Allianz General Insurance Company (M) Berhad v Norbiyah Binti Mat Aris (W-02(NCC)(A)-823-05/2023)

1.

RAHMAT BIN EMBONG … RESPONDENTS (In the Matter of the High Court of Malaya in Kuala Lumpur In the Federal Territory of Malaysia Originating Summons No. WA-24NCC-898-09/2022) Between Allianz General Insurans Company (M) Berhad … Plaintiff

Norbiyah Binti Mat Aris 2. Rahmat Bin Embong … Defendants S/N Lt5CM5tz7Uq/f99fl2mIQw CORAM DATUK MOHAMED ZAINI BIN MAZLAN, JCA DATIN PADUKA EVROL MARIETTE PETERS, JCA DATO' HAJAH ALIZA BINTI SULAIMAN, HCJ

This is an appeal against the decision of the Kuala Lumpur High Court dated 5.5.2023 where the appellant’s application vide the Originating Summons (‘O.S.’) for, among others, an order that the respondents were not entitled to enforce the judgment dated 27.1.2022 (‘said Judgment’) in the Kuala Terengganu Sessions Court Civil Suit No.: TA-A53KJ-351-08/2019 (‘Suit 351’) against the appellant, was dismissed.

We have considered the Record of Appeal and the oral and written submissions of the parties and we are of the unanimous view that the appeal should be dismissed.

Our grounds for the decision are elaborated below.

On 7.3.2015, while the 1st respondent (‘R1’) was riding motorcycle registration no. TAT 5353, which was registered in the name of S/N Lt5CM5tz7Uq/f99fl2mIQw the 2nd respondent (‘R2’) at Jalan Hiliran, Kuala Terengganu, a collision occurred with motorcycle registration no. TBG 8067, which was ridden by Muhammad Nur Najmi Bin Ismail (1st defendant in Suit 351; ‘D1’) and registered in the name of Ismail Bin Abdul Rahman (2nd defendant in Suit 351; ‘D2’).

On 2.6.2015, the solicitors for R1 and R2 gave notice to the appellant as the insurer under sub-s 96(2) of the Road Transport Act 1987 [Act 333] (‘RTA 1987’) of the intention of filing an action in court in respect of the accident. There were other correspondences to the appellant on 8.7.2015 and 18.8.2015 regarding the same matter.

On 16.12.2015, consent judgment was entered, without any admission of liability, in the Kuala Terengganu Magistrates’ Court Civil Suit No. TA-A73KJ-447-10/ 2015 (‘Suit 447’) where D1 and D2, together with Rahimah Binti Musa, were named as the plaintiffs (D1 was described as “Seorang kanak-kanak dibawah umur yang menuntut melalui wakil litigasinya yang sah iaitu Rahimah Binti Musa”) and R1 and R2 as the defendants. It was a term of the consent judgment that R1 and R2 were to pay D1 the sum of RM10,000.00 as general damages and special damages including interest and costs of RM1,000.00 as full and final settlement of the claim. D2’s claim against R1 and R2 were withdrawn.

On 6.9.2016, the appellant filed O.S. No. TA-24NCVC123- 09/2016 (‘O.S. No. 123’) naming D1 and D2 as respondents to seek an order pursuant to s 96 of the RTA 1987 that the applicant was entitled to avoid liability under the insurance policy for D2’s S/N Lt5CM5tz7Uq/f99fl2mIQw motorcycle on the ground that D1 had made a representation of fact which was false in some material particular with the purpose of making an invalid claim under the insurance policy (‘Repudiation Proceedings’). According to the appellant, it had appointed an independent adjusting company to conduct investigations into the alleged accident and it was discovered that D1 had lodged a false report when he inculpated D2’s motorcycle in the alleged accident.

Subsequently, R1 and R2 filed the Writ and Statement of Claim (‘SoC’) in the Kuala Terengganu Sessions Court Civil Suit No.: TA-A53KJ-292-10/2016 (‘Suit 292’) against D1 and D2 on 12.10.2016 alleging that the accident occurred due to D1’s negligence. Apart from claiming general damages, R1 prayed for the sum of RM153,000.00 as special damages and R2 sought the sum of RM4,300.00 as special damages.

On 14.11.2016, the learned Sessions Court Judge allowed the appellant’s application in O.S. No. 123 (‘Declaratory Order’).

The appellant’s solicitor sent a letter dated 29.11.2016 to the respondents’ solicitors enclosing the Declaratory Order and asked that Suit 292 be withdrawn. Consequently, Suit 292 was withdrawn.

On 23.11.2017, R1 and R2 filed an application to set aside the Declaratory Order on the ground that the appellant failed to serve the notice under sub-s 96(3) of the RTA 1987 to them or their solicitors. However, on 16.1.2018, R1 and R2 applied to withdraw the said application with liberty to file afresh.

The Writ and SoC for Suit 351 were filed on 28.8.2018. This time, R1 prayed for the sum of RM224,000.00 as special damages with R2 maintaining the quantum of claim for special damages.

