Article On Recovery or Execution - G Naidu

[2019] 1 LNS(A) xcviii Legal Network Series 1
STATUTORY LIABILITY OF A MOTOR INSURER TO SATISFY A

JUDGMENT OBTAINED BY A THIRD PARTY: RECOVERY OR
EXECUTION?
by
G. NAIDU*
Must a Plaintiff who has obtained judgment in a civil suit involving two
vehicles in the accident, hereinafter referred to as the said accident,
proceed by way of a recovery summons to enforce the judgment?
To answer this question, the statutory liability of a motor insurer must be

determined.
Once a judgment is obtained by a Plaintiff against a Defendant in the said

accident, the first recourse is against the Insurer of the Defendant.
However, if the insurer refuses to pay or delays in making payment of the
judgment sum, the Plaintiff [provided he has complied with Section 96(2)
of the Road Transport Act 1987 (RTA)] would normally have proceeded
by way of a recovery summons. This is no longer the situation after the
decision of the Court of Appeal in Pacific & Orient Insurance Co Bhd v.
Muniammah Muniandy [2011] 1 CLJ 947.
As early as 2003, in the case of Pacific & Orient Insurance Co Bhd v.

Rusnah Abd Raop [2003] 6 MLJ 113, His Lordship Justice Kang in his
judgment stated as follows:
“The Defendant need not institute a separate recovery action

against the plaintiff and obtain a judgment there from before
proceeding to present a winding up petition.”
The eminent author S. Santhana Dass in Personal Injury Claims (2 nd

Edition) at page 732 refers to an unreported case of Rayappen a/l
Ferdanis & Rokumoney a/p Velautham v. B H Insurance (M) Bhd
[Rayuan Sivil No. W-02 (In) NCC-3000-2010] which states as follows:
“We agree with the appellants that by virtue of sub-s. 96(1) of the
RTA the plaintiff in a motor accident negligence case who has
obtained a judgment in his favour against the defendant is entitled
to enforce that judgment against the defendant's insurer without
need to commence separate recovery proceedings against the
insurer.”
When Section 96(3) of the RTA is read as a whole with the relevant
provisions of the RTA, it appears, that once a notice is given by the
Plaintiff to the insurers of the Defendant and the insurers have not
disputed that they are the insurers; the insurers are liable to pay. Once
judgment is obtained, it would appear that there is, in fact, no need to
proceed by way of a recovery summons. The Plaintiff can proceed to
execute against the insurer if the insurer refuses or delays to effect
payment.
When the RTA is read as a whole there is nothing that suggests that once
a judgment has been obtained against the insurers, that the Plaintiff must
proceed by way of a recovery summons.
This is the position of the law as stated in the following cases. They are:
i) Pacific & Orient Insurance Co Bhd v. Rasip Hamsudi & Ors

[2017] 4 CLJ 572 [para 34];
“Further, the decided authorities were all stacked up against

the appellant that no separate recovery proceedings had to be
taken against the insurer once a judgment had been obtained
by a third party against their insured. There would therefore
be no further proceedings where the declaratory order
obtained by the insurer could be challenged if it was
wrongfully secured in violation of statutory requirements
including the proviso to s. 96(3) of the RTA”;
ii) Pacific & Orient Insurance Co Bhd v. Muniammah Muniandy

[2011] 1 CLJ 947;
The locus classicus in respect of enforcement of the judgment

against motor insurers is the case of Pacific & Orient
Insurance Co Bhd v. Muniammah Muniandy [page 957] where
it states:
“[21] a) Nowhere does s. 96(1) of the Road Transport Act

1987 say that the respondent must first obtain
another judgment against the appellant before she
can proceed to enforce the judgment earlier
obtained by the respondent against the insured;
b) Therefore, the question of the respondent having

to file a recovery proceeding under s. 96(1)
against the appellant, as contended by the
appellant in its memorandum of appeal, does not

arise at all;
c) In short, the respondent, who had obtained a

monetary judgment against the insured which has
not been stayed, has the right under s. 96(1) to
enforce the said judgment against the insurer
without having to first file a recovery proceedings
against the insurer.” [our emphasis]
iii) Pacific & Orient Insurance Co Bhd v. Kamacheh Karuppen

[2015] 4 CLJ 54 [page 55];
“[1] The right of the respondent as a third party to approach

the court for redress against the appellant, who itself was not
a tortfeasor and with whom the respondent had no
contractual relationship, arose from statutory empowerment
under s. 96 of the RTA. The mechanism of s. 96 of the RTA
operates thus: there is a statutory obligation created by s. 96
of the RTA on the part of the insurer on being so notified on
the failure of the insured to pay up the judgment sum that the
insured had failed to be satisfied in favour of the third party.
This duty to pay up is statutory in origin and is an exception
to the concept founded upon privity of contract. (para 17)”;
The above passage does not suggest that he must file a recovery suit. It
simply entitles the Plaintiff to enforce the judgment against the insurer
although he is not a party to the suit.
“[4] Section 96(1) imposes upon the insurer the obligation of

paying to the person who had obtained judgment against the
insured, after a certificate of insurance had been duly delivered to
the person by whom the policy is effected in respect o f any third
party risk covered under the policy. The appellant in the present
appeal was obliged statutorily to pay the respondent who had
obtained the judgment against the insured and therefore, it was the
insurer's mandatory duty to satisfy the judgment. (para 38)”
Furthermore, in the case of Ahmad Nadzrin Abd Halim & Anor v. Allianz
General Insurance Company (M) Bhd [2015] 9 CLJ 821, Her Ladyship
Lim Yee Lan at para 21 referring to Pacific & Orient Insurance Co Bhd
v. Kamacheh Karuppen had this to say:
“[21] Based on the decision of this court in Pacific & Orient

Insurance Co Bhd v. Kamacheh Karuppen, it is now clear that the
following are the only circumstances and conditions under which
an insurer would be able to avoid its payment obligation to the
third party in respect of any judgment obtained against an insured
owner under s. 96(1), namely:
“(i) before or within seven days after the commencement of

the proceedings in which the judgment was given, the
insurer was not given any notice of the proceedings (s.
96(2)(a);
(ii) where the execution of the judgment is stayed pending

an appeal (s. 96(2)(b);
(iii) before the happening of the event which was the cause
of the death or bodily injury giving rise to the liability
covered under the policy, the policy has been cancelled
by mutual consent between the insured and the insurer
or by virtue of any provision contained therein and the
certificate of insurance surrendered to the insurer
pursuant to such cancellation (s. 96(2)(c));
(iv) before the date the liability was incurred, the insurer
had obtained a declaration from a court that the
insurance was void or unenforceable (s. 96(3)).”
In Ahmad Nadzrin [supra] at para 27, the Judge cited and adopted the
following passages:
“[27] In this regard, we agree with and cite with approval the
following passage of the judgment in the case of Pacific & Orient
Insurance Co Bhd v. Goh Cheng Loong & Ors [2013] 1 LNS 1002,
in which Vazeer Alam Mydin Meera JC (as he then was) sets out
correctly the proper interpretation to be given to s. 96(3) in the
following manner:
[17] Therefore, it is abundantly clear that the insurer’s

statutory liability to pay would come about when judgment in
respect of any such liability... Once that liability has arisen
the insurer cannot avail itself of the provisions of section
96(3) of the Road Transport Act 1987 to seek declaratory
relief to repudiate liability. In this case, that judgment on
liability pursuant to section 96(3) would be the judgment of

the Sessions Court in the Sessions Suit, which has been
delivered.”
In Ahmad Nadzrin [supra], His Lordship Hamid Sultan at para 45 clearly

states the law. That if the insurer has obtained a declaration before
judgment, the insurer can escape liability. It is possible His Lordship may
have had the MIB Agreement in mind, in particular in respect of who is
“the insurer concerned”, [See the Article by Manoharan Veerasamy] [1] for
he goes on to state as follows in his judgment:
CONSTRUCTION AND JURISPRUDENCE IN RELATION TO

SECTION 96(3) OF THE RTA 1987:
“It is a mandatory requirement for a motor vehicle owner to obtain

an insurance policy to cover third party risks. (See s. 90 of the RTA
1987). The insurance coverage technically is not for the motor
vehicle owner per se, but to cover negligence caused by the use of
the motor vehicle by any person.
(See s. 91(1)(b) of the RTA 1987). That is to say, any person can
drive the motor vehicle whether authorised by the owner or
otherwise, but if the vehicle causes damage to a third party, the
insurers are liable to pay under the policy unless the insurance
policy and/or the certificate stated in s. 91(4) of the RTA 1987 is
set aside by the order of court. (See s. 91 of the RTA 1987).”
With this right of execution by the third party, that is, the ability to
recover the judgment sum from the insurer without a recovery summons,
it may seem that it is unfair to the insurers.
To create a balance between the rights of the insurer and the third party,
Parliament enacted Section 10(3) of Road Traffic Act 1934 (UK) which
is in pari materia to Section 80(3) of the Road Traffic Ordinance 1958
(RTO) (now s. 96(3) RTA 1987) which allows the insurer to obtain a
declaration.
THE RATIONALE FOR A DECLARATION
The rationale for a declaration is well stated in the judgment of Lord

Justice Scott in Merchants' and Manufacturers, Insurance Co Ltd v. Hunt
and Other [1941] 1 All ER 123 [page 3]:
“This proviso thus gives to plaintiffs who obtain judgment in an

action for damages caused by the negligent driving or management
of a motor car a direct right of action against the insurance
company who issued the policy required by the 1930 Act, although
the plaintiffs in the negligence action are not party to the policy,
and although the policy is avoidable at the insurer's instance .”
His Lordship then goes on to state the hardship it would cause to the
insurer and what avenues Parliament has given to the insurer. He says as
follows:
“From the extreme hardship which might otherwise result from sub -
s (1), sub-s. (3) gives the insurer a conditional means of escape. If
he discovers that he was induced to make the contract of insurance
by some material non-disclosure or misrepresentation which, by
ordinary insurance law, and not merely by reason of some special

stipulation which he has put in his form of policy, entitles him to
avoid the contract, he may obtain a declaration to that effect from
the court, and he will then be free from the statutory liability to the
injured third party.”
It is pertinent to note that His Lordship states “… a conditional means of

escape.” This will be examined later.
He further goes on to state that a compromise is achieved by virtu e of

Section 10(3) RTA UK 1934:
“This legislation was obviously intended to effect, inter alia, a fair

compromise between the two desirable but conflicting objects-
namely, on the one hand that of protecting the public from the
danger of impecunious tortfeasors on the roads, and, on the other
hand, that of avoiding the injustice of putting on a wholly innocent
and misled insurer the whole pecuniary burden of a policy which,
neither in law nor in equity, is his policy.”
Hence, Section 80(3) of the RTO 1958 to be read together with Section
80(5) permitted the insurers to obtain a declaration if they are of the view
that there was non-disclosure and/or there was material
misrepresentation.
Having obtained a declaration, the insurers are discharged from their

statutory duty to pay the judgment. See:
1. Merchants’ and Manufacturers, Insurance Co Ltd v. Hunt and

Others [1941] 1 All ER 123;
2. Zurich General Accident and Liability Insurance Co Ltd v.

