Bennett v Stephens & Anor [2012] EWHC 1 (QB)

Case No HQ06X00932[2012] EWHC 1 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/1/2012
Before
THE HONOURABLE MR JUSTICE TUGENDHAT
Between
Anthony Nathaniel BennettClaimant(1) Leonard John StephensDefendants(2) Zenith Insurance CompanyDefendant
David Westcott QC (instructed by Withy King) for ClaimantSimon Browne QC (instructed by Beachcroft) for 1 st DefendantTim Horlock QC ( instructed by Weightmans) for MIBHearing Hearing date: 3 November 2011
Judgment
[1]The claimant in this action is a young man. On 25 October 2003 he was involved in a serious road traffic accident caused by the admitted negligence of the First Defendant, who was the driver of a car involved. The injuries suffered by the claimant are very serious indeed, but fortunately they do not affect his ability to manage his own affairs. So he is not a protected person. Faraday Underwriting Ltd assumed the Second Defendant’s responsibility for meeting the damages under a reinsurance contract. Faraday Underwriting Ltd and its successors are referred to as “the Defence Insurer”, and is to be treated as if it were the insurer of the First Defendant driver. The parties negotiated an agreement in settlement of the Claimant’s claim. The Claimant wishes there to be an order for periodical payments. The Defence Insurer is willing to agree to that.[2]The Damages Act 1996 (“the 1996 Act”) s.2 provides that: “(3) A court may not make an order for periodical payments unless satisfied that the continuity of payment under the order is reasonably secure”.[3]For that reason, and for that reason only, the case was brought before Mackay J on 14 July 2010. He heard submissions from Mr Westcott QC for the Claimant and Mr Browne QC for the First Defendant. Mackay J made two orders on 14 July, and it is pursuant to those orders that the matter comes before the court. I shall refer to them as the PP Order and the Security Order.[4]The question that I have to decide is whether the PP Order takes effect according to its terms, or whether some variation of those terms is required to reflect the concerns raised by the Motor Insurers’ Bureau (“MIB”). The MIB is a third party affected by the Order, and since it was not present or represented on 14 July, Mackay J made the Security Order providing it with an opportunity to be heard. It has made representations pursuant to that Order.[5]The MIB is a company limited by guarantee. Underwriters who are approved under the Road Traffic Act 1988 to write motor policies are required to be members of the MIB. The MIB is party to an agreement with the Secretary of State for the Environment, Transport and the Regions made on 13 August 1999 (“the 1999 Agreement”). Pursuant to that agreement the MIB pays or causes to be paid unsatisfied judgment debts entered against drivers who are uninsured.

