[*232] 1985 December 31.
(BOYADJIS, P.D.C., KALLIS, D.J.)
IN THE DISTRICT COURT OF NICOSIA
v.
Cosmos Anonymos Eteria Genikon Asfalion,
Defendants.
Contract - Repudiation by a party not accepted by the other - Whether the party, who repudiated the contract, is entitled to invoke terms of it as a defence to a claim based thereon - Question determined in the affirmative.
Contract - Contract of insurance - Time bar clause - Action filed after expiration of time - Waiver or estoppel alleged by plaintiff - The latter has to establish that the defendants unequivocally and in clear and unambiguous terms represented by word or conduct that they will not insist on the time bar clause.
P. Angelides, for the Plaintiff.
St. Erotocritou (Mrs.), for the Defendants.
BOYADJIS, P.D.C.: The judgment of the Court was delivered by Kallis, D.J.
KALLIS, D.J.: By virtue of a contract of insurance (see 20 Exh. 1) which was concluded on June 19, 1980, the defendants insured certain premises at Nicosia belonging to the plaintiff. As a result of a fire which broke out on 20.6.80 the premises were destroyed; and the plaintiff by letter dated 20.6.1980 (see Exh. 2), [*233] which she addressed to the defendants applied to be compensated. The defendants by means of their reply dated 27.6.1980 (see exh. 3) informed the plaintiff that they accepted no liability whatsoever under the contract in question which - according to them - was void ab initio as executed through fraud and/or false representations and/or through concealment of material facts. The defendants further returned the premium and added - without prejudice to the above allegations - that the claim did not fall within the provisions of the contract and/or that the alleged damage suffered did not fall within the provisions of the contract. Finally, defendants reserved their right to give further reasons for repudiating liability.
Hence the above action, which was filed on 18.10.1980 for £27,000 damages occasioned by fire and/or as damages by virtue of a contract of insurance.
Defendants resisted the claim and alleged that plaintiff secured the contract in question by fraud and/or false representations and/or by concealing material facts. Defendants, further, contended that even if the contract were to be considered as valid plaintiff is not entitled to any relief because she acted in breach of clause 13 of the contract of insurance which provided as follows:
“If the claim of the assured is in any way fraudulent or if there has been made an untrue statement in support thereof or if the assured [*234] or anybody else acting on his behalf used fraudulent means for the purpose of deriving benefit from this contract or if the damage or loss had emanated by a voluntary act of the assured or with his collaboration, or if a claim had been submitted and was rejected and the assured has not brought an action within three months from the rejection or in case of arbitration under clause 18 of the contract within three months from the arbitrator’s or arbitrators’ award or the umpire, the company is discharged of any obligation arising under this contract to compensate the assured”.
Finally, the defendants prayed, by way of counterclaim, for a declaration that the said contract was void ab initio as secured by fraud and/or false representations and/or by concealment of material facts.
There followed an application by defendants on 20.2.1982 under 0.30, r.1 (b) and 2 for an order of the court to try and determine the issue, before the trial of the action, whether the failure of the plaintiff to bring an action against the defendants within three months from the refusal of the defendants to satisfy the claim relieves the defendants from their obligation to compensate the plaintiff. [*235]
The Court (Kourris P.D.C. and Nicolaides D.J.) dismissed the application and an appeal was taken against such dismissal. Following the disposal of the appeal counsel for the defendants applied for a date of hearing of the preliminary issue as “per the order of the Supreme Court dated 23.2.1984”. When the file of the action was laid before this Court there could not be traced therein the decision of the Supreme Court disposing the appeal, which was given on appeal, nor could such a decision or a drawn up copy thereof be traced in the file of the appeal - vide minute of this Court dated 11.10.1984; and such copy has never been made available to counsel for the parties. Both counsel, however, were in full agreement regarding the consent order which was orally delivered by the Supreme Court on 23.2.1984 which - according to counsel - was as follows:
“There should be a separate trial of the above issue by a differently constituted Court and that both parties would be at liberty to adduce evidence on this issue”.
