Aviva Insurance Ltd & Anor, R (On the Application Of) v The Secretary of State for Work And Pensions

Under Human Rights Act 1998, section 3(1), the court has no discretion to decline a Convention-compatible interpretation where such an interpretation is possible. The court may read legislation restrictively or expansively, and may imply exceptions, provided the result remains consistent with the legislation’s underlying thrust and does not require the court to make choices calling for legislative deliberation.

Where statutory benefit-recovery provisions imposed disproportionate liabilities on insurers under historic policies, the provisions could be read down to require proportionate reduction of liability in defined disease cases. A public authority acted unlawfully by recovering sums exceeding the liability under the legislation as so read. The court also confirmed that the precise starting dates of incompatibility may depend on when the relevant legal developments took effect.

This was a consequential judgment following the court’s substantive decision in [2020] EWHC 3118 (Admin). The claimants, liability insurers, challenged the operation of the Social Security (Recovery of Benefits) Act 1997 in relation to legacy insurance policies and long-tail disease claims.

The substantive judgment had found three features of the statutory scheme incompatible with Article 1 of the First Protocol to the Convention: recovery of benefits despite contributory negligence; recovery of benefits relating to only part of a divisible disease; and recovery in indivisible disease cases where liability would otherwise have been apportioned. This judgment addressed the scope of the relief, starting dates, section 3 interpretation, unlawfulness, the Bainbridge certificate, remedy issues and permission to appeal.

1. Scope. The order was confined to insurance policies issued before the Social Security (Recovery of Benefits) Act 1997 came into force, and reinsurances of those policies. It applied to claims involving diseases, including claims brought by the person suffering from the disease or that person’s representative, rather than only employment claims.
2. Starting dates. The contributory-negligence feature was incompatible from the commencement of the Human Rights Act 1998. The same date applied to divisible-disease cases, although the court noted that the problem might have existed from the enactment of the 1997 Act. For indivisible diseases, incompatibility began at the end of 2002, after a reasonable period for adaptation following Fairchild v Glenhaven Funeral Services Ltd and the subsequent legislative response to Barker v Corus UK Ltd.
3. Section 3. Section 3(1) imposes a mandatory interpretative obligation. The court must use it where a compatible reading is possible. That obligation does not authorise a reading inconsistent with a fundamental feature or underlying thrust of the legislation, or one which pre-empts choices requiring legislative deliberation. Here, alternative amendments or regulations could not remove the incompatibility without addressing the identified features.
4. The relevant provisions could therefore be read down so that an insurer under a pre-1997 policy, and a reinsurer, incurred a proportionately reduced liability where the insured’s liability was reduced by contributory negligence, related only to part of a divisible disease, or would otherwise have been apportioned for an indivisible disease.
5. The defendant acted unlawfully. The defendant could have used section 22(4) of the 1997 Act to make regulations limiting insurers’ liability, and had also recovered sums exceeding those lawfully due under the legislation as read down. The Bainbridge certificate was not quashed at that stage, but the claimants were given liberty to apply.
6. The Administrative Court was to determine any issue under section 31(2A) of the Senior Courts Act 1981. Other detailed remedy issues were suitable for transfer to the Chancery Division. Permission to appeal was granted to both parties.

High Court (Administrative Court): consequential issues determined following the substantive judgment in [2020] EWHC 3118 (Admin). Permission to appeal was granted to both parties.