On 6.11.2019, the appellant’s solicitors wrote to the respondents’ solicitors to inform them of the Declaratory Order and to convey the appellant’s position that it is not liable to satisfy any judgment that may be obtained in Suit 351.

The respondents’ solicitors replied on 18.11.2019 that they doubt the validity of the Declaratory Order and will challenge it accordingly.

On 29.11.2019, the appellant’s solicitors informed the respondents’ solicitors that they have instruction to accept service of cause papers only with respect to any application to challenge the Declaratory Order, and not Suit 351, and hence, the cause papers were to be served directly on D1 and D2.

An interlocutory judgment was entered against D1 and D2 on 17.12.2019 on the basis of 100% liability for the road accident.

After a hearing on assessment of damages, the said Judgment was pronounced whereby D1 and D2 were ordered to pay R1 the sum of RM158,000.00 as general damages, RM182,242.00 as special damages and RM14,146.00 as costs.

The appellant then received the letter of demand dated 25.8.2022 from the respondents’ solicitors demanding payment in accordance with the said Judgment.

On 14.9.2022, the respondents made an ex-parte application in Suit 351 for a garnishee order against the appellant to enforce the judgment sum of RM448,058.27 as computed in the respondents’ solicitors’ letter dated 25.8.2022.

This led to the filing of the O.S. in the Kuala Lumpur High Court by the applicant on 19.9.2022 as the respondents took the position that there was no necessity to apply for the Declaratory Order to be set aside as the same was void on the ground that the appellant failed to comply with the requirement to give notice under sub-s 96(3) of the RTA 1987.

The learned High Court Judge (‘HCJ’) identified two issues for consideration as follows:

Issue 1: Whether the Declaratory Order under sub-s 96(3) of the RTA 1987 was validly obtained when notice of the Repudiation Proceedings was not given to R1 and R2 on the ground that no tortious claim had been filed at the Sessions Court when the Repudiation Proceedings were initiated; and

Issue 2: Whether R1 and R2 can proceed to enforce the said Judgment given that Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2011] 1 CLJ 947 is no longer good law.

As regards Issue 1, the HCJ held that the words “shall not be entitled to the benefit of this subsection” in sub-s 96(3) of the RTA 1987 is mandatory i.e. if an insurer fails to comply with the statutory requirement of giving notice, the insurer is not entitled to benefit from any relief ab initio. This was in line with the ruling by the Federal Court in AmGeneral Insurance Bhd v Sa’amran Atan & Ors [2022] 6 MLRA 224. As a result, the Declaratory Order was of no value or unsustainable in law and the issue of setting aside the Declaratory Order did not arise.

The High Court rejected the appellant’s argument that there was no tort action pending when the declaration was sought and hence, there was no necessity to give notice. The appellant had anticipated a third-party claim and it cannot be allowed to take inconsistent positions to repudiate liability while denying the duty to notify. Doing so would unfairly prejudice innocent third parties who, despite serving the notice under sub-s 96(2) of the RTA 1987, would only know that they have no recourse against the insurers upon commencing a tortious claim, by which time, much expenses would have been expended and valuable resources would have been lost.

In respect of Issue 2, the High Court was of the view that the Court in Sa’amran Atan did not overrule Muniammah or declare that Muniammah was bad law. Instead, the apex court discussed S/N Lt5CM5tz7Uq/f99fl2mIQw Muniammah at length in the context of the need to file for recovery proceedings and reaffirmed that a third-party judgment creditor has the right to enforce the judgment directly against the insurer under sub-s 96(1) of the RTA 1987 without having first to file recovery proceedings against the insurer.

The HCJ also dismissed the appellant’s reliance on s 464(f) of the Companies Act 2016 [Act 777] (‘CA 2016’) and sub-s 195(1) of the Financial Services Act 2013 [Act 758] (‘FSA 2013’) in contending that these provisions bar any party, except the Central Bank of Malaysia, from winding up a licensed insurance company. These provisions were inapplicable as the respondents have not commenced any winding up proceedings against the appellant.

The appellant listed 14 grounds in the Memorandum of Appeal and Supplemental Memorandum of Appeal. However, in the Written Submission before the panel, the appellant had narrowed down the grounds of appeal to the following integral issues:

whether the Declaratory Order is valid and in compliance with sub-s 96(3) of the RTA 1987;

whether the respondents are required to set aside or file a collateral action to impeach the Declaratory Order; and

whether the respondents can execute the said Judgement without obtaining judgment against the appellant vide a recovery action.

