The Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019

Introduced to Parliament on 1 July 2019.

Section 152 Road Traffic Act 1988 to be reformed once more

Once an insured risk has materialised, a motor insurer will no longer be able to avoid its statutory liability to compensate third party victims on the grounds that the policyholder deceived them when the motor policy was taken out.  

The section 152 declaration procedure, widely employed by motor insurers to deflect claims to the relatively disadvantageous scheme managed by the Motor Insurers' Bureau under the Uninsured Drivers Agreement 2015 is effectively abolished and not before time!

Two campaign victories!

June and July 2019 have been very satisfactory months from my perspective.  They have delivered two major reforms on issues that I was first to raise and then to campaign to reform.

 Reform 1: MIB v Lewis [2019] EWCA Civ 909

In June 2019 the Court of Appeal's ruling in MIB v Lewis confirmed something that I have been contending for, for the past twelve years.  It ruled that the Motor Insurers' Bureau is an emanation of the state and that this status fixes it with a liability to compensate motor accident victims adversely affected by the governments failure to fully implement the civil law rights conferred under the European Directive 2009/103/EC.  This has far reaching implications, some of which I allude to in this blog in my earlier postings this month [see The MIB's Surrogate Liability]. 

Reform 2: Abolition of section 152(2) Road Traffic Act 1988 declarations under Regulation 6 of The Motor Vehicles (Compulsory Insurance) (Miscellaneous Amendments) Regulations 2019

See: http://www.legislation.gov.uk/uksi/2019/1047/contents/made

The government’s explanatory note has this to say:

'Regulation 6 amends section 152 of the Road Traffic Act 1988 (c. 52) to limit the rights of an insurer to rely on having voided an insurance policy after an accident has taken place. Regulation 7 makes an equivalent change for Northern Ireland and amends section 98A of the Road Traffic (Northern Ireland) Order 1981. Regulation 8 is a saving provision for any court declarations obtained prior to 1st November 2019.'

A long overdue reform

I believe that I was first to argue (in my Journal of Personal Injury Law commentary on Delaney v Pickett [2011] EWCA Civ 1532 in 2012 and on several occasions in the New Law Journal, subsequently,  that the ability of insurers to obtain a court declaration that exculpates  them from any responsibility to compensate victims where a policy was induced by fraud or misrepresentation under s152 Road Traffic Act 1988 - was unlawful. I explained that this statutory provision failed to conform with the autonomous compensatory guarantee vouchsafed by Directive 2009/103 and a line of consistent Court of Justice rulings to this effect dating back to Bernaldez [1996] ECR 1-1929.


Excerpt from my 2017 article Inception Deception: 'Motor insurers have relied increasingly on  152 RTA 1988 in recent years, particularly in high value claims. It is a uniformly accepted convention that once a court declaration under s 152 (2) is made, the insurer is released from any direct liability to meet a third-party claim, whether  contractually or statutorily imposed (ie under either s 151 of RTA 1988 or Reg 3 of the Rights Against Insurers Regulations 2002 (SI 2002/3061). ....This author first criticised this approach for being inconsistent with the protective purpose of the Directives in his JPIL commentary on Delaney v Pickett [2011] EWCA Civ 1532 and again in this journal on 8 February 2013 in ‘On the right road? Pt II’, (see 163 NLJ, 7547 p 130) Fidelidade has vindicated this view.'

I also raised this particular issue initially in various consultation responses to the Department of Transport.  When this was ignored, after a long campaign, I manage to persuade RoadPeace to include this issue as one of the numerous grounds where we sought judicial review in 2015.  The strength of my argument was later reinforced by the Court of Justice’s ruling in Fidelidade-Compania de Seguros SA v Caisse Suisse de Compensation  C-287/16.

It was remarkable that Mr Justice Ouseley’s judgment in in RoadPeace v Secretary of State for Transport and Motor Insurers' Bureau [2017] EWHC 2725 condoned this clear and blatant infringement of European law by misconstruing, in the most strained terms, the inescapable implications of Fidelidade, when dismissing this particular ground of the judicial review. 

