Non party costs Orders and credit hire companies

One of the other areas of work that keeps me busy, is costs litigation. The gift that never stops giving, as I have been arguing costs points both for and against insurance companies for 20 years. I have another webpage I devote to all matters to do with costs litigation here: http://www.costsbarrister.co.uk.

An interesting point that is arising with increasing frequency are applications against credit hire companies for non party costs Orders, under parts 44 and 46 CPR and section 51 of the Senior Courts Act 1981.

At the moment the tide is flowing strongly against the insurance industry: perhaps the leading case is the decision of Mr Justice Turner in Select Car Rentals v Esure [2017] EWHC 1434 (QB). I am grateful to counsel in the case Mr Matthew Stockwell for forwarding to me a copy of the judgment and also confirming that the case is not going further to the Court of Appeal.

The significance of the case, is that it confirms that despite an unfortunately worded Practice Direction, the scope of the court’s discretion to make a non party costs order, is no wider than it would be in any other type of case, where a non party costs application might be considered. The judgment also considered the earlier case I argued before District Judge Avent last year, a copy of which can be found here: Nathanmana v UK Insurance Judgment.

Mr Justice Turner within his judgment, also cites Cook on Costs with approval, a further example of that text’s revived authority with the higher judiciary, under the careful stewardship of its current authors.

In May I argued one of these applications whilst acting for a credit hire company, before District Judge Burn in the County Court at Lambeth, with judgment being reserved and handed down last month. A copy of that decision with her reasons for refusing to make a non party costs Order can be found here: Hussain v Bradford and Euronex Lambeth County Court 2nd August 2017 District Judge Burn.

Of course these applications can properly be made against credit hire companies and can succeed: last year, at the door of the court, when acting for an insurance company, I settled a case for a sum exceeding £30,000, the credit hire company accepting that it had to pay costs. But the insurers have to pick their fights carefully.

And so another branch of satellite litigation continues to flourish.

Keep it simple

Section 151 of the Road Traffic Act 1988, whilst a very useful provision for claimants is by no means a panacea and it can be important to understand its limitations. In certain circumstances an insurance company can avoid having to satisfy a judgment by reason of the existence of a black letter insurance law defence. In particular what might seem an open and shut case, may not be, dependent on the interplay of article 75 and section 151.

I start with consideration of section 151 itself.

151.— Duty of insurers or persons giving security to satisfy judgment against persons insured or secured against third-party risks.

(1) This section applies where, after [a policy or security is issued or given for the purposes of this Part of this Act,] 1 a judgment to which this subsection applies is obtained.

(2) Subsection (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required 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 or security […] 2 , and the judgment is obtained against any person who is insured by the policy or whose liability is covered by the security, as the case may be, or

(b) it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and the judgment is obtained against any person other than one who is insured by the policy or, as the case may be, whose liability is covered by the security.

(3) In deciding for the purposes of subsection (2) above whether a liability is or would be covered by the terms of a policy or security, so much of the policy or security as purports to restrict, as the case may be, the insurance of the persons insured by the policy or the operation of the security by reference to the holding by the driver of the vehicle of a licence authorising him to drive it shall be treated as of no effect.

(4) In subsection (2)(b) above “excluded liability” means a liability in respect of the death of, or bodily injury to, or damage to the property of any person who, at the time of the use which gave rise to the liability, was allowing himself to be carried in or upon the vehicle and knew or had reason to believe that the vehicle had been stolen or unlawfully taken, not being a person who—

(a) did not know and had no reason to believe that the vehicle had been stolen or unlawfully taken until after the commencement of his journey, and

(b) could not reasonably have been expected to have alighted from the vehicle.

In this subsection the reference to a person being carried in or upon a vehicle includes a reference to a person entering or getting on to, or alighting from, the vehicle.

(5) Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment—

(a) as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum,

(b) as regards liability in respect of damage to property, any sum required to be paid under subsection (6) below, and

(c) any amount payable in respect of costs.

The learned author of Macgillivaray on Insurance Law has noted this about the construction afforded to section 151 and I have highlighted the particular sentence that requires emphasis:

31-025 For s.151 to operate, it appears that there must be an apparently valid policy which in terms covered the use to which the insured vehicle was being put at the time, but assuming, for the purposes of the section, that the policy covers driving by any person regardless of whether or not that person holds a valid driving licence.162 On the other hand, the insurers are not disentitled from reliance on a nondisclosure or misrepresentation or breach of warranty which would entitle them to avoid or cancel the policy as against their insured, subject to their due compliance with the procedure laid down by s.152.163 The third party is further assisted by s.148(1) and (2) which avoid certain terms of policies otherwise providing a defence to insurers against claims made on the policy.

The case of Bristol Alliance Partnership v Williamson [2013] QB 806 is recent and binding. It explains how section 151 is to be construed, and in particular the effect that limitations on use may have: if a car is involved in an accident when it is being used for a purpose not covered by the terms of the insurance policy, it is clear that no claim can succeed under section 151. Instead, the insurer is going to be involved under the MIB agreement as article 75 insurer.

Paragraph 12 of the judgment notes:

Article 75 of the MIB’s memorandum and articles of association provides that the article 75 insurer , namely the member who at the time of the accident which gave rise to the liability was providing any insurance in respect of the vehicle, even if use of the vehicle is other than that permitted under the policy, must pay the original judgment creditor such sum as is due and outstanding under the Road Traffic Act judgment.

The detailed analysis of section 151 is contained in the judgment of Ward LJ who began as follows with a detailed, exhaustive (and exhausting) analysis of the general scheme under the Act:

34 It is common ground that there are four preconditions for the third party victim to satisfy: (1) that “a certificate of insurance has been delivered under section 147 ” ( section 151 ); (2) that “a judgment to which this subsection applies is obtained” ( section 151(1) ); (3) that the judgment relates “to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 ” ( section 151(2) ); and (4) that the liability is “covered by the terms of the policy … to which the certificate relates”: section 151(2)(a) .

35 It is also common ground that conditions (1) to (3) are satisfied. The dispute centres on condition (4). In a nutshell the vital contentions are these. The second defendant contends that because the policy excludes liability for deliberate acts, the liability is not “covered by the terms of the policy” and so this essential precondition for imposing liability on the insurer pursuant to section 151(2)(a) is not satisfied. The claimant denigrates this argument. The purpose of Part VI of the Act is entirely concerned with protecting victims from the financial consequences of an injury caused by a driver that is not the victim’s fault. Thus, submits the claimant, if the second defendant is correct, then it is open to an insurer to sell policies to drivers on the basis *827 that they comply with the requirements of the Act and to issue a certificate of insurance to confirm that fact, but then to insert terms in the policy that undercut the minimum terms which ought to ensure the victim’s protection and so to refuse to compensate on that basis. It is a good jury point. The legal foundation upon which it has to rest is that the error in the second defendant’s argument is to fail to give proper meaning to the words which followed “covered by the terms of the policy”, namely, “to which the certificate relates”. The certificate relates to a policy that is certified as satisfying the requirements of the relevant law applicable in Great Britain and therefore must include a liability to compensate third parties for damage caused by the assured even when engaged in a criminal or deliberate act.

36 Since section 151 must be construed in the context of Part VI as a whole, it is necessary to see how this statutory scheme for compulsory motor insurance is designed to operate. Part VI , the forerunner of which goes back to Part II of the Road Traffic Act 1930 , is there to provide protection for those who sustain injury or damage caused by the use of a motor vehicle on a road or in a public place and it does so by providing for compulsory insurance in respect of third party risks. Section 143 is the starting point of the legislative scheme. Section 143 prohibits the use of a motor vehicle on a road or in a public place without there being in force “such a policy of insurance … as complies with the requirements of this Part of this Act”. To use the vehicle without such insurance is a criminal offence. It is clear that it is the duty of the user to ensure that “there is in force in relation to the use of the vehicle by that person such a policy of insurance … as complies with the requirements of this Part of this Act”. The important words in section 143 are “in relation to the use of the vehicle”. In other words the user’s duty (and no one else’s) is to ensure that insurance cover is in place whenever and however he uses the vehicle. If the use is not covered then he is not insured and criminal sanctions will follow that illegal use.

