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.

Leave a Reply

Your email address will not be published. Required fields are marked *