Aileen McHarg: Axa General Insurance Ltd. v. The Lord Advocate

The Inner House of the Court of Session has handed down its much-anticipated judgment in  Axa General Insurance Ltd. v. The Lord Advocate [2011] CSIH 31.  Probably the most important decision on the validity of devolved legislation to date, it concerns whether Acts of the Scottish Parliament (ASPs) are subject to review on common law grounds in addition to the specific grounds set out in the Scotland Act, and resolves a conflict of authority in the Outer House on this point.  The case was brought by four insurance companies in respect of the Damages (Asbestos-Related) (Scotland) Act 2009, which provides that pleural plaques and certain other asbestos-related conditions constitute non-negligible personal injury which is actionable under Scots Law.  The Act was passed in response to the House of Lords’ decision in the English case of  Rothwell v. Chemical Insulating Co. Ltd. [2008] 1 AC 281, which held that damages were not recoverable, since although evidence of exposure to asbestos, pleural plaques do not in themselves produce any harmful symptoms nor do they contribute to the development of other, harmful, asbestos-related conditions.  As well as claiming a breach of Article 1 Protocol 1 (A1P1) of the European Convention on Human Rights (ECHR) (a challenge based on Article 6 was not renewed on appeal), the insurance companies argued that, in reversing Rothwell, the Damages Act was irrational at common law.  The Inner House unanimously agreed with the Lord Ordinary (Lord Emslie) that the Act was not invalid on either ground.  However, they took a different view on the availability of common law grounds in principle.  The case also makes important rulings in relation to title and interest to bring, and more unusually to defend, challenges to ASPs.

Title and Interest

The respondents argued that the petitioners were not ‘victims’ in respect of the A1P1 challenge, nor did they have sufficient title and interest in respect of the common law challenge.  The Inner House rejected both contentions.  On the former point, since the insurance companies were in practice the ones who would bear the costs of actions based on the 2009 Act, they were sufficiently directly affected by it to be classed as ‘victims’ under Art 34 ECHR.  On the latter, the court considered that a broad approach to questions of title is appropriate in matters of public law.  In passing legislation, the Scottish Parliament has a duty to members of the public to act in conformity with the law.  Hence, following Wilson v IBA 1979 SC 351, individual members of the public who are adversely affected by legislation are entitled to challenge it, provided that they can qualify interest to do so.

On the other hand, the Inner House upheld the petitioners’ objection to the decision to allow eight individual sufferers from pleural plaques to enter the process as respondents, on the basis that being a beneficiary of legislation does not confer title and interest to defend it against a challenge to its validity.  Rather, the appropriate contradictor is the promulgator of the legislation or their representative, in this case the Lord Advocate, and other interested parties should enter the process as interveners.

Article 1, Protocol 1

The Inner House accepted that the petitioners’ property rights, in the form of their capital assets, were engaged by the legislation, although they rejected the claim that the ‘immunity’ from suit conferred on them by Rothwell itself counted as an asset.  They also accepted, unlike Lord Emslie, that there had been an ‘interference’ with the petitioners’ property in terms of A1P1.  However, they had no difficulty in finding that the interference was justified.  The petitioners argued that, in granting damages to the ‘worried well’, the legislation served no legitimate public interest, and that placing the costs of such a policy on insurance companies imposed a disproportionate burden on them.  Not surprisingly, the court rejected both arguments.  The Scottish Government and Parliament were entitled to take the view that the Rothwell decision amounted to a social injustice, and that the anxiety caused by confirmation of exposure to asbestos was a matter worthy of monetary compensation.  Moreover, the decision to place liability on employers and their insurers rather than, for example, setting up a public compensation fund was not disproportionate.  Insurers take the risk that the law might develop in ways adverse to their interests, and A1P1 does not always require that compensation be paid in order to justify interference with property rights, especially in cases where the state is concerned to rectify what it sees as a social injustice as between categories of its citizens.

Common Law Grounds

In Adams v. The Scottish Ministers 2003 SLT 366, Lord Nimmo Smith held that ASPs were a form of legislation which was sui generis, but which had more in common with primary than secondary legislation, and hence could be challenged only on the grounds set out in the Scotland Act.  In Axa, at first instance, Lord Emslie disagreed.  Although accepting Lord Nimmo Smith’s characterisation of ASPs, he took the view that all statutory bodies were subject to control by the courts at common law, unless there was something in the governing statute to exclude review, which was not the case here.  ASPs could therefore be challenged on the full range of common law grounds, including irrationality, albeit the intensity of review would be limited.  Drawing an analogy with cases involving subordinate legislation which had been subject to Parliamentary approval, irrationality challenges would not be available ‘short of the extremes of bad faith, improper motive or manifest absurdity,’ which standard was not met in this case.

