The recent judgment in the case of Colley v Shuker [2020] EWHC 3433 (QB) has added to the scope of claims that can be brought against the Motor Insurers’ Bureau (MIB), increasing its potential liabilities in a hitherto uncharted direction.
The facts in Colley were not in dispute. On 27 March 2015, the Claimant (C) was a passenger in a vehicle driven by the First Defendant (D1) on a public road. There was an accident, caused by D1’s negligence and C sustained very serious injuries, which rendered him an incomplete tetraplegic. D1 was convicted of causing serious injury by dangerous driving. C knew that D1 did not have a valid driving licence and was not insured to drive the vehicle. The vehicle was insured by UK Insurance Limited (D2), but the Policyholder was D1’s father; D1 was not a named driver.
D2 obtained a declaration against the Policyholder under the former 152(2) of the Road Traffic Act 1988 ("the RTA"), that the Insurer was entitled to avoid the Policy on the grounds of material misrepresentation. Due to legislative changes on 1 November 2019, it is no longer possible to obtain such a declaration.
C sought compensation for his injuries, commencing proceedings against D1 and D2. Judgment was obtained against D1 but, due to the declaration, proceedings against D2 were struck out as the insurer held no statutory liability. It is worth bearing in mind that if the same claim were pursued today, D2 would hold an RTA liability.
The claim was then pursued against the MIB and, in the event that the claim failed against the MIB, the Secretary of State for Transport, based on a “Francovich” claim for its failure to properly implement Directive 2009/103/EC ("the 2009 Directive"). The liability of the MIB was tried as a preliminary issue, with the claim stayed against the Secretary of State, pending determination.
The preliminary issue required the determination of two main issues:
- Whether the MIB had any liability to compensate the Claimant in the circumstances of this case, under Article 10 of the 2009 Directive; and
- If yes, whether the MIB had a defence under Article 10(2) of the 2009 Directive – or the “passenger knowledge” defence.
On the first issue, it was broadly accepted that the MIB is an “emanation of the state”, with the court being assisted by the previous decision of the Court of Appeal in Motor Insurers Bureau v Lewis [2019] EWCA Civ 909, known as Lewis v Tindale at first instance (“Lewis”). In Lewis, the court held that the MIB, as an emanation of the state, was still obliged to compensate the claimant who was injured in an off-road accident (which therefore did not fall within the compulsory insurance requirements of the RTA). The Directives required insurance in this scenario, but UK law did not require it - so UK law was incompatible with the requirements of the Directive and accordingly, as an emanation of the state, the MIB was obliged to compensate.
However, the MIB denied that it was an “emanation of the state” in the circumstances of this case. Under Article 10 of the 2009 Directive, the MIB’s obligation to compensate is limited to circumstances where the general requirement for insurance under Article 3 of the 2009 Directive “has not been satisfied”. The MIB contended that this only extended to circumstances where the vehicle is either unidentified or uninsured. As D1’s father had taken out a policy of insurance with D2, the MIB contended the obligation to insure had been satisfied, such that it had no obligation to compensate in this scenario.
The court did not accept this argument and agreed with the Climant, namely that the MIB’s obligation extends to a scenario where a vehicle is insured, but where the law of the Member State allows the insurer to avoid liability. The court therefore held that the MIB, as an emanation of the state, was liable to compensate the Claimant.
The second issue, the “passenger knowledge” exception, was then considered. Article 10(2) of the 2009 Directive provides:
"Member States may, however, exclude the payment of compensation by that body in respect of persons who voluntarily entered the vehicle which caused the damage or injury when the body can prove that they knew it was uninsured".
Could the MIB rely on this exception to avoid liability? The judge found that the MIB could not, saying:
“In my judgment, the wording of the exclusion in the second sub-paragraph of Article 10(2) is a reference to the vehicle being uninsured and not to the driver being uninsured. That comes from the syntax of Article 10(2), which refers to the knowledge that “it” is uninsured. The word “it” in the context of the sentence means “the vehicle”, whereas the word “they” refers to the drivers. The exclusion is therefore where there is knowledge that the vehicle is uninsured rather than the driver not being a named or an insured driver.”
While the logic of this interpretation of the wording can be followed, it requires the adoption of a position that a vehicle is “insured” if a policy of insurance relating to it exists, irrespective of the terms of the policy and who is covered by the policy. This does not sit particularly well with a scenario in which the C passenger knows that the vehicle being driven by D has no insurance, but in fact C has insurance on another vehicle which permits him to drive any vehicle.
Reference to the CJEU was refused. Any such reference would have to have been made before the expiry of the Transitional Period on 31 December 2020, but the judge did not consider that the test for a reference was satisfied and the imminent expiry date did not have any bearing on the relevant test.
Following the expiry of the Transitional Period, references to the CJEU are, of course, no longer possible. Nevertheless, pending further domestic legislative changes, English courts are currently still required to interpret English legislation by reference to EU law. It is possible, therefore, that we may yet see further extensions to the liability of the MIB.
