When Is a Judgment Not Worth the Paper It Is Printed On? [Sa’Amran 6/11]

When Is a Judgment Not Worth the Paper It Is Printed On? [Sa’Amran 6/11]

An insurer raced to the High Court for a declaration that it owed nothing — before the trial court had decided whether its rider was even in the accident. It won. The victim then won his trial. Two judgments, one collision, and a paper judgment not worth the paper it is printed on. The Federal Court called it a serious error of law and fact — and a breach of Article 8.

by GK Ganesan June 16, 2026 19 Views

A study of Appeal No. 4 in AmGeneral Insurance Bhd v Sa’Amran al Atan & Ors and other appeals [2022] 5 MLJ 825; [2022] 8 CLJ 175 — being Mohamad Zulkarnain bin Mustafa v Allianz General Insurance (M) Bhd (Federal Court Appeal No. 02(f)-05-01/2020(W)).

I. TWO JUDGMENTS, ONE COLLISION

There is a particular kind of victory that leaves the winner worse off for having won. Mohamad Zulkarnain found it. He sued for his injuries, fought his case to trial, and was awarded judgment. By the time he held it, the same set of facts had already been decided against him in another courtroom he had never entered — and his judgment was worth, in the Federal Court’s own phrase, no more than the paper it was printed on.¹

How a litigant can win his trial and lose his case at the same time is the question Appeal No. 4 answers. The mechanism was section 96(3) of the Road Transport Act 1987, and the lesson is what happens when a procedural shortcut is allowed to overtake the trial it was never meant to replace.

II. THE SCHEME, AND ITS PRESSURE POINT

Part IV of the RTA exists to see that the victims of negligent driving are paid. Section 96(1) makes the insurer directly liable to satisfy a judgment obtained against its insured — the injured party need not sue the insurer separately, because the insured’s judgment debt becomes the insurer’s. That is the protective design, and the courts read it generously to serve its purpose.

Section 96(3) is the counterweight. It lets an insurer escape that liability if, before the liability is incurred, it obtains a court declaration that the policy is void or unenforceable. The provision has a built-in safeguard: its proviso requires the third party who has sued the insured to be given notice of the declaration application, so that his interests are not decided behind his back.

The safeguard, however, protects only against being unheard. It does not protect against something subtler — a declaration won on the very facts that the trial court is about to decide. That is the pressure point Appeal No. 4 exposed.

III. A STORY TOLD FOUR TIMES

The facts have the shape of a tall tale, improved with each retelling. The rider first lodged a police report admitting that he had collided with the appellant’s motorcycle. He then filed two corrective reports — one altering the location of the accident, the other the year. Later, once the insurer’s adjusters had produced their report, came a fourth police report, together with statutory declarations, recanting his original admission and denying that he had been involved at all.²

When Zulkarnain sued for negligence, the insurer did not wait to test that performance at trial. It went to the High Court and obtained a declaration under section 96(3) that it would not have to meet any judgment he might win. The trial court at Teluk Intan then did its own work, heard the witnesses, disbelieved the recantation, found the rider negligent, and gave judgment to the victim.

The result was a small absurdity with large consequences. Zulkarnain held a judgment; the insurer held a declaration that it need not honour it. Same collision, same disputed fact — whether the rider was involved at all — answered twice, by two courts, in opposite directions.

IV. THE QUESTIONS FOR THE FEDERAL COURT

Three questions framed the appeal. First, whether granting a section 96(3) application that turned on issues of negligence still awaiting trial breached the victim’s right to equality under Article 8 of the Federal Constitution. Second, whether, where the application turned on the very question of whether the insured had been involved in the accident, the High Court should have stood aside for the tribunal about to decide that question on oral evidence. Third, whether section 96(3) is confined to the voidness or unenforceability of the policy, rather than serving as a licence to decide the core facts of a negligence claim.

V. THE COURT’S ANSWER

A. What Section 96(3) Is for — and What It Is Not

The Federal Court’s reply was firm and unambiguous. Section 96(3) is a means of declaring a policy void or unenforceable. It is not a side door through which an insurer may enter the trial court’s province and decide liability for itself:

“… the High Court ought to have dismissed the s. 96(3) application as the first respondent relied on facts which formed the core points of dispute between the parties in the trial court, such as whether the rider of the motorcycle was involved in the accident. The question of whether the rider was involved in the accident was an issue of tort and not of contract. The legislative intent behind s. 96(3) is clear, that the provision is only meant for determining issues of voidness and unenforceability of an insurance contract and cannot be exploited to determine core factual issues in the tort of negligence such as the issues of liability and damages.”³

The contest over whether the rider was even in the accident was a question of tort, not of contract — and tort is the trial court’s business. Where the underlying facts are genuinely disputed and already being litigated, they belong to that court and to no other.

