SULAIMAN SESAY and mE WHITE CROSS INSURANCE COMPANY AND BAFFI MINERAL MINING COMPANY LTD. (006)  SLSC 15 (26 January 1961);
Plaintiff (Sesay) was injured in an automobile accident while he was a passenger in a motor car belonging to Baffi Mineral Mining Company Ltd. (Baffi), of which he was " managing director.'' He sued Baffi for negligence and obtained judgment against it for £2,645 12s. 6d. damages and costs. Baffi had insured the car with the White Cross Insurance Company (White Cross), which had undertaken Baffi's defence. Subsequently, Sesay brought an action against White Cross under the provisions of section 11 (1) of the Motor Vehicles (Third Party Insurance) Ordinance, which provides: "If after a certificate of insurance has been issued in favour of the person by whom a policy has been effected ... judgment in respect of any such liability as is required to be covered by a policy . . . issued for the purposes of this Ordinance, being a liability covered by the terms of the policy ... , is obtained against any person insured by the policy ... then ... the insurer ... shall ... pay to the persons entitled to the benefit of such judgment any sum payable thereunder .... " Counsel for White Cross argued that Baffi's liability was not one which was "required to be covered " by the insurance policy, since Sesay was an employee of Baffi and section 7 (1) of the Ordinance provides that a policy " shall not be required to cover liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment." Held, for the plaintiff, (1) plaintiff was not "in the employment of" the Baffi Mineral Mining Company within the meaning of section 7 (1) of the Motor Vehicles (Third Party Insurance) Ordinance. (2) The liability of Baffi to the plaintiff was a liability which was covered by the terms of the policy issued by White Cross to Baffi. Cases referred to: Fowler v. Commercial Timber Company Limited  2 K.B. 1 ; Trussed Steel Concrete Company Limited v. Green  1 Ch. 115; Lee v. Lee's Air Farming Ltd.  A.C. 12; In re Newspaper Proprietary Syndicate, Limited. Hopinkson v. Nawspape:r Proprietary Syndicate, Limited  2 Ch. 349. Cyrus Rogers-Wright for the plaintiff. Arthur E. Dobbs for the White Cross Insurance Company. Note: This decision was reversed by the Court of Appeal on April 14, 1961 (S.L. & G.A. 2/61).
MARcus-JoNES J. On October 24, 1960, the plaintiff was awarded the sum of £2,645 12s. 6d. damages against the Baffi Mineral Mining Company and costs to be taxed in an action for negligence resulting in personal injuries to the plaintiff when the defendant's car in which the plaintiff was travelling was involved in an accident. The costs were taxed at £93 7s. 6d. and the plaintiff now seeks to recover these amounts from the White Cross Insurance Company as insurers of the motor car of the Baffi Mineral Mining Company. The plaintiff has now sued the White Cross Insurance Company on the ground that the Baffi Mineral Mining Company were entitled, under the policy of insurance, to be indemnified by it in respect of the third party liability, and that the plaintiff now has a direct claim vested in him against the defendant insurance company by virtue of the Motor Vehicles (Third Party Insurance) Ordinance (No. 3 of 1949). The White Cross Insurance Company dispute the claim that under the policy this particular liability is covered. Learned counsel for the defendant company submitted that this action is misconceived, but with respect I do not agree with him. Section 11 of Ordinance No. 3 of 1949 makes an insurer bound to satisfy judgment obtained against persons insured in respect of third party risks notwithstanding that the insurers might be entitled to avoid or cancel the policy provided the insurers have been given notice of the proceedings within fourteen days of the commencement of those proceedings. It depends on the happening of an event, namely, that a judgment has been recovered and if that event has happened the injured party is entitled to be paid by the insurance company notwithstanding that the policy is voidable or has been avoided. Mr. Dobbs argued that there was a statutory exception in case of death or personal injuries in motor accidents contained in section 11 (1) of the Motor Vehicles (Third Party Insurance) Ordinance (No. 3 of 1949), which reads: " If after a certificate of insurance has been issued in favour of the person by whom a policy has been effected or a certificate of security has been issued in favour of the person whose liability is covered by such security judgment in respect of any such liability as is required to be covered by a policy or security issued for the purposes of this Ordinance, being a liability covered by the terms of the policy or security, is obtained against any person insured by the policy or whose liability is covered by the security, as the case may be, then, notwithstanding that the insurer or the giver of the security may be entitled to avoid or cancel or may have avoided or cancelled the policy or the security, as the case may be, the insurer or the giver of the security shall, subject to the provisions of this section, pay to the persons entitled to the benefit of such judgment any sum payable thereunder in respect of the liability including any sum payable in respect of costs and any sum payable by virtue of any law in respect of interest on that sum or judgment." That the important words under this section are- " In respect of any such liability as is required to be covered by a policy or security issued for the purposes of this Ordinance," and that to find out what liability has to be covered under the Ordinance reference should be made to section 7 of the Ordinance which reads: (1) A policy of insurance for the purposes of this Ordinance must be a policy which:
(a) is issued by an insurer approved by the Governor in Council; and (b) insures such person or classes of person as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of a motor vehicle covered by the policy; Provided that such policy shall not be required to cover: (a) liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment ; or (b) save in the case of a passenger vehicle or where persons are carried by reason of or in pursuance of a contract of employment, liability in respect of the death of or bodily injury to a person being carried in or upon or entering or getting on to or alighting from a motor vehicle at the time of the occurrence of the event out of which the claims arise ; or (c) any contractual liability. (2) Notwithstanding anything in any law contained a person issuing a policy of insurance under this section shall be liable to indemnify the persons or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of person. He submitted that the matter falls under either or both of the provisos in section 7 (a) or (b) and that the liability for which judgment has been obtained is not a liability as is required under the Ordinance. He then proceeded to argue whether the plaintiff was a person in the employment of the Baffi Mineral Mining Company. He conceded that a mere director would not be considered to be in the employment of the company but submitted that where a person becomes a managing director then he becomes an employee of the company for he performs two functions, that of director and that of manager. He referred to Fowler v. Commercial Timber Co. Ltd.  2 K.B. 1, where it was held that a person appointed managing director could sue the company for breach of contract where the company went into voluntary liquidation although the voluntary liquidation was with the assent of the company. He also cited the case of Trussed Steel Concrete Co. v. Green  1 Ch. 115 and submitted that by implication it decided that a managing director could be employed by the company, and also Lee v. Lee's Air Farming Ltd.  A.C. 12, where it was held that Lee was a "worker" within the meaning of section 2 of the New Zealand Workers' Compensation Act since Lee's special position as governing director and principal shareholder did not preclude him from making on the company's behalf a contract of employment with himself, nor preclude him from entering into, or working in the capacity of servant under, a contract of service with the company. Concluding, Mr. Dobbs submitted that plaintiff had admitted he had been appointed under the provisions of the Articles of Association and read Article 13. The mere fact that he is unpaid is irrelevant; he was in the position of a manager, though part time. He was injured in an accident whilst he was being carried in the company's motor car which from the evidence was a private motor car and in
ew of the definition of passenger vehicle in the Ordinance, exception (b) of section 7 (1) applies. Rogers-Wright refers to paragraph 1823 of McGillivray on Insurance Law, 4th ed.: " If an insurer undertakes the defence of a claim he thereby admits liability in respect of it and cannot thereafter say that the loss was not one covered by the policy." He cites authorities holding that the managing director of a company was not a servant of the company. He argued that the judgment recovered amounted to a statutory debt which the plaintiff was entitled to recover. And he referred to a number of authorities on whether or not plaintiff was a person in the employment of the company. I propose first of all to dispose of the question whether the plaintiff as a managing director was a servant of the company and consequently a person in the employment of the company. It was held in In re Newspaper Proprietary Syndicate Ltd. Hopkinson v. Newspaper Proprietary Syndicate Ltd.  2 Ch. 349 that "A managing director of a company is not a ' clerk or servant ' within the meaning of the Preferential Payments in Bankruptcy Act, 1888, s. 1 (1) (b)." Mr. Justice Cozens-Hardy said at p. 350: " The claim is made on the ground that the managing director is a ' clerk ' or ' servant ' of the company, and that ' wages ' or ' salary ' to an extent of £50 were due to him. I think the claim cannot be supported. A managing director is certainly not a 'clerk' of the company. Is he a 'servant' of the company? This proposition was negatived by the Court of King's Bench in Dunston v. Imperial Gas Light & Coke Co. (1832) 3 B. & Ad. 125, where it was pointed out that a director is not a servant but a manager; and in Hutton v. West Cork Railway Co. (1883) 23 Ch.D. 654, 672, Bowen L.J., dealing with a case of a managing director, says 'A director is not a servant. He is a person who is doing business for the company, but not upon ordinary terms.' A managing director is only an ordinary director entrusted with some special powers. It is not relevant to say that he is entitled to remuneration by virtue of a special bargain, or that his remuneration is described as a salary." In Trussed Steel Concrete Co. v. Green, supra, Justice Cohen said, inter alia: " My attention has been called to a number of cases in which in certain contexts managing directors have been held not to be in the one case servants and in another case in the employment of a company. But I think Lord Carmont in delivering his judgment in Anderson v. lames Sutherland (Peterhead) Ltd., 1941 S.C. 203 was right when he said 'Each of the decisions was given in cases where the context played a vital part in the conclusion arrived at.' It has been held that a managing director is not a servant within the meaning of the preferential payment clauses in the Companies Act, 1929. It has been held that he is not a person in the employment of the company where the question under consideration was the power of the company to pay pensions to persons in the employment of the firm. The widest statement of the principle was that by Eve J. in In re Lee, Behrens & Co. Ltd.  2 Ch. 46, where he said, 'A director is not a servant of the company; per Lord Justice Bowen in Hutton v. West
