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Katherine Deal KC

Barrister, 3 Hare Court

Spanish insurers may be reeling from the aftershocks of the recent judgment of the Court of Appeal

Opinion
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Spanish insurers may be reeling from the aftershocks of the recent judgment of the Court of Appeal

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Katherine Deal KC of 3 Hare Court examines recent judgment of the Court of Appeal in Nicholls & Anr v Mapfre Espana [2024] EWCA Civ 718

Spanish insurers may be reeling from the aftershocks of the recent judgment of the Court of Appeal in Nicholls & Anr v Mapfre Espana [2024] EWCA Civ 718, confirming that Spanish penalty interest rates are matters of substance falling within the scope of article 15 of the Rome II Regulation. The potential for grievance amongst Spanish insurers (and those from other jurisdictions where high rates of interest may apply) suffering the potential triple whammy of high interest, substantial legal costs and the penalties imposed under the Part 36 regime is enormous.

But all of the conjoined appeals (covered widely elsewhere since judgment was handed down, and outside the scope of this article) were started in the issue frenzy at the end of 2020 before the end of the Brexit transition period. It is worth a quick recap of how likely it is that English victims will be able to take advantage of this judgment in the future.

Under the old Brussels regime, suing insurers in England was commonplace. The recast Judgments Regulation and its predecessor (as well as the Lugano Convention) expressly provided for an EU-domiciled insurer to be sued directly by the victim in the courts of the victim’s domicile as long as the direct action was permitted, as confirmed by the CJEU in FBTO v Odenbreit Case C-436/06. Since all Member States had been required to provide a direct right of action against road traffic insurers courtesy of the Motor Insurance Directives (and indeed many Member States provide one against all liability insurers), the gates were wide open, and claimants joyfully took advantage. Whilst there remained occasional skirmishes (could tortfeasors be joined to the direct claim? Could the jurisdictional route be barred by a clause in the insurance contract?), Community insurers largely resigned themselves to the inevitable and looked to defend the claims on their merits rather than on jurisdictional grounds.

Then came Brexit, and the veto by rEU of the UK’s request to accede to Lugano. Whilst Rome II was retained, the Brussels jurisdictional regime was not (nor could it have been, depending as it does on reciprocity). So, back to the common law regime we went – meaning that jurisdiction is established by service, for which permission is needed.

Generally, permission is granted as a paper exercise of the court’s discretion, with defendants using the Part 11 procedure to challenge procedure and ask for permission to be set aside. The claimant will then bear the burden of proving that permission should have been granted.

The test is currently set out in CPR Part 6.37 and Practice Direction B. For the purposes of this article, only two requirements are addressed, the ground relied on under paragraph 3.1 of Practice Direction 6B; and the requirement that England and Wales is the proper place in which to bring the claim.

As to the former, the most likely route is through the tort gateway – where damage is or will be sustained within the jurisdiction, which will involve the claimant proving that some, not negligible, pain and suffering and/or financial loss was or will be sustained here, Brownlie (No.2) [2021] UKSC 45. There is some uncertainty about the availability of this gateway in a direct claim against an insurer. In numerous non-personal injury claims English courts have considered that a direct claim against insurers was properly characterised as a quasi-contractual claim where the victim exercises the rights of the insured as against the insurer and is similarly bound by any requirement as to forum, rather than one in tort. However the availability of the tort gateway in personal injury claims seems to have gone by tacit consent as long ago as 2013 – Stylianou v Toyoshima and Suncorp [2013] EWHC 2188 (QB) seems to have proceeded on an acceptance (at least where the direct claim was coupled to a claim against the tortfeasor) that the tort gateway could be prayed in aid against a foreign insurer by the victim of a tort, irrespective of whether the cause of action was properly to be regarded as a claim in tort. It is understood that Deputy Master Marzec recently accepted in the unreported decision of Aulla v Generales S.A. (judgment of 17 June) that a direct claim against an insurer can fit through the tortious gateway. Until reported, the reasoning cannot be scrutinised, although it is at least temporarily good news for claimants.

Forum however is the enduring battleground. A reminder that a claimant must prove that England is ‘clearly’ the appropriate forum in which the case can be suitably tried ‘for the interests of all the parties and for the ends of justice’ (the time-honoured test), which involves consideration of the factors connecting the case to this forum and to the alternative forum(s).

There is no limit on the factors that may be prayed in aid by either side, and the weight that will be placed on them will very much depend on the adequacy of the evidence rather than their mere identification, see the recent (impressive) judgment of Geraint Webb KC in Lunn v Antarctic Logistics [2024] EWHC 1662 (KB). Factors which may be regarded as relevant include the issues actually in dispute (jurisdiction could be refused for a dispute on liability which requires a site visit, but allowed for one only involving quantum); the governing law (generally be that of the country where the accident happened, and a factor weighing heavily against an English forum); factors which might prevent a claimant from getting justice (such as lengthy judicial delays or even corruption; or an inability to travel to that country e.g. because of the severity of injuries); and any territorial scope limits in the insurance policy on which the direct claim is based. Factors less relevant in the modern world will be physical whereabouts of witnesses and documents and translation of documents. Availability of funding regimes in the alternative forum may carry some small weight, but the non-availability of a conditional fee regime or legal aid generally will not. And whilst some courts will regard it as relevant that a claimant has front-loaded the expert evidence which would be wasted if the challenge succeeds, many others will not, regarding that as a risk the claimant knowingly ran.

The few reported cases all suggest that something ‘extra’ is needed for jurisdiction here. Whether the paucity of the evidence put forward in challenge (Lunn), the reversal of the burden of proof (Charlton v Deffert [2022] EWHC 2378 (KB)), the availability of a claim against at least one defendant in the jurisdiction (Szrek v DIV-ING DOO [2024] EWHC 219 (KB), the cases where claimants have succeeded have all had a feature out of the ordinary. By contrast, few if any ‘standard’ Odenbreit claims against insurers seem to have survived a challenge (Aulla; Moore v Macif [2022] 10 WLUK 621, Winks v Huk-Coburg-Allgemeine Versicherung Liverpool CC, 3 January 2024).

For now, at least, Spanish insurers may be taking heart that the aftershocks of Nicholls will not be felt for long.

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