R (Moreton) v Medical Defence Union Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice NEWMAN: |
| Judgment Date | 26 July 2006 |
| Neutral Citation | [2006] EWHC 1948 (Admin) |
| Docket Number | Case No: CO/3152/2005 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 26 July 2006 |
[2006] EWHC 1948 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Newman
Case No: CO/3152/2005
Mr A ULLSTEIN QC and Ms S HENNESSY (instructed by Irwin Mitchell incorporating Alexander Harris) for the Claimant
Mr R SNOWDEN QC, Mr M FORDHAM and Mr B KENNELLY (instructed by Fladgate Fielder) for the Defendant
I have before me a preliminary issue as to whether the defendant, the Medical Defence Union Limited (hereafter the MDUL), is amenable to judicial review, either because it is a "public body" or because it is exercising a "public function" in a respect which affects the claimant ( CPR 54.1(2)(a)(ii)). Bean J. ordered the issue to be tried and the grant of permission was:
"limited to whether the impugned decision is amenable to judicial review. The grant or otherwise of permission on the other issues is to await the court's decision on the preliminary issue".
The claimant is one of a number of individuals bringing private law proceedings against Melvyn Megitt, an orthodontist, arising out of allegedly negligent treatment carried out by him. The directors of the MDUL decided not to provide Mr Megitt with indemnity against the claimant's claim, which indemnity was one of the possible discretionary benefits of his membership of the MDUL.
A substantial number of individuals have brought similar claims against Mr Megitt. The MDUL has agreed to provide indemnity against three claims, but in all other cases it has declined to provide assistance. It gave no reasons for its decision. It is not in doubt that if the decision stands, some seventy-four claims brought against Mr Megitt will have to come to an end, since he has not the financial resources necessary to satisfy any judgments which might be obtained.
It will be apparent from these uncontested facts that the MDUL's decision will give rise to significant hardship to many individuals. It can be said that, whatever the correct legal outcome of this preliminary issue, the character of discretionary indemnity gives rise to concern on a broad front. It highlights the existence of a disparity between discretionary indemnity and the terms provided to practitioners by insurance companies. In the view of the MDUL, discretionary indemnity is not as satisfactory as that which is available under an insurance contract. The MDUL therefore also provides an insurance contract as a benefit of membership. As I shall have cause to recite later in this judgment, it is to be noted that this view is not shared by another significant provider of discretionary cover, namely Dental Protection Ltd (DPL), and its associated company, the Medical Protection Society Ltd (MPS). In a news release on 9 th November 2005 the Chief Executive of the MDUL stressed that only a regulated insurance policy provides adequate safeguards for doctors and patients in connection with negligence claims. He stated:
"The MDU wholeheartedly supports the Department of Health's policy to require mandatory clinical negligence indemnity for all healthcare professionals, but we believe very strongly it should be either through employers' indemnity or an insurance contract. The UK is very much out of step in that discretionary indemnity still exists. We remain surprised that the Department continues to countenance discretionary indemnity, with all its uncertainties, in the light of the Australian Government's recent decision that all Australian doctors and dentists must be insured. Discretionary indemnity is no longer acceptable there."
These proceedings for judicial review constitute an attempt to redress an adverse consequence of discretionary cover affecting the claimant, by the application of public law review to the exercise of discretion. In short, the claimant's case is that, notwithstanding the MDUL's legal character and status as a company limited by guarantee, providing discretionary membership benefits, on a mutual basis, under a statutory contract between itself and its members, pursuant to its Memorandum and Articles, it is nevertheless subject to public law scrutiny and review in connection with the exercise of its discretion whether to indemnify one of its members. The argument has not been extended to any other of the numerous discretionary powers held by the MDUL. Mr Ullstein QC has manfully sought to overcome the legal hurdles to the claimant's case, but, in my judgment, the law is clear and the attempt fails.
