Kwok v UBS. Cockerill J helpfully on Lugano, economic loss and branch jurisdiction.

Update 25 02 2022 thank you Matthew Hoyle for letting me know that Justice Cockerill today granted UBS permission to appeal against her judgment.

In Kwok & Ors v UBS AG (London Branch) [2022] EWHC 245 (Comm) Cockerill J holds on forum damni (Article 5(3) for purely economic loss, and branch jurisdiction (Article 5(5) for the English courts under the Lugano Convention. Defendant is Switserland based and the proceedings clearly were initiated prior to Brexit.

On A5(3) locus damni, all parties and the judge agree that CJEU authority is not easy to disentangle and does not unequivocally point into one direction: see eg [84] ‘the authorities are not entirely pellucid on what they do say.’

The bank, defending, argues ia that a rule of thumb under (limited) English authority is that in a case of negligent misstatement the damage will occur where the misstatement is received and relied upon. Cockerill J distinguishes the authority from current case and also points out [82] that all cases concerned predate the CJEU authority particularly in Lober and Vereniging van Effectenbezitters, and that ‘the tide of authority is against the proposition that loss is suffered wherever a claimant ultimately feels it’ [85]. Having summarised the lines of interpretation following from CJEU authority, she concludes [113]

Once the focus is on actual manifestation (of damage, GAVC) the most natural analysis is to view the damage as occurring where and when the Acquired Shares were liquidated.

here, London, where the shares claimants had invested in were held and where the funds they had invested were depleted; the loss crystallises, manifests, becomes certain and irreversible with the sale of shares and that loss of claimants’ Monetary Contribution which had merged into the shares  [115].

The account, where the damage was first “registered” or “recorded” was in London with the defendant itself (as in CJEU Kronhofer) [117]. The Universal Music-instructed ‘special circumstances’ cross-check also points to London: [118]

London was the place at which it had been agreed by all parties that the Acquired Shares would be held, and all of the contractual documents UBS entered into (albeit for a transaction at one remove from the Claimants) were to be in English and governed by English law. It was therefore entirely predictable and foreseeable from November 2014 that the parties might sue or be sued in London in relation to the Investment and dealings with the Acquired Shares.

Branch jurisdiction under Article 5(5) is dealt with obiter [120] ff. Cockerill J holds [138] that was is needed inter alia per CJEU flyLAL is ‘sufficient nexus’, sufficiently significant connection does not require involvement in the tortious acts [140]. This is supported, Cockerill J holds [148] by the fact that UBS London’s thoughts and actions will be relevant to the trial. There will be a need to investigate UBS London’s conduct and intentions both (i) at the time of the representations and advice given by UBS and (ii) late events and the loss resulting therefrom.

A good judgment to assist with the economic loss jigsaw.

Geert,

The CJEU in Hrvatske Šume on contract or tort re claims of unjust enrichment. Confirmation that not all claims need to be either one or the other.

Update 17 January 2022 see here for a series of postings on the judgment.

The CJEU held this morning in  C‑242/20 Hrvatske Šume. Gilles Cuniberti already has a summary of the judgment here and I reported on the AG Opinion here. The Opinion was in essence confirmed.

Of first note is that the CJEU unlike the AG does address the Article 24(5) Brussels Ia issue of exclusive jurisdiction for claims in ‘enforcement’ of a judgment. It holds that an action for restitution based on unjust enrichment does not come within A24(5)’s scope for [32] an action the subject matter of which is a claim for restitution based on unjust enrichment is not intended to obtain a decision in proceedings relating to recourse to force, constraint or distrain on movable or immovable property in order to ensure the effective implementation of a judgment or authentic instrument. This is the case even if that unjust enrichment arises from the fact that enforcement has been annulled.

On the A7(1)-(2) issue the Court first of all and justifiably dismisses the suggestion made ia by the European Commission that A7(1) and (2) BIa dovetail: ie that necessarily a claim which is not a contractual one, must (and in subsidiary fashion) be on in delict per A7(2): [53]: forum delicti requires a harmful event (reference in support is made to Austro-Mechana),  which is simply absent in cases of unjust enrichment.

