Sahin v Havard & Anor

On 24^th January 2008 at 9.30 p.m. Mr Sahin was travelling along Clarence Road E5, a short distance north of London Fields, in a motor car with registered number Y238 CDC when a Vauxhall Vectra car with registered number YL06 FZV collided with him. Mr Sahin says the driver of the Vauxhall negligently caused damage to Mr Sahin’s vehicle and caused him to suffer loss, in respect of that damage and hiring a substitute vehicle, in a sum which is, rather surprisingly, said to exceed £100,000. The driver of the other car has never been identified (I shall call him “Mr X”). One might, therefore, have thought that this was a case to which the MIB Untraced Drivers Agreement of 2003 would have applied. Instead Mr Sahin has instituted two sets of proceedings.

The vehicle was owned by a car hire company, Local Contract Hire Leasing Ltd, which had hired the car to Ms Cassandra Havard. The car insurance policy insured both the hire company as owner and Ms Havard as a person driving with the permission of the car hire company. For the purposes of this appeal it is accepted that Ms Havard permitted Mr X to drive the vehicle; it is also accepted that Mr X had no insurance of his own.

Mr Sahin first obtained a default judgment against the car hire company on 23^rd July 2009 but the proceedings were discontinued because by that time the car hire company had gone into liquidation.

He then began proceedings on 31^st August 2011 against Ms Havard on the basis that she had permitted the driver to drive when the driver had no insurance. This was a breach of the statutory duty imposed by section 143 of the Road Traffic Act 1988 (“the 1988 Act”) which provides that a person must not cause or permit any other person to use a motor vehicle on a road unless there is in relation to the use of the vehicle by that other person a policy of insurance in respect of third party risks which complies with the insurance requirements of the Act.

Mr Sahin again obtained a default judgment, this time against Ms Havard, on 28^th November 2011. The insurer of the car hire company then applied to be joined as a second defendant to the proceedings and to have the default judgment set aside. Those applications came before DJ Sterlini on 17^th April 2013 who granted the insurer permission to be joined in the proceedings but declined to set aside the default judgment given against Ms Harvard.

On 20^th February 2014 Mr Sahin was granted permission to amend his particulars of claim to make a claim against the insurer. That he has now done alleging that the insurer should have paid him the amount of the default judgment pursuant to the 1988 Act but has failed to do so. He then applied for summary judgment against the insurer but DJ Parker adjourned that hearing to the trial.

When the matter came on for trial the judge, Her Honour Judge Baucher, sitting in the Central London County Court, with the help of the parties, formulated two issues for decision and left over the question whether the case should proceed to trial, until those issues had been decided. The second of these issues was whether the insurer was liable directly to Mr Sahin which in turn depended on the answer to two questions:-

whether Ms Havard’s liability to Mr Sahin was a liability which was statutorily required to be covered pursuant to section 145 of the 1988 Act which sets out the statutory requirements for motor insurance policies; and

whether Ms Havard’s liability was in fact covered by the terms of the insurance policy.

The relevant provisions are sections 143, 145, 148 and 151 of the 1988 Act as amended which are to be found in Part VI which deals with Third-party Liabilities. The most fundamental provision is section 143 which provides that it is a criminal offence to use, or cause or permit another person to use, a motor vehicle without insurance:-

Subject to the provision of this Part of the Act –

a person must not use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act, and

a person must not cause or permit any other person to use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that other person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act.

If a person acts in contravention of subsection (1) above he is guilty of an offence.

A person charged with using a motor vehicle in contravention of this section shall not be convicted if he proves –

that the vehicle did not belong to him and was not in his possession under a contract of hiring or of loan,

that he was using the vehicle in the course of his employment, and

that he neither knew nor had reason to believe that there was not in force in relation to the vehicle such a policy of insurance or security as is mentioned in subsection (1) above.”

Section 145 sets outs the requirements of a motor insurance policy:-

In order to comply with the requirements of this Part of this Act, a policy of insurance must satisfy the following conditions.

The policy must be issued by an authorised insurer.

Subject to subsection (4) below, the policy –

must insure such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person or damage to property caused by, or arising out of, the use of the vehicle on a road or other public place in Great Britain. …”

Section 147 provides for insured persons to be provided with certificates of insurance (or certificates of security) and section 148 makes provision for the avoidance of certain exceptions in policies (or securities):-

Where a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, so much of the policy or security as purports to restrict –

the insurance of the persons insured by the policy, or

the operation of the security,

Those matters are –

the age or physical or mental condition of persons driving the vehicle,

the condition of the vehicle,

the number of persons that the vehicle carries,

the weight of physical characteristics of the goods that the vehicle carries,

the time at which or the area within which the vehicle is used,

the horsepower or cylinder capacity or value of the vehicle,

the carrying on the vehicle of any particular apparatus, or

the carrying on the vehicle of any particular means of identification other than any means of identification required to be carried by or under the Vehicle Excise and Regulation Act 1994.”

Section 151 is the provision which makes the insurer directly responsible for satisfying judgments obtained by third parties against the insured:-

This section applies where, after a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, a judgment to which this subsection applies is obtained.

