The Court of Appeal has held that a Spanish hotel company could be joined to proceedings in England brought by a claimant against the hotel’s Spanish liability insurer.
The English claimant, Mr Keefe, suffered severe injuries while on holiday in Tenerife in October 2006. The accident occurred at a hotel owned by the second defendant, a company domiciled and incorporated under the laws of Spain.
The claimant originally brought proceedings directly against the hotel’s Spanish insurer in England under the special rules on jurisdiction in matters relating to insurance contained in the 2001 Brussels Regulation (Council Regulation (EC) 44/2001). Spanish law applied to the claim but, under the law which preceded the Rome II Regulation (Council Regulation (EC) 864/2007), the quantum of damages recoverable would be assessed in accordance with English procedural law. This would be higher than the amount of damages that would be awarded under Spanish law.
The insurer accepted liability but when it emerged that the relevant insurance policy was subject to a financial limit that was significantly below the damages claimed, the claimant applied to the English court to join the insured hotel as a party to the proceedings under Article 11(3) of the Brussels Regulation. Article 11(3) provides that “If the law governing such direct actions [against the insurer] provides that the policyholder or the insured may be joined as a party to the action, the same court shall have jurisdiction over them.”
The insured hotel was, unsurprisingly, keen to avoid the jurisdiction of the English court and applied to challenge its jurisdiction, relying on Article 2 of the Brussels Regulation which provides that a defendant should generally be sued in the court of the Member State in which the defendant is domiciled.
The Master and, on appeal, the High Court, dismissed the application, accepting the claimant’s argument that, under Article 11, the court had jurisdiction over the insured by virtue of having jurisdiction over the insurer. On appeal to the Court of Appeal, the Spanish hotel company submitted that the English court did not have jurisdiction because:
- this was not a dispute involving insurance, but a ‘lack of insurance’ and so Article 11 was not applicable; instead the general principle (Article 2) and the law of Spain should apply; and
- there had to be a policy dispute between the insurer and the insured in order for the claimant to be able to rely on the provisions of Article 11 and join the insured to the English action.
Court of Appeal’s decision
The insured’s attempts to avoid being joined to the action by disputing the English court’s jurisdiction were unsuccessful before the Master, the High Court, and finally in the Court of Appeal.
Although Article 11 is a derogation from the general rule that a tortfeasor is entitled to be sued in the courts of the country where the harmful event occurred, the court clarified that this was not to be construed narrowly. The Court of Appeal held that the argument that the claim was for the uninsured excess of the policy (and so was not an ‘insurance dispute’ and therefore fell outside the scope of Article 11(3)), could not be sustained because:
- it was clear that a weaker party should be given more favourable protection than the general rules of jurisdiction allow under the Brussels Regulation; and
- there was no requirement for there to be a policy dispute between insurer and insured before the claimant could rely on Article 11.
The Court of Appeal also rejected the insured’s argument that there was a risk of irreconcilable judgments if separate proceedings were issued in Spain against the hotel, as, quite simply, the court felt there would not be such a risk. This was a practical and cost effective result since it reduced the risk of multiple proceedings.
The decision provides useful guidance on when a foreign insured and its liability insurer may be joined in the same proceedings in England under the Brussels Regulation. The issue was important in this case because the quantification of damages under Spanish law would be lower than under English law. That has, however, now changed as under Rome II, which applies to accidents occurring on or after 11 January 2009, the applicable law for the quantification of damages in respect of a tort obligation is the law of the country in which the damage occurs. On the facts of this case, Spanish law would have applied to the quantification of damages.
Although the effect of Rome II is that the law of the country where the damage occurs will apply to the quantification of damages for accidents occurring on or after 11 January 2009, there may still be practical benefits to a claimant in being able to bring proceedings in the UK against both a foreign tortfeasor and its liability insurer.