Cox v Ergo Versicherung AG

Damages for a foreign tort are governed by the applicable substantive law. Rules defining recoverable loss, mitigation and receipts for which credit must be given are substantive when they determine the scope of liability.

The damages provisions of the Fatal Accidents Act 1976 apply only to an action brought under that Act. They neither govern a German cause of action nor operate as mandatory rules overriding the ordinary choice of law. General English assessment principles cannot enlarge liability imposed by the applicable foreign law.

English legislation is presumed not to apply extra-territorially. An implication may arise where the legislation cannot otherwise operate effectively, or where it embodies a policy which Parliament must have intended to govern everyone resorting to an English court. The Fatal Accidents Act 1976 satisfies neither condition.

Major Christopher Cox died after a German driver struck his bicycle in Germany. His widow brought a direct claim in England against the driver's German insurer. Liability and the application of German law to the tort were common ground, but German and English law produced materially different awards for dependency and bereavement.

Sir Christopher Holland determined preliminary issues in the High Court: [2011] EWHC 2806 (QB). The Court of Appeal, by a majority, held that the damages rules of the Fatal Accidents Act 1976 could not govern the German cause of action, although Dame Janet Smith dissented on their application as part of the law of the forum: [2012] EWCA Civ 854.

The central issues were whether the relevant damages rules were substantive or procedural, whether the 1976 Act applied to a German cause of action, and whether the Act had an overriding or extra-territorial effect.

1. Appeal dismissed unanimously. Lord Sumption delivered the principal judgment, with which Lord Neuberger, Lord Toulson and Lord Hodge agreed. Lord Mance agreed in the result and substantially agreed that German law governed the recoverable damages. The declarations made below were to be varied as agreed by counsel.

2. The German rules under section 844 of the Bürgerliches Gesetzbuch were substantive. A rule requiring credit for maintenance received as a legal right from a subsequent partner formed part of mitigation and defined the loss lying within the defendant's liability. German law also substantively determined whether psychological injury or bereavement constituted a recoverable head of loss. Lord Mance agreed expressly with this analysis.

3. The damages provisions of sections 1A, 3 and 4 of the Fatal Accidents Act 1976 could not govern the German cause of action. Per Lord Sumption, if substantive, they were displaced by German law. In any event, their language confined them to an action brought under section 1 of that Act. The German right could nevertheless be enforced by an award of damages under the ordinary English remedial principle that compensation should place the claimant in the same financial position as if the wrong had not occurred.

4. That general remedial principle required credit for receipts referable to the loss, subject to limited exceptions. It did not, however, require credit for voluntary maintenance received before the claimant's new partner became legally obliged to support her. The German cause of action compensated the loss of a legal right to maintenance, and only a corresponding alternative legal right counted as mitigation.

5. Lord Mance reasoned alternatively that an English procedural rule could not enlarge liability under the applicable substantive foreign law. Accordingly, even if sections 3 and 4 were procedural, their exclusion of remarriage-related benefits could not override the substantive German requirement to credit maintenance received as of right.

6. The 1976 Act neither applied extra-territorially nor constituted mandatory law overriding the ordinary choice of law. Such an implication generally requires either that the legislation cannot operate effectively without extra-territorial application, or that it embodies a policy of such importance that Parliament must have intended universal application in English proceedings. The Act corrected an anomaly in English tort law and did not require application to foreign torts. The German rules reflected an orthodox compensatory principle and did not offend English public policy.

1. United Kingdom Supreme Court: The widow's appeal was dismissed unanimously. The Court upheld the application of German substantive damages law, although its reasoning differed from that below: [2014] UKSC 22.
2. Court of Appeal: The majority held that the damages provisions of the Fatal Accidents Act 1976 could not be applied to the German cause of action. Dame Janet Smith dissented on that issue: [2012] EWCA Civ 854.
3. High Court, Queen's Bench Division: Sir Christopher Holland determined preliminary issues and made unappealed findings concerning German law: [2011] EWHC 2806 (QB).