A claim in restitution of unjust enrichment may in fact be contractual [47] if there is a pre-existing relationship that is closely linked to the claim. An obvious example [48] is that of the applicant relying as the basis of its right to restitution. on unjust enrichment closely linked to a contractual obligation which he or she regards as invalid, and which has not been performed by the defendant, or which the applicant considers he or she itself has ‘over-performed’.

Geert.

EU Private International Law, 3rd ed. 2021, 2.419 ff.

O’Loan and Scott v MIB and AIG. On the meaning of ‘the tort’ in Article 4(3) Rome II’s displacement rule.

O’Loan and Scott v MIB and AIG (Fintan O’Loan and Elisabeth Scott v Motor Insurance Bureau and AI Europe SA) involves the same Loi Badinter that was also the subject of Marshall v MIB. I was alerted to the case buy Ian Denham’s post. Judgment is as yet unreported and I am grateful to Ian for having sent me copy.

The contested claim is the one of Ms Scott v AIG. She was the front seat passenger of the hire car, insured by AIG and driven by Mr O’Loan, her partner, when the car was driven into by an uninsured, French registered car. Ms Scott therefore turns to the driver, her partner (in reality, the insurer of the hire car), to have her damage covered under the strict liability (no need to show fault) rule of the French Loi Badinter.

To get to French law however she needs to overcome Article 4(2) Rome II’s provision that in case victim and party claimed to be liable are habitually resident in the same country at the time the damage occurs, the laws of that country apply. A4(3) is the portal to that escape route:

(3) Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.

It was conceded by both parties [12] that the district judge cut quite a few corners on the A4(3) analysis and Platts J therefore started afresh. Winrow v Hemphill of course was referred to, as was Owen v Galgey (the conclusions of which I disagreed with).

The judge notes (as does the Handbook: para 4.39) that it is important to identify what is meant by “the tort/delict’ in A4(3) before considering whether that tort/delict is more closely connected with a country other than England. A4(3) holds that ‘the tort’ (not individual elements of the tort, such as the event and/or the damage and /or anything singular at all) needs to be ‘more closely connected’.

I disagree with the judge [23] that ‘the tort’ or ‘delict’ clearly refers to the event which caused the damage, or ‘the incident’ [24]. In the case of a tortious obligation ‘the tort’ arguably refers to the classic 3 elements of event, damage, and causal link between the two (all three here clearly referring to France). I do agree it does not refer to the cause of action which arises from the incident [24]. While linguistically speaking that may be caught be ‘the tort’ for it would be one of its consequences, it would also mean that remedies available, or not, for instance would play a role in determining lex causae. Where Rome II envisages such assessment, it says so explicitly: such as in Article 7’s environmental damage rule.

The judge’s reasons for opting for displacement are [30]

I therefore consider the connection with France to be manifestly closer than the connection with England: the collision was in France; it was between two vehicles registered in France; the damage was caused in France in that the initial injury was suffered in France. Further, the circumstances were such that the claim of first claimant is to be dealt with under French law.

That last element is in slight contradiction I find to the judge’s consideration signalled above, that an advance on (remedies available or not under the) lex causae, must not play a role. If that is the case for claimant seeking to overturn A4(2)’s presumption, arguably there must not be a role either for the lex causae of other claims involved in the case.

Of note is the judge’s emphasis on the vehicles both being registered in France. If that is an element, travellers of countries without strict liability rules, might have a strong incentive indeed to hire cars rather than drive their own when driving in EU Member States with strict liability rules such as the Loi Badinter.

Appeal dismissed, for the result is the same (French law applies) even if the route to it was quite different from the first judge.

I do not think the analysis on ‘the tort’ is quite there yet.

Geert.

EU Private International Law, 3rd ed. 2021, Heading 4.5.2 (para 4.39 ff).

 

The UK Supreme Court in Brownlie (II). With the tort jurisdictional gateway widened to consequential losses, forum non conveniens emerges as the default gatekeeper.

I have posted before on the Brownlie v Four Seasons litigation, please refer to the earlier post for context. The case revolves around whether courts should hear cases where the only damage sustained in their jurisdiction, is ‘indirect’ damage.

