Gunn & Ors v Diaz & Ors [2017] EWHC 157 (QB)

Case No HQ15P00778[2017] EWHC 157 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/02/2017
Before
THE HONOURABLE MRS JUSTICE ANDREWS DBE
Between
LYNDSEY CAROLINE GUNN (a protected party, by her litigation friend LESLEY BARBARA GUNN)ClaimantROBERT HENRY GUNNClaimantLESLEY BARBARA GUNNClaimantCATHERINE ELIZABETH GUNNClaimantAXA PPP HEALTHCARE LIMITEDClaimantACE EUROPEAN GROUP LIMITEDClaimantGERARDO DIAZDefendantsBENJAMIN ELEAZAR CORNIELES GUEVARADefendantMAX GUSTAVO CRUZ GRANADefendantMOTORES COSTA RICO PUNTOCOM S.A. (trading as SIXT COSTA RICA)DefendantCITI LEASING COSTA RICA S.A.DefendantINSTITUTIO NACIONAL DE SEGUROSDefendant
Chirag Karia QC (instructed by Holman Fenwick & Willan LLP) for Sixth DefendantHoward Palmer QC (instructed by Slater & Gordon LLP) for ClaimantsHearing Hearing dates: 17 January 2017
Judgment

INTRODUCTION

[1]This is an application by the sixth defendant (“INS”), to set aside service of the Claim Form and the Particulars of Claim on it out of the jurisdiction, and for a declaration that the English court has no jurisdiction over it. INS is a Costa Rican state-owned insurance entity constituted and organised pursuant to the Costa Rican National Insurance Institute Act No. 12 of 30 October 1924. It has no presence within this jurisdiction, and conducts no business here.[2]It is accepted by the claimants that on the current state of the law, the application must succeed, unless they are permitted to rely upon a jurisdictional “gateway” under Practice Direction 6B to CPR Part 6 (“PD 6B”) upon which none of them sought to rely at the time of their application for permission to serve out. The second, third and fourth claimants contend that they are in a different position from the others so far as the jurisdictional gateway upon which they did rely is concerned, but as they have no claim against INS, their position is of less importance in the context of this application.[3]The gateway upon which the claimants now seek to rely is the “necessary or proper party” gateway under PD 6B paragraph 3.1(3). This provides that permission may be granted to serve outside the jurisdiction where:
“A claim is made against a person “the defendant” on whom the claim form has been or will be served (other than in reliance on this paragraph) and a) There is between the claimant and the defendant a real issue which it is reasonable for the court to try; and b) The claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.” a) There is between the claimant and the defendant a real issue which it is reasonable for the court to try; and b) The claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.”
[4]This rule replaced the former RSC Order 11 rule (1)(1)(c), which in its original form was couched far more narrowly, in that before permission could be granted to serve a defendant out of the jurisdiction as a necessary or proper party, the anchor defendant had to have been duly served within the jurisdiction. That rule was extended in 1988 to encompass an anchor defendant duly served within or outside the jurisdiction. Under the present formulation of the rule, at the time when permission to serve out of the jurisdiction is sought, the anchor defendant may also be someone who has yet to be served, either in or outside the jurisdiction. That means that the claim against him may be one in respect of which extra-territorial jurisdiction is exercised under some different gateway in PD 6B.[5]The claims in this action arise out of a road traffic accident which occurred in the San Carlos area of San José in Costa Rica, on the morning of 21 March 2009. The first (and principal) claimant, Lyndsey Gunn, then aged 34 and working as a chartered accountant with PricewaterhouseCoopers in London, was taking part in an organised group bike ride when her bicycle was hit by an oncoming Suzuki motor car. That vehicle was in the process of overtaking a lorry, and was therefore on the wrong side of the road and travelling at some speed. Road conditions were good, and visibility was clear. She suffered life-changing injuries, including a serious head injury, for which she was initially treated in hospital in Costa Rica before being flown back to England, where she has received specialist treatment.[6]Ms Gunn’s rehabilitation has been a long and slow process; she still suffers from significant cognitive impairment which limits all aspects of her decision-making, and needs a wheelchair to mobilise. As she is a patient and lacks capacity, she brings these proceedings by her litigation friend, her mother, who is also a claimant in her own right.[7]The vehicle which ran into Ms Gunn had been hired by the first defendant, (“Diaz”) a US citizen domiciled in Florida, who was visiting Costa Rica on business, from the fourth defendant (“Sixt”), a car hire company, on 10 March 2009. It was part of a fleet of vehicles leased by Sixt from their owner, the fifth defendant, (“Citi”) under a Financial Leasing Contract dated 9 November 2007. The lease term was 48 months from the date of the delivery order for the last car. Sixt and Citi are both Costa Rican registered companies. The Financial Leasing Contract is expressly subject to Costa Rican law.[8]The only person named as an additional driver in the hire contract was the third defendant (“Cruz”). At that time, Cruz ran a business in San José with the second defendant (“Cornieles”). Diaz was a customer of theirs. Both Cruz and Cornieles are domiciled in Costa Rica.[9]It is common ground that by article 4(1) of Regulation EC 864/2007 (commonly referred to as “Rome II”) the law of the country in which the accident took place, namely Costa Rica, is applicable to any claims brought in tort. The claimants’ legal expert, Mr Federico Torrealba, explains that Costa Rican law operates a principle very similar to the English concept of “res ipsa loquitur” but even without it, the case against the driver appears unanswerable on liability. Realistically, if there were to be any significant dispute about the claim for damages for personal injury (other than a possible dispute as to the driver’s identity) it would be about quantum.[10]By article 15 of Rome II, Costa Rican law also governs the assessment of damages, though the actual circumstances of the claimant, including the losses suffered and costs incurred by Ms Gunn in England in consequence of her injuries, are to be taken into account in the assessment by virtue of Recital 33. On the evidence of Mr Torrealba, it would appear that Costa Rican law approaches the issue of damages in much the same way as English law, with a similar division between economic and non-economic losses.[11]The second, third and fourth claimants are Ms Gunn’s father, mother and sister (“the relatives”). Under the law of Costa Rica, a parent, sibling or other person who has a special emotional link to the injured party, has a personal right to bring a “moral damages” claim for compensation for the suffering that he or she experiences from seeing their injuries. In addition, as Mr Torrealba explains:
“the courts also consider the changes in the life of the close relatives, for example, if they have sacrificed their usual activities in order to help and support the victim. These damages are known in Costa Rica - following the French legal doctrine - as indirect, reflex or par ricochet damages.”
[12]The relatives’ claims are pleaded in paragraph 33 of the Particulars of Claim as follows: “As a result of the accident and/or by reason of the negligence and/or fault and/or breach of Costa Rican law of the driver of the vehicle the Second, Third and Fourth Claimants have suffered pain and injury, and have sustained loss and damage for which they claim damages including “ricochet” damages pursuant to Costa Rican law. Particulars of injury, loss and damage of the second third and fourth claimants the Second, Third and Fourth Claimants have suffered personally as a result of the fact that the First Claimant has sustained injuries. Furthermore, they have each spent time caring for, helping and supporting the First Claimant. Further particulars will be provided in due course.” (my emphasis).

Particulars of injury, loss and damage of the second third and fourth claimants

[13]The fifth and sixth claimants are English insurance companies who were respectively the providers of healthcare insurance and travel insurance to Ms Gunn. They bring their claims on the basis of various provisions of Costa Rican law pursuant to which insurers who have paid sums to, or on behalf of the claimant in respect of injury, loss or damage arising from an accident can recover such sums from the liable tortfeasor.[14]It will be readily apparent from the foregoing overview that the only connections that this matter has with England are that(a) the claimants are all domiciled in England and(b) the losses consequential on Ms Gunn’s personal injuries (including most of the costs of her medical care, and the loss and damage for which her relatives are entitled to claim in their own right) were largely incurred or suffered here.

THE CLAIM AGAINST THE DRIVER OF THE CAR

[15]The driver of the car which ran into Ms Gunn and caused her injuries followed the ambulance to the hospital, but then absconded. His identity remains uncertain. Eyewitnesses told the public prosecutor of San Carlos investigating the accident that there were two men in the car, and gave descriptions of them; one said he would be able to identify the driver if he saw him again, but no identification procedure appears to have been carried out. The claimants have sued Diaz, Cornieles and Cruz in the alternative on the basis that one of them was the driver.[16]The public prosecutor’s report dated 30 April 2009 indicates that Cruz made a voluntary statement to the prosecutor in the presence of his lawyer, in which he said that he was not in the car at the time of the accident; the passenger had been Cornieles, who had been guiding Diaz round the San Carlos district. Cruz said that in the course of a subsequent telephone conversation, Diaz (who was by then back in the USA) had confirmed that he had been the driver. There is no evidence that Cornieles has been interviewed. Diaz has claimed in a deposition taken in Florida that the driver was Cornieles, though he accepted that he was the other man in the car. It is impossible to determine at this juncture where the truth lies, but on any view, there is no evidence that Cruz was the driver, let alone sufficient evidence to give rise to a serious issue to be tried. Mr Torrealba realistically accepts that the choice is between Diaz and Cornieles. Permission to serve the Claim Form out of the jurisdiction on Cruz should never have been granted on the evidence that was adduced by the claimants (which has not improved). However, as he has not been served and judgment has been entered against Diaz, this may have no practical implications.

