In short

Two injured passengers, Benjamin Wilkinson and Tracy Evans, each held insurance on a vehicle they allowed an uninsured friend to drive. After serious accidents they obtained judgments against the negligent drivers, but their insurers sought to invoke section 151(8) of the Road Traffic Act 1988 to recover those payouts from the injured policyholders themselves, which would effectively deny them compulsory motor insurance compensation.

Blair J in Wilkinson held that section 151(8) could not be used to defeat the insurer's section 151(5) duty to pay judgment benefits, while Judge Gregory in Evans reached the opposite conclusion. This court referred questions to the Court of Justice, which ruled that national rules automatically excluding insured passenger victims from compensation conflict with EU Motor Insurance Directives.

Returning after the CJEU's preliminary ruling, the Court of Appeal unanimously held that section 151(8)(b) should be read so that, where the insured person may be entitled to judgment benefits, any insurer recovery must be proportionate and determined on the facts. Both appeals were allowed to the extent that the first-instance orders could not stand, and the court will make a declaration on the correct construction of the subsection.

Decision

Churchill appeal against Blair J declaration on section 151(8)(b) allowed in part, on terms that to the extent that the declaration in paragraph 1(b) of the order of 11 June 2009 cannot now stand. [77]
Evans appeal against Judge Gregory order on section 151(8)(b) allowed in part, on terms that to the extent that paragraphs 1 and 3 of the order of 10 June 2009 cannot now stand. [77]
Correct construction of section 151(8)(b) granted, on terms that declaration to be drafted by counsel. [77]

Issues

Can section 151(8) of the Road Traffic Act 1988 be interpreted in a manner compatible with the EU Motor Insurance Directives?
Yes. All parties agreed that conforming interpretation is possible, though they disagreed on the wording to be implied. [7]
Where an insured passenger victim caused or permitted an uninsured driver to use the vehicle, does section 151(8) limit the extent of compulsory motor insurance cover rather than operate solely as a civil indemnity rule?
Yes. When the insured is also the injured passenger, section 151(8) automatically excludes that person from insurance benefit and therefore limits cover, so it must be interpreted consistently with Articles 12(1) and 13(1) of the 2009 Directive as explained by the CJEU. [64]
Should section 151(8)(b) be read to bar any insurer recovery from an insured passenger entitled to judgment benefits, or to permit recovery only where proportionate on the facts of the case?
Recovery must be proportionate. Section 151(8)(b) is to be interpreted as if it ended with a proviso that, where the insured may be entitled to judgment benefits, any recovery must be proportionate and determined on the basis of the circumstances of the case. [76]
Does the no-fault character of the section 151(8) indemnity preclude imposing a proportionate recovery limitation on insured passenger victims?
No. The subsection already requires that the insured caused or permitted the use giving rise to the liability, so further conditions limiting recovery against an insured passenger victim do not contradict its fundamental principle. [75]
Does the CJEU's analysis at paragraph 49 of its preliminary ruling permit national rules that restrict compulsory motor insurance compensation for passenger victims based on their contribution to the loss?
Yes, but only exceptionally. General or abstract rules may not disproportionately refuse or restrict compensation solely on the basis of the passenger's contribution; limitation is permitted only in exceptional circumstances assessed on the particular facts. [72]

Reasoning

Section 151(8) grants insurers a civil indemnity when an insured caused or permitted use by an uninsured driver, but where the insured is also the injured passenger it operates to exclude insurance benefit and must comply with EU motor insurance law. [61]
The claimants' interpretation would preserve insurer recovery against non-victim insureds but abolish it altogether against insured passenger victims, whereas the CJEU permits only proportionate restriction in exceptional cases. [65]
The CJEU's paragraph 49 addresses any national rule impinging on passenger compensation through compulsory insurance, not only civil liability concepts such as contributory negligence. [72]

Written by AI from the judgment on 23 August 2026. Each ¶ links to the paragraph it came from. Read those before relying on it.

▶Statutes Cited4

▶Case Law Cited14

▶Cited By19

Churchill Insurance Company Ltd v Fitzgerald & Wilkinson & Ors [2012] EWCA Civ 1166

Case No (1) B3/2009/1435 & (2) B3/2009/2174

[2012] EWCA Civ 1166

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM

Venue (1) Manchester District Registry, Queen's Bench Division

Mr Justice Blair

7MA91096

(2) Walsall County Court

His Honour Judge Gregory

7B126175

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 24/08/2012

Before

LORD JUSTICE MAURICE KAY

(VP of the Court of Appeal, Civil Division)

LORD JUSTICE ETHERTON

LORD JUSTICE AIKENS

Between

(1) Churchill Insurance Company LimitedAppellant

Fitzgerald & WilkinsonRespondents

(2) EvansAppellant

Cockayne & Equity Claims LimitedRespondents

Secretary of State for TransportIntervener

Between

Stephen Worthington QC & Fergus Randolph QC (instructed by Keoghs LLP) for Appellant Churchill Insurance Company Limited

Stephen Grime QC & Conor Quigley QC (instructed by Potter Rees) for Respondent Wilkinson

(2) Conor Quigley QC & William Waldron QC (instructed by Jerome Solicitors Ltd) for Appellant Evans

Winston Hunter QC (instructed by Herzog & Associates) for Respondent Equity Claims Limited

Brian Kennelly & Judith Ayling (instructed by the Treasury Solicitor) for Secretary of State for Transport (Intervener)

Hearing Hearing dates : 17th of May 2012

Judgment

Lord Justice Aikens :

[1]Imagine a person (A), who is insured to drive a vehicle, decides to allow someone else (B) to do so but B is not insured to drive that vehicle. A gets in the vehicle as a passenger. B drives the vehicle negligently, crashes it and A suffers physical injury. A then sues B for damages for his injuries and a judgment is obtained against B. A’s insurer, who had issued a certificate of insurance, is obliged by virtue of section 151(5) of the Road Traffic Act 1988 (“the Act”) to pay to A the benefit of the judgment, even if, under the circumstances of the accident and injury, the insurer would be entitled to avoid or cancel the insurance policy under its terms. However, by section 151(8) of the Act, an insurer who has become liable to meet a judgment in respect of the liability of a person who is not insured by a policy is entitled to recover that amount from an insured person under the policy, if that person had caused or permitted the use of the vehicle which gave rise to the liability. In my example, that person would be the injured passenger A. The practical effect of section 151(8), therefore, is that because the insurer can recover back from A the total of the sum that it is liable to pay to A under section 151(5), it would not pay out the judgment sum to A in the first place. So, on the face of the terms of the Act, A, an insured passenger victim of the negligent driving of the uninsured driver B who was permitted by A to drive the vehicle would be excluded, or omitted, from the benefit of the compulsory motor insurance.

[2]The present two appeals effectively concern precisely such facts. Two judges ruled at first instance In Benjamin Wilkinson (by his father and Litigation Friend Stephen Wilkinson) v Kieran Thomas Fitzgerald and Churchill Insurance Company Limited

[2009] EWHC 1297 (QB)

, a decision of Blair J of 11 June 2009. Tracey Evans v Equity Claims Limited and others, a decision of HHJ Gregory, sitting in the Walsall County Court, of 3 June 2009. on the question of whether the insurer would indeed be entitled under section 151(8) to recover back the sums it was obliged to pay (under section 151(5) of the Act) to the injured insured passenger pursuant to a judgment obtained against the negligent uninsured driver. The judges’ answers were different. In one case, Wilkinson v Churchill Insurance Company Limited, which came before Blair J, the point was taken that an absolute right of the insurer to recover from the insured injured passenger Mr Wilkinson under section 151(8) was incompatible with both the provisions of a series of European Directives which concern insurance against civil liability in respect of road accidents within the area of what is now the European Union and a number of decisions on those directives by what is now the Court of Justice of the European Union (“CJEU” – formerly the European Court of Justice: “ECJ”). Blair J held that in order to make section 151(8) compliant with the principles established by those European Directives and the case law, it had to be interpreted and applied in such a way that it did not negate the insurer’s obligation under section 151(5) to pay to someone entitled to the benefit of a judgment the sum payable under that judgment. In the second case Judge Gregory dismissed Ms Evans’ claim, holding that Equity was entitled under section 151(8) to recover all of the sum that it was obliged to pay to her under section 151(5). The European law point was not argued before Judge Gregory.

[3]There was then an appeal in both cases. In the Wilkinson case the insurers, Churchill Insurance Company Limited (“Churchill”), appealed the declaration made in paragraph 1(b) of Blair J’s order of 11 June 2009 that they did not have the right pursuant to section 151(8)(b) of the Act, to recover the amount due to the claimant, Mr Wilkinson, pursuant to section 151(5). In the Evans case, Ms Evans appealed paragraphs 1 and 3 of the order of Judge Gregory dated 10 June 2009 that the insurers, Equity Claims Limited (“Equity”) were entitled, pursuant to section 151(8)(b) of the Act, to recover from Ms Evans any sum that Equity was liable to pay to her pursuant to section 151(5) of the Act. I will refer to the insurance companies collectively as “the insurers”.

[4]This court Lord Neuberger of Abbotsbury MR, Waller and Wall LJJ:

[2010] EWCA Civ 556

; [2010] PIQR P15 decided that it must ask for a preliminary ruling from the CJEU on two questions concerning the effect of the various European “Motor Insurance Directives” First Motor Insurance Directive (72/166/EEC); Second Motor Insurance Directive (84/5/EEC) and the Third Council Directive (90/232/EEC). Those were subsequently amended before being consolidated in the 2009 Directive. which go back to 1972, that is before the United Kingdom joined what was then the European Economic Community. The various Directives have now been consolidated into Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 (“the 2009 Directive”).

