While on holiday on the island of Tenerife the claimant stayed at a hotel owned and operated by a company registered and incorporated in Spain. As she was descending an inadequately lit staircase she fell and sustained severe injuries. The claimant issued proceedings against the defendant, the Spanish public liability company providing insurance cover to the hotel, and the defendant admitted liability for the claimant’s injury. It was common ground between the parties that Spanish law applied to matters of substance (including the existence, nature and assessment of damages and remedy) but that English law, as the law of the forum court with jurisdiction, governed matters of procedure and evidence. An issue arose, inter alia, as to whether the appropriate rate of interest to apply to the damages award was the penalty rate under Spanish law or a rate applied under section 35A of the Senior Courts Act 1981.
On the claim—
Held, order accordingly. (1) The right to claim interest by way of damages clearly fell within article 15 of Parliament and Council Regulation (EC) No 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations (“Rome II”) and was therefore to be determined by the law applicable to the non-contractual obligation. Article 15(d) applied the law of the non-contractual obligation to the measures which the court might take to ensure the provision of compensation. A substantive right to an award of interest to compensate the victim for being kept out of his or her award and the loss of use of the money was consistent with the purpose of an award of damages for personal injury, namely, to restore the victim of an accident to the position that they would have been in but for the accident. However, as the purpose of penalty interest in Spanish law was to incentivise early interim payments and to discourage delay and procrastination on the part of the defendant, it was a procedural sanction to give teeth to a procedural regime aimed at early disposal of cases and as such it was not a substantive right. The imposition of an award of penalty interest by definition was not intended to achieve restitutio in integrum for the claimant but to penalise the defendant for having failed to comply with the requirement to make a conservative payment within three months of the claim, and the penalty interest provisions were discretionary and might be excluded if there was a good reason to do so. The Spanish law provisions concerning penalty were therefore procedural and it followed that the interest rates to be applied in the present case were those of the lex fori, under section 35A of the Senior Courts Act 1981 (paras 101–103).
(2) While the imposition of the Spanish penalty interest rate might expose the defendant to a double jeopardy of Spanish penalty interest and costs and interest penalties under CPR r 36.17, that was not a good reason to disapply the Spanish rate of interest. The sanctions set out in rule 36.17 were themselves discretionary and might be displaced if there was a good reason to do so. Accordingly, pursuant to section 35A of the 1981 Act, interest would be awarded on general and special damages in accordance with the penalty rate which would have been applied had the litigation been issued and pursued in Spain (paras 108, 109).
Matthew Chapman KC (instructed by Leigh Day) for the claimant.
Philip Mead (instructed by Hextalls) for the defendant.