UK: Insurance And Reinsurance Weekly Update - 2 July 2013

Last Updated: 16 July 2013
Article by Nigel Brook

Welcome to the twenty-fourth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2013.

These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.

This week's caselaw

  • Aspen Insurance UK v Adana Construction
    A Clyde & Co case in which the court decided whether a loss fell within the scope of a policy and the relevance of market practice.
  • Abela & Ors v Baadarani
    The Supreme Court decides whether permission to serve out of the jurisdiction by an alternative method should have been given.
  • Antonio Gramsci Shipping v Lembergs
    A Clyde & Co case on whether the corporate veil can be pierced to show consent to a jurisdiction clause.
  • Kyla Shipping v Bunge
    A case on whether the Court of Appeal should set aside a High Court judge's refusal to allow an appeal.
  • The Northampton Regional Livestock Centre Co v Cowling & Anor
    Court decides a security for costs application.

Aspen Insurance UK v Adana Construction

Whether loss fell within scope of policy/relevance of market practice

Clyde & Co (Victor Rae-Reeves and Richard Butt) acted in this case

Insurers sought a declaration of non-liability from the court. The policy in question included cover for both public liability (which excluded liability "caused by any product") and product liability. The insured sought cover for any liability which it might have arising out of the collapse of a tower crane at a construction site which caused personal injuries and property damage. The insurers argued that the crane base in question was a "product" as defined in the policy, and hence was not covered under the public liability section. Furthermore, it was argued, the claim did not fall to be covered under the product liability section of the policy because the parties had agreed that insurers would have no liability "arising in connection with the failure of any Product to fulfil its intended function".

Much of the case turns on its particular facts and the particular wording of the policy, but there are some general points worth noting:

  1. The court should generally be cautious about granting a declaration of non-liability before the insured's liability has been established and before a trial in the action against the insured has taken place. Mackie HHJ referred to the Court of Appeal decision in Horbury Building Systems v Hampden Insurance [2004] (where it was the insured seeking a declaration from the court).
  2. The insurers had adduced expert evidence on the market's conventional understanding as to the division between public liability and product liability (with the latter cover applying only once the works have been handed over). The judge held that such evidence was irrelevant and that "everything depended on the terms of the policy" in this case.
  3. Although the insurer's view about how the public liability and product liability sections of the policy worked was "legitimate", he held that the policy did not reflect that view and that such a view would result in a "gap in the cover which reasonable business people would expect to have taken out". The judge appears to have been influenced, to some degree, by the fact the insured is a "medium sized private family company".
  4. The judge did not decide the correct test for how an insurer should act when being asked to consent to the insured incurring defence costs (the parties had disagreed on the nature of this test).

COMMENT: Whilst the judge found that evidence of market understanding was irrelevant in the context of this case, there is prior caselaw and textbook commentary supporting the view that market understanding at the time the policy is issued can be material.

The case is being appealed.

Abela & Ors v Baadarani

Supreme Court decides whether permission to serve out of the jurisdiction by alternative method should have been given

The first instance and Court of Appeal decisions in this case were reported in Weekly Updates 05/11 and 46/11. The claimant applied for, and obtained, an order under CPR r6.15(2) providing that steps already taken to bring the claim form to the attention of the defendant by an alternative method amounted to good service. The claimant had sought to effect service in Lebanon, which is not a party to any bilateral treaty with the UK or the Hague Service Convention. The evidence showed that it was likely to take several months to serve via consular/judicial channels and so the claimant had instead delivered the claim form (within 6 months of issue) to the business address of the defendant's lawyer in Beirut. This did not amount to good service on the defendant under Lebanese law.

Evans-Lombe J held that this was an appropriate case for the exercise of his discretion under CPR r6.15(2), but the appeal from that decision was allowed. The Supreme Court has now unanimously held as follows:

