Walters v Commercial Union Assurance Co. (Civil Cause 183 of 1993) [1993] MWHCCiv 11 (27 April 1993)

IN THE HIGH COURT OF'MALAWI PRINCIPAL REGISTRY CIVIL CAUSE NO.183 OF 1993 . BETWEEN: — ' ALFRED WALTERS (MALE) PLAINTIFF and COMMERCIAL UNION ASSURANCE (PLC) ... DEFENDANT CORAM: ----,- W.‘ ’ A *'■' K ' MWAUNGULU, REGISTRAR Kasamba1a, Counsel for the Plaintiff Banda, Counsel for the Defendant ORDER the 21st of April, 1993 I heard an application by the defendant, Commercial Union Assurance Company (PLC), that writ of summons and the statement of claim be struck out. plaintiff was hit by a motor cycle on the 30th September, The'motor cycle Registration No. BF 1210 is insured by the t h e The 1991. The motor cycle was being riden by Justice decided, mtroduc The plaintiff has not sued Justice Mahilasi. He has rely on section 65A of the Road Traffic Act that was in 1988. The section provides as follows: person having a claim pect of any insured in to which a pol icy of i against a person liability in regard urance has been "L ' for the purposes of this Part shall he entitled his own name Io recover directly Prom the insurer any amount, not exceeding the amount ■ by the pol icy, for which the person Li;jojiginsured is liable to the person having the claim." The,’application is sought on the ground that the liability of .the"defendant, if any, to third parties, such as the plaintiff, under‘section 65A of the Road Traffic Act, is a liability to indemnif y only in the event of the defendant's insured is found to be -.liable to a third party. It is contended that as no 'liability on the part of the insured has been established and no other defendant is joined in the action the writ and/or the .statement of claim-does not disclose a cause of action against the defendant. If I understand the defendant correctly, he is arguing that the plaintiff cannot sue the insurer directly unless the insured has been found liable by a judgment, arbitration award or agreement and to that end the tortfeasor is to be joined as defendant. Mr. Banda, who appears for the defendant, has argued/that generally insurance policies are cover for indemnity for legal liability which only arises where liability against the insured has been established by action, arbitration, or agreement. He argues that legal liability in circumstances like the present where there is an action cannot be established without joining the insured as a defendant. He cited the cases of Post Office v. Norwich Union Fire Insurance Society Ltd (1967) 1 All E. R. and Freshwater -vs- Western Australian Insurance Company ( 19321 All E. R. and Bradley -vs- Eagle Star Insurance Compan y L td. (1989) 1 All E. R. 961. - A The plaintiff has cited before me a very recent decision by the the Honourable the Chief Justice in Ngosi -vs- The Attorney General and National Insurance Company Ltd., Civil Cause No.133 of 1991. He has also cited the Zimbabwean case of Eagle Star Insurance -vs- Grant (1989) 3 ZLR 278 and the South African case of Workmen 1s Compensation Commissioner -vs- Norwich Union Fire Insurance Society Ltd. (1953) 2 AD 546. - Norwich Union Fire Insurance Society Ltd. Third Partie"sTRight -vs- based on section 11 of the Insurers) Act U. K. which is as fol1ows:- This case against consider the case of Post Office "Where under any contract of insurance a person ' ; /(hereinafter referred to as the insured) is insured o? Jiagainst liabilities to third parties which he may incur, then - in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or (b) in the case of the insured being a company, in the event of of a winding-up order being 3/. . . . ■■ or a resolution for a voluntary winding-up being passed, with respect to the company, or of a receiver or manager of the company's business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised .in or subject to the charge; either before or after that event, any such liability as aforesaid is incurred by the insured, his against; the insurer under the contract in respect. .... . notwithstanding anything in any Act or and vest in Ihe incurred." rule of law io the contrary, third party to whom be transferred to the liability was of Australia, Trustees v. Southern Union remedy an injustice created by two of Appeal in Re-Harrington Motor Co., This Act was passed to decisions of the Court p. Chaplin (1928) Ch. and Hood's General Insurance Co. of Australia, Ltd. (1928) Ch. 793. In the Re-Harrington Motor Company Limited case a company, the insured, went into liquidation after judgment had been obtained by the plaintiff. The money ordered to be paid to the plaintiff was paid to the liquidator who treated the insured person as an unsecured creditor. The Court of Appeal held that 'the -liquidator had been right to deal with the matter in that way. ."In the Hood's Trustees case the insured became bankrupt. The Court of Appeal upheld Justice Tomlin's order that the .insurance money vested in the Trustees in Bankrupcy and could not bp!given to the victim of injury. Section 11 of the 1930 .. Act . therefore was intended to cure an anomaly created by these Ex two decisions of the Court of Appeal. Section 1 of the 1930 Act was considered in Post Office . 