37 The next question which has to be answered is this: when will the policy of insurance comply with the requirements of Part VI of the Act? The answer is given in section 145 . Note how section 145(1) introduces the answer: “In order to comply with the requirements of this Part of this Act, a policy of insurance must satisfy the following conditions.” The claimant is correct in submitting this is a neutral provision: it does not stipulate that the user must take out a policy of insurance complying with the Act nor does it say that the “authorised insurer” has to issue a policy which complies with the Act. (An “authorised insurer” is defined in section 95 of the Act to mean an insurer who is a member of the Motor Insurers’ Bureau.) The purpose of section 145 is to specify what the “requirements in respect of policies of insurance” are. Subject to the exclusions provided by subsection (4) , the policy must pursuant to subsection (3) “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 or damage to property caused by or arising out of the use of the vehicle on a road or other public place.” The claimant properly emphasises the word “ any ”. “ Any  ” damage would include deliberate damage. If there could be doubt about it, Hardy v Motor Insurers’ Bureau [1964] 2 QB 745 and Gardner v Moore [1984] AC 548 *828 dispel those doubts. Thus a requirement of Part VI of the act is that deliberate damage to property must be covered by the policy of insurance.

38 Reading sections 143 and 145 together, the scheme of the Act seems perfectly plain.  “Do not use a motor car on the road unless you have insurance covering any liability (including liability for your deliberate acts) which you may incur in respect of damage to property which arises out of your use of the vehicle.”

In other words it is the duty of the user to make sure that his use is covered by insurance. That is the effect of the established authority. See Lord Denning MR in Hardy v Motor Insurers’ Bureau [1964] 2 QB 745 , 760: “the policy of insurance which a motorist is required by statute to take out must cover any liability which may be incurred by him.” So too Kennedy LJ, at para 9 of Charlton v Fisher [2002] QB 578 : “it remained the obligation of the … user of the vehicle to restrict the user so as to keep it within the terms of the cover.” Then there is para 63 of the judgment of Rix LJ in Charlton v Fisher : “the statutory duty to comply with the requirements in respect of compulsory insurance is upon the driver, not the insurer.” I agree.

39 Under the statute not all damage to property has to be covered. Subsection (4) states that the policy shall not be required to provide for, among other things, insurance of more than £1m in respect of damage to property arising out of any one accident: section 145(4)(b) . Nor shall the policy cover liability in respect of damage to goods carried for hire or reward in the vehicle: section 145(4)(d) . The question is whether this is an exclusive list and whether other forms of liability may be excluded by agreement between insurer and assured. If the list was intended to be all-embracing the statute would surely have said so.

40 Section 147 introduces the certificate of insurance into the scheme. That the certificate has an important part to play is demonstrated by the fact that the policy of insurance shall be of no effect for the purposes of Part VI unless and until the certificate is delivered by the insurer to the person by whom the policy is effected. The claimant relies upon the fact that the certificate must be in the prescribed form and must contain such particulars of any conditions subject to which the policy is issued and of any other matters as may be prescribed. As set out at para 10 above, the 1972 Regulations require the certificate to be in Form A and thus to give information as to any limitations as to use. It has, however, never been doubted, so far as I know, from the earliest days of compulsory motor insurance that the certificate of insurance does not trump the terms of the policy. Branson J was dismissive of the contention to the contrary, saying in Gray v Blackmore [1934] 1 KB 95 , 103:

“the defendant issued a certificate of insurance under the Road Traffic Act 1930 and that certificate is in the prescribed form, and that certificate contains upon the face of it, under the heading ‘Limitations as to use’, this other provision that the policy does not cover the use of the car for any purpose in connection with the motor trade. In view of that express statement upon the face of the certificate of insurance, I cannot think there can be anything in the next point taken upon this policy, to wit, a point that some estoppel arises to prevent the defendant from relying *829 upon that limitation against the assured. The suggestion is that, because at the foot of the certificate of insurance there is a certificate that the policy is issued in accordance with the provisions of the Road Traffic Act 1930 , and because it is contended that the policy is not in accordance with the provisions of the Road Traffic Act if it contains any limitations as to the use of the car at all, therefore the defendant is estopped from saying that that the limitation has an operation against the plaintiff. I cannot see how any estoppel can begin to arise in the matter, and I say no more about that point.”

I agree with that and that is probably enough to sink the claimant but in deference to the sustained arguments advance to us on both sides, I carry on.

Importantly he then considered limitations on use and whether a limitation on use was material to the operation of section 151:

 45 We are about to get to section 151 . The scheme of the Act is by now established. There is no exhaustive list of matters which cannot be excluded from the cover of the policy. Other exclusions are effective. Thus the validity of such time-honoured limitations on use, for example, for social, domestic or pleasure purposes have never been doubted. If there is a social domestic or pleasure limitation, then to use the vehicle, insured in that way, for hire or for business would be to use the vehicle illegally because use for hire or for business would not be covered by the policy and the use for that purpose would be uninsured. As I have already said, it is the responsibility of the user to ensure that the use to which he put the vehicle is covered by the *831 terms of the policy taken out in respect of the vehicle he is using. If the policy limits the cover, then it is obvious that the premium would be lower than it would be if each and every use, without exception, had to be covered. The motorist has the freedom to select a policy to match his need and to pay the price accordingly. That has to be good for us all.

This is most significant. Because what can be a defence to a claim under section 151 against an insurer, can be a plea that the vehicle driven by the tortfeasor was being used contrary to the permitted uses.

Ward LJ then moved onto address section 151 directly:

46 That is the context in which section 151 takes its place in the scheme. Section 151 is at the heart of the scheme because it is section 151(5) which “subject to the provisions of this section” imposes on the insurer the liability to pay the innocent third party victim any damages payable under a judgment he has obtained in respect of that damage, in this case, to property. The liability of the second defendant therefore depends upon the four preconditions set out in section 151(1)(2) being satisfied. As set out at para 29 above, this depends on whether the defendant’s liability “is a liability covered by the terms of the policy … to which this certificate relates” as required by section 151(2)(a) .

47 Mr Palmer for the second defendant has a short and simple answer to this appeal. Liability for this damage is not covered by the terms of the policy because the terms of this policy expressly exclude any damage caused by the deliberate act of the driver. It is as short and as simple and as attractive as that. One has to acknowledge the seductive attraction of the KISS argument (“Keep it short and simple”) but hard-hearted judges have to steel themselves against its beguiling allure. Before falling for Mr Palmer’s charm, and saying, “Sounds perfectly sensible to me, Mr Palmer”, I have to acknowledge that Mr Ross has a worthy point when he submits that the words “to which the certificate relates” have to be given some meaning: they cannot simply be dismissed as otiose.

48 These words did not appear when first the legislature gave the injured third party the statutory remedy against the insurer. The original enunciation of the rule was contained in section 10 of the 1934 Act, which was in these terms:

“(1) If, after a certificate of insurance has been delivered under subsection (5) of section 36 of the principal Act to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of subsection (1) of section 36 of the principal Act (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability …”

The meaning is clear enough: the insurer’s liability must not only be of the kind which the Act requires must be covered but it must also actually be covered by the policy. These are two separate preconditions.

49 Section 207 of the Road Traffic Act 1960 is the first to introduce the words upon which Mr Ross relies and that is repeated in section 149 of the Road Traffic Act 1972 . The words in parenthesis are enlarged, with my emphasis added, so as to read “(being a liability covered by the terms of the policy or security to which the certificate relates  ) …”

 50 The outcome of the appeal depends upon whether these additional words have made any difference. In my judgment they have not. In the first *832 place, as Lord Hailsham LC said in Gardner v Moore [1984] AC 548 and as I have already pointed out, the history does not affect the construction. Secondly, and in answer to the point made by Mr Ross, these additional words do serve a purpose, namely to link the first requirement (delivery of a certificate of insurance) to the very policy which covers the liability. This is more obvious when, for the first time, the 1988 Act divides section 151 into constituent parts. Let us look at section 151 again. Pursuant to section 151(1) this section applies where, after a certificate of insurance has been delivered to the person by whom a  policy has been effected, judgment is obtained. Note the use of the indefinite article. At this stage we do not know exactly what policy that is. The judgment is defined in section 151(2) being a judgment relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by  a  policy of insurance under section 145 . Once again the indefinite article is used and so we are still not yet sure at precisely which policy the section is being aimed. Clarification is given by section 151(2)(a) . The liability must be “covered by the terms of  the  policy to which the certificate relates”. Now we know what we are looking for. We are looking for the policy to which the certificate of insurance relates. A certificate of insurance relating to that policy has to be delivered. Liability has to be covered by the terms of that policy. Thus the necessary identification of the policy and the link to the delivery of the certificate of insurance is provided by the very words Mr Ross wrongly submits are otiose. Section 151(1)(2) now has coherence. It leaves Mr Ross with no answer to Mr Palmer’s short and simple point.

