The Court of Appeal has held that direct damage in the jurisdiction is required to come within the tort jurisdictional gateway in the CPR, effectively overruling earlier first instance decisions that indirect or consequential damage was sufficient: Lady Christine Brownlie v Four Seasons Holdings Incorporated [2015] EWCA Civ 665.

The decision brings the position under the common law in line with the position in EU cases, where it has long been the case under the Brussels regime that direct damage within the jurisdiction is required.

The earlier decisions under the common law were controversial, both in taking a different approach to that under the EU regime and in giving jurisdiction in many cases to the claimant’s domicile. An earlier Court of Appeal decision, Erste Group Bank AG, London Branch v JSC “VMZ Red October” [2015] EWCA Civ 379, had cast doubt on whether the tort jurisdictional gateway extended to consequential loss, but reached no final conclusion.

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. It was Lady Brownlie’s case that the Four Seasons chain of hotels was run by Four Seasons Holdings Incorporated, a Canadian company, and that it was liable for the damage suffered.

Lady Brownlie brought proceedings in England to recover damages in contract and in tort and obtained permission to serve outside the jurisdiction. That permission was overturned by a master, reinstated by a judge and the judge’s decision then appealed to the Court of Appeal.

Decision

Much of the decision concerns the contract claims which are fact specific and not covered in this post. So far as the claims in tort were concerned, the issue before the Court of Appeal was whether Lady Brownlie had shown “damage was sustained within the jurisdiction” under the relevant gateway at CPR Practice Direction 6B, para 3.1(9)(a). This turned on whether any damage, including consequential damage, is sufficient for the gateway, or whether it has to be direct damage, and then on whether the damage sustained was in fact consequential or direct.

Under the Brussels regime, a defendant can be sued in the place where the harmful event occurred (see now article 7(2) of the Recast Brussels Regulation, No 1215/2012.) This has been interpreted as being either the place where the act giving rise to the harmful event occurred or where the damage occurred. So far as “damage” is concerned, the CJEU has held that this means direct damage; consequential loss is not sufficient (Handelskwekerij G J Bier BV v Mines de Potasse D’Alsace SA C -21/76, [1978] 708, Dumez France v Hessiche Landesbank C-220/08, [1990] ECR 1-49).

A different approach has however been taken in English first instance decisions interpreting the CPR tort gateway requirement for damage. These cases have drawn a distinction between the expression “damage” and “the damage”, concluding “damage” can include any damage suffered. This difference in approach has also been justified on the basis that in common law cases there is the additional requirement of establishing that England is the forum conveniens. The court can therefore decline jurisdiction if England is not the appropriate forum for the claim, whereas there is no such power in Brussels regime cases.

The divergence of approach between EU and non-EU cases has been criticised, most recently by the Court of Appeal in the Erste case. In that case the court declined to decide whether the English first instance cases should be overruled but it had “serious reservations” as to whether they were right, commenting:

‘…the effect of the first instance authorities is to make this gateway extraordinarily wide. For example, in Booth v Phillips [2004] 1 WLR 3292 it was sufficient that the executrix of the deceased, who had died in an accident in Egypt had paid funeral expenses in England to enable her to serve out of the jurisdiction on behalf of his estate for the whole of the estate’s loss…In Cooley v Ramsey [2008] EWHC 129 (QB)…it was sufficient that the claimant, who had been left gravely handicapped by an accident in Australia, suffered loss of earnings after repatriation to England six months later…’

The Court of Appeal in the Brownlie case has now clarified the position. Lady Justice Arden, giving the main judgment, held that indirect or consequential loss is not sufficient to satisfy the tort jurisdictional gateway. The gateway should be interpreted consistently with Rome II ((EC) 864/2207) which determines the law applicable to non-contractual obligations, and that in turn should be interpreted in the same way as the tort jurisdiction ground in the Brussels regime.

This conclusion meant that two of Lady Brownlie’s tort claims could not be brought in England as the direct loss occurred in Egypt. She was however able to bring a claim under the Fatal Accidents Act 1976; the court held this was a direct loss in the jurisdiction, not a consequential loss, and in the absence of evidence of Egyptian law, the court was entitled to assume Egyptian law was the same as English law. The court acknowledged, however, that the distinction it was drawing between this claim and the other tort claims was novel and a point which the Supreme Court might wish to consider in due course.

Comment

Whilst most of the cases on this point have been personal injury cases, including the Brownlie case, the Erste case involved claims for conspiracy and other economic torts. There is therefore no reason to believe any different approach would be taken in respect of other tort claims.