Phillips v Rafiq & Anor

The issue in this appeal is this: is the appellant, the Motor Insurers’ Bureau (“M.I.B”) liable upon the proper construction of the Uninsured Drivers Agreement of 1999 to satisfy any judgment obtained against the first defendant in this action brought by Mrs Louise Phillips, the widow of the late Neville Phillips, on her behalf and on behalf of his dependents, for damages under the Fatal Accidents Act 1976 in circumstances where the deceased was killed in a road traffic accident and where he knew that he was being carried as a passenger in the vehicle concerned when it 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 1988. This is the M.I.B’s appeal against the declaration made on 11th May 2006 by His Honour Judge Seymour Q.C. sitting as an additional judge of the Queen’s Bench Division that the Bureau is so liable.

The salient facts are not in dispute. Mr Phillips acquired the vehicle concerned, a Fiat Marea, registration number S394MTH, under a conditional sale agreement dated 25th November 2001. At the time he arranged temporary insurance cover which was valid until Christmas Day 2001. That expired and Mr Phillips neglected to take steps to continue the insurance on the motor car and his use of it thereafter was uninsured.

On 27th August 2002 Mr Phillips was in the Birmingham area assisting his friend, Mr Mohammed Rafiq, the first defendant in the action to plaster and paint a shop belonging to members of Mr Rafiq’s family. When the work was finished Mr Phillips began the drive back to London but via Walsall where they collected two female relatives of Mr Rafiq for a lift back to London. They sat in the back of the car. Mr Rafiq took over the driving from Walsall. He was driving on the M25 motorway near Potter’s Bar at about 3 a.m. on the morning of 28th August 2002. It would appear from the accident reconstruction that he lost control of the vehicle probably because he fell asleep. The car veered into the central crash barrier and overturned. Mr Phillips was in the front passenger seat, possibly not wearing a seat belt. He suffered such serious injuries that he died in hospital later that day. The two young girl passengers were also killed. Mr Rafiq survived. He was later convicted of driving without due care and attention.

Although Mr Rafiq had a policy of motor insurance which covered his driving of his own vehicle, that policy did not cover his use of Mr Phillips’ vehicle. Mr Phillips did not trouble to ask Mr Rafiq whether he had cover to drive and the judge had no difficulty in finding that Mr Phillips knew or ought to have known that he was being carried in the vehicle when its use was uninsured. There is no appeal against that finding of fact.

Mrs Phillips brings her claim under the Fatal Accidents Act but deliberately makes no claim on behalf of the estate under the Law Reform (Miscellaneous Provisions) Act 1934. She sought a declaration that the M.I.B. were liable to satisfy any judgment obtained by her against Mr Rafiq who played no part in the action. His negligence is not disputed by the M.I.B.

The defence of the M.I.B. is that the claim depends wholly upon whether the deceased would have been entitled to recover his damages from the Bureau had he not died. It is averred that the M.I.B. would not be liable to satisfy any award made in his favour because he had voluntarily allowed himself to be carried in the vehicle when he knew or ought to have known that the vehicle was being used without proper insurance being in force. It is contended that if the M.I.B. would not have been liable to him, it could have no residual liability to the claimant whose entitlement under the Fatal Accidents Act is derivative of and dependant upon the viability of the claim the deceased would have had if he lived. If he could not recover, she could not recover.

The answer depends upon the proper construction of clause 6.1(e) of the Uninsured Drivers’ Agreement which provides an exception to the M.I.B’s obligation to satisfy compensation claims in these terms:

“Clause 5 [obliging the M.I.B to satisfy any judgment against the driver] does not apply in the case of an application made in respect of a claim of any of the following descriptions …

(e)

a claim which is made in respect of a relevant liability described in paragraph (2) [it being common ground that this is such a relevant liability] by a claimant who, at the time of the use giving rise to the relevant liability was voluntarily allowing himself to be carried in the vehicle and, either before the commencement of his journey in the vehicle or after such commencement if he could reasonably be expected to have alighted from it, knew or ought to have known that –

(i)

…

(ii)

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 1988 Act, …”

“Claimant” has been defined in the Agreement as follows:

“In this Agreement, unless the context otherwise requires, the following expression shall have the following meaning –

“Claimant” means a person who has commenced or who proposes to commence relevant proceedings and has made an application under this Agreement in respect thereof.”

