This question is at the heart of the Supreme Court’s decision in Four Seasons International Holdings (FSIH) v Brownlie. The fatal car accident, which gave rise to the claim, happened in Egypt but the claimant was an English resident and had incurred losses and expenses related to the incident on returning to England. She issued in England against FSIH, which was based in Canada, and thus had to apply to serve the proceedings outside the jurisdiction. Whether she would be able to do that would turn on where the damage was sustained.
The disposal of the appeal
The car accident in which the claimant’s husband was killed and she was injured happened during an excursion booked by telephone with the Four Seasons Hotel in Cairo. She claimed in both contract and tort (for her own injuries and under the Fatal Accidents Act 1976) against the hotel’s holding company, FSIH. In July 2015 the Court of Appeal allowed the service outside the jurisdiction in respect of the tort claims alone. FSIH appealed to the Supreme Court.
The Supreme Court allowed the appeal (the decision may be read here), meaning that the claim against FSIH cannot be pursued in England on any basis. It is worth pointing out, however, that one of the Justices expressly referred to the prospect of the claimant being allowed to make further applications to join other parties and amend her particulars of claim.
The disposal of the claims against FSIH actually turned on the identity of the correct defendant. On the evidence available, FSIH did not operate the hotel in Cairo and it did not contract with the claimant to provide the excursion. The contractual claim against it therefore had no prospects of success and it could not be vicariously liable in tort for the negligent driving during the excursion.
The unresolved obiter issue of the meaning of “damage”
The Supreme Court nevertheless went on to consider – in obiter remarks which are nevertheless highly relevant – the basis of the arguments about service outside the jurisdiction. The point is governed by CPR Practice Direction 6B. In contract claims, the PD requires that the contract “was made within the jurisdiction”, which was not established on the facts. In tort claims, it requires that the “damage was sustained or will be sustained, within the jurisdiction.”
The incident happened in Egypt and the applicable law was therefore Egyptian law. The claim advanced under the Fatal Accidents Act 1976 therefore had no prospect of success. The remaining claim was in respect of the claimant’s own injury and consequential loss. Were these elements “damage … sustained within the jurisdiction” such that service outside the jurisdiction would, had the point been live, been permitted? [This was an entirely separate matter to the application of Egyptian law to the claim].
The Supreme Court split 3:2 on this. In the minority were Lords Sumption and Hughes, who argued that the damage for these purposes is complete when the incident occurs and it is therefore sustained at the time of the accident and at the place of the accident. For them, what was sustained in England and Wales was the financial measure of the damage rather than the damage itself. There was nothing in the language of the Practice Direction to suggest that ”damage” should extend to the financial or physical consequences of the damage. This approach was consistent with that in the Brussels regulation, which allows jurisdiction in the courts of the place “where the harmful event occurred.”
Lady Hale gave the main opinion for the majority. She argued that many torts, such as trespass and libel, are actionable per se, i.e. without proof of damage. On that basis there was no reason to think that the Practice Direction intended “damage” to mean completion of the cause of action. Its drafters were more likely to have the ordinary natural meaning of the word in their mind. She was persuaded by a decision of the New South Wales Court of Appeal which had found, when considering a very a similar rule that: “damage, therefore, is to be contrasted with the element necessary to complete the cause of action; it includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant.”
Lords Wilson and Clarke agreed with her that this wider interpretation of damage would be preferred. Lord Wilson’s view was that it would be “legitimate to interpret the word ‘damage’ as extending to the secondary damage which the claimant and her husband’s estate sustained in England and which flowed from the primary damage sustained in Egypt.”
Where does this leave issues of “damage” and indirect consequences?
Frankly, this is far from clear. The opinions of the Justices in Brownlie are all obiter and therefore, not determinative. The split decision on the point does not help either. “Damage” here was being interpreted in the context of the CPR and service outside the jurisdiction.
But the same word “damage” is used to determine matters of applicable law* in the Rome II regulation. The regulation is fairly clear that “damage” occurs “where the injury was sustained or the property was damaged respectively.” Even so, in this different context, it is worth noting that he ECJ held in 2015 in Lazar v Allianz that an award similar to bereavement damages claimed by Romanian parents whose daughter had been killed in a car accident in Italy was not “damage” for the purposes of Article 4.1 of the Rome II regulation, which provides that the applicable law “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.” Although this case was brought to the attention of the Supreme Court during the hearings in Brownlie, it is not mentioned at all in this judgment.
Unfortunately, the question whether “damage” could, should, or does mean different things in the different contexts of jurisdiction and applicable law, is in no way settled by Brownlie. Despite it perhaps appearing an obscure point it is far from that: in every accident abroad involving a British national it is certain that there will be financial consequences in the UK – the wider view of damage – as well as a harmful event – the narrow view of damage – in a different country.
It is worth recalling, however, that Brownlie will not affect claims arising out of motor accidents within the European Union. These are subject to the special regime in the Codified Motor Insurance Directive and under which people injured in a road accident in another Member State may (i) present claims in their ‘home’ state to the claims representative of the insurer of the foreign motorist and/or (ii) following the Odenbreidt case, sue the foreign insurer directly in their home state.
* Lady Hale correctly and helpfully re-emphasised that questions of jurisdiction and applicable law have to be analysed separately: “Applicable law and jurisdiction are two different matters. There is no necessary coincidence between the country with jurisdiction and the country whose law is applicable. It is accepted that in this case Egyptian law is applicable to the tort claims. Furthermore, there can only be one applicable law, whereas even in European law there can often be more than one country with jurisdiction.”
Written by Alistair Kinley, director of policy and government affairs at BLM.