Neutral Citation Number: [2009] EWHC 1297 (QB)
Claim No: 7MA91096
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY

Date: 11/06/2009

Before :

THE HON. MR. JUSTICE BLAIR
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Between :

	BENJAMIN WILKINSON
(By his father and Litigation Friend
STEPHEN WILKINSON)	Claimant	
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	(1)	KIERAN THOMAS FITZGERALD

(2) CHURCHILL INSURANCE COMPANY LIMITED	First Defendant

Second Defendant	

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Stephen Grime QC (instructed by Potter Rees) for the Claimant
The First Defendant was not present or represented
Stephen Worthington QC and Fergus Randolph QC (instructed by Keoghs Solicitors) for the Second Defendant
Hearing dates: 20 and 21 May 2009
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Judgment

Mr. Justice Blair : 

1.	This is the trial of a preliminary issue.  It concerns the statutory liability of an insurer to satisfy a judgment obtained against a driver who was not insured by the policy.  UK domestic legislation gives the insurer a right of recovery against an insured person who caused or permitted the use of the vehicle.  The Claimant argues that this right of recovery is incompatible with his rights as a road accident victim under various EC/EU.  I am told that there is no authority on this point, which appears not to have been argued before.  It is however plainly a point of some general importance.
2.	For present purposes, the facts are agreed.  In October 2004, Mr. and Mrs. Wilkinson, the Claimant’s parents, bought their son a car for £1,600.  The car was insured through Churchill Insurance Company Limited, the Second Defendant.  The policy holder was Mrs. Wilkinson, but the Claimant was a named driver.  On 23 November 2005, he met with a couple of friends, one of them being the First Defendant, who had been drinking.  The Claimant, who had not been drinking, drove them to a local Macdonalds, where they had something to eat.  When they left, the Claimant allowed the First Defendant to drive the car, although (for present purposes) it is accepted that he knew he was not insured under the policy.   Unfortunately, the First Defendant lost control, and the car collided with a vehicle driving in the opposite direction.  The Claimant, who was aged 20 at the time, suffered severe injuries.  I am told by his Counsel (though this is not an agreed fact) that he has no memory of the events surrounding the accident.  The First Defendant was subsequently convicted of dangerous driving, driving with excess alcohol and driving without insurance.
3.	The Claimant wanted to recover damages for his injuries.  But on 2 February 2007, his mother got a letter from the Defendant insurance company which informed her that as a consequence of the Claimant causing or permitting the use of the vehicle by the First Defendant, the company had a right of recovery against the Claimant pursuant to s. 151(8) Road Traffic Act 1988.  As a consequence it was said that:
“Ben [the Claimant] will be entitled to pursue a claim against [the First Defendant] in a personal capacity.  Theoretically Churchill Insurance might be required to satisfy such a claim.  However, this would be rendered meaningless as Ben would be required to reimburse all such payments on the same basis, namely that he caused or permitted the use of the vehicle by [the First Defendant] in the first place”.
4.	These proceedings were begun on 9 November 2007.  Judgment has been entered by the Claimant against the First Defendant with permission for the Defendants to raise contributory negligence at the quantum stage.  The Second Defendant pleads contributory negligence on the basis that the Claimant knew or should have known the First Defendant had been drinking with the result that his ability to drive was or was likely to be impaired.
5.	By Order of 17 July 2008, District Judge Gosnell ordered the trial of a preliminary issue between the Claimant and the Second Defendant as follows:
(a)	Whether the Second Defendant must indemnify the First Defendant in respect of the Claimant’s claim; and
(b)	Whether the Second Defendant has any right to recover such amount from the Claimant pursuant to Section 151(8) of the Road Traffic Act 1988 or otherwise”.  
6.	As I shall explain, the first point is not in dispute.  The Defendant insurance company accepts not only that it “might” have to indemnify the First Defendant in respect of the Claimant’s claim (as was said in the letter of 2 February 2007), but that it does have to do so.  But as foreshadowed in the letter, it does not accept that the Claimant should receive the money.  It claims to be entitled to recover the money under s. 151(8).  The effect of this set off and counter claim is said to be a circuity of action, with the result that the Claimant’s claim fails.  The Claimant submits that this is wrong.  He says that such an outcome contravenes the provisions of certain EC directives and in particular the Second Council Directive of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles (84/5/EEC).  He argues that the right of recoupment given by the UK legislation has to give way to the effect of European law.
The legislative background
7.	Counsel described English law when it comes to compensation obligations in respect of injury caused by negligent driving as something of a hotchpotch.  Three bodies are potentially liable: (1) contractual insurers, which cover the vast majority of cases, (2) statutory (sometimes called the RTA) insurers whose liability arises because legislation so stipulates, though there would be no contractual liability, and (3) the Motor Insurers Bureau (MIB), which since its establishment in 1946 has provided a safety net which now operates principally where there was no insurance at all or where the driver is not identified. The background is explained by Lord Nicholls in White v. White [2001] 1 WLR 481 at [4] – [6].  While the overall aim is that compensation should be paid to injured parties by one or other of the bodies, it is further right that (as the Second Defendant has demonstrated) insurance companies have had certain rights of recovery against an insured for sums which they have been obliged to pay out under provisions of the Road Traffic legislation going back to s. 38 of the first Act in 1930.
8.	When the United Kingdom joined what was then the European Economic Community, it became subject to various Directives which were concerned with insurance against civil liability in respect of road accidents.  As the Claimant put it, in a single economic area where vehicles operate across frontiers, it is not acceptable to have potential disparities between motor insurance cover.  There are now four such Directives, the first (72/166/EEC) dating from 1972.  The particular purpose of the First Motor Insurance Directive was to reduce the disparities between insurance arrangements in different Member States as these could affect the free movement of vehicles goods and persons.  Its aim was to provide for compulsory insurance of vehicles in all States to at least a minimum level.  Article 3 states:	
“1. Each Member State shall .... take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance. The extent of the liability covered and the terms and conditions of the cover shall be determined on the basis of these measures.”	   
The Second Motor Insurance Directive
9.	The argument in the present case has centred on the Second Motor Insurance Directive (84/5/EEC).  As the Claimant puts it, the Second Motor Insurance Directive took the process further by seeking to ensure the widest protection for accident victims under the differing national regimes.  The following recitals of the Directive are relevant:	
“Whereas the amounts in respect of which insurance is compulsory must in any event guarantee victims adequate compensation irrespective of the Member State in which the accident occurred;”  
“Whereas it is in the interest of victims that the effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident; whereas, however, in the case of vehicles stolen or obtained by violence, Member States may specify that compensation will be payable by the abovementioned body;” 	
The “aforementioned body” is that mentioned in the previous recital as the “body to guarantee that the victim will not remain without compensation where the vehicle which caused the accident is uninsured or unidentified....”, which in the case of the UK is the MIB.	
10.	One then comes to the provision that is central to the Claimant’s submissions.  Article 2 provides as follows:
“1. Each Member State shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article 3 (1) of Directive 72/166/EEC, which excludes from insurance the use or driving of vehicles by: 
- persons who do not have express or implied authorization thereto, or 
- persons who do not hold a licence permitting them to drive the vehicle concerned, or 
- persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned, 
shall, for the purposes of Article 3 (1) of Directive 72/166/EEC, be deemed to be void in respect of claims by third parties who have been victims of an accident.	
