YOU’VE STARTED SO YOU’LL FINISH: MASTER SETS ASIDE NOTICE OF DISCONTINUANCE SERVED BY INSURER

In Advantage Insurance Co Ltd v Stoodley & Anor [2018] EWHC 2135 (QB) Master Davison set aside the claimant’s notice of discontinuance made after reading the defendant’s  additional written submissions after a hearing.  The notice of discontinuance was viewed as “tactical.

CPR rule 1.4(2)(i) places on the court the duty to further the overriding objective by active case management including “dealing with as many aspects of the case as it can on the same occasion”.

THE FACTS

A road traffic accident occurred in December 2015, a passenger was killed, another seriously injured.  The vehicle involved was insured by Trinity, however Trinity’s policy did not cover the driver at the time of the accident. That driver (Mr Stoodley) had insurance with Advantage which covered him for driving other vehicles.   There was an issue as to which insurer was responsible for paying the third parties.

ADVANTAGE’S ISSUE OF PROCEEDINGS

Advantage issued proceedings claiming a declaration that it was not liable to indemnify Mr Stoodley.  It joined Trinity into the proceedings because Trinity would be liable to pay damages if the application was successful.

ADVANTAGE’S NOTICE OF DISCONTINUANCE

After the hearing the Master ordered the parties to file additional written submisisons.  After Trinity supplied further submissions Advantage filed a notice of discontinuance.  Trinity then applied to set aside that notice of discontinuance.

