20
Nov
20
Articles, Travel & Cross Border Claims
Special Briefing: recent developments in the requirement for local standards and in how to calculate interest in foreign accident cases

In the last couple of weeks we have seen developments in two of the most controversial areas of travel and cross border work: local standards, and the incidence and calculation of interest. Unfortunately the developments themselves have not been uncontroversial; both High Court decisions have been the subject of criticism, and, arguably, leave the law less clear cut than it was before. In Morgan v TUI the judge resurrected the Evans v Kosmar line of reasoning which caused so much confusion prior to clarification in Lougheed v On the Beach, whilst in Troke v Amgen​ the court appears to have confused the concepts of mandatory and discretionary legal provisions, on the one hand, with the distinction between substantive and procedural law, on the other, whilst attempting to bring the incidence and calculation of interest under Rome II into line with the rules under Rome I. 

Suffice to say that it is unlikely that either decision will settle the debates between practitioners over these interesting issues. 

Local standards evidence and accidents abroad: a review of TUI UK Limited v Lynn Morgan [2020] EWHC 2944 (Ch)

Following the judgment of Phillips J in Wilson v Best Travel [1993] 1 All ER 353, local standards evidence has been fundamental in claims concerning accidents abroad. Such evidence is essential to demonstrate that a contract has not been performed with reasonable skill and care, albeit there are exceptions to the rule. If there are applicable international standards, for example HACCP, or if res ipsa loquitur applies, no local standards evidence will be required. In addition, if the standards applied by the hotel or other supplier are so woefully inadequate that it is clearly at fault, no local standards evidence will be required. In cases where these exceptions do not apply, local standards evidence would be necessary. If a claimant consequently fails to obtain such evidence in support of his or her claim, they would do so “at [their] peril”.

In the recent decision of TUI UK Limited v Lynn Morgan [2020] EWHC 2944 (Ch), the High Court held that where local standards are unclear, the court would not require claimants to prove standards which are vague, nebulous or non-existent. Instead, a claimant can resort to other material to establish that the obligation to exercise reasonable skill and care has been breached. This article seeks to analyse this judgment and its implications.

Factual background

Mrs Morgan had booked a package holiday with TUI to stay at the Morne Hotel in Mauritius (“the Hotel”). The holiday was to take place in July 2015. Mrs Morgan duly went on the holiday with her husband. On the second night of the holiday, at approximately 9pm, she was returning to her room from dinner. She walked alone along an outside, unlit sun terrace, adjacent to the swimming pool. Unfortunately, whilst walking to her room, she collided with a heavy wooden sunbed and fell, sustaining injuries.

Mrs Morgan brought a claim against TUI pursuant to Regulation 15 of the Package Travel, Package Holiday and Package Tours Regulations 1992. She specifically alleged that there had been a breach of an implied term in the contract that services would be provided with reasonable care and skill, especially with regard to the provision of lighting at the accident location.

The trial came before HHJ Jarman QC. The Judge found in his judgment that the accident spot “was not pitch dark”, but it would have been very difficult to see the dark wooden sunbed, especially when someone was walking from the lit pathway onto the unlit sun terrace. He further found that the lack of lighting caused the accident. What concerned HHJ Jarman QC, however, was that the safety regulations in Mauritius as to external lighting applicable in hotels was unclear. He heard evidence from Mr Magner, Mrs Morgan’s expert, who referred extensively to the International Standards Organisation’s standard ISO 30061 on emergency lighting (“the ISO Standard”). Mr Magner had stated in his evidence that the standard “did not apply strictly to what lighting would be required at the accident spot”. However, Mr Magner suggested that if there was no specific local standard, such as in this case, the ISO Standard was what would be used.

HHJ Jarman QC handed down a reserved judgment, in which he found that liability was made out. He found that there was no prevailing standard in the form of regulations or the like which Mrs Morgan could point to, to answer what the Hotel’s obligations were regarding the external lighting. He accepted however that the likely standard relating to the provision of lighting on the sun terrace was the minimum set out by the ISO Standard. In addition, Mrs Morgan was deemed to be contributorily negligent in the order of 20%.

Permission to appeal was later granted by Mr Justice Marcus Smith. TUI advanced five grounds of appeal, namely that:

  1. the Judge misunderstood the ISO Standard as setting minimum standards of emergency or general lighting in external areas.
  2. the Judge was wrong to find that the ISO Standard set a universal principle in respect of emergency or general lighting.
  3. the Judge should not have felt bound to infer a local standard on the basis of the limited evidence before him and was wrong to infer such a standard from the fact that the Hotel installed additional lighting after the accident. The Judge should have found that the local standard was not proven.
  4. there was no good evidence before the Judge to the effect that the deficiency in lighting would have made any difference.
  5. the structure of the judgment showed the Judge pre-determined the issue of liability.

