Salamo Elema, Insurance Commissioner v Pacific MMI Insurance Limited (2011) SC1114

• Jurisdiction: Papua New Guinea
• Judge: Salika DCJ, Cannings J, Gabi J
• Judgment Date: 22 July 2011
• Citation: (2011) SC1114
• Docket Number: SCM NO 7 0F 2010
• Court: Supreme Court
• Year: 2011
• Judgement Number: SC1114

Full Title: SCM NO 7 0F 2010; Salamo Elema, Insurance Commissioner v Pacific MMI Insurance Limited (2011) SC1114

Supreme Court: Salika DCJ, Cannings J, Gabi J

Judgment Delivered: 22 July 2011

SC1114

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCM NO 7 0F 2010

SALAMO ELEMA, INSURANCE COMMISSIONER

Appellant

V

PACIFIC MMI INSURANCE LIMITED

Respondent

Waigani: Salika DCJ, Cannings J, Gabi J

2011: 29 June, 22 July

STATUTES – Insurance Act – whether Insurance Commissioner can invoke Section 34 (powers of inspection and investigation) to require an insurer to provide information, files and documents for the purpose of investigating a complaint by a customer of the insurer as to rejection of insurance claim

STATUTES – statutory interpretation – literal meaning of words used in statutory provision – examination of purpose of provision, given its context in a statutory scheme.

The appellant, the Insurance Commissioner, relying on Section 34 of the Insurance Act, wrote to the respondent, a licensed insurer, requiring it to explain why it had rejected an insurance claim (the insured having complained to the Commissioner about the rejection) and to provide information and documents regarding the rejected claim and its entire file since inception of the cover. The respondent refused to comply and applied for judicial review of the Commissioner’s decision to impose the requirements on the ground that Section 34 did not authorise him to impose such requirements in regard to a complaint by an insured. The National Court granted judicial review and held that the Commissioner had acted unlawfully. The Commissioner appealed to the Supreme Court.

Held:

(1) When the question arises as to whether power conferred by a statutory provision has been lawfully exercised the court should first examine whether the exercise of power falls within the literal meaning of the words of the statutory provision; and if it does, the court should then examine whether the purpose of that provision, given its context in the statutory scheme of which it forms part, qualifies the literal meaning of the words used.

(2) If Section 34 is read literally and in isolation it appears to authorise the decision of the Commissioner, but given the purpose of the provision, evident from its context in the whole of the Insurance Act, particularly in light of the complaints and dispute resolution procedure in Part IX of the Act, the literal meaning of the words is heavily qualified: the power in Section 34 is not to be exercised for the purpose of inquiring into complaints from insured persons or resolving disputes between them and insurers.

(3) The National Court did not err in law in deciding that the Commissioner acted beyond the power conferred by Section 34 and the appeal was accordingly dismissed.

Cases cited

The following cases are cited in the judgment:

Gari Baki v Allan Kopi (2008) N4023

Pacific MMI Insurance Ltd v Salamo Elema, Insurance Commissioner (2010) N4032

The State v James Yali (2005) N2932

APPEAL

This was an appeal against a decision of the National Court to grant judicial review of a decision of the Insurance Commissioner under the Insurance Act 1995.

Counsel

J A Griffin QC & D H Katter, for the appellant

A Mana, for the respondent

22 July, 2011

1. BY THE COURT: This is an appeal by the Insurance Commissioner against a decision of the National Court, constituted by the Chief Justice, Sir Salamo Injia.

2. The National Court granted judicial review in favour of the respondent, Pacific MMI Insurance Ltd, of a decision of the Commissioner, relying on Section 34 of the Insurance Act 1995, to require MMI, a licensed insurer, to explain why it had rejected a K20 million insurance claim by Hanjung Power Company Ltd (the insured having complained to the Commissioner about the rejection) and to provide information and documents regarding the rejected claim and its entire file since inception of the cover. The respondent refused to comply and applied for judicial review of the Commissioner’s decision to impose the requirements on the ground that Section 34 did not authorise him to impose such requirements in regard to a complaint by an insured. The National Court granted judicial review and declared that the Commissioner had acted unlawfully and granted an injunction against the Commissioner (Pacific MMI Insurance Ltd v Salamo Elema, Insurance Commissioner (2010) N4032).

