224 Current Law Journal [2006] 1 CLJ

RAMLI SHAHDAN & ANOR A

v.

MOTOR INSURER’S BUREAU OF WEST

MALAYSIA & ANOR
B
COURT OF APPEAL, PUTRAJAYA
GOPAL SRI RAM JCA
PAJAN SINGH GILL JCA
RAHMAH HUSSAIN JCA
[CIVIL APPEAL NO: N-01-75-1999] C
8 SEPTEMBER 2005
CONTRACT: Privity - Exception - Contract made between two parties
for benefit of third party - Rights of third party
D
CONTRACT: Rescission - Mutual agreement - Whether agreement is
extinguished when recinded by mutual agreement of both parties and
substituted with new agreement

DAMAGES: Personal injuries - Uninsured motorist - Claim against

Motor Insurers Bureau of Malaysia - Whether claim can be pursued if E
judgment obtained after 31 December 1991

This appeal concerned the impact of two agreements signed

between the 1st and 2nd respondents as against the rights of the
1st and 2nd appellants. The said agreements are referred to as the F
1st agreement and 2nd agreement respectively.

The 1st appellant was riding his motorcycle when he was collided
into by another motorcycle bearing registration number NF 7486
ridden from the opposite direction by a motorcyclist who had no G
third party risk coverage at the time of the accident. The 2nd
appellant was the pillion rider of the 1st appellant, and both
appellants suffered grave injuries as a consequence of the collision.
On 6 May 1988 the appellant’s solicitors wrote to the 1st
respondent to give them notice that the appellants were instituting H
proceedings against Wan Kon Chah, the rider of the motorcycle,
registration number NF 7486. Court proceedings were then
commenced at the Seremban High Court by the appellants, and a
copy of the said summons was served on the 1st respondent.
I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 225

A On 1 January 1992 a new agreement was entered into between

the 1st respondent and the 2nd respondent. Clause 3 of this 2nd
agreement provided as follows “This agreement shall apply to all
claims preferred against the Bureau excluding any court awards
which remain unsatisfied as at 1 January 1992.”
B
On 3 September 1993, judgment was entered against the
uninsured rider of motorcycle, NF 7486 at the High Court at
Seremban. Armed with the judgment, the appellants’ solicitors
wrote to the 1st respondent on 11 October 1993 and 12
C November 1993, making no reference to the judgment obtained,
but instead referred to the claim forms which had been earlier sent
to the 1st respondent, and requesting an amicable settlement to
the matter. On 19 November 1993, the 1st respondent wrote
back offering the appellants a compassionate sum of RM8,200 to
D Ramli bin Shahdan and RM4,450 to Lim Chong Lai. Dissatisfied
with this proposal, appellant’s solicitors filed an originating
summons against the 1st and 2nd respondents.

The 1st respondent raised the issue for locus of the appellants to
sue, as the appellants were not parties to the 1st and 2nd
E
agreements, and had not given any consideration on the said
agreement. Another issue arising was in relation to the validity of
the 1st and 2nd agreements. The appellants’ counsel argued that
the collision occurred during the tenure of the 1st agreement, and
through the correspondence that ensued, they were entitled to the
F
full advantage of the 1st agreement, namely cl. (2) which would
entitle the appellant in whose favour judgment was obtained of
any sum payable thereunder.

Held (dismissing the appeal with costs)

G Per Pajan Singh Gill JCA:

[1] When a contract as in the present case is made between the

1st respondent and 2nd respondent for the benefit of the
appellants, then the 2nd respondent can sue on the contract
H for the benefit of the appellants, and recover all that the
appellants would have recovered as if the contract had been
made by the appellant himself. If the 2nd respondent fails in
his duty, the appellants as beneficiaries under the implied trust,
may successfully maintain an action against the 1st respondent
I and 2nd respondent as joint defendants. This issue of locus
of the appellants, to sue, was for purposes of the appeal cadit
quaestio.
226 Current Law Journal [2006] 1 CLJ

[2] From the purport of both the 1st and 2nd agreements it was A
the intention of the contracting parties that the 1st agreement
be terminated, and be substituted by the 2nd agreement.
From a plain reading of cl. l(b) of the 2nd agreement, there
was an unequivocal intention by both the 1st and 2nd
respondents to mutually rescind the 1st agreement. The effect B
of such a recession by mutual agreement is clear, the first
contract is extinguished. This is unlike a variation, when the
old contract continues to exist in the altered form. The 2nd
agreement nullified the effect of the 1st agreement making it
inoperative. Therefore, the submissions of the appellant that C
they were entitled to their rights in damages as per the 1st
agreement was “dead in the water”, as there was no
obligation on the 1st and 2nd respondents to perform any
bargain or obligations under the 1st agreement.
D
[3] The effective date of the judgment entered in favour of the
appellant against the uninsured party also militated against the
submissions of the appellants that they were entitled to their
claims under the 1st agreement. For the purpose of the
agreements in question, what was imperative for purposes of E
enforcement against the 1st respondent was a “judgment”.
The effective judgment in this respect was dated 3 September
1993, which in effect took the judgment out of the compass
of the 1st agreement that was deemed ineffective at that point
of time. Bearing in mind the date of the judgment, the F
termination of the 1st agreement on 31 December 1991 and
cl. 3 of the 2nd agreement, the said judgment fell out of the
sphere of the 1st and 2nd agreements.
Case(s) referred to:
G
Gregory and Parker v. William [1817] 3 Mer 582 (refd)
Gurtner v. Circuit [1968] Vol 1 Lloyd’s Law Reports 171 (refd)
New Indian Assurance Co Ltd v. Simirah [1966] 2 MLJ 4 (refd)
Polygram Records Sdn Bhd v. The Search & Anor [1994] 3 CLJ 806 HC
(refd)
Tomlinson v. Gill [1756] Amb 330 (refd) H
United Dominions Corp (Jamaica) Ltd v. Michael Mitri Shouciar [1969] 1
AC 340 (refd)

