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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Aviva Insurance Ltd & Anor, R (On the Application Of) v The Secretary of State for Work and Pensions [2020] EWHC 3118 (Admin) (20 November 2020)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2020/3118.html
Cite as: [2020] EWHC 3118 (Admin)
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Neutral Citation Number: [2020] EWHC 3118 (Admin)
Case No: CO/2608/2019
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 20/11/2020
Before :
BEFORE THE HONOURABLE MR JUSTICE HENSHAW
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Between :
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THE QUEEN on the Application of (1) AVIVA INSURANCE LIMITED (2) SWISS REINSURANCE COMPANY LIMITED |
Claimants |
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- and –
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THE SECRETARY OF STATE FOR WORK AND PENSIONS |
Defendant |
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Michael Kent QC, Benjamin Tankel and Kate Boakes (instructed by Keoghs LLP) for the Claimants
Edward Brown and Brendan McGurk (instructed by Government Legal Department) for the Defendant
Hearing dates: 8 and 9 July 2020
Further evidence and written submissions filed 17 July 2020
Judgment
Mr Justice Henshaw:
(A) INTRODUCTION
(B) SUMMARY OF THE CLAIMANTS’ CLAIMS
(C) THE DEFENDANT’S POSITION IN OUTLINE
(3) Background to the 1997 Act
(E) KEY PROVISIONS OF THE 1997 ACT
(G) TARGETS OF THE CLAIMANTS’ CLAIM
(H) JUSTICIABILITY
(I) LIMITATION
(J) WHETHER THE CLAIMANTS ARE ‘VICTIMS’ FOR HRA PURPOSES
(K) WHETHER THE ACT INFRINGES THE CLAIMANTS’ A1P1 RIGHTS
(1) Interference
(2) Legitimate aim
(3) Rational connection to aim
(5) Fair balance
(L) FAILURE TO MAKE REGULATIONS UNDER SECTION 22(4)
(M) REMEDIES
(N) CONCLUSION
1. By this claim for judicial review the First Claimant (“Aviva”), an insurer with a substantial book of long-tail employers’ liability (“EL”) insurance, and the Second Claimant (“Swiss Re”), a reinsurer with contractual responsibilities in respect of this and other long-tail books, contend that provisions of the Social Security (Recovery of Benefits) Act 1997 (“the 1997 Act” or “the Act”), as currently interpreted and applied by the Defendant through its Compensation Recovery Unit (“CRU”), are incompatible with their rights under Article 1 of the First Protocol (“A1P1”) to the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) as incorporated in the United Kingdom by the Human Rights Act 1998 (“HRA”).
5. Linden J granted permission to proceed, on the papers, on 21 January 2020.
(B) SUMMARY OF THE CLAIMANTS’ CLAIMS
9. Since the 1997 Act came into force, there have been far-reaching changes in the common law and statutory provisions in relation to asbestos-related diseases. These changes have been driven by the express objective of readjusting the balance between tortfeasors and victims in asbestos cases in favour of the victim, as Males LJ noted in Equitas Insurance Limited v Municipal Mutual Insurance Limited [2019] EWCA Civ 718 §§ 90-91. However, they have also had the consequence of increasing the amount the Defendant considers she is entitled under the 1997 Act to recoup from insurers on account of the benefits the State has, as a matter of public policy, decided to provide to such victims.
10. These changes in the legal framework are summarised in McGregor on Damages (20th ed.) §§ 8-006 to 8-029, and include the following developments:
i) Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32: the usual “but for” test for causation in fact was exceptionally relaxed, on policy grounds, to enable mesothelioma victims to prove causation in circumstances where due to the aetiology of the disease, medical science did not permit identification, even on the balance of probabilities, of the source of asbestos fibres which caused it in a given case. The mesothelioma might have started from a single fibre inhaled when working for a particular employer, and the court concluded that a modified approach to proof of causation was justified, under which it would be sufficient to prove that the defendant employer had materially increased the risk of contracting the disease.
ii) Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572: held that the Fairchild principle makes a tortfeasor liable only for a share of damages, in proportion to his contribution to the overall exposure.
iii) Section 3 of the Compensation Act 2006: reversed Barker v Corus and thus imposed full liability upon a tortfeasor who was only responsible for part of the asbestos exposure.
iv) Durham v BAI (Run off) Ltd (in scheme of arrangement) & conjoined appeals [2012] UKSC 14; [2012] 1 WLR 867 (the “Employers’ Liability Trigger Litigation”): held that on the correct construction of EL insurance policies, in a mesothelioma case injury is “sustained” or “contracted” at the moment when the employee is wrongfully exposed to asbestos, rather than the moment when the disease is later established in the employee’s body.
v) International Energy Group Ltd v Zurich Insurance Plc UK [2015] UKSC 33; [2016] AC 509: concluded that the common law rule in Barker v Corus of aliquot share liability continues to apply in cases not covered by the Compensation Act 2006.
vi) Heneghan v Manchester Dry Docks [2016] EWCA Civ 86: held that the Fairchild exception applies to asbestos-related lung cancer cases because, in aetiological terms, mesothelioma and lung cancer are legally indistinguishable. It is convenient to refer to diseases of this type as being “indivisible”, the term used in Carder (below).
vii) By contrast, Carder v University of Exeter [2016] EWCA Civ 790 concerned asbestosis, which is regarded as a “divisible” disease in the sense that periods of exposure can be linked on a causal basis to the onset or severity of the disease. It is a dose-related disease, whose extent and severity is related to the quantity of fibres ingested (judgment § 2). The Court of Appeal held the claimant to be entitled to damages from a former employer who had been responsible for only 2.3% of his total exposure to asbestos dust because, although very small, the contribution made a material contribution to the claimant's condition.
11. The present Claimants’ complaint is that the combination of the 1997 Act (as interpreted by the Defendant) and the developments outlined above has given rise to five situations where liability insurers are obliged to reimburse the State for benefits that do not correspond to any damage caused by their insured, or (or including) where the insured is only one of two or more employers liable for such damage and the insurer’s contribution to the victim’s exposure was limited (and in some cases very limited):
ii) the requirement to repay 100% of the recoverable benefit even where the employee’s “divisible” disease is, as in Carder, in part unconnected with the insured’s tort;
iv) the requirement to repay certain benefits that do not correspond to a recognised head of loss. The choice as to which benefits to pay to a disabled person is a matter of government policy. Only some of these are prescribed benefits which the Claimants are required to repay. Nevertheless, the nature and amounts of those prescribed benefits do not always correspond to heads of compensation that would be payable by way of damages following a successful negligence claim. For example, Universal Credit is now a listed benefit referred to in Schedule 2 to the 1997 Act, but is deductible only against “Compensation for earnings lost during the relevant period”. Universal Credit now includes a number of benefits that were previously not recoverable, including housing benefit. However, the Claimants’ evidence indicates that, as one would expect (and as exemplified by the case of Bainbridge), claims for loss of earnings are often not made by those suffering from mesothelioma given their average age; and
v) the requirement to repay 100% of the recoverable benefit despite the element of compromise that is present in most settled claims. This requirement even extends to claims that are settled without admission of liability.
i) The Claimants are required to pay very significant amounts of benefits even where these are not the result of their insured’s wrongdoing. That aspect of the scheme has never been considered by Parliament, no clear justification for it has been articulated or identified, and it is unnecessary in order to meet the (accepted) legitimate aim of ensuring that the tortfeasor should pay for the damage he has caused.
ii) This excessive and individual burden is exacerbated by the fact that the legislation is retroactive. Thus, EL policies which were priced and paid for many years before the legislation came into force are now required to cover a liability for the repayment of benefits that could never have been anticipated at the time the policies were made.
iii) In any event, the impugned measures do not strike a fair balance between the interests of the Claimants and those of the community. In particular:
a) the 1997 Act does not correct a social injustice as between tortfeasor and victim, but rather involves the recoupment of State benefits by the Defendant - in many cases it actually works against victims;
b) the 1997 Act does not build on established legal principles. Rather the Defendant has had the advantage of developments in the common law and statute which were expressly intended to benefit the victims of torts, without considering the impact of their extension to other areas;
c) insurers are not tortfeasors and therefore the policy considerations which underpin the concept that “the tortfeasor pays” do not apply. The liabilities in practice fall on insurers because EL insurance has been compulsory since 1972; and
d) it is impossible for the Claimants to mitigate the additional burden in relation to their many responding policies, which predate the coming into force of the 1997 Act.
16. The Claimants contrast this situation with similar legislative reforms which post-date the HRA, which have not operated retrospectively and have involved careful and proportionate transitional provisions. Such schemes show that it is perfectly possible to design a scheme that does not require insurance companies to fund State benefits paid for injury that is not, on analysis, the result of their insureds’ wrongdoing. They cite as examples:
i) regulation 10 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008 (SI 2008/1596), which applies to the particular types of payment made to employees covered by section 1A of the 1997 Act. Regulation 10 has the effect of limiting a compensator’s liability to the Defendant to the amount credited by the employee, with the result that there is no excess payment by the insurer;
ii) Part 3 of the Health and Social Care (Community Health and Standards) Act 2003, which concerns the recovery of NHS treatment charges from those responsible for injuries, but does not apply to diseases and is not retrospective. Section 153 of the Act (as amended) provides for payments to be reduced as regards a claim where a court has ordered a reduction of damages in accordance with section 1 of the Law Reform (Contributory Negligence) Act 1945;
iii) regulation 6 of the Personal Injuries (NHS Charges) (Amounts) Regulations 2015 (SI 2015/295), which provides for apportionment where each of two or more compensators has made a compensation payment or is (or is alleged to be) “liable to any extent in respect of the injury”: with the result that one compensator and his insurer will be liable for only an apportioned part of the NHS charges, even where the other person responsible for the injury does not make a contribution (e.g. because he is untraceable or uninsured);
17. In In re Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3, [2015] AC 1016 (the “Welsh Bill case”), the Supreme Court held provisions relating to recovery of NHS charges in proposed legislation in Wales to be incompatible with the rights of insurance companies under A1P1. The aim of the Bill was the recovery of the cost of NHS treatment for any asbestos-related disease, by requiring compensators to make payment against certificates under a scheme similar to the benefit recovery scheme under the 1997 Act (save that it allowed a deduction to reflect any contributory negligence on the part of the victim). The Bill included a provision similar to section 22 of the 1997 Act, quoted below, deeming liability insurance to cover this new liability with retrospective effect.
