Can an insurer cancel or void a policy in the face of MIB – and by when?

In Malaysia, if a car is validly insured when an accident happens, the insurer must pay the victim. Compulsory-insurance legislation, the Motor Insurers’ Bureau Agreements, and consumer-protection reforms now make post‑accident cancellations and technical excuses very difficult. The whole scheme is designed to protect injured people, not insurers’ balance sheets.

by GK Ganesan January 9, 2026 1007 Views

[This article is intended for publication in a legal journal.]

HOW THE RTA, THE MIB AGREEMENTS, AND THE FINANCIAL SERVICES ACT 2013 CEMENT INSURER LIABILITY AFTER AN ACCIDENT

I. INTRODUCTION

[1]. When motor insurers sseek to cancel the policy after an accident, they often discover—too late—that section 96 of the Road Transport Act 1987 (“RTA”) runs on its own unforgiving clock.¹ Miss the statutory steps or fail to obtain the pre-accident declaration, and the policy that was supposedly dead springs back to life, this time in favour of the injured victim. The Motor Insurers’ Bureau (“MIB”) Domestic Agreement and the advent of the Financial Services Act 2013 (“FSA 2013”) have completely changed the landscape of the law—a reality the courts must now acknowledge.

[2]. Everything turns on one element: timing. Was the policy cancelled before the accident, or only after it? Section 96 RTA is the statutory fulcrum—at once deceptively simple and structurally intricate.² On one level, it obliges insurers to satisfy judgments obtained by third-party claimants. On another, it carves out carefully guarded escape routes for insurers, some based on cancellation and others on voidness or unenforceability.

[3]. This article examines a disarmingly basic question: when the insurer pleads cancellation and, in the alternative, voidness or unenforceability, can both stories be true at the same time? The answer lies in understanding how the RTA, the MIB scheme, and the FSA 2013 work together to cement insurer liability once an accident occurs.

II. THE STATUTORY FRAMEWORK: SECTION 96 RTA AND THREE LEGAL STATES

A. Section 96(1): The Primary Duty

[4]. Section 96(1) RTA imposes a direct statutory duty on motor insurers to satisfy judgments in respect of death or bodily injury caused by the use of a motor vehicle on a road, where a policy issued under section 91 is in place.³ Critically, insurers must do so “notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy”.⁴

[5]. Those few words conceal three different legal states:

(a). A right to cancel: a future, prospective power under the policy.

(b). Actual avoidance: treating the policy as void from the beginning (ab initio).

(c). Actual cancellation: terminating the policy for the future only.

[6]. The common law, as reflected in Shawcross and Malaysian commentary, recognises that cancellation and avoidance are not twins but distant cousins.⁵ Avoidance operates retrospectively: the policy is void ab initio, as though it never existed. Cancellation is prospective: it discharges future obligations but leaves past rights untouched.⁶

[7]. That distinction is vital. A cancelled policy remains valid for the period before cancellation; a void policy never had legal life at all.

B. Cancellation: Prospective Only, and Hemmed in by Section 96(2)(c)

[8]. Standard Malaysian motor policies contain a familiar cancellation condition:

(a). The insured may cancel by written notice.

(b). The insurer may cancel by giving 14 days’ written notice to the insured’s last known address.

(c). Within seven days of cancellation, the insured must surrender the certificate of insurance or, if it is lost or destroyed, furnish a statutory declaration.⁷

[9]. Courts have treated a properly posted notice of cancellation to the last known address as sufficient, at common law, to cancel the policy as between insurer and insured.⁸ But that is only the contractual layer.

[10]. Section 96(2)(c) RTA adds a statutory superstructure. It provides that no sum is payable by the insurer in respect of any liability if, before the accident, the policy was cancelled by mutual consent or under a cancellation provision, and one of three conditions is met:⁹

(a). Before the accident, the certificate is surrendered or a statutory declaration of loss/destruction is made.

(b). After the accident, but within 14 days of cancellation, the certificate is surrendered or the statutory declaration is made.

(c). Within that same 14-day period, the insurer has commenced proceedings under this Part in respect of the failure to surrender the certificate.

[11]. The net effect is brutal in its simplicity:

(a). If the insured continues to hold the certificate and none of the three events occurs, the insurer remains liable under section 96(1), even if the policy has been contractually cancelled.¹⁰

(b). Cancellation alone is ineffective to escape statutory liability unless it is coupled with surrender, a statutory declaration, or timely proceedings for failure to surrender.¹¹

[12]. “Proceedings under this Part” in section 96(2)(c)(iii) has generated debate. Two candidates present themselves: criminal proceedings under section 102(1) RTA, which criminalises failure to surrender the certificate within seven days of cancellation; or civil proceedings for breach of the statutory duty to surrender.¹² As Dass notes, Part IV provides no civil mechanism for compelling surrender of the certificate beyond the specific declaration route in section 96(3).¹³ The more coherent reading is that criminal prosecution under section 102(1) is the intended “proceedings”.¹⁴

[13]. The RTA also imposes a separate duty on insurers to notify the Registrar of Motor Vehicles of cancellations, failures to issue policies after cover notes, or changes of use; failure to do so is an offence.¹⁵

[14]. And what happens if cancellation is effective under section 96(2)(c)? The answer is stark: the insured is treated as uninsured, and the victim’s route is then via the Motor Insurers’ Bureau of Malaysia.¹⁶

C. Void or Unenforceable Policies: Section 96(3) as a Mandatory Code

[15]. Cancellation is one thing; voidness and unenforceability are another. Where an insurer alleges that a policy is void or unenforceable—typically for non-disclosure, misrepresentation, fraud, or breach of condition—the statutory route is section 96(3):

“No sum shall be payable by an insurer under subsection (1) if before the date the liability was incurred, the insurer had obtained a declaration from a court that the insurance was void or unenforceable.”¹⁷

[16]. Two crucial features emerge from the text and the case law.

