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Cite as: [2017] IESC 31

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Judgment

Title:

The Law Society of Ireland -v- The Motor Insurers’ Bureau of Ireland

Neutral Citation:

[2017] IESC 31

Supreme Court Record Number:

45/2016

Court of Appeal Record Number:

522 2015 COA

Date of Delivery:

25/05/2017

Court:

Supreme Court

Composition of Court:

Denham C.J., O'Donnell Donal J., McKechnie J., Clarke J., MacMenamin J., Charleton J., O'Malley Iseult J.

Judgment by:

O'Donnell Donal J.

Status:

Approved

Result:

Appeal allowed

Details:

Judgment also by McKechnie J.


Judgments by	Link to Judgment	Concurring	Dissenting
O'Donnell Donal J.	Link	Denham C.J., McKechnie J., Charleton J., O'Malley Iseult J.	Clarke J., MacMenamin J.
Clarke J.	Link	MacMenamin J.
MacMenamin J.	Link

SUPREME COURT

Denham C.J.
O’Donnell J.
McKechnie J.
Clarke J.
MacMenamin J.
Charleton J.
O’Malley J.

Supreme Court No: 2016/45

IN THE MATTER OF AN APPLICATION BY THE ACCOUNTANT OF THE COURTS OF JUSTICE PURSUANT TO THE INSURANCE ACT 1964 (AS AMENDED BY THE INSURANCE (AMENDMENT) ACT 2011)

BETWEEN:

THE LAW SOCIETY OF IRELAND

Claimant (By Order of the Court)/Respondent

AND

THE MOTOR INSURERS’ BUREAU OF IRELAND

Respondent (By Order of the Court)/Appellant

Judgment of O’Donnell J. delivered the 25th of May 2017

1 The legal ideal aspires to clarity, certainty and precision, but much of the business of the courts, particularly in the interpretation of contracts or statutes involves a consideration of ambiguity. Ambiguity however is not solely a feature of language. Rubin’s Vase is an image used in psychology but now well known. It is an ambiguous form that can be seen either as a vase or two symmetrical faces, but not both. Similarly, Wittgenstein apparently used an ambiguous image in the nature of a line drawing which could be viewed either as a rabbit or a duck to illustrate a distinction he sought to make between “seeing that” and “seeing as”. The provisions of the Motor Insurers’ Bureau Agreements (“the Agreement”) with respective Ministers for Transport between 1955 and 2009, are a much more humdrum example. But, as the extensive judgments in the High Court and Court of Appeal, and the detailed arguments in this Court all show, they too are ambiguous and their interpretation is to some extent also dependent on perception.

2 From the point of view of a person involved in a road traffic accident, and who seeks compensation from a driver who is under a legal obligation to have insurance against the risk of injury caused by such an accident, there is no relevant distinction between those cases undoubtedly covered by the MIBI Agreement of the uninsured or untraced driver or the drivers where cover has been repudiated, and the circumstances considered here, where the negligent driver has the benefit of an insurance policy, but the insurance company is insolvent and unable to provide the indemnity which it agreed. To the injured party, his lawyer and, perhaps, a Government minister concerned with public policy, these represent different ways in which for the victim of an accident, the reality of recovery can fall short of the promise of compulsory insurance of road vehicles. To an innocent party whose claim succeeds but who does not receive compensation, it is a matter of irrelevance precisely why an insurance policy is not available to cover the claim or all of the claim, and accordingly entirely sensible that a provision, in this case in the shape of an agreement with the motor insurers, should provide a safety net which ensured that injured claimants were not left uncompensated. From the perspective of a motor insurer, there is however a very significant difference between the industry accepting responsibility for compensation of claimants whose injuries are caused by an uninsured (or untraced) driver as a result of an accident, and on the other hand accepting liability for injuries caused by drivers who have insurance policies with a company which has become insolvent. The first is a risk which can be assessed, and indeed managed by encouraging enforcement of the law, and can be provided for by being priced into the premiums charged to customers. It will always necessarily be a fraction of the total claims exposure of a company and because it is spread across the market, it will have little competitive impact. As the evidence in this case shows however, acceptance of an obligation to make good claims which were required to be met by an insurer which has since become insolvent is of an entirely different magnitude and which could easily put at risk the solvency of the remaining insurers. The question for this Court is whether or not the Agreement is to be interpreted as covering claims to be met by an insolvent insurer. That in turn involves considering what the parties to the Agreement are to be understood to have meant when they made the operative Agreement in 2009, itself a successor to earlier agreements dating back to 1955. That task involves a consideration of the language used and the background facts, conscious also that such matters may take on a different complexion depending on the vantage point from which they are viewed.

3 This case has been the subject of detailed consideration in the High Court (Hedigan J.) ([2015] IEHC 564) and in three concurring judgments in the Court of Appeal ([2016] IECA 60). The proceedings did not involve oral evidence, cross-examination or any dispute on the facts. However, while the facts are not in controversy, a dispute has raged over the manner in which such matters should be interpreted, and in particular the weight to be given to certain factors. I gratefully adopt therefore the account of the facts set out in the judgment of Mr. Justice Clarke. Accordingly, it will I hope be sufficient to identify the factors which I consider to be relevant and explain why on balance I have come to the conclusion that in this case the appellant’s (“the MIBI”) interpretation of the Agreement is correct.

The Factors
4 The relevant factors looked at neutrally, appear to be as follows:

(i) The broad language of the Agreement, and in particular clause 4;

(ii) The payment by the MIBI of certain claims in respect of the equitable insurance companies;

(iii) The manner in which similar language in the UK agreement has been referred to in certain judgments;

(iv) The terms of a note included in the accounts of the MIBI for 2012 and 2013;

(v) The terms of a memorandum of Government in 1964 obtained from the National Archives;

(vi) The provisions of s.3 of the Insurance Act 1964 (as amended) and as re-enacted as s.3(7) of the Insurance Act 2011;

(vii) The headings of the MIBI Agreement;

(viii) The interpretation of the Agreement attributed to the parties namely, the MIBI and the Minister;

(ix) The terms of the Agreement providing for the operation of the Agreement in any particular case, and in particular clause 3;

(x) The Memorandum of Association of the MIBI;

(xi) Considerations of commercial common sense;

(xii) The provisions and operation of the 1964 Act.

5 I think it is accepted that factors (i) - (v) broadly speaking favour the interpretation advanced by the Law Society, namely that the Agreement binds the MIBI to satisfy judgments obtained which have not been honoured in whole or in part by reason of the insolvency of an insurer. Factors (vii) to (xii) broadly speaking are in favour of the interpretation advanced by the MIBI, namely that that is, that the Agreement is limited to the satisfaction of judgments obtained in respect of uninsured and untraced drivers. Factor (vi) is relied on by both parties in support of their respective interpretations.

6 In my view however, it is not a simply question of assigning these factors to either side of the argument and explaining the weight which it is considered should be attributed to each factor and then considering on which side the balance lies. Since it is not suggested that there is any difference in understanding between the parties, the Agreement here has a single meaning, even if it is disputed. That is the meaning which both parties are taken to have agreed upon. That meaning is, however, to be determined from a consideration of the Agreement as a whole. What the Court must seek therefore is not an interpretation in which some aspects win out over others. Rather it is a case of providing an interpretation of the Agreement as a whole, which not only relies on those features supportive of the interpretation, but also most plausibly interprets the entire Agreement and in particular those provisions which appear to point to a contrary conclusion. Even if the majority of factors appeared to tend broadly to one side of the argument, that interpretation cannot be accepted if it is wholly and fundamentally irreconcilable with some essential features. To take a concrete example, the words chosen by the parties are obviously of particular significance. It may be that looked at in isolation all considerations of language, syntax and grammar strongly suggest that one interpretation is much more likely than another which is submitted. However, if the objectively more likely interpretation is plainly and unavoidably inconsistent with another provision of the contract in respect of which there is no ambiguity, then that itself is a strong indicator that another possible, if less objectively likely, interpretation of the clause was that which the parties intended and therefore agreed. Even then a court might still have to consider whether it was possible that the parties had simply managed to contradict themselves in the course of the same document. An agreement is an exercise in communication and there is a working, though by no means irrebuttable, presumption of coherence. It is important therefore to test any interpretation of a clause against the understanding of the agreement to be gleaned from what is said, and sometimes not said, elsewhere in the agreement.

7 Both parties and all the judges are in agreement that the operative principles are those set out at pages 114-115 in the decision in the judgment of Lord Hoffman in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98, and which has been adopted with approval in the Irish courts:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. . . .

(5) The “rule” that words should be given their “natural and ordinary meaning” reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said... :

“. . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.””

8 These principles represent a significant staging point in the development of what might be described as a modern approach to the interpretation of contracts, a development which, as the principles recognise, has not necessarily reached its terminus. The common law is treated as a coherent and consistent body of law developing incrementally by subtle changes, and only on occasion by sharp and dramatic turns. It is sometimes only after a period of time that the significance of a development is understood and it becomes apparent that the direction of the law has altered considerably. The modern approach to the interpretation of contracts is one which would probably be unrecognisable to, and might be regarded as heresy, by the Victorian judges who expounded so confidently on commercial matters. In my view, it is important to understand the full import of the changes wrought by the approach set out in Investors Compensation Scheme Ltd. v. West Bromwich Building Society. It is also necessary to be aware of the significance of this development for the overall approach to the interpretation of agreements, and not to simply mix and match authorities drawn from different eras and contexts, as if they were a body of coherent rules produced by a single author. For example, the “rule” that where a recital and an operative part of a deed conflict that the operative provision must prevail, is like the “rule” referred to by Lord Hoffman that words should be given their “natural and ordinary meaning”, no more than an expression of common sense about the manner in which we communicate. It is not an iron rule, particularly if it may not have been present to the mind of the parties when making their agreement. To take a homely example, if in agreement it is recited that a landowner wishes to have ragworts removed from a specified field, and the operative provisions says in general language that he will pay a certain amount per 100 ragworts delivered on a given day, no one would suggest that this entitles the other party to produce an unlimited number of ragworts from any other location and demand payment. In that case of course it might be said that there is no true conflict, but rather that the recital can be read harmoniously with the operative provision as indicating the scope of the agreement. But this itself illustrates the importance of approaching the Agreement in a holistic way rather than having immediate resort to case law.

9 A contract is a form of communication intended to convey the meaning agreed upon by the parties. Words are the vehicle through which that meaning is conveyed but the meaning of a document is much more than the meaning of the words. It is what the parties would reasonably have been understood to mean from a consideration of all the available guides to the meaning of the agreement. Words are an important and very often the only necessary guide to discerning the meaning, but they are only a guide, and as recognised by Lord Hoffman, they can be ambiguous, and sometimes even, as happens in real life, it may be apparent the parties have for whatever reason used the wrong words or syntax. In those circumstances, the words must give way.

10 Since much in this case turns on the approach to be taken to the apparently clear and broad language used in clause 4.1.1, I think it useful to consider in a little more detail the implications of the approach in Investors Compensation Scheme Ltd. v. West Bromwich Building Society. In a paper given to German patent lawyers, “Patent construction” (2006) CIPA Journal 727, Lord Hoffman discussed this approach to interpretation. Patent law is traditionally seen as highly specialised and precise and technical. However he took a very homely example. He was standing at his kitchen sink doing the washing up when his wife suggested he should put on his umbrella. He hesitated only for a moment before opening a cupboard taking out an apron and putting it on. He continued at pages 727-728:

“If one looks in the dictionary, there is no way in which the word umbrella . . . can mean apron. . . Nevertheless I understood clearly what my wife was using the word umbrella to mean. I was in the kitchen, which has a roof, and anyway it was not raining, so she clearly could not have intended the dictionary meaning of umbrella. But an umbrella keeps you from getting wet and this suggested that she was concerned that I might get my suit wet while I was washing up the dishes. For that purpose, I usually wear an apron. So I concluded that she was using the word umbrella to mean apron. The reason why she chose that word does not particularly matter. It might have been some poetic fancy but more likely it was just a slip of the tongue. The point is that despite the dictionary, she succeeded in conveying the meaning which she intended.

This illustration tells us something important about language. It is a code which we use to communicate. The code has two elements: semantics, the meaning of words, and syntax . . . the order in which words are arranged. But when we try to understand what someone is saying, the code is only part of what we rely on. Enormously important is the background, the context, the knowledge already assumed to be shared between the speaker and listener, [and] the purpose for [which] the communication is being made. What we are trying to understand is not just the meaning of the words. That in itself is inadequate. The real object, as in the case of my wife’s remarks about putting on my umbrella, is to understand what the speaker intended to mean by using those words.

That was a case of someone conveying a meaning, clearly and unambiguously, although she has used the wrong word. In legal documents, including patent specifications, one does not often get people using the wrong words. Most patent specifications are very carefully drafted and you would certainly hesitate a long time before concluding that the background and context show the draftsman must have used the wrong word. However, if you do come to that conclusion, as sometimes you do, you give effect to what you think the draftsman was using the word to mean, irrespective of what the word means in a dictionary. . . . It would have been absurd if, standing in the kitchen, I had got out my umbrella. If you say that understanding your wife in ordinary conversation is different from construing patent specifications and other legal documents, I say that the only difference is that you will more readily start with the assumption that highly paid people drafting legal documents were using words in the ordinary dictionary meanings. But that is all.” [Emphasis added].

11 In this case, I consider that the words used in clause 4.1.1, are certainly capable of bearing the meaning for which the Law Society contends. It would be idle, and indeed dishonest to pretend that the arguments and considerations which persuaded the courts below, and which are set out so eloquently in the judgment Clarke J. delivers, are not strong and plausible. Indeed if this case had not been so well prepared and argued by both sides, it is conceivable that a judgment in favour of one or other of the parties might not have attracted notice or comment. But the parties here were well matched and have fought each other to a standstill through three courts, and it is necessary to make a decision. The background, the context, the knowledge shared between the parties, and the purpose for which the agreement was being made, all lead me to the conclusion that the MIBI Agreement was not intended to extend to cases where the defendant was insured, but his insurer has become insolvent.

12 Legal agreements are not poetry intended to have nuances and layers of meaning which reveal themselves only on repeated and perhaps contestable readings. Agreements are intended to express in a clear and functional manner what the parties have agreed upon in respect of their relationship, and the agreements often do so in a manner which gives rise to no dispute. But language, and the business of communication is complex, particularly when addressed to the future, which may throw up issues not anticipated or precisely considered at the time when an agreement was made. It is not merely therefore a question of analysing the words used, but rather it is the function of the court to try and understand from all the available information, including the words used, what it is that the parties agreed, or what it is a reasonable person would consider they had agreed. In that regard, the Court must consider not just the words used, but also the specific context, the broader context, the background law, any prior agreements, the other terms of this Agreement, other provisions drafted at the same time and forming part of the same transaction, and what might be described as the logic, commercial or otherwise, of the agreement. All of these are features which point towards the interpretation of the agreement, and in complex cases, a court must consider all of the factors, and the weight to be attributed to each. The reasonable person who is the guide to the interpretation of the agreement is expected not merely to possess linguistic skills but must also have, or acquire, a sympathetic understanding of the commercial or practical context in which the agreement was meant to operate, and perhaps even an understanding of the many ways in which even written, formal and legal communication falls short of the standard clarity and precision set by the early editions of Fowler’s Modern English Usage.

13 What might be described as the modern approach to interpretation probably owes something to a developing understanding of communication. But it is also a valuable correction to a disposition to make what might be described as the errors to which lawyers are prone. Precision in language is highly valued among lawyers and for good reason. It is an important skill that benefits clients when being advised as to transactions, and when on occasion such transactions give rise to legal disputes and litigation. Inevitably in such disputes and particularly one as extensive and contestable as this, there is an intense focus on the language and in particular the words used. It is important to remind ourselves however, that the process is not the deconstruction of a text, but rather the interpretation of an agreement. Parties undoubtedly seek clarity of language, but they do not do so as an end in itself. The focus of the parties is an agreement, normally commercial, which they consider is to their benefit. That is the context in which the words are used, and in which they must be interpreted.

14 It is also inevitable that when there is a dispute about an issue, that there is a tendency to approach the interpretation of an agreement through that dispute. In this case, it might be said that the question for the Court is whether the MIBI Agreement covers policies issued by insurers which have become insolvent. But it is an error, which can sometimes lead to the wrong result, to approach the interpretation of the Agreement solely through this focus. It is indeed rare that disputes on contractual interpretation address issues which are central to an agreement because, often if the matter is heavily negotiated, the parties will have a clear understanding of what has been agreed, and that will be reflected in the agreement. Much more difficulty arises when the issue, as here, is one which is not specifically addressed, discussed or negotiated. Although the question can be framed as to what the parties agreed about that specific issue, the true question is perhaps subtly different. It is necessary to understand the entirety of an agreement and then to consider what that means for the specific issue now raised. It is necessary therefore to see the agreement and the background context, as the parties saw them at the time the agreement was made, rather than to approach it through the lens of the dispute which has arisen sometimes much later.

15 I make these observations at the outset, because it appears to me that above all the argument about detail, a significant difference between those who, like me, consider that the Agreement does not extend to insolvent insurer claims, and those who take the contrary view, is a difference to the importance to be attributed to the words used in clause 4.1.1 The more those words are considered on their own, the easier it is to conclude that the insolvent insurer cases come within the Agreement. The more they are seen as a guide, albeit an important one, to the Agreement as a whole, the more possible it is to conclude that the Agreement, when properly construed does not cover those cases.

What Agreement is to be construed?
16 One issue which has arisen in this case is what Agreement is to be construed. There are a series of MIBI Agreements expressed to be supplemental on the original agreement of 1955. In a lucid and attractive argument, counsel for the Law Society argued that the correct approach to the interpretation in the clause in the Agreement, which had remained essentially unchanged since 1955, was to consider what it meant in 1955, and then to consider what if anything in the intervening time could alter that meaning. Attractive though it is, I do not agree that this is the correct approach. The agreement which we must interpret is the operative Agreement applicable at the time when the issue arose with the accountant of the High Court. Accordingly that is the 2009 Agreement. Where there is some ambiguity about the meaning of a clause, then it is entirely possible that it might be said that one interpretation was more plausible as of say 1955. However, if over the intervening years, the Agreement has been amended and supplemented in a manner which is strongly suggestive of the other meaning, or arguably only consistent with it, then the applicable Agreement in 2009 is or ought to be interpreted in that way. To return to Rubin’s vase, if in subsequent years the parties or their successors add eyes, teeth, and moustaches to the silhouettes, then the picture can only be of two faces however plausible the vase interpretation may have been initially. However, I agree that the fact that this is a developing agreement is important to its understanding in a number of different respects. The 2009 Agreement is nominally the product of the same parties as those which made the 1955 Agreement, but in reality entirely different people were involved. That in my view must be taken into account in considering the various forms of the Agreement. The development of the Agreement may also be relevant in a different respect. There is or may be a natural unwillingness to revise aspects of an agreement which have been found to work satisfactorily. At the same time, the fact that the Agreement is returned to on a number of occasions by the same parties represented by different persons, may be relevant in considering arguments relating to what has been described as business common sense. It is useful to ask, if at each renegotiation or amendment, whether the parties can be said to have intended to agree to the provision as interpreted.

17 A related issue in this case is that I think it is necessary to distinguish carefully between evidence which predates 1964 and that which postdates it. The existence of the Insurance Act of 1964 (“the 1964 Act”) and the fund it established are indeed key components in this case. While the interpretation of the MIBI Agreements is the issue debated here, the specific legal controversy is the contention that the accountant of the High Court should not make payments under the scheme of the 1964 Act. The question of the breadth or otherwise of the MIBI Agreement is not something to be considered in the abstract. The existence of the 1964 Act and the mechanism it creates is an important part of the context against which the MIBI Agreement must be construed at least thereafter. The 1964 Act on its face covers claims made in respect of Setanta insurance policies unless excluded by the terms of s.3(7) and the fact that payment can be made elsewhere. The MIBI Agreement for its part is certainly capable of covering such claims. The question therefore is the line between the two.

The issues raised by the structure of the proceedings
18 It is also important to keep in mind the somewhat unusual format of these proceedings. The origin of the case was the contention by the Law Society made to the accountant of the High Court that the MIBI Agreement covered claims made in respect of Setanta Insurance and that therefore the accountant should not make a payment. The accountant raised the matter and the President of the High Court directed a trial of the issue between the Law Society and the MIBI. However, these proceedings are not plenary proceedings. No discovery has been sought or oral evidence given. The information marshalled so impressively emerges from public sources. A court must be therefore a little more cautious in drawing general conclusions from the documents provided to it than might be case where discovery has been obtained and scrutinised by the parties.

19 The structure of these proceedings is important in another respect. The proceedings themselves are not, as would almost invariably be the case, between the two parties to the Agreement or their assignees or successors. Moreover the Agreement which is sought to be construed is itself unusual in that it is an agreement between two parties which confers benefits on third parties for whom it may be said the Law Society are a reasonable proxy. It has been observed that the nature of the MIBI Agreement is perhaps best understood as an agreement that the MIBI will not raise a privity objection if sued by a claimant. But in the context of this case, that raises a particular difficulty. The MIBI’s obligation is therefore not to raise a privity objection to any claim brought, which is itself within the scope of the Agreement. In this case the MIBI however takes a view as to the scope of the Agreement which does not extend to the Setanta claims. If the MIBI refused to satisfy any judgment and objected that any claimant did not have privity with it and therefore could not sue to enforce the Agreement, it would fall to the party to the Agreement, that is the Minister, to enforce it in favour of the third party. Otherwise, absent one of the recognised exceptions to the privity rule, it cannot be enforced. That is of particular relevance here, where it is contended that both parties to the Agreement consider that it does not extend to the Setanta claims or claims made in respect of insurers which have become insolvent.

20 This is connected to a further potential difficulty touched on in the judgment of Ms. Justice Finlay Geoghegan in the Court of Appeal. The origin of this case lies in the fact that there is now a disparity, not just in mechanism, but in amount between the liability of the Insurance Compensation Fund (“the insurance fund”), under the 1964 Act and the liability of the MIBI if it arises. In blunt terms, a claimant will be limited to 65% of a claim (and in any event capped at €830,000) if it falls to be dealt with under the 1964 Act regime, whereas the MIBI Agreement provides for effectively full recovery. It is indeed a useful thought experiment to consider how this question of interpretation would be approached if the situation was somewhat reversed and the insurance fund provided a full indemnity, but the MIBI Agreement did not extend to property damage. The Setanta claims undoubtedly fall prima facie within the scope of the Insurance Compensation Fund under the 1964 Act (as amended) since Setanta is an insolvent insurer. The structure of these proceedings is a contention made that the accountant ought not to make payment under the Act because it is contended that there is another source of payment here, namely the MIBI. However, even if the contention of the Law Society is upheld in this case that by itself does not ensure payment from the MIBI: all it does, negatively, is prevent payment from the Insurance Compensation Fund. Whether a claimant may recover from the MIBI in fact may depend in broad terms on whether the MIBI in the light of a judgment accepted that it was liable. Even then, there may be significant difficulties of procedure which may mean that even under the terms of the MIBI Agreement, strict compliance with which is a precondition to liability, there is no obligation to pay. In such circumstances, a claimant may not recover at all, or will be forced back to the fund with added delay and considerable expense. While the large and difficult issue involved in this case is whether the MIBI has a liability under the Agreement in general, these specific problems cannot be ignored in the resolution in the case.

21 Finally, there may be merit in applying a form of sense check to the legal analysis. What conclusions are to be drawn from the interpretation arrived at by the Court? As a matter of fact, how is it suggested that all the different factors occurred? Is it the case that the Court is being asked to accept that one or other party was oblivious to the meaning now contended to be agreed and that state of ignorance continued for 60 years, or is it suggested that the parties always understood that the Agreement would have certain consequences but now seek to deny that because of the scale of the potential liability? It is useful to articulate the factual theory upon which it is said that the interpretation of the contract is compatible with all the relevant evidence. That explanation should be capable of being tested against any of the factors. But it too must at least be consistent. If different explanations were provided for different aspects of the case, then that must at a minimum, raise questions as to the plausibility of the interpretation contended for. Thus, for example, it should not be possible to advance an interpretation that lays heavy emphasis on the words of a particular clause on the basis that they are the product of careful legal drafting, but discount the provisions of other parts of the agreement or suite of agreements produced at the same time. Those too must be assumed to be the product of careful drafting, and any inconsistency between them and the interpretation of the clause argued for must be addressed. Similarly it ought not to be possible to explain some aspects of the obvious difficulties in this case on the basis that the parties did not really realised the extent of the agreement they were making, but explain others, even tacitly on the basis that the parties did fully understand the scope of the agreement they were making, but now faced with liability, have both dishonestly sought to resile from that position.