Subsection (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 of this Act and either –

it is a liability covered by the terms of the policy or security to which the certificate relates, and the judgment is obtained against any person who is insured by the policy or whose liability is covered by the security, as the case may be, or

it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and the judgment is obtained against any person other than one who is insured by the policy or, as the case may be, whose liability is covered by the security.

Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment –

as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum,

as regards liability in respect of damage to property, any sum required to be paid under subsection (6) below, and

any amount payable in respect of costs.

Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy or whose liability is not covered by a security, he is entitled to recover the amount from that person or from any person who –

is insured by the policy, or whose liability is covered by the security, by the terms of which the liability would be covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and

caused or permitted the use of the vehicle which gave rise to the liability.”

It is these provisions (and particularly section 151) on which Mr Sahin relies for the purpose of asserting that Ms Havard’s insurer should satisfy the judgment he has obtained against Ms Havard. As is clear, however, from section 151(2), the insurer only has to satisfy judgments in respect of a liability which is (1) required to be covered by a policy of insurance under section 145 and (2) is in fact covered by the terms of the policy. That is the reason why HHJ Baucher sought to resolve the questions set out at para 7 above.

For this purpose one goes back to section 145 which provides that the policy must insure the insured (here Ms Havard) in respect of any

The permission which Ms Havard gave to Mr X to drive the motor vehicle was a permission given in breach of the provision of section 143 of the 1988 Act that a person must not permit any other person to use a motor vehicle unless there is in force in relation to the use of the vehicle by that other person a policy of insurance complying with the requirements of the Act. There was no such policy and accordingly Ms Havard was in breach of the statutory liability imposed on her by section 143. That liability is known for short as a Monk v Warbey liability because it was in Monk v Warbey [1935] 1 KB 75 that it was first decided that a claimant injured by a vehicle driven by some person who had been permitted by the owner (or the insured) to drive the motor vehicle without any insurance could recover damages for his loss from the owner (or the insured).

So, now that Ms Havard has had a judgment given against her in respect of that Monk v Warbey liability, the question is whether that liability is a liability required to be covered under section 145 of the 1988 Act as a liability

Mr Engelman for Mr Sahin submits that giving permission to drive a motor vehicle is using that vehicle and that therefore liability for giving that permission is a liability that has to be covered by insurance. Mr McDonald for the insurer says that a liability for permitting someone to drive without insurance is not a liability which has itself to be insured under section 145. Insurance for failing to ensure that there is insurance is an oxymoronic concept for which it would be impossible to assess a premium.

Although the question which arises in this case has not (so far as counsel are aware) been decided before, there is some authority on the concept of “use of a motor vehicle” particularly in cases where passengers are concerned. In O’Mahony v Joliffe [1999] Lloyds 1R 321 Simon Brown LJ identified the central principles to be derived from the cases at page 324:-

Mr Engelman objected that the judge had failed to take into account the later cases of Bretton v Hancock [2005] EWCA Civ 404, [2006] PIQR P1 and Vnuk v Triglav (case C-162/13) of 4^th September 2014 in the Court of Justice of the European Union. Bretton was another passenger case in which Ms Bretton was a passenger in a car in which she had an interest driven by her fiancé who did not have insurance. Beatson J held that not only did she have an interest in the car, but she also had sufficient control of it on the relevant occasion to constitute use of the vehicle on her part. On appeal it was conceded that the question of user was to be determined by reference to the question whether she had an interest in the car. This court held (para 22) that the documentary evidence was only consistent with the car being her property “or at least her joint property” with her fiancé. In those circumstances there was sufficient user for the purpose of the proposed Monk v Warbey liability. The concession on which the case proceeded on that point was not made in the present case and I do not see how Bretton v Hancock can help Mr Sahin or how it takes matters further than O’Mahony.

In Vnuk the question referred was whether the phrase “the use of vehicles” in Article 3(1) of the First Motor Insurance Directive covered a case in which the defendant insured a person who struck the claimant’s ladder with his tractor while the claimant was storing hay in a hay loft in a farmyard, on the basis that the incident was not a road traffic accident. The court held (para 56):-

To my mind permitting the use of a vehicle is not the same as using the vehicle. Section 143 of the 1988 Act draws a clear distinction between the two and, as Mr McDonald pointed out, section 143(1)(b) would scarcely be necessary if “causing or permitting use” were the same as “use”. It must follow that the liability of someone who permits another to use a vehicle without an insurance policy is not a liability which is itself required to be insured under section 145 and is not therefore a liability which an insurer is obliged to satisfy under section 151.