THE CLAIMS AGAINST SIXT AND CITI

[17]Article 188 (b) of the Traffic Law and Article 1048 (5) of the Civil Code of Costa Rica provide two possible legal bases upon which a claim may be brought for damages against a company which exploits a vehicle for commercial purposes. Article 188(b) of the Traffic Law stipulates those persons who are jointly and severally liable, with the driver, to pay damages. The claimant needs to prove that the loss was caused by the fault of the driver, and that at the time of the accident the vehicle was part of the other defendant’s commercial or industrial activity. The provision appears to be wide enough to make the commercial exploiter jointly and severally liable with the driver for personal damages claimed by the victim’s immediate family, though this point is not specifically addressed by the experts.[18]Article 1048(5) of the Civil Code creates a strict liability on the exploiter of a motor vehicle for injuries or death caused to a person by that vehicle, unless the accident was caused by force majeure or was exclusively the fault of the victim. That liability, unlike the liability under article 188(b) of the Traffic Law, does not depend upon proof that the driver was negligent. The liability under this provision would be to Ms Gunn, as the victim of the accident.[19]Mr Torrealba’s view is that the prospects of establishing liability against Sixt under both these provisions are very high. He is more doubtful about the prospects of establishing such liability against Citi, as there is no case law directly in point, but nevertheless expresses the opinion that the same principles would be applied by the civil courts because the car was part of Citi’s commercial activity.

THE CLAIM AGAINST INS

[20]The claim against INS is of a totally different character. It is brought under articles 715–718 of the Costa Rican Civil Code. For present purposes the most material provisions are articles 715 and 716, which (in informal translation) provide as follows:
“Article 715 Creditors may exercise all the rights and actions of their debtor, except those that are exclusively personal. Article 716 In order for the creditor to be able to exercise the rights and actions of the debtor, it is necessary that the debt be enforceable, that the debtor refuses to exercise them, and that prior judicial authorisation is granted to the creditor for the subrogation. However, the creditor may act without judicial authorisation, and even if his debt is conditional or still not enforceable, for the purpose of performing acts directed to preserving the debtor’s patrimony, preventing irreparable damage, such as a prescription, or that would result from the lack of enforcement of a judgment.”

Article 716

[21]The experts are agreed that the right conferred by these provisions is one of subrogation whereby, if the insured defendant (the “debtor”) does not exercise his right to recover an indemnity under an insurance policy, then, provided that the requirements of Article 716 are fulfilled, the person who has a right of recovery against the defendant (“the creditor”) can step into his shoes and make a direct claim against the insurer under the policy.[22]Therefore, although the insured event giving rise to the claim under the policy would be the liability of the assured defendant to pay damages for personal injuries, which is a liability in tort, any subrogated claim for an indemnity which the claimant would be exercising by virtue of Article 715 would be a claim in contract against a Costa Rican insurer, under a policy or policies of insurance governed by the laws of Costa Rica. It would be subject to the same defences, contractual or otherwise, as the insurer could raise against the assured. Article 717 precludes the defendant from exercising his rights against the insurer once the subrogation has taken effect.[23]INS’ legal expert, Mr Miguel Elizondo-Soto, explains in his evidence that INS has written two insurance policies of relevance under which the owner or driver of the vehicle would be indemnified up to the policy limits. The first is what he describes as a mandatory “civil liability” policy under Costa Rica’s mandatory insurance regime (known as the SOA) under which INS’s liability is limited to a sum equivalent to approximately US$5,347, though the sum would be payable in the local currency (Costa Rican colones). This mandatory cover takes effect under the Traffic Law and regulations made thereunder, and there is no written insurance policy issued by INS.[24]Mr Torrealba describes the SOA as a public fund administered by INS, and financed by the annual contributions paid by owners of motor vehicles as a requirement of being allowed to drive them on public roads. Presumably, though neither expert spells this out, it responds to the situation in which there is strict liability on the part of the vehicle’s owner, as well as to cases of established tortious liability for which the owner is liable as well as the driver.[25]The second policy is a voluntary insurance policy taken out by the owner of the vehicle, Citi. A copy of the relevant policy is in evidence, but unfortunately it has not been translated into English. However, it is possible to discern from article 2 that the insured parties under that policy are the person or persons expressly identified in the policy as the assured, and any other person who at the time of the accident is driving the car with the express or implied permission of the assured. On the evidence before me, that would exclude Cornieles if he was the driver of the car, as the only authorised drivers were Diaz, as the hirer, and Cruz. The only named assured is Citi: its particulars are set out on the first page. This is confirmed by a translated INS certificate dated 1 August 2016 which refers to the policy being taken out by “the insured”, Citi Leasing Costa Rica S.A.[26]Given that, on Mr Torrealba’s evidence, Sixt appears likely to be liable to the victim of any car accident for damage caused by the negligence of the driver to whom it has hired the vehicle, one might have expected it also to have taken out voluntary insurance of this nature. Yet there is no evidence that Sixt could make a claim under the policy taken out by Citi, and such evidence as there is suggests it could not. Sixt is not a named assured. It is neither the owner of the car nor the driver, and there is no evidence that under Costa Rican law a lessee is treated as the “owner” or as a named assured despite not being identified as such in the policy. There is no evidence of any assignment of that policy in favour of Sixt. There is no evidence that Citi was acting as agent for the lessee in taking out the insurance, or that Sixt can take advantage of that policy by operation of any other provision of Costa Rican law.[27]Citi may well have taken out that policy for its own benefit (given that, according to Mr Torrealba, there is a risk that it would be held liable under Article 188(b) of the Traffic Law as a commercial exploiter of the vehicle). The likelihood of this being the case is reinforced by the terms of the Financial Leasing Contract between Sixt and Citi, which is in evidence and has been translated. This obliges the lessee (Sixt) to take out and pay the premiums for insurance cover in respect of the leased vehicles (i.e. the whole fleet) for prospective extra-contractual third-party liability due to the injury or death of persons. The contract expressly stipulates that the beneficiary of such insurance is to be the lessee. If Sixt fails to do so, or fails to pay the premiums, then Citi has the right to do so, and to recoup the money with interest from Sixt. However, that cannot be what happened here, as the policy is a single vehicle policy, taken out in Citi’s own name. Sixt is not even a named assured.[28]One would naturally expect that Sixt would have acted in accordance with its contractual obligations, particularly since it would have been in its own interests to do so, but the existence of such a policy is entirely speculative. Any such policy must have been underwritten by someone other than INS. INS has certified that the only policy that it has written in respect of the relevant vehicle is the one taken out by Citi.[29]Mr Palmer QC, who appeared on behalf of the Claimants, pointed out that Mr Elizondo-Soto has made an assumption that Sixt would be entitled to make a claim under the Citi policy. Whilst that is true, it appears from paragraph 50 of his report that Mr Elizondo-Soto’s assumption is solely based on the assertion in paragraph 11 of the Particulars of Claim that “the fourth defendant owned the vehicle pursuant to a financial leasing contract with the fifth defendant” (my emphasis). However, it is plain on the evidence that Sixt did not own the vehicle. The Financial Leasing Contract does not pass property in the vehicle to the lessee, though it contains a provision obliging him to buy it (and the other vehicles in the fleet) from Citi after the period of the lease expires. The accident took place within the rental period, and therefore at a time when Citi remained the owner.[30]I cannot accept that Sixt could make a claim against INS under a policy taken out by Citi in the name of Citi, or that this is even arguable, in the absence of clear and unequivocal expert evidence to that effect, especially as such a finding would appear to be contradicted by all the documentary evidence. Mr Elizondo-Soto describes the assured as “the driver/owner.” Mr Torrealba had an opportunity to address the point, but he is silent on the position of Sixt, which is neither the driver nor the owner. Whilst I appreciate that Mr Torrealba had a very limited amount of time in which to respond to Mr Elizondo-Soto’s expert report, which was only served on 9 January 2017, he did respond to it as a matter of urgency, and no adjournment was sought by the claimants so as to afford him more time.[31]As Mr Elizondo-Soto explains, the coverage under the voluntary policy is only for injuries/death to individuals under public liability: strict liability is not included. Therefore, fault of the driver would have to be established. What Mr Elizondo-Soto says about this is not challenged by Mr Torrealba, and it is reflected in the language of article 3 of the policy itself.[32]The evidence of both experts supports the proposition that Ms Gunn, as the victim of the accident, would be able, on satisfaction of the requirements of Article 716, to step into the shoes of either Diaz, if it can be established that he was the driver, or Citi, if it is liable under Article 188(b) of the Traffic Law, to make a claim for an indemnity against INS under the voluntary policy, in respect of such liability up to the policy limits. These equate to US$89,126 per person and US$178,253 per event, although payment would be made in Costa Rican colones.[33]It seems clear that only person who would be able to take advantage of Article 715 to make a subrogated claim under the voluntary policy is Ms Gunn, because the voluntary insurance policy only covers the owner/driver’s liability for personal injuries caused by the insured vehicle. It is likely that the same is true of the mandatory insurance. I can conceive of no reason why the SOA, as a public fund, should be used to compensate car owners or drivers for their liability to relatives of the injured party for “moral damages” claims, especially given the relatively small policy limit. However, neither expert has turned his attention specifically to that issue. If a liability to pay the relatives’ claims had been covered by the policies, then they would have been in no better position than Ms Gunn as regards the making of a subrogated claim under Article 715.[34]It is obvious that the general damages alone (or Costa Rican equivalent) are likely to be measured in the equivalent of hundreds of thousands of pounds. Ms Gunn’s claim would plainly exhaust the policy limits under both the mandatory and voluntary contracts of insurance, whose total is less than US$95,000. In practical terms, therefore, the question whether the relatives would be able to use the same route of Article 715 to make a subrogated claim is academic.[35]The experts disagree as to whether the requirements of Article 716 have been satisfied. Mr Elizondo-Soto says they have not. Whilst he accepts that a judge has not given authorisation for the subrogation, Mr Torrealba contends that Ms Gunn can rely upon the second paragraph of Article 716, which enables the claim to be made without such authorisation in order to preserve the claimant’s rights, e.g. so as to avoid the consequences of the operation of a time-bar. Although the expert evidence is that in Costa Rica, unlike England, time for making a claim for contribution or an indemnity starts running for limitation purposes from the date of the accident, I find this contention hard to square with Mr Torrealba’s view that Ms Gunn’s lack of capacity has stopped time running against her for the purposes of limitation in Costa Rica. If that is right, she would not be exposed to any danger of losing her rights by prescription if she waited to obtain the court’s authorisation before making her claim. Having said that, Ms Gunn’s ability to rely on the second paragraph of Article 716 is a matter on which there appear to be genuine differences of opinion between the experts, and it is not obvious that Mr Torrealba is wrong.[36]On behalf of INS, Mr Karia QC realistically accepted that there is a serious issue to be tried on the merits on the question whether Ms Gunn can make a subrogated claim against INS under the two policies, save in respect of one matter raised by Mr Elizondo-Soto affording INS a potential defence, to which Mr Torrealba has not responded. I shall address that matter at an appropriate juncture later in this judgment.

