Tan

- vs -

Pan Global Insurance Sdn Bhd

Judgment

RK Nathan, J

FACTS

The initial action

1. On September 11, 1984 one Tan Tok Nam and Tan Peng Hin as the driver and owner (and as first and second plaintiff) respectively of motor lorry PQ2931 sued one Lim Ah Chim (Lim) as the owner of motorcar PAM9379 at all material times in the Penang High Court vide Civil Suit No 310/84. It was the plaintiffs' case that on July 26, 1983 the first plaintiff was driving the motor lorry along the Butterworth/Simpang Empat Road in the direction of Butterworth when he was collided into by motor lorry AT4012 which was forced to encroach into the first plaintiff's path by the negligence of Lim and/or his servant and/or his agent /or an authorised driver in the management and control of the said motorcar PAM9379 which came out without stopping from a side road on the plaintiffs' right. Various particulars of negligence were pleaded. The first plaintiff sustained personal injuries and claimed damages for pain and suffering and for special damages. The second plaintiff's claim was only in respect of special damages being the cost of the lorry which was beyond repairs, amounting to RM35,000 and for loss of earnings at RM8,000 per month for five months amounting to RM40,000.

2. By his defence filed on September 22, 1984 Lim admitted that at all material times he was the registered owner of the said motorcar PAM9379. He went on to plead that it was not the negligence of the driver of the said motorcar PAM9379 which led to the collision but that the collision was caused solely and/or substantially contributed to by the negligence of the driver of motor lorry AT4012 and the first plaintiff. He then went on to plead various particulars of negligence against both the drivers.

3. Parties filed an agreed statement of facts in which inter alia Lim admitted being the driver of the said motorcar PAM9379 at all material times. Lim's solicitors then proceeded to take out a summons for leave to issue a third party notice against the driver and owner respectively of motor lorry AT4012 and obtained the said order on October 9, 1985. The third party then filed their defence. On September 27, 1988 the solicitors for Lim obtained an order discharging themselves as solicitors and a new firm of solicitors appeared for Lim as of May 24, 1990. In the meantime, the second plaintiff having died on February 22, 1978, his administrator substituted himself as the second plaintiff.

4. The case having been transferred to the Sessions Court at Butterworth and upon hearing the evidence of the plaintiff and his witnesses and in the absence of Lim or the third party, the court on November 4, 1993 ordered Lim to pay the plaintiff the sum of RM12,000 as general damages with interest at 8% p.a. from the date of service of the writ and RM710 as special damages with interest at 4% from the date of accident to date of judgment. The defendant was also ordered to pay the second plaintiff the sum of RM25,000 as special damages with interest at 4% from the date of accident to date of judgment. The total cost was assessed at RM4,785.

   RECOVERY ACTION AGAINST THE INSURERS

5. Having obtained judgment against the defendant Lim, the plaintiffs sought recovery against the insurers of the defendant's motorcar PAM9379 at the material time. By way of a civil action commenced at the Butterworth Sessions Court (52-240-94) the plaintiffs sued Pan Global Insurance Sdn Bhd (Pan Global) to recover the full judgment sum with interest and costs. A search made by the plaintiffs upon the Registrar & Inspector of Motor Vehicles, Pulau Pinang (RIMV) showed that Pan Global were the insurers of PAM9379 from June 1, 1983 to May 31, 1984 and that the insured was Lim and the cover note number was 514034. However the policy of insurance in respect of the same vehicle in the appeal record showed that the said motorcar PAM9379 was insured with United Oriental Assurance Sdn Bhd (UOA) as from July 26, 1983 to January 25, 1984 and that the insured was one Tan Chai Kim.

6. In its defence to the recovery claim Pan Global whilst admitting issuing a policy to cover the said vehicle from June 1, 1983 to May 31, 1984 denied that they were the insurers of the said vehicle at the material time because they contended that at the time of the accident the ownership of the said car had passed on to someone else and that the insurers at the material time were UOA. Pan Global also denied liability towards the second plaintiff as the claim was one for which they were not statutorily liable.

   THE EVIDENCE LED AT TRIAL

7. The plaintiffs called as their first witness the officer from the RIMV who testified that motorcar PAM9379 was insured with the defendants between the period June 1, 1983 to May 31, 1984. On the date of the accident namely on July 26, 1983 pursuant to the records in his possession, the insurers were the defendant. Under cross-examination the witness testified that in the case of a transfer of interest, the vendor of a motorcar would fill up and sign a form called MV3 whereas the purchaser would fill up a form called MV4 and sign it. The intended purchaser must then submit a fresh cover note or a policy of insurance from an insurer with the new purchaser's name endorsed on the same cover note or policy. Together with these the purchaser must also hand over a photostat copy of the identity card of both the purchaser and the vendor and finally the registration card of the said car must also be surrendered. It would normally take between three to four days for the new registration to take effect from the date the said documents were handed over to the RIMV.

8. The second witness was the first plaintiff. As soon as he was called I note from the notes of evidence that counsel for the defendant consented to the contents of the pleadings and to the judgment. In a surprising turn of events, counsel for the defendant even conceded to the judgment obtained by the second plaintiff in respect of property damage. There was no cross-examination of this witness.