(C) THE DEFENDANT’S POSITION IN OUTLINE
i) The real target for the Claimants’ claim is the 1997 Act itself. Although the Claimants refer to the Defendant’s interpretation of the Act, its language is clear, and it requires insurers to meet the relevant liabilities to the State.
ii) The real challenge is therefore to primary legislation passed 23 years ago, and on the basis of which the Claimants have written and priced EL policies in the intervening period, and the Defendant has provided social security benefits to eligible claimants in knowledge of the fact that (contributions to) those payments would be recoverable from insurers under the 1997 Act.
iii) The challenge is not justiciable because the HRA does not apply to conduct before it came into force. In the present case, the insertion by section 22 of the 1997 Act of a provision, deeming insurance policies to cover the insureds’ liabilities under section 6 of the Act, was a one-off pre-HRA event.
iv) The challenge is also out of time at least in so far as concerns any claim for damages under HRA section 6. Further, any claim based on failure to make regulations under the 1997 Act has not been made promptly and in any event within 3 months of the grounds first arising.
v) The Claimants are not ‘victims’ for HRA purposes, because Aviva has reinsured its liabilities to Swiss Re, and Swiss Re will have provided such reinsurance in full knowledge of the facts and priced any higher costs resulting from the 1997 Act into the premium it charged Aviva.
vi) Any failure to make regulations under the 1997 Act (specifically, under section 22(4): see section (L) below) cannot be challenged under the HRA.
vii) In any event, there has been no violation of the Claimants’ A1P1 rights. The relevant measures pursue a legitimate aim, to which they are rationally connected, and strike a fair balance between the Claimants’ interests and the public interest. The Claimants are in substance seeking to reverse a balance struck in the 1997 Act, for good socio-economic reasons, and return the relevant costs (amounting to tens of millions of pounds a year) to the taxpayer. Changes in market conditions, including changes that arise from latent liabilities and judgments of the higher courts on principles of personal injury and insurance law, are part of the lot of being an insurer. Moreover, the Claimants’ contentions are founded on the proposition that primary legislation cannot proportionately require insurers to meet any liability that extends beyond the common law liabilities to which their insureds were subject on ordinary tortious principles. In reality, it is obvious that Parliament can impose burdens in excess of those arising at common law, and there are numerous examples of this, both general (e.g. taxation), and specific in the field of insurance (e.g. the Motor Insurers’ Bureau, which requires that every insurer underwriting compulsory motor insurance contribute to its funding).
viii) The statements in the Welsh Bill case on which the Claimants rely were obiter and are distinguishable.
21. At common law a claimant had to give credit against particular heads of loss for State benefits that in effect provided a form of compensation for the same head of loss: Hodgson v Trapp [1989] AC 807; Ballantine v Newalls Insulation Co Ltd [2001] I.C.R. 25. Such State benefits fell outside the rule that the proceeds of insurance or third party benevolence should be ignored. No credit had to be given for so much of the State benefits as exceeded the comparable head of loss recovered, or which had no counterpart in a head of claim against which they could be offset.
“Secondly, it was argued that the defendant should not be relieved of part of his liability by the state; the tortfeasor should pay in full. This view seems to us to be based on a wrong conception of the tort system, which is directed at the compensation of loss rather than the punishment of wrongdoing. The aim should be for the damages to be equal to the actual net loss suffered. We think the argument is also undermined by the fact that tort compensation is usually paid, not by the defendant, but by his insurers.”
24. The Pearson report recommended instead that “where damages are reduced on account of contributory negligence, only the equivalent proportion of the relevant social security benefits should be deducted.” (§ 498)
26. The developments outlined above led to the Social Security Act 1989, which was later consolidated into Part IV of the Social Security Administration Act 1992. The 1989 Act sought to rectify State cross-subsidising of damages awards by, for the first time, introducing a CRU-style system. Under the new scheme, the compensator was required to deduct from any payment made to the injured person any relevant benefits, and then pay the amount so deducted over to the (then) Department of Social Security. (The change in relation to the position of claimants led to an unsuccessful challenge under the ECHR in Stevens and Knight v UK [1999] EHRLR 126). The Pearson recommendation that the tortfeasor’s credit against damages should be reduced in line with any contributory negligence on the part of the plaintiff was not implemented. The essential effect of the scheme was to remove the State’s cross-subsidy of damages awards, and ensure instead that the tortfeasor paid the full amount of the damages that he would otherwise (but for the injured person’s receipt of State benefits) have had to pay.
27. Section 22 of the 1989 Act provided, so far as material:
“Recovery of sums equivalent to benefit from compensation payments in respect of accidents, injuries and diseases
(1) A person (the “compensator”) making a compensation payment, whether on behalf of himself or another, in consequence of an accident, injury or disease suffered by any other person (the “victim”) shall not do so until the Secretary of State has furnished him with a certificate of total benefit and shall then—
(a) deduct from the payment an amount, determined in accordance with the certificate of total benefit, equal to the gross amount of any relevant benefits paid or likely to be paid to or for the victim during the relevant period in respect of that accident, injury or disease;
(b) pay to the Secretary of State an amount equal to that which is required to be so deducted; and
(c) furnish the person to whom the compensation payment is or, apart from this section, would have been made (the “intended recipient”) with a certificate of deduction.
(2) Any right of the intended recipient to receive the compensation payment in question shall be regarded as satisfied to the extent of the amount certified in the certificate of deduction.
(3) In this section—
“benefit” means any benefit under—
(a) the Social Security Acts 1975 to 1988, or
(b) the Old Cases Act,
and the “relevant benefits” are such of those benefits as may be prescribed for the purposes of this section;
“certificate of total benefit” means a certificate given by the Secretary of State in accordance with Schedule 4 to this Act;
“certificate of deduction” means a certificate given by the compensator specifying the amount which he has deducted and paid to the Secretary of State in pursuance of subsection (1) above;
“compensation payment” means any payment falling to be made (whether voluntarily, or in pursuance of a court order or an agreement, or otherwise)—
(a) to or in respect of the victim in consequence of the accident, injury or disease in question, and
(b) by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of that accident, injury or disease,
and includes, in particular, so much of the payment as represents reimbursement for costs incurred in procuring it, but does not include benefit or an exempt payment;
…
“relevant period” means—
(a) in the case of a disease, the period of 5 years beginning with the date on which the victim first claims a relevant benefit in consequence of the disease; or
(b) in any other case, the period of 5 years immediately following the day on which the accident or injury in question occurred;
but where before the end of that period the compensator makes a compensation payment in final discharge of any claim made by or in respect of the victim and arising out of the accident, injury or disease, the relevant period shall end on the date on which that payment is made whether or not any subsequent payment falls to be made in respect only of taxed costs.
(4) For the purposes of this section the following are the “exempt payments”—
(a) any small payment, as defined in paragraph 4 of Schedule 4 to this Act;
…
…
(6) Except as provided by any other enactment, in the assessment of damages in respect of an accident, injury or disease the amount of any relevant benefits paid or likely to be paid shall be disregarded.
(7) Schedule 4 to this Act shall have effect for the purpose of supplementing the provisions of this section; and this section shall have effect subject to the provisions of that Schedule.
(8) This section and that Schedule shall apply in relation to any compensation payment made after the coming into force of this section to the extent that it is made in respect of—
(a) an accident or injury occurring on or after 1st January 1989; or
(b) a disease, if the victim’s first claim for a relevant benefit in consequence of the disease is made on or after that date.”
“(1) This paragraph applies in any case where the compensator has made a compensation payment but—
(a) has not requested a certificate of total benefit in respect of the victim, or
(b) if he has done so, has not made the relevant payment within the time limit imposed by paragraph 2 above.
(2) Where this paragraph applies, the Secretary of State may—
(a) if no certificate of total benefit has been issued to the compensator, issue to him such a certificate and a demand for the relevant payment to be made forthwith, or
(b) if a certificate of total benefit has been issued to the compensator, issue to him a copy of that certificate and such a demand,
and that relevant payment shall, to the extent that it does not exceed the amount of the compensation payment, be recoverable by the Secretary of State from the compensator.
…”
““compensation payment” means any payment falling to be made (whether voluntarily, or in pursuance of a court order or an agreement, or otherwise)—
(a) to or in respect of the victim in consequence of the accident, injury or disease in question, and
(b) either—
(c) [sic] by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of that accident, injury or disease; or
(ii) in pursuance of a compensation scheme for motor accidents,
but does not include benefit or an exempt payment or so much of any payment as is referable to costs incurred by any person”
The main operative provision was section 82:
“Recovery of sums equivalent to benefit from compensation payments in respect of accidents, injuries and diseases
(1) A person (“the compensator”) making a compensation payment, whether on behalf of himself or another, in consequence of an accident, injury or disease suffered by any other person (“the victim”) shall not do so until the Secretary of State has furnished him with a certificate of total benefit and shall then—
(a) deduct from the payment an amount, determined in accordance with the certificate of total benefit, equal to the gross amount of any relevant benefits paid or likely to be paid to or for the victim during the relevant period in respect of that accident, injury or disease;
(b) pay to the Secretary of State an amount equal to that which is required to be so deducted; and
(c) furnish the person to whom the compensation payment is or, apart from this section, would have been made (“the intended recipient”) with a certificate of deduction.
(2) Any right of the intended recipient to receive the compensation payment in question shall be regarded as satisfied to the extent of the amount certified in the certificate of deduction.”