[5]The relevant provisions of the Act and the 2009 Directive are long. I have thought it best to put them into Appendices to this judgment. Appendix One contains the relevant sections of the Act. Appendix Two contains relevant portions of the Preamble of the 2009 Directive (the preambles of Directives are always important for the purposes of interpretation of the actual provisions) and the relevant Articles of that Directive. However, because section 151(8) is at the centre of the argument, I set out the relevant part of it again here:

“(8) Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy…. he is entitled to recover the amount from that person or from any person who— (a) is insured by the policy…. by the terms of which the liability would be covered if the policy insured all persons….., and (b) caused or permitted the use of the vehicle which gave rise to the liability.”

[6]The CJEU’s answers to this court’s questions were given in a judgment promulgated on 1 December 2011.

Case C-442/10

: report yet to be published. The principal answer is, effectively, that the Directives must be interpreted as precluding national rules whose effect is to “omit automatically” the requirement that the insurer should compensate a passenger who is a victim of a road traffic accident. This is so even when that accident was caused by a driver not insured under the insurance policy and when the victim, who was a passenger in the vehicle at the time of the accident, was insured to drive the vehicle himself and he had given permission to the uninsured driver to drive it. [44] of the CJEU’s judgment. However, when the CJEU went on to consider the second question posed, it made various additional statements in [45] –[49] of its judgment which are important to the present stage of these appeals.

[7]The two appeals now return to this court and the questions to be decided are: first, can section 151(8) be interpreted in a way that makes it compatible with the European Directives on Motor Insurance; and, secondly, if so, how should the section be interpreted? The Secretary of State for Transport (“SST”) obtained permission to intervene in this appeal. The claimants, the insurers and the SST all agree that that section 151(8) can be interpreted in a manner that will make it compatible with the European Directives, although any interpretation would, inevitably, involve the notional addition of some wording to the sub-section. The disagreement is about what that wording should be. On this argument the two claimants are aligned on one side and the insurers and the SST on the other.

[8]By the end of the oral submissions which we heard on 17 May 2012, the primary submission of the claimants was that section 151(8) could be made to comply with the Motor Insurance Directives by interpreting it as if to add the following wording (put here in bold italics) to the first part of that sub-section:

“Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured in a policy…he is entitled to recover the amount from that person or from any person, not being a person entitled to the benefit of a judgment to which this section refers, who – (a) is insured by the policy…. By the terms of which the liability would be covered if the policy insured all persons…and (b) caused or permitted the use of the vehicle which gave rise o the liability.” (a) is insured by the policy…. By the terms of which the liability would be covered if the policy insured all persons…and (b) caused or permitted the use of the vehicle which gave rise o the liability.”

[9]The proposed interpretation of the insurers and the SST would be as if to add words at the end of sub-paragraph (b) of section 151(8) as follows: (b) caused or permitted the use of the vehicle which gave rise to the liability, save that where the person insured by the policy may be entitled to the benefit of any judgment to which this section refers, any recovery by the insurer in respect of that judgment must be proportionate and determined on the basis of the circumstances of the case”.

II. The Facts

[10]In the case of Wilkinson v Churchill Insurance Company Limited, the matter came before Blair J on the preliminary issue of whether the insurers were entitled to invoke section 151(8) so as not to pay to Mr Wilkinson the benefit of a judgment he had obtained against the negligent uninsured driver, his friend Mr Fitzgerald. The issue was decided on assumed facts. A summary was set out in a schedule to this court’s judgment when it asked for a preliminary ruling from the CJEU. This court also set out a summary of the facts as found by Judge Godfrey in Evans v Equity Claims Limited. I have reproduced those two summaries in Appendix Three to this judgment. III The history of the European Directives and a summary of the relevant sections of the Act

[11]When the UK joined the EEC in 1973 there were already in existence various European Directives concerning insurance against civil liability in respect of road accidents. The principle behind the Directives was that vehicles would inevitably operate across national frontiers within the single economic area that was then the EEC and it was not acceptable to have potential disparities between national regimes on motor insurance cover. Article 3 of the First Directive (72/166/EEC) provided that each Member State should take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory was covered by insurance. Moreover, the extent of the liability covered and the terms and conditions of the cover were to be determined on the basis of the measures set out in the Directive.

[12]The Second Motor Insurance Directive (84/5/EEC) sought to ensure the widest protection for motor accident victims. Part of the Preamble to that Directive stipulated that the amounts in respect of which insurance was to be compulsory must, in any event, guarantee victims adequate compensation. Another part of the preamble said that it was in the interests of victims that the effect of certain exclusion clauses in insurance policies should be limited to the relationship between the insurer and “the person responsible for the accident”. Article 2 of the Second Directive provided as follows: "1. Each Member State shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article 3 (1) of Directive 72/166/EEC , which excludes from insurance the use or driving of vehicles by: - persons who do not have express or implied authorization thereto, or - persons who do not hold a licence permitting them to drive the vehicle concerned, or - persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned, - shall, for the purposes of Article 3 (1) of Directive 72/166/EEC, be deemed to be void in respect of claims by third parties who have been victims of an accident. However the provision or clause referred to in the first indent may be invoked against persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen. Member States shall have the option – in the case of accidents occurring on their territory – of not applying the provision in the first subparagraph if and in so far as the victim may obtain compensation for the damage suffered from a social security body.”

[13]The UK implemented this Second Directive in the Motor Vehicle (Compulsory Insurance) Regulations of 1987. 1987 SI No 2171. Those regulations were then enacted as section 151 of the Act. I will describe the effect of the relevant terms of the Act. However, first it should be recalled that in English law (in contrast to the position in most other Member States of the EU) a motor insurance policy will insure the legal liability of identified persons or classes of person in respect of the use of an identified vehicle. So the emphasis is on which person is an insured. In other European legal systems the emphasis is on which vehicle is the subject of the insurance even when a motor insurance policy covers the legal liability of persons using the vehicle.

[14]The starting point of the Act for present purposes is section 143(1)(a) which stipulates that users of motor vehicles must be insured against third party risks by a policy of insurance in compliance with the requirements of the Act. The various relevant sections of the Act also mention “security” and “certificates of security”. In his judgment Blair J stated that he had been informed that these “certificates of security” were not often used, so I have omitted reference to them. The present cases were both concerned with certificates of insurance issued in the normal way. Section 143(1)(b) is important. It provides that a person must not cause or permit any other person to use a motor vehicle on a road (or other public place) unless that other person is insured against third party risks (as required by the Act) under a policy of insurance in respect of the use of that vehicle. That “obligation” is given force by section 143(2) which makes it a criminal offence for a person to “cause or permit” another person to use a motor vehicle when that person is not covered for third party risks by a policy of insurance.

[15]Section 145 sets out the requirements in respect of policies of insurance that are the subject of the Act. The policy must be issued by an authorised insurer and it must insure a person, or persons or a class of persons (as specified in the policy) in respect of any liability that may be incurred in respect of the death or bodily injury to any person or damage to property caused by or arising out the use of the vehicle on a road (or other public place) in Great Britain or, broadly, elsewhere in the EU.

[16]Section 147 provides for the issue and surrender of certificates of insurance by the insurer to the person by whom the policy of insurance is effected, ie. the principal insured. Section 148 has the effect of nullifying provisions in a certificate of insurance that purport to restrict the insurance of the person(s) insured by the policy in respect of eight identified conditions relating to the vehicle or its condition, which are set out in section 148(2). If an insurer has to pay out a sum in respect of any person by virtue of the fact that section 148(1) renders ineffective certain exclusions in the policy (as set out in section 148(2)) then, by virtue of section 148(4) the insurer can recover that sum from the person who would have been insured but for the exclusion. Similarly, section 148(5) renders ineffective (so far as liabilities covered by section 145 are concerned) conditions in a policy entitling an insurer to avoid or cancel a policy upon the event of certain specified things being done or not being done. Again, under section 148(6) the insurer’s contractual right (if any) to recover back from an insured any sums which the insurer has become liable to pay under the policy (because the avoidance or cancellation provision has been made ineffective by the Act) is preserved. There is a certain similarity between the provisions of section 148(4) and (6) and section 151(8).

[17]Section 151 is headed “duty of insurers…to satisfy judgment against persons insured…against third party risks”. Section 151(1) sets out the circumstances in which the section applies. It does so when, after a certificate of insurance has been delivered to the person by whom a policy of insurance has been affected, a judgment has then been obtained to which section 151 applies. Section 151(2) states that such a judgment is one relating to a liability which is of a type that is required to be covered by a policy of insurance under section 145 of the Act. The judgment can be either in respect of a liability of a person insured by the policy or, as in the present two cases, a judgment in respect of a liability of a person who is not insured by the policy but where the liability is of a type that would have been covered if he had been so insured. Section 151(4) deals with “excluded liability” which does not concern us at present.

[18]Section 151(5) sets out the mandatory obligation of the insurer to pay out to the person entitled to the benefit of the judgment, even if the insurer would otherwise be entitled to avoid or cancel the policy. Then section 151(8) sets out the insurer’s entitlement to recover back sums paid out under section 151(5). This right is exercisable either(i) against the uninsured person in respect of whose liability the insurer has had to meet the benefit of a judgment, or

(ii) a person who is insured by the policy by the terms of which the uninsured tortfeasor’s liability would have been covered if the policy had “insured all persons” and that insured person “caused or permitted the use of the vehicle which gave rise to the liability”. As Blair J noted, an insurer has had certain statutory rights to recover from an insured person the sums which the insurer has been obliged to pay out under the provisions of the Road Traffic Acts since the first of those Acts was passed in 1930. [7] of his judgment.

[19]The Third Council Directive (90/232/EEC) became effective from May 1990. Article 1 provided, (without prejudice to Article 2(1) of the Second Directive), that the insurance referred to in Article 3(1) of the First Directive should cover liability for personal injuries to all passengers, other than the driver, arising out the use of a vehicle.