Legislation referred to:

Contracts Act 1950, s. 63
I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 227

A For the appellant - Manian Raju (D Krishna with him); M/s Gunaretnam &
Co
For the 1st respondent - Kanagasabapathi (Woo Kok Wai with him);
M/s Kenaga, Suresh & Co
For the 2nd respondent - Mary Lim (Maheran Md Isa & Mohaji Selamat
with her)
B
Reported by Amutha Suppayah

JUDGMENT
C
Pajan Singh Gill JCA:
In this appeal before us, we were called upon basically to
determine the impact of two agreements signed between the 1st
and 2nd respondents as against the rights of the 1st and 2nd
D appellants.

For the purpose of this judgment, the said agreements have been
referred to as the 1st agreement and 2nd agreement respectively.

Historical Background
E
The Motor Insurers Bureau of Malaysia was conceived in social
justice and was born into the then, Road Traffic Ordinance 1958
(now The Road Traffic Act 1987). The basis of this provision in
the said ordinance was to recognise to some extent the
unfortunate position of victims of road accidents, where
F
experience has shown, by reason of legal technicalities, that
innocent victims, despite the requirements of Compulsory Third
Party Insurance, failed to obtain any compensation. See New
Indian Assurance Co. Ltd v. Simirah [1966] 2 MLJ p. 4.
G Mechanism Involved In The Setting Up Of Motor Insurers
Bureau
The Motor Insurers Bureau does not exist as an Insurance
Company, but is premised on an agreement entered into on 15
January 1968, between the Bureau and the Minister of Transport.
H It states in so far as is material, that:
... the Bureau will, subject to the provisions of these presents, pay
or cause to be paid to the person or persons in whose favour
such judgment was given any sum payable or remaining payable
thereunder in respect of the aforesaid liability including taxed costs
I
... or satisfy or cause to be satisfied such judgment.
228 Current Law Journal [2006] 1 CLJ

So much for the origins of the Motor Insurers Bureau and the A
manner in which it operates. Now to the issues at hand.

Chronology Of Event
In the present instance, the 1st appellant was riding a motorcycle,
registration number NG 8397, along the Jalan Sepang, Salak road B
from the direction of Sepang to Salak on 4 May 1985 at about
7.30pm, whereupon he was collided into by a motorcycle,
registration number NF 7486 ridden from the opposite direction.
The said motorcyclist, Wong Kon Chah riding motorcycle,
registration number NF 7486 had no third party risk coverage at C
the time of the accident. This is borne out by a letter dated 26
October 1985 written by the said Wong Kon Chah to the
appellant’s solicitors. The 2nd appellant was pillion rider of the 1st
appellant, and both appellants apparently suffered grave injuries as
a consequence of the collision. D

Following a letter dated 26 October 1985, from the said Wong

Kon Chah, the appellant’s solicitors Messrs Gunaretnam & Co. at
the behest of the appellant wrote to the 1st respondent, putting
him on notice that the appellant’s solicitors were in the process
E
of commencing proceedings against the 1st respondent.

After a series of correspondences between the appellant’s solicitors

and the 1st respondent; on 6 May 1988 the appellant’s solicitors
wrote to the 1st respondent to give them notice that the
appellants were instituting proceedings against Wan Kon Chah, F
the rider of the motorcycle, registration number NF 7486. The
said letter bears reproduction:
GUNARETNAM & CO.
Advocates and Solicitors G
No. 14, Jalan Dato’ Abdul Rahman
(Jalan Wilkinson)
Seremban, N.S.

6th May, 1988 H

Claim File 579/86

G/V/5325 (VK)

I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 229

A Messrs Motor Insurers’ Bureau

Of West Malaysia
3rd Floor, WismaPIAM
150, Jalan Tun Sambanthan
50470 Kuala Lumpur A.R. REGISTERED
B Dear Sirs,

Re: Notice to Motor Insurers Bureau of West Malaysia of

proceedings against An uninsured owner of vehicle

As Solicitors for and on behalf of Ramli bin Shahdan of 26,

C Peringkat 11, Kg. LBJ, 71760 Seremban and Lim Chong Lai of
144, Taman Salak, Sepang, Selangor, we hereby give you Notice
pursuant to the Agreement dated the 12th day of December, 1967
made between the Minister of Transport of the one part and the
Motor Insurers Bureau of the other part, that the said Ramli bin
D Shahdan and Lim Chong Lai intend to institute proceedings in
Court against Wan Kon Cha, 79, Ladang Bute, Nilai Pos,
Seremban, for damages in respect of personal injuries arising out
of a motor vehicle accident involving a motorcycle bearing
registration number NF 7486 belonging to the said Wan Kon
Chah which said vehicle was at all material time uninsured.
E
Dated the 6th day of May, 1988.

Yours faithfully,

Sgd: xxx
F
Court proceedings vide Civil Action 23-73-90 were then
commenced at Seremban High Court by the appellant, and a copy
of the said summons was served on the 1st respondent.