It is well-established that an appellate court will not intervene with the decision of a lower court unless the lower court is shown to be plainly wrong in arriving at its decision. A plainly wrong decision happens when the court below is guilty of no, or insufficient, judicial appreciation of evidence. If, in arriving at the decision, it could not reasonably be explained or justified and the decision of the lower court is one which no reasonable judge could have reached, the decision is susceptible to appellate intervention. The plainly wrong test is not intended to be used by the appellate court as a means to substitute its own decision for that of the lower court on the facts (see Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67 at pp 81 - 96, especially paragraphs 62 - 78; see too, Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 MLJ 441 at p 464, paragraph 60; MMC Oil & Gas Engineering Sdn Bhd v Tan Bock Kwee & Sons Sdn Bhd [2016] 2 MLJ 428 at p 437, paragraph 17; and Bludream City Development Sdn Bhd v. Pembinaan Bina Bumi Sdn Bhd [2024] 3 MLRA 909).

The salient part of s 96 of the RTA 1987 for purposes of present discussion is re-produced below for ease of reference: “Duty of insurers to satisfy judgements against persons insured in respect of third party risks

(1) If, after a certificate of insurance has been delivered under subsection 91(4) to the person by whom a policy has been effected, judgement in respect of any such liability as is required to be covered by a policy under paragraph 91(1)(b) (being a liability covered by the terms of the policy) is given against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled the policy, the insurer shall, subject to this section, pay to the persons entitled to the benefit of the judgement any sum payable in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any written law relating to interest on judgements.

No sum shall be payable by an insurer under subsection (1) –

in respect of any judgement, unless before or within seven days after the S/N Lt5CM5tz7Uq/f99fl2mIQw commencement of the proceedings in which the judgement was given, the insurer had notice of the proceedings;

in respect of any judgement, so long as execution is stayed pending an appeal; or

in connection with any liability, if before the happening of the event which was the cause of the death or bodily injury giving rise to the liability the policy was cancelled by mutual consent or by virtue of any provision contained therein and either –

before the happening of the said event the certificate was surrendered to the insurer or the person to whom the certificate was delivered made a statutory declaration stating that the certificate had been lost or destroyed;

(ii) after the happening of the said event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy, the certificate was surrendered to the insurer or the person to whom the certificate was delivered made such a statutory declaration as aforesaid; or S/N Lt5CM5tz7Uq/f99fl2mIQw

(iii) either before or after the happening of the said event, but within the said period of fourteen days, the insurer has commenced proceedings under this Part in respect of the failure to surrender the certificate.

No sum shall be payable by an insurer under subsection (1) if before the date the liability was incurred, the insurer had obtained a declaration from a court that the insurance was void or unenforceable: Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not become entitled to the benefit of this subsection as respects any judgement obtained in proceedings commenced before the commencement of that action unless, before or within seven days after the commencement of that action, he has given notice to the person who is the plaintiff in the said proceedings specifying the grounds on which he proposes to rely, and any person to whom notice of such an action is so given shall be entitled if he thinks fit to be made a party thereto. …” (emphasis added). S/N Lt5CM5tz7Uq/f99fl2mIQw

The appellant submitted, on the authority of Etiqa General Takaful Berhad v Fariza binti Mohamad Redzwan & 2 Ors [2022] 8 AMR 121 that, reading sub-s 96(3) of the RTA 1987 and its proviso, the commencement of an application for declaration before the filing of a tort action is not precluded.

In this regard, the words “before the date the liability was incurred” in sub-s 96(3) has been interpreted to mean that liability is only incurred when judgment on liability is pronounced by a court after full trial [see Jayakumar Rajoo Mohamad v. CIMB Aviva Takaful Berhad [2018] 4 MLRA 267 (CA)].

The appellant further submitted that there is no ambiguity in the interpretation of sub-s 96(3), hence the provision must be given its plain and ordinary meaning [see Jayakumar Rajoo (supra)] and by doing so, the proviso to the said sub-s merely envisages a situation where a tort action has been commenced before the commencement of an application for a declaration to void an insurance policy. Sub-s 96(3) does not impose any restriction nor the requirement of notice to the respondents when there is no pending action, as per the facts in this suit, where the Declaratory Order was obtained prior to the commencement of Suit 351.

The appellant’s counsel reasoned that, unless and until the injured party serves a notice pursuant to sub-s 96(2) of the RTA 1987, the insurer in most instances is unaware of an alleged motor vehicle accident (‘MVA’). It is only after receipt of the notice that an insurer will commence investigations into the potential S/N Lt5CM5tz7Uq/f99fl2mIQw claim and if the need arises, seek a declaration expeditiously, as was done in this case.

With reference to Sa’amran Atan, the appellant sought to distinguish the facts in that case to the facts in the current appeal as the judgment in Sa’amran Atan dealt with eight appeals where the apex court held that the requirement for the insurer to serve a notice to the plaintiff in the tortious action was mandatory in view of the fact that there were pending tortious suits. On the other hand, in the instant appeal, there was no pending tortious suit when the declaration application was filed by the appellant.

The appellant additionally contended that the Declaratory Order was served on the respondents’ erstwhile solicitor, Messrs Zurina, Hafizah & Co in Suit 292 whereby Suit 292 was subsequently withdrawn.