C. Timing: Before the Accident or Before “Liability” Crystallises?

[17]. The statutory framework establishes a critical temporal sequence. Section 96(3) stipulates that an insurer must obtain a declaration before the insurer incurs liability. The pivotal question is: when does this liability arise?

[18]. On a facile construction of sections 91(1) and 91(3), an insurer seems to incur statutory liability when judgment is granted in the tortious proceedings commenced by the accident victim. Section 91(3) states that “a person issuing a policy of insurance under this section” (the insurer) “shall be liable to indemnify the person specified in the policy in respect of any liability which the policy purports to cover.” This creates a prospective obligation. Section 96(1) mandates that “the insurer shall pay to the persons entitled to the benefit of the judgement any sum payable in respect of the liability.” The reference point is clear: judgment crystallises the liability. Section 96(3) confirms this temporal framework by referring to “any judgement obtained in proceedings commenced before the commencement of that (declaratory) action.” Read together, these provisions suggest that the declaration must be obtained before judgment, as this is when the insurer technically “incurs liability” under the statutory scheme. On this view, the declaration need not precede the accident itself—only the moment of liability crystallisation.

[19]. But that is only half the story. Sitting firmly behind section 96(3) is the Motor Insurers’ Bureau Domestic Agreement. It quietly rewrites the timing, the responsibilities of every licensed motor insurer in Malaysia; and crucially, the consequence of declarations for a licensed motor insurer.

III. THE MOTOR INSURERS’ BUREAU: QUASI-STATUTORY GLUE THAT BINDS INSURERS

A. The Twin Agreements: Principal and Domestic

[20]. Under the 1992 MIB Domestic Agreement, the expression “insurer concerned” is a term of art. It denotes the insurer who, at the time of the accident, was providing compulsory third-party insurance cover in respect of the vehicle whose use gave rise to the victim’s injury. Once a company falls within that definition, it assumes a primary, direct obligation to satisfy the injured victim’s unsatisfied judgment.¹⁸

[21]. Clause 3(a) of the Substituted Domestic Agreement makes this liability explicit. The Insurer Concerned must “satisfy the Original Judgment Creditor if and to the extent that the Judgment has not been satisfied by the Judgment Debtor within twenty-eight days”, and any such payment is deemed to discharge the Bureau’s liability under the Principal Agreement.¹⁹ The Bureau itself may pay, but only as a matter of discretion and administrative convenience; the primary duty rests squarely on the Insurer Concerned.

[22]. Critically, the Domestic Agreement strips away most of the contractual defences that an insurer might otherwise assert against its own policyholder. Clause 1 (“Insurer Concerned”) provides that an insurer remains the Insurer Concerned notwithstanding fraud, non-disclosure, misrepresentation, breach of condition, unauthorised use, dishonoured premium cheques, or transfer of ownership, and ceases to be Insurer Concerned only if there has been cancellation, lapse or a declaration before the compulsory liability is incurred.²⁰ In other words, once the accident happens, the door is effectively closed: post‑accident cancellation and post‑accident declarations do not release the insurer from its MIB obligations.

[23]. That structure has a profound temporal consequence. For purposes of the Domestic Agreement, “liability required to be insured” means liability for death or bodily injury arising from the use of the vehicle on a road—that is, liability arising at the moment of the accident.²¹ Once that accident occurs, the Insurer Concerned’s obligation to ensure that the judgment is satisfied has crystallised. Any subsequent cancellation or section 96(3) declaration may adjust the internal relationship between insurer and insured, but it cannot retrospectively unwind the Insurer Concerned’s duty to the victim under the MIB scheme.

B. “Insurer Concerned”: A Term of Art

[24]. This is why Muhamad Haqimie Hasim rightly treated liability under the MIB framework as commencing at the accident rather than at judgment. The Court of Appeal held that, even where the vehicle had been sold before the crash, the original insurer remained liable as Insurer Concerned unless there had been a prior cancellation or replacement policy.²² The Domestic Agreement thus re‑anchors the “incurring” of liability at the accident date, not the judgment date.

C. MIB and the Temporal Shift: Liability Commences at the Accident

[25]. Properly understood, therefore, the category of Insurer Concerned performs two simultaneous functions. First, it identifies which insurer—among all market participants—must answer to the victim for an unsatisfied compulsory judgment. Second, it overrides most of that insurer’s contractual avoidance rights for the benefit of third parties, forcing the insurer to pay first and argue later with its policyholder.²³

[26]. This establishes a critical temporal marker: under the MIB framework, liability commences at the time of the accident, not at judgment. The Court of Appeal ruled that an insurer remains liable even if a vehicle has been sold before the accident, provided a transfer of interest occurred within the scope of the policy, unless subsequent insurance has been obtained or the policy was cancelled prior to the accident. This represents a fundamental departure from the strictly statutory position that liability crystallises only upon judgment.

[27]. The MIB Agreement therefore operates as a temporal modification of the statutory framework. By becoming parties to the Domestic MIB Agreement, insurers have undertaken binding contractual obligations that antedate judgment. These contractual commitments shift the relevant moment of “incurring liability” from judgment-date to accident-date. For purposes of section 96(3), this has profound implications: if liability “starts” at the time of the accident under the MIB Agreement, then any declaration seeking to void the policy must be obtained before the accident occurs, not merely before judgment is entered.

[28]. The legal consequence is stark: insurers who wish to rely on section 96(3) declarations must act before any accident occurs, not after. This imposes a near-impossible burden in most circumstances, as vitiating factors are rarely discovered pre-accident. The MIB Agreement thus effectively neutralises section 96(3) as a viable defence in third-party claims, prioritising victim compensation over contractual defects.