Morrison and Others [1942] 1 All ER 529;
3. New India Assurance Co Ltd v. Pang Piang Chong & Anor

[1971] 1 LNS 90; [1971] 2 MLJ 34;
4. John Doe v. Peng Yong [1997] 3 CLJ Supp 345;
The relevance of this case is that the Counsel for the third
party submitted that no declaration had been obtained
pursuant to the RTA.
5. United Malayan Insurance Co Ltd v. Lee Yoon Heng [1964] 1

LNS 212; [1964] MLJ 453;
6. Tan Kang Hua v. Safety Insurance Co [1972] 1 LNS 149;

[1973] 1 MLJ 6;
7. Tan Tok Nam & Anor v. Pan Global Insurance Sdn Bhd
[2002] 1 LNS 155; [2002] 3 MLJ 742. In a recovery suit, the
judge commented on the fact that no declaration had been
obtained by the insurer as the facts in the case suggested that
there may have been a transfer of interest.
THE AMBIT OF SECTION 80(3) RTO 1958
The right of an insurer to obtain a declaration under Section 80(3), is

limited to non-disclosure and/or material misrepresentation. If the
insurers are of the view that the insurers are not liable for any reason
other than non-disclosure and/or material misrepresentation in respect of

the policy, they could raise those issues at the recovery stage which has
been the practice until recently.
However, with the amendment to Section 80(3) of the RTO 1958 which is
now Section 96(3) of the RTA 1987, the avenue for the insurer to proceed
by way of a declaration for any reason that they deem fit is open to them.
Therefore, the insurer can now raise any issue they wish to raise.
To appreciate the amendment, we must refer to Section 80(3) the relevant

parts of which are as follows:
“(3) No sum shall be payable by an insurer under the foregoing

provisions of this section if, in an action commenced before or
within three months after the commencement of the proceedings in
which the judgment was given, he has obtained a declaration that
apart from any provision contained in the policy he is entitled to
avoid it on the ground that it was obtained by non-disclosure of a
material fact or by a representation of fact which was also in some
material particulars …”
When we contrast it with Section 96(3) the following becomes apparent.

That is:
i) a) In Section 80(3) a declaration must be obtained before

or within three months after the commencement of the
proceedings in which the judgment was given. That is,
it is clear that the insurer must file a declaration not
only before judgment but within three months of the
proceeding in which the judgment was given to the

Plaintiff;
b) For instance, if default judgment has been obtained

and the insurer applies to set aside the judgment and is
successful, the insurer will be barred, for the insurer
has not filed within the time frame. The same will also
apply if a new trial is ordered by the court;
ii) With the amendment, this time frame has been removed
(Section 96(3)). That is the insurer can apply for a declaration
any time before judgment is obtained. For instance, if a
default judgment has been obtained by the Plaintiff, the
insurer can file for an application to set aside the default
judgment, and if the insurer is successful and of the view they
are not liable on the policy then they can apply for a
declaration. Similarly, if a retrial is ordered;
iii) Secondly, Section 96(3) states that:
“no sum shall be payable by an insurer under subsection if

before the date the liability was incurred, the insurer had
obtained a declaration from the court ....” the expanded scope
of Section 96(3) of the RTA becomes obvious.
Section 80(3) of the RTO 1958 was limited. Now, an insurer can obt ain a
declaration for any valid reason it deems fit without any restriction in
respect of time.
The numerous reported cases on recovery clearly show that prior to the
amendments, the issue of transfer of interest was only raised during the
recovery stage.
HISTORICAL DEVELOPMENT
[See the article of Nik Ramlah Mahmood] [2]
To further appreciate the law, we must examine the manner in which the
law itself has developed since 1930. The state of law in respect of motor
insurance and its inability to cover a risk is well illustrated in the
judgment of Mackay v. London General Insurance Company, Ltd
(Lloyd’s LL Reports (Vol 51 pg 201) where the judge said as follows:
(Date of Accident on Nov 5, 1932, Date of Decision on March 13, 1935)
“I am quite satisfied that both those answers were quite

immaterial; that if he had stated the truth in its full detail this
insurance company would have jumped at receiving his premium.
They would never have dreamed of rejecting his application , but

after they have given him the policy, and after the accident has
happened and the liability is incurred, they seize upon these
inaccuracies in the proposal form in order to repudiate their
liability.
I am extremely sorry for the plaintiff in this case. I think he has

been very badly treated - shockingly badly treated. They have taken
his premium. They have not been in the least bit misled by the
answers which he has made. They would never have refused to take
his money; they would never have refused to give him his policy if
they had known everything which they know now. But they have
seized upon this opportunity in order to turn him down and leave
him without any indemnity for the liability which he incurred.” [our
emphasis]
After that decision, the UK Parliament amended Section 10(1), (2) and
(3) of the RTA 1934 which is in pari materia with Section 80(1), (2) and
(3) of the RTO 1958.
Another relevant section is Section 91(3) of the RTA 1987 which reads as
follows:
“Notwithstanding anything in any written law, a person issuing a

policy of insurance under this section shall be liable to indemnify
the person or; class of persons specified in the policy in respect of
any liability which the policy purports to cover in the case of t hat
person or class of persons.”
Section 36(4) of the Road Traffic Act 1930 is similar to Section 91(3) of
the RTA 1987 (except for the fact that the Road Traffic Act (UK) 1934
uses the phrase “any enactment” while ours states “any written law”).
Most Malaysian laws are codified and we also follow common law and
equity. We have our Insurance Act 1996, now replaced by the Financial
Service Act 2013 (FSA). To date, our courts have not construed this
provision in relation to the Insurance act 1996, now FSA 2013, and the
Contracts Act.
1. The reading of this section may give one an impression that if

there is any conflict with any other law, the provisions of the
RTA shall prevail. A search of the Law Reports unfortunately

have not construed this section except for observations by the
judges.
2. When this provision was introduced in the UK in 1930, in

McCormick & Anor v. National Motor & Accident Insurance
Union Ltd [1934] Lloyd’s Law Report Vol 49 361, it was
observed that it was done to ensure that the provision of the
Life Assurance Act 1774 was excluded. However in
Malaysia, as stated above, most of our laws are written laws.
Hence, a decision on this provision would be helpful.
See the views expressed by Lord Justice Scrutton in the case of:
i) a) McCormick & Anor v. National Motor & Accident

Insurance Union Ltd [1934] Lloyd's Law Report Vol 49
361 [pg 366];
b) Lord Justice Greer in McCormick & Anor [supra];
c) In Tattersall v. Drysdale [1935] Lloyd’s Law Report

174, the High Court adopted the views express by L.J.
Greer [see page 181].
ii) The Supreme Court of India in the case of Rikhi Ram And
Anor v. Smt. Sukhrania & Ors on 5 February, 2003 [Case No:
Appeal (Civil) 1578 of 1994] interpreted Sections 94 and 95
of the Motor Vehicles Act, 1939 as follows:
“A perusal of Sections 94 and 95 would further show that the

said provisions do not make compulsory insurance to the

vehicle or to the owners. Thus, it is manifest that compulsory
insurance is for the benefit of third parties. The scheme of the
Act shows that an insurance policy can cover three kinds of
risk, i.e. owner of the vehicle; property (vehicle) and third
party. The liability of the owner to have compulsory
insurance is only in regard to the third party and not to the
property. Section 95(5) of the Act runs as follows:
‘Notwithstanding anything elsewhere contained in any law, a

person issuing a policy of insurance under this section shall
be liable to indemnify the person or classes of person
specified in the policy in respect of any liability which the
policy purports to cover in the case of that person or those
classes of person.’ The aforesaid provision shows that it was
intended to cover two legal objectives. Firstly, that no one
who was not a party to a contract would bring an action on a
contract; and secondly, that a person who has no interest in
the subject matter of an insurance can claim the benefit of an
insurance. Thus, once the vehicle is insured, the owner as
well as any other person can use the vehicle with the consent
of the owner. Section 94 does not provide that any person
who will use the vehicle shall insure the vehicle in respect of
his separate use.
On an analysis of Section 94 and 95, we further find that

there are two third parties when a vehicle is transferred by
the owner to a purchaser. The purchaser is one of the third

parties to the contract and other third party is for whose
benefit the vehicle was insured. So far, the transferee who is
the third party in the contract, cannot get any personal
benefit under the policy unless there is a compliance of the
provisions of the Act. However, so far as third party injured
or victim is concerned, he can enforce liability undertaken by
the insurer.”
In the case of Jones v. Welsh Insurance Corporation Ltd [1937] 4 All ER

149, the court dismissed the Plaintiff’s claim on the grounds that the
policy did not cover the risk and Justice Goddard referred to the views of
Justice Swift and said:
“For this adds another to the growing list of cases which show
that, in spite of the statutory provisions for compulsory insurance,
persons injured by motor cars through no fault of their own may be
left with no prospect of obtaining compensation, a position to
which the late Swift J, not long since called attention in vigorous
and pointed language. The public believe, and with reason, that the
Road Traffic Acts insure that, if they have the misfortune to be
killed or injured by a driver’s negligence, there will at least be
compensation for themselves or their dependants, knowing nothing
of the pitfalls which still abound in policies, in spite of s . 12 of the
Act of 1934.”
That was in October 1937.

Then again in December 1937 Justice Goddard in the case of Peters v.