The appellant was of the firm position that the Declaratory Order was validly obtained and is binding on the respondents until and unless it is impeached.

We shall first deal with the 3rd Issue followed by the 1st and 2nd Issues as set out in paragraph 26 above. S/N Lt5CM5tz7Uq/f99fl2mIQw Whether the respondents can execute the said Judgement without obtaining judgment against the appellant vide a recovery action

We begin our analysis by referring to the Federal Court’s explication of s 96 of the RTA 1987 in the following words in the judgment in Muniammah’s case: “[16] The statutory provisions of s 96(1) is very clear. It imposes upon the insurer (the appellant, in this appeal) 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. In short, the appellant in the present appeal is obliged statutorily to pay the respondent who had obtained the judgment dated 16 December 2009 against M. Sekar a/l Marimuthu (the insured) for a sum of RM89,374.03. It is also clear under the section that the appellant (insurer) is also obliged to pay the respondent the costs and interest accrued therefrom. [17] The insurer would only be able to avoid the payment obligation under the circumstances and conditions mentioned in subs 2 and 3 of s 96, that is to say, where the requisite notice of the proceedings was not given to the insurer before the commencement of the proceedings; where there is a stay of the judgment pending appeal; where the policy of insurance respecting the liability had been cancelled; S/N Lt5CM5tz7Uq/f99fl2mIQw and where the insurer had obtained a declaration from the court that the insurance was void or unenforceable. None of the abovementioned exceptions apply to allow the appellant (insurer) in the present case to avoid his statutory obligations on the policy. … [21] 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. Therefore, the question of the respondent having to file a recovery proceedings under s 96(1) against the appellant, as contended by the appellant in its memorandum of appeal, does not arise at all. 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.” (emphasis added).

In our considered view, the learned HCJ correctly referred to paragraphs 103 and 218 in the judgment of Sa’amran Atan’s case in concluding that the panel did not overrule the decision in Muniammah and in fact, approved the same. The legal principle that the judgment sum becomes immediately enforceable against S/N Lt5CM5tz7Uq/f99fl2mIQw the insurer was upheld. The relevant excerpt from Sa’amran Atan reads as follows: “[103] Therefore, the question of the respondent having to file for recovery proceedings under s. 96(1) against the first appellant as contended by learned counsel does not arise at all: See also the decisions of the Court of Appeal in Pacific & Orient Insurance Co Bhd v. Muniammah Muniandy [2011] 1 CLJ 947 and Yeap Tick In (supra) which decisions on this point we are in agreement with. In Muniammah Muniandy, this is what Ramly Ali JCA (as he then was) said: [21] … [218] We have in Appeal No. 2 decided that there is no necessity for a third party claimant (in this case the respondent) who had obtained judgment from the trial court against the insured to obtain another judgment against the insurer (in this case the appellant) before the third party claimant could enforce the trial court’s judgment (in this case the Shah Alam Sessions Court judgment) against the insured. Therefore the question of the appellant’s entitlement to an injunction, quia timet or permanent against the respondent does not arise. The two leave questions must therefore be answered in the negative.” (emphasis added).

Applying the legal principle as set out above to the present case, there was therefore no necessity for the respondents to first obtain a judgment against the appellant before they can commence execution proceedings by way of the garnishee proceedings.

The appellant submitted at length in its Written Submission to persuade this panel that the decision in Muniammah’s case is, at best, obiter dicta following the enactment of the FSA 2013. At the same time, the appellant submitted that Muniammah’s case has become bad law for the following reasons:

the subject matter of the appeal in Muniammah’s case revolved on the ex-parte injunction against the presentation of a winding up petition. Hence, it was premature for the Court of Appeal to address the issue of the insurer’s liability to satisfy a judgment at the hearing of the injunction application. It was contended that what should have been decided in Muniammah’s case was whether the High Court had erred in dismissing the injunction application. Instead, the Court of Appeal proceeded to decide on the merits of the prospective claim by the respondent when this should have been addressed only at the stage of the winding up petition;

Muniammah’s case involved the presentation of a statutory notice under s 218 of the Companies Act 1965 [Act 125]. Prior to the decision in Muniammah, there was no statutory bar to presenting a winding up petition on a licensed insurer. S/N Lt5CM5tz7Uq/f99fl2mIQw However, this position has been reversed with the introduction of s 464(f) of the CA 2016 and sub-s 195(1) of the FSA 2013; and

the Court of Appeal did not address its mind to sub-s 97(1) of the RTA 1987 which provides that: “Rights of third parties against insurers

