011-NLR-NLR-V-71-RUBY-GENERAL-INSURANCE-CO.-LTD.-Appellant-and-S.-YASAPALA-DE-SILVA-and-other.pdf
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Ruby General Insurance Co. Ltd. v. Yasapala de Silva
Present: H. N. G. Fernando, C.J., and de Kretser, J.
RUBY GENERAL INSURANCE CO. LTD., Appellant, andS. YASAPALA DE SILVA and others, Respondents
S. G. 50/66—D. G. Ratnajmra, 5139/M
Motor vehicle—Insurance against third party risks—Action for declaration of non-liability for breach of a condition in the policy—Necessary parties—MotorTraffic Act (Cap. 203), ss. 99, 100 (4), 102 (4), 105, 109.
1 (1910) 13 N. L. R. at p. 320.
H. N. G. FERNANDO, C.J.—Ruby General Insurance Co. Ltd. v.
Yaeapala de Silva
55
Where, in consequence of the breach of a condition in a policy of insuranceagainst third party risks, the insurer institutes action against the policy-holderunder section 109 of the Motor Traffic Act with the purpose of obtaining adeclaration avoiding the liability which section 105 of the Act imposes on aninsurer to pay the amount decreed against a judgment-debtor in a previousaction, it is not necessary that the judgment-debtor should be made a party.
. It would be sufficient if the judgment-creditor in the previous notion is givennotice so that he may have the requisite opportunity to intervene.
A.PPEAL from a judgment of the District Court, Ratnspura.
C. Ranganathan, Q.C., with S. Nandalochana and C. Sanderasekera,for the Plaintiff-Appellant.
Wanigatunga, for the Added Defendants-Respondenta.
Cur. adv. wit.
June 28, 1968. H. N. G. Fernando, C. J.—
The respondents to this appeal were the Plaintiffs in an earlier actionin which they obtained a decree for damages on account of personalinjuries caused to them by the negligent driving of a motor bicycle. Thedefendant in that action had been the rider of the bicycle.
The present appellant, an Insurance Company, had issued a policy ofinsurance which was in force in respect of the bicycle at the relevant time.The holder of the policy was the person who was then owner of the bicycle,and the certificate of insurance required by s. 100 (4) of the Motor TrafficAct had been issued to that person.
Upon the entry of the decree in the former action, s. 105 of the Act tookeffect. It is necessary to cite here its relevant provisions:—
“ If, after a certificate of insurance has been issuedto the
person by whom a policy has been effected, a decree in respect of anysuch liability as is required by s. 100 (1) (b) to be covered by a policy(being a liability covered by the terms of the policy) is'obtained against
any person insured by the policy, thenthe insurer shall, subject
to the provisions of sections 106 to 109, pay to the persons entitled tothe benefit of the decree any sum payable thereunder in respect of thatliability.’’
Hie appellant company thus became liable in law to pay to therespondents the amount decreed to them in the former action. Butss. 106 to 109 contain exceptions to such liability; and the appellantsought to invoke the exception granted by s. 109 by instituting the present
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H. N. G. FERNANDO, C.J.—Ruby General Insurance Co. iAd. v.
Yaeapala tie Silva
action for a declaration that a breach had been established of a conditionenumerated in subsection (4) of s. 102 of the Act and included in thepolicy of insurance, namely the condition that the insured motor bicycleshall not be driven by a person who is not the holder of a driving licence.The appellant had no difficulty in establishing the breach of thiscondition, because it was proved that the person who drove the bicycleat the time of the accident did not hold a driving licence.
Yet the appellant’s action was dismissed on the ground that he broughthis action only against the holder of the policy of insurance, but notagainst the person who actually drove the bicycle. Thus the questionwhich arises in the appeal is whether, in an action for a declaration unders. 109 filed with the purpose of avoiding the liability which s. 105 imposeson an insurer to pay the amount decreed against a judgment-debtor in aprevious action, it is necessary that the judgment-debtor should be madea party.
Section 109 itself contains no provision as to this matter. All it saysexpressly is that the insurer who brings an action for a declaration under8. 109 must give notice of the action to the plaintiff in whose favour theearlier decree was entered, i.e., to the judgment-creditor. This noticewas duly given to the present respondents, and in fact they intervenedand contested the appellant’s action for the declaration.
In the absence of any express provision in s. 109 specifying the personagainst whom the action should be instituted, the question of joinderhas in my opinion to be determined on general principles. A policy ofinsurance is a document constituting a contract between the insurer andthe insured ; apd a condition contained in such a policy would prima faciebe a condition binding on the policy-holder. If then the insurer seeksa declaration that there has been a breach of the condition, it is entirelyreasonable that the policy-holder should be named defendant in theaction for the declaration, for he is prima facie responsible for theobservance of conditions in the policy.
