Department of Trade and Industry v St Christopher Motorists Association Ltd

[1974] 1 All ER 395

 

Categories: INSURANCE
Court: CHANCERY DIVISION
Lord(s): TEMPLEMAN J
Hearing Date(s): 16 OCTOBER 1973

Insurance – Contract of insurance – Nature of contract – Contract for the payment of a sum of
money on happening of specified event – Contract for the provision of services on happening of
event – Whether contracts of insurance limited to contracts for payment of sum of money.

The St Christopher Motorists Association (‘the association’), a proprietary club, was formed by the
defendant company for the purpose of advancing and protecting the interests of, and providing
facilities for, motorists and owners or users of motor vehicles. The association was owned and
managed by the defendant company. All fully licensed drivers over the age of 25 years were
eligible for membership of the association. The rules of the association provided that, in return for
an annual sum paid by a member, if an event should happen whereby he was unable to drive his
own car, either because he had had an accident or because he had been disqualified from driving
and, if he otherwise qualified for benefits under the rules, he was entitled to a ‘chauffeur service’
whereby, subject to certain limitations, the association would provide him with a driver to drive his
car, and if necessary, a car and driver. The claims made by members were examined by a
committee which assessed the merits of each claim and decided whether or not it would be
accepted. The decision of the committee was final, but it did not have an absolute discretion to
deprive a member of benefits if he qualified under the rules. Provided that he made truthful
declarations in his application form a member was entitled to the services provided by the
association. The Department of Trade and Industry sought a declaration that, by undertaking to
provide benefits for the members of the association in accordance with its rules, the defendant
company was carrying on insurance business and was an insurance company to which the
Insurance Companies Act 1958 applied.

Held – Contracts of insurance were not confined to contracts for the payment of a sum of money
but included contracts for some benefit corresponding to the payment of a sum of money. No
difference could be drawn between the defendant company paying a chauffeur on the one hand
and on the other hand agreeing to pay the individual member a sum of money which would
represent the cost to him of providing himself with a chauffeur in the event of his being disabled
from driving. It followed that the arrangements made by the defendant company on behalf of
members of the association amounted to insurance and the department was entitled to the
declaration sought (see p 400 h to p 401, b, post).
Dictum of Channell J in Prudential Insurance Co v Inland Revenue Comrs[1904] 2 KB at 664
applied.

Notes
For principles common to all insurances, see 22 Halsbury’s Laws (3rd Edn) 180, para 347, and for
cases on the subject, see 29 Digest (Repl) 42–51, 1–62.

Cases referred to in judgment

Grant v Knaresborough Urban District Council [1928] Ch 310, 97 LJCh 106, 138 LT 488, 92 JP 30,
26 LGR 165, 30 Digest (Reissue) 194, 232.
Prudential Insurance Co v Inland Revenue Comrs[1904] 2 KB 658, 73 LJKB 734, 91 LT 520, 29
Digest (Repl) 51, 61.
Rayner v Preston (1881) 18 Ch D 1, 50 LJCh 472, 44 LT 787, 45 JP 829, CA, 29 Digest (Repl) 448,
3282.

Page 396 of [1974] 1 All ER 395

Adjourned summons
By an originating summons dated 31 August 1973, the Department of Trade and Industry, sought,
inter alia, the following relief: (1) a declaration that, by undertaking to provide benefits for the
members of the proprietary club known as St Christopher Motorists Association (‘the association’)
in accordance with the rules of the association, the defendant company, St Christopher Motorists
Association Ltd, was carrying on insurance business and was an insurance company to which the
Insurance Companies Act 1958 applied; and (2) a declaration that, by accepting applicants as
members of the association, the defendant had effected contracts of insurance. The facts are set
out in the judgment.

J M Chadwick for the Department of Trade and Industry.

Patrick Talbot for the defendant.

