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

Last Updated: 19 January 2011
Article by Nigel Brook

This Week's Caselaw

Amalgamated Metal Trading Ltd & Ors v Baron

Whether service out of the jurisdiction in Peru was valid and power of court to allow service by alternative means

The claimants obtained permission to serve out of the jurisdiction and purported to serve the defendant at his apartment in Peru. Under CPR r6.40(3(c) service may be effected by any method permitted by the law of the country in which the claim form is served and the claimant sought to rely on this provision (rather than any other provision in the CPR). Service was made via a process server. However, expert evidence adduced by the defendant showed that service in Peru must be through judicial channels and effected by a "judiciary officer".

The claimant therefore sought to argue that, unless a method is specifically prohibited by the country in which service is to be effected, any method can be used. That argument was rejected by Chambers J: "the fact that "long arm" jurisdiction is being exercised from this jurisdiction cannot, without more, give full play to a claimant's imagination in deciding how to effect service in another jurisdiction....It seems to me that, while it is always open to a claimant to lead evidence to the effect that the state in which service is said to have been effected permits such service by conduct that is not express, a claimant cannot say that where a state expressly provides for a method or methods of service within its jurisdiction but does not expressly provide that service by other means is illegal then it is to be inferred that service by other means is permitted for the purposes of CPR r6.40(3)(c)". Accordingly, the judge held that service had been bad. The claimant therefore applied for various forms of relief including:

  1. Waiver of defect in service. The judge said that there had not been a flaw in the execution of service - instead, the whole process had been illegitimate as a means of effecting service. The court cannot invent a wholly new method of service.
  2. Ordering service by alternative means on the defendant's solicitors in London (the solicitors had advised that they were not authorised to accept service). There has been some recent debate as to whether alternative service can be ordered in relation to service out of the jurisdiction. The judge accepted that CPR r6.15 (alternative service) applies only to service within the jurisdiction (see Brown v Innovatorone [2009], Weekly Update 23/09). However, he said that "one must ask oneself how a deliberate decision could have been reached to jettison an express power to order service by alternative means that is retained in respect of service within the jurisdiction and which under the previous rules operated both in respect of service out of the jurisdiction and service within the jurisdiction...One may be confident that the Rules Committee did not intend to remove the power". Chambers J therefore concluded that he did have power under the rules to order service by alternative means (by reason of CPR r6.37(5)(b)(i)). He added that if he was wrong on that, then there is a lacuna in the rules and the power to order service by alternative means is inherent in the rules.

However, on the facts, the judge found no compelling reason to exercise this power. The defendant had not intended to evade service ("I do not see why a defendant should give a warm welcome to the unheralded arrival within his home of a process server" who was attempting to effect service in a way which was not permitted). The judge also rejected the argument that the defendant speaks English and therefore there would have been undue delay to translate documents into Spanish. Nor did the fact that service through diplomatic channels would take at least another 12 months influence the judge - this was said to be a result of the claimant's own making.

Bank Mellat v HM Treasury

Sanctions case: Iranian bank challenges HM Treasury order effectively excluding it from the UK financial market

Pursuant to powers conferred on it by the Counter-Terrorism Act 2008, HM Treasury made an Order effectively excluding the appellant (an Iranian bank) and the Islamic Republic of Iran Shipping Lines from the UK financial market. The appellant challenged the Order but Mitting J rejected that challenge. The appellant then appealed to the Court of Appeal

There were two main grounds of appeal:

  1. Substantive ground. Broadly, the appellant alleged that the Order was disproportionate. There was some discussion as to the correct test for proportionality in this case and whether it should be determined by reference to the 3-stage test set out in de Freitas [1999] (ie i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and iii) the means used to impair the right are no more than is necessary to accomplish the objective). The alternative view is that the third stage of the test does not apply and so, when very important public interests are in play, interference in private rights well beyond the minimum necessary to safeguard those interests may be proportionate (the so-called Luxembourg test). Kay LJ held that the minimum interference test is relevant to the test of proportionality (although the test should be cautiously deployed). The Court of Appeal found that the Order was proportional and the minimum interference part of the test was satisfied in this case: "this is a case in which it is established that the most effective measure is the most intrusive one but that is justified by the very high value of the legitimate aim, namely minimising the risk of very great harm to vital national interests" (ie preventing the bank from helping to fund the development of nuclear weapons by Iran).
  2. Procedural ground. Broadly, the appellant argued that it had not been given an opportunity to make representations prior to the making of the Order. One of the arguments raised was based on Article 6(1) of the ECHR which provides that: "In the determination of his civil rights and obligations..., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law". Elias LJ, dissenting, believed that there had been a breach of Article 6 (and the common law principles of natural justice). However, both Kay LJ and Pitchford LJ disagreed. They held that, at the time the Order was made, there was no dispute about the appellant's civil rights - on the contrary, it was the Order itself which gave rise to the dispute. Pitchgord LJ concluded: "When what is at stake is the risk of financing by a United Kingdom-based bank (deliberate or unconscious) of the nuclear or missile programme of an unfriendly state, it seems to me that the urgency of interim preventative measures, such as that specifically provided by Parliament in the present case, is obvious".

The appeal was therefore dismissed.

Huscroft v P&O Ferries

Power to order security for costs under CPR r3.1 markup.cgi?doc=/ew/cases/EWCA/Civ/2010/1483.html&query=title+(+huscroft+)&meth od=boolean

The defendant applied for, and obtained, security for its costs from the claimant under CPR r3.1(3) (rather than under CPR r25). CPR r3.1(3) provides that where a court makes an order, it may make it subject to conditions, including a condition to pay a sum of money into court. Both the district judge and Bullimore HHJ appeared to accept that under CPR r3.1(3), the court has the power, when making an order of any kind, to impose conditions on the parties, whether related to specific paragraphs of the order or not. The claimant appealed and the Court of Appeal has now unanimously allowed the appeal.

Moore-Bick LJ, giving the leading judgment, held that it would be wrong to encourage litigants to use CPR r3.1(3) as a convenient means of circumventing CPR r25, and therefore providing a less demanding route to obtaining security for costs. When making an order under CPR r3.1(3), the court should bear in mind the principles underlying CPR r25 (in particular, in this case, that a a personal claimant who is resident in the EU cannot be required to provide security just because he is impecunious - something more will be needed). The Court of Appeal also held that CPR r3.1(3) does not give the court a general power to impose conditions whenever it happens to be making an order: "The purpose of rule 3.1(3) is to enable the court to grant relief on terms and when the power is exercised the condition ought properly to be expressed as part of the order granting the specific relief to which it relates". The order in this case did not do that - instead it had been a free-standing order and was not expressed as a condition of obtaining any relief which the claimant was seeking.

The Court of Appeal also held (contrary to views expressed in Halabi v Fieldmore Holdings [2006]) that a power to attach a condition to an order was not exercisable only if there is a history of repeated failures to comply with court orders or if a party is not conducting the litigation in good faith: " I do think, however, that before exercising the power given by rule 3.1(3) the court should identify the purpose of imposing a condition and satisfy itself that the condition it has in mind represents a proportionate and effective means of achieving that purpose having regard to the order to which it is to be attached". Nothing in this case was said to justify attaching an order for security for costs to a wide-ranging order for directions of the kind routinely made at CMCs.

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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