Evans v The Secretary Of State For The Environment, Transport And The Regions And The Motor Insurers Bureau – Opinion Of Advocate General

FACTS:-

The facts of this case are set out in Evans v The Secretary of State for the Environment, Transport and The Regions and The Motor Insurers Bureau [2001] PIQR P3 which was decided by Mr Justice Buckley in the Queen’s Bench Division of the High Court. Mr Justice Buckley decided to refer a series of questions to the ECJ. That decision was appealed to the Court of Appeal, but the appeal was dismissed.

See Evans v The Secretary of State for the Environment Transport and the Regions and the MIB [2001] EWCA Civ 32.

The Advocate General prepared an opinion for the European Court of Justice (“ECJ”) by way of guidance.

HELD:-

Advocate General Alber summarised the provisions of Council Directive 72/166 EEC and Council Directive 84/5/EEC (“the First and Second Directives”) which related to the approximation of the laws relating to insurance against civil liability in respect of motor vehicles, and in particular the setting up of a body, charged with the task of providing compensation to victims of uninsured and untraced drivers.

Alber AG also summarised the system of the MIB in the Great Britain and in particular the 1972 Agreement, which was the subject matter of the dispute in this case.

He then went on to consider the history of this case and the precise questions that had been put to the ECJ.

These were:-

“1. On the proper interpretation of Council 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 Motor Insurance Directive):-

(a)    must the arrangement concerning the provision of compensation by the body established or authorised pursuant to Article 1(4) include provision for the payment of interest on the sums found to be payable for the damage to property or personal injuries?”
(b)    if the answer to question (a) is yes, from what date and on what basis should such interest be calculated?

2. On the proper interpretation of Article 1(4) of the Second Motor Insurance Directive, in circumstances where the compensating body itself has an obligation to investigate the victim’s injury and loss (and to incur the costs thereof, including the cost of medical and other reports):

(a)    must the arrangements concerning the provision of compensation by the body include provision for the payment of the costs incurred by a victim in preparing and making his application to that body for compensation?
(b)    If the answer to question (a) is yes, on what basis are those costs to be calculated in a case where that body has made an offer to the victim in excess of the amount that he finally recovers, which offer the victim declined to accept?

3. On the proper interpretation of Article 1(4) of the Second Motor Insurance Directive, if the victim’s application for compensation is determined by a body that is not a court, must he have a full right to appeal against that determination to a court, on both the facts and the law, rather than an appeal to an independent arbitrator having the following principal characteristics:

(i)    the victim may appeal to the arbitrator on both the facts and the law;
(ii)    when giving notice of appeal, the victim may make further representations and adduce further evidence to the compensating body upon which the compensating body may alter its award prior to the appeal
(iii)    the victim is provided in advance with a copy of all the material to be provided to the arbitrator and is given the opportunity to add any material that he wishes in response;
(iv)    the arbitrator makes an award, without an oral hearing, in which he or she decides what award the compensating body ought to make and gives reasons for that decision;
(v)    if the victim is dissatisfied, he is entitled to appeal from the arbitrator to the Courts but he may do so only on the grounds of serious irregularity affecting the arbitration or on a question of law (including whether there was any evidence to support any particular conclusion of the arbitrator or whether any particular conclusion was one to which no arbitrator could reasonably come upon the evidence), and in the case of an appeal on a question of law, permission to appeal must be obtained from the Court which will not be given unless the decision of the arbitrator is obviously wrong and it is just and proper in all the circumstances for the Court to determine the question.

4. If the answer to questions 1(a) and/or 2(a) and/or 3 is Yes, has a Member State duly authorised a body under Article 1(4) of the Second Motor Insurance Directive when an existing body has the task of providing compensation to victims pursuant only to an agreement with the relevant authority of the Member State that does not correspond to the Second Motor Insurance Directive in those respects, and

(a)    that agreement creates a legal obligation owed to the relevant authority of the Member State to provide compensation to victims which is directly enforceable by the relevant authority and does not give such victims a directly enforceable legal right to claim against that body, but the victim may apply to the Court for an order that the authority should enforce the agreement if the authority were to fail to do so; and
(b)    that body carries out  that obligation by accepting and paying claims from victims in accordance with that agreement; and
(c)    the Member State considered in good faith that the provision of that agreement gave at least as good protection to victims as the requirements of the Second Motor Insurance Directive?

5. If the answer to any of questions 1(a) or 2(a) is Yes, and/or if the answer to question 4 is No, does a failure to comply with the Second Motor Insurance Directive in that respect constitute a sufficiently serious breach by the Member State to give rise to liability for damages as a matter of Community law if it is established that such damage was caused?”

