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||Neutral Citation Number:  EWCA Civ 932
||Case No: A2/2016/1904
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE STEWART
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
SIR JAMES MUNBY,
PRESIDENT OF THE FAMILY DIVISION
LORD JUSTICE McFARLANE
LORD JUSTICE LEWISON
|| MR MICHAEL HOWE
||- and -
||MOTOR INSURERS' BUREAU
Benjamin Williams QC (instructed by Fieldfisher LLP) for the Appellant
Howard Palmer QC (instructed by Weightmans LLP) for the Respondent
Hearing dates: 28th June 2017
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Lord Justice Lewison:
- For the purposes of CPR Part 44.13, which describes the claims eligible for Qualified One-Way Costs Shifting ("QOCS"), what is a claim for damages for personal injury? As Stewart J said it is a simple question but does not yield a simple answer.
- The context in which the question arises is as follows. Mr Howe was driving a lorry on the A16 in France when a wheel detached from a lorry in front of him. Through no fault of his own, Mr Howe collided with the wheel. The resulting accident left him severely injured. Neither the other vehicle nor its driver has been traced. After a long delay Mr Howe brought a claim against the Motor Insurers' Bureau ("MIB"). Stewart J dismissed the claim on the ground that it was statute barred. His judgment is at  EWHC 640 (QB),  1 WLR 2707. Mr Howe appealed against that decision. However, in the light of the decision of the Supreme Court in Moreno v MIB  UKSC 52,  1 WLR 3194 this court struck out the appeal on 7 February 2017 on the ground that it was bound to fail: see  EWCA Civ 302. It is thus now accepted that his substantive claim against the MIB is at an end. The remaining issues relate to the costs of that claim and of the unsuccessful appeal. In his second judgment Stewart J held that Mr Howe's claim was not a claim for damages for personal injury for the purposes of CPR Part 44.13. His second judgment is at  EWHC 884 (QB),  1 WLR 2751. The judge himself gave permission to appeal and we have been assisted on this appeal by Senior Costs Judge Master Gordon-Saker. I am most grateful for his assistance but this judgment is mine alone.
- Although at one stage it appeared that one of the issues was whether QOCS applied to appeals in cases that otherwise fell within its scope, it is now common ground that it does.
- Mr Howe's claim against the MIB was brought under regulation 13 of the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 ("the Regulations"). Regulation 13 provides:
"Entitlement to compensation where a vehicle or insurer is not identified
(1) This regulation applies where— (a) an accident, caused by or arising out of the use of a vehicle which is normally based in an EEA state, occurs on the territory of— (i) an EEA state other than the United Kingdom, or (ii) a subscribing state, and an injured party resides in the United Kingdom, (b) that injured party has made a request for information under regulation 9(2), and (c) it has proved impossible— (i) to identify the vehicle the use of which is alleged to have been responsible for the accident, or (ii) within a period of two months after the date of the request, to identify an insurance undertaking which insures the use of the vehicle.
(2) Where this regulation applies— (a) the injured party may make a claim for compensation from the compensation body, and (b) the compensation body shall compensate the injured party in accordance with the provisions of article 1 of the second motor insurance Directive as if it were the body authorised under paragraph 4 of that article and the accident had occurred in Great Britain."
- Regulation 16 provides:
"Any sum due and owing pursuant to these Regulations shall be recoverable as a civil debt."
- In his Particulars of Claim Mr Howe pleaded the accident and alleged that it was caused by the driver of the lorry in front of his. It then referred to the MIB as the compensation body.
- Paragraph 6 of the Particulars of Claim alleged that the MIB was "liable to compensate the claimant in respect of his injuries and losses." The relief claimed was:
"(1) Damages Exceeding £300,000
(2) Provisional Damages
- Shortly before trial Mr Howe amended his Particulars of Claim. The amendments introduced two allegations which, in essence, were designed to overcome the limitation defence that the MIB had advanced. In consequence the relief sought was amended to include a claim for:
"A declaration that the MIB is liable to compensate the Claimant in accordance with the Untraced Drivers' Agreement …"
- Apart from being renumbered, the original relief claimed remained in the statement of case.
