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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Farrell -v- Whitty & ors [2015] IESC 39 (12 May 2015)
URL: http://www.bailii.org/ie/cases/IESC/2015/S39.html
Cite as: [2015] IESC 39
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Judgment
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An Chúirt Uachtarach The Supreme Court Record number: 1997/10802P
Appeal number: 145/2008 Clarke J Laffoy J Charleton J
Elaine Farrell Plaintiff/Respondent and
Alan Whitty, The Minister for the Environment, Ireland and the Attorney General Defendants/Respondents and
The Motor Insurers’ Bureau of Ireland Defendant/Appellant Judgment of Mr Justice Charleton delivered on the 12th day of May 2015. 1. This is an order for reference for preliminary ruling by the Supreme Court pursuant to Article 267 of the Treaty on the Functioning of the European Union. The specific issue which is before the Supreme Court in these proceedings is as to whether the defendant/appellant the Motor Insurers’ Bureau of Ireland (hereafter ‘MIBI’) is an emanation of the State for the purposes of the Acquis Communautaire, and in particular under the existing decisions of the Court of Justice of the European Union. It is agreed between to the parties to the appeal from the decision of the High Court to the Supreme Court that, dependant on the correct answer to that question, either the MIBI, which brought this appeal to the Supreme Court, or the Minister for the Environment, Ireland and the Attorney General, the respondents to the appeal, will be liable to bear the burden of compensating Elaine Farrell who was the plaintiff in the original High Court case, but who has taken no part in the appeal. That issue arises in circumstances where it has been determined that Ireland has failed in its obligation to properly, and within time, transpose into national law the provisions of a directive. The MIBI is an incorporated body set up to deal with claims under that directive; more particularly claims for compensation where, as in this case, the driver of a vehicle while liable is both uninsured and unable to compensate out of his or her resources a person in the position of Elaine Farrell who has been injured in a traffic accident. Alan Whitty, the driver in this case, took no part in this appeal. 2. It is axiomatic that the obligation of effective cooperation cast, in now consolidated form, by Article 4.3 of the Treaty of European Union means that where the directive attributes rights to individuals which are unconditional and sufficiently precise, and where the absence of the proper and timely implementation of which causes damage to individuals, a member state may thereby become liable; Francovich and Others v Italy (Case C-479/93) [1995] ECR I-03843; Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53; Kampelmann and Others (Joined Cases C-253/96 to C-258/96) [1997] ECR I-06907, para. 37 and Meiland Azewijn (Case C-292/02) [2004] ECR I-07905, para. 57. Here, Ireland was obliged to, but did not in a timely way, implement a directive requiring that all passengers in motor vehicles should be covered by the insurance of the driver of that vehicle. Background 4. These proceedings arise as a result of an accident on 26 January 1996 when Elaine Farrell was injured as a passenger in the rear of the van driven by Alan Whitty. At all times, it was accepted that this accident was the fault of Alan Whitty. He was thus liable to compensate her. He was not, however, insured for injury to her. Nor did he have the financial means to compensate her for the injury which she suffered. As of the date of the accident there did not exist in Ireland an obligation under law for drivers to insure against injury to passengers in a vehicle where that passenger was seated on the floor of a van which was not fitted with seats. Elaine Farrell was such a passenger when the vehicle driven by Alan Whitty crashed. He did not commit any criminal offence thereby because the requirement of compulsory insurance in those circumstances provided for in the Third Directive had, as of that time, not been transposed into the law of Ireland. 5. This is the second such reference in this case. In Farrell v Whitty (Case C-356/05), the Court answered two questions from the High Court, the court of first instance in this case. The first related to the requirement to insure in the instant circumstances; and the second as to direct reliance by individuals injured in circumstances like that of Elaine Farrell should Ireland not have properly transposed the relevant provisions of the directives. By virtue of dealings between the parties, Elaine Farrell has been paid a sum of money appropriate to compensate her for her injuries. The issue before the High Court at first instance and on appeal to the Supreme Court is as to which of the two parties to the appeal bears responsibility for the damages paid, the party taking the appeal which is the MIBI, or the effective respondent to the appeal which is the Minister for the Environment, Ireland and the Attorney General. The answer to that question, and to the same issue posed in different cases, depends upon whether the MIBI is an emanation of Ireland. 