Motor Insurance Issues
Cases
Patrick Kinsella v The Motor Insurers Bureau of Ireland
Unreported Supreme Court, 2 April 1993
This is an appeal brought by the plaintiff against the order of the High Court made by Carney Jon 28 November 1991 dismissing the plaintiffs claim. The plaintiffs claim brought by him by plenary summons was for payment of the
sum of £59,940, being the sum in which the plaintiff had obtained judgment one Bridget Higgins for injury to the plaintiff which was required to be covered by an approved policy of insurance under section 56 of the Road Traffic Act l961. The judgment remained unsatisfied for upwards of 28 days from the time of its pronouncement by the High Court and the plaintiff asserted that the defendant Bureau was accordingly obliged under the terms of the agreement made between it and the Minister for Local Government on the 30 December l964 to pay to the plaintiff the amount of the said judgment.
….
Mrs Bridget Higgins was an aunt of the plaintiff, being his mother’s sis ter, and on the day of the accident was visiting the plaintiffs parents, where he lived. The plaintiff was about to leave the house in order to drive his own car over to visit his sister and on his recollection Mrs Higgins herself and, on her recollection some other members of the family who were there suggested that she should drive the car when she was going with him. The purpose of this apparently was that she was contemplating purchasing a car herself, and was anxious to know if the particular model owned by the plaintiff might be suitable. The state of the plaintiffs knowledge concerning Mrs Higgins and the driving of cars was that she drove a car the property of her husband who was a disabled person and that was something of which he had been informed by members of the family. In addition, he had seen her driving a car the property of his (the plaintiffs) father.
The plaintiff agreed to let Mrs Higgins drive the car and then an accident occurred which was apparently due to her negligence and in which the plain tiff suffered serious injuries.
In the course of his evidence the plaintiff agreed that he was aware that the policy covering his car, which was an owner/driver policy only, did not cover the driving of it by Mrs Higgins. He stated, however, his belief that Mrs Higgins was insured to drive the car, and the basis of that belief appears in a particular question and answer which at No. 57 in the transcript was as follows:
“Q. You seem to say something (in) direct evidence, correct me if I am wrong, but that you knew she was driving her husband’s car, on his policy. Is that correct? A She would be covered on your insurance once she was on an insurance policy, I understood.” ·
It was not suggested in cross-examination of the plaintiff that his statement that he believed Mrs Higgins was insured to drive his car on this occasion was false, nor was any submission to that effect made either in the High Court or on the hearing of the appeal. He did not inquire from Mrs Higgins as to whether she was insured or not, but she gave evidence to the effect, which again was not contested, that she believed that she was insured to drive any other car by reason of the terms of her husband’s insurance policy, and that if her nephew had asked her on this occasion as to whether she was insured she would have answered “yes”. Her evidence, of course, is relevant only as evidence of the holding of a belief (which apparently was held by her nephew as well) by her as a mature woman. At the very conclusion of his evi dence he was asked the following question:
“72. Q. In those circumstances, where you didn’t know she had a licence and where you did know she wasn’t covered on your policy, why was it you didn’t ask about insurance before she went to drive the car. A. I knew she was driv ing. I assumed she had a licence. Q. You didn’t question the matter at all? A. No. Q. Even though you knew if an owner wanted insurance, you agreed with me to have somebody else drive his car he must apply for that insur ance to his own company? A. I never thought of insurance on that morning.”
The reason why the learned trial judge in his ruling of the case decided against the plaintiff is to be found in this paragraph:
“Now Mr Kinsella gave Mr Connolly an answer at the start of cross examination that he knew the only person who could drive the car was himself. He also gave Mr Connolly certain other answers which were against him. I asked him to consider the situation at that point, was he agreeing too readily with Mr Connolly about what was being put to him and he indicated that he was standing by the answer that he had already given, and in the light of that I don’t see that I am left with any choice other than to hold in Mr Connolly’s favour.”
Mr Connolly, of course, was counsel for the defendant.
The question at the commencement of cross-examination referred to in that judgment, it was agreed by counsel, was a question as to whether Mr Kinsella realised that his own policy of insurance which he had taken out on his own car was owner/driver only, and that he undoubtedly admitted. Hav ing regard, however, to the basis of the belief which Mr Kinsella stated, which was that Mrs Higgins was entitled to drive, not by reason of his policy, but by reason of her husband’s policy and having regard to the fact that that was a belief which the evidence supported was also held by Mrs Higgins, ap plying the principles which I have outlined at the commencement of this judgment, I have come to the conclusion that the learned trial judge was wrong in the inference which he raised from the evidence. Essentially, the case appears to have been determined by him, to a very large extent, on the basis of the plaintiffs admission that he was aware that his own policy of insurance was an owner/driver policy. That does not, in my view, conclude the matter, and also, in my view, it would be necessary, having regard to the interpretation which I think must correctly be put upon the clause in this agreement, that regard would be had, and significant regard, to the fact that on the evidence before the trial judge it was uncontested that the plaintiff had a bona fide belief, although an incorrect one, in the fact that the driving of Mrs Higgins on the occasion was covered by insurance. In these circumstances I would allow the appeal, set aside the order made in the High Court and grant to the plaintiff judgment for the sum of £59,940. If that is the order being made by the Court, in my view, the Court should hear counsel on the question of the claim by the plaintiff for the costs of the proceedings against Bridget Higgins, and also the claim of the plaintiff which is made for interest.
DISPOSITION
Appeal allowed.
Daniel Curran v Mary Gallagher, Joseph Gallagher and the Motor Insurers Bureau of Ireland
Unreported Supreme Court, 7 May 1997
LYNCHJ
On 24 June 1992 the plaintiff who was then aged 22 years and 5 months a passenger in a motor car the property of the second defendant driven by his daughter the first defendant who was then aged 19 years and 5 months when the said motor car was involved in a collision with a wall and the plaintiff thereby suffered personal injuries loss and damage. On 8 November 1993 the plaintiff recovered judgment in default of Defence against the first and sec ond defendants arising out of the said accident, the damages to be assessed by a Judge of the High Court.
What was pleaded against the first and second defendants in paragraph 4
of the statement of claim and, in default of Defence, not denied by them was as follows:
“On or about the 24 day of June 1992 the plaintiff was lawfully travelling asa passenger in a motor vehicle registered letters and numbers 533 IH owned by the second named defendant and driven by the first named de fendant on the public highway near Falcarragh, Co Donegal when owing to the negligence and breach of duty of the first and second named defen dants or either of them their servants or agents in or about the driving maintenance management care and control of the said vehicle same was caused to go out of control and crash whereby the plaintiff sustained per
sonal injury loss and damage.”
By section 118 of the Road Traffic Act 1961 it is provided as follows:
“Where a person (in this section referred to as the user) uses a mechanically propelled vehicle with the consent of the owner of the vehicle, the user shall, for the purposes of determining the liability or non liability of the owner for injury caused by the negligent use of the vehicle by the user, and for the purposes of determining the liability or non liability of any other person for injury to the vehicle or persons or property therein caused by negligence occurring while the vehicle is being used by the user, be deemed to use the vehicle as the servant of the owner, but only insofar as the user acts in accordance with the terms of such consent.”
It follows that the recovery of judgment by the plaintiff against the second defendant involves a finding, in default of denial by the second defendant, that the first defendant was driving his motor vehicle with his consent. That is of course a finding as between the plaintiff and the second defendant and does not therefore bind the third defendant although the third defendant must have been aware of that judgment since it is part of the record and also because the procedures of the third defendant are such that if there was any motor insurance covering the vehicle in question (and clearly there was so far as Mr and Mrs Gallagher’s driving was concerned) even though such insur ance was not operative in the circumstances of the accident the insurer pro viding such motor insurance must handle any claim arising out of the use of that motor vehicle and pay the amount thereof if the claim succeeds against the third defendants.
The plaintiff claims that by virtue of an agreement made the 21 Decem ber 1988 between the third defendant, the Motor Insurers Bureau of Ireland and the Minister for the Environment the third defendant is obliged to sat isfy such judgment as the plaintiff may obtain against the first and/or the second defendant. In answer to that claim the third defendant pleads at paragraph 5 of its defence as follows:
“If the plaintiff suffered personal injuries loss or damage which is denied and further, if the plaintiff is entitled to recover in respect of any such damages as against the first or second named defendants herein, which is denied then this defendant denies that it is obliged pursuant to the terms of the 1988 Agreement entered into between this defendant and the Minis ter for the Environment to satisfy any such judgment on the grounds that the plaintiff knew, or ought to have known, that the first and second named defendants herein were not covered by an approved policy of insur ance under Section 56 of the 1961 Road Traffic Act as amended.”
That is the issue which came for trial before the learned High Court Judge (Carroll J) on 20 October 1995 and comes before this Court by way of appeal from the judgment delivered by her on 25 October 1995 upholding the said defence of the third defendant and dismissing the plaintiffs claim as against the third defendant.
Paragraph 5(2) of the Agreement of 21 December 1988 provides as follows:
“Where at the time of the accident the person injured or killed or who sus tained damage to property knew, or ought reasonably to have known, that there was not in force an approved policy of insurance in respect of the use of the vehicle, the liability of MIB of I shall not extend to any judgment or claim either in respect of injury or death of such person while the person injured or killed was by his consent in or on such vehicle or in respect of damage to property while the owner of the property was by his consent in or on the vehicle or the property was in or on the vehicle with the consent of the owner of the property.”
In the case of Patrick Kinsella against the Motor Insurers Bureau of Ireland the then Chief Justice, Mr Justice Finlay (on 2 April 1993) delivering the judgment of the Supreme Court had this to say about paragraph 5(2) of the Agreement of 1988 quoted above.
“Firstly it is clear that the onus is upon the defendant to prove thata per son claiming on foot of a judgment in the circumstances in which the plaintiff is claiming in this case either knew, or should reasonably have known, that the use of the vehicle on the occasion was not covered by in surance. Secondly I am satisfied that having regard to the terms of Clause 3(2-) this corresponds to Clause 5(2) in the 1988 Agreemen-t that the question as to whether or not a Claimant should reasonably have known of the absence of insurance is essentially a subjective question. The issue is not: woulda reasonable person have known? But rather: should the par ticular individual, having regard to all relevant circumstances, have known? For example, obviously a person with defective reasoning or men tal powers, or a young child could not possibly be defeated by this Clause.
It is also, in my view, relevant that a person who travels ina vehicle which he knows is being used by a person who is not covered by insurance under the Road Traffic Act is, essentially, blameworthy for he is clearly condon ing, though probably not technically participating in the commission ofa serious offence. Having regard to that principle, I am satisfied thata court in reachinga conclusion as to whether a person claiming under the Agreement should reasonably have known of the absence of insurance, is to some extent, at least, concerned to assess as to whether the attitude or conduct of the person concerned at the time of the accident was in this par-
ticular sense blameworthy.”
The issue between the plaintiff and the third defendant was tried on oral evidence and this court is bound by. findings of primary fact made by the learned trial judge if supported by credible evidence. The relevant facts as found by the learned trial judge may be summarised as follows.
On the date in question which was apparently Bonfire night at about 3 a.m. the plaintiff and the first defendant were passengers in the front ofa motor car driven by the first defendant’s boyfriend a Mr Sharkey with three passengers in the rear at the relevant time. That car stalled outside the Garda Station in Falcarragh, Co. Donegal, not far from the old peoples’ home where the first defendant’s mother was on night duty and about one mile or so from the intended destination of the parties in that motor car namely the Rye River Inn. The first defendant said she would get her mother’s car and got out to go to the old peoples’ home where she knew that her mother would have parked her Father’s the second defendant’s car unlocked and with the
keys under a mat inside the car.
The plaintiff left the boyfriend’s car and followed the first defendant. As
found by the learned trial judge the second defendant’s car had been parked by his wife the first defendant’s Mother unlocked and the first defendant got the keys from under a mat in the car though whether before or after the plaintiff arrived at the car is unclear. The plaintiff sat into the car: another of the boyfriend’s passengers a Mr Harkin arrived and knocked on the window of the car apparently to try to stop the first defendant but she drove off to wards the intended destination and the accident occurred in the course of that journey. The learned trial judge concludes her judgment as follows:
“So basicallyI accept Mary Ellen’s account in preference to the plaintiffs account. The question is whether he knew or ought to have known that she was not insured to drive. I do not think the time they knew each other in Glasgow is significant. Nicky Sharkey had a car and she didn’t drive it. But I think the age of Mary Ellen is important. She was only 19 at the time. AndI think the fact that he lied about the keys being handed out the window is significant. He tried to make out by that, that she drove with permission of her mother, and there was also the attempt by John Joe Harkin to stop her. He had never seen her drive before and it seems to me the inference to be drawn from the circumstances surrounding this accident, is that she took the car. It was highly suspect and he ought to have known she was not insured.”
Conclusions
In effect the learned trial judge finds against the plaintiff because she found that he invented the story about the keys being handed out througha window of the nursing home to the first defendant by her Mother and some other de tails. Taking the facts as found however, and viewing the matter as of 24 June 1992I cannot see that the fact that the first defendant knew that the car would be open and the key under the mat should have conveyed to the plaintiff that night that the first defendant had no authority to take the car. The case must be decided by the plaintiffs state of knowledge on 24 June 1992 whereas his knowledge at the date of trial was of course complete. Everybody knew at the date of the trial on 20 October 1995 that the first defendant had never helda driving licence of any sort on or prior to 24 June 1992 and for that reason alone no motor insurance policy would have been operative to cover the driving of the car by the first defendant. I cannot agree however that the age of the first de fendant 19 years and5 months at 24 June 1992 is any evidence whatever from which it could be inferred that the plaintiff ought to have known that she had never held any form of driving licence up to then in the absence of any other evidence of such knowledge on the part of the plaintiff and there was none. At the appeal before this Court it seemed to me that the third defendants were relying ona submission that the plaintiff ought to have known that the first
defendant never held any form of driving licence but on my querying whether they were so relying, this submission was abandoned.
The appeal therefore comes down to a question as to whether or not the evidence supported the finding that the plaintiff ought to have known that the first defendant had no authority to take the car …
In his attempt to improve his case the plaintiff has created some evidence against himself where there was none. The fact that he has lied tends to sug gest and obviously did suggest to the learned trial judge the inference that he knew more than he admitted. But in my view the inference does not follow. The plaintiff was a young man home from Scotland and due to return there soon. He was on a night out and prepared to stay up all night so long as some amusement or as he puts it some “crack” beckoned to him and he was anx ious to go on to the next venue for amusement. As he said at question 431 “I would have walked on down to Rye River Inn. That’s just the way events happened that night. I was home and I was out for the night. The crack was fairly good up until that. I wanted it to carry on.”