- Section II of CPR Part 44 is headed "Qualified One-Way Costs Shifting." Part 44.13 begins:
"(1) This Section applies to proceedings which include a claim for damages:
(a) For personal injuries…"
- The question is whether Mr Howe's claim falls within that rule. The origins of QOCS lie in Sir Rupert Jackson's report into Civil Litigation Costs. Chapter19 of the report dealt with one-way costs shifting in the context of personal injuries litigation which, Sir Rupert said, he was treating as "a broad concept". Once ATE premiums ceased to be recoverable it was necessary to protect claimants from the risk of adverse costs orders obtained by insured or self-insured parties with deep pockets. His proposal was that all claimants in personal injury cases be given a broadly similar degree of protection against adverse costs orders as that enjoyed by legally aided claimants. Plainly, this recommendation was designed to protect claimants who lost their cases, as successful claimants would not be liable to pay an unsuccessful defendant's costs. It was intended to overcome the deterrent effect on bringing claims for personal injury of the risk of paying a defendant's costs if the claim failed. Although the broad thrust of Sir Rupert's recommendation was accepted, the eventual scheme embodied in the CPR did not follow the legal aid model. As Mr Palmer QC for the MIB submitted, it is much more prescriptive than the broader more discretionary approach that Sir Rupert recommended.
- In order to decide whether Mr Howe's claim falls within the scope of QOCS it is necessary to look at his claim and the legal background to it in a little more detail. Regulation 13 was enacted in order to give effect to the United Kingdom's obligations under the Fourth Motor Insurance Directive (Directive 2000/26/EC). The objectives of that Directive are set out in a number of its recitals (some of which are annexed to the judge's judgment on liability):
"(8) It is in fact appropriate to supplement the arrangements established by Directives 72/166/EEC, 84/5/EEC and 90/232/EEC in order to guarantee injured parties suffering loss or injury as a result of a motor vehicle accident comparable treatment irrespective of where in the Community accidents occur
(25) It is necessary to make provision for a compensation body to which the injured party may apply where the insurance undertaking has failed to appoint a representative or is manifestly dilatory in settling a claim or where the insurance undertaking cannot be identified to guarantee that the injured party will not remain without the compensation to which he is entitled; the intervention of the compensation body should be limited to rare individual cases where the insurance undertaking has failed to comply with its duties in spite of the dissuasive effect of the potential imposition of penalties.
(26) The role played by the compensation body is that of settling the claim in respect of any loss or injury suffered by the injured party only in cases which are capable of objective determination and therefore the compensation body must limit its activity to verifying that an offer of compensation has been made in accordance with the time-limits and procedures laid down, without any assessment of the merits."
- Article 1.1 of the Fourth Directive provides:
"The objective of this Directive is to lay down special provisions applicable to injured parties entitled to compensation in respect of any loss or injury resulting from accidents occurring in a Member State other than the Member State of residence of the injured party which are caused by the use of vehicles insured and normally based in a Member State."
- Article 6.1 provides:
"Each Member State shall establish or approve a compensation body responsible for providing compensation to injured parties in the cases referred to in Article 1."
- Article 7 provides:
"If it is impossible to identify the vehicle or if, within two months following the accident, it is impossible to identify the insurance undertaking, the injured party may apply for compensation from the compensation body in the Member State where he resides. The compensation shall be provided in accordance with the provisions of Article 1 of Directive 84/5/EEC."
- Article 1.4 of the Second Motor Insurance Directive (Directive 84/5/EEC) provides:
"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."
- Lord Mance discussed the scheme required by the various Motor Insurance Directives in Moreno. He said at  that:
"Viewing its development holistically, it can be seen to be a scheme of which the constant aim has been to improve the prospects and ease with which injured parties can recover the compensation to which they are "entitled" in respect of any loss or damage caused by vehicles."
- At  he drew the conclusion:
"The inference is that, to whichever special provision of the Fourth Directive the victim of a motor accident may have to have recourse, the compensation to which he or she is entitled is and remains the same. It is the same compensation as that to which the victim is entitled as against the driver responsible, or his or her insurer, or, that failing, as against the guarantee fund of the state of the accident. The compensation remains the same if and when the victim has recourse instead to the compensation body established in his own state of residence under article 6 or 7."
- Returning to the Regulations, in Moreno Lord Mance said at :
"In construing the 2003 Regulations, the starting point is that they should, so far as possible, be interpreted in a sense which is not in any way inconsistent with the Directives: Marleasing SA v La Comercial Internacional de Alimentación SA (Case C-106/89)  ECR I-4135."
- It is important to note that the Marleasing approach to interpretation is the starting point: not merely an add-on.
- The ECJ considered the scope of the Second Motor Insurance Directive (Directive 1984/5/EEC) in (Case C-63/01) Evans v Secretary of State for the Environment, Transport and the Regions  All ER (EC) 763. The court began by considering the general purpose of the Directive. Of particular importance are the following paragraphs in its judgment:
" 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.
