Car crash Euro-damages against government upheld by CA

22 March 2015 by David Hart KC

Delaney v. Secretary of State for Transport, Court of Appeal, 9 March 2015 – read judgment 

The Court of Appeal has recently upheld the decision of Jay J here that a drug-dealer was entitled to compensation against the Government for injuries in a car accident, even though at the time he and the negligent driver both had drugs on them. 

The Government was involved because the driver’s insurance was invalidated because of his cannabis use, and because the Government had not made provision for these liabilities to be picked up by either by insurers or the Motor Insurers Bureau (MIB), as it should have done under EU Law.

Mr Delaney therefore recovered state liability damages – which lawyers know as Francovich damages – from the Government.

I set out the full background in my earlier post here. Mr Delany’s proceedings against the driver had been dismissed by an earlier decision of the CA because the Uninsured Drivers Agreement between the MIB and the Secretary of State excluded cases where the vehicle was being used in the course or furtherance of a crime.

This claim arose because Mr Delaney said that the SoS had wrongly excluded liability via cl.6(3)(iii) as part of domestic law. The EU rule, he said, (contained in Article 1(4) of Directive 84/5/EEC, known as the Second Directive) contained no such exclusion, and therefore he had lost out because of the SoS’s failure to comply with EU law.

The CA, like Jay J, swiftly dismissed the SoS’s argument that cl.6(3)(iii) could be read compatibly with the EU rule. Article 1(4) contained a full list of possible exclusions (e.g. where the passenger knew that the vehicle was uninsured) and did not allow the member state to exclude other cases. This answer emerged from a full review of the European Court of Justice cases, and the CA gave the SoS’s submissions short shrift at [33]. Derogations from rules in EU law are to be interpreted strictly (otherwise the derogation would tend to swallow the rule) and so there was no room for the contention that the SoS could devise wider derogations as he had sought to do so.

One senses that the real argument was about the next issue, namely whether the SoS’s breach of EU law was sufficiently serious to give rise to a breach of EU law. Hence the rather desperate arguments to find some ambiguity in the Directive or in the cases, so that it could be argued that it was an unfortunate misinterpretation of EU requirements, rather than a wilful failure to follow what the European law says (perish the thought).

State liability or Francovich damages arise, where

(a) the EU provision must be intended to confer rights on individuals,

(b) the breach by the member state must be ‘sufficiently serious”, and

(c) there must be a direct causal link between the breach and the damage.

Here, as in the court below, the issue in this case was whether the breach was “sufficiently serious”. The cases seek to draw a distinction between instances where the rule conferred a wide margin of discretion on member states when implementing EU policies, and those where the margin was constrained by the terms of the EU rule. This in turn depends on how clear or precise the underlying EU rule was.

The principles underlying the exercise of deciding seriousness of breach were not in issue. It was multifactorial, with the key factors being (a) the importance of the principle of EU law; (b) the extent of the margin of discretion and the clarity of the provisions in issue; (c) the degree of excusability of the error; (d) the state of mind of the infringer; and (e) the attitude of the Commission to the proposal to be implemented.

One case featured in the argument both before Jay J and in the CA, an asylum Reception Directive case, Negassi [2013] EWCA Civ 15, where the CA held that the evaluation of the seriousness was quite finely balanced. It bore in mind that the breach was not deliberate, cynical or egregious; it was the result of a misunderstanding of new provisions in an area of recent EU concern. Hence there the damages claimed failed.

The current case was however different. The CA agreed with the judge in deciding that this was a “little or no margin of discretion” case.  It was also clear and obvious from the CJEU case law that the exclusions were confined to those expressly set out in the directive.

Jay J had decided that the SoS was guilty of a serious breach in circumstances where its room for manoeuvre under the Directives was closely circumscribed. Its obligations under the Directives were quite clear, and, in the absence of knowing the actual reason for this decision by the Department (oddly the relevant documents do not seem to have survived), the best that may be said is that the Defendant decided to run the risk, which was significant, knowing of its existence.

The CA endorsed all of these conclusions. It also pointed out that it would have been unwise in the extreme to introduce an additional exclusion without taking legal advice: [57].

One additional point arose. The SoS argued that it was for the CA to carry out the balancing exercise itself, and its task was not simply about reviewing the decision of the judge; it was said that this was the SoS’s approach in all Francovich damages cases. The CA ducked this one for the moment, wishing to hear fuller submissions on it in a case where it mattered. It doubted it made any practical difference in the generality of cases.

Conclusion

An unsurprising conclusion, but an important reminder to government that it cannot play fast and loose with EU obligations, however much it may not like them.

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