Spencer v Secretary for Work & Pensions

These two appeals were heard together since in each is raised the question as to when a cause of action for Francovich damages accrues (damages against the government for failing to implement Community law) and as to whether the actions are barred by limitation. In each case the claimant suffered personal injuries. In one case Mr Moore was injured by an untraced driver and received compensation from the MIB under the Untraced Drivers Agreement 1972, but claims that the compensation was inadequate because the government failed to correctly implement Council Directive 84/5/EEC. In the other Mr Spencer made a claim against Boots the Chemist Ltd (Boots) as his employers which failed, and he makes a claim against the government “for the failure of the defendant to implement Article 6(2) of the Framework Health and Safety Directive into the Management of Health and Safety at Work Regulations 1992”. In seeking a summary disposal of the cases, in each case the government have asserted that if a cause of action accrued it did so when the claimants suffered their personal injuries and that the claims are barred by section 2 of the Limitation Act 1980. In both cases the government have succeeded in their argument, in the case of Mr Moore before Eady J by a decision dated 20^th April 2007, and in the case of Mr Spencer before Holland J by a decision dated 27^th July 2007, itself a decision dismissing an appeal from a decision of Master Miller dated 19^th October 2006.

Mr Moore and Mr Spencer argue on the appeals as they did below, that until there was a decision on their case, under which they had not received that to which they assert proper implementation would have entitled them, no cause of action had accrued. In the case of Mr Moore the decision relied on is not the original decision of the adjudicating panel of the MIB but that of an Arbitrator on appeal under the 1972 Agreement; in the case of Mr Spencer, although at one time it was the decision of the Court of Appeal which dismissed his appeal from the decision of the judge which was relied on, before us it is the decision of the judge who dismissed the claim against Boots.

Under Community law it has been held that there are three conditions to be satisfied for a Member State to incur liability to an individual under Community law: (1) the rule of law infringed is intended to confer rights on individuals; (2) the breach is sufficiently serious and, in particular, there was a manifest and grave disregard by the Member State of its discretion; and (3) there is a direct causal link between the breach of the obligation resting on the Member State and the damage sustained by the injured party [see Francovich v Italian Republic (Joined cases C-6/90 and 9/90) [1995] ICR 722, Brasserie du Pêcheur SA v Federal Republic of Germany (Joined cases C-46 and 48/93) [1996] QB 404 and Sir Andrew Morritt’s summary of the position in paragraph 11 of his judgment in Phonographic Performance Ltd v Department of Trade and Industry [2004] 1 WLR 2893].

Insofar as each of the appeals is an appeal against summary judgment and is concerned with the question of limitation, all three conditions can be assumed to have been fulfilled. The first question in each of the appeals is when the cause of action would have accrued.

In Mr Moore’s case there are three elements to his claim: (1) costs which the Arbitrator did not award said to be due to a defect in the MIB scheme; (2) interest not awarded again alleged to be due to a defect in the MIB scheme; and (3) damages alleged to be inadequate due to an unfair procedure attributable to a defect in the MIB scheme.

Mr Seabrook QC, in support of his argument for Mr Moore that the date of the Arbitration award was the relevant date when Mr Moore’s cause of action against the government accrued, argued: (1) the relevant breach of Community law was a continuing breach and since the United Kingdom could have remedied the breach at any time prior to the Arbitrator’s award no cause of action accrued until the date of the award; (2) the damages claim element only accrued when the Arbitrator failed to award the amount Mr Moore should have recovered; (3) the costs and interest elements only accrued once the claim had been processed; (4) since Mr Moore’s claim could only succeed if the driver remained untraced, and since the driver could have been traced right up until the final award it was only at the date of the final award that it was known that the claim would succeed; and (5) Mr Moore’s losses were unquantifiable and impossible to measure until the final award of the Arbitrator.

In Mr Spencer’s case the claim is to receive damages for personal injury not awarded against Boots. Mr Epstein QC adopted Mr Seabrook’s arguments adapted to the circumstances of Mr Spencer’s case. He put point (4) in a way in which it could not perhaps be put in the case of Mr Moore. He submitted that, in his action against Boots, Mr Spencer might have recovered all his losses in his action for negligence; it was not until he had lost the action and could identify a way in which he had not been able to argue his case that he could identify a loss flowing from the United Kingdom’s breach.

