Evans v The Secretary Of State For The Environment, Transport And The Regions And The Motor Insurers Bureau [2001]

Reported: [2001] PIQR P3
Year: 2001
Court: Court of Appeal

FACTS:-

The Claimant suffered injuries in a road traffic accident on the 25th December 1991 caused by an untraced driver. He was outside his sister’s house in Upper Norwood, bending down on the road side into his parked car in order to locate and remove a parcel, when he was struck by untraced vehicle. His injuries included a serious fracture to his left leg. He made a claim for compensation on the 17th May 1992 to the Motor Insurers Bureau The MIB requested a copy of the police report and sent instructions to one of their members, NIG to investigate.

NIG investigated the matter and interviewed the Claimant. His’ solicitors then prepared a financial claim including loss of earnings. Both parties obtained medical reports and on the 4th August 1994, NIG offered to pay £40,000 in addition to an interim payment of £10,000 which had already been made. The offer was rejected and the Claimant’s solicitors requested that the matter be referred to the MIB for a formal award.

On the 5th December 1994 NIG confirmed that they had sent a formal report to the Adjudication Panel. The MIB then considered that they had insufficient evidence and they instructed a chartered accountant to consider the loss of earnings claim. The Claimant’s solicitors obtained their own accountant’s report which they submitted to the MIB together with a medical report.

In August 1995 the Claimant’s solicitors sent a revised schedule to the MIB for £183,678.50 plus interest. That did not include damages for the Claimant’s personal injuries.

The MIB declined to disclose their accountant’s report until the matter had been before the Adjudication Panel. On the 11th January 1996 the MIB wrote to the Claimant’s solicitors indicating that he was to a substantial extent responsible for the accident and making an award of £50,000 less interim payments.

On the 14th February 1996, the Claimant’s solicitors duly served a notice of appeal, enclosing further evidence.

NIG were constructed by the Adjudication Panel to give the matter further consideration before an appeal. They instructed enquiry agents to observe the Claimant. In March 1996 a video was obtained together with an up to date medical report. The video purported to show that the Claimant’s impediment in walking was not so significant.

In June 1996 Miss Cotton QC was appointed arbitrator and the MIB wrote to the Claimant’s solicitors Aaron indicating that they were preparing the papers for the arbitrator. On the 12th July 1996 they sent the Claimant’s solicitors a bundle of the papers that they proposed to submit to the MIB together with the video. On the 22nd July 1996 the Claimant’s solicitors indicated that there was no further evidence. On the 27th August 1996 Miss Cotton QC submitted her reasoned award to the MIB and the result was communicated to the Claimant’s solicitors on the 2nd September 1996.

The award was £46,629 which had been calculated on the basis of 20 per cent contributory negligence. In addition it was ordered that the arbitrator’s fee should be paid on the grounds that the Claimant had been dishonest in the account he gave to the doctors and there was no reasonable grounds for the appeal. The arbitrator also found that his account of his continuing disability was “wholly exaggerated”. The Claimant’s solicitors’ disbursements of £770 were paid together with the ex gratia costs of £150 plus VAT.

On the 16th September 1996 Mr Evans applied to the Commercial Court for leave to appeal against the arbitrator’s award pursuant to section 1(2) the Arbitration Act 1979. On the 16th December 1996, leave to appeal was granted on the issue of whether the arbitrator had jurisdiction to award interest but it was refused in relation to contributory negligence. On the 27th July 1997 Thomas J dismissed the Claimant’s appeal and on the 30th September 1998, the Court of Appeal dismissed the Claimant’s subsequent appeal. See Evans v Motor Insurers Bureau; Mighell V Reading; White V White [1999] Lloyds Law Reports 30 Vol. 1

On the 18th January 1999 the House of Lords refused the Claimant’s petition for permission to appeal.

On the 25th February 1999, the Claimant issued a claim against the Secretary of State for the Environment, Transport and the Regions alleging a failure by the United Kingdom to implement the Council Directive 84/5/EEC (“The Second Directive”). This was effectively a “Francovich” claim after the case of Francovich and Bonifaci v Italian State [1991] ECR I-5357 (see below).

The Claimant alleged that the failure to implement had caused loss and damage to him, because a proper implementation would have secured a higher award from the MIB and one which included interest and costs.

By this time, the Claimant had obtained public funding.

Article 1.4 of the Second Directive provided:-

“Each Member State shall set up or authorise a body with the task of providing compensation…..for……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 MIB applied to join themselves in as Second Defendant, and a trial of the preliminary issues was ordered as follows:-

whether the MIB was duly authorised by the First Defendant, pursuant to the Second Directive;
whether the First Defendant was in breach of obligations under the Second Directive in respect of;

the absence of any provision for the payment of interest

the absence of any provision for payment of costs

the procedural method adopted by the MIB in relation to claims by victims of unidentified drivers;

in the event that the answers to any of the above questions was yes, whether the claimant was a member of a class of persons intended to be protected or benefited by the Second Directive and thereby entitled to bring an action against the First Defendant.