Section 99 of the Motor Traffic Act contains the basic provision that“ no person shall use or drive, or cause or permit any other person to uae-or drive a motor vehicle, unless there is in force in relation to the use ofthe vehicle by that person or that other person, a policy of insurance ….in respect of third-party risks ”. In every case, save perhaps in a veryexceptional one, the person who knows whether or not a vehicle is or isnot so insured is the owner of the vehicle, for he is the person who wouldordinarily effect the insurance. Section 99 fits the common-placesituation, for ordinarily the person who uses a vehicle, or permits othersto use or drive it, is the owner, and it is he who commits an offence against8. 99 if the vehicle is not insured. Even in the case where the policycontains a condition prohibiting the driving thereof by a person withouta driving licence, it is the policy-holder who will know of the condition,and he commits an offence if he permits the vehicle to be driven by an
H. N. G. FERNANDO, C.J.—Ruby General Insurance Co. Lid. o.
F aswpala <2e Silva
■ •»
unlicensed person. The provisions of s. 99 thus confirm the prima facieimpression that the policy-holder must be named defendant in an actionunder s. 109.
Let me consider also whether, in an action under 8. 109, any purposewould be served by the joinder of the judgment-debtor in the earlieraction.
So far as the insurer (who seeks the declaration of non-liability) isconcerned, he does not require any relief against the judgment-debtor.His sole concern is to relieve himself of the liability to pay the amount ofthe former decree to the holder of that decree, i.e., to the former judgment-creditor ; and s. 109 quite reasonably informs the insurer that he canobtain that relief only if he gives notice of his action to the judgment-creditor. So far as the former judgment-debtor is concerned, the formerdecree is fully capable of execution against him, and his legal liabilityfor payment of the amount of that decree is not one whit affected by theresult of an action filed by the insurer in terms of s. 109. In thesecircumstances, there are no considerations of law or common sense whichsupport the possibility that the Legislature entertained any intentionthat the former judgment-debtor must be made defendant in an actionunder s. 109. That being so, the only permissible implication is that theLegislature had no intention to provide for any departure fromestablished principles. In the context, two principles apply:—
where a plaintiff seeks relief from the Courts on the ground of a
breach of a contract to which the plaintiff is a party, the properperson to be sued is the other party to the contract;
an Order of a Court will not prejudice a third party (in this case
the decree-holder in the former action), unless that third partyhas an opportunity to oppose the making of the Order.
These principles are fully satisfied, in an action under s. 109, by thejoinder of the policy-holder, and by the notice to the former judgment-creditor which gave him the requisite opportunity to intervene.
Counsel appearing for the respondent referred to certain .Englishjudgments holding that a third party has a right to sue an insurer fordamages for injury caused by an insured vehicle, and that even an insuredperson himself may recover damages from the insurer for injury causedby the negligence of his own driver. Those judginents will no doubtrequire consideration in Ceylon if our Courts have to deal with similarclaims. But the instant case raises only the question whether s. 109must be so construed as to require that the negligent driver of a vehiclewho has become the judgment-debtor in a decree obtained by a personinjured by his negligence, is a “ necessary party ” to a subsequent actionin which the insurer seeks to avoid the statutory liability to pay theamount of the decree to the injured person. Counsel could not urge anyconsiderations of justice or common-sense'which might permit a Court to
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Government Agent, Kalutara v. Gunaratna
construe s. 109 in this manner. If the Legislature did intend that thejudgment-debtor in the former action is a necessary party to an actionunder 8. 109,1 can sec no reason why that intention was not expressed.
Before concluding this judgment, I must invite special attention to thereason why in this case innocent pedestrians, injured in a road accidentthrough the negligent driving of a motor vehicle, are disentitled fromreceiving compensation from the insurer although the vehicle was in factinsured against third party risks in accordance wit^h the Motor Traffic Aot.The reason is that s. 102 of the Act permits a policy of insurance to containan exception from liability if the insured vehicle is driven by a personwho does not hold a driving licence. Many policies contain this and otherpermitted exceptions. The consequence is that injury to innocent thirdparties is not covered, if an unlicensed person drives the vehicle or ifthere is a breach of some other permitted condition in a policy. Howeverexpedient it may have been for the law to permit such exceptions fromliability in the nineteen-thirties (when compulsory insurance was firstintroduced in Ceylon), the proper authorities must consider whetherthese exceptions can now be tolerated.
The judgment and decree are set aside, and decree will be enteredgranting to the appellant the declaration sought in his plaint. I makeno order as to costs.
de Kbetser, J.—I agree.
Appeal allowed.