The litigation is not terribly good publicity for English civil procedure. The length of the proceedings resembles that of systems often referred to when in ordinary circumstances the English courts are much speedier. Moreover the outcome of the final Supreme Court judgment on 20 October (FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45 ) on the jurisdictional gateway for torts inevitably will lead to a carrousel of future litigation and long-winded jurisdictional argument.

Even though the court was seized much before Brexit day, the jurisdictional issues are not subject to Brussels Ia. (The applicable law is, however, determined by Rome II and that this is Egyptian law is not disputed). The Court of Appeal as I discussed in my earlier post, upheld ‘damage in the jurisdiction’ on the basis of a wider notion of ‘damage’ under residual English rules than under the EU rules. The UKSC has now agreed by a majority of four to one, confirming the obiter outcome of the earlier, ‘Brownlie I’ (in current judgment recalled at [45] ff) obiter views of the Court in a different composition.

Lord Lloyd-Jones reminds us [25] of the 3 requirements to meet the jurisdictional threshold. Claimant must show firstly ‘a good arguable case’ that the claims fall within one of the gateways in the civil procedure rules – CPR, introduced by Statute; further a serious issue to be tried on the merits (this is designed to keep out frivolous suits); and finally that England is the appropriate forum for trial and the court ought to exercise its discretion to permit service out of the jurisdiction that is the ‘forum non conveniens’ test.

The only issue under consideration before the SC was the first one, in particular, whether the case meets the conditions of CPR PD 6B paragraph 3.1(9):

“Service out of the jurisdiction where permission is required. 3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where -…

Claims in tort

(9)       A claim is made in tort where –

(a)        damage was sustained, or will be sustained, within the jurisdiction; or

(b)       damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction.”

Candidates for Lady Brownlie’s claim satisfying the tort gateway in England, are [27] (a) a claim for damages for personal injury in her own right; (b) a claim for damages in her capacity as executrix of the estate of her late husband for wrongful death; and (c) a claim for damages for bereavement and loss of dependency in her capacity as her late husband’s widow.

Under EU jurisdictional rules, the only one of these three which in my view would have any chance of success under A7(2) BIa, is the latter. Despite CJEU Lazar (on the equivalent rule for applicable law under Rome II) I still do not see clear in the application of A7(2) to claims based on bereavement and loss of dependency. For these, I submit, Lloyd-Jones suggestion [73] fits even if the test, like in the EU, is based on direct effect only: ‘the event giving rise to the damage directly produced its harmful effects on Lady Brownlie in England and Wales.’

In essence the SC confirms the Court of Appeal’s insistence that the residual English rules must not ‘parrot’ the CJEU’s interpretation of ‘damage’ with its insistence on only direct damage satisfying the tort gateway – Pike in particular echoed the same feeling. Great emphasis is put on the perceived very different nature of the English private international law exercise as opposed to the EU, ‘Brussels’ regime. See for instance [55] ‘fundamental differences between the two systems would have made such an assimilation totally inappropriate’ – ditto, ex multi, [74].

This now Supreme Court confirmed ‘fundamental’ [74] difference between the regimes must and will, I submit, play a role in pending cases under Brussels Ia, such as those involving Articles 33-34 lis pendens provisions.

I do agree with Lloyd-Jones’ remark [50] that he is unconvinced of the suggested link between damage completing a cause of action (highly relevant at the applicable law stage] and the identification of an appropriate jurisdiction. Yet unlike him I would take that in a different direction. Not therefore in the direction of an in principle unlimited jurisdictional gateway for tort (Lord Leggatt, dissenting, at 171 remarks all English tourists travelling abroad will now have such gateway, without anyone suggesting ‘any principled basis for it’, and at [194] he suggests forum shopping will be encouraged eg by non-English tourists employing medical treatment in England as an anchor for jurisdiction), disciplined only by forum non conveniens (which was not under appeal here [79]; although Lord Lloyd-Jones does remark obiter at 80 that the judge had rejected forum non referring in particular referring to the fact that to a significant extent the claimant’s losses had been experienced in England ). Rather, I would revisit the original (for the EU at least) and contra legem (for A7(2) BIa like its predecessors does not mention damage) introduction of damage as a gateway in CJEU Bier.

