Court of Appeal gives wide interpretation to “damage” for the purposes of the common law jurisdictional gateway for tort claims

The Court of Appeal has held, by a majority, that direct damage in the jurisdiction is not required in order for a claim to come within the tort jurisdictional gateway in the CPR: FS Cairo (Nile Plaza) LLC v Christine Brownlie [2020] EWCA Civ 996. In doing so it followed obiter comments made by the majority in the Supreme Court in an earlier judgment in the case (see our post on that decision here).

The test under the common law is, therefore, different from the test under the recast Brussels Regulation (and the Lugano Convention) where direct damage in the jurisdiction is a requirement.

Given the divergent views expressed on this issue by numerous higher court judges, it remains ripe for further consideration in the Supreme Court. While arguments that the common law gateway does or should mirror the test in the Brussels regime may diminish post-Brexit, there is still the underlying question of principle to be decided: what amounts to a sufficient connection to the jurisdiction to justify tort proceedings being brought in England and Wales against a foreign defendant?

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 against Holdings 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 on the basis that the claim did not come within the tort gateway in the CPR. Permission was granted to appeal to the Supreme Court, given the uncertainty over how the tort gateway should be interpreted.

The Supreme Court, however, following the admission of further evidence, considered there was no good arguable case that Holdings was in fact the owner or operator of the hotel and therefore overturned the grant of permission to serve outside the jurisdiction. In those circumstances, the correct interpretation of the tort gateway did not arise. However, the appropriate test was considered by the court at length in obiter comments. The majority (Lady Hale and Lords Wilson and Clarke) considered that direct damage in the jurisdiction was not required in order to come within the tort gateway. Lords Sumption and Hughes disagreed (agreeing with the decision on this point in the Court of Appeal, although not the reasoning).

In light of the finding concerning the ownership of the hotel, Lady Brownlie then sought from the High Court, and was granted, permission to substitute Holdings with FS Cairo (Nile Plaza) LLC (“FS Cairo”), an Egyptian company, and to serve the claim outside of the jurisdiction.

FS Cairo appealed to the Court of Appeal. The two issues before the court were whether the claims came within the tort gateway in the CPR and whether the claims made had a reasonable prospect of success (which entailed considering to what extent foreign law needed to be pleaded and proved). This post deals only with the decision in respect of the tort gateway.

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.”

Decision

The Court of Appeal held, by a majority (Arnold LJ dissenting), that the claims came within the tort gateway.

Judgment of McCombe LJ

Lord Justice McCombe, who gave the first judgment on this issue, observed that the appeal in the case went precisely to the point considered by the Supreme Court in very full obiter dicta and (like the trial judge) he would feel strongly inclined to follow the majority conclusion unless there was other binding authority or he was clearly persuaded not to do so.

After analysing the various arguments raised, he reached the conclusion that the views of the majority were correct. The proper question to ask was whether a claimant had suffered “significant damage” in the jurisdiction. There was no need to import the legalistic niceties inherent in the concepts of direct and indirect damage.

As regards those arguments:

• The court rules which applied to common law cases were amended in 1987 so as to apply where damage from a tort was suffered in the jurisdiction, as well as when the acts giving rise to the tort were committed here. That change was made in light of the CJEU decision in Handelswerkerij GJ Bier BV v Mines de Patasse d’Alsace CA (Case 21/76) [1978] QB 708. That case had interpreted the phrase “where the harmful event occurred” in the Brussels regime as meaning either where the damage was sustained or where the act took place that gave rise to the damage. Without the change to the court rules, the tort gateway in common law (ie non EU) cases would have been much narrower than the tort provision in the Brussels regime.
• That change, effected by entirely different language to that used in the Brussels regime, did not mean the subsequent narrow interpretation of “damage” adopted in CJEU decisions on the Brussels regime also applied to interpret the English common law gateway.
• It was clear from the decision in Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 that there were differences between the EU rules and the common law gateway. Under EU rules, if damage is sustained where the causal act took place, there is no jurisdiction in a second state, even if significant further damage is suffered there. That is not the case in England in light of the Metall und Rohstoff case.
• As regards other cases relied on, in particular Societe Commerciale de Reassuance v Eras International [1992] 1 Lloyd’s Rep. 570 and  ABCI v Banque Franco-Tunisienne [2003] 2 Lloyds Rep 146  the facts were very different and there was little relevant comparison with personal injury cases.
• The residual discretion afforded by the doctrine of forum conveniens in common law cases was an important factor to take into account.
• Interpretation of “damage” in the gateway could not be assisted by looking at the Rome II Regulation on the law applicable to non-contractual obligations.