On 19 July 1990, the 1st respondent wrote to the appellant

G
wherein reference was made in the said letter to cl. 6(d) of the
1st agreement, and simultaneously proposing an out of court
settlement. Once again, it is pertinent that the said letter be
reproduced:
H

I
230 Current Law Journal [2006] 1 CLJ

MOTOR INSURERS’ BUREAU OF WEST MALAYSIA A

Telephone: 2747395/6/7/8/9
Cable: PERINSURAN KUALA LUMPUR

Registered Office: 3rd Floor

Wisma PIAM B
150, Jalan Tun Sambanthan
50470 Kuala Lumpur
Postal Address: P.O. Box
12555
50782 Kuala Lumpur C

Your Ref: G/V/5325(VS)

19th July, 1990

M/s Gunaremam & Co.,

D
14, Jalan Dato’ Abdul Rahman
70000 SEREMBAN

Dear Sirs,

Re: Our Ref: Claim File 579/86 Accident on 3.5.1985 involving

E
motor cycle NG 8397 and NF 7486

We refer to your letter of 31st May, 1990 together with a copy

of the Summons.

Please let us have your clients minimum quantifications for

F
settlement out of Court.

Meanwhile no doubt actions have been filed in Court, we

appreciate that you withhold further Court proceedings to the
matter – Clause 6(d) of the MIB Agreement refers.
G
We await your reply,

Yours faithfully,

By Order of the Council

Sgd. xxx H
Senior Claims Executive

I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 231

A On 19 September 1990 Messrs Wong Seng Chow, Nagarajah &

Co. wrote to the appellant’s solicitors informing them that they
had been retained as solicitors for the 1st respondent, and had
instructions to accept service of process in respect of this matter.
Thereupon a flurry of correspondence was exchanged between the
B solicitors and from what we gather, the appellants were moving
towards setting the action down for trial in the High Court of
Seremban. The agreed and disagreed bundle of documents were
for instance, filed in court.

C However, on 16 January 1992, a letter was issued from the office

of 1st respondent’s solicitors which is reproduced:
Wong Seng Chow, Nagarajah & Co.
Peguambela & Peguamcara
Advocates & Solicitors
D
Partners First Floor
Dato’ Wong Seng Chow Standard Chartered
Miss Nagarajah Bank Chambers
Jalan Dato’ Bandar
Tunggal
E
70000 Seremban
Negeri Sembilan
Malaysia

Your Ref: KG/V/5325

F Our Ref: (NR) 90185 (MIB)

16th January, 1992

BY HAND

Without Prejudice
G
Messrs. Gunaretnam & Co.
Advocates and Solicitors
No. 14, Jalan Dato’ Abdul Rahman
(Jalan Wilkinson)
H
70000, Seremban

Dear Sirs,

Re: Seremban High Court Sivil Suit

Number 23-73 of 1990
I
232 Current Law Journal [2006] 1 CLJ

We refer to the above captioned matter. A

We have been instructed by our clients the Motor Insurers’

Bureau of West Malaysia to enquire as to whether your clients
are amenable to an early settlement of the above suit. If so,
kindly let us have your views on liability and the minimum figures
your clients have in mind for a quick settlement. B

Please let us have a reply at your earliest convenience.

Yours faithfully,

Sgd: xxx C
c.c.
Claims Executive
Motor Insurers’ Bureau of West Malaysia
3rd Floor, Wisma PIAM
150, Jalan Tun Sambanthan
D
50470 Kuala Lumpur (Ref: Claim File 579/86)

The appellant’s solicitors in response to the request for settlement,

on 5 May 1992 wrote a rather detailed opinion to the 1st
respondent, setting out the extent of injuries to both the
appellants, and suggesting in the said letter a region for settlement E
on both general and special damages.

There was, however, a turn of event for the course of the

correspondence as a new agreement on 1 January 1992 was
entered into between the 1st respondent and the 2nd respondent, F
resulting in the termination of the services of Messrs. Wong Seng
Chow, Nagarajah & Co. as solicitors for the respondent.

From the correspondence that crystallized, the application for

withdrawal of solicitors of Wong Seng Chow, Nagarajah & Co.
G
was scheduled for hearing on 25 September 1992, but despite
this, the appellant’s solicitors diligently kept writing to the
respondent’s solicitors, requesting a reply to their proposal for
settlement. Eventually, a court order of 11 December 1992
granting the firm of Wong Seng Chow, Nagarajah & Co.
H
withdrawal of services, was obtained and served on the appellant’s
solicitors in February 1993.

I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 233

A From that date forward, the appellant’s solicitors wrote directly to

the 1st respondent informing them about the progress of the case,
in terms of fixing the dates of the case at the Seremban High
Court. Of pertinence is a letter dated 7 May 1993 wherein the
appellant had informed the 1st respondent that they were
B proceeding to trial, to obtain judgment against the uninsured party,
and thereafter seek to enforce the judgment against the 1st
respondent.

In response to this, the 1st respondent by letter on 12 May 1993

C had this to say:
MOTOR INSURERS’ BUREAU OF
WEST MALAYSIA

Telephone: 2747395/6/8/9
D Cables: PERINSURAN KUALA LUMPUR

Registered Office: 3rd Floor

Wisma PIAM
150, Jalan Tun Sambanthan
50470 Kuala Lumpur
E Postal Address:P.O. Box 12555
50782 Kuala Lumpur

Your Ref: M/V/5324

12th May 1993

F M/s Gunaremam & Co.

