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Another case defining the meaning of hire and reward?

Motor Insurers' Bureau v Meanen

HOUSE OF LORDS

[1971] 2 All ER 1372, [1971] 2 Lloyd's Rep 251, [1971] SC 148

HEARING-DATES: 17, 18 MAY AND 7 JULY 1971

7 JULY 1971

Insurance - Motor insurance - Third-party risks - Compulsory third-party insurance - Passengers - Passengers carried for hire or reward - 'Hire or reward' - Passengers carried in private car - Owner of minibus regularly over period of 11 months driving fellow workers to place of work - Minibus fitted with seats for 11 passengers - Informal arrangement among regular passengers to pay cost of petrol - Owner not buying petrol for any of the journeys - Whether passengers being carried for hire or reward - Road Traffic Act 1960, s 203 (4).

NOTES:
For compulsory motor insurance in respect of passengers carried for hire or reward, see 22 Halsbury's Laws (3rd Edn) 368, para 756, and for cases on the subject, see 29 Digest (Repl) 547-549, 3723-3731.

For the Road Traffic Act 1960, s 203, see 28 Halsbury's Statutes (3rd Edn) 328.

CASES-REF-TO:

Albert v Motor Insurers' Bureau [1971] 2 All ER 1345.
Bonham v Zurich General Accident and Liability Insce Co Ltd [1945] 1 All ER 427, [1945] KB 292, 114 LJKB 373, 172 LT 201, 78 Lloyd's Rep 245, 29 Digest (Repl) 547, 3724.
Coward v Motor Insurers' Bureau [1962] 1 All ER 531, [1963] 1 QB 259, [1962] 2 WLR 663, [1962] 1 Lloyd's Rep 1, Digest (Cont Vol A) 522, 814a.

INTRODUCTION:

Appeal.

This was an appeal by the Motor Insurers' Bureau against an interlocutor pronounced by the First Division of the Court of Session (the Lord President (Lord Clyde), Lord Migdale and Lord Cameron), dated 30th October 1970, refusing a motion for review of an interlocutor pronounced by the Lord Ordinary (Lord Kissen), dated 29th May 1970, whereby (1) the respondent, John Meanen, was awarded damages of £ 24,100 against the widow of the driver of the motor vehicle in which the respondent was travelling as a passenger, when he sustained severe injuries as a result of a motor accident, and (ii) the appellants were found liable to pay the 24,100 to the respondent (since the widow was unable to do so) by virtue of an agreement between the Minister of Transport and the appellants dated 17th June 1946, which provided that '... if judgment in respect of any liability which is required to be covered by a policy of insurance... under Part II of the Road Traffic Act 1930 is obtained against any person in any...&Court in Great Britain... and any such Judgment is not satisfied in full within seven days... then [the appellants] will... satisfy... any sum payable...' The facts are set out in the opinion of Lord Donovan.

COUNSEL:
J H McCluskey QC and R E Henderson (both of the Scottish bar) for the appellants, the bureau. W A Elliott QC and H D B Morton (both of the Scottish bar) for the respondent.

JUDGMENT-READ:
Their Lordships took time for consideration. 7th July. The following opinions were delivered.

PANEL: LORD DONOVAN, VISCOUNT DILHORNE, LORD PEARSON, LORD DIPLOCK AND LORD CROSS OF CHELSEA

JUDGMENTBY-1: LORD DONOVAN.

JUDGMENT-1:

LORD DONOVAN.

My Lords, on 23rd February 1967 John Meanen sustained severe injuries when the motor vehicle in which he was a passenger (a Ford Minibus) came into collision with a lorry at a junction on the Glasgow to Stirling road. The driver of the minibus, one Patrick McKale, was killed in the accident. The driver of the lorry, John Larkin, was in the employ of the owners of the lorry, Messrs Hugh Clelland & Sons; and at the time of the accident he was driving the lorry in the course of his employment with that concern. In due course John Meanen, the present respondent, sued only Hugh Clelland & Sons for damages for the injuries he had suffered. They called in, as the first third party, the Secretary of State for Scotland who bears responsibility for the design, construction and maintenance of trunk roads in Scotland such as the one on which the accident occurred.

