RoadPeace v Secretary of State for Transport

RoadPeace is a national charity, providing support for road crash victims and seeking to improve road safety. In these proceedings, it challenges various provisions of domestic law, which govern compulsory insurance for motor vehicles and make provision for the payment of compensation in respect of injury and damage caused by uninsured or unidentified drivers. It does so on the grounds that they contravene various provisions of EU law, or do not comply with it sufficiently to give it lawful effect.

The domestic legislation at issue is in the Road Traffic Act 1988, notably s143 and s151, the Third Parties (Rights Against Insurers) Act of 2010, replacing the 1930 Act, and the European Communities (Rights Against Insurers) Regulations 2002 S.I. No. 3061.

These legislative provisions are supported by agreements between the Motor Insurers’ Bureau, MIB, the Interested Party and the Secretary of State for Transport, SST, the Defendant. The MIB is a company to which all authorised motor insurers must belong and which they fund. One set of agreements, deals with Uninsured Drivers, the UDA, and the other with Untraced Drivers, the UtDA. The MIB has compensated the victims of uninsured drivers under UDAs since 1946, and of untraced drivers under UtDAs since 1969. The current UDA of July 2015 was brought into force on 1 August 2015, but the 1999 UDA remains in force in respect of accidents occurring between 1999 and 1 August 2015. A supplemental agreement of January 2017, removing the “terrorism” exception, came into force on 1 March 2017 in relation to accidents occurring on or after that date. UtDA applicable at the time of the oral hearing came into force in 2003, was amended by a supplemental agreement of 2011, and both are replaced, but only in relation to accidents occurring after 1 March 2017, by the January 2017 UtDA. There have been other supplemental agreements, immaterial for present purposes.

The relevant EU Directive is Directive 2009/103/EC, the Sixth Directive, the Directive, relating to compulsory insurance in respect of the use of motor vehicles. It consolidates its five predecessors, without introducing any new provisions, at least of any note. So the EU legislative structure has been in force for many years. It was the subject of a reference from Slovenia; Vnuk v Zavarovialnica Triglav D.D. C- 162/13, 4 September 2014, [2016] RTR 10. This enlarged the scope of the compulsory insurance obligation, in relation to the use of motor vehicles on private land, in an unexpected way.

Many of the issues raised in the Claim Form, about the compatibility of domestic law, and of the arrangements between the MIB and SST, with EU law were not pursued. Three groups of issues remain. The first group relates to the compatibility of UK statutes with the Directive: (1) ss143, 145 and 151 of the Road Traffic Act 1988, RTA, and allied provisions which permitted insurance policies to include limitations and exclusions on the use insured, such as confining the insured use of the vehicle to “social domestic or and pleasure use”; (2) Regulation 3(2) of the European Communities (Rights Against Insurers) Regulations 2002, the Regulations, which it was said permitted the insurer, as against the innocent third party victim of the insured, to rely on breaches of the policy by the policyholder, unlawfully qualifying the absolute protection which RoadPeace said the Directive required; (3) s153(3) of the RTA and s2(4) of the Third Parties (Rights Against Insurers) Act 2010, RAIA, which enabled the insurer to raise, against the innocent third party, rights which the insurer had against the policyholder, again unlawfully qualifying the absolute protection which RoadPeace said the Directive required.

Second, and also a question of the compatibility of UK statute law with the Directive, are the contentions which arise out of the CJEU Chamber decision in Vnuk. This applies to ss143, 145, 151 RTA and the Regulations, R2(1). RoadPeace contended that the restriction of compulsory insurance to the use of a motor vehicle “intended or adapted for use on roads” and to its use “on a road or public place” is not consistent with the decision in Vnuk. That is not at issue.

There is a large issue about what remedy, if any, is appropriate while the European Commission decides whether there should be an amending Directive, and the Government decides what legislative changes are required.

There is a related aspect as to the meaning of “accident” in Reg 2(1) the Regulations which I shall deal with under that head.

Third, there is a group of issues which relate to the compatibility of the UDA and UtDA with the Directive. (1) RoadPeace contends that the existing UtDA is unlawful and, though improved in the new agreement, remains unlawful, because it fell and still falls short of the protection required to be given to minors and protected persons involved in seeking compensation from the MIB equivalent to the protection they would receive in civil litigation under the CPR. (2) There are two issues where RoadPeace accepts that the new UtDA will meet EU law requirements, but contends that the existing UtDA, which will apply to accidents up to 1 March 2017, does not. These issues are (a) the time limit on the requirement for reporting accidents to the police, and (b) the definition of “significant personal injury”, which is a threshold requirement for property damage claims. (3) There is an issue about the “terrorism exception” not now in the agreements, but still applicable to accidents happening before 1 March 2017. The SST, but not the MIB, accepts that the exception is not permissible under the Directive. The debate before me therefore was largely about the remedy in relation to accidents which had occurred before that date and to which the exclusion in respect of acts of terrorism would apply. The SST contended that damages under Francovich v Italy [1991] E R I-3061, [1995] ICR 722 and Brasserie du Pecheur v Germany; R v SST ex p Factortame (No.4), [1996] QB 405 ECJ, were the appropriate remedy, if the conditions were met. RoadPeace contended that that would be inadequate.

The history behind the current legislation and the agreements up to 2010 is set out in the judgment of Hickinbottom J in Carswell v SST and MIB [2010] EWHC 3230 (QB), [7-13]. The relevant parts of the domestic legislation are as follows. S143(1)(a) RTA makes it an offence for a person to “use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that person such a policy of insurance…in respect of third party risk as complies with ...this Act.” I note the limit to “road or other public place”, and that it is the use by a particular person which is to be insured, rather than any user of the vehicle. It does not apply to invalid carriages. Certain other vehicles are excepted from s143 by s144, such as police vehicles, ambulances and local authority vehicles.

S145(3) spells out the requirements of the Act in respect of an insurance policy under s143. A policy “(a) must insure such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of death or bodily injury to any person or damage to property caused by or arising out of the use of the vehicle on a road or other public place in Great Britain… and (b) must in the case of a vehicle normally based in Great Britain insure him or them in respect of any liability which may be incurred by him or them in respect of the use of the vehicle and of any trailer, whether or not coupled, [in another EU member state, according to its compulsory insurance law]”. There is a converse requirement for vehicles normally based in another member state but used in Great Britain.

S148 invalidates certain exceptions in a compulsory insurance policy in so far as they relate to the liabilities which have to be insured. I note the invalidation of exceptions related to the age, physical or mental condition of the driver, the condition of the vehicle, its horsepower, and the time and areas within which the vehicle may be used. S149 invalidates any restriction of liability to or acceptance of the risk of negligence on the part of a passenger.

S151 is important, not just for the protection it gives to victims by enabling them to enforce judgments directly against the insurer in respect of compulsory insurance obligations, but also for its effect on remedies sought here by RoadPeace. S151(5) entitles the victims of road accidents, who have the benefit of a judgment against an insured person, to require the insurer to pay the sum payable under the judgment to the victim directly, subject to a £1m limit in respect of property damage, and whether or not the insurer would be entitled to avoid the policy. This obligation applies where, by subsection (1), a policy has been issued for the purposes of s145, and a judgment of the sort set out in subsection (2) has been obtained. That is a judgment in relation to a liability required to be covered by a compulsory insurance policy under s145, and either the liability is covered in fact by the policy or “(2)(b) it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons…and the judgment is obtained against any person other than one who is insured by the policy….” The excluded liability in s151 is in respect of injury to a person allowing himself to be carried in the vehicle who “knew or had reason to believe that the vehicle had been stolen or unlawfully taken” before the journey began and could not have reasonably been expected to get out. S151(8) permits an insurer who has had to satisfy judgment pursuant to s151(5) to recover his payment either from the uninsured person who created the liability or the insured person who caused or permitted the use of the vehicle which gave rise to the liability.

By s153, bankruptcy and the like do not remove the effect of the insurance policy in respect of the compulsorily insured risks, nor by s153(3) do those rights affect the RAIA. S1 of the RAIA enables the victim to bring proceedings directly against the insurer of a bankrupt or the like, and to enforce judgment once the liability of the insured has been established. By s2(4), if a declaration is sought that the insured is liable, the insurer can rely on any defence which the insured could have relied on if proceedings had been brought against him.

The same limit as in s143 RTA to “road or other public place” is to be found in the 2002 Regulations, giving effect to one of the predecessors to the Sixth Directive. It is found in the definition of “accident”, in relation to which the victim can bring proceedings against the insurer. “Vehicle” means any motor vehicle “intended for travel on land and propelled by mechanical power… normally based in the [UK].”

Article 3 is the key provision. Article 3 provides:

“Each Member State shall, subject to Article 5, 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 the measures referred to in the first paragraph.”

Appropriate measures are also required to be taken to ensure that the contract of insurance also covers a loss or injury arising in the territory of other Member States according to the law in force there. Article 5 permits certain derogations in respect of compulsory insurance, which are not directly material. Article 7 requires Member States to take all appropriate measures to ensure that vehicles, normally based in the territory of a third country which enter a Member State’s territory, are also covered by compulsory insurance. Article 9 provides for a minimum amount of compulsory insurance which must be covered in respect of personal injury and property damage.

Article 10 requires a Member State to set up or authorise 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 Article 3 has not been satisfied. Member States are entitled to regard compensation by that body as subsidiary but they may not allow that body to make payment of compensation conditional on the victim establishing that the person liable is unable or refuses to pay.”

By Article 10.2, Member States may:

“exclude the payment of compensation by that body in respect of persons who voluntaily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured.”

Article 13 deals with exclusion clauses. Article 13.1 provides:

“Each Member State shall take all appropriate measures to ensure that any statutory provisions or any contractual clause contained in an insurance policy issued in accordance with Article 3 shall be deemed to be void in respect of claims by third parties who have been victims of an accident where that statutory provision or contractual clause excludes from insurance the use or driving of vehicles by: (a) persons who do not have express or implied authorisation to do so; (b) persons who do not hold a licence permitting them to drive the vehicle concerned; (c) persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned. But if the insurer can prove that a person voluntarily entered the vehicle which caused the damage knowing that the vehicle was stolen liability can be excluded.”

