RUKAYABAI Versus SECRETARY OF DEFENCE GOVERNMENT OF PAKISTAN ISLAMABAD , A..Rauf

The plaintiffs have brought this suit in forma pauperis for recovery of Rs. 90,000 as damages under the Fatal Accidents Act.

2. Plaintiff No. 1 is the widow and plaintiffs 2 to 6 are the minor children of deceased Zainuddin who lost his life as a result of this accident, having been knocked down by a bus on Frere Road It has been stated that on 22nd June, 1969 at about 7-45 a.m. Zainuddin had stopped his bicycle carrying a basket of fish on the foot-pavement on Frere Road as he wanted to go up-stairs to sell fish he being a fish hawker. At that time a bus bearing registration No. KAU 9470, coming from Mauripur side and going to wards Saddar, while overtaking another bus, came on the extreme right-hand side and knocked down deceased Zainuddin and one other person. The bus had stopped with one of its wheels on the foot-pavement. Zainuddin died instantaneously as a result of shock and haemorrhage due to fracture of pelvis, rupture of bladder and laceration of the intestines The other injured person, however, survived.

3. Muhammad Afsar, defendant No. 4, who was the driver of this bus was sent up by the Police in the Court of A. C. M. XX, Karachi for offence under section 304-A, P. P. C. He was convicted and sentenced to R. I. for one year a fine of Rs. 500 or in default further R. I. for six months. He was also sentenced to pay fine of Rs. 200 or suffer further R. I. for three months under section 337, P. P. C. for causing injuries to the other person by name Ali Jan.

4. The death of Zainuddin was thus caused by rash and negligent driving by Muhammad Afsar driver, defendant No. 4. This bus originally belonged to President, Service Institute, P. A. F. Station, Mauripur, Karachi defendant No. 2 and was insured with National Insurance Scheme managed by Pakistan Insurance Corporation defendant No. 3. Since the bus was used for carrying P. A. F. personnel from Karachi to Mauripur and back, Secretary, Ministry of Defence has also been impleaded as defendant No. 1.

5. Deceased Zainuddin at the time of his death was about 40 years of age and but for this accident he might have lived up to the age of 65 years. He was earning about Rs. 300 per month by retail sale of fish as a hawker. The widow and minor children of deceased Zainuddin have thus been deprived of this earning and they have accordingly brought this suit for recovery of Rs. 90,000 as damages against all the defendants.

6. Defendants Nos. 1, 2 and 3 have denied their liability in their respective written statements while defendants Nos. 4 and 5 have remained ex parte. Defendant No. 1 contended that the Ministry of Defence had no concern with this suit as the Service Institute, P. A. F. Mauripur, Karachi was an independent institute not under the Ministry of Defence. Defendant No. 2, Pre4ident, Service Institute, contended that on 9th of May, 1969 the Service Institute executed an agreement of sale with defendant No. 5 in respect of their six buses including the one involved in the accident. These buses were sold for Rs. 1,35,000 and while Rs. 35.000 were paid the balance was to be recovered in 10 monthly instalments of Rs. 10,000 each. The possession of the buses was handed-over to defendant No. 5 together with the right to ply these buses and defendant No. 5 had to employ the staff and pay their salary from the date of this sale; that the alleged driver of the bus was thus the employee of defendant No. 5, and not of defendant No. 2.

7. Defendant No. 3, Pakistan Insurance Corporation, denied their liability on the ground that there was no privity of contract between the company and the plaintiff as at the time of the alleged accident the bus was not owned by Defendant No. 2 and their liability is governed by provisions of section 96 of the Motor Vehicles Act, 1939.

8. On the aforesaid pleadings of the parties the following issues were settled ;-

(1) Are the plaintiffs heirs (dependents) of the deceased Zainuddin?

(2) What was the age and income of the deceased Zainuddin at the time of his death?

(3) Whether Zainuddin's death was caused on 22-6-69 by rash and negligent driving of the bus No 9470?

(4) Who owned the said bus and by whom was defendant No. 4 the driver, employed ?

(5) Was not the Bus No. 9470 insured with defendant No. 3 at the time of accident?

(6) What compensation is each of the plaintiffs entitled to and who is liable to pay the same?

(7) Whether defendant No. 1 is a necessary party?

(8) Reliefs.

These issues are answered as under:----

8. The facts of this case as stated in evidence have hardly been disputed. Plaintiff Ruqqiya Bai, widow of Zainuddin, has deposed that her husband was 40 years of age at the time of the accident and he used to pay her net earnings of Rs. 10 per day. She has produced the judgment of A. C. M. Court No. XX, Karachi showing that driver Muhammad Afsar defendant No. 4, had been found guilty of negligence and had been convicted and sentenced. The case had been registered and investigated by the Police and sent up to that Court. One of the witnesses, namely, Muhammad Usman Exh. 7, has been produced and examined in this Court also to show that the accident was a result of negligent driving by the driver of the concerned bus who lost control of the vehicle while overtaking another bus and came to the extreme right hand side over the foot-path of Frere Road, where the deceased was standing with his cycle at the corner.

