—(1) If after a certificate of insurance has been issued under section 4(9) to the person by whom a policy has been effected judgment in respect of any such liability as is required to be covered by a policy under section 4(1)(b) (being a liability covered by the terms of the policy) is obtained against any person insured by the policy then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to this section, pay to the Public Trustee as trustee for the persons entitled thereto —
any sum payable thereunder in respect of the liability including any amount payable in respect of costs; and
any sum payable in respect of interest on that sum by virtue of any written law relating to interest on judgments.
(2) Notwithstanding subsection (1) providing for the payment to the Public Trustee —
where the judgment is for a sum not exceeding the relevant amount, the insurer may pay the sum to the person or persons entitled to the benefit of the judgment; and
the right of action thereby created shall vest in the person or persons entitled to the benefit of the judgment payable thereunder.
(3) No sum shall be payable by an insurer under subsections (1) and (2) —
in respect of any judgment unless before or within 7 days after the commencement of the proceedings in which the judgment was given the insurer had notice of the bringing of the proceedings;
in respect of any judgment so long as execution thereon is stayed pending an appeal; or
in connection with any liability if before the happening of the event which was the cause of the death or bodily injury giving rise to the liability the policy was cancelled by mutual consent or by virtue of any provision contained therein and either —
before the happening of that event the certificate was surrendered to the insurer or the person to whom the certificate was issued made a statutory declaration stating that the certificate had been lost or destroyed;
after the happening of that event but before the expiration of a period of 14 days from the taking effect of the cancellation of the policy the certificate was surrendered to the insurer or the person to whom the certificate was issued made such a statutory declaration as aforesaid; or
before or after the happening of that event but within the period of 14 days the insurer commenced proceedings under this Act in respect of the failure to surrender the certificate.
(4) No sum shall be payable by an insurer under subsections (1), (2) and (3) if in an action commenced before or within 3 months after the commencement of the proceedings in which the judgment was given he has obtained a declaration that apart from any provision contained in the policy he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular or, if he has avoided the policy on that ground, that he was entitled to do so apart from any provision contained in it.
(5) An insurer who has obtained a declaration under subsection (4) in an action shall not thereby become entitled to the benefit of that subsection as respects any judgment obtained in proceedings commenced before the commencement of that action unless before or within 7 days after the commencement of that action he has given notice thereof to the person who is the plaintiff in those proceedings specifying the non-disclosure or false representation on which he proposes to rely and any person to whom notice of such an action is so given shall be entitled if he thinks fit to be made a party thereto.
(6) If the amount which an insurer becomes liable to pay under this section in respect of a liability of a person insured by a policy exceeds the amount for which he would apart from this section be liable under the policy in respect of that liability, he shall be entitled to recover the excess from that person.
(7) In this Act references to a certificate of insurance in any provision relating to the surrender or the loss or destruction of a certificate of insurance shall in relation to policies under which more than one certificate is issued be construed as references to all the certificates and shall where any copy has been issued of any certificate be construed as including a reference to that copy.
(8) Every judgment for a sum exceeding the relevant amount in respect of any such liability as is required to be covered by a policy under section 4(1)(b) shall provide that the sums payable under the judgment shall be paid to the Public Trustee as trustee for the persons entitled to the benefit of the judgment.
(9) The moneys received by the Public Trustee under a judgment in accordance with subsection (1) shall be distributed by him, after payment of all costs and fees, directly to the persons entitled in accordance with the judgment of the court and with any rules made under this Act.
(10) In this section —
“material” means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and if so at what premium and on what conditions;
“liability covered by the terms of the policy” means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.