This blog was launched by Nicholas Bevan in April 2013 to alert his fellow legal professionals to the systemic illegality that permeated the UK's national law provision for compulsory third party motor insurance. Major reforms have resulted. Unfortunately, Brexit has stalled this process, making this blog largely redundant. Earlier posts are retained here as archive material.
Dr Nicholas Bevan
Tuesday, 10 March 2015
MINISTER LOSES DELANEY APPEAL
The Court of Appeal’ decision
Yesterday the Court of Appeal delivered its judgment in Delaney v
Secretary of State for Transport  EWCA Civ
172. It is a humiliating defeat for the minister.It upholds Mr
Justice Jay’s decision to award Francovich
damages against the Secretary of State for failing to properly implement the
Second European Directive On Motor Insurance(84/5/EEC). This is a unanimous
decision by Lords Justices Richards, Kitchin and Sales.
In delivering the only reasoned judgment Richards LJ stated
that he had no hesitation in rejecting the Secretary of State’s contention that
the Directives conferred a discretion on member states to introduce additional liability
exceptions to those expressly sanctioned by the directives.
The only exclusions of liability that the Motor Insurance
Bureau can lawfully impose on an applicant are those expressly permitted by
Article 1(4) itself (now set out in Article 10(2) of the consolidated Sixth
European Directive On Motor Insurance (2009/103/EC).
Richards LJ explained the Minister’s interpretation of
Article 1(4), ran ‘counter to the aim of
protecting victims which is stated repeatedly in the directives and suffuses the
reasoning of the Court of Justice in the case-law. That aim is just as valid
and important in the Article 1(4) context as it is in the other contexts
considered in the cases. As the Court said in Ruiz Bernaldez, at paragraphs
17-18 of its judgment, Article 1(4) was one of the measures by which the aim of
protection of victims was developed and supplemented’.
He also referred to European case law to the effect that,
Article 1(4), as a derogation from the basic compensatory requirement, must be
strictly construed. The underlying
policy here is to avoid disparities across the European Union. If member states were allowed a discretion to
introduce their own additional exclusions this would undermine the legislative
aim of the directives.
He upheld Jay J’s ruling that clause 6.1(e)(iii) is
incompatible with the European directives.
He also upheld Jay J’s finding that the breach was
a serious one, given the lack of any
appreciable discretion in the
matter;sufficiently serious to give rise to Francovich
damages. Jay J had been right to
concentrate on Ruiz Bernaldez as he did when determining whether the minister
had been justified or not in sanctioning the additional exclusion of liability
back in 1999. Richards LJ explained why:
‘although the judgment of the Court in [(Case
C-129/94) Ruiz Bernaldez ] was concerned specifically with the
obligation to provide insurance cover and not with the obligation under Article
1(4), the reasoning in it had a direct bearing on Article 1(4) and supported
the judge's interpretation of the article.’
Leave to appeal to the Supreme Court has been refused.
The original claim
Sean Delaney’s claim arose out a road accident back in
November 2006 in which he sustained a serious head injury. It was common ground that he was a passenger
in a car driven by Shane Pickett and that Pickett was entirely responsible for
causing the accident. The expensive
Mercedes sports car in which Delaney and Pickett were travelling was insured
with Tradex Insurance Services Ltd.
Unfortunately the case was complicated by the discovery of
substantial quantities of cannabis tucked away in the clothing of both the
unconscious driver and his passenger.
The trial judge found that they were engaged in drug dealing at the time
of the collision.
It should be noted however, that Delaney and Pickett’s nefarious
purpose merely provided the context for the accident, they were not
intoxicated; bad driving practice was the sole cause of the accident.
His claim against Pickett and Tradewise failed at first
instance. His appeal in Delaney v Pickett  EWCA Civ 1532 resulted in a
Pyrrhic victory. This is because although
he able to succeed against driver, Pickett did not have the means with which to
satisfy Delaney’s substantial claim. As to his insurer, the Court of Appeal
held that as Tradewise had obtained a declaration under section 152 Road
Traffic Act 1988 its policy was rendered void (on grounds of material
non-disclosure). This meant that Pickett
was effectively an uninsured driver. It
then proceeded to apply a literal interpretation of clause 6(1)(e)(iii) of
Uninsured Drivers Agreement 1999. This clause
purports to entitle the MIB to exclude any liability to compensate where the
passenger knew or ought to have known that the vehicle was being used in the
course of or furtherance of a crime.
As I pointed out at the time, both in the New Law Journal (see
Trial & Error,
20 April 2012) and the Journal of Personal Injury Law, (see my case comment on Delaney v Pickett in issue 1 of 2012) that
decision was clearly wrong. What is remarkable
about it is that it does not seem to have occurred to anyone involved (neither
the claimants solicitors, the learned QCs, the trial judge nor even to the
three lords justices of appeal) to question whether clause 6 is compatible with
the comprehensive cover principle required by the European directives on motor
insurance. So no attempt was made to
apply a European law consistent interpretation of clause 6. By the time they woke up to the significance
of the European law it was too late to raise this before the Supreme Court.