  1. A concession by the defendant that CPR r6.15(2) applied to service out, as well as service within, the jurisdiction was correctly made (notwithstanding that the rule appears in the part of the CPR dealing with service within the jurisdiction).
  2. CPR r6.15(2) authorises service where a method is not otherwise permitted. Accordingly, it only applies if none of the other methods provided in the CPR (including a service by a method permitted by local law) has been successfully adopted. It therefore applied in this case. The only bar to the exercise of the court's discretion is if the method used is actually contrary to local law (which was not the case here).
  3. The issue on appeal here was whether the judge had been entitled to hold that there was "a good reason" to exercise his discretion. The Court of Appeal had been wrong to add a gloss to this test by saying that there will only be a good reason in exceptional circumstances. In cases not involving a bilateral service treaty or the Hague Convention (and where service can take a very long period of up to a year), Lord Clarke suggested that orders permitting alternative service "are not unusual".
  4. Although the fact that the claim form has been brought to the attention of the defendant cannot constitute a good reason in itself, it will be a "critical factor". The fact that the defendant here had refused to cooperate was also highly relevant (even though a defendant is under no duty to disclose his address). The Supreme Court concluded that the judge had been entitled to make the order he did: "critical points were that the documents were delivered within the six months' validity of the claim form and brought to the respondent's attention and that service via diplomatic channels had proved impracticable". Events before the issue of the claim form (eg delay by the claimant) were not relevant.
  5. Finally, Lord Sumption said it was "no longer a realistic view of the situation" to describe service out of the jurisdiction as an "exorbitant" jurisdiction and "it should no longer be necessary to resort to the kind of muscular presumptions against service out which are implicit in adjectives like "exorbitant". The decision is generally a pragmatic one in the interests of the efficient conduct of litigation in an appropriate forum".

COMMENT: This Supreme Court decision brings some welcome clarity to various service out issues (for example, whether CPR r6.15 applies to service out of the jurisdiction and whether a method which is not valid under local law (but not expressly prohibited either) can be ordered under this rule). However, Lord Clarke did appear to suggest that it may be less easy to obtain an order under CPR r6.15 where the country where the claim form is to be served is a signatory to a service treaty/convention to which the UK is also a signatory. He referred to the case of Cecil v Bayat (see Weekly Update 08/11) in which the Court of Appeal held that "service on a party to the Hague Convention by an alternative method under CPR 6.15 should be regarded as exceptional, to be permitted in special circumstances only". However, it would appear that Lord Sumption (with whom Lords Neuberger, Reed and Carnwath agreed) was of the opinion that an order under CPR r6.15 should not be seen as exceptional even where there is a relevant treaty/convention.

In any event, claimants can take comfort from the fact that the English courts (as evidenced in this case and several others in recent years) are apparently willing to assist them where service out by the methods specified in the CPR is likely to be (or has proved) difficult for reasons beyond their control, especially where a defendant has not been cooperative.

Antonio Gramsci Shipping v Lembergs

Whether corporate veil can be pierced to show consent to a jurisdiction clause

Clyde & Co (Edward Mills-Webb and Chris Moxon) acted in this case.

Article 23 of Regulation 44/2001 provides that, where the parties (one or more of whom is domiciled in the EU) agree that the courts of a Member State shall have jurisdiction to hear a dispute, those courts will have exclusive jurisdiction. The issue in this case was whether the corporate veil should be pierced so that an individual who had not entered into a contract containing a jurisdiction clause could still be bound by it in certain circumstances.

At first instance in this case, the claimant had shown a good arguable case that the defendant was the beneficial owner and controller of a company which had been incorporated as a device to conceal wrongdoing. That company had entered into a contract with the claimant which contained an English jurisdiction clause. The claimant sought to rely on EU jurisprudence and policy grounds to support an argument that the defendant should be treated as a party to the contract.

That argument was rejected by the judge. He held that EU law leaves the regulation of when the veil can be pierced to national law.

In VTB Capital v Nutritek (see Weekly Update 05/13), the Supreme Court had refused to pierce the corporate veil as "it would lead to the person controlling the company being held liable as if he had been a co-contracting party with the company concerned to a contract where the company was a party and he was not" and it was held that there was no prior caselaw to support such an extension of the law.

Applying that principle to this case, the Court of Appeal held that the defendant was not bound by the jurisdiction clause.

Kyla Shipping v Bunge

Whether Court of Appeal should set aside High Court judge's refusal to allow an appeal

The underlying dispute between the parties was whether the charterparty which they had entered into was frustrated. The charterparty had contained a continuing warranty that the owners would maintain insurance at a stipulated level. When the ship was damaged, the owners argued that the charterparty was frustrated because it would cost more to repair the vessel than it was worth. The charterers sought to argue that the owners were obliged to repair the vessel using the insurance proceeds. At arbitration, it was held that the contract was frustrated. Hamblen J gave permission to appeal on a point of law under section 69 of the Arