons Sdn Bhd on cases which have been decided before Sinnaiyah & Sons Sdn Bhd and are pending appeals.

 

B. Facts

 

2. The Plaintiff owns and operates the Workshop in Malacca.

 

3. The Defendant had offered and the Plaintiff had accepted the Policy (entitled “Motor Repairers Protection Plan Policy”). The Policy provided for, among others, insurance coverage in case of fire to the Workshop up to a maximum insured sum of RM1.4 million for the following 6 items:

 

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(a) loss and damage to the building up to an insured sum of RM300,000 (Building Category);

 

(b) loss and damage to furniture, fixtures, fittings and office equipment in the Workshop up to an insured sum of RM40,000;

 

(c) loss and damage to equipment in the Workshop, including machineries, utensils and tools, up to an insured sum of RM130,000 (Workshop Equipment Category);

 

(d) loss and damage to stock in trade (consisting of car spare parts and accessories) up to an insured sum of RM150,000 (Stock in Trade Category);

 

(e) loss and damage to the vehicles of the Plaintiff’s customers which are held in trust or custody of the Plaintiff in the Workshop up to an insured sum of RM700,000 (Customers’ Vehicles Category); and

 

(f) loss and damage to spray painting booth and oven (including spraying equipment) up to an insured sum of RM80,000.

 

4. The Plaintiff had paid a premium of RM10,282.20 to the Defendant for the Policy.

 

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5. The duration of the Policy was from 20.12.2012 until 19.12.2013. The Fire took place at about 8.40 pm, 21.5.2013, during the duration of the Policy.

 

6. At about 1.30 pm, 22.5.2013, Mr. Chan Lin Sian (SP1), a director of the Plaintiff, made a police report regarding the Fire (Plaintiff’s Police Report).

 

7. The Defendant appointed McLaren Saksama (M) Sdn. Bhd. (MSSB), loss adjusters, to investigate in respect of the Fire and the Plaintiff’s claim in this case.

 

8. On 24.6.2013, the Plaintiff submitted to the Defendant a list of the Plaintiff’s claim totaling RM1,699,850 (Plaintiff’s Claim List dated 24.6.2013). The Plaintiff’s Claim List dated 24.6.2013 stated, among others –

 

(a) 69 cars in the Customer’s Vehicles Category had been damaged by the Fire (69 Cars);

 

(b) the value of the 69 Cars stated in the Plaintiff’s Claim List dated 24.6.2013 was only an estimate because there was no fixed or determinable value for each of the 69 Vehicles. Some of the 69 Vehicles were “priceless” as they were “antique” cars; and

 

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(c) the estimated loss stated in the Plaintiff’s Claim List dated 24.6.2013 was only part of the total loss suffered by the Plaintiff in the Fire.

 

9. On 25.6.2013 the Plaintiff filled up a form prepared by the Defendant [entitled “Claim Form for Fire (including Special Perils/All Risks/Burglary/Householders/Houseowners Policies)”] in respect of the Fire (Plaintiff’s Claim Form dated 25.6.2013). It is important to note that the Plaintiff’s Claim Form dated 25.6.2013 only stated that the Fire had occurred and did not give any particular of the Plaintiff’s claim and the total amount of the claim.

 

10. The Plaintiff submitted a revised claim list to the Defendant on 9.7.2013 (Plaintiff’s Claim List dated 9.7.2013). The Plaintiff’s Claim List dated 9.7.2013 claimed a total sum of RM1,712,560 for all losses and damage suffered by the Plaintiff due to the Fire.

 

11. On 26.12.2013, there was a meeting at the office of the Defendant’s branch in Malacca (Meeting dated 26.12.2013) attended by, among others –

 

(a) SP1; and

 

(b) Mr. Thomas Tan Chiap Yeong (SD3), an Assistant General Manager with MSSB. SD3 is MSSB’s loss adjuster who investigated in respect of the Fire and the Plaintiff’s claim in this case.

 

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12. At the Meeting dated 26.12.2013, the Plaintiff submitted another further revised claim list to the Defendant (Plaintiff’s Claim List dated 26.12.2013). The Plaintiff’s Claim List dated 26.12.2013 did not specify a total sum claimed by the Plaintiff but the total value of the items claimed in the Plaintiff’s Claim List dated 26.12.2013 was RM1,697,380.

 

13. By way of a letter dated 4.3.2014 from the Defendant’s solicitors, Messrs Isharidah, Ho, Chong & Menon (Messrs IHCM) to the Plaintiff (Messrs IHCM’s Letter dated 4.3.2014), Messrs IHCM informed the Plaintiff of the following, among others:

 

(a) investigations revealed that only 6 vehicles out of the many vehicles alleged by the Plaintiff to be in the Customers’ Vehicles Category, possessed valid car insurance policies. The Defendant alleged that it was “highly questionable” and ‘‘unusual’ that the ‘‘bulk’ of the vehicles claimed by the Plaintiff to be in the Customers’ Vehicles Category did not have valid car insurance policies;

 

(b) there were a few vehicles which were not affected or damaged by the Fire but nonetheless, the Plaintiff had submitted claims for these vehicles. As such, the Defendant alleged that the Plaintiff had submitted a false claim;

 

(c) some vehicles claimed by the Plaintiff had “violent wreckage marks” but the Plaintiff had claimed for these vehicles as if these vehicles could be used;

 

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(d) the Plaintiff had claimed for vehicles without details of their ownership and registration numbers. There were some vehicles which were not sighted by MSSB;

 

(e) several vehicles claimed by the Plaintiff were in a “crumpled/wrecked state” prior to the Fire but the Plaintiff had grossly inflated the value of such vehicles. Accordingly, the Plaintiff had made exaggerated claims regarding these vehicles;

 

(f) the value of the majority of the vehicles claimed by the Plaintiff, did not reflect their market value. The Defendant alleged that the Plaintiff’s claim in respect of “priceless” and “antique” vehicles, was not true;

 

(g) there were at least 3 vehicles which had been sold to the Plaintiff as “scrap/wreck” by the vehicles’ insurers. Such vehicles were “total loss” vehicles and yet, the Plaintiff falsely placed these vehicles in the Customers’ Vehicles Category and made an exaggerated claim “far beyond the market value of these vehicles”; and

 

(h) the relationship between an insurer and insured is premised on the “utmost good faith” principle. The Defendant alleged that the Plaintiff had breached such a principle which entitled the Defendant to repudiate all liability under the Policy.

 

14. In response to Messrs IHCM’s Letter dated 4.3.2014, the Plaintiff’s then solicitors, Messrs Murphy & Dunbar (Messrs MD), sent a letter dated

 

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31.3.2014 to Messrs IHCM (Messrs MD’s Letter dated 31.3.2014).

 

Messrs MD’s Letter dated 31.3.2014 stated, among others:

 

(a) the Plaintiff denied all allegations stated in Messrs IHCM’s Letter dated 4.3.2014; and

 

(b) Messrs MD requested for a copy of MSSB’s report so that Messrs MD could advise the Plaintiff.

 

Messrs MD’s Letter dated 31.3.2014 was marked “without prejudice” but had been tendered by the Plaintiff in this case. Accordingly, the Plaintiff has waived its right to object to the admissibility of Messrs MD’s Letter dated 31.3.2014 – please see the Singapore Court of Appeal’s judgment in Lim Tjoen Kong v A-B Chew Investments Pte Ltd [1991] 3 MLJ 4, at 8-9, delivered by Chan Sek Keong J (as he then was).

 

15. Messrs MD sent another letter dated 26.6.2014 to Messrs IHCM (Messrs MD’s Letter dated 26.6.2014). According to Messrs MD’s Letter dated 26.6.2014, among others –

 

(a) the Plaintiff is a lay person who is neither familiar nor well-versed with the terms and conditions of the Policy. As such, the Plaintiff had to engage a “professionaf’ to assist in the 11 re-formulation” of the Plaintiff’s claim;

 

(b) pending the completion of the “re-formulation” of the Plaintiff’s insurance claim, “all claim documents previously submitted” to the Defendant “are hereby withdrawn and disregarded”; and

 

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(c) the Plaintiff would submit the “re-formulated claims documents” to the Defendant “in due course”.

 

16. Messrs IHCM replied to Messrs MD’s Letter dated 26.6.2014 by way of a letter dated 1.7.2014 (Messrs IHCM’s Letter dated 1.7.2014). Messrs IHCM’s Letter dated 1.7.2014 stated, among others –

 

(a) both the Plaintiff and Defendant had agreed to all the terms and conditions of the Policy. As such, the Defendant rejected the Plaintiff’s “ignorance” of the terms and conditions of the Policy;

 

(b) the Plaintiff’s submission and re-submission of its claim, specifically in respect of the Customers’ Vehicles Category, evidenced an “acute understanding” of the nature of the categories of insurance and the sum insured for each category;

 

(c) the result of the “detailed” investigation of MSSB had revealed a fraudulent claim by the Plaintiff;

 

(d) as the Plaintiff had submitted its claim on 3 occasions, the Plaintiff’s averment that the Plaintiff needed to appoint a “professional’ for reformulation of its claim, was thereby rejected by the Defendant; and

 

(e) the Defendant stood by its decision to repudiate liability under the Policy.

 

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C. This suit

 

17. On 15.9.2014, the Plaintiff filed this action based on the Policy against the Defendant (This Action) and claimed for, among others, a sum of RM1,241,000 (as indemnity for the loss and damage suffered by the Plaintiff due to the Fire at the Workshop) to be paid by the Defendant to the Plaintiff under the Policy.

 

18. On the first day of the trial of This Action, 4.2.2015, the Plaintiff’s learned counsel, Mr. Samreet Singh, applied to amend the Plaintiff’s claim (Plaintiff’s Amendment Application) so as to reduce the sum claimed by the Plaintiff to RM237,452.11 (Amended Sum). This Amended Sum was the adjusted amount of indemnity stated in MSSB’s report dated 29.3.2014 (MSSB’s Report).

 

19. The Defendant’s learned counsel, Mr. Gurmukh Singh, to his credit, did not object to the Plaintiff’s Amendment Application. As such, this court allowed the Plaintiff’s Amendment Application.

 

D. Plaintiff’s case

 

20. SP1 was the only witness called by the Plaintiff in support of This Action.

 

21. SPI’s witness statement stated, among others, as follows:

 

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(a) SP1 was at home on 21.5.2013 when SP1 received a telephone call at about 8.30 pm from SPI’s friend who informed SP1 of the Fire;

 

(b) SP1 rushed to the Workshop and with the assistance of SPI’s friends, SP1 managed to remove several vehicles from the Workshop;

 

(c) SP1 made the Plaintiff’s Police Report;

 

(d) SP1 subsequently received a report dated 4.6.2013 from the Fire and Rescue Department of Malaysia (Fire Department) regarding the Fire (Fire Department’s Report);

 

(e) SP1 testified that the Plaintiff suffered a total loss of RM237,452.11 which consisted of the following –

 

Item Nature of loss suffered by Plaintiff Amount (RM)

 

1. Workshop Equipment Category 65,084.67

 

2. Stock in Trade Category 146,717.44

 

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3.

 

Customers’ Vehicles Category

 

25,650

 

(f) the Amended Sum was based on MSSB’s Report; and

 

(g) SP1 explained that the Plaintiff had earlier submitted higher claim sums because the Plaintiff did not know what could be claimed under the Policy.

 

22. SP1 was cross-examined at length by the Defendant’s learned counsel.

 

SP1 testified as follows in SPI’s cross-examination, among others –

 

(a) SP1 had no proof to substantiate the Amended Sum. The Plaintiff merely relied on MSSB’s Report in respect of the Amended Sum. During SPI’s re-examination, SP1 stated that the Plaintiff had no choice but to accept MSSB’s Report in respect of the sum regarding the loss and damage suffered by the Plaintiff due to the Fire;

 

(b) SP1 did not have any receipt for the repair and reinstatement of the Workshop because to save cost, the Plaintiff did such work itself;

 

(c) SP1 agreed with MSSB’s Report that the Workshop did not have 30 vehicle racks (to store the vehicles) as claimed by the Plaintiff. During SPI’s re-examination, SP1 however testified that MSSB made a mistake and the Workshop had indeed 30 vehicle racks;

 

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(d) SP1 denied that the Plaintiff’s claim was false. SP1 further denied that most of the vehicles at the Workshop at the time of the Fire, were “scrap metal’;

 

(e) SP1 was asked about the Plaintiff’s Claim List dated 24.6.2013 which stated that certain vehicles in the Workshop were in “excellent’, “good” and ‘‘fair’ condition whereas such vehicles were actually “scrap metal’. SP1 was also asked whether SP1 knew that 15 out of the 69 Cars (stated in the Plaintiff’s Claim List dated 24.6.2013) were not at the Workshop during the Fire. The learned defence counsel also asked SP1 whether he knew that only 6 vehicles at the Workshop had valid car insurance policies. SP1 however maintained that the contents of the Plaintiff’s Claim List dated 24.6.2013 were correct;

 

(f) SP1 did not understand the contents of Messrs IHCM’s Letter dated 4.3.2014 because SP1 was illiterate;

 

(g) SP1 disagreed with the learned defence counsel that 3 vehicles claimed by the Plaintiff were sold to the Plaintiff as scrap metal; and

 

(h) SP1 denied that the Plaintiff had breached its duty of good faith owed to the Defendant;

 

E. Defendant’s case

 

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23. The Defendant called 3 witnesses to resist This Action, namely –

 

(a) Mr. Teh Yau Kun (SD1), the Defendant’s Vice President (Property Claims);

 

(b) Mr. Yap Long Cheng (SD2), Assistant Manager (Motor Claims Department) in TUNE Insurance Malaysia Bhd (TIMB); and

 

(c) SD3.

 

24. SD1 testified as follows in his witness statement, among others:

 

(a) the Defendant had appointed MSSB to carry out investigation in this case. Additionally, the Defendant had also carried out investigation of this case on its own accord (Defendant’s Investigation);

 

(b) the Defendant’s Repudiation was based on MSSB’s Report and “all other evidence” gathered in the course of the Defendant’s Investigation. The grounds of the Defendant’s Repudiation had been stated in Messrs IHCM’s Letter dated 4.3.2014;

 

(c) the Plaintiff had made a false claim in respect of the Customers’ Vehicles Category. The Plaintiff could not have made an error in its claim for the Customers’ Vehicles Category because –

 

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(i) all the vehicles claimed for by the Plaintiff were in the Plaintiff’s possession. As such, the Plaintiff should have been “fully’ aware of the condition of the vehicles; and

 

(ii) scrap metal and wrecked vehicles which had been destroyed in the Fire, should have been claimed by the Plaintiff under the Stock in Trade Category instead of being claimed by the Plaintiff in the Customers’ Vehicles Category;

 

(d) Insurance Services Malaysia Bhd. (ISM) is a company with “MSC status” and provides online access to its database. The Defendant had carried out an “ISM search” in this case for each vehicle claimed by the Plaintiff in the Customers’ Vehicles Category. The Defendant discovered that out of 69 Cars claimed by the Plaintiff in the Customers’ Vehicles Category, only 6 vehicles had valid car insurance policies;

 

(e) by way of a letter dated 5.3.2010 to the Plaintiff, BH Insurance (M) Bhd. (BHI) had offered to sell to the Plaintiff, vehicle with the registration no. WGG 9934 as scrap metal for RM300. The Plaintiff had accepted this offer by way of the Plaintiff’s letter dated 2.2.2919 to BHI. Despite such evidence, the Plaintiff had claimed for RM23,000 from the Defendant for vehicle with the registration no. WGG 9934! The Defendant had documentary proof that 3 vehicles claimed by the Plaintiff in this case, had actually been bought by the Plaintiff as scrap metal;

 

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(f) the Plaintiff’s claim for Workshop Equipment Category was not without suspicion. The Plaintiff had claimed for 30 vehicle racks under the Workshop Equipment Category but MSSB had only found 10 vehicle racks at the Workshop; and

 

(g) although the Plaintiff’s claim was based on a few categories, there was only one claim. Once a claim based on one category is false, the entire claim is tainted and “cannot be entertained”.

