CAN A COURT ORDER A ROAD VICTIM’S COMPENSATION BE PAID TO THE PUBLIC TRUSTEE (ARB)?

There is a new trend in Malaysian vehicular accident cases.

Recently, lawyers acting for insurance companies have fallen into the habit of asking courts to pay a victim’s compensation, not directly to the victim but to the Public Trustee (or ‘Amanah Raya Bhd’, or ‘ARB’ as it is called).

[1] We need to address several questions on two fronts: –

  1. Are such orders practical?
  2. Are these orders even legal?

[2] Before we address these issues, let us look at the Scenario:

Suppose A is badly injured in a road accident. B is the owner of the car that collides into A. C is the driver of the car. A sues B, C and E through her mother, D. E is the insurer of the vehicle owned by B. Assume the courts find the defendant liable.

Suppose A requires professional nursing care for the rest of her life: two nurses to care for her round the clock.

The statistical average of a woman’s duration of life is 78 years. Assume A is 20 years of age and has 58 years of life left to her. 58 years into 12 months equals 696 months.

Sometimes courts have had deducted one third of this number (called the ‘multiplier’) by what is known as the ‘contingency rule’.

Under that rule, courts will deduct one third of the total duration of years that she will live. They give her two-thirds of the 696 months duration as compensation. That equals 464 months.

I have written previously to show that this deduction is illegal and unconstitutional. See the essay entitled, ‘Should courts discard the rule that reduces an accident victim’s compensation by 33%?’ [Click here]

That is a story for another day.

Assume now that private nursing care costs, for example, RM10,000.00 per month. That results in a huge sum.

RM10,000.00 multiplied by 696 months amounts to RM6,960,000.00 for future nursing care.

That money is not, argue insurers’ lawyers, ‘due and payable to the victim this minute’.

The insurer argues that the money is not to be put into the hands of the caregiver, such as the mother, brother, or some other family member who is taking care of the victim.

Their argument is so huge a sum is ‘susceptible to be squandered’.

The insurer wants to pay the damages, to the Malaysian Public Trustee (or ‘Amanah Raya’ or ‘ARB’), so that the ARB ‘can hold it on behalf of the victim’.

This argument is completely wrong, for many reasons.

[3] Some Practical Points 

[3-1] Q1: Is the Public Trustee efficient at managing its investments?

The evidence does not lead us to that conclusion.

The ARB is a creature of statute. It manages its investments through a vehicle, ‘Kumpulan Wang Bersama’ (‘KWB’).

On 10 December 2020, the Auditor General laid a report before Parliament. That report covered ARB’s investments for 11 years: from 2008 up to 2019.1 See his report dated 10 December 2020 2:42 pm the star online  It concluded that the ARB was inefficient as a fund manager.

Eventually, the ARB had to depend on the government to cover for the inefficient investment performance.

So why should one risk one’s life and hand it over to an inefficient investor?

[3-2] Q2: Does the ARB charge fees?

Yes. Not only can the ARB charge fees, it can arbitrarily increase it from time to time.2See section 33 of the Public Trustee Act 1949 This means the ARB fees are uncertain. 

The victim cannot fight the ARB because she is ‘locked-in’ by the court order.

[3-3] Q3: Who will pay the fees?

The insurance companies point a finger at the victim. This brings us to a crucial issue:

[3-4] Q4: Do ARB fees reduce a victim’s compensation?

Who will say ‘No’?

ARB’s annual fee reduces the compensation over time. In this case, for 58 years.

Let us calculate the amount of fees payable.

Assume the ARB charges, say, 0.4% per annum, on the deposited sum of RM6.96 million.

At RM334,080.00 per annum, over 58 years, it would amount to RM1.937 million.

Over time, the annual fee reduces the compensation. Which court would intend this consequence?

The High Court in Jagathees Nagulan & Others v Suresh Balakrishnan and another, 3[2016] 6 CLJ 258 in fact states that ARB charges a far higher rate of 1.0% to 2.0% per annum. That would result in the victim losing vastly larger sums of money.

And therefore, to make an ARB order would not only be unfair to the victim, but goes against high authority.

