CROSS-BORDER MOTOR ACCIDENTS AND THE MOTOR VEHICLES

Citation(1998) 10 SAcLJ 370
Date01 December 1998
Published date01 December 1998

(THIRD-PARTY RISKS AND COMPENSATION) ACT

This article examines the recent Court of Appeal decision in Nippon Fire & Marine Insurance Co Ltd v Sim Jin Hwee, the ramifications of the decision and Parliament’s response to the decision.

ON 3 July 1998, the Motor Vehicles (Third-Party Risks and Compensation) (Amendment) Act 1998 (“1998 Amendment Act”) received the Presidential assent.1 The 1998 Amendment Act was enacted to “ensure that Singapore registered and insured vehicles travelling into West Malaysia are covered for third party liability insurance and that the benefits of third party victims of road accidents caused by the use of Singapore vehicles in West Malaysia are preserved.”2

The impetus for the 1998 Amendment Act was the decision of the Singapore Court of Appeal in Nippon Fire & Marine Insurance Co Ltd v Sim Jin Hwee3 (the Nippon Fire case). The decision in the Nippon Fire case had great impact on the Singapore motor insurance industry as previously,4 motor insurers had assumed that the benefits in the Motor Vehicles (Third-Party Risks and Compensation) Act extend to victims of road accidents in West Malaysia caused by the use of Singapore registered and insured vehicles. To fully appreciate the difficulties engendered by the Nippon Fire case, it is necessary to examine in detail the Nippon Fire case.

I THE NIPPON FIRE CASE

In the Nippon Fire case, the Court of Appeal held that a person injured in a motor accident on a Malaysian road does not have a statutory right

to recover directly against the insurer under section 9(1)5 of the Motor Vehicles (Third-Party Risks and Compensation) Act (the Act) and may not rely on section 10(1)6 of the Act.

The facts of the case may be shortly stated. In early December 1991, a Singapore registered motor vehicle driven by one Lim met with an accident on the Malaysian side of the Singapore-Johore Causeway. Sim, who was a passenger in the vehicle driven by Lim, suffered serious injuries which left him partially paralysed. At the time of the accident, the vehicle was registered in the name of Leong. Leong7 was the hirer of the vehicle under a hire-purchase agreement entered with OCBC Finance Ltd. Leong’s use of the vehicle was insured by the appellants, Nippon Fire & Marine Insurance Co Ltd (“the insurer”). The motor insurance policy issued by the insurer to Leong provided insurance cover for use of the vehicle in “West Malaysia, the Republic of Singapore, and that part of Thailand within 50 miles of the border between Thailand and West Malaysia.”

Sim commenced proceedings against Lim8 and Leong for damages in negligence for his injuries and obtained judgment against Leong,9 who by then was a bankrupt.10 Sim then sued11 the insurer seeking payment of

the judgment sum awarded against Leong. The insurer denied liability on several grounds, viz., (a) the policy did not cover an accident occurring in Malaysia; (b) title to the vehicle had passed to Wong by way of a sale; (c) the vehicle was driven by a person not authorised by Leong to drive; and (d) it had not been notified of Sim’s action against Leong as required under section 9(3)(a) of the Act.

The Court of Appeal, in agreeing with the High Court’s findings on grounds (b), (c) and (d), said that these three grounds “have little merit in them and are principally questions of fact or settled by authority … The learned judge found in favour of the respondent on all these matters. They do not merit discussion in this judgment.”12

The Court of Appeal upheld ground (a). The court identified the issue as one of pure construction of section 9(1) of the Act. According to the court, the words “any such liability as is required to be covered by a policy under section 4(1)(b)” in section 9(1) meant a policy covering liability “in respect of death of or bodily injury to any person caused by or arising out of the use of the motor vehicle”, and that although the word “use” as defined in the Act is not restricted to use on Singapore roads, it means use on Singapore roads only by reason of the presumption that statutes are not to be interpreted as having extra-territorial effect unless expressly so provided. In adopting such a construction of the Act, the Court of Appeal differed from Rubin J who had, at first instance, held that the Act conferred benefits on Sim notwithstanding that he was injured in a road accident which occurred in West Malaysia.

