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2020 MarsdenLR 190
COURT OF APPEAL PUTRAJAYA
MOHAMAD ZULKARNAIN MUSTAFA – Appellant
Versus
ALLIANZ GENERAL INSURANCE COMPANY (M) BHD & ORS – Respondent
[Civil Appeal No: W-02(IM)(NCC)-1676-08/2017]
The duty of utmost good faith in insurance contracts requires full disclosure; failure to properly disclose can void the insurance policy.
Headnote:(A) Road Transport Act 1987 - Section 96(2) and 96(3) - Motor vehicle insurance - Liability of insured and insured rider - The plaintiff sought a declaration that the policy was void due to fraud - The 3rd defendant, not privy to insurance, could not seek indemnity - Evidence established non-involvement of the insured motorcycle in the accident. (Paras [1], [9], [10], [11])
(B)
Contract of insurance - Duty of utmost good faith and full disclosure - The insured rider's false statements warranted repudiation of insurance. (Paras [5], [9], [10], [12])
Facts of the case:
The plaintiff, a licensed general insurance company, filed for a declaration that its policy regarding an insured motorcycle was void after the 3rd defendant instituted a civil action for damages following a road accident.
Findings of Court:
The insured rider failed to disclose the motorcycle's non-involvement in the accident, corroborated by sworn statements which were not challenged.
Issues
: The court addressed the extent of the 3rd defendant's entitlement to indemnity under the insurance contract and whether a fraud claim necessitates oral evidence.
Ratio Decidendi:
The court reaffirmed that the insured's obligation of full and frank disclosure persists and the findings were based on unchallenged affidavit evidence.
Result:
Appeal dismissed and costs awarded.
Introduction
[1] This case came about when the plaintiff, a licensed general insurance company was served with a notice pursuant to s 96(2) of the Road Transport Act 1987 ( RTA 1987) with respect to an alleged road accident on 21 December 2015 involving motorcycle No AHW 5937 ("insured motorcycle") and motorcycle AJW 5727.
[2] The insured under the motor vehicle policy is the 1st defendant ('insured') and the insured rider of the insured motorcycle was the 2nd defendant ('insured rider'). On 18 August 2016, the 3rd defendant had instituted a civil action in the Sessions Court against the insured and the insured rider for damages arising from the alleged road accident.
[3] Meanwhile, the plaintiff's adjusters who had investigated into the matter concluded that the insured motorcycle was not involved in the accident. Consequently, on 3 March 2017 the plaintiff filed an Originating Summons (OS) in the High Court for a declaration that the motor vehicle insurance policy relating to motorcycle No AHW 5937 is void and unenforceable with respect to a road accident that occurred on 21 December 2015. On 21 July 2017, the High Court granted the declaration sought by the plaintiff. The aggrieved 3rd defendant appealed against the High Court order. After hearing of parties, we dismissed the 3rd defendant's appeal. We now set out the reasons for our decision. In this judgment, the parties shall be referred to as they were in the Court below.
Background Facts
[4] The background facts relating to this appeal has been comprehensively set out in paras [3] to [11] of the learned judge's written judgment.
Findings Of The High Court
[5] The findings of the learned judge may be summarized as follows:
a) As the 3rd defendant is not privy to the contract of insurance between the plaintiff and the 1st defendant, the 3rd defendant is not entitled in law to seek indemnity under the contract of insurance.
b) On the facts, there was a failure on the part of the insured rider to make a full and frank disclosure when he lodged false police reports stating that the insured motorcycle was involved in the accident with the 3rd defendant.
c) The insured rider's sworn statements in the forms of statutory declaration (SD) as well as affidavit in reply confirmed the fact of the non-involvement of the insured motorcycle in the accident.
d) The insured rider's statements were corroborated by the insured's SD and affidavit in reply.
e) The statements of the insured and of the insured rider were not challenged by the 3rd defendant in the High Court.
f) Preferring the insured and insured rider's aforesaid statements, the learned judge rejected the evidence of the investigation officer in the civil action filed by the 3rd defendant which implicated the insured motorcycle and the insured rider's involvement in the accident.
g) Pursuant to sub-section 96(3) of the RTA 1987, the plaintiff was entitled to commence an action to repudiate a policy in respect of an insured vehicle before any judgment is obtained in the civil action commenced by the 3rd defendant.
Submission Of Parties
[6] Learned counsel for the 3rd defendant canvassed the following points:
i. On 23 October 2017, the 3rd defendant obtained judgment in his civil action in the Sessions Court. The insured and insured rider was adjudged to be wholly liable and special and general damages were awarded to the 3rd defendant. The High Court dismissed the insured and insured rider's appeal.
ii. The Originating Summons should not have been disposed on the SDs and affidavits because the issue of fraud is involved. As fraud is a serious issue to be tried, the matter should have been heard on viva voce evidence. The 3rd defendant should have been given the opportunity to cross-examine the witnesses and deponents of the affidavits and statutory declarations ( Ting Ling Kiew v. Tang Eng Iron Works Company Ltd , ; Bank Negara Malaysia v. Mohd Ismail Ali Johor ; ; [1992] 1 CLJ (Rep) 14; Alloy Automotive Sd
