ANNE KERR v. DUNCAN McKENZIE
W1847/99
ANNE KERR v DUNCAN McKENZIE
Glasgow November 2000
NOTE:
Introduction
This is a summary cause action in which the pursuer sues for damages following upon a road traffic accident on 12 March 1999. Liability was admitted. It was also admitted that the pursuer's claim for loss of use and travel costs was properly valued at £500. The issue in the case was whether the pursuer was entitled to recover the sum of £374.57 being the cost of the hire of a replacement car for the period 16 - 27 March 1999 when this sum had been paid by DAS Legal Expenses Insurance Co Ltd ("DAS") on the pursuer's behalf. In other words could DAS exercise a right of subrogation.
Oral evidence was not led and a joint minute entered into which forms No. of process. In terms of the joint minute all documents lodged as productions were agreed to be what they bore to be and could be founded upon as evidence of what they contained.
At the outset it was noted that the productions in the eight inventories had been incorrectly numbered. It was therefore agreed that the productions would be identified by reference to the numbered inventory. Thus, for example, the second item on the fifth inventory of productions would be referred to as 5/2 of process.
Mr Clark, advocate appeared for the pursuer and Mr Jones, QC for the defender. It was common ground between the parties that there were two issues to be resolved. Firstly, they wished the Court to determine whether a contract had been entered into between the pursuer and DAS. Secondly, if there was such a contract, whether DAS had an absolute discretion as to whether they should provide the indemnity provisions contained within the contract.
The pursuer's submissions on the existence of a contract with DAS and the pursuer.
In support of his submission that there was a contract between the pursuer and DAS Mr Clark referred me to 4/1, 5/1, 5/2, 7/1, 7/2, 7/3, 7/5, 8/1 and 8/2 of process. The essence of his submission was that 5/1 of process which was the Kwikfit Motor Policy Document could be split into two sections. Section 1 was contained in pages 1 to 30 and section 2 on pages 31 to 35. In section 1 the insurer was defined as that specified in the Schedule and the Certificate of Motor Insurance. These were 7/3 and 7/5 of process respectively and the insurer was clearly Provident Insurance plc ("Provident"). Section 2 dealt with the DAS Legal Protection Plan where the insurer was defined as DAS Legal Expenses Insurance Company Limited. Kwikfit Insurance Services were the intermediaries. The policy document, 5/1 of process, had been sent to the pursuer by Kwikfit's letter dated 1 September 1998 (7/1 of process) in which the pursuer was asked to check that all the details in the policy booklet (5/1 of process) were correct. This therefore included a reference to the DAS Legal Protection Plan. DAS's Guidance Notes (5/2 of process) had also been sent to the pursuer with Kwikfit's letter of 1 September 1998. 7/3 of process, which was the Schedule to the policy, specified the cover provided by Provident. That cover included third party, fire and theft. It did not include any legal protection plan cover. Accordingly, I was invited to conclude that Provident were providing the third party, fire and theft cover and DAS were providing the legal expenses cover. One found at 4/1 of process, a letter from DAS to the pursuer dated 17 March 1999 in which they indicated that they were providing a vehicle on hire under the terms and conditions of the pursuer's policy with DAS. Number 8/1 of process was a letter from Kwikfit to DAS dated 2 June 2000 in which Kwikfit confirmed that every claim passed to DAS from Kwikfit had the benefit of DAS legal cover and that within each Kwikfit policy, provision is made for a replacement vehicle hire. At 8/2 of process one saw the Binding Authority Agreement between DAS and Kwikfit in which Kwikfit were authorised to provide legal expenses insurance and assistance to nominated customers of Kwikfit. At Clause 5 Kwikfit were obliged to issue an individual policy for each risk accepted under the scheme. Schedule 1 provided that Kwikfit would make payment of £2.85 per policy to DAS. At Clause 8 one saw that there would be a monthly settlement of accounts. At Schedule 2 to the Agreement one found the specification of the legal expenses insurance cover. Numbered paragraph 2 included replacement vehicle hire. From the documentation Mr Clark invited me to conclude that
- the pursuer had made a proposal to Kwikfit as agents for DAS.