14, Jalan Dato’ Abdul Rahman
70000 SEREMBAN

Dear Sirs,

G Re: Our Ref: Claim File 579/86

Accident on 3.5.1985 involving
Motor cycles NG 8397 and NF 7486

We refer to your letter of 7th May 1993.

H The Bureau is not responsible for the Judgment which you intend
to obtain this case. Please refer the same direct to the Defendant.

WITHOUT PREJUDICE

Nonetheless, if your clients wish the Bureau to consider their

I claim, please request each of them to complete and return our
Claim Form (2 sets are enclosed).
234 Current Law Journal [2006] 1 CLJ

Yours faithfully, A

By Order of the Council

Sgd: xxx
Secretary
B
In compliance, however, to the aforesaid letter in respect of the
claim forms, the appellant’s solicitors had on 6 July 1993,
completed and executed the said claim forms of the 1st and 2nd
appellants. We interject by stating here that the act of the
appellants in completing the claim forms, did have a bearing on the C
outcome of this decision. We would elaborate on this aspect in
the latter part of our judgment. For the record, the claim forms
were annexed and adduced in evidence.
On receipt of the said forms, the 1st respondent wrote to the
D
appellant’s solicitors on 19 July 1993 and the letter reads as
follows:
MOTOR INSURERS’ BUREAU OF WEST MALAYSIA

Telephone: 2747395/6/7/9 E
Cables: PERINSURAN KUALA LUMPUR

Registered Office, 3rd Floor

Wisma PIAM
150, Jalan Tun Sambanthan
50470 Kuala Lumpur F
Postal Address:P.O.Box 12555
50782 Kuala Lumpur

Your Ref: M/V/5325

19th July 1993
G
M/s Gunaretnam & Co.
14, Jalan Dato’ Abdul Rahman
70000 SEREMBAN

Dear Sirs,
H
Re: Our Ref: Claim File 579/86
Accident on 3.5.1985 involving
Motor cycles NG 8397 and NF 7486

We refer to your letter of 6th June 1993.

I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 235

A The matter shall be referred to the Bureau’s Council and we shall

revert to you on their decision in due course.

Yours faithfully,
By Order of the Council

B Sgd:
Secretary

Whilst this was in progress, on 2 August 1993, Messrs W.M.

Cheong & Associates came on record as solicitors for the 1st
C
respondent, and filed the notice of change of solicitors.

On 3 September 1993, judgment was entered against the

uninsured rider of motorcycle, NF 7486 at the High Court of
Seremban. Counsel for the appellants was present, and one Mr.
Sundra Siva, who was present, presumably acting on behalf of the
D 1st respondent.

Armed with the judgment, the appellant’s solicitors wrote to the

1st respondent on 11 October 1993 and 12 November 1993,
making no reference to the judgment obtained, but instead referred
E to the claim forms sent by the 1st respondent, and requesting an
amicable settlement to the matter.

On 19 November 1993, the 1st respondent wrote in response to

the previous letter of the appellant and this letter reads as follows:
F MOTOR INSURERS’ BUREAU OF WEST MALAYSIA

Telephone:2747395/6/7/8/9
Cables: PERINSURAN KUALA LUMPUR

Registered Office: 3rd Floor

G Wisma PIAM
150, Jalan Tun Sambanthan
50470 Kuala Lumpur
Postal Address:P.O.Box 12555
50782 Kuala Lumpur
H
Your Ref: M/V/5324
Our Ref: Claim File 579/86

I
236 Current Law Journal [2006] 1 CLJ

WITHOUT PREJUDICE A

19th November 1993

M/s Gunaretnam & Co.

Jalan Dato’ Abdul Rahman
70000 SEREMBAN B

Dear Sirs,

Re: Accident on 3.5.1985 involving M/cycle NG 8397 and m/

cycle NF 7486
C
We refer to our letter dated 10th November 1993.

We are pleased to inform that the Bureau’s Council upon

consideration of your client’s claim has agreed to award a
compassionate sum of RM8,200.00 to Ramli bin Shahdan and
RM4,450.00 to Lim Chong Lai. D

Kindly provide us with a copy of your client’s I/C (both sides)

to enable us to prepare the necessary Discharge Papers for their
completion.

Do let us have the above document within 3 months from the E

date hereof failing which we would assume your client’s is not
interested in the above matter and close our file accordingly.

Yours faithfully,

By Order of the Council F

Sgd: xxx
Claims Executive

Obviously dissatisfied with this proposal, the indefatigable

appellant’s solicitors, then embarked in correspondence with the G
Minister of Transport.

Not having a favourable reply to the latest correspondence, must

have been the proverbial “straw that broke the camel’s back”, for
an originating summons been filed thereafter on 27 March 1995 H
against the 1st and 2nd respondents.

We have deliberately laid out rather laboriously the series of

conduct and correspondence between the parties, as we find that
it has an important bearing to the issues of law that were argued
I
during the appeal before us, and before the trial judge.
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 237

A Now what are the issues of law?

