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The Dekagram 9th May 2023

Articles, News | Tue 9th May, 2023

In all the excitement this week – yes, the inaugural Deka Chambers Eurovision Sweepstake was drawn on Thursday – you could be forgiven for missing an important decision on the recoverability of Spanish penalty interest, considered below. And it’s also worth bearing in mind the guidance given recently on the operation of s.33 of the Limitation Act 1980, a provision you always hope you won’t need to use, but which this recent judgment demonstrates can be invoked many years after the expiry of the primary limitation period.

The Latest Installment in the Spanish Penalty Interest Saga

Regular readers will recall that the team has written before about the vexed question of whether the incidence of interest on damages is a matter governed by substantive law or procedural rules. The latest in the line of cases all, seemingly, providing different answers to the question is the decision of Martin Spencer J in the conjoined appeals in Nicholls, AXA Assistance v Mapfre and Woodward v Mapfre, unreported, 4th May 2023. It is to be hoped that this judgment provides the final word on the subject and that parties in this type of litigation will now have some much-needed certainty on whether or not penalty interest is likely to be awarded in these cases.

First, a reminder of why the question is important. When a claim is brought before the courts of England and Wales it is common for interest to be claimed on both general and special damages, but for many years now the rate of interest applied has been so low that any interest award is invariably dwarfed by the damages awarded. Not so in Spain. Pursuant to Article 20 of the Spanish Insurance Contract Law 50/1980 of 8th October:

a) the Spanish courts are empowered to award interest at a penalty rate on damages in a claim brought directly against an insurer or, where there is no insurer, against the Spanish Guarantee Fund (the Spanish equivalent of the UK Motor Insurers’ Bureau);

b) the aim of the penalty interest regime contained in Article 20 is to discourage delay (by the insurer) in responding to a claim in those cases where the insurer is aware of its contractual obligation to make a payment (under the policy);

c) the Spanish Supreme Court has held that interest under Article 20 should be calculated as follows, (i) for the first two years after the relevant date (usually the date of accident), interest will accrue at the annual rate prescribed in Spanish law, increased by a substantial percentage increment; (ii) two years after the relevant date, interest accrues at 20% per year;

d) these penalty interest provisions will not apply where, “… the absence of satisfaction in indemnity or payment of the minimum amount is based on a justified cause or is not attributable to them [the insurer]”: Article 20(8). To this extent, an award of penalty interest does not follow automatically.

e) penalty interest will be levied on the entirety of the award made to the Claimant (not just, as in England, on past losses and general damages).

The combined effect of these provisions is often that the interest claimed under them is the largest item of loss claimed, with significant six figure sums being commonplace. It is therefore of obvious advantage to Claimants for claims subject to Spanish applicable law for interest to be awarded in accordance with the Spanish provisions on interest; and of equally obvious advantage to Defendants for such claims to be subject to the English rules on recoverability of interest. The question has therefore arisen: will the courts of England and Wales, when considering whether to make an award, do so using the Spanish provisions or the English rules on interest?

Articles 1(3) of Regulation (EC) No.593/2008 (‘Rome I’) and of Regulation (EC) No.864/2007 (‘Rome II’) provide that ‘this Regulation shall not apply to evidence and procedure …. The result of this is that even where the English courts are applying foreign law to a contractual or tortious claim, the law of the forum (namely, English law) will continue to apply to matters of procedure. Therefore if the recoverability of interest is a matter of substantive law, the Spanish rules will be applied by the English courts, whereas if it is a matter of procedure, the English rules will be applied.

In Scales v MIB [2020] EWHC 1747 (QB) Cavanagh J awarded Spanish penalty interest, stating:

“The existence of a right to claim interest as a head of loss is a substantive matter to be determined by reference to the foreign law, the lex causae.”

Which is fairly definitive.

In Troke v Amgen [2020] EWHC 2976 (QB), by contrast,the court awarded interest on the English scale. Griffiths J, in rejecting the Appellant’s appeal, said this:

“[the answer is suggested] by the characterisation of the Spanish rates as “a penalty interest”, which arose “where insurers have not made a relevant interim payment within three months from the accident”. Interim payments on account of a substantive award or settlement to be determined later seem to me to have the quality of procedural matters. A penalty, also, is to be distinguished from a substantive right. A penalty is a procedural sanction (or incentive). It is not a fundamental right. It is also to be expected that a penalty award will ultimately be in the discretion of the court (and so procedural) rather than being claimed as an absolute right (and so part of the substantive as opposed to procedural law). This is reinforced by the expert saying that the “penalty interest” is something which the Spanish law “contemplates” rather than Spanish courts awarding it automatically and as of right.