Section 100, headed “Recovery of relevant payment in cases of default”, included the following:
“(1) This section applies in any case where the compensator has made a compensation payment but—
(a) has not requested a certificate of total benefit in respect of the victim, or
(b) if he has done so, has not made the relevant payment within the time limit imposed by section 83 above.
(2) Where this section applies, the Secretary of State may—
(a) if no certificate of total benefit has been issued to the compensator, issue to him such a certificate and a demand for the relevant payment to be made forthwith, or
(b) if a certificate of total benefit has been issued to the compensator, issue to him a copy of that certificate and such a demand,
and the amount so certified shall, to the extent that it does not exceed the amount of the compensation payment, be recoverable by the Secretary of State from the compensator.”
i) On their natural meaning, the words “required to be deducted” in section 82(1)(b) did not refer to sums that could not be deducted from the compensation payment because they exceeded the amount of that payment: rather, they referred to sums which the compensator could and should have deducted from the compensation payment.
ii) Section 81(1) defined “certificate of deduction” as “a certificate given by the compensator specifying the amount which he has deducted and paid to the Secretary of State in pursuance of section 82(1) below”, thus tending to suggest that the amount payable to the Defendant equalled, rather than potentially exceeded, the amount deducted.
iii) Section 100, quoted above, provided for the Defendant to be able to recover the certified benefits only “to the extent that it does not exceed the amount of the compensation payment”.
iv) The heading to section 82 referred to recovery of sums equivalent to benefit “from compensation payments” rather than as freestanding obligations owed by compensators to the Defendant.
“• We will issue the Certificate [of Total Benefit] within four weeks of receiving a valid application.
• The Certificate tells you the amount to be deducted from the compensation award.
…
• On the date compensation is actually paid, the amount you have deducted is due to be paid to CRU. We must receive it from you within 14 days.
• If you fail to deduct the amount due to CRU from the payment to the plaintiff, you still remain liable to pay us. We can take legal action to enforce recovery”
Whilst not expressly stating the position either way, this guidance envisages the amount payable to the Defendant being no more than the amount deducted from the compensation payment.
(3) Background to the 1997 Act
i) The summary by Lord President Rodger in Mitchell v Laing 1998 SC 342 (Court of Session, Inner House, First Division) of the changes introduced by the 1997 scheme:
“In the first place, however small the amount of compensation which they have to pay, compensators are liable to pay to the Secretary of State the amount of the recoverable benefits paid to the victim in respect of the accident, injury or disease ( secs 6, 1(1)(b) and (4)(c)). This is a change from the previous system under which the compensators paid over only what they could deduct from the compensation due to the victim—which might not always be as much as the benefits which the victim had received. In this respect the new provision imposes a heavier burden on compensators, the intention being that they, rather than the state, should bear the cost of the results of the wrong done to the victim.” (p344G-H, my emphasis)
ii) A note produced by the social policy section of the House of Commons library entitled “Recovery of social security benefits from compensation awards” (last updated 4 May 2007) explaining that under the previous scheme the CRU collected from the compensator only the “deductions” from the award made to the victim, and that one of the differences under the 1997 scheme was that:
“Compensators are now liable to repay the full amount of benefits which have been paid as a result of an accident, injury or disease. They are allowed to reduce compensation payments to take account of benefit recovery, but only where the benefits and compensation meet the same need. So compensators bear the extra cost of benefits paid where the compensation payment cannot be reduced.”
iii) The article by “Social Security (Recovery of Benefits) Act 1997 and Regulations”, Andrew Dismore, J.P.I.L. 1998, Mar, 14-64, summarising the “reforms” under the 1997 Act as including the point that “any excess” which could not be offset against the corresponding heads of damage “will be met by the insurer and refunded to the DSS”.
36. The legislative history materials to which both parties referred me indicate that the relevant reforms made in 1997 flowed to a very large degree from two significant problems that had emerged under the 1989/1992 scheme:
i) There was a “small payment limit” of £2,500 below which benefits were not deducted or payable to the State, on the ground that it had not been thought worthwhile recouping benefits in such low value claims. However, this had created a perverse incentive for parties to settle claims at just below the threshold, to the disadvantage of injured persons.
ii) Under the 1989/1992 scheme, the compensator’s deduction was made against all damages payable to the injured person, including general damages such as those for pain, suffering, and loss of amenity. That was regarded as grossly unfair: benefits were not paid in relation to pain, suffering or loss of amenity, so there was no risk of double recovery, and the effect of the deduction was to deprive the injured person of compensation to which he was entitled.
37. These concerns loom large in the legislative history I was shown. For example, the Social Security Select Committee’s Fourth Report on Compensation Recovery (June 1995) referred at § 26 to feature (ii) above of the 1989 scheme, saying “Most crucially, recovery was extended to total damages, including those for pain and suffering and injury, rather than simply those for lost earnings” and stating at § 34 that “We believe that recovery from damages other than those for loss of earnings is central to the unfairness with the present scheme”. This was described at § 43 as the most serious failing of the scheme. Paragraphs 46ff discussed the small claims cap, the way in which in practice it benefitted compensators and insurers rather than injured persons or the taxpayer, and the perverse incentives to which it gave rise. Contributory negligence was discussed at §§ 61ff, including the way in which injured persons might as a result receive no compensation after deductions for State benefits, and proposals were set out for a solution.
39. The evidence the Committee had received included a Memorandum from the Law Society favouring redress of “the less fair aspects of the present scheme, particularly (a) [t]o exempt general damages from benefit recovery and (b) [t]o provide for pro rata recovery in circumstances where the victim is found to have been contributorily negligent”. The Association of British Insurers also submitted a memorandum dated 3 February 1995 , which among other things commented on contributory negligence:
“As all awards below the small payments limit are subject to the recoupment provisions, the scheme does not make allowance for contributory negligence on the part of the claimant. However, we recognise that there would be practical difficulties in taking contributory negligence into account. Most claims are concluded by negotiation and the dividing line between quantum and liability can be very blurred. From a claimant’s point of view, he is simply concerned with what he is likely to receive at the end of the day and, in achieving this amount, he may be equally reluctant to concede an apportionment of liability during early negotiations.
Accordingly the Association does not consider that contributory negligence should play a role in the operation of the scheme. It would be appropriate to leave things as they are.” (§§ 8.1 and 8.2)
“the fundamental principle is that the taxpayer should be protected from the effects of injury or disease for which a third party is responsible” (§ 23)
The Reply attached a consultation document which among other things invited views on whether contributory negligence and the overall strength of the claim were factors that should be taken into account.
42. In January 1996 Price Waterhouse produced a compliance cost assessment in relation to the Select Committee’s proposals. It indicated that:
ii) abolition of the small payments limit would increase insurance claims by an estimated £51.1 million to £66.9 million a year (including £36.14 to £45.31 million of EL liabilities), plus administrative costs of between £2.5 million and £3.8 million a year. The reason why this change was thought likely to increase liabilities was because the incentive to settle below £2,500 would disappear and “Consequently the overall settlement size would probably increase. The extra cost to the insurer in such cases is the difference between the two settlement levels. (There is an equivalent gain to the taxpayer in terms of increased benefit recovery.)” (Price Waterhouse report § 53) At the time, it was said that 65-70% of cases were being settled at or below the small payments limit.
It is therefore apparent that the then understanding was that any additional burden due to limiting deduction of recoverable benefits to specific heads of claim, and having to repay to the CRU amounts for which no such credit had been received, would give rise to only modest additional costs. It was the removal of the small payments limit that was identified as giving rise to significantly increased potential liabilities for insurers.
43. Price Waterhouse also costed a proposal to remove benefit recovery in asbestos-related settlements, which it estimated would lead to a reduction in the region of £1.75 million in the annual amount of benefit recovered. The estimate was based on the 49 such settlements notified to the CRU in June, July and August 1995. Thus at that time, asbestos disease claims (which formed a significant proportion of long-tail liabilities for EL insurers) provided a relatively modest part of benefit recovery by the State.
47. The Minister was asked about how contributory negligence would be dealt with, responding that it was a complex issue to which the House would no doubt return in Committee. (I understand that the parties to the present case were not, however, able to access records of any such committee discussion.)
49. Summarising, the Minister referred to the reasons for the proposed measures as follows:
“The first is that in the present scheme, compensation payable for pain and suffering can be eroded, which means that the victim can lose out. All noble Lords agree with me that that is wrong. Secondly, manipulation of the present scheme is taking place around the £2,500 limit which means that the taxpayer is losing out. Therefore, I believe that the case is strong and your Lordships have agreed that the new scheme will be fairer to the victim; it will enable compensation for pain and suffering to be paid in full; and it will be fairer to the taxpayer to recovering all social security benefits in the cases where compensation is payable. I believe also that it will be fair to business, allowing compensation to be reduced where a corresponding benefit has been paid.”
(E) KEY PROVISIONS OF THE 1997 ACT
53. Section 1 of the 1997 Act (as amended) provides:
“(1) This Act applies in cases where—
(a) a person makes a payment (whether on his own behalf or not) to or in respect of any other person in consequence of any accident, injury or disease suffered by the other, and
(b) any listed benefits have been, or are likely to be, paid to or for the other during the relevant period in respect of the accident, injury or disease.
(2) The reference above to a payment in consequence of any accident, injury or disease is to a payment made—
(a) by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of the accident, injury or disease,
(b) in pursuance of a compensation scheme for motor accidents, or
(c) under the Diffuse Mesothelioma Payment Scheme (established under the Mesothelioma Act 2014);
but does not include a payment mentioned in Part I of Schedule 1.
(3) Subsection (1)(a) applies to a payment made—
(a) voluntarily, or in pursuance of a court order or an agreement, or otherwise, and
(b) in the United Kingdom or elsewhere.
(4) In a case where this Act applies—
(a) the “injured person” is the person who suffered the accident, injury or disease,
(b) the “compensation payment” is the payment within subsection (1)(a), and
(c) “recoverable benefit” is any listed benefit which has been or is likely to be paid as mentioned in subsection (1)(b).”