51 One should not, however, leave section 151 without considering subsection (3) . So much of the policy as purports to restrict the insurance to the driver holding a licence authorising him to drive the vehicle shall be of no effect. Just as was the case under section 148 , some limitations on liability are void. Turning the tables on Mr Ross, Mr Palmer submits that this would be quite otiose if, as Mr Ross contends, all exclusions of liability are prohibited. On the claimant’s case, the terms of the policy may dictate the position as between the assured and the insurer so as to deny the assured his right of indemnity from the insurer for any damage the assured may suffer but, says the claimant, as between the third party and the insurer, the minimum requirements prescribed by section 145 cannot be undermined. The purpose of section 151 is to secure the third party’s right to recovery whatever the terms of the policy may dictate as between policy holder and insurer. That simply cannot be correct. Mr Palmer must be right in asserting that there would be no need for section 151(3) nor for section 148(4) if the only requirement of section 151 is that the liability is of the kind which ought to have been covered by a policy complying with section 145 even if the actual policy does not cover that particular liability.

52 The final stake driven into the heart of the claimant’s argument is that it is common ground that section 151 lays down two preconditions for the insurer’s liability, the first being that liability is required to be covered by a policy of insurance which satisfies section 145 and the second that the liability is actually covered by the terms of the policy to which the certificate relates. If, as the claimant contends, section 145 was to impact on the actual policy issued so as to require every liability which has to be covered pursuant to section 145 to be treated as if it were covered by a policy, then there would be no need for this second precondition. All that would be needed to make *833 the insurer liable is that the insurer has issued a policy of motor insurance and the policy holder or an authorised driver has caused the third party to suffer some loss through his use of the vehicle on the road.

The final paragraph that I need to cite, is absolutely plain:

53 Mr Ross had to accept under gentle prompting from me at the start of the second day of this hearing that if the insurance cover was limited to social domestic or pleasure use, then that limitation would be, or should be, noted on the certificate of insurance. If so and the vehicle was used for a business purpose or for hire, then any liability arising from such impermissible use would not be covered by the terms of the policy. He had to accept that in those circumstances the third party would have no claim under section 151 and would be driven to seek his remedy under the MIB Agreement . In other words Mr Ross has to accept that some limitations on use are permissible. He has to say that those limitations are confined to the conventional limitations. He cannot satisfactorily explain to me why a limitation which excludes liability for road rage or deliberate acts is not a limitation to which effect has to be given.

It follows that when considering an action under section 151 to enforce a judgment (often obtained by default) against an insurance company, care must be given to consideration as to whether in fact, they might have a defence grounded in insurance law after all.

The dust behind the door

Fraud and credit hire sometimes seem to go hand in hand, and the reason is not hard to discern, it is the corrupting influence of money: whether that be grasping claimants lying about whiplash symptoms, organised criminal conspiracies of fraud rings seeking to commit insurance fraud, or professional witnesses instructed on behalf of insurance companies forging evidence and lying in court, whilst pocketing their fees.

In recent weeks the Auto Focus litigation seems largely to have concluded with the principal protagonists receiving substantial jail terms per the press and TV reports:

https://www.theguardian.com/uk-news/2017/jun/16/expert-witnesses-jailed-perjury-cost-replacement-cars-insurance

The judgment leading up to this point can be found here: Accident Exchange v Nathan Broom and others [2017] EWHC 1096 (Admin) and over some 79 pages Mr Justice Supperstone sets out the long and sorry story of Auto Focus and Accident Exchange.

In brief the case concerned applications by Accident Exchange to commit a number of professional witnesses formerly employed by Auto Focus to prison. As the judge noted in his judgment:

AE was part of Accident Exchange Group plc. It was a specialist car hire and claims management company whose main business was the hire of cars to victims of road traffic accidents. It operated a fleet of mainstream, specialist and prestige hire vehicles, and provided replacement cars on credit hire terms.

The Defendants, and each of them, were employed as rates surveyors by a company known as Autofocus Limited “(AF)”. The First and Seventh Defendants were both rates surveyors and team leaders. The Second Defendant was a Director of AF.

AF provided forensic services principally to motor insurers when an issue arose in litigation in the County Court as to what daily rate of hire could be recovered by a car hire company through a claimant whose car had been damaged and who had hired a replacement car on credit hire terms (even though the claimant could have afforded to hire one on non-credit hire terms). Insurers, who in the ordinary way bore the proper cost of the hire, very often challenged the charge that was made.

The thrust of the evidence on behalf of Accident Exchange was summarised in this way:

In his first witness statement dated 6 January 2016 Mr Evans describes how in 2008, but more throughout the course of 2009, it became increasingly evident to AE that there was reason to doubt the accuracy of the rates evidence that was being produced by AF. The disparity between the sums the courts were awarding claimants based on AF’s evidence and the hire charges incurred was becoming cumulatively extremely significant. In the latter half of 2009 evidence began to come to light that AF’s reports were not only inaccurate, but contained information which inquiries suggested was simply made up. Mr Evans says, by way of example, car hire companies included in the surveys produced by AF were being quoted as having (1) given a rate that did not exist at the location referred to, (2) denied ever having employed an individual at the branch alleged to have given the quotation, (3) denied having had the  make and model of car for which they had allegedly quoted, and (4) denied the terms as to excess levels as stated in the reports produced by AF. This led Mr Evans to commence an investigation into a number of cases in which AF had produced reports and given evidence. As a result of those investigations AE identified 26 cases in which evidence had been obtained which suggested the evidence of AF was false, a further 20 cases in respect of which it wished to undertake further investigation as to the validity of the evidence, and an additional 20 cases where the award for hire charges had been reduced on the basis of AF’s evidence and which were open to potential appeal.

Over a trial lasting a number of weeks, the court considered the evidence of what had been referred to in earlier judgments of “industrial scale perjury”: although a significant number of the Defendants did not contest the allegations made against them.

The judge concluded at paragraph 322 of his judgment:

The evidence that AF was involved in the systematic, endemic fabrication evidence in which the Defendants and each of them knowingly and actively participated throughout the material time is overwhelming.

In addition to going to prison, the defendants will have to bear the costs of the trial and these are likely to significantly exceed £1 million.

So what lessons does this case carry for the future? Apart from the obvious “tell the truth” when giving evidence in court?

It shines a spotlight on some murky practices that have applied in the past, and points to the need for BHR evidence provided in current cases to be rigorously evaluated, not only by claimants seeking to recover damages for credit hire but by the insurance companies and solicitors who commission such evidence.

In particular if telephone calls have been made, are there recordings which should be disclosed? If evidence is obtained from proprietorial databases, how should the accuracy of such data be verified?

When a BHR report is received, should a claimant’s solicitor carry out their own checks, ringing the companies which purportedly had vehicles available?

And what material should be exhibited to a BHR report to demonstrate that the figures contained within it are not only genuine but not misleading, through eg, the absence of terms and conditions.

The Autofocus debacle demonstrates the danger of accepting apparently compelling evidence at face value and although this damaged the financial interests of Accident Exchange, it has also illustrated the need for due diligence by insurance companies and solicitors who act for them.

Sound and fury

An interesting case from a few months ago is the decision in the Court of Appeal in the case of Hamid v Khalid and Co-operative Insurance [2017] EWCA Civ 201. The case can be regarded on one level as a lineal descendant of Armstrong v First York Limited [2005] EWAC Civ 277 where Judge Stewart QC (as he then was) memorably preferred the lay witness evidence of the claimant to unimpeached expert evidence to hold that a genuine claim was made out.

In the case of Hamid is interesting for the fact that the appeal failed despite a valiant attempt by defence counsel to persuade the court that the Recorder who tried the case at first instance was wrong in her evaluation of the evidence by citing an alleged 30 instances of major points of significance in the evidence which it was contended the judge had either failed to deal with or where her conclusions were against the weight of the evidence.

The appeal failed against a backdrop of the Court of Appeal reminding itself of the very limited scope that an appellate court has to interfere with findings of fact: the judgment of Henderson LJ is a useful aide memoire of the surfeit of relatively recent appellate statements emphasising what a broad brush a first instance judge has, when it comes to painting findings from the evidential palette.

