ROYAL EXCHANGE ASSURANCE v. OWUSU [1965] GLR 490

DIVISION: SUPREME COURT

DATE: 21 JUNE 1965

BEFORE: MILLS-ODOI, APALOO AND BRUCE-LYLE JJ.S.C.

CASES REFERRED TO

(1) Wyatt v. Guildhall Insurance Co., Ltd. [1937] 1 K.B. 653; [1937] 1 All E.R. 792; 106 L.J.K.B. 421;

156 L.T. 292; 53 T.L.R. 389; 81 S.J. 358.

(2) Bright v. Ashford [1932] 2 K.B. 153; 101 L.J.K.B. 318; 147 L.T. 74; 96 J.P. 182; 48 T.L.R. 357.

NATURE OF PROCEEDING

APPEAL by the defendant insurers against the judgment of Prempeh J. (as he then was) at the High

Court, Accra, by which the defendants were adjudged liable to the plaintiff for the judgment debt and costs awarded against the defendant’s insured and his driver for the negligent driving of the insured’s motor-car. The facts are fully set out in the judgment of Mills-Odoi J.S.C.

COUNSEL

Mrs. A. Harlley for the appellants.

Asafu-Adjaye, Jun. for the respondent.

JUDGMENT OF MILLES-ODOI J.S.C.

This is an appeal against the decision of the High Court, Accra (Prempeh J. as he then was) whereby the defendants-appellants (hereinafter referred to as “the insurers”) were adjudged liable to the plaintiff-respondent (hereinafter shortly referred to as “respondent”) for the sum of £G1,473 10s. being judgment debt and costs awarded in a previous action in favour of the self-same respondent against the insurers’ insured and his driver for the negligent driving of motor-car No. AE 4305. The facts which are too clear for argument are as follows: On 29 July 1960 the insured took out an insurance policy in respect of his private motor-car, Vauxhall Velox Saloon No. AE 4305, against third party risks with the insurers.

[p.492] of [1965] GLR 490 The liability under the policy was limited to the use of the motor-car for only social, domestic and pleasure purposes and for the insured’s business. It did not, and was not intended to, cover use for hire or reward or for racing, pace-making, reliability trial, speed-testing, or use for any purpose in connection with the motor trade. The insured was at all times material to the date of the accident which gave rise to the action an assistant stores superintendent of the Medical Research Institute, and he attended business at

Accra. The policy did not cover liability of the insured alone; it covered also “any driver who is driving the motor-car on the insured’s order or with his permission, provided that such driver… shall as though he were the insured observe, fulfil and be subject to the terms, exceptions and conditions of this policy, in so far as they can apply.” In other words, the driver was in no better position than the insured.

On 7 October 1962, while the policy was still in force, the respondent agreed with the insured’s driver to travel as a passenger for reward on the insured’s motor-car No. AE 4305 from Accra to Aburi. Under and by virtue of that contract, namely, to convey the respondent as a passenger for reward, the respondent boarded the motor-car and upon reaching mile 14 on the Accra-Aburi road, it ran into a ditch and he sustained serious personal injuries. Whereupon the respondent brought an action against the insured and his driver jointly and severally and easily recovered judgment for damages and costs against them for

£1,473 10s. He then instituted this action to recover the sum so awarded from the insurers relying upon the Motor Vehicles (Third Party Insurance) Act, 1958.1

When the case came up for hearing in the court below the respondent tendered in evidence a copy of the judgment he had recovered against the insured and his driver. He admitted travelling in the insured’s motor-car on the date in question and that he agreed to pay a fare to the driver. Nevertheless he denied that he travelled as a passenger for reward, his reason for so saying being that he was not conveyed to his destination and did not therefore pay any fare. The essential part of his evidence material to this case is as follows:

“On 7 October 1962, I travelled on a vehicle No. AE 4305 which went into a ditch. The driver told me he would charge me a fare. The vehicle did not reach its destination but went into a ditch and I sustained severe personal injuries. I never paid any fare because I never reached my destination.”