Article 13.3 deals with driving under the influence of alcohol. It provides:

“Member States shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy which excludes the passenger from such cover on the basis that he knew or should have known that the driver of the vehicle was under the influence of alcohol or of any other intoxicating agent at the time of an accident, shall be deemed to be void in respect of the claims of such passenger”.

Article 25 provides:

“If it is impossible to identify the vehicle or if, within two months of the date of the accident, it is impossible to identify the insurance undertaking, the injured party may apply for compensation from the compensation body in the Member State where he resides. The compensation shall be provided in accordance with provisions of Articles 9 and 10.”

The Directive contains a large number of recitals most of which add nothing. But I refer to recital 14 and 15. Recital 14 reads:

“It is necessary to make provision for a body to guarantee that the victim will not remain without compensation whether the vehicle which caused the accident is uninsured or unidentified. 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. 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 the compensation to damage to property caused by an unidentified vehicle may be limited or excluded in view of the danger of fraud.

15.

It is in the interest of victims that the effects of certain exclusion causes be limited to the relationship between the insurer and the person responsible for the accident.”

I pick up the terms of the Agreements when I deal with the issues to which they relate.

Mr Hyam submitted that sections 145 and 151 of the RTA 1988 breached the Directive, and indeed its predecessors, because they did not prohibit insurance policies from including limitations on the use insured to uses such as “social, domestic and pleasure use”, thereby excluding cover were that vehicle to be used, for example, for hire or reward or business purposes. That is indeed a common form of limitation. He also instanced the exclusion of liability for “deliberate damage” or “road rage”.

The basis for that submission is Article 3 of the Directive, read with the jurisprudence of the CJEU. Although such use would not be insured, and the MIB would be responsible for meeting any claim under the UDA, Mr Hyam submitted that the Directive was clear that the Article 10 body, here the MIB, was a body of last resort. The primary obligation was to ensure that the compulsory insurance satisfied the Directive.

Mr Hyam submitted that the use of a vehicle was not to be regarded as uninsured under the Directive, where there was an insurance policy in force in respect of it. It was not open to a Member State, except in the limited circumstances permitted by the Directive, to treat claims excluded by an exclusion or limitation provision as uninsured claims. He relied on a sequence of CJEU decisions, expressed in general terms and not addressing this sort of issue. Mr Palmer described these terms as limitations on the extent or scope of the insurance cover rather than exclusions from the cover required under Article 3. Mr Worthington QC for the MIB emphasised the language of the second paragraph to Article 3.

I have already set out the provisions of Article 3, which reflect the recitals to the Directive, so I turn to the authorities, starting with those from the CJEU.

Ruiz Bernaldez [1996] 2 CMLR 889 considered Spanish legislation which absolved the motor insurer of a drunk driver from paying compensation for property damage caused by his driving. The opinion of the Advocate General in this case was considered carefully in relation to the liability of the MIB by Jay J, an approach approved by the Court of Appeal, in Delaney v Secretary of State for Transport [2015] 1 WLR 5177. The Advocate General said at [25]:

“All the parties acknowledge that the scope of this wording is clearly very wide. It leaves the Member states with a wide discretion and therefore necessarily accepts that there will be differences in the extent of the cover from Member State to Member State. The wording of the first indent of Article 3(2) also testifies to the potential difference, in providing that each Member State is to take all the appropriate measures to ensure that the contract of insurance also covers, according to the law in force in other Member States, any loss or injury which is caused in the territory of those States.”

Then having set out the exclusion provisions voided by Article 13 of the Directive, he said this at [27]:

“27.

That provision might be regarded as containing an exhaustive list of permissible exclusions from insurance cover. However, it must also be viewed in its regulatory context and against the background of its legislative history. The freedom originally given to the Member States when drawing up the rules on insurance against civil liability proved, in the course of time, to be detrimental to the common market.

28.

Those requirements regarding the content of insurance contracts, with their corresponding provisions in the operative part of the directive, must be regarded as minimum requirements. In general, it can be stated that the legislative discretion allowed to the Member States under the First Directive was to an extent restricted by the increased provision for minimum requirements under the Second and Third Directives. Consequently, the discretion retained by the Member States is circumscribed by the minimum requirements and by other conditions and structural principles laid down by the directive.

29.

Viewed against that background Article 2(1) of Directive 84/5 must also be regarded as a minimum requirement, in the sense that certain - generally lawful – exclusions from insurance cover may not be invoked, at least against an injured third party. If the view is taken that the provision’s purpose isprimarily to prohibit any exclusions from insurance cover as against an injured person – an interpretation also supported by the statement in the seventh recital in the preamble to Directive 84/5 that “it is in the interest of the victims that that effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident” – then the abovementioned exclusions should not be understood to be an exhaustive list of possible exclusions from cover.”

The next question was whether an exclusion from insurance on the ground of fitness to drive was compatible with the then multiplicity of Directives. His opinion was:

“33.

First of all, I would like to turn my attention to the basic distinction between the legal relationship of insurer and insured, on the one hand, and of insurer and victim, on the other hand. That distinction is of fundamental importance also in regard to the statutory insurance rules. It is entirely conceivable for the insurer’s liability as against the victim to be more extensive than as against the other party to the contract of insurance or the person causing the damage, who are not necessarily the same persons.

34.

Upon reading the directives, one is struck by the fact that they do not lay down any specific requirements regarding the relationship between the parties to the contract of insurance. The directives are silent as to the consequences of a breach of a duty of care by the insured or by the person causing the damage. It can be concluded from this that the Member States or the contracting parties are relatively free to define the relationship between the parties to the contract of insurance, but their freedom may, of course, be exercised only in compliance with the other provisions of the directives.

35.

Consequently, it seems to be wholly permissible for legal consequences to be linked to the failure of the insured party or the driver to observe a duty to take due care. Where the driver is intoxicated, I therefore consider it permissible for liability to be excluded as against the driver or for a right of recourse to be given.

36.

The answer to the second question is therefore as follows:

An exclusion from insurance cover against civil liability with respect to a driver who, whilst under the influence of alcohol, has caused material damage with a motor vehicle is compatible with the relevant legislation.”

The third question was whether Article 2(1) of Directive 84/5 provided an exhaustive list of exclusions void against a third-party victim. He answered:

“38.

In the course of answering the first question it was established that the list of possible exclusions in Article 2(1) of Directive 84/5 is not to be regarded as an exhaustive enumeration of permissible exclusions from insurance cover. Likewise, it has already been stated in connection with the answer to that question that Article 2(1) of Directive 84/5 lays down a minimum requirement to the effect that those exclusions from insurance cover are invalid at any rate against the victim.

39.

In my opinion, this approach justifies the further conclusion that any objections by the insurer, based on his contract with the insured, concerning any exclusions from cover are invalid as against the victim. If even the exclusions from cover listed in Article 2(1) of Directive 84/5, which are considered to be objectively justified, do not exempt the insurer, then still less should an exclusion from liability or a right of recourse permitted where a person’s conduct is blameworthy – as discussed in connection with the second question – lead to the insurer’s liability for damage being excluded as against the victim. Moreover, this conclusion is supported by the directives’ overall objective, to which I have already referred, namely the protection of victims.

40.

The answer to the third question must therefore be as follows:

Exclusions from liability that are basically possible and permissible but go beyond the exclusions from insurance cover referred to in Article 2(1) of Directive 84/5 may not be relied upon as against the victim.”

Accordingly, he concluded that a contractual clause which excluded cover where the driver responsible for the accident was intoxicated, and which was effective as between the insurer and insured, would be incompatible with the Directives if relied on against a third-party victim.

The CJEU adopted the Advocate General’s opinion, in shorter form. It held at [18-20 and 24]:

“[18] In view of the aim of ensuring protection, stated repeatedly in the directives, Article 3(1) of the First Directive, as developed and supplemented by the Second and Third Directives, must be interpreted as meaning that compulsory motor insurance must enable third-party victims of accidents caused by vehicles to be compensated for all the damage to property and injuries sustained by them, up to the amounts fixed in Article 1(2) of the Second Directive.

[19] Any other interpretation would have the effect of allowing Member States to limit payment of compensation to third-party victims of a road traffic accident to certain types of damage, thus bringing about disparities in the treatment of victims depending on where the accident occurred, which is precisely what the directives are intended to avoid. Article 3(1) of the First Directive would then be deprived of its effectiveness.

[20] That being so, Article 3(1) of the First Directive precludes an insurer from being able to rely on statutory provisions or contractual clauses to refuse to compensate third-party victims of an accident caused by the insured vehicle.

[24] The answer to Questions 1 to 4 must therefore be that Article 3(1) of the First Directive is to be interpreted as meaning that, without prejudice to the provisions of Article 2(1) of the Second Directive, a compulsory insurance contract may not provide that in certain cases, in particular where the driver of the vehicle was intoxicated, the insurer is not obliged to pay compensation for the damage to property and personal injuries caused to third parties by the insured vehicle. It may, on the other hand, provide that in such cases the insurer is to have a right of recovery against the insured.”

In Candolin v Vahinkovakuutusakeyhtio Pohjola [2006] RTR 1, the CJEU again had to consider the consequences of drunken driving. The driver and all the passengers were drunk. One passenger was killed, and all the other passengers were seriously injured in a road accident. The Finnish Court ruled that, under domestic law, the passengers were not entitled to receive compensation from the insurance company because they should have realised that the driver was drunk. The CJEU repeated what it had said in Ruiz Bernaldez, as set out above, and held at [23] that what is now Article 13 of the Directive “must be interpreted as meaning that a statutory provision or a contractual clause in an insurance policy which excludes the use or driving of vehicles from the insurance may be relied on against third parties who are victims of a road accident only where the insurer can prove that the persons who voluntary entered the vehicle which caused the injury knew that it was stolen.” The aim of the Directive was to ensure that compulsory motor vehicle insurance allowed all passengers while victims of an accident caused by motor vehicle to be compensated for the injury or loss they have suffered. National provisions cannot deprive the provisions of the Directive of their effectiveness. This would happen where, solely on the basis of a passenger’s contribution to his injuries, the right to be compensated by the compulsory motor insurance were denied or limited in a disproportionate manner. It was irrelevant that the passenger was the owner of the vehicle.

Similar language is to be found in Lavrador v Cia de Seguros Fidelidade-Mundial SA [2012] RTR 44, referred to in Wilkinson v Fitzgerald [2012] EWCA Civ 1166, [2013] 1 WLR 1776, called Churchill Insurance Company Ltd v Evans, C–442/10, when it was before the CJEU.