3. The Commissioner has appealed against the whole of the judgment on four grounds, set out as grounds 2.1 to 2.4 in the notice of appeal. We have for the sake of convenience renumbered them as grounds 1 to 4 and will address each one in turn. It is argued that the trial judge erred in law in four respects.

GROUND 1: ERROR OF LAW BY HOLDING THAT SECTION 34 DOES NOT EMPOWER THE COMMISSIONER TO DIRECT A LICENSED INSURER TO PROVIDE INFORMATION REGARDING A DISPUTED INSURANCE CLAIM

4. The trial judge concluded that for a number of reasons Section 34 did not allow the Commissioner to direct a licensed insurer to provide information regarding a disputed insurance claim. First, Section 34 only applies where the Commissioner investigates persons who are not licensed insurers or who are suspected of conducting insurance business without a licence; and in this case it was clear that MMI was a licensed insurer. Secondly, the relationship between an insurer and an insured is governed by the contract between them, and any modification of that relationship – such as requiring the insurer to disclose information regarding the contract to the Commissioner – must be expressly provided for by statute; however, Section 34 does not expressly provide for the Commissioner to demand information from an insurer regarding a particular contract. Thirdly, Part IX of the Insurance Act – headed ‘Complaints Procedures and Dispute Resolution’ – provides an exclusive procedure for resolving the type of dispute that arose between Hanjung and MMI, which required the dispute to be first registered with the Commissioner and then referred to the Insurance Complaints Tribunal for determination; and that procedure was not followed in this case.

5. Mr Griffin, for the Commissioner, submitted that his Honour’s reasoning is flawed and his interpretation of Section 34 untenable. Neither the words of Section 34 nor its position in Part V of the Act – Audit, Returns, Inspection etc – support a construction that its operation is confined to insurers which are unlicensed or those suspected of carrying on insurance business without a licence, it was submitted. The words of Section 34, particularly in light of Section 35, which allow the Commissioner to give directives to a licensed insurer following the conduct of an investigation under Section 34, clearly allow the Commissioner to investigate specific transactions and disputes. As to his Honour’s conclusion that Part IX of the Act provides an exclusive procedure for an insured to complain to the Commissioner, this cannot be correct, Mr Griffin submitted, as it would result in the extraordinary situation where a complaint could be dealt with only by the convening of a tribunal, leaving the Commissioner powerless to address issues raised by the complaint by, for example, making a recommendation.

6. Those submissions raise these issues:

· What is the scope of Section 34? Does it only apply where the Commissioner investigates persons who are not licensed insurers or who are suspected of conducting insurance business without a licence?

· Do the words of Section 34 allow the Commissioner to investigate a dispute between an insurer and its customer?

· Does Section 35 support the view that Section 34 allows the Commissioner to investigate specific transactions and disputes?

· Does Part IX of the Insurance Act provide an exclusive procedure for resolving disputes between insurers and their customers?

Scope of Section 34

7. Section 34 consists of two subsections. Subsection (1) confers various powers on the Commissioner, the nature and purpose of which are at issue in this appeal. Subsection (2) makes it an offence to amongst other things fail to comply with requests of the Commissioner. It states:

(1) The Commissioner or a person authorized by him for the purpose may at any time during the ordinary hours of business do all or any of the following:—

(a) enter any land or place where any person—

(i) is acting as; or

(ii) is carrying on or is reasonably suspected by him to be acting as or carrying on, business as,

an insurer or insurance broker or loss adjuster;

(b) make such examination and inquiries as are necessary to ascertain the manner in which any business referred to in Paragraph (a) is being carried on and, in particular, whether the provisions of this Act have been or are being complied with in respect of that business;

(c) examine any person engaged or apparently engaged, whether as principal or employee, in the business, and require him—

(i) to answer any question put to him; and

(ii) to furnish such information as may be required; and

(iii) to sign a declaration as to the truth of any answer given by him;

(d) inspect and examine any...