Albion (Un)Chained

Last night I tuned into watch the leadership debate, between the various candidates for the Conservative party leadership, and in consequence the Premiership. There was a notable absentee, Mr Johnson, the favorite to win the position. Wisely he had weighed up the benefits and disbenefits of attending and realised he had more to lose than to gain by gracing the floor.

What struck me as I Iistened to their presentations, was not that all the candidates are very much in the pro-Brexit camp: in a sense they would have to be of course, as they are playing to the Conservative party membership who are the electorate that counts for this current contest.

Rather I was puzzled by how easy they thought it would be to leave the European Union, whether renegotiating by a wider deal, deletion of the infamous backstop, proroguing Parliament (a strategy that did not serve Charles I well) or leaving by default on 31st October 2019. I rather doubt that anything touching on these issues is going to prove “easy” at all.

Even in something as necessary and mundane as the world of motor insurance law, the European Union and its law casts a long shadow. That was demonstrated again this month with the decision of the Court of Appeal in the case of Motor Insurers Bureau v Lewis [2019] EWCA Civ 909 a case which will have significant implications for motor claims and which I would have thought undoubtedly warrants a trip to the Supreme Court.

The facts can be stated thus:

2. On 9 June 2013 the claimant, then aged 67, was walking on private land in Lincolnshire. Dennis Tindale (who was the first defendant in the proceedings before Soole J, the MIB being the second defendant and the Secretary of State for Transport the third defendant) was a local farmer. He erroneously assumed that the claimant had been up to no good in the vicinity of his farm premises. He pursued the claimant and his friends, driving a 4×4 Nissan Terrano, which was not insured. He drove the vehicle along a public road before accessing a public footpath along which the claimant and his friends had walked, driving down an embankment on which one of the footpaths was situated, through a barbed wire fence, into a field. He drove across the field around a marshy area and then into collision with the claimant, causing him serious injury. At the appeal hearing, we were informed that Mr Tindale was subsequently prosecuted for causing grievous bodily harm with intent contrary to section 18 of the Offences against the Person Act 1861, but acquitted at trial.

When the matter came on for trial the issues could be summarised as follows:

3. By Order dated 9 June 2017, Mr Tindale was debarred from defending the claim. The MIB did not dispute that Mr Tindale was liable for the accident, but contended that it had no contingent liability to the claimant pursuant to the Uninsured Drivers Agreement (“UDA”) 1999 because the accident and injuries were not caused by or arising out of the use of the vehicle on a road or other public place under section 145 of the Road Traffic Act 1988 (hereafter “the RTA”).

4. Pursuant to an Order dated 12 February 2018, there were three preliminary issues before the judge:
(1) Whether any judgment the claimant obtains against Mr Tindale is a liability which is required to be insured against pursuant to Part VI of the 1988 Act;

(2) If any judgment the claimant may obtain against Mr Tindale is a liability which is not required to be insured against pursuant to Part VI of the 1988 Act, whether the MIB is otherwise obliged to satisfy such judgment pursuant to the 2009 Directive;

(3) Whether the provisions of the relevant Directives have direct effect against the MIB in the circumstances of this claim.

At trial, the MIB lost.

12. The judge considered the second and third issues together under the heading “Direct Effect”. He noted at [60] that the principle had two central ingredients as summarised by the CJEU in Farrell v Whitty (No. 1) (Case C-356/05) [2007] 2 CMLR 1250 at [37]: “it has been consistently held that a provision in a directive has direct effect if it
appears, as far as its subject matter is concerned, to be unconditional and sufficiently precise.” As the judge said this reflected long-established authority, notably Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53 and Comitato di Coordinamento v Regione Lombardia (Case C-236/92) which he cited. He also noted at [64] that in the judicial review proceedings in R (RoadPeace Ltd) v Secretary of State for Transport [2017] EWHC 2725 (Admin); [2018] 1 WLR 1293 the Secretary of State and the MIB had accepted that Article 3 of the 2009 Directive had direct effect between the individual and the State or its emanation, whilst disputing that the MIB was an emanation of the State: see [94] of the judgment of Ouseley J. No such concession was made in these proceedings.