Alber AG dealt with each question in turn.

1.    Payment of interest and reimbursement of costs – the first and second questions

Alber AG considered the arguments put forward by the parties to the dispute, the Claimant, the UK government, the MIB and the European Commission. He then proceeded to examine the wording of the First and Second Directives, neither of which made express reference to interest and costs. Article 1(4) of the Second Directive provided that compensation must be provided “at least up to the limits of the insurance obligation. “ With regard to the scope of compulsory insurance, the fifth recital in the preamble to the Second Directive states that “the amounts in respect of which insurance is compulsory must in any event guarantee victims adequate compensation irrespective of the Member State in which the accident occurred.”

It was therefore necessary to consider whether a claim for compensation might, by its nature, possibly require payment of interest and costs.

Article 3(1) and 3(2) of the First Directive provided that each Member State had to take all appropriate measures to ensure that a contract of insurance covered all loss or injury caused in the territory of other Member States, in accordance with the legal provisions of those States.

The Second Directive extended compulsory cover to damage to property as well as minimum amounts for the cover to persons. The Third Motor Insurance Directive went even further by imposing minimum requirements with regard to the group of persons to be covered by insurance.

However it was a matter for the Member States to determine the characteristics of a compensation claim. Article 1(4) of the Second Directive stated that each Member State must apply its laws, regulations and administrative provisions to the payment of compensation by that body. Even if it could be shown that other Member States included within their concept of compensation, interest and costs, that result need not necessarily apply for all Member States.

However Article 1(4) also said:

“This provision shall be without prejudice to the right of the Member States to regard compensation by that body as subsidiary or non-subsidiary and the right to make provision for the settlement of claims between that body and the person or persons responsible for the accident….”

That wording indicated that the method of proceeding against the body could not be considered in isolation from the original claim for compensation. That was reinforced by the fact that the MIB was a body established under private law, therefore the Claimant’s case involved a private law claim for compensation.

Alber AG then turned to case law. In Case C-271/91 Marshall [1993] ECR I-4367 the issue related to “adequate reparation” for the loss sustained as a result of dismissal for sex discrimination. The legal system of the Member State laid down an upper limit but there was no provision for interest. The ECJ held that the award of interest must be regarded as an essential component of compensation.

Similar conclusions were reached in Case C-238/78 Ireks-Arkady v Council and Commission [1979] ECR 2955 and Case C-308/87 Grifoni v EAEC [1994] ECR I341.

A counter argument was found in Case C-66/95 Sutton [1997] ECR I-2163 but the award in that case related to arrears of social security benefits which were not compensatory in nature. The Court had left open the issue of whether entitlement to interest might follow from a claim against the Member State.

Therefore the case law appeared to indicate that interest was payable on an award from the MIB.

However the next issue was whether the objectives of the Directives supported that view. The Second Directive made victims of untraced drivers the subject of Community law. The authorised body had to provide compensation “at least up to the limits of the insurance obligation.” That was a clear reference to the normal obligation to compensation of those injured by insured vehicles. The fact that this was a minimum requirement was evidence from the use of the phrase “at least up to the limits of the insurance obligation.”

Furthermore the wording of the final sub paragraph of Article 1(4) of the Second Directive stated “without prejudice to any other practice which is more favourable to the victim” and this suggested that minimum protection must be afforded by the Directive to victims of untraced vehicles.

There were exceptions to these rules, but these were expressly mentioned and objectively justified. For instance Member States were permitted to limit or exclude damage to property caused by untraced vehicles. This was an anti fraud measure.

Therefore in order to answer the question concerning award of interest and reimbursement of costs, the issue was how one would proceed in a case of damage caused by an insured vehicle. If interest and costs were awarded in cases involving compulsory insurance, they should be awarded in compensation proceedings brought by victims of untraced vehicles. That then would be an interim answer to the first and second questions posed by the UK court.

The arbitration procedure – third question

The starting point here was Article 1(4) which should be read in conjunction with the sixth recital in the preamble to that Directive. The material passages said:-

“Each Member State shall set up or authorise a body with the task of providing compensation….for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation has not been satisfied….”

“The victim may in any case apply directly to the body, which….shall be obliged to give him a reasoned reply regarding the payment of any compensation.”

The sixth recital provides:

“….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;…..it is important….that the victim of such an accident should be able to apply directly to that body as a first point of contact.”