… Consequently, on the materials before the Judge, and consistently with his findings …I reject the argument that the Expert Report was describing a substantive as opposed to a procedural right to interest. It follows that the Judge was right not to apply the Spanish rates as a matter of substantive right to be governed by the lex causae.

Which is also quite definitive, albeit in a completely different way.

The decision at first instance in Woodward v Mapfre, unreported, 14th October 2022 offered a third alternative. In that case HHJ Walden-Smith rehearsed the arguments set out in Scales and in Troke, and concluded:

“In my judgment, the right to penalty interest is not a substantive right.   It is acknowledged that it will not always apply, albeit that is in restricted circumstances, and as such is a matter of procedure to be determined by the lex fori (the law of England and Wales).    What this court does have, is a discretion to award interest pursuant to the provisions of section 69 of the County Courts Act 1984 in my judgment, it is appropriate to award interest, as a matter of lex fori, at the same rate as the penalty rate of the Spanish law…

Consequently, it is my conclusion that while the lex fori rather than the lex causae applies to the interest to be added to the final judgment on both general and special damages, I determine that the interest to be applied is in accordance with the penalty interest to be applied in the Spanish court pursuant to the discretion under section 69 of the County Courts Act 1984.”

Neatly, then, although the Defendant succeeded on the legal point (interest is a matter of procedural and not substantive law) it failed on the discretion point (as a matter of judicial discretion the English courts may award Spanish penalty interest, and it was appropriate in that case to do so).

Lambert J handed down judgment in Sedgwick v Mapfre [2022] 4 WLR 108 on 26th October 2022, twelve days after the judgment in Woodward. She had heard argument prior to the outcome in Woodward and therefore her judgment does not refer to that case, but the reasoning and outcome are the same. She found that the rules on interest are procedural and not substantive, but that Spanish penalty interest should be awarded as a matter of discretion (albeit in that case interest ran from the date of the pre-action protocol letter of claim and not the date of the accident).

Her Honour Judge Bloom came to a similar conclusion at first instance in Nicholls v Mapfre, unreported, 2022.

Mapfre appealed the decisions on penalty interest in both Nicholls and Woodward, and the appeals were conjoined as raising the same point of appeal: the award of interest being a procedural matter governed by section 69 of the County Courts Act 1984, the Appellant contended that there is no room for the introduction of Spanish law relating to awards of interest, even as a matter of discretion.

Martin Spencer J reverted to first principles. Because the applicability or otherwise of foreign law is governed by Regulation (EC) 864/2007 (‘Rome II’) it is necessary to consider not whether the incidence of Spanish penalty interest is a substantive or procedural matter by reference to Spanish or English law or rules, but whether it is so defined by reference to the Regulation itself, which has an autonomous meaning. The relevant articles state as follows:

Article 1: Scope

1. This regulation shall apply, in situations involving a conflict of laws, to non-contractual obligations in civil and commercial matters. It shall not apply, in particular, to revenue, customs or administrative matters or to the liability of the State for acts and omissions in the exercise of State authority (acta iure imperii)…

3. This Regulation shall not apply to evidence and procedure, without prejudice to Articles 21 and 22.

Article 4: General Rule

1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.

2. However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.

3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.

Article 15: Scope of the law applicable

The law applicable to non-contractual obligations under this Regulation shall govern in particular:

a) the basis and extent of liability, including the determination of persons who may be held liable for acts performed by them;

b) the grounds for exemption from liability, any limitation of liability and any division of liability;

c) the existence, the nature and the assessment of damages or the remedy claimed;

d) within the limits of powers conferred on the court by its procedural law, the measures which a court may take to prevent or terminate injury or damage or to ensure the provision of compensation.

Martin Spencer J considered these provisions and accepted the submissions of counsel for Mrs Woodward that they must be read as providing that the incidence of Spanish penalty interest is a matter of substantive and not procedural law:

With the greatest possible respect to them, I find myself differing from the views and conclusions of Griffiths J and Lambert J. In my judgment, the recovery of interest provided for by Spanish law under Article 20 of the Spanish Insurance Act is, pursuant to Rome II and as a matter of European law, substantive, not procedural.

This was so under Rome II – although the judge also expressed the view that penalty interest is a matter of substantive Spanish domestic law. Interestingly, the fact that the recoverability of Spanish penalty interest had the effect of doubling the sums awarded to the Claimants weighed on the judge’s mind only in favour of the Claimants and not the Defendants:

I consider it to be relevant that the result of the application of Article 20 of the Spanish Insurance Act is to have such a dramatic effect upon the overall amounts awarded. In both cases before me, the effect was more or less to double the award, and I assume there were similar effects in XP and Sedgwick. In Nicholls, the amount of interest was €41,196.08. According to the appellant’s skeleton argument, interest awarded at the conventional rates for personal injury claims (2% on general damages and half the special account rate on special damages) would have resulted in an award of €2,447.03. A similar discrepancy between the sum awarded and the sum that would have been awarded had conventional rates been applied pertains in the Woodward case. This significant difference indicates clearly, to my mind, that the awards of interest in both cases are much more in the nature of substantive rights to damages than the kind of discretionary awards made in the English courts.

