COURT OF APPEAL, ACCRA
Date: 29 JULY 1975
AZU CRABBE C.J., AMISSAH AND ARCHER JJA
CASES REFERRED TO
(1) Sosu v. Royal Exchange Assurance, Court of Appeal, 4 May 1970, unreported.
(2) Rogerson v. Scottish Automobile and General Insurance Co., Ltd. (1931) 146 L.T. 26; 48 T.L.R. 17; 75 S.J. 724; 37 Com.Cas. 23, H.L.
(3) Lucena v. Craufurd (1806) 2 Bos. & P.N.R. 269; 127 E.R. 630, H.L.
(4) McLeod (or Houston) v. Buchanan [1940] 2 All E.R. 179; 84 S.J. 452; (1940) S.C. (H.L.) 17: (1940) S.L.T. 232, H.L.
(5) Monk v. Warbey [1935] 1 K.B. 75; [1934] All E.R. Rep. 373; 104 L.J.K.B. 153; 152 L.T. 194; 51 T.L.R. 77; 78 S.J. 783, C.A.
(6) Tattersall v. Drysdale [1935] 2 K.B. 174; [1935] All E.R. Rep. 112; 104 L.J.K.B. 51 1; 153 L.T. 75; 51 T.L.R. 405; 79 S.J. 418.
(7) Peters v. General Accident Fire and Life Assurance Corporation Ltd. [1938] 2 All E.R. 267; 158 L.T. 456; 54 T.L.R. 663; 82 S.J. 294; 36 L.G.R. 583, C.A.
(8) Smith v. Ralph [1963] 2 Lloyd’s Rep. 439, DC.
(9) Watkins v. O’Shaughnessy [1939] 1 All E.R. 385; 83 S.J. 215, C.A.
(10) Scammell (G.) and Nephew, Ltd. v. Ouston [1941] A C. 251; [1941] All E.R. 14; 110 L.J.K.B. 197; 164 L.T. 379; 57 T.L.R. 280; 85 S.J. 224; 46 Com.Cas. 190, H.L.
(11) Board v. Parish (1941) 64 C.L.R. 588.
(12) Roberts v. Anglo-Saxon Insurance Association (1927) 96 L.J.K.B. 590; 137 L.T. 243; 43 T. L.R. 359, C.A.
(13) Austin v. Zurich General Accident and Liability Insurance Co., Ltd. [1945] 1 K.B. 250; [1945] 1 All E.R. 316; 114 L.J.K.B. 340; 172 L.T. 174; 61 T.L.R. 214, C.A.
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(14) Boss v. Kingston [1963] 1 W.L.R. 99; [1963] 1 All E.R. 177; 61 L.G.R. 109; [1962] 2 Lloyd’s Rep. 431, DC.
(15) Shell Company of Ghana Ltd. v. Sarpong [1973] 1 G.L.R. 249, C.A.
(16) Fynn v. Badu [1971] 1 G.L.R. 80, C.A.
(17) Helby v. Mathews [1895] A C. 471; 64 L.J.Q.B. 465; 72 L.T. 841; 60 J.P. 20; 43 W.R. 561; 11 T.L.R. 446; 11 R.232, H.L.
NATURE OF PROCEEDINGS
APPEAL from the decision of the High Court, Accra, in which judgment was given in favour of the respondent in an action arising from a third party insurance contract. The facts are set out in the judgment of Azu Crabbe C.J.
COUNSEL
James Quashie-Idun for the appellants.
Ohene Ampofo for the respondent.
JUDGMENT OF AZU CRABBE C.J.
On 12 May 1967, the plaintiffs, an insurance company carrying on business in Ghana, brought an action in the High Court, Accra, against the defendant, a transport owner. The plaintiffs’ claim was for a declaration that an insurance policy No. CV39736 issued by the plaintiffs to the defendant in respect of an Austin motor vehicle with registration No. GE 2844 was void and of no effect on the sale, under a hire purchase, of the said vehicle by the defendant, to one Kwasi Twum.
The simple facts of the plaintiffs’ case are that in June 1962, the plaintiffs issued to the defendant a third party insurance policy No. CV 39736 in respect of a number of vehicles owned by the defendant. The plaintiffs subsequently agreed to extend this policy to cover an Austin commercial vehicle, registration No. GE 2844, owned by the defendant. On or about 29 August 1963, the defendant conveyed, under a hire-purchase agreement, the vehicle No. GE 2844 to one Kwasi Twum. It was contended by the plaintiffs that the transfer of the said vehicle amounted to a sale and was without their knowledge, and that consequently the third party insurance policy No. CV39736, in so far as it affected the said vehicle, became void and of no effect after its transfer to Kwasi Twum under the hire-purchase agreement.
The defendant admitted that he sold the vehicle under a hire-purchase agreement, as alleged by the plaintiffs, but he argued that the transaction was with the consent of the plaintiffs, because the plaintiffs were positively aware that he was running a transport business of selling on hire-purchase all those vehicles which they agreed to insure for him. In support of this contention the defendant exhibited an undated letter (marked exhibit A) written by the plaintiffs to him, which referred to the list of vehicles, submitted by the defendant for insurance, “being subject to hire-purchase agreement with your customers.”
