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

Last Updated: 15 April 2011
Article by Nigel Brook


West Tankers v Allianz

A case on whether a declaratory arbitral award can be enforced as a judgment (in order to gain primacy over an irreconcilable foreign judgment).

JSC BTA Bank v Solodchenko & Ors

A case on Norwich Pharmacal orders and the court's power to order cross-examination

Eagle v Redlime Ltd

A decision on whether a negligence action was time barred and the date when the claimant had knowledge of the damage

Other News

Lloyd's has issued a market bulletin on Claims Management Principles and Minimum Standards

Please note that there will be no weekly update for the next two weeks.

This Week's Caselaw

West Tankers v Allianz

Whether a declaratory arbitral award can be enforced as a judgment (in order to gain primacy over an irreconcilable foreign judgment)

Section 66 of the Arbitration Act 1966 provides that "(1) An Award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect". In this case, the parties had entered into a charterparty which provided for arbitration in London in the event of a dispute. Notwithstanding the arbitration clause, the defendants commenced proceedings in Italy. The ECJ ruled that the English courts had no power to grant an anti-suit injunction. The claimant began arbitration. The defendants took no part in the arbitration and the tribunal eventually made an award in the claimant's favour. Since the proceedings in Italy were still on-going, the claimant applied under section 66 and obtained leave from the English court to enforce the award as a judgment. In this way, the claimant hoped to obtain primacy over any eventual judgment in the defendant's favour in Italy, due to the application of Article 34(3) of Regulation 44/2001. This provides that a judgment will not be recognised if it is irreconcilable with an earlier judgment given in a dispute between the same parties in the Member State in which recognition is sought (here, England).

The award in favour of the claimant declared that it was under no liability to the defendant. The defendant sought to argue, on appeal, that section 66 does not apply to declaratory judgments. That argument was rejected by Field J. The purpose of section 66 "is to provide a means by which the victorious party in an arbitration can obtain the material benefit of the award in his favour other than by suing on it". Where there is no appreciable risk of the losing party obtaining an inconsistent judgment in a member state which he might try to enforce here, leave will not be granted. However, where, as here, the applicant is trying to establish the primacy of a declaratory award over an inconsistent judgment, the court will have jurisdiction to make a section 66 order because to do would be to make a positive contribution to the securing of the material benefit of the award.

The defendants had also sought to argue that any attempt to rely on Article 34 of the Regulation was doomed to fail because of the Court of Appeal decision in National Navigation v Endesa [2010] (where it was held that it would not be contrary to public policy to recognise a judgment even where an English court would have decided that the parties had agreed to refer the dispute to arbitration - see Weekly Update 48/09). Field J held that the claimant had satisfied the threshold requirement that it had a "real prospect" of establishing the primacy of the award over an inconsistent judgment. However, at this stage, the issue did not need to be finally determined because it was hypothetical: "hypothetical because the unsuccessful party to the arbitration will not have obtained an inconsistent judgment in a member state at the time the court is dealing with the s. 66 application".

COMMENT: This case suggests a possible practical solution may exist where a party, in breach of an arbitration agreement, commences proceedings in another Member State. If the other party commences arbitration and pushes for a declaratory award in its favour as quickly as possible, this case raises the possibility that the English courts might refuse to recognise any later irreconcilable judgment from the courts of the other Member State. It was unclear whether such a step was possible in light of the Court of Appeal's judgment in National Navigation v Endesa, so this case will give renewed encouragement to parties who feel they have been wronged because the other side has sought to "grab" jurisdiction in breach of an arbitration agreement. However, the issue was not finally decided in this case and it remains to be seen whether the English courts will refuse to recognise any eventual judgment in the defendant's favour from the Italian courts.

JSC BTA Bank v Solodchenko & Ors

Norwich Pharmacal orders and the court's power to order cross-examination

A Norwich Pharmacal Order ("NPO") is a common law right which requires a respondent who is "mixed-up" in wrong doing (whether innocently or not), so as to facilitate that wrongdoing, to provide "full information" on the alleged wrongful act. In this case, the defendant (before he became a party to the proceedings) was ordered to make disclosure pursuant to an NPO and the issue arose as to whether he should be ordered to attend for cross-examination.

It is well-established by caselaw that the court has jurisdiction to order cross-examination on an affidavit of assets ancillary to a freezing injunction, if it is just and convenient to do so. This is in order to ascertain whether the defendants has fully and properly complied with the disclosure obligations imposed on them by the freezing order. Similar considerations apply in relation to disclosure ordered against a non-party. On the facts of this case, Henderson J was "amply satisfied" that the defendant's existing disclosure was "seriously incomplete". However, the defendant had sought to argue that crossexamination should not be ordered because the claimant had not yet reviewed all the material in its possession.

Although the judge expressed surprise at the amount of time it was taking the claimant to review documentation, he said that "there are no positive grounds for supposing that the material taken from the storage unit will provide comprehensive answers to the questions in the disclosure order; it is a matter of urgency for the Bank to seek to recover its allegedly misappropriated assets; and in a major international fraud case of the present type it is in my judgment entirely reasonable for the Bank to seek to press ahead on several fronts simultaneously". However, the cross-examination must be confined to ensuring compliance with the disclosure order, and that it should not be permitted to become a "roving inquiry" into the general merits of the underlying action.

Eagle v Redlime Ltd

Whether negligence action was time barred and date when claimant had knowledge

of damage

Section 14A of the Limitation Act 1980 provides that an action for damages for negligence will be time barred either after 6 years from the date on which the cause of action accrued or 3 years from the date on which the claimant first had knowledge of the material facts about the damage and (inter alia) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence.

In this case, the claimant noticed cracking and knew that there had been subsidence in October 1996. He sought to argue, however, that it was only when he received an expert's report a month later that he had grounds for a reasonable belief that such cracking pointed towards a cause of action against the defendant. Eder J rejected that argument. Here, knowledge of subsidence and cracking had given rise to knowledge "about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment".

Although the claimant did not have knowledge about the full extent of the damage, or the precise cause of the subsidence, that did not matter. Nor was it necessary for the claimant to know for certain that the damage was attributable to, or caused by, the negligence of the defendant. Instead, it was enough that he "must know enough for it to be reasonable to begin to investigate further; and that there is a real possibility that the damage was caused by an act or omission by [the defendant]". Accordingly, the claim was time-barred.

Other News

Lloyd's has issued a market bulletin on Claims Management Principles and Minimum Standards. This requires, for example, having a well-documented claims philosophy, documentation of the handling of a claim and reserving in a consistent, timely and accurate manner. For subscription business, there should be an effective claims agreement process to protect the interests of followers:

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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