Privity Of Contract, Do The Plaintiffs Have A Locus To

Sue?
Admittedly this area of law was not argued in great detail, whilst
B the matter was heard on appeal, but we wish all the same to
comment on it. Suffice to say, in the court below, issue was taken
by the 1st respondent on the locus of the appellants to sue, as
the appellants were not parties to the 1st and 2nd agreement, and
had not given any consideration to the said agreement.
C
To this issue, we universally adopt the views propounded by the
erudite judge Lord Denning, who we note treated the relationship
and position of a Motor Insurers Bureau as a unique entity, a
league of its own, so to speak, which goes against convential
wisdom, in area of privity of contract. In Gunner v. Circuit [1968]
D
Vol. 1, Lloyd’s Law Reports 171 (Court of Appeal) at 176, Lord
Denning held:
Then the plaintiff will be able to come down on the Motor
Insurers’ Bureau and call upon them to pay because they have
E made a solemn agreement that they will pay ...

It is true that the injured person was not a party to that

agreement between the Bureau and the Minister of Transport and
he cannot sue in his own name for the benefit of it. But the
Minister of Transport can sue for specific performance of it.
F
He can compel the Bureau to honour its agreement by paving the injured
person, see Beswick v. Beswick [19671 3 WLR 932, (emphasis added).
If the Minister of Transport obtains an order for specific
performance, the injured person can enforce it for his own benefit,
see by Lord Pearce in [1967] 3 WLR, at p. 952 E. to G. If the
G
Minister of Transport should hesitate to sue, I think it may be open to
the plaintiff to make him a defendant: and thus compel performance ...
(emphasis added).

On our part we are aware that the doctrine of privity, while not
H an irrational doctrine from the nature of a contract, has in
particular incidence caused injustice and proved inadequate to
modern needs. In such circumstances, it is not surprising that
various attempts have been made to induce courts to sanction
evasions of the doctrine.
I
238 Current Law Journal [2006] 1 CLJ

Reported case laws had indicated a considerable measure of A

success in this respect. It has been observed for instance that an
undisclosed principal could sue on a contract made by another.
By the rules governing negotiable instruments, it has long been
established, first by custom of law merchant, then by judicial
decision, and finally by statute that a third party may sue on a B
basis of exchange or a cheque. Equally, we find in the sphere of
insurance, there are several situations where a policy may avail for
the benefit of persons who have not themselves effected the
policy. Further, the usage of trade and commerce have modified
the rigours of common law doctrine of privity of contract. C

Outside this scope, litigants have from time to time been able to
invoke the assistance of equity.

As early as 1753, Lord Hardwicke indicated the possibilities of a

D
trust situation being created. His Lordship was prepared, in a case
where for example A promised to B to pay money to C, to regard
B as trustee for C for the benefit of the contract. See Tomlinson
v. Gill [1756] Amb 330.

In 1917, Sir William Grant affirmed the concept of the possibilities E

of a trust in the case of Gregory and Parker v. William [1817] 3
Mer. 582. In this case, Parker owed money to both Gregory and
Williams. He agreed with Williams to assign to him the whole of
his property, if Williams would pay the debt due to Gregory, but
Williams failed to implement his promise. Gregory and Parker filed F
a bill in equity to compel performance of the promise and
succeeded. It was held that Parker must be regarded as a trustee
for Gregory, and he (Gregory) derived an equitable right through
the mediation of Parker’s agreement.
G
Against this backdrop we can say with equanimity that when a
contract as in our present instance is made between 1st
respondent and 2nd respondent for the benefit of the appellants,
then 2nd respondent can sue on the contract for the benefit of
the appellants, and recover all that the appellants would have H
recovered as of the contract had been made by the appellant
himself. Implicit in this proposition of ours, is the fact that if the
2nd respondent fails in his duty, the appellants as beneficiaries
under the implied trust, may successfully maintain an action against
the 1st respondent and 2nd respondent as joint defendants. This I
issue of locus of the appellants, to sue, is for purposes of this
appeal cadit quaestio.
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 239

A Validity Of The 1st And 2nd Agreement

The above issue was the central thrust of argument of both the
appellant and respondent before us, and in the court below.

The 1st agreement dated 15 January 1968 was tendered as an

B exhibit, and for clarity we reproduce:
MEMORANDUM OF AN AGREEMENT made and entered
into by and between TAN SRI HAJI SARDON BIN HAJI
JUBIR, P.M.N. in his capacity as THE MINISTER OF
TRANSPORT of the Government of Malaysia (hereinafter called
C “the Minister”) of the one part, and MOTOR INSURERS’
BUREAU of WEST MALAYSIA a Company duly incorporated
with limited liability according to the laws of MALAYSIA
represented herein by YEOH TAT THONG he being duly
authorized thereto by a Resolution of the Council bearing date the
12th day of December, 1967, (hereinafter called “the Bureau”) of
D
the other part.

WHEREAS the Minister and Those Insurers Authorised to

Transact Compulsory Motor Vehicle Insurance in West Malaysia
(hereinafter called “the Insurers”) have agreed that the Bureau
E should be incorporated under the Companies Act 1965 and that
the parties should thereafter enter into the agreement set forth
below.

NOW THEREFORE THIS AGREEMENT WITNESSETH:

F 1. THE operative date of this Agreement shall be fifteenth day

of January, 1968.

2. IF judgment in respect of any liability which is required to

be covered by a policy of insurance under Part IV of the
Road Traffic Ordinance 1958 (hereinafter called “the
G Ordinance”) is obtained against any person or persons in
any Court in West Malaysia and either at the time of the
accident getting rise to such liability there is not in force a
policy of insurance as required by the Ordinance or such
policy is ineffective for any reason other than inability of the
Insurer to make payment and any such judgment is not
H
satisfied in full within twenty-eight days from the date upon
which the person or persons in whose favour such judgment
was given became entitled to enforce it then the Bureau will,
subject to the provisions of these presents, pay or cause to
be paid to the person or persons in whose favour such
I judgment was given any sum payable or remaining payable
thereunder in respect of the aforesaid liability including taxed
costs (or such portion thereof as relates to such liability) or
satisfy or cause to be satisfied such judgment.
240 Current Law Journal [2006] 1 CLJ

3. THIS Agreement may be terminated by the Minister at any A

time or by the Bureau on two years notice without prejudice
to the continued operation of this Agreement in respect of
accidents occurring before the date of termination.