However the provision or clause referred to in the first indent may be invoked against persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen.
Member States shall have the option – in the case of accidents occurring on their territory – of not applying the provision in the first subparagraph if and in so far as the victim may obtain compensation for the damage suffered from a social security body.”	
11.	Leaving aside the option at the end of the article (which the UK has not exercised), the Claimant paraphrases the intended effect of this provision as follows.  Where a statutory provision or contractual clause restricts cover by reference to the authorisation of the driver, it is to be treated as void against all persons save those who knowingly entered a stolen vehicle.  There are significant issues between the parties as to the application of Article 2 to the facts of this case, but I do not think that this paraphrase is controversial.  In White v. White, ibid, at [11], Lord Nicholls said that the “main purpose of the Directive was to improve guarantees of compensation for victims of motor accidents by ensuring a minimum level of compensation for them throughout the Community”.  At [14], he refers to the “general rule that victims of accidents should have the benefit of protection up to specified minimum amounts, whether or not the vehicle which caused the damage was insured”.  
Section 151 Road Traffic Act 1988
12.	Implementation of the Second Directive in the UK was done in the first instance by way of the Motor Vehicles (Compulsory Insurance) Regulations (1987 SI No 2171).  Shortly afterwards, these provisions were enacted in s. 151 Road Traffic Act 1988.  The effect of that section is that where a motor insurer has issued a certificate of insurance valid for a particular vehicle, the insurer is responsible to meet a judgment obtained by a person injured by the negligence of a driver whether or not permitted by the policy.  The provisions that give effect to this outcome are as follows (references to certificates of security which I am told are not used often can be ignored).
13.	Section 151(1) provides that:
“This section applies where, after a certificate of insurance or certificate of security has been delivered under section 147 of this Act to the person by whom a policy has been affected or to whom a security has been given, a judgment to which this subsection applies is obtained.”
14.	Section 151(2) provides that:
“Subsection (1) applies to judgments relating to a liability with respect to any matter where liability with respect to that matter is required to be covered by a policy of insurance under section 145 of this Act and either-
(a) it is a liability covered by the terms of the policy or security to which the certificate relates, and the judgment is obtained against any person who is insured by the policy or whose liability is covered by the security, as the case may be, or
(b) it is a liability, other than an excluded liability, which would be so covered if the policy insured all persons or, as the case may be, the security covered the liability of all persons, and the judgment is obtained against any person other than one who is insured by the policy or, as the case may be, whose liability is covered by the security.”
This, as Claimant explains it, means that even if the insurance policy does not in fact cover driving by the torfeasor, the policy must be read as if “all persons” were insured. 
15.	Section 151(4) deals with the reference to “excluded liability” in s. 151(2)(b) as follows:
“In subsection 2(b) above ‘excluded liability’ means a liability in respect of the death of, or bodily injury to, or damage to the property of any person who, at the time of the use which gave rise to the liability, was allowing himself to be carried in or upon the vehicle and knew or had reason to believe that the vehicle had been stolen or unlawfully taken, not being a person who-
(a) did not know or had no reason to believe that the vehicle had been stolen or unlawfully taken until after the commencement of his journey; and
(b) could not reasonably have been expected to have alighted from the vehicle.”
This reflects the “stolen vehicle” exclusion expressly contemplated by the terms of Article 2 of the Second Directive.
16.	The duty to satisfy judgments is contained in s. 151(5) which provides as follows:
“Notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy or security, he must, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment—
(a) as regards liability in respect of death or bodily injury, any sum payable under the judgment in respect of the liability, together with any sum which, by virtue of any enactment relating to interest on judgments, is payable in respect of interest on that sum,
(b) …
(c) any amount payable in respect of costs.”
17.	There then follows the insurer’s entitlement to recover which is the key provision in this case (for clarity I have omitted the references to certificates of security).  Section 151(8) provides as follows:
“Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured by a policy …, he is entitled to recover the amount from that person or from any person who—
(a) is insured by the policy, … , by the terms of which the liability would be covered if the policy insured all persons … and
(b) caused or permitted the use of the vehicle which gave rise to the liability. 
This is the provision relied upon by the Defendant insurer in the present case, and where the disputes as to construction lie.  There is no issue as to the right of the insurer to recover from the “person who is not insured by a policy”, who in this case is the First Defendant (the driver) the judgment against whom it is obliged to satisfy under the earlier subsections.  Whether he would be good for the money is obviously unlikely. The issue is whether a right of recovery lies against the Claimant as a person who was “insured by the policy” and who “caused or permitted the use of the vehicle which gave rise to the liability”. If the money payable by way of damages can be recovered, the insurer will in effect be held harmless.
The Claimant’s submissions
18.	It is common ground that the effect of s.151 Road Traffic Act 1988 is that the insurer is obliged to meet any judgment which the Claimant obtains against the First Defendant.  The Claimant submits that the insurer’s assertion that it has a right under s.151 (8) to recoup anything it pays out would in reality deprive him of any benefit from the judgment.  Mr. Stephen Grime QC on his behalf accepts that if, as he puts it, it is realistic to divorce the right of the Claimant to a judgment from the right of the insurer to recoup the proceeds, the Claimant’s argument becomes much more difficult.  He submits however that if one looks at the reality of the situation, the effect of the insurer’s assertion is to adopt an interpretation of s.151 which has the effect of taking out a class of victim, namely persons who may not be policy holders, but happen to be named drivers under the policy, and who have caused or permitted the use of the vehicle which gave rise to the liability.  It is not permissible, he submits, under the Motor Insurance Directives for there to be such a disentitled class.  This is because the Second Directive, and in particular Article 2, is strict in defining the class of persons who fall outside its provisions, and the Claimant does not fall within that class.  On that basis, it is submitted that the question is what the English Court should do if a “natural” or “conventional” interpretation of s.151 (8) were to run counter to the Second Directive.  In such a case, he submits that the English Court can by interpretational means avoid the inconsistency, because its duty in these circumstances is to adopt a wider principle of interpretation than would normally be permissible, if necessary implying words into the domestic legal provision. The Court should, he submits, either adopt a wide view of what the statute means, or import words that achieve the necessary result.  
19.	Specifically, Mr. Grime QC submits that the reference in s. 151 (8) to recovery from “any person who…is insured by the policy” should be construed narrowly so that it means “policy holder”.  (That works for him in the present case, because the policy holder is the Claimant’s mother.)  In that regard, he submits that at the moment of the accident, there was no insurance of the Claimant in any effective way.  He was not the driver, and consequently there was no effective liability against which he required to be indemnified.  Mr. Grime accepts that such a construction could not follow from a conventional interpretation of the words of the statute, but submits that it is permissible in the circumstances.   Alternatively, he submits that wording should be implied in to the first part of s. 151 (8) so that the entitlement to recover the amount in question from a person should include the following: “not being a person entitled to the benefit of a judgment to which this section refers”.  Otherwise he submits, there would be removed from the right of recovery persons who are victims and who are entitled to be compensated because of the preceding parts of s.151.  As regards the meaning of Article 2, he submits that the reference to “authorisation” in the first indent means authorisation for insurance purposes.  In this case, the First Defendant had neither express nor implied authorisation.  There can, he says, only be a derogation from Article 2, in the limited circumstances set out in that article.