9. The main question in this case is regarding the liability of the respective defendants. Flight-Lt. Akhtar of P. A. F., Mauripur who has been examined on behalf of defendant No. 2 had produced the original agreement of sale of this bus with effect from 1-5-1969. This bus was sold by the Institute to defendant No. 5 who was to ply the said bus and employ the staff for the purpose. Until the full amount was paid by instalments the Institute was to remain as owner but the possession and control was to be transferred to the purchaser.

10. Although the Motor Vehicle Act, 1939 has been repealed by West Pakistan Motor Vehicles Ordinance, 1965. Chapter 8, relating to insurance of motor vehicles has been retained. Under section 2 (19) 'owner' 4 as been defined as the person in possession of a motor vehicle and in relation to a motor vehicle which is the subject-matter of a hire-purchase agreement the person in possession of that vehicle under that agreement. This definition has been repeated in the new Ordinance of 1965, section 2 (24) (b). Obviously at the time of the accident the vehicle was in possession of the hire-purchaser and under terms of the agreement the driver was employee of the hire-purchaser, defendant No. 5. Therefore, neither defendant No. 1 nor defendant No. 2 would be vicariously liable for the negligent act on the part of the defendant No. 4, who was an employee of defendant No. 5. In Abdul Rahman v. Roquea Kadir and others (P L D 1961 Dacca 419) it was held that the person in possession and control of the vehicle in question which was subject of hire-purchase agreement was the hire-purchaser; while the vehicle was being driven by the driver of the hire-purchaser, a fatal accident took place and action for damages for the negligent act of the driver was brought against both the owner and the hire-purchaser. It was held that the original owner was, owner on paper alone and in fact he had no control over the driver, and no control over the running of the vehicle, as possession of the vehicle was with the hire-purchaser. That the biro-purchaser alone could, therefore, be made answerable in damages on account of the accident. In Hussain and another v. Muhammad Rafiq and 4 others (P L D 1971 Kar. 129) it was held that since the owner had no control over the said bus, which was vested exclusively in the hirer, the owner could not be held liable for the negligence of the driver. A passage from Salmond on Jurisprudence was relied upon that "The owner will escape liability, however, if he can show that the motor-car has been lent or hired for purposes in which he has no interest or concern. In such a case the driver is the owner's bailee and not his servant." Reliance was also placed on an English decision in Daniels v. Vaux ((1938) 2 K B 203) and France v. Parkinson ((1954) 1 A E L R 739).

11. The main question for consideration in this case is regarding the viability of the insurance company. The insurance policy is said to have been handed-over to defendant No. 5 but it continued to remain in the name of defendant No. 2 and even the insurance company had not been informed of the transfer of the vehicle to defendant No. 5. In Mst. Hamida Begum v. Suleman Jan and others (P L D 1961 Kar. 529) it was held by Faruqui. J. that where 'A' after getting his bus insured transferred the bus to B subsequently but the policy of insurance had not been transferred in the name of B, the insurance company could not be held liable to pay damages to B in case, of an accident. A contrary view was however, taken by Khamisani, J. in Messrs Pak, Insurance Co. Ltd. v. Mst. Bashir Begum alias Farzana and others (P L D 1966 Kar. 152). It was observed in that Division Bench judgment as under :---

" Apart from that, the fact that the insurance policy was transferred on the 20th of April 1954, in the name of defendant No. 1 will not make the slightest difference in so far as the liability of the appellants is concerned. The bus in question was admittedly insured with the appellants and this insurance policy was effective from the 10th of March, 1954, to the 9th of March 1955. The incident which resulted in the death of the deceased occurred on the 20th of April 1954, during the subsistence of this insurance policy. The appellants, therefore, in our opinion, will be bound to pay the damages under the Fatal Accidents Act regardless of whether the insurance policy stood in the name of Abdul Hai Khan or in the name of Muhammad Ali Premji, Defendant No. 1."

