Judgments - White (A.P.) v. White and The Motor Insurers Bureau

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    39. Under an agreement dated 21 December 1988 between the Secretary of State for Transport and the MIB, the MIB agreed to provide compensation to persons who suffered personal injuries or damage to property arising out of motor car accidents where the offending vehicle, or the offending driver, was uninsured. The MIB has never put to the test whether its liability under the agreement, or any predecessor agreement, is enforceable against it by the injured third party. It has always honoured its contractual commitment. But it denies that, on the true construction of the agreement, it has any contractual commitment to compensate Brian White.

    40. The agreement contains, in clause 6, an important exception. It is on the true construction of this exception that the MIB's obligation to compensate Brian White depends.

    "6(1) 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 . . .

        (ii) knew or ought to have known that 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 Road Traffic Act 1972."

In other words, if the injured passenger "knew or ought to have known" that the vehicle was being driven while uninsured, the MIB is not obliged to compensate him for his injuries.

    41. Brian White's compensation claim was tried by Judge Potter. He gave judgment on 13 March 1997. He held, notwithstanding a good deal of evidence from which a contrary conclusion might have been drawn and mainly on the strength of a conversation between the two brothers in 1990 at which they had agreed that their practice of illegal driving should stop and that "it would be very much better for both of them to put themselves into a position where they could drive motor cars legally," that it would be "going too far to say that when he [i.e. Brian] embarked on this journey with [Shane] he knew that [Shane] at that time was not covered by insurance." But the judge held that Brian ought to have known

    "because he ought not to have got into a vehicle driven by his brother without making sure that his brother had carried out the good resolution and really had made himself a legal driver."

So the action against MIB appeared to be heading towards failure, not because Brian had known his brother was uninsured but because he ought to have known that that was the position. The judge said:

    "So I find that I cannot say that the plaintiff knew the first defendant had not done that; [but] he ought to have known, because he ought to have made sure one way or the other, and he certainly made no effort to do so."

    42. It is clear that the judge's conclusion was based on a construction of the phrase "ought to have known" in the MIB agreement that included something less than actual knowledge: "he ought to have known, because he ought to have made sure . . ."

    43. Judge Potter's judgment on 13 March 1997 did not dispose of the case. Although his finding that Brian White "ought to have known" the vehicle was uninsured appeared to bring the case within the clause 6(1)(e)(ii) exception, a point on Community law was raised. The point was based on the Second Council Directive 84/5/EEC of 30 December 1983.

    44. The purpose of the Second Council Directive was to remove, or obtain the removal of, disparities between the laws of different member states regarding compulsory insurance cover for damage to persons or property arising out of motor vehicle accidents. Article l(4) of the Directive provided, so far as relevant for present purposes:

    "Each member state shall set up or authorise a body with the task of providing compensation, at least up to the limits of the insurance obligation for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation provided for in paragraph 1 has not been satisfied . . .

    However, member states may exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury where the body can prove that they knew it was uninsured."

    45. A similar exclusion relating to "persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen" is to be found in Article 2(1).

    46. The agreement of 21 December 1988 was not the first agreement between the Secretary of State and the MIB. There had been a succession of agreements, starting with one dated 17 June 1946, under which the MIB had agreed to provide compensation for third parties injured in motor vehicle accidents where there was no insurance cover. But the agreement of 21 December 1988 was intended to implement the requirements of the Second Directive. The notes to the agreement make that clear. Paragraph 3 of the notes, referring to the requirement that compulsory insurance should cover not only personal injuries but also damage to property, said that:

    "This provision gives effect to article 1.1 of Council Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of member states relating to insurance against civil liability in respect of the use of motor vehicles."

There is nothing in the notes to explain the difference between "knew" in article l(4) of the Second Directive and "knew or ought to have known" in clause 6(1)(e)(ii) of the MIB agreement.

    47. The point taken before Judge Potter was that since he had found that Brian did not know that the vehicle and the driver, his brother Shane, were uninsured, and notwithstanding that Brian ought to have known, the terms of article 1(4) of the Second Directive covered the case. Article 1(4), it was argued, was capable of direct enforcement by victims of motor vehicle accidents, the MIB was an emanation of the state and, accordingly, Brian White could enforce article 1(4) against the MIB and claim compensation for his injuries.

    48. Judge Potter accepted this argument. In a judgment given on 12 March 1998, nearly a year after his judgment on the facts, he found in favour of Brian White. Some of his remarks in the 1998 judgment elucidate the nature of the factual findings in his 1997 judgment. He said;

    "'ought to have known' very clearly includes cases where one did not, in fact, know. I am quite satisfied that in this respect the Directive and the agreement are incompatible and the agreement must yield to the Directive. 'Or ought to have known' embraces cases of mere negligence which cannot be equated with knowledge. There would be more to be said, of course, if one were discussing knowledge and how knowledge can be imputed, but if one merely says that somebody ought to have known one is not even imputing knowledge. One is finding something quite separate and distinct."

It seems clear from this passage that the judge's finding that Brian White "ought to have known" was a finding inconsistent with actual knowledge or imputed knowledge.

    49. The MIB appealed (Sub nom Mighell v Reading) [1999] 1 CMLR 1251 on the issue of Community law and, also, on the judge's failure to find actual knowledge. As to the latter point, Schiemann LJ said, at p 1258:

    "Many a judge would I suspect have drawn different inferences from the facts but I am not persuaded that it was not legally open to the judge to draw the inferences which he did draw."