THE JUDGMENT OF MACKAY J

[6]In a judgment dated 14 July 2010 neutral citation number [2010] EWHC 2194 (QB) Mackay J summarised the facts and the legal framework in terms which it is not necessary for me to repeat. A reader of this judgment can refer to that judgment.[7]Mackay J considered the financial position of the Second Defendant and it re-insurers, which he described in paragraph 10 of his judgment. He went on to say: “11. If matters rested there however, I would be reluctant to pronounce myself satisfied under s.2(3) without in any way denigrating the current status or stability of Faraday as a going concern, taller trees than it have fallen in the financial forest before now and unless it could claim the backing of s.2(4), which it cannot, as I am presently invited to assume, I would hesitate to say that I could sufficiently discount the risk that it might fail sometime in the next fifty years or so, which is the period I have to consider covered by the proposed order in this case. …14. So, the focus of the submissions to me realistically concentrated on what might be called the last line of defence, the Motor Insurers’ Bureau or MIB. Where the MIB has in the past unequivocally accepted responsibility for funding a periodical payments order, a good example of this is Thacker v Steeples, Cox J’s decision on 16 May 2005, a case in which it was a Defendant at his own insistence, it was held, notwithstanding that it was not a body falling within s.2(4) of the Act, that continuity of payment by it was reasonably secure under s.2(3). Her decision has been followed in numerous subsequent cases, including settlement approval, some of which I believe I may have made myself since that time.15. The issue therefore is, if Faraday defaulted or failed, and the prospects of recovery against insurers or a trust scheme of the Lloyds Fund are judged, as I currently am inclined to judge them, as too difficult and problematical, what are the Claimant’s prospects of making the MIB liable to make the periodical payments order in this case?... ”.[8]The MIB is not a Defendant in the present case and it was not represented before Mackay J. It is represented before me by Mr Horlock QC. But neither it, nor any other party, has applied for an order that it be joined as a Defendant.[9]At para 17 of his judgment Mckay J said: “I have had full helpful and candid arguments from counsel on both sides, but nothing from the MIB itself, and the form of the order, if I make one, may need to reflect this potential problem which I will discuss later”.[10]Mackay J then went on to consider a number of questions in relation to the MIB of which the first two are the only ones with which I am required to be concerned. At para 18 of his judgment, he asked himself two questions: “a) will the MIB still exist throughout the lifetime of this order? and b) if so will its obligations still be those which can be seen in the 1999 Agreement?[11]In respect of question (a) he concluded at paragraph 19 of his judgment that: “The risk that it would effectively disappear and not be replaced by some equivalent institutional body, in my judgment is so remote as to be incapable of being discounted entirely for present purposes”.[12]In relation to question (b) he said at paragraphs 19 and 20 of his judgment: “… As far [as] it is however true that the 1999 Agreement is itself the latest of a series of such agreements starting in 1946, and that it may in its turn be replaced by successive versions. That seems to me to be quite probable and the precise terms of such replacements are currently unpredictable, though their general thrust could be foreseen. 20. However, as Mr Westcott argues, those such as this Claimant who have in effect accrued claims against the MIB as an insurer as a last resort will retain those rights whatever any new agreement says. He directs me to clause 23.1 of the current agreement by which the predecessor, 1988 agreement, was stated to continue in force, but in relation to claims arising out of accidents occurring before 1 October 1999, which was the date when the 1999 agreement came into force. Secondly, he directs my attention to clause 4(2) which read: ‘This Agreement may be determined by the Secretary of State or by MIB giving to the other not less than 12 months’ notice in writing, but without prejudice to its continued operation in respect of accidents occurring before the date of termination’ . Having read these provisions I have no reason to doubt the continuity of payment is reasonably secure as a result of any future deprivation, itself unlikely, of the right to have recourse to the MIB or … any equivalent body in respect of the claim that this Claimant has and which currently falls within the scope of the current agreement”. ‘This Agreement may be determined by the Secretary of State or by MIB giving to the other not less than 12 months’ notice in writing, but without prejudice to its continued operation in respect of accidents occurring before the date of termination’ .[13]Having considered a further matter which is no longer a live issue, Mackay J continued his judgment as follows:
“27… we need to discuss the form of this order with counsel. I have been shown the decision of Swift J of 8 December 2006 in Harpin v. Walsall Hospital NHS Trust. She made a periodical payments order where the Secretary of State for Health was not a party to the claim, but was the source of a payment which was to be made, and that order required notice to be given to him [,] the order being stated to take effect unless he by a specified date applied to set aside or vary its terms. In the absence of such application the order on its face expressed satisfaction of the continuity under s.2. 28. It seems to me that that device could legitimately be used in this case and that if it was, I would feel able to express my satisfaction under s.2(3) of the Damages Act 1996. I therefore need to discuss the implications of this ruling with counsel”
.

