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You are here: BAILII >> Databases >> United Kingdom Journals >> Statutory Reform of Choice of Law in Tort and Delict: A Bitter Pill or a Cure for the Ill? URL: http://www.bailii.org/uk/other/journals/WebJCLI/1996/issue2/mayss2.html Cite as: Statutory Reform of Choice of Law in Tort and Delict: A Bitter Pill or a Cure for the Ill? |
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![[1995] 2 Web JCLI](../../images/thisissu.gif)
Copyright © 1996 Abla Mayss.
First Published in Web Journal of Current Legal Issues in association with Blackstone Press
Ltd.
* My sincere thanks to Brian Thompson, Sue Nott and Alan Reed for their invaluable comments on an earlier draft of this article.
"The law is to the advantage of the defendant because, as a general rule, the plaintiff cannot succeed in any claim unless both the law of the forum and the law of the place where the wrong occurred make provision for it, whereas the defendant can escape liability by taking advantage of any defence available under either law. This appears unfair to plaintiffs because it ensures that they cannot generally succeed to a greater extent than is provided by the less generous of the two systems of law concerned." (HL Paper 36, March 1995, p 3)
Indeed, Lord Mackay's views on the unsatisfactory effect of the double- actionability rule had been shared by many, including academics and members of the judiciary and had provoked calls for reform. This dissatisfaction was primarily levelled at two particular issues. First, the general rule had attributed unique importance to the law of the forum in such cases. Secondly, the exception to the rule, as established in Boys v Chaplin [1971] AC 356 and extended in Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190, had created much uncertainty.
Accordingly, in 1984, the English and Scottish Law Commissions (Law Com WP No 87) suggested two models for reform and without a preference to either. Following extensive consultations, the Law Commissions adopted Model One (Law Com No 193) as the basis for reforms, and drafted a Bill to this effect. An amended version of this Bill has now been incorporated in Part III of the Private International Law (Miscellaneous Provisions) Act 1995. This Act received Royal Assent on 8 November 1995.
In general terms, Part III (not yet in force(2) ) of this Act repeals the common law rules on choice of law in tort, save for the tort of defamation. It introduces a new general rule in favour of the lex loci delicti as the prima facie applicable law. Hence, the main purpose of this article is to review the common law rules, examine their strength and weaknesses, and then assess the impact of the new law. Bearing in mind the field of law Part III of the Act caters for, where the question of choice of law had been repeatedly described as raising "one of the most vexed questions in the conflict of laws", it is intended to explore the extent to which the new law is likely to remedy the anomalies of the common law rules and address the question of whether Part III of the 1995 Act has improved the situation.
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(i) the alleged wrong must have been actionable as a tort if committed in England; and
(ii) it had to be actionable in the lex loci delicti.
The much criticised first limb of this rule had derived from the Privy Council decision in The Halley (1868) LR 2 PC 193. Here an action was brought against a shipowner for damage caused by a collision due to the negligent navigation of a pilot he was compelled to employ by Belgian law. The action was dismissed on the ground that English law did not at the time recognise such vicarious liability though it was recognised under Belgian law. In other words, English courts would not allow a claim for a tort which was unknown to English law. As for the second limb, when initially formulated by Willes J in Phillips v Eyre, it had imposed a requirement of non-justifiability rather than actionability in the locus delicti. This phrase led English courts, at one stage, to take the view that the rule was satisfied where the defendant's conduct attracted criminal, but not civil, liability under that law.(3) Such an interpretation, however, was rejected in Boys v Chaplin [1971] AC 356, where the House of Lords adopted the view that civil actionability rather than non-justifiability had to be satisfied.
The general rule was also greatly criticised because it operated in favour of the defendant and to the disadvantage of the plaintiff. Whilst the plaintiff could only succeed in his claim where both the law of the forum and that of the place of tort made provision for such a tort, the defendant could easily escape liability where either system of law allowed for a defence. This disadvantage became more apparent where such a defence formed a part of the law of the forum, in the sense that a defendant who had committed a tort in a foreign jurisdiction, knowing his act to be wrong, could avail himself of a defence available to him only under English law. Clearly in such cases, a plaintiff would be more inclined to bring suit elsewhere. This inadequacy alone might be said to account for the relatively few cases in English courts in respect of foreign torts.
