UKSC 3
RECOVERY OF MEDICAL COSTS FOR ASBESTOS DISEASES (WALES) BILL: Reference by the Counsel General for Wales
Lord Neuberger, President
Lady Hale, Deputy President
JUDGMENT GIVEN ON
Heard on 14 and 15 May 2014
LORD MANCE (with whom Lord Neuberger and Lord Hodge agree)
"(a) imposes liability on persons by whom or on whose behalf compensation payments are made to or in respect of victims of asbestos-related diseases to pay charges in respect of National Health Service services provided to the victims as a result of the diseases;
(b) makes provision for the certification of the amount of the charges to be paid, for the payment of the charges, for reviews and appeals and about information;
(c) extends insurance cover of liable persons to their liability to pay the charges."
"(1) Where the liability or alleged liability of the person by whom or on whose behalf a compensation payment is made is, or (if established) would be, covered to any extent by a policy of insurance, the policy is to be treated as covering the person's liability under section 2.
(2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted.
(5) This section applies in relation to policies of insurance issued before (as well as those issued after) the date on which this section comes into force.
(6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making."
"(1) The Welsh Ministers must, in the exercise of their functions under the National Health Service (Wales) Act 2006, have regard to the desirability of securing that an amount equal to that reimbursed by virtue of section 2 is applied, in accordance with that Act, for the purposes of research into, treatment of, or other services relating to, asbestos-related diseases.
(2) The Welsh Ministers must report annually to the National Assembly for Wales on the application of amounts equal to sums reimbursed by virtue of section 2."
(i) First, by section 2, it imposes a novel statutory or "quasi-tortious" liability towards the Welsh Ministers on compensators (defined as set out in para 3 above).
a. This liability is a liability for pure economic loss which does not exist and has never existed at common law.
b. It does not reflect any liability which the compensator had to the victim, since the victim has no liability to the Welsh Ministers to meet any economic loss the Welsh Ministers may have suffered.
c. The liability exists whether the compensation is paid to the victim with or without admission of liability; the Counsel General in written submissions states that a "key point is that it is a necessary condition of the Bill attaching to insurers that there must be liability established or conceded". But a payment without admission of liability does not in law or even de facto amount to a concession of liability.
d. The liability is based on future compensation payments made in respect of actual or potential wrongs, the operative elements of which were committed many decades ago, though the victims are or will only suffer the consequences and the Welsh National Health Service will only have to bear the hospitalisation costs in the future.
(ii) Second, by section 14, the Bill imposes a new contractual liability on the liability insurers of compensators (typically employers' liability insurers such as those involved in the Trigger litigation: Durham v BAI (Run-Off) Ltd  UKSC 14,  1 WLR 867) to cover any liability which such compensators have as a result of section 2.
a. It imposes this new liability on any insurer whose policy would to any extent cover the compensator for any liability which the compensator has or would (if established) have towards the victim.
b. It imposes it irrespective of any policy exclusion or restriction.
c. It imposes it in relation to policies issued before as well as after the date section 14 comes into force - and so in relation to policies issued and covering events occurring many decades ago.
d. It does all this although - indeed no doubt because - such liability insurers would not otherwise be likely to have to answer for any charges levied under section 2. This is clear on any reading of the typical employers' liability policy wordings summarised in annex A to my judgment in the Trigger case. In essence, such policy wordings cover employers' liability in damages for claims by actual or former employees suffering injury or disease. They are, furthermore, triggered by the original exposure to asbestos during the course of the insurance, not by the imposition of charges under section 2 as a result of compensation payments made, with or without admission of liability, long after the expiry of the policy period.
(iii) Third, section 15 provides that the Welsh Ministers must, in the exercise of their functions under the National Health Service (Wales) Act 2006 ("the NHS (Wales) Act"), have regard to the desirability of securing that an amount equal to that reimbursed by virtue of section 2 is applied, in accordance with that Act, for the purposes of research into, treatment of, or other services relating to, asbestos-related diseases.
Competence under section 108(4) and (5)
"if it relates to one or more of the subjects listed under any of the headings in Part 1 of Schedule 7 and does not fall within any of the exceptions specified in that Part of that Schedule …."