D. Does Insurer Concerned Status Continue Even After a Section 96(3) Declaration?

[29]. This raises a vexed question: does a motor insurer’s contractual liability as “insurer concerned” continue under the Domestic MIB Agreement, even after the insurer has obtained a section 96(3) declaration or has—after the accident—cancelled the policy under section 96(2) RTA?

[30]. In my view, the answer is in the affirmative. The advent of the Financial Services Act 2013 further enhances the position of third-party victims.

[31]. One is reminded of the foresight of the Court of Appeal in Hameed Jagubar. The Court observed that, having been party to the MIB Agreement, and yet going ahead in seeking a section 96(3) declaration, an insurer would be acting unconscionably:

“…, it may perhaps be timely for the Legislature to reconsider s. 96(3) of the RTA which appears to be out of step with the arrangements settled in the MIB agreement. In order to take into account the provisions of the MIB agreement, which … are binding on all motor insurers, some form of amendment to this provision is imperative to acknowledge the purpose and objectives of the said arrangement. This would also be in keeping with the standard term in all third party insurance policies which is that the insurer will honour the MIB agreement. Having agreed to be bound as such, it would be unconscionable for the insurer in such a case to seek declarations from the court to bar innocent third parties from enforcing their claims.”

E. Notice: The Proviso Requires Service on the Third-Party Claimant

[32]. The proviso to section 96(3) expressly requires insurers who obtain such a declaration in an action to serve notice on the third-party claimant before or within seven days after commencement, specifying the grounds relied on.²⁴

[33]. Failure to comply with the notice requirement is not a harmless defect. The Federal Court in Sa’amran held that non-service renders the declaration “irregular, defective and unenforceable”, because it deprives the third-party claimant of the chance to participate and defend their rights.²⁵ The Court of Appeal in Pacific Orient Insurance Co Bhd v Rasip bin Hamsudi & Ors 4 CLJ 572 (CA) strongly affirmed this principle, holding that the proviso to section 96(3) imposes a mandatory procedural safeguard: the third-party claimant must be given notice and an opportunity to be heard.²⁶ Failure to serve notice means the insurer cannot avail itself of the statutory defence.²⁷

F. Section 96(3): A Complete Statutory Code [Plus the Mantle of MIB]

[34]. Recent Federal Court authority has gone further. In Chen Boon Kwee v Berjaya Sompo Insurance Berhad 6 MLJ 519 (FC), the Federal Court confirmed that section 96(3) constitutes a complete statutory code for declarations that a policy is void or unenforceable in the motor-accident context. Two implications follow:

(a). Insurers may not use general declaratory remedies (e.g. under the Specific Relief Act 1950) to circumvent section 96(3)’s requirements of timing and notice.²⁸

(b). Section 96(3) is available for clear-cut cases where the policy is plainly void or unenforceable, but it is not a substitute for a tort trial where core factual issues (e.g. who was driving, negligence) remain contested; in such cases the insurer’s proper course is to intervene in the main action.²⁹

[35]. Once again, timing is unforgiving. If the insurer sleeps on its rights and the accident occurs before a declaration is obtained, section 96(3) is closed. The insurer’s defences are then constrained by sections 96(2)(a)–(c) and the limited grounds recognised in the case law.³⁰

[36]. Yet one cannot confine Chen Boon Kwee to section 96(3) RTA alone, while disregarding the second statutory creature in Part IV—section 89—in the form of the MIB, which is integral to the statutory shield for innocent accident victims. The one cannot work without the other.

[37]. The Federal Court in AmGeneral Insurance Bhd v Sa’amran Atan & Ors 8 CLJ 175 (FC) held that the MIB agreements are “an integral part of the legal framework to provide a comprehensive scheme to compensate third-party victims”.³¹ The Court emphasised that the definition of “insurer concerned” in the Domestic Agreement binds insurers even in cases of transfer of interest, provided the insurer has not obtained a pre-accident declaration.³²

IV. THE FINANCIAL SERVICES ACT 2013: SUBSTANTIVE BRAKES ON AVOIDANCE

A. Schedule 9: A Revolution in Consumer Insurance Law

[38]. The Financial Services Act 2013 (“FSA 2013”), which came into force on 30 June 2013, introduced Schedule 9, dramatically reforming the law of pre-contractual disclosure and misrepresentation for insurance contracts.³³

[39]. Critically, Section 129 FSA 2013 provides that Schedule 9 applies “for the purposes of obtaining a declaration under subsection 96(3) of the Road Transport Act 1987…to determine if a consumer insurance contract which provides cover for third party risks may be avoided by a licensed insurer for misrepresentation”.³⁴

[40]. Schedule 9 abolishes the harsh common law doctrine of utmost good faith for “consumer insurance contracts”—defined as insurance entered into by an individual wholly for purposes unrelated to the individual’s trade, business or profession.³⁵ For such contracts, the insured’s duty is no longer to disclose all material facts voluntarily. Instead, the duty is merely to answer the insurer’s specific questions with reasonable care and honesty.³⁶

B. Proportionate Remedies Replace Draconian Avoidance

[41]. Moreover, Schedule 9 Part 3 introduces proportionate remedies for careless or innocent misrepresentation, replacing the draconian common law remedy of complete avoidance.³⁷ Paragraph 1(6) of Schedule 9 provides that if the insurer would have charged a higher premium, it may reduce the claim proportionately; if it would have imposed different terms, the policy is treated as if on those terms; only if the insurer would not have entered the contract at all may it avoid the policy and refund premiums.³⁸

[42]. Crucially, Paragraph 1(3) of Schedule 9 introduces a non-contestability clause for life policies that have been in force for more than two years, preventing avoidance except for fraud.³⁹ While this non-contestability provision applies only to life policies, not motor policies, it illustrates Parliament’s intent to restrict insurers’ avoidance powers in consumer contexts.

