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Brownlie v Four Seasons in the Supreme Court: Consequential loss and the ‘tort gateway’

News & Judgments
20 December 2017

 

Facts

In Brownlie v Four Seasons [2017] UKSC 80, the Claimant and her family went on holiday to Cairo. Before they left England, the Claimant telephoned the Four Seasons Hotel where they would be staying to book a tourist excursion. Tragically, during that excursion the family’s car came off the road and the Claimant’s husband and her daughter were killed. The Claimant sought to serve what she believed was the owner/operator of the hotel out of the jurisdiction, including under (i) the ‘gateway’ for contracts concluded within the jurisdiction (PD 6B, para. 3.1(6)(a)); and (ii) the ‘tort gateway’ (PD 6B, para. 3.1(9)).

Issues

Much the better of the argument?

Lord Sumption appeared to approve use of the Canada Trust gloss that a party must have “much the better of the argument” that a claim falls within a jurisdictional gateway, provided that the test was “correctly understood” (Lord Sumption, at [7]). What the test meant for Lord Sumption was that:

(i) The claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the Court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it”.

Lord Sumption expressly stated that he “d[id] … not believe that anything is gained by the word ‘much’ [in the formulation ‘much the better of the argument’], which suggests a superior standard of conviction that is both uncertain and unwarranted in this context” (at [7]).

Lady Hale expressed the view (emphasising that it was obiter) that the correct test was whether a Claimant had a ‘good arguable case’, and that “glosses should be avoided”. Her Ladyship also said that she did not see Lord Sumption’s formulation – set out above – as further glossing the test (at [33]).

Contract ‘Gateway’ 6(a): Place where the contract was concluded

One of the ‘Gateways’ provided for in Practice Direction 6 is where “[a] claim is made in respect of a contract where the contract … was made within the jurisdiction”: PD6B, para. 3.1(6)(a).

Lord Sumption accepted that this ‘gateway’ required an offer and acceptance analysis in accordance with the rules laid down in Entores v Miles Far East [1955] 2 QB 327 (CA). His Lordship stated, however, that the application of those rules to determine whether or not the English Courts had jurisdiction over a dispute was “not at all satisfactory”, and were “particularly arbitrary when the mode of communication used is instantaneous” (at [16]).

Lord Sumption called on the Rules Committee to “re-examine” the drafting of PD6B, para. 3.1(6)(a). Similarly, Lady Hale suggested that the Committee consider “adopting a broader formulation of the rule” in PD 6B, para. 3.1(6)(a): at [34]. It remains to be seen what the Rules Committee will do with that invitation.

‘Tort Gateway’ 9: Damage sustained in the jurisdiction

There was anobiterdisagreement between Lord Sumption (with whom Lord Hughes agreed)and Lady Hale (with whom Lords Wilson and Clarke agreed)as to whetherin personal injury cases arising from accidents abroad consequential loss in England would satisfy the ‘tort gateway’ (PD 6B, para. 3.1(9)).

The view of Lady Hale and Lords Wilson and Clarke that consequential loss would satisfy that gateway prevailed by a bare majority.

The (bare) majority view (Lady Hale and Lords Wilson and Clarke)

Lady Haleconsidered that the line of first instance personal injury cases leading up to the Court of Appeal’s decision in Brownlie – which had held that such consequential damage was sufficient to found English jurisdiction – had beencorrectly decided.

First, her Ladyship disagreed with Lord Sumption that an analogy should be drawn between the common law and European rules of jurisdiction: the European decisions were “of no help in construing the [RSC and CPR] Rules” (at [50]).Lord Wilson expressly agreed on this point (at [61]). Lady Hale held this view because:

  • The language used in the Rules now contained in Practice Direction 6B was “quite different from the language of the Convention” (at [50]).
  • Whilst the European scheme “eschews any discretion in favour of clear and certain rules”, the English scheme “retains the ‘valuable safety value of discretion’” (citing Professor Briggs, at [51]).

Second, Lady Hale’s view was that the framers of the Rules had likely used the term ‘damage’ in the sense of the “the ordinary and natural meaning of the word” (at [52]).There was no reason to suppose that the framers of the relevant Rules used the term in the sense of the damage which ‘completed the cause of action’, or violated the right protected (as Lord Sumption had suggested, as to which see below).