1'-- ........ 1 • — .... v.'1'Norwich Union Fire Insurance Society Ltd. The statement of Lord Denning, M. R. on page 579 in the Court of Appeal was approved by the House of Lords in Bradley v. Eagle Star Insurance Company Limited in a judgment in which Justice Templeman dissented not on the law as stated but op a different complexion of the facts, of the Court of Appeal decision Lord Denning by Lord Denning At page 579 - 580 said:- Under that shoe section the injured person steps into the of the wrongdoer. There is transferred to him gjthe wrongdoer's "rights against the insurer .contract". What are those rights? When do the "liability" of the insured is no doubt that his liability to the under the they arise? concerned, injured ?ii there ’ o r' o r > perso the time of the accident, when 4/ . . . . .-negligence and damage coincide; but the "rights" of the tinsured against t he: insurers do not arise at that t line. The policy in the present case provides that the (defendants) will indemnify the insured against legally of Loss all sums which the insured shall liable to pay as compensation in of or damage to property." become respect seems to me that A. J. G. Potter & Sons, Ltd., acquire ‘only a right to sue in the money when their liability to the injured person has been established so as to give to a right of indemnity. .,. injured person must be ascertained and ’ cither by judgment, of the Court , an a rb i t ra I i on or by agreement. lint i I Their liability to the d e t e rm ined to or by an award in that is done, the I agree with the /Ji ./^.l^righ I’ in an indemnity does not arise. by DEVLIN, J., in West Wake J. Price & Co. v. J . LIlLnK-111: "The assured cannot recover anything under the main indemnity clause or make any claim the underwriters until the assured have found liable and so sustained a loss." against been sue the insurance company except in circumstances as the insured himself could the insurance company. Potters could have •/'• Under section 1 of the Act of 1930 the injured such have sued sued for an third person ascertained. earlier for ■ •indemnity only when their liability to the ''was established and the amount of the loss i In some circumstances an insured might sue person a declaration, e.g., i. f the insurance company were repudiating the policy for some reason; but when the policy is admit! cully good, the insured cannot sue for an ^indemnity uni i I fiasco rtained." own liability to the third person i In my view both the. decisions of the Court of Appeal and the House of Lords turn out on the construction of the particular provision, namely section 11 of the Third Parties ■(Rights against Insurers) Act 1930 and the wording of the contract policy. A close reading of section 11 will, show that the rights which were conferred on the third party were those that the insurer and the insured agreed in the contract policy. These were transferred or vested in the third party in the event of the insured becoming bankrupt or an insured company being wound-up. Admittedly under the contract policy and at common law the liability of the insurer did not arise until the liability of the insured had been established either by the ■!! I® © ft fee & 5/.... I gggl Cpupti act ion , arbitration or agreed. This was because, as ng^pte'd out by Counsel for the defendant, a policy of insurance Ug^gti^ement to indemnify for legal liability. What the 1930 Act did was to vest or transfer the rights that the insured had under .the contract policy to the third party. The third party had-no rights against the insurance company because of lack of ■privity of contract. The rights that the insured had against the insurer were that, in the event that legal liability had been established either by action, arbitration or agreement, he would be indemnified by the insurer under the policy contract.. The third party, according to the English Act, could not. have more rights than the ones the insured had under the policy contract. Since under the indemnity clause the insured could only recover from the insurer on proof of' legal 1 iabi1i ty against the insured by Court, action, arbitral ion the third party's rights under the English Ari were similarly muted. The third party could not recover without legal liability being established against the insured. On the basis ■bfuthqfeoo 