THE HISTORY OF THESE CLAIMS

[37]The Claim Form was issued on 19 February 2015, almost six years after the accident. The application for permission to serve the Claim Form and Particulars of Claim on the defendants out of the jurisdiction was issued on 25 February that year and received by the Court on 2 March. It was supported by a witness statement of Mr Paul McClorry, a solicitor at Slater & Gordon. The sole basis upon which permission was sought – as against all six defendants - was PD 6B para 3.1(9)(a), which relates to claims in tort where damage was sustained within the jurisdiction (“the tort gateway”). Permission was granted by Master McCloud by order dated 11 March 2015.[38]At the time when the application was made, there were some authorities at first instance supporting the proposition that if consequential loss and damage was suffered within the jurisdiction following an accident abroad, that would suffice to bring the claim within the tort gateway. The Court of Appeal, in Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665, has since ruled that “damage” for the purposes of the tort gateway means direct damage, not consequential loss.

(a) into line with article 4 of Rome II which provides that:

“The law applicable should be determined on the basis of where the damage occurs, regardless of the country or countries in which the indirect consequences could occur. Accordingly, in cases of personal injury or damage to property, the country in which the damage occurs should be the country where the injury was sustained or the property was damaged respectively.”
[39]Therefore, the tort claims brought by Ms Gunn and the insurer claimants against the first five defendants in the present case do not fall within the tort gateway. This was accepted by Mr Palmer, but he contended that there is still a good arguable case that the relatives’ claims fall within para 3.1(9)(a). This submission was based on the part of the judgment in Brownlie in which it was held that there was a good arguable case that a claim under the Fatal Accidents Act 1976 could be brought within the jurisdiction against foreign defendants in respect of a fatal accident abroad, even though the deceased’s estate could not pursue a direct claim in tort. That finding is specific to a claim under the 1976 Act, which is a personal claim arising out of an English statute for loss of dependency on the deceased. Arden LJ was not laying down a rule that any personal cause of action brought by someone for loss and damage suffered in England, in consequence of injuries sustained by a loved one in a road traffic accident abroad, can be brought in England, even if the victim cannot sue here. That proposition would appear to fly in the face of the language of article 4 of Rome II.[40]There is no true analogy with a Fatal Accidents Act claim for loss of dependency in this case. The cause of action arises under Costa Rican law, not under an English statute. Although the relatives’ claim is independent of Ms Gunn’s and is for their own suffering and financial loss, it does not follow that these matters were not “indirect consequences” of the damage caused by the tort (as defined by article 4 of Rome II and in Brownlie), namely the personal injuries which were sustained by Ms Gunn in Costa Rica. In my judgment, the relatives’ losses are as much an indirect consequence of the injuries Ms Gunn sustained in the road traffic accident as the consequential losses and damages for which she is claiming. The “moral damages” claim, whilst a claim for pain and suffering and distress, is not a claim for personal injury suffered in the accident: it is dependent upon the impact of Ms Gunn’s injuries on the claimants, as demonstrated by the way in which it is pleaded in the Particulars of Claim. The pecuniary damages are referred to as “richochet” damages, and Mr Torrealba describes them as indirect losses.[41]Accordingly, there is no good arguable case that the relatives can rely on their losses as “damage” suffered within the jurisdiction for the purposes of the tort gateway. The reasoning in Brownlie, far from supporting that argument, contradicts it, as does the express language of article 4 of Rome II. Far from clearly having the better of the argument, those claimants clearly have the worst of it.[42]Judgment in Brownlie was handed down on 3 July 2015. An appeal is due to be heard by the Supreme Court in May 2017 and the claimants have expressly reserved their position should the decision of the Court of Appeal be reversed. However, as matters currently stand, the upshot of that decision is that this court had no basis for exercising jurisdiction over any of these defendants in respect of the road accident in Costa Rica, and there was no lawful basis upon which permission could have been granted to serve this claim form out of the jurisdiction on any of them.[43]In any event, permission to serve the claim against INS out of the jurisdiction could not have been lawfully granted under the tort gateway, even on the basis of the mistaken view of the ambit of that gateway which prevailed at the time when permission was sought, for the simple reason that the claim against INS is a claim in contract. This is a point, like the absence of any evidence that Cruz was the driver, that the Master (and the claimants’ own lawyers) appear to have overlooked. The only basis on which it would have been possible, at the time, to have sought permission to serve INS would have been under the “necessary or proper party” gateway on which the claimants now belatedly seek to rely.[44]Mr McClorry has explained in his second witness statement dated 16 December 2016 that it has not been a straightforward matter to serve the proceedings on the various defendants out of the jurisdiction. The claimants’ solicitors cannot be blamed for the time it has taken. Mr McClorry made an application in June 2015 seeking the court’s permission to extend the time for service against all six defendants by a period of eight months, i.e. until 18 April 2016. The Master granted that application on 7 July 2015, four days after the decision of the Court of Appeal in Brownlie had been handed down, and therefore at a time when no criticism could fairly be levelled at anyone for omitting to draw that decision to the court’s attention.[45]The only defendant served within that extended period was Diaz, who was served on 5 January 2016. Diaz failed to acknowledge service, and the claimants elected to enter a default judgment against him in circumstances I will go on to describe. This might put them in some difficulty if it is later established that Corneiles was the driver of the car, but that is not a matter on which I need dwell for present purposes. Neither Cornieles nor Cruz has been served and it would be wrong for the claimants to try to do so now, not least because the claims against them (as the putative driver) are alternative to the claim against Diaz on which judgment has already been entered.[46]Mr McClorry made an application in March 2016 seeking a further extension of time for service until 18 December 2016. He failed to draw the court’s attention to the judgment of the Court of Appeal in Brownlie, which by then was over eight months old. Mr McClorry has confirmed that he was aware of that decision at the time, but frankly accepted that it did not occur to him to tell the court about it. He explained that his mind was entirely focused on the reasons why service had not been achievable on the Costa Rican defendants in the timescale allowed under the CPR and the previous court order of 7 July 2015. Master McCloud granted the extension on 4 April 2016.[47]Sixt was served via the British Embassy in San José at some point in June 2016. Reynolds Porter Chamberlain (“RPC”), solicitors then acting for Sixt, acknowledged service on its behalf on 15 June, indicating an intention to contest the court’s jurisdiction. Despite this, on 20 June Sixt disinstructed RPC, and 8 July 2016 they came off the record. No alternative solicitors were ever appointed. In the event, no application was made by Sixt to contest the jurisdiction, and no fresh acknowledgment of service was filed; therefore, Sixt is deemed to have accepted that the court has jurisdiction to try the claims against it (see CPR Part 11.5). That, of course, does not preclude any other defendant from arguing that it does not.[48]No defence was served by Sixt, and on 8 August 2016 an application was made for judgment in default of acknowledgment of service against Diaz, and in default of defence against Sixt. The witness statement of Mr McClorry dated 8 August 2016 filed in support of the Claimants’ application for default judgment again made no mention of the decision in Brownlie.[49]That application was successful. On 19 August 2016 by order of Master Davidson, judgment was entered in the following terms:
“1. Judgment in default of Acknowledgment of service be entered against the first defendant and in default of defence against the fourth defendant 2. Costs in the case”
Strictly speaking, the order should have provided for judgment to be entered on liability, with damages to be assessed. That is the only way in which it can be interpreted, because there would have to be an assessment of quantum in any event. Yet no defence and no counter-schedule have ever been served.[50]The effect of entering judgment is that neither of those defendants would be entitled to contest liability or quantum. In any event, it is unrealistic to suppose that Diaz or Sixt are going to seek to engage in the process, which means that there will be no trial of the claims against them. The assessment of damages is likely to be carried out on the basis of uncontested evidence, including expert evidence, adduced by the claimants.[51]INS was served with the proceedings in around mid-July 2016 and an acknowledgment of service was lodged on 22 July. The application challenging the jurisdiction was issued on 5 August 2016.[52]Citi has not yet been served. I was informed by Mr Palmer that attempts to do so are still being made, irrespective of the fact that the claimants have accepted that the order for service out of the jurisdiction on Citi was granted on an erroneous interpretation of the rules. It may be that once the process for service in Costa Rica has been put in train, it cannot easily be halted, but I am still troubled by the idea that a foreign defendant which has a cast-iron right to have the order for service on it set aside should be put to the unnecessary trouble and expense of making an application to this court to do so.