The Court of Appeal took the view that “it would be absurd to give [the Act] extraterritorial effect for to do so would mean that an owner of a motor vehicle to comply with section 3 of the Act must have cover on roads all over the world.”13

The upshot of the decision in the Nippon Fire case is that “liability” referred to in section 9(1) of the Act is a liability arising out of the use of a motor vehicle on Singapore roads. Thus, the respondent could not rely on section 9(1)14 or section 10(1)15 of the Act to sue the insurer directly. On section 10(1) of the Act, the court focused on the words “any policy issued for the purposes of this Act” and concluded that “by

necessary implication [the words] must refer to third party liabilities which fall within section 4(1)(b) of the Act. Since the respondent’s claim falls outside section 4(1)(b), section 10(1)(a) of the Act would not apply.”16

Although the Court of Appeal ruled that a third party injured in a road accident in West Malaysia caused by a Singapore registered and insured motor vehicle has no right, under the Act, to sue the Singapore insurance company (which has insured the use of the motor vehicle in West Malaysia), the ruling does not affect the victim’s right to recover indirectly from the insurer if the insurance policy is valid as a contract at the date of judgment. This indirect recovery route exists because the tortfeasor will be able to seek an indemnity under the insurance policy for any damages which the tortfeasor is adjudged to be liable to such a third party. This indirect recovery route involves the insured tortfeasor claiming against the insurance company on the contract evidenced by the motor insurance policy. The monies recovered by the insured tortfeasor under the motor insurance policy will be available for payment to the third party provided the tortfeasor is solvent. The indirect recovery route does not secure to the third party the benefits under the Act such as the benefits in section 7, 8, 11, 13 and 14 of the Act. Where the insured tortfeasor is insolvent, the monies obtained under the motor insurance policy will have to be distributed in accordance with the general insolvency law with the result that the third party may not obtain full compensation for the injuries caused to him.

Thus, as a result of the Nippon Fire case, a victim of a motor accident in West Malaysia caused by the use of a Singapore registered and insured motor vehicle would, in a case where the tortfeasor is insolvent, have to obtain the assistance of the Official Assignee in Singapore to commence an action (in the name of the insolvent insured tortfeasor) in contract against the Singapore insurance company which insured the use of the motor vehicle in West Malaysia. However, a contractual action by the insolvent insured against the insurance company may not result in the third party recovering compensation in full or at all since the third party’s claim against the insolvent insured is an unsecured claim.17

II COMMENTS ON THE NIPPON FIRE CASE

Although the Court of Appeal accepted that the Act was enacted “essentially to protect … third parties, i.e., road accident victims”,18 the court restricted the scope of section 4 of the Act to the use of motor

vehicles in Singapore only. In restricting the scope of section 4 of the Act to the use of motor vehicles in Singapore, the court relied on the presumption that unless clear words are used, statutes are not intended to have extra-territorial application.

With all the respect which one would accord to any decision of the Court of Appeal, it is debatable whether the public interest is served by restricting the scope of section 4 of the Act to the use of motor vehicles in Singapore only. In this regard, it is worthy of note that, in Parliament, the Minister for Communications stated that “the Court’s ruling [in the Nippon Fire case] is not in the public interest as it means that victims of motor accidents have to resort to indirect means in order to claim against the insurers. This will cause victims and the estates of deceased victims unnecessary expense and delay. In [the Nippon Fire] case, it would reduce the amount of damages payable to the injured passenger because the insurance monies will have to be shared with other creditors of the bankrupt insured.”19

It is arguable that the benefits of the Act should extend to a victim of a motor accident which occurred in West Malaysia as the insurance policy itself covered the use of the motor vehicle in Singapore and West Malaysia. After all, if by the terms of an insurance policy issued to cover the use of a Singapore registered motor vehicle, a Singapore insurer20 agrees to insure the use of the motor vehicle on West Malaysian roads, a finding of liability against the insurer will not prejudice it in any way.21 Thus, there would have been justification for the court to hold that the benefits of the Act accrue to any person who is injured or killed (whether in Singapore or in West Malaysia) by the use of a motor vehicle which is insured for third party liability as required by the Act. In other words, where a motor vehicle used in Singapore is insured against third party liability in accordance with the Act, the benefits of the Act22 accrue to the victims of road accidents caused by the use of that motor vehicle provided the accident occurs in a territory covered by the insurance policy. Since motor insurance policies issued in Singapore cover the use of the insured motor vehicle in Singapore and West Malaysia...

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