C. Does the FSA 2013 Alter the Position Regarding the MIB Domestic Agreement?

[43]. The answer is, no. The FSA 2013 governs the substantive grounds upon which insurers may avoid policies for misrepresentation. It determines whether a policy is voidable, not when an insurer must seek a declaration or against whom the insurer remains liable.⁴⁰

[44]. The MIB Domestic Agreement is a statutorily demanded contractual arrangement concerning timing and procedure—specifically, that insurers must obtain declarations before accidents to escape being the “insurer concerned”.⁴¹ The FSA 2013 does not displace this contractual obligation. Indeed, Paragraph 1(3) of Schedule 9 expressly states “For the purposes of obtaining a declaration under subsection 96(3) of the Road Transport Act 1987, this Schedule shall apply…”⁴² This wording suggests that Schedule 9 operates within the Section 96(3) RTA framework, determining substantive grounds for avoidance, but does not override the MIB Domestic Agreement’s timing requirements.

[45]. An insurer may establish grounds for avoidance under Schedule 9—for example, proving deliberate or reckless misrepresentation under Paragraph 1(5)—but still find itself bound as “insurer concerned” if it failed to obtain a pre-accident declaration as required by the MIB Domestic Agreement.⁴³

V. THE INSURER’S PARADOX: CANCELLED OR VOID?

[46]. All of this culminates in a conceptual fork in the road.

(a). If the insurer says, “The policy was cancelled”, it must walk the section 96(2)(c) tightrope: mutual consent or contractual cancellation + proper handling of the certificate and, if necessary, proceedings within 14 days.⁴⁴

(b). If the insurer says, “The policy was void or unenforceable”, it must satisfy section 96(3): obtain a pre-accident declaration, with proper notice to potential third-party claimants.⁴⁵

[47]. Attempting to plead both positions aggressively and inconsistently—”cancelled, but also void”—is not merely inelegant advocacy. It veers into logical incoherence. A truly cancelled policy is neither void nor unenforceable; it was valid up to the date of cancellation and only inoperative thereafter.⁴⁶ By contrast, a void policy never attached at all; there is nothing to cancel.

[48]. The statutory routes mirror that dichotomy:

(a). section 96(2)(c) for cancelled policies;

(b). section 96(3) for void or unenforceable policies.

[49]. If an insurer relies on cancellation but fails to prove compliance with section 96(2)(c), section 96(1) liability remains. It cannot then retro-label the policy as void and try to walk through the closed door of section 96(3).⁴⁷

[50]. Nor can it sidestep section 96(3) by seeking a generic declaration under the Specific Relief Act 1950 to achieve the same result (no liability to the third party) while avoiding statutory safeguards. The principle generalia specialibus non derogant—that specific provisions displace general ones—prevents this.⁴⁸

[51]. Properly analysed, the insurer has to pick its path early and live with the consequences:⁴⁹

(a). Cancelled policy? Comply strictly with section 96(2)(c). If you do, liability shifts to the MIB. If you don’t, section 96(1) bites.

(b). Void or unenforceable policy? Secure a pre-accident section 96(3) declaration with notice. If you don’t, the statutory duty to satisfy judgments remains, subject only to the narrow defences in sections 96(2)(a)–(c).

[52]. That is the timing paradox: insurers wish to treat policies as dead from the beginning (void) and dead only from the end (cancelled), but the statute insists they choose one death, not two.

VI. COMPARATIVE COMMONWEALTH PERSPECTIVES: HARDY, WHITE, AND THE SOCIAL PURPOSE OF COMPULSORY INSURANCE

A. Hardy v Motor Insurers’ Bureau: Lord Denning’s Enduring Insight

[53]. The Malaysian scheme finds its intellectual ancestry in the United Kingdom’s Hardy v Motor Insurers’ Bureau 2 All ER 742, a landmark decision of the English Court of Appeal. In Hardy, the plaintiff, a chief security officer, was dragged along a road and seriously injured by an uninsured driver who had committed a felony under s 18 of the Offences against the Person Act 1861.⁵⁰

[54]. The Motor Insurers’ Bureau argued that its agreement with the Minister of Transport did not require it to compensate victims of deliberate criminal acts. Lord Denning MR rejected this contention in a judgment of enduring influence:⁵¹

“The policy of insurance, which a motorist is required by statute to take out, must be taken to cover both negligent as well as intentional criminal use of the insured vehicle…If the motorist intended from the beginning to make a criminal use of the vehicle…and the insurers knew that that was his intention, the policy would be bad in its inception. No one can stipulate for iniquity. But that is never the intention with which such a policy is taken out…The question arises only when the motorist afterwards makes a criminal use of the vehicle. The consequences are then these: if the motorist is guilty of a crime involving a wicked and deliberate intent, and he is made to pay damages to an injured person, he is not himself entitled to recover on the policy. But if he does not pay the damages, then the injured third party can recover against the insurers under s 207 of the Road Traffic Act, 1960—for it is a liability which the motorist, under the statute, was required to cover. The injured third party is not affected by the disability which attached to the motorist himself.”

B. White v White: Recognising the MIB Agreement “as Important as Any Statute”

[55]. The House of Lords in White v White & Anor 2 All ER 43, 52 (para 35) has further endorsed Lord Denning MR’s pronouncement, recognising the MIB agreement as “as important as any statute”.⁵²

[56]. Lord Justice Diplock’s judgment in Hardy articulated the key principle with characteristic clarity:⁵³

“The rule ex turpi causa non oritur actio does not alter [the construction of the contract]. It deals with enforceability of rights arising out of the contract…The court has to weigh the gravity of the anti-social act and the extent to which it will be encouraged by enforcing the right sought to be asserted against the social harm which will be caused if the right is not enforced…The whole purpose of [Part VI of the Road Traffic] Act is for the protection of the persons who sustain injury caused by the wrongful acts of other persons who use vehicles on a road…I can see no reason in public policy for drawing a distinction between one kind of wrongful act, of which a third party is the innocent victim, and another kind of wrongful act—between wrongful acts which are crimes on the part of the perpetrator and wrongful acts which are not crimes, or between wrongful acts which are crimes of carelessness and wrongful acts which are intentional crimes.”