No evidence was led at the court below, because the parties were agreed that the main issue to be tried was one of law, namely, whether the defendant after selling vehicle No. GE 2844 under the hire-purchase agreement to Kwasi Twum still had an insurable interest in the said
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vehicle. Accordingly, this sole issue was by consent set down for legal argument. In his argument, counsel for the plaintiffs relied on, the case of Sosu v. Royal Exchange Assurance, Court of Appeal, 4 May 1970, unreported, in which the principle of the English case of Rogerson v. Scottish Automobile and General Insurance Co., Ltd. (1931) 146 L.T. 26, H.L. was applied. That principle as stated at p. 27 is: “When once the car which is the subject of this policy is sold, the owner’s rights in respect of it cease and the policy so far as the car is concerned is at an end.” In the Sosu case it was assumed that. there was a sale, in the ordinary sense, of the insured vehicle by the assured, and, consequently, the Court of Appeal was able to hold that the assured ceased to have any rights and the policy came to an end.
The learned judge of the court below in this case distinguished the Sosu case from the present case. He said as reported in [1973] 1 G.L.R. 226 at p. 229:
“In the present case, the plaintiffs agree that there was no outright sale. The sale in question was by a hire-purchase agreement: see paragraph (5) of the statement of claim. By that hire-purchase agreement, the defendant parted with his possession only. It was not pleaded, neither was it contended by learned counsel for the plaintiffs, that even though the sale was by a hire-purchase agreement, the purchaser, Kwasi Twum, at the time the present writ was issued, had finished paying the total purchase price, as was found in Sosu’s case (supra), and that the property in the said vehicle had, in fact, passed to Kwasi Twum. In this respect it can be said that Sosu’s case is distinguishable from the present case.”
Then after quoting the definition of “insurable interest” from Stroud’s Judicial Dictionary (3rd ed.), Vol. 2, p. 1484, para 15, he said at p. 230:
“Since the ownership in the vehicle remained in the defendant until the purchase price was paid, the mere, fact that the defendant parted with possession for the time being, under the said hire-purchase agreement, could not deprive the defendant of his insurable interest. For, the defendant still had relation to, or concern in the vehicle, the subject-matter of the insurance, and which concern or relation, ‘by happening of perils insured against, may be so affected as to produce a damage, detriment or prejudice’ to him.”
Consequently, the learned judge ruled that the defendant had an insurable interest in the vehicle No. GE 2844, and that the insurance policy No. CV39736 issued by the plaintiffs in respect of the said vehicle was still valid and of full effect.
In this appeal it has been argued that the conclusion of the learned judge was wrong on two main grounds:
(1) that the Rogerson principle was extended to a sale under hire-purchase agreement and that the Sosu case is, therefore, indistinguishable and decisive of this case;
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(2) that in a motor vehicle insurance particularly, an insurance not of property, but an insurance in respect of third party liability-the requirement is for the policy-holder to continue to have possession and control of the vehicle to protect his insurable interest and not its safety or its preservation.
Before considering these grounds upon which the ruling of the learned judge is challenged, I think it would be convenient, firstly, to consider what constitutes an insurable interest, since the contest between the parties in the court below centred on the issue whether the defendant had an insurable interest in vehicle No. GE 2844. The classical definition of insurable interest was given by Lawrence J. in the English case of Lucena v. Craufurd (1806) 2 Bos. & P.N.R. 269 at P. 302, H.L.:
“A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it … and whom it importeth that its condition as to safety or other quality should continue; interest does not necessarily imply a right to the whole or a part of a thing, nor necessarily and exclusively that which may be the subject of privation, but the having some relation to, or concern in the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce a damage, detriment, or prejudice to the person insuring; and where a man is so circumstanced with respect to matters exposed to certain risks or damages, or to have a moral certainty of advantage or benefit, but for those risks or dangers, he may be said to be interested in the safety of the thing. To be interested in the preservation of a thing, is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction. The property of a thing and the interest derivable from it may be very different; of the first the price is generally the measure, but by interest in a thing every benefit or advantage arising out of or depending on such thing may be considered as being comprehended.’’
In MacGillivray on Insurance Law (5th ed.), Vol. 1, pp. 219 – 220, para. 445, the learned author gives a more compendious definition of insurable interest in property as follows:
“Insurable interest in property is not confined to the absolute legal ownership. Generally, any person who is so situated that he will suffer loss as the proximate result of damage to or destruction of the property has an insurable interest in it. But there must be some direct relationship to the property itself, for otherwise the interest is too remote and therefore not insurable. The Lucena v. Craufurd Lord Eldon said, ‘I am unable to point out what is an interest unless it be a right in the property or a right derivable out of some contract about the property,’ and if we add to this, ‘or some legal liability to make good the loss,’ we get a substantially accurate definition of insurable interest in property.”
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And at pp. 222 – 223, para. 450, it is also stated:
“Vendor and purchaser. A person who has entered into a valid contract for the purchase of any property has an insurable interest in it. The loss of, or damage to, the property may extinguish or diminish the value of his contractual right, and his insurable interest is commensurate with the loss which he may thus suffer. The contract must be valid and subsisting in order to give the purchaser an interest; but the fact that it is voidable, or that the purchaser’s right is unenforceable by action, does not affect his insurable interest. In like manner the vendor of any property retains an interest in it for so long as he is in such a legal position with regard to it that any loss or damage to the property might result in loss to him. Vendor and purchaser may in certain circumstances have concurrent intents enabling each to insure and recover the full value of the property. Thus, if the risk has passed to the purchaser but the vendor is unpaid and has a lien on it for the purchase-money, the purchaser has an interest to the full value in respect of his risk and of his liability to pay the full price for the property which, when conveyed to him, may have become valueless, and the vendor has an interest to the full value in respect of his lien, because the loss of the property means the loss of his security and the loss of the purchase price if the purchaser is insolvent.”