A provision falls within section 108(5)
"if (a) it provides for the enforcement of a provision (of that or any other Act of the Assembly) which falls within subsection (4) or a provision of an Assembly Measure or it is otherwise appropriate for making such a provision effective, or (b) it is otherwise incidental to, or consequential on, such a provision."
"Promotion of health. Prevention, treatment and alleviation of disease, illness, injury, disability and mental disorder. Control of disease. Family planning. Provision of health services, including medical, dental, ophthalmic, pharmaceutical and ancillary services and facilities. Clinical governance and standards of health care. Organisation and funding of national health service.
Human genetics, human fertilisation, human embryology, surrogacy arrangements.
Regulation of health professionals (including persons dispensing hearing aids).
Misuse of and dealing in drugs.
Human medicines and medicinal products, including authorisations for use and regulation of prices.
Standards for, and testing of, biological substances (that is, substances the purity or potency of which cannot be adequately tested by chemical means).
Vaccine damage payments.
... Health and Safety Executive and Employment Medical Advisory Service and provision made by health and safety regulations."
"Constitution, structure and areas of local authorities. Electoral arrangements for local authorities. Powers and duties of local authorities and their members and officers. Local government finance."
The framework within which business rates and council tax are charged is provided by the Local Government Finance Act 1988, as amended in 1992 and 2012. Such taxes are payable to the relevant local government authorities, not to the Welsh Ministers. The reference to "Local government finance" enables the Welsh Assembly, for example, to determine the level of business rates or limit council tax increases chargeable under these statutes (though, under the block grant system, this does not appear to affect the overall level of funding available to the Welsh Government). But, it cannot on any view be read as a general power enabling the Welsh Assembly to raise funds in any way it may decide, even if such funds are ear-marked for use to support local government activities.
"For the purposes of this section the question whether a provision of an Act of the Assembly relates to one or more of the subjects listed in Part 1 of Schedule 7 (or falls within any of the exceptions specified in that Part of that Schedule) is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances."
The expression "relates to", used in section 108(4), has been examined in the context of the Scotland Act, where it is by section 29(3) given a definition identical to that in section 108(7) of GOWA. But it is used in the Scotland Act 1998 to define not the competence conferred to the devolved Parliament, but the competence reserved to the Westminster Parliament. Despite this difference, there is no reason to give the words a different meaning in the two pieces of legislation. The expression involves words of neutral meaning, used to define the parameters of competence. In a Scottish context, it was considered by the Supreme Court in Martin v Most  UKSC 10, 2010 SC (UKSC) 40, paras 15 and 49 and in Imperial Tobacco Ltd v Lord Advocate  UKSC 61, 2013 SLT 2, para 16. In Martin v Most Lord Walker said that the expression was "familiar in this sort of context, indicating more than a loose or consequential connection, and the language of section 29(3), referring to a provision's purpose and effect, reinforces that" (para 49). In Imperial Tobacco, Lord Hope, in a judgment with which all other members of the court agreed, endorsed Lord Walker's approach that the expression "indicates something more than a loose or consequential connection" (para 16). In a Welsh context, the test adopted in both these authorities was referred to with approval in the recent decision in In re Agricultural Sector (Wales) Bill  UKSC 43;  1 WLR 2622, para 50, where the Supreme Court added that "As the section requires the purpose of the provision to be examined it is necessary to look not merely at what can be discerned from an objective consideration of the effect of its terms".
Does the Bill infringe A1P1?
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
General principles under A1P1
"This, however, does not settle the issue. Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim 'in the public interest', but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see, amongst others, and mutatis mutandis, the above-mentioned Ashingdane judgment (1985) 7 EHRR 528, 57). This latter requirement was expressed in other terms in the Sporrong and Lönnroth judgment by the notion of the 'fair balance' that must be struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights ((1983) 5 EHRR 35, para 69). The requisite balance will not be found if the person concerned has had to bear 'an individual and excessive burden' (para 73). Although the court was speaking in that judgment in the context of the general rule of peaceful enjoyment of property enunciated in the first sentence of the first paragraph, it pointed out that 'the search for this balance is ... reflected in the structure of article 1 (P1-1)' as a whole (para 69)."