I need to say a little more about this latter decision, to which the CJEU 6^th Chamber made extensive reference in its decision on the reference from Portugal in Fidelidade-Compania de Seguros SA v Caisse Suisse de Compensation C-287/16, 20 July 2017. I received written submissions from the parties about this case in October 2017.

Churchill Insurance Co. Ltd. involved two separate claimants, who were insured to drive the vehicles, who had allowed themselves to be driven as passengers by uninsured drivers, and who were injured in road accidents as a result of the drivers’ negligence. In one case, the claimant knew the driver was not insured; in the other, the claimant gave no thought to insurance. Each claimant obtained judgment against the driver, which the claimants’ insurers were obliged to pay to the claimant under s151(5) of the 1988 Act. The Court of Appeal held that s151(8) of the 1988 Act excluded from the benefit of an insurance policy a passenger who was insured under the policy but who had given permission to an uninsured driver to drive. A question was referred to the CJEU, which reformulated the question actually asked, so as to decide whether a provision which automatically excluded the benefit of compensation possibly due to an insured, as it concluded the Court of Appeal had decided was the effect of s151(8), limited the extent of civil liability insurance cover and so was incompatible with the Directive.

Its judgment refers to a number of its earlier decisions adopting the general point it obtained from them. At [28], drawing on two earlier Portuguese cases, it said that Article 3(1) “requires

“…the member states to ensure that civil liability in respect of the use of motor vehicles normally based in their territory is covered by insurance, and specifies, inter alia, the types of damage and the third parties who have been victims of an accident to be covered by that insurance.”

At [33], it said that the court had held that Article 3(1) of the Directive “precludes an insurer from relying on statutory provisions or contractual clauses in order to refuse to compensate third parties who have been victims of an accident caused by the insured vehicle.” The only permitted derogations in an insurance policy excluding insurance against civil liability in respect of injury suffered by third parties were those expressly provided for in the Directive. The Directive precluded national rules which had the effect of automatically omitting the requirement that the insurer should compensate a passenger who was the victim of a road traffic accident on the ground that he, but not the driver of the vehicle which caused the accident, was insured to drive it.

At [40], it drew a distinction between the situation in which the vehicle that caused the accident was driven by a person not insured to drive it, “while a driver was, moreover, insured to drive that vehicle”, and the situation in which the vehicle which caused the accident “was not covered by any insurance policy ….” The fact that the driver was not named in the insurance policy could not mean that the vehicle was not insured for the purposes of the Directive.

I observe that the language of the court is clearly applicable to circumstances where it is the vehicle which is the subject of the insurance, but less obviously directed to the other form of insurance policy, common in the UK, where it is a person and his use, which are covered, rather than the vehicle itself.

I am not concerned with the problems which that judgment created in the application of the distinction between civil liability law, which the Directive did not seek to harmonise except to the extent that a limitation on liability deprived the Directive of its effectiveness, and the extent of compensation to be afforded to third parties in respect of the civil liability of an insured person. A conforming interpretation had to be given to s151(8) in that respect when the case returned to the Court of Appeal.

It is clear that the Article 10 body, such as the MIB, is a body of last resort; Csonka v Magyar Allam (Case C409/11) 11 July 2013 [2014] 1 CMLR 14 at [30-32], and that is not at issue. I accept Mr Palmer’s submission that Csonka dealt only with the distinction between the case where the insolvency of the insurer prevented payment in respect of an obligatory insured risk, and the case where the obligatory insurance cover did not exist; see the issue formulated at [22].

Csonka also says at [31] that the EU legislature had made it clear that the Article 10 body was only obliged to pay compensation where damage is caused by a vehicle “for which the insurance obligation provided for in art.3(1) of the first Directive has not been satisfied, that is to say, a vehicle in respect of which no insurance policy exists.” The Directive required Member States “to ensure that every owner or keeper of a vehicle normally based in its territory takes out a policy with an insurance company for the purpose of covering … his civil liability arising as a result of that vehicle. Viewed in that light, the very fact that damage has been caused by an uninsured vehicle attests to a breakdown in the system which the member state was required to establish and justifies the payment of compensation by the national body providing compensation.” But the insurance obligation had been satisfied where the insurer under a policy which had been taken out was insolvent.

Csonka did not deal with the scope of the uses for which insurance cover was obligatory, nor hold that no limitations on the scope of the user insured were permissible under the Directive; that issue simply did not arise, and cannot be regarded as advanced, let alone resolved, by the sort of general language used by the CJEU in that case.

I need next to refer to Vnuk, above. Vnuk was standing on a ladder in a farm yard in Slovenia. A trailer, attached to a tractor reversing in the yard, struck the ladder and Vnuk was injured. The insurer argued that the tractor was not being used on the road, but in the farm yard and so was not covered. The question referred to the CJEU was whether “the use of vehicles” in Article 3 (1) of the Sixth Directive extended to use in the circumstances here. The Court held that it did, and that the use of the tractor to manoeuvre the trailer into the barn should have been covered by compulsory insurance, even though the accident was not a road traffic accident. Its reasoning was that the tractor with or without trailer attached was a “vehicle” within the Directive as “a motor vehicle intended for travel on land”, unaffected by the fact that it could be or was used as an agricultural vehicle. No permitted special plate exemption had been applied by Slovenia. It was therefore subject to Article 3(1). “Use of vehicles” was a concept which did not permit of different approaches in Member States, which it appears there were, although “accidents” and “use of vehicles” were concepts not defined in the Directive. They had to be understood as part protective of accident victims and part liberalising the movement of people and goods for the purposes of the internal market, providing comparable treatment in relation to vehicular accidents regardless of where in the EU they occurred. The process had evolved through the previous five Directives.

For some Member States, this was a surprising outcome. The UK and others have had to consider what the full effect of the judgment was, and how to meet it through legislation.

Mr Palmer submitted that these cases permitted the distinction between a use of a motor vehicle which fell outside the scope of the cover and so was an uninsured use, and an exclusion from liability for a use, which was otherwise covered, because of the manner in which it was being driven on that use. None required insurance for all uses to which a motor vehicle could be put as part of what Vnuk described as a “use consistent with their normal function”. Limitations on the use of a vehicle were compatible with the Directive because the insurance obligation required uses to be insured, not all vehicles to be insured for all uses. If a vehicle was used for an uninsured use, it was the uninsured user who had failed to comply with the insurance obligation under s143, and anyone who had caused or permitted that use had also committed an offence. But the use was uninsured, and it was that fact which enabled a claim to be made on the MIB, as a last resort. Mr Worthington supported those submissions.

I would have had considerable reservations about whether CJEU jurisprudence intended to reflect that distinction in view of its emphasis on the very limited circumstances in which compulsory insurance would not cover the third-party victim of a road accident. The vehicle may not be insured for a particular user or use, but it is still insured and required to be insured for the purposes of the victim’s claim, even if there is no liability to the insured. The approach is intended to be consistent throughout the EU. The distinction is one familiar to domestic law, but not one reflected or even averted to in the breadth of the language in the CJEU cases I have cited. Even if such a distinction is to be drawn, such that use for social domestic or pleasure purposes represents a lawful limitation on the scope of compulsory insurance, it is difficult to see that an exclusion for “road rage” or “deliberate damage” would not fall foul of the Directive, because it relates to the manner in which a vehicle is driven on a use which itself cannot be “road rage” or “deliberate damage”; this is closer to the “blameworthy conduct” which, like drunkenness is not a basis for excluding liability to a third party – including a passenger.

Mr Palmer however is supported by a line of domestic authorities at the Court of Appeal level which, even if they might not bind me, nonetheless persuade me that I should conclude that there is no incompatibility between a restriction on the scope of the use covered in an insurance contract, including “road rage” and “deliberate damage”, and the requirements of the Directive. The first is EUI v Bristol Alliance Ltd Partnership [2012] EWCA Civ 1267. This was not a case involving the MIB. The driver had deliberately caused serious property damage to a shop owned by the claimant. The driver’s motor insurance policy did not cover damage arising out of his deliberate acts; he therefore had no contractual right to indemnity against his motor insurer for that liability and so his use of the vehicle was uninsured. Indeed, the certificate limited the use to social, domestic and pleasure purposes and travel between home and permanent place of business; it expressly did not cover use for hiring, merchandise delivery nor any purpose connected with the motor trade, nor did it cover use for racing, rallying, track days, trials or various test drives. The MIB was not liable to pay; the UDA did not cover the property damage to the shop because the claimant shop owner itself had property insurance which covered the damage. The contest was between the property insurer and the motor insurer.

Ward LJ, with whom Janet Smith and Macfarlane LJJ agreed, described the contest in this way at [2]:

“The property insurer contends that upon the proper construction of the policy, the Road Traffic Act 1988, sections 145 and 151 in particular, and the European Directives on Motor Insurance, the motor insurers must cover damage to the property whether deliberately caused or not. The motor insurer contends that because the policy expressly excludes damage deliberately caused with the result that this damage is not covered by the motor insurance policy, then upon the proper construction of section 151 they are not obliged to indemnify the claimant.”

At [45], he set the context for s151, in these terms:

“45.

We are about to get to section 151. The scheme of the Act is by now established. There is no exhaustive list of matters which cannot be excluded from the cover of the policy. Other exclusions are effective. Thus the validity of such time-honoured limitations on use, for example, for social domestic or pleasure purposes have never been doubted. If there is a social domestic or pleasure limitation, then to use the vehicle, insured in that way, for hire or for business would be to use the vehicle illegally because use for hire or business would not be covered by the policy and the use for that purpose would be uninsured. As I have already said, it is the responsibility of the user to ensure that the use to which he put the vehicle is covered by the terms of the policy taken out in respect of the vehicle he is using. If the policy limits the cover, then it is obvious that the premium would be lower than it would be if each and every use, without exception, had to be covered. The motorist has the freedom to select a policy to match his need and to pay the price accordingly. That has to be good for us all.”

