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Sun Insurance Co.Ltd v Chandra [2011] FJCA 26; ABU0031.09 (18 March 2011)

IN THE COURT OF APPEAL, FIJI ISLANDS
AN APPEAL FROM THE HIGH COURT

CIVIL APPEAL NO.ABU 0031 OF 2009
[High Court Civil Action HBC No. 42 of 2009]

BETWEEN:

SUN INSURANCE COMPANY LIMITED
APPELLANT

AND:

MUKESH CHANDRA
RESPONDENT

CORAM: Hon. Justice William Marshall, Justice of Appeal
Hon. Justice Izaz Khan, Justice of Appeal
Hon. Justice Kankani T. Chitrasiri, Justice of Appeal

COUNSEL: Mr S. Maharaj for the Appellant
Mr E. Maopa for the Respondent

Date of Hearing: Monday 7th March 2011
Date of Judgment: Friday, 18th March 2011

JUDGMENT

William Marshall, JA

1. In my opinion there are two issues arising in this case. Since the judgment of Inoke J on 10th September 2009 in the Court below, the Supreme Court gave judgment in Civil Appeal No.CBV0005 of 2008S in the case of Sun Insurance v. Pranish Prakash Chand on 15th October 2010. It was a judgment of the Court. However I was delegated to perform the extensive legal research. The importance of the judgment is that it explains the legislative scheme of Cap 177 in terms of the legislative history and the common law that has arisen from the passing of the original legislation in the United Kingdom which is in pari materia with Cap 177 in Fiji. It explains that the United Kingdom legislation first enacted in Part II of the Road Traffic Act 1930 did not deal with the mischief. The legislature in the United Kingdom therefore passed section 10 in Part II of the Road Traffic Act 1934. It did so in order to ensure that third parties (as defined in the 1930 Act section 36) would, in most but not all cases, be able, by working the scheme provided by section 10 of the 1934 Act, be able to recover directly from the insurers who had underwritten the risks of third party liability in an insurance policy with the owner of the vehicle at fault.
   
2. In paragraphs 58 and 59 of Sun Insurance v. Pranish Prakash Chand the Supreme Court explains that Zurich General Accident v. Morrison (1942) 1 AER 529 (in the United Kingdom) and Murtaza Khan v. Reginam 11 FLR 161 (in Fiji) were correctly decided and the principles stated represent the law of Fiji.
   
3. In paragraphs 68 of the judgment in Sun Insurance v. Pranish Prakash Chand the Supreme Court gives its reasons for interpreting section 10 of the 1934 Act in the United Kingdom (which is section 11 of Cap 177) in favour of third parties even where the insurer is temporarily out of cover because he is in breach of a condition imposed by the insurer. That represents the law of Fiji.
   

The problem of the insured's driver not holding
a driving licence at the time of the accident

4. In Sun Insurance v. Pranish Prakash Chand at paragraphs 71 and 72, the judgment of the Court says:
   

"71. In Fiji the problem remains as it was in the 1930's in the United Kingdom. The insurers employ the same clauses conditions and other devices to restrict their liability and their pay outs.

72. In the view of this Court Ashok Kumar and Another v. Sun Insurance Company Limited Civil Appeal No.ABU0072 of 2004S it is open to question as to whether it was correctly decided. The driving restriction for permitted drivers depends on their having held and not having been disqualified from holding or obtaining a licence. The restriction to exclude drivers who have failed to renew their driving licence after thirty days from its expiry would seem to be an insurance company device to avoid liability. It is arguably within the mischief of the 1934 Road Traffic Act Part II reforms in the United Kingdom."

5. The driver condition invariably used by underwriters in the United Kingdom following the enactment of the 1934 Act scheme, firstly, was that the driver had to have possessed a valid driving licence. Secondly, at the time of the event the driver must not be disqualified from holding or obtaining a licence. The policy of this was clear. Firstly that the insurer was not to be liable to the third party employing the section 10 scheme (in Fiji section 11) if the permitted driver of the insured had never held a driving licence. Secondly the insurer was not to be held liable to the third party if at the time of the event the insured's driver was disqualified from holding or obtaining a driving licence.
   
