Court of Appeal rules in revived Brownlie litigation

A summary of the background to this case is set out in a previous blog post on the first instance decision here. On appeal under the citation FS Cairo (Nile Plaza) LLC v Brownlie [2020] EWCA Civ 996, the Court of Appeal ruled on:

  • whether the tort gateway for service out of the jurisdiction could be triggered by consequential damage suffered in the UK; and
  • the status and effect of the common law presumption that, in the absence of evidence of the content of a foreign applicable law, the court will simply apply English law.

This is a highly significant decision for lawyers interested in the conflict of laws. However, rather unhelpfully, three distinct sets of judicial reasons on the second issue have complicated rather than clarified the position concerning the need to prove foreign law. At the end of this blog post, I summarise the current position as I understand it to be.

Tort Gateway

A bare majority of the Supreme Court in Brownlie v Four Seasons Holdings International [2017] UKSC 80 had concluded in obiter comments that the CPR 6BPD 3.1(9) “tort” gateway could be triggered where consequential damage (including consequential financial damage) was sustained in the UK. We considered this decision in a previous blog post here.

Nicol J had concluded at first instance that consequential damage had been sustained in the UK such that this gateway was engaged. His reasons for doing so are set out in a previous blog post here.

Before the Court of Appeal, the Defendant advanced a direct attack on the majority of the Supreme Court’s reasoning. The appeal judges agreed that the obiter comments of the Supreme Court were not strictly binding on them (although they were highly persuasive). They were in effect invited by the Defendant to approach the matter afresh.

Both McCombe and Arnold LJJ carried out detailed analyses of the authorities and materials relating to CPR 6BPD 3.1(9). Like the Supreme Court before them, they came to opposing views. McCombe LJ agreed with the majority that the tort gateway covered indirect damage sustained in the UK (at [22]–[56]). Arnold LJ disagreed (at [69]–[92]).

Underhill LJ, who had the deciding vote, gave a short judgment on this issue in effect agreeing with McCombe LJ (at [158]–[161]).

The comments of the majority of the Supreme Court therefore stand. But Arnold LJ’s spirited dissent suggests that this may not be the end of the road.

Foreign Law

The Claimant advanced her claim against the Defendant on three bases: (i) vicarious liability in tort, (ii) direct liability in tort, and (iii) contractual liability.

The Claimant’s pleaded case had originally been based on the Law Reform (Miscellaneous Provisions) Act 1934 and the Fatal Accidents Act 1976. However, it was by this stage common ground that the claim was subject to Egyptian law in accordance with the provisions of Rome I and Rome II.

Following an obiter indication by the Supreme Court that the Fatal Accidents Act 1976 would not apply to a tort not governed by English law, the specific references to these statutes were deleted from the Claimant’s statements of case. However, the substance of the claims remained the same, with the difference that the Claimant had now inserted the words “pursuant to Egyptian law” into her prayer for relief.

The parties were given permission to adduce expert foreign law evidence by Stewart J in February 2019. The parties both instructed foreign law experts who produced written reports.

All three appeal judges agreed that the Claimant’s expert foreign law evidence set out a reasonably arguable case on vicarious liability in tort (although Arnold LJ thought that this case should have been incorporated into the pleadings: [120]–[121]).

However, all three appeal judges also agreed that the Claimant’s evidence did not discuss the principles of Egyptian law which would govern a direct claim in tort or a contractual claim. Arnold LJ suspected that the omission of these matters was a tactical decision by the Claimant on the basis that the evidence would not have assisted the Claimant’s case:

Given Mr Edge’s expertise in both English and Egyptian law, I doubt that this is accidental. On the contrary, I think it likely that he focussed his reports on vicarious liability for good reason.

The question on appeal was whether, in these circumstances, the Claimant’s statement of case set out a reasonably arguable case on direct liability in tort and contractual liability.

All three judges agreed that, in cases involving a foreign applicable law, there was a presumption that, in the absence of proof of the foreign law, English law would apply. This is set out, for example, in Dicey, Morris and Collins, “The Conflict of Laws” (15th Edn. 2012) at 9R-001:

Rule 25

(1) In any case to which foreign law applies, that law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means.
(2) In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case.

The Claimant argued that, to the extent that her foreign law expert was silent, she could rely on this default rule to plug the gaps. Under English law, she clearly did have a reasonably arguable case on direct liability in tort and contractual liability. Nicol J had accepted this submission at first instance.

The majority of the Court of Appeal upheld this decision. However, all three judges gave different reasons in their judgments on this issue. The following sections will summarise each set of reasons.