He then turned to the European dimension, first citing Ruiz Bernaldez, above, followed by the CJEU judgment on the reference in Wilkinson v Fitzgerald, above. The crucial issue was whether Bernaldez was of general application so as to compel a Marleasing meaning to be given to s151(2)(a) read with s145. (This is a reference to Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR 1-4315, [1993] BCC 421 to the effect that when a national court interpreted a provision of national law it was required “to do so as far as possible” in the light of the wording and purpose of Community law, in order to achieve the result sought by Community law and thus to comply with Treaty obligations).

He concluded that there was no incompatibility such as to require a conforming interpretation to be given to the Act, and what he said was equally applicable to the limitations on use and the restriction in relation to “deliberate damage”, and the like. He said this at [65]:

“If Mr Ross is correct then the way the Road Traffic Act combined with the MIB scheme has always operated is not compliant with the Directives. It has never been doubted (and Mr Ross has not questioned it) that a limitation for social, domestic or pleasure purposes is effective in our domestic law. Consequently, if the vehicle is used for hire, the use is treated as uninsured. But if the Directives preclude the insurer being able to rely on that limitation to refuse to compensate the victim, and if the victim must be compensated, then section 143 loses its teeth. Collins J refused to accept that argument in R v Solihull MBC, ex parte Singh [2007] EWHC 552 (Admin) and in my judgment, he was right to do so. Collins J held that to use the vehicle for hire in contravention of the limitation on use for social, domestic or pleasure purposes meant that there was no insurance within the terms of the Act and the criminal offence was made out. The fact that the victim of any accident will be compensated either by the insurer concerned under section 151 or by the insurer but this time through the MIB does not affect the existence of such criminal liability.”

Ward LJ cited Collins J citing Sir Ralph Gibson in Silverton v Goodall, 1997, in which the point had been argued about the width of what was said in Bernaldez, holding that the structure of the Act of 1988 and the MIB agreements satisfied the requirements of the Directives. Ward LJ also cited Andrew Smith J in Axa Insurance UK LPC v Norwich Union Assurance Ltd [2007] EWHC1046 (Comm) holding that the width of Bernaldez did not alter the fundamental approach of European law that it was Member States which determined the extent of compulsory insurance. Clark v Kato [1998] 1 WLR 1647, in the House of Lords was prayed in aid: Lord Clyde stated that the Directives recognised that there could be differences between the extent of cover which national laws could impose; he specifically said that vehicle insurance in the UK had been discussed with the Commission and no action had been taken to amend the UK legislation or to challenge its terms. Ward LJ concluded at [68-69]:

“68.

Thus, in my judgment the scheme of the Act coupled with the MIB arrangements satisfy the aim and the spirit of the Directive to “enable third party victims of accident caused by vehicles to be compensated for all damage to property and personal injuries sustained by them” as set out in [18] of Bernaldez. There is no suggestion that the United Kingdom has failed to implement the Directive. In those circumstances there is no justification for reading Bernaldez in such a way as to preclude the insurer relying on the exclusion clause. The fact is that the exclusion of liability in our case means that the driver was uninsured, but the Directives allow for such uninsured losses to be paid under the MIB scheme even if that is the measure of last resort. If our domestic law complies with the European Directives, Bernaldez can be interpreted restrictively as Mr Palmer contends and thus does not compel us to give any other interpretation to section 151 than that which the plain and ordinary meaning of the word compels.

69.

I am satisfied, therefore, that the liability is not covered by the terms of the policy, that the use of the vehicle was, therefore, uninsured, that section 151 gives the claimant no right of recovery directly against the insurer with the result that the claimant would ordinarily seek its recourse under the provisions of the MIB Agreement. Had the property owner not made a claim under its property insurance and there was no question of subrogation, the motor insurer would have to satisfy the liability as the Article 75 insurer under the MIB scheme and there would be no question of not complying with the Directives. It is only because of the subrogation that liability can be denied.”

This authority has been considered after Vnuk. In Sahin v Havard [2016] EWCA Civ 1202, Mr Sahin, the driver of a car damaged in a collision with a car driven by an untraced driver, but which had been hired to Ms Havard, sued her and the hire company, which turned out to be insolvent. He did not proceed under the UtDA. He sued her on the grounds that she had permitted the untraced driver to drive the car without insurance, contrary to s143 of the 1988 Act; he obtained a default judgment. The car hire firm’s insurance company was joined to the proceedings. The question was whether Ms Havard’s liability to Mr Sahin was statutorily required to be covered by s145 of the 1988 Act. Longmore LJ, with whom Kitchen and Floyd LJJ agreed, rejected a submission that the Directive required insurance to be in place in respect of all those driving vehicles without permission, even if they were thieves. He referred to the judgment of Ward LJ in Bristol Alliance, above, and concluded, [24], that there was no scope for construing s145 in isolation from MIB Arrangements, “since the aims and spirit of the Directive are complied with and there be no suggestion that the United Kingdom has failed to implement the Directive.” He added that in any event that it was difficult to see how the wording of the Act could be “manipulated or amended” to achieve the result that loss caused by any driver who was to be covered under a system where it was the driver was required to be insured rather than the vehicle. There were significant difficulties in the way of a Marleasing construction.

I have concluded, in the light of those domestic authorities, that I cannot accede to Mr Hyam’s submissions. They may not strictly be binding, but I am bound to treat the reasoning as in point and persuasive. It would be remarkable if, without spelling it out in so many words, the CJEU had decided as far back as Bernaldez, the language of which, in its usual way, it repeats in subsequent cases, that any use which could be made of a motor vehicle required compulsory insurance. The structure of the Directive protects third parties where the use is not covered by the terms of the compulsory cover. It would be a more expensive process to obtain insurance, yet quite unnecessary for the achievement of the Directive’s purposes, with attendant needless criminalisation; indeed it could create a perverse incentive to avoid insurance at all.

Even had I reached a conclusion in his favour, I would have done no more than grant a declaration. This is not a case for a Marleasing construction: the reasons against doing so given in Sahin v Havard [26] are compelling; indeed, the form of Marleasing construction proposed emerged far too late in the hearing to be useful. Considerable care is required where a change in the law would mean that drivers were committing criminal offences and there were no provisions in place for the Article 10 body to take up the necessary liabilities.

I do not consider that the most recent Fidelidade case of July 2017, above, alters that conclusion, though its tenor assists Mr Hyam. It concerned the compatibility with the Directive of Portuguese national legislation which rendered null and void an insurance contract concluded on the basis of false statements concerning the identity of the owner of a motor vehicle and the identity of its user. A motorcyclist was killed in a motor accident, along with the Portuguese driver of the car involved. The Portuguese insurer declined to reimburse the Caisse Suisse de Compensation the compensation it had paid out to the motorcyclist, because the policyholder, who was not the driver, had made a false statement, in obtaining the insurance, as to who was the owner and usual driver of the vehicle. The CJEU decided [27] that Fidelidade could not rely on the statutory provisions on the nullity of the contract or invoke that nullity against a third party victim so as to be released from its obligation under Article 3(1) to compensate the victim for the accident caused “by the insured vehicle”.

It repeated in [23-26] paragraphs from the Churchill Insurance Co. Ltd. case, above, and stated that the court had held in that case at [40], “that the fact that a vehicle is driven by a person not named in the insurance policy relating to that vehicle cannot...support the conclusion that the vehicle is uninsured for the purposes of the third subparagraph of Article 1(4) of the Second Directive….”

It went on to hold that the statutory provision in the Portuguese Commercial Code, which provided for the nullity of an insurance contract where the insured had no economic interest in the contract, dealt with an issue, the legal conditions for the validity of the insurance contract, which was governed by national and not EU law. Nonetheless, such national law could not deprive the Directives of their effectiveness. The European Commission had noted that the right of an accident victim to receive compensation in compliance with the Directive “may be impaired by the conditions for the validity of the insurance contract” such as that at issue in that case. The CJEU stated at [34]: “Such provisions are thus liable to result in compensation not being paid to third-party victims and, consequently, in those directives being deprived of their effectiveness.” That finding was not affected by the fact that the Article 10 body might be liable to make the compensation payment; it was a body of last resort because its payment of compensation was “envisaged only for cases in which the vehicle that caused the injury or damage has not satisfied the requirement for insurance referred to in Article 3 (1)…, that is to say, it is a vehicle in respect of which no insurance contract is in place.” Here it repeated what had been said in Csonka.

Mr Hyam submitted that Fidelidade supported his submissions in relation to the unlawfulness of ss145 and 151 in permitting limitations and exclusions such as to “social domestic or pleasure use”, and in relation to R3(2) the Regulations in qualifying the absolute protection of the Directive by enabling an insurer to raise against an innocent third party any breaches of condition or warranty by the policyholder, and similarly in s153(3) of the 1988 Act, with s1(4) RAIA, by enabling the insurer to raise against an innocent third party any rights which it had acquired against the policyholder. It also supported his contention that the fact that the innocent third party could fall back on compensation from the MIB, provided no answer to a breach of the Directive.

Mr Worthington submitted that Fidelidade was confined to the specific issue it dealt with, and otherwise took general principles no further than the case law which it cited. That issue was whether national law could permit an insurer to avoid meeting third-party claims because of a domestic law provision nullifying the policy. He pointed out that Portuguese law required the owner or keeper to insure the vehicle and, if not void, the policy would have covered the accident. The summary statement of law at [35] of the judgment referred to the obligation that “every owner or keeper of a vehicle” conclude a contract with an insurance company to guarantee his civil liability arising from the use of the vehicle. That simply related the Directive to Portuguese law, whereas the Directive is more broadly expressed requiring member states to take all appropriate measures to ensure that “civil liability in respect of the use of vehicles…is covered by insurance.”

The judgment did not suggest that a vehicle must be insured in respect of all possible uses and users; the UK system obliges a particular user to insure his particular and actual use of the vehicle. It is not limited to “normal function”. The policy can lawfully be limited to or exclude particular uses, which are properly then recognised as uninsured by the MIB if the user does not have insurance for that particular use. It was not his submission that the existence of the MIB permitted unlawful exclusions.

Mr Palmer for the defendant, agreeing with Mr Worthington, submitted that Fidelidade added nothing to the debate before this Court on the grounds raised. The language of the Court in [23] and [35] simply reflected the fact that it was considering the form of compulsory insurance required under Portuguese law where the owner was required to take out insurance to cover the use of the vehicle. The Court was not supposing that the Directive required the owner of the vehicle to ensure it for all users and uses; it actually requires the use to be insured. s143 RTA achieved that by requiring insurance to be in force in relation to the use of a vehicle by the person using it, and forbidding a person to cause or permit its use without such insurance. Those general passages from the judgment had to be understood in that light. The case did not concern the scope of insurance obligations, the issue in this case, but rather the effect of an insurance contract nullified under a provision of domestic law.