The decision of the High Court

The appeal came before Mr Justice Marcus Smith and took place via Skype for Business. In summarising the relevant law that he had been referred to, Mr Justice Marcus Smith stated the following at paragraph 17 of the judgment:

  1. The Court will not automatically apply the standards that would pertain if the performance of an obligation were in England. On the contrary, the Court will regard the standards prevailing in the place of performance as a “very important signpost” in determining the content of the obligation.
  2. If it can be shown that the standards prevailing in the place of performance have been infringed, then the organiser’s English law obligation to exercise reasonable skill and care will almost inevitably also be breached.
  3. However, the converse does not necessarily follow. Even if the standards prevailing in the place of performance have been complied with, it does not necessarily follow that the organiser will escape liability. The standards prevailing in the place of performance may, for no justifiable reason, fall so far below either internationally accepted or English standards that the organiser assumes an obligation to exercise reasonable skill and care that is informed not by the local standards, but by other standards. Standards (whether local, English, or international) will be important in articulating what is reasonable, but they are not the last word.
  4. Whilst the burden of proving a breach of the implied term of reasonable skill and care falls on the claimant, that burden does not necessarily oblige a claimant to demonstrate what the locally applicable standards were to succeed in their claim. Where the local standards are unclear, the Court would not require a claimant to seek to prove standards which are vague, nebulous or non-existent. In such a case, a claimant is entitled to have resort to other material in order to establish that the obligation to exercise reasonable skill and care has been breached.
  5. Although local standards will doubtless be a “very important signpost” where they are readily ascertainable by reference to a local law or regulation, for example, in cases where there is no readily ascertainable standard, it will be for the claimant to establish the content of the duty by leading other evidence.

Dealing with Grounds 1 to 3 of the Grounds of Appeal, Mr Justice Marcus Smith said that the question before the trial judge was not whether the ISO Standard was applicable, but whether it was an appropriate standard to use to determine the factual question of whether TUI had breached its duty to perform services with reasonable skill and care. Mr Justice Marcus Smith considered that the trial judge was entitled to prefer Mr Magner’s evidence. He also considered the trial judge was “absolutely right” to apply what were inapplicable standards, in order to fill the void in the local law. He further considered that the trial judge did not infer anything about local standards from events after the accident. Consequently, Grounds 1 to 3 were dismissed.

Turning to Ground 4, Mr Justice Marcus Smith did not consider there was anything in this point and it was dismissed.

Finally, turning to Ground 5, counsel for TUI accepted there had been no suggestion that the trial judge had pre-judged the matter before him. Rather, the point that was being made was that the Judge had failed to properly analyse the legal questions before him, such that the treatment of local standards was an afterthought. Mr Justice Marcus Smith did not consider that this was anything more than a re-run of Grounds 1 to 3, and this was also dismissed.

Analysis

The judgment, in this author’s view, is one that could potentially be appealed successfully. It is interesting to note that Mr Justice Marcus Smith referred to Lougheed v On the Beach [2014] EWCA Civ 1538 to support the proposition that where there was no readily ascertainable standard, it would be for the claimant to establish the content of the duty of care by leading other evidence. However, that seems to misunderstand Lougheed. Lougheed was not a case where there was no readily ascertainable standard: rather, it was a case where the claimant failed to adduce any evidence of them. In addition, at trial, there was no enquiry as to the general practice of identifying and removing spillages. The claimant attempted in Lougheed to fill the gap in her case, as it were, in the absence of that evidence, by using a non-expert to answer questions about the frequency with which floors should be cleaned. But whilst this evidence led to her victory at first instance, the Court of Appeal did not consider this evidence sufficient and overturned her case. Tomlinson LJ specifically indicated in Lougheed that a claimant who chose not to adduce local standards evidence in such cases did so at their peril.

The key issue in Morgan was that there was no prevailing standard which could inform what the Hotel’s obligations were in respect of external lighting. This is distinct, in this author’s view, from the issue in Lougheed, where no local standards evidence had been obtained. It is notable that neither the judge at first instance in Morgan, nor Mrs Morgan’s expert, were under the impression that the ISO Standard was actually the applicable standard where the accident occurred. Despite this, Mr Justice Marcus Smith considered that the trial judge was entitled to apply inapplicable standards to fill the void in the local law. Unusually, it does not appear as though it was ever argued that the claimant could succeed in its case by establishing local custom and practice, which would have been permissible in accordance with the authorities on the issue. Mr Justice Marcus Smith has, in effect, utilised the reasoning in Evans v Kosmar [2007] EWCA Civ 1003 to justify the decision of the court below, namely that Wilson is not an exhaustive statement of the duty of care, and a claimant could establish liability against a tour operator by other means.

It remains to be seen as to whether TUI will seek permission to appeal. For now, claimants are likely to rely on this judgment in an attempt to establish liability where local standards evidence is lacking, which could lead to a greater number of successes in these claims.

About the author

Ranked by the Legal 500 2021 as a Rising Star in Travel Law, Dominique Smith was called in 2016 and has a busy travel law practice. She undertakes work for both Claimants and Defendants in package travel claims, contractual disputes, and other related claims. Dominique has a particular interest in cross-border clinical negligence claims and regularly appears in the Coroners’ Courts.