6. It is appropriate to identify the parties with particularity. The plaintiff is Elaine Farrell, who on the occasion of the accident was seated on the back floor of a van not equipped with rear seats, driven by the first defendant Alan Whitty, the owner and driver of same, who held no policy of insurance. He does not have funds to compensate Elaine Farrell out of his own resources. He lost control of the van while driving it on a public road crashing it into a wall, thereby injuring her. The second, third and fourth defendants are Minister for the Environment, Ireland and the Attorney General. These defendants are, in effect, the member state, called upon to compensate the plaintiff due to the failure to transpose identified. The fifth defendant is the MIBI, the body which as a matter of contract with Ireland, detailed below, is given the special responsibility, in accordance with The Second Directive, for compensating persons who were the victims of road traffic accidents where the driver was uninsured or where the driver could not be identified. The MIBI were joined in these proceedings on the basis of a contention by Elaine Farrell, as plaintiff, joined in by Ireland, that this corporation was, as an emanation of the State, liable to compensate Elaine Farrell arising out of the failure of transposition referenced above. The only issues remaining arise between those defendants in the light of the alternative contentions. 7. This Court on appeal has not been told any details as to amount or as to what arrangements the parties may have made regarding the payment of compensation to Elaine Farrell. As a live legal issue, what remains is which of the two active defendants in the case is liable; the MIBI, as appellant to this Court, or the effective respondent the Minister for the Environment, Ireland and the Attorney General. These are the only parties to the proceedings with a continuing interest in the outcome. The answer to liability depends upon whether the MIBI sought to be fixed with liability by Ireland, consequent upon a failure by Ireland to transpose a directive properly, is an emanation of the member state. There is no issue but that the defendant Minister and the defendants Ireland and the Attorney General are appropriate defendants. However, should it be found that Ireland is liable, the case is made by Ireland that the party to pay the damages is the MIBI as it is an emanation of Ireland. If it is an emanation of Ireland, then under the argument presented on this appeal, the MIBI will be liable; the defendants representing Ireland as a juristic person will not. Liability to pay the damages to Elaine Farrell, and others in her situation, depends on whether, as a matter of European Law, the MIBI is an emanation of Ireland as a member state. On this issue, at first instance, before the High Court, Birmingham J held that the MIBI was an emanation of the State and therefore the party liable to compensate Elaine Farrell; Farrell v Whitty and Others [2008] IEHC 124. This ruling was appealed to the Supreme Court by the MIBI. On this reference, it is appropriate to describe as a matter of law and of fact, the origin and function of the MIBI in dealing with and compensating passengers who have been the victims of road traffic accidents but where the driver at fault was uninsured or is unidentifiable. The Motor Insurers Bureau of Ireland 9. The agreement of 21st December, 1988, is the one operative as of the date of this accident of 26th January, 1996. In it, the Minister for Transport replaced the Minister for Local Government as the State party to the agreement. Pursuant to clause 2, the MIBI may be sued by any person seeking compensation for an uninsured or unidentified driver and may be cited as a co-defendant. The MIBI may be cited as a sole defendant by a plaintiff seeking to enforce the agreement to the benefit of that person. Since, ordinarily, the MIBI have no responsibility for the driving of motor vehicles, they would not be the appropriate defendants in cases alleging negligent driving on public roads. Pursuant to this private agreement, however, the MIBI becomes an appropriate defendant with an uninsured driver who is identified; or the sole defendant where the driver is unidentified. More significantly, the MIBI may be sued by an injured plaintiff to enforce the agreement between Ireland and the insurers even though that plaintiff injured by negligent driving was not a party to the agreement between the State and the MIBI. As a matter of law, a person who is not a party to a contract, in other words does not join in the formation of an agreement, cannot sue on same. This is called the no privity of contract defence. The only parties to the agreement are the State and the insurers writing motor insurance in Ireland. Clause 3 of the agreement sets out the conditions precedent for the liability of the MIBI, including notice and entitlement to information. Clause 4 sets out the agreement of the MIBI to pay the victims of uninsured or unidentified drivers. Liability of the MIBI to pay arises where a judgment remains unsatisfied in full within 28 days but only where that judgment covers “any liability for injury to person or damage to property