UK: Insurance And Reinsurance Weekly Update - 13th November 2012

Last Updated: 15 November 2012
Article by Nigel Brook

Turville Heath v Chartis

Whether dispute fell within a dispute resolution clause and whether clause amounted to an arbitration agreement/court's inherent power to order a stay

An insurance policy contained the following clause: "Arbitration. If you and we fail to agree on the amount of loss, either party may...demand that each selects an independent appraiser...The independent appraiser will select an arbitrator within 15 days....The independent appraisers will then appraise the loss and submit any differences to the arbitrator. A decision...agreed to by the two appraisers, or either appraiser and the arbitrator, will be binding". When the insured commenced litigation, the insurer applied to court for a stay of those proceedings. Edwards-Stuart held as follows:

(a) The dispute between the parties did relate to quantum rather than liability and so fell within the terms of the clause. The insured had sought to argue that it was alleging breach of express and implied terms because the insurer had failed to indemnify it. The judge held that, in truth, the allegation was that the insurer had not adopted a proper approach to the assessment of the measure of indemnity under the policy (liability having been admitted). English law does not give an insured a separate entitlement to damages for an insurer's failure to pay, or to pay the correct amount under a policy.

(b) The clause did not cease to be a valid arbitration agreement just because it provided that a decision agreed by the two appraisers would be binding on the parties. If the parties agreed, there would be no dispute to put to the arbitrator. The parties could withdraw their dispute from the process at any time.

However, the judge went on to hold that the provision for a decision to be binding if it was made by "either appraiser and the arbitrator" prevented this clause from being a valid arbitration agreement: "A sole arbitrator must be able and competent to make his own independent decision on all the matters put before him". Here, the arbitrator could only make a binding decision if one of the appraisers agreed with him/her. Nor could it be said that the appraisers could become arbitrators when the situation so required. The clause did not expressly provide for that and, in any event, by the time the appraisers have identified the differences between them, they will have formed a conclusion on the value of the claim and so would no longer be independent.

(c) Accordingly, the insurer could not rely on section 9 of the Arbitration Act 1996 to obtain a stay. However, Edwards- Stuart J held that the court proceedings should be stayed pursuant to the inherent jurisdiction of the court under section 49 of the Senior Courts Act 1981. The machinery of the clause had not broken down and was not incapable of being operated. The process provided for by the clause should continue: "The strongest factors are that the parties entered into the arbitration clause process without protest and have invested considerable sums in that process....there is no question of any parallel proceedings in court concerning issues of liability".

Jolly v Harsco Infrastructure

Part 36 and whether court should order judgment

The claimant made a Part 36 offer to settle the issue of liability 99% in her favour. The defendant accepted the offer. The claimant then drafted an order seeking judgment to be entered in her favour and providing for the costs consequences set out in CPR r36.14 to apply (CPR r36.14 applies where a defendant fails to beat a claimant's offer). The defendant argued that since the claimant had not received judgment, the costs consequences set out in CPR r36.14 did not apply - instead the costs consequences set out in CPR r36.10 applied (this covers the effect of acceptance of a Part 36 offer). Cranston J agreed with the defendant. Part 36 is a self-contained code and "nothing in the self-contained code which is Part 36 provides for judgment to be entered in this situation". The defendant had not consented to judgment being entered and the judge had no power to enter judgment otherwise. Hence the issue of liability should be stayed upon the terms of the claimant's offer and the question of the costs relating to that issue (including the basis of assessment of those costs) should be postponed to be dealt with under CPR r36.10 or under the general discretion set out in CPR r44.3.

COMMENT: One interesting aspect of this case is that the judge was clearly prepared to accept that the offer in question was a valid Part 36 offer even though it provided for acceptance of 99% of the claim (although he did not expressly address this issue). There is prior caselaw to the effect that an offer must be a genuine attempt to settle in order to qualify as a Part 36 offer. For example in the case last year of AB v CD & Ors (see Weekly Update 12/11) Henderson J held that it was clear that a request to a defendant to submit to judgment for the entirety of the relief sought by the claimant cannot be an offer to settle within Part 36. He said that: "In my judgment, the offer must contain some genuine element of concession".

