No Right of Recoupment under Section 151(8) After Policy Avoidance under Section 152(2)
Ian Whyte v David Arthur [2025] CSOH 47

1. Introduction

Ian Whyte, a passenger injured in a 2017 road-traffic collision, sued the driver (David Arthur), his motor insurer (UK Insurance Ltd) and various third parties in the Scottish Court of Session. During the pleadings UK Insurance had already settled Mr Whyte’s claim in its capacity as an Article 75 insurer for the Motor Insurers’ Bureau (MIB), because the driver was uninsured. The second third party, Lauren Ruth Methven, had originally procured the policy on the vehicle but had done so fraudulently; UK Insurance had avoided that policy in 2019 under section 152(2) of the Road Traffic Act 1988 (RTA 1988).

The core issue at the “debate” (pleading relevancy hearing) was whether, notwithstanding that avoidance, UK Insurance could rely on section 151(8) RTA 1988 to recoup the damages it had paid from Ms Methven. Lady Haldane held it could not, dismissed the claim as directed against Ms Methven, and in doing so crystallised an important rule on the interaction of sections 151 and 152 of the RTA 1988 and the MIB scheme.

2. Summary of the Judgment

• By obtaining a declarator of avoidance under section 152(2), UK Insurance extinguished any liability it might otherwise have had under section 151 to satisfy judgments.
• Because no liability arose “under section 151”, UK Insurance could not invoke the recoupment mechanism in section 151(8).
• Once a policy is avoided ab initio, the driver (and any putative insured) becomes “uninsured”; compensation is then channelled through the MIB, whose nominated Article 75 insurer acts only as agent, not as a statutory insurer under section 151.
• English Court of Appeal authorities (Delaney v Pickett and Colley v Shuker) squarely support this analysis and are to be followed absent compelling Scots-law reasons to differ.
• No further factual inquiry was required; the issue was purely one of statutory construction.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

Delaney v Pickett [2012] 1 WLR 2149 (CA)

• Policy avoided under s.152(2) for non-disclosure; insurer nonetheless handled claim as Article 75 insurer.
• Court recognised that, following avoidance, liability to the victim falls on the MIB (via the appointed insurer), not on the policy insurer under s.151.

Colley v Shuker & MIB [2021] 1 WLR 1889 (HC & CA)

• Extensive discussion of UK’s obligations under the EU Motor Insurance Directives.
• Confirmed that a declaration under s.152(2) “releases the insurer … from any obligation arising under section 151”.
• Reiterated that the injured party can sue the MIB directly; the vehicle is treated as uninsured.

Lady Haldane treated these English decisions as highly persuasive on a UK-wide statute. They collectively establish that once s.152(2) is engaged, s.151 falls away entirely.

3.2 The Court’s Legal Reasoning

1. Statutory Textual Analysis
   Section 152(2) expressly begins “No sum is payable by an insurer under section 151… if he has obtained a declaration…”. Therefore, the pre-condition for recovery in s.151(8) (“Where an insurer becomes liable under this section”) is never satisfied.
2. Structural Reading of Part VI RTA 1988
   Section 151 presupposes the continuing existence of a valid policy at the date of judgment. Section 151(5) (obligation to satisfy despite avoidability) applies after judgment, whereas a successful s.152(2) declaration (here obtained before the personal-injury action started) removes the policy ab initio; thus s.151(5) is not triggered.
3. Policy Coherence with the MIB Scheme
   Allowing insurers both (a) to avoid a policy, and (b) to recoup payouts from the fraudulent proposer, would undermine the raison d’être of the MIB as “insurer of last resort” funded by the wider industry. Parliament balanced risk-allocation by: • giving insurers a choice—honour the policy or avoid it—not both; • but if they avoid, MIB (and ultimately the market) carries the victim’s loss.

3.3 Anticipated Impact of the Decision

• Scottish Precedent – First Scottish authority squarely adopting Colley logic; Outer House practitioners can cite it as binding at first instance.
• Insurer Strategy – Insurers must weigh the financial implications: avoiding a policy bars future recoupment from the fraudulent insured; they can still seek non-statutory remedies (e.g., deceit) but not s.151(8).
• Pleading Practice – Claimants and defenders should plead MIB liability correctly; naming the Article 75 insurer is unnecessary if no direct cause of action exists.
• Legislative Reflection – Decision underlines that the post-2019 amendment (requiring declarations before the accident) has tightened avoidance opportunities; future reforms may further restrict insurer defences.

4. Complex Concepts Simplified

• Section 151 RTA 1988 – Creates a statutory guarantee: if a motor insurer issued a policy, it must satisfy third-party judgments even where it could avoid the policy.
• Section 152(2) – Provides a “get-out” if the insurer proactively obtains a court declaration that the policy was induced by fraud or non-disclosure, absolving it from s.151 liability.
• Article 75 Insurer – Under the MIB’s constitutional documents, the insurer that issued (or should have issued) the policy is appointed to administer any claim on the MIB’s behalf; it pays, but strictly as agent.
• Motor Insurers’ Bureau (MIB) – An industry-funded body stepping in where compulsory insurance is absent; operates through Uninsured and Untraced Drivers Agreements with the Government.
• Recoupment (s.151(8)) – Lets insurers recover from persons who caused or permitted use of the vehicle if the insurer was liable under s.151 in the first place.

5. Conclusion

Lady Haldane’s judgment cements a clear rule: once an insurer avails itself of the section 152(2) declaration and voids the policy, it steps outside section 151 entirely and cannot later rely on section 151(8) to claw back the compensation. Responsibility for compensating the injured party shifts to the MIB; the appointed insurer acts merely as agent. The decision promotes doctrinal clarity, aligns Scottish law with English authority, and gives insurers a stark choice—either honour the policy (and preserve recoupment rights) or avoid it (and forfeit those statutory remedies).