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.