They also called in as second third party the widow of Patrick McKale, the deceased driver of the minibus. The present respondent then amended his conclusions and claimed damages against Hugh Clelland & Sons, and the two third parties, jointly and severally. Each of these last three parties to the proceedings blamed the others. In the course of the proof the present appellants, the Motor Insurers' Bureaue, were also added so that the question of any liability on their part could be decided in the same proceedings. They thus became the second defenders. The declaratory conclusion added to raise this question was thus expressed:

'For declarator that in the event of the second third party being alone found liable to make representation to the pursuer the second defenders are liable to make payment to the pursuer of any damages awarded in terms of the Memorandum of Agreement between the Ministry of Transport and the second defendants dated 17th June, 1946.'

The agreement in question is one under which the Motor Insurers' Bureau undertakes, in certain circumstances, and subject to certain conditions, to pay damages warded in this type of case which would otherwise not get paid. I need not repeat what I have already said in the contemporary case of Albert v Motor Insurers' Bureau n1 about the right of a third party to sue on that agreement.

n1 [1971] 2 All ER 1372

At the trial of the action before the Lord Ordinary (Lord Kissen) n2 the driver of the minibus (McKale) was found solely to blame for the accident on the ground of failure to keep a proper look-out; and the sum of £ 24,100 was awarded to the present respondent as damages. This sum the widow of McKale was unable to pay; and the insurance company concerned has failed.

The question whether the bureau were thus liable to step into the breach and pay the £ 24,100 to the present respondent thus arose. Under the memorandum of agreement dated 17th June 1946 above referred to, the bureau undertook to satisfy any award of damages in respect of any liability which is required to be covered by a policy of insurance or a security in terms of the Road Traffic Acts and is not otherwise satisfied. The words I have emphasised give rise to the present dispute.

The present respondent maintains that McKale, the driver of the minibus, was at the time of the accident and had for some eleven months before been carrying passengers for hire or reward within the meaning of the proviso to s 203 (4) of the Road Traffic Act 1960. He accordingly was undr a duty to insure his passengers against risk of injury while travelling in his minibus though in fact he did not do so. The conditions precedent for liability on the part of the bureau therefore all exist.

The bureau, on the other hand, contends that McKale was not required to insure his passengers as claimed, for the reason that he was not and had not carried passengers for 'hire or reward' within the true meaning of that expression in the aforesaid proviso. Accordingly, the bureau is under no liability to pay pursuant to the aforesaid agreement. This issue was decided adversely to the bureau but by the Lord Ordinary n3 and, on a reclaiming motion, in the First Division of the Court of Session n4. The bureau now appeals to your Lordships.


n2 1970 SLT 341

n3 1970 SLT 341

n4 (30th October 1970) unreported

The relevant findings of fact are set out in the judgment of the Lord Ordinary and it will be convenient to set them out in full. He says n5:

n5 1970 SLT at 343

'The facts which I found to be established on this aspect of the case were as follows, viz.: -- (1) The van, which I have previously described, had been used by the van driver daily to carry himself and other workmen from Glasgow to their place of work at Longannet since he acquired it, on a hire-purchase contract, about 11 months before the accident. (2) Prior to acquiring this van, he had acquired and used other similar vans to carry himself and workmen to Longannet and other places where they worked. (3) The passengers to Longannet normally consisted of a brother-in-law (Morrison), some friends and fellow workmen, but the numbers varied from day to day. (4) No money was paid by any of the passengers to the van driver for the carriage but there was an informal arrangement among the regular passengers to contribute to the cost of transport by buying petrol for the van regularly on these journeys. (5) The extent of the contribution of petrol varied according to the numbers of men using the van, but was estimated at the purchase of about three to four gallons at a cost of about £ 1 every six or more days for each regular passenger. (6) The van driver took no part in the purchases of the petrol and no part in deciding which passenger had to pay for the petrol. This was decided informally among the passengers without any reference to any written records. (7) Petrol was regularly bought on the journeys without regard to the immediate requirements of petrol for a journey. 8. Lifes to other passengers who were not regular passengers were given without payment for petrol. (9) The van driver did not buy petrol on any of these journeys and received no other contribution of any kind towards the expense of running the van. (10) The amount of petrol left in the van after private use or left in it before a week-end when it was going to be used for private purposes was ignored. (11) All the passengers, including the van driver, received travelling allownces from their employers at Longannet. The amounts varied but could be as much as 18s. daily. (12) The [respondent] was a regular passenger in the van on its journeys to and from Longannet and the van driver received recompense for carrying him by his contributions in purchases of petrol for the van. He was one of the regular petrol paying passengers in the van at the time of the accident. (13) The van driver had a wife and two children and used this van for transport for them on week-ends and other social occasions. (14) The arrangement for transport was completely informal without any binding obligation, without any definite terms and without the van driver taking any steps in regard to the carrying out of any such indefinite terms.'

