UK: Weekly Update - A summary of recent developments in insurance, reinsurance and litigation law – 28/10

Last Updated: 28 July 2010
Article by Nigel Brook

This Week's Caselaw

Royal & Sun Alliance v Rolls-Royce

Whether a stay should be granted and whether Florida was the appropriate forum to hear an insurance dispute

The insured, an English company, commenced proceedings against its English insurers in Florida. It sought a declaration that it was entitled to an indemnity under various insurance policies. The insurers then commenced proceedings in England, asserting that they were not liable to the insured. The relevant policies did not contain an exclusive jurisdiction clause.

In Owusu v Jackson [2005], it was held that if an English court is first seised of proceedings against a defendant domiciled in England, it cannot stay those proceedings in favour of a non-Member State court (although the English court can grant a stay if there is an exclusive jurisdiction clause). However, the position remains unclear where (as in this case) foreign proceedings are already on foot - there are conflicting decisions as to whether Owusu applies. This question had been referred by the Irish Supreme Court to the ECJ, but that case has now settled prior to resolution of this issue. In this case, Blair J said he should first determine the issue of whether the insured had shown that Florida was the appropriate forum for the trial of the claim.

The insurers argued that England was the appropriate forum because the parties are English and the insurance policies are expressly governed by English law. The insured countered that Florida was the appropriate forum because its claim under the policies arises from legal actions brought against it (mainly) in Florida. Although Blair J accepted that the accumulated knowledge and experience of, in particular, the insured's Florida lawyers was significant, this was not a decisive factor. The proceedings being brought against the insured in Florida concerned its liability for the failure of one of its products, whereas this was a claim by an English insured against its English insurers under an insurance policy subject to English law. For that reason, it had not been shown that Florida was the appropriate forum and so the application for a stay was refused. As a result, the judge did not need to decide the Owusu point.

Network Rail v Conarken

Whether loss caused by negligent driver's damage to rail track was recoverable - of possible interest to motor insurers

Network Rail sued the employers of certain negligent heavy goods vehicle drivers who had caused physical damage to bridges and railway lines (there were 1365 road accidents affecting railway services in 2008-9). It was undisputed that the defendants were liable for the costs of repairs. What was in dispute in this case was whether the defendants were also liable for sums which Network Rail had to pay to various train operating companies because the track was unavailable for use while remedial works were carried out.

Akenhead J reviewed the relevant law. He concluded that in negligence cases involving physical damage to property, loss of profit or revenue can be recovered as damages subject to causation being established and it being demonstrated that the loss is consequential upon or closely associated with the physical damage. The fact that the loss of profit/revenue arises because a contract between the claimant and a third party makes the claimant liable to pay the third party does not stop it being recoverable. Akenhead J said that he did not need to decide whether the "but for" test of causation was appropriate because it was clear in this case that there was a direct causal connection between the negligent acts and the sums paid to the operating companies. The loss was a reasonably foreseeable consequence of the negligence and was not too remote. He therefore held that the amounts paid to the operating companies were recoverable as consequential losses arising from the physical damage to the property. It did not matter that the defendants would not have been directly liable to the operating companies because no property belonging to those companies was physically damaged. Network Rail had the right to sue for negligence in respect of physical damage to its property.

The judge also went on to hold (obiter) that a negligent incursion on to, and damage of, a claimant's land or property can in law be trespass (and directly consequential losses would in practice be recoverable). There was no actionable nuisance committed by the defendants in this case though.

Midland Packaging v HW Chartered Accountants

Part 36 offers and criticism of Carver case

In this case, the parties made various Part 36 offers. There was no dispute that the claimants had been "successful" and had bettered the offer in relation to the main issue in the case. Brown J also noted the recent criticism of Carver v BAA plc [2008] by the Jackson Report on Costs (in Carver, it was concluded that account should be taken of all aspects of a case, including emotional stress and financial factors). However, it was argued by the defendant that Carver ought to applied to this case "where the disparity of offer and award of damages was £91,742 in a claim where the Claim was pleaded at £2,348,480, opened at £1,541,081 and a counter offer was made only a little below that at £1,380,072". That argument was rejected by the judge: "In my judgment, £91,742 is a significant sum worth fighting this litigation for. It is a far cry from, in effect, fighting over £51 as in Carver. It was open to the Defendants to have raised their offers more than they did so that the "certainty" of Part 36 came into effect, rather than hoping for the "uncertainty" of Carver to come to their aid. It is understandable that the Jackson Report has concluded as it has done that it is desirable that costs battles over Carver do not proliferate as here." This is therefore the second criticism, in almost as many weeks of Carver, following the Court of Appeal decision in Gibbon v Manchester City Council (see Weekly Update 25/10)..

