England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/06/2007

Mr Justice Flaux:

Introduction and background

1. This case involves the trial of various preliminary issues concerning whether or not the Untraced Drivers Agreement between the Department of Transport and the Motor Insurers Bureau ("MIB") complies with the provisions of Article 1 (4) of the Second Motor Insurance Directive. The underlying dispute concerns a hit and run incident alleged by the Claimant to have occurred in June 1993. I should state at the outset of this judgment that neither the Secretary of State nor the MIB admits the facts concerning the alleged incident, but for the purposes of the determination of the preliminary issues, I am asked to assume as follows. The Claimant was born in 1989. In about June 1993 (the precise date of the incident remains unclear, the Claimant having pleaded that it occurred on 1 May but now accepting that it was probably 21 June 1993) when aged three, he was crossing the road near his home with his father (and possibly also his mother) when a car pulled out of a side road too fast and ran into the Claimant, injuring him. The car did not stop and the driver was never traced. The Claimant sustained injuries and was treated in hospital. At the time it appears that the Claimant's parents did not obtain legal advice and were thus unaware of the existence of the MIB.
2. The MIB was incorporated as a company under guarantee in 1946, its members being the various insurers who from time to time are authorised pursuant to the relevant statutory provisions to carry on motor insurance business. Originally, the MIB provided protection for victims of uninsured drivers pursuant to an agreement, the Uninsured Drivers Agreement, with the Secretary of State, under which the MIB honours judgments obtained against uninsured drivers which the claimant has not been able to enforce. It also protected victims of untraced drivers on an ex gratia basis until the first formal Untraced Drivers Agreement with the Secretary of State in 1969. The Agreement with which this case is concerned is the Untraced Drivers Agreement, made between the MIB and the Secretary of State on 22 November 1972, just before the accession of the United Kingdom to the European Community. It provides for application to be made by victims of untraced drivers to the MIB which carries out an investigation and, if the various provisions of the Agreement are satisfied, it will award to the applicant "a payment of an amount which shall be assessed in like manner as a court, applying English law…would assess the damages which the applicant would have been entitled to recover from the untraced person in respect of that death or injury if proceedings to enforce a claim for damages in respect thereof were successfully brought by the applicant against the untraced person". (Clause 3). An applicant who is dissatisfied with the award or with a decision not to indemnify him is given a right of appeal to an arbitrator on a panel of Queen's Counsel drawn up by the Lord Chancellor. The Secretary of State is given the power to appoint the arbitrator from that panel.
3. The Agreement contains in Clause 1 (1) various conditions which have to be fulfilled in relation to an application. Particularly relevant to the present dispute are the following:

"…this Agreement applies to any case in which an application is made to MIB for a payment in respect of the death of or bodily injury to any person caused by or arising out of the use of a motor vehicle on a road in Great Britain and the case is one in which the following conditions are fulfilled, that is to say-

…

(c) the death or injury was caused in such circumstances that on the balance of probabilities the untraced person would be liable to pay damages to the applicant in respect of the death or injury;

…

(f) the application is made in writing within three years from the date of the event giving rise to the death or injury."

4. It would appear that the Claimant's parents first became aware of the possibility of claiming compensation for his injuries from the MIB in October 2001. An application was made to the MIB, but in December 2001, the MIB rejected that application, relying on Clause 1 (1) (f), the three year time limit provided by that clause having expired in June 1996. The Claimant and his parents did not seek to appeal that decision to the arbitrator pursuant to the procedure laid down by the Untraced Drivers Agreement. Instead the present proceedings were commenced in March 2006, claiming damages for breach by the MIB of the Untraced Drivers Agreement as it should be properly interpreted in accordance with Community law, alternatively for breach of statutory duty arising out of Community law directly applicable to the MIB. In the alternative, the Claimant made a claim against the Secretary of State for damages for breach of statutory duty in failing properly to implement Article 1 (4) of the Second Directive.
5. The Defendants both filed Defences taking issue with all these claims. It is to be noted that the MIB raises in terms that the claim by the Claimant against the MIB for breach of the Agreement is wholly misconceived because no claim lies outside the application procedure under the Untraced Drivers Agreement. Reliance is placed in the pleading and was placed at the trial by Mr O'Brien QC on behalf of the MIB on the decision of the Court of Appeal in Persson v London County Buses [1974] 1 WLR 569, from which it is clear that there is no cause of action available to a victim of an untraced driver against the MIB outside the terms of the Agreement. As Counsel for the MIB in that case argued, the Untraced Drivers Agreement is enforceable by the Secretary of State and (by consent of the MIB) by an applicant but only in accordance with the terms of the Agreement. That argument was accepted by the Court of Appeal.
6. Mr O'Brien relies upon that case as demonstrating that the procedure under the Untraced Drivers Agreement is a self-contained and exclusive procedure. He reserves the right to contend, on the basis of that case that, not having pursued an appeal from rejection of the Claimant's application to the arbitrator under the procedure set out in the Agreement, even if the Claimant succeeds on the preliminary issues against the MIB, it will not be open to him to make a fresh application to the MIB. As I indicated at the hearing that is not a matter which I can determine at this stage and I simply note the reservation.

The preliminary issues

7. When the matter came before Master Yoxall at a case management conference on 13 October 2006, the parties were agreed that there should be a trial of the preliminary issues set out in the Schedule to the Order made at that hearing. Those preliminary issues are as follows:

"1. On the true construction of Directive 84/5/EEC and/or by reason of the European Community principle of equivalence, must the making of a claim for compensation in respect of injury caused by an untraced driver under the national provisions implementing, and/or relied upon by the Member State as implementing, Article 1(4) of Directive 84/5/EEC be subject to a limitation period no less favourable than that which applies to the commencement of actions in the courts in respect of claims brought by minors for personal injury in tort against a traced driver?

2. If the answer to Question 1 is yes, must the contract between the First and the Second Defendants namely the Untraced Drivers Agreement 1972 whereby the First Defendant undertook to provide compensation under specified terms for persons injured by untraced drivers, and under which the Claimant made a claim for compensation be construed so as to give effect to Article 1(4) of Directive 84/5/EEC and/or the European Community principle of equivalence?

3. If the answer to Question 1 is Yes and the answer to Question 2 is No, does European Community law impose a directly effective obligation on the First Defendant to provide compensation to a minor who makes a claim that falls within Article 1(4) of Directive 84/5/EEC later than three years after the accident which gives rise to such a claim but within three years from the date at which he attained his majority?

4. If the answer to Question 3 is No, is the United Kingdom in sufficiently serious breach of its Community law obligations under Article 1(4) of Directive 84/5/EEC and/or the principle of equivalence; and did the breach cause loss to the Claimant such as to entitle the Claimant to damages against the Second Defendant?"

The first issue

8. In considering the first issue, it is important to have in mind the two applicable Council Directives on motor insurance. The First Directive 72/166/EEC of 24 April 1972 obliges each Member State to ensure that civil liability in respect of the use of motor vehicles is covered by insurance. More detailed obligations are then imposed by the Second Directive 84/5/EEC of 20 December 1983. Article 1(4) provides as follows:

"Each Member State shall set up or authorize a body with the task of providing compensation, at least up to the limits of the insurance obligation for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation provided for in paragraph 1 has not been satisfied. This provision shall be without prejudice to the right of the Member States to regard compensation by that body as subsidiary or non-subsidiary and the right to make provision for the settlement of claims between that body and the person or persons responsible for the accident and other insurers or social security bodies required to compensate the victim in respect of the same accident.

