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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Colley v Shuker & Ors [2020] EWHC 3433 (QB) (14 December 2020) URL: http://www.bailii.org/ew/cases/EWHC/QB/2020/3433.html Cite as: [2020] EWHC 3433 (QB), [2020] WLR(D) 679, [2021] 1 WLR 1889, [2021] RTR 17, [2021] WLR 1889 |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
MR DANIEL JAMES COLLEY |
Claimant |
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- and – |
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MR. DYLAN SHUKER (2) UK INSURANCE LIMITED (3) MOTOR INSURERS BUREAU (4) SECRETARY OF STATE FOR TRANSPORT |
Defendant |
____________________
MS. MARIE LOUISE KINSLER QC and MR. RICHARD VINEY (instructed by Weightmans) for the THIRD DEFENDANT
Hearing dates: 3rd and 4th November 2020
____________________
Crown Copyright ©
MR JUSTICE FREEDMAN:
I Contents
SECTION NUMBER |
SUBJECT | PARAGRAPH NUMBER |
I | Contents | |
II | Introduction | 1-2 |
III | The facts | 3-14 |
IV | Application of EU law and the provisions of the 2009 Directive | 15-18 |
V | Articles 3, 10 and 12 of the 2009 Directive | 19-30 |
VI | The UK legislative framework for compulsory third-party motor insurance | 31-35 |
VII | Failure to implement the Motor Insurance Directive | 36-38 |
VIII | Claim against Insurer | 39-44 |
IX | The preliminary issue | 45 |
X | Issue 1: Can the Claimant rely upon Articles 3(1) and 12 of Directive 2009/103/EC to require the MIB, an emanation of the state and compensation body for the purposes of Article 10, to pay compensation in the circumstances of the present case? |
46 |
XI | The nature and history of the MIB | 47-49 |
XII | Claimant's case of a direct claim against the MIB. | 50-63 |
XIII | MIB's case that there is no direct claim because the Article 3 obligation has been satisfied | 64-69 |
XIV | MIB's case as to the effect of the travaux préparatoires | 70-78 |
XV | Claimant's response as regards travaux préparatoires | 79-83 |
XVI | Further consideration of Delaney | 84-92 |
XVII | The consideration of the Csonka case by the MIB | 93-95 |
XVIII | The consideration of the Csonka case by the Claimant | 96-105 |
XIX | Other European decisions and especially Fidelidade: submission of the MIB | 106-111 |
XX | Other European decisions and especially Fidelidade: submission of the Claimant | 112-113 |
XXI | Discussion | 115-128 |
XXII | Issue 2: whether the Third Defendant is entitled to rely on the exclusion permitted by Article 10(2) second sub-paragraph of Directive 2009/103/EC in respect of the Claimant, in the circumstances of the present case. |
129-130 |
XXIII | Submission of the Claimant | 131-139 |
XXIV | Submission of the MIB | 140-146 |
XXV | Discussion | 147-157 |
XXVI | Conclusion | 158-160 |
II Introduction
III The facts
"On 20 May 2014, the father of the First Defendant, Mr Nicholas Shuker, applied to UK Insurance Limited (the Second Defendant) ["the Insurer"] for motor insurance in respect of the Vehicle, which application was accepted and a policy was issued and incepted on 21 May 2014 under policy number 19862770 ("the Policy"). The Policy named Mr N Shuker as the Policyholder and Main Driver, and A Hutchinson (Partner) as the Other Driver. The Policy did not provide cover for the use of the Vehicle by the First Defendant, who was an uninsured driver".
"At all material times the Claimant knew that the First Defendant did not have a valid driving licence and was not insured to drive the Vehicle".
IV Application of EU law and the provisions of the 2009 Directive
"According to the court's settled case law, the need for a uniform application of European Union law and the principle of equality require the terms of a provision of European Union law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope normally to be given an independent and uniform interpretation throughout the European Union; that interpretation must take into account not only its wording but also its context and the objectives pursued by the rules of which it is part"
V Articles 3, 10 and 12 of the 2009 Directive
Each Member State shall, subject to Article 5, take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance.
The extent of the liability covered and the terms and conditions of the cover shall be determined on the basis of the measures referred to in the first paragraph.
