Brownlie back in the High Court: Claimant allowed to serve on substitute defendant

Regular readers of this blog will recall our article on the Supreme Court’s judgment in Four Seasons Holdings Incorporated v Brownlie [2017] UKSC 80 (here).

In an order drawn up in July 2018, the Supreme Court directed that all consequential matters should be remitted to the High Court and that the Claimant had permission to issue certain applications. On 17 August 2018, the claimant duly issued three applications:

• For the correction or substitution of FS Cairo (Nile Plaza) LLC (“LLC”, an Egyptian company) in place of the existing Defendant, Four Seasons Holdings Incorporated (“Holdings”, a Canadian company).
• For permission to amend the Claim Form and Particulars of Claim.
• For permission to serve the Claim Form and Amended Particulars of Claim out of the jurisdiction on LLC in Egypt.

All three applications were recently granted by Nicol J in Brownlie v Four Seasons Holdings Inc [2019] EWHC 2533 (QB). The lengthy decision contains some essential points for cross-border personal injuries practitioners. It deals with:

• Limitation and the doctrine of “relation back” in claims under Rome I and Rome II.
• The “presumption of equivalence” of foreign law with English law where no foreign law has been pleaded.
• Application of the majority of the Supreme Court’s (obiter) approach to “damage” in the context of CPR 6BPD 3.1(9)(a) (the tort gateway).
• Guidance on the approach to determining the forum conveniens post-Vedanta Resources plc v Lungowe [2019] UKSC 20

Nina Ross and James Beeton consider the decision in this blog.

Factual Background

The Claimant and her family had booked a holiday to Egypt staying at the Four Seasons Hotel in Cairo. On 21 December 2009, before leaving England, the Claimant had also booked by telephone, through the hotel’s concierge, an excursion to Fayoum in a hired, chauffeur-driven car. The excursion took place on 3 January 2010 and ended in tragedy. The car left the road and crashed, killing the Claimant’s husband and his daughter Rebecca and seriously injuring the Claimant and Rebecca’s two children. The driver of the car was subsequently convicted of involuntary manslaughter.

Lady Brownlie issued claims for (1) her own injuries, (2) damages in her capacity as the dependant of her husband under the Fatal Accidents Act 1976, and (3) damages on behalf of her husband’s estate under the Law Reform (Miscellaneous Provisions) Act 1934. These claims were based on contract and tort. It was agreed that the applicable law was Egyptian law, both under Rome I (Regulation (EC) No. 593/2008), which applied to the contractual claims, and under Rome II (Regulation (EC) No. 864/2007), which applied to the tortious claims.

Two defendants were named on the Claim Form. The first was Four Seasons Holdings Inc (“FSH”), a Canadian corporation and the holding company of the Four Seasons hotel group. The second was Nova Park SAE, an Egyptian company which was understood to own the hotel building. The claim was not served on Nova Park SAE, and they effectively dropped out of the picture.

The Proceedings to Date 

The claim had already been the subject of much litigation:

• In April 2013, the claimant was given permission by Master Yoxall to serve Holdings out of the jurisdiction at an address in Canada pursuant to CPR r. 6.36.
• Following service, Holdings invoked the procedure in CPR Part 11 to contest the jurisdiction of the English court. Master Cook allowed Holdings’ application.
• The Claimant appealed and her appeal was allowed by Tugendhat J ([2014] EWHC 273 (QB)).
• Holdings appealed to the Court of Appeal ([2013] EWCA Civ 663). The Court of Appeal dismissed the appeal in respect of the contract claim. It held that Tugendhat J had been right to find that the Claimant had a good arguable case that Holdings had been party to the contract to provide the excursion and that the contract had been made in England. However, so far as the tortious claim was concerned, the claimant did not have a good arguable case that damage was sustained in England since the accident had taken place in Egypt and only consequential loss was incurred in England. The dependency claim was different. That claim was for an independent loss; it was not consequential damage and it did occur within the jurisdiction and so the dependency claim could continue.
• Both parties were given permission to appeal to the Supreme Court. At the appeal hearing in the Supreme Court in May 2017, evidence emerged that the Four Seasons Hotel in Cairo was in fact managed and operated by LLC at the relevant time.
• In December 2017, the Supreme Court handed down judgment ([2017] UKSC 80). It held that the Claimant did not have a reasonably arguable case against Holdings either in contract or in tort.
• On 17 August 2018, the claimant issued the fresh applications that Nicol J considered in this judgment.

(i) Application to Substitute LLC

Changes of parties: Which rule applied?

The court’s powers to authorise the substitution of one party by another are different depending on whether a relevant limitation period has expired.

CPR r. 19.2 deals with changes of parties generally, while CPR r. 19.5 deals with changes of parties after expiry of limitation. Significantly, CPR r. 19.5 also covers situations where the relevant limitation period is prescribed by the Foreign Limitation Periods Act 1984 or by “any other enactment … under which such a change is allowed”.

The parties agreed that limitation would be determined under Egyptian law. LLC argued that they had a good limitation defence. Nicol J therefore had to decide whether this case was covered by CPR r. 19.2 or by CPR r. 19.5.

Standard of proof in cases covered by the Foreign Limitation Periods Act 1984

Section 1 of the Foreign Limitation Periods Act 1984 says two things. First, it incorporates the limitation provisions of any foreign law which applies in proceedings in England and Wales. Second, where this happens, s. 35 of the Limitation Act 1980 applies to determine “the time at which” the proceedings have been commenced.

Section 35 of the Limitation Act 1980 is significant because it incorporates the doctrine of “relation back”. This means that new claims made in the course of any proceedings are deemed to have commenced for limitation purposes as a separate action “on the same date as the original action”.

So, where an amendment is permitted to introduce a new claim which was in time at the date of commencement of the action but arguably out of time on the date on which permission to amend is granted, the defendant will be precluded from reliance at trial on the arguable limitation defence.

In Ballinger v Mercer Ltd [2014] EWCA Civ 996 at [27], the Court of Appeal decided that a particular approach has to be taken in cases to which s. 35 of the Limitation Act 1980 applies:

• There is an initial burden on the defendant to show that it would have a prima facie defence of limitation.
• However, if it does, then the burden passes to the claimant who must show that the limitation defence is not reasonably arguable.

The justification for placing such an onerous standard on the claimant is the doctrine of relation back, the effect of which is to shut out the defendant from relying on an arguable limitation defence.

The twist in Rome I and Rome II cases

It was common ground that Egyptian law would determine the issue of limitation. The parties agreed that this followed from article 12(1)(d) of Rome I (for the contract claims) and article 15(h) of Rome II (for the tort claims).

But this led to a twist. Section 8 of the Foreign Limitation Periods Act 1984 says that, where it is Rome I or Rome II which provide for the application of a foreign law, then s. 1 of the 1984 Act will not apply. So, this was not a case covered by the 1984 Act. It was, however, a case involving “any other enactment” under which a post-limitation change of parties was allowed (namely, Rome I and Rome II). This meant that it could still potentially fall under CPR r. 19.5.

Standard of proof in Rome I and Rome II cases

Since the Foreign Limitation Periods Act 1984 did not apply, there was no incorporation of the doctrine of relation back. This was a conclusion supported by Stuart-Smith J in Vilca v Xstrata Ltd [2018] EWHC 27 (QB) at [109]–[112].

As the rationale in Ballinger for imposing an enhanced standard of proof on the Claimant was critically dependent on the notion of relation back, Nicol J concluded that the enhanced standard did not apply in this case. The reason was straightforward: “In the absence of any relation back, the defendant will be able to pursue its limitation defence even if permission to substitute is granted” ([49]).

The result was that the Claimant did not need to show that LLC’s limitation defence was not properly arguable: she only had to establish a reasonably arguable case on limitation.

Nicol J found on the basis of the written expert evidence that the claimant did have a reasonably arguable case that her claims were brought in time under Egyptian law. Nicol J also concluded that, if he were wrong about the standard of proof, then the Claimant would not have been able to go further and show that LLC had no reasonably arguable limitation defence.