Thereafter both counsel applied for an immediate trial of the issue in question without waiting for the office copy of the order of the Supreme Court; and stated that they will not be adducing any evidence apart from the documents exhibits 1, 2 and 3 and the following statements - not on oath - by Mr. Panayiotis Demetriou, the ex-advocate of the plaintiff and Mrs. Stella Erotokritou. [*236]
Mr. Demetriou stated:
"(α) Μετά την λήψη της επιστολής της ασφάλειας Τεκμήριο 3, επικοινώνησα τηλεφωνικώς με τον διευθυντή της εναγομένης εταιρείας κ. Κυριάκο Τηλλή σχετικά με το θέμα της αποζημιώσεως της ενάγουσας που ήταν τότε πελάτισσα μου. Ο κ. Τηλλής με έντονο και κατηγορηματικό τρόπο απέρριψε κάθε συζήτηση για αποζημιώσεις εις την πελάτισσά μου. Μετά δυο-τρεις μέρες και όχι αργότερον της 10ης Ιουλίου, 1980 συναντήθηκα τυχαία εις την είσοδο του κτιρίου του Δικαστηρίου με την τότε δικηγόρον των εναγομένων κ. Στέλλα Ερωτοκρίτου και ανοίξαμε σύντομη συζήτηση του θέματος της απαιτήσεως της πελάτισσας μου. Η κ. Ερωτοκρίτου είπε 'δεν αρκεί που το εκρούσετε θέλετε και αποζημίωση; Όχι μόνον δεν θα σας αποζημιώσουμε αλλά θα σας κινήσουμε και αγωγή.'
(β) Εγώ παρετήρησα 'Κίνα. Εν τοιαύτη περιπτώσει δεν θα κινήσουμε εμείς.' Όμως δεν θυμούμαι ούτε μπορώ να ισχυρισθώ πώς η κ. Ερωτοκρίτου άκουσε την τελευταία μου αυτή παρατήρηση γιατί ελέχθηκε την ώρα που χωρίζαμε."
Mrs. Erotokritou stated:
"Συμφωνώ με την παράγραφο (α) της δηλώσεως του κ. Δημητρίου. Αναφορικώς με την παρατήρηση 'Κίνα. Εν τοιαύτη περιπτώσει δεν θα κινήσουμε εμείς.' Εγώ δεν άκουσα τον κ. Δημητρίου όταν λέγη ότι έκαμε αυτήν την παρατήρηση."[*237]
Following the above statements the Court, with the consent of both parties, gave directions for written addresses.
Learned counsel for the plaintiff made a two fold submission, namely:
(a) that a contracting party cannot invoke the terms of a contract which has either been repudiated by him or considered - by him - as void ab initio, and
(b) that the assured has been previously dispensed by the insurers from the obligation of performing the condition in question and thus such condition has been waived by a course of conduct on behalf of the insurers inconsistent with its continuing validity.
In support of contention (a) above, learned counsel argued that as far as his research could take him the only instance in which a provision of a repudiated contract may possibly be applied is the one providing for the resolution of a dispute by arbitration so long as the arbitration clause is so general as to cover the case of a dispute arising from repudiation; and he referred, in this connection, to Heyman and Another v. Darwins Ltd., (1942) 1 ALL E.R. 342 (H.L.). He, also, referred to Johannesburg Municipal Council v. Stuart, (1909) S.C. H.L. 53, in which, according to learned counsel, it was decided that a contracting party cannot be allowed to repudiate a contract and thereafter to invoke a term thereof [*238] as a defence. He, finally, submitted that the clear conclusion to be drawn from the Heyman case is that when a contract has been repudiated by one of the contracting parties he can invoke a term thereof only in case of resolution of disputes through arbitration so long as the arbitration clause is so wide so as to cover a dispute arising from repudiation.
He also referred to the following passages from Ivamy, General Principles of Insurance, at p. 313:
“Where the insurers seek to avoid the policy or to resist liability on the ground that the assured has failed to comply with a condition of the policy, the assured will, nevertheless, be entitled to recover, if he is able to show that he has previously been dispensed by the insurers from the obligation of performing the condition in question, and that, in the circumstances, no breach of it has therefore been committed.”
And at p. 314:
“The conduct of the insurers may render the fulfilment of the condition unnecessary, e.g. by wrongfully repudiating the policy or their liability thereunder before it becomes necessary for the assured to perform it, or refuse to fulfil their part of the condition or otherwise prevent him from performing it.” [*239]
And at p. 315:
“Conditions precedent may be waived by a course of conduct inconsistent with their continuing validity, even though the contracting party does not intend his conduct to have that result. This is especially so if the course of conduct leads the other party to spend time and incur expense in a proceeding which he would not have undertaken had he not been led, by the conduct of the other party, to think that he was relieved, by concurring in those proceedings, from the other course of conduct and conditions prescribed by the policy.”