THE NON-DISCLOSURES

[53]The application for the extension of time for service of the claim form in March 2016 was necessarily made “without notice”. Like any other without notice application, there was a duty on the claimants, as applicants, to make full and frank disclosure of all material facts known to them, or which they would have known if they had made reasonable inquiries. On any application made without notice, the party making the application must identify all matters relevant to the application, including all matters, whether of fact or of law, which may constitute a ground for not granting the order sought. The materiality of a particular matter is to be decided by the court and not by the applicant or his legal advisers: see Orb ARL v Fiddler [2016] EWHC 361 (Comm) per Popplewell J at [36].[54]The importance of the duty of disclosure to the administration of justice is stressed in the commentary in the White Book 2016 at 25.3.5. Although this passage appears as a commentary to the rules concerning injunctions and other interim remedies (which is the context in which applications are most frequently made without notice) it conveniently sets out an applicant’s disclosure duties in respect of any without notice application, and cites the authorities relevant to a wide spectrum of such applications. Specific reference is made to Masri v Consolidated Contractors International Co SAL [2011] EWHC 1780 (Comm) in which the importance of observing this duty in the context of applications for permission to serve process outside of the jurisdiction was emphasized by Burton J. He pointed out that what is being sought is the exercise of an exorbitant jurisdiction, bringing a foreign defendant within the jurisdiction, even if only to incur the costs and inconvenience of fighting a jurisdiction application successfully.[55]That duty was owed to the court, and as it appeared to me that it had been breached, I raised the issue during the hearing of this application, as it seemed to me to be relevant to the exercise of my discretion. Because the point had not been taken by INS, and the evidence filed in support of the application for the relevant (second) extension of time was not then before the court, I gave directions for the service of further evidence and submissions following the hearing.[56]Pursuant to those directions, Mr McClorry has filed a further witness statement exhibiting the application notice seeking the second extension of time, and his witness statement and evidence in support of it dated 8 March 2016. Mr McClorry states that there is nothing in the White Book to suggest that the evidence in support of the application for an extension of time should be directed at anything other than the reasons why service had not yet been effected, and why an extension of time was necessary or desirable. He plainly overlooked the passage at 25.3.5 to which I have referred.[57]A claimant’s solicitor cannot just rely on the essentials: he should also direct his mind specifically to the question whether there is anything else that the court would wish to know before deciding whether to make the order, or which might have an impact on its decision. Had he thought about it, it should have been obvious to Mr McClorry that the court would wish to know that in consequence of a decision of the Court of Appeal, handed down almost nine months earlier, the order had been obtained on the basis of a misinterpretation of the rules permitting service out of the jurisdiction under the only gateway relied upon. Therefore, the sole legal basis for the service that the claimants were asking the court for more time to effect had disappeared.[58]Mr Palmer made the bold submission that the fact that the court had made an order for service that it had no power to grant under the rules as properly interpreted, was irrelevant to the application for an extension of time for service, and that Mr McClorry was “quite right” not to include reference to the decision in Brownlie in his evidence in support of the application. The claimants were forced to apply for an extension of time due to circumstances beyond their control relating to the slow machinery of the process of service in Costa Rica, and that was all the court needed to be told.[59]I cannot accept that submission. True it is that in Collier v Williams [2006] 1 WLR 1945, at [131] the Court of Appeal said that in an application for an extension of time for service of a claim form the “critical inquiry” that the court undertakes is an inquiry into the reasons why service has not yet been effected and whether any fault can be attributed to the solicitors. However, the Court of Appeal did not say that was the only factor to be weighed in the exercise of discretion, and in any event it was not addressing circumstances like this, which are not likely to arise in the general course of such applications. In an earlier part of that judgment, at [38], in the context of addressing the more common situation where the extension of time for service would deprive the defendant of a limitation defence, the court stressed that it was “highly desirable that full consideration (with proper testing of the argument) is given to the issue of whether the relief sought should be granted.” It also pointed out that if an application to set aside service were made in future, the applicant for an extension of time may well be worse off than he would be if the extension had been refused in the first place.[60]Whilst the court would naturally want to know why service had not been effected within the time allowed for doing so, and that this was not due to some fault on the part of the claimant’s solicitors, it would want to know anything else that was relevant to the exercise of its discretion to extend time. It was plainly a material factor in the exercise of that discretion that in consequence of the clarification of the law by the Court of Appeal in Brownlie, permission had been obtained to serve the claim form out of the jurisdiction on an erroneous, too wide interpretation of PD6B 3.1(9)(a). Therefore, by the time the extension was sought, it was apparent that there was no basis upon which the court could exercise extra-territorial jurisdiction over any of the defendants in respect of their claims. The consequence of this was that the claimants were asking the court to extend time for service of a claim on foreign defendants over whom the English court had no jurisdiction, pursuant to an order that should not have been granted, and which would probably be set aside as a matter of course if the foreign defendants, once served, made such an application. If the court felt that in the light of that information the matter was inappropriate for disposal on the papers, it could have called for a hearing.[61]The claimants’ solicitors were aware of the Court of Appeal’s judgment; they ought to have been aware of its potential impact and that, at the very least, it decided that the relevant rule on which they had relied when obtaining permission to serve out, had been misinterpreted (to their clients’ advantage). They ought to have told the court about it, so that it could decide what to do. I accept that the non-disclosure was not deliberate, but that does not mean that it was not culpable. A reasonable solicitor, particularly one practising in the field of personal injury claims as Mr McClorry does, would have appreciated the ramifications of Brownlie, and would have drawn it to the court’s attention.[62]Mr Palmer submitted that to require the claimants to reveal the decision in Brownlie to the court would be to place too great a burden on them and that it is not for the court to change its mind, once made up, on reconsideration of the facts; but with respect, that submission misses the point. The court would not be changing its mind about the original grant of permission (though it would have had the power under CPR 3.1(7) to revoke the order permitting service out). It would be deciding whether or not to allow more time for service of an order that purported to exercise an extra-territorial jurisdiction that did not exist on the true interpretation of the rules, thereby potentially causing the claimant (or those effecting service abroad) to waste more time and expense in serving it, and the foreign defendant(s) to incur unnecessary expense in applying to set it aside or else run the risk, as Sixt did, of being deemed to have accepted the court’s jurisdiction. In any event, it has never been an answer to non-compliance with this fundamental duty that compliance is considered to be too burdensome. Compliance, however burdensome, is the price that an applicant must pay for obtaining an order without notice.[63]This does not mean that, when seeking an extension of time for service, claimants will always be required to anticipate all possible arguments that might be raised on an application to set aside the order for service which were not drawn to the court’s attention when the order was originally sought, or to inform the court of any changes in factual circumstances since the order was granted that might have a bearing on the merits of such an application. Each case must depend on its own facts. The position in this case is clear-cut. The decision in Brownlie was a statement of fundamental legal principle that went to the very heart of the court’s extra-territorial jurisdiction. A lack of jurisdiction emanating from the clarification by a higher court of the scope of the very provision relied on to obtain permission, is something quite different from any other dispute about the merits of the grant or refusal of the order. It is no great burden to impose on claimants to require them to be frank with the court about a matter of such fundamental importance.[64]I accept, of course, that the order for service out was valid at the time it was granted, and it was not automatically nullified by the decision in Brownlie. If the court, when fully informed, had thought that there was room for argument about the impact of Brownlie on the order it might have given the claimants (or maybe the relatives) the benefit of the doubt and allowed the extension of time for service – but at least it would have done so after consideration of the full picture, and almost certainly after hearing legal argument about it. However, I cannot conclude that the non-disclosure made no material difference to the outcome of the application. Indeed, I consider that it is far more likely that on being apprised of the true situation, and having considered the Court of Appeal’s reasoning in Brownlie and the arguments that I have had to consider about its impact on the relatives’ claims, the Master would not have extended the time for service of the claim form in April 2016.[65]In any event, is within the court’s power to discharge an order obtained by non-disclosure even if, after full inquiry, the court takes the view (which I do not) that the order was otherwise justified, and would probably have been made even if there had been full disclosure. For the purposes of the present application, I shall consider in due course what consequences, if any, should flow from the non-disclosure.[66]There is no mention of the decision in Brownlie or its ramifications in the evidence filed in support of the application for judgment in default either, which was also made without notice. The court plainly did not know that the second extension of time for service referred to in Mr McClorry’s evidence in support of that application had been obtained by material non-disclosure. At least as against Sixt, it would have been relevant to the exercise of the court’s discretion to know that the claimants were seeking to take advantage of the passivity of Sixt to obtain a judgment in circumstances where the claims against it were matters over which the court unarguably had no jurisdiction at the time when the order for service was made, and that the claimants’ legal advisers were, or should have been aware of the lack of jurisdiction when they sought the extension of time in March 2016, and when the claim form was served on Sixt.[67]It would have been possible to mount an argument, based on CPR 11.5 and Sixt’s deemed submission to the jurisdiction, that the claimants were still entitled to go ahead and enter judgment against it, but at least the court would have been in possession of all the relevant information when deciding whether or not to allow that to happen. It was only as a result of the failure by Sixt to comply with the relevant procedural rules consequential on service that it was deemed to have accepted that the court had jurisdiction. I accept that the effect of CPR 11.5 is that a defendant with an otherwise valid objection to the jurisdiction may lose it, and that it could be said that he only has himself to blame if he fails to raise that objection at the appropriate time. However, if that defendant should never have been served with the proceedings, and would not have been, had the court been told the full story at the time when the relevant extension of time for doing so was sought, the court may have shared my view that it would not be fair to allow the claimant to enter judgment in default against him.[68]Faced with the full picture, the court may well have declined to allow judgment to be entered in default, and ordered a hearing at which the claimant’s legal representatives would have been asked to show cause why the order permitting service on Sixt and/or the order extending time for doing so should not be set aside of the court’s own motion.[69]It is obvious from this history of the matter that the claimants have obtained significant forensic advantages from their non-disclosures. They seek to obtain a further forensic advantage now, because they contend that Sixt, having accepted the jurisdiction, can be relied upon as the anchor defendant against whom proceedings will be continuing in this jurisdiction, at least for the purposes of assessment of damages, and that INS is a necessary or proper party to those proceedings. In the alternative, they rely on the as yet unserved Citi.[70]I will address the consequences of the non-disclosure in due course, but first I will consider the claimants’ application as if there had been no material non-disclosure or if the non-disclosure had not been culpable.

