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

Last Updated: 7 December 2010
Article by Nigel Brook

This Week's Caselaw

Lonmar Global v West & Ors

Allegations of breach of contract and inducement in alleged employee poaching case

The claimant, a Lloyd's (re)insurance broker, brought a claim against certain of its former employees for breach of contract and breach of fiduciary duty. It also brought a claim against one of its competitors (and prospective future employer of the employees in question) for alleged inducement of breaches of contract and conspiracy. The case mostly turns on its particular facts. The judge, Hickinbottom J, found that there was no broad duty implied into a contract of employment requiring an employee who owes no fiduciary obligation (and who is not acting in concert with others) to disclose to an employer that fellow employees are being recruited by a competitor. In any event, the claimant had failed to show any loss resulting from any breaches by the former employees or the competitor (for example because the claimant had no realistic prospect of retaining certain business, or because certain business was not profitable).

One general point arose though in relation to the competitor. It was alleged that it had induced the former employees to breach their contracts of employment. The judge accepted that senior executives at the competitor must have known that the former employees were breaching certain obligations owed to the claimant. However, he held that "mere knowledge of breach is insufficient". To prove the tort of inducement to breach a contract, the claimant must show that the defendant intended to interfere with the claimant's contractual arrangements with (in this case) his employee. Here there was no evidence that the competitor had positively encouraged the employees to solicit clients and other employees: "As a matter of law, I am sure that even silence in certain circumstances can be persuasive in encouraging a breach of contract and can intend to do so". However, the argument in this case was not established by the facts.

Fulham FC v Richards & Anor

Position where there are two conflicting first instance decisions

The respondents sought a stay (under section 9 of the Arbitration Act 1996) of the unfair prejudice petition presented by Fulham FC on the ground that the matters in issue between the parties fell within the terms of arbitration agreements contained in the FA's rules. The main issue to be determined by the court was whether the statutory right of a member to present an unfair prejudice petition under the Companies Act 2006 can be removed or diminished by contract. There were two conflicting first instance decisions on this issue (the first decided that the right could be removed and the second decided that the right was inalienable). The petitioner argued that where there are two conflicting first instance decisions, the court should regard the latter of the two as settled law and automatically follow it, leaving it to the Court of Appeal to decide between them. Vos J held that the correct test was that laid down by Nourse J in another case (in Colchester Estates v Carlton [1986]), "that such matters should be regarded as settled law "when the earlier decision has been fully considered, but not followed, in a later one"". One exception to this rule was where the third judge is convinced that the second was wrong in not following the first (eg because some binding or persuasive authority has not been cited in either of the the earlier two cases). Applying that test, Vos J concluded that the later of the two conflicting decisions here was wrong and that the statutory right to bring an unfair prejudice petition is not an inalienable right.

COMMENT: This case confirms the position as set out by Nourse J in Carlton. The correct treatment of two conflicting decisions is interesting in light of the current conflict regarding the right of a party to proceedings to obtain details of the other side's insurance position. There are currently two conflicting first instance decisions on the point, West London Pipe Line Storage v Total [2008] doubting the earlier decision in Harcourt v Griffin [2007] which had held that CPR r18 (covering requests for further information) was wide enough to include requests for disclosure of a defendant's insurance cover (see Weekly Updates 24/08 and 32/07 plus the comments on these two decisions in Barr & Ors v Biffa Waste [2009] (Weekly Update 18/09)).

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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