McCombe LJ

McCombe LJ at [60] considered that it was necessary to

step back from detail and look at the case in the round.” The question of how and when foreign law is to be pleaded and proved is determined substantially by what is in the interests of efficient procedural management of each case. In an English court, issues of foreign law are issues of fact and are not to be debated at length on a preliminary application about jurisdiction. The same holds good for the extent to which the default rule should be applied. On the other hand, no party is to be ambushed by a surprise point of foreign law and, as far as necessary, pleading and the exchange of expert evidence may be required

McCombe LJ’s view at [62] and [63] was essentially that there was no need for the Claimant to set out “the minutiae of foreign law, in the relatively straightforward factual context of a case arising out of a road accident” in circumstances where the claims were likely to be seriously arguable under any system of law:

It would be strange if such claims were not considered at least seriously arguable under any system of law. Whether the potential claims sound in what we would call contract and/or in tort (or both), and whether claims under both heads are permitted in any single set of proceedings under Egyptian law, may be nice arguments for trial. It is not suggested that the claims do not have any real basis in fact and, if that is right, the precise legal basis of potential liability seems to me to be of subsidiary importance at this stage.

The question of “who should plead her/its case on foreign law first” was merely a “technical issue”, and the details of foreign law were “issues for more extensive expert evidence in due course, supported by source material, (and cross-examination on it) at a trial”.

Underhill LJ

Although Underhill LJ did not give the second judgment, his reasoning will be dealt with at this point because he also concluded that there was no need for the Claimant to particularise specific provisions of Egyptian law. He pointed out at [171] that the presumption that English law will apply

is a rule of evidence, intended to address the situation where foreign law does apply (or at least may do so) but there is no evidence about its content. Conceptually, the Court is applying the foreign law but using the default rule to establish its effect.

At [175], he explained that it represented a practically useful tool for resolving potentially costly disputes involving foreign applicable law:

it seems to me to represent a sensible and just way of avoiding the expense and complication of the parties having to investigate and prove foreign law. That is most obviously sensible where the likelihood is that the effect of the applicable law will be substantially the same as that of English law (typically, though not only, where the law in question is that of a common law jurisdiction). But it may also be attractive to the parties in cases where it is recognised that the foreign law in question is very different in its sources and structure, so that it it is entirely conceivable that it might produce a different substantive outcome from English law; even in such a case the trouble and expense of establishing whether that is so may be viewed by the parties as disproportionate.

But the limits of the rule were also clear:

It is important not to lose sight of the fact that the rule only applies if both parties are content that it should: either can ensure that the relevant foreign law is applied substantively as well as nominally by pleading and proving its content.

The position where a claimant sought to rely on English law, even if she appreciated that the defendant would argue otherwise, was straightforward:

In such a case they will simply plead their case without reference to foreign law, and the burden will be on the defendant to plead that foreign law applies and the relevant content of that law.

It is worth noting that this proposition was supported by Arnold LJ and appears to be consistent with the judgment of McCombe LJ.

Where the claimant accepted that foreign law applied but wanted to rely on the default rule identified in Dicey, there was again no need to plead the foreign law. At [178], Underhill LJ said

In my view it is obvious that in this case also (subject to para. 181 below) they cannot be obliged to plead from the start the relevant content of Ruritanian law. If it were otherwise there would be no scope for the application of the default rule. That conclusion is consistent with the Civil Procedure Rules. Rule 16.4 (1) (a) requires a claimant to plead in their particulars of claim only a concise statement of the facts on which they rely: thus if they are not relying on the content of Ruritanian law they are not required to plead it.

This proposition was again supported by Arnold LJ and appears to be consistent with the judgment of McCombe LJ.

The difference of opinion between Underhill LJ on the one hand and Arnold LJ on the other emerges at the point where a defendant objects to the claimant relying on the default rule.

Arnold LJ considered that it would become incumbent on the claimant to plead the relevant principles of foreign law on which she relied (for reasons set out below). Underhill LJ, on the contrary, thought that the burden was on the defendant to do this (at [179]):

If in such a case the defendant wishes to rely substantively on Ruritanian law, then the ordinary principles of pleading – see CPR 16.5 (2) – require them to plead in their defence (a) that Ruritanian law applies (unless the claimant has already conceded that that is the case) and (b) its relevant content; and the claimant would plead any contrary case by way of reply (or perhaps, if that were more convenient, by way of amendment to their particulars).