I do not consider that Fidelidade alters the weight I should give to the domestic authorities. The fundamental question is whether the CJEU, in repeating the very general language it has used since Bernaldez means to hold, without actually saying so, that long-standing limitations on the uses insured have not been lawful for years. These are limitations which do not arise in the same way where it is the vehicle which is insured. Churchill Insurance, a UK case in which the language of earlier cases was repeated, did not deal with this issue.

Article 18 requires Member States to ensure that any party injured as a result of an accident caused by a vehicle covered by insurance as required by Article 3 shall enjoy a direct right of action against the insurance undertaking covering the person responsible.

Mr Hyam submitted that R3(2) the Regulations which entitles the third-party victim of an accident to bring proceedings directly against the insured person’s insurer, qualifies the protection required to be given by Article 3(1) of the Directive because the words which make the insurer liable “to the extent he is liable to the insured person” permit the insurer to raise against the victim any breaches of condition or warranty perpetrated by the policyholder. Mr Palmer responded that that simply put the insurer, facing direct proceedings by the third-party, in no worse a position than it would be, were it paying out under the insurance policy following proceedings against the insured person. It would be able to rely on the same lawful exclusions to the same extent.

In the same vein, s153(3) RTA and s1(4) RAIA together permit the insurer to raise against the third party any rights which the insurer has acquired against the policyholder. This, submitted Mr Hyam, suffered from the same legal defect. The effect of s153(1) was that bankruptcy and the like did not affect “any such liability of [the bankrupt] as is required to be covered by a policy of insurance under section 145 of this Act.” S153(3) subsection (1) did not affect any rights conferred by the RAIA “on the person to whom the liability was incurred, being rights so conferred against the person by whom the policy was issued or the security was given.”

Mr Palmer submitted that these provisions, stemming from the previous RAIA of 1930, fully replaced by 1 August 2016 when the RAIA 2010 fully came into force, were intended to ensure that damages awarded against an insured but bankrupt driver went to the victim and not to the bankrupt’s creditors. They aim to ensure that the third party victim of an insured but bankrupt driver was in no worse position than the third party victim of an insured but solvent driver. The insured’s rights against the insurer were transferred to the victim.

Mr Worthington pointed out that s153 (1) preserved the rights of an injured third-party against an insurer were the insured to become insolvent; the insurer remained obliged to satisfy the judgment by virtue of s151 RTA.

In my judgment, these provisions do not create any new issues of conflict with the Directive, unless the defences which can be raised by the insurer in direct proceedings against it are more extensive than those which the insurer would be entitled to raise pursuant to the insurance contract, so as to avoid cover. But as I read the provisions, they do not have that effect. It would be a strange result if exclusions or grounds for avoiding the contract which could not be raised as against the third party in proceedings against the insured, could nonetheless be raised in direct proceedings against the insurer. I see no such language. Rather the two forms of claim are intended to proceed on the same footing. This is a different issue from whether the underlying insurance obligation is compatible with the Directive in the exclusions on limitations it permits; if it is not compatible, then the same incompatibility would apply to proceedings against the insurer which I have already dealt with.

A further issue arose which is usefully picked up here. Mr Palmer accepted in his written submissions of October that the true effect of Fidelidade was that s152(2) RTA was no longer compatible with EU law. The general rule is that the insurer is directly responsible for satisfying judgements obtained by third parties against the insured even if the insurance company will otherwise be entitled to avoid the policy. There was an exception to that general rule in s152(2), where a declaration had been made that the policy had been obtained through non-disclosure of a material fact or a materially false representation of fact. Amendment would therefore be required. But that was not part of the challenge in these proceedings, nor did it relate to this ground.

I agree. The defendant is plainly aware of the position and no remedy is called for.

The claimant submits that Vnuk holds that the Directive requires insurance for any use which “is consistent with the normal function” of the vehicle in question. Therefore, s185 of the 1988 Act and the two agreements with the MIB, contain unlawful restrictions, in the compulsory insurance obligations, to the use of motor vehicles “intended or adapted for use on roads” and to their use “on a road or within a public place”. s185 defines a “motor vehicle” as “a mechanically propelled vehicle intended or adapted for use on roads.” It excludes invalid carriages. Article 1 of the Directive defines “vehicle” as “any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled.” That is also the definition to be found in R 2(1) RAIR. S143 and “relevant liabilities” are too restricted, which is carried forward into the UDA of 1999 which continues to apply to accidents occurring before 1 August 2015.

The defendant does not dispute that Vnuk widens the scope of the compulsory insurance obligation and that amendments to legislation and the two agreements are required. The issue is as to the extent to which amendment is required, and as to its timing, in view of the need for consultation, agreement, and consideration of possible changes to the Directive itself.

The European Commission published an Inception Impact Assessment, IIA, on the adaptation of the Directive in June 2016 in the light of the Vnuk judgment. It referred to the fact that the use of certain vehicles or in certain locations “may not have been initially understood to be regulated under the Directive by some Member States….” As the judgment risked having significant effects, and EU-wide consistency in the achievement of a high level of protection for victims, was required, an urgent examination was called for. The Commission also intended to launch a wider review of the Directive towards the end of 2016, now apparently to be launched sometime this year. The IIA described the objective of the proposal as being to maintain “a high degree of protection for victims of motor vehicle accidents while respecting the right of Member States to set up arrangements at national level to protect victims of accidents that are the result of agricultural, construction, industrial, motorsport or fairground activities.” The approach would seek to exclude activities from the scope of compulsory insurance rather than exempting certain types of vehicle such as tractors from its scope. But in “the absence of compulsory policies covering these activities at EU level, the scope of the... Directive should be limited to the use of vehicles in the context of traffic.”

The Commission’s suggestions were: (1) making no amendments at all to the Directive, or (2) requiring guarantee schemes to cover uninsured agricultural, construction, industrial, motorsport or fairground activities, (3) confining the scope of the Directive to accidents caused by motor vehicles in the context of traffic where the public had access, or (4) excluding certain types of vehicles from the scope of the Directive. It seemed to favour the third option. The claimant disputed this but, like the defendant, that is how I read it.

Ms Matthew, Deputy Director of the Road User Licensing, Insurance and Safety Division within the defendant since 2012 and whose role includes responsibility for the team developing policy and legislation in this area, gave evidence in her second witness statement about the steps being taken by the defendant. He had hoped to be consulting on the Commission’s own proposals in its wider review but in their absence he launched a consultation on 20 December 2016.

Part of the consultation included questions about the Commission’s suggestions. In it, he accepted that the United Kingdom had to comply with the Vnuk judgment in the absence of any amendment to the Directive. Part of the consultation involved consideration of what amendments were required to satisfy the Vnuk judgment: the definition of “motor vehicle” as “any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled” would remain unchanged; third party insurance cover would be required when a motor vehicle “is used in a way that is consistent with the normal function of the vehicle”, (itself a problematic concept), which could cover use on private land which was not a road or other public place. The paper described the judgment as a “significant disappointment” and “something of a game-changer for motor insurance legislation.” There could be significant and onerous costs and burdens for the motor sports industry, as well as for the users of mobility scooters and powered wheelchairs which currently require no compulsory insurance. This was the first of two main options. Mr Worthington also pointed out there would be enforcement difficulties in extending compulsory insurance to unregistered vehicles not used on a road or other public place, and no “moral pressure” to insure them either.

The second main option would arise were the Directive to be amended, in line with the Commission’s third suggestion of limiting the Directive to the use of vehicles in traffic, but it was accepted that so long as the UK was a Member State of the EU, it would have to adopt whichever amendment or none emanated from the EU’s legislative process. This is the Government’s preferred option.

The consultation process closed at the end of March 2017. The Government hoped to have the responses published by the end of June along with a statement of its intentions. So far as I am aware, that has not yet happened.

The claimant’s simple position is that unless and until the Directive is amended in whatever form an amendment might take, the legislation and agreements have to be amended to bring them into line with the judgment. Until then, there would be a knowing and deliberate breach of the Directive. The defendant refused to delay the hearing of this issue until the publication of its statement of intentions at the end of June 2017. The ongoing consultation does not mean that the intervention of the Court should be postponed.

Mr Hyam made a number of suggestions as to how the Court should intervene: (1) there should be Marleasing amendments to the relevant legislation inserting, for example to give the flavour of the proposal, an obligation to cover “all liabilities required to be covered by the Sixth Directive”; or, if that were impossible, (2) a declaration that national legislation was incompatible with the Directive in the ways identified in the grounds, or (3) a mandatory order that steps be taken, within a timeframe, to put in place policies or guidance to meet the obligation in the judgment, or (4) at least, at one time, to set aside the offending legislation, or some combination of those remedies. In addition, he suggested that any declaratory relief or mandatory order would reduce the scope for or prevent the MIB relying on what he described as “unlawful provisions” of the agreements. Mr Palmer and Mr Worthington complained at the late addition in its skeleton argument by the claimant of any elaborate argument that a remedy beyond a declaration should be granted.

In support of these remedies, Mr Hyam referred me to a number of authorities. I have referred to the interpretative obligation in Marleasing. This was discussed in Vodafone No.2 v HM Revenue and Customs Commissioners [2009] EWCA Civ 446,[2010] Ch 77 at [37-8] by Sir Andrew Morritt C, with whom Longmore and Goldring LJJ agreed. He said at [38] in particular:

“38.

Counsel for HMRC went on to point out, again without dissent from counsel for V2, that:

“The only constraints on the broad and far-reaching nature of the interpretative obligation are that:

The meaning should “go with the grain of the legislation” and be “compatible with the underlying thrust of the legislation being construed.” (Per Lord Nicholls in Ghaidan at 33; Dyson LJ in EBCentral Services at 81). An interpretation should not be adopted which is inconsistent with a fundamental or cardinal feature of the legislation since this would cross the boundary between interpretation and amendment; (See Ghaidan per Lord Nicholls at 33; Lord Rodger at 110-113; Arden LJ in IDT Card Services at 82 and 113) and

The exercise of the interpretative obligation cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate. (See Ghaidan per Lord Nicholls at 33; Lord Rodger at 115; Arden LJ in IDT Card Services at 82 and 113.)””