The Court of Appeal noted:

26. The principles which govern the review of findings of fact by an appellate court were authoritatively re-stated by the Supreme Court in McGraddie v McGraddie [2013] UKSC 58, [2013] 1 WLR 2477, at [1] to [6], in the judgment of Lord Reed with which the other members of the court agreed. These principles were then endorsed, and further developed, by the Supreme Court in Henderson v Foxworth Investments Ltd [2014] UKSC 41, [2014] 1 WLR 2600, at [58] to [68], where the only reasoned judgment was again given by Lord Reed. The point which emerges with particular clarity from these passages is that an appellate court should not interfere with the trial judge’s conclusions on primary facts unless it is satisfied that the trial judge was “plainly wrong”. The meaning of that phrase was elucidated in Henderson at [62], where Lord Reed said:

“There is a risk that it may be misunderstood. The adverb “plainly” does not refer to the degree of confidence felt by the appellate court that it would not have reached the same conclusion as the trial judge. It does not matter, with whatever degree of certainty, that the appellate court considers that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge could have reached.”

27. Because Mr McGrath relies on it, I also draw attention to what Lord Reed said in Henderson at [67]:

“It follows that, in the absence of some other identifiable error, such as (without attempting an exhaustive account) a material error of law, or the making of a critical finding of fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified.”

28. It is also pertinent to note the guidance given by this court in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 at [114] to [115] (per Lewison LJ), and (very recently) in Grizzly Business Ltd v Stena Drilling Ltd and Another [2017] EWCA Civ 94 at [39] to [40]. This guidance emphasises that appellate courts should not interfere with findings of fact by trial judges unless compelled to do so. The reasons for this approach include the following, which Lewison LJ identified in the Fage case at [114]:

“(i) The expertise of a trial judge is in determining what facts are relevant to the legal issues to be decided, and what those facts are if they are disputed.

(ii) The trial is not a dress rehearsal. It is the first and last night of the show.

(iii) Duplication of the trial judge’s role on appeal is a disproportionate use of the limited resources of an appellate court, and will seldom lead to a different outcome in an individual case.

(iv) In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping.

(v) The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence).

(vi) Thus even it were possible to duplicate the role of the trial judge, it cannot in practice be done.”

I respectfully agree with all of those observations.

The Court also emphasised how exceptional it would be, for a party, having been acquitted of allegations of fraud at trial, to be found to be fraudster on appeal:

29. Authority for this proposition may be found in Akerhielm v De Mare [1959] AC 789 (PC), where Lord Jenkins, delivering the judgment of the Privy Council, said at 806:

“Suffice it to say that their Lordships are satisfied that this is not one of those exceptional cases in which an appellate court is justified in reversing the decision of a judge at first instance when the decision under review is founded upon the judge’s opinion of the credibility of a witness formed after seeing and hearing him give his evidence … Their Lordships can hardly imagine a case in which the credibility of a witness could be more vital than a case like the present where the claim is based on deceit, and the witness in question is one of the defendants charged with deceit. Their Lordships would add that they accept, and would apply in the present case, the principle that where a defendant has been acquitted of fraud in a court of first instance the decision in his favour should not be displaced on appeal except on the clearest grounds (see Glasier v Rolls (1889) 42 Ch D 436, 457).”

The judgment will be useful when considering the test on appeals from all levels, particularly now that even appeals on Multi-track cases in the County Court, will fall to be dealt with by a High Court judge.

The Blue Book

Long ago, in the mid 1990s the Nottingham County Court had a local practice direction, agreed by the District Judges, which amongst other things provided that witness statements should be exchanged in small claims cases and an for an infant approval hearing, an affidavit from the child’s solicitor setting out certain particulars was required.

The practice direction had a blue cover and was available for the princely sum of £2 from the court office, in those halcyon days, when courts had offices that were open to the public.

As this was long before the internet, solicitors from out of town, routinely breached the provisions of the practice direction, not being aware of it, and found out about their ignorance when a “show cause” wasted costs Order arrived in the post. Happy days.

One of the Woolf Reforms was to abolish local practice directions.

It scarcely seems credible now, but what was contemplated was a slimmed down set of civil procedure rules, which avoided the complexities and arcane practices of the Rules of the Supreme Court and the County Court Rules.

But in the last 20 years, local practice directions have crept back, though often not described as such. Instead, judges create their own termplate orders and preferred ways of doing things. The legality of these “directions” I have long thought dubious.

The leading case of  Bovale Limited v Secretary of State for Communities and Local Government [2009] EWCA Civ 171 is a clear authority for how Practice Directions or even “practice directions” must be made according to the procedure prescribed by sections 5 and 9 of the Civil Procedure Act 1997, with the consent of the Lord Chief Justice. It is not open to a group of county court judges to simply decide what the procedure will be in their court any more.

Thus in credit hire claims many judges routinely make orders for specific disclosure of certain classes of document such as bank statements, wage details, and other forms of financial documentation before an order for standard disclosure has been complied with. They also attach sanctions in the form of peremptory orders for breach, before any default has taken place.

It has to be said, that the reason why they do it, is because of the degree of non-compliance with court Orders, that has been demonstrated in the past by some solicitors who run credit hire claims. The district judges are keen not to waste time in their busy lists, dealing with applications concerning non-compliance.

Equally, some solicitors acting for insurance companies, will, with a straight face, seek to include within the directions Order, provision for specific disclosure of V5 certificates, or insurance certificates or MOT certificates, when they know full well who is the registered keeper of a car, who insures it, and whether or not it has an MOT from other sources. But it’s good to keep one’s opponent’s on their toes and to help them avoid complacency setting in.

So it is of considerable interest that the Civil Procedure Rules Committee is promulgating a draft Order, to be of general application in credit hire claims. The consultation paper can be found here: Model Order Directions to be Used in all Credit Hire Cases.

Shrewd observers will note that it mirrors what is actually happening in practice at the moment.

What it could have required and what would actually be more useful, would be for a claimant to file something akin to “an affidavit of means”, explaining why he says he is impecunious, what his disposable income is, and what he spends his money on.

This might have gone some way to resolving the “push me, pull you” argument on impecuniosity at trial, or at least shortened what is always the most turgid part of cross examination.

 

Order Selacchi

One of the more enduring problems created by credit hire claims arises from the sheer number of parties who can take an interest in the financial aftermath of a road traffic accident.

Both motorists are likely to have road traffic liability insurers, the insurers may have claims handlers or verification agents, both insurers may instruct firms of solicitors to pursue a claim for their subrogated losses or defend a claim, both motorists may also instruct a claims management company, or claims handling organisation and then in turn may instruct solicitors to pursue their claims for uninsured losses.

The perennial problem that usually arises  from parallel negotiations conducted by these actors, is is whether a settlement of insured  losses between two of these organisations acts as a once and for all settlement which has the effect, deliberately or inadvertently of barring any subsequent claim for the remaining uninsured losses or any claim by the side who made the settlement, for their own motorist’s losses.

Often the first settlement will be made in total ignorance of the parallel chain of negotiations and may only come to light when proceedings are issued and a Defence raising the issue is lodged. The point may arise when there has been a contractual settlement or when there has been a prior set of proceedings: in which case an issue of res judicata may also fall to be considered.

This point has arisen in the law reports before. The essential point is whether any contract of compromise concluded, properly construed included the  uninsured losses, or only the insured losses.  See the summary in Foskett on Compromise (8th edition) in chapter 22 for a general survey of compromise of uninsured/insured losses.

Assuming that there has been a contractual settlement and then a set of proceedings is issued, a number of points will fall to be considered.

Many statements of case (pleadings) these days are not worthy of dignifying with the name, being produced by machines by rote in standard form, and unsullied by the hand of a lawyer. It follows that if this point surfaces it must be considered as to whether the point has been properly raised and advanced in the pleading, with the particulars of a contract fully pleaded. If no particulars are given of any settlement or no date of settlement is alleged and no material facts advanced to support it, then it may be arguable whether the point is properly before the court.

Sometimes the point of a prior settlement is raised, and advanced as an abuse of process, but no application is made to strike out the claim and instead the Defendant may fully engage with the court process, providing disclosure and witness statements. In such circumstances, they may find that they have inadvertently thrown away the point

Per the case of Johnson v Gore Wood [2002] 2 AC 1 and the later case of Cocoa Cola Company and another v Ketteridge [2003] EWHC 2488 (Ch) as a point of law, a failure to raise and deal with an allegation that an abuse of process was being committed at an earlier stage, precluded the Defendant from raising the point at trial.