There was also a separate judgment of Qadeeruddin, J. in that case who observed "that the mere contention that the accident took place before the transfer of the policy does not constitute a proper defence in respect of third party insurance. The defences which can be taken in respect of third party insurance by the insurers are set out in subsection (2) of section 9 of the Motor Vehicles Act, 1939. None of these provisions have been or can be invoked to justify this plea". Reliance was placed for this opinion on the case of Madras Motor Insurance Company v. Muhammad Mustafa (A I R 1961 Mad. 208) It was observed in Madras Judgment: "The statute has expressly confined the right of insured to avoid his liability to certain grounds and the Court cannot add to those grounds for reason of hardship. Any alternative view would involve the difficulty which would result in the injustice that the third parties who may be injured by any such accidents, may be unable to obtain the benefit of compulsory insurance, under a variety of circums tances such as the transfer of property in tire vehicle, or the death of the insured resulting in an immediate devolution of title by operation of law, etc."

12. It has been pointed out by Mr. Abdul Rauf that the Division Bench Judgment in P L D 1966 Kar. 162 was based on the Madras case reported in A I R 1961 Mad. 208. But that case was again overruled by Madras High Court and was not considered as good law. Consequently the Karachi view was also overruled in L. P. A. ND. 61 of 1961 by a Judg ment delivered on 3-2-1966, by I. B. Khamisani and H. T. Raymond, JJ., although this judgment was not reported. In that case also the bus involved in the accident, originally belonged to one Sulleman Jan and was transferred by him to one Mehboob Ali, and then to Muhammad Sharif Chohan. The accident then took place, but the insurance policy still continued to remain in the name of Sulleman assured. The relevant part of that judgment reads as under:----

" The second point argued by the learned counsel for the appellant was that the bus being insured in the name of respondent No. 2 and the insurance certificate issued in his name subsisting on the day of the accident, the Insurance Co. i.e. respondent No. 3 would be liable to the extent of the amount for which the vehicle was insured and would therefore to that extent indemnify the appellant. He has tried to bring his case under section 96 (1) of the Motor Vehicles Act which reads as under:----

"96(1). If, after a certificate of insurance has been issued under sub section (4) of section 95 in favour of 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 under clause (b) of subsection (1) of section 95 (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 person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

We have considered the arguments of the learned counsel and we are clearly of the view that there is no substance in them. In order to bring the case of they appellant within section 96 (1) it is necessary to establish the liability of respondent No. 3 as required to be covered by a policy under clause (6) of subsection (1) of section 95 of the Motor Vehicles Act. Clause (b) of subsection (1) of section 95 of Motor Vehicles Act reads as under:

'95 (1) (b) insures the person or classes of persons specified in the policy to the extent specified in subsection (2) against 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 the vehicle in a public place in the Provinces and the Capital of the Federation or in a reciprocating territory.'

This clause deals with the insurance of a person or classes of persons speci fied in the policy to the extent specified in subsection (2) of this section against any liability which may be incurred by him or them in respect of the death or bodily injury to any person caused by or arising out of the use of the vehicle in a public place. The other condition for the purpose of bringing the case of the appellant within section 96 (1) of the Motor Vehicles Act is that the insurers will be called upon to pay to the person entitled to the benefit of the decree any sum not exceed ing the sum assured, if a judgment in respect of such a liability is obtained against any person insured under the policy. It is quite clear in section 96 (1) that the liability of the insurers to pay to the person entitled to the "benefit of the decree will arise only after judgment against the insured has been obtained. The condition precedent therefore for the liability of the insurer is that a judgment and decree must be obtained against an insured person. In this particular case the judgment and decree has been obtained against the appellant who is admittedly not an insured person. The insured person in this case is Sulleman Jan respondent No. 2 and not the appellant. In the event of the judgment having not been obtained against Sulleman Jan, the insured, the liability of the insurers i.e. respondent No. 3, to pay to the person entitled to receive the amount for which the policy exists, will not arise. We are strengthened in our view by the case of Gyarsilal v. Sitacharan A I R 1963 Madh. Pra.

164. We are consequently of the view that respondent No. 3 is not liable to pay the whole or any part of the amount of the decree to respondent No. 1 or 2 to indemnify the appellant on account of any subsequent payment made by him to respondent No. 1."

13. In A I R 1963 Madh. Pra. 164 referred to above in Division Bench judgment of this Court this point bad been considered at great length.

It was observed in that judgment as under:----

"A motor insurance policy is a contract of personal indemnity and the assured cannot claim the insurance amount when he does not suffer any loss or damage. Where a car insured against damage, third party risks etc. is transferred by the owner to another person, the owner himself retaining no interest in the car, and if subsequently the car is involved in an accident causing damage to it and injuries to others, the owner cannot recover from the insurer any amount inasmuch as be cannot be said to have suffered any loss. Again, the purchaser of the car cannot also in the absence of an 'assignment' of the policy in his favour or a special statutory provision claim the insurance amount from the insurer. There is no such statutory provision either in the Motor Vehicles Act or in the Insurance Act about the transferee's right under a motor insurance policy.