Judgment of Arnold LJ

Lord Justice Arnold took the view that the court should make up its own mind as to the correct answer, given that the Supreme Court’s views were obiter, there was only a bare majority in favour of the broader interpretation and two of the majority acknowledged the need for caution in relying upon the view they expressed.

His starting point was that the word “damage” in the gateway was capable of being interpreted broadly or narrowly so it was important to have regard to the context and purpose of the rule, which applied to all tort claims, not just personal injury claims.

He concluded that what must be shown is that direct damage was suffered in the jurisdiction and indirect damage is insufficient. Only this would represent a sufficient connection with this jurisdiction to justify the English court asserting jurisdiction over a foreign defendant. Otherwise it would not only confer on the courts what Lord Sumption described as “universal jurisdiction to entertain claims by English residents for the more serious personal injuries suffered anywhere in the world”, but an equally broad jurisdiction over torts causing purely economic damage.

As regards the various arguments raised:

• The amendment of the court rules in 1987 supported the conclusion that the gateway should be interpreted at least as broadly as the tort provision in the recast Brussels Regulation but did not go further and mean it should not be interpreted more broadly. To that extent he agreed with Lord Wilson’s comments in the Supreme Court.
• He was unimpressed however with the argument that the CJEU’s decisions on the meaning of “damage” post-dated the amendment in 1987. Where domestic legislation is adopted to be consistent with European legislation, it should be interpreted consistently with how it is interpreted from time to time by the CJEU.
• The power to refuse jurisdiction on the basis of forum non conveniens was a factor favouring a broader rather than narrow construction of gateways but it was important not to place too much weight on this. Disputes as to appropriate forum are expensive and uncertain. Adopting an interpretation of the gateway which left most of the work in identifying appropriate cases for determination in England to the forum conveniens rules would be a recipe for litigation.
• The decision in Metall und Rohstoff was only authority for the proposition that, if most of the damage has been sustained in the jurisdiction, it is immaterial that a small amount has been suffered outside. The decision in ABCI, on the other hand, was strongly persuasive of the need for direct damage in the jurisdiction.
• The Supreme Court had unanimously agreed that the Rome II Regulation on the law applicable to non-contractual obligations was not directly relevant when interpreting gateways, as jurisdiction and applicable law are distinct concepts. However, the reasoning in Lazar v Allianz SpA (EU:C:2015:802) was, he thought, persuasive when it came to identifying the relevant connecting factors for the purposes of jurisdiction.

So far as the damages claimed were concerned, Lord Justice Arnold’s view was that damages for bereavement and loss of dependency were indirect consequences of the death of Sir Ian in Egypt and Lady Brownlie’s claims for pain, suffering and loss of amenity were the direct consequences of the tort which took place in Egypt. There was therefore no good arguable case that the claims fell within the tort gateway.

Judgment of Underhill LJ

Lord Justice Underhill took the view that the approach which accorded proper weight to a fully considered but obiter view of a majority of the Supreme Court should be the same as that which a first instance court takes to a decision of a court of co-ordinate jurisdiction, namely it should follow the decision unless it was clearly wrong.

Applying that test, he was not persuaded that the view of the majority in the Supreme Court was wrong. He therefore agreed as to the outcome with Lord Justice McCombe.

However in his view there were powerful arguments to be made on both sides and he did not think there was any value in his contributing to the debate about which of the two approaches would be preferable or more in accordance with the case law.

Further guidance?

How the tort gateway should be interpreted is clearly controversial. It has been considered by many judges and opposite views reached. In this case alone, there are only two reasoned judgments on this question and they reach opposite conclusions. Further guidance from the Supreme Court would therefore be welcome.

It may be thought that with the UK having left the EU and the transition period coming to an end on 31 December 2020, the argument that the common law gateway does or should reflect the tort rules in the Brussels regime diminishes (at the very least). There is however a more fundamental issue to be decided – what is or should be a sufficient connecting factor to justify the English court taking jurisdiction in a tort claim over a foreign defendant. Resolving that issue includes deciding whether gateways should be widely interpreted, given the court’s discretion to refuse jurisdiction where England is not the forum conveniens, or whether a more narrow interpretation, which gives greater certainty to parties and reduces the likelihood of lengthy jurisdiction challenges, should be adopted.