UK: Weekly Update: A Summary of Recent Developments in Insurance, Reinsurance and Litigation Law

Last Updated: 11 November 2010
Article by Nigel Brook

This Week's Caselaw

Dallah Real Estate v Government of Pakistan

Supreme Court decision on enforcing an arbitration award/scope of Kompetenz- Kompetenz principle

http://www.bailii.org/uk/cases/UKSC/2010/46.html

The Court of Appeal's decision in this case was reported in Weekly Update 27/09. The government of Pakistan set up a trust and that trust entered into an agreement with the appellant. The agreement provided for arbitration under the rules of the ICC in Paris. There was no express choice of law. The trust ceased to exist and the appellant purported to commence an ICC arbitration against the government instead. The government contested the jurisdiction of the tribunal. The tribunal found that it did have jurisdiction and made an award in favour of the appellant. The appellant then sought to enforce that award under the Arbitration Act 1996 (which gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958). The government argued that the award should not be enforced because the arbitration agreement was invalid under the law of the country where the award was made (ie France) - see s)103(2)(b) of the 1996 Act. The English courts initially gave the appellant leave to enforce the award but that leave was then set aside by the High Court and an appeal from that decision was rejected by the Court of Appeal. The Supreme Court has also now unanimously dismissed the appellant's appeal on the following grounds:

  • Although the arbitrators can rule on their own jurisdiction (under the principle of Kompetenz-Kompetenz), that decision can still be the subject of judicial review: "An arbitral tribunal's decision as to the existence of its own jurisdiction cannot therefore bind a party who has not submitted the question of arbitrability to the tribunal". This is the case where the seat of the arbitration is in England, but it is also the position when an English court is asked to enforce a foreign award. There is no obligation on the party resisting enforcement to seek to set aside the award in the country where it was made. Nor does it matter whether the tribunal has assumed or (after full deliberation) concluded that it has jurisdiction. The tribunal's view as to its jurisdiction is not conclusive either;
  • The Supreme Court rejected the appellant's argument that an enforcing court should only conduct a limited review if the tribunal has decided that it has jurisdiction. The New York Convention does not accord "primacy to the courts of the arbitral seat, in the sense that the supervisory court should be the only court entitled to carry out a re-hearing of the issue of the existence of a valid arbitration agreement";
  • The correct law to be applied in this case was French law (which, in turn, recognises and applies transnational principles when determining the existence, validity and effectiveness of an international arbitration agreement). The key issue here was whether the appellant could demonstrate that there had been a "common intention" between the parties as to jurisdiction. The Supreme Court held that, on the facts, there had been no such common intention in this case; and
  • Finally, this was not a case where the court should exercise its general discretion to enforce the award (the appellant had argued that the discretion should be exercised because the government had not resorted to the French courts to set aside the award). Lord Collins agreed that the enforcing court has a discretion to enforce an award even if the party resisting enforcement has proved that there was no valid arbitration agreement: "There may, of course, in theory be cases where the English court would refuse to apply a foreign law which makes the arbitration agreement invalid where the foreign law outrages its sense of justice or decency". However, there was no basis for exercising the discretion in this case. The Court of Appeal had been correct to hold that the failure by the resisting party to take steps to challenge the jurisdiction of the tribunal in the courts of the seat would rarely, if ever, be a ground for exercising the discretion in enforcing an award made without jurisdiction.

SK Slavia v Debt Collect London & Anor

Whether Czech or English court was "first seised" for the purpose of EC Regulation 44/2001

http://www.bailii.org/ew/cases/EWCA/Civ/2010/1250.html

Clyde & Co for defendants (Toby Rogers and Dominic How)

In June 2009, the respondent issued proceedings in England against the appellant. It then served the appellant in August. However, it was unaware that the appellant had already lodged proceedings against it in the Czech court in April 2009. The Czech proceedings were not, and could not be, served on the respondent, though, until payment of the Czech court fee for service. An issue then arose as to which court was first seised under Articles 27 and 28 of EC Regulation 44/2001 (dealing with related actions).

