The Judicial Committee of the Privy Council Decisions

Presidential Insurance Company v. Molly Hosein Stafford (Trinidad and Tobago) [1999] UKPC 14 (22nd March, 1999)

Presidential Insurance Company Limited Appellant

v.

Molly Hosein Stafford Respondent

FROM

THE COURT OF APPEAL OF TRINIDAD

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 22nd March 1999

------------------

Lord Lloyd of Berwick

[Delivered by Lord Hobhouse of Woodborough]

------------------

1. On 27th June 1976 a car driven by Edward Chicken Lalla was in collision with a car driven by Molly Stafford on a public road in Trinidad. Molly Stafford was injured. She sued Mr. Lalla. The trial on liability did not take place until June 1990. Mr. Lalla was held 70% to blame for the accident. Judgment for damages to be assessed was entered in her favour on 22nd June 1990. On the inquiry, her damages were assessed as follows -

 

2. General damages: $95,000 plus interest at 6% pa from the date of the service of the writ (29th July 1980) to the date of the assessment.

 

3. Special damages: $11,000 plus interest at 3% pa from the date of the accident to the date of the assessment.

 

4. General damages for loss of "pecuniary prospects": $5,000.

 

5. She was also awarded the costs of the trial and the assessment which on taxation totalled $43,136.25. Accordingly judgment was entered for her on 24th April 1991 for the aggregate of these sums and costs to be taxed.

 

6. Mr. Lalla did not satisfy the judgment against him. So it became necessary for Mrs. Stafford to commence a second action against his insurers, the Presidential Insurance Company Limited, under the Motor Vehicles Insurance (Third-Party Risks) Act (Chapter 48:51, as amended). The Insurance Company had been conducting the defence on behalf of Mr. Lalla in the first action. The Insurance Company did not dispute liability but contended that its liability to Mrs. Stafford under the Act was limited to $50,000 and no more.

 

7. This defence has raised a question of the construction of the Act: does an insurance company have any liability to the injured party for the costs of the first action and in respect of interest or are such sums covered by the $50,000 limit? At the trial in the second action, Maharaj J. held that they were not covered and gave judgment for Mrs. Stafford for the $50,000 plus interest on that figure at 6% pa for the period from the commencement of the first action to the date of the judgment in that action and the two awards of costs in the first action with interest at 6% pa for the period from the completion of the relevant part of the proceedings in the first action to the issue of the writ in the second action. The Insurance Company appealed to the Court of Appeal submitting that no sum in excess of $50,000 should be awarded. By a majority, Sharma J.A. and Hamel-Smith J.A., Permanand J.A. dissenting, the Court of Appeal dismissed the appeal. They gave leave to appeal to their Lordships’ Board.

 

8. The scheme of the statute is the same as that adopted by most other Caribbean countries. It requires drivers to have compulsory third party insurance to cover "in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to or damage to the property of any person caused by or arising out of the use of the motor vehicle on a public road" (section 4(1)). This obligation was however

qualified by subsection (2) which provided that the policy is not required to cover (among other things) "liability in respect of any sum in excess of [$50,000] arising out of any one claim by any one person". The provision upon which Mrs. Stafford sued was in section 10 of the Act. This section gives a direct right of action by the injured person against the insurance company. The right is defined in terms which refer back to the cover "required" by section 4. It has been held in a series of cases that this involves that the monetary limit has to be read into section 10. (Harker v. Caledonian Insurance Co. [1980] 1 Lloyds Rep. 556; Suttle v. Simmons [1989] 2 Lloyds Rep. 227; Toolsie Goberdhan v. Caribbean Insurance Co. Ltd. (Privy Council Appeal No. 61 of 1997; judgment delivered 21st May 1998)

 

9. The point in the present case is one which arises in consequence of this construction. It could have been decided in the earlier cases but it was not, despite a dictum of Lord Diplock in the Harker case (to which their Lordships will later refer). Section 10(1) provides that:-

"If .. judgment in respect of any such liability as is required to be covered by a policy under s.4(1)(b) . is obtained against any person insured by the policy, then ... the insurer shall .. pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any written law relating to interest on judgments."

 

10. It is out of the final words following the word "including" that the point of contention in the present case arises. The Insurance Company submits that that word implies that there are to be no additions whatsoever to the "required" sum. The Courts below have held that this submission is wrong.