General Accident & Life Assurance Corpn Ltd [1937] 4 All ER 628 held
that the motor insurance policy is a personal insurance as an insur er
before accepting the risk assesses his past record and other factors which
may increase or reduce the risk before accepting the risk. As it was a
personal insurance, it followed that the motor insurance policy is not
assignable and therefore the policy lapses.
Here again, notwithstanding extensive amendments to the Road Traffic

Act (UK) 1934, Section 10(3) of the RTA 1934, an injured innocent
victim was left uncompensated for the court held that the policy had
lapsed. Perhaps this is what prompted Justice Godard to state as follow s.
In the case of Zurich General Accident and Liability Insurance Co. Ltd.
v. Morrison [1942] 1 All ER 529 72 LIL Rep 167, CA173-174:
[This passage was adopted by the Supreme Court in Malaysia National

Insurance Sdn Bhd v Lim Tiok [1997] 2 CLJ 351.]
“Part II of the Road Traffic Act 1934 was passed to remedy a state
of affairs that became apparent soon after the principle of
compulsory insurance against third party risks had been
established by the Road Traffic Act of 1930. That Act and the
Third Parties (Rights Against Insurers) Act, passed in the same
year, would naturally have led the public, at least those who were
neither lawyers nor connected with the business of insurance, to
believe [our emphasis] that if thereafter they were, through no
fault of their own, injured or killed by a motor car, they or their
dependants would be certain of recovering damages, even though

the wrongdoer was an impecunious person. How wrong they were
quickly appeared. Insurance was left in the hands of companies
and underwriters who could impose what terms and conditions
they chose. Nor was there any standard form of policy, and any
company, who could fulfill the not very onerous financial
requirements that were necessary for acceptance as an approved
insurer, could hedge the policies with so many warranties and
conditions that no one advising an injured person could say with
any certainty whether, if damages were recovered against the
driver of the car, there was a prospect of recovering against the
insurers...
In the case of motor car insurance it was the third parties who
needed the warning, and unfortunately they had no voice as to the
warranties or conditions that were inserted in policies, though it
was only because they held a policy that careless drivers were
enabled to drive and put other persons in peril. [our emphasis] It
is not surprising, therefore, that by 1934 Parliament interfered,
and by s. 10 of the Act of that year (from which our s. 80(1) of the
Ordinance is derived) they took steps towards remedying a
position which to a great extent nullified the protection that
compulsory insurance was intended to afford. Generally speaking,
s. 10 was designed to prevent conditions in policies from defeatin g
the rights of third parties.”[our emphasis]
Parliament in UK by enacting Section 10(1), (2) and (3) of the 1934 Road
Traffic Act in so far as 3rd party rights are concerned, has effectively
removed the contractual and common law rights the insurers had in
respect of repudiating liability in a motor insurance policy.
The above observations clearly illustrate the challenges the motor

insurance industry was facing and the frustration the judiciary had. A
further examination of reported cases show that the courts in interpreting
Sections 10(1), (2) and (3) of the 1934 Road Traffic Act have insisted on
strict compliance and have demanded that the insurers must demonstrate
to the court by way of admissible evidence; and only upon successfully
satisfying the court, both evidentially and legally, that there has been a
breach of the policy conditions or any other law, has the court granted a
declaration. See the cases of Merchants and Zurich [supra].
The tool the court employed to achieve that objective was that a
declaration in compliance with the law must be obtained before judgment
is obtained against the insured. If the insurer failed to do so, the policy
was held to be in force. [Durrant v. Maclaren [1956] LLR 70].
WHEN DOES THE POLICY CEASE TO COVER
In the case of Goodbarne v. Buck [1940] 1 K.B. 107 an injured party sued
the owner and driver of a motor insured vehicle for allowing a person to
drive a vehicle while there was not in force a proper policy of insurance
in relation to the driving of the vehicle.
The insurers had successfully obtained a declaration against both the

driver and owner of the vehicle on the grounds that there was non-
disclosure and misrepresentation, and hence, they were not liable on the
policy.
The court in its judgment discussed the relationship between the insured
and the insurer and also the effect on the policy in relation to the Road
Traffic Act.
This is what the court said:
“It is true that as between the immediate parties to a policy and in

considering the rights and liabilities which it purported to create,
when once there has been a declaration of avoidance by the Court,
it is as though the risk had not been written between the parties,
but it does not follow that for the purpose of consideration of s. 35,
sub-s. 1, of the Road Traffic Act, 1930, for all purposes the policy
must be regarded as never having been in existence at all. The
question which has to be determined under the section is whether,
at the time when the accident happened and the motor vehicle in
question was being used...
It is to be observed that the words are ‘unless there is in force in

relation to the user of the vehicle…., such a policy .... as complies
with the requirements of this part of the Act.’ What has to be looked
at is this: Was there a policy which was in force at the time the user
of the vehicle was being had? As between the parties to this action,
the fact that the rights which were created by the contract o f
insurance were subsequently avoided, does not, it seems to me,
prevent there having been a policy in force at the time of the user
of the vehicle which is in question. At that time there had been no
avoidance of the policy and there might never have been any
avoidance of it if the insurance company had chosen to abide by it .
Looking, therefore, at the time when the tortious act and the use in
question occurred, it follows that there was in fact at that time a
policy in respect of the car which complied then with the terms of
the Act.”
In the case of Durrant v. Maclaren [1956] LLR 70 the Court of Appeal

applied the case of Goodbarne v. Buck [1940] 1 K.B. 107 and held that
the policy, although it had been obtained by fraud, was valid until a
declaration was obtained by the insurer. The court held as follows:
“His argument is that if by any means an insurance policy may be

avoided or may be void ab initio, then it cannot be a policy in
force. Quite clearly when Sect. 3 was passed that might have been
the position, but Sect. 10 of the Act of 1934 does provide that the
policy is in force and remains in force once a certificate of
insurance has been given, and the insurance company must pay if
judgment is obtained in respect of an accident unless proceedings
are taken under Sect. 10(2). No proceedings of that kind have been
taken in this case, and therefore until such proceedings are taken
the insurance company remains liable to pay any damages incurred
providing a judgment is obtained, in spite of the fact that the
proposed insurer has made clearly false statements in his proposal.
In these circumstances, it seems to me that this insurance was in
force at the time when the respondent was driving this car, and I
agree that this appeal must be dismissed.”
These may perhaps be the reasons why only few cases on Section 80(3)
of the RTO 1958 and 96(3) of RTA 1987 are reported in the Malaysian
Law Reports. After 2012, the Law Reports reveal numerous cases
reported in respect of Section 96(3) of the RTA.
THE CURRENT POSITION
Durrant v. Maclaren [supra], clearly established the fact that an insurer

is liable to pay on the policy if they fail to obtain a declaration. The UK,
Section 10(3) is in pari materia to Section 80(3) of the RTA. A search in
the local law reports does not reveal any reference to Durrant v.
Maclaren. In Singapore the case of Durrant v. Maclaren and was referred
to and was applied in Lim Cheng Wai v. Public Prosecutor [1988] 1 LNS
99.[3]
Durrant’s case is an authority for the proposition that if no declaration is

obtained pursuant to Section 96(3) of RTA before judgment, insurers are
liable on the policy.
The manner in which the law has developed and the amendment that has
been made as reflected in Section 96(3) makes it clear that an insurer
must obtain a declaration prior to judgment being obtained by a third
party if they want to escape their statutory liability.
Hence, it would appear that after the amendment to Section 80(3) of the
RTO 1958 and reading of Section 96 of the RTA 1987 as a whole,
recovery proceedings are no longer needed for the third party to execute
on the judgment against the Insurer.
It follows therefore, that in Letchumanan’s case [supra] where the insurer

was allowed to raise the issue in respect of policy conditions as to
whether they were on risk, was wrongly decided and should not be
followed. A perusal of the authority does not reveal whether Section
96(3) the RTA 1987 was referred to or submitted on. This issue will be
addressed later in greater detail.
THE BENEFITS OF SECTION 96(3)
For the insurer to have a valid declaration, the insurer must comply
strictly with the provisions of the Section 96(3) of the RTA. That is, the
insurer must give notice to the third party, and should the third party wish
to be added as a Defendant, they must be added. The declaration must be
filed before a judgment is entered against the insured.
The application for declaration has several obvious advantages:
i) the Plaintiff, at the early stage of the proceedings will come

to know whether the insurer will be liable and this will save
time and costs;
ii) Furthermore, the Plaintiff, having obtained a judgment

against the Defendant, need not expend any moneys to
recover his judgment. This certainly saves time and especially
saves precious judicial time;
iii) Thirdly, the insurers having decided to participate in the

motor insurance business will have to manage an efficient
claims department:
(a) The moment a claim is intimated by a third party

pursuant to s. 96(2) (a) of the RTA, the insurer must
attend to the claim;
(b) Upon obtaining all the relevant documents from the

third party or their insured and/ or their adjusters, the
insurer needs to ascertain whether they are liable on the
policy and decide on what course of action they intend
to take. This may include an application for a
declaration and/or an application to intervene or any
other proceedings.
iv) The size of the motor insurance market is huge wherein th e

total premium that was collected for the year 2015 was a
whopping RM8.17 billion. This was 46.3% of the general
insurance market. (PIAM Annual Report 2016) If the
insurers want to participate in this sector of the industry there
is every reason for them to comply with the provisions of the
RTA.
If the insurers were to observe the above purported objectives of s . 96(3)

of the RTA 1987, this will certainly bring greater efficiency to the motor
insurance industry. Insurers can no longer collect premiums and pay
compensation only after the Plaintiff has obtained a judgment. The
Plaintiff need not proceed to enforce the judgment by way of recovery
summons which, as stated earlier, is no longer necessary with the
amendments included in s. 96(3) of the RTA.
The use of a declaration is well demonstrated in the case of lskandar

Mohd Nuli v. AmGeneral Insurance Bhd [2017] 8 CLJ 129 where the
court granted the insurers the declaration applied for.
Parliament, through Section 6 of FSA 2013, has found it necessary to

regulate the manner in which insurance companies, who come within the
definition of financial institutions in the FSA, have been managed.
This is clear in Section 6(a) (iv) & (b) of FSA 2013 in particular.
Regulatory objectives:
The principal regulatory objective of this Act is to promote

financial stability and in pursuing this objective, the Bank shall -
(a) foster
(iv) fair, responsible and professional business

conduct of financial institutions; and
(b) strive to protect the rights and interests of consumers of

financial services and products.
THE PRINCIPLES OF STATUTORY INTERPRETATION
The decision of the court in the case of Iskandar Mohd Nuli [supra] is
timely and in line with the objective and spirit of the RTA 1987 and the
FSA 2013.
In interpreting the law relation to the RTA 1987, the Supreme Court in
Malaysia National Insurance Sdn Bhd v. Lim Tiok [1997] 2 CLJ 351
stated the approach the courts must take when interpreting the laws in
relation to RTA and held as follows:
“It is important to fit these three elements - the common law

principle, the contribution legislation, and the compulsory third
party insurance legislation - in such a manner as to ensure that
they work in harmony without occasioning injustice.”
The Supreme Court in Malaysia National Insurance Sdn Bhd v. Lim Tiok
having stated that the RTA is a social piece of legislation and the factors
involved in interpreting this principle; the court goes on further to adopt
the passages in Shawcross.
This is what the Supreme Court said:
“We note that Shawcross in his work on Motor Insurance, 2 nd Edn.

