There has been much discussion about the legal implications of the recent case of Delaney v Secretary of State for Transport. 

This case involved Mr Delaney, who on 25 November 2006 was the front seat passenger of a vehicle driven by Shane Pickett when he suffered serious injuries in a road traffic accident due to the negligence of Mr Pickett. Delaney was found with 240g of cannabis under his jacket and Pickett was found with a smaller amount in his sock. Delaney brought a claim against Pickett’s insurers, Tradewise, who avoided the policy pursuant to section 152(2) of the Road Traffic Act 1988 on the grounds of non-disclosure of material facts and misrepresentation.  Tradewise standing in the place of the Motor Insurers Bureau then became the Article 75 insurers liable to meet any valid claim under the MIB Uninsured Drivers Agreement. However, when Delaney commenced court proceedings against Pickett and Tradewise, both claims were dismissed.  It was held that Delaney’s claim was barred on grounds of public policy and Delaney knew or ought to have known that the vehicle was being used in the course or furtherance of crime, and therefore clause 6(1)(e)(iii) of the Uninsured Driver’s Agreement 1999 was applicable. Delaney appealed and his claim was dismissed.  

The recent case involved a further claim by Delaney for damages arising as a result of the Government being in breach of Article 1(4) of EU Directive 84/85, which set out the obligations of EU governments to arrange for an insurer of last resort to pay compensation to third party road traffic accident victims. Delaney argued that clause 6(1)(e)(iii) of the MIB agreement was not one of the permitted exceptions and the exclusion of liability under that clause was in breach of the UK’s obligations under EU law. Delaney argued that the breach was sufficiently serious to entitle him to Francovich damages under EU law principles.

Mr Justice Jay held that EU law imposes obligations on Member States in respect of damage caused by vehicles in relation to which a valid policy of insurance was taken out, but where that policy was subsequently avoided by the insurer and requires Member States to ensure that compensation is paid in all circumstances save those expressly set out as exclusions within the text of these provisions.The exception in clause 6(1) (e)(iii) was not consistent with and therefore does undermine the specific exceptions permitted by EU law.  He held that it followed that the UK, in the legal personification of the Secretary of State for Transport, was in plain breach of EU law and the question of liability to pay compensation on Francovich principles therefore arose.  The Judge concluded that the Government was guilty of serious breach of Community law where its room for manoeuvre under the Directives was closely circumscribed.  It did not have a wide discretion.  Its obligations under the Directives and their relevant confines were quite clear – and in the absence of knowing the actual reason for this policy decision - the best that may be said is that the Secretary of State decided to run the risk, which was significant, knowing of its existence.  The Government was therefore liable to Delaney for any loss suffered as a consequence of this breach.

This case highlights that even where exceptions to liability under the MIB agreements have been applied in the UK previously, there are only certain limited exceptions permitted under EU law and if a road traffic accident victim is unable to obtain compensation from the MIB because of an exception which was not sanctioned by the EU, then they may have a remedy against the UK government.