Cox v Ergo Versicherung AG

The central issue on this appeal is the choice of law which determines the scope and amount of damages recoverable in these proceedings by the widow of a member of HM Forces, stationed in Germany at the date of his death, against the German insurer of the German driver, whose negligence caused an accident in Germany resulting in the deceased’s death there.

It is not in dispute that German law governs the liability of the driver. The appellant says, however, that the quantification of damages recoverable from the respondent insurer is governed entirely by English law, and, in particular, by the provisions of the Fatal Accidents Act 1976 (“FAA”). The respondent, on the other hand, says that the principles for quantifying the damages are those applicable to a claim under section 844 of the Bürgerliches Gesetzbuch (“BGB”), that is the German Civil Code. The FAA provisions would produce a much more generous result for the appellant.

There is another issue on this appeal concerning the validity, meaning and effect of a document signed by the claimant, which purported to assign to the Ministry of Defence part of the claimant’s claims arising out of the accident. We have adjourned that issue and so it will not be addressed in this judgment.

The appeal is from the order dated 7 November 2011 of Sir Christopher Holland, sitting as a Deputy Judge of the High Court, and arises out of his reserved judgment of the same date. In that judgment he determined a number of issues ordered to be tried as preliminary issues by Foskett J. The Judge held and ordered that the appellant cannot rely on FAA, and that German law applies to limit the respondent’s liability by requiring that there be taken into account the obligation under German law to mitigate, maintenance from the appellant’s new partner, and the possibility or prospect of the appellant re-marrying or cohabiting with a new partner. The Judge gave permission to appeal.

This claim arises out of an accident which occurred in Germany in May 2004. At the time of the accident the appellant, Katerina Cox, and her husband, Major Christopher Cox, were living in Germany where Major Cox was stationed with HM Forces. On 21 May 2004 Major Cox was riding his bicycle on the verge of a road near his barracks when he was knocked off his bicycle by a car which had left the road, mounted the verge and collided with him. As a result of the accident Major Cox suffered injuries from which he died. The driver of the car was a German national, Herr Günter Kretschmer, who was resident and domiciled in Germany and was insured by the respondent, a company registered in Germany. The appellant was living with her husband in Germany at the date of his death. She returned to live in England in April 2005 and has lived here since that time. She was his sole dependant.

The provisions of the Private International Law (Miscellaneous Provisions) Act 1995 (“PILA”) are relevant to the choice of law issue. The relevant provisions of PILA, FAA and section 844 BGB (“section 844”) are set out in the Appendix to this judgment.

The legal analysis in the present case is unaffected by Regulation EC No 864/2007 (“Rome II”), which only applies to accidents occurring abroad after 10 January 2009.

There is no dispute as to the liability of Herr Kretschmer or that, as I have said, his liability is to be determined according to German law. It is also not in dispute that the appellant has a direct right of action against the respondent under German law by virtue of paragraph 3(1) of Pflichtversicherungsgesetz, giving effect to Article 3 of Directive 2000/26/EC of 16 May 2000, subsequently superseded by Directive 2009/103/EC of 16 September 2009.

Subject to an argument of the appellant about the mandatory application of FAA to claims for loss of dependency before an English Court (which I consider below), it is clear that the appellant is entitled to bring her section 844 proceedings against the respondent in England as a result of Regulation (EC) No. 44/2001. The European Court of Justice held in FBTO Schadeverzekeringen NV v Jack Odenbreit (2007) ECR 1-11321 that Articles 9(1)(b) and 11(2) of that Regulation permit the injured party to bring an action directly against the insurer before the courts in a Member State where the injured party is domiciled provided that a direct action is permitted and the insurer is domiciled in a Member State.

The Judge heard written and oral evidence, including expert evidence on German law.

He contrasted the recoverable loss under FAA, on the one hand, and section 844, on the other hand. As to FAA, he quoted the following passage from the judgment of Smith LJ in Welsh Ambulance Services v Williams [2008] EWCA Civ 81 at [50]:

The Judge noted, as consistent with that legal policy, the irrelevance under FAA of a widow's re-marriage or prospects for such (s.3(3)) and the disregard of benefits "which have accrued or will or may accrue" as a result of the death (s.4). Damages for bereavement are recoverable under FAA s.1A.

The Judge summarised his findings on the position under German law in paragraph [17] of his judgment. For the purpose of this appeal, it is necessary only to quote the following from that paragraph:

“(e)

Fundamental to an award pursuant to s.844(2) is the aim to restore the claimant to the financial position that he or she would have enjoyed as a dependant of the deceased, but to do so in "nett" terms. It is for the claimant to be compensated, but not knowingly overcompensated. To that end, an award is not made as at the moment of death; it seeks to reflect and react to the subsequent history so far as such impacts upon the loss of dependency – excluding only receipt of the proceeds of an insurance policy. This philosophy and its impact readily appears from a staged approach to the assessment of a widow's s.844(2) claim, that is (as the experts agree), standard for a German court:

(i)

Establish the likely prospective lifetime income of the deceased (it being assumed that he would die before the claimant).

(ii)

Deduct from (i) any savings that the deceased would have been likely to make.

