Byrne (a minor) v The Motor Insurers Bureau Secretary of State for Transport

Article 1(4) of the Second Motor Insurance Directive requires compensation arrangements for victims of unidentified or uninsured vehicles to provide protection equivalent to, and as effective as, that available under national law to victims of insured drivers. A limitation period for claims against the compensation body must therefore be no less favourable than the corresponding limitation period for a tort claim against a traced driver. The Untraced Drivers Agreement’s absolute three-year period failed that requirement when compared with the protection afforded to minors by section 28 of the Limitation Act 1980.

The Directive could have direct effect in principle because the United Kingdom had fully exercised its discretion by designating the MIB. However, the MIB was not an emanation of the state. The United Kingdom’s failure to identify and correct the incompatible limitation provision constituted a sufficiently serious breach capable of giving rise in principle to Francovich damages.

The claimant, injured as a three-year-old by an untraced driver in about June 1993, applied to the MIB in 2001. The application was rejected as outside clause 1(1)(f) of the Untraced Drivers Agreement, which required an application within three years of the accident.

He brought proceedings against the MIB and the Secretary of State, alleging that the Agreement failed to implement Article 1(4) of the Second Motor Insurance Directive. The preliminary issues concerned the applicable limitation period, conforming interpretation of the Agreement, direct effect against the MIB, whether the MIB was an emanation of the state, and whether any breach by the United Kingdom was sufficiently serious to support damages.

1. Limitation and equivalence. The first preliminary issue was answered affirmatively. Article 1(4) required protection for victims of untraced drivers equivalent to, and as effective as, that available under English law to victims of insured drivers. The relevant comparator was a tort claim against a traced and insured driver, including the limitation protection available to minors under section 28 of the Limitation Act 1980. Clause 1(1)(f), imposing an absolute three-year period, was less favourable because it could bar a minor’s claim before the corresponding court claim expired.
2. The MIB procedure’s alleged advantages of being cheap, informal or speedy could not justify the shorter period. Compliance with clause 1(1)(f) was a condition precedent to using the remainder of the procedure. Any objective justification based on stale claims was unsupported and could not cure the disparity.
3. Conforming interpretation. The Marleasing principle did not apply to the Untraced Drivers Agreement, which was a private law agreement rather than national legislation. The judge was bound by the Court of Appeal’s decision in Mighell v Reading. If that principle had applied, however, it would have permitted words to be added to clause 1(1)(f) extending time for a minor until attaining majority. This observation was unnecessary to the decision.
4. Direct effect and state emanation. Following Gharehveran, the Second Directive was capable in principle of direct effect because the United Kingdom had fully exercised its discretion by designating the MIB. Nevertheless, direct enforcement against the MIB required it to be an emanation of the state. Applying the criteria in Foster v British Gas, the MIB provided a public service but was not under sufficient state control and possessed no special powers. It was therefore a private law entity and no direct claim lay against it.
5. State liability. The failure to check and amend the Untraced Drivers Agreement when implementing the Directive in 1987–1988, despite departmental recognition that a shorter limitation period would be incompatible, amounted to an inexcusable lack of thoroughness. It was a sufficiently serious breach in principle to expose the United Kingdom to Francovich/Factortame damages. Causation and actual loss were left undecided.