20.	In summary, the Claimant submits that in terms of the Second Directive, an uncompensated class of victim has been created of which the Claimant is an example.  A blanket exclusion of a class of victim beyond Article 2 is impermissible.  He says that this can be tested by looking at his position.  He is to be treated as having had a satisfied judgment, with the consequence that he would be unable to go to the MIB, whose liability is only to satisfy an unsatisfied judgment (this point is accepted by the Defendant insurance company).  Yet he has not received any compensation.
The Defendant insurance company’s submissions
21.	In summary, the insurer’s case is that s. 151 (8) is not incompatible with the Directives.  The insurer does not accept that these provisions constitute “exclusions” within the meaning of Article 2 of the Second Directive.  Alternatively, on the premise that the Claimant is right on the effect of the Directives, s.151 (8) cannot be interpreted in the way contended for.  But the Claimant is not without a remedy, as there would be available a remedy against the Government for failing properly to implement the Directive under the so-called Francovich principle (Francovich v. Italian Republic [1991] ECR I-5357).  For a recent example, see Byrne v. The Motor Insurers Bureau [2008] EWCA Civ 574.
22.	Mr. Stephen Worthington QC for the insurer submits that the judgment that has been entered by the Claimant against the First Defendant will be satisfied, and the insurer will have compensated the Claimant and fulfilled any obligations to him under the Second Directive.  At that point, its obligations come to an end.  But, he submits, the insurer is still entitled to look to him in a different guise, and recover the judgment amount under s. 151 (8).  At that point, the fact that the Claimant is a victim is completely irrelevant.  He is liable to repay because he is a person insured under the policy, and on the plain reading of the section, the money can be recovered.  The fact that at an earlier stage he was a victim is he submits happenstance.  It is not a question of a level playing field under the EC/EU—s. 151 (8) is as he puts it on a different pitch altogether from ss. 151 (1), (2) and (5).  In what he describes as the heart of his submissions, he says that there is a fundamental difference between (1) an injured person’s right to compensation from the insurer, which is a benefit of the insured, and (2) the insurer’s right of recovery from either the tortfeasor or persons insured under the policy, which is a right of the insurer.
23.	Provisions allowing for recoupment in one form or another have a long history which can be traced through the various Road Traffic Acts from the first legislation in 1930.  The important point, Mr. Worthington QC submits, is that Parliament has differentiated between the obligation to compensate, and the right of recovery.  Section 151 (8) does not, he submits, deal with exclusions.  It does not purport to exclude compensation for victims.  Successive Road Traffic Acts have imposed obligations to compensate on insurers which go beyond their contractual liability, but have permitted the right of recovery by insurers see for example s. 149(4) RTA 1972.  Section 151 (8) is merely another aspect of this right.  The Claimant was the instigator of the use of the vehicle uninsured, and there is nothing unconscionable in the insurer being able to recover its loss from the insured person who permitted the unauthorised use.  
24.	Mr .Fergus Randolph QC who presented the insurer’s case on European law, said that the Claimant’s case is based on Article 2 (1) of the Second Directive.  But he submits, s. 151(8) does not impinge on the aims of the Second Directive, which are the free movement of vehicles nor does it impinge on the comparability of awards in different Member States.  In the Claimant’s original submissions of 17 July 2008, it had been said that the first indent of that article was relevant because the First Defendant did not have authorisation to drive the car at the time of the accident.  But paragraph 13 of the statement of facts agreed on 13 May 2009 make it clear that at the time of the inception of the insurance, the Claimant knew that the First Defendant was not insured under the policy, and it is to be inferred that he had the same knowledge at the time of the accident.
25.	Mr Randolph QC submitted that there are two reasons why Art. 2 (1) does not apply to this case.  The first is that on the facts, there is no exclusion from insurance of a person who does not have “express or implied authorisation”.  He points out that it is accepted in the agreed statement of facts that the Claimant did in fact authorise the First Defendant to drive.  Alternatively, he submits that s. 151 (8) is not a statutory provision which excludes from insurance the use or driving of vehicles by persons who do not have authorisation.  This, he submits, is a complete answer to the Claimant’s case.  It differentiates this case from the decisions of the European Court of Justice which have considered these Directives, which in any case he submits properly read do not assist the Claimant’s argument.  
26.	He also submitted that, even if the Claimant’s interpretation is correct, there are limits to a domestic court’s powers and duties of interpretation.  The principle identified by the ECJ in Marleasing SA v. La Comercial Internacional de Alimentación SA C-106/89 [1990] ECRI-4135 (paragraph 8 of the judgment) is that “… the Member States’ obligation arising from a directive to achieve the result envisaged by the directive and their duty under Article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty”.  The Marleasing principle requires the interpretation of national law in the light of the wording and purpose of the directive in order to achieve its result only “so far as possible”.  He submitted that the suggested amendments “did violence” to the language of s. 151 (8).  If as the Claimant submitted this was a case in which the literal words of the subsection did not properly implement the Second Directive, it was not possible to get around that outcome by interpretation.   His remedy was to mount a Francovich claim against the Government.  
27.	Finally, Mr. Worthington QC returned to the construction point.  His submissions at this stage  were advanced on the premise that the court was to find that s.151 (8) did conflict with the Second Directive and that the court was required therefore interpret the subsection in a manner consistent with the Directive if possible.  This submission was to the effect that it was not possible to interpret the subsection in the way suggested by the Claimant without conflicting with the clear words and purpose of the statute.  Whatever rules of construction are appropriate in such circumstances, he submitted that it could not be done in this case.  As regards the Claimant’s first suggested interpretation, he submitted that the Claimant was plainly a person “insured by the policy” within the meaning of S. 151 (8) (a).  The obligation to insure the vehicle is expressed by reference to its use in s. 143 RTA 1988, and the prohibition is against using the vehicle uninsured, or causing or permitting any other person to do so.  The question whether someone is or is not insured is determined by reference to what has to be insured.  It does not depend on whether the person concerned is the driver.  The cases show that you do not have to be the driver to be required to be insured under a policy. 
28.	As regards the words the Claimant suggested should be added to s. 151(8), namely “not being a person entitled to the benefit of a judgment to which this section refers”, he pointed out that a different formulation appears in paragraph 47 of the Claimant’s supplementary submissions of 14 May 2009.  Mr Worthington submitted that there was no reason why a victim should be immune from consequences of his own actions.  The addition of the words as suggested would, he submitted, negate the purpose of the subsection.  The whole purpose of the statutory right of recovery was to catch a group of people who had caused or permitted the use of the vehicle, and there is no reason why this should not include victims.  
The European jurisprudence
29.	The parties referred to a number of decisions of the ECJ partly to show the aims and purposes of the Directives, upon which both parties placed reliance, and partly to show how the Court has dealt with analogous questions that have arisen in the context of road accidents.  In Evans v. Secretary of State for Transport & MIB (2003) ECR 1-14447, the ECJ explained the purposes of the Second Directive as follows:
“26. As regards the extent of the insurance obligation, the fifth recital in the preamble to the Second Directive indicates that the amounts of compulsory insurance cover must in any event guarantee victims “adequate compensation”. 
27. 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.”   
The Defendant insurance company points out that the present matter concerns an identified driver and an insured vehicle.  Nevertheless, the underlying rationale is the same, and I do not think that this is in dispute.