The SC puts great trust in forum non conveniens as a gatekeeper: [79]

The discretionary test of forum non conveniens, well established in our law, is an appropriate and effective mechanism which can be trusted to prevent the acceptance of jurisdiction in situations where there is merely a casual or adventitious link between the claim and England. Where a claim passes through a qualifying gateway, there remains a burden on the claimant to persuade the court that England and Wales is the proper place in which to bring the claim. Unless that is established, permission to serve out of the jurisdiction will be refused (CPR rule 6.37(3)). In addition – and this is a point to which I attach particular importance – the forum non conveniens principle is not a mere general discretion, the application of which may vary according to the differing subjective views of different judges creating a danger of legal uncertainty. On the contrary, the principle applies a structured discretion, the details of which have been refined in the decided cases, in a readily predictable manner.

I have less trust in forum non as the predictable gatekeeper suggested by the majority. Consider Lord Leggatt’s dissenting view [200]:

In the absence of any prescribed decision procedure or ranking of factors, different judges assessing whether England and Wales is the appropriate forum will inevitably attach different degrees of weight to different factors and may reach differing conclusions on similar facts without either conclusion being susceptible to legal challenge. Not only is such inconsistency of outcome itself a source of injustice, but it also encourages satellite litigation and causes defendants who have no real connection with England to have to incur the difficulty and expense of instructing English lawyers to apply in England to contest the jurisdiction of the English courts. That gives a claimant a significant and unfair tactical advantage.

Moreover, as already highlighted by Joshua Folkard, cases of purely economic loss are likely to provoke much (and expensive) discussion. Lloyd-Jones L [43] himself notes: ‘Within the Brussels system, the distinction between direct and indirect damage is, however, sometimes elusive.’ He refers immediately to financial losses as the example with the least jurisdictional grip. He repeats this point ia [76], seeking to distinguish it from the more complex tort suffered by Lady Brownlie.

Cases of purely economic loss will continue to be litigated extensively at the jurisdictional level for current judgment does not offer any instruction on them. [76]: ‘the mere fact of any economic loss, however remote, felt by a claimant where he or she lives or, if a corporation, where it has its business seat would be an unsatisfactory basis for the exercise of jurisdiction. However, this is not such a case.’

An end to the jurisdictional tussle in current case therefore, nine years (8  years and 11 months) after the claim was issued. Yet continuing consequential uncertainty for many other pending and future claims.

Geert.

Yet again on distinguishing contract from tort (and on enforcement jurisdiction). Saugmandsgaard Oe reigns in forum delicti and forum contractus in HRVATSKE ŠUME.

Saugmandsgaard Oe AG opined (no English version at the time of writing) last week in C‑242/20 HRVATSKE ŠUME on the classic conflict of laws issue of distinguishing contract from tort.. He, oddly perhaps, unless some technical reason for it escapes me, does not entertain the question on the scope of Article 24(5) Brussels Ia’s exclusive jurisdictional rule for ‘proceedings concerned with the enforcement of judgments’.

The Opinion is a Qualificationfest.

The case concerns actions for recovery of sums unduly paid, in other words, undue enrichment. This enrichment came about by a Croatian court having  earlier ordered Hrvatske Šume, debtor of  Futura, both of Croatia, to pay its debt to Futura directly to BP Europe SA, successor to Burmah Oil, both domiciled in Germany. Hrvatske appealed that order however that appeal did not halt the payment. Now that the appeal has turned out to be successful, Hrvatske want their money back yet so far Croatian courts have held that they do not have jurisdiction under Article 7(2) BIa (the case actually went under the the predecessor, Brussels I however there is no material difference).

As the referring court notes, there is no delicti commissi in the case of unjust enrichment: it is a non-contractual obligation in which no delict is committed. (This is the very reason Rome II includes a separate heading for unjust enrichment). One might suggest this would leave forum damni only under A7(2), however the AG correctly in my view re-emphasises the seminal statements in CJEU Kalfelis, that actions under A7(2) concern ‘all actions which seek to establish liability of a defendant  and which are not related to a ‘contract’ within the meaning of Article [7](1)’. Unjust enrichment not seeking to establish liability, A7(2) is not engaged. Along the way, note his discussion of linguistics and his seeking support in Rome II.