Such anomalies could be illustrated by the often cited Scottish case of M'Ellroy v M'allister 1949 SC 110, where a widow claimed damages for the death of her husband as a result of a lorry accident in England. Both, the deceased who was a passenger and the driver, a fellow employee, were at the time conducting work for their Scottish employer. The widow's claim entailed the following:
(1) solatium under Scots law, the lex fori;
(2 & 3) by English law, the lex loci delicti, on behalf of his estate and under the Fatal Accidents Act 1846; and
(4) by both laws, the funeral expenses.
The Court of Session applied the double-actionability rule and held that the widow was merely entitled to recover the funeral expenses, that is the only common head of damages under both laws, and regardless of the slight connection with England which was the place where the accident had occurred.
The major problem, in the view of the Law Commissions, with the double- actionability rule was with the first limb of the rule. This limb, which had originated in The Halley, had received unquestioned judicial acceptance, constituted the unwarranted anomaly and was central to any proposed reforms. The main criticisms against this first limb of the rule were rehearsed by the Law Commissions in Report No 193. The Report stated that the exceptional role given by this rule to the substantive law of the forum could be described as 'parochial' in appearance, for it presupposed that it would be inherently just for English domestic law of tort to apply irrespective of the circumstances of the case and the connection or non-connection of the parties with the forum. Indeed, apart from matters of procedure and subject to overriding public policy considerations, the Law Commissions saw no reason for retaining the application of the law of the forum to all cases involving foreign torts or delicts. After all, The Halley (1868) LR 2 PC 193, which was the nexus of the first limb, could be justified on the historical ground that the law of tort was formerly seen as "having a punitive rather than compensatory function". In other words, it used to be more closely allied to criminal law, an area of law which courts in the UK are always expected to apply UK law. As this is no longer the case, the Law Commissions concluded that the purpose of the first limb of the rule has been defeated.
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Despite the variety of reasons expressed by their Lordships, academics and judges in subsequent cases tended to view Lord Wilberforce's judgment as authoritative and to accept the proposition that the rule should apply with flexibility, as amounting to an exception to the double-actionability rule (see eg Fawcett 1992, p 535; Stone 1995, p 278; Johnson v Coventry Churchill International Ltd [1992] 3 All ER 14). In fact Dicey & Morris on The Conflict of Laws (Collins 1993, pp 1487-1488) stated the rule (rule 203) in the following terms:
"(1) As a general rule, an act done in a foreign country is a tort and actionable as such in England, only if it is both (a) actionable as a tort according to English law, or in other words is an act which, if done in England, would be a tort; and (b) actionable according to the law of the foreign country where it was done.
(2) But a particular issue between the parties may be governed by the law of the country which, with respect to that issue, has the most significant relationship with the occurrence and the parties."
In spite of the recognition of such an exception, there has been a reluctance to invoke it. In the very few instances where it was successfully applied it resulted in ousting the application of the lex loci delicti in favour of English law as the law of the forum. Moreover, the implication of paragraph (2) of rule 203, if taken to have represented the law correctly, had meant that only a particular issue could be governed by another law by way of exception. This appeared to have ruled out the possibility of applying the exception to the whole of the cause of action. It was not until July 1994, when the Privy Council decided the case of Red Sea Insurance Co Ltd v Bouygues SA [1994] 3 WLR 926, that the uncertainty surrounding the extent of the exception was somewhat elaborated.
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The 23 plaintiffs, who were involved in various ways in connection with construction work at the university of Riyadh in Saudi Arabia, brought an action in Hong Kong against Red Sea, an insurance company incorporated in Hong Kong with its head office in Saudi Arabia, for indemnity under an insurance policy claiming loss and expense incurred in relation to correction and repairs of certain structural damage. The first to third plaintiffs were employed as main contractors, the fourth to thirteenth plaintiffs (a consortium 'PCG') were suppliers of precast concrete building units, and the fourteenth to twenty-third plaintiffs acted as architectural and design consultants. Red Sea argued that the loss claimed by the plaintiffs was not covered by the policy, and counterclaimed that PCG was in breach of its duty of care to the other plaintiffs for having supplied faulty precast units, but if Red Sea was liable under the policy it was entitled to recover the loss from PCG by way of subrogation to the rights of the other plaintiffs. On PCG's application to strike out the counterclaim, Red Sea applied for leave to amend the counterclaim to the effect that the law governing the relationship between the plaintiffs and Red Sea was that of Saudi Arabia, under which Red Sea was entitled to sue PCG directly for the damage caused to the other plaintiffs.
