Commercial and chancery

Despite a seemingly simple distinction, the boundaries between procedural and substantive issues in damages claims can be blurred. By Jonathan Harris

It is a principle of private international law that, once the law applicable to an issue only applies to issues classified as substantive, the law of the forum, English law, remains applicable to matters of procedure.

In the law of damages, a deceptively simple distinction is drawn, based upon the landmark decision of the House of Lords in Boys v Chaplin (1971), between categories of damages (which are treated as substantive) and the quantification of damages (procedural).

In Harding v Wealands (2006) the House of Lords had to classify rules of the governing law (New South Wales (NSW)) that created a statutory ceiling on the damages available in a motor accident claim. In doing so, it had to determine a question of fundamental importance as to the extent to which English lawyers, and English courts, need concern themselves with foreign laws on the assessment of damages.

When Boys was decided, the courts applied the common law test of ‘double actionability’, which required a claimant to show that a claim was actionable both as a tort by English law and was civilly actionable by the law of the place of the tort. This was replaced by the Private International Law (Miscellaneous Provisions) Act 1995, Part III, in favour of the application of the law of the place of the tort alone (subject to the possibility of displacement by another law of substantially closer connection).

This meant that however caps on damages might have been classified at common law, one important question in Harding was whether the 1995 act had changed the understanding of the term ‘procedure’ in this area of law. However, Section 14(3)(b) of that act states that the rules on the governing law do not affect “any rules of evidence, pleading or practice or authorise… questions of procedure in any proceedings to be determined otherwise than in accordance with the law of the forum”.

Harding v Wealands
In 2003, Mr Harding, a UK national, was rendered a quadaplegic following a motor accident in NSW. He had been travelling in a vehicle driven by Ms Wealands, an Australian national. At the time of the accident the parties were living together in England and were visiting Australia on holiday.

Section 5 of the Motor Accidents Compensation Act 1999 of NSW contains provisions stating the maximum compensation payable by a defendant for financial loss, loss of earnings and on the prevention of interest being paid for certain types of financial loss. Mr Justice Elias had held that these limits on the level of damages were procedural. However, in a surprising development, the majority of the Court of Appeal (Lord Justices Arden and Aldous; Lord Justice Waller dissenting) had decided that the decision in Boys did not require it to conclude that only the question of the availability of heads of damages was substantive and that all other matters, such as ceilings on damages, were procedural.

The court cited with approval the High Court of Australia’s decision in John Pfeiffer v Rogerson (2003), and held that procedure should be narrowly confined to matters that related to the manner and conduct of the proceedings and that all other provisions or rules were to be classified as substantive. In this respect there was support from Dicey and Morris on the Conflict of Laws, which states that statutory provisions limiting a defendant’s liability are prima facie substantive.

The House of Lords reversed the Court of Appeal decision, holding that ceilings on damages were procedural. Although their Lordships in Boys had differed as to exactly how the distinction between substance and procedure should be drawn, all had agreed that the quantification of damages was a matter of procedure. Their Lordships were clear that the 1995 act had not changed matters. Sections 10 and 14(2) indicated that the act did not affect anything other than the rules on the actionability of tort claims and, in particular, did not alter the rules on the classification of damages. Moreover, their Lordships ruled that the statement in Dicey and Morris was too broad and not applicable to the assessment of damages in tort claims.

Decision repercussions
Their Lordships’ decision seems clearly to reflect the intention of Parliament. A number of their Lordships commented that, if there had been any ambiguity, they would have invoked the doctrine in Pepper v Hart (1993), since the statements of the then Lord Chancellor Lord Mackay of Clashfern, who promoted the bill, indicated that there had been no intention to change the law on damages (a view also expressed in the Law Commission Report No 193, Scot Law Com No 129, on which the legislation was based). Indeed, Lord Carswell took the opportunity to emphasise the usefulness of the Pepper doctrine and observed that it would be “wilful blindness for courts to deprive themselves of its assistance in proper cases” (para 81).

The effect was that the cap imposed by NSW law was not applied. It is easy to feel sympathy with the outcome at two levels: first, the claimant was able to claim the higher level of damages available under English law; second, it means + continued that English courts need not concern themselves with foreign rules on the assessment of damages in tort. This may be particularly reassuring when the foreign law does not contain rules limiting the level of damages, but rules allowing for very high damages awards, as may exist in the US. Lord Rodger also noted (para 70), that “it would be equally unacceptable if, say, United Kingdom courts had to award damages according to a statutory scale which, while adequate in another country because of the relatively low cost of services etc there, would be wholly inadequate in this country, having regard to the cost of the corresponding items here”.

The desired outcome?
But one might pause to reflect on the desirability of the outcome. Insurers will doubtless be less than enthusiastic about the prospect of paying damages in excess of the maximum amount stipulated by a statutory provision of the governing law. Moreover, the change in the choice of law rules in tort in the 1995 act should arguably have been reflective of a wider shift of emphasis.

Arden LJ noted in the Court of Appeal, para 66, that “once the court has decided that the law of New South Wales is the proper law of the tort, it is logical, so far as possible, to apply the law of New South Wales throughout”.

If one applies a foreign tort law only in part, one thereby distorts the very law one is applying by superimposing rules of English law as to the remedy awarded to support the foreign right. In a world of highly developed jurisdiction rules to counteract the worst excesses of forum shopping, the effect of the Harding decision is that the claimant could recover higher damages in an English court than in a NSW court, creating a clear forum shopping incentive to sue in England.

Lord Rodger (para 64) responded correctly, saying: “This policy [of treating all aspects of the assessment of damages as procedural] may be criticised as being liable to encourage forum shopping or on some other ground, but it is the policy of the legislature.”

Some people, at least, may question whether this legislative policy best serves the prevailing needs of private international law. n
Jonathan Harris is a barrister at Brick Court Chamberscontinued #