Counsel, finally, submitted that the defendant company is not entitled to use the contract as a valid one and this it cannot invoke the time-bar clause thereof. The conduct of the defendant company, counsel concluded, clearly shows that it has fully waived the right to use the time-bar clause and has, in the circumstances, been estopped of the right of defence provided by the contract.
On the other hand, learned counsel for the defendants submitted that the conversation between Mr. Demetriou and Mrs. Erotocritou does not constitute promissory estoppel and/or abandonment of clause 13; and only proves affirmatively that the Director of the defendant company rejected the claim categorically and Mrs. Erotocritou, acting as counsel for the defendants, made it clear that the claim was fraudulent. [*240]
In the Heyman case, according to the head-note, the respondents contracted with the appellants, an American firm, whereby the latter were to act as their selling agents over a wide area. The agreement contained an arbitration clause in these terms: If any dispute shall arise between the parties hereto in respect of this agreement or any of the provisions herein contained or anything arising hereout the same shall be referred to arbitration …….“ A dispute arose between the parties, and the appellants, having intimated to the respondents that their letters showed that they had repudiated the agreement, issued a writ against them, claiming a declaration that the respondents had repudiated the agreement and damages under a number of heads. The respondents claimed that the action should be stayed pursuant to the Arbitration Act, 1889, s.4, in order that the matters in dispute might be referred under the arbitration clause. The appellants contended that, the respondents having repudiated the agreement as a whole and the appellants, by the issue of the writ, having accepted that repudiation, the contract had ceased to exist for all purposes, and the respondents could not afterwards rely on the arbitration clause:-
HELD: the dispute between the parties was a dispute within the arbitration clause and the appellants’ action ought to be stayed. Where there has been a total breach of a contract by one party so as to relieve the other of his obligations under it, an arbitration clause, if its terms are wide enough, still remains effective. This is so even where the injured party has accepted the [*241] repudiation, and, in such circumstances, either party may rely on the clause.
Now as to repudiation which was much relied upon by learned counsel for the plaintiff, the law is to the effect that repudiation by one party has no effect unless the other party accepts it. See Golding v. Edinburgh Ins. Co. (1932) 43 Lloyds L.R. 487 where it was held that there was no complete repudiation by the company of the policy; and that as the plaintiff - same as in this case - was still claiming under the policy, and as by the terms of the policy an award was a condition precedent to liability, the action ought to be stayed.
In the Heyman case (supra) Lord MacMillan said at p.346: “Repudiation, then, in the sense of a refusal by one of the parties to a contract to perform his obligations thereunder, does not of itself abrogate the contract. The contract is not rescinded. It obviously cannot be rescinded by the action of one of the parties alone”.
With all respect to learned counsel, the Heyman case has not decided that when a contract has been repudiated by one of the parties, a term thereof can be invoked only in the case of arbitration clauses. This becomes, we think, clear from the following passage by Lord MacMillan at p.347: [*242]
“I am accordingly of opinion that what is commonly called repudiation or total breach of a contract, whether acquiesced in by the other party or not, does not abrogate a contract, though it may relieve the injured party of the duty of further fulfilling the obligations which he has by a contract undertaken to the repudiating party. The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract.”
True in Jureidini v. National British and Irish Millers Ins. (1915) A.C. 499, also relied upon by counsel for the plaintiff, Viscount Haldane L.C. said at p. 505:
“When there is a repudiation which goes to the substance of the whole contract, I do not see how the person setting up that repudiation can be entitled to insist on a subordinate term of the contract still being enforced”;
and in Johannesburg Municipal Council v. Steward, (1909) S.C. (H.L.) 117 Lord Loreburn L.C. said at p.54: [*243] “If the course of action which is established be that there has been repudiation or a breaking of a contract in the sense that the contract “has been frustrated by the breach, then it would not be within the arbitration clauses in either of these contracts.”
And Lord Shaw in the same case said at p. 56:
“As these averments stand the contract was wholly repudiated. It does not appear to me to be sound law to permit a person to repudiate a contract and thereupon specifically to found upon a term in that contract which he has thus repudiated.”
