On the fateful date of 18 December 2010, a commercial bus driven by an employee of San Express Holiday Sdn Bhd (“Second Defendant”) met a tragic accident upon the driver’s failure to manoeuvre a corner at the 15^th kilometre of the Simpang Pulai-Cameron Highlands Road, resulting in the commercial bus crashing into a road divider and falling onto an adjacent road. Sadly, the lives of 28 passengers were lost and ten other passengers were injured.
 
The commercial bus was owned by SK Murni Tours & Travel Sdn Bhd (“First Defendant”) and was insured under an insurance policy issued by the Multi-Purpose Insurans Bhd (“Plaintiff”). By an agreement between the First Defendant and the Second Defendant, the First Defendant had transferred all of its rights under an operating licence to the Second Defendant, thus allowing the Second Defendant to operate, use and maintain all of the buses owned by the First Defendant.
 
A claim was initiated by the victims, either on their own or through representative action, against the Plaintiff as the insurer of the said commercial bus. Compensation of RM1,351,400.00 and RM304,124.00 was paid to 16 deceased passengers and nine injured passengers respectively by the Plaintiff.
 
The Plaintiff then commenced an action in the High Court against the First Defendant, the Second Defendant, Puspakom Sdn Bhd (“Third Defendant”), the Director-General of the Road Transport Department Malaysia (“Fourth Defendant”), the Director-General of the Public Works Department (“Fifth Defendant”) and the Government of Malaysia (“Sixth Defendant”), claiming for the following:

1. an indemnity from the defendants for the losses suffered by the Plaintiff in the sums of RM1,351,400.00 and RM304.124.00;


2. a declaration that the defendants are liable to indemnify the Plaintiff for all the outstanding claims made against the Plaintiff; and


3. special damages of RM351,825.98 being the sum incurred by the Plaintiff as a result of the accident.

The High Court Decision

Judgment was entered against the First Defendant and the Second Defendant upon their failure to file their respective defences and to take part in the trial of the Plaintiff’s action. The Plaintiff’s action only proceeded against the Third Defendant, the Fourth Defendant, the Fifth Defendant and the Sixth Defendant (collectively, “the Defendants”).
 
Although a plethora of issues were raised by the parties, a key issue was whether the Plaintiff had locus standi to bring an action against the Defendants under the “Claim Discharge Receipt and Indemnity” forms signed between the Plaintiff and the passengers or their personal representatives who had received compensation from the Plaintiff. The trial judge determined this issue in the affirmative and held that the Plaintiff had locus standi to bring an action against the Defendants on, inter alia, the following grounds:

1. the Defendants’ position that the Plaintiff had no locus standi due to the absence of a valid assignment or subrogation of rights was untenable as the Plaintiff’s legal liability arose after the occurrence of the accident. The Plaintiff was obligated to make payment to the victims; and


2. the Defendants, as outsiders to the insurance policy,  had no right to question the Plaintiff’s duty to pay and the form of settlement.

The Court of Appeal Decision

Dissatisfied with the decision of the High Court, the Defendants appealed.
 
As in the case before the High Court, numerous issues was raised in the Defendants’ respective memoranda of appeal which may, inter alia, be summarised as follows:

1. the Plaintiff did not have locus standi to bring an action against the Defendants via subrogation or the assignment document given by the victims as the Plaintiff had recorded a consent order in the Ipoh Sessions Court to compensate 16 of the deceased victims and 9 of the injured victims, for the sums of RM1,351,400.00 and RM304,124.00 respectively; and


2. the Defendants did not owe a duty of care (whether by common law or statutory right) to the Plaintiff as the insurance policy issued for the commercial bus was a contractual contract  between the Plaintiff, as the insurer, and the First Defendant, as the insured.

The Court of Appeal subscribed to the crux of the Defendants’ submissions that the “Claim Discharge Receipt and Indemnity” forms on which the Plaintiff’s cause of action was premised, was a conditional assignment between the Plaintiff and the victims which only conferred on the Plaintiff the right to bring an action in the names of the victims and not in the Plaintiff’s own name.
 
With reference to the words “you have my authority to, at your own costs, use my name” contained in the said forms, the Court of Appeal held that such words amounted to a conditional assignment requiring any intended actions to be brought in the names of the victims.
 
The Court of Appeal added that a transfer of rights or an assignment that has such conditions cannot constitute an absolute transfer of rights or an “absolute assignment” to the Plaintiff who therefore does not have the locus standi to bring the action in its own name.
 
The Court of Appeal’s decision was grounded on the Federal Court decisions in Nouvau Mont Dor (M) Sdn Bhd v Faber Development Sdn Bhd [1985] 1 CLJ 56 (“Nouvau Mont Dor”), Malaysian International Merchant Bankers Bhd v Malaysian Airlines System Bhd [1982] CLJ 319 (“Malaysian International Merchant Bankers”) and the Supreme Court decision in Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd [1989] 2 CLJ 101 (“Hipparion”). The core principle that can be distilled from the aforementioned cases is that in deciding whether an assignment of rights^[1] is absolute or otherwise is “to be gathered only from the four corners of the document itself”. Only an absolute assignment of rights will enable an assignee to bring an action in its own name or in the name of the assignor.
 
The Court of Appeal opined that the trial judge had erred in not according weight to the above principle. It was clear that the words “you have my authority to, at your own costs, use my name” was a conditional assignment and not an absolute assignment under section 4(3) of the Civil Law Act 1956 (“CLA 1956”). The Court of Appeal was of the considered view that the Plaintiff was not entitled to bring an action in its own name as it was a clear contradiction to the contents of the “Claim Discharge Receipt and Indemnity”.
 
In the same vein, the Court of Appeal held that as the Plaintiff’s cause of action was premised on the “Claim Discharge Receipt and Indemnity” and not based on the doctrine of subrogation whereby the Plaintiff would step into the First Defendant’s shoes.
 
In the above premises, the Court of Appeal by a unanimous decision set aside the High Court’s decision and allowed the appeal by the Defendants.
 
Comments
 
The test in determining whether an assignment of rights is absolute or otherwise within the meaning of section 4(3) of the CLA is “to be gathered only from the four corners of the document itself” as propounded in Nouvau Mont Dor, Malaysian International Merchant Bankers and Hipparion are strongly rooted in the English Court of Appeal cases of Read v Brown (1889) 22 QBD 128, Hughes v Pump House Hotel Co Ltd [1902] 2 KB 190 and Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 WLR 919. The application of this test by the Court of Appeal further affirms the position that until and unless an assignee is completely vested with an assignor’s rights, an action in court cannot be taken solely in the assignee’s name. When applied to a claim discharge form^[2], the terms contained therein must be examined to determine whether an insurer is entitled to bring an action in its own name or in the assignor’s name.
 
Although the Court of Appeal did not delve into the legal jurisprudence behind an absolute assignment and a conditional assignment, the Court of Appeal’s decision will undoubtedly assist insurers in deciding whether the rights assumed by them under a claim discharge form is an absolute assignment that confers a right on the insurer to initiate proceedings in its own name or is a conditional assignment which requires proceedings to be initiated in the name of the party granting rights under the form.
 
This Court of Appeal decision is reported in Puspakom Sdn Bhd lwn. Multi-Purpose Insurans Bhd & Satu Kes Yang Lain [2022] 10 CLJ 261.
 
Case note by Loo Peh Fern (Partner) and Wan Nabil Ikram (Associate) of the Insurance and Reinsurance Practice of Skrine.