In Johnson Lord Millett observed as follows:

This makes it unnecessary to deal with Mr Johnson’s submission that it is too late for the firm to raise the issue. If necessary, however, I should have regarded the delay as fatal. Indeed, I should have regarded it as more than delay; I think it amounted to acquiescence. There is no proper analogy with the case which discloses no cause of action. Although it is obviously desirable to apply to strike out a claim which is doomed to fail at the earliest opportunity, there is no point in proceeding with a trial which serves no useful purpose. Even if the point is taken at the trial itself, it is a matter for the trial judge to decide whether to hear the evidence and adjudicate on the facts before deciding whether they give rise to liability, or to assume that the plaintiff will establish his allegations and decide whether, as a matter of law, they give rise to liability.

But the premise in the present case is that Mr Johnson has a good cause of action which he should have brought earlier if at all. I do not consider that a defendant should be permitted to raise such an objection as late as this. A defendant ought to know whether the proceedings against him are oppressive. It is not a question which calls for nice judgment. If he defends on the merits, this should be taken as acquiescence. It might well be otherwise if the ground on which the proceedings are alleged to be an abuse of process were different. But in a case of the present kind the court is not so much protecting its own process as the interests of the defendant

In the Cocoa Cola case Rimer J held at paragraph 79:

In any event, I regard it as too late for Ray Junior to take the point that the action against him is an abuse. If it is or was ever an abuse, it must have been an abuse from the moment the claim form was issued, and that was the time when, if it was open to him to do so, Ray Junior could and should have sought to strike the action out. Instead, he put in a defence on October 1, 2002 and has defended the claim on its merits. His defence raised no allegation that the action was an abuse, and it is now too late to raise the point. As Lord Millett said in Johnson, at 61F, “A defendant ought to know whether the proceedings against him are oppressive. It is not a question which calls for nice judgment. If he defends on the merits, this should be taken as acquiescence.” In my view, Ray Junior has acquiesced in the bringing against him of this action. That does not preclude him from defending it on the merits. It does preclude him from saying at the trial that the action should be dismissed on the ground that its commencement was an abuse of the process and that it should never have been brought at all.

The date of an alleged settlement is particularly important, because it determines the relevant facts as they existed at that date for the purposes of determining what is the background matrix of fact, to be taken into account for construing what a contract actually means.

The question then is whether the parties to the contract intended to include within their settlement the uninsured losses as a fully comprehensive settlement or whether the settlement was limited to the insured losses, applying an objective standard of the reasonable observer, taking account of the background matrix of fact.

See in particular ICS v West Bromwich Building Society [1998] 1 WLR 896 and Lord Hoffman’s famous statement of principle on the correct approach to construction at pages 912 to 913 of his speech.

My Lords, I will say at once that I prefer the approach of the judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 W.L.R. 1381 , 1384–1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989 , is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of “legal” interpretation has been discarded. The principles may be summarised as follows.

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the *913 exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749 .

(5) The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191 , 201:“if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”

If a point of compromise is pleaded, then ideally this matter should be dealt with by way of an application or possibly a trial of a preliminary issue, well in advance of trial. But these points will continue to arise, not least because of the ease with which parallel claims are facilitated by the MOJ Portal.

The resurrection of John Doe

The recent decision of the Court of Appeal in the case of Cameron v Hussain and Liverpool Victoria Insurance Company [2017] EWCA Civ 366 made me chuckle, as I was originally instructed in the case to advise and argue the point.

Here is a copy of my Skeleton Argument for the original appeal, from as long ago as 2014 2014 07 25 Cameron(B) Armstrong Sol Skeleton Argument of Appellant 297670 (amm). How quickly the years pass.

Regrettably, a clash of professional commitments meant that I could not attend to argue either the original application or the appeal before HH Judge Parker in Liverpool, and it was inherited by Mr Williams QC who in colloquial terms “played a blinder” and achieved such sterling success in the Court of Appeal.

The arguments as I recollect were ones I originally devised for another case which found its way in some shape or fashion to the Mercantile Court in Birmingham, some years previously.

A successful application to amend the title of the Defendant to bring a claim against John Doe, led to the insurance company on the other side instructing Leading Counsel to provide an opinion and promptly settling the case.

The effect of Cameron now is to ensure that the victim of a tortfeasor is able to obtain judgment against the tortfeasor in a road traffic accident case by describing the tortfeasor instead of having to provide his name, for the purposes of bringing a claim. The broad effect of the judgment will be to emphasise the advantage of this course of action for the innocent victim, rather than having to pursue the residual remedy of a claim under the Untraced Drivers Agreement.

The issues in the case were summarised by Gloster LJ in these terms:

1.The issues in this case may be summarised as follows:

(I) whether it is possible to obtain a judgment in respect of a claim for damages against a defendant identified only by description (“an unnamed defendant”), in the context of a motor claim against an unidentified hit-and-run driver, where the vehicle was identified and an insurance policy had been effected in respect of such vehicle in the name of either a non-existent person or someone who was not traceable;

(II) whether an insurer would be liable to satisfy any unsatisfied judgment against such an unnamed defendant under section 151 of the Road Traffic Act 1988 (“the 1988 Act”);

(III) whether the judges below were right to refuse to allow the claimant permission to amend her claim form and particulars of claim so as to substitute, for the named first defendant, a defendant identified only by the following description:

‘The person unknown driving vehicle registration number Y598 SPS who collided with vehicle registration number KG03 ZIZ on 26th May 2013.’

The facts of the case need to be set out with some care and were summarised by the Court of Appeal as follows:

2. On 26 May 2013 there was a collision between the claimant in the action, Miss Bianca Cameron (“the appellant”), driving her Ford Fiesta, registration number KG03 ZJZ, and another motorist, driving a Nissan Micra, registration number Y598 SPS, on Torres Road in Leeds. That driver went on to hit another vehicle, but did not stop. However, the vehicle registration number of the Nissan was taken down by a passing taxi driver. As a result of the accident, the appellant suffered modest personal injuries as did the passengers in her car. In addition, her own car was written off and she incurred charges for the hire of a replacement car.  The total value of the appellant’s claim (which excludes any claim by her passengers) is estimated at between £10,000 and £15,000. 

3. The Nissan was ascertained by the police to be registered to a Mr Naveed Hussain as registered keeper, who is currently the first defendant in the action (“the first defendant”). The first defendant did not co-operate with police enquiries into the accident, and on 19 November 2013 he was convicted of the offence of failing to give information about the identity of a driver by the Calderdale Justices. 

4. The Nissan was also discovered to be the subject of a policy of motor insurance (“the policy”) written by Liverpool Victoria Insurance Co Limited, the second defendant and respondent to the appeal (“the respondent”). The respondent filed evidence in the lower court stating that its insured was a Mr Nissar Bahadur of Hinkley, Leicestershire – a person whom it now believes to be fictitious, such that the policy was obtained by fraud.  The first defendant (i.e. the registered keeper) was not himself insured to drive the Nissan.

5. In January 2014 the appellant issued proceedings claiming damages against the first defendant, because at that time she believed him to be the other driver involved in the collision. In March 2014, the appellant amended the proceedings to add the respondent as second defendant and to seek a declaration against it pursuant to section 151 of the Act to the effect that it was obliged to satisfy any unsatisfied judgment against the first defendant.

6. In May 2014 the respondent filed a defence denying its liability to satisfy any judgment against the first defendant. This was on the grounds: (a) that the first defendant was not covered to drive the Nissan under the terms of the policy; and (b) that the claimant was unable to prove the identity of the driver at the time of the accident.

7. On 4 June 2014 the respondent issued an application for summary judgment on the basis of the arguments in its defence.

8. On 19 June 2014 the appellant made a cross-application for permission to amend her claim form and the particulars of claim so as to substitute, for the first defendant, a defendant identified only by the description set out in paragraph 1(iii) above.

9. On 16 July 2014 District Judge Wright dismissed the appellant’s application to substitute the name of the first defendant for the description set out above and granted summary judgment against the appellant on the respondent’s application.

10. On 13 January 2015 HHJ Parker (“the judge”) dismissed an appeal by the appellant against that decision. By the time of that hearing it was common ground that the first defendant was not the driver of the vehicle on the relevant date.

By a majority in the Court of Appeal, Gloster and Lloyd-Jones LJJ allowed the appeal and overturned the decision of the County Court judge. Gloster LJ’s judgment provided as follows:

40. In my judgment, in a case such as the present, the court can and should, in accordance with principle, exercise its procedural powers to permit an amendment of the claim form (and the consequent amendment to the particulars of claim) to allow a claimant to substitute an unnamed defendant driver, identified by reference to the specific vehicle which he or she was driving at a specific time and place, and consequently to enable a judgment to be obtained against such a defendant, which an identified insurer is required to satisfy pursuant to the provisions of section 151 of the 1988 Act. My reasons are set out below.