He then maintained that he is entitled to recover from the insurers the damages and costs which had been awarded him.

[p.493] of [1965] GLR 490

The insurers disputed the respondent’s claim and denied that they were under any obligation to indemnify him. They did not deny the existence of the policy between them and the insured. Their defence is grounded upon the fact that the motor-car was at the time of the accident being used by the insured’s driver in such a way that it was not covered by the policy at all; and, therefore, whether the insured is liable to the respondent or not, they (the insurers) have no interest in the matter whatsoever.

Such then were the salient features of the case for both parties in which the evidence was simple and straight-forward and the issues that fell for the determination by the learned trial judge were:

(a) whether, taking the terms, exceptions and conditions of the policy as they appear therein, the insured and his driver were both covered in respect of the motor-car No. AE 4305, at the date of the accident, so as to make the respondent entitled to his claim. The insurers contended that they were not; and

(b) if the issue in (a) above is determined in favour of the insurers, whether, in spite of the policy on which the insurers rely as showing that the motor-car was used outside the policy, the effect of the

Motor Vehicles (Third Party Insurance) Act, 1958, is so to vary the rights of the insured and the insurers as to make the respondent entitled to indemnity in respect of the accident. After hearing evidence and the submissions of learned counsel for the parties the learned trial judge decided the first issue in favour of the respondent and gave judgment for him on the following grounds:

(a) that the insurers failed to prove that “the vehicle had been used by their insured for a purpose otherwise than as covered by the policy”;

(b) that “the contract contained in the policy is personal between the insured and the insurers and since it has not been established that the insured had expressly authorised the driver to use the car otherwise than as covered by the terms of the policy, or, that he had knowledge of any such use by him, there was no breach of contract between the insured and the insurers”; and

(c) that the insured’s driver did not in fact accept any reward from the respondent. “Even if the mere fact that he asked for a reward can be imported to mean an acceptance of it—which in my view can hardly be the case—the wrong by the driver in so doing cannot be attached to the insured such as to amount to a breach by him of the terms of the contract.”

[p.494] of [1965] GLR 490

Against this judgment the insurers have appealed to this court. On the hearing of the appeal, learned counsel for the insurers vehemently criticised the judgment of the learned trial judge under the following grounds of appeal which she argued before us, namely:

“(1) The learned judge misinterpreted section 10 (1) of the Motor Vehicles (Third Party Insurance) Act,

1958.

(2) The learned judge erred in holding that the onus was on the defendants to prove that the plaintiff was not being carried for a reward.

(3) The learned judge was wrong in holding that the plaintiff was not being carried for a reward.”

As a matter of convenience, I shall deal first with grounds (2) and (3) supra and consider them together. It is beyond doubt that this action was brought by the respondent under section 10 (1) of the Motor Vehicles

(Third Party Insurance) Act, 1958, which reads as follows:

“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 effected 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.”

It is abundantly clear, therefore, that the first condition of the obligation of the insurers is that there is a judgment recovered by the person who seeks protection under section 10 (1) of the aforesaid Act. The second condition is that the judgment must be in respect of a liability which is required to be covered by compulsory insurance. In other words, the only person who can maintain a right of action against the insurers is a person falling within the limited class of third parties whose bodily injury or death is required to be covered by a motor policy.

The third condition is that the liability is in fact covered by the terms of the policy or would be covered by the policy but for the fact that the insurers are entitled to avoid or cancel, or have avoided or cancelled the policy. For this purpose conditions declared to be invalid as against a third party are ignored; but even if, [p.495] of [1965] GLR 490 after ignoring all such conditions the relevant use of the vehicle puts it outside the scope of the policy, the insurers are left immune: see Halsbury’s Laws of England (3rd ed.), Vol. 22, pp. 375-376, para. 769.

In the instant case, there is no dispute over the first and second conditions referred to supra. The bone of contention is obviously over the third condition and, in order to succeed, the respondent must show that he was entitled to be indemnified under the policy in respect of liability to the insured or the insured’s driver arising out of the accident.