The House of Lords case of Wells v Wells ruled that the courts were not entitled to ‘reduce awards’. Lord Lloyd said: “There is no room for a judicial scaling down .… [And] there is no more reason to reduce the awards,…”4[1999] 1 AC 345 at 384 p.363

[3-5] Q5: Is there evidence to show that the ARB can give the accident victim better rates than commercial fund managers?

Clearly, no.

The Public Trustee has the power to invest. But there is nothing to show that the ARB can grant a better rate to the victim compared to commercial fund managers.

For example, Bank Rakyat Bhd grants an interest rate (currently) of 4% per annum.

If the victim deposits her RM6.96 million with Bank Rakyat, she makes RM 16.15 million on her capital sum over 58 years.

ARB cannot grant that rate. At any rate, it is incapable of managing funds profitably.

These brings us to the legal position.

[4] The development of common law in this area

In compensating a victim that she has injured, the defendant is bound by the common law rules.

[4-1] Compensation by way of money

First: if the victim has lost an arm, a defendant cannot give his own arm in reparation. So, money is paid to compensate the victim instead.

The law requires that the victim be put in nearly the same position she was before the accident.5Livingstone v Rawyards Coal Co (1880) 5 ABB CS 25

This is explained by a chestnut, Livingstone v Rawyards Coal Co.6 (1880) 5 ABB CS 25 There, Lord Blackburn ruled that the quantum that should be paid to the victim should be:  

“… that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in, if he had not sustained the wrong for which he is now getting his compensation or reparation.”7Wells v Wells, ibid, at p.39

[4-2] A ‘once and for all’ lump sum payment

Second, the compensation must be by a lump sum: ‘once for all’ payment. It caters for past, present, and future damages.

Let us look at this example.

[4-3] Fitter v Veal

In 1701, a man (let us call him ‘B’) assaulted and battered Mr. Fitter.8 Fitter v Veal (1701) 12 Mod Rep.542. See also Darley Main Colliery Company v Mitchell (1886) 11 AC 127, O’Sullivan v William [1992] 3 All ER 385. The Court ordered B to pay Fitter 11 as damages.

Fitter’s injuries were more serious than he had initially thought. He had to spend extra money for a skull surgery. He sued B for those extra expenses.

The court ruled that Fitter could not recover the sum for this further loss, in a new case.

The ‘lump sum’ basis is explained by Lord Lloyd of Berwick in Wells v. Wells:

“[It] was common ground between all parties that the task of the court in assessing damages for personal injuries is to arrive at a lump sum which represents as nearly as possible for compensation for the injury which the plaintiff has suffered.”9 Ibid, at p.363

The aim of this rule is to prevent plaintiffs from filing new cases in the future for the very same injury.

This is because the court has to assess what quantum has to be paid to the victim: this includes assessment for future losses in one lump sum. That must involve some guesswork, leading to some inaccuracy.

Yet, there are practical reasons for this.

Thus, if additional expenses are incurred 10 years after the accident, the victim could not ask for extra damages.

[4-4] Courts cannot order payments in instalments

An award in a negligence case could not be subdivided and paid ‘in stages’, or ‘progressively’.

In Wells v Wells, Lord Steyn criticised the ‘once and for all’ principle. Lord Steyn argued that the lump sum system was ‘inflexible’. He thought that the solution was “relatively straightforward”. He thought the court should be:

“given the power of its own motion to make an award for periodic payments rather than a lump sum in appropriate cases.”10[1999] 1 AC 345 at 384

In the UK, Section 2 of the Damages Act 1996 allows courts to order periodic payments to be made to the victim. However, the court can only do that if both parties had agreed.

Lord Steyn in Wells v Wells made further observation that since:

“… such agreement was virtually never forthcoming the present power to order a periodic payment is a dead letter.”

Yet, neither in the UK or in Malaysia do the courts have power to make any such order.

To buttress this point, Lord Lloyd of Berwick in Wells v. Wells observed that,

“… this is therefore not the place to discuss any other methods of compensation such as ‘structured settlement’.” 11See page 363 (f) of the judgement

So, asking monies to be paid to the ARB is to create a ‘structured settlement’: it is a payment to be made as and when a future surgery or medication was required.