30.	The argument before me has focused on three decisions in particular, and I shall confine my consideration to these.  The first is Ruiz Bernáldez, Case C-129/94, [1996] ECR I-1847, which was a case from Spain.  The facts were that Mr Bernáldez had driven a vehicle whilst intoxicated, and caused an accident resulting in damage to property.  Criminal proceedings had resulted in an award of compensation.  Under Spanish law, the insurer was entitled to escape liability for the acts of the intoxicated driver.  The question whether the exclusion of damage caused by intoxicated drivers was permissible in the light of the Directives was referred to the ECJ.  In deciding whether this decision was compatible with EU law, in paragraph 13 the Court said in relation to the aims of the Motor Insurance Directives:
“The preambles to the directives show that their aim is firstly to ensure the free movement of vehicles normally based on Community territory and of persons travelling in those vehicles, and secondly of guaranteeing that the victims of accidents caused by those vehicles receive comparable compensation irrespective of where in the Community the accident has occurred …”
31.	The Court continued:
“18 In view of the aim of ensuring protection, stated repeatedly in the directives, Article 3(1) of the First Directive, as developed and supplemented by the Second and Third Directives, must be interpreted as meaning that compulsory motor insurance must enable third-party victims of accidents caused by vehicles to be compensated for all the damage to property and personal injuries sustained by them, up to the amounts fixed in Article 1(2) of the Second Directive. 
19 Any other interpretation would have the effect of allowing Member States to limit payment of compensation to third-party victims of a road-traffic accident to certain types of damage, thus bringing about disparities in the treatment of victims depending on where the accident occurred, which is precisely what the directives are intended to avoid. Article 3(1) of the First Directive would then be deprived of its effectiveness. 
20 That being so, Article 3(1) of the First Directive precludes an insurer from being able to rely on statutory provisions or contractual clauses to refuse to compensate third-party victims of an accident caused by the insured vehicle.
32.	There is then the following explanation of the effect of Article 2(1) of the Second Directive:
21. In that context the first subparagraph of Article 2(1) of the Second Directive merely recalls that obligation with respect to provisions or clauses in a policy excluding from insurance the use or driving of vehicles in particular cases (persons not authorized to drive the vehicle, persons not holding a driving licence, persons in breach of the statutory technical requirements concerning the condition and safety of the vehicle). However, by way of derogation from that obligation, the second and third subparagraphs of Article 2(1) provide that certain persons may be excluded from compensation by the insurer, having regard to the situation they have themselves brought about (persons entering a vehicle which they know to have been stolen) or to the compensation they can claim elsewhere (victims who may obtain compensation for the damage suffered from a social security body).”
33.	The Court went on in paragraph 22 to find that Article 3(1) of the First Directive “does not preclude statutory provisions or contractual clauses under which it is possible for the insurer to claim against the insured in certain cases”, and continued:
“23. That applies in particular to provisions or clauses which allow the insurer to claim against the insured with a view to recovering the sums paid to the victim of a road-traffic accident caused by an intoxicated driver.”    
It is to be noted that this passage does not in terms recognise recovery where the insured and victim are the same person.
34.	The Court’s ruling was that Article 3(1) of the First Council Directive is to be interpreted as meaning that, without prejudice to the provisions of Article 2(1) of the Second Council Directive, a compulsory insurance contract may not provide that in certain cases, in particular where the driver of the vehicle was intoxicated, the insurer is not obliged to pay compensation for the damage to property and personal injuries caused to third parties by the insured vehicle.  It may, on the other hand, provide that in such cases the insurer is to have a right of recovery against the insured.
35.	The Claimant submitted that Bernáldez establishes that there cannot be exclusions from cover provided by domestic legislation other than those classes allowed by the Article 2 of the Second Directive, which follows from the statement of the purpose of the Directives.  The Defendant insurance company on the other hand places strong reliance on paragraphs 22 and 23 which recognise that it is possible for the insurer to recover from the insured in certain cases.  My own view is that the Claimant’s interpretation finds strongest support in the submissions made by the UK Government in the case, though there is force in the response of Mr Randolph QC for the defendant insurer that this does not find its way so clearly into the judgment.  However, though in a broad sense Bernáldez may be seen as supportive of the insurer’s position, it involved damage to property rather than (as in the present case) personal injuries, and does not appear to be dispositive of the present issue because the decision was in the context of recovery by insurers against a policy holder and not against the victim of an accident as in this case.
36.	Case C-348/98: Mendes Ferreira [2000] ECR I-6711 was a case of a road traffic accident involving a car belonging to Mr. Ferreira and driven by one of his sons in which another of his sons, aged 12, travelling in the same vehicle, was fatally injured.  No other vehicle was involved in the accident and the driver of the vehicle was not at fault.  Portuguese law at the time distinguished between passengers carried free of charge who were required to prove fault in order to recover compensation, and paying passengers who did not have to prove fault.
37.	The Court said in paragraph 23 that it was clear from the aim of the three directives governing insurance against civil liability in respect of the use of motor vehicles and from their wording that they do not seek to harmonise the rules of the Member States governing civil liability.  It repeated what it had held in Bernáldez at paragraphs 13 to 16, namely that:
“24 … the preambles to the directives in question show that their aim is, first, to ensure the free movement of vehicles normally based on Community territory and of persons travelling in those vehicles and, second, to guarantee that the victims of accidents caused by those vehicles receive comparable treatment irrespective of where in the Community the accident occurred (see, more particularly, the fifth recital in the preamble to the Second Directive and the fourth recital in the preamble to the Third Directive).”
38.	Explaining how things had developed, it explained that for the purposes identified, the First Directive established a system based on the presumption that vehicles normally based on Community territory are covered by insurance.  Article 3(1) thus provides that Member States are to take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in their territory is covered by insurance.  However, the original version of that article left it to the Member States to determine the damage covered and the terms and conditions of the compulsory insurance against civil liability. In order to reduce the disparities which continued to exist between the laws of the Member States as regards the extent of the obligation to insure, the Court explains that Article 1 of the Second Directive required civil liability for damage to property and personal injuries to be compulsorily covered up to specified sums.  Article 3 thereof provided that, as regards personal injuries, the members of the family of the insured person or of the driver may not be excluded from cover on the ground of their family relationship. Article 1 of the Third Directive extended that obligation to provide cover for personal injuries to passengers other than the driver.  In summary:
27 Article 3(1) of the First Directive, as amplified and supplemented by the Second and Third Directives, thus requires the Member States to ensure that civil liability in respect of the use of vehicles normally based in their territory is covered by insurance, and specifies, inter alia, the types of loss or injury and the third-party victims to be covered by that insurance. On the other hand, that provision does not state what type of civil liability, for risk or for fault, is to be covered.
39.	The Court continued:
28 In the absence of any Community rules defining the type of civil liability in respect of the use of vehicles to be covered by compulsory insurance, it is in principle for the Member States to lay down the system of civil liability applicable to road-traffic accidents.
29 It follows that, as Community law stands at present, the Member States are free to determine the type of civil liability applicable to road-traffic accidents. However, they must ensure that the civil liability arising under their domestic law is covered by insurance which complies with the provisions of the three directives in question.