(1) Where under any policy issued for the purposes of this Part, a person (hereinafter referred to as “the insured”) is insured against liabilities to third parties which he may incur then –

in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or

in the case of the insured being a company, in the event of a winding-up order being made or a resolution for a voluntary winding-up being passed with respect to the company or of a receiver or manager of the company’s business or undertaking being appointed or of possession being taken by or on behalf of the holders of any debentures secured by a floating charge on any property comprised in or subject to the charge, S/N Lt5CM5tz7Uq/f99fl2mIQw if either before or after that event any such liability as aforesaid is incurred by the insured, his rights against the insurer under the policy in respect of the liability shall, notwithstanding anything in any written law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred.”. Based on the plain meaning of the above provision, the appellant contended that the respondents’ rights to recover directly under the motor policy against the appellant only exist when the appellant has been wound up. Hence, the Court of Appeal in Muniammah’s case and the Federal Court in Sa’amran Atan’s case had overlooked s 97 of the RTA 1987 in arriving at their findings that the third party has direct recourse to enforce the judgment against the insurer concerned. In this respect, the appellant additionally made comparisons between the long title in the Road Traffic Act 1930 (United Kingdom) and the RTA 1987, and to the long title in the Third Parties (Rights Against Insurers) Act 1930, s 10 of the Road Traffic Act 1934 (United Kingdom) (which is in pari materia to sub-s 96(1) of the RTA 1987) and the English case of Charlton v Fisher and Another (2001) EWCA CIV 112 to support the submission that, in line with the purpose of s 97 of the RTA 1987, this court should follow the English position and require the respondents to initiate recovery proceedings first upon obtaining the said Judgment instead of immediately commencing execution proceedings.

At the outset, we find that the appellant’s submission that “garnishee proceedings are another mode of executing a judgment similarly like winding up proceedings” is flawed in the light of the trite legal principle that a winding up petition is not execution on a judgment (see, among others, Maril-Rionebel (M) Sdn Bhd & Anor v Perdana Merchant Bankers Bhd and other appeals [2001] 4 MLJ 187 and Juara Aspirasi (M) Sdn Bhd v Tan Soon Ping [2012] 1 MLJ 50).

Next, we find that the appellant’s argument that the respondents must first obtain judgment vide a recovery action before they can execute the said Judgment has been put to rest by the Federal Court in the recent case of Chen Boon Kwee v. Berjaya Sompo Insurance Bhd [2025] 2 CLJ 169.

Three questions of law arose for consideration of the Court in Chen Boon Kwee. The second question was “whether to recover the judgment sum in the tortious action, the victim is then required to file separate recovery proceedings against the insurer of the vehicle owner, by reference to the dicta of the Federal Court in AmGeneral Insurance Bhd v. Sa’ Amran Atan & Ors And Other Appeals [2022] 8 CLJ 175 and Pacific & Orient Insurance Co Bhd v. Yeap Tick (Appeal No. 6 in AmGeneral, supra); read with Malaysian Motor Insurance Pool v. Tirumeniyar Singara Veloo [2019] 10 CLJ 731; [2020] 1 MLJ 440?”.

The discussion on the said second question is at paragraphs 16 to 45 of the judgment where references were made to, among S/N Lt5CM5tz7Uq/f99fl2mIQw others, the English Road Traffic Act 1934. We find the following excerpts from the judgment are instructive: “[38] The third party insurance scheme in Part IV of the RTA when viewed as whole is to afford protection to third party road users. As such, it's provisions must, in accordance with well-settled principles, receive a broad and liberal interpretation that enhances its avowed object. This is what Lord Simon in Stock v. Frank Jones (Tipton) Ltd [1978] 1 WLR 231, referred to as the “functional construction of a statute”. And when such a broad and liberal interpretation is adopted, it is evident that there is no necessity to import into the legislative scheme a two-tier adjudication process, ie, first to obtain judgment in tortious claim, and then to enforce the judgment against the insurer vide a recovery action, when such a requirement is not found in the RTA. If there was such a requirement, the Legislature would have provided for it. [39] Thus, for the courts to impose a requirement for recovery action would defeat the intent of the Legislature. To that extent we adopt with approval the views expressed by the Court of Appeal in Muniammah Muniandy (supra): [21] … This was reaffirmed by this court in Pacific & Orient Insurance Co Bhd v. Mohamad Rafiq Muiz Ahmad S/N Lt5CM5tz7Uq/f99fl2mIQw Hanipah (Appeal No. 2 in AMGeneral Insurance Bhd v. Sa’ Amran Atan & 2 Ors (supra)) in the following authoritative words: There is nothing in section 96(1) to say that the third party claimant must first obtain another judgement against the insurer before he could proceed to enforce the judgement that he had earlier obtained against the insured. After all, the judgement debt of the insured becomes the judgement debt of the insurer ... … [44] The statutory third party insurance scheme in Part IV of the RTA is, as stated earlier, a piece of beneficent social legislation. As such, any legitimate claim of a third party for death or injury sustained from a road accident involving a vehicle insured by an insurer must be resolved expeditiously and without the need for protracted litigation or excessive legal costs. Hence, the necessity to determine the tortious claim as well as the insurer’s denial of liability, if any, without undue delay or the need for a recovery action that would add further costs and prolong the ultimate resolution of the third party’s claim for compensation. Running down cases comprise the bulk of the subordinate court’s civil case load, and the addition of another tier of unnecessary adjudicatory process in the form recovery action, is wholly unwarranted. The court’s finite resources would be put to better use if such proceedings are done away S/N Lt5CM5tz7Uq/f99fl2mIQw with and the legal process is done fairly and efficiently to all parties, be it the third-party victim, the insured tortfeasor or the insurance company, and ensure that justice is done. [45] In the premise of the foregoing, we answer question 2 in the negative.”.