(iii)

Deduct from the foregoing the fixed costs incurred in running the matrimonial household.

(iv)

Allot to the claimant 45% of the balance.

(v)

Add this latter sum to the fixed costs as per step (iii).

(vi)

Deduct any allowance for contributory negligence (if such be proved).

(vii)

Deduct from the ongoing balance the income which the claimant has made, or would be likely to make by taking up paid employment.

(viii)

Deduct from the still ongoing balance maintenance accruing to the claimant through re-marriage or through a relationship other than marital following the birth of a child.

Fundamental to the foregoing is a substantive requirement of German law: the duty to mitigate, such justifying ongoing reference to her earning capacity and to benefits accruing from re-marriage or from a similar relationship.”

As the Judge noted (at paragraph [18]) it is evident that a claim under FAA is potentially more valuable to the appellant than a claim under section 844.

The Judge held that the appellant could not rely on FAA in any respect. He expressed his reasons in paragraphs [29] and [30] of his judgment. It is sufficient to quote the following passage in paragraph [29]:

“In my judgment Part III [of PILA] is for present purposes the source of the material provisions of English conflict of laws. The provisions as cited clearly make selection of the applicable law as the unsurprising starting point. With German law thus identified, its application has to follow, propounding a package of provisions, inter alia so as to address, per s.9(4) of Part III "the question whether an actionable tort … has occurred", that is, whether there is liability and if so … for what by way of heads of damage. The answers as provided by the applicable German law have been summarised in paragraph 17 hereof – they do not include resort to the FAA.”

The presentation of Mr Layton’s attack on the Judge’s judgment changed between his opening submissions and his submissions in reply. By the conclusion of the appeal, his primary and secondary arguments (in terms of logical analysis rather than substantive merit) were, in brief summary, as follows.

The starting point of his analysis was that the appellant’s claim can only be brought before an English court under FAA and that she has no cause of action under section 844 justiciable here. Mr Layton gave the following two reasons for that proposition. Firstly, he submitted, there is no territorial limitation to the application of the provisions of FAA. He said that both wrongful conduct and deaths abroad are capable of falling within those provisions, and foreign dependants can take advantage of them. He referred to Davidsson v Hill [1901] 2 KB 606 and The Esso Malaysia [1975] 1 QB 198 in support of that submission.

He relied, secondly, on the following statements in Roerig v Valiant Trawlers Ltd [2002] EWCA Civ 21, 1 WLR 2304 at [20] and [28] of Waller LJ, with whom the other members of the court agreed:

“20.

… Procedurally an action on behalf of a person killed in an accident is only available in the English courts by virtue of what is now sections 1 and 2 of the 1976 Act.”

“28.

… As I have already said, we are concerned with an action which can only be brought in this country by virtue of the 1976 Act.”

Accordingly, Mr Layton submitted, again citing Waller LJ in Roerig (at [28] and [29]) in support, the court is bound in these proceedings under FAA to apply the provisions for assessment of damages in FAA ss. 3 and 4 because those provisions are expressed in mandatory terms.

Mr Layton submitted that this analysis is consistent with, and supported by, the approach of the courts in cases under the Civil Liability Contribution Act 1978 which involve a foreign element. Citing Chadwick J in Arab Monetary Fund v Hashim Times Law Reports 11 October 1994, Mr Layton said that in cases under the 1978 Act the court does not ask whether, under some rule of English private international law to be found independently of that Act, the contribution claim is to be determined by reference to the 1978 Act. Rather, the court asks whether, under the provisions of the 1978 Act itself, the contribution claim ought to succeed. As the point was expressed in the brief published summary of Chadwick J’s judgment:

“If B and C were each persons against whom liability had been or could be established in an action brought against them by A in an English court, applying the appropriate law in accordance with English private international law rules, then the Act conferred on B a right of contribution against C to which the court had to give effect. There was no preliminary question as to proper law the answer to which determined, independently of the Act, whether the Act applied.”

Mr Layton argued that such an approach would not give rise to any problems of comity with other nations either generally or on the particular facts of the present case. In the case of a death to which foreign law applies, FAA s.1 is only engaged if the death is the consequence of tortious wrongdoing actionable under the applicable foreign law. FAA provides, on the appellant’s case, a remedy in the English courts for conduct which is (whichever the applicable law) wrongful and results in death which causes loss to a dependant. Further, on the particular facts of the present case, the appellant would have a claim in Germany directly against the respondent under section 844. Mr Layton’s analysis flowed from his description of a claim under FAA as a claim “piggy-backing” on or grafted onto the underlying liability.

The appellant’s alternative case is advanced on the hypothesis that she is entitled to bring her claim under section 844 before an English court. The essence of this alternative case may be summarised in the following five propositions. First, in applying conflict of law rules, the Judge failed to make a fundamental distinction between the relevant cause of action, on the one hand, and the precise issue which arises for determination, on the other hand. Secondly, the relevant issue in the present case is the identification of the head of loss recoverable by the appellant. Thirdly, that head of loss is properly identified as loss of material support, which, in English law, is characterised as loss of dependency. Fourthly, the assessment of damages for loss of dependency is, as a matter of conflict of laws, a procedural matter to be governed by the lex fori, that is the law of the place where the proceedings are being conducted. Fifthly, English law as to the assessment of damages for loss of dependency as a result of death caused by a wrongful act is contained in FAA, and accordingly the provisions of that Act govern the assessment of damages in the present case.