Although the RoadPeace judicial review was instrumental in forcing the MIB to introduce major reforms to both compensation schemes and although it resulted in additional declarations of the UK's non-conformity with EU law, the judgment obtusely rejected our claims that this and number of other similar statutory provisions flouted EU law. The spectre of Brexit appears to have had a tangible effect. After three long years of extensive pro bono work, we were forced to leave this highly unsatisfactory decision where it lay, unchallenged.

The fact that the government has forced through this reform, presumably in the face of stiff opposition from the motor insurance lobby (who rely on section 152 avoidance declarations as a staple first line of defence, especially in serious injury claims where they face extensive liabilities) makes it abundantly clear that the government accepts that Ouseley J got this (and in my view much else) badly wrong in 2017. 

Immediate effect through direct effect

Although these regulations only come into force on 1 November 2019 (on day one of Brexit *) their effect can be invoked against the MIB with immediate and retrospective effect, following the Court of Appeal’s decision in MIB v Lewis.

[* After this article was posted, Brexit day was postponed by three months] 

Worrisome developments at APIL

As to section 152 Road Traffic Act 1988 generally, I had proposed to deliver a webinar (Winning the unwinnable claim Part 2) for the Association of Personal Injury Lawyers, explaining why Mr Justice O’Farrell’s recent decision in Colley v Shuker [2019] EWHC 781 (QB) which upheld the effect of an insurer’s revocation of its cover under section 152 of the 1988 Act was misconceived and contrary to EU law.  I also intended to cover four new Court of Justice rulings, to explain where the Supreme Court went wrong in its decision in Pilling v UK Insurance  and to explain how, after MIB v Lewis, claimants can pursue direct personal injury actions against the MIB where a policy has been revoked by invoking the same European law directly against the MIB, as though the 1988 Act fully implemented the Directive – only to have my training proposal rejected on the basis that it raised no new point of law. How bizarre!  

As a senior fellow and longstanding member of APIL, who has supported its charitable objectives in different ways over several decades,  I am becoming increasingly baffled and concerned by the internal politics that are corroding the credibility and quality of APIL’s training and accreditation schemes.

The big question

If the government is able to implement the effect of Fidelidade’s ruling from 2017, why has it not implemented the Vnuk ruling from 2014.  

The government conceded that the scope of the UK’s compulsory third party motor insurance regime failed to implement the Directive’s unrestricted scope both within the RoadPeace judicial review and in its consultation on Vnuk.  Were are now five years on from Vnuk and three years on from the governments promise to act. I suspect that the prospect of a Brexit is influencing events but what has that to do with the rule of law?

THE MIB’s SURROGATE LIABILITY (Part 2)

The implications of Motor Insurers’ Bureau v Lewis [2019] EWCA Civ 909

Part 2 goes to press

The second article, in my two-part feature on Lewis, was published this Friday in the New Law Journal.  The first instalment explained the reasoning behind the Court of Appeal’s two confirmatory findings: (i) that the Motor Insurers’ Bureau (MIB) is an emanation of the state; (ii) that Articles 3 and 10 of the Motor Insurance Directive (2009/103) have direct effect against it. The second article sets out some of the wide-ranging and potentially disruptive ramifications of this ruling.

The key implications of the Lewis ruling are twofold. 

First, the MIB is fixed with a vicarious form of liability to redress any gaps in the compensatory guarantee vouchsafed by the third-party motor insurance regime in the UK.  A key point that the commentaries I have read and heard all miss is that this is a general principle that has a wide and encompassing application. It is not confined to the facts of the case (e.g. claims featuring a motor accident on private land where the compulsory insurance provisions of the Road Traffic Act 1988 does not apply) but to all other instances where our national provision fails to fully implement the Directive.  The impact is major, reflecting as it does the egregious and wide-ranging infringements of EU law in the UK’s transposition of the Directive.  For example, uncompensated victims of motor accidents caused by mechanical and software defects, or unusual vehicles (neither of which scenarios are covered by the UK regime, in clear breach of EU law) can now pursue a direct action against the MIB. The EU law principle of equivalence requires that these claims are to be governed by the normal civil procedural rules that apply to conventional personal injury claims; not the disadvantageous provisions of the Uninsured Drivers Agreement 2015.  

