I.  A VERY MALAYSIAN TRANSACTION

A.  What Sambung Bayar Means

Sambung bayar is Malay for “continue paying”, and it describes a transaction every Malaysian knows and no statute recognises. A car still under hire purchase changes hands informally: the buyer takes the keys and simply carries on the seller’s monthly instalments to the bank. Nobody troubles the financier. Nobody troubles the insurer. And nobody troubles the Road Transport Department, so the register continues to proclaim the seller as owner. Counsel for the insurer in this appeal described it with admirable candour — a “transfer of interest” in which the insured “ceased to have any insurable interest, possession, care, custody and control of the motor vehicle”, while on paper nothing had happened at all.¹AmGeneral Insurance Bhd v Sa’Amran a/l Atan & Ors and other appeals [2022] 5 MLJ 825; [2022] 8 CLJ 175 (FC) at [4], quoting the appellant’s written submissions (Abdul Rahman Sebli FCJ).

B.  The Sale That Never Quite Happened

In November 2007, Fazlina binti Mihad sold her car in just this paperwork-free fashion. She handed it to a salesman known to her only as “Zul”, part-exchanged it for a Honda Civic, paid RM7,000 to settle the balance owing to CIMB Bank, and signed a transfer form.²Sa’Amran at [17]. Her version was tidier than the classic sambung bayar — she settled the bank herself — but the essential vice was identical: the register was never told. And there matters rested for seven years, until 6 September 2014, when the same car — driven by one Nakiuddin bin Ahmad, a man she had presumably never met — collided with Sa’Amran a/l Atan.³Sa’Amran at [14].

C.  The Question for the Apex Court

Sa’Amran did what any sensible victim would. He searched the register, found Fazlina named as owner and AmGeneral as insurer, noted that the policy ran from 8 November 2013 to 7 November 2014 — comfortably straddling the accident — and sued in the Sessions Court at Kuantan.⁴Sa’Amran at [14]–[15]. The insurer’s response was to ask the Kuala Lumpur High Court, under s.96(3) of the Road Transport Act 1987, to declare the policy null and void. Its sole ground: Fazlina had sold the car in 2007 and so had no insurable interest when it crashed.⁵Sa’Amran at [16]–[18].

The High Court agreed. The Court of Appeal did not.⁶Sa’Amran at [18]–[20]. So the Federal Court was asked one question: does the registration impose liability on the insurer notwithstanding that the insured ceased to have insurable interest in the motor vehicle at the time of the accident?⁷Sa’Amran at [3]. The answer, delivered by Abdul Rahman Sebli FCJ for a unanimous panel, was yes.⁸Sa’Amran at [69]. How the Court got there is a study in how much of received insurance wisdom dissolves on contact with the statute.

II.  THE INSURER’S CASE: SEVENTEEN REASONS AND A DOCTRINE

A.  Everything Including the Kitchen Sink

The insurer advanced no fewer than seventeen grounds, lettered (a) to (q) in the judgment, in support of a single proposition: sale kills the policy.⁹Sa’Amran at [22]. It deployed Halsbury’s, Merkin and Hemsworth on motor insurance, eight authorities on uberrimae fidei stretching back to Carter v Boehm, and s.96(5) of the RTA for good measure.¹⁰Sa’Amran at [7]–[10]. The register, it said, is not a document of title; the sale of a car is governed by the Sale of Goods Act 1957 and is complete on delivery; the insured’s own statutory declaration was the best evidence of the sale; and Parliament could not have intended to hold an “innocent” insurer liable for dealings it knew nothing about.¹¹Sa’Amran at [22], grounds (e), (i), (j) and (k).

The Court’s reception was cool. The reliance on utmost good faith was “misconceived”: Fazlina had concealed nothing when the policy was taken out, and had committed no fraud in any claim.¹²Sa’Amran at [11]. In any event, uberrimae fidei is a common law doctrine operating between insurer and insured; it does not reach into the statutory protection that ss.94 and 95 give third parties.¹³Sa’Amran at [12]. And there was a quieter embarrassment. The insurer could not point to any clause of the policy that Fazlina had breached. The policy did not even require her to notify the insurer of a sale.¹⁴Sa’Amran at [13]. Seventeen grounds, and not one term of the contract among them.

III.  TRANSFER OF INTEREST IS NOT TRANSFER OF OWNERSHIP

A.  Section 13(1) Means What It Says

The Court’s first move was definitional, and fatal. “Transfer of interest is not transfer of ownership.”¹⁵Sa’Amran at [25]. A valid transfer of ownership can be effected only by strict compliance with s.13(1) of the RTA: the registered owner forwards the prescribed statement within seven days; the new owner does likewise with the certificate and fee; and the vehicle is not to be used beyond seven days unless the new owner is registered.¹⁶Sa’Amran at [25]. The procedure is mandatory, and its purpose is not bureaucratic tidiness. It exists so that when the car meets another road user, the victim can identify the registered owner and maintain an action against the tortfeasor.¹⁷Sa’Amran at [26].