THE MASTER’S JUDGMENT ON THIS ISSUE

(B) The application to set aside the Notice of Discontinuance
    1. It was the expectation of Trinity that the Notice of Discontinuance would be followed by an unequivocal acceptance on the part of Advantage that it was the contractual insurer and was obliged to indemnify Mr Stoodley against liability in the personal injury claim brought by Mr Reed under claim number HQ17P02973 to which Advantage has been made a second defendant pursuant to the provisions of European Communities (Rights Against Insurers) Regulations 2002. Though it adds nothing to the contractual indemnity in favour of Mr Stoodley, Advantage would also, on the face of it, have an obligation under section 151 RTA 1988 to satisfy a judgment in Mr Reed’s favour. However, the position that Advantage took was that the ambit of the Part 8 claim had been narrower than this. In a letter to Trinity dated 21 May 2018 it stated that the claim had been “solely concerned with the compatibility of ‘Driving Other Cars’ insurance and the Road Traffic Act 1988”. They went on to say that whether Advantage was a “contractual” or “RTA” insurer was not an issue. They now accepted that they were an “RTA” insurer. In a statement dated 25 June 2018, Mr Hibbert of BLM on behalf of Advantage, stated that having reconsidered the matter, the stance Advantage took was that “as a provider of DOC cover it has an obligation to meet any judgment obtained by Mr Reed against [Mr Stoodley] due to the provisions of Part VI of the Road Traffic Act 1988” but “the mechanism by which that obligation arises is, however, still to be resolved and is not one that will be resolved by delivery of the judgment [Trinity] now seeks”. It is apparent from the letter of 21 May 2018 already quoted that Advantage considers that any liability it has to Mr Reed is one that will be shared with Trinity. In his statement, Mr Hibbert referred to there being “various other insurance issues” between Advantage and Trinity which would need to be “borne out in the main action”.
    2. These issues were not further elaborated upon in the witness statement. At the hearing, Mr Kennedy QC was reluctant to go beyond Mr Hibbert’s very guarded position. The furthest he would go was to indicate to me (if I understood him correctly) that it was now accepted that Advantage’s status was that of a contractual insurer whose insurance had been modified by statute. In the jargon of motor insurance, this is sometimes referred to as the “hybrid contractual insurer”. But he indicated that this, in their view, meant that Advantage’s liability (as with Trinity’s contingent liability under section 151) arose under Part VI of the RTA 1988 rather than as a contractual insurer – hence the potential for contribution from Trinity. He indicated that it was not accepted that the European Communities (Rights Against Insurers) Regulations 2002, providing for a direct claim by the injured party against the insurer, applied to such a liability. Finally, he indicated that there would or might be a claim against Mr Hampton for his part in aiding and abetting Mr Stoodley’s offence of causing death by careless driving when under the influence of alcohol and this might be a liability in respect of which Trinity might be obliged to indemnify Mr Hampton. I would observe that these latter two points are not, or not strictly, insurance issues arising between Advantage and Trinity. However, the others plainly are.
    3. Trinity’s position, shortly put, was that it was not permissible for Advantage to open up further issues. The Part 8 claim had been brought precisely to settle who sat where on the “liability tree” and Trinity were entitled to expect that the outcome would decide those matters.
The legal background
    1. CPR rule 38.4 is in these terms:
“(1) Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside.”
    1. The rule has recently been considered by Robin Knowles J in the case of Stati & Ors v The Republic of Kazakhstan [2018] EWHC 1130 (Comm). He adopted the formulation of Henderson J in High Commissioner for Pakistan v National Westminster Bank plc [2015] EWHC 55 (Ch) that “the Court has a discretion which it should exercise with the aim of giving effect to the overriding objective of dealing with cases justly and at proportionate cost”. It is not necessary to establish an abuse of process although that would be a powerful factor in favour of granting an application, (paragraph 41).
    2. The well-known principle in Johnson v Gore Wood [2002] 2 AC 1 that there should be finality in litigation and that a party should not be twice vexed in the same matter is also relevant. In limited circumstances, in the context of discontinuance CPR rule 38.7 gives this principle statutory force. That rule is in these terms:
“38.7 A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if (a) he discontinued the claim after the defendant filed a defence, and (b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”
    1. Because this claim is a Part 8 claim and consequently there is no “defence” as such, it is doubtful whether rule 38.7 would bite. But that, of course, does not detract from the general principle on which the rule is based.
Discussion
  1. For the following reasons, I have exercised my power to set aside the Notice of Discontinuance.
  2. I do not agree that delivery of this judgment will not resolve the “mechanism” of Advantage’s liability. Its liability only arises under Part VI of the RTA 1988 if that proposition is put forward in a strained and tendentious sense. Advantage’s obligation is to indemnify Mr Stoodley under the DOC provisions of the policy. That is a straightforwardly contractual obligation, albeit one that has been modified by section 148(5) RTA 1988. The fact that section 148(5) has modified the contract does not render Part VI of the Act the source of the obligation. On the contrary, the obligation remains contractual. To the extent that Advantage have argued that this was not a matter within the ambit of the action or the hearing before me on 27 April 2018, I also do not agree. It is true that the proceedings sought a declaration that Advantage was “not liable to indemnify Mr Stoodley pursuant to the provisions of Part VI”. But Trinity’s skeleton argument of 18 April 2018 very specifically addressed this wording. Paragraphs 4 and 5 of the skeleton pointed out that (a) an obligation to indemnify did not arise under Part VI and that (b) the scheme of section 148 was to modify the insurer’s contractual obligation, which was an obligation to indemnify, under the policy. That analysis or refinement seemed to be accepted by Mr Kennedy QC in his skeleton argument in response because at paragraph 2 he said that if Advantage was unsuccessful in its argument that Part VI did not apply to DOC cover then “it cannot rely on breaches of condition to refuse indemnity”. Those exchanges in the skeleton arguments seemed clear enough and it was certainly my understanding at the time that I was being invited to resolve the question whether Advantage was contractually obliged to indemnify Mr Stoodley. That is not a matter from which Advantage should be permitted to resile or seek to leave open for another day. This alone is a good reason to set aside the Notice of Discontinuance, which I regard as having been tactical.
  3. It is also appropriate to set aside the Notice of Discontinuance because the clear purpose of identifying the issues that arose in Advantage’s claim was to achieve an overall resolution of the insurance position as between Advantage and Trinity. CPR rule 1.4(2)(i) places on the court the duty to further the overriding objective by active case management including “dealing with as many aspects of the case as it can on the same occasion”. The “various other insurance issues” which Mr Hibbert has referred to in his witness statement and upon which Mr Kennedy QC elaborated are matters which should have been canvassed at the stage when the relevant issues were being formulated and refined. As Mr Viney put it in his oral submissions: if Advantage wanted to argue that there was parity between an insurer liable to indemnify under the contract as modified by section 148 and an insurer liable to satisfy a judgment under section 151 then that clearly should have been raised so that it could be properly and efficiently dealt with. I agree with that submission. If Advantage now raise it either in the action brought by Mr Reed or in another action, then it will be for the court dealing with that claim to decide whether it amounts to an abuse of the process. However, it is appropriate to record my view that, on present information, it was incumbent on Advantage to bring the issue forward in these proceedings and it is not open to Advantage to “keep its powder dry” (Mr Kennedy QC’s expression) in that respect.