THE ORDERS OF 14 JULY 2010

[14]Following the delivery of that judgment counsel drew up the two Orders for submission to the judge. As I understand it from counsel, the precise form of the two Orders so drawn was not the subject of submissions to the Judge. He made the orders in the forms submitted.[15]The PP Order contained a number of recitals and other provisions which need not be repeated. So far as material it included the following, with the words in para 3 of the Order which have given rise to the present application being underlined:
“… AND UPON the court having determined that the continuity of the payments particularised in the schedule attached to this order is reasonably secure, pursuant to s.2(3)Damages Act 1996 because they shall be paid by the Defence Insurer or, if and to the extent that they are not paid by the Defence Insurer within 7 days of the due date, by the [MIB]… AND UPON this order and the Schedule attached hereto only coming into effect pursuant to the terms of the [Security Order] BY CONSENT IT IS ORDERED THAT: 1. The further sums in relation to future care and case management as particularised in the attached Schedule shall be paid to the Claimant by the Defence Insurer or, if and to the extent that they are not paid by the Defence Insurer within 7 days of the due date, by the [MIB]. 2. All further proceedings in this action be stayed except for the purpose of implementing the terms of this Order and the terms particularised in the attached Schedule. 3. The Claimant, the Defendants, the Defence Insurer and the [MIB] be permitted to make further application to the court and if necessary to add the Defence Insurer and the MIB as parties for the purpose of carrying the terms of this order and the terms set out in the attached schedule into effect”
.

BY CONSENT IT IS ORDERED THAT:

[16]It is pursuant to para 3 of the PP Order that this matter comes before me. But, as already noted the MIB has not been joined as a party. It does not seek to be joined.[17]The Security Order so far as material provides as follows:
“… AND UPON the Court concluding (subject to review following such hearing as may be provoked by notice being given under paragraph 2(a) below) that pursuant to paragraphs 5(1) and (2) of the Uninsured Drivers Agreement dated 13 day of August 1999, the [MIB] would be obliged to pay to the Claimant any sum payable or remaining payable if any judgment sum in this claim were to remain unsatisfied for a period of 7 days from the date upon which the Claimant became entitled to the same AND UPON the court on that account being satisfied (subject to review following such hearing as may be provoked by notice being given under paragraph 2(a) below), pursuant to s.2(3)Damages Act 1996 and rule 41.9 Civil Procedure Rules 1999, that the continuity of periodical payments, under the attached order is reasonably secure IT IS ORDERED THAT 1. A copy of this order and the [PP Order] attached hereto shall be served on the [MIB] by 4pm on 20 August 2010. 2. This Order and the [PP Order] shall take effect as Final Orders by 4pm on 17 September 2010: (a) UNLESS the [MIB], or their legal representatives by 4pm on 17 September 2010 serve … notice by letter of any objection, together with the reasons for the same, to the aforementioned conclusion regarding the application of the Uninsured Drivers’ Agreement dated 13 day of August 1999 in this matter; (b) AND if such notice is served as prescribed in paragraph 2(a) above then the said Orders and Schedule shall not take effect as Final Orders and the matter shall be listed for a directions hearing… with counsel for the Claimant, the Second Defendant and the [MIB] to be in attendance….”
. IT IS ORDERED THAT (a) UNLESS the [MIB], or their legal representatives by 4pm on 17 September 2010 serve … notice by letter of any objection, together with the reasons for the same, to the aforementioned conclusion regarding the application of the Uninsured Drivers’ Agreement dated 13 day of August 1999 in this matter; (b) AND if such notice is served as prescribed in paragraph 2(a) above then the said Orders and Schedule shall not take effect as Final Orders and the matter shall be listed for a directions hearing… with counsel for the Claimant, the Second Defendant and the [MIB] to be in attendance….”.