Matters were eventually put right in second action ably
presented by Philip Moser QC and Eric Metcalfe of Monkton Chambers.
This second action sought Francovich damages from the Secretary of State for Transport on the
ground that he had been denied compensatory relief because the Minister had
failed to fully implement the Motor Insurance Directives. The gravamen of its case was that the crime
exclusion in clause 6(1)(e)(iii) did not conform with the single permitted
exclusion in article 1(4) of the Second European Directive on motor insurance (84/5/EEC). This can only be invoked against ‘persons who voluntarily entered the vehicle
which caused the damage or injury, when the body [i.e. the Compensating Body,
which in the UK is the Motor Insurers Bureau] can prove that they knew the
vehicle was uninsured’.
Mr Justice Jay found the Minister liable for a serious
breach of the Directives. The Directive’s
meaning was held to be ‘close to being
self-evident’ and the CJEU case law ‘unequivocal’.
He also held that the breach was neither inadvertent nor
excusable and then continued: ‘the
Defendant is guilty of a serious breach of Community law in circumstances where
its room for manoeuvre under the Directives was closely circumscribed. It did
not have a wide discretion. Its
obligations under the Directives, and their relevant confines, were quite
clear, and - in the absence of knowing the actual reason for this policy
decision - the best that may be said is that the Defendant decided to run the
risk, which was significant, knowing of its existence.’
Some differences of emphasis
This latest Court of Appeal decision upholds Jay J’s first
instance decision in all material respects.
However a careful reading of this decision reveals a difference of
emphasis in some of its reasoning. For
example when it considered the importance of the principle breached, which is
part of the multifactorial test for determining the seriousness of an
actionable breach of European law, as outlined by Lord Clyde in Factortame
(No.5), it is not at all obvious that the Court of Appeal agreed with Jay
J’s view that the Directive’s aim of protecting victims of road traffic
accidents ‘was a principle of
second-order importance’, given the significance Richards LJ attached to the explanation within Bernaldez of the
protective purpose, (see above). This was a point that I took issue with in my
own commentary on the first instance decision: see A World Turned Upside Down, JPIL issue 3 of 2014. We know now, from the CJEU’s ruling in Damijan Vnuk v Zavarovalnica Triglav
C-162/13, that this protective purpose has been promoted to rank in top equal
place in importance with the aim of liberating the movement of people and
vehicles within the European Union, see my September 2014 blog: VNUK
RULING: ROAD TRAFFIC ACT 1988 BREACHES EU LAW.
Another point of difference is the way
the Court of Appeal considered the views expressed in Advocate General Lenz's Opinion to the Courtof Justice in Bernadezon the
thorny issue of the proper scope of the role of the compensating body (the
MIB). . Jay J opined ‘that, although the scheme of the Second
Directive is such that the insurer (if it exists) and not the national body should
pay compensation, provided that the system as a whole ensures complete
protection for victims there may be no objection in principle to the national
body having an enhanced role. This is exactly the position which obtains in
this jurisdiction on account of section 152(2) of the RTA 1988.’ This reflects the position of that the
learned Ward LJ took in EUI v Bristol Alliance Partnership
 EWCA Civ1267, paragraph 65 and it is also one that I have previously
criticised in robust terms.
However it would appear from the way Richards JL’s judgment
reviews the relevant European case law, (Case C-129/94) Ruiz Bernaldez , (Case C-537/03) Candolin , (Case C-356/05) Farrell  and (Case C-409/11) Csonka , that he shares this writers’ view that the MIB’s
role, when acting in its capacity as the UK’s compensating body, is strictly
circumscribed. In this context, it is
restricted to providing compensation for damage or injury caused by
unidentified or uninsured drivers. This
does not extend to the enhanced role of compensating victims where the vehicle
had some insurance in place but where the insurer is able to evade liability to
compensate the third party victim. At
paragraph 33 (vii) Richards LJ says as much: ‘Csonka shows that the obligation of that body to pay compensation is
expressly limited by the terms of Article 1(4) to damage or injury "caused
by an unidentified vehicle or a vehicle for which the insurance obligation
provided for in paragraph 1 has not been satisfied"’.
The relevant excerpt of the CJEU’s judgment in Csonka he was referring to is as
"29. The importance attached by the EU legislature to the protection of
victims moved it to supplement those arrangements by requiring Member States,
under art.1(4) of the Second Directive, to establish a body with the task of
providing compensation, at least up to the limits laid down by EU law, for
damage to property or personal injuries caused by an unidentified vehicle or a
vehicle for which the insurance obligation under art.1(1) of the Second
Directive, which refers to art.3(1) of the First Directive, has not been
satisfied. In order to alleviate the financial burden to be borne by that body,
Member States were free to exclude the payment of compensation by it in certain
cases or to provide for excesses.