Frustratingly for Mapfre, if the judge had not found that recoverability of Spanish penalty interest was a matter of substantive law, he would have allowed the appeals; he held that it was not open to the judges at first instance to award penalty interest as a matter of discretion. He based this finding on the fact that penalty interest provisions are designed to encourage early settlement, whereas the English procedural rules contain their own inducements to settle in the form of CPR Part 36; it is therefore impermissible to import those of other legal systems.

As a result, the appeals were dismissed, the judges at first instance having come to the right conclusion, albeit for the wrong reasons.


The interpretation of foreign law is a matter of fact and not law, and on one view as a result none of the decisions on Spanish penalty interest is binding on the lower courts. However, it is suggested that in this particular case the judgment of Martin Spencer J is binding, since his decision was founded on the conclusion that as a matter of interpretation of Rome II the incidence of penalty interest is a matter of substantive law and not procedure. The judgment therefore concerns the interpretation of a piece of binding retained EU legislation and not a foreign non-binding provision. Furthermore, even if this were not the case, the judgment contains a thorough and persuasive review of the caselaw to date and of the arguments of distinguished counsel, and a highly respected judge comes to a firm and categorical conclusion. It looks very much as if Spanish insurers will have to accept that penalty interest applies as much in cases brought within the jurisdiction of England and Wales as it does in  Spanish claims. There is of course an answer to any assertion that this gives rise to injustice; the rules do not apply where the insurer has made reasonable offers to settle the claim.

Matthew Chapman KC was instructed by Slater & Gordon for the Claimant in Woodward v Mapfre.

About the Author

Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at Deka Chambers, Matthew Chapman KC, Jack Harding, Dominique Smith, Tom Yarrow and Henk Soede, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade. She undertakes purely domestic high value personal injury work as well as cross border work and has a wealth of experience of difficult and sensitive cases. She was appointed a KC in March 2023.

Guidance on s.33 Applications Given by the High Court

The High Court handed down judgment in  Tyers v Aegis Defence Services (BVI) Ltd & Ors [2023] EWHC 896 (KB) on 28th April 2023.

George Tyers was a South African national engaged to carry out security work for the Defendant, Aegis Defence Services, at a camp in Iraq. On 29th May 2012, he went for an early morning jog around the perimeter of the camp, which was still under construction. He entered the inner perimeter of the camp through a gate, and pushed the gate closed after him.  However, the gate was not secured to its stanchion and it toppled over onto him, sadly killing him. 

His widow, Juanita Tyers (‘the Claimant’) sought damages on behalf of the Estate under the Law Reform (Miscellaneous Provisions) Act 1934 and on behalf of herself and their daughter, Georgina Tyers as dependants pursuant to the Fatal Accidents Act 1976. 

Proceedings were not issued until seven years after the accident and four years after limitation expired. The Claimant issued an application under section 33 of the Limitation Act 1980 for the court to disapply the usual limitation period. The case contains a detailed discussion of the points the Court must consider when determining such an application.

In this case, it was determined with reference to section 14 of the Limitation Act that primary limitation began on the date of death. This was because the Claimant was aware of her husband’s death, she was aware the death had occurred at work and in part from his working conditions as the gate had crushed him. The Court also concluded that the Claimant knew that the accident ‘was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty’ (s.14(b)).

Despite this meaning the claim was significantly out of time, the Court concluded that this was a case where it should exercise its discretion to disapply the limitation period and allow the claim to succeed. In reaching that decision the Court considered a number of factors, noting the following in particular:

  1. There was little to no dispute as to the circumstances of the accident;
  2. The Defendant had carried out an investigation and preserved a lot of the evidence the court may require;
  3. Even if the claim had been brought within the primary limitation period, it was likely that by the time of trial witnesses would have been unavailable in any event;
  4. The claim appeared to be a strong one and the Claimant had sought advice following her husband’s death, but had not been advised to consult an English solicitor earlier than she did. The Claimant had also faced numerous difficulties in the years following her husband’s death which made the delay more understandable.

There was a detailed discussion in relation to the relevant authorities and this case provides a useful reminder of the principles the court will consider when determining such an application.

About the Author

Amelia Katz was called in 2018. She has a busy practice across all of chambers’ specialisms and has a particular interest in costs, having completed her LLM with a dissertation on the subject. She has built up a wealth of experience in the County Courts and is looking forward to applying this experience in travel related cases.

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