The Law Society of Ireland v The Motor Insurers' Bureau of Ireland

• Jurisdiction: Ireland
• Judge: O'Donnell J.,Mr. Justice Clarke,Mr. Justice John MacMenamin
• Judgment Date: 25 May 2017
• Neutral Citation: [2017] IESC 31
• Date: 25 May 2017
• Court: Supreme Court
• Docket Number: Supreme Court No: 2016/45 [Appeal No: 45/2016]

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)/Respondent

AND

THE MOTOR INSURERS' BUREAU OF IRELAND

Respondent (By Order of the Court)/Appellant

[2017] IESC 31

O'Donnell Donal J.

Clarke J.

MacMenamin J.

Denham C.J.

O'Donnell Donal J.

McKechnie J.

Clarke J.

MacMenamin J.

Charleton J.

O'Malley Iseult J.

Supreme Court No: 2016/45

[Appeal No: 45/2016]

THE SUPREME COURT

Liability – Compensation – Motor accidents – Appellant seeking to appeal against Court of Appeal order – Whether appellant was obliged to compensate

Facts: An appeal to the Supreme Court was concerned with the potential liability of one or other of the Insurance Compensation Fund or the respondent/appellant, the Motor Insurers’ Bureau of Ireland (MIBI), in respect of the compensation of parties injured in motor accidents due to the negligence of drivers who had policies of insurance with Setanta Insurance company in circumstances where that company is insolvent. The High Court (Kearns P), by order dated the 27th April, 2015, directed that the claim be maintained by the claimant/respondent, the Law Society, as representative of the interests of potential plaintiffs. On the substantive 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 following points: 1) Whether the MIBI Agreement may properly be construed so as to impose liability or potential liability on insurance underwriters which are party to the MIBI Agreement to pay out in respect of claims against persons who were insured with Setanta at the time of its entering into liquidation in April 2014; 2) The correct principles to be applied in construing the MIBI agreement, whether it be a private agreement or an administrative arrangement between Government and the motor insurance industry, with particular reference to the influence of statutory provisions on the proper interpretation of the language thereof; 3) If the MIBI is so liable, 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 Insurance Act 1964 authorising payments out of the Insurance Compensation Fund “only if it appears to the High Court that it is unlikely that the claims can be met otherwise than from the Fund.”

Held by O’Donnell J, Denham CJ, McKechnie J, Charleton J, and O'Malley Iseult J concurring, that the Agreement must be interpreted as applying only to the limited class of cases as asserted by the MIBI and does not extend generally either to cases where an insurer is insolvent, or indeed to all cases in which a claim has not been satisfied within 21 days.

O’Donnell J held that the Court would allow the appeal, and set aside the declaration made in the Court of Appeal. Clarke J and MacMenamin J also handed down dissenting judgments in the matter.

Appeal allowed.

Judgment of O'Donnell J. delivered the 25th of May 2017

1 The legal ideal aspires to clarity, certainty and precision, but much of the business of the courts, particularly in the interpretation of contracts or statutes involves a consideration of ambiguity. Ambiguity however is not solely a feature of language. Rubin's Vase is an image used in psychology but now well known. It is an ambiguous form that can be seen either as a vase or two symmetrical faces, but not both. Similarly, Wittgenstein apparently used an ambiguous image in the nature of a line drawing which could be viewed either as a rabbit or a duck to illustrate a distinction he sought to make between ‘seeing that’ and ‘seeing as’. The provisions of the Motor Insurers' Bureau Agreements (‘the Agreement’) with respective Ministers for Transport between 1955 and 2009, are a much more humdrum example. But, as the extensive judgments in the High Court and Court of Appeal, and the detailed arguments in this Court all show, they too are ambiguous and their interpretation is to some extent also dependent on perception.

