Pacific & Orient Insurance Co Bhd (formerly known as Pacific & Orient Insurance Co Sdn Bhd) v Motor Insurers' Bureau Of Singapore

• Jurisdiction: Singapore
• Judge: Quentin Loh J
• Judgment Date: 04 October 2012
• Neutral Citation: [2012] SGHC 202
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 808 of 2011 and No 580 of 2011
• Published date: 11 June 2013
• Year: 2012
• Hearing Date: 06 July 2012
• Plaintiff Counsel: Harry Elias SC, Francis Goh Siong Pheck and Tan Huilin Bernice (Harry Elias Partnership)
• Defendant Counsel: Andre Yeap SC, Lai Yew Fei and Sharmila Jit Chandran (Rajah & Tann)
• Subject Matter: Insurance,motor vehicle insurance,compulsory,companies,regulation,Contract,contractual terms
• Citation: [2012] SGHC 202

Quentin Loh J (delivering the judgment of the court):

There are two Originating Summonses before me, one being OS No 808 of 2011 (“OS 808”) and the other, OS No 580 of 2011 (“OS 580”). In OS 808, Pacific & Orient Insurance Company Berhad (“P&O Insurance”) is the Plaintiff while the Motor Insurers’ Bureau of Singapore (“MIB”) is the Defendant. P&O Insurance was formerly known as the Pacific & Orient Insurance Company Sendirian Berhard. In OS 580, the positions are reversed where MIB is the Plaintiff while P&O Insurance is the Defendant.

These proceedings are mirror applications which revolve around the essential question of whether P&O Insurance, which carries on business as an insurance company in Malaysia with no office in Singapore, is liable to satisfy a Singapore judgement obtained by an injured pillion rider (or by his estate in the event of his death), against its policy holder who is the rider of the motorcycle, in a traffic accident which occurred in Singapore.

This is in turn contingent upon the obligations which P&O Insurance has undertaken under a 15 September 1975 Agreement (“Special Agreement”) with MIB.

Background Facts

The following facts are not disputed. On 21 December 2005, Ravi a/l Mariappen (“Ravi”), a Malaysian, was riding his Malaysian-registered motorcycle with Ganesan a/l Govindaraj (“Ganesan”) riding pillion along Benoi Road, Singapore, when there was a collision with a lorry driven by Mohammel Hoque Aminul Hoque (“the lorry driver”).

Ganesan, who was injured, commenced Suit No 460 of 2008 (“Suit 460”) against Ravi. The lorry driver was subsequently added as a second defendant. On 27 July 2010, final judgment in the sum of S$243,983.68 was entered in Ganesan’s favour. Liability was apportioned with Ravi bearing 75% and the lorry driver bearing 25% of the blame for the accident.

Ganesan’s lawyers had notified MIB on 17 July 2008 that they had commenced proceedings against Ravi and that they had informed P&O Insurance, who had issued a policy dated 12 April 2005 to Ravi in Malaysia, of this. However, P&O Insurance had disclaimed liability on the ground that Ravi had not taken out any insurance for pillion rider cover.

MIB took the position that P&O Insurance was an “Insurer Concerned” under the Special Agreement that was binding on P&O Insurance and that the latter should settle the judgment obtained by Ganesan. P&O Insurance disagreed that it was an “Insurer Concerned” and refused to settle the judgment. The parties therefore commenced these proceedings seeking the court’s ruling on this and other related issues.

Relevant History of the Motor Insurers’ Bureau

It bears repeating that the ubiquitous motor vehicle, indispensable to modern life, has an unfortunate inherent capacity to injure, maim or cause the death of other road users or pedestrians as well as inflict property damage. All too often, more than one category of harm is caused. Hence the enactment of social legislation, not long after the widespread use of motor vehicles, to ensure that no vehicle is on the road without compulsory insurance cover for personal injury or death to a third party arising out of the negligent use of the vehicle: see the English Road Traffic Act of 1930 (c 43) (UK). The equivalent legislation in Singapore is the Motor Vehicles (Third Party Risks and Compensation) Act (Cap 189, 2000 Rev Ed), (“MV(TP)A”). Given the contractual nature of insurance, it would be of no comfort to such a victim if, for one reason or another, the insurer was entitled to deny liability or cover to the vehicle owner or driver it has insured. This deficiency was addressed by the MV(TP)A which essentially provided that an insurer who is entitled to avoid liability under the policy to indemnify the vehicle owner and/or driver, must nonetheless first satisfy any judgment for death or personal injury entered against its insured owner and/or driver. It is then entitled to recover that sum from its insured. This allowed the victim, provided it gave due notice of his claim, a direct cause of action against the insurer.