13. The judge went on to deal with the submissions of the parties before reaching his conclusion on direct effect at [95] to [101]. He found that Article 3 satisfies the conditions set out in Becker and subsequent CJEU jurisprudence that the obligation on the State is unconditional and sufficiently precise and that the concession in RoadPeace had been correctly made. As to precision, the CJEU had made it unequivocal that the obligation of compulsory insurance extended to the use of vehicles on private land. This was implicit in Vnuk v Zavarovalnica Triglav dd (Case C-162/13) [2016] RTR 10 and explicit in later authorities.

14. As to whether the obligation was unconditional, the judge rejected the submissions of Mr Hugh Mercer QC for the MIB as to the “measures” which the State could decide to take in implementing a compulsory insurance regime rendering Article 3 expressly conditional. He concluded that, unlike in Comitato di Coordinamento, the core obligation of the State under Article 3 was not conditional, it was not a mere objective or framework but a result to be achieved.

15. He then concluded that the existence of the further obligation under Article 10 to set up a body responsible for compensation did not in any way diminish the core obligation of the State under Article 3, citing [39] of the judgment of the CJEU in Farrell v Whitty No. 2 (Case C-413/15) [2018] QB 1179 (a case concerned with the status and obligations of the Motor Insurers’ Bureau of Ireland (“MIBI”), a materiallyi dentical organisation to the MIB): “…the intervention of such a body is designed to remedy the failure of a Member State to fulfil its obligation to ensure that civil liability in respect to the use of motor vehicles normally based in its territory is covered by insurance…”

16. The judge went on to conclude that Article 3 had direct effect to the extent of at least the minimum requirement of €1 million per victim in Article 9 of the 2009 Directive. In relation to Mr Mercer QC’s submission that there was a third necessary ingredient of direct effect, that the relevant Directive must define rights which individuals are able to assert against the State, the judge accepted that requirement but concluded that Article 3 clearly did define those rights for the reasons he had already given.

17. He went on to consider the issue of whether the MIB was an emanation of the State. He noted that, on existing domestic authority, the MIB was not an emanation of the State by reference to my judgment in Byrne v MIB [2007] EWHC 1268 (QB); [2009] QB 66, following what I regarded as the persuasive reasoning to that effect of Hobhouse LJ in Mighell v Reading [1999] Lloyd’s Rep IR 30. In Byrne I determined that, under European law, an entity would only be an emanation of the State if it satisfied three conditions laid down by the CJEU in Foster v British Gas plc (Case C188/89] [1991] 1 QB 405.

18. The judge referred to the debate thereafter once the CJEU in Farrell v Whitty No 1 had referred that case back to the High Court of Ireland and Birmingham J found the MIBI was an emanation of the Irish State. As the judge said, that case went on appeal to the Supreme Court of Ireland which made a further reference to the CJEU. In Farrell v Whitty No 2 the first question for the Court was whether the elements of the test in Foster were conjunctive or disjunctive. The CJEU had noted at [24] and following, the tension between [18] of Foster and [20] of the same judgment, on which I had relied in Byrne. The judge noted at [109] of his judgment that, at [26] to [28], the CJEU concluded that [20] of Foster must be read in the light of [18], with the consequence that the conditions were not conjunctive.

19. The further question in Farrell v Whitty No 2 which was relevant for present purposes was, as the judge noted, whether the provisions of a Directive that are capable of having direct effect may be relied upon against the body upon which the Member State has conferred the task that is the subject of what is now Article 10 in the 2009 Directive. The judge then cited extensively from [35] to [42] of the CJEU judgment (to which I will return in more detail below) and set out the parties’ rival submissions. Since those submissions essentially reflect those made to this Court, which I summarise below, I will not repeat them here.