HELD:-

Buckley J said that the First Defendant, the Secretary of State for the Environment, Transport and Regions had admitted that it had responsibility for implementation of the relevant Directives. The parties were broadly agreed that a reference should be made to the European Court of Justice on the issue of whether compensation under Article 1.4 included interest.

The Claimant’s counsel had submitted that in the event of a reference the court should add other questions including whether the United Kingdom could be said to have implemented the Second Directive at all. One of those questions related to the issue of costs. This was resisted by the Defendants’ counsel.

Buckley LJ considered the issue of the MIB’s position in law. Hobhouse LJ in Evans v Motor Insurers Bureau; Mighell V Reading; White V White [1999] Lloyds Law Reports 30 Vol. 1 had said that the MIB was not an “emanation of the state.” Diplock LJ had said in Gurtner v Circuit & Another [1968] 2 QB 587 that the court had turned a blind eye to the fact that the Claimant in an MIB case was not privy to the contract between the MIB and the government. However that solution could not be adopted where a party to the litigation does raise the privity of contract point.

The Uninsured Drivers Agreement made provision for the payment of costs and interest, whereas the Untraced Drivers Agreement made no express provision for either.

Thomas J who adjudicated on Mr Evans’s claim at first instance against the MIB (before he appealed to the Court of Appeal) had said that in his view interest is awarded on personal injury damages but it was not a part of those damages. It was awarded pursuant to statutory provisions. Buckley J agreed with that conclusion.

As to costs, it was common ground that these were not paid by the MIB under the 1972 Agreement. They simply made a small ex gratia payment and disbursements (excluding counsel).

In October 1984, the Department of Transport issued a consultation document on the effects of the Second Directive. That document suggested that the existing compulsory insurance provisions of the Road Traffic Act 1972 and the MIB Agreement would provide the necessary safeguards as stipulated under the Second Directive. UK insurers were expected to provide unlimited cover for liability for personal injury, so the limits of insurance for bodily injury in Article 1(2) were not relevant.

The Motor Vehicle (Compulsory Insurance) Regulations 1987 were brought in specifically to give effect to the Directives, in particular the extension of compulsory insurance to cover damage to property. However the Department of Transport considered that the provisions of Article 1.4 were covered by the existing statutory obligations.

The primary obligation to insure was contained in section 143 of the Road Traffic Act 1988 and section 145 contained the requirements for a valid policy of insurance.

Issue (a)

“Whether the MIB is duly authorised by the First Defendant, pursuant to the Second Directive.”

Buckley J turned to the first issue, to be referred to the European Court of Justice. The Claimant’s counsel said that the MIB was not “authorised” because (apart from the inadequacy of the Untraced Drivers Agreement and the fact that the UK had inadequately implemented the Directive) it was obliged to comply with the Second Directive. Its sole duty was in private law under its agreement with the Government. There was no duty to provide compensation in accordance with the Second Directive.

The Claimant’s counsel referred to Article 249 of the European Community Treaty, which states:-

“A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and method.”

Buckley J accepted that “authorised” in the context of the Second Directive must import an obligation on the guarantee body to pay compensation. However he did not accept that the MIB was not “authorised”. If that were the case, it would mean that even if the MIB Agreement complied fully with the Second Directive, it would still be invalid because the MIB was not “authorised” to provide compensation for victims of uninsured and untraced drivers.

The Claimant’s counsel also referred to a number of cases Case C-354/98 Commission v France, Case C-197/96 Commission v France [1997] ECR I-1489, Case C-217/97 Commission v Germany, September 9, Case C96/95 Commission v Germany [1997] ECR I-1653 and Case C-13/90 Commission v France [1991] ECR I-4327.

In summary these cases said that the provisions of a Directive should be implemented with unquestionable binding force and with the specificity, precision and clarity required in order to satisfy the requirement of legal certainty. Member States had to establish a specific legal framework in the area in question.

Buckley J accepted these authorities, but said that they did not lay down a general rule to the effect that a Directive could only be implemented by legislation. It was perfectly possible to set up a compensation fund such as the MIB using the Agreements with the government.

However the Claimant’s counsel also argued that the Claimant had no legal right to enforce the MIB Agreement himself, the Agreement was terminable on 12 months notice and the Claimant could not enforce the terms of the Second Directive against the MIB.

The government’s counsel submitted that the MIB was authorised. Any shortcomings in the MIB Agreement should be regarded as inadequate implementation. Furthermore any loss suffered by the Claimant was caused by inadequate implementation not non implementation. The Claimant’s counsel countered this by saying that it was the non authorisation of the MIB (i.e. the fact that it was under no legal obligation to comply with the Directive) which had caused the Claimant’s loss.

Buckley J said that he would follow the guidelines in R v International Stock Exchange of the United Kingdom and the Republic of Ireland Ltd, ex parte Else (1982) Ltd and Another 1993 QB 534. The issue would be referred to the European Court of Justice.

