Examination of Witness (Questions 140-153)
29 JANUARY 2004
Sir Peter North CBE QC DCL FBA
Q140 Chairman: My own instinct, which is
not necessarily better than any observer's, is that, if a person
is to have a direct action against an insurer, the insurer should
never be liable to more than he was liable to pay under his contract.
It is the section of the law on contractual obligation that should
apply?
Sir Peter North: With great respect, that is
a very English law view. That is exactly where I began and I would
share that view. What I find very difficult here is that, if one
is dealing with jurisdiction issues, if one goes to the Brussels
Convention, and now the Brussels Regulation, there are protective
provisions in there which say the consumer, a less privileged
party, if I can put it in an economic way, can have choices of
jurisdiction, you can sue at home or you can sue where the defendant
is. That seems to me entirely understandable. What I am finding
it very difficult to find a rational explanation for is why they
are doing that at the choice of law stage.
Q141 Chairman: Do you think that they should
not?
Sir Peter North: I think they should not.
Q142 Lord Clinton-Davis: Have you had any
discussions yourself with the insurance industry, and, if you
have, what was the outcome?
Sir Peter North: No, I have not. It is a concern
that I have, which I have voiced outside here, that the views
of the insurance industry on all of this are very important, and
it would seem to me, hopefully, that their input could be achieved
at an earlier rather than a later stage. But, no, I have not had
any discussions myself.
Lord Grabiner: The unstated premise of the provision,
as drafted, is that the insured should be treated as a consumer,
who is an inferior bargaining party, so to speak, there is not
actually a bargaining party, and should be protected in this rather
odd way.
Chairman: I do not know that it is the insured, it
is the person who is not the insured, is it not?
Q143 Lord Grabiner: If he makes claims,
he seems to have the option. He is the beneficiary of the cover
there, so he might be the insured but he might be some third party
protected by the cover. He is saying, in effect, "I'm the
consumer and I'm entitled to be given this special advantage"?
Sir Peter North: If that were the case, which
it is not, because it is not so limited, that would be consistent
with the jurisdictional provisions in the Brussels Regulation,
which do give, if you like, jurisdictional advantages to consumers.
One could understand the purpose of a rule which said that the
consumer, in one of these third party claim cases, might be given
the choice between the laws. I have to say that that approach
would have a consistency with the jurisdiction rule arguments.
I am not convinced, however, that that is a really valid argument
in the choice of law field, in the way it is in the jurisdictional
field; but at least you could run the argument in an understandable
way, if it was a consumer protection issue, which it is not here.
Q144 Chairman: Sir Peter, can I ask you
to look at Article 24 for a moment, which seems, if I read it
right, to put at risk the practice of common law courts to give
exemplary damages?
Sir Peter North: Yes. My written comments are
exactly the same as the ones I am about to express to you. I cannot
see any justification for excluding the award of exemplary damages
in the international sphere when it is still allowed in the domestic
sphere; and I cannot see a good case for it not being allowed
in the domestic sphere.
Q145 Chairman: It might go wider than exemplary
or punitive damages, because the reference is to "non-compensatory
damages" and then there is a comma "such as . . ."
so exemplary or punitive damages are just examples. If you had
damages measured by reference to the profits which the wrongdoer
had made and you had extracted from him as profit, that would
be non-compensatory damages?
Sir Peter North: What this looks like to me
is, in a sense, the harmonisation of the law on exemplary damages,
as I said when I wrote, by the side wind of this draft Regulation,
and I see no case being made for that. There might be a case,
though I do not know what it is; but certainly it has not been
made, and it is not made in the Commission's paper anyway.
Q146 Chairman: I do not think it has been
established. It has been law for years but in patent infringement,
for example, you can get your damages based on the royalty that
the individual should have paid if he had gone through and negotiated
for one, that is at non-compensatory level?
Sir Peter North: It is not argued.
Lord Grabiner: It is compensatory.
Chairman: It is not compensatory, no. It is not based
on the loss that you have suffered. It is based on the benefit
he has obtained.
Lord Neill of Bladen: The theory is, if the defendant
had behaved lawfully, he would have come and asked for a licence
which he could have got and this is what he would have had to
pay.
Chairman: The evidence may be that he would not have
got it and he would have been turned down.
Lord Neill of Bladen: That would be different. The
case I am thinking of actually involved a House of Lords case
where they did decide, there was an offer, but anyone could go
along who was in this trade and get a licence at a certain price.
Of course, he would never have got permission, but that is a different
matter.
Chairman: Forgive me, the current English law is
that if he would not have got permission it does not matter, you
extract from him his profit. There has been a recent case in the
House, a doctor in Regent's Park, and the current rule is that
if there is not any actual loss but the individual has made a
profit out of what he has done, you can extract from him his profit.
I think it is a very sensible development in the area of damages,
but it seems to be contrary to what is contemplated here.
Q147 Lord Grabiner: You have managed to
stimulate debate on this side of the table, which is quite an
achievement. You said that this was an example of an attempt at
harmonisation. Actually, is it not really an attempt to abolish
the concept, of harmonising the concept of abolition of the concept
of exemplary damages?
Sir Peter North: Yes. I think that is a perfectly
fair way of putting it. I have just turned to the Commission document,
the descriptive section on Article 24, and the final paragraph
says: "Compensatory damages serve to compensate for damage
sustained by the victim or liable to be sustained by him at a
future date. Non-compensatory damages serve a punitive or deterrent
function." Jumping back a paragraph, we are told that the
effect of Article 24 is to ensure, I am paraphrasing now, that
the award of such damages will be contrary to Community public
policy. What has that got to do with a choice of law Regulation?
Q148 Chairman: When we put the question
to the Commission officials, they said that, oh, it was just making
the law tidier.
Sir Peter North: You can do that in all sorts
of ways.
Q149 Chairman: The suggestion has been made
that the provenance of this is a desire to continue to permit
the courts in the European Union to refuse to enforce American
triple damages awards?
Sir Peter North: You can achieve that more readily
than by doing this.
Q150 Chairman: You can do that a lot more
simply, is that what you mean?
Sir Peter North: Yes. I am not sure it is an
argument which would be very convincing in the corridors of Brussels,
but it is almost a vires argument. This point is outside the ambit
of the instrument.
Q151 Lord Neill of Bladen: Really it is
Article 2, about laws in general, is it not?
Sir Peter North: Yes. I think this is my vires
point. It has a sweeping effect, which is not articulated in any
way in the Report's paragraphs relating to Article 2.
Q152 Lord Grabiner: It is not a complex
point at all?
Sir Peter North: No.
Q153 Baroness Thomas of Walliswood: When
we discussed this last week with the people from the Commission,
the gentleman explained quite clearly why they had done it. They
had seen a sort of rather inconvenient little bit of law and they
thought, while they were putting through this one, they would
add just a little bit of straightening out in there. We all yelled,
or rather the Chairman very forcibly asserted, the idea of competence
creep and he was covered in blushes, but he defended his action
to the last. He would not give way, but it was totally competence
creep, it was perfectly demonstrated.
Sir Peter North: Obviously, My Lady, he was
a very brave soul.
Baroness Thomas of Walliswood: He was a brave soul.
Chairman: Sir Peter, thank you very, very much indeed
for a very interesting hour that you have given us, and your evidence
will be of very great assistance to us in preparing our report
and in trying to get rid of the fog in our minds about some of
these issues. Thank you.
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