In Mr Spencer’s case further arguments were raised. It was argued that it was a principle of Community law that Mr Spencer was bound to exhaust all domestic remedies before pursuing a claim to Francovich damages. It was argued that in the result no cause of action arose until all domestic remedies had been exhausted. It was also argued that the community principle of “effectiveness” should prevent reliance on the limitation period expiring, it being said it was “virtually impossible” to pursue the government at the same time as the primary tortfeasor. Mr Seabrook, for Mr Moore, adopted the additional arguments made on behalf of Mr Spencer, adapted to Mr Moore’s situation.

In Mr Moore’s case, if he was to succeed on the limitation point, a further issue arose as to whether he had an arguable case on one aspect of his claim, the claim that his damages were inadequate as a result of unfairness in the procedure, alleged to be due to a defect in the MIB scheme. Eady J also ruled against him on that aspect and he appealed that part of Eady J’s ruling as well. No similar point arises in Mr Spencer’s case although, as will appear, it originally did when the matter was being considered by Master Miller.

Mr Moore, then a 28 year old actor with the Royal Shakespeare Company, was very seriously injured in a road traffic accident on 19^th April 1995. The culpable driver did not stop and has remained untraced. On 7^th July 1995 Mr Moore made an application to the MIB under the 1972 Untraced Drivers Agreement. On 7^th June 1999 he was awarded by an MIB adjudication panel £376,286. He exercised his right of appeal to an Arbitrator and he was awarded £585,134 by the Arbitrator on 8^th February 2000.

Mr Moore alleges that if the government had properly implemented Council Directive 84/5/EEC he would have received an increase in his award from the Arbitrator of £605,075.44, not received due to unfairness in the procedure which the MIB scheme allowed to be adopted in his case. He further alleged that he would have received a further sum of £53,729.30 in interest and £15,051.75 in costs not received because of inadequacies in the MIB scheme, present because of a failure by the government to implement the Directive. On 3^rd February 2006 (just under six years from the award of the Arbitrator) he commenced proceedings against the Secretary of State for Transport claiming Francovich damages. MIB was granted permission to intervene in those proceedings.

Mr Spencer worked for Boots between 1970 and April 1997. In 1991 he was appointed manager of their shop at Bulwell, Nottinghamshire. Save for a period between January and September 1996 that remained his position until he resigned in April 1997. The Bulwell dispensary was very busy but cramped. Its lay-out was such that a left handed person could most conveniently lift “retained stock bottles so as to place the same in the returns tray.” Mr Spencer was left handed and did much of the required lifting. By the end of 1996 Mr Spencer was experiencing pain in his left shoulder. Mr Spencer’s case was that the pain was due to pericapsulitis of the shoulder caused by repetitive lifting. In November 1999 he commenced proceedings against Boots alleging that the company had been negligent and had been in breach of the Manual Handling Operations Regulations 1992.

The matter came on for trial and on 12^th March 2002 judgment was given against Mr Spencer by His Honour judge Barratt. An appeal to the Court of Appeal was dismissed on 31^st October 2002.

Before the judge and in the Court of Appeal reliance was placed on the Management of Health and Safety at Work Regulations 1992. By regulation 3 of those regulations employers have to make a suitable and sufficient assessment of the risks to the health and safety of their employees to which they are exposed whilst they are at work. Regulation 15 of the Management Regulations however excluded civil liability for breach of the Regulations and thus the argument before the judge and then in the Court of Appeal had to be simply that a failure to conduct a risk assessment was evidence of negligence.

On 5^th January 2006 Mr Spencer issued a claim against the Secretary of State for Work and Pensions. The essential thrust of his claim was that the United Kingdom had failed to implement Article 6(2) of Council Directive 89/391/EEC of 12^th June 1989 (the Framework Directive) by failing to provide for civil liability to arise from a breach of the Management Regulations. He asserted that in the result the trial judge and the Court of Appeal refused to provide a remedy for breach of the Management Regulations and as a result he lost his case.

