Bennett v Stephens & Anor

For a consent periodical payments order, the court’s task is to decide whether continuity of payment is reasonably secure. The court cannot vary the terms of a proposed consent order without the parties’ consent.

Where the agreed funding arrangement does not fall within the statutory methods of secure funding, the order must specify an alternative method. If that funding method later changes, the change may constitute a breach unless the statutory safeguards apply. An order referring to payment by the Motor Insurers’ Bureau does not bind the Bureau where it is not a party. It binds the insurer, which must procure the alternative payment or be in default.

The claimant had suffered serious injuries in a road traffic accident caused by the admitted negligence of the first defendant. The parties agreed settlement by periodical payments funded initially by the defence insurer, with the Motor Insurers’ Bureau (“MIB”) to pay if the insurer failed to pay within seven days.

Mackay J made a periodical payments order and a security order under which the orders would become final unless the MIB objected. The MIB objected to wording suggesting that it was directly bound and to reasoning suggesting that its liability would continue despite future changes to the 1999 Agreement. The central issues were whether continuity of payment remained reasonably secure and how the orders should be construed.

1. Outcome. The court remained satisfied that continuity of payment was reasonably secure. The periodical payments order was not to be read as binding the MIB, which was not a party.
2. The court’s task under Damages Act 1996, section 2(3), was confined to deciding whether continuity of payment was reasonably secure. Since the order was made by consent, the court could not vary it without the parties’ consent.
3. The risk that the claimant would lose any legally enforceable recourse against the MIB or an equivalent institution was so remote that it could be discounted for present purposes. That conclusion did not require the court to decide that the MIB would remain liable whatever future arrangements might be made.
4. Clause 4(2) of the 1999 Agreement addressed termination by notice. It did not address every possible form of termination or variation, including legislation enacted by Parliament, and could not bind Parliament. The claimant’s wider submission concerning accrued claims was therefore rejected.
5. Because MIB was not a source of payment specified in section 2(4), the order had to specify an alternative funding method under CPR rule 41.9. The order provided for payment first by the defence insurer and, upon non-payment within seven days, for the insurer to procure payment by the MIB.
6. If the MIB later ceased to be liable, that would amount to an alteration of the funding method and therefore a deemed breach under section 2(7), unless one of the statutory exceptions applied. The operative order bound the defence insurer, not the MIB. If the insurer could not procure MIB payment, the insurer would be in default.

First-instance decision. The judgment considered and clarified the effect of orders made by Mackay J on 14 July 2010 in [2010] EWHC 2194 (QB).