But Lord MacMillan in the Heyman case said the following regarding the aforesaid dicta in the last mentioned two cases (vide p. 346):
These dicta, in view of their high authority, are entitled to the most careful consideration, but, with all respect, I do not think they constitute pronouncements in law by this House such as to be binding upon your Lordships. To take first the dictum of LORD LOREBURN, L.C., I confess that I find it obscure, without expressing myself so bluntly as LORD SUMNER, who, in a subsequent case, prefaced his comment on the dictum with the words: ‘Whatever exactly this sentence means’: Hirji Mulji v. Cheong Yue S.S. Co. Ltd., (1926) A.C. 497 at p. 511. It certainly does not say that repudiation destroys [*244] the contract and with it the arbitration clause which it contains. As LORD DUNEDIN, then Lord President, said in this same Johannesburg case (1909) S.C. (H.L.) 53, in the Court of Session, at p. 878, after pointing out that the defenders there ‘threw up the whole contract’ and the pursuers replied ‘We see you cannot go on, you have so utterly broken the contract that we hold it at an end and we will claim damages for breach,’ at once added:
“That does not mean that the contract is gone for ever; on the contrary the contract remains and is only the measure of liability for damages.”
(See, also, pp. 347-348)
and regarding the above dictum of Haldane L.C. Lord Wright said the following at p. 354:
“It may be observed that this observation was solely that of VISCOUNT HALDANE and was not concurred in by his colleagues and was not necessary to the ratio decidendi adopted by them. It may be simply another way of stating that the company by their conduct had waived the condition and were not entitled to rely upon its non-fulfilment. If it means that the company, by making allegations which, if established, relieved them from liability under the terms of the policy, repudiated the contract, I do not think that it can be regarded as good law, nor is it consistent with the later authorities which I have cited. LORD SUMNER, in [*245] Macaura v. Northern Assurance Co. (1925) A.C. 619, at p. 631, states the effect of the decision in Jureidini’s case (1915) A.C. 499, to be that the defendants could not both repudiate the contract in toto and require the performance of a part of it, which only became performable when liability was admitted or established.
“I have italicised these last words because I think they distinguish Jureidini‘s case (1915) A.C. 499 from cases like Woodall v. Pearl Assurance Co. (1919) 1 K.B. 593, which LORD SUMNER approved. In the Hirji Mulji case (1926) A.C. 497 he repeated much the same idea, adding ‘it is a case of approbation and reprobation.’
“Perhaps what LORD SUMNER meant was that the company had somehow prevented the possibility of an arbitrator awarding damages if liability were established. It is familiar law that a party who has prevented fulfilment of a condition precedent cannot set up the fact of its non-fulfilment. It is, however, enough here to say that on any view Jureidini’s case (1915) A.C. 499 does not, in my opinion, help the defendants.”
Having in mind the speeches of all the Law Lords in the Heyman case we hold that when a party to a contract repudiates the contract or repudiates liability thereunder, he may still rely on clauses thereof [*246] as defence accordingly the defendant company could invoke the time-bar clause. Further, had the insurers not repudiated liability upon being confronted with the claim, the plaintiffs by relying on the doctrine of waiver and estoppel might have asserted that they have waived their right to deny liability.
Waiver - Estoppel
The law on the above subjects is thus stated on MacGillvray & Parkington on Insurance Law, 6th ed. paras. 910-911:
910. Is the plea of waiver a plea of estoppel? An insurer who has waived a right accruing to him by reason of the assured’s breach of warranty or condition is frequently said to be ‘estopped from’ asserting such a right, and the use of that phrase raises the difficult question of the juristic relationship between the doctrine of waiver and the classic doctrines of estoppel. This question does not admit of any simple answers on existing case law, but it may be helpful to close this section with some observations on it.
“911. The classic doctrine of estoppel requires (i) an unequivocal representation by word or conduct of a present fact, which is (ii) made to someone expected to rely on it, who (iii) does rely upon it to his detriment. It is clear that in many cases where a plea of waiver has [*247] succeeded, the court has not applied these strict conditions, and it is submitted that the doctrine of waiver of breach is really an application of the doctrine of election, namely that, once a party has manifested his intention to forgo a contractual right, either by express statement or by inference from conduct inconsistent with exercise of that right, he may not revoke that election later. Accordingly intention to forgo the right in question is an essential element in waiver, even if it be presumed by law in certain instances, and once the insurer has acted in a way inconsistent with a desire to avoid liability under the policy for breach of condition or warranty, he is presumed to have made his choice and is precluded from going back on it. No detriment need be pleaded by the assured, and no ‘estoppel’ is involved.”