Having suggested that the courts should be given that power, Lord Steyn made a crucial observation:

“… the judges cannot make the change. Only parliament can solve the problem”.

Thus, if no such power exists, Malaysian courts cannot make any such order.

Until there is legislation on these issues, Malaysian courts have no power to make these ‘ARB orders’.

[4-5] Q7: Should the victim be asked his consent

In situations such as these, the victim’s informed consent is crucial. The money is hers. But previous decisions have not been adequately addressed this concept at all. 

[4-6] Q8: Can an insurer dictate how the victim invests the compensation?

The answer is a ‘No’. An insurer cannot dictate how the victim – or his litigation representative – invests the compensation.

Why is that?

First, under the Road Transport Act 1987 (‘RTA’), no vehicle can operate on a public road without third-party insurance cover.

Should a third party be injured in a negligent collision, sections 91(3) and 96(3) of the RTA mandatorily require an insurer to compensate the victim. There are several exceptions to this rule, but these are not relevant for the purposes of this article.

Section 91(3) of the RTA states that:

“… notwithstanding anything in any written law (and this of course also includes the Public Trustee Corporation Act 1995)… an insurer ‘issuing a policy of insurance … shall be liable to indemnify the class of person specified in the policy’ for ‘any liability which the policy purports to cover’.”

While, sec. 96(1) of the RTA states that if judgement is given to a victim, then,

“… the insurer shall… pay to the [victim] entitled to the benefit of the judgement, including any costs and any … interest on the sum.”

The exclusionary words in sec. 91(3) are that:-

“notwithstanding anything in any written law…”  (and this includes the Public Trustee Corporation Act 1995), if judgement is given in favour of such a victim, then, “… the insurer shall… pay the [victim].” 

There is nothing in the RTA that allows the insurer or any defendant to demand or determine that the compensation should be paid through the ARB. Nor is such a power given to the court.

The courts have consistently accepted this parliamentary injunction in the RTA as a piece of social legislation to protect road users.

The ARB Act cannot make any inroads into that RTA obligation. 

So, the insurer’s obligation to pay is mandatory.

[5] Which brings us to the Public Trustee Corporation Act of 1995

The authority of the Public Trustee derives from the Public Trust Corporation Act 1995 (‘PTC Act’).

[5-1] Objectives of the PTC Act

Section 10 of the PTC Act states that the objectives of the Corporation are only two:

(1) ‘To be an organisation that exhibits ‘a sense of social responsibility by having regard to the interests of the Malaysian community’; and

(2) ‘To be as efficient and profitable as private trust companies’.

You will note that the second statutory aim has not been a roaring success.

[5-2] How does the PTC Act define ‘trust’ and ‘trustee’?

The PTC Act defines the word ‘trust’ as including ‘an executorship or administratorship’; and ‘trustee’, states the PTC Act, “shall be construed accordingly.”

That is a vague and a wide definition. We need to examine if there is anything limiting this ambiguity.

[5-3] Who are the administrators and executors under the PTC Act?

The PTC Act defines ‘administrator’ as ‘a person to whom letters of administration is granted’. It defines the word ‘administration’ as the ‘administration of an estate of a deceased person by an executor or an administrator.’12 Sec.2 Public Trust Corporation Act 1995

Again, the Act defines the word ‘executor’ as a person:

‘…to whom the execution of the last will of a deceased person is, by the testator’s appointment, confided’.13 Sec.2 Public Trust Corporation Act 1995

[5-4] The duties and rights of the ARB arise from a class of trusts which it is ‘authorised to accept’

The first hint is that the duties of ARB seem to be focused solely, if not predominantly, on the estate of deceased persons; not issues concerning accident victims.

The second clue is in sec.12 of the PTC Act. That section states that:

“The Corporation may be appointed to be the trustee of any will or settlement or other instrument creating a trust or to perform any trust or duty belonging to a class which it is authorised to accept…”.

This definition is important.

If monies are paid to the estate of a deceased, can the Public Corporation exploit the PTC Act and parachute itself into assets of an accident victim and purport to act as her trustee?

