ALLIANZ GENERAL INSURANCE COMPANY (M) BERHAD v 1. ) NORBIYAH BINTI MAT ARIS 2. ) RAHMAT BIN EMBONG

Case Significance

Holds under section 96 of the Road Transport Act 1987 that an insurer cannot rely on a declaratory order avoiding liability against injured third parties who were not parties to, or given the notice required by the proviso to sub-section 96(3) for, the declaration proceedings; such an order is unenforceable against them and they may enforce their judgment without impeaching it.

This Court of Appeal decision concerns the enforcement of a road-accident judgment against a motor insurer and the operation of section 96 of the Road Transport Act 1987 (RTA 1987). The appellant, Allianz General Insurance Company (M) Berhad, was the insurer; the respondents are natural persons referred to here by their roles, who had obtained a Sessions Court judgment arising from a traffic accident and sought to enforce it against the insurer. The insurer had earlier obtained a declaratory order, in proceedings to which the respondents were not parties, purporting to entitle it to avoid liability under the relevant policy on the ground that a false representation had been made.

The appeal raised three connected questions: whether the respondents could execute the judgment against the insurer without first obtaining judgment against it through a recovery action; whether the declaratory order the insurer had obtained was valid and complied with sub-section 96(3) of the RTA 1987; and whether the respondents were required to set aside or bring a collateral action to impeach that declaratory order before enforcing their judgment.

The Court of Appeal dismissed the insurer's appeal. Its decision turned on the notice requirement in the proviso to sub-section 96(3) of the RTA 1987. Because the declaratory order had been made in proceedings in which the respondents — third parties whose rights were affected — were not named, the order was, on the authority relied upon, unenforceable against them. The court declined to decide a further argument that sub-section 96(3) should be construed as mandatorily requiring an affected third party to be joined, because that point had not been raised at the High Court and the appeal could be determined on the notice ground alone. Finding no appealable error by the High Court, the Court of Appeal affirmed its decision and ordered the insurer to pay costs of RM35,000.

The judgment is a valuable statement on section 96 of the RTA 1987: an insurer cannot rely on a declaratory order avoiding liability against injured third parties who were not parties to, or given the notice required by the proviso to sub-section 96(3) for, the declaration proceedings; such an order is unenforceable against them, and they may enforce their judgment without first impeaching it.