It is not necessary to set out in detail here the submissions made by Mr Layton in respect of each of those propositions. So far as concerns the argument that the Judge failed to identify the relevant issue for the purpose of identifying the law governing the resolution of that issue, Mr Layton points, in particular, to paragraph [29] of the Judge’s judgment, the material part of which I have quoted earlier, in which the Judge said:

“With German law thus identified, its application has to follow, propounding a package of provisions, inter alia so as to address … whether there is liability and if so … for what by way of heads of damage. The answers as provided by the applicable German law … do not include resort to the FAA”

Mr Layton’s second and fourth propositions on the appellant’s alternative case are not in dispute. What is in dispute, and is central to the success of the appeal on the appellant’s alternative case, is whether the head of loss recoverable by the appellant is properly characterised, for the purpose of conflict of law rules, as loss of dependency in the FAA sense. Mr Layton submitted that the characterisation exercise is one of English law as the law of the place of litigation and is to be approached in a broad and general way. He relied upon the judgments in Macmillan Inc v Bishopsgate Investment Trust plc (No.3) [1966] 1 WLR 387, Roerig, Harding v Wealands [2006] UKHL 32, [2007] 2 AC1 (HL), Maher v Groupama Grand Est [2009] EWCA Civ 1191, [2010] 1 WLR 1564, and Briggs on The Conflict of Laws (2^nd ed) pp. 8-12.

Mr Layton supplemented his primary alternative case with a number of further arguments. He submitted that FAA ss. 3 and 4 impose mandatory rules, and accordingly are required by PILA s.14(4) to be applied irrespective of any foreign law that would otherwise apply. Mr Layton supported that proposition and analysis by reference to the judgment of Waller LJ in Roerig and the judgment of Arden LJ in Harding v Wealands [2002] EWCA Civ, [2005] 1 WLR 1539 (CA) at 1558A.

Mr Layton further submitted that it would, in any event, be contrary to English public policy for the calculation of compensation payable to the appellant to be made otherwise than under FAA ss.3 and 4 since those provisions reflect the will of Parliament; and, accordingly, PILA s.14(3)(a)(i) requires the assessment of damages payable to the appellant to be carried out in accordance with sections 3 and 4 irrespective of any foreign law that would otherwise apply. In that connection, he referred to passages in the speech of Lord Reid in Parry v Cleaver [1970] AC 1 at 13H and 19G.

Mr Layton also contended that PILA s. 12 applies on the facts of the present case to displace German law if that would otherwise apply under the general rule in PILA s.11. The matters which Mr Layton emphasised in that connection are that Major Cox was a British army officer posted to Germany by the MoD; he was living with Mrs Cox in British Army accommodation; and for the purposes of his pension he has been treated as having died in service.

The respondent has served a Respondent’s Notice to uphold the Judge’s order on different or additional grounds. It is not necessary to set out those further grounds here.

Mr Layton advanced his analysis and arguments with tenacity, but I do not accept them.

It is clear that an action under FAA s.1 is not the only permissible route for bringing the appellant’s claim before an English court. Mr Layton’s argument to the contrary was not identified by the parties, Foskett J or the Judge as a preliminary issue, which doubtless explains why the Judge did not address it specifically in his judgment. The degree of confidence which the appellant has in the argument is perhaps illuminated by the fact that, until his closing submissions, Mr Layton advanced the argument as a secondary, alternative one, whereas it logically comes first. The appellant herself, in paragraph 3 of her Particulars of Claim, asserts that she brings her claim “(1) … pursuant to the provision of the Fatal Accidents Act 1976 and/or (2) pursuant to German law.”

As a further preliminary observation, Mr Layton never explained how, if his argument is correct, the appellant is able to bring these proceedings directly against the respondent. The European Communities (Rights against Insurers) Regulations 2002 impose a direct liability on an insurer to an injured person, but only in respect of an injury resulting from a road accident in the United Kingdom. It is unclear whether Mr Layton was in some way seeking to meet the point when he described a claim under FAA as “piggy-backing” on or grafted onto the underlying claim against the insured and as purely procedural. I do not see how that does meet the point, but, in any event, those descriptions are inapposite because it is clear that the Fatal Accidents Act 1846 (“the 1846 Act”), FAA’s statutory predecessor, created a new cause of action which never existed at common law. Not only does FAA provide a cause of action which does not exist at common law, but it enables the deceased’s dependants (in certain circumstances) to sue on their own behalf and not as the deceased’s personal representatives. FAA, far from being merely procedural, creates a right of action which does not exist and has never existed outside FAA and its statutory predecessors.