B. One Trial, Not Two

The vice was compounded by the manner of it. The disputed facts here were not marginal; they were the whole case, and they had shifted under oath:

“The facts and the evidence in the present case were so highly contested, compounded as it were by the fact that the third respondent made a complete about turn in his evidence after the I.O. had given evidence at the trial in the Teluk Intan Sessions Court. Surely this required determination by viva voce evidence in a single trial and not by two different courts as had happened in this case. These highly contested factual issues cannot suitably be resolved by way of a s. 96(3) declaration as they form a crucial point of contention between the parties.”⁴

A man who changes his story after hearing the investigating officer give evidence is to be tested in the witness box, under cross-examination, by the judge who hears the rest of the case — not on affidavit, in a separate forum, by a judge who hears none of it. To split that single question across two courts is to invite precisely the contradiction that occurred.

C. The Arbitrariness, and Article 8

The vice was not mere procedural untidiness, and the Court named it for what it was. The facts on which the insurer relied ought to have been tested in the pending trial; to decide the whole case on affidavit instead was an arbitrariness that struck at the victim’s constitutional guarantee of equality:

“The arbitrariness that had taken place has created uncertainty for the appellant’s chances of recovery and this breaches his right to equality under art 8 of the Federal Constitution as the fate of the entire case was decided not in a trial but on an originating summons.”⁵

This is the answer to the first leave question, and it is express. The breach was not merely inferred from the statute’s protective purpose; it was found in terms under Article 8, because a man’s entire claim had been decided by summons rather than by trial. The consequence followed at once:

“What transpired in this case has resulted in the trial court’s function being rendered useless and its judgment in favour of the appellant nugatory as the s 96(3) declaration obtained by the first respondent from the High Court defeated the judgment obtained by the appellant from the sessions court, thus leaving him with only a paper judgment that may not even be worth the paper it is printed on. That defeats the object of the RTA to protect third parties against risks arising out of the use of motor vehicles rather than to put its object into effect.”⁶

The granting of the declaration was, in the Court’s own words, “a serious error of law and fact” that “denied the appellant of the fruits of his litigation in the Teluk Intan Sessions Court.”⁷

VI. THE PRINCIPLE, STATED PLAINLY

Reduced to its essence, Appeal No. 4 holds this. A section 96(3) declaration must not be granted while the core facts of tortious liability await determination in a separate trial. The provision is no shortcut around a trial on the merits. The question of involvement — whether the insured or his vehicle was in the accident at all — is a question of tort to be decided once, on oral evidence, by the trial court. An insurer that wishes to contest those facts must do so where they are tried: by intervening in the liability action, not by racing it to a different courtroom.

The correct course, where the involvement of the insured is genuinely in doubt, is for the High Court to dismiss the section 96(3) application and let the trial court decide — the approach the Federal Court approved in Malaysia Motor Insurance Pool v Eastern Moon Enterprise,⁸ and which echoes the older insistence that a declaration under section 96(3) is for “clear-cut cases” alone.⁹

The protective purpose that underlies this is not peculiar to Malaysia. It is the settled rationale of compulsory motor insurance across the common law world, expressed by Lord Hailsham LC in Gardner v Moore: the scheme exists so that the innocent victim of a negligent and uninsured-in-substance driver is not left to bear a loss that the legislation was designed to shift to the insurer.¹⁰

VII. THE AFTERLIFE OF APPEAL NO. 4

The principle has not lain idle. In Jiwaneswary Raman v Etiqa General Takaful Bhd, the Court of Appeal applied Zulkarnain directly, explaining that whether the insured was involved in the accident is an issue of tort to be decided “by viva voce evidence in a single trial, not by two different or separate proceedings,” and reproducing the reasoning at [159]–[160].¹¹ And the Federal Court returned to the broader scheme in Chen Boon Kwee v Berjaya Sompo Insurance Bhd, confirming that section 96(3) is not the insurer’s sole route, that any declaration must be obtained before liability is incurred, and that the tortious claim and the insurer’s challenge ought ideally to be heard by the same court.¹²

That last point is the quiet vindication of the argument in Appeal No. 4. The disease was two judgments from two courts on one set of facts. The cure is to keep the dispute in a single forum — to let the trial court try the case, and to let the insurer make its stand there, in the open, rather than in a pre-emptive strike that leaves the victim holding paper.

VIII. CONCLUSION

Appeal No. 4 is a short answer to a real temptation. An insurer faced with a doubtful claim will always prefer to settle the matter cheaply, on affidavit, before the witnesses are heard. Section 96(3) offered an apparent means to do so, and for a time it was used to that end. The Federal Court closed the door. The merits of a road accident claim are to be decided once, at trial, by the court that hears the evidence — and a victim’s hard-won judgment is not to be reduced, by a procedural manoeuvre conducted elsewhere, to a worthless piece of paper.

∞§∞

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 Pablo Merchan Montes 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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When Is a Judgment Not Worth the Paper It Is Printed On? [Sa’Amran 6/11]

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