It was not incumbent on a party to supply the text which he said was required, but it was useful if he did.

There had already been a finding that s145 RTA 1988 was not compatible with the Directive in UK Insurance Ltd v Holden [2016] EWHC 264 QB, [2016] 4 WLR 38, HHJ Waksman QC. This was because of the limitation to use of a vehicle on a road or other public place. No further remedy was given.

Unibet (London) Ltd v Justitiekanslern [2007] CMLR 30 draws together a number of authorities which affirm the principle of effective judicial protection as a general principle of Community law, that it is for the Member States to ensure judicial protection of an individual’s rights under Community law, that the national court must ensure that it examines the compatibility of national law with Community law and that, if it is dealing with the dispute governed by Community law, it must be in a position to grant interim relief in order to ensure the full effectiveness of the judgment to be given on the Community law rights. At [61], it affirmed that judicial review proceedings constituted effective judicial protection of rights under Community law because it would enable a party to obtain a judicial decision that national legal provisions were incompatible with Community law. This is reflected in R v Transport Secretary Ex p Factortame Ltd (No.2) [1991] AC 603 at 659B where Lord Bridge said that the European Communities Act 1972 had been clear that it was the duty of a United Kingdom court: “when delivering final judgment, to override any rule of national law found to be in conflict with any directly enforceable rule of Community law. Similarly, when decisions of the European Court of Justice have exposed areas of United Kingdom statute law which failed to implement Council directives, Parliament has always loyally accepted the obligation to make appropriate and prompt amendments.”

The way in which UK Courts had dealt with a similar problem could be seen in R (ClientEarth) v Secretary of State for the Environment, Food and Rural Affairs [2015] UKSC 28. The UK was in breach of the EC Council Directive on air quality. Following a reference to the CJEU, which included the question as to what a national court was required to do in respect of the failure to comply, it had answered that the court should take, with regard to the national authority, “any necessary measure, such as an order in the appropriate terms, so that the authority establishes the plan required by the Directive in accordance with the conditions” in the Directive. Accordingly, the court laid down a mandatory order, with a defined timetable with liberty to apply to vary it, requiring new and adequate air quality plans to be prepared.

I did not find reference to decisions relating the incompatibility of domestic legislation with the ECHR of equal assistance because the statutory requirements of the Human Rights Act 1998 are different, and the Marleasing obligation is a stronger obligation than the “reading down” obligation in relation to the ECHR.

Mr Palmer, with the support of Mr Worthington, accepted that there should be a remedy for any breach of the Directive which caused loss. He submitted that it was adequate in the circumstances that damages would be available for any claimant who suffered loss through an inability to rely on either an insurance policy, because it was too narrow in scope, or an agreement with the MIB, pursuant to Francovich above. Evans v Secretary of State for the Environment, Transport and the Regions [2004] RTR 32 summarised the requirements for the award of such damages for failure to implement a Directive properly: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation incumbent on the state and the loss or damage sustained by the interested parties. Although the question of whether a breach is sufficiently serious requires the application of an “multifactorial test”, see Delaney v Secretary of State for Transport [2015] EWCA Civ 172, the application of that test is not before the Court. Mr Hyam contended that a liability to pay Francovich damages could not be a substitute for complying with the EU law obligation to legislate as required by the Directive.

It is correct that the state cannot choose to breach the law because it may be liable in damages. Individuals have already brought proceedings for Francovich damages. They may be more difficult proceedings than claims against an insured individual or pursuant to the two MIB agreements: individuals may not be aware of the potential claims, and the breach in question has to be sufficiently serious. But I do not accept Mr Hyam’s contention that Francovich damages are an ineffective remedy, devised as the requirements are by the CJEU itself, to provide an effective remedy for a failure to transpose a Directive which causes damage.

I see no form in which any order “setting aside” any part of the domestic legislation can achieve anything other than chaos; none has been suggested. Whatever the deficiencies of the domestic legislation as against the Directive, as interpreted in September 2014, they are necessary in order to achieve the undoubted good which they do and without which it is difficult to see what compulsory insurance provisions would be in place.

In reality, what Mr Hyam seeks is an interpretation under the Marleasing principles to give effect to whatever it is that the Vnuk judgment means; this involves reading in words of addition to refer directly to the Directive. I am not prepared to grant such relief. First, it goes against the principles enunciated in Vodafone 2, above: it would eliminate fundamental and long-standing features of the legislation in relation to the use of vehicles other than on a road or other public place, and as to what motor vehicles required insurance. Yet more importantly, such amendment cannot be made without the courts making decisions and assessing practical repercussions which are very much for the defendant. The scope of the judgment in Vnuk is unclear. Did it decide that all use of a motor vehicle, whether on public and private land, in a manner consistent with the normal function of the vehicle, must be covered by insurance against liability to a third party, without limitation or exclusion, as Mr Hyam QC for RoadPeace contended? Did it simply mean that a motor vehicle used other than on a road or public place, in a manner consistent with the normal function of the vehicle, had to be covered by insurance against third party liability, subject to such limitations as might be agreed between insurer and insured, as Mr Palmer for the SST and Mr Worthington QC for the MIB contended. What the CJEU meant by normal function of the vehicle is unclear: was this the normal function of the type of vehicle, or of the particular vehicle in question? And, if types, how are they broken down into different types. Many issues are left for debate, and it would appear for domestic law or Court decision. If the CJEU intended its words to have precision, it may be because it intended only a modest change, but it happened to use rather wide language. Practical remedies at this stage are perforce rather limited, for all the statements of principle in Unibet. The decision-making process is underway in the hands of the defendant, albeit that it is to some extent dependent on my next point.

Second, it is very relevant that the European Commission itself is contemplating legislative amendment, because it recognises the unexpected problems which Vnuk, in its unqualified language taken at face value, creates. This may be proceeding more slowly than expected but nonetheless the process is underway which may affect whether legislative change and its terms is required. Third, although it is not incumbent on a party to provide specific language for a Marleasing interpretation, it does at least help the parties to focus on the issues; here the language which relates to a complex issue arrived before the defendant and MIB late in the day. I put this point third for convenience although it is not the major point. Fourth, there is a recognised remedy in the form of Francovich damages. On the material before me, that seems an entirely appropriate remedy for somebody who has a claim which the proper implementation of the Directive would have enabled to be met, but its insufficient implementation precluded.

I should say that I also reject Mr Hyam’s contention that there is an obligation to make good a failure to transpose Directives properly by passing legislation which has retrospective effect. There are obvious difficulties with such a proposition where the relevant legislative scheme imposes on individuals an obligation to take out the required insurance cover, and makes the use of the vehicle without such insurance a criminal offence. Yet it is that obligation, sanctioned as it is, which is the most important feature of the scheme, and is the necessary counterpart to the obligation under Article 10 of the Directive, and the earlier domestic arrangements with the MIB, to set up arrangements for the third-party victims of uninsured or unidentified drivers. Indeed, it is far from clear that if there is an obligation to enact amendment retrospectively, but presumably without retrospective criminalisation, how retrospective liability on the MIB could then be justified. It is also unclear how far back in time the amendment would have to go, and whether the September 2014 date of the judgment in Vnuk rather than some earlier Directive, could itself be taken. These are all issues which can be considered in the course of a Francovich damages claim.

The two authorities relied on by Mr Hyam do not in fact support him. Bonifaci v Instituto Nazionale della Previdenza Sociale [1998] CMLR 257 rather emphasises the importance of Francovich damages as the remedy for belated or inadequate transposition or implementation of Community measures; but it goes on to say that even where there has been retrospective transposition, there may yet be cases where loss has been sustained which requires to be made good. It does not require the correcting legislation to be retrospective; see [45-54]. Maso v INPS and Italy [1997] 3 CMLR 1244 adds nothing.

Mr Palmer and Mr Worthington submitted that although the Directive had direct effect between an individual and an emanation of the state, vertical direct effect, it was clear that the Directive did not create rights enforceable against a private individual or body such as the MIB. The MIB is not an emanation of the state, see Byrne v MIB [2009] QB 66 at 63, Flaux J; this was not an issue in the Court of Appeal. However, in his further written submissions, Mr Palmer drew my attention to Farrell v Whitty Case C413/15, a decision of the CJEU dated 10 October 2017. It held that the Motor Insurers Bureau of Ireland was an “emanation of the state” with the result that the Directive, being sufficiently precise and unconditional, could be relied on against it. It may not automatically follow that the MIB is also an emanation of the state. If the MIB is not an emanation of the state, no remedy could lie against the MIB. That would be to give horizontal direct effect to the Directive, which no one suggested was part of the Community’s legal order; Marshall v Southampton and South West Hampshire Area Health Authority (No.1) [1986] ECR 723.

The Claimant submitted that if the MIB were an emanation of the state, then a Marleasing interpretation of the UDA/UtDA were required as an alternative means of bringing them into line with the Directive. It wished to argue this point in detail after the handing down of this judgment. I do not propose to permit a further ground of challenge to be added to this action after judgment on the grounds raised, nor further to postpone it for argument on what is not a straightforward issue. Nor is this case the only vehicle whereby such an issue can be raised.

The issue moreover only goes to remedies and were the MIB an emanation of the state, all the problems I have already considered would arise, and more, because they would involve re-writing agreements voluntarily entered into. The agreements have been held not to be provisions of domestic law for the purposes of the application of Marleasing; see White v White [2001] UKHL 9, [2001] 1 WLR 481 at [22]. It is difficult to see how the agreements could usefully be set aside. The provisions cannot simply be red-lined out. Indeed, it is difficult to see that the rewriting of the agreements, as Mr Hyam would require, could be imposed on a contract. In any event the agreements are not illegal; they are effective for the purpose for which they have been agreed, and in beneficial accordance with the policy of the Directive. It is difficult to see, were Mr Hyam right that the limitations could not be enforced, how the agreements as a whole could remain enforceable.

It is correct that the defendant cannot hide behind the agreements and the problem of their amendment by an order of the court to avoid his legal obligations. Even were the MIB to decline to enter into any amending agreement, the defendant would still be in breach of his obligations, and would still be obliged to put in place an alternative body or arrangement to satisfy Article 10 of the Directive. If, meanwhile, the agreements do not cover what should be covered, the defendant may be liable to pay Francovich damages.