I take the view that on 24 June 1992 the plaintiff would have accepted whatever form of transport was available without having it cross his mind that there might be some impropriety about the means of transport, and it must be remembered that the test of knowledge is a subjective one and the onus of proof is on the third defendants. I appreciate that the judgment in default of Defence against the second defendant does not bind the third de fendant but having regard to the paucity of other evidence available to the third defendant I find it strange that the third defendant did not call as wit nesses either the second defendant or Mrs Gallagher to corroborate, if it were the fact, that the first defendant had no authority to take the car out on the public road and to explain why the second defendant allowed judgment to go against him in default.
In my view the inference drawn by the learned trial judge is not sup ported by the primary evidence. The third defendants have failed to dis charge the onus of proof which rests on them and the decision of the learned trial judge should be reversed and a declaration made as claimed in the Statement of Claim that the third defendant is obliged to satisfy such judg ment as the plaintiff may obtain against the first or second defendants pur suant to the provisions of the said agreement and a consequential order requiring the third defendant so to do.
KEANE J concurred.
SCHIEMANN LJ
Mighell v Reading;
[1999] Lloyd’s Rep. IR 30 Court of Appeal
8: Motor Insurance 265
The preamble: ” 4. Whereas it is necessary to make provision for a body
to guarantee that the injured person will not remain without compensa tion where the vehicle which caused the accident is uninsured or unidenti fied; whereas, however, Member States should be given the possibility
of applying certain limited exclusions as regards the payment of compen sation by that body and of providing that compensation for damage to property caused by an unidentified vehicle may be limited or excluded in view of the danger of fraud”;
… Article 1(4): “Each Member State shall set up or authorise a body with the task of providing compensation … for personal injuries caused by
an unidentified vehicle or a vehicle for which the insurance obligation pro vided for in paragraph 1 has not been satisfied . . . However, Member States may exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured.”
These appeals concern persons injured in traffic accidents who seek remedies against the Motor Insurers’ Bureau (“the MIB”) under the Uninsured Drivers Agreement and the Untraced Drivers Agreement. The cases are typical ofa number now pending and are of some general importance. The appeals have been listed together because in each case the injured person seeks to rely on rights allegedly given to him as a result of legislation promulgated by the Council of the European Community, namely, the Second Council Directive of 30.12.1983 on Motor Insurance (84/5/EEC). Although the rights which flow from our membership of the European Community are now part of our law and enforced as such, it is convenient for the purposes of exposition to refer to the rights which flow from our membership of the Community as community rights obtained by virtue of community law and to refer to those rights which
are independent of our membership of the Community as domestic rights obtained under domestic law.
Mr Mighell and Mr White were each injured whilsta passenger ina car driven by an uninsured defendant. On the findings of the courts of first in stance, Mr Mighell knew that the driver was uninsured and Mr White did not know this but ought to have known it. Mr Mighell lost his claim before GageJ who held (i) he had no remedy under domestic law, (ii) community law would have helped him had he not known that the driver was uninsured, but (iii), since he did know this, community law did not help him. Mr Mighell appeals on the third holding and the MIB, in their respondents’ notice, cross appeal on the second holding. Mr White won before HH Judge Potter (sitting asa judge of the High Court) who held that he had no remedy under domes tic law but that community law did enable him to succeed. The MIB appeals on the point of community law. In each case there were also appeals and
cross appeals on the factual findings which, for reasons whichI shall shortly explain, we have rejected …
The relevant agreement in the case of Messrs Mighell and White is the Unin sured Drivers Agreement which was concluded on 21 December 1988. In each of their cases the question arises whether the MIB can rely on Clause 6(1):
“MIB shall not incur any liability under Clause 2 of this agreement in a case where – (e) at the time of the use which gave rise to the liability the person suffering … bodily injury … was allowing himself to be carried in
… the vehicle and either before the commencement of his journey in the vehicle or after such commencement if he could reasonably be expected to have alighted from the vehicle he – 1) … , or (2) knew or ought to have known that the vehicle was being used without there being in force in rela tion to its use such a contract of insurance as would comply with Part VI of the Road Traffic Act 1972 …
The Facts in White
The plaintiff Brian White was injured whilst a passenger in a car driven by his brother Shane White who was uninsured. The MIB resisted payment on the ground that the plaintiff knew or ought to have known that Shane was uninsured. The Judge held that the MIBhad not proved that Brian knew that Shane was uninsured but that they had proved that Brian ought to have known that fact. The MIB appeal submitting that the Judge ought to have held that Brian knew that Shane was uninsured. Again I regard this submis sion as powerfully arguable but am not persuaded by it. The basis of the MIB’s case was that both brothers had a number of convictions many of which involved driving offences and that Brian knew much of Shane’s past, which included driving whilst uninsured. This formed the basis of the Judge’s finding that Brian ought to have known that Shane was uninsured. That finding is not appealed by Brian. The reason for the Judge’s rejection of MIB’s contention (that Brian knew that, at the time of the accident, Shane was uninsured) was a conversation which he held that the brothers had had in prison during which Shane had confided to Brian that it would be better for both of them if they were to put themselves in a position where they could drive motor cars legally. This seemed to the Judge to make much sense even for those who intended to continue committing other crimes. The Judge held that Shane had had time since that conversation to acquire an insurance policy and that it would not be right to draw the inference that Brian knew that Shane had not in fact done so. Many a Judge would I suspect have drawn different inferences from the facts but I am not persuaded that it was not legally open to the judge to draw the inferences which he did draw.
Brian, for his part, cross-appealed the Judge’s finding that, whilst Brian was drunk when he entered the car, he was conscious of what was going on and therefore could properly be described as “allowing himself to be carried” within clause 6 of the Agreement. The Judge was faced witha number of witnesses as to the plaintiffs state of intoxication when he got into the car. Most of those witnesses for reasons which were open to him he did not find easy to believe. The Judge found on the balance of probabilities that Brian got into the car voluntarily and that he knew that the driver in the next seat was his brother Shane and that the others would not have taken Brian with
them if he had been as drunk as he claimed. Again, I am not persuaded that these findings were not legally open to the Judge.
The Second Directive imposed upon Member States an obligation to amend their national provisions to comply with the Directive not later than
31 December 1987. Counsel for the injured persons submitted that this Country had failed to do so. They made submissions in relation to The Time of Knowledge, and The Quality of Knowledge.
The Time of Knowledge submissions centred on the time in relation to which the injured person’s knowledge of the fact that the driver was unin sured has to be proved. Is it the time of entry into the vehicle, or the time of the accident or some intermediate point? It was common ground that the Agreement’s provisions were clear and referred to an intermediate point:a passenger who, whilst in the vehicle, was informed of the lack of insurance and then had the opportunity to get out but failed to, was precluded from recovering. Counsel for the injured persons submitted that article 1.4 of the Directive was equally clear and referred to the time of entry into the vehicle
by the passenger and that any subsequent discovery by the passenger of the insurance position was irrelevant …
The Quality of Knowledge submissions centred on the difference between the phrase in the Agreement “knew or ought to have known” and the word “knew” in the Directive. Counsel for the injured persons submits that the former is clearly wider than the latter and that in consequence many are denied compensation who were intended by the framers of the Directive to receive it. Both Gage J and HH Judge Potter accepted that submission.
Mr Roth submitted that such a strict interpretation was inappropriate for the Directive and that a wider interpretation should be adopted. He referred us to a judgment of the Court of Appeal in Commissioner for New Towns v Cooper [1995] Ch 259. In that case Stuart-Smith LJ referred to an analysis by Peter Gibson J in Baden v Societe Generale etc. [1993] 1 WLR 509 of knowledge as comprising: (i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make; (iv) knowledge of circum stances which would indicate the facts to an honest and reasonable man; and
(v) knowledge of circumstances which would put an honest and reasonable man on enquiry. The Lord Justice indicated at page 281 of the report that each of the first three categories constitute actual knowledge in law.
Mr Roth submitted that the Directive should be construed so as to em brace the first three of those categories but so as to exclude the last two. He then submitted that one should construe the Agreement in the light of the Directive as thus construed. He submitted that the Agreement thus con strued would only cover categories (i) to (iii) and that therefore there was no inconsistency between the Directive and the Agreement.
The categorisation of mental states made by Peter Gibson J is one which is useful in the present context in helping to focus the mind on the fact that there is a continuum of mental states between total and forgivable ignorance and complete knowledge. Again I do not find it easy to be sure precisely where in that continuum one departs from the meaning of “knew” envisaged by the framers of the Directive. If any of these cases had turned on the point I would have been minded to refer the question to the European Court of Jus tice. However, I incline to the view, and for present purposes I am prepared to assume in the injured persons’ favour, that the disparity between the two texts can not be resolved in the manner suggested by Mr Roth and that the United Kingdom is therefore in breach of its obligations under the Directive to make its national provisions comply with the Directive;
Does the Untraced Drivers Agreement comply with the Directive?
Mr Walker QC, Counsel for the injured person, submitted that the concept of compensation as used in the Directive was wide enough to include an interest element. This submission had been rejected by Thomas J. Before us, Mr Roth submitted that, if it were necessary to resolve the point, then a reference to the European Court of Justice would be appropriate. I agree. For present purposes I am prepared to proceed on the basis that the United Kingdom is in this regard also in breach of its obligations under the Directive.
Counsel for the injured persons have submitted that the Directive gives rights which are directly enforceable against the MIB as an emanation of the State. This submission was accepted by Gage J and HH Judge Potter. Its correctness is challenged by Mr Roth and by Mr Dermod O’Brien QC who appeared for the MIB.
It is now well established that in circumstances where a Member State has failed to implement or has improperly implemented a Directive that State may find itself liable to pay compensation to a person who has been given rights under the Directive. The route to State liability which is sign posted in earlier decisions of the ECJ is by giving direct effect to the rights set out in the Directive. In these circumstances the State is in effect pre vented from asserting when sued that it has failed to implementa Directive. It is held just as liable as it would have been had it implemented it. That route is available against the State and bodies sufficiently closely identified with the State to make it proper for the court to prevent them also from rely ing on that failure. Such bodies have acquired the sobriquet of being emana tions of the State. The doctrine of direct effect, however, is not available against outsiders. In the cant phrase the Directive is given vertical but not
horizontal effect. At one time, those who could not rely on the doctrine of ver tical effect against the State were thought to be without remedy.
Since Francovichv Italian Republic Joined Cases C-6 and 9/90 [1991] ECR 1-5337 another route for securing State liability has been signposted by the ECJ. In the circumstances set out in that case State liability is achieved by givinga right to damages against the State for failure to implement the Directive. Whether the doctrine of direct effect, which arguably erodes the distinction made by the Treaty between Directives and Regulations, would have developed if the Francovich line of cases had been in place when the point first arose for decision and whether in the future the doctrine of direct
effect will wither away it is not necessary to explore. The fact is that at pre sent it is still part of the jurisprudence.
The claimant in Francovich relied primarily on the doctrine of direct ef fect and only secondarily on his then novel claim for damages. In the event the claim based on direct effect failed and that for damages succeeded. For the purposes of the present appeals however, which involve no claim for damages for non-implementation but only a claim on the basis that the Di rective is capable of having direct effect, it is the fate of the primary claim in Francovich which is instructive. There, the Italian Government had failed to implementa Directive which required Member States to establisha system under which employees were protected in the event of the insolvency of their employer. Article 5 provided that Member States were to lay down detailed rules for the organisation, financing and operation of guarantee institutions. The assets of the institutions must be independent of employer’s operating capital, employers must contribute to financing, unless it was fully covered by the public authorities, and, finally, the institution’s liabilities must not depend on whether or not obligations to contribute to financing have been fulfilled. Advocate General Mischo in his opinion stated in paragraph 8:
“In order for it to be possible for an employee to enforce the rights which Directive 80/987 is intended to create before implementation of the Direc tive, the provisions concerning: the identity of the persons intended to
benefit; the scope of the rights; the identity of the persons liable must be unconditional and sufficiently precise.”
The Court held in paragraph 11 of its judgment:
“As the Court has consistently held, a Member State which has not adopted the implementing measures required bya Directive within the prescribed period may not, against individuals, plead its own failure to perform the obligations which the Directive entails. Thus wherever the provisions ofa Directive appear, as far as their subject matter is con cerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed
period, be relied upon as against any national provision which is incom patible with the Directive or insofar as the provisions of the Directive de- fine rights which individuals are able to assert again the State … ”
The Court held that the provisions in question in that case were uncondi tional and sufficiently precise as regards the content of the guarantee. How ever the Court continued in paragraph 26:
“Accordingly, even though the provisions of the Directive in question are sufficiently precise and unconditional as regard the determination of the persons entitled to the guarantee and as regards the content of that guar antee, those elements are not sufficient to enable individuals to rely on those provisions before the national Courts. Those provisions do not iden tify the person liable to provide the guarantee, and the State cannot be considered liable on the sole ground that it has failed to take transposition measures within the prescribed period.”
Similarly, in Wagner Miret Case C-334/92 [1993] ECR 1-6911 Spain had also failed to implement fully the same Directive. It had established a Fondo but not all categories of employees were entitled to remedies from that Fondo. It was argued that Spain should not be allowed to deny that this Fondo was liable even to the excluded class of employees. This argument was rejected both by Advocate General Lenz and by the ECJ. The former stated in para graph 14 of his opinion that “the direct effect of a provision of a Directive must appear from the provision itself, and from its context, and not from the law of a Member state”. He pointed out in paragraph 17 that
“… it would be unfair to require guarantee institutions to bear risks for which they have not received contributions beforehand. In such cases it might be accepted that the institutions would in turn have a right of re course against the State. However, this roundabout procedure becomes unnecessary if individuals are granted a direct claim to compensation against the Member State concerned, as in the Francovich case.”
The ECJ agreed that the case was one where the direct effect route for secur ing compensation was not available because it had been left to the State to identify the one or more guarantee institutions against which the remedy was to be available.
