Law Society of Ireland v Motor Insurers' Bureau of Ireland

• Jurisdiction: Ireland
• Judge: Mr. Justice Gerard Hogan,Ms. Justice Finlay Geoghegan
• Judgment Date: 02 March 2016
• Neutral Citation: [2016] IECA 60
• Docket Number: Court of Appeal No. 2015/522
• Court: Court of Appeal (Ireland)
• Date: 02 March 2016

[2016] IECA 60

THE COURT OF APPEAL

Ryan P.

Finlay Geoghegan J.

Hogan J.

Court of Appeal No. 2015/522

Ryan P.

Finlay Geoghegan J.

Hogan J.

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/APPELLANT

AND

THE MOTOR INSURERS' BUREAU OF IRELAND

RESPONDENT

Motor insurance – Liquidation – Payment – Appellant seeking to appeal against the High Court interpretation of its agreement with the Minister for Transport – Whether the agreement applied to drivers whose insurer was wound up because of insolvency

Facts: Setanta Insurance Company Ltd., a company registered in Malta, carried on motor insurance business in Ireland until it went into liquidation in April 2014. At the time it went into liquidation, Setanta had issued approximately 75,000 motor insurance policies, all of which were in respect of risks in Ireland. All of its policies were cancelled with effect from May 2014. The question that arose was how the outstanding claims against Setanta policyholders were to be met, in circumstances where it was clear that there would be insufficient funds available. The Accountant of the Courts of Justice sought the direction of the High Court as to whether the claims should be met by payments out of the Insurance Fund which he administers under the direction of the President of the High Court pursuant to the Insurance Act 1964, or by the appellant, the Motor Insurers Bureau of Ireland (MIBI), pursuant to its agreement with the Minister for Transport dated 2009. By order of 27th April 2015, the President of the High Court directed two questions to be decided by way of preliminary issue: 1) Whether the MIBI has a liability or potential liability to pay out in respect of claims against persons who were insured with Setanta at the time of its entering into liquidation; 2) 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 s. 3 of the 1964 Act 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?. In its September 2015 judgment, the High Court (Hedigan J) answered the questions as follows: 1) The MIBI is liable to pay out in respect of claims against persons who were insured with Setanta at the time of its entry into liquidation; 2) The High Court may not approve payments under s. 3 of 1964 Act unless it appears to it that the MIBI is unlikely to meet the claim notwithstanding its obligation to do so. The MIBI appealed to the Court of Appeal against that interpretation of its 2009 agreement with the Minister for Transport, submitting that the High Court failed to address serious issues concerning the implications of its findings as to the meaning of the agreement and its application in the case of an insolvent insurer. The respondent, the Law Society of Ireland, submitted that clause 4.1.1 of the agreement clearly encompassed a situation in which a negligent driver insured by Setanta does not satisfy a judgment or PIAB order and that MIBI?s liability in an insolvency situation was clearly captured by the broad terms of the clause.

Held by Ryan P that the question for decision by the Court was whether in the circumstances that arose out of the insolvency of Setanta, the MIBI agreement applied to drivers whose insurer was wound up because of insolvency. Ryan P was persuaded that the MIBI Agreement did mean what it appeared to say, which was that the Bureau accepted responsibility to pay whatever the circumstances of the failure to satisfy the judgment. Ryan P did not think it was possible to achieve a process of reasoning that was completely satisfactory in the sense of arriving at a result that was logically impregnable. However, Ryan P thought that a judgment in favour of the interpretation advanced by the Law Society did make sense and represented a more satisfactory reading of the agreement than that proposed by the MIBI. Ryan P was, accordingly, in agreement with the judgment of the High Court.