Applying the legal principles as established by the Court in Chen Boon Kwee’s case, it is therefore beyond argument that the respondents are not required to file separate recovery proceedings against the appellant to recover the judgment sum in accordance with the said Judgment.

Based on the foregoing analysis, the 3rd Issue is answered in the affirmative. Whether the Declaratory Order is valid and in compliance with sub-s 96(3) of the RTA 1987

Proceeding next to the 1st Issue as stated in subparagraph 26(a) above, the Federal Court in Sa’amran Atan heard eight appeals and among the questions of law which were determined was whether an insurer was bound to serve the cause papers relating to the application for a declaration pursuant to sub-s 96(3) of the RTA 1987 upon the third party claimant before the third party claimant obtained the judgment against the insured and the tortfeasor. The discussion on this issue is quoted below: S/N Lt5CM5tz7Uq/f99fl2mIQw “[93] Perhaps a good starting point in dealing with this issue is the case of Merchants’ and Manufacturers, Insurance Co., Ltd. v. Hunt and Others [1941] 1 All ER 123 where the English Court of Appeal was called upon to consider s. 10(3) of the 1930 Act which is substantially similar in purport to s. 96(3) of the RTA. This is how Scott LJ expressed his views in that case: 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 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. 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 subsect. (1) through the possibility of the policy being avoided in the proceedings under the first part of subsect. (3) without his knowledge, and even by collusion between the insurer and the insured. It was essential that he should be given the right to appear in it and there defend his rights. Both S/N Lt5CM5tz7Uq/f99fl2mIQw the requisites are met by the proviso to subsect.

which in effect creates two condition precedents to the existence of the insurer’s right to get this declaration under the first part of the subsect. (3). The third party gets full notice of the grounds of the insurer’s claim and given unqualified right to become a party in all the rights of a party to an action without any qualification upon them. [94] Section 96(3) of the RTA speaks of a declaration obtained by the insurer “before the date the liability was incurred”, meaning to say before judgment in the tortious claim by the third party claimant is obtained against the insured and the tortfeasor. To that extent the provision is clear and unambiguous, which explains why the first appellant proceeded with the application under s. 96(3) after the respondent had commenced the tortious claim against the insured rider and owner of the motorcycle (second appellant) in the Bandar Baru Bangi Magistrate’s Court and before judgment was obtained by the respondent as the third party claimant. [95] The point to note is that while s. 96(3) gives the insurer the right to obtain a declaration that the insurance policy is void and unenforceable, s. 96(1) makes it mandatory for the insurer to make payment after judgment had been obtained against the insured by the third party claimant. Judgment here means S/N Lt5CM5tz7Uq/f99fl2mIQw judgment in an action for negligence filed by the third party claimant and not judgment in any other cause of action. [96] What s. 96(3) mandates is that where the insurer intends to repudiate liability under the policy, it must comply with the following procedural requirements:

notice must be given to the plaintiff in the tortious claim action before liability is incurred;

(ii) the notice must state the grounds relied on by the insurer to obtain a declaration;

(iii) the notice must be served on the plaintiff in the tortious claim within seven days after the commencement of the claim;

(iv) the notice must be served on the parties who have interest in the proceedings. [97] In the present case, the first appellant knew of the pending Bandar Baru Bangi Magistrate’s Court proceedings against the rider and registered owner of the motorcycle (second appellant), yet it chose not to comply with the statutory requirements laid down by the proviso to s. 96(3). The cause papers which ought to have been served on the respondent S/N Lt5CM5tz7Uq/f99fl2mIQw who was the plaintiff in the Bandar Baru Bangi Magistrate’s Court proceedings were not served on him. This was an outright contravention of s. 96(3), rendering the declaration order issued by the High Court irregular, defective and unenforceable. The first appellant had no discretion not to comply with the proviso to s. 96(3). Nor does the court have the discretion to allow any such application which suffers from such fundamental defect. … [104] In an application for a declaratory order under s. 96(3), the insurer must confine itself to the particulars it sets out in the notice served on the plaintiff in the tortious claim proceedings. The reason for this according Lord Greene in Zurich is this: 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 the 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. If I am right in thinking that only matters referred to in the notice can be relied on, it seems to me to follow that the question whether such matters are S/N Lt5CM5tz7Uq/f99fl2mIQw material and whether the policy was obtained by them must be examined on the artificial basis that, as between the insurer and the third party, all other material facts as having been disclosed. The result is to prevent the insurer from relying either directly or indirectly on any other matter not specified in the notice as a ground or part of a ground for avoiding the policy as against the third party. [105] Goddard LJ in the same case emphasised the importance of time within which the notice must be served other than the content of the notice, and he went on to say: 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 party should know the grounds on which reputation 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 subsection. The protection afforded is little enough. S/N Lt5CM5tz7Uq/f99fl2mIQw [106] In the present case, neither the notice nor the cause papers for the s. 96(3) application were served on the respondent by the first appellant, in breach of the proviso to s. 96(3), which as we said makes the first appellant’s repudiation of the insurance policy based on the declaration order it obtained from the High Court unsustainable in law. [107] In the premises, the answer to leave question 1 is this: The insurer is bound to serve the cause papers relating to the application for a declaration pursuant to s. 96(3) of the RTA on the third party claimant before the third party claimant obtains judgment against the insured and the tortfeasor.” (emphasis added).