 

25. During SDI’s cross-examination –

 

(a) SD1 agreed that this Policy had been in effect for approximately 5 years and this case was the first claim by the Plaintiff;

 

(b) SD1 testified that MSSB gave preliminary reports regarding this case to the Defendant, as early as after MSSB had inspected the Workshop. However, the Defendant’s Repudiation was based solely on MSSB’s Report and not on MSSB’s preliminary reports. SD1 conceded that the Defendant’s Repudiation (by way of Messrs IHCM’s Letter dated 4.3.2014) was made before the Defendant received MSSD’s Report (dated 29.3.2014). SD1 explained that the Defendant’s Repudiation was made based on a “synopsis” given by MSSB (MSSB’s Synopsis) and also because the Plaintiff had “pressured” the Defendant regarding the Plaintiff’s claim by complaining to Bank Negara Malaysia (Plaintiff’s Complaint To BNM). SD1 disagreed that the Defendant’s Repudiation was premature. During re-examination, SD1 stated that MSSB’s Synopsis was “complete”;

 

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(c) SD1 disagreed with the contention by the Plaintiff’s learned counsel that “it is normal for [the Plaintiff’s customers] not to renew their [car insurance policies]’ as their vehicles were in the Workshop for intensive repair;

 

(d) in response to a question on whether the Defendant had informed the Plaintiff what item could and could not be claimed by the Plaintiff under the Policy, SD1 replied that the Plaintiff as a car repairer, deals with a lot of insurance claims and should know which vehicle is bought by the Plaintiff as scrap metal;

 

(e) according to SD1, when a claim is grossly exaggerated, such a claim is fraudulent;

 

(f) SD1 testified that the Defendant did not forward a copy of MSSB’s Report to the Plaintiff because this is not the Defendant’s “practice” to do so; and

 

(g) SD1 conceded that although the Plaintiff had experience in dealing with motor insurance claims, the Plaintiff had no experience in making a fire insurance claim. This is because this case was the first fire insurance claim by the Plaintiff.

 

26. During SDI’s re-examination, in response to a question on why the Defendant did not issue the Defendant’s Repudiation after the receipt of MSSB’s Report, SD1 explained that the Plaintiff had kept on pressuring the Defendant to settle the Plaintiff’s claim. Furthermore, the Plaintiff had

 

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made the Plaintiff’s Complaint To BNM. As such, the Defendant had to respond quickly by deciding to repudiate liability under the Policy.

 

27. After SDI’s re-examination, I exercised my discretion under s 165 of the Evidence Act 1950 (EA) and asked SD1 whether the Defendant had made a police report alleging that the Plaintiff had made a false claim in this case (Defendant’s Allegation).

 

28. Section 165 EA provides as follows:

 

“Judge’s power to put questions or order production

 

165. The Judge may, in order to discover or to obtain proper proof of relevant facts, ask any question he pleases, in any form at any time, of any witness or of the parties, about any fact relevant or irrelevant; and may order the production of any document or thing; and neither the parties nor their agents shall be entitled to make any objection to any such question or order, nor, without the leave of the court, to cross-examine any witness upon any answer given in reply to any such question:

 

Provided that –

 

(i) the judgment must be based upon facts declared by this Act to be relevant and duly proved;

 

(ii) this section shall not authorize any Judge to compel any witness to answer any question or to produce any document which the witness would be entitled to refuse to answer or produce under sections 121 to 131 if the question were asked or the document were called for by the adverse party; nor shall the Judge ask any question which it would be improper for any other person to ask under section 148 or 149; nor shall he dispense with the primary evidence of any document, except in the cases hereinbefore excepted.”

 

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(emphasis added).

 

29. The court’s power under s 165 EA to ask questions to a witness, has been explained in the following cases:

 

(a) in Teng Boon How v Public Prosecutor [1993] 3 MLJ 553, at 561564, Edgar Joseph Jr SCJ delivered the following judgment of the Supreme Court –

 

—Judicial loquacity has provided grounds for appeal and we need no more than refer to some of the well-known cases in this area.

 

Excessive interventions by the trial Judge add “great weight to the substance of the appeal” (Brassington v. Brassington [1962] P 276 at 281) and taken together with other grounds of appeal may result in the reversal of judgment in a civil case (Yuill v. Yuill [1945] P 15); Jones v. National Coal Board [1957] 2 QB 55 62) or setting aside of a conviction in a criminal case. (See R. v. Gilson [1944] 2 Cr. App.R 174; R v. Clewer [1953] 37 Cr. App.R 37). In certain circumstances, the criticism of the conduct of the trial Judge is of such magnitude as to constitute by itself a sufficient ground for reversal of the judgment (See Hobbs. v. Tinling [1992] 2 KB 1; Jones v. National Coal Board (ibid) ] or quashing of the conviction. [See R v. Green [1949] WN 488, R v. Mc Kenna [1960] 1 QB 411]. In other cases, even though the interventions of the Judge may not result in the quashing of the conviction, the appellate Court may reduce the sentence thus giving effect to its disapproval (See e.g. R v. Hirock [1970] 1 QB 67).

 

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It was Lord Greene MR who explained that justice is best done by a Judge who holds the balance between the contending parties without himself taking part in their disputations. If a Judge, said Lord Greene, in Yuill v. Yuill (ibid ), should personally conduct the examination of witnesses, “he, so to speak, descends into the arena and is liable to have his vision clouded by the dust of conflict”.

 

And, it was Lord Denning MR who in Jones v. National Coal Board (ibid ), emphasised the importance of the Judge not descending into the arena and thereby depriving himself of the ability to take a detached view when forming his conclusion. …

 

We agree that notwithstanding the wide ambit of s 165 [EA]

 

which provides: …

 

… the desirable limits of judicial intervention in the examination and cross-examination of witnesses enunciated in Yuill v. Yuill and Jones v. National Coal Board would apply in this country. These limits apply with double force in the case of interrogation by a Judge of an accused person since, in our view, the nature of examination contemplated by s 165 [EA] is not examination or cross examination of an inquisitorial nature for the purpose of entrapping an accused or of extracting from him damaging admissions upon which to build up a case against him or to supply a gap in the evidence for the prosecution. Especially is this so, in the case of an accused facing a capital charge. We must therefore treat the failure of a trial Judge sitting alone, to direct himself correctly in accordance with these principles, in the same way as a failure to direct a Jury correctly.

 

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We have also considered cases such as R v. Gilson and Cohen [1944] 29 Cr App R 174., R v. Cain [1936] Cr. App. R 204, R v. Bateman [1946] 31 R. Cr App R 106 cited with approval in Gan Kok Liong v PP [1969] 1 MLJ 32, R v. Clewer[1953] 37 Cr App. Rep 37, but these cases can, to some extent, be distinguished from the present case, because, unlike the present case, the interventions by the Judge by way of crossexamination were during the examination in chief or crossexamination of the accused person or his witnesses.

 

Similarly, the Singapore case of Roseli bin Amat & Ors v PP [1989] 2 MLJ 65 is also distinguishable because there, unlike here, there were interruptions preventing the accused from giving evidence in their own way and making adverse comments, of the following sort:

 

(i) excessive interruptions by the learned Judge in the examination and cross-examination of witnesses by Counsel with the consequence that Counsel were unduly hampered in the crossexamination of the prosecution witnesses and in the examination of their own clients;

 

(ii) unfair and improper cross-examination by the learned Judge of the appellants in a hostile manner including disallowing them to give evidence in their own way; and

 

(iii) making adverse comments or observations which strongly indicated that the learned Judge had closed his mind and predetermined the guilt of the appellants prior to considering all the evidence before him.

 

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Nevertheless, we were reluctantly driven to the conclusion, that the Judge did in this case descend into arena and did allow his judgment of the facts to be clouded by the results of his cross-examination of the appellant, the brother Tan Booy Keng, and the taxi driver Loh Chin Wah, though we do not doubt that he was actuated by the best of motives.”

 

(emphasis added);

 

(b) Paramill Sdn Bhd & Anor v Datuk Joseph Pairin Kitingan [2007] 7 MLJ 289, at 311, Tengku Baharudin Shah JCA delivered the following judgment of the Court of Appeal –

 

“[61] With due respect you cannot ignore the power of a

 

judge to question witnesses and to order the production of any document or thing in order to discover or to obtain proper proof of relevant facts — see s 165 [EA]. Neither the parties nor their agents are entitled to make any objection to any such order. …”

 

(emphasis added); and

 

(c) in Chew Lip Seng v Perwira Habib Bank (M) Bhd [1999] 1 MLJ 310, at 314-315, NH Chan JCA decided as follows in the High Court

 

“After adducing the above evidence, the plaintiff closed his case and the hearing was adjourned for the defence to decide whether to call

 

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any witnesses. At the resumed hearing, Mr Wong for the plaintiff applied under s 138(4) [EA] to recall his client. This was strenuously objected to by Mr Royan for the defence on the ground that the plaintiff had already closed his case. In the end, I decided to recall the witness myself. I can do this under s 165 [EA]. See Sarkar on Evidence (14th Ed) 1993 vol 2 at p 2023, which says:

 

The court has always the power to recall a witness at any stage of the proceedings … and to put any question it pleases, in any form (s 165). The judge’s power to recall witness, is seldom interfered with by appellate court [Middleton v Burned 4 Ex 243]. If the examination of the witness has been conducted unskilfully, the court usually examines a witness at the close of his examination, ie after re-examination. There is no right of re-examination after the interrogation by the court.

 

In a civil case, a judge has no power to call a witness not called by either party without the consent of the parties (Re Enoch and Zuretzky, Bock & Co’s Arbitration [1910] 1 KB 327, Lim Ker v Chew Seok Tee [1967] 2 MLJ 253). But, it appears (if we are to follow the common law of England) that that rule does not apply to a criminal trial. The judge at a criminal trial may call a witness not called by either side, without their consent, if he considers it to be necessary in the interests of justice (R v Dora Harris [1927] 2 KB 587). Even so, there is a definite limitation placed upon this discretionary power of the criminal court. After the defence has been closed, no witness can be called either by the judge or by either party, unless the reason for such evidence is one which no human ingenuity could have foreseen (R v Day [1940] 1 All ER 402). Since the present case is a civil case, I shall leave the question whether the rule applies to a criminal trial in this country to be decided in a case in which the question directly arises.

 

In the present case, however, the plaintiff had already given evidence. Section 165 empowers a judge to recall a witness who has given evidence. But the judge would not have power to call the witness initially without the consent of both of the parties. ‘… a judge has power to recall a witness who has given evidence, though he would not have had power to call him initially’, said Pearce LJ in Fallon v Calvert [1960] 2 QB 201, at p 205.

 

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In R v Seigley (1911) 6 Cr App R 106, Hamilton J said (at p 107):

 

A prisoner, when once he has made himself a witness, is liable, like any other witness, to be recalled for the purpose of answering such questions as the judge permits to be put to him.

 

In R v Sullivan [1923] 1 KB 47, the Court of Criminal Appeal approved this passage from Taylor on Evidence (12th Ed) para 1477, which states:

 

The judge has always a discretionary power, with which the court above is very unwilling to interfere, of recalling witnesses at any stage of the trial, and putting such questions to them as the exigencies of justice require.

 

And in Fallon v Calvert, at p 205, Pearce LJ said:

 

And the principle, so far as civil cases are concerned, has never been doubted. If a party chooses to give evidence, he submits himself to the court to be asked all such questions as justice requires until the case is concluded.

 

And all of these pronouncements from the common law are embodied in s 165[EA] …”

 

(emphasis added);

 

30. Based on the above cases, my understanding of s 165 EA is as follows:

 

25

 

(a) there is a distinction between civil and criminal cases. In criminal cases, the court should be more circumspect in exercising its discretion to ask questions from a witness. This is because in criminal cases, the prosecution bears a heavy legal burden to prove the guilt of the accused beyond all reasonable doubt. If there is any reasonable doubt in the prosecution case, the benefit of such a doubt should be given to the accused – please see the Supreme Court’s judgment given by Lee Hun Hoe CJ (Borneo) in Public Prosecutor v Kau Joo Huat [1988] 2 MLJ 91, at 93;

 

(b) in civil cases, the court may ask questions from a witness provided that such questions are necessary in the interest of justice. The fact that a question is relevant under s 5 EA may not be necessary in the interest of justice. Furthermore, the adversarial nature of our court proceedings presumes that all relevant questions would have already been asked by learned counsel on behalf of their clients; and

 

(c) if the court decides to exercise its discretion in the interest of justice to ask questions from a witness –

 

(i) the court should only ask questions after the conclusion of the re-examination of the witness. This is consistent with the adversarial nature of our court proceedings. The court should not ask question from a witness in the midst of his or her examination-in-chief, cross-examination or re-examination. This is because the parties’ learned counsel should be allowed to

 

26

 

perform their duties to the court and their clients by asking all relevant questions from the witnesses; and

 

(ii) after the witness has answered the court’s question (Witness’ Answer To Court’s Question), the court should ordinarily allow –

 

(1) further cross-examination by the party who has not called the witness. Such a further cross-examination is limited only to the Witness’ Answer To Court’s Question; and

 

(2) further re-examination by the party who has called the witness. Needless to say, such a further re-examination is confined to the Witness’ Answer To Court’s Question.

 

31. My question to SD1 on whether the Defendant had made a police report regarding the Defendant’s Allegation, was necessary in the interest of justice for the following reasons:

 

(a) if no police report had been made by the Defendant concerning the Defendant’s Allegation, the truth and bona tides of the Defendant’s Allegation could be doubted; and

 

(b) if a police report had been made in respect of the Defendant’s Allegation, the results of the police investigation and the possibility of criminal prosecution regarding a false insurance claim, will assist this court to decide This Action justly.

 

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32. SD1 answered the court’s question in the affirmative. After the Defendant’s Repudiation, SD1 lodged a police report on 7.3.2014 (Defendant’s Police Report). The Defendant’s Police Report averred that based on MSSB’s Report, it was believed that there were elements of fraud in the Plaintiff’s insurance claim.

 

33. After SD1 had answered my question, I granted leave for further crossexamination and further re-examination of SD1.

 

34. The Plaintiff’s learned counsel asked SD1 during further crossexamination on whether there was any “outcome” from the Defendant’s Police Report. SD1 answered in the negative. There was no further reexamination of SD1 by the Defendant’s learned counsel.

 

35. SD2 testified that TIMB had sold 2 “wrecked” cars to the Plaintiff for RM1,500 each on 19.5.2011. The Plaintiff had claimed for these 2 vehicles in the Customers’ Vehicles Category.

 

36. SD3 gave the following evidence in his witness statement, among others,:

 

(a) SD3 prepared MSSB’s Report in this case;

 

28

 

(b) except for 2 invoices for “half cut’ vehicles, the Plaintiff did not produce any invoice, receipt or documentary proof to support all the other items claimed by the Plaintiff under the Policy;

 

(c) there was “impropriety” in the Plaintiff’s insurance claim. The Plaintiff’s claim under Workshop Equipment Category and Stock in Trade Category could be verified by a visual inspection. The Plaintiff’s insurance claim for Customers’ Vehicles Category could not however be ascertained by a visual inspection and required extensive investigation;

 

(d) in respect of the Plaintiff’s claim for Customers’ Vehicles Category

 

(i) MSSB could not sight 15 vehicles in the Workshop as claimed by the Plaintiff;

 

(ii) MSSB conducted searches at the Road Transport Department (JPJ Searches) in respect of the vehicles claimed by the Plaintiff. The JPJ Searches revealed that most of the vehicles claimed by the Plaintiff to be in the Customers’ Vehicles Category, had no valid car insurance policies;

 

(ii) based on the addresses on the registration cards of the cars as provided by the Plaintiff and results of the JPS Searches, MSSB visited and interviewed some the owners of the cars claimed by the Plaintiff in the Customers’ Vehicles Category (MSSB’s Interviews). Many of the owners who had been

 

29

 

interviewed by MSSB, stated that their cars had been sold as scrap metal;

 

(iii) the amounts claimed for “scrap vehicles” by the Plaintiff, were grossly inflated over and above their market value; and

 

(iv) in view of MSSB’s investigation, MSSB only recommended a total adjusted indemnity sum of RM25,650 for the Customers’ Vehicles Category;

 

(e) the Plaintiff could not have made a mistake in making this claim. This is because the Plaintiff is in the car repair business and the Plaintiff’s “calling is in this very field”; and

 

(f) when MSSB proposed a total adjusted indemnity sum in MSSB’s Report (as per the Amended Sum now claimed by the Plaintiff in This Action), such a proposal had no bearing on the bona tides of the insurance claim. The loss adjuster’s duty is to give an adjustment of the claim on the assumption that the claim is genuine. When a loss adjuster makes market inquiries, the insurer is not bound by such inquiries and the insurer may insist on strict proof of the loss by the insured.

