The Dekagram: 2nd December 2024

This week we look at cases on two procedural matters which could be fatal to claims; mispleading, and res judicata. In both instances the claimants’ claims survived intact, but it’s never good to have to rely on the appeal courts to rescue you. Much less stressful all round if you win at first instance, we always find.

And – STOP PRESS – the Ministry of Justice has just announced that the new personal injury discount rate in England and Wales will be +0.5% from 11^th January 2025. We stand ready to recalculate all your Schedules and Counterschedules.

Direct Actions against Insurers Revisited: Is it necessary to plead the foreign law cause of action against a foreign insurer?

Alton v PZU [2024] EWCA Civ 1435

In 2017, one Ms Alton was in a road traffic accident with a lorry driver whose policy of insurance was issued by a Polish insurer, PZU. The insurer’s claims handler in the UK, InterEurope AG European Law Service (‘InterEurope’) admitted liability for the accident in correspondence. The Claimant’s solicitors then issued proceedings against InterEurope, seeking to rely on the European Communities (Rights Against Insurers) Regulations 2002. Unfortunately, as keen-eyed readers will have already spotted, InterEurope was not the correct defendant. A defence was filed, which inevitably pointed out the error of the Claimant’s ways and let them know that they had the wrong defendant and, as the correct party was a Polish insurer, the wrong cause of action. The Claimant then applied to substitute the correct defendant (PZU) but somewhat strangely, didn’t remedy the erroneous cause of action.

PZU applied to strike out the claim. The Claimant’s resistance to this application took the form of a skeleton argument drafted by Jake Rowley. He submitted that, although the Defendant was correct and the 2002 regulations couldn’t support a direct cause of action against PZU, this was a straightforward Kim v Park situation where the Court should refrain from striking out a defective statement of case if said defect might be simply “cured by amendment”. The amendment in this instance would involve the substitution of the correct Rome II approach (detailed below) and the identification of the relevant Polish law permitting direct actions against Polish liability insurers. It is worth setting out Mr Rowley’s key paragraph in full, as it ended up being the main focus of the Court of Appeal’s analysis. Paragraph 17 of his skeleton read:

17. Given PZU are now the Defendant, the claim is capable of amendment to cure the defect, that is because:

a) Pursuant to Article 18 of Council Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II) a direct right of action an insurer defendant is granted if the law applicable to the non contractual obligation or the law applicable to the relevant contract of insurance so provides. The provisions of Rome II in relation to non-contractual obligations are retained EU Law by virtue of the operation of regulation 6 of The Law Applicable to Non-Contractual Obligations (England and Wales and Northern Ireland) Regulations 2008 as amended by The Law Applicable to Contractual and Non-Contractual Obligations (Amendment etc.)(EU Exit) Regulations 2019. As such Rome II applies to claims brought within the jurisdiction of England & Wales whether the claim was instituted before or after 31st December 2020; and

b) Poland is an EU Member State and is bound by the terms of the Sixth Motor Insurance Directive (2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability). Pursuant to Article 18 of the 2009 Directive each Member State is required to permit a direct right of action against an insurer in respect of the civil liability of their insured. The overwhelming likelihood is that the law of Poland permits direct actions against liability insurers in the circumstances of this accident.

In a submission that is no doubt very familiar to judges across the land, the Claimant was effectively arguing that there definitely was some specific bit of law which let them do what they were trying to do, they just weren’t quite sure what it was yet. 

The Defendant’s skeleton pointed out that the claim was now statute barred by limitation and any amendment must therefore “arise from the same or substantially the same facts”. Foreign law is a matter of fact, and therefore an amendment of that kind would necessarily entail the introduction of a new fact. They also took issue with what might seem to be Mr Rowley’s strongest point: his assertion that “the overwhelming likelihood” was that Polish law allowed for direct actions against liability insurers such as PZU. 

DDJ Pithouse (‘the DDJ’) agreed with the Defendant and struck the claim out. In an ex tempore judgment that perhaps loses some of its clarity in the transcript, the DDJ focused mainly on the fact that the relevant amendment still hadn’t been made in the two months that had passed since the Defendant’s application to strike out. Indeed, it seemed to the DDJ that the Claimant was still “considering whether they ought to apply to the court to amend”. The DDJ also stated that he was “not satisfied that there is sufficient pleading that would enable this matter to overcome the requirements”.

The Claimant was granted permission to appeal and, in the meantime, applied to amend the pleadings in exactly the manner set out in paragraph 17 of Mr Rowley’s skeleton. His Honour Judge Parker (‘the Judge’) at the appeal hearing found that the DDJ had failed to consider the proportionality of striking out the Claim. Crucially, the Judge highlighted that PZU had not at any point actually denied that there was a cause of action against them “merely that the claimant had failed to identify what it was”. The order of the DDJ was set aside.