The judges below in the present cases took the view that since the MIB had in effect been nominated by the State to carry out the task of compensat ing those injured persons who could not look to an insurance company there fore the Directive could be regarded as having direct effect. Here, as it seemed to me, they erred. Whether a Directive has direct effect or not can not logically depend on what has been done in a particular Member State. I re gard that as acte clair. In the present case it was, at the time when the Direc tive came into force, open to the Government to fulfil its obligations thereunder in any way that it pleased whether by using the MIB or in some other way. In those circumstances it does not seem to me that the doctrine of vertical effect comes into play.
Mr O’Brien also submitted an alternative reason why the doctrine of direct effect was not in play. He submitted that it would not be appropriate to treat the MIB as an emanation of the State for the purposes of that doctrine. Mr Roth submitted that if the point were crucial then this too would be an appropriate question to refer to the ECJ. For my part, I accept that there is substan tial uncertainty surrounding the concept of “emanation of the State”. That un certainty springs in part from the uncertainty of the legal concept and in part from the difficulty of applying that concept to a particular factual situation. The latter is a task which the national courts have to fulfil although they may be helped by a reference. I would not regard it as acte clair that the MIB was not an emanation of the State, although that is my current opinion. I do not find it necessary to express a concluded opinion on the point …
Conclusions in White
Mr Geoffrey Tattersall QC, who appeared for Mr White, submitted that the exclusion of his client from remedy because he ought to have known that the driver was uninsured went beyond what was permitted by the Directive. As I have indicated, I am prepared to assume for present purposes that this is correct. Mr Tattersall had as his primary submission that Mr White had a directly enforceable right under community law to be compensated by the MIB. The judge below accepted this submission. For reasons given earlier in this judgment I would reject it.
Mr Tattersall’s second submission echoed Mr Purchas’ submission that the offending clause should be struck from the Agreement. He relied on Chemidus Wavin Ltd v Societe pour la Transformation etc. [1978] 3 CMLR 514, a decision of this court. That case however was concerned with the automatic nullity pro vided for by Article 85(2) of the Treaty in respect of contractual provisions in compatible with Article 85(1) and established that the consequences of such nullity were for the national courts to sort out. Community law has not any express equivalent to Article 85(2) which is applicable to provisions (such as those in the present Agreements) which are in place notwithstanding a Direc tive which obliges Member States to amend them or put something new in their place. Nor do the doctrines of direct effect and damages against the State for non-implementation involve the nullity of the offending national measure or any part thereof. I would reject this submission.
His third submission was that the Agreement ought to be construed in such a way that, even though his client ought to have known that the driver was uninsured, nevertheless he should be permitted to recover under the Agree ment. He submitted that it was the duty of the national courts to try and con strue national measures in such a way that they conform to community law and that in the instant case community law indicated (as I am prepared for present purposes to assume it does) that those in the position of Mr White should have access to compensation. There are problems with such a submis sion because it involves applying a doctrine developed in the context of legisla tion to the Agreement. I shall examine these problems in the context of the Evans appeal. However, as it seems to me, the insuperable difficulty with this submission in the context of Mr White’s claim is that nothing which can legiti mately be described as a process of construction of the Agreement can result in the construction of the Agreement to mean what Mr Tattersall submits it means. His meaning flies in the face of the wording of the Agreement.
His fourth submission was that it was the intention of both the Secretary of State and the MIB to conclude an agreement which provided for the citizen all that was envisaged by the Directive and that the Agreement ought to be construed in the light of this common intention. I am prepared for present purposes to accept that it was indeed the intention of the Secretary of State to conclude an agreement, which would have the result of complying with the requirements of the Directive. I am prepared for present purposes to accept that the MIB thought that the Secretary of State considered that the Agree ment had that result and that they did not entertain the contrary view. ButI see no reason to suppose that the MIB was itself desirous of achieving an imposition of liability on itself in circumstances where both it and the Secre tary of State wrongly thought there was no community obligation to impose sucha liability. Why should it be? If the Secretary of State misinterpreted the Directive in sucha way as to impose a lighter burden on the MIB than he would have sought to impose had he interpreted the Directive correctly, that was a matter for him not the MIB.
I would allow this appeal by the MIB.
White v White
[2001] Lloyd’s Rep. IR. 493 House of Lords
JUDGMENT
Lord NICHOLLS OF BIRKENHEAD:
MIB’s basic obligation is subject to some exceptions. The success or failure of
Brian White’s claim, so far as it is based on the terms of the MIB agreement, depends on the proper interpretation of one of these exceptions, set out in clause 6(1)(e). MIB’s obligations do not apply in a case where the injured pas senger “knew or ought to have known” that the vehicle had been stolen or
was uninsured. Clause 6(1) reads:
(1) MIB shall not incur any liability under Clause 2 of this Agreement ina case where-
(e) at the time of the use which gave rise to the liability the person suffering death or bodily injury was allowing himself to be carried
in or upon the vehicle and … before the commencement of his jour-
ney, in the vehicle he –
(i) knew or ought to have known that the vehicle had been sto- len or unlawfully taken
or
(ii) knew or ought to have known that the vehicle was being used without there being in force in relation to its use sucha contract of insurance as would comply with Part VI of the
Road Traffic Act 1972.
The crucial phrase for the purposes of this case is “knew or ought to have known”.
The Motor Insurance Directive
When interpreting any document it is always important to identify, if possi ble, the purpose the provision was intended to achieve. This makes it neces sary, in the present case, to go to the Second EEC Motor Insurance Directive 84/5/EEC, of 30 December 1983, on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles. It is necessary to do so because the purpose of the 1988 MIB agreement was to give effect to the terms of this Directive.
The main purpose of the Directive was to improve guarantees of compen sation for victims of motor accidents by ensuring a minimum level of protec tion for them throughout the Community. One aspect of this was the need, as stated in the preamble, “to make provision for a body to guarantee that the victim will not remain without compensation where the vehicle which caused the accident is insured or unidentified”. Member States, however, were to have the opportunity of applying certain “limited exclusions”.
Article 1 of the Directive requires each Member State to have compulsory motor insurance covering third party liability for both personal injury and damage to property. It sets minimum standards of protection up to which compensation must be available for the victims of accidents throughout the
Community. Article 1(4) makes provision regarding unidentified and unin sured vehicles:
Each Member State shall set up or authorize a body with the task of pro viding compensation, at least up to the limits of the insurance obligation, for damage to property or personal injuries caused by an unidentified ve
hicle ora vehicle for which the insurance obligation provided for in para graph 1 has not been satisfied.
The permitted exception is then stated in these terms:
However, Member States may exclude the payment of compensation by that body in respect of persons who voluntarily entered into the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured.
Thus, Member States may exclude compensation for damage or injury caused by the driver of an uninsured vehicle if the person who suffered damage or injury “voluntarily” entered the vehicle and “knew” it was uninsured. It should be noted that, unlike the corresponding exception in the MIB agree ment (“knew or ought to have known”), the exception permitted by the Direc tive uses the word “knew” without any adornment. It is this difference in language which gives rise to the issues arising on this appeal.
What is meant by “knew” in the context of the Directive? The interpretation of the Directive is a matter governed by Community law. If the meaning of “knew” in Article1 is doubtful, and it is necessary to resolve the doubt in order to decide this appeal, then a reference to the European Court of Justice must be made. Rightly so, because it is important that the provisions of this Directive are applied uniformly throughout the Community. So I turn to consider what “knew” means in the Directive and whether there is any relevant ambiguity.
The context is an exception to a general rule. The Court of Justice has stressed repeatedly that exceptions are to be construed strictly. Here,a strict and narrow interpretation of what constitutes knowledge for the purpose of Article 1 is reinforced by the subject matter. The subject matter is compensa tion for damage to property or personal injuries caused by vehicles. The gen eral rule is that victims of accidents should have the benefit of protection up to specified minimum amounts, whether or not the vehicle which caused the damage was insured. The exception, therefore, permits a Member State, con trary to the general rule, to make no provision for compensation for a person who has suffered personal injury or damage to property. Proportionality re quires that a high degree of personal fault must exist before it would be right for an injured passenger to be deprived of compensation. A narrow approach is further supported by the other prescribed limitation on the permissible ambit of any exclusion: the person claiming compensation must have entered the vehicle voluntarily. The need for the passenger to have entered the vehi cle voluntarily serves to confirm that the exception is aimed at persons who were consciously colluding in the use of an uninsured vehicle. And it can be noted that the Directive emphasises the exceptional nature of the exclusion of compensation by placing the burden of proving knowledge on the party who seeks to invoke the exception, namely, the institution responsible for paying compensation.
This, then, is the context in which “knew” is used in this Directive. In this context, knowledge by a passenger that a driver is uninsured means primar ily possession of information by the passenger from which the passenger drew the conclusion that the driver was uninsured. Most obviously and sim ply, this occurs where the driver told the passenger that he had no insurance cover. Clearly, information from which a passenger drew the conclusion that the driver was uninsured may be obtained in many other ways. Another in stance would be when the passenger was aware, from his family or other connections with the driver, that the driver had not passed his driving test (“if he’d taken the test, I would have known”). Knowledge of this character is often labelled actual knowledge, thereby distinguishing other types of case where a person, although lacking actual knowledge, is nevertheless treated by the law as having knowledge of the relevant information.
There is one category of case which is so close to actual knowledge that the law generally treats a person as having knowledge. It is the type of case where, as applied to the present context, a passenger had information from which he drew the conclusion that the driver might well not be insured but deliberately refrained from asking questions lest his suspicions should be confirmed. He wanted not to know (“I will not ask, because I would rather not know”). The law generally treats this state of mind as having the like conse quences as would follow if the person, in my example the passenger, had acted honestly rather than disingenuously. He is treated as though he had received the information which he deliberately sought to avoid. In the context of the Directive that makes good sense. Such a passenger as much colludes in the use of an uninsured vehicle as a passenger who actually knows that the vehicle is uninsured. The principle of equal treatment requires that these two persons shall be treated alike. The Directive is to be construed accordingly.
Thus far I see no difficulty. I consider that it is acte clair that these two categories of case fall within the scope of the exception permitted by the Di rective. Conversely, I am in no doubt that “knew” in the Directive does not include what can be described broadly as carelessness or “negligence”. Typi-cally this would cover the case where a passenger gave no thought to the question of insurance, even though an ordinary prudent passenger, in his position and with his knowledge, would have made enquiries. He “ought” to have made enquiries, judged by the standard of the ordinary prudent pas senger. A passenger who was careless in this way cannot be treated as though he knew of the absence of insurance. As Lord Denning MR said in Compania Maritima San Basilio SA v Oceanus Mutual Underwriting Asso ciation (Bermuda) Ltd. [1977] QB 49, 68, negligence in not knowing the truth is not equivalent to knowledge of it. A passenger who was careless in not knowing did not collude in the use of an uninsured vehicle, and he is not to be treated as though he did. To decide otherwise would be to givea wide,
rather thana narrow, interpretation to the exception permitted by the Direc tive. This also seems to me to be acte clair.
I pause to note that, on this basis, there is no occasion to refera question of interpretation to the Court of Justice in the present case. The circum stances of Brian White’s accident come within this last category of case. The judge, having heard oral evidence from Brian White, rejected the idea that on the night in question any one of those involved “so much as bothered his head about sucha matter as insurance”. In the past both brothers had been accus tomed to drive while uninsured. In 1990, three years before the accident, they agreed that it would be better to put themselves ina position where they could drive cars legally. The judge observed that much can happen in three years. So it was going too far to say that, because of what had hap pened in the past, Brian knew Shane was still driving without insurance in 1993. But Brian ought not to have got into a car driven by his brother with
out making sure his brother “had carried out the good resolution and really had made himself a legal driver”.
This finding by the judge is no more than a finding of carelessness, as sessed by the standard of the ordinary prudent passenger having the knowl edge possessed by this particular passenger. Thus, this accident falls outside
the circumstances in which the Directive permits a Member State to exclude payment of compensation.
The interpretation of the MIB agreement
Against this background I turn to the interpretation of the phrase “knew or ought to have known” in clause 6(1)(e) of the 1988 MIB agreement. This question of interpretation is governed by English law. “Ought” importsa standard by reference to which conduct is measured. Such is the prevalence of negligence in English law that the phrase immediately prompts the thought that the standard imported by “ought” is the standard of the reason able person. In cases of professional negligence the standard is that of the reasonably competent and careful professional in the relevant discipline. But this is not necessarily the standard. The meaning of the phrase depends upon its context. Here the context is the Directive. The MIB agreement was en tered into with the specific intention of giving effect to the Directive.
Had the MIB agreement been embodied in legislation, whether primary or secondary, the English court would have been under an obligation to in terpret its provisions as far as possible, in a way which gives effect to the Directive; see Marleasing SA v La Comercial Internacional de Alimentaci6n SA (Case C-106/89) [1990] ECR 1-4135. As Lord Oliver of Aylmerton ob served in Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546, 559, a purposive construction will be applied to legislation even though, per haps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use.
The present case does not involve legislation. Despite the contrary argu ment submitted to your Lordships, I do not see how the Marleasing principle, as such, can apply to the interpretation of the MIB agreement. Article 5 of the EC Treaty (OJ 1992 C224, page 6) obligates Member States to take all appropriate measures to ensure fulfilment of their obligations arising out of the Treaty. The rationale of Marleasing is that the duty of Member States under Article 5 is binding on all the authorities of Member States, including the courts. The courts must apply national law accordingly, whenever the law was enacted or made. But it is one matter to apply this principle to na tional law. Whatever form it may take, law is made by authorities of the state. It is quite another matter to apply this principle to contracts made be tween citizens. The Marleasing principle cannot be stretched to the length of requiring contracts to be interpreted in a manner that would impose on one or other of the parties obligations which, Marleasing apart, the contract did not impose. This is so even in the case of a contract where one of the parties is an emanation of government, here, the Secretary of State. The citizens’ obligations are those to which he agreed, as construed in accordance with normal principles of interpretation.