Statutory policy of Part VI of the 1988 Act

41. I start my analysis from the basic proposition that the policy of the regime imposed by Part VI of the 1988 Act makes clear that, where a policy of insurance is in place in respect of a vehicle, the insurer must, where it has received statutory notice (under section 152 of the 1988 Act) of the issue of third party proceedings, generally meet liabilities to a third party victim irrespective of whether the policy covers the driver/tortfeasor, and irrespective of the identity of the tortfeasor. That is so unless the insurer can show that it was either off-cover (because the policy has been cancelled) or that it should never have been on-cover (because the policy was procured by non-disclosure or misrepresentation) and, in both the latter cases, that it has also taken rapid and formal steps to demonstrate those matters.

42. That policy is wholly consistent with common sense. If an insurer agrees to effect an insurance policy in respect of a specific vehicle and receives a premium in respect of accepting that risk, then prima facie, at least, and subject to any right to avoid the policy, the insurer, having received the economic benefit, should bear the economic risk as to the following matters: the existence or non-existence of the insured or named drivers; the fact that such persons may allow uninsured persons to drive the vehicle; and the fact that, because the vehicle is on the road, it may be driven unlawfully by persons without the consent of the insured. After all, the insurer, and only the insurer, is in a position to evaluate that risk; it, and it alone, makes the business decision as to whether to accept the risk, and to allow the particular vehicle to be driven with the benefit of an insurance policy in the name, or purportedly in the name, of a particular insured. The insurer enters the market knowing of the risk that, under the provisions of section 151, it may well be held liable to satisfy judgments against third-party tortfeasors, who have driven the insured vehicle negligently, notwithstanding that the latter may not be insured under the terms of the policy.

43. As Mr Williams submitted, the policy of imposing third party liabilities on the insurer of a vehicle irrespective of its obligations to its insured has stood since the Road Traffic Act 1934. The mischief to which that legislation was directed was stated by Goddard LJ in Zurich Insurance Co Ltd v Morrison [1942] 2 KB 53 (CA), 61:

“Part II of the Road Traffic Act 1934 was passed to remedy a state of affairs that became apparent soon after the principle of compulsory insurance against third party risks had been established…. That… would naturally have led the public… to believe that if thereafter they were, through no fault of their own, injured or killed by a motor car they or their dependants would be certain of recovering damages, even though the wrong-doer was an impecunious person.  How wrong they were quickly appeared.  Insurance was left in the hands of companies and underwriters who had imposed what terms and conditions they chose.  Nor was there any standard form of policy, and any company… could hedge round the policies with so many warranties and conditions that no one advising an injured person could say with certainty whether… there was a prospect of recovering against the insurers … It is not surprising therefore… that… Parliament interfered, and… they took steps towards remedying a position which to a great extent nullified the protection that compulsory insurance was intended to afford.  Generally speaking, [the legislation] was designed to prevent conditions in policies from defeating the rights of third parties, but insurers were still allowed to repudiate policies obtained by misrepresentation or non-disclosure of material facts.”

Likewise, in In Hardy v MIB [1964] 2 QB 745 (CA), 769-770, Diplock LJ stated (in relation to the equivalent provisions of the Road Traffic Act 1960):

“The whole purpose of this Part of the Act is for the protection of the persons who sustain injury caused by the wrongful acts of other persons who use vehicles on a road, and it was no part of the policy of the Act that the assured’s rights to enforce his own contract against the insurers should constitute the sole measure of the third parties’ rights against the insurers… .”

44. Thus the effect of the statutory regime is clear. Like its predecessors, the 1988 Act gives insurers rights of recourse against the insured or other culpable third party where they must pay out without contractual obligation to do so. For example, section 151(8) provides that an insurer may recover its outlay from an uninsured user of the vehicle, or from the insured if he permitted the user.  Nevertheless, in accordance with the policy explained by Goddard LJ in the Zurich case, whether this right of recourse proves to be useful is a risk which falls on the insurer.  In many cases, the right will be nugatory, because the actual tortfeasor will be a man of straw (e.g. cases where the driver was a thief).  In particular, insurers may well routinely have to meet judgments obtained against defendant drivers who, although their identity is known at the date the proceedings were instituted by the victim, can no longer be traced by the time judgment is obtained. An example given by Mr Williams was the case of a visiting foreign worker who, although originally identified, some time after the relevant accident returned home to a foreign country and could no longer be found. In such circumstances, no defence is afforded to the insurer; Indeed, if proceedings are yet to be issued, the usual procedure is that the claimant obtains an order for alternative service on such a defendant by serving the insurer itself; see for example the practice suggested in Murfin v Ashbridge [1941] 1 All ER 231 (CA), 235 and in Gurtner v Circuit [1968] 2 QB 587 at 596G 597D in relation to substituted service on an insurer in relation to a named and  identified, but untraceable, defendant. It was common ground between Mr Williams and Mr Worthington that this was the normal practice in relation to an order for service by alternative means: Blackstone’s Civil Practice 2017, §15.19; Zuckerman on Civil Procedure (3rd ed), §5.122.  

45. Accordingly, as Mr Williams submitted, insurers will commonly have to meet judgments under section 151 where they have no hope of enforcing against the culpable party, or even of finding the culpable party. Insurers will defend and control the defence of such proceedings whether the culpable party has been served with them, or knows anything about them.  Indeed the insurers may well have been served with the proceedings in lieu of the culpable party. 

46. In such circumstances I am not impressed by Mr Worthington’s arguments that to permit a judgment to be entered against an unknown defendant driver in circumstances such as the present, where the vehicle, the insurer and the purported name of the insured can all be identified, will open the floodgates to a raft of fraudulent claims against insurers. It is for insurers to stipulate the conditions which they require to be satisfied by a proposed insured to establish identity before insurers issue a policy. If they do not, as a matter of practice, whether because of administrative difficulties or otherwise, seek declarations that they are entitled to avoid policies in the event of fraudulent non-disclosure or misrepresentation, that is a matter of their own commercial choice. Moreover, Mr Worthington was not able to articulate, other than in the most vague and general terms, the type of problems which he said might arise.

47. Thus, it appears to me to be entirely consistent with the policy of the 1988 Act that an identified insurer’s liability under section 151 in relation to a policy of insurance, written in respect of a specific vehicle and a specific named insured, should not depend on whether, as at the date of issue of the proceedings, or thereafter, the claimant can identify the tortfeasor driver by name.

The exercise of the court’s powers under the relevant rules of the CPR

48. It was correctly assumed by both parties that, only if judgment for damages could indeed be obtained against an unnamed defendant satisfying the relevant description, could it be a proper exercise of the court’ s powers or discretion to permit an amendment of the claim form and particulars of claim to substitute the unnamed defendant. The argument therefore appropriately focused on the issue as to whether a judgment for damages could be obtained against an unidentified party. However, Mr Worthington also argued that the existence of the appellant’s alternative remedy under the UTDA meant that the case could not be regarded as an exceptional one justifying the exercise of the court’s discretionary power to permit proceedings to continue against an unnamed defendant.

49. I reject Mr Worthington’s submission that, whether as a matter of the construction of the relevant rules or as to the circumstances in which any power conferred thereunder should be exercised, a party is unable to bring proceedings against an unnamed party, identified by a specific description, for damages, or is unable to do so in the absence of a claim for an injunction to restrain such a defendant’s conduct in the future. In my judgment, in appropriate circumstances such as the present, a claimant can do so.

50. In my judgment, the analysis of Sir Andrew Morritt V-C in Bloomsbury Publishing Group v News Group Newspapers [2003] 1 WLR 1633 is compelling and I respectfully adopt it. In that case, an injunction was granted against unknown persons who had obtained a copy of an unpublished Harry Potter Sir Andrew Morritt V-C found that the cases decided prior to the introduction of the CPR were no longer applicable. He held that under the CPR, there was no procedural bar to issuing proceedings, and obtaining orders, against persons unknown. There was no attempt to prescribe the circumstances in which parties would be permitted to do so….