16 October 1973. The following judgment was delivered.

TEMPLEMAN J. This is a summons by which the Department of Trade and Industry seek a
declaration that by undertaking to provide benefits for the members of the proprietary club known
as St Christopher Motorists Association in accordance with the rules of the association, the
defendant, St Christopher Motorists Association Ltd, is carrying on insurance business and is an
insurance company to which the Insurance Companies Act 1958 applies, and a declaration that by
accepting applicants as members of the association the defendant does effect contracts of
insurance. That raises the question of what is insurance? The department wish to find out whether
the defendant is carrying on insurance business because the department are contemplating
exercising powers under the Insurance Companies (Amendment) Act 1973 and earlier Acts, the
object of which is to ensure that when companies take premiums in return for specified
obligations, those companies keep in hand in some form or another sufficient moneys to be able to
provide a margin of solvency so that, in the public interest, the chances of insurance companies
falling on hard times, in a manner which has been painfully familiar in the past, will be eliminated
or, at any rate, reduced.
The court has no power to make a declaration by consent and is very reluctant to embark on
deciding any question without full argument. In the present case the defendant has very properly
taken the view that whatever the answer to this interesting problem the public interest is involved
in seeing that the defendant has a margin of solvency. The defendant has accordingly taken steps
by way of reinsurance to ensure compliance with the Acts and the defendant is not terribly
interested in what becomes then an academic question.
The Department of Trade and Industry, on the other hand, consider this an important matter
on which they would like to obtain a decision, and despite an invitation on my part to desist,
followed by some grumbling, counsel for the department cited to me Grant v Knaresborough
Urban District Council which, without hearing argument on the other side, I was disposed in the
circumstances to accept as compelling me to decide this application. The result is that I have
heard argument from the plaintiff and no argument from the defendant. From the point of view of
the defendant that was a perfectly proper attitude to take, and counsel for the department accepts
that any decision I make now can only be on the particular facts of this particular case. But he has
gone through the evidence and gone through the statutes to satisfy me that he is entitled to the
declaration which he seeks.
This summons having been brought by the department with a view to their exercising certain
statutory powers, one looks first of all to the statutes to see if they define insurance, and for
reasons which are understandable the result is a blank. There are various types of insurance
business on which the Acts concentrate, and no difficulty has ever arisen in practice, and therefore
there has been no all-embracing definition, and the probability is that it is undesirable that there
should be, because

Page 397 of [1974] 1 All ER 395

definitions tend sometimes to obscure and occasionally to exclude that which ought to be included.
I mention this to show that diligent search has been made in the statutes which are relevant, and
the result of that search has been fruitless.
So I must turn to consider what this defendant company does and to consider whether, in the
light of what it does and in the light of the authorities, it can be said that this defendant is carrying
on an insurance business. The defendant company was incorporated under the Companies Act
1948 and its objects are, as set out in the department’s affidavit, first:
 ‘To protect advance and further the interests of and provide facilities for motorists and drivers
or users of all types of mechanically propelled transport in any manner whatsoever … ’

And secondly:
‘To establish, promote, maintain and conduct an association of motorists and owners or users
of all types of mechanically propelled transport to be called St. Christopher Motorists’ Association
or any other associations, clubs or societies and to afford to the members thereof all privileges
and advantages thereof.’

Pursuant to those objects the defendant company formed the association, the St Christopher
Motorists Association, which is a proprietary club owned and managed by the defendant company.
The relationship between the members of the association and the defendant is that the members
of the club look to the defendant to provide benefits which the club offers to each member. In
other words, there is a contractual relationship between an individual member of the association
and the defendant company. To find out what that contractual obligation is and to see what
members are bound to do and what the defendant is bound to do for the members, one turns to
the rules. Counsel for the department, before coming to the rules, referred to an advertisement.
This says:
‘St. Christopher Motorists Association protects you against being unable to drive your car. For
as little as £10 a year the St. Christopher Motorists Association will help keep you on the road,
when you can’t be behind the wheel. Whether disqualification or injury prevents you from
driving, SCMA will provide you with a driver and, if necessary a car and driver, for up to 40 hours
a week, for a maximum of 12 months.’