A second (major) collateral effect of Lewis is that the MIB Agreements themselves are now subject to a curative construction that bring their non-conforming provisions into line with the minimum standard of compensatory provision mandated under EU law. All this and more is explained in my New Law Journal Article, The MIB’s surrogate state liability (Pt 2).

Why did it take so long?

It took 12 years for the erroneous first instance findings in Byrne v MIB and the Secretary of State for Transport 2007 to be challenged in the UK. In Byrne, Flaux J (now Lord Justice Flaux) was not informed of consistent line of domestic authorities, which were determinative on the issue, concerning the correct approach to take when applying the Foster criteria for deciding whether a legal entity is to be treated as though it were part of the state and thus potentially subject to the direct effect of incompletely implemented rights conferred under a directive.  That same court was also badly misinformed on the facts. The MIB and the Secretary of State for Transport withheld an abundance of highly relevant material (documents and facts) that would, in my view, have established that the extensive control exercised by the minister over the MIB’s compensatory role and the special powers it enjoyed in this capacity; confer it with a special status as an emanation of the state. 

These important issues were not pressed by the claimant at the time.  This was an entirely justifiable tactic in the circumstances of the particular case: the claimant team’s imperative was to focus its limited resources, in what had become an expensive litigation, to the key issues necessary to establishing one of two alternative successful outcomes. Its case concentrated on the near certainty that the court would find the government liable under an alternative ground based on Francovich state liability principles; where it succeeded ultimately in the Court of Appeal.  

Unfortunately, Flaux J’s erroneous finding (on the alternative ground) as to the MIB’s state liability under Foster principles proved to be a dead-weight deterrent for numerous claimants thereafter (probably numbered in their thousands).

It took a ruling from the Court of Justice of the European Union in Farrell v Whitty (no 2) in 2018 to embolden a leading firm in an otherwise predominantly lack-lustre claimant personal injury sector, to bring the long overdue challenge in Lewis.  Farrell is on all fours with the domestic authorities on state liability that were completely overlooked eleven years before in Byrne.   Its finding on special powers coincided with my long-held view that the MIB’s compensatory role, which is funded through its imposition of a levy on all UK motor insurers as a precondition to authorised status in the UK, constituted a special power, which satisfied the criteria for emanation of the state status. The implications of Farrell (no 2) were as obvious as they were ineluctable.  However, it is striking that none of probably thousands of claimants were advised to challenge Byrne's evidently flawed findings on the MIB’s proper status, until Farrell (no2).

The 12-year hiatus of unjust outcomes from Byrne to Lewis neatly illustrates the sorry plight of individual claimants in our civil justice system.  Although the Civil Procedural Rules profess to impose equality between the parties, their failure to achieve this is abject: access to Justice is anything but equal.  

This is partly due to the fact, as the Byrne case illustrates, that multi-national and state parties are free to bend the rules when it suits them, with apparent impunity. Costs sanctions imposed for unreasonable conduct is a worthwhile risk where a distorted outcome might result in a windfall of £millions.  The multi-£bn motor insurance sector plays a vital and largely beneficial role in our society. Unfortunately, its powerful lobby has distorted our national law provision for compulsory insurance by obstructing much needed reform, over many decades, and it is able to invest disproportionate sums in civil actions to achieve partial and unmerited outcomes that serve its strategic aims. Whilst successive governments are responsible for excessive court fees and the abolition of legal aid which drastically curb access to justice, the judiciary have also contributed to the problem which deters many if not most private citizens from challenging abuses of power. Rupert Jackson’s dogmatic proposals for curbing legal costs through arbitrarily derived fixed fees, Draconian procedural penalties, and though the imposition of arcane cost recovery principles (such as the proportionality principle that imposes an arbitrary cap on recoverable costs in a Procrustean fashion) has made civil litigation an unjust process where disparities in resources is routinely exploited by wealthy institutions at the expense of private litigants. 