6. After the 1934 Act commenced, there were no conditions in the United Kingdom such as the condition in the present policy which was also in the policy in Sun Insurance v. Pranish Prakash Chand. This turns on the imposition of a third condition by the insurer on the insured's driver. If he has not renewed his driving licence after 30 days of its expiry, the insured is not covered by reason of this failure on the part of his driver. This applies even if the driver is a qualified driver and is not disqualified from holding or obtaining a licence.
   
7. The policy of the 1934 reform of the 1930 Act was to ensure that the injured third party or his estate if he has been killed, can recover directly from the insurance company even if the insured is not covered at the time of the accident because of breach of condition. Third parties have no say in the insured's contract with his insurer and no say how the insured or his permitted driver conduct themselves in relation to their driving or their administrative ability in renewing their driving licences. The injury causing driver is almost invariably a stranger to the third party and causes injury or death to him on a public road out of the blue. It would be a complete lottery if the driver hitting the third party happened to be on only his 30th day after expiry of his licence without renewal but there arose completely different result on the 31st day after expiry.
   
8. It is because of the need to make third party insurance effective for the vulnerable injured third party, that section 10 of the 1934 Act was passed. In my view any imposed condition other than the two discussed above does not take away the third party's statutory right to claim against the insurer under section 10 of the 1934 Act. The thirty days non renewal condition is an insurance company add on intended to make insurers not liable and intended to make third parties lose out.
   
9. It is well to remind ourselves of the practices of insurance companies that lead to the passing of the 1934 Act section 10 in the United Kingdom. It is described by Lord Justice Goddard (as he then was) in Zurich General Accident and Liability Insurance Co. Limited v. Morrison (1992) 1 AER 529 at 540. He said:
   

"The Road Traffic Act, 1934, Part II, 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, 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 that, if thereafter they were, through no fault of their own, injured or killed by a motor car, they or their dependents 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, which 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. I myself once tried a case Richards v. Brain and Port of Manchester Insurance Co. [1934] 50 Lloyd's L.R. 88 where the insurers were enabled to escape liability if at the time of the accident the car was being driven by a Jew, a bookmaker or an actor. It was indeed a state of affairs to which the words of Fletcher Moulton, L.J. in Joel v. Law Union & Crown Insurance Co. (9) were forcibly applicable. In that case Fletcher Moulton L.J. in dealing with a life policy, said, at p.885:

I wish I could adequately warn the public against such practices on the part of insurance offices. I am satisfied that few of those who insure have any idea how completely they leave themselves in the hands of the insurers should the latter wish to dispute the policy when it falls in.

In the case of motorcar insurance, however, 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 careless drivers held a policy that they were enabled to drive and put other persons in peril. It is not surprising, therefore, that by 1934 Parliament interfered, and, by the Road Traffic Act, 1934, s.10, took steps towards remedying a position which to a great extent nullified the protection that compulsory insurance was intended to afford. Generally speaking, sect.10 was designed to prevent conditions in policies from defeating the rights of third parties ..."

10. I accept that section 10 and the direct liability to injured third parties of the insurer did not apply in what the legislation intended to be uninsured situations. If an insured's vehicle is driven by a joy rider or thief or even by a relative of the insured without permission the injured third party has no statutory claim against the insurer.
    
11. Secondly, where the driver may have the permission of the owner, but has never held a driving licence or at the time of this event is disqualified from holding or obtaining a driving licence, the policy does not create the insurers statutory direct liability to third parties who are injured or killed.
    
12. In Fiji unlike the United Kingdom where there is the Motor Insurers Bureau or in Hong Kong where there is the Traffic Accident Victims Assistance Scheme (TAVAS), there is no administrative scheme agreed between the insurers and the government in these situations where the third party scheme of section 10 does not apply. In Fiji the victim can sue the tortfeasor or an employer where respondea superior and vicarious liability applies. But both of these may be men of straw.
    
13. But when it comes to the words "at any time within the period of thirty days [from expiry]" we are in a different situation. It is a provision purporting to exclude the driving of a qualified driver who is not disqualified. It is in the same category as the provision that the policy does not cover a person driving if he is:
    

"a Jew, a bookmaker or an actor"

as in the Richards case cited by Lord Justice Goddard in Zurich.

