Chen Boon Kwee v Berjaya Sompo Insurance Bhd [2025] 1 MLJ 158

Federal Court (Putrajaya)

Insurance — Motor insurance — Insurer’s liability to satisfy judgment

1. The Appellant, Chen Boon Kwee, was employed by Asia Aquaculture (M) Sdn Bhd, an aquaculture company. On 16 June 2015, his employer instructed him to travel from Batu Pahat to the company’s hatchery in Desaru to carry out an insurance audit. As part of this work-related assignment, the Appellant’s wife, Tan Saw Kheng (TSK), who owned a Toyota Camry (registration no. WYC 8461) insured under a third-party motor insurance policy issued by Berjaya Sompo Insurance Bhd, authorised the Appellant’s colleague, Masri bin Tamin, to drive the vehicle.
2. While en route to Desaru, the car collided with a lorry, resulting in severe injuries to the Appellant. Subsequently, the Appellant filed a civil suit in the Batu Pahat Sessions Court against the lorry owner, lorry driver, Masri, and TSK, claiming damages for negligence. After a full trial, the Sessions Court held that Masri, as the driver, was 100% liable for the accident and that TSK, as the vehicle owner, was vicariously liable since Masri had been driving as her authorised agent. Judgment was entered in favour of the appellant on 25 November 2019, awarding him damages.
3. Masri and TSK appealed to the High Court and later to the Court of Appeal, but both appeals were dismissed, rendering the Sessions Court judgment final. Following this, the Appellant sought to enforce the judgment against Berjaya Sompo Insurance Bhd pursuant to subsection 96(1) of the Road Transport Act 1987 [Act 333] “RTA”, which obliges an insurer to satisfy a judgment obtained by a third party against an insured person.
4. However, the insurer refused payment, arguing that the policy did not cover passenger liability, as TSK had not purchased additional coverage for passengers. The insurer further contended that the Appellant was not a “third party” within the meaning of paragraph 91(1)(b) of the RTA and that he was required to file a separate recovery action against the insurer to obtain the judgment sum.
5. On 9 February 2021, the insurer filed an Originating Summons in the High Court, seeking a declaration that it was not liable to indemnify TSK or pay the judgment sum unless and until the Appellant filed a recovery action. The High Court agreed with the insurer, ruling that a separate recovery suit was necessary. The Court of Appeal subsequently affirmed this decision, holding that the insurer could rely on the exception clause under sub-paragraph 91(1)(b)(bb) of the RTA and that recovery proceedings must be filed before payment could be enforced.
6. Dissatisfied, the Appellant appealed to the Federal Court, arguing that he was entitled to recover the judgment sum directly under subsection 96(1) without filing a recovery action, as he was travelling in the insured vehicle pursuant to a contract of employment, which qualified him as a protected third party under the RTA.

1. Whether a third-party victim who has obtained a judgment against the insured must file a separate recovery action against the insurer before enforcing the judgment under subsection 96(1) of the RTA?
2. Whether an insurer who fails to obtain a declaration under section 96(3) of the RTA that the policy is void or unenforceable can later avoid liability under subsection 96(1)?
3. Whether paragraph 91(1)(b) proviso (bb) of the Road Transport Act 1987 excludes the insurer’s liability to compensate a passenger who was travelling in the insured vehicle by reason of a contract of employment?

(1)  Whether a third-party victim who has obtained a judgment against the insured must file a separate recovery action against the insurer before enforcing the judgment under subsection 96(1) of the RTA?

(a) The Federal Court answered this question in the negative, holding that a third-party victim is not required to institute a separate recovery action against the insurer. Once a judgment has been obtained against the insured, the insurer’s statutory obligation to satisfy that judgment arises automatically under subsection 96(1) of the RTA. The Federal Court in the case of AmGeneral Insurance Bhd v Sa ’Amran a/l Atan & Ors and other appeals [2022] 5 MLJ 825; [2022] 8 CLJ 175 stated–

“There is nothing in section 96(1) to say that the third-party claimant must first obtain another judgment against the insurer before proceeding to enforce the judgment already obtained against the insured. After all, the judgment debt of the insured becomes the judgment debt of the insurer.” (para [29])

(b) The Court emphasized that the Road Transport Act is a social welfare legislation, enacted to ensure that road accident victims are compensated expeditiously and without undue legal technicalities. Requiring a recovery action would impose unnecessary litigation, delay justice, and contradict the legislative intent of the RTA. (paras [37]– [39], [44]).

(2)  Whether an insurer who fails to obtain a declaration under subsection 96(3) of the RTA that the policy is void or unenforceable can later avoid liability under subsection 96(1)?

(a) The Federal Court answered this question in the negative, confirming that subsection 96(3) provides the sole statutory recourse available to an insurer seeking to avoid liability. An insurer who wishes to challenge its obligation must either obtain a prior declaration under section 96(3) that the policy is void or unenforceable or intervene in the tortious proceedings to raise its defence at trial.

(b) The Court stated –

“If the insurer wished to challenge its liability to pay on grounds that the policy was void or unenforceable, it must obtain a timely declaration under section 96(3) of the RTA before the liability judgment was entered. Absent that relief, the insurer’s liability to pay is immediate.” (para [43])

(c)  The Court reasoned that this interpretation promotes finality and certainty in litigation and prevents insurers from delaying payment through post-judgment challenges. In the present case, since Berjaya Sompo Insurance Bhd did not seek a declaration under section 96(3) or intervene during the trial, it was barred from denying liability after the judgment became final.

(3)  Whether paragraph 91(1)(b) proviso (bb) of the RTA excludes the insurer’s liability to compensate a passenger who was travelling in the insured vehicle by reason of a contract of employment?

(a) The Federal Court answered this question in the negative, holding that paragraph 91(1)(b) proviso (bb) does not exclude the insurer’s statutory duty to indemnify under subsection 96(1). The phrase “contract of employment” in paragraph 91(1)(b) proviso (bb) must be interpreted broadly, referring to any contract of employment, not merely one with the insured.

(b) The Court stated –

“The words ‘other than a passenger carried by reason of or in pursuance of a contract of employment’… do not refer solely to employees of the insured but extend to any person being carried pursuant to a contract of employment with some other third-party employer.” (paras [67]– [70])

(c)  The Court observed that the Appellant was travelling in the insured vehicle in the course of his employment with an aquaculture company, and therefore he fell within the class of persons protected as third parties under the RTA. Consequently, the insurer was statutorily bound to indemnify the insured and satisfy the judgment sum awarded to the Appellant.

1. The Federal Court unanimously allowed the appeal, set aside the decisions of the lower courts, and granted the Appellant liberty to enforce the Sessions Court judgment directly against the insurer/Respondent.

1. Subsection 96(1) RTA makes it compulsory for insurers to satisfy judgments obtained by third parties against insured persons.
2. No recovery action is needed once judgment is final.
3. Insurers must act proactively either by obtaining a declaration under subsection 96(3) or intervening in the tort suit to avoid liability.
4. The RTA should be interpreted liberally to protect accident victims and avoid procedural delays.
5. Passengers travelling under any contract of employment fall within the RTA’s third-party protection.