Lewis v Motor Insurers Bureau: a five-month wonder?

Date: 
04 October 2018

The High Court rules that the MIB is an emanation of the state. Nicholas Bevan reports.

  • Lewis v MIB : provides a valuable new direct route to redress against the MIB for motor accident victims wrongly excluded from the compensatory guarantee.
  • Accordingly, motor accident victims injured in private parking areas or in private cul de sacs can now recover their compensatory entitlement from the MIB direct.
  • However, after Brexit, these important principles, which enable ordinary citizens to challenge the longstanding abuses of power and institutional bias in this area, will be lost.

In Lewis v MIB [2018] EWHC 2376 (QB), [2018] All ER (D) 53 (Sep) Mr Justice Soole ruled that the Motor Insurers’ Bureau (MIB) was liable under European law to compensate a man who was struck down and seriously injured by an uninsured motorist in a field. In doing so, he broke with a time honoured but misconceived belief that the MIB’s compensatory role is restricted to the contractual obligations with the Secretary of State for Transport.

The uninsured driver, Mr Tindale, was an elderly farmer who believed that Mr Lewis and two others were attempting to steal scrap metal from his farm. He decided to give chase down a country lane in his Nissan Terrano 4 x 4. When the suspects fled into an adjoining field he drove his vehicle through a barbed wire fence in hot pursuit. Unfortunately, the Nissan struck Mr Lewis in the field, breaking his neck.

The MIB is a consortium exclusively owned and managed by every authorised UK based motor insurer. Membership of the MIB is imposed as a condition precedent of an insurer’s authorised status. One of its principal roles is to serve as a compensatory guarantee of last resort for victims of uninsured and untraced drivers. This activity is funded by a levy imposed on every authorised motor insurer; ultimately, this is recouped through motor insurance premiums. The MIB operates two separate compensatory schemes: one for victims of uninsured but identified drivers, the other for unidentified drivers where no insurer can be traced.

The MIB rejected Mr Lewis’s claim under the Uninsured Drivers Agreement 1999 (UDA 1999) on the basis that this private law agreement with the Secretary of State for Transport restricts its potential liability to incidents that occur on a road or other public places; not privately-owned fields. The terms of the UDA 1999 confine the MIB’s compensatory role to incidents that conform to a ‘relevant liability’. Clause 1 defines this ‘as a liability in respect of which a contract of insurance must be in force to comply with Part VI of the 1998 Act’. This refers to the Road Traffic Act 1988, which by virtue of s 143 (that prescribes the duty to take out third party cover) and s 145 (that defines the scope of third party cover) restrict the geographic scope of the UK’s compulsory motor insurance regime to ‘the use of the vehicle on a road or other public place’.

Part VI of the 1988 Act, as well the various MIB agreements, are all supposed to fully implement the obligations imposed on the UK under Directive 2009/103/EC on Motor Insurance (the Directive). This is still a work in progress. The UDA 1999 was replaced in 2015 and later revised again in 2017 after various legal challenges, in an attempt to bring the scheme closer into alignment with European law by removing various unlawful exclusions and restrictions of MIB liability (see 'On the Right Road?' NLJ , February 2013 and 'A call for (more) reform', NLJ ,17 July 2015).

Implementation

Unfortunately, the UK has failed to fully implement the Directive’s geographic scope. In R (on the application of RoadPeace) v Secretary of State for Transport [2018] 1 WLR 1293, [2017] All ER (D) 74 (Nov) Mr Justice Ouseley declared that Part VI of the 1988 Act as well as the EC (Rights Against Insurers) Regulations 2002 and the MIB agreements (uninsured and untraced) are all incompatible with the Directive because they exclude private land. The government’s own consultation on Vnuk in 2016 admitted as much but it has failed to act.

Articles 1 and 3 of the Directive (that define the scope of the compulsory motor insurance requirement), as interpreted by Vnuk v Zavarovalnica (Case C-162/13) [2016] RTR 10 [para 59] Andrade v Salvador & ors (Case C-514/16) 28 November 2017 at [34]; also Torreiro v AIG Europe Ltd (Case C-334/16) 20 December 2017 at [28] make it clear that the insurance obligation extends to the entire territory of each member state: including privately owned fields. Similarly, Art 10 of the Directive (which sets out the obligation of the authorised compensating body for victims of unidentified and uninsured vehicles and which in the UK is discharged by the MIB) inherits the same geographic scope as it intended to dovetail its compensatory guarantee with Art 3’s provision for civil liability insurance.