Capita Alternative v Drivers Jonas

Whether tax situation should be taken into account when assessing damages

The first instance decision in this case was reported in Weekly Update 33/11.The claimants alleged that they had invested in a shopping centre after receiving negligent advice from the defendant surveyors. Much of the case turned on its facts and the appeal also considered whether the judge had been correct in finding negligence. However, two points in the case are of more general interest:

(1) The Court of Appeal emphasised that a judge is never bound by expert evidence (even if that expert evidence is undisputed). A judge should have a reasoned basis for his decision but is not confined, for example, by quantum figures contended for by the experts.

(2) The judge had erred as a matter of law in failing to require the claimants to give credit for tax benefits which they had received for investing in the shopping centre. Although the investment had not been "tax driven", the incidence of taxation was relevant to the calculation of the claimants' damages. It did not follow that in every claim for damages the incidence of taxation should be taken into account (it is a matter of fact and degree) but in this case, tax considerations were "part and parcel" of the scheme and so it was wrong to ignore them.

JSC VTB Bank v Skurikhin

Enforcing a freezing injunction in a foreign country

The claimant had obtained a freezing order against the non-resident defendant and sought disclosure of further information from him, as well as permission to enforce the freezing injunction against assets owned by an English company (of which he was thought to be the ultimate beneficial owner) in Italy.

Gloster J recognised that the English court should be cautious in exercising its jurisdiction to grant relief under section 25 of the Civil Jurisdiction and Judgments Act 1982 where the relief has the potential for extra-territorial effect in the case of non-residents with assets abroad. There must be a "real connecting link between the subject matter of the measures sought and the territorial jurisdiction". However, in this case, she decided to exercise her discretion to make the orders sought.

The freezing order in this case restrained the defendant from dealing with his "interests" in the English company. Those interests had to be situated in England. Although the defendant's interests might be technically situate outside the jurisdiction in this case, the key point was that any dealing with those interests would take effect in the jurisdiction because that is where the company is registered.

In Dadourian v Simms (see Weekly Update 07/06) the Court of Appeal laid down guidelines governing the court's approach to an application to enforce a freezing injunction in another jurisdiction. Gloster J held that those guidelines had been met in this case and so the injunction could be enforced against the assets in Italy. In relation to guideline 3 (the interests of the parties must be balanced) she held that this had been met by her requirement that the claimant provide security for costs.

JSC BTA Bank v Ablyazov

Court of Appeal decides whether court had jurisdiction to order surrender to tipstaff

Weekly Update 09/12 reported a judge's decision to sentence the defendant, who was in contempt of court, to 22 months' imprisonment and to order him to surrender to the tipstaff. The Court of Appeal has now rejected an appeal from that decision.

It held that the length of the sentence was justified, notwithstanding that the maximum sentence was 2 years and there had not been a total failure of compliance with prior orders. The defendant's contempts had been "multiple, persistent and protracted" and included non-disclosure, lying in cross-examination and dealing with assets in breach of a freezing order (as well as the forging of documents).

The Court of Appeal also found that the court had had jurisdiction under section 37 of the Senior Courts Act 1981 to debar the defendant from defending the claims against him unless he surrenders to the tipstaff and makes proper disclosure of his assets. Rix LJ did not find such an order "particularly novel" either: orders for the surrender of passports are not unfamiliar even in the absence of contempt and "at any stage of the developing jurisprudence, it might have been said (and often was) that novelty was a bar to some particular order". However, Toulson LJ was concerned about the part of the order debarring the defendant from defending the claims if he fails to surrender. He said that since his non-surrender here would not prejudice the claimant in the prosecution of its claims, to debar him "would be a form of additional punishment for his contempt, which seems to me to be wrong in principle and not in accordance with the authorities cited by Rix LJ". Nevertheless, he recognised that the point was likely to be academic in this case and so he did not develop it at greater length.

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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