[57]. The Hardy principle—that compulsory motor insurance serves a social objective of protecting innocent third parties, which must prevail over contractual disputes between insurer and insured—has been consistently adopted by Malaysian courts. In Hameed Jagubar bin Syed Ahmad v Pacific Orient Insurance Co Bhd 6 MLJ 618 (CA), at para 38, Justice Harmindar Singh Dhaliwal emphasised:⁵⁴

“Motor insurance is compulsory by law and Parliament’s intention is to provide compensation by insurance companies especially [to] innocent and blameless third parties who suffered injury and damage. Although the insured was guilty of breach of utmost good faith, the intervener was an innocent third party.”

[58]. The Court of Appeal went further, holding at paragraph 50 that by entering the MIB agreement, the insurer had “effectively waived their right to seek…orders from the court under s 96(3) of the RTA” and that “it would be unconscionable for the insurer in such a case to seek declarations from the court to bar innocent third parties from enforcing their claims”.⁵⁵

C. Singapore: AM General and the Primary Liability of the “Insurer Concerned”

[59]. In Singapore, the High Court decisions in Pacific Orient Insurance Co Bhd v Motor Insurers Bureau of Singapore 1 SLR 341 and Motor Insurers Bureau of Singapore v AM General Insurance Bhd SGHC 39 establish an unequivocal principle: the Insurer Concerned’s obligation under the Domestic Agreement is primary, direct, and non-waivable through post-accident cancellation or avoidance. The operative Singapore clause is Domestic Agreement cl 31, which obliges the Insurer Concerned to satisfy the original judgment creditor where a judgment for compulsory liability remains unsatisfied beyond 28 days. The equipollent Malaysian provision is Substituted Domestic Agreement cl 3(a), which in materially identical terms requires the Insurer Concerned in Malaysia to “satisfy the Original Judgment Creditor if and to the extent that the Judgment has not been satisfied by the Judgment Debtor within twenty-eight days”.

[60]. In AM General, Justice Quentin Loh confronted the exact argument now advanced by Malaysian insurers: that the MIB must satisfy judgments first, with the “Insurer Concerned’s” role confined to indemnifying or reimbursing the MIB afterwards. His Lordship rejected this contention comprehensively. The judgment held, at para 70, that “there is nothing express or implied in these agreements that requires the MIB to satisfy the judgment under the Principal Agreement first before any liability arises as between the MIB and the individual insurers under the Domestic Agreement”. In Malaysia, Substituted Domestic Agreement cl 3(a), read with cl 4, plays the same structural role as the Singapore Domestic Agreement cl 31: it places the primary obligation to satisfy unsatisfied judgments on the Insurer Concerned, and deems such payments to discharge the Bureau’s liability under the Substituted Principal Agreement.

[61]. The Singapore court’s reasoning turned on five interlocking propositions, each fatal to the insurer’s argument:

(a). First, Clause 31 of the Singapore Domestic Agreement unequivocally requires the Insurer Concerned to satisfy the judgment creditor “if and to the extent that the Judgment has not been satisfied by the Judgment Debtor within twenty-eight days”—language that obliges the Insurer Concerned to pay the victim directly, not merely to indemnify the MIB. The Malaysian equivalent, Substituted Domestic Agreement cl 3(a), is drafted in the same terms and likewise directs the Insurer Concerned to “satisfy the Original Judgment Creditor” once the 28-day period has passed.

(b). Second, Clause 6 of the Singapore Domestic Agreement provides that the MIB “may” itself satisfy any judgment which an Insurer is obliged to satisfy—discretionary language that necessarily implies the MIB has no primary obligation to pay, because that duty rests with the Insurer Concerned. The equipollent Malaysian provision is Substituted Domestic Agreement cl 6A, which similarly allows the Malaysian Bureau, where expedient, to satisfy a judgment which an Insurer is obliged to satisfy and then recover the sum from that Insurer.

(c). Third, Clause 4 of the Singapore Domestic Agreement states that all payments made by an Insurer under cl 31 “shall be deemed to be made in discharge of the liability of the Bureau under the Principal Agreement”. This clause would be otiose if the Insurer’s role were confined to reimbursing the MIB after the MIB had already paid. Malaysia mirrors this in Substituted Domestic Agreement cl 4, which provides that all payments made by an Insurer under cl 3(a) are deemed to discharge the Bureau’s liability under the Substituted Principal Agreement.

(d). Fourth, the Singapore Domestic Agreement’s recital shows that cl 31 “delegates” the MIB’s obligation under the Principal Agreement to the Insurer Concerned, so that the Insurer Concerned must satisfy the judgment in the first instance. The Malaysian Substituted Domestic Agreement contains a virtually identical recital structure, expressly stating that the parties are “desirous of carrying out the aforesaid Agreement between the Bureau and the Government of Malaysia and of putting into effect the objects of the Bureau… in the most efficient, expeditious and economical manner”, with cl 3(a) operating as the same delegation mechanism.

(e). Fifth, the Singapore Principal Agreement envisages that the MIB will “pay or cause to be paid” and “satisfy or cause to be satisfied” unsatisfied judgments, indicating that the MIB may “cause” payment through the Insurer Concerned rather than paying directly itself. The Malaysian Substituted Principal Agreement is functionally parallel: cl 2 authorises the Bureau to “pay or cause to be paid” compassionate sums where there is no effective insurance, while the Substituted Domestic Agreement cl 3(a) and cl 4 together operationalise the “cause to be paid” limb through the Insurer Concerned.