"43. The financial considerations cited by the Government and their concern to bring Belgian law into line with the law of neighbouring countries could warrant prospective legislation in this area to derogate from the general law of tort.
Such considerations could not justify legislating with retrospective effect with the aim and consequence of depriving the applicants of their claims for compensation.
Such a fundamental interference with the applicants' rights is inconsistent with preserving a fair balance between the interests at stake."
"Lack of cogent justification in the course of parliamentary debate is not a matter which 'counts against' the legislation on issue of proportionality. The court is called upon to evaluate the proportionality of the legislation, not the adequacy of the minister's exploration of the policy options or of his explanations to Parliament. The latter would contravene article 9 of the Bill of Rights. The court would then be presuming to evaluate the sufficiency of the legislative process leading up to the enactment of the statute."
Application of A1P1 to the present reference
"Retrospectivity. The key to this issue is not in my view that insurance is a contract against risks. There are always limits to the contingencies upon which insurers speculate, provided by the terms and conditions of the policy. Further, insurers are normally entitled to expect that the liabilities, which their insured employers incur 'arising out of and in the course of [their] employment' and which they insured under the specimen copy policy to which I have referred, will be liabilities capable of existing in law at the time of the occurrence during the relevant employment from which such liabilities arise. Hence, the present challenge to the 2009 Act is based on the fact that it retrospectively converts into harm actionable in law physical changes which (it has been held in Rothwell …) were not otherwise such, in the hope or expectation that the relevant policies will respond to that development."
a. The Scottish statute was passed to rectify a perceived injustice directly affecting those suffering from asbestos-related diseases, and was in this very real sense social remedial legislation. Despite the Counsel General's contrary submission, the same cannot in my opinion be said of the Bill. It has no effect on sufferers from asbestos-related diseases. Its purpose is to transfer the financial burden of costs of their hospitalisation from the Welsh Ministers to compensators and their insurers.
b. The Scottish statute was passed to restore the legal position as it had been understood at first instance for some decades, and it might well have been accepted as being at the highest instance. The present Bill aims to change a well-understood position which has existed since the NHS was created, by introducing a new right of recourse which has never previously existed, though it is one which Parliament could at or at any time since the creation of the NHS have decided to introduce without any legal problem in relation to future events giving rise to liability claims against compensators (and so to liability insurance claims by compensators against their liability insurers).
c. The Scottish statute built on established legal principles, requiring liability to exist before compensators could be compelled to meet claims for pleural plaques and for insurance cover to exist before such compensators could recover from their liability insurers. This was one of the two points stressed by Lord Hope in AXA, as I have mentioned in the preceding paragraph. The Bill bypasses such principles, making the liability of compensators dependent simply on the payment of compensation, even if made without admission of liability and making the liability of insurers arise independently of the terms of the insurance policies issued, by reference to the fact of payment of such compensation, provided such policies would to some extent cover any liability which such compensators would, if it were established, have had.
LORD THOMAS: (with whom Lady Hale agrees)
The legislative background
(i) The first and central aim of the Bill is to withdraw the requirement that the Welsh NHS continue the delivery of the benefit to employers and their insurers of not having to meet the cost of medical treatment and care of an employee where the employers are responsible for causing asbestos diseases as tortfeasors. It is intended that the costs of medical treatment and long term care of such employees incurred by the Welsh NHS after the coming into force of the Bill are to be met by employers responsible at any time in the past for causing asbestos-related diseases and by the employers' insurers, rather than being met out of the monies generally provided by the Welsh Government to the Welsh NHS out of the block grant allocated by Her Majesty's Treasury to the Welsh Assembly.
(ii) The second, but necessarily subsidiary, aim is to establish machinery for collection of the costs which is as simple and as efficient as possible and causes those with asbestos-related diseases the least stress. It is intended that the machinery would enable employers to recover under their employers' liability policy the sums payable by way of charges to the Welsh NHS which would have been payable if the liability for such charges had been imposed on the employees and recovered in the conventional way as damages from the employers.
(i) The basis of the view I have formed is that the Bill has the two distinct objectives which I have set out and which it is necessary to analyse separately.