As I have said, Mr Layton relied on Davidsson v Hill, The Esso Malaysia and Roerig on this part of his submissions. In Davidsson it was held (Kennedy and Phillimore LJJ) that the Norwegian widow of a Norwegian seaman killed on the high seas in a Norwegian vessel as a result of a collision with a British ship, which was negligently navigated, could maintain an action under the 1846 Act. There was no issue in that case, however, as to the application of the law of the place where the tort was committed because it was common ground that the high seas was “the common ground of all countries”. The only issue was whether an action under the 1846 Act could be brought by a foreign claimant in respect of the death of a foreign national.

The Esso Malaysia concerned a claim under the Fatal Accidents Acts 1846 to 1959 arising out of the deaths of Russian seamen as a result of a collision in international waters between two foreign registered vessels. Brandon J held that such a claim could in principle be maintained under those statutes.

It is clear from those two cases and also Roerig, in which a Dutch woman successfully brought proceedings in England for recovery of damages under FAA in respect of the death of her husband on an English-registered trawler, that FAA does have an extraterritorial reach. They do not go so far as to establish, however, that FAA is without any territorial limitation whatever. As Mr Mercer observed, both Davidsson v Hill and The Esso Malaysia have the particular feature that the death occurred in international waters. He drew our attention to the following passage in Dicey Morris and Collins on The Conflict of Laws (14^th ed) at para 35-073:

“There is the strongest ground for the assertion that collisions on the high seas, even though either or both of the ships are foreign ships and even though both wear the same foreign flag, since they take place outside the territorial jurisdiction of any State, are in an English court to be treated as governed by English law, even apart from statutes and convention.”

Furthermore, in The Esso Malaysia (at p. 207B) Brandon J declined to express any view on the applicability of the 1846 Act to deaths occurring abroad or in territorial waters.

It is not necessary to resolve whether FAA is without any territorial limits whatsoever and, if it has any such limits, what they are. The absence of any such limits is helpful to Mr Layton’s argument but is not essential to it. What is critical to Mr Layton’s argument on this aspect of the appellant’s case is whether it was decided by the Court of Appeal in Roerig that a claim on behalf of a person killed in an accident is only actionable in an English court under FAA. I have set out earlier in this judgment the passages in paragraphs [20] and [28] of the judgment of Waller LJ in Roerig relied upon by Mr Layton. They do not, however, form part of the ratio of the judgment.

In any event, it is clear, as Mr Mercer submitted, that those passages in Roerig are not directed to an issue concerning exclusivity of jurisdiction under FAA where there is a foreign element, but to the procedural necessity of making a claim under FAA where the applicable law is English law because there is no cause of action available to a claimant for damages for loss of dependency either at common law or under any other statute. The claimant in Roerig did not rely upon any provision of Dutch law. It was not in dispute in that case that English law was the law applicable under the general rule in PILA s.11 since the accident to the claimant’s husband had occurred on an English registered trawler. Her claim was made under, and only ever asserted under, FAA. That was why the defendant in that case sought to invoke the displacement provisions of PILA s.12.

There is, therefore, nothing in either FAA or the decided cases to support the appellant’s case that she is obliged in the present proceedings to make her claim under, and only under, FAA and so is precluded from bringing a claim here under section 844.

That then leads to Mr Layton’s principal alternative case. The starting point for that alternative case is that it is common ground that, under the general rule in PILA s.11(1) (and so subject to Mr Layton’s arguments under PILA s.12 (displacement of the general rule), s.14(3)(a)(i) (conflicting principles of English public policy) and s.14(4) (mandatory nature of FAA ss.3 and 4)), German law is the “applicable law” governing the substantive aspects of the appellant’s cause of action. Germany is the country in which the events constituting the tort in question occurred since the accident occurred there and Major Cox was killed there.

Mr Layton is undoubtedly correct, however, and indeed it is common ground, that that is not the end of the conflict of laws analysis. It is necessary to identify and characterise the particular issue in question in order to ascertain the law governing the determination of that issue. FAA s.9(2) provides that the characterisation of the issue is a matter for the court of the forum, namely (as Mr Layton rightly submitted) the English court in the present case. The process was described in the following well-known passage in the judgment of Staughton LJ in the leading case Macmillan Inc v Bishopsgate Trust (No. 3) [1996] 1 WLR 387 at 391G-392B:

“In any case which involves a foreign element it may prove necessary to decide what system of law is to be applied, either to the case as a whole or to a particular issue or issues. Mr. Oliver, for Macmillan Inc., has referred to that as the proper law; but I would reserve that expression for other purposes, such as the proper law of a contract, or of an obligation. Conflict lawyers speak of the lex causae when referring to the system of law to be applied. For those who spurn Latin in favour of English, one could call it the law applicable to the suit (or issue) or, simply, the applicable law.

In finding the lex causae there are three stages. First, it is necessary to characterise the issue that is before the court. Is it for example about the formal validity of a marriage? Or intestate succession to moveable property? Or interpretation of a contract?

The second stage is to select the rule of conflict of laws which lays down a connecting factor for the issue in question. Thus the formal validity of a marriage is to be determined, for the most part, by the law of the place where it is celebrated; intestate succession to moveables, by the law of the place where the deceased was domiciled when he died; and the interpretation of a contract, by what is described as its proper law.

