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Is an RTA Insurer Liable for an Unidentified Defendant?

The Court of Appeal has held in Cameron v Hussain and Liverpool Victoria [2017] EWCA Civ 366 that a Claimant can obtain a judgment against a Defendant identified only by description of him as the driver of a vehicle on a particular date. Whilst in almost every other area of law such judgment would be worthless as unenforceable, the Road Traffic Act 1988 provisions impose a contingent liability against the insurer of the vehicle to satisfy such a judgment. At first blush this seems to dismantle the careful limitations placed on the European Communities (Rights Against Insurers) Regulations 2002 to effectively enable a Claimant to pursue the insurer of a vehicle despite the fact that the driver of the same is unknown. This article, drafted by Park Square Barristers’ insurance indemnity specialists, Richard Paige and Judy Dawson, looks at the Court of Appeal judgment and the implications for the insurance industry.

Facts

A car collided with the Claimant’s car but did not stop. It went on to collide with another vehicle. A witness was able to take down its registration number. Using this the police were able to identify the registered keeper but he refused to provide the details of the driver. He was subsequently convicted of the offence of failing to provide such details. Using the registration number the Second Defendant was identified as the insurer of the vehicle. Their investigations revealed that their policyholder was fictitious. The registered keeper was not insured under the policy. The registered keeper was named as First Defendant, but for the purposes of the appeal it was accepted that he was not the driver.

The Lower Courts

Initially the Claimant issued proceedings solely against the registered keeper, alleging that he was the driver of the vehicle at the material time. She then amended proceedings to add the insurer as Second Defendant and sought a declaration that it was liable to satisfy any judgment against the First Defendant. A Defence was filed on behalf of the insurer denying any such liability as the First Defendant was not covered to drive the vehicle under the policy and the Claimant could not establish the identity of the driver. Such Defence was followed by an application for summary judgment. The Claimant then made a cross-application for permission to amend her pleadings to substitute for the First Defendant an unnamed Defendant identified only be the description of him being the driver of the vehicle involved in the accident.

DJ Wright dismissed the Claimant’s application and granted summary judgment in favour of the Defendants.

HHJ Parker heard the subsequent appeal and duly dismissed it. The Claimant appealed to the Court of Appeal and was given permission to appeal.

The Court of Appeal judgment

The Court of Appeal considered the issues of (i) whether it was permissible for a claimant to proceed against an unnamed defendant and (ii) whether in the circumstances of the case it was appropriate to allow the claimant to do so.

The appeal court, consisting of Gloster LJ, Lloyd Jones LJ and Sir Ross Cranston, decided that under the CPR such a power did exist, notwithstanding the provisions of r. 7A PD 4.1(3) and r. 16 PD 2.6(a) which appeared to make the inclusion of the full name of the parties (and therefore the defendant) a mandatory requirement.

The decision was reached in part on the basis that other provisions of the CPR made express provision for unnamed parties (r. 8.2A, r. 19.7 and r. 55.3(4)) and in part on the basis that actions had been permitted against unnamed defendants in previous claims (Bloomsbury Publishing Group v News Group Newspaper [2003], Stone v WXY [2012], Brett Wilson LLP v Persons Unknown [2015] and Smith v Unknown Defendant Pseudonym ‘Likeicare’ [2016]).

Having decided unanimously that the power did exist for a claim to be brought against an unnamed defendant, the Court was then split as to whether in the particular circumstances of the case it should be permitted. The majority found that it was appropriate, Sir Ross Cranston dissenting.

The majority of the Court of Appeal accepted the relatively simple argument that: As s. 151(2) of the Road Traffic Act 1988 obliges an insurer to satisfy a judgment against the driver of an insured vehicle, irrespective of whether the driver is himself covered by the policy of insurance, then provided that the vehicle is identified and insured, who was driving is essentially irrelevant, and as such there is no disadvantage in failing to identify the driver in the proceedings.

The Court of Appeal considered whether the following factors should prevent such a claim proceeding:

  1. The inability of the insurer to exercise the rights that it might have against its own insured under s. 151(8) of the RTA;
  2. The greater difficulties that an insurer would have in investigating claims where there was no identified driver, and therefore the potential for abuse in fraudulent claims;
  3. The fact that a claimant in such circumstances would not be left without a remedy, by reason of the operation of the Untraced Drivers’ Agreement.

Ultimately, only Sir Ross Cranston considered these factors sufficient to prevent such a claim proceeding.

