(1971) All N.L.R. 523


Division: High Court, Kano

Date of Judgment: 30th August, 1971

Case Number: SUIT NO. K/107/70

Before: Wheeler, J.


Civil Action.


The plaintiff was entitled to be indemnified by the defendant under the policy of insurance by virtue of the cover note because:-

(1)     The cover note, on the evidence, had not been issued fraudulently, and as in issuing the cover note the Manager was acting within the scope of his apparent authority, the defendants could not be heard to say that its issue was unauthorised in fact.

(2)     There was consideration for the issue of the cover note as, on the evidence, the rebate of £105-14s-8d had been retained by the defendants and off-set against the renewal premium.


The plaintiff's use of the lorry on the road in reliance on the cover note had the effect of creating an enforceable contract of insurance.

Cases referred to:

Northern Assurance Company Ltd. v. Wuraola, S.C. 349/1966, of 10th January, 1969 (unreported).

Taylor v. Allon, (1965) 1 All E.R. 557.


SUIT NO. K/107/70.

Majiyagbe (with him Orinfumishe), for the plaintiff.

Nnadi for the defendants.

Wheeler, J.:-On the 10th January, 1970, the plaintiff's lorry KC. 4919 was involved in an accident and damaged beyond repair. He now claims the sum of £4,000 as the value of the lorry under a policy of insurance with the defendants.

The plaintiff's case, briefly put, is that the policy in question was in force at the date of the accident having been renewed by a cover note dated the 30th December, 1969. The defendants deny this. In a lengthy statement of defence, they plead the policy had lapsed when the accident occurred as the renewal premium, less a rebate due to the plaintiff for the period the lorry had been off the road, had not been paid, and that the plaintiff had been informed of this by registered letter dated the 4th December, 1969 which the plaintiff with fraudulent intent had returned unclaimed. And that with the same intent, the plaintiff has paid £300 of the outstanding premium of £469-15s-9d on the day of the accident after the accident had occurred. As to the cover note of the 30th December, 1969, the defendants plead that, if it was issued at all, it was obtained from the defendants by fraud or misrepresentation on the plaintiff's part.

There is a considerable area of common ground in this case. It is agreed that the plaintiff initially insured the lorry together with another lorry with the defendants under the policy of insurance, exh. 1 which was due to expire on the 14th November, 1969. It is agreed that during the currency of the policy both lorries were taken off the road for a period and the cover on them reduced to fire and theft only, and that as a result, when full cover was re-instated at the plaintiff's request with effect from the 25th October, 1969, there was due from the defendants to the plaintiff a sum of £105-14s-8d as a rebate of premium. It is also agreed that the thirty day cover note, exh. 4 was issued by the defendants to the plaintiff on the 25th October, 1969 in respect of the lorry in question. Finally it is agreed that that lorry had to be written off as a result of an accident on the 10th January, 1970, and that at the time of the accident, no part of the rebate of premium had been repaid by the defendants to the plaintiff which still stood to the plaintiff's credit in the books of the defendants.

What is in issue in this case is whether at the time of the accident there was a valid contract of insurance in existence between the parties covering the lorry. The plaintiff relies on the cover note, exh. 5 read with the policy, exh. 1 as establishing this. Both were produced in evidence by Alhaji Haliru, an employee of the plaintiff. The cover note is dated the 30th December, 1969 and (inter alia) states that:-

"The under mentioned having proposed for insurance in respect of the Motor Vehicle described in the Schedule below and having paid the sum indicated the risk is hereby held covered in the terms of the Company's usual form of Policy as described hereunder for a period of thirty days, that is to say from the time and date indicated hereunder to the same time on the thirtieth day after such date unless the cover be terminated by the Company by notice in writing in which case the insurance will thereupon cease and a proportionate part of the annual premium otherwise payable for such insurance will be charged for the time the Company has been on risk."

There is no indication in the Schedule that any sum had been paid by the plaintiff. Provision is made for entering that sum opposite the words "Premium or Deposit Paid" but the space provided has two lines through it. Neither is there any mention in the cover note of the policy, exh. 1 or of any other policy, but opposite the words "Special Conditions" the word "Renewal" has been entered.

Alhaji Haliru's evidence was that in October 1969, he made it clear to Mr Sanni, the manager of the defendants' branch in Kano that the plaintiff wished to renew the policy, exh. 1 and that he was then given the cover note, exh. 4 which was to expire on the 24th November, 1969 and that at the same time, Mr Sanni made him to understand that the "laid-up" rebate due to the plaintiff would be treated as part of the renewal premium.

