Supreme Court considers that there is no requirement of direct damage in England for permission to serve tort claim outside the jurisdiction at common law

The Supreme Court has found, by a majority and in obiter comments, that direct damage in the jurisdiction is not required to come within the tort jurisdictional gateway in the CPR, disagreeing with the Court of Appeal: Lady Christine Brownlie v Four Seasons Holdings Incorporated [2017] UKSC 80 (our post on the Court of Appeal decision can be accessed here).

According to the majority, the test under the common law is, therefore, different from the test under the recast Brussels Regulation, where direct damage in the jurisdiction is a requirement.

This is unlikely to be the last word on this issue. A strong dissenting opinion was given by Lord Sumption, with whom Lord Hughes agreed. Lady Hale, giving the lead judgment for the majority, stressed that her comments should be treated with "appropriate caution" as they were obiter and Lord Wilson, who agreed with her judgment, was clearly concerned that there may have been less full argument than the importance of the issue required.

The door therefore appears to be open (or at least ajar) for further argument before the Supreme Court in the future.

Background

Lady Brownlie was injured and her husband died in a car accident in Egypt during an excursion organised through the concierge at the Four Seasons hotel Cairo. Other family members also died or were injured. It was Lady Brownlie's case that the Four Seasons chain of hotels was run by Four Seasons Holdings incorporated ("Holdings"), a Canadian company, and that it was liable for the damage suffered.

Lady Brownlie brought proceedings in England to recover damages in contract and in tort. She obtained permission to serve outside the jurisdiction. That permission was overturned by the Court of Appeal.

Decision

The Supreme Court took the unusual course of giving Holdings the opportunity to put in further evidence regarding ownership and operation of the Cairo hotel. That evidence established that Holdings was not the owner or operator of the hotel. There was therefore no realistic prospect that Lady Brownlie could establish that she contracted with Holdings or that Holdings was vicariously liable for the negligence of the driver of the excursion vehicle.

In those circumstances the correct interpretation of the tort gateway did not arise. However, Lord Sumption would have held, if necessary, that the order for service out in respect of the tort claims could not stand, and devoted half of his judgment to explaining why. Lady Hale and Lords Wilson and Clarke gave judgments explaining why they disagreed.

The tort gateway in the CPR provides (PD 6B, para 3.1(9)):

"3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where….

(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."

The key arguments are outlined below.

Damage done v financial value of damage

Minority view

Lord Sumption considered that there is a fundamental difference between damage to an interest and facts which are merely evidence of the financial value of that damage. So in a personal injury claim the damage is suffered as soon as the injury occurs, even if subsequent events are relevant to determine its pecuniary measure (such as medical expenses or funeral costs). The same principles apply where the interest protected by the legal duty is a purely financial interest.

Majority view

Lady Hale thought that this argument equated "damage" with the damage which completes the cause of action. She observed that damage was not an essential part of every cause of action in tort. She thought (Lord Clarke expressly agreeing) that there was no particular reason to think that completion of the cause of action is what the framers of the rules had in mind when they used the word "damage", as opposed to the ordinary and natural meaning of the word. Several first instance judges had held that "damage" included all the detriment suffered by the claimant, and she would be very reluctant to disagree with them. The Court of Appeal in New South Wales had also interpreted a similar provision in their rules in the same way.

Lord Wilson and Lord Clarke also considered that the absence of the word "the" before "damage" in para 3.1(9)(a) meant that damage for the purpose of the rule could be wider than the damage which violated the claimant's interest and completed the cause of action.

Drafting of tort gateway

Minority view

Lord Sumption considered that it would have been possible to provide that "damage" should extend to the financial or physical consequences of the damage, but there was nothing in the language of the gateway which suggested this was intended and two policy considerations strongly suggested that it was not.

The first was that all the jurisdictional gateways were concerned to identify some substantial and not merely casual or adventitious link between the cause of action and England. Interpreting the gateway in the manner suggested would, in the great majority of cases, confer jurisdiction on the country where the claimant was resident and that would be so wide as to conflict with the purpose of the rules.

The second concerned the history of the tort gateway and its relationship with the tort jurisdiction provision under the Brussels regime (now article 7(2) of the Recast Brussels Regulation). The CJEU had adopted the distinction which Lord Sumption advocated between the damage sustained by the interest which the law protects and the expenditure which serves as a measure of that damage. In addition, the tort gateway had been deliberately drafted so as to assimilate the tests under the EU rules and common law rules. Pre 1987, the test looked to where the wrongful act was done and the location of the damage was irrelevant. Whilst in 2000 when the gateways were transferred to a Practice Direction, the word "the" was omitted before "damage", that was in order to exclude the suggestion that all the damage had to be sustained within the jurisdiction. It would be strange if the effect of expanding the gateway to match the wider special jurisdiction authorised in Brussels regime cases had been to make it very much wider than even that regime authorised.

Majority view

Lady Hale agreed that a claimant should not be in the position of choosing where to bring the claim, but considered that the forum conveniens discretion was robust enough to prevent that.

So far as the history of the gateway was concerned, the CJEU cases interpreting the meaning of "damage" came after the rules had been amended to mirror those in the Brussels regime and were therefore no help in interpreting them. If the Rules Committee had wanted to assimilate the rules after the first instance decisions giving a wide interpretation to "damage" they could have done so, but they had not.

The relevance of the overriding discretion as to forum conveniens

Minority view

Emphasis had been placed, including by judges at first instance, on the court's overriding discretion to refuse to hear a case on the basis that England was not the forum conveniens, whereas no such discretion existed under the Brussels regime. In Lord Sumption's view, however, the purpose of the discretion was to limit the exercise of the court's jurisdiction, not to displace the criteria in the gateways. There should be no presumption in favour of the widest possible interpretation of the gateways simply because jurisdiction conferred by law in this way could be declined as a matter of discretion.

Majority view

Lady Hale thought it important to bear in mind the difference between the common law and Brussels regimes. The European scheme deliberately eschews any discretion in favour of clear and certain rules. No doubt that was why it wished to draw the direct/indirect distinction. The English scheme in contrast retained the "valuable safety valve" of discretion.

Analogy with choice of law rules

The main argument which the Court of Appeal accepted was that "damage" was confined to direct damage for the purpose of choice of law and the same concept should be applied to questions of jurisdiction. None of the judges in the Supreme Court agreed with this analysis. Damage for choice of law purposes was limited to direct damage as that was what the relevant rule (article 4(1) of the Rome II Regulation) said in terms. It did so because there can be only one proper law, whereas more than one country can have jurisdiction over a claim.

Other issues

This decision is also of interest concerning the comments made on:

• The "good arguable case" test in establishing a gateway and Lord Sumption's interpretation of what the test means in practice.

Lord Sumption referred to the Court of Appeal decision in Canada Trust Co v Stolzenberg (No 2) where it was suggested that "good arguable case" means one side has "a much better argument" on the material available". He considered this a serviceable test if properly understood. What is meant, he thought, is (i) the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) if there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it. He did not believe anything was gained by the word "much" in the Court of Appeal's interpretation of the test.

Lady Hale agreed that the test is "good arguable case" and glosses should be avoided. She did not read Lord Sumption's comments as glossing the test.

• The difficulty of establishing where a contract was made, particularly where instantaneous exchanges eg by telephone are concerned. The court was in agreement that this was an area that it would be useful for the Rules Committee to consider.