14. There is no offence in law of "being uninsured because the drivers valid driving licence is expired" at least in the United Kingdom. If there is in Fiji, it arises from a misunderstanding of the law under discussion. The sanction of driving without current and valid licence is the only relevant and applicable offence. Since it has no insurance implications the penalty is minor. Honest and careful drivers are often unaware that the licence in their wallet expired six months or a year ago. In the United Kingdom since 1976, all new full driving licences are valid until the day before the licenced driver's 70th birthday. This removed many cases of driving without a valid licence from the Magistrates Court. In other countries including Fiji the revenue from renewal fees serves to discourage the Land Transport Authority, or equivalent body, from doing in this matter what is done in the United Kingdom. In Hong Kong the period is 10 years. In Fiji the maximum renewal period is six years.
    
15. In the United Kingdom the invariable term until very recently from the entry into force of the 1934 Act section 10 has been:
    

"Providing that the person holds a licence permitting him to drive ... and is not disqualified from holding or obtaining such a licence."

16. I am firmly of the view that the insurance companies in the United Kingdom used this simple formula and avoided such "30 day clauses" as we see in the present case, because they were aware that the Courts would hold that such a term would not withstand scrutiny in the Courts. The Courts would find that the clause was valid between insurer and insured but that it had no impact on the section 10 statutory right of third parties to recover from the insurer. In Hong Kong this invariable formula without additions remains in place for every policy of vehicle insurance to the present day.
    
17. The section 10 scheme as Sun Insurance v. Pranish Prakash Chand explains does not avoid some effectiveness for such "30 day" clauses. The section 10 scheme simply puts the third parties claim ahead of the interests of the insurer. Having paid out the third party, the insurer can then recover what he paid to the third party from the insured by reason of subsection (4) of Section 10 of the 1934 Act and its Fiji equivalent in Cap 177.
    

The facts on this point

18. At pages 19 and 20 of the Record of investigator's report requested by Sun Insurance is set out in their affidavit:
    

"(o) That Nazim Hussein, when driving the said vehicle AC133 was not a holder of a driving licence at the time of the accident and was accordingly convicted and fined by the Nadi Magistrate's Court on 27/05/2005 for the offence of driving a Motor Vehicle without a driving licence and contravening the condition of Third Party Policy."

19. This was not what Sun Insurance had to prove in order to defeat the third party's claim.
    
20. The first fact that would have been factually relevant and if proved would have defeated Mukesh Chandra's statutory claim against Sun Insurance is if it is proved that Nazim Hussein had never held a driving licence.
    
21. That is not proved by sub paragraph (o) above.
    
22. The second fact that would have been factually relevant and if proved would have defeated Mukesh Chandra's statutory claim is if it is proved that on 30th April 2005 Nazim Hussein was disqualified (by Court order) from holding or obtaining a driving licence. That is also not proved by sub-paragraph (o) above.
    
23. The deficiencies go further because sub paragraph (o) does not even prove that Nazim Hussein was in breach of the "30 day from expiry of driving licence period" condition imposed by Sun Insurance. It does not say when Nazim Hussein's previous licence (if any) expired.
    
24. Applying the law stated above to the facts the first thing to note is that the burden of proof is upon Sun Insurance. They have failed to prove either of the two facts that would result in a breach of condition which would avoid Mukesh Chandra's third party statutory claim against Sun Insurance. If they had proved "not within thirty days" then section 10 subsection (f) of the 1934 Act and its Fiji equivalent would kick in. That would allow Sun Insurance to recover monies paid out to Mukesh Chandra from the insured person in respect of vehicle number AC 133 (Mr Imlesh Krishna). However in my judgment Sun Insurance have not proved "not within 30 days".
    
25. I propose therefore that it be ordered that the amount ordered to be paid by Sun Insurance to Mukesh Chandra in respect of the passenger liability claim, be appropriated instead to the claim in respect of Imlesh Krishna as insured of AC123 in respect of driver Nazim Hussein and his negligent driving. An order will be necessary that $233,295 be paid to Mukesh Chand in respect of this liability. An order in respect of interest should also be made.
    