It made no difference that the claimant had expressly acknowledged that foreign law applied:

it can make no difference to the issue of who has the burden of pleading foreign law that the claimant has expressly acknowledged that foreign law applies (i.e. as opposed to simply pleading on the basis of English law). Indeed, as noted at para. 171 above, by definition the default rule only comes into play where foreign law does apply. The distinction between accepting the application of foreign law and pleading its content is arguably not sufficiently appreciated in some of the authorities.

In a nutshell, the error in the approach of Arnold LJ, according to Underhill LJ, was this:

it is the production of such evidence [of the foreign applicable law] that disapplies the default rule, not merely a party registering an objection to its application, as Arnold LJ suggests … To characterise that approach as “reversing the burden of proof” is tendentious. The effect of the default rule is – inevitably – that the burden of pleading (and, in the service out context, proving) the content of foreign law is on the party who wishes to contend that it is different from English law.

Finally, there was no problem with the default rule applying to some discrete elements of the case whilst others were directly addressed by the foreign law evidence. Underhill LJ said at [218]:

The default rule is, as we have seen, a practical rule of evidence designed to assist in determining claims with a foreign element: I see no reason why its application needs to be all-or-nothing except in cases where dealing with different issues by reference to different systems of law might create real difficulties.

Arnold LJ

Arnold LJ disagreed. At [134], he accepted that the parties to litigation were entitled expressly or impliedly to agree that the substantive content of the applicable law was the same as English law. This possibility “does a lot of the work that might otherwise need to be done” by the presumption identified in Dicey.

On applications for permission to serve out of the jurisdiction, there was no need to plead a foreign law where the claimant contended that English law applied, “even if the claimant recognises that it is arguable that some other law applies (although the duty of disclosure may in that case require the claimant to disclose that to the court).” As noted above, Underhill LJ held a similar view.

This was also the case where the claimant accepted that a foreign law applied but no objection had been raised by the defendant to reliance on the default rule in Dicey.

If the claimant accepts that the applicable law is a foreign law, then the duty of disclosure requires the claimant to disclose that to the court. I do not consider that, at the stage of the without notice application, a claimant who accepts that the applicable law is a foreign law is obliged to provide evidence of the foreign law (or to plead it). Rather, it is open to the claimant to rely upon Rule 25(2); but again the duty of disclosure requires the claimant to disclose that to the court. Faced with such a position, a defendant who wishes to dispute the jurisdiction of the court may choose expressly to agree that the substantive content of the applicable law is the same as English law, thereby saving both parties the trouble and expense of obtaining evidence of the foreign law. Alternatively, the defendant may silently acquiesce in the position adopted by the claimant, thereby impliedly agreeing to it.

Underhill LJ again adopted a similar view, set out above.

But, in Arnold LJ’s opinion, matters were fundamentally different where the defendant did object to the claimant relying on the default rule. Arnold LJ said at [138]:

If the defendant objects to the claimant relying upon the default rule, however, then I consider that it is incumbent on the claimant to adduce evidence of the foreign law (and to plead that law in the Particulars of Claim). It is well established, and not in dispute in this case, that, at the stage of a jurisdictional challenge by the defendant, the burden of proof remains on the claimant. That must include the burden of proving the law upon which the claimant’s cause of action depends. It would be contrary to principle to permit the claimant to reverse the burden of proof by requiring the defendant to adduce evidence that the foreign law is different to English law.

At [151], Arnold LJ considered it absurd that the Claimant should be entitled to rely on a mishmash of Egyptian and English law. He said at [152]:

What counsel for Lady Brownlie is really trying to do by relying upon Rule 25(2) is to make up for gaps in her client’s expert evidence as to Egyptian law (and moreover gaps which do not appear to be accidental so far as the expert is concerned). In any other context, the idea that lacunae in a claimant’s expert evidence could be filled by a legal fiction would be given short shrift. I see no reason why it should be permitted in this context.

At [154], Arnold LJ swept aside McCombe LJ’s suggestion that the gaps in the evidence could be filled by assertions that “any system of law” would provide for direct tortious and contractual liability on the basis of the facts pleaded and that “the precise legal basis of potential liability [is] of subsidiary importance”.

In my view there are four problems with this suggestion. First, no such case was advanced by counsel for Lady Brownlie (and if it had been, she would have again faced the problem of the absence of a respondent’s notice). Secondly, it is contrary to the principle, which is not in dispute in this case, that the burden lies on the claimant to establish by evidence a real prospect of success in respect of each claim advanced. Thirdly, it is contrary to the purpose and effect of Stewart J’s order. Fourthly, it not obvious to me that Egyptian law would recognise concepts such as those discussed in paragraph 122 above.

