Royal Insurance Co., Ltd. v. Navaratnam
1959 Present: H. N. G. Fernando, J., and Sinnetamby, J.ROYAL INSURANCE CO., LTD. (of No. 1, North John Street,Liverpool), and YEN. J. A. R. NAVARATNAM et ah, Respondents
8. C. 446—D. C. Jaffna, 12,058
Motor vehicle—Insurance against third party risks—Condition in folicy that insurershall not be liable for damage caused while the vehicle is being driven by anyperson other than the assured—Validity of such condition—Action by insurerfor declaration of non-liability—Specification of breach of condition—MotorTraffic. Act, No. U of 1951, ss. 99, 100, 102 (4), 105, 109.
In regard to insurance against third party risks unler section 09 et seq. ofthe Motor Traffic Act, a condition in an ihsurance policy .which excludes drivingby an employee of the assured or by a person acting with the assured’s exoressor implied permission, is not a condition authorized by section 102, and there-fore does not exempt the insurer from liability to satisfy a decree for damagesentered against the assured in respect of death or bodily injury caused to a“ third party ” while the vehicle is being driven by such an “ excluded driver”.
In an action instituted by an insurer for declaration of non-liability in terms ofseotion 10P of the Motor Traffic Act,the insurer need not specify the relevantprovision of the law relating to the breach of the condition in question. Whatthe section requires is that notice should be given only of the factual particularsof the breach of condition.
H. N. G. FERNANDO, J.—Royal Insurance Co., IM. t>. Navaralnam,
-^^•PPEAL from a judgment of the District Court, Jaffna.
//. V. Perera, Q.C., with K. N. Choksy, for the plaintiff-appellant.
Sam. P. C. Fernando, with Cecil de S. Wijeratne and M. Rajeek, for the1st defendant-respondent.
S. J. V. Chelvanayakam, Q.C., with C. Ranganathan and S. Sivarajah,for the 2nd and 3rd added defendants-respondents.
Cur. adv. vult.
July 6, 1959. H. N. G. Fernando, J.—
The decision in this appeal is likely to be of much interest to ownersof motor vehicles and to insurance companies. What is principallyinvolved is the question whether a condition in an insurance policy, whichexcludes driving by an employee of the assured or a person acting with theassured's express or implied permission, exempts the insurer from the lia-bility to satisfy a decree for damages entered against the assured inrespect of death or bodily injury caused to a “third party ” while thevehicle is being driven by such an “ excluded driver”.
The policy in this case contains a general exception providing that“ the Company shall not be liable under this policy in respect of, interalia, any accident, loss, damage and jor liability caused, sustained or in-curred whilst the motor car is being driven by an excluded driver”. Thisexpression is defined in the schedule to the policy to mean any personother than the insured.
It is common ground that the accident which has been the occasion ofthis action occurred while the insured’s motor car was being driven by amechanic in the employment of a repair garage to which the car had beenentrusted for repairs by the insured owner, and there can be no questionthat the car was so driven with the implied permission of the owner. Theaccident resulted in the death of one Mr. Ariyanayagam whose heirs,the first and second added defendants, obtained in action No. 11730
C. Jaffna a decree for damages against the insured owner, the presentfirst defendant, in a sum of Rs. 25,000.
Under section 105 of the Motor Traffic Act (No. 14 of 1951) the insurancecompany would be liable to pay the amount of this decree unless it obtainsa declaration, for which provision is made in section 109, “ that a breachhas been established of a condition specified in the policy, being one ofthe conditions enumerated in section 102 (4) ”. The present action bythe insurance company is for such a declaration, which the companyclaims on the ground that, because the motor car was driven by the
522 H. N. G. EEBNANDO, J.—Royal Insurance Go., Ltd. v. Navaratnam
garage meohanic, there was a breach of the condition earlier mentioned,namely, that the car shall not be driven except by the insured. Thequestion for determination therefore is whether such a condition is oneenumerated in section 102 (4) of the Act.
Before examining the condition now in question by reference to sec-tion 102, it is necessary to consider the scheme of insurance againstthird party risks for which provision is made in the Act. Section 99prohibits the use or driving of a motor vehicle on a highway by anyperson, unless there is in force in relation to such use by that person apolicy of insurance, in respect of third party risks, in conformity withthe requirements of the Act. The principal requirement for presentpurposes is that imposed by section 100, namely, that the policy must in-sure the insured person (usually that would be the registered owner)in respect of any liability which may be incurred by him in respect of thedeath of, or bodily injury to, any person, caused by or arising out of theuse of the motor vehicle on a highway. In the case of a motor car whichis neither a hiring-car nor a lorry, the policy must cover, without monetarylimit, any such aforementioned liability which may actually be incurred.Subject therefore to any exception for which the Statute may provide,the policy in such a case has to cover the full amount of a decree enteredagainst the assured in respect of any such liability, and, by reason of theprovisions of section 105, the company would be liable to pay the fullamount of the decree to the added defendants. Read together thereforethe object of sections 99, 100 and 105 is to render the insurer liable,without limit, to satisfy a decree which may be entered against theinsured in respect of the death of, or bodily injury to any person causedby or arising out of the use of the motor car on a highway.