 

37. SD3’s cross-examination revealed, among others, the following:

 

(a) SD3 did not tell the Plaintiff what could and could not be claimed under the Policy;

 

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(b) the Plaintiff’s learned counsel adduced a copy of the minutes of Meeting dated 26.12.2013 which had been signed by, among others, SP1 and SD3 (Exhibit P2). Paragraph 2 of Exhibit P2 stated that SP1 had informed the Defendant and SD3 that the Plaintiff would not proceed to claim for 8 vehicles (which had been claimed earlier by the Plaintiff) [Paragraph 2 of Exhibit P2]. Surprisingly, SD3 testified that SD3 did not agree to Paragraph 2 of Exhibit P2 despite signing Exhibit P2! SD3 further gave evidence that SD3 signed Exhibit P2 without agreeing to Paragraph 2 of Exhibit P2. Finally, SD3 conceded that SD3 agreed to Paragraph 2 of Exhibit P2 by signing Exhibit P2;

 

(c) SD3 stated that only some of the vehicle owners who had been interviewed by MSSB, agreed to give signed statements. However, such statements were not attached to MSSB’s Report;

 

(d) SD3 “strongly’ disagreed with the statement by the Plaintiff’s learned counsel that lodging a motor accident insurance claim differed completely from making a fire insurance claim. SD3 however agreed that in a motor accident insurance claim, there is no claim for stock in trade and “customers’ vehicles held in trust”; and

 

(e) SD3 agreed that SD3 would “stand by the Amended Sum as stated in MSSB’s Report.

 

F. Submission by parties

 

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38. The Plaintiff has advanced, among others, the following contentions in support of This Action:

 

(a) the Defendant’s Repudiation was made before the finalization of MSSB’s Report. SD1 testified that the Defendant’s Repudiation had been made based on MSSB’s Synopsis. As the Defendant had not adduced MSSB’s Synopsis as evidence in this case, an adverse inference under s 114(g) EA should be drawn against the Defendant;

 

(b) the Defendant is required to prove the Defendant’s Allegation (that the Plaintiff had made a fraudulent claim) beyond all reasonable doubt. There were no sufficient particulars pleaded in the Defence regarding the Defendant’s Allegation as required by Order 18 rule 12(1)(a) of the Rules of Court 2012 (RC);

 

(c) an exaggerated claim did not necessarily mean that the claim was fraudulent. Reliance was placed on the following cases –

 

(i) the Malaysian High Court judgment in Wong Cheong Kong Sdn Bhd v Prudential Assurance Sdn Bhd [1998] 1 CLJ 916;

 

(ii) the Singapore High Court case of Globe Trawlers Pte Ltd v National Employers’ Mutual General Insurance Association Ltd & Tan Brothers Insurance Agencies Pte

 

Ltd [1989] 1 CLJ 831;

 

32

 

(iii) the English High Court decision in London Assurance v Clare & Anor (1937) 57 Lloyd’s LR 254; and

 

(iv) the English High Court case of Ewer v National Employers’ Mutual General Insurance Association Ltd [1937] 2 All ER 193;

 

(d) there was no evidence to prove that the Plaintiff knew the claim for Customers’ Vehicles Category was false and the Plaintiff proceeded with such a fraudulent claim;

 

(e) the court should accept the Amended Sum as found by MSSB in this case; and

 

(f) the Plaintiff has proven on a balance of probabilities, its claim for the Amended Sum under the Policy.

 

39. The Defendant presented, among others, the following submission to resist This Action:

 

(a) an allegation of fraud need only be proven on a balance of probabilities as held by Mohd. Azmi FCJ in the Federal Court case of Ang Hiok Seng v Yim Yut Kiu [1997] 1 CLJ 497. Ang Hiok Seng was unfortunately not referred to by subsequent Federal Court cases of Yong Tim v Hoo Kok Chong & Anor [2005] 3 CLJ 229 and ASEAN Security Paper Mills Sdn Bhd v CGU Insurance Bhd

 

33

 

[2007] 2 CLJ 1. The Defendant’s learned counsel further submitted that Yong Tim and ASEAN Security Paper Mills Sdn Bhd have been decided per incuriam of Ang Hiok Seng;

 

(b) there is evidence on a balance of probabilities to show that the Plaintiff has made a fraudulent claim, especially concerning the Customers’ Vehicles Category;

 

(c) the Defendant can rely on condition 3 in “Claims Conditions applicable to Section 1” (Condition 3) to repudiate all liability under the Policy. The Defendant cited the High Court case of Modern Universal Sdn Bhd v MSIG Insurance (M) Bhd [2014] 3 CLJ 745 in support of its reliance on Condition 3;

 

(d) a grossly exaggerated claim may amount to a fraudulent claim. The Defendant relies on the High Court’s judgment in Sen Hua Tat Furniture Sdn Bhd v Kurnia Insurans (M) Bhd [2011] LNS 1180;

 

(e) the Defendant’s Repudiation was met with “bare denials” by the Plaintiff. Hence, the Plaintiff had no valid insurance claim. The Defendant relied on the following judgments –

 

(i) the Court of Appeal case of Ling Hock Ling v Tai Lian Land Development Co [2006] 4 CLJ 396; and

 

(ii) the High Court’s decision in Octville Golf Properties Sdn Bhd v Uniwheels Sdn Bhd [2002] 1 LNS 694;

 

34

 

(f) SP1 had committed perjury in SPI’s evidence;

 

(g) the Defendant need not “separate” the “uncontentious elements” in the Plaintiff’s insurance claim from the “fraudulent elements” in the claim because upon the application of Condition 3, “all benefit under this Policy, shall be forfeited”. On this point, the Defendant relied on

 

(i) Wong Cheong Kong Sdn Bhd;

 

(ii) Sen Hua Tat Furniture Sdn Bhd;

 

(iii) Modern Universal Sdn Bhd; and

 

(iv) the opinion of Professor Poh Chu Chai (Prof. Poh), “Law of Insurance”, 3rd Edition, at p. 569-570;

 

(h) the Plaintiff had not acted in utmost goof faith in making this fraudulent claim;

 

(i) in any event, the Plaintiff has failed to discharge the legal burden to prove the quantum of the loss and damage suffered by the Plaintiff due to the Fire. The Plaintiff cannot rely on MSSB’s Report to circumvent this legal burden to prove quantum of loss; and

 

35

 

(j) the Plaintiff had failed to plead and particularise special damages with specificity.

 

G. Is Three-Month Limitation Period valid under s 29 CA?

 

40. In the “Agreed Issues To Be Tried”, both parties have forwarded, among others, whether the Three-Month Limitation Period is valid under s 29 CA.

 

41. Condition 3 states as follows:

 

“If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy; or if the loss or damage be occasioned by wilful act, or with the connivance of the Insured; or if the claim be made and rejected and an action or suit be not commenced within three (3) months after such rejection, or in the case of an Arbitration taking place in pursuance of the Claims Condition 10 of this Policy) within three (3) months after the Arbitrator or Arbitrators or Umpire shall have made their award, all benefit under this Policy, shall be forfeited ”

 

(emphasis added).

 

42. It is clear that Condition 3 has expressly provided for Three-Month Limitation Period.

 

36

 

43. It is not disputed that the Plaintiff has a six-year limitation period (Six-Year Statutory Limitation Period) to file This Action based on the Policy from the date of the Fire as provided in s 6(1)(a) [actions founded on a contract] of the Limitation Act 1953 (LA).

 

44. Section 29 CA provides –

 

Agreements in restraint of legal proceedings void

 

29. Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

 

Saving of contract to refer to arbitration dispute that may arise

 

Exception 1—This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in the arbitration shall be recoverable in respect of the dispute so referred.

 

Saving of contract to refer questions that have already arisen

 

Exception 2—Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any law as to references to arbitration.

 

Exception 3—Nor shall this section render illegal any contract in writing between the Government and any person with respect to an award of a scholarship by the Government wherein it is provided that the discretion exercised by the Government under that contract shall be final and conclusive and shall not be questioned by any court. In this exception, the

 

37

 

expression “scholarship” includes any bursary to be awarded or tuition or examination fees to be defrayed by the Government and the expression —Government” includes the Government of a State.’

 

45. I am of the view that Condition 3 which provides for the Three-Month Limitation Period is void under s 29 CA to the extent that Three-Month Limitation Period is less than the Six-Year Statutory Limitation Period. I rely on the 2 decisions of our highest courts as follows:

 

(a) in a judgment given by LC Vohrah J, the Supreme Court decided in New Zealand Insurance Co Ltd v Ong Choon Lin (t/a Syarikat Federal Motor Trading) [1992] 1 MLJ 185, at 190-191 and 195, as follows –

 

“A Whether condition 19 of the fire policy contravenes s 29 [CA]

 

It was argued before the learned judge on behalf of the appellant that since the respondent’s action was filed 12 months after the fire the respondent’s claim was barred by condition 19 in the following words:

 

In no case whatever shall the company be liable for any loss or damage after the expiration of twelve months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration.

 

It would appear that the learned judge so found because the effect of condition 19 would be to deprive the respondent of his statutory right to bring an action under s 6(1)(a) [LA] …

 

38

 

It is clear therefore that the legal distinction that obtains in the relevant Indian decisions that have been referred to between a right and its remedy in the context of the consequences that flow therefrom does not exist in Malaysian law in the eyes of which the distinction is merely semantic. We do not think that a right can be dissociated from its remedy. We are therefore of the opinion that condition 19 of the fire policy contravenes s 29 [Ca]. The learned judge was therefore correct in holding that condition 19 of the fire policy is void by virtue of the imperative words of s 29 [CA] as it clearly limits the time within which the respondent can enforce his right under s 6(1)(a) [LA].”

 

(emphasis added); and

 

(b) the recent Federal Court’s judgment in Pacific Bank Bhd v Kerajaan Negeri Sarawak [2014] 5 AMR 228 concerned the construction of a clause in a guarantee and not in an insurance policy. In Pacific Bank Bhd, at p. 233, 234, 245-246, 248, 252-253, 255, 256-257 and 258, the Federal Court held in a judgment given by Zainun Ali FCJ that the particular wording of the clause in the guarantee in that case (which restricted the right to sue) did not contravene s 29 CA (which nullifies contractual clauses restricting enforcement of a right to sue by reducing the Six-Year Statutory Limitation Period) –

 

“[11] It would be instructive to have regard to the relevant terms

 

of the letter of guarantee. It reads:

 

This guarantee is effective from 25th April 1997 and shall expire on 24th April 1998. All claim, if any in respect of this guarantee shall be made during the guarantee period failing which it shall be deemed to have been discharged and released from all and

 

39

 

any liability, under this Guarantee (the impugned guarantee clause).

 

[12]

 

[13]

 

[14]

 

[15]

 

[20]

 

[21]

 

Decision

 

[87]

 

[88]

 

Thus both of the letters of guarantee and indemnity would expire on April 24, 1998. On April 14, 1998, i.e. well before the expiry of the said letter of guarantee and indemnity, the appellant informed Niah Native’s contractor of the impending expiry of the same and inquired as to whether they wished to renew the said guarantee. There was no response from Niah Native’s contractor.

 

By a letter dated May 8, 1998, the appellant wrote to the respondent to inform them that the said letter of guarantee had expired on April 24, 1998 and that it was thus cancelled.

 

The respondent duly acknowledged the appellant’s May 8, 1998 letter above and did not raise any objection nor did it dispute its content.

 

It is the appellant’s case that the cancellation of the letter of guarantee renders the guarantee null and void and of no further force and effect.

 

Then on October 20, 1998 i.e. six months after the expiration of the letter of guarantee, the respondent made a claim for the outstanding amount of RM118,790.69.

 

The respondent’s claim above was however rejected by the appellant, quite obviously on grounds that the letter of guarantee had expired. It is the appellant’s case that had it paid the respondent’s claim, the appellant would then have no recourse against Syarikat Mustapha & Ngu Timber Sdn Bhd since the letter o f indemnity had also expired by April 24, 1998.

 

After having construed the submission of both parties, we would answer the question posed before us in the negative for the following reasons:

 

Firstly, the language of the letter of guarantee is vital; that should a guarantee prescribes that a certain

 

40

 

event must happen before a cause of action accrues, for example, the making of a prior demand, then that has to be complied with before a cause of action can arise and a right to sue accrues; in other words, it is our view that whether a prior demand is a condition precedent to the creation of liability in a guarantee, depends on the precise terms of the contract. (See Orang Kaya Menteri Paduka Wan Ahmad Isa Shukri bin Wan Rashid v Kwong Yik Bank [1989] 3 MLJ 155.) (Emphasis added.)

 

[89] Thus in the instant appeal if the language of the letter of guarantee is clear i.e. where the said clause only prescribes a time limit for a demand to be made before a cause of action can arise, so be it. Its plain and ordinary meaning must be given.

 

[90] Following Orang Kaya’s case, where an obligation exists by virtue of a covenant, its extent is to be measured only by the words of the covenant.

 

[91] As such, a guarantor should not be made liable beyond the precise terms of his commitment (see Orang Kaya Menteri Paduka (supra)).

 

[92] In the instant appeal, the said clause therefore limits when a right to sue or cause of action will accrue to the respondent. (Emphasis added.)

 

[93] In short, once the right to sue or cause of action accrues, it does not affect the six years limitation period within which the respondent may sue.

 

[94] Thus the liability of the guarantor depends very much on the language of that instrument and the nature of the liability it creates.

 

[95] It is our view that a guarantor is entitled to insist that the terms of his obligation are strictly observed by the parties; he cannot be made liable for more than he had undertaken or bargained for.

 

[96] In this connection there is a need to distinguish between limiting a right and limiting the enforcement of that right.

 

41

 

[97]

 

[98]

 

[108]

 

[136]

 

[137]

 

[140]

 

As a matter of interest, s 29 [CA] is derived from and is in pari materia with the old s 28 of the Indian Contracts Act. (Emphasis added.)

 

The Indian courts have consistently held that s 28 only invalidates agreements which limits the time within which a person has to enforce his rights. It will not invalidate agreements which determines when a right arises or the time when a right will arise. In other words, there is the distinction between the accrual of cause of action and enforcement of cause of action. Time limitation on the accrual of cause of action does not infringe s 29.

 

It is apparent therefore that the Indian new s 28(b) above would, from the construction of it, clearly invalidate the letter of guarantee clause, if it were to exist in Malaysia -comparatively, our s 29 of the Contracts Act contains no such provision as provided for in the current s 28(b) of the Indian Contracts Act. Thus taken contextually, we need to apply our s 29 in accordance with its express terms and construe its plain and ordinary meaning. (Emphasis added.)

 

Thus as the authorities above have clearly shown, it is trite that parties to a contract are entitled to regulate or modify their rights in the event of breach and the rights of accrual of any cause of action in any way they deem fit. (Emphasis added.)