Ryan P held that the Court would dismiss the appeal and affirm the order of the High Court, but with some modifications of the orders. Ryan P held that a claimant is required to comply with the terms of the MIBI agreement and it follows that the only declaration that can be made in respect of the issue at 1) as set by the President of the High Court is in respect of potential liability. In respect of the issue at 2) Ryan P did not think it was necessary or appropriate for the Court to make any declaration; the jurisdiction under the 1964 Act is exercised under the terms and conditions specified by the legislation and it is not for the Court to make a general rule as to how that is to be done.

Appeal dismissed.

JUDGMENT of the President delivered on 2nd March 2016

Introduction

1 Setanta Insurance Company Ltd., a company registered in Malta, carried on motor insurance business in Ireland until it went into liquidation. At an Extraordinary General Meeting that was held in Malta on 16th April 2014, it was decided that Setanta would surrender its insurance business licence and be immediately dissolved. A liquidator was appointed on 30th April, 2014. At the time it went into liquidation, Setanta had issued approximately 75,000 motor insurance policies, all of which were in respect of risks in Ireland. All of its policies were cancelled with effect from 29th May 2014.

2 The question that arises in this case is how the outstanding claims against Setanta policyholders are to be met, in circumstances where it is clear that there will be insufficient funds available. The number of claims is estimated to be between 1,700 and 2,000. In this action, the Accountant of the Courts of Justice sought the direction of the High Court as to whether the claims should be met by payments out of the Insurance Fund which he administers under the direction of the President of the High Court pursuant to the Insurance Act, 1964 as amended, or by the Motor Insurers Bureau of Ireland, pursuant to its agreement with the Minister for Transport dated 2009.

3 The Insurance Act 1964 established the Insurance Compensation Fund. Section 3 authorises payment to be made out of the fund to a person under a policy issued by an insurer in liquidation in respect of a risk in the State, if it is unlikely that the claim can be met otherwise. The amount is limited to the lesser of 65% of the sum payable or ?825,000. Subsection (7) excludes payment out of the fund where a payment equal to the whole of the sum is made by the Motor Insurers Bureau of Ireland and restricts the amount where the Bureau has made part payment.

Insurance companies carrying on motor business in the State have had agreements with the Minister responsible for transport and road traffic since 1955. By an agreement made in March of that year, the motor insurers agreed to set up a body that would enter into an agreement with the relevant Minister to provide for payment of claims of persons injured by drivers who were not insured. Thus was born the Motor Insurers Bureau of Ireland, which mirrored a similar organisation that was then in existence for some years in the United Kingdom. The first agreement between the MIBI and the Minister was made in November 1955. That was replaced successively by subsequent agreements, each of which terminated its predecessor, but also cited as part of its terms and to be read with it the original agreement of March 1955 that is the foundation of the Bureau itself. The present operating agreement is the 2009 edition. Membership of the Bureau and compliance with the agreements is a condition of providing motor insurance in the State, under section 78 of the Road Traffic Act, 1961. Setanta was a member of the MIBI as required by the 1961 Act.

4 A central issue in the case is the interpretation of the agreement between the Bureau and the Minister. Clause 4.1.1 is the provision whereby the Bureau undertakes its liability to pay compensation. The precise terms will have to be considered in due course, but it may broadly and loosely be described for the purpose of introduction as providing that if a court judgment for damages for personal injury or death or damage to property arising out of a liability which is required to be covered by an approved policy of insurance under s. 56 of the Road Traffic Act 1961 is not satisfied, the MIBI will, subject to the provisions of the agreement, satisfy the judgment, whether or not the person is covered by an approved policy of insurance and whatever may be the cause of the failure of the judgment debtor. This is subject to a reduction for money received under an insurance policy covering the loss or damage.

5 The Accountant of the Courts of Justice raised the issue whether the claims of persons bereaved or injured or suffering loss arising out of liability covered by approved policies of insurance issued by Setanta should be provided for by payments out of the Insurance Fund or by the MIBI. By order of 27th April 2015, the President of the High Court directed to questions to be decided by way of preliminary issue, as follows:

(a) Whether the Motor Insurers' 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

(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...