However, there were still cracks through which claims could fall through and victims were left without compensation. For example, what if for one reason or another, there was no effective insurance cover? What if the driver fled the accident scene and the victim was so severely injured or even killed that the vehicle and its driver could not be traced? What happens if the insurer became insolvent?

The first Motor Insurers’ Bureau was established in England in 1946. It was a fund financed by all motor insurers in the country to pay compensation to road traffic victims who were unable to recover any compensation for their injuries or claims. This same model was subsequently adopted in Hong Kong, Malaysia and Singapore.

Malaysia set up its Motor Insurers’ Bureau of West Malaysia, (“MIBWM”), in 1968 and it was based on the English model. Singapore set up its Bureau in 1975 and it was based on the MIBWM model.

MIB is an independent public company incorporated on 25 January 1975. It is set up and funded by all general insurance companies and Lloyd’s Underwriters carrying on motor business and operating in Singapore. Among its objects in its Memorandum of Association (“MOA”) are, at clause 3: (a) to enter into and give effect of any agreement or agreements and any amendments thereto between the Bureau and any Government Department or duly authorised Government Representative of Singapore for the purpose of ensuring as far as possible that the operation of the Motor Vehicles (Third-Party Risks and Compensation) Act (Chapter 88) and any statutory modifications thereto and re-enactment thereof and any amendments that may be made thereto shall be just and equitable and achieve to the fullest extent possible the objects for which they were promulgated, and in furtherance of the above objects; (b) to make compassionate payments or allowances to persons injured and to the dependents of persons killed through the use of motor vehicles as defined in the Motor Vehicles (Third-Party Risks and Compensation) Act (Chapter 88) or any statutory modifications thereto and re-enactment thereof;

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(f) to enter into binding agreements with its members or any of them ... for such other purposes as may be conducive to efficient, economical or expeditious discharge of its obligations and furtherance of its objects.

Article 13 of MIB’s Articles of Association provides as follows:

Every member shall be bound to further to the best of its ability the objects, interests and influences of the Bureau and shall observe these Articles and any regulations which may be promulgated from time to time for the administration of the Bureau and any Agreements which may be entered into between the Bureau and such member.

On 22 February 1975, two agreements were entered into: First, MIB entered into an agreement with the Minister of Finance. This was known as the Principal Agreement. The Principal Agreement sets out the obligations of the MIB to compensate victims of road accidents under certain conditions. These were basically where there was no effective insurance for the vehicle involved, where the driver of the vehicle could not be traced or where the insurer had become insolvent. Second, MIB entered into an agreement with all insurance companies and Lloyds Underwriters which sold motor insurance policies in Singapore, (“motor insurance business”). This was known as the Domestic Agreement. The Domestic Agreement specifies the situations and conditions under which an insurance company is liable to compensate victims of a road accident.

When any subsequent insurer applied for a licence from the Monetary Authority of Singapore, and part of its insurance portfolio was motor insurance business, it was a condition of its licence that it had to sign an agreement with the MIB and agree to the terms of the Domestic Agreement.

The underlying rationale of a scheme like the Motor Insurers’ Bureau is to fulfil the social aim of providing compensation for all road accident victims where for some reason there was no effective insurance policy to cover the liability and it was also to help spread the risk among all insurers issuing motor insurance policies within the jurisdiction in cases of untraced drivers and insolvent insurers. Hence MIB had the right to call for contributions from all insurers to meet its liabilities. In addition, the concept of the “Insurer Concerned” was a practical measure adopted to save administrative costs and relieve the MIB from the need to have qualified staff to investigate, process and deal with or settle claims of such victims.

When the MIBWM was set up in Malaysia in 1968, the free flow of traffic between Singapore and Malaysia caused a problem. Because Singapore vehicles could enter West Malaysia freely, MIBWM found it had to compensate victims of road accidents on West Malaysian roads caused by Singapore vehicles without a right to seek recovery because its equivalent of the Domestic Agreement was only signed with insurers registered in Malaysia. Malaysian insurers were thus left to shoulder the entire financial burden in relation to Singapore vehicles travelling on Malaysian roads. Consequently, pursuant to discussions between the regulators on both sides of the Causeway, Singapore insurers signed special agreements to be bound as if they were bound by MIBWM’s Memorandum and Articles of Association and their equivalents of the Principal and Domestic Agreements. When Singapore set up the MIB seven years later in 1975, there was therefore already a precedent to deal with the problem of Malaysian vehicles on Singapore roads. Hence motor insurers transacting motor insurance business on both sides of the Causeway had to enter into agreements with the MIB or MIBWM respectively.

Pacific Insurance and the MIB

P&O Insurance carried on its...