(2) Kwikfit had issued a policy which included the DAS element of the cover.
(3) Kwikfit had acted as an intermediary in accordance with their agreement with DAS (8/2).
(4) on page 9 of 5/1 the pursuer was asked to make sure that the policy met her requirements and from this I could infer that she accepted the policy.
(5)the pursuer made a claim under the policy.
(6)DAS met that claim.
Accordingly there was a contract.
The defender's submissions on the existence of a contract with DAS and the pursuer.
In response Mr Jones submitted that from the letter of 1 September 1998 from Kwikfit to the pursuer (7/1 of process), I should conclude that the DAS element of the cover was the equivalent of a free travelling alarm clock when one booked a Mediterranean holiday. The DAS element came as an unsolicited extra along with other goods and services which had been contracted for. In order to establish a contract between herself and DAS the pursuer required to demonstrate that there had been an exchange of consent, either express or implied, between her and DAS. If there had been such an exchange of consent how and when had it taken place? When the pursuer received her policy documents there was an offer from DAS which in the event, and only in the event, of a claim being made under the Provident policy she might be able to make a claim under the DAS element of the policy. There was no premium attributable to DAS. From 8/2 of process it was clear that Kwikfit had engaged DAS to provide a service. Mr Clark could not rely upon page 9 of 5/1 to support any element of DAS cover. Page 9 was a reference to the Provident policy only. The joint minute of admissions specified the documents comprising the contract which were the policy document, the Schedule of Insurance and the Certificate of Insurance. Nowhere in these documents could one find an exchange of consent between the pursuer and DAS. Furthermore from 8/2 of process I could conclude that it was Kwikfit and not the pursuer who paid the premium to DAS. The pursuer thus had no contractual right until the accident had occurred.
Decision as to whether there is a contract between the pursuer and DAS
The joint minute lodged by the parties records at paragraph 2:-
"The policy document (No. of process), the Schedule of Insurance (No. of process) and the Certificate of Insurance (No. of process) comprise the contract of insurance."
The discussion before me proceeded on the basis that the policy document was 5/1 of process, the Schedule of Insurance was 7/3 of process and the Certificate of Insurance was 7/5 of process. The policy document would appear to be a Kwikfit document.
On page 1 of 5/1 of process the insurer is said to be specified in the Schedule (7/3) and Certificate of Motor Insurance (7/5). By reference to 7/3 and 7/5 there is no doubt that the insurer is Provident.
On page 31 of 5/1 one sees a reference at the top of the page to DAS Legal Protection Plan. On the same page the insurer is said to be DAS. The document thus refers to two different insurers. In my opinion the correct approach to 5/1 is to consider that it is split into two parts. Part 1 is contained in pages 1 to 30. Part 2 is contained within pages 31 to 35. Pages 36 and 37 contain what is said to be "Helpful General Information". It is specifically provided on page 36 that "These notes are for your assistance and do not form part of the insurance". It might therefore be reasonable to infer that what has preceded pages 36 and 37 did form part of the insurance. A reference to "the insurance" is in my opinion a shorthand way of saying "the contract of insurance". I consider that this points to Kwikfit, at least, considering that there was a contract in existence in relation to both parts.
It is clear from 7/3 and 7/5 of process that the person to receive the benefit of the insurance cover provided by Provident is Mrs Anne Kerr, the pursuer in this action. Page 32, in the DAS section, defines the insured as being the person named as the policy holder in the Certificate of Motor Insurance (7/3) and the Schedule (7/5). This can only be a reference to the pursuer. Thus in the section of the policy document under the heading DAS Legal Protection Plan the insured person is the pursuer.