SHOULD THE CLAIMANTS BE PERMITTED TO RELY ON AN ALTERNATIVE GROUND OF JURISDICTION?

[71]In NML Capital Ltd v Argentina [2011] UKSC 31, [2011] 2AC 495, the Supreme Court considered the current provisions of Part 6 of the CPR and PD 6B pertaining to service of process outside the jurisdiction, and decided that, in principle, a party could be permitted to rely on grounds that had not been relied on at the time of the without notice application for leave to serve out of the jurisdiction, if the interests of justice so required. Lord Phillips, with whom Lord Collins, Lord Clarke, Lord Walker and Lord Mance agreed, disapproved the so-called rule in Parker v Schuller (1901) 17 TLR 299, and its extended application in subsequent cases such as Metall und Rohstoff v Donaldson, Lufkin & Jenrette [1990] 1 QB 391. The rule required a party seeking to rely on a cause of action other than that originally relied on, to issue fresh proceedings, rather than the court permitting him to amend the existing claim. The Supreme Court decided, albeit obiter, that this approach should no longer be followed.[72]Lord Phillips observed at [75] that where a party has been served out of the jurisdiction on a false basis, in circumstances where there is a valid basis for subjecting him to the jurisdiction, it is not obvious why it should be mandatory for the claimant to have to start all over again, rather than that the court should have a discretion as to the order that will best serve the overriding objective. He went on to indicate at [77] that in principle an amendment to the pleadings to substitute a cause of action that was not originally relied upon by the claimant would be permissible, just as an amendment to add a new cause of action would be permissible, unless the amendment would result in the inclusion of a claim in respect of which permission could not or would not have been granted to serve out of the jurisdiction. Although his observations were directed at amendments to plead new causes of action, there is no basis for drawing any distinction in this context between an amendment to rely on a new jurisdictional gateway based upon a different cause of action, and an amendment to rely on the “necessary or proper party” gateway under PD 6B para 3.1 (3).[73]In his concurring remarks, Lord Collins drew an express analogy with the powers of the court in cases of non-disclosure to dispense with the need to start all over again if that would simply result in the unnecessary expenditure of further costs. He observed at [136] that in such a scenario, the court has a discretion(a) to set aside the order for service and require a fresh application or(b) to treat the claim form as validly served, and deal with the non-disclosure if necessary by a costs order. He stated at [137] that by analogy, where the ground for service out has been incorrectly identified, the court would also have power to grant permission to serve out on a fresh basis and dispense with re-service.[74]Whilst NML Capital was concerned with whether the claimant should be permitted to rely on fresh grounds for claiming that Argentina could not raise State Immunity as a defence, and so (as Lord Collins pointed out) Parker v Schuller was not directly applicable, that did not stop their Lordships from strongly deprecating the approach taken in that case and the line of authority following it. The observations of Lord Phillips, endorsed by the remaining justices of the Supreme Court, were plainly intended to bring about a change of approach, consistent with the changes brought about by the CPR. The approach endorsed by the Supreme Court has since been applied by the Court of Appeal in Alliance Bank JSC v Aquanta Corporation and others [2012] EWCA Civ 1588, [2013] 1 All ER (Comm) 819.[75]In deciding whether to exercise my discretion to permit the Claimants to rely on a different ground of jurisdiction, I must consider whether that ground is one in respect of which permission could not or would not have been granted to serve out of the jurisdiction. That raises an interesting question as to the point in time at which that question is to be determined – the date on which permission was originally sought and granted, or the date on which the Claimants seek to amend their grounds so as to rely upon the new ground?[76]An application to set aside permission to serve out of the jurisdiction falls to be determined by reference to the position at the time permission is granted, not by reference to circumstances at the time that the application to set aside is heard. However, subsequent events may shed light on considerations which were relevant at the time: see Erste Group Bank AG v JSC “VMZ Red October” [2015] EWCA Civ 379 [2015] 1 CLC 706 at [44] - [45], and the cases there cited. Logically, if a claimant seeks to rely upon a new ground in order to defeat an application to set aside the original grant of permission, the court should be looking at the same point in time, i.e. the date when permission was granted, and asking itself whether the claimant would have obtained permission on the alternative ground if it had been raised then.[77]Permission that was rightly granted will not be discharged simply because circumstances have changed; but decisions of a higher court which change the view of the law which prevailed at the time when permission was granted do not change the law: they clarify what the law has always been. Thus permission that was granted on a mistaken view of the law can be discharged in circumstances where a higher court has subsequently corrected the mistake.[78]Therefore, whilst I have little doubt that, if the claimants had originally sought permission to serve INS out of the jurisdiction as a necessary or proper party to the claims in tort against the other defendants, permission would probably have been granted by the Master, the Court of Appeal in Brownlie has since articulated the correct interpretation of the rules at that time, which is different from the interpretation that was then being applied. On the proper interpretation of PD 6B para 3.1(9)(a), the court could not have granted permission to serve any of these defendants out of the jurisdiction. On that basis alone, in applying the test set out by Lord Phillips in NML, I should exercise my discretion against permitting the claimants to rely on a fresh ground because there would have been no permissible “anchor defendant” on whom they could rely at that time.[79]However, that is not quite the end of the matter, because it might be argued, by reference to the more flexible approach endorsed in NML, that if a claimant would be entitled to obtain permission to serve the claim form on INS out of the jurisdiction as matters now stand, even if they could not have done so earlier, (because there is arguably now a qualifying anchor defendant, Sixt having been served and submitted to the jurisdiction) it would be contrary to the overriding objective to make them start all over again. I am prepared, without deciding the point, to make the assumption in favour of the claimants that a court has a discretion to permit reliance on a new ground of jurisdiction which can only be relied upon because of a change in the factual circumstances since permission to serve out was originally granted; but as a bare minimum the claimants would have to establish that they would be entitled to obtain permission on the new ground if they made that fresh application now.[80]The correct approach to whether permission should be given to serve a foreign defendant out of the jurisdiction was stated in the judgment of the Privy Council given by Lord Collins in AK Investment CJSC and others v Kyrgyz Mobil Tel Ltd) [2011] UKPC 7, [2012] 1 WLR 1804, (“AK Investment”) namely: i) The claimant must satisfy the court that in relation to the foreign defendant there is a serious issue to be tried on the merits; ii) The claimant must satisfy the court that there is a good arguable case that the claim falls within one or more of the heads of jurisdiction in PD 6B, which in this context connotes that one side has “much the better of the argument” than the other on that point. iii) The claimant must satisfy the court that in all the circumstances, England and Wales is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction (see CPR 6.37).