22 It is now necessary to turn to the construction of the Agreement. As already indicated, I have come to the conclusion that the Agreement does not oblige the MIBI to cover claims made in respect of drivers whose insurer has become insolvent. In approaching that question it is necessary first to place the agreement in it commercial factual and legal context, keeping in mind the possibility that the Agreement may have a different appearance depending on the perspective from which it is viewed. This is not an exercise in context trumping words. Rather it is a process of interpretation of the text of an agreement seeking to reconcile so far as possible all the admissible evidence and arguments, so as to give effect to the Agreement the parties are to be understood to have made.

Commercial background
23 There is no dispute and less doubt that the Agreement certainly covers at least three classes of case: the untraced driver, the uninsured driver who never had a policy of insurance, and the driver whose policy has been repudiated. There may be a degree of overlap between these cases since in some at least of the cases of the untraced driver, the driver may have been uninsured. It is said by the MIBI that these represent a measurable risk which is to some extent controllable in that extra enforcement will have an impact upon the number of drivers who are uninsured, and in any event, it is possible to make an actuarial calculation of the likely cost in any given year which is itself likely to be a fraction of the overall cost of claims. Members of the MIBI are then called upon to contribute accordingly.

24 There is also no doubt, and it was not contested in evidence or indeed capable of being contested, that if the MIBI Agreement is held to cover claims made against the policy holder whose insurer has become insolvent, then that is not just a significantly different risk, but it is one which is potentially ruinous for the remaining insurers. The nature of insurance involves an assessment of risk, the period between receipt of premium and potential payment, investment return during that period, and the fixing of premiums to attract business which will be profitable. It follows that an insurer, who undervalues risk and offers reduced premiums, will attract more business. There is not only therefore an inherent risk that a company which miscalculates risk will become insolvent, but it is also likely to have acquired a very substantial segment of the market. The companies which have failed, and been the subject of payments through the insurance fund, namely the ICI, PMPA, and Quinn Insurance Ltd., all had substantial businesses and the amount of the deficiencies involved were very large indeed being €139m, €164m and €1.158bn respectively. In a substantial case, even if the MIBI made a call upon its members, it is likely that some of them would not be able to meet the call, in which case the burden would fall on the remaining insurers with a further possible domino effect. Indeed it is more likely that the MIBI as a limited company would simply be wound up. The irony would be then that on the Law Society’s interpretation, Setanta claimants would then fall back upon the insurance fund, but all other MIBI claimants would have no recourse. There is no doubt therefore that if the Agreement has the effect contended for by the Law Society, that it was an extremely foolish agreement to make on a professional level, and indeed to continue to supplement and renew on five occasions up until the most recent agreement in 2009. This is not a determinative factor since it is not unknown for commercial parties to make agreements that in retrospect are clearly unwise. Nevertheless, the commercial impact of the Agreement is a necessary part of the background since if an agreement is plainly foolish to the point of threatening the financial viability of the companies, then it is necessary to offer some plausible explanation why a prudent party (and in this case that involves all the motor insurers doing business in the State) would enter such an agreement and renew it over a period of 60 years.

25 A further feature is that while at one level the argument is that if the Agreement extends to claims made against insolvent insurers, that is only a further heading of coverage that it is necessary to recognise that it represents liability of a different sort and type. The categories of untraced/uninsured/repudiated cases, have a common feature in that they relate to actions of wrongdoing committed by a driver of a car. The driver of a vehicle whose insurer who later becomes insolvent, has done nothing wrong. Furthermore, the risk being covered is entirely different: on one case it is a risk that the driver will be uninsured, will leave the scene, or will breach the terms of his or her insurance. At one level, it is understandable that if insurers get the benefit of a captive market created by the desire that injured plaintiffs should not go uncompensated, that a corollary should be that they pay compensation in such cases. After all, if the uninsured drivers had complied with their statutory obligations, or the untraced drivers had been found, then the companies may have received a premium but they would still have this liability. In the case of a policy which has been repudiated, then an insurer has at least been prepared to take the risk of that driver, and therefore it is not unreasonable that it should be obliged to compensate a plaintiff if injured, and left to pursue its dispute with its own insured. In effect the claimant is protected, and the risk that the individual defendant will not be able to pay the damages is transferred from the injured party to the MIBI, but not removed. It is less clear why in principle insurers should also take on the risk of the insolvency of another insurer. Such an insurer is necessarily a competitor, and moreover one whose activity may have reduced the profitability of the solvent insurers. In such a case, it is perhaps not unreasonable that the insolvency should be borne by the general insurance market and the State in the same way as other claims against parties whose insurer is insolvent.

26 The MIBI has also made reference to the fact that the Agreement now satisfies an important State obligation under Directive 2009/103/EC which requires the State to make provisions for “a body to guarantee that the victim will not remain without compensation where the vehicle which caused the accident is uninsured or unidentified”. The CJEU in Csonka and Others v. Magyar Állam (C-409/11), confirmed that the Directive does not extend a compensation policy obligation to insolvent insurers. At paragraph 44, Advocate General Mengozzi identified the difference between the two classes of liability as follows:

“Lastly, I should also like to emphasise the important difference that exists, in my view, between a vehicle in respect of which the insurance obligation as described in Article 3 of Directive 72/166 has not been satisfied and a vehicle insured with an insolvent insurer. After all, a vehicle for which the insurance obligation has not been satisfied is an uninsured vehicle. A vehicle which was insured with an insolvent insurer

has

satisfied the obligation to secure insurance against civil liability in respect of the use of vehicles. The risk cover is genuine but the compensation is delayed by the financial situation of the insurer.”

27 The existence of the MIBI Agreement is linked to the provisions of s.76 of the Road Traffic Act, firstly of 1933, and subsequently s.76 of the Act of 1961, which made insurance of motor vehicles compulsory. A vehicle insured with an insolvent insurer has, as Advocate General Mengozzi observes, satisfied that obligation. As the Law Society points out, it is quite possible that in this one respect, Ireland has made a more extensive provision than was required by European law (though given the trend of the development of Irish law and even the development of coverage in respect of uninsured driving that seems unlikely). However, the analysis of the ECJ and Advocate General Mengozzi in Csonka is more important in my view in recognising that the liability of an insolvent insurer to victims of a road traffic accident is of a different order type and genus than the area covered by the Directive and by the agreed provisions of the MIBI of the uninsured/untraced/repudiated cases. If therefore, insurers and subsequently the MIBI agreed to extend their liability to insolvent insurers, then it is extremely unlikely that they could have done so advertently, and with an awareness of the potential liability that was being assumed. That is the commercial background which is relevant to the interpretation of the Agreement.

The words used
28 I think it is clear that the principal argument which persuaded the High Court and Court of Appeal that the Law Society was correct in its interpretation of the Agreement, was the apparent clear words of clause 4.1.1 of the Agreement. I will set these out with the emphasis attributed to them by the Law Society, in its submissions:

“Subject to the provisions of clause 4.4,

if Judgment/Injuries Board Order to Pay in respect of

any liability for injury to person or death or damage to property which is required to be covered by an approved policy of insurance under s.56 of the Act is

obtained against any person or persons

in any court established under the Courts (Establishment and Constitution) Act, 1961 (No.38 of 1961) or the lnjuries Board established by the PIAB Act 2003

whether or not such person or persons be in fact covered by an approved policy of insurance and any such judgement is not satisfied in full within 28 days

from the date upon which the person or persons in whose favour such judgement is given become entitled to enforce it

then MIBI will so far as such judgement relates to injury to person or damage to property and subject to the provisions of this Agreement pay or cause to be paid

to the person or persons in whose favour such judgement was given any sum payable or remaining payable thereunder in respect of the aforesaid liability including taxed costs (or such proportion thereof as is attributable to the relevant liability) or satisfy or cause to be satisfied such judgement

whatever may be the cause of the failure of the judgement debtor.

” (Emphasis added)

29 The MIBI has sought to suggest that the claim is a clause only about timing, or a subsidiary provision. I do not agree. As the Law Society suggests in its written submissions, clause 4.1.1 imports the essential nature of the obligation under the Agreement and cannot be said to be merely a timing matter or a subsidiary provision, not least, because there is no other liability clause.

30 It is clear that the wording of this clause was a significant factor in the courts below. For example, Ms. Justice Finlay Geoghegan recognised the difficulty of reconciling the Law Society’s interpretation with the other provisions of the Agreement, most notably clause 3.11 which permits for the assignment of a judgment and consequently its enforcement against the insured. However, she considered that that could not “require a construction of the liability of MIBI under the 2009 Agreement which is different to the meaning of clause 4.1.1 construed in accordance with the ordinary meaning of the words used in relevant background to the 2009 Agreement”. Again, she considered that “any inconsistency between the clause 3.11 and clause 4.1.1 could not alter the construction of the 2009 Agreement as a whole in accordance with the ordinary meaning of the words used by the parties”. In my view, this approach elevates the ordinary meaning of the words to a position which is not perhaps entirely merited. It is clear from the principle set out in Investors Compensation Scheme Ltd. v. West Bromwich Building Society, that if the ordinary meaning of the words would lead to a conclusion contrary to the intention which emerged from the rest of the Agreement and the relevant background, then those ordinary words must give way. Indeed, as was observed in that case, a court might come to the conclusion that the drafting had simply miscarried, and that notwithstanding the clear and unambiguous words used, that the parties cannot be held to be bound by such a meaning. Nevertheless, I agree since in any agreement words are used to convey meanings and to express agreement, very considerable weight must be given to them, and that taken on their face, they are certainly broad enough to support the contention of the Law Society that claims in respect of insolvent insurers are covered by the agreements.

31 However, it is important to note that the words used here are not specific. They make no reference to insolvency of an insurer and are not otherwise directed towards that case. This is not a case of reading umbrella as apron or phone as post. Rather the words of the clause are general and it is said that the breadth of the language must encompass claims made against insolvent insurers. This is important because the question becomes not only the meaning that may be attributed to such language, but also the intended field of application of the provision, which means considering the indications as to scope to be found in the entire agreement. On its face, the reading contended for by the Law Society suggests not merely that the Agreement is broad enough to cover claims in respect of insolvent insurers, but must also include claims against solvent insurers where for any reason payment is not forthcoming within 21 days of judgment. This could occur because of delay on the part of an insurance company, industrial action in relation to that company, or in other sectors of the economy which prevent payment being made, or for other reasons. What is inescapable is that the reading of the clause proffered by the Law Society in this case would make the MIBI a blanket guarantor of all claims, at least those in respect of which compulsory insurance was necessary. Of course this is not how the Agreement has been interpreted or applied. Claims are not routinely notified to the MIBI to maintain the possibility of executing under the MIBI Agreement against that company. However for present purposes, it is this broader interpretation that must be tested against the rest of the Agreement, and the commercial and other background factors to it.

32 The MIBI rely on three factors of the Agreement which they say are plainly inconsistent with such an interpretation. First, as already observed, they say that the language is general and not specific. It does not mention insolvency at all. Given the significant nature of such potential liability it is surprising, at a minimum, that it would not be specifically stated, particularly if the Agreement must be treated as having been carefully drafted to reflect the parties’ intentions. Although this point can be shortly stated, it is a powerful point nonetheless. Second, the preamble to the Agreement states:

“text of an agreement dated the 29th January, 2009, between the Minister for Transport and the Motor Insurers’ Bureau of Ireland extending, with effect from dates specified in the Agreement, the scope of the Bureau’s liability with certain exceptions, for compensation for victims of road accidents involving uninsured or stolen vehicles and unidentified or untraced drivers to the full range of compulsory insurance in respect of injury to person and damage to property under the Road Traffic Act 1961”.

Not only does the preamble not mention the liability for claims in respect of which the insurer has become insolvent, it plainly does not describe the Agreement in the broad terms which the Law Society’s interpretation would seem to require. It does not state that the MIBI is in effect a guarantor of all judgments for all road traffic act claims in respect of which compulsory insurance is necessary which have remained unpaid for 21 days. If we approach clause 4.1.1 as a carefully drafted provision, there is no reason to assume carelessness here, and the fact that the narrow and specific terms of the preamble are inconsistent with the broad and general interpretation advanced, is a serious obstacle to the interpretation advanced by the Law Society.

33 The Law Society offers two responses to this, one broader and one narrower. First, it says that no reliance should be placed upon the preamble because of the terms of the clause 4.1.1. It relies on the authority such as the judgment of Romilly M.R. in Young v Smith (1865) L.R. 1 Eq. 180 for the proposition that “where the recitals on the operative part of the deal are at variance, the operative part must be officious and the recitals inofficious”. In the Court of Appeal, Ryan P. agreed with this approach.

34 I cannot accept this argument. I rather question whether this Victorian certainty is applicable here at least to exclude the question in limine. The judgment cited expresses the common sense view that the parties will pay particular attention to the operative provisions of a contract, which are likely to be more specific than any generalisation in the preamble or recitals. Where there is a clear conflict between such general descriptive provisions and specific operative provisions, then effect will normally be given to the operative provisions applying that presumption. But the question here is whether there is such an inconsistency or rather whether the two can be read consistently which is what one would normally expect. Put more simply still, the question for the Court is perhaps why would the parties describe this Agreement in inadequate and misleadingly narrow terms, if indeed the Agreement has the broad and generous sweep for which the Law Society contends? To my mind, it is an inadequate answer to this question to merely cite Victorian authority.

35 The second answer the Law Society proffer is that the description in the preamble itself is plainly inadequate since even on the MIBI’s interpretation of the Agreement because it does not refer to cases where the insurer has repudiated liability. That is so, and this would be a reason for giving effect to the specific provisions of the Agreement which provide cover in that case. But that only highlights the fact that there are no such similar specific provisions in the Agreement dealing with the case of insolvency. Furthermore, it does not explain why the preamble does not describe the Agreement in the broad and comprehensive terms for which the Law Society must necessarily contend namely that it covers all claims subject to limited exceptions.

36 The third point made by the MIBI is that the Law Society’s interpretation is inconsistent with the specific provisions of the Agreement. Some of the procedures and provisions under the Agreement may be difficult, if not impossible, to satisfy in the case of insolvency even though it has been held that strict compliance with the Agreement is a necessary precondition to liability of the MIBI under it. This is particularly significant since the procedures in the Agreement are important, indeed central to it. It is very much an Agreement designed to put in place procedures to be followed to obtain recovery in certain cases. Thus, for example, where insolvency occurs after the accident and commencement of proceedings, and possibly even after judgment, it will have been impossible to comply with the prior notification obligations, and it may not have been the case that the parties complied with the obligation of notice in relation to any motion for judgment. This issue arises in the most acute form however in connection with clause 3.11 which the Court of Appeal acknowledged was the most difficult provision to read compatibly with the interpretation of that the Agreement provided for liability for claims in respect of which the insurer was insolvent.

Clause 3.11
37 Clause 3.11 provides in simple terms that on satisfaction of a judgment, the judgment is assigned to the MIBI. The purpose of this is of course to permit the MIBI to recover against the defendant in the proceedings. This is entirely logical in those general cases which the MIBI accepts are covered by the Agreement. The risk that an uninsured defendant may not be able to meet the judgment in favour of the plaintiff is transferred from the plaintiff to the MIBI. But the Agreement does not absolve the defendant who after all is culpable first in relation to driving, and second in failing to be insured in compliance with the statutory obligation, or leaving the scene of an accident (or both) or breaching the terms of his insurance so as to give rise to repudiation of the contract. The MIBI, having satisfied the claim of the innocent injured party is fully entitled to seek to recover from such a person if they have the means to make good the loss and clause 3.11 is a necessary step. However, in the case of an insolvent insurer, the driver is not at fault for the inability of the insurance policy to provide cover for the award fully, or perhaps at all, by reason of the insolvency of the insurer. However, if the Agreement applies to such a case, the plaintiff must have obtained judgment against that defendant, and clause 3.11 allows the MIBI to seek to recover the total amount of the judgment and costs from that person who if they have any means will then be at risk of losing their assets, including conceivably their home. It is accepted that this is an unjust outcome which the parties can hardly have intended. Thus the MIBI argue strongly that this is a reason to conclude that the parties did not intend that a broad reading be given to clause 4.1.1 and is instead consistent with the narrower reading suggested by the preamble that the Agreement was intended to cover only a limited class of cases.

38 It is important to emphasise that the focus on this aspect of the case, and the possible injustice to an insured who has an accident but finds himself or herself the subject of a claim by the MIBI, is not a question of seeking to weigh possible injustices. Obviously the person who is injured, in an accident caused in whole or in part by negligent driving is a victim not just of a legal wrong, but if the promise of compulsory insurance fails, and such a person cannot recover damages, then that person suffers a further serious injustice. Indeed the MIBI Agreement was introduced to address that problem in the case of uninsured or untraced drivers, at least. The focus on the possibility of recovery by the MIBI against the insured whose insurer has become insolvent arises however because it sheds light on the question of interpretation of the Agreement which this Court must consider. Given that one of the purposes of compulsory insurance is indeed to protect drivers from the costs of compensation which might otherwise be ruinous, it might be expected that if it was intended that there should be recovery from the MIBI rather than the insurance fund, then the parties to the Agreement would have addressed the apparent injustice of treating a person who has complied with the obligation to obtain insurance (but where insurer becomes insolvent after the accident) in the same way as a person who for example had not obtained insurance or left the scene of an accident. If we are to approach the provisions of one clause as the product of careful legal drafting, then once again the question arises: if the parties intended the Agreement to extend to such cases, why is there no reference to this situation, and why should it be assumed that the parties intended to leave an apparently unfair outcome in place? If the parties had in view the possibility of insurer insolvency why address the possible injustice to a plaintiff but not to the corresponding defendant? It would for example have been a simple thing to provide that in the case of a driver whose insurance company becomes insolvent that clause 3.11 shall not apply. One, and perhaps the most obvious answer to these queries is that the parties did not intend to address the issue of insurer insolvency at all.

39 It is instructive to consider how this problem is responded to by the Law Society, in an argument which was accepted in the Court of Appeal. Both Ryan P. and Finlay Geoghegan J. agreed that there was an inconsistency and potentially severe injustice here but that this consequence could not, as they saw it, override the clear words of clause 4.1.1 in what was described as their natural and ordinary meaning. Again, and respectfully, I disagree that this is the correct approach. This approach takes the ordinary and natural, or perhaps surface, meaning of words as a fixed and immutable point and concludes that if another provision is not compatible with it, then the incompatibility and consequent injustice must simply be accepted. But in my view, the fact that there is such an unavoidable incompatibility and obvious injustice, is a reason to consider if the so called ordinary and natural meaning should indeed be given to the words in their context. The question is what interpretation is to be given to the Agreement as a whole and in its entire context. This is all the more important where the question relates principally to the scope of the agreement. Paying attention to compatibility and apparent logical inconsistency such as this, is central to the approach which culminated in the decision of Investors Compensation Scheme Ltd. v. West Bromwich Building Society. Words are important as a guide and often the surest guide to the agreement made by the parties. But where other guides suggest a different approach to that suggested by the dictionary meaning of the words taken on their own and out of context, then that is a reason to reconsider the interpretation to be given to the contract.

40 Finlay Geoghegan J. offered a slightly different solution. She accepted the argument made by counsel for the Law Society that it would not necessarily follow that the insured who could not obtain indemnity under the policy, and against whom the MIBI enforced a judgment, would be left without a remedy. It was suggested, that if the MIBI sought to enforce the judgment, the insured might then be able to claim from the insurance fund and furthermore that such claim would not be precluded by the terms of s.3(7) of the 1964 Act as inserted by the 2011 Act. Again with respect, it appears to me that there is subtle but important shift of focus here. The question is not whether if the Law Society interpretation is correct, that an insured might be able to mount some plausible argument that a sympathetic court might accept to allow him or her to recover from the insurance fund at least to the extent of 65% of the cost of the claim. The question is whether the parties to the Agreement could ever have been thought to have intended such an unsatisfactory, cumbersome, opaque, and inevitably unjust result. Even if this interpretation of the Agreement and the Act is correct (and it is acknowledged that this is anything but clear-cut), it would mean that the victim would still obtain judgment against the insured. If the MIBI satisfied the judgment, it would then take an assignment of the judgment and could seek to execute it against the insured. The insured may then seek to recover against the insurance fund, but would be limited to 65% of the judgment amount. There would be inevitable delay in having it determined that such a claim could indeed be made during which time the defendant would be at risk of execution, interest would be mounting, as indeed would stress. If, in the event the defendant was unsuccessful in the argument floated by counsel for the MIBI in this case, then there would be no recovery from the insurance fund, and the defendant would face the prospect of being at the loss of further costs incurred in seeking it. If the argument is successful, recovery would still be limited to 65% (or the capped amount) at some future point, which may still leave a very substantial debt. The MIBI for its part would still be able to demand satisfaction of the full 100% of the judgment from the defendant. It is difficult to conceive of any reason why the parties to the MIBI Agreements between 1955 and 2009 could have thought that this would be a desirable situation. But if they had considered this possibility, then it is also difficult to understand why they would have provided for such a cumbersome procedure, when an easier solution would have been to allow the MIBI to recover direct from the insurance fund which could have been provided for in both the Agreement and in the legislation. But finally, if we are to believe that the parties addressed their minds to the situation and intended the outcome that the possible injustice to the insured should be palliated by permitting an indirect claim on the fund by the insured after execution of a judgment assigned by MIBI, it is difficult, if not impossible, to believe that the Agreement would not have said so.

41 It is worth recalling why this sub-issue arose in the present context. It was argued forcefully by the MIBI that the Agreement cannot be given the broad interpretation advanced by the Law Society, (and which undoubtedly accords with the ordinary meaning of the words in clause 4.1.1 taken on their own) because to do so would conflict with clause 3.11, or at least mean that the Agreement would operate in a manifestly unjust way, and that therefore the parties cannot be taken to have intended to agree to such a course unless that was their unmistakable intention. It is no answer to that argument to prefer the plain meaning words of clause 4.1.1, because the words of 3.11 are equally plain if not more so. Nor is it an answer to suggest that the injustice which would follow or would not be so great if the Agreement and Act can be interpreted in a novel way. That is of no assistance to the interpretation issue unless it suggests that the parties considered the position and intended it. That is plainly not the case here. If indirect recovery by the insured from the insurance fund was however intended, then surely that would have been made more explicit. In any event, the equivalent provisions of clause 3.11 permitting assignment of the judgment were in place since 1955, and therefore, on the Law Society’s interpretation at least, the original Agreement intended full recovery against the innocent insured, without any recourse to the insurance fund since of course that was not created until 1964.

42 The only plausible answer the Law Society can give is that it was accepted by Ryan P. namely that it does not matter because the plain words of clause 4.1.1 must prevail. But that means accepting that the parties were clumsy at best in the way in which they expressed themselves in clause 3.11. Once however, this possibility is acknowledged, then the question equally arises why should the Court not consider the possibility that clause 3.11 is accurate and intended, and that clause 4.1.1 should not be given the broad reading contended for? Why in other words not consider the possibility that it is clause 4.1.1 which is clumsy?

43 This leads to a further point of broader application. It is not merely that the broad reading of clause 4.1.1 is admittedly difficult to reconcile with both the preamble and clause 3.11, significant as though those points are. The fact is that there is no other provision of the Agreement which can be said to be consistent with, or otherwise reinforce, the Law Society’s reading of clause 4.1.1 which would have it extend not just to insolvent insurers but indeed to any claim not met within 21 days of judgment. The Agreement contains fairly detailed provisions (which must be strictly complied with) which are plainly directed towards those cases which the MIBI accept are covered by the Agreement: the uninsured/untraced/repudiation cases. The insolvent insurer (or even the more general unmet judgment) cases present different issues of fact; yet no specific provision can be identified that is referable to either of these cases. As already observed some of the provisions are difficult to apply and others produce a palpably unfair result. When we recall that on any view the issues posed by the insolvent insurer present different and distinct questions of both law and policy, and furthermore that on a commercial level involve a very extensive liability, this silence is baffling if the Agreements were intended and understood to have the meaning contended for. It is difficult, if not impossible, to believe that if the MIBI or its constituent members had intended and understood that the Agreement extended to the case of insolvent insurers (or indeed more broadly again to all cases) that specific reference would be made to that, first in the preamble and then in clause 4.1.1, and that specific provisions would be included directed to such cases.