The subject of insurable interest is particularly relevant in the leading branches of insurance-marine insurance, fire insurance, property insurance and life insurance, and although the definition of insurable interest in Lucena v. Craufurd (supra) was formulated in a marine insurance case, I am satisfied that the definition in that case is equally applicable in motor insurance. Where the insured is the owner of the subject-matter of insurance, he has undoubtedly an insurable interest in it, although this insurable interest is not confirmed to the interest arising from ownership alone. It includes every kind of interest that may subsist in or be dependent upon the subject-matter that is insured. An assured cannot recover upon a contract of insurance, unless he shows that he has an insurable interest in the subject-matter of the insurance.
It is the common practice of insurance companies in issuing a policy of motor insurance to cover the assured against two principal types of loss: (a) loss or damage to the motor vehicle itself, and (b) risk of liability to third parties who may be injured by the motor vehicle. It is also not uncommon for insurance companies to issue policy which covers not only the assured, but also anyone who drives with the consent of the assured against this second type of liability.
It was alleged by the plaintiff company, and not denied by the defendant, that the policy was for third party risks and not a comprehensive policy, and consequently, the policy in this case must be deemed as one that complied with the provisions of the Motor Vehicles (Third party Insurance) Act, 1958 (No. 42 of 1958). Section 3 (1) and (2) of the Act make the following provisions:
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“(1) Subject to the provisions of this Act no person shall use, or cause or permit any other person to use, a motor vehicle unless there is in force in relation to the user of that motor vehicle by such person or such other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the provisions of this Act.
(2) Any person acting in contravention of this section shall be liable on conviction to a fine not exceeding two hundred pounds or to imprisonment for one year or to both such fine and imprisonment and a person convicted of an offence under this section shall be disqualified from holding or obtaining a driving licence.”
Section 6 of the Act also provides (only the relevant provisions are reproduced) that:
“(1) A policy of insurance for the purposes of this Act must be a policy which-
(a) is issued by an insurer approved by the Minister; and
(b) insures such persons or classes of person as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of a motor vehicle covered by the policy . . .
(3) Notwithstanding anything in any written law contained a person issuing a policy of insurance under this section shall be liable to indemnify the persons or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of person.
(4) A policy shall be of no effect for the purposes of this Act unless and until there is issued by the insurer to the person by whom the policy is effected a certificate, in this Act referred to as a certificate of insurance, in the prescribed form and containing such particulars of any conditions subject to which the policy is issued and of such other matters as may be prescribed.”
Section 10 (1) of the Act also provides:
“If after a certificate of insurance has been delivered under the provisions of subsection (4) of section 6 to the person by whom a policy has been affected judgment in respect of any such liability as is required to be covered by a policy issued under the provisions of paragraph (b) of subsection (1) of section 6, being a liability covered by the terms of the policy, is obtained against any person insured by the policy then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of such judgment any sum payable thereunder in respect of the liability including any sum payable in respect of costs and any sums payable by virtue of any written law in respect of interest on that sum or judgment.”
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And in subsection (5) of section 10 the expression “liability covered by the terms of the policy” is interpreted to mean “a liability which is covered by the policy. . .” Section 3 (1) of the Motor Vehicles (Third Party Insurance) Act, 1958, is in all material respects similar to section 35 (1) of the English Road Traffic Act, 1930 (20 & 21 Geo. 5, c. 43). In McLeod (or Houston) v. Buchanan [1940] 2 All E.R. 179 at p. 186, H.L., Lord Wright, after referring to this section and Monk v. Warbey [1935] 1 K.B. 75, C.A. said:
“The courts below proceeded on the footing that the construction and effect of the Road Traffic Act, 1930, s. 35, were as stated by the Court of Appeal in Monk v. Warbey [1935] 1 K.B. 75. This was rightly not questioned before your Lordships. Sect. 35 of the Act, while in express terms merely creating a criminal offence, punishable by the penalties stated in the Act, does also by implication, on principles well settled and now familiar in the case of offences under similar statutes, create a civil liability in favour of any one of the class of persons whom the statute is intended to protect when such person is injured by reason of a breach of the statutory duty or obligation. The class of persons whom the section is intended to protect includes those who are likely to be injured by the negligent user of the vehicle – that is, prima facie and generally, persons using the highway. The appellant’s son, who was killed by James Buchanan’s negligence in driving the van, clearly falls within that class. The particular mischief which the section is aimed at averting is the danger that the user of the wrongdoing vehicle (if I may call it so) is not covered against third party risks, so that the injured person has not the right, which he would have had if there had been an insurance, of recourse against the insurers under the Claims Against Insurers Act, 1930, if the wrongdoer cannot personally answer in damages. The provision is an important element in the policy of the legislature to secure the benefit of insurance for sufferers from road accidents.”
The question in this case is not that the defendant used or caused or permitted any other person to use vehicle No. GE 2844 to which there was no valid policy of insurance in relation to its user, but rather whether the policy lapsed because the defendant had ceased to have any insurable interest in the vehicle after he had parted with it to Kwasi Twum. It is a fundamental principle of insurance law that an insured person cannot recover under an indemnity policy, unless he has an insurable interest in the subject-matter in respect of which the claim is made, and if the insured car is sold, the insurance policy comes at an end: see Rogerson v. Scottish Automobile (supra). The case of Rogerson v. Scottish Automobile was followed in Tattersall v. Drysdale (1935] 2 K.B. 174, where the policy effected by the insured stated that it extended to cover anyone driving with the permission of the insured “provided that such person is not entitled to an indemnity under any other policy.” The insured in that case lent the car to a customer, who had traded in an old car and was awaiting delivery of a new one. The customer was involved in an accident, and
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claimed that he was entitled to an indemnity under the insured’s policy, because his own policy, which contained a similar extension clause, had ceased to cover him, because he had traded in his own car. Consequently, he contended that the proviso in the assured’s policy did not apply, for he was not “a person entitled to an indemnity under any other policy.” Goddard J. (as he then was) held that the claim under the insured’s policy succeeded, because the customer had parted with his own car and was no longer interested under his own policy.