at pp. 282, 283, has made the same point as Lord Denning, though
in an amplified form, thus:
It will be seen therefore that the expression ‘a liability covered by

the terms of the policy’ has two possible meanings:
1. It may mean a ‘liability in respect of which an

indemnity is enforceable under the terms of the policy
or which would be so enforceable but for the fact that
the insurers are entitled to avoid or cancel the policy’
(i.e. ‘terms’ in the sub-section refers to all classes of
terms in the policy).
2. It may mean a liability within the risks specified in the

policy or which would be within the risks specified in

the policy but for the fact that the insurers are entitled
to avoid or cancel the policy, etc., or are entitled to
evade liability thereunder’ (i.e. ‘terms’ in the sub-
section refers only to terms descriptive of risk).
Nevertheless, it is apparent that, if the first meaning is

to be given to these words, the whole object of this Part
of this Act would be defeated. If only for that reason the
second interpretation, however illogical, must be
adopted. It is submitted, therefore, that ‘liability
covered by the policy’ means-
(1) Liability which comes within (or arises out

of) a risk apparently insured by the express
terms of the policy, whether or not it is a -
(2) Liability in respect of which the insurers

are entitled to refuse an indemnity on the
ground that the assured has committed
some breach of the terms of the policy.”
The Supreme Court having considered that the RTA is a social piece of
legislation and the consequences it would have on third parties, goes on
to conclude that the Supreme Court will adopt an interpretation even if
the interpretation were to be illogical; if that interpretation can achieve
the objective of the Act and bring about harmony in respect of the other
areas that are related to motor insurance claims in particular to the RTA
1987, the Common Law and the Civil Law Act.
The insurer, with their management experience and pool of human

resources should be able to protect their corporate interests provided they
are diligent and efficient.
Should the insurer fail to comply with the statutory provisions, the
comments of the High Court in the case of Rasip Hamsudi v. Pacific &
Orient Insurance Bhd [2015] 7 CLJ 984 (paras 29 & 30) are relevant:
“The Plaintiffs have the right under s. 96(1) of the RTA to enforce
the said judgment against the first defendant... Therefore, while the
declaratory order shall be operative and binding against the first
and third defendants, as contracting parties to the policy and as
parties to the HC suit, the first defendant cannot disentitle the
plaintiffs of their third party statutory rights found in s. 96(1) of the
RTA 1987, by virtue of that declaratory order. The plaintiffs’
statutory rights under s. 96(1) of the RTA were fully preserved
notwithstanding the declaratory order.”
In the case of Arnandan a/l Soria Demadu v. Pacific & Orient Insurance
Co Bhd [Alor Setar High Court Originating Summons No: KA-
24NCVC391-04/2018 (02.12.2018) (unreported)] His Lordship Dato’
Haji Ghazali bin Haji Cha had this to say:
“It can be seen that s. 96(3) RTA 1987 was intended to give
insurers an avenue to contest their liability towards any Third
Party claim, [our emphasis] through the proceedings for a
Declaration, and the wording of s. 96(3) RTA 1987 is wide enough
to cover any given situation that make a policy “void” or

“unenforceable”, including fraud.”
Recovery proceedings were therefore available to the insurer where they

did not have any avenues to challenge the validity of the policy that had
been issued except for those that involved non-disclosure and
misrepresentation.
There are several English cases like Jones, Peters and also to some extent
Lee v. MIB where recovery suits were used to determine:
i) the validity of the policy;
ii) the scope of cover of the policy.
The same practice was followed in Malaysia. The numerous reported

cases will testify to this. After the amendment to s. 80(3) of the RTO
1958, there were very few reported cases in respect of recovery giving an
initial impression that the possibility of obtaining a declaration from the
court was remote. It is possible the insurers would also have considered
the fact that by virtue of the MIB circular dated 18th January 1985, and
thereafter the MIB agreement 1992 which expanded the definition of the
insurer concerned. 1 For some reason, sometime in 2010, notwithstanding
the MIB agreement, some insurers proceeded to obtain declaration
pursuant to Section 96(3)of the RTA 1987 strictly complying with the
procedures while others did not.
The insurers use Section 96(3) as an avenue to determine the liability of

the policy.
It can be said the current practice is to now obtain a declaration in

compliance with Section 96(3) of the RTA 1987.
It has taken a long time to come to this stage. The reading of the case of
Merchants & Zurich [supra], a commercial case that involved insurance
was decided before 1936 and has been cited in numerous other Malaysian
cases. They were binding if not highly persuasive, and notwithstanding
that, it is sad to note that cases like Azhar v. Pacific & Orient Insurance
Co Ltd have found its way to the Court of Appeal without reference to
Merchants & Zurich [supra].
In Merchants & Zurich [supra] the insurers’ counsel submitted that the
declaration was merely between the insurers and the insured. This is w hat
the Court of Appeal said:
“We were told that counsel for the two Thornes had objected to the
admissibility of that evidence as against the Thornes, but that the
judge had overruled the objection. Counsel for the two Thornes
submitted before us that, as his clients were defendants, they were
entitled to all the rights of defendants, the more so as they were, or
might be, vitally interested in resisting the appellants’ claim to a
declaration.
Counsel for the appellants, on whom we at once called for a reply

to this argument, submitted that, on its true interpretation, sub-s(3)
contemplated that the only issue for trial in an insurer’s action for
a declaration would be that which arose between insurer and
insured, the sole parties to the contract, that a declaration against
the insured alone was intended (As submitted in Azhar’s case and
in many other cases throughout the country), and that such a
declaration was intended to be binding against all parties claiming
under a judgment for damages for death or personal injuries
obtained by them against the insured party to the contract or other
persons coming within the indemnity provided by the terms of the
policy.”
The court then proceeded:
“To our question as to why Parliament in the sub-section had given

an absolute right to such third person to be made a party to the
insurer’s action, counsel for the appellants was unable to give any
reply which I was able to understand. In my opinion, the necessary
implication of the word “party” in the sub-section is that he is
entitled to be made a co-defendant under the RSC Ord 16, and that
he then acquires all the rights of a defendant. In the present case,
the Thornes, on exercising that election, were made co-defendants
at the instance of the plaintiff company. ([1941] 1 All ER 123 at
130).”
RATIONALE AS TO WHY S. 96(3) REQUIRES DECLARATION

BEFORE JUDGMENT
The court has strictly construed the provisions of s. 96(3) of the RTA
1987, that is, notice must be given stating the grounds and an application
for declaration must be made before judgment. Rasip Hamsudi [supra]
[COA].
NOTICE PURSUANT TO SECTION 96(3)
The Courts have observed that the rights that have been given to the
insurers under Section 96(3) of the RTA to obtain declaration may be
abused.
This is what the court held in:-
i) Merchants’ [supra] per Scott CJ:
“However, it would have been unfair to confer this relief

unconditionally. There was an obvious danger of the injured
party being deprived of the pecuniary safeguard which was
the subject of sub-s (1) through the possibility of the policy.”;
ii) Zurich [supra] per Lord Greene MR:
“If this subsection had stopped there, the benefit conferred b y

sub-s (1) on third parties would have been seriously
curtailed; but a proviso is added for their protection, by
which the benefit of the declaration.”
THE TWO CONDITIONS PRECEDENT
To ensure that the third party’s rights which are contained in Section
96(1) of RTA 1987 is not defeated by a declaration; Section 96(3) of the
RTA has provided certain safeguards such as notice must be given:
i) so that the third party can take any appropriate steps; and
ii) to avoid collusion between the insurer and the insured.

This is what Lord Justice Scott said in the case of Merchants’ and
Manufacturers, Insurance Co Ltd v. Hunt and Others [1941] 1 All ER
123 (page 4):
“There was an obvious danger of the injured party being deprived

of the pecuniary safeguard which was the subject of sub-s (1)
through the possibility of the policy being avoided in proceedings
under the first part of sub-s (3) without his knowledge, and even by
collusion between the insurer and the insured. It was essential that
he should have notice of any such action by the insurer, and also
that he should be given the right to appear in it and there defend
his rights. Both the requisites are met by the proviso to sub -s (3),
which in effect creates two conditions precedent to the existence of
the insurer’s right to get his declaration under the first part of sub -
s (3).”
The court goes on to hold that the two conditions precedent must be
fulfilled and said as follows (page 4):
“The third party gets full notice of the ground of the insurer ’s
claim, and is given an unqualified right to become a party in the
insurer’s action, and it is particularly to be noted that he is given
all the rights of a party to an action without any qualification upon
them.”
The court has strictly construed the notice requirement in re spect of time
and also content.
The importance of the content of the notice was emphasized and

examined in the case of Zurich General Accident and Liability Insurance

Co Ltd v. Morrison and Others [1942] 1 All ER 529. The high court held
as follows (page 1):
“On the true construction of the Road Traffic Act 1934, s . 10(3),
the insurers were prevented from relying either directly or
indirectly on any matter not specified in the notice as a ground for
avoiding the policy as against a third party; but not as against the
insured.”
On Appeal, the Court of Appeal dismissed the Plaintiff’s appeal and had
this to say in respect of the appellant’s submission (page13):
“The appellants maintain that they are also entitled to rely upon it
as against the respondent, notwithstanding the fact that it was not
mentioned in the notice. In my opinion, this contention is quite
hopeless. True it is that the proviso to sub-s. (3) does not in terms
say that, as against the third party, the insurer is to be confined to
the particulars set out in his notice. The reason for this is that it
was quite unnecessary for it to do so. If the insurer could, as
against the third party, bring forward matters not specified in the
notice, the protection which the proviso gives could be rendered
completely abortive. Atkinson J was, in my opinion, manifestly right
in his decision upon this point.”
(page 16)
“The judge upheld this plea of Mrs Rackley, and I think he was
clearly right. The provisions of the Act of 1934 are clearly intended
to limit the grounds on which insurers can avoid the policy so as to

defeat the claim of a third party in the position of Mrs Rackley to
those grounds which they have specified in the notice which the Act
requires them to serve upon her.”
The court went on to hold that the insurers can amend their pleadings to
include other grounds, but not against the third party.
This is what Lord Justice Goddard said (page 19):
“There is, however, every reason why it should not prejudice the
third party. If by amending his pleading the insurer can, in effect,
add to the notice which he has given to the third party, the
protection which, in my opinion, the proviso is designed to give to
the latter is rendered nugatory.”
These cases clearly demonstrate that the courts have construed t he

provisions strictly, thereby ensuring that the objective of Section 96 of
the RTA 1987 is not defeated.
The issue of time and costs is relevant.
In a nutshell, the statutory notice issued by the third party can only be
defeated by another statutory provision provided always that the insurers
comply with s. 96(3) of the RTA.
Parliament, by enacting that any misrepresentation must be material has

moved away from the general law of insurance, as stated by Mackinnon J
in Zurich's [supra] case.
It is submitted that similarly, in all instances where the insurers apply for
a declaration, they cannot merely rely on the duty to disclose and invoke
uberrimae fidei.
A mere breach of duty does not entitle the insurers to repudiate liability
after an accident has occurred.
It follows that after an accident, if it is discovered by the insurer that a

vehicle is in the custody of a third party or it has been sold but not
transferred - it does not follow that the insured may be in breach of the
policy, and/or in breach of the duty of utmost good faith that would
entitle the insurer to repudiate liability.
All cases involving declaration must be decided on the evidence adduced.