At 71 ff the AG distinguishes the wide interpretation of ‘establishing liability’ in CJEU Austro Mechana.

A clear implication of the Opinion is that it confirms a disjoint in BIa /Rome II: not all non-contractual obligations for which Rome II identifies a lex causae, are caught by A7(2) BIa’s forum delicti rule.

The AG also engages with the possibility of Croatia being forum contractus  (he kicks off his Opinion with this issue) and dismisses it, seeking support inter alia in CJEU Handte and also in Rome II specifically providing for an unjust enrichment heading. This part of the Opinion is more optimistically straightforward than one might have expected. Following flightright, Wikingerhof etc., A7(1) has been (unduly, in my view) stretched and it would be good to have the CJEU further clarifying same. (C-265/21, in which I have been instructed, might be just the case).

Geert.

EU Private International Law, 3rd ed. 2021, 2.419 ff.

Volvo Trucks. The CJEU unconvincingly on locus damni in follow-on damages suit for competition law infringement.

Update 12 November 2021 see the Spanish SC confirming (Marta Requejo Isidro review of the case and link to the judgment), it seems, the limited approach which I discuss below), meaning: the Mozaik approach no longer applies when the buyer has not purchased the goods affected by the collusive arrangements within the jurisdiction of a single court, territorial jurisdiction lies with the courts of the place where the undertaking harmed has its registered office.

The CJEU held yesterday in C-30/20 Volvo Trucks. I reviewed Richard de la Tour AG’s Opinion here.

After having noted the limitation of the questions referred to locus damni [30]  (excluding therefore the as yet unsettled locus delicti commissi issues) the CJEU confirms first of all [33] that Article 7(2) clearly assigns both international and territorial jurisdiction. The latter of course subject to the judicial organisation of the Member State concerned. If locus damni x has no court then clearly the Regulation simply assigns jurisdiction to the legal district of which x is part. However the Court does not rule out [36] per CJEU Sanders and Huber that a specialised court may be established nationally for competition law cases.

The Court then [39] applies C‑343/19 Volkswagen (where goods are purchased which, following manipulation by their producer, are of lower value, the court having jurisdiction over an action for compensation for damage corresponding to the additional costs paid by the purchaser is that of the place where the goods are purchased) pro inspiratio: place of purchase of the goods at artificially inflated prices will be locus damni, irrespective of whether the goods it issue were purchased directly or indirectly from the defendants, with immediate transfer of ownership or at the end of a leasing contract [40].

The Court then somewhat puzzlingly adds [40] that ‘that approach implies that the purchaser that has been harmed exclusively purchased goods affected by the collusive arrangements in question within the jurisdiction of a single court. Otherwise, it would not be possible to identify a single place of occurrence of damage with regard to the purchaser harmed.’

Surely it must mean that if purchases occurred in several places, Mozaik jurisdiction will ensue rather than just one locus damni (as opposed to the alternative reading that locus damni jurisdiction in such case will not apply at all). However the Court then also confirms [41 ff] its maverick CDC approach of the buyer’s registered office as the locus damni in the case of purchases made in several places.

Here I am now lost and the simply use of vocabulary such as ‘solely’, ‘additionally’ or ‘among others’ would have helped me here. Are we now to assume that the place of purchase of the goods is locus damni only if there is only one place of purchase, not if there are several such places (leaving a lot of room for Article 7(2) engineering both by cartelists and buyers); and that, conversely, place of registered office as locus damni only applies in the event of several places of purchase, therefore cancelling out the classic (much derided) Article 7(2) Mozaik per Shevill and Bier – but only in the event of competition law infringement? This, too, would lead to possibility of forum engineering via qualification in the claim formulation.

I fear we are not yet at the end of this particular road.

Geert.

EU Private International Law, 3rd ed. 2021, Heading 2.2.12.2.8.

Vereniging van Effectenbezitters. Prospectus liability, purely financial damage and collective actions. The CJEU reigns in jurisdiction using statutory reporting obligations, at odds with its approach in Volkswagen.

Update 21 May 2021 for additional analysis see Mathias Lehmann here.