The general nature of the contract appears from that advertisement; the motorist is to pay an
annual sum and in return for that annual sum, if an event happens under which he cannot drive
his own car, either because he has had an accident or because the law forbids him to drive, then
for certain specified periods the association will provide him with a driver to drive the car in place
of the member and, if necessary, a car and driver.
Now, broadly speaking, the rules do no more than that. Of course, there are, in summary, 40
rules and they contain various detailed restrictions on the rights of the member and there is a
description and elaboration of the circumstances in which benefits must be provided by the
association and thus by the defendant company.
The question arises whether the benefits to be provided are contractual or whether they are, in
large measure, discretionary. Rule 21 provides that the claim of a member shall be examined by a
committee and the committee shall assess the merits of each claim and decide whether or not the
claim is to be accepted. For example, a member may make a false declaration on his original
application for membership which would invalidate his claim, or a member may claim for a driver
as a result of an injury which was not sustained while driving his car. The decision of the
committee shall be final and they shall not be required to give any reason for their decision .
Counsel for the department submits, and I accept that, looking at the rules as a whole, that does
not vest in the committee an absolute discretion as to whether

Page 398 of [1974] 1 All ER 395

benefits are to be provided. It seems to me plain, from the other rules, which I need not go into in
detail, that if a member makes a perfectly truthful declaration on his application form, the material
parts of which require him to say whether he has had any earlier brush with the law, and answer
other questions designed to show whether, if I can use the phrase at this early stage, he is a good
or bad insurable risk, providing he does that, and providing that the event which happens is one
on which the association is to provide benefits, then he is entitled to the services offered by the
association.
So far this looks very much like insurance. A member pays an annual sum which looks like a
premium; he pays it because he is frightened of some uncertain disaster which may fall on him
and which will have adverse consequences to him, and the defendant company engages to see
that he is indemnified or compensated if the awful event happens. But if the member qualifies for
benefits he does not get a sum of cash or money from the defendant company. He is entitled to
what are called the benefits of the chauffeur service and the chauffeur service takes this form .
First of all I read from r 17:
‘It shall be the responsibility of a member claiming Chauffeur Service to nominate a suitable
person to act as chauffeur. Subject to the Committee’s approval of the nominee and acceptance
of the member’s claim, the Company will enter into an agreement with the chauffeur under
which his services will be available to the member, or alternatively, at the Company’s option,
offer to provide to the member, at the Company’s expense, the services of a hired motor car and
driver upon such terms and for such period as the Company may think fit, and subject to the
 member entering into an agreement with the Company in such form as the Company may from
time to time prescribe.’

The member, having sustained the disaster of not being able to drive himself may nominate his
own chauffeur, and if he nominates the chauffeur the company employs the chauffeur and pays
the chauffeur. The agreement to be entered into by the member is not, as I understand it,
anything more than a provision which enables the company to obtain from the member some
waiver of liability if the chauffeur or if the car provided by the company turns out to be unfit. Then:
‘In the event of a member being unable to find a suitable driver or hired car, the Company will
provide one or the other’.
There are certain limitations on the provision of a chauffeur or of a hired car and chauffeur. The
first is (r 18): ‘The maximum period for which the Chauffeur Service can be made available to any
member is 12 consecutive calendar months’. The second is (r 19):
‘The Company will only provide the services of a driver up to a maximum of 40 hours per
week. If a member wishes to employ a driver in excess of these hours, he must do so at his own
expense.’

Then there are various provisions whereby the member must provide evidence of the accident or
of a conviction and also various provisions whereby, if his conviction is something very serious—for
example, if, on taking the blood/urine test on which he is convicted he has more than double the
maximum alcohol allowable by law—then the committee will not normally offer the full chauffeur
service. But, as I have said, these are not discretionary in the sense of the company being able to
deprive a member of the chauffeur service if he is otherwise qualified and if he makes a proper
claim in a proper form. In return for that he is not paid anything but he is either provided with a
chauffeur paid by the company or he is provided with a hired car and chauffeur at the company’s
option, and I understand that option is usually exercised when the amount of running about which
the member ordinarily requires is very limited so that it would pay the company to provide a taxi
service rather than a full chauffeur service.