SUBMISSIONS OF THE PARTIES

[18]On 17 September 2010 the following submissions were included in a document served by the MIB in accordance with the Security[19]Paragraph 4 of the submission dated 17 September 2010 contains suggested alterations to be made to the Order, and the MIB invited the parties to agree to such a variation. However, the parties have not agreed. The submission of 17 September 2010 continues as follows:
“5. MIB is grateful to the court for the opportunity to make these submissions. It is hoped that given, MIB’s position as set out above, a further hearing or debate will not be required. However, in the event that the suggested re-wording of the Order as set out in paragraph 4 above should prove unacceptable to the Court or to any of the parties, then MIB asks that these submissions shall stand as a letter of objection in accordance with paragraph 2(a) of the Security Order.”
[20]The real issue raised by the MIB is not whether the continuity of payment under the order is reasonably secure, but whether the reasons given by Mackay J for coming to that conclusion are, all of them, soundly based.[21]Secondly MIB submits that the form of the PP Order is objectionable in any event. Mr Horlock submits that para 1 of the PP Order should not include provision that the sums particularised in the schedule “shall be paid to the Claimant by the [MIB]”. The most that the paragraph should provide is that those sums “shall be paid to the Claimant by the Defence Insurer”.[22]Mr Westcott submits that the objections of MIB are unjustified. He submits that for reasons given by Mackay J in his judgment MIB would be responsible to the Claimant in the event that there were to be a default of payment under the PP Order at anytime in the future, whether or not the 1999 Agreement were still in force. As set out in para 20 of the judgment of Mackay J, he submits that the effect of provisions of the 1999 Agreement is that the Claimant will retain the rights under the 1999 Agreement whatever new agreement may be entered into by MIB. He further submits that Mackay J accepted this submission.[23]In his Skeleton Argument he also submitted that the PP Order might be re-drafted by agreement between the parties and MIB, but no such agreement has been forthcoming, and so I need not consider the proposed drafts.[24]Finally, and as a fallback position, Mr Westcott submitted that the form of the PP Order is unobjectionable whether or not MIB would be responsible to the Claimant in the event that there were to be a default of payment under the PP Order at any time in the future. He submits that if it is not directly binding on MIB then, nevertheless, paragraph 1 of the PP Order specifies a method of payment within the meaning of s.2(5) and (7) of the 1996 Act and CPR Part 41.9. The effect is therefore that if MIB ceases to be liable in the way which all parties agree that it is liable so long as the 1999 Agreement is in force, then the point at which MIB ceases to be so liable, would be an event of default or breach the order within the meaning of s.2(7) of the 1996 Act.

STATUTORY FRAMEWORK

[25]The 1996 Acts.2 provides (in addition to s.2(3) set out above) as follows: “2 Periodical payments. (1) A court awarding damages in an action for personal injury (a) may, with the consent of the parties, make an order under which the damages are wholly or partly to take the form of periodical payments… (4) For the purpose of subsection (3) the continuity of payment under an order is reasonably secure if— (a) it is protected by a guarantee given under section 6 of or the Schedule to this Act, (b) it is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or (c) the source of payment is a government or health service body. (5) An order for periodical payments may include provision— (a) requiring the party responsible for the payments to use a method (selected or to be selected by him) under which the continuity of payment is reasonably secure by virtue of subsection (4); (b) about how the payments are to be made, if not by a method under which the continuity of payment is reasonably secure by virtue of subsection (4); (c) requiring the party responsible for the payments to take specified action to secure continuity of payment, where continuity is not reasonably secure by virtue of subsection (4); (d) enabling a party to apply for a variation of provision included under paragraph (a), (b) or (c). ... (7) Where an order is made for periodical payments, an alteration of the method by which the payments are made shall be treated as a breach of the order (whether or not the method was specified under subsection (5)(b)) unless— (a) the court which made the order declares its satisfaction that the continuity of payment under the new method is reasonably secure, (b) the new method is protected by a guarantee given under section 6 of or the Schedule to this Act, (c) the new method is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or (d) the source of payment under the new method is a government or health service body”. (1) A court awarding damages in an action for personal injury (a) may, with the consent of the parties, make an order under which the damages are wholly or partly to take the form of periodical payments… (4) For the purpose of subsection (3) the continuity of payment under an order is reasonably secure if— (a) it is protected by a guarantee given under section 6 of or the Schedule to this Act, (b) it is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or (c) the source of payment is a government or health service body. (5) An order for periodical payments may include provision— (a) requiring the party responsible for the payments to use a method (selected or to be selected by him) under which the continuity of payment is reasonably secure by virtue of subsection (4); (b) about how the payments are to be made, if not by a method under which the continuity of payment is reasonably secure by virtue of subsection (4); (c) requiring the party responsible for the payments to take specified action to secure continuity of payment, where continuity is not reasonably secure by virtue of subsection (4); (d) enabling a party to apply for a variation of provision included under paragraph (a), (b) or (c). ... (7) Where an order is made for periodical payments, an alteration of the method by which the payments are made shall be treated as a breach of the order (whether or not the method was specified under subsection (5)(b)) unless— (a) the court which made the order declares its satisfaction that the continuity of payment under the new method is reasonably secure, (b) the new method is protected by a guarantee given under section 6 of or the Schedule to this Act, (c) the new method is protected by a scheme under section 213 of the Financial Services and Markets Act 2000 (compensation) (whether or not as modified by section 4 of this Act), or (d) the source of payment under the new method is a government or health service body”.[26]CPR Part 41.9 reads as follows:
“41.9(1) An order for periodical payments shall specify that the payments must be funded in accordance with section 2(4) of the 1996 Act, unless the court orders an alternative method of funding. (2) Before ordering an alternative method of funding, the court must be satisfied that – (a) the continuity of payment under the order is reasonably secure; and (b) the criteria set out in Practice Direction 41B are met. (3) An order under paragraph (2) must specify the alternative method of funding.”

