Recovery of Medical Costs for Asbestos Diseases (Wales) Bill: Reference by the Counsel General for Wales

JurisdictionEngland & Wales
JudgeLord Neuberger,Lord Mance,Lord Hodge,Lord Thomas
Judgment Date09 February 2015
Neutral Citation[2015] UKSC 3
Date09 February 2015
CourtSupreme Court

[2015] UKSC 3

THE SUPREME COURT

Hilary Term

before

Lord Neuberger, President

Lady Hale, Deputy President

Lord Mance

Lord Hodge

Lord Thomas

Recovery of Medical Costs for Asbestos Diseases (Wales) Bill: Reference by the Counsel General for Wales

Appellant

Theodore Huckle QC

Richard Gordon QC

(Instructed by Welsh Government Legal Services Department)

Intervener

Michael Fordham QC

Jason Pobjoy

(Instructed by Bircham Dyson Bell)

Heard on 14 and 15 May 2014

Lord Mance (with whom Lord Neuberger and Lord Hodge agree)

Introduction
1

This reference, made by the Counsel General for Wales, raises for determination whether the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill is within the legislative competence of the National Assembly for Wales (the "Welsh Assembly"). The issues involved are novel and important, and the Counsel General was right to recognise them as such and to make the present reference with a view to resolving them. The reference has been well-presented and argued on both sides.

2

The Bill contains in section 1 its own "overview". It

"(a) imposes liability on persons by whom or on whose behalf compensation payments are made to or in respect of victims of asbestos-related diseases to pay charges in respect of National Health Service services provided to the victims as a result of the diseases;

(b) makes provision for the certification of the amount of the charges to be paid, for the payment of the charges, for reviews and appeals and about information;

(c) extends insurance cover of liable persons to their liability to pay the charges."

3

Liability to pay NHS charges arises under section 2 "where a compensation payment is made to or in respect of a person (the 'victim') in consequence of any asbestos-related disease suffered by the victim". It is imposed on the person who is or is alleged to be liable to any extent in respect of such disease and by whom or on whose behalf the compensation payment is made after the Bill comes into force. It is convenient to describe such a person as the "compensator". The liability is to reimburse the Welsh Ministers in respect of any relevant Welsh NHS services provided to the victim as a result of the disease, in an amount set or amounts out in, or determined in accordance with, regulations under section 6(2) and specified in a certificate to be issued by the Welsh Ministers subject to any limit fixed by regulations under section 6(5)(a). The Bill contains extensive provisions requiring sufferers, compensators and others to provide information (section 12), requiring compensators to apply for and the Welsh Ministers to issue certificates specifying the relevant charges arising under section 2 in accordance with regulations and reduced where appropriate to reflect any contributory fault on the part of the sufferer (section 6) as well as regulating other matters, such as the time for payment of charges (section 7), the recovery of charges (section 8), the review of certificates (section 9), appeals against certificates (section 10 and 11) and cases in which compensators make lump sum or periodical payments (section 13).

4

Section 14 deals with the liability of insurers. It provides:

"(1) Where the liability or alleged liability of the person by whom or on whose behalf a compensation payment is made is, or (if established) would be, covered to any extent by a policy of insurance, the policy is to be treated as covering the person's liability under section 2.

(2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted.

(5) This section applies in relation to policies of insurance issued before (as well as those issued after) the date on which this section comes into force.

(6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making."

5

Section 15 provides:

"(1) The Welsh Ministers must, in the exercise of their functions under the National Health Service (Wales) Act 2006, have regard to the desirability of securing that an amount equal to that reimbursed by virtue of section 2 is applied, in accordance with that Act, for the purposes of research into, treatment of, or other services relating to, asbestos-related diseases.

(2) The Welsh Ministers must report annually to the National Assembly for Wales on the application of amounts equal to sums reimbursed by virtue of section 2."

6

The Bill in these circumstances has the following characteristics:

  • (i) First, by section 2, it imposes a novel statutory or "quasi-tortious" liability towards the Welsh Ministers on compensators (defined as set out in para 3 above).