[20]Lastly, the 2009 Directive codified the three earlier directives relating to insurance against civil liability in respect of the use of motor vehicles. The previous directives were repealed with effect from 27 October 2009. In Annex II to the 2009 Directive there is a “Correlation Table” to show which articles of the new Directive correspond to those of the previous ones. The relevant correlation is summarised in the CJEU’s judgment in the present case at [11], as follows:

“Article 3(1) of the First Directive corresponds to the first and second sub-paragraph of Article 3 of Directive 2009/103; Article 1(4), third sub-paragraph and Article 2(1) of the Second Directive corresponds to Article 10(2), second sub-paragraph and Article 13(1) of Directive 2009/103 respectively; and Article 1, first sub-paragraph of the Third Directive corresponds to Article 12(1) of Directive 2009/103”

. The CJEU preferred to refer to the earlier directives in its judgment. I will follow the habit of the previous judgment of this court and refer to the provisions of the 2009 Directive.

[21]It is especially important to note the terms of paragraphs 15 and 23 of the preamble of the 2009 Directive, which reproduce the wording of equivalent paragraphs of preambles of previous Directives. For the purposes of this appeal the important Articles of the 2009 Directive are Articles 3, 12(1) and the concluding statement of Article 12, together with Article 13(1) and (3). IV The first decision of this court; the questions put to the CJEU and the CJEU’s preliminary rulings on them.

[22]This court decided:(1) that on the correct construction of section 151(8) of the Act its effect, “…as a matter of English law…”, was to exclude from the benefit of an insurance policy a passenger who is the insured under the policy but who has given permission to an uninsured driver to drive. [12]

(2) If that is the correct construction of section 151(8), then two questions must arise: first, does section 151(8) in its present form comply with Community law or would Community law regard it as “void and unenforceable”; and secondly, can the section be interpreted in such a way as not to breach Community law. [12] and [37]-[38].

(3) It would be inappropriate to consider whether, as a matter of English national law section 151(8) could be interpreted so as to comply with Community law until it is known whether it did or did not so comply and if not, the extent to which it did not. [39]

(4) Although it was difficult, if not impossible, to see how the insured (and injured) passenger’s knowledge that the person who had been allowed to drive was uninsured could give rise to a finding of contributory negligence by the insured injured passenger, the fact that the latter did know the driver was uninsured may make a difference so far as Community law was concerned. [36]

[23]This court therefore decided to pose two questions for preliminary rulings from the CJEU. The terms of the two questions were as follows:(1) Are Articles 12(1) and 13(1) of the 2009 Directive to be interpreted as precluding national provisions the effect of which, as a matter of the relevant national law, is to exclude from the benefit of insurance a victim of a road traffic accident, in the circumstances where:

a. That accident was caused by an uninsured driver; and

b. That uninsured driver had been given permission to drive the vehicle by the victim; and

c. That victim was a passenger in the vehicle at the time of the accident; and

d. That victim was insured to drive the vehicle in question? In particular: 1. Is such a national provision one which “excludes from insurance” within the meaning of Article 13(1) of the 2009 Directive? 2. In circumstances such as arising in the present case, is permission given by the insurer to the non-insured “express or implied authorisation” within the meaning of Article 13(1) of the 2009 Directive? 3. Is the answer to this question affected by the fact that, pursuant to Article 10 of the 2009 Directive national bodies charged with providing compensation in the case of damage caused by unidentified or uninsured vehicles may exclude the payment of compensation in respect of persons who voluntarily enter the vehicle which caused the damage or injury when the body can prove that these persons know that the vehicle was uninsured?

(2) Does the answer to question 1 depend on whether the permission in question (a) was based on actual knowledge that the driver in question was uninsured or (b) was based on a belief that the driver was insured or (c) where the permission in question was granted by the insured person who had not turned his/her mind to the issue?

[24]The CJEU’s judgment first noted that the Court of Appeal had found that the effect of section 151(8) of the Act was “…to exclude automatically from the benefit of insurance an insured, who, taking a place as a passenger in the vehicle that he is insured to drive, has given an uninsured driver permission to drive that vehicle”. It noted that the Court of Appeal was “…uncertain whether European Union law precludes such an exclusion and, if so, whether section 151(8) …could be interpreted in a manner consistent with European Union law”. [16] and [23] of the CJEU’s judgment. The CJEU said that the second question posed in that passage was not for it to consider, but was for the national court to decide. [22] of the CJEU judgment. That is why this court is considering the point now. That second question is, effectively, the one that this court now has to determine.

[25]The CJEU then analysed the nature of the issue on which it had been asked to give a preliminary ruling. I regard the Court’s characterisation of the issue as important so I will quote paragraphs 23 and 24 of its judgment: “23. It is apparent from the order for reference that the Court of Appeal interprets section 151(8) of the 1988 Act, in situations such as those described in the first question referred for a preliminary ruling, not as providing for the payment of compensation by the insurer to the insured victim, followed by reimbursement of that amount by the insured to the insurer, but as having the effect of excluding automatically from the benefit of insurance a passenger, the victim of a road traffic accident, who is insured to drive the vehicle himself and who has given permission to an uninsured driver to drive. 24. It follows that the questions referred to the Court in the present case do not concern the compatibility with EU law of a rule governing civil liability, but concern rather the compatibility with EU law of a provision which, according to the interpretation given by the referring court, by excluding automatically the benefit of compensation possibly due to an insured, limits the extent of civil liability insurance cover. The questions referred therefore do indeed concern the scope of the relevant EU rules”.

[26]The CJEU then re-stated the objectives of the EU rules “…relating to civil liability in respect of the use of motor vehicles…” contained in the various motor insurance Directives. These objectives were: first, to ensure the free movement of vehicles normally based in EU territory and of people travelling in those vehicles; secondly, to guarantee that the victims of accidents caused by such vehicles received “comparable treatment”, which must mean comparable treatment in relation to the consequences of a finding of civil liability by a national court or, presumably, an admission of liability. The third objective was to protect “…that particularly vulnerable category of potential victims who are motor vehicle passengers” by filling the gaps in compulsory motor insurance cover of those passengers in certain Member States. [27] of the CJEU judgment.

[27]Therefore, the court said, the First, Second and Third Motor Directives required Member States to ensure that civil liability in respect of the use of motor vehicles in their territory was covered by insurance. Further, the directives specified the types of damage and the categories of “third parties” who are victims of an accident that are to be covered by this insurance scheme. [28] of the CJEU judgment.

[28]The CJEU then re-stated the particular aim of what are now the first and second sub-paragraphs of Article 3 and Articles 12(1) and 13(1) of the 2009 Directive. These correspond, respectively to Article 3(1) of the First Directive, Article 1 first sub-paragraph of the Third Directive and Article 2(1) of the Second Directive. This aim is to “…ensure that compulsory motor vehicle insurance against civil liability in respect of the use of motor vehicles allows all passengers who are victims of an accident caused by a motor vehicle to be compensated for the injury or loss they have suffered”. The court emphasised that the distinction to be drawn was between all passengers, who must be the subject of insurance cover, and the driver. [29] of the CJEU’s judgment, referring to Article 1 of the Third Directive (Article 12(1) of the 2009 Directive) and its decisions in Candolin and others [2005] ECR 1-5745 at [32] and Farrell [2007] ECR 1-3067 at [23]. Therefore, the aim was to ensure that the “legal position of the owner of the vehicle” who is present in the vehicle as a passenger and who is a victim of an accident must be the same as that of any other passenger. [30] of the CJEU’s judgment. I interpret the words “the owner of the vehicle” to include someone who is insured to drive the vehicle. The expression “the owner of the vehicle” was probably used by the CJEU because of the fact (already noted) that in most Member States it is the vehicle which is the object of the insurance against legal liability rather than individual (or a class of ) insureds.

[29]The next statement in the CJEU’s judgment is particularly important for the present issue. The aim of protecting passenger victims, as pursued by the first three Directives (and so the 2009 Directive which replaced them) therefore required: “…the legal position of the person who, at the time of the accident was a passenger in the vehicle in respect of which he was insured to drive, to be the same as that of any other passenger who is a victim of the accident”. [31] of the CJEU’s judgment.

[30]Accordingly, a passenger who is insured to drive the vehicle who is injured in an accident is within the category of “third parties” as defined in Article 13(1) of the 2009 Directive. [32] of the CJEU’s judgment. Article 13(1) of the 2009 Directive replaced Article 2(1) of the Second Directive. Moreover, the effect of what is now Article 13(1) of the 2009 Directive Formerly Article 2(1) of the Second Directive. is that an insurer is precluded from being able to rely on any statutory conditions or contractual clauses that would exclude insurance cover for civil liability for damage or injury to a passenger victim of an accident when the damage or injury was caused by the use or driving of the insured vehicle by a person not authorised to drive it or who has no driving licence or where there are breaches of statutory safety requirements. [34] of the CJEU’s judgment. There is an exception to this, as set out in the proviso to what is now Article 13(1) of the 2009 Directive. The exclusion of insurer liability can be invoked if(i) it is shown that the person who caused the injury or damage as a result of his driving did not have express or implied authorization to drive the vehicle and

(ii) the person who suffered injury or damage voluntarily entered the vehicle knowing that the vehicle was stolen. But that exception, or “derogation” is limited strictly to that one situation: see [35] of the CJEU’s judgment and the cases there referred to.

[31]The CJEU then stated that “…it follows from the foregoing…” that: “…[Article 12(1)] and [Article 13(1)] of the [2009 Directive] must be interpreted as precluding national rules the effect of which is to omit automatically the requirement that the insurer should compensate a passenger, the victim of a road traffic accident, on the ground that that passenger was insured to drive the vehicle which caused the accident but that the driver was not”. [36] of the CJEU’s judgment. It will be noted that the CJEU uses the words “omit automatically” whereas this court had held that (in English law) section 151(8) excluded an insured passenger victim from the benefit of the policy where he had given permission to an uninsured person to drive the vehicle. I do not regard the use of these different verbs (“omit/exclude”) as important.

[32]The CJEU’s answer to the first question posed by the Court of Appeal is in the following terms, substituting the provisions of the 2009 Directive for those of the earlier ones that are actually referred to in the CJEU’s judgment: “…[Articles 12(1) and 13(1) of the 2009 Directive] Corresponding respectively to Article 1, first sub para of the Third Directive and Article 2(1) of the Second Directive. must be interpreted as precluding national rules whose effect is to omit automatically the requirement that the insurer should compensate a passenger who is a victim of a road traffic accident when that accident was caused by a driver not insured under the insurance policy and when the victim, who was a passenger in the vehicle at the time of the accident, was insured to drive the vehicle himself and who had given permission to the driver to drive it”. [44] of the CJEU’s judgment.