40.	The Defendant insurer submits that this shows that provided the laws of the Member States comply with the Directives, then the precise rules of civil liability which apply are a matter for each State. There is no prohibition within the Directives against Member States providing civil liability rules which enable recovery from the uninsured tortfeasor or the insured.  The Claimant on the other hand points out that the Court held that third-party victims of an accident cannot be excluded from compulsory motor-vehicle insurance for the simple reason that they are members of the family of the insured person or of the driver.  The case, he submits, is an illustration of the strictness with which the ECJ limits the ambit of the right of the Member States to have in their domestic law anything inconsistent with the provisions of the Second Directive.   
41.	The Defendant insurer also submits that the ECJ made it clear in Ferreira at paragraph 32 that a domestic blanket ban could be permissible in the following circumstances: “... if that Member State’s domestic law does not impose compulsory cover in respect of personal injuries to passengers who are not family members, Article 3 of the Second Directive does not require it to impose compulsory cover for personal injuries to passengers who are members of the family of the insured person or of the driver”.  This (it is said) clearly wholly undermines the Claimant’s point about blanket bans.  As long as they are not discriminatory and therefore not contrary to the aims of the EU directives, those directives do not preclude such national measures.
42.	The final authority is case C-537/03: Candolin [2005] ECR I-5745 which was a case from Finland to which Mr Randolph QC properly drew attention, pointing out (rightly in my view) that it appears to be the nearest authority to the Claimant’s case.   The case involved a family: R was driving P’s car, in which P, V and C were passengers (it is unclear in the facts of the case whether the owner P was also the policy holder).  All were intoxicated.  The car crashed, C died and the others were injured.  The driver was imprisoned and ordered to pay compensation.  At first instance, it was held that the insurance company should pay the compensation, in particular because it was unlikely that the driver would have the financial resources otherwise to do so.  That decision was overturned on appeal.  The insurance company contended that all the passengers were contributorily negligent in allowing themselves to be driven by a drunken driver and that the contributory negligence released the insurance company from any obligation to pay a judgment (Mr Grime QC suggests that the effect of such negligence may have been the same as under English law prior to 1945, in other words to provide a complete defence).  The insurance company also contended that it was not liable to pay where the injured passenger (that is P) was also the owner of the vehicle.  The matter was referred to the ECJ.
43.	In paragraph 17 of its judgment, the Court reiterated the aims of the Directives by reference to Bernáldez which I have set out above, and need not repeat.  There follows a discussion upon which the Claimant places reliance.  In view of the aim of protecting victims, the Court has held that:
18   … Article 3(1) of the First Directive precludes an insurer from relying on statutory provisions or contractual clauses in order to refuse to compensate third-party victims of an accident caused by the insured vehicle (Ruiz Bernáldez, paragraph 20). 
19    The Court has also held that the first subparagraph of Article 2(1) of the Second Directive simply repeats that obligation with respect to provisions or clauses in a policy excluding from insurance the use or driving of vehicles in particular cases (persons not authorised to drive the vehicle, persons not holding a driving licence, persons in breach of the statutory technical requirements concerning the condition and safety of the vehicle) (Ruiz Bernáldez, paragraph 21). 
20  By way of derogation from that obligation, the second subparagraph of Article 2(1) provides that certain persons may be excluded from compensation by the insurer, having regard to the situation they have themselves brought about (persons entering a vehicle which they know to have been stolen) (Ruiz Bernáldez, paragraph 21).
21     However, as it is a provision which establishes a derogation from a general rule, the second subparagraph of Article 2(1) of the Second Directive must be interpreted strictly. 
22     As the Advocate General rightly stated, in point 42 of his Opinion, any other interpretation would allow Member States to limit payment of compensation to third-party victims of a road accident to certain circumstances, which is precisely what the directives are intended to avoid. 
23     It follows that the second subparagraph of Article 2(1) of the Second Directive must be interpreted as meaning that a statutory provision or a contractual clause in an insurance policy which excludes the use or driving of vehicles from the insurance may be relied on against third parties who are victims of a road accident only where the insurer can prove that the persons who voluntarily entered the vehicle which caused the injury knew that it was stolen.
44.	The Court then proceeded to consider the effect of the contributory negligence of a passenger.  In paragraphs 25-6, it rejected the proposition that Community law does not impose any limits on the appraisal, under national law on civil liability, of the extent to which the passenger contributed to the occurrence of his injuries, holding that:
27  The Member States must exercise their powers in compliance with Community law and, in particular, with Article 3(1) of the First Directive, Article 2(1) of the Second Directive and Article 1 of the Third Directive, whose aim is to ensure that compulsory motor vehicle insurance allows all passengers who are victims of an accident caused by a motor vehicle to be compensated for the injury or loss they have suffered. 
28   The national provisions which govern compensation for road accidents cannot, therefore, deprive those provisions of their effectiveness. 
29   Such would be the case specifically where, solely on the basis of the passenger’s contribution to the occurrence of his injuries, national rules, established on the basis of general and abstract criteria, either denied the passenger the right to be compensated by the compulsory motor vehicle insurance or limited such a right in a disproportionate manner. 
45.	The Court went on to hold that the fact that the injured passenger was also the owner of the vehicle was not relevant:
31  In the determination of whether those circumstances exist and whether the limit on the compensation is proportionate, which is a matter for the national court, the fact that the passenger concerned is the owner of the vehicle the driver of which caused the accident is irrelevant. 
32     By providing that insurance for civil liability in respect of the use of motor vehicles covers liability for personal injuries to all passengers other than the driver, Article 1 of the Third Directive lays down only one distinction between the driver and the other passengers. 
33     Furthermore, the protective aims recalled in paragraphs 18 to 20 of this judgment require that the legal position of the owner of the vehicle, present in the vehicle at the time of the accident as a passenger, be the same as that of any other passenger who is a victim of the accident. 
46.	In support of its interpretation, the Court said as follows:
34 That interpretation is supported by the way in which Community law has evolved. The seventh recital in the preamble to the Second Directive states that it is in the interest of victims that the effects of certain exclusion clauses should be limited to the relationship between the insurer and the person responsible for the accident. In order to give protection comparable to that of other third parties who are victims, as is clear from the ninth recital in the preamble to that directive, Article 3 has extended insurance cover for personal injuries to members of the family of the insured person and the driver or any other person who is liable. Article 1 of the Third Directive adopts an even broader formula, by providing for compensation for personal injuries for all passengers other than the driver. Therefore, the owner of the vehicle, who is a passenger, is not excluded from the benefit of compensation. 