The Memorandum of Association of the MIBI
44 The MIBI also rely to the Memorandum of Association of the MIBI. Object 3.1 of the Memorandum provides that the principal object of the company is to “enter into agreements and make arrangements in compliance with current agreements with the Minister for Transport . . . responsible for compulsory motor vehicle insurance and connected matters for the compensation of victims of road traffic accidents … involving either uninsured vehicles, stolen vehicles, unidentified drivers, or untraced drivers which are required to be covered by contract of insurance …”. Plainly the objects clause does not extend to providing compensation for the victim of road accidents where the driver is insured with a company which is now insolvent. Accordingly, if the Agreement is interpreted to extend to insolvent insurers, payment would be ultra vires the MIBI.

45 This is responded to by the Law Society with an argument accepted by Hogan J. in the Court of Appeal. It is first pointed out that the MIBI’s interpretation of the Agreement itself goes somewhat further than the Memorandum in that uninsured drivers (and not simply uninsured vehicles) are admittedly covered. Hogan J. acknowledged however that there was a strong argument that the Memorandum did not extend to cover the liability which the Law Society contended was part of the Agreement. However he considered the most straight forward answer to this was that no road user injured and who sought recovery, would be “actually aware” of this lack of vires on the part of the MIBI, and therefore any such lack of vires could not be pleaded by the MIBI so as to exclude entitlements otherwise conferred by the 2009 Agreement on such third parties pursuant to s.8(1) of the Companies Act 1963, which for the purposes of the case was considered to be the applicable provision.

46 Again, this is however a subtle shifting of gears which presents an apparent response to the argument but in fact addresses a different question, which was not posed. In my view at least, the question is not whether the MIBI could raise a plea of ultra vires, but rather what light this admitted interpretation of the Memorandum of Association throws upon the Agreement itself. The Memorandum of Association of the company is particularly important in this case. It should be recalled, that the original Agreement of the 10th March, 1955, was between named insurers and the Minister for Local Government under which they agreed to form the company. The MIBI was therefore incorporated on the 27th July, 1955, and the Agreement entered into thereafter between the Minister for Local Government and the newly formed MIBI. The incorporation of the company was therefore a key provision in the Agreement between the Minister and the insurance companies and furthermore was entered into during the same time period, and in the same legal context, as the Agreement of the 10th March, 1955, and the subsequent Agreement of the 30th November, 1955. Its terms throw substantial light on the scope of the Agreement as understood at the time. It is significant that the Minister, who was to approve the formation of the company, raised no objection to this formulation of the objects clause. There could be no reason why the companies incorporating the MIBI would voluntarily seek a mismatch between the scope of objects clause and the scope of the Agreement which the company was incorporated to enter into. The only possible conclusion from this sequence of events is that the insurers establishing the MIBI did not advert to the possibility of the insolvency of an insurer and did not consider that it was the function of the MIBI to make payments in relation to it. This is a very powerful indicator of the scope of the Agreement as contemplated by the parties at the time. It is no answer to this to argue that if the Agreement is construed more broadly, then the MIBI would not be entitled to raise the doctrine of ultra vires as a defence to the claim.

The position taken by the Minister
47 The MIBI also rely on the position adopted by the other party to the Agreement, the Minister for Transport. The MIBI has exhibited a letter of the 10th September, 2014, to the MIBI from a principal officer in the Department, which was also copied to the relevant equivalent officer in the Department of Finance. It states as follows:

` “The Department has considered the contents of your letter and sought the advice of the Attorney General in this regard.

It is the Department’s position that there is no legal obligation, under the MIBI Agreement 2009, on the MIBI to satisfy judgements or claims made against customers of Setanta Insurance in liquidation when they have an existing approved policy of insurance at the time of the accident which has not been declared void or cancelled up to May 2014. Furthermore the Department is of the view that the Insurance Compensation Fund, established under the Insurance Act 1964 as amended, is the express statutory mechanism for providing compensation for claimants against insurers, both foreign and domestic, in liquidation. This would include any claims made by injured victims against Setanta who have not had their judgments or claims satisfied by Setanta.”

48 The MIBI rely on this as reflecting the views of the other party to the Agreement and as coinciding with the view maintained by the MIBI that claims against defendants insured who have become insolvent are not captured by the Agreement. The Law Society argued, and indeed the Court of Appeal appears to have accepted, that the letter was irrelevant since it merely recorded legal advice, which moreover, in the light of the decision of the Court of Appeal, was erroneous. I do not think however that it is sufficient to treat the letter in this fashion. It is certainly clear that advice was obtained prior to its completion and it so states. Furthermore, since it distinguishes carefully between claimants in respect of accidents which occurred prior to cancellation of the policy in May 2014, and those thereafter, it makes a careful distinction which may reflect advice. But the letter does not purport to be merely, or at all, the recording of legal advice. Rather it states the “position” of the Department. Furthermore, it is written in the context of a dispute which by then had arisen and which had been the subject of public controversy not least in circumstances where the matter had been agitated in the Oireachtas, and before Oireachtas sub-committees, at which the principal officer in the Department of Finance copied with the letter had given evidence. It is a serious matter for the Department to commit itself in this way in general, but more so when done specifically in the context of the public dispute which had arisen. The Law Society do point out that the Department did not participate in the proceedings although having been served, and that no affidavit was sworn by an official setting out the background facts. This is true, but I do not think that the Court can assume as the Law Society invited it to do so, that the letter is misleading, and that although the Department knew the Agreement covered insolvent insurers, it has nevertheless adopted a contrary “position” in the knowledge that the letter would be used in court. It would indeed be a serious thing if the position adopted in public by the Department was intentionally misleading. Such a serious conclusion could however only be arrived at after a full oral hearing and cross-examination which did not take place here and which the Law Society did not seek. I consider that the Court must therefore take the letter as proffered as a representation of the position of the Department and not merely legal advice with the qualification that it has not been the subject of testing in court as might have occurred had there been an oral hearing. However, taking it in this way, the letter offers further important support for the interpretation advanced by the MIBI. If this is accepted, even with some qualifications, then it appears that the MIBI and the Department of Transport shared a view as to the scope of the Agreement. If so, it becomes difficult to see how it can be said that the Agreement can be interpreted more broadly than the parties to the Agreement itself contend.

The Act of 1964
49 Both sides rely on the provisions of this legislation. Clearly, the Setanta liquidation claims come within the scope of the 1964 Act as subsequently amended, because they are claims made in respect of an insurer now insolvent. However the Law Society pointed to provisions of the Act. First, s.3(2) of the 1964 Act as inserted by s.4 of the 2011 Act, provides, rather curiously, that the High Court should order payment out of the insurance fund “only if it appears to the High Court that it is unlikely that the claim can be met otherwise than from the Fund.” This indeed was the provision relied upon by the Law Society to persuade the accountant of the High Court to seek directions rather than make payments from the Insurance Fund to those with claims against a driver insured by Setanta.

50 Furthermore, s.3(4) of the 1964 Act which was re-enacted in identical terms by s.4 of the Insurance (Amendment) Act of 2011 and became section 3(7). It makes specific reference to the Motor Insurers’ Bureau of Ireland and provides:

“Where in respect of a sum due under a policy, a payment equal to the whole of the sum is made by the Motor Insurers’ Bureau of Ireland, a payment shall not be made out of the Fund under this section in respect of the sum, and where, in respect of such a sum, a payment equal to part of the sum is made by that Bureau, a payment out of the Fund in respect of the sum shall not exceed the amount of the sum less the amount of the payment by that Bureau.”

51 Section 3(2) of the 1964 Act (as amended) is important in this case since it is the ostensible basis upon which these proceedings are mounted. However, if payment is refused in reliance on s.3(2), that by itself does not ensure that payment will be made by any other source, and specifically the MIBI. That raises issues as to the resolution of these proceedings, and the appropriateness of them for these complex matters, but it does not add much to the question of interpretation. Section 3(2) is in general terms, and cannot itself be read as a statutory endorsement of the possibility of payment by the MIBI.

52 Section 3(4) of the 1964 Act (as re-enacted as s.3(7) under the 2011 Act) is however a different matter. It specifically refers to the MIBI and contemplates the possibility that there may be payment. Presumably the reference to part payment by the MIBI is a reference to the limitations on recovery in respect of property damage which, although adjusted, have remained a part of the regime. Counsel for the Law Society argues with considerable force, that given its context, this is a clear endorsement of the possibility that the MIBI will have a liability in the case of insolvency, since it is only in that context that the possibility of a payment out of the insurance fund could arise. Thus, he says, this is only consistent with the MIBI being liable in such a circumstance.

53 The MIBI respond in two different ways— neither of which is fully convincing. First, it is suggested that there is some residual area where it is possible that there is a circumstance where the section may have application. Thus, in the so called “insurer concern” cases, an individual insurer has a responsibility and of course may become insolvent. However, it is not clear that in such a case it can be said that the MIBI makes a payment which is contemplated by s.3(4). Alternatively it said that s.3(4) is clearly drafted in the light of the issue which arose in respect of the insolvency of the Equitable Insurance company, to which greater reference will be made below, where the MIBI certainly made some payments. If however, this was the reason for s.3(4) it does not readily explain why it would be re-enacted as s.3(7) in 2011. Again, the MIBI suggest there is a tendency to draft by accumulation, and it is rare for provisions in legislation to be dropped. This is true but nevertheless, neither of these explanations are wholly convincing.

54 This is an important point, and one which favours the Law Society’s interpretation. However, it is not a point which determines the case. The provisions of s.3(4) contemplate but do not require payment by the MIBI in such circumstances. The central feature of this case is that there was a degree of confusion and ambiguity as to the function of the MIBI in insolvency claims. Therefore the Act can be read that if, for whatever reason, a payment is made by the MIBI, then the insurance fund is to that extent, absolved. But a different point can also be made in this regard. The interpretation advanced by the Law Society assumes that motor claims against insolvent insurers come within the terms of the MIBI. Thus they should be excluded as a matter of principle from the insurance fund. If the Law Society’s interpretation is correct, one might expect therefore that claims made in respect of road traffic accidents involving vehicles and driving which is the subject of the compulsory insurance provisions of the Road Traffic Act, would be simply excluded from the scope of the legislation in 1964, and certainly when re-enacted in 1983 and again in 2011. Two other aspects of the regime under the 1964 Act also support, at least inferentially, the position of the MIBI. First, if the interpretation of the Law Society is correct, then motor insurers, who are the subject of calls under the MIBI Agreement, should not be required to contribute through the levy to the insurance fund. Put another way, motor policies, should not be the subject of a levy for the insurance fund, or at least at the same rate, since on the Law Society’s argument, the insurance fund does not deal with motor claims. If accordingly, the motor insurers considered that MIBI was to be the source of compensation of plaintiffs’ claims against drivers whose insurer becomes insolvent, then it seems likely that at some stage they would have raised the issue in an attempt to reduce, if not remove, their obligation to contribute to the insurance fund.

55 Furthermore, the insurance fund has dealt with very substantial claims made in respect of insolvent insurers who provided motor insurance. The PMPA failed in 1983, ICI (later Icarom) in 1985, and more recently Quinn Insurance Ltd. went into administration. Each of these companies had substantial motor business. As of the 1st April, 2015, the principal officer in the Department of Finance stated that the amount outstanding owed by those businesses were then €139 million, €164 million and €1.158 billion, respectively. Given the structure of the insurance fund, these monies were met by monies advanced from the public purse which are gradually recouped from the 2% levy over time. It should be said that in each of these cases, the mechanism adopted was to make use of the administration procedure which meant that the companies although insolvent, were not placed in liquidation but rather were maintained as a going concern. There was therefore no question of any limitation on the amount to be paid in respect of claims. Nevertheless the fact remains that if the Law Society’s contention is correct, then the accountant and the High Court were wrong to make any payments in respect of the motor claims of those companies since such claims properly fell to the MIBI to satisfy. It is not a sufficient answer to suggest, as I understand the Law Society to do, that this is irrelevant because there was no practical difference for claimants, since the administration process meant that the claims were paid in full, albeit through the insurance fund. From the perspective of claimants that is so and provides some, although not a complete explanation, why no such claims were not made to the MIBI. But it provides no satisfactory explanation whatsoever from the perspective of the insurance fund and the Accountant whose statutory obligation it was to ensure that only claims were paid which properly fell on the insurance fund.

56 Three further matters are relied upon by the Law Society. First, the Equitable Insurance Company collapsed in 1964. The problems created by this event appear to have been the genesis for the introduction of the 1964 Act and the creation of the Insurance Compensation Fund. In the course of its creation, a memorandum to Government in April 1964, records that the Motor Insurers’ Bureau “will in accordance with the terms of the agreement with the Minister for Local Government meet certain liabilities under motor policies to the extent of €140,000 leaving a balance of €210,000 approximately”. It is also recorded that the Minister had requested the MIBI to accept liability for all claims under equitable motor policies whether or not they were covered by the Agreement with the Minister for Local Government but that the request was turned down. The Law Society’s suggestion is that this is clear evidence that as of 1964 the MIBI Agreement was considered to cover the risk of an insurer’s insolvency. Against this the MIBI point out that this occurred in a different legal context, that it is not clear that on the basis upon which any money was paid by the MIBI in respect of the Equitable Insurance Company, and finally, they point to the provisions of the MIBI’s council minutes of the 26th September, 1994, which recorded that the Bureau had succeeded in recovering more than €94,000 in respect of the Equitable Insurance Company (in liquidation) “which is the amount which was discharged by the Bureau on behalf of Equitable in the past” and that this was now the end of the Bureau’s involvement in the matter. The MIBI maintain therefore, that any payment made in 1964 may have been on an ex gratia basis, and predated the establishment of the insurance fund, and cannot therefore be considered a decisive guide to the interpretation of the Agreement after 1964, where, as already set out, it appears that large insolvencies of companies with motor policies were dealt with under the insurance fund.

57 Finally, the Law Society point to the provisions of the accounts of the MIBI which, for 2012, contain a note which sets out a contingent liability that:

“In the event of insolvency of any of its members, the Bureau is required, under its agreement with the Minister for Transport, to pay claims, to the extent that its insolvent member is unable to do so.”

Mr. Casey, the Chief Executive of the MIBI, who swore an affidavit on its behalf in these proceedings, has acknowledged that the accounts contain this provision but maintains that it is an error and that no provision was made in the accounts for any such contingent liability. The Law Society argue that a statement in the accounts adopted by the directors of the company is a solemn matter and not likely to be disregarded. That is so, but human error is not impossible. There is scope for confusion as to the liability of MIBI members to contribute inter se to MIBI liability in the case of the insolvency of a member of the MIBI, and the question of whether the MIBI’s liability extends to insolvent insurers. In any event, given the fact that this case extends over a 60 year period, it is misguided to assume a single corporate entity with a single shared view of this matter. The fact is that during this time there would have been considerable turnover of individuals both in the Department and the MIBI and its constituent insurers. Accordingly, it cannot simply be a case of finding what some people have said at different stages and attributing that view to the body in general throughout its life. Whereas here, a provision is ambiguous, it is to be expected that some persons involved on either side over the period of 60 years will hold a different view and may express them. However, the question, if relevant is what the general view of those involved with the company or the Department was particularly at the time of, and as expressed in, the Agreements.

58 While undoubtedly this is a finely balanced case, in my view it must be resolved in favour of the interpretation advanced by the MIBI. It is clear that the major factor in the decisions of the High Court and Court of Appeal was the weight given to what was described as the ordinary and natural meaning of the words in clause 4.1.1. However, in my view when the clause is put in the context of the Agreement as a whole and set against the background of what was known between 1955 and 2009, it is possible to read those words as the MIBI suggest, as being applicable only to a limited class of claims. Once the scope of the Agreement is established, then the generality of the language used in clause 4.1.1 poses no difficulty. For the most part, the Department and the MIBI had a shared understanding of the scope of the Agreement and the broad language used, was employed in that context and subject to that limitation. The information in the Memorandum for Government in relation to Equitable Insurance is not unequivocal, and, at any event, relates to a period before the enactment of the 1964 Act.

United Kingdom Authorities
59 The Law Society however also place reliance on observations in certain UK authorities. I agree that particularly in an area as obscure as this, any source that shines light on the matter is welcome. Furthermore, it seems probable that both structure and content of the MIBI Agreement was closely modelled on the UK agreement. Perhaps the most relevant authority is the observation of Diplock L.J. (as he then was) in Gurtner v. Circuit [1968] 2 Q.B. 587 at p.598. The first two paragraphs of the judgment are particularly useful:

“This appeal illustrates once again the legal anomalies which result from the method adopted by the Minister of Transport in 1946 to fill a gap in the protection of third parties injured by negligent driving of motor vehicles provided by the Road Traffic Acts of 1930 and 1934.

Under those Acts although insurance against third party risk was made compulsory and insurers made directly liable to satisfy judgments against their assured, an injured person, although he had recovered judgment against a negligent defendant, could whistle for his money if (a) the defendant was not insured at the time of the accident or (b) his policy of insurance was avoided in the circumstances specified in section 10(3) of the Act of 1934 for non- disclosure or misrepresentation or (c) his insurer too was insolvent. To fill this gap the insurers transacting compulsory motor vehicle insurance business in Great Britain, acting in agreement with the Minister of Transport, formed a company, the Motor Insurers’ Bureau, to assume liability to satisfy judgments of these three kinds. But instead of amending the legislation so as to impose upon the Motor Insurers’ Bureau a statutory liability to the unsatisfied judgment creditor as had been done by the Road Traffic Act, 1934, in respect of the liability of insurers to satisfy judgments against defendants covered by a valid policy of insurance, the matter was dealt with by an agreement of June 17, 1946 between the Minister of Transport and the Motor Insurers’ Bureau.” [Emphasis added]

60 Understandably the Law Society place heavy reliance on this observation, and the circumstance in which the observation has been repeated in subsequent cases. However, it is an observation on a matter which was not the subject of the argument in the case. Gurtner v. Circuit is an important decision as to the circumstances in which a non-party may seek to be joined as a party to litigation. In that UK case, the MIB had sought to be joined as a defendant to contest a claim in circumstances where the defendant was to be treated as uninsured. The case did not raise the specific question as to whether the agreement extended to the insolvent insurer situation. In Morgans v. Launchbury [1973] AC 127, Lord Pearson (again obiter) appears to have described as “not effectively insured” persons who had “taken their policies from an insolvent insurance company”. These judgments predate the introduction of the Policy Holders Protection Act of 1975 and 1977, (now replaced by the Financial Services and Markets Act 2000) which introduced a scheme of compensation in respect of insolvent insurers akin to the Insurance Act of 1964. Subsequently, the UK MIB agreement was amended to exclude cases in which a claimant had received compensation from “the Policy Holders Protection Board under the Policy Holders Protection Act 1975”. Accordingly while the matter has been referred to in passing in subsequent cases, and indeed in one academic article, the matter has not been the subject of a decided case in which the issue was clearly raised. Both sides rely on these developments for their own purposes. The MIBI argue that the UK position now reflects the logic of the position contended for by them in that insolvent insurer claims are dealt with as part of the regime set up to deal with the problems created by insolvencies among insurers, rather than under the Motor Insurers’ Bureau type agreement. On the other hand, the Law Society argue with some force, that this result was only achieved by specific amendments which accordingly implies that without such language, the Agreements would extend to the insolvent insurer situation. In my view, the balance of these arguments favours the Law Society. However, that only goes so far. The UK has, as it were, put features on the faces and coloured them in in relief, so that there can no longer be any argument that the picture is a vase. In Ireland we face a situation where the picture is free from that type of clear statutory and contractual adjustment. In that context, I agree that it is significant that Diplock L.J. considered in 1968 that the same language in the United Kingdom was broad enough to cover the insolvent insurer situation, but since the issue was not argued and did not arise in the case, the observation, preceding as it does the 1975 legislation, has less force than would be the case if it had been the subject of clear argument and reasoned decision.

61 Gurtner v. Circuit is also relevant to another aspect of the case which was touched on earlier and which relates to the manner in which these proceedings have been designed. It confirms that the legal analysis of the MIB agreement is one made between two parties conferring a benefit on third party claimants. Unless one of the exceptions to the privity rule applies, such an agreement is not enforceable at the suit of any such third party (at least without the acquiescence of the party sued) and as both Diplock L.J. and Salmon L.J. observed, the ultimate method and enforcement of the Agreement in the case of any dispute would be for the Minister to sue the MIBI for enforcement of the terms of the Agreement. This is reinforced by the fact that the 2009 version of the Agreement contains a provision in relation to which disputes are resolved finally, by the decision of the Minister. If both the Minister and the MIBI are agreed on the extent to which the Agreement covers claims, then the Minister would not sue, and could not, at least without some elaborate and relatively novel legal argument, be forced to do so.

62 It is of course to be expected, that in the circumstances of this case the Minister would accept the determination of the Court that the proceedings cover the insolvent insurer case if that was the decision of the Court. But this cannot be guaranteed, and in any event only leads to a further problem, which clearly troubled Finlay Geoghegan J. in the Court of Appeal. These proceedings do not, and any proceedings, could not force the MIBI to satisfy any individual award. Nor could proceedings provide a blanket obligation on the MIBI to satisfy awards where the insurer was insolvent. That is because compliance with the MIBI is a precondition to liability in any case, whether or not the insurer is insolvent. These proceedings seek to achieve a result indirectly and negatively, by preventing the accountant of the High Court from making payment from the insurance fund to parties otherwise entitled to claim under it, on the basis that it appears that another source of compensation is available, in this case, a possible claim against the MIBI. An order effectively restraining the accountant from payment does not compel payment by the MIBI. If the MIBI did not satisfy the judgment, then the claimant would have to revert to the insurance fund, in which case the attempt to obtain payment from the MIBI would have been a costly and pointless detour. This is clearly less than satisfactorily, but is the effect of the fact that all parties and all information are not before the Court.

63 This leads to a final consideration. It is unrealistic not to recognise that at the forefront of this case is the fact that these complex arguments are only necessary because there is a substantial difference between the available recovery under the insurance fund (limited to 65% or €830,000), and from the MIBI which recovery is close to a full indemnity against judgments obtained. It is indeed an interesting thought experiment to consider how the arguments might differ if the situation was reversed and the insurance fund offered the prospect of 100% recovery and the MIBI only a substantial fraction. However, it is not possible to be unaware of the fact that if the Agreement is interpreted as the MIBI suggests it should be, victims of road traffic accidents will face a significant limit on the amount that they can recover. The Law Society makes this point very effectively in the conclusion of its submission by arguing that a finding that liability lay with the insurance fund, and not the MIBI “would be to the benefit of insurers at the expense of victims”.

64 The reality is however that the Court is not asked to determine whether a victim should be paid in full, or almost in full (from the MIBI), or in part (from the insurance fund). If that were the question, it would be easily answered. It is asked to give a determination on the interpretation of an agreement in accordance with principles applicable to every contract. Whatever interpretation is given, it will almost certainly lead to further developments, either the possible winding up of the MIBI, or the renegotiation of the Agreement on the one hand, because even the Law Society appears to accept, that the Agreement as interpreted, lacks any commercial justification or logic from the insurers point of view. On the other hand, if the claims are to be met under the insurance fund, then it is inevitable that there would be pressure for the amendment of the 1964 Act scheme. The logic of limiting payments made in respect of insolvent insurers, makes some sense in the context of claims by policy holders. It may be thought that there should be some moral hazard, as it were, for the decision to place insurance with a new insurer offering perhaps suspiciously low premiums. Otherwise there would be no incentive to obtain insurance from more cautious businesses, since any policy holder would know that there was a 100% backstop in the shape of the insurance fund. However, whatever logic there exists in this regard, the same logic cannot, it seems, apply to victims who have claims against a policy holder with such a company. A victim does not choose the party with whom he or she collides, and still less his or her insurer. It is perhaps instructive that when the ICI, the PMPA, and Quinn Insurance Ltd. all collapsed, the authorities adopted the option of administration to allow the companies to continue in business with the effect that all claims were met. If accordingly, this Court were to determine that on its true construction such claims do not fall under the MIBI and must therefore be met by the insurance fund, then there is a strong and probably unanswerable case in equity for the amendment of the scheme to permit recovery of such claims. If indeed, the position were maintained that victims are limited to 65% of the recovery, the constitutional validity of the application of any such limit to third party claimants would clearly arise and have to be addressed.

