White v. White and The Motor Insurers Bureau

The House held that clause 6(1)(e)(ii) of the 1988 Motor Insurers' Bureau (MIB) agreement, which excludes MIB liability where the injured passenger "knew or ought to have known" the vehicle was uninsured, must be interpreted in the light of the Second Council Directive 84/5/EEC (the Motor Insurance Directive). The phrase "knew or ought to have known" is to be read restrictively and, in the context of that agreement, is to be co-extensive with the Directive's exception based on actual knowledge (including wilful blindness), not mere negligence. Because the trial judge's findings established carelessness rather than actual knowledge or wilful blindness, the exclusion did not apply and MIB was liable to satisfy the judgment.

The claimant, Brian White, was seriously injured as a passenger in a car driven by his brother, who was unlicensed and uninsured. Brian sued the Motor Insurers' Bureau under the MIB agreement that implements the Second Council Directive 84/5/EEC. Clause 6(1)(e)(ii) excludes liability where the injured passenger "knew or ought to have known" the vehicle was uninsured.

Nature of the claim: an injured passenger sought compensation from MIB under the 1988 MIB agreement after obtaining a judgment against the uninsured driver.

Procedural history: trial before Judge Potter (High Court) who found Brian did not actually know his brother was uninsured but ought to have known; Court of Appeal differed on interpretation; appeal to the House of Lords.

Issues framed:

• whether the phrase "knew or ought to have known" in clause 6(1)(e)(ii) should be construed to include mere negligence;
• whether the MIB agreement must be interpreted in conformity with the Motor Insurance Directive and, if ambiguous, whether the Directive required a narrow meaning of "knew" (actual knowledge including wilful blindness); and
• whether the Directive had direct effect against MIB as an emanation of the state (alternative argument).

Court's reasoning: the agreement was made to give effect to the Directive and must be interpreted so as to carry through the Directive's protection. The Directive permits exclusion only where the passenger actually knew the vehicle was uninsured (including cases of deliberate blindness), and exceptions are to be construed strictly. Although the Marleasing principle for interpreting domestic legislation in light of Directives is not directly applicable to private contracts, the purpose and matrix of the MIB agreement justify construing "ought to have known" so as to be co-extensive with the Directive's "knew". Mere carelessness or negligence does not amount to the requisite knowledge. As the trial judge's findings amounted to negligence rather than actual or wilful blindness, MIB's exclusion did not apply and MIB was liable. The House did not need to decide the separate question of direct effect against MIB.

Appeal allowed. The House held that the phrase "knew or ought to have known" in clause 6(1)(e)(ii) of the 1988 MIB agreement must be interpreted restrictively so as to be co-extensive with the exception permitted by Article 1(4) of Directive 84/5/EEC. "Ought to have known" in that contractual context does not embrace mere negligence; it extends to actual knowledge and states of mind equivalent to actual knowledge (including wilful blindness). The trial judge's finding of carelessness therefore did not bring the case within the exclusion and MIB remained liable.

Trial: High Court (Judge Potter), factual findings 13 March 1997; further judgment on Community law 12 March 1998; Court of Appeal (Mighell v Reading) [1999] 1 CMLR 1251; appeal to House of Lords, [2001] UKHL 9.