Dermot Homan (plaintiff/ respondent) v Anthony Kiernan (defendant/ appellant) and Lombard & Ulster Banking Ltd (defendant/ respondent).

Negligence - Road traffic accident - Vehicle subject to leasing agreement - Term of lease that vehicle be comprehensively insurer - No valid policy of insurance - Whether vehicle driven with consent of owner - Whether lessor liable for plaintiffs injuries - Road Traffic Act 1961 (No 24), section 118.

The Supreme Court (before Mr Justice O'Flaherty, Mr Justice Barrington and Mr Justice Murphy); judgment delivered 22 November 1996.

THE plaintiff was injured by the negligent use of an uninsured vehicle which was subject to a leasing agreement, a term of which was that the vehicle be comprehensively insured. The lessee had taken possession of the vehicle some days after the execution of the lease agreement and it is not until then that he was approved for a loan by the lessor.

On the date on which the lessee signed the form, the clause guaranteeing that it would be insured could not have been operative because there was no vehicle and no agreement in respect of which it could operate. The failure to insure did not vitiate the consent given to the lessee to drive the vehicle by the lessor and, therefore the lessor was liable for the plaintiff's injuries.

The Supreme Court so held in allowing an appeal from a decision of the High Court.

James Macken SC and Dominick Hussey BL for the plaintiff/ respondent; Rory Brady SC and John Gleeson BL for the defendant/ appellant; Eoghan Fitzsimons SC and Alexander Owens BL for the defendant/ respondent.

MR JUSTICE O'FLAHERTY said that in 1989 the first named defendant, Anthony Kiernan wanted to acquire a new Izuzu truck from Harris Commercials - and he entered a lease agreement - with the second named defendant, Lombard & Ulster Banking Ltd (Lombard). The lease agreement was dated 29 August 1989, but Mr Kiernan did not take possession of the truck until some days later and it was not until that occasion that he was approved for a loan in relation to the truck by Lombard's representative. Mr Kiernan gave evidence that he did not get the truck insured although under the terms of the lease he was required to have it insured. On 2 December 1989 the truck was negligently in collision with the plaintiff and he sustained damages which were agreed at the sum of £40,000.

Mr Justice O'Flaherty said that, the question that arose for decision was whether Lombard should, as owners of the truck, satisfy that judgment or whether it would fall to the Motor Insurers Bureau of Ireland to do so, Mr Kiernan having executed a mandate to enable the Bureau to deal with the proceedings.

Mr Justice O'Flaherty referred to section 118 of the Road Traffic Act 1961 which provides that where a person uses a vehicle with the consent of the owner for the purposes of determining the availability of the owner for injury caused by negligent use, then he shall be deemed to use the vehicle as the servant of the owner but only in so far as the user acts in accordance with the terms of such consent. Section 3(5) of the Act provides that "any reference in this Act to use of a vehicle with the consent of a person includes a reference to use with his implied consent and to use on his order".

Mr Justice O'Flaherty said that it was conceded that Lombard was the "owner" of the vehicle in question and the matter for resolution was whether the tact that Mr Kiernan did not have it insured in accordance with the lease meant that the driving was not with the consent, express or implied, of the owner. The trial judge had found for Lombard and said that it was not possible to transfer a liability vicariously onto the shoulders of the lessor unless there was a compliance with the terms of the agreement.

Mr Justice O'Flaherty then referred to the material terms of the lease including clause (4) which provided that "the lessee shall immediately after he has signed this agreement insure the goods - . . ". On the front page of the lease agreement it was stated. "To Lombard ... - (7)I/we have insured the vehicle in accordance with the terms of the agreement under the full comprehensive policy." Mr Justice O'Flaherty noted that when Mr Kiernan executed the agreement, he had not yet been approved for a loan and therefore this statement or representation was clearly inapplicable.

Tuning to the law, Mr Justice O'Flaherty referred to Buckley v Musgrave Brook Bond Ltd [1969] IR 440 which established that where the user of a vehicle had an original consent to such use, the owner had the onus of establishing that the consent did not apply to the particular circumstances of the case.

Mr Justice O'Flaherty said that it was conceded that Mr Kiernan did not have the vehicle insured and it would appear that his obligation under the terms of the lease was to obtain insurance cover "with an insurance company approved by the owner". If there was a breach of that obligation then the owner may insure as aforesaid and recover the costs thereof from the lessee forthwith. It was submitted on behalf of Lombard that the applicable clause was really clause (7) at the front of the agreement but, as already pointed out, Mr Kiernan had not been approved for a loan at that stage and so had no vehicle which he could have insured. Mr Justice O'Flaherty said that in any event, taking that to mean that there was an obligation on a person to have comprehensive insurance it must be in accordance with the terms of the lease and the related term indicated that the insurance was to be effected with an insurance company approved by Lombard.

It was submitted that if a party wanted to put a limit on the terms of a consent to user, he must do so, in a clear fashion and if consent had been given and an assertion was made that a person was operating outside the terms of the consent then the burden of proof rested on the person so asserting. Reliance was also placed on O Fiachain v Kiernan (unreported, High Court, 1 November 1985) where Mr Justice Keane had said that once the conclusion was reached that the car was on the occasion being used by the defendant with the consent of the finance company within the meaning of section 118, the fact that the owner did not consent to, the actual mode of user was immaterial. It was, accordingly, not material that the finance company had not consented to the driving of the motor car where the driving was not insured.

It was submitted on behalf of Lombard that the case was that Lombard gave the vehicle to Mr Kiernan conditional upon his having insurance and since he had not complied with the requirement to have insurance, then the consent was void. The obligation under clause (7) was to have comprehensive cover and this applied not only at the initial signing of the agreement but for its duration.

Mr Justice O'Flaherty said that the single critical question for resolution was whether the consent, which was undoubtedly given, was vitiated because of the lack of insurance. Mr Justice O'Flaherty said that it was not. At the date on which Mr Kiernan signed the form, clause (7) could not have been operative because there was no vehicle and no agreement in respect of which it could "operate. The fact that after the acceptance of his proposal Lombard did not check whether he had an insurance policy in force indicated that Lombard was not concerned about whether he had taken out a policy or whether he would keep it in force during the currency of the agreement.

Further, Mr Justice O'Flaherty said that it would be a great hardship on the general public, if there were no MIBI agreement, that leasing companies might let out vehicles on the road, as owners, and yet be in a position to say that the driving was not with their consent because no insurance had been taken out and this was against the policy of section 118.

In the circumstances, Mr Justice O'Flaherty said that the failure to have the vehicle insured did not vitiate the consent that Mr Kiernan undoubtedly had been liven to drive the vehicle by Lombard and the appeal was allowed.

MR JUSTICE BARRINGTON and MR JUSTICE MURPHY agreed with the judgment of Mr Justice O'Flaherty.

Solicitors: William Bradshaw (Dublin) for the plaintiff/respondent; Holmes O'Malley Sexton (Limerick) for the defendant/ appellant; Binchys (Dublin) for the defendant/ respondent.