CPR r. 19.2 applied and LLC would be added

Since the Claimant had shown a reasonably arguable response to any limitation defence (and this was all that was required), Nicol J was satisfied that the right provision for consideration of the application for substitution was CPR r. 19.2 rather than 19.5.

Under CPR r. 19.2, the court has a discretion to order a person to be added as a party if “it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings” (under CPR r. 19.2(2)). There is also specific provision for the court to substitute a new party for an existing one if this is desirable and “the existing party’s interest or liability has passed to the new party”.

Even if the existing party’s interest has not passed to a new party, the court can still achieve substitution indirectly by exercising its powers to simply add the new party (under CPR r. 19.2(2)) and remove the old party (under CPR r. 19.2(3)): see London Borough of Hounslow v Cumar [2012] EWCA Civ 1426.

Applying this broad discretion under CPR 19.2, Nicol J concluded that it was desirable to add LLC to these proceedings. If LLC were not added, the Claimant would have to issue fresh proceedings against LLC which would increase time and costs. Further, for the reasons set out below, the claims against LLC had reasonable prospects of success.

Same result even if CPR r. 19.5 applied

CPR r. 19.5(2) provides that the court can only substitute a party after expiry of limitation if (i) the relevant limitation period was current when the proceedings were started and (ii) the addition or substitution is “necessary” (in the way defined at CPR r. 19.5(3)).

Applying the lower standard of proof, Nicol J was satisfied that (i) the Claimant had a reasonably arguable case that the relevant limitation period was current when proceedings were started and (ii) the substitution of LLC was “necessary” because Holdings was sued in mistake for LLC. Applying the three-part test in Adelson v Associated Newspapers Ltd [2007] EWCA Civ 701:

• The person who made the mistake in this case was the person responsible directly, or through an agent, for the issue of the claim form;
• Had the mistake not been made, LLC would have been named as the defendant;
• The mistake was to the name of the party (applying The Sardinia Sulcis).

(ii) Application to Amend

In addition to her application for substitution, the Claimant also applied to make amendments to the Claim Form and the Particulars of Claim under CPR Part 17. These included:

• Making express that the claims were all made under Egyptian law;
• Deleting the reference to the Law Reform (Miscellaneous Provisions) Act 1934 and substituting that the Claimant brought that claim on behalf of her late husband’s estate and on behalf of his estate and heirs; and
• Deleting the reference to the Fatal Accidents Act 1976 and substituting that the claim was brought for dependency for wrongful death.

Without prejudice to its position on any appeal, the Defendant did not argue that the amendments should be refused on the basis that they were incompatible with CPR r. 17.4(2), which dealt with amendments adding or substituting new claims after expiry of limitation.

However, the Defendant opposed the amendments on the basis that they had no reasonable prospects of success, as they failed to plead any Egyptian law to found a cause of action.

Nicol J dealt with this argument as part of the application to serve out of the jurisdiction.

(iii) Application to Serve out of the Jurisdiction

Nicol J identified three stages to this application:

1. Did each of the claims which the Claimant wished to pursue against LLC pass through one or other of the jurisdictional gateways in Practice Direction 6B?
2. Did each of the claims which the Claimant wished to pursue against LLC have a reasonable prospect of success?
3. Was England the proper forum for the Claimant’s claims to be litigated?

Did the claims pass through the CPR 6BPD jurisdictional gateways?

Nicol J held that the tort claims satisfied the test under CPR 6BPD 3.1(9)(a), which required that “damage was sustained, or will be sustained, within the jurisdiction”.

In her personal capacity, the claimant had continued to suffer loss in England ever since her return. As her husband’s dependant she had likewise suffered loss in England. This was sufficient for both claims to pass through the gateway. Nicol J therefore adopted the approach of the majority in the Supreme Court who had expressed the obiter view that consequential damage is sufficient to satisfy the tort gateway.