See the case of New India Assurance Co Ltd v. Pang Piang Chong &
Anor [1971] 2 MLJ 34 where His Lordship Syed Othman J succinctly
said as follows:
“The materiality of any particular misstatement or non-disclosure

is a question of fact to be determined by the court. The purpose of
an insurance as in this case is to cover the insured in the event of
an accident. The primary concern of an insurer before he insures a
proposed insured is therefore to determine whether he is a bad risk.
I do not think that it should be the concern of a prudent insurer as
to whether or not the proposed insured has committed an offence
for non-compliance or statutory requirements which are not
pertinent to show that he is such a risk.”
This case illustrates the fact that any breach must be material and it must
be seen from the view point of what risk the policy covers.
At an early stage of the proceedings the third party needs to know

whether the insurer will indemnify the insured or repudiate liability. This
issue is discussed both by the High Court and the Court of Appeal in
Zurich [supra]. This is what Atkinson J said:
“It seems to me that there is a very good reason why the legislature
should have laid down this condition. A plaintiff about to sue, or
suing, a motor car owner is to be told early on that the insurance
company is going to repudiate liability. The plaintiff has t o make
up his mind whether to go on or not. If the grounds indicated are
perfectly clear and he knows the defendant he is suing is not worth
powder and shot, he does not waste money on an action; but, if the
grounds seem to him insufficient, he goes on and gets judgment. It
seems to me extremely hard and going in the teeth of the intention
of Parliament if, at the last moment, some new ground can be
introduced which may destroy the value of his judgment .”
Lord Greene MR, said as follows in respect of time:
“The object of this proviso clearly is to enable the third party to

decide whether, in view of the allegations contained in the notice, it
is worth his while to incur the expense of proceeding with his
action and to allow him, as a person interested in disputing the
insurer’s claim, to be heard in opposition to it.”
Goddard LJ also expressed the importance of time and the time within
which notice must be served and also emphasized on the content of the
notice. This is what he said [page 18]:
“It seems to me that what the legislature had in mind was that, if an
insurer was intending to repudiate a policy, it was only fair that the
injured third party should know the grounds on which repudiation
was sought before he went to the expense of endeavouring to
establish his claim against the insured, who, if not entitled to
indemnity, might be unable to satisfy a judgment. It was to prevent
an injured party incurring further useless expense. Hence, the
necessity of the notice prescribed by the proviso to the subsecti on.
The protection afforded is little enough.”
THE STANDARD OF PROOF REQUIRED UNDER SECTION 96(3)

OF THE RTA 1987:
To further ensure that third parties are protected, the court has insisted
that the insurers must strictly comply with the statutory provisio ns and
have also demanded that the legal and evidential burden is correctly
discharged.
The reported cases clearly illustrate the approach the courts have taken in
interpretation of Section 96(1) (2) and (3) of the RTA 1987 (UK Section
10(1), (2) and (3) of 1934 Act.).
Section 96(3) of the RTA 1987, as stated earlier, has removed the
limitation that was placed on the insurers that was in respect of
non-disclosure and misrepresentation.
Section 96(5) defines what amounts to misrepresentation.

The FSA 2013, Schedule 9 makes a distinction between consumer

contracts and non-consumer contracts. The duty to disclose has been
modified.
Section 96(5) of the RTA 1987 is specifically referred to in FSA 2013

Division 3, Part 1 1(3), in so far as it relates to misrepres entation and
obtaining of declaration.
If it is not a consumer contract, Section 96(5) of the RTA becomes

relevant as the RTA does not distinguish between consumer and non -
consumer contracts.
The issue that needs to be considered is whether the same standard of

proof that was placed on the insurers, before the amendment to Section
80(3) of the RTO 1958 applies when the insurers apply for a declaration
for any other reasons. Example: transfer of interest.
Does a mere breach of warranty entitle the insurer to repudiate liability?

Must an insurer, in order to succeed in obtaining a declaration, go on to
prove that the policy was “obtained” by the insured by virtue of any
breach?
It is submitted that the same standard of proof should apply to Section

96(3) of the RTA 1987 as it has only expanded the scope for the insurer
to apply for a declaration for any reason they deem fit.
Justice See Mee Chun in the case of Pacific & Orient Insurance Co
Berhad v. Thayamal M Raman & 2 Ors [2013] 1 LNS 456 has referred to
Merchants [supra] where the court adopted the Editorial Note as follows:
“EDITORIAL NOTE. At the trial of the action, it was held that the
admissions of the insured party and his son, though strictly only
evidence against themselves, could be made the basis of a
declaration which would be binding on all parties to the action. The
Court of Appeal have wholly disagreed with this holding, and all
members of the court are emphatically of opinion that the injured
persons, who had been made parties to the action for a declaration,
were vitally interested in requiring that the falsity of the
representations relied on by the insurance company should be
strictly proved.”
To appreciate the standard of proof, cases like Zurich [supra] and

Merchants’ [supra] are instructive. The cases illustrate that the court
have demanded a high standard of proof.
The judgment of Lord Justice Scott in Merchants’ [supra] is clear. He

held as follows:
“In my opinion, the necessary implication of the word “party” in

the sub-section is that he is entitled to be made a co-defendant
under RSC Ord 16, and that he then acquires all the rights of a
defendant. In the present case, the Thornes, ([1941] 1 All ER 123
at 130) on exercising that election, were made co-defendants at the
instance of the plaintiff company. It follows that they were then
entitled to insist on the case being properly proved against them,
and to make all proper objections to the admissibility of evidence,
and, as the plaintiffs’ case was not so proved, they were entitled to
judgment with costs.”
That is, the evidence adduced must be admissible against the third party.
Luxmoore LJ was also of the view that there must be admissible evidence
against the third party and they as defendants have all the rights to insist
on strict proof. He held as follows:
“As defendants, they were, in my judgment, entitled to insist on

strict proof of the facts on which alone the right to the declaration
could be founded, and I fail to see any ground for holding that the
Thornes’ rights as defendants are in any way curtailed by anything
in the section referred to. On the contrary, the form of the
declaration, as stated in the section - namely, a declaration that the
insurer is “entitled to avoid the contract” - emphasizes the interest
of the Thornes in the company’s action, for, if that action had been
against the Hunts alone on the ground that the policy was issued by
the company by reason of false representations made by Charles
Hunt, then the relief sought would be, not a declaration in the form
stated, but a declaration that the contract was void and ought to be
set aside and delivered up for cancellation, for, in such a case, the
court would not make a declaration which would leave it to the
company to decide whether or not it would avail itself of such a
declaration.”
Again, in the case Zurich [supra] the court very clearly held that there
must be sufficient evidence before the court and Lord Greene MR stated
as follows:
“ln answering these questions, Atkinson J adopted the test laid

down by the Privy Council in Mutual Life Insurance Co of New

York v. Ontario Metal Products Co Ltd, at pp 351, 352:
‘……it is a question of fact in each case whether, if the

matters concealed had been truly disclosed they would, on a
fair consideration of the evidence, have influenced a
reasonable insurer to decline the risk or to have stipulated
for a higher premium.’
In my opinion, Atkinson J was right in thinking that the same test is

to be applied under the language of the present section. On the
facts he held that the appellants had not satisfied the test, and I
agree with him.”
Lord Justice Mackinnon in Zurich [supra] states the general law of

insurance and the standard of proof. He then examines the relevant
provisions and he goes on to state as follows:
“Under the general law of insurance an insurer can avoid a policy

if he proves that there has been misrepresentation or concealment
of a material fact by the insured. What is material is that which
would influence the mind of a prudent insurer in deciding whether
to accept the risk or fix the premium.”
His Lordship goes on further to state the standard of proof that was
required by common law:
“If this be proved, it is not necessary further to prove that the mind
of the actual insurer was so affected. In other words, the insured
could not rebut the claim to avoid the policy because of a material
representation by a plea that the particular insurer concerned was
so stupid, ignorant or reckless that he could not exercise the
judgment of a prudent insurer and was in fact unaffected by
anything the insured had represented or concealed.”
His Lordship goes on to state that Section 10 of the Road Traffic Act
1934 has modified and required a different standard of proof:
“Under the provisions of this Act of 1934, however, I think that this
general rule of insurance law is modified. Section 10 of that Act
requires the insurer to establish that the policy was “obtained” by
non-disclosure or misrepresentations. In such a case as this,
therefore, I think that the plaintiffs must establish two propositions:
(i) that the matter relied on was “material” in the sense

that the mind of a prudent insurer would be affected by
it, and
(ii) that in fact their underwriter’s mind was so affected,

and the policy was thereby obtained.”
This decision clearly illustrates that the insurers must adduce evidence to
show that the mind of a prudent insurer would have accepted or declined
to provide cover. This clearly cannot be determined by affidavit
evidence.
DISCRETION OF THE COURT:
It is trite law that declaration as a remedy is at the discretion of the court.