As a solicitor of many years standing it has also been disheartening to witness the recent startling decline in the quality of the Supreme Court’s judgments in this area. I can only hope that the Cameron and Pilling rulings in February and March this year, which I appear to be alone in robustly criticising (see my New Law Journal articles and my earlier posts in this blog) are anomalies that will never be repeated. It is also equally startling to note that none of my fellow commentators and law reporters featuring these two appalling rulings recognise the blatant misstatements of fact and law within them.  

Brexit’s effect

The findings that (i) the 1988 Act fails to conform with the unrestricted geographic scope of the Directive, (ii) that the MIB is an emanation of the state and (iii) that both Articles 3 and 10 of the Directive have direct effect against it, will all endure as retained EU law under s4(1) of the EU Withdrawal Act 2018. Accordingly, individual claimants will be able to invoke the direct effect of these findings beyond a Brexit notwithstanding that abolition of the primacy of EU law under s5.

It remains to be seen where the courts will draw the line on the wider implications of this ruling, especially where a domestic non-conforming provision has not yet been recognised as such on Brexit. It is also by no means certain that claimant law firms will exploit these newly confirmed rights to the full extent.

THE MIB's SURROGATE LIABILITY

Motor Insurers’ Bureau v Lewis [2019] EWCA Civ 909

The first instalment of my two-part feature in the New Law Journal was published on 12 July. It explains how the scattergun tactics employed by the Motor Insurers’ Bureau (MIB), in its futile appeal against Soole J’s first instance decision has proved to be a costly mistake. 

The MIB has appealed Soole J’s finding that it was bound by the direct effect of Article 3 of the Motor Insurance Directive 2009/103 (the Directive) under EU law.  Article 3 prescribes the minimum standard of civil liability insurance necessary to deliver a consistent level of compensatory guarantee is conferred on third party motor accident victims throughout the EU and EEA.

In Lewis, the claimant was grievously injured when he was run down by an uninsured car in a privately-owned field, which location does not fall within the geographic scope of the Part VI of the Road Traffic Act 1988 that regulates the compulsory insurance requirement in the UK. The MIB had rejected the claimant’s application arguing that it had no liability under the Uninsured Drivers Agreement on the basis that its contractual liability under that agreement is coextensive with the statutory insurance obligation. 

The first instance decision confirmed that the UK legislation infringed the Directive on this point.  Furthermore, it held that as it was bound by the Court of Justice of the European Union’s ruling in  (Case C‑413/15) Farrell v Whitty and Others (no 2) [2017], the MIB’s role in discharging the state’s obligation, imposed under Article 10 of the Directive, to authorise a compensating body to meet claims by victims of uninsured vehicles, pinned it with state liability to compensate victims wrongly denied the compensatory guarantee through insurance provision due to the government’s defective implementation.

The MIB’s unsuccessful appeal has served to compound its problems. 

• First, the Court of Appeal has upheld the first instance finding that the MIB is fixed with state liability (due to its emanation of the state status) to compensate victims affected by the government’s failure to fully implement Article 3 of the Directive (which provision met the criteria of unconditionality and sufficient precision to qualify for direct effect);

• Second, the court went on to rule that the Article 10 also qualified for direct effect against the MIB.

In the second instalment, to be published shortly, I consider the far-reaching implication of both findings. 

• I will explain how direct effect of Article 3 against the MIB leaves it exposed to an extraordinary range of novel extra-statutory liabilities, derived independently of its contractual obligations with the state.  It is fixed, under directly applicable EU law, to compensate victims injured or sustaining loss in a diverse range of scenarios that ought to be covered by the compulsory third party insurance requirement, but which are not, due to the UK’s longstanding infringements of the Directive. Any proper analysis reveals some surprising outcomes (unprecedented, even).