I am satisfied that an appropriate form of declaration should be granted however. The last issue is whether, in addition to a declaration, some form of timetable for legislative amendment should be laid down. In principle, I consider that a court should not simply leave an issue of legislative incompatibility with Community law to a timetable wholly within the control of the defendant, sympathetic though I am to the need for certainty and to the desirability of avoiding an amendment which exceeds what the European Commission or awarding Directive itself requires. I am not sure where the two consultation or consideration processes have got to, or how much longer is sensibly required for decisions to be made by the defendant or Commission. I have concluded that further submissions, initially in writing, are required from the parties following the hand down of this judgment on whether more than a declaration is required.

Mr Hyam submits that the definition of “accident” in Reg. 2(1) RAIR fails to comply with the Directive, because it is confined to an accident “on a road or other public place in the United Kingdom” arising out of the use of an insured vehicle. Insofar as the issue concerns the words “on a road or other public place”, it raises precisely the same issues as I have just dealt with. However, the defendant accepts that the limitation of the definition of “accident” to the United Kingdom breaches the Directive, other than because of Vnuk. This is a matter under consideration by the Lord Chancellor who made the RAIR. Mr Palmer submitted that the issue was a narrow one, primarily concerned with the circumstances where a vehicle normally based in England or Wales has an accident in another Member State, which causes damage to another person whose habitual residence is England or Wales. The law of England and Wales would apply to the claim under Article 4 of the Rome II Regulation (EC) No. 864/2007. The RAIR would therefore apply, and no claim could be brought directly against the insurer. That, he submitted, was the extent of the breach. Consultation was underway with the defendant, outcome as yet unknown, over an amendment, as to which there are a number of possible solutions. The explanation provided by Ms Matthew in her second witness statement persuades me that she and Mr Palmer are right as to the extent of the problem and that it does not extend to a UK citizen resident in another Member State, because the law of that Member State would apply.

I see no reason why a declaration should not be made, and in view of the limited nature of the change, I would have been minded to set a timetable for ministerial action but the Lord Chancellor, as the responsible Minister, is not a party.

The UtDA of 2003 provides in clause 4 that the agreement applies where death or bodily injury to a person or damage to any property of a person has been caused by the use of a motor vehicle on a road or other public place in Great Britain and it is not possible for the applicant to identify the person who is or appears to be liable in respect of the death, injury or damage.

The MIB has to carry out an investigation and produce a report on the basis of which, and any relevant proceedings, it has to reach a decision on whether to make an award in respect of the injury and how much that award should be. Clause 8 provides that the award to the applicant is to be the sum “equivalent to the amount which a court”, if the accident has taken place in England and Wales, would have awarded to the applicant by way of general and special damages, if the applicant had brought successful proceedings to enforce a claim for damages against the unidentified person. In calculating that sum the MIB is required to adopt the same method of calculation as the court would adopt in calculating damages in general. There are provisions in relation to property loss. Interest is payable as well. There is also provision for a contribution towards legal costs incurred in the making of an application, and in seeking advice in respect of the correctness of a decision or the adequacy of an award made by the MIB.

The 2017 UtDA in clause 14 introduced provision for the approval of claims made by minors and protected parties. Where the MIB received unconditional acceptance of its proposed award or there was no unconditional acceptance or notice of appeal within the time limit but either the claimant was under the age of 18 in England and Wales or 16 in Scotland or the MIB decided from the evidence that the claimant lacked capacity within the meaning of the Mental Capacity Act 2005 to conduct and/or make decisions in relation to his claim the

“MIB shall, rather than being obliged to pay the award in accordance with the time limits provided by clause 13, apply to the Secretary of State for the appointment to the arbitrator and the provisions of clause 18 shall apply.”

The arbitrator’s principal function by clause 14(2) is to determine whether the proposed award represents a fair settlement for the claimants. Before seeking approval of the award by the arbitrator, the MIB must request certain information from the claimant and provide any such information to the arbitrator. This includes for example, in relation to a person who lacks capacity, the identity of anyone who holds a power of attorney, and in relation to a minor, the name of any person who has parental responsibility for the claimant. Where the claimant has a personal injury trust, the claimant’s suggestions as to how the award should be paid, should also be sought.

There are then provisions in relation to the other material to be placed before the arbitrator which includes the proposed award, evidence to show the claimant wishes to accept it and information provided by the claimant. The claimant has to provide a copy of any advice from counsel in respect of the adequacy of the award, which is not to be disclosed to the MIB without the claimant’s written permission. If the arbitrator approves the award, he specifies who is “the appropriate representative” to whom the MIB shall pay the award, or the lump sum element where periodical payments are also involved. The “appropriate representative” is a person designated by the arbitrator “as a most suitable personal body to receive and administer the award on the claimant’s behalf”. In certain circumstances, this may be the claimant himself. If no appropriate representative is available, the MIB can be directed to pay the costs of setting up a trust.

“If the arbitrator is unable to approve and/or the form of the award on the information and documentation available to him, he may ask MIB to consider the claim further giving directions in that respect and seek counsel’s advice and set a date for an oral hearing if he wishes to see the Claimant or anyone else in person. If he refuses to approve the award the claim will continue and the MIB must either decide to alter the terms of the proposed award and go through the same process or maintain his original proposal in which case it goes by way of an appeal to a different arbitrator. The arbitrator’s decision is to be written and final when they approve the award.”

Mr Hyam makes two complaints: first, although welcoming the new provisions of clause 14, there is no such protection for minors in respect of accidents occurring before 1 March 2017; second, the new provisions still do not provide, as they ought to, equivalent protection for minors to that which can be found under the CPR Part 21. CPR 21.2, PD 21 paras 5.2(1) and 6.4(1) required the appointment of a litigation friend and written advice from a barrister on the sufficiency of the award. Those CPR requirements were in addition to the requirement for settlements on behalf of a minor to be approved by the court, a feature now reflected in the new clause 14. He submitted, drawing on Dunhill v Bergin [2014] UKSC 18, that the rationale for those provisions was that children and protected parties required protection not only from themselves, but also from their legal advisers who might lack the necessary skill or experience, leading to a settlement for far less than the claim was worth. An opinion of counsel was almost always required to assist the court approving a settlement by way of “an external check on the propriety of the settlement.” Without it, neither court nor arbitrator could assess whether a minor claimant had been properly advised. A minor could bring a claim against the MIB without receiving advice or assistance from lawyer or litigation friend, with no one to make submissions, with no advice for the arbitrator or evidence other than that collected and provided by the MIB. This was not equivalent protection as between a Community law right and a domestic right.

Mr Palmer and Mr Worthington contended that neither the agreement of 2003, nor the amendments, offended any principle of Community law. I have referred briefly above to the principles of equivalence and effectiveness. Whether those principles were satisfied depended on a consideration of procedures viewed as a whole. Mr Palmer pointed to what he said were marked differences between the contexts in which the CPR and UtDA operated. The claim against the MIB under the UtDA did not involve adversarial litigation comparable to that to which the CPR applied. There is no defendant, nor is the MIB in a position equivalent to a defendant, seeking to persuade the claimant in negotiation to accept something less than that which might be ordered by the tribunal.

Under the 2003 agreement, if an applicant did not accept the MIB decision, an independent QC would determine the award, acting as an arbitrator. The 2017 amendment makes that process mandatory, and the arbitration is inquisitorial rather than adversarial or negotiated.

No litigation friend was required because there was no litigation. That did not mean that parent or guardian were prevented from involvement with the same authority as a litigation friend. In practice, an “authorised person” as defined in clause 1 (5) of the agreement, would assist a minor or protected person; this could but would not normally be a solicitor or legal representative. The authorised person would still have to be a person recognised in law as having authority to act on the claimant’s behalf.

Written advice from counsel was not mandatory because the arbitrator would be independent and experienced in the area. If the arbitrator considered however that further advice was required, he could call for it.

I accept the submissions of Mr Palmer and Mr Worthington in relation to the provisions of clause 14 in the new agreement. The principle of equivalence can properly reflect the differences in circumstance in which it is to be applied. I am not sure that the CPR represent the correct measure for equivalence. There is no equivalent domestic procedure for what is now a process under the Directive: all claims in respect of unidentified drivers proceed under the UtDA. But even if one compares a claim in respect of an unidentified driver with a claim in respect of an identified, insured driver, which would be governed by the CPR, the differences are quite significant, in particular the absence of a defendant in an adversarial process. The MIB is under a duty to investigate the claim, and to determine the award under the same conditions as those which would apply where the claim is made against an identified driver. No such duty applies to a defendant under the CPR. The arbitrator has the power to require counsel’s advice. There is no bar on legal advice or representation for a minor, and they would have an authorised person to assist. Clause 14 represents a careful provision for minors and protected parties.

So far as the position in respect of accidents occurring before 1 March 2017 is concerned, I have concluded that the provisions just about satisfy the principles. This is because of the duties on the MIB, the independent arbitrator and the process of onward review under the Arbitration Act. This has been a long-standing process in respect of which there has been, so far as I am aware, no complaint by the European Commission; nor have I seen evidence of real problems on the part of minor or protected claimants in obtaining satisfactory awards under the UtDA, which would not have been found in a CPR claim against an insured driver. In any event I could not order the dis-application of the agreement in relation to accidents before 1 March 2017; I could only make a declaration that the defendant or agreement had failed to fulfil the duty imposed by the Directive.

Mr Hyam had a further ground of complaint about the provisions, not materially altered in the new UtDA, which provided that a reference in the agreement “to the doing of an act by, or the happening of an event in relation to, a claimant includes reference to that act or event in relation to a solicitor or other person acting on the claimant’s behalf.” This, he said, fixed a minor or protected person with a binding effect of any concession decision or act are done in his name, a provision, he said, “clearly open to abuse”. He wanted time to consider those matters further but not at the hearing in February.

I am not prepared to have a further hearing on that point; Mr Hyam raised many and varied points, some of detail and some of principle; not all were pursued. As both Mr Palmer and Mr Worthington pointed out, it is curious that Mr Hyam should complain at the absence of a litigation friend and yet that someone, acting on a minor’s behalf, could bind him.

