UK: Weekly Update: A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law - 15/11

Last Updated: 5 May 2011
Article by Nigel Brook

THIS WEEK'S CASELAW

Baker v Quantum Clothing

Supreme Court allows employers' appeal in hearing loss case - of possible interest to employers' liability insurers

http://www.bailii.org/uk/cases/UKSC/2011/17.html

This appeal concerns the liability of employers in the knitting industry of Derbyshire and Nottinghamshire for hearing loss suffered by employees before the Noise at Work Regulations came into force in 1990. Although one of the issues in the case concerned the interpretation of a statutory provision, the case also examined whether the employers were liable under common law in negligence, and so that aspect will be of general interest to employers and their insurers.

At first instance, Inglis HHJ found that the employers had not committed any breach of common law (or statutory duty). On appeal, the Court of Appeal found that there had been a breach of statutory duty and (although not necessary to do so) it also found that the employers were liable from January 1988 (when the terms of a draft EU Directive came to be generally known) onwards but that two employers had greater than average knowledge and so were liable from an earlier date.

In a 3:2 ruling, the Supreme Court has allowed the appeal from the Court of Appeal's decision. Lord Mance gave the leading judgment and he held that an earlier 1972 Code of Practice had remained a generally acceptable standard which a reasonable and prudent employer could rely upon until the late 1980's.

Lord Mance also rejected the argument that those employers who had focused more closely on the potential risk and had displayed "greater than average social awareness" should be treated differently from ordinary, reasonable employers. Thus, when Mustill J had talked of "changes in social awareness" in Thompson v Smiths Shiprepairers [1984]: "he was referring to changes leading to a general raising of the standard which average employers were expected to observe, not of individual employers spear-heading such changes by forming the view that the standard should be raised". However, there was no majority support for that view and so the Supreme Court held that the two employers should have taken further steps from an earlier date than 1988. This raises the paradox, noted by Lord Mance, that "those who have a safety department and medical officers and take noise more seriously than the ordinary reasonable employer are liable, while others are not".

In the judgment at first instance, Inglis HHJ had allowed a further 2 year period post January 1988 for introducing protective measures. The Court of Appeal disagreed and instead allowed a period of only 6 to 9 months. The Supreme Court has now found that generally the Court of Appeal had been unjustified in interfering with the judge's conclusion. However, in relation to one employer (who had already been contemplating changes as at January 1988), there was said to be force in the view that 9 months was long enough to perfect such changes.

Yeganeh v Zurich Plc

Insured wins appeal against finding of fraudulent claim

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2011/398.html&query=title+(+yeganeh+)&method=boolean

Weekly Update 20/10 reported the first instance decision in this case in which the judge found that there was no direct evidence of arson but that the insured had made a dishonest claim for contents under his household insurance policy. The insured appealed against that decision and the Court of Appeal has now allowed the appeal and remitted the matter for re-hearing. The Court of Appeal gave two reasons for allowing the appeal:

  1. It was implicit in the insurer's case that if the insured had made a false claim, his girlfriend had been complicit in the deception, since she had provided a witness statement supporting his case. Although the judge had had doubts about the general honesty of the insured, there had been no finding as to whether or not he believed his girlfriend or found her to be equally dishonest. The judge had therefore failed to make a crucial finding of fact.
  2. The judge had also erred in accepting a late suggestion that items had been planted in the property. The experts had not been asked to investigate this aspect of the insurer's case and further analysis was required.

CMA-CGM Marseille v Petro Broker

Whether party entitled to return of its payment into court

http://www.bailii.org/ew/cases/EWCA/Civ/2011/461.html

The appellant obtained an arbitration award in its favour. The respondent obtained an injunction (described as a freezing order) preventing the appellant from enforcing the award. However, the injunction only came into effect after the respondent had paid into court the amount of the arbitration award (US$4.5m).

The respondent subsequently decided that it did not wish to maintain the injunction. When seeking its withdrawal, the respondent also applied for a return of the sums paid into court. Hamblen J granted that application, having taken the view that the payment into court had been the "quid pro quo" for the respondent getting the injunction and so if the injunction was withdrawn "it was appropriate to go back to square one" and to return the money to the respondent. The appellant appealed against that order.

The Court of Appeal allowed the appeal, finding as follows:

  1. The court did have jurisdiction to grant the injunction under section 44(5) of the Arbitration Act 1996, because the arbitrators had no power to grant it. The Court of Appeal doubted, in any event, that if the court had not had jurisdiction that would automatically mean that the money paid in as a condition of its making should be returned.
  2. Although the rationale for the payment into court ended when the injunction was withdrawn, that was not conclusive of the question whether the money should be returned to the respondent.
  3. CPR r3.1 para 6A provides that: "Where a party pays money into court following an order under paragraph (3) or (5), the money shall be security for any sum payable by that party to any other party in the proceedings". It was held that that indicates that "the predisposition of the court ought to be that the money should be available as a secured fund against which one party to litigation can enforce against the other payment of such sums as may become due in connection with the litigation". Having paid into court the amount which was "indisputably" due to the appellant, the appellant should be allowed to enforce against it. Although there may be cases where it is necessary to consider the competing claims of other creditors, no such consideration applied here.

