Right to peaceful enjoyment of possessions - Property - Devolution issues - Scotland

AXA General Insurance Ltd and others v Lord Advocate and others (Scotland): SC (Justices of the Supreme Court - Lords Hope (deputy president), Brown, Mance, Kerr, Clarke, Dyson, Reed): 12 October 2011

The appellants were insurance companies whose business included the writing of employers’ liability insurance policies. They undertook to indemnify the employer in respect of liability incurred by it for harm or injury arising out of the employer’s negligence.

In Rothwell v Chemical & Insulating Co Ltd [2007] All ER (D) 224 (Oct), the House of Lords had held on the basis that pleural plaques caused no symptoms and did not increase susceptibility to other asbestos-related diseases or shorten life expectancy, that they did not constitute an injury which was capable of giving rise to a claim for damages.

That decision was followed in Scotland as there was no material difference between the law of England and Wales and Scots law on that issue. In 2009, the Scottish parliament passed the Damages (Asbestos-related Conditions) (Scotland) Act 2009 (the 2009 act), which provided that asymptomatic pleural plaques, pleural thickening and asbestosis would constitute, and should be treated as always having constituted, actionable harm for the purposes of an action for damages in respect of personal injury. The appellants challenged the lawfulness of that act, on the basis that reversing Rothwell would expose them to claims under their indemnity insurance policies amounting to millions of pounds annually and perhaps several billions of pounds in total. Accordingly, they sought a declaration that the 2009 act was unlawful.

The first respondent was the lord advocate representing the Scottish ministers. The second respondent, the advocate general for Scotland, represented the UK government. The third to 10th respondents were individuals who had been diagnosed with pleural plaques caused by negligent exposure to asbestos. They each intended to raise actions for damages seeking reparation for the loss, injury and damage which they claimed to have sustained as a result of their employers’ negligence. They claimed that they would be financially disadvantaged if the attack on the 2009 act was successful.

The lord ordinary held, inter alia, that the appellants had failed in their various challenges to the 2009 act and that their petition had to be dismissed ([2010] CSOH 2). The appellants reclaimed. The First Division allowed the reclaiming motion to the extent of repelling the answers for the third to 10th respondents on the ground that they did not have a title and interest to be convened as respondents, but quoad ultra refused the reclaiming motion ([2011] CSIH 31). The appellants appealed to the Supreme Court, and the third to 10th respondents cross-appealed. The attorney general for Northern Ireland, the Northern Ireland Department of Finance and Personnel, the first minister of Wales and Friends of the Earth (Scotland) were given permission to intervene.

The appellants challenged the validity of the act on two bases. First, that it was incompatible with their rights under article 1 of the first protocol to the European Convention on Human Rights (the convention), and therefore was outside the legislative competence of the Scottish parliament under the Scotland Act 1998. Accordingly, it fell to be determined: (i) whether the appellants were victims for the purposes of article 34 of the convention; (ii) whether the 2009 act was an interference with their possessions which did not pursue a legitimate aim; and (iii) whether the means chosen were disproportionate.

Secondly, they submitted that the 2009 act was open to judicial review as an unreasonable, irrational and arbitrary exercise of the legislative authority of the Scottish parliament. The third to 10th respondents argued that they had been proper parties to the proceedings as they were members of a class affected by the 2009 act, within the ambit of rule 58.8(2) of the Rules of the Court of Session 1994, SI 1994/1443, which required that a person wishing to enter a process had to be directly affected by any issue raised. The appeal would be dismissed. The cross-appeal would be allowed.

(1) It was settled law that the fact that interference with property was not present or immediate but might not occur until some time in the future did not exclude the person from being a victim for the purposes of article 34 of the convention. A person’s financial resources were capable of being possessions within the meaning of article 1 of the first protocol to the convention (see [26] of the judgment).

The appellants had been entitled to bring the proceedings, as the effect of the 2009 act was that they would be victims for the purposes of article 34 of the convention if proceedings in respect of that act were to be brought in the European Court of Human Rights. That was so since the consequences of the 2009 act were not too remote or tenuous for them to be directly affected by them. Further, the amount of money that they would be required to pay to satisfy their obligations under the insurance policies was a possession for the purposes of article 1 of the first protocol to the convention. Accordingly, for the 2009 act to be compatible with the applicants’ convention right, the 2009 act had to be shown to be pursuing a legitimate aim and to be reasonably proportionate to that aim (see [27]-[28] of the judgment).