which is required to be covered by an approved policy of insurance under Section 56 of the [Road Traffic] Act [1961]”. As previously indicated, Alan Whitty was not obliged as a matter of Irish law to insure against negligent injury to Elaine Farrell because she came within a class of persons who while covered by the Third Directive, did not have such rights transposed into Irish law. That is the key point in this reference. Under clause 5 of the agreement, a person carried in a stolen vehicle, necessarily uninsured for that reason, was excluded from compensation where they knew or ought to have known of that fact. This was later changed so that only passengers who knew of the status of the vehicle were excluded. Clause 5 is not relevant here. 10. Clause 10 of the agreement permits the MIBI to settle proceedings of which it has been given notice under clause 3. The MIBI may make the negligently injured plaintiff an offer in full satisfaction of the claim, together with taxed costs to the date of the offer and, if accepted, such offer discharges their liability. The plaintiff may refuse, in which case the action proceeds to court. If the plaintiff recovers more in litigation, the balance in damages and costs is added to the liability of the MIBI to pay the plaintiff 11. There is no legislation or other form of public law providing for the MIBI to act on behalf of the uninsured or unidentified driver. Any rights that there are derive from the MIBI agreement with the Minister. Where there is an uninsured driver, the MIBI will seek to contract with her or him in order to deal with the case either by settlement or in court. The MIBI will approach the uninsured driver and request that driver to sign litigation and settlement rights in their favour by way of a mandate. If this contract is entered into, the MIBI runs the case in the same way as an insurance company defends claim on behalf of an insured driver; which is a very normal and everyday occurrence in Irish courts. If the uninsured driver refuses to enter into such a contract, then it appears that the MIBI simply proceeds to act on behalf of the uninsured driver anyway. The MIBI does so without any contract with the uninsured driver and proceeds in that regard as if they have such authority. As recounted in Noctor and Lyons, The MIBI Agreements and the Law, 2nd Ed.,(Dublin, 2012) chapter 9, a book by two leading legal practitioners in this area of public law, what occurs most often is that the driver will not appear at the trial but the MIBI will have been joined as a co-defendant. As such, the MIBI will run whatever defence there may be to the allegation of negligent driving and will also contest the level of damages that the injured plaintiff should be awarded. The MIBI will then seek to recover from the uninsured driver without a signed mandate by that driver. This action by the MIBI would be brought under the law of unjust enrichment. There is no legal authority in statute for the MIBI to so proceed; the only apparent authority is in the MIBI agreement with the Minister. The merit of such a position, however, is that the MIBI is paying damages on behalf of an uninsured driver. Therefore control of the proceedings on behalf of the uninsured driver is a fair position on the merits, in such circumstances. Where the driver is unidentified, as in the case of a driver who unlawfully flees from the scene of an accident without reporting it, the MIBI cannot get the party primarily liable to sign rights of litigation and settlement to them. Nonetheless, the MIBI, without any specific legal provision in favour of this, proceeds to litigate in court or settle the case out of court as a defendant as if they had such authority. In so far as Ireland has permitted this legally unchallenged situation to operate, it has not legislated for this but appears to have done so through the general governmental authority of the State. The MIBI will often sue uninsured drivers to recover damages and outgoings in respect of litigation on their behalf, and, if signed, the mandate with such drivers is legal authority enough. Where there is no contract entered into with an uninsured driver, then general principles of loss would entitle suit, provided there is a legal obligation by the MIBI to intervene and run the case. The possible only basis in this regard is the MIBI agreement. The loss by way of paying damages and costs is that of the MIBI, however, and this is because of the agreement with the Minister. 