20. The judge then set out his conclusion on emanation of the State at [126] to [133]. He concluded that the effect of the judgment of the CJEU in Farrell v Whitty No 2 was to supersede my reasoning in Byrne and that of Hobhouse LJ in Mighell. The CJEU had decided that the Foster conditions were not conjunctive, so that, contrary to my conclusion at [57] of Byrne, it is not necessary to establish that the MIB is under the control of the State. It had also decided that private law bodies “such as the MIBI” may be an emanation of the State for the purpose of the obligations of the Motor Insurance Directives which have direct effect, and then held that the MIBI was an emanation of the State for the purposes of what is now Article 10, meeting the requirements of delegation and special powers.

21. The judge held that there were no material differences between the position of the MIBI and the MIB, so that there was good reason to reach the same conclusion. He rejected the distinction which Mr Mercer QC sought to draw between Farrell v Whitty and the present case as regards delegation of the task, that Farrell v Whitty involved a defective implementation of Article 3 whereas the present case involved no implementation at all. He concluded at [131] that in each case there had been an incomplete implementation of the obligation placed on Member states by Article 3 and, in each case, the effect of European law was to treat the designated compensation body under Article 10 as if the obligation imposed upon the State had been delegated to it in full.

22. As regards “special powers”, whilst the application of the facts to the European law is for the domestic court, the concept is one of European law and the judge said there was no material distinction between the position of the MIBI and tha t of the MIB. The judge could see no basis to distinguish the position of Ms Farrell and that of the claimant and concluded that, in each case, the State’s unimplemented obligation under the Directive must be met by its designated compensation body.

The Court of Appeal held:

63. The UK government has failed to fulfil its obligation under Article 3 of the 2009 Directive to ensure that civil liability in respect of the use of motor vehicles on private land is the subject of a scheme of compulsory motor insurance. That the government is under that obligation in respect of the use of vehicles on private land cannot be doubted in view of the judgment of the CJEU in Vnuk and the subsequent CJEU judgments in Andrade v Proença Salvador (Case C-514/16) [2018] 4 WLR 75 at [36] and Nunez Torreiro at [28] and [30]. The government has also failed to comply with its co-extensive obligation under Article 10 to assign responsibility for meeting that  liability to the compensation body contemplated by that Article, just as the Irish government had failed in Farrell v Whitty.

64. Contrary to the arguments advanced by Mr Mercer QC, I do not consider that the UK government has retained a discretion to delegate to some other compensation body than the MIB the residual liability to compensate those injured by uninsured vehicles on private land. The argument that the government retained such a discretion where it had failed to transpose all its EU law obligations under the Directive correctly into national law was run in Byrne by reference to Francovich and Wagner Miret and rejected by me at [56] of my judgment. I concluded that the relevant discretion had been fully used in circumstances where the UK had chosen to designate the MIB as the body through which it sought to implement the Motor Insurance Directives. That conclusion was not challenged on appeal. I see no reason to reach a different conclusion in the present case.

65. I also consider that there is force in Mr Moser QC’s submission that, unlike the Directive being considered in Francovich and Wagner Miret, Article 10 of the 2009 Directive expressly contemplates the Member State setting up a compensation “body” in the singular, not a whole series of bodies. In any event, it seems to me that the reasoning of the CJEU in Gharehveran at [39] to [44] is applicable here. In that case, by designating itself as the guarantee institution, the Member State made full use of the relevant discretion. By parity of reasoning, the UK government has made full use of any discretion by delegating the Article 10 task to the MIB. I am strengthened in that conclusion by the analysis of the Advocate General in Farrell v Whitty (No 2) particularly at [126] and by the judgment of the CJEU in Nunez Torreiro, which recognises that compliance with Article 3 is not a matter for the discretion of the
Member State.

66. Accordingly, in my judgment and contrary to the arguments advanced on behalf of the MIB, Article 3 of the 2009 Directive is unconditional and precise, so that it is capable of having direct effect. Since it is common ground that Article 3 and Article 10 are co-extensive, it must follow that Article 10 is also capable of having direct effect. I also agree with Mr Moser QC that, although the conclusion of the CJEU in [41]-[42] of Farrell v Whitty (No 2) is expressed in a somewhat abstract way, the Court was saying that these Articles were sufficiently unconditional and precise to be of direct effect.

