VNUK RULING: ROAD TRAFFIC ACT 1988 BREACHES EU LAW

VNUK RULING: ROAD TRAFFIC ACT 1988 BREACHES EU LAW

European Court of Justice ruling in Damijan Vnuk

A recent European Court of Justice ruling has wide-ranging implications for all motorists, their insurers and above all for the compensatory entitlement of accident victims.  

Unlawful restrictions with wide implications

EU member states cannot restrict the scope of their national law provision imposing the duty to insure against third party risk from motor vehicle use, the Court ruled.  This has immediate consequences not only for motor insurers, whose long established policy has been to restrict their contractual indemnity to claims arising out of accidents that occur ‘on roads or other public places’, but also for the premium paying public and motor accident victims.  

Damijan Vnuk

Road Traffic Act 1988 is defective:   the duty to insure should extend to farmyards and private property

In Damijan Vnuk v Zavarovalnica Triglav C-162/13, a Slovenian farmworker was knocked off a ladder by a reversing tractor and trailer, whilst he was stacking bales of hay in a barn loft.  The incident occurred in a farm yard on private property. 

His claim against the driver’s motor insurers failed at first instance and when he appealed the Slovenian Supreme Court referred the case to the Court of Justice of the European Union to determine whether the duty to insure ‘the use of vehicles’ within the meaning of Article 3(1) of the First Directive on motor insurance (72/166/EEC) covered the accident circumstances.

A number of member states intervened in the proceedings, including the UK, and they argued that the compulsory insurance requirement should not apply. 

Different emphasises

In Vnuk, the Court noted the subtle variations of emphasis within the different language editions of the motor insurance directives, the different the ways in which individual member states have implemented the compulsory third party insurance requirement and the importance of a consistent approach.  It noted that ‘where there is divergence between the language versions of a European Union text, the provision in question must be interpreted by reference to the general scheme and purpose of the rules’.  

EU law policy objective of protecting victims

The Court made an important observation on policy that impacts not only how one should interpret the motor insurance directives but also on the prospects of Francovich damages being awarded where an individual has sustained loss caused by a member state’s infringement of a directive.  It stated that the objective of protecting accident victims was of equal importance to the dual aim of freeing the movement of persons and goods with a view to achieving the internal market.  Hitherto, the social aim of providing compensatory protection was widely considered to be subordinate to the wider objective of encouraging free movement within the EC.

Court of Justice ruling

As to the facts of the Vnuk case, the Court ruled that the accident circumstances were capable of falling within the scope of insurance cover required under the directives.  It referred Mr Vnuk's case back to the Slovenian courts to make the necessary factual findings.  

Vehicles

On the specific issue as to whether a reversing trailer propelled by a tractor was required to be covered by the article 3 insurance ‘use of vehicles’ requirement, it ruled that it was.  Motor vehicle use covers ‘any use of a vehicle that is consistent with the normal function of that vehicle’ [59].  Compare that with the much narrower definition within section 185 below.

When one considers the definition of ‘vehicle’ provided in what is now article 1.1 of the sixth consolidating directive on motor insurance (2009/103/EC ) in the light of this new interpretation, it suggests that many vehicles which are currently considered under our national law to be exempted from the third party insurance obligation, such as ride along mowing machines and airport tugs (on the basis that they are not intended or adapted for road use) are in fact capable of falling within the definition.  

However it should be noted that article 5.2 of the sixth directive provides a safety clause that allows member states to devise a list of vehicle types that are to be derogated from the insurance requirement but they must also be covered by the compensatory guarantee scheme under what is now article 10. The minister must now act promptly not only devise a list of motor vehicles that are to be exempted from the compulsory insurance requirement, but he will need to notify the European Commission, incept regulatory provision for these vehicles to be ‘plated’ and to ensure that the MIB Uninsured Drivers Agreement encompasses these claims. As the MIB's liability for such vehicles can be subordinated to other existing cover, where it exists (such as under a household or public liability policy) then the financial impact of this extended scope will be mitigated.

The Court also ruled that ‘the fact that a tractor, possibly with a trailer attached, may, in certain circumstances, by used as an agricultural machine has no effect on the finding that such a vehicle corresponds to the concept of 'vehicle' in Article 1(1) of the First Directive.’  The Vnuk ruling opens the way to arguments that third party cover extends to the use of a stationary tractor or other motor vehicle generating electricity or powering machinery, provided this is a ‘normal use’.  Compare that with the much narrower definition within section 185 below.

Accident locations

Although the Court’s characteristically elliptical judgment did not expressly rule that the geographic scope of the duty to insure extended to private property, such as the farm yard where Mr Vnuk was injured, this is the inescapable conclusion to be drawn from the Court’s judgment.  It appears to have subsumed considerations as to the location of the accident within a broader concept that any motor vehicle use must be covered by insurance.  This is clear from its concluding paragraph where it ruled that ‘the concept of 'use of vehicles' in that article [viz article 3] covers any use of a vehicle that is consistent with the normal function of that vehicle. That concept may therefore cover the manoeuvre of a tractor in the courtyard of a farm in order to bring the trailer attached to that tractor into a barn, as in the case in the main proceedings, which is a matter for the referring court to determine.’

