Case No.:

(HC-Revision-470- 1958)

Court:

The High Court

Issue No.:

1960

Principles

·  Insurance—Notice of institution of proceedings against insured—Road Traffic Ordinance, s. g of “notice “—Whether such notice should be given in accordance with section 19 of the Interpretation and General Clauses Ordinance—Bills of Exchange Ordinance, s. 35 (5)

·  Company law—Ostensible authority of secretary of company—Rule in Royal British Bank v. Turquand (1856) 6 E. & B. 327 Statute—Construction—Interpretation and General Clauses Ordinance. s. 19

(i) The provision in section55 of the Road Traffic Ordinance that before the insurer can be held liable for injury sustained by a third party and covered by the insurance policy, the insurer must have notice of the institution of the proceedings, means simply that he must have some knowledge of the matter: it is not necessary that there be notice drawn in accordance with formalities set out in Section 19 of the Interpretation and General Clauses Ordinance. This section is irrelevant since it is concerned with cases where the law authorises or requires the service of a notice or a document and lays down the procedure for such service; section 55 speaks of notice, not in this sense, but in the sense of knowledge, cognisance or warning.

(ii) The rulc in Royal British Bank v. Turquand (1856) 6 E. & B. 327, that third parties dealing with companies are not affected by rules of internal management, together with the exceptions thereto (e.g., that third parties are so affected if there were circumstances which ought to have put them on inquiry as to the powers of the company officer dealing with them) has no application where there is no allegation that the act of the officer of the company was contrary to the internal rules of the company.
Houghton v. Nothard [1928] A.C. 1distinguished.
 

Judgment

(HIGH COURT) AND (COURT OF APPEAL)

ROBERT KEGELEIRIS v. SUDAN MOTOR INSURANCE CO. LTD.

AND ANDRE LEMAIR AND SOCIETE BELGE DE TRANSPORT

PAR AIR S.A. SOBELAIR

(HC-Revision-470- 1958)

 (AC.Revision-55- 1960)

Revision

Advocate:  E. M. Kronufi……….. for applicants and plaintiffs

                 Ahmed Suliman and Abdel Wahab Mohamed …for respon- dents and defendants

February 14,1960. Osman El Tayeb P.J.: —These three cases were consolidated and filed in one record and one judgment was passed in the three of them dismissing them all on November 2, 1958. The defendant company is one, and the issues are substantially the same.

Plaintiffs are the crew of a “Sobelair” aeroplane that landed at Wadi Seidna aerodrome on January 2, 1953. From the aerodrome they took the B.O.A.C. crew bus, vehicle No. K-3607 coming to Khartoum. As this bus was being driven through Doma Road in Omdurman, another passenger bus, vehicle No. K-5161 collided with it, and as a result the passengers sustained injuries. On December 15,1954 the three plaintiffs individually instituted civil suits in the High Court, Khartoum, against the driver, Abdel Muneim Mohamed, and the owner, El Hag Mahmoud Mohamed Nabag, of the passenger bus, claiming damages for personal injuries. The civil suits were HC-CS- -334, 336 and 353-1954 After deliberations and negotiations between advocate for the plaintiffs on the one side, and defendants and their advocate on the other side, consent decrees were passed in the three cases for payment of the sums of:

£S.2,521. 815m/ms to Robert Kegeleiris;

£S.831.075m/ms to André Lemair;

£S.697.695m/ms to Sobelair.

These sums represented 50 per cent, of the damages claimed plus costs. Ihese consent decrees were entered on January 2, 1956, in the presence of Advocate Gumaa, who represented defendants.

Afterwards defendants declined and refused to settle the above mentioned consent decrees; therefore plaintiffs instituted this case against them in order to obtain an order against them in their capacity as insurers ot the two defendants in the first three cases, to meet their statutory liability under section 55 (1) of the Road Traffic Ordinance, by payment in satisfaction of the amounts of the three decrees; the alternative ground is that defendant.s made an undertaking under the agreement of settlement to pay the sums in the consent decrees.

Defendants in reply denied liability on the grounds: i) that the statutory notice under section 55 (2) of the Ordinance was not given; and (ii) that no binding undertaking under an agreement of settlement was made. The issues were framed to cover these two points. Evidence was heard, and the learned District Judge based his judgment on totally irrelevant matters, that were not in dispute between the parties nor covered by the issues.