65 However, the issue for this case and which the Court must resolve, is the difficult one of the interpretation to be given to an agreement which itself is ambiguous. This is like a freeform jigsaw where it is possible to arrange the pieces in at least two different patterns, each of which has some attractive elements, but where some pieces are difficult to fit into the overall pattern. It is useful therefore to stand back and consider the overall picture, and the competing arguments as to what occurred here.

66 I do not think it is possible to arrive at a conclusion that the Agreement had a meaning that neither of the parties intended. Nor in these circumstances is it necessary to consider the possibility that the Minister for Transport believed and intended that the Agreement would cover insolvent insurers but the MIBI did not. The issue in this case appears to resolve itself therefore to a question as to what the parties collectively intended. On the Law Society’s case, the parties intended to cover the case of an insolvent insurer (although perhaps not appreciating the significance of this liability), and the MIBI has now sought to resile from that position when faced with the scope of the liability. Furthermore, it is contended that the Department has facilitated this approach by taking a public stance that at least suggests it agrees with the MIBI’s interpretation, and certainly does not contest it. On this approach, the language of clause 4.1.1 is deliberate and the reference in the accounts represents the true position of the MIBI (and necessarily the Department). This interpretation would however raise troubling questions, particularly since it reflects adversely on the individuals and institutions involved, in circumstances where there has not been a hearing with full discovery, oral evidence and cross-examination. Ultimately however, I consider the argument put forward by the MIBI to be a more plausible approach. On this version, the parties were in agreement as to the scope of what was to be covered by the Agreement and in its various iterations, namely the uninsured/untraced/repudiated cases. In that context they used words of general application, which when viewed, particularly out of their context, certainly are capable of much broader application. However, given the fact that liability for claims against drivers whose insurance company has become insolvent raises different issues of law, procedure and fact, and moreover involves significantly different risk and exposure, it is difficult to accept that had such an extension of liability been intended on each occasion on which the Agreement was made or renewed or amended, that detailed provisions would not have been included for the different factual and legal scenarios, and that explicit provision would be made for the interaction between satisfaction by the MIBI and recovery from the insurance fund, and indeed the possibility of recovery of portion of the amount from the liquidator of the insolvent insurer. In simple terms, it is difficult to accept that the parties intended to cover such a case, and yet did not address themselves to the commercial and legal issues involved. In those circumstances, I have come to the conclusion that the Agreement must be interpreted as applying only to the limited class of cases as asserted by the MIBI and does not extend generally either to cases where an insurer is insolvent, or indeed to all cases in which a claim has not been satisfied within 21 days. Accordingly I would allow the appeal, and set aside the declaration made in the Court of Appeal.

Judgment of Mr. Justice Clarke delivered the 25th May, 2017.

1. Introduction
1.1 One the perennial issues which leads to complex and innovative litigation is the age old question of identifying a potential defendant who not only may have a legal liability to pay damages but will also be in a position to actually discharge any damages awarded. In the terminology of those involved in litigation this involves identifying a defendant who will be a “mark”. It hardly needs to be said that it would, in the vast majority of cases, amount to little more than a pyrrhic victory if one were to succeed in establishing liability and achieve an award of significant damages but, at the end of the day, the person against whom that award is made was not in a position to pay up. Many developments in the law of liability, particularly but not exclusively in tort, have been driven by plaintiffs seeking to expand the category of those who may be found liable because the person or body which might be considered to be the natural or primary target of litigation would be unable to pay any damages awarded.

1.2 Such considerations have doubtless informed attempts going back over many years to put in place measures designed to minimise the risk that persons injured in motor accidents, who can establish liability, might be left without a practical remedy in the form of an order for damages which is likely to be met. The system for the compensation of those injured in motor accidents through the fault of others remains based on the tort of negligence. The law of tort itself of course requires the establishment of fault. However, in the absence of any specific mechanism to ensure payment of any damages awarded, the chances of a plaintiff actually recovering damages would be wholly dependent on whether those persons against whom fault could be established (whether directly or vicariously) were marks. If the system were left entirely to its own devices plaintiffs would succeed in actually achieving compensation (or fail so to do) wholly dependent on the financial standing of those against whom awards could be made. Indeed, it does have to be said that there are certain areas of liability where that somewhat random element continues to apply. While many, indeed most, employers either have a sufficient level of assets to cover damages claims or are insured, an employee who suffers a workplace injury due to negligence attributable to their employer is dependent on either the employer concerned being in a position to meet any award or there being an effective policy of insurance in place.

1.3 However, there clearly has been a policy view going back very many years that, at least in the most general of terms, persons who are injured through the fault of others in motor accidents should not be left on the hazard of having to depend on identifying a defendant who is a mark in order to be able to recover damages in practise. The system of compulsory insurance for those driving motor vehicles is, of course, directed to that end. Where that system works, plaintiffs do not have to concern themselves with whether the defendant whose negligence caused their injuries is a mark but rather can look to the defendant’s insurer. But without further intervention such a system would have left some, being those who were unlucky enough to be injured by drivers who either were not insured or whose insurance company had some legitimate basis for declining liability, without practical recourse. It is in that context that the position of the respondent/appellant (“MIBI”) comes into play. While it will be necessary briefly to outline the history of the MIBI in due course and while the precise scope of its obligations lie at the heart of the issues which arise on this appeal, it can, at least in very general terms, be said that the purpose of the MIBI from its inception has been designed to at least partly fill the gap in cases where persons are injured due to the negligence of drivers who are not insured.

1.4 But a second possible difficulty also potentially arises. Insurance is only as good as the solvency of the insurance company which provides cover. Plaintiffs, dependent on insurance for the recovery of damages, are, therefore, dependent on the ability of the relevant insurance company to pay. It will be necessary in that context to refer in due course to certain statutory measures which have been put in place to provide a compensation fund (the Insurance Compensation Fund - “the Fund”) designed to cover, at least in part, the liabilities of insolvent insurance companies.

1.5 This appeal is concerned with the potential liability of one or other of the Fund or the MIBI in respect of the compensation of parties injured in motor accidents due to the negligence of drivers who had policies of insurance with Setanta Insurance company (“Setanta”) in circumstances where that company is insolvent.

1.6 In substance the issue is a very net one. Are claims arising in such circumstances covered by the MIBI agreement, in which case the compensation of such injured parties will be a matter for the insurance industry in accordance with the terms of that agreement? Alternatively do such claims fall outside the scope of the MIBI agreement, in which case injured parties must rely on the Fund to the extent that it is obliged to make up some of the damages to which they might be entitled. The Fund can be called upon only where there is no other source of payment so that it would have no liability if the MIBI is obliged to compensate.

1.7 It should be emphasised that the question really turns on the proper interpretation of the agreements governing the obligations of the MIBI considered in the context of the legislation establishing and governing the Fund. This case is not about whether it would be better or more appropriate that the burden of meeting damages properly owed to persons injured by the negligence of drivers whose insurance company became insolvent should fall on the Fund or the MIBI. That is a question of policy and one for the agreement of the parties. Rather the issue concerns the extent, if any, to which the insurance companies who subscribed to the MIBI and through it to the MIBI agreement have, in substance, contracted to meet such claims. If the relevant agreements were clear in either including or excluding liability in such cases then that would be that. The problem is that the agreements are, on any view, unclear and it follows that it is necessary for the courts to do the best they can in construing the agreements and any other relevant materials in order to answer the question raised.

1.8 In any event the High Court (Kearns P.), by order dated the 27th April, 2015, directed that this claim be maintained by the claimant/respondent (“the Law Society”) as representative of the interests of potential plaintiffs. The circumstances leading to that order will be addressed shortly. On the substantive issue being heard, the High Court (Hedigan J.) found in favour of the Law Society and held that the MIBI was obliged to compensate. (See Law Society v. MIBI [2015] IEHC 564). The Court of Appeal dismissed an appeal by the MIBI against that order (see Law Society v Motor Insurers Bureau of Ireland [2016] IECA 60).

1.9 This Court, (see Law Society v. MIBI [[2016] IESCDET 57), gave leave to appeal on the following basis:-

“… subject to the refinement or alteration of what follows at the case management conference, the Court will allow an appeal on the following points:

Whether the MIBI Agreement may properly be construed so as to impose liability or potential liability on insurance underwriters which are party to the MIBI Agreement to pay out in respect of claims against persons who were insured with Setanta, a Maltese registered insurance company, at the time of its entering into liquidation in April 2014.

The correct principles to be applied in construing the MIBI agreement, whether it be a private agreement or an administrative arrangement between Government and the motor insurance industry, with particular reference to the influence of statutory provisions on the proper interpretation of the language thereof

If the MIBI is so liable, how any such liability or potential liability on the part of the MIBI impacts upon the power of the High Court to approve payments under section 3 of the Insurance Act 1964 (as inserted by section 4 of the Insurance (Amendment) Act 2011) authorising payments out of the Insurance Compensation Fund “only if it appears to the High Court that it is unlikely that the claims can be met otherwise than from the Fund.”

Against that general background it is necessary to turn to a brief account of the procedural history.

2. Procedural History
2.1 These proceedings ultimately arose from a decision by Setanta to enter into a creditor’s voluntary winding up in April 2014, which event was preceded by concerns being voiced by the Central Bank from September 2013. The Accountant of the Courts of Justice, exercising statutory duties under s. 26 of the Courts Officers Act 1926 in relation to whether relevant claims could be met otherwise than from the Fund, issued proceedings (Accountant of the Courts of Justice and the Insurance Act, 1964 - Record No. 2015/85) on the 13th April, 2015, in which para. 1 of the relief claimed sought the determination of the following questions:-

“(a) Whether MIBI has a liability or potential liability to pay out in respect of claims against persons who were insured with Setanta, a Maltese registered insurance company, at the time of its entering into liquidation in April 2014.

(b) If so, how any such liability or potential liability on the part of the MIBI impacts upon the power of the High Court to approve payments under section 3 of the Insurance Act 1964 (the “Principal Act”) ( as inserted by section 4 of the Insurance (Amendment) Act 2011 (the “2011 Act”) ) authorising payment out of the Fund “only if it appears to the High Court that it is unlikely that the claim can be met otherwise than from the Fund.”

2.2 On the 27th of April, 2015 Kearns P. ordered that the Law Society and the MIBI be added as claimant and respondent respectively to the proceedings. Kearns P. further directed that the question of who is liable for claims against Setanta policy holders be considered with two questions being directed to be tried being whether MIBI had any liability and, if so, how such liability impacted on the power to make payments out of the Insurance Compensation Fund under s.3 of the Insurance Act 1964.

2.3 Thereafter, the hearing of those issues came before Hedigan J. in the High Court. As noted earlier the High Court found in favour of the Law Society, an appeal was brought by MIBI to the Court of Appeal but was dismissed and leave to appeal to this Court was successfully sought.

3. The MIBI Agreements
3.1 The genesis of the MIBI agreements came in the form of terms concluded between those insurers carrying on motor insurance business in Ireland and the relevant minister (I will use the term “the Minister” to refer to the various titles which the minister responsible for insurance has held over the period since 1955). That initial agreement (“the original agreement”) contemplated the establishment of what became the MIBI and set out the commitment of the relevant insurers to procure that the MIBI would enter into an agreement with the Minister providing a mechanism to ensure the discharge of certain judgments against uninsured drivers. In furtherance of the original agreement the MIBI was established in 1955 as a company limited by guarantee. Its objective was stated to be to compensate victims of uninsured motorists but its liability extended only to circumstances where compulsory insurance was required. As contemplated by the arrangement between the Minister and the motor insurance industry, the terms of the scheme were set out in the form of a contractual agreement between the MIBI and the Minister (“the 1955 Agreement”). This agreement was amended several times with each subsequent agreement determining or terminating the previous one.

3.2 Under the 1955 Agreement, the MIBI essentially agreed to pay the amount of a judgment against an uninsured driver if the judgment was not otherwise satisfied within 28 days. This obligation extended only to judgments in respect of personal injury or death caused by the driving of the vehicle in circumstances within the scope of s. 56 of the Road Traffic Act 1933. (See Clause 1 and Note 2 to the 1955 Agreement). The Agreement also provided for the possibility of ex gratia payments which could be made in respect of serious injuries or death caused by untraced motorists, (see Note 8 to the 1955 Agreement). The 1955 Agreement did not apply to damage to property

3.3 A subsequent agreement was made in 1964 which reflected the extension of compulsory insurance requirements arising from the Road Traffic Act, 1961 (“the 1961 Act”). Section 56 of the 1961 Act extended the compulsory insurance requirement to “use”, as opposed to simply “driving” of a vehicle.. The Notes to the 1964 Agreement state that the Agreement would “with certain exceptions extend to persons travelling in the vehicle” or passengers. (See the MIBI Agreements and The Law, by Lyons and Noctor, 2nd edition, par 1.12) The MIBI was not liable to satisfy judgments in respect of persons travelling in a vehicle where the vehicle was being used without the owner’s consent.(Clause 3, par 1 and Note 2). However, the MIBI could make ex gratia payments if it could be shown that the relevant passenger was not aware that the vehicle was being used without the owner’s consent. (See Clause 4 and Note 2). Similarly, the MIB was not liable to compensate persons who were in or on a vehicle in circumstances where they knew or ought to have known that there was no policy in place in respect of the “use” of the relevant vehicle. (See Clause 3, par 2). In addition Clause 4 of the 1964 Agreement, Note 8 allowed for ex gratia payments in relation to untraced drivers on the same terms as set out in the 1955 Agreement.

3.4 In 1988 a further agreement was made which implemented the Second Council Directive on Motor Insurance of 20th December 1983, on the approximation of the laws of Member States relating to insurance against civil liability in respect of the use of motor vehicles (Directive 1984/5/EEC) and extended liability to damage to property caused by uninsured motorists (reflected in Clause 4 of the 1988 Agreement). In addition clause 6 extended liability for injury or death - but not damage to property - in respect of untraced drivers. Under clause 5, certain passenger claims were excluded in respect of a stolen vehicle (CL. 5.1), where a person knew or ought to have known that a vehicle was uninsured (Cl. 5.2) or where an accident took place between two uninsured vehicles.

3.5 A 2004 Agreement introduced procedural changes for making claims and significantly, in clause 13, the Fund is referred to as the “… Fund of Last Resort.” However, this clause was not repeated in the subsequent Agreement; nor was it to be found in previous agreements.

3.6 A 2009 Agreement implemented the judgment of the CJEU in Commission v Ireland (Case C-211/07) such that only passengers who “knew” - as opposed to “ought to have known” - that they were in an uninsured vehicle, were excluded from being compensated by MIBI. In addition the agreement did not provide for an exclusion in respect of a collision involving two uninsured vehicles, (as had been the case in cl. 5.3 of the 1988 Agreement) as this was also held contrary to the 2nd EU Motor Directive ( 84/5/EEC). Clause 7.1. also introduced compensation for damage to property caused by untraced drivers but only where damages were also obtained for personal injuries.

3.7 It is anticipated that the MIBI Agreement(s) may have to be further amended in light of the recent decision of the CJEU in Damijan Vnuk v Zavarovalnica Triglav C-162/13. (See pars 34, 52 and 59). Vnuk turned, amongst other things, on the interpretation of Article 3(1) of the first EU motor insurance Directive72/166/EC EU of 24th April, 1972 (it should be noted that that directive and all subsequent directives are now consolidated in Directive 2009/103/EC “relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability”). This case exemplifies the factors which may contribute to changes in the MIBI Agreements. The CJEU extended the parameters of required compensation by holding that accidents occurring in the course of the normal use of a vehicle must be covered. The effect of that case is that accidents occurring on private property must now be covered. Therefore, failure to insure in respect of accidents on private property may allow a victim to seek compensation from MIBI in the future.

4. The UK MIB Agreements:
4.1 There are two relevant MIB Agreements in the UK, the “Uninsured Drivers” Agreement and the “Untraced Drivers” Agreement. The first MIB Agreement was concluded on 31st December, 1946. This agreement was amended in November 1972, and renamed the “Compensation of Victims of Uninsured Drivers” or the “Uninsured Drivers” Agreement. The second, the “Untraced Drivers” agreement, was concluded in 1969 and also replaced in 1972. Prior to this later agreement payments in respect of untraced drivers were only made on an ex gratia basis. Both Agreements are determinable by either the MIB or the relevant Secretary of State on 12 months notice and have been amended on various occasions, most recently in 2017.

4.2 Under the UK Road Traffic Act 1988 it is compulsory for insurers to be a member of the UK MIB. Similarly, in Ireland, s. 78 of the 1961 Act made it compulsory for all insurers to be members of MIBI.

5. The Insurance Compensation Fund
5.1 The Fund was first established following the enactment of the Insurance Act 1964 (“the 1964 Act”). Provision was made for the Fund in s. 2 of that Act. Its administration is conferred on the Accountant of the Courts of Justice. Generally speaking, the Fund only applies to non-life insurers and the 1964 Act provides for funding by means of a levy on the insurance industry and loans from government. Section 6 provided that the Fund is to be financed by way of contributions from applicable insurers.

5.2 Section 4 of the 1964 Act states that a grant of IR£30,000 would be made available by the relevant minister to specifically address the payments made by the liquidator of Equitable Insurance (“Equitable”) under the provisions of s. 3 of the Act. Section 3 allowed for the payment out of the Fund of monies due by the liquidator of Equitable to meet certain claims. It is common case that the collapse of Equitable Insurance was unprecedented in Ireland at that time and closely preceded the enactment of the 1964 Act.

5.3 Section 3(7) of the 1964 Act, as inserted by the Insurance (Amendment) Act 2011 (“the 2011 Act”) states:-

“Where, in respect of a sum due under a policy, a payment equal to the whole of the sum is made by the Motor Insurers Bureau of Ireland, a payment shall not be made out of the Fund under this section in respect of the sum, and where, in respect of such a sum, a payment equal to the part of the sum is made by that Bureau, a payment out of the Fund in respect of the sum shall not exceed the amount of the sum less the amount of the payment by that Bureau.”

5.4 This provision is virtually identical in form to its predecessor, s.3(4) of the 1964 Act, as originally enacted. That provision contained five subsections and has been amended several times, by the Insurance (No. 2) Act 1983; the Insurance ( Miscellaneous Provisions) Act 1985 (the “Act of 1983”); the Insurance Act 1989 (the “Act of 1989”) and the 2011 Act. It is instructive to refer here to some of those amendments which affected the evolution and operation of the Fund.

5.5 Section 3(2) of the Insurance Act, 1989, inserted new sections (1B), (1C), (1D), and (1E).

5.6 Subsection (1B)(a) authorises payments out of the Fund to the liquidator of an insolvent insurer in respect of sums arising under a policy, including costs in securing the sum. Subsection (1B)(b) limits payments made out of the Fund in respect of subsection (1B)(a) to 65% of the total sum. Subsection (1C) stipulates that the 65% limit in subs. (1B)(c) applies to payments out of the Fund in respect of a liability of an insured to a third party.

5.7 Subsection (1D) expressly prohibits any payments out of the Fund under subs. (1B) in respect of a body corporate or unincorporated body of persons, unless and only in so far as a liability is owed to or by an individual. Furthermore, Section 31(1) effectively halted payments out of the Fund to a liquidator of an insolvent insurer in respect of sums arising under subs. 1A (as inserted by the Insurance Act, 1989) insofar as they related to a refund of premium to an insured,

5.8 Most recently, s.4 of the 2011 Act effectively repealed all intermediate amendments and wholly substituted section 3 of the 1964 Act and inserted sections 3A, 3B and 3C.

5.9 Section 4 of the 2011 Act also introduced a new subsection 3(2) into the 1964 Act, which was not contained in s.3 as originally enacted. Section 3(2) states:-

“The High Court shall order a payment under subsection (1) only if it appears to the High Court that it is unlikely that the claim can be met otherwise than from the Fund.”

5.10 Section 3A of the 1964 Act, as inserted by s. 4 of the 2011 Act, also provides that payments out of the Fund may be made to the liquidator of an insolvent insurer to discharge sums due or owing in respect of policies issued by that insurer. Section 3A(3) provides that a person must repay to the Fund any amounts subsequently received in excess of the sum due to them.

6. The Relevant MIBI Agreement
6.1 As noted earlier the central question on this appeal is as to whether, properly construed in the light of all relevant circumstances, the MIBI agreement applicable (being the 2009 agreement) (“the Agreement”) covers liability in respect of drivers who were insured but whose insurer becomes insolvent and thus unable to meet the claims of third parties against the drivers concerned.

6.2 In that context it is necessary to set out those provisions of the Agreement which might be said to at least have some bearing on that question. The principal clause of the agreement which places an obligation on the MIBI to meet claims is clause 4 which is under the heading “Satisfaction of Judgements by MIBI”. Clauses 4.1.1 and 4.1.2 are particularly relevant and are in the following terms:-

“4.1.1 Subject to the provisions of clause 4.4, if Judgement/Injuries Board Order to Pay in respect of any liability for injury to person or death or damage to property which is required to be covered by an approved policy of insurance under Section 56 of the Act is obtained against any person or persons in any court established under the Courts (Establishment and Constitution) Act, 1961 (No.38 of 1961) or the Injuries Board established 6 by the PIAB Act, 2003 whether or not such person or persons be in fact covered by an approved policy of insurance and any such judgement is not satisfied in full within 28 days from the date upon which the person or persons in whose favour such judgement is given become entitled to enforce it then MIBI will so far as such judgement relates to injury to person or damage to property and subject to the provisions of this Agreement pay or cause to be paid to the person or persons in whose favour such judgement was given any sum payable or remaining payable thereunder in respect of the aforesaid liability including taxed costs (or such proportion thereof as is attributable to the relevant liability) or satisfy or cause to be satisfied such judgement whatever may be the cause of the failure of the judgement debtor.

4.1.2 Subject to the provisions of clause 4.4, the MIBI shall satisfy, as soon as reasonably possible, any judgement in favour of a person who has issued proceedings pursuant to clause 2.3”

6.3 It is also of some relevance to recall, as noted earlier, that there were two agreements entered into in 1955. The first, the original agreement, was between insurance companies and the Minister and provided for the establishment of MIBI. The second, which post dated the MIBI coming into existence, was between the Minister and MIBI itself. The genesis of the commitment to provide for the satisfaction of relevant judgments was to be found in clause 2A of the original agreement under which insurers agreed to procure that MIBI would enter into an agreement with the relevant minister which agreement would contain provisions including the following term:-

“That if judgment in respect of any liability for injury to person which is required to be covered by an approved policy of insurance under Section 56 of the Act is obtained against any person or persons in any court established under the Courts of Justice Act , 1924 ( No. 10 of 1924) whether or not such person or persons be in fact covered by an approved policy of Insurance and any such judgment is not satisfied in full within 28 days from the date upon which the person or persons in whose favour such judgment was given any sum payable or remaining payable there-under in respect of the aforesaid liability including taxed costs ( or such proportion thereof as is attributable only to injury to person) or satisfy or cause to be satisfied such judgment whatever may be the cause of the failure of the judgment debtor to satisfy the same.”

6.4 It will be seen that the broad thrust of the core obligation to satisfy judgments has remained much the same since the initiation of the arrangements in 1955.

6.5 Clause 2 of the Agreement states as follows:

“Enforcement of Agreement

A person claiming compensation by virtue of this Agreement (hereinafter referred to as “the claimant”) must seek to enforce the provisions of this Agreement by:-

2.1 making a claim directly to MIBI for compensation which may be settled with or without admission of liability, or

2.2 making an application to the Injuries Board citing MIBI as a respondent under the terms of the PIAB Act 2003 which, pursuant to s.12(1), provides that unless and until such an application is made, no proceedings in court may be brought in respect of the claim,

2.3 citing MIBI as co-defendants in any proceedings against the owner and or/user of the vehicle giving rise to the claim except where the owner and user of the vehicle remain unidentified or untraced, or

2.4 citing MIBI as sole defendant where the claimant is seeking a court order for the performance of the Agreement by MIBI provided the claimant has first applied for compensation to MIBI under the clause 2.1 and has either been refused compensation by MIBI or has been offered compensation by MIBI which the claimant considers to be inadequate and/or applied to the Injuries Board as at 2.2 and having received a release from the Injuries Board to proceed with legal action.”