The victim may in any case apply directly to the body which, on the basis of information provided at its request by the victim, shall be obliged to give him a reasoned reply regarding the payment of any compensation.

However, Member States may exclude the payment of compensation by that body in the event of damage to property by an unidentified vehicle.

They may also authorize, in the case of damage to property caused by an uninsured vehicle an excess of not more than 500 ECU for which the victim may be responsible.

Furthermore, each Member State shall apply its laws, regulations and administrative provisions to the payment of compensation by this body, without prejudice to any other practice which is more favourable to the victim."

9. Much of the debate at trial in relation to the first issue turned on the effect of the decision of the European Court of Justice in Evans v Secretary of State for the Environment and Motor Insurers Bureau [2003] Case C-63/01. Evans had been one of three cases heard together in the Court of Appeal in 1998 concerning whether the Untraced Drivers Agreement was consistent with the Second Insurance Directive. The specific point in the Evans appeal concerned whether or not, on the basis that the Untraced Drivers Agreement did not require the payment of interest on an award, that was inconsistent with Article 1(4) of the Directive and if so, what if any remedies the plaintiff had. The Court of Appeal (in a judgment reported as Mighell v Reading [1999] 1 Lloyds Rep IR 30) found that whilst the concept of "compensation" in the Directive might be wide enough to encompass interest, the Directive did not have direct effect and confer legal rights on the plaintiff against the MIB nor did the principle that domestic legislation has to be interpreted in conformity with community law extend to a private law agreement such as the Untraced Drivers Agreement. I shall have to consider the judgments in the Court of Appeal in more detail later in this judgment.
10. Following that unsuccessful appeal against the MIB, Mr Evans commenced proceedings against both the Secretary of State, contending that the United Kingdom had failed to implement the Second Directive adequately or at all. The MIB applied to intervene and was joined as a party. The matter came before Buckley J in March 2000 on the trial of various preliminary issues. The learned judge referred the case to the European Court of Justice, formulating various questions in relation to Article 1(4) of the Second Insurance Directive. The European Court summarised those questions as being:

"The questions referred to the Court, which it is appropriate to consider together, raise a number of problems concerning the nature of the body which the Member States are required to establish in order to implement the Second Directive (fourth question), the remedies which must be available to victims of damage or injury caused by unidentified vehicles or vehicles for which the insurance obligation has not been satisfied (hereinafter insufficiently insured vehicles) (third and fourth questions), the need to provide for interest to be payable on sums paid to victims by the abovementioned body (first question), the need to provide for reimbursement of costs incurred by victims pursuing claims for compensation (second question) and the possible liability of the Member State concerned for failure to transpose the Second Directive correctly (fifth question)."

11. Mr Paines QC for the Claimant relies on the "Preliminary Observations" by the Court at paragraphs 21 to 28 of the Judgment and in particular paragraph 27, which states in relation to the First and Second Insurance Directives that:

"It is thus clear that the Community legislature's intention was to entitle victims of damage or injury caused by unidentified or insufficiently insured vehicles to protection equivalent to, and as effective as, that available to persons injured by identified and insured vehicles."

12. Mr Paines contends that it is clear from this passage and the judgment as a whole that the European Court was saying that the protection for victims of untraced drivers under the regime contemplated by Article 1 (4) has to be as effective as that which the relevant national legal system would give in the case of a victim of a driver who was backed by valid motor insurance. He goes on to submit that the three year time limit for all applications under Clause 1 (1) (f) of the Untraced Drivers Agreement fails to provide the equivalent protection required because it precludes any application made more than three years after the accident, whereas a claim in tort in Court proceedings against an insured driver could be brought by the Claimant at any time prior to his 21^st birthday in 2010, because of the operation of section 28 of the Limitation Act 1980. It is not just minors who are deprived of that equivalent protection, but others under a disability within the meaning of section 28 and victims with latent injuries or who do not have full knowledge within the meaning of section 14A of the Limitation Act 1980.
13. In those circumstances, Mr Paines contends that it is not necessary to consider further the general Community principle of equivalence since Clause 1 (1) (f) of the Untraced Drivers Agreement fails to give the equivalent protection required by the Second Directive as interpreted in paragraph 27 of the Judgment of the European Court in Evans. However, in so far as necessary, he submits in the alternative that the provision is a procedural rule which infringes the Community principle of equivalence.
14. The European Court of Justice has stated the relevant principles in a number of cases in essentially identical terms, set out in Evans at paragraph 45:

"It is settled case-law that in the absence of Community rules governing the matter it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from Community law, provided, however, that such rules are not less favourable than those governing similar domestic actions (the principle of equivalence) and do not render virtually impossible or excessively difficult the exercise of rights conferred by Community law (the principle of effectiveness) (see, in particular, Case C-120/97 Upjohn [1999] ECR I-223, paragraph 32)."

15. It would be fair to say that whilst the European Court has considered in a number of cases, including Evans, the application of the principle of effectiveness, there is little guidance in the decisions of the Court as to how the principle of equivalence is to be applied in practice. Mr Paines submits that the claim in tort against a traced and insured driver is the "similar domestic action" for two reasons.
16. First he submits that the European Court in Evans has identified the relevant comparator as the tort claim given that this is the whole basis of the Second Directive. Second he submits that there is sufficient similarity between the procedure before the MIB and an action in tort before the Courts, pointing out that the action need not be identical but only similar. He relies upon the speech of Lord Slynn of Hadley in Preston v Wolverhampton Healthcare NHS Trust (No 2) [2001] 2AC 455, rejecting an argument that a claim for breach of a contract of employment in failing to pay into a pension scheme was not sufficiently similar to a claim for infringement of Article 119 of the EC Treaty. In paragraph 22 of his speech, Lord Slynn said as follows:

"The essential matter here is that moneys have not been paid to the trustees of a pension fund to purchase pension rights on eventual retirement or on reaching the prescribed age. A successful claim under article 119 obtains retroactively full access to the scheme so that the necessary contributions to obtain the appropriate pension rights for that individual have to be paid. A claim in contract would be for damages for the failure to pay those sums to the trustees leading to a total or in some cases a partial loss of the pension rights. In form they are plainly different but in substance the eventual benefit to the employee is sufficiently similar for present purposes. To adopt the words of the Court of Justice [2001] 2 AC 415, 451F-G, para 57 the "right of action available under domestic law is a domestic action similar to proceedings to give rights conferred by article 119 of the Treaty …" This is so whether the contractual term is express, implied or imposed by statute."

