Oldham Borough Council v Sajjad

Whether a motor insurance policy covers a particular activity is ordinarily determined by construing the policy and comparing the activity with the risk insured. An area-based restriction on the use of a vehicle is ineffective under section 148(2)(e) of the Road Traffic Act 1988, so far as compulsory third-party liabilities are concerned. The offending restriction must be treated as deleted. A person may therefore commit an offence by plying for hire outside the area of a hackney carriage licence while remaining insured for the purposes of section 143. Criminality of the activity does not, by itself, determine whether the insured risk is covered.

Oldham Borough Council appealed by way of Case Stated against the decision of Oldham Magistrates’ Court, which acquitted Mohammed Sajjad of using a motor vehicle without insurance contrary to section 143 of the Road Traffic Act 1988.

Mr Sajjad drove a vehicle licensed by Rossendale Borough Council to ply for hire in Rossendale, but not elsewhere. He picked up passengers in Oldham without a prior booking and pleaded guilty to unlawfully plying for hire. His insurance covered business use, including carrying passengers for hire or reward under a public hire licence. The central question was whether the insurance certificate remained valid for the activity in which he was engaged.

1. The appeal was dismissed. The magistrates’ answer to the Case Stated was correct, and costs were assessed at £5,000 including VAT.

2. Whether insurance covers a particular risk is ordinarily a matter of construction of the policy. Once the nature of the insured risk is identified, the court must determine whether the activity undertaken falls within that risk: Telford and Wrekin Borough Council v Ahmed and Ors was relevant in that respect.

3. The certificate covered business use, including the carriage of passengers for hire or reward under a public hire licence. The restriction limiting the public hire licence by reference to the licensing area purported to restrict use by reference to an area within which the vehicle was used.

4. Section 148(2)(e) of the Road Traffic Act 1988 renders such an area-based restriction ineffective in relation to liabilities required to be covered under section 145. Under section 148(1), the policy was to be read as if the offending restriction were deleted. The policy therefore covered the relevant third-party risk.

5. Adams v Dunne illustrated that the commission of a separate criminal offence does not itself invalidate insurance where the policy covers the driving activity. Telford and Wrekin Borough Council v Ahmed and Ors was distinguishable because the policies there excluded public hire altogether and contained no area restriction.

6. The reasoning concerning prohibited conditions in Singh v Solihull Borough Council supported the conclusion. The respondent’s unlawful plying for hire remained a separate offence, but it did not make him guilty of using a vehicle without insurance.

• High Court (Administrative Court): Oldham Borough Council appealed by Case Stated against the decision of Oldham Magistrates’ Court dated 26 February 2016. The appeal was dismissed with costs.