Nawaz & Anor v Crowe Insurance Group

In this appeal we have been greatly assisted by the quality of argument which has been advanced both on behalf of the appellants and on behalf of the respondent.

The issue which is before the court is divided into two parts: first, whether notice was given to a person who was an appropriate person to receive that notice under section 152 of the Road Traffic Act 1988; and secondly, if a notice was given under that section, whether the notice was sufficient for the purposes of the section.

The appeal arises out of an alleged road traffic accident which occurred on 25 August 1998. The collision was alleged to have been between a vehicle driven by the first appellant, Mr Nisar Ahmed Nawaz, in which the second appellant, Mr Fiaz Hussain, was a passenger, and a vehicle which it is alleged was being driven by Mr Samin Chaudry.

The proceedings were in due course issued against Mr Chaudry by the appellants and they obtained a default judgment on 8 July 2000. Thereafter, separate proceedings were issued against the Crowe Insurance Group, who are the successors to those who were insuring Mr Chaudry at the relevant time.

The contention of the insurers is that they did not have any liability to the appellants. The reason was that no proper notice had been given which satisfied section 152(1) of the 1988 Act.

It is convenient to turn, first, to the terms of the provisions of the Road Traffic Act. Section 151 contains provisions dealing with the duty of insurers and persons giving security for the purpose of the Act to satisfy judgments against persons insured or secured against third party risks. If the insurers are under any liability to the appellants in this case it would be under section 151 of the Act. Section 152, however, contains exceptions to section 151. It reads:

“152(1) No sum is payable by an insurer under section 151 of this Act --

(a)

in respect of any judgment unless, before or within seven days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings, or

(b)

in respect of any judgment so long as execution on the judgment is stayed pending an appeal, or

(c)

in connection with any liability if, before the happening of the event which was the cause of the death or bodily injury or damage to property giving rise to the liability, the policy or security was cancelled by mutual consent or by virtue of any provision contained in it, and also --

(i)before the happening of that event the certificate was surrendered to the insurer, or the person to whom the certificate was delivered made a statutory declaration stating that the certificate had been lost or destroyed, or

(ii)after the happening of that event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy or security, the certificate was surrendered to the insurer, or the person to whom it was delivered made a statutory declaration stating that the certificate had been lost or destroyed, or

(iii)either before or after the happening of that event, but within that period of fourteen days, the insurer has commenced proceedings under this Act in respect of the failure to surrender the certificate.

(2)

Subject to subsection (3) below, no sum is payable by an insurer under section 151 of this Act if, in an action commenced before or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration --

(a)

that, apart from any provision contained in the policy of security, he is entitled to avoid it on the ground that it was obtained --

(i)by the non-disclosure of a material fact, or

(ii)by a representation of fact which was false in some material particular, or

(b)

if he has avoided the policy or security on that ground, that he was entitled so to do apart from any provision contained in it.

(3)

An insurer who has obtained such a declaration as is mentioned in subsection (2) above in an action does not by reason of that become entitled to the benefit of that subsection as respects any judgment obtained in proceedings commenced before the commencement of that action unless before, or within seven days after, the commencement of that action he has given notice of it to the person who is the plaintiff (or in Scotland pursuer) in those proceedings specifying the non-disclosure or false representation on which he proposes to rely.

(4)

A person to whom notice of such an action is so given is entitled, if he thinks fit, to be made a party to it.”

It will be observed that the effect of section 152(1) is that if there is no proper notice served on an appropriate person for the purposes of the section, then the liability of an insurer comes to an end. The section itself explains the purpose of the notice which is required. This is because, as the provisions of subsection (2) and subsection (4) make clear, there are steps which an insurer can take to protect itself from being faced with liability because a judgment given against an insured where it would be entitled either to avoid the policy under which it provided insurance by seeking a declaration as indicated in subsection (2) or by exercising its right under subsection (4) to be made a party to the action.

The provisions antecede the 1988 Act. In those circumstances it is not surprising that there have been a number of authorities in which the provisions of what is now section 152 or its predecessors, are considered. Fortunately, however, for present purposes it is not necessary to go through all the previous decisions since, with one exception to which it will be necessary to refer, the present state of the authorities insofar as they deal with the matters that arise in this appeal are admirably summarised in the judgment of Kennedy LJ in Wylie v Wake [2001] RTR 291, in relation to which we also have a transcript (Case No A2/2000/0394). At paragraph 25 of that judgment Kennedy LJ deals with case of Desouza v Waterlow [1999] RTR 71, and the judgments of Roch LJ and Cazalet J. Kennedy LJ initially refers to page 81 where Cazalet J said:

“In my view, notice in any particular case is a matter of fact and degree and will turn on the extent to which the insurer has been made aware of the background circumstances and of the position of the claimant in regard to the taking of proceedings. Such notice can be given orally or in writing. The essential purpose of the requirement of notice is that the insurer is not met with information, out of the blue, that his insured has had a judgment obtained against him.....