17. Mr Paines submits that Lord Slynn was looking at the end result, as to what the two procedures being compared achieve. He says that in the present case the objective of the procedure before the MIB and of the action in tort is the same: to recover for the victim compensation which is to be calculated in exactly the same way in relation to an identical event, an accident. This is sufficient similarity. He goes on to submit that the procedure before the MIB is demonstrably less favourable to the Claimant than this similar domestic action because of the effect of Clause 1 (1) (f) as compared with section 28 of the Limitation Act and that none of the supposed procedural advantages of the MIB scheme can alter that position.
18. The Defendants (for whom Mr Jonathan Crow QC for the Secretary of State made the leading submissions orally at the hearing) contest the Claimant's interpretation of paragraphs 21 to 28 of the Judgment. They contend that in this passage the European Court was not dealing with the principle of equivalence as referred to in the various decisions of the European Court and all that was being considered was internal to the Directives themselves, namely whether the scheme set up by the Member State as required by Article 1 (4) of the Second Directive provides an equivalent level of protection for untraced drivers as that provided by the First and Second Directives for traced insured drivers. Reliance is placed on the judgment of the European Court in C-129/94 Bernaldez [1996] ECR I-1829 where the relevant motor insurance Directives were considered, in support of the proposition that the objective of the Directives is not to align compensation under them with that available under any particular domestic system, but to ensure that the compensation obtained by a victim of a motor accident is equivalent wherever within the Community the accident occurs. The Defendants submit that the MIB scheme does satisfy the Directives as they invite this Court to interpret them, because it provides the same level of compensation as the Directives prescribe in the case of insured drivers, if not more.
19. Mr Crow also submits that there is nothing in the Evans Judgment suggesting that the comparison is to be with the demands of the common law as opposed to the demands of the Directives themselves. Thus, he points out that in considering the question of interest, the Court at paragraphs 65 to 71 was not drawing any comparison between the MIB scheme and the recoverability of interest in domestic actions under section 35A of the Supreme Court Act 1981 but merely considering whether adequate compensation within the meaning of the Second Directive itself should include interest. Similarly in relation to costs, he points out that at paragraphs 74 to 78 of the Judgment the Court is not drawing any comparison between the position under the MIB scheme and the recoverability of costs in English proceedings, but states that costs are only recoverable to the extent necessary to safeguard the rights derived by victims from the Second Directive.
20. In relation to the Claimant's alternative case, the Defendants submit that there is no "similar domestic action" with which to make a comparison in considering the Community principle of effectiveness and they make the point that various decisions of the European Court recognise in terms that there may be no similar domestic action with which to make a comparison. In support of their contention that a claim in tort against an insured driver is not a similar action to the MIB procedure, the Defendants rely upon the principles stated by Buxton LJ in Matra Communications v Home Office [1999] 1 WLR 1646 at 1658-9:

"Two principles can be drawn from this part of the judgment [of the European Court in Palmisani v INPS [1997] ECR I-4025]. First, the principle of "equivalence" really does mean what it says. The domestic court, in applying the principle, must look not merely for a domestic action that is similar to the claim asserting Community rights, but for one that is in juristic structure very close to the Community claim. It does that, in the words of the Court of Justice in Case C-326/96, Levez, [1999] IRLR 36 at paragraph 43, by considering "the purpose and the essential characteristics of allegedly similar domestic actions". That approach was demonstrated in Palmisani by the rejection of a claim for specific payments, as opposed to compensation, as a relevant comparison. It was also demonstrated by the need to find in the domestic law not merely a cause of action for reparation, but one for reparation for conduct of a public authority in the exercise of its powers. The narrowness of that comparison was underlined by Mr Advocate General Cosmas in paragraphs 38 and 39 of his opinion:

"38. The claim in this case is for reparation on the ground that Directive 80/987 was not transposed into Italian law within the prescribed period, and as a result the persons concerned could not obtain the benefit of the guarantee provided for by the Directive at the proper time. Only the national court is in a position to know what similar claim may exist under the Italian legal system.

39. If, however, it were necessary to provide the national court with some element of comparison, it would in my opinion be the non-contractual liability of the State arising from belated adoption of a regulatory act provided for by an enabling statute."

Second, as paragraph 39 of the judgment of the Court of Justice in that case makes clear, if there is no action in the domestic system that fulfils the requirements set out above, then the national system is at liberty (subject always to the further principle of effectiveness) to set whatever limitation period seems best to it for the claim in relation to Community rights."

