UK: Weekly Update - A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law - 10/11

Last Updated: 17 March 2011
Article by Nigel Brook

This Week's Caselaw

Sienkiewicz v Grief (UK) Ltd

Supreme Court rules on causation test for mesothelioma in "single exposure" cases

http://www.bailii.org/uk/cases/UKSC/2011/10.html

The unusual features of mesothelioma (see Weekly Update 38/10 for further details) have led to the development of a special test of causation for the disease (it being impossible for a claimant to prove causation according to the conventional "but for" test). The case of Fairchild v Glenhaven [2002] provided a cause of action "against a defendant who has materially increased the risk that the claimant will suffer damage and may have caused that damage, but cannot be proved to have done so because it is impossible to show, on a balance of probability, that some other exposure to the same risk may not have caused it instead" (as per Lord Hoffmann) (emphasis added). In Barker v Corus [2006] it was established that, where not all those who were responsible for an employee's mesothelioma were before the court, only a proportion of the relevant damages would be recoverable. Section 3 of the Compensation Act 2006 reversed that finding and, as a result, (and on the satisfaction of certain conditions) an employer who negligently exposes an employee to asbestos (and is liable by reason of having materially increased a risk) can be held liable for the whole of the damage even though another person may also have exposed the victim to asbestos.

Of issue in this case was which causation test applies in a "single exposure" case (ie the claimant alleges only one possible tortious source for the asbestos exposure). Is it the Fairchild test ("materially increased the risk") or is it the alternative "doubles the risk" test i.e. it must be shown that the exposure for which the employer was responsible has more than doubled the environmental exposure (in this test case, it was proven that the employer had only increased the exposure which the employee would have otherwise experienced as a result of environmental exposure to asbestos by 18%).

The House of Lords has unanimously held that the special rule established in Fairchild applied. There was no room for the "doubles the risk" approach. This was the case even though, as Lord Brown recognised, the result is the liability in full even of someone who is responsible for only a small proportion of the overall exposure of a claimant to asbestos dust.

Meat Corporation of Namibia v Dawn Meats

Whether expert was independent/disclosure of privileged information

http://www.bailii.org/cgibin/markup.cgi?doc=/ew/cases/EWHC/Ch/2011/474.html&query=title+(+meat+and+namibia+and+dawn+)&method=boolean

The claimant sought a direction that permission to call an expert (sought by the defendant) be refused because she had seen confidential and privileged information and because she lacked the necessary independence of an expert. Both sides had tried to instruct her, and in the course of negotiations, the claimant had supplied certain materials to the expert, who had then chosen to act for the defendant. Mann J held as follows:

  1. It was undisputed that the expert had received privileged and confidential information from the claimant. In the House of Lords case of Prince Jefri Bolkiah v KPMG [1999], it was held that accountants who provide litigation support services must generally be treated in the same way as solicitors and hence have a duty to preserve confidentiality (including not acting for the other side). Mann J held that the strict test in Prince Jefri does not apply just because an expert has received privileged and confidential information though.
    The expert in this case could not be equated with a solicitor. She had not been engaged to do anything by the claimant - she had received the information in the course of enquiries as to whether she would act as the claimant's expert: "to some extent, the information was pushed on her". The judge also said it was an "unrealistic parallel" to compare her to professionals undergoing a "beauty parade" for legal work who commonly refuse to receive privileged information.
  2. Furthermore, two factors in this case meant that confidentiality and privilege was likely to be maintained: (a) The expert had provided an undertaking not to disclose confidential or privileged material to the defendant; and (b) most of the disclosure would be irrelevant or "fundamentally uninteresting" to the defendant. For example, the defendant already knew about the claimant's offers to it. Although the claimant's view of the merits of the litigation would be of interest, that information would be covered by the undertaking.
  3. Was the expert barred from acting for the defendant? Mann J held that she was not. The court should not bar an expert just because he or she has acted for both sides. In this case, the expert had not even acted for the claimant, but had only discussed the case with it.
  4. Did the expert lack the necessary independence because she also acted as a consultant for the defendant? Mann J said this would depend on all the circumstances of the case and "If the status of an employee does not automatically disqualify a person as an expert, then it is even clearer that, by itself, the status of consultant, providing limited functions for a limited part of the year, cannot automatically disqualify either. A lot more than that would have to be established."
    In this case, the consultancy was an entirely severable activity. Although she might discuss the case with the defendant in the course of her consultancy, that was entirely acceptable. Experts "do not have to live in some hermetically sealed environment with resort only to witness statements".

