Posts Tagged Indirect damage
IM Skaugen v MAN. Relevance and location of indirect damage in case of misrepresentation, and forum non conveniens in Singapore.
I shall be posting perhaps tomorrow on yesterday’s CJEU judgment in Löber v Barclays (prospectus liability – see my review of Bobek AG’s Opinion here), but as a warming-up for comparative purposes, a note on  SGHC 123 IM Skaugen v MAN. I have not been able to locate copy of the judgment (I am hoping one of my Singaporean followers might be able to send me one) so I am relying entirely on the excellent post by Adeline Chong – indeed in general I am happy largely to refer to Adeline’s post, she has complete analysis.
The case concerns fraudulent misrepresentation of the fuel consumption of an engine model sold and installed into ships owned by claimants (Volkswagen echo alert). Defendants are German and Norwegian incorporated companies: leave to serve out of jurisdiction needs to be granted. Interesting comparative issues are in particular jurisdiction when only indirect damage (specifically: increased fuel consumption and servicing costs with downstream owners who had purchased the ships from the first owners) occurs there; and the relevance of European lis alibi pendens rules for forum non conveniens purposes.
On the former, Singaporean CPR rules would seem to be prima facie clearer on damage not having to be direct for it to establish jurisdiction; a noted difference with EU law and one which also exercised the UK Supreme Court in Brownlie. Note the consideration of locus delicti and the use of lex fori for same (a good example in my view of the kind of difficulties that will arise if when the Hague Judgments project bears fruit).
On forum non conveniens, Spiliada was the main reference. Of interest here is firstly the consideration of transfer to the Singapore International Commercial Court (SICC); and the case-specific consideration of availability of forum: the Norwegian courts had been seized but not the German ones; Germany had been identified by the Singaporean High Court as locus delict: not Norway; yet under the Lugano Convention lis alibi pendens rule, the German courts are now no longer available.
Sometimes I post a little late. Rarely outrageously overdue. Yet Four Seasons Holdings Inc v Brownlie  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 [ 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.
Rome II: A manifestly closer connection overrides common habitual residence. The High Court in Marshall v MIB.
Marshall v MIB  EWHC 3421 (QB) involved a road traffic accident that occurred in France. On 19th August 2012 an uninsured Peugeot motor car registered in France driven by Ms Bivard, a French national, hit Mr Marshall and Mr Pickard, both British nationals, as they were standing behind a Ford Fiesta motor car and its trailer, while it was being attended to by a breakdown recovery truck on the side of a motorway in France. The Ford Fiesta motor car was registered in the UK and insured by Royal & Sun Alliance (“RSA”), and the recovery truck was registered in France and insured by Generali France Assurances (“Generali”). The Peugeot then collided with the trailer shunting it into the Ford Fiesta which in turn was shunted into the vehicle recovery truck. Mr Pickard suffered serious injuries. Mr Marshall died at the scene.
This case raises points about among others (1) the law applicable to an accident involving a number of persons and vehicles; and (2) the application of the French Loi Badinter to the facts of this case, if French law applies: The second main issue is if French law applies, whether the Ford Fiesta motor car and recovery truck are “involved” within the meaning of the Loi Badinter, which it is common ground is the applicable French statute. If those vehicles are “involved” it is common ground that RSA, as insurer of the Ford Fiesta, and Generali, as insurer of the recovery truck, are liable to Mrs Marshall, and that Generali, as insurer of the recovery truck, is liable to Mr Pickard.
Two actions were commenced. The first by Mrs Marshall (Mr Marshall’s widow) against the Motor Insurers’ Bureau (“the MIB”). Mrs Marshall relied on relevant English 2003 Regulations. The 2003 Regulations make the MIB liable in respect of liabilities of compensation bodies in other EEA states for losses caused by uninsured drivers. The relevant compensation body in France responsible for such losses is the Fonds de Garantie (“FdG”). The MIB denied liability, contending that the FdG would not be liable to Mrs Marshall because under the Loi Badinter Mr Pickard and RSA, as driver and insurer of the Ford Fiesta, and Generali, as insurers of the recovery truck, were liable. The second action was brought by Mr Pickard against the Motor Insurers’ Bureau relying on the 2003 Regulations. The MIB deny liability and contend that Generali, as insurers of the recovery truck, are liable to Mr Pickard.
The High Court was asked (1) what law applies per Article 4 Rome II, and (2) whether under the circumstances, Article 4(3) Rome II might have any relevance.