The High Court of Hong Kong, applying the double-actionability rule, refused leave to amend and ordered the counterclaim to be struck on the grounds that (a) the right of subrogation under Hong Kong law could not arise until payment had been made by the insurer; (b) in any case proceedings had to be brought in the name of the insured; and (c) that the law of Saudi Arabia could not be relied upon exclusively to determine the liability in tort in the courts of Hong Kong. The Court of Appeal appeared to have applied a wider interpretation to the rule by setting aside the order striking the counterclaim and holding that Red Sea should be permitted to establish that it could pursue the claim by way of subrogation under Saudi Arabian law, but also decided that the company could not sue PCG directly for negligence relying solely on the lex loci delicti. On appeal to the Judicial Committee of the Privy Council, Lord Slynn delivered their Lordships' judgment which allowed the defendant to recover its loss by exclusively relying on the lex loci delicti and irrespective of the fact that it had no remedy under the lex fori.
Following a brief exposition of the background and development of the double- actionability rule, Lord Slynn went on to say that if the law of England was as stated in rule 203 of Dicey & Morris, the defendant would win since that law equally applied in Hong Kong. If it was not, it would be necessary to consider what was the then current position. Having endorsed both limbs of the general rule as incorporated in Clause (1) of rule 203, he proceeded to consider the exception and the doubts surrounding its extent by addressing the question of whether rule 203(2), which recognised an element of flexibility, was correctly stated. As a starting point, he examined the House of Lords decision in Boys v Chaplin [1971] AC 356 and concluded that, although this part of the rule reflected Lord Wilberforce's views in that case, their Lordships' reasons for reaching the same conclusion varied to such an extent that it made it impossible to extract a binding ratio decidendi. Consequently, he explored relevant English and Australian decisions (4) in order to ascertain whether or not the exception existed. If so, whether there was any indication that it could extend to the case in hand which raised different considerations. He also found it helpful to review relevant extracts from both the Law Commission Report (No 193) and the American Restatement of the Law, Second, Conflict of Laws. Indeed the Law Commission (Report No 193, 1990, paragraph 2.7, at p 7) had expressed the view that there was no reason why the existence of a foreign element should not make it just to apply a foreign law to determine a dispute in tort, even though the substantive provisions of that law might be different from English law. Similarly, section 145 of the Restatement of the Law implied that the US courts had long recognised that they were not compelled to decide all issues under the local law of a single state. The end result of this lengthy overview was that the Privy Council recognised the reality of the conflict which had arisen since Boys v Chaplin. On the one hand, there was detected the desire to apply a rule which was certain and clear and, on the other hand, there was a need for flexibility whereby injustice could be avoided. Nevertheless, the fact remained that the way in which the exception had been applied left many questions unanswered, and it was unfortunate that only two of those questions were considered in this case.
The first question addressed the issue of whether the exception could be relied upon to invoke the application of the lex loci delicti even if the claim was not actionable under the lex fori. Lord Slynn, while recognising that to do so would be a departure from the strict rule in The Halley (1868) LR 2PC 193, took the view that it would be unrealistic to limit the exception to the application of the law of the forum. This would clearly contradict the degree of flexibility envisaged by Lord Wilberforce in Boys v Chaplin [1971] AC 356 where he stated that (at pp 391-392):
"the necessary flexibility can be obtained...through segregation of the relevant issue....For this purpose it is necessary to identify the policy of the rule, to inquire to what situations, with what contacts, it was intended to apply; whether not to apply it...would serve any interest which the rule was devised to meet....No purely mechanical rule can properly do justice to the great variety of cases where persons come together in a foreign jurisdiction for different purposes with different pre-existing relationships, from the background of different legal systems."
Lord Slynn concluded by adding that the fact that the forum was being required to apply a foreign law in a situation where its own law would not give a remedy, would also be a factor to be taken into account when the court was to decide whether the exception should apply.