6.6 The relevant aspects of Clause 3 of the Agreement state as follows:

“Conditions precedent to MIBI’s liability

The following shall be conditions precedent to MIBI’s liability:

…

3.4 The claimant shall co-operate fully with An Garda Síochána or any other authorised person in their investigations of the circumstances giving rise to the claim

…

3.6 The claimant shall endeavour to establish if an approved policy of insurance covering the use of any vehicle in the accident exists by demanding or arranging for the claimant’s legal representative to demand insurance particulars (including policy number if available) of the user or owner of the vehicle in accordance with the provisions of section 73 of the Road Traffic Act, 1961. Provided the claimant or his legal advisers have made this demand in writing and he has been unsuccessful in so establishing after two months from the date of the accident, notification to MIBI may then take place. If within that two month period the claimant can present to MIBI written confirmation from a member of An Garda Síochána or the owner and/or user of the vehicle giving rise to the claim, then notification may take place immediately.

…

3.9 The claimant shall give not less than twenty eight days notice to MIBI before issuing a motion for judgment against any person which may give rise to an obligation by MIBI.

…

3.11 All judgements shall be assigned to MIBI or its nominee.

…

3.13 Any accident giving rise to a claim made to the MIBI shall be reported by the claimant to An Garda Síochána within two days of the event or as soon as the claimant reasonably could.”

6.7 Clause 9 states as follows:

“Recoveries

Nothing in this Agreement shall prevent any vehicle insurer from providing by conditions in its contracts of insurance or by collateral agreements that all sums paid by it on behalf of MIBI or by MIBI by virtue of the Principal Agreement or of this Agreement in or towards the discharge of the liability of its policyholders shall be recoverable by it or by MIBI from the policyholder or from any other person.”

6.8 The relevant text to the Preamble to the Agreement states as follows:

“AGREEMENT

Text of an Agreement dated the 29th day of January 2009 between the Minister for Transport and the Motor Insurers’ Bureau of Ireland, extending, with effect from dates specified in the Agreement, the scope of the Bureau’s liability, with certain exceptions, for compensation for victims of road accidents involving uninsured or stolen vehicles and unidentified or untraced drivers to the full range of compulsory insurance in respect of injury to person and damage to property under the Road Traffic Act, 1961.”

6.9 On one view the contents of the memorandum of association of the MIBI may be relevant to the proper construction of the Agreement for the sole purpose of the incorporation of the MIBI was to enable it to enter into the original agreement and, by implication, its successors. In that context it should be noted that the memorandum of association has been amended and what follows is the relevant text of that memorandum including any amendments up to and including those passed at an EGM of the company on the 18th December, 2009. It is first, perhaps, appropriate to note certain of the objects of the company which are set out in clause 3 of the memorandum of association. The following sub-clauses are argued to be of relevance to the issues which arise in this case.

“3.1 to enter into agreements and makes arrangements in compliance with current agreements or future agreements with the Minister for Transport (hereinafter called “the relevant Minister”) of the Republic of Ireland responsible for compulsory motor vehicle insurance and connected matters for the compensation of victims of road accidents, (other than the exceptions as provided in the Agreement dated 29th January 2009 between the Minister for Transport and the Motor Insurer’s Bureau of Ireland) involving either uninsured vehicles, stolen vehicles, unidentified drivers or untraced drivers which are required to be covered by contracts of insurance under the Road Traffic Acts 1961 - 2006 as amended or by common law, or a provision of the treaties of the European Community, or an act, regulation or directive adopted by an institution of the European Community, or otherwise.

…

3.12 to pay, satisfy or compromise any claims made against the Bureau which it may seem expedient to satisfy or compromise, notwithstanding that there may be no obligation to do so in law, and to effect counter guarantees.

…

3.19 to enter into agreements with the relevant Minister or any minister or department of state in the Republic of Ireland or elsewhere in relation to the payment of claims by third parties in respect of death or injury to persons or properties suffered in an accident arising out of or in consequence of the driving, ownership, management or control of a motor vehicle or to enter into such agreements either as principal or agent and generally act as agents in this country or of any organisations or associations concerned with the business of motor vehicle insurance whether established in this country or outside it.

…

3.27 to do all such other things that are incidental or conducive to the attainment of the above objects or any of them.”

6.10 Certain provisions of the articles of association are also said to be of relevance. These include Art. 10 concerning cessation of membership the relevant parts of which are in the following terms:-

“10.1.1 A member shall cease ipso facto to be a Member where such Member:-10.1.1 goes into liquidation, has a receiver appointed over its assets, goes into examinership or is insolvent;

10.1.2 ceases to transact or carry on motor vehicle insurance business in the State;

No such Member, while continuing to transact motor vehicle insurance business in the State, shall be entitled to resign its membership.

Any such member ceasing to be a Member shall nevertheless remain liable for its or his share( pro rate or otherwise) of all obligations ( including but not limited to the obligations of a Member under Article 63.3) arising prior to such resignations and during that current year in which the resignation takes effect.

Upon the occurrence of any event listed in Article 10.1.1 or 10.1.2 any payments which the Bureau may as a result be called upon to make on a Member’s behalf to any creditor shall be contributed solely by the other members respectively. IN each case contributions actually payable by each of the other members shall be made in proportion to their respective levies within their respective group’s actual percentage of the total Bureau levy( relative to the year in which the Bureau meets the said contribution.).

…

10.5 Where any Member ceases to be a Member he shall remain fully liable in respect of all obligations incurred by him in virtue of his membership of the Bureau before its cessation and, for the avoidance of doubt, where an incident arises prior to cessation of membership and that incident would give rise to an obligation on that Member by virtue of his membership then that Member shall remain fully liable in respect of that obligation notwithstanding his being unaware of such incident or obligation prior to the cessation of his membership.”

6.11 In addition Art. 63 sets out the mechanism whereby members are required to start and end making their contribution towards the Funding of the MIBI. It must, of course, be recalled that each insurer providing motor insurance in the State is required to be a member. Thus any new insurer entering that market is required to join the MIBI and any insurer leaving that market may then leave the MIBI. Article 63 is designed to deal with the commencement and cessation of the obligations of members in that context and is in the following terms:-

“63.1 In the first calendar year of membership a Member will be required to pay a joining fee and an annual membership fee in accordance with Article 7. The annual membership fee in the first calendar year of membership shall be calculated on a pro rata basis from the actual date the new Member was admitted to the 31st December in the same calendar year.

63.2 Levies on new Members will be payable by each new Member in accordance with the provisions of Article 62.

63.3. A levy will continue to be assessable on and payable by a Member for the calendar year following the year in which that Member ceases to transact motor vehicle insurance business in accordance with the terms of Article 10.3 and the basis for the calculation of that levy will be the GWP recorded by the Member in its final calendar year of carrying on motor vehicle insurance business in the State.”

6.12 Two further matters are also said to be potentially relevant. The first is a note to the financial statements of the MIBI for the year ended 31st December, 2012 which is in the following terms:-

“As stated in the Report of the Board, in the event of the insolvency of any of its members, the Bureau is required, under its agreement with the Minister for Transport, to pay claims, to the extent that its insolvent members are unable to do so. No provision has been made for this contingent liability in these financial statements.”

A similar note appeared in many previous financial statements.

6.13 Finally, it may be of some relevance to make reference to certain extracts from a letter written by the Chief Executive Officer of MIBI to the then President of the Law Society on the 29th September, 2014 which deals with what is said to be the position of the relevant department. The Minister is, of course, the other party to the MIBI agreement and it is said that the Minister does not dispute MIBI’s construction of the agreement to the effect that it does not provide for a liability in the case of insolvent insurers. The relevant extract is in the following terms:-

“As you are aware from our more recent exchange in July of this year the MIBI had sought legal advice to ascertain whether the MIBI was liable to make payments to discharge an unsatisfied judgment in respect of a Setanta related claim under the 2009 Agreement. The legal opinion was unequivocal in its conclusion that the 2009 Agreement did not require the MIBI to satisfy awards against drivers covered by an approved policy of insurance where the insurer was unable to pay all or part of the award because of insolvency.

…

The Department [of transport] recently responded and has confirmed that it is the Department’s position that there is no legal obligation on the MIBI to satisfy claims made against policyholders of Setanta.

The MIBI has its own legal advice, there is the advice of the Attorney General obtained by the Department of Transport and Department of Finance have confirmed the position to the Finance Committee of the Oireachtas and to the Dáil.”

6.14 Against that background it is next necessary to turn to the respective arguments put forward by the parties.

7. The Argument
7.1 As noted in the introduction to this judgment, the MIBI agreement which governs the legal obligations which arise in this case makes no express provision, one way or the other, as to whether the compensation mechanism provided for in the agreement is to be applicable in the case of insolvent insurers. It follows that the position of each of the parties was to point to aspects of the Agreement, its predecessors, the legislation governing the Fund and other surrounding circumstances for the purposes of suggesting that an interpretation favourable to their case was more appropriate. Thus a range of provisions of the MIBI agreements, the relevant legislation and the facts were called in aid on both sides with, hardly surprisingly, emphasis being placed on those elements of the agreements and other materials which might be said to tend to favour one view or the other. Against that backdrop it is appropriate to set out the principal arguments of the parties by reference to those aspects of the agreements, legislation and facts which were argued potentially to have an influence on the overall determination of the scope of the obligations arising under the relevant MIBI agreement. Many of the points raised by either side were pursued in detail with rebuttal following reply aided, I suspect, by the fact that the case had already been argued twice before it reached this Court. What follows is a description of the main thrust or principal themes of the argument. For the sake of brevity some detail has been omitted.

7.2 However, before going on to consider the specific provisions of the documentation which are said to be relevant to the issue in this case, it is of some importance to identify one general question concerning the proper approach to the construction of the agreement to which it will be necessary to return. The general principles applicable to the construction of contracts were not in dispute. However, at least on one view, it was possible that the question of whether it was appropriate to characterise the agreement as being “administrative” or alternatively “contractual” in nature might have some relevance to its proper construction. MIBI argued that the Agreement is purely contractual in nature save, perhaps, for the fact that it is intended to, and in fact does, confer rights on persons who are not parties to the agreement being persons who are injured as a result of the negligence of drivers in circumstances covered by the terms of the Agreement. On the other hand the Law Society contended that the Agreement has at least significant public law features which, it was said, potentially affect both the proper interpretation of the agreement itself and the extent to which it might, in certain circumstances, be permissible for the MIBI to rely on the strict terms of the agreement.

7.3 Perhaps it might be said that the key argument which emerged between the parties was as to whether, as the Law Society argued, the Agreement, and in particular clause 4, provides for compensation to a broad class of injured parties or whether, as the MIBI argued, the Agreement is designed to cover a narrower class. In substance, leaving aside untraced or unidentified cases which are not fully relevant to the issue in this case, the debate was whether the Agreement extended only to persons who did not have a valid policy of insurance or whether its scope was wider and extended to any case where qualifying compensation was not paid.

7.4 The starting point for any description of the argument must, therefore, be article 4 itself for it is that article which specifies the primary obligation. I, therefore, turn to the arguments put forward by the parties in respect of the proper construction of that article and then go on to consider the other aspects both of the various MIBI agreements, the legislation and the surrounding facts and circumstances which are called in aid by either side.

7.5 It will, of course, be necessary to consider the judgments of both the High Court and the Court of Appeal. However, it is appropriate to set out the positions of the parties first so as to place those judgments in context.

(i) Clause 4.1

7.6 A key provision of the Agreement, of course, is clause 4.1.1. The Law Society argues that the terms of that clause are sufficiently wide to include liability for insolvent insurers. MIBI argue to the contrary and suggest that if it had been intended that the agreement apply to a potentially wide class of persons, such as drivers who held a valid policy of insurance from an insurer who become insolvent, then it would have been expected that an express clause to that effect would have been included. In one sense that fundamental argument was about what the default position was. The Law Society argued that the terms of clause 4.1 were sufficiently wide so that it would have required a clear exclusion to remove any potential obligation to compensate in the case of insolvent insurers. On the other hand the MIBI argued, as just noted, that the obligation which would be placed on the remainder of the insurance industry to pick up the tab in the case of a collapsed fellow insurer was such that it would have required a clear express inclusion.

7.7 As will have been seen the basic structure of clause 4 requires the MIBI to satisfy any judgment of the type specified in the clause which remains unsatisfied for 28 days from when the relevant judgment becomes enforceable. The category of judgment covered refers to one arising from a “liability for injury … which is required to be covered by an approved policy of insurance under (the relevant legislation) …”. The Law Society suggests that the wording of that clause does not require that the driver whose liability gives rise to the relevant judgment actually be uninsured but rather it is said that the clause simply provides that the MIBI will satisfy any judgment arising from circumstances which were the subject of compulsory insurance which remains unsatisfied for 28 days. However, other aspects of clause 4 itself were also the subject of significant debate.

7.8 The first such provision is the phrase appearing both in clause 4.1.1 and also in its ultimate predecessor, clause 2A of the original arrangement. In both of those clauses the phrase “whether or not such person or persons be in fact covered by an approved policy of Insurance…” is used. The Law Society suggests that this phrase makes clear that the question of whether or not there is a policy of insurance in existence is not material to the issue of the obligation of the MIBI to compensate. On that basis it is argued that the fact that there may have been a policy in existence at the time of an accident but that the relevant insurer became insolvent thereafter does not affect the scope of the agreement. On the other hand the MIBI suggests that the relevant phrase is designed to deal with situations where a policy is validly repudiated after an accident. In such a case the insurer is not contractually bound to their insured. On the other hand, it is pointed out that an insolvent insurer remains subject to a liability to their insured and, thus, onward to a party injured by that insured, even though the insurer may not be able to meet that liability due to its insolvency.

7.9 Next there was some debate concerning the relevance of the use of the phrase “the Bureau’s liability… for compensation for victims of road accidents involving uninsured or stolen vehicles and unidentified or untraced drivers” in the preamble to the Agreement. The MIBI suggests that the use of that phrase is consistent with its argument that clause 4.1.1 is intended to cover a limited class only being the class defined by that phrase. However, the Law Society argues that the substantive terms of the agreement itself do not, in its primary operative clause, include such a limitation and also repeat the argument made, in a different context, about the meaning of the word uninsured by reference to the time at which a person might be said to be uninsured. In rebuttal the MIBI argue that a person who holds a policy with an insolvent insurer nonetheless remains insured even though there may be little practical benefit in the insurance in question.

7.10 Finally, the Law Society places reliance on the phrase contained in both clause 4.1.1 of the Agreement and clause 2A of the original agreement where it is specified that the relevant liability is to arise “whatever may be the cause of the failure of the judgment debtor to satisfy same”. It is argued that this is in very wide terms and would clearly cover a case where the problem arose from the insolvency of the judgment debtor’s insurer. The MIBI argue that the phrase is intended to clarify that the MIBI will discharge a liability regardless of the reason for the failure of the insurer to pay but only within what it argues is the limited class of case covered by the agreement.

7.11 However, each of the parties suggested that assistance in the proper construction of clause 4.1 could be gained from a range of other materials such as the legislation concerning the Fund, the Memorandum and Articles of Association of the MIBI, certain case law and the surrounding facts. In that context it is necessary to set out the principal issues raised starting with the 1964 Act and in particular section 3(7) thereof.

(ii) Section 3(7) of the 1964 Act

7.12 The Law Society refers to various statutory provisions in support of their argument. In particular it is said that the argument in favour of the broad ambit of liability in clause 4.1.1 of the Agreement is reinforced by s.3(7) of the 1964 Act. That section provides that payment should not be made out of the Fund where a payment has been made by the MIBI. The Law Society argues that this section implies that the primary liability should rest on the MIBI and that the Fund should only become liable on a secondary basis. On the other hand, the MIBI suggests that the purpose of s.3(7) is simply to avoid a double payment.

7.13 Section 3(7) does not, of course, expressly state that the MIBI is to be liable in any particular circumstances. However, the Law Society argues that the section contemplates the possibility that the MIBI might be liable in a case where the insurer was insolvent for otherwise, it is said, the Fund would have no role. On the other hand the MIBI suggests that a liability on the MIBI could not arise, under statute, by implication in circumstances where the MIBI agreement itself makes no express relevant provision.

7.14 The argument also touched on the fact that the Fund is applicable in the case of all non life insurers. Obviously those insurers providing motor insurance are a subset of that general class. The MIBI agreement, of course, only applies to motor insurers. Thus only motor insurers fund the MIBI but all non life insurers have obligations to the Fund. Section 3(7) of the 1964 Act refers to a sum due under a policy although the Law Society argues that the only policies which could, in practise, have relevance in the context of excluding a payment from the Fund where a payment had been made by the MIBI must be a payment arising under a motor insurance policy on the basis that it is only under such a policy that the question of a payment by the MIBI could arise.

7.15 On the question of the MIBI’s “double payment” argument it should be noted that s.4 of the 1964 Act, as originally enacted, stated that the Minister was to make a grant to the Fund “for the purpose of making payments under section 3 of this Act to the liquidator of the Equitable Insurance Company, Limited.” Section 4 of the Act of 1964 was repealed by section 5 of the 2011 Act. However, that same Act also re-enacted section 3(4) of the Insurance Act 1964, now section 3(7). The MIBI say that speculation as to why the provisions of s.3(7) were retained by the 2011 Act is not permissible. The Law Society, however, suggests that it is a principle of construction that the Oireachtas does not legislate in vein. On that basis it is said that the re-enactment of the subsection (now s.3(7)) is contrary to the view that the provision was designed only to prevent double recovery in the context of Equitable.

7.16 In that context a debate arose as to whether there were any circumstances in which s.3(7) could have practical application even if the MIBI interpretation of their obligations was correct. In other words were there, in practise, circumstances where the MIBI might make a payment in relation to a case where an insurer ultimately became insolvent and where the prevention double recovery, which the MIBI argues is the sole purpose of s.3(7), might operate in practise. It is said that there are certain circumstances where the MIBI might make a payment on the basis of the situation then appearing but where subsequent events might change the situation. If, in such a context, a relevant insurer were to become insolvent then, it is said, s.3(7) could apply and would have the effect of preventing the Fund from having to pay out in such circumstances. This might happen where MIBI makes a payment and it later transpires that an insurance policy was in existence or where there is a dispute as to cover or where the driver is unknown but later identified or where an untraced vehicle is subsequently traced.

7.17 The Law Society places reliance on the fact that untraced or unidentified drivers were only covered by the possibility of an ex gratia payment under the 1955 or 1964 Agreements so that, it is argued, those cases could not have been in contemplation in the context of section 3(7). MIBI suggests, however, that, given the focus on the re-enactment of s.3(7) in 2011, it is relevant to take into account the fact that, by that time, untraced or unidentified drivers were within the full ambit of agreement and not just confined to the potentiality for an ex gratia payment.

7.18 It is next necessary to return to certain other articles of the Agreement which are said to influence the proper construction of the Agreement as a whole.

(iii) Conditions Precedent and Enforcement (Articles 2 and 3 of the Agreement)

7.19 The starting point under this heading is a suggestion that the case law in this area confirms that the conditions precedent set out in Art. 3 of the Agreement require to be strictly construed and complied with even where no prejudice is established (see for example O’Flynn v. Buckley, Walsh MIBI and Horan [2009] 3 IR 311). MIBI suggests that certain of those conditions precedent, in particular Arts. 3.4, 3.6, 3.9 and 3.13, are consistent with the liability of the MIBI extending only to a limited class of person (including uninsured drivers but not those whose insurance becomes practically ineffective by the insolvency of the relevant insurer) rather than the wide class contended for by the Law Society (being any person in whose favour an order is made which remains unsatisfied for 28 days). Conditions concerning cooperation with an Garda Síochána in investigations, reports to the garda and attempts to establish the existence of a policy of insurance are said to fall into this category. In addition it is said that the requirement to be found in clause 3.9, being to give notice to the MIBI before issuing a motion for judgment, could not have been complied with in the case of a party injured by the negligence of a Setanta insured where the injured party had brought a motion for judgment prior to Setanta going into liquidation.

7.20 To the extent that it might be argued that these conditions precedent can be complied with in some, although not all, Setanta insured type cases, MIBI argues that the agreement could not have been intended to cover some but not all persons in a particular class.

7.21 The Law Society suggests that clause 3 cannot be said to override what is submitted to be the clear wording of clause 4.4.1.

7.22 In addition the Law Society suggest that the interpretation sought to be placed on much of clause 3 by MIBI would mean that many of the same clauses equally might not necessarily be complied with in the case of an accident caused by the negligence of a driver who appeared to have a policy of insurance but where, for one reason or another, that policy was not valid or was properly repudiated. In such a case the injured party might have no reason to believe that there was any need to instigate investigations by an Garda Síochána and might believe that there was an approved policy of insurance in place. The Law Society suggests that it could never have been the intention to exclude such cases for the ambit of the MIBI scheme.

7.23 In the context of the enforcement of the agreement, the MIBI notes that clause 2 requires that the MIBI be joined as a co-defendant in proceedings except in cases where the owner and user of the vehicle remain unidentified or untraced. Likewise, the MIBI is required to be the sole defendant in the cases covered by clause 2.4. It is argued that this provision is inconsistent with the contention that the agreement covers insolvent insurers for it is said that the proceedings might well predate the insolvency concerned. In those circumstances it would not, of course, have been within the contemplation of the plaintiff concerned to join the MIBI for the need to rely on the MIBI agreement would not be apparent.

7.24 However, the Law Society state that the provisions concerning enforcement cannot be used to limit the coverage of the agreement specified in clause 4 and in particular note that the MIBI may be joined as a sole defendant where a party has applied for compensation and has been refused. It is said that there is no reason in principle why those events could not occur after an insolvency has arisen so as to trigger the enforcement mechanism set out in clause 2.4.

(iv) Conflict between Clauses 3 and 4

7.25 As already noted a key part of the Law Society argument is that the wording of clause 4 appears to relate to any case where a judgment remains unpaid after 28 days. On the other hand, as just noted, an important part of the argument of the MIBI draws attention to the conditions precedent set out in clause 3 and the suggestion that at least some of those conditions cannot be met in the case of drivers insured by a collapsed insurance company. The Law Society, while not accepting the interpretation of the MIBI of the effect of clause 3, nonetheless argues that clause 3 is insufficient to displace the clear wording of clause 4. However, the MIBI place reliance on the fact that clause 4.1.1 includes the phrase “subject to the other provisions of this agreement” so that, it is said, the wording of that clause cannot be read in isolation. On the other hand the Law Society suggests that MIBI’s case involves a rewriting of clause 4.1.1 rather than its interpretation in accordance with the other terms of the agreement.

7.26 Having considered the relevant clauses of the Agreement and the legislation it is now necessary to turn to certain other materials which are said to be relevant.

(v) The Articles and Memorandum of Association

7.27 Part of the argument put forward by MIBI relied on the suggestion that an intention not to provide compensation in the case of insolvent insurers can be gleaned from the Memorandum and Article of Association of the company. Reliance is placed on clause 3.1 which refers to providing compensation in respect of uninsured, unidentified or untraced cases. Thus it is argued that the scope of agreements which are in the power of MIBI must be confined in a like manner. It is said that any agreement which went beyond the scope of that contemplated in the objects clause would potentially be ultra vires. While it was not suggested that that would, in itself, render a wider agreement invalid, nonetheless it is said that it cannot have been the intention of the Minister to enter into an agreement which was ultra vires. In that context attention is drawn to the fact that the Minister may well have been aware of the Memorandum and Articles of Association of the MIBI at the time of the 1955 Agreement

7.28 On that basis it is necessary to look at the relevant provisions of the Memorandum and Articles of Association. The precise terms of clause 3.1, as cited earlier, provide for the payment of compensation to the victims of road accidents “involving… uninsured vehicles…”. That raises, in turn, the question of the time at which it is required that the vehicle be uninsured. MIBI argues that the natural meaning of the phrase contained in the clause in question is that the vehicle must be uninsured at the time of the accident. On that basis it is said that a driver who has a valid policy of insurance at the time of an accident, but whose insurer subsequently becomes insolvent, cannot be said to be uninsured for the purposes of the clause. On the other hand the Law Society suggests that the interpretation sought to be placed on the clause by MIBI would be inconsistent with cover being provided in cases where a policy of insurance is repudiated.