In Peters v. General Accident Fire and Life Assurance Corporation Ltd. [1938] 2 All E.R. 267, C.A. the headnote reads:
“The vendor of a motor van insured by the defendants handed over the insurance policy with the van to the purchaser. The policy contained the usual clause extending the cover to any person driving with the consent or permission of the insured. The plaintiff, who had been injured by the van after the sale had been completed, obtained a judgment against the purchaser, and in the present action sought to recover the damages he had been awarded from the present defendants under the provisions of the Road Traffic Act, 1934, s. 10. The motor van was sold for £10, of which £5 was paid when the van was handed over and the remaining £5 after the occurrence of the accident: –
HELD:
(i) at the time of the accident, the purchaser could not be said to be driving the van by the order or with the permission of the vendor, as the van was then the purchaser’s own property.
(ii) the insured was not entitled to assign his policy to a third party. An insurance policy is a contract of personal indemnity, and the insurers cannot be compelled to accept responsibility in respect of a third party who may be quite unknown to them.”
In the course of his judgment in that case, Sir Wilfrid Greene M.R. said at pp. 270 – 271:
“What happened here was that Peters obtained a judgment against Pope, and he seeks under sect.10 to make the present respondents, the insurance company, liable, upon the ground that he has obtained a judgment against a person insured by the policy. He says that Pope is a person insured by the policy, because Pope, on the true construction of the policy, is a person who was driving the car with Coomber’s permission. The answer to that is, in my opinion, short and clear. At the date when the accident took place, the entire property in this car was vested in Pope. He had bought the car. On the sale of the car, the property passed to him, and, although Mr. Comyns Carr at one stage of the argument appeared to suggest that it had not, yet, when his attention was called to the evidence, he felt himself constrained to give up that point. The property, therefore, passed to the purchaser long before this accident took place. The circumstance that he had not paid the whole of the purchase price is irrelevant for that purpose, because that circumstance does not leave in the vendor, Mr. Coomber, any interest in the car. There is no
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vendor’s lien, or anything of that sort. The car had become the out-and-out property of Pope. When Pope was using that car, he was not using it by the permission of Coomber. It is an entire misuse of language to say that. He was using it as owner, and by virtue of his rights as owner, and not by virtue of any permission of Coomber.”
See also Smith v. Ralph [1963] 2 Lloyd’s Rep. 439, D.C.
The facts in the Peters case are similar to the Sosu case; except that whereas the transaction in the former was an outright sale, it was in the latter a hire-purchase agreement. The Court of Appeal, in the Sosu case, was not prepared to draw any distinction between an outright sale and a sale under a hire-purchase agreement. It accordingly held that the property in the vehicle in that case had passed at the time of the accident, and that the case was governed by the principle in the Rogerson case. I was a member of the court that gave the decision in the Sosu case, but I regret that after a more careful and critical study of the authorities, I now feel unable to support that decision. As it now appears to me a person remains the owner of a motor vehicle when it is under his control, and any lawful use of it can only be by his permission. After he has sold the vehicle and parted with the possession of it to a purchaser, the latter then uses the vehicle by virtue of his ownership, and not by the vendor’s permission. Consequently, the vendor’s policy lapses upon the sale, unless it has been transferred: see Rogerson v. Scottish Automobile and General Insurance Co., Ltd. (supra); Peters v. General Accident Fire and Life Assurance Corp. Ltd. (supra) and Watkins v. O’Shaughnessy [1939] 1 All E.R. 385, C.A.
It seems to me that in the Sosu case the Court of Appeal, with all due respect, omitted to consider the juridical nature of a hire-purchase agreement.
What then is a hire-purchase agreement? The term is defined in section 3 (1) of the Hire-Purchase Act, 1958 (No. 55 of 1958), as
“an agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee, and where by virtue of two or more agreements none of which by itself constitutes the hire-purchase agreement, there is a bailment of goods and either the bailee may buy the goods or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made.”
In Scammell and Nephew Ltd. v. Ouston (1941) 164 L.T. 379 at p. 385, H.L., Lord Wright describes the main features of a hire-purchase agreement as follows:
“It is not a contract of sale, but of bailment. The owner of the chattel lets it out on hire for a periodic rent on the terms that, on completion of the agreed number of payments, and on due compliance with the various terms of the agreement, the hirer is to have the option to buy the chattel.”
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The general characteristics of a hire-purchase agreement are: (a) the delivery of the goods or chattel to the hirer who obtains possession; (b) the property in the goods or chattel remains in the owner; and (c) the hirer agrees to pay the purchase price by instalments, and the owner agrees to transfer the property in the goods or chattel to the hirer on completion of the payment. The distinction between a sale and a hiring agreement was aptly drawn by Rich Ag. C.J. in the Australian case of Board v. Parish (1941) 64 C.L.R. 588, when he said at p. 594:
“A contract of letting of a chattel, whatever the length of the term, creates no right in rem, but rights which are contractual only. In such a case, the hiring agreement creates once and for all a permission to use, which is referable to nothing but a consensual arrangement between the parties. On the other hand, a sale and delivery of a vehicle to a purchaser vests in the purchaser rights in rem, and, prima facie, the purchaser thereafter depends on his ownership, and not on any authorization by the vendor, for his right to use the car.”
