Driving Without a License: What are your potential liabilities?

Differing views on liability of driving without a license (High Court’s decision and Court of Appeal’s decision)

Section 26(1) of the Road Transport Act 1987 (RTA 1987) prohibits driving without a valid license. In Muhammad Noor Redzuan Misran v. Muhammad Amirul Hafiz Khairulazuin [2020], the High Court imposed full liability on an unlicensed driver involved in an accident. The court reasoned that illegal driving should not be protected by law, and had the driver not been on the road, the accident wouldn't have occurred.

In contrast, the Court of Appeal in Ahmad Zulfendi bin Anuar v. Mohd Shahril bin Abdul Rahman [2022] ruled that driving without a license does not automatically imply negligence. Liability depends on driver's conduct, not the absence of a license. Evidence must prove negligence and causation, not merely the lack of a license.

Whether insurance company can rely on the terms and conditions in the policy to avoid liability?

One cannot ignore the contractual provisions of the policy which may contain exceptions that nullify the claim. In insurance claims, it's important to consider both the terms of the policy and the legal requirements under the RTA 1987. Insurance policies often have conditions that must be met for claims to be approved. The principle established in Thomson v. Weems and applied in Chung Kuo Ping @ Richard v. Malaysian Assurance Alliance Bhd [2008] confirms that if a condition in the policy is a precedent to the insurer's liability, it must be strictly followed for the insured to make a claim to its insurer. The High Court in Kunasegaran a/l Vadevello v. The Pacific Insurance Bhd [2024], further upheld the insurer's right to deny liability under the policy's exclusion clause.

In cases where the insured has violated the contractual terms of the policy, the insurer may seek a declaration under Section 96(3) of the Road Transport Act 1987 to declare the policy void or unenforceable with respect to the insured vehicle.

Legal Protections for Third-Party Claimants Under the RTA 1987

However, the discussion above pertains solely to claims by the insured against their insurer. The Road Transport Act 1987 provides protections for third-party claimants in cases of personal injury or death. Section 91(1)(b) ensures that insurers cannot avoid liability to third parties based on the insurance policy terms. Section 96(1) obligates insurers to pay third parties who have obtained a judgment against the insured. Once a certificate of insurance is issued, the insurer must satisfy the judgment, regardless of privity of contract. Sections 94 and 95 prohibit insurers from excluding liability based on certain contractual terms, including claims that the driver lacked a valid license.

Circumstances Where Insurers Can Avoid Payment

The insurer, however, would be able to avoid the payment obligation under the terms and conditions mentioned in sub-ss (2) and (3) of Section 96 of the RTA based on certain conditions:

1. where the requisite notice of the proceedings was not given to the insurer before the commencement of the proceedings;
2. where there is a stay of the judgment pending appeal;
3. where the policy of insurance respecting the liability had been canceled; and
4. where the insurer had obtained a declaration from the court that the insurance was void and unenforceable

However, what would happen to a third party where a policy has been canceled or repudiated pursuant to the circumstances provided in s 96(2) and s 96(3) of the Act? Would he be left with a paper or empty judgment in the event the driver or registered owner of the vehicle cannot satisfy the judgment sum?

If a third-party claimant secures a judgment against an uninsured driver or vehicle owner due to the cancellation or repudiation of a policy under sections 96(2) and 96(3) of the Road Transport Act 1987, they are not left without recourse. The Act, through section 91(1)(a), ensures that the Motor Insurers' Bureau (MIB) steps in to compensate third-party victims in such cases. While the MIB can provide compensation when insurance is ineffective or absent, they typically cover up to 75% of the judgment sum, offering partial protection to the third-party claimant. [see : AmGeneral Insurance Bhd lwn Pentadbir Tanah Pusaka Rajendran a/l Subramaniam, simati dan lain-lain [2017] MLJU 1871]