[1985] LRC (Comm) 135

HIGH COURT OF SOLOMON ISLANDS

TRADING CO (SOLOMONS) LTD

v

SUN ALLIANCE INSURANCE LTD

High Court:
Daly, C.J.
16th June 1983

Insurance - Third Party Policy - Whether owner and driver of insured vehicle may recover under the policy of insurance - Motor vehicle (Third Party Insurance) Act 1972 - Several liability of owner and driver for injury caused to any person, even the insured driver - Owner entitled to claim an indemnity from insurer for injury negligently caused to driver.

On the 27th October 1981 a driver, employed by the plaintiff company, was injured in a road accident caused by defective braking system of a bus he was driving. The plaintiff was held to be responsible for the accident and damages were assessed at $8,000. At the relevant time the plaintiff had taken out a policy of insurance with the defendant company. The policy, headed "Third Party Policy", was drafted to comply with the Motor Vehicles (Third Party Insurance) Ordinance 1972 (which later became the Act of the same name) and was expressed to cover:

. . . the owner and any other person who drives the motor vehicle, against all liability . . . incurred by the owner and/or the driver in respect of the death of or bodily injury to any person caused by or arising out of the use of the Solomon Islands."

In defence to an action brought by the plaintiff for an indemnity in respect of the $8,000 paid to the driver, the defendant (through its solicitors) contended that the policy insured the owner and driver against damage they might cause to third parties but not to themselves: it was a third party policy covering only injury to third parties. The plaintiff, however, relied upon section 5(1) of the Motor Vehicles (Third Party Insurance) Act 1972, which stated that every policy was required to:

. . . insure the owner of the motor vehicle mentioned in the policy and any other person who at any time drives the motor vehicle ... jointly and each of them severally against all liability incurred by that owner and that person jointly or by either of them severally in respect of the death or of bodily injury to a person caused by or arising out of the - use of the motor vehicle in the Solomon Islands."

HELD: Judgment for the plaintiff.

The policy issued by the defendant for the purposes of what became the Motor Vehicle (Third Party Insurance) Act 1972 had to be read to incorporate liability as set out in that Act: section 5(1) referred to the several liability of an owner of a vehicle in respect of injury to a person; that could, on an unrestricted reading of the Act, refer to the driver of the bus in the instant case. In the absence of any express words of restriction, it was incorrect to construe a policy which insured an owner against liability to any person to refer only to any person other than a person who must himself be insured. (See pp. 138 and 141, post.)

Digby v General Accident Corporation [1942] 2 All ER 331 followed. Cooper v Motor Insurers Bureau [1983] 1 All ER 354 not followed.

Cases referred to in judgment:
Barnet Group Hospital Management Committee v Eagle Star Insurance Co [1960] 1 QB 107, [1959] 3 WLR 610, [1959] 2 Lloyd's Rep 335, [1959] 3 All ER 210, 123 JP 521, 103 SJ 619
Cooper v Motor Insurers Bureau [1983] 1 WLR 592, [1983] 1 All ER 354, [1983] RTR 412, 127 SJ 242
Digby v General Accident Corporation [1943] AC 121, [1942] 2 All ER 331, HL

Legislation referred to in judgment:
Motor Vehicles (Third Party Insurance) Act 1972, sections 5 and 8

United Kingdom:
Road Traffic Act 1930, section 35
Road Traffic Act 1972, sections 143 and 145

Action
Trading Co (Solomons) Ltd commenced proceedings in the High Court of the Solomon Islands (civil case no. 15 of 1983) against Sun Alliance Insurance Ltd, claiming an indemnity under the terms of a policy of insurance issued by the defendant in favour of the plaintiff. The facts appear in the judgment.

F. Waleilia for the plaintiff.
The defendant did not appear and was not represented.

16th June 1983

DALY, C.J.:

In this case the Court is asked to determine a number of questions arising from the interpretation of a policy of insurance.

The case arises in this way. The plaintiff, Trading Co (Solomons) Ltd, were the owners of a Hino motor bus ("the bus"). The driver of the bus was employed by the plaintiff under a contract of employment. Whilst engaged on his employment on 27th October 1981 the driver was involved in an accident with the bus. As a result the driver suffered injuries. In this Court in civil case no.20 of 1982, the driver succeeded in establishing that the plaintiff was liable to compensate him for his injuries. This liability was 100% and was incurred on the basis that the plaintiff was responsible for a defect in the braking systems of the bus. Damages in excess of $8,000.00 were awarded to the driver against the plaintiff.