Based on the above quoted passages from the judgment, the Court held that one of the procedural requirements under sub-s 96(3) of the RTA 1987 which must be fulfilled was that notice must be given to the plaintiff in the tortious claim action before liability is incurred i.e. before the court where the tortious action was filed has made a pronouncement on liability for the MVA concerned.

In Sa’amran Atan, the Court found that the first appellant was aware of the pending tortious claim and yet it did not issue the mandatory notice pursuant to sub-s 96(3) of the RTA 1987. In the instant appeal, although Suit 292 and Suit 351 were commenced after the filing of O.S. No. 123, nevertheless before the appellant S/N Lt5CM5tz7Uq/f99fl2mIQw filed O.S. No. 123, the solicitors for R1 and R2 had given notice to the appellant, as the insurer under sub-s 96(2) of the RTA 1987, of the respondents’ intention of filing an action in court in respect of the MVA and this was followed with other communications on the matter. Four months later, Suit 447 was filed, not by the respondents, but by D1 and D2 against the respondents, which resulted in a consent judgment being entered two months after that.

The Court in Sa’amran Atan held that the insurer was bound to serve the cause papers relating to the application for a declaration pursuant to sub-s 96(3) of the RTA 1987 on the third-party claimant before the third-party claimant obtained judgment against the insured and the tortfeasor. Similarly, here, as the appellant had knowledge of the respondents’ intention of commencing civil action in respect of the MVA, the appellant was bound to give notice to the respondents of its intention to apply to repudiate liability.

Insofar as the rules of statutory interpretation are concerned, the Court in Sa’amran Atan said: “[37] In The Construction of Statutes (3rd edn) the learned author Elmer A Dreidger holds the following views at p 131: “There is only one rule in modern interpretation, namely courts are obliged to determine the meaning of legislation in its total context, having regard to the purpose of the legislation, the S/N Lt5CM5tz7Uq/f99fl2mIQw consequences of proposed interpretation, the presumptions and special rules of interpretation, as well as admissible external aids. In other words, the courts must consider and take into account all relevant and admissible indicators of legislative meaning. After taking these into account, the court must then adopt an interpretation that is appropriate. An appropriate interpretation is one that can be justified in terms of (a) its plausibility, that is, its compliance with the legislative text; (b) its efficacy, that is, its compliance with the legislative text; and (c) its acceptability, that is, the outcome is reasonable and just.””.

In our considered view, an interpretation which is appropriate insofar as the proviso to sub-s 96(3) of the RTA 1987 is concerned is that, if a tortious suit has been commenced before the commencement of the application for a declaration, notice must be given by the insurer to the plaintiff in the tortious suit and this must be done before or within seven days after the commencement of the application for a declaration. However, if no tortious suit has been commenced, this does not ipso facto mean that the requirement to give notice is dispensed with.

We are in agreement with the learned HCJ’s findings as expressed in the following paragraphs of the judgment: “[7] The very fact that the Plaintiff embarked on an application to repudiate liability must be based on S/N Lt5CM5tz7Uq/f99fl2mIQw a contemplation that a potential claim will be made against them. This is more so when the Plaintiff was served with a notice under s. 96 (2) of the RTA, which was marked as X-1 in the Plaintiff Affidavit in Support as documented in Enclosure 2. [8] The Plaintiff did not serve a notice on the Defendants as 3rd Party because it claims that there was no pending tortious action. However, in the same breath, the Plaintiff wants to protect itself against a potential action that may be taken against the insured despite there being no tortious action filed. The Plaintiff cannot take a “heads I win, tails you lose” position. [9] To allow the action taken by the Plaintiff would result in unsuspecting 3rd parties who despite serving a notice under s. 96(2) would only know that they have no recourse against the insurers upon commencing a tortious claim. By then, much expenses would have been expanded and valuable resources would have been lost.”.

