Does the Civil Liability (Contribution) Act 1978 have overriding effect so that it applies to all contribution claims brought in England and Wales? Or does it apply only when the domestic choice of law rules indicate the law of England and Wales governs the claim? The UK Supreme Court provides the answer in a recent appeal decision.

On 2 November 2022, the Supreme Court handed down its long-awaited judgment in the case of The Soldiers, Sailors, Airmen and Families Association – Forces Help and another v Allgemeines Krankenhaus Viersen GmbH [2022] UKSC 29. The court decided that a contribution claim brought in the English courts would be determined not by English law but by German law. Paralegals Rafaella Salerno and Joe Corina review the judgment.

The background to the case

In 2000, Mr Roberts suffered a brain injury at birth in a hospital in Germany where his father was stationed at the time with the UK armed forces. Mr Roberts alleged his brain injury was a result of the attending midwife’s negligence and brought proceedings against the midwife’s employer, Soldiers, Sailors, Airmen and Families Association – Forces Help (“SSAFA”), and the Ministry of Defence (“MoD”). The MoD agreed to indemnify SSAFA in the event of a successful claim. SSAFA and MoD then brought a claim for contribution against the company that operated the hospital, Allgemeines Krankenhaus Viersen GmbH (“AKV”), alleging that, pursuant to the Civil Liability (Contribution) Act 1978 (the “1978 Act”), AKV was liable for the negligent treatment alleged by Mr Roberts.

It was common ground that, although proceedings were brought in England, Mr Roberts’ negligence claim against SSAFA and MoD and any liability of AKV to Mr Roberts would be governed by German law. However, the Supreme Court’s decision centred on the contribution claim brought by SSAFA and MoD against AKV. The point of law to be determined by the Supreme Court was whether the 1978 Act had a mandatory overriding effect so that it would apply to all contribution claims brought in England, or whether it only applied where domestic choice of law rules indicated that the contribution claim in question would be governed by English law.

Applying English conflict of laws rules, SSAFA, MoD and AKV all agreed that the contribution claim would be governed by German law unless the 1978 Act had a mandatory overriding effect, ie the 1978 Act would have effect notwithstanding that German law otherwise applied when determining all other issues in the case.

The parties further agreed that if the contribution claim were governed by German law, the limitation period for finding AKV liable would have expired. SSAFA and MoD maintained that English law applied by virtue of the 1978 Act having a mandatory overriding effect such that the contribution claim against AKV would not be time-barred.

At first instance ([2019] EWHC 1104 (QB)), the High Court held that the 1978 Act did have overriding effect and that the contribution claim had been brought against AKV in time. The Court of Appeal agreed ([2020] EWCA Civ 926), dismissing AKV’s appeal. AKV further appealed to the Supreme Court.

The Supreme Court, disagreeing with both the High Court and the Court of Appeal, unanimously allowed AKV’s appeal, holding that SSAFA and MoD’s claims for contribution against AKV fell to be decided under German law and were, therefore, time-barred. The 1978 Act did not have a mandatory overriding effect so as to displace the application of German law in relation to the contribution claim.

Of note is that if the events in this case had occurred after 2009, Regulation (EC) 864/2007 on the law applicable to non-contractual obligations (“Rome II”) would have applied instead of the 1978 Act. Rome II, however, states that the same law governs claims for contribution as the original claim from which the contribution claim arises. Therefore, under Rome II, the outcome in this case would have been the same.

The issue in the Supreme Court

The issue before the Supreme Court was whether the 1978 Act did or did not have a mandatory overriding effect.

Lord Lloyd-Jones first turned to the wording of the 1978 Act. He determined that it does not expressly have overriding effect, nor does it expressly apply irrespective of the foreign law otherwise applicable to the contribution claim. In the absence of such wording, Lord Lloyd-Jones considered whether it could be implied that the 1978 Act was intended to have a mandatory overriding effect from the wording. Disagreeing with the Court of Appeal, the Supreme Court held that the 1978 Act  was equivocal and that a mandatory overriding effect was not required for the statute to fulfil its intended purpose. The 1978 Act’s wording was found to be “equally consistent with a statutory right of contribution arising only where conventional choice of law rules indicate English law as the law with which the contribution claim is most closely connected”.

The court went on to consider parliamentary materials, legislative history and reports released by the Law Commission and authorities. The admissible parliamentary materials and legislative history did not support the view that the statute was to have overriding effect. It was held that the weight of academic commentary strongly favoured AKV’s case that the 1978 Act did not have overriding effect.

In arriving at its decision, the court distinguished between “overriding” and “extra-territorial” effect. The term “extra-territorial effect” was adopted in the earlier case of Cox v Ergo Versicherung AG [2014] UKSC 22, where the widow of a British Army officer brought an action in England over the death of her husband in Germany. Although it was accepted that German law applied to liability, the widow sought to apply the provisions of the Fatal Accidents Act 1976 to the recovery of damages. As a matter of statutory interpretation, the court found that the act did not apply as there was no explicit suggestion that it should apply, nor could it be inferred. In the present case, the court inferred a “risk of confusion” if the two terms are used interchangeably. The issue was not whether the legislation applied outside the jurisdiction (“extra-territorial effect”), but instead whether English law should be applied to an issue otherwise governed by foreign law (a provision having mandatory “overriding effect”).

In concluding its judgment, the Supreme Court addressed two considerations that were particularly influential to its decision. First, there would be many situations in which a contribution claim would be governed by English law, even though the underlying claim would be governed by foreign law. The Court of Appeal’s view that the chances of such situations would be so “small to the point of invisibility” so as to justify the displacing of conventional choice of law rules could not be accepted.

Second, there was no good reason why Parliament should have intended to confer a statutory right of contribution whenever the party from whom the contribution is sought can be brought before a court in this jurisdiction, regardless of the law with which the contribution claim has its closest connection. Lord Lloyd-Jones could not see any sound reason why the UK Parliament should be legislating to remedy a perceived deficiency of foreign law to provide for a contribution claim that would otherwise not be permissible under the applicable foreign law. Furthermore, it would be contrary to established principles for English law to be applied if the contribution claim were most closely connected to a foreign law.

Conclusions

The Supreme Court’s decision sets a significant precedent for cross-border civil and commercial proceedings. The law governing a contribution claim brought in the English courts will be determined by domestic conflict of law rules, which will normally (although not necessarily) be the law governing the main claim. The 1978 Act does not have mandatory overriding effect and will only apply where the applicable law is English law.

From a practical perspective, defendants looking to pass a claim onto a third party ought to pay attention to the limitation rules applicable under any foreign law in order to preserve their right to a contribution from that third party.

For contribution claims relating to events occurring after 2009, it is clear from Rome II that the governing law will, like in this case, be the same law as that governing the main claim from which the contribution arises. Therefore, the practical implications of this case are equally applicable to pre-2009 cases as to cases relating to events occurring today.

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