On 27th October 1981 there was in force in relation to the bus, a policy of insurance ("the policy"). The insurer under the policy was the defendant, Sun Alliance Insurance Ltd. The plaintiff, under a trade name, was described as owner. The policy is headed "Third Party Policy" and its preamble recites that a premium has been paid "for the issue . . . of a third - party policy for the purposes of the Motor Vehicles (Third Party Insurance) Ordinance 1972, as amended in relation to the motor vehicle described herein. . ." The body of the policy reads:-

"Such insurer hereby agrees that during the period commencing and terminating as shown above, and during any period for which the insurer may renew this policy, the insurer shall insure the owner and any other person who drives the motor vehicle, whether with or without the authority of the owner, against all liability (except a liability referred to in sub-section (3) of section 5 of the said Ordinance) incurred by the owner and/or the driver in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle in any part of the Solomon Islands."

In the proviso there is a limitation of liability to $8,000.00.

When action was commenced against the plaintiff it sought to obtain an indemnity from the defendant as to $8,000.00. But the defendant replied that "as there is no cover provided under the policy for the driver of the vehicle involved in this accident" they were unable to accept any responsibility. The plaintiff commenced these proceedings to determine its rights under the policy. The defendant did not appear at the hearing but through its solicitors stated that it "adopts the view that policy insures owner and driver against damage they do to third parties but not to themselves." This "view", perhaps because it was conveyed by telegrams is, in fact, an inaccurate representation of the nature of the case as it cannot be suggested that the driver did damage to himself in the light of the finding of this court that the driver's injuries were occasioned entirely by the fault of the plaintiff.

What I take it that both these statements made on behalf of the defendant mean is that, as both the owner (the plaintiff) and the driver are insured under the policy then they are not "third parties"; but, as it were, second parties. The first party is the insurer. As the policy is said to be "a Third Party Policy" then only liability to third parties is covered and, therefore, there is no insurance against liability to an insured person himself in his capacity as a second party.

Mr. Waleilia in his fair and most helpful submissions for the plaintiff accepts that there is authority for such an approach in another jurisdiction but adds that we must look at the express terms of our own Act and interpret those terms and not be misled by cases on rather different legislation. That submission had considerable force.

I start then with a consideration of our Act, the Motor Vehicles (Third Party Insurance) Act 1972, as it is now known, ("the Act"). Section 8(1) of the Act provides:-

"Subject to the provisions of this Act, it shall not be lawful for a person to use, or cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person, or that other person, as the case may be, such a policy of insurance or such a security as complies with the requirements of this Act."

It will be noted that this section does not in fact refer to a "third-party policy". To find out what policy "complies with the requirements of the Act" one turns to section 5(1). This provides:-

"5. (1) In order to comply with the requirements of this Act, a policy of insurance-

(a) shall be issued by a licensed insurer, and

(b) subject to the next succeeding sub-section, where it is issued in relation to a particular motor vehicle, shall insure the owner of the motor vehicle mentioned in the policy and any other person who at any time drives the motor vehicle, whether with or without the authority of the owner, jointly and each of them severally against all liability incurred by that owner and that person jointly or by either of them severally in respect of the death of or bodily injury to a person caused by or arising out of the use of the motor vehicle in the Solomon Islands."

Sub-section (2) enables a limitation of liability such as was incorporated in the proviso to the policy. It is paragraph (b) of sub-section (1) which is of importance in this case and it therefore requires careful analysis.

Before I commence that process I make one observation. It will be seen that the terms of the policy are in different terms to the Act; the policy merely refers to liability "incurred by the owner and/or the driver" whereas the Act expressly states that the owner and driver are insured "jointly and severally" against liability incurred by each of them "jointly or by either of them severally". In addition the policy states that the liability is in respect of death or injury "to any person"; the Act refers to death or injury "to a person", (my emphasis). In my judgment, as the policy is expressed to be "for the purposes of the Act" its terms must be read so as to incorporate liability as set out in the Act. Therefore the words of the Act must be looked at rather than the looser words of the policy to decide the exact nature of rights and liabilities under the policy.