The nature of the MDUL
The MDUL is a private company limited by guarantee. Its members are doctors, dentists and other healthcare professionals who, in return for an annual membership fee, are afforded the right to request certain discretionary membership benefits, including legal advice and assistance and the provision of indemnity in respect of claims made against them. (See, in particular, Article 48(3) of the Memorandum and Articles of Association). It operates on a mutual basis providing any such discretionary benefits from funds contributed by its members. It is not an insurance company. (See Medical Defence Union Ltd v Department of Trade [1980] Ch 82).
Section 14 of the Companies Act 1985 provides that its Memorandum and Articles of Association should constitute a statutory contract between the MDUL and its members, and govern the scope and manner in which its directors exercise their powers. The management of the affairs of the MDUL, in the exercise of all powers on behalf of the MDUL, is in the hands of its board of management or any committee or agent authorised by it. The members of the board of management are, for all purposes, the directors of the company. Article 48 provides for a discretion to:
"… grant from the funds of The MDU to any member or any applicant for election to membership …. an indemnity wholly or in part with regard to any action, proceeding, claims or demands by or against them in respect of any matter concerning or affecting whether directly or indirectly the professional character or interests or conduct in a professional capacity of any such member …".
Article 48(3) provides:
"Any such indemnity may be granted or terminated by resolution of the Board of Management or any authorised committee or decision of any authorised agent and the grant of indemnity in every case shall be made only upon such terms and conditions as the Board of Management committee or agent shall think proper and it shall rest only in the absolute discretion of the Board of Management committee or agent in every case to limit or restrict the grant of such indemnity or altogether to decline to grant the same or to determine any indemnity so granted without assigning any reason."
A member is not entitled to insist on the exercise of a discretionary power in his or her favour. In the Medical Defence Union Ltd v Department of Trade, Sir Robert Megarry VC characterised the right of the member as comprising "Merely a right to have his request fairly considered by the council or one of its committees". The case required the court to determine the question whether the contract between each member and the MDUL was a contract of insurance for the purposes of the Insurance Companies Act 1974. The Vice Chancellor held that, although the right to which the contract gave rise was a "benefit", it was not itself of the nature of money or money's worth. Further, it did not satisfy the requirements for a contract of insurance and, since subscriptions were unaffected by claims and the general nature of the Union's work was far removed from that carried on by those concerns generally accepted as undertaking contracts of insurance, he granted a declaration that it was not an insurance company which carried on any class of insurance business for the purposes of the 1974 Act.
The claimant has not sought to challenge the correctness of this decision. Nor has the claimant suggested that insurance companies who do provide indemnity to doctors, dentists and other healthcare professionals in connection with the discharge of their professional responsibilities are subject to judicial review. This realistic recognition of the position nevertheless points up a central difficulty for the argument that the MDUL is subject to judicial review because it has been based upon the proposition that the MDUL is so woven into the fabric of public regulation or into a system of government or governmental control as to make it subject to judicial review.
The claimant's argument
The terms of the argument reflect the observation of Sir Thomas Bingham MR, as he then was, in the case of R v The Jockey Club, ex parte Aga Khan [1993] 1 WLR 909 at 921. Having reviewed certain parts of the judgment of the Court of Appeal in R v The Panel on Take-overs and Mergers, ex parte Datafin Plc [1987] QB 815, Sir Thomas Bingham observed as follows:
"The effect of this decision was to extend judicial review to a body whose birth and constitution owed nothing to any exercise of governmental power but which had been woven into the fabric of public regulation in the field of take-overs and mergers. R v Advertising Standards Authority Ltd ex parte Insurance Service Plc (1989) 2 Admin.L.R.77 appears to me to be a precise application of the principle thus established to analogous facts".
Three principal conclusions were formulated to comprise the steps in the argument of Mr Ullstein. In turn, he submitted they led to the conclusion that the MDUL has been woven into the fabric of public regulation in connection with doctors, dentists and...
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