It is common ground between the parties that the proper approach is, of course, the enunciation of principle expressed by Lord Hoffman in I.C.S. Ltd v West Bromwich B.S. [1998] A.C. 896, 912:

“(1)

Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2)

The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3)

The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. …

(4)

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: (see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749).

(5)

The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in The Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:

". . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."”

Our attention was also drawn to R (Westminster City Council) v National Asylum Support Service [2002] UKHL 38 [2002] 1 W.L.R. 2956 where Lord Steyn explained in paragraph 5:

“The starting point is that language in all legal texts conveys meaning according to the circumstances in which it was used. It follows that the context must always be identified and considered before the process of construction or during it. It is therefore wrong to say that the court may only resort to evidence of the contextual scene when an ambiguity has arisen.”

The Road Traffic Act 1930 made it compulsory for motor vehicles to be insured against third party risks yet the Act gave no protection to those third parties where the negligent motorist had failed to comply with his statutory obligation to insure. That lacuna was filled in 1946 by motor insurers setting up the M.I.B. to satisfy judgments where the use of the vehicle should have been covered by contracts of insurance under the Road Traffic Acts. All motor insurers are members of the Bureau. The Bureau’s funds are obtained from levies charged upon insurers and so come from the premiums which are charged by those insurers to members of the public. The obligations of the M.I.B. arise from agreements made with the Minister of Transport, now the Secretary of State for the Environment, Transport and the Regions. Agreements were made in 1946, 1971, 1972, on 21^st December 1988 ( “the 1988 agreement”) and on 13th August 1999 (“the 1999 Agreement”).

Our attention has also been drawn to the second Council Directive of 30th November 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles, (84/5/EEC). One of the preambles recites:

“Whereas it is necessary to make provision for a body to guarantee that the victim will not remain without compensation where the vehicle which caused the accident is uninsured … whereas, however, Member States should be given the possibility of applying certain limited exclusions as regards the payment of compensation by that body …”

Article 1.4 then provided:

“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 … a vehicle for which the insurance obligation … 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 when the body can prove that they knew it was uninsured.”

We were referred to White v White [2001] 2 A.E.R. 43 where the House of Lords had to interpret the exclusion clause in the 1988 Agreement in the light of this Directive. I do not gain much assistance from this authority. The factual issue was quite different: in essence the issue was whether the passenger knew or ought to have known that the driver of the vehicle was not insured if he was merely careless or negligent, giving no thought to the question of insurance even though an ordinary prudent passenger, in his position and with his knowledge, would have made enquiries. To quote from the headnote:

“A strict and narrow interpretation of what constituted knowledge for the purpose of art. 1 was reinforced by the subject matter, namely compensation for damage to property or personal injuries caused by vehicles. Proportionality required that a high degree of personal fault had to exist before it would be right for an injured passenger to be deprived of compensation. … As the MIB agreement was intended to give effect to that Directive, the phrase “knew or ought to have known” in clause 6(1)(e)(ii) bore on conventional principles of interpretation, the same meaning as “knew” in art. 1.”

Whilst, therefore, the Directive is obviously part of the relevant background, this aspect of it and the decision in White v White hardly throws much light on the controversy we have to resolve.

More to the point are the terms of the 1988 Agreement and the extent to which the 1999 Agreement differs from it. I must, therefore, examine those differences, though not exhaustively. These are the major points:

This was the second round of a gladiatorial contest between Mr McKeon for the M.I.B. and Mr Ritchie for dependants of a deceased passenger. They first locked horns in the Altrincham County Court on 18^th May 2004 when His Honour Judge Tetlow found for the M.I.B. in Sheldon v Goldstraw. Judge Seymour declined to follow that decision. The nub of his judgment was this:

“30.

It seems to me that the basic approach to the construction of any document, in the light of the guidance of Lord Hoffmann to which I have referred, is to look at what it actually says. That must be the logical starting point. While a document must be construed against the background of the relevant circumstances in which it was made, one should not start from the position that the answer to the proper construction of the document lies in the background circumstances and that little or no account need be taken of the wording of the document. Moreover, as it seems to me, where the relevant words of a document appear on their face to have a clear and unambiguous meaning that is a powerful aid to that construction. There must be a certain weight to be attached to the consideration that the parties meant what they appear clearly to have said. In the present case the wording of the definition of the expression “claimant” is clear and is to the effect for which Mr Ritchie contended.