“(1) This section applies in a case where, in relation to any head of compensation listed in column 1 of Schedule 2—
(a) any of the compensation payment is attributable to that head, and
(b) any recoverable benefit is shown against that head in column 2 of the Schedule.
(2) In such a case, any claim of a person to receive the compensation payment is to be treated for all purposes as discharged if—
(a) he is paid the amount (if any) of the compensation payment calculated in accordance with this section, and
(b) if the amount of the compensation payment so calculated is nil, he is given a statement saying so by the person who (apart from this section) would have paid the gross amount of the compensation payment.
(3) For each head of compensation listed in column 1 of the Schedule for which paragraphs (a) and (b) of subsection (1) are met, so much of the gross amount of the compensation payment as is attributable to that head is to be reduced (to nil, if necessary) by deducting the amount of the recoverable benefit or, as the case may be, the aggregate amount of the recoverable benefits shown against it.
(4) Subsection (3) is to have effect as if a requirement to reduce a payment by deducting an amount which exceeds that payment were a requirement to reduce that payment to nil.
(5) The amount of the compensation payment calculated in accordance with this section is—
(a) the gross amount of the compensation payment, less
(b) the sum of the reductions made under subsection (3), (and, accordingly, the amount may be nil).”
“(1) If a compensation payment is made in a case where—
(a) a person is liable to any extent in respect of the accident, injury or disease, and
(b) the liability is covered to any extent by a policy of insurance,
the policy is also to be treated as covering any liability of that person under section 6.
(2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted.
(3) For that purpose excluding or restricting liability includes—
(a) making the liability or its enforcement subject to restrictive or onerous conditions,
(b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy, or
(c) excluding or restricting rules of evidence or procedure.
(4) Regulations may in prescribed cases limit the amount of the liability imposed on the insurer by subsection (1).
(5) This section applies to policies of insurance issued before (as well as those issued after) its coming into force.
(6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making.”
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
67. In assessing the proportionality of a measure, including primary legislation, with individual Convention rights, the court adopts a four-stage test. See, e.g., Bank Mellat v HM Treasury (No.2) [2014] AC 700 § 20 per Lord Sumption:
“...the question depends on an exacting analysis of the factual case advanced in defence of the measure, in order to determine (i) whether its objective is sufficiently important to justify the limitation of a fundamental right; (ii) whether it is rationally connected to the objective; (iii) whether a less intrusive measure could have been used; and (iv) whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community.”
68. The Claimants do not have to show that the matters complained of, at any rate at the fourth stage (“whether on a fair balance the benefits of achieving the aim by the measure outweigh the disbenefits resulting from the restriction of the relevant protected right” (per Lord Mance in the Welsh Bill case) represents a manifestly unreasonable choice by the legislature. Lord Mance at § 52 of that case said:
“...at least the fourth stage involves asking simply whether, weighing all relevant factors, the measure adopted achieves a fair or proportionate balance between the public interest being promoted and the other interests involved. The court will in this context weigh the benefits of the measure in terms of the aim being promoted against the disbenefits to other interests. Significant respect may be due to the legislature's decision, as one aspect of the margin of appreciation, but the hurdle to intervention will not be expressed at the high level of “manifest unreasonableness”. In this connection, it is important that, at the fourth stage of the Convention analysis, all relevant interests fall to be weighed and balanced. That means not merely public, but also all relevant private interests. The court may be especially well placed itself to evaluate the latter interests, which may not always have been fully or appropriately taken into account by the primary decision-maker.”
69. The Defendant cited Pye v UK (2008) 46 EHRR 34 for the contrary proposition. The ECtHR in that case, which concerned the acquisition of land by adverse possession, stated that in spheres such as housing the court will respect the legislature’s judgment as to what is in the general interest unless that judgment is manifestly without foundation (§ 75). At § 81 the court said:
“The Court would first note that, in the case of James, the Court found that the view taken by Parliament as to the tenant's “moral entitlement” to ownership of the houses at issue fell within the State's margin of appreciation. In the present case, too, whilst it would be strained to talk of the “acquired rights” of an adverse possessor during the currency of the limitation period, it must be recalled that the registered land regime in the United Kingdom is a reflection of a long-established system in which a term of years' possession gave sufficient title to sell. Such arrangements fall within the State's margin of appreciation, unless they give rise to results which are so anomalous as to render the legislation unacceptable. The acquisition of unassailable rights by the adverse possessor must go hand in hand with a corresponding loss of property rights for the former owner. …”
“This, however, does not settle the issue. Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim ‘in the public interest’, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see, amongst others, and mutatis mutandis, the above-mentioned Ashingdane judgment (1985) 7 EHRR 528, 57). This latter requirement was expressed in other terms in the Sporrong and Lönnroth judgment by the notion of the ‘fair balance’ that must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights ((1982) 5 EHRR 35, para 69). The requisite balance will not be found if the person concerned has had to bear ‘an individual and excessive burden’ (para 73). Although the court was speaking in that judgment in the context of the general rule of peaceful enjoyment of property enunciated in the first sentence of the first paragraph, it pointed out that ‘the search for this balance is … reflected in the structure of article 1 (P1–1) ’ as a whole (para 69).” (§ 50)
71. Lord Mance also noted that:
“It is also clear that the European Court of Human Rights scrutinises with particular circumspection legislation which confiscates property without compensation or operates retrospectively. In the case of confiscation, it will normally be disproportionate not to afford reasonable compensation, and a total lack of compensation will only be justifiable in “exceptional circumstances”. In the case of retrospective legislation, “special justification” will be required before the court will accept that a fair balance has been struck: paras 48-49 above.…” (§ 53)
and:
“At the domestic level, the margin of appreciation is not applicable, and the domestic court is not under the same disadvantages of physical and cultural distance as an international court. The fact that a measure is within a national legislature’s margin of appreciation is not conclusive of proportionality when a national court is examining a measure at the national level: In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] AC 173 ; R (Nicklinson) v Ministry of Justice [2014] 3 WLR 200, at paras 71, 163 and 230, per Lord Neuberger, Lord Mance and Lord Sumption. However, domestic courts cannot act as primary decision makers, and principles of institutional competence and respect indicate that they must attach appropriate weight to informed legislative choices at each stage in the Convention analysis: see AXA , para 131, per Lord Reed, R (Huitson) v Revenue and Customs Comrs [2011] EWCA Civ 893, [2012] QB 489 , at para 85. But again, and in particular at the fourth stage, when all relevant interests fall to be evaluated, the domestic court may have an especially significant role” (§ 54)
72. It is common ground in the present case that:
i) rights and obligations under a policy of liability insurance constitute ‘possessions’ for the purposes of A1P1;
ii) a liability imposed by the State that reduces the value of an existing contract can amount to an interference with possessions;
iii) the obligation imposed by the 1997 Act upon liability insurers to repay to the State relevant benefits engages A1P1 as it establishes an obligation to make “contribution akin to taxation”;
iv) the question whether A1P1 rights are unlawfully interfered with or whether such interference is justified requires the court to be satisfied both that the measures adopted pursue a legitimate aim by a legitimate means and that the impact on the Claimants satisfies the test of proportionality; and
v) where the impact has retrospective effect “special justification” is required.
73. The ECtHR has held that systems of taxation or which impose positive obligations on persons constitute systems of control (rather than amounting to deprivation): Gasus-Dosier and Fordertechnik v Netherlands (1995) 20 EHRR 403; Denev v Sweden (1989) 12 EHRR 391 (and also Mellacher v Austria (1990) 12 EHRR 391). The test is whether the interference was provided by law, and achieves a ‘fair balance’ between the demands of the general interests of the community and the protection of the fundamental rights of individuals. The ECtHR affords a wide margin to states to determine what the public interest demands: James v UK (1986) 8 EHRR 123 (see also R (Countryside Alliance) v Attorney General [2008] 1 AC 710 per Hord Hope: “It was open to [the legislature] to form their own judgment as to whether [the relevant activities] caused a sufficient degree of suffering…for legislative action to be taken to deal with them.”). There must be a reasonable relationship of proportionality between the means employed and the aim pursued (see Hutten-Czapska v Poland (2007) 45 EHRR 4, para 167).
(G) TARGETS OF THE CLAIMANTS’ CLAIM
i) “Failure to read and give effect to provisions of the 1997 Act so as to ensure its compatibility with the Convention rights of liability insurers as required by section 3 of the Human Rights Act” (“Decision 1”);
ii) “Failure to make Regulations under section 22(4) of the said Act so as to ensure such compatibility in relation to insurance policies issued before its commencement” (“Decision 2”); and
iii) “Certificate of recoverable benefit issued by the Compensation Recovery Unit ref JXR-123” (“Decision 3”).
75. The Defendant submits that the attack on Decision 1 is in reality a challenge to the lawfulness of the 1997 Act itself. She accepts that in general terms failures to act are treated as continuing decisions and thus amenable to judicial review because they involve a public authority deciding (usually by refusing) to take some positive act (eg the refusal to bring into force a statutory scheme, withdraw a direction or to give a consent). However, Decision 1 is not such a decision. In identifying the real target of a claim, the court will look to “the decision which in substance is being challenged not a later claimed acknowledgment of its validity”: R v Newbury District Council ex parte Chieveley Parish Council (1998) 10 Admin LR 676. In R(P) v Essex County Council [2004] EWHC 2027 (Admin) it was held that “The Administrative Court exists to adjudicate upon specific challenges to discrete decisions. It does not exist to monitor and regulate the performance of public authorities” (§ 33).
i) it does not involve any additional interference over and above that which occurred when the 1997 Act was passed. The Claimants’ real complaint concerns the insertion of the insuring clause by section 22 (retrospectively and prospectively), and that it was at that moment that any extant property rights (i.e. contractual rights) were disturbed, and not subsequently: I consider this argument in section (H) below; and
ii) it falls outside the HRA by reason of HRA section 6(6): I consider that provision in section (L) below.