In the schedule of insurance annexed to 5/2 of process, but curiously not in the schedule found at 7/3 of process, there is a reference to £253.97 being payable as a premium to Provident. In 8/2 of process, which is the Binding Authority Agreement, one sees, as Mr Jones correctly submitted, that on the face of it DAS contracted not with the pursuer but with Kwikfit. However in terms of 8/2, DAS obliged themselves to provide legal expenses insurance and assistance to nominated customers of Kwikfit in return for payment to DAS of £2.85 per nominated customer. The cover included replacement vehicle hire. (See numbered paragraph 2 in Schedule 2 to 8/2). From 4/1 and 4/2 of process it seems a reasonable inference to draw that the pursuer was nominated by Kwikfit. In 4/1, a letter from DAS to the pursuer dated 17 March 1999, DAS write: "This vehicle has been provided to you under the terms and conditions of your DAS policy". No. 4/2 of process is a letter dated 8 October 1999 from Accident Response Network (ARN) to the pursuer's agents. From its terms it is clear that ARN had provided a hire car to the pursuer and that they had been paid by DAS. The letter goes on to say that there was no contractual link between the pursuer and ARN. The clear implication from the letter is that DAS had arranged with ARN to provide the pursuer with a car on hire, that DAS had met the cost thereof and that the cover was being provided in terms of the contract between the pursuer and DAS as that cover is set out in 5/1 of process. I am thus prepared to infer from the foregoing that the pursuer had been nominated by Kwikfit to DAS to receive the benefit of the cover set out in part 2 of the policy document (pages 31 to 35) and as a result DAS were under an obligation to provide cover to the pursuer all in terms of their agreement with Kwikfit. I consider that there is a clear and almost irresistable inference to be drawn from the circumstances which I have endeavoured to set out that there was the necessary exchange of consent to enable a contract to be constituted between the pursuer and DAS. If a precise time has to be specified as to when the pursuer and DAS exchanged consent, and I am not sure that it is necessary, it might be thought to be when the pursuer received Kwikfit's letter 7/1 of process. From 7/1 of process it is quite clear that the pursuer was given details of the cover provided by DAS and the relative DAS Guidance Notes and invited to check that the details were correct. There is nothing to suggest that the cover was conditional upon an accident occurring. It seems to me that at least from 1 September 1998 DAS were under an obligation to the pursuer to provide cover in terms of ages 31 to 35 of the policy document 5/1. It is also reasonable to infer that the pursuer believed she had such cover. If, for example, a third party had endeavoured to sell a legal protection plan to the pursuer after receipt by her of 7/1 of process, I can infer from the admitted facts that the pursuer, on the balance of probabilities, would have rejected the offer on the basis that she was already so covered. There is no evidence before me to say whether the pursuer was ever charged by Kwikfit for this cover. I do not consider that to be a necessary prerequisite for there to be a contract in existence between the pursuer and DAS.
One would normally analyse the relationship as Kwikfit acting as agents for a principal, the pursuer, the identity of whom becomes disclosed upon nomination by Kwikfit to DAS. However I think that Mr Clark is correct that given the terms of 8/2 of process there is sufficient evidence to rebut the normal position that the intermediary or broker is an agent of the insured. On the documents which form the evidence in the case Kwikfit would appear to have contracted with the pursuer in their capacity as agents for DAS. Alternatively it might be said that a jus quaesitum tertio had been created with the pursuer as a beneficiary. There was a contract between Kwikfit and DAS (8/2). Both intended to benefit the pursuer (this can be taken from the terms of 8/2, 4/1, 4/2 and 5/1). The pursuer was not just identified but nominated by Kwikfit (see the foregoing paragraph). There had been delivery of the policy document 5/1 to the pursuer in which the benefit on her was conferred. The pursuer had title and interest to sue. The requirements of a jus quaesitum tertio as they are set out in McBryde, The Law of Contract in Scotland at pages 409 to 412 would appear to be met. I should record that I was not addressed to any material extent on whether a jus quaesitum tertio was created. Mr Jones had only seen 8/2 of process just before coming into Court and had not had the opportunity to fully consider its implications.