 

Coming back to the appeal before this court, it is clear that parties have expressly agreed that for liability on the part of the appellant to arise, a claim (demand) must be made during the guarantee period. In fact even the majority in the Court of Appeal had agreed that the word “claim” in the said clause meant a demand.

 

We have taken pains to illustrate the Indian authorities, for a reason. It is to indicate the distinction between an agreement prescribing the time limit in which a cause of action may arise (and then giving rise to a right to sue), and an agreement which limits the time period for suing.

 

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[156]

 

[168]

 

[169]

 

[170]

 

[175]

 

[176]

 

Having said that, it is a truism that a guarantee unlike an insurance, is not a contract uberrimae fidei. This observation was stated clearly by the Federal Court in Heng Cheng Swee v Bangkok Bank Ltd [1976] 1 MLJ 267, where it was held that a contract of guarantee depends primarily on its expressed terms and cannot be varied by oral evidence; secondly, to determine the defendant’s rights which are embodied in the guarantee, it is only necessary to look at the guarantee itself.

 

As s 29 [CA] clearly stipulated: …

 

The operative words are “enforcing his rights”. The legal definition of “enforce” inter alia, includes to “enforce is to put in execution of a judgment”.

 

(Stroud’s Judicial Dictionary of Words and Phrases, Seventh Edition Volume I Thomson Sweet & Maxwell 2006 at p 841.)

 

Thus the word means to ensure observance of or obedience to (a law, decision) or to impose by force. Clearly the word is synonymous with the words “impose” and “execute” which would come with the force of law or by way of court judgment.

 

Thus, it is our view that the time period is a limitation for the making of a claim in the event of a default. Following the ordinary meaning of the language of the letter of guarantee, as accepted by the respondent and the guarantor, the claim must be made within the guarantee period upon an event of default. The word “claims” which entails a demand for the payment when default occurs should be construed in its ordinary sense and meaning and thus the limitation paragraph does not amount to restricting one’s right to enforce under s 29.

 

The impugned clause of the letter of guarantee therefore does not offend s 29 and thus the question posed is answered in the negative .”

 

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(emphasis added).

 

The Federal Court in Pacific Bank Bhd, at p. 253-253, however affirmed the application of New Zealand Insurance Co Ltd in respect of limitation clauses in insurance policies, as follows –

 

“[142] Looking firstly at the New Zealand Insurance case, it

 

is seen that the relevant clause therein differs from the relevant clause in the instant appeal. (Emphasis added.)

 

[143] The clause in the New Zealand Insurance case reads:

 

In no case whatever shall the company be liable for any loss or damage after the expiration of twelve months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration.

 

[144] Thus in the New Zealand Insurance case, a claim demand was submitted to the insurance company within the validity period but it was rejected. The beneficiary then filed a suit after the expiry of the twelve months period as prescribed in the clause. It was alleged by the insurance company that the claim was invalid since it was filed late, outside of the twelve month period. The then Supreme Court held that such a clause would be rendered void by s 29.

 

[145] To reiterate, the facts in the instant appeal differs from the facts in the New Zealand Insurance case, since the latter case involved a claim made within time although the suit was filed outside of the agreed period. …”

 

(emphasis added).

 

44

 

46. I am of the view that the Three-Month Limitation Period in Condition 3 clearly restricts the Plaintiff’s right to enforce its contractual rights under the Policy by reducing the Six-Year Limitation Period to the Three-Month Limitation Period. Condition 3 is not a clause which restricts the Plaintiff’s right to sue under the Policy. Accordingly, based on New Zealand Insurance Co Ltd and Pacific Bank Bhd, the Three-Month Limitation Period in Condition 3 is void under s 29 CA.

 

47. Our apex court has decided New Zealand Insurance Co Ltd on 7.12.1991 and this judgment has been reported in 1992. Despite this decision of our highest court since 7.12.1991, the Policy contained the Three-Month Limitation Period which clearly contravened s 29 CA. It is my hope that insurance companies will ensure that their insurance policies comply with s 29 CA.

 

H. Has Plaintiff proved Defendant is liable under Policy for loss suffered by Plaintiff due to Fire?

 

48. In American Home Assurance Company v Nalin Industries Sdn Bhd

 

[1993] 2 AMR 1881, at 1885-1886, Eusoff Chin SCJ (as he then was) decided as follows in the Supreme Court:

 

“It is of course incumbent on the respondent as the plaintiff to establish that the loss it suffered arose out of an accident to an object covered by the policy. In Regina Fur Co Ltd v Bosom [1958] 2 Lloyd’s Rep 425, Evershed MR held that the onus of proving that its case fell within the policy, remained at all times with the insured.

 

45

 

While this case serves only to reaffirm the trite position that the onus is on the plaintiff to establish that it comes under the peril insured against, the burden is not on the respondent (plaintiff) to establish that the event which took place, namely the rupture of the coil, falls within any of the exceptions to the definition of ‘accident’ in the policy. That onus is on the appellant to prove that the rupture falls under the exception and was therefore not an accident ”

 

(emphasis added).

 

49. American Home Assurance Company has been followed by Mohd. Kamil Awang J in the High Court in the following cases:

 

(a) Tuong Aik (Sarawak) Sdn Bhd v Arab-Malaysian Eagle Assurance Berhad [1996] 1 AMR 871, at 876; and

 

(b) Tang Tung Thian & Anor v United Oriental Assurance Sdn Bhd

 

[2000] 5 MLJ 696, at 701.

 

50. It is clear that the Plaintiff bears the legal burden under ss 101(1) and 102 EA to prove cumulatively the 3 following matters:

 

(a) the Fire is a peril or risk insured under the Policy (Insured Risk);

 

(b) if the Fire is an Insured Risk, the loss and damage suffered by the Plaintiff is ‘‘directly or proximately caused” by the Fire (Causation Issue); and

 

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(c) if the Plaintiff’s loss and damage is “directly or proximately caused’ by the Fire, the extent of such a loss and damage (Quantum Issue).

 

51. Whether the Fire is an Insured Risk or not under the Policy, is a question of construction of the Policy. Interpretation of a contract, including an insurance policy, is a question of law to be decided by the court and not by witnesses through their oral evidence – please see Gopal Sri Ram JCA’s (as he then was) judgment in the Court of Appeal case of NVJ Menon v The Great Eastern Life Assurance Company Ltd [2004] 3 CLJ 96, at 103-104.

 

52. Section 1 of the Policy provided that subject to the terms and conditions contained in the Policy, the Defendant agreed to “pay or make good” to the Plaintiff the “actual value” of the Plaintiff’s property insured under the Policy which had been destroyed or damaged by fire. It is clear that the Fire is an Insured Risk under the Policy.

 

53. Before I discuss the Causation and Quantum Issues, I will address the Defendant’s contention that the Plaintiff has failed to plead with sufficient particulars in its Amended Statement of Claim (ASOC) the special damages to be claimed from the Defendant. I have no hesitation to reject this submission on the following grounds:

 

(a) paragraphs 7 and 8 ASOC contained sufficient particulars regarding the loss and damage suffered by the Plaintiff due to the Fire

 

47

 

(Plaintiff’s Alleged Loss), so as to give adequate notice to the Defendant to defend This Action;

 

(b) the Defendant did not request or demand for further and better particulars (FBP) of the Plaintiff’s Alleged Loss from the Plaintiff at any time. In fact, the Defendant did not file any application to court under Order 18 rule 12(3) RC for a court order to compel the Plaintiff to supply the Defendant with FBP regarding the Plaintiff’s Alleged Loss;

 

(c) during pre-trial case management of this case under Order 34 RC, the Defendant did not inform the court that the Defendant needed FBP concerning the Plaintiff’s Alleged Loss to defend This Action; and

 

(d) under Order 1A RC, the court “shall have regard to the overriding interest of justice and not only to the technical non-compliance with” RC. Order 2 rule 1(2) RC provides that RC “are a procedural code” which is “subject to the overriding objective of enabling the Court to deal with cases justly”. It is clear that under Order 1A and Order 2 rule 1(2) RC, the court is mandated to decide cases justly unshackled by contentions that there has been technical noncompliance with RC.

 

54. I am satisfied that the Plaintiff has proven on a balance of probabilities that the Plaintiff has suffered loss and damage due to the Fire up to the Amended Sum. This decision is premised on the following reasons:

 

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(a) I find SD3 to be an expert loss adjuster within the meaning of s 45(1) and (2) EA based on the fact that SD3 has worked as a loss adjuster with MSSB for 17 years. Clearly, SD3 has a wealth of experience as a loss adjuster. The Plaintiff has not challenged SD3’s expertise. In fact, the ASOC is based on the Amended Sum stated in MSSB’s Report; and

 

(b) SD3 has conducted a detailed investigation in respect of the Fire and the result of SD3’s investigation is contained in MSSB’s Report. MSSB’s Report clearly shows that the Plaintiff has suffered loss and damage due to the Fire up to the Amended Sum.

 

Based on the above reasons, the Causation and Quantum Issues are resolved in the Plaintiff’s favour.

 

55. I cannot accept the Defendant’s contention that the Plaintiff cannot rely on MSSB’s Report. I decide as such for the following 2 reasons:

 

(a) once a piece of evidence is admitted at a trial, any party may rely on this evidence, irrespective of which party tenders such evidence. Once oral or documentary evidence is placed before the court, all parties are entitled to submit on its weight and it is up to the court as a decider of fact, to give any weight or otherwise to such evidence. This court attaches great weight to MSSB’s Report because as explained above, SD3 is a competent loss adjuster and has investigated extensively in respect of the Fire; and

 

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(b) the Defendant itself has relied on MSSB’s Report to allege that the Plaintiff has made a fraudulent insurance claim. By the Defendant’s own reliance on MSSB’s Report, the Defendant is estopped from denying the other contents of MSSB’s Report regarding the loss and damage suffered by the Plaintiff due to the Fire.

 

I. Is Defendant’s Repudiation valid?

 

56. Once the Plaintiff has proven on a balance of probabilities that the Plaintiff has suffered loss and damage due to the Fire up to the Amended Sum, the onus shifts to the Defendant to justify the Defendant’s Repudiation. In Modern Universal Sdn Bhd, at p. 750, Prasad Sandosham Abraham J (as he then was) decided as follows in the High Court:

 

“ The onus is on the insurance company ie, the defendant to justify the repudiation of the plaintiff’s claim under the policy.”

 

(emphasis added).

 

57. Before I discuss the validity of the Defendant’s Repudiation, I will deal with 3 contentions by the Plaintiff as follows:

 

(a) whether the Defendant’s Repudiation can be lawfully made before the Defendant’s receipt of a “final” MSSB’s Report?;

 

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(b) whether an adverse inference under s 114(g) EA should be made against the Defendant for the Defendant’s failure to produce MSSB’s Synopsis?; and

 

(c) whether the Defendant has pleaded with sufficient particulars in the Defence regarding the alleged fraudulent claim by the Plaintiff as required by Order 18 rule 12(1)(a) RC?

 

58. After dealing with the above 3 subsidiary issues raised by the Plaintiff, I will discuss the validity of the Defendant’s Repudiation as follows:

 

(a) irrespective of the terms and conditions of the Policy, is there a rule of law which allows the Defendant to avoid all liability under the Policy due to the Plaintiff’s fraudulent claim?;

 

(b) has the Plaintiff breached an implied duty under the Policy (to act in utmost good faith) by making a fraudulent claim?; and

 

(c) can the Defendant’s Repudiation be justified under Condition 3?

 

J. Could Defendant’s Repudiation be made before receipt of MSSB’s Report?

 

59. The Plaintiff has submitted that the Defendant’s Repudiation (by way of Messrs IHCM’s Letter dated 4.3.2014) has been made before the

 

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Defendant’s receipt of MSSB’s Report dated 29.3.2014. I do not find such a fact to invalidate the Defendant’s Repudiation. This is due to the following reasons:

 

(a) there is evidence from SD1 that the Defendant’s Repudiation has been made based on MSSB’s Synopsis which is “complete”; and

 

(b) there is no evidence that there is any contradiction between MSSB’s Synopsis and MSSB’s Report. In fact, the ASOC depends solely on MSSB’s Report to prove the Causation and Quantum Issues.

 

Based on the above reasons, it cannot be said that the Defendant’s Repudiation is baseless. Having said that, it is prudent for an insurer to repudiate liability under an insurance policy only after having received and after having considered carefully the contents of a “finar report from its loss adjusters (hopefully with the advice of the insurer’s legal advisors, both internal and external). This is because firstly, until a loss adjuster has signed his or her report, the loss adjuster is entitled to withdraw or modify his or her draft expert opinion. Secondly, a decision by an insurer to repudiate liability under an insurance policy (Insurer’s Repudiation) before receipt of a “finar report from its own loss adjusters, may render the insurer vulnerable to allegations that the Insurer’s Repudiation is baseless and is made in bad faith.

 

K. Should an adverse inference be drawn against Defendant for failing to adduce MSSB’s Synopsis?

 

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60. The Plaintiff has invited this court to draw an adverse inference under s 114(g) EA against the Defendant in respect of the Defendant’s failure to produce MSSB’s Synopsis as evidence in this case.

 

61. An adverse inference under s 114(g) EA can only be drawn against a party in a suit if the party has suppressed material evidence. This is clear from the Supreme Court’s judgment given by Mohd. Azmi SCJ in Munusamy v Public Prosecutor [1987] 1 MLJ 492, at 494, as follows:

 

“It is essential to appreciate the scope of section 114(g) lest it be carried too far outside its limit. Adverse inference under that illustration can only be drawn if there is withholding or suppression of evidence and not merely on account of failure to obtain evidence.

 

It may be drawn from withholding not just any document, but material document by a party in his possession, or for nonproduction of not just any witness but an important and material witness to the case.”

 

(emphasis added).

 

62. I decline to invoke an adverse inference under s 114(g) EA against the Defendant for its failure to produce MSSB’s Synopsis because –

 

(a) as explained above, there is no evidence to show any contradiction between MSSB’s Synopsis and MSSB’s Report. As such, there is no suppression of material evidence by the Defendant in respect of MSSB’s Synopsis. In fact, the Plaintiff has also relied on MSSB’s Report;

 

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(b) the Plaintiff only requested once for MSSB’s report by way of Messrs MD’s Letter dated 31.3.2014. As explained above, Messrs MD’s Letter dated 31.3.2014 was marked “without prejudice”. Understandably, the Defendant’s solicitors could not be faulted for not responding to Messrs MD’s Letter dated 31.3.2014; and

 

(c) there is no prejudice to the Plaintiff by the non-production of MSSB’s Synopsis as SD3 (who prepared MSSB’s Report) has been called by the Defendant to testify in this case. The Plaintiff’s learned counsel has cross-examined SD3 at length and could have questioned SD3 in respect of MSSB’s Synopsis.

 

L. Did Defence particularise alleged fraudulent claim by Plaintiff?

 

63. I have perused paragraphs 5, 6(i) to (viii) and 9 of the Defence and I am satisfied that the Defendant has fulfilled Order 18 rule 12(1)(a) RC by pleading with sufficient particulars in the Defence regarding the alleged fraudulent claim by the Plaintiff (Defendant’s Allegation). In any event, the Plaintiff is barred from raising such a technical contention due to the following reasons:

 

(a) the Plaintiff did not request or demand at any time for FBP regarding particulars of the Defendant’s Allegation. Nor did the Plaintiff file any application to court under Order 18 rule 12(3) RC for a court order to compel the Defendant to supply the Plaintiff with FBP regarding the Defendant’s Allegation;

 

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(b) during pre-trial case management of this case under Order 34 RC, the Plaintiff did not inform the court that the Plaintiff needed FBP concerning the Defendant’s Allegation to prosecute This Action; and

 

(c) Order 1A and Order 2 rule 1(2) RC will bar such a technical objection by the Plaintiff.