80. It is well established that the HRA does not apply to conduct that took place before it came into force: see R v Kansal (No 2) [2002] 2 AC 69; R v Lambert [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816. Lord Hope in In re McCaughey and another (Northern Ireland Human Rights Commission and others intervening) [2011] UKSC 20, [2012] 1 AC 725 said:
“The policy choice [of the HRA] was that, save to the limited extent referred to in section 22(4), the Act was not to apply retrospectively. As Lord Nicholls of Birkenhead said in Wilson v First County Trust Ltd [2004] 1 AC 816, para 12, sections 6 to 9 are forward looking in their reach: one would not expect a statute promoting human rights values to render unlawful acts which were lawful when done. I would add that, as section 6(6) provides that “an act” includes a failure to act, one would not expect it to apply to failures to act which were not unlawful when the alleged failure occurred.” (§ 67)
81. In McCaughey the Court considered the effect of the House of Lords’ earlier decision in In re McKerr [2004] 1 WLR 807, which had held that the procedural obligations to investigate killings under Article 2 ECHR were inextricably linked to the substantive obligation, such that even after the entry into force of the HRA no procedural obligation arose in relation to a death which occurred prior to the commencement of the HRA. Following the decision of the Strasbourg court in Šilih v Slovenia (2009) 49 EHRR 996 to the effect that the investigative obligation under Article 2 ECHR was a freestanding obligation, the issue came back before the Supreme Court in In Re McCaughey. Lord Hope said:
“The deaths with which these appeals are concerned took place in October 1990. The papers were passed to the coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings. Those statements were not provided to him until 2002. It was not until 14 September 2009 that the coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2. It is common ground that, as the deaths occurred before article 2 was made part of domestic law, the substantive aspects of that article cannot be applied to them under the Human Rights Act 1998. Section 22(4) of the Act precludes this. Sections 6(1) and 7(1)(a) of the Act do not apply because the killings occurred before the Act came into force. Any attempt that might have been made in domestic law prior to 2 October 2000 to require the coroner to carry out an investigation into them that met the requirements of article 2 would have been bound to fail. Human rights had not yet been brought home. The simple fact is that from the date when the deaths occurred to the date immediately before the Act came into force there was no obligation to investigate these deaths in the manner that meets the procedural requirements of article 2 under domestic law. The House of Lords held in In re McKerr [2004] 1 WLR 807 that, where there had been no breach of the procedural obligation before 2 October 2000, there could be no continuing breach thereafter.” (§ 68)
82. These cases indicate that it is necessary for the HRA to be in force at the time of the alleged violation in question. There is no exception in relation to A1P1 corresponding to the freestanding investigative obligation arising under Article 2 of the ECHR (where the duty to conduct a Convention-compliant investigation into a death involving state officials may arise even though the death took place before October 2000, so long as there is a sufficient connection between the death and the subsequent investigation: see the discussion in In the matter of an application by Geraldine Finucane for Judicial Review (Northern Ireland) [2019] UKSC 7 §§ 82ff).
84. I do not accept those submissions. Section 22(1) provides:
“(1) If a compensation payment is made in a case where—
(a) a person is liable to any extent in respect of the accident, injury or disease, and
(b) the liability is covered to any extent by a policy of insurance,
the policy is also to be treated as covering any liability of that person under section 6.”
86. Moreover, as the Claimants note, when the 1997 Act came into force there will have been millions of extant policies of insurance written on a “causation” basis (every employer, large or small, having been required to have such insurance since 1972 and the majority having it well before then), each policy year giving rise to a separate contract of insurance. Any one of those contracts might potentially have had to respond to claims yet to be made by or on behalf of former employees. The possibility that any one of those pre-existing contracts might subsequently give rise to future obligations to make payments to the CRU of the type about which complaint is made in these proceedings would give rise to, at most, purely contingent liabilities of the sort considered in Law Society v Sephton [2006] 2 AC 543. It is artificial for the Defendant to characterise section 22 of the 1997 Act as having interfered with rights only in 1997.
90. Further, the Defendant submits, there should be no question of any extension of time under HRA section 7(5)(b) in the following circumstances:
ii) The Defendant and her predecessors have been paying such benefits on the basis that they would be recovered in full from insurers under the 1997 Act. Requiring this to be unwound, for any period of time, would expose the Defendant to an enormous repayment liability at a time when public finances are obviously stretched as a result of the COVID-19 pandemic and the extreme financial measures (and consequences) that have resulted.
iii) Swiss Re made a further positive choice to accept the consequences of section 22(1) when in 2015 it agreed to reinsure Aviva’s back book of long tail risks. That price would reflect the liability that each policy within that back book may give rise to under the Act. The Claimants are commercially sophisticated actors who would (or should) have factored those liabilities into the price of the book.
i) the Claimants’ claims as set out in their Judicial Review Claim Form and Detailed Grounds include an alternative claim for restitution on the basis of payment under mistake of law (citing Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349), to which the HRA time limit would not apply, and
ii) in oral submissions the Claimants indicated that they wished to reserve the right to contend, if necessary, that the limitation period should be extended pursuant to Limitation Act 1980 section 32(1)(c) (to the effect that where an action is brought for relief from the consequences of a mistake, then the period of limitation shall not begin to run until the claimant has discovered the mistake or could with reasonable diligence have discovered it).
92. The Claimants point out that they have not formulated their financial loss claims in their Detailed Grounds, on the basis that it would be impracticable pending the court’s decision on the substance of the challenge; and in the event that other remedies are granted, they seek an order transferring the claim to the Chancery Division for an inquiry under CPR PD 40A into losses they have sustained. This proposed course was indicated in the Detailed Grounds themselves (§ 71) as being appropriate in what is likely to be a complex assessment of losses, by way of exception to the general rule identified by Singh LJ in R (Nazem Fayad) v SSHD [2018] EWCA Civ 54 as to the need to particularise claims for damages within judicial review proceedings. The Defendant in the present case has not taken issue with this approach, and I agree it is appropriate. In my view, questions of limitation (both under the HRA and at common law) are most appropriately addressed in the light of and following detailed formulation of any claim for financial loss that may be advanced in the light of the present judgment. Those questions will include the question of whether any necessary extension should be granted pursuant to HRA section 7(5)(b), in which context I should record that the considerations referred to in § 90 above are not common ground and are likely at least in part (most notably the contention recorded in § 90.i) above) to be hotly contested.
i) The power conferred by section 22(4) was enacted in plain view. It was open to the Claimants at any stage to either (i) ask the Secretary of State how she proposed to use that power, (ii) make submissions that it should be used for the very purpose now relied upon, and/or (iii) to complain in the event that the Secretary of State did not do so. At no stage prior to these proceedings, however, has either Claimant ever made any such enquiry, submission or complaint.
ii) The Claimants cannot, having been fully aware for the past 23 years of both the existence of the power and the fact that it has not been used for the purposes now contended for, now seek to rely on the fact that the alleged public law failure is continuing so as to permit the Claimants to challenge the decision not to make regulations at any time of their choosing, no matter how much time has passed since s.22(4) was enacted.
94. The Defendant’s objections on delay grounds as set out in her Summary Grounds of Resistance (§§ 5 and 19) appear to have been based on her contention regarding the alleged one-off effect of section 22 of the 1997 Act. Linden J when granting permission to proceed left the question of delay open. The Defendant’s Detailed Grounds of Resistance recorded that fact (§ 5) but did not advance any positive case on delay. In any event, I do not consider the claim to be barred on grounds of delay. Although the 1997 Act was passed 23 years ago, and there has been an alleged failure since then to make regulations under section 22, it is only as a result of subsequent developments that, on the Claimants’ case, the legislation has begun to infringe their A1P1 rights. It would be difficult to define precisely when that moment occurred. However, (a) the alleged infringement is a continuing act, such that a claim can in principle be brought under the HRA without the need for an extension (cf O’Connor v Bar Standards Board [2017] UKSC 78 § 30), and (b) the present claim was commenced promptly and within three months after the Bainbridge settlement (on 10 April 2019) which the Claimants have selected as an example of what they contend to be the unlawful effects of the legislation.
(J) WHETHER THE CLAIMANTS ARE ‘VICTIMS’ FOR HRA PURPOSES
95. Section 7(1), (3) and (7) HRA provide:
“(1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may—
(a) bring proceedings against the authority under this Act in the appropriate court or tribunal,
or
(b) rely on the Convention right or rights concerned in any legal proceedings, but only if he is (or would be) a victim of the unlawful act.
…
(3) If the proceedings are brought on an application for judicial review, the applicant is to be taken to have a sufficient interest in relation to the unlawful act only if he is, or would be, a victim of that act.
…
(7) For the purposes of this section, a person is a victim of an unlawful act only if he would be a victim for the purposes of Article 34 of the Convention if proceedings were brought in the European Court of Human Rights in respect of that act.”
97. To the extent that this is a claim that legislation be read down pursuant to HRA section 3 or for a declaration of incompatibility pursuant to section 4 of the HRA 1998, rather than a claim brought pursuant to section 7, the Claimants submit that they do not have to demonstrate that they are “victims”, citing the observation of Lord Steyn, with whom Lords Scott and Walker agreed, in R (Rusbridger) v Attorney General [2004] 1 AC 357 § 21 that that proposition in relation to section 3 is “obvious on proper view of the place of section 3 in the scheme of the Human Rights Act”). The Claimants argue that they need to demonstrate only that they have a sufficient interest in the matters complained of, for the purpose of satisfying the standing requirements for a judicial review claim.