His judgment as a whole appears to be confused, unsatisfactory and un reliable. So I have to consider the evidence tendered to prove or disprove the issues.

I shall first discuss the law on the point of the form of the notice required under section 55(2) (a) of the Road Traffic Ordinance. It reads:

No sum shall be payable by an insurer under the foregoing provisions of this section:

(a) In respect of any judgment, unless before or within fourteen days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings.”

The learned advocate for plaintiffs submitted that the subsection does not stipulate that the notice required should be in writing or in any other form or manner, nor that it should be given by the claimant or any particular person. The learned advocate for defendants submits that this statement is not correct in law. He refers to section 19 of the Interpretation and General Clauses Ordinance, but without any comment as to what it means. He again refers to the English case Herbert v. Railway Passengers Assurance Co. [1938] 1 All E.R. 650 in which, he said, it was held that the notice required under section 10 (2) of the Road Traffic Act, 1934, the equivalent of section 55 (2) of the Road Traffic Ordinance, I935 must be something more formal than a casual mention of the proceedings in a conversation, and that there must be something to indicate that notice is given. However, he does not contend that the notice should be in writing or in any particular form or manner.

Section 19 of the Interpretation and General Clauses Ordinance provides for a possibly effective mode of service of a notice, by posting or a registered letter, where a contrary intention is not shown in the law requiring notice. It does not obviate notice by personal delivery. Again the section seems to be dealing with a case where the required notice must be in writing. However, it does not help in the present case.

Section 55 (2) (a) has to be strictly interpreted as it is a law interfering with the right of personal property in one sense and in the other it is part of a penal law, i.e., the Road Traffic Ordinance. As such, the notice required is not meant to be made in any particular form or manner. There is nothing in the section to show an intention that it should be made in any particular form or manner. It means that the insurer must have had notice that is knowledge of the proceedings. in order to make him liable to satisfy the judgment that may pass against the insured.

The same point is discussed by Shawcross on the Law of Motor Insur ance, 2nd ed. pp. 298—299 it says:

“The question as to what form the notice is to take is more difficult. Since it is merely provided that the insurers must have had [notice, and there is no requirement that notice shall be served or even given, by any particular person, it is submitted that neither written nor express notice is necessary.”

But notice cannot mean vague information; it must be knowledge in the sense that it is given formally by the claimant or the insured or their agents to the insurers or their agents. So it is sufficient to communicate the information of the proceedings before or within fourteen days from the date of their bringing into court to an agent of the insurers by an agent of the plaintiffs verbally on an occasion on which the talk can be understood to be formally made.

Looking into the evidence as to this point—as well as as to the other points—I cannot hesitate a bit in taking the evidence of Advocate Ahmed Gumaa to be the most reliable. He was the secretary of the defendants at the material time, the time of the bringing of the proceedings on December 18, 1954 .This appears in the evidence of the two witnesses of defendants. He was also their legal adviser and advocate. In a former case resulting from the same accident, Advocate Gumaa on behalf of defendants settled the case out of court and defendants paid the sum agreed upon. Advocate Gumaä states in his evidence that he was present in court when the action was allowed in those cases before Judge Watson and that Advocate Kronfli gave him notice of the, claims. He adds that on the same or next day, he informed El Widaa Osman, who was then the managing director of the defendants and was in charge of their office.

Can this satisfy the requirement of section 55(2) (a) about the notice? In my opinion the answer is in the affirmative. The meeting of Advocate Kronfli with Advocate Gumaa in the court on that day was a casual one, in that it was not arranged for the purpose of giving notice about their cases; but Advocate Kronfli took the chance to communicate the informa tion in a formal manner to Advocate Gumaa about the bringing of those cases. Any words like “please see that the injured persons are suing for damages” in the circumstances that Advocate Gumaa saw the petitions allowed and that he and defendants had knowledge of the accident and were expecting that such cases might be instituted, in my opinion Con stituted sufficiently the required notice. Advocate Gumaa in his capacity as secretary and advocate of the defendants accepted that notice and without delay communicated it to the managing director of the company.