2 From the point of view of a person involved in a road traffic accident, and who seeks compensation from a driver who is under a legal obligation to have insurance against the risk of injury caused by such an accident, there is no relevant distinction between those cases undoubtedly covered by the MIBI Agreement of the uninsured or untraced driver or the drivers where cover has been repudiated, and the circumstances considered here, where the negligent driver has the benefit of an insurance policy, but the insurance company is insolvent and unable to provide the indemnity which it agreed. To the injured party, his lawyer and, perhaps, a Government minister concerned with public policy, these represent different ways in which for the victim of an accident, the reality of recovery can fall short of the promise of compulsory insurance of road vehicles. To an innocent party whose claim succeeds but who does not receive compensation, it is a matter of irrelevance precisely why an insurance policy is not available to cover the claim or all of the claim, and accordingly entirely sensible that a provision, in this case in the shape of an agreement with the motor insurers, should provide a safety net which ensured that injured claimants were not left uncompensated. From the perspective of a motor insurer, there is however a very significant difference between the industry accepting responsibility for compensation of claimants whose injuries are caused by an uninsured (or untraced) driver as a result of an accident, and on the other hand accepting liability for injuries caused by drivers who have insurance policies with a company which has become insolvent. The first is a risk which can be assessed, and indeed managed by encouraging enforcement of the law, and can be provided for by being priced into the premiums charged to customers. It will always necessarily be a fraction of the total claims exposure of a company and because it is spread across the market, it will have little competitive impact. As the evidence in this case shows however, acceptance of an obligation to make good claims which were required to be met by an insurer which has since become insolvent is of an entirely different magnitude and which could easily put at risk the solvency of the remaining insurers. The question for this Court is whether or not the Agreement is to be interpreted as covering claims to be met by an insolvent insurer. That in turn involves considering what the parties to the Agreement are to be understood to have meant when they made the operative Agreement in 2009, itself a successor to earlier agreements dating back to 1955. That task involves a consideration of the language used and the background facts, conscious also that such matters may take on a different complexion depending on the vantage point from which they are viewed.

3 This case has been the subject of detailed consideration in the High Court (Hedigan J.) ( [2015] I.E.H.C. 564) and in three concurring judgments in the Court of Appeal ( [2016] I.E.C.A. 60). The proceedings did not involve oral evidence, cross-examination or any dispute on the facts. However, while the facts are not in controversy, a dispute has raged over the manner in which such matters should be interpreted, and in particular the weight to be given to certain factors. I gratefully adopt therefore the account of the facts set out in the judgment of Mr. Justice Clarke. Accordingly, it will I hope be sufficient to identify the factors which I consider to be relevant and explain why on balance I have come to the conclusion that in this case the appellant's (‘the MIBI’) interpretation of the Agreement is correct.

The Factors

4 The relevant factors looked at neutrally, appear to be as follows:

(i) The broad language of the Agreement, and in particular clause 4;

(ii) The payment by the MIBI of certain claims in respect of the equitable insurance companies;

(iii) The manner in which similar language in the UK agreement has been referred to in certain judgments;

(iv) The terms of a note included in the accounts of the MIBI for 2012 and 2013;

(v) The terms of a memorandum of Government in 1964 obtained from the National Archives;

(vi) The provisions of s.3 of the Insurance Act 1964 (as amended) and as re-enacted as s.3(7) of the Insurance Act 2011;

(vii) The headings of the MIBI Agreement;

(viii) The interpretation of the Agreement attributed to the parties namely, the MIBI and the Minister;

(ix) The terms of the Agreement providing for the operation of the Agreement in any particular case, and in particular clause 3;

(x) The Memorandum of Association of the MIBI;

(xi) Considerations of commercial common sense;

(xii) The provisions and operation of the 1964 Act.

5 I think it is accepted that factors (i) – (v) broadly speaking favour the interpretation advanced by the Law Society, namely that the Agreement binds the MIBI to satisfy judgments obtained which have not been honoured in whole or in part by reason of the insolvency of an insurer. Factors (vii) to (xii) broadly speaking are in favour of the interpretation advanced by the MIBI, namely that that is, that the Agreement is limited to the satisfaction of judgments obtained in respect of uninsured and untraced drivers. Factor (vi) is relied on by both parties in support of their respective interpretations.

6 In my view however, it is not a simply question of assigning these factors to either side of the argument and explaining the weight which it is considered should be attributed to each factor...