THE 1999 AGREEMENT

[27]In clause 1 of the 1999 Agreement it is provided that: “MIB’s obligation ‘means the obligation contained in clause 5.[28]Clause 5 reads as follows:
“MIB’s obligation to satisfy compensation claims 5. (1) Subject to clauses 6 to 17, if a claimant has obtained against any person in a Court in Great Britain a judgment which is an unsatisfied judgment then MIB will pay the relevant sum to, or to the satisfaction of, the claimant or will cause the same to be so paid. (2) Paragraph (1) applies whether or not the person liable to satisfy the judgment is in fact covered by a contract of insurance and whatever may be the cause of his failure to satisfy the judgment.” (2) Paragraph (1) applies whether or not the person liable to satisfy the judgment is in fact covered by a contract of insurance and whatever may be the cause of his failure to satisfy the judgment.”
[29]Clauses 4(2) and 23(1) of the 1999 Agreement are set out in para 20 of the judgment of Mackay J cited above.

DISCUSSION

[30]It is to be remembered that the PP Order is an order put before the court to be made by the consent of the Claimant and the Defendants. The sole task of the court is to decide, in accordance with s.2(3) of the 1996 Act whether it is satisfied that the continuity of payment under the order is reasonably secure. If the court is not so satisfied, then that is the end of the matter, and the PP Order could not be made. If the court is so satisfied, then the court can make the PP Order. But the court cannot vary an order that is put before the court as a consent order unless the parties consent.[31]Mackay J was satisfied that the continuity of payment under the PP order is reasonably secure. He made the order subject to the suspensive condition which permitted MIB to make an objection and to attend to make submissions in support of the objection. Having heard the submissions of the MIB and of the parties to the action, it would be open to me to find that I was not satisfied that the continuity of payment under the PP Order is reasonably secure. If I was not so satisfied, the Order could not be made, and the parties would either have to make a new agreement or the litigation would have to be pursued to trial.[32]However, neither of the parties to the action, nor the MIB, is submitting that I should not be satisfied that the continuity of payment under the Order is reasonably secure. They are all submitting that I should be so satisfied. And in so far as it may be material, I state now that I am so satisfied.[33]In my Judgment Mackay J did not accept that MIB would remain liable to the Claimant whatever might happen in the future. What he decided was that having heard the submission of Mr Westcott, and having read the relevant provisions, he was in no doubt that continuity of payment is reasonably secure as a result of any future deprivation, itself unlikely, of the right of the Claimant to have recourse to the MIB or any equivalent body.[34]In my judgment it was not necessary for Mackay J to accept that MIB would remain liable to the Claimant whatever might happen in the future in order to reach the conclusion that continuity of payment is reasonably secure.[35]For my part I am not able to accept Mr Westcott’s submission that accrued claims against MIB will be protected in respect of accidents occurring while the 1999 agreement is in force whatever subsequent arrangements may be put in place. In my judgment Clause 4(2) is addressing only one of a number of possible situations in which the 1999 Agreement may be determined or varied. It is addressing the situation where the 1999 Agreement is determined by the Secretary of State, or by MIB, giving to the other notice of termination. Other possible circumstances in which the 1999 Agreement may be determined include not only the circumstances under which any contract may be determined (including frustration, and a repudiation which is accepted, however improbable these may be), but also termination or variation pursuant to legislation enacted by Parliament. Parliament would not be obliged to include in any such legislation a provision by which the Secretary of State was required to give twelve months notice in writing, and clause 4(2) cannot bind Parliament.