[62]. The implications for post-accident cancellation and section 96(3) declarations are stark. If the duty of the “Insurer Concerned” under the MIB Domestic Agreement is primary, and arises at the moment of the accident—as both Singaporean case law and Malaysian commentary (Dass) recognise—then two consequences follow:

(a). Post-accident cancellation under section 96(2) RTA cannot relieve the insurer of Domestic Agreement liability, because that contractual duty has already crystallised at the accident date. Under the Malaysian Substituted Domestic Agreement, cl 1 (“Insurer Concerned”) expressly provides that an insurer remains the Insurer Concerned notwithstanding fraud, non-disclosure, misrepresentation or exclusion clauses, and that it ceases to be Insurer Concerned only where cancellation or a declaration has occurred before the date the compulsory liability was incurred.

(b). Post-accident section 96(3) declarations likewise cannot discharge Domestic Agreement obligations, because the insurer’s status as “Insurer Concerned” is frozen at the accident date and is only displaced, under the Malaysian wording in cl 1(vi)(b)(i)–(iii), by cancellation, declaration or lapse prior to the accident.

[63]. This construction harmonises perfectly with Lord Cross’s observation in the House of Lords decision White v White 2 All ER 43, where His Lordship affirmed that the MIB agreement is “as important as any statute”. The MIB Domestic Agreement is not a private indemnity arrangement subordinate to statutory avoidance rights; it is a quasi-statutory instrument designed to ensure victim compensation regardless of insurer-insured disputes.

[64]. Malaysian courts should adopt the Singapore interpretation explicitly. The Malaysian Substituted Domestic Agreement was drafted in conscious parallel with the UK and Singapore instruments; its key provisions—definition of Insurer Concerned in cl 1, primary payment obligation in cl 3(a), discharge of Bureau liability in cl 4, and MIB’s residual discretion in cl 6A—are textually and functionally equipollent to the Singapore Domestic Agreement. The Singapore approach better effectuates the social-insurance purpose articulated by Lord Denning in Hardy v Motor Insurers’ Bureau and endorsed in White v White: compulsory motor insurance exists to protect innocent third parties, and the MIB scheme is the legislative and contractual machinery for delivering that protection. Once an accident has occurred, the presence of the Malaysian MIB Substituted Domestic Agreement means that, notwithstanding sections 91(3), 96(2) and 96(3), a motor insurer cannot rely on post-accident cancellation or voidability arguments to escape its obligations as Insurer Concerned; its remedy lies instead in recovery actions against its insured, not in shutting out third-party victims.

[65]. Dass cites the Felix Cassel Committee Report of 1937 and the passage from Shawcross and Lee on Motor Insurance (2nd edition) at page 303, which states: “actions by insurers for a declaration that they are entitled to avoid the policy…will not…be brought at any time after the assured’s liability to the third party arose, i.e., after the accident giving rise to the liability under the policy”.⁵⁶

VII. THE FEDERAL COURT’S SILENCE ON THE MIB QUESTION IN HAMEED JAGUBAR: UNNECESSARY UNCERTAINTY

[66]. The Federal Court in Pacific & Orient Insurance Co Bhd v Hameed Jagubar was asked a narrow, seemingly technical question: when did the motor policy become effective—at the moment the cover note was issued, or from midnight on the commencement date printed on the certificate? The Court treated this purely as a matter of contractual construction and held that the cover began at the time of issuance, not retroactively from midnight.⁵⁷

[67]. That might sound like a tidy answer. Yet in the peculiar ecosystem of Malaysian motor insurance, it left a critical question untouched: what about the Motor Insurers’ Bureau (MIB) Domestic Agreement, and the concept of the “insurer concerned”, which can keep an insurer on the hook even where the policy is avoided or backdated? The Court of Appeal in Hameed Jagubar had treated the MIB Agreement as integral to the legal framework and had used it to hold that the insurer remained liable to third-party victims, regardless of backdating or alleged non‑disclosure.⁵⁸ The Federal Court, however, said nothing about MIB at all.

[68]. To justify its conclusion on timing, the Federal Court borrowed the Indian notion of “special contracts” in motor insurance: policies where the date and ” time of issue” [and not the “time of commencement”] are expressly stated, so that cover runs from that precise moment rather than from midnight.⁵⁹That concept is rooted in the post‑1988 Indian regime, where the Motor Vehicles Act 1988 amended the earlier 1939 Act and introduced new statutory forms for cover notes and certificates.⁶⁰ In the Malaysian RTA, “time of commencement” and “time of issuance” are two separate statutory concepts. One cannot transpose one with the other in Malaysia.

[69]. The Indian High Court in M/s United India Insurance Co Ltd, Namakkal v Veerammal read, and explained this change as deliberate: under the previous Indian statutory Form A, the wording was simply “effective from date of commencement of insurance for the purpose of the Act”, whereas under the new Form 52 the prescribed wording became “effective from date and time of commencement of insurance”. It expressly noted that “time has been included under the New Act”, signalling a statutory shift towards precise, time‑stamped risk assumption.⁶¹

[70]. That statutory underpinning simply does not exist in Malaysia. Malaysian motor insurance still operates under the Road Transport Act 1987, which broadly reflects the pre‑1988 Indian position: the legislation speaks in terms of “dates”, not times, and does not prescribe a statutory form that fixes the exact hour and minute at which cover begins.⁶² In other words, Indian “special contracts” are creatures of a later statutory amendment; the same legal biology has never taken root here. There is, again, no Indian equivalent of the Malaysian MIB Agreements. These distinctions are vital; for they matter.

[71]. By transplanting the Indian reasoning without acknowledging that statutory backdrop, the Federal Court risked importing a solution tailored to a different legislative template. In Malaysia, absent a clearly stipulated time of commencement, long‑standing authority treats cover as running from midnight on the commencement date, not from the later time of issuance, precisely to protect third‑party victims from gaps caused by backdated paperwork.⁶³ The Indian forms now hardwire the opposite. That is the real distinction between “their” position and ours.