Whilst the Directive did not expressly refer to a requirement of legal protection for this entitlement, this none the less followed from the general principles governing the application of Community law. Alber AG referred to two cases, Case 222/84 Johnston [1986] ECR 1651 and Case C185/97 [1998] ECR I-5199 and also to Articles 6 and 13 of the European Convention for the Protection of Human Rights and Fundamental Freedoms of 4th November 1950 (“ECHR”).

The second paragraph from the Directive “The victim may….apply directly to the body…” must be treated as a minimum procedural requirement

The UK government had questioned whether the rights of a victim were civil rights within Article 6 of the ECHR. Even if the rights were founded under public law that did not mean that the injured person should be deprived of his legal rights of enforcement. Article 6 said that protection must be guaranteed by an independent and impartial court established by law, and also operating publicly in accordance with fair procedure.

The problem with the MIB’s procedure was that the first step in the objection procedure (the review of the proposed decision) did not meet the requirements of judicial control. The MIB took a decision, which it had to allow to be enforced against itself.

The second stage of the MIB’s objection procedure was the appeal to the arbitrator. European Community case law defined the constituent factors that identified a court or tribunal for the purposes of Article 177 of the European Community Treaty (“EC Treaty”). These were:-

• Statutory basis
• Permanent body
• Mandatory jurisdiction
• Adversarial procedure
• Application of legal rules

The Agreement between the government and the MIB made the first criterion questionable, although it could be said that if the arbitrator appointed under the Agreement came under the Arbitration Acts that was a legal or statutory basis.

The arbitrator was appointed on an ad hoc basis, so it was extremely problematic to consider him/her as a permanent body. Mandatory jurisdiction was satisfied, insofar as the MIB provided the only recourse to compensation. Adversarial procedure was however a problem because a tribunal could not base its decision on any circumstances not raised by the parties in the proceedings, and on which the opposing party had not been able to state its views. The fifth criterion, “application of legal rules” would be satisfied if the tribunal made its decision in line with law and statute, but not if it made the decision in line with “fairness”. Therefore as an interim conclusion, the arbitration tribunal did not satisfy in full the relatively strict criteria of Article 177.

In relation to Article 6 of the ECHR, there was an issue as impartiality and independence, particularly when one looked at the proximity of the arbitrator to their MIB and their procedural situation.  Moreover there was no public hearing and no public pronouncement.

The European Court had already set out its views on the judicial nature of a private arbitration tribunal in Case 102/81 Nordsee [1982] ECR 1095. There the court had said that attention must be paid to the particularities of the individual arbitration proceedings.

Anyone who may have been injured was obliged to seek legal protection within the framework of an agreement in the establishment of which he played no role and which was negotiated by parties entirely separate from him and over which he had no influence.

The appeal procedure (under the Arbitration Acts) was restricted, and access to the court and the scope of review was subject to several limiting provisions. One could only appeal to the court from the arbitrator if there were serious irregularities adversely affecting the decision or issues of law. Access to the ordinary courts was therefore rendered considerably more difficult and that was a problem for effective legal protection. Alber AG said that he considered that a stage for the determination of facts to be indispensable.

The UK government had argued that the MIB procedure provided a quicker and more cost effective manner of dealing with cases. Alber AG commented that it had taken nearly five years for the arbitrator to issue her decision. However that argument did not amount to a sufficient justification for depriving injured parties of effective legal protection.

Correct implementation of the Directive – fourth question

Alber AG considered the history of the MIB, which dated back to 1946. The United Kingdom had initiated a consultation process in relation to the Second Motor Insurance Directive. He also referred to the case of White v White and Another [2001] 1 WLR 481. Mr White’s case had been adjudicated upon by the Court of Appeal alongside that of the present Claimant’s case in Evans v Motor Insurers Bureau; Mighell v Reading; White v White [1999] 1 LLR 30.

The House of Lords in White were dealing with the interpretation of the 1988 Uninsured Drivers Agreement and in particular the meaning of “knowledge” of no insurance. They had said that they were not in a position, as required under the decision in Case C – 106/89 Marleasing SA v La Commercial Internacional de Alimentacion SA [1990] ECR 1-4135 to construe the Agreement in such a way as to give effect to the substance of the Directive, since this was a contract under private law. (Note:- the House of Lords in the case of White did construe the Directive and in particular the definition of “knowledge” of no insurance, in light of the terms of the Directive).

In the same case before the Court of Appeal (Evans v Motor Insurers Bureau; Mighell v Reading; White v White [1999] 1 LLR 30) the court had held that what the United Kingdom had done by way of implementation of the Directive did not bring into existence “any entity or relationship” which enabled the Directive to be enforced against anybody (save against the United Kingdom in the manner laid out in Francovich versus Italian Republic Cases C-6 and 9/90 [1991] ECR 1-5337).

