Daniel Kuczak v Treacy Tyres [Portumna] Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Twomey
• Judgment Date: 29 March 2022
• Neutral Citation: [2022] IEHC 181
• Docket Number: [2018/8428P]
• Year: 2022
• Court: High Court

Between

Daniel Kuczak

Plaintiff

and

Treacy Tyres [Portumna] Limited

Defendant

[2022] IEHC 181

[2018/8428P]

THE HIGH COURT

JUDGMENT OF Mr. Justice Twomey delivered on the 29th March, 2022

INTRODUCTION

1 This case is an example of a situation in which insurance companies want the taxpayer ‘ to foot the bill for what might be regarded as a business expense of the insurance companies’, to adopt the language of the Law Reform Commission (referenced below). In unusually explicit language, the Law Reform Commission considers that it is very clear that it is ‘wrong’ for taxpayers to subsidise insurance companies in this manner. This Court reaches the same conclusion in this case.

2 While the sum involved in this case is €45,000, the amounts at stake on an annual basis could be significant if the figures contained in a recent academic article (see below) are correct, since there is reference to a ‘ shortfall of €20m’ to the taxpayer in one year alone, arising from the practice of insurance companies seeking to have the taxpayer foot the bill for their ‘business expenses’.

How ‘business expenses’ of insurance companies are converted to a taxpayer's liability

3 The conversion of what would otherwise be a business expense of an insurance company into a liability of the taxpayer arises by the insertion of a particular form of ‘consent term’ into a Court Order on the settlement of personal injury cases, which consent terms are referred to as “s. 343R(2) Consent Orders” after the relevant section of the Social Welfare Consolidation Act 2005 (the “2005 Act”).

4 These consent terms appear to be innocuous, e.g. the insertion of a term when a personal injuries case is being settled, on the consent of both parties, that the defendant was only 10% liable for the injuries to the plaintiff, to take an example from a previous case heard by this Court (i.e. Condon v HSE [2021] IEHC 474). Similar innocuous appearing ‘consent terms’ are that the plaintiff has withdrawn his claim for loss of earnings or that there was no claim for loss of earnings (as noted by Keane J. when writing extra-judicially, in the article referenced below).

5 That article appeared in the Irish Judicial Studies Journal, which has as its primary purpose to provide ‘Irish judges with information and opinions that are relevant and useful to them in their work’. At that time of the article's publication, Keane J. was sitting in the personal injuries division of the High Court and he brought to the attention of his judicial colleagues, particularly those who might only deal with personal injury cases for a week or two a year while on circuit, that these s. 343R(2) Consent Orders are in fact far from innocuous.

6 At page 56 of that article he points out that s. 343R(2) Consent Orders sought by insurance companies on the settlement of personal injury cases have ‘ no apparent purpose other than to’ deprive the taxpayer (i.e. the Department of Social Protection (the “Department”)) of a reimbursement from insurance companies to which the taxpayer is entitled. These consent terms have one aim, and one aim only, namely to deprive a person who is not party to the proceedings (the taxpayer) of money due from the insurance company (to which the taxpayer would otherwise be entitled).

7 To appreciate the significance of what is occurring with s. 343R(2) Consent Orders, it is helpful to consider this situation if the money was owed by an insurance company to a private company or an individual (X), rather than to the taxpayer. Imagine the reaction if in such a situation an insurance company (B) and a plaintiff (A), when striking out the proceedings ( A v B), to which X was not a party, were to apply to court to insert a ‘consent term’ in their court order which would deprive X of its legal right to repayment of money from the insurance company. It should be emphasised that there is no input obtained from X, the party who is financially prejudiced by the order, before the granting of such orders.

8 Yet, as brought to the attention of the judiciary by Keane J, this is exactly what is occurring with the use of s. 343R(2) Consent Orders.

9 Just because one is dealing with the taxpayers' funds, rather than the funds of an individual, does not, in this Court's view, mean that the taxpayer/Department should be deprived of money due to it, on the simple say-so of an insurance company inserting an apparently innocuous consent term in an order striking out a personal injuries' claim.

10 As explained by Keane J., once a judge puts such a ‘consent term’ in a Court Order it has the effect of writing-off debts owed by insurance companies to the Department. In this way, these apparently innocuous consent terms convert what the Law Reform Commission describes as a ‘ business expense’ of an insurance company into the liability of the taxpayer.

