Dr Nicholas Bevan

Dr Nicholas Bevan

Tuesday, 18 March 2014


Dunhill v Burgin [2014] UKSC 18

(See the post below for a more detailed consideration of the case itself)

The Dunhill ruling is important for three reasons.  Firstly it provides clarification on the correct test for determining mental capacity.  Secondly it confirms that if a claim is settled or compromised in ignorance of the fact that one of the parties lacks the requisite capacity and the parties agree what ostensibly appears to be a binding agreement, that can be set aside and the claim reopened, notwithstanding the common law rule in Imperial Loan Co Ltd v Stone [1892] 1 QB 599.  In doing so, Dunhill demonstrates the ability of the Civil Procedure Rules to amend the substantive common law rules that determine the ability of an agent to conclude a binding agreement on behalf of someone lacking the requisite capacity.  (see my earlier post).

A third significance: lack of protection for victims of untraced drivers

The ruling in Dunhill is also important in the contrasting standard it sets.  The standard of protection extended to children and protected parties under the Civil Procedure Rules, that lie at the heart of that case, do not extend to victims of untraced drivers under the Untraced Drivers Agreement 2003. These are non contentious claims for compensation to the MIB.  The lack of suitable safeguards under the 2003 scheme is an anomaly that requires urgent revision, as is explained in An Untidy Arrangement? published in this week's edition of the New Law Journal.

Further flaws identified in the MIB Agreements

The Dunhill judgment is also helpful for the interesting obiter discussion on whether, under our common law, an agent has authority to effect a binding contract on behalf of a mentally incapacitated principle; apparently not.  That being the case, it would appear that both cl. 3 of the Uninsured Drivers Agreement 1999 and cl. 2 of the Untraced Drivers Agreement 2003 appear to be unlawful.

These clauses in the Motor Insurance Bureau's Agreements provide that the actions of an applicant / claimant’s representative have a binding effect whether made on behalf of a child or mentally incapacitated individual - as though they were adults of unsound mind.  Put at its simplest, neither the Secretary of State nor the MIB possess the constitutional power that would entitle them to prescribe new common law principles.  Accordingly and in so far as these clauses appear to do just that, they are ultra vires.

In this respect, successive ministers at the DfT have behaved as though they have special powers.  [See for example the way the 1999 MIB Agreement prescribes what inferences are to be drawn from certain facts in clause 6.3; also ultra vires, I think.]

A ministry in a muddle

Howlers like this (and there are plenty to be found within both MIB Agreements - see my Call for Reform blog from 16 April 2013) are the inevitable consequence of the DfT's misguided practice that places such a high degree of trust (reliance even) on the MIB and the ABI  for the legal advice it receives and in the articulation of its policy and rules concerning the legal entitlement of victims of motor accidents to a compensatory guarantee. The MIB is owned and operated by all the major UK based motor insurance companies that underwrite motor insurance in the UK.

The DfT could have employed highly qualified (independent) Parliamentary draftsmen to prepare a short and simple codified scheme using clear and easily accessible language; it chose not to and one wonders why.  Instead the DfT effectively waived through the MIB's very unfair and partial proposals - without proper consultation.  The agreements produced by this method are lengthy, turgid, and in places self contradictory, with the result they are confusing and lack legal certainty.  They are also replete with infringements of Community law.

Conflict of interest

The Uninsured Drivers Agreement 1999 and the Untraced Drivers Agreement 2003 are eloquent in one respect however:  as a testimony to the folly of permitting a non governmental body with a vested interest in the outcome to exercise such sway in a government department's policy and rule making. There is a simple reason why both MIB Agreements look and read remarkably like a badly drafted insurance policy; one that has a strong insurer bias at the expense of the victims it is supposed to protect.  The explanation has everything to do with the controlling hand that drafted them. My critique, not just of the MIB Agreements but also of our national law provision in this area generally is freely available on the New Law Journal’s website, see: On The Right Road?.

It is a Minister’s prerogative, and dare I say it his duty, to dictate what his Department’s policy and rules should be.  Ministers should ensure that what they do is always in the public’s best interest; not just that of the powerful insurance lobby.  How then can the DfT ensure this if it permits an organ of the insurance industry to draft its national law provision, especially where there is such an obvious conflict of interest?

Conflict of laws

Legal practitioners need to understand that our national law provision for victims of uninsured and untraced drivers is out of step with the minimum standards of protection required under superior Community law. This is the central theme of my four articles: On The Right Road?. It is regrettable that a number of recent cases have revealed that it is not only the DfT that appears not to understand the significance of the primacy of Community law in this area, it is a failing that extends to many legal practitioners and even some judges as well.

Advanced level training

On the bright side, bad law can sometimes be good business for lawyers.  I plan to offer advanced level training through the Association of Personal Injury Lawyers to equip the legal eagles amongst us with the requisite know-how to identify the many opportunities that exist to present a successful legal challenge of national law provision in this area.

Asleep at the wheel

It will be recalled that the DfT announced its review of the MIB Agreements in late February last year within just over four weeks of what some have dubbed 'Jackson day'. It published its proposals for reforming both MIB Agreements in a consultation paper (the fruit of three years detailed discussions with the MIB, apparently). To be fair, most of the proposals were beneficial but they were limited in scope. Take for example the recommendation in Question 5 of the Consultation Paper that an independent arbitrator be appointed to approve settlements on behalf of minors and protected parties - this is restricted to untraced driver claims only and then only where the applicant has no legal representation at all. The Dunhill case provides ample proof why that proposal is inadequate. The risk of junior legal representatives being assigned to handle untraced driver claims (in a non contentious area of business that does not insist on professionally trained advisers made all the more likely by the nugatory fixed fees permitted under the scheme) and of their failing to recognise the true value of a claim - is all too real. Furthermore the risk that an inexperienced arbitrator will be presented with inadequate (or worse yet, partial or incomplete) expert evidence is also a distinct prospect.  Vulnerable victims require safeguards, not only against themselves and the their lawyers but also against inadvertent bias in the investigation of the claim by the MIB itself - that is why the CPR insists upon not one but three separate measures (see below under Wake Up Call).

Taken as a whole, the DfT's review failed to redress the many substantive law defects in our national law provision in this area. This was explained to the Minister. The DfT was asked to widen the scope of its review (see my earlier blog in the point) to cure the many defects that were identified and explained.  The Minister was also invited to participate in a constructive dialogue by several parties.  These requests were met with a stony silence.

The DfT's consultation ended in April 2013 and we were told that the Minister would publish a report with his final proposals in July 2013.

We are nearly one year on from the end of the consultation and the Minister's much delayed report is still awaited.  Meanwhile, the victims of uninsured and untraced drivers continue to be exposed to the injustices perpetrated under both MIB Agreements.


Whilst the DfT have been able to block the involvement of the Law Commission, see my earlier post, it is likely to find the European Commission far less accommodating.

A formal infringement complaint was filed at the European Commission by myself in August 2013.  The case against the United Kingdom has passed the initial vetting process and the prima facie case is now established.  The complaint is being investigated under the EU Pilot Scheme. More news about that anon.....

Wake up call

The Dunhill case serves as a useful cautionary tale. It illustrates just what can happen when vulnerable parties (whether children or the mentally incapacitated) are not properly protected under our law.  The triple safeguards deemed necessary (as Dunhill demonstrates) under the Civil Procedure Rules : (i) appointment of litigation friend, and (ii) independent legal advice and (iii) court approval of settlements - should be extended by operation of the law to victims of uninsured and untraced drivers; it isn't at present. 

I have written to the DfT to ask them what action they intend to take.  I am not expecting a reply any time soon.

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