Lord Wilson (at [64]-[65]) and Lord Clarke (at [68]) both concurred in Lady Hale’s view, stating that the absence of use of the definite article in PD6B, para. 3.1(9)(a) suggested that damage referred to in that Rule could be wider than damage which violates the Claimant’s interest and/or completes the cause of action.

Whilst Lady Hale accepted the danger of a Claimant thereby being able to ‘pick and choose’ her jurisdiction, that issue could be dealt with by a “robust” application of the forum conveniens discretion at the third stage of the test (at [54]).

The minority view (Lords Sumption and Hughes)

Lord Sumption thought that the ‘gateway’ could not be satisfied in such cases by consequential loss suffered in England and therefore affirmed the Court of Appeal’s decision on this point, albeit for very different reasons (Lord Sumption, at [22]-[31]).

Lord Sumption held that the Court of Appeal had been wrong to decide that consequential loss was not sufficient by way of analogy with the Rome II Regulation. There was no “necessary connection” between the meaning of damage in the context of (i) applicable law; and (ii) jurisdiction: at [22]. Both Lady Hale (at [49]) and Lord Wilson (at [58]) agreed with Lord Sumption to that extent.

Lord Sumption held, however, that such consequential damage did not satisfy the tort ‘gateway’ because:

  • The interest protected by torts concerned with bodily integrity was the avoidance of physical injury. The financial consequences of that injury merely quantified the relevant damage: at [23]-[25].
  • It would have been possible for the draftsmen on the Rules Committee to have provided expressly that the term “damage” extended to consequential loss, but they had chosen not to do so: at [27].
  • Allowing a Claimant to found jurisdiction on the basis that the consequences of an accident affected her in her home country would “in the great majority of cases confer jurisdiction on the country of the claimant’s residence”. That would “produce a test for jurisdiction so wide as to conflict with the purpose of the rule” (at [28]).
  • Lord Sumption accepted that an analogy should be drawn between the common law rules of jurisdiction and the European rules contained in the Brussels Convention and Regulation because “the jurisdictional gateway in the English rules for claims in tort was deliberately drafted so as to assimilate the tests for asserting jurisdiction over persons domiciled in an EU member state and persons domiciled elsewhere” (at [30]).

The tort ‘gateway’ and economic loss

The majority did not deal specifically with consequential loss outside of the personal injury context. Lady Hale rejected what she had considered as a ‘middle way’ of holding that the bodily effects of an injury would satisfy the ‘tort gateway’, however, partly on the basis that “in some torts the damage is wholly financial, so that separating out the direct and the consequential would be even more difficult” (at [55]).

Abela v Baadarani

Lord Sumption noted that some commentators (in particular Professor Briggs) had argued that his obiter comments in Abela v Baadarani [2013] 1 WLR 2043 (at [53]) supported an argument for ‘downgrading’ and eventually abolishing the jurisdictional gateways in order effectively to makeforum conveniens (and a serious issue to be tried) the criteria for service out.

His Lordship stated, however, that that approach was “contrary to principle, and … not warranted by anything that was said in Abela v Baadarani” (at 31]). The need to satisfy the relevant jurisdictional gateways will therefore continue to play a key role in the service out analysis.

Moreover, Lord Sumption stated by his comments in Abela v Baadarani that whilst he had “protested against the importation of an artificial presumption against service out”, he had “not proposed to substitute an alternative, and equally objectional, presumption in favour of the widest possible interpretation of the gateways” (at [31]).

Conclusion

Due to an unusual procedural development before the Supreme Court (which led the Court to request further evidence from the Defendant as to the corporate structure of the hotel group, and ultimately to conclude that the named Defendant was the wrong party) the Court emphasised that its decision on these points wasobiter.

This emerged most clearly from Lord Clarke’s statement (at [57]) that “had [the Court’s conclusion on the scope of the ‘tort gateway’] been part of the decision, it would have been far-reaching; and the need for the court at the hearing of this appeal to address other issues … may have led to less full argument about the meaning of para 3.1(9)(a) than its importance requires”.

The Supreme Court’s decision may not, therefore, be the last word on this issue.

 

Article written by Joshua Folkard.

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