Supreme Court finds Civil Liability (Contribution) Act 1978 applies only where contribution claim governed by English law

The Supreme Court has held that the Civil Liability (Contribution) Act 1978 does not have overriding effect and therefore applies only where domestic conflict of laws rules indicate that the contribution claim in question is governed by English law: The Soldiers, Sailors, Airmen and Families Association – Forces Help v Allgemeines Krankenhaus Viersen GmbH [2022] UKSC 29.

In doing so, the Supreme Court disagreed with the conclusion reached by the Court of Appeal and the High Court. The effect in the current case was that, since the underlying contribution claim was governed by German law, and under German law the relevant limitation period had expired, the contribution claim could not be pursued.

The decision is significant in establishing that a contribution claim brought in the English courts will be determined according to the law which governs it applying the usual domestic conflict of laws rules (which will ordinarily, but not necessarily, be the law governing the underlying claims). Only if that law is English law will the 1978 Act apply. Parties wishing to bring contribution claims should therefore keep a close eye on the applicable limitation period under any relevant foreign law, as that law will also govern questions of limitation as a result of the Foreign Limitation Periods Act 1984.

Background

The underlying claim related to a brain injury the claimant suffered at birth at a hospital in Germany when his father was stationed with UK armed forces in Germany. The claimant brought proceedings against the Ministry of Defence and the Soldiers, Sailors and Airmen and Families Association - Forces Help (or SSAFA), which employed the midwife who was said to have been negligent. The two defendants in turn brought a claim for contribution against the third party hospital under the 1978 Act. This provides a right of contribution where another person is liable to the claimant in respect of the same damage.

It was common ground that the claimant's claims against the defendants, and any liability of the third party to the claimant, were all governed by German law. It was also agreed that, applying English conflict of laws rules, German law would apply to the contribution claim - unless the 1978 Act has overriding effect so that it applies irrespective of the applicable law. The parties further agreed that, if the contribution claim was governed by German law, the applicable limitation period would have expired, whereas if the 1978 Act applied that would not be the case.

The High Court directed that the question of whether the 1978 Act has overriding effect be determined as a preliminary issue, and decided the preliminary issue in the affirmative. The Court of Appeal dismissed an appeal against that decision. The third party appealed to the Supreme Court.

Decision

The Supreme Court unanimously allowed the appeal, finding that the 1978 Act does not have overriding or mandatory effect, so does not apply automatically to all proceedings for contribution brought in the English court without reference to choice of law rules. Accordingly, German law applied to the contribution claims, and they were time-barred. Lord Lloyd-Jones gave the court's judgment, with which Lord Reed, Lord Hodge, Lord Kitchin and Lord Hughes agreed.

Lord Lloyd-Jones said the question under consideration was whether Parliament had intended that the 1978 Act should be given overriding effect. He noted that confusion could arise if this was referred to as “extra-territorial effect”. The issue was "not whether the 1978 Act applies outside the jurisdiction but whether it mandates the application of English law to issues which would otherwise be governed by a foreign law".

He noted that the 1978 did not expressly provide for overriding effect. The question was whether such an intention had to be implied from the provisions of the statute. He concluded that it did not.

Section 1(6) of the 1978 Act provides that it is immaterial whether any issue arising in the underlying claim "was or would be determined (in accordance with the rules of private international law) by reference to the law of a country outside England and Wales". The Court of Appeal had considered that, since this section applies the Act even though the underlying claims were subject to a foreign law, the Act must have been intended to apply irrespective of the choice of law which prima facie governed the contribution claim. However, Lord Lloyd-Jones said this was a non sequitur, as the law governing the principal liability of the defendants and that governing contribution between them are distinct matters.

Lord Lloyd-Jones suggested the point might be a convincing one if a contribution claim was invariably governed by the same law as the underlying claims, as otherwise the provision of s.1(6) cited above would seem pointless. However, he did not consider that this was invariably the case. There may be situations in which a contribution claim is most closely connected with English law, despite the underlying claims being governed by foreign law, such as where the two defendants are in a special relationship which is governed by English law.

None of the other provisions of the 1978 Act relied on by the defendants indicated that the Act was intended to have overriding effect, as they were equally consistent with the Act applying only where the contribution claim was governed by English law, and there was nothing in the legislative history to support the view that the Act was intended to have overriding effect. There were comments in two Law Commission working papers in the early 1980s which assumed that the 1978 Act applied only to the extent that English law was the applicable law.

There were a number of cases in which overriding effect appeared to have been assumed, and the point was considered expressly by Chadwick J in Arab Monetary Fund v Hashim (No 9), The Times, 11 October 1994 in which he concluded that the Act did have overriding effect. However, Lord Lloyd-Jones said, Chadwick J's judgment was open to criticism both because much of its reasoning was circular, and because the notion that it was up to English law to remedy perceived deficiencies in the contribution provisions of foreign legislation was open to serious doubt.

In Lord Lloyd-Jones's judgment, there was no good reason why Parliament should have intended to give overriding effect to the 1978 Act, so as to confer a statutory right of contribution whenever a third party contribution defendant could be brought before the English court and regardless of the law that would otherwise apply.