IS THERE A SERIOUS ISSUE TO BE TRIED ON THE MERITS AGAINST INS?

[81]I have already adverted to Mr Karia’s concession that there is a serious issue to be tried, as between Ms Gunn and INS, save for one point which Mr Elizondo-Soto had raised and which Mr Torrealba had not addressed, which he submitted demonstrated that the subrogated claim was bound to fail. This was the point that INS can rely on Article 15 of the voluntary policy which provides that there is no cover:
“where there has been fault or negligence of the insured or the driver of the vehicle insured in the attention of the judicial process and it has influenced its result, causing a greater obligation in the indemnities to be borne by the insurer.”
[82]Whilst it is true that Diaz and Sixt have both allowed default judgments to be entered against them, it is far from clear that the consequence of this is that the insurers are going to be liable to pay under the insurance contract in circumstances in which they would not otherwise have been liable to pay, or that their liability is greater than it otherwise would have been. If Diaz was not the driver, and Cornieles was, the insurers may not be liable under the policy anyway, and the default judgment against Diaz would not preclude them from taking that point. If Diaz was the driver, he would have had no defence on liability, and even if certain heads of damage or their quantum had been susceptible of challenge, the policy limit would be exhausted by the claim come what may. Article 15 is therefore unlikely to be a complete answer to the subrogated claim of Diaz.[83]The position vis à vis Sixt is somewhat different, because as I have already indicated it is not an insured party under either policy, and therefore there is no subrogated claim for Ms Gunn to pursue in its stead against INS. Thus Sixt’s change of mind about disputing the jurisdiction and the subsequent judgment in default entered against it does not affect the insurers’ position at all. If Sixt had been an assured, then the insurers might have had a defence under Article 15 in respect of Sixt’s failure to defend the claim against it, but on the current evidence it is impossible to conclude that such failure left the insurers any worse off.[84]Despite the failure of Mr Torrealba to address the Article 15 defence, I cannot conclude at this juncture that a putative subrogated claim for an indemnity brought by an assured “owner” in respect of its statutory liability for the tort of the driver would be bound to fail.[85]Accordingly, there is a serious issue to be tried on the merits against INS as regards Ms Gunn’s claim to be subrogated to any claims that Diaz may have had for an indemnity under the policies (if it is established that Diaz was the driver). There is also a serious issue to be tried on the merits against INS as regards Ms Gunn’s claim to be subrogated to any claims that Citi may have had for an indemnity under the policies arising out of its potential liability to her under Article 188(b) of the Traffic Law, for damages caused by the driver’s negligence, in the event that such liability could be established. However, there is no serious issue to be tried on the merits against INS as regards any claim by Ms Gunn to be subrogated to any claims that Sixt may have had for an indemnity under the policies in respect of its putative Article 188(b) liability because Sixt, not being an assured, had no such claims.[86]A number of authorities relating to the jurisdiction under this gateway were cited to me, from which the following principles relevant to the issues in the present case can be extracted: i) The “necessary or proper party” gateway is anomalous, in that, by contrast with the other heads of jurisdiction, it is not founded upon any territorial connection between the claim, the subject-matter of the relevant action, and the jurisdiction of the English courts: AK Investment at [73]; ii) The prospect of proceedings having to take place in more than one jurisdiction will never be enough, in and of itself, to justify the joinder of a foreign defendant: AK Investment, per Lord Collins at [73], adopting the well-known dictum of Lloyd LJ in Golden Ocean Assurance Ltd v Martin [1990] 2 Lloyd’s Rep 215 at 222:
“... caution must always be exercised in bringing foreign defendants within our jurisdiction under Order 11 r 1(1)(c). It must never become the practice to bring foreign defendants here as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.” iii) The claimant must show that a claim is made against a defendant on whom the claim form has been or will be served (otherwise than in reliance on the “necessary or proper party” gateway). Service on that anchor defendant may be within the jurisdiction; outside the jurisdiction without permission if permission is unnecessary; or outside the jurisdiction with permission, if permission is required: Alliance Bank JSC v Aquanta Corporation and others [2012] EWCA Civ 1588 [2013] 1 All ER (Comm) 819, at [79]. iv) The mere fact that defendant A is sued only for the purpose of bringing in B as a defendant is not fatal to the application for permission to serve B out of the jurisdiction, but it is a factor in the exercise of the court’s discretion: AK Investment at [76] – [79], reiterated and applied in Nilon Ltd and another v Royal Westminster Investments SA and others [2015] UKPC 2, [2015] 3 All ER 372. v) The court must first ask itself, viewed in isolation, (a) whether there is a real issue to be tried between the claimant and the anchor defendant on the merits, (i.e. one with a real, rather than fanciful, prospect of success) and (b), if so, whether it is reasonable for the English court to try that claim: Erste Group Bank AG v JSC “VMZ Red October” [2015] EWCA Civ 379 [2015] 1 CLC 706. vi) The question whether it is reasonable for the English court to try the claim between the claimant and the anchor defendant is an objective one: it is not the same question as whether it was reasonable for the claimant to start proceedings against that defendant within the jurisdiction: Erste Group Bank at [48]. vii) If the anchor defendant has failed to acknowledge service or is not defending the claim, there is highly unlikely to be a real issue to be tried which it is reasonable for the court to try: a fortiori if the claimant has entered default judgment or summary judgment already, see Erste Group Bank at [78] and [136]; viii) It is only if both limbs of PD 3.3(1)(a) are satisfied that the court should go on to consider, under sub-paragraph (b) whether there is a good arguable case that B is “a necessary or proper party” to the claim between the claimant and A: Erste Group Bank at [38]. ix) The question whether B is a “proper party” to the claim against A is answered by asking: “supposing both parties had been within the jurisdiction, would they both have been proper parties to the action?”
AK Investment at [87], (applying Massey v Heynes & Co (1888) 21 QBD 330); Nilon Ltd especially at [15]. B will be a proper party if the claims against A and B involve one investigation or there is a sufficient “common thread” between them.

Has Sixt been “served” for the purposes of para 3.1(3)?

