Royal Caribbean Hotels Ltd v B'Dos Fire and General Company et Al; Bank of Nova Scotia v Royal Caribbean Hotels Ltd

• Jurisdiction: Barbados
• Judge: Williams, C.J.,Smith, J.A.,Moe, J.A.
• Judgment Date: 14 July 1992
• Neutral Citation: BB 1992 CA 31
• Docket Number: Civil Appeal Nos. 12 and 13 of 1991
• Court: Court of Appeal (Barbados)
• Date: 14 July 1992

Court of Appeal

Williams, C.J.; Smith, J.A.; Moe, J.A.

Civil Appeal Nos. 12 and 13 of 1991

Royal Caribbean Hotels Limited

and

B'Dos Fire and General Company et al

Bank of Nova Scotia

and

Royal Caribbean Hotels Ltd.

Appearances:

Mr. E. Niles in association with Miss E. Gittens for Royal Caribbean Hotels Limited.

Mr. J.S.B. Dear Q.C. in association with Miss C. Chase for Barbados Fire and General Insurance Co.

Mr. P. Williams, Q.C. in association with Mr. A. Brewster for the Bank of Nova Scotia.

Insurance - Policy against hurricane and associated perils — Whether stipulations in policy waived by conduct of servants and agents of first defendant.

JUDGMENT OF THE COURT:

1 The plaintiff Royal Caribbean Hotels Limited [“Royal Caribbean”] was the owner of the Regency Cove Hotel [“the Regency Cove”] on August 3, 1980, when hurricane Allan struck Barbados and caused damage to the hotel which, with its contents, were insured against hurricane and associated perils with the first defendant, Barbados Fire and General Insurance Company [“Barbados Fire”]. On that date the plaintiff owed the second defendant, the Bank of Nova Scotia [“the bank”] over Bds$550,000.00, the debt being secured by a duly registered debenture dated November 26 1969 issued by the plaintiff and by the personal guarantee of Mr. Thomas McKay, one of its shareholders. Pursuant to its powers under the debenture, the bank had paid the insurance premium in 1980 and held the policy of insurance.

2 In its amended Statement of Claim the plaintiff claims the following relief against Barbados Fire and the bank:–

• (i) a declaration that they are jointly and/or severally liable to pay and make good to the plaintiff the loss and damage which it suffered in accordance with the provisions of the policy of insurance;

• (ii) alternatively, a declaration that the Bank is liable to account to it for negligence amounting to wilful default and/or neglect from which it has suffered the loss and damage;

• (iii) an order for the payment of S133,515.00 [earlier particularised] or such sums found to be due to the plaintiff in respect of the loss and damage;

• (iv) damages;

• (v) interest at such rate and for such period as the court thinks fit;

• (vi) such further and other relief as may be just; and

• (vii) costs.

3 The learned trial judge gave judgment for Barbados Fire against the plaintiff with costs but found the bank liable in negligence and gave judgment for the plaintiff against the bank for $133,515.00 and costs. He also ordered the Bank to pay the plaintiff all costs which he ordered it to pay to Barbados Fire.

4 The plaintiff has appealed against [1] the dismissal of its claim against Barbados Fire [2] the failure to make an order for interest on the sum awarded against the bank and [3] the refusal to make an award of damages for economic loss.

5 The bank has appealed against the judgment in favour of the plaintiff and the order requiring it to recoup the plaintiff for the costs ordered to be paid to Barbados Fire.

6 Central to the issue of whether Barbados Fire is or is not liable to the plaintiff are two conditions in the policy on which Barbados Fire relies in its amended Defence. Condition 11 reads –

“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 particular an account as may be reasonably practicable 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.

• (b) Particulars of all other insurance, if any.

The Insured shall also at all times at his own expense produce, procure and give to the company all such further particulars, plans, specifications, books, vouchers, invoices, duplicates or copies thereof, documents proofs and information with respect to the claim and the origin and cause of the fire and the circumstances under which the loss or damage occurred, and any matter touching the liability or the amount of the liability of the company as may be reasonably required by or on behalf of the company together with a declaration on oath or in other legal form of the truth of the claim and of any matters connected therewith.

No claim under this policy shall be payable unless the terms of this condition have been complied with.”