The question whether, if limitation were no answer to the claim, Mr Spencer has any prospect of succeeding on his claim was considered by Master Miller and he would have dismissed the claim but for the possibility of an amendment on which he has as yet to rule. Holland J thought Master Miller had been somewhat charitable in allowing for the possibility of an amendment, but that question is not before us. The only issue which is before us is one of limitation on which Master Miller and Holland J on appeal ruled in favour of the Secretary of State, holding that Mr Spencer’s cause of action for Francovich damages, if he had one, accrued at the date when he suffered personal injury and not at the date either of the judge’s dismissal of the claim against Boots or the dismissal of the appeal from that judgment. Indeed, as I understand Holland J’s decision, his view was that the only question was whether a cause of action did not accrue until Mr Spencer had exhausted all domestic remedies, in relation to which he found that the obligation to exhaust domestic remedies was an obligation to mitigate and not a condition to be satisfied before a cause of action accrued.

It is common ground that a claim for Francovich damages must be treated as a claim in tort to which section 2 of the Limitation Act 1980 applies [see Phonographic Performance Ltd v Department of Trade and Industry [2004] 1 WLR 2893]. It is further common ground that loss and damage must have been suffered before any cause of action accrues [see the ingredients of a cause of action for Francovich damages as set out in paragraph 3 above]. Thus it is common ground that the limitation period is one of six years from the accrual of the cause of action, i.e. from the date when all the necessary ingredients of a cause of action are present. If, as the government argue, all ingredients, including the suffering of damage, were present as at the date of the personal injuries suffered, then in both the case of Mr Moore and the case of Mr Spencer their actions are statute barred.

There is no previous appellate authority dealing with limitation in the context of a claim for Francovich damages in the context of an alleged failure by the government to provide a remedy in a personal injury case. The arguments, as to what the law should be, start on both sides from the perceived merits of ruling one way or the other, as is so often the case when limitation is in issue. On the one side it is said: how can claimants such as Mr Moore and Mr Spencer begin to see what loss or damage they have suffered until they know the result of the actions or proceedings which they claim have not achieved what they should have? On the other side it is said that being able to quantify loss is not the test, and that it is obvious from the date of the personal injury that a claimant is worse off if the United Kingdom has failed to implement a Directive.

In searching the cases for the appropriate analogy one indeed sees arguments similar to those deployed in these cases. It is unfair, it has been argued, that a cause of action should accrue before a claimant is even aware he has been injured. But the courts in England have taken a strict view and it is Parliament which has had to correct any injustice. Lord Mance in Law Society v Sephton [2006] 2 AC 543 at 561 paragraph 56 summarises the position in this way:-

As argued by Mr Jonathan Crow QC, for the Secretary of State in each action, the cause of action in these cases is for economic loss. It is thus to the economic loss cases to which one must turn for analogy. I will leave on one side for the moment the arguments based on continuous cause of action or the exhaustion of domestic remedies or the principle of effectiveness. It seems to me that at least prima facie an alleged failure of a government to have a particular provision in force is analogous to a solicitor failing to provide an appropriate term in a contract or an insurance broker failing to provide an effective policy of insurance. It is thus to those kinds of cases to which one should at least at first turn for guidance.

So far as a solicitor failing to put a relevant term in a contract is concerned, an example is D. W. Moore v Ferrier [1988] 1 WLR 267, in which a solicitor was alleged to have failed to put restrictive covenants in certain contracts of employment, and the Court of Appeal held the cause of action accrued when the contract was drafted and not when it was known what damage might be suffered as a result of the failure. “Rights under the two agreements were demonstrably less valuable than they would have been had adequate restrictive covenants been included” per Neill LJ at 278G.

An example of the case where a broker obtained insurance that turned out to be voidable for non-disclosure is Knapp v Ecclesiastical Group Plc [1998] PNLR 172. The Court of Appeal, following other authorities on a similar point, held that the cause of action accrued when the policy was taken out and not when it failed to respond to a claim.

The above cases were all cited with approval in the decision of the House of Lords in Law Society v Sephton. That decision is the most recent in which the economic tort cases in the context of limitation have been analysed. There is also a helpful summary of many of the different cases in these areas in the speech of Lord Nicholls in Nykredit Mortgage Plc v Edward Erdman Group Limited (No. 2) [1997] 1 WLR 1627 at 1630C – 1635B, again examined by the House of Lords in Sephton.