11 In that article, Keane J. highlighted that while in the vast majority of instances in which personal injuries cases settled in the past the Court simply struck ‘out the proceedings with no further order’, there is now a ‘new phenomenon in settled personal injuries actions’ whereby ‘defendants now regularly apply to the court’ for s. 343R(2) Consent Orders on their settlement.

12 This case is an example of the practice to which Keane J. refers. Here, the sum of €45,000 would be converted from being the liability of an insurance company into the liability of the taxpayer by the simple expedient of a term being inserted into a Court Order with the consent of both parties to the litigation (i.e. a ‘consent term’) when the personal injury case settles.

13 This Court adopts the analysis of Keane J. and the language of the Law Reform Commission to conclude that it is wrong for ‘consent terms’ to be inserted into Court Orders on the settlement of personal injury cases, with the intent of having the taxpayer foot the bill for insurance companies' business expenses. By the taxpayer subsidising insurance companies in this way, to pay settlements in personal injury cases, the taxpayer is directly benefiting insurance companies, and indirectly benefiting personal injury plaintiffs and their lawyers (whose fees are invariably paid as part of the settlement sum).

14 The reimbursements due to the taxpayer/Department, under s. 343R(1) of the 2005 Act when personal injury cases settle, are known as ‘recoverable benefits’. Keane J.'s article highlights the successful attempts in recent times by insurance companies to avoid their repayment to the taxpayer by the use of s. 343R(2) Consent Orders. Section 343R(2) of the 2015 Act was inserted by s. 13(d) of the Social Welfare Pensions Act 2013 and has only been operative since 1st August, 2014. Accordingly, the seeking of s. 343R(2) Consent Orders is for this reason a ‘ new phenomenon’ that has only come in existence since that date.

15 The very significant financial effect of a s. 343R Consent Order, in converting a business expense of an insurance company into the taxpayers' liability, is not immediately obvious from the somewhat dense and technical s. 343R of the 2015 Act, which states:

“Obligation to pay recoverable benefits

• 343R. (1) Subject to subsection (2), a compensator shall pay to the Minister the amount of recoverable benefits specified in the relevant statement of recoverable benefits before making any compensation payment to, or in respect of, an injured person.

• (2) Where the recoverable benefits specified in the statement of recoverable benefits exceed the amount of the relevant compensation payment and that relevant compensation payment was the subject of an order of a court or assessment by the Board in accordance with the Act of 2003, the compensator is liable only to the extent of that amount so ordered or assessed.

• (3) A compensator who fails to comply with subsection (1) or otherwise fails to pay the amount of recoverable benefits due to the Minister is liable to pay on demand to the Minister that amount of recoverable benefits so due.”

For this reason, it may be helpful at this stage to give a brief hypothetical example of how s. 343R(2) Consent Orders can work in practice.

How does s. 343R(2) convert a company's business expense into a taxpayer's liability?

16 Sean Citizen claims he was injured in a shop that has insurance. He makes a claim against the shop in which he claims that the shop was 100% responsible for his ‘pain and suffering’ resulting from his injuries and 100% liable for his loss of earnings. The Department pay him disability and other benefits of €80,000 when he is out of work arising from the accident, which accident Sean claims was 100% the responsibility of the insurance company. These payments are known as ‘recoverable benefits’ of €80,000, since they are ‘recoverable’ by the taxpayer/Department from the insurance company which, by settling the claim (and refusing to contest liability in court for the accident), can be said, in general terms, to be accepting responsibility for causing the injuries.

17 The insurance company offers Sean €100,000 (to include his legal costs of €20,000) to settle the claim and he is happy with this sum. As a condition of the settlement, the insurance company says that Sean must agree to the Court Order striking out the claim on its settlement containing a term that says that Sean was 90% liable for the accident and the shop/insurance company was only 10% liable.

18 This ‘consent term’ enables the insurance company to claim that, it has an ‘order of a court’ (to quote s. 343R(2)) to the effect that the insurance company was only 10% liable for the accident. On this basis, it will be able to claim that it will only have to pay back 10%, or €8,000, of the €80,000 in recoverable benefits to the taxpayer/Department. Accordingly, by the simple expedient of inserting this ‘consent term’ in the Court Order striking out the proceedings on their settlement, the...