Nor was there any requirement to seek to "ring fence" the expert. Although there had been an allegation that the expert had been involved in some of the transactions which were part of the underlying dispute, that had not yet been proven and the mere allegation was not enough to disqualify her.

Mann J therefore gave the defendant permission to call the expert. He did, however, point out that it remained open to the claimant to challenge the expert's degree of independence in cross-examination at the trial.

D Sousa v London Borough of Waltham Forest

Whether entitlement to a success fee under a CFA affected by subrogation

http://www.bailii.org/ew/cases/EWCA/Civ/2011/194.html

This was an appeal brought by a local authority against the decision that the respondent was entitled to recover a 100% success fee under a Collective Conditional Fee Agreement ("CCFA"). Jackson LJ, in his review of Civil Litigation Costs, criticised the increasing practice of insurers to engage solicitors under CCFAs to handle recovery actions for costs incurred in subsidence claims where local authority trees are implicated as the cause of damage. This was said to be having a detrimental effect on public finances. However, the Court of Appeal has dismissed the appeal for the following reasons:

  1. It was clear that the insured was entitled to recover his costs and those costs could include a success fee. The doctrine of subrogation does not affect this position. So the CCFA must be treated as the insured's CCFA and there were no grounds for saying that it was unreasonable for him to instruct solicitors on a conditional fee basis.
  2. It was agreed that the court should look at the reality of the situation, though, and have regard to all the circumstances of the case. It was therefore necessary to consider whether it was reasonable for the insurer to enter into the CCFA. Although sympathetic to the local authority's arguments (for example, the insured, having been fully indemnified, did not need to protect himself against any liability for his solicitors' costs), it was concluded that CFAs are open to all and "if the law permits it, it must be reasonable for rich as well as poor to take advantage of that which the law permits". The courts had no power to force the insurance companies to fund the litigation themselves.

Bank of Scotland v Pereira & Ors

Interrelationship between application to set aside an order and an appeal where defendant failed to attend

http://www.bailii.org/ew/cases/EWCA/Civ/2011/241.html

CPR r39.3(3) provides that "where a party does not attend and the court gives judgment or makes an order against him, the party who failed to attend may apply for the judgment or order to be set aside". In this case, a defendant who had taken no part in the proceedings sought to appeal against a judge's refusal to set aside parts of an order against her. She also applied for permission to appeal out of time against the order itself. The Master of the Rolls (giving the leading decision in the Court of Appeal) therefore set out, as part of his decision, six points "which can at least act as guidelines and would apply in the great majority of cases" on the relationship between an application under CPR r39.3 and an attempt to appeal (under CPR r52):