Each Member State shall take all appropriate measures to ensure that the contract of insurance also covers: (a) according to the law in force in other Member States, any loss or injury which is caused in the territory of those States
…
The insurance referred to in the first paragraph shall cover compulsorily both damage to property and personal injuries." (Article 3, First Directive)
"Each Member State shall set up or authorise a body with the task of providing compensation, at least up to the limits of the insurance obligation for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation provided for in Article 3 has not been satisfied." (emphasis added) (Article 1(4), Second Directive)
"Member States may, however, exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured". (Article 1(4), Second Directive)
"Without prejudice to the second sub-paragraph of Article 13(1), the insurance referred to in Article 3 shall cover liability for personal injuries to all passengers, other than the driver, arising out of the use of a vehicle".
"Each Member State shall take all appropriate measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article 3 shall be deemed to be void in respect of claims by third parties who have been victims of an accident where that statutory provision or contractual clause excludes from insurance the use or driving of vehicles by (a) persons who do not have express or implied authorisation to do so; (b) persons who do not hold a licence permitting them to drive the vehicle concerned; (c) persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned."
However, the provision or clause referred to in point (a) of the first sub-paragraph may be invoked against persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen.
Member States shall have the option — in the case of accidents occurring on their territory — of not applying the provision in the first sub-paragraph if and in so far as the victim may obtain compensation for the damage suffered from a social security body.
2. In the case of vehicles stolen or obtained by violence, Member States may provide that the body specified in Article 10(1) is to pay compensation instead of the insurer under the conditions set out in paragraph 1 of this Article. Where the vehicle is normally based in another Member State, that body can make no claim against any body in that Member State.
Member States which, in the case of vehicles stolen or obtained by violence, provide that the body referred to in Article 10(1) is to pay compensation may fix in respect of damage to property an excess of not more than EUR 250 to be borne by the victim.
3. Member States shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy which excludes a passenger from such cover on the basis that he knew or should have known that the driver of the vehicle was under the influence of alcohol or of any other intoxicating agent at the time of an accident, shall be deemed to be void in respect of the claims of such passenger.
"38 Therefore, the task that a compensation body such as MIBI is required by a Member State to perform, a task that contributes to the general objective of victim protection pursued by the EU legislation relating to compulsory motor vehicle liability insurance, must be regarded as a task in the public interest that is inherent, in this case, in the obligation imposed on the Member States by Article 1(4) of the Second Directive.
39 In that regard, it must be borne in mind that, in case of damage to property or personal injuries caused by a motor vehicle for which the insurance obligation provided for in Article 3(1) of the First Directive has not been satisfied, the Court has held that 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 (see, to that effect, Csonka at paragraph 31).
…
41 The provisions of a directive that are unconditional and sufficiently precise may consequently be relied upon against an organisation such as the MIBI."
"[45] A national court is obliged to set aside a provision of national law that is contrary to a directive only where that directive is relied on against a Member State, the organs of its administration, such as decentralised authorities, or organisations or bodies which are subject to the authority or control of the State or which have been required by a Member State to perform a task in the public interest and, for that purpose, possess special powers beyond those which result from the normal rules applicable to relations between individuals.
…
[49] It follows from the foregoing considerations that a national court, hearing a dispute between private persons, which finds itself unable to interpret provisions of its national law in a manner that is compatible with a directive, is not obliged, solely on the basis of EU law, to disapply the provisions of its national law which are contrary to those provisions of that directive that fulfil all the conditions required for them to produce direct effect and thereby to extend the possibility of relying on a provision of a directive that has not been transposed, or that has been incorrectly transposed, to the sphere of relationships between private persons."
VI The UK legislative framework for compulsory third-party motor insurance
"(1) This section applies where, after a policy … is issued for the purposes of this Part of this Act, a judgment to which this subsection applies is obtained.
(2) Subsection (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under s.145 of this Act and either—(a) it is a liability covered by the terms of the policy … and the judgment is obtained against any person who is insured by the policy … or (b) it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons … and the judgment is obtained against any person other than one who is insured by the policy.
…
(5) Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, … he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment—(a) as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability …" (emphasis added).
"… no sum is payable by an insurer under s.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 under … that Act or on that ground, that he was entitled so to do apart from any provision contained in the policy …"
VII Failure to implement the Motor Insurance Directive
VIII Claim against Insurer
"The claim made by the claimant is against the second defendant, a private entity, to enforce rights arising out of the Directive. It does not assert directly enforceable rights against the second defendant as an agent of a Member State. Therefore, there is no obligation on the court, or power, to disapply the domestic legislation."