It is plain that the hirer under a hire-purchase agreement does not acquire any proprietary rights in the subject-matter of the agreement, unless he has exercised his option to purchase.
It seems quite clear to me that at the date of the contract for hire of a motor car the owner has the control of the car and it is in his power to determine the extent to which he will permit the hirer to use it. For as Lord Carmont said in McLeod (or Houston) v. Buchanan (1940) S.C. (H.L.) 17, and approved by Lord Caldecote at p. 33.
“any one who parts with the control of a motor vehicle completely, without making any definite arrangement with the custodian as to use, impliedly permits all uses, and it is for the permitter to see that there is the requisite insurance cover in force in relation to a use which is in fact unrestricted.”
The hire-purchase agreement for the sale of a car implies permission of its use by the hirer, and if the owner of the car has restricted its use in conformity with his policy of insurance he retains his insurable interest in the car. So long as the car is being used in that restricted way the insurer cannot avoid the policy: see Roberts v. Anglo-Saxon Insurance Association (1927) 96 L.J.K.B. 590 per Bankes L.J. at p. 591, C.A.
In this case, it was alleged that the plaintiffs knew at the time of the contract for the policy that the defendant would transfer possession of the vehicle to another person by a hire-purchase agreement. The plaintiffs did not deny this allegation, neither did they contend that the person who had possession of the car was using it for a purpose not covered by the insurance policy. In my view, the mere transfer of possession of the vehicle to Kwasi Twum would not by itself be sufficient to destroy the defendant’s insurable interest in the car. In this case, the plaintiff company have failed to show that the defendant permitted the use of vehicle No. GE 2844 without any restriction as to user. I think, therefore, that the plaintiffs argument must fail.
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I now turn to the second argument for the plaintiffs. The question that this argument raises is whether the owner of a car who insures in respect of third party liability only is required either by law or by practice to have continued possession or control of the car so as to protect his insurable interest. Section 3 (1) of the Motor Vehicles (Third Party Insurance) Act, 1958, imposed a duty upon the defendant not “to use or cause or permit any other person to use” his motor vehicle on the road unless there was in force in relation to the user of the vehicle by that other person such a policy of insurance in respect of third party risks as complies with the requirements of the Act. These requirements are set out in section 6 of the Act, and the material requirement is contained in subsection (1) (b), which refers not to the policy-holder or assured, but merely to “such persons or classes of person as may be specified in the policy.” And subsection (3) of the same section makes the insurer liable to indemnify any class of driver, though he may not be liable to the injured third party himself. It has been held that any such person might sue the insurers direct on the policy, where the policy was expressed to cover “any person who is driving on the assured’s orders or with his permission”: see Tattersall v. Drysdale (supra) and Austin v. Zurich General Accident and Liability Insurance Co., Ltd. [1945] 1 K.B. 250, C.A. In my view, the effect of subsection (3) is in fact to create a contract between the insurers and any driver of the vehicle who is of a class covered by the policy. It is, therefore, usual in hire-purchase agreements for the hire of motor vehicles for a clause to be inserted whereby the hirer is expressly prohibited from using the vehicle, unless such use is covered by third party insurance.
In my view the short answer to Mr. Quashie-Idun’s second argument is that the holder of a policy in respect of third party liability need not have any insurable interest in the vehicle, and the policy will not necessarily lapse, because the insured person had sold or parted with all interest in it. In Boss v. Kingston [1963] 1 All E.R. 177, D.C. Boss and one Hansford were charged by Kingston, a police officer, with unlawfully using a motor cycle on a road, when there was then not in force in relation to the user of the vehicle by each of them such a policy of insurance or security in respect of third-party risks contrary to section 201 of the Road Traffic Act, 1960 (similar to section 3 of the Motor Vehicles (Third Party Insurance) Act, 1958, of Ghana). The facts in that case were that Boss was driving Hansford’s motor cycle with Hansford on the pillion. Hansford’s insurance was effective only when Hansford was driving. Boss had a policy in respect of a Triumph motor cycle which he had sold a fortnight before. This policy afforded cover to Boss when riding “any motor cycle described in the Schedule” and also whilst riding any other motor cycle “not belonging to him . . . as though such motor cycle were a motor cycle described in the schedule.” The schedule contained particulars of the Triumph motor cycle only. The justices convicted on the ground that Boss’s policy lapsed when he sold the Triumph motor cycle because he had ceased to have an insurable interest in the vehicle to which the policy related. On a case stated, the Queen’s Bench Division distinguished the reasoning in Rogerson v. Scottish Automobile and General Insurance Co., Ltd. (supra) and Tattersall
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v. Drysdale (supra), and held, though the court dismissed the appeal on other grounds, that as Boss’s policy was in respect of third party risks only there was no need for him to have an insurable interest in the vehicle and the justices’ reasoning was wrong. Lord Parker C.J. observed at p. 179 that:
“The conclusion of the justices was based on the fact that, once the Triumph motor cycle was sold, the appellant Boss had no insurable interest in it. That being so, they were of opinion, following the reasoning in Rogerson v. Scottish Automobile and General Insurance Co., Ltd. ([1931] All E.R. Rep. 606; 146 L.T. 26) and Tattersall v. Drysdale ([1935] All E.R. Rep. 112; [1935] 2 K.B. 174) that the whole policy lapsed, including the further cover provided in respect of other cycles not owned by or under hire to the assured. It is to be observed, however, that, in the present case, unlike the cases referred to, the policy is in respect of third-party risks only and, accordingly, that there is no necessity for the assured to have any insurable interest in the vehicle. He could in law at any rate, and possibly in practice, be able to get cover against damage caused by his driving of any vehicles whether or not he had any insurable interest in them. Accordingly, as it seems to me, these cases are not, at any rate directly, relevant and the justices’ reasoning was wrong.
