Suffian CJ (delivering judgment of the Court):

On 1st June, 1963, lbrahim bin Kimpal was riding on a lorry, being driven by Tan Keng Hong, the first defendant employed by Yoong Leok Kee Corp. Ltd. (the second defendant) along the Kuala Pilah-Seremban Road. Going down a slope at the bottom of which was a bend, the lorry loaded with timber overturned because of brake failure and as a result Ibrahim was killed. The administrators of his estate (plaintiffs) won judgement for damages in negligence against the two defendants, but the learned trial Judge held that the insurers of the lorry, the New India Assurance Company Ltd. who had been made a third party, were not liable to indemnify the defendants, who would therefore have to pay damages out of their own pocket.

The defendants appeal to us.

During the course of the arguments for reasons stated then, we indicated to Counsel that we dismissed the appeal against liability and against quantum.

It now remains for us to deal with the question whether or not the insurers are liable to indemnify the defendants.

The policy provides by s. II that -

The company [third party] will subject to the limits of liability indemnify the insured [the second defendant and his servant the first defendant] in the event of accident caused by or arising out of the use of the motor vehicle ... which the insured shall become legally liable to pay in respect of ... death to any person."

Then "Exceptions to S II" mention eight exceptions to the above undertaking by the insurers, two of which are material. The material parts are exceptions (ii) and (iii) which read:

The company shall not be liable in respect of -

(ii)death of ... any person in the employment of the insured arising out of and in the course of such employment;

(iii) death of ... any person (other than a passenger carried by reason of or in pursuance of a contract of employment) being carried in or upon ... the motor vehicle at the time of the occurrence of the event out of which any claim arises."

We are concerned mainly with the words italicized.

On the authority of Izzard v. Universal Insurance Co. Ltd. [1937] AC 773 a House of Lords decision, which we respectfully follow, it is clear that the above provisions of the policy mean this, that-

(1)the insurers will indemnify the second defendant and his servant against third party risks, but this is subject to the limits of liability stated in the policy;

(2)in accordance with the limits of liability stated in the policy: TEXT(a) the insurers will not be liable to indemnify the defendants in respect of third party claims from persons in the employment of the second defendant whose death arose out of and in the course of that employment, and TEXT(b) the insurers will not be liable in respect of death of any person being carried in the lorry at the time of the accident;

(3)but - and this is an important qualification - the insurers will be liable to indemnify the defendants in respect of the death of any passenger carried on the lorry by reason of or in pursuance of a contract of employment. This is clear from the words italicized in exception (iii) to s. II.

In this case, the contract of employment cannot mean contract of employment with the second defendant, because exception (ii) clearly excludes the insurers from liability in respect of death of any person in the employment of the second defendant arising out of and in the course of such employment. So it is clear that the words in italics can only mean that the insurers will be liable to indemnify the defendants in respect of the death of a passenger not employed by the second defendant and carried by reason of or in pursuance of a contract of employment.

From the above it is clear that the insurers are liable to indemnify the defendants if Ibrahim bin Kimpal was a passenger carried on the lorry by reason of or in pursuance of a contract of employment between him and his employer not being the second defendant.

On the