I would draw the following conclusions from the authorities including Sephton and Nykredit. The facts may demonstrate that no measurable damage has been suffered at the date when negligent advice has been given or negligent failure has occurred and, as Sephton itself demonstrated, that will be so where damage is totally contingent. But if it can be shown that a claimant is worse off in terms that can be measured financially at the date of receipt of the advice or the negligent failure, the cause of action will accrue on that date, even though accurate measurement of damage would be difficult and some of the damage may still be contingent. In particular, if the allegation is of a failure to provide a term in a contract or a failure to provide an effective insurance policy, the cause of action will accrue on receipt of the negligently drafted contract or receipt of the ineffective policy because, as at that date, the claimant has received something of less value and has thus suffered loss.

Prima facie therefore I accept as argued by Mr Crow that when Mr Spencer suffered his personal injury, he also suffered loss in relation to his claim against the government because, although he had a claim against Boots, the claim he had was not as valuable as the claim he would say that he should have had. There was no law, as he argues there should have been, which would have enabled him to put his claim in a way which would have made his claim more valuable.

On behalf of Mr Spencer it is argued that the loss is not measurable in financial terms because it is said that he might have succeeded in obtaining full damages, even on the case he was able to put and that thus his loss as at the accident date is not just impossible to quantify but not measurable at all. This may, at first sight, seem an attractive argument but to an extent it seems to me to flow from the inherent weakness in Mr Spencer’s case. One must test the position by reference to a clear case. If the United Kingdom had failed to bring in a law so that Mr Spencer in fact had no claim whereas he should have had a claim, it is clear that as at the date of his accident he would have suffered a loss and the quantification would be no different than the quantification in any personal injury action contingent in some respects on many factors. It would be the same if the alleged breach would result in Mr Spencer receiving only half his damages.

The position cannot in my view be any different if the failure is to provide a cause of action which, only by a very narrow margin, would place him in a better position than the cause of action he in fact has.

So far as Mr Moore is concerned, again he made a claim as a person injured by an untraced driver but (on his case) the scheme available to him was inadequate in various ways, including that it did not allow for interest or costs and/or because it risked unfairness in reaching the appropriate figure for compensation. Mr Seabrook very properly did not suggest that there could be different dates depending on which type of damage was being claimed and, in my view, that was a correct concession to make.

In my view, prima facie at least, Mr Moore suffered damage as a result of the alleged failure of the United Kingdom government when he was injured by an untraced driver, since such claim as he had under the MIB scheme was of less value to him than he would assert it should have been. I emphasise again that the question of limitation must be tested on facts which provide a clear case of breach e.g. no MIB scheme at all or one that only produces half the appropriate damages. In such a case it would be clear that injury was suffered when as a victim injured by an untraced driver the victim has no claim when he should have or only has half a claim. Quantification of damage would be no different than in a personal injury action.

The position cannot be different because all that is being said is that there are some less clearly defined deficiencies in the scheme.

How then do Mr Seabrook and Mr Epstein meet the above? Points (2) to (5), taken by Mr Seabrook as set out in paragraph 6 above, seem to me akin to the arguments raised in the analogous cases to which I have referred. The fact that losses cannot be quantified is not to the point. As long as some measurable damage has been suffered, the cause of action will accrue. For the reasons I have given, a measurable loss was suffered by both Mr Moore and Mr Spencer in relation to their claim against the government when they suffered their personal injuries.

That leaves, so far as Mr Seabrook’s arguments are concerned, the point that the above principles did not affect his client because the United Kingdom was in continuous breach. On this basis he argued that a cause of action accrued every day that the United Kingdom remained in breach. He suggested his argument was supported by Phonographic Performance Ltd v Department of Trade [2004] 1WLR 2893, where Sir Andrew Morritt V-C did find the government in continuous breach and awarded damages confined to six years prior to the issue of proceedings. In that case he cited the following passage from a judgment of Colman J concerned with the operation of agreements infringing Articles 81 and 82 of the EC Treaty. Having stated that it was common ground that a cause of action for breach of statutory duty first arises when the breach causes damage, Colman J said this:-

In the Phonographic case Sir Andrew Morritt V-C assumed that the government had failed to bring in certain legislation which would have made the playing of certain recordings an infringement of copyright, and held on that basis that they had continued to fail to bring in that legislation so that each time a recording was played the claimants suffered damage from that continuous failure.