4. THIS Agreement shall not apply if the injury or death giving

rise to the claim resulted from an accident which occurred B
before the operative date of this Agreement.

5. NOTHING in this Agreement shall prevent the Insurers (or

any of them) from providing by conditions in their contracts
of insurance or by collateral agreements that all sums paid
C
by them on behalf of the Bureau or by the Bureau by virtue
of this Agreement in or towards the discharge of the liability
of their policyholder shall be recoverable by them or by the
Bureau from the policyholder or from any other person.

6. THE following shall be conditions precedent to the liability D

of the Bureau, namely:

(a) That written notice of proceedings be given by registered

post before commencement of such proceedings:

(i) to the Insurer in any case in which there was in E

force at the time the accident occurred a policy of
insurance purporting to cover the use of the vehicle,
the existence of which is known before the
commencement of proceedings to the person bringing
such proceedings (hereinafter called “the Plaintiff).
F
(ii) To the Bureau in any other case,

(b) That a copy of any Summons, Declaration or any

statement of claim which may be issued shall be supplied
to the Insurer or the Bureau, as the case may be, and
that the Plaintiff shall not seek to obtain judgment before G
the expiry of thirty days from the date the copy of such
Summons, Declaration or statement of claim shall have
been supplied to the Insurer or the Bureau, unless within
the said period of thirty days the person against whom
the Plaintiff has taken proceedings issues any process H
which would lead to the dismissal of such proceedings for
want of prosecution.

(c) That if so required by the Bureau and subject to full

indemnity from the Bureau as to reasonable costs the
Plaintiff shall take all reasonable steps to obtain judgment I
against any person against whom he may have a remedy
in respect of or arising out of the injury or death giving
rise to the aforesaid proceedings.
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 241

A (d) That the Plaintiff shall comply with all requirements of

the Bureau in relation to any matter which might give
rise to a claim against the Bureau in terms of this
Agreement, provided that the Plaintiff shall not be bound
by the terms of this paragraph unless the requirements
of the Bureau are in all the circumstances reasonable. In
B
the event of any dispute as to the reasonableness of any
requirement, the decision of the Minister shall be final
and binding on all parties concerned.

(e) That the judgment or judgments (including such

C judgments as may be obtained under paragraph (c) of
this Clause) shall be ceded to the Bureau or its nominee.

(f) That the Plaintiff shall give credit to the Bureau for any
amount paid to him by or on behalf of the Defendant in
respect of any liability for injury to or death of any
D person, arising out of the event which occasioned the
claim against the Bureau. In the event of such amount
including a sum in respect of loss of or damage to
property, the amount of which is not separately specified
then the amount of the credit to the Bureau shall be in
the same proportion as the amount of the claim for
E
injury or death of any persons bears to the total claim
where such claims included an amount in respect of loss
or damage to property.

7. WHEN notice of proceedings has been given under Clause

F 6 it shall be competent for the Bureau at any time before
date set down for the hearing of the action to offer to the
Plaintiff in full satisfaction of the obligation of the Bureau
such sum as they consider sufficient in respect of any claim
made together with the equivalent of the taxed costs to the
date of such offer. If such offer is not accepted and in any
G ensuing action the Plaintiff is awarded in respect of his claim
for injury to or death of any person not more than the sum
offered under this Clause (exclusive of the sum for such
costs) then in satisfaction of their undertaking under this
Agreement the Bureau shall not be required to pay more
H than the total amount awarded together with the sum offered
in respect of costs and shall be entitled to set off any costs
incurred by them after the date of the offer against any
amount awarded the Plaintiff.

I
242 Current Law Journal [2006] 1 CLJ

8. (a) The acceptance of liability by the Bureau under Clause A

2 in respect of any vehicle the use of which is required
to be covered by a policy of insurance shall extend to
the use of a vehicle to which Section 74 of the Ordinance
does not apply by virtue of sub-section (5) of that
Section only so long as there is in force a policy of
B
insurance purporting to cover such use of the vehicle.

(b) For the purpose of this Clause such a vehicle which has
been unlawfully removed from the possession of the
person legally entitled to possession for the time being
shall be taken to continue in that possession whilst it is C
so removed.

9. THIS Agreement shall not apply to the use of a vehicle:

(a) in respect of which there is a security complying with

Section 77 of the ordinance. D

(b) which has entered West Malaysia through the frontier

with Thailand unless such vehicle is registered in
accordance with Section 6 of the Road Traffic Ordinance,
1958 of West Malaysia or with Section 6 of the Road
Traffic Ordinance, 1961 of the Republic of Singapore. E

10. THE Minister undertakes to ensure that every person

hereafter authorized as an Insurer for the purposes of Part
IV of the Ordinance will undertake to become a member of
the Bureau as a condition of such authorization.
F
11. IN this Agreement, “judgment” shall mean only a judgment
in favour of the person who suffered bodily injury, his
dependants or legal personal representative.

