Phillips (As Representative Of The Estate Of Neville Phillips Deceased) And Rafiq (1) And The MIB (2) [2007]

FACTS:-

Mr Phillips acquired a vehicle under a conditional sale agreement. He arranged temporary insurance cover which was valid until Xmas day 2001. However after its expiry, Mr Phillips did not take steps to renew it. On the 27th August 2002, Mr Phillips was helping a friend, Mr Rafiq to decorate a shop. They had to give a lift to two female relatives of Mr Rafiq and Mr Rafiq undertook the driving. It is thought that he fell asleep at the wheel and the car had an accident. Mr Phillips was killed along with the two other passengers. Mr Rafiq survived and was convicted of driving without due care and attention.

Mr Rafiq’s had a policy of insurance that covered the use of his vehicle, but not the car he was driving at the time. The trial judge had found that Mr Phillips knew or ought to have known that there was no insurance on the car and there was no appeal against that finding.

Mrs Phillips brought her claim against the Motor Insurers Bureau under the Fatal Accident Act (claim for dependency) but deliberately omitted to make a claim under the Law Reform (Miscellaneous Provisions) Act 1934 (a claim for the benefit of Mr Phillips’ estate).

Negligence was not at issue.

The MIB defended the claim on their construction of Clause 6.1(3) of the Uninsured Drivers Agreement 1999:-

“Clause 5 [obliging the MIB to satisfy any judgment against the driver] does not apply in the case of an application made in respect of a claim of any of the following descriptions…..

(e) a claim which is made in respect of a relevant liability described in paragraph (2) by a claimant who, at the time of the use giving rise to the relevant liability was voluntarily allowing himself to be carried in the vehicle and, either before the commencement of his journey or after such commencement if he could reasonably be expected to have alighted from it, knew or ought to have known that –

………

(ii) that vehicle was being used without there being in force in relation to its use such a contract of insurance as would comply with Part VI of the 1988 Act,…”

“Claimant” is defined in Clause 1 of the Agreement as follows:-

“Claimant” means a person who has commenced or who proposed to commence relevant proceedings and has made an application under this Agreement in respect thereof.”

HELD:-

Lord Justice Ward said that it was common ground between the parties that the proper approach to the interpretation of this clause, was that expressed by Lord Hoffman in ICS Ltd. v West Bromwich BS [1998] AC 896,912.

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 that they were in at the time of the contract.
2. That background was a “matrix of fact”. It is 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
4. The meaning which a document would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter for dictionaries and grammars, the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood the document to mean.
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. However if one would 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 Justice Ward also referred to R (Westminster City Council) v National Asylum Support Services [2002] UKHL 38 in which Lord Steyn had said that the starting point was that language in all legal texts conveys meaning according to the circumstances in which it was used. The context must be identified and considered before the process of construction or during it, regardless of whether an ambiguity has arisen.

There followed a consideration of the MIB scheme and Article 1.4 of the Second Council Directive of the 30th November 1983 (84/5/EEC), as well as the case of White v White [2001] 2 All ER 43 where the same exclusion clause in the 1988 Uninsured Drivers Agreement (i.e. knowledge of no insurance) was considered. The Directive and White did not assist in the present case.

However the terms of the former 1988 Agreement and the 1999 Agreement needed consideration. Clause 6.1 of the 1988 Agreement stated:-

“MIB shall not incur any liability under clause 2 of this Agreement in a case where:-

……

(e) at the time of the use which gave rise to the liability the person suffering death or bodily injury or damage to property was allowing himself to be carried in or upon the vehicle and either before the commencement of his journey in the vehicle or after such commencement he could reasonably be expected to have alighted from the vehicle he –

(i)    knew or ought to have known that the vehicle had been stolen or unlawfully taken, or
(ii)    knew or ought to have known that the vehicle was being used without there being in force in relation to its use a contract of insurance as would comply with Part VI of the Road Traffic Act 1972.”

Clause 6(1)(e) of the 1999 Uninsured Drivers’ Agreement stated that the MIB were not liable to pay:-

(e) a claim which is made in respect of a relevant liability described in paragraph (2) by a claimant who at the time of the use giving rise to the relevant liability was voluntarily allowing himself to be carried in the vehicle and, either before the commencement of his journey in the vehicle or after such commencement he could reasonably be expected to have alighted from it, knew or ought to have known that –

(i)    the vehicle had been stolen or unlawfully taken
(ii)    the vehicle was being used without there being in force in relation to its use such a contract of insurance as would comply with Part VI of the 1988 Act.

