Stych v Dibble & Anor

For the statutory motor-insurance exclusion to apply, the insurer must prove that the injured passenger knew, or had blind-eye knowledge, that the vehicle had been stolen or unlawfully taken. Mere carelessness, failure to enquire, or circumstances which would have prompted a prudent passenger to ask questions are insufficient. Blind-eye knowledge requires a suspicion that the relevant fact exists, a conclusion that it might well exist, and a deliberate decision not to ask questions to avoid confirmation. The Road Traffic Act 1988 must be construed, so far as possible, consistently with the Second Directive. The burden of proving the exclusion rests on the insurer. On the facts, the insurer failed to establish the required state of mind, so the liability was not an excluded liability.

The claimant suffered tetraplegia as a rear-seat passenger in a Range Rover driven by the first defendant, who had taken the vehicle from a garage without the owner’s permission. The first defendant was convicted of aggravated vehicle taking and judgment in default was entered against him.

The claimant sought payment from the second defendant, the vehicle’s insurer, under section 151 of the Road Traffic Act 1988. The central issue was whether the claimant knew, or had reason to believe, that the vehicle had been stolen or unlawfully taken within section 151(4), so that the liability was excluded.

1. Construction and burden of proof. The court held that section 151 of the Road Traffic Act 1988 must, so far as possible, be construed to fulfil the United Kingdom’s obligations under the Second Directive. The insurer therefore bore the burden of proving the facts bringing the liability within the exclusion in section 151(4), on the balance of probabilities.
2. Required state of mind. The words “knew or had reason to believe” were construed consistently with White v White and the Motor Insurer Bureau. They require actual knowledge or blind-eye knowledge. Blind-eye knowledge requires information from which the passenger concluded that the vehicle might well have been unlawfully taken, together with a deliberate refusal to ask questions lest the suspicion be confirmed. A failure to ask questions, without an existing suspicion or conclusion, is insufficient.
3. Earlier first-instance reasoning. The approach in McMinn v McMinn and Aioi Insurance Co, insofar as it treated section 151 as unconstrained by the Second Directive and allowed liability to be established without the passenger applying his mind to the issue, was rejected.
4. Meaning of “stolen or unlawfully taken”. The parties agreed that the issue could be decided on the basis that knowledge that the vehicle had been taken without permission was sufficient. The judge expressed reservations about whether that wide construction was compatible with the Directive, but did not decide the point because the claimant succeeded even on that assumption.
5. Application. The claimant was accepted as an honest and credible witness. He had no actual or blind-eye knowledge that the Range Rover had been taken without permission. The insurer therefore failed to prove an excluded liability under section 151(4).

The action could proceed to the next stage.