[33]The CJEU then considered the Court of Appeal’s second question, which asked whether the answer to the first question would be different if, in fact,(a) the insured victim was aware that the person to whom he gave permission to drive the vehicle was not in fact insured to do so, or

(b) the insured victim believed he was insured to do so or

(c) the insured victim did not turn his mind to that question. The CJEU’s answer was that it makes no difference in any of those cases. [47] and [50] of the CJEU’s judgment. However, the Court then qualified that answer. It said that a national court was entitled to consider those questions in the context of its national rules on civil liability, provided that the exercise of powers under those rules was in compliance with EU law as laid down in the Directives and that the national law did not deprive those Directives of their effectiveness.

[34]The CJEU summarised its position on the second question put to it by this Court at [49] of its judgment. The CJEU said:

“Accordingly, national rules, formulated in terms of general and abstract criteria, may not refuse or restrict to a disproportionate extent the compensation to be made available to the passenger by compulsory insurance against civil liability in respect of the use of motor vehicles solely on the basis of his contribution to the occurrence of the loss which arises. It is only in exceptional circumstances that the amount of compensation may be limited on the basis of an assessment of that particular case.”

In support of this proposition the cases of Candolin at [29], [30] and [35]; Farrell at [35]; Carvalho Ferreira Santos [2011] ECR 1-6711 at [38] and Ambrosio Lavrador and Olival Ferreira Bonifacio [2011] ECR 1-0000 at [29].

[35]The CJEU therefore answered the two questions put to it in the terms of [44] and [47] of its judgment. V Other relevant EU case law: the Candolin and Lavrador cases.

[36]There are two more matters to cover before I consider the arguments of the parties on this appeal. The first is to refer to two decisions of the ECJ/CJEU on the interaction between the motor Directives and national laws concerning civil liability for injury or damage to a “third party” as a result of an accident involving a motor vehicle. Those cases clarify to a certain extent two matters which are, in my view, important in the present case. The first matter is the understanding of the ECJ/CJEU towards the distinction between, on the one hand, national rules concerning civil liability for damage and injury resulting from road accidents and, on the other hand, Community law regarding compulsory insurance for civil liability towards “third parties”, including passengers, arising out of accidents involving motor vehicles. The second point concerns the extent to which national rules on civil liability (in this area) have to be subjugated to Community law.

[37]The first case is Candolin. [2005] ECR 1-5745. A road accident occurred in Finland. It involved a car in which the driver and three passengers were all drunk. The driver was convicted in the District Court of Porin of driving whilst drunk and he was sentenced to imprisonment. He was also ordered to pay compensation to the daughter of one of the passengers who had been killed in the accident. The car was insured by an insurance company known for short as “Pohjola”. The District Court took the view that the passengers should have noticed that the driver was drunk. The relevant Finnish law on motor vehicle insurance Law 279/1959 as amended by Law 656/1994 at paragraph 7(3). provided that if a passenger knew or should have known that the driver of the vehicle had an alcohol level above a stipulated limit, so that his ability to act correctly was considerably impaired, then if that passenger was injured as a result of the actions of the drunken driver, compensation would be paid to the passenger from the vehicle’s insurance “only insofar as there was a special reason for that”. Pohjola argued that this Finnish law entitled it to refuse to pay compensation to the daughter because the deceased mother knew or ought to have known that the driver was drunk.

[38]The ECJ summarised the questions posed by the Finnish Supreme Court for a preliminary ruling as being whether or not the provisions of the Second and Third Directives Equivalent to Articles 12(1) and 13(1) of the 2009 Directive. would preclude a national law: “…according to which compensation paid under compulsory motor vehicle insurance may be refused or limited on the basis of the passenger’s contribution to the injury he has suffered and whether the answer is different where the passenger is the owner of the vehicle”. [16] of Candolin

[39]The ECJ stated, at [24] of its judgment, that the Directives did not seek to harmonise the rules of Member States which concerned civil liability in respect of road accidents involving motor vehicles and that Member States were free to determine their own rules on civil liability on such questions. But such rules had to be compliant with the Directives and must not deprive the Directives of their effectiveness. That would be so when a national rule concerning civil liability for injury or loss of a passenger who was a victim of an accident caused by a motor vehicle was “established on the basis of general and abstract criteria” and was such as to deny or limit in a disproportionate manner the right of a passenger to be compensated by the compulsory motor vehicle insurer “…solely on the basis of the passenger’s contribution to the occurrence of his injuries…”. [27]-[29] of Candolin. It was only in exceptional circumstances that the amount of the victim’s compensation could be limited and it depended on an assessment of the particular case. It was for a national court to determine whether those circumstances existed and whether any limit to compensation imposed was proportionate. But the fact that the passenger concerned was the owner of the vehicle the driver of which caused the accident was irrelevant. [30]-[31] of Candolin.

[40]The second case is Lavrador v Companhia de Seguros Fidelidade-Mundial SA. [2012] RTR 44 The claimant’s young son, who was riding his bike on the wrong side of the road in Portugal, was killed when hit by a car that was being driven carefully. The claimant brought an action claiming compensation from the insurers of the vehicle. The claim was dismissed by the court of first instance in Portugal, which applied a national law Articles 505 and 570 of the Portuguese Civil Code. having the effect of excluding or limiting the right of an accident victim to claim compensation when the injured person’s fault had contributed to the occurrence or to an aggravation of the injury or loss. The Portuguese Supreme Court referred a question to the CJEU for a preliminary ruling on whether what is now Article 12(1) of the 2009 Directive At the time of the accident the relevant provision of EU law was Article 1 of the Third Directive. was to be interpreted in such a way that the provisions of the Portuguese Civil Code may not exclude or limit the right to compensation of the child victim of the accident on the sole ground that the child was partly or exclusively responsible for the loss incurred.

[41]The CJEU noted that there is a distinction between the obligation to provide insurance cover against civil liability for damage caused to third parties by motor vehicles and the extent of the compensation to be afforded to third parties on the basis of the civil liability of the insured person. “Whereas the former is defined and guaranteed by European Union legislation, the latter is, essentially, governed by national law”. [25] of the judgment, referring to the Carvalho case at [31] and cases there cited. The Court re-iterated its previous statements that the Directives do not seek to harmonise the rules of Member States governing civil liability in respect of motor accidents and the Member States are “free to determine the rules of civil liability applicable to road accidents”. That principle applied equally to damages suffered by “non-motorised” users of the road, as confirmed by Article 12(3) of the 2009 Directive. [26] of the judgment. The only qualifications to this principle are: first, that Member States are obliged to ensure that civil liability arising under national law is “covered by insurance compatible with” the Directives; [27] of the judgment. and secondly, that the national provisions of Member States must not deprive the Directives of their effectiveness. [28] of the judgment. The Court then re-stated what it had said in Candolin at [29] and [30], viz. that the Directives would be deprived of their effectiveness if national law denied the victim the right to be compensated by the compulsory vehicle insurance or limited such a right in a disproportionate manner “on the basis of general and abstract criteria”. Only in exceptional cases could the amount of the victim’s compensation be limited “on the basis of his particular case”. [29] of the judgment.

[42]The CJEU drew a distinction between two situations. The first was when the right to compensation for the victims of the accident was affected by “a limitation of the cover against civil liability by the insurance provisions”. The second was where that right was affected by “a limitation of the insured driver’s civil liability under the applicable civil liability rules”. [31] of the judgment. Interestingly, although the CJEU had restated in the Wilkinson case its rule that it was not the business of the CJEU to interpret national legislation and assess its effect, [22] of the CJEU’s judgment in Wilkinson. in Lavrador the Court appeared to give its interpretation of the Portuguese national law. It said that the intention of the Portuguese national legislation was, first, to exclude the “risk liability” of the vehicle driver when the accident was caused exclusively by the victim. Secondly, the CJEU said that the intention of the Portuguese Civil Code was to regulate the amount of a victim’s compensation “in proportion to the degree of seriousness of [the] fault” if that fault had “contributed to the causation or aggravation” of the loss of the victim. [33] of the Lavrador judgment. The CJEU then said that the Portuguese legislation (in contrast to that in Candolin and the earlier case of Farrell

Case C-356/05

;

[2007] ECR I-3067

) did not have the effect of automatically excluding or limiting disproportionately the right to compensation, by means of compulsory insurance against the civil liability of a vehicle driver, when the victim contributed to his own loss or injury. So the national law did not infringe the provisions of the Directives. [34] of the judgment.

[43]The CJEU answered the Portuguese Supreme Court’s question in terms of EU law, by saying that the Directives were to be interpreted in such a way that they did not preclude: “…national provisions falling within civil liability law that allow exclusion or limitation of the right of the victim of an accident to claim compensation under the civil liability insurance of the motor vehicle involved in the accident, on the basis of an individual assessment of the exclusive or partial contribution of that victim to his own loss or injury”. [35] of the judgment.

[44]I think it must follow from the CJEU’s analysis in these two cases that there are two key questions to ask about any national law that may impinge on the circumstances when the victim of a road accident can recover damages as a result of the civil liability of a driver of a vehicle. The first question is whether the particular national law provision falls within what the CJEU in Lavrador called national “civil liability law”, or “civil liability rules”, which I take to be in contrast to national law provisions which define or limit the scope or extent of insurance cover against civil liability of a vehicle driver in respect of a passenger victim of a road accident. As Advocate General Mengozzi noted at [16] of his Opinion in the present case, this distinction can, in practice, present certain difficulties, on which the CJEU may be called upon to give further clarification in the future.