There is a point that was not raised by plaintiffs, to which I may refer briefly. It is that defendants had waived this right of notice, had it not been given. They waived it by accepting the summons from the insured, and directing them to Advocate Gumaa to defend the cases, as he did; and later entering into negotiations to settle them with readiness to pay the sum that might be reached in the settlement. The notice is required by the law for their own protection and so they can waive it.

I come to the point of the consent decrees. Advocate Gumaa was, after discussing the matter with the board of directors, on October 20, 1955, authorised to reach amicable settlement with plaintiffs’ advocate to the amount of 50per cent, to 6o per cent of the total claims. On November 19, 1955, a meeting was arranged between Advocate Kronfli for plaintiffs and Advocate Gumaa for defendants in the office of the former. It was attended by two of the directors. After discussion the two advocates agreed to a settlement for 50 per cent of the claims plus costs. On November 22, 1955, Advocate Gumaa sent a letter to the def informing them about the agreement and requested them to send their cheque for the suui agreed upon.

Instead of sending the cheque, the directors held a meeting on December 4, 1955, in which they decided not to pay and instructed Advocate Gumaa to proceed with the cases. They sent a letter to Advocate Gumaa to this effect dated December 10, 1955. On December 7, 1955, Advocate Kronfli sent an application to the judge, High Court, Khartoum, requesting him to put the three cases before the court for the purpose of passing consent decrees on the sums agreed upon. On January 2, 1956, the cases were put before the court and consent decrees were passed in the presei of Advocate Gumaa for the insured on the brief and authority of defendants. The latter refused to settle these decrees and so these cases were brought.

There is no doubt that Advocate Gumaa was expressly authprised by defendants to agree on a settlement in respect of those claims, and that such an agreement of settlement was intended to be binding on both parties, and that defendants had undertaken to pay the sum that should be agreed upon between the two advocates. The agreement of settlement was made and concluded. In my opinion the refusal of defendants to be bound by it was not justified. They have no chance to avoid it.

The binding agreement of settlement leads naturally to consent decrees. Advocate Gumaa in his capacity as a counsel for defendants, appeared before the court on January 2, 1956, and consented to a decree in pur suance of the agreement.

The argument is that Advocate Gumaa nad received from defendants express instructions not to consent to a decree and proceed with the hearing of the cases until final judgment by court. It is clear that an advocate has to act according to th express instructions of his clients, but if he has acted contrary to express instructions in, the conduct, and disposal of a case, for example, consenting to a decree, the client will still be bound by the result of the case. The consequential question as to whether the advocate, in his office acting as a counsel or a solicitor, is liable to the clients for making good the loss is a matter outside the scope of this case.

I think defendants may be bound by the agreement of settlement of the cases, made and concluded by their advocate, who had their express authodtY to make that agreement. But I am not taking this as the ground or one of the groundsfor decision in this revision. The grounds for the decision as I expounded them above, are that defendants in their capacity as insurers have to meet their liability under the law; to pay in satisfaction for judgments passed against the insured, in a matter covered by the policy of insurance, whether those decrees were passed with the consent of their advocate, contrary to their instruction, is immaterial and does not afford a defence to avoid liability.

For these reasons I hold that the decrees, in the three cases dismissing plaintiffs’ claims against the defendants, should be set aside, and decrees on revision shall pass in each of the three cases against the defendants for the sum claimed, with costs in this court and the court below.

                                                                                      (Revision allowed)

On application for revision against the decision of Osman El Tayeb,P.J:-

May 30, 1960. Babikir Awadalla J.: —This is an application for revision against the decision of His Honour the Province Judge, Khartoum, reversing the decision of the District Judge, Khartoum, in CS- with which cre consolidated (.S-352 and 353-1956. The facts leading to the institution of these three suits are fully set out in the judgment of His Honour the Prov:nc Judge and we need not restate them here. The grounds upon whe h the decision of His Honour the Province Judge is based are:

(1) That the requirements of paragraph (a) of subsection (2) of section 55, Road Traffic Ordinance, as regards notice have been satisfied in this case, and

(ii) that quite apart from their liability under the Ordinance the insurers (applicants) have bound themselves to pay 50 per cent, of the original claims against the insured.