Flawed UK statutory and extra statutory provision

It will be readily appreciated that sections 143 and 145 of the Road Traffic Act 1988 restrict the duty to take out third party motor insurance and the scope of cover to be provided by authorised motor insurers in the United Kingdom to the ‘use of a motor vehicle on a road or other public place’.  Section 185 restricts the definition of ‘motor vehicle’ to ‘a mechanically propelled vehicle intended or adapted for use on roads’.  These restrictions conflict with the wider scope required by the motor insurance directives.  

These same restrictions in the scope of the duty to insure also impact on the Uninsured Drivers Agreement 1999 or the Untraced Drivers Agreement 2003.  This is because these agreements inherit the same defective restrictions in geographic and technical scope that are grafted on directly from the Road Traffic Act 1988. 

Gaps in protection

Under UK law those injured by motor vehicles in private lanes and car parks, gated communities and private caravan sites are excluded from the compensatory guarantee provided under the various schemes for which the Secretary of State for Transport is responsible.  The same applies to anyone injured on a public road by a motorised vehicle not intended or adapted for road use.  

The UK’s current national law provision is not only unlawful but it is also lacks common sense.  When the life-time compensatory needs of a chronically injured victim can amount to many millions of pounds, what possible good is served by exposing these motor accident victims to these arbitrary restrictions?  One way or another, the tax payer always funds the bill.  

Remedies

It is trite law that although a European directive does not have direct effect between individuals, it is still possible to benefit from provisions that conform to the three conditions set out in Francovich as developed by Brasserie du Pecheur:

•          the rule of law infringed must be intended to confer rights on individuals;
•          the breach must be sufficiently serious, and
•          there must be a direct causal link between the breach of the obligation and the damage sustained by the injured parties

Accident victims denied compensation due to the currently flawed restrictions contained in Part VI of the Road Traffic Act 1988 or under either of the Uninsured Drivers Agreement 1999 or the Untraced Drivers Agreement 2003 have two principal means of redress.

•          The first is to cite the relevant European law  when presenting their claim and to require a Community law compliant interpretation of sections 143, 145 and 151 of the Road Traffic Act 1988 and / or the MIB Agreements.  
•          If the court considers that the contra legem rule prevents it from delivering an EU law consistent interpretation, then the victim may be entitled to Francovich damages against the Secretary of State for Transport.  However the right to compensation is not automatic: a party affected by an infringement of a directive will have to satisfy the multi-factored test expounded by Lord Clyde in  R v Secretary of State for Transport, ex parte Factortame Ltd and others [1999] 4 All ER 906.

In fairness to the Government, the Vnuk ruling will probably come as something of a nasty surprise to a number other member states.  This is likely to have a significant bearing on any Francovich claim featuring a historical breach by the UK of the geographic and technical scope of the insurance requirement under article 3.  Looking forwards, the Vnuk ruling does not seem to permit member states any appreciable discretion on the geographic scope.  Technical arguments on what constitutes a motor vehicle may well prove to be a fertile ground for litigation.

Failings at the Department for Transport

Early last year, the Secretary of State for Transport was warned (in the responses to his own consultation on the MIB Agreements) that the UK statutory and extra-statutory provision for road accident victims contained a large number of defects that breached the minimum standards of protection required under EU law.  These included a detailed explanation as to why the geographic and technical scope of the insurance obligation within the Road Traffic Act 1988 was too narrowly confined.  The minister chose to do nothing. The Vnuk ruling confirms that these warnings were correct.

The minister's inaction is unacceptable not only for those unfortunate enough to be motor accident victims but also for the motor insurers that underwrite the cost of compensating these victims.  The Minister needs to discharge his constitutional duty to implement European law and this involves articulating a clear and Community law compliant policy that will confer proper compensatory safeguards and enable insurers to revise the terms of their policies and to set appropriate reserves. 

Time’s up

Hitherto, successive holders of the office of the Secretary of State for Transport have chosen to ignore the numerous deficiencies in the compensatory schemes their department is responsible for.  After Vnuk, the incumbent minster has little choice if he is to avoid the embarrassment of an infringement action, judicial review or further Francovich rulings.  He must take decisive action: first by undertaking an EU law compliant review of the entire UK statutory and extra-statutory provision for victims of motor accidents and then by rectifying the numerous defects that such an exercise will inevitably reveal. 

His department has recently incurred a substantial liability for Francovich damages in Delaney v Secretary of State for Transport 2014 EWHC QB (currently listed for appeal in February 2015) for a blatantly unlawful exclusion of liability clause within the Uninsured Drivers Agreement. A similar outcome is in prospect as and when other defects are challenged.  The European Commission is also actively investigating the United Kingdom's defective transposition of the motor insurance directives.

Mr McLoughlin, time's up!