The 2nd agreement dated 1 January 1992 was in the words of

G
the preamble to the said agreement, a substitute to the 1st
agreement, and was deemed to have rescinded the 1st agreement.
For full effect to the said Agreement is reproduced:
MEMORANDUM OF AN AGREEMENT
BETWEEN THE MINISTER OF TRANSPORT H
AND THE MOTOR INSURERS’ BUREAU OF
WEST MALAYSIA

MEMORANDUM OF AN AGREEMENT (hereinafter referred

to as “the Agreement”) made and entered into by and between
Y.B. Dato’ Seri Dr. Ling Liong Sik in his capacity as THE I
MINISTER OF TRANSPORT of the Government of Malaysia
(hereinafter called “the Minister”) of the one part,
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 243

A and

MOTOR INSURERS’ BUREAU OF WEST MALAYSIA, a

Company duly incorporated with limited liability according to the
laws of MALAYSIA represented herein by Mr. Lawrence Pereira
he being duly authorized thereto by a Resolution of the Council
B bearing the date 9th January 1992 (hereinafter called “the Bureau”)
of the other part.

WHEREAS the Minister and the Bureau have agreed that the
Agreement set forth below shall substitute the previous agreement
between the parties that was entered into on the 16th day January
C
1968 (hereinafter referred to as the “Principal Agreement”).

l. (a) The operative date of this Agreement shall be the 1st

day of January 1992.

(b) The Minister of Transport and the Bureau shall be

D
deemed to have mutually rescinded the Principal
Agreement on the 31st day of December 1991.

2. The Bureau may subject to Clause 10 here of and upon

application by a Claimant, consider to make at its absolute
E discretion, compassionate payments or allowances to persons
injured and to the dependants of persons killed through the
use of Motor Vehicles which do not have in force a policy
of insurance as required under Part IV of the Road
Transport Act 1987 (hereinafter referred to as “the Act”) or
where such policy is ineffective for any reason other than the
F
inability of the insurer to make payment.

6. This Agreement shall apply to all claims preferred against

the Bureau excluding any court awards which remain
unsatisfied as at the 1st day of January 1992.
G 7. NOTHING in this Agreement shall prevent the Insurers
(or any of them) from providing by conditions in their
contracts of insurance or by collateral agreements that all
sums paid by them on behalf of the Bureau or by the
Bureau by virtue of this Agreement in or towards the
H discharge of the liability of their policyholder shall be
recoverable by them or by the Bureau from the
policyholder or from any other person.

I
244 Current Law Journal [2006] 1 CLJ

8. Where legal proceedings have been commenced against A

any person or persons arising out of a vehicular collision,
written notice of such proceedings together with a
certified copy of the Summons, Statement of Claim,
Police Reports, Medical Reports and all other relevant
supportive documents shall be supplied to the Bureau
B
within 30 days of the issuance of any legal process.

9. All claims against the Bureau shall be made within the

period of three years from the date of accident or such
further period as the Bureau may grant.
C
7. If the Bureau so requires, the Claimant shall subject
to full indemnity from the Bureau as to costs that may
be incurred, pursue with legal process until judgment,
against any person whom he may have a cause of
action.
D
8. The Claimant shall at all times, or from time to time
comply with all requirements of the Bureau in relation
to any matter which might give rise to a claim against
the Bureau in terms of this Agreement.

9. That the award, to the extent of any compassionate E

payment or allowances if any, made by the Bureau
pursuant to Clause 2 hereof, shall be ceded to the
Bureau or its nominee.

10. This agreement shall not apply to the use of a vehicle:

F
(a) in respect of which there is a security complying
with Section 93 of the Act.

(b) which has entered Malaysia through the frontiers

with Thailand, Indonesia and Negara Brunei
Darussalam unless such vehicle is registered in G
accordance with Section 7 of the Act, or with
Section 6 of the Road Traffic Ordinance, 1961 of
the Republic of Singapore or similar provisions of
the relevant Acts of Indonesia and Negara Brunei
Darussalam. H

11. The Minister undertakes to ensure that every person

hereinafter authorized as an Insurer for the purposes
of part IV of the Act will undertake to become a
member of the Bureau as a condition of such
authorization. I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 245

A 12. This Agreement may be terminated by the Minister at

any time or by the Bureau on two years’ notice
without prejudice to the continued operation of this
Agreement in respect of accidents occurring before the
date of termination.
B 13. In this Agreement:

(i) “Judgment” shall mean only judgment in favour of

the person who suffered bodily injury, his
dependants or legal personal representative.
C (ii) “Claimants” means persons injured or the
dependants of persons killed through the use of
motor vehicles which do not have in force a policy
of insurance as required under Part IV of the Act
or where such policy is ineffective for any reason
D other than the inability of the Insurer to make
payment.

The construction of the two agreements, together with the date

of the accident, course of conduct of the parties during the
tenure of the 1st agreement and 2nd agreement, and the date of
E
judgment subsequently obtained in respect of the uninsured party
had an important impact on the judgment arrived by us on the
matter.

In a nutshell much emphasis was placed by the appellant’s

F counsel on the fact that the collision occurred during the tenure
of the 1st agreement, and through the correspondence that
ensued, that they were entitled to the full advantage of the 1st
agreement, namely cl. (2) which would entitle the appellant in
whose favour judgment was obtained of any sum payable
G thereunder in respect of the aforesaid adjudged liability.