The ECJ had laid down basic principles for the implementation of a directive. Such implementation did not necessarily require legislation, but where the Directive was intended to create rights for individuals, the legal position had to be sufficiently precise and clear and the individuals had to be able to rely on those rights before the national courts.

Article 249 of the EC Treaty left it to national bodies to choose the form and the means of achieving a Directive’s objectives. The agreement between the MIB and the UK government was not objectionable per se. However the rights given under that agreement had to be identifiable and pursuable with the requisite clarity and certainty.

Victims of untraced drivers in the UK had no claim against the MIB. The MIB did pay compensation where claims were brought, but if the victim felt that he was adversely affected, he had to institute judicial proceedings against the UK government in order to force the MIB to comply with the Agreement. That created so many imponderables that it failed to satisfy the requirements of legal certainty.

It would have been necessary for a national court to carry out (with regard to the substantive rights of injured persons) an interpretation of the legal position resulting from the MIB Agreements. The House of Lords in the case of White had decided that the 1988 MIB Uninsured Drivers Agreement had been concluded with the intention of giving effect to the Second Directive.

As British courts found that they could not proceed in this manner, the requirements of legal certainty were not satisfied. Therefore there had been no proper implementation of the Second Directive by the UK government.

Liability of the Member State to pay damages – fifth question

The High Court in the UK was seeking to determine whether the defect in implementing the Second Directive constituted a sufficiently serious breach of Community Law. The shortcomings referred to above did constitute a breach of Community law with regard to the implementation of the Directive. However there was a question as to whether this breach could lead to a claim for damages.

Alber AG considered the decision in Francovich. The proceedings in that case arose from the failure of the Italian government to implement timeously in national law the directive on the approximation of the laws of Member States relating to the protection of employees in the event of the insolvency of their employer. This constituted a breach of Article 189 of the EEC Treaty (now the third paragraph of Article 249). However there were three conditions before a right to reparation could arise:-

• The result prescribed by the Directive should entail the grant of rights to individuals
• It should be possible to identify the content of those rights on the basis of the provisions of the Directive
• There must be a causal link between the breach of the State’s obligation and the loss and damage suffered by the injured party

In Joined Cases C-46/93 and C-48/93 Brasserie du Pecheur and Factortame [1996] ECR I-1029 the ECJ had said that a breach of primary legislation by a Member State could give rise to a claim against that State. In that case the ECJ had also said that the breach had to be “sufficiently serious.” Alber AG then considered other cases that had developed the issue further.

Prior to the Second Directive coming into force, the UK already had a mechanism (the MIB) for compensating victims of uninsured and untraced drivers. They did not need to set up a new one. However action was needed to establish a judicially enforceable claim in favour of the victim at least up to the limits of the insurance obligation. That could have been done either by changing the MIB Agreements or by legislation.

The issue of whether damage had been suffered by the Claimant, and if so to what degree, was a matter for the national court.

Alber AG therefore proposed that the reply of the ECJ to the questions submitted would be as follows:-

“(1) Interest and costs are a necessary component of compensation claims brought by victims of untraced vehicles if and to the extent to which interest and costs form part of claims for compensation brought by victims of properly insured and identified vehicles. This finding holds good in regard to both the substance and the payment details.

(2) In the circumstances outlined in the third question, a victim must, on grounds of effective legal protection, have the right to appeal to an ordinary court on questions of fact and law.”

(3) Regard being had to the rights of victims, the Second Directive has not been transposed in the national law of the Member State with the precision and clarity necessary to satisfy the requirement of legal certainty.

(4) By virtue of the fact that it has failed to ensure that persons injured by untraced vehicles have an enforceable claim, at least up to the limits of the insurance obligation, against the body defined in Article 1(4) of the Second Directive, the United Kingdom has committed a sufficiently serious breach of Community law.”

The case then went to the European Court of Justice for its decision in Evans v SSETR and the MIB [2003] Case C-63/01.

Related posts:

1. Evans v The Secretary Of State For The Environment, Transport And The Regions And The Motor Insurers Bureau – Case c-63/01 [2003]
2. Evans v The Secretary Of State For The Environment, Transport And The Regions And The Motor Insurers Bureau [2001]
3. Evans v The Secretary Of State For The Environment, Transport And The Regions And The Motor Insurers Bureau [2001] Court of Appeal
4. Evans v Secretary Of State For The Environment Transport And The Regions And Another [2006]
5. Byrne (A Minor) v The Motor Insurers Bureau And The Secretary Of State For Transport [2007]