    • a. This liability is a liability for pure economic loss which does not exist and has never existed at common law.

    • b. It does not reflect any liability which the compensator had to the victim, since the victim has no liability to the Welsh Ministers to meet any economic loss the Welsh Ministers may have suffered.

    • c. The liability exists whether the compensation is paid to the victim with or without admission of liability; the Counsel General in written submissions states that a "key point is that it is a necessary condition of the Bill attaching to insurers that there must be liability established or conceded". But a payment without admission of liability does not in law or even de facto amount to a concession of liability.

    • d. The liability is based on future compensation payments made in respect of actual or potential wrongs, the operative elements of which were committed many decades ago, though the victims are or will only suffer the consequences and the Welsh National Health Service will only have to bear the hospitalisation costs in the future.

  • (ii) Second, by section 14, the Bill imposes a new contractual liability on the liability insurers of compensators (typically employers' liability insurers such as those involved in the Trigger litigation: Durham v BAI (Run-Off) Ltd [2012] UKSC 14, [2012] 1 WLR 867) to cover any liability which such compensators have as a result of section 2.

    • a. It imposes this new liability on any insurer whose policy would to any extent cover the compensator for any liability which the compensator has or would (if established) have towards the victim.

    • b. It imposes it irrespective of any policy exclusion or restriction.

    • c. It imposes it in relation to policies issued before as well as after the date section 14 comes into force — and so in relation to policies issued and covering events occurring many decades ago.

    • d. It does all this although — indeed no doubt because — such liability insurers would not otherwise be likely to have to answer for any charges levied under section 2. This is clear on any reading of the typical employers' liability policy wordings summarised in annex A to my judgment in the Trigger case. In essence, such policy wordings cover employers' liability in damages for claims by actual or former employees suffering injury or disease. They are, furthermore, triggered by the original exposure to asbestos during the course of the insurance, not by the imposition of charges under section 2 as a result of compensation payments made, with or without admission of liability, long after the expiry of the policy period.

  • (iii) Third, section 15 provides that the Welsh Ministers must, in the exercise of their functions under the National Health Service (Wales) Act 2006 ("the NHS (Wales) Act"), have regard to the desirability of securing that an amount equal to that reimbursed by virtue of section 2 is applied, in accordance with that Act, for the purposes of research into, treatment of, or other services relating to, asbestos-related diseases.

7

The Bill thus imposes new liabilities on compensators in respect of past conduct and on liability insurers under past insurance contracts. The Counsel General stresses that compensators would only incur such liabilities as a result of their making future compensation payments to or in respect of victims of asbestos-related diseases who suffer future hospitalisation; and that insurers would only incur such liabilities under such contracts upon such compensation payments being made and then only if such contracts would to some extent cover any liability which the compensator might have towards the asbestos-related disease sufferer to make such compensation payments. The Bill is thus not retrospective in the fullest sense, but it does significantly restructure both the consequences of actual or possible negligence or breach of statutory duty committed long ago by compensators, and the terms of and liabilities attaching under insurance policies also underwritten years ago to cover any such negligence or breach of duty.

8

Unsurprisingly, in view of the identity of the interveners, the Association of British Insurers, the primary focus of submissions before the Supreme Court has been on section 14 of the Bill. But, inevitably, attention has also had to be given to the aim and effect of other provisions of the Bill, particularly section 2, which is directed to compensators.

9

The question referred to the court subdivides into two more specific issues: whether the Bill, and in particular, but not exclusively, section 14, falls within section 108(4) and (5) of the Government of Wales Act 2006 ("GOWA"), which in turn depends in this case upon whether it relates to "Organisation and funding of national health service" in paragraph 9 of Part 1 of Schedule 7 to GOWA – an issue on which section 15 has a potential bearing; and whether, if it does fall within section 108(4) and/or (5), it is nonetheless outside the Welsh Assembly's competence by virtue of section 108(6), read with section 158(1), on the ground that it is incompatible with the Convention rights scheduled to the Human Rights Act 1998. It is logical to take these issues in that order, since section...

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