67. It is accepted by the MIB that in relation to the task delegated to it under Article 10 it is to be regarded as an emanation of the State, as I have already recorded at [37] above. Its contention that the task delegated to it is limited to the RTA liability stands or falls with the attempt by Mr Mercer QC to distinguish the analysis and reasoning of the CJEU in relation to the MIBI in Farrell v Whitty (No 2). I consider that that analysis and reasoning is indistinguishable.

68. The distinction which Mr Mercer QC sought to draw between cases where there had been a breakdown of the system and cases, such as he categorised the present case, where there was no system at all, is a wholly artificial one which will not bear scrutiny. In both cases, in the words of the CJEU in [39] of Farrell v Whitty (No 2), the Member State has failed “to fulfil its obligation to ensure that civil liability in respect to the use of motor vehicles…is covered by insurance”. Mr Mercer QC sought to argue that because the CJEU then cited [31] of Csonka, this analysis was intended   to be confined to cases where a system had been put in place but it had broken down. I reject that argument. [39] of Farrell v Whitty (No 2) is in broad general terms, not limited to cases where the failure of the Member State is partial as opposed to total. Furthermore, the fact that the UK government has failed to legislate for compulsory insurance in respect of the use of motor vehicles on private land and then specifically to delegate to the MIB the residual liability where the relevant vehicle is uninsured, can legitimately be described as a breakdown in the system put in place by the government.

69. Both in Farrell v Whitty (No 2) and the present case, the effect of the failure is the same: a gap in the insurance cover compulsorily required by the domestic legislation and a corresponding gap in the protection of the victims of motor accidents, which, as is clear from all the CJEU jurisprudence, is the very mischief that the Motor Insurance Directives are designed to avoid. The suggested distinction between the use of a motor vehicle on a road or other public place and the use of a motor vehicle on private land is, at least on the facts of the present case, a wholly artificial one, given that immediately before he drove his car onto the private land, Mr Tindale was driving it uninsured on the public road. The distinction is also inimical to the CJEU jurisprudence, which in my judgment does not support any part of Mr Mercer QC’s

70. On a proper analysis, Csonka cannot be regarded as a case where the Member State had failed to implement its obligations under Articles 3 and 10 of the Directive. There was simply no obligation on the State under the Motor Insurance Directives to implement a compensation scheme in respect of insurance cover formerly provided by insurers who had become insolvent. This interpretation of Csonka is borne out by the judgment of Richards LJ in Delaney v Secretary of State for Transport [2015] EWCA Civ 172; [2015] 1 WLR 5177 at [33]. Nothing in the CJEU judgment has any impacton the issues for determination in the present appeal.

71. Contrary to the submissions of Mr Mercer QC, the reference in the last sentence of [46] of the judgment of the CJEU in Juliana to “the insurance obligation” is not to the relevant national legislation but to the obligation on the Member State under Article 3 of the Directive, as is clear from the preceding sentence and from the next paragraph of the judgment, [47], which provides:
“Moreover, the interpretation set out in paragraphs 38 to 42 of the present judgment makes it possible to ensure the attainment of the objective of protecting the victims of accidents caused by motor vehicles, laid down by the directives concerning insurance against civil liability in respect of the use of vehicles, which has consistently been pursued and reinforced by the EU legislature (Rodrigues de Andrade, (Case C-514/16), [2018] 4 WLR 75, paragraphs 32 and 33 and the case-law cited). That interpretation guarantees that those victims are, in any case, compensated, either by the insurer, under a contract entered into for that purpose, or by the body referred to in Article 1(4) of the Second Directive, in the event that the obligation to insure the vehicle involved in the accident has not been satisfied or where that vehicle has not been identified.”

72. Thus, contrary to Mr Mercer QC’s submissions, Juliana is not authority for the proposition that Article 10 does not extend to provide compensation in situations where the national legislation did not provide for compulsory motor insurance. On the contrary, the judgment of the CJEU recognises and applies the broader objective of the Motor Insurance Directives of protecting the victims of motor accidents, by requiring Member states to ensure that motor insurance is compulsory, so that the victims are compensated by the insurer or, in cases where the obligation to insure the vehicle has not been satisfied, by the compensation body to which that task has been delegated under Article 10. In my judgment, the last sentence of [46] is sufficiently widely phrased to encompass both the case where the State has not fully implemented its insurance obligation under Article 3 of the 2009 Directive (as in the present case) and the case where, although the State has implemented the obligation, the driver or owner of the vehicle has not taken out the compulsory insurance required.

