Elizabeth Ram (Administrator of the estate of Pearl Baboolal) v Motor and General Insurance Company Ltd (Trinidad and Tobago)

Heard on 24 February 2015

Pearl Baboolal was killed in a motor vehicle accident on 22 December 1993 when she was a passenger in a maxi-taxi driven by the late Mr Roland Gokool. Several people were killed or seriously injured in the accident, resulting in legal claims against the driver. On 16 December 1997 Ms Elizabeth Ram, who is the administratrix of Ms Baboolal's estate, commenced an action (HCA No 3222 of 1997) in the High Court against Mr Gokool. She gave notice of the action to Mr Gokool's insurers ("MGI") on 22 January 1998. On 22 October 1998 Ms Ram obtained judgment against Mr Gokool under Order 19 Rule 6 of Supreme Court Rules and on 13 July 1999 damages were assessed by Master Paray-Durity in the sum of $81,000.

On 19 September 2001 Ms Ram raised an action (HCA No 2605 of 2001) against MGI under section 10 of the Motor Vehicles Insurance (Third-Party Risks) Act (Chapter 48:51) ("the Act") in which she claimed the $81,000, together with interest and costs, which the High Court had awarded on 13 July 1999 in its judgment against the driver. On 16 October 2001 MGI lodged a defence in which it asserted that its liability to third parties in respect of the claims arising out of one accident was limited to $1m both by contract and by statute. MGI pleaded that it had already paid out the maximum $1m to third parties with claims arising out of the accident and that it had thus already discharged its contractual liabilities to its insured, which reflected the statutory requirements in section 4(2)(f) of the Act.

MGI's defence was supported by an affidavit by Amryl Vialva, a legal secretary, which listed the twelve claims that MGI had settled. The list stated the parties to each action, the registered High Court number of each action and the amount paid out. From that list it appears that two of the claims (action HCA No 3236 of 1997 — Sinanan v Gokool— and action HCA No 3252 of 1997 — Frederick v Gokool) which MGI met were claims in actions raised after the date when Ms Ram commenced her action against Mr Gokool. The appellant submits that MGI has acted unfairly and to her prejudice in selecting claims to pay out.

The principal issue in this appeal is whether an insurance company, before it pays third party claims under an insurance policy which has a contractual monetary limit on the aggregate of claims arising out of one event which equates with the statutory minimum cover, must (a) ascertain the total claims arising from the event and (b) where the total exceeds the limit, devise a scheme for the proportionate payment of the claims.

The Act provides (in section 3(1)) that it is not lawful for any person to use or cause or permit any other person to use a motor vehicle or licensed trailer on a public road unless there is in force an insurance policy in respect of third party risks that meets the requirements of the Act. Section 4(1) provides that that policy of insurance must (a) be issued by a person who is an insurer and (b) insure the persons specified in the policy:

"in respect of any liability which may be incurred by him or them in respect of any 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 or trailer mentioned in the policy on a public road."

MGI's policy of insurance contained a contractual limit of $1m on its liability for the aggregate of claims arising out of the same event. This contractual limit complied with section 4(2)(f) of the Act which provided:

"In the case of death or of bodily injury, a policy of insurance shall not be required to cover —

… (f) liability in respect of any sum in excess of one million dollars arising out of the total claims for any one accident for each vehicle concerned."

Section 10 (1) provides:

"If … judgment in respect of any such liability as is required to be covered by a policy under section 4(1)(b) (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then … the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability …" (emphasis in italics added)

In order to allow a person to invoke this provision to obtain payment directly from the insurer section 10(2)(a) provides for a plaintiff to give timely notice to the insurer of the legal proceedings which he or she raises against the insured person, as Ms Ram did in this case.

In the action against MGI Ms Ram applied for summary judgment under Order 14 of the Rules of the Supreme Court and after a hearing on 4 June 2004, at which MGI were not represented, Tiwary-Reddy J granted her decree for $81,000, interest and costs. On 4 October 2004 MGI applied for that order to be set aside and thereafter lodged Ms Vialva's affidavit (para 3 above). Myers J set aside the order on 21 February 2005 and the application for summary judgment proceeded to a contested hearing. In a judgment dated 12 April 2006 Ventour J granted summary judgment to Ms Ram, finding that MGI had failed to take into account the "total claims" as section 4(2)(f) of the Act required. He held that the insurance company had first to ascertain who the third party claimants were and the extent of their claims before it could apply the insurance moneys to meet the total claims. The Act did not give an insurance company a free hand to select which claims to settle and which third parties it would leave without a remedy. MGI should have applied to the court so as to devise a scheme to allow it to meet its liability under section 4(2)(f) of the Act.

MGI appealed that decision. On 5 February 2009 the Court of Appeal (Warner, John and Yorke-Soo Hon JJA) allowed MGI's appeal. In the leading judgment, Warner JA referred to Cox v Bankside Members Agency Ltd[1995] 2 Lloyds LR 437 and held that where an insurer had a limited fund to meet the claims of multiple claimants it was legitimate to pay the claims in chronological priority until the insurance was exhausted. She observed that the Act made no provision for the proportional or partial settlement of claims and there was no suggestion that MGI had paid out the sums up to the limit otherwise than in good faith. The court dismissed Ms Ram's application for summary judgment and, on the basis that the decision finally disposed of the whole action, dismissed the action. By order dated 28 September 2009 the Court of Appeal granted Ms Ram final leave to appeal to the Board.

Ms Ram's arguments before the Board generally followed her contentions before the Court of Appeal. In summary Mr Stanley Marcus SC submitted on her behalf:

(i) that MGI was required by necessary implication from section 4(2)(f) of the Act to take reasonable steps to ascertain the total claims before making any payments to claimants;

(ii) that by failing so to do, MGI had "lost the statutory protection of section 4(2)(f)"; and

(iii) that the evidence presented by Ms Vialva (a) suggested that MGI had paid out claims after it had received intimation of Ms Ram's claim against its insured on 22 January 1998, (b) showed that two actions (referred to in para 3 above) had been raised against...