Thirdly, it is necessary to identify the system of law which is tied by the connecting factor found in stage two to the issue characterised in stage one. Sometimes this will present little difficulty, though I suppose that even a marriage may now be celebrated on an international video link. The choice of the proper law of a contract, on the other hand, may be controversial.”

Auld LJ in the same case described the process as follows:

“Subject to what I shall say in a moment, characterisation or classification is governed by the lex fori. But characterisation or classification of what? It follows from what I have said that the proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the true issue or issues thrown up by the claim and defence. This requires a parallel exercise in classification of the relevant rule of law. However, classification of an issue and rule of law for this purpose, the underlying principle of which is to strive for comity between competing legal systems, should not be constrained by particular notions or distinctions of the domestic law of the lex fori, or that of the competing system of law, which may have no counterpart in the other's system. Nor should the issue be defined too narrowly so that it attracts a particular domestic rule under the lex fori which may not be applicable under the other system: see Cheshire & North's Private International Law , 12th ed., pp. 45–46, and Dicey & Morris , vol. 1, pp. 38–43, 45–48.” (p. 407 B/D)

“I agree with the judge when he said [1995] 1 W.L.R. 978, 988: “In order to ascertain the applicable law under English conflict of laws, it is not sufficient to characterise the nature of the claim: it is necessary to identify the question at issue.” Any claim, whether it be a claim that can be characterised as restitutionary or otherwise, may involve a number of issues which may have to be decided according to different systems of law. Thus it is necessary for the court to look at each issue and to decide the appropriate law to apply to the resolution of that dispute.” (p.407B/D)

There is no difficulty in identifying the critical issues on this appeal for the purpose of ascertaining by which law they are to be determined. They are, first, the head of damages recoverable by the appellant, and, secondly, the assessment or quantification of those damages. It is well established that the former is a matter of substantive law and so governed by the applicable law (PILA s.9(4)), and the latter is regarded, under conflict of law rules, as procedural and so governed by the law of the forum (PILA s.14(3)(b)): Harding v Wealands (HL); Maher.

It follows that, insofar as the Judge held and ordered that German law governs the assessment or quantification of the damages recoverable by the appellant, he was wrong to do so. That still leaves, however, the critical questions whether (1) the Judge was nevertheless right to hold that the appellant cannot rely on FAA at all in relation to the quantification of damages, and (2) if so, whether the damages recoverable by the appellant should be assessed, as a matter of English law, on principles and in a manner analogous to those applicable under German law to a claim under section 844.

In answering those questions, the first step is the proper identification and characterisation of the head of loss recoverable by the claimant under German law, that is to say under section 844. On the face of it, that is not difficult. In addition to funeral costs, it is compensation for loss of the claimant’s legal right to maintenance by the deceased. The claim is truly for loss of maintenance, neither more nor less, and so calculated on a “net” basis. So, for example, as appears from the Judge’s summary in paragraph [17(e)] of his judgment, there is to be taken into account income which the claimant has made, or would be likely to make, by taking up paid employment as well as maintenance resulting from re-marriage.

Compensation for the loss of such maintenance is not the same head of damages as compensation for loss of dependency under FAA. It is not a condition of the right to compensation under FAA that the deceased was under a legal liability to maintain the claimant. The right to compensation under FAA depends on the fact of dependency and not the deceased’s legal obligation to the claimant. It includes bereavement damages, which have nothing to do with maintenance. Apart from bereavement damages, the claim under FAA is for an amount which is fixed as at the date of death and takes no account of any income or other financial benefits that will or may accrue to the claimant after the death. Contrary to Mr Layton’s submission, those are not merely points on the manner of assessment, which is a matter for English law. They help to illuminate that the proper characterisation of the head of loss (aside from bereavement damages) recoverable under FAA is compensation for loss of factual financial dependency as at the moment of death, and so irrespective of any legal obligation of the deceased, any need of the claimant and all future events.

What is recoverable under FAA is a highly anomalous head of damages since it could leave the claimant in a considerably better financial position than that in which he or she would have been had the deceased survived. The anomalous nature of the assessment was pointed out by Lord Diplock in Cookson v Knowles [1979] AC 556 at 568D-F as follows:

“Today the assessment of damages in fatal accident cases has become an artificial and conjectural exercise. Its purpose is no longer to put dependants, particularly widows, into the same economic position as they would have been in had their late husband lived. Section 4 of the Fatal Accidents Act 1976 requires the court in assessing damages to leave out of account any insurance money or benefit under national insurance or social security legislation or other pension or gratuity which becomes payable to the widow on her husband's death, while section 3(2) forbids the court to take into account the re-marriage of the widow or her prospects of re-marriage. Nevertheless, the measure of the damages recoverable under the statute remains the same as if the widow were really worse off by an annual sum representing the money value of the benefits which she would have received each year of the period during which her husband would have provided her with them if he had not been killed. ”

As I have said, damages are assessed in accordance with the law of the forum. The problem that arises is that the only head of damages recoverable under English law by a claimant for financial loss as the result of the death of another due to the defendant’s tortious act is that recoverable under FAA. That, however, as I have said, is not the same head of loss as is recoverable under section 844. There is no head of loss similar to section 844 recoverable either at common law or under any English statute. As Dame Janet Smith observed in the course of the hearing, the only concept of maintenance in English law is in a family law context.

