Cox v Ergo Versicherung AG [2014] UKSC 22

Major Cox was killed by a negligent driver in Germany. His widow sued the German insurer in England, seeking to apply the Fatal Accidents Act 1976. The Supreme Court held German law governed damages, and the Act's provisions did not apply.

Facts

On 21 May 2004, Major Christopher Cox, a British Army officer serving in Germany, was killed when a car driven by Mr Gunther Kretschmer, a German national, left the road and struck him while he was cycling. Mr Kretschmer was insured by the respondent German insurer under a contract governed by German law. Mrs Cox, the deceased’s widow, was living with him in Germany at the time but returned to England after the accident, where she has since been domiciled. She subsequently entered a new relationship and had two children with her new partner.

Relying on her direct right of action against the insurer under German law and on articles 9 and 11 of Regulation EC 44/2001, Mrs Cox sued the insurer in England for bereavement and loss of dependency. Liability was admitted; the dispute concerned the applicable law for assessment of damages.

Issues

The principal issues were:

• Whether the assessment of damages was governed by German law (specifically section 844 BGB) or by English law under the Fatal Accidents Act 1976;
• Whether sections 1A, 3 and 4 of the Fatal Accidents Act 1976 applied as procedural rules of the forum;
• Whether the Fatal Accidents Act had extra-territorial effect or constituted mandatory rules applicable irrespective of ordinary choice of law principles.

Relevant Legal Framework

Under section 844(2) BGB, damages restore the dependant to the financial position she would have been in but for the death, subject to a duty to mitigate and requiring credit for maintenance received by legal right from subsequent partners. By contrast, section 3(3) of the Fatal Accidents Act 1976 excludes remarriage or the prospects of remarriage from consideration, and section 4 requires disregard of benefits accruing as a result of the death. The Act also provides for bereavement damages under section 1A, which have no direct counterpart in the BGB.

The Private International Law (Miscellaneous Provisions) Act 1995 applied (the accident preceding Rome II). Sections 11 and 12 pointed to German law as the lex causae, but section 14(3)(b) preserved procedural matters for the lex fori.

Arguments

Mrs Cox argued that sections 1A, 3 and 4 of the Fatal Accidents Act applied either as procedural rules of the forum (following Harding v Wealands [2007] 2 AC 1), or because the Act had extra-territorial effect, or as mandatory rules of English law overriding ordinary choice of law principles.

The respondent insurer contended that German law governed the substantive assessment, including the requirement to give credit for maintenance from a subsequent partner, and that the Fatal Accidents Act had no application to a claim founded on a German cause of action.

Judgment

Substance versus procedure

Lord Sumption (with whom Lord Neuberger, Lord Toulson and Lord Hodge agreed) held that the relevant German rules were substantive. The requirement under section 844 BGB to give credit for maintenance received by legal right from a subsequent partner reflected principles of causation and mitigation, which define the scope of the defendant’s liability. Applying Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883, such rules are substantive. The rule denying bereavement damages and permitting recovery only for psychological disturbance akin to physical injury was also substantive, going to recoverability of heads of loss.

Applicability of the Fatal Accidents Act

Lord Sumption held it unnecessary to classify sections 1A, 3 and 4 as procedural or substantive because they were irrelevant either way. These provisions apply only to “an action under this Act” — i.e. actions brought under section 1. A claim founded on German substantive law is not such an action. If the English court applies its own rules of assessment, the applicable principle is the general common law rule that the claimant is put in the same financial position, no better or worse, than she would have been in but for the wrong — which requires credit for receipts referable to the loss. Thus, credit must be given for maintenance from her subsequent partner from the birth of their child, when a legal maintenance obligation arose under German law.

Extra-territorial effect

Lord Sumption rejected the submission that the Fatal Accidents Act applies extra-territorially. He distinguished two questions: identifying the proper law, and whether a mandatory rule of the forum displaces it. Citing Clark v Oceanic Contractors Inc [1983] 2 AC 130, extra-territorial application requires either that the legislation cannot achieve its purpose otherwise, or that it embodies a policy so significant Parliament must have intended it to override ordinary choice of law rules. Cases such as Davidsson v Hill [1901] 2 KB 606 and The Esso Malaysia [1975] 1 QB 198 turned on the absence of any more appropriate law for maritime torts, not on extra-territoriality. The Act was passed against a background where double-actionability applied, and its purpose — remedying an English common law anomaly denying recovery for death — provided no reason to extend it to foreign torts.

Mandatory rules

The same reasoning defeated the submission that the Act’s provisions were mandatory rules under section 14(4) of the 1995 Act. The German rule requiring credit for alternative maintenance was orthodox, not repugnant to English policy, and indeed reflected principles the English common law applies outside the statutory fatal accidents context.

Lord Mance’s concurrence

Lord Mance agreed, emphasising that even if sections 3 and 4 were procedural, an English procedural rule could not expand a defendant’s liability beyond the substantive limits set by the governing foreign law. He reserved his position on aspects of Coupland v Arabian Gulf Oil Co and Roerig v Valiant Trawlers Ltd.

Verdict

The appeal was dismissed. Damages fall to be assessed in accordance with German substantive law under section 844 BGB.

Implications

The decision confirms that where a tort claim is governed by a foreign lex causae, the specific damages provisions of the Fatal Accidents Act 1976 do not apply, because they are confined by their own terms to actions brought under section 1 of the Act. The Act neither has extra-territorial effect nor constitutes a mandatory rule capable of overriding ordinary choice of law principles under the 1995 Act.

Where foreign law governs a fatal accident claim brought in England, English courts will apply the foreign law’s substantive rules of assessment, including rules on causation, mitigation, and credit for benefits received. In the absence of any Fatal Accidents Act framework applying to such foreign claims, general common law principles of assessment (restoration to the position but for the wrong) provide the residual measure.

The judgment is significant for cross-border personal injury litigation, particularly claims brought in England against foreign insurers under Regulation EC 44/2001. It clarifies that claimants cannot cherry-pick more favourable English statutory damages rules — such as the disregard of remarriage under section 3(3) — where the substantive law governing liability is foreign. The Court also noted that for accidents post-dating 11 January 2009, the Rome II Regulation (article 15(c)) resolves such questions by applying the lex causae to “the existence, the nature and the assessment of damage or the remedy claimed”, making these difficult substance/procedure distinctions largely redundant going forward.

The decision also offers guidance on the limits of Harding v Wealands, indicating that the classification of damages rules as procedural cannot expand substantive liability under foreign law, and leaves open certain earlier dicta about the classification of sections 3 and 4 of the FAA.

Verdict: The appeal was dismissed. The Supreme Court held that damages were to be assessed under German substantive law (section 844 BGB), not under the Fatal Accidents Act 1976, subject to redrafting of the declarations by counsel.

Source: Cox v Ergo Versicherung AG [2014] UKSC 22