Mr Engelman then submitted that section 145 should be construed to mean that use included permission to use because the Second Motor Directive (now consolidated into the Sixth Motor Directive but, at the time of the accident, a free-standing Directive) required insurance to be in place in respect of all those driving vehicles without permission even if they were thieves. The Second Motor Directive (84/5/EEC) of 30^th December 1983 provided in its preamble:-

persons who do not have express or implied authorization thereto, or

persons who do not hold a licence permitting them to drive the vehicle concerned, or

persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned,

As Ward LJ observed in Bristol Alliance LP v Williams [2013] QB 806 at paragraph 11, in the case of the United Kingdom the compensation body referred to in Article 1.4 and Article 2 is the Motor Insurers’ Bureau. That case, like the present case, was an attempt made by a claimant who had suffered property damage to recover its loss directly from an insurer of a defendant but it was clear that the liability for that loss was a loss required to be covered by section 145; the only question is whether it was necessary to show also that the loss was covered by the policy. It was not so covered because the policy excluded liability for loss caused by the insured’s deliberate act. The claimant therefore had no recourse to the insurer. As Ward LJ pointed out at paragraph 42, section 148 provides that any attempt to restrict the insurance by reference to the matters listed in sub-section (2) of section 148 is of no effect. One of those matters, for example, is the age or physical or mental condition of the person driving the vehicle (Mr Engelman submitted that provision might be read as rendering inoperative an exclusion of liability clause covering any drive irrespective of their age, physical and/or mental condition; but that is obviously wrong). But as Ward LJ further pointed out in paragraph 45 there is no exhaustive list of matters which cannot be excluded and other exclusions are “effective”. An exclusion for deliberate damage was held to be effective in that case. Likewise an exclusion for liability for loss incurred by someone driving a vehicle without permission will be effective as a matter of domestic law.

Ward LJ (with the agreement of McFarlane LJ and Dame Janet Smith) went on to hold, relying on dicta of Collins J in Singh v Solihull MBC [2007] 2 CMCR 1279, Andrew Smith J in Axa Insurance Co UK pt v Norwich Union Insurance Ltd [2008] Lloyds Rep IR 122 and Lord Clyde in Clarke v Kato [1998] 1 WLR 1647, that the scheme of the 1988 Act, coupled with the MIB arrangements, satisfied both the aim and spirit of the Directive and enabled the third party victims of accidents to be compensated for all damage to property and personal injuries sustained by them (para 68). This is a conclusion already reached by the European Court of Justice in Evans v Secretary of State for the Environment (case C-63/01), 2003 ECR –1 14447.

In these circumstances there is, in my judgment, no scope for construing section 145, in isolation from MIB arrangements, so as to accord precisely with the Second Motor Directive, since the aims and spirit of the Directive are complied with and there can be no suggestion that the United Kingdom has failed to implement the Directive. Mr Engelman’s argument is, therefore, misplaced.

Even if the argument had any plausibility, Mr Engelman would still have to state how the wording of the statute could be manipulated or amended to achieve the result that loss caused by any driver (even a thief) was to be covered under a system where it is the person driving who is required to be insured rather than (as in many other European systems of law – see Wilkinson v Fitzgerald [2013] 1 WLR 1776, para 13 of the judgment of Aikens LJ) it is the vehicle which is the subject of the insurance.

Mr Engelman would have to rely on the Marleasing principle [1990] ECR 1-4135 and say not merely that use includes permission to use in spite of the distinction drawn by section 143 and that exclusions prohibited by section 148 should include an exclusion in respect of persons driving a car without permission. Such a construction would offend at least three of the principles set out by Sir Andrew Morritt C in Vodafone 2 v Revenue and Customs Commissioners [2010] Ch. 77 paras 37-38 namely that:-

the construction should go with the grain of the legislation;

the construction must not be inconsistent with a cardinal feature of the legislation (here that exclusions are to be allowable if they are not prohibited); and

the construction must not give rise to important practical repercussions which the court is not equipped to evaluate.

All this is quite unnecessary when the MIB Untraced Drivers Agreement covers the situation satisfactorily. The only respects in which it can be (and slightly was) suggested to be unsatisfactory are (1) that there is a shorter time within which claims can be brought and (2) that there is a limit on legal fees recoverable in a claim against MIB which does not exist, at any rate in the same way, in respect of claims made in court. But these are considerations which cannot influence the true construction of either the Act of 1988 or the terms of the policy of insurance; they are in any event expressly contemplated in the preamble to the Second Directive and the question of costs was addressed in Evans paras 53 and 74-78.

I therefore agree with the judge that Ms Havard’s liability is not a liability required to be covered by a policy of insurance under section 145 of the 1988 Act.

The second question is whether Ms Havard’s liability is a liability in fact covered under the policy. The answer is that it is not. If it is not a liability required to be covered by the policy, it might be surprising to find that it was. In fact the policy makes the matter clear under the heading “Liability to Third Parties”:-

the Insured;

any person driving the Insured Vehicle with the permission of the Insured or on the order of the Insured; or

any person using the Insured Vehicle with the permission of the Insured.”

It is clear that Mr X was not driving or using with the permission of the insured and liability arising from that does not therefore fall within the policy.

The General Exclusions clause then puts the matter beyond doubt since it excludes liability for:-

…

Being driven by any person not permitted by the Certificate of Insurance or any Endorsement(s) attaching to and forming part of this Policy Document.”

The judge was thus correct to dismiss the claim without further ado. I would dismiss this appeal.

I agree.

I also agree.