21. The Defendants contend that a claim in tort in Court proceedings is very different in "juristic structure" to the claim under the MIB procedure asserting Community rights under Article 1 (4). Mr O'Brien QC for the MIB submitted that in addressing this issue the court had to look at three aspects which he derives from Palmisani, Matra and Preston. First, whether there was a similar purpose to the two "claims" as to which he submitted that there was not, since the purpose of a claim against an insured driver was to secure a finding of liability in tort, whereas the purpose of an application under the Untraced Drivers Agreement is to seek to enforce a contractual liability which the MIB has entered into with the Secretary of State.
22. Second, whether there is a similarity in terms of the cause of action. He submits that whereas a victim of an accident has a cause of action in tort against an insured driver who is a named person served with court process, under the Untraced Drivers Agreement the victim has no cause of action at all. Rather he has access to a facility which has been negotiated between the MIB and the Secretary of State that if certain conditions are satisfied, the MIB will pay compensation in satisfaction of its contractual obligation to the Secretary of State. Reliance is again placed on Persson v London Country Buses. At most, a refusal by the Secretary of State to take action compelling the MIB to comply with its own procedure would be susceptible to judicial review.
23. Third, whether the essential characteristics of the two "claims" are similar. Mr O'Brien submits that they could hardly be more different. The claim against an insured driver involves an adversarial and judicial process, whereas the MIB procedure is essentially inquisitorial. The MIB investigates the claim, obtains statements, police reports and medical reports and makes an award. He also makes the point that whilst it is the date of issue of proceedings that is relevant for the purposes of limitation, there are no proceedings before the MIB where the claim involves an untraced driver. Clause 1 (1) (f) simply requires that an application is made within three years of the accident.
24. The Defendants also contend that even if, contrary to those submissions, the action in tort is a similar domestic action, the principle of equivalence is not breached in relation to the MIB procedure because that procedure does not involve less favourable treatment of the applicant than in Court proceedings. It is submitted that the Court has to look at the question of limitation in the context of the MIB procedure as a whole. It is a one-sided procedure, without an opponent which benefits the applicant, in contrast to Court proceedings. It is relatively cheap, speedy and informal, so that overall Clause 1 (1) (f) does not involve less favourable treatment.
25. Attractively though the arguments for the respective Defendants on this first issue were put, I cannot accede to them. In my judgment, the interpretation which the Defendants seek to put upon the Second Directive is unduly narrow and does not accord with the overall purpose of the First and Second Directives. I have reached this conclusion for two related reasons.
26. First, as is clear from paragraph 13 of the Judgment of the European Court in Bernaldez, the aim of these Directives is to ensure free movement of vehicles based in Community territory. As is also clear from the preamble to both Directives, this was to be achieved by abolishing "green card" checks at national borders. However, as Mr Paines pointed out and as is confirmed by the preamble to both Directives, the quid pro quo for such abolition was: (1) that national rules on compulsory motor insurance had to be harmonised. A process begun by the First Directive was made tighter by the Second Directive, so that Member States can be confident that all law abiding drivers within their national territory, wherever they come from within the Community, have insurance which complies with the minimum requirements of Article 1 of the Second Directive; (2) because what Mr Paines described as a malign consequence of such abolition was that uninsured drivers could no longer be caught at national borders, the Second Directive by Article 1 (4) imposed on Member States an obligation to set up a body which will provide compensation to victims of uninsured and untraced drivers as compulsory insurance does in respect of the victims of insured drivers.
27. I agree with Mr Paines that the Community interest reflected in the two Directives would not be adequately achieved unless the victim of an uninsured driver could obtain from the national body set up under Article 1 (4) protection equivalent to the protection he would obtain in the national court if he brought a claim in tort or delict against an insured driver. The Untraced Drivers Agreement simply does not provide such equivalent protection to someone in the position of the Claimant (or indeed to many other victims who in Court proceedings would be entitled to suspension of limitation periods under sections 14A, 28 or 33 of the Limitation Act) in circumstances where the MIB is not required to consider an application made more than three years after the date of the accident, here in about June 1996, whereas a claim in tort in the Courts could be commenced any time before June 2010.
28. The second reason is that I do consider that paragraph 27 of the Judgment of the European Court in Evans is a ruling by that Court that the protection provided by the national scheme under Article 1 (4) in respect of the victims of uninsured or untraced drivers must be equivalent to and as effective as the protection available under the national legal system to victims of insured drivers. I agree with Mr Paines that this must be the correct interpretation of the Judgment and that the Defendants' more restrictive approach is wrong because (1) if, as the Defendants suggest, all that the European Court was saying was that the protection under Article 1 (4) must be equivalent to the minimum limits of the insurance obligation under Article 1 (2), paragraph 27 would be otiose because the Court had dealt with that more limited requirement of equivalence in paragraphs 22 to 26 of the Judgment and (2) viewed in isolation, the insurance obligation under Article 1 (2) does not guarantee the adequate compensation to which paragraph 26 of the Judgment refers, without the operation of the national law pursuant to which the victim obtains compensation. Accordingly, when paragraph 27 speaks of protection for victims of uninsured or untraced drivers equivalent to and as effective as the protection available against insured drivers, the Court is not saying merely that the minimum compensation level must be equivalent but that the protection that the body set up under Article 1 (4) provides must be equivalent to and as effective as that given by the national court when it gives judgment against an insured driver.
29. Furthermore, the somewhat opaque reasoning of the Court in paragraph 28 seems to me to be doing no more than emphasising that what is required by the Directive is equivalence not identicality, hence the reference to the national body set up not having to be placed on the same footing so far as civil liability is concerned as a defendant in a claim against an insured driver. Although the Defendants seek to rely on that paragraph as supporting their case, it seems to me to do the precise opposite. It only makes sense if what this entire section of the Judgment (and specifically the previous paragraph 27) is determining is that the protection provided by the national body required under Article 1 (4) is equivalent to and as effective as that provided by the national legal system in respect of insured drivers. Were it otherwise, it is difficult to see what point there would be in the reference to the civil liability of the defendant (clearly a reference to national legal systems) at all.
30. It follows that I accept the Claimant's submission that the MIB procedure does not provide protection equivalent to or as effective as the protection provided by the English common law in respect of insured drivers, because of the disparity in terms of time bar for any "claim" between Clause 1 (1) (f) of the Untraced Drivers Agreement and the relevant provisions of the Limitation Act. Further, I agree that Article 1 (4) of the Second Directive as interpreted by the European Court in Evans provides its own comparator as regards equivalence and effectiveness in the tort claim against an insured driver, without any need to consider other European Court decisions on the principle of equivalence generally.
31. In the circumstances, it is not strictly necessary to consider the Claimant's alternative case that the MIB procedure offends the general principle of equivalence, but since the point was fully argued, I will consider it shortly. I do not accept the Defendants' submissions that the claim in tort is not a "similar domestic action". Those submissions seem to me to be unduly formulaic as regards the criteria to be considered in deciding what is a "similar domestic action" and tend to elide similarity with identicality.
32. Thus, it seems to me that contrary to the submissions of both Defendants, the decisions of the European Court on this question, as interpreted and applied by the English courts in Matra and Preston, have a broader conception of purpose and essential characteristics than the somewhat narrow one for which the Defendants contend. This is borne out by Lord Slynn's speech in Preston at paragraph 22, from which it is apparent that he is looking at the end result, what each "claim" achieves in terms of the eventual benefit to the claimant. It was because that end result was sufficiently similar in substance that he concluded that the claim for damages for breach of contract was a similar domestic action to the Community claim under Article 119.
33. I do not accept Mr Paines' submission in reply that the reference to "cause of action" in the decision of the European Court in Palmisani and the decision of the Court of Appeal in Matra is somehow to be construed as referring to a "cause" in the civil law and, specifically, French sense of the purpose of the action, the way in which it satisfies the interests of the claimant. Rather, it seems to me that the reference is to a cause of action as that concept is understood in common law systems. Nonetheless, it does not seem to me that this is a basis for concluding that the claim in tort is not a similar domestic action, merely because the procedure with which the comparison is being made is one which does not give a cause of action against the MIB under English law. The context in which the principle of equivalence has to be considered is Article 1 (4) of the Second Directive which, as the Claimant rightly points out, does not require that the law of the relevant Member State provides a cause of action available to the claimant against the body set up to provide compensation, as was essentially decided by the European Court in Evans.
34. In considering the question of whether the MIB procedure involves less favourable treatment of victims than a claim in tort before the English courts, it does not seem to me that the consideration of the comparative limitation periods by Lord Slynn in Preston is of any assistance to the Defendants. That was a case where although the one limitation period was prima facie shorter than the other, in fact it had various advantages for a claimant in relation to the time after which a claim could be made. In contrast, compared with the extended limitation period under section 28 of the Limitation Act, the three year period under Clause 1 (1) (f) of the Untraced Drivers Agreement holds no advantages for a claimant and is plainly less favourable.
35. The MIB has stopped short of trying to justify the discrepancy by reference to some objective justification of an absolute three year limit on the basis of the difficulty of investigating stale claims. Although it sought to serve a witness statement after the date for exchange as extended by agreement between the parties and only days before the trial which seemed to be attempting to provide evidence of such objective justification, Mr O'Brien eschewed any such purpose in seeking permission to adduce the statement. In the event, because he was not able to demonstrate any particular relevance of the statement to the issues I have to decide and because the MIB could not satisfy the various criteria in CPR 3.9 which are to be considered in determining whether to allow in a statement served late, I ruled against the MIB and did not allow the statement to be adduced. However, even if I had reached a contrary conclusion and the proposed statement had been designed to demonstrate some objective justification for Clause 1 (1) (f), it does not seem to me that any supposed objective justification could even begin to justify the less favourable treatment as regards time limits under Clause 1 (1) (f) as opposed to the relevant provisions of the Limitation Act.
36. As for the Defendants' submission that the provision in clause 1 (1) (f) is not less favourable when viewed in the context of other supposed advantages of the MIB procedure, I do not see how those advantages, even if established, could be prayed in aid against a claimant who by virtue of Clause 1 (1) (f) is deprived of access to that procedure. As I see it, since compliance with Clause 1 (1) (f) is a condition precedent to the invocation by the Claimant of the procedure laid down by the remainder of the Untraced Drivers Agreement, that quick, cheap and easy procedure (even assuming that is a correct characterisation of the procedure) can hardly be used to justify the much shorter time limit under Clause 1(1) (f) than under the Limitation Act if, as a consequence of Clause 1 (1) (f), it is said by the Defendants that the Claimant cannot even begin to invoke the procedure.
37. It follows that I answer the first preliminary issue in the affirmative, that on a true construction of the Second Directive and/or by virtue of the Community principle of equivalence, the MIB procedure relied upon by the United Kingdom as implementing the Second Directive should be subject to a limitation period no less favourable than that which applies to the commencement of proceedings by minors for personal injury in tort against a traced driver i.e. the limitation provision in section 28 of the Limitation Act.

