Keefe v Hoteles Piñero Canarias SL – Judgments Regulation, Jurisdiction, Insurers

On Tuesday 7 March 2017, the Supreme Court heard submissions in this important case concerning jurisdiction under the Judgments Regulation. Philip Mead of 12 King’s Bench Walk appeared for the Appellant (led before the Supreme Court by James Collins QC). This blog summarises the submissions heard by the court.

Background

C, who was domiciled in England, suffered severe personal injuries while staying at a hotel in Spain. He brought a direct action in England against the hotel’s liability insurer pursuant to arts. 9 and 11(2) of Council Regulation (EC) 44/2001 (the “Judgments Regulation”). The accident had occurred before January 2009, meaning that Council Regulation (EC) 864/2007 (“Rome II”) did not apply: as a result, quantification of the C’s damages would be assessed as a matter of English law (which was significantly more generous than Spanish law).

It later transpired that there was a limit of cover under the insurance policy which was significantly less than the damages claimed. C successfully applied to join the hotel owner to the action to recover the uninsured excess. The hotel owner’s challenge to the joinder decision was rejected in the High Court by Master Cook, on the first appeal by HHJ Higgins and subsequently by the Court of Appeal. The hotel owner appealed to the Supreme Court.

Appellant’s Arguments

The Appellant began by setting out the Judgment Regulation’s general rule – that a defendant would be sued in their domicile. They could only be sued elsewhere in accordance with the exceptions set out in the Regulation. Section 3 of the Regulation contained an autonomous and exclusive set of rules that applied ‘in matters relating to insurance’.

The Appellant’s central contention was that art. 11(3) only allowed an insured to be joined where the matter as between the insured and the party seeking to join the insured related to the insurance cover. This would typically arise where: (1) in defence to a direct action brought by the injured party, the insurer argued that there was no or limited cover under the policy, (2) that was disputed by the insured and (3) the insurer wanted to join the insured so that the insured would be bound by the determination of that issue in the context of the direct action by the injured party. Alternatively, the insured might itself wish to join the proceedings (for example, by seeking a declaration that the insurer was liable under the policy).

However, article 11(3) would not allow the insured to be joined for the purpose of establishing, as against the insured, the existence or extent of the insured’s liability to the injured party. That would not be a ‘matter relating to insurance’. A claim would only concern ‘matters relating to insurance’ if the purpose of the claim could be regarded as the enforcement of rights arising under an insurance contract, or the determination of a dispute as to the rights and liabilities under that contract, such that consideration of the insurance contract was indispensable to the determination of the claim against the relevant defendant. That would be the case in a direct action by an injured party against an insurer – but not in respect of a tort claim against an insured party, even if it were advanced in the same proceedings as a direct claim against the insurer. The claim would remain a ‘matter relating to tort’ and it would make no difference that it had been ‘lumped together’ with the direct claim against the insurer.

Support for these propositions was to be found in Kalfelis v Bankhaus Schroder Munchmeyer Hengst & Co and others [1988] ECR 5579, where it had not been possible to ‘lump together’ separate claims against a single defendant for characterisation purposes and also in the recent Supreme Court decision in AMT Futures Ltd v Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH [2017] UKSC 13 (delivered last week and considered on this blog here), where a similar result was reached in a case involving separate types of claims against different defendants.

Lord Toulson queried whether this would give the ‘weird’ result that the court could determine vis-à-vis the insurer whether the insured was negligent, but could not do so as against the injured party himself. The Appellant’s response was that since the court would only have jurisdiction in relation to the matter of insurance that result was inevitable. The injured party was relying upon a special and exceptional set of rules in Section 3 – the gaps in jurisdiction that appeared could be avoided if the claim were brought in the natural forum (i.e. Spain). By choosing to sue in England, the Respondent had chosen to fragment the claims and to run the risk of those gaps appearing.

Furthermore, it was submitted, the same result would be reached on a purposive construction of the provisions. Those provisions would be given a restrictive interpretation so as to ensure that they applied only where the purpose of protection of the insured or injured party vis-à-vis the insurer would be served. That purpose was irrelevant when considering a claim by an injured party against an insured – in such a case neither one of them could be considered to be the ‘weaker’ party.

Alternatively, the Appellant argued that if joinder were possible then the court should apply a test asking whether the claims against the insurer and the insured were so closely related that it would be expedient to hear and to determine them together to avoid the risk of irreconcilable judgments.

In the final alternative, the Appellant contended that the question should be referred to the CJEU.

Respondent’s Arguments

The Respondent argued that, if the Appellant were correct, it would significantly limit the scope of art. 11(3) in circumstances where there were policy limits in place. Such limits might impact substantially on the adequacy of a direct action brought in the court of the injured party’s own domicile to satisfy the injured party’s claim. It was in precisely such circumstances that it would be likely to be necessary or desirable to join the tortfeasor as well. The only way that the injured party could avoid that risk would be to forego the right given to him to sue the relevant insurer in the courts for the place where he was domiciled. The joinder of the insured as a party to a direct claim against the insurer was a matter relating to insurance because a claim falling within art. 11(3) allowed for the determination in one jurisdiction of the various rights and obligations in the tripartite relationship between the liability insurer, insured and injured party. The factual basis of the claims was the same and the connection between the two Defendants was the insurance contract. That contract was central to the claim brought against the insurer and could therefore act as an ‘anchor’ in a claim to which the Appellant could be joined.

On the Appellant’s case, the court making a determination regarding policy issues in circumstances where the insured was joined would not have jurisdiction to consider the underlying liability of the insured to the injured party. In the meantime, the injured party could not litigate the issue of the underlying liability elsewhere (because of the lis pendens provisions). Such an outcome, it was submitted, could not be reconciled with a teleological and purposive interpretation of the Regulation.

The Respondent accepted that in a claim against the hotel alone, he would not be the ‘weaker’ party for the purposes of the Regulation; but it was contended that the Respondent would be the ‘weaker’ party in the context of a direct claim against the insurer. In such circumstances, the objective of maximising the Respondent’s protection would best be served by permitting the joinder. In response, Lord Sumption queried whether he could only in such circumstances be considered the weaker party as against the insurer (but not also as against the hotel); the Respondent’s position, however, was that this was not the effect of Section 3, which would extend the additional protections in any event.

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