Joining a Foreign Tortfeasor to an Odenbreit Claim – Keefe v Hoteles Piñero Canarias SL
Mr Keefe alleges that he was at a hotel in 2006 when an unsecured parasol was lifted by a gust of wind causing its spike to be blown into his right eye socket. He suffered catastrophic injuries. As at the date of the appeal his damages were valued in excess of £5m.
In October 2011 he brought an Odenbreit claim in the High Court against the hotel’s Spanish-domiciled insurer. In its Defence, the insurer admitted liability and put quantum in issue. It also, for the first time, relied on a cap on its liability under the policy of just over €600,000 (inclusive of costs). This obviously left a potentially massive shortfall on the claim.
Accordingly, Mr Keefe sought to issue a claim against the hotel directly and join it to proceedings as the Second Defendant. In November 2012 the hotel (also Spanish domiciled) applied for an order that the English courts had no jurisdiction to try the claim against it. Its application failed before the Master and the High Court on appeal. It appealed to the Court of Appeal.
Mr Keefe relied on Articles 8-14, Regulation 44/2001 (Articles 10-16 in the Recast). In particular he relied on Article 11(3). Article 8 provides that these Articles apply in “matters relating to insurance”. Article 11 provides:
(2) Articles 8, 9 and 10 shall apply to actions brought by the injured party directly against the insurer, where such direct actions are permitted.
(3) If the law governing such direct actions provides that the policyholder or the insured may be joined as a party to the action, the same court shall have jurisdiction over them.”
The hotel contended that the claim against it fell outside the scope of Article 11(3) (and Articles 8-14 generally). The claim against the hotel (unlike the claim against its insurer) did not concern a policy dispute, or any other insurance dispute. It was not a “matter relating to insurance”. It was a claim in tort. The rules relating to insurance are distinct and separate from those regulating tort.
Further, it was a condition of the applicability of Article 11(3) that there be a risk of irreconcilable judgments. There was no such risk. The claims against the hotel and its insurer were different in nature. What was required was a risk of irreconcilable outcomes in cases “involving the same situation of fact and law”.
The Court of Appeal rejected the hotel’s contentions. Construing the wording of Article 11 purposively it said that there was no warrant for imposing a restriction that the insurer or insured could only be joined where there was a policy dispute, or similar. Further, there was a risk of irreconcilable judgments. There was no threshold requirement that there be a risk of irreconcilable outcomes in situations “involving the same situation of fact and law”. Where an injured party sought to rely on the jurisdiction under Article 11(3) to join an insured tortfeasor as a party to a direct claim against an insurer, the English court was bound to accept that jurisdiction. This was so even though English law’s procedural rules on joinder were discretionary.
Article continues below...
This book is intended as a handbook for advisers to employers, providing an overview of the...
This is a significant decision. An injured party will often need or want, in the same proceedings, to bring a claim directly against the foreign-domiciled tortfeasor. The most obvious example is, as here, where there was a likely shortfall on the policy.
Keefe is a pre-Rome II case. Spanish law applies to determine the recoverable heads of loss but, following Harding v Wealands, English law as the law of the forum applies to the quantification of damages. This is likely to lead to a significantly higher award than Spanish quantification would permit. For that reason, while the claim was initially pursued in Spain, the decision was taken to pursue it in England once the significance of the decision in Odenbreit (which came out in 2007) was appreciated.
Under Rome II (which applies to accidents occurring on or after 11 January 2009) Spanish law would apply to determine both recoverable heads of loss and to quantification. This would be the case whether the claim was brought in Spain or England. In theory, therefore, an injured party could now pursue the same claim for the shortfall against the tortfeasor in Spain as they could in England. The advantage given by Harding v Wealands to the party pursuing their claim in England has been swept away.
It was for this reason that Gloster LJ suggested that it was unlikely that there would be many cases in the future where this point would arise. However, the case is likely to remain significant. For many claimants it is crucial to be able to sue in the courts of your domicile and in one set of proceedings. In reality, even after Rome II, pursuing a claim abroad is often challenging. There are a host of practical problems, such as availability of funding, differences in procedure (such as that governing expert evidence) and recoverability of costs.
As well as being significant the decision is likely to be controversial. In particular, it is open to debate whether the claim against the hotel is a “matter relating to insurance”. This is, after all a claim for an uninsured excess. On one view, this is simply a claim in tort.
Further, a curiosity of the decision is that it appears to leave an insured defendant worse off, jurisdictionally speaking, than one with no insurance at all (as Article 11(3) cannot bite in such a case). It is doubtful that that was intended.
It also raises some unanswered questions. One is what would happen in a case where the validity of the insurance contract is in issue. It is uncertain whether, if the insurer should subsequently succeed in avoiding the policy, the court would still have jurisdiction over the claim against the tortfeasor.
The hotel has sought permission to appeal to the Supreme Court and a reference to the CJEU. On any view there are likely to be further developments in this area.