1 icy contract, and the Act of 1930 the law as laid down by. the I Court of Appeal and House of Lords is correct. This is what was vested in the third party under the 1930 Act. In England they do not have the equivalent of our section 65A of theiRoad Traffic Act. The United Kingdom Act and the Malawi Act are not in par-materia. I will consider our section 65A in due course. agreemen t. Mr. Kasambala appearing for the plaintiff cited the case Of Ngosi v. The Attorney General, and the National Insurance Company. At page 6 of the unreported judgment the Honourable the Chief Justice said: "There is another issue on which Mr. Mwafulirwa addressed me but Mr. Chisanga was unable to make any submission. And this is whether, in view of the provisions of Section 65A of the Road Traffic Act, it is possible to directly sue the insurer before establishing liability against a third party, cases were cited to me considered these and I have decisions but- it seems to me that provisions of the Section 65A itself arc very clear there was no need and to even cite further authorities. It is my considered view that Section 65A gives the right to directly before 1 iabi I i ty is established assured . " sue the insurer against the Zimbabwean and South African This was an action for loss of dependency under the Statute Law (Miscellaneous Provisions) Act. Chapter 501 of l he laws of Malawi. The plaintiff actually sued the Attorney General as a tortfeasor and the National Insurance Company Limited under Section 65A of the Road Traffic Act. From the .judgment, i t is 6/ . . . . doubtfuL 1 whether the second defendant queried the right of the .insured under section 65A of the Road Traffic Act. It looks like Mr. a^resse ■ .■V. C . CW’ - " section Court. however Commis,si This was Africa^ . Mwafulirwa who appeared for the plaintiff just d the Court and Mr. Chisanga who appeared for the efendant did not comment or raise the issue. The i ssue er the third party can directly sue the insurer under 65A of the Road Traffic Act was probably not before the The statement could therefore be obiter. Mr. Kasambala relied on the case of Workmen's Compensation ioner v. Norwich Union Fire Insurance Society Limited. the decision of the Appellate Division of South The action was based on very clear and direct Provision section 8 of the Workmen's Compensation Act 30 . 1949: of 1941 as substituted by section 3 of the Act 36 of • . "W an in respect of which compensation s payable, was caused in circumstances creating a egal liability in some person other than the employer (hereinafter referred to the workman to as the third party) to pay in respect thereof - the workman may both claim compensation under this Act and take proceedings in a Court of law against the third party to recover damages: and the Commissioner ...... shall have a right of action against the third party for recovery of the compensation he is obliged to pay under this Act as a result of the accident, and may exercise such right either by intervening in proceedings instituted by the workman against the third party or by instituting separate Section 11(1) of the Motor Vehicle Insurance Act 1942 provides: registered company which has insured ......a motor hide ...... shall be obliged to compensate any person atsoever (in this section called the third party) for y such loss or damage which the third party has f fered ............" said at page 551: rior to the coming into operation of Act 29 of 1942 a person who was injured through the negligent driving of a motor vehicle had an action at law for damages against the driver of the vehicle as well as 'against the employer of the driver if the driver was ^at the time the injury was caused driving the vehicle ■fin the course of his employment. In practice, however, y/ythat right of action was not infrequently of little because the defendant did not have the means ’ , ' /wherewith to pay the damages. To remedy this state of affairs the Act was passed. It made the insurance of /motor vehicles compulsory and in order to protect the public made the insurer of the vehicle directly liable ,,yin damages to a person who was injured through J negligence or other unlawful act, in respect of the driving of a motor vehicle even though the injury was caused neither by the insured nor by a driver in his . . vemploy or driving with his permission. The insurer is '•liable even if the vehicle concerned was driven by a ■thief. " Finally, there is the case of Eagle Insurance Company Ltd, v. 