The insured must maintain insurable interest for a valid insurance policy, and non-disclosure does not void liability to third parties.

[1] The Plaintiff is applying for a declaration that the motor insurance policy which it had issued to the 1st Defendant for a car with registration No. WJG7341 ("the car") is void and unenforceable after it was involved in an accident.

[2] The Plaintiff is seeking to void the policy on the basis that the 1st Defendant had sold the car and no longer had insurable interest in the car.

[3] According to the Plaintiff, the 1st Defendant was also in breach of his duty of good faith or ubberimae fides in not informing the Plaintiff, as insurer, that the car had been sold.

[4] The net effect of this would be to render a claim against the Plaintiff under s 96 of the Road Transport Act 1987 (" RTA ") to be unenforceable.

[5] On the 25 May 2014, the car driven by the 2nd Defendant was involved in a collision with a motorcycle bearing registration No. FP2624G ("the motorcycle").

[6] In that accident, the 3rd Defendant was riding the motorcycle with the 4th Defendant riding pillion.

[7] An action was commenced in the Johor Bahru Sessions Court Summons No. JA-A53KJ-835-12/2006 where the 3rd and 4th Defendants are suing the 1st and 2nd Defendants, as owner and driver of the car respectively.

[8] Notice under s 96 of the Road Transport Act 1987 had been given by the 1st and 2nd Defendants to the Plaintiff.

[9] The declaration sought here would be to the effect that the Plaintiff would not be liable to satisfy any judgment or order under s 96 RTA that the 3rd and 4th Defendants may obtain against the 1st Defendant who had insured the car with the Plaintiff.

[10] The reason for avoiding cover was that the Plaintiff had alleged that 1st Defendant had sold the car WJG7341 to the 2nd Defendant, who was driving the same when the accident occurred.

[11] Let us first look at the first part of the equation where the Plaintiff is seeking to declare the policy issued to the 1st Defendant to be void.

[12] The Plaintiff alleged that an arrangement under a "transfer of interest" had occurred between the 1st Defendant and the 2nd Defendant in 2012, where the 1st Defendant had supposedly sold the car to the 2nd Defendant.

[13] At that material time, the car was still subject to a hire-purchase with Malayan Banking Berhad.

[14] This would be better understood as a "sambungbayar" arrangement, where the hirer of a vehicle still under a hire-purchase loan would "sell" the vehicle, where the "buyer" would continue to pay the monthly instalments to the bank/financier until the hire-purchase facility has been fully settled.

[15] This would then entitle the hirer to be registered as the owner of the vehicle, who would then transfer the car to the "buyer".

[16] This is usually on the fervent hope and prayer that the "buyer" somehow manages to uphold his/her end of the bargain and that nothing like a road traffic accident involving the vehicle happens in the intervening period so as to cause the "buyer" to want to escape, exit or end the "sambungbayar" arrangement.

[17] All these will usually not be disclosed to the bank/financier, as technically, the hirer has no legal ownership over the vehicle to "sell" to the "buyer".

[18] The legal maxim of nemo dat quod non habet, which roughly translates to "no person can give what he does not own", applies.

[19] In more precise statutory form, this is found under s 27 of the Sale of Goods Act 1957 which is reproduced below:-

27. Sale by person not the owner

(1) Subject to this Act and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof, and