28/06/2024
Background & issues
The judgment of the Court of Appeal was handed down on Thursday 27 June 2024 in three conjoined appeals. The Appellant in each case (and Defendant at first instance) was a Spanish insurance company (Mapfre) sued (in direct right pursuant to Spanish law) under the Odenbreit jurisdiction that was available prior to the end of the Brexit transition period. The appeals reached the Court of Appeal by different routes (reflecting the Courts in which the first instance decisions had been reached):
On reaching the Court of Appeal, Nicholls, Woodward and Sedgwick were joined to be heard/resolved at the same time (before a three-judge panel: Coulson, Dingemans and Stuart-Smith LJJ). The following issues fell to be decided on appeal (slightly, but – it is hoped – neutrally reworded from the Court of Appeal judgment):
Issue 1: whether interest payable under Article 20 of Spanish Insurance Contract Law 50/1980 (a species of interest commonly, but perhaps inaccurately, referred to as “Spanish penalty interest”) is a matter of “procedure” within the meaning of Article 1.3 of the Rome II Regulation (No 864/2007)?
Issue 2: if Spanish interest of this kind is a matter of procedure, does an English Judge trying a personal injury claim nevertheless have the procedural discretion (pursuant to section 35A of the Senior Courts Act or section 69 of the County Courts Act) to award interest at a rate equivalent to the rate which would apply under Article 20 of the Spanish law?
Issue 3 (for the purposes of the Sedgwick appeal only): was the Respondent (Ms Sedgwick) entitled to bring in her own name the subrogated claim for (third party insurer funded) losses reflecting the costs of repatriation and medical expenses?
Dingemans LJ delivered the leading judgment. Stuart-Smith LJ added a short paragraph indicating initial scepticism with the Court’s approach to Issue 1, but also indicating that, ultimately, he agreed with this approach. Coulson LJ added a short concurring note.
Issue 1: Spanish interest principles and rates were procedural or substantive?
This issue was resolved in the Claimants’/Respondents’ favour and Mapfre’s appeal was dismissed.
In summary, the Court’s conclusions rested on the central premise that the award of interest under Article 20 of Law 50/1980 was an integral part of substantive Spanish law damages assessment (and could not, therefore, be detached as a separate item of procedure pursuant to Article 1.3 of Rome II):
In reaching these conclusions the Court was keen to emphasise that it was not deploying Spanish law in order to set a dividing line between procedure (Article 1.3 of Rome II) and substance (Article 15 of Rome II): for these purposes, “procedure” has an autonomous meaning which is not to be identified by recourse to the approach taken in any particular EU/former EU Member State. Instead, the Court was using Spanish law for a different and permissible purpose: to reach an accurate understanding (by reference to the Spanish law expert evidence presented at first instance) of the manner in which Spanish law damages are assessed (in order to understand whether Spanish interest is/is not an integral/intertwined element of the Spanish law damages award).
Issue 2: if, conversely, Spanish interest was procedural, was there a procedural discretion to adopt a Spanish law approach?
This secondary issue was also – albeit making no difference to the outcome – resolved in the Claimants’/Respondents’ favour and Mapfre’s appeal was dismissed.
The Court’s primary conclusion was that Maher v Groupama [2010] 1 WLR 1564 (CA) sanctioned the approach taken by the first instance Judges; it was implicit, therefore, that the Court rejected Mapfre’s submission that the Rome II Regulation had altered/affected the discretion as to interest which was available to a Trial Judge (a submission derived from the fact that Maher – a Court of Appeal decision – was a pre-Rome II authority). Second, the Court referred back to its conclusion that Spanish interest was an integral element of a Spanish law damages award and this justified the exercise of the Court’s unfettered discretion to award interest along Spanish law lines. Third, CPR Part 36 awards did not affect this conclusion: the Part 36 regime ran along a parallel, but separate, procedural track.
Issue 3 (Sedgwick appeal): was Ms Sedgwick entitled to bring the subrogated claim in her own right?
This issue was resolved in Ms Sedgwick’s favour and Mapfre’s appeal was dismissed. In common with Lambert J at first instance, the Court did not appear to have been much assisted by the CJEU authorities on which Mapfre relied (see, Ergo Insurance v IF P & C [2016] RTR 14 and Fonds des Garantie v Victoria Seguros [2023] IL Pr 24). In Ms Sedgwick’s case, Spanish law permitted the recovery of a third party insurer’s losses, but Spanish law required this insurer (as Claimant) to bring the claim in this regard. However, Ms Sedgwick’s third party insurance contract was an English contract governed by English law.
The Court resolved the Spanish law/English law conflict in this regard by reference to Article 19 of Rome II and by proceeding from first principles construing Article 19 thus: “Where … [an accident victim] … has a … [tort] claim … [against a tortfeasor or, here, Spanish insurer], and … [a travel/medical insurer] has a duty to satisfy the … [the victim], or has in fact satisfied the … [the victim] in discharge of that duty, the law which governs the … [travel insurer’s] duty to satisfy the … [victim] shall determine whether, and the extent to which, the … [travel insurer] is entitled to exercise against the … [tortfeasor/Spanish insurer] the rights which the … [victim] had against the … [tortfeasor/Spanish insurer] under the law governing their relationship.” Dingemans LJ held as follows, “This means that the laws of England and Wales determine ‘whether, and the extent to which, [the third party insurer] is entitled to exercise against [Mapfre] the rights which [Ms Sedgwick] had against [Mapfre].’ In my judgment, this means that the laws of England and Wales will determine whether Ms Sedgwick can bring that part of the claim which has been paid by Insurefor.com in her own name. Under the laws of England and Wales Ms Sedgwick can bring the claim against Mapfre for the costs of repatriation and medical costs, subsequently paid to her by Insurerfor.com under her travel insurance. This does not seem to be a surprising conclusion.”
Conclusions
Nicholls et al, is a further contribution to the growing (but still limited) body of English case law which considers the boundary between substance and procedure in a Rome II context. It is further support for the contention – suggested by Professor Dickinson,[1] among others – that a sensible distinction can be drawn between:
Nicholls et al performs the further service of reconciling a number of irreconcilable decisions on the same point decided by English Courts in the past several years: see, excluding the first instance decisions which were the subject of this appeal, AS Latvijas Krajbanka v Antonov [2016] EWHC 1679 (Comm); Scales v MIB [2020] EWHC 1747 (QB); Troke v AMGEN [2020] 4 WLR 159 (QB); Royalty Pharma Collection Trust v Boehringer [2021] EWHC 2692 (Pat)).
Matthew Chapman KC represented the claimants, instructed by Blake Morgan LLP, Slater and Gordon UK and Leigh Day.
Read the full judgment now handed down by the Court of Appeal.
[1] A Dickinson, The Rome II Regulation (2008).
[2] See, M Chapman, The Rome II Regulation in the English Courts [2015] JPIL 114, 120.
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