Save for Mrs Marshall’s claim for dependency which if English law applies is under the Fatal Accidents Act 1976 (“FAA 1976”), it is common ground that the direct damage occurred in France for all of the claims, including Mrs Marshall’s claim on behalf of Mr Marshall’s estate. In respect of the FAA 1976 claim, RSA (Mr Marshall’s insurers) submits that the direct damage occurred in the location where Mrs Marshall has suffered her loss of dependency, which is in England and Wales. Dingemans J resolves this issue of ricochet damage with reference to the AG’s Opinion in Lazar: the CJEU’s judgment in same was issued about a month after the High Court’s judgment in Marshall. The Advocate General, having regard to the relevant principles of consistency, foreseeability and certainty, in his opinion considered that “the damage occurs” for the purposes of a claim such as an FAA 1976 claim where the relevant death occurs. The AG noted that different EEA states took different approaches to the characterisation of a dependency claim. For example in both England and Italy it is considered that the damage for a loss of dependency occurs in the country where the dependant is situated, but that this is not a European wide approach. The opinion, Dingemans J notes, shows that the Advocate General was influenced by the need to avoid different Courts in different EEA states adopting different solutions to applicable law in fatal accident cases, which would lead to a diversity of approach in different jurisdictions.
The action between Mrs Marshall and Mr Pickard triggers Article 4(2) of the Rome II Regulation, identifying as applicable law the law of the country were both the ‘person’ claimed to be liable and the ‘person’ sustaining damage, are habitually resident at the time the damage occurs. Dingemans J rightly (at 17) dismisses the suggestion (made in scholarship) that the moment more than two ‘persons’ are involved, Article 4(2) becomes inoperable.
Turning then to Article 4(3), the escape clause of a ‘manifestly closer connection’. Dingemans J entertains the interesting proposition that Article 4(3) has to lead to a law different from the law which would be applicable per Article 4(1) or (2). This in particular would mean that once Article 4(2) is engaged, it cannot be undone by recourse to Article 4(3). Dingemans J insists that Article 4(3) must be employed generally, even if it leads to a resurrection of Article 4(1), and goes on to find French law to be applicable (at 19-20):
In my judgment this case provides an illustration of when French law is provided as the governing law under article 4(1), excluded (for part of the claims) under article 4(2), and then required again under article 4(3).
It is also common ground that article 4(3) imposes a “high hurdle” in the path of a party seeking to displace the law indicated by articles 4(1) or 4(2), and that it is necessary to show that the “centre of gravity” of the case is with the suggested applicable law. In this case there are a number of circumstances which, in my judgment, make it clear that the tort/delict is manifestly more closely connected with France than England and Wales. These are: first that both Mr Marshall and Mr Pickard were hit by the French car driven by Ms Bivard, a national of France, on a French motorway. Any claims made by Mr Marshall and Mr Pickard against Ms Bivard, her insurers (or the FdG as she had no insurers) are governed by the laws of France; secondly the collision by Ms Bivard with Mr Marshall and Mr Pickard was, as a matter of fact and regardless of issues of fault or applicable law, the cause of the accident, the injuries suffered by Mr Marshall and Mr Pickard and the subsequent collisions; and thirdly any claims that Mr Marshall and Mr Pickard have against Generali, as insurers of the vehicle recovery truck, are also governed by the laws of France.
This judgment to my knowledge, with Winrow v Hemphill is one of few discussing Article 4(3)’s escape clause in such detail. (The add-on being that in Marshall Article 4(3) was found as being able to override Article 4(2). A judgment which, like Winrow, does justice to both the exceptional nature of the provision, and the need to consider all relevant factors.
Ps very soon the Supreme Court will hear further argument on the application of the Rome II Regulation in Moreno v MIB.
European private international law, second ed. 2016, Chapter 4, Headings 4.5.1 and 4.5.2
Lazar v Allianz, Case C-350/14, was held on 10 December last. It addressed the issue of ‘ricochet’ damage in the Rome II Regulation on the law applicable to non-contractual obligations. Ricochet or ‘reflective’ or ‘indirect’ losses occur when someone suffers losses as a result of a tort directly causing damage to someone else.
The request has been made in a dispute between Mr Lazar, who resides in Romania, and the Italian insurance company Allianz SpA regarding compensation for material and non-material damage which Mr Lazar claims to have suffered in jure proprio by reason of the death of his daughter, a Romanian national who was resident in Italy, which occurred in Italy as a result of a road traffic accident caused by an unidentified vehicle. For Mr Lazar, it is more interesting for Italian law to be considered the lex causae.