7.29 Leaving aside the proper construction of the Articles and Memorandum, the Law Society also argues that the original agreement between the Minister and the motor industry, which contemplated the establishment of the MIBI, predates the Articles and Memorandum. While it is, of course, accepted that each of the MIBI agreements were entered into after the MIBI had been established and after, therefore, its Memorandum and Articles of Association had come into existence, it is nonetheless said that there is a consistency between the scope of the obligations undertaken by the MIBI which dates back to the original agreement entered into between the industry and the Minister such that, the Law Society argues, little assistance can be given in construing the scope of the MIBI’s obligations from the Articles and Memorandum. It is also argued that, given that the purpose of the agreement is to benefit persons injured as a result of the negligence, those persons cannot properly be said to have their entitlements reduced by reason of the Articles and Memorandum in the light of the then applicable section 8 of the Companies Act, 1963. On the other hand the MIBI argues that the claims of injured parties are ultimately derivative of the entitlement of the Minister because it is the Minister who is the contracting party.

7.30 On that basis it is suggested that the scope of the agreement must be interpreted by reference to the position only of the contracting parties being the Minister and the MIBI. On that basis it is said that the scope of the agreement, insofar as it relates to injured parties, cannot be greater than the scope of the agreement which the Minister, as a party, could enforce. In that context both parties comment on Tevlin v. McArdle and MIBI [2014] IEHC 436.

7.31 The Law Society also places reliance on Art. 10.1 of the Articles of Association, already cited, which concerns the termination of membership of the MIBI by an insurer. Attention is drawn to the fact that clause 10.1.1 provides for automatic termination of membership in the event that a member goes into liquidation. MIBI argues that the proper interpretation of the agreement as a whole simply requires the MIBI to honour liabilities already incurred by the insolvent insurer prior to it ceasing to be a member meaning judgments already entered against insured covered by the insurer in question.

7.32 The wording of the relevant passage from clause 10.1 refers, amongst other things, to the circumstances when a member goes into liquidation or becomes insolvent. What follows is an obligation on the remaining members to contribute to any payments which the MIBI may be required to make on the insolvent former member’s behalf “to any creditor”. The MIBI argues that the use of the term “creditor” confines the case to one where there has already been a judgment against an insured of the now insolvent insurer. The Law Society, on the other hand, refers to the use of the term “all obligations” in the previous paragraph of Art. 10.1 and suggests that that paragraph extends the obligations being considered under para. 10.1 to all cases of liability or potential liability.

(vi) “The Equitable Collapse”

7.33 The historical role of the Fund, particularly in the context of the collapse of Equitable, is itself also a matter of contention between the parties. It is agreed that the MIBI previously paid out in respect of liabilities attributable to Equitable in 1963. However, the MIBI say that, because of the limited nature of the evidence, no inference should be drawn as to the legal basis of those payments and the fact of those payments should not influence the view of the relevant agreement which the parties held at that time. The MIBI assert there is no evidence that it did in fact accepted liability in respect of Equitable and it was suggested that any payments were likely to have been ex gratia. It was said that there is evidence, in the form of a 1964 departmental publication (“The 1964 Memoranda”), that the 1964 Act was enacted in the wake of, and to address, the liquidation of Equitable. This is said to form part of the “factual matrix” which should inform the Court’s interpretation of the intention behind the 1964 Agreement. Further reliance is placed on the fact that the 1964 Memoranda makes clear that the Fund was designed to address insolvent insurers’ liabilities. In any event, MIBI say that Re: Butler [1970] I.R. 45 is inconsistent with the MIBI being liable in this context and, it is submitted, that case “indicates” that all payments to Equitable after the enactment of the 1964 Act were out of the Fund alone. Therefore, the MIBI argues that section 3(7) is simply designed to prevent double recovery where payments were made to Equitable prior to the enactment of the 1964 Act and that this was at the forefront of the contracting parties’ thoughts in entering the 1964 MIBI Agreement.

7.34 On the other hand the Law Society points out that there is no reference in the MIBI’s 1966 Statement of Accounts which suggests that payments to Equitable were on an ex gratia basis and that some payments in respect of Equitable claims which were made by the MIBI appear to post-date the 1964 Act. The Law Society note there is no reference in the affidavit of Mr. Casey, the Chief Executive Officer of the MIBI, to the payments being ex gratia in nature. The Law Society say the 1964 Memoranda “indicates” that the MIBI was in fact requested to meet all of Equitable’s liabilities, even those not covered by the then applicable 1955 Agreement, but that the MIBI refused. (See High Court Judgment in this case, at para. 7.26). Therefore, it is said that there is no evidence to support MIBI’s proposition that the legal basis of the payments was either “unclear” or “ex gratia”. The Law Society do say that it is not clear as to whether payments were made out of the Fund in those cases in respect of motor policies or whether a judgment creditor existed for 28 days such as to invoke MIBI liability.

(vii) MIBI Internal Documents

7.35 The Law Society seek to place reliance on statements contained in each of the MIBI’s report and note to financial statements from 2005 to 2013 to the effect that, in the event of the insolvency of one of its members, the MIBI must cover claims “to the extent that its insolvent member is unable to do so”.

7.36 On the other hand the MIBI says that this note cannot be said to reflect the common intention of the parties to the MIBI agreement (because it is argued that the Minister was not informed of the note) and cannot, on that basis, be relevant to the proper interpretation of the agreement.

7.37 In addition it is said that no estoppel could arise because the note is addressed to the members of the MIBI and not either the Minister or the public so that no reliance can be said to have been placed on the note.

7.38 Ultimately the MIBI state that the note is in error. It is said that it cannot, as extrinsic evidence of the intention of one of the parties, be taken to be evidence which can influence the proper interpretation of the agreement. In that regard reliance was placed on Phipson On Evidence (17th Ed. para. 42-12).

(viii) Business Sense

7.39 The MIBI suggest that the interpretation placed on the agreement by the Law Society, and approved by the Court of Appeal, would flout ordinary business sense and should, therefore, only be accepted if the agreement clearly provided for the acceptance by the MIBI of liability in respect of insolvent insurers. First it is said that such a construction would require other insurers to guarantee a competitor company which operated a high risk strategy in relation to writing insurance. This, it is said, would undermine the business model of companies with a low risk strategy.

7.40 Second, the MIBI argues that imposing a liability on continuing insurers in the case of an insolvent competitor could lead to a knock-on effect where the liabilities thus imposed led to significantly increased liabilities to the MIBI being placed on the balance sheets of the surviving insurers. Next it is said that any potential liability to cover claims against drivers insured by an insolvent insurer would amount to a contingent liability in respect of which provision would need to be made. However, no realistic appraisal of the appropriate level of provision could be achieved without access to the financial data of those competitors.

7.41 However, the Law Society, placing reliance on ICDL v. ECDL [2012] 3 I.R. 327, and Arnold v. Britton [2015] UKSC 36, suggests that it is clear, as a matter of principle, that a business sense argument cannot be used to displace the clear wording of an agreement. The Law Society further argue that any issues under this heading can and should be addressed by the industry attempting to renegotiate the agreement with the Minister. Furthermore, the Law Society argues that the agreement needs to be seen in the context of the fact that its overall intention is to provide a mechanism to ensure that persons injured by the negligence of others receive compensation. The fact that insurers are required, therefore, to cover liabilities in respect of uninsured drivers means that such liability arises no matter how large the incidence of claims against such uninsured drivers may be.

(ix) The United Kingdom Case Law

7.42 The Law Society argues that certain passages in judgments delivered in the United Kingdom suggest that the interpretation given to the MIB Agreements in that jurisdiction was such that they were taken to cover cases involving insolvent insurers. Reliance in that regard is placed on Jacobs v MIB [2010] EWCA Civ 1208 at par 7, and Gurtner v Circuit [1968] 2 QB 587 at 598, and Bennett v Stephens [2010] EWHC 2194 at paragraph 16. On the other hand MIBI argues that the issue of the potential extension of liability of the United Kingdom MIB to cases involving insolvent insurers was not directly before the courts on the occasions in question. On that basis it is suggested that the comment which the Law Society seek to rely on are obiter dicta.

(x) Anomalies

7.43 While not necessarily said to be decisive, both sides did draw attention to potential anomalies in the overall operation of the compensation system for injured parties if the construction sought to be placed on the MIBI agreements by their opponent were to prevail.

7.44 The MIBI draws attention to the fact that the agreements are clear in requiring, as a condition to the payment of compensation to an injured party, that the entitlement of that injured party to recover from the negligent driver concerned must be assigned to the MIBI. In practise, therefore, the scheme ordinarily contemplates that, while the MIBI must pay the injured party, it retains the entitlement to recover any amount paid to the insured party from the driver whose negligence gave rise the liability in the first place. Obviously, in the case of persons who did not go to the trouble of getting insurance in the first place, this provision makes complete sense. If it should prove practical for the MIBI to seek to recover any money which it had to pay out then it can do so. The scheme, in effect, provides for a timely and straightforward payment mechanism in favour of the injured party rather than requiring that party to obtain judgment against a defendant and try and enforce it. But the uninsured driver whose negligence caused the problem in the first place does not escape liability and can be pursued if there is any point to it.

7.45 The application of that regime in the case of an insolvent insurer would, however, potentially mean that a driver, who had in place a policy of insurance where, through no fault of the driver concerned, the relevant insurer became insolvent, would be exposed to personal liability. On the basis of the Law Society’s interpretation of the agreements, it is said that the MIBI would have to pay the injured party but the MIBI, on its argument, could seek to recover any monies paid out from the driver. There was some debate about whether that consequence could truly arise in all the circumstances having regards to the terms of the agreement and the legislation concerning the Fund but it can be said that it remains a possibility. The argument in this regard was described by Ryan P. in the Court of Appeal as troubling. He recognised the injustice of imposing liability on a driver whose insurer happens to become insolvent. However, Ryan P. was of the view that it did not necessarily follow that such an unfortunate consequence could affect the proper interpretation of the agreements. Likewise, Ryan P. did make some mention of the possibility that there might be certain terms in an agreement which a party would not be entitled to seek to enforce because it would be unjust so to do.

7.46 There was also a connected issue concerning the extent to which it might be possible for such a driver to recover from the Fund. In the ordinary way the Fund is authorised to pay to the liquidator of an insolvent insurer sums arising under a policy but limited to 65% (and with a cap in certain circumstances) in respect of payments relating to the liability of an insured to a third party. On one view it might be said that a driver who becomes liable to the MIBI, as a result of the assignment to the MIBI of a judgment obtained by a party injured by the negligence of the driver concerned, could benefit from such a payment. Such a driver has, of course, a valid policy with the insolvent insurer. As a matter of contract between that driver and the relevant insurer, the now insolvent insurance company is obliged to cover the driver’s liabilities. The reason why the driver would in practice be liable to the MIBI would be because of the failure of the relevant insurer to meet its contractual obligations (by reason of its insolvency).

7.47 If that argument were correct it would follow that, in practical terms, the MIBI could pursue the driver concerned for the entire award to the injured party together with costs but the driver would be able, subject to some limitations, to obtain 65% of such sums from the Fund. Thus, in practice, at least in most cases, the driver would be exposed as to 35% of the total award (including costs) made in favour of the injured party. While that would be a significant exposure on the part of the relevant driver it does also follows that, if the interpretation advanced by the MIBI is correct, any driver who is insured by an insolvent insurer would face a similar exposure for the injured party could obtain judgment for the full sum properly due and only 65% (or less) would be met by the Fund thus leaving the injured party to pursue the individual driver for the balance.

7.48 On the other side of the coin the Law Society relies on that undoubted consequence of the MIBI being correct. As already noted the provisions of the 1964 Act, in their current form, make clear that the Fund only covers 65% of the total sums due by an insolvent insurer to injured third parties. It follows that, if the construction sought to be placed on the Agreement by the MIBI itself is correct, then those who are injured as a result of the negligence of drivers who are insured as of the date of the accident concerned but whose insurer becomes insolvent, are likely, as a matter of practice, to be confined to 65% (or less) of the total claim. This will be so unless the driver is a mark for the balance. On that basis the Law Society argues that it would be anomalous that someone who is injured due to the negligence of a driver who has no policy of insurance at all will get full compensation under the Agreement but a driver who, through happenstance, is injured by the negligence of a driver who has a policy of insurance but whose insurer becomes insolvent, will likely only receive 65% of full compensation. In such a case it is to be recalled that a significant element of the damages required to be paid to those who suffer catastrophic and life changing injuries are designed to provide financial support to make up for either lost income or the provision of necessary medical and other supports. The compensation which would be required to be paid to such a catastrophically injured person for that type of support would be likely to be cut by over a third if their only recourse is to the Fund.

7.49 It must, of course, be accepted that, outside the field of compulsory motor insurance, the potential to actually recover damages can depend on whether there is a defendant who is a mark. Sometimes that problem may well lead to one party receiving full compensation but an equally deserving party receiving no or much less compensation. However, the Law Society argues that, in the light of the fact that it has been the consistent policy for the last 60 years to attempt to ensure that those injured by the negligence of others in motor accidents do receive compensation, it would be a strange result if only one category of such persons (being those injured by the negligence of insurers who turn out to be insolvent) were to receive compensation which falls a significant way below the full amount to which they would ordinarily be entitled.

7.50 In addition, it is worth noting that those, such as employers, who are insured by insurers who become insolvent run the same risk of being directly exposed to the tune of at least 35% of any damages awarded. As O’Donnell J. suggests in his judgment in this case, it may well be that it was considered that those who enter into insurance with imprudent insurers (and who may, at least in some cases, have thereby benefited by unrealistically low premia) should be exposed to some of the potential liabilities which would flow from the insolvency of the insurer concerned. Be that as it may non-motor insured also have a potential exposure to being forced to meet part of claims brought against them which are covered by an insurance policy written by an insolvent insurer because the Fund will only meet a portion of the relevant claim thus leaving the person or company concerned exposed for the balance.

7.51 It follows that it is possible that there may be anomalies whatever the result of this case. There can be little doubt but that those anomalies could be cleared up either by amendments to the MIBI agreements or to changes in the relevant legislation or, indeed, both of those measures. However, a court is confined to dealing with the legal measures in place at any relevant time. If, on a proper construction of the relevant legal materials, anomalies arise then there is little that a court can do about it. The extent, if any, to which this Court should, in this case, have regard to the potential anomalous consequences of one interpretation or another is a question to which it will be necessary to turn in due course.

(xi) The Insurer Concerned

7.52 It is also necessary to mention the practical way in which the MIBI organises its internal business for, again on one view, it may be that this has some relevance to the proper construction of the agreements. It is unnecessary to go into any great detail relating to the concept of “insurer concerned”. Suffice it to say that there are internal mechanisms applied within the MIBI for identifying, in appropriate cases, the insurance company which is to deal with particular claims both administratively and financially. On the one hand it might be said that those practical measures for the implementation of the obligations of the relevant insurers form part of the factual matrix or context against which the agreements, and in particular those agreements subsequent to the original, which would have been negotiated against the backdrop of that mechanism being in place, should be construed. On the other hand it might be argued that whatever mechanism the insurers who are members of the MIBI might decide as and between themselves for distributing the burden of meeting claims covered by the Agreement (both as to the administrative burden of defending claims and the financial burden of making payments) is purely internal to the MIBI and cannot be said to play any legitimate role in the interpretation in the MIBI’s external obligations to compensate injured parties.

7.53 Having addressed the principal aspects of the documentation, the legislation and the facts which are called in aid by both sides it is necessary briefly to identify the reasons why the High Court and, in particular, the Court of Appeal found in favour of the construction urged by the Law Society.

8. The High Court Judgment
8.1 In his judgment Hedigan J. set out much of the facts and arguments which are already addressed in this judgment. He noted that the key phrases which are found in clause 4 of the Agreement are repeated from the original agreement and in particular clause 2 thereof. Hedigan J. suggested that the background to the MIBI Agreements generally was an intention to protect the innocent victims of uninsured drivers. In broad terms Hedigan J. came to the view that clause 4.1.1 (and its antecedents) covers liability in the case of an insolvent insurer. He went on to analyse the various arguments put forward on behalf of MIBI for suggesting that the narrower meaning of the scope of the Agreement should, nonetheless, be adopted. However, at para. 9(12), he concluded as follows:-

“The background against which this agreement was made, including the conduct of the parties thereto together with their conduct post 2009, does not provide any basis for changing the meaning of what the Agreement states. In my view the liability of the MIBI in this regard has been apparent and accepted since at the very least 1964, if not indeed 1955.”

8.2 On the business efficacy argument the trial judge noted that it might well be that developments in the insurance market on a European level had altered the parameters of risk contemplated by the MIBI Agreements. However, he expressed the view that that could not affect the meaning of those agreements which had, in his view, been understood to cover cases of insurer insolvency until quite recently.

8.3 On that basis Hedigan J. came to the view that the interpretation advanced by the Law Society was correct and so held.

9. The Court of Appeal Judgment
9.1 Each of the judges of the Court of Appeal delivered judgments. Ryan P. concluded first, not without some reservations on his part, that it was appropriate to treat the Agreement as purely commercial albeit with what he described as very special, almost unique, features. Ryan P. suggested that clause 4.1.1 clearly covered the case of insurer insolvency but identified what he considered to be a more difficult question being whether that interpretation could be said to have been negatived by other aspects of the Agreement. While accepting that some of the other features (in particular clause 3(11)) might tend to negative the broad interpretation of clause 4, Ryan P. was of the view that the very breadth of the terminology found in clause 4 was sufficient to rebut any ambiguities arising from other clauses.

9.2 Ryan P. went on to suggest that the historical context of the collapse of Equitable and the enactment of the 1964 Act provided further support for the conclusion that insurer insolvency was covered by clause 4.1.1 and indicated his view that such a construction would not be at odds with commercial sense or general business efficacy.

9.3 Finlay Geoghegan J. took a similar view in placing significant reliance on what she saw to be the clear wording of clause 4.1.1. Finlay Geoghegan J. also noted the issue, touched on earlier in this judgment, as to whether an insured who became liable to the MIBI as a result of a claim against him by an injured party being assigned to the MIBI would be entitle to recover out of the Fund at least to the limits which the legislation provides.

9.4 Hogan J. also placed significant reliance on what he found to be the clear wording of clause 4.1.1 and found the arguments put forward on behalf of the MIBI for suggesting that the clause in question did not clearly cover insolvent insurers’ cases to be “ultimately unconvincing”. Hogan J. also came to a similar view to that of Ryan P. in regarding the all embracing nature of the wording of clause 4.1.1 as being sufficient to rebut any arguments deriving from other clauses in the Agreement. Hogan J. did not consider the commercial reality argument as being persuasive not least because of the statutory obligation imposed on insurance companies to fund payments required to be made out of the Fund. In that regard Hogan J. also placed reliance on the policy argument to the effect that the purpose of the Agreement was to ensure that persons injured by the negligence of others would receive full compensation.

9.5 While each of the three judgments of the Court of Appeal addressed certain additional issues it seems clear that the overall rationale of that court was that the wording of clause 4.1.1 was clear and strong in its terms such that it was sufficient to overbear any of the additional arguments put forward on behalf of the MIBI in favour of its alternative construction.

10. The Law
10.1 As noted earlier there was little disagreement between the parties as to the appropriate principles to be applied in construing the Agreement. The one possible exception was the suggestion put forward on behalf of the Law Society to the effect that the fact that the Agreement has, on their case, a public law element may have some implications for its proper interpretation.

10.2 This Court has, in Analog Devices BV v. Zurich Insurance Company [2005] 1 IR 274, confirmed that the modern approach to the construction of contracts in this jurisdiction is similar to that applied by the courts of the United Kingdom as developed in cases such as Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896.

10.3 However, in the light of the issue raised concerning the possibility that the Agreement might be said to have a public law element which might influence its proper interpretation, it may be appropriate to attempt to identify the underlying principle behind the proper approach to the interpretation of documents which are designed to affect legal rights and obligations.

10.4 The modern approach has sometimes been described as the “text in context” method of interpretation. It might be said that the older approach in the common law world placed a very high emphasis indeed on textual analysis without sometimes paying sufficient regard to the context or circumstances in which the document in question came into existence. On the other hand it is important not to lose sight of the fact that the document whose interpretation is at issue forms the basis on which legal rights and obligations have been established. That is so whether the document in question is a statute, a contract, the rules of an organisation, a patent or, indeed, any other form of document which is designed, whether by agreement or unilaterally, to impose legal rights and obligations on either specific parties or more generally. To fail to have sufficient regard to the text of such a document is to give insufficient weight to the fact that it is in the form of the document in question that legal rights and obligations have been determined. However, an over dependence on purely textual analysis runs the risk of ignoring the fact that almost all text requires some degree of context for its proper interpretation. Phrases or terminology rarely exist in the abstract. Rather the understanding which reasonable and informed persons would give to any text will be informed by the context in which the document concerned has come into existence.

10.5 Perhaps it is fair to say that the main underlying principle is that a document governing legal rights and obligations should be interpreted by the courts in the same way that it would be interpreted by a reasonable and informed member of the public who understands the context of the document in question. Such a person would, necessarily, pay a lot of attention to the text but would also interpret that text in its proper context.

10.6 With one exception it seems to me that the detailed rules specified in Investors Compensation Scheme can be seen as being derivative from that general “text in context” approach. The exception is the fact that prior negotiations or drafts are not regarded as forming an appropriate part of the context by reference to which the text is to be interpreted. As pointed out in many of the authorities, to take that approach is to deviate from the approach which a reasonable and informed member of the public might take. However, there are sound reasons of policy, which it is unnecessary to repeat here, for adopting that approach. Indeed even the contra proferentem rule, as discussed in the context of Investors Compensation Scheme by O’Donnell J. in ICDL GCC Foundation FZ-LLC & Another v. European Computer Driving Licence Foundation Limited [2012] IESC 55, can be seen as an application of the underlying principle. The reasonable and informed person would be likely to assume that an individual who wished to insert a clause into a contract specifically for their own protection or benefit would ensure that the clause was expressed in clear terms. It would follow that, provided that the terms were clear and that there was no ambiguity, the clause should stand and provide whatever protection its terms permitted. However, if the clause were unclear and an ambiguity existed, then the clause should be construed against the profferer for the reasonable and informed observer would be likely to take the view that, if greater protection or benefit had truly been agreed, the profferer would have ensured that it was clearly specified.

10.7 It is also appropriate to take into account the fact that part of the overall context requires a consideration of the nature of the type of document which requires to be interpreted. It has again often been said that part of the reason for conferring a significant weight to the text actually used is that we do not expect persons to make mistakes or use loose language in important documents. Similar considerations would apply with the same, or perhaps even greater, force in the case of legislation or the like. On the other hand documents such as planning permissions have been held to be properly interpreted by reference to the way in which they might be interpreted by an ordinary person concerned with either proposing or opposing a development. As per the judgment of McCarthy J. in In Re XJS Investments [1986] I.R. 750, such documents are not to be construed in the same was as, for example, documents of title. Furthermore, many types of formal legal documents are written in a traditional language typically used for documents of the type in question and this itself forms part of the context.

10.8 I would emphasise, however, that, in my view, it is possible, particularly in the case of formal agreements negotiated carefully by experienced players often with significant legal and other advice, to overdo context. I fully agree with the insight of Lord Hoffman, as noted by O’Donnell J. in his judgment in this case, that, in a family context, words may often have a clear meaning which would be understood by all within the family but where that meaning differs radically from the meaning which any external party might place on them. An umbrella is an umbrella and an apron is an apron but it may be that, in the context of certain families one may mean the other. I must confess to a standing joke in my own family which requires persons to be asked to post a letter in a phone box.