So the Marleasing principle must be put on one side. Even so, I consider that the application of conventional principles of interpretation of documents
arrives at the same result. The purpose for which the MIB agreement was made furnishes a compelling context. The exception spelled out in clause 6(1)(e)(ii) of the agreement was intended by the parties to carry through the provisions of the Directive. The phrase “knew or ought to have known” in the agreement was intended to be co-extensive with the exception permitted by Article 1 of the Directive. It was intended to bear the same meaning as “knew” in the Directive. It should be construed accordingly. It is to be inter preted restrictively. “Ought to have known” is apt to include knowledge which an honest person who enters the vehicle voluntarily would have. It includes the case of a passenger who deliberately refrains from asking ques tions. It is not apt to include mere carelessness or negligence. A mere failure to act with reasonable prudence is not enough. Hence it does not embrace the present case. Brian White’s claim is not excepted from the MIB agreement. On this I respectfully differ from the view of the Court of Appeal.
Precisely where the boundary is drawn between the states of mind within the scope of clause 6(1)(e) and those outside it is not a matter which arises on this appeal. This question, should it ever arise, is better pursued on an occa sion when the facts make it necessary to obtain guidance_ from the Court of Justice on the precise scope of the exemption permitted by Article 1(4) of the Directive. As already noted, a reference for this purpose is not a course open to the House on this appeal.
Mr. O’Brien QC, appeared for MIB objected to the appellant being permit ted to advance a case based on this interpretation of the MIB agreement. This interpretation was not advanced at the trial. At the trial the case put forward on behalf of Brian White was that the exemption in the agreement was wide than that permitted by the Directive. He should not now be permit ted to put forward an interpretation of the agreement which, had it been ad vanced at the trial, might have led to different findings of fact.
I am unable to accept this objection. It was for MIB to establish the facts upon which MIB sought to rely to bring the case within clause 6(1)(e). In the course of his submissions to your Lordships, Mr. O’Brien expressly dis
claimed any wish to have the matter remitted so that the judge’s findings of fact could be clarified or amplified on this point.
This conclusion suffices to decide this appeal. Mr. Tattersall QC pre sented an alternative argument, should he fail on the question of interpreta tion of the MIB agreement. He submitted that the Directive gives rights which are directly enforceable against MIB as an emanation of the state. Since Brian White’s claim against MIB based on the MIB agreement itself
has succeeded, it is not necessary to pursue, or express any opinion on, this alternative formulation of Brian White’s case.
Storebrand Skadforsikring AS v Finanger
[2000]) Lloyd’s Rep. IR 462
ADVISORY OPINION
Facts and procedure
1. Bya reference dated 23 June 1999, registered at the court on 28 June 1999, Norges Hayesterett (Supreme Court of Norway), madea Request for an Advisory Opinion in a case brought it before it by the appellant against the respondent.
2. On 11 November 1995 in Nord-Trondelag, Norway, the respondent was injured ina traffic accident. She was a passenger in a car which drove off the road. The cause of the accident was the reduced driving ability of the driver, due to the driver being under the influence of alcohol. As a result of the acci dent, the respondent was left 60 per cent medically disabled and 100 per cent
occupationally disabled. The third-party motor vehicle liability insurance was with the appellant.
3. The respondent sued the appellant, claiming compensation for the per sonal injuries she suffered in the accident. The basis for the claim was the Norwegian Act of3 February 1961 relating to compensation for injury caused bya motor vehicle (the Automobile Liability Act – bilansvarsloven). Accord ing to section 15 of that Act, the owner of a motor vehicle subject to registra tion shall insure it “[f]or cover of insurance claims pursuant to chapter II”. Under section 4 of Chapter II, the main rule is that, whena motor vehicle causes injury, the injured party is entitled to compensation from the insur
ance company with which the vehicle is insured, regardless of whether any one is to blame for the injury.
4. The appellant rejected the claim of the respondent. The legal basis for re fusing to pay compensation to the respondent was section 7, third para, litra b of the Automobile Liability Act, which states inter alia that the injured party may not obtain compensation if he or she knew or must have known that the driver of the vehicle was under the influence of alcohol.
5. In a judgment of 21 September 1998, Frostating lagmannsrett (Prostrating
Court of Appeal) concluded that the accident occurred due to the driver’s be ing under the influence of alcohol and that the respondent knew that the driver was under the influence of alcohol.
6. The appellate court noted that the main rule in section 7, third paragraph, litra b of the Automobile Liability Act is that the injured party is not entitled to compensation in those cases which fall within the scope of the provision. The court concluded, however, that section 7, third para, litra b wascontrary to EEA law. The provision was set aside pursuant to section 2 of Act No. 109 of 27 November 1992 relating to Implementation in Norwegian Law of the Main Agreement on the European Economic Area (EEA) etc. (the EEA Act – Easloven). Pursuant to section 7, first paragraph of the Automobile Liability Act, Frostating lagmannsrett reduced the compensation to be paid to the re spondent by 30 per cent as a consequence of her having mentally contributed to the driving and her knowledge that driving in a car under the prevailing conditions would entail a considerable safety risk. The appellant appeared the judgment to Hayesterett.
7. Hayesterett decided to submit a Request for an Advisory Opinion to the EFTA Court on the following question:
Is it incompatible with EEA law for a passenger who sustains injury by voluntarily driving in a motor vehicle not to be entitled to compensation unless there are special grounds for being so, if the passenger knew or must have known that the driver of the motor vehicle was under the influ ence of alcohol at the time of the accident and there was a causal link be tween the influence of alcohol and the injury?
8 Reference is made to the Report for the Hearing for a fuller account of the legal framework, the facts, the procedure and the written observations sub mitted to the court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the court.
Legal background
1. EEAlaw
1. The question referred by Hayesterett concerns the interpretation of various articles of the First, Second and Third Motor Vehicle Insurance Directives.
2. Article 3(1) and 3(2) of the First Motor Vehicle Insurance Directive read as follows:
1. Each Member State shall, subject to Article 4, take all appropriate measure to ensure that civil liability is respect of the use of vehicles nor mally based in its territory is covered by insurance. The extent of the li ability covered and the terms and conditions of the cover shall be determined on the basis of these measures.
2. Each Member State shall take all appropriate measures to ensure that the contract of insurance also covers:
– according to the law in force in other Member States, any loss or injury which is caused in the territory of these States ( … ).
3. Article 1(1) and 1(2) of the Second Motor Vehicle Insurance Directive read as follows:
1. The insurance referred to in Article 3(1) of Directive 72/166/EEC shall cover compulsorily both damage to property and personal injuries.
2. Without prejudice to any higher guarantees which Member States may lay down, each Member State shall require that the amounts for which such insurance is compulsory are at least:
– in the case of personal injury, 250,000 ECU where there is only one victim
( … ).
4. Article2 of the Second Motor Vehicle Insurance Directive reads as follows:
1. Each Member State shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insur- ance policy issued in accordance with Article 3(1) of Directive 72/166/EEC, which excludes from insurance the use or driving of vehicles by:
– or persons who do not have express or implied authorization thereto,
– persons who do not hold a licence permitting them to drive the ve hicle concerned, or
– persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned
shall, for the purposes of Art 3(1) of Directive 72/166 EEC, be deemed to be void in respect of claims by third parties who have been victims of an accident.
However, the provision or clause referred to in the first indent may be in voked against persons who voluntarily entered the vehicle which caused
the damage or inquiry, when the insurer can prove that they knew the ve hicle was stolen.
Member States shall have the option – in the case of accidents occurring on their territory – of not applying the provision in the first sub
paragraph if and in so far as the victim may obtain compensation for the damage suffered from a social security body.
2. In the case of vehicles stolen or obtained by violence, Member States may lay down that the body specified in Article 1(4) will pay compensation instead of the insurer under the conditions set out in paragraph 1 of this Article; where the vehicle is normally based in another Member State, that body can make no claim against any body in that Member State.( … ).
5. Article 1, first paragraph of the Third Motor Vehicle Insurance Directive reads as follows:
Without prejudice to the second sub paragraph of Article 2(1) of Directive 84/5/EEC, the insurance referred to in Article 3(1) of Directive 72/166/EEC shall cover liability for personal injuries to all passengers, other than the driver, arising out of the use of a vehicle ( … ).
2. National law
6. Section7 of the Norwegian Automobile Liability Act, contained in Chapter
II of the Act with the caption “compensation for which the insurance company is responsible”, reads as follows:
§7 (when the insured party has contributed to the injury)
If the injured party has intentionally or negligently contributed to the in jury, the court may reduce the compensation or set it aside entirely, except in cases when the injured party has exhibited only slight negligence. In the decision, regard shall be had to the conduct demonstrated by both sides and the circumstances generally.
If a motor vehicle causes injury while immobile and the injury did not oc cur in connection with the stopping or starting of the vehicle, the court may reduce the compensation or set it aside entirely, even if the injured party has exhibited only slight negligence.
The injured party may not obtain compensation, unless there are special grounds for doing so, if he voluntarily drove or allowed himself to be driven in the motor vehicle which caused the injury even though he
(a) knew that the vehicle had been taken from its lawful owner by a crimi nal act, or
(b) knew or must have known that the driver of the vehicle was under the influence of alcohol or another intoxicant or narcotic (cf. Section 22, first paragraph of the Road Traffic Act). The specific rule enunciated herein does not apply, however, if it must be assumed that the injury would have occurred even if the driver of the vehicle had not been under the influence as aforementioned.
An injured driver of the motor vehicle which caused the injury may not ob tain compensation, unless there are special grounds for doing so, if he knew or must have known that the vehicle was being used in connection with a criminal act.
Arguments of the parties
7. The appellant, supported by the Government of Iceland and the Govern ment of Norway, is of the opinion that a distinction must be drawn between conditions for liability and insurance cover. The Directives do not impose requirements as to the content of national law governing liability, but rather are to be construed as regulating insurance cover when conditions for com pensation are present.
Therefore, they relate only to insurance cover, not to liability. The Direc tives concern only situations in which the right to compensation is already established under a Contracting Party’s national law. This follows especially from the headings and the wording of the Directives in several places.
8. The appellant argues that, accordingly, the consideration of protection of victims goes no further than to ensure that a person who has a claim against a person who has caused injury gets that claim satisfied. The Directives’ ob jective of protection does not go so far as to confer a claim on a victim of a motor vehicle accident against a person who has caused injury and/or his insurance company.
9. With respect to the objective of the Directives, viz. Facilitation of the free
movement of persons within the European Economic Area, the appellant ar gues that the fact that the conditions for liability for compensation may vary between Member States is not a hindrance to the free movement of persons, since only a small group of passengers is affected.
10. The appellant, the Government of Iceland and the Government of Norway propose to answer the question of H0yesterett in the negative.
11. The Government of Liechtenstein argues that the exclusion of insurance liability as set out in the Directives is exhaustive. Therefore it is incompati ble with EEA law to provide for a passenger who sustains injury by voluntary driving in a motor vehicle not to be entitled to compensation, unless there are special grounds for being so, if the passenger knew or must have known that the driver was under the influence of alcohol at the time of the accident.
12. The respondent is of a different opinion and refers in particular to the wording of Article 3(1) of the First Motor Vehicle Insurance Directive and to Art 1, first paragraph of the Third Motor Vehicle Insurance Directive. An ordinary linguistic understanding of these provisions supports the proposi tion that the Directives impose requirements for national legislation on in surance cover of liability for compensation. This, in the view of the respondent, is also in line with the goal of ensuring a high level of consumer protection as referred to in the twelfth and thirteenth recitals of the pream ble to the Third Motor Vehicle Insurance Directive.
13. In the view of the EFTA Surveillance Authority, the scope of the Motor Vehicle Insurance Directives cannot vary according to the classification of the rules concerning liability and insurance in the Contracting Parties’ national legal systems. In particular, the EFTA Surveillance Authority argues that the qualification of a rule under national law cannot preclude an examination as to whether it is compatible with the Directives. Therefore, Art 3(1) of the First Motor Vehicle Insurance Directive, seen in the light of Art 1 of the Third Motor Vehicle Insurance Directive and Art 2(1′) of the Second Motor Vehicle Insurance Directive, must be interpreted so as to precludea national rule according to which there is no obligation for the insurer to pay compen sation if the passenger knew or must have known that the driver was under the influence of alcohol at the time of the accident.
14. The Commission of the European Communities refers to the Directives and argues that it follows from their whole rationale that compensation to the victims of car accidents should be guaranteed in all cases of accidents. The Court of Justice of the European Communities (“ECJ”) has confirmed this interpretation in Criminal Proceedings Against Ruiz Bernaldez Case C- 129/94 (1996] ECR 1-1829. The Commission concludes that the Directives precludea national statutory provision according to which there is no obliga tion for the insurer to pay compensation to a passenger who sustains injuries unless there are special grounds for doing so, if the passenger knew or should
have known that the driver of the vehicle was under the influence of alcohol at the time of the accident.
15. The respondent, the EFTA Surveillance Authority and the Commission of
the European Communities propose to answer the question of Hoyesterett in the affirmative.
Findings of the Court
16. The Court notes that the main argument of the appellant, the Govern ment of Iceland and the Government of Norway, is that the Motor Vehicle Insurance Directives do not deal with rules relating to personal liability but only with insurance. That argument may appear to find support in the titles of the Directives and the wording of the provisions, in particular in the First Motor Vehicle Insurance Directive. However, further analysis of the texts, including the preambles to the Directives, is required.
17. The overall purpose of the Motor Vehicle Insurance Directives is to facili tate the free movement of goods and persons and to safeguard the interests of persons who may be the victims of accidents caused by motor vehicles (fist and second recitals of the preamble to the First Motor Vehicle Insurance Di rective). In particular, the goal of the Motor Vehicle Insurance Directives is to ensure the free movement of motor vehicles and of person travelling in those vehicles (third recital of the preamble to the First Motor Vehicle Insur ance Directive). To that end, the Motor Vehicle Insurance Directives aim at ensuring that “the national law of each Member State should ( ) provide
for the compulsory insurance of vehicles against civil liability, the insurance to be valid throughout Community territory” (eighth recital of the preamble to the First Motor Vehicle Insurance Directive).
18. The purpose of the Second Motor Vehicle Insurance Directive is to further reduce disparities between the laws of the Member States in the field of mo tor vehicle insurance since, as it stated in the third recital of the Second Mo tor Vehicle Insurance Directive “these disparities have a direct effect upon the establishment and the operation of the common market”. Consequently, the Second Motor Vehicle Insurance Directive establishes, as already stated, inter alia minimum amounts for which insurance is compulsory (Art 1). The fifth recital of the preamble to the Second Motor Vehicle Insurance Directive emphasises that these amounts must “guarantee victims adequate compen sation irrespective of the Member State in which the accident occurred”.
