Persson v London Country Buses [1974]

FACTS:-

The Claimant, a bus conducted, was injured in the course of his employment when the bus on which he was travelling suddenly stopped. The Claimant claimed damages against his employers, which were repudiated on the ground that the accident was caused solely by the fault of a motorist who was unidentified and untraced. Faced with that allegation the Claimant made an application to the Motor Insurer’s Bureau under the bureau’s agreement of 21 April 1969 with the Ministry of Transport to pay compensation where the accident was the sole fault of an untraced driver

Clause 3 of the agreement provided;

“the bureau, shall, on any application made to them in a case which the Agreement applies, award to the Applicant… a payment of an amount which shall be assessed…”

Clause 7 provided that the bureau should investigate an application for compensation and unless a preliminary investigation disclosed that the case was not one to which the agreement applied, make a report on the application. On the basis of the report the bureau were obliged to decide whether to make an award and if so to calculate the award.

Clause 10 contained provisions for the payment of the award to the applicant. Clause 11 provided that an applicant should have the right to appeal to an arbitrator against any decision of the bureau. Clause 20 contained provision for payment to the applicant of any sum awarded to him by an arbitrator.

The bureau accepted the Claimant’s application, investigated it through the agency of an insurance company, obtained a report of the circumstances of the accident and, having considered the report, decided that an award should not be made to the claimant. Their decision was notified to the claimant and a copy of the report was sent to him, the ground on which they so decided was that on the balance of probabilities the untraced person would not be liable to pay damages to the claimant, they said that the requirement of clause 1 of the agreement were not satisfied.

In the letter dated 2 March 1973 notifying the decision to the Claimant’s solicitors it was pointed out that under the agreement the Claimant had a right of appeal to an arbitrator. The Claimant deliberately chose not to exercise that right of appeal as to do so would have involved his undertaking to abide by the decision of the arbitrator. If he appealed and failed and then, in the proceedings against his employers, he obtained evidence of negligence on the part of the untraced driver he would have no claim on the bureau.

He decided to sue both the bus company and the bureau in the county court and on 3 May 1973 commenced proceedings. The Claimant submitted that the bureau were liable to pay compensation to him under the terms of the agreement between the minister of transport and the bureau. The bureau made a successful application for the claim to be struck out and for the dismissal of the Claimant’s claim against them on the found that it disclosed no cause of action.

The Claimant’s appeal against that decision failed. The Claimant appealed the decision and the order of the circuit judge in the Court of Appeal before Lord Justice James and Justice Stamp

HELD:-

The real issue before Lord Justice James was as to construction of the agreement, in particular clause 7.

Counsel for the Claimant submitted that clause 7, which is relied on by counsel for the bureau as setting out the obligations of the bureau where the agreement applies, is procedural only and doe not in any way limit the obligations of the bureau under clause 3. He also contended that the appeal procedure under clause 11 to 22 does not exclude an applicant’s right of recourse to the courts, but serves as a cheap, convenient and speedy way of contesting the decision of the bureau of which an applicant can avail himself if he wishes

In response to the Claimant’s submissions counsel for the bureau submitted that the proper construction of the agreement was that the bureau undertakes to act in relations to applications in a stated way (clause 7) and undertakes to make an award in favour of and to pay the sum awarded to an applicant when either (1) the decision of the bureau is to do so or (2) the arbitrator or an appeal by the applicant under clause 11, decides that an award shall be made (clause 20).

He also argued that the obligation to make an award under clause 13 in favour of an applicant is expressly made subject to the provision of the following clauses, including clause 7; that clause 7 prescribed precisely what the bureau shall do in respect of any application received and that under clause 7 the bureau have the duty to make a decision whether to make an award; that if in performance of their obligations under clause 7 the bureau decide that the case is one which does not satisfy one or more of the condition in clause 1, there is no obligation to make an award because the case is not one to which the agreement applies and the application must be rejected.

Counsel for the bureau cited a number of authorities to support the proposition that where the parties to a contract have agreed in language which clearly shows who is to decide certain facts then no right of action in the courts is vested in the contracting parties until the facts have been decided according to the contract. First he referred to Cipriani v Burnett ([1933] AC 83.  Lord Macmillian said [1933] AC at 88, 89);

“it is not essential in order to exclude a right of action at law that the contract should in terms prescribe that the award fo the specially constituted tribunal shall be a condition precedent of any legal proceedings. In Scott v Avery (1856) 5 HL Cas 811 the contract so prescribed, and the action was held not to be maintainable in the absence of an award, but Lord Campbell in his speech referred to Brown v Overbury as being identical in principle, and in the latter case, where the court refused to entertain a claim for the prize in a sweepstake on a horse race, in the absence of a decision by the stewards as to the winner, the clause in the rules of the race provided no more, according to the report, than that any dispute as to the race was to be decided by the award of four stewards”

Then Lord Macmillan quoted from Brown v Overbury ((1856) 11 Exch at 716, 717, per Alderson B)

“every contract must be determined according to the circumstances belonging to it. This one of racing, and the universal practice has been, that, in order to ascertain who is to have the stakes, it must be first determined who is the winner, not in the opinion of a jury, but of the persons appointed to deice it, viz, the judge or the stewards.”

And Martin B ((1856) 11 Exch at 717, 718):

“the judgement of the stewards in the case of a horse race must necessarily be conclusive; they are expressly appointed to decide the matter, and there is no appeal from them. It is a condition precedent to the Claimant’s right to recover, that he obtained “

Lord Justice James was unable to accept the argument of the Claimant namely that clause 7 was purely procedural. He stated that it was clear from the provisions of the agreement, and to clause 3, that the determination of the question whether there ought to be an award and the process of assessment is to be carried out under the provisions of clause 7 subject to the right of appeal to an arbitrator under clause 11. The only right to payment is the right to payment of the amount awarded under either clause 10 or if there is an appeal under clause 20. If there is no award there is no right to payment. On the proper construction of the agreement the bureau did all that they were obliged to under clause 7. Their decision to reject the application was in performance of the terms of the agreement and not a repudiation of the agreement.

Lord Justice James agreed with the circuit judge, in accepting counsel for the bureau’s submission. Namely that Clause 3 of the agreement is subject to Clause 7 and that it is perfectly clear that on the basis of the report the bureau shall decide whether to make an award. There were no grounds on which the Bureau is in breach of the agreement. Therefore the appeal was dismissed.

Justice Stamp agreed with Lord Justice James.

Related posts:

1. White v London Transport Executive [1971]
2. Cleland v London General Insurance Co Ltd [1935]
3. Elizabeth v Motor Insurers Bureau [1981]