Gunn & others v Diaz & others [2017] EWHC 157 (QB) – service out of the jurisdiction

This blog is by Patrick Vincent of 12 King’s Bench Walk

This was a decision of Mrs Justice Andrews in a catastrophic personal injury claim.The point decided was whether to accede to one of the Defendants’ applications to set aside an order permitting service upon it out of the jurisdiction.

Superficially the point is a short one, but the detailed judgment deals with several important issues of law and procedure relevant to international claims, and particularly international person injury claims, including:-

  • The duties on a party making a without notice application to serve out of the jurisdiction, or to extend time for service.
  • The availability of the jurisdictional “gateways” set out in the Practice Direction 6BPD3.
  • The proper characterisation of claims brought against foreign insurers.

Background

The principal claimant (“the Claimant”) was injured by an overtaking vehicle. when cycling in Costa Rica. The other claimants were family members who claimed to be entitled to damages for indirect losses under Costa Rican law, and the Claimant’s travel and medical insurers which claimed their outlays under Costa Rican law.

The Defendants were:-

  • Three individuals(Diaz, Cruz and Cornieles) said to be candidates for driving the vehicle.
  • Sixt, the hire company from which Diaz had rented the vehicle.
  • Citi, which owned the vehicle and had leased it toSixt.
  • INS, a Costa Rican state owned insurance body that had written two relevant policiesindemnifying the driver and owner of the vehicle (but not Sixt). The combined limit of indemnify under the policies was a little over US$90,000.

The driver, Sixt and Citi were probably all liable to the Claimant under Costa Rican law.

Costa Rican law permitted the Claimant, subject to certain conditions, to bring a subrogated claim against the insurers of those liable for the accident. As such, this was a claim in contract subrogating the Claimant to the driver’s and Citi’s right to indemnity from INS.

It was agreed that Costa Rican law applied to the assessment of damages. There was at this stage no evidence as to the likely measure of damages under Costa Rican law, but the severity of the Claimant’s injuries and the impact of Recital 33 to the Rome II regulation means that, even if ungenerous compared to an English assessment, the likely award under Costa Rican law would exceed the indemnity limits.

Identity of the Driver

The driver of the vehicle was not positively identified. The evidence at the hearing was that:-

  • Diaz hired the car with Cruz named as an additional driver.
  • Cruz told the investigating authorities that he was not in the vehicle at the time,that Diaz had admitted being the driver, and that Cornieles was the passenger.
  • Diaz claimed in a deposition that he was the passenger andCornieles was the driver.

The judge’s finding that there was “no evidence” that Cruz was the driver, and thus insufficient evidence to give rise to a serious issue to be tried as between him and the Claimant, is understandable. However, in circumstances where someone is clearly lying, and the vehicle appears to have been hired with the intention of it being driven by two named individuals, there does appear to be a good argument that the Costa Rican court could have been asked to draw the inference that the driver was one of those two individuals, and thus very possibly Cruz.

In any event, the matter proceeded on the basis that the driver was either Diaz or Cornieles.

Procedural History

The accident occurred on 21st March 2009. The claim form was issued on 19th February 2015. An application for permission to serve all six defendants out of the jurisdiction was made on 25th February 2009 and granted on 11th March 2015. That permission was sought via PD6B para 3.1(9)(a) (“the Tort Gateway”) which permits service out of the jurisdiction in tort claims where “…damage was sustained, or will be sustained, within the jurisdiction…”. It was at the time arguable, although far from certain, that circumstances in which an English claimant was injured abroad but experienced the impact of her injuries in England were sufficient to get through the Tort Gateway.

In June 2015 the Claimants applied without notice to extend the time for service to April 2016. The application was supported by evidence and granted on 7th July 2015.

Diaz was served in January 2016. He did not respond.

The Claimants applied in March 2016 for a further extension of time for service until December 2016. Permission was granted on 4th April 2016.

Sixt was served in June 2016. Although it initially appointed solicitors, they came off the record and Sixt took no further steps. Its failure to make an application disputing jurisdiction meant that it was deemed to have accepted jurisdiction (CPR11.1(5)), and enabled the Claimants successfully to apply for judgment in default against both Sixt and Diaz in August 2016.

INS was served in July 2016 and duly made the application disputing jurisdiction which the judgment of Andrews J determined.

Cruz, Cornieles and Citi had not been served as at the date of the hearing.

Determination

The application of INS to set aside service succeeded. In the judgment the following areas of interest were considered.

Subrogation and the Tort Gateway

Permission to serve INS out of the jurisdiction should never have been granted because the initial application relied on the Tort Gateway, but the claims against INS were subrogated claims and therefore claims in contract not tort (paragraph 43).

The Duty of Disclosure in Without Notice Applications

On 3rd July 2015 the Court of Appeal handed down judgment in Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665.

That decision made untenable the argument that, in a personal injury claim, “damage” for the purposes of the Tort Gateway occurs anywhere other than where the accident occurred.

The court was critical of the Claimants’ failure to draw Brownlie to the court’s attention when making the second application to extend time for service in March 2016 (paragraph 61), and when applying for summary judgment against Diaz and Sixt in August 2016 (paragraph 66).