19. Lastly, the Third Motor Vehicle Insurance Directive aims at eliminating “any uncertainty concerning the application of the first indent of Art 3(2) of Directive 72/166/EC” (sixth recital of the preamble), according to which Member States shall take all appropriate measures to ensure that the con tract of insurance also covers any loss or injury which is caused in the terri tory of those States. Thus, “a high level of consumer protection should be taken as a basis” (thirteenth recital of the preamble) and liability shall be covered “for personal injuries to all passengers, other than the driver, arising out of the use of a vehicle” (Art 1).
20. The Court concludes from the foregoing that the Motor Vehicle Insurance Directives have established the principle of compulsory third-party insurance in return for a single premium throughout the European Economic Area. In view of the aim of ensuring protection, which is stated repeatedly in the Mo tor Vehicle Insurance Directives, Art 3(1) of the First Motor Vehicle Insur ance Directive, as developed and amended by the Second and Third Motor Vehicle Insurance Directives, must be interpreted as meaning that compul sory motor vehicle insurance must enable third-party victims of accidents caused by motor vehicles to be compensation for all actual loss incurred up to the amounts fixed in Art 1(2) of the Second Motor Vehicle Insurance Direc tive, see also Criminal Proceedings Against Ruiz Bernaldez Case C-129/94 (1996] ECR 1-1829. That judgment states at para 24 that “a compulsory in surance contract may not provide that in certain cases, in particular where the driver of the vehicle was intoxicated, the insurer is not obliged to pay compensation for the damage to property and personal injuries caused to third parties by the insured vehicle. ( )”.
21. Even if the main text of the First Motor Vehicle Insurance Directive fo cuses on insurance coverage, that Motor Vehicle Insurance Directive has been supplemented by the Second and Third Motor Vehicle Insurance Direc tives in such a way that the three Motor Vehicle Insurance Directives, taken as a whole, provide for limits on the extent to which insurers may rely on contractual clauses or national statutory provisions on liability for compensa tion to exclude certain situations from insurance coverage altogether. Conse quently, the distinction between provisions on personal liability and insurance cover is not decisive in the case at hand. The arguments submitted by the appellant, the Government of Norway and the Government of Iceland on this point must, therefore, be rejected.
22. The appellant, supported by the Government of Norway, has argued sub sidiarily that the restrictive effects on the free movement of goods and per sons are too uncertain and indirect, such that the national rule in question must be deemed incapable of hindering the free movement of goods and per sons. The Government of Norway has referred to case law of the ECJ con cerning Art 30 of the EC Treaty (now, after amendment, Art 28 EC), in particular Criminal Proceedings Against Peralta Case C-379/92 [1994] ECR 1-3453, and CMC Motorradcenter GmbH v Pellin Baskiciougullair Case C- 93/92 [1993] ECR 1-5009; and to case law of the EFTA Court concerning Art
11 of the EEA Agreement: Ullensaker Kommune v Nille AS Case E-5/96 [1997] EFTA Court Report 30; [1997] 3 CMLR 236.
23. With respect to this argument, the Court merely notes that it is stated in the third recital of the preamble to the Second Motor Vehicle Insurance Direc tive that major disparities in the extent of the obligation of insurance cover do, in fact, affect in a relevant way the establishment and operation of the common market. Furthermore, the objective of ensuring the free movement of goods and persons is not the only. one pursued by the Directives and, consequently, the possible limited effects with regard to this objective are not decisive.
24. With regard to the goal of ensuring that the victims of motor vehicle acci dents receive comparable treatment irrespectively of where in the European Economic Area the accident occurs, the Court notes that in most of the Con tracting Parties a passenger is fully covered by insurance even if the driver is intoxicated. This means that, in those States, passengers who become victims of motor vehicle accidents caused by intoxicated drivers obtain treatment which is significantly more favourable than the respondent would obtain un der the Norwegian provision in question in the case at hand. This disparity may jeopardise the aim of the Motor Vehicle Insurance Directives and lead to a distortion of competition between motor vehicle insurers in different Con tracting Parties that is not compatible with the aim of establishing a homo geneous European Economic Area.
25. The appellant, supported by the Government of Iceland and the Govern ment of Norway, points out that Art 2 of the Second Motor Vehicle Insurance Directive contains an exception to the principle of compulsory insurance cover for passengers and argues that the provision should not be interpreted as being exhaustive. In the view of the Court, it is sufficient to state that Art 2 is an exception to a general rule and so must be interpreted narrowly (see Case E-5/96 Ullensaker Kommune v Nille AS [1997] EFTA Court Report 30, at para 33: [1997] 3 CMLR 236). Any other conclusion would jeopardise the overall goal of the Motor Vehicle Insurance Directives, viz, to ensure that all passengers are, as a rule, covered.
26. Submissions have been made about the possibility of reducing compensa-
tion asa consequence of contributory negligence. The Court limits itself to stating thata reduction of compensation due contributory negligence must be possible in exceptional circumstances. However, the principles set out in the Motor Vehicle Directives must be respected. A finding that a passenger who passively rode in a car driven by an intoxicated driver is to be denied com pensation or that compensation is to be reduced in a way which is dispropor tionate to the contribution to the injury by the injured party would be
incompatible with the Directives.
27. The Court notes that no provisions of EEA law other than those discussed
need to be examined before the question put by Heyesterett can be answered.
28. The answer to the question referred must therefore be that it is compati ble with EEA law (Council Directive 72/166/EEC of 24 April 1972. Second Council Directive 84/5/EEC of 30 December 1983, and Third Council Direc tive 90/232/EEC of 14 May 1990 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles) for a passenger who sustains injury by voluntarily drivinga motor vehicle not to be entitled to compensation unless there are special grounds for being so, if the passenger knew or must have known that the driver of the motor vehicle was under the influence of alcohol at the time of the accident and there was a causal link between the influence of alcohol
and the injury.
Charlton v Fisher and Churchill Insurance
[2001] Lloyd’s Rep. IR 387
Court of Appeal
JUDGMENT
Lord Justice KENNEDY:
This is the second defendant’s appeal from a decision of Judge Thompson QC
sitting at Bournemouth County Court who, on 12 April 2000, dismissed the second defendant’s appeal from a decision of District Judge Edwards who on 22 November 1999 had declared that the second defendant is obliged to in demnify the first defendant in respect of his liability to the claimant …
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In addition to the issues identified in the defence of the second defendant andin the reply Mr. Palmer has raised in his skeleton argument for this court the issue of whether the first defendant was entitled to an indemnity in respect of deliberate acts, either as a matter of construction or as a matter of public policy. As Mr. Norman for the claimant pointed out, the public policy issue was raised briefly by counsel then appearing for the second defendant before Judge Thompson, but on that occasion when Mr. Norman pointed out that the issue was not pleaded it was not pursued. Mr. Norman submitted that we should not allow that issue to be pursued in this court. Realistically, Mr. Norman does not now claim to be taken by surprise. He has had ample time to consider and respond to his opponent’s skeleton, and he recognises that ifa public policy issue is raised the very nature of the issue makes it impossible for the court to ignore it, but he submits that in order properly to adjudicate on the issue we need to know more than we do about the gravity of the con duct and the means of the first defendant. For reasons which will emerge later in this judgement I consider that we do know enough to deal with all the issues now raised, and it is nothing to the point that this is, as Mr. Nor man pointed out, a second tier appeal. The division of this court which gave permission to appeal rightly considered that the appeal raises issues of im portance worthy of consideration by the court.
Extent of the cover
In my judgment the starting point for a consideration for all the issues raised must be the statutory obligation to insure. That is now to be found in section 143(1) and section 145(3) of the Road Traffic Act 1988. The material words read:
Section 143(J)(a) “A person must not use a motor vehicle on a road unless there is in force in relation to the use of the vehicle by that person sucha
policy of insurance … as complies with the requirements of this Part of this Act … “.
Section 145(1) “In order to comply with the requirements of this Part of this Act a policy of insurance must satisfy the following conditions.
(3) … the policy –
(a) must insure such person … as may be specified in the policy in respect of any liability which may be incurred by him … in re spect of the death of or bodily injury to any person or damage to property caused by, or arising out of, the use of the vehicle on a road in Great Britain”.
It was no doubt in order to comply with those requirements that the first defen dant contracted with the second defendant, and the certificate of insurance is sued by the second defendant makes it clear that the insurers were affording him the cover he required. On that document there appear above the signature of the chairman and chief executive of the second defendant these words:
I hereby certify that the Policy to which this Certificate relates satisfies the requirements of the relevant law applicable in Great Britain …
The form and wording of the certificate is prescribed by paragraph 5(1)(a) and FormA in the Schedule to the Motor Vehicles (Third Party Risks) Regulations 1972 (SI 1217). It is clear from that prescribed form that the insurer is entitled to lay down “limitations as to use” and in this case familiar limitations are set out on the face of the certificate. Under that heading the certificate reads:
Use for social domestic and pleasure purposes including commut ing to and from a permanent place of work. This policy does not cover use for racing competitions rallies or trials. Use for hiring or for any business purpose.
So, as Mr. Palmer points out, it was clear from the outset that although the policy was said to satisfy the requirements of the relevant law the insurer was not agreeing to indemnify the insured in respect of every possible form of use. The obligation imposed by section 143(1)(a) required the first defendant or other use of his vehicle not to use the vehicle on a road unless there was in force “in relation to the use” of the vehicle by that person” a policy of insurance which complied with the requirements of the statute. In other words it re mained the obligation of the first defendant or other user of the vehicle to re strict the user so as to keep it within the terms of the cover. That necessarily means that a policy can comply with the requirements of section 145(3) which does not insure the person or persons specified in the policy in respect of any liability which may be incurred, but only in respect of any liability incurred whilst the vehicle is being used as permitted by the terms of the policy.
Turning now to the words of the policy booklet, it explains to the insured on page 2:
The Policy is in three parts –
the wording contained in this policy booklet
the schedule which gives details of you/your car/the cover/the Period of Cover/the premises
the effective Certificate of Motor Insurance which shows who may drive and the purposes for which your car may or may not be used.
Thus the importance of the Certificate of Motor Insurance as an indication of permitted user is again underlined. Section 1 of the policy is headed “Liabil ity to Third Parties” and under the heading “Indemnity to You” it begins:
We will indemnify you in respect of legal liability in the event of an accident involving –
(a) your car ”
I emphasise the word accident because Mr. Palmer submits that it is impor tant. The Second Defendant chose not to offer cover which precisely reflected the wording of section 145(3) of the 1988 Act, that is to say in respect of the death of or bodily injury to any person or damage to property caused by or arising out of the use of the vehicle on a road. The cover offered was wider than that required by section 145(3) in that the vehicle did not have to be on a road but, Mr. Palmer submits, it was not offered in relation to damage or the consequences of damage deliberately caused by the insured, albeit such damage would fall within the scope of section 145(3). Mr. Palmer accepts that the explanatory note in relation to section 1 of the Policy does not use the word accident. It says simply –
“We will protect you against claims made for death or bodily injury to someone or for damage to their property while driving or using:
(a) your car ”
If those were the words of the policy they would plainly be apt to cover dam age deliberately caused. Mr. Palmer accepts that under this policy the insured would still be covered when offending against the criminal law. If he caused death by dangerous driving he would be entitled to be indemnified provided, Mr. Palmer submits, he did not intend to injure his victim.
Public policy
Mr. Palmer contends that the submission that he makes in relation to the proper construction of the Policy accords with the normal approach which is adopted by the courts in relation to contracts of insurance, and with public policy. It has been clear, at least since the decision of the House of Lords in Beresford v Royal Insurance Co Ltd [1938] AC 586 that an insured may not recover under a policy of insurance in respect of loss intentionally caused by his own criminal or tortious act, however clearly the wording of the policy
may suggest otherwise, and his personal representative is in no better posi tion. In Beresford Lord Atkin said at 595:
On ordinary principles of insurance law an assured cannot by his own de liberate act cause the event upon which the insurance money is payable. The insurers have not agreed to pay on that happening. The fire assured cannot recover if he intentionally burns down his house, nor a marine as sured if he scuttles his ship, nor the life assured if he deliberately ends his
own life. This is not the result of public policy, but of the correct construc tion of the contract.
As to the position of a personal representative, Lord Atkin said at 599:
I cannot think the principle of public policy to be so narrow as not to in clude the increase of the criminal’s estate amongst the benefits which he is deprived of by his crime. His executor or administrator claims as his rep resentative, and, as his representative, falls under the same ban.
On the following page Lord Atkin expressed the view that the ban would not affect an assignee for value before the event apparently giving rise to liability
under the policy, but that is not a situation which falls for consideration in the present case.
Where loss or damage is sustained caused by or arising out of the use ofa vehicle on a road after a certificate of insurance has been issued then section 151 of the 1988 Act requires the insurers in certain circumstances to satisfy any judgment obtained against any person who is insured, even though they would not be required to indemnify the insured pursuant to the terms of his contract. The material parts of that section read:
(1) This section applies where, after a certificate of insurance … has been delivered … to the person by whom a policy has been effected … a judg- ment to which this sub-section applies is obtained.
(2) Sub-section (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is re
quired to be covered by a policy of insurance under section 145 of this Act and either-
(a) it is a liability covered by the terms of the policy … to which the certificate relates, and the judgment is obtained against any person who is insured by the policy …
(5) Notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy … he must pay to the person entitled to the benefit of the judgment…
Mr. Palmer’s submission, as I understand it, is that if he is right in relation to construction and public policy then, even had the relevant incident oc curred on a road, the insurers would not become liable to satisfy a judgment in favour of the claimant pursuant to section 151 because the first defen dant’s liability to the claimant would not be “covered by the terms of the pol icy” for the purposes of section 151(2)(a). She would however be able to recover from the MIB. He points out that in section 148 of the 1988 Act cer tain types of restriction on liability are said to be of no effect, from which it can be inferred that other restrictions are valid.
Respondent’s case
On the construction point Mr. Norman adopts the reasoning of the judge in the court below. Having referred to some of the authorities, including in par ticular Hardy v Motor Insurers’ Bureau [1964] 2 QB 745, to which I will turn later in this judgment, the judge held that the relevant policy covered any use by the first defendant of his vehicle. The word “accident” was found by the judge to be wide enough to encompass the incident which occurred on 5 October 1995. The insurers could have worded their policy so as to restrict or exclude liability arising out of incidents occurring off the road, but they did not do so, and that the judge found to be significant.