IX The preliminary issue
(1) Issue 1: whether the Claimant can rely upon Articles 3(1) and 12 of Directive 2009/103/EC to require the Third Defendant, an emanation of the state and compensation body for the purposes of Article 10, to pay compensation in the circumstances of the present case; and
(2) Issue 2: whether the Third Defendant is entitled to rely on the exclusion permitted by Article 10(2) second sub-paragraph of Directive 2009/103/EC in respect of the Claimant, in the circumstances of the present case. The second sub-paragraph states: "Member States may, however, exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured."
X Issue 1:
Can the Claimant rely upon Articles 3(1) and 12 of Directive 2009/103/EC to require the MIB, an emanation of the state and compensation body for the purposes of Article 10, to pay compensation in the circumstances of the present case?
XI The nature and history of the MIB
XII Claimant's case of a direct claim against the MIB.
"[67] 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.
[68] 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…"
(1) the obligation to provide insurance cover under Article 3 and the duty of the compensation body under Article 10 are co-extensive;
(2) the United Kingdom Government has not retained a discretion to assign that responsibility to some other body than the MIB, since article 10 contemplated the setting up of a single compensation body, not a whole series of bodies; that, accordingly, articles 3 and 10 are both unconditional and sufficiently precise so as to be capable of having direct effect. At para. 63 of Lewis, Flaux LJ stated "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";
(3) the MIB, albeit a private law body, has had conferred on it by the United Kingdom Government the task under article 10, which includes remedying the Government's failure to institute in full a compulsory insurance regime in respect of the use of vehicles on private land;
(4) since that task is in the public interest and since the MIB possessed special powers by virtue of the provisions of the RTA 1988 which obliges all authorised motor insurers to be members of the MIB and to contribute to its funding, the MIB was an emanation of the State against which article 10 of Directive 2009/103 could be enforced by the claimant: see also the Defence of the Secretary of State in this action to like effect at para. 4(b).
(1) As an emanation of the State, the MIB would not be assisted by arguing that the breach of EU law was committed by the UK Government. Where the Claimant is able to rely on a directive as against the State, he may do so regardless of the capacity in which the latter is acting, whether as central government, an agency or a private law body entrusted with the relevant task, as it is necessary to prevent the State from taking advantage of its own failure to comply with EU law (see: Case 152/84 Marshall [1986] ECR 723 at para. 49; Case C-188/89 Foster [1990] ECR I-3313 at para. 17, applied more recently in Joined Cases 444/09 and 456/09 Gavieiro [2010] ECR I 14031, at para. 82).
(2) The provisions of the Directive are binding on all authorities of the Member States, which includes the MIB as an emanation of the State: see Case 103/88 Costanzo [1989] ECR 1839, at paras. 29-33.
(3) The principle of primacy of EU law requires not only the courts but all the bodies of the Member States to give full effect to EU rules: Case C-378/17 The Minister for Justice and Equality and The Commissioner of the Garda Síochána v Workplace Relations Commission EU:C:2018:979 (judgment, 4 December 2018), see paras. 38-46 and 50. Thus there is a positive duty on the body (here the MIB) tasked with implementing the provisions of a directive (here the Motor Insurance Directive), to disapply any conflicting provisions (here including in the Uninsured Drivers' Agreement).
XIII MIB's case that there is no direct claim because the Article 3 obligation has been satisfied
"As regards the determination of the actual circumstances in which the insurance obligation laid down in Article 3.1 of the First Directive may be regarded as not having been satisfied, it is significant – as the Advocate General stated in point 32 of his opinion – that the European legislature did not confine itself to providing that the body must pay compensation in the event of damage caused by a vehicle for which the insurance obligation has not been satisfied in general, but made it clear that that was to be the case only in relation to damage caused by a vehicle for which the insurance obligation provided for in Article 3.1 of the First Directive has not been satisfied, that is to say, a vehicle in respect of which no insurance policy exists." (emphasis added) Such a restriction is explained by the fact that Article 3(1) of the First Directive – as has been pointed out in paragraph 28 above – requires each Member State, subject to the derogations allowed under Article 4 of that directive, to ensure that every owner or keeper of a vehicle normally based in its territory takes out a policy with an insurance company for the purpose of covering, up to the limits established by European Union law, his civil liability arising as a result of that vehicle. Viewed in that light, the very fact that damage has been caused by an uninsured vehicle attests to a breakdown in the system which the Member State was required to establish and justifies the payment of compensation by a national body providing compensation."