A clause in a motor car insurance policy with regard to the transfer of the policy in the event of the sale of the car to which it relates is really not a clause with regard to the assignment of the policy. Such a policy being a contract of personal indemnity cannot be assigned; when it is transferred, there is only a novation of the contract by which the original assured is released and a new assured is accepted (1937) 4 All E R 628. Ref. to pats. 21.

Therefore, when a question is raised as regards the transfer of a motor insurance policy containing a clause regulating its transfer to the purchase of the car, then what is to be seen and determined is whether there has been a novation of the contract of personal indemnity in terms of the clause. One of the requisites for such novation is that there must be agreement of all the parties to the new contract. The consent of parties to a novation may be established by circumstances showing such assent as well as by express words. The question whether there was an agreement to substitute a new contract or not is a question of fact depending on the intention of the parties and one must look to the substance of the matter and not to mere form. The handing over of the policy by the vendor to the purchaser on the sale of a car does not by itself constitute a transfer of the policy to the purchaser."

14. Thus where a car is transferred alongwith the policy the transfer must be consented to by the insurance company. After the assent there will be a novation of the contract and the liability in respect of the transferee would be accepted by the insurance company. Section 96 (1), Motor vehicles Act, 1939 which limits the defences open to an insurance company is subject to section 95 of the same Act. Under section 95 (5) the liability of the insurer is to the person or classes of persons specified in the policy. The section reads thus:----

"Notwithstanding anything else contained in any law a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons."

Therefore, unless there is judgment against the persons insured in respect of 3rd party risk section 96 (1) will have no application. The assignment of the policy in favour of the transferee must be assented to by the insurer before the transferee can be compensated in case of a judgment against him in respect of third party risk.

15. The learned counsel for the plaintiff has referred to Sri Manmatha Nath Kuri v. Moulvi Muhammad Mokhlesur Rehman and another (P L D 1969 S C 565). But this question was not considered in that decision as the main question in that case was whether in case of judgment against persons insured against third party risk, the insurance company can be made liable to make the payment under section 96 even though the company had not been impleaded as a party. In earlier decision in the appeal filed before the High Court the insurance company was not made a party. It was held in that case that the only grounds upon which the insurance company can avoid its liability, were those mentioned in subsection (2) of section 96 and no privity of contract was necessary under section 96 to make an insurance company liable.

16. In Peter v. General Accidents and Life Assurance Corporation Limited ((1937) 4 A E L R 628) the vendor of a motor car insured by the defendants handed over the insurance policy with the car 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 car 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 defendant under the provisions of the Road Traffic Act, 1934 (section 10). It was held (i) that when the vendor sold the car the insurance policy technically lapsed; (ii) at the time of the accident the purchaser could not be said to be driving the car by the order or with the permission of the vendor as the car was then the purchaser's own property; (iii) the insured is not entitled to assign his policy to a third party. An insurance policy is a contract of personal indemnity and the insurers cannot the compelled to accept responsibility in respect of the third party who may be quite unknown to them". An attempt was made in this case to show that the handing over of policy on the sale of the car was in law an assignment of the policy. The contention was rejected upon the ground that the insurers relied upon the history of the driver. As an alternative it was sought to rely upon the clause in the policy allowing the car to be driven by any person with the permission of the insured, but the judge took the view that the insurance had already lapsed. It was observed by Goddard, J. "if you sell your car, you cannot, merely by handing over your car and saying: 'Take this policy and do what you can do with it; I assign it to you,' put the under-writers under an obligation to indemnify the purchaser when they have agreed only to indemnify the vendor".

17. Thus the insurance company was liable to compensate the Institute-the Institute could not transfer this policy but should have asked the insurance company to transfer the same in the name of the purchaser. Since this was not done the policy had lapsed.

18. The issues regarding the heirs of the deceased or the age and income of the deceased have hardly been contested. The deceased was 40 years of age and the average expectation of life being about 65 years he may have lived for 25 years more. His average earnings were Rs. 10 per day or Rs. 300 per month. In the later years these earnings would have been much more. However, even at Rs. 3,600 per year the income for 25 years would amount to Rs. 90,000.

19. In the result the suit is decreed ex parte for Rs. 90,000 against defen dants Nos. 4 and 5 jointly and severally. They shall also be liable for costs including the court-fee which should be recovered from defendant No. 5 and shall be the first charge on the amount recovered in the suit. Out of the decretal amount the plaintiff No. 1 Ruqqiya Bai may be paid her share of 1/8th and the remaining shares of the minor sons and daughters should be kept in their names in fixed deposits till they attain majority.

20. The suit is dismissed as against defendants Nos. 1, 2 and 3 with no order as to costs.

S. A. H. Suit decreed.