Whilst the majority of the Court of Appeal considered the operation of the UTDA, this appeared to be solely in relation to the remedies (and costs) that it afforded a claimant compared to court proceedings. The Court of Appeal did not appear to consider the case in the wider framework of the RTA 1988, the UTDA and the Uninsured Drivers’ Agreement. Indeed, Gloster LJ stated “The fact that, in that context, the court considered that there was “no scope for construing section 145, in isolation from MIB arrangements” is irrelevant for present purposes.” In so holding, it is suggested that the Court of Appeal rode a coach and horses through such arrangements. After all, the arrangements are identified as the Untraced Drivers’ Agreement and Uninsured Drivers’ Agreement, not the Untraced Vehicles’ Agreement and Uninsured Vehicles’ Agreement.

Limitations?

Perhaps in an effort to allay any concerns raised about unforeseen consequences or the opening of floodgates, Lloyd Jones LJ stated “It is important to bear in mind that the procedural innovation sought would be limited to cases where the vehicle driven by the tortfeasor was insured and where the insured and the registered owner are identifiable.” Based upon the reasoning of the judgment there is no logical basis for such a limitation, either in construction or interpretation of the legislation or the CPR. Indeed, in Cameron, it was established and accepted that the insured was fictitious. As such, even in the extant case the limitation was exceeded as the insured was not identifiable. Furthermore, there are no justifiable grounds why such a claim should not be able to proceed if the registered owner cannot be identified. Despite such criticism however, the fact is that such limitation was imposed and Claimants will be unable to rely on such Court of Appeal case unless there is an identifiable registered keeper (it is noted that the Court of Appeal conflated owner and registered keeper in stark disregard to reality).

Similarly, it is certainly arguable that there is no logical basis why such a “procedural innovation” should only apply in cases where the vehicle is insured. The rationale of the judgment was that the operation of s.151 meant that the claimant could obtain a judgment that was efficacious even if the driver was unknown because it could be enforced against the insurer. However, the same argument would apply in relation to an uninsured vehicle, as the judgment could be enforced against the MIB under the UIDA. It may be that the Court of Appeal were cautious not to dismantle wholesale the careful interrelation of such agreements, statutory provisions and European Regulations; but in venturing down that path they started to do exactly that. Again however, the Court of Appeal have not opened that particular door in their judgment and lower courts will be bound by it. They have made it a difficult intellectual exercise however for any future Court of Appeal facing such an argument.

Fraudulent claims

An obvious consequence of the judgment which only Sir Ross Cranston considered to carry any significant weight was the spectre of abuse, particularly in fraudulent claims. It goes without saying that the already difficult task of an insurer in investigating a fraudulent claim will be made even more difficult if there is no driver that can be interviewed, or even traced to establish whether there are links between the parties.

The Limitation Act

The judgment also raises questions as to limitation of claims. Pursuant to s.14(1)(c) of the Limitation Act 1980, a claimant’s date of knowledge for limitation purposes includes the requirement that he knows “the identity of the defendant”. In cases of this nature, one consequence, unforeseen by the Court of Appeal, may be that claimants are not subject to any limitation period. Consequently, insurers could now face claims from many years ago. In the circumstances that the Claimant’s case would be that he or she were able to identify a Claimant for the purpose of proceedings by reference solely to them being the driver of a vehicle, a matter known to them presumably since the accident, the Courts would probably be unlikely to allow them to drive a coach and horses through the Limitation Act by relying on this point

No doubt, many other unforeseen consequences will become apparent over the months and years to come.

Procedural Issues

Whilst the Court of Appeal confirmed that a claim could be brought against an unknown driver, it failed to set out the procedure for doing so. The tenor of the judgments was that it was an exercise of the court’s discretion to allow such a claim to proceed, but it was unclear whether this was because an application was being made to amend the proceedings, or whether the court would be required to exercise its discretion in all such cases. Sir Ross Cranston (who it must be remembered gave the minority judgment) stated “In my view the threshold is high when a court exercises a discretion under the rules to allow proceedings against unnamed parties.” However, given that there is no rule within the CPR that allows proceedings against unnamed parties in these circumstances, it is unclear at what stage, if at all, the court will or must exercise its discretion. For example, if a claimant wishes to proceed against an unnamed party, will he need to apply to the court for permission to do so? Or will it fall to the insurer to challenge a statement of case against an unnamed defendant? Unfortunately, the Court of Appeal left these questions unanswered and also whether the insurer must be joined in such proceedings.