It is now contended on behalf of applicants:

1.As regards (1): that the provisions of section, Road Traffic Ordin ance, as regards notice have not been complied with in that (a) the insurers had no notice whatsoever of the claims against the insured within the prescribed time; and (b) that assuming that such notice was given, then it was not given in the manner provided for in section 19 of the interpretation and General Clauses Ordinance 1955.

11.As regards (ii) : that the alleged compromise s as made subject to final Approval by the Insurers (applicants) and is not therefore binding because such approval was withheld.

All these points were raised in the original proeedings beforc the District Judge whose judgment was in our view quite aptly, desribed by His Honour the Province Judge as “confused and unsatisfactory.’ His Honour the Province Judge had dealt with all these arguments with admirable clarity and were it not for the need of a pronouncement by the court of Appeal in the question of interpretation involved, nothing useful need be added to his judgment.

We will now deal with the points raised by applicants in their above order

First, as to the question of notice, i.e., whether applicants had had notice of the claims against the insured within the time prescribed by section 2

(1) (a). This is a question of fact on which there was ample evidence before the learned District Judge to answer in the affirmative Nonethe less the Distnct Judge found that no such notice was given and rejected the evidence of PW 2 Ahmed Gumaa because in the learned judge,s opinion Ahmed Gumaa was in great differences with the board of directors as the circumstances of the case show.” There is abundant evidence that PW.2 was at the material time both the secretary and legal adviser of the applicants’ company. This witness said on oath, at page 45 of the record, that he was present at the sitting at which action was allowed and that he had notice of the claims from their inception His evidence on the point is corroborated by that of PW.1El Tayeb El Khazin, at the bottom of page 22 of the record when he said The company briefed Ahmed Gumaa because he is the legal adviser of the company to defend

Nabag who is insured with the company and is a shareholder as well It seems that the learned District Judge assumed from the fact that because Ahmed Gumaa had no longer any connections with the applicants corn pany, his evidence must necessarily be biased, for we can find nothing in the record from which it could reasonably be inferred that Ahmed Gumaa was “in great differences” with the applicants’ company. In our opinion His Honour the Province Judge was quite right in reversing the learned District Judge on the point. It is true that the decision of a court of first instance on a question of fact must not be lightly upset especially when it is based on the court’s impression of the witness’s credibility or lack of it, hut when such impression is grounded neither on the demeanour of the witness noj- on contradictory evidence apparent on the face of the record nor on any assertion of bias by his adversary, then an appellate authority is entitled to interfere, not in order to substitute its own conscie’nce for that of the court below, but in effect to decide the issue de novo and treat the conclusions of the inferior court as extra-judicial and such that they ought never to have been made.

This brings us to the question whether such notice was invalid by reason of its contravening the provisions of section 19 of the Interpretation and General Clauses Ordinance, I955. His Honour the Province Judge, in our view quite rightly, decided this point against applicants and ruled that the said section is irrelevant. Section 19 of the Ordinance referred to deals with the service ‘of notices and reads as follows:

“Where any law authorises or requires any notice or any other document to be served, whether the expression ‘serve’ or the expres sion ‘give’ or send’ or any other expression is used, then, unless the contrary intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a, letter containing the notice or document, and unless the con trary be proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”

The operation of this section is subject to two conditions, viz., (a) there must be a document; (b) that document must be required or authorised to be served. That there must be a “document” in the first place is clear from the use of the word “other” between the words “notice” and “document” at the beginning of the second line. It is a matter of common knowledge that when the pronoun “other” is used, then the word coming before it is simply a species and that one following it is the genus to which that species belongs. The notice contemplated by section 19 can therefore in no way be construed to mean any notice not intended by the law to be contained in a document. The applicants have to prove that the word “notice” in section 55 means a “documentary notification” before section 19 of the Interpretation and General Clauses Ordinance, 1955 can be called into play. I do not think that this is possible in view of the wording of section 55. It is clear that the said section speaks of notice in the sense of knowledge, cognisance or warning. There are many instances of the use of this word in that sense in many Sudan enactments and—to mention but one—we would like to refer to section 35 (5) of the Bills of Exchange Ordinance, 1917, which reads as follows:

“Where a bill which is not overdue has been dishonoured, any person who takes it with notice of the dishonour takes it subject to any defect of title attaching thereto at the time of dishonour,but nothing in this subsection shall affect the rights of a holder in due course.”

