C’est magnifique, mais ce n’est pas la guerre

For many years there have been a large number of issues floating about in the legal ether about the compatibility of domestic law including provisions which govern compulsory insurance for motor vehicles and make provision for the payment of compensation in respect of injury and damage caused by uninsured and unidentified drivers with European Union law.

In the case of Roadpeace v Secretary of State for Transport and the MIB [2017] EWHC 2725 (Admin) a number of these issues were bundled up into judicial review proceedings brought against the Secretary of State for Transport, with the MIB joined as an Interested Party. In a lengthy and interesting judgment Mr Justice Ouseley largely followed the restrictive course taken by the Court of Appeal in construing the relevant legislation and agreements in earlier cases.

The issues that he had to deal with were summarised thus in paragraphs 5 to 9 of the judgment:

Many of the issues raised in the Claim Form, about the compatibility of domestic law, and of the arrangements between the MIB and SST, with EU law were not pursued. Three groups of issues remain. The first group relates to the compatibility of UK statutes with the Directive: (1) ss143, 145 and 151 of the Road Traffic Act 1988, RTA, and allied provisions which permitted insurance policies to include limitations and exclusions on the use insured, such as confining the insured use of the vehicle to “social domestic or and pleasure use”; (2) Regulation 3(2) of the European Communities (Rights Against Insurers) Regulations 2002, the Regulations, which it was said permitted the insurer, as against the innocent third party victim of the insured, to rely on breaches of the policy by the policyholder, unlawfully qualifying the absolute protection which RoadPeace said the Directive required; (3) s153(3) of the RTA and s2(4) of the Third Parties (Rights Against Insurers) Act  2010, RAIA, which enabled the insurer to raise, against the innocent third party, rights which the insurer had against the policyholder, again unlawfully qualifying the absolute protection which RoadPeace said the Directive required.

Second, and also a question of the compatibility of UK statute law with the Directive, are the contentions which arise out of the CJEU Chamber decision in Vnuk. This applies to ss143, 145, 151 RTA and the Regulations, R2(1). RoadPeace contended that the restriction of compulsory insurance to the use of a motor vehicle “intended or adapted for use on roads” and to its use “on a road or public place” is not consistent with the decision in Vnuk.  That is not at issue.

There is a large issue about what remedy, if any, is appropriate while the European Commission decides whether there should be an amending Directive, and the Government decides what legislative changes are required.

There is a related aspect as to the meaning of “accident” in Reg 2(1) the Regulations which I shall deal with under that head.

Third, there is a group of issues which relate to the compatibility of the UDA and UtDA with the Directive. (1) RoadPeace contends that the existing UtDA is unlawful and, though improved in the new agreement, remains unlawful, because it fell and still falls short of the protection required to be given to minors and protected persons involved in seeking compensation from the MIB equivalent to the protection they would receive in civil litigation under the CPR. (2) There are two issues where RoadPeace accepts that the new UtDA will meet EU law requirements, but contends that the existing UtDA, which will apply to accidents up to 1 March 2017, does not. These issues are (a) the time limit on the requirement for reporting accidents to the police, and (b) the definition of “significant personal injury”, which is a threshold requirement for property damage claims. (3) There is an issue about the “terrorism exception” not now in the agreements, but still applicable to accidents happening before 1 March 2017.   The SST, but not the MIB, accepts that the exception is not permissible under the Directive. The debate before me therefore was largely about the remedy in relation to accidents which had occurred before that date and to which the exclusion in respect of acts of terrorism would apply. The SST contended that damages under Francovich v Italy [1991] E R I-3061, [1995] ICR 722 and Brasserie du Pecheur v Germany; R v SST ex p Factortame (No.4), [1996] QB 405 ECJ, were the appropriate remedy, if the conditions were met. RoadPeace contended that that would be inadequate.

The challenges by and large failed, apart from the one in relation to the VNUK judgment, which is of course, something that the government clearly hopes will be cured by Brexit, when the binding quality of judgments of the European Court of Justice lapse in the near future. Possibly.

Hidden away in the judgment is an interesting concession concerned with section 152(2) of the Road Traffic Act 1988 in these terms at paragraph 70:

A further issue arose which is usefully picked up here. Mr Palmer accepted in his written submissions of October that the true effect of Fidelidade was that s152(2) RTA was no longer compatible with EU law. The general rule is that the insurer is directly responsible for satisfying judgements obtained by third parties against the insured even if the insurance company will otherwise be entitled to avoid the policy. There was an exception to that general rule in s152(2), where a declaration had been made that the policy had been obtained through non-disclosure of a material fact or a materially false representation of fact. Amendment would therefore be required. But that was not part of the challenge in these proceedings, nor did it relate to this ground.

Section 152(2) provides as follows:

(2) Subject to subsection (3) below, no sum is payable by an insurer under section 151 of this Act if, in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration—

(a) that, apart from any provision contained in the policy or security, he is entitled to avoid it either under the Consumer Insurance (Disclosure and Representations) Act 2012 or, if that Act does not apply, on the ground that it was obtained—

(i) by the non-disclosure of a material fact, or

(ii) by a representation of fact which was false in some material particular, or

(b) if he has avoided the policy or security under that Act or on that ground, that he was entitled so to do apart from any provision contained in the policy or security.

and, for the purposes of this section, “material” means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions.

I have fond memories of that subsection: remembering travelling to obscure courts in Lincolnshire, now long since closed, 20 or more years ago to obtain such declarations. Now it appears that this route is no longer open to an insurer to avoid indemnity: and so incrementally the law moves on.

The judgment is essential reading for all those who have cause to deal with the murky business of enforcing judgments against insurers: it also admirably traces the key statutory provisions, both domestic and European and cases which govern this area of law and so forms a useful starting place for material for further reading.

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