Although he had written the letter, exh. 17 on the 4th December, 1969, indicating that the plaintiff's cover had lapsed because he had failed to pay the balance of the renewal premium, in the course of a subsequent discussion with Alhaji Haliru who had assured him he would pay the balance due, he had agreed to issue the cover note, exh. 5 on the basis and in the circumstances I have mentioned. The plaintiff, the witness went on, had in fact paid the balance of the renewal premium by two cheques (one post-dated) given to him by Alhaji Haliru on the evening of the 9th January, 1970, that is the day before the accident to the lorry took place.

The defendant's General Manager and also a clerk in their Kano office at the material time gave evidence for the defence. The clerk, Mr Shodeinde denied the policy, exh. 1 had been renewed by the plaintiff and recalled being present when Alhaji Haliru had told Mr Sanni in the office that the policy was not being renewed as the desire of the plaintiff to become a member of the defendants' Board of Directors had not been met. Further the cover note, exh. 5 had been "fraudulently" issued by Mr Sanni as there was no record of this having been issued in the Return, exh. 19 submitted to head office for the 30th December. The General Manager's evidence was that the cover note, exh. 5 should never have been issued by Mr Sanni in the circumstances in which he did, and it afforded no insurance cover to the plaintiff as all Managers had written instructions not to issue a cover note unless at least 40% of the premium or renewal premium had been paid and not to re-insure commercial vehicles above a value of £2,000 without reference to head office.

Mr Shodeinde was a witness who gave me the impression that he was anxious to assist his employer's case as much as he possibly could and I disbelieve his evidence that he heard Alhaji Haliru indicate he would not renew the policy as the plaintiff had not been given a seat on the defendants' Board of Directors. I consider it highly improbable that a discussion of that nature would take place in the presence of a mere clerk, and in any event it is inconsistent with the documentary evidence. On the contrary I accept the evidence of Alhaji Haliru and Mr Sanni that the plaintiff through Alhaji Haliru indicated his intention to renew the policy, exh. 1 and find on the evidence that it was renewed for a period of thirty days by the issue of the cover note exh. 5 on the 30th December, 1970. It seems to me that the renewal date of the policy being the 15th November 1969, the issue of the cover note, exh. 4 by Mr Shodeinde on the 25th October, 1969 affording cover to the plaintiff beyond the 15th November, 1969 was consistent with an intention on the part of both parties to renew the policy. Even stronger evidence of the intention to renew and of the fact of the renewal is that the defendants in the endorsement to the policy, exh. 18 dated the 6th November, 1969 stated that the laid-up rebate £105-14s-8d due to the insured would be off-set against the premium payable on the renewal date coupled with the evidence that the plaintiff never demanded payment of that rebate nor was it ever paid to him but was in fact, in accordance with the endorsement, off-set against the renewal premium paid by the plaintiff and accepted by the defendants.

I mention here that there is no doubt in my mind on the evidence that the cover note exh. 5 in speaking of "renewal" refers to, and was understood by the parties to refer to, the renewal of the policy of insurance, exh. 1 which is the contract of insurance under which the plaintiff claims in this action. In Northern Assurance Company Limited v. Wuraola, unreported; SC/349/66; judgment dated 10th January, 1969, the Supreme Court applied the principle of incorporation by reference in the construction of a contract of insurance and I can see no reason why the same principle should not be applied in this case to link exhibits 1 and 5 as constituents of the contract entered into by the parties, and none has been suggested to me.

It has been suggested that the cover note, exh. 5 was issued by Mr Sanni after the accident had occurred and not on the 30th December, 1969 on the ground that there is no reference to it in the Return, exh. 19 made to head office by the defendants' Kano branch in respect of cover notes issued on the 30th and 31st December, 1969.

I do not accept that Mr Shodeinde's evidence was that the cover notes were only issued by the Kano office in strict numerical sequence from one booklet. The cover note, exh. 5 is numbered 02622 and although it is not mentioned in the Return, exh. 19, cover notes 02624 and 02626 are mentioned which in the light of the evidence of Alhaji Haliru and of Mr Sanni satisfies me on the balance of probabilities that the cover note, exh. 5 was in fact issued by Mr Sanni on the 30th December, 1969 and not after the accident as the defendants' allege. Indeed the words "fraud" and "collusion" have not infrequently been used in the course of this trial by the defendants to describe the parts played by Alhaji Haliru and Mr Sanni in this matter. Although it has not escaped my attention that the plaintiff and Mr Sanni are now both on the Board of Directors of a recently established insurance company, it goes without saying that that is not evidence of fraud, and I can find no other evidence substantiating those allegations.