[45]Depending on the answer to the first question, the second question is: do those rules infringe the objectives and terms of the Directives. As a general rule, if the relevant national provision is a rule governing “civil liability” then the only limitation on their applicability is that such provisions must not deprive the Directives of their effectiveness. But if the national provision is one that concerns the extent to which a passenger can benefit from civil liability insurance cover, then that does directly concern the Directives and the national law must not conflict with their objectives and provisions.

VI Principles of interpretation of national laws which are based on EU Directives

[46]This topic has to be examined on two levels. First it is necessary to consider, as a matter of EU law, the obligations of Member States with regard to the implementation of EU Directives. This involves, but is not limited to, EU law obligations of interpretation of national law by national courts when those national laws might touch on the implementation of EU Directives. Secondly, it is necessary to examine briefly what the English courts have held is the scope of the court’s power to interpret national laws in order that they can be interpreted consistently with any EU Directive which the national laws are intended to implement.

[47]On the issue of Member States’s obligations as a matter of EU law, the ECJ has stated that when an EU Directive imposes obligations on Member States and it is implemented by national legislation, there is a duty on Member States (imposed by what is now Article 4(3) of the Treaty on European Union – the Maastricht Treaty 1992 – “TEU”) to take all appropriate measures, whether general or particular, to ensure fulfilment of that obligation. This duty is binding on all the authorities of the Member States, including, in respect of matters within their jurisdiction, their courts. Bernhard Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Walshut eV:

Case C-397/01

to C-403/01; [2004] ECR 1-8835 at [110]. This case developed principles stated in Marleasing SA v La Comercial Internacional de Alimentacion SA

Case C-106/89

; [1990] ECR 1-4135 at [8] – [9]. Thus, when a national court has to apply the domestic provisions which have been specifically enacted for the purpose of transposing an EU Directive intended to confer rights on individuals, the national court must presume (in the light of what is now Article 228 of the Treaty on the Functioning of the European Union – the Rome Treaty 1958 - “TFEU”) that the Member State, following its exercise of the discretion afforded it under that Article, intended entirely to fulfil the obligations arising from the Directive concerned. Ibid at [112]. Thus, when a national court applies domestic provisions enacted to implement a particular Directive, it must interpret that national law in conformity with Community law. In doing so the court must consider its national law as a whole in order to assess to what extent any particular national law may be applied so as not to produce a result contrary to that sought by the Directive. Ibid at [115]. The national court must, of course, use interpretive methods recognised by its own national law. The court should use such interpretive methods so as, first, to avoid a conflict between the provision of the national law derived from the Directive and any other rules of domestic law; and, secondly, to reduce the scope of the other rule of domestic law in such a way as to be able to achieve the result sought by the Directive. Ibid at [116].

[48]These obligations of Member States are EU law obligations. This EU law principle of interpretation of national law that is intended to implement an EU Directive is often called the principle of “consistent interpretation”. That principle is, however, subject to what the ECJ has called “the general principles of law, particularly those of legal certainty and non-retroactivity”. Kiriaki Angelidaki et al v Oranismos Noarkhiaki Aftodiikisi Rethimnis and Dimos Geropotamou: Cases C-378/07 to C-380/07; [2009] ECR 1-3070 at [199]. Thus, as I understand it, when the national court undertakes its obligation to refer to the content of a Directive in order to interpret and apply the relevant national law that implements the Directive, the national court must not use that obligation as the basis for an interpretation of the national law that is obviously contrary to its own laws or in a way that would, retroactively, re-interpret other existing laws.

[49]The English courts have developed certain parameters for the interpretation of domestic statutes which can be used in order that the courts can fulfil the EU law obligations set out above as well as their obligation to interpret statutes consistently with the Human Rights Act 1998. These parameters were summarised by Sir Andrew Morritt C in Vodaphone 2 v Revenue and Customs Commissioners.

[2010] Ch 77

at [37]-[38]. They were not in dispute before us, although their application to the present cases obviously is. It is easiest to set out the summary as given by the Chancellor, although I have used numbers rather than letters and I have incorporated into one paragraph the two paragraphs of his judgment where the summary is set out. Some of the principles are derived from cases concerning the effect of the Human Rights Act 1998 on the interpretation of domestic statutes. Again it was agreed that the principles set out in those cases applied equally to the interpretation of national laws which implement EU Directives.

[50]The parameters of interpretation are: “The obligation on the English courts to construe domestic legislation consistently with Community law obligations is both broad and far-reaching. In particular [the obligation]:(1) is not to be constrained by conventional rules of construction; Pickstone v Freemans plc

[1989] AC 66

per Lord Oliver of Aylmerton at 126B

(2) does not require ambiguity in the legislative language; Ibid; Ghaidan v Godin-Mendoza

[2004] 2AC 557

at [32] per Lord Nicholls of Birkenhead

(3) is not an exercise in semantics or linguistics; Ghaidan’s case at [31] and [35] per Lord Nicholls; [48]-[49] per Lord Steyn; [110]-[115] per Lord Rodger of Earlsferry.

(4) permits departure from the strict and literal application of the words which the legislature has elected to use; Lister v Forth Dry Dock & Engineering Co Ltd

[1990] 1 AC 546

at 577A per Lord Oliver of Aylmerton; Ghaidan’s case at [31] per Lord Nicholls.

(5) permits the implication of words necessary to comply with Community law obligations; Lister at 577A per Lord Oliver; Ghaidan’s case at [31] per Lord Nicholls.

(6) [accepts that] the precise form of words to be implied does not matter; Pickstone at 112D per Lord Keith of Kinkel; Ghaidan’s case at [122] per Lord Rodger; R (IDT Card Services Ireland Ltd) v Customs& Excise Commissioners

[2006] STC 1252

at [114] per Arden LJ.

(7) [is only constrained] to the extent that the meaning should ‘go with the grain of the legislation’ and be ‘compatible with the underlying thrust of the legislation being construed’; Ghaidan’s case at [33] per Lord Nicholls; Revenue and Customs Commissioners v EB Central Services Ltd

[2008] STC 2209

at [81] per Dyson LJ.

(8) must not lead to an interpretation being adopted which is inconsistent with the fundamental or cardinal feature of the [national] legislation since this would cross the boundary between interpretation and amendment; Ghaidan’s case at [33] per Lord Nicholls and at [110]-[113] per Lord Rodger; IDT Card Services case at [82] and [113] per Arden LJ.

(9) cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate. Ghaidan’s case at [33] per Lord Nicholls and [115] per Lord Rodger; IDT Card Services case at [113] per Arden LJ.

[51]The issue between the parties, who all accept that there has to be some notional verbal manipulation of the wording of section 151(8), is about how the obligation of conforming interpretation and the broad scope for interpretation of the Act are to be exercised. It is now necessary to consider the parties’ rival arguments.

VII The arguments of the parties

[52]Mr Conor Quigley QC, who led the team for the appellant Tracey Evans and the respondent Benjamin Wilkinson, submitted that Blair J’s approach to the correct interpretation of section 151(8), as set out at [68] of his judgment, was correct. Thus the section should be interpreted so that the insurer’s right of recovery under section 151(8) could not be applied in such a way as to negate the insurer’s obligation under section 151(5) to pay to someone entitled to the benefit of a judgment the sum payable under that judgment. Mr Quigley submitted that Blair J was correct to recognise that factual situations might vary, but there was nothing in the present case that could lead to any reduction in the entitlement of either Mr Wilkinson or Ms Evans to receive the full amount of the judgment obtained against the negligent driver.

[53]In Mr Quigley’s submission it is important to analyse carefully the nature of the statutory right granted to an insurer by virtue of section 151(8). He submitted that the sub-section enabled an insurer to recover, by way of indemnity from an insured who(a) would have been covered by the insurance and

(b) had caused or permitted the use of the vehicle that gave rise to the liability for which there was insurance cover, the sum paid out under section 151(5). This right was absolute and was not dependent upon proof of any fault on the part of the insured. He submitted that any interpretation of section 151(8) which introduced a “fault-based” system would not be permissible. It would go against a cardinal feature of the legislation, which, so far as section 151(8) was concerned, was a right of indemnity that did not depend on fault.

[54]Mr Fergus Randolph QC, who led the submissions of the teams on behalf of the insurers, accepted that if an insurer exercised his right of recovery from an insured under section 151(8), then in a case where the insured was also the victim of the accident, there would be an automatic exclusion of the victim from the benefit of the insurance. However, he submitted, it does not follow that the section has to be interpreted so that it can never be applied to an insured who is also a passenger victim. An interpretation of the section that would permit recovery by an insurer from an insured/passenger victim on a case by case basis according to the particular facts would be consistent with the European Courts’ decisions in Candolin and Lavrador.

[55]Mr Stephen Worthington QC, who appeared for Churchill, analysed further the right granted to an insurer under section 151(8). He submitted that section 143(1)(b) of the Act creates a kind of statutory duty not to “cause or permit” another person to use a motor vehicle on a road unless insured in accordance with the Act. A breach of that duty was a criminal offence by virtue of section 143(2). In his submission, section 151(8) created the right of an insurer to extract a civil law penalty from its insured in circumstances where the insurer had been liable to pay under a motor insurance in respect of the civil liability of an uninsured driver where the insured had caused or permitted the use of the vehicle by that uninsured driver. Therefore, Mr Worthington submitted, the basis for a recovery under section 151(8) was that the insured was at fault in causing or permitting the uninsured driver to use the vehicle concerned. Section 151(8) should be interpreted so that this right of recovery was not automatic but could only be exercised when it was proportionate to do so on the facts of the particular case. That would be consistent with Candolin, Lavrador and the remarks of the CJEU in the present case at [48] – [49].

[56]Mr Winston Hunter QC, who appeared for Equity, submitted that the claimants’ proposed interpretation of section 151(8) would be contrary to the philosophy of the remarks of the European Court in Candolin, Lavrador and at [48]-[49] of the present case. That was because, on the claimants’ interpretation, there could be no circumstances when an insured/passenger victim might be liable to repay some of the benefit of the judgment to the insurer, whatever the factual situation might be. Mr Hunter accepted that the legal basis for recovery by an insurer under section 151(8) was not contributory negligence and so was not directly concerned with what would normally be called the “legal cause” of the injury. However, he submitted, Parliament had clearly intended that, by section 151(8), an insurer should have a right to claim a civil indemnity from the insured, even when a victim himself. The only question was how to interpret that section so as to make that right a proportionate one rather than an absolute one.