Concluding his judgment, the learned Chief Justice said at p.180:
“That being so, the only remaining question is whether, in the circumstances of this case, the policy has lapsed in regard to the named vehicle. I conceive that it might be possible for the vehicle to be parted with in circumstances in which rights of user are retained, in which case it could be said that the indemnity in respect of it remains in operation. Where, however, as here, possession of the vehicle is parted with and no rights of user are retained, the indemnity must, I think, lapse in regard to that vehicle. That being so, for the reasons given above, the whole policy will lapse. Accordingly, I have come to the conclusion that the justices were right in convicting the appellants albeit for the wrong reasons, and that this appeal fails.”
Salmond J. also said at p. 180 that:
“I must confess that, but for condition (5) in the policy, I should have come to a different conclusion. If it were not for this conclusion, I should have been disposed to find that it would need express words in this third-party liability policy to make the sale of the vehicle named in the policy absolve the insurers from their liability to indemnify the assured whilst driving the other vehicles referred to in the policy. Condition (5), however, imposes an obligation on the assured to take all reasonable steps to maintain the named vehicle in an efficient condition, and states that the company shall have at all times free access to examine such vehicle. The assured’s compliance with that obligation is a condition precedent to the insurers’ liability. Once the assured sells or parts with possession of the named vehicle
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without retaining power to comply with his obligations under condition (5)—and there is no suggestion that he retained such power-he is in breach of condition (5), and it inescapably follows that the insurers are absolved from all legal liability.”
In this present case, the two vital alternative questions raised, as it seems to me, are (a) whether the respondent permitted the use of the vehicle for purposes not covered by the insurance policy issued by the appellant company, or (b) whether the respondent parted with possession of the vehicle without retaining power to comply with his obligations under the policy. The answer to either question depends upon a proper construction of the policy. The policy was not tendered in evidence, and it is, therefore, impossible to determine whether the parting of the vehicle in this case absolves the appellant company from their liability to indemnify the respondent. It seems to me, therefore, that the second argument by counsel for the appellant company is without merit, and must also fail.
In the result, I would dismiss the appeal.
JUDGMENT OF AMISSAH J.A.
I agree that this appeal must be dismissed. The issue which the parties agreed to submit to the trial judge for his decision and the nub of the argument presented to us was whether the respondent after selling the insured vehicle under a hire-purchase agreement continued to have any insurable interest in the vehicle to sustain the type of policy taken out on the vehicle. That policy covered only third party risks. The appellants’ view was that he did not. The respondent argued the contrary. From the judgment in favour of the respondent’s contention, this appeal has been brought.
It is accepted that third-party policies for vehicles are of two kinds. One is what has come to be known as an “Act policy” which means a policy taken in compliance with the Motor Vehicles (Third Party Insurance) Act, 1958. The Act obliges users of vehicles to insure only against personal injuries to third parties. And this is distinguished from a full third-party policy which covers not only personal injuries but damage to the property of third parties. But whether it is the one type of third-party policy or the other, Mr. James Quashie-Idun, for the appellant, pointed out that the interest of the owner of a vehicle sold on hire-purchase was solely in the preservation of the property itself, and not in liability to third persons occasioned by the user of the vehicle. Therefore, while a comprehensive insurance policy taken by the owner would be lawful as based on his insurable interest in the continued existence of the vehicle, a third party policy would have no possible interest to cover and would consequently be improper. The argument is simple and attractive. It has the support of our decision in Shell Company of Ghana Ltd. v. Sarpong [1973] 1 G.L.R. 249, C.A. the decision in which we lay the responsibility for insuring a vehicle against third party liability in compliance with the Motor Vehicles (Third Party Insurance) Act, 1958, on the user who may not necessarily be the owner. In that case where the vehicle in question had also been sold under a hire-purchase agreement, we hold that the responsibility was not
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the owner’s because he had no means of controlling the use of the vehicle while the agreement subsisted, but that of the purchaser. That position is in consonance with the earlier decision in Fynn v. Badu [1971] 1 G.L.R. 80, C.A. where this court held that the owner of a vehicle cannot be made vicariously liable for the negligence of the hire-purchaser. Over the latter, the former has no control in the user of the vehicle. Without the necessary control the owner ought not to be held responsible for the default either intentional or negligent of the purchaser. If the owner has no such responsibility, wherein lies his insurable interest in liability to third parties arising out of the user of the vehicle? Though not all insurance agreements are contracts of indemnity, motor vehicle insurance contracts are recognised as pre-eminently so. What possible liability then could arise which would necessitate an indemnity to the owner?