He was also satisfied that the contractual claims met the test under CPR 6BPD 3.1(6)(a), which required that the contract “was made within the jurisdiction”.

A contract made orally (including a contract made over the telephone) was made in the place where the acceptance of the offer is heard by the offeror (Entores v Miles Far East Corporation [1955] 2 QB 327).

The defendant argued that the claimant did not have a good arguable case that she was the offeror due a to lack of evidence on this point. Nicol J rejected that argument, quoting the Court of Appeal’s analysis in Brownlie v Four Seasons Holdings Inc [2013] EWCA Civ 663 at [69]–[70] that

“Lady Brownlie had to approach the concierge and set out her requirements … The concierge on this basis merely responded to Lady Brownlie’s proposals, and that would mean the concierge’s role was to accept those proposals.”

Did the claims have reasonable prospects of success?

The Defendant argued that the claims had no reasonable prospects of success, as the Claimant had failed to plead any Egyptian law to found a cause of action.

But Nicol J rejected this argument, holding (at [126]) that the claimant was entitled to rely upon rule 25(2) of Dicey, Morris & Collins on the Conflict of Laws, that, in the absence of satisfactory evidence of foreign law, the court will apply English law:

• The principle in Dicey was of high authority and long standing. It was not for a judge at first instance to conclude that it had been abrogated.
• Nicol J adopted the comments of Arden LJ in Brownlie v Four Seasons Holdings Inc [2013] EWCA Civ 663 that the rule served a real purpose in an adversarial system which relied on the parties to advance competing cases. It was a pragmatic way to proceed in the absence of contrary evidence.
• The Defendant had relied on Belhaj v Straw [2014] EWCA Civ 1394 to argue that the Claimant was obliged to set out her case on foreign law. However, Belhaj was best seen as a case management decision as to which party should first plead the foreign law on which they rely. There was not in the present case the same imperative for the Claimant to plead first the provisions of Egyptian law on which she relied.
• The recent case of Iranian Offshore Engineering and Construction Company v Dean Investment Holdings SA [2018] EWHC 2759 (Comm) (considered in a separate blog here) supported the proposition that there was no rule of general application that where a claim was governed by foreign law, the claimant had to plead a case as to the content of that foreign law.

On that basis, he was satisfied that the claims in tort and in contract were reasonably arguable.

Was England the proper forum?

Finally, Nicol J concluded that England was the proper forum for the litigation for the reasons set out at [139] of the judgment:

• The present litigation had already continued for a substantial length of time in England, albeit not against LLC (but this was due to the “ducking and weaving” of Holdings, and not due to the fault of the Claimant);
• If the litigation were conducted in Egypt it may well be difficult to predict the length of time it would take and there was clear scope for it to take much longer since there was an automatic right of appeal;
• To a significant extent the Claimant’s losses had been experienced in England;
• Quantum was likely to be a key issue and many of the witnesses as to quantum were based in England;
• A trial in England would substantially reduce the need for translation and interpretation of evidence; and
• The nationality and domicile of the claimant at least showed that this was not a case of forum shopping.

Conclusion

Nicol J allowed the application to add LLC as Defendant and to remove Holdings from the proceedings. The application to amend the Claim Form and the Particulars of Claim to remove the references to provisions of English law was allowed. The claims passed through the relevant jurisdictional gateways in CPR 6BPD, they had reasonable prospects of success, and England was the appropriate forum: on that basis, the Claimant was given permission to serve out of the jurisdiction.

We understand that LLC’s application for permission for a “leapfrog” appeal directly to the Supreme Court was refused. We also understand that permission to appeal to the Court of Appeal was refused in respect of the finding that the contract gateway was satisfied and in respect of the decision that England was the appropriate forum. However, permission was granted for an appeal on two points:

• The scope of the jurisdictional gateway for claims in tort in personal injury and fatal accident claims.
• Whether the Claimant can discharge the burden of establishing that each of her claims has a reasonable prospect of success by relying on the “presumption” that foreign law is the same as English law.

The case therefore seems destined for further consideration by the higher courts.