[87]At first sight the answer to this is yes: Sixt was served in accordance with the order granting permission, in a procedurally regular manner. However, Mr Karia relied upon the approach to this question adopted by the Court of Appeal in Alliance Bank JSC v Aquanta Corporation and others, (above) another case in which the claimant was seeking to rely on the “necessary or proper party” gateway against certain of the defendants against whom that gateway had not been relied on initially. Tomlinson LJ, with whom the other members of the Court of Appeal agreed, held at [78] that the changes to the scope of Order 11 rule 1(1)(c), as reflected in the current Practice Direction, did not abandon the requirement that service on the anchor defendant be achieved in a regular fashion (if that defendant was already served). Mr Karia submitted that it was inherent in Tomlinson J’s reasoning that if the court’s permission to serve the anchor defendant out of the jurisdiction was necessary, that permission had to have been properly (i.e. lawfully) obtained. The phrase “achieved in a regular fashion” was not confined to adoption of the necessary procedural formalities for effecting service.[88]Although I was not initially attracted by that submission, it appears on closer analysis to be correct. When Tomlinson LJ is referring to achieving service “in a regular fashion” he is harking back to the pre-CPR requirement that the anchor defendant be “duly served”. Prior to 1987 he had to be “duly served within the jurisdiction” and after 1988 he had to be “duly served within or out of the jurisdiction”. That requirement was different from, and additional to, the requirement that the action against that defendant be “properly brought” (which, as explained by Lord Collins in AK Investment, is simply a different formulation of the question whether there is a serious issue to be tried on the merits between the claimant and that defendant).[89]If, prior to the changes to the rules in 1987, a claimant had effected personal service on a foreign domiciled defendant within the jurisdiction on an impermissible basis (e.g. temporary presence) and had then sought to bring in another defendant as a necessary or proper party, service on the first defendant could not have been relied on, irrespective of whether that defendant had protested about it, or tried to set aside service. He would not have been “duly served” even though the procedural formalities had been observed. The same would be true of a foreign defendant served abroad after 1987 without permission, if permission would have been required, or a foreign defendant on whom permission to serve out had been obtained on a specific ground for which there was, in fact, no good arguable case that it applied. Therefore, in order to meet the preliminary requirements of PD 6B para 3.1(3), service of the claim form on the anchor defendant must be, or have been, legally permissible.[90]I am fortified in that conclusion by the fact that, in the same paragraph of his judgment, and in the context of considering this point, Tomlinson LJ noted, with tacit approval, a concession made by leading counsel for the claimant bank in that case that “he could not rely upon the inactive defendants who have not challenged service upon them, or who have not pursued their challenge, as anchor defendants if the court concludes that permission to serve them out of the jurisdiction should not have been granted.” It is unclear what drove that concession, but in my judgment it was rightly made: for why should a foreign defendant be brought into proceedings within this jurisdiction on the basis of service on someone who should never have been served with the proceedings in the first place?[91]There is even less justification for another foreign defendant being joined in an action merely by virtue of the first foreign defendant taking no steps to set aside the claim form, and being deemed to have submitted to the jurisdiction as a result of the rules of English procedure. Service on the inactive defendant may well have been permitted by court order, and it may have been “regular” in that sense, but the anchor defendant should never have been brought before the English court. Yet Mr Palmer is seeking to rely upon service on an inactive defendant (Sixt) which has not pursued its challenge, despite the fact that permission to serve process on it out of the jurisdiction should not have been granted.[92]In my judgment the phrase “…has been or will be served (other than in reliance on this paragraph)” must necessarily import the notion that the court is entitled to exercise jurisdiction over that anchor defendant in respect of the claim against him at the time of service, and not simply by reason of his capitulation or inactivity after service has taken place. Therefore, in a case where permission is required, the anchor defendant must be someone who has been or is to be served in accordance with permission lawfully granted under one of the other gateways, irrespective of whether he has sought to set aside service. The claimant cannot seek to hide behind a court order for service out that the court had no jurisdiction to make, even if that order authorised service on the anchor defendant at the time that service was effected.[93]That approach to the interpretation of the initial requirements of paragraph 3.1(3) is consistent with the approach of a differently constituted Court of Appeal in Erste Group to the question whether sub-paragraph 3.1(3)(a) is satisfied, because, as it held, that sub-paragraph is not concerned with whether the court has jurisdiction over the anchor defendant in respect of an issue to be tried, it is concerned with whether it is reasonable for it to exercise that jurisdiction.[94]The court did not have extra-territorial jurisdiction over Sixt or Citi at the time when permission to service out under the “tort” gateway was sought and obtained, it had no jurisdiction over Sixt at the time when Sixt was served, and it has no jurisdiction over Citi now. Consequently, the putative future service of the claim form on Citi, which Citi has a cast-iron right to have set aside, cannot be relied on to make Citi an “anchor defendant” for the purposes of bringing a claim against INS. Nor can the past service on Sixt.[95]Even assuming contrary to the above analysis that Sixt has been “served,” for the purposes of para 3.1(3), and turning to the two limbs of sub-paragraph (a), it is quite plain that there is no real issue to be tried between the claimants and Sixt, for the simple reason that Sixt, having acknowledged service, for whatever reason gave up its jurisdictional challenge (which was bound to have succeeded), failed to serve a defence, and default judgment has already been entered against it. Realistically, Sixt is going to play no further part in the action; an assessment of quantum will not involve a “trial” in any meaningful sense.[96]This case is strikingly similar to Erste Group Bank in that regard. In that case, at the time when permission to serve the new defendants as necessary or proper parties was sought, the claimant bank had already obtained summary judgment against the first two defendants (the insolvent borrower and the borrower’s guarantor respectively) who had expressly agreed to contractual claims against them being submitted to the jurisdiction of the English court. The Court of Appeal decided that the bank had already submitted its claims in contract and debt against those defendants to the Russian courts, and therefore was precluded from invoking English jurisdiction; but that even if that conclusion was wrong, the bank could not satisfy either of the limbs of PD 6B 3.1(3)(a).[97]There was no real issue to be tried, because the bank’s claims in debt and contract had been admitted in the liquidation proceedings against the insolvent borrower, and there was no suggestion that the borrower was disputing its liability. It was entirely passive in the English proceedings. Similar objections arose in respect of the claim against the guarantor, which (like Diaz) had failed to acknowledge service indicating an intention to defend the claim.[98]In the present case, there is no issue to be tried in any sense between Ms Gunn, (or any of the other claimants) and Sixt, for much the same reasons. Sixt has not disputed its liability in the proceedings and judgment has now been entered against it. On Mr Torrealba’s evidence, Sixt’s liability as a commercial exploiter of the vehicle for the damage caused by the driver’s negligence, and its strict liability to the injured person under the relevant provisions of Costa Rican law appeared to be almost as much of a foregone conclusion as the conclusion that the driver was negligent. Since no defence has been served, and no counter-schedule, quantum is not going to be put in issue either. Consequently, there is no outstanding issue in dispute for the court to resolve. The fact that the English court would still need to assess damages is not sufficient to bring the claim within this limb of the rule. The same reasoning applies to any claim the relatives might have against Sixt under Article 188(b) of the Traffic Law.

Is it reasonable for the English court to try the claim(s)?

[99]As to the second limb of sub-paragraph 3(a), the judgment in Erste Group Bank makes it clear at [78] [vii] that it may not be reasonable for the English Court to try a claim even if it plainly has jurisdiction over that claim (in that case, because of an exclusive jurisdiction clause in the contracts; in the present case, because Sixt is deemed to have accepted that it does). The court will have to consider, among other matters, if there is any utility in its trying the claims against the anchor defendant. If the claimant has nothing to gain from a trial of those issues here, even a trial to the stage of obtaining summary judgment (other than using the claim against the anchor defendant as a vehicle for bringing in the target defendant) the second limb will not be satisfied. That was the basis on which, on the facts, the claimant in Erste Group Bank failed on this limb of the gateway.[100]In the present case, as in Erste Group Bank, there would be no particular advantage for the claimants to be gained from this court trying any legal issues arising as between the claimants and Sixt that may still require determination, especially as those issues would all have to be resolved by reference to Costa Rican law. There is no evidence, for example, that Sixt has any assets outside Costa Rica against which an English judgment could be executed. In any event Sixt is undoubtedly solvent and is likely to be able to pay any damages awarded against it.[101]Mr Karia also submitted, and I accept, that it would not be objectively reasonable for the court to exercise its jurisdiction over Sixt in circumstances where it is clear on the present state of the law that the court should not have granted permission to serve out against Sixt, even though such permission was in fact granted on the basis of a misunderstanding of the scope of the tort gateway, and even though the order granting permission has not yet been set aside. Sixt’s subsequent submission to the jurisdiction is no justification for concluding that it would be reasonable; that would be to make the mistake referred to in Erste Group Bank of confusing the existence of jurisdiction over the claims with the reasonableness of exercising it.[102]Even if I am wrong, and the fact that the claims against the anchor defendant should not have been brought within the jurisdiction in the first place is not a factor to be taken into account when assessing the reasonableness of trying those claims in England, it would fall to be considered at the final stage, and would constitute a very powerful reason for the court to exercise its discretion to refuse to allow service out of the jurisdiction on INS in the interests of justice.[103]So far as Citi is concerned, the claimants’ position is even less attractive. Even if there were any issue to be actively tried within the jurisdiction as between Ms Gunn and Citi (which would depend on Citi’s response to being served with the claim form) it cannot be reasonable for this court to assert a jurisdiction over a foreign defendant that it does not have, in order to assert jurisdiction over another foreign defendant that it would not have if viewed in isolation. Citi cannot be used as an anchor defendant.

Is ins a proper party to the relevant claim against Sixt?

[104]Neither limb of sub-paragraph 3.1(3)(a) is satisfied and that is enough to satisfy me that the claimants have failed to establish a good arguable case that they would be entitled to rely on this alternative gateway (though Ms Gunn is the only claimant that matters for these purposes, because she alone has the arguable subrogated claim against INS). But even if that were not an insurmountable obstacle, there is a further problem, namely, that INS is not a proper party to the claim brought by Ms Gunn against Sixt. The relevant connection has to be between the claim against the anchor defendant and the claim against the other defendant.[105]There is no, or no sufficient connection between a claim that a defendant who is not an assured under the insurance policies is liable in tort for the negligence of the driver, and a claim by the injured party to be subrogated to the rights of the driver, whoever he may be, or the owner of the vehicle, if it is liable under Article 188(b) of the Traffic Law, against their insurers. Ms Gunn’s claims against Sixt under Article 188(b) of the Traffic Law and Article 1048(5) of the Civil Code do not raise the same factual or legal issues as her claim to be subrogated to Diaz’s or Citi’s claims for an indemnity in respect of his or its tortious liability against INS under the insurance policies. The connection between them is tenuous, especially as the driver’s liability in negligence is a foregone conclusion. If both defendants were English, it would be difficult to justify trying those claims in one action.[106]I can see that in another case, there might be a sufficient connection between a claim in tort against the driver or owner of the car, and the claim of the injured party to be subrogated to the driver’s or owner’s rights under an insurance policy covering him for such tortious liability. As Mr Palmer points out, an injured party may bring direct claims against European insurers in respect of the insured liability of assured drivers for personal injuries. But that right arises as a result of specific rules; INS is not a European insurer, and Mr Palmer has rightly not sought to rely on Diaz as an anchor defendant. I have already explained why Citi, which has a cast-iron basis for setting aside the order for service upon it, cannot be regarded as an anchor defendant. So the claimants have failed to show that they have the better of the argument in respect of limb (b) as well.

IS THIS THE APPROPRIATE FORUM FOR TRIAL?