Cork Railway Co. nor is any managing or other director a person in the employment of the company.' " In the Trussed Steel case, clause 3 of the agreement provided as follows: "During the continuance of this agreement Mr. Green shall devote his whole time and attention to his duties as managing director and shall in all respects conform to and comply with the directions given and regulations made by the board of the company and shall do all in his power to promote develop and extend the business of the company and shall not without the consent of the company during such continuance directly or indirectly engage or be concerned or interested in any other business of any kind whatsoever." Clause 4 fixed his remuneration at £2,000 per annum. It was held that while the defendant might be a person "employed" by the company, he was not, as managing director employed " at " or " from " any particular address and therefore did not come within the terms of the order, and could be dismissed without the consent of the Minister. In Lee v. Lee's Air Farming Ltd., supra, where it was held that Lee, the governing director, was a "worker " within the meaning of section 2 of the New Zealand Workers' Compensation Act, Article 32 of the Articles of Association of the company stated that Lee " shall be and he is hereby appointed governing director and subject to the provisions of cl. 34 hereof shall hold that office for life .... " And Article 33 provided: "The company shall employ the said Geoffrey Woodhouse Lee as the chief pilot of the company at a salary of £1,500 per annum from the date of incorporation of the company and in respect of such employment the rules of law applicable to the relationship of master and servant shall apply as between the company and the said Geoffrey Woodhouse Lee.'' From the evidence in this case there is nothing from which I can deduce a contractual relationship of employment between the plaintiff and the company. He says he is a part-time managing director and receives no salary whatsoever. He is engaged on a business of his own and only attends to the Baffi Mineral Mining Company's business whenever his services are required. The fact that the plaintiff is a director of the company is no impediment to his entering into a contract of service with the company. But I can find no such relationship here and I hold that the plaintiff is not a person in the employment of the Baffi Mineral Mining Company. In order to answer the question whether the defendant insurance company are liable to the plaintiff it is necessary to consider the proposal form and policy, but unfortunately neither side has tendered the proposal form signed by the Baffi Mineral Mining Company in evidence and only the policy Exh. 3 is in evidence. The scope of the third party liability intended to be covered is shown by the terms of the policy as contained in section 11 and headed Liability to Third Parties. Section 1 reads : " Subject to the limits of liability the company will indemnify the insured in the event of accident arising out of the use of the motor car against all sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of (a) death of or bodily injury to any person except where such death or injury arises out of and in the course of the employment of such person
by the insured and excluding liability to any person being a member of the insured's household who is a passenger in the motor car unless such person is being carried by reason of or in pursuance of a contract of employment." The policy referred to is described as Private Motor Car Policy (Comprehensive) and was on a Wolseley car /539. It incorporated a proposal which was to be the basis of the contract. Mr. Dobbs' contention is that passenger risk covered is passenger risk whilst the plaintiff was travelling in a passenger vehicle which according to the interpretation of " passenger vehicle " in section 2 means " a motor vehicle used for carrying passengers for hire or reward" whereas in this case the vehicle in question was a private motor car. If this contention is accepted it will have the effect of excluding altogether third party risk whilst travelling in the vehicle of the Baffi Mineral Mining Company. In my opinion the liability which the plaintiff seeks to enforce is covered by the policy of insurance and in the absence of any declaration that the defendants are entitled to avoid the policy under section 11 (3) of Ordinance No. 3 of 1949, the plaintiff is entitled to the remedy which he seeks. I therefore order that the plaintiff do recover from the defendants, the White Cross Insurance Company, the sum of £2,645 12s. 6d. and costs of £96 7s. 3d. awarded the plaintiff in an action against the Baffi Mineral Mining Company less 10 per cent. excess payable. The Baffi Mineral Mining Company are liable to respect of all claims as indorsed in the policy of insurance. The defendants to pay the taxed costs of this action.
Insurance-Whether insurance company liable to pay person obtaining judgment against insured-Motor Vehicles (Third Party Insurance) Ordinance (Cap. 133, Laws of Sierra Leone, 1960), ss. 7, 11-Whether plaintiff "in the employment of" defendant company-Whet her liability "required to be covered" by insurance policy.