26. I agree with the judgment of Izaz Khan JA in respect of allowing the appeal in respect of passenger liability. So the orders in the Court below will have to be vacated in regard thereto. In respect of $4,000 which is recoverable under the passenger liability policy. Mukesh Chandra cannot be paid more than the total damages assessed by the learned Judge in the Court below. Since the insurer is the same in both policies and claims, no need for contribution arises and all the money due to be paid can be paid out in respect of the claim in respect of motor vehicle AC 133 and the negligent driving of Nazim Hussein. While Mukesh Chandra is entitled to $4000 in respect of the passenger liability claim, that can be the subject matter of a declaration. In respect of costs I propose that there be no order for costs in the appeal. At first instance Sun Insurance should pay Mukesh Chandra's costs including those in HBC 50 of 2007L, assessed at $4000. The achievement of results is so inconsistent that it does not justify costs in the appeal. Both sides have wrestled with complex legal problems and have tried to assist the Court.
    
27. I find it surprising that in view of paragraphs 71 and 72 in the Supreme Court judgment in Sun Insurance v. Pranish Prakash Chand (cited above) that Mr Maopa did not file a Respondents Notice cross appealing the dismissal in the Court below of the claim in respect of the driver of vehicle no.AC133. If Mr Maharaj noticed the point it is not surprising that he did not allude to it.
    
28. The issue in respect of vehicle number AC 133 was raised fairly and squarely in the Originating Summons. It is for this Court to apply the correct law to the facts. I do not think that a Respondent's Notice is required to enable this Court to do justice. If I thought it was necessary I would give appropriate leave.
    

Izaz Khan, JA

29. This is an appeal by Sun Insurance Company Limited against Mukesh Chandra from the decision of His Lordship Inoke, J who found for the plaintiff Mukesh Chandra and made the following orders:
    
    • (i) that the defendant, Sun Insurance was liable to pay this judgment the sum of $233,295.00 plus interest and costs in the sum of $3,500.00 to Mukesh Chandra;
      
    • (ii) and order that Sun Insurance pays the said sum; and
      
    • (iii) that it also pays the cost of that action by Mukesh Chandra.
      
30. The third party insurer, Sun Insurance was entitled to defend Mukesh Chandra's action for orders in relation to default judgment he had obtained against the insurer.
    
31. The Trial Judge found the following facts:
    

"The Plaintiff was a fare paying passenger in a van registration number BU 802 that was insured with Sun Insurance. He was injured when the van collided with a second vehicle, AC133, also insured with Sun Insurance. The Plaintiff obtained judgment against the drivers and the owners of the two vehicles and is pursuing enforcement of his judgment against those persons in other proceedings. Action HBC 50/2007 is the action in which the Plaintiff obtained judgment against the drivers and owners of the two vehicles. The First and Second Defendants in that action were the driver and registered owner, respectively, of van BU802. The Third and Fourth Defendants were the driver and registered owner of vehicle AC133, respectively. The Plaintiff's present application is to obtain the above declarations from the Court and hopefully secure payment from the insurer".

32. As far as vehicle AC133 is concerned, the driver was unlicensed. However, that is not the end of the matter. I agree with the judgment and reasons of William Marshall JA on those issues.
    
33. As for the other vehicle, namely BU802 the trial Judge held that Sun Insurance was liable in damages.
    
34. The appellant Sun Insurance has argued that the trial Judge was wrong because the passenger in the vehicle was not a third party so as to attract liability for insurance. It was argued that a third party could never be liable for insurance unless the only exception which is encapsulated in paragraph (b) of Subsection (1) of Section 6 is applicable.
    

As is explained in the judgment of the Supreme Court in Sun Insurance v. Pranish Prakash Chand (supra) at paragraph 29, the first statutory scheme in the United Kingdom bringing in compulsory third party insurance was the Road Traffic Act 1930. As paragraph 29 of the judgment in Sun Insurance v. Pranish Prakash Chand explain, although passengers carried in the insured's vehicles are third parties in respect of the insurer and the insured, a policy decision of the United Kingdom legislature was made to exclude a number of what are (conceptually) third party claims from the scheme of insurance. They are listed in the proviso to section 36(1)(b) of the 1930 Act. The most important of these relates to passengers carried in the insured's vehicle. It is at proviso (ii).