Lord Justice Ward then considered the provisions of Clause 6.2 and 6.4 of the 1999 Agreement and also the Notes for Guidance. He also considered the case of Sheldon v Goldstraw Altrincham County Court 18th May 2004 where the judge had declined to find for the Claimant in a similar case. However in the court below in this case, Judge Seymour had declined to follow that decision.

Lord Justice Ward said that Judge Seymour had taken into account of the relevant background and purpose of the Agreement. However the Court of Appeal would now makes it own interpretation, given that the facts were not in dispute.

The background to any scheme for the compensation of victims of uninsured drivers, must include the range of victims objectively likely to be within the contemplation of the contracting parties. Victims included dependents. LJ Ward considered the Fatal Accidents Act 1976, which makes it clear that the claim of the dependents is separate and distinct from the claim that survives for the benefit of the estate pursuant to the Law Reform (Miscellaneous Provisions) Act 1934. That distinction must have been in the minds of the draughtsmen of the MIB Agreement.

The Second Council Director (84/5/EEC) was also relevant, since the Agreement must be assumed to have been drafted in a way that is compliant with the Directive. However the Directive was vague as to whom the victim should be. It was not correct to say that the derivative claim under the Fatal Accident Act 1976 lay outside the purposes of the Directive. It was correct to say that the exclusion of such a derivative claim was permissible under the Directive.

However the ability to exclude a claim by a passenger with “knowledge” and his dependents (as was done in the 1988 Agreement) did not indicate whether that power had been exercised again by the 1999 Agreement.

The 1988 Agreement was relevant to the construction of the 1999 Agreement. The MIB’s counsel had argued that because the 1999 Agreement had more conditions and was far more strict than the 1988 Agreement, therefore it should be interpreted in a stricter fashion. LJ Ward said that this did not explain why the language in Clause 6(1)(e) of the 1999 Agreement was so different. The MIB’s counsel had also argued that the “Claimant” in the 1999 Agreement definition section meant the person who commences proceedings unless the context required otherwise. However in LJ Ward’s view this was no more than an express reminder to apply the principles in ICS Ltd. v West Bromwich BS. Nothing leapt from the page that would force the reasonable reader to conclude that “claimant” meant something different from the meaning of “claimant” as given in Clause 1 of the 1999 Agreement.

An alternative definition could not be easily supplied. If “claimant” meant “deceased” according to the MIB Agreement, that would mean that an injured Claimant who survived an accident with guilty knowledge, would be able to make a claim because he was not deceased.

Ward LJ considered the guidance notes at the end of the 1999 Agreement. Clause 3.6 stated that the MIB were not liable to pay:-

“3.6 A Claim made by a passenger in a vehicle where the loss or damage has been caused by the user of the vehicle if:-

3.6.1 use of the vehicle was not covered by a contract of insurance; and

3.6.2 the claimant knew or could be taken to have known that the vehicle was being used without insurance….”

The MIB’s counsel argued that “passenger” in 3.6 should be read synonymously with “claimant in 3.6.2.

Ward LJ accepted the force of this argument, but could not accept that this explanatory note could override the Agreement itself so that the word “passenger” in Clause 3.6 of the Notes would override “claimant” in Clause 6(1)(e) of the Agreement.

The MIB’s counsel submitted that it was absurd to compensate the dependents but refuse compensation to the passenger who survives. The trial judge, Judge Seymour had said that there could be very sound reasons of policy for wishing to achieve that result. The Court of Appeal did not know the answer to that.

Finally it could not be immaterial that this was an Agreement made between two sophisticated parties (the MIB and the Government) who had a high level of knowledge of the working of the scheme. Commonsense suggested that parties of that kind did not make flagrant linguistic mistakes in formal documents as important as this. A reasonable man could not confidently say that the purpose of this Agreement was to exclude a dependent’s claim. In those circumstances, the literal meaning must prevail. Consequently the MIB’s appeal must be dismissed.

Related posts:

1. Phillips (Administratrix Of The Estate Of Neville Phillips Decesased) v Rafiq (1) And The MIB 2006
2. S (A Child) v Goldstraw 2005