  1. If a defendant (or claimant, but it will usually be a defendant) seeks a new trial because he/she did not attend the trial, he/she should normally proceed under CPR r39.3 (even if there are other grounds of appeal too).
  2. There is no point in making a CPR r39.3 application, though, if the defendant has no good reason for not attending the trial and/or did not make the application promptly. The defendant can still appeal the order or judgment in the normal way. However, it should be noted that a defendant who did not attend trial will generally face additional difficulties in bringing an appeal because (a) the application for permission to appeal is likely to be made out of time and (b) it will be hard to persuade an appellate court that evidence or arguments not raised at trial should be allowed in the appeal.
  3. Similarly, if a CPR r39.3 application fails, the defendant still has a right to appeal. However, the appellate court "should take a great deal of persuading" to depart from the conclusion reached by the judge who heard the application to set aside.(Lloyd LJ, dissenting, held that if a defendant's CPR r39.3 application failed, he/she cannot try again by a direct appeal (unless appealing against the original order on other grounds)).
  4. If the defendant's CPR r39.3 application failed because the arguments on the substantive issues would have had no prospect of succeeding at any retrial, he/she should not normally be entitled to raise the same arguments by bringing an appeal against the decision.
  5. If the CPR r39.3 application fails, a defendant will normally face severe difficulties in trying to rely on evidence which was not put before the trial judge or to argue for a retrial (unless the evidence would not have been available even if he/she had attended the trial or the application for a retrial was not dependent on the fact he/she did not attend at trial).
  6. Similar considerations apply where a defendant appeals a trial judge's decision (and does not make a CPR r39.3 application) and seeks to put in new evidence or requests a retrial.

On the facts of the case, the Court of Appeal refused the defendant's applications.

Masri & Anor v Consolidated Contractors International & Ors

Whether earlier House of Lords decision prevented receivership order over a third party

http://www.bailii.org/ew/cases/EWHC/Comm/2011/409.html

Paragraph 19 of the standard form freezing injunction set out in Appendix 5 of the Commercial Court Guide provides (in relevant part) as follows: "(1) Except as provided in paragraph (2) below, the terms of this order do not affect or concern anyone outside the jurisdiction of this court. (2) The terms of this order will affect the following persons in a country or state outside the jurisdiction of this court- (a) the Respondent or his officer or agent appointed by power of attorney (b)....".

One of the issues in this case was whether the House of Lords decision in Masri v Consolidated Contractors (No 4) [2009] affected the question whether an order can be made against a third party outside the jurisdiction. Masri (No 4) was a decision on the construction of CPR r71.1 (which provides for a judgment debtor to be required to attend court to provide information). It held that this rule did not apply to directors or officers of a corporate judgment debtor who are outside the jurisdiction.

However, Gloster J held that the House of Lords had not considered whether a director or officer out of the jurisdiction could be liable for contempt of court. There were good arguments for finding that Masri (No 4) did not apply to receivership orders or freezing injunctions where the director or officer is named in the order, not because he is a third party but because he is the directing mind or controlling organ of the corporate defendant (and so his acts or omissions count as the acts and omissions of the company so far as breach of the order/contempt proceedings are concerned). Although the order is made against the judgment debtor (in this case) the judicial administrator appointed over the debtor was being warned that he may be held liable to contempt proceedings if he procures the judgment debtors to act in contravention of its terms.

Locke v Stuart & anor

Preparing cases on fraudulent insurance claims

http://www.bailii.org/cgibin/markup.cgi?doc=/ew/cases/EWHC/QB/2011/399.html&query=title+(+locke+and+stuart+)&method=boolean

The defendant insurers alleged (and proved) a substantial fraudulent conspiracy in this case, involving multiple staged road traffic accidents whereby the conspirators claimed for personal injury damages (sustained as either passengers or "innocent" drivers). The case accordingly involved a factual analysis by the judge, Mr Andrew Edis QC. However, he also warned that "insurers making allegations of the kind which I have found proved in this case must do so with care". In particular, their legal advisers must advance allegations only on proper grounds. In particular: "I consider it to be inappropriate for trial bundles to contain the names and personal details of people with the suggestion that they have been guilty of fraud unless there are proper grounds evidentially for that assertion". The case also relied on evidence obtained from Facebook. The judge noted that a large amount of time in the case had been taken up with arguments about the strengths and weaknesses of Facebook evidence and suggested a short document should have been drawn up summarising those arguments instead.

Other News

FSA sets out plans for new regulatory structure: It will be replaced in two years by the the Prudential Regulatory Authority and the Consumer Protection and Markets Authority: http://www.fsa.gov.uk/pubs/international/dceo_transition.pdf

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