In my opinion therefore, there was sufficient evidence before me to enable me to hold that a contract was entered into between the pursuer and DAS.
Did DAS have a right of subrogation
The second question which fell to be answered was whether the contract between the parties was one which could properly be described as a contract of indemnity insurance. The parties were agreed that if in terms of the contract, DAS had an absolute discretion in the provision of the cover set out on pages 31 to 35 of 5/1 then the contract could not be characterised as a contract of insurance and accordingly DAS would have no right to be subrogated to the pursuer's claim. Reference was made to Medical Defence Union Ltd v Department of Trade [1980] 1 CH 82, Department of Trade and Industry v St Christopher Motorists' Association [1974] 1 CH 17. It was also agreed that following the decision in Dimond v Lovell [2000] 2 WLR 1121 the benefit provided by DAS to the pursuer was not to be considered res inter alios acta.
The debate on this argument turned upon how the second numbered paragraph on page 32 of the policy document fell to be interpreted. That paragraph is in the following terms:-
"Replacement Vehicle Hire
The Insurer will pay the Vehicle Hire Costs after an accident involving a collision between the Insured Vehicle and another vehicle, as long as:-
(a)the Insured Vehicle cannot be driven, and
(b)the accident was entirely the other person's fault, and
(c)the Insurer had already agreed to pay the Vehicle Hire Costs."
Paragraph 2(c) provided the focus for the debate.
The pursuer's submissions on whether DAS had subrogation rights
Mr Clark submitted for the pursuer that this clause only provided that the insurer required to give the go-ahead before the vehicle could be hired. DAS first required to satisfy themselves that all other policy conditions had been met. The only discretion amounted to the nature of the vehicle which might be hired and the cost thereof. It did not vest an absolute discretion in the insurer. In order to achieve an absolute discretion clear language would be required. Similar wording had been considered in Christine Everson v J S Flurry, Slough County Court, 25 February 1998 and Alan Heyward v David Netherwood, Barnsley County Court, 28 July 2000. Both cases were unreported. The matrix of fact in which the policy fell to be interpreted was that the pursuer owned a vehicle. The policy had been taken out in good faith. The pursuer had received the policy with the DAS plan included. The pursuer had received guidance notes from DAS. One could therefore conclude that one of the purposes of the insurance cover was payment of vehicle hire costs. There had been no indication in clear language of any absolute discretion being reserved to the insurer. This would be necessary if the insurers were to avoid having an obligation to provide cover. The policy document should be read contra proferentem DAS.
The defender's submissions on whether DAS had subrogation rights
Mr Jones invited me to look at numbered paragraph 2 on page 32 and consider whether the pursuer could be successful in an action concluding for specific implement against the insurer for the provision of replacement vehicle hire. In Mr Jones submission such an action would fail. The defender insurer would be entitled to say that it had not agreed to pay the vehicle hire costs as it had a complete discretion in the matter. There was therefore no obligation upon it to provide replacement vehicle hire cover. Paragraph 2(c) could not have the meaning argued for by the pursuer since the policy document already made such provision on page 35 at numbered paragraph 9. If numbered paragraph 9(b) on page 35 was the only contractual provision which provided a hurdle to the pursuer, an action ad factum praestandum could successfully be raised against the insurer seeking an order ordaining the insurer to choose the appropriate vehicle hire company and the appropriate vehicle. Numbered paragraph 2(c) on page 32 precluded such an action being successful. Mr Jones considered that the decisions in Everson and Heyward fell to be distinguished in that in the present case the contract provided that there was need for a prior agreement before the obligation became prestable.