31.

I accept that the wording of the definition was introduced by the expression “unless the context otherwise requires”. One would ordinarily expect that the contingency against which the parties were seeking to guard by including some such wording was a situation in which the application of the literal definition produced absurdity or something approaching it. Mr McKeon seemed at one point rather to be submitting that the effect of the words was a somewhat Alice in Wonderland licence to the parties to interpret their definitions as they chose depending upon the result they wanted to achieve. I cannot accept that submission.

32.

It is obviously right, in my judgment, in construing the 1999 Agreement, to have in mind that it is the successor to a number of other agreements between essentially the same parties in dealing with the same subject matter. However that does not lead to the conclusion, in my judgment, that the parties to the 1999 Agreement wished to achieve in respect of passengers injured by uninsured drivers who had knowledge of the lack of insurance the same provision as was made in the 1988 Agreement. The obvious course to take had that been desired would have been simply to repeat the relevant provisions of the 1988 Agreement. The use of different wording shows plainly, as it seems to me, that it was not intended simply to reproduce the same effect as in the 1988 Agreement. The wording in the 1988 Agreement was clear as to the effect upon the claims of dependents. The changing of that clear wording, in my judgment, shows that, for whatever reason, the parties to the 1999 Agreement wished to make different provision. The different provisions made, as it seems to me, not visiting the consequences which would have ensued for a person in the position of Mr Phillips had he been the claimant upon his dependents, is not absurd or ridiculous. There could be very sound reasons of policy for wishing to achieve exactly that result.

33.

I accept the submission of Mr Ritchie that it is irrelevant to the proper construction of the 1999 Agreement that the necessary basis for a claim under the Fatal Accidents Act 1976 s. 1 is that the deceased, had he lived, would have had a claim. So far as the 1999 Agreement is concerned, the sole issue is whether the actual claimant, Mrs Phillips, satisfies the requirements of the 1999 Agreement, properly construed, which need to be met before she is entitled to have her judgment, assuming she gets one, against Mr Rafiq, settled by M.I.B. In my judgment, for the reasons which I have given, she does.

34.

For the reasons submitted by Mr Ritchie I find that the provisions of Article 1(4) of the second Motor Insurance Directive are also irrelevant to the proper construction of the 1999 Agreement. These provisions do not require any exception at all to be made under the scheme like that established by the 1999 Agreement. They simply prescribe the greatest extent of the permitted exceptions.”

Relying on Lord Steyn’s opinion set out above, Mr Worthington submits that the judge erred in starting his consideration with the literal meaning and in not first having regard to the background to assist in establishing the true meaning. He submits he erred in requiring some absurdity or ambiguity to be shown before resorting to a contextual, purposive construction. In my view it would be unfair to the judge to uphold that criticism. This was an ex tempore judgment and as such should not be subjected to close textual analysis. Read as a whole I am quite satisfied that the judge plainly did take account of the relevant background and purpose of this Agreement. In any event, it seems to me that, since permission to appeal has been granted, we must now decide for ourselves. After all interpretation is a question of law or, perhaps more accurately given the need to construe the agreement against the relevant background, a question of mixed law and fact. As the facts are not in dispute, we are as well equipped to construe the Agreement as the learned judge was.

The background to any scheme for the compensation of the victims of uninsured drivers must include the range of victims objectively likely to be within the contemplation of the contracting parties. Victims of motor accidents may be those who suffer damage to their property, many of course are those who are injured and sadly, some are killed. Victims will necessarily include not only those who survive but also their dependents who suffer the loss of income derived from the deceased. All of these victims would reasonably be within the contemplation of the contracting parties.

This claim for loss of income after the death of the deceased was brought by Mrs Phillips for herself and for the dependents under the Fatal Accidents Act 1976. S. 1 provides as follows:

“(1)

If death is caused by any wrongful act, neglect or default which is such as would (if death had not ensued) have entitled the person injured to maintain an action and recover damages in respect thereof, the person who would have been liable if death had not ensued shall be liable to an action for damages, notwithstanding the death of the person injured.