98. Subsequently to Rusbridger, the Court of Appeal in Joseph Taylor v Lancashire CC and Secretary of State for the Environment, Food & Rural Affairs [2005] EWCA Civ 284 stated that:
“… While in the field of human rights, as in public law generally, the courts are not attracted to arguments based upon a lack of standing if there is merit in the argument which is being advanced, here, it is hard to see how Mr Taylor's argument can be categorised as being other than purely hypothetical. As Lord Hutton, Lord Roger of Earlsferry and Lord Walker of Gestingthorpe pointed out in R (Rusbridger) v The Attorney General [2004] 1 AC 357 “it is not the function of the courts to keep the statute book up to date. That important responsibility lies with Parliament and the Executive.” (Paragraphs 36, 58 and 61)” (§ 43)
and made the point that the circumstances of the case before it were very different from those in Rusbridger. After quoting Lord Steyn’s statement cited above, the court said:
“This desirably flexible approach to the grant of declarations, cannot appropriately be applied in the circumstances that exist here where Mr Taylor has not been and could not be personally adversely affected by the repealed legislation on which he seeks to rely. To allow him to do so would be to ignore section 7 of the HRA. On this ground alone, we could dispose of his appeal. However, in view of the other issues that have been fully argued before us we do not consider that it would be right to confine our decision to this point alone.” (§ 44)
99. The Supreme Court in In the matter of an application by the Northern Ireland Human Rights Commission for Judicial Review (Northern Ireland) [2018] UKSC 27 said:
“62. True it is that sections 3 and 4 of the HRA are not made expressly subject to the "victimhood" requirement which affects sections 6 and 7 : R (Rusbridger) v Attorney General [2004] 1 AC 357 , para 21, per Lord Steyn; though they must undoubtedly be subject to the usual rules regarding standing in public law proceedings. However, a capacity to commence general proceedings to establish the interpretation or incompatibility of primary legislation is a much more far-reaching power than one to take steps as or in aid of an actual or potential victim of an identifiable unlawful act. Further, Parliament's natural understanding would have reflected what has been and is the general or normal position in practice, namely that sections 3 and 4 would be and are resorted to in aid of or as a last resort by a person pursuing a claim or defence under sections 7 and 8 : see Lancashire County Council v Taylor [2005] EWCA Civ 284; [2005] 1 WLR 2668, para 28, reciting counsel's submission, and paras 37-44, concluding that, to exercise the court's discretion to grant a declaration to someone who had not been and could not be "personally adversely affected" would be to ignore section 7. …”
100. For present purposes I proceed on the basis that it is necessary for the Claimants to show, for any of their claims, that they are at least persons who could be adversely affected by the matters of which they complain. It is common ground in the present case that under Strasbourg case law, it is not necessary for standing that the applicant has actually suffered the consequences of the alleged breach, provided there is a risk of the applicant being directly affected by it in the future: Dudgeon v UK (1981) 4 EHRR 149. Where a claimant claims to be a potential (rather than a present actual) victim, he must provide reasonable and convincing evidence of the likelihood that a violation affecting him personally will occur: mere suspicion or conjecture is insufficient (Senator Lines v 15 Members States (2004) 39 EHRR SE3, p.20).
104. The Defendant cites Aston Cantlow v Wallbank [2004] 1 AC 546, where the House of Lords held that certain individuals who were obliged to fulfil an obligation they had voluntarily taken on were not being deprived of their possessions for the purposes of A1P1. In that case, the respondents owned a farm, part of which was rectorial property; they were therefore liable to pay for all necessary repairs to the chancel of the local church under the Chancel Repairs Act 1932. The House of Lords rejected their argument that the Parish Council had acted unlawfully by requiring them to pay for the repairs, thereby interfering with their right to the peaceful enjoyment of their possessions under A1P1. Lord Hobhouse said:
“90. …When Mr and Mrs Wallbank acquired the title to that land they assumed that responsibility to repair and the consequent liability in default if they should fail to discharge it. This was not a responsibility and liability which they shared with the public in general; it was something which they had personally assumed voluntarily by a voluntary act of acquisition which at the time they apparently thought was advantageous to them. From the point of view of both the PCC and the Wallbanks, the transaction and its incident were private law, non-governmental, non-public activities and not of a public nature. Again, this conclusion is adverse to the Wallbanks' defence.
…
“91. … The word “possessions” …applies to all forms of property and is the equivalent of "assets". But what is clear is that it does not extend to grant relief from liabilities incurred in accordance with the civil law. It may be that there are cases where the liability is merely a pretext or mechanism for depriving someone of their possessions by expropriation but that is not the case here. The liability is a private law liability which has arisen from the voluntary acts of the persons liable. They have no Convention right to be relieved of that liability. Nor do they have a Convention right to be relieved from the consequences of a bargain made, albeit some 200 years earlier, by their predecessors in title….The only reason why they are being sued is because they are the parties liable. This defence also fails. The submission that there should be a declaration of incompatibility likewise fails.
92. For the sake of completeness, it was clear that at all material times both they and their predecessors in title knew of the responsibility to repair or at least that it was asserted that they would be responsible if they acquired the title to the relevant land, an assertion which they have now admitted to be correct subject only to the Human Rights Act 1998. Further, they originally ran a case of waiver by the PCC which they have now accepted was rightly rejected. If they had had a legal defence it would have been recognised by the court and the action would have been dismissed. Their financial liability under the 1932 Act is not arbitrary. It arises from their failure to perform a civil private law obligation which they had voluntarily assumed.”
“… This proposition is stated too widely and too loosely to be acceptable. Clearly, the expiry of a limited interest such as a licence in accordance with its terms does not engage article 1. That is not this case. Here the transaction between the parties provided for repayment of the loan and for the car to be held as security. What is in issue is the “lawfulness” of overriding legislation. The proposition advanced by the Secretary of State would mean that however arbitrary or discriminatory such legislation might be, if it was in existence when the transaction took place a court enforcing human rights values would be impotent. A Convention right guaranteeing a right of property would have nothing to say. That is not an attractive conclusion.” (§ 41)
(K) WHETHER THE ACT INFRINGES THE CLAIMANTS’ A1P1 RIGHTS
112. Moreover, in my view the funds used to meet insurance liabilities can also properly be regarded as ‘possessions’. As indicated in AXA General Insurance Ltd v Lord Advocate [2011] UKSC 46:
“I would also hold that the amount of money that they would be required to pay to satisfy their obligations under the insurance policies is a possession for the purposes of A1P1” (§ 28 per Lord Hope)
“The concept of “possessions” has been interpreted by that court as including a wide range of economic interests and assets, but one paradigm example of a possession is a person’s financial resources. That is implicitly reflected in the recognition, in the second paragraph of A1P1, that the preceding provisions do not impair the state’s right to secure the payment of taxes or other contributions or penalties. In the case of an insurance company, the fund out of which it meets claims must therefore constitute a possession within the meaning of the article. Legislation which has the object and effect of establishing a new category of claims, and which in consequence diminishes the fund, can accordingly be regarded as an interference with that possession.” (§ 114 per Lord Reed)
“it is an instrument of social policy that ensures that the State can recover a contribution of costs that it has incurred from tortfeasors or their insurers and the EL industry generally. This meets the costs that are attributable to tortious wrongdoing and increases the amount of public resources generally and thereby furthers the community interest.”
(3) Rational connection to aim
i) the requirement to repay 100% of the recoverable benefit even where the employee’s own negligence also contributed to the damage sustained;
ii) the requirement to repay 100% of the recoverable benefit even where the employee’s ‘divisible’ disease is, as in Carder, in part unconnected with the insured’s tort;
iii) the requirement to repay 100% of the recoverable benefit in ‘indivisible’ disease cases even where the insured’s tort exposed the victim to asbestos only for a limited period, such that at common law they would bear only a share of the liability;
iv) the requirement to repay certain benefits that do not correspond to a recognised head of loss, including benefits that do not correspond to heads of compensation that would be payable by way of damages following a successful negligence claim; and
v) the requirement to repay 100% of the recoverable benefit despite the element of compromise that is present in most settled claims, even where settlement occurs expressly without admission of liability.
133. The Defendant submits in her skeleton argument that:
“101. Once it is accepted that it is a legitimate aim that the insurance industry should contribute to the welfare costs occasioned by the tortfeasor’s insured conduct to the extent considered appropriate by Parliament, then it follows that the means used are not more than is reasonably necessary for that purpose. Any “less intrusive” means, would, in effect, be in furtherance of a different or lesser objective.
102. … Having accepted (C/Skel §42) that the aim of increasing the amount of public resources available generally is a further, legitimate aim, the Secretary of State could not achieve her two stated aims which together seek to ensure that the State can recover the costs it has incurred arising “in respect of” the tortious accident injury or disease, namely the cost of the welfare benefits that have had to be paid to the victims of those torts. If the State is to be alleviated of those costs, costs which arise from the tortious conduct of the insured, it is necessary to adopt the measures in question insofar as they require either the tortfeasor or their insurers to bear the burden of those consequential costs.
103. By contrast, the Insurers measures would, for the reasons set out in para 100 above, fail to give effect to those legitimate aims insofar as it would compel the Secretary of State to adopt a statutory measure that imposed no greater burden on the insurer than its insured would incur at common law.”
i) (Feature 1: contributory negligence): I have concluded that potential practical difficulties about taking account of contributory negligence are capable of providing a rational connection between the challenged measures and a scheme which fails to provide for discounts based on contributory negligence. However, the ‘no less intrusive means’ test may operate more strictly. The evidence and submissions before me do not indicate that it would in fact be impracticable to take account of contributory negligence in the scheme, insofar as it applies as between compensators/insurers and the State (as opposed to its application vis-à-vis injured persons). The examples of the Welsh and Scottish Bills suggest that others have taken the view that such account could be taken, in somewhat similar contexts. Therefore, on the footing that the scheme aims to recover from insurers costs attributable to their insureds’ tortious wrongdoing, I am not persuaded that a scheme taking account of contributory negligence would be incapable of achieving the scheme’s objective. It follows that the recovery of sums without regard to contributory negligence can be justified, if at all, only on the basis of a wider aim of increasing public resources.
ii) (Features 2 and 3: 100% recovery regardless of independently caused injury or of third party fault): I have already concluded that these features are not rationally connected with an aim of recovery of costs fairly attributable to insureds’ wrongdoing. Even if I am wrong in that view, I do not consider that no less intrusive means could be used to achieve that objective. On the contrary, it would be possible for the scheme to limit recovery in proportion to the insured’s contribution to the injured person’s overall exposure. These features could therefore be justified, if at all, only on the basis of a wider aim of increasing public resources.