In theory, it would be perfectly open to the English court now to develop from scratch its own rules for the assessment of damages for loss of maintenance in a section 844 case. As a matter of expediency, however, it seems obvious to start by examining the way another jurisdiction carries out such an assessment where it has a section 844 head of loss. The only other jurisdiction to which we were referred was Germany itself. Neither counsel indicated to us that the way the assessment is carried out under German law would be difficult for English lawyers or judges to understand or to implement in practice. Apart from Mr Layton’s general point that FAA represents the will of Parliament (which I consider in detail later), nothing has been said to us to indicate that the way the assessment is carried out under German law would offend English public policy: so far as it is possible to tell on the information we have been given, the way in which damages are assessed under section 844 produces a perfectly coherent, logical and fair financial award, indeed more so than the award of damages under FAA. I can see no good reason, therefore, why, purely as a matter of English law rather than comity, it would not be expedient to follow, at least as a starting point for assessment of damages, the way damages are assessed in Germany in cases under section 844. The English court is not bound by German methodology, and experience and precedent may result in deviation from German methodology. No sound reason has been given to us, on the hearing of this appeal, however, as to why there would be any problem in following that methodology in the present case.

I can see no good reason why, to avoid that result, the English court should interpret the head of loss recoverable under section 844 so widely as inevitably to encompass loss of dependency under FAA. That would be the result if the head of damages recoverable under section 844 was characterised simply as economic loss consequential on death as a result of the defendant’s tortious wrongdoing. That would go further than any reported authority and is wrong in principle.

It is true that in Macmillan Auld LJ said (at p. 407B/D as quoted above) that the classification of an issue for the purpose of ascertaining the governing law should be conducted with a view to the principle of striving for comity between competing legal systems, and the issue should not be defined so narrowly that it attracts a particular domestic rule under the law of the forum that may not be applicable under any other system. That comment, however, was directed to the identification of the relevant issue for the purpose of ascertaining the governing law. In the present case, the problem arises not because of any difficulty in the identification of the issue and the governing law (head of damages governed by German law, and assessment governed by English law) but because the head of damages recoverable under German law has no equivalent in English law. Furthermore, characterising the recoverable head of damages in the present case in the wide way for which the appellant contends runs the danger of falling foul of the very mischief which Auld LJ was concerned to avoid, namely unjustifiably promoting a particular domestic rule under the law of the forum (the anomalous scope of damages payable under FAA) which is not applicable under other systems of law.

Characterising the head of loss recoverable under section 844 so widely as to encompass economic loss outside maintenance is, in effect, for the law of the forum, English law, to be used to identify and characterise the head of loss which is the proper reserve of the applicable law, German law. Far from promoting comity, it would be an intrusion of the law of the forum into an area which, under private international law, is reserved to the applicable law.

The unprincipled nature of such an approach in the present case is highlighted in two ways. Firstly, the Judge observed in paragraph [17] of his judgment that, fundamental to the recovery of “net” maintenance under section 844, that is to say taking into account the appellant’s earning capacity and benefits accruing from re-marriage, is the requirement under German law of the duty to mitigate. It is common ground that a duty to mitigate is a matter of substantive law governed by the applicable law, that is to say German law in the present case: Harding v Wealands (HL) at [74].

Secondly, and more generally, there is a necessary and intimate relationship between identification of actionable loss resulting from a tortious act, on the one hand, and the scope of liability and causation, on the other hand. As Lord Hoffmann said in Harding v Wealands (HL) (in which it was held that English law governed the quantification of damages for injuries caused by the defendant, an Australian national, to the claimant arising out of an accident in New South Wales):

“24.

In applying this distinction to actions in tort, the courts have distinguished between the kind of damage which constitutes an actionable injury and the assessment of compensation (ie damages) for the injury which has been held to be actionable. The identification of actionable damage is an integral part of the rules which determine liability. As I have previously had occasion to say, it makes no sense simply to say that someone is liable in tort. He must be liable for something and the rules which determine what he is liable for are inseparable from the rules which determine the conduct which gives rise to liability. Thus the rules which exclude damage from the scope of liability on the grounds that it does not fall within the ambit of the liability rule or does not have the prescribed causal connection with the wrongful act, or which require that the damage should have been reasonably foreseeable, are all rules which determine whether there is liability for the damage in question. On the other hand, whether the claimant is awarded money damages (and if so, how much) or, for example, restitution in kind, is a question of remedy.”