PZU appealed on two grounds:

1. The Judge had not been entitled to interfere with the DDJ’s discretion; and in the alternative,
2. The Judge’s own reasoning was flawed.

The appeal was heard by Peter Jackson LJ, Popplewell LJ, and Holgate LJ on 6^th November 2024. In his judgment, with which Lord Justices Jackson and Holgate agreed, Popplewell LJ dismissed the appeal. The Judge had been “entitled to substitute his own evaluative assessment” for three key reasons:

1. The DDJ was wrong to doubt that a pleading could properly be formulated to advance a claim against PZU.
2. The DDJ was wrong to treat the claimant as merely considering whether she might or might not apply to amend the pleading and in failing to take account of the possibility of an unless order which was the course the claimant invited.
3. The DDJ took no account of the balance of prejudice to the parties.

The first point is key for practitioners who might find themselves in this sort of unfortunate situation. Effectively, the Court agreed with Mr Rowley’s “overwhelming likelihood” submission. At paragraph 26:

InterEurope had said at an early stage that liability would not be in issue, which was only consistent with PZU having a direct liability as the insurer of the lorry. The Defence of InterEurope pleaded full reasons why PZU was not liable under the 2002 Regulations, but did not suggest that PZU was not subject to a direct claim at all. Most tellingly, when Mr Rowley’s skeleton argument set out in terms the basis for the direct claim at paragraph 17, it was not met by the suggestion that there was no such claim under Polish law, a matter with which PZU would be immediately familiar as a Polish motor insurer. The DDJ should have drawn what we take to be the obvious inference that there was most unlikely to be an issue about the direct claim existing under Polish law once it was pleaded.

Popplewell LJ is refreshingly focused on the practical reality of these sorts of cross-border claims. PZU, as an insurer, would obviously have known full well that there was a direct cause of action against them and what specific provision of Polish law gave rise to that cause of action (for the curious, it is Article 822(4) of the Polish Civil Code). Of course, there is a balance to be struck here, as defendants are under no general obligation to remedy claimants’ defective pleading for them. However, at paragraph 28, Popplewell LJ pointed out that PZU were at the very least obligated to say whether or not they disagreed with Mr Rowley’s “overwhelming likelihood” submission:

To require Ms Alton to go to the expense of taking advice on Polish law in order to set the provision out in a pleading would not have been proportionate if it were not going to be in issue.

The Court of Appeal did not need to determine whether the claim was now out of limitation, as the Judge had found that the DDJ didn’t address this question. However, in the hope that the parties might avoid “wasting any further costs”, Popplewell LJ provided his “provisional view”. Although the addition of the relevant provision of Polish law to the pleadings would indeed constitute a new fact, the overall factual matrix was clearly still substantially the same (as per Mulalley v Martlet Homes Ltd [2022] EWCA Civ 32). Foreign law is a question of fact but is a “special kind of fact” (at para 32) and is “in substance, part of the identification of the legal, rather than factual, basis for a claim.” Therefore, Popplewell LJ concluded “A change in the legal basis of a claim can be made without offending against either the letter or the spirit of what is precluded by s. 35 of the Act and CPR part 17.4(2)”.

Alton is a useful case for practitioners wrestling with uncertain foreign law frameworks in applications to amend or strike-out. However, caution should be exercised before relying on the ‘overwhelming likelihood’ of the right provision turning up. As with so many strike-out applications, the Court of Appeal ultimately concluded that the right approach would have been for the DDJ to give adequate consideration to the proportionality of strike-out and make an unless order. Had the DDJ done so, the Claimants would have been under substantial time pressure to identify the correct legal provision, and if no suitable advice on Polish law was forthcoming, it is perhaps unlikely that a Judge would have set aside the strike out purely on the basis that it is disproportionate to expect a claimant to know what their cause of action is.

About the Author

Tom Clarke was called in 2022 and has a wide-ranging common-law practice across all of Chambers’ core areas. He is in court almost every day alongside a busy civil paperwork practice. He has a sensitive and patient manner with clients and witnesses alike. He has represented the families of recently deceased individuals in both inquests and clinical negligence proceedings and is part of a team at Deka Chambers working to update the vulnerable witnesses toolkit for the advocates’ gateway. Throughout 2024, Tom has been brought in to assist with document work on multiple catastrophic injury claims by senior members of chambers and is currently being led by Giles Mooney KC in a childbirth hypoxia claim.

Res Judicata: Can a party be bound when it has had no opportunity to argue its case?

It may be thought that this is a question which answers itself, but it was considered by the courts of Romania to be so knotty that it was the subject of a recent decision of the Court of Justice of the European Union, which, as we all know, may be persuasive but will not be binding on the courts of England and Wales.