 

M. Is there a rule of law to allow an insurer to avoid liability under an insurance policy due to insured’s fraudulent claim?

 

M1. Malaysian case law

 

64. In the following Malaysian High Court cases (in chronological order), insurers had alleged that fraudulent claims had been made by the insured:

 

(a) Muhammad Kamil b Awang J held in Tuong Aik (Sarawak) Sdn Bhd, at p. 880-881, 884 and 885, as follows –

 

“The second issue is whether the defendants are entitled to repudiate the claim on the ground that the plaintiff had failed to observe and exercise the utmost good faith in putting up a fraudulent claim.

 

The duty of utmost good faith extends to the making of claims and a breach of such duty entitles the insurers to avoid the plaintiff’s claim under the marine policy. In the case of Black

 

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King Shipping Corporation And Wayang (Panama) SA v Mark Ranald Massie (The “Litsion Pride”) (1985) Vol 1 LLR 438, Hirst J held that “the duty of utmost good faith extended to claims” and “the duty not to make fraudulent claims and not to make claims in breach of the duty of utmost good faith was an implied term of the policy.”Further in Continental Illinois National Bank & Trust Co of Chicago And Xenofon Maritime SA v Alliance Assurance Co Ltd (The “Captain Panagos DP”) (1986) Vol 2, LLR 511-512, Evans J stated thus –

 

“… But fraud, or any other breach of what I will assume is continuing duty of utmost good faith in relation to the making of claims, also breaks an implied term of the contract, whether or not facts exist which would ground a genuine claim. That breach entitles the insurer to avoid the policy ab initio under s 17 of the Marine Insurance Act 1906 ….”

 

What then is a fraudulent claim? Halsbury’s Laws of England (Vol 25) p 273 provides:

 

“A claim which is put forward when the assured knows that he has suffered no loss or which is supported by false evidence is clearly fraudulent.”

 

“A particular kind of fraud is immaterial. It may contain false statement of facts or it may be supported by fraudulent evidence.” [General Principles of Insurance Law (supra)].

 

A claim which contains a false statement of facts or which is supported by false evidence is clearly fraudulent. …

 

On the totality of the evidence, the defendants had proved beyond reasonable doubt that the plaintiff had submitted a fraudulent claim in that the plaintiff had falsely stated that items 11, 13, 14, 15 and 16 in Exhibit P9 had been installed and repaired on Asiaweld VII. The plaintiff in making the claim knew or ought to have known that these items had not been installed or repaired. Further the plaintiff had submitted a false evidence to support its claim in the form of

 

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the photographs of another barge and not Asiaweld VII, see Exhibit D15(a)-(d).

 

In The “Litsion Pride” (supra), the shipowners submitted, inter alia, false evidence in a letter dated August 2, 1982, which was concocted and false information invented to deceive the underwriters. The House of Lords held that the shipowners were guilty of material fraud in relation to the letter of August 2, 1982.

 

In Dome Mining Corporation Ltd v Drysdale (1931) LLLR Vol 41109, the plaintiff submitted false evidence by putting forward an engineer’s report containing false evidence to support their claim. It was held that the claim was fraudulent and the claim was avoided.

 

In the present case, the consequence of making a fraudulent claim by the plaintiff, it forfeits all benefits under the Marine Policy. See Dome Mining Corporation’s case (supra). However, the plaintiff’s claim is fraudulent in part and appears to be honest in relation to other parts of the claim, the entire claim fails because the same becomes tainted with dishonest and fraudulent intent.

 

In Lek v Mathews (1927) LLLR Vol 29-141, the assured had put forward fraudulent claims in relation to part of the stamp collections insured under the policy. The House of Lords gave judgment for the underwriters and the entire plaintiff’s claim failed. Further, in the case of Teh Say Cheng v North British And Mercantile Insurance Co Ltd (1921) FMSLR 248, the plaintiff claimed for RM67,003.42 but could only prove a loss amounting to RM5,993.73 and failed to adduce any satisfactory evidence as to the balance. The court held that there was a fraud on the defendants and the plaintiff was entitled to recover nothing under the policy.

 

Based on the authorities above, although the plaintiff’s claim appears to be genuine in part and fraudulent in part, the entire claim fails because the same is tainted with fraudulent intent.

 

In the present case, the plaintiff had breached the duty of utmost good faith by making a fraudulent claim. In consequence of such breach, the defendants may avoid the policy or simply defend the claim without avoiding the policy. The defendants had elected to repudiate liability and defend the claim without avoiding the policy. In my judgment, the plaintiff was guilty of

 

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making a false claim, and in the event, I would give judgment in favour of the defendants .”

 

(emphasis added);

 

(b) in Wong Cheong Kong Sdn Bhd, at 921-922, 923, 927 and 929-930 and, Vincent Ng J (as he then was) decided as follows –

 

“The law on fraud as applicable to insurance claims is lucidly and aptly stated by Raoul Colinvaux in ‘The Law of Insurance’

 

(5th encl at p. 167) thus:

 

One of the consequences of the principle that a contract of insurance is one of the utmost good faith, (see Heyman v. Darwins [1942] AC 356, 365) is that fraudulent claims made under it give the insurers the right to avoid (see Stebbing’s Case [1917] 2 KB 433, 438) the whole policy. Thus, if the assured makes a fraudulent claim he cannot recover at all (See Norton v. Royal [1885] 1 TLR 460), and conditions in the policy to this effect (see Jureidini v. National British [1915] AC 499) are declaratory of the legal position without them.

 

A statement made by the assured is fraudulent if he knows it to be false and makes it in order that the insurers may act upon it. The most common examples are claims made by an assured who has himself destroyed the property insured, or grossly exaggerated claims. Mere exaggeration, however, is not conclusive evidence of fraud, (see London Assurance v. Clare [1937] 57 L1LR 254, 268) for value is often a matter of opinion, though such exaggeration will amount to fraud if it is dishonestly made, or so greatly in excess of the true amount as to be incompatible with good faith (see Chapman v. Pole [1870] 22 LT 306).

 

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Fraud entitles the insurers to avoid the whole policy, and not merely repudiate liability on it. The burden of proving fraud is on the party who alleges fraud and in cases of criminal fraud he is required to prove it beyond reasonable doubt. See: Saminathan v. Pappa [1981] 1 MLJ 121; Tai Lee Finance Co. Sdn. Bhd. v. Official Assignee & Ors. [1983] 1 MLJ 81 and Boonsom Boonyanit @ Sun Yok Eng v. Adorna Properties Sdn. Bhd. [1995] 4 CLJ 45. …

 

The linchpin of the defendants’ avoidance of the whole policy upon their allegation of fraud, is found in condition 13 of the policy, which reads: …

 

The Law On Exaggerated Claims

 

An exaggerated claim will not relieve the insurer of liability unless the claim can be shown to be fraudulent. An inflated claim will be considered fraudulent only if it is clear, upon the criminal burden of proof beyond reasonable doubt, that the assured had intended to defraud the insurers or that the overestimation of loss is so serious as to lead to the inference that the assured must have intended to defraud them. Whether a claim was put in with the intention of defrauding the insurance company is largely a question of fact to be inferred from the surrounding circumstances, which must point towards such intention to defraud; bearing also in mind that the assured may honestly over estimate his loss and that sometimes this may be due to mistake.

 

In the event, for all the above reasons, I have come to the conclusion that the defendants have utterly failed to discharge their criminal burden of showing that the plaintiffs had submitted a fraudulent claim or declaration, such as would entail forfeiture of benefit or avoidance of the policy under condition 13 of same. Indeed, from a careful study of the evidence

 

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from both sides, and having also to consider the contents of exh D42, it is my judgment that neither was such burden discharged by the defendants on a balance of probabilities (civil burden). Furthermore, I find that no intention to commit fraud on the part of the plaintiffs has been shown .”

 

(emphasis added);

 

(c) in Sen Hua Tat Furniture Sdn Bhd v Kurnia Insurans (M) Bhd

 

[2011] 1 LNS 1180, at paragraphs 12-14, Umi Kalthum JC (as she then was) gave the following judgment –

 

“COURT’S DECISION:

 

12. The Court’s answer to the question on the point of law is in the affirmative and thereby dismisses the Plaintiff’s action with costs. The Court does so for the following reasons. The fire insurance policy, being a contract of insurance, is of a nature known as contract uberrimae fidei, that is a contract of fullest confidence. As such, the duty of good faith on the part of the Plaintiff continued when the claims by the Plaintiff were made to the Defendant – see Galloway v. Guardian Royal Exchange (UK) Ltd, (C.A.) (supra). It has been proven by the Adjusters’ Final Report that doctored or manipulated invoices submitted to the Defendant amounted to rM8,113,610.00 for sale invoices and RM5,480,180.00 for the purchase invoices. Over and above that, the Plaintiff made a claim for RM2,773,497.00. In contrast, the Adjusters found only RM617,725.96 worth of claim to be substantiated. The Court can only come to the irresistible [sic] conclusion that the Plaintiff had grossly exaggerated its claims to the extent that it must be inferred that it was with the intent to defraud the Defendant.

 

13. It is unacceptable to the Court for the Plaintiff to argue that the Plaintiff did not make any fraudulent claim as the Statement of Claim had been amended to the figure certified by the Adjusters as RM617,725.96. This was done after the finding of fact by the Adjusters, to preempt the Defendant’s case against the Plaintiff. This attempt by the Plaintiff to do so shows nothing but bad faith to say the least. It does not obliterate the fact that the Plaintiff had

 

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made the grossly exaggerated claim which must taint his so called —proper” claim. In Galloway’s case, there was an attempt by the assured to argue that his false claim for a computer worth £2,000, stolen during a burglary, would not disentitle him from claiming £16,133.94 for genuine loss. This was what Lord Woolf MR had to say (at page 5 of Lexis Nexis down loaded version):“… In determining whether or not the fraud is material so that it has that effect, one of course has, in my judgment, to look at the whole of the claim.

 

But if you have a claim (which admittedly here is for a much more substantial sum than the part which is fraudulent) where the part which is fraudulent is nonetheless in relation to £2,000 (which amounts to about ten per cent of the whole) that is an amount which is substantial and therefore an amount which taints the whole), I would take the view that the consequences are that the view of the Judge was right and the whole of the claim was thus tainted by the fraud. The position is that the contract remains one of good faith and the insured is required to exercise good faith in the making of the claim. In making of the claim the facts are normally wholly within the insured’s knowledge. The insurers are dependent on the insured exercising good faith in order to evaluate the claim. ”

 

In this case, the fraudulent claim amounted to 70% of the Plaintiff’s original claim. It would be a travesty of justice for a plaintiff to be allowed to amend his statement of claim subsequently, to only include — true” claims, and his claim be allowed for being ‘truthful’ upon his attempts to defraud the Insurer being found out. This the Court will not allow.

 

POINT OF CONSTRUCTION:

 

B. Whether clause 15 of the Policy nevertheless forfeits the benefit of the Policy to be received by the Plaintiff.

 

14. On the second issue, Clause 15 of the Policy states:-

 

“If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or any one acting on his behalf

 

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to obtain any benefit under this Policy; or, if the loss or damage be occasioned by the willful act, or with the connivance of the Insured; or, if the claim be made and rejected and an action or suit be not commenced within 3 months after such rejection, or (in the case of an Arbitration taking place in pursuance of Condition 22 of this Policy) within three (3) months after the Arbitrator or Arbitrators or Umpire shall have made their award, all benefit under his Policy shall be forfeited.” [Emphasis added.]

 

It is clear from the provisions of Clause 15 that the Plaintiff has forfeited its rights to benefit from the Policy on the ground of making fraudulent claims to the tune of RM1,382,274.04 (on the original claim), and has employed fraudulent means to support its claim for the sums of RM8,113,610.00 and RM5,480,180.00 found by the Adjusters to be amounts due under doctored or manipulated invoices submitted. See Chong Soo Sin (T/A Syarikat Perniagaan Moden) v. Industrial & Commercial Insurance (M) Berhad, Central Bank of India, Ltd. v. Guardian Assurance Co, Ltd. (supra).”

 

(emphasis added);

 

(d) in Metro Gain Sdn Bhd v. Commerce Assurance Bhd [2012] 9 MLJ 682, at 689, 689-691, 691-692, 696-697, 697-698 and 702, Gunalan Muniandy JC held as follows –

 

—[10] In insurance law, where the alteration in the usage of the premises is in such a manner that would aggravate or increase the risk of damage when fire occurs it would be a breach of the fire policy if it contains a condition similar to our condition 9(a) (see Farnham v Royal Insurance Co Ltd [1976] 1 Lloyd’s Rep 449; Marzouca v Atlantic & British Commercial Insurance Co Ltd [1971] 1 Llyod’s Rep 449).

 

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[11] I agree with D’s contention that P’s failure to duly notify P of the alteration in the circumstances of occupancy as referred to above was a concealment of the actual status of the business which would constitute a breach of the clear terms of condition 9(a) of the FMD policy/8(c) of the FCL policy. This by itself would entitle D to repudiate liability under these policies as compliance with all the stipulated conditions was a condition precedent for coverage under the policies.

 

[13] By virtue of the above, the insured had first to forthwith give notice to the insurer when a loss or damage happens and within 15 days after that, or such further time that the insurer may allow, submit a written claim for the loss or damage containing in particular an account as may be reasonably practicable the details of the damage and amount of the loss or damage, excluding of profit of any kind.

 

[14] Where notice has been made a condition precedent for a claim under a policy, the insurer would be right to deny liability if it is not strictly complied with. As

 

explained by Poh Chu Chai on the Law of Insurance (5th Ed) at p 821:

 

A term requiring an insured to give a notice of loss to an insurer must be made a condition precedent to liability of the insurer before the insurer is entitled to disclaim liability of the loss. In other words, the liability of an insurer to indemnify an insured under the policy is made to depend on the insured fulfilling his duty to give notice of the loss to the insurer (see Stoneham v Ocean Railway & General Accident Insurance Co (1887) 19 QBD 237).

 

In order to avoid liability under the policy in this instance, no necessity in law is imposed on the insurer

 

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to show that he has been prejudiced by the said noncompliance of due notice (see Pioneer Concrete (UK) Ltd v National Employers Mutual General Insurance Association Ltd [1985] 1 Lloyd’s Rep 274).

 

[15] P’s list of claim was only received by Crawford on 12

 

April 2006 (see Crawford’s Final Report — exh D93) which was almost six months from the date of incident. There was no record of P having applied for and being granted an extension of time by D to submit its claim. P’s answer to the non-compliance with condition 12 was that P took steps to promptly notify D by its letter of 18 October 2005. Six days after the incident (exh P2) stating that P intended to make a ‘full loss claim’. Further, that P had been purchasing fire insurance policies from D for many years and had never previously made any claim. After the fire, (‘A term requiring an insured to give a notice of loss to an insurer must be made a condition precedent to liability of the insurer before the insurer is entitled to disclaim liability for the loss. In other words, the liability of an insurer to indemnify an insured under the policy is made to depend on the insured fulfilling his duty to give notice of the loss to the insurer.’ (see Stoneham v Ocean Railway & General Accident Insurance Co (1887) 19 QBD 237). In order to avoid liability under the policy in this instance, no necessity in law is imposed on the insurer to show that he has been prejudiced by the said non-compliance of due notice (see Pioneer Concrete (UK) Ltd v National Employers Mutual General insurance Association Ltd [1985] 1 Lloyd’s Rep 274). D’s adjuster (‘DW2’) was at the premises for investigation and was duly given all the required information which would have enabled him to do a verification with the Customs Department but he failed to do so. Finally, that P2 was a notice of loss ‘as may be reasonably practicable’ compared to Crawford who took a year to complete their report.