 

11. The subsection involves a number of stages. Some are non-controversial: a policy for the required amount covering the driver in respect of any liability he may incur in respect of personal injury to another caused by his driving and a judgment obtained by the injured person in proceedings against the driver. The right that is then given to the injured party as against the insurer is to be paid any sum payable thereunder in respect of the liability, that is to say the liability required to be covered.

12. It then becomes necessary to ask what is the sum payable under the judgment. It is a single sum which is arrived at by the judge at the trial in the first action totalling up all the sums of damages with the addition of interest where it has to be taken into account in the calculation. As will be appreciated, the computation of damages in personal injury cases, because it includes a number of different categories of general damages relating both to the past and to the future and special damages, will normally require any interest element to be treated in a number of different ways and at different rates. But the result is a single sum for which judgment is then given. That is the sum payable under the judgment in respect of the insured liability. The interest calculation that preceded the judgment is subsumed in the judgment and ceases thereafter to be relevant. However, a judgment once entered itself carries interest under statute at the judgment rate from the date of the judgment until it is satisfied.

 

13. Returning to the wording of section 10(1), it will be seen that what is being referred to in the last part of the subsection is clearly interest on the judgment. So the correct understanding of the words "including ... interest on that sum by virtue of any written law relating to interest on judgments" is not as a reference to the calculations made before judgment in the first action but to the statutory interest upon the unsatisfied judgment, the judgment being deemed to have been for no more than $50,000. The word "including" is clearly used in the sense of referring to what the injured person is entitled to be paid by the insurer: he or she is entitled to be paid by the insurer not only the deemed amount of the judgment but also interest on it so long as it shall remain unpaid. His or her entitlement includes that interest. Any other construction would place a premium on delay and default on the part of the insurer and only serve to frustrate the purpose of the statute.

 

14. It follows however that the approach to the interest aspect of this dispute adopted by Maharaj J. and upheld by the Court of Appeal was mistaken. (Both parties have now recognised that this is so.) The entitlement of Mrs. Stafford in respect of interest was to interest on the $50,000 at the judgment rate from 24th April 1991 (which their Lordships understand was the date of the final judgment in the first action) down until she was paid a sum sufficient to discharge that judgment debt. The Insurance

15. Company is not at liberty to fail to pay the (pro rata) judgment without incurring a liability for statutory judgment rate interest.

 

16. This leaves the question of the costs which the judge in the first action ordered the driver to pay as well. When a judgment is given in an action it will normally include some order as to costs, as occurred in the first action. This is a consequence of the disputed litigation. What the subsection is providing is that the injured person’s right to recover from the insurer includes the costs which the driver has been ordered to pay in the first action. This does not relate to the minimum cover required by section 4. Here again the contrary interpretation would simply serve to frustrate the purpose of the subsection. The insurer would be provided with an incentive to use its right, as the insurer of the driver, to defend the first action to the extent of depriving the injured person of the benefit of the recovery which he or she is intended to have under the subsection. The decisions of the judge and the Court of Appeal were therefore correct on this aspect. Mrs. Stafford was also entitled to interest on the unpaid costs liability at the judgment rate from the time that she became entitled to be paid those costs down to the time of payment.

 

17. The error in the argument of the Insurance Company was to relate the word "including" to the word "liability", whereas it should be related to the word "entitled". As previously observed there is no binding authority on the question raised by this appeal but it is reassuring to note that in the Harker case, [1980] 1 Lloyds Rep. at pp. 558-9, Lord Diplock, having mistakenly assumed that Donaldson J. had held that the insurer’s liability to the deceased included interest on the judgment in the first action and the costs of the first action (it appears that the point had been conceded and the relevant sum paid), went on to say:-

"... there are instances, of which costs and interest on the judgment are examples, where the insurer would be liable in the direct action for sums in excess of the permissible monetary limits upon the cover afforded by the policy."

 

18. This dictum, although not necessary for the decision of that case, is entitled to the respect of their Lordships and confirms the correctness of the interpretation which their Lordships have placed upon the subsection.

 

19. It follows that their Lordships consider that the appeal of the Insurance Company should be allowed to the extent of varying that part of the judge’s judgment which gave Mrs. Stafford interest on her damages and substituting interest at the

judgment rate from the date of the judgment in the first action on the deemed amount of her judgment against the driver (i.e. the $50,000). This adjustment may well prove to be favourable to Mrs. Stafford. Apart from this the appeal fails and should be dismissed. The costs of this appeal must be paid by the appellants.