 It must nevertheless be emphasised that, to meet the requirements of the Second Directive, the body responsible for awarding compensation does not necessarily have to be placed, as far as civil liability is concerned, on the same footing as a defendant such as the driver of an identified and sufficiently insured vehicle."
- One of the specific questions that was put to the ECJ was whether, compatibly with the Second Directive, Mr Evans ought to have been entitled to recover from the MIB the costs of pursuing his claim. The court's answer was:
" First, it is to be observed that the Second Directive contains no provision concerning reimbursement of costs incurred by the victims of damage or injury caused by unidentified or insufficiently insured vehicles in connection with their application to the body responsible for awarding compensation.
 The view of most of the member states is that the question of reimbursement of costs incurred in connection with the procedure for obtaining compensation is a procedural matter.
 As pointed out in para  of this judgment, in the absence of Community rules governing the matter, it is for the domestic legal system of each member state to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from Community law, in conformity with the principles of equivalence and effectiveness.
 It is incumbent on the national court to verify whether, under the procedural arrangements adopted in the United Kingdom, those principles are complied with. In particular, it should assess whether, in view of the less advantageous position in which victims find themselves vis-à-vis the MIB and the conditions under which such victims are able to submit their comments on matters that may be used against them, it appears reasonable, or indeed necessary, for them to be given legal assistance.
 In those circumstances, art 1(4) of the Second Directive is to be interpreted as meaning that compensation awarded for damage or injury caused by an unidentified or insufficiently insured vehicle, paid by the body authorised for that purpose, is not required to include reimbursement of the costs incurred by victims in connection with the processing of their application for compensation except to the extent to which such reimbursement is necessary to safeguard the rights derived by victims from the Second Directive in conformity with the principles of equivalence and effectiveness. It is for the national court to consider whether that is the case under the procedural arrangements adopted in the member state concerned."
- According to the ECJ, therefore, whether costs are recoverable is a matter for an individual member state; but the principles of equivalence and effectiveness must be respected.
- In considering the principle of equivalence, it is obviously important to identify the correct comparator. In Byrne v MIB  EWCA Civ 574,  QB 66 Carnwath LJ ((with whom Waller and Keene LJJ agreed) said at  (ii):
"The appropriate comparison for the purposes of the principle of equivalence is the system of remedies available for insured drivers."
- On the face of it, it follows that if the rules relating to the recoverable costs in a claim against the MIB are less favourable to a claimant than the rules relating to the recoverable costs in a claim against an insured driver, the principle of equivalence will have been breached. Plainly, if an injured person sues an insured driver his claim will be covered by QOCS.
- So far as the principle of effectiveness is concerned, the principle requires that national laws or procedures do not render practically impossible or excessively difficult the exercise of rights conferred by EU law. Whether they do is for the national court to judge.
- Mr Palmer argued that these principles are not engaged in relation to the CPR, for two main reasons. First, unlike the 2003 Regulations, the CPR were not passed in order to implement any provision of EU law. In my judgment this is too narrow a view. The interpretative duty (including the application of the principles of equivalence and effectiveness) applies not only to national provisions enacted in order to give effect to EU directives, but also to national law as a whole: (Joined cases C-397/01 to C-403/01) Pfeiffer v Deutsches Rotes Kreutz  ECR 1-8835. As the court put it (omitting citations):
" Thus, when it applies domestic law, and in particular legislative provisions specifically adopted for the purpose of implementing the requirements of a directive, the national court is bound to interpret national law, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and consequently comply with the third paragraph of Article 249 EC …
 The requirement for national law to be interpreted in conformity with Community law is inherent in the system of the Treaty, since it permits the national court, for the matters within its jurisdiction, to ensure the full effectiveness of Community law when it determines the dispute before it….
 Although the principle that national law must be interpreted in conformity with Community law concerns chiefly domestic provisions enacted in order to implement the directive in question, it does not entail an interpretation merely of those provisions but requires the national court to consider national law as a whole in order to assess to what extent it may be applied so as not to produce a result contrary to that sought by the directive….
 In that context, if the application of interpretative methods recognised by national law enables, in certain circumstances, a provision of domestic law to be construed in such a way as to avoid conflict with another rule of domestic law or the scope of that provision to be restricted to that end by applying it only in so far as it is compatible with the rule concerned, the national court is bound to use those methods in order to achieve the result sought by the directive."