That power is limited by Section 11(2) which states that the:

‘… Corporation … shall have the same powers, duties and liabilities and be entitled to the same rights and immunities and be subject to the same control and orders of the Court as a private person in that capacity’.

[5-5] Section 11(2) PTC Act brings into play other Acts

If a private person wishes to act as a trustee of an accident victim, what legal pre-requisite must the potential trustee satisfy?

The PTC Act does not have provisions dealing with it.

There are other principal Acts that deal with the court’s power to appoint trustee.

So, one has to fall back on those statutes: namely the Trustee Act 1949 (Revised 1978) and the Mental Health Act 2001.

[5-6] Trustee Act 1949

The first is the Trustee Act 1949 (Revised 1978) which has its objects and powers in section 2.

Section 2(1) of the Trustee Act 1949 states:

“This Act, except where otherwise expressly provided, applies to trusts including, so far as this Act applies thereto, executorships and administratorships constituted or created either before or after the commencement of this Act.”

Section 2(2) of the Trustee Act 1949 states:

“The powers conferred by this Act on trustees are in addition to the powers conferred by the instrument, if any, creating the trust, but those powers, unless otherwise stated, apply if and so far only as a contrary intention is not expressed in the instrument, if any, creating the trust, and have effect subject to the terms of that instrument.”

So, we can conclude that ‘trust powers’ must arise under a deceased’s estate or ‘on instrument creating a trust’. No such power exists in the PTC Act.

[5-7] The power of a trustee to invest

The Trustee Act gives the powers of investment to trustees in sections 4 to 15, but it is a tight chapter which sets out the exercise of investment powers.

Part IV of the Act sets out who and how the trustees are to be appointed. The power of the court in appointing ‘new’ trustees are set out exclusively in Part V of the Trustee Act. These Trustee Act provisions only come into play by reason of Section 11(1) PTC ACT.

Thus sec. 11(1) of the PTC Act brings into play the entire Trustee Act 1949 with these words:

“If a Court, the Government of Malaysia or a person within or outside Malaysia has power to appoint a trustee, executor, administrator, guardian, next friend, agent, attorney, receiver, receiver and manager or liquidator or make any other appointment of a fiduciary nature, the Corporation may be so appointed.”14 See sec. 11(2) of the PTC Act

Thus, if a High Court has the power to appoint a trustee, next friend or make any other appointment of a fiduciary nature, the Corporation may also be appointed.

[5-8] To which court must this PTC Act application be made?

Under Section 2, ‘court’ means the ‘High Court’.

[5-9] It is the Trustee Act that controls and applies to all ‘trusts’ and also ‘executorship’ and ‘administratorship’

That is why the ARB has the same duties and liabilities of any natural person who acts as a trustee. This is set out in Section 11(2) PTC Act, which states:

“The Corporation may act either alone or jointly with any person or body of persons in any capacity to which it may be appointed and shall have the same powers, duties and liabilities and be entitled to the same rights and immunities and be subject to the same control and orders of the Court as a private person acting in that capacity.”

The trustees’ powers, duties and liabilities are set out in the Trustee Act 1949 but not the ARB Act.  If anything, the PTC Act states that the powers of the trustee shall be those of a private person.15 See sec. 11(2) of the PTC Act

Also, the powers to appoint trustee in sec.45(5) and sec.46 of the Trustee Act are not expressly catered for in the ARB Act.

[5-10] Mental Health Act 2001 (‘MHA’)

Next comes the Mental Health Act 2001 (‘MHA’). But that Act is only for “mentally disordered person”. The Preamble of the Act refers to persons who are ‘mentally disordered’. The preamble to the MHA states:

“An act to consolidate the laws relating to mental disorder and to provide for the admission, detention, lodging, care, treatment, rehabilitation, control and protection of persons who are mentally disordered and for related matters.”

Under section 2 of the MHA, ‘mental disorder’ is defined as ‘mental illness’ or ‘psychiatric disorder’ or ‘any other disorder of the mind’.  