The evidence showed that it is standard practice in the Czech Republic not to pay court fees at the time of filing the action. Instead, the claimant awaits information from the court first as to the amount and bank account details, before paying. However it is a requirement that the fee is paid before service can take place.

Article 30 of Regulation 44/2001 provides, in relevant part, that "a court shall be deemed to be seised... at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant" (emphasis added).

The Court of Appeal held that, in this case, the English court was first seised. It rejected the appellant's argument that it had not "failed" to take any step necessary for service but instead had simply waited to pay the fee. It held that non-payment of the fee was a failure to take a step required for effecting service - "failure" in Article 30 meant a failure to comply with a duty imposed by the procedural law of the relevant country. It was not the case that the only failure which was relevant was one which means that the proceedings could never be served on the defendant. Although the failure was remedied in this case, that only meant that the Czech court was again seised.

Brooks v AH Brooks & Co

Service on a partnership/acknowledgment by PI insurers' solicitors

http://www.bailii.org/ew/cases/EWHC/Ch/2010/2720.html

The claimant alleges professional negligence against two former partners of the law firm AH Brooks & Co in relation to causes of action which arose at various dates between 1990 and 2007. One of the former partners (Mr M) ceased to be a partner in 2003 and the other (Mrs M) carried on the business as a sole trader until she sold the business to the current partners in 2008. She then remained as an employee until 2009, shortly before the claim form was issued and served. The firm continued to trade under the name AH Brooks & Co.

Service of the claim form (which named the defendant as AH Brooks & Co) was made by post to the Managing Partner at the firm. For convenience, it has long been the case that a claim can be brought against a partnership's business name, but the substance of the action is that it is brought against the individuals who constituted the partnership at the relevant time. The issue in this case was whether the claim had been validly served.

Personal service is optional. CPR r6.9(2) provides that a partnership can be served (inter alia) by service on all or any of the partners at the usual or last known place of business of the firm. However, that provision is qualified where a claimant has reason to be believe that the partners in question have now ceased to be partners of the firm. In that case, the claimant must take steps to identify an alternative address or method of service.

In this case, it was not suggested that the claimant considered Mr M to be carrying on business at the address to which the claim form was sent and so he should have taken reasonable steps to identify a current address for Mr M (eg his residential address). Since Mrs M was known to be an employee, she could not "carry on business" at the firm's address and again, alternative steps should have been taken. Accordingly, service at the firm's address did not constitute good service for either Mr or Mrs M.

However, an acknowledgment of service was sent to the claimant by the firm of solicitors instructed by professional indemnity insurers to act on behalf of the firm. The current partners could not authorise those solicitors to sign an acknowledgment of service since they were not partners at the date of accrual of the causes of action. However, Mrs M was a party to the PI policy for the relevant year (ie when the claims were notified) and it was a term of that contract that the insurers were authorised to conduct the defence of any proceedings against the firm (including claims against former partners). Cooke J concluded that the solicitors were therefore authorised by Mrs M to sign the acknowledgment of service (and so were authorised to sign on behalf of all the other partners too - see PD 10 para 4.4(2)). The acknowledgment of service waived any defects in service.

In any event, had it been necessary, the judge said that, since Mr and Mrs M became aware of the claim within a very short time (and so had every opportunity to participate in its defence), he would have permitted service at the firm's address to be deemed to be good service.

Brink's Global Services v Igrox Ltd Vicarious liability and whether employee acting in course of employment

http://www.bailii.org/ew/cases/EWCA/Civ/2010/1207.html

Brink's entered into a contract with a London bank for the carriage of silver from London to India. The silver was packed into wooden pallets and the pallets had to be fumigated before being placed on board the vessel. Igrox instructed two of its employees to carry out the fumigation in a secure compound in Kent. They removed the original seal but failed to apply the fumigant. One of the employees later returned on his own and stole the silver. The issue in the case was whether the employee had committed the theft in the course of his employment, so that Igrox was vicariously liable for the loss of the silver.