Rotenberg v Sucafina

Status of interim appeal awards and application under section 79 of the Arbitration Act 1996

http://www.bailii.org/ew/cases/EWHC/Comm/2011/901.html

Two issues arose in this case:

  1. The status of "interim" appeal awards. Under the arbitration rules of the Coffee Trade Federation Ltd ("CTF"), a board of appeal had the power to make an interim award following an appeal (Rule 48). Eder J said that it was ambiguous whether "interim award" was meant to cover both partial and provisional awards. Section 47 of the Arbitration Act 1996 allows the tribunal to make an award which relates to part only of the claim (ie a partial award) and section 39 allows the tribunal to order on a provisional basis any relief which it would have power to grant in a final award (ie it is not final).

    The issue in this case was whether the "interim" appeal award was binding or not. Eder J held that it was: "it seems to me that the much better construction of Rule 48 is one which gives effect to (or at least is consistent with) the general desirability of an arbitral tribunal having a power to make a partial award which is final and binding; and that, on this basis, Rule 48 should be read as including a power to make such a partial award".
  2. An application under section 79 of the 1996 Act (which gives the court a power to extend any time limit relating to arbitral proceedings). The claimant applied for an extension of time to take up the appeal award. Section 79 provides (inter alia) that the court should not exercise its power if a "substantial injustice" would be done. Eder J confirmed that this is a stringent hurdle to overcome.

    On the evidence, the claimant (who had been advised by London solicitors), was aware of the serious consequences of not taking up the award on time. Furthermore: (1) the deadline was clear; (2) the arbitral process had been in existence for many years; (3) the defendant had not contributed to the claimant's failure to comply with the deadline; (4) the claimant had had sufficient funds to pay the CTF; and (5) the claimant's explanation for his delay was vague. The application under section 79 was therefore refused.

Dubai Islamic Bank v PSI

Whether commencement of earlier proceedings overseas prevented claimant from relying on an exclusive jurisdiction clause

http://www.bailii.org/ew/cases/EWHC/Comm/2011/1019.html

The agreement entered into between the parties contained an exclusive jurisdiction clause in favour of the English courts. One party (the bank) commenced proceedings in Bahrain against the participants in an alleged fraud. It subsequently commenced proceedings against those parties in England. They sought to argue that, in light of the Bahraini claim brought by the bank, England was not the proper forum and the exclusive jurisdiction agreement was no longer of any effect because the bank was in repudiatory breach of that agreement. Neither party was able to rely on caselaw authority on the repudiation of a jurisdiction clause but it was agreed that the normal principles applicable to repudiation of an arbitration clause would apply. Beatson J noted that repudiation is something which is "not lightly to be inferred" (see Lloyd J in The Mercanaut [1980) and, where it is to be inferred by conduct, the conduct must be clear and unequivocal.

Beatson J held that there had been no repudiatory breach by the bank. It had not taken earlier steps in England because it had concentrated on locating assets and recovering them. The bank had taken Bahraini legal advice that the only quick way to freeze assets would be to institute proceedings (notwithstanding a provision of Bahraini civil procedural law that it is not necessary to commence substantive proceedings in order to obtain an attachment order).

Had there been a repudiatory breach, Beatson J said that (but for the way the defendants had pleaded their case in Bahrain) there had been "considerable force" in the defendant's argument that they had accepted the breach. In particular, a failure by the defendants to challenge the jurisdiction of the Bahraini court and active participation in those proceedings had demonstrated that they accepted that the jurisdiction agreement was at an end.

The judge also declined to order a stay on discretionary grounds. On the facts, a stay would not ensure that there was no multiplicity of proceedings.

Bond v Dunster Properties

Effect of delay in handing down judgment

http://www.bailii.org/ew/cases/EWCA/Civ/2011/455.html

The judge at first instance did not hand down judgment in this case until some 22 months after the conclusion of the hearing. Such a delay was described by the Court of Appeal as "lamentable and unacceptable" and as reflecting adversely on the reputation and credibility of the civil justice system as a whole. Although there is no statutory rule which provides that a judgment must be delivered within a specified time, it must be delivered within a reasonable time. Any delay should "as a matter of courtesy" be explained by letter or email to the parties. The issue in this case, though, was the effect that the delay had on an appeal from the decision.

The Court of Appeal held that, when a party appeals against a judge's findings of fact, those findings are not automatically to be set aside because the judgment was seriously delayed. Instead, the appeal court will apply an additional test, namely: "If the reviewing court finds that the judge's recollection of the evidence is at fault on any material point, then (unless the error could not be due to the delay in the delivery of judgment) it will order a retrial if, having regard to the diminished importance in those circumstances of the special advantage of the trial judge in the interpretation of evidence, it cannot be satisfied that the judge came to the right conclusion".