As one can see, in that case, each breach did lead to different damage. Mr Moore’s case is quite different because he is not suffering a series of accidents, each of which would produce a fresh cause of action. His claim arises out of one accident and it was at the date of that accident that he suffered damage as explained above. If Mr Moore could argue that, once he had suffered his injuries, and once he had commenced his claim under the MIB scheme, the United Kingdom government’s duty was to bring in a scheme which applied to him retrospectively, the position might be different. But Mr Seabrook disavowed any suggestion that he was putting the case on that basis.

The fact that the United Kingdom could have remedied the situation is not to the point. The position seems to me clear - the United Kingdom was in breach if it failed to implement the Directive. I would accept that so far as Mr Moore was concerned the United Kingdom must be assumed to have been in continuous breach up until the moment he was injured by an untraced driver. Once Mr Moore suffered damage from the breach, that completes his cause of action against the government. The obligation of the government to Mr Moore, once he had suffered damage for their failure, was to pay damages.

So far as Mr Spencer was concerned the position so far as continuous breach is concerned is the same. The UK had a duty to implement the Directive. I accept that it may have been in continuous breach until Mr Spencer was injured, but once he was injured the United Kingdom had an obligation to pay damages and I see no room for some further obligation under Community law requiring them to remedy the situation.

There are certain additional points taken on behalf of Mr Spencer and supported by those acting for Mr Moore. It is first submitted that a Francovich claim should be a claim of last resort and thus that it should be a precondition of bringing such a claim that domestic remedies have been exhausted. This line of submission is supported by reference to a dictum of Lord Nicholls in Autologic Holdings plc v Inland Revenue Commissioners [2006] 1 AC 118 at 132, where he said:-

Before the Master and the judge reliance was placed on passages in the judgment of Brasserie du Pêcheur as supporting an argument that, in addition to the ingredients of a Francovich cause of action as spelt out in paragraph 3 above, it was a condition that domestic remedies should have been exhausted.

Both the Master and the judge were correct in rejecting the argument that Brasserie du Pêcheur imposed any precondition on Mr Spencer to sue his employer first. That authority sets out the preconditions for State liability as per paragraph 3 above and made clear that those conditions are both necessary and sufficient (para 66) and there is no room for suggesting the addition of some further condition. In a separate section of the judgment the Court said this:-

The passage in Autologic is concerned with a totally different situation, as Mr Epstein conceded. There is in fact no support for the contention that the ingredients of a Francovich cause of action are other than those identified.

It was then argued that the Community law principle of effectiveness should provide the answer. That argument is put this way in the skeleton:-

It is of course right that if a claimant proceeds against alternative defendants when he can only succeed against one, he takes a risk so far as costs are concerned. There are ways of mitigating that risk, for example by seeking an arrangement to stay the proceedings against one defendant while the case against the other is fought out. If such an arrangement were offered, and it was unreasonable to refuse it, that might well lead to the court exercising its discretion as to costs against the party acting unreasonably. In Mr Spencer’s case, as it happens, if all his arguments had succeeded he could have obtained judgment against both defendants and, indeed if his case were a good one, it would have been sensible to have both defendants present at the trial so that damages could be dealt with as between the defendants. The reality is that so far as costs are concerned the real risk relates to whether the case is successful or not, and it does not seem to me that there is any distinction between a Francovich cause of action and any other, so far as the risk of costs is concerned. Costs cannot be said to make it “virtually impossible” to bring a Francovich claim at the same time as the claim against the primary tortfeasor.

Accordingly, in my view, limitation is a complete answer to the claims of Mr Moore and Mr Spencer and I would dismiss the appeals on that basis.

This makes it strictly unnecessary to deal with the second point raised on the appeal by Mr Moore. Suffice it to say that, although I can see that he had a very arguable case that there was unfairness in the way the reference to the Arbitrator was conducted, it seems to me that the protection of the Arbitration Act 1996, particularly sections 33 and 68, was available to deal with the same. If, thus, it was an obligation on the United Kingdom government to provide an MIB scheme which protected a claimant against unfair procedure, in my view, Mr Moore had no arguable case that the United Kingdom was in breach.

I agree that the appeals should be dismissed, and am content respectfully to adopt the reasoning of Waller LJ.