[107]Finally, and on the assumption that contrary to all my previous findings there is a good arguable case that all the requirements of the “necessary or proper party” gateway have been satisfied, the Court must consider under CPR Part 6.37(3) whether England and Wales is clearly or distinctly the appropriate forum for the trial of the dispute against all the defendants. The appropriate forum is that forum where the case may most suitably be tried for the interests of all the parties and the ends of justice: Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 475-484, AK Investment at [88]. The burden lies on the claimant to satisfy the Court that this is so. In determining this: i) The Court must consider which is the “natural forum”, namely what is the forum which has the most real and substantial connection with the dispute. ii) Where the claim against the anchor defendant is in tort, the starting point for deciding the appropriate forum is the place of commission of the tort.[108]England and Wales, far from being clearly or distinctly the appropriate forum for a trial of all the issues, against all the defendants, is clearly not the appropriate forum. There will be no trial against Sixt or Diaz, and there are no common issues that remain to be resolved. Citi has not been served and there is no lawful basis upon which the claims against Citi could be tried within this jurisdiction anyway. The subrogated insurance claim against INS has no connection with this jurisdiction. Ms Gunn is seeking to be subrogated under Costa Rican law to claims for a contractual indemnity by Costa Rican assured against a Costa Rican insurer under two Costa Rican insurance policies, made in Costa Rica and expressly subject to the laws of that country, which claims are said to have been triggered by the assured’s liability in tort under various different provisions of Costa Rican law for personal injuries (and other loss and damage) caused by a road accident which took place in Costa Rica.[109]The accident involved a car hired from a Costa Rican car rental company which had leased it from a Costa Rican owner, and a driver who is either domiciled in Costa Rica (Corneiles) or in Florida (Diaz). The questions whether someone with a claim in damages against the driver or owner of the car could be subrogated to that party’s rights under the contract of insurance without first obtaining the permission of the court in the circumstances of this case, and if so, whether the insurer would have a defence to the claim, are all governed by Costa Rican law. The liability of the driver and even the quantification of the damages in respect of which an indemnity would be sought, are matters of Costa Rican law, although liability is unlikely to be an issue and the policy limits are such that in reality the limits of both policies, mandatory and voluntary, are bound to be exhausted in this case.[110]In short, all issues of law in this case are issues of Costa Rican law. Some of them appear to be novel; many are complex. Expert evidence will be required. The relevant documents (including the relevant legal provisions) are all in Spanish. The governing law is generally a positive factor in favour of a trial in that country because it is generally preferable, all other things being equal, that a case should be tried in the country whose law applies. That factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles applicable to such issues in the two competing jurisdictions: see VTB Capital Plc v Nutrietek International Corporation [2013] 2 AC 337 at [46] and Erste Group Bank at [149]. On the evidence of the experts thus far, there are some similarities between Costa Rican law and English law, but there are also some relevant differences; for example, there is no equivalent in England of the provisions relied on to bring the claim against INS. The limitation provisions that potentially apply are also very different.[111]On the face of it, there is no good reason why INS should be required to come to the English courts to defend such a claim. Although INS is a substantial state-owned entity, the policy limits are so modest that the costs of litigating the matter outside Costa Rica are likely to be regarded as disproportionate. Mr Palmer submitted that the low level of the contractual indemnity was a point that cut both ways, as it would be disproportionate to expect Ms Gunn to go to Costa Rica to recover such modest sums, and the corporate defendants were large entities who could look after themselves. I am not persuaded by this; there would have been no basis for making this claim against INS in England if it had stood alone, as it has no connection with this jurisdiction. Therefore, if Ms Gunn wanted to recover the insurance money, she would have had to have started proceedings in Costa Rica. Her position cannot be enhanced by the fact that she has obtained permission to bring tort claims in England against other defendants on what has transpired to be an impermissible basis.[112]No reason, let alone a good one, has been put forward for the claimants’ failure to start proceedings in Costa Rica, especially as Mr Torrealba was appointed as Ms Gunn’s “curador” (the equivalent of a litigation friend under Costa Rican law) as long ago as 2010. Proceedings there may well take much longer to get to trial, but the claimants have waited so long before issuing the proceedings here that in practical terms, an action commenced in Costa Rica in 2010 may well have been heard before a trial in England would be heard now.[113]As for the alleged disadvantages for the claimant of litigation abroad, the claimants’ own expert is of the opinion that none of Ms Gunn’s claims is time-barred. It is highly unlikely that Ms Gunn would be required to give evidence if the matter went to trial in Costa Rica; on Mr Torrealba’s evidence the Costa Rican principle akin to res ipsa loquitur should suffice to establish the liability of the driver. In any event I doubt she would be capable of giving evidence anywhere, given her current medical condition. Even if it had to be proved that the driver was negligent, any English eyewitness to the accident could give evidence in Costa Rica by video link. Only one such individual was identified by the prosecutor in his report. The other eyewitnesses interviewed by the prosecutor, including the man who said he could identify the driver, were local Costa Rican road workers. Mr Palmer submitted that there would be greater hardship on the English claimant who has to obtain her quantum evidence in England. I cannot see why that should be so; the evidence in England is no more difficult to gather for a trial in Costa Rica than it would be for a trial in England.[114]Mr Palmer also sought to rely on the fact that the assessment of damages will be going ahead in England anyway. That, of course, depends on the view that I take of what should happen to the order that judgment be entered in default against Diaz and Sixt in the light of my findings that the order for service out should never have been granted against any of the defendants and the second order for an extension of time was obtained by material non-disclosure. However even if that assessment were to go ahead, it would have no impact on the amount potentially recoverable from the insurers by way of subrogated claims, for the reasons I have already stated.[115]For all those reasons, this is a case in which it would be inappropriate for the court to exercise its discretion to grant permission to serve the claim form out of the jurisdiction on INS out of the jurisdiction under the “necessary or proper party” gateway, if a fresh application were to be made now on the basis of matters as they presently stand.

DISCRETION

[116]Finally, it is important to remember that the claimants are seeking the exercise of the court’s discretion to allow them to rely on a different gateway from the one on which they originally relied. I have already held that permission to serve out could not have been lawfully granted under the “necessary or proper party” gateway on the date when the order was originally sought, as there was no anchor defendant who could have been served under the tort gateway. I have also explained why I would refuse permission to serve INS out of the jurisdiction under the “necessary or proper party” gateway if a fresh application were to be made today. For those reasons alone it would be inappropriate for the court to exercise its discretion to permit reliance on that gateway so as to defeat INS’ application.[117]However, even if I had concluded that there was a good arguable case that the claims against INS fell within the “necessary or proper party” gateway, and even if I had otherwise considered that this jurisdiction was clearly and distinctly the appropriate forum for resolution of those claims, there are two further and independent reasons why I would refuse permission to the claimants to rely on that alternative gateway as a matter of discretion.[118]The first is that, as I have already indicated, it would be wrong in principle to allow any party to take advantage of its service on Sixt, and Sixt’s subsequent inactivity, as a vehicle for bringing in another defendant to the English proceedings, when the claim against Sixt was one for which the party in question should not have obtained permission for service out of the jurisdiction in the first place. That is so irrespective of whether I am right or wrong in my view that these considerations arise at an earlier stage of the analysis.[119]The second is that it would be unjust to INS for this court to allow these claimants to achieve any advantage from their culpable failure to disclose all material facts to the court at the stage when they sought the second extension of time for service of the claim form. As I have said, the court has the power to set aside an order obtained by non-disclosure even if it might still have been granted had full disclosure been made by the party who obtained it. This is not a case in which the extension of time for service is likely to have been granted. It is highly probable that if the decision in Brownlie had been drawn to the court’s attention when the second extension of time for service out was sought, the extension would have been refused. The claim form would never have been served on Sixt, and the claimants would not be in a position to argue that it may still be served on Citi. The consequence of that is that neither of those parties would even have been candidates for the anchor defendant.[120]In any event, regardless of whether the extension would have been granted, and despite the fact that it was not deliberate, this was a very serious breach of the duty to make full and frank disclosure, for which there is no excuse. The fact that the delay in service was due to circumstances outside the control of the claimants’ solicitors is irrelevant. In my judgment the claimants should be deprived of any forensic advantage gained by their solicitors’ failure to abide by that duty. The additional non-disclosure at the time of the default judgment application makes the position of the claimants when asking the court to exercise a discretion in their favour even less attractive, but the non-disclosure which really matters for the purposes of the exercise of judicial discretion is the earlier in time. This was not a non-disclosure that would have made no difference, it was serious, and the consequences of it should be visited on the party which was responsible.

CONCLUSION

[121]For those reasons, the application by INS to set aside the Order for service of the claim form and Particulars of Claim on it out of the jurisdiction and for declaratory relief is granted.[122]It seems to me, also, that the position of Citi should be safeguarded. Setting aside the order extending the time for service of the claim form and Particulars of Claim on the grounds of non-disclosure should obviate the necessity for Citi, if it is served, to make a similar application, but I am considering whether I should set aside the original Order for service out as against all the Defendants. Both courses would have implications so far as the default judgments are concerned. I shall therefore invite further submissions from counsel on these matters before the order consequential on this judgment is drawn up.

Cited in 5 later judgments