The facts

The case arose out of the death by electrocution of an employee of SC Energotehnica SRL Sibiu (‘Energotehnica’) on 5^th September 2017 during the course of his employment. Another employee, MG, was responsible for organising work, training staff and adopting measures to ensure safety at work and the provision of protective equipment.

The Romanian authorities conducted two procedure concerning the death: first, an administrative inquiry procedure instituted by the Inspecția Muncii (Labour Inspectorate) against Energotehnica; and, secondly, criminal proceedings against MG for failure to comply with legal measures concerning safety at work, and for manslaughter.

By way of an enquiry report dated 9^th September 2019 the Labour Inspectorate classified the death as an ‘accident at work’ within the meaning of the relevant national legislation. This decision was successfully appealed to the Court of Appeal of Alba Iulia.

Meanwhile, MG was prosecuted in criminal proceedings, and the deceased’s successors became civil parties in proceedings before that court, requesting that MG and Energotehnica (the latter being liable under civil law for MG) be ordered to pay compensation for their loss.

By judgment dated 24^th December 2021 the Court of First Instance in Rupea discontinued the criminal proceedings against MG and dismissed the civil claim brought by the deceased’s successors. In doing so the court held, first, that there was reasonable doubt that MG gave a work instruction to the deceased and that, secondly, the event at issue in the main proceedings took place outside working hours, with the result that it could not be classified as an accident at work.

The Public Prosecutor’s Office attached to the Court of First Instance and the deceased’s successors lodged an appeal against that judgment before the Court of Appeal, Brașov,, which was the referring court.

The court noted that, in accordance with Romanian law, as interpreted in the light of the caselaw of the Constitutional Court of Romania, the decision of the administrative court was binding on the criminal court because it had acquired the force of res judicata. But the deceased’s successors had had no opportunity to be heard before that court. So a court which had not heard submissions from them had made a binding decision which affected them.

The Court of Appeal in Brasov therefore referred two questions to the CJEU:

‘(1)      Do the principle of the protection of workers and the principle of employer responsibility, enshrined in Article 1(1) and (2) and Article 5(1) of [Directive 89/391], transposed into national law by [the Law on safety and health at work], read in the light of Article 31(1) of the [Charter], preclude rules such as those which apply in the case in the main proceedings, [as interpreted] by a decision of the national Constitutional Court, in accordance with which an administrative court may, at the request of an employer and in inter partes proceedings involving only the State administrative authority, give a final ruling that an event does not constitute an accident at work, within the meaning of that directive, and may thus prevent a criminal court – seised both by a prosecutor bringing criminal proceedings against the worker responsible and by a civil party bringing civil proceedings against the employer as the party liable under civil law in the criminal proceedings, on the one hand, and the worker employed by that employer, on the other – from reaching a different decision regarding the characterisation of the same event as an accident at work, that characterisation being a constituent element of the offences tried in the criminal proceedings (without which it is impossible to make a finding of either criminal liability or civil liability alongside criminal liability), regard being had to the force of res judicata of the final administrative judgment?

(2)      If the first question is answered in the affirmative, is the principle of the primacy of EU law to be interpreted as precluding national legislation or a national practice pursuant to which the ordinary national courts are bound by decisions of the national Constitutional Court and may not, for that reason, without committing a disciplinary offence, of their own motion disapply the case-law resulting from those decisions, even if, in light of a judgment of the Court of Justice, they take the view that that case-law is contrary to Article 1(1) and (2) and Article 5(1) of [Directive 89/391], transposed into national law by [the Law on safety and health at work], read in the light of Article 31(1) of [the Charter]?’

The Law

The tenth recital of Directive 89/391 states:

‘Whereas the incidence of accidents at work and occupational diseases is still too high; whereas preventive measures must be introduced or improved without delay in order to safeguard the safety and health of workers and ensure a higher degree of protection’.

Article 1(1) and (2) of the Directive provides:

‘1.      The object of this Directive is to introduce measures to encourage improvements in the safety and health of workers at work.

2.      To that end it contains general principles concerning the prevention of occupational risks, the protection of safety and health, the elimination of risk and accident factors, the informing, consultation, balanced participation in accordance with national laws and/or practices and training of workers and their representatives, as well as general guidelines for the implementation of the said principles.’

Article 4(1) of the Directive reads as follows:

‘Member States shall take the necessary steps to ensure that employers, workers and workers’ representatives are subject to the legal provisions necessary for the implementation of this Directive.’

Entitled ‘General provision’, Article 5 of the Directive provides, in paragraph 1:

‘The employer shall have a duty to ensure the safety and health of workers in every aspect related to the work.’

The Romanian legislature had transposed these provisions into domestic criminal law. But under its domestic criminal procedure, decisions of the administrative court as to the nature of the incident in question were binding on the criminal courts, and when making such decisions the administrative court heard submissions only from the employer.