The second question, which required an answer, was whether the exception could extend to govern a whole case rather than specific isolated issues as was the case in Boys v Chaplin and indeed the opening words of rule 203(2) of Dicey & Morris. Again, Lord Slynn's reasoning had the impact of further extending the application of the exception by stating that, although such instances might be rare, the exception was not limited in application to isolated issues but might also apply to the whole claim. This should take place in circumstances where all, or almost all, the significant connecting factors point in the direction of the lex loci delicti. In this instance, the policy of insurance was subject to the law of Saudi Arabia, the work was carried out in Saudi Arabia, all the contracts were to be performed in Saudi Arabia and were all made subject to the law of that country. The breaches, alleged damage and the cost of repairing such damage occurred in Saudi Arabia. The only connection with Hong Kong was that the defendant company was incorporated there, but then its head office was in Saudi Arabia. All of the above factors tipped the scales in favour of applying the exception to the double-actionability rule and allowing the defendant to rely exclusively on the lex loci delicti.
The above judgment was greatly commended and frequently described as an essential step in the right direction, for it resolved many ambiguous questions which had surrounded the exception. The fact remained, however, that many other questions still required elaboration and amplification (see Fawcett 1984, pp 665- 669). Moreover, the general rule of double-actionability, which had frequently been criticised for having caused injustice in some instances, was confirmed.
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In addition, there had been some doubts surrounding the applicable test to such instances, for such test was that normally applied to ascertain the place of tort for jurisdictional purposes under what used to be Order 11, rule 1(1)(h) of the Rules of the Supreme Court. Regardless of the fact that this rule was abolished and replaced by rule 1(1)(f) in 1987, which no longer requires such a place to be determined, this process had been questioned on the ground that a decision to grant leave to serve a writ out of the jurisdiction was, and still is, discretionary. Whilst an English court might be inclined to decide that a tort had been committed in several places for the purposes of a rule of jurisdiction, it had to insist on one single place of tort for the purposes of choice of law (see Fawcett 1992, pp 552-554).
Such a distinction between English and foreign torts had been justified on the ground that it would not be desirable to hold a person, who acted lawfully in England, liable in this country due to the application of a foreign law. It must be noted, however, that retaining this distinction would have the opposite effect in cases where the law of the UK imposed liability and the law of the relevant foreign country did not.(5) Also retaining the protective effect of this distinction would become derisory where the damage occurred within the European Economic Area. Should the damage occur within that boundary, a plaintiff would be able to bring his action in that country by virtue of Article 5(3) of the Brussels Convention 1968 or the Lugano Convention 1988 on jurisdiction and enforcement of judgments in civil and commercial matters. The courts of that country might well apply its own law under which the defendant would be liable. Were the plaintiff to succeed in his/her action, UK courts would have the obligation to recognise and enforce that judgment in accordance with the provisions of the Conventions.
By way of summary, the state of the common law rules was far from clear. The general rule of double-actionability operated in favour of defendants. The first limb of the rule incorporated a nationalistic attitude. The nature and extent of the exception required further elaboration. The distinction made between English torts and foreign torts promoted complexity, for it necessitated the identification of the place of tort as a first step in the process of determining the applicable law. Hence, well balanced reforms were needed to remedy such shortcomings. Does the new law tackle these shortcomings?
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It can safely be said that Part III of the Act is not a comprehensive piece of legislation. Apart from the tort of defamation which will be examined separately, a further issue was left outside both the ambit of the Law Commissions' draft Bill and that of the 1995 Act. This related to the complex question of the possibility of raising contractual defences in a tort action. The state of the common law rules was, and still is, far from clear in this context (see, eg, Sayers v International Drilling Co [1971] 1 WLR 1176; and Coupland v Arabian Gulf Petroleum Co [1983] 1 WLR 1136). Indeed, the Law Commissions admitted so and stated that such defences could be seen "as exclusively contractual, exclusively tortious", or "as an issue where choice of law rules in contract and tort have roles to play, but different ones". In their opinion, this was a difficult question of characterisation which depended on the particular facts of each case as well as on policy considerations. As such, the Law Commissions felt unable to recommend a satisfactory legislative intervention. The end result is that such defences remain to be dealt with as issues of characterisation. By virtue of section 9 of the Act, the common law rules remain applicable in this context.