10.9 But as already noted a most important part of context is the nature of the document concerned. In Investors Corporation itself the point is made that we do not readily accept that people make mistakes in carefully drafted and important documents. If the failing which the modern jurisprudence sought to address was over-reliance on textual analysis then there is a danger, at the other extreme, in an over-reliance on context or subordinate parts of agreements. Important legal documents are drafted in particular ways. They have clauses which specify the primary liabilities and obligations of the parties. While one should always look at the agreement as a whole and should always look at the context in which the agreement is reached one should not unduly downplay the importance of the words in which the primary rights and obligations of the parties have been defined. To do so would be to elevate context and subordinate clauses above primary text which would, in my view, be just as great a mistake as the previous practice of elevating text above context. Lord Hoffman’s observations might make perfect sense in a family setting but it would require very special circumstances to interpret the word “umbrella” as meaning “apron” in a carefully drafted legal contract.

10.10 It is on that basis appropriate to at least have some regard to the nature of the Agreement. While it is, in substance, an agreement between the Minister and the MIBI it is, of course, designed not to benefit the Minister directly but rather to give effect to the Minister’s policy desire to ensure that there should be appropriate compensation for those who can establish that they were injured in motor accidents as a result of the negligence of others.

10.11 It follows that the appropriate approach to be adopted in construing the Agreement is to consider the text but in its context giving appropriate weight to both. Part of that context is the nature of the document whose construction is at issue. In the circumstances of this case the relevant context is that it is a long term agreement between the Minister and the MIBI which is designed to provide benefits for third parties being those who are injured in cases covered by the Agreement.

10.12 Before going on to apply that general approach to the issue of construction which arises in this case it is, perhaps, worth making one additional point by way of background to the task with which the Court is faced in a case such as this where what is in dispute is the construction of a long term agreement.

10.13 It might well be said that agreements which are designed to last over a long period of time can often give rise to greater questions of construction or difficulty than one-off contracts. The reason for this is that courts are often called on to apply such contracts to developing situations which may not have been contemplated, or at least not contemplated in the same way, at the time when the contract was originally entered into. However, it is an occupational hazard of long term agreements that they may have unintended consequences when the circumstances to which the contract applies change over time.

10.14 A simply example might be to touch on long term commercial leases. Those who remember the situation which emerged in the late 1960s and 1970s will be aware that significant litigation occurred at that time which stemmed from the fact that the standard form of commercial lease then used was typically for a term of 21 years without rent review. In times when inflation reached a level which had not previously been anticipated, landlords were faced with a situation where the rent which they were receiving in real terms fell considerably while tenants had the benefit of what might have been felt to have been a windfall gain.

10.15 On the other hand, in the immediate aftermath of the onset of the great recession, the boot was on the other foot. By that time rent review clauses had become the norm and it was almost always the case that such rent reviews were on a so-called “upward only” basis. It followed that, with a very significant collapse in the going rate for rents, tenants found themselves paying a lot more than the market would have suggested and landlords had the benefit of what many might have regarded as windfall gain.

10.16 This demonstrates that long term contracts, which might have appeared to have been relatively evenly balanced between the benefits and obligations of both sides at the time when they were entered into, can turn out to favour or disadvantage one side or the other because of a change in circumstances. It is all the more important, therefore, that care be exercised by all parties entering into long term arrangements to ensure that they include means of amendment or, indeed, the potential to escape from the arrangements, so as to cover unexpected eventualities. Those who enter into long term arrangements without such provision inevitably must be taken to have accepted a risk. Those who, as the parties to the various MIBI agreements did, revise their contractual arrangements from time to time also need to have regard to any change in circumstances then present or anticipated and to make sure that the text of any amended agreement entered into covers such situations.

10.17 Any failure so to do runs the risk of the sort of unintended consequences which I have sought to identify. Against that backdrop I now turn to a discussion of the core issue of construction which arises in this case.

11. Analysis
11.1 It seems to me that, in the circumstances of this case, it is appropriate to start with the text of the Agreement while of course keeping in mind that context needs to be considered in construing that text. In my view the Law Society was correct to argue that clause 4.1.1 of the Agreement can properly be described as the central provision governing the liability of MIBI. It is in that form that the primary obligation of the MIBI has been defined. It is important to acknowledge that the terms of clause 4.1.1 are conditional for there is a reference to the clause applying “subject to the provisions of this Agreement”. However, and subject to that important caveat, the primary obligation of the MIBI under the Agreement as a whole, which is to be found in that clause, is to “pay … to the person … in whose favour such judgment was given any sum payable … in respect of the aforesaid liability …” The reference to “such judgment” is a reference to an unsatisfied judgment in a case covered by compulsory insurance. Thus the structure of the Agreement is that it relates to unsatisfied judgments (or, in more recent versions, Injuries Board orders). It is in that form that the parties have chosen to define the legal obligations arising under the Agreement. In its terms that clause does not specifically relate to uninsured drivers as such but rather relates to cases covered by compulsory insurance where there is a judgment or Injuries Board order which has not been satisfied.

11.2 It is also of some importance to note that the clause is said to be applicable “whether or not such person or persons be in fact covered by an approved policy of insurance”. Taken at face value the text of clause 4.1.1 would seem to apply even to a case where the defendant against whom an order had been made was insured by a solvent insurance company but, for whatever reason, that insurance company had not discharged the judgment in question within 28 days from the time when the judgment became effective.

11.3 It is, of course, necessary to point out that such a narrow textual analysis is not necessarily decisive. Even if the clause itself was not qualified by the express provision that it is subject to the other terms of the Agreement, a pure reliance on textual analysis would not accord with the modern approach to interpretation of legally binding documents. However, it remains the case that clause 4.1.1 is an important starting point. The parties could have chosen, if they wished, to define the obligation of MIBI in express terms by reference to uninsured drivers. There are, indeed, references to uninsured drivers to be found elsewhere in the Agreement. However, the parties chose, from the very beginning, to define the obligation of the MIBI by reference to unsatisfied judgments in cases covered by compulsory insurance rather than by reference to the relevant defendant being uninsured and, indeed, arguably did so in a manner which expressly suggests that the obligation arises whether or not the relevant defendant was insured.

11.4 On that basis I am satisfied that the Law Society were correct to argue that clause 4.1.1 potentially covers a situation such as that which lies at the heart of these proceedings being a case where a relevant defendant was insured by an insurer who has become insolvent. Given that that clause represents the primary definition adopted by the parties to specify the circumstances in which the MIBI is to be liable, it seems to me to follow that the real question is as to whether there is anything to be found either elsewhere in the Agreement or in the general context surrounding the Agreement and its predecessors which might lead to a different interpretation being placed on clause 4.1.1 other than that which might derive from a purely textual analysis of that clause. It is in that context that it is necessary to turn to the various arguments put forward by the parties both in favour and against the proposition that the Agreement as a whole needs to be construed in a way different from that which a textual analysis of clause 4.1.1 might suggest.

11.5 The first such point that needs consideration is the argument put forward on behalf of MIBI which suggests that the phrase providing for liability on the part of MIBI, in clause 4.1.1, which refers to that liability arising whether or not the relevant person was actually insured, was intended to cover the case of an insured who held a policy of insurance at the time when the relevant accident occurred but where the insurer in question validly repudiated the policy of insurance thereafter. It is certainly the case that the phrase in question makes clear that that the MIBI would have to cover a person who had a potentially valid policy of insurance at the time of an accident but where the relevant insurer became legally entitled to repudiate. Such a situation could, of course, apply either in circumstances where events predating the accident, such as the proposal for insurance and the information supplied with it, were deficient in a manner which would entitle the insurer to repudiate or where the insured, post accident, committed a breach, such as failure to cooperate with the insurer in an appropriate way, which would also justify repudiation.

11.6 I would attach some weight to that argument for it does provide a possible explanation for the inclusion of the phrase in question which is not inconsistent with the MIBI’s case. On the other hand it does have to be said that there is nothing in the text of clause 4.1.1, or indeed any surrounding documentation or materials, which suggests that the proviso contained in that phrase is confined to cases where there was a policy of insurance which is validly repudiated. On the contrary, read in its natural way, the clause seems to cover any failure to discharge a judgment whether or not there is a policy of insurance in place. In those circumstances the weight to be attached to the MIBI’s argument on this point seems to me to be quite limited.

11.7 Before leaving this aspect of the debate it is also important to recall, as the Law Society argued, that both the Agreement and the original agreement specified that the relevant liability is to arise “whatever may be the cause of the failure of the judgment debtor to satisfy same”. Here again MIBI argue that that phrase was not intended to expand the obligations arising under the Agreement to all cases where there was a failure to pay but rather was intended only to deal with all cases which come within the ambit of the Agreement. Again I think it is fair to say that the phrase in question lends weight to the Law Society’s argument for it is, in its terms, unqualified and does not appear to confine itself in any particular way.

11.8 Next it is necessary to turn to the various conditions precedent set out in the Agreement which the MIBI argues are strongly suggestive that the Agreement as a whole should properly be construed as only applying to uninsured drivers. The relevant conditions have already been cited and relate to matters such as cooperation with An Garda Síochána in investigations, reports to the Garda and attempts to establish the existence of a policy of insurance.

11.9 It is clear, from the case law already cited, that compliance with those conditions precedent is, as a matter of law, a mandatory requirement for liability to be imposed on MIBI. It also seems that compliance with at least some of those clauses would be of little relevance in the case of a claim against an insured whose insurer had become insolvent. In such a case there would undoubtedly have been an apparently valid policy of insurance in place and thus Garda investigations and the like into the insurance status of the defendant would not be very relevant.

11.10 However, it seems to me that the point made by the Law Society in response to that argument is of considerable significance. It will be recalled that the explanation given by MIBI for the inclusion of the phrase concerning whether or not there was an insurance policy in place was that that phrase was intended to cover cases where the insurance policy in question was validly repudiated. Indeed, it seems to me that the MIBI would have been in some very considerable difficulty in having any cogent answer to the Law Society’s interpretation of clause 4.1.1 without that argument. But the conditions precedent on which reliance is placed under this heading would equally be of little practical application in the case of a repudiated policy. The insured would have had a policy of insurance, apparently valid, at the time of the accident. There would, for example, be no requirement to investigate the existence of the policy for it would be clear that it did exist with the only issue being whether it had subsequently been validly repudiated.

11.11 Given that it is accepted, as it would have to have been, that the MIBI agreement undoubtedly covers repudiated policies of insurance then it is hard to see how any great weight can be attached to the argument based on those condition precedents. Some of the conditions precedent may have limited, or indeed no, application in particular circumstances. While compliance is mandatory, compliance can only be required where the issue sought to be covered by the condition precedent is of some arguable relevance. It does not seem to me that compliance with those conditions precedent concerning matters such as investigation of insurance policies will, ordinarily, have any relevance in the case of at least some repudiated policies. It follows that there are at least some cases where compliance with the conditions precedent will not, in practise, arise. It follows in turn that the fact that the same or similar conditions precedent may be of limited or no relevance in the case of an insolvent insurer is of relatively little weight in construing the Agreement as a whole.

11.12 Before leaving the issue of the conditions precedent it is important to comment on the argument between the parties as to the extent to which it might be said that article 3, concerning conditions precedent, or indeed any other articles, could override what is said to be the clear wording of clause 4.1.1. I do not doubt that there can be circumstances where, notwithstanding the clear wording of what might be said to be the principal operative clause in an agreement, a proper construction of the agreement as a whole and in its context might nonetheless lead to a conclusion which differed somewhat from that which might be reached by simply considering the text of that principal clause. However, in relation to such an argument I think it is important to emphasise that particular weight should be given to the structure of any agreement and in particular the principal way in which the parties have sought to set out their main obligations and entitlements. It would, in my view, require something quite significant in terms of other provisions in the Agreement or of the general context, to displace what might otherwise be taken to be the natural meaning of clause 4.1.1. To take any other view would be to significantly undervalue the text of a central clause of a carefully drafted and important agreement. It would be to overvalue context and subordinate clauses.

11.13 I am not satisfied that there is anything in clause 3, or indeed in any of the other clauses of the Agreement, which so clearly points in the opposite direction so as to displace the basic structure of what was agreed not only in the Agreement but in all its predecessors. In each of those agreements the insurers and the Minister defined the primary terms of the MIBI’s liability by principal reference to unsatisfied judgments rather than specifically by reference to the uninsured status of the defendant in question.

11.14 Finally, in the context of the terms of the Agreement, it is of importance to address the argument put forward on behalf of the MIBI which places reliance on the terms of the preamble which suggest that the purpose of the Agreement is to provide for compensation for victims of road accidents “involving uninsured or stolen vehicles and unidentified or untraced drivers”. The MIBI argues that this provision of the preamble makes clear that the overall intent of the Agreement was that it was to be confined to providing for compensation to a limited class being those injured by the negligence of the various categories of drivers specified. I think it has to be said that, at a minimum, a tension exists between the text of the preamble and the provisions of Clause 4.1.1. As noted earlier, Clause 4.1.1 does not, certainly in express terms, contain any restriction which confines liability to a limited class of the type specified in the preamble. That tension is a matter to which it will be necessary to return.

11.15 In the light of that analysis of the Agreement it is next necessary to consider the various other documents, materials or external circumstances which were urged by the parties as having some relevance to the proper construction of the Agreement.

11.16 I should first turn to the arguments put forward by both sides which suggest that the interpretation proffered by their opponent would lead to anomalies. For the reasons identified earlier in this judgment, it seems to me that there may be some merit in what both sides say in this regard. The concern expressed by the MIBI related to the position of a person who held a policy of insurance with Setanta and who was the subject of a successful claim. As already noted, it is part of the MIBI scheme that the MIBI becomes entitled to enforce any judgment obtained by a relevant plaintiff in the event that the MIBI discharges the liability under the judgment concerned. Prima facie there would, indeed, appear to be what might be described as at least a material risk that the burden of discharging the judgment in favour of the injured party might ultimately fall, to the extent that it might be enforceable in practice, on the driver whose negligence caused the accident in question. Certainly the ordinary operation of the MIBI Agreement would lead to the MIBI obtaining the benefit of any judgment against that driver. Precisely what the position of that driver might be thereafter was the subject of some debate but it is not, in my view, possible to resolve such questions in this case.

11.17 For the reasons noted earlier it is at least arguable that a driver in such a situation might be in a position to obtain from the Fund at least some of the monies which were owed to the MIBI (subject to a cap and a limitation of 65%). If that turns out to be the case then such a driver would only be exposed to the extent of either 35% or the balance over the cap. But, on the basis of the MIBI construction of the Agreement being correct, the same driver would be exposed in exactly the same way in any event. This is so because the Fund would only cover the injured party’s claim to the same extent and the injured party would be entitled to seek the balance directly from the driver. On that view there may, in fact, be no anomaly for the driver would have the same exposure in either event.

11.18 Suffice it to say that such a driver would be exposed to some extent should they prove to be a mark. Given that the driver concerned would not be at fault, for they would have held a valid policy of insurance at the time of the relevant accident, this might be seen as anomalous although, of course, the driver would have to have been negligent for any liability to arise in the first place. On the other hand any non-motor insured, who happens to have a liability to a third party but whose insurer becomes insolvent, will also be exposed to meeting at least part of the claim. While there are undoubtedly policy considerations which suggest that innocent injured parties should be fully compensated, it would appear to be the policy of the Fund legislation that relatively innocent insured may nonetheless have to meet part of a relevant claim, perhaps to discourage a race to the bottom in the insurance business.

11.19 The point made on behalf of the Law Society on anomalies is, however, undoubtedly valid and arguably much clearer. If persons injured due to the negligence of drivers insured by Setanta must look to the Fund for compensation then there is no doubt that there will be limitations on the amount of damages which they can recover in practice. It would again seem highly anomalous that, having put in place extremely detailed provisions to ensure that persons injured in road traffic accidents through the fault of others should actually be able to recover full compensation, it would transpire that those unlucky enough to be injured by the negligence of a driver, who had a policy of insurance but where the insurance company concerned proved to be insolvent and the driver not a mark, would be placed at a significant disadvantage over another injured party who happened to be injured due to the negligence of a completely uninsured driver.

11.20 Given the clear underlying policy behind the MIBI Agreements from the beginning and, indeed, the European law obligations of the Minister to ensure compensation in appropriate cases, such a consequence would undoubtedly be anomalous.

11.21 However, there may be anomalies either way. Why is this so? It can only be because, prior to the collapse of Setanta, none of the relevant parties really sat down and thought through how things were to work in the case of a significant insolvency of a motor insurer. If they had then surely the range of anomalies which were canvassed in argument before this Court would have been considered and express measures, whether statutory or in the context of amendments to the MIBI Agreements, would have been put in place to deal with those anomalies. The fact that this did not happen means that there may be anomalies whatever the decision of this Court. But this Court cannot rewrite either the law or the MIBI Agreements. Whichever way this Court decides this appeal there may be anomalies and persons will have to bear the burden of that situation. But it is not within this Court’s power to prevent that situation. Those who could have prevented it did not address the situation prior to the insolvency of Setanta and the Court is left with no choice but to take the situation as it stands with whatever consequences follow. It is, of course, the case that part of the context which can properly be taken into account in the construction of a legally binding document may be potential anomalies which would arise from its construction in any particular way. The notional reasonable and informed person would undoubtedly lean against interpreting the intention of the parties as creating significant anomalies at least if there was an alternative construction available which would prevent any such anomaly arising. However, I am not sure, given that there may be anomalies either way, that the fact of those anomalies can be taken to influence to any material extent the proper construction of the Agreement in this case.

11.22 I propose next to take a number of further questions together. The first is the argument on business efficacy relied on by MIBI. The second concerns the implications, if any, from the actions taken after the Equitable collapse. A third stems from the fact that no amendments were introduced into the MIBI agreement at the time when the Fund came into existence.

11.23 The business sense argument is relatively straightforward. It is argued on behalf of the MIBI that the effect on competitors of a requirement in substance to underwrite the liabilities of an insolvent motor insurer (which would result from the Court adopting the interpretation on the Agreement argued by the Law Society) would not make business sense. It was accepted, of course, that a business sense argument cannot override the clear wording of a contract. However, it was said that the Agreement is sufficiently unclear and imprecise to make it appropriate for the Court to have significant regard to the business sense argument.

11.24 There were, perhaps, two legs to the argument that it would not make business sense to underwrite the liabilities of an insolvent competitor. First it was said that the potential or contingent liabilities which might thereby arise were potentially very substantial indeed and that, being insurers, each motor insurer who is party to the MIBI arrangements would have to consider how properly to make provision against such a possible liability. It is, of course, the case that all insurance is about risk. Insurers seek to assess the risk involved in offering any particular type of insurance and attempt to fix the premium accordingly. There can be little doubt but that the clear obligation of motor insurers in Ireland to contribute to the MIBI must properly be taken into account by each insurer in their overall assessment of potential liabilities. Outside the ambit of the MIBI, insurers in the non-motor aspect of the market must assess the liabilities which may arise on their own policies. That may or may not prove to be a difficult task. Some types of eventualities can, doubtless, be predicted with reasonable accuracy. Others may be more sporadic such as the substantial liabilities which may arise for those offering household insurance policies in the event of extreme weather conditions affecting many policy holders.

11.25 While acknowledging that having to provide funding to compensate those injured by the negligence of uninsured drivers provides an added level of difficulty for those involved in the motor insurance business, it is argued that it is at least possible to make some reasonable estimation as to the likely burden arising from the commitments which motor insurers make to the MIBI. In substance the MIBI can, perhaps, suggest that, while it may not be possible to estimate the precise amount of money which insurers will have to contribute to the MIBI in each year, the overall exposure is no more likely to fluctuate wildly from year to year than the exposure which will arise under each insurers own policies. It is said, however, that taking on the burden of potentially having to meet the liabilities of a, possibly very substantial, insurer who becomes insolvent would give rise to a level of potential liability which would be both very difficult to assess or to make provision for. On that basis it is argued that a court should lean against an interpretation which places such a burden on the relevant insurers unless the terms of the agreement imposing that liability are clear.

11.26 In the same context some reliance is placed on the regulatory obligations of insurers concerning adequate provision. In addition it is said that an obligation to cover the liabilities of an insolvent insurer would give rise to significant market difficulties. On that argument it is suggested that it is more likely that an insurer will become insolvent if it adopts imprudent policy writing or premium fixing practices. Such practices may, at least in the short-term, secure additional business which may, at least in part, be at the expense of the very competitors who may have to cover the liabilities of the imprudent insurer should it become insolvent. It is said that this again is the type of consequence which the Court should lean against unless the relevant contractual arrangements clearly imposed it.

11.27 There is certainly some merit in those arguments. Accepting an obligation to meet the liabilities of competitors who become insolvent has potential significant adverse consequences for those in the motor insurance business along the lines identified. Those consequences are certainly a factor which the Court should take into account as a result of which the Court should scrutinise the relevant contractual arrangements to ensure, if it be the case, that they truly do impose an obligation of the type concerned. This is a matter to which I will return at the end of this analysis.

11.28 However, in the same context the Law Society raises the question of what actually occurred after the Equitable collapse. As noted earlier there is clear evidence that the MIBI actually discharged the liabilities of Equitable when it became insolvent. As the events are quite some time ago there is, understandably, something of a lack of very clear evidence about the legal basis on which MIBI discharged those liabilities. It is suggested, although the evidence is extremely limited in this regard, that the payments might have been made on an ex gratia basis. On the other hand the Law Society draws attention to the fact that the insurers at the relevant time were asked, but declined, to extend MIBI cover to other cases thus, by inference, being prepared to rest on their legal obligations.

11.29 That leads to perhaps a further important point which was the subject of some debate in the argument before this Court. Obviously at the time when the original MIBI Agreement was put in place and at the time of the Equitable collapse, the Fund did not exist. While there have been some changes in the text of the MIBI agreements over time, I think it is fair to say that the core provision which lies at the heart of the dispute in this case has not significantly altered at least insofar as it relates to the issues which this Court has to decide. In particular there was no alteration brought about as a result of the creation of the Fund. In the light of the fact that MIBI had, in fact, compensated those injured by the negligence of drivers covered by Equitable, and in the light of the fact that, thereafter, the Fund came into existence, it might have been thought that the relevant agreement would be amended to make clear, if it was indeed the case that such was what the parties wished, that the Fund was now to be the resort of those injured by the negligence of drivers who held policies with an insolvent insurer. No such amendment in fact occurred. It seems to me that, while there is undoubtedly some weight to be attached to the business sense argument put forward on behalf of MIBI, the absence of any amendment at the time when the Fund came into existence must also be taken into account in any overall assessment.

11.30 Before leaving the business efficacy argument it is also appropriate, in my view, to touch on the question of the notes to the financial statements of the MIBI to which reference has already been made. I will deal with the specific arguments raised under that heading later in this judgment. However, it seems to me that those notes are of particular relevance in the context of the business efficacy argument. It is true, of course, that the unilateral view of one party is not relevant to the construction of an agreement. Agreements are to be construed objectively. However, it seems to me that the established view of a party can be of some relevance in considering the weight, if any, to be attached to a business efficacy argument. The whole point of such an argument is that it is said that a particular construction should not be favoured because it should be assumed that a reasonable business person would not have entered into an agreement which was contrary to business sense. Such an argument is normally made by a party who asserts that, from its perspective, an agreement construed in a particular way would not have made sense and that it should be implied that the party would not have entered into such an agreement unless the text is clearly to the contrary. But if the very party whom it might be said would not have entered into an agreement of a particular type can be shown to have believed that it had entered into an agreement of that very type, then such an argument is, in my view, significantly undermined. I say that notwithstanding the fact that events occurring after a contract has been concluded cannot ordinarily be used to construe the meaning of the contract at the time it was entered into for that exercise again has to be conducted on an objective basis and in the light of the circumstances prevailing at the time in question. However, if it truly is to be said that it would not have made business sense for the MIBI (and the insurers who are members of it) to have agreed to cover the liabilities of an insolvent insurer then it is surely highly surprising that they appear to have believed, for a significant number of years leading up to the Setanta collapse, that they had done just that. If it would have been so contrary to business sense to have entered into such an agreement then it is surprising in the extreme that the MIBI actually thought that it had done so.

11.31 It is next necessary to turn to the arguments put forward by both sides which derive from the statutory provisions concerning the fund. The Law Society places reliance on the terms of s.3(7) of the 1964 Act which provides that payment should not be made out of the Fund where a payment has been made by the MIBI. It is suggested that this implies that the MIBI is to be the primary source of compensation in cases of insolvency in the motor insurers’ industry. However, the MIBI argue, correctly in my view, that s.3(7) could not impose a liability on the MIBI where one did not exist in the first place under the Agreement.