I adhere to the construction of the proviso to s 203 (4) of the Road Traffic Act 1960, which I have propounded in Albert's case n6; and applying that construction to the facts of the present case I think it fits. The long standing and regular arrangement for the charriage of passengers; the use of a minibus fitted with seats for 11 passengers; the arrangement (albeit informal) among the regular passengers to pay for the cost of the petrol; these features add up to and justify the conclusion that McKale was engaged part-time in carrying passengers under an arrangement which went beyond mere social kindness. It had the flavour of business about it.

It was, as the Lord President says, 'joint advanture', in which McKale provided the vehicle and drove it, and the passengers supplied the petrol and enjoyed the convenience of being taken from their place where they lived to the place where they worked and back again. McKale did this for reward, the reward being that he paid for no petrol and could use any balance over at the week-end as though it were his own. All the judges of the First Division attached importance to the duration and regularity of the arrangement and so do I. I find myself in entire agreement with the views of Lord Cameron, and in particular with his observation that the provisio relates to --

n6 [1971] 2 All ER 1345

'something more than a transient and unique use of a motor vehicle for a particular carriage, for less the actual carriage of any passenger for hire or reward at the time of the occurrence or relevant event.'
I think the provisio poses the question whether the motor vehicle in question is an asset of a passenger carrying enterprise, albeit on a modest scale and albeit part-time, in return for reward in money or money's worth. I do not think it necessitates the existence of a binding contract. If the vehicle is such as asset, then it is immaterial whether at any particular time it is actually carrying passengers or not, and immaterial whether among any of the passengers it is carrying there are some who are being carried free.

I would dismiss the appeal.

JUDGMENTBY-2: VISCOUNT DILHORNE.

JUDGMENT-2:
VISCOUNT DILHORNE. My Lords, this appeal raises similar issues to those in Albert v Motor Insurers' Bureau n7 and it is not necessary for me to repeat what I said in that case.

n7 [1971] 2 All ER 1345

On the facts of this case, the Lord Ordinary n8 at first instance and the First Division of the Court of Session n9 were, in my opinion, right in holding that the minibus in which the respondent was travelling at the time of the accident was a vehicle carrying passengers for reward.

Those facts have been fully stated by my noble and learned friend, Lord Donovan, and it will suffice for me to say that when a minibus which can carry 11 passengers has been used daily for about 11 months, and prior to that other vehicles, by the driver to take him, his friends and fellow-workmen to and from their place of work and when there was an informal arrangement that the regular passengers should regularly buy petrol for the minibus regularly on these journeys, the amount purchased being unrelated to the requirements for the journey, I think that the conclusion is inescapable that the passengers were being carried for reward and that the minibus was a vehicle in which passengers were carried for reward within s 203 (4) of the Road Traffic Act 1960. On the facts of this case, it appears even more clearly than in Albert's case n6 that the driver was running an unofficial taxi service. The arrangement was not a purely social one. It had a business or commercial character. I would therefore dismiss the appeal.

n6 [1971] 2 All ER 1345

n8 1970 SLT 341

n9 (30th October 1970) unreported

JUDGMENTBY-3: LORD PEARSON.

JUDGMENT-3:
LORD PEARSON. My Lords, the facts have been stated in the opinion of my noble and learned friend, Lord Donovan. In my opinion, the case is not distinguishable from the case of Albert v Motor Insurers' Bureau n7. The arrangements had acquired the character of business arrangements, and any requirement that there may be of frequency or use character was satisfied. I would dismiss the appeal.

n7 [1971] 2 All ER 1345

JUDGMENTBY-4: LORD DIPLOCK.

JUDGMENT-4:
LORD DIPLOCK. My Lords, I agree that this appeal should be dismissed.

JUDGMENTBY-5: LORD CROSS OF CHELSEA.

JUDGMENT-5:

LORD CROSS OF CHELSEA.