Sub-section (1) of section 102 provides that “ so much of the policy aspurports to restrict, or attach conditions to, the insurance of any personinsured thereby shall, save as otherwise provided in sub-section (4), be ofno effect” as respects the liability to third party risks which section 100requires the policy to cover.
The provision in section 102 (4) which is directly relevant for thepurposes of this case reads as follows:—
“ (4) Nothing in sub-section (1) shall apply in the case of any
condition in a policy of insurance, being a condition which—
provides that the motor vehicle shall not be driven by a person
the insured or any person driving with his express or
implied permission ;
the insured or any person employed by him ;
any person or persons named in the policy
H. N. G. FERNANDO, J.—Royal Insurance Go., Lid. v. Navaratnam 523
Tlie learned District Judge has held that the condition in the presentpolicy, in effect “ that the car shall not be driven by any person otherthan the insured ”, is a condition permitted by sub-section (4) and thataccordingly in terms of section 109 the company is entitled to a declarationthat it is not liable to pay the amount of the decree earlier entered. Buthe held for other reasons, irrelevant for present purposes, but to bediscussed later, that the declaration which the insurance company is toget under section 109 will not bind the added defendants. The appealto this Court by the insurance company has been against this latterfinding, but Counsel for the added defendants in appeal has argued thatin any event the condition is not one specified in section 102 (4), and thatthe company is therefore not entitled to the declaration which is soughtin this action.
Counsel argued that the condition under consideration does not fallunder any one of the paragraphs (i), (ii) and (iii) specified in clause (6)as reproduced above. His contention in regard to each of the paragraphs
and (ii) is that a condition preventing driving “ by a person otherthan the insured ” does not satisfy either paragraph because each of thoseparagraphs only contemplates the exclusion of persons other than, inthe one case, “ the insured or any person driving with his express orimplied permission”, and in the other “ the insured or any person em-ployed by him”. Therefore, it is said, a condition is only valid undereither such paragraph if its terms coincide with the terms of that para-graph. Granting this interpretation for the purposes of discussion, namely,that the exclusion of all persons other than the insured is not permittedeither by paragraph (i) or by paragraph (ii), Counsel has yet to overcomeparagraph (iii). This paragraph permits a condition restricting drivingby any person, other than any person or persons named in the policy.If for instance it is permissible to include a condition that the car shallnot be driven by anyone other than “ X”, there seems no reason why“ X ” should not be the insured owner himself; if then the insured ownercan be named in the condition as the only permitted driver, the objectionthat in the present case he was not actually named, though in feet clearlymentioned in the policy, would be highly technical. Indeed Counseldoes not rely on that technicality. But he argues that, since it is notpermissible under paragraphs (i) and (ii) to specify the insured as theonly permitted driver, then by implication the same is not permissibleeven under paragraph (iii). With respect I am not prepared to interpretthe clause in this way : taken by itself, paragraph (iii) would authorisethe specification of only one named driver and I am unable to read intothe paragraph any qualification which is not expressed therein, but whichif it exists at all can arise only by implication from the cases dealt within paragraphs (i) and (ii).
It seems to me nevertheless that Counsel's objection to the conditionmust succeed, but on rather different grounds, which suggested themselvesto me upon the general considerations which Counsel himself urged.
H. N. G. FERNANDO, J.—Royal Insurance Go., Ltd. v. Navaratnam
The statutory provision I am considering has no counterpart either inthe English or Indian Law, although the history of our section 102 re-veals that the Indian Legislature had before it in draft form an exceptionin terms similar to clause (b) of our section 102 (4): that provision how-ever was not passed into law in India. I have therefore to interpret theintention of the Legislature without the assistance of any precedent.
The Legislature’s intention as appearing from sections 100 and 105 wasapparently that if a person suffers death or bodily injury caused byanother person’s motor vehicle and if the owner or driver of the vehiclebecomes liable under the ordinary law to pay damages in consequence,those damages should, if not paid, be automatically recoverable fromanother source. The alternative source which the statute provides isone which can reasonably be expected to be in funds for the purpose,namely, an approved insurer. Accordingly the statute compulsorilyprovided for insurance against third party risks. It is noteworthy thatsection 105 does not provide even that the liability of the insurer to paywill arise only if and when the insured person himself fails to pay theamount of the decree. Once the decree is entered, the section casts adirect obligation on the insurer to pay the damages. We see then thatthe Legislature not only compels the owner of a motor vehicle, howeveraffluent he may be, to insure himself against the liability specified insection 100, but also directly compels the insurer to pay any sum payableunder a decree in respect of such liability. In other words, the Legislaturethus provides an assurance to other users of the highway that thedamages to which they may become entitled under the ordinary lawwill be paid by the insurer.
