Dr Nicholas Bevan

Dr Nicholas Bevan

Thursday, 5 June 2014


Department for Transport held liable for flouting the Motor Insurance Directives

On Tuesday 3 June Mr Justice Jay awarded Fracovich damages to a passenger who was gravely injured by an uninsured driver.  In Delaney v Secretary of State for Transport [2014] EWHC 1785 (QB) the judge held that the DfT has deliberately flouted superior European Community law in its implementation the European Motor Insurance Directives.

The Delaney case: brief facts

The MIB had previously refused his claim, relying on clause 6(1)(e)(iii) of the Uninsured Drivers Agreement 1999.  That clause entitled them to exclude any liability because it was established that he knew the vehicle was being used in the course of or furtherance of a crime.  The claimant’s appeal failed in Delaney v Pickett [2011] EWCA Civ 1532.  However that decision was remarkable because no one thought to argue that this clause was inconsistent with the European Motor Insurance Directives, so the issue as to whether the exclusion was lawful was never considered. 
Matters were eventually put right in this Francovich action.  Here, our national law provision for guaranteeing the compensatory rights of motor accident victims was put under proper scrutiny and it was found badly wanting by the judge. 

Department for Transport shamed

This decision cannot be anything other than a major embarrassment to the Secretary of State for Transport. 
As recently as July 2013 the Minister was blithely asserting in a statement of intent, in the face of numerous written submissions to the contrary, that...’ These [MIB] agreements fulfil the UK’s obligations under EU motor insurance law ....’ 

The court’s findings:

  • That the meaning of the relevant provisions within the European Motor Insurance Directives was clear and obvious to the point that they were ‘close to being self-evident’.
  • That there was no evidence that the DfT even took legal advice.
  • That the DfT had made a deliberate decision to add an exclusion of liability in clause 6 of the 1999 Agreement when it was clearly not permitted under European law.
  • The judge found the DfT ‘guilty of a serious breach of Community law’, of such severity as to warrant Francovich damages.
  • He rejected the DfT's plea that its infraction was somehow inadvertent or excusable. 
  • As to the conflict between its policy decision and what was required under European law, the judge said: ‘the best that may be said is that the Defendant decided to run the risk, which was significant, knowing of its existence’.
  • The judge repeatedly expressed his surprise at the ‘remarkable’ lack of any relevant documentary records, when ‘A provision of this sort must have been the subject-matter of detailed written discussion and deliberation within the department, and (one would have thought) a Ministerial submission. And yet we have nothing’.  As to the DfT’s failure to explain its policy position, he described this as a ‘deafening silence’.

Many other UK law provisions in this area conflict with European Law.  For example, the Minister’s statutory provision implementing article 3 of the Sixth Motor Insurance Directive civil liability insurance cover provisions within Part VI of the Road Traffic Act 1988 was held to be seriously flawed in Churchill v Wilkinson [2012] EWCA Civ 116).  In that case, the defect obliged the Court of Appeal to adopt a bizarre and unprecedented measure: it  effectively legislated an amendment to a statutory provision by adding a new ‘notional’ clause to section 151(8) of the 1988 Act as a stop gap measure.

DfT inaction and obfuscation

The facts speak for themselves:
  • Discussions with the MIB and various representative groups over much need reform to both the Uninsured and Untraced Drivers Agreements had reached an impasse by late 2009.
  • In February 2013 I set out the case for extensive reform of the UK statutory and extra-statutory provision in my four part series of articles published in consecutive weeks in the New Law Journal under the tile: On the Right Road?.  I warned the Minister that he faced judicial review or an infringement action if he continued to do nothing to rectify the many serious breaches of European Community law. 
  • This warning was repeated by myself and others in response to his flawed consultation that quickly followed, see: Review of the MIB Agreements. 
  • The Minister then ignored our calls for a dialogue.  Instead he preferred to consult with the MIB, who are most probably the true authors of the MIB Agreements.
  • When I was approached by the Law Commission and asked to prepare a detailed law reform proposal for them to submit to the Lord Chancellor, which I did, their involvement was later blocked by the Minister.
  • The Minister promised to publish a report setting out his detailed proposals for reforming the MIB Agreements in July 2013, that was postponed to the Autumn of 2013 and yet we have heard nothing more.

