Four seasons v Brownlie: establishing jurisdiction on the basis of indirect damage.

Sometimes I post a little late. Rarely outrageously overdue. Yet Four Seasons Holdings Inc v Brownlie [2017] UKSC 80 needs to be reported on the blog for it is rather important, firstly, with respect to the topical interest in pursuing holding companies for actions (or lack fo them) committed by affiliated companies. And secondly, for jurisdiction in tort, to what degree jurisdiction on the basis of injury sustained abroad, can qualify as lasting damage in the UK. Findings on the latter issue were obiter therefore they need to be treated with caution.

All five judges issued a judgment, with a 3 to 2 majority eventually holding (again: obiter) that jurisdiction in tort in England against non-England based defendants, can go ahead on the basis of indirect damage – albeit in such cases it might still falter on forum non conveniens grounds.

Sumption J, outvoted on the indirect damage issue, wrote the most lengthy judgment.

I tweeted the ruling mid December. Students of international law will of course appreciate the personal background to the case, particularly if you have ever had the chance to be taught by prof Sir Ian Brownlie – Philippe Sands’ obituary is here.

Sir Ian died in a car ­accident while on holiday with his family in Egypt. His wife was also injured. She brought proceedings seeking: (i) damages for her own personal injuries, (ii) damages under the Law Reform (Miscellaneous Provisions) Act 1934 as Sir Ian’s executrix, and (iii) damages for her bereavement and loss of dependency under the Fatal Accidents Act 1976.

The First Defendant, Four Seasons Holdings Inc (“Holdings”), is the holding company of the Four Seasons hotel group. It is incorporated in British Columbia. The Second Defendant, Nova Park SAE (“Nova Park”) is an Egyptian company which was identified by Lady Brownlie’s solicitors as the owner of the hotel building. The case falls outside the Brussels I Recast Regulation therefore. However reference to Brussels and particularly of course to Rome II is made in the various judgments, for even though the English Courts do not decide jurisdiction on the basis of Brussels, they do have to apply Rome I or II if the suit qualifies as one in contract cq tort.

The Court of Appeal [[2015] EWCA Civ 665] had held that the jurisdictional gateways were not satisfied. There was no contract with Four Seasons Holdings, and given that Holdings was not the owner, there could be no claim in tort for vicarious liability.

David Hart QC has excellent (much more swift) analysis here and I am happy largely to refer. A few points of additional interest.

On the issue of suing holding companies, Sumption J writing at 14 ff dismisses service out of jurisdiction for there is no reasonable possibility of a claim succeeding: at 15:

‘there is no realistic prospect that Lady Brownlie will establish that she contracted with Holdings, or that Holdings will be held vicariously liable for the negligence of the driver of the excursion vehicle.’ That is because (at 14) it is entirely clear ‘that Holdings is a nontrading holding company. It neither owns nor operates the Cairo hotel, which has at all material times been owned by Nova Park, a company with no corporate relationship to any Four Seasons company. A Dutch subsidiary of Holdings called Four Seasons Cairo (Nile Plaza) BV entered into an agreement with Nova Park to operate the hotel on behalf of Nova Park, although at the material times the actual operator was an Egyptian subsidiary of Holdings, FS Cairo (Nile Plaza) LLC, which assumed the contractual obligations of the operator by assignment. Other subsidiaries of Holdings supplied advice and specific services such as sales, marketing, central reservations and procurement, and licensed the use by Nova Park of the Four Seasons Trade Mark’.

Judgment in Brownlie preceded the current cases referred to it on the subject of CSR and jurisdiction (see my previous postings on that, most recently Unilever). Yet it is clear that plaintiffs have to show much more than a corporate bloodline between mother companies and affiliated undertakings, for suits to have any chance of success.

The case could have ended here for all five judges agree on this point. Yet aware of the relevance of direction, discussion was continued obiter on the topic of suing in tort. Firstly it was clear that if a claim in tort could be brought in the English courts, it would be subject to Egyptian law per Article 4(1) Rome II. In the Court of Appeal, Arden LJ had taken analogy with that Article (and the whole Regulation)’s rejection of indirect damage as relevant for deciding lex causae. And of course Rome II’s stance on this point is influenced by the CJEU’s case-law going in the same direction, but then for jurisdiction, in Marinari and the like. Sumption J cites Canadian authority (Stephen Pittel has reference to it here) and is critical of too much emphasis put on a connection between jurisdiction and applicable law, for determining jurisdiction.

Big big pat on his back; readers of the blog know (see eg here) I am not at all enthused by too much analogy between jurisdiction and applicable law).

Sumption at 22

It is undoubtedly convenient for the country of the forum to correspond with that of the proper law. It is also true that both jurisdiction and choice of law can broadly be said to depend on how closely the dispute is connected with a particular country. But there is no necessary connection between the two. The Practice Direction contemplates a wide variety of connecting factors, of which the proper law is only one and that one is relevant only to contractual liabilities. For the purpose of identifying the proper law, “damage” is limited to direct damage because article 4 of Rome II says so in terms. It does this because there can be only one proper law, and the formulation of a common rule for all EU member states necessarily requires a more or less mechanical technique for identifying it. By comparison, indirect damage may be suffered in more than one country and jurisdiction in both English and EU law may subsist in more than one country.

Lady Hale is even more to the point at 49: ‘Applicable law and jurisdiction are two different matters. There is no necessary coincidence between the country with jurisdiction and the country whose law is applicable.

Yet for the case at hand ultimately Sumption J does curtail the relevance of indirect damage: at 23:

There is, however, a more fundamental reason for concluding that in the present context “damage” means direct damage. It concerns the nature of the duty broken in a personal injury action and the character of the damage recoverable for the breach. There is a fundamental difference between the damage done to an interest protected by the law, and facts which are merely evidence of the financial value of that damage. Except in limited and carefully circumscribed cases, the law of tort does not protect pecuniary interests as such. It is in general concerned with non-pecuniary interests, such as bodily integrity, physical property and reputation which are inherently entitled to its protection.

At 29 ff follows Sumption’s engagement with relevant CJEU authority, leading him eventually to reject indirect damage as a basis for jurisdiction. That same authority is also discussed by Lady Hale and more succinctly by the others, however they prefer to take the English law on this point in a different direction, particularly taking the CPR (the relevant English civil procedure rules) use of the word ‘damage’ at face value, meaning including indirect damage: residual English PIL therefore not determined by CJEU authority.

As noted in my introduction, even if jurisdiction can be established on the basis of indirect damage in England, forum non conveniens may still scupper jurisdiction eventually.

Geert.

 

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