XIV MIB's case as to the effect of the travaux préparatoires
(1) The outset: the guarantee body has its legislative origins in Article 1 of the Second Motor Insurance Directive, article 1(3) being the forerunner to Article 10 of the Codified Directive originally provided:
"Each Member State shall make provision that compensation within the limits authorised by paragraph 2 for damage to property or personal injuries caused by an unidentified vehicle in respect of which the insurance obligation provided for in paragraph 1 has not been satisfied shall be borne by a body set up or authorised Article 1(3) of the draft Second Motor Insurance Directive: by that State."
Article 2 of the draft Second Motor Insurance Directive provided:
"For the purposes of Article 1(3) of this Directive….where an insurer refuses to make payment by virtue of the law or of a contractual provision authorised by law, the vehicle shall be treated as an uninsured vehicle".
Therefore, at the outset the Commission's proposal was that the guarantee body would be liable where no insurance had been taken out and, additionally, where an insurance policy had been taken out but an insurer was entitled to refuse to pay – on the basis of law or the insurance contract. This is confirmed by Recital 6 of the Proposal which stated:
"Whereas it is necessary to make provision for a body to bear secondary liability for the payment of compensation in cases where the vehicle responsible is unidentified or uninsured, or where the insurer is entitled to disclaim liability; whereas the latter case must be treated in the same way as a case of non-insurance." (emphasis added)
(2) The European Parliament amended the draft Second Motor Insurance Directive to remove the proposed Article 2 (but not the Recital). The European Parliament instead inserted a provision that rendered contractual terms that excluded vehicles from cover if driven by certain categories of person void insofar as an injured third party might rely on the insurance policy.
(3) The Commission partially accepted this amendment and proposed an Amended version of Article 2 to reflect this. However, the Commission did not accept the European Parliament's proposed deletion of the original Article 2, noting that it considered "it is essential to retain the principle of treating as cases of non-insurance those residual cases in which the insurer can avoid payment for any compensation to the victim". The Commission's Amended Proposal inserted a new recital ("whereas it is necessary to provide that all other instances in which the insurer is entitled to disclaim liability must be treated as instances of non-insurance") to reflect the point previously covered by original Recital 6 together with a revised Article 2 which includes the following:
"Where an insurer refuses to make payment by virtue of the law or of another contractual provision authorized by law, the vehicle shall be treated as an uninsured vehicle".
(1) the Directives show that as a rule it is the insurer of the vehicle that has caused damage who is responsible for covering that damage. Only in cases in which the vehicle is uninsured or unidentified, that is to say, if the responsible insurer cannot be established, must the body referred to in Article 1(4) of the Directive 84/5 act [Lenz Opinion para. 47);
(2) originally under the documents concerning the preparatory work on Directive 84/5, the Commission wanted a more extensive duty of the body to pay compensation. The original proposal for Article 2 was then quoted (Lenz Opinion para. 48). The vehicle was to be deemed to be uninsured in the case of all statutory or contractual exclusions (Lenz Opinion para. 49).
(3) Article 1(4) as finally adopted is then set out, showing that the proposal did not survive in the Council: (Lenz Opinion para. 50).
(4) The first part of para. 51 of Lenz Opinion reads as follows:
"The wording finally adopted and the provision's legislative history show that the "body" is in no way conceived as a general "catch-all", providing compensation upon the occurrence of any excluded events. Nor does the provision simply refer to the "absence of insurance" to which the national court alludes. Everything indicates that within the framework established by the directives, the person who has suffered harm as a result an accident must recoup his loss from the insurer."