12. There have been two more agreements of dates 31st March 2004 and of 29th January 2009, between the Minister on behalf of Ireland and the insurers. These are identical with the agreement just outlined but with small modifications. Through these agreements, firstly, the defects related to liability to insure in respect of passengers in the rear of vans not fitted with seats and, secondly, passengers who ought reasonably to have known, as opposed to who knew, of the stolen status of a vehicle have been corrected. In this way Irish law has been brought into line with the Directives. Funding the MIBI and conditions for writing motor insurance 14. To write insurance for vehicle liability in Ireland motor insurers must be member of the MIBI. Section 56 of the Road Traffic Act 1961 requires every user of a motor vehicle to be covered by insurance for injury or damage to third parties in a public place. This permitted a lack of insurance cover for “excepted persons” under section 65(1) of the Act of 1961. It was in Ireland excepting passengers as previously detailed, where no seats were fitted in the rear of commercial vehicles, from the obligation of drivers to have insurance against their own negligent driving, that the issue giving rise to this case arose. The MIBI is a private company. It is not funded by Ireland but by insurers operating under the terms of the agreement. Participation in the MIBI for those wishing to write insurance, however, is not voluntary. By s78 of the Act of 1961, as substituted by article 9 of the Council (Amendment) Regulation S.I./346/1992 on European Communities (Compulsory Insurance), it is a requirement for insurers carrying on vehicle insurance in Ireland that they be members of the MIBI. Thus the insurers are members of the MIBI and in that capacity are bound by the agreement between the MIBI and Ireland. By virtue of arrangements between those insurers, they fund the MIBI as to administrative costs and the payment of damages to injured plaintiffs and the disbursement of legal costs for which they are liable or which the MIBI incurs. Changes in the memorandum and articles of association by the MIBI can only be made with the consent of the relevant minister. That is not a special power, however, as this provision was applicable to all companies limited by guarantee under section 28 of the Companies Act 1963. 15. From time to time, changes in the agreement between the Minister, on behalf of Ireland, and the MIBI are necessary. These have specifically arisen because of the requirement to confine exclusion from recovery to passengers who knew that a car was stolen, changing that category from those who knew or ought to have known, and because of the need to include recovery to passengers seated on the floor of vans that were not fitted with seats. In each such instance, where a change is needed, the MIBI agrees to the change and the insurers continue to be members of the MIBI. If there were no such agreement to a necessary change to reflect alterations in national law or European obligations, the earlier agreement would continue as regards the motor insurers then party to the existing agreement. Insurers not agreeing to a change in the terms of agreement between the MIBI and Ireland could cease to be a member of the MIBI. In which case, they would not be entitled to a licence to write vehicle insurance in Ireland. It is less clear as to what might happen should the members writing motor insurance in Ireland as members of the MIBI collectively decide not to agree to a change in the MIBI agreement. The judgment of the High Court
12.10 I do of course accept that subject to one qualification, the State, certainly through its executive arm, is not in a position to dictate how the MIBI deals with individuals claims. There is, however, one significant exception to that general position. Clause 3(7) deals with the obligation on a claimant to take all reasonable steps against a person against whom there might be a remedy and goes on to provide that in the event of any dispute as to the reasonableness of the step, the matter is referred to the Minister for the Environment whose decision is final. It is certainly an unusual feature of a contract that it should provide that in the event of a disagreement one party to the contract should determine how the dispute is to be resolved. 13.1 It does seem to me that this provision is of a significantly different character to the provision in the English agreement that an arbitrator chosen from a panel of Queen’s Counsel appointed by the Secretary of State hears an appeal when a claimant is dissatisfied with the amount of compensation offered. 13.2 A further indication of the level of public control as a matter of reality, is that amendments to the Memorandum and Articles of Association of the company require the consent of the Minister for Employment and Enterprise. 13.3 There is another area that merits examination as illustrating that the MIBI is not a typical private body entering into obligations on a voluntary basis. By virtue of s. 78 of the Road Traffic Act, 1961 as substituted by article 9 of the European Communities (Compulsory Insurance) (Amendment) Regulations, 1992 (S.I. 347 of 1992), in order for an undertaking to issue an approved policy of insurance it must be a member of the Motor Insurance Bureau of Ireland. Perhaps, even more unusually, before a body can become an exempted person and so be freed of the obligations of compulsory insurance it must provide an undertaking to deal with third party claims in respect of its vehicles on terms similar to those agreed between the Minister and the Motor Insurance Bureau of Ireland. 13.4 All these factors lead me to the view that the MIBI, in substance, if not in form operates as a quasi-State claims agency giving effect to an important aspect of public social policy. As such it falls to be identified with the State and is to be regarded as an emanation of the State. 