47.	The Claimant relies on this decision in a number of respects.  First, he submits that it illustrates that the status of victim and the right to compensation is freestanding and not affected by other qualities of the victim—there the fact that the victim was also owner of the vehicle.  It also (it is said) contains the clearest possible statement of the importance of interpreting all derogations from Article 2(1) of the Second Directive strictly.  Further it submits that the Court’s comments reinforce the Claimant’s case that the effect of s. 151(8) contended for by the Second Defendant removes compensation from another class of victim not sanctioned by any Directive provision—passengers who (whether vehicle owners or not) were entitled drivers under the insurance policy and who caused or permitted the use of the vehicle—and that this is contrary to EU law.  The defendant insurer on the other hand argues that Claimant’s reliance on Candolin does not assist him because he fails to deal with what is said to be the critical distinction between that case and the present proceedings.  In Candolin, the insurer was seeking to exclude liability completely based on Article 2.1 of Council Directive 84/5/EEC.  That approach clearly could not have succeeded because on the facts, the insurer was unable to rely on Article 2.1.  By contrast, it is submitted that in the present case, the insurer does not seek to rely on Article 2.1.  The effect of s. 151(8) RTA 1988 is not to exclude liability but rather to give the insurer the right of recovery in certain limited circumstances.  It is this latter point that seems to me to be central in determining which of these submissions is the correct one and I shall come back to it.  I consider however that in general terms the Claimant was justified in his submission that, whatever the precise analysis of Candolin, the trend of these authorities is towards a strict interpretation of any exclusion from the right to compensation unless provided for by the terms of the Directives.  This is consistent with the overall aim of the Directives which is to ensure that a wide group of victims receive compensation.  
The domestic jurisprudence
48.	In respect of the domestic jurisprudence, I have already cited the decision of the House of Lords in White v. White [2001] 1 WLR 481 as to the effect of the Directives, though the point at issue in that case was different from the present case.  I am told that the only English authority dealing directly with s. 151(8) Road Traffic Act 1988 is the decision of the Court of Appeal in Lloyd-Wolper v. National Insurance Guarantee Corp plc [2004] EWCA Civ 766 in which the Court considered the meaning of “permission” in the context of the subsection.  The facts were that the defendant’s son was driving his father’s car when he injured the claimant. The father’s insurers paid the claim and sought to recover it from the father pursuant to s. 151 (8).  The issue was whether the father (who was a dealer in second hand cars) had caused or permitted his son to drive the car and therefore whether s. 151(8)(b) was engaged.  It was held that permission is given for the purposes of the subsection even where it is based on a mistaken belief induced by a misrepresentation by the driver.  At [27], Pill Lj points out that the financial effect upon an insured person of the application of the provision may be extremely severe, underlining the need for insured people to be conscious of the requirements in this respect.  No question arose as to European law, but in any event, the facts were different from those in the present case because the father against whom recovery was made was not a victim of the accident.
49.	Despite the fact that one might have thought that the present factual situation is not a particularly unusual one, the only case directly in point to which I have been referred is a decision of an appellate court in the Isle of Man in the case of Kelly v. McClure, 24 October 2000, (Deemsters Kerruish and Tattersall).  In that case, the victim of an accident had caused or permitted the use of the vehicle in question.  The Isle of Man legislation had a provision in similar terms to s. 151 (8), and under its terms the Court permitted the insurers to recoup the compensation from the victim.  The Claimant says that the case was wrongly decided, but the Defendant insurer says that it was correct on this point.  There do not appear to have been any submissions made to the Court as to the applicability of the provision—in that regard, the Isle of Man is not within the EU, and none of the arguments on the various Motor Insurance Directives that have been central to this case were applicable.  The declarations made at the end of the judgment do however show how a disposition might be effected if the Defendant insurer is correct in its contention that a recovery under s. 151(8) RTA 1988 is consistent with its liability to meet any judgment that may be obtained by the Claimant against the First Defendant under the earlier subsections.
Discussion
50.	It is common ground in this case that the insurer must meet the judgment that the Claimant passenger has obtained against the First Defendant driver.  The issue is whether that obligation is satisfied in circumstances in which the insurer proposes to exercise its statutory right to recover the proceeds.  If it is, there will be no compensation from the MIB, since its liability is to meet an unsatisfied judgment.  There is, as was pointed out, a difference between an obligation to satisfy a judgment, and a right to recover the amount thereby paid out.  But in this case, both arise within the statutory provision that was the means by which the UK implemented the Second Motor Insurance Directive.  Article 2 of that Directive avoided certain exclusions from liability which insurers would otherwise be contractually free to impose.  The heart of the argument as it has been advanced in this case is whether the effect of the insurer’s proposed exercise of its right of recovery will transgress that provision.  The Claimant says that it will because a new and uncompensated class would be created.  The insurer says that it will not.  If it will, the question is then what is to be done about it.  Can the statutory provision in question be interpreted in such a way as to comply with the Directive?  Or must the Claimant look to a remedy against the UK Government for wrongful implementation of the Directive?  The background to the determination of these issues is the long standing policy that victims of road accidents should receive compensation irrespective of whether the driver was insured. 
51.	I have found none of the points at issue at all easy, and discussed with the parties whether it would be appropriate at this stage to refer questions to the ECJ.  This was done recently in a similar context by the County Court in McCall v. Poulton (a decision upheld by the Court of Appeal at [2008] EWCA Civ 1313).  It is fair to say that Mr Grime QC for the Claimant was more enthusiastic than the Defendant insurer (though he did not argue for a reference).  Since this court is not a court of last resort I have a discretion, and I think that Mr Randolph QC for the insurer was right to say that the issues will be more clearly identified at the appellate stage should the case go that far (there was some complaint on the Defendant insurer’s part as to the lateness of the Claimant’s supplementary submissions which were served just before the hearing).  For that reason, I do not think that it would be right to order a reference at this point.  I will consider the issues under two broad headings.
(1) Insurer’s exercise of the right of recovery
52.	Central to the Defendant insurer’s case is the proposition that it does not seek to avoid its liability to meet the judgment obtained by the Claimant against the First Defendant pursuant to its obligations under ss. 151 (2) and 151 (5) of the 1988 Act.  On the contrary, it accepts that obligation but seeks to recover the amount of the judgment from a person insured by the policy as it is permitted to do by s. 151 (8).  The fact that the payment under s. 151 (5) and the recovery under s. 151 (8) are from the same person is, it submits, irrelevant to the principle.  Its case is that whilst the purpose of the Second Directive is to ensure that the innocent victims of road accidents receive compensation irrespective of whether the tortfeasor is insured (see paragraph 32 of its Preliminary Skeleton Argument dated 2 October 2008), there is nothing in the Second Directive which precludes Member States from enacting legislation which permits insurers who have to meet judgments against uninsured drivers from seeking recovery of their outlay from the persons insured under the policy if they have caused or permitted the uninsured driving.
53.	Clearly, on this basis the Claimant will not receive the amount of the judgment.  But as it was put by the insurer in oral argument, the judgment is satisfied “in the nanosecond before recovery”.  How this might be accomplished in practice appears from the Isle of Man case of Kelly v. McClure which I have referred to above, in which the Court declared so far as relevant (1) that the insurer was liable to satisfy the claimant’s judgment against the driver, and (2) that the insurer was entitled to recover from the claimant any sum which it was thereby liable to pay to him.