(ii) Secondly, it is necessary in such an analysis first to consider the liability of the employer. That is because the effect of the Bill on the liability of insurers under their employers' liability policies depends on an examination of the two distinct objectives of the Bill as they affect any employer who has the benefit of employers' liability insurance.
My approach was not the central focus of the argument, particularly because the only challenge was from the insurance industry and not from any of the employers. However because the procedure to refer a question to this court operates as a direct reference resulting in a final decision without the benefit of a prior decision of another court and because the effect of the judgment of Lord Mance, as the view of the majority of the court, is far reaching and final, it is necessary to set out my own analysis.
The position of employers under section 2 of the Bill
(1) Legislative competence under section 108(4) and (5)
(a) The legislative competence to fund the Health Service under section 108(4) and (5) and Schedule 7
"Promotion of health. Prevention, treatment and alleviation of disease, illness, injury, disability and mental disorder. Control of disease. Family planning. Provision of health services, including medical, dental, ophthalmic, pharmaceutical and ancillary services and facilities. Clinical governance and standards of health care. Organisation and funding of national health service."
"The services so provided must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment whenever passed."
Sections 77 to 83A of that Act (as amended prior to 1999) enabled charges to be made for specified services; the powers to set prescription and other charges were set out in section 77. These were exercisable by the Secretary of State by subordinate legislation. Under the National Assembly for Wales (Transfer of Functions) Order 1999, the powers of the Secretary of State under the National Health Service Act 1977 were simply transferred to the Welsh Assembly, as under the first phase of devolution the Welsh Assembly only had the power to make subordinate legislation.
"The services so provided must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed."
The terms of the NHS (Wales) Act are not, in my view, therefore relevant to limiting the meaning of Heading 9.
(b) Charging employees who can recover from their employers
(c) The machinery provided for in the Bill
(i) Sections 2 and 3 impose liability to pay the charges for treatment by the Welsh NHS directly on any employer who is or is alleged to be liable to any extent in respect of the asbestos-related disease.
(ii) The charges can only be recovered if incurred after the coming into force of the Bill.
(iii) The liability only arises if a payment of compensation in respect of the asbestos-related disease is made to the employee after the coming into force of the Bill.
(iv) Section 5 provides the means by which Welsh Ministers certify the amount of the charges.
(v) Section 15 provides that Welsh Ministers must have regard to the desirability of securing that an amount equal to the funds it received through these payments is spent on research or treatment of asbestos-related diseases.
(d) Is there retrospectivity in respect of the liability imposed on employers?
(2) The effect of A1P1
(a) The applicable principles under A1P1
(i) Can it be said that the judgement of the Welsh Assembly was manifestly unreasonable in its decision to legislate first to make employers bear the future cost of medical treatment of a disease they had caused rather than such costs being borne by the State and secondly to impose machinery that creates a new direct liability? This can be properly described as the issue of legitimate aims.
(ii) Was a fair balance struck, in the judgement of the court, between the demands of the general interest of the community and the requirements of the protection of the employer's fundamental rights? This can properly be described as the issue of proportionality.
(b) Was the Welsh Assembly entitled to view the Bill as having legitimate aims?
(i) Since the establishment of the NHS in the United Kingdom in 1946, the general expectation has been that it would provide medical treatment and care free at the point of delivery, subject to limited exceptions, such as prescription charges. However, it does not follow from that general expectation that a legislature with responsibility for the NHS cannot change the extent to which its services are funded by the State so that they are not free at the point of delivery. Indeed, charges for NHS services (such as prescription charges) have been imposed or increased on many occasions.
(ii) In Wales there was a concentration of heavy industry. Wales, along with some other parts of the United Kingdom, has a long and direct experience of serious industrial diseases, such as pneumoconiosis, and their devastating effect on employees. It has long been seen as a matter of social justice that proper compensation and care be provided at the expense of employers in those industries to those suffering from such diseases through negligent acts and breach of statutory duty. Given the period of time that elapses after exposure to asbestos before the disease manifests itself, it cannot be an objection that the wrongdoing occurred many years ago.