The second issue

38. Although I have answered the first issue in the affirmative, it does not necessarily follow that this gives the Claimant any remedy against the MIB. I turn to consider that overall question, which is raised by the second and third issues.
39. It is a well established principle of Community law (the principle of conforming interpretation or the Marleasing principle after the case in the European Court of Justice where the principle was elucidated) that the national courts of a Member State are obliged to interpret domestic legislation, so far as possible, in the light of the wording and purpose of a Community Directive in order to achieve the result intended by the Directive and thereby comply with Community obligations. The application of this principle in English courts leads to a broad approach to statutory interpretation way beyond what would be permissible under domestic law. Thus, in Litster v Forth Dry Dock & Engineering [1990] 1 AC 546, the House of Lords made a significant change to the relevant domestic legislation by adding to it words which were not there. The only real limit to this approach to interpretation seems to be that, although the approach may change the meaning of the legislation, it must not conflict with a fundamental feature of the legislation: see Ghaidan v Godin-Mendoza [2004] 2 AC 557 per Lord Nicholls at paragraphs 30 to 33 and Commissioners of Customs & Excise v IDT Card Services Ireland Ltd [2006] EWCA Civ 29 per Arden LJ at paragraphs 81 to 89.
40. Mr Paines seeks to invoke that principle in the present case in inviting the Court to interpret the Untraced Drivers Agreement in such a way as to write in to the end of clause 1 (1) (f) the words: "or, in the case of a minor, of the date of his attaining majority" to reflect the application of section 28 of the Limitation Act, which the Claimant contends is the result intended by the Second Directive. It seems to me however that there is great difficulty in applying the Marleasing principle to a private law agreement such as the Untraced Drivers Agreement.
41. The immediate obstacle which the Claimant faces in seeking to apply the principle to the Untraced Drivers Agreement is that this very contention was rejected by the Court of Appeal in Evans v Motor Insurers Bureau (Mighell v Reading) [1999] LRIR 30. At 39 rhc Schiemann LJ stated:

"For my part I do not accept that the Marleasing principle has any application to the agreement. The Marleasing principle applies to the interpretation of national law and puts an obligation on the courts to interpret national law in the light of community law. It is not authority for the proposition that an agreement between a national government and another person must as a matter of community law be interpreted in such a manner that the state has fulfilled all its obligations under community law. Such a proposition seems to me wrong in principle when applied to agreements. The agreement can not in my judgment be properly categorised as part of national law. The state was at liberty to fulfil its community obligations in any way it liked and the fact that it chose to do nothing because it thought that the existing agreement by chance achieved fulfilment of those obligations can not provide a basis for concluding that the other party to the existing agreement should be bound to a particular interpretation resulting solely from the State's view of its effect."

42. Hobhouse LJ agreed, stating at 41 lhc:

"The argument on behalf of White (and to some extent Evans), as explained by Schiemann LJ sought to invoke a rather different principle relating to the construction of national measures; I agree that this argument does not assist the plaintiffs (or Evans). Similarly the fact that the Secretary of State may have made a mistake as to the obligations of the United Kingdom under the second Directive does not alter the position that, as a matter of contract law, the obligations and liabilities of the Bureau are those which it accepted and assumed under the Agreement and no more."

43. Mr Paines contends that this part of the decision of the Court of Appeal has been overruled or at least overtaken by the decision of the European Court in Evans. It is certainly true that, in that case, the Advocate General's Opinion expressed some concern about the decision of the Court of Appeal. However, I agree with the Defendants' submission that the concern was not about the failure of the Court of Appeal to apply the Marleasing principle to the Untraced Drivers Agreement, so much as that the consequence of the non-applicability of the principle was that the United Kingdom had failed to comply with Article 1(4) of the Second Insurance Directive (see paragraphs 115-116 and 132-133 of the Opinion).
44. Nevertheless, the Claimant relies upon paragraphs 34 to 37 of the Judgment which provide as follows:

"34. The fact that the source of the obligation of the body in question lies in an agreement concluded between it and a public authority is immaterial, provided that that agreement is interpreted and applied as obliging that body to provide victims with the compensation guaranteed to them by the Second Directive and as enabling victims to address themselves directly to the body responsible for providing such compensation.

35. As to whether it is sufficient, for the purposes of transposing the Second Directive, to rely on an existing body, it must be borne in mind that, whilst legislative action on the part of each Member State is not necessarily required in order to implement a directive, it is essential for national law to guarantee that the national authorities will effectively apply the directive in full, that the legal position under national law should be sufficiently precise and clear and that individuals are made fully aware of all their rights and, where appropriate, may rely on them before the national courts (Case C-365/93 Commission v Greece [1995] ECR I-499 paragraph 9, and Case C-144/99 Commission v Netherlands [2001] ECR I-3541, paragraph 17).

36. As the Court has already made clear, the last-mentioned condition is of particular importance where the directive in question is intended to accord rights to nationals of other Member States (Commission v Greece, cited above, paragraph 9, and Commission v Netherlands, cited above, paragraph 18). That is the position in relation to the Second Directive, which is intended in particular, according to the fifth recital in its preamble, to guarantee victims adequate protection, irrespective of the Member State in which the accident occurred.

37. In those circumstances, it must be held that a body may be regarded as authorised by a Member State within the meaning of Article 1(4) of the Second Directive where its obligation to provide compensation to victims of damage or injury caused by unidentified or insufficiently insured vehicles derives from an agreement concluded between that body and a public authority of the Member State, provided that the agreement is interpreted and applied as obliging the body to provide victims with the compensation guaranteed to them by the Second Directive and provided that victims may apply directly to that body."

45. The Claimant contends that the effect of those paragraphs (taken with the Advocate General's Opinion) is that the European Court was effectively overruling the Court of Appeal and directing that the Marleasing principle applies to the Untraced Drivers Agreement. I agree with the Defendants that these paragraphs of the Judgment simply will not bear that construction. If the Court had been intending to overrule the decision of the Court of Appeal or to decide that the Marleasing principle did apply to a private law contract such as the Untraced Drivers Agreement, it seems to me that (given that the Advocate General had raised his concerns about the decision of the Court of Appeal in his Opinion and given that, as the Claimant averred, the question whether the principle did apply to the agreement was a matter of Community law) it is inconceivable that the Court would not have made express mention of the decision of the Court of Appeal and disapproved of it. I am unimpressed with the argument that somehow the European Court has overruled the Court of Appeal sub silentio.
46. I consider that the correct analysis of paragraphs 34 to 37 of the Judgment is that the Court was saying that the Untraced Drivers Agreement would comply with the Directive provided that certain criteria were satisfied, but was leaving to the national courts of the United Kingdom how that Agreement was to be interpreted, without in any sense dictating that the national courts had to apply the Marleasing principle. If, as the Claimant submitted, that left the precise status and interpretation of the Agreement up in the air, so be it; for present purposes I need only state that as a judge at first instance I am clearly bound by the decision of the Court of Appeal that the Marleasing principle does not apply to the Agreement.
47. In those circumstances, it is strictly unnecessary to indicate what my decision would have been as to the interpretation of the Agreement had I concluded that the Marleasing principle did apply. However, in case this matter goes further, I should indicate that, in my view, the application of that principle would justify the writing into Clause 1 (1) (f) of the additional words for which the Claimant contends, notwithstanding that normal English law principles of construction would not permit that interpretation. I do not consider, despite the Defendants' contentions to the contrary, that there is any basis for saying that the interpretation of the Agreement for which the Claimant contends is contrary to some fundamental feature of the Agreement. By no stretch of the imagination can the three year limit under Clause 1 (1) (f) be considered such a fundamental feature. It follows that, if the Marleasing principle were applicable, which I have concluded it is not, the Agreement could be rewritten in the manner for which the Claimant contends.

The third issue

48. In relation to the third issue, it is accepted by the Claimant that he would have to satisfy two criteria before any breach of the Directive was directly enforceable against the MIB by the Claimant:

i) that the Second Directive is capable of having direct effect in that the provision relied upon is "unconditional and sufficiently precise", the prescribed period for implementation has passed and the Directive has not been correctly implemented by the Member State;

ii) that even if the Claimant establishes that the Directive is capable of having direct effect, the MIB is an emanation of the state within the meaning of that concept as a matter of Community law.