35. Eventually judicial calls for the repeal of this exclusion lead in the 1970's to the legislature in the United Kingdom, passing amending legislation. When this was passed in the United Kingdom the legal framework was amended and passenger liability was included in the risks requiring to be covered by compulsory third party insurance.
    
36. In Fiji, Cap 177 first made its appearance as Ordinance No.19 of 1948. When the United Kingdom included passenger liability within the third party risks that must be covered, it provided a problem for places like Fiji. Being less developed it was felt that if the full passenger liability amendment was brought into the law of Fiji it would result in unaffordable insurance premiums. There was a risk of more people defying the law and driving without insurance. So a decision was taken for there to be a token amendment. The Fiji legislature enacted a right to a small portion of what the insurance companies would be required to pay out if passengers in the insured's vehicle were fully included within compulsory third party insurance.
    
37. This amendment as material says:
    

"Section 6 – (1) In order to comply with the provisions of this Act, a policy of insurance must be a policy which - ... Provided that – ...

(b) such policy shall not be required to cover liability in excess of $4,000 for any claim made by or in respect of any passenger in the motor vehicle to which the policy relates or in excess of $40,000 for all claims made by or in respect of such passengers. The amount herein specified shall be inclusive of all costs incidental to any such claim or claims".

38. Mr S Maharaj for Sun Insurance argues that since Mukesh Chandra was in a passenger van being used to carry passengers for hire and reward this token maximum payment does not apply to him.
    
39. That is not my reading of the section 6(1)(b) amendment. It simply provided some cover for which the insurer would be liable for respect of passengers carried in the insured's vehicle rather than none at all. It applies to all third party policies in Fiji. The fact of the vehicle being used for hire or reward is irrelevant for this purpose.
    
40. Therefore Mr Mukesh Chandra is entitled to recover $4000 from Sun Insurance in respect of their liability under the policy covering vehicle number BU 802. But although this should be declared in the order to be made by this Court, since no element of double damages can be awarded it cannot be ordered on top of $233295 being the total damages that Mukesh Chandra can recover under any or all heads of claim.
    
41. But the main point of this appeal in respect of vehicle number BU 802 is that the learned judge in the Court below erred in failing to find that in Fiji Cap 177 section 6(1)(a) proviso (ii) continues to exclude liability for passengers carried in the insured's vehicle from the bundle of third party risks that must be compulsorily insured by a motor vehicle third party insurance policy. The only exception is the token amount of $4000 set out above.
    
42. I agree with the orders proposed by William Marshall JA.
    

Kankani T. Chitrasiri, JA

43. I agree with the judgment and reasons of William Marshall JA in respect of vehicle number AC 133 and with the judgment and reasons of Izaz Khan JA in respect of vehicle number BU 802. I also agree with the orders proposed by William Marshall JA.
    

William Marshall, JA

44. The Orders of the Court
    

(1) The orders in the Court below are set aside.

(2) In respect of their liability to third parties under their policy in respect of vehicle AC 133, Sun Insurance Company Limited (Appellant) do pay Mukesh Chandra (Respondent) the sum of $233295.

(3) A declaration that Sun Insurance Company Limited (Appellant) in respect of their liability to third parties under their policy in respect of vehicle BU 802 would have been liable to pay Mukesh Chandra (Respondent) the sum of $4000 which sum is included in the sum to be paid under (2) above and therefore does not fall to be paid twice by Sun Insurance Company Limited.

(4) Interest at 6% for the period from 10th September 2008 until the date of these orders on the sum of $233295 to be paid by Sun Insurance Limited (Appellant) to Mukesh Chandra (Respondent).

(5) There be no order as to costs of the appeal.

(6) In respect of costs at first instance and in respect of action HBC 50 of 2007L Sun Insurance Company Limited (Appellant) do pay Mukesh Chandra (Respondent) costs assessed in the sum of $4000.

.........................................................
Hon. Justice William Marshall
Justice of Appeal

.....................................................
Hon. Justice Izaz Khan
Justice of Appeal

.........................................................
Hon. Justice Kankani T. Chitrasiri
Justice of Appeal