The Legislature, before deciding to provide exceptions to the generalprinciple that a policy of insurance must cover the liability in question,must surely have taken into account the normal “ course of business ”,so to speak, which obtains with respect to the use of motor vehicles. Usersof a highway can reasonably expect that motor vehicles will normallybe driven by one of the following, that is, the owner himself (usually theinsured person), a person acting with his express or implied permission,or a person employed by him. Use by other persons can fairly be regardedas “ extraordinary”, at least for the reason that any other person wouldprobably be committing a breach of the civil or criminal law if he wereto use or drive the vehicle. If there were to be such an extraordinary use,it would not be unreasonable for a person injured to be met with themaxim “ that the loss must lie where it falls ”. But the maxim shouldnot in reason be available in a case where the use of a motor vehicle hasbeen in accordance with normal practice, and it is very doubtful whetherthe Legislature could have had a contrary intention.
Turning again to clause (b), it is certainly open to the construction thatthe condition it contemplates is one composite condition, and that if it isproposed to include a condition in a policy under that clause, the condi-tion must be at least substantially that which the clause contemplates.It is in my view fair to construe the words “ other than ’” as being
ft. ft. G. FERNANDO, J.—Royal Insurance Co., 1M. v. Navaratmm
equivalent to “ who is not ”. The contemplated condition would then bethat the car shall not be driven by a person who is not:—
the insured or any person driving with his express or implied
the insured or any person employed by him ;
a person named in the policy.
In other words, clause (b) only permits the exclusion of persons who arenot persons referred to in paragraphs (i), (ii) and (iii), or vice versa it isnot permissible to exclude driving by the persons of the descriptionmentioned in those paragraphs.
Let us suppose for instance that section 102 authorised a conditionprohibiting the carriage in a motor car of anything other than :—
the baggage of persons carried in the car ;
goods belonging to the insured or to members of his family;
Would there be any doubt that a valid condition cannot excludethe carriage of anything mentioned in the three paragraphs ? Whenclause (a) of section 104 permits a “ condition which excludes the use ofthe vehicle ….
…. (ii) for business purposes, other than the business purposes
of the insured ”, it is quite clear that the words “ other than ” precedea specified purpose which cannot be excluded.
A comparison with clause (c) of sub-section (4) is useful in this connection.That clause refers to a condition “ which provides that the motor vehicleshall not be driven by :—
any person or persons named in the policy;
any person who is not the holder of a driving licence;
any person whose driving licence has been cancelled or suspendedor who is for the time being disqualified for obtaining a drivinglicence; ”,
In clause (c) the object of the Legislature is perfectly clear. Thecondition there contemplated is one providing that the vehicle shall not bedriven BY any or all of the persons who are described in the three para-graphs of that clause. In other words, the three paragraphs comprise adescription of persons who may be specified in the policy as prohibitedor excluded drivers. The structure of clause (b) is however quite diiferent.The condition which this clause permits is that the vehicle shall not bedriven BY PERSONS OTHER THAN the persons described in the threeparagraphs of clause (b). Those three paragraphs therefore, unlike the
526 H. N. G. FERNANDO, J.—ttoyal Insurance. Co., Lid. v. Ifavamfndm
three paragraphs in clause (c), comprise, not a description of personswho may be specified in the policy as prohibited or excluded drivers,but rather a description of persons who may not be so specified. It isonly the third paragraph of clause (6) which is optional. Two classes ofpersons must always be “ permitted ” drivers, i.e., (i) the insured orpersons driving with his permission and (ii) persons employed by theinsured; but if there is a condition excluding all others, some personor persons can be specifically named under paragraph (iii) as beingnevertheless not excluded.