[72]. Overlay this with the MIB regime and the picture becomes more complex. Since 1992, all Malaysian motor insurers have been party to a Principal Agreement with the Minister of Transport and a Domestic Agreement amongst themselves, under which the “insurer concerned” must satisfy judgments for compulsory third‑party liabilities.⁶⁴ The Court of Appeal in Hameed Jagubar held that, by entering this regime, the insurer had effectively waived its right to seek a section 96(3) declaration to escape liability in a backdated cover‑note scenario; its recourse was to pay the victim and then recover from its insured.⁶⁵

[73]. When Hameed Jagubar reached the Federal Court, however, the MIB Domestic Agreement was not framed as an issue in the leave questions. The Court therefore confined itself to the contractual timing issue and did not revisit its earlier declaration or the insurer’s status as “insurer concerned”.

[74]. That silence matters. The Court of Appeal had already woven the MIB Agreement into the statutory fabric, treating it as quasi‑statutory and i The Federal Court’s later endorsement of “special contracts” did not overtly dislodge that reasoning, but by ignoring it the apex court created the appearance of a forked path: one route that sees the MIB Agreement as decisive, and another that pretends it does not exist.

A manufactured lacuna—and a simple fix

[75]. The result is an unnecessary and avoidable uncertainty. On the one hand, appellate authority and leading commentary say that once an insurer has issued a policy covering the date of the accident, it remains the “insurer concerned” under the MIB Domestic Agreement, even if the cover note was backdated or a declaration is obtained after the accident.⁶⁶ On that view, the timing games about “special contracts” are legally interesting but practically academic, because the insurer has already contracted—via MIB—to pick up the judgment and chase its insured later.

[76]. On the other hand, Hameed Jagubar in the Federal Court can be misread as validating a narrow, contract‑only analysis that downplays or ignores the MIB overlay. Practitioners are left asking: does the Court of Appeal’s robust MIB‑based approach still stand, or indeed, has it been silently eroded? Scholarly opinion leans to the former, with some suggesting that the Federal Court’s omission renders its decision per incuriam on the MIB point.⁶⁷

[77]. Yet the underlying solution is disarmingly simple:

(a). First, recognise openly that Malaysia is still operating, in substance, under the pre‑1988 Indian model, in which cover—absent an express time—runs from midnight on the commencement date, and that Indian “special contract” reasoning is tethered to statutory forms that Malaysia has never adopted.⁶⁸

(b). Second, treat the MIB Domestic Agreement as what the Court of Appeal and later the Federal Court in AmGeneral v Sa’amran Atan say it is: an integral part of the legal framework that binds insurers as “insurers concerned” unless they act before the accident to cancel, lapse, or obtain a declaration.⁶⁹

[78]. Once those two points are accepted, the supposed gap in Hameed Jagubar shrinks to size. The Indian “special contract” authorities explain why timing wording in forms matters; the MIB Agreement explains why, in Malaysia, timing arguments cannot be used as a trapdoor to drop innocent victims into a compensation void. All that remains is for either the Federal Court, in a suitable case, or Parliament, by amending section 96(3), to say so plainly.

VIII. THE RECOGNITION OF THE LEGAL STATUS OF THE MIB AGREEMENT: A WATERSHED MOMENT IN ENGLISH JURISPRUDENCE

A. The Historical Misapprehension

[79]. For over a decade following 1968, English judges laboured under a persistent and erroneous misconception. They failed to acknowledge the proper legal status and true significance of the Motor Insurers’ Bureau agreement. This fundamental oversight shaped jurisprudence for decades.

B. The Transformative Cases

[80]. The landscape shifted dramatically with two pivotal decisions. Hardy v Motor Insurers’ Bureau and White v White altered this course irretrievably. These cases represent watershed moments in the law’s recognition of the MIB agreement.

[81]. In White v White, the House of Lords embraced Lord Denning’s formulation in Hardy. His statement that the MIB agreement is “as important as a statute ought to be the effect” proved decisive. This pronouncement carried considerable weight from the highest court.

[82]. White v White reinforced and extended the Hardy principle with crystalline clarity. The observation that the MIB agreement possesses the status of something “as important as any statute” resolves the matter conclusively. The MIB agreement possesses statutory force. This requires no further elaboration.

C. Application to Malaysian Jurisprudence

[83]. Malaysian courts must embrace this settled English authority. The ratio decidendi established in these cases provides binding guidance. Malaysian courts should adopt Hardy and White v White without hesitation or qualification.

D. The Enduring Validity of the Court of Appeal Authority of Hameed Jagubar on MIB

[84]. The Court of Appeal decision in Hameed Jagubar regarding the MIB agreement remains sound law. Apart from the several reasons advanced in this article, two other compelling reasons support this conclusion.

[85]. First, the Federal Court did not disturb the ratio expressed by Harminder JCA. In the Court of Appeal’s judgment in Hameed Jagubar, a clear ratio concerning MIB emerged. When this matter proceeded to the Federal Court on appeal, the Federal Court did not overturn or disturb the Court of Appeal’s ratio. Silence in such circumstances carries profound significance.

[86]. Second, the Federal Court positively endorsed the relevant dicta in Sa’amran. The Federal Court not merely acquiesced in the Court of Appeal’s reasoning. It actively approved the doctrinal foundation. Moreover, the Federal Court proceeded to hold that the MIB agreement constitutes a material document. Courts must consider such an agreement when determining whether to grant or decline a declaration.⁷⁰

E. The Convergence of Authority

[87]. The Federal Court’s approach in Sa’amran proves especially instructive. The Federal Court carefully reviewed and cited with approval the Court of Appeal’s reasoning in Hameed Jagubar across numerous pages of judgment. This extensive recitation and endorsement demonstrates unequivocal acceptance. The Court of Appeal’s decision in Hameed Jagubar therefore retains full force as binding authority. It remains good law.

