Datin Lai Leong Peng v Pacific & Orient Insurance Co. Berhad (WA-22NCC-454-07/2023)

The main issue before me is whether the defendant who had insured the plaintiff’s car Porsche 911 GT3 RS [registered in Langkawi under a tax-free regime] can insist that the insured pay the full custom duties on the car and thereafter transfer the ownership to the defendant before paying out the insured sum after the plaintiff’s car was involved in an accident and declared Beyond Economic Repair (“BER”).

The secondary issue is whether after the plaintiff had refused to accept the condition that the insured pays the full custom duties on the car and thereafter transfers the ownership to the defendant before receiving the insured sum the defendant can now repudiate the plaintiff’s claim for indemnity under the Insurance Policy for alleged non-disclosure and/or providing false information [for having a ‘false’ Langkawi address] when the defendant had failed to repudiate the policy as required by section 19 of the Contracts Act for the alleged misrepresentation and/or alleged false information.

The trial was heard over 3 days in 2025. Oral submissions by counsel were held before me on 31-03-2026. On conclusion of oral submissions, I allowed the plaintiff’s claim in the Statement of Claim at paragraphs 36 a, d and f. For the quantum I allowed RM 1,225,000, RM 150, RM 13,317.80 and RM 5,000 with interest at 5% p.a. from the date of writ till the judgment is satisfied. Costs of RM 50,000 to be paid by the defendant to the plaintiff subject to allocatur.

On 18-04-2026, an appeal was filed by the defendant to the Court of Appeal against my judgment. These are my Grounds of Judgment. Background facts The Vehicle was registered in Langkawi Island

The plaintiff’s vehicle with registration number KV6828E (“Vehicle”) was registered in Langkawi Island with an address of Lot 166 Kampung Kelibang, MK Kuah, 0700 Langkawi, Kedah. [See B1 page 6].

Porsche Malaysia was engaged by the plaintiff to purchase and register the Vehicle in Langkawi Island in order to be eligible for a customs duty exemption. A warehouse service provider in Langkawi Island, namely one Mr. Ong Seng Aun, through his company, Langkawi Automobili Enterprise, was engaged by the plaintiff to facilitate the registration and storage of the Vehicle in Langkawi Island.

The Vehicle ownership certificate issued by the Malaysian Road Transport Department shows that the Vehicle is registered in Langkawi Island. The Vehicle is also duly registered with the Royal Malaysian Customs Department (“Customs”) for use in the mainland/Peninsula. [See witness statement of PW4 Lim Thean Seng Q and A 2 - 5]. Insurance Policy issued by the defendant

The Vehicle is insured under an Insurance Policy issued by the defendant.

Under the terms of the Insurance Policy, where the insured vehicle is declared BER, the defendant is contractually obliged to compensate the insured based on the sum insured as stated in the Schedule of the Insurance Policy.

The sum insured for the plaintiff’s Vehicle, as stated in the Schedule of the Insurance Policy, is RM 1,250,000.00.

Section G/Endorsement 2 (Excess Damage Claim) provides that the excess amount stated in the Schedule of the Insurance Policy is the amount to be borne by the insured for each and every claim under Section A of the Insurance Policy, including claims arising from accidental collision. In this case, the applicable excess is RM 25,000.00.

Therefore, the amount payable by the defendant to the plaintiff upon a BER declaration of the plaintiff’s Vehicle is the agreed value of RM 1,250,000.00 less the applicable excess of RM 25,000.00, resulting in a net indemnity sum of RM 1,225,000.00.

The Customs on 12-07-2022 issued K1 Form to permit the Vehicle to be brought out from Langkawi Island for a period between 12- 07-2022 until 10-10-2022.

The Vehicle was involved in an accident on 07-10-2022.

During the trial, DW1, the defendant’s Senior Manager, confirmed under cross-examination that it was the defendant who made the decision to classify the Vehicle as BER and to compensate the plaintiff on the basis of a BER assessment. [See Notes of Proceedings at page 160]. The defendant’s First Offer and Second Offer to the plaintiff

The defendant issued a letter dated 12-12-2022 (“First Offer”). In the said letter, the defendant expressly confirmed that the plaintiff’s Vehicle had been assessed and determined to be BER, and offered the sum of RM 1,225,000.00 in full settlement of the plaintiff’s claim under the Insurance Policy. The First Offer was marked “Without Prejudice”. [See B1 page 81].

The offer sum of RM 1,225,000.00 is the agreed value of RM 1,250,000.00 less the applicable excess of RM 25,000.00.