Hobhouse LJ said, at p 1269:

    "Although the finding that White believed his brother was insured and did not know that he was not was somewhat surprising, it was based upon the acceptance of White's oral evidence given at the trial and no adequate basis was shown for the conclusion that the judge was not entitled to accept that evidence if he chose to do so. The judge's finding that White ought to have known that his brother was not [insured] was clearly of the character of a finding of contributory negligence and no more; it did not amount to a finding which could amount to a finding of knowledge however widely that word was construed."

50. As to the Community law issue, the Court of Appeal held:

(i) first, that although the terms of the Second Council Directive were to be taken into account in construing the MIB agreement, nonetheless clause 6(1)(e)(ii) of the agreement effected a wider exclusion than was authorised by Article 1(4) of the Directive, and that it followed that the UK Government had failed fully to implement the Directive;

(ii) second, that the terms of the Directive did not permit direct enforcement. Francovich v Italian Republic (Joined Cases C-6/90 and 9/90) [1995] ICR 722 and Wagner Miret v Fondo de Garantía Salarial (Case C-334/92) [1993] ECR I-6911 were relied on.

    51. On the second of these points I am in full agreement with the Court of Appeal. The terms of the Second Directive were not such as to permit direct enforcement. The "body" to be given the task of providing the compensation is not identified in the Directive. Each member state is given the alternative either to set up a new body or to identify an existing body to provide the compensation. There is nothing in the language of the article to prevent a member state from entrusting the provision of the compensation to more than one body. An example suggested in the course of the hearing by my noble and learned friend Lord Mackay of Clashfern was one body to provide compensation for personal injuries and another body to provide compensation for damage to property. The Second Directive has left the form of the arrangements to the member states. In the Francovich case, the European Court of Justice said, in paragraph 11, that:

    "wherever the provisions of a Directive appear, as far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the Directive . . ."

and, in paragraph 26 that:

    "even though the provisions of the Directive in question are sufficiently precise and unconditional as regards the determination of the persons entitled to the guarantee and as regards the content of that guarantee, those elements are not sufficient to enable individuals to rely on those provisions before the national courts. Those provisions do not identify the person liable to provide the guarantee, and the state cannot be considered liable on the sole ground that it has failed to take transposition measures within the prescribed period."

    52. In the present case it is not the UK Government that is the defendant. It is the MIB. But the MIB is not identified in the Directive and the extent of its liability depends upon arrangements made between the UK Government and itself. If those arrangements do not impose liability on it, then it is not liable. Direct effect cannot, in my opinion, be given to the Directive as against the MIB.

    53. Returning to the first Community law point, the construction point, a sustained argument has been addressed to your Lordships in support of the proposition that, since the MIB Agreement of December 1988 was intended by both parties to implement the Second Directive, the meaning to be attributed to "knew or ought to have known" in clause 6(1)(e)(ii) of the agreement should be the same as the meaning to be attributed to "knew" in article 1(4) of the Second Directive. It is, of course, commonplace to say that an agreement should be construed so as to give effect to the intentions, objectively ascertained, of the parties to it. But the proposition that that commonplace principle of construction can resolve the apparent difference between "knew" and "knew or ought to have known" is not one that I find myself able to accept. I would accept that "knew" in article 1(4) can, and should, be construed so as to cover not only actual knowledge but also imputed knowledge. In a very recent case in your Lordships' House, Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170, there was an issue as to the meaning of "with the privity of the assured" in section 39(5) of the Marine Insurance Act 1906. The trial judge did not find that there had been any actual knowledge on the part of the assured but he found there had been "blind-eye" knowledge, in that the assured "did not want to know". The Court of Appeal [1997] 1 Lloyd's Rep 360 reversed the finding and were upheld in this House. My noble and learned friend Lord Hobhouse of Woodborough agreed with the Court of Appeal that "A finding of negligence to a very high degree did not suffice for a finding of privity" (paragraph 26). In my own judgment, in paragraph 116, at p 209, I tried to express the essentials of "blind-eye" knowledge:

    "blind-eye knowledge requires, in my opinion, a suspicion that the relevant facts do exist and a deliberate decision to avoid confirming that they exist . . . . The deliberate decision must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe."

    54. Whatever else may be comprehended in the word "knew" in article 1(4) on its correct construction, the word must surely comprehend blind-eye knowledge as described.

    55. At the other extreme, I would regard it as clear that "knew" does not cover inadvertence. As Lord Hobhouse said in the Manifest Shipping case, a finding of negligence cannot suffice. What then is the meaning of "knew or ought to have known" in the MIB agreement? Can the expression "ought to have known" be construed so as to exclude negligence? In my opinion, it cannot. It is the deliberate contrast between "knew" and "ought to have known" that seems to me to be conclusive. The phrase is contrasting actual knowledge on the one hand with a state of mind involving the absence of actual knowledge on the other hand. The expression "ought to have known" is a very common one in our law. It is used time and time again in a great variety of factual situations and legal claims. I do not think it is in the least ambiguous. It is always, in my experience, taken to connote negligence. Judge Potter took it to mean that. So did the Court of Appeal. A construction of "ought to have known" that excludes negligence would, I respectfully suggest, be incomprehensible to the lawyers up and down the land who have to make our law work. The justification for the construction would be that the agreement was intended to implement the Directive and that "knew" in the Directive did not include negligence. It would be more apt, I suggest, to infer that the parties intended, by using the expression "ought to have known", to include negligence and did so either under a misapprehension as to the meaning to be attributed to "knew" in article 1(4) or without properly directing their minds to the point.

    56. For these reasons I am unable to concur in a construction of the MIB agreement that would allow Brian White, notwithstanding the finding that he ought to have known the vehicle was uninsured, to recover against the MIB.

    57. I would dismiss this appeal.


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