Mr. Perera for the company has referred to one matter wdiich appears tomilitate against the construction I place on clause (b), namely that, ifparagraphs (i), (ii) and (iii) were intended to be a composite descriptionof persons who may not be excluded, there should have been no repetitionin paragraph (ii) of reference to the insured since the necessary referencehad already been made in paragraph (i). While agreeing that there isno convincing answer to this criticism, I am unwilling to draw any stronginference from what might well have been a comparatively minor gram-matical error. Save for this one apparent flaw in the language, there isnothing in clause (b) repellent to the construction that it was intended torefer compositely to the content of a permitted condition. Indeed,even if paragraphs (i) (ii) and (iii) were to be read disjunctively as per-mitting separate conditions and the restriction of driving only to oneperson, the language would still be open to the same objection that thewords “ the insured ” are unnecessarily repeated. To read those para-graphs disjunctively would to my mind lead to an unreasonable conclusion,going a long way contrary to the intention of the Legislature as expressedin the ‘ principal ” sections 100 and 105. In my opinion the Legislaturedid not intend, by sanctioning a condition excluding the driving of amotor vehicle by persons who might normally and reasonably be expectedto be driving it, to whittle down the scope of the protection assured toother users of the highway.
In the present case the accident occurred while the car was being drivenby a person who had the implied permission of the insured to drive thecar. A condition excluding driving by a person of that description being,as I hold, not permitted by section 102, does not therefore relieve theinsurer from the obligation imposed by section 105 and is not a conditionthe breach of which entitles the insurer to a declaration under section109.
In view of this conclusion I need refer only briefly to the other pointinvolved in this appeal. Section 109 enables an insurer to obtain a dec-laration which will free him from the obligation imposed by section 105to satisfy a decree previously entered against the insured person. Butone requirement specified in the proviso to section 109 has to be satisfiedif the insurer is to become entitled to the benefit of such a declaration.That requirement is that within a limited time the insurer must givenotice (of his proceedings for the declaration) to the person who was
H. N. G. FERNANDO, J.—Royal Insurance Co., Ltd. v. Navaratwm
the plaintiff in the action in which the earlier decree (against the insuredperson) was obtained. In that notice the insurer must specify “ thebreach of condition on which he proposes to rely”.
In the present case the insurer, by his letter P31 of 15th November1954 gave notice that he was filing an action for a declaration undersection 109 and stated that the assured “ has committed a breach of acondition of the policy which is also a condition enumerated in section102 (4) (6) of the Motor Traffic Act in that he caused or permitted the saidcar to be driven at the time of the accident by a person other than himselfin terms contrary to the policy ”. In my opinion, whioh is contraryto that formed by the learned Distriot Judge, the insurer adequatelyand even completely specified in this letter the breach of condition onwhich he proposed to rely. It was not necessary, as the learned Judgethought, that the insurer should have specified the breach by referenceto the particular sub-head in section 102 (4) (6), What section 109requires is that the former plaintiff should be given factual particularsof the breach of condition to be relied upon. The section does not inmy view require the insurer to instruct the plaintiff as to the relevant pro-vision of the law which is alleged to sanction the inclusion of the particularcondition in question.
There is nothing in my view which conflicts with the view expressedin The Ceylon Insurance Co. Ltd. v. Richard et all. The notice given inthat case was clearly defective because it merely stated that there hadbeen “ a breach of a condition ” and did not specify in any way eitherwhat the condition was or in what the breach had consisted. My conclu-sion on this point is however of no assistance to the company becausedespite the sufficiency of their notice their action for a declaration mustfail.
In pursuance of his conclusion that the condition in the policy is oneenumerated in section 102 (4) (6) of the Act, the learned District Judgehas entered decree granting to the plaintiff a declaration “that thedefendant has committed a breach ” of that condition and is not liableto indemnify the defendant in respect of the accident. We are not calledupon in this appeal to decide w'hether the abovementioned declarationwas correctly granted, because the defendant has not appealed againstthat decree; and for that reason we are unable to interfere with thatdeclaration, whatever may be its worth. I feel constrained however topoint out that the effect of sub-section (1) of section 102 is that a condi-tion in a policy, which is not a condition specified in sub-section (4)of that section, “ shall be of no effect as respects any such liability as isrequired to be covered by section 100 (1) (b) ”. The consequence in myopinion might well be that a condition of the description now in questionis of no avail, not only as against a “ third party”, but also as against theinsured himself. Considering that Counsel for the defendant did submitin the lower Court that the condition was nuD and void, it is surprisingthat the defendant’s advisers failed to appeal against the judgment anddecree.
1 (1951) $3 N. L. R. Si.
528 H. N. G. FEENANDO, 3.—Boyal Insurance Co., Ltd. v. Navaratnam
The decree further orders the plaintiff to pay to the added defendantsthe amount of the decree and the costs in the earlier case No. 11,730,
C. Jaffna. In view of the conclusions I have readied on the appeal,this order against the plaintiff gives effect substantially to the provisionsof section 105 of the Act and can for that reason be properly allowed tostand. In the result the decree entered in the District Court is affirmedand the appeal is dismissed with costs payable by the plaintiff to theadded defendants.
SinnetaMby, J.—I agree.
Appml d km istscd.