The 1st Issue in subparagraph 26(a) above is therefore answered in the negative. S/N Lt5CM5tz7Uq/f99fl2mIQw Whether the respondents are required to set aside or file a collateral action to impeach the Declaratory Order

As it is our finding that the Declaratory Order is invalid, there is no necessity to answer the 2nd Issue. We merely make the observation that in the article written by none other that the learned counsel for the respondents titled The Role of The MIB and The Liability of The Insurer Concerned Under MIB/Domestic Agreement [2023] 1 LNS(A) lxxv, he opined the following at p 63: “Can a third party enforce a judgment without a need to set aside a declaration?

i) It is pertinent to note, section 96(3) RTA also spells out the consequences of failing to comply with the procedures which reads: ‘shall not be entitled to take the benefit of the said order’. Whether that order of the court should be set aside before a third party can enforce a judgment by the third party has raised some issues. The argument in favour of setting aside the declaration or for that matter, a court order effecting a party has been well stated in the case of Badiaddin [supra]. That is a declaration or any order affecting that person must be set aside before the third party can enforce the judgment/order. Regardless of the fact whether that order is void or voidable. See Isaacs v. Robertson [1985] AC 97; S/N Lt5CM5tz7Uq/f99fl2mIQw ii) However, the reading of the Federal Court decision of Am General Insurance Bhd v. Sa’amran Atan [supra] para 34 strongly suggested that following the case of Pacific & Orient Insurance Co Berhad v. Kumari Nadason [supra] the order need not be set aside. The reason being the empowering section that entitles an insurer to obtain a declaration; that very section itself expressly states the consequences of failing to comply with the condition precedents stated therein i.e. ‘they shall not be entitled to take the benefit of the said order’. Section 96(3) clearly provides that the insurer can get a declaration but shall not be entitled to take the benefit of the declaration if the papers were not served on the plaintiff prior to getting the declaration. The declaration that they got is useless. Hence, there is a conflict between express statutory provision in section 96(3) of the RTA which entitles an insurer to obtain a declaration which also expressly states the consequence of failure to comply with the condition precedent and the common law. It is trite law in such instances the statutory provision prevails. The insistence of some insurers that the declaration obtained must be set aside before the enforcement of the judgment has creates “a conflict”.”

There appears to be sound basis for the respondents’ stance that, as sub-s 96(3) of the RTA 1987 itself states the validity or effectiveness of the declaration as against a third party, and in particular, the consequences for non-fulfilment of the notice requirement i.e. the order is of no effect, hence a third party does not need to apply to set aside the order if it can be shown that the requirements under the sub-s 96(3) were not complied with.

There are two other submissions to be addressed for the sake of completeness, namely –

the submission by the appellant that at all material times, the respondents’ erstwhile solicitors were aware of the fact that Messrs. S.G. Lingam was the appellant’s solicitor and the former chose not to comply with rule 56 of the Legal Profession (Practice and Etiquette) Rules 1978 by not serving a written notice to the latter before entering the said Judgment. The respondents’ conduct in enforcing the said Judgment in these circumstances was said to be unethical and unsustainable. Moreover, Messrs. S.G. Lingam acted for the appellant with the intention of upholding the commonality of interest as elucidated in AmGeneral Insurance Berhad v Iskandar Mohd Nuli [2016] 2 MLRA 94. In this regard, we are of the view that the appellant’s contention is relevant in the context of an application to set aside the said Judgment, but not for purposes of this appeal; and

the submission by the respondents that, following the decision by the Court of Appeal in Waytha Moorthy Ponnusamy & Ors v. YB Dato’ Seri Dr Ahmad Zahid Hamidi – Timbalan Perdana Menteri/ Menteri Dalam Negeri & Ors [2023] 1 CLJ 385, and as the Declaratory Order was made against the respondents who were not named as parties in the application for the declaration, the Declaratory Order was an unenforceable order against the respondents. The learned counsel for the respondents implored this court to make a finding that sub-s 96(3) of the RTA 1987 should be construed to make it mandatory for a third party whose rights may be affected by an order to be added as a party in an application for a declaration. We have scrutinised the written submissions filed at the High Court and we find that this argument was not raised at all. In view of the fact that this instant appeal can be determined primarily on the first ground of appeal relating to the issue of notice as required under the proviso to sub-s 96(3) of the RTA 1987, we are not compelled to make any finding on the issue as posed by the respondents.

Premised on the aforesaid considerations, it is our unanimous decision that there are no appealable errors by the learned HCJ and hence, appellate intervention is not warranted.

The appeal is therefore dismissed and the decision by the High Court is affirmed.

The appellant is ordered to pay costs of RM35,000.00 to the respondents, subject to allocator fees. DATED: 29.1.2026 (ALIZA BINTI SULAIMAN) JUDGE HIGH COURT IN MALAYA KUALA LUMPUR For the Appellant : Jeyaveeran S Naicker (Kishan A/L Govindaraju and Rosmaria Binti Daud with him) Messrs. Naicker & Associates For the Respondents: R. Ganavathy Naidu a/l N. Rasu (M. Yoshini with him)