Delaney -v- Secretary of State for Transport (2015) EWCA Civ 172

In a unanimous ruling, the Court of Appeal has upheld a decision that the UK had incorrectly implemented an EU Motor Insurance Directive by including the so called ‘crime’ exception clause in the MIB Uninsured Drivers’ Agreement 1999. The UK Government is therefore in breach of EU Law.

Clause 6.1(e) (iii) of the Uninsured Drivers Agreement provides that the Motor Insurers’ Bureau (MIB) can exclude liability to a claimant injured in a road traffic accident where the claimant knew or ought to have known that the vehicle was being used in the course or furtherance of a crime.  This crime exception has now been held to be in breach of the UK’s obligations under Directive 72/166, Directive 84/5 and Directive 90/232. The UK Government will need to remedy this breach.  

Facts of the case

The claimant, Delaney, was injured in a road traffic accident in 2006, caused by the negligence of his driver. Emergency services found a significant amount of cannabis in the vehicle. The driver’s insurer voided the policy, and so the claim fell under the Uninsured Drivers Agreement, but the insurer remained on risk in place of the MIB under Article 75. At first instance, the insurer successfully relied on the crime exception clause, on the basis that the claimant and defendant were transporting cannabis for the purpose of drug dealing. The claimant’s claim failed and this was upheld on appeal. Interestingly the claimant was refused permission to appeal to the Supreme Court.

The claimant subsequently brought these proceedings against the Secretary of State, on the basis that the crime exception was a breach of EU Law. The claimant was successful at first instance, and this decision has now been upheld by the Court of Appeal.

The decision

The Court of Appeal judgment, led by Lord Justice Richards examined the relevant Directives and addressed two issues:

  1. Was the exclusion clause incompatible with the directives?
  2. Was the breach sufficiently serious to give rise to liability?

The court found that under strict construction, the Directives included an exhaustive list of exclusions for which member states could exclude liability. Knowledge that the vehicle in which the claimant was traveling was being used in the course or furtherance of a crime was not one of the permitted exclusions. The only exclusions to liability allowed by the Directives are:

  1. if the claimant knew that the vehicle was uninsured;
  2. restrictions on the level of property damage payable when caused by an unidentified vehicle; and
  3. imposition of an excess of €500 in property damage claims for which the claimant may be responsible.

The inclusion of the crime exception ran counter to the aim of protecting victims, as had previously been made clear in European case law. The case of Ruiz Bernandez (1996) held that a member state cannot exclude liability for property damage caused by an intoxicated driver. This principle was extended further in the case of Candolin (2005), in which the passengers knew of the driver’s intoxication and were intoxicated themselves.

Allowing member states to include their own exclusions undermined the aim of avoiding disparities of treatment between different member states thereby affecting the right of free movement.

In addition, if the insurer had been unable to void the policy, then they would not have access to an equivalent crime exception and it would make little sense that issues of policy indemnity could affect a claimant’s right to compensation in this way.

As to whether the breach was sufficiently serious to give rise to liability, the court looked to the implementation of the crime exception. It appeared to the court that clause 6.1(e) (iii) had no corresponding provision in the original Agreement in 1988 and there was no evidence as to why it was subsequently included, without consultation in the updated 1999 Agreement. This, along with a lack of consideration of the relevant case law, and subsequent lack of any excuse for the breach, contributed to the courts view that the breach was sufficiently serious to give rise to liability.

The appeal was dismissed and the claimant awarded damages for the UK Government’s breach of EU Law, otherwise known as Francovich damages.

The Court of Appeal refused permission to appeal, but the Secretary of State still has the option of applying to the Supreme Court directly. 

Commentary

As a result of this decision, the crime exception under clause 6.1(e) (iii) of the Uninsured Drivers Agreement 1999 will no longer be a valid defence to either Article 75 Insurers or the MIB. The UK Government will need to amend the Uninsured Drivers’ Agreement to rectify the breach.

Anticipating that this outcome would raise some eyebrows, Mr Justice Jay at first instance commented that ‘many readers may be wondering how it comes about that a drug dealer is entitled to compensation against Her Majesty’s Government in circumstances where he was injured during the course of a criminal joint enterprise. The understandable reaction might be “there must be some rule of public policy, reflecting public revulsion which bars such a claim”.  The short answer is that there is not’.

It remains to be seen whether this ruling will result in earlier decisions being revisited by claimants who feel that they have been denied justice, but regardless, the ruling will undoubtedly be unwelcome news for both the Department of Transport and the Motor Insurers’ Bureau - who are likely to see a substantial increase in these types of claims.