It does not follow that when a court rules on the rights of the parties that
the court will also grant a declaration as a remedy; more so if there are
third parties whose rights may be affected by the declaration.
THE IMPORTANCE OF A DECLARATION BEING A

DISCRETIONARY REMEDY:
This is admirably stated in Zamir & Woolf The Declaratory Judgment

[2 nd Edition, page 125, 4-01]:
“A most important feature of the declaratory judgment is that it is a

flexible and discretionary remedy. This helps to explain its
increasing popularity with litigants and judges both in the private
and public law fields. Its flexible and discretionary nature enables
the court to exercise precise control over the circumstances and
terms in which relief is granted. 1 Although a claimant or an
applicant may have proved his case, he still has to persuade the
court both that it should in its discretion make a declaratory
judgment and, if it does, that the terms he seeks are appropriate.”
The unreported case of Pacific & Orient Insurance Co Bhd v. Phoo Keng
Ann [Mahkamah Rayuan Malaysia, Rayuan Sivil No: W- 02(NCVC)-(A)-
760-04-2014] is an illustration of the above principle of law. [See order
attached]. [4]
BRIEF FACTS:
The Insurers applied for a declaration on the grounds that the insured had
sold the vehicle but no transfer had been effected. The insured disputed
this fact. The High Court dismissed the application.
The insurers appealed and the Court of Appeal allowed the appeal. A
declaration was granted expressly ordering that the rights of the third
party were not affected in respect of Section 96(1) of the RTA. The order
reads as follows:
“(d) Keputusan Mahkamah ini tidak menjejaskan hak mana-mana

pihak Ketiga menurut Sek 96(1) Akta Pengangkutan Jalan 1987.”
A reading of the Affidavit In Support of the application reveals the

following:
i) that the Plaintiff filed a suit no. 53-1203-09/2012.
ii) the accident was on 4.6.2010.
iii) the Court of Appeal granted the declaration on 7.4.2015

which was dismissed by the High Court on 31.3.2014.
The affidavit does not reveal as to whether a notice pursuant to Section

96(3) was served on the Plaintiff in the civil suit before a declaration was
obtained.
CASE OF INNOCENT THIRD PARTIES:
The learned author, S.C. Banerjee, in Law Of Specific Relief [13th

Edition] at page 639 states that equity will not interfere if a third party
has acquired some rights:
“Equity will not interfere with the rights of innocent third persons,
who acquire an interest in property by transfer from a person

holding under a voidable contract, and as against them rescission of
the contract will not be decreed. Where one of two innocent parties
must suffer from the fraud of a third, the rule is that the loss falls
on the one who enabled the third party to commit the fraud. [8]
Where, therefore, a sale has been procured by fraud, a purchaser in
good faith from the fraudulent buyer acquires an indefeasible
title, [9] and the defrauded seller cannot afterwards rescind. But,
where goods have been obtained, not by means of a contract but
through fraudulent pretenses, no title, however qualified, can pass
and no disposition of the property by the possessor can bind the
defrauded owner. [10] ”
The cases of Goodbarne v. Buck [supra] and Durrant v. Maclaren [supra]

have held that a motor insurance policy issued pursuant to the RTA 1987
is valid until a declaration has been granted pursuant to s . 96(3) of the
RTA 1987. It follows that a third party who has been injured has acquired
a right on the policy. That right is crystalized the moment a notice is
given. Although the insurers have a right to apply for a declaration
against the insured, and if the third party indicates a desire to be
included, the third party must then be added as a Defendant. It does not
follow that the court will grant a declaration against the third party.
The courts will have to consider when a declaration is sought against two
different individuals, who have different contractual and/or statutory
rights against the insured, whether the legal burden has been discharged.
Also, to what extent the declaration would affect the third party.
This approach was taken in both Merchants’ and Zurich. [supra] and a
similar approach was taken in Ahmad Nadzrin [supra].
In Ahmad Nadzrin [supra] where His Lordship, Hamid Sultan, had this to
say:
“[52] (i) I agree with the respondent (insurer)’s submission that a

declaration can be obtained before the judgment in the negligence
suit. However, the court can refuse the declaration if the
interveners can demonstrate prejudice in consequence of the delay
by the respondent approaching the court for the relief, taking into
consideration that the relevant provision has the characteristic of
social legislation;”
His Lordship goes on further to say:
“(ii) We have perused the affidavit of the interveners. The affidavit

does not demonstrate any fact relevant to the question of prejudice
or that it will be unjust to grant a declaration at this stage, save
that the deponent only complains of delay and not p rejudice to
sustain third party claim in consequence of delay which cannot be
compensated by costs by the insurer in respect of the delay.”
Hence, it is pertinent to note His Lordship’s emphasis when he states:
“...and not prejudice to sustain third party claim in consequence of

delay which cannot be compensated by costs by the insurer in
respect of the delay.”
It is incumbent on the third party to demonstrate by way of evidence to

the court that the third party would be prejudiced if a declaration is

granted. The Defendant, a tortfeasor, may be a man of straw and thus,
unable to satisfy any judgment the third party may obtain against him.
This in law, will amount to prejudice.
THE CURRENT POSITION:
As noted, s. 80(3) of the RTO 1958 was limited. If the insurers were to be
of the view that they were not liable, they can refuse payment. Under
such circumstances, the third party had no option but to file for recovery.
But with the amendment, that is no longer necessary for the courts have
repeatedly held: if there is no declaration, the insurers must pay.
When the issue of enforcement of a judgment obtained by a third party

without obtaining a judgment against an insurer came before the Court of
Appeal in the case of Pacific & Orient Insurance Co Bhd v. Muniammah
Muniandy [2011] 1 CLJ 947, the court, having perused through Section
96(1)(2) and (3) of the RTA 1987, interpreted those sections correctly by
ruling:
“(i) Section 96(1) imposes upon the insurer the obligation of

paying to the person who had obtained a judgment against
the insured, after a certificate of insurance had been duly
delivered to the person by whom the policy is affected in
respect of any third party risk covered under the policy. Thus,
the appellant was obliged statutorily to pay the respondent
who had obtained the said judgment. The insurer would only
be able to avoid the payment obligation under the
circumstances and conditions mentioned in s. 96(2) & (3)

RTA87. None of said exceptions applied to allow the
appellant to avoid its statutory obligations on the policy.
Therefore, the judgment debt of the insured became judgment
debt of the appellant (insurer) by virtue of s. 96(1). (para
16).”
A perusal of the Law Reports reveals that in the case of Muniammah

[supra] the Court of Appeal for the first time interpreted Section 96(1)
and (3) 1987 as a whole after it replaced Section 80 of the RTO 1958.
As correctly pointed out by Justice Ramly Ali, in Pacific & Orient

Insurance Co Bhd v. Muniammah, nowhere in the Act is it stated a
recovery must be filed. In earlier reported cases (before amendments),
there were no provisions for the insurer to apply for a declaration other
than those stated in s. 80(3) of the RTO 1958. They could wait and see
until judgment was obtained. Then decide whether they are liable or not.
All the reported cases in respect of recovery suggest that now, with the
amendment, the insurer must act if they want to escape from their
statutory obligation. To impose a further burden on the third party to file
for recovery to be paid by the insurers is a sheer waste of time. After
judgment has been entered, what issue is there to be determined?
The Court of Appeal ruled in Muniammah [supra] that the judgment

against the insured is against the insurer. See the case of Wall v. Radfords
[1991] 2 All ER 741 and Talbot [1994] QB 290 CA.
The Learned Author in the book of Res Judicata by Spencer Bower And
Handley [Fourth Edition] in his book under the heading of ‘The Effect of
Insurance’ at para 12.03 has stated as follows:
“In a number of cases, personal injury claimants have been

confronted with issue estoppels from proceedings in the county
court or equivalent conducted by property damage insurers. In
Wall v. Radford and Talbota litigant in his own right and in right of
his insurer were held to be the same person for res judicata
purposes. It is suggested that identity does not necessarily exist in
such cases. This is not a technical question because a litigant
should not be concluded by a decision in proceedings conducted by
others.
In Gleeson [1977] 1 WLR 510, 516 Megarry VC said:
“Any contention which leads to the conclusion that a person is

liable to be condemned unheard is plainly open to the greatest of
suspicions. A [party] ought to be able to put his own [case] in his
own way, and to call his own evidence. He ought not to be
concluded by the failure of the [case] and the evidence adduced by
another in other proceedings unless... a decision... in them ought
fairly and truly... to be in substance a decision against him.”
Notwithstanding the caution by Megarry VC in the case of Gleeson, the

English Court held that the defence of res judicata is available.
Let us consider the caution of Megarry VC:
“in other proceedings unless... a decision in them ought fairly and

truly... to be in substance a decision against him.”
- and when we consider what in fact has happened in most cases, if

not all, such as:
(a) that the statutory notice was served on the insurers;
(b) that the insurers have had a number of opportunities to

participate in the proceedings;
(c) that the insurers pursuant to the conditions in the policy

took full conduct of the defence;
(d) that the insurers having interviewed all the witnesses

and having examined all the documents (evidences).
It is clear then that the insurers have fully participated in the proceedings
except for the fact that the insurers were not named as parties to the
proceedings. In Pacific & Orient Insurance Co Bhd v. Rusnah Abd Raop
[2003] 6 MLJ 113 Justice Kang as he was then said as follows:
“At the sessions court, the plaintiff stepped into the shoes of the
insured to defend the defendant's claim [our emphasis] when in the
end the aggregate sum of RM71,505.78 in special and general
damages was awarded to the defendant. The plaintiff appealed
against the decision of the sessions court to the High Court which
had dismissed the appeal. An application for leave to appeal to the
Court of Appeal is now pending, but no stay of execution had been
applied for.”
In such instances, there are no justifiable grounds as to why res judicata

should not apply.
In the case of Letchumanan [supra], the issue of res judicata was raised.
This is what the Court of Appeal said:
“[20] It is our view that the liability and recovery actions are
distinct from each other. The former is a claim founded on tort
whereas the latter is based on a statutory right provided under the
provisions of the RTA. For this reason alone, it would be unjust to
bar the insurers from raising afresh the issue of its liability even to
the extent of adducing evidence on the same issue at the recovery
action stage.”
It is submitted that, with the amendments, both actions have been

merged. It is conceded that the action by the third party is based on tort.
It is pertinent to consider, that for the third party to benefit from the
statutory right that is given to him, he must comply with Section 96(2)
(a) of the Act, that is, he must serve the statutory notice on the insurer.
Upon service of that notice, his right to claim and to be indemnified by
the insurer has crystalised. Hence, the judgment becomes vested in the
third party once a judgment has been given against the insured. Before it
is vested in the third party the insurer must obtain a declaration.
The right to be indemnified by the insurer upon a judgment being

obtained is pursuant to a statute (RTA). It follows that the third party
need not proceed by way of recovery action to enforce the judgment.
Herein, the issue that arises is this: Section 96(1) of the RTA 1987 which
creates the insurer’s statutory liability also provides the insurer, by way
of a statute, with an avenue to escape from that liability as provided for
in Section 96(3) RTA.
A statutory liability created by Parliament for the benefit of a third party

has also provided a statutory avenue to the insurer to avoid liability. In
that sense, it is submitted that Section 96 has codified the ‘recovery
proceeding’.
Prior to the amendment to Section 80(3) of the RTO 1958, as discussed,

the insurers’ avenue was limited. After the amendment, as embodied in
Section 96(3), the avenue for a “statutory escape” is wide open. That is,
“for any reason the insurers deem fit”.
Parliament has given the insurers that statutory right, and the insurers
surely cannot now complain that their purported right to defend in
recovery proceedings, which was an avenue before the amendment, is no
longer available.
If a recovery suit is filed against the insurer, and should the insurer raise
any other issues that he could have had before judgment was obtained,
surely res judicata would apply and the defence would be struck off.
What purpose would a recovery suit serve? None.
Res judicata comes to the aid of the third party and the insurer cannot
claim as it was stated in Letchumanan's [supra] case that it is “unjust to
bar the insurers from raising afresh issue of its liability”.
The short answer is: the insurers had a statutory right to apply for a
declaration. They failed to exercise it. It is unfortunate that the Court of