51. In Brett Wilson LLP v Persons Unknown [2015] EWHC 2628 (QB), Warby J granted an injunction and damages against “Persons Unknown responsible for the operation and publication of the website [SFUK.com]”. That was in the context of a claim for defamation, under the summary disposal provisions in section 9 of the Defamation Act 1996. The court was also satisfied that the defendants, though unidentifiable, had knowledge of the proceedings: see [6]-[9], [16], [31] and [35]. No specific reference was made to the (apparent) novelty of the award of damages, in addition to an injunction.

52. Smith v Unknown Defendant Pseudonym ‘Likeicare’ [2016] EWHC 1775 (QB) was another summary determination of a claim for an injunction and damages in respect of defamation. Again there was no discrete consideration of the jurisdiction to award damages against unnamed defendants: see [11] and [18]-[22].

53. I agree with Sir Andrew Morritt V-C that there is no reason in principle why, in appropriate cases, it should not be permissible under the CPR for a claimant to bring proceedings against an unnamed defendant, suitably identified by an appropriate description. The fact that the CPR may make express provision for situations in which this can take place does not preclude orders being made against unnamed defendants in other circumstances. Likewise, I see no reason in principle, or as a matter of construction of the rules, why the ability to do so should be limited to a claim for an injunction or in relation to future relief. Although there was no express discussion of the issue as to whether it was appropriate to bring a claim for damages against an unnamed person in the defamation cases, the logic of Sir Andrew Morritt’s analysis, in my judgment, equally applies to a claim for damages. The Canadian authorities demonstrate that it is well-established that damages claims may be issued against unnamed defendants. For example, in Manson v John Doe [2013] ONSC 628 damages of $200,000 were awarded against an anonymous person waging a campaign of defamation via websites. In such a case there is every reason for such an order to be made.

54. As Sir Andrew Morritt V-C pointed out, the question is not simply whether a claimant can issue proceedings against a person unknown, notwithstanding the direction in the rules that a defendant “should” be named, or whether the court can permit a party to amend the claim form to substitute an unnamed defendant for a named defendant. The question also arises whether, in any particular case, the court should in the exercise of its discretion permit a claimant to amend in order to substitute an unnamed defendant, or permit such an action to proceed, so as to lead to a judgment against him. Once it is accepted that proceedings can be brought against unnamed defendants, then whether in any particular case that should occur, or whether relief should be granted against such defendants, must, it seems to me, depend on whether the overriding objective (that is to say of deciding cases justly and at proportionate cost – see CPR r1.1) would be furthered by such a course.

55. In that context also, I do not accept Mr Worthington’s submission that it is only in “exceptional” circumstances that a claimant would be permitted to join an unnamed defendant, identified only by description, or that a judgment for damages would be granted against such a defendant. Nor do I accept his suggested constraint that, if a claimant has an alternative remedy (i.e. in the present case the appellant’s remedy under the UTDA) that necessarily precludes any exercise of the court’s relevant discretion in a claimant’s favour – whether to permit a claimant to substitute an unnamed defendant or to award damages against such a defendant.

56. For these reasons I also reject Mr Worthington’s submission that the judge’s approach, as set out in paragraphs 23 and 24 of his judgment (as quoted above), was correct as a matter of law and that accordingly the exercise of the district judge’s discretion should be upheld. I see no reason why the fact that the appellant has an alternative remedy for compensation under the UTDA against the Motor Insurers Bureau should be regarded as a legitimate reason for preventing her from enforcing her undoubted substantive rights to:

a judgment for damages for negligence against the unnamed driver of the Nissan; and

in the event that such a judgment is unsatisfied, payment by the respondent as insurer of the Nissan of the amounts payable under the judgment pursuant to the provisions of section 151.

Put another way, in circumstances where the appellant has an undoubted right conferred by statute to payment by the insurer of a vehicle in the event that she obtains a judgment against its negligent driver, it cannot be just to deprive her of the remedy to give effect to that substantive right, simply by the court’s refusal to exercise a procedural power on grounds of the existence of an alternative remedy against the MIB – a remedy which she is not obliged to pursue and the exercise of which is not a precondition to her entitlement under section 151.

57. I also reject Mr Worthington’s submission and the judge’s conclusion that it would cause no injustice so far as the appellant is concerned if she were restricted to her claim to compensation under the UTDA and prevented from enforcing her rights under section 151. Apart from the point, which I have already mentioned (namely, that it is unjust for her to be deprived of a remedy to enforce her substantive right under section 151), it is clear that, for the reasons given by Mr Williams, including in particular the restriction on costs recovery, the inability to recover subrogated claims and the absence of a transparent court adjudication of her claims, a claimant in the position of the appellant might well regard a claim for compensation under the UTDA as an inferior remedy to a court action for damages and under section 151.

58. I likewise reject Mr Worthington’s submission and the judge’s conclusion that to permit an action to proceed against an unnamed defendant by reference to a specific description would cause injustice to the respondent as insurer, on the grounds that it will be unable to ascertain from the driver, or indeed its own purported insured, how the accident happened or whether there is any defence to the claim. For the reasons which I have already stated in paragraph 42 above, the respondent’s inability to ascertain the facts from the driver of a vehicle is a problem which it may often face in section 151(2)(b) situations. So far as being unable to ascertain the relevant facts from its own insured is concerned, the respondent must bear the responsibility of not having carried out appropriate checks as to the identity, or existence, of the insured prior to inception of the policy.

After the concurring judgment of Lloyd-Jones LJ, Sir Ross Cranston gave a dissenting judgment, and set out in his view, why the appeal should be dismissed.

In effect, the Court of Appeal taking a stance of general application refused to allow the insurance tail to wag the procedural dog. Once it was established that a claim in tort could be brought against persons unknown, then the decision of the majority of the Court of Appeal followed logically.

Indeed the reasoning of the majority was that their decision in any event ran with the grain of the Road Traffic Act 1988 which was concerned with the substantive rights of the tortfeasor’s victim.

An application has been made to the Court of Appeal for permission to appeal to the Supreme Court. It will be interesting to see if this case, is elevated to the Supreme Court in the months to come.

 

Part 45 and issue based costs Orders

Long term readers of this blog, will know that I tend to place articles I write on costs issues, on my other blog dedicated to matters of costs and litigation funding at www.costsbarrister.co.uk. However I am placing this article on this blog as it has a particular relevance to credit hire claims which fail at trial.

Many credit hire claims start off under the Portal as part of a larger claim frequently including claims for damages for personal injuries, vehicle repairs or value, loss of earnings and other heads of claim. When a case falls out of the Portal and assuming it is allocated to the Fast Track, it will be subject to the fixed costs provisions of part 45 CPR.

Not infrequently a case will proceed to trial and although the claimant will recover some damages, a credit hire claim can fail in its entirety: perhaps on the issue of need for a replacement vehicle, problems with the enforceability of a credit hire agreement or some other reason.

Often the credit hire claim will be the single largest head of claim, and have identifiable items of costs related to it: disclosure of bank statements and other financial documentation, rates evidence, part 18 requests and reply and so on.

Even if the claimant is successful overall, the defendant may argue that either the costs of the claimant should be reduced, due to the failure of the credit hire element of the claim, or even to recover its own costs of the issue of credit hire. To what extent is this possible, if the case is a Fast Track case and fixed costs are prescribed by part 45 CPR? The answer may be: it isn’t.

Part 45 CPR contains no support for the notion that the court has a general power to make an issue based costs Order by reference to particular heads of loss: in fact it tightly prescribes the costs that can be awarded to either party, limiting a defendant’s potential to recover costs to the circumstances where the defendant has made a part 36 offer or pursued a counterclaim.

This is not to say that success or failure by the claimant on particular issues is not taken account of by the rules: it plainly is, but not in the context of making an order, but rather by the quantification of the costs recoverable by the claimant.

This is a logical approach, given the very modest sums recoverable, the context of QUOCS and the essentially arbitrary nature of the “bright lines” drawn in table 6B on the phases of the claim.

Pursuant to rule 45.29B when a costs order is made in the claimant’s favour, the costs are calculated as being the fixed costs recoverable under rule 45.29C and the reasonable disbursements permitted under rule 45.29I.

Table 6B indicates that where the claim is disposed of at trial, the relevant fixed costs are £2655 plus 20% of the damages awarded plus the trial advocacy fee with the addition of VAT on these amounts.

Rule 45.29I provides a further list of the categories of reasonable disbursements which will be recoverable, with VAT if appropriate.