[30] It is also worth examining the travaux préparatoires for Directive 84/5/EEC. Those preparatory documents show that the legislature wished to some extent to limit the circumstances calling for the compulsory payment of compensation by the body to be set up in accordance with Article 1(4) of Directive 84/5 and to adopt a strict interpretation of the expression 'vehicle for which the insurance obligation … has not been satisfied'. In the initial proposal for Directive 84/5, the intention was to treat as an 'uninsured' vehicle a vehicle which has caused damage for which, by virtue of the law or of a contractual provision authorised by the law, the insurer is entitled to refuse compensation; ultimately, that proposal was not adopted. [31] I draw two sets of conclusions from that significant shift between the wording of the proposal and the final wording of Directive 84/5. First, it appears that, in the mind of the legislature, a vehicle in respect of which the insurance obligation has not been satisfied was equivalent to an uninsured vehicle– which is confirmed, moreover, by the wording of the fifth sub-paragraph of Article 1(4) of Directive 84/5. Next, it is clear that, in the final version of Directive 84/5, the EU legislature knowingly set boundaries to the circumstances calling for the payment of compensation by the body which was to be set up, inasmuch as its only express reference – other than to unidentified vehicles – was to 'vehicle[s] for which the insurance obligation provided for in paragraph 1 has not been satisfied', that is to say, vehicles for which an insurance policy has not been taken out. The measure adopted in 1983 clearly shows that the legislature did not itself see Article 3 of Directive 72/166 as a general clause requiring the Member States to set up a guarantee mechanism. [32] It is worth noting that the legislature did not confine itself to providing that the body to be set up should pay compensation in the event of damage caused by vehicles for which the insurance obligation was not satisfied in general, but was minded to make it clear that this was to be the case only in relation to damage caused by vehicles for which the insurance obligation provided for in paragraph 1 of Article 1 of Directive 84/5 was not satisfied." The MIB submits that the legislative history of what is now Article 10 shows a significant and deliberate contraction in the guarantee body's remit in comparison to the original proposal. The Council expressly restricted the ambit of the guarantee body's compulsory liability: the body was not required to respond where an insurance policy had been taken out in respect of the vehicle, but the insurer subsequently sought to disclaim liability. The suggestion of the Commission that the guarantee body was there to fill the gaps was rejected: it is only there to provide compensation where no insurance contract has been taken out. One of the reasons for this contraction was that despite the concern to protect victims, there was also a concern about the financial burden represented by the payment of compensation on the guarantee body (Csonka Opinion of Mr Mengozzi at para. 43) as a result of which the insurance obligation became confined to "specific, clearly identified, sets of circumstances" (Csonka at para. 32). Moreover, even in uninsured cases, the body was not required to cover claims within the scope of what became Article 10(2). Ms Kinsler QC submits that this reveals a legislative intent which is highly relevant to the proper interpretation of the Directive and to the outcome of the preliminary issues. XV Claimant's response as regards travaux préparatoires |
"46. Apart from those highly exceptional cases of the victim's own blameworthy conduct, it must be assumed that there is a need to ensure that there are no gaps in the duty to compensate the victim. That principle can be seen to be the guiding principle of the directives. To that effect, the national guarantee body must be regarded as covering accident victims who would otherwise be unprotected. The reason for requiring such a body to be established is the concern to protect victims."
"51. ….Only if, for whatever reason, he has no claim for compensation against the insurer, would the 'body' have to pay compensation in the interest of the extensive protection of victims. Furthermore, the Member States are free to extend the competence of the body by statute, provided complete protection is ensured for victims."
XVI Further consideration of Delaney
"39. The third point I derive from these paragraphs of Advocate General Lenz's Opinion is that, although the scheme of the Second Directive is such that the insurer (if it exists) and not the national body should pay compensation, provided that the system as a whole ensures complete protection for victims there may be no objection in principle to the national body having an enhanced role. This is exactly the position which obtains in this jurisdiction on account of section 152(2) of the RTA 1988. However, the logical corollary must evidently be this: that the national body, here the MIB, must pay compensation in circumstances where the insurer - "for whatever reasons", which must include the avoiding of the insurance policy for misrepresentation or non-disclosure by the insured – owes no liability in respect of the victim's claim. Were the position otherwise, the victim would be left without a remedy even in circumstances where there was no blameworthy conduct on his part.
40. I have paid particular attention to the Opinion of Advocate General Lenz because it appears to me to contain a flawlessly coherent, logical and principled guide to the scheme of the Second Directive….The only matter where there might be a scintilla of uncertainty (viz. the first sentence of paragraph 46 of his Opinion) is answered by an accurate reading of the Directive itself and subsequent ECJ jurisprudence. As for the language of the Directive, I am referring to the fact that it sets out a number of exclusions and derogations, and it is an established principle of Community law that these must be read restrictively.