Thus, to fall under the MHA a person must qualify as a person with a mental disorder. If one applies this qualifier to an accident victim, one notes that the phrase ‘mental disorder’ has, under normal circumstances, nothing to do with the state of the mind of an accident victim.

Again, where the state of the mind of the accident victim is concerned, his litigation affairs are under the victim’s ‘litigation representative’.

Under the Rules of Court 1980, and before 01 August 2012, the ‘litigation representative’ had an old and endearing term: ‘next friend’.16See Order 76 r.3

Thus fathers, mothers, uncles, aunts or siblings were often appointed ‘next friends’ over the affairs of a road accident victim if he was disabled from representing himself.  

However, since 01 August 2012, the phrase ‘next friend’ has transmogrified into the phrase ‘litigation representative’. The one means the other.

[5-11] Does one need a court order to be appointed as a litigation representative?

A court order is not necessary to be appointed as a litigation representative. This can be inferred from the words of O. 76.r.3 of the Rules of Court 2012. 

A Court of Appeal decision, which dealt with the identical concept on the same O.76 r.3, Ziko Abbo & Another v. Ketua Polis Daerah Bau, Kuching, Sarawak & Ors [2011] 3 CLJ 76 affirms the true position.

[5-12] Therefore, there is no lacunae in statutory law dealing with accident victims

The Road Transport Act 1987 and the Trustee Act 1949 deal with accident victims. There is therefore no call to fall back on the PTC ACT (or the ‘ARB Act’) or its provisions.

[6] Q:10: Can the insurers resort to the ARB Act?

A close study of the Public Trustee Corporation Act 1995 (or the ‘ARB Act’) reveals several points:

  1. the ARB Act gives no express powers to courts to order investment of the road accident victims’ compensation.
  2. all such powers of the court regarding road accident victims fall wholly within the RTA;
  3. the ARB Act caters only for the management of the estates of deceased persons; and
  4. even then, where the court may exercise its powers of the appointment of trustees, these powers, in so far as they involve the Public Trustee, are subject to the Trustee Act 1949 (Revised in 1978).

[7] Q11:  If the ‘ARB application’ had not been made at trial, can appeal courts make an arb order?

The answer is ‘No’.

True it is that the Court of Appeal can make any order that the High Court could have made.  

But an appellate court is also a creature of statute. It can only make those orders that parliament allows it to make under the Courts of Judicature Act 1964 (‘CJA’).

But the Court of Appeal can only make those orders on matters which were applied for before the High Court, and if there is a proper appeal on the point.

So, the Court of Appeal can grant relief only on matters which are already the subject of an appeal. This is explained in sections 67(1) and 69(4) of the CJA.

Under section 67(1) of the CJA 1964, the Court of Appeal merely has:

‘the jurisdiction to hear and determine any appeal from any judgement or order of any High Court in any civil cause or matter, …, subject… to any other written law … upon which such appeal shall be brought’.

Under section 69(4), the Court of Appeal can make: ‘any order … as the case requires’.

Whereas under sec.69(1) of the CJA 1964, the Court of Appeal can make any order that the High Court could have made:

“…the Court of Appeal shall have all the powers and duties, as to amendment or otherwise, of the High Court, together with full discretionary power to receive further evidence by oral examination in court, by affidavit, or by deposition taken before an examiner or commissioner.”

So, where an insurance company’s lawyers demand for an ARB order at an appeal, for the first time, an appeal court has no power to deal with the question.

Worse, the Sessions Court has no power to make any order under the ARB Act 1995. Only the High Court may do so.

So, where the insurer’ lawyers demand for an order to be made in favour of the ARB, but that point had not been applied for at the trial court, an appeal court has no power to look into the question or make any order sending off the compensation sum to the ARB.

[8] Conclusion

So, in my humble opinion, the courts have no jurisdiction or power to make an ARB Order.

Even if they did, the courts should make the order in one lump sum in favour of the victim without interfering with the victim’s, or his caregivers’ (who in law are constituted as trustees) choice in investing the money in the best manner possible, in the best interest of the victim.

If there are fears that the compensation sums monies will be abused, there are enough legal mechanisms to punish these breaches of fiduciary duties.

 

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