Hew Soon Tai (P) and 2 Others v Hong Leong Assurance Berhad
Civil Appeal No. W-02-1001-06/2014; Court of Appeal
Date of Judgment: 12 June 2015 | Source: Federal Court Registry

IN THE COURT OF APPEAL OF MALAYSIA

(APPELLATE JURISDICTION)

CIVIL APPEAL NO: W-02-1001-06/2014

BETWEEN

1. HEW SOON TAI (P) ... APPELLANTS

2. SUM JHEE YAN

3. SUM YEW FEI

(Plaintif-Plaintif Kedua dan Ketiga adalah
Budak-budak di bawah umur yang menuntut
Melalui ibu yang sah Hew Soon Tai)

AND

HONG LEONG ASSURANCE BERHAD ... RESPONDENT

[In the matter of civil suit No: S2-22-1096 Tahun 2008
In the High Court of Malaya in Kuala Lumpur]

BETWEEN

1. HEW SOON TAI (P) ... PLAINTIFFS

2. SUM JHEE YAN

3. SUM YEW FEI

(Plaintif-Plaintif Kedua dan Ketiga adalah
budak-budak di bawah umur yang menuntut
melalui ibu yang sah Hew Soon Tai)

AND

HONG LEONG ASSURANCE BERHAD ... DEFENDANT

CORAM: Balia Yusof bin Haji Wahi, JCA; Hamid Sultan Bin Abu Backer, JCA; Badariah binti Sahamid, JCA

Hamid Sultan Bin Abu Backer, JCA (Delivering Judgment of The Court)

GROUNDS OF JUDGMENT

[1] The appellants/plaintiffs' appeal against the decision of the learned High Court Judge who refused to give the declaratory prayers and incidental orders in respect of five insurance policies out of the claim on six insurance policies. The respondent/defendant cross-appeals against the decision of the learned High Court judge in allowing the claim in respect of one policy out of the six insurance policies claimed by the appellant. The appeal came up for hearing on 16-4-2015.

[2] On the date of hearing, both parties in respect of the cross-appeal by consent agreed that the order of the learned trial judge in respect of the one policy is to be set aside. That brings an end to the cross-appeal, taking into consideration the grounds of this judgment in relation to the five policies the appellants complain of.

[3] Upon hearing the appeal, we allowed the appeal with costs. My learned brother Balia Yusof bin Haji Wahi JCA and learned sister Badariah binti Sahamid JCA have read the judgment and approved the same. This is our judgment.

Brief Facts

[4] The 1st appellant is the wife of the deceased. The deceased had purchased six policies from the respondent. The 2nd and 3rd appellants are children of the deceased. The details of the policies are as follows:

(1) 1st Policy No. IL2002031961-6 insured the life of the 3rd appellant for the sum of RM50,000.00.

(2) 2nd Policy No. IL2002030672-5 insured the life of the 2nd appellant for the sum of RM100,000.00.

(3) 3rd Policy No. IL2002031959-4 insured the deceased for the sum of RM300,000.00.

(4) 4th Policy No. IL20020301022-5 the subject matter of the cross-appeal was brought by the 1st appellant and insured the life of the 1st appellant for the sum of RM200,000.00.

(5) 5th Policy No. IL20020306714 insured the life of the 3rd appellant for the sum of RM100,000.00.

(6) 6th Policy No. IL20020319605 insured the life of the 2nd appellant for the sum of RM50,000.00.

[5] The prayers of the appellants in the statement of claim can be summarised as follows:

(i) A declaration that the six policies are still in force;

(ii) The defendant to pay the sum of RM300,000.00 under the 3rd policy;

(iii) A declaration that the premiums for the 1st, 2nd, 5th and 6th policies have been waived;

(iv) In the alternative a sum of RM500,000.00 to be paid by the defendant;

(v) Interests and costs.