[57]Mr Brian Kennelly for the SST supported the arguments advanced on behalf of the insurers. He emphasised that the CJEU in the present case had not decided whether section 151(8) complied with the motor insurance Directives.

[58]In response, Mr Quigley accepted that section 151(8) created a statutory civil liability on the insured if the circumstances set out in that sub-section were fulfilled. But, he emphasised, it created a strict liability on the part of the insured. The proposed interpretation of the insurers would change the nature of the regime into one based on an overall consideration of facts, which was not contemplated by Parliament. Such an interpretation would “go against the grain” of the legislation.

[59]Mr Stephen Grime QC, for Wilkinson, also pointed out that, on the insurers’ proposed interpretation of section 151(8), a judge would be faced with a difficult exercise. There could not be a simple percentage reduction, as in the case of a finding of contributory negligence. The size of the award to the claimant victim would also be a major consideration.

VIII Analysis and conclusions

[60]In my view there are two stages to deciding on whether it is the claimants’ or the insurers/SST’s interpretation of section 151(8) that is to be preferred. The first is to consider the nature of section 151(8) and the second is to see which interpretation best conforms with the nature of the section and the requirements and restrictions imposed by the EU Directives.

[61]The nature of section 151(8). Section 151(8), is, of course, a national rule; there is nothing equivalent in the EU Directives. What does it do? It grants to a compulsory motor insurer who has had to satisfy a judgment pursuant to section 151(5) the right to recoup his payment from either the uninsured person who created the liability or an insured person who caused or permitted the use of the vehicle which gave rise to the liability. So, in a sense, the section is the other side of a bargain. It is the benefit that the compulsory motor insurer obtains in return for having to pay out in circumstances where it might otherwise have been able to avoid or cancel the policy. It is linked into section 148(6) of the Act. This stipulates that a provision in a motor policy requiring an insured to pay to the insurer any sums which the insurer may have become liable to pay under the policy to the satisfaction of third parties will not be void, despite the terms of section 148(5) of the Act, which renders ineffective other types of exclusion/avoidance clauses in policies. I imagine this insurer’s right to claim an indemnity was the bargain struck by statutory motor insurers at the time that compulsory motor insurance was first introduced into the UK by the 1930 Road Traffic Act.

[62]Secondly, in the context of the EU Directives, it is necessary to ask whether section 151(8) is a national rule governing “civil liability” or a national rule concerning the extent to which an insured can benefit from compulsory motor insurance cover. In my view there are elements of both in the provision. Let me take first the case of an insured who has caused or permitted an uninsured driver to use the vehicle, but that insured has not himself suffered any injury and an insurer pays out to a injured passenger, who is not an insured, pursuant to section 151(5)) of the Act. The insurer then seeks to recover that payment from the insured under section 151(8). In that case the right of the insurer to recover from the insured does not impinge on the extent of anyone’s ability to obtain compensation through compulsory motor insurance against civil liability. On those facts I would accept the analysis of Mr Worthington that section 151(8) grants the insurer a right to recover a civil indemnity from the insured who has failed to fulfil the obligation imposed on all by section 143(1)(b) of the Act. I cannot see how, in that case, the right granted by section 151(8) curtails in any way the ability of the passenger victim, who is not an insured, to benefit from the statutory compulsory motor insurance. In that circumstance, section 151(8) cannot infringe the principles of the EU motor insurance Directives at all. I will call this “Case 1”.

[63]However, the position is radically different when the insured is a passenger who is injured in the accident caused by the uninsured driver of the vehicle. This court held, in its first judgment in this case that, in those circumstances, the effect of section 151(5) and (8) together is, “as a matter of English law”, to “ …exclude from the benefit of the insurance a passenger who is the insured but has given permission to an uninsured driver to drive.” This court is bound by that analysis of section 151(8) as a matter of English law. Moreover, that analysis, with the addition of the word “automatically” after “exclude” was the basis on which the CJEU approached both questions referred to it by this court. Hence the CJEU’s statement, at [24], that the issue referred to it was: “…the compatibility with EU law of a provision which, according to the interpretation given by the referring court, by excluding automatically the benefit of compensation possible due to an insured limits the extent of civil liability insurance cover”.

[64]Thus, because in this second circumstance section 151(8) has the effect of limiting the extent of civil liability insurance cover to which a passenger victim who is an insured is entitled under both the EU Directives and section 151(5) of the Act, it seems to me that section 151(8) has to be interpreted in a manner which is consistent with the interpretation of Articles 12(1) and 13(1) of the 2009 Directive The equivalent of Article 1 first sub-para of the Third Directive and Article 2(1) of the Second Directive respectively. given by the CJEU in this case. Those provisions preclude national rules “…the effect of which is to omit automatically the requirement that the insurer should compensate a passenger, the victim of a road traffic accident, on the ground that the passenger was insured to drive the vehicle which caused the accident but that the driver was not”. [36] of the judgment of the CJEU in the present cases. I will call this “Case 2”.

[65]What is the correct “conforming interpretation” of section 151(8)? It seems to me that any interpretation that must be given to section 151(8) has to deal with both Case 1 and Case 2. The claimants’ interpretation preserves the insurer’s right under Case 1, but excludes it altogether in Case 2. The question is whether that drastic consequence is necessary in order that section 151(8) is compatible with the EU Directives as interpreted by the European Courts.

[66]The claimants argued that this result is compatible with the distinction that the European courts have drawn between, first, the right of Member States to fashion their own national rules on civil liability for road accidents, which is untrammelled so long as those rules do not thereby render the EU Directives ineffective, Candolin at [28]; Lavrador at [25] and [29]. and, secondly, national rules which have the effect of curtailing a right to compensation through the benefit of compulsory liability insurance for motor accidents. Broadly speaking, English law reduces or extinguishes a claimant’s right to claim damages through “civil liability” concepts such as contributory negligence, the claimant’s voluntary agreement to an act occurring and causation. This court stated (at [36] of its first judgment in this case) that it did not see how the insured passenger’s knowledge that the driver was driving uninsured could give rise to a finding of contributory negligence on the part of the insured. Logically, there would therefore be even less scope for a finding of contributory negligence if the insured passenger did not know the driver was uninsured but still caused or permitted him to drive the vehicle.

[67]So, it is argued for the claimants, there is no means by which the fact that a passenger victim insured, who had caused or permitted the uninsured person to drive the vehicle could have an impact, in English law, on the civil liability of that driver. Therefore, the claimants’ interpretation of section 151(8) which prevents that section from being utilised against such a passenger victim insured is proper because, it is argued, there can only be such a reduction or extinction if it is in consequence solely of national rules relating to “civil liability”, as in the Lavrador case.

[68]I cannot accept that argument. It seems to be clear that in Candolin the ECJ considered national rules of Finland which the referring court regarded (and so the ECJ accepted) as being rules concerning the right of a person (there the daughter of the deceased passenger) to compensation payable under compulsory motor vehicle insurance. The ECJ held that the EU Directives precluded any national rules, whether concerned with civil liability or with the right to compensation payable under compulsory motor insurance, which deprived the Directives of their effectiveness. The important point is that the ECJ went on make statements about what national rules could or could not do in relation to the right to compensation under compulsory motor insurance law. Thus it said, at [29], that national rules could not, “on the basis of general or abstract criteria” deny a passenger victim totally of the right to be compensated by the compulsory motor insurance or limit that right in a “disproportionate manner”. The ECJ emphasised, at [30]-[31], that it was for the national court to see if exceptional circumstances existed which might justify a limit on the right to compensation and then it had to be proportionate. Thus, in my view, the ECJ was laying down the permissible scope of national rules concerning the right to a passenger victim’s compensation under compulsory motor insurance provisions.

[69]That approach was repeated in the CJEU’s judgment in the present case at [48]-[49] when it considered the second question put to it by this court, viz. whether the answer to question one would be different if the insured victim was aware that the person to whom he gave permission to drive the vehicle was not insured to do so. Having said the answer would be the same, the CJEU then went on to reiterate what it had said in Candolin.

[70]It seems to me, therefore, that a close analysis of the CJEU’s statement in [49] is most important to see if, first, there can be national rules that can restrict the extent to which a passenger’s right to recover compensation through compulsory motor insurance and, secondly, the possible scope of those restrictions. That analysis will, in my view, then determine how section 151(8) should be interpreted.

[71]For convenience I will set out [49] of the CJEU’s judgment again here: “Accordingly, national rules, formulated in terms of general and abstract criteria, may not refuse or restrict to a disproportionate extent the compensation to be made available to a passenger by compulsory insurance against civil liability in respect of the use of motor vehicles solely on the basis of his contribution to the occurrence of the loss which arises. It is only in exceptional circumstances that the amount of compensation may be limited on the basis of an assessment of that particular case”.

[72]First of all, it is clear that the paragraph is dealing with any national rules that would impinge on the extent to which a passenger can recover compensation through compulsory motor insurance, not just national rules concerning civil liability arising out a motor accident. Secondly, the paragraph refers to a “passenger” receiving compensation, so this must refer to all types of passenger victim, whether or not they are also an insured. Thirdly, the national rules with which this paragraph is concerned (formulated in terms of “general and abstract criteria”) are rules that refuse or restrict the right to compensation “…solely on the basis of [the passenger’s] contribution to the occurrence of the loss which arises”. Fourthly, although the CJEU will have been conscious of the particular comments of Waller LJ’s judgment in this case at [36], “I do not see how knowing that a driver is driving uninsured could give rise to a finding of contributory negligence as a matter of English law”. this part of [49] of the CJEU’s judgment is not couched in terms of English law concepts of either causation or contributory negligence. The phraseology “his contribution to the occurrence of the loss which arises” is much less precise. It appears to me that the statement was not intended to be confined to any particular national rule concerning “civil liability” or concepts which an English lawyer would call “causation” or “contributory negligence”. Fifthly, the paragraph re-iterates the view (expressed in Candolin) that there can be a “refusal or restriction” or “limitation” of the amount of compensation that a passenger/victim can recover from compulsory motor insurance in exceptional circumstances, “on the basis of an assessment of that particular case”. That phraseology is also general and must equally refer to all types of passenger, rather than just those who are passenger victims but not also insureds.