 

[16] With respect, I did not see how the above facts could be a ground for dispensation of compliance with the mandatory requirement of claim for loss within 15 days. To begin with P2 could by no stretch of language be considered a claim as envisaged in condition 12. It could amount to no more that a notice of intention to make a full

 

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loss claim. The late submission of the claim, well in excess of the 15 day deadline, without further time being given by D, was a clear-cut breach of condition 12 that certainly gave D the right to repudiate liability on this ground alone. Whether it was unconscionable under the circumstances of the case for D to allege breach of condition 12 was an irrelevant factor.

 

[17] It was also D’s case that P had breached condition 12 by including in their claim ‘profit of any kind’ by adding in it import duties and sales tax deliberately knowing that they were not entitled to this claim as they had been exempted from such tax/duty. The exemption was by virtue of their license as a ‘licensed manufacturing warehouse’ (‘LMW’) under which the Customs Department exempted them from paying the said import duty. P’s total claim of over RM4.9m included import duty and sales tax amounting to almost RM1m. As there was no possibility of re-export to third countries, the question of imposition of sales tax did not arise. D’s counsel (‘D/C’) rightly pointed out that they (P) had throughout the entire trial not provided any proof that they had paid any of the sales tax and import duties that were part of their list of claim.

 

[18] P contended that as the imported materials had all been destroyed in the fire and could not be manufactured, the Customs Department would impose import duties that P would be liable to pay. This was pure speculation without any evidential basis in support of the fact asserted. As for sales tax, there was absolutely no mention whatsoever at the trial that the tax was payable by P. On this score, D/C submitted that P had deliberately and knowingly inflated their insurance claim by at least 20% through inclusion of the sales tax and import duties that had not been proven to have been paid or to be payable.

 

[19] The short answer to P’s contention would be that condition 12 explicitly stipulates that the claim should be for loss or damage that happens. I agree with the defence argument that it was wrong for P to claim for import duties that may be imposed when in all likelihood, it may not be imposed as P was exempted

 

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from paying the duties by reason of being a manufacturer. There was absolutely no proof that the duties would be imposed due to the goods destroyed in the fire being incapable of being manufactured. By the same token, there was no question of sales tax being imposed as there was no possibility of re-export of goods manufactured from the imported materials. Hence, I held that the assertion that P had included ‘profit of any kind’ in their list of claim had been made out and had, thereby, clearly infringed condition 12 in this respect.

 

Conditions 15 of the FMD and 12 of the FCL policies

 

[20] Both conditions are identical. For cease of reference, they read as follows:

 

If the claim be in any respect fraudulent, or jf any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under this Policy; or, if the loss or damage be occasioned by the willful act, or with the connivance of the Insured;… all benefit under this Policy shall be forfeited.

 

[37] Based on the above evidence and the fact that exhs P39 and P40 were not properly admitted into evidence by calling the maker, I upheld the defence submission that these exhibits should be disregarded as mere fabrications. Apart from proof of payment not being produced, the reluctance to properly prove P39 by calling the maker raised suspicions as to its genuineness. If the invoice is found to be false, the delivery order (exh P40) has also to be regarded as false.

 

[38] Apart from the lack of credibility and unreliability of the evidence of P’s witnesses as highlighted above, DW2, a chartered loss adjuster and general manager of Crawford, concluded in his report (exh D93) based on his personal investigations that the invoices from

 

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Familiar, Ningbo and Hangzhou were all suspect. His conclusions on the discrepancies in these documents were hardly challenged or contradicted in crossexamination. He was convinced especially that the two invoices from Familiar were clearly falsified documents. As for the purported exports from China, his finding was that the various transactions supported by the unproven invoices were not genuine. Amongst others, P had failed to provide the documents requested for showing the chain of delivery of the products from China to P’s premises, such as the bill of lading from the source in China. P gave the excuse that the China suppliers were uncooperative. Yet, he managed to call witnesses purportedly from the suppliers to support his claim. It has to be reiterated that the competency of these witnesses to give credible evidence was highly questionable.

 

[39] Based on my analysis of the above evidence as a whole, I found sufficient grounds to hold that P was in breach of condition 15 by using fabricated documents, and consequently submitted fraudulent and grossly exaggerated claims in obtaining benefits under the policy. There was, in my finding, enough evidence to hold that D had, on a balance of probabilities, proved fabrication of the supporting documents as alleged. The standard of proof of fabrication or forgery in civil case, even though high, is on a balance of probabilities. …

 

[41] In the circumstances, I found that, on the totality of the evidence adverted to, D had made out a case for repudiation of liability under the two policies for breach of the explicit terms of conditions 15 and 12. A claim shown to be submitted with fraudulent intent, as in the instant case by submitting falsified documents and exaggerated figures, entitles the insurer to avoid liability. …

 

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[53] In this case, irrespective of whether the fire was accidental or caused by arson, there is, in my finding, clear evidence of the claim being dishonestly exaggerated by falsification of at least some of the documents tendered to support the claim. Falsification or forgery, compared to fraud, has to be proved only on a balance of probabilities. P’s act is in clear breach of condition 15 of the FMD policy and condition 12 of the FCL policy. Even if the court is wrong on this finding, P has breached condition 12 of the FMD Policy. I am compelled to hold that, as observance of all the stipulated conditions, is a condition precedent for recovery by the insured under both policies, it was right and lawful for D to repudiate liability under both the policies

 

(emphasis added); and

 

(e) Prasad Sandosham Abraham J (as he then was) decided as follows in Modern Universal Sdn Bhd, at p. 752, 761-762, 763-764 and 764-765 –

 

“[7] The second ground raised by the defendant to repudiate the said insurance policy appearing on pp. 1-18 of Bundle B. The defendant argues the fact the plaintiff did not possess a license to operate a “disco/karaoke/spa/inn operator” and the non-disclosure of the same is a breach of the duty of good faith and would entitle the defendant to repudiate the policy and I again turn to condition 10 (p. 8 of Bundle B) which I now set out.

 

10. Fraud

 

If the proposal or declaration of the Insured is untrue in any respect, or if any material fact affecting the risk be incorrectly stated therein or omitted there from, or if this Insurance or any renewal thereof

 

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shall have been obtained through any misstatement, misrepresentation or suppression, or if any claim made shall be fraudulent or exaggerated, or if any false declaration or statement shall be made in support thereof, then, in any of these cases, this Policy shall be void.

 

[21] I note the defendant’s basis to repudiate liability lies in the breach of condition 10 of the said insurance policy. It is also to be noted that the plaintiff did not produce their own expert report to rebut that of the defendant. From the facts it appears here looking at all the circumstances of the case, the expert reports and surrounding circumstances I hold the defendant is entitled to repudiate liability under the said policy. I find that there is a high probability that the fire was caused and/or attributed to the plaintiff. …

 

[23] With regards to the claim actually made and the invoices tendered in support of the claim the defendant plead —Dura lex sed ita scripta est” which simply means if the assured shall make any claim knowing the same to be false or tainted with elements of fraud regards the amount exist or otherwise, the claim under the policy becomes void and all claims there under shall be forfeited. Having read condition 4(c) and condition 10 of the said policy and having due regard to the evidence of the witnesses, I accept the submission of the defendant that condition 4(c) and condition 10 have been breached.

 

[24] Therefore, based on all the evidence highlighted, I submit that the defendant has successfully proven the plaintiff’s

 

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breach of condition 10, ie, an express contractual term, in using fabricated and consequently fraudulent documents in view of obtaining benefits under the all risks policy. …

 

[28] On the facts and surrounding circumstances when taken together with the compelling circumstantial evidence, this court finds that the plaintiff’s involvement in the setting up of the fire is not without foundation and that fraudulent means or devices have been used by the plaintiff to obtain benefit under the said policy. Therefore, the defendant is entitled to repudiate its liability under the fire policy. As for the claim under the fire-consequential loss policy, this court finds that the claim is a grossly exaggerated claim together with non-existent claims, which disentitles the plaintiff to claim indemnity under the said policy. Accordingly, the defendant is also entitled to repudiate liability and discharge themselves under any legal obligations to satisfy the plaintiff’s claim.

 

[29] It is settled law that a contract of insurance is one, where the parties to the contract are under duty to exercise the utmost good faith in matters relating to the said contract. Consequently, where the party to the contract of insurance acts mala fide, then, the innocent party, the defendant in the present case, is entitled in law to be discharged from the obligations under the contract. In the present case, the plaintiff has made a grossly exaggerated claim which is fraudulent in nature to defraud the defendant. On the facts and the surrounding circumstances of the present case, the plaintiff’s entire claim is liable to be defeated as there has been, inter alia, failure to act in good faith. As stated, a contract of insurance is based upon good faith, and if the utmost good faith is not observed by either party, the contract may be avoided by the other party.

 

[31] Where a claimant inflates the amount of his claim there is a prima facie presumption that he is not acting in good faith

 

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and it is for the claimant to rebut the presumption if he is to succeed in its claim. In our present case I find the plaintiff has failed to rebut that presumption and therefore the plaintiff was not acting in good faith when making this claim and the claim should be dismissed. It is clear from the cases that in making a claim the insured ie, the plaintiff must exercise the utmost good faith and must avoid any attempt to exaggerate his claim. If an insured is unsure of his figures he should say so in order to avoid any allegation of fraud. I find as a fact having reviewed the evidence and the documents, there has been exaggeration of the plaintiff’s claim in particular reference to invoices (see Bundle B at p. 99-214). [32] With regards to circumstances surrounding the plaintiff’s loss, the plaintiff had ceased operating its business since 2006. Further, the statement of account of plaintiff (See p. 25 of Bundle B) also show that the plaintiff was not in financial good health and was not making any income as it was yet to obtain the licence to operate his business. It is judgment of this court that the surrounding circumstances point to this claim being in breach of condition 10 of the policy. I refer to the text —Law of Insurance” by Poh Chu Chai 6th edn. at pp. 910911 where the learned Author sets out the approach to be adopted and I quote …”

 

(emphasis added).

 

65. I have taken the liberty to cite at length the above 5 Malaysian cases (5 Cases) to show the reasoning applied by the courts in deciding whether the insurers can lawfully repudiate liability or otherwise in those cases.

 

66. An analysis of the 5 Cases shows the following 2 approaches in deciding the validity of an insurer’s repudiation of liability under a policy on the alleged ground that the insured has made a fraudulent claim:

 

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(a) the first approach is based on the specific wording of the condition in the insurance policy regarding an insured’s fraudulent claim (1st Approach). The 1st Approach was adopted in Metro Gain Sdn Bhd; and

 

(b) the second approach discusses whether by making a fraudulent claim, the insured has breached an implied duty imposed by the insurance policy to act in utmost good faith (2nd Approach). The 2nd Approach is illustrated in Tuong Aik (Sarawak) Sdn Bhd,

 

In Wong Cheong Kong Sdn Bhd, Sen Hua Tat Furniture Sdn Bhd and Modern Universal Sdn Bhd, the courts applied both the 1st and 2nd Approaches.

 

67. If part of an insured’s claim is fraudulent, the entire claim will be dismissed by way of the 1st and/or the 2nd Approaches –

 

(a) Tuong Aik (Sarawak) Sdn Bhd, at p. 884; and

 

(b) Sen Hua Tat Furniture Sdn Bhd, at paragraphs 13 and 14.

 

68. In Modern Universal Sdn Bhd, the court has decided that where an insured exaggerates or inflates insured’s claim, there is a prima facie presumption that the insured is not acting in good faith and it is for the insured to rebut this presumption if the insured is to succeed in the insured’s claim. This is also the view of Prof. Poh based on an old

 

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English case, Levy v Baillie (1831) 7 Bing 349, as stated in the following books by Prof. Poh –

 

(a) “Law of Insurance”, 3rd Edition, at p. 573; and

 

(b) “General Insurance LaW’, (2009), at p. 458.

 

69. As to what constitutes a fraudulent claim, the following cases are relevant:

 

(a) an insurer has to prove that the insured has the intention to defraud the insurer. This is clear from the following cases:

 

(i) Wong Cheong Kong Sdn Bhd, at p. 927 and 930; and

 

(ii) Sen Hua Tat Furniture Sdn Bhd, at paragraph 12;

 

(b) the court in Tuong Aik (Sarawak) Sdn Bhd, at p. 881, followed the then edition of the “Halsbury’s Laws of England”, Vol. 25, at p 273, which states that an insurance claim is fraudulent if the claim is put forward when the insured knows that he or she has suffered no loss or where the claim is supported by false evidence. According to Tuong Aik (Sarawak) Sdn Bhd, at p. 881, a claim which contains a false statement of facts or which is supported by false evidence, is clearly fraudulent; and

 

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(c) in Modern Universal Sdn Bhd, at p. 764, the court states that if an insured acts mala fide, the insurer is entitled in law to be discharged from its obligations under the insurance policy.

 

70. The following cases have decided that if an insured makes a fraudulent claim, the insurer is entitled to avoid the insurance policy and not merely to repudiate liability under the policy:

 

(a) Wong Cheong Kong Sdn Bhd, at p. 923; and

 

(b) Modern Universal Sdn Bhd, at p. 764.

 

The distinction between an insurer’s avoidance of an insurance policy and the insurer’s mere repudiation of a policy is important as will be explained later in this judgment with respect to an English House of Lords’ case.

 

M2. English law on fire insurance

 

71. Section 5 of the Civil Law Act 1956 (CLA) provides as follows:

 

“Application of English law in commercial matters

 

5(1) In all questions or issues which arise or which have to be decided in the States of Peninsular Malaysia other than Malacca and Penang with respect to the law of partnerships, corporations, banks and banking, principals and agents, carriers by air, land and

 

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sea, marine insurance, average, life and fire insurance, and with respect to mercantile law generally, the law to be administered shall be the same as would be administered in England in the like case at the date of the coming into force of this Act, if such question or issue had arisen or had to be decided in England, unless in any case other provision is or shall be made by any written law.

 

(2) In all questions or issues which arise or which have to be decided in the States of Malacca, Penang, Sabah and Sarawak with respect to the law concerning any of the matters referred to in subsection (1), the law to be administered shall be the same as would be administered in England in the like case at the corresponding period, if such question or issue had arisen or had to be decided in England, unless in any case other provision is or shall be made by any written law”

 

(emphasis added).

 

72. Section 5(1) CLA only allows the application of English law on fire insurance in West Malaysia (other than Penang and Malacca) up to the date of the coming into force of CLA, namely 7.4.1956 (Cut-off Date). Section 5(2) CLA allows a “continuous” reception of English commercial law in Penang, Malacca and East Malaysia. In fact, the Sarawak High Court applied current English marine insurance law in Tuong Aik (Sarawak) Sdn Bhd, at p. 875-876.

 

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73. Despite the Cut-off Date in s 5(1) CLA, West Malaysian courts have applied English cases on commercial matters which have been decided after the Cut-off Date.

 

74. I am of the view that in the absence of Malaysian legislation on a particular commercial matter, courts in West Malaysia (other than Penang and Malacca) may resort to the latest English cases on that matter. I rely on the Supreme Court’s judgment delivered by Anuar J (as he then was) in United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 MLJ 182, at 193, as follows –

 

“In our judgment, it is important generally speaking, and more so in matters of commercial law, that there should be uniformity in the common law of the Commonwealth .”

 

(emphasis added).

 

In view of the global importance of the English insurance syndicate, “Lloyds of London”, it is important for our insurance law to be consistent with English insurance law, especially current English case law. With this policy consideration in mind and the fact that there is no Malaysian legislation on fraudulent insurance claims, I now refer to the House of Lords’ case of Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd & Ors [2001] 1 All ER (Comm) 193.