To turn to the words of sub-section 5(1), they, too, do not refer to a third party policy although the remaining four sub-sections do so refer. Perhaps of more significance, it will be observed that paragraph (b) refers to a policy "issued in relation to a particular motor vehicle" rather than in relation to a particular form of use of that vehicle. As we have seen, the paragraph goes on to lay emphasis by repetition on the fact that the insurance is joint and several and it is insurance against joint and several liabilities. It would seem to follow that, if the owner is himself severally liable, that has no effect on the several liability of the driver or, indeed, on the insurer to indemnify each of them if they were to be found severally liable in respect of injuries to another person arising out of one accident. It would also seem to follow that if the driver is severally liable by himself that can have no effect on the position of the owner. Indeed why should it? The paragraph contemplates a vehicle taken without authority and it is difficult to see why the owner should be liable for, for example, the negligent driving of a thief. That is something over which he has no control and which he has not permitted. Equally the driver is not to be held responsible for something over which he has no control and has not permitted such, as we have in this case, the provision to him of a defective vehicle by the owner. If as a result injury occurs to the driver there would be "injury to a person caused by or arising out of the use of the motor vehicle in Solomon Islands". Thus on an unstrained reading of paragraph (b) of sub-section 5(1) every condition for the indemnity provided in the insurance policy to come into effect would appear to be present in this case. These conditions are:-

(a) The policy was in relation to the bus;

(b) the owner (the plaintiff) was severally insured;

(c) the owner was severally liable in respect of bodily injury to a person, that is the driver (as this Court has held);

(d) the bodily injury to the driver was caused by or arising out of the use of the bus in Solomon Islands.

To hold that, because the driver is also jointly and severally insured and might himself in certain circumstances claim indemnity under the same policy, the insurers can disavow liability for his injuries caused by the fault of the owner is neither logical nor supportable by the words of the Act. The draftsman of the Act could, had this been the intended result, have used such words as "in respect of the death or bodily injury to any other person . . .". Or, as Mr. Waleilia suggests, he could have incorporated an express exclusion in section 5(3) where other liabilities are excluded. Applying then what I conceive to be the natural meaning of the words in section 5(1)(b) of the Act, I would, if that were all, reach a conclusion in favour of the plaintiff's submissions.

Nevertheless, as I have pointed out, in another jurisdiction different conclusions have been reached in similar circumstances and it is incumbent upon me to consider the cases to which I have been referred. In Digby v General Accident Coporation [1942] 2 All ER 331 ("Digby's case") an owner of a motor vehicle was injured due to the fault of her chauffeur. The owner held an insurance which indemnified her against sums which she might become legally liable to pay "to any person" for injuries caused "by, through, or in connection with the vehicle". A further clause extended the same indemnity to any person driving the vehicle with permission of the owner. The owner sued the chauffeur for damages. The latter sought indemnity from the insurers. In the House of Lords, two Law Lords were convinced by the argument that, put shortly, as this was a "third party policy", and the owner was not a third party therefore she was not a person who was making a claim within the terms of the indemnity clause. However the majority took the view that, in the absence of express words of restriction, the owner was "any person" making a claim for injuries and the chauffeur was entitled to be indemnified against that claim. At p331 (D) Lord Porter said:

"The company reply in the first place that the risks against which the authorised driver is protected are not specified in section 2(3) of the policy; that he is to be indemnified only in like manner to the policyholder; that to ascertain those risks recourse must be had to sub-section (1) under which the policyholder is, it is true, protected against a claim made upon her by any person; but that, as she cannot claim against herself, a claim 'by any person' cannot include a claim by the policyholder; and that consequently the authorised driver is not protected against such a claim. I do not think the conclusion follows from the premises. The authorised driver is to be indemnified 'in like manner' to the policyholder not merely against such claims as could be a made upon her. In my view, the true reading of sub-section (3) is that just as the policyholder is to be indemnified against any claim made upon her by a person other than herself, so the authorised driver is to be indemnified against any claim made upon him by a person other than himself."

The same could be said of our provision; the owner and the driver are each b to be indemnified by a claim made upon him by a person other than himself.

A similar natural reading was given to the words "any person" in the U.K. Road Traffic Act 1930 in Barnet Group Hospital Management Committee v Eagle Star Insurance Co Ltd [1959] 3 All ER 210. Section 35(1) of that Act provided that liability would be indemnified "in respect of the death of or bodily injury to any person caused by or arising out of the use of a vehicle on a road". Of these words Salmon, J. said:-

"[They] are as wide as they can be and I see no reason for cutting down their meaning".