The Inner House in Axa steered a middle course between these two positions.  While the judges agreed that ASPs are essentially in the nature of primary legislation, much more proximate to Acts passed at Westminster than to subordinate legislation, even that subject to Parliamentary approval, there is nothing in the Scotland Act which gives ASPs the status of Acts of the UK Parliament.  The recognition that ASPs are sui generis thus called for a new approach to their review.  The traditional grounds of common law review are not, without modification, apt for them.  While, illegality review is available, in terms of breach of the limits on legislative competence set out in the Scotland Act, ASPs are not apt for review for procedural irregularity, nor for irrationality, even in its extreme sense.  But this does not mean that the Court of Session could never strike down ASPs on common law grounds.  In particular, if a case were made out on grounds of ‘bad faith’ or ‘improper motive’, which are not truly aspects of irrationality, the court might well hold itself entitled to intervene.  Similarly if the Scottish Parliament were to take an exceptional measure of the kind contemplated by Lord Steyn in R (Jackson) v. Attorney General [2006] 1 AC 262 it might be challengeable at common law.

Again, however, no such exceptional case was made out here.  Indeed, the court went out of its way to emphasise that, even if an irrationality challenge had been available, it would have failed.  Although, they said, the House of Lords’ reasoning in Rothwell might in retrospect seem compelling, it was not inconceivable that the decision might have gone the other way.  Indeed, for a significant period prior to the decision, insurers had de facto accepted liability for pleural plaques, and this was something that the Scottish Parliament was entitled to take into account as a matter of political judgment.

Conclusion

On the substantive validity of the Damages Act, the Inner House is surely correct.  The insurance companies have declared their intention to appeal, in the apparent belief that their arguments will be viewed more sympathetically by the Supreme Court than by the Scottish courts. (See the discussion here.) However, this seems unlikely, as to strike down the Act would be tantamount to saying that legislation is not permitted to alter the common law of negligence.  On the issue of principle, the Inner House’s approach is interesting.  While the decision is welcome to those of us who have argued that the Scottish Parliament is not just another statutory body, and that ASPs are properly to be regarded as primary legislation,* it provides further evidence that primary legislation is not per se immune from judicial review.  Notwithstanding the court’s claim to be adopting an approach tailored to the sui generis nature of ASPs, it appears to have been strongly influenced by the developing theory of common law constitutionalism, and in particular the House of Lords’ decision in Jackson, which is quoted from at length.  The decision rejects, for instance, the relevance of arguments based on the reviewability of Acts of the pre-Union Parliament of Scotland or of colonial legislatures.

Given the doctrinal and theoretical importance of this issue, the prospect of an appeal to the Supreme Court is probably a good thing.  Nevertheless, it will mean further delay in meeting claims from pleural plaques sufferers, some of whom may die in the meantime.  This underlines the real objection to loose judicial talk in cases such as Axa and Jackson about the possibility of striking down legislation in extreme cases.  The danger is not so much that an extreme case will ever materialise (although, as Mullen has argued, there is always a risk, once the possibility of review is admitted, that the threshold for intervention will be lowered in future).  Rather, leaving the door to the courts open just a chink encourages speculative challenges which give the powerful another route by which to promote their political interests.  Sometimes delaying implementation, or even frightening off the opposition, might be as good as a substantive victory.  In other words, judicial sabre-rattling may change the way the political game is played, even if battle is never actually joined.

*   See, e.g., A McHarg ‘What is Delegated Legislation?’ [2006] PL 539; T Mullen ‘The Axa Insurance Case: Challenging Acts of the Scottish Parliament for Irrationality’ 2010 SLT 39; A Page ‘The Scottish Parliament, Pleural Plaques and the Court’ 2010 JR 139.

Aileen McHarg is a Senior Lecturer in Law at the University of Glasgow.

3 Comments

Filed under Devolution, Human rights, Scotland

3 responses to “Aileen McHarg: Axa General Insurance Ltd. v. The Lord Advocate

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  3. Pingback: Devolution in the courts: the UK Supreme Court considers the ‘pleural plaques’ legislation « Devolution Matters

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