73. However, even if I were wrong about that, it is quite clear from the broad terms of [39] of the judgment of the CJEU in Farrell v Whitty (No 2) that the compensation body is intended to protect and compensate victims by remedying the failure of the Member State to fulfil its obligation under Article 3 to ensure that civil liability in respect of the use of motor vehicles is covered by insurance. As the CJEU jurisprudence makes clear, that obligation includes the use of vehicles on private land.

74. Accordingly in my judgment, the MIB, albeit a private law body, has had conferred on it by the UK government the task under Article 10, which as [39] of Farrell v Whitty (No 2) makes clear, includes remedying the failure of the government to institute in full a compulsory insurance regime, in the present case in respect of the use of vehicles on private land. As the CJEU held in [42] of Farrell v Whitty (No 2), it is inherent in that task that it is in the public interest. Like the MIBI, the MIB possesses special powers by virtue of the provisions of the RTA which oblige all authorised motor insurers to be members of the MIB and to contribute to its funding. The short answer to Mr Mercer QC’s point that the MIB levy does not oblige insurers providing off-road cover to contribute to the levy is that any issue can be addressed by amendment to the RTA and/or the MIB Articles of Association, but, in any event, that point does not provide an arguable point of distinction between the present case and Farrell v Whitty (No 2).

75. Accordingly, like the MIBI, the MIB is an emanation of the State against which Article 10 of the 2009 Directive can be enforced by the claimant, as it has direct effect. In my judgment, this does not have the effect of making the MIB a primary compensator as Mr Mercer QC contended. The MIB may well have rights of contribution over against the Department of Transport. Indeed, we were informed by Mr Moser QC that the MIB has issued a Contribution Notice against the Department in the present proceedings. In any event, on the basis that the MIB is an emanation of the State, it is no answer to its liability to compensate the claimant that this liability has only arisen through the fault of the UK government: see [62]-[63] of Konle v Austrian Republic (Case C-302/97) [1999] ECR I-3099.

76. During the course of argument the question arose as to the source of the obligation which therefore rests on the MIB. In my judgment, Mr Moser QC was correct that the answer is the 2009 Directive as applied against the MIB as an emanation of the State and it is no answer to say that the source of the obligation cannot be found in national   law. That simply replicates the fallacious argument of the MIB that its obligation to compensate is limited by the RTA liability.

77. It follows that the judge’s conclusions on direct effect and emanation of the State were correct and that the appeal of the MIB must be dismissed.

This case is extremely important. Not only does it deal with the road/public place/private place distinction, which has been on life support, since the VNUK decision it also deals with the position of the MIB as being, not a private company, but an emanation of the state.

As such it is capable of being held liable under the principle of direct effect. It also follows in my view that the MIB is subject to other doctrines, of public law, including public law duties which might be relevant to future claims in judicial review.

The bigger issue here, is however grounded in the Brexit mire. The government has been aware of the significance of VNUK for a long time. It has stated in its consultation documents that the United Kingdom’s intention is to leave the European Union.

It has therefore done nothing to remedy the gaps in United Kingdom insurance provision which have been obvious for some years now: because why change English law at the behest of European law interpreted by European judges, when the United Kingdom will soon be free from its vassalage to the European Court of Justice?

But Brexit has been a long time coming. The law does not stand still. Claims like that of Mr Lewis will still be brought, and now they can be brought against the MIB, instead of some more removed Francovich type claim against the United Kingdom. Whether this position will endure in the Supreme Court remains to be seen: that court in recent years has been increasingly sceptical about the involvement of supra-national courts in the affairs of the United Kingdom.

At the moment however, the authorities are all pointing against the MIB, and are likely to remain so, until mighty Albion is unchained from the shackles of European Union law.

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