But in the most recent case of Cooper v Motor Insurers Bureau [1983]1 All ER 354 Barry Chedlow, Q.C., sitting as a Deputy Judge of the English High Court reached a somewhat different conclusion. In that case a Mr. Killacky asked the plaintiff to test his, Mr. Killacky's, motorcycle. The plaintiff did so and was injured when the brakes proved defective. The question arose as to whether the liability of Mr. Killacky to the plaintiff should have been insured to comply with the terms of the U.K. Road Traffic Act 1972 which was in similar terms to the 1930 Act. This too, required insurance of user on the road in respect of liability "to any person". It was held that the liability of Mr. Killacky to the plaintiff need not be covered. The basis of the decision is contained in the following passage at page 357:-

"It seems to me that section 143 of the 1972 Act requires, on the facts of this case, that the plaintiff's user of the motor cycle should be covered against third party risks; the three parties here involved, in my views, are the insurers, the insured or his invitee, who is temporarily to be considered the insured, and third parties other than these two. It is the use, whether by the insured himself or his invitee, which has to be covered but the cover given to the invitee cannot give to the latter any greater right than the insured himself has and the insured has no such right himself. I consider that the only liability which falls to be covered under section 143(1) and 145(3)(a) is the plaintiff's liability to others. Mr. Killacky's liability to the plaintiff is not a liability which falls to be covered by the statute. If one supposes that the plaintiff had a policy covering him whilst riding Mr. Killacky's motor cycle but Mr. Killacky had none, if the plaintiff's arguments are correct, an offence would have been committed because Mr. Killacky would have had no policy complying with section 143(1) to cover his liability to the plaintiff."

This really amounts to a resurrection of the argument which found favour of only two of the Law Lords in Digby's case. I must, with respect, say that I find the reasoning unconvincing. If the policy must insure the owner against liability to "any person" there seems to me no justification whatsoever in restricting those words to "any person other than a person who must himself be insured". I would have thought that the statement that "the cover given to the invitee cannot give to the latter any greater right than the insured himself has and the insured has no such right himself" was also inconsistent with Digby's case. The essence of that case was that the owner and driver had exactly the same right under the policy, that is, to be indemnified against claims by other persons whoever they might be.

There is no "greater right" in holding that a driver is to be indemnified against a claim by a policy-holder owner; he gets the same right as the policy-holder owner himself which, on my reading of the legislation, is to be indemnified against a claim made against him by all other persons. What the learned Deputy Judge is saying is that the owner policyholder should not get the same cover as the co-insured driver from the policy of insurance but should get something less, that, indemnity against claims by any person, other than the claims by a co-insured driver. Whilst the latter on the other hand, on the authority of Digby's case, would get indemnity against claims by any person including the owner. It is this restriction on these words "any person" which in my judgment cannot be justified on the basis of statutory interpretation, as was held in the earlier cases, and cannot be justified in logic.

Be that as it may, the terms of our statute refer expressly and clearly to the several liability of both owner and driver. There is, as well, less indication than in the United Kingdom legislation of the "third party" aspect of the policy and I, for my part, find the reasoning of the majority in Digby's case cogent in their rejection of the laying of any great emphasis upon this particular label.

Having read these decisions with care I find that the two earlier decisions support the approach and conclusion which I have adopted and reached in construing section 5(1)(a) of the Act and the later decision is one which I find unconvincing and, indeed, at odds with its predecessors.

Thus I find myself reinforced by those earlier decisions in the conclusion which I reached earlier in this judgment that the terms of the policy in this case as read with the terms of the Act of Solomon Islands are such that the plaintiff is entitled to an indemnity from the defendant as to $8,000.00 of the damages awarded against it in Civil Case no. 20 of 1982.

The first two questions in the summons raise questions of whether the existence of a contract of employment between the owner and driver effect a right to indemnity. This point was not argued and, indeed, subject to the express exclusion in section 5(3)(a) of the Act would appear to be irrelevant (see Digby's case). The answer to questions 1 and 2 are "Yes" and "No".

Question 3 is inaptly phrased. It reads:-

"In the circumstances disclosed by the affidavit evidence is the employee driver a third party within the meaning of the Motor Vehicles (Third Party) Insurance Act?"

I prefer not to answer a question which has as its basis a structure of first, second and third parties. This structure, in my view, does not greatly assist the analysis of rights and liabilities under a policy complying with the Act. I would say:-

"In the circumstances disclosed by the affidavit evidence, the liability for the bodily injury sustained by the employee driver is a several liability of the owner of the vehicle against which a policy of insurance complying with the requirements of the Act insures that owner and the fact that the employee driver might also be insured against liabilities under that policy is irrelevant."

Determination accordingly with costs of the plaintiff to be paid by the defendant.