Andrews J emphatically rejected the suggestion that, in a without notice application to extend time for service, the supporting evidence need only deal with the reasons why service has not been effected and whether there is any fault on the part of the solicitors (paragraph 59). In any without notice application the applicant was under a duty to disclose all matters of fact or law which may constitute a ground for not granting the order (paragraph 51). That was particularly so in applications to serve out of the jurisdiction. “Compliance, however burdensome, is the price that an applicant must pay for obtaining an order without notice.” (Paragraph 62).

Andrews J said that, had Brownlie been brought to the court’s attention on the occasion of either the March 2016 extension application or the default judgment application, then neither would have been granted. The failures were highly relevant to the court’s exercise of its discretion.

Preserving the Order Permitting Service Out

By the time the application was heard, the Claimants accepted that, following Brownlie, the original order permitting service out was liable to be set aside, but they sought to preserve the Order permitting service on INS by relying upon an alternative ground not relied upon when the original order was made – the fact that Sixt, having submitted to the jurisdiction, was arguably now a qualifying anchor defendant so that jurisdiction could be achieved via PD6B para 3.1(3) (“the Anchor Defendant Gateway”).

Having considered NML Capital Ltd v Argentina [2011] UKSC 31, Andrews J was prepared to assume that she had a discretion to permit reliance upon a new ground of jurisdiction which could only be relied upon because of a change of factual circumstances since permission to serve out was originally granted, but only if persuaded that a fresh application using the new ground would succeed (paragraph 79).

She therefore went on to consider the merits of such a hypothetical application by reference to the factors set out in AK Investment CJSC & others v Kyrgyz Mobil Tel Ltd [2011] UKPC 7 namely whether there was a serious issue to be tried, whether there was a good arguable case that one of the gateways in PD6B was available and whether England and Wales was the appropriate forum. Her conclusions were as follows:-

  • There were serious issues to be tried as to the merits of the Claimant’s subrogated claim against INS via the vehicle driver and Citi. There was no subrogated claim viaSixt because it was not an insured under the INS policies.
  • The Anchor Defendant Gateway was not available because althoughSixt had in fact been physically served, the requirement for service on the anchor defendant in the Practice Direction included a requirement for the service to have been lawful at the time it was effected – which was not the case here because of Brownlie. Relying upon Erste Group Bank AG v JSC “VMZ Red October” [2015] EWCA Civ 379 she confirmed that the Practice Direction’s definition of the anchor defendant as a defendant that has been or will be served (other than in reliance on paragraph 3.1(3)) necessitates the court being entitled to exercise jurisdiction over that anchor defendant at the time of service, and not simply by reason of its capitulation or inactivity once service has taken place. For the purposes of the Practice Direction therefore Sixt had not been properly served and could not in the future be served.
  • Even assuming thatSixt had been served, there was no real issue to be tried as between the Claimant and Sixt, the proposed anchor defendant, because the lack of defence meant that liability was not contested, and the lack of a counter schedule meant that “quantum is not going to be put in issue either.” (para 98). The assertion in relation to quantum is perhaps surprising. CPR 16.5(4) provides that a defendant to a money claim shall be taken to require the amount of money claimed to be proved unless admitted. Practice Direction 16PD 12.2 requires a defendant in a personal injury claim to serve a counter schedule in response to any schedule. The CPR does not automatically shut out a defendant from contesting quantum if judgment in default has been entered against it, nor if no counter schedule has been served. In practice many personal injury claims start with judgment in default against a defendant who has no answer to liability, with directions then given for a full contest on quantum.
  • INS was not a “proper party” to the claim againstSixt, the proposed anchor defendant. There was no sufficient connection between the tortious liability claim against Sixt, and the subrogated claims against INS via its insureds – which did not include Sixt. The position contrasted with that in the EU where “specific rules” (i.e. the Motor Insurance Directives, the Brussels Regulations and Odenbreit C-436/06) might have led to a different result.
  • England and Wales was in any event not the appropriate forum for the trial.

The order for service on INS was accordingly set aside and it appears from the final paragraph of the judgment that the order permitting service on the other defendants is likely to have the same fate.

Conclusion

Great care is required when formulating without notice applications for service out of the jurisdiction and extending time. The duty of disclosure when making such applications extends well beyond the immediate circumstances surrounding the desire for service out, and/or the difficulties effecting it.

If the Anchor Defendant Gateway must be used, a “good quality” defendant should be selected – a defendant that can be served uncontroversially, and that will respond to service.

The courts will adopt a cautious and restricted approach when asked to exercise their discretion to bring within their jurisdiction defendants which would not normally be subject to that jurisdiction, and claimants seeking the exercise of that discretion must have dotted all “I”s and crossed all “T”s. Permission retrospectively to put things right will be rare; as an example Andrews J made clear at paragraph 65 that it would be within the court’s power to discharge an order for service out obtained by non-disclosure even if subsequent full inquiry revealed the order to be justified.

Suing liability insurers within the EU is significantly easier than suing liability insurers outside the EU. The fact that an insurer and some other unconnected defendant are or may be liable for the same loss (as here) is likely to be insufficient to make one a “proper party” to a claim against the other.

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