[73]I have already accepted that the effect of section 151(8) is to grant the insurer the right to claim a civil indemnity in circumstances where the insured has caused or permitted an uninsured driver to use the vehicle which gave rise to the liability. This court has held that, in the case of an insured passenger victim, the sub-section has the effect of excluding (automatically) the insured passenger victim from compensation under compulsory motor insurance. In my view in a case where an insured passenger victim either caused or permitted the uninsured driver to use the vehicle which gave rise to the liability that the insurer has had to meet under section 151(5), then section 151(8) is, in the terms of [49] of the CJEU’s judgment in this case, a right based on the insured passenger victim’s “contribution” to the “occurrence of the loss”. Therefore, section 151(8) should be interpreted in a manner which both retains the ability of an insurer to utilise its right to obtain an indemnity from an insured when he is not a passenger victim, (my Case 1) and so does not affect the latter’s right to compensation through compulsory motor insurance, but also ensures that in the case of the insured passenger victim, (my Case 2), it complies with the restrictions envisaged in [49].

[74]The insurers and the SST argued that this is precisely what their interpretation would achieve. But the claimants countered that this interpretation is impermissible because it would be contrary to the “fundamental principle” of section 151(8). The claimants argued that the section creates a “no fault” right of indemnity, whereas the interpretation of the insurers and SST would turn it into a right dependent on establishing fault or applicable only after making other qualitative assessments.

[75]I cannot accept this argument of the claimants. Section 151(8) in fact demands that two pre-conditions be fulfilled before the insurer has the right to an indemnity from the insured. It has to be shown that the insured “caused or permitted In Philip Lloyd-Wolper v Robert Moore et al

[2004] EWCA Civ 766

this court held that, for the purposes of section 151(8), “permission” was given even if it was given as a result of a misrepresentation that the driver was, in fact, insured. See [28] per Pill LJ with whom Rix LJ and Sir William Aldous agreed. the use of the vehicle” and that the use of the vehicle “gave rise to the liability”. So I think it cannot be against the fundamental principle of section 151(8) to require further conditions be fulfilled in certain limited circumstances before the insurer can exercise the right (to whatever extent may seem proportionate) against an insured passenger victim.

[76]Accordingly, I would prefer the interpretation advanced by the insurers and the SST.

(b) as notionally including the words added in bold italics:

“Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured in a policy…he is entitled to recover the amount from…any person who- …… (b) caused or permitted the use of the vehicle which gave rise to the liability, save that where the person insured by the policy may be entitled to the benefit of any judgment to which this section refers, any recovery by the insurer in respect of that judgment must be proportionate and determined on the basis of the circumstances of the case”. (b) caused or permitted the use of the vehicle which gave rise to the liability, save that where the person insured by the policy may be entitled to the benefit of any judgment to which this section refers, any recovery by the insurer in respect of that judgment must be proportionate and determined on the basis of the circumstances of the case”

IX Disposal

[77]None of the parties invited this court to make any determination on the facts of the two cases in the event that this court accepted that section 151(8)(b) should be interpreted as submitted by the insurers and the SST. My proposal would be, therefore, that this court should make a declaration on the correct construction of section 151(8)(b). It would follow, I think, that the appeal from the judgment of Blair J must be allowed to the extent that the declaration in paragraph 1(b) of the Order of 11 June 2009 cannot now stand. This stated that Churchill Insurance Company Ltd did not have the right to recover, under section 151(8)(b) the amount paid to Mr Wilkinson pursuant to section 151(5) of the Act. It must also follow that the Order made by Judge Gregory on 10 June 2009 in paragraphs 1 and 3 equally cannot now stand. This stated that Equity Claims Limited was entitled, by reason of section 151(8)(b) of the Act to withhold from Ms Evans any sum that Equity was liable to pay her pursuant to section 151(5) of the Act. So the appeal in that case would also have to be allowed, to the extent that follows from my conclusion on the interpretation of section 151(8)(b). Counsel must draft a suitable form of order applicable to each appeal. Lord Justice Etherton

[78]I agree. Lord Justice Maurice Kay

[79]I also agree. Appendix One Road Traffic Act 1988 143 - Users of motor vehicles to be insured or secured against third-party risks. (1). Subject to the provisions of this Part of this Act— (a). a person must not use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act, and (b). a person must not cause or permit any other person to use a motor vehicle on a road or other public place unless there is in force in relation to the use of the vehicle by that other person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act. (2). If a person acts in contravention of subsection (1) above he is guilty of an offence. ………………………… 145 - Requirements in respect of policies of insurance. (1). In order to comply with the requirements of this Part of this Act, a policy of insurance must satisfy the following conditions. (2). The policy must be issued by an authorised insurer. (3). Subject to subsection (4) below, the policy— (a). must insure such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person or damage to property caused by, or arising out of, the use of the vehicle on a road or other public place in Great Britain, and…. ……………………… 148 - Avoidance of certain exceptions to policies or securities. (1). Where a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, so much of the policy or security as purports to restrict— (a). the insurance of the persons insured by the policy, or (b). the operation of the security, (as the case may be) by reference to any of the matters mentioned in subsection (2) below shall, as respects such liabilities as are required to be covered by a policy under section 145 of this Act, be of no effect. (2). Those matters are— (a). the age or physical or mental condition of persons driving the vehicle, (b). the condition of the vehicle, (c). the number of persons that the vehicle carries, (d). the weight or physical characteristics of the goods that the vehicle carries, (e). the time at which or the areas within which the vehicle is used, (f). the horsepower or cylinder capacity or value of the vehicle, (g). the carrying on the vehicle of any particular apparatus, or (h). the carrying on the vehicle of any particular means of identification other than any means of identification required to be carried by or under [F1the Vehicle Excise and Registration Act 1994]. (3). Nothing in subsection (1) above requires an insurer or the giver of a security to pay any sum in respect of the liability of any person otherwise than in or towards the discharge of that liability. (4). Any sum paid by an insurer or the giver of a security in or towards the discharge of any liability of any person which is covered by the policy or security by virtue only of subsection (1) above is recoverable by the insurer or giver of the security from that person. (5). A condition in a policy or security issued or given for the purposes of this Part of this Act providing— (a). that no liability shall arise under the policy or security, or (b). that any liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy or security, shall be of no effect in connection with such liabilities as are required to be covered by a policy under section 145 of this Act. (6). Nothing in subsection (5) above shall be taken to render void any provision in a policy or security requiring the person insured or secured to pay to the insurer or the giver of the security any sums which the latter may have become liable to pay under the policy or security and which have been applied to the satisfaction of the claims of third parties. (7). Notwithstanding anything in any enactment, a person issuing a policy of insurance under section 145 of this Act shall be liable to indemnify the persons or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of persons. ………………… 151 - Duty of insurers or persons giving security to satisfy judgment against persons insured or secured against third-party risks. (1). This section applies where, after a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been effected or to whom a security has been given, a judgment to which this subsection applies is obtained. (2). Subsection (1) above applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 of this Act and either— (a). it is a liability covered by the terms of the policy or security to which the certificate relates, and the judgment is obtained against any person who is insured by the policy or whose liability is covered by the security, as the case may be, or (b). it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and the judgment is obtained against any person other than one who is insured by the policy or, as the case may be, whose liability is covered by the security. (3). In deciding for the purposes of subsection (2) above whether a liability is or would be covered by the terms of a policy or security, so much of the policy or security as purports to restrict, as the case may be, the insurance of the persons insured by the policy or the operation of the security by reference to the holding by the driver of the vehicle of a licence authorising him to drive it shall be treated as of no effect. (4). In subsection (2)(b) above “excluded liability” means a liability in respect of the death of, or bodily injury to, or damage to the property of any person who, at the time of the use which gave rise to the liability, was allowing himself to be carried in or upon the vehicle and knew or had reason to believe that the vehicle had been stolen or unlawfully taken, not being a person who— (a). did not know and had no reason to believe that the vehicle had been stolen or unlawfully taken until after the commencement of his journey, and (b). could not reasonably have been expected to have alighted from the vehicle. In this subsection the reference to a person being carried in or upon a vehicle includes a reference to a person entering or getting on to, or alighting from, the vehicle. (5). Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment— (a). as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum, (b). as regards liability in respect of damage to property, any sum required to be paid under subsection (6) below, and (c). any amount payable in respect of costs. (6). This subsection requires— (a). where the total of any amounts paid, payable or likely to be payable under the policy or security in respect of damage to property caused by, or arising out of, the accident in question does not exceed £1,000,000, the payment of any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum, (b). where that total exceeds £1,000,000, the payment of either— (i). such proportion of any sum payable under the judgment in respect of the liability as £1,000,000 bears to that total, together with the same proportion of any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum, or (ii). the difference between the total of any amounts already paid under the policy or security in respect of such damage and £1,000,000, together with such proportion of any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on any sum payable under the judgment in respect of the liability as the difference bears to that sum, whichever is the less, unless not less than £1,000,000 has already been paid under the policy or security in respect of such damage (in which case nothing is payable). (7). Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is insured by a policy or whose liability is covered by a security, he is entitled to recover from that person— (a). that amount, in a case where he became liable to pay it by virtue only of subsection (3) above, or (b). in a case where that amount exceeds the amount for which he would, apart from the provisions of this section, be liable under the policy or security in respect of that liability, the excess. (8). Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy or whose liability is not covered by a security, he is entitled to recover the amount from that person or from any person who— (a). is insured by the policy, or whose liability is covered by the security, by the terms of which the liability would be covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and (b). caused or permitted the use of the vehicle which gave rise to the liability. (9). In this section— (a). “insurer” includes a person giving a security, (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c). “liability covered by the terms of the policy or security” means a liability which is covered by the policy or security or which would be so covered but for the fact that the insurer is entitled to avoid or cancel, or has avoided or cancelled, the policy or security. Appendix Two 134. Directive 2009/103/EC of the European Parliament and of the council of 16 September 2009 135. relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to ensure against such liability (codified version) (text with EEA relevance) 136. THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION 137. ……… 138. Whereas: (1). Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of Member States relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability [3], Second Council Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles [4], Third Council Directive 90/232/EEC of 14 May 1990 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles [5] and Directive 2000/26/EC of the European Parliament and of the Council of 16 May 2000 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles (Fourth motor insurance Directive) [6] have been substantially amended several times [7]. In the interests of clarity and rationality those four Directives should be codified, as well as Directive 2005/14/EC of the European Parliament and of the Council of 11 May 2005 amending Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC and 90/232/EEC and Directive 2000/26/EC of the European Parliament and of the Council relating to insurance against civil liability in respect of the use of motor vehicles. (2). Insurance against civil liability in respect of the use of motor vehicles (motor insurance) is of special importance for European citizens, whether they are policyholders or victims of an accident. It is also a major concern for insurance undertakings as it constitutes an important part of non-life insurance business in the Community. Motor insurance also has an impact on the free movement of persons and vehicles. It should therefore be a key objective of Community action in the field of financial services to reinforce and consolidate the internal market in motor insurance. (3). Each Member State must take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance. The extent of the liability covered and the terms and conditions of the insurance cover are to be determined on the basis of those measures. 142. ………. (12). Member States’ obligations to guarantee insurance cover at least in respect of certain minimum amounts constitute an important element in ensuring the protection of victims. The minimum amount of cover for personal injury should be calculated so as to compensate fully and fairly all victims who have suffered very serious injuries, while taking into account the low frequency of accidents involving several victims and the small number of accidents in which several victims suffer very serious injuries in the course of one and the same event. A minimum amount of cover per victim or per claim should be provided for. With a view to facilitating the introduction of these minimum amounts, a transitional period should be established. However, a period shorter than the transitional period should be provided for, in which Member States should increase these amounts to at least half the levels provided for. 144. …….. (14). It is necessary to make provision for a body to guarantee that the victim will not remain without compensation where the vehicle which caused the accident is uninsured or unidentified. It is important to provide that the victim of such an accident should be able to apply directly to that body as a first point of contact. However, Member States should be given the possibility of applying certain limited exclusions as regards the payment of compensation by that body and of providing that compensation for damage to property caused by an unidentified vehicle may be limited or excluded in view of the danger of fraud. (15). It is in the interest of victims that the effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident. However, in the case of vehicles stolen or obtained by violence, Member States may specify that compensation will be payable by the abovementioned body. 147. ………. (18). In the case of an accident caused by an uninsured vehicle, the body which compensates victims of accidents caused by uninsured or unidentified vehicles is better placed than the victim to bring an action against the party liable. Therefore, it should be provided that that body cannot require that victim, if he is to be compensated, to establish that the party liable is unable or refuses to pay. 149. ……… (23). The inclusion within the insurance cover of any passenger in the vehicle is a major achievement of the existing legislation. This objective would be placed in jeopardy if national legislation or any contractual clause contained in an insurance policy excluded passengers from insurance cover because they knew or should have known that the driver of the vehicle was under the influence of alcohol or of any other intoxicating agent at the time of the accident. The passenger is not usually in a position to assess properly the level of intoxication of the driver. The objective of discouraging persons from driving while under the influence of intoxicating agents is not achieved by reducing the insurance cover for passengers who are victims of motor vehicle accidents. Cover of such passengers under the vehicle’s compulsory motor insurance does not prejudge any liability they might incur pursuant to the applicable national legislation, nor the level of any award of damages in a specific accident. 151. …….. (25). Some insurance undertakings insert into insurance policies clauses to the effect that the contract will be cancelled if the vehicle remains outside the Member State of registration for longer than a specified period. This practice is in conflict with the principle set out in this Directive, according to which compulsory motor insurance should cover, on the basis of a single premium, the entire territory of the Community. It should therefore be specified that the insurance cover is to remain valid during the whole term of the contract, irrespective of whether the vehicle remains in another Member State for a particular period, without prejudice to the obligations under Member States’ national legislation with respect to the registration of vehicles.153. ……..