41. The Judgment of the ECJ in Ruiz Bernaldez was couched in characteristically elliptical terms, and in line with its traditionally parsimonious approach no answer was supplied to the fifth question; it simply did not arise. However, at paragraph 20 of its Judgment the ECJ supported the Advocate General's reasoning in relation to his answer to the third question and, because the point was effectively the same, the fourth:
"That being so [the need to avoid disparities in the treatment of victims], Article 3.1 of the First Directive precludes an insurer from being able to rely on statutory provisions or contractual clauses to refuse to compensate third-party victims of an accident caused by the insured vehicle."
"The present case falls within Article 1(4) rather than under the general provisions concerning insurance cover only because, fortuitously and as a result of particular provisions of national law, the driver's insurer succeeded in avoiding the policy ab initio on the ground of non-disclosure of material facts (see paragraph 2 above), which had the consequence that the vehicle fell to be treated as an uninsured vehicle. It is common ground that, if the policy had not been avoided, the insurer would not have been able to rely on any equivalent to clause 6.1(e)(iii) to defeat Mr Delaney's claim: such an exclusion is not permitted by Article 2(1) of the Second Directive. Having regard to the aims of the directives, it would be very surprising if such an exclusion were nonetheless available to the body provided for by Article 1(4)." (emphasis added)
XVII The consideration of the Csonka case by the MIB
XVIII The consideration of the Csonka case by the Claimant
"57. Thus, the principle of Community law vouched by Csonka is clear. An Article 1.4 compliant regime does not have to guarantee the satisfaction of the insurance obligation in some general way: the national body is not a long-stop to meet the obligations of insolvent insurers. The guarantee which Article 1.4 mandates is limited to cases where there is no insurance policy in existence at all (emphasis added).
58. In my judgment, Csonka's case [2014] 1 CMLR 377 has no relevance to the situation where an insurer seeks to avoid liability to the victim, either on the basis of misrepresentation or non-disclosure by the insured, or on the basis of some misconduct by the victim which is not expressly catered for in the exceptions to the Directive. As it happens, Advocate General Mengozzi mentioned only the first type of case, not the second, and as we have seen he did so in a different context. It is entirely plain from earlier ECJ jurisprudence, which I have discussed, that the insurer cannot seek to avoid liability to the victim on the basis of the insured's failures or the victim's misconduct, subject to one of the limited exceptions being in application.
" For the purposes of its analysis of Article 1.4, Csonka proceeded on the basis of a strict dichotomy: either there is no insurance, or the insurer is unable to satisfy the subrogated liability for a reason unconnected with the requirements of the Directives as revealed by an examination of their language and intendment. There is no room for an additional category of case, that is to say the situation where the insurer seeks to avoid liability under the policy on a basis which is unsupported by the language and intendment of the Directives. In any event, as soon as one brings into play other provisions of the Directives, as the reformulated first preliminary issue now does, it is clear from the raft of ECJ decisions to which I have referred that a situation cannot arise whereby the insurer's avoidance of liability leaves the victim without a remedy. These decisions apply to the obligations of the relevant national body if, as here, the victim has no remedy against the insurer under domestic law."
This part of the judgment did not form a part of the challenge before the Court of Appeal.
XIX Other European decisions and especially Fidelidade: submission of the MIB
"27 Accordingly, it must be held that the fact that the insurance company has concluded that contract on the basis of omissions or false statements on the part of the policyholder does not enable the company to rely on statutory provisions regarding the nullity of the contract or to invoke that nullity against a third-party victim so as to be released from its obligation under [Article 3 of the 2009 Directive] to compensate that victim for an accident caused by the insured vehicle.
28 The same is true regarding the fact that the policyholder is not the usual driver of the vehicle.
29 Indeed, the Court has held that the fact that a vehicle is driven by a person not named in the insurance policy relating to that vehicle cannot, in view, in particular, of the aim pursued by the First, Second and Third Directives of protecting victims of road traffic accidents, support the conclusion that that vehicle is uninsured for the purposes of the [second] sub-paragraph of [Article 10 of the 2009 Directive] (judgment of 1 December 2011, Churchill Insurance Company Limited and Evans, C-442/10, EU:C:2011:799, paragraph 40).
30 In that context, the referring court also asks the Court whether an insurance company is entitled to rely, in the case of an ongoing contract for compulsory motor vehicle insurance against civil liability and in order to avoid its obligation to compensate third-party victims of an accident caused by the insured vehicle, on a statutory provision, such as Article 428(1) of the Portuguese Commercial Code, which provides for the nullity of an insurance contract in the event that the person for whom or on whose behalf the insurance has been taken out has no economic interest in the conclusion of that contract.