49. So far as the first of those criteria is concerned, even on the basis (which follows from my decision on the first issue) that the United Kingdom had failed to implement the Second Directive correctly by the date for compliance of 31 December 1988, the Defendants contend that the Second Directive does not have direct effect. They submit that this was the decision of the Court of Appeal in the conjoined appeals in Mighell v Reading [1999] 1 Lloyd's Rep IR 30, following and applying the decisions of the European Court and that I am bound by the decision of the Court of Appeal.
50. In that case the Court of Appeal considered the decisions of the European Court in C-6/90 and 9/90 Francovich [1991] ECR I-5337 and C-334/92 Wagner Miret [1993] ECR I-6911. In Francovich the Court was considering Council Directive 80/987 on the approximation of the laws of Member States relating to the protection of employees in the event of the insolvency of the employer. The Italian government had failed to introduce a system for the provision of the guarantees required by the Directive within the prescribed period. One of the questions considered by the European Court was whether the Directive had direct effect so that the employees concerned could enforce their rights under the Directive against the state. The Court decided that the provisions of the Directive were not sufficiently precise and unconditional in relation to the identity of the person liable to provide the guarantee, because the Member State was given a complete discretion under the Directive as to the organisation, operation and financing of the guarantee institutions. The provisions of the Directive thus did not identify the person liable to provide the guarantee and the state could not be held liable directly under the guarantee merely because it had not exercised its discretion.
51. In Wagner Miret the Court considered the implementation of the same Directive in Spain. Spanish law had established a guarantee fund before the Directive came into effect which protected certain categories of employee and the Spanish government had not considered it necessary to amend its national law. Mr Wagner Miret was a member of higher management of the relevant company who was made redundant. When the company became insolvent, he brought a claim in the national courts seeking payment out of the guarantee fund which was dismissed on the basis that the fund did not apply to higher management. The matter was referred to the European Court which decided that the Directive did not have direct effect because it had left to the Member State whether to set up one or more guarantee institutions for all categories of employee. Because that discretion had been left to the Member State, a higher management employee could not enforce the Directive directly against a guarantee fund set up to protect other categories of employee.
52. Having considered the effect of these two decisions, Schiemann LJ in Mighell v Reading held as follows (at p 37 lhc):

"The judges below in the present cases took the view that since the MIB had in effect been nominated by the State to carry out the task of compensating those injured persons who could not look to an insurance company therefore the Directive could be regarded as having direct effect. Here, as it seemed to me, they erred. Whether a Directive has direct effect or not can not logically depend on what has been done in a particular Member State. I regard that as acte clair.

In the present case it was, at the time when the Directive came into force, open to the Government to fulfil its obligations thereunder in any way that it pleased whether by using the MIB or in some other way. In those circumstances it does not seem to me that the doctrine of vertical effect comes into play."

53. Swinton Thomas LJ agreed with the reasoning of Schiemann LJ as to why the Second Directive did not have direct effect against the MIB. Hobhouse LJ was doubtful as to whether the reasoning would always be correct although he considered it led to the right outcome in those cases (see pp 41-2) . It is in those circumstances that the Defendants submit that I am bound by that decision that the Second Directive does not have direct effect against the MIB.
54. The Claimant contends that the European case law in this area has moved on since the decision of the Court of Appeal in Mighell v Reading in September 1998. Particular reliance is placed on the decision of the European Court in C-441/99 Gharehveran [2001] ECR I-7687. That case considered further the same Directive as had been considered in Francovich and Wagner Miret. The Swedish state had designated itself as liable to fulfil the obligation to meet claims for pay guaranteed under the Directive. Under Swedish law, someone in the position of the claimant in that case, whose husband was the owner of the company which had employed her and had become insolvent, was excluded from the guarantee scheme operated by the state. This was a breach of the Directive and the European Court held that the claimant could enforce the Directive directly against the state in the national courts.
55. The Court distinguished Francovich and Wagner Miret on the grounds that they were cases in which, respectively, the Member State had still not used the discretion it enjoyed under the Directive to designate an organisation to provide the requisite guarantee or had only made partial use of the discretion. In contrast, having designated itself as the person liable to provide the guarantee, the Swedish state had made full use of the discretion and could not maintain that it still needed to take measures to implement the Directive. In those circumstances, the existence of the discretion under Article 5 of the Directive could not be invoked by Sweden to prevent the claimant from having a direct claim under the Directive against the state. As the Court held in paragraph 44:

"[an] individual must be allowed to rely on provisions conferring on him in a precise and unconditional way the status of beneficiary of a directive once the discretion given to a Member State with regard to other provisions of the directive, whose non-implementation was the only obstacle to the effective exercise of the right invested in the individual by the directive, has been fully used."

56. Mr Paines for the Claimant submits that this reasoning is equally applicable here, where the United Kingdom has chosen to designate the MIB as the body through which it seeks to implement the Second Directive. The relevant discretion has been fully used and it cannot seriously be suggested that somehow, as in Wagner Miret, the discretion has only been partially used. I accept that submission. It seems to me that the Second Directive is capable in principle of having direct effect in these circumstances on the basis of the reasoning in Gharehveran. It is accepted by Mr Crow on behalf of the Secretary of State that if I accept that the reasoning of that decision of the European Court is applicable here, as I do, under section 3 (1) of the European Communities Act 1972, I must apply and follow that reasoning, even if there is a contrary decision of the Court of Appeal in Mighell v Reading. The obligation to apply the principles of Community law as laid down by the European Court of Justice means that the doctrine of precedent is not applicable: see Crehan v Inntrepreneur Pub Company [2004] EWCA Civ 637 at paragraphs 132 to 134.
57. Turning to the second criterion, even if the Directive is (as I have concluded) capable of having direct effect, it cannot be enforced directly against the MIB save to the extent that that body is an emanation of the state. It is important to bear in mind that one is concerned here with what the concept of emanation of the state means as a matter of Community law, as opposed to as a matter of English law or public international law, as considered most recently by Morison J in Walker International v Republic of Congo [2005] EWHC 2813 (Comm). As a matter of Community law, an entity will normally only be regarded as an emanation of the state if it satisfies the three conditions laid down by the European Court of Justice in C-188/89 Foster v British Gas [1990] ECR I-3313, namely (i) that it performs a public service (ii) under the control of the state and (iii) it has for that purpose special powers beyond those which result from the normal rules applicable in relations between individuals. In Doughty v Rolls Royce[1992] IRLR 126, Mustill LJ held that if the particular entity under consideration does not have special powers, then before it could be considered an emanation of the state, one would have to identify some other feature of its activities which pointed to it being an emanation.
58. In the case of the MIB, despite the submissions of the Defendants to the contrary, it seems to me that the provision of protection and compensation for victims of accidents involving uninsured or untraced drivers, whether by satisfying judgments against uninsured drivers or by the procedure for investigation and award under the Untraced Drivers Agreement, is a "public service".
59. As for state control, the Claimant submits that the MIB is under the control of the Secretary of State because (i) the manner in which it provides the service is controlled or regulated by the terms of the various Agreements with the Department of Transport and (ii) under the Untraced Drivers Agreement, it is the Secretary of State who appoints any arbitrator pursuant to Clause 18. The Defendants point out that although the procedure may be regulated by the Agreement, how the MIB deals with any particular application is entirely a matter for the MIB and the Secretary of State has no right to interfere. The Claimant counters this by saying that it is irrelevant that the state does not have day to day control over the body: it may still be under the control of the state: see Griffin v South West Water [1995] IRLR 15 at paragraph 94 per Blackburne J. That is of course quite correct, but that was a case where the relevant statute clearly gave the Secretary of State wide powers of control as to the manner in which the functions of SWW as a water and sewerage undertaker were to be carried out: see paragraphs 97 to 110 of the judgment. There are no equivalent powers of control given to the Secretary of State over the manner in which the MIB carries out its functions in the Untraced Drivers Agreement. Certainly, it does not seem to me that the power to appoint an arbitrator from a panel could even begin to be the requisite level of state control.
60. However, even if I were wrong in concluding that the MIB is not under the control of the state, where the contention that it is an emanation really founders as I see it is in relation to the complete absence of "special powers". Mr Paines for the Claimant contended that the MIB was given what he characterised as an "extremely potent power" by section 145 of the Road Traffic Act 1988 to exclude an insurer from membership of the MIB which would have the effect that that insurer would no longer be an "authorised insurer" and so could not issue policies of motor insurance.
61. It seems to me that this argument fails for two related reasons. First, the statute cannot be interpreted as conferring the power for which the Claimant contends, which would require reading words into section 143(5) and (6) which are simply not there. Second, as one would expect of a company limited by guarantee of which the members are the various motor insurers, the relations between the members and the MIB are governed not by the statute but by the Articles of Association of the MIB to which I was referred by the Defendants. It is clear from Article 4 that the MIB does not have the power for which the Claimant contends, to exclude an authorised insurer from membership. Rather that Article provides that any person who has obtained an authorisation to carry on motor insurance business under what is now the Financial Services and Markets Act 2000 (formerly the Insurance Companies Act 1982) shall be a Member of the MIB and shall have its name entered in the Register. Accordingly, the MIB has no special powers, nor is there anything else about its activities which points to it being an emanation of the state.
62. The matter does not end there, because in Mighell v Reading, Hobhouse LJ found in terms that the MIB was a private law entity and not an emanation of the state. I was told by Mr O'Brien QC (who appeared then as now for the MIB) that Foster v British Gas was cited in extenso to the Court of Appeal in his skeleton argument, so that Hobhouse LJ must have had the three conditions for emanation well in mind. At page 42 rhc, he said:

"The Bureau is not constitutionally an emanation of the state: it is a private law company. It is not functionally an emanation of the state: it acts on its own behalf in the commercial interest of its members not on behalf of the state or as a delegate of the state. It enters into commercial private law contracts with inter alia the Secretary of State. Similarly, when seeking to implement the second Directive in relation to uninsured drivers the Secretary of State chose to make use of the same private law mechanisms as before.

The only capacity in which the Bureau has acted is as a private law entity and the only obligations it has assumed have been private law contractual obligations. This cannot be said to be a situation where any public law relationship has come into existence. Therefore the argument of the plaintiffs/claimants fails on the character of the relationship."

63. The other members of the Court of Appeal did not find it necessary to decide the point, although Schiemann LJ (with whom Swinton Thomas LJ agreed) indicated at page 37 rhc that it was his current opinion that the MIB was not an emanation of the state. Accordingly, what Hobhouse LJ said is not binding authority. However, I agree with the Defendants that it is persuasive reasoning. It fortifies the conclusion I have reached independently that the MIB is not an emanation of the state. Accordingly, the Claimant has no right of direct action against the MIB for breach of the Second Directive.

The fourth issue

64. It remains to be considered whether the Claimant has a claim for Francovich/Factortame damages against the Secretary of State. For the purposes of the determination of the preliminary issues, I am concerned only with what might be described as the issue of principle, whether the United Kingdom is in sufficiently serious breach of the terms of the Second Directive to expose it to a claim for Francovich/Factortame damages and not with the issue of causation or any other factual issue as to whether that breach has actually caused the Claimant any loss or damage.
65. It is common ground that before I could conclude that the United Kingdom was exposed to such a claim, the Claimant must satisfy me that the United Kingdom "has manifestly and gravely disregarded the limits on its discretion": paragraph 55 of the Judgment of the European Court in Brasserie du Pecheur [1999] QB 404 at 499F. In paragraph 56 of that judgment the European Court identified the factors to be taken into account in determining that question as follows:

"The factors which the competent court may take into consideration include the clarity and precision of the rule breached; the measure of discretion left by the rule to a national or Community authorities; whether the infringement and the damage caused was intentional or involuntary; whether any error of law was excusable or inexcusable; the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law."

66. Those factors, many of which overlap, have been refined by subsequent decisions, as Lord Slynn pointed out in R v Secretary of State Ex parte Factortame (No. 5) [2000] 1 AC 524 at p 541D-F:

"More recent cases show the working out of these rules. Thus in Reg. v. H.M. Treasury, Ex parte British Telecommunications Plc. (Case C-392-93) [1996] QB 615 the Court held that where the interpretation adopted by the United Kingdom was arguable on the basis of an imprecisely worded article of the relevant directive and where there was no case law to give guidance the state was not liable in damages. In Reg. v. Ministry of Agriculture, Fisheries and Food, Ex parte Hedley Lomas (Ireland) Ltd. (Case C-5/94) [1997] QB 139 where there was no or very little room for discretion in granting a licence that could in itself be a sufficiently serious breach. In Dillenkofer v. Federal Republic of Germany (Case C-178/94) [1997] QB 259 it was held that a failure to implement a directive, where no or little question of legislative choice was involved, the mere infringement may constitute a sufficiently serious breach. In Denkavit Internationaal B.V. v. Bundesamt für Finanzen (Cases C-283/94) [1996] ECR I-5063 the Court held that other member states, after discussion with the Council had adopted the same interpretation of the Directive as Germany and as there was no relevant case law of the Court it was held that the breach was not sufficiently serious."

67. In the present case particular reliance is placed by the Claimant upon the fact that in 1987, when the United Kingdom was seeking to implement the Second Directive by introducing compensation for property damage caused by uninsured drivers, the Department of Transport appears to have been alive to the point that the three year time limit for such claims which the MIB wanted in any amended version of the Uninsured Drivers Agreement would be contrary to Article 1 (4) of the Second Directive. This emerges from the correspondence between the Department and the MIB in September 1987 exhibited to the witness statement of Mr Roberts of the Department. In particular, in a letter from the Department of 16 September 1987, it was stated that: "Article 1.4 appears to preclude the proposed three year limitation for property damage claims".
68. The MIB in its reply of 21 September 1987 resisted the proposed six year time limit (evidently in line with the Limitation Act), as "far too long and ..totally unacceptable" and stated that the three year period which the MIB was proposing for property damage claims under the Uninsured Drivers Agreement (as for bodily injury claims) had as its object "to protect [the MIB] against unreasonably "stale" claims". In the event, despite those concerns of the MIB, the views of the Department prevailed and the new Uninsured Drivers Agreement introduced with effect from 31 December 1988 did not contain any special limitation period for the bringing of claims. It was therefore subject to the ordinary rules as to limitation under the Limitation Act 1980.
69. Mr Paines relies upon this material as demonstrating that the Department appreciated at the time when it was implementing the Second Directive that a three year time limit under the Uninsured Drivers Agreement would not comply with the Directive because it was shorter than the limitation periods for claims in proceedings against insured drivers. However, it did not amend the three year limit which was present in the existing Untraced Drivers Agreement, which suggests that the Department overlooked the need to check that other Agreement for compliance with the Directive. Accordingly, says Mr Paines, this is not some excusable misunderstanding as to the law or as to what compliance with the Directive required, but an inexcusable lack of thoroughness.
70. Mr Crow on behalf of the Secretary of State relies on ten points in support of his submission that any breach of the Directive by the United Kingdom was not sufficiently serious to attract Francovich/Factortame damages:

i) The Second Directive does not itself deal with limitation, so that one is not in the territory of competing interpretations.