On a preliminary issue, Soole J decided that it was not possible to reconcile the wording of the 1988 Act with the Directive by a Marleasing style purposive construction that extended ss 143 and 145 to cover private land. He gave three reasons. First, he thought that this would go against the main thrust of the Act’s legislative intention; second, because it raised certain (unspecified) policy ramifications that the court was ill equipped to consider, and finally because he thought it would impose retrospective criminal liability. In the author’s opinion none of these justifications bear close scrutiny.

Surely the main thrust of Part VI of the 1988 Act is to guarantee the compensatory entitlement of motor accident victims through compulsory insurance. It’s precise geographic scope is a detail; hardly a raison d’etre. Notable by its absence in the judgment is any mention of Bernhard Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Walshut eV:  Case C-397/01 to C-403/01; [2004] ECR 1-8835 which has moved the art of consistent construction on from Marleasing. At para 113 Pfeiffer requires national courts to apply a legal presumption whenever a national implementing measure is interpreted. They are obliged to assume that the national transposition is intended to ‘fulfil entirely’ the directives’ legislative objectives. Arguably this overrides Lord Clyde’s reasoning in Clarke v General Accident Fire and Life Assurance Corporation plc [1998] 1 WLR 1647, p.1659D, that clearly influenced the learned judge. On the second point, the author struggles to discern any insuperable policy issues that could justify the court’s inaction here; none were raised in the government’s own consultation on Vnuk in 2016. As to the risk of imposing criminal penalties retrospectivity, one suspects that could have been avoided, with little difficulty, by offering appropriate ‘notional wording’ to differentiate between s 143’s the civil and criminal law implications. A similar approach was adopted for s 151 (8) of the 1988 Act by Lord Aikens in his judgment in Churchill v Wilkinson [2012] EWCA Civ 1166.

Another curious feature of this judgment is that it does not attempt to apply a consistent construction of the UDA 1999 itself. The MIB Agreements are clearly part of our national rules and laws implementing the directive and so it follows that they are also subject to the European law doctrine of consistent construction. (See ‘On the right road? (Part III)’, NLJ, 15 February 2013 and ‘State liability: betwixt and between Brexit (Part 2)’, NLJ, 3 November 2017.

Central issues

Happily, the judgment rests on firmer ground on two central issues. The first involved an analysis of Art 10 of the Directive and examined whether its terms are sufficiently precise and unconditional to qualify for direct effect: so as to enable private individuals to invoke its terms against the state or its emanations (the direct effect issue), per Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53 at [23-25]. The second issue looked to the MIB and tested whether its compensatory role was sufficiently closely associated with the government to be caught by this principle (the emanation of the state issue). This obliges the court to test the MIB’s role and powers against the three criteria set out at paras 18 and 20 in Foster v British Gas Plc (Case C-188/89) [1991] 1 QB 405, [1990] 3 All ER 897.

On the first issue, in keeping with Mr Justice Flaux’s finding in Byrne v MIB [2009] QB 66, [2008] 4 All ER 476 the judge held that Art 10 satisfied the preconditions of precision and unconditionality and so was capable of direct effect. The declarative effect of the Vnuk and Torreiro rulings, that post-dated Mr Lewis’s injury, deliver the required objective standard of clarity.

As to the second issue, Soole J departed from Flaux J’s earlier finding in Byrne that the MIB was not an emanation of the state (see Putting Wrongs to Rights (Part 2), NLJ, 3 June 2016 which also criticises Flaux J’s findings on this point). Since when the Court of Justice’s ruling in Farrell v Whitty (No 2) (Case C-413/15) [2018] 3 WLR 285 has effectively superseded Byrne’s shortcomings on this point.