 

75. In Manifest Shipping Co Ltd, the following judgments have been delivered in the House of Lords –

 

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(a) Lord Hobhouse, at p. 214-215 and 218, decided as follows –

 

—Fraudulent claims

 

[61] This question arises upon policies which up to the time of the making of the claim are to be assumed to be valid and enforceable. No right to avoid the contract had arisen. On ordinary contractual principles it would be expected that any question as to what are the parties’ rights in relation to anything which has occurred since the contract was made would be answered by construing the contract in accordance with its terms, both express and implied by law. Indeed, it is commonplace for insurance contracts to include a clause making express provision for when a fraudulent claim has been made. But it is also possible for principles drawn from the general law to apply to an existing contract – on the better view, frustration is an example of this, as is the principle that a party shall not be allowed to take advantage of his own unlawful act. It is such a principle upon which the defendants rely in the present case. As I have previously stated there are contractual remedies for breach of contract and repudiation which act prospectively and upon which the defendants do not rely. The potential is also there for the parties, if they so choose, to provide by their contract for remedies or consequences which would act retrospectively. All this shows that the courts should be cautious before extending to contractual relations principles of law which the parties could themselves have incorporated into their contract if they had so chosen. The courts should likewise be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the overriding needs of justice. Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied and it is right to question whether the codifying statute from which the right contended for is said to be drawn is being correctly construed.

 

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[62] Where an insured is found to have made a fraudulent claim upon the insurers, the insurer is obviously not liable for the fraudulent claim. But often there will have been a lesser claim which could properly have been made and which the insured, when found out, seeks to recover. The law is that the insured who has made a fraudulent claim may not recover the claim which could have been honestly made. The principle is well established and has certainly existed since the early nineteenth century (see 25 Halsbury’s Laws (4th edn) (1994 reissue) para 492; Welford and Otter-Barry’s Law relating to Fire Insurance (4th edn, 1948) p 289 ff). This result is not dependent upon the inclusion in the contract of a term having that effect or the type of insurance; it is the consequence of a rule of law. Just as the law will not allow an insured to commit a crime and then use it as a basis for recovering an indemnity (see Beresford v Royal Insurance Co Ltd [1937] 2 All ER 243, [1937] 2 KB 197), so it will not allow an insured who has made a fraudulent claim to recover. The logic is simple. The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.

 

[72] For the defendants [insurers] to succeed in their defence under this part of the case the defendants have to show that the claim was made fraudulently .”

 

(emphasis added).

 

Lord Hobhouse’s judgment has been concurred by Lord Steyn (at p. 197), Lord Hoffmann (at p. 197) and Lord Scott (at p. 232); and

 

(b) Lord Scott, at p. 226 and 227 decided as follows –

 

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—[96] It seems to me clear, therefore, that the content of the duty of ‘utmost good faith’ post-contract must be examined afresh and is not coloured by the extent of the duty owed by the assured pre-contract. …

 

[102] These authorities make clear that the content of the duty of good faith owed by an assured post-contract is not the same as the duty owed in the pre-contract stage. So what is the content of the duty owed at the claim stage? It is, at least, that of honesty in the presentation of a claim…”

 

(emphasis added).

 

Lord Steyn (at p. 197) and Lord Hoffmann (at p. 197) agreed with the judgment of Lord Scott.

 

76. In view of the above policy consideration, I refer to the “Halsbuiy’s Laws of England’, 4th Edition (2003), Vol. 25, at paragraph 182 (Paragraph 182), as follows:

 

” 182. What claims are fraudulent

 

A claim is fraudulent if: the insured has suffered no loss or has brought about his own loss; the claim is supported by the use of fraudulent means or devices; or the insured has deliberately suppressed a defence which would otherwise be open to the insurers. ’

 

(emphasis added).

 

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Paragraph 182 has referred to English cases which I have not cited in this judgment in the interest of brevity.

 

N. This court’s approach

 

77. To decide the legality of the Defendant’s Repudiation, I adopt the following approach:

 

(a) irrespective of the terms and conditions of insurance policies, there is a rule of law which provides that if an insured makes a fraudulent claim, the insurer is entitled to repudiate all liability under the policy -Lord Hobhouse’s judgment in Manifest Shipping Co Ltd;

 

(b) an insured makes a fraudulent claim if –

 

(i) the insured has the intention to defraud the insurer – Wong Cheong Kong Sdn Bhd (at p. 927 and 930) and Sen Hua Tat Furniture Sdn Bhd (at paragraph 12);

 

(ii) the insured has brought about the insured’s own loss and damage – Paragraph 182;

 

(iii) the insured has actual knowledge that the insured has suffered no loss and damage – Paragraph 182;

 

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(iv) the insured has actual knowledge that the claim is supported by the use of fraudulent means or devices – Paragraph 182;

 

(v) the insured has actual knowledge that the claim contains a false statement of facts – Tuong Aik (Sarawak) Sdn Bhd, at p. 881;

 

(vi) the insured has actual knowledge that the claim is supported by false evidence – Tuong Aik (Sarawak) Sdn Bhd, at p. 881;

 

(vii) the insured has actual knowledge that the claim is exaggerated or inflated and yet the insured proceed to make the claim – Sen Hua Tat Furniture Sdn Bhd (at paragraph 13) and Modern Universal Sdn Bhd (at p. 764-766); or

 

(viii) the insured has deliberately suppressed a defence which would otherwise be open to the insurers – Paragraph 182;

 

(c) the insured’s intention or knowledge may be proven by direct evidence or be inferred from all the evidence adduced in the case in question, including circumstantial evidence;

 

(d) if the court finds as a fact that the insured has made a fraudulent claim, this will necessarily mean that the insured has breached the implied duty under the insurance policy to act in utmost good faith;

 

(e) whether an insured has made a fraudulent claim or not in a particular case is a question of fact dependent primarily on the insured’s state

 

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of mind. Accordingly, cases on fraudulent claims are based on their own peculiar facts and cannot constitute binding legal precedents from the view point of the stare decisis doctrine;

 

(f) once an insured has proven on a balance of probabilities that the insured has suffered loss and damage due to an Insured Risk and has also proven the Causation and Quantum Issues (please see the above Part G), the burden then shifts to the insurer to justify its repudiation of liability under the policy. Accordingly, with respect, I cannot accede to the proposition that where an insured has exaggerated or inflated the insured’s claim, there is a prima facie presumption that the insured is not acting in good faith and it is for the insured to rebut this presumption if the insured is to succeed in the insured’s claim. An exaggerated or inflated claim may support an allegation of a fraudulent claim and may assist the insurer to discharge its burden to justify the insurer’s repudiation but cannot in itself raise a rebuttable presumption of lack of good faith on the insured’s part

 

(g) if an insurer can prove that a claim has been fraudulently made, the insurer may avoid all liability under the insurance policy but cannot avoid the policy – judgments of Lord Hobhouse and Lord Scott in Manifest Shipping Co Ltd; and

 

(h) if the court finds that am insured has not made a fraudulent claim, the insurer may still lawfully repudiate liability under the insurance policy pursuant to an express condition in the policy. In deciding

 

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whether an insurer can rely on a specific condition in an insurance policy to avoid liability under the policy, the particular wording of the condition is important. Previous cases are only relevant if they concern the same condition in terms of its wording.

 

O. Standard of proof of fraud before Sinnaiyah & Sons Sdn Bhd

 

78. At the time of my oral decision of This Action on 13.5.2015, I had decided that the Defendant had the burden to prove beyond all reasonable doubt that the Plaintiff had made a fraudulent claim in this case (Beyond Reasonable Doubt Standard Of Proof). My decision is premised on a preponderance of the judgments of our highest courts as follows (in chronological order);

 

(a) the Privy Council’s opinion delivered by Lord Diplock in Saminathan v Pappa [1981] 1 MLJ 121, at 126, an appeal from Malaysia;

 

(b) Lord Keith’s judgment in the Privy Council case of Datuk Jagindar Singh & Ors v Tara Rajaratnam [1986] 1 MLJ 105, at 110;

 

(c) the Supreme Court’s judgment given by Syed Agil Barakbah SCJ in Chu Choon Moi v Ngan Sew Tin [1986] 1 MLJ 34, at 38;

 

(d) the judgment of Steve Shim CJ (Sabah & Sarawak) in the Federal Court case of Yong Tim, at p. 234-235 and 237; and

 

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(e) Nik Hashim FCJ’s judgment in the Federal Court in ASEAN Security Paper Mills Sdn Bhd, at p. 19-20.

 

In view of the above decisions of our apex courts, I was unable to apply Mohd. Azmi FCJ’s judgment in Ang Hiok Seng, at p. 514-518, which held that an allegation of fraud could be proven on a balance of probabilities (Balance Of Probabilities Standard Of Proof).

 

P. Defendant has failed to prove beyond reasonable doubt that Plaintiff has made fraudulent claim

 

79. Based on the Beyond Reasonable Doubt Standard Of Proof, I find that

 

the Defendant is not able to prove that –

 

(a) the Plaintiff has the intention to defraud the Defendant in making a claim in this case;

 

(b) the Plaintiff has actual knowledge that the Plaintiff has suffered no loss and damage;

 

(c) the Plaintiff has actual knowledge that the Plaintiff’s claim is false;

 

(d) the Plaintiff has actual knowledge that the claim is supported by the use of fraudulent means or devices;

 

(e) the Plaintiff has actual knowledge that the Plaintiff’s claim is supported by false evidence; and

 

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(f) the Plaintiff has actual knowledge that the Plaintiff’s claim is exaggerated or inflated.

 

80. The above decision is based on the following evidence and reasons:

 

(a) the Plaintiff did not cause the Fire in any manner. MSSB’s Report stated that the Fire could have been caused by an electrical short-circuit (p. 23 of Bundle B);

 

(b) in the Plaintiff’s Police Report (p. 34 of Bundle A), SP1 stated that the Plaintiff did not know the amount of loss suffered by the Plaintiff due to the Fire. A lot of weight is attached to this contemporaneous Plaintiff’s Police Report which is made at about 1.30 pm, 22.5.2013, about 17 hours after the occurrence of the Fire (at about 8.40 pm, 21.5.2013). It is to be noted that making a false police report is an offence punishable under s 182 of the Penal Code;

 

(c) the Fire Department’s Report is made pursuant to an investigation conducted by the Fire Department in respect of the Fire. Both parties have classified the Fire Department’s Report as “Part B” under Order 34 rule 2(2)(e)(i) RC, namely the authenticity of the Fire Department’s Report is not disputed but its contents are disputed. Paragraph 4.2 of the Fire Department’s Report (p. 37 of Bundle A) estimated the loss due to the Fire to be RM1,030,000 (Fire Department’s Estimate). In paragraph 8 of the Fire Department’s

 

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Report (p. 38 of Bundle A), the Fire Department’s officer who prepared the Fire Department’s Report, Encik Kamarulzaman bin Mohd. Din, affirmed that all the information contained in the Fire Department’s Report was true and was based on the original report of the Fire Department. The Fire Department is a Government department which is independent and competent to investigate in respect of any fire. There is no suggestion by the Defendant that the Fire Department’s Report is biased in the Plaintiff’s favour or inaccurate in any manner. If the Fire Department’s Estimate is RM1,030,000, the Plaintiff could not have been faulted in respect of the erroneous amounts of RM1,699,850 and RM1,712,560 stated in the Plaintiff’s Claim Lists dated 24.6.2013 and 9.7.2013 respectively;

 

(d) the Plaintiff’s Claim Form dated 25.6.2013 (p. 58-59 of Bundle A) is the most significant document under the Policy for reasons which I will explain later in this judgment. The Plaintiff did not give any particular of the Plaintiff’s claim in the Plaintiff’s Claim Form dated

 

25.6.2013. Nor was a sum claimed by the Plaintiff in the Plaintiff’s Claim Form dated 25.6.2013. It is clear from the contents of the Plaintiff’s Claim Form dated 25.6.2013 that the Plaintiff was unsure of the quantum of loss suffered by the Plaintiff due to the Fire. Furthermore, upon receipt of the Plaintiff’s Claim Form dated

 

25.6.2013, the Defendant did not request the Plaintiff to “declare” the particulars and the amount of loss and damage suffered by the Plaintiff as a result of the Fire;

 

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(e) MSSB’s Report acknowledged that the Plaintiff’s profitability “appeared to be stable” for 3 financial years ending December 2010, December 2011 and December 2012 (before the Fire) [p. 20 of Bundle B]. Such a fact disproves any financial distress which may constitute a motive for the Plaintiff to exaggerate or inflate fraudulently its claim. Motive is always relevant under s 8(1) EA;

 

(f) although the Policy has been in effect for approximately 5 years, this case is the first fire insurance claim made by the Plaintiff. This supports the Plaintiff’s evidence that the Plaintiff has no prior experience or knowledge in making a fire insurance claim. The Plaintiff may be a car repairer who is conversant in making motor insurance claims. Filing a motor insurer’s claim is clearly different from making a fire insurance claim. The title and contents of the Plaintiff’s Claim Form dated 25.6.2013 clearly indicate that this case concerns a fire insurance claim and not a motor insurance claim;

 

(g) Paragraph 2 of Exhibit P2 shows that the Plaintiff has informed the Defendant and SD3 at the Meeting dated 26.12.2013 that the Plaintiff has withdrawn its claim for 8 vehicles. Such a conduct by the Plaintiff is relevant under s 8(2) EA to prove firstly, the Plaintiff has no actual knowledge of its loss and damage caused by the Fire as late as 26.12.2013, more than 7 months after the Fire. Secondly, Paragraph 2 of Exhibit P2 shows that the Plaintiff is still “negotiating” or “bargaining” with the Defendant as explained by MacKinnon J (as he then was) in the English High Court case of Ewer, at p. 203. It is to be noted that neither the Defendant nor MSSB request the Plaintiff

 

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to make a “declaration” of the particulars and amount of loss and damage suffered by the Plaintiff due to the Fire. Furthermore, neither the Defendant nor MSSB inform the Plaintiff that there would be no “negotiations” with the Defendant and MSSB regarding the amount claimed by the Plaintiff;

 

(h) the Defendant’s Police Report has been made and yet the Plaintiff has not been charged with an offence of cheating the Defendant by making a false insurance claim; and

 

(i) SP1 who has prepared the Plaintiff’s Claim Lists dated 24.6.2013, 9.7.2013 and 26.12.2013, is illiterate. SPI’s educational background shows that it is more probable for the amounts to be stated erroneously, rather than fraudulently, in the Plaintiff’s Claim Lists dated 24.6.2013 and 9.7.2013.

 

Q. Does Sinnaiyah & Sons Sdn Bhd have any effect on this case?

 

81. On 10.8.2015, the Federal Court in a judgment delivered by Richard Malanjum CJ (Sabah & Sarawak) in Sinnaiyah & Sons Sdn Bhd, at paragraphs 48-53, held that an allegation of fraud, even if such an allegation concerns “criminal fraud”, need only be proven on a balance of probabilities and not beyond all reasonable doubt.

 

82. The question that now arises is whether Sinnaiyah & Sons Sdn Bhd has any effect on my oral decision on 13.5.2015 (Oral Decision). The

 

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Federal Court has addressed this issue in Sinnaiyah & Sons Sdn Bhd, at paragraph 54, as follows:

 

“[54] However, we should make it clear that this judgment only

 

applies to this appeal and to future cases and should not be utilised to set aside or review past decisions involving fraud in civil claims

 

(emphasis added).

 

83. The above passage in Sinnaiyah & Sons Sdn Bhd does not state whether Sinnaiyah & Sons Sdn Bhd applies to decisions which have been made before the Federal Court’s judgment in Sinnaiyah & Sons Sdn Bhd and are pending appeals.

 

84. In view of Sinnaiyah & Sons Sdn Bhd and in the interest of justice, I have decided to review my Oral Decision on whether the Defendant has proven that the Plaintiff has made a fraudulent claim. I will now re-assess all the evidence adduced in this case to decide whether the Defendant is able to prove on a balance of probabilities that the Plaintiff has made a fraudulent claim in this case.

 

85. Based on the reasons elaborated in the above sub-paragraphs 80(a) to

 

(i), I am satisfied the Defendant has failed to prove on a balance of probabilities that –

 

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(a) the Plaintiff has the intention to defraud the Defendant in making a claim in this case;

 

(b) the Plaintiff has actual knowledge that the Plaintiff has suffered no loss and damage;

 

(c) the Plaintiff has actual knowledge that the Plaintiff’s claim is false;

 

(d) the Plaintiff has actual knowledge that the claim is supported by the use of fraudulent means or devices;

 

(e) the Plaintiff has actual knowledge that the Plaintiff’s claim is supported by false evidence; and

 

(f) the Plaintiff has actual knowledge that the Plaintiff’s claim is exaggerated or inflated.