Louis Dreyfus Commodities v Bolster Shipping

Whether Mexican proceedings were a breach of an arbitration clause

The claimant shippers and the defendant owners entered into a bill of lading which provided for arbitration to settle any disputes between them. The eventual purchasers of the cargo commenced proceedings in Mexico against (inter alia) the owners. The shippers were not a party to those proceedings. However, the owners sought to join the shippers to the proceedings and the shippers argued that this amounted to a breach of the arbitration clause and sought an anti-suit injunction from the English courts. Tomlinson J identified the key question as: "what is to be the nature of LDCK's [the shippers'] involvement in the Mexican proceedings and in whose, if anyone's, favour a judgment might be?"

It was accepted that the joinder application did not "necessarily mean" that the shippers would be bound by a judgment. The purpose behind the owners' application was to ensure that certain documentation and information is provided to the Mexican court. The judge found that this did not breach the terms of the arbitration clause (which required that all disputes between the shippers and the owners arising out of their contract should be decided by arbitration). There is no implied term that a party to an arbitration clause cannot obtain evidence by resorting to a tribunal other than the contractual arbitration. Furthermore, "a party to an arbitration clause does not undertake to his contractual partner that he will not, if sued by a third party, suggest that it is to the contractual partner that the third party should rather look for recompense". Nor was it a breach of the clause for the shippers to be bound by a judgment from the Mexican court. The Owners were not inviting the Mexican court to resolve a dispute between themselves and the shippers – crucially, they have not asserted a claim against the shippers, and they have not identified any dispute between themselves and the shippers arising out of the contract. The judge therefore refused to grant an anti-suit injunction.

Other news

Please find link to PD 31B - the new practice direction (and questionnaire) relating to electronic disclosure which will come into effect on 1 October 2010 for all multi-track cases which start on or after that date. The main points to note are as follows:

  1. Discussions must take place between the parties prior to the first CMC on the use of technology to manage electronic documents and on how disclosure of electronic documents will take place. In some cases (the PD suggests heavy and complex cases, although this is not a defined term), it may be appropriate for the discussions to take place before proceedings are even commenced. If a party carries out electronic disclosure without having first discussed with the other parties how to plan and manage that disclosure, the court could order that party to carry out further searches or even repeat steps already carried out.
  2. Before the first CMC, the parties should submit to the court a summary of the matters on which they agree (and on which they disagree) in relation to the disclosure of electronic documents. Where the parties cannot agree, the court will either give written directions or order a separate hearing. The parties should also seek directions at any time if it becomes apparent that they can't agree on electronic disclosure.
  3. The parties may, if they wish, complete the Electronic Documents Questionnaire attached to the PD. The questionnaire must be verified by a statement of truth and will only be available for inspection by non-parties if permission is given. Note that the court can order the parties to complete the questionnaire (usually to be exchanged within 14 days of the order) if the parties cannot reach agreement. The person who signs the questionnaire must attend the first CMC (and any subsequent hearing at which disclosure is likely to be considered).
  4. The PD warns that it will often be insufficient to use simple keyword searches (or other automated methods of searching) alone. The parties should therefore consider supplementing such searches with additional techniques (eg individually reviewing certain documents or categories of documents).
  5. Parties must justify any request to see metadata which is not already provided anyway (ie where documents have been provided in native format).
  6. When drafting the list of documents, documents can be listed other than in date order but they should be listed individually (if possible). Consistency in the way documents are listed is key. Dates should be set out in alphanumeric form (eg "01 Jan 2010").
  7. Unless otherwise agreed, electronic documents should be provided in their native format. A party should also provide any available searchable OCR versions of electronic documents with the original (unless these have been redacted). Where redactions have been made, the original unredacted version must be preserved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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