[36]I stress that I regard the risk of the Claimant having no legally enforceable claim against either MIB, or an equivalent institution or body, as so remote as to be capable of being discounted entirely for present purposes. In that respect I agree with Mackay J. In my judgment that is all he decided. In my judgment when he made the PP Order and the Security Order that is all he intended those orders to mean.[37]However, it is understandable that MIB should have been concerned, either that the Orders meant what Mr Westcott submits they mean, or that a dispute might arise as to what they mean, which ought, for the benefit of the Claimant as much as anyone else, to be resolved now, and not left to arise, however improbably, at a future time, possibly thirty or forty years into the future.[38]On the other hand, I accept Mr Westcott’s alternative submissions. The periodical payments specified in the PP Order are not ones which it is contemplated are to be funded in accordance with s.2(4) of the 1996 Act. MIB is not a source of payments specified in s.2(4). It follows that, in accordance with CPR 41.9(1), the Order must specify an alternative method of funding. The effect of the PP Order is that the alternative method of funding is, in the first instance, funding by the Defence Insurer, and, in case of non-payment for 7 days by the Defence Insurer, payment by MIB.[39]If at any time during which a payment is due under the PP Order MIB ceases to be liable to the Claimant in the event that the Defence Insurer should cease to make a payment, (and whether or not the Defence Insurer has in fact failed to make a payment within the specified 7 days) it seems to me that the cessation of liability on the part of MIB would be an alteration of the method by which payments are to be funded. The result would be that, pursuant to s.2(7) of the 1996 Act, there would be deemed to be a breach of the Order, unless any of the sub-sections s.2(7)(a) to (d) of the 1996 Act apply.[40]Mr Westcott makes no submissions as to what the effect would be of the occurrence of such a breach. It is not necessary to know the answer to that question.

CONCLUSION

(d) CONCLUSION

[41]For the reasons given above, in my judgment the PP Order, para 1, is not to be read as an order of the court binding upon MIB. It is an order binding upon the Defence Insurer only, requiring in the first instance that it pay the Claimant, and in the alternative that it procure payment by the MIB. If it is unable to procure payment by the MIB, then it, not the MIB, will be in default.In the event that any similar order referring to the MIB is to be drafted in the future, in a case where MIB is not a party, those preparing the draft may wish to consider adopting a form of words which will not give rise to concerns on the part of MIB of the kind that have arisen in this case.

Order

“1. …. 2. MIB does not dispute that, pursuant to Clause 5 of the current agreement between itself and the Secretary of State… (i.e. the Uninsured Drivers Agreement dated 13 August 1999), should a judgment in favour of the Claimant (herein be unsatisfied) within the meaning of that agreement, MIB would be obliged to satisfy that judgment. 3. However, with respect the terms of the [Security Order] appear to overstate the position of MIB. It is not possible to be certain that, at a future date upon which the judgment may become unsatisfied MIB would be obliged to satisfy any such judgment. The agreement in force at that future time may not be the agreement dated 13 August 1999 and its terms may not be identical to those of the agreement dated 13 August 1999. Such an obligation is of course possible and MIB would not seek to challenge that conclusion, along with the other circumstances of the case, the continuity of payment of a periodical payments order is reasonably secure (emphasis added [by MIB]).” Such an obligation is of course possible and MIB would not seek to challenge that conclusion, along with the other circumstances of the case, the continuity of payment of a periodical payments order is reasonably secure (emphasis added [by MIB]).”

Cited in 1 later judgment