The defendant did not, at this stage, allege any breach of policy terms or raise any issue of non-disclosure. Neither did the defendant put as a precondition that the plaintiff pays the full customs duty in respect of the Vehicle before the defendant would release the settlement sum. [See B1 page 81].

Notwithstanding the First Offer, the defendant verbally informed the plaintiff that payment of custom duty in respect of the Vehicle was required to be borne by the plaintiff before the defendant would release the settlement sum. [See witness statement of PW4 Lim Thean Seng Q and A 14].

The First Offer and the oral term were not accepted by the plaintiff.

The defendant, through its solicitors’ letter dated 15-06-2023, made a second offer to settle the plaintiff’s insurance claim (“Second Offer”). The Second Offer was subject to the condition that the plaintiff either pay the custom duty herself, or alternatively the defendant would settle the custom duty and disburse only the balance amount to the plaintiff. The Second Offer was marked “Strictly Without Prejudice”. [See B1 pages 135 - 136]. The plaintiff rejected the Second Offer

By letter dated 29-06-2023, the plaintiff’s solicitors rejected the Second Offer and reiterated her position that there was no contractual or legal basis under the Insurance Policy for imposing upon the plaintiff the obligation to pay custom duty as a condition precedent to indemnification. [See B1 page 137].

The plaintiff filed this suit against the defendant for – i. A declaration that the plaintiff is entitled to be indemnified by the defendant under the Insurance Policy for the loss and damage of the plaintiff’s Vehicle; ii. A sum of RM 1,245,526.80 comprising: a. 1,225,000.00 (agreed sum insured after less excess applicable under the Insurance Policy); b. Towing Charges on 07-10-2022 (from the location of the Accident to police station) of RM 150; c. Storage charges, towing charges, labour charges and service tax by Porsche Malaysia of RM 13,317.80; d. Towing Charges on 18-01-2023 (from Porsche Malaysia to warehouse in Pulau Langkawi) of RM 5,000; and e. Medical expenses and charges by Klinik Pakar Au Yong (psychiatrist) of RM 2,059. iii. General damages to be assessed against the defendant for causing mental distress to the plaintiff; iv. Interest on such sums as are found to be due to the plaintiff from the defendant at such rate and for such period as this Honourable Court shall deem fit; and v. Costs. The defendant’s Defence

In response, the defendant denies any liability to pay.

The defendant contends that the plaintiff used a false Langkawi address to obtain exemption from custom duty. [See Amended Defence at paragraph 5 in Enclosure 93 Amended IP page 30].

The defendant also contends to my great astonishment this argument [See Enclosure 128 defendant Reply Written Submission page 3] - The burden is on the Plaintiff to show that he had a choice of taking a policy from Langkawi to avoid paying the Customs Duty but the Plaintiff chose to take a policy from the insurers who are based on Mainland. It was the Plaintiff’s choice to take the policy or any policy. The insurer has no idea of the working mechanics of Langkawi Duty Free Car and they were never a party to any decision by the Customs to provide the Plaintiff’s permission to purchase a Duty-Free Vehicle. [unquote]

The following witnesses testified during the trial for the plaintiff: - i. PW1 - Chong Weng Tat. ii. PW2 - Lai Leong Peng. iii. PW3 - Lim Fun Yee. iv. PW4 - Lim Thean Seng.

The defendant called these witnesses-i. DW1 - Thevantharen Muniandy. ii. DW2 - Farhani Binti Muhamad Zin. iii. DW3 - Shahrizan Bin Shahari. iv. DW4 - Amshar Hisham Bin Badrul Hisham. v. DW5 - Rashila Binti Abdullah.

The issues to be determined by this Court are set out in the Agreed Issues to Be Tried dated 02-12-2025, agreed by the parties upon conclusion of the full trial [Enclosure 124]. They are as follows-Issue No. 1: Whether the plaintiff is entitled to be indemnified by the defendant for the loss of and damage to the Vehicle, in the amount of the sum insured under the Insurance Policy, arising from a road traffic accident? Issue No. 2: Whether the plaintiff failed to disclose true information and/or provided false information when subscribing to the Insurance Policy with the defendant? Issue No. 3: If the plaintiff is found to have committed the alleged non-disclosures as stated in Issue No. 2 above, whether the defendant is entitled to repudiate the plaintiff’s claim for indemnity under the Insurance Policy? Issue No. 4: Whether the defendant’s letter of offer contained a term requiring the plaintiff to pay customs duties as the plaintiff’s Vehicle was declared Beyond Economic Repair (“BER”) in order to effect the transfer of ownership to the defendant, and if so, whether the defendant is entitled under the Insurance Policy to impose such a term?