7 Condition 19 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.”

8 Condition 20 is also relevant. It states that every notice or other communication to the company required by the conditions must be written or printed.

9 The case for Barbados Fire can be summarised in the following way –

• (a) the plaintiff did not give written notice to it forthwith on the happening of the loss or damage as required by Condition 11 and consequently, in accordance with the condition's final paragraph, no claim is payable;

• (b) the plaintiff did not within 15 days after the loss or damage deliver to the company a claim in writing of the loss or damage as prescribed by paragraph (a) of the condition. The company had not allowed in writing any further time for the delivery of the prescribed particulars. In the circumstances, in accordance with the condition's last paragraph, no claim is payable; and;

• (c) The loss or damage had taken place on August 3, 1980, the action against the company had not been commenced until October 10, 1985 and there had been no arbitration. Consequently Condition 19 operates to exclude the Company from liability under the policy.

10 Mr. Niles for the plaintiff seeks to avoid one or other or both of these conditions in various ways, his main argument being that the following clause [“the mortgage clause”] forming part of and attaching to the policy prevents Barbados Fire from relying on Conditions 11 and 19 to the extent of the bank's interest –

“Loss, if any, under this policy shall be payable to the Bank of Nova Scotia as Mortgagees or Assignees of mortgagee interest to the extent of their interest.

It is hereby agreed that in the event of loss or damage, the Company will pay the Mortgagees or said Assignees to the extent of their interest and that this insurance in so far as concerns the interest therein of the Mortgagees or said Assignees only shall not be invalidated by any act or neglect of the Mortgagor or owner of the property insured, nor by anything whereby the risk is increased being done to, upon or in any building hereby insured, without the knowledge of the Mortgagees or said Assignees provided always that the Mortgagees or said Assignees shall notify the Company of any change of ownership or alteration or increase of hazard not permitted by this insurance so soon as any such change, alteration or increase shall come to their knowledge, and on demand shall pay to the Company the appropriate additional premium from the time when such increase of risk first took place.

And it is further agreed that whenever the Company shall pay the Mortgagees or said Assignees any sum for loss or damage under this policy, and shall claim that as to the Mortgagor or Owner no liability therefor existed, the Company shall at once be legally subrogated to all rights of the Mortgagees or said Assignees to the extent of such payment, and the Mortgagees or said Assignees shall do and execute all such further or other acts, deeds, transfers, assignments, instruments and things as may be necessary or be reasonably required by the Company for the purpose of better effecting such subrogation, but such subrogation shall not impair the right of the Mortgagees or said Assignees to recover the full amount of their claim.

Provided that as between the Company and the Mortgagor or Owner of the property insured nothing contained in this clause shall in any way constitute or be deemed to constitute any waiver of, or prejudice or affect any rights which the company may have against the Mortgagor or Owner of the property insured, or lessen any obligations which may be imposed on the Mortgagor or Owner of the property insured either by or under this policy or by law, and such rights and obligations shall as between the Company and the Mortgagor or Owner of the property insured remain in full force and effect.

The Company reserves the right to cancel this policy at any time as provided by the terms thereof, but in such case this policy shall continue in force for the benefit only of the Mortgagees or said Assignees for 10 days after notice to the Mortgagees or said Assignees of such cancellation, and shall then cease, and the Company shall have the right on like notice to cancel this agreement.”

11 Three Canadian cases were cited in support of this submission, London Loan and Savings Co. of Canada v. Union Insurance Co. of Canton Ltd. (1925) 4 D.L.R. 676, London & Midland General Insurance Co. et al v. Bonser (1972) 29 D.L.R. 468. and Braaten et al v. Yorkshire Trust Co. [1984] C.C.L.L. 116.

12 The common thread running through these cases and, it seems, the plank on which Mr. Niles rests his submission, is the construction of what is called the standard mortgage clause as a contract by the insurer directly with the mortgagee. So Ritchie J. delivering the judgment of the Supreme Court of Canada in the Bonser case, referred, (at p. 474) to the position taken by the courts of the United States as summarised in Couch on Insurance, 2nd ed., 1963, vol. 11. p. 348, para. 42: 694 –

“Under the standard or union mortgage clause, an independent or...