It must also be noted that other choice of law rules which apply in particular cases, such as torts committed on the high seas, which are governed by the principles of maritime law, are not affected by the Act.
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When the Bill was first introduced into the House of Lords, it discarded the above measures concerning defamation. The Lord Chancellor justified this omission on the ground that the Law Commissions' proposed provision had depended on "a somewhat simultaneous publication of the same matter in a number of jurisdictions". It had then proceeded to give priority to UK law which would apply if the publication was made previously or simultaneously in the UK. This, according to the Lord Chancellor, seemed to be based on a similar principle as the double-actionability rule and therefore, should not be incorporated in the new law.
Nevertheless, many arguments against the impact of subjecting defamatory statements to the mercy of the general provisions of the new law have ended, and rightly so, in success. Defamation has been excluded altogether from the scope of the 1995 Act. Such arguments were in terms of the impact the new law would have had on the freedom of expression had the Bill been adopted in its original form as introduced into the House of Lords. For instance, in the words of Lord Brightman quoting from an article in The Times, if a British newspaper published truthful but damaging material about an elected politician, and the publication occurred abroad as well as in this country, then if the plaintiff were to bring an action for libel in England, he would fail under the common law because truth would be a defence to publication in UK law. Under the new law, however, the plaintiff would be able to obtain damages or even an injunction in the UK if in the foreign country where the publication occurred truth would not be a defence (SPBC 1994-95, at 51).
Admittedly, such a result would jeopardise the freedom of expression which is considered as an essential human right. Although it was argued at various stages that the provision of displacing the would-be applicable law in such instances on the ground of public policy, would overcome this problem, the absolute need to preserve such freedoms proved paramount and defamation was excluded altogether from the Act. According to section 13, the double-actionability rule remains applicable in this context.
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This general rule should identify the most appropriate applicable law in the majority of cases and without recourse to ascertaining the place of tort. It is likely to correspond with the reasonable expectations of the parties involved in the tort or delict. It also accords with the choice of law rules that are applicable in most of the European legal systems. As such, it is expected to promote uniformity and discourage forum shopping.
It is worthy of note that some concern was expressed in relation to the general rule at various stages of the debate. In effect, this rule may lead English courts to hear actions for torts which are unknown to English law, such as privacy, unfair competition or criminal compensation. Such a risk, however, has been circumvented by section 9 of the Act which specifies that the provisions apply to issues which the courts in the UK characterise as issues relating to tort or delict as opposed, for example, to contract or other bases of liability. Hence, if a UK court does not characterise an issue as being one of tort, such court will not hear the action. Alternatively, UK courts may invoke the ground of public policy, as provided by section 14 of the Act, in order to disregard such actions.
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This exception is likely to operate in favour of the law of the territory in which the tort has the most real and substantial connection, ie a proper law exception. It has the effect of applying another law to any or all of the issues where it would be inappropriate to decide the case according to the law of the place of wrong, as was the case in Boys v Chaplin. It would be invoked in two situations: (1) where there was no single territory or country in which the most significant elements in the sequence of events occurred, or (2) where it would substantially be more appropriate that another law should apply
The word substantially was emphasised by Lord Mackay, (Hansard, HL, 1994, vol 559(11), col 833) in terms that the exception is not intended to operate every time another applicable law might be appropriate, but only where it would be substantially so. But what is meant by substantially? When is the exception likely to apply? Section 12(2) attempts to provide some guidance in terms of identifying some particular factors which may be taken into account as connecting a tort with that other country. Those factors may relate to the parties, to any of the events which constitute the tort in question or to any of the circumstances or consequences of those events. Clearly, such an exception attempts to preserve flexibility as opposed to the certainty provided by the general rule. Although it is likely to create interpretation problems, it has answered many of the questions which remained unanswered under the common law. It will certainly apply in cases like Boys v Chaplin and Red Sea. It will certainly apply to the whole case or alternatively to one or more specific issues in the dispute. Whether or not it will cause major interpretation problems remains to be seen.