Decision on the right to be subrogated
In endeavouring to answer this question I found it instructive to compare the Provident element of the policy with the DAS element. On page 10 of 5/1 of process one sees under the heading "Cover for Legal Costs" the cover Provident will provide to the insured. Included are solicitor's fees for representation at, for example, a Fatal Accident Inquiry. Also included are the "costs of defence" against a charge of causing death by dangerous driving. It is then provided by way of a rider that "All legal costs are subject to the insurers prior written consent". This is very similar wording to what is found in the DAS part of the policy dealing with replacement vehicle hire. There one finds "the Insurer has already agreed to pay the Vehicle Hire Costs". If I adopted Mr Jones' argument I should interpret the rider as giving to Provident an absolute discretion as to whether they are prepared to provide "Cover for Legal Costs". There would thus be no indemnity insurance cover for legal costs. However, on page 24 of the policy document under heading G "Legal Proceedings outside the British Isles", the contract makes provision for what is not covered in respect of legal costs. The clear implication being that in other respects insurance cover for legal costs does exist. This suggests that the wording on page 10 of 5/1 does not fall to be interpreted as providing an absolute discretion to Provident. That there was such cover would also be the normal expectation in motor policies.
Furthermore, if one reads further in 5/1 one sees at section D on pages 12 and 14 that the insured "may authorise reasonable and necessary repairs to the insured vehicle". The insured has thus been given the power, subject to certain qualificatioins, to incur costs which the insurers will subsequently meet. The wording on page 10, in contrast, makes it clear to the insured that he has no such power in relation to incurring legal costs. That in my opinion does not mean that the insurer has an unfettered discretion as to whether to cover such legal costs. The wording on page 10 has as its purpose to ensure that insurers are able to control who is instructed to provide legal services. This might well be because, and it is a commonly known fact which would be within judicial knowledge and form part of the factual matrix against which insurance contracts fall to be interpreted, insurers have their panel lawyers in whom they have confidence and with whom they have negotiated attractive rates. In contrast insurers are generally prepared to allow an insured to instruct the insured's own garage to provide a repair service provided that the costs are reasonable and the work necessary. A poor repair will have no further consequences for the insurer whereas poor legal advice might well have consequences adverse to the insurer. By analogy the provision on page 32 of 5/1 in the DAS section of the policy, under the heading "Replacement Vehicle Hire" falls to be interpreted in a similar manner. Insurers have panels from whom vehicles are hired on preferred rates in a manner similar to lawyers. DAS were simply reserving the right to control this element of the cover when they inserted numbered paragraph 2(c) on page 32 of 5/1. It would also be understandable if they wanted to avoid arguments with their insured as to what type of vehicle should be hired and for what period. I do appreciate, as submitted by Mr Jones, that at numbered paragraph 9(b) on page 35 the insurers specifically reserve the right to choose the vehicle hire company and the type of vehicle to be hired. In my opinion the contract falls to be interpreted as the insurer adopting a belt and braces approach by including paragraph (9)(b).
Further, if the rider at 2(c) fell to be interpreted as the defender submitted, then the provision to be found at 9(a) on page 35 would be quite redundant. Paragraph 9(a) is in the following terms:-
"The following conditions apply to any claim for Vehicle Hire Costs:-
- An Insured Person must agree to the Insurer trying to recover any Vehicle Hire Costs in his or her name and any costs recovered must be paid to the Insurer."
The parties were agreed that if 2(c) gave an absolute discretion to the defenders then the right of subrogation as we see set out at 9(a) would not be available to the insurers. Paragraph 9(a) would thus be unenforceable. It is a well established rule that if one of two constructions will make the contract valid and the other deprive it of operative effect the former is to be preferred (Gloag on Contract page 402). It seems to me that the rule is also applicable when dealing with part of a contract as opposed to the whole. By interpreting the wording on page 32 at paragraph (2)(c) as submitted by the pursuer, paragraph 9(a) on page 35 becomes operable. This therefore points to the pursuer's submission being preferable.