Infringement Complaint

It can hardly be very surprising then, when every attempt to persuade the Minister to discharge his legal obligations had been thwarted, that I should resort to presenting a formal infringement complaint to the European Commission.  This was filed in late August 2013.  The complaint identifies over 40 instances of potential breach of Community law in our statutory and extra statutory national law provision for victims of motor accidents.
The European Commission has decided to act on the infringement complaint.  In March 2014 it incepted the EU equivalent of our pre action protocol enquiry procedure by asking the UK Government to explain how it implements the Directives across a number of different areas; calling for a response.  

Unfortunate timing

Mr Justice Jay’s ruling could hardly have come at a worse time for the Minister, given that he has exposed the DfT for deliberately flouting the minimum standards of protection imposed under the Directives.

Implications of Delaney

This decision has profound implications for all RTA practitioners: 
Firstly, is demonstrates that our national law provision for protecting victims' compensatory entitlement cannot be taken at face value. 
Secondly, when the correct interpretive approach is applied to our statutory and extra-statutory provision in this area it is revealed as being replete with unlawful exclusions, limitations and exceptions which favour insurers at the expense of innocent victims.  This applies not just to the MIB’s duty to compensate under the Uninsured Drivers Agreement 1999 but equally to the duty to insure and the insurer’s duty to indemnify under Part VI of the Road Traffic Act 1988 (see Churchill above);to the EC Rights against Insurers Regulations 2002; as well as to both the MIB Agreements. 
Thirdly, the evidence suggests that many of these defects are the result of deliberate policy decisions that the DfT have taken but where, strangely, no documentary evidence relating to that decision survives.  As a result, all our national law provision in this area is to be treated with circumspection. 

Fourthly, the judgement ignores the unanimous Court of Appeal ruling in EUI v Bristol Alliance Partnership [2012] EWCA Civ 1267 that wrongly confines the application of an important CJEU ruling in Rafael Bernaldez Case C-129/94 to criminal cases. I say wrongly because the Bernaldez ratio has been extended by the CJEU to civil liability scenarios in a number of subsequent rulings.  Jay J applied the Bernaldez ruling as well as those of Candoline Case C-537/03 and Farrell v Whitty, Case C-356/05 to interpret the MIB Agreement.  These rulings support only a very restrictive interpretation of the exclusions of liability permitted by the Directives to those expressly provided for within the Directives.  This is confined to the provision within article 10.2 of the Sixth Directive (article 1.4 of the Second Directive), namely: against ‘persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured.’
Fifthly, it confirms the long line of Court of Justice rulings to the effect that the only circumstances in which a compulsory third party motor insurance policy can exclude or restrict liability to indemnify a third party victim for damage is that set out in what is now article 13 of the Sixth Motor Insurance Directive (article 2.1 of the Second Directive), this is restricted to ‘persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen’.  This puts in doubt the ability of an insurer to apply, ex post facto, for a court declaration to the effect that an insurance policy is void for material non disclosure or misrepresentation, even though this is expressly provided for under s152 of the 1988 Act.  Although this occurred in Delaney it was not raised as a contentious issue; perhaps it should have been. What is practically beyond any doubt is the fact that policy exclusions and restrictions not specifically listed in s148 of the 1988 Act as void against a third party (e.g. restrictions in use) are unlawful under Community law.  This goes against the recent and unanimous ruling by the Court of Appeal in EUI above, even so it is still bad law. Many other infractions exist within this field of law.

Call to action

It is our role as claimant representatives to identify and challenge unlawful restrictions to our clients’ legal entitlements.  These issues, where they exist, should be flagged up at the pre action protocol stage, and challenged in the first instance proceedings; not years later.  It has been settled law since 1984 that our national courts must apply superior Community law, see Case 14/83 Von Colson and Kamann [1984] ECR 1891, paragraph 26: this applies to District Judges and Justices of the Supreme Court alike.  Ultimately, the exercise of our clients’ legal rights under the Directives does not depend on the DfT transposing them into national law but it does depend on legal professionals spotting and contesting unlawful infringements to full and fair compensation under the rule of law.
Competency in European law is an essential requirement in RTA tort law, just as much as it is in employment law or health and safety law.   We are all European lawyers now; ignorance is no excuse. 

DfT in disarray

The DfT’s policy in this area is not just discredited by this decision, it is in tatters.  The European Commission is investigating widespread infringements in this area and so major reform is likely.  In the meantime opportunities for successful legal challenges are legion.  

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