As stated in the early part of this judgment, the insured was covered in respect of this motor-car for use for only social, domestic and pleasure purposes and for his business, excluding use for hire or reward or for racing et cetera. It seems to me, therefore, that if the car was being used otherwise than in accordance with the description of use, then the policy did not cover it. By the words in the exclusion clause, coupled with the words at the beginning of the description of the use clause, I am of the opinion that the policy, which was intended solely to be a cover for a private motor-car, was keeping the indemnity confined to the car while it was being used for social, domestic and pleasure purposes.

It is necessary at this stage to discuss the question whether the respondent was being carried as a passenger at the date of the accident in accordance with the description of use so as to give him a right to claim indemnity from the insurers. In the previous action instituted against the insured and the driver for damages for the negligent driving of the motor-car resulting in his personal injuries, the respondent made the following averments in paragraph (3) of his statement of claim:

“(3) On or about 7 October 1962 the plaintiff [respondent] was travelling as a passenger for reward in the second defendant’s [insured’s] said vehicle when upon reaching mile 14 on the Accra-Aburi road the second defendant’s said vehicle was so negligently driven and managed and controlled by the first defendant as his driver that he ran the said vehicle into a ditch whereby the plaintiff sustained serious personal injuries.”

In the instant case the respondent pleaded the policy and contended that he was entitled to claim thereunder because “the policy was neither cancelled by mutual consent nor by virtue of any provision contained therein before the happening of the event which was the cause of his bodily injuries.”

In their statement of defence the insurers denied liability for any claims arising out of the accident on the ground that the motor-car

[p.496] of [1965] GLR 490 was not covered by the policy while it was being used for reward. It would seem therefore that the onus lay on the respondent to prove that the relevant use of the motor-car at the material time did not put it outside the scope of the policy; that is to say, that the policy did cover the user of the motor-car in the way in which the insured’s driver was using it at the date of the accident. That being so the learned trial judge’s view that the onus lay on the insurers to prove that the vehicle had been used by the insured for a purpose otherwise than as covered by the policy is erroneous.

The facts and circumstances of this case show that the basic essentials to the creation of a valid contract were established. There was an agreement between the insured’s driver and the respondent that the latter be conveyed on the motor-car from Accra to Aburi upon payment of a fare. Upon that mutual understanding, the respondent boarded the vehicle and the driver drove off. The mere fact that the fare was not paid by the respondent cannot, in my view, change the character of the contract. It remained throughout a contract to convey the respondent in the insured’s motor-car as “a passenger for reward.” Since the policy limited liability to use for social, domestic and pleasure purposes and for the insured’s business only, thereby excluding use for reward, as in this case, I think the user put it outside the scope of the policy. The insurers are therefore not liable under the policy, because it did not cover the use which was made of the car on the journey in question: see Wyatt v. Guildhall Insurance Co., Ltd.2

I, for my part, find it difficult to accept the finding of the learned trial judge that,

“the contract contained in the policy is personal between the insured and the defendants [insurers] and since it has not been established that the insured had expressly authorised the driver to use the car otherwise than as covered by the terms of the policy . . . there was no breach of contract between the insured and the defendants [insurers].”

I think the learned trial judge either failed to consider critically the terms and conditions of the policy or, if he did, he must have misconceived the provisions of clause (3) thereof whereby the insurers undertook responsibility to indemnify not only the insured for any liability under the policy but also,

“any driver who is driving the motor-car on the insured’s order or with his permission, provided that such driver . . . shall as though he were the insured observe fulfil and be subject to the

[p.497] of [1965] GLR 490 terms, exceptions and conditions of this policy in so far as they can apply.”

In my opinion, express authority by the insured to the driver for the purpose for which the motor-car should be used is immaterial. It is sufficient if it is proved that the motor-car was driven on the order or with the permission of the insured; and there is evidence, in the instant case, that the driver drove the car on the order of the insured.