[6] The prayers in the statement of claim at pages 112 and 113 of Appeal Record read as follows:

"DAN Plaintif-Plaintif menuntut daripada Defendan:-

(a) satu perisytiharan bahawa polisi-plisi IL/2002/031959/4, IL/2002/031960/5, IL/2002/031022/5, IL/2002/030672/5, IL2002/031961/6 dan IL/2002/030671/4 masih terpakai dan berkuatkuasa;

(b) Jumlah RM300,000.00 di bawah insuran Polisi No. IL/2002031959/4 dibayar kepada Plaintif Pertama;

(c) Satu perisytiharan bahawa premium-premium bagi polisi-polisi insurans IL/2002/031960/5, IL/2002/031022/5, IL/2002/030672/5, IL/2002/031961/6 dan IL/2002/030671/4 diabaikan ("waived") sehingga tarikh matangnya dan bahawa Plaintif-Plaintif berhak untuk menuntut mengikut terma-terma polisi-polisi tersebut;

(d) Secara alternative, sejumlah wang sebanyak RM500,000.00 dibayar kepada Plaintif-Plaintif bagi polisi-polisi insurans IL/200/031960/5, IL/2002/031022/5, IL/2002/030672/5, IL/2002/031961/6 dan IL/2002/030671/4;

(e) Faedah pada kadar 8% setahun ke atas jumlah RM300,000.00 dari tarikh penghakiman sehingga ke tarikh penyelesaian penuh;

(f) Faedah pada kadar 8% setahun ke atas jumlah RM500,000.00 dari tarikh penghakiman hingga ke tarikh penyelesaian penuh;

(g) Apa-apa faedah ("benefit") lain yang patut dan wajar dibayar di bawah polisi-polisi insurans tersebut;

(h) Kos atas Dasar indemniti; dan

(i) Apa-apa relif, perintah, arahan, siasatan dan akaun lain yang Mahkamah Yang Mulia ini fikir patut dan wajar diberikan."

[7] It is not in dispute that the deceased:

(i) purchased the policies;

(ii) within 23 days of the purchase, the deceased was shot dead by the police;

(iii) the policies had a condition governing death. In the 1st, 2nd, 5th and 6th policies, the condition governing death reads as follows:

"Should the Payor prior to the expiry of the Supplementary Insurance die, the Company shall provide the following benefits:

(i) The premiums payable under the basic Policy and this Supplementary Insurance shall be waived until the expiry date of this Supplementary Insurance. The first premium to be so waived shall be the one falling due immediately after the date of death of the Payor."

In the 3rd and 4th policies, the condition governing death reads as follows:

"Death of the Payor by suicide, sane or insane or by hands of justice within twelve (12) months from date of the issuance or any reinstatement of this Supplementary Insurance, whichever is later, shall render this Supplementary Insurance null and void."

(iv) the respondent repudiated the policy on public policy grounds and on the grounds that the deceased did not disclose that he was previously convicted of a criminal offence, and that breaches the rule of uberrima fidei which has statutory force under section 150(1) of the Insurance Act 1996 (IA 1996) which reads as follows:

"150. (1) Before a contract of insurance is entered into, a proposer shall disclose to the licensed insurer a matter that-

(a) he knows to be relevant to the decision of the licensed insurer on whether to accept the risk or not and the rates and terms to be applied; or

(b) a reasonable person in the circumstances could be expected to know to be relevant.

(2) The duty of disclosure does not require the disclosure of a matter that-

(a) diminishes the risk to the licensed insurer;

(b) is of common knowledge;

(c) the licensed insurer knows or in the ordinary course of his business ought to know; or

(d) in respect of which the licensed insurer has waived any requirement for disclosure."