31 It must be noted that such a question is concerned with the legal conditions of validity of the insurance contract, which are governed not by EU law but by the laws of the Member States.
32 Those States are nonetheless obliged to ensure that the civil liability arising under their domestic law is covered by insurance which complies with the provisions of the three abovementioned directives [as now consolidated in the 2009 Directive]. It is also apparent from the Court's case-law that the Member States must exercise their powers in that field in a way that is consistent with EU law and that the provisions of national legislation which govern compensation for road accidents may not deprive the First, Second and Third Directives of their effectiveness (judgment of 23 October 2012, Marques Almeida, C-300/10, EU:C:2012:656, paragraphs 30 and 31 and the case-law cited).
33 As noted by the European Commission, the right of victims of an accident to receive compensation may be impaired by the conditions for the validity of the insurance contract, such as the general clauses set out in Article 428(1) and the first paragraph of Article 429 of the Portuguese Commercial Code.
34 Such provisions are thus liable to result in compensation not being paid to third-party victims and, consequently, in those directives being deprived of their effectiveness.
35 That finding is not called in question by the fact that it is possible for the victim to receive compensation from the Fundo de Garantia Automóvel. The payment of compensation by the body referred to in [Article 10(2) of the 2009 Directive] was, in fact, designed to be a measure of last resort, envisaged only for cases in which the vehicle that caused the injury or damage has not satisfied the requirement for insurance referred to in [Article 3], that is to say, it is a vehicle in respect of which no insurance contract is in place. Such a restriction is explained by the fact that that provision, as recalled in paragraph 23 of the present judgment, requires each Member State to ensure, subject to the derogations allowed under Article 4 of the First Directive, that every owner or keeper of a vehicle normally based in its territory concludes a contract with an insurance company in order to guarantee, up to the limits established by EU law, his civil liability arising as a result of the use of that vehicle (see, to that effect, judgment of 11 July 2013, Csonka and Others, C-409/11, EU:C:2013:512, paragraphs 30 and 31).
36 However, as recalled in paragraph 29 of the present judgment, the fact that a vehicle is driven by a person not named in the insurance policy relating to that vehicle cannot support the conclusion that that vehicle is uninsured for the purposes of the [second] sub-paragraph of [Article 10(2) of the 2009 Directive]." (emphasis added)
XX Other European decisions and especially Fidelidade: submission of the Claimant
XXI Discussion
"Second, as noted by the Commission, the payment of compensation by a national body is considered to be a measure of last resort, provided for only in cases in which the vehicle that caused the injury or damage is uninsured or unidentified or has not satisfied the insurance requirements referred to in Article 3(1) of the First Directive" (emphasis added).
(1) If the scope of the Directive had been so narrow, then narrower words would have been used so as to refer specifically to uninsured vehicles and not to the broader concept of "a vehicle for which the insurance obligation provided for in Article 3 has not been satisfied".
(2) The perfect framework according to EU law is that if there is insurance in place, the claim can be brought against the insurer no matter what incompatible exclusions or defences exist according to the national law. However, the guarantee body is there to provide compensation where the system breaks down. The system can break down where there is no insurance. It can also break down where the insurance according to the national law is inadequate and in circumstances where the Directive has no direct effect.
(3) The concept of last resort was expressed in the Opinion of Advocate General Lenz in Ruiz Bernaldez especially at paras. 46 and 51 referred to above. That is broad enough to indicate a claim against the guarantee body at para. 51 of the Opinion: "….only if, for whatever reason, he has no claim for compensation against the insurer, would the 'body' have to pay compensation in the interest of the extensive protection of victims." In my judgment, this provides a complete answer to the submissions of the MIB as regards the travaux préparatoires: see paras. 79-83 and see also paras.112-113 above. As there noted, the Court should reject reliance on that which was not implemented and concentrate on construing that which was implemented.
(4) This accords with the understanding of the position in these courts, which I respectfully follow. In Lewis, the Court of Appeal (per Flaux LJ at para. 72) stated that the protection encompasses 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. Reference is made to the analysis of Lewis at paras. 52-61 in this Judgment above which is strongly supportive of the Claimant's case. This culminates in the four conclusions derived from Lewis at para. 61 of this Judgment above.