The only question left then is, as stated earlier in this judgment, whether in spite of the conclusion reached that the motor-car was used outside the scope of the policy there is anything in the Motor

Vehicles (Third Party Insurance) Act, 1958, which does so alter the rights of the parties, as defined by the policy, as to make the respondent entitled to an indemnity against the insurers in respect of the accident.

In ground (1) of the grounds of appeal learned counsel for the insurers complained that the learned trial judge in considering this aspect of the case misinterpreted subsection (1) of section 10 of the Motor

Vehicles (Third Party Insurance) Act, 1958, which complaint is in my view, well founded. The Act is one to make provision for the protection of third parties against risks arising out of the use of motor vehicles and for purposes incidental thereto. It is of prime importance, therefore, that the motor vehicles must be used within the scope of the policy. The policy referred to in this case did not cover use whilst carrying a passenger for reward. In those circumstances there was no policy of insurance in force in respect of third party risks.

Learned counsel for the respondent, relying on section 8 of the Motor Vehicles (Third Party Insurance)

Act, 1958, submitted that if it is open to the insurers to issue a policy containing conditions limiting the effect of the policy, it will be contrary to the policy of the Act which is intended to be for the protection of third parties. He then contended that any condition in the policy which avoids the terms of the policy is contrary to the Act and ought not to be upheld. Section 8 reads:

“Any condition in a policy or security issued or given for the purposes of this Act providing that no liability shall arise under the policy or security, or that any liability so arising shall cease in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy or security, shall be of no effect in connection with such claims as are set out in paragraph (b) of subsection (1) of section 6:

[p.498] of [1965] GLR 490 Provided that nothing in this section shall be so construed as to render void any provision in a policy or security requiring the person insured or secured to repay to the insurer or the giver of the security any sums which the insurer or the giver of the security may have become liable to pay under the policy or the security and which have been applied to the satisfaction of the claims of third parties.”

In the case of Bright v. Ashford,3 where the policy referred to did not cover use whilst carrying a passenger unless a side-car was attached to the motor cycle the court held that in those circumstances there was no policy of insurance in force in respect of third party risks. In the course of the arguments in that case the respondent placed reliance upon section 38 of the Road Traffic Act, 1930,4 (a section substantially similar to section 8 of the Motor Vehicles (Third Party Insurance) Act, 1958) and contended that since Part II of the Road Traffic Act, 1930, was intended “to make provision for the protection of third parties against risks arising out of the use of a motor vehicle,” any condition in the insurance policy which avoids liability thereunder is contrary to the policy of the Act, and therefore ought not to be upheld. Lord Hewart C.J. who read the judgment of the court then had this to say5:

“This was a condition which circumscribed the operation of the policy from the beginning. There was, therefore, no policy of insurance against third-party risks at all in force in relation to the use of the motor cycle by the respondent, where a passenger was being carried otherwise than in a side-car.”

In my opinion section 8 of the Motor Vehicles (Third Party Insurance) Act, 1958, has no application in the present case; it only renders void and of no effect a condition in a policy providing that no liability shall arise under the policy or that any liability so arising shall cease in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy. I think the section was inserted in the Act to prevent the person injured from having his remedy taken away by the person insured not doing something after the accident. In the instant case, the condition in the policy prevented any liability attaching under the policy as soon as the insured’s driver commenced to carry the respondent as a passenger for reward. There was therefore no policy in force to cover the respondent against third party risks.

For these reasons, I think the appeal should be allowed.

[p.499] of [1965] GLR 490

JUDGMENT OF APALOO J.S.C.

I have had the benefit of reading beforehand the judgment which my brother Mills-Odoi J.S.C. has just delivered. I agree with his conclusion and the reasons which led him to that conclusion and I also think that the appeal should be allowed.

JUDGMENT OF BRUCE-LYLE J.S.C.

I also agree.

DECISION

Appeal allowed.

S. K. D.-B.