Cosmic Insurance Corporation Ltd v Ong Kah Hoe (trading as Ong Kah Hoe Industrial Supplies) and Another

• Jurisdiction: Singapore
• Judge: MPH Rubin J
• Judgment Date: 20 September 1997
• Neutral Citation: [1997] SGHC 237
• Docket Number: Suit No 950 of 1994,Suit No 950 of 1994 (Registrar's Appeal No 287 of 1995)
• Date: 20 September 1997
• Published date: 19 September 2003
• Year: 1997
• Plaintiff Counsel: Savliwala Din and Nigel Bogaars (Harry Elias & Partners)
• Citation: [1997] SGHC 237
• Defendant Counsel: Carolyn Tan and Au Thye Chuen (Tan-Au Associates)
• Court: High Court (Singapore)
• Subject Matter: Motor vehicle insurance,Payment made by insurer to third party not in discharge of policy holder's liability,Principles,Contract,Whether insurer entitled to restitution from policy holder for payment made to third party,Payment not made in discharge of policy holder's liability,Importance of liability of policy holder,Recovery provision,Restitution,Whether insurers able to recover payment made to third party from policy holder,Insurance,Lack of evidence to attach vicarious liability to policy holder,Remedies

The main issue in this case is whether under the terms of a motor vehicle insurance policy, the insurers can recover from the policy holder who is the owner of a motor lorry, sums paid out by the insurers to the estate of a third party road accident victim. The brief facts which gave rise to the dispute herein could be summarised as follows.

The first defendant Ong Kah Hoe who had been trading under the name and style of Ong Kah Hoe Industrial Supplies, was the owner of a motor lorry bearing registration number YB 9832A. The plaintiffs were the insurers of the said motor lorry under a commercial vehicle insurance policy (the insurance policy), covering inter alia, third party risks for the period between 12 November 1986 and 11 November 1987.

The second defendant in the suit herein, the brother-in-law of the first defendant, was at the material time the latter`s employee. He was admittedly employed by the first defendant as a driver for the first defendant`s business concerns. The second defendant`s driving licence was suspended by the relevant authorities for a period of one month with effect from 16 December 1986 and he was not therefore permitted to drive any motor vehicles under the licencing laws of Singapore.

On 18 December 1986 at about 12.30pm, a collision occurred along Loyang Avenue, Singapore, between a cyclist, one Aardjo Soekatmo Darmasto and the motor lorry of the insured. The cyclist was badly injured in the accident and died as a result. The second defendant was the driver of the said motor lorry at the material time although he was then under a driving ban.

A claim was in the event made by the estate of the deceased in Suit No 2138/88, only against the second defendant, the driver of motor lorry. The first defendant was not made a party to the proceedings in the said suit. The insurers who had received notification of the claim pursuant to s 9 of the Motor Vehicles (Third-Party Risks And Compensation) Act (Cap 189) (MVTP Act), having been informed that the second defendant was under disqualification at the material time, avoided liability. Judgment was subsequently entered by the administrators of the estate of the deceased on 30 June 1993, against the driver in Suit No 2138/88 (the second defendant in the current proceedings) for a sum of $158,508.00.

The parties appealed to the judge in chambers against the judgment dated 30 June 1993. The learned judge who heard both the appeals dismissed the second defendant`s appeal and allowed the appeal of the estate of the deceased by increasing the amount of damages payable. Suffice it if I said that the judgment sum on appeal together with interests and costs as settled, according to the plaintiffs, was $346,429.67.

The records show that the second defendant who faced three criminal charges, one under s 304A of the Penal Code and the other two under s 47(5) read with s 131(1)(a) of the Road Traffic Act (Cap 276) and s 3(1) read with s 3(2) of the MVTP Act, was convicted of these offences, fined and further disqualified from holding or obtaining class 3 of the driving licence for one year.