[8] On the issue of public policy and the principles of uberrima fidei the respondent says:

(i) In reliance of MacGillivray on Insurance Law, Eleventh Edition, p.356:

"The courts will not permit a person to enforce his rights under a contract of any kind if it is tainted by illegality. This principle of public policy is expressed in the familiar Latin maxim ex trupi causa non oritur action (an action does not arise from a base cause). Although this maxim is lacking in precise legal definition, it is reflected in two rules affecting the enforceability of rights under contracts of insurance. First, a claim is unenforceable when the grant of relief to the plaintiff would enable him to benefit from his criminal conduct. Secondly, a claim is unenforceable when the plaintiff either has to found his claim on an illegal contract or to plead its illegality in order to support his claim. Once a court has determined that one or other rule applies to the facts of a given case, it has no discretion whether to apply the rule depending upon the degree to which the plaintiff has affronted the public conscience."

(ii) In reliance of Poh Chu Chai, Principles of Insurance Law, 6th Edition, p 776:

"The rationale behind the rule of public policy is that the law is reluctant to render its assistance to a person who commits a criminal offence to obtain a benefit or to enforce a right arising from his unlawful conduct."

(iii) In reliance of the House of Lords case of Beresford v Royal Insurance Co Ltd [1938] A C 586 quotes Lord Macmillan who observed:

"I feel the force of the view that to increase the estate which a criminal leaves behind him is to benefit him. To enforce payment in favour of the assured's representative would be to give him a benefit, albeit in a sense a post-mortem benefit, the benefit, namely, of having his last and criminal act provided for his relatives or creditors. And no criminal can be allowed to benefit in any way by his crime."

(iv) In reliance of Poh Chu Chai, Principles of Insurance Law, 6th Edition, pp 782-784, the learned author wraps up her discourse in this fashion:

"The legal implication to be drawn from Beresford v Royal Insurance Co Ltd is that even though an insurer may have contractually agreed to make payment under the policy to a policyholder if he commits suicide, the courts will not enforce such an agreement if an issue based on public policy is raised by the insurer."

(v) In reliance of Poh Chu Chai, Principles of Insurance Law, 6th Edition:

"An insured's duty to disclose material information to an insurer constitutes a duty which exists independently of any proposal form. The mere fact that an insurer may require an insured to answer a question pertaining to the information in a proposal form does not relieve the insured of his duty of disclosure."

(vi) In reliance of E R Hardy Ivamy, General Principles of Insurance Law, 6th Edition:

"The assured must disclose all material facts which are within his actual or presumed knowledge. The absence of a proposal form does not modify the assured's duty of disclosure."

(vii) In reliance of S Santhana Dass, Law of Life Insurance in Malaysia:

"The disclosure must be made voluntarily, in the sense that even if the insurer does not ask an appropriate question either in the proposal from or otherwise, the insured is bound to disclose any information which is material or relevant to the risk. He must not wait to be asked. An insured's duty to disclose material information to the insurer is a duty which exists independently of any proposal form."

(viii) Relies on the case of Toh Kim Lian & Anor v Asia Insurance Co Ltd [1996] 1 MLJ 149, where it was stated:

"It is a general principle in insurance law that an insured is under a duty to disclose material facts and the absence of a proposal form does not modify the insured's duty."

[9] The learned counsel for the appellants says the respondent cannot repudiate liability on public policy grounds as well as ubberima fidei, and this clause relating to death benefit or conditions governing death will not apply here because:

(i) the deceased did not die in the hands of justice, as he was shot dead by the police;

(ii) the deceased did not die of lawful arrest as the deceased was shot dead by the police. No public inquest was also done.

[10] The material part of the learned counsel for the appellants' submission reads as follows:

"35. The Appellants humbly refer to the evidence of PW-1, the wife of the Deceased who had clearly stated that her husband had been wrongfully shot by the police and that the husband had been kidnapped a day before he died. This is supported by police reports lodged by the wife at the material time. Since there is no other evidence of eye witnesses that state otherwise, the evidence of PW-1 which is consistent and credible must be accepted as the truth. How can a person be said to have been shot in a police ambush allegedly evading arrest when in actual fact that person had been kidnapped a day earlier, and a police report had been lodged to state that.