(iii) The cost of the provision of health services through the Welsh NHS is an escalating cost. One of the reasons is the effect of serious industrial diseases caused by the concentration of heavy industry and the past negligence and breach of statutory duty by employers. The cost of the Welsh NHS is now a very significant part of the expenditure of the Welsh Assembly which has to be met out of the overall grant to the Welsh Assembly by HM Treasury, as described at para 83 above. There can be little doubt that provision of finance for the Welsh NHS and the Welsh NHS' continued ability to provide the requisite health services out of monies made available to it out of the grant to the Welsh Assembly by Her Majesty's Treasury is a matter of pressing legitimate concern to the Welsh Assembly.
(i) Given the choices which are open to a democratically elected legislature in how the escalating overall cost of health care is to be met and taking account of the very long period of time before an asbestos-related disease caused by the employer manifests itself, the Welsh Assembly has to make a judgement. It must be entitled to consider in such circumstances which benefits and services it is to continue to provide free of charge. I cannot therefore see a reason why it is not open to the Welsh Assembly to make a judgement that there is a real social and economic need to withdraw the benefit of free medical treatment and care and impose charges on the employers in industries where negligence or breach of statutory duty has occurred in the past.
(ii) The fact that the consequences of such wrongdoing take years to manifest themselves and the escalating cost of treating and caring for those suffering from the diseases can indeed be seen as providing a justification for the Welsh Assembly, in the context I have set out, in withdrawing the benefit hitherto provided and allowing the cost to be borne by those tortfeasors in the same way that those tortfeasors bear the other costs of their wrongdoing which has brought about the diseases.
(iii) I cannot therefore see a basis for contending that the Welsh Assembly is not reasonably entitled to reach a judgement that there is a strong public interest in doing so. Nor can I see the basis for questioning as reasonable the judgement of the Welsh Assembly that it would be desirable that the funds so raised would directly benefit those suffering from asbestos-related diseases.
(iv) Choices have to be made in setting overall policy in relation to the level of service, treatment and care to be provided by a national health service, the funding of such services and the services in respect of which charges are to be made. These are choices of social and economic policy which in my view can and should only be made by the Welsh Assembly as a democratically elected legislature.
(v) The Welsh Assembly is also entitled to make the judgement that instead of a scheme which would have involved levying a charge on employees and collecting it from the employers through a scheme of the type I have described at paras 96-98, machinery for direct collection would confer a further benefit on those suffering from asbestos-related diseases by relieving them of further worry and stress.
(vi) That public interest can therefore be seen as reflecting choices of social and economic policy and of social justice in Wales which may be different to the views of social and economic policy and social justice reasonably held in other parts of the United Kingdom or by other people. As these choices are being exercised in matters within the primary legislative competence of the democratically elected Welsh Assembly, the Welsh Assembly is, in my view, reasonably entitled to adopt such choices and views for Wales.
(c) No objection could be taken to charges being claimed by employees from employers
(i) The payments would be in respect of a recognised head of damages caused by an asbestos-related disease or condition for which liability under existing law had been incurred. The position is, in my view, different to that in AXA General Insurance Ltd v HM Advocate. The Damages (Asbestos-related Conditions) (Scotland) Act 2009 imposed liability for a condition, asymptomatic pleural plaques, where it had been declared by the courts that there was no liability under existing law. The Bill in the Welsh Assembly has imposed no new liability in respect of responsibility for the asbestos-related disease or condition. The Bill is premised on existing liability for the disease, the existing consequent liability to pay damages and an existing well-recognised head of damages, namely medical treatment and care.
(ii) The payments would only be payments made after the coming into force of the Bill.
(iii) The payments could not be recovered in cases where a settlement had been made of the liability incurred by the employer, as the liability would have been discharged.
(d) The limited retrospectivity
(e) The approach to proportionality
(f) The detriment to employers arising from the Bill
(g) The weight to be accorded to the public interests as perceived by the Welsh Assembly
(h) The benefits to be derived from the provisions of the Bill
The position of insurers
(a) The extent of the liability imposed on insurers under section 14 of the Bill
(b) Legislative competence under section 108(4) and (5)
(c) The retrospective nature of the provision
(d) Legitimate aim and retrospectivity
(e) Conclusion in relation to insurers