 

R. Plaintiff has not breached implied duty to act in utmost good faith

 

86. In view of the above decision that the Defendant has failed to prove that the Plaintiff has made a fraudulent claim in this case, I find that the Plaintiff has not breached an implied duty under the Policy to act in utmost good faith.

 

S. Can Defendant rely on Condition 3?

 

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87. Condition 3 has been produced verbatim in the above Part F. I have dealt with the Three-Month Limitation Period in Condition 3 vis-à-vis s 29 CA. I will now decide whether the Defendant may rely on the other parts of Condition 3 regarding “fraudulent claims” to avoid liability under this Policy.

 

88. In respect of “fraudulent claims”, the Plaintiff would lose all benefit under the Policy if any one or more of the 5 following limbs of Condition 3 can be proved by the Defendant in this case:

 

(a) if a “claim” is in any respect fraudulent (1st Limb);

 

(b) if any false “declaration” is made or used in support of a “claim” (2nd Limb);

 

(c) if any fraudulent means or devices are used by the Plaintiff or any person acting on the Plaintiff’s behalf to obtain any benefit under the Policy (3rd Limb); and/or

 

(d) if the loss or damage by the Fire is occasioned –

 

(i) by a wilful act of the Plaintiff (4th Limb); and/or

 

(ii) with the connivance of the Plaintiff (5th Limb).

 

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89. It is clear that the 4th and 5th Limbs do not apply in this case as there is no evidence the Fire as well as the Plaintiff’s loss and damage are caused –

 

(a) by the Plaintiff’s wilful act; or

 

(b) with the connivance of the Plaintiff.

 

90. Based on the above Part P and sub-paragraphs 85(a) to (i) [the Defendant’s failure to prove that the Plaintiff had made a fraudulent claim in this case], the Defendant cannot rely on the 3rd Limb.

 

91. The word “claim” is used in the 1st Limb and condition 1 in “Claims Conditions applicable to Section 1″ (Condition 1). Condition 1 reads as follows:

 

“1. On the happening of any loss or damage the Insured shall forthwith give notice thereof to the Company and shall within 15 days after the loss or damage, or such further time as the Company may in writing allow in that behalf, deliver to the Company.

 

(a) a claim in writing for the loss and damage containing as particulars an account as may be reasonable practicable [sic] of all the several articles or items of property damaged or destroyed, and of the amount of the loss or damage thereto respectively, having regard to their value at the time of the loss or damage, not including profit of any kind.

 

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(b) Particulars of all other insurances, if any.

 

(emphasis added).

 

92. Firstly, I am of the view that the word “claim” in Conditions 1 and 3 must have the same meaning. It is inconceivable, if not absurd, to have a meaning of the word “claim” in Condition 1 which is different from that used for Condition 3.

 

93. Secondly, I opine that the word “claim” in Conditions 1 and 3 can only refer to the formal insurance “claim form” which has been prepared by the Defendant and filled up by the Plaintiff, namely the Plaintiff’s Claim Form dated 25.6.2013. My opinion is supported by the following reasons:

 

(a) if the Plaintiff’s Claim Form dated 25.6.2013 was not the “claim” within the meaning of Condition 1 and since the Plaintiff had not filed any other claim within 15 days from the date of the Fire (besides the Plaintiff’s Claim Form dated 25.6.2013), the Defendant would have repudiated all liability under the Policy for the Plaintiff’s breach of the mandatory Condition 1. Condition 1 is mandatory because Condition 1 employs the imperative term “shall”, not once but twice. In fact, Condition 1 expressly provides for the Plaintiff to make a “claim” within a time period of 15 days from the date of the Fire;

 

(b) the first page of the Plaintiff’s Claim Form dated 25.6.2013 states as follows –

 

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“ This form should be completed by the Insured and returned to the Company as soon as possible and in no case later than 15 days from the date of the occurrence.”

 

(emphasis added).

 

The above wording in the Plaintiff’s Claim Form dated 25.6.2013 clearly shows that the Plaintiff’s Claim Form dated 25.6.2013 is envisaged by Condition 1; and

 

(c) it is trite law that insurance policies are drafted by insurers and if there is any ambiguity in the construction of a provision in a policy, namely if there are 2 or more interpretations of the provision, the court will apply the contra proferentem rule of construction. According to the application of this rule of construction, the provision in the policy will be interpreted strictly against the insurer and the interpretation favourable to the insured will be adopted. An example of the application of the contra proferentem rule is the High Court’s judgment of Zulkefli J (as he then was) in American International Assurance Co Ltd v Koay Fong Eng (Administrator of the Estate of Ho Moh Koay, deceased) [1996] 5 MLJ 268, at 274.

 

Applying the contra proferentem rule, I interpret the word “claim” in the 1st Limb to refer to the Plaintiff’s Claim Form dated 25.6.2013.

 

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94. In the Plaintiff’s Claim Form dated 25.6.2013, there is a “Part D” which is entitled “CLAIM PARTICULARS” (1st Part D). The 1st Part D provides for “Particulars of the claim to be given in detail”. Despite the existence of the 1st Part D in the Plaintiff’s Claim Form dated 25.6.2013, the Plaintiff did not state any particular of the Plaintiff’s claim and the total amount of the claim in the 1st Part D. Accordingly, the Plaintiff’s Claim Form dated

 

25.6.2013 cannot be said to be fraudulent in any respect within the meaning of the 1st Limb because the Plaintiff did not make any claim for indemnity in the Plaintiff’s Claim Form dated 25.6.2013. Consequently, the Defendant cannot rely on the 1st Limb to justify the Defendant’s Repudiation.

 

95. The 2nd Limb uses the term “declaration”. At the bottom of the second page of the Plaintiff’s Claim Form dated 25.6.2013 is another “Part D” which is entitled “DECLARATION’ (2nd Part D). The 2nd Part D states “I/We declare that the particulars [illegible because of the Plaintiff’s company stamp) are true and complete”. I take the view that the word “declaration” in the 2nd Limb must refer to the Plaintiff’s Claim Form dated

 

25.6.2013 because firstly, the wording in the 2nd Part D clearly shows that the “declaration” in the Plaintiff’s Claim Form dated 25.6.2013 is what is envisaged by the 2nd Limb. Additionally or alternatively, applying the contra proferentem rule, the 2nd Limb should be strictly construed against the Defendant in the sense that the 2nd Limb refers to the “declaration” in the Plaintiff’s Claim Form dated 25.6.2013.

 

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96. As the Plaintiff did not give any particular of the Plaintiff’s “claim” in the Plaintiff’s Claim Form dated 25.6.2013, the “declaration” made by the Plaintiff in the 2nd Part D cannot be false. Hence, the 2nd Limb cannot be invoked by the Defendant in this case.

 

97. The Defendant has relied on Modern Universal Sdn Bhd. It is to be noted that in Modern Universal Sdn Bhd, at p. 752, condition 10 of the insurance policy in that case is materially different from Condition 3. I produce the relevant part of the High Court’s judgment in Modern Universal Sdn Bhd, at p. 752 –

 

“10. Fraud

 

If the proposal or declaration of the Insured is untrue in any respect, or if any material fact affecting the risk be incorrectly stated therein or omitted there from, or if this Insurance or any renewal thereof shall have been obtained through any misstatement, misrepresentation or suppression, or if any claim made shall be fraudulent or exaggerated, or if any false declaration or statement shall be made in support thereof, then, in any of these cases, this Policy shall be void.”

 

(emphasis added).

 

According to condition 10 of the policy in Modern Universal Sdn Bhd, an exaggerated insurance claim in itself was a ground for the insurer to repudiate liability under the policy in that case. There is no provision in Condition 3 or any other provision of the Policy in this case for the Defendant to repudiate liability under the Policy solely on the ground of an exaggerated insurance claim.

 

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98. There is another ground to distinguish Modern Universal Sdn Bhd from the present case. In Modern Universal Sdn Bhd, the High Court dismissed the plaintiff insured company’s claim because the High Court found as a fact that there was a “high probability that the fire was caused and/or attributed to the plaintiff’.

 

99. The Singapore High Court case of Globe Trawlers Pte Ltd, at p. 836, concerned a condition 13 of the insurance policy which is substantially similar to Condition 3. In Globe Trawlers Pte Ltd, at p. 836, LP Thean J (as he then was) held as follows:

 

“Condition 13 provides:

 

If the claim be in any respect fraudulent or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under this policy; or, if the loss or damage be occasioned by the wilful act, or with the connivance of the insured; or, if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or (in case of an arbitration taking place in pursuance of the 18th condition of this policy) within three months after the arbitrator or arbitrators or umpire shall have made their award, all benefit under this policy shall be forfeited.

 

The 1st defendants [insurer] merely made a bald assertion that the plaintiffs’ [insured] claim is fraudulent and it seems to me that the

 

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basis for saying that is that the claim is grossly exaggerated. Assuming that the claim is grossly exaggerated, the 1st defendants must go further to show that such exaggerated claim is a fraudulent claim. On this, there was not a shred of evidence in support. This defence has no merit whatsoever and I have no hesitation in rejecting it ”

 

(emphasis added).

 

T. Defendant’s cases can be distinguished from this case

 

100. All the cases relied on by the Defendant can be easily distinguished from this case based on the reasons stated in sub-paragraphs 80(a)-(i) and the particular wording of Condition 3.

 

101. In Sen Hua Tat Furniture Sdn Bhd, at paragraphs 8, 10 and 14, there was evidence that the plaintiff/insured had doctored and manipulated documents to support the plaintiff’s claim.

 

102. Ling Hock Ling and Octville Golf Properties Sdn Bhd do not concern insurance claims, let alone fraudulent claims by insured.

 

U. Interest should be awarded on Amended Sum

 

103. As I have found the Defendant liable to the Plaintiff for the Amended Sum, I award pre-judgment and post-judgment interest on the Amended Sum by virtue of the following provisions:

 

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(a) the Plaintiff is entitled to pre-judgment interest on the Amended Sum from the date of the Fire until the date of the Oral Decision under s 11 CLA. Section 11 CLA provides as follows –

 

“Power of Courts to award interest on debts and damages

 

11. In any proceedings tried in any Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest as such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment:

 

Provided that nothing in this section –

 

(a) shall authorize the giving of interest upon interest;

 

(b) shall apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or

 

(c) shall affect the damages recoverable for the dishonour of a bill of exchange. ”

 

(emphasis added).

 

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In Wong Cheong Kong Sdn Bhd, at p. 943-945, the High Court awarded pre-judgment interest on the insurance indemnity ordered by the court from the date of the fire pursuant to s 11 CLA; and

 

(b) post-judgment interest is given on the Amended Sum by virtue of Order 42 rule 13 RC which reads as follows –

 

“Interest on judgment debts

 

Order 42 rule 12

 

Subject to rule 12A, except when it has been otherwise agreed between the parties, every judgment debt shall carry interest at such rate as the Chief Justice may from time to time determine or at such other rate not exceeding the rate aforesaid as the Court determines, such interest to be calculated from the date of judgment until the judgment is satisfied”

 

(emphasis added).

 

104. Based on the aforesaid reasons, I order the Defendant to pay to the Plaintiff interest at the rate of 5% per annum on the Amended Sum from 21.5.2013 until the date of full payment of such interest.

 

V. Plaintiff is not entitled to costs of This Action

 

105. Generally, costs should follow the event, namely costs should be awarded to the successful party. This is provided by Order 59 rule 3(2) RC which reads as follows:

 

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“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs ”

 

(emphasis added).

 

It is to be noted that Order 59 rule 3(2) RC (except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs) also provides the court with a discretion not to award costs to the successful party.

 

106. I refer to Order 59 rules 8(b) and 16(6) RC as follows:

 

“ Special matters to be taken into account in exercising discretion

 

Order 59 rule 8

 

The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account –

 

(a) any offer of contribution or offer of settlement under Order 22B;

 

(b) the conduct of all the parties, including conduct before and during the proceedings;

 

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(c) the conduct of the parties in relation to any attempt at resolving the cause or matter by mediation or any other means of dispute resolution; and

 

(d) in particular, the extent to which the parties have followed any relevant pre-action protocol or practice direction for the time being issued by the Registrar.

 

Order 16 rule 6(6)

 

Notwithstanding paragraphs (2) to (4), if any action is brought in the High Court, which would have been within the jurisdiction of a Subordinate Court, the plaintiff shall not be entitled to any more costs than he would have been entitled to if the proceedings had been brought in a Subordinate Court, unless in any such action a Judge certifies that there was sufficient reason for bringing the action in the High Court ”

 

(emphasis added).

 

107. As the Amended Sum falls within the monetary jurisdiction of the Sessions Court according to s 65(1)(b) of the Subordinate Courts Act 1948 and as this court has allowed This Action only in respect of the Amended Sum, ordinarily the Plaintiff would be entitled to costs for trial in the Sessions Court [as provided in Order 59 rule 16(6) read with Order 59 rule 23(1) RC] (Scaled Costs). However, I exercise my discretion under Order 59 rule 3(2) read with Order 59 rules 8(b) RC to deprive the Plaintiff of Scaled Costs because of the following reasons:

 

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(a) the Plaintiff should have filed This Action in the Sessions Court (and not the High Court) in view of the Amended Sum stated in MSSB’s Report;

 

(b) after having filed This Action wrongly in the High Court, the Plaintiff should have expeditiously applied to –

 

(i) reduce the amount of its claim to the Amended Sum; and

 

(ii) transfer This Action from the High Court to the Sessions Court under Order 57 rule 1(2)(b) RC; and

 

(c) the Plaintiff only applied to reduce the amount of its claim to the Amended Sum on the first day of trial!

 

V. Summary of court’s decision

 

108. A summary of this judgment is as follows:

 

(a) the Three-Month Limitation Period in Condition 3 is void and unenforceable under s 29 CA;

 

(b) the Plaintiff has proven on a balance of probabilities loss and damage due to the Fire (an Insured Risk under the Policy) to the extent of the Amended Sum;

 

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(c) English case law has established a rule of law that irrespective of the terms and conditions of an insurance policy, an insurer can avoid liability under an insurance policy if the insured has made a fraudulent claim. Such English case law is applicable in Malaysia;

 

(d) the Defendant has failed to prove in this case, either beyond reasonable doubt or on a balance of probabilities, that the Plaintiff has made a fraudulent claim;

 

(e) the Plaintiff has not breached an implied duty under the Policy to act in utmost good faith; and

 

(f) the Defendant cannot rely on Condition 3 to justify the Defendant’s Repudiation.

 

109. Premised on the above reasons, This Action is allowed with the

 

following orders:

 

(a) the Defendant to pay the Amended Sum (RM237,452.11) to the Plaintiff;

 

(b) interest at the rate of 5% per annum on the Amended Sum from 21.5.2013 until the date of full payment of such interest, to be paid by the Defendant to the Plaintiff; and

 

(c) no order as to costs.

 

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110. This case underscores the need for insured persons to exercise some care in making insurance claims. If the insured is uncertain of any matter regarding the insured’s claim, the insured should inquire from the insurer. This will avoid any allegation of fraud against the insured which may lead to the insurer’s refusal to indemnify the insured under the policy and litigation (such as in this case).

 

WONG KIAN KHEONG

 

Judicial Commissioner High Court (Commercial Division) Kuala Lumpur

 

DATE: 19 OCTOBER 2015

 

Counsel for Plaintiff: Mr. Samreet Singh Sagoo & Mr. Ananth Nair (Messrs Dave Anan)

 

Counsel for Defendant: Mr. Gurmukh Singh (Messrs Isharidah, Ho, Chong & Menon)

 

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