Case Management Directions

McCombe and Underhill LJJ held by a majority that the appeal was dismissed. McCombe LJ went on to say this at [59]:

I would add a direction, in exercise of the case management powers of the court, that Lady Brownlie should set out in outline (in a revised pleading) the main principles of Egyptian law upon which each of the claims are based. I would so order, not as a condition of permission to serve out of the jurisdiction but to achieve orderly progress in the resolution of the claims.

This placed Underhill LJ in a slightly awkward position:

Since I would decide the appeal in the Respondent’s favour on the basis that she was not obliged at the stage of the jurisdictional challenge to adduce evidence of the content of Egyptian law, it is at first sight contradictory to require her to plead it either, unless and until the Appellant does so.

However, at [223]–[224] he went on to agree that such an order should be made:

On balance, however, I accept that such an order can be justified as a matter of case-management in the particular circumstances of this case …

… it seems to me cleaner that she should also go first in pleading the remaining Egyptian law on which she will have to rely as regards her other claims (and her entitlement to claim as her husband’s executrix and dependant). It also appears to me that the precise basis of the claims being made may be relevant to the availability of a defence based on cumul and/or limitation, on both of which the Appellant has made it clear that it intends to rely; and the position will be easier for everyone if it can plead those defences in response to a substantive pleading of Egyptian law. If in the end it turns out that the Appellant accepts that Egyptian law recognises the essential propositions, then some costs may turn out to have been wasted, but that is a price worth paying for having a complete Egyptian law case pleaded from the start and avoiding the risk of it having to be pleaded piecemeal by way of reply or further amendment.

Comment

The precise status of the tort service gateway remains controversial. The majority opinion in this case represents an authoritative ruling on its scope. But the judicial split in the Supreme Court and now the Court of Appeal suggests that this is a matter on which experienced judges can reasonably disagree. It remains to be seen whether the Defendant will be given a second chance to argue this point at the highest level.

The status of the rule that English law will apply in the absence of proof of a foreign applicable law is less clear. The position appears to be this:

  • It is always open to the parties to agree that English law applies – or, more accurately, that the substantive content of the foreign applicable law mirrors English law.
  • There is no need for a claimant to plead or particularise a foreign law where she contends that English law applies. This is the case even if it is arguable that some other law applies. McCombe LJ said that the claimant may in these circumstances have to raise the fact that there is some other potentially applicable law on an application for service out of the jurisdiction (but the other judges did not specifically say this).
  • Where the claimant accepts that a foreign law applies, there is no need for the claimant to particularise or prove the content of that foreign law if no objection is raised by the defendant to reliance on the default rule that English law will apply. On an application for service out of the jurisdiction, there is no need for the claimant to plead or provide evidence of potentially problematic provisions of the foreign applicable law.
  • Where the claimant accepts that a foreign law applies but the defendant does object to reliance on the default rule that English law will apply, there is a divergence between all three judges.

According to the Underhill LJ (contrary to Arnold LJ), the onus in these circumstances is on the defendant to plead the provisions of foreign law on which it relies. If the defendant fails to do this, then the claimant is entitled to rely on the default rule that English law will apply.

But Underhill LJ’s conclusion is somewhat undermined by the fact that he went on to say that the Claimant did have to plead her case on Egyptian law so that the Defendant would know where it stood and could respond accordingly. A good reason, Arnold LJ might say, for her to do this at the outset.

Is Underhill LJ’s opinion supported by McCombe LJ, such that it represents a majority ruling on this issue? I am not convinced that it is. McCombe LJ emphasised his view that it would be surprising if the claims in this particular case “were not considered at least seriously arguable under any system of law”. It was on this basis that “the precise legal basis of potential liability” was “of subsidiary importance at this stage” and the question of “who should plead her/its case on foreign law first” was merely a “technical issue”.

McCombe LJ’s approach therefore appears to be confined to those claims which are “seriously arguable under any system of law”. He was not dealing with and did not advance a view on the broader question of what should happen in cases that do not fall into this category. The question of whether it is a valid category of cases at all is highly questionable: Underhill LJ did not adopt it (his comments at [207] were dealing with a different question) and Arnold LJ specifically rejected it.

So, there are apparently three distinct approaches to a topic of central importance in English private international law. If there is to be an appeal to the Supreme Court on this issue, it cannot come soon enough.

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