154. HAVE ADOPTED THIS DIRECTIVE

155. CHAPTER 1

156. GENERAL PROVISIONS

157. Article 1

158. Definitions

159. For the purposes of this Directive:

[1]"vehicle" means any motor vehicle intended for travel on land and propelled by mechanical power, but not running on rails, and any trailer, whether or not coupled;

[2]"injured party" means any person entitled to compensation in respect of any loss or injury caused by vehicles; ………. Article 3 Compulsory insurance of vehicles Each Member State shall, subject to Article 5, take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance. The extent of the liability covered and the terms and conditions of the cover shall be determined on the basis of the measures referred to in the first paragraph. Each Member State shall take all appropriate measures to ensure that the contract of insurance also covers: (a). according to the law in force in other Member States, any loss or injury which is caused in the territory of those States; (b). any loss or injury suffered by nationals of Member States during a direct journey between two territories in which the Treaty is in force, if there is no national insurers’ bureau responsible for the territory which is being crossed; in such a case, the loss or injury shall be covered in accordance with the national laws on compulsory insurance in force in the Member State in whose territory the vehicle is normally based. The insurance referred to in the first paragraph shall cover compulsorily both damage to property and personal injuries. ………. CHAPTER 5 SPECIAL CATEGORIES OF VICTIM, EXCLUSION CLAUSES, SINGLE PREMIUM, VEHICLES DISPATCHED FROM ONE MEMBER STATE TO ANOTHER Article 12 Special categories of victim

[1]Without prejudice to the second subparagraph of Article 13(1), the insurance referred to in Article 3 shall cover liability for personal injuries to all passengers, other than the driver, arising out of the use of a vehicle.

[2]The members of the family of the policyholder, driver or any other person who is liable under civil law in the event of an accident, and whose liability is covered by the insurance referred to in Article 3, shall not be excluded from insurance in respect of their personal injuries by virtue of that relationship.

[3]The insurance referred to in Article 3 shall cover personal injuries and damage to property suffered by pedestrians, cyclists and other non-motorised users of the roads who, as a consequence of an accident in which a motor vehicle is involved, are entitled to compensation in accordance with national civil law. This Article shall be without prejudice either to civil liability or to the quantum of damages. Article 13 Exclusion clauses

[1]Each Member State shall take all appropriate measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article 3 shall be deemed to be void in respect of claims by third parties who have been victims of an accident where that statutory provision or contractual clause excludes from insurance the use or driving of vehicles by: (a). persons who do not have express or implied authorisation to do so; (b). persons who do not hold a licence permitting them to drive the vehicle concerned; (c). persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned. However, the provision or clause referred to in point (a) of the first subparagraph may be invoked against persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen. Member States shall have the option — in the case of accidents occurring on their territory — of not applying the provision in the first subparagraph if and in so far as the victim may obtain compensation for the damage suffered from a social security body.

[2]In the case of vehicles stolen or obtained by violence, Member States may provide that the body specified in Article 10(1) is to pay compensation instead of the insurer under the conditions set out in paragraph 1 of this Article. Where the vehicle is normally based in another Member State, that body can make no claim against any body in that Member State. Member States which, in the case of vehicles stolen or obtained by violence, provide that the body referred to in Article 10(1) is to pay compensation may fix in respect of damage to property an excess of not more than EUR 250 to be borne by the victim.

[3]Member States shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy which excludes a passenger from such cover on the basis that he knew or should have known that the driver of the vehicle was under the influence of alcohol or of any other intoxicating agent at the time of an accident, shall be deemed to be void in respect of the claims of such passenger. Appendix Three Summary of the facts of the two cases as used by the CJEU Wilkinson v Churchill Insurance Company Limited (“Churchill”) The following were the assumed facts. In October 2004, Mr. and Mrs. Wilkinson, BW’s parents, bought him a car for £1,600. The car was insured through Churchill. The policy holder was Mrs. Wilkinson, but BW was a named driver. On 23 November 2005, he met with a couple of friends, one of them being Mr Fitzgerald, who had been drinking. BW, who had not been drinking, drove them to a local MacDonald’s, where they had something to eat. When they left, BW allowed Mr. Fitzgerald to drive the car. It is accepted for the purposes of the preliminary issue that BW knew Fitzgerald was not insured under the policy. [The Statement of Facts before the Court of Appeal also states that it was part of BW’s case (denied by Mr. Fitzgerald) that Mr. Fitzgerald had previously represented to BW that Mr. Fitzgerald had separate insurance. It was agreed by the parties prior to the court hearing, however, that resolution of that dispute was not material to the trial of the preliminary issue.] Unfortunately, Mr Fitzgerald lost control, and the car collided with a vehicle driving in the opposite direction. BW, who was aged 20 at the time, suffered severe injuries. Mr. Fitzgerald was subsequently convicted of dangerous driving, driving with excess alcohol and driving without insurance. Evans v Equity Claims Limited (“Equity”) HHJ Gregory QC found as follows: Tracy Evans (TE) owned a motorcycle. She insured the same with Equity under which she was insured to drive her motorcycle but no one else. On 4th August 2004 she permitted Adam Cockayne to drive her motorcycle with herself as pillion passenger. Through the negligence of Adam Cockayne he drove into the back of a lorry and TE was seriously injured. Adam Cockayne had been insured under a policy to drive his own motorcycle but no other and was thus uninsured. The judge found that in permitting Adam Cockayne to drive she had given no thought to the question whether Adam Cockayne was insured to drive her motorcycle.

Cited in 19 later judgments

and 10 more of the most senior