POOLE & OTHERS v HM TREASURY
Last Updated: 12:01am GMT 01/11/2007

Court of Appeal (Civil Division)
Buxton, Jacob and Moore-Bick LJJ
October 24, 2007

EC law - Failure to fulfil obligations - Freedom of establishment - Lloyd's - Lloyd's Names - Loss - Regulation - Claim for failure to transpose requirements of directive into national law - Grant of rights to individual claimants - Grant of rights - Transposing directive - Implementation - Directive 73/239 on the Business of Direct Insurance other than Life Assurance 1973

FACTS

The appellant Lloyd's Names (P) appealed against a decision ([2006] EWHC 2731 (Comm), [2007] 1 All ER (Comm) 255) that they could not bring a claim against the United Kingdom government on the basis of an alleged failure to transpose the requirements of Directive 73/239 into national law. P had suffered losses in the course of underwriting at Lloyd's. Their complaint, which had been pursued in other proceedings both against their agents and the persons who introduced them to the Lloyd's market, and against Lloyd's itself, was that the market had been inadequately regulated, thus leading to the acceptance of risks that under a proper system of regulation would not have arisen, or which would have been identified in advance. In the instant proceedings P claimed that the UK government had wrongly failed to transpose into UK law Directive 73/239 on the coordination of national provisions on the taking up and pursuit of the business of direct insurance. P's case was that had that Community law duty been properly discharged the market would have been properly regulated and P's losses would not have occurred, or would have been less in extent. The judge held that the directive did not grant any rights to those in P's position so that no claim by them could be based on the alleged failure to transpose it properly. P submitted that (1) the requisite grant of rights under the directive could be established if they could show that some right, not necessarily the right in respect of which the proceedings were brought, would have been granted to persons in their position under domestic law if the directive had been implemented; (2) in any event implementation of the directive had been intended to confer on P the right that they asserted against the government.

ISSUE

(i) Whether the requisite grant of rights under the directive could be established if they could show that some right, not necessarily the right in respect of which the proceedings were brought, would have been granted to persons in their position under domestic law if the directive had been implemented.

(ii) Whether in any event implementation of the directive had been intended to confer on P the right that they asserted against the government.

HELD (appeal dismissed)

(i) The obligation of the Member State was to take measures to achieve the result prescribed by a directive, Francovich v Italy (C6/90) [1991] ECR I-5357 applied. The conditions for the imposition of Francovich liability were that the result required by the directive should entail the grant of rights to individuals; that it should be possible to identify the content of those rights on the basis of the provisions of the directive; and the existence of a causal link between the breach of the state's obligation and the loss and damage suffered by the injured parties. The first condition was stated in terms that, read out of context, could support P's argument that any right was sufficient, even though not the right on which the claim was based. However, the second and third conditions showed that argument to be misconceived. The second condition required the content of the rights to be specified, and that was necessary in order to determine whether the claimant had suffered a relevant loss under the third condition. Further, if one group of persons was accorded the right to sue in the national court in order to support the objectives of a directive, it was very unlikely that a different group of persons needed to be given such a right as well: on the assumption that insureds had been given rights under the directive in relation to the regulation of the insurance market it was not necessary for insurers such as P to be given such rights as well; and if it was not necessary for insureds to be given rights by the directive, it followed a fortiori that it was not necessary for insurers.

(ii) A single majority judgment in Rutherford might have given clearer and more manageable guidance for tribunals, and where possible there should be a judgment or judgments at the appellate level which made it clear precisely what an appeal decided.

J McNeill QC and M Ford (instructed by Simpson Millar) for the appellant. C Jeans QC and A Short (instructed by in-house solicitor) for the respondent.

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