The plaintiffs who had avoided liability on the basis that the motor lorry was permitted to be driven by a person who was under a driving ban at the relevant period, was later required by the Motor Insurers` Bureau of Singapore (MIB) to pay the successful plaintiff in Suit No 2138/88 the sums awarded to them by the court. In this regard the direction from the MIB addressed to the solicitors for the insurers dated 1 March 1994 (AB-135) read, inter alia, as follows:

We wish to state that this is a claim which the insurers M/s Cosmic Insurance Corporation Ltd will have to settle as `Insurer Concerned` under the terms of the MIB Agreement without having to involve the Bureau.

The insurers having paid out the judgment sum, costs and the computed interests to the estate of the deceased cyclist, demanded repayment of the said sum from the first defendant herein ie, the insured, owner of the motor lorry as well as from the second defendant. Their claim, insofar as the issues canvassed in the present proceedings are concerned, is in the main contained in paras 8, 13 and 14 of their amended statement of claim and they are as follows:

8 By a judgment in Suit 2138/88 dated 30 June 1993 and order of court dated 4 August 1993, judgment was entered by the administratrix of the estate of the deceased against the second defendant for the sum of $273,915 for general and special damages and costs which was taxed for a total sum of $66,025.00 and interest in the sum of $6,489.67. The total paid (hereinafter referred to as `the judgment sum`) is therefore $346,429.67.

9 By reasons [of] the matters aforesaid, the first defendant is also liable vicariously to the plaintiffs in the said action in Suit No 2138/88 as the employer of the second defendant.

13 By virtue of an agreement dated 22 February 1975 between the Honourable Minister for Finance and the Motor Insurer`s Bureau of Singapore (the MIB Agreement) and/or by virtue of the MIB Agreement and/or a Memorandum of Agreement also dated 22 February 1975 (the Memorandum of Agreement), the plaintiffs were compelled to pay the Public Trustee the judgment sum.

14 The plaintiffs will contend that by the `Avoidance of Certain Terms and Right of Recovery` clause of the insurance policy, the first and second defendants are liable to repay to the plaintiffs all sums which they were compelled to pay to the Public Trustee and which they would not have been liable to pay but for the MIB Agreement and/or the MIB Agreement and/or the Memorandum of Agreement.

15 Further, or in the alternative, the Plaintiffs will contend that by virtue of the facts pleaded in the foregoing paragraphs of the statement of claim herein, the plaintiffs are entitled to recover from both defendants all sums paid by them to the Public Trustee by the restitutionary remedy of recoupment.

A default judgment is reported to be in place against the second defendant in this proceedings. He is apparently a person of little means and therefore whatever judgment obtained against him is of no value to the plaintiffs. The first defendant ie, the insured owner of the motor lorry against whom there was initially a default judgment, had since obtained leave to contest the plaintiffs` claim. His defence insofar as material appears in paras 4, 6(b), 7 and 8 of the defence and they read as follows:

4 Paragraphs 8, 9 and 10 of the statement of claim are denied. in Suit No 2138/88. The first defendant was not found liable vicariously to the plaintiff in the said action comprised in Suit No 2138/88 and was at all material times not a party but a stranger to the said suit.

6(b) The first defendant would aver at trial that the payment made by the plaintiffs fell outside the scope of the clause in the policy termed `Avoidance of Certain Terms and Right of Recovery` and thus the first defendant avers that in law and under the policy the plaintiffs have no right of recovery against the first defendant for the said payment to the Public Trustee pleaded in para 8 of the amended statement of claim.
7 In the premises paras 13, 14 and 15 of the amended statement of claim are denied. The first defendant would further rely at the trial of this action on (inter alia) cll 4 and 5 of the said MIB Agreement pleaded in para 13 of the amended statement of claim and aver further that cl 3 of the said MIB Agreement requires a judgment to be obtained `in respect of any liability which is required to be covered by a policy of insurance under the Act` and that no such judgment had been obtained as the liability of the first defendant to the plaintiff in Suit No 2138/88 (which is denied) would be that of an owner of a motor vehicle who causes or permits the use of his vehicle by an uninsured person and fails to ensure that the driver is properly insured.
8 The first defendant avers that even if the plaintiffs made...