iii) (Feature 4: benefits not corresponding to heads of loss): on the footing that the scheme legitimately aims to recover the costs of benefits arising out of the infliction of the insured’s tort, even though the benefits themselves are not tortious heads of loss and recoverable as such, I consider that no less intrusive means would be able to achieve that objective.
iv) (Feature 5: settlements without admission): the Claimants have accepted that it would not be practicable to operate a scheme drawing a distinction on this basis, it follows that no less intrusive means are available in this regard.
i) The Scheme was the subject of detailed consultation, including with the insurance industry, and the interests of the insurance industry were taken into account prior to and during the passage of the Bill giving rise to the 1997 Act.
ii) Were the obligation to reimburse the state for its payment of recoverable benefits to be treated, in effect, as a tax on insurers, it is clear that the fair balance test would only apply insofar as it requires procedural guarantees to establish that the particular insurer is liable to make the payments: the State is otherwise left to decide for itself the level of the liability, and the means of assessing and collecting the same. As the ECtHR stated in Gasus-Dosier and Fordertechnik v Netherlands (1995) 20 EHRR 403, it will “respect the legislature’s assessment in [enforcing tax liabilities] unless it is devoid of reasonable foundation.” That permissive approach has also been extended to retrospective taxation schemes: see National and Provisional Building Society v UK (1997) 25 EHRR 127 § 76. In the present case, the State could have decided simply to tax the insurance industry or increase general taxation; but instead created a bespoke scheme which correlates more accurately to actual EL insurance liabilities.
iii) Although applicable to policies written before section 22 came into force, it only applies to recoverable benefits arising after the Act came into force (including claimants whose extant claims had not been determined). Insurers therefore could seek to adjust their premia prospectively to mitigate any increased liability that might accrue. Swiss Re was able to fully assess the impact of section 22 when it came to consider Aviva’s proposal to reinsure its book in 2015 in any event. The industry has adhered, without difficulty or complaint, to the scheme since its inception. The Claimants’ evidence does not say that they have been unable to adjust premia or take other commercial decisions to adjust as a result of impact of common law and statutory changes since 1997 Act. Nor does the evidence expressly address or provide any evidence specifically as to the Claimants’ profitability, whether in relation to EL policies alone, or when offered as part of wider packages. They have accordingly not shown any “excessive and individual burden” to exist.
iv) The estimated additional burden to the insurance industry referred to during the passage of the Bill has turned out to be correct.
v) The scheme does not shift all liabilities to the insurance industry. Rather, the balance was struck such that those liabilities are restricted to a period of 5 years. The State picks up the remainder. There are far more costs arising from tortious wrongdoing which are met by the general body of taxpayers in any event (including continuing costs to the NHS as a result of the expensive and long-term treatment which sufferers of long-tail illness undergo, but also less quantifiable costs, such as the costs of economic inactivity on the part of affected workers).
vi) Insofar as special justification is additionally required in the context of legislation that has retrospective effect, (a) such justification plainly exists on the facts and (b) that justification achieves a fair and proportionate balance between the various interests engaged. The House of Lords in Axa held that a statutory rule which (retrospectively) changed a common law rule to the detriment of insurers was proportionate, as, in part, insurers were well placed to “take the rough with the smooth” when determining risk. That change was comparable to the change in the present case to the insuring clause. The broad principle is that insurers operate in a sector where changes to risk, including through legislative (and retrospective) changes are themselves an identifiable and perennial risk.
vii) The retrospectivity in Axa involved the ‘social injustice’ of denying those with pleural plaques insurance cover (because it did not amount to actionable harm). Similarly, the contested aspects of the 1997 Act seek simultaneously to ensure that employees who are victims will not fail to be protected because of the disappearance of an employer or insurer, while at the same time requiring the tortfeasor (or its insurer) to bear responsibility for the social burden that would otherwise arise, in circumstances where the welfare benefits in question are paid “in respect of” the accident injury or disease caused by the tortfeasor. That is a classic example of a polycentric socio-economic policy designed, at one and the same time, to protect employees and to remedy the injustice of the state subsidising the tortfeasor’s losses by requiring it to bear the cost of the welfare requirements that their conduct has necessitated.
viii) The 1997 Act is “remedial social legislation” like that involved in Bäck v Finland 40 EHRR 48, where retrospective legislation had granted relief to impecunious debtors allowing them to write down their debts very substantially on the basis of a greatly reduced payment schedule. The retrospective nature of this legislation meant “that a special justification [was] required for such interference” with existing contracts, but it was “remedial social legislation” and the ECtHR held that “in particular in the field of debt adjustment … it must be open to the legislature to take measures affecting the further execution of previously concluded contracts in order to attain the aim of the policy adopted” (§ 68).
ix) As many of the claims arise in relation to exposure that occurred decades ago, many of the Claimants’ EL predecessors in title received premium for EL risks where claims in respect of those risks were never made before those policies became untraceable. The insurance industry has had the historic benefit of that premium; yet the Claimants are seeking to avoid the burden to which that lack of traceability has given rise.
x) The relevant observations in the Welsh Bill case are not binding and distinguishable because (a) they were obiter, (b) it concerned a decision of a non-sovereign parliament, so the restrictions on the court’s role explained in Wilson did not apply (c) the present case concerns pre-HRA legislation, (d) the question in the Welsh Bill case was the legality of a scheme in current circumstances, whereas the present case concerns an Act passed 23 years ago (since when no further interference has occurred), (e) in the present case, both the State and insurers have been operating for 23 years on the basis of the regime and will have made decisions reflecting it, (f) there was, in the present case, a social policy consensus for the package of measures put in place
139. I consider these points in turn below.
“The question of justification and proportionality has to be answered by reference to the time the events took place to which the statutory provision is being applied. The person claiming to be a victim has to show how he has been affected by the provision he complains about. Those who are seeking to justify the use of the statutory provision have to do so as at the time of that use. If they cannot justify it at that time, their use of it is a breach of the victim's "Convention rights". That is how the European Court would decide the question and it is also how the municipal court is required to look at it. In most cases the difference will probably be academic and it no doubt was so regarded in the present case. But as circumstances change so the justification or the absence of it may change. Merely to examine the situation at the time the Act in question was passed and treat that as decisive is wrong in principle. The same point can be seen equally clearly in relation to a question of compatibility arising under section 4. As I have explained earlier, the decision under section 4 has to be made as at the time of the decision; just as the current state of the legislation at that time is what has to be the subject matter of the decision so also the circumstances and social needs existing at that time are what is relevant, not those existing at some earlier or different time. To look for justification only in the Parliamentary debates at the time the statute was originally passed invites error.” (§ 144)
142. Even bearing those factors in mind, I do not consider that the first to third features identified in § 11 above strike a fair balance, still less that special justification has been shown bearing in mind their retrospective effect. They have the effect of imposing substantial liabilities to the State pursuant to historic insurance policies, upon insurers who could not have priced any such risks into the premiums obtained at the time, in respect of State benefits bearing no proportionate relationship to the wrongdoing by the relevant insureds. The social policy objectives which, exceptionally, have led the courts and Parliament to take a novel and particularly generous approach to causation vis-à-vis the victims of asbestos-related diseases do not reasonably justify imposing on the insurers additional liabilities to the State.
146. [iii] There is no cogent basis on which it can be assumed that insurers could seek to adjust their premia prospectively to mitigate any increased liability that might accrue as a result of the features of the scheme of which the Claimants complain. To do so would involve seeking to increase premia on current insureds by reference to liabilities arising on business underwritten in the past for other insureds. Insurers operate in a competitive market, and for affected insurers to seek to increase premia in that way would self-evidently tend to put them at a competitive disadvantage compared to others. The witness statement of Aviva’s Technical Liability Manager, Mr Donovan, states that:
“Many current EL insurers have only come into the market over recent years and have no legacy, or long tail, claims. If those insurers with long tail claims were to increase their EL premiums they would be at a competitive disadvantage when put against insurers who did not. There would be no advantage offered to the potential policyholder to go with those higher premiums. All other things being equal the customer would be likely to choose the cover with the lowest premium.”
148. In these circumstances, I do not consider that the court can confidently assume, as the Defendant submits, that industry has adhered without difficulty to the scheme since its inception. Although failures such as those mentioned above cannot specifically be linked to the liabilities to the State exacted pursuant to the 1997 Act, those liabilities clearly formed part of the burden of asbestos-related liabilities upon those firms, as well as being a burden on extant firms with long-tail asbestos exposure.
“Retrospectivity. The key to this issue is not in my view that insurance is a contract against risks. There are always limits to the contingencies upon which insurers speculate, provided by the terms and conditions of the policy. Further, insurers are normally entitled to expect that the liabilities, which their insured employers incur “arising out of and in the course of [their] employment” and which they insured under the specimen copy policy to which I have referred, will be liabilities capable of existing in law at the time of the occurrence during the relevant employment from which such liabilities arise” (§ 91)
153. [vii] The retrospectivity in Axa involved an Act of the Scottish Parliament which reversed the statement of the common law in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281 that asymptomatic pleural plaques resulting from asbestos exposure did not in themselves amount to actionable damage. The Supreme Court noted that the typical policy wording indemnified the insured against “bodily injury”. Thus, if the position in law were that pleural plaques were to be regarded as “bodily injury” as the 2009 Act deemed them to be, then the liability was covered by the terms of the insurance policy agreed between the parties. There was, unlike in the present case, no need for any statutory extension to the contractual obligation.