A person with notice of dishonour of a bill cannot claim that because he had no written notification of a dishonour served in accordance with section 19 then he takes the bill free from any defect of title attaching to it at the time of dishonour.

That section 19 is only concerned with the service, rather than the reception, of notices is again clear from the wording. It says “where any law authorises any notice or any other document to be served, whether the expression ‘serve or the expression ‘give’ or ‘send’ or any other expression is used.” Section ç on the other hand, requires an insurance company to have notice before it can be made liable on a judgment obtained against the insured. It does not require any person to give that notice. It might have been given by the insured (and usually insurance agreements of this sort make such notification imperative on the insured) or by the person injured, the inaterialthing being that it must come to the know ledge of the insurers. In other words, section 19 is operative only when there is a statutory aiAthority or obligation to give notice not where there is a statutory’ requirement or condition to receive one.

We now come to the second point dealt with by the learned advocate for applicants, viz., whether the compromise made between PW.2 on behalf of applicants and Advocate Kronfli on behalf of respondents was a final one under which both parties must be held to be bound or whether it was “a preliminary agreement conditional on ratification by applicants” and so not binding on them in the absence of such ratification.

The learned District Judge said that this agreement was conditional on the approval of applicants, but His Honour the Province Judge has reversed his finding on the point because in his opinion the agreement was not at all subject to any approval by the applicants and was binding the moment it was concluded. The learned advocate for applicants again raised the point was again raised before us by the learned advocate for applicants.

The learned advocate for respondents, on the other hand, contend that the point for consideration by the court is not what the real authority of Ahmed Gumaa was but is “what was his ostensible authority.” We entirely agree with the learned advocate for respondents that that was the real point for consideration by the court in so far as the agreement to compromise was concerned. On the evidence as it stands no one can suggest that there is anything to show that Ahmed Gumaa represented his powers to be anything but final and conclusive. The learned advocate for applicants contends that a plea of ostensible authority on the part of respondents will bring the case within the rule in Houghton v. Nothard. This case ‘is one of the exceptions to the well-known rule in British Bank v. Turquand, which lays down that persons dealing with a company are not concerned to inquire whether all matters of internal management have been complied with, if everything is apparently regular. But the rule does not apply in a few well-recognised cases one of which is where the person dealing with the company has been put on inquiry and it is a case for inquiry if a director or officer of the company does something.outside his normal powers. That is the ratio decidendi in Houghton v. Not hard. But the rule in Royal British Bank v. Turquand as well as the exceptions thereto only operate where the’ act on which liability is sought to be imposed on the company is one involving a contravention of the internal rules or regulations of the company even though it is within the powers conferred by the memorandum and articles.

In the present case, no allegation was made that the act of compromising these cases was contrary to the internal rules of the company and in the absence of such a contention we cannot see how the rule in Houghton v. Nothard can be called into play. If it is sought to contend that it was contrary to the resolution of October 20, I 9 to make a final compromise, then evidence of the terms of the resolution ought to have been brought before the court. Otherwise the evidence of Ahmed Gumaa himself as to the terms of that resolution is in - our view the best obtainable in the circumstances.

But even assuming, for the sake of argument, that the question is “what was the extent of Ahmed Gumaa’s mandate?” have applicants anything in the evidence to rely on? They failed to produce the resolution of October 20, I955 that contained the terms of Ahmed Gumaa’s mandate and sought simply to rely on the wording of Exh. 3, a document that was produced in evidence by Ahmed Gumaa himself and the produc tion of which is, in our view, contrary to the rules as to privileged communications. However, the fact that applicants are now relying on this and on nothing else means that they are waiving their privilege, but did they make use of this document in the only sphere in ‘which it could have done justice to their case? The document is of course inadmissible as proof agau respondents that the authority of Ahmed Gumaa was limited, but it is admissible to contradict him on the evidence he had given viva voce. He was not cross-examined with that end in view in order to explain its contents and that is a mistake for which the learned advocate for applicants can only blame himself. However, as we are basing our decision the q of ostensible authority the point appears to be one of mere academic interest and would not have affected our decision in the absence of clear evi that the respondents knew that Ahmed Gumaa’s mandate was a limited one, if such be the fact.

This application is therefore dismissed with costs.

A.M. Iman 1. : —l concur.

                                                                             (Application dismissed)