The Opinion of Wahl AG neatly summarised the two opposing views: (at 40-41 of his Opinion):
According to the first view, (…) material and non-material damage suffered by the family members of a person who has died in another Member State does not necessarily constitute indirect consequences of the tort/delict for the purposes of Article 4(1) of the Rome II Regulation. It would follow in particular that, because it is based on an obligation that is distinct from the obligation as between the opposing party and the person who died in the accident, a claim for compensation in respect of material rights claimed by the close relatives of a person who has died as a result of a traffic accident which occurred in the State of the court seised must be assessed by reference to the law of the place in which the damage sustained by those relatives occurred, namely the place of their habitual residence, unless it can be demonstrated that, in accordance with Article 4(3) of the Rome II Regulation, it is clear from all the circumstances of the case that there are manifestly closer connections with another country.
According to the second view (…) the damage sustained, in their country of residence, by the close relatives of a person who has died in a road accident which occurred in the State of the court seised must be regarded as constituting indirect consequences of the damage suffered by the immediate victim of the accident. The term ‘country in which the damage occurs’ must be interpreted as referring to the place which caused the damage, which, in the main proceedings, is the place of the road accident.
He eventually opined in favour of the second view, taking inspiration ia from CJEU case-law on Article 7(2) of the Brussels I Recast (previously Article 5(3) Brussels I)- even though at 51 he cautioned against lifting interpretation from the jurisdictional Regulation for use in the applicable law Regulation. His main arguments were as follows:
(at 74) the interpretation whereby the general rule under which the expression ‘country in which the damage occurs’ in Article 4(1) of the Rome II Regulation extends to the place of the direct damage — in this case the place of the fatal collision — has the benefit of simplicity and objectivity where all the damage alleged actually originates from the same source.
(at 75) this is consistent with the foreseeability pursued by the drafting of the Rome II Regulation. In most cases, the person liable is able to anticipate the consequences in other countries of his conduct or of the conduct of persons for whom he is responsible. Similarly, the victim is generally informed of the legal context to which he was exposed or exposed his property. In other words, both the person liable and the victim were informed and took the necessary steps, in particular with regard to insurance, in connection with the applicable law in the country or countries in which damage might potentially occur.
(at 76) the general rule for determining the applicable law in the Rome II Regulation is characterised by neutrality. Taking the example of the material damage suffered by the survivors of a person who has died as a result of a traffic accident, it may be considered that the neutrality of the law would be jeopardised in so far as that damage is still located in the victim’s place of residence. (The AG notes that in other instances Rome II is not neutral: he refers in particular to Articles 6 (on acts of competition) and 7 (on environmental damage).
(at 77) such an interpretation is also consistent with the other idea underlying connecting factors in private international law, namely the idea of proximity, which is intended, as far as possible, to connect a situation to the law of the country with which it is most closely connected. Whilst the place of the accident is undeniably related to the other components of the liability, the domicile of the indirect victim is not necessarily so related.
(at 79) the Rome II Regulation introduces corrective mechanisms which make it possible, in several respects, to avoid the apparent rigidity of the rule of the place in which the damage occurs.
Conclusion (at 83) ‘The term ‘place in which the damage occurs’ must, further to the case-law on the Brussels Convention and the Brussels I Regulation, be understood as meaning the place of the occurrence of the event, in this case the road accident, which directly produced its harmful effects upon the person who is the immediate victim of that event.’
The Court itself, much more succinctly, agrees.
A singular event, therefore, leads to one applicable law, even if its ricochet effect causes damage elsewhere. That such damage is actionable separately (for it may create multiple obligations in tort) or even iure proprio does not impact that analysis.
A word of caution, however: the judgment only holds for singular events. More complex events, especially of a continuing kind, are much more likely to create direct harmful effects in a multitude of persons, potentially therefore also leading to more loci damni. The ricochet effect therefore is highly likely to echo again at Kirchberg.
Pike & Doyle (Mumbai terror) at the High Court: forum non conveniens and the need for distinguishing Rome II and Brussels I
In Pike & Doyle v the Indian Hotels Company Limited, the High Court withheld its jurisdiction in the case of two (surviving but injured) victims of the Mumbai terror attacks. The UK Human Rights Blog has a posting on the forum non conveniens side of the case. I would like to point to some interesting observations in the judgment on the impact of the interpretation of the special jurisdictional rule for tort under the Jurisdiction Regulation (Brussels I).
The First Claimant suffers continuing pain and loss of amenity and substantial economic losses caused by his injuries. The Second Claimant sustained loss of earnings in England and Wales and has a continuing loss in the form of counselling. On that basis both Claimants have therefore suffered indirect or secondary damage as a result of the Defendants’ alleged negligence in Mumbai. The Claimants’ submission is that this is sufficient to found jurisdiction. The Defendants challenge this.