Clause 4.1(f) of the 2003 UtDA requires certain conditions to be met, set out in Clause 4(3): (c) to (e) are as follows-

“The applicant, or a person, acting on the applicant’s behalf must have reported that event to the police – (i) in the case of an event from which there has arisen a death or bodily injury alone, not later than 14 days after its occurrence, and (ii) in the case of an event from which there has arisen property damage (whether or not a death or bodily injury has also arisen from it), not later than five days after its occurrence, but where that is not reasonably possible the event must have been reported as soon as reasonably possible; (d) the applicant must produce satisfactory evidence of having made the report … in the form of an acknowledgment from the relevant force showing the crime or incident number under which that force has recorded the matter; (e) after making or authorising the making of, report to the police, the applicant must have co-operated with the police in any investigation they have made into the event. ”

The obligations on the MIB to investigate claims and to determine the amount of award are important. Clause 7 requires the MIB at its own cost to “take all reasonable steps to investigate the claim made in the application.” If it is satisfied after a preliminary investigation that the case is not one to which the agreement applies and therefore the application should be rejected, it has to inform the applicant but otherwise “it shall conduct a full investigation and shall as soon as reasonably practicable and with regard to the availability of evidence make a report on the applicant’s claims”.

The new 2017 UtDA contained different reporting obligations on a claimant. Clause 10 required a claimant, and no other person, to comply with the requirements of that clause, failing which the MIB would be entitled to reject the claim. There was a requirement for documentation to be provided by clause 10(4)(a); a claimant was required generally to give all such assistance:

“as MIB may reasonably require to enable it to investigate the claim including, in particular, the provision of a statement and other information either in writing, or, if so required by MIB, orally at interview between the claimant and MIB or its agents; (c) For the purposes of paragraph (a), the Claimant must, if he has not previously done so, and where reasonably requested by MIB, report the matter to the police as soon as reasonably practicable and co-operate with any subsequent police investigation or inquiries.”

Again, Mr Hyam accepted that the 2017 amendments, requiring an accident only to be to be reported “as soon as reasonably practicable” after it occurred, were compatible with the Directive, and were what the claimant had been seeking. However, as the amendment did not apply to accidents occurring before 1 March 2017, the unlawfulness which it contended existed, had not been eliminated. The amendment had also removed the requirement for a claimant to provide evidence that the accident had been reported to the police, and to cooperate with the police.

Mr Hyam produced a case from 2014, which he said was typical, where a failure to report within the time limits in the unamended UtDA, had caused the MIB to reject a claim, a decision upheld by the arbitrator, and on appeal under the Arbitration Act 1996, on the grounds that it was an issue of fact as to whether the report had been made within the time limits or as soon as reasonably possible.

Mr Hyam did not suggest that there was a specific provision of the Directive which governed time limits for reporting accidents. He submitted that in Evans v Secretary of State for the Environment, Transport and the Regions Case 63/01[2004] RTR 32, at [27] the CJEU had held that the intention behind the legislation “was to entitle victims of damage or injury caused by unidentified or insufficiently insured vehicles to protection equivalent to, and as effective as, that available to persons injured by identified and insured vehicles.”

Neither Mr Palmer nor Mr Worthington accepted that the unamended agreement was unlawful, nor that the amendment could be said to demonstrate its unlawfulness.

It is difficult to see by reference to what principle of Community law, the earlier version could be said to be unlawful. The issue does not arise with the identified but inadequately insured driver, where liability would be dealt with under the UDA. Evans does not suggest that there should be no differences between the provisions for insured and identified drivers and unidentified drivers. It is evident that there are differences in their circumstances. First, there is the obvious risk of fraud which is reduced by an early report to the police, which it is no great task to undertake, and an obligation thereafter to cooperate. The more serious the personal injury, the likelier that the police would be involved early anyway. The fruits of an early investigation by the police may accord with or provide an alternative picture to the one presented by the claimant. There may be nobody, where the driver is untraceable, who can say anything about the accident; if nothing is done within a quite short space of time, investigation is made much more difficult. Investigation may uncover an insured driver. Second, the time limits for reporting to the police, in the case of death or personal injury, and the different and more flexible time limit in relation to property damage, are a perfectly legitimate way, albeit not the only way, in which a reporting requirement can be made effective. Third, by s170 RTA 1988, the driver involved in a personal injury accident, or one in which another vehicle or other property is damaged, is under a legal obligation to stop and provide his details, or to report the accident to the police within 24 hours. A debate about whether the time limit was too short or too inflexible does not begin to demonstrate an incompatibility with Community law.

I see nothing here to offend the principle in Evans. The Community law principle of equivalence as between national rules concerning the exercise of a Community law right and those concerning a domestic law right is not offended. Equivalence does not require that the provisions be identical; these are equally favourable for the differing circumstances to which they need to apply. Nor, in my judgment, can it be said that the rights under the Directive, in respect of unidentified drivers are rendered ineffective, that is to say, made impossible or excessively difficult in practice to exercise.

Accordingly, I do not accept Mr Hyam’s submissions on this issue.

Article 10.3 of the Directive permits Member States to:

“limit or exclude the payment of compensation by the body in the event of damage to property by an unidentified vehicle.

However, where the body has paid compensation for significant personal injuries to any victim of the same accident in which damage to property was caused by an unidentified vehicle, Member States may not exclude the payment of compensation for damage to property on the basis that the vehicle is unidentified.”

Subparagraph 3 continues:

“The conditions in which personal injuries are to be regarded as significant shall be determined in accordance with the legislation or administrative provisions of the Member State in which the accident takes place. In this regard, Member States may take into account inter alia, whether the injury requires hospital care.”

The 2011 supplementary UtDA introduced provisions in respect of “significant personal injury”. It added, to the exclusions from the agreement, circumstances where the applicant claimed compensation in respect of damage to property arising out of the use of an unidentified vehicle, unless a claim for “significant personal injury” had been paid by the MIB in respect of the same event, and the property damage loss exceeded the specified excess. The supplementary agreement defined “significant personal injury” as meaning “bodily injury resulting in death or for which 4 days or more of consecutive in-patient treatment was given in hospital, the treatment commencing within thirty days of the accident….”

Mr Hyam did not suggest that the new definition was objectionable. His submissions relate to the previous form of agreement.

It is to be remembered that this is not a provision which relates directly to compensation for personal injury. Compensation for “significant personal injury” only provides the threshold for compensation for property damage in untraced driver cases, and does so because of the obvious risk of fraudulent claims for property damage in respect of a driver, said to be unidentified or untraceable, who does not exist. Significant personal injury is seen as good evidence that the accident genuinely occurred and had some severity.

I accept Mr Palmer’s submission that the fact of amendment could not show that the previous versions were in some way incompatible with the Directive. Rather they reflected changes in medical understanding, treatment and duration of hospital stay. I accept Mr Worthington submission that the scope of this exception was left by Article 10 (3) of the Directive to the discretion of Member States. Nothing in the previous provision warrants a contention that they were incompatible with the Directive. There is nothing in this point.

The Uninsured Driver’s Agreement, UDA, of July 2015, replacing the earlier one of 1999, contained an exclusion in respect of death, bodily injury or damage to property caused by or in the course of an act of terrorism within the meaning of s1 of the Terrorism Act of 2000. It was specifically amended by the Supplemental Agreement of 2017. But the removal of that exclusion only applies to events occurring after 1 March 2017. The 2003 UDtA, in clause 5(1)(d), contained a similar exclusion. That exclusion does not appear in the new UtDA of January 2017. However, that agreement which came into force on 1 March 2017, does not apply to accidents occurring between 2003 and 1 March 2017.

Mr Hyam submitted that that exclusion had been unlawful, and that although remedied for the future, had not been remedied in relation to any terrorist exclusions occurring before that date. Mr Palmer did not contest that the exclusion was not compatible with the Directive.

Mr Worthington cautioned that the issue was not clear-cut. He submitted that, even on an un-attenuated Vnuk approach, the use of a vehicle for an act of terrorism was not likely to be consistent with the normal function of that vehicle. He may be right about that, and I express no concluded view, although it does not seem to me in principle to be different from an exclusion which related to “deliberate damage” or “road rage”.

Either way, submitted Mr Worthington, the issue was likely to be academic because there was no evidence of injury or damage being caused by an act of terrorism, which would otherwise be within the scope of the agreements, before 1 March 2017. Mr Palmer submitted that if the agreements were applied to injury caused by an act of terrorism before 1 March 2017, and so excluded liability, Francovich damages would be an appropriate remedy were the conditions met. Although Mr Hyam suggested that was inadequate.

I am entirely satisfied that that is the appropriate remedy. I do not see that retrospective legislative change is workable or necessary. Nor do I see that any declaration is required: the issue between Mr Palmer and Mr Worthington could take some time to resolve, with little present value that I can see.

Mr Palmer had contended that there could be no remedy against the MIB to resolve the incompatibility, including by way of avoiding the provisions of the agreements before their amendment. Any action would have to have been against the defendant in respect of governmental failures. That is not now so clear cut. The effect of Farrell v Whitty on the MIB, as an emanation of the state, could only be an issue in this case in relation to the “terrorism” exclusion in the earlier agreements, because that is the only area in which a provision of the agreements has been found incompatible with Community law. Whether the MIB is an emanation of the state, and what effect that would have on past agreements, is a large issue to consider in circumstances where the agreements have now been amended in the relevant respect, there is no evidence of an accident to which the terrorism exclusion in the unamended agreements could apply, which means that the issue is very unlikely to be resolved at all in this context. Were it to arise, the issue would then be resolved. At present, it appears likely to be wholly academic in the context of this case.

Certainly, whether the MIB is an emanation of the state may be a lively issue, but is one to be pursued where an actual claim depends on it. No point was taken in relation to the standing of RoadPeace to raise the issues which it has raised. But that does not mean that interesting issues, which probably have no practical application should be pursued by it, especially as such issues can be pursued by affected litigants when they do have practical application.

I grant permission for those grounds pursued before me which had not already received permission. I do so because it would make any further proceedings less procedurally complicated, without concluding that all of them are reasonably arguable.

I have concluded that a declaration should be made in respect of the Vnuk decision. If the parties cannot agree its terms, I will receive written submissions. I will receive written submissions in the first place on whether a timetable and if so in what terms should be set.

Except for those points, the claim is dismissed.