Cox v Ergo Versicherung AG7 is an interesting example of the English courts wrestling with the question of which law governs the assessment of damages in a cross border case. A British army major was killed in a road traffic accident in Germany by the fault of a German driver. His widow sued the driver’s insurer in the English courts, as she was entitled to do by reason of the ECJ’s decision in Odenbreit.8 The German driver’s liability was governed by German law. Under German law, the widow was entitled to claim compensation for loss of maintenance by her deceased husband. The widow contended that when it came to the quantification of damages, the principles of the Fatal Accidents Act 1976 (“the 1976 Act”) should be applied. The defendant disagreed.

The claimant relied on a number of arguments which the Court of Appeal dismissed without difficulty. There was no basis for the suggestion that the German cause of action (a straightforward tortious claim) was not justiciable in England or that the relevant German rules offended English public policy. The 1976 Act was not an overriding mandatory provision to be applied regardless of the foreign law. And there was no basis for displacing German law in favour of English by reference to section 12 of the 1995 Act.

That cleared the ground for the difficult argument. Choice of law in Cox was governed by the Private International Law (Miscellaneous Provisions) Act 1995 (“the 1995 Act”), since the accident happened before 11 January 2009.9 It will be remembered that under English common law rules of conflict of laws, unchanged by the 1995 Act, the law of damages is treated as partly substantive and partly procedural. The question of whether a particular head of loss is recoverable at all is determined by reference to the putatively foreign substantive law. Once established that the head of loss is recoverable in principle under that foreign law, however, the quantification is treated as a matter of procedure and thus carried out according to English rules.

Where a person under a legal obligation to maintain another is negligently killed, German law provides a claim for the benefit of the person “deprived of this right to maintenance as a consequence of the killing” (section 844 of the Bürgerliches Gesetzbuch (“the BGB”)). The German law experts in the case agreed that under German law the claimant had to give credit for earnings she had received since her husband’s death or would receive in the future and for maintenance received from another source, for example following remarriage. This was said to follow from the duty to mitigate loss. English law damages for loss of dependency under the 1976 Act are of course calculated without any credit having to be given for benefits arising from the death or for actual or prospective remarriage.

The issue which divided the Court of Appeal was whether the claim for loss of maintenance under German law was essentially similar to the loss of dependency claim under the 1976 Act. If so then, in accordance with the rules described above, the damages for the loss of maintenance would be assessed on English law principles. If German loss of maintenance is not in essence similar to English loss of dependency, however, it would be inappropriate to use the 1976 Act rules of quantification and necessary to forge a remedy suitable to the nature of the German head of loss. In practice, that would mean following the principles of assessment used by the German courts.

The majority (Etherton LJ and Maurice Kay LJ) held that loss of maintenance under German law was fundamentally different to loss of dependency under the 1976 Act. Etherton LJ gave the leading judgment. He relied on a number of factors.10 The German cause of action depended on a legal obligation to maintain whereas the English right to claim was not so limited. The 1976 Act includes general damages for bereavement whereas German law does not. Under German law post-death events were taken into account as part of a duty to mitigate whereas in English law they were not. The duty to mitigate and the scope of liability were both matters of substantive law and were both important to the question at issue.

Dame Janet Smith dissented. Her approach was simple. “ In my view, the crucial question is ‘what does the law of each country seek to compensate the claimant for?’ It is not a matter of how it is done. I think the important point is that both jurisdictions provide for the loss of financial support for persons deprived of that support by the tort. That is the head of damage with which we are concerned.11 In essence, she held, German law and English law were providing a remedy for the same loss (the loss of financial support) and simply applied different rules to the quantification of the loss.

It seems to this writer that as an application of the well-established principles of English conflict of laws for establishing quantum (identify the head of loss by reference to the foreign substantive law, quantify it by reference to the law of the forum) Dame Janet Smith’s approach is correct. A claim for loss of maintenance under German law is protecting the same interest and compensating the same loss as a claim for loss of dependency under English law. The logic of the majority starts from the way in which the Germans value the loss of support, note that it is very different to the way the English value the loss of support, and conclude that therefore the two systems are not compensating the same thing. But that is to look at the question from the wrong end.

German law provides compensation for loss of support to a more limited class of claimants than English law, but that does not change the nature of the loss being compensated. Equally, German law brings into account actual or likely benefits accruing to the claimant after her husband’s death from earnings and remarriage. The majority describe this as more than a mere rule of quantification. It arises, it is said, from the duty to mitigate which is a matter of substantive law. That analysis is not, however, wholly satisfactory. First, the Court of Appeal has previously held unequivocally in respect of a fatal accidents claim that “[t]he question whether deductions should be made for benefits is not a question which goes to liability: it is a question going to assessment. 12

Secondly, the reference to the duty to mitigate is not explored and cannot really explain the German rule in full. The question of whether benefits already received are to be brought into account is not a matter of mitigation in any meaningful sense. And the description of a requirement to bring into account benefits accruing from remarriage as arising from the duty to mitigate is baffling without further explanation. Does a widow really have a duty under German law to remarry so as to reduce the damages payable by the tortfeasor who has killed her first husband? Is she in breach of that duty if she prefers a poor man to a wealthy one? It hardly seems likely. Overall, Dame Janet Smith applies the simple logic of the common law rule better than the majority.

What the decision may really show, however, is a court doing whatever is necessary to avoid applying an unsatisfactory rule. The majority appeared to find the German rules more rational and likely to lead to more accurate compensation than the English rules which artificially freeze the picture at the date of the husband’s death and ignore everything which happens afterwards. Assessing damages according to the law of the forum is equally objectionable on a broader basis of principle. We create a sophisticated set of rules to ensure that the case is judged according to the most appropriate law, and then we rip up those rules when it comes to the assessment of damages, which in personal injury and fatal accident cases is more often than not the most important issue between the parties. In what useful sense are the legal rules leading to a judgment for say £1m rather than £2m merely procedural?

But help is at hand. Rome II removes from English law the rule that the assessment of damages is a matter of procedure. If choice of law is governed by Rome II (as it will be in the large majority of future cases) then the assessment of damages will be governed by the substantive applicable law.13 Cox would have the same effective outcome if decided under Rome II but that outcome would be arrived at much more simply.