54.	I begin by accepting the point made by Mr Worthington QC that there is a conceptual difference between (1) an injured person’s right to compensation from the insurer, which is a benefit of the insured, and (2) the insurer’s right of recovery from either the tortfeasor or persons insured under the policy, which is a right of the insurer.  But the question as I see it in the present case does not arise in this general way. It is a very specific one that arises in the context of the aim of the Directives, and in particular the Claimant’s argument as to the meaning of Article 2 of the Second Directive.  As to the aim of the Directives, as Bernáldez and subsequent authority holds, this is, first, to ensure the free movement of vehicles normally based on Community territory and of persons travelling in those vehicles and, second, to guarantee that the victims of accidents caused by those vehicles receive comparable treatment irrespective of where in the Community the accident occurred.  It is also to be noted that the Court in Candolin at paragraph 27 refers to Article 3(1) of the First Directive, Article 2(1) of the Second Directive and Art. 1 of the Third Directive “whose aim is to ensure that compulsory motor vehicle insurance allows all passengers who are victims of an accident caused by a motor vehicle to be compensated for the injury or loss they have suffered”.  Mr Randolph points out that this has to be read in the light of the reference to Article 1 of the Third Directive, and the argument being advanced in Candolin as set out in paragraph 25 or the judgment, but I do not think that the principle is contentious.  (Article 1 of the Third Directive (90/232/EEC) states that, “Without prejudice to the second subparagraph of Article 2 (1) of Directive 84/5/EEC, the insurance referred to in Article 3 (1) of Directive 72/166/EEC shall cover liability for personal injuries to all passengers, other than the driver, arising out of the use of a vehicle.”)
55.	I have set out Article 2 in paragraph 10 above.  So far as material, it provides that each Member State shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article 3 (1) of the First Directive which excludes from insurance the use or driving of vehicles by persons who do not have express or implied authorisation shall, for the purposes of Article 3 (1), be deemed to be void in respect of claims by third parties who have been victims of an accident.  (Article 3(1) of the First Directive is set out in paragraph 8 above.)
56.	In its argument, the Defendant insurer put forward a number of reasons why the non-compatibility claim (based as it is on Article 2) should fail.  The first is that there was no exclusion from insurance of a person who did not have “express or implied authorization”, since the Claimant did in fact authorise the First Defendant to drive.  As regards what is meant by authorisation in this context, the Claimant submits and (I do not think it is disputed) that there may be two answers, either (a) authorisation for the physical use of the vehicle regardless of any question of insurance, which on the agreed facts must be assumed to have happened in this case, or (b) authorisation of the insurer to use or drive the vehicle under the cover of the policy, which did not happen.
57.	In further written submissions, the Claimant argues that the second answer is correct for three reasons:
(a)	The Article is directed to statute or policy provisions which affect the cover provided by the insurance and, certainly in relation to a policy, the only person who may give or withhold authorisation to a person or class of persons to drive or use and be covered by the policy is the insurer.  The giving or withholding of physical authorisation to use or drive by a vehicle owner or a person having control over a vehicle cannot exclude or include the user or driver under cover of the policy.  The policy cover is dependent on the insurer.
(b)	Second, the use of the word “thereto” – unless it is to be regarded as a surplusage – must refer back to some preceding part of the Article and the only candidate is the insurance of the vehicle so that this word makes clear that it is authorisation by or for the insurer.
(c)	Third, if the insurer’s interpretation was right, the Directive would be aiming for a very odd result.  This would be that compulsory cover would exist where a person was covered by a policy but did not have authorisation for physical use (which would be either theft of the vehicle or a near equivalent) but there would be no compulsory cover where the person was not covered by the policy but did have authorization for physical use.
Reference is also made as to how the intended effect of the Article was understood by the UK Government.
58.	The Defendant insurer answers these contentions as follows.  First, it is said that the Claimant’s thesis does not fit with the concept of “implied” authorisation.  This can only be concerned (it is submitted) with a factual situation.  Second, it ignores the effect of recital seven to the effect that “is in the interest of victims that the effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident”.  This it is argued puts the relationship between the insurer and the insured on one side for these purposes.  Third, as a matter of construction, the word “thereto” does not refer back to “insurance”, but to “driving”.  
59.	Despite the force of the insurer’s submissions in this respect, I consider that on balance the Claimant’s construction of the provision is preferable for the first reason he gives.  In short, authorisation in the first indent means (in my view) authorisation for insurance purposes, and in the present case the First Defendant did not have express or implied authorisation in that respect.  As the Claimant points out, the provision is concerned with cover, and the only person who may give or withhold authorisation to a person or class of persons to drive or use the car and be covered by the policy is the insurer.  I do not consider that recital seven negates this construction because it has to do with the effects of exclusion clauses rather than the specific situation envisaged in the first indent.  The word “thereto” could be read either way, in my view, and is not conclusive.  So I consider the Claimant to be correct in his submission that this case is within the first indent of Article 2, but that is not the end of the matter.
60.	The insurer’s alternative submission is that s. 151 (8) is not a statutory provision which “excludes from insurance” the use or driving of vehicles by persons who do not have authorisation within the meaning of Article 2(1).  It is convenient to answer that question after expressing my view as to the insurer’s submissions on whether it fulfils its obligation to indemnify the Claimant in respect of his judgment against the First Defendant in circumstances in which it simultaneously exercises its right to recovery under s. 151(8).
61.	As mentioned, I accept the distinction drawn by the Defendant insurer between an injured person’s right to compensation and an insurer’s right of recovery.  But in the present case, that distinction has to be viewed against the insurer’s admitted obligation to satisfy the judgment against the First Defendant pursuant to ss. 151(2) and (5) Road Traffic Act 1988, which form part of the provisions by which the UK implemented the Second Motor Insurance Directive.   By s. 151(5), notwithstanding that the insurer may be entitled to cancel the policy, he must pay to a person entitled to the benefit of a judgment as regards liability for bodily injury any sum payable under the judgment in respect of the liability.  In agreement with the Claimant’s submissions in this respect, the reality of the Defendant insurer’s case is not (as it submits) that the Claimant would be paid the sum due under the judgment albeit for a nanosecond, but that the Claimant would lose his right to payment altogether.  The s. 151(5) obligation to make a payment satisfying a judgment should in my opinion be applied in a substantive and not just a formal sense.  The position in this respect is in my view as stated by the European Court in Candolin (paragraph 28), namely that national provisions which govern compensation for road accidents cannot deprive those provisions of their effectiveness.  I consider that the Defendant insurer’s argument is incompatible with the passage in Candolin noted above (paragraph 27) which says that the aim of the Directives is to ensure that compulsory motor vehicle insurance allows all passengers who are victims of an accident caused by a motor vehicle to be compensated for the injury or loss they have suffered.  The satisfaction of a judgment followed by immediate recoupment of the proceeds, or a claim defeated on the basis of circuitry of action, does not appear to me to achieve that end.
62.	On that basis, I consider that the passages in the judgment of the ECJ in Bernáldez to the effect that it is possible for an insurer to recover from the insured in certain cases do not assist the insurer in this case. That case involved damage to property rather than (as in the present case) personal injuries, and the decision was in the context of recovery by insurers against a policy holder and not against the victim of an accident.  In terms of analysis, the present case appears to me to be closer to Candolin where the objection to the effect of contributory negligence under the applicable national rules was that it denied the passenger the right to be compensated (judgment paragraph 29).  In my view, that would be the effect of s. 151(8) if it applies in this case as contended by the Defendant insurer.  It is further to be noted that one of the questions referred to the Court in Candolin was:
Does Community law preclude the right of a car owner who is a passenger in the car to compensation for personal injury payable from compulsory motor vehicle insurance from being assessed more severely than that of other passengers on the ground that he permitted an intoxicated person to drive his car?
It was held that the fact that the injured passenger was also the owner of the vehicle was not relevant (I have set out the relevant passages from the judgment above).  Clearly there are similarities between that case and the present case.  As mentioned above, it is unclear from the report of the case whether the owner was also the policyholder, but the reasoning of the Court gives no reason to suppose that the result would have been different.