- As  makes clear, the interpretative duty extends beyond domestic provisions enacted in order to implement a directive. What matters is that the national rule must be interpreted compatibly with the objective of the Directive, and that includes the application of the principles of equivalence and effectiveness.
- The second main objection to the application of these principles was that they come into play in order to give protection to those who have rights in EU law. Mr Howe's problem is that both the judge and this court have decided that he has no such rights. If he has no rights in EU law the court must interpret domestic legislation according to domestic principles. The superficial logic of this argument is formidable. However, once again I consider that it is too narrow a view. In some cases a court can (and does) grant interim relief in cases where the existence of a right in EU law is contested. That interim relief might involve the temporary disapplication of domestic legislation or, in an extreme case, suspension of an allegedly invalid EU provision. It is of course only an analogy, but the grant of relief of this kind does not depend on the court reaching a positive conclusion one way or the other about the existence of EU rights.
- In my judgment, therefore, the Marleasing principles (and the associated principles of equivalence and effectiveness) are engaged. Sir Andrew Morritt C set out both the scope and the limits of the principles applicable to a conforming interpretation in Vodafone 2 v HMRC  EWCA Civ 446,  Ch 77 (reproduced without the underlying citations):
"In summary, the obligation on the English courts to construe domestic legislation consistently with Community law obligations is both broad and far-reaching. In particular: (a) it is not constrained by conventional rules of construction; (b) it does not require ambiguity in the legislative language; (c) it is not an exercise in semantics or linguistics; (d) it permits departure from the strict and literal application of the words which the legislature has elected to use; (e) it permits the implication of words necessary to comply with Community law obligations; and (f) the precise form of the words to be implied does not matter.
The only constraints on the broad and far-reaching nature of the interpretative obligation are that: (a) the meaning should 'go with the grain of the legislation' and be 'compatible with the underlying thrust of the legislation being construed'. An interpretation should not be adopted which is inconsistent with a fundamental or cardinal feature of the legislation since this would cross the boundary between interpretation and amendment; and (b) the exercise of the interpretative obligation cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate."
- The judge acknowledged that the rationale for QOCS applied to Mr Howe's claim but nevertheless held that it was outside the scope of CPR Part 44.13. He reasoned that the claim was a claim to compensation recoverable by statute (rather than in tort at common law); and that the MIB had not been guilty of any breach of duty. The conclusion that the compensation that Mr Howe claimed was not "damages" was underlined by regulation 16 which described the compensation as a "civil debt". He was not persuaded to reach any different conclusion by reference to principles of EU law.
- Applying orthodox domestic common law principles of interpretation, in order to fall within the scope of CPR Part 44.13 a claim must be both a claim for "damages" and also one in which the damages claimed are "for personal injuries." At common law there is a clear distinction between a claim that sounds in debt and a claim that sounds in damages. A debt is a definite sum of money payable by one person to another usually in return for the performance of a specified obligation by the payee or on the occurrence of some specified event or condition. A claimant who claims payment of a debt need not prove anything beyond the occurrence of the event or condition on the occurrence of which the debt became due. He need prove no loss; and the rules about remoteness of damage and mitigation of loss are irrelevant. Damages, on the other hand, consist of a sum fixed by law in consequence of an antecedent breach of obligation or duty.
- Sometimes the distinction between the two is elusive, or even counter-intuitive. For example a claim under a contract of guarantee or indemnity is usually regarded as a claim for damages, even if the principal obligation guaranteed is an obligation to pay a debt. A claim against insurers for indemnity under an insurance policy, even where the policy is a valued policy, is classified as a claim sounding in damages. That has been the position for some 200 years. There are other kinds of claim for money, for example claims for equitable compensation, which are neither.
- However, the application of common law taxonomy to claims created by EU law may be misleading. It must not be forgotten that a claim created by EU law applies across the various legal systems of the EU which will have their own taxonomy of claims. Lord Mance made a similar point in Moreno at .
- To revert to the Directive, what it requires is the ability to claim "compensation" from the compensation body. Article 1.1 of the Fourth Directive describes it as "compensation in respect of any loss or injury resulting from accidents". Article 1.4 of the Second Directive describes it (so far as relevant) as "compensation …for … personal injuries." In view of the requirement in regulation 13 that the MIB must compensate the injured party "in accordance with Article 1 of the second motor insurance directive" I do not consider that there is any difficulty in characterising Mr Howe's claim as a claim for compensation "for personal injuries".