Appeal in the case of Letchumanan [supra] did not consider the insurer’s
statutory right to apply for a declaration before judgment as provided for
in s. 96(3) RTA. Although at para 21 the court said as follows:
“It is upon this construction of the insurance policy that the

insurers raised for the first time in the recovery action. In this
appeal, P & 0, as the insurers is thus seeking to declare that the
policy as against the deceased, is unenforceable due to the
exception in its terms. This issue remains alive and was brought up
on appeal to the High Court and now before us”.
It can be said that the sole purpose of Section 96(3) is to give the insurer
an opportunity to avoid liability. They have failed to do.
In the circumstances, Letchumanan [supra] as an authority should not be

followed. A perusal of the authority does not reveal whether the parties
submitted in respect of Section 96(3). The report also reveals that the
court did not consider Section 96(3).
In view of the above, the passage in para 21 of Letchumanan [supra] is a

misstatement of law or the court failed to consider that the insurer did
have a statutory option before judgment but failed to exercise their
statutory right to their benefit.
The current judicial trend since Muniammah [supra] is that the court does
allow execution without a judgment on the insurers.
In the circumstances, there is no valid reason unless the insurer would

like to have a “second bite of a cherry”, which is not permitted in our

legal system.
A RESPONSE TO MR. DASS’S ARTICLE
The eminent author of S. Dass in his article Recovery By Third Party

Against The Insurer In Motor Accident Cases - By Recovery Proceedings
Or Execution published in CLJ [2019] 1 LNS(A) iii has concluded that
the preferred approach is to proceed by way of recovery and he states as
follows:
“The position taken by Abdul Aziz Rahim J in Pacific & Orient v

Paul Rozario seems to be the more equitable approach with respect
to the rights of third parties against insurers.”
The learned author has taken the traditional approach, that is, he
examines the reported cases and concludes that there must be two (2)
elements that is ‘cause of action’ and ‘right of action’.
This approach is based on the common law practice system.
When Section 96 of the RTA 1987 is viewed as a whole, it becomes

apparent that both elements have been merged, in that Section 96 allows
the Plaintiff who has obtained a judgment to exercise his right, and
Section 96(3) is a form of ‘defence’ which allows an insurer to obtain a
declaration to defeat the right of the Plaintiff to enforce his judgment.
The learned author has referred to Section 151 and 152 of the RTA 1988
(UK). A perusal of both these sections reveal that both the provisions
have been extensively amended. When it is read together with Section 1
of Third Parties Act 2010 (UK), it becomes apparent that the UK has
taken its own approach in respect of third parties rights in an insurance
contract.
The preamble to Third Party 2010 states as follows:
“An Act to make provision about the rights of third parties against
insurers of liabilities to third parties in the case where the insured
is insolvent, and in certain other cases.”
As stated earlier, Section 96(3) of the RTA 1987 was amended in two (2)
important aspects:
i) time; and
ii) scope.
The limitations that were imposed by Section 80(3) of the RTO 1958
have been removed.
If a comparison is made between Section 152 of the RTA 1988 UK and

Section 96(3) of the RTA 1987, it becomes apparent that the two major
limitations that Section 80(3) had, have not been removed; although
Section 152 of the UK Act has also broadened the scope for an insurer to
avoid liability.
In conclusion any reliance on the current UK provisions is not helpful.
In the case of Pacific & Orient Insurance Co Bhd v. Rusnah Abd Raap,
Justice Kang (as he was then) construes Section 96(3) as a whole and
held that once judgment is obtained, there is no need to proceed for
recovery.
Although Rusnah’s [supra] case was not followed in the case of Pacific
& Orient Insurance Co Bhd v. Paul Rozario [supra], the reading of the
judgment in Paul Rozario’s case makes it clear that the judge declined to
follow the case of Pacific & Orient Insurance Co Bhd v. Rusnah because:
i) at the sessions court the Plaintiff (ie the insurance company)

stepped into the shoes of the insured to defend the Defendants
claim; thus it appears therefore that in that case there was
judgment directly against the Plaintiff therein;
ii) In this respect, learned counsel for the defendant herein

informed the court that was not so and he knows that for a
fact because he was the counsel in that case for the plaintiff;
iii) That may be so; but as argued by learned counsel for the
plaintiff herein court here should go by what is written in the
reported judgment.
The judge then rules:
“In the light of this controversy, I refuse to follow Rusnah’s case.”
Mr. Dass discusses the issue of the delivery of the Certificate of

Insurance. The reading of the authorities cited in the said article will
reveal that the insurers have raised the issue of delivery the moment they
realised that their record reveals that they did not issue the Certificate of
Insurance.
Nallini Pathmanathan JC (as she then was) in Tokio Marine lnsurans

(Malaysia) Bhd v. Mohd Radzi bin Zainuddin & Anor [2012] 8 MLJ 814
stated as follows:
“This appears to be this court to be entirely justified, as in the

instant case the plaintiff has consistently taken the position that
they never insured the driver or the owner of the vehicle bearing
registration no PBW 7126.”
Although the burden is on the Plaintiff to show that the Certif icate of
Insurance has been issued, the Plaintiff will be able to discharge this
burden without much difficulty. See the following cases: -
i) Re Tan Kheng Cheng [1962] 1 LNS 176; [1962] MLJ 310
ii) Public Prosecutor v. Sia Yok Hua [1973] 1 LNS 122; [1974]
1 MLJ 93;
iii) Pengarah Jabatan Pengangkutan Negeri Selangor & Ors v.

Sin Yoong Ming [2015] 1 CLJ 1.
The above cases must be read together with Section 96(1) of the RTA
1987 which expressly states that the Certificate of Insurance must be
issued before Section 96(1) becomes operative.
It is ironic that Parliament has amended the RTA several times and
permitted a third party to enforce the judgment although the third party is
not a party to the contract; but when it comes to enforcing that statutory
right, the burden to prove that a certificate of insurance has been issued
has been placed on the third party!
Although in the case of Mustapha Man & Anor v. Pan Global Insurance
Sdn Bhd the High Court held that the burden is on the Plaintiff; the
moment a notice is issued by the third party the insurers must take all
steps to ensure that they are not on cover. The insurers will have to act
responsibly and comply with the RTA and with the FSA 2013. To what
extent will s. 106 of the Evidence Act 1956 be construed by the court to
assist the third party is left to be decided by the court.
In the final analysis, the sole objective of Section 96 of the RTA 1987 is
to ensure that the third party who has suffered injury as a result of a
motor vehicle accident will be able to enforce his judgment speedily and
in the most economic manner.
Section 96 has achieved those objectives. In the case of Mohamad Rafiq

Muiz Ahmad Hanipah v. Pacific & Orient Insurance Co Bhd [2018] 1
LNS 942 the decision of high court Judge Mohd Nazlan Mohd Ghazali
was confirmed by the Court of Appeal on 27 th May 2018 vide Civil
Appeal No: W-02(NCC)(A)-611-03/2018.
There is now a body of cases which have clearly established the practice
that if the third party has obtained a judgment against an insurer an d
notice has been given, and other provisions of Section 96(2) of the RTA
1987 do not apply, and the insurer has not obtained a declaration before
judgment - the Plaintiff is entitled to enforce the judgment directly on the
insurer.
As stated earlier, with the removal of the time limitation and permitting
the insurer to apply for a declaration for any reason they deem fit,
Section 96 has merged the rights of the Parties. A third party, having
complied with the notice provision, can enforce the judgment dire ctly on
the insured provided that the insurers have not obtained a declaration
before judgment. It is submitted that the ‘right to recovery’ has been
codified by virtue of the amendments to Section 96 of the RTA 1987.
Mr. Dass also refers to the seminal work of Shawcross on the Law of
Motor Insurance.
The learned author, Shawcross, does not state the rationale as to why
there must be a recovery summons.
As elaborated earlier, Section 10(10) of RTO 1934 which is in pari

materia to Section 80(3) of the RTO 1958, did not provide a mechanism
as to how to resolve other issues, if any, in respect of policy conditions.
Cases like Peters and Jones [supra] are an illustration.
In Malaysia, after the amendments to the RTA 1987, we have cases like
Ahmad Nadzrin [supra] which clearly state that in cases where there is a
transfer of interest, the insurer is entitled to obtain a declaration before
judgment and thus, escape from their statutory liability. In this context,
referring to cases decided on recovery summons in respect of Section
80(3) of the RTO 1958 is not helpful.
ENFORCEMENT
a) Safeguard:
It is possible that an insurer may be faced with execution

proceedings without their knowledge.
This situation is remedied by the fact that the third party must show
evidence to the court that they have complied with Section 96(2) of
the RTA 1987.
If the third party intends to proceed by way of garnishee proceedings, an

affidavit must be filed verifying the facts and the insurer will have an
opportunity to challenge the order before it is made absolute.
The Notice of Proceedings
Section 96(2) requires notice must be given before commencement of

proceedings or within seven (7) days. This will give sufficient time for
the insurers to prepare their case.
Cazalet Jin Desouza v. Waterloo [1999] RTR 71 CA said as follows:-
“The essential purpose of the requirement of notice is that the

insurer is not met with information, out of the blue, that his insured
has had a judgment obtained against him.”
With the use of computers, the insurers, within minutes if not seconds,
will be able to verify whether they have issued the certificate of
insurance and can take the appropriate action. If the policy has been
cancelled, the insurers can notify the third party. If the third party
disputes the insurer's contention, the insurers can file for a declaration.
The fear that insurers would be subject to execution without notice is

therefore unfounded.
CONCLUSION:
Once a vehicle has a valid insurance policy and notice has been given by
the third party, the only option that is available to the insurer to avoid
statutory liability is to obtain a declaration as was done in Ahmad
Nadzrin. The following cases are further illustration as to how insure rs
have employed Section 96(3):
a) In the case in Tirumeniyar a/l Singara Veloo v Malaysia

Motor Insurance Pool [2017] 8 CLJ 682 insurers sought for a
declaration that the injured party who was an employee of the
insured and sustained injuries in the course of his
employment, was covered by the policy.
The Court of Appeal held that it did cover the employee.
If there were no amendments to Section 80(3) of the RTO 1958 , now

