Delaney v Secretary of State for Transport

EU motor-insurance directives require victims to receive compensation through the insurer or, where necessary, the national compensation body. Member States may not add exclusions beyond those expressly permitted by the directives, unless justified by an established and proportionate domestic public-policy rule.

A crime-related exclusion in an uninsured drivers’ agreement was therefore incompatible with the directives. The United Kingdom had a closely circumscribed discretion and committed a sufficiently serious breach for Francovich state liability. Causation was not broken by the separate uninsured-vehicle exception because the claimant lacked actual knowledge or wilful blindness as required by White v White.

The claimant was seriously injured as a passenger in a vehicle driven negligently during a criminal joint enterprise. The driver’s insurer avoided the policy under section 152(2) of the Road Traffic Act 1988. The claimant’s domestic claim against the driver and insurer was initially dismissed, but the Court of Appeal allowed the public-policy appeal and dismissed the claim under clause 6(1)(e)(iii) of the Uninsured Drivers’ Agreement 1999.

The claimant then alleged that the crime exception breached Articles 3.1, 1.4 and 2.1 of the relevant EU directives and claimed damages under the Francovich principle. The issues were whether the directives applied where insurance had been avoided, whether their permitted exclusions were exhaustive, whether the crime exception was lawful, and whether any breach caused recoverable loss.

1. Directive coverage. Articles 1.4 and 2.1 of the Second Directive applied where a policy had been taken out but the insurer could avoid liability under domestic law. The United Kingdom’s arrangements placed the Article 75 insurer in the position of insurer of last resort, so the victim could not be left without a remedy merely because the policy had been avoided for misrepresentation or non-disclosure (paras [39], [48], [60]-[63]).

2. Exhaustive exclusions. The directives established a comprehensive code. Compensation had to be provided unless one of the specific exclusions or derogations stated in the directives applied. The recitals could not enlarge those express exceptions. The reasoning in Ruiz Bernaldez, Candolin and Farrell supported that conclusion (paras [41], [46]-[50], [63]-[67]).

3. Crime exception. Clause 6(1)(e)(iii) was a material additional exclusion. It was not merely a subset or explanation of the exception for a passenger who knew that the vehicle was uninsured under clause 6(1)(e)(ii). It therefore breached the United Kingdom’s EU-law obligations (paras [68]-[72]).

4. State liability. The Francovich test is applied contextually. The seriousness inquiry remains multifactorial, but the available margin of discretion is central. Where the directives are clear and leave little or no discretion, a material breach will more readily be sufficiently serious. The defendant had no wide legislative choice and could not establish that the breach was excusable. The breach was sufficiently serious to found liability (paras [74]-[85], [104]-[117]).

5. Causation. Applying White v White, the claimant did not have information from which he concluded that the vehicle might be uninsured while deliberately refraining from inquiry. His knowledge of cars did not justify an inference of actual knowledge or wilful blindness. The causation defence therefore failed.

6. There was judgment for the claimant on liability, with damages to be assessed (paras [118]-[124]).

• Court of Appeal: On 21 December 2011, the Court of Appeal allowed the appeal on the ex turpi causa issue but, by a majority, dismissed it on the clause 6(1)(e)(iii) issue. No EU-law compatibility argument was determined.
• High Court (Queen’s Bench Division): The present court determined the EU-law and state-liability issues and gave judgment for the claimant on liability, with damages to be assessed.