(2)

Subject to section 1A(2) below, every such action shall be for the benefit of the dependents of the person ("the deceased") whose death has been so caused.”

This statutory provision makes it clear that the claim of the dependents is separate and distinct from the claim which survives for the benefit of the estate pursuant to the Law Reform (Miscellaneous Provisions) Act 1934 which is in these terms:

“(1)

Subject to the provisions of this section, on the death of any person after the commencement of this Act all causes of action … vested in him shall survive … for the benefit of his estate.”

This distinction is well known and must have been in the minds of the draughtsmen of the M.I.B. Agreement. The Fatal Accidents Act itself does not deal with enforcement or satisfaction of any judgment obtained under it and the Act cannot, therefore, have much more bearing on the proper meaning to be given to clause 6.1(e).

The second Council Directive (84/5/EEC) is, as I have mentioned, also obviously relevant. The Agreement must be assumed to have been drafted in a way which is compliant with the Directive. One can, therefore, fairly say that the main purpose of the Agreement if it is to accord with the preamble must be “to guarantee that the victim will not remain without compensation”. But certain limited exclusions as regards the payment of compensation are permitted. The Directive is vague as to who the victim is but, in my view correctly, it was not argued that the derivative claim under the Fatal Accidents Act of dependants who suffer loss as the result of the death of a passenger in an uninsured motor car was outside the underlying purpose of the Directive. Rather, and again in my view correctly, the common ground before us was that the exclusion of such a derivative claim is permissible when the passenger has the knowledge referred to in the relevant power of exclusion in the Directive, namely:

“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 when the body can prove that they knew it was uninsured.”

But the ability to exclude both a claim by such a passenger, and his dependents, as was done in the 1988 Agreement, does not in my view indicate whether that power has been exercised again by the 1999 Agreement.

The 1988 Agreement is obviously relevant to the background to the construction of the 1999 Agreement. The material terms of the 1988 Agreement admit of no difficulty in construction. Had it still applied to this claim, then the claimant would not have been able to obtain satisfaction from the M.I.B. because under clause 6.1(e) that Agreement “the person suffering death”, the late Mr Phillips, “was allowing himself to be carried in or upon the vehicle” knowing its use was uninsured. The language is plain and the meaning is obvious. Yet the stark fact is that that formula was not adopted in 1999.

Mr Worthington’s comparative analysis of the 1988 and 1999 Agreements draws attention to the expansion of the conditions precedent in 1999 to justify the submission that, objectively considered, the 1999 Agreement was tighter than the 1988 Agreement and was certainly not more “liberal”. That may be and probably is so. But that cannot explain why the language in clause 6.1(e) is so utterly different. It is not as if the draughtsman had lost sight of the words in the 1988 version of clause 6.1(e) “the person suffering death or bodily injury or damage to property” because similar words are used to create what was in my view correctly accepted to be a wholly different exclusion that did not apply in this case in clause 6.1(c) for the “beneficiary”. Why, one asks rhetorically, were those words not carried forward into clause 6.1(e) in 1999 when they had such an important place in the structure of the exclusions in 1988?

Mr Worthington relies, of course, on the flexibility of the new definitions in 1999 because “claimant” means the person who commences the proceedings unless the context otherwise requires. In considering what that means, another issue of construction may possibly arise in that the words “in this Agreement, unless the context otherwise requires” may be ambiguous. The context may mean, as Mr Worthington contends it does, the context in which the Agreement is made, in other words, the whole background or the matrix of fact. It may, however, be that the relevant context is the context in the Agreement itself, in other words the context in which the word is used from time to time and place to place in the Agreement. For my part this does not seem to matter much. The word “claimant” must of course be looked at in the context of the sentence or paragraph in the Agreement in which it is placed to see how it fits in with the Agreement read as a whole. Mr Worthington’s construction seems to me in this case to amount to no more than an express reminder to apply the principles of construction set out by Lord Hoffmann. Both exercises always have to be undertaken. In the narrow context of clause 6 nothing leaps from the page which would force the reasonable reader to conclude that “claimant” there meant something different from the meaning of “claimant” as given in clause 1. In both exercises a significant weakness of Mr Worthington’s argument is that he cannot easily supply the alternative definition for “claimant” in respect of a claim under the Fatal Accidents Act. He suggests “deceased”. Simply to substitute “deceased” for “claimant” in clause 6.1(e) in all cases would lead to the absurd result that the injured passenger who survives is not excluded from the scheme even if he had guilty knowledge. The substitution of one word for another does not work. Also that simple substitution does not work in a claim under the Fatal Accidents Act because the deceased is not the person making the claim. It follows that what Mr Worthington seeks can only be achieved by the wholesale rewriting of clause 6.1(e) if it is to cover claims by a passenger with guilty knowledge who survives and a claim under the Fatal Accidents Act on behalf of the dependents of such a passenger if he dies.