The decision

In Commission v United Kingdom, Case C‑127/05 it was held that Article 5(1) of Directive 89/391 makes the employer subject to the duty to ensure that workers have a safe working environment, a duty the meaning of which is specified in Articles 6 to 12 of that Directive (and by various individual Directives which lay down the preventive measures to be adopted in certain specific industrial sectors). Nevertheless, the Directive does not specify the type of liability required to ensure compliance with safe working practices. Furthermore, although the Directive refers to the principle of responsibility of the employer and establishes general obligations relating to the protection of the safety and health of workers at work in every aspect related to their work, it does not contain any specific provisions concerning the detailed procedural rules for bringing proceedings to hold an employer liable for failure to comply with those obligations.

Nevertheless, the CJEU referred to the right to effective judicial protection enshrined in Article 47 of the Charter. Although the procedure by which a member state ensured workers’ safety was a matter for its domestic legislature, it had to be effective and to give rise to a fair trial. And so the Court held:

“Thus, the Member States must ensure that the practical arrangements for the exercise of the remedies on account of a breach of the duties provided for by that directive do not disproportionately affect the right to an effective remedy before a court or tribunal referred to in Article 47 of the Charter (see, by analogy, judgment of 12 January 2023, Nemzeti Adatvédelmi és Információszabadság Hatóság, C‑132/21, EU:C:2023:2, paragraphs 50 and 51).

That right comprises various elements, including, in particular, the right to be heard. In that regard, the Court has already held that it would be incompatible with the fundamental right to an effective legal remedy if a judicial decision were founded on facts and documents which the parties themselves, or one of them, have not had an opportunity to examine and on which they have therefore been unable to state their views (see, to that effect, judgment of 25 April 2024, NW and PQ (Classified information), C‑420/22 and C‑528/22, EU:C:2024:344, paragraph 106 and the case-law cited).

Where a criminal court is called upon to rule on the civil liability arising from acts of which the defendant is accused, the right to be heard of the parties seeking to establish that liability would be infringed if it were not possible for them to adopt a position on a condition necessary for that liability to be incurred, before that condition is definitively decided by the court seised. In that case, the fact that those parties may take a position before a court on the employer’s liability would be devoid of any practical effect.”

Therefore, the Court concluded, Article 1(1) and (2) and Article 5(1) of Directive 89/391, read in conjunction with the principle of effectiveness and Article 47 of the Charter, must be interpreted as precluding legislation of a member state under which the final judgment of an administrative court concerning the classification of an event as an ‘accident at work’ has the force of res judicata before the criminal court called on to rule on the civil liability arising from the acts of which the defendant is accused, where that legislation does not allow the successors of the worker who was the victim of that event to be heard in any of the proceedings ruling on the existence of such an accident at work.

As to the second question referred, it is a fundamental principle of the CJEU that national law must be interpreted in conformity with EU law, and this requires national courts to do whatever lies within their jurisdiction to ensure that an EU Directive is fully effective and to achieve an outcome consistent with the objective pursued by it. That requirement to interpret national law in conformity with EU law entails, in particular, the obligation for national courts to change established caselaw, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive (judgment of 6 November 2018, Max-Planck-Gesellschaft zur Förderung der Wissenschaften, C‑684/16, EU:C:2018:874, paragraphs 59 and 60 and the case-law cited). Therefore the Court concluded that the principle of primacy of EU law must be interpreted as precluding a member state from legislating to the effect that ordinary national courts must apply decisions of the constitutional court of that member state, where they consider, in the light of the interpretation given by the Court of Justice, that those decisions infringe the rights that individuals derive from Directive 89/391. In other words, domestic judges cannot be disciplined for applying EU rather than domestic caselaw.

Comment

This decision can be viewed as another example of CJEU overreach in that the Court struck down elements of the Romanian domestic criminal procedure code and interfered with the domestic judicial disciplinary process; on the other hand, its rationale that the successors of the victim of an accident at work should have an opportunity to be heard on a matter which affects them is undeniably sound. Those member states with hybrid procedures binding potential civil claimants will now look to their procedural rules and ask whether they guarantee fairness to all concerned parties, both potential claimants and possible defendants to claims. Turning to the UK, given that civil claimants have no right to be heard in criminal proceedings, the same rationale applies; even were the standard of proof not entirely different, no determination in the course of criminal proceedings could possibly bind a party to civil proceedings. A useful reminder, perhaps, to some civil judges who might be tempted to find otherwise.

About the Author

Called to the Bar in 1997, Sarah Prager KC has been listed in the legal directories as a Band 1 practitioner in travel law for many years, and, more recently, listed in aviation as well. 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.