30. The payment of compensation by such a body was therefore
considered to be a measure of last resort, envisaged only for cases in
which the vehicle that caused the injury or damage is uninsured or unidentified
or has not satisfied the insurance requirements referred to in art.3(1) of the
First Directive ….
33. As regards the determination of the actual circumstances in which
the insurance obligation laid down in art.3(1) of the First Directive may be
regarded as not having been satisfied, it is significant – as the Advocate
General stated in point 32 of his Opinion – that the EU legislature did not
confine itself to providing that the body must pay compensation in the event of
damage caused by a vehicle for which the insurance obligation had not been
satisfied in general, but made it clear that that was to be the case only
in relation to damage caused by a vehicle for which the insurance obligation
provided for in art.3(1) of the First Directive has not been satisfied, that is
to say, a vehicle in respect of which no insurance policy exists ….
34. It follows from the foregoing that … the payment of compensation
by such a national body, as provided for under the First and Second Directives,
cannot be regarded as the implementation of a guarantee scheme in respect of
insurance against civil liability relating to the use of motor vehicles;
rather, it is intended to take effect only in specific, clearly identified,
sets of circumstances." (Bold emphasis added)
This leaves no room for motor insurers to argue that they are
entitled to deflect their statutory liability under section 151 Road Traffic
Act 1988 and to treat insufficiently insured vehicles as being uninsured claims to be handled under the terms of
Uninsured Drivers Agreement 1999, save where expressly precluded from relying
on a breach of policy term by the Road Traffic Act 1988.
Accordingly the long establish convention
whereby thousands of so called ‘article 75’ claims are treated as uninsured
claims under the terms of the 1999 Agreement is manifestly inconsistent with
European law. Any scintilla of doubt was
dispelled by the recent ruling in Damijan
Vnuk, which confirmed in the clearest of possible terms that European law
requires the protection afforded to third party victims through compulsory
insurance to cover:
·any type of motor vehicle, ·any use made of it, provided its use is
consistent with its normal function, and ·to such use anywhere, whether on public or
This leaves little scope for the so called ‘article 75’
procedure. With the single permitted exception
under article 13 (which applies to a passenger whom the insurer can prove knew
the vehicle was stolen when they entered it) any other breach of policy term or
condition is irrelevant when it comes to deciding a third party victim’s proper
entitlement to third party cover under a European law consistent interpretation
of our national law.
18 years of inaction
The Court of Appeal was crystal clear in stating that
although Bernaldez was concerned with
the insurance obligation under article 3 of the First Directive (72/166/EEC),
as opposed to deciding the role of the compensating body under Article 1(4) of
the Second Directive, it was sufficiently clear from the underlying principles
upon which it relied that there was no room for member states to introduce or
permit to exclusions of liability not expressly authorised by the Directives.
This means that Bernaldez has a wide and general application that dates back to
that judgment of 28 March 1996; nearly 19 years ago. This principle applies with equal force to numerous
statutory and extra statutory restrictions, limitations and exclusions of
Writing on the wall
It is abundantly clear that not only will the Secretary of
State need to take urgent steps to revise the geographic and technical scope of
the duty to insure and the scope of third party cover, following the Damijan Vnuk ruling, but he will also
have introduce extensive revisions to the statutory and extra statutory schemes
he is responsible for. This will involve
extensive changes to Part VI of the Road Traffic Act 1988, the Rights Against
Insurers Regulations 2002 and both the Uninsured Drivers Agreement 1999 and the
Untraced Drivers Agreement 2003.
The present muddle is as deplorable as it was avoidable. The Minister was provided with chapter and
verse on the imperative for extensive reform in February 2013 and again in
response to his own consultation on the MIB Agreements which he simply ignored;
later abandoning the whole process.
The minister is responsible for this shambles; are no excuses.
Civil servants also need to learn from their past mistakes. It seems increasingly likely that successive
ministers have been advised to adopt, in a more or less unaltered form, the
Motor Insurance Bureau’s proposals for compensating victims of uninsured and
untraced drivers. One does not need to
be a expert in literary criticism to discern the authorship of the present
Agreements. Whist the Motor Insurers
Bureau professes to be a non profit making organisation, it is in reality an
organ of the multi-billion pound motor insurance lobby, no more; no less. Its board is comprised of senior executives
from each of the insurance companies authorised to underwrite motor insurance
and as its representative body it would be extraordinary if it were not
sensitive to the commercial the businesses interests it represents when submitting
its proposals to the Government.
It is obvious that the minister passively agreed to the Motor
Insurers Bureau’s proposal to insert a new crime exception to the Uninsured
Drivers Agreement in 1999, without troubling to consider whether this complied
with well established European law touching on this issue. I touched on these issues and on the
unconstitutional influence that powerful motor insurers exert over the Legislature
and the Executive in my New Law Journal article published in October 2014, Bad Law.
Lessons need to be learnt and defective law remedied.