The remaining provisions ensure that the reforms in this Part do not have retrospective effect. They also save the effect of various procedural rules, the application of the principles of public policy and certain mandatory domestic rules, such as the rule that English courts would not give effect to foreign penal, revenue or other public law, which are regarded as so important that, as a matter of construction or policy, they must apply to any action before UK courts, and even where the claim would otherwise be governed by a foreign law. These are important safeguards for defendants against liabilities and remedies under foreign law. These safeguards may be invoked either where a certain rule of the applicable foreign law contravenes some fundamental provision of UK law, or where such rule embraces penal, revenue or other public law as understood by UK rules of private international law that it would not be tolerable to enforce here. Part III of the Act also excludes the application of renvoi.(7)
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The vital question remains however, whether the Act has struck the right balance between certainty and flexibility. Indeed, there is a need for a balance between the certainty which enables one to ascertain what the relevant rules are and to apply them without recourse to lawyers and courts, and a flexibility which gives the courts in difficult cases the freedom to reach a just decision in a given case. This is expressed with the commercial world in mind in cases where, for example, insurance companies have a need to understand and know what the law is. They need, as Dr North put it "as good a steer as possible as to what the outcome of the case would be" (SPBC 1994-95, at p 36). The new provisions seem to have achieved this aim. They identify a clear and precise general rule which can easily determine the applicable law. This rule may, however, be displaced where upon comparison of the significance of the factors which connect a tort or delict with the country identified under the general rule with the significance of the factors connecting the tort or delict with another country. Admittedly, this may create some interpretation problems, but it is not anticipated to cause the grave injustice the common law rules had occasionally caused.
As for the argument regarding the difficulties created by English courts having to apply a foreign law, this pales into insignificance when one considers that English courts have been repeatedly requested to do so in many areas of Private International Law. Moreover, this is not necessarily fatal since the foreign law has to be pleaded and proven by the parties, otherwise English courts will assume that it is the same as English law.
Whether or not Part III of the Act is the required curative measure for preventing future injustices remains to be seen. However, it can certainly be commended, for the first limb of the double-actionability rule, which had operated as a sword against plaintiffs and as a shield in favour defendants, has been swept away. The boundaries of the exception have been extended and its edges have been trimmed. It clearly is not a bitter pill and it can safely be described as a preventive measure for the reoccurrence of such injustices as those which had been caused by cases similar to M'Elroy v M'Allister.
Collins, L (1993) Dicey & Morris on The Conflict of Laws, 12th ed (London: Sweet & Maxwell).
Fawcett, J J (1984) 'Policy Considerations in Tort Choice of Law' 47 Modern Law Review 650.
Fawcett, J J (1992) Cheshire & North's Private International Law 12th ed (London: Butterworths).
Law Commission No 124 (1983) Foreign Money Liabilities (London: HMSO).
Law Commission No 146 and Scottish Law Commission No 96 (1985) Polygamous Marriages (London: HMSO).
Law Commission No 193 and Scottish Law Commission No 129 (1990) Choice of Law in Tort and Delict (London: HMSO).
Law Commission Working Paper 87 (1984) Choice of Law in Tort and Delict (London: HMSO).
Special Public Bill Committee Report (1994-95) Private International Law (Miscellaneous Provisions) Bill HL Paper 36, Session 1994-95.
Stone, P (1995) The Conflict of Laws (London: Longman).
(1) In all such areas, clear and general rules allow UK courts to apply the provisions of a foreign law exclusively in an appropriate case rather than its concurrent application with the law of the forum. Back to text
(2) Part III will come into force on such day as the Lord Chancellor and the Lord Advocate may by order made by statutory instrument appoint. Back to text
(3) See Machado v Fontes [1897] 2 QB 231. Back to text
(4) Such as, Church of Scientology of California v Commissioner of Police of the Metropolis (1976) 120 SJ 690; Coupland v Arabian Gulf Oil [1983] 1 WLR 1136; Johnson v Coventry Churchill International Ltd [1992] 3 All ER 14; Warren v Warren [1972] QdR 386; and Corcoran v Corcoran [1974] VR 164. Back to text
(5) It is worthy of note that Part III of the Private International Law (Miscellaneous Provisions) Act 1995 declined to incorporate this recommendation, but at the same time excluded the tort of defamation from the ambit of the new rules. Back to text
(6) Part I of the Act makes provisions in relation to interest on judgment debts and arbitral awards; and Part II makes provisions in relation to the validity of marriages entered into by unmarried persons under a law which permits polygamy. Back to text
(7) Part IV deals with the commencement of the various Parts of this Act. Back to text