In this case, the Court of Appeal held that the delay in delivering judgment did not render the judge's conclusions on the issues under appeal unsafe so as to make it just to order a retrial. Accordingly, the appeal was dismissed.

North Shore Ventures v Anstead

Whether hearing was in private and whether a non-party had a right to a transcript

http://www.bailii.org/ew/cases/EWHC/Ch/2011/910.html

The defendants applied for a declaration that certain cross-examination hearings were in private (and hence a non-party had no right to a transcript) and an order that the claimant should not disclose the transcripts of those hearings to any third party.

Floyd J found as follows:

  1. PD 39 para 1.5(5) provides that a hearing pursuant to an order to attend court for questioning "shall in the first instance be listed by the court as hearings in private under rule 39.2(3)(c)". CPR r39.2(3)(c) provides that a hearing may be in private if it involves confidential information (including information relating to personal financial matters). The difficulty in this case was that the hearings in question were not in fact listed in private, even though they did fall within para 1.5(5).

    The judge rejected an argument by the defendants that the hearings had a "private character" which remained even if the hearings were not actually listed as hearings in private: "In my judgment, paragraph 1.5 of the Practice Direction does not deem a hearing to be in private even when it is not so listed. The correct view is that where proceedings are not listed as being in private, contrary to the terms of the Practice Direction, the general rule applies and the proceedings are in public. The public are entitled to assume, when proceedings are not listed as private, and when no sign appears on the court door to the effect that they are not to be admitted, that the proceedings are open to the public. It is the duty of parties and their advisors, if there are no such indications and they wish proceedings to be private, to make an application for the proceedings to be conducted in private". Thus, due to the error in listing, the hearings in question were not private.
  2. CPR r34.12 provides that the product of an examination as to assets cannot be used for any purpose other than the purpose of the proceedings in which the order was made. However, there is no such corresponding provision in CPR r31.22, where a document is disclosed because it has been read to, or by, the court or referred to at a hearing in public. Floyd J held that the net effect, though, is that "although a non-party may obtain a copy of the transcript of an examination as to assets conducted in public, it may only be used by the third party for the purposes of proceedings to which, by definition, he is not a party". He agreed to mark the file with an indication that copies of the transcript could only be used for the purposes of the present proceedings.

Europeans Ltd v Revenue & Customs

Third party costs orders and delay in notifying third party

http://www.bailii.org/ew/cases/EWHC/Ch/2011/948.html

HMRC applied for a third party costs order against the sole shareholder and managing director of a company which had brought a claim for input tax. Proudman J agreed with HMRC that this was an exceptional case and therefore it was appropriate to make the director primarily liable for the costs of the company. He had treated the company as his "cypher" and its business was carried out for his personal benefit. However, he sought to rely on the fact that HMRC had not warned him that it intended to pursue him personally until after the company's claim had failed and the company had been liquidated.

Proudman J noted the requirement to warn the third party at the earliest opportunity (see Symphony Group v Hodgson [1994]). However, she stated that: "failure to give an early warning is not a stand-alone requirement which will operate conclusively against the applicant. It is no more than a material consideration, albeit a highly material consideration. It is only one of the factors which the court must take into account in the exercise of its discretion in considering the overall justice of the case". On the facts of this case (for example, the fact that the director would most likely have continued to act in the same way even if a warning had been given), the judge concluded that the absence of an early warning was not sufficient to deny HMRC a third party costs order.

City of Nottingham Fire Authority v Gladman

Court's approach to application to adduce evidence late

http://www.bailii.org/ew/cases/EWHC/Ch/2011/1918.html

During the course of the trial in this case, the claimant sought to rely on further evidence. It accepted that the evidence was late (and did not provide adequate reasons for not calling the witness beforehand), but argued that if the evidence was not allowed into trial, it might suffer a serious injustice. However, the defendant also argued that it would be prejudiced by this late delivery. Smith J therefore considered what approach the court should adopt in relation to late amendments. The Court of Appeal recently considered the same issue in Swain-Masonn & Ors v Mills & Reeves (see Weekly Update 03/11) and held that the test laid down in Worldwide Corporation Ltd v GPT (1998) (ie that costs may not be an adequate remedy for a party being "mucked about") was to be preferred to the test in Cobbold v Greenwich (1999) (ie that amendments should generally be allowed provided that any prejudice to the other side can be compensated for in costs).

In this case, Smith J disagreed with the comment by Lloyd LJ in Swain-Masonn that the courts are less ready to allow very late amendments than used to be the case and that a heavy onus lies on a party seeking to make a very late amendment to justify it. Smith J said that to give one factor (the lateness of the sought amendment) a higher status "creates difficulties". A judge should instead consider all factors and "come to a conclusion weighing all factors but not giving one (lateness) a greater significance". He also said that the Court of Appeal in Swain-Masonn had not held that Cobbold was wrongly decided. He concluded that he ought to follow the Cobbold decision in preference to Worldwide Corporation. If there is no prejudice "it is difficult to see how an application to amend late should be disallowed because of the super imposition of a higher onus to justify". He concluded that, in this case, it was right to allow the evidence to be adduced

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