The necessary and intimate relationship between liability, causation and actionable loss was explained in greater detail in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883 by Lord Nicholls at [69]-[71] and Lord Hoffmann at [127]-[129]. Lord Nicholls said as follows on the point:

“69 How, then, does one identify a plaintiff's "true loss" in cases of tort? This question has generated a vast amount of legal literature. I take as my starting point the commonly accepted approach that the extent of a defendant's liability for the plaintiff's loss calls for a twofold inquiry: whether the wrongful conduct causally contributed to the loss and, if it did, what is the extent of the loss for which the defendant ought to be held liable. The first of these inquiries, widely undertaken as a simple "but for" test, is predominantly a factual inquiry. …

70 The second inquiry, although this is not always openly acknowledged by the courts, involves a value judgment ("ought to be held liable"). Written large, the second inquiry concerns the extent of the loss for which the defendant ought fairly or reasonably or justly to be held liable (the epithets are interchangeable). To adapt the language of Jane Stapleton in her article "Unpacking 'Causation'" in Relating to Responsibility, ed Cane and Gardner (2001), p 168, the inquiry is whether the plaintiff's harm or loss should be within the scope of the defendant's liability, given the reasons why the law has recognised the cause of action in question. The law has to set a limit to the causally connected losses for which a defendant is to be held responsible. In the ordinary language of lawyers, losses outside the limit may bear one of several labels. They may be described as too remote because the wrongful conduct was not a substantial or proximate cause, or because the loss was the product of an intervening cause. The defendant's responsibility may be excluded because the plaintiff failed to mitigate his loss. Familiar principles, such as foreseeability, assist in promoting some consistency of general approach. These are guidelines, some more helpful than others, but they are never more than this.

71 In most cases, how far the responsibility of the defendant ought fairly to extend evokes an immediate intuitive response. This is informed common sense by another name. Usually, there is no difficulty in selecting, from the sequence of events leading to the plaintiff's loss, the happening which should be regarded as the cause of the loss for the purpose of allocating responsibility. In other cases, when the outcome of the second inquiry is not obvious, it is of crucial importance to identify the purpose of the relevant cause of action and the nature and scope of the defendant's obligation in the particular circumstances. What was the ambit of the defendant's duty? In respect of what risks or damage does the law seek to afford protection by means of the particular tort? Recent decisions of this House have highlighted the point. When evaluating the extent of the losses for which a negligent valuer should be responsible the scope of the valuer's duty must first be identified: see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191. In Reeves v Comr of Police of the Metropolis [2000] 1 AC 360 the free, deliberate and informed act of a human being, there committing suicide, did not negative responsibility to his dependants when the defendant's duty was to guard against that very act.”

In the present case the causally connected losses recoverable under section 844 are necessarily limited by the scope of the liability under German law. The cause of action under section 844 is for the loss of the benefit of the legal liability of the deceased for maintenance of the claimant. That is why the causally connected losses are limited to net maintenance and why they are distinguishable from the damages payable under FAA for loss of factual dependency at the date of the deceased’s death, irrespective of any legal obligation of the deceased. In truth, that distinction has nothing to do with assessment of damages as a matter of procedure, but is all to do with the substantive law as to the scope of liability and the causal connection between that liability and the actionable loss.

I turn to Mr Layton’s further arguments on the appellant’s alternative case, that is to say his arguments on the application of PILA s.14(4) (FAA ss. 3 and 4 as mandatory requirements), PILA s.14(3)(a)(i) (public policy) and PILA s.12 (displacement). It would be fair to say that Mr Layton did not advance those arguments with the same degree of confidence and robustness as those I have already addressed. Indeed, at the very end of the hearing of the appeal, in exchanges with the Bench on how best to proceed with the appeal on the assignment point, he was willing to abandon his arguments on public policy and displacement altogether. All those further arguments are, in my view, plainly without merit.

Mr Layton relied upon passages in the judgment of Waller LJ in Roerig and in the judgment of Arden LJ in Harding v Wealands (CA) in support of his argument that FAA ss. 3 and 4 are mandatory requirements for the purpose of PILA s.14(4). Neither judgment supports his submission. In paragraph [28] of his judgment in Roerig Waller LJ said that, as a simple matter of statutory construction, once an action is brought in reliance on the provisions of FAA, the sections of FAA which refer to assessments “in an action under this Act” simply apply. In the present case, however, for the reasons I have given, the claim can only be advanced under section 844. The claim is not a claim under FAA at all. Arden LJ’s judgment in the Court of Appeal in Harding v Wealands takes the matter no further. In the passage relied upon by Mr Layton (at [2005] 1 WLR 1539 paragraph [47])) Arden LJ merely summarised what Waller LJ had decided in Roerig. She undertook no independent analysis of her own.

There is nothing in the language of FAA which indicates an intention by Parliament to impose a mandatory obligation on the English courts to apply the provisions of FAA in a case like the present where the head of loss is different from loss of dependency in the FAA sense.