As I suggested when I reviewed the Advocate-General’s Opinion in C‑709/19 Vereniging van Effectenbezitters, the CJEU was likely to be much more succinct, which has proven true with the judgment this morning (no English version available as yet).

The CJEU ignored of course the AG’s calls fundamentally to reconsider the locus damni introduction in Bier. Yet it re-emphasised its willingness to reign in the repercussions of Bier, insisting places of jurisdiction under Article 7(2) Brussels Ia need to correspond to those with a certain link to the case. Its core reference throughout is its judgment in Lober, itself an odd case for the court did not assign territorial jurisdiction (an issue also sub judice in Volvo Trucks). Clearly Universal Music features heavily, too.

The Court’s instruction in Universal Music, that the mere presence of a bank account in which damages materialise, does not suffice to establish jurisdiction, is expanded in Vereniging van Effectenbezitters with the use of statutory reporting requirements: [35] For listed companies (clearly, an entry for distinguishing: how about those unlisted?), only the courts of the Member States in which they are under a statutory reporting duty with a view to its listing, are reasonably foreseeable to it, as places in which a market in its financial instruments may emerge.

The Court also adds [36] that the collective action nature of the suit is of no relevance. The referring court had asked whether in such suits the domicile of the aggrieved could be dropped as being relevant, however the CJEU insisted that domicile has no stand-alone relevance in purely financial damage at all, even in non-collective action.

To the degree that the existence of such statutory obligations is not exhaustively harmonised across the EU (on that subject, I am no expert), this opens op possibilities of course for Member States to assist its consumers with forum shopping, by expanding reporting requirements. (Albeit such extra requirements may themselves by vulnerable under free movement of establishment and /or services; but now my mind is racing ahead).

The Court’s limiting approach here is in stark contrast with the much wider consequences of its findings on jurisdiction viz material consumer products in  Volkswagen.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.459

Johnson v Berentzen. The doubtful Pandya conclusions on service as lex causae confirmed.

Cressida Mawdesley-Thomas has overview of the facts and issues in Johnson v Berentzen & Anor [2021] EWHC 1042 (QB) here. Stacey J essentially confirms the conclusions of Tipples J in Pandya.

The case concerns the extent of the ‘evidence and procedure’ exclusion from the Rome II Regulation on applicable law in the event of non-contractual obligations.  For the reasons I outlined in my review of the latter (readers please refer to same), I continue to disagree. With counsel for claimant I would suggest Pandya wrongly interpreted A15(h) Rome II in concluding that the provisions of A15 (‘scope of the law applicable) are to be construed widely , and the evidence and procedure exclusion (not: ‘exception’), narrowly.

Something for the Court of Appeal to look into, I would suggest.

Geert.

EU Private International Law, 3rd ed. 2021, para 4.79 ff.

 

Italy’s residual private international law rules in the spotlight in Dolce & Gabbana v Diet Prada defamation suit.

I was unaware of a fashion blogosphere war of words and more between Dolce & Gabbana and the founders of Diet Prada until I was asked to comment (in Dutch) on the pending lawsuit in Italy. The suit has an echo of SLAPP – Strategic Lawsuit Against Public Participation.

Among others this post on The Fashion Law gives readers the necessary background and also links to the defendants’ lawyers reply at the jurisdictional level. It is this element of course that triggered the interview request, rather than my admittedly admirable sense of style (with sentences like these, I think I may be in need of a break).

Readers might be surprised to find the legal team discussing A7(2) Brussels Ia’s forum delicti, and CJEU authority such as Bolagsupplysningen seeing as per A6 BIa the Regulation does not apply, rather the Italian residual rules. However as Andrea Bonomi and Tito Ballarino review in the Encyclopedia of Private International Law, Italy has extended the scope of application of BIa to its internal sphere. Hence an interesting discussion of the CJEU case-law on locus damni, centre of interests etc. As well as a probably ill-fated attempt to encourage the Italian courts, in subsidiary fashion, to exercise forum non should the A7(2) arguments fall on deaf ears. Probably futile seeing as the Italian regime does not know a foum non rule, however if BIa is extended, would that not also extend to forum non-light in A33-34? As far as I could tell from the submission, however, no reference was made  to an 33-34 challenge.

Enfin, lots of interesting things to ponder at a different occasion. Happy Easter all.

