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Court of AppealPartially AllowedCivil Appeal 203 of 2010· [2013] KECA 548 (KLR)

James Muriithi Mugo v Kenya Alliance Insurance Co Ltd

Court of Appeal
30 May 2013
MMM. S. A. MakhandiaSKS. Gatembu KairuJOJ. Otieno-Odek
4,208 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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This Court of Appeal at Nakuru appeal concerned the interpretation of section 5 of the Insurance (Motor Vehicle Third Party Risks) Act, Cap 405. The appellant, a turnman injured in a 2005 accident while travelling in his employer's insured lorry, had obtained a decree of Kshs 4,400,000 against the owner and driver, and then sued the insurer seeking a declaration that it was statutorily obliged to satisfy the decree. The High Court (Ouko, J) dismissed the suit, holding that section 5(b)(iv), introduced by the Finance Act 2006 with effect from 1st January 2007 and capping compulsory cover at Kshs 3,000,000, defeated the claim. The Court of Appeal framed three questions: coverage under section 5(b)(ii), notice under section 10, and the retrospective application of section 5(b)(iv). It affirmed the trial judge on coverage, holding the turnman was a third party carried by reason of or in pursuance of his employment, following M'Mairanyi v Blue Shield, and affirmed the finding of notice. However, it held that section 5(b)(iv) had no retrospective effect and could not defeat rights acquired when the accident occurred, so the trial judge erred in invoking it. The court reversed the High Court judgment, substituted a declaration that the insurer must satisfy the decree in the primary suit, dismissed the respondent's cross-appeal, and awarded the appellant the costs of both the appeal and the cross-appeal.

Key legal issues

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01

Whether the appellant, an employee carried in the insured lorry, fell within compulsory insurance cover under section 5(b)(ii) of Cap 405

Holding

Yes; as a turnman carried by reason of or in pursuance of his contract of employment, he was a third party required to be insured despite the general employee exclusion in section 5(b)(i).

Reasoning

Sections 5(b)(i) and 5(b)(ii) distinguish employees whose work is unconnected to the vehicle from those, like drivers and turnboys, whose terms of employment relate to the vehicle. Relying on McGillivray, Tan Keng Hong and the Court of Appeal's own decision in M'Mairanyi v Blue Shield, the court held that a person carried because his contract of employment required or entitled him to travel is within the compulsory cover. The trial judge's interpretation accorded with M'Mairanyi.

p. 7
02

Whether due notice of the primary suit was served on the respondent under section 10 of the Act

Holding

Yes; the finding of notice was not disturbed, being based on a demand letter copied to the insurer and an affidavit of service.

Reasoning

A demand letter dated 11th October 2005, before commencement of the primary suit on 25th October 2005, was copied to the respondent with policy particulars, and a process server deponed to service on 12th October 2005. The trial judge, on the totality of the evidence including pleadings in a related case, found notice proved on a balance of probability. This is a first appellate review of evidence and the court saw no reason to interfere with that factual finding.

p. 7
03

Whether section 5(b)(iv) of Cap 405, imposing a Kshs 3,000,000 ceiling, applied retrospectively to defeat the claim

Holding

No; the provision, effective 1st January 2007, did not affect rights acquired when the accident occurred on 25th January 2005.

Reasoning

The cause of action arose and suit was filed before the amendment came into operation, so the appellant had already acquired a right in the language of Free Lanka Insurance v Ranasinghe. Applying the presumption against retrospectivity in the Interpretation and General Provisions Act, and Jivraj v Devraj and Ngobit Estate v Carnegie, retroactive effect requires express declaration or necessary intendment, neither present. The trial judge therefore erred in raising the point suo motu and dismissing the claim on it.

p. 8

Legal principles established

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  • Sections 5(b)(i) and 5(b)(ii) of Cap 405 recognise two categories of employees: those not required to be covered, and employees such as drivers and turnboys whose terms of employment relate to the motor vehicle, who must be covered.
  • A person carried in a vehicle by reason of or in pursuance of a contract of employment is a third party required to be insured; the appellant as turnman was covered under section 5(b)(ii).
  • Section 5(b)(iv) of Cap 405, which came into effect on 1st January 2007, has no retrospective effect and cannot defeat rights acquired when the accident occurred in January 2005.
  • A court may raise and determine an issue suo motu, provided no costs are awarded to either party on that basis (respondent's concession on ground 1 was not disputed in substance).

Court orders

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  1. 1.Appeal allowed; judgment of the High Court in Nakuru HCCC No. 129 of 2008 reversed
  2. 2.Order dismissing the appellant's suit substituted with an order declaring that the respondent is under a statutory duty to satisfy the decree of 7th March 2008 in Nakuru HCCC No. 261 of 2005
  3. 3.Respondent's cross appeal dismissed
  4. 4.Appellant to have the costs of the appeal and of the cross appeal

Authorities

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Legislation

  • Insurance (Motor Vehicle Third Party Risks) Actsection 5, including 5(b)(i), 5(b)(ii), 5(b)(iv); section 10; section 10(2)(a); section 10A
  • Interpretation and General Provisions Actsection 23(3)(c), Cap 2
  • Finance Actsection 34, Act No. 10 of 2006
  • Workmen's Compensation Act
  • Land Control Act
  • Rules of this Court (Court of Appeal Rules)rule 91; rule 93

Cases cited (11)

  • Free Lanka Insurance Co. Ltd vs. Ranasinghe
    [1964] 1 All ER 457

    Rights acquired before an amending provision takes effect cannot be affected by it.

  • Govindji Popatlal vs. Premchand Raichand Limited
    [1963] EA 69

    Amendments to legislation do not have retrospective effect unless a contrary intention appears.

  • Suleiman Ibrahim vs. Awadh Said
    [1963] EA 179

    Amendments do not have retrospective effect unless a contrary intention appears.

  • Presidential Insurance Co. Ltd vs. Stafford
    [1997] 4 LRC 595

    Purpose of the statute: injured third party should not go without remedy on insurer insolvency.

  • Izzard vs. Universal Insurance Co. Ltd
    [1937] 3 All ER 79

    Passengers injured in course of employment, within an exception to an exception, are covered.

  • Tan Keng Hong and another vs. New India Assurance Co Ltd
    [1978] 2 All ER 380

    Construction of 'by reason of' and 'in pursuance of' a contract of employment in the exception.

  • M'Mairanyi and others vs. Blue Shield Insurance Co Ltd
    [2005] 1 EA 280

    Interpretation of section 5 of Cap 405: passengers carried by reason of or in pursuance of employment are compulsorily insured.

  • Gateway Insurance Company Ltd vs. Sudan Mathews
    High Court Civil Suit 1078 of 2000

    Coverage of passengers carried by reason of employment.

  • Selle v Associated Motor Boat Compan Limited
    [1968] EA 123

    First appellate court's duty to review evidence and draw its own conclusions.

  • Jivraj vs. Devraj
    [1968] EA 263

    Presumption against retrospectivity as a basic principle of common law and of section 23 of the Interpretation Act.

  • Ngobit Estate Ltd vs. Carnegie
    [1982] KLR 437

    Retroactive effect requires express legislative declaration or necessary intendment.

On appeal from
High Court of Kenya at Nakuru
HCCC No. 129 of 2008
Jurisdiction invoked
First appellate jurisdiction under the Court of Appeal Rules; appeal against High Court judgment (s 5, Insurance Motor Vehicle Third Party Risks Act, Cap 405 in issue)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "James Muriithi Mugo v Kenya Alliance Insurance Co Ltd", Case Analysis (2013). Civil Appeal 203 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/548/eng@2013-05-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.