I turn to the argument on public policy. I cannot see any basis for Mr Layton’s argument that assessment of damages in the present case on a different basis to that prescribed by FAA would be contrary to public policy for the purposes of PILA s.14(3)(a)(i). Mr Layton referred to observations of Lord Reid in Parry v Cleaver [1970] AC1. That case concerned the question whether, in assessing damages payable to a police constable who had been severely injured by the defendant’s negligence, the claimant’s entitlement to a pension on being discharged from the police force for disablement should be taken into account. It was held that it should be ignored. Mr Layton referred to the following passages in the speech of Lord Reid:

“I cannot accept the view that disregarding these types of receipt is anomalous. In dealing with damages under the Fatal Accidents Act, 1846 (Lord Campbell's Act), such receipts were not disregarded until the law was altered by recent legislation. There, there was a universal rule. Here, there never was. The common law has treated this matter as one depending on justice, reasonableness and public policy.” (p.13H)

“If public policy, as now interpreted by Parliament, requires all pensions to be disregarded in actions under the Fatal Accidents Acts, I find it impossible to see how it can be proper to bring pensions into account in common law actions. Plaintiffs were formerly worse off under Lord Campbell's Act and I can think of no reason why the position should now be reversed so as to make them worse off at common law. In my judgment, a decision that pensions should not be brought into account in assessing damages at common law is consistent with general principles, with the preponderating weight of authority, and with public policy as enacted by Parliament, and I would therefore so decide.” (p.20B/C)

Those comments of Lord Reid have no relevance to the issue of public policy under PILA s.14(3)(a)(i). FAA reflects public policy in the obvious sense that it expresses the will of Parliament. As I have said, however, FAA does not expressly or impliedly provide either that a claim arising out of an accident abroad can only ever be brought before an English court under its provisions, or that the English courts must apply its provisions in a case like the present where the head of loss is different from loss of dependency in the FAA sense. If FAA does not expressly or impliedly so provide, there is no scope for a further argument based on public policy. A good contrast with the present case is section 1(6) of the Civil Liability (Contribution) Act 1978, which expressly provides as follows:

“References in this section to a person's liability in respect of any damage are references to any such liability which has been or could be established in an action brought against him in England and Wales by or on behalf of the person who suffered the damage; but it is immaterial whether any issue arising in any such action was or would be determined (in accordance with the rules of private international law) by reference to the law of a country outside England and Wales. ”

I turn to the argument on displacement. As I have said earlier in this judgment, the appellant’s case on displacement of German law for the purpose of identifying the relevant head of loss rests on the fact that Major Cox was a British army officer posted to Germany by the MoD; he was living with Mrs Cox in British Army accommodation; and for the purposes of his pension he has been treated as having died in service.

In Roerig the defendant contended that the fact that the deceased was Dutch, employed by a Dutch company, paying Dutch taxes and making contributions to obtain Dutch benefits and the fact that the dependants would suffer their loss of dependency in Holland as Dutch citizens were the most significant factors which made it logical to assess damages by reference to Dutch law. Those factors can fairly be seen as the mirror image of those relied upon by the appellant in the present case for the purposes of PILA s.12. In rejecting the argument under PILA s.12 in Roerig Waller LJ said (in paragraph [12]) that the logic of the defendant’s argument in that case would lead almost inevitably to the consequence that, where a claimant injured in England is a foreigner living and employed in that foreign country, any head of damage should be assessed in accordance with the law of his or her country. Indeed, he acknowledged that it could be said to be “appropriate” that that should be so since the injured party or the dependants of the injured party are likely to feel their loss only in that foreign country. Waller LJ, nevertheless, rejected the argument on the following basis:

“12.

… But it seems to me that it was not intended that the general rule should be dislodged so easily. Where the defendant is English and the tort took place in England it cannot surely be said that it is substantially more appropriate for damages to be assessed by Dutch law simply because the claimant or the deceased is Dutch. One can entirely understand that, if fortuitously two English persons are in a foreign country on holiday and one tortiously injures the other, the significant factors in favour of England being the place by reference to which the damages should be assessed may make it substantially more appropriate that damages should be assessed by English law. But say the position were that an English defendant under English principles relevant to assessment of damage would have to pay aggravated damages to a claimant, and would thus have to pay English plaintiffs such damages, why should a foreigner not be entitled to have such damages awarded in his or her favour simply because by the law of where they reside those damages would be unavailable? … In my view the word “substantially” is the key word. The general rule is not to be dislodged easily. I thus think the judge was right in the view he formed that the defendants had failed in their attempt to do so.

That reasoning shows clearly why the appellant’s PILA s.12 displacement argument cannot succeed in the present case. The accident occurred in Germany, where the tortfeasor, the victim and the appellant were all living at the time. It is common ground that those factors engage the general rule in PILA s.11 (1), by which German law is the applicable law for determination of all substantive matters, including identification of the recoverable heads of loss. I am very doubtful that the fact that the deceased in the present case was a serving officer of HM Forces and that, for the purposes of the pension payable to the appellant, he is treated as having died in service are relevant factors, but even if they are, they and the other matters relied upon by the appellant plainly do not make it “substantially more appropriate” for the general rule in PILA to be displaced in favour of English law any more than the factors relied upon by the defendant in Roerig made it appropriate for English law to be displaced by Dutch law in that case.

For those reasons, I would hold that the Judge was wrong to order that German law applies to determine whether maintenance from the appellant’s new partner (or her right thereto, if any) and also the possibility or prospect of the appellant re-marrying and/or co-habiting with a new partner are to be taken into account in determining the extent of the respondent’s liability.

I would hold that the Judge was correct, however, to hold that the claimant cannot rely on FAA.

I would further hold that the damages recoverable by the appellant should be assessed, as a matter of English law, on principles and in a manner analogous to that applicable under German law to a claim under section 844.