The High Court's recent judgments on consent settlement orders in Daniel Kuczak v. Treacy Tyres (Portumna) Limited may have wide-reaching implications for plaintiffs, defendants and defendant's insurers in personal injury actions in the context of the Social Welfare Consolidation Act 2005.
The principal judgment 1
The plaintiff had settled with the defendant and the defendant's insurance company regarding the injuries he suffered. While the plaintiff was injured and out of work, the Department of Social Protection (“DSP”) paid €90,000 to the plaintiff for disability benefits or other loss of earnings.
Normally, in such circumstances, the defendant (and therefore the insurance company, pursuant to the defendant's policy covering the claim) would be obliged to repay the DSP this €90,000 under section 343R (1) of the Social Welfare Consolidation Act 2005 (the “2005 Act”).
In this case, the Court was asked by the defendant and its insurer to insert a term in the order striking out the proceedings recording that the defendant was only 50% liable for the plaintiff's injuries, on the basis of the settlement that had been agreed between the parties. If the Court acceded to this request, then on the basis this order would be an “order of a court” for the purposes of section 343R (2) of the 2005 Act, the defendant (and its insurer) would only have to repay 50% of the social welfare benefits in question to the DSP.
The 2005 Act relates, in part, to the Recovery of Benefits and Assistance scheme, a system of recoverable benefits whereby social welfare payments paid to an injured person could be repaid to the State by the person liable for the relevant personal injury (or their insurer). For cases which are settled on the basis that the defendant is not fully liable, it was usual for the parties to ask the court to insert a term in the order striking out proceedings (a ‘consent settlement order') that liability be apportioned, for example, on a 50:50 basis for the purpose of the Recovery of Benefits and Assistance scheme. This request was often granted by the courts without issue.
In the principal judgment, the Court considered if such a term should be inserted in the consent settlement order, given the effect of including such a term under section 343R (2) of the 2005 Act. The Court found that the parties had entered into a private settlement agreement that the defendant was only 50% liable for the plaintiff's injuries, with the result of such allocation of liability being the defendant (and therefore the insurer) would be relieved of the obligation to repay the taxpayer €45,000 in social welfare payments if this allocation was included in the consent settlement order (on the basis this was an “order of a court”, as was required by S.343R(2)). This would reduce the overall amount the insurer would have to pay to settle the matter, with any savings then being available to fund the payment to be made to the plaintiff to settle the claim.
The Court considered if it would be “just or fair” to insert a such a term in a consent settlement order in circumstances where it would, in words of Mr Justice Keane (writing in the Irish Judicial Studies Journal), amount to a “subvention from the State (or taxpayer)” to insurance companies. The Court also agreed with the statement of the Law Reform Commission that the taxpayer should not have to “foot the bill for what might be regarded as a business expense of the insurance companies”.
The Court held (stressing its objectivity and lack of financial interest in the matter) that in this case the parties to the proceedings were deciding amongst themselves, for their financial benefit and without regard to the interest of the taxpayer, to what degree the defendant was at fault and the amount of social welfare benefits which should be repaid to the DSP. The Court took the view that the interests of the DSP (and therefore the taxpayer) were not represented in the settlement negotiations and the DSP had no say in having its property rights compromised.
The Court held that a defendant and their insurer could not claim to have an “order of a court” simply because they had successfully requested a court to insert a term (that was agreed between the parties to the personal injuries' claim on settlement) in a consent settlement order issued by a court striking out the proceedings. The Court's view was that the only purpose of inserting such a term in the consent settlement order is to persuade the Department of Social Protection that there is an “order of a court”, meaning that the defendant and their insurer are only 50% liable for the personal injuries in question.
The Court concluded that the parties to personal injuries actions should not be able to get the taxpayer to subsidise the settlements which are paid to personal injury plaintiffs by relieving defendants and their insurers of the obligation to reimburse the taxpayer for the amount of social welfare benefits that had been paid by the State to the plaintiff. The Court refused to insert the requested term in the order striking out the proceedings, on the basis that the DSP was financially prejudiced by the insertion of that term and was not party to the settlement negotiations.
However, the defendant's insurer requested that the Court agree to delay the perfection of the court order until they had sought the agreement of the Minister for Social Protection to insert such a term in the consent settlement order, and the Court agreed.
The supplementary judgment 2
In the supplementary judgment, Mr Justice Twomey noted that the Minister confirmed to the Court that she agreed with the interpretation of the Court in the principal judgment that a consent settlement order is not an “order of a court” for the purposes of s. 343R(2) of the 2005 Act. The Minister contended that section 343R(2), properly interpreted, simply does not apply to settlements. It was intended by the Oireachtas to apply only to cases in which there had been a full hearing by a court or a full assessment by the Personal Injuries Assessment Board.
The Court noted that the Minister's counsel stated that she did not accept that a defendant or its insurer is relieved from the obligation to reimburse the taxpayer by a consent settlement order. This would be to the financial detriment of the taxpayer, who is not a party to the settlement agreement or the court proceedings. The Court also noted that the Minister confirmed that she agreed with the Court that the reimbursement of the taxpayer takes precedence over the compensation paid to the plaintiff. The Minister was also not consenting to the insertion of the 50:50 apportionment of liability in the order striking out the proceedings, to be issued by the Court. Mr Justice Twomey lifted the stay on the order in the principal judgment, perfecting the order striking out the proceedings, with no term regarding the allocation of liability between the parties.
Consent settlement orders were previously seen as innocuous and granted on a daily basis by courts on the settlement of personal injury cases. However, this was not uniform practice, as some courts were willing to include the requested terms in orders striking out proceedings, while others were not. In the supplementary judgment, the Court noted that refusals to include such terms had not previously been appealed in the seven and a half years since section 343R(2) came into effect.
The Court (and the Minister) in the supplementary judgment aimed to strike the balance between the financial interests of the parties to the action and those of an unrepresented third party (the taxpayer). The parties are open to appeal the Court's decision in this case. In the absence of an appeal, this may end the current practice of parties in personal injuries cases seeking to include provisions regarding allocation of liability in consent settlement orders or claiming that they are an “order of a court” for the purposes of section 343R(2) of the 2005 Act. This could have a significant impact on the total amount defendants and their insurers will have to pay out on foot of settling personal injury claims, precipitating a change to current litigation practice and reserving practice of insurers.
Thanks to Adrienna McCarthy for her assistance in writing this article.
1 Daniel Kuczak v. Treacy Tyres (Portumna) Limited  IEHC 181
2 Daniel Kuczak v. Treacy Tyres (Portumna) Limited (No.2)  IHEC 619
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.