Furthermore, to construe paragraph 2(c) on page 32 as giving to DAS an unfettered discretion whether they should pay Vehicle Hire Costs would give the opening words of paragraph 2 no content. Paragraph 2 opens with the words "The insurer will pay the vehicle hire costs" as long as certain conditions specified at a) and b) are met. It might be thought odd if the absolute obligation at the start of the clause was qualified by adding a further qualification at c) which gave the insurer an absolute discretion such as would avoid the absolute obligation.
Also, if an absolute discretion was imported into the contract at paragraph (2)(c) there would be no need to make it a precondition of the insured's entitlement to replacement vehicle hire that the insured's vehicle could not be driven (paragraph 2(a)) or that the accident was entirely the fault of a person other than the insured (paragraph 2(b)). Such considerations could be weighed in the mind of the insurer when deciding whether to exercise its absolute discretion which the defender says was conferred by paragraph 2(c). When intimating that they have exercised their discretion in favour of the insured, conditions could be attached. On the same reasoning there would be no need to attach conditions to any claim for the vehicle hire costs as one sees at paragraph 9 on page 35. Such conditions could just as easily have been imposed as a pre-condition to the exercise of the absolute discretion in favour of the insured. Indeed if the aim of the parties had been to confer on the defenders an absolute discretion all that would have been required at paragraph 2 on page 32 would have been "The insurer may in its unfettered discretion pay the vehicle hire costs after an accident involving a collision between the insured vehicle and another vehicle." All other words, including paragraph 9 on page 35, would be redundant. However, the parties did make further provision regarding vehicle hire costs. It might be thought to be disingenuous of DAS to include them in the policy document if they had as their aim by the wording of paragraph 2(c) the reservation to themselves of an absolute discretion. The reasonable reader might form the view that the purpose in including them was to delude the insured into believing that the insured was receiving more than was the case. If DAS wished to reserve an unfettered discretion they ought to have made specific provision such as one found in the Medical Defence Union case. In that case the agreement provided that the MDU would provide an indemnity to members in certain circumstances but went on to say "and it shall rest only in the absolute discretion of the council...in every case to limit or restrict...or altogether to decline to grant...any indemnity...". Thus it was clear to members precisely what benefits membership bestowed. I should make it clear that in this case it is not DAS who are advancing the case that they had an unfettered discretion but the defender, or at least the defender's insurers.
Accordingly I am of opinion that the wording of paragraph 2 c) does not confer upon DAS an unfettered discretion as to whether to provide replacement vehicle hire cover. DAS thus have a right to be subrogated to the pursuer's claim.
On the evidence I was unable to come to the view that the policy document 5/1 fell to be construed contra proferentem DAS. There is no evidence before me that it is their document. It looks to be a document prepared by Kwikfit. Whether it conforms to the DAS Master Policy Wording referred to in Schedule 2 of 8/2 I cannot say. It might be said that if Kwikfit were contracting as agents for DAS then their words would fall to be construed contra proferentem DAS. In coming to my decision I have not had regard for this tool of contract interpretation.
I was also referred to the terms of 4/1 and 4/2 of process. Number 4/1 is a letter from DAS to the pursuer and, as previously noted, contains the sentence "This vehicle has been provided to you under the terms and conditions of your DAS policy." Although Mr Clark invited me to find that the terms of the letter supported the construction for which he contended, I have come to the view that the terms of the letter are fairly neutral. What is said in 4/1 is not inconsistent with DAS having an unfettered discretion. Perhaps the best which could be said is that if DAS were exercising an unfettered discretion one might have expected them to record in their letter that they were so doing rather than record that the vehicle had been provided under the terms and conditions of the insured's DAS policy.
I am fortified in my view by the fact that the conclusion which I have reached is consistent with the decisions in the two unreported English cases to which I was referred.
Decree in the sum of £911.57 being the agreed damages will be pronounced. The pursuer will be entitled to the expenses of the action as the successful party. The proof will be certified as suitable for the employment of senior counsel as agreed.
SHJAT.AH.Kerr.20.11