It would have been better if we had been placed in the position to examine the insurance policy in this case. But the policy is not available to us, the parties having decided to do without evidence of any kind. And as in civil cases the philosophy we go by is that the parties know best how to dispose of their own case, we have to do the best we can without. It seems at first difficult to spell out a situation from the hire-purchase arrangement which could give rise to loss to the owner or his liability to third parties which in turn would call for an indemnity. The third party motor insurance policy as mentioned earlier is a contract of indemnity and unless the initial liability of the assured to third parties in respect of the vehicle’s use is a possibility, there should be no occasion calling for an indemnity. If the assured cannot be made liable for damage or injury arising out of the user of the vehicle while on hire-purchase, surely he cannot have an insurable interest. That interest must be an interest of the hire-purchaser’s. He without question has the control over the user of the vehicle and therefore will be the person fixed with liability normally for damage or injury arising from such user. Mr. Ohene Ampofo, however, has pointed out a situation, contingent may be but nevertheless real, where liability in the owner might arise. Assume some default under the hire-purchase agreement which justifies the owner’s right in seizing the vehicle. And assume that the owner wishes to exercise his right. If he has no insurance cover which satisfies the requirements of the Motor Vehicles (Third Party Insurance) Act, 1958, at least, he would not be able to move the vehicle from the place where the purchaser has placed it to another of his own choice. It may be argued that nothing prevents the owner at that time from taking the necessary cover and that it is then, not earlier, that his insurable interest arises. But a situation of the kind justifying a seizure may come up suddenly. It would be impractical to hold that in every case matters could and ought to be satisfactorily dealt with by waiting for the contingency to arise before meeting it. I am for this reason moved to conclude that the owner also has an insurable interest during the subsistence of the hire-purchase agreement to warrant him taking or retaining a third party policy. Of course the conditions under which this interest of the owner operates differ from those for the purchaser. The two interests are not co-extensive or in competition with each other. It is
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for the parties to agree upon them and on how to regulate them in the insurance contract.
In my opinion, therefore, the issue submitted to the trial judge had to be decided in the respondent’s favour. And if his lack of an insurable interest is the sole reason for the request for the cancellation of the third party policy then the request ought not to be entertained. The appeal must fail.
JUDGMENT OF ARCHER J.A.
This appeal raises a problem to which a solution must be found in future and I have therefore considered it necessary to write a separate opinion. Whenever the Court of Appeal in this country makes a pronouncement on a point of law, lawyers and their clients will assume that the law on the matter is certain and that, in future cases, it will be safe to rely on that pronouncement. That is exactly what has happened in this appeal.
On 4 May 1970, in the case of Sosu v. Royal Exchange Assurance (supra), this court, relying on the English case of Rogerson v. Scottish Automobile and General Insurance Co., Ltd. (1931) 146 L.T. 26, H.L. held that the rights of an owner of a vehicle, the subject-matter of an insurance policy ceased once the vehicle was sold. The Rogerson case was a straightforward sale in which ownership was transferred and title passed to the purchaser. The Sosu case was not an outright sale but a hire-purchase transaction; yet this court held that a sale had taken place. The appellants in the present appeal, who were also the appellants in the Sosu case, have come again waving the Sosu judgment at this court with confidence. I think before this court refuses to follow the Sosu case, every effort must be made to convince the appellants that the Sosu case was wrongly decided.
Before the Hire-Purchase Act, 1958 (No. 55 of 1958), was enacted in Ghana, the law relating to hire-purchase agreements was exclusively governed by the English common law, which Chitty on Contracts (22nd ed.), Vol. II at p. 292 states as follows:
“A contract of hire-purchase may be defined as an agreement under which an owner lets chattels of any description out on hire and further agrees that the hirer may either return the goods and terminate the hiring or elect to purchase the goods when the payments for hire have reached a sum equal to the amount of the purchase price stated in the agreement or upon payment of a stated sum. The essence of the transaction is therefore (i) a bailment of goods by the owner to the hirer, and (ii) an agreement by which the hirer has the option to return or purchase the goods at some time or another. Its object is to ensure that until the full price is paid the property in the goods remains in the owner, and in such a way that the hirer will normally be unable to pass a good title to a third party during the continuance of the bailment. In order to achieve this object, the agreement must give to the hirer a true option to return or purchase the goods. If it fails to do so, with the result that the hirer is bound to purchase the goods in
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any event, there is an agreement to sell, and the hirer may be able to pass a good title to a third party by virtue of the Factors Act, 1889, or of the Sale of Goods Act, 1893.”
In 1958 when the then Ghana Parliament passed the Hire-Purchase Act, 1958, it defined a hire-purchase agreement by re-stating the common law concept. Section 3 (1) provided as follows:
“‘hire purchase agreement’ means an agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee . . .”
This definition is in conformity with the House of Lords decision in the leading case of Helby v. Mathews [1895] A.C. 471, H.L. that is, where under a hire-purchase agreement the hirer was under no legal obligation to buy the goods, then such an agreement was not a contract of sale, but of hire with, in addition, an option to purchase, and therefore the hirer had not “agreed to buy goods” within the meaning of section 9 of the English Factors Act, 1889 (52 & 53 Vict., c. 45). The Hire-Purchase Act, 1958, regulated transactions covered by the Act and no more. It also imposed restrictions on the right of the owner to seize the chattel and gave the court discretionary powers. The 1958 Act had nothing to do with the law relating to the sale of goods- a subject-matter which was governed by the common law and British statutes of general application. However, confusion was created in 1962 when the then Parliament chose to enact the Sale of Goods Act, 1962 (Act 137), by codifying with amendments the law relating to the sale and hire-purchase of goods. Hire-purchase contracts were provided for in Part VIII of the Act and a hire-purchase contract was defined in section 81 to mean “a contract of sale of goods in which the price is to be paid in five or more instalments.” This was the beginning of the confusion. Was there any difference between a hire-purchase agreement and a credit-sale? As a result, judgments in the High Court were not only inconsistent but they varied with the jurisprudence of individual judges.
Nevertheless, it could not be said that the Sale of Goods Act, 1962, purported to transmute a hire-purchase transaction into an ordinary outright sale. Indeed sections 25 and 26 of the Act provided as follows:
“25. Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.
26. Subject to section 25 of this Act, the property in goods passes under a contract of sale when the parties intend it to pass.”