13.5 In seeking to determine whether the MIBI is as a matter of European Law an emanation of the State I have been conscious that European Law in this area is not static. That this is so is illustrated by the decision of the ECJ in Riksskatteverket v. Gharehveran (Case 441/99) [2001] E.C.R. I-07687. That case considers the same Directive as had been the issue in two of the very early cases in this area; Francovich v. Italy (Cases 6/90 and 9/90) [1991] ECR I-5357 and Wagner Miret v. Fondo de Garanatia Salarial (Case 334/92) [1993] ECR I-6911 and proceeded to distinguish the earlier judgments in permitting the claimant to enforce the Directive directly against the Swedish State in the national courts 13.6 I have stated my view that it is not appropriate to apply rigorously the Foster tripartite test to establish the status of the MIBI. However, I should, before concluding state briefly that even had I been minded to apply that test more rigidly I believe I would have reached the same conclusion. 13.7 For reasons that will already be apparent I would have had no hesitation in concluding that the Bureau performs a public service. The position in relation to State control and special powers is less clear cut. Nonetheless I am of the view that aspects such as the operation of a veto on the alteration on the memorandum and articles as well as the entitlement of the Minister to give a binding direction in the event of a disagreement between a claimant and the bureau are indicative of a significant level of State control. This is hardly surprising given that it is the State that ultimately controls the scope of the obligations of the Bureau as it is the State that determines the extent of the requirements for compulsory insurance. The third test, that of “special powers”, is obviously the most difficult but here too I would have been prepared to identify special powers particularly in the area of the requirement for membership of the Bureau on the part of those bodies seeking to conduct insurance business. 17. In summary, the MIBI accepts, in argument on the appeal before the Supreme Court, that it has special responsibilities. That, the MIBI claims, is not to be equated with special powers. It is claimed by the MIBI that the MIBI has no such powers. It is argued that all of the responsibilities of the MIBI came from the contract with the Minister. This is therefore urged to be, in reality, a matter of private law. Further, the MIBI asserts that any changes that come about in the agreements must be regarded as a matter of negotiation of contract between two parties at arm’s length. Insurance and making provision for properly being able to cover the cost of insurance liabilities that may arise in any given year, the MIBI contends, is a matter of prediction. Setting a premium in order to ensure that costs are covered and a reasonable level of profit may be achieved is, the MIBI says, founded on what liability arises under policies as actually entered into. Thereafter, it is urged, a prediction is made as to the level of outgoings during the term of the insurance policies. What is wrong, it is argued, is for the MIBI to be saddled with liabilities that do not arise under policies of motor insurance. No one in the insurance industry, urges the MIBI, was obliged to predict that, even though passengers in commercial vehicles not fitted with seats in the rear were not required under Irish law to be insured by the driver of that vehicle, the failure of Ireland to implement the relevant Directive correctly would make the MIBI liable retrospectively. Predictability is at the heart of the insurance industry, in their submission. Perhaps someone in the relevant section of the public service in Ireland, the office of the Minister, it is urged, might predict that Ireland’s failure might make Ireland liable, but liability by the MIBI is remote. 18. The question of what is or is not an emanation of the State is a concept across the common European legal system. The MIBI points to the test set out in Foster and Others v British Gas plc (Case C-188/89) ECR I-03313 at paragraph 20 thus:
The arguments presented by Ireland
Observation Questions posed
(a) conjunctively, or (b) disjunctively? 2. To the extent that separate matters referred to in Foster and Others v British Gas plc (Case C-188/89) may, alternatively, be considered to be factors which should properly be taken into account in reaching an overall assessment, is there a fundamental principle underlying the separate factors identified in that decision which a court should apply in reasoning an assessment as to whether a specified body is an emanation of the State? 3. Is it sufficient that a broad measure of responsibility has been transferred to a body by a member state for the ostensible purpose of meeting obligations under European law for that body to be an emanation of the member state or is it necessary, in addition, that such a body additionally have (a) special powers or (b) operate under direct control or supervision of the member state? 24. This reference is signed by the three judges of the Supreme Court of Ireland sitting on this case. Frank Clarke Mary Laffoy Peter Charleton | ||||||||||||||||||||||||||||||||||||||