Some help can be obtained from looking at the practicalities; any claim issued against an unnamed Defendant cannot be properly served and thus to enable the Claimant to proceed he or she would have to make an application for service to be dispensed with. It is presumably at such hearing that an insurer’s cross-application for striking out the proceedings for breach of the CPR requirement to provide the full name of the Defendant will be heard. That assumes of course that the insurer is properly notified and joined into proceedings. The Court of Appeal, faced with proceedings in which the insurer was Second Defendant, has not considered whether there is any requirement of joining the insurer or even serving proceedings upon the same. Whilst section 152 provides that the insurer must be given notice of the bringing of proceedings, those practising in this area are aware of the lacuna (often deliberately exploited by Claimant solicitors) whereby such notice does not include the service of sealed proceedings such that the insurer may be left unaware of when and where proceedings have been issued and in particular the Claim Number that enables them to apply to be joined. This may prove to be of vital importance given the potential increased significance of declaration proceedings.  Such have a strict three month time limit.

The Court of Appeal also failed to address the question of what steps, if any, a claimant must go to in order to ascertain the name of the defendant. So, by way of example, would it be acceptable for a claimant to simply take down the registration number of the defendant’s vehicle and then issue proceedings against an unnamed driver, without ever asking the driver his name? The facts of Cameron were stark; it was irrefutable that the registered keeper was identified and aware of proceedings (and the allegation of the accident) as he had been prosecuted and convicted of failing to provide the driver’s name. References to DVLA registered keepers are not the same as the oddly worded “registered owner” referred to in the judgment; the V5 document is specifically stated to be not proof of ownership.

Declarations

Again we find ourselves in a position where we would urge insurers to take advantages of the limitations imposed in the judgment without understanding or agreeing with the intellectual basis of such limitations. A surprising emphasis was placed by Lady Justice Gloster on the fact that the insurer had had the opportunity but had not exercised its right in obtaining a declaration (based on the fact that it was accepted by all parties it would seem that the policyholder was fictitious and thus the details provided at inception were fraudulent). It would seem that her reasoning was that where the legislative framework provided the insurer with an opportunity to rid itself of the unwanted contingent liability for policies obtained by misrepresentation, it should have taken advantage of such opportunity (and consequently its failure should be punished by the Court refusing to exercise its discretion in its favour). This is intellectually difficult to understand but seems to be encapsulated in the judgment.

It would therefore seem that the Claimant will not be given permission to proceed against an unnamed Defendant in the case where a declaration has been sought and successfully obtained. Such declarations have been historically rare as the commercial realities of the situation is that the insurer who obtains such a declaration by reason of misrepresentation or non-disclosure escapes Road Traffic Act liability but has to satisfy the judgment in any event pursuant to Article 75. An interesting argument will no doubt be played out;

  1. The insurer will contend that the Claimant should not have permission to add an unnamed Defendant given that such is not effective as the insurer will be applying for a declaration and therefore any judgment will be unenforceable.
  2. The Claimant will no doubt contend that such judgment will be effective due to the insurer’s liability to satisfy the same pursuant to Article 75.
  3. The insurer can rely on the fact that LJ Gloster’s judgment was specifically limited to cases where there was an identifiable insurer who would have liability under the Road Traffic Liability to satisfy the judgment.

This demonstrates the difficulty with Lady Justice Gloster’s judgment; what appears to have been her inherent assumption that an insurer who obtained a declaration would not have to satisfy a judgment obtained against either the driver (or by implication an unnamed Defendant) is entirely incorrect. Whether an insurer can effectively work backwards from her stance (ie that it has obtained a declaration and therefore should not have to satisfy such judgment and therefore it is not appropriate for the Claimant to be allowed to add an unnamed Defendant) remains to be seen. It is likely to cause difficulties in the future as courts attempt to square a circle.

The decision of Cameron has caused consternation amongst those that defend road traffic claims, but it may be some time before the full impact of the decision is known. In the meantime, it is anticipated that applications under s.152(2) to void policies that have been incepted fraudulently will become of greater importance and insurers and solicitors will need to be alive to the limited period in which such applications can be made and indeed consider making the same prior to the issue of proceedings.

Richard Paige and Judy Dawson are both specialists in insurance indemnity fraud and are currently running a series of short seminars dealing with the implications of this judgment.

Contact Civil clerks

Francine Kirk on 0113 202 8605

Jordan Millican on 0113 213 5207