Geert.

EU Private International Law 3rd ed. 2021, para 2.437 ff.

Owen v Galgey. Applying A4(2) Rome II to multiparty claims (following Marshall), and a rare, if in my view uncertain, reversal using A4(3)’s ‘manifestly more closely connected’ escape clause.

Update 29 January 2021 today posted additional critical analysis here.

In Owen v Galgey & Ors [2020] EWHC 3546 (QB), Linden J yesterday dealt with the application of Rome II’s common habitual residence exception to A4(1) lex loci damni rule, and with the general escape clause of A4(3).

These cases often involve tragic accidents and injuries and the sec conflict of laws analysis below in no way of course mean any disrespect to claimant and his loved ones.

Claimant is a British citizen who is domiciled and habitually resident in England. He brings a claim for damages for personal injury sustained by him as result of an accident in France (3 April 2018), when he fell into an empty swimming pool which was undergoing works at a villa in France, a holiday home owned by the First Defendant, whose wife is the Second Defendant. They are also British citizens who are domiciled and habitually resident in England, Third Defendant is a company domiciled in France, and the public liability insurer of the First and Second Defendants. Fourth Defendant is a contractor which was carrying out renovation works on the swimming pool at the time of the accident. Fifth Defendant is the public liability insurer of the Fourth Defendant. Fourth and Fifth Defendants are both companies which are domiciled in France.

That French law applies to the claims against Fourth and Fifth Defendant is undisputed. There is however a dispute as to the applicable law in relation to his claims against the First to Third Defendants. These Defendants contend that, by operation of A4(2) Rome II, English law applies because the Claimant and the First and Second Defendants are habitually resident in England. Claimant contends that French law applies by operation of A4(3) Rome II: the ‘manifestly more closely connected’ rule.

Textual argument suggest that on the basis of the text of Recital 18 and A4(2) itself, A4(2) only applies to two party cases and does not apply in multi-party cases. Linden J at 29 notes that this would also correspond with the narrow reading required of A4(2). However he follows of course the authority of Marshall, which I approved of at the time (if only because, if multi-party claims were outside the scope of A42(), it would suffice for either claimant artificially to add a defendant to the claim, or for a defendant similarly to manoeuvre in a second defendant, for A4(2) to become inoperable). A4(2) also applies if more than one party is involved.

On A4(3), then, Marshall, too, is authority and Winrow v Hemphill another rare case that seriously engaged with the issue. In the latter case, Slade J held that the balance was in favour of not applying the escape clause, particularly in view of the period of time of habitual residence in Germany, and subsequent continuing residence in that country (inter alia for follow-up treatment). In the former, Dingemans J did reach a conclusion of applying A4(3) hence lex causae being French law on the grounds I discuss in my post on the case. Here, Linden J discusses the various factors at issue in Winrow v Hemphill and in Marhsall and reaches a conclusion of French law:

In my view it is clear that the tort/delict in the present case is manifestly more closely connected with France. France is where the centre of gravity of the situation is located and the preponderance of factors clearly points to this conclusion. This conclusion also accords with the legitimate expectations of the parties.

The reasons for that are essentially listed at (75  ff)

The tort/delict occurred in France, as I have noted. This is also where the injury or direct damage occurred. The dispute centres on a property in France and it concerns structural features of that property and how the First, Second and Fourth Defendants dealt with works on a swimming pool there. Although these defendants deny that there was fault on the part of any of them, the First and Second Defendants say that the Fourth Defendant was responsible if the pool presented a danger and the Fourth Defendant says that they were. The allegations of contributory negligence/fault also centre on the Claimant’s conduct whilst at the Villa in France.

The First and Second Defendants also had a significant and long-standing connection to France, the accident occurred on their property and the works were carried out by a French company pursuant to a contract with them which is governed by French law. Their insurer, the Third Defendant, is a French company and they are insured under a contract which is governed by French law. The contract was to insure a property in France albeit one which, I accept, applied to claims under English and French law. It is also common ground that the claim against the Fourth Defendant, and therefore against the Fifth Defendant, also a French company, is entirely governed by French law and will require the court to decide whether the Fourth Defendant or, at least by implication, the First and Second Defendants were “custodians” of the property for the purposes of French law.