As to public policy Mr. Norman submits that, first, public policy seems to require that at least on roads those injured by motor vehicles should be prop erly compensated (see section 151 and the MIB Agreement). Secondly, there is in the present case no evidence of any intent to injure the claimant, so such loss as she can prove was not deliberately caused. Thirdly, the authorities suggest that the conduct of the insured needs to be scrutinised and evaluated before it is accepted as a bar to indemnity. Fourthly, the claimant can if nec essary rely on section 148(7) of the 1988 Act and fifthly, there is nothing in the wording of the policy to distinguish between use on and off the road.
Conclusion
In my judgment the word “accident” in section 1 of the Policy with which we are concerned should not be given a narrow meaning. On the face of it, and bearing in mind that the insurer and the insured are contracting against the statutory background provided by the Road Traffic Act 1988 it may well extend to any incident involving the insured’s car, but I recognise the force of the ar guments to the opposite effect, which are explored in the judgment of Rix LJ.
However it seems to me that on the authorities it is clear beyond argu ment that the principle that Lord Hailsham formulated as that a person may not stand to gain an advantage arising from the consequences of his own in iquity applies in relation to motor insurance contracts as it does elsewhere, and for most purposes has the same effect as if section 1 were so worded as not to apply to damage arising from the insured’s own deliberate criminal act. Even if the first defendant did not know that the claimant was in the car . which he struck, it seems to me impossible to contend that in law her injuries were caused by anything other than his deliberate criminal act.
Had the incident occurred on a road the first defendant would have been required by section 143 of the 1988 Act not to so use his vehicle unless it was insured to the extent required by section 145. It was not so insured, but the claimant would then have been able to recover pursuant to section 151 or under the MIB Agreement. As the incident in fact occurred off the road the claimant has no such redress. Section 148(7) is, in my judgment, of no assis tance to the claimant. It merely enables a person or persons specified in the policy (e.g. other named drivers) to obtain indemnity from the insurer.
I would therefore allow the appeal and declare that the second defendant is not obliged to indemnify the first defendant or to discharge the first defen dant’s liability to the claimant …
Dodson v Peter H. Dodson Insurance Services
[2001] Lloyd’s Rep. IR 278
Court of Appeal
JUDGMENT
Lord Justice MANCE
This is the judgment of the Court. We have before us an appeal with leave of BellJ from his order made 17 February 2000 declaring that, upon the true construction of a policy of motor insurance issued by the Eagle Star Insur ance Co Ltd to the claimant for the period 11 September 1992 to noon on 11 September 1993 and despite the sale of the claimant’s car on 17 April 1993, the claimant remained covered during the policy period in the event of his driving, subject to the owner’s permission, any motor car not belonging to or held under a hire purchase agreement by him. The claimant’s claim is for damages against the defendants, insurance brokers through whom he placed the policy, for negligence in (allegedly, since it is in issue whether they ever did) advising him that the insurance would remain in force in this situation. He was involved in a serious accident on 16 May 1993, while driving his mother’s car, as a result of which he incurred substantial liability with his passengers and third parties. The Eagle Star refused to indemnify him. Act ing presumably with the advice of lawyers, he discontinued the proceedings initially pursued against them. Instead he has pursued the defendants, his brokers, by the present proceedings. The brokers’ response to the proceedings was to plead that the Eagle Star was after all liable, and to issue an applica tion for summary judgment under Part 24. On that application, the judge
assumed the accuracy of all the matters pleaded in the statement of claim, and made the order now under appeal …
The defendants deny that one can deduce any general principle from the au thorities. They submit that the issue is one of construction of a particular policy wording, differing from any covered by the cases.
The judge accepted the defendant’s case. He viewed clause l(l)(b) as an independent head of insurance, capable of operating throughout the insur ance period irrespective of whether or not the insured maintained his inter est in the insured car or had replaced it under the insurance with another …
After considering the authorities, Bell J said in the present case:
… I do accept Mr Doctor’s essential argument that those decisions concen trated, as they had to, on the particular wording of the material provisions in the different policies which they construed. I do not believe that one can de duce from the cases a general principle that in respect of all broadly similar policies of motor insurance the sole subject matter or insurable interest is the vehicle owned or held by hire purchase, and proposed by the insured, so that when it is disposed of without the substitution of another in accordance with the provisions of the policy, the policy lapses or becomes void.
The judge’s reference to “subject matter” no doubt derives from Goddard J’s judgment in Tattersall. Goddard J cannot have been using the phrase as equating with or referring to insurable interest. It was, we think, no more than short-hand for a conclusion, as a matter of contractual construction, that cover under the particular clause insuring against third-party liability while driving another car was conditional upon the retention of the insured car. The reasoning in Rogerson and in Tattersall did not, in our view, depend critically on the fact that property insurance had been taken out on the in sured car, although that may have featured in the argument. In Boss there was no such property insurance at all, but only third party liability cover relating to (a) driving the specified motor cycle and (b) driving any other mo tor vehicle not belonging or hire-purchased to the policy holder.
The central issue of construction in the present case is thus whether the third-party cover afforded while driving other cars depended or was condi tional upon the insured’s continuing ownership of his own car (in respect of which it happens that in this case he did also take out property insurance against fire and theft). While each case turns ultimately on the terms of the particular policy, previous decisions cannot simply be put on one side, once one sees that they concerned policy wording in somewhat differing terms. The question is whether the difference is material: see MacGilliuray, paras 11.2-11.4. If it is not, we have to consider whether and to what extent we must or should follow the previous authority, which in the case of Tattersall and Boss is not binding on us …
The proposal for the present insurance thus confirms that this was based on the insured having and wishing to insure himself in respect of his own car – here against fire and theft as well as third-party liability. That was on any view the origin and context of the policy. As indicated by Lord Parker’s first reason in Boss (and the nature of the proposal in this case), so here also the basic pre mium which insurers required (leaving aside no claims bonus and age related factors) will have depended first and foremost upon the details given regarding the car and its anticipated use and users. Mr Doctor, as we understand, accepts this. He adds that some premium may also be attributable to the third-party cover afforded by clause l(l)(b) in respect of the driving by the insured of other cars (although it is not unknown for insurers to grant ancillary cover for no extra premium). The present proposal confirms the obvious, namely that premi ums for motor insurance covering third party liability vary fundamentally ac cording to factors related to the insured car (its characteristics), the insured and any others who will be permitted to drive it (their age, experience and record), and their likely user. No attempt is made in the present proposal to elicit infor mation ·about other vehicles (not belonging or on hire purchase to the insured) that the insured might drive. So, in this sense, the driving of other vehicles must have been regarded as ancillary. This is so, whether or not any element of the premium was attributable to it. If any element of premium was attributable to it, it must have been a fixed element, not depending on particular circum stances. An insured may of course be bound under the general duty of disclosure to disclose any unusual matter relating to any anticipated driving of other vehi cles. If such a matter were disclosed (for example if an insured intended asa matter of daily routine to drive someone else’s high-powered sports car in pref erence to his own run-of-the-mill vehicle), that could no doubt affect the insur ers’ willingness to accept the insurance at all or the premium. That would bea special and different situation, not applicable here. But, accepting all this, it is unclear how one derives from it support for a conclusion that the cover for driv ing other vehicles depended upon retention of the insured vehicle and so of cover while driving that vehicle. Insurers may not have been very concerned to try to rate the possibility that other cars might be driven, before or after disposal of the insured car, because this is, in the general frame of things, a less common and problematic aspect of the risk. That does not lead to the conclusion that it is not a risk that insurers would tolerate in those cases where an insured disposed of (and did not replace) the insured car.
The second reason given by Lord Parker in Boss involves a statement about “the natural meaning” of the indemnity relating to liability whilst driving any vehicle not belonging or hired to the insured. Lord Parker viewed clause (2) in Boss as offering “temporary cover while the insured vehicle is out of use”. It may be, though he did not say so specifically, that his view was influenced by the opening words of clause (2) – “In terms of and subject to the limitations of and for the purposes of this policy … ” – and that he equated them to the ex press words of extension in Tattersall. Goddard J’s reasoning in Peters, where he described a clause with the same opening words as those in Tattersall as an “extension clause”, is certainly consistent with that view. In the absence of words like those opening words, Lord Parker’s view appears to us too narrowly expressed. Those who acquire and insure a car become accustomed to driving themselves, and there are many circumstances in which they may want cover while driving another’s car. On the face of clause l(l)(b), there is no require ment that the insured vehicle should be “out of use”, or even that the useof any other vehicle should be “temporary”. Clause l(l)(b) must cover situations where the insured vehicle is physically available for use, but the insured, in the ordinary course and for reasons entirely of his own convenience, prefers to drive another car – for example, a more comfortable car on a long journey ora
friend’s car at destination after he chooses to take a long-distance trip to say Edinburgh by train or air.
Having regard to Lord Parker’s reasoning in Boss at page 102 (second paragraph), it might also be argued that the granting under the present pol icy of fire and theft cover on a specified vehicle, owned and kept by the insured according to the proposal, makes this a more obvious case than Boss for treating the whole as a dependent upon a continuing assumption that the insured would have and retain possession of the specified car. That view is reflected in MacGilliuray. But, it seems to us improbable that the scope of clause l(l)(b) varies according to whether or not the insured elects for any property cover on the car. The basis of the proposal in Boss does not appear from the report. But the present insurers were clearly concerned to have full details of the insured’s car, and his relationship to it. The present insured (in common, we would think, with most insureds) also had a clear insurable in terest in the car with which the insurance originated, whether he chose to take out property insurance on the car or not.
As to Lord Parker’s third reason, which Salmon J found decisive, the pre sent policy contains similar provision in the shape of clause 11(5) as regards maintenance of the insured vehicle in an efficient and roadworthy condition and the taking of all reasonable steps to safeguard it from damage or loss. Further, clause 11(8) of the present policy makes “the observation and fulfil ment of the terms of this Policy so far as they relate to anything to be done or complied with by thf, Insured” (in other words, compliance with clause 11(5)) a “condition precedent to any liability of the Company to make any payment under this Policy”, in precisely the same way that clause 11(6) of the policy in Boss made compliance with, inter alia, clause 11(5) a condition precedent to any liability there. Further, clause 11(5) relates, clearly, to the liability cover, as well as the fire and theft cover afforded by this particular policy. In so far as it extends to the taking of all reasonable steps to safeguard the insured vehicle from damage or loss, it goes beyond the clause in Boss. Mr Doctor points out that it does not contain the further provision, present in Boss, whereby “the company shall have at all times free access to examine” the vehicle described in the schedule. That provision cannot however have been crucial to the decision in Boss, and its absence cannot constitute a material distinction between Boss and this case. We need not consider whether a right to inspect would anyway be implicit in the light of clause 11(5).
We prefer to leave for consideration on another occasion the question of whether the impact of clause 11(5) read with clause 11(8) may, as a matter of construction, be confined to cases where indemnity is claimed either for loss or damage to the insured car (clause 2) or against third party liability while driving the insured car (clause l(l)(a), rather than under clause l(l)(b). The point evidently did not occur to the Divisional Court in Boss. Mr Doctor did not suggest it as the correct interpretation of clause 11(5) and (8). So we did not hear argument on it. The question may in fact amount to no more than a restatement, in another context, of the same question that we have to con sider under clause 1. If clause l(l)(b) provides merely ancillary cover, then it may be understandable that breach of clause 11(5) should undermine the whole policy. If clause l(l)(b) is otherwise apt to provide independent cover, then it may be natural to try to read clause 11(5) as confined in its impact to clause l(l)(a) and 2.
The obligation under clause 11(5) is not an absolute obligation to ensure that the car never becomes inefficient or unroadworthy. It is an obligation to take reasonable steps to have it maintained from time to time either in ac cordance with normal procedures to prevent it becoming inefficient or unroadworthy or in response to any inefficiency or unroadworthiness which becomes apparent: see eg Conn v Westminster Motor Insurance Association [1966] 1 Lloyd’s Rep 123 and 407 and Mcinnes v National Motor and Acci dent Insurance Union Ltd [1963] 2 Lloyd’s Rep 123. So we see no inconsis tency with, and no reason to limit, clause 11(5) in the light of the modified cover provided by clause 7 (Service and Repair) which reads:
This Policy (excluding the terms of Section 2 of Clause 1) shall operate while the Insured Vehicle is in the custody of a member of the motor trade for service or repair.
We do however see considerable force in the submission that the Court in Boss placed a greater significance on the similar provision to clause 11(5) there present than it can fairly bear. A requirement to maintain a car, as and when necessary, postulates continued possession of the car. Its subject mat ter is the insured car, and it can only operate so long as the insured retains the insured car. It is in Lord Parker’s words in Boss “really only apt in rela tion toa normal vehicle”. But it does not follow axiomatically that it requires the insured to retain the car, or that its inclusion indicates that any indem
nity cover relating to other vehicles ceases after disposal of the insured car. On this it may simply be neutral.
We have dealt with the clauses which appear common to the policy in Boss and the present policy. But the present policy contains other relevant terms not present or considered in Boss. First, without going through the policy to identify every occasion, the policy wording contains many references focusing on the insured vehicle, without corresponding provision in respect of the driving of other vehicles. For example, the cover in respect of “Foreign Travel” specified in clause 6(3), (4), (5) and, probably, (6) is only afforded in respect of the insured vehicle. The General Exception in clause 10(6) relating to accidents or liability while in or on the various dangerous parts of an aero drome is also limited to the Insured Vehicle. We include to attribute this
limitation, as regards liability cover, to oversight. Again, it suggests the pol icy’s focus on the insured vehicle.
Clause 9, Rebate for Laying Up, is also of interest. It provides:
Upon notice being given to the Company that the Insured Vehicle is to be laid up and out of use, otherwise than as a result of damage or loss covered by this Policy, the Policy (except for Clause 2) will be suspended as from the date of receipt by the Company of the current Certificate(s) of Motor
Insurance. The Company will allow an appropriate return of premium at the end of the period of suspension.
Clause2 is the property damage cover in respect of loss or damage to the in sured vehicle (here only against the perils of fire and theft). So, if an insured wishes to lay up the insured car, he can only do so by giving up the cover under clause l(l)(b). There is no right to restrict the cover to clause l(l)(b) cover. That contrasts with the defendants’s submission that the insured can, under the same policy, always decide to sell his car and retain the benefit of clause l(l)(b) cover until the date when it would otherwise have expired.