- Can the reference in CPR Part 44.13 to "damages for personal injuries" be interpreted, conformably with the Marleasing principle, to include a claim for compensation under regulation 13? The rationale underlying QOCS is, in my judgment, a domestic version of the principle of effectiveness. Those who have (or may have) valid claims for damages for personal injury should not be deterred from pursuing them by the risk of having to pay the defendant's costs, except in the circumstances laid down by Section II of Part 44. If Mr Howe's claim under regulation 13 is covered by QOCS he will be in an equivalent position to an injured person who sues an insured driver.
- The change required is to disapply the common law taxonomy of legal claims to a claim to compensation under regulation 13 and to treat the word "damages" in Part 44.13 as including compensation under that regulation. That is, no doubt, a departure from the "the strict and literal application of the words". However, I do not consider that it "goes against the grain" of the CPR. As Mr Williams QC, for Mr Howe, pointed out the glossary of terms in Appendix E to the CPR itself describes "damages" as a "sum of money awarded by the court as compensation to the claimant". Nor does this interpretation run counter to the underlying thrust of either the CPR or QOCS. As the judge himself said, Mr Howe is within the rationale which inspired QOCS. This interpretation is also supported by Lord Mance's statement in Moreno at  that the compensation to which the injured party is entitled is "the same compensation as that to which the victim is entitled as against the driver responsible."
- One factor which influenced the judge in his conclusion that QOCS did not apply was the terms of regulation 16. Where a duty or obligation is created by statute, it is for Parliament to decide what are the consequences of breach of that duty or failure to perform that obligation. In some cases it does so expressly, by providing that a breach of statutory duty is actionable. In other cases, the legislation is silent, in which case the courts must work out by reference to a number of different indicators, whether Parliament intended that a breach of statutory obligation should be actionable and, if so, by whom. However, as a general rule where Parliament has decided that a breach of duty is actionable in one particular manner it is not open to the courts to devise a different form of remedy. A venerable and often cited statement to this effect is found in the judgment of Lord Tenterden CJ in Doe d Murray v Bridges (1831) 1 B & Ad 847:
"And where an Act creates an obligation, and enforces the performance in a specified manner, we take it to be a general rule that performance cannot be enforced in any other manner."
- In our case regulation 16 provides "any sum due and owing" under the Regulations is recoverable as a civil debt. Does Mr Howe claim a sum that is "due and owing" under the Regulations? In my judgment he does not. One of the characteristics of a debt is that its amount is ascertained at the time when proceedings are begun. It is only when the amount of a debt has been ascertained that it can be said to be "due and owing". I do not consider that by regulation 16 Parliament can be taken to have altered one fundamental characteristic of a debt by a side wind. In my judgment regulation 16 would apply to Mr Howe's claim once the amount of his compensation had been assessed. It would also apply where one compensating body is subrogated to a claim against another compensating body after it has paid out an ascertained sum to an injured claimant. I do not, therefore, consider that regulation 16 undermines the interpretation of CPR Part 44.13 that I prefer.
- Accordingly, I would allow the appeal. The consequence is that the QOCS regime applies. Under the QOCS regime CPR Part 44.16 (2) provides:
"Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just where –
(b) a claim is made for the benefit of the claimant other than a claim to which this section applies."
- It follows from the way in which this rule is framed that the first instance judge must both (a) exercise a discretion and (b) conduct an evaluation of what is just on the facts of any particular case. The MIB asked the judge for permission to enforce a costs order against Mr Howe in so far as the costs related to his unsuccessful claim for a declaration that the MIB was liable to compensate him under the Untraced Drivers' Agreement. That was the claim that was introduced by amendment shortly before trial. The judge said that if he were wrong about the application of QOCS (as I think he was) he would not have exercised his discretion in favour of MIB.
- Mr Palmer argued that to allow the MIB to enforce its costs order in relation to the claim for a declaration would be a more just outcome than that which the judge would have favoured. However, I do not consider that he identified any error of principle that the judge made. What the argument amounted to was no more than an invitation to this court to consider the matter afresh. But that is no ground for impugning the exercise of a judicial discretion. I would reject the MIB's argument under this head.
- Accordingly, I would simply allow the appeal. A number of other questions were canvassed very shortly at the hearing, but they were all dependent on the outcome of the appeal. We said at the hearing that the time for dealing with those arguments (preferably on the papers) would be once the result of the appeal was known.
Lord Justice McFarlane:
- I agree.
Sir James Munby, President of the Family Division:
- I also agree.
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