SRI LANKA INSURANCE CORPORATION LTD vs. CHRYSANTHA FERNANDO

029-SLLR-SLLR-2005-V-1-SRI-LANKA-INSURANCE-CORPORATION-LTD-vs.-CHRYSANTHA-FERNANDO.pdf



CA
Sri Lanka Insurance Coroporation vs
Chrysantha Fernando (Balapatabendi, J.)
229
SRI LANKA INSURANCE CORPORATION LTDVSCHRYSANTHA FERNANDOCOURT OF APPEALBALAPATABENDI, J., ANDWIJERATNE J
A. 383/99(F)
C. COLOMBO 16598/MRMAY 10,2004
Motor Traffic Act, No. 14 of 1951, sections 100(4) 100(1)b and 106-109-Motoraccident – Ex parte trial – Damages awarded – Valid policy – Separate actioninstituted against the Insurance Corporation to recover same – PrescriptionOrdinance, sections 3 and 6 – Applicable provision – Written contract – Shoulda separate action be instituted ?
HELD:
(i) Ex parte judgment was entered on 27.03.90. The instant action was institutedon 7.7.1995 to enforce the decree against the defendant appellant (Insurance
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Sri Lanka Law Reports
(2005) J Sri L. R.
Corporation) as the liability to pay the damages on the decree obtained by theplaintiff respondent has arisen out of the contract of insurance which is awritten contract.
(ii) The prescriptive period is 6 years and not 3 years.
Per' Balapatabendi, J.,
“The plaintiff respondent who obtained a money decree for damagesagainst the insured could have executed the decree on the insurer(defendant appellant) without instituting the instant action."
APPEAL from a judgment of the District Court of Colombo.
Case referred to :
1. Fernando vs De Silva and others – (2000) 3 SriLR 29Chandana Prematilake for appellant
Basheer Ahmed with V. A. Mowjook and V. A. Mayhes for plaintiffrespondent.
Cur. adv. vult.
June 7, 2004
JAGATH BALAPATABENDI., J.The plaintiff- respondent who was seriously injured and sufferedpermanent disability in a motor accident, instituted action bearing No.4645/M in the District Court of Mt.Lavinia, claiming damages in a sum ofRs. 3,35814 with legal interest against the registered owner of the vehiclethe 1 st defendant, and the driver the 2nd defendant for negligent driving,with notice of the action given to the Insurer the Insurance Corporation ofSri Lanka. The case had proceeded to trial ex-parte, the ex parte judgmenthad been pronounced and the exparte decree had been entered on
The said ex parte-decree had been seized on both defendants.After exchange of some correspondence between the plaintiff respondentand the Insurance Corporation in respect of said damages awarded, theplaintiff-respondent instituted the instant action against the defendant-appellant the Sri Lanka Insurance Corporation Ltd. (the successor of theInsurance Corporation of Sri Lanka) bearing No. 16598/M on 07.07.1995praying for a judgment and a decree against the defendant appellant forthe decreed sum (Rs. 3,35814) with the legal interest thereon from
on the basis that the defendant-appellant corporation had issued
CASri Lanka Insurance Corporation vs231
Chrysantha Fernando (Balapatabendi, J.)
a policy of insurance in relation to the use of the said vehicle (which metwith the accident), to the registered owner of the vehicle, and the saidpolicy was valid at the time of the accident.
The learned District Judge held in favour of the plaintiff-respondent allowingthe reliefs claimed in the prayer to the plaint, by the judgment dated
This appeal is preferred against the said judgment, by thedefendant-appellant.
At the hearing of the appeal the counsel for the defendant-appellantassailed the judgment stating that the learned District Judge had erred inlaw on the question of prescription.
Counsel for both parties-agreed to tender written submissions on thesaid question of law.
The contention of the defendant-appellant was that the instant actionwhich had been filed by the plaintiff-respondent on 7.7.1995 praying forajudgment and a decree against the defendant-appellant (The insurer) adecreed sum obtained against the insured (the owner of the vehicle) on
is prescribed in law, under the provisions of the section 10 ofthe Prescription Ordinance, as the Prescription Ordinance does notspecifically provide a prescriptive period within which an action based on adecree of court could be instituted. As sugh the instant action had beeninstituted after 3 years from the date of the decree had been prescribed inlaw.