These two factors point in the same direction as Lord Parker’s reasoning in Boss. But an important pointer in the opposite direction, is in Mr Doctor’s submission, clause 1(1), the Replacement/Additional Vehicles clause. This has to be read with the clause on the reverse of the certificate whereby the Eagle Star reserved the right to decline to insure any vehicle. Under Form A, cover for an additional or replacement vehicle would depend upon notification and agreement. Under Form B, which actually applied, the only express condition of cover in respect of an additional or replacement vehicle is that its particulars should have been notified to the Eagle Star within seven days of its acquisition. That being done, cover would presumably apply from acquisition.
Clause 11(1) refers to cover “for” or “in respect of’ an additional or re placement vehicle, and does not therefore, expressly, address the cover pro vided by clause l(l)(b) in respect of the driving of any other vehicle not owned or hired by the insured. It may be argued that this indicates that the cover under clause l(l)(b) was intended to be independent and to continue even though the insured did not acquire, or give notice of acquisition of, any additional or replacement vehicle. But that would be an obscure way of indi cating such an intention, and it is difficult to think that it played any role in the use of such words in relation to additional vehicles. The only possible effect of failure to notify an additional vehicle is to leave it uncovered, while the cover in respect of the original insured vehicle together with the cover for driving other vehicles would remain naturally untouched. An alternative and more likely possibility is that the draughtsman was not addressing his mind to clause l(l)(b) at all. Failure to notify an additional vehicle can have no effect on the previous cover under clause l(l)(a) and (b). Failure to notify a replacement vehicle means that there is no cover for or in respect of that ve
hicle. On this basis, if cover under clause l(l)(b) is naturally dependent upon
retention of the specified vehicle, then it too would fall on any failure to in sure a replacement vehicle.
The significant feature of clause 11(1) in the present context is that it pro vides no period within which any replacement vehicle must be acquired. And there is under this motor policy no obligation to inform insurers of any dis posal of the insured vehicle or any major change in circumstances during the policy period. All that clause 11(1) says is that notice must be given within seven days of any replacement. It is, no doubt, quite common for an insured to dispose of his insured car by trading it in against another car. But this is clearly not the only or even perhaps the most common situation. Garage trade-in values can usually be bettered elsewhere. Cars are bought and sold at auction and by advertisement. For this and many other reasons, there may well be delay between disposal of one car and its replacement. The basic submission of Mr Hytner QC for the claimant was that, if there was any gap, however short, between the times of these events, the policy lapsed and the latter could no longer be notified as a “replacement” under clause 11(1). We cannot accept that. The Eagle Star must we think be taken to have accepted
– at the least – the risk of replacement not being achieved at the moment of disposal of the old car – and to have agreed to provide clause l(l)(b) cover on a continuous basis.
Mr Doctor argues for a wide latitude in this context. In his submission re placement under that clause contemplates disposal of the insured car followed by its “replacement” by purchase of another car at any later time within the policy period. In the meantime, between the disposal and the acquisition of a new car, the insured would, he submits, be covered under clause l(l)(b) in respect of the driving of any other car not owned by or hired to him. Ina loose sense, no doubt, a person might speak of “replacing” a car, if he sold one car and, aftera gap of almost any length (even years), bought another. We doubt whether the draughtsman of clause 11(1) was actually thinking so generally. The difficulty remains that he has not introduced any express limits. The clause must, in our view, be read as allowing some gap between disposal and replacement, and we have come to the conclusion that this gap cannot sensibly be limited to whatever the law might regard as de minimis. That would itself introducea considerable and unsatisfactory uncertainty, and unless de mini mis was given an unusually expanded meaning, would appear unlikely to cater for quite common situations. It would also be most unsatisfactory if cover un der the second indemnity continued for some period after disposal, only to cease abruptly at some entirely unspecified point in time, by when it was sub sequently adjudged that it was too late to “replace”.
Although they were not reflected in any pleading and not considered in the judge’s judgment, we may refer to this point to statements by the claim ant’s solicitors and by Mrs Dodson in their witness statements to the effect that, although the claimant took advantage of a favourable offer froma friend to sell his car on 17 April 1993, he was at all times thereafter, and still at the date of the accident on 16 May 1993, looking to get another car “shortly”. He never in fact acquired or gave notice in respect of any replace ment. If these facts were established, and in the absence of any guidance in the policy, could the insured then still be said to be replacing his car within the meaning of clause ll(c)? And if not, then what if the gap had been only two weeks or one week? Mr Hytner’s analysis cannot answer these questions satisfactorily or clearly, except by the unacceptable submission that all cover
ceases automatically unless a replacement car is acquired before or at the time of the disposal of the insured car.
It is also worth noting the position under a certificate describing the in sured car in Form A, although Form B applied in this case. Again, there is no period provided within which the replacement vehicle must be obtained. But cover for such a replacement depends on obtaining a cover note before the re placement vehicle “is used” (see the certificate). No cover applies fora replace ment vehicle “until the Company has been notified of such … replacement and
a [fresh] Certificate of .motor insurance has been received by the insured”. Again, there is nothing to indicate that these steps must be completed before the original insured car is disposed of. Yet, on Mr Hytner’s case, as soon as the original car is disposed of, the policy cover would come generally to an end. We think that, under a certificate in Form A, any insured would be entitled to as sume that there could be a gap between disposal of his old car and completion of the steps necessary to obtain insurance for a fresh car, without prejudicing his continuing right to rely on the second indemnity in respect of liability while driving another car not owned or on hire purchase to him.
It may also be of some interest to consider what happens regarding pre mium if cover lapses automatically upon or after disposal of the insured vehi cle without replacement. There will have been no total failure of consideration. There is nothing to entitle an insured to a pro rata or other return of premium. Yet, if all cover ceases entirely on disposal without re placement of the insured car, the insured will be left (i) without cover under clause l(l)(b) at the very moment when he is likely to require it and (ii) with out any right to any return of premium. As to (i), it may be said that driving other people’s cars on a regular basis in circumstances where one has no car at all of one’s own involves different risks from driving such cars on an ancil lary basis, when one retains one’s own car. That is however itself speculative. Many car-owners after sale of their own cars may have very little opportunity to borrow or drive other cars. To postulate extreme situations (such as the driver who, a month into the insurance, disposes of his own car and is lent his father’s Ferrari on a regular basis) does not assist. Insurance involves a general pooling of diverse risks, some of which may well always be extreme. The general insurance assumption is that it is possible to cater for the rare extremes by predicting and rating the mean. As to (ii), a partial answer may be that insurers are in practice willing to concede a return of premium (though not necessarily strictly pro rata) if a motor insured wishes to cancel and return the certificate for any reason. The same objection would anyway arise under a policy excluding any cover along the lines of clause l(l)(b) (if such policies are ever issued), and it is perhaps also unlikely that clause l(l)(b) was included to meet this objection, since (as we have pointed out) there may well be insureds who, after disposal of their own car, have no pos sibility of or interest in driving anyone else’s car and so would obtain no benefit from clause l(l)(b) in any event.
The judge said that, if Eagle Star had intended clause l(l)(b) to bear the
meaning for which the claimant contends, it would have been easy to have inserted some words such as “whilst still the owner or hirer on hire purchase of the Insured Vehicle” at its beginning. The same argument could have been, and quite probably was, run in Boss. It is almost always possible on any point of construction to say after the event that the point could have been put be yond doubt, either way, by express words. So we are not particularly im pressed by this argument. Bearing in mind the tenor and terms of the authorities and texts up to the present date, it might, if anything, be said that, so far as it has any force, its force lies in the opposite direction to that which the judge suggested: if clause 11(1) had been intended to confer or re flect the independence in scope of cover under clause l(l)(b) for which Mr Doctor contends, in contrast to the more limited cover recognised in Tatter sall and Boss, one might have expected that intention to have been made more explicit. The matter is also more complicated than the judge thought. Any addition to clause l(l)(b) would have to take account of clause 11(1) re lating to additional/replacement vehicles. The wording suggested by Mr Doc tor to the judge would immediately achieve the unacceptable result that, if there was a minimal gap occurring, in the ordinary course of replacing the insured car, between its disposal and its replacement, then clause l(l)(b) cover would cease during that gap. That does not however mean that I dis agree with the judge that some formula could quite readily be devised by in surers to reflect the intention for which Mr Hytner contends, if that does represent the insurers’ intention. I am sure that it could be.
Looking at the arguments overall, we confess to having been concerned as to whether we can – at least without creating unacceptable uncertainty – satisfactorily distinguish Boss, a case which has stood for nearly 40 years and received a general interpretation in the leading insurance texts. But at the end of the day, we have come to the conclusion, firstly, that the presence of the replacement/additional vehicles clauses constitutes a very relevant dis tinction between this policy and that considered in Boss. The absence from clause l(l)(b) of any wording equivalent to the opening words of clause (2) in Boss may also constitute a relevant distinction. Under clause l(l)(b), insurers must be taken to have accepted that cover while driving other cars could con tinue after disposal of the insured car, and we see no satisfactory stopping point, short of a conclusion that such cover is independent of the retention or replacement of any insured car. Secondly, we regard the reasoning in Boss as itself open to substantial doubt. Insurance wordings should be clear. If cover under an apparently independently worded indemnity clause is intended to depend upon retention or replacement of the insured car, to which the cover does not relate, or upon continuation of cover under a separately expressed indemnity clause, one would expect this to be clearly stated. In case of any real ambiguity (and this is in our view, at lowest, such a case), an insurance wording such as the present falls to be construed against the insurers whose standard wording it is and who put it forward contractually in apparently general terms and then seek to read into it an unexpressed restriction of their liability. On this basis, we consider that Lord Parker’s second reason in Boss is open to legitimate criticism, at least so far as it was formulated asa general proposition, not based on any language particular to the policy in case. We have already given reasons for doubting the validity of his first and third reasons, when reviewing them earlier in this judgment.
The uncertainty involved in unsettling an apparent consensus of view about the scope of a second indemnity such as clause l(l)(b) in this policy has caused us the greatest concern. But all the authorities recognise that the point is ultimately one of construction of the individual policy. There is here, on any view, one major material difference, constituted by the replace ment/additional vehicles clause, as well as the difference in wording of the relevant indemnity. Further, our decision can only affect current and recent policies (and then still only policies which do not make the position clear one way or the other). At the end of the day, and after some hesitation, we have come to the conclusion that it is more important to re-enforce the message that insureds are entitled to clear wordings and to the benefit of any ambigu ity, then to force the present particular policy wording (and probably other policy wordings in future) into an artificial mould dictated by legal authority. If any insurer does not like our decision, it can for the future formulate its policies differently, provided that it makes its intention clear. Indeed, we would consider it desirable that motor insurers should in any even-t and whatever such intentions may be – ensure that their intentions on the pre sent point are made express in their wordings – to avoid yet further disputes and decisions in the series currently ending with this judgment.
We therefore dismiss this appeal and uphold the judge’s declaration that, fol lowing the claimant’s sale of his car on 17 April 1993 without replacing it, the claimant was covered under clause 1 of the policy during the remainder of the policy period in the event of his driving, with the owner’s permission, any motor car not belonging to and not held under a hire purchase agreement by him.
Liam Rothwell v Motor Insurers Bureau of Ireland
Unreported High Court, 6 July 2001
JUDGMENT of Mr. Justice McCracken delivered the 6th day of July, 2001
BACKGROUND
On 6th November, 1995 the Plaintiff was driving his motor car in the direc tion of Nenagh on the main Limerick to Nenagh road. I am satisfied that he was driving perfectly normally on a straight stretch of road. Suddenly, and for no reason which was apparent to the Plaintiff at the time, his car skidded and spun across onto the wrong side of the road and collided with a car trav elling in the opposite direction. As a result the Plaintiff suffered injuries, the most serious of which was the dislocation of his right shoulder.
When the accident was investigated by the Gardai it was found that there was a patch of oil on the road about 50 feet in length and covering most of the side of the road on which the Plaintiff had been driving. The Garda evidence, which I accept, is that this was almost certainly either petrol or diesel fuel and that it would not have been seen by the driver of a car. I have no doubt that the direct cause of this accident was the oil on the roadway, and it is relevant that the second car appears to have skidded across the road very shortly afterwards, although fortunately it did not collide with another vehicle.
THE PLAINTIFF’S CLAIM
The source of the oil on the road is unknown, and if it came from another vehi cle, the identity of that vehicle is also unknown. Accordingly, the Plaintiff has brought proceedings against the Defendant pursuant to the terms of the agreement, commonly known as the MIBI Agreement, dated 21st December, 1988 and made between the Minister for the Environment and the Defendant, which was entered into to ensure that persons suffering personal injury in road accidents involving uninsured or stolen vehicles and unidentified or untraced drivers would be adequately compensated. The relevant Clause in that Agree ment under which the Plaintiff is claiming reads as follows:
“6. In the case of an accident occurring on or after the 31st day of Decem ber, 1988, the liability of M.I.B. of I. shall extent to the payment of com pensation for the personal injury or death of any person caused by the negligent driving of a vehicle in a public place, where the owner or user of the vehicle remains unidentified or untraced”.
CAUSE OF SPILLAGE
While the origin of this spillage is unknown, I have had the benefit of evi dence from Mr. Edmund Buckley, a Motor Assessor, and I accept his evidence as being expert evidence on the topic. I accept his evidence that the spillage itself was probably quite small, being limited to a couple of pints, and that, because it was an isolated patch of oil, it was most unlikely that it was caused by any form of leakage, for example, from an oil tanker. As the whole
Hardy v Motor Insurers’ Bureau
[1964] 2 All ER 742
LORD DENNING MR
The policy of insurance, which a motorist is required by statute to take out, must cover any liability which may be incurred by him arising out of the use of the vehicle by him. It must, I think, be wide enough to cover, in general terms, any use by him of the vehicle, be it an innocent use or a criminal use, or be it a murderous use or a playful use. A policy so taken out by him is good altogether according to its terms. Of course, if the motorist intended from the beginning to make a criminal use of the vehicle-intended to run down people with it or to drive it recklessly and dangerously-and the insurers knew that that was his intention, the policy would be bad in its inception. No one can stipulate for iniquity. But that is never the intention with which such a policy is taken out. At any rate no insurer is ever party to it. So the policy is good in its inception. The question arises only when the motorist afterwards makes a criminal use of the vehicle. The consequences are then these: if the motorist is guilty of a crime involving a wicked and deliberate intent, and he is made to pay damages to an injured person, he is not himself entitled to recover on the policy. But if he does not pay the damages, then the injured third party can recover against the insurers under s 207 of the Road Traffic Act 1960; for it is a liability which the motorist, under the statute, was required to cover. The injured third party is not affected by the disability which attached to the motorist himself. So, here, the liability of Phillips to the plaintiff was a liability which Phillips was required to cover by a policy of insurance, even though it arose out of his wilful and culpable criminal act. If Phillips had been insured, he himself would be disabled from recovering from the insurers. But the injured third party would not be disabled from recovering from them. Seeing that he was not insured, the defendants must treat the case as if he were.
