Delaney v Secretary of State for Transport [2015] EWCA Civ 172

Posted by Malcolm Johnson on

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In November 2006, Sean Delaney was seriously injured in a car accident. A substantial quantity of cannabis was found in the vehicle in which he and the driver, Mr Pickett were travelling. Mr Delaney brought an action against Mr Pickett and his insurers, Tradewise who promptly obtained a court order that they were entitled to avoid the policy pursuant to section 152(2) of the Road Traffic Act 1988. Their grounds were that their insured had failed to notify them that he suffered from diabetes and depression, and that he was a habitual user of cannabis. 

Tradewise’s liability then passed into the scope of the MIB’s 1999 Uninsured Drivers Agreement. They now stood in the shoes of the MIB in defending the claim brought by Mr Delaney and they invoked clause 6.1(e)(iii) of the Agreement against him on the grounds that he knew or ought to have known that the car was being used in the course or furtherance of crime, namely to transport cannabis for the purposes of drug-dealing. At trial, Mr Delaney’s claim failed on the Clause 6.1(e)(iii) point as well as the public policy defence of ex turpi causa non oritur actio. He appealed to the Court of Appeal in Delaney v Pickett [2011] EWCA Civ 1532 but although he succeeded in overturning the judge’s decision on the ex turpi causa defence, he failed in relation to Clause 6.1(e)(iii).   

However, one of the judges in the Court of Appeal, Lord Justice Richards noted in his judgment that no reliance had been placed by Mr Delaney on the incompatibility of Clause 6.1(e)(iii) with European Union Motor Insurance Directives. A belated attempt was made to rely on them in an application for permission to appeal to the Supreme Court but permission was refused.

Mr Delaney subsequently brought a claim against the Secretary of State for Transport, contending that (1) the exclusion in clause 6.1(e)(iii) was incompatible with EU Directives, and the United Kingdom was thereby in breach of EU law, and (2) that the breach was sufficiently serious to give rise to liability to damages on the principles in Case C-6/90, Francovich v Italy [1991] ECR I-53.

At first instance, Mr Justice Jay found for Mr Delaney on these issues, and he gave permission to the government to appeal.  In the Court of Appeal, Lord Justice Richards (with whom Lord Justice Kitchin and Lord Justice Sales agreed) considered the three main European Union Directives, which were 72/166/EEC 84/5/EEC and 90/232/EEC. These Directives had (subsequent to Mr Delaney’s accident) been consolidated into Directive 2009/103/EC. The Second Directive, 84/5/EEC gave Member States the possibility of applying certain limited exclusions as regards the payment of compensation in uninsured drivers’ cases. Article 1(4) of Directive 84/5/EEC set out those limited exclusions.

However caselaw from the European Court of Justice had strictly limited the exclusions. Richards LJ considered three key cases:-

  • Case C-129/94, Ruiz Bernaldez [1996] ECR I-1847 Case C-537/03
  • Candolin v Vahinkovakuutusosakeyhtio Pohjola [2005] 3 CMLR 17
  • Case C-356/05, Farrell v Whitty [2007] CMLR 46

Richards LJ said that on the natural reading of Article 1(4) of the Second Directive, the only permitted exclusions were those set out expressly in the Article itself. It was a general principle of EU law, specifically applied in the context of these Directives by the Court in Candolin that derogations from a general rule were to be strictly construed.Consequently Richards LJ held that Clause 6.1(e)(iii) of the 1999 Uninsured Drivers' Agreement was incompatible with Article 1(4) of the Directive 84/5/EEC and that the United Kingdom was thereby in breach of its obligations under EU law.

This left a second issue, which was whether the breach was sufficiently serious to give rise to liability.  Richards LJ ran through the factors identified by Lord Clyde in the case of R v Secretary of State for Transport, ex parte Factortame Ltd (No.5) [1993] 3 CMLR 597, [2000] 1 AC 524.

One of these was the degree of excusability of the error made by the government in introducing a clause that breached EU law. The trial judge had said that there was a conspicuous paucity of any evidence as to how Clause 6.1(e)(iii) of had been brought into force. In relation to the other Factortame factors, the protection of victims of road traffic accidents was an important principle worthy of recognition. The Claimant had a substantial claim for damages which Clause 6.1(e)(iii) had precluded. The implementation of this particular Directive left little margin for discretion open to any Member State. The language of Directive 84/5/EEC was clear enough and the case of Ruiz Bernaldez, coupled with a basic understanding of EU law principles, ought to have led any reasonable official acting with the resources of the government to conclude that the insertion of Clause 6.1(e)(iii) could not lawfully be achieved. Consequently Richards LJ would dismiss the government’s appeal.

It seems that the Men in Black are still mounting a spirited defence in their never ending war against the aliens of the planet, European Union, but this decision of the Court of Appeal demonstrates their and the government’s vulnerability to a challenge under European law. The restrictive meaning of Clause 6(1) of the 1988 MIB Uninsured Drivers Agreement was raised 14 years ago by the House of Lords in White v. White [2001] 1 WLR 481. There the House of Lords simply imported the plain meaning of Article 1(4) of Directive 84/5/EEC (the meaning of a passenger’s knowledge in relation to an uninsured vehicle) into the Agreement itself. Since that time, other cases have illustrated the potential incompatibility of both Uninsured and Untraced Drivers Agreements. Byrne (A Minor) v The Motor Insurers Bureau and the Secretary Of State for Transport [2008] EWCA Civ 574 led to substantial changes to the limitation provisions in the 2003 Untraced Drivers Agreement. More recently we have the case of Vnuk v Zavarolvalnica Triglas D.D CJEU (Third Chamber) 4th September 2014 C-162/13 which calls into question the compulsory insurance exception built into both the Untraced and Uninsured Agreements that excludes any accident caused by a motor vehicle not intended or adapted for the road, on private land. We are still awaiting government proposals for a new consolidated MIB Agreement. It will be interesting to see whether the MIB and the government accepts the full force of EU legislation.

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Malcolm is an Senior Associate in our London office, with nearly twenty years' experience.

Malcolm Johnson
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