It was established in the case of Heasmans v Clarity Cleaning [1987] that, in order to establish vicarious liability, there has to be a sufficiently close connection between the theft and the employment. It is not enough if the employment merely provides the employee with an opportunity to steal. The Court of Appeal reviewed the relevant caselaw on this point and concluded that it was fair and just to hold that there was a sufficiently close connection for Igrox to be vicariously liable. As Moore-Bick LJ put it: "in those circumstances theft by an employee from the very container which he is instructed to fumigate is in my view a risk reasonably incidental to the purpose for which he is employed". Moore-Bick LJ also doubted whether Heasmans would be decided in the same way if heard today. Longmore LJ added that "the cases show that a very important element is that the employer puts the employee in the position he does as part of the employer's business".

Ashley-Carter & Anor v Hofmann & Mountford & Ors

Costs orders where losing party's conduct was reprehensible/date interest can run from

http://www.bailii.org/ew/cases/EWHC/QB/2010/2349.html

The judge in this case found that the losing defendants' behaviour had been "reprehensible". They had had no grounds for defending the claim, had conducted settlement negotiations unreasonably and had wound up a third defendant in order to frustrate the claimant's chances of recovery.

HHJ Thornton QC ordered costs to be paid on an indemnity basis. One noteworthy issue in the case was the application of CPR r44.3(6)(g), which permits the court to award interest on costs from a date before judgment. Walker LJ said in Bim Kemi AB v Blackburn Chemicals [2003] that "In any event in principle there seems no reason why the court should not [award interest] where a party has had to put up money paying its solicitor and been out of the use of that money in the meanwhile". Interest was ordered to be paid from the date of the solicitor's invoice. However, Lindsay J in Douglas v Hello! Ltd (No.9) [2004] said that "in principle, it seems to me that the more appropriate dates, when one is seeking to measure the extent to which a party has been out pocket, would be the dates on which invoices were actually paid." In this case, the judge held that interest should be awarded on the costs which the claimants had already paid their solicitors "from the date that the solicitors invoiced him for those costs".

Given the unmeritorious way that the sum owed to the claimant had been withheld from him, the judge also ordered that interest should be awarded at 5%, notwithstanding the prevailing low base rates.

Chadwick v Hollingsworth (Nos. 1 and 2)

Permission to appeal and whether judge correct to order applicant to pay all the costs of the action to date

http://www.bailii.org/ew/cases/EWCA/Civ/2010/1210.html http://www.bailii.org/ew/cases/EWHC/QB/2010/2718.html

The claimant alleged that the defendant, a consultant orthopaedic surgeon, had been negligent in the management of his post-operative care. His case was based on the advice of an expert. When that expert (for unknown reasons) changed his mind about the case, the claimant sought and obtained permission to call a second expert. The claimant also applied for permission to amend his particulars of claim. Although some of the original allegations survived, the majority of allegations in the amendment were based on the second expert's report. The county court judge granted permission to amend, but only on terms that the claimant pay all the costs of the action to date. The claimant wished to appeal that decision. The first case was heard by the Court of Appeal.

The Court of Appeal held that it did not have jurisdiction to hear the appeal. The Access to Justice Act 1999 (Destination of Appeals) Order 2000 provides that an appeal from the county court must be made to the High Court, but an appeal can be made to the Court of Appeal if the decision being appealed is a "final decision", which is in turn defined as a decision that "would finally determine...the entire proceedings". In breach of CPR r40(2), the order of the county court did not state whether it was final. Moore-Bick LJ held that the order did not finally determine the entire proceedings. Even an order striking out the claim would not have been a final order for these purposes (see PD 52 para 2A.2). Nor could it be said that the 2000 Order was only directory in nature.

Accordingly, the matter was remitted to the High Court. Rix LJ, sitting as a member of the High Court, allowed the appeal from the county court judge's decision. The county court judge had decided that the claimant should pay the costs of the proceedings to date on the basis that: (a) this was not a substantially new case and (b) the old case on causation would have failed (see Beoco v Alfa Laval [1995]). Although Rix LJ was prepared to assume that the case had been substantially altered (although the original case was preserved) he held that the claimant's action would not have failed without the amendment. At this stage, it should not be summarily decided that the whole of the costs of the action had been wasted. The trial judge could make a costs order which would properly take into account the ultimate result. Accordingly, the claimant should only bear the costs of the amendment

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