Outer House dismisses motor insurer’s claim against third party for recovery of sum paid to injured passenger

About this case:

• Citation:
  [2025] CSOH 47
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lady Haldane

Pursuer Ian Whyte originally raised the action against first defender David Arthur following a road traffic accident in June 2017. The pursuer and the two third parties in the claim were passengers in the first defender’s vehicle. The second defender, UK Insurance Ltd, sought to recoup sums it had paid to the pursuer from the second third party, Lauren Methven, under section 151(8) of the Road Traffic Act 1988.

The case was heard by Lady Haldane in the Outer House of the Court of Session. Smith KC appeared for the second defender and McNaughton KC and Swanney, advocate, appeared for the second third party.

Insurer of last resort

The car involved in the accident was owned by the first third party, who was no longer involved in proceedings. Ms Methven, the second third party, obtained a certificate of insurance from the second defender having made false representations, including that she was the owner. The first defender, who was the driver, was not insured to drive the car. After the accident but prior to Mr Whyte raising proceedings, the second defender had the policy avoided in an undefended Court of Session action in September 2019.

It was the second defender’s position that, notwithstanding the terms of that interlocutor, they were entitled to rely on section 151(8) of the 1988 Act to recoup the sums paid by them to the pursuer. An alternative argument that they were entitled to recoup the damages by common law was not maintained at debate.

For Ms Methven it was submitted that the only policy relevant to this matter was rendered void ab initio and so could not be relied upon for the purposes of section 151(8). Additionally, the obligation to make payment to the pursuer arose as a consequence of his claim against the defender as an uninsured driver and against the second defenders in their capacity as Article 75 insurers on behalf of the Motor Insurer’s Bureau. The claim was thus properly understood as one against an uninsured driver in which the MIB was the insurer of last resort.

Senior counsel for the second defenders submitted that a proof before answer was necessary to establish the facts forming the backdrop to the operation of sections 151 and 152 of the 1988 Act to the present case. It would be a ‘surprising result’ if a declarator obtained under section 152(2), as happened in September 2019, deprived the insurer of the right to avail themselves of the recoupment provision in section 151(8).

Absence of liability

In her decision, Lady Haldane noted the desire for a consistent UK-wide approach to the 1988 Act, adding: “From the various authorities cited the following propositions can reliably be drawn. The effect of a declaration under section 152(2) of the 1988 Act is to relieve the insurer of any obligation to make payment under section 151. The individual who is the subject of such a declaration is therefore an uninsured driver. This state of affairs brings into scope the MIB as the insurer of last resort. It is of note in this context that the agreement governing the participation of the MIB is called the ‘Uninsured Drivers’ Agreement’.”

She continued: “Any insurer nominated by the MIB to investigate and settle, if appropriate, any resultant claim is not settling the claim directly but is doing so ‘standing in the shoes’ of the MIB. It is only the agent of the MIB who is and remains liable under the uninsured drivers’ agreement. If that is correct, then it would follow from the absence of direct liability on the insurer in terms of section 151 to satisfy any judgment, that there is equally no direct entitlement to recoup any sum paid from the now uninsured individual.”

Considering the language of the provisions in more detail, Lady Haldane said: “The plain language of section 152(2) states in terms that ‘no sum is payable by an insurer under section 151 of this Act where he has obtained a declaration that he is entitled to avoid the policy in question’. That language is clear and unambiguous. As a matter of logic, it follows that if no sum is payable under section 151 in the event of the policy being avoided, then nor can the insurer avail itself of the right under s 151(8) to seek recoupment of sums paid in satisfaction of any judgment arising in terms of section 151.”

She concluded: “The effect of a declaration under section 152(2) on obligations under section 151, and the consequent role of the MIB, have been considered at appellate level in England. The conclusion of the Court of Appeal on these matters is clear. I see no compelling reason to demur or deviate from the analysis of that court.”

Lady Haldane therefore upheld the submissions of the second third party and dismissed the claim insofar as directed against her.