'Grant. In Zimbabwe it appears there is a section which is equivalent to our section 65A for Korsah, J. A., says at page 280: "Section 25 of the Act confers on a claimant the right to recover directly from the insurer, within a period of two years commencing from the date on which such claim ’"arose, any amount not exceeding the amount covered by -.the statutory policy. This right to proceed against the insurer directly is purely a statutory provision given - to a claimant who issues process in respect of a statutory policy. It differs from the situation at M /.common law where an •..-against the insurer ••^contract of insuranc '•’Insurer. Under the ./perforce exercise hi * 1 ® B injured third party cannot proceed directly because there is no e between the third party and the common law, a third party must s delictual rights against the insured who may then call upon the insurer, by virtue •of the contract existing between the insurer and the ensured, to indemnify him from the liability incurred. y- O'. He goes on to say: •Ft P <"By the enactment of section 25 of the Act and by making the insurer liable directly for the death or bodily •injury of a third party the y... - form of vicarious liability, legislature introduced a new which in certain 4^ circumstances absolves the person who would otherwise be '‘^liable to compensate a third party. Except for this statutory innovation, this provision has not amended the common law principles of delictual liability. 8/. . . . - 8 - Section 11(1) of the Motor Vehicles Insurance Act 29 of 1942 of South Africa created a right of action against an insurer similar to that introduced by our section 25 of the Act." Unfortunately section 25 of the Zimbabwean Act is not in the library and is not quoted in the judgment. From what one can mesmerize from the judgment of the Supreme Court of Appeal it is obvious that both it and the South African provision create a cause of action for which the third party can directly sue >the5Insurer without having to establish legal liability by an aptibp, arbitration award or agreement as is the case in the United Kingdom and at common law. It is also platitudinous tbatrthe sections actually create an alternative, abridged and handy^way to third parties that never existed al. common law. Thevprovision docs not denigrate the common law position for . 'the third party can still sue the insured hoping and trusting . that- the insured will request the insurer to indemnify the .third-party. It is for this reason that there is a statutory limitation to the period in which a third party can sue the insured. It is still open to the third party to sue the insured after the expiration of 2 years from the date on which the. cause of action arose. Now coming to our section 65A and I think I should reproduce it: ? Itg JS® ytl writ’8. ■ Xi’S (1) Any person having a claim against a person insured in respect of any liability in regard to which a policy of insurance has been issued for the purposes of this Part shall be entitled in his own name to recover directly from the insurer any amount not exceeding the amount covered by the policy, for which the person insured is liable to the person having the claim:" There seems to be a measure of semblance between our provision and the Zimbabwean and South African ones. I think in going to a statute one should look at the plain words in the statute itself. There is always a temptation particularly in common law jurisdiction to countenance the common law position and to gloss over the plain words of the statute. There could be situations where this could be necessary particularly where the statute is codifying the common law. If that is not the case there should be considerable care because the legislation could be very well intended to alter the common law position. In my opinion to contend that legal liability established by Court action, arbitration or agreement is a condition precedent to a third party suing the insurance under section 65A of the Road Traffic Act is to read into there for there is nothing in the provision to suggest that provision what is not 9/.... ' '‘ U' • ;^s the case. Mr. Banda argued that 1 lability means ^ity in the sense that 1 i ah i 1. i ty must have been stab.l ished. Sect, ion 65A, however, provides that.: ■"Any person hay_ing a c la i m (the emphasis is mine) Sjagainst a person insured m respect of any ] iabil i ty h' ' fin regard to which a policy of insurance has been ^'^^.^•issued for’the purposes of this part shall be entitled his own name recover directly The rec-.i ”■ -r.'