11.32 There was some debate concerning the legislative history of the relevant provisions of the 1964 Act as amended from time to time which arose in the context of the argument put forward by MIBI that the only purpose of s.3(7) was to prevent a double payment. In that context the Law Society drew attention to the fact that s.4 of the 1964 Act permitted the Minister to make payments to the liquidator of Equitable. That provision might, it was accepted, provide an initial explanation consistent with the predecessor of s.3(7) being intended to prevent double compensation. However, the Law Society went on to note that s.3(7) is, in its current form, a re-enactment of s.3(4) of the original legislation. That re-enactment occurred in 2011 and, it is said, clearly correctly so far as it goes, could not have in any way been related to the Equitable collapse over half a century earlier. In that context the MIBI suggested that there could be, admittedly rare, circumstances where there might be a risk of a double payment where there was a change in circumstances after a payment out by the MIBI which might, theoretically, lead to a potential claim on the Fund were it not for s.3(7).

11.33 While there was much interesting debate concerning the provisions of the 1964 Act, in its various forms, which concerned the Fund, I have come to the view that the legislation cannot have any proper bearing on the proper interpretation of the Agreement. I could well see that if the Agreement had been specifically amended in the context of the introduction of the Fund, the new legislative backdrop which would have arisen at that time would undoubtedly have formed part of the context by reference to which the text of the relevant agreement as amended would need to be interpreted. The legislative context in which any agreement is entered into can clearly form a part, and frequently an important part, of the context which must be taken into account in analysing the text. This will be particularly so where the agreement is entered into with the State.

11.34 However, I am not convinced that legislative provisions or changes can play quite such an important role in the proper interpretation of a pre-existing contract unless the terms of the contract itself are such that their proper interpretation is necessarily altered by legislative change. In that latter context it is easy to envisage a case where, for example, a contract stipulates that a service provider is to comply with all relevant regulatory requirements in providing the service in question. Clearly a change in the regulatory regime would affect such a contract without any amendment being required. There might, in such a context, be difficult questions of construction where the new regulatory regimes seemed to be in conflict with, or to create difficulties of interpretation in relation to, other provisions contained in the same contract. Doubtless other examples could easily be given. I would wish to emphasise, therefore, that I do not consider that an agreement cannot be held to change its proper meaning by reason of the knock-on effect of legislative change. However, the fact that there is no amendment as a result of legislation may be part of the factual matrix which provides context for the construction of the Agreement. For present purposes I would confine myself to holding that the legislative history of the Fund for the purposes of this case could not have any proper bearing on the true construction of the Agreement.

11.35 I next propose to deal with two arguments put forward by MIBI which, in reality, concern documentation internal to that company and the motor insurers who are members of it. It is argued that certain aspects of the Memorandum and Articles of Association of the MIBI and the internal arrangements entered into between the MIBI and the individual insurance companies for distributing the burden of the liabilities of the MIBI (including the so-called “insurer concerned” provisions) are consistent with MIBI’s interpretation of the Agreement. I am not convinced that any significant weight can be attached to these arguments. They may, or may not, reflect a certain view by the MIBI and its motor insurer members as to the proper interpretation of the Agreement. Clearly the internal constitutional documents of the MIBI are a matter for it and the arrangements which the various insurers enter into between themselves for distributing the burden of complying with the MIBI’s obligations are again a matter for those insurers. Doubtless, in formulating those measures, each had regard to its own understanding of the scope of the obligations which the MIBI might have to undertake. But as such they could do no more than establish the subjective view of one party as to what the Agreement means. While various relevant Ministers, or officials in the relevant departments, may or may not have been aware of some or all of the detail of those internal MIBI measures at various points in time, it does not seem to me that there is any legitimate basis for suggesting that any of those measures could properly form part of the context which might legitimately affect the proper interpretation of the Agreement.

11.36 For like reasons I am not convinced that the contents of various notes contained in MIBI accounts, which seem to imply a belief on the part of the MIBI at certain stages that it did have a liability in the case of an insolvent insurer, carry any significant weight in themselves. These again reflect the subjective view of one party to a contract. I have already dealt with the impact of those notes on the business efficacy argument.

11.37 Indeed, even insofar as any weight might be attached to the various internal documents of the MIBI referred to, same cut both ways for the MIBI is able to point to aspects of its Article and Memorandum of Association and the internal agreement between the insurers which might be said to support its construction while the Law Society can point to the notes to which I have just referred to the opposite effect.

11.38 But more fundamentally it seems to me that one of the consequences of the underlying principle to be applied in the construction of legally binding documents, which I have already sought to identify, is that the test is an objective test and little will normally be gained by attempting to identify the subjective views of the parties as to what the contract means.

11.39 There may, of course, be cases where something in the nature of an estoppel might arise in circumstances where parties have acted in a way which demonstrates an acceptance on both their parts that an agreement should be given a particular construction. This will be particularly so in the context of long-term agreements. The fact that an objective interpretation of the contract might lead to a different result may be displaced by a party being estopped from relying on that objective construction if they have acted in a way which would reasonably lead the other party to believe that a particular interpretation was accepted all round. However, given that the internal documentation of the MIBI points in both directions and the rather unusual nature of this contract being one where the persons who may benefit are not actually parties to the contract at all, I am not persuaded that any question of estoppel could arise.

11.40 In similar vein it does not seem to me that the attempt by the MIBI to suggest that the Minister necessarily agreed with the MIBI’s construction of the Agreement is either properly made out or, in any event, of any particular relevance. If it could have been demonstrated that, prior to the collapse of Setanta, both the MIBI and the Minister had acted in a way which made clear that they both accepted that the Agreement did not extend to the case of an insolvent motor insurer, then things might be different but there was no evidence in that regard.

11.41 Therefore, I have come to the view that, as in the case of the possible effect of the 1964 Act on the proper construction of the Agreement, the various matters internal to the MIBI which I have sought to analyse do not provide any assistance either.

11.42 Finally, it is necessary to make some brief reference to the United Kingdom case law. I am not convinced that any very great assistance can really be obtained from the case law relied on. It is true that there are certain observations in the judgments already cited which seem to imply a view that the United Kingdom MIB Agreement may be taken to cover cases involving insolvent insurers. However, it does appear that the MIBI are correct to argue that the issue was not squarely before any of the courts on the relevant occasions. In addition it is clear, as the argument and analysis set out in this judgment hopefully demonstrates, that much of the debate in this case is dependent on the precise terms of the Agreement. Unless there were United Kingdom authorities which made clear that the court in question was addressing the precise issue of interpretation with which this Court is concerned and where the terms sought to be interpreted were the same as, or at least not materially different from, those in the Agreement, it is doubtful if any great weight could be placed on those United Kingdom authorities.

11.43 Having analysed the various arguments put forward it is necessary to summarise the conclusions on the individual elements of the argument for the purposes of determining an overall conclusion on the issue before the Court.

12. Discussion
12.1 The starting point has to be to note that there is at least some ambiguity to be found in the Agreement. For the reasons analysed earlier I am satisfied that Clause 4.1.1, taken by itself, is very clear in its terms and includes an obligation on the MIBI to provide compensation in the case of an insolvent insurer. I am not convinced that the argument based on conditions precedent really creates any ambiguity or provides any basis for an alternative construction to be placed on Clause 4.1.1. However, the stated purpose of the Agreement in the preamble seems to me to be potentially inconsistent with Clause 4.1.1 and it follows that there is, at least to that extent, an ambiguity.

12.2 While accepting that an interpretation which may give rise to an anomaly can be a factor, at least in some cases, to be taken into account in the proper construction of a legally binding document, I am not, for the reasons set out earlier, convinced that the anomalies pointed to in this case can affect the proper construction of the Agreement. The reason why anomalies may be relevant is that the hypothetical reasonable and informed person would lean against an anomalous interpretation unless the wording was clear such that no alternative meaning could be implied. However, here the anomalies may cut both ways and, in my view, the reasonable and informed person would be faced with the task of accepting that, whatever interpretation is to be placed on the Agreement, it is possible that anomalies will occur. On that basis I am not satisfied that the anomalies can have any significant material effect on the proper construction of the Agreement.

12.3 Also for the reasons already set out I am not satisfied that the 1964 Act and its various amendments can play any significant role in the proper interpretation of the Agreement not least because no amendment took place to the Agreement at the time when the Fund was first created.

12.4 I have concluded that there is some merit in the business sense argument put forward on behalf of MIBI but would question the weight to be attached to that argument not least because of the fact that it would have been easy for the parties, after the Fund had come into existence, to have amended the Agreement to make express provision which made absolutely clear, if that was truly the intention of the parties, that it was now to be the Fund which would cover compensation in cases of insolvent insurers. In addition, the fact that, in formal and published documents, being its financial statements for a number of years, the MIBI indicated that it considered that it did have a liability in the case of insolvent insurers greatly diminishes any weight which can be attached to an argument which is based on the fact that it would not have entered into such an agreement.

12.5 Finally I have concluded that the internal documentation of the MIBI relied on by both sides cannot properly be taken, in all the circumstances of this case, to influence an objective interpretation of the Agreement.

12.6 In the light of that analysis it seems to me that the key components which determine the proper interpretation of the Agreement are Clause 4.1.1 itself coupled with the contrary indication in the preamble and, to the extent that weight can properly be attached to it, the business sense argument which is at least a matter to which consideration should be given, having regard to the ambiguity created because of the conflict between the preamble and Clause 4.1.1.

12.7 I do place significant weight on the fact that Clause 4.1.1 is the device which the MIBI and the Minister have at all times over the last 60 years chosen as the mechanism for determining the scope of the liability of the MIBI. The Agreement could have been cast in many different ways but that it is the way in which the parties chose to specify the obligations of the MIBI. That clause is, in my view, as the Law Society argued, sufficiently wide to encompass the case of an insolvent insurer. Given that that clause was chosen by the parties as the primary means of defining the obligations of the MIBI, it seems to me that it would have required something of quite significant weight to displace the interpretation of the Agreement as a whole which a consideration of that clause would indicate. While acknowledging that some weight does have to be attached both to the preamble and to the business sense argument, I am not convinced that either of those matters, whether taken in isolation or cumulatively, are sufficient to displace what seems to me to be the natural and ordinary meaning of Clause 4.1.1 itself. To take any other view would, in my judgment, be to elevate either context or subordinate parts of the Agreement to a status which they do not deserve and would be to significantly undervalue the clear meaning of the principal operative clause of the Agreement itself.

12.8 In those circumstances I am satisfied that the proper interpretation of the Agreement as a whole, both having regard to its text and the context in which it and, indeed, its predecessors, were formulated, is such that it must be held to include an obligation on the part of the MIBI to cover liability in any case where a judgment remains unsatisfied for 28 days against a driver whose driving was the subject of compulsory insurance. That general statement is, of course, subject to the caveat that the conditions precedent specified in the Agreement must be met. But I am also satisfied that those conditions precedent only apply to the extent that they have any practical application to the case in question.

13. Conclusions
13.1 There can be little doubt that the issue which arose for consideration on this appeal has very significant implications both for the MIBI, for the motor insurers who are members of the MIBI, for persons injured due to the negligence of drivers insured by Setanta and indeed for drivers who held Setanta insurance but who were unfortunate enough to be involved in accidents for which they are found liable. However, the result of this appeal depends only on the proper construction of the Agreement and not on any policy considerations as to where the liability for compensating those injured due to negligence should properly lie.

13.2 It is unfortunate that the task of construing the Agreement is both complex and not free from doubt. It is particularly unfortunate that, when the Fund was brought into existence as a result of the 1964 Act, the relevant MIBI agreement at the time, or at least its successors, were not amended in a fashion which made clear whether the liability to compensate those injured as a result of the negligence of drivers insured by an insolvent insurer was to fall on the MIBI or, alternatively, on the Fund. If the Agreement in its relevant form came to be drafted in a way which made the answer to that question clear then, I suspect, none of us would be here.

13.3 However, the courts were left with the task of attempting, as best they could, to place an appropriate construction, in accordance with law, on the Agreement as it stands having regard both to the text of the Agreement and the context in which it, and indeed its predecessors, were entered into. That task of interpretation is, in my view, far from easy and the result is not clear-cut.

13.4 However, for the reasons analysed in some detail in this judgment, I would hold that the proper construction of the Agreement as a whole, taken in context, is that it generally imposes an obligation, subject to compliance with such of the conditions precedent as may be relevant in practice, on the MIBI to cover claims made against drivers insured by Setanta. In those circumstances I would dismiss the appeal.

Judgment of Mr. Justice John MacMenamin delivered the 25th May, 2017.

1. I agree with the judgment delivered by Clarke J. I would like to make certain additional comments in relation to the approach to interpretation so elegantly set out in my colleague O’Donnell J.’s judgment. In essence one can safely say that the starting point for the different approaches in these judgments is how this agreement should be interpreted. I confine my observations to only a few points.

2. The parties to this case both approach it on the basis of accepting the law as set out in Investors’ Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896 (HL) (“ICS”) and as subsequently approved in Ireland. In ICS Lord Hoffman set out the following general principles:

1. The Court must consider the meaning a document would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties at the time the document was made.

2. This background knowledge includes all relevant factual information that is available to the parties, and which would have affected the way in which the language used in the document would have been understood by a reasonable person.

3. Pre-contractual negotiations, however, are excluded from this background information.

4. The meaning of a document may not be the same as the meaning of the words used. The Court can and should attempt to ascertain what the words were intended to convey as opposed to their literal meaning.

5. Whilst parties must be taken to have used the words they did for a reason, it may be possible to conclude that something has gone wrong with that language and the Court must attempt to give effect to what the parties meant to say.

3. There is, of course, much that is attractive in such an approach. It is predicated on the proposition that courts should enjoy a significantly wider ambit in order to interpret contracts in a more contextual manner. It allows a court to impart business commonsense to agreements. But in law, context is not in fact “everything”. Lord Steyn’s observation to that effect in R. v. Sec. of State for the Home Dept. Ex P Daly [2001] All ER 433 at para 28 must even itself, be seen its own context, i.e. in a discussion as to the basis for judicial review in English law. Context matters a very great deal. But it must not be elevated so high as to defeat textual indications pointing to a different conclusion. For the purpose of this case context can be understood only in light of what the parties to the agreement understood at the time the agreement was made. But one cannot exclude past events from their contemplation these past events are discussed in Clarke J.’s judgment. This is discussed in Clarke J.’s judgment. There is a very real risk that in applying the ‘business commonsense’ test, which is inherent to the I.C.S. approach, a court may be tempted to find what the parties should have agreed, rather than what they actually agreed; or to give some retrospective meaning to what was left ambiguous in an agreement.

4. What is noteworthy about the two, fully reasoned, judgments of my colleagues is the extent to which, by attributing different weight to the five considerations set out in ICS one can arrive at diametrically opposed conclusions. This to my mind raises questions about how helpful, what may characterised as the “ICS criteria” always are, unless those criteria are operated within some ‘rules’ as to the manner in which they are to be weighed and utilised in any particular situation. Granted, the agreement is ambiguous in the sense that all the clauses do not mesh together consistently. But I think the fundamental question is what is the gist of the most important part of the agreement? Does it create liability? In my view it does. That most important part is clause 4.1.1 even in its broad terms. Does it create liability against MIBI? In my view it does.

5. In analysing any agreement, the Court may want to ask itself the question “could these parties, negotiating a particular contract have possibly meant what the contract now appears to say?” But this is not always the right, or the only, question. What must be truly in issue is what the parties actually agreed. To my mind a court must look at the words and context. But the value of the words used cannot be discounted to the point where context becomes a form of “trump card”, where there is always the risk that hindsight dictates what the parties should have agreed rather than their actual common intention. There is a risk that a mis-located or overemphasised ‘contextualisation’ process can defeat explicit words and material facts. An “imputed” context can be too narrow; when, in fact, there is a necessity that, in a broader, historical and contextual analysis, more weight should be given to the actual words used by the parties. I think this is so here.

6. I am concerned as to what are the limits which can be placed on the criteria of contextualisation and business commonsense. There may be many potential ‘moving parts’, but what are the fixed parts or rules regarding weighting each of the criteria? I admit this is not always an easy question. To my mind, the case for adopting the “chronological approach” from 1955 onwards, for assessing the 2009 agreement as advocated by counsel for the Law Society has real persuasive force. It allows for a fuller, and more telling, range of materials to be taken into account. The analysis retains its force despite the amendments and alterations which took place to the agreement. Bearing in mind those successive amendments one might rhetorically ask why, if the parties were prepared to change other parts of the agreement, did they not amend clause 4.1.1 as quoted in Clarke J.’s judgment? They had ample opportunity to do so. The question becomes more pertinent when one looks to the MIBI’s financial statements which, up to 2013 made allowance for insurers’ insolvencies. It goes very far to simply say this was an error. Even if it was an error did it not represent the MIBI’s own contemporaneous understanding of its potential liability in the event of an insurer’s insolvency?

7. The agreement, and its predecessors, were negotiated by people who work, both now, and in the past in the world of insurance, and by those officials who seek to regulate that world. People who work in this area are well familiar with the contractual principles of contra proferentem and material non-disclosure. The fact that the negotiating personnel may have changed is immaterial. Institutions and corporations do not “forget” things.

8. There are real contrasts therefore with the facts of I.C.S. The identity and the state of knowledge of the parties here is very different from those in that case. The Court is here dealing with persons very familiar with the concept of words having ‘meaning’ in Lord Atkins’ celebrated phrase in Liversidge v. Anderson, [1941] UKHLI and with people for whom the omission of words have a real consequence. All the negotiating parties had and have a common characteristic that is a desire to avoid ambiguity when it could be avoided. Yet clause 4.1.1 remained unaltered. It is to be recollected that pace Lord Hoffman’s homely metaphor, the Court is not here dealing with a private inter partes agreement; but rather one with a strong “public” law aspect. This is part of the broader context also.

9. These concerns become more acute when there are other pieces of material in the broader context which might indicate quite clearly that insolvency of an insurer was consistently in the minds of the respondent. Many of these are outlined in Clarke J.’s judgment.

10. I would add to these, what is to be found in what is termed the ‘Domestic Agreement’ made on the 1st January, 1993 between the Motor Insurers’ Bureau of Ireland (“MIBI”) and the various insurers and underwriters who were its members. This was part of the material made available to the Court.

11. This agreement was to be seen in light of the fact that the MIBI was at the time about to enter into what is called the “Uniform Agreement” with the bureaux of other European countries who were members of the Council of Bureaux. It implemented what are called the Geneva Recommendations, making uniform arrangements for owners and drivers of motor vehicles to be adequately insured against third party risk when entering foreign countries where insurance against such risks was compulsory. For that purpose, the MIBI wished to bind its members in relation to a definition of what would be the “insurer concerned” and also to define exceptions to that term. The agreement identifies relevant countries and deals with how judgments are to be satisfied.

12. Clause 7 provides that “where it appears expedient to the MIBI to settle or compromise at its discretion any claim arising out of a Road Traffic Act liability without allowing such claim to proceed to judgment, the MIBI should be entitled to recover its outlay from any member found to be insurer, or insurer concerned in relation thereto. Clause 8 allowed the MIBI to make calls or levies on the insurers who are members of the MIBI for such sums as the bureau might from time to time require in order to enable it to discharge its obligations or further its objects. The agreement sets out various provisos. It deals with both insurers and underwriters.

13. Clause 10 deals with the issue of “Insolvency of Member”. It provides

“(1) In the event of

the insolvency of any insurance company

any payments which MIB of I may as a result be called upon to make on its behalf to judgment creditors shall be contributed solely by the other Insurers’ Companies and in the event of the insolvency of an Insurance Underwriter all payments which MIB of I may as a result be called upon to make on his behalf to judgment creditors shall be contributed solely by the other Insurance Underwriters in each case the individual contributions being in the pro rata proportion mentioned in clause 8 hereof.

(2) It is agreed in the event of such payments referred to in clause 10(1) having to be made MIB of I will have the right to make a claim for a refund of such payments on behalf of its members against such liquidator, receiver, examiner or otherwise of such Insolvent Insurance Company or Insurance Underwriter”. (emphasis added)

14. Of course one can say these clauses should be seen within the particular context of the domestic agreement made in 1993. But I do not believe it can be tenably suggested that the MIBI did not at least have the insolvency issue on its mind then and subsequently. In my view this too must be part of the context.

15. I remain unconvinced that any of the subsequent amendments made after 1955 are such that they require a different interpretation to be put on the whole agreement from that which is readily discernible from clause 4.1.1. It is unnecessary to rehearse Clarke J.’s detailed analysis of that clause, or the other provisions or which the MIBI, now, seek to rely.

16. I should also express my concern that, in the ultimate, the application of “business commonsense” can, in certain circumstances be difficult to distinguish from subsequent rectification of a contract. At what point does business commonsense end and rectification begin, albeit with the benefit of hindsight? Part of the attraction of a “contextual approach” is that it can obviate injustice. But it can also create contractual uncertainty, or it can lead to an interpretation with the wisdom of hindsight.

17. In the neighbouring jurisdiction the contextual approach was applied in a number of cases after ICS (see Attorney General for Belize v. Belize Telecom [2009] UK PC 10; Transfield Shipping Inc. v Mercator Shipping Inc. [2008] UK HL48). But there is evidence that Lord Hoffman’s views have been the subject of some reassessment in the United Kingdom (see Arnold v. Britton [2015] UK SC; Marks and Spencer plc v. BNP Paribas Securities Services Trust Co. (Jersey) Ltd. [2015] UK SC 72.

18. In Arnold Lord Neuberger identified criteria which were relevant to the decision of the UK Supreme Court in that case. These were:

(1) Reliance placed on commercial commonsense and surrounding circumstances should not undermine the importance of the language and wording of the provision to be construed.

(2) The less clear centrally relevant words to be interpreted, the more ready the Court can properly be to depart from their natural meaning.

(3) Commercial commonsense is not to be invoked retrospectively.

(4) Whilst commercial commonsense is an important factor to be considered a court should be slow to reject the natural meaning of a provision simply because the consequences seem imprudent for a party. The purpose of interpretation is to identify what the parties have agreed, not what the Court considers they should have agreed.

(5) When interpreting a contractual provision one can only take into account facts or circumstances that existed at the time the contract was made and were known or reasonably available to both parties.

(6) In cases where an event subsequently occurs that was not intended or contemplated by the parties on the basis of the wording but it is clear what the parties would have intended, the Court will give effect to that intention.

19. At the minimum, this revisiting of the criteria raises a question as to the extent to which the courts in the neighbouring jurisdiction now see the I.C.S. judgment as the last word in this evolving area of law. It raises the question whether the same approach should unquestioningly be adopted in our courts with possibly far reaching consequences in the future. I fully accept that the agreement under consideration contains clauses which are apparently not consistent with clause 4.1.1. But to my mind, the critical question is not whether they are inconsistent, but whether they are sufficiently inconsistent in order to raise a real question as to how the agreement should now be interpreted?

20. The weight of the words in clause 4.1.1 although broad, and capable of more than one interpretation, ultimately to my mind only point in one direction. They favour the Law Society’s case. Counsel for the MIBI has, with considerable ingenuity, been able to construct a most capable argument whereby greater weight should be put upon those other clauses which are most helpful to his case. But the key question is, surely, whether any one or all of those clauses are sufficiently clear and decisive in order to displace the “working assumption” that should inform the Court’s interpretation induced by clause 4.1.1. In my view they are not.

21. In his dissenting judgment in Arnold v. Britton Lord Carnwath made the apposite observation that “As Tolstoy said of unhappy families, every ill-drafted contract is ill-drafted ‘in its own way’”. I do not deny this observation can be made in relation to the agreement under discussion. But there is nothing, even at this stage to prevent a further revision of the agreement. I would dismiss the appeal and uphold the three judgments of the Court of Appeal and that of the High Court judge.

22. I can see the force in the proposition that the outcome of this case may be detrimental to the insurance market, in Ireland and that there is an urgent need to address this question. I acknowledge, too, that the judgments of the courts below have serious implications for the MIBI levy on insurers. It is within the power of the parties to the agreement to further revise this agreement - if they wish. But that is not the point. To my mind the essential, determinative, issue is what the 2009 agreement conveys to the objective observer, rather than what the parties now wish they had agreed in light of the collapse of Setanta. I would affirm the judgments and order of the Court of Appeal.

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