In a teleological construction, the search is for a clear understanding of the underlying purpose in order to give effect to it. The document itself gives some indication of where to search. It begins as follows:

“13th August

Motor Insurers’ Bureau

(COMPENSATION OF VICTIMS OF UNINSURED DRIVERS)

The Text of an Agreement dated 13th August 1999 between the Secretary of State for the Environment, Transport and the Regions and Motor Insurers’ Bureau together with some notes on its scope and purpose.”

Those notes throw some light on the purpose because paragraph 1.1 tells us:

“The role of M.I.B. under this Agreement is to provide a safety net for innocent victims of drivers who have been identified but are uninsured.”

That is achieved by clause 5 but, as I have already said, it cannot serve further to elucidate who is within the contemplated range of victim. On the face of it the dependent is as much a victim as the deceased himself is.

Paragraph 3 of the notes is relied on by Mr Worthington. This deals with the “claims which M.I.B. is not obliged to satisfy” and includes:

“3.6

A claim made by a passenger in a vehicle where the loss or damage has been caused by the user of the vehicle if:-

3.6.1

use of the vehicle was not covered by a contract of insurance; and

3.6.2

the claimant knew or could be taken to have known that the vehicle was being used without insurance …”

Mr Worthington submits that the word “passenger” in 3.6 is used synonymously with “claimant” in 3.6.2. I see the force of the argument but I do not accept that this explanatory note can override the Agreement itself so as to lead to the substitution of “passenger” for “claimant” in clause 6.1(e).

Mr Worthington also submits that the contracting parties could not objectively have intended to encourage uninsured use. I cannot see that the Agreement provides any such encouragement. As it says, it provides a scheme for compensation of victims of uninsured drivers. That purpose is achieved if the dependents are seen as victims. The appellant submits it is absurd to compensate the dependents but refuse compensation to the passenger who survives badly injured with a massive claim for loss of future earnings. That may be an anomalous result but as the judge held, “There could be very sound reasons of policy for wishing to achieve exactly that result.” We simply do not know and, looked at objectively, cannot exclude a deliberate extension of protection so as to bring dependents within the umbrella of compensation. If it was thought right to indemnify dependents, then the insurers’ who entered into this Agreement must also have accepted that law abiding drivers would have to fund this additional burden.

Finally, it cannot be immaterial that this is not an Agreement made between two legally unsophisticated parties who were using their best but incompetent endeavours to reduce to writing an oral understanding which they had reached. This, on the contrary, is an Agreement between the Secretary of State on the one hand and the M.I.B. on the other. And so, looked at objectively, the teams who drafted this Agreement must be held to have a high level of knowledge of the working of the scheme in the past and of expertise over the subject matter of it. As Lord Hoffmann said, commonsense suggests that in those circumstances parties of that kind do not make flagrant linguistic mistakes in formal documents as important as this. The 1988 Agreement clearly excludes a claim of the kind brought in this action: the 1999 Agreement when construed literally, clearly included it. Nothing in the background would drive a reasonable man to conclude that the words mean something quite different from what they so plainly and obviously literally mean. A reasonable man could not confidently say that the purpose of this Agreement is to exclude a dependent’s claim. In those circumstances, the literal meaning must prevail.

For those reasons I am satisfied that the judge was correct in his interpretation and in the declaration he made. I would dismiss this appeal.

I agree.

I also agree.