[88]. Different labels have been used to describe the ‘legal status’ of the MIB Agreement.⁷¹ It is plainly more than a simple bargain between two private parties and, in substance, carries statutory force, because the UK and Singapore courts have recognised the quasi-legislative character of their own MIB arrangements.

[89]. To treat the Domestic MIB Agreement otherwise would undermine the legislative purpose of protecting innocent third parties: that would place Malaysia out of step with the broader Commonwealth approach to compulsory motor insurance and guarantee fund schemes.

[90]. This has a critical interpretive consequence. The words of section 96(3)—“before the date the liability was incurred”—might, if read in isolation, invite a narrow, insurer‑friendly construction that focuses on when judgment is entered. By contrast, the MIB Domestic Agreement fixes “liability required to be insured” at the accident and then makes Insurer Concerned status turn on whether cancellation, lapse or declaration occurred before that accident.⁷² The two instruments therefore speak in different temporal registers.

[91]. When judges deal with third‑party road‑accident claims, they cannot give exclusive primacy to the bare text of section 96(3) while treating the Domestic Agreement as an afterthought. Hardy, White, AM General, Sa’amran and Hameed Jagubar together require a different approach: the MIB Agreements—especially the Domestic Agreement—possess quasi‑statutory or “as‑important‑as‑a‑statute” force in the compulsory insurance ecosystem.⁷³ In that setting, the Domestic Agreement does not merely “assist” interpretation; it modifies how section 96(3) operates in practice by shifting the true “liability” date for participating insurers back to the accident.

[92]. Put starkly, once the MIB scheme is factored in, licensed motor insurers cannot invoke the literal timing latitude in section 96(3) as against injured third parties. By voluntarily entering a scheme mandated by section 89 RTA as a condition of their licence, they have accepted that their Insurer Concerned obligations will endure regardless of any post‑accident declaration. Courts across the hierarchy must therefore be prepared—where third‑party protection is at stake—to prefer the MIB timing rules over a mechanistic reading of section 96(3). That is not judicial disobedience of the statute; it is the faithful application of the statute together with the quasi‑statutory contractual architecture that the statute itself has called into being.⁷⁴

[93]. If these principles are properly understood and correctly applied, Malaysian cases will align with the Malaysian Parliamentary intent and accord with the Commonwealth position.

[94]. For these reasons, there is no impediment in the path of Malaysian courts to rule that the MIB Agreement possesses statutory force.

IX. CONCLUSION: THE INSURER’S DILEMMA AND THE EVOLUTION OF THE LAW

[95]. The current legal position creates a profound dilemma for motor insurers. Upon discovering non-disclosure or misrepresentation, an insurer faces a stark choice.

[96]. It may seek a declaration under Section 96(3) RTA after the accident but before judgment, potentially succeeding in avoiding liability to the third party under the RTA. However, this success may prove pyrrhic: the insurer likely remains bound as “insurer concerned” under the MIB Domestic Agreement, since it failed to obtain a pre-accident declaration as required by Clause 1(vi)(b)(i).⁷⁵

[97]. Alternatively, the insurer may choose not to seek any declaration, accepting its role as “insurer concerned”, paying the judgment, and pursuing recovery against the insured for fraud or misrepresentation. This approach avoids the costs and uncertainty of declaration proceedings while preserving the right of recourse.⁷⁶

[98]. The underlying policy is clear: Parliament and the insurance industry, through the MIB scheme, have prioritised the protection of innocent third-party victims over insurers’ contractual rights.⁷⁷

[99]. The law imposes upon insurers the burden of investigating risks before accepting them and issuing policies. Once an accident occurs, the victim’s right to compensation crystallises, and insurers cannot retrospectively escape liability by pointing to the insured’s fraud.⁷⁸

[100]. The FSA 2013 has reinforced this policy by limiting avoidance to cases of deliberate or reckless misrepresentation in consumer contracts and by requiring insurers to frame clear questions rather than relying on the insured’s spontaneous disclosure duty.⁷⁹

[101]. The law’s evolution reflects a broader societal commitment to social insurance principles, recognising that motor insurance serves not merely private contractual interests but the public good of road safety and victim compensation.⁸⁰

X. WHAT MALAYSIAN COURTS HAVE AN OPPORTUNITY TO DO, AND MUST DO

[102]. The paradox remains unresolved in its finer details—courts have not definitively ruled on whether MIB Domestic Agreement obligations survive Section 96(3) RTA declarations in all circumstances. Yet the weight of authority, the purposive interpretation adopted by appellate courts, and the fundamental objectives of compulsory motor insurance law all point towards a single conclusion: when an insurer’s right to cancel collides with a victim’s right to compensation, the law increasingly sides with the victim.⁸¹

[103]. The courts must articulate and affirm these principles with unmistakable clarity. Only through such judicial exposition can the protective architecture embedded in the Road Transport Act be fully realised. The legislature’s foundational policy—strengthened through the Motor Insurers’ Bureau Agreements and further developed in the Financial Services Act—requires consistent and coherent judicial endorsement.

[104]. Courts must explain not only what the law is, but why it operates as it does. In doing so, they turn bare interpretation into purposive jurisprudence. That approach keeps victim protection at the heart of motor insurance legislation.

∞§∞

The author expresses his gratitude to Mr G Naidu, Mr Harbans Singh, Mr Manoharan Veerasamy, Mr Rajan Ayyappan, Mr Kandiah Chelliah, Ms Geetha Kesavan Nair, Mr Ravi Ganesan, Mr Derrick Lee, Miss TP Pavaani, Miss JN Lheela, Miss Lydia Jaynthi for their assistance, comments and suggestions.

All errors are the author’s.

Image: Courtesy of Anthoy Maw of Unsplash

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