The Supreme Court of India had made the same point in Naveen Kumar v Vijay Kumar: a claimant ought not to be burdened with following a trail of successive unregistered transfers, for that would defeat the statutory object.¹⁸Sa’Amran at [27], citing Naveen Kumar v Vijay Kumar & Ors (Civil Appeal No 1427 of 2018) (SC India, unreported). One sympathises. Sa’Amran could search the register. He could hardly be expected to search for Zul.

B.  The Statutory Declaration Proves a Sale, Not a Title

What of Fazlina’s statutory declaration — the insurer’s “best evidence”? It proved precisely what it said: that she had sold the car. It did not prove that legal ownership had passed, because under the RTA that can only be established by proof of registration under s.13(1).¹⁹Sa’Amran at [43]. Since nobody had complied with s.13(1), Fazlina remained the registered owner at the time of the accident “and even to this day”.²⁰Sa’Amran at [28].

IV.  SECTION 109: A LAWSUIT IS NOT A PROSECUTION

A.  The Ejusdem Generis Gambit

Registration mattered because of s.109. Subsection (1) deems the registered owner to be the owner “for the purpose of any prosecution or proceedings under this Act”; subsection (2) deems the driver’s acts and omissions to be those of the registered owner, unless she shows she took all reasonable steps to prevent them.²¹Sa’Amran at [31]–[32]. Fazlina offered no such evidence, so the driver’s negligence was hers, and the policy issued to indemnify her was in full force.²²Sa’Amran at [29].

The insurer’s escape route was ingenious. Section 109, it argued, deals in offences; “proceedings” must be read ejusdem generis with “prosecution”, confining the deeming to criminal and quasi-criminal matters and leaving a civil damages claim untouched.²³Sa’Amran at [22], ground (d). The Court would have none of it. Read as a whole and in the right context, s.109 “applies to civil and criminal proceedings alike”.²⁴Sa’Amran at [38]. A claim for damages by an accident victim is a lawsuit, not a prosecution under the Act — and a lawsuit is a “proceedings” within s.109(2).²⁵Sa’Amran at [40]. Had Parliament meant to confine the section to prosecutions, it would not have needed the word “proceedings” at all; and the Act is in fact full of civil proceedings, s.96(3) declarations among them.²⁶Sa’Amran at [41]. The proviso to s.109(2), which excepts contraventions of ss.41 to 49 — penal provisions all — shields the registered owner from prosecution for the driver’s driving offences, not from civil liability for his negligence.²⁷Sa’Amran at [30]–[31].

V.  THE HERESY: THIRD-PARTY COVER NEEDS NO INSURABLE INTEREST

A.  The Premium Was Banked

Then came the part of the judgment that insurers will like least. The Court reminded itself that the insurer had received payment for issuing the policy. Having banked the premium, it “cannot look the other way and resile from its promise to indemnify the insured when indemnity became due by raising the technical ground that the insured had no insurable interest in the motor vehicle at the time of the accident”, unless the policy had expired or been lawfully terminated.²⁸Sa’Amran at [46]. The doctrine of mutual benefit and burden — Halsall v Brizell — forbids taking the benefit of a deed without subscribing to its obligations.²⁹Sa’Amran at [47], citing Halsall v Brizell [1957] Ch 169. And the real beneficiary of a statutory third-party policy is not the insured at all. It is the accident victim.³⁰Sa’Amran at [47].

B.  Boss v Kingston and the Point Everyone Forgot

The deeper doctrinal strike was this: for third-party risks cover, insurable interest is not required in the first place. In Boss v Kingston, Lord Parker CJ observed that where the policy is in respect of third-party risk only, “there is no necessity for the assured to have insurable interest in the vehicle”.³¹Sa’Amran at [48], citing Boss and Another v Kingston [1963] 1 All ER 177. That single observation, the Court said, rendered “the whole substratum of the appellant’s argument unsustainable in law”.³²Sa’Amran at [48]. The Privy Council reached a kindred conclusion in Siu Yin Kwan v Eastern Insurance, holding that indemnity insurance requires no insurable interest,³³Sa’Amran at [62], citing Siu Yin Kwan v Eastern Insurance Co Ltd [1993] 1 LNS 65 (PC) (Lord Lloyd). and Brett MR had said as long ago as Stock v Inglis that once the premium is received, the objection of no insurable interest is often “a technical objection without any real merit”.³⁴Sa’Amran at [61], quoting Kenneth Sutton, Insurance Law in Australia (2nd Ed) at p 371, citing Stock v Inglis [1884] 12 QBD 564 at 571.

