Sean Robert Delaney v Secretary of State for Transport
| Jurisdiction | England & Wales |
| Judge | Lord Justice Richards,Lord Justice Kitchin,Lord Justice Sales |
| Judgment Date | 09 March 2015 |
| Neutral Citation | [2015] EWCA Civ 172 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B3/2014/2031 |
| Date | 09 March 2015 |
[2015] EWCA Civ 172
Lord Justice Richards
Lord Justice Kitchin
and
Lord Justice Sales
Case No: B3/2014/2031
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Jay
[2014] EWHC 1785 (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL
Brian Kennelly (instructed by The Treasury Solicitor) for the Appellant
Philip Moser QC and Eric Metcalfe (instructed by Pinto Potts Solicitors) for the Respondent
Hearing date: 11 February 2015
Introduction
Motor insurance is the subject of European Union directives aimed at partial harmonisation of national laws. One of the obligations imposed on Member States is to set up or authorise a body with the task of providing compensation to the victims of unidentified or uninsured drivers. The relevant body in the United Kingdom is the Motor Insurers' Bureau ("the MIB"). Its obligations are governed by an agreement made in 1999 between the Secretary of State and the MIB ("the Uninsured Drivers' Agreement"). By clause 6.1(e) of that agreement, the MIB's obligation to meet a claim against an uninsured driver is subject to an exception in respect of:
"a claimant who, at the time of the use giving rise to the relevant liability was voluntarily allowing himself to be carried in the vehicle and, either before the commencement of his journey in the vehicle or after such commencement if he could reasonably be expected to have alighted from it, knew or ought to have known that –
…
(iii) the vehicle was being used in the course or furtherance of a crime."
That clause was relied on to exclude liability to Mr Delaney, the respondent to the present appeal, in earlier proceedings which culminated in the judgment of this court in Delaney v Pickett [2011] EWCA Civ 1532, [2012] 1 WLR 2149. The circumstances are described fully in that judgment. In summary, on 25 November 2006 Mr Delaney was the passenger in a car driven by Mr Pickett and was seriously injured in an accident caused by Mr Pickett's negligence. A substantial quantity of cannabis was found in the car at the time of the accident. Mr Pickett had a policy of insurance with Tradewise Insurance Services Limited ("Tradewise") but Tradewise obtained an order of the court that it was entitled to avoid the policy pursuant to section 152(2) of the Road Traffic Act 1952 on the ground of non-disclosure of material facts, namely that Mr Pickett suffered from diabetes and depression and was a habitual user of cannabis. The situation therefore fell within the scope of the MIB Agreement. For reasons it is unnecessary to go into, Tradewise stood in the shoes of the MIB in defending the claim brought by Mr Delaney. It successfully invoked clause 6.1(e)(iii) against him on the ground that he knew or ought to have known that the car was being used in the course or furtherance of crime, namely to transport cannabis for the purpose of drug-dealing. The claim therefore failed.
The judgment in Delaney v Pickett noted that no reliance had been placed on the EU directives in those proceedings. A belated attempt was made by Mr Delaney to rely on them in an application for permission to appeal to the Supreme Court but permission was refused.
Mr Delaney subsequently brought a claim against the Secretary of State for Transport, contending that (1) the exclusion in clause 6.1(e)(iii) was incompatible with the EU directives, and the United Kingdom was thereby in breach of EU law, and (2) the breach was sufficiently serious to give rise to liability to damages on the principles in Case C-6/90, Francovich v Italy [1991] ECR I-537, as developed in the case-law considered later in this judgment.
On the trial of preliminary issues, Jay J found in Mr Delaney's favour on both aspects of the claim. The judge himself gave permission to appeal to this court.
The EU directives on motor insurance
The relevant EU legislation concerning motor insurance has now been consolidated into Directive 2009/103/EC but because of the date of Mr Delaney's accident this appeal is concerned with three predecessor directives:
i) Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability ("the First Directive");
ii) Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles ("the Second Directive"); and
iii) Directive 90/232/EEC of 14 May 1990 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles ("the Third Directive").
The First Directive established the basic obligation of Member States to ensure the existence of insurance cover. Article 3(1) provided:
"Each Member State shall … 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 these measures."
The Second Directive extended that obligation in various ways, for reasons explained in the recitals. Having referred to Article 3(1) of the First Directive, the recitals continued:
"Whereas, however, major disparities continue to exist between the laws of the different Member States concerning the extent of this obligation of insurance cover; whereas these disparities have a direct effect upon the establishment and operation of the common market;
Whereas, in particular, the extension of the obligation of insurance cover to include liability incurred in respect of damage to property is justified;
…
Whereas it is necessary to make provision for a body to guarantee that the victim will not remain without compensation where the vehicle which caused the accident is uninsured or unidentified; whereas it is important … to provide that the victim of such an accident should be able to apply directly to that body as a first point of contact; whereas, however, Member States should be given the possibility of applying certain limited exclusions as regards the payment of compensation by that body and of providing that compensation for damage to property caused by an unidentified vehicle may be limited or excluded in the view of the danger of fraud;
Whereas it is in the interest of victims that the effects of certain exclusion clauses shall be limited to the relationship between the insurer and the person responsible for the accident; whereas, however, in the case of vehicles stolen or obtained by violence, Member States may specify that compensation will be payable by the aforementioned body;
Whereas in order to alleviate the financial burden on that body, Member States may make provision for the application of certain excesses where the body provides compensation for damage to property caused by uninsured vehicles or, where appropriate, vehicles stolen or obtained by violence …." (emphasis added).
In line with those recitals, Article 1(1) of the Second Directive provided that the basic obligation in Article 3(1) of the First Directive was to apply in respect of property damage as well as personal injuries, whilst Article 1(4) of the Second Directive imposed an obligation on Member States to set up or authorise a body with the task of providing compensation to the victims of unidentified or uninsured drivers:
" Article 1
1. The insurance referred to in Article 3(1) of [the First Directive] shall cover compulsorily both damage to property and personal injuries.
…
4. Each Member State shall set up or authorize 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 paragraph 1 has not been satisfied. …
The victim may in any case apply directly to the body which, on the basis of information provided at its request by the victim, shall be obliged to give him a reasoned reply regarding the payment of any compensation.
However, Member States may 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.
Member States may limit or exclude the payment of compensation by that body in the event of damage to property by an unidentified vehicle.
They may also authorize, in the case of damage to property caused by an insured vehicle an excess of not more than 500 ECU for which the victim may be responsible.
Furthermore, each Member State shall apply its laws, regulations and administrative provisions to the payment of compensation by this body, without prejudice to any other practice which is more favourable to the victim."
Article 1(4) is the central provision in the present case. The first main issue is whether the exclusion in clause 6.1(e)(iii) of the Uninsured Drivers' Agreement is compatible with it.
Article 2(1) of the Second Directive is also relevant. It limited the circumstances in which insurance cover could be excluded:
"Each Member State shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article...
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