UK: Insurance And Reinsurance - 8 March, 2013

Last Updated: 11 March 2013
Article by Nigel Brook

FSA v Sinaloa Gold Plc & Ors

Supreme Court rules on whether the FSA should be required to give the normal cross-undertaking to third parties on a freezing order application

The earlier decisions in this case have been reported in Weekly Updates 18/11 and 38/11. Applicants for a freezing order usually have to give a standard form of undertaking to pay any damages sustained by either the respondent to the application or any third party if they suffer loss as a consequence of the order (and it subsequently transpires that the grant of the order was not justified). In the case of third parties, though, they are protected whether or not the grant of the order was justified. In this case, the FSA argued that it should not be compelled to give the standard undertaking, on the basis that it should not be liable in damages for anything done or omitted in the discharge of its functions. At first instance the judge held that a law enforcement body should give the usual third party undertaking as to damages, but this was reversed by the Court of Appeal. The Supreme Court has now rejected an appeal from that decision.

Although the Supreme Court was somewhat critical of the earlier House of Lords decision in F Hoffmann-La Roche v Secretary of State for Trade and Industry [1975], it upheld the general distinction in that case drawn between private litigation and public law enforcement. This is because: “a public authority is seeking to enforce the law in the interests of the public generally, often in pursuance of a public duty to do so, and enjoys only the resources which have been assigned to it for its functions. Other than in cases of misfeasance in public office remains the case that English law does not confer a general remedy for loss suffered by administrative law action”. Accordingly, the FSA should not be required to give a cross-undertaking as a matter of course or without considering what is fair in the particular circumstances of a case. Nor could any distinction be drawn with Hoffmann-La Roche on the basis that that case concerned an undertaking to the respondent and not a third party.

Navig8 PTE v Al Riyadh

Jurisdiction arguments in relation to applications for anti-suit injunction and negative declarations

A dispute arose between a Jordanian company and a Singaporean company. The Jordanian company commenced proceedings in Jordan against (inter alia) the Singaporean company. Some 3 months later, the Singaporean company issued proceedings in England and sought an anti-suit injunction restraining the Jordanian proceedings, as well as negative declarations that it was not a party to certain contracts and was not liable to the Jordanian company. Smith J considered both applications in this case:

(1) The Anti-Suit Injunction: The judge accepted that the Singaporean company did not have a good arguable claim that this was a claim covered by the grounds for granting permission for service out. Although the contract in question was probably governed by English law, the claim for an injunction, based on the ground that the Jordanian proceedings were vexatious or oppressive, did not fall within PD 6B para 3.1(6)(c) (“a claim is made in respect of a contract..governed by English law”). Here, no contractual right was asserted and no right resulting from any (actual or threatened) non-performance of a contract is asserted, and so the claim was not “in respect of” the contract. Nor could it be said that the Jordanian proceedings were vexatious or oppressive in this case.

Smith J also rejected an argument that if the claim was to proceed in Jordan, the Singaporean company would lose its right to rely on an exclusion provision in the relevant contract (pursuant to the Contracts (Rights of Third Parties) Act 1999, which allows a third party to enforce a contractual term that purports to confer a benefit on him). It was not that the Jordanian courts would not recognise the 1999 Act - instead they might just hold that the relationship is governed by Jordanian law. It is not possible to argue that a choice of English law allows a party to restrain proceedings in any jurisdiction that does not give effect to English law rights (unless that jurisdiction recognises similar rights under its own law). Accordingly, the Singaporean company should not be permitted to serve out of the jurisdiction a claim for an injunction.

2) The Negative Declarations: Although the parties chose the governing law to be English law, no one connected with the dispute was English and the dispute itself concerned a shipment of cargo to Jordan (which is where the key witnesses are based). Furthermore, the Jordanian proceedings were relatively advanced. Nevertheless, Smith J held that the choice of English law outweighed other considerations and established that England was the proper place in which to bring the declaration claims. This was in part due to the differences between English and Jordanian law on legal issues which were likely to be of importance in the case. Smith J also accepted that it might subsequently be possible for the Singaporean company to obtain an anti-suit injunction which was ancillary to the declaration (even though this would, in effect, allow the Singaporean company to circumvent the fact that it had no proper basis for obtaining permission to serve a claim for an anti-suit injunction out of the jurisdiction - see (1) above).

Ariadne Capital v Serageldin

Beating a Part 36 offer in a non-money claim/ costs where case settles

The parties to proceedings reached a settlement (resulting in a consent order) but were unable to reach agreement on costs. The court was therefore asked to decide costs. The judge, Harvey QC, noted prior caselaw to the effect that if the parties settle without resolving the issue of costs, the “fall back” is for the court to make no order to costs because it cannot usually be said with certainty which side is the “winning” party. In this case, the judge found that the claimant was clearly the winning party on some issues (and would be entitled to its costs on those issues) but otherwise there would be no order as to costs.

The judge also considered the effect of a Part 36 offer made by the claimant prior to the consent order. In Carver v BAA (see Weekly Update 17/08), the Court of Appeal held that all the circumstances of a case should be taken into account when deciding whether a Part 36 offer has been beaten. That decision has now been reversed by the introduction of CPR r36.14(1A), but only in relation to money claims. Where, as here, there is a non-money claim, Carver will still apply. The judge held that, taking into account all the circumstances, the claimant’s offer had not been beaten - for example, the schedule to the order had obliged delivery up of all documents excluding those reasonably understood to contain privileged material, whereas the Part 36 offer had not contained any such exclusion. Furthermore, the consent order made no provision for the claimant to have its costs of the action, whereas the Part 36 offer proposed that the defendant should be liable for the claimant’s costs pursuant to CPR r36.10.

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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