C.  Nothing in the Act Says the Policy Lapses

The statute pointed the same way. There is nothing in the RTA that can be construed to mean a third-party policy lapses upon sale of the vehicle, where the policy is otherwise valid and subsisting at the accident.³⁵Sa’Amran at [49]. Cover for third-party risks is compulsory under s.90(1), on pain of fine, imprisonment and disqualification;³⁶Sa’Amran at [49]. the second of the Act’s stated objects is “the protection of third parties against risk arising out of the use of motor vehicles”;³⁷Sa’Amran at [50]. s.91(3) makes the insurer liable to indemnify the persons specified in the policy “notwithstanding anything in any written law”; and s.94 strikes down conditions purporting to end liability after the event giving rise to the claim — parties simply cannot contract out.³⁸Sa’Amran at [51]–[52]. The Supreme Court in Lim Tiok had long since confirmed that the whole purpose of compulsory motor insurance is full and effective protection of innocent third parties, whatever private arrangements insurer and insured may have made,³⁹Sa’Amran at [55], citing Malaysian National Insurance Sdn Bhd v Lim Tiok [1997] 2 MLJ 165; [1997] 2 CLJ 351. and the Federal Court in Tirumeniyar had explained that s.91(3) bypasses privity of contract altogether.⁴⁰Sa’Amran at [56], citing Malaysian Motor Insurance Pool v Tirumeniyar a/l Singara Veloo [2020] 1 MLJ 440; [2019] 10 CLJ 731 at [47].

The Indian Supreme Court, construing materially similar provisions, had held that on a transfer of the vehicle the insurer’s liability to the victim does not cease even where nobody tells the insurer of the sale — compulsory insurance being “for the benefit of third parties” and, in Santro Devi, “in a way part of the social justice doctrine”. ⁴¹Sa’Amran at [59]–[60], citing Rikhi Ram v SMT Sukhrania (Civil Appeal No 1578 of 1994) (SC India, unreported) and United India Insurance Co Ltd v Santro Devi [2009] 3 MLJ 130 (SC India). The seller’s loss of interest, in short, changes nothing for the victim.⁴²Sa’Amran at [45].

VI.  LAYING THE GHOSTS: ROSLAN BIN ABDULLAH AND PETERS

The insurer’s heaviest artillery was historical: the Federal Court’s own decision in Roslan bin Abdullah, and the English Court of Appeal in Peters, each said to establish that sale extinguishes the seller’s cover. Both were distinguished, and rather thoroughly. In Roslan bin Abdullah there was no policy in force at all — it had lapsed — and the case was decided under the long-repealed Sarawak Ordinance, without any equivalent of s.13 or s.109 in play.⁴³Sa’Amran at [67]; Roslan bin Abdullah v New Zealand Insurance Co Ltd [1981] 2 MLJ 324. Peters fared no better: the UK Road Traffic Act 1930 contained nothing like s.13(1) or s.109, defined “owner” differently, and the court there was concerned with the equivalent of s.96(1).⁴⁴Sa’Amran at [68]; Peters v General Accident Fire and Life Assurance Corpn Ltd [1938] 60 Ll L Rep 311. Authorities from a statute without a deeming provision tell one nothing about a statute with one. The Court of Appeal’s modern line — Zainudin Mat Isa, Muhamad Haqimie, Aqmal — emerged vindicated.⁴⁵Sa’Amran at [20]–[24], [66]; Muhamad Haqimie Hasim v Pacific & Orient Insurance Co Bhd [2018] MLJU 629 (CA, Tengku Maimun Tuan Mat JCA, as the Chief Justice then was).

VII.  THE ANSWER, AND WHAT IT BURIES

So the leave question was answered in the affirmative: registration imposes liability on the insurer notwithstanding that the insured ceased to have insurable interest at the time of the accident.⁴⁶Sa’Amran at [69]. The question in our title is therefore answered too. Even after sambung bayar, the insurer must still pay the crash victim. Every informally sold car in the country — and there are many — carries its registered owner’s third-party cover with it until the policy expires or the register is amended. The insurer who wishes to escape must do so the lawful way, by a timely s.96(3) declaration with proper notice to the victim — a discipline examined in the companion essay on the notice rule in this series — and not by waving the insured’s statutory declaration after the crash.

There is a temptation to read Sa’Amran Appeal No. 1 as ‘sentiment defeating’ principle.

It is the reverse.

The principle of insurable interest belongs to the private bargain between insurer and insured, and even there it has no purchase on third-party risks cover.

The RTA’s bargain is a different one: the insurer takes the premium and the public takes the protection.

Fazlina’s car left her driveway in 2007. Her name never left the register, and her insurer’s promise never left the Act.

On 6 September 2014, both were waiting where the statute had put them.

∞§∞

This article is written for a general readership and does not constitute technical or legal advice. Readers with legal questions are encouraged to seek independent legal advice.

The author thanks KN Geetha, TP Vaani, JN Lheela, and Lydia Jaynthi at GK Legal. Our gratitude to Getty Images of Unsplash for the image.

Claude, Anthropic’s AI, smoothed the drafting; Perplexity Pro checked the facts. The argument, the views, and the errors remain the author’s.

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