My Lords, the facts of this case as found by the Lord Ordinary are set out in the opinion of my noble and learned friend, Lord Donovan. The ground on which the Lord Ordinary n7 and the judges of the Inner House of the Court of Session 9 decided that the pursuer was entitled to succeed was that though there was no legal contract between McKale and his passengers a vehicle might be one on which passengers are carried 'for reward' as opposed to 'for hire' without there being any legal obligation on the passenger to pay for his transport and that the well founded expectation on the part of McKale that his regular passengers would in fact always pay for the petrol made their carriage a carriage 'for reward' within the meaning of the Act.

In reaching this conclusion they accepted the distinction between carriage 'for hire' and carriage 'for reward' drawn by the majority of the Court of Appeal in Bonham v Zurich General Accident and Liability Insce Co Ltd n10 and declined to follow the decision of the Court of Appeal in Coward v Motor Insurers' Bureau n11. In my speech in the appeal in the case of Albert v Motor Insurers' Bureau n12 I have given my reasons for thinking that the Court of Appeal was right in holding, as it did in Coward's case n11, that the words 'a vehicle in which passengers are carried for hire or reward' in s 36 (1) of the Road Traffic Act 1930 (and so in s 203 (4) of the Road Traffic Act 1960) should not be construed without regard to the meaning of the same words in the part of the Act dealing with public service vehicles and that in that part the two words 'hire' and 'reward' were used as interchangeable equivalents.

I also said that in my judgment if payment is not made in advance the carrying will not be 'for hire or reward' unless the passenger is undertaking to pay a quantified or quantifiable sum for his carriage but that I was not satisfied that a term express or implied in the agreement that neither party was to be entitled to sue on it would take the agreement outside the Act. I am not sure whether the courts below held that there was no contract in this case because the terms were too uncertain or because there was an implied term that the agreement was not to be enforceable in the courts. But if Scots law is the same as English law in this field I do not think that either conclusion was justified. On the findings of fact numbered 1 to 13 in the opinion of the Lord Ordinary n13 the regular passengers on any given day were, as I see it, being carried under a contract between them and McKale for their transport to and from work on that day.

There is, of course, of necessity something artificial in applying legal conceptions to arrangements of this sort when the last thing that the parties have in mind is recourse to legal proceedings; but in order to test the matter let us assume that at some point it became necessary for petrol to be bought in order to enable the minibus to complete the double journey that day; that none of the regular passengers in the bus on that day was willing to pay for the petrol; and that McKale had to pay for it himself.

Why, in such circumstances, should McKale not have been able to claim in a court of law against the regular passengers in the minibus on that day that they were liable to repay him what he had spent to enable the minibus to get back to Glasgow? McKale was not concerned with any arrangements which the regular passengers might have made among themselves with regard to purchases of petrol, and though he could not have called on them to buy petrol in excess of what (if any) was required to enable the day's journey to be completed and could not oblige any of them to travel on the minibus next day, yet when once the minibus set off from Glasgow on any given day with one or more regular passengers on board then if Scots law is the same as English law in this field I would have thought that McKale came under a legal obligation to transport those passengers to Longannet and back which he would have broken if he had stopped the minibus and told them all to get out of it, and that they came under an obligation to see that McKale got to Longannet and back to Glasgow without having to pay for any petrol.

It was not suggested in argument that there was any distinction between Scots and English law relevant to the determination of this appeal and I observe that Lord Cameron, though he decided the case on the footing that there was at any rate a carriage 'for reward' not involving a contract, did not exclude the possibility that there might have been a contract.

n7 [1971] 2 All ER 1345

n9 (30th October 1970) unreported

n10 [1945] 1 All ER 427, [1945] KB 292

n11 [1962] 1 All ER 531, [1963] 1 QB 259

n12 [1971] 2 All ER 1345

n13 1970 SLT at 343; the facts found by the Lord Ordinary are also set out in the opinion of Lord Donovan at p 1373, ante

So, although my reasons for holding that the respondent was entitled to succeed differ from those given below, I would dismiss this appeal.

DISPOSITION:
Appeal dismissed.

SOLICITORS:
Thompson & Co, agents for Bonar Mackenzie & Kermack, Edinburgh (for the appellants); Asher Fishman & Co, agents for Allan McDougal & Co, Edinburgh (for the respondent).