NLJ: Foreign dangers

Henry Morton Jack discusses fatal accidents abroad.

The Supreme Court recently handed down judgment in  Cox v Ergo Versicherung AG (formerly known as Victoria)  [2014] UKSC 22, [2014] All ER (D) 16 (Apr) on a number of preliminary issues. The judgment concerns the law applicable to the assessment of damages suffered by dependants of a person killed in an accident abroad.

The questions for the Supreme Court to consider were firstly whether English or German Law applied to that assessment and secondly, if English law did apply, whether damages were governed by the Fatal Accidents Act 1976 (FAA 1976).

The Supreme Court held that the appellant’s right to damages arose under German law but that such damages were to be assessed in accordance with English law, excluding the provisions of FAA 1976.

The facts

The appeal arose out of a fatal road traffic accident in Germany on 21 May 2004. The appellant’s husband, Major Christopher Cox, a British national serving with Her Majesty’s Forces in Germany, was riding his bicycle on the verge of a road when a motor vehicle driven by Mr Kretschmer, a German national resident in Germany, left the road and hit him, causing fatal injuries. Mr Kretschmer was insured by the respondent, a German insurance company, under a contract governed by German law.

There was no issue as to jurisdiction or liability. The central issue between the parties related to the quantification of the respondent’s liability to the appellant. The resolution of this issue depended on the extent to which English or German law applied and, in particular, whether the appellant could rely on FAA 1976.

The questions raised by the appeal are of general significance because the provisions of FAA 1976 do not require credit to be given in the assessment of damages for maintenance payments received by a claimant widow from a current partner. In contrast, under German law credit would need to be given for maintenance payments. This, of course, would serve to reduce the damages recoverable by the appellant.

In the present case, the outcome was important to the appellant because, although she had been living with her husband in Germany at the time of the accident, she had subsequently returned to England and now has two children with a new partner. Therefore, if the quantum of her loss was assessed according to the provisions of FAA 1976, she stood to receive a greater sum than if quantum were assessed according to corresponding provisions under German law.

The “anomalous” FAA 1976

As has often been noted, FAA 1976 disregards and does not require credit to be given for benefits and mitigation of losses. In this regard, FAA 1976 is an exception to the general principle upon which damages are awarded in English law because it allows for the possibility that a claimant might, in financial terms at least, recover more than she has lost.

The peculiar nature of fatal accident claims, and the unquantifiable nature of the underlying loss, are no doubt at the heart of this public policy-driven exception. Nevertheless, as Lord Sumption stated in his judgment in the present case: “What is clear is that ss 3 and 4 (of FAA 1976) mark a departure from the ordinary principles of assessment in English law, which can fairly be described as anomalous.”

Lord Sumption’s words echo the famous dictum of Lord Diplock, who noted that assessment under FAA 1976 is “an artificial and conjectural exercise [whose] purpose is no longer to put dependants, particularly widows, in the same economic position as they would have been in had their late husband lived” ( Cookson v Knowles [1979] AC 556, [1978] 2 All ER 604).

The law

As the date of the accident rendered the claim outside the scope of the Rome II Regulation, the applicable law was determined by reference to the Private International Law (Miscellaneous Provisions) Act 1995 (PIL(MP)A 1995). PIL(MP)A 1995 provides that issues arising on a cause of action in respect of personal injury are to be determined according to the law of the place where the tort occurred (s 11). However, this does not affect procedural rules “to be determined…in accordance with the law of the forum” (s 14(3)(b)).

The appellant’s case that she could rely on FAA 1976 was advanced on two main grounds: that FAA 1976 was a mandatory rule of the forum within s 14(4) of the 1995 Act; and that even if the appellant’s cause of action only arose under German law, her damages were to be assessed in accordance with English law (following Harding v Wealands [2007] 2 AC 1, [2006] 4 All ER 1), including FAA 1976.

The decision

The majority of the Court of Appeal (Dame Janet Smith DBE dissenting) had determined that, although the rules regarding assessment of damages in FAA 1976 were “procedural” for the purposes of PIL(MP)A 1995, they could not be relevant to an assessment of damages for the German cause of action because the conceptual differences between the English and German law as to damages for fatal accident claims were too great.