It is apparent, however, from the evidence of the defendants' General Manager that in issuing the cover note, exh. 5 on the 30th December, 1969 Mr Sanni was in breach of head office instructions in two respects. First, he had issued it although 40% of the renewal premium had not been paid. Secondly, he had not obtained prior approval from head office although he was covering a commercial vehicle above £2,000 in value. In this regard it is important to note that the General Manager's evidence was not that Mr Sanni had no authority to issue cover notes, but that his authority to do so was limited in the way I have indicated. He also stated during cross-examination that those limitations would not have been apparent to a client doing business with the defendants through Mr Sanni.

The law on this point is well settled. It is stated as follows in Halsbury's Law, Third Edition, Vol. 25 at page 531:-

"Where the servant, whilst acting in the ordinary course of his employment on his master's behalf, makes a contract which falls within the apparent scope of his authority the master cannot escape liability on the ground that he did not authorise the making of the contract, not even on the ground that the forbade his servant to make it. All persons dealing with the servant are entitled to assume, unless they have notice to the contrary, that he possesses the authority which it is usual for a servant in his position to possess, and his master, by placing him in that position, impliedly holds him out as having such authority."

It follows that the legal implications of the situation here are clear: as Mr Sanni was acting within the scope of his apparent authority in issuing the cover note, exh. 5 he must be deemed to have had authority to issue it and the defendants, as his employers, can not be heard to dispute its validity on the ground that it was unauthorised in fact.

The defendants also dispute the validity of the cover note, exh. 5 on the ground that it was issued without valuable consideration. But I find that there was such consideration in that the rebate of £105-14s-8d was retained by the defendants and off-set against the renewal premium pursuant to an agreement between Alhaji Haliru and Mr Sanni. Even if no rebate of premium had been due from the defendants to the plaintiff, it would seem that by using the lorry on the road in reliance on the cover note, exh. 5 issued by the defendants, an enforceable contract of insurance was created under which the plaintiff became liable to pay a premium for the period of cover: see the observations of Lord Parker, C.H., in Taylor v. Allon, (1965) I All E.R. 557 at page 559.

Finally, the defendants argue that they are not liable under the policy as the loss occurred "during non-payment of the instalments" of premium and therefore falls within the general exceptions clause in the policy. I am unable to agree. It is enough to dispose of that point to say that Mr Sanni's evidence which I accept, is that when he issued the cover note, exh. 5 on the 30th December, 1969 he was prepared to give the plaintiff three months in all to pay the balance of the renewal premium, and I do not see that it is inconsistent with the evidence on that point that he should have been concerned to see, as the evidence show that he was, that the plaintiff should pay it as soon as possible within that period.

The evidence indeed is that the balance of the renewal premium was wholly paid by the plaintiff by the end of January 1970.

In the result I find that the plaintiff is entitled to be indemnified by he defendants under the policy, exh. 1 for the loss of his lorry KC. 4919 in the accident on the 10th January, 1970.

Although, Alhaji Haliru's evidence is that the lorry was worth £4,000 at the time of the accident, that could not be so for that was the value placed on it when it was first insured as a new lorry in November, 1968. The General Manager's evidence is that after a year's use, the lorry would have depreciated by 25%. Yet I observe he also gave evidence that at one stage the defendants had offered to settle the plaintiff's claim for £3,300 less the sum of £300 under the excess clause which both parties agree was endorsed on the policy. I do not consider that a lorry would deteriorate by as much as 25% in just over a year. I find that the offer of £3,300 made but later withdrawn, by the defendants less the sum of £300 payable under the excess clause reflected a fair and reasonable estimate of the value of this lorry in January, 1970, and that is the sum I award the plaintiff.

There is a final point. I observe that condition 9 of the policy requires all claims arising under the policy to be referred to arbitration as a condition precedent to liability on the part of the insurers. This clause is not referred to in the pleadings and has not once been mentioned in the course of the trial, and I conclude I must take it therefore that the provisions of that clause have been waived by the defendants.

Judgment is accordingly entered for the plaintiff in the sum of £3,000 with costs.

▲ To the top