ii) The language of the Directive is not indicative of the right answer. It only looks at the question of adequate compensation.

iii) The Commission did not take this point against the MIB and the Secretary of State at the time that the Agreement was before the European Court in Evans.

iv) There is no guidance from any other Community institution.

v) Nobody raised this point on the Untraced Drivers Agreement when the Department was consulting prior to implementation of the Directive in the 1980s.

vi) It is now more than 18 years since the date for transposition of the Directive and yet this is the first case where it has been suggested that the United Kingdom has failed to transpose the Directive correctly in relation to minors, which is illustrative of the excusability of any breach.

vii) The principle of equivalence is elastic and does not require exact replication. Rather the Member State has an element of discretion.

viii) There are good reasons for imposing a shorter time limit where there is no defendant as is the case under the MIB procedure. This is relevant to deciding the seriousness of the breach.

ix) There is no suggestion of bad faith or intentional infliction of damage by the Department.

x) It is relevant to look at what other Member States have done. The department commissioned a Report from the British Institute of International and Comparative Law on how other Member States dealt with limitation in the context of claims by minors against insured drivers on the one hand and uninsured or untraced drivers on the other. In summary this showed a wide disparity as to general limitation periods and three other Member States, France, Greece and Luxembourg where the time limit for bringing a claim before the national body which has been designated to comply with the Second Directive is less than the general limitation period.

71. It is probably convenient to start with the fifth point. Whilst it is no doubt strictly true that no-one appears to have raised the specific issue of compliance of Clause 1 (1) (f) of the Untraced Drivers Agreement with the Second Directive during the consultation process in the 1980s, the fact remains that it is clear from the correspondence in 1987 and the form of the new Uninsured Drivers Agreement in December 1988, that the Department did appreciate that a three year time limit which was less than the corresponding limitation period for a claim against an insured driver in Court would be precluded by Article 1 (4). Whilst I bear in mind that with the passage of time it has not been possible for the Department to call evidence from any of the relevant decision makers, so that what would have happened if the Department had checked the Untraced Drivers Agreement has to be a matter of inference, it seems to me that it is entirely appropriate to infer that any check of the Untraced Drivers Agreement would have been bound to lead the Department to conclude that Clause 1 (1) (f) did not comply with Article 1 (4) of the Second Directive, in which case its terms should have been changed at that stage.
72. I consider that this also answers several of Mr Crow's other points, specifically the first to fourth, sixth and eighth points. Whilst those points would no doubt be relevant factors in another case, they do not seem to me to be of much avail to the Secretary of State in a case where it is quite apparent that, at the time when the Second Directive was being implemented in 1987 and 1988, the Department appreciated that a shorter time limit under one of the MIB Agreements than applicable to comparable Court proceedings against an insured driver would not comply with the Directive. I agree with Mr Paines that the failure to amend Clause 1 (1) (f) to bring it into line with the Limitation Act and hence comply with Article 1 (4) of the Second Directive, is not attributable to confusion or misunderstanding but is attributable to an inexcusable lack of thoroughness. That lack of thoroughness is compounded by the fact that, notwithstanding the Evans judgment of the European Court in 2003 which highlighted that the Untraced Drivers Agreement did not comply with the Second Directive in other respects, the Department does not seem to have checked through the entire Agreement at that time to ensure that it complied in every respect with the Directive.
73. Mr Crow sought to disparage the phrase "inexcusable lack of thoroughness" as no more than the use of a pejorative adjective. He submitted that it was not possible to say whether what occurred was that the view was taken within the Department that an amendment to Clause 1 (1) (f) was not required to comply with the Directive or that the Department simply overlooked the issue in relation to the Untraced Drivers Agreement. He went on to contend that whichever was the correct explanation made no difference to the seriousness of any breach. I cannot accept that submission. It is inherently unlikely, in view of what was said in the Department's letter of 16 September 1987 about the proposed three year time limit being precluded by Article 1 (4) of the Second Directive, that the Department could or would have taken a different view in relation to the existing time limit in the Untraced Drivers Agreement, which might be said to be an a fortiori case. Even if a different view had been taken, it would surely have been documented.
74. I consider that the most likely explanation is that no-one in the Department checked the existing Untraced Drivers Agreement for compliance with the Directive. Contrary to Mr Crow's submission, it is my view that, in the context of the obligations of the Member State to ensure compliance with a Council Directive, that was an extremely serious breach. Of course it is not being suggested that the United Kingdom acted in bad faith or intentionally inflicted damage (Mr Crow's ninth point) but as Mr Paines pointed out, the fact that a Member State acted in good faith is not an answer if the lack of thoroughness, although inadvertent, is a sufficiently serious breach.
75. I should add in relation to the eighth point that it is difficult to see how this assists the Department in circumstances where there is no evidence that the reason why the provision in Clause 1 (1) (f) remained unchanged is that, at the time when the Directive was being implemented, it was considered that the three year limit should be kept because there were good policy reasons for it in the context of the MIB procedure. On the contrary, the Department rejected the MIB's supposed good policy reasons for wanting a three year limit for property damage claims. Furthermore, this point seems perilously close to the suggestion of objective justification which Mr O'Brien, at least, expressly eschewed on behalf of the MIB. I do not see how, even if there were good reasons for a shorter time limit from the MIB's perspective, that could justify a system of compensation for victims of untraced drivers which was not equivalent to and as effective as claims in tort against insured drivers in Court proceedings, let alone justify the failure of the United Kingdom to implement the Directive properly.
76. As for Mr Crow's seventh point, it is of course correct that the Directive as interpreted by Evans gives the Member States a discretion as to what if any body or system they use to comply with their obligations under the Directive. However, contrary to what Mr Crow seems to be submitting, they are not given a discretion as to whether to comply with the requirements of the Directive. This issue of breach is being considered on the basis that the United Kingdom through the Untraced Drivers Agreement with the MIB has not fully complied with the Directive, which is not an area where discretion is relevant.
77. Finally in relation to the comparative study as to what other Member States do, I consider that the fact that other Member States may be in breach of their obligations to implement the Second Directive properly is not relevant to the question whether the United Kingdom is in breach. Furthermore, that fact does not seem to me to reduce the seriousness of the breach unless it could be said that the United Kingdom had relied, albeit mistakenly, upon the conduct of other Member States as evidencing that a shorter time limit than the general limitation period was not contrary to the Directive. However, there is no evidence of any such reliance.
78. In my judgment, Mr Paines is correct in his submission that the lack of thoroughness in failing to check the Untraced Drivers Agreement for compliance with the Second Directive at the time of implementation in 1987 and 1988, whether on its own or in conjunction with the corresponding failure to check the entire Agreement for compliance after the Evans judgment in 2003, does mean that the Department's breach of the Second Directive is sufficiently serious to give rise in principle to an exposure to Francovich/Factortame damages. As already indicated, in the context of the trial of these preliminary issues, I say nothing about whether the Claimant will in fact be able to recover such damages from the Secretary of State.