9. The defendants called as their first witness one Tan Chai Kim. He testified that it was he who drove the said car PAM9379 on July 26, 1983 when it was involved in a collision with the plaintiffs' motor lorry. He had bought the said car a day or two before the accident. He was not sure whether he had taken insurance when he bought the car. He didn't even know the name of the insurers of his vehicles at the material time.

10. Under cross-examination he said that he left the matter of the registration of the car and the taking of insurance to a casual friend named Ah Leong. He admitted that on the day of the accident he did not know if the car was registered in his name or whether it was covered by insurance. All he knew was that he had bought the car. He also admitted that he had no record of a transfer of the vehicle to his name nor of any insurance covering him at the material time. He also had not seen the registration book of the said car.

11. He also did not know if he had been registered as the owner of the said vehicle with the RIMV on the date of the accident. When shown the cover note he admitted that Lim and not he was the registered owner of the said vehicle at the material time. In any case Tan Chai Kim admitted that at the time of the accident he had not made full payment for the vehicle.

12. The second witness for the defence was the Branch Manager of UOA. He testified that UOA had insured the said vehicle PAM9379 with effect from July 26, 1983 till January 25, 1984 with Tan Chai Kim as the policy holder. He confirmed that an own damage claim was made for the repairs of the said vehicle by Tan Chai Kim. At this stage there was a half-hearted attempt by counsel for the defendant to tender the registration book of the said vehicle but upon objection being taken, and even before the court could make a ruling, counsel withdrew his request to tender the registration book of the vehicle which he contended showed the registered owner as Tan Chai Kim. Under cross-examination this witness testified that either the insured or the insurers could cancel the policy by giving due notice of cancellation within seven days and that the RIMV must be notified of the cancellation by the insurer. He confirmed that if Pan Global were to cancel the policy they must notify the RIMV of the said cancellation. When asked a specific question as to what would be the position if Pan Global did not notify the RIMV of the said cancellation, his evidence was that the said cancellation if any was ineffective and Pan Global would remain the insurers at the material time. The defence then called an adjuster who testified that he had attempted without success, to trace the whereabouts of Lim the insured of the defendant at the material time. The defendant then closed their case without themselves giving evidence.

13. Having heard lengthy submissions the learned Sessions Judge dismissed the plaintiffs' claim with costs. In his judgment the learned Sessions Judge held that there was a sale of the motorcar to Tan Chai Kim prior to the date of the accident. He further held that there was no evidence from the present owner Tan Chai Kim that he drove the car as the servant or agent of the previous owner for any vicarious liability to accrue.

    FINDINGS OF THIS COURT

14. It is clear from the records of the RIMV that Pan Global were the insurers of the said motorcar on the date of the accident and that the insured then was Lim. There was some half-hearted challenge made upon the RIMV officer who testified that Pan Global were the insurers of PAM9379 as of July 26, 1983. It was put to him that the records may not be correct or that the details as contained in the cover note may not be true. But that submission did not take into consideration the defendant's admission in paragraph I of the defence in this recovery action where the defendant admitted that the initial owner Lim had a valid insurance cover for period June 1, 1983 to May 31, 1984 with the defendant. However they denied they were at risk because at the material time there had been a transfer of interest.

15. Since the accident occurred on July 26, 1983 the pre-amendment Act would apply namely the Road Transport Ordinance 1958. Section 74 therefore made it mandatory for every registered owner of a motor vehicle to have a valid insurance cover in respect of third party risks. Section 75 required insurers to provide cover in respect of the death of or bodily injury to any person arising out of the case of a motor vehicle on the road and the insurers are required to issue to the insured a "certificate of insurance" which includes a cover note. However it is s 80 that is most relevant to the issue before me. The relevant parts of the said section reads as follows:

    80.	(1)	If, after a certificate of insurance has been delivered under subsection (4) of section 75 of this Ordinance to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of subsection (1) of section 75 of this Ordinance (being a liability covered by the terms of the policy) is given against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled the policy the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any written law relating to interest on judgments.
    	(2)	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 seven days after the commencement of the proceedings in which the judgment was given the insurer had notice of the proceedings; or (b) in respect of any judgment, so long as execution thereon is stayed pending an appeal; or (i) before the happening of the said event the certificate was surrendered to the insurer or the person to whom the certificate was delivered made a statutory declaration staling the certificate had been lost or destroyed; or (ii) after the happening of the said event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy, the certificate was surrendered to the insurer or the person to whom the certificate was delivered made such a statutory declaration as aforesaid; or (iii) either before or after the happening of the said event, but within the said period of fourteen days, the insurer has commenced proceedings under this Part of this Ordinance in respect of the failure to surrender the certificate.

16. To my mind, s 80(1) is explicit. The innocent third party was totally unaware of the alleged transfer of interest. The RIMV had not been notified of the new change. Pan Global were on record as covering the said vehicle. If the insured namely the original owner Lim had breached the policy condition by not notifying the insurers of the sale then it is a matter between the insurers and the insured. It is always open to the insurers to sue their then insured for indemnity for breach of policy condition or for failing to comply with s 86 which requires the insured to surrender the said certificate or give notice within seven days from the date of cancellation, which means from the date of the sale of his car to Tan Chai Kim. But in so far as the innocent third party is concerned, the said section is clear.

    Notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability.

17. These words are explicit. Sub-section (3) of the said section provides that the said Pan Global need not pay the judgment sum if they had commenced before or within three months after the commencement of the proceedings in which the judgment was given, namely in Suit No 310/84, the said insurers had obtained a declaration that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular. In any case, whether the insurer can fall within the protection of this provision in this case where there was no material non disclosure when the policy was obtained, and whether the said insurer could avail itself of this proviso when the only ground is that the insured had transferred the interest without cancelling the policy, is a matter for the court to decide. For the moment s 80 requires Pan Global to satisfy the judgment sum. There is another issue I have to consider. Pursuant to s 80(2)(a) the third party must, before or within seven days after the commencement of the proceedings in which judgment was given, give notice of such commencement of proceedings to the insurers. I must presume such notice must have been given although I am surprised that counsel for the plaintiffs had omitted to include this vital notice in the appeal record. I must presume so because both counsel involved in this appeal specialise in running down cases and there is no doubt in my mind that the said notice would have been given. In any case, paragraph I of the defence admits the cover but merely denies the risk, not on this issue that no notice under s 80(2)(a) had been given, but because of the transfer.

18. Looking into the facts of the case it is also clear that the learned Sessions Judge had erred in finding as a fact that the said car was sold prior to the accident. Tan Chai Kim himself is unable to state when he bought it. He did not even know when he became the registered owner of the car. He left it entirely to his friend Ah Leong, whom he described as a casual friend. Yet this Ah Leong was never called to testify. To my mind Ah Leong is a vital witness who could have given evidence as to the date of purchase of the vehicle. I must however hold it against the defence for failing to call its own insured Lim as its witness. Only his evidence will suffice to show if Tan Chai Kim was or was not his servant or agent at the material time. While Tan Chai Kim said that he had purchased the vehicle two or three days before the accident the certificate of insurance from UOA included in the record of appeal showed that the said car was covered by LJOA from July 26, 1983 to January 25, 1984 and the accident occurred on July 26, 1983. So in other words for those two to three days was Tan Chai Kim driving the said car with the consent of Lim? And if this was so, certainly Tan Chai Kim would have been covered by Pan Global. It is common ground that one need not be the servant or agent of the owner of the vehicle to be covered by insurance, so long as one drives the said car with the consent of the insured. Then there is the admission of Lim in the statement of agreed facts that he was driving the said car at the material time whereas in this present recovery claim Tan Chai Kim had stated that he was the driver. This material discrepancy has not been explained by the defence. Whilst in this case. Tan Chai Kim denied knowing Lim, to my mind the material witness to have been called would be the insured of the defendant. Of course the defendants adduced evidence through their adjuster that he had tried to contact Lim. The adjuster's pathetic attempt to trace the witness is unacceptable. He merely met a postman who told that there was no such address as given, of Lim. However he went to that area where the house was located and asked one or two residents. It would have been a simple exercise to have officially written to the National Registration Department giving details of Lim's identity card number with the usual search fee to have obtained a prompt response. I am not convinced that a proper attempt had been made to trace Lim.

19. Another pertinent failure of the defence is its refusal to testify upon its own cause. Surely Pan Global could have sent its claims manager or a representative to testify that it had repudiated or cancelled the policy. For all intents and purposes whilst the said car had UOA as insurers, it was also covered by Pan Global. Even to date Pan Global had led no evidence that it had repudiated the policy or had cancelled the policy. I find that in the absence of any evidence from the defendant, and notwithstanding their insured's conduct in not informing them of the sale of the said motorcar, Pan Global were still the insurers because they had not gone on record to have cancelled the policy or cover note.

20. It is clear that the said vehicle was covered by double insurance at the material time. It is for Pan Global to satisfy the plaintiffs and then to recover if at all or share the loss with the co-insurers. That is for both the insurers to decide.

21. I therefore hold that Pan Global is liable to satisfy the judgment obtained by the first plaintiff. As the second plaintiff's claim is purely damage to property the recovery proceedings against Pan Global cannot be founded on any provision of the Road Traffic Ordinance and therefore Pan Global is not statutorily liable to the second plaintiff unlike the case of the first plaintiff (see QBE Insurance Ltd v Dr K Thuraisingam [1982] 2 MLJ 62). The second plaintiff's recourse is to proceed against the insured, not against the insurers.

22. I therefore allow the first plaintiff's appeal with costs and dismiss the second plaintiff's appeal, also with costs.

QBE Insurance Ltd v Dr K Thuraisingam [1982] 2 MLJ 62

Road Transport Ordinance 1958: s.74, s.75, s.80, s.86, s.86

Brijnandan Singh Bhar (Brijnandan Singh Bhar & Co) for Appellant/Plaintiff

Rajendran (Dass, Jainab & Associates) for Respondent/Defendant

This decision is also reported at [2002] 4 AMR 4589