Aviva Insurance Limited v The Secretary of State for Work and Pensions

The Court of Appeal considered whether the Social Security (Recovery of Benefits) Act 1997 and regulations under it are compatible with article 1 of the first protocol of the European Convention on Human Rights (A1P1) as given domestic effect by the Human Rights Act 1998. The claimants (insurers) challenged provisions requiring payment to the Compensation Recovery Unit (CRU) of amounts equal to recoverable social security benefits paid to injured persons, arguing in particular that recent developments in tort law (including Fairchild and related authorities) made the statutory scheme an unjustified interference with insurers' possessions.

The court applied the four-part proportionality test derived from Bank Mellat (legitimate aim; rational connection; no more intrusive measure; fair balance) and the Supreme Court's guidance on intensity of review (R(SC)). It held that the legislative object was to recover state benefits paid in respect of accidents, injuries or disease and to shift certain burdens from claimants to compensators (including insurers), that there was a rational connection between the interference and that aim (including in the contributory negligence, divisible/indivisible disease and non-matching/head-of-loss situations), and that Parliament had special justification for the scheme. The judge below had characterised the legislative aim too narrowly and erred in concluding incompatibility in respect of the principal situations; the Court of Appeal allowed the Secretary of State's appeal and dismissed the insurers' cross-appeal.

This case concerned a judicial review challenge by Aviva and Swiss Re to the compatibility with A1P1 of the Social Security (Recovery of Benefits) Act 1997 and the CRU certificate regime. The insurers had been required to pay sums equal to listed social security benefits received by injured claimants in long-tail industrial disease claims. They argued that subsequent legal developments (notably Fairchild and related causation and liability developments) meant the statutory scheme imposed disproportionate and retrospective burdens on a shrinking class of employers' liability insurers, including in five identified situations: (1) where claimants were contributorily negligent; (2) where the disease was divisible and the insurer's insured was only partially responsible; (3) where an indivisible disease gave rise to joint liability but other contributors could not be traced; (4) where a CRU certificate did not match any head of loss recoverable from the compensator; and (5) where certificates followed commercial compromises.

The judgment below (Henshaw J) declared the Secretary of State's conduct unlawful and issued read-down declarations in respect of three principal situations, granted liberty to apply to quash a specific CRU certificate and transferred proposed damages claims to the Chancery Division. The Secretary of State appealed and the insurers cross-appealed.

The Court of Appeal (Dingemans LJ, with whom the other members agreed) analysed the challenge under A1P1 applying the Bank Mellat proportionality formulation and the Supreme Court's guidance on margin and intensity of review in R(SC). The court determined:

• (i) the 1997 Act's legitimate aim, construed from the statute, was to recover state benefits paid in respect of accidents, injury or disease and to shift to compensators (including insurers) the burden of benefits which do not correspond to a head of loss;
• (ii) there was a rational connection between that aim and the interferences complained of (including the contributory negligence, divisible/indivisible disease and non-matching situations), in part because the Act retained safeguards such as the link in section 1(1)(b) and an appeal ground in section 11(1)(b) limiting recovery to benefits paid in respect of the relevant injury or disease;
• (iii) less intrusive alternatives would not have achieved Parliament's objective of recovering state benefits while protecting claimants' general damages;
• (iv) in the balancing exercise the court gave appropriate weight to Parliament's long-standing socio-economic policy (dating back to the 1948 Act and progressed through the 1989 Act), to the five-year relevant period limitation, and to the fact that compulsory employers' liability insurance and evolving tort law placed foreseeable long-tail risks on insurers; accordingly the statutory scheme struck a fair balance and special justification existed for its retrospective effects.

The Court concluded that the judge below was wrong to find an A1P1 incompatibility in the principal situations, and allowed the Secretary of State's appeal; the insurers' cross-appeal was dismissed and the claim for judicial review was dismissed.

Procedural and subsidiary issues considered included whether article 9 Bill of Rights was infringed by use of parliamentary materials (rejected), justiciability, victim status under section 7 HRA (insurers could be victims if there had been an infringement), and limitation/CPR Part 54 time limits for judicial review (the court emphasised the three-month promptness rule and reserved detailed resolution of historic damages claims to appropriate civil proceedings).

The Court of Appeal allowed the Secretary of State's appeal and dismissed the insurers' cross-appeal. The court held that the 1997 Act, construed in light of the Human Rights Act and relevant authorities, pursued a legitimate aim of recovering state benefits paid in respect of accidents, injuries or disease and shifting certain burdens to compensators; the interferences complained of were rationally connected to that aim, not more intrusive than necessary, and struck a fair balance. The judge below had erred by construing the legislative aim too narrowly and by finding incompatibility in the principal situations; the judicial review claim was dismissed.

Originating judicial review in the Administrative Court (Henshaw J) [2020] EWHC 3118 (Admin) (first-instance judgment and subsequent consequential judgment). Appeal to the Court of Appeal (this judgment) [2022] EWCA Civ 15 which allowed the Secretary of State's appeal and dismissed the insurers' cross-appeal.