Page 399 of [1974] 1 All ER 395

In return for annual sums, if there happens an event which is uncertain at the date when the
member joins, then on that happening the member is entitled to services and those services are to
compensate him for the loss or disadvantage which has happened to him as a result of the
happening of the uncertain event. Prima facie that would appear to me to be coming very near
what, without any guidance, I would have thought was the essence of insurance.
Counsel for the department drew my attention to Chitty on Contractsa, in which the editor
says:
‘A contract of insurance is one whereby one party (the insurer) undertakes for a consideration
to pay money to or for the benefit of the other party (the assured) upon the happening of an
event which is uncertain, either as to whether it has or will occur at all, or as to the time of its
occurrence, where the object of the assured is to provide against loss or to compensate for
prejudice caused by the event, or for his old age (where the event is the reaching of a certain
age by the assured) or (where the event is the death of the assured) for the benefit of others
upon his death.’

That definition seems to cover the present case except for the requirement which is stated by
the editor to be necessary, namely, that the insurer must undertake to pay money to the assured.
Counsel for the department, as he was bound to do appearing without opposition, drew my
attention to the possible argument that in the present case it could be said that there is no policy
of insurance because the defendant company does not undertake to pay money to the member but
only to provide services whatever those services may cost. True, the company must pay money to
the chauffeur in order to employ him but that is not what the editor means when he says that the
insurer must undertake to pay money to or for the benefit of the other party.
The authority cited by Chittyb  for the assertion that a contract of insurance must provide for
payment of money to the insured is Rayner v Preston. That was a case where, in the then existing
state of the law, a purchaser of a house was not entitled to claim from the vendor a sum of money
paid to the vendor by an insurance company in respect of an insurance of the house against a fire
which took place after the contract but before completion. In that case it was never relevant to
consider whether every contract of insurance provided for payment of money to the insured, and
passages ((1881) 18 Ch D at 9) in the judgment of Brett LJ, on which the editor in Chittyc  relies,
must, I think, be read in that context. There is a slightly similar statement in Halsbury’s Laws of
Englandd  in which it is said:
 ‘Every insurance, whatever its nature, postulates that a sum of money will be paid by the
insurers on the happening of a specified event.’

For that proposition there is cited Prudential Insurance Co v Inland Revenue Comrs. In that case,
in consideration of weekly payments, the insurance company agreed to pay a certain sum on the
attainment by the insured at the age of 65 or in the event of his dying under that age a smaller
sum to be paid to his executors, and it was held that that was a policy of insurance on a
contingency depending on a life within the meaning of s 98 of the Stamp Act 1891. So again, as a
matter of decision, the case does not establish whether it was essential for money to be paid to
the insured, but Channell J considered the question of what is a policy of insurance. He said
([1904] 2 KB at 662, 663):

Page 400 of [1974] 1 All ER 395

‘The Attorney-General says that to constitute a contract of insurance it must be a provision
against something—against some loss or disadvantageous event. [Counsel for the appellants]
says that may be true as regards marine and fire policies which are indemnities against loss, but
it is not true as regards life policies, for a policy of life insurance is not a contract of indemnity.
But the question is whether that makes any real difference, and it seems to me that we must
inquire a little further into the nature of a contract of insurance. Where you insure a ship or a
house you cannot insure that the ship shall not be lost or the house burnt, but what you do
insure is that a sum of money shall be paid upon the happening of a certain event. That I think is
the first requirement in a contract of insurance. It must be a contract whereby for some
consideration, usually but not necessarily for periodical payments called premiums, you secure to
yourself some benefit, usually but not necessarily the payment of a sum of money, upon the
happening of some event. Then the next thing that is necessary is that the event should be one
which involves some amount of uncertainty. There must be either uncertainty whether the event
will ever happen or not, or if the event is one which must happen at some time there must be
uncertainty as to the time at which it will happen. The remaining essential is that which was
referred to by the Attorney-General when he said the insurance must be against something. A
contract which would otherwise be a mere wager may become an insurance by reason of the
assured having an interest in the subject-matter—that is to say, the uncertain event which is
necessary to make the contract amount to an insurance must be an event which is prima facie
adverse to the interest of the assured. The insurance is to provide for the payment of a sum of
money to meet a loss or detriment which will or may be suffered upon the happening of the
event. By statute it is necessary that at the time of the making of the contract there should be
an insurable interest in the assured. It is true that in the case of life insurance it is not necessary
that the interest should continue, and the interest is not the measure of the amount recoverable
as in the case of a fire or marine policy. Still, the necessity of there being an insurable interest at
the time of the making of the contract shows that it is essential to the idea of a contract of
insurance that the event upon which the money is to be paid shall prima facie be an adverse
event. Thus a contract depending upon the dropping of a life, such as a contract whereby two or
more people purchase a property as joint tenants with the object of the longest liver getting the
benefit of survivorship, would not be a contract of life insurance, although it would be a contract
with reference to a contingency depending upon a life or lives; it would not be a contract of
insurance at all. A contract of insurance, then, must be a contract for the payment of a sum of
money, or for some corresponding benefit such as the rebuilding of a house or the repairing of a
ship, to become due on the happening of an event, which event must have some amount of
uncertainty about it, and must be of a character more or less adverse to the interest of the
person effecting the insurance.’