Issue (b)(i)

“whether the First Defendant was in breach of obligations under the Second Directive in respect of;
(i) the absence of any provision for the payment of interest”

Buckley J said that the 1972 MIB Agreement could not be construed as allowing for interest. He considered the terms of the Directive and the provisions of section 145 of the Road Traffic Act 1988 but decided that the position was far from clear, and therefore the matter would be referred up to the European Court of Justice.

However Buckley J commented that pursuant to the Directives, that which had to be insured against was civil liability in the Member States. The minimum thresholds set out in the Directives were quantitative not qualitative. In other words, the minimum level of compensation was simply a minimum amount of money that had to be paid to the victim of an untraced driver, it did not set down any rules for the kind of compensation that might be paid. So Buckley J thought that interest should be payable.

Hobhouse LJ had expressed much the same view in Evans v Motor Insurers Bureau; Mighell V Reading; White v White [1999] Lloyds Law Reports 30 Vol. 1.

Issue (b)(ii)

(b) whether the First Defendant was in breach of obligations under the Second Directive in respect of;……..
(ii) the absence of any provision for payment of costs

No costs were payable under the 1972 MIB Agreement. Again Buckley J said that as far as the Directive was concerned, the matter was unclear. He inclined to the view that compensation did include costs, because it was not difficult to envisage cases where the absence of interest and costs would make the damages largely illusory. Therefore this issue would be referred.

Issue (b)(iii)

(b) whether the First Defendant was in breach of obligations under the Second Directive in respect of;……….
(iii) the procedural method adopted by the MIB in relation to claims by victims of unidentified drivers;

Buckley J summarised the procedure in the 1972 MIB Untraced Drivers Agreement. The Claimant’s counsel had quoted from a book entitled “Directives in European Community Law: a Study of Directives and their Enforcement in National Courts (1995) by a Professor S Prechal which said that Member States must ensure that the rights under national implementing measures should be asserted by judicial process. The MIB’s process did not meet the requirements of judicial control, and any appeal under the Arbitration Acts was limited.

The Claimant’s counsel also relied on Article 6 of the European Convention on Human Rights which stated:-

“In the determination of his civil rights and obligations……everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly.”

Therefore according to the Claimant’s counsel, the MIB’s procedure did not satisfy the terms of Article 6.

The government’s counsel actually conceded that if Article 6 did apply, the MIB’s procedure did not meet its requirements. However that concession did not mean that the MIB procedures were inadequate implementation of the Second Directive.

Buckley J said that in his view, fair procedures and ones that can be controlled and reviewed by the courts were necessary. Also a victim should have an enforceable legal right against the body that provided the compensation. The Defendant’s counsel suggested that the Minister of the Department of Transport could enforce a claim against the MIB and if he arbitrarily chose not to do so, he might be susceptible to judicial review, or alternatively a relator action could be brought. Buckley J said that he did not regard this round-about method of enforcing a victim’s rights as satisfactory. In England and Wales, the victim of the untraced driver had civil rights, which needed to be established. In this case, he was doubtful whether the procedures under the 1972 Agreement could be regarded as sufficiently compliant with Article 6 and the Directive. The main points of concern were:-

An appeal from the MIB arbitrator was limited by the Arbitration Acts
Any such appeal did not involve a re-hearing or unfetter review of the evidence
The limited nature of that appeal led to a greater need to openness and fairness in the earlier considerations of the Claimant’s case by the MIB and their arbitrator
The Claimant did not see the initial report until after the MIB had made its decision so he cannot deal with it before the matter went on to the arbitrator
The absence of an oral hearing or a more formal exchange of cases or submissions meant that a finding of dishonesty could be made in the absence of a victim (as it had been here) and with his being given an opportunity to deal with that finding

The Claimant in this case had no notice of any particular allegations of contributory negligence until after the award had been made. The initial report from the MIB made no such allegation. There was no oral hearing at which the Claimant could be present. His medical experts could not comment on the video evidence placed before the arbitrator.

Therefore this issue would be referred to the European Court of Justice.

Issue (c)

“Whether the claimant was a member of a class of persons intended to be protected or benefited by the Second Directive and thereby entitled to bring an action against the First Defendant.”

It was conceded by both Defendants that the MIB was indeed a member of a class intended to be protected or benefited by the Directive.

That left the question of causation, which was not before the court. Serious breaches of Community law by Member States might give rise to liability to an individual. The case of Francovich and Bonifaci v Italian State [1991] ECR I-5357 identified a Community rule of state liability.

There were two main question likely to arise (a) whether liability arose in the present case and (b) what remedy was provided under United Kingdom law, for example, an action in tort or for breach of statutory duty.

The relevant case law appeared to decide that liability will arise where there is no discretion and the Member State has failed to implement a directive. However where there was a discretion, liability arises only if the breach of failure is manifestly grave or other circumstances.

In the circumstances, Buckley J said that it was highly desirable for this question of liability to be put to the European Court of Justice, and he would do so by extending issue (c) under his case management powers.

The Government and the MIB appealed Buckley J’s decision. The result of that appeal can be seen in Evans v SSETR and the MIB [2001] EWCA Civ 32.