Clause (2) of the 2nd agreement, however, gives the Bureau,

subject to cl. 10 an absolute discretion to make “Compassionate
Payments” (emphasis is ours) or “Allowances” to persons injured,
H or to dependants of person killed in a motor accident where motor
vehicle did not have a valid policy of insurance as required under
Part IV of the Road Traffic Act 1987.

I
246 Current Law Journal [2006] 1 CLJ

We can well thus understand the anxieties of the appellants in A

their dogmatic persistence that their rights to recovery of damages
were governed by the 1st agreement in view of the marked
difference as to the payment between the 1st and 2nd agreement.
However, on deliberation we are sanguine enough to hold that
from the purport of both the 1st and 2nd agreement it was the B
intention of the contracting parties that the 1st agreement be
terminated, and substituted by the 2nd agreement.

How Do We Come To This View?

From a plain heading of cl. 1(b) of the 2nd agreement we find it C
apparent, that there was an unequivocal intention of both the 1st
and 2nd respondents to mutually rescind the 1st agreement.

Effect Of Such Recession Of The 1st Agreement In Law

The effect of such a recession by mutual agreement is clear, the
D
first contract is extinguished. This is unlike a variation, when the
old contract continues to exist in the altered form. See Chitty on
Contracts above at para 1595. In the Privy Council’s decision in
United Dominions Corp. (Jamaica) Ltd v. Michael Mitri Shouciar
[1969] 1 AC 340 Lord Devlin said “if the new agreement reveals
E
an intention to rescind the old, the old goes, and if it does not,
the old remains in force and unamended”

The position in s. 63 of our Contracts Act 1950 is similar. It

provides “if parties to a contract agree to substitute a new
contract for it, or to rescind, or alter it, the original contract need F
not be reformed”.

Section 63, we note covers situations not only limited to the scope
of novation, but also when parties have rescinded an earlier
contract, and substituted a new one which we plainly see in the G
instance, from the tenor, and wording of the 2nd agreement.
Flowing from this, it is our view that the 2nd agreement nullifies
the effect of the 1st agreement making it inoperative. See Ploygram
Records Sdn Bhd v. The Search & Anor [1994] 3 MLJ p. 127.
H
On the strength of aforesaid principles, the submissions of the
appellant that they were entitled to their rights in damages as per
the 1st agreement is “dead in the water”, as there is no obligation
on the 1st and 2nd respondents to perform any bargain or
obligations under the 1st agreement. I
 Ramli Shahdan & Anor v. Motor Insurer’s
[2006] 1 CLJ Bureau Of West Malaysia & Anor 247

A There is also the issue of the effective date of the judgment

entered in favour of the appellant against the uninsured party.
This date militates against the submissions of the appellants that
they were entitled to their claims under the 1st Agreement. The
appellants took the court below through a discourse, about the
B proposals and offers that went back and forth between the
appellants and the 1st respondent. But the fact remains here that
for the purpose of the agreements in question, what is imperative
for purposes of enforcement against the 1st respondent is a
“judgment”. This is clearly stated in cl. 2 of the 1st agreement,
C and cl. 2 and cl. 3 of the 2nd agreement. The effective judgment
in this respect was dated 3 September 1993, which in effect took
the judgment out of the compass of the 1st agreement that was
deemed ineffective at that point of time. Further, cl. 3 of the 2nd
agreement we wish to reinforce states as follows:
D
3. This Agreement shall apply to all claims preferred against the
Bureau excluding any court awards which remain unsatisfied as at
the 1st day of January 1992.

Viewed in its totality, it is “plain as a pikestaff bearing in mind the

E date of the judgment, viz-a-viz, 3 September 1993, the termination
of the 1st agreement on 31 December 1991, and cl. 3 of the 2nd
agreement mentioned above, the said judgment fell out of the
sphere of the 1st and 2nd agreement.

F There was also a veiled attempt judging from the affidavits of the
appellant that the respondents, despite being aware of the
existence of the 2nd agreement lulled the appellants into believing
that their claims against the 1st respondent would be entertained
in compliance with the 1st agreement. Appellant’s counsel had
G laboured on this issue throughout their affidavits, and to this, we
have picked one point out that puts paid to the argument. The
letter of 12 May 1993 from the Motor Insurers Bureau which
states that the Bureau is not responsible for any judgment which
the appellant had intended to obtain against the uninsured party
H and further requesting them (appellants) to submit their claim
forms pursuant to the 2nd agreement for the consideration of the
1st respondent. The claim forms in turn, were duly executed by
the appellants, and by a letter dated 19 November 1993 a
proposal was made by the 1st respondent to award a
I compassionate payment of RM8,200 to the 1st appellant and
RM4,450 to the 2nd appellant.
248 Current Law Journal [2006] 1 CLJ

This telling piece of evidence viewed, viz-a-viz, submitting claim A

forms pursuant to 2nd agreement against the backdrop of
correspondence produced by the appellant shows us in no
uncertain terms, that the appellants were in no way labouring
under any impression held out by the 1st and 2nd respondents,
that they were entitled to their claims under the 1st agreement. B
The submissions of the appellants on estoppel by conduct is with
respect, a non-starter.

It is indeed an unfortunate situation here and our sympathies are

with the appellants who have suffered grave injuries. However, the C
saying “Hard cases make bad law” comes to our mind in this
instance. It is with a heavy heart that we dismiss the appeal with
costs.

My learned brother Gopal Sri Ram JCA and my learned sister

D
Rahmah Hussain JCA have read this judgment in draft and have
expressed their agreement with it.