Law Society of Ireland v Motor Insurers Bureau of Ireland (MIBI)

JurisdictionIreland
JudgeMr. Justice Hedigan
Judgment Date04 September 2015
Neutral Citation[2015] IEHC 564
CourtHigh Court
Date04 September 2015

[2015] IEHC 564

THE HIGH COURT

[No. 85 SP/2015]
Law Society of Ireland v Motor Insurers Bureau of Ireland (MIBI)
No Redaction Needed
IN THE MATTER OF AN APPLICATION BY THE ACCOUNTANT OF THE COURTS OF JUSTICE PURSUANT TO THE INSURANCE ACT 1964 (AS AMENDED BY THE INSURANCE (AMENDMENT) ACT 2011)

BETWEEN

THE LAW SOCIETY OF IRELAND
CLAIMANT (By Order of the Court)
-AND-
THE MOTOR INSURERS' BUREAU OF IRELAND
RESPONDENT (By Order of the Court)

Insurance – The Insurance Act 1964 – The Insurance Compensation Fund – Liability in relation to an insolvent insurer – Interpretation of agreement – Council Directive 2009/103/EC

Facts: By order of the President of the High Court, the applicant being the Accountant of the Courts of Justice having statutory responsibility to administer the Insurance Compensation Fund sought an order in relation to the preliminary issues pertaining to the potential liability of the respondent for paying the claims against persons who were insured with an insolvent insurer and power of High Court to approve payment under s. 3 of the Insurance Act 1964 out of the Insurance Compensation Fund. The claimant and respondent were added as parties to the present proceedings by order of the President of the Court.

Mr. Justice Hedigan held that the respondent was liable to pay out claims against persons who were insured with an insolvent insurer at the time of its entry into liquidation and that the High Court might not approve payments under s. 3 of the Insurance Act 1964 unless it appeared to the Court that the respondent was unlikely to meet the claims. The Court observed that the liability of the respondent for the insolvent insurer had been apparent since 1963 and upon giving a plain, natural and ordinary meaning to the relevant agreement, it became clear that the respondent was liable to pay liabilities of the insolvent insurer. The Court in consonance with Investors Compensation Scheme Limited v West Bromwich Building Society held that the true intent of a document could be ascertained from the background, including anything that affected the way the document would have been reasonably understood, and where the parties could not comprehend what the words used indicate, regards must be had to business common sense.

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JUDGMENT of Mr. Justice Hedigan delivered on the 4th day of September, 2015

INTRODUCTION
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2 1.1. The applicant herein is the Accountant of the Courts of Justice ("the Accountant") and has statutory responsibility for administering the Insurance Compensation Fund ("the Fund") under the control of the President of the High Court. In the discharge of this statutory responsibility, the Accountant, and by extension the President of the High Court, must consider whether eligible claims can be met otherwise than from the Fund.

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3 1.2. Following the liquidation of Setanta Insurance Company ("Setanta") on 30 th April, 2014, approximately 1,750 claims by and against Setanta policyholders remained in existence. An issue arose as to who is liable to cover these claims and the applicant, having received legal advice that there was an arguable case that liability may rest with the Motor Insurers' Bureau of Ireland ("the MIBI"), commenced the within proceedings.

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4 1.3. By order dated 27 th April, 2015, the President of the High Court directed that the following matters be tried as a preliminary issue:

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a "(a) Whether the Motor Insurance Bureau of Ireland has a liability or potential liability to pay out in respect of claims against persons who were insured with Setanta, a Maltese registered insurance company, at the time of its entering into liquidation in April 2014

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(b) If so how any such liability or potential liability on the part of the MIBI impacts upon the power of the High Court to approve payments under section 3 of the Insurance Act 1964 (as inserted by section 4 of the Insurance (Amendment) Act 2011 authorising payment out of the Insurance Compensation Fund 'only if it appears to the High Court that it is unlikely that the claim can be met otherwise than from the Fund'."

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Kearns P. also directed that the Law Society of Ireland should act as the claimant while the MIBI should be the respondent. The Accountant has adopted a neutral position in the proceedings.

THE PARTIES
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2 2.1. As previously stated, the applicant is the Accountant of the Courts of Justice, one of whose functions is to administer the Insurance Compensation Fund on behalf of the President of the High Court pursuant to s. 2 of the Insurance Act 1964 ("the 1964 Act"). As such, it is the role of the applicant to make an application under the Insurance (Amendment) Act 2011 ("the 2011 Act") for payment out of the Fund in respect of these outstanding claims involving Setanta policy holders.

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3 2.2. The Law Society of Ireland is the professional body for solicitors in the State and exercises statutory functions under the Solicitors Acts 1954 to 2013 in relation to the education, admission, enrolment, discipline and regulation of the solicitors' profession. It also performs a representative function for solicitors and represents more than 10,000 solicitors. It is in this latter role that the Society appears in these proceedings.

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4 2.3. The MIBI is a private company set up by the motor insurance companies who operate in the motor insurance industry in the State. It was established under the Companies Acts and is limited by guarantee. Participation by motor insurance companies is not voluntary and is required by s. 78 of the Road Traffic Act 1961 ("the 1961 Act"). The MIBI is also the body through which effect is given to the State's obligations under EU Motor Insurance Directives in respect of the provision of certain compensation to road traffic victims. Following its establishment in 1955, the MIBI has entered into a series of agreements with the Minister for Local Government and later the Minister for Transport, known collectively as the "MIBI Agreements". The latest of these agreements was entered into in 2009 ("the 2009 Agreement") and the construction of this agreement is central to the matters presently before the Court.