Section 96(3) of the RTA 1987, the Plaintiff, after obtaining judgment
and upon the refusal of the Insurer to pay the judgment sum, would have
been compelled to file a recovery to determine whether the insurers were
liable on the policy. See the case of Lim Eng Yew v. United Oriental
Assurance Sdn Bhd [1989] 2 CLJ (Rep) 65;
b) Another illustration is the case of Chu Chu @ Moksin Amlih

[2017] 1 LNS 717 where the insurers had some doubts as to
whether, on the facts of the case, they were liable on the
policy.
The insurers applied for a declaration in the Sessions Court and it was
granted, and the same was confirmed by the High Court. The insurers
also became an intervener in the main suit. The Plaintiff appealed to the
Court of Appeal and the Court of Appeal allowed the appeal and said as
follows:
“[27] In a situation such as in the present case, it is for the trial

Judge in the Selayang Suit to determine whether the Appellant is
covered under the insurance policy by virtue of the fact that he is
carried on the lorry by reason of a contract of employment with the
2nd and/or 3rd Respondents, or even if he is not, whether his
injuries sustained are covered against the insured person in respect
of third party risks arising out of the use of the motor vehicle on a
road.
[28] In our view, for the present case, it tantamounts to an abuse

of the process of the Court for the 1st Respondent to institute the
Shah Alam OS for a declaration under s. 96(1) and (3) of the RTA
when the Selayang Suit is still ongoing. Any declaration granted by
the Sessions Court in the Shah Alam OS would be highly
prejudicial to the Appellant should, at the end of the day, the
Selayang Suit be decided in the Appellant’s favour.”
From the above two (2) authorities, it is apparent that, if there is any
defence available to the insurer there are sufficient procedures available
for an insurer to obtain a declaration before judgment to escape liability.
If the insurer fails to do so the insurers are liable and as stated in Pacific
& Orient Insurance Co Bhd v. Muniammah Muniandy [supra], the
judgment debt of the insured becomes the judgment debt of the insurer by
virtue of Section 96(1) RTA 1987. When we examine the manner in
which the law has developed to date, there is no justifiable reason as to

why the Plaintiff having obtained a judgment, must proceed with another
action to enforce the judgment.
* G. Naidu [R. Ganavathy Naidu] Advocate & Solicitor, [Grays Inn] London.
** I would like to put on record my utmost gratitude to my friends in the legal

fraternity who contributed by way of advice and materials to this article.
Endnotes:
[1]
Pacific & Orient Insurance Co Bhd v. Hameed Jagubar - Did The Federal Court
Finally Answer All The Questions On Backdated Insurance Cover Notes? by
Manoharan Veerasamy [2019] 1 LNS(A) 1x1.
[2]
Journal of Malaysian And Comparative Law by Nik Ramlah Mahmood [1990] Vol
17 80.
[3]
Lim Cheng Wai v. Public Prosecutor [1988] 1 LNS 99.
Certificate Of lnsurance
The failure to produce a certificate of insurance at the request of the police
amounts to an offence and also if the policy does not cover for purposes for
which the vehicle is been used. For insurers to be liable under Section 96, a
certificate must be issued. In this case the court held as follows : “Secondly, if
upon its true construction, the policy covers the use of the vehicle in question,
the policy may yet be voidable at the option of the insurers, eg on th e ground
of misrepresentation. However, such a policy will remain a policy in force
unless the policy had in fact been avoided in accordance with s. 9(4) of the
Motor Vehicles (Third-Party Risks and Compensation) Act: see, for example
Durrant v. Maclaren [1956] 2 Llyod's Rep 70.”
[4]
Pacific & Orient Insurance Co Bhd v. Phoo Keng Ann [Mahkamah Rayuan,
Rayuan Sivil No: W-02(NCVC)-(A)-760-04-2014].
[Attachment]
DALAM MAHKAMAH RAYUAN MALAYSIA
(BIDANGKUASA RAYUAN)
[RAYUAN SIVIL NO. W-02(NCVC)-(A)-760-04-2014]
ANTARA
PACIFIC & ORIENT INSURANCE CO BERHAD PERAYU

(NO. SYARIKAT: 12557-W)
DAN
PHOO KENG ANN RESPONDEN
[Dalam Perkara Mengenai Mahkamah Tinggi Malaya di Kuala Lumpur
(Bahagian Sivil)
Saman Pemula No. 24NCVC-936-05/2013
ANTARA
PACIFIC & ORIENT INSURANCE CO BERHAD PLAINTIF

(NO. SYARIKAT: 12557-W)
DAN
PHOO KENG ANN DEFENDAN]
KORAM
LIM YEE LAN, HMR
VARGHESE A/L GEORGE VARUGHESE, HMR

IDRUS BIN HARON, HMR
PADA 7 APRIL 2015 DALAM MAHKAMAH TERBUKA
PERINTAH
RAYUAN INI ditetapkan untuk pendengaran pada hari ini dalam kehadiran
Kamalanathan Ratnam peguam bagi pihak Perayu dan K.H. Lua peguamcara bagi
pihak Responden DAN SETELAH MEMBACA Rekod Rayuan dan kesemuanya yang
difailkan di sini DAN SETELAH MENDENGAR hujahan pihak-pihak yang tersebut
MAKA ADALAH DENGAN SEBULAT SUARA DIPERINTAHKAN bahawa:
(a) Rayuan dibenarkan;
(b) Perintah Mahkamah Tinggi bertarikh 31.3.2014 diketepikan termasuk

Perintah mengenai kos;
(c) Permohonan (1) dalam Mahkamah Tinggi Kuala Lumpur Saman

Pemula No. 24NCVC-936-05/2013 untuk satu deklarasi bahawa Polisi
Insuran No. 02-01-09-EAW-007682 dan Sijil insuran No.
020109EAW007682 bagi tempoh 29.10.2009 hingga 30.11.2010 yang
dikeluarkan kepada ‘insured’ PHOO KENG ANN berkenaan motorkar
No. TK 3003 diisytiharkan batal dan tidak berkuatkuasa adalah
dibenarkan;
(d) Keputusan Mahkamah ini tidak menjejaskan hak mana-mana pihak

Ketiga menurut Sek 96(1) Akta Pengangkutan Jalan 1987;
(e) Kos kepada Perayu sebanyak RM15,000.00 sebagai kos di sini dan di
bawah; dan
(f) Deposit dikembalikan kepada Perayu.
DIBERI di bawah tandatangan saya dan Meterai Mahkamah pada 7 April 2015.
ZULKPLI BIN ABDULLAH

TIMBALAN PENDAFTAR
MAHKAMAH RAYUAN MALAYSIA
PUTRAJAYA
PERINTAH ini difailkan oieh Tetuan Vinod Kamalanathan & Associates, iaitu
peguamcara bagi Perayu/Plaintif yang dinamakan di atas yang mempunyai alamat
penyampaian di Suite 501, 5m Floor, Loke Yew Building, 4 Jalan Mahkamah
Persekutuan, 50050 Kuala Lumpur. [RUJ KAMI: VKA/L/1165(1)2013/P&O/es]

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[2019] 1 LNS(A) xcviii Legal Network Series 1

STATUTORY LIABILITY OF A MOTOR INSURER TO SATISFY A

To answer this question, the statutory liability of a motor insurer must be

Once a judgment is obtained by a Plaintiff against a Defendant in the said

As early as 2003, in the case of Pacific & Orient Insurance Co Bhd v.

“The Defendant need not institute a separate recovery action

proceeding to present a winding up petition.”

The eminent author S. Santhana Dass in Personal Injury Claims (2 nd

i) Pacific & Orient Insurance Co Bhd v. Rasip Hamsudi & Ors

“Further, the decided authorities were all stacked up against

ii) Pacific & Orient Insurance Co Bhd v. Muniammah Muniandy

The locus classicus in respect of enforcement of the judgment

“[21] a) Nowhere does s. 96(1) of the Road Transport Act

b) Therefore, the question of the respondent having

appellant in its memorandum of appeal, does not

c) In short, the respondent, who had obtained a

iii) Pacific & Orient Insurance Co Bhd v. Kamacheh Karuppen

“[1] The right of the respondent as a third party to approach

“[4] Section 96(1) imposes upon the insurer the obligation of

“[21] Based on the decision of this court in Pacific & Orient

“(i) before or within seven days after the commencement of

(ii) where the execution of the judgment is stayed pending

[17] Therefore, it is abundantly clear that the insurer’s

liability pursuant to section 96(3) would be the judgment of

In Ahmad Nadzrin [supra], His Lordship Hamid Sultan at para 45 clearly

CONSTRUCTION AND JURISPRUDENCE IN RELATION TO

“It is a mandatory requirement for a motor vehicle owner to obtain

it may seem that it is unfair to the insurers.

THE RATIONALE FOR A DECLARATION

The rationale for a declaration is well stated in the judgment of Lord

“This proviso thus gives to plaintiffs who obtain judgment in an

ordinary insurance law, and not merely by reason of some special

It is pertinent to note that His Lordship states “… a conditional means of

He further goes on to state that a compromise is achieved by virtu e of

“This legislation was obviously intended to effect, inter alia, a fair

Having obtained a declaration, the insurers are discharged from their

1. Merchants’ and Manufacturers, Insurance Co Ltd v. Hunt and

Others [1941] 1 All ER 123;

2. Zurich General Accident and Liability Insurance Co Ltd v.

3. New India Assurance Co Ltd v. Pang Piang Chong & Anor

4. John Doe v. Peng Yong [1997] 3 CLJ Supp 345;

5. United Malayan Insurance Co Ltd v. Lee Yoon Heng [1964] 1

6. Tan Kang Hua v. Safety Insurance Co [1972] 1 LNS 149;

THE AMBIT OF SECTION 80(3) RTO 1958

The right of an insurer to obtain a declaration under Section 80(3), is

other than non-disclosure and/or material misrepresentation in respect of

To appreciate the amendment, we must refer to Section 80(3) the relevant

“(3) No sum shall be payable by an insurer under the foregoing

When we contrast it with Section 96(3) the following becomes apparent.

i) a) In Section 80(3) a declaration must be obtained before

proceeding in which the judgment was given to the

b) For instance, if default judgment has been obtained

iii) Secondly, Section 96(3) states that:

“no sum shall be payable by an insurer under subsection if

[See the article of Nik Ramlah Mahmood] [2]

“I am quite satisfied that both those answers were quite

They would never have dreamed of rejecting his application , but

I am extremely sorry for the plaintiff in this case. I think he has

“Notwithstanding anything in any written law, a person issuing a

1. The reading of this section may give one an impression that if

RTA shall prevail. A search of the Law Reports unfortunately

2. When this provision was introduced in the UK in 1930, in

i) a) McCormick & Anor v. National Motor & Accident