(5) The effect is that the direct rights which the Claimant has as a result of the Directive against the MIB as an emanation of the State have not been protected as a result of the old form of section 152(2) of the RTA 1988 and the declaration. The UK Government has failed to institute in full the compulsory insurance regime. On the basis of the above reasoning, the Claimant is entitled to enforce his directly effective rights against the MIB: see paras. 62-63 above.
(6) In any event, the CJEU in Farrell v Whitty (No.2) stated that the task which a compensation body is required to perform is to contribute to the general objective of victim protection by the EU legislation regarding compulsory motor vehicle insurance. That is 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 is covered by insurance: see paras. 38-39 of Farrell v Whitty (No.2) as referred to in Lewis at paras. 73-74: see especially paras. 57, 67 and 98 of this Judgment above.
(7) In Delaney, the understanding of Jay J was that protection was not limited to cases where the vehicle was unidentified or uninsured, but applied where an insurer would seek to avoid due to non-disclosure or misrepresentation invoking section 152(2) of the RTA 1988. Whilst that was in the context of a Francovich claim, it is no longer a Francovich claim. That is for two reasons, namely
(a) the result of Smith v Meade confirming the absence of horizontal effect of the Directives in respect of private bodies such that an insurer can avoid liability due to a measure such as section 152(2) of the RTA; and
(b) the result of Lewis [at 74-75] confirming the role of the MIB as an emanation of State and as having to remedy the failure of the government to institute in full a compulsory insurance scheme and being subject to a direct action from the victim.
This was expressed by Mr Moser QC, namely that "a vagary of our system as it was under the old 152(2)" did not excuse the Secretary of State: see the further analysis in respect of Delaney especially at paragraphs 86-92 of this Judgment above. Once it was established that the MIB was an emanation of State, the national law which was incompatible with the Directive would not excuse the MIB.
(8) The Directive is to be construed purposively in the context of the extensive protection to victims of road accidents. This is consistent with the responsibility of the national courts to provide the legal protection which individuals derive from rules of EU law. It is to ensure that the objectives of the legislation are met and that those rules are fully effective.
(9) The construction that such a victim is confined to a Francovich claim despite the availability of a direct claim of a victim against the MIB would represent a major lacuna in the protection of the Directive. The suggestion that Smith v Meade provides support is not accepted for the reasons advanced by the Claimant and summarised at paragraph 114 above and having regard to all the matters set out in this para. 120. A Francovich claim provides a limited protection because of the need to prove a sufficiently serious breach by the Government. In this case the Secretary of State contends for the reasons set out in sub-paragraphs 10a–10g of his Defence that the breach does not satisfy the sufficiently serious test in Francovich.
XXII Issue 2: whether the Third Defendant is entitled to rely on the exclusion permitted by Article 10(2) second sub-paragraph of Directive 2009/103/EC in respect of the Claimant, in the circumstances of the present case. The second sub-paragraph states: "Member States may, however, exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured" [emphasis added].
XXIII Submission of the Claimant
"In that regard, it is first necessary to point out that the situation in which the vehicle that caused the damage was driven by a person not insured to do so, while a driver was, moreover, insured to drive that vehicle, and the situation specified in [Article 10(2) of the 2009 Directive] in which the vehicle which caused the accident was not covered by any insurance policy, are situations neither similar nor comparable. The fact that a vehicle is driven by a person not named in the relevant insurance policy cannot, having regard, in particular, to the aim of protecting victims of road traffic accidents pursued by the First, Second and Third Directives, support the view that that vehicle was not insured for the purpose of that provision."
"Finally, it must be recalled that the EU legislation concerning civil liability insurance in respect of the use of vehicles prevents the exclusion of the insurer's obligation to compensate a victim of a road traffic accident involving an insured vehicle when the accident has been caused by a person who is not the person covered by the insurance policy: see Churchill Insurance Co Ltd v Wilkinson (Case C-442/10) EU:C:2011:799; [2013] 1 WLR 1776; [2011] ECR I-12639, paras. 33–44 and the case law cited."
XXIV Submission of the MIB
XXV Discussion
XXVI Conclusion
Note 1 And in the A-G’s Opinion at paras. 37 and 43, referring to the Court’s clear inclination to interpret broadly and generously provisions which may be favourable to victims [Back] Note 2 In fact, the relevant accidents occurred prior to the expiry of the date for implementation into domestic law of the provisions of the 2009 Directive, so the CJEU referred to the identical antecedent provisions in the earlier Directives (see judgment, para. 39). [Back]