.! here is not that the liability must be establish- d . The requirement, is that the person must have a claimAagainst the insured, not the insurer. The claim could succeed or fail but if he has a claim he can recover directly. That claim, as far as the third party is concerned, does not arise when he brings the act.ion and the Court pronounces liability on it but when the time of the accident.. If Pari lament had intended that the rights of the third party to sue the insurer was to depend on proof of legal liability it should have made that clearly in words like insured" o proposed is to be taken then there would be a multiplicity of actions and the third party would probably have to obtain a judgment from the insured and if the insurer refuses to honour any person who has a judgment against a person words to like effect. If the interpretation arose, namely, the ■ the’judgment against the insured the third party will have to sue,the insurer on the judgment. This would be more circumlocuitous than the position at common law. I think that j the position in our statute is akin to one obtaining in 'Zimbabwe and South Africa. Tn terms of clarity the South African Provision probably statute intended anything different from the Zimbabwean and South African statutes. In that sense the statement of the Ch ief Jus t.; ce in Ngosi - Attorney Genera 1 and the Nationa 1 Insurance Company Limi ted t ---------------„— - - - --------------------------- interpretation of the albeit obiter, is the correct but I do not think that our 1 aw. L Let me a 1 so add tha1, the action for non-joinder, to, strike out action for non-joinder Order,15 rule 6(1) of the Rules of the Supreme Court provides: if this summons is to strike out the practice of the Courts is not. or misjoinder of parties non-joinder any cause or or matter shall be defeated by of any party: matter determine the No cause m i sjoinde Court, may issues or questions in dispute so far as they affect. the rights and interests of the persons who are part i es to actions and m no way diminishes the .importance, o f having before the Court, the proper parties necessary for determingmg the points at issue." reason of And the eg £ Performing Right Soci ty Ltd. London Theatre of Varieties L td A ;(19 24j A . C . 1,’ I 4~V 1 SCOUNT CAVE, said : K 'Further under Order .. (be defeated by reason joinder of any party, r. 11, no action can now the misjoinder or non- of but this does not mean that £ judgment can be obtained in the absence of a s C, "’^(necessary party to the action, and the rule i any h**'4 ' C satisfied by allowing parties to be added at Hence, the plaintiff risks the case if the the nature of these actions the ihsurer should be joined in the action for I 'think that in vi tortLeaser and the practical reasons. tortfeasor is called and denies liability and this he must because generally policy contracts require the insurer not tp make concessions on liability. This, however, is a rule of practice and rules of practice cannot circumvent the Act. The Act does not say so. To say that all parties necessary must be included in the action to decide the issue between the parties does not in any way derogate the other rule that the plaintiff has the right to decide who he is going to put in as a defendant. The defendant can himself apply to the Court that another be included as a defendant, to the action. (Union Bank of Middle E a s t L t d . v . Clapham, The Times July 20, 1981 I. In this case the plaint iff has just, taken out the writ. There is a notice of in t.ent ion to defend. The right, to add part ics still remains until trial. I would be very slow, therefore, to strike out the action for non-joinder. I think 1 am content with the general principle that, the Court wi.ll not defeat a matter by misjoinder or non-joinder of any party. It is also contended that the statement of claim discloses no cause of action. No evidence is admissible in this aspect. The Court looks at the pleadings alone Attorney General of Duchy of Lancaster v, London and North Western Railway Co. (1892) 3 Ch. 274. Section 65A of the Road Traffic Act employs the word "recover by suit or action. Cozens-Hardy, M. R. I Is: include recovery 2 K. B. 758 n Page v. Burtwell (1905) is a word wide enough to said at page 761-762: "Recover . - to limit the word 'recover to legal proceedings. I think L to there is a payment, and receipt of money anguagc of Vaugham Williams, Nau J. 1 Lis Steam Shipping Co. take the 01 ive r v . 639 , unde r way qualified, I think that is sufficient to is in case within the operation of Section 6 and bring the put the workman in the position of having proceeded against his employer for compensation, and recovered Workmen's Compensation Act, and that receip J . , i n (1903) 2 K . B . the no L L XX. XX-V^V^X Xl. VXUUVO UJ XV^UX XX V J. -X 65A creates a statutory cause of action which exists Statement of claim. It cannot be said that there is of action in the statement of claim. includes recovery by legal action section the c au s e no I therefore dismiss the application with costs to the plaintiff. MADE in Chambers on this 27th day of April, 1993, Blantyre. ft . / i Al D. F. Mwaungulu REG 15T-1W