I will address each issue one by one. Issue No. 1: Whether the plaintiff is entitled to be indemnified by the defendant for the loss of and damage to the Vehicle, in the amount of the sum insured under the Insurance Policy, arising from a road traffic accident?

Having heard the witnesses and read the written submissions, I am of the view at all material times, the plaintiff has made the requisite premium for the Insurance Policy and the plaintiff’s Vehicle was insured under the Insurance Policy issued by the defendant.

I am of the view the Insured Event had occurred.

On 07-10-2022, PW-2 was driving the plaintiff’s Vehicle with the plaintiff’s permission when the vehicle lost control and collided with a road divider (“Accident”). A police report was duly lodged in respect of the Accident.

During the trial, DW1, the defendant’s Senior Manager, confirmed under cross-examination that it was the defendant who made the decision to classify the plaintiff’s Vehicle as BER and to compensate the plaintiff on the basis of a BER assessment - Notes of proceedings at page 160: Stop, do you agree with me that it was the Defendant who decided that it is the Vehicle is Beyond Economical Repairs? Yes. That the Defendant was the one who make that decision? Yes.

After appointing an independent adjuster to carry out inspection and investigation of the plaintiff’s Vehicle, the defendant issued the First Offer. [B1 pages 81 - 85]. In the said letter, the defendant expressly confirmed that the plaintiff’s Vehicle had been assessed and determined to be BER, and offered the sum of RM 1,225,000.00 in full settlement of the plaintiff’s claim under the Insurance Policy.

The defendant, through its solicitors’ letter dated 15-06-2023 [B1 pages 135 - 136], made the Second Offer. The Second Offer was subject to condition that, that the plaintiff either pay the customs duty herself, or alternatively that the defendant would settle the customs duty and disburse only the balance amount to the plaintiff.

I am of the view that this term is misguided and in bad faith made by the defendant Pacific & Orient Insurance Co. Berhad. It is not part of the terms of the insurance contract.

It is a sad reflection on the insurer defendant as having accepted to cover the plaintiff for an accident to the car chose to find a way to avoid paying out on what is a valid clam. Without prejudice basis waived

The First Offer and Second Offer were made by the defendant on a without prejudice basis but disclosure had been permitted by conduct and in law.

The defendant has waived its right to object to the admissibility of the First Offer and Second Offer by pleading and relying on the same in its Amended Defence at paragraphs 10, 11, 17, 18, 20 and relying on them during the trial. [See Dexon Electrical Engineering Sdn Bhd v Chin Pooi Yee (Trading as a Sole Proprietor Under the Name of Aa Flexi Trading) & Anor [2021] 1 LNS 1753, HC, Dusun Desaru Sdn Bhd & Anor v Wang Ah Yu & Ors [1999] 5 MLJ 449, HC, Gary Teh Chin Yeong v Kwong Yan Loy & Anor [2019] 5 CLJ 329, HC, and Nulink Solutions Sdn Bhd v Afdilia Holdings Sdn Bhd [2016] 1 LNS 1244, HC].

In conclusion, issue No. 1 is answered in favour of the plaintiff.

I now move to issue 2. Issue No. 2: Whether the plaintiff failed to disclose true information and/or provided false information when subscribing to the Insurance Policy with the defendant?

The defendant argues the address used by the plaintiff is a fake address. This arguments smacks of bad faith. It did not appear in the two offers to pay. It arose only when the plaintiff refused to agree to the unreasonable new term imposed by the defendant.

In any event, the burden is on the defendant to prove the address used is a fake address under the Evidence Act. The defendant failed to prove. The evidence shows as follows.

The fact that Lot 166, Kampung Kelibang, Langkawi, Kedah is a real and identifiable address is confirmed by DW-4, an Assistant Legal Officer at the Langkawi District and Land Office: Notes of proceedings at pages 222 - 223: Soalan saya, alamat di Lot 166 Kampung Klebang memang boleh dapat dikesan lokasi dia kan? Boleh. Sebab itu lah tuan boleh pergi sana buat semakan? Benar. Jadi alamat ini memang wujudlah? Ya, betul wujud.

At all material times, the JPJ and the Customs had no issue accepting the said address for the registration of the plaintiff’s Vehicle. The Vehicle was duly registered by the JPJ and the Customs.

During trial, both the DW2 (Enforcement Officer of the Langkawi Island JPJ) and DW3 (former deputy director of the Langkawi Island Customs) confirmed that there was no investigation or prosecution whatsoever against the plaintiff in respect of the registration of the plaintiff’s Vehicle using the said address.

The evidence of DW2 and DW3 is consistent with the Customs Duties (Exemption) Order 2017 paragraph 2[1] read with the