It was not challenged that the liabilities on the relevant policy ofinsurance of the predecessor the Insurance Corporation of Sri Lanka hadpassed on to the defendant-appellant Sri Lanka Insurance CorporationLimited.
I would like to point out the effect of the provisions of the section 105of the Motor Traffic Act, which had been carefully considered in the caseof Fernando Vs De Silva & Others.(U
Gunawardene, J held that “Section 105 of the Motor Traffic Actimposes an absolute obligation on the Insurer, and the Insurer is legallybound to compensate the party who has obtained judgment in his favourfor damages sustained in a motor – accident caused by a vehicle coveredby policy of insurance issued by the insurer." Also, “ in order to enforce a
232Sri Lanka Law Repons(2005) 1 Sri L. R.
decree for damages obtained against the insured, a separate action neednot be brought against the insurer and it is not even necessary to add theinsurer as a respondent for the purpose of executing the decree."
Further, Gunav/ardene, J observed that “under a contract of insurance,•insurer is legally’bound to compensate the other party. The added featurefor the law (under section 105 of the Motor Traffic Act) itself commandsthe insurer to pay directly to the injured third party. ”
It is relevant to note that, in terms of the contract of insurance betweenthe insured and the insurer, (the Sri Lanka Insurance Corporation Ltd) theinsurer had admittedly undertaken to pay damages or compensation onthe occurrence of damage or injury to a third party arising out of the use ofthe vehicle having a policy of insurance, belonging to the insured. Also,the policy of insurance obtained in favour of the insured, protects him,from liability to a third party, as a result of the operation of the relevantvehicle. The law demands and binds the insurer to indemnify the insuredagainst the insured’s liability to pay damages that had been awarded bycourt to a third party.
So that the obligation or the liability to pay damages even to a thirdparty arises on the contract of the policy of insurance, and in additionunder the provisions of section 105 of the Motor Traffic Act itself, i.e, thelaw compels or commands the insurer to pay damages directly to thethird party.
Section 105 of the Motor Traffic Act, No. 14 of 1951 as amended,which reads as follows. “ if after a certificate of insurance has been issuedunder section 100 (4) to the persons by whom a policy has been effected,a decree in respect of anysuch liability as is required by section 100(1)(b) to be covered by a policy of insurance (being a liability covered by theterms of the policy) is obtained against any person insured by the policy,then notwithstanding that the insurer may by entitled to avoid, or cancel,or may have avoided or cancelled, the policy, the insurer shall, subject tothe provisions of sections 106 to 109, pay to the persons entitled to thebenefit of the decree any sum payable therunder in respect of that liability,including any amount payable in respect of costs and any sum payable inrespect of interest on that sum under such decree.”
CALukmanjee and another vs233
Sylvester and others (Imam, J.) ■
(2) In this section, "liability covered by the terms of the policy” meansa liability which is covered by the policy or which would be so covered butfor the fact that the insurer is entitled to avoid or cancel, or has avoided orcancelled, the policy".
The liability imposed by section 105 is subjected to certainexemptions mentioned in sections 106 to 109 of the Act, but suchexemptions are not relevant to the present case and it was not in issue.
The plaintiff-respondent who obtained a money decree for damagesagainst the insured in the case No. 4645/M,' could have executed thedecree on the insurer – (the defendant-appellant) without instituting theinstant action. As it may be, it is obviously clear for the reasons men-tioned above that the liability to pay the damages on the decree obtainedby the plaintiff-respondent on 27.3.1990 arisen out of the contract ofin surance (which is a written contract), the instant action instituted on07.07.1995 to enforce the said decree against the defendant-appellantwas well within the prescriptive period of 6 years, as stipulated in theprovisions of section 6 of the Prescription Ordinance. As such it is need-less to consider the question of prescription for execution of a decreeunder the provisions of section 337 of the Civil Procedure Code as amendedby Act, No. 53 of 1980.
In the circumstances mentioned above, I am of the view that theinstant action instituted by the plaintiff-respondent was well within theprescriptive period of 06 years as decided by the learned trial judge. Theargument advanced by the counsel for the defendant-appellant is rejected,and the judgment of the learned trial judge is affirmed. The appeal isdismissed with costs fixed at Rs. 15000.
WIJEYARATNE, J. — I agree.
Appeal dismissed.