I reach this conclusion with hesitation. Not only is the form of inquiry required by the case-law somewhat artificial in itself, but it is made more difficult by the particular context. Liability under the Francovich principle does not fit naturally into a conventional domestic legal analysis. It is a principle of Community law, concerned with the effectiveness of the integration of European legal rights with domestic remedies. It is not surprising that it has been hard to find a convincing analogy in the English law cases.

On balance I am persuaded it is possible to see the Francovich right as analogous to a claim, for example, for a defective form of insurance policy. If an insurance policy is obtained which due to the broker’s negligence turns out not to cover all the required risks, it is well established that time begins to run from the date of the policy, not from the date when the defect results in actual loss following a claim event (Knapp v Ecclesiastical Group plc [1998] PNLR 172). The claimant, so it is said (see e.g. per Lord Mance in Law Society v Sephton [2006] 2 AC at p 565A-C), has suffered “measurable loss” at that time, in that:

By the same token, the accident victim, who is unable to pursue claims to which he should have been entitled under Community law, has a less valuable package of rights (or causes of action) than he would have had if the UK had complied with its obligations. To describe this as “measurable loss” is admittedly artificial, since no one would ordinarily attempt to put a value on the deficiency at that stage. In practical terms the Francovich claim is likely to become relevant only at the time when it has become apparent that the domestic remedies are inadequate, which may be at a much later date. In Spencer’s case, for example, the initial claim, if successful, would have covered the whole loss without any need to resort to a Francovich remedy. However, in theory at least it is possible to imagine a potential purchaser of the victim’s rights bidding less for the incomplete package, and to put a figure on that shortfall. In that respect the position is arguably no different from that accepted as giving rise to measurable loss in cases such as Knapp.

To the extent that it is permissible to take account of policy considerations, I see merit in an approach which minimises uncertainty. I also agree with Burnton LJ’s comments on considerations of “procedural efficiency”. This is best achieved by acknowledging the existence of a supplementary cause of action under Community law which comes into effect at the same time as the other causes of action under English law, so that if necessary the two can be tried together.

I agree, and add a few words of my own in deference to the submissions put before us.

In a sense, Mr Spencer’s Francovich cause of action was contingent: if well founded, it could be said to have been contingent on Boots not having been negligent and not having committed a relevant breach of the Manual Handling Regulations but having been in breach of the Management and Health and Safety at Work Regulations. But these are not true contingencies, in the sense of events that may or may not occur. They are facts that occurred when he suffered his injury. There may be cases where such facts are undisputed; there will be cases where they are the subject of dispute. But the existence of a dispute does not detract from the fact that they have already occurred.

Thus it follows that if the facts on which Mr Spencer’s Francovich claim depends did occur, he suffered loss when he suffered his injury. He then had no cause of action against Boots because, if his allegations are well founded, the Secretary of State had failed properly to implement the Framework Health and Safety Directive.

Furthermore, Mr Spencer’s case is that the cause of action did not accrue until his claim against Boots failed. If this means that the claim could not be tried with the claim against Boots, the result would be procedurally inefficient, since unless the Secretary of State agreed to accept the findings made when the claim against Boots was tried, the factual issues involved in the claim would have had to be tried again; and there would be a risk of inconsistent findings. But if the claims against Boots and the Secretary of State were tried together, and the former failed but the latter succeeded, the judge could there and then award damages against the Secretary of State. This too points towards the Francovich cause of action having already accrued.

Turning to Mr Moore’s claim, whatever the nature of his claim under the MIB agreement, it did not include a claim to interest or costs. That defect is the subject of his Francovich claim. If his Francovich claim is well founded, that defect rendered his MIB claim less valuable and was the damage he suffered: he had a claim under the MIB agreement worth less than it should have been. That damage was suffered as soon as his claim under the MIB agreement arose, and that was when he suffered injury as a result of the negligent driving of an untraced driver. The fact that it was then impracticable or impossible to quantify his loss did not mean that he had not suffered a loss: clearly he had, in the same way that a creditor whose guarantee is unenforceable due to the negligence of his solicitor suffers loss when he lends on the basis of that guarantee, although he cannot then know whether or to what extent the principal debtor will default on his repayment of the loan.