Applying that definition to the present case, we have a contract not for the payment of a sum
of money but for some corresponding benefit, the provision of a chauffeur or the provision of a
hired car and chauffeur to become due on the happening of an event. The event is a physical
accident which debars the member from driving himself or the interposition of the law which
positively forbids him to drive himself. Then the event must have some amount of uncertainty
about it. Well, there is a great deal of uncertainty about it. The event must be of a character more
or less adverse to the interest of the person effecting the insurance. Well, that is fulfilled here
because it is adverse to the interests of the individual member that he should be immobilised
either for physical reasons or because of the requirements of the law.
That definition, including the learned judge’s careful pronouncement that there must either be
the payment of a sum or some corresponding benefit, seems to me to

Page 401 of [1974] 1 All ER 395

meet the present case and particularly so when, in substance, there seems to me to be no
difference between the defendant company paying a chauffeur on the one hand and on the other
hand agreeing to pay to the individual member a sum of money which would represent the cost to
him of providing himself with a chauffeur in the event of his being disabled from driving himself. I
cannot see any difference in logic between the two and therefore I see no reason why, in the
present particular case, the arrangement made by the defendant company should not amount to
insurance.
It does not follow that the definition given by Channell J in a case based on the facts with which
he was concerned and applied by me to the case in which I am now concerned is an exhaustive
definition of insurance. There may well be some contracts of guarantee, some contracts of
maintenance which might at first sight appear to have some resemblance to the definition laid
down by Channell J and which, on analysis, are not found to be true contracts of insurance at all. I
wish to guard myself, particularly in view of the fact that, as I have said, counsel for the
department has had no vocal opposition except mine, against deciding anything other than that
the rules and trade of the defendant company in the present case amount to insurance. Counsel
for the department himself suggested some further limitation in that the event which must happen
must not be an event within the control of the insurer, but whether that, in fact, be so, I need not
now decide. It is sufficient for my purposes that the narrow distinction which might have been
argued to differentiate the case of the defendant from the normal type of insurance, that narrow
distinction being the insistence that the defendant company pays for a service instead of paying
the member the amount which it will cost him to provide a service, is not one which enables the
defendant company to carry on business outside the provisions of the Insurance Companies Acts.
In the result, I am prepared to make a declaration in the terms of cll 1 and 2 of the summons.

Declaration accordingly.
Solicitors: Treasury Solicitor; Slowes(for the defendant).

Jacqueline Metcalfe   Barrister.

Footnotes
a
23rd Edn (1968), vol 2, p 477, para 991
b
Ibid, footnote 1
c
Ibid, footnote 1
d
3rd Edn, vol 22, p 180, para 347

Footnote

a
23rd Edn (1968), vol 2, p 477, para 991

Footnote

b
Ibid, footnote 1

Footnote

c
Ibid, footnote 1

Footnote

d
3rd Edn, vol 22, p 180, para 347