• I will also explain how the direct effect of Article 10 of the Directive against the MIB can be used to circumvent the House of Lords ruling in White v White in 2001 which hitherto has justified, wrongly so in my view, the judiciary’s reluctance to remedy non-conforming provisions within both the Uninsured Drivers Agreement 2015 and the Untraced Drivers Agreement 2017 by subjecting their provisions to the EU law doctrine of consistent construction. Although the RoadPeace judicial review I was behind in 2015-2018 was responsible for the excision of many blatantly unjust and arbitrary exclusions of liability (on the ground that they infringed the directive), a significant number remain.  These injustices can now be challenged with facility, provided it can be established that they fall below Article 10’s minimum standards to a disproportionate extent.

LAW COMMISSION ENDORSE NEED FOR PRODUCT LIABILITY REVIEW

Automated Vehicles and Liability for Vehicle Defects

The Law Commission has published its initial response and recommendations in its three year project that reviews the legal framework necessary to accommodate the introduction on our roads of automated vehicles.

LINK

In my response to Question 18 of the Law Commissions’ preliminary consultation on Automated Vehicles (Law Commission Consultation Paper 240; Scottish Law Commission Discussion Paper 166) I argued the case for a wider review of the compensatory protection afforded to motor accident victims under the Road Traffic Act 1988 and the Consumer Protection Act 1978. 

I explained that the no-fault liability under the Automated & Electric Vehicles Act 2018 failed to address the very real and immediate need for suitable cover for existing and near to market automation that present the gravest threat to the public.  Only advanced forms of automation (that have yet to be developed) or current levels automation operating within highly restricted environments qualify for the protection conferred under the 2018 Act. 

In my answers to Question 7 and 18 I stress that section 145 of the Road Traffic Act 1988 only requires compulsory third-party cover to provide an indemnity against the policyholder’s personal liability.  This appears to breach the wider insurance obligation mandated under Article 3 of the Motor Insurance Directive 2009/103 (the Directive) that extends to require civil liability cover for defects in the vehicle, such as defective automation; that can result spontaneously, independently of the policyholder or user’s fault. My views on this lacunae in our national law provision have since been fully vindicated by the Court of Justice of the European Union (CJEU).  See: (Case C-100/18) Línea Directa Aseguradora, SA v Segurcaixa, Sociedad Anónima de Seguros y Reaseguros of 20 June 2019.

It appears that my concerns about to this particular infringement of the Directive, first raised by me in my consultation response to the Department for Transport’s 2013 consultation on the MIB Agreements, has been acknowledged by the Law Commission; albeit in oblique terms. 

In the Law Commission’s 19 June 2019 paper: Summary of the Analysis of Responses to the Preliminary Consultation Paper it appears to recommend that the government undertake a general review of product liability for automated vehicles.

Unfortunately, the government has reneged on its commitment, made not only in the RoadPeace judicial review in 2018 but also in its own consultation paper on Vnuk in 2016, to bring the geographic scope of compulsory motor insurance under the Road Traffic Act 1988 into line with the wider remit of the Directive.  With a hard Brexit looking increasingly likely and given the government's manifest and obdurate disregard of EU law on this issue and its long standing refusal to fully implement various other aspects the Directive -  I am not holding my breath.

New remedy

Fortunately however, victims who are injured by a  mechanical or software defect in a vehicle whose compensatory guarantee under EU law is frustrated by the responsible vehicle's insurer and / or the MIB refusing to compensate the claim on the basis that it is not a relevant liability (i.e. because the fault does not fall within section 145’s non-conforming scope) now have a new remedy.  

Claimants can now invoke the direct effect of Article 3 of the Directive in an ordinary personal injury action against the MIB, see my blogs on the Court of Appeal ruling in MIB v Lewis 2019.  See also my New Law Journal articles which predicted this outcome: On the Right Road? in 2013, Putting Wrongs to Rights 2016; State Liability; betwixt and between Brexit in 2017 etc.

This new direct right allows the claimant to cite the wording of Articles 3 and 10 of the Directive as though they were fully incorporated into our national law, word for word, and to plead this in an ordinary civil / tort law action directly against the MIB.