In Farrell (No 2) the Irish Republic sought guidance on the correct application of Foster to help it determine whether the Irish Republic’s MIB (MIBI) was an emanation of the state and thus subject to the direct effect of the Directive.

At paras 27 and 28 the Court of Justice reiterated that it is not essential that all three of the Foster characteristics (set out in para 20 of the Foster judgment) are established. It ruled that it was sufficient to prove that a body, such as the MIBI, was discharging a public service on the state’s behalf and that it enjoyed special powers for that purpose beyond those exercised by private individuals. So although there is abundant evidence of the UK government’s control over the MIB’s compensatory role, it is not necessary to establish this, if the other criteria are met.

In Farrell (No. 2) the Court of Justice departed from convention to offer what appears to be factual findings. It ruled that the Irish statutory provision that requires every motor insurer to be a member of the MIBI (which appears to be based on s 95(2) of the RTA 1988) amounts to a special power [para 40]. It also ruled that ‘a compensation body such as MIBI’ satisfied the criteria for designation as an emanation of the state at paras 38 to 41.

As for Mr Lewis’s claim, it was accepted that the MIBI’s inception, funding, management and compensatory role faithfully mirror the MIB’s, in all essential respects. Indeed, the MIB was unable to offer any reason in law or fact that could distinguish the position of the MIBI from the MIB in this context. It was, therefore, almost inevitable that Soole J should conclude, as he did, that the MIB was bound by the direct effect of the Directive’s geographic scope; making it liable to compensate Mr Lewis for his injury in the field. This outcome was anticipated here in ‘State liability: betwixt and between Brexit’, NLJ , 27 October and 3 November 2017.

The MIB will probably appeal this decision. However, in this author’s view, and absent any new evidence on the MIB’s status as an emanation of the state, it seems destined to fail. It appears incontestable that the MIB does provide a public service. As to the other Foster criteria: in the unlikely event that the MIB were able to somehow establish (Farrell (no. 2) notwithstanding) that it possesses no special powers, it would not be hard to establish that the government actively exerts a very direct control over its operations: as the recent reforms to the MIB agreements so clearly demonstrate.

Redress

This ruling provides a valuable new direct route to redress against the MIB for motor accident victims wrongly excluded from the compensatory guarantee that ought to be vouchsafed under the 1988 Act and the MIB Agreements because they fall foul of a geographic restriction from the 1930s. Accordingly, motor accident victims injured in private parking areas or in private cul de sacs can now recover their compensatory entitlement from the MIB direct, even though these areas ostensibly fall outside the scope of the statutory and extra-statutory schemes.

The direct effect of Art 10 against the MIB is also pertinent to other lacunae in the UK’s transposition of the Directive. Some obvious examples are: accidents caused by vehicles that are neither intended nor adapted for road use, such as certain quad bikes, mobility scooters, rally cars or off-road dumpsters. Another class of accidents are those caused by a mechanical defect (s 145 of the 1988 Act only requires the personal liability of the user to be covered). Furthermore, in the USA we are witnessing a spate of accidents caused by the combination of faulty automated systems and inadequate user supervision. We are told that these will shortly be introduced in the UK. These semi-automated systems would not qualify for the new direct right conferred by the Automated and Electric Vehicles Act 2018. Direct effect could even be invoked to challenge various unjust restrictions in the MIB Agreements, where they conflict with the minimum standard of protection mandated by the Directive.

Comment

Whether the MIBs newly extended liability is established independently of its private law agreements with the Secretary of State by virtue of Art 10’s direct effect (applying Foster) or through a European law consistent construction of the 1988 Act and/or the agreements themselves (applying Pfeiffer) these remedies are all predicated on the primacy of European law.  After Brexit, these important principles, that enable ordinary citizens to challenge the longstanding abuses of power and institutional bias in this area, will be lost.  Victims falling foul of these arbitrarily derived exclusions and exceptions will be left without redress.

Claimant lawyers have been slow to invoke their client’s proper entitlement under European law. They now have only a few months in which to do so. The MIB will be relieved to know that it is likely to be saved by the Brexit bell. 

Dr Nicholas Bevan, legal consultant & trainer ( mail@nicholasbevan.com; www.nicholasbevan.com) .

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