Regarding the Law of Estoppel, in the case of HadjiYiannis v. Attorney-General of the Republic, (1970) 1 C.L.R. 32 pp. 48-49, Josephides, J. stated the following at pp. 48-49:
“The doctrine of promisory estoppel is to the following effect, that is to say, where by his words or conduct one party to a transaction makes to the other a promise or assurance which is intended to affect the legal relations between them, and the other party acts upon it, [*248] altering his position to his detriment, the party making the promise or assurance will not be permitted to act inconsistently with it.”
In Stylianou and Others v. PapacleovouIou and Others, (1982) 1 C.L.R. 542, Pikis J. said at pp. 552-553:
“The impetus for the widespread application of equitable estoppel in modern times stemmed from the decision of Denning, J., as he then was, in Central London Property Trust v. High Trees House Ltd. (1947) K.B. 130 - (1956) 1 ALL E.R. 256. The learned Judge found ample authority for its existence, especially in the exposition of the law on the subject, by Lord Cairns in Hughes v. Metropolitan Railways Co. (1874-1880) All E.R. Rep. 187, 191. Lord Cairns pronounced that it is the first principle of the courts of equity that a person will not be allowed to insist on his strict legal rights whether arising under a contract or on his title deeds or by statute, when it would be inequitable for him to do so having regard to the dealings between the parties. Since the decision in the High Trees case the law reports abound with decisions where equitable estoppel was successfully invoked to mitigate the vigour of the law. Its juridical basis was expanded. It has come to be acknowledged as a fundamental precept of justice [*249] designed to ensure standards of probity in the dealings of mankind, so that law and justice may march hand in hand. It is established that a party, making a promise, cannot resile therefrom when it would be inequitable for him so to do notwithstanding the absence of a legally recognised relationship between the promisor and the promisee. And it is inequitable for the promisor to resile from his promise whenever, as a result of such representation, the promisee has modified his position in a way that it would be unjust for the promisor to withdraw from his representations; provided always, of course, that the representations made are clear and unambiguous, such as could lead the promisee to act upon them.”
See, also, Markidou v. Kiliaris and Another, (1983) 1 C.L.R. 392 p. 408 where Pikis, J. said:
“An equitable estoppel in its various forms has come to be regarded as an important principle of equality, intended to streamline the law along the dictates of justice - Moorgate Mercantile v. Twitchings, (1975) 3 ALL E.R. 314 (C.A.). In due course its definition was stripped of formality and “its application freed from technical prerequisites. It has come to this. A party will not be allowed to resile from his representations as to the existence of a particular [*250] state of affairs in circumstances where so to do would be inequitable.”
And see, further, Boustani v. Linmare Shipping Co. (1984) 1 C.L.R. 354, at p. 361.
Having regard to the above legal position we are of opinion that for the plaintiff to succeed on her plea of waiver and estoppel she has to establish that the defendants unequivocably and in clear and unambiguous terms represented by word or conduct that they will not insist on the time-bar clause. Now what are the facts upon which the plaintiff seeks to establish that such a representation was made?
The first part of statement (a) by Mr. Demetriou refers to the categorical rejection of the claim; and the second part thereof - the utterances of Mrs. Erotokritou - again makes it clear that the claim is rejected and proceeds to add that an action will be brought against plaintiff.
Taking statement (a) alone we cannot by any stretch of imagination construe it as conveying to anyone the impression that it thereby foregoes or waives the time-bar clause.
Regarding statement (b) of Mr. Demetriou, it was not heard by Mrs. Erotokritou, and the question arises whether on such statement waiver or estoppel can be found even if Mr. Demetriou was all along under the impression that Mrs. Erotokritou has heard such statements. [*251]
Having considered the matter in the light of the law applicable we are of opinion that for estoppel or waiver to be found there must exist representations in clear and unambiguous terms, by word or conduct by or on behalf of the promisor. It matters not that Mr. Demetriou was under the impression or was thinking that Mrs. Erotokritou heard his statement for the law - as we conceive it - is that the representations must move directly from the promisor.
For all the above reasons the plaintiff has failed to make up a case of estoppel or waiver; and her action must, therefore, fail with costs to be assessed by the Registrar, unless agreed upon between the parties.