In support of their claim, defendant relied essentially on the impact which EU law suo arguendo has on the interpretation of the relevant English rules of procedure: as summarised by Stewart J (at 12):
The Defendants’ submission is as follows:
(i) Before 1 January 1987 RSC order 11 rule 1(1)(h) required a plaintiff to establish that the action was “founded on a Tort committed within the jurisdiction”. The test was “where in substance did the cause of action arise?” (Distillers Co Ltd v Thompson [reference omitted]).
(ii) On 1 January 1987 the rule changed such that the new RSC order 11 rule 1(1)(f) became “the claim is founded on a Tort and the damage was sustained, or resulted from an act committed, within the jurisdiction.” The change was made to give effect to Article 5(3) of the Brussels Convention and the decision of the European Court in Handelskwekerij G.J. Bier B.V. v Mines Potasse d’Alsace S.A. [reference omitted]
[references to further precedent omitted]
(iii) The European Rules do not allow indirect secondary damage to found jurisdiction.
Dumez France v Hessische Landesbank [reference omitted]). Marinari v Lloyds Bank plc [reference omitted]). [references to further precedent omitted]
(iv) This is all accepted and is in line with the original Bier case where the European Court held that where an act occurred in one Member State and the damage occurred in another, the Claimant could sue the Defendant in the Courts of either state. (…)
(v) Given the above, the Court should apply normal principles of interpretation to the rule namely: delegated legislation is construed in the same way as an Act, the starting point is to ascertain the legislative intention and the person seeking to understand that intention must do so in the light of the enactment and its purpose. The interpretation must be an informed one [references omitted]
(vi) Therefore since the pre 1987 law would not have allowed indirect secondary damage to found jurisdiction and since the purpose of the change was to align the RSC (subsequently CPR) with the European rules which do not allow such a founding of jurisdiction, the rules should be interpreted consistently with the European cases.
Stewart J disagreed and precedent did before him. Absent the European context – for defendant is not domiciled in the EU and the Brussels I-Regulation does not otherwise apply, there is no reason to assume that the relevant English rules cannot be applied taking into account indirect damage as a jurisdictional basis for the English courts: Tugendhat J had already held so with reference to the preparatory works of the relevant change to the Rules of Procedure. He effectively found that Parliament did not fully assimilate the rules relating to non party states with those relating to states which are a party; it effectively wanted their to be a wedge between the application of the jurisdictional rule for tort in and outside the Brussels-I context.
Neither, Stewart J held, can Rome II come to the defendants’ rescue. This was an attempt by defendants to recycle the limitation to Article 5(3) of the Brussels I Regulation. No reference to this was made in the judgment however a prima facie forceful recital in the Rome II Regulation is recital 7: The substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and the instruments dealing with the law applicable to contractual obligations.
Since Rome II harmonises applicable law for tort even if the national court withholds jurisdiction on the basis of its residuary jurisdictional rules (such as here, given that Brussels I does not apply), this bridge between the various Regulations might resurrect the relevance of the Dumez France and Marinari limitations to the judgment in Bier.
Stewart J however was not swayed and referred to Sir Robert Nelson in Stilyanou:
- Brussels 1 relates to a different subject matter, namely jurisdiction, and has to be construed as a separate regulation, albeit consistently with the other regulations forming part of the compatible set of measures.
- Rome II does not abolish the discretion which has to be exercised under the CPR in relation to non Member States.
- Article 2 on its face is wide enough to include any damage direct or indirect which the regulation as a whole covers. Article 4(1) expressly excludes indirect damage which would otherwise be included by virtue of Article 2. There is no reason why “damage” under the CPR should be interpreted as in a specific Article such as Article 4 which defines the applicable law, rather than interpreted as a general article such as Article 2 which applies to the regulation as a whole (apart from Article 4).
- Inconsistencies in the meaning of damage may exist as the tests are different under Brussels 1, Rome II and CPR. The latter includes the exercise of the discretion and hence consideration of forum conveniens to ensure the proper place for the trial is selected, whereas Brussels 1 and Rome II do not.
- Rome II does not concern jurisdiction and does not override CPR 9(a). Where Brussels I does not apply, the issue of jurisdiction will be governed by a country’s own rules ie. in England and Wales the CPR
Neither Stewart J nor Sir Robert refer to recital 7 Rome II however their arguments in my view are supported post their findings by the ECJ judgment in Kainz.
A very interesting case for many aspects of conflicts law.