On appeal, Lord Sumption noted that the Court of Appeal had been “much exercised by the difficulty of applying the damages rules of FAA 1976 to a cause of action under [German law] given the considerable differences between them”.

Giving the leading judgment of the court, Lord Sumption agreed with the Court of Appeal, but “for an altogether simpler reason than the conceptual differences between the two laws”. In his view, it was “unnecessary to engage in the technical and difficult task of classifying sections 1A, 3 and 4 of the Fatal Accidents Act as procedural or substantive, because these sections are irrelevant in either case”.

Lord Sumption held that, if substantive, the sections were irrelevant because the substantive law in the present case was German. If procedural, the sections still did not apply because they did not lay down general rules of English law relating to the assessment of damages, even in personal injury actions, but only rules applicable to actions under FAA 1976 itself.

In conclusion, Lord Sumption held that an action to enforce a liability whose applicable substantive law is German law is not an action under FAA 1976 to which the damages provisions of the Act can apply.

The inevitable consequence of this decision was that the appellant did not have the benefit of the “anomalous” provisions for the assessment of damages which apply under FAA 1976. Her damages were thus subject to the rules of assessment which apply generally in English law in the absence of any statute displacing them. In other words, she must be put in the same financial position, neither better nor worse, as she would have been in if her husband had not been fatally injured.

Unresolved issues

Despite the judgment of the Supreme Court, a number of questions relating to the applicability of FAA 1976 in respect of accidents abroad remain unresolved.

Lord Sumption held that FAA 1976 did not have extra-territorial effect in this case. Having noted that there was nothing in the language of FAA 1976 to suggest that its provisions were intended to apply irrespective of the choice of law derived from ordinary principles of private international law, he described the Act as “an unpromising candidate for implied extra-territorial effect”. This is because, at the time when FAA 1976 was passed, actions brought in England on a foreign tort were subject to the ‘double actionability’ rule subsequently abolished by PIL(MP)A 1995.

Lord Sumption observed that the whole purpose of s 1 of FAA 1976 was to correct an anomaly in the English law of tort and there was no apparent reason to apply it to fatal accidents which were governed by foreign laws and therefore unlikely to exhibit the same anomaly.

However, Lord Sumption’s reasoning leaves open the possibility that FAA 1976 may apply where the fatal accident law of a foreign country is contrary to English public policy. Section 14 of PIL(MP)A 1995 specifically preserve rules of domestic law so important that as a matter of policy they must apply in any action before a court of the forum, even where the issues are in principle governed by a foreign law selected by a foreign choice of law rule. As Lord Sumption noted: “Some foreign laws governing the availability of damages for fatal accidents may no doubt be so offensive to English legal policy that effect would not be given to them in an English court.”

Since the Supreme Court has now held that FAA 1976 does not contain mandatory rules, the exact basis on which an English court would assess damages having disapplied foreign law is unclear.

Furthermore, it is not clear whether FAA 1976 applies in circumstances where Article 4(2) of Regulation EC No. 864/2007 (Rome II) applies. Article 4(1) of Rome II states that, unless otherwise provided for in the Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.

Article 4(2) states, however, that where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply. It seems clear, therefore, that where Art 4(2) applies FAA 1976 would apply. Lord Sumption stated specifically, however, that the Act has no extra-territorial effect.

In conclusion, the judgment of the Supreme Court clarifies the law in relation to claims for wrongful deaths which occur in other jurisdictions and are pursued in England and Wales. In particular, it is suggested that the decision will be reassuring to foreign insurers who now know with certainty that FAA 1976 does not apply in cases where a foreign law is applicable. However, some unresolved issues remain in the light of the Supreme Court’s judgment which will need to be resolved in due course.

Henry Morton Jack, barrister, 2 Temple Gardens ( Henry acted for the appellant on instruction from Leigh Day, led by Alexander Layton QC, 20 Essex Street, with Marie-Louise Kinsler, 2 Temple Gardens.