 

Conflicts of Law and Rates of Interest under Regulation (EC) 864/2007 (‘Rome II’)

The High Court recently handed down judgment in Troke v Amgen Seguros Generales Companie de Seguros y Reaseguros SAU [2020] EWHC 2976 (QB). In an appeal from the county court, Griffiths J significantly clarified the law on the applicability of foreign laws governing rates of interest under Rome II.

The Facts

The claimants suffered injury in Spain and brought proceedings against the Spanish tortfeasor’s insurer in England. Liability was admitted, as were general and special damages. At the point of trial, the only issue was the rate of interest payable on the agreed damages. The claimants contended that the Spanish penal rate of interest (up to 20%) was payable; the defendant that a lower rate of interest was payable on the discretionary English basis under section 69 of the County Courts Act.

The Rome II Regulation

Regulation (EC) No 864/2007 (“Rome II”) on the law applicable to non-contractual obligations (i.e. torts) provides that Rome II “shall not apply to evidence and procedure” (Article 1(3) of Rome II). That is consistent with the law pre-Rome II. The difficult question was whether a rule governing the rate of interest was a rule of procedure, in which case Rome II would not apply and the rate of interest would be governed by the law of the forum – i.e. the law of England and Wales; or whether conversely the rate of interest was a rule of substantive law, in which case it would be governed by the lex causae, i.e. Spanish law.

The Decision at First Instance

At first instance, the trial judge held that “the rate of interest is a procedural decision and is governed by the lex fori. In other words, this court should apply the rate of interest applicable in the law of England and Wales”. In doing so, the trial judge rejected the tentative suggestion of the editors of Dicey on the Conflict of Laws (fifteenth edition, ch. 7-113) that the rate of interest on damages in tort, under Rome II, is governed by the lex causae.

The Decision of the High Court

In considering the trial judge’s decision, Griffiths J noted the context of Rome II as a treaty designed to harmonise conflict-of-law rules across member states. Whilst Article 15 of Rome II provides that the lex causae governs “the existence, the nature and the assessment of damage or the remedy claimed”, Article 15 was not concerned with clarifying the distinction between substance and procedure. Having regard to the harmonisation policy objective of the treaty, Griffiths J considered that Rome II “should be expected to be broadly consistent in its interpretation and application” with Rome I (which relates to harmonisation of conflict-of-law rules relating to contractual obligations between member states). As such, Griffiths J upheld the trial judge’s decision that his power to award interest under s69 was not inconsistent with Rome II and was permitted by Article 1(3).

Whilst the reference to Rome I and to contractual rights to interest might be regarded as contentious in the context of tortious obligations, it is important to note that the court’s decision does not preclude English judges from taking foreign rates of interest into account in exercising their discretion as to rates of interest (see XP v Compensa Towarzystwo SA [2016] EWHC 1728 (QB), at para 67). Where a party seeks such an exercise of discretion, that party will need to adduce cogent evidence of the basis on which foreign interest rates are applicable.

It is also worth noting that the claimants faced some difficulty with the wording of the joint expert’s report. The report stated that the relevant Spanish legislation “contemplates a penalty interest where insurers have not made a relevant interim payment within 3 months from the accident”. From this, the trial judge concluded that whilst interest was recoverable in the instant case, such recoverability was “potentially discretionary”. The decision in Troke was therefore premised on the Spanish penal rate of interest being discretionary (per the expert’s use of the word “contemplated”). As a discretionary rule, it was a procedural matter rather than a substantive right. Griffiths J found further support for this conclusion from the penalty nature of the Spanish interest rate. Such penalty features of rules which incentivise early payment on account or settlement “have the quality of procedural matters” (at paragraph 64 of Troke).

Conclusion

The decision is of considerable importance for European insurers and for victims of torts which take place abroad, but it does leave open the possibility of the application of foreign rates of interest under Rome II in English proceedings. It remains open to a party to prove that a foreign rate of interest is mandatory rather than discretionary, or to persuade the court that it should exercise its statutory discretion under s 69/s35A to apply a foreign rate of interest (e.g. where it can be shown that general damages allowed under foreign law are particularly modest when stripped of a higher accompanying rate of interest). There remains, therefore, a degree of uncertainty as to the effective applicability of foreign rates of interest in English courts.

 

About the Authors

Called in 2011, prior to pupillage Conor Kennedy spent two years working with a leading insurance law firm, gaining experience across regulatory, employment, leisure, travel and public sector teams. He has a varied civil practice and is accredited for Direct Access instruction, but has a particular interest and expertise in claims involving fundamental dishonesty.

Harvey Lavis is a Senior Paralegal within the Travel, Tourism and Insurance department at Trowers. He acts on behalf of both Claimants and Defendants, with a particular interest in claims proceeding within the English & Wales jurisdiction, arising out of accidents which have occurred abroad. He has a sound understanding of the Package Travel Regulations, the EU Motor Directives, the Montreal Convention and the Athens Convention, with experience in all of these areas.

Written by or involving: Conor Kennedy, Dominique Smith

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