These provisions clearly applied to hire-purchase agreements. It is usual in all hire-purchase agreements for clauses to be inserted indicating the right of the hirer to exercise his option to purchase the goods after all the instalments have been paid. It follows therefore that until the option has been exercised, there is no intention to pass or transfer title to the hirer. Then section 26 (2) states: “Unless a different intention appears the
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property in the goods passes under a contract of sale when they are delivered to the buyer.” This subsection no doubt applies to outright sales and could not apply to hire-purchase agreements.
If only the then Parliament had meticulously considered the legal implications of the new statutory definition in the Sale of Goods Act, 1962 (Act 137), it would have refused to incorporate the law relating to hire-purchase in an Act dealing with outright sales. On the contrary, the new definition appears erroneously to have eclipsed the common law concept of a hire-purchase agreement: see the article “Selling by Instalments” by S. A. Brobbey in (1970) 2 R.G.L. 13, 104, 207 and also another article “Some Reflections on Hire-Purchase in Ghana” by Walter Dickey in (1972) 4 R.G.L. 184.
The chaos that ensued did not abate until the Hire-Purchase Decree, 1974 (N.R.C.D. 292), was passed and the common law definition of hire-purchase as originally adopted in the Hire-Purchase Act, 1958, was re-enacted: see paragraph 24 of N.R.C.D. 292 and also the Memorandum to the Decree. Until the new Decree came into force last year, a hire-purchase agreement was statutorily referred to as a contract of sale under Act 137. That was the law in May 1967 when the writ of summons in Sosu’s case was issued. That was the law when the Court of Appeal delivered its judgment in the Sosu case in May 1970. Bearing in mind this state of confusion in the law at the time, one’s sympathies must go to the three learned judges who delivered the judgment in Sosu’s case.
With this chequered historical record of the law, I shall now deal with the point of law raised in this appeal. No evidence was led in the court below, and neither the court below nor this court has had the opportunity of seeing the insurance policy concerned. However, the parties were agreed that the appellants issued third party policies to the respondent under the Motor-Vehicles (Third Party) Insurance Act, 1958, in respect of a number of vehicles including the vehicle the subject-matter of this appeal; that the policy was for third-party risks only and not a comprehensive policy; that the respondent after the issue of the policy entered into a hire-purchase agreement with a Kwasi Twum and parted with the possession of the said vehicle.
By paragraph (5) of their statement of claim, the appellants pleaded that: “On or about 29 August 1963, unknown to the plaintiffs the defendant sold the said vehicle on hire-purchase to one Kwasi Twum.”
The language used in May 1967 when the writ of summons was issued is excusable because the Sale of Goods Act, 1962, which was the law at the time, defined a hire-purchase agreement as “a contract of sale.” Nevertheless, there is one clear factor which disposes of the appeal; that is notwithstanding the use of the word “sold” in the pleading, ownership did not pass to Kwasi Twum. It was possession which passed. If ownership had passed, then the respondent would have disposed of all his interest in the vehicle and would have had no connection or relation with the vehicle; and as such any insurable interest which he had in the vehicle would have ceased. But that was not the case. The respondent retained legal ownership
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but parted with possession only with a reservation or right to re-take possession.
The respondent could re-take possession, if the hirer voluntarily returns the vehicle to the owner or if the owner exercises his right of seizure. As soon as the owner re-takes possession, he automatically regains control of the vehicle. If he uses the vehicle or permits another person to use the vehicle, then he would be directly liable to third parties injured by the vehicle or he would be vicariously liable for the torts of his servants or agents. There are two decisions of this court to the effect that when an owner of a vehicle enters into a hire-purchase agreement and he parts with possession, then he ceases to have any control over the use of the vehicle and he will not therefore be vicariously liable for the torts of the hirer: see Fynn v. Badu [1971] 1 G.L.R. 80, C.A. and Shell Company of Ghana Ltd. v. Sarpong [1973] 1 G.L.R. 249, C.A. The owner of the vehicle will be held vicariously liable only if he expressly authorises or permits the vehicle to be used. This could happen when the owner has re-taken possession. In this appeal, I think one point must be stressed. So long as the owner has a right of seizure or the right to re-take possession, the owner has an insurable interest in the vehicle. If the present third party policy is avoided, it would mean that whenever the owner seizes the vehicle there would be no third-party policy covering the vehicle and he cannot use the vehicle while he is uninsured. The owner must either take a cover note to enable the seized vehicle to be driven from the place of seizure to another destination for keeping. If it is impossible to arrange a cover-note because the vehicle was seized at a time when all the insurance offices were closed or that the seizure was on a remote highway, the owner would be compelled to leave the vehicle at the place of seizure. It is obvious that there are risks to which the right of seizure is exposed and it is the statutory duty of the owner to insure himself against these risks under the Motor Vehicles (Third Party) Insurance Act, 1958.
In conclusion, I would say that until a hirer has exercised his right of option to purchase a chattel under a hire-purchase agreement, there is no sale in law. There is a clear legal distinction between a hire-purchase agreement and a contract of sale. The Sosu case, which was decided by this court at a time when considerable confusion had been created by the mixing up the law of sale of goods with that of hire-purchase in one enactment, that is the Sale of Goods Act, 1962 (Act 137), cannot assist the appellants. Neither the appellants nor the learned judges who delivered the Sosu judgment are to blame. The fault must lie with the legislators who sat in Parliament House in the early sixties, and passed this Act without proper scrutiny and thereby unknowingly gave their blessing to the academic predilections of the draftsman of the Bill.
For the above reasons, I would also dismiss the appeal.
DECISION
Appeal dismissed.
K.S.N. D.