63.	For that reason, I also reject the Defendant insurer’s submission that (on its interpretation of the effect of the subsection), s. 151(8) is not a statutory provision which “excludes from insurance” as those words are used in Art. 2 of the Second Directive.  If the insurer’s interpretation of the subsection is correct, I consider that the Claimant is right to submit that it impermissibly creates an excluded class of victim, being persons who are insured (in this case as a named driver) and who cause or permit the use of the vehicle by somebody else.  I accept the submission that this is impermissible in terms of Art. 2 of the Second Directive.  This approach appears to be consistent with the view of the majority in White v White, ibid.  Referring to the general rule that victims of accidents should have the benefit of protection whether or not the vehicle which caused the damage was insured,  Lord Nicholls said at [14] that the “Court of Justice has stressed repeatedly that exceptions are to be construed strictly”.  On the facts of this case there are plainly significant issues of contributory negligence, but it is not in my view compatible with the Directives to deny compensation altogether.
(2) The scope of interpretation
64.	Given that conclusion, the question is whether s. 151(8) can be interpreted consistently with the Directives, as the Claimant submits, or whether the Claimant must be left to his Francovich remedy as the Defendant insurer submits.  As regard interpretation, there is no dispute as to the applicable principles.  In relation to enactments relied on as bringing into force directives or to enactments already existing relied on as fulfilling a Member State’s obligation in that respect, paragraph 8 of the judgment of the ECJ in Marleasing states that: 
“. . . . the Member States’ obligation arising from a directive to achieve the result envisaged by the directive and their duty under Article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty.”
As Lord Oliver said in Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546, 559, a purposive construction will be applied to the legislation even though, perhaps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use.  In this regard, “the national court goes much further in interpreting the enactment than it could conceivably go by the ordinary rules of interpretation” (McCall v. Poulton [2008] EWCA Civ 1313 at [28] per Waller LJ).
65.	Nevertheless, the Defendant insurer submits, and I accept, that this exercise is not an untrammelled one. It does not require national courts to impose an artificial or strained interpretation of national law.  The court remains engaged in an exercise in interpretation, not rewriting.  As Advocate General Sharpston said in her Opinion in Case C -432/05: Unibet [2007] ECR I-02271 at paragraph 55:
“In that case [Marleasing] the Court ruled that, in applying national law, ‘the national court called upon to interpret it is required to do so, as far as possible, in the light of wording and the purpose of the’ Community legislation. That caveat is in my view critical. The Court does not require national courts to impose an artificial or strained interpretation of national law. As the Court stated in Murphy, the duty applies ‘within the limits of [the national court’s] discretion under national law’. It is clear that the Court envisages that in some circumstances it may not be possible to achieve by way of interpretation the result prescribed by the applicable Community law.”
66.	With those principles in mind, I come to consider the parties’ respective submissions.  The Claimant’s first point is that the reference in s. 151 (8) to recovery from “any person who…is insured by the policy” should be construed narrowly so that it means “policyholder”.  It is to be noted that the rationale for this suggestion is not a principled one, because the policyholder equally may be an injured passenger, though not in the instant case.  It is based on the proposition that at the moment of the accident, there was no insurance of the Claimant in any effective way, since he was not the driver, and consequently there was no effective liability against which he required to be indemnified.  Mr. Grime QC accepts that such a construction could not follow from a conventional interpretation of the words of the statute, but submits that it is permissible in the circumstances.  For the reasons advanced by the insurer, I consider such a construction to be misconceived.  The obligation to insure a vehicle is expressed by reference to its use in s. 143 RTA 1988, and the prohibition is against using the vehicle uninsured, or causing or permitting any other person to do so.  The question whether someone is or is not insured does not depend on whether the person concerned is the driver (Elliott v. Grey [1960] 1 QB 1, Cobb v. Williams [1973] RTR 113). The Claimant’s construction confuses the existence of insurance with the right of indemnity.  In my view, it is no more available as a construction of s. 151(8) RTA 1988 under the Marleasing principle than it would be under purely domestic principles of statutory construction.  
67.	The Claimant’s second point is much more substantial.  He submits that wording should be implied into the first part of s. 151 (8) so that the statutory entitlement to recover the amount in question from any person who is insured by the policy should include the following proviso, “not being a person entitled to the benefit of a judgment to which this section refers”.  These words refer back to the language of s. 151(5).  This, he submits, would prevent the removal from the right of compensation persons who are victims and who are entitled to be compensated under the preceding subsections of s.151.  It is correct as the insurer pointed out that paragraph 47 of the Claimant’s supplementary submissions of 14 May 2009 invites the court to treat the words “recover from any person who is insured by the policy” as meaning any person “other than a victim”.  I do not think that there is much of a difference however.  The Defendant insurer’s main point is that there is no reason why a victim should be immune from consequences of his own actions.  If Parliament had wanted to differentiate between victims and others, it could have done so.  The addition of the words as suggested would, it is submitted, negate the purpose of the subsection.  The whole purpose was to catch a group of people who had caused or permitted the use of the vehicle, and this would include victims.  In summary, the interpretation approach could not do what was suggested without completely defeating the purpose of the provision.  
68.	I agree with the insurer’s submission that a victim should not be immune from consequences of his own actions, but consider that in the light of the Directives, and their interpretation by the Court of Justice, this is a proper function of the principles of contributory negligence, and not the statutory right of recovery.  For the reasons given above, I consider that the insurer’s contention in the present case results in the Claimant victim being entirely uncompensated for his injuries, which is not a permissible outcome under the Directives.  I do not accept that this defeats the purpose of the statutory provision, and note that the result in the Lloyd-Wolper case, for example, would be unaffected.  I would broadly accept the Claimant’s submission that the words “recover from any person who is insured by the policy” in s. 151(8) should be interpreted as meaning a person “not being a person entitled to the benefit of a judgment to which this section refers”.  But I do not think it necessary to imply specific wording into s. 151(8), and would prefer not to do so.  In my judgment, the position can be stated simply.  Applying the Marleasing principle, and as a matter of the interpretation of the provisions of s. 151 Road Traffic Act 1988 as a whole, the insurer’s right of recovery under s. 151(8) cannot be applied in such a way as to negate the insurer’s obligation under s. 151(5) to pay to someone entitled to the benefit of a judgment the sum payable under that judgment. In saying that, I recognise that factual situations will vary.  It will be appreciated that I am concerned (and only concerned) with the application of the principles to the particular facts of this case.  On these facts, the obligation would in my opinion be negated.
Conclusion
69.	The Defendant insurer’s contention on the preliminary issue is that while it accepts that it must indemnify the First Defendant in respect of the Claimant’s claim, it has the right to recover such amount from the Claimant pursuant to s. 151(8) Road Traffic Act 1988.  In my view, applying the above principles, on a true interpretation of s. 151(8), the Defendant insurer is not entitled to recover such amount in this way.  I would determine the preliminary issues as follows:
(a)	The Second Defendant must indemnify the First Defendant in respect of the Claimant’s claim; and
(b)	The Second Defendant does not have the right to recover such amount from the Claimant pursuant to section 151(8) Road Traffic Act 1988.
I am most grateful to the parties for their assistance, and will hear counsel as to any consequential orders.