“The effects of asbestos provide ample evidence of this phenomenon, as people began to live long enough after exposure to it to contract mesothelioma and other harmful asbestos-related diseases. The nature, number and value of claims were therefore always liable to develop in ways that were unpredictable. The premium income that was expected to meet the claims that were foreseen at the outset may have no relationship, in the long term, to the burden that in fact materialises. How best to provide for that eventuality is an art which takes the rough with the smooth and depends on the exercise of judgment and experience.” (§ 39)
“… The anxiety that is generated by a diagnosis of having developed pleural plaques is well documented and it had been the practice for over 20 years for such claims to be met, albeit without admission of liability. The numbers of those involved, and the fact that many of them live in communities alongside people who are known to have developed very serious asbestos-related illnesses, contributed to a situation which no responsible government could ignore. It seems to me that the Scottish Parliament were entitled to regard their predicament as a social injustice, and that its judgment that asbestos-related pleural plaques should be actionable cannot be dismissed as unreasonable.” (§ 33)
159. [viii] I would accept that insofar as the 1997 Act set out to address the problems of the small claims limit and deductions from general damages, both of which disadvantaged injured persons, it could be regarded as being “remedial social legislation”. However, insofar as it operates now to require payments by insurers to the State of sums that do not correspond to their insureds’ contribution to the damage (i.e. the first three features identified in § 11 above), it cannot be regarded as social remedial legislation, nor as being comparable to the legislation at issue in Bäck v Finland. There are no such pressing social concerns in the present case as might constitute special justification for retrospective legislation. On that basis, the remarks of Males LJ in Equitas Insurance Limited v Municipal Mutual Insurance Limited [2019] EWCA Civ 718, which the Claimants highlight, are pertinent:
“There is no doubt that the Fairchild decision together with the Compensation Act 2006 and the cases which have applied these principles have created significant anomalies in the law. That jurisprudence, intended as it was to ensure a remedy for victims of negligent exposure to asbestos, has extended into liability insurance and (now) reinsurance in ways which seem unlikely to have been intended or predicted.” (§ 90)
“…once the courts can be confident that the objective of ensuring victim protection has been achieved, it is desirable that the anomalies should be corrected and that the law should return to the fundamental principles of the common law. Put shortly, once unorthodoxy has served its purpose, we should revert to orthodoxy…”. (§ 91)
“63. The Counsel General [for the Welsh Government] submits that AXA [2012] 1 AC 868 was a stronger case for treating the legislation as incompatible than the present, yet the Supreme Court did not do so. I do not accept the Counsel General’s analysis. The Scottish statute in issue in AXA affected all outstanding and future claims, and the present Bill on its face also affects all future compensation payments made in respect of outstanding and future claims. But the two differ in other important respects:
a. The Scottish statute was passed to rectify a perceived injustice directly affecting those suffering from asbestos-related diseases, and was in this very real sense social remedial legislation. Despite the Counsel General’s contrary submission, the same cannot in my opinion be said of the Bill. It has no effect on sufferers from asbestos-related diseases. Its purpose is to transfer the financial burden of costs of their hospitalisation from the Welsh Ministers to compensators and their insurers.
b. The Scottish statute was passed to restore the legal position as it had been understood at first instance for some decades, and it might well have been accepted as being at the highest instance. The present Bill aims to change a well-understood position which has existed since the NHS was created, by introducing a new right of recourse which has never previously existed, though it is one which Parliament could at or at any time since the creation of the NHS have decided to introduce without any legal problem in relation to future events giving rise to liability claims against compensators (and so to liability insurance claims by compensators against their liability insurers).
c. The Scottish statute built on established legal principles, requiring liability to exist before compensators could be compelled to meet claims for pleural plaques and for insurance cover to exist before such compensators could recover from their liability insurers. This was one of the two points stressed by Lord Hope in AXA, as I have mentioned in the preceding paragraph. The Bill bypasses such principles, making the liability of compensators dependent simply on the payment of compensation, even if made without admission of liability and making the liability of insurers arise independently of the terms of the insurance policies issued, by reference to the fact of payment of such compensation, provided such policies would to some extent cover any liability which such compensators would, if it were established, have had.
64. The first of these points requires further treatment. The Counsel General submits that, although the Bill has no effect on sufferers from asbestos-related diseases, it is a measure passed as a matter of economic and social policy, in relation to which the Welsh Assembly should be recognised as having a wide area of appreciation and discretionary judgment: see Huitson [2012] QB 489, at para 85 per Mummery LJ. He also cites in support the House’s decision in Wilson [2004] 1 AC 816. Both these were cases where the relevant legislation had retrospective aspects. But in both there were directly applicable and compelling social interests militating in favour of retrospectivity. Wilson concerned consumer protection legislation regarding the enforceability of loan agreements which failed correctly to state the amount of credit. Huitson concerned legislation protecting a grave challenge to the public exchequer, posed by wholly artificial tax arrangements taking advantage of double taxation treaties to avoid the payment of United Kingdom tax by United Kingdom residents. The arrangements were anyway doubtfully legal and such residents had no legitimate expectation that they could avoid such tax.
65. Although the Bill would either save the Welsh Ministers money or add to their resources, it is not shown that it would achieve a directly applicable or compelling social or economic interest comparable with those involved in these previous cases. Section 15 of the Bill contains the specific enjoinder that the Ministers should have regard to the “desirability” of equivalent sums being made available for “research into, treatment of or other services relating to asbestos-related diseases”, but it is not shown that any such sums so expended would add to existing sums already being spent in these areas, or resolve any exceptional social or economic problem. It is common knowledge that the funding of the National Health Service is under increasing strain throughout the United Kingdom, and it may be so even more in Wales than elsewhere, but that is a different level of general problem to any shown on the authorities to be relevant in the present context.
66. The Counsel General maintains that special justification exists for the retrospectivity involved in the Bill because, without it, the Bill cannot achieve its legitimate policy aim. That is a circular submission, which, if accepted, would eliminate the important balancing stage of the proportionality exercise identified by Lord Reed in Bank Mellat (para 43 above) by Lord Hope in AXA (para 49 above) and by the Strasbourg Court in its case law (paras 44-48 above). …”
(L) FAILURE TO MAKE REGULATIONS UNDER SECTION 22(4)
i) HRA section 6 enables the Claimants to complain about the failure to make regulations where the 1997 Act empowers the Defendant to do so in circumstances where, if contrary to the Claimants’ primary submission the proper interpretation of the 1997 Act does not remove all of the matters objected to in these proceedings, the making of such regulations would achieve that result.
ii) This part of the Claimants’ complaint could not on any view contravene Article 9 of the Bill of Rights. Only the Secretary of State has the power to make regulations and to lay them before Parliament: it is not legislation which it is open to any member of Parliament to bring forward. The decision of the Secretary of State as to whether to make such regulations is an executive action and not a “proceeding in Parliament” for the purposes of Article 9.
168. The Defendant makes three points specifically in relation to this part of the Claimants’ case.
““An act” includes a failure to act but does not include a failure to—
(a) introduce in, or lay before, Parliament a proposal for legislation; or
(b) make any primary legislation or remedial order.”
“(2) A statutory instrument containing regulations or an order under this Act (other than regulations under section 11(2A) or 24 or an order under section 34) shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(2A) A statutory instrument containing regulations under section 11(2A) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
Subsection 30(2) thus subjects regulations under inter alia section 22(4) to what may termed a ‘negative procedure’, which may be contrasted with those variants of the affirmative and negative resolution procedures under which proposed secondary legislation is laid before Parliament only in draft, pending either approval or the absence of objection by Parliament.
171. Section 5(1) of the Statutory Instruments Act 1946 provides:
“Where by this Act or any Act passed after the commencement of this Act, it is provided that any statutory instrument shall be subject to annulment in pursuance of resolution of either House of Parliament, the instrument shall be laid before Parliament after being made and the provisions of the last foregoing section shall apply thereto accordingly, and if either House within the period of forty days beginning with the day on which a copy thereof is laid before it, resolves that an Address be presented to His Majesty praying that the instrument be annulled, no further proceedings shall be taken thereunder after the date of the resolution, and His Majesty may by Order in Council revoke the instrument, so, however, that any such resolution and revocation shall be without prejudice to the validity of anything previously done under the instrument or to the making of a new statutory instrument”
172. In R(T) v Chief Constable of Greater Manchester Police [2014] UKSC 35, [2015] AC 49 Lord Reed considered whether a failure to amend an Order made in 1975, following the entry into force of the HRA, would fall within HRA section 6(6). He noted that the term “legislation”, as used in section 6(6)(a), must include subordinate legislation, given the express reference in section 6(6)(b) to primary legislation. Lord Reed said:
“149. I am inclined to think that it was. The power to make orders under the 1974 Act is exercisable in accordance with section 10(2), which requires that a draft of the proposed order must be laid before Parliament and approved by an affirmative resolution. The draft order would appear to me to be properly described as a “proposal for legislation”. That approach leads to the somewhat unattractive conclusion that whether a failure to make subordinate legislation falls within the scope of section 6 of the Human Rights Act depends upon the particular way in which the legislation must be made: an order made by the Secretary of State subject to annulment by a resolution of either House, for example, would not on any view involve the laying before Parliament of a “proposal for legislation”. On the other hand, it is consistent with the respect for Parliamentary sovereignty found throughout the Human Rights Act that the decision of a member of either House whether to lay a legislative proposal before Parliament, whether in the form of a Bill or a draft order, should not be the subject of judicial remedies. As I shall explain, however, I find it unnecessary to reach a concluded view upon the point, which was not the subject of submissions.” (my emphasis)
“Subsection (4) is designed to deal with the situation where an upper limit on the insurer's liability to pay compensation in the event of injury has been agreed and reached. It enables the Secretary of State to restrict the amount of benefit the insurer has to repay in such circumstances. Because the upper limits which apply in personal injury policies are usually very high, such situations are likely to arise extremely rarely. However, where such a limit is reached, and the insurer is not liable to pay the whole of any compensation due, it would not be appropriate for him to be held responsible for the repayment of the whole of the benefits recoverable. However, we still intend to seek full repayment of benefits from the compensator in all other circumstances. It will be necessary to devise workable rules for restricting liability to repay benefits in such a scenario in consultation with interested parties. The inclusion of this regulation-making power gives us the flexibility to carry out that consultation before the new scheme comes into effect.”