36. PW-2, the mother of PW-1 had also stated that her children had gone missing during that time and she had lodged police reports on the same matter, but no action was taken.

37. The Respondent at the High Court had failed to rebut this evidence by PW-1 and PW-2 yet the Learned High Court Judge had decided that the deceased had died in a shoot out whilst evading lawful arrest based solely on conjecture in newspapers.

38. DW-7 who was an investigating officer in this case had clearly stated whilst cross examination, that he had no knowledge of the investigation carried out on the shoot out and has no knowledge on the conclusion of the investigation.

39. DW-7 had no knowledge on whether the Deceased had any criminal records or had been charged in any Courts prior to his death. Hence, the Appellants had submitted that DW-1 is not a credible witness yet the Learned High Court Judge had decided that the Deceased had a criminal record and was involved in the M16 gang.

40. The Appellants humbly submit that evidence of DW-4, DW-5 and DW-6 who are newspapers reporters cannot be used as they had no knowledge of the facts of the case and authenticity of the facts. The Appellants further submit that the newspapers articles cannot be used as the authenticity cannot be verified. The unchallenged evidence of PW-1 report her husband being kidnapped is unrebutted and clear and credible and must be accepted."

[11] We have read the appeal record and able submissions of the parties. After giving much consideration to the submission of the respondent, we take the view the appeal must be allowed. Our reasons inter alia are as follows:

(i) The principles of uberrima fidei or utmost good faith in relation to disclosure by the insured to the insurer is well established. The duty is not only confined to the insured but also to the insurer in a limited sense. Section 150(2) of IA 1996 itself recognises as a fact that the uberrima fidei principle will not bite in certain circumstances. Case laws have also asserted that the insurer has an equal duty to disclose the information the insurer seeks plainly and clearly. In essence, the statute as well as case laws do not permit the insurers to hide behind the veil of ubberima fidei principles per se.

(ii) Insurance policy per se cannot be avoided by the insurer based on ubberima fidei principles without balancing the insurer's obligation and duty either under the statute expressly and/or implied, for example as set out in section 150(2) IA 1996 and/or development of case laws in Malaysia. The materiality of the fact which requires disclosure depends on the surrounding circumstances and also the nature of the information sought by the insurer. [See New India Insurance Company v Raghava Reddi [1961] AP 295]. In Azizah binti Abdullah v Arab-Malaysian Eagles Sdn Bhd [1996] 3 CLJ 426, the court on the facts held:

"[5] It is trite law that the burden of proof in respect of nondisclosure of material facts is on the insurer. The standard of proof for fraud is proof beyond a reasonable doubt. However, it is not the law of evidence that every step in an allegation of fraud has to be proved by calling live and admissible evidence, nor is it the law that fraud cannot be inferred in an appropriate case.

[6] The respondent had failed to discharge its burden in proving non-disclosure, fraud, and knowledge on the part of the deceased, and, consequently, could not avoid its liability under F2.

[7] The nature of a contract of insurance is one of uberrimae fidei. Insurers are entitled to a full disclosure of all the knowledge possessed by the insured that is material to the risk. However, the duty of disclosure is not confined only to the insured. Insurers are also bound by this common law duty; it is a reciprocal duty. And it is equally a duty on the part of the insurer to define the information he seeks plainly and clearly."