(2) Due to their direct knowledge of their society and its needs, the national authorities were in principle better placed than an international judge to appreciate what is ‘in the public interest’. Under the system of protection established by the convention, it was accordingly for the national authorities to make the initial assessment, both of the existence of a problem of public concern warranting measures of deprivation of property and of the remedial action to be taken.

The national authorities enjoyed a certain margin of appreciation. Further, the notion of ‘public interest’ was necessarily extensive. In particular, the decision to enact law expropriating property would commonly involve consideration of political, economic and social issues on which opinions within a democratic society might reasonably differ wildly (see [31] of the judgment).

In the instant case, the 2009 act had been passed in pursuance of a legitimate aim, in that the Scottish parliament had been entitled to regard the predicament of sufferers of pleural plaques as a social injustice, and its judgment that the diagnosis should be actionable could not be dismissed as unreasonable. The facts and policies underlying the Scottish parliament’s assessment that the provisions of the 2009 act had been necessary in the general interest were reasonably clear. A diagnosis of pleural plaques would cause a great deal of worry, and the condition was normally the result of a fault by an employer (see [33] and [125] of the judgment).

(3) In questioning whether the insurance industry represented by the appellants was being called upon to bear a disproportionate and excessive burden, there were two special features. The first was that claims which the 2009 act made possible would only succeed if it could be shown that the exposure to asbestos had been caused by the employer’s negligence. Its effect was restricted to new claims, and to claims that had been commenced but not yet determined. It preserved all the other defences that might be open on the law or the facts, other than the single question whether the pleural plaques were themselves actionable.

The second was that the business in which insurers were engaged, and in pursuance of which they had written the policies that would give rise to the obligation to indemnify, was a commercial venture which was inextricably associated with risk. As they were long-term policies, there had inevitably been a risk that circumstances unseen at the date when they had been written, might occur which would increase the burden of liability, as the example of the increasing knowledge of asbestos claims had illustrated.

Accordingly, the nature, number and value of claims had always been liable to develop in unpredictable ways. Accordingly, the fact that the 2009 act would increase the burden on insurers did not carry much weight. Pleural plaques had been regarded as actionable for about 20 years prior to Rothwell. Accordingly, the 2009 act could be seen as preserving the status quo. Notwithstanding its retroactive effects, the 2009 act struck a reasonable balance between the rights of insurers under the convention and the general interest in ensuring that persons suffering from pleural plaques and related conditions should continue to receive compensation (see [36]-[39], [129] and [134] of the judgment).

Accordingly, the interference with the appellants’ possessions by the 2009 act had pursued a legitimate aim by reasonably proportionate means. Consequently, the act had not been outside the legislative competence of the Scottish parliament (see [41] of the judgment).

(4) Since there was no provision in the Scotland Act 1998 which excluded the possibility of judicial review, it followed that acts of the Scottish parliament would be subject to judicial review by the Court of Session at common law, but not, however, on the grounds of irrationality, unreasonableness or arbitrariness. The guiding principle was by what grounds they might be subject to review was to be found in the rule of law. That was the ultimate controlling factor, and the courts had to insist that it was respected by legislation that the Scottish parliament had enacted. It would, however, be wrong for the judges to substitute their views as to what was rational or reasonable for the considered judgment of the democratically elected legislature (see [47], [51]–[52], [148] and [153] of the judgment).

(5) As to whether the third to 10th respondents were entitled to be parties, the test of ‘standing’, rather than the private law rule that title and interest had to be shown, was a more appropriate approach in judicial review proceedings (see [62], [171] of the judgment).

In the circumstances, the third to 10th respondents had standing as they were ‘directly affected’ by the appellants’ challenge to the 2009 act (see [63]–[64] and [175] of the judgment).

Richard Keen QC and Jane Munro (instructed by Brodies) for the appellants; Alan Dewar QC and James Mure QC (instructed by Scottish Government Legal Directorate Litigation Division) for the first respondent; Ruth Crawford QC and John MacGregor (instructed by Office of the Solicitor to the Advocate General for Scotland) for the second respondent; Aidan O’Neill QC and Chris Pirie (instructed by Thompsons Solicitors) for the third to 10th respondents; Theodore Huckle QC and Clive Lewis QC (instructed by Welsh Assembly Government Legal Services Department) for the First Minister of Wales; John Larkin QC and Donal Sayers BL (instructed by Solicitors for the Attorney General for Northern Ireland) for the Attorney General for Northern Ireland; Simon Collins (instructed by Patrick Campbell & Co Solicitors) for Friends of the Earth (Scotland) Ltd; Paul Maguire QC and Paul McLaughlin BL (instructed by Departmental Solicitor’s Office) for the Department of Finance and Personnel (Northern Ireland).