Whilst it cannot be said at this stage that, by analogy with Marshall, the accident was entirely caused by the Fourth Defendant in particular, the situation in relation to the swimming pool which is said to have been the cause of the accident was firmly rooted in France and it resulted from works which were being carried out by the Fourth Defendant as a result of it being contracted to do so by the First and Second Defendants. The liability of the First and Second Defendants, if any, will be affected by how they dealt with that situation, including by evidence about their dealings with the Fourth Defendant. That situation had no significant connections with England other than the nationality and habitual place of residence of the First and Second Defendants.

The core counterarguments which were dismissed, are (78 ff)

I take the point that the Claimant and the First and Second Defendants were habitually resident in England at the relevant time, that there was a pre-existing relationship between them, and that the Claimant and his family came to be at the Villa as a result of an agreement which was made in England. But, applying an objective test (see Chitty on Contract Volume 1 at paragraph 2-171 in particular), I am not satisfied that this agreement, on the information available at this stage, was contractual in nature. Part of the difficulty in relation to this aspect of the First to Third Defendants’ argument is that there is very little information before the court as to what precisely happened. Looking at the agreed facts in the context of the statements of case and the other materials which I have been shown, however, it appears that the agreement resulted from a casual conversation between social acquaintances in the context of mutual favours having been done in the past. It was informal in nature and it appears that the Claimant offered to do the work as a favour and the First and Second Defendant invited him and his family to the Villa to return that favour.

If I had found that there was a contract, I would also likely have found that it was governed by French law. Although it was entered into in England between British parties, it related entirely to a property in France. Performance of the contract on both sides could only be effected at a particular property in France and was very strongly connected to France in that it involved work on a villa there and a family holiday there. This and the other features of the case would have led me to conclude that [A4(3) Rome I] indicated that there was a manifestly closer connection between the contract and France, although I acknowledge that there is a degree of circularity in this approach. ….

Mr Doherty understandably emphasised that, even if there was no contract with the Claimant, the relationship and the agreement which led to the Claimant and his family being in France were based and made in England. I was also initially attracted by his argument that in effect the Claimant’s complaint is about the way in which the First and Second Defendants fulfilled their side of that agreement. But that is not the claim which he makes, and, in any event, their performance of the agreement was in the form of allowing the Claimant and his family to occupy a villa in France. Nor is this a case in which, for example, the injury occurred whilst the Claimant was carrying out work on the Villa and potential tortious and contractual duties (if the relationship was contractual) therefore arose directly out of the relationship between the parties.

To my mind the tort/delict in this case is much more closely connected to the state of the swimming pool which, as I have said, was part of a property in France and resulted from the French law contract between the First and Second Defendants and the Fourth Defendant. If any of the Defendants is liable, that liability will be closely connected with this contract. This point, taken in combination with the other points to which I have referred, in my view clearly outweighs the existence of any contract with the Claimant relating to the Villa, even if I had found there to be a contractual relationship and even if it was governed by English law.

Similarly, although I have taken into account the nationality and habitual place of residence of the Claimant and the First and Second Defendants, these do not seem to me to alter the conclusion to which I have come. I have also taken into account the fact that the consequences of the accident have to a significant extent been suffered by the Claimant whilst he was in England, but in my view the other factors to which I have referred clearly outweigh this consideration.

Of particular note for future direction on Rome II, is the discussion on existing pre-contractual relations.

This is of course a fact-specific and to a certain extent, discretionary assessment. I also agree there is no limit to the kinds and amount of factors which a judge may take into account when applying the A4(3) exception.

I am minded to disagree with the conclusion reached here, however.  The judge’s assessment is one that echoes a proper law of the tort approach, starting from scratch. But that is not what A4(3) is about: it does not start from scratch; it starts from the clearly stated rule of A4(1) or A4(2), which require a lot of heavy lifting to be dislodged. The arguments pro upholding the A4(2) presumption listed in 78ff in my view give the finding for sustaining its consequence and hence English law as lex causae, strong foundations indeed which I believe, respectfully of course, the judge did not show enough deference to.

Geert.

European Private International Law, 3rd ed. 2021, Heading 4.5.

 

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