It will be noted that because the claimant’s costs are calculated by reference to the judgment sum awarded, because the claimant will have been awarded no sums in respect of damages for credit hire, the claimant’s costs have already notionally been reduced by 20% of the damages that might have been awarded: in effect, the claimant has been deprived by the rules, of the costs of that issue.

For the defendant to be awarded a further sum of costs in respect of that issue, would accordingly constitute “double recovery”. Moreover the rules are prescriptive of the amount of costs that a defendant can be awarded: see in particular rule 45.29F.

The limitations are particularly striking: see 45.29F(2) any award of the defendant’s costs cannot exceed the amount that would have been awarded to the claimant at the same stage of the proceedings. The court’s jurisdiction to award any costs to the defendant at all, is prescribed, and predicated upon the notion that the defendant is successful at an identifiable stage of the proceedings.

Thus there is no scope for the defendant to be awarded “assessed costs” of a particular issue as the claimant will have succeeded at each stage of the proceedings, pre-issue, pre-trial and at trial.

In a scenario where there are substantial awards of damages for the claimant for eg: personal injuries and no effective part 36 offer by the defendant, there can be no doubt that the claimant was the winner at each stage of the proceedings.  The claimant will have had to go to trial to recover those damages and incurred the advocacy fee to do so.

See also 45.29G: even had the defendant brought a counterclaim, which succeeded, that would not have disentitled the claimant to his costs of the claim calculated in accordance with rules 45.29C and 45.29I and only nominal costs would have been attributed to the costs of the counterclaim, reflective of the Medway Oil principle.

In summary, as part of the “swings and roundabouts” of part 45 CPR, it can be argued that the court has no power to order the claimant to pay the costs of a failed claim for credit hire itself part of a larger claim: the rules in 45 CPR do not provide for it and the circumstances where the defendant might recover costs (success at an identifiable stage, a part 36 offer, or a counterclaim) do not arise in this case.

The above analysis is underpinned by the general principles which apply to awards of costs in personal injury actions, where a claimant’s claim is reduced at trial, or he fails on certain allegations, or certain heads of claim. Even if the court took the view that it had a wider discretion than is submitted to be the case, it would, not aid the defendant as binding authority indicates that the discretion should not in this context, be exercised in favour of the defendant.

In the case of Fox.v Foundation Piling [2011] EWCA Civ 790 Jackson LJ summarised the position as follows:

From this review of authority I draw the following conclusions. First, where one party makes a Part 36 offer and then achieves a more advantageous result than that proposed in his offer, the provisions of rule 36.14 modify the court’s general discretion in respect of costs. This is important because parties who choose to use the Part 36 mechanism in their settlement negotiations need to have a clear understanding of the legal effects of making, accepting and rejecting offers under Part 36.

Secondly, parties are quite entitled to make Calderbank offers outside the framework of Part 36. Where a party makes such an offer and then achieves a more advantageous result, the court’s discretion is wider. Nevertheless it may well be appropriate to order the party which has optimistically rejected the Calderbank offer to pay all costs since the date when that offer expired. This was what the court ordered in Stokes.

A not uncommon scenario is that both parties turn out to have been over-optimistic in their Part 36 offers. The claimant recovers more than the defendant has previously offered to pay, but less than the claimant has previously offered to accept. In such a case the claimant should normally be regarded as “the successful party” within rule 44.3 (2). The claimant has been forced to bring proceedings in order to recover the sum awarded. He has done so and his claim has been vindicated to that extent.

In that situation the starting point is that the successful party should recover its costs from the other side: see rule 44.3 (2) (a). The next stage is to consider whether any adjustment should be made to reflect issues on which the successful party has lost or other circumstances. An adjustment may be required to reflect the costs referable to a discrete issue which the successful party has lost. An adjustment may also be required to compensate the unsuccessful party for costs which it was caused to incur by reason of unreasonable conduct on the part of the successful party.

In a personal injury action the fact that the claimant has won on some issues and lost on other issues along the way is not normally a reason for depriving the claimant of part of his costs: see Goodwin v Bennett UK Limited [2008] EWCA Civ 1658. For example, the claimant may succeed on some of the pleaded particulars of negligence, but not on others. Indeed the fact that the claimant has deliberately exaggerated his claim may in certain instances not be a good reason for depriving him of part of his costs: see Morgan v UPS. A defendant who has obtained video surveillance evidence is perfectly well able to protect his position on costs by making a modest offer under Part 36.

Nevertheless in other cases (as stated above) the fact that the successful party has failed on certain issues may constitute a good reason for modifying the costs order in his favour. This is commonly achieved by awarding the successful party a specified proportion of its costs. In Widlake the facts were so extreme that the successful party was ordered to bear all of its own costs.(emphasis added)

There are of course, excellent arguments which could be mounted for a defendant but given the length of this post, I shall have to save those for another day.

The mailbox rule

It is frequently the case in credit hire litigation, that an issue arises as to whether correspondence that is said to have been sent, was actually received. It can be of the utmost importance to establish whether that was so, in for example an application to set aside default judgment or to establish whether an effective notice was given under section 152 of the Road Traffic Act 1988.

This can be a surprisingly hard point to establish: many of those working in firms of solicitors advancing claims for credit hire will be dealing with hundreds of files and will have no personal recollection of whether a letter was actually sent. Part of the evidential gap can be filled by giving evidence of the system that will undoubtedly exist for the sending of correspondence: how it comes to be written, sent out and dispatched from the Post Room and how a copy came to be placed on a solicitor’s file.

Not infrequently, an insurer will point to the corresponding absence of the letter (allegedly) sent on its own file: the insurer tasked with proving the negative of non-receipt will in turn be able to give evidence as to how post is dealt with, within its organisation and how it will (usually) be scanned to an appropriate file. The insurer will then ask the court to draw an inference, that whether the letter was sent or not, it was certainly not received.

How is a court to resolve this conundrum? Particularly when faced with the he said/she said dichotomy posed by the witness evidence on dispatch and receipt? The answer can sometimes lie in the existence of the presumption of regularity which applies to such a scenario. The presumption of regularity is no more than a rebuttable presumption of fact in this context, but can be usefully deployed to fill an evidential gap on the receipt of correspondence. The conflicting inferences that the court is asked to draw by the parties are (i) that the letter was sent so it must have been received versus (ii) there is no copy of the letter on the file therefore it must not have been received.

This can be crucial when, for example a conclusion that no section 152 notice was given would render a judgment worthless, due to the inability to enforce it against an insurer. There are useful statements of the application of the presumption in the case law. See in particular the judgment of Roch LJ in the case of Desouza v Waterlow [1999] RTR 71 where he noted:

If an insured is to rely on section 152(1)(a) then he has to plead the absence of notice in his defence. That is Baker v. Provident Accident & Whitecross Insurance Co. Ltd [1939] 2 All E.R. 690 . However, what amounts to notice of the bringing of proceedings must, in my judgment, depend on the facts and circumstances of each particular case. Here the evidence was that the plaintiff sent the letter of April 24, 1991 and had the conversation of April 30. That evidence was not contradicted. The presumption that events occur as they should means that the judge and this court should accept that the letter did arrive at its destination (emphasis added).

A fuller exposition of this presumption arises in a decision of the United States Supreme Court of Rosenthal v. Walker 111 U.S. 185 (4 S.Ct. 382, 28 L.Ed. 395) where it is known as “the mailbox rule”. In that case the Supreme Court stated:

The rule is well settled that if a letter properly directed is proved to have been either put into the post-office or delivered to the postman, it is presumed, from the known course of business in the post-office department, that it reached its destination at the regular time, and was received by the person to whom it was addressed. Saunderson v. Judge, 2 H. Bl. 509; Woodcock v. Houldsworth, 16 Mees. & W. 124; Dunlop v. Higgins, 1 H. L. Cas. 381; Callan v. Gaylord, 3 Watts, 321; Starr v. Torrey, 2 Zab. 190; Tanner v. Hughes, 53 Pa. St. 289; Howard v. Daly, 61 N. Y. 362; Huntley v. Whittier, 105 Mass. 392. As was said by GRAY, J., in the case last cited. ‘the presumption so arising is not a conclusive presumption of law, but a mere inference of fact, founded on the probability that the officers of the government will do their duty and the usual course of business; and, when it is opposed by evidence that the letters never were received, must be weighed with all the other circumstances of the case, by the jury in determining the question whether the letters were actually received or not.’

It is  rare in the County Court that points of the law of evidence arise in civil claims and rarer still that one can usefully cite American law: but in this context the law on presumptions can sometimes be successfully deployed to tip the evidential balance in one’s favour.