Randall v Motor Insurers’ Bureau
[1969] 1 All ER 21
MEGAW J
lsthe judgment which was given in favour of the plaintiff against Mr Scott a judgment in respect of the liability required to be covered by s 203 (3) (a) of the Act of 1960? Subsection (3), so far as it is
relevant, reads:
‘(3) … the policy-(a) must insure such person … in respect of any liability which may be incurred by him … in respect of … bodily injury to any person caused by, or arising out of, the use of the vehicle on a road;
‘”road” means any highway and any other road to which the public has access … ‘
It is not suggested on behalf of the plaintiff that the driveway in the school’s property was a road. It is not suggested on behalf of the defendants that Hillsborough Road, including the pedestrian pavement, was not a road. There is no dispute that Mr Scott incurred liability to the plaintiff in respect of bodily injury. The one and only question in dispute is: Was it bodily injury caused by, or arising out of, the use of the Dodge lorry on a road? In my judgment, the answer to that question on the facts of this case is ‘Yes’. I have no doubt that in common sense and in the ordinary use of language the lorry was being used on a road-Hillsborough Road-at thetime when the plaintiff sus ained the serious injury of which he complains. If anything turns on the precise time of the incident, which, again as a matter of common sense, cannot be divided into a series of separate incidents, the determining factor is the time when the wheel of the lorry ran over the plaintiffs leg. At that time the greater part of the lorry was on the road, and the lorry as a whole was using the road. The fact that the rear part of the lorry including the wheel which ran over the plaintiff’s leg, was still, just, on private property does not, in my view, affect the conclusion that the lorry was then using the road. It was the use of the lorry on the road-the fact that it was being driven further on to the road in order to drive away along the road-which caused the injury. Certainly the injury arose out of the use of the lorry on the road. The fact that the plaintiff, when he was injured, was still-though only just-on private property and that the wheel which caused the injury was still, just, on private property does not, to my mind, affect the conclusion. The plaintiff therefore succeeds in his claim.
White v London Transport Executive and Motor Insurers’ Bureau
[1971] 2 Lloyd’s Rep 256
LORD DENNING MR
In order to decide this case, it is important to see the effect of the 1969 agreement. It gives very great powers to the Motor Insurers’ Bureau. By art 6 the injured person must give all such assistance as may be reasonably required to the Motor Insurers’ Bureau to enable it to investigate the matter. He must, for instance, furnish to the Bureau statements and information in writing or orally, if they so request. By art 6 (1) (b) the injured person, if so required by the Bureau, must take all such steps as may be reasonable to get judgment against an identified person such as the London Transport Executive. In art 6 (2) there is a provision for the Insurers’ Bureau to indemnify the injured person against all costs which he incurs in going on with the action in pursuance of the Bureau’s request. Later on, in art 8, the Bureau can require the injured person to furnish them with a statutory declaration as to the circumstances.
Those provisions show quite clearly that the Bureau are standing behind the plaintiff in this action. They require it to be brought; they indemnify the plaintiff; they put him forward on their behalf in an endeavour to make the London Transport Executive wholly or in part to blame. Nevertheless in their application they wish to come in and stand behind the defendant. They want to say the plaintiff’s claim for damages is excessive; and also to say that the plaintiff was guilty of contributory negligence. It seems to me that if the Bureau were allowed to come into the action, it would be open to their Counsel on the one hand to cross-examine the plaintiff about contributory negligence and damages; and then, on the other hand, to cross-examine the 1
defendants’ witnesses to show that they were wholly or in part to blame. Such an exceptional course might be permissible if it were necessary to ensure that all the matters in dispute could be effectively determined. But I do not see that it is necessary in the least. In my judgment, seeing that the plaintiff is bringing the action on the direction of the Motor Insurers’ Bureau, she will be bound to pursue the action with vigilance and skill against the London Transport Executive, doing all she can to make them liable in part or whole. So far as the London Transport Executive is concerned, they will do all their best to defend the action by disputing negligence, by alleging contributory negligence, and questioning the damages. So all the matters will be properly and fully investigated without the necessity of joining the Bureau.
Accordingly, I doubt whether this joinder,is ‘necessary’ within the opening words of Order 15, r 6. I
Persson v London Country Buses
[1974] 1 All ER 1251
JAMES LJ
The proper construction of the Agreement we find to be that contended for by Counsel for the Bureau, and we are unable to accede to the argument of Counsel for the plaintiff that cl 7 is purely procedural in effect. We emphasise that it is only by virtue of the terms of the agreement that any payment at all can be obtained from the Bureau. Clause 3, so much relied on on behalf of the plaintiff, entitles an applicant to an ‘award’ of a payment. Under that clause the award is not an award of an amount which the applicant is entitled to recover from the untraced person, or from the Bureau, but of an amount to be–
‘assessed in like manner as a Court . . . would assess the damages which the applicant would have been entitled to recover … if proceedings to enforce a claim for damages in respect thereof were successfully brought by the applicant against the untraced person.’
It is clear from the provisions of the Agreement which follow, and to which cl 3 is expressly made subject, that the determination of the question whether there ought to be an award and the process of assessment is to be carried out under the provisions of cl 7 subject to the right of appeal to an arbitrator under cl 11. It is, we think, equally clear that the only right to payment is the right to payment of the amount awarded under either cl 10 or, if there is an appeal, under cl 20. If there is no award, there is no right to payment. On the construction we apply, the Bureau did all they were obliged to do as prescribed by cl 7. Their decision to reject the application was in performance of the terms of the Agreement and not a repudiation of the Agreement. Earlier cases in which the Bureau has been made a party to litigation in relation to liability or possible liability under the 1946 Agreement afford no guidance on the issue raised in the present case. Under the former agreement the issue of liability to satisfy a judgment was involved, whereas under the 1969 Agreement any liability of the Bureau is in relation to an untraced person against whom there can be, ex hypothesi, no judgment.
In our judgment the obligation under cl 3 of the agreement to make an award is subject to the provisions of cl 7, and the decision whether the case is one to which the Agreement applies as defined by cl 1(1) is one for the Bureau to make. If an applicant is dissatisfied with that decision, he has the right of appeal provided by the agreement. He cannot bring an action, as the plaintiff seeks to do, alleging a breach of the Agreement on a basis of fact which is reserved by the Agreement for the decision of the Bureau in accordance with the terms of the contract.
Porter v Motor Insurers’ Bureau
[1978] 2 Lloyd’s Rep 463
FORBES J
The Agreement provides in cl 2 for the satisfaction of claims by the Motor Insurers’ Bureau. There is no difficulty here. [Counsel] for the Bureau accepts that there is a liability to indemnify passengers in these circumstances since the insurance of passengers against injury became a statutory necessity. The real issue arises on cl 6, and it is cl 6 (1) (c) (ii) which exercises us. Perhaps I can read it quickly.
‘MIB shall not incur any liability under cl 2 of this Agreement in a case where: (c) at the time of the accident the person suffering death or bodily injury in respect of which the claim is made was allowing himself to be carried in a vehicle and … (ii) being the owner of … the vehicle he was using or causing or permitting the vehicle to be used without there being in force in relation to such a use a contract of insurance as would comply with Pt VI of the Road Traffic Act 1972, knowing or having reason to believe that no such contract was in force.’
Of course, one bas to construe the application of those words in these circumstances on the basis that having accepted Mrs Porter’s evidence the situation was quite simply this. She had told Mr Addo that the car was not insured. She had told Mr Addo that the Customs had told her she must have an insured driver. He had offered, knowing that, to drive her vehicle and she had therefore made the assumption that he was an insured person. That is the background of it.
… has advanced an argument based on the last words of this sub-clause-
Having reason to believe that no such contract was in force …
I think it is important that one should distinguish two things which those words do not say. The first is that it does not say ‘having reasonable belief that no such contract was in force.’ The words are ‘having reason to believe.’ It seems to me that those two expressions are wholly dissimilar. ‘Having reason to believe’ is a reference to a rational process of thought. ‘Having a reasonable belief is a reference to the man on the Clapham omnibus. The other thing which it does not say is ‘having no reason to believe that such contract was in force.’ There is the biggest distinction in the world it seems to me between words saying ‘having reason to believe no such contract was in force’ and ‘having no reason to believe that such a contract was’. The onus is thrown wholly differently in those two circumstances. And be it said that if the Motor Insurers’ Bureau and the Government in drawing up this Agreement had intended that this document should say or should cover the circumstances envisaged by such words as ‘having no reasonable belief that such a contract was in force’ or indeed ‘having no reason to believe that such a contract was in force’, it would have been the simplest thing in the world to write those words into this contract. The fact that they were not so written seems to me to indicate quite clearly that one has to construe the words as they are, ‘having reason to believe that no such contract was in force.’ What reason is advanced? What reason could Mrs Porter have, in the circumstances I have outlined, to believe that no such contract was in force? Really there is none, and [Counsel for the Bureau] is driven back strictly to the argument that those words do not mean what they say. They either mean ‘having no reason to believe that such a contract was in force’, or alternatively they mean ‘not having a reasonable belief that such a contract was in force’. I reject both those arguments. It seems to me that the words must be construed exactly as they lie. In this case in the circumstances I have outlined, Mrs Porter having made clear to Mr Addo that the car was not insured, that she required an insured driver, and he in those circumstances having volunteered to drive, she was perfectly entitled to rely on the assumption that he was an insured driver. That is going much further than she needs to, because I cannot see anywhere here anything which should have caused Mrs Porter to have reason to believe that no such contract was in force. And, of course, some such reason there would have to be in order to defeat her claim on the Agreement against the Motor Insurers’ Bureau.
Cooper v Motor Insurers’ Bureau
[1983] 1 All ER 353
CHEDLOW QC
The relevant insurance obligations under the Road Traffic Act 1972 are contained in ss 143 and 145 of that Act. The relevant part of s 143 is sub-s (1) which says:
‘Subject to the provision of this Part of this Act, it shall not be lawful for a person to use, or to cause or to permit any other person to use, a motor vehicle on a road unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, such policy of insurance or such a security in respect of third-party risks as complies, with the requirements of this Part of this Act . ‘
Section 145 (3), as amended, reads:
‘Subject to subsection (4) below, the policy-(a) must insure such person, persons or classes of persons 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 the vehicle on a road in Great Britain …’
Because of the hardship to persons injured by motor vehicles which should have been insured as required by the Road Traffic Act 1972 but were not, the Motor Insurers’ Bureau agreed with the Minister to satisfy judgments obtained by such injured persons if they fell within the category which should have been insured, subject to the Motor Insurers’ Bureau being given notice.
The text of the agreement (the Motor Insurers’ Bureau
(Compensation of Victims of Uninsured Drivers) Agreement) dated 22 November 1972 between the Secretary of State for the Environment and the Motor Insurers’ Bureau contains the two following material clauses for the purposes of this judgment. The first is headed ‘Satisfaction of Claims by Motor Insurers’ Bureau’ and reads as follows:
‘If judgment in respect of any relevant liability is obtained against any person or persons in any Court in Great Britain whether or not such a person or persons be, in fact, covered by a contract of insurance, and any such judgment is not satisfied in full within seven days from the date upon which the person or persons in whose favour the judgment was given became entitled to enforce it, then MIB will, subject to the provisions of Clauses 4, 5 and 6 hereof, pay, or satisfy, or cause to be paid or satisfied to or to the satisfaction of the person or persons in whose favour the judgment was given, any sum payable or remaining payable thereunder in respect of the relevant liability, including any sum awarded by the Court in respect of interest on that sum and any taxed costs …’
I am unable to accept the construction of the statute which renders this a liability which falls to be covered under the Road Traffic Act 1972 and for which the Motor Insurers’ Bureau are liable. Section 143 speaks, first, of the user and, second, of one who causes or permits user. These two situations must be covered against third party risks. I do not consider thats 143 is intended to insure against personal injury to the person actually using the vehicle. Whens 145 (3) (a) speaks of ‘any person’ it does so, in my view, in the limited context of the word ‘use’ in s 143 and is not enlarging the scope of the cover needed which is, in my judgment, that both the user or person permitted to use the vehicle should be covered against claims by persons injured by the use of the vehicle on the highway. I notice in passing that when Lord Porter, in the passage to which I referred in Digby v General Accident, Fire and Life Assurance Corpn Ltd5 was discussing third party liability he said:
‘In my view, in a policy such as this, indemnity against third-party liability is used in contradistinction to indemnity against “loss or damage” to the car and means only that the insurer will indemnify the insured against any proper claim made upon him by a person who is injured by the negligent driving of the car.’
It seems to me thats 143 of the 1972 Act requires, on the facts of this case, that the plaintiffs user of the motor cycle should be covered against third party risks; the three parties here involved, in my view, are the insurers, the insured or his invitee, who is temporarily to be considered the insured, and third parties other than these two. It is the use, whether by the insured himself or his invitee, which has to be covered but the cover given to the invitee cannot give to the latter any greater right than the insured himself has and the insured has no such right himself. I consider that the only liability which falls to be covered under ss 143(1) and 145(3)(a) is the plaintiffs liability to others. Mr Killacky’s liability to the plaintiff is not a liability which falls to be covered by the statute. If one supposes that the plaintiff had a policy covering him whilst riding Mr Killacky’s motor cycle but Mr KiJlacky had none, if the plaintiffs arguments are correct, an offence would have been committed because Mr Killacky would have had no policy complying withs 143(1) to cover his liability to the plaintiff.
In these circumstances, I hold that the Motor Insurers’ Bureau are under no obligation to satisfy this judgment since it did not arise out of a liability which fell to be covered under the Road Traffic Act 1972.