.... it seems to me that by stating his position as he did in those communications the plaintiff made wholly clear the course which he was proposing to take.”

Kennedy LJ then refers to a passage in the judgment of Roch LJ at page 82:

“The insurers, through their counsel Mr Astor, argue that the interpretation of section 152(1)(a) turns on the use of the word 'the' in front of the word 'proceedings', and therefore what has to be given by way of notice to the insurers is notice of the particular proceedings brought by the third party. In my judgment, the subsection is not to be interpreted in that way. As notice of the bringing of proceedings can be given before those proceedings are commenced, that is to say at a time when the proceedings do not exist, the notice intends to commence an action against the insurers' insured. Once the insurers have that knowledge there is an onus on them to inform themselves of the precise details of the proceedings.”

Under the heading “Conclusions from Authorities”, Kennedy LJ set out five points as follows:

“(1)

To show that the insured had notice of the bringing of the proceedings there must be more than evidence of a casual comment to someone who at times acted as an agent for the insurers (see Herbert v RPA Company).

(2)

Any notification relied upon must not be subject to a condition which may or may not be fulfilled (see Weldrick and Harrington) but if the only condition is one which requires action from the recipients which they choose not to take then by making that choice they render the notice unconditional and thus effective (see Ceylon Motor Insurance Association Ltd).

(3)

The notice can be oral, and it need not even emanate from the claimant (see Harrington and Desouza). It can be given before proceedings have commenced, and it need not be specific as to the nature of the proceedings, (Desouza) or the court (see Ceylon and Harrington).

(4)

Whether in any given case it is shown that the insurer had notice of the beginning of the proceedings (as opposed to the making of a claim) is a matter of fact and degree (Desouza).

(5)

The essential purpose of the requirement of notice is to ensure that the insurer is not suddenly faced with a judgment which he has to satisfy without having any opportunity to take part in the proceedings in which that judgment was obtained (Desouza).”

The case to which I should refer in more detail, because it was an authority which Mr Vineall on behalf of the insurers paid particular attention, is Herbert v Railway Passenger Assurance Co [1938] 60 LlL Rep 143. It is unnecessary to set out the facts which were considered by Porter J in that case. It is only necessary to refer to one short, but important, paragraph of his judgment. At page 146 of his judgment Porter J said:

“But even if that is right, I think that for that purpose it must really be a notice in the sense that it is given formally as a notice, it must not be some mere piece of casual conversation. Here, I can see no reason why Mr Ackery should regard Mr Wilkinson's statement as a matter which he ought to pass on to the insurance company, or as a matter which he should remember at all. In the course of casual conversation, Mr Wilkinson, who had come up to see his former companions, mentioned that an action had been brought against him -- in a friendly casual conversation. To my mind, that can in no sense be regarded as being a notice as required by the Act. It must be something much more formal than that, something which would indicate to the company's agent, if agent he was for that purpose, that a notice was being given.”

That statement adds light to what Kennedy LJ said in his judgment at (i) as to the need for some degree of formality when giving a notice orally under section 152.

Having referred to what Porter J said in Herbert, it is advisable to return to Kennedy LJ's judgment and to cite one further passage from it. At paragraph 32 Kennedy LJ said:

“There may well be other cases in which contact, even an informal contact, shortly before the commencement of proceedings would put the insurer in the position of having notice of the bringing of the proceedings -- everything would depend on the facts of the case, but a prudent solicitor would be well advised to ensure that the insurer received written notice within 7 days after the commencement of proceedings. There can then be no room for argument.”

If ever justification for that advice was needed then it is provided by the facts of the present case. It is clear that the litigation which has taken place over whether a notice has been given in this case could so easily have been avoided if that advice had been followed. This is a second appeal at very great expense in relation to claims by the appellants which are modest. However, no written notice was given and in consequence both the District Judge before whom the matter came initially, and the Circuit Judge who subsequently had to deal with the matter, were faced with an issue which is not easy to resolve.