[12] The uberrima fidei principle is not an absolute principle to allow any form of high handedness by the insurer to avoid liability. Similar issues and principles were dealt with by the Federal Court in the case of The "Melanie" United Oriental Assurance Sdn Bhd Kuantan v WM Mazzarol [1984] 1 MLJ 260. In that case, the contention of nondisclosure was as follows:

"It is the submission of counsel for the appellant company that a contract of insurance being anuberrimae fidei contract, they are entitled to repudiate their obligations because the respondent had been guilty of a non-disclosure for failing to disclose to them that the "Melanie" had an accident on November 20, 1977 (referred to in the judgement as "the earlier mishap"). Counsel for the respondent on the other hand submitted that the respondent was not guilty of any such non-disclosure because in the first place none of the questions in the proposal form which the respondent completed and signed require him to disclose such accident and in the second place the appellant company's agent, Pany, with whom the respondent dealt in effecting the insurance had knowledge of the earlier mishap, because not only was he told by Cassidy but also by the respondent himself."

The court on the facts held:

"(1) the omission by the respondent to state the earlier mishap in the proposal form was not his fault but that of the appellant company themselves for framing ambiguous questions. Such ambiguity must be resolved in favour of the respondent;

(2) it is settled law that where an agent is authorised to negotiate and settle terms of a proposal or delegated with a duty to investigate certain matters, the agent's knowledge is also the knowledge of the insurance company. In this case the learned judge was right in holding that the agent was acting as agent for the appellant company when he received the information about the earlier mishap from the respondent."

[13] In the instant case, it was never established in law that the deceased was a criminal and resisted arrest. It is not the law of Malaysia to shoot dead a person who resisted arrest. [See Nurasmira Maulat bt Abd Jaffar & Ors v Ketua Polis Negara & Ors [2015] 2 CLJ 231]. The legal presumption known in common law jurisdiction from time immemorial is that a person is innocent until proven guilty. That presumption cannot be debunked by hearsay evidence, surmise or authoritative statement from person in authority. The burden is a high one which the respondent has not met according to law to canvass any related issue as to arrest and his subsequent death. If disclosure of criminal conviction is necessary, it ought to have been stated in the proposal form, taking into consideration a good number of people are convicted and sentenced daily in contrast to the number of persons dying of illness or cardiac arrest, etc. which are often seen as insurance risk. The learned counsel for the respondent was also not able to furnish us any cases from respectable jurisdiction where life insurance policy has been repudiated on the grounds of non disclosure of criminal conviction.

[14] It is also the unrebutted evidence of the appellant that the 1st appellant has made a police report one day before the death of the deceased that the deceased had been kidnapped. On the facts of the instant case and the circumstances which suggest that the deceased was unlawfully killed will not attract the quote of Lord Macmillan in the case of Beresford v Royal Insurance Co Ltd [1938] AC 586.

[15] We do not think there are any valid grounds in law and/or fact for the respondents to deny liability under the relevant policies in issue. And there is no merit in the cross-appeal.

[16] For reasons above, we allowed the appeal of the appellants with the following orders:

(i) The decision of the High Court in respect of the 4th policy is set aside by consent and the declaration sought in respect of the 4th policy is dismissed.

(ii) The respondent to pay the appellants a sum of RM300,000.00 in respect of the 3rd policy with interest at 5% per annum from the date of the writ until the date of realization.

(iii) In respect of the 1st, 2nd, 5th and 6th policies, a declaration as prayed is allowed.

(iv) The respondent to pay costs of RM10,000.00 to the appellant.

(v) Deposit is refunded to the appellants.

We hereby ordered so.

Dated: 12 June 2015

Sgd

DATUK DR. HJ. HAMID SULTAN BIN ABU BACKER
Judge
Court of Appeal

Malaysia.

Note: Grounds of judgment subject to correction of error and editorial adjustment etc.

Counsels for Appellants: Jasbeer Singh [with Parvinder Kaur], Messrs. Jasbeer Nur & Lee, Advocates & Solicitors, No. 2.33, 2nd Floor, Kompleks Wilayah, Jalan Dang Wangi, 50100 KUALA LUMPUR.

Counsels for Respondent: Christopher Foo [with Farah Jihan Ariffin], Messrs Raja Darryl & Loh, 18th Floor, Wisma Sime Darby, Jalan Raja Laut, 50350 KUALA LUMPUR.

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