BACKGROUND
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2 3.1. At an EGM of Setanta Insurance Company, a Maltese registered insurance company, held on 16 th April, 2014, it was decided that Setanta would surrender its insurance business licence and be immediately dissolved. A liquidator was subsequently appointed on 30 th April, 2014. Setanta was a member of the MIBI as required by s. 78 of the 1961 Act and at the time it entered liquidation it had issued approximately 75,000 motor insurance policies, all of which were in respect of risks in Ireland. All of Setanta's policies were cancelled with effect from 29 th May, 2014 and there now remains between 1,700 and 2,000 claims in existence by and against Setanta policy holders which are potentially eligible for payment under the Fund.

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3 3.2. On 1 st May, 2014, following the liquidation of Setanta, John Shaw, then President of the Law Society, wrote to John Casey, Chief Executive of the MIBI, stating that many solicitors had been inundated with queries from concerned Setanta customers and persons with claims outstanding against Setanta policyholders as to the consequences of the liquidation. Mr. Shaw stated that:

"It seems clear to us that the Motor Insurers' Bureau of Ireland are responsible for any such undischarged judgments under the terms of the 2009 Agreement and we now call upon you to confirm that no claimant will suffer any loss as a result of this event."

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4 3.3. Following this letter, a large amount of correspondence ensued between the various parties as to where liability for the outstanding Setanta related claims lies. By letter dated 25 th July, 2014 Mr. Casey responded, stating that the MIBI had received legal advice on the issue of liability and stated:

"The legal opinion obtained, which analysed the legal and regulatory framework in which the MIBI operates in Ireland, was unequivocal in its conclusion that the 2009 Agreement does not require the MIBI to satisfy awards against drivers covered by a policy of insurance where the insurer is unable to pay all or part of an award because of insolvency."

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5 3.4. Further correspondence from the MIBI indicates that the MIBI had contacted the Department of Transport in relation to the issue and it is indicated that the Department shared the view that the MIBI was not liable under the 2009 Agreement for claims related to insolvent insurers.

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6 3.5. On 28 th November, 2014, the Minister for Transport wrote to the incumbent President of the Law Society, Kevin O'Higgins, stating that:

"I have had enquiries made in the matter and the position is that my Department has received unequivocal legal advice from the Attorney General's Office regarding this matter."

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The advice clearly states that any liability for any unsatisfied claims against Setanta Insurance (in liquidation) is not a matter for my Department, or for the Motor Insurers Bureau of Ireland (MIBI).

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Plaintiffs should be advised to pursue this matter with the Liquidator of Setanta and the Insurance Compensation Fund established under the Insurance Act 1964 for the purpose of providing compensation to unsatisfied claimants"

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7 3.6. The letter offers an interpretation of the 2009 Agreement and refers to a recent European Court of Justice decision in Csonka v. Magyar Allam ( Case C-409/11) which the Minister states makes clear that there is no legal obligation under the EU Motor Insurance Directives that requires the MIBI to satisfy unpaid claims made against an insolvent insurer.

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8 3.7. Mr. O'Higgins replied to this letter on 18 th February, 2015 setting out the position of the Society and an alternative interpretation of the 2009 Agreement. The positions, as set out in...

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4 cases
  • Law Society of Ireland v Motor Insurers' Bureau of Ireland
    • Ireland
    • Court of Appeal (Ireland)
    • 2 March 2016
    ...where Hedigan J. ruled that the MIBI was liable in principle in the case of insurer insolvency: see Law Society of Ireland v. MIBI [2015] IEHC 564. As well as being an issue of immense practical importance, this appeal raises questions of interpretation one of very considerable difficulty. ......
  • The Law Society of Ireland v The Motor Insurers' Bureau of Ireland
    • Ireland
    • Supreme Court
    • 25 May 2017
    ...issue being heard, the High Court (Hedigan J) found in favour of the Law Society and held that the MIBI was obliged to compensate ([2015] IEHC 564). The Court of Appeal dismissed an appeal by the MIBI against that order ([2016] IECA 60). The Supreme Court gave leave to appeal on the followi......
  • Gilliland v Motor Insurers' Bureau of Ireland
    • Ireland
    • High Court
    • 30 November 2018
    ...pending the outcome of the Accountant's proceedings. That case proceeded through all divisions of the Superior Courts - the High Court ([2015] IEHC 564), the Court of Appeal ([2016] IECA 60) and ultimately the Supreme Court ([2017] IESC 31) which on 25th May, 2017 rejected the claim. The ef......
  • The Law Society of Ireland v The Motor Insurers Bureau of Ireland
    • Ireland
    • Supreme Court
    • 29 April 2016
    ...Court that it is unlikely that the claims can be met otherwise than from the Fund.’ The judgement of the High Court is to be found at [2015] IEHC 564. It was appealed to the Court of Appeal and the judgement thereof is to be found at [2016] IECA 60. There are three separate judgements from ......

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