Having obtained judgment, the appellants sought to recover from the insurers. For that purpose they commenced proceedings. The proceedings were allocated to the fast track. The matter came for hearing before the District Judge, who concluded that adequate notice had been given. Accordingly, judgment was given in favour of the appellants.

There was then an appeal to His Honour Judge Tetlow. He allowed the insurers' appeal and came to the conclusions that the judgment in favour of the appellants had to be set side and judgment given in favour of the insurers.

In his judgement the District Judge considered the facts carefully. He focused on a conversation which took place between a trainee solicitor employed by the solicitors then acting on behalf of the appellants, and a legal secretary of a partner of the firm representing the insurers. There was no issue that the insurers had instructed the firm in question, and a partner, Mr Ward, dealt with the matter. The insurers had made it clear that the solicitors had no authority to accept service. The fact that they had not given authority to the solicitors to accept service led to a series of communications between the trainee solicitor and the legal secretary of Mr Ward. They culminated in a conversation which took place on 16 May, which was followed by a conversation on 17 May. The District Judge dealt with the earlier communications prior to those on 16 and 17 May. He said that there had been no notice given for the purposes of section 152 of the Act during the earlier conversations. Having done so, the District Judge turned to what he described as the “third element”. He did so in these terms:

“19.

So then we come to the third element which is the allegation that there was a discussion on 16 May between Mrs Idriss [the trainee solicitor] and Mrs Berry [the legal secretary]. In fact, what one has to look at is what happened on the two days: 16 and 17 May of last year.

20.

Both of them gave evidence that it was their employers' standard practice for all conversations to be subject to a file note. That, of course, is good practice and I am sure that firms such as these would have such a practice and I am sure that the employees do their utmost to comply with that practice but we all know that errors are made. We all know, in practice, if you are having a conversation you put the phone down and the thing rings again. In fact, in passing, that was one of the great delights of being appointed District Judge: one has a phone on one's desk which never rings; it is one's servant, not one's master.”

In a way the District Judge was an deal judge to try this sort of case. He obviously had been a solicitor for a number of years and he knew very well what happened in solicitors' offices such as the one in which he was working. He went on:

“21.

We all know that, on occasion, calls are made but notes are not made. So dealing, firstly, with Mrs Idriss's notes of the conversation. She put in her note of 16 May that she rang and spoke to Mr Ward's secretary. She specifically wanted to obtain the address of the third party. According to that note the secretary said that she would check the file and come back to her. In any event, the secretary did not come back to her but she rang on the following day and she was then given the forename of the third party and the address, which she had already got when she and Mr Ward had previously discussed this, confirmed and, indeed, she got a phone number.

22.

The evidence of Mrs Berry in relation to the second conversation (that is 17 May) is set out at page 242. That is very similar, in fact, to the content of Mrs Idriss's note of the 17th May conversation. If that was the only telephone conversation which took place between Mrs Idriss and Mrs Berry, it is quite clear that the note dated 17 May made by Mrs Berry is incomplete. She says that she would not release information as to the address of a client without specific authorisation. That is instilled into legal secretaries from the point that they join a firm: they know full well that it is privileged information. She was quite clear that she would have sought authorisation and, of course, that note does not say that so it must be incomplete in that regard. It is difficult indeed to believe that Mrs Berry had asked Mrs Idriss to hang on while she obtained confirmation. Had Mr Ward been there it might have been a different matter. She would simply have called through to him and said, 'Is it all right if I give them the third party's details', and Mr Ward would have said, 'Yes'. But, of course, Mr Ward was not there. She would have to take the file off to somebody else and somebody else is not going to approve the release of that information without checking the file carefully to make sure that it could be done and, again, there is no reference to that.

23.

Mrs Berry accepted there may have been another telephone call and that is entirely consistent with what Mrs Idriss said. I am quite satisfied that the conversation on 16 May referred to by Mrs Idriss, and detailed by Mrs Idriss in her note at page 222 of the bundle, did take place. There is no suggestion that that is in any way fabricated. That note was clearly there on 30 August when the issue of failure to serve pursuant to section 152 first reared its ugly head and Mrs Idriss, very sensibly, went along to see Mr Bancroft and, no doubt, he checked the file, saw the May 16th note, heaved something of a sigh of relief and wrote to Keoghs [the insurers' solicitors] immediately in the letter which is at page 178/179 referring to that conversation. So I am entirely satisfied that the conversation did take place. The note is quite clear: 'Telephone call to Keoghs'; Damien Ward not in until Thursday; told secretary we are now issuing and therefore need third party's address; she will check their file and come back to us; Keoghs not got initial or name of third party; they will need to get permission to contact the insured today and find out who the insurers are in this case'. I am satisfied that is an accurate record of the conversation and Mrs Idriss gave evidence and I accept that she made that note immediately after the conversation. It really was not a very long conversation; it did not need to be; it was not even separately timed; it would be a routine telephone attendance but the note was quite clear: 'We are now issuing'.”

The District Judge went on:

“24.

That conversation is quite clear notice that proceedings are to be commenced and, indeed, proceedings were subsequently brought within a matter of three weeks or so, so it was clearly those proceedings which were referred to. I do not believe that when Mrs Idriss rang to speak to Mrs Berry she was intending to give a section 152 notice. She indeed accepted that, at the time she made that call, she did not appreciate the import of giving notice under section 152 and, of course, she did not have to have made that call with the intention of giving that notice. What she has to have done is to have communicated that she was intending to bring those proceedings and I am satisfied that that call did take place.”

As was clear from Kennedy LJ's judgment, to which I referred in detail earlier, issues of this sort are largely issues of fact. Those findings by the District Judge are findings which it is very difficult to change in this court. We have been shown the transcript of the evidence given by Mrs Idriss and Mrs Berry relating to this matter. While the transcript is not entirely clear, in my judgment it strongly supports the findings to which the District Judge came.

However, the insurers decided to appeal to the Circuit Judge. The first matter that was in issue was whether the insurers had given authority to their solicitors to receive a notice, assuming proper notice had been given. On this point, to a substantial extent, the judge was the author of his own decision in favour of the insurers. It is not necessary for me to go into it further. Very properly the insurers now accept that the solicitors whom they engaged would have been authorised to receive a notice if it had been given to them. Such a concession was one which they obviously should make; it was self-evident that the solicitors did have authority to receive the notice.

However, two further points were found in favour of the insurers by the Circuit Judge on the appeal. The next point with which it is convenient to deal is the judge's conclusion that Mrs Berry had no authority to receive the communication of a notice from the solicitors acting on behalf of the appellants. This argument was approached by the respondents on the basis that Mrs Berry was some form of sub-agent. Complicating this issue by raising issues of sub-agency throws no illumination upon the issue which is involved. Clearly whether notice is given to the insurers direct or to a firm of solicitors engaged by the insurers, an oral notice cannot be given to someone who is inappropriate and to whom it is unreasonable to give a notice. So a notice cannot be given to a janitor employed by the solicitors or a janitor employed by the insurance company. But a legal secretary is the sort of person to whom some notice can be given. The argument which is before us is whether in the circumstances of this case it was reasonable to give a section 152 notice to Mrs Berry.

On the hearing of the appeal, according to his judgment, the Circuit Judge regarded it as being critical that Mrs Idriss had not told Mrs Berry to give a message to the absent Mr Ward. With respect to the judge, that in my view was not the critical question. The critical question was whether Mrs Berry was an appropriate person to whom to give notice.

As is apparent from the judgment of the District Judge, it was the clearly established practice of Mrs Berry to take down a note of things that she was told. If she was told that proceedings were commenced, it could be reasonably concluded that that was an appropriate way of giving notice to Mrs Berry since if she complied with her own practice notice to her would be notice to Mr Ward. The District Judge considered that she was a person to whom it was appropriate to give notice. Speaking for myself, I consider that the Circuit Judge on the appeal was wrong to interfere with the decision of the District Judge on the evidence in a matter of this sort.

Everything depends upon the circumstances. Legal secretaries may be skilled in dealing with communications of this sort. Mrs Berry had been working for this particular partner for five years; she had been working as a legal secretary for seven years. It seems to me that nobody in the firm would have criticised Mrs Berry if she had said, “I received a notice today from Mrs Idriss that proceedings are going to be commenced and made a note to that effect”. Nobody would have said: “You should have said to the solicitors on the other side: 'I am not authorised to receive that notice'.” It seems to me that it was well within her authority and reasonable for her to receive that notice.

However, a more telling point was taken by the Circuit Judge (although it was not a matter subject of the appeal to him) as to the sufficiency of the notice. Mr Vineall advanced a very cogently reasoned argument for suggesting that the judge was right to come to the conclusion which he did that the notice which was given was insufficient. This follows from the fact that Mrs Idriss did not appreciate the importance of giving a notice. If she had appreciated the significance of giving a notice, she would no doubt have been more specific in relation to what she said to Mrs Berry. But what she said was linked to the fact that the appellants' solicitors had decided that the time had come to commence proceedings. For that purpose they needed details in order to ascertain the identity of the defendant which was more likely to be known by the insurers' solicitors than anyone else. Mrs Idriss therefore, reasonably, rang the insurers' solicitors to try to find those details. She stated clearly that proceedings were about to be commenced. Because she was unable to give information on her own authority about the defendant, Mrs Berry enquired of someone as to whether it was in order for her to give the details. She then did so. It is true, as Mr Vineall submits, that the focus of the telephone call would therefore be to a significant extent on obtaining the details. But it equally made absolutely clear that proceedings were to be commenced. It seems to me, that being so, that the District Judge was entitled to come to the factual conclusion that sufficient notice had been given. Mr Vineall said that it had to be the sort of information that would “ring bells” for Mrs Berry. It seems to me that, for a legal secretary of a partner acting on behalf of insurers to be told that proceedings are about to commence, is something that should ring bells. Unfortunately, as the District Judge understood, on this occasion Mrs Berry did not make the record she normally would. It is as a result of that factor this issue arose.

The District Judge, in my judgment, was therefore entitled to come to the decision which he did. Fortunately, from the insurers' point of view, this is not a disaster. The claim, as I have indicated, in any event is not a large claim. But quite apart from the fact that the claim is not large is the fact that the Civil Procedure Rules now confer ample discretion upon the court to avoid insurers suffering undue hardship because of their failure to appreciate in time that a notice had been given. The insurers, rightly or wrongly, have reason to suspect in this case that the claim which has been made is a dishonest one: that there has been collusion between those involved to put forward a claim when there is no justification for it. The insurers should be entitled to investigate whether that is the position or not. At the present time judgment has been given in default against the third party, Mr Chaudry. However, this court can set aside that judgment. If this is something which the insurers require, I would certainly be in favour of so doing. In addition, the court can make an order the result of which will be that the insurers become second defendants in those proceedings. Again I would make that order so as to enable justice to be done. I have no hesitation in making those orders because Mr Morgan, who helpfully referred to the relevant provisions of Part 13, Part 19, Part 20, together with Part 40 of the Civil Procedure Rules, which are all apposite here, concedes that such an order can be made by this court and accepts in the circumstances that it would be appropriate so to do.

Accordingly, I would allow the appeal, set aside the judgment made by His Honour Judge Tetlow and make the order that I have just indicated in the main proceedings, if that is something which Mr Vineall invites the court to do on the insurers' behalf.

LORD JUSTICE KENNEDY: I agree. It is important that anyone acting for a claimant in a personal injuries claim who hopes ultimately to rely on section 151 of the Road Traffic Act 1988 gives clear notice to the relevant insurers as required by section 152(1)(a). The reason for the requirement of notice is obvious. The insurers need to know that proceedings are being commenced so that at the proper time they can have the opportunity, if so advised, to take an active part in those proceedings.

In this case the solicitors acting for the insurers made it clear to the claimants' solicitors that if and when proceedings were issued, the proceedings should be served on the defendant but copied to the solicitors acting for the insurers. If that had been done, no problem would have arisen. It was not done. So what the claimants, through Mr Morgan, now have to rely on is a telephone call by a trainee solicitor, Mrs Idriss, to Mrs Berry, the secretary to a solicitor acting for the insurers, in which Mrs Idriss sought information as to the address of the defendant and explained that request by saying she was now issuing.

Mrs Berry received authority to release the information, and it was supplied. The District Judge found that what was said was sufficient for the purposes of section 152(1), and I would not go behind that finding. But it lacked the formality that Porter J had in mind when he said in Herbert at page 146 that a degree of formality was required. In reality the inadequacy of the notice was demonstrated by the fact that the information given to Mrs Berry never seems to have arrived with the partner for whom she worked and thus to the insurers, who did not have the opportunity to join in the action. If clear and timely notice is not given, preferably in writing, and probably by sending to the insurers or their solicitors a copy of the claim form, the insurers are in fact left in the dark as to the commencement of proceedings and there will then almost always be some further unnecessary litigation, part, if not all, of the costs of which may well have to be borne by those responsible for the inadequacy of the notice.

LORD JUSTICE SCOTT BAKER: I agree with both judgments.

Appeal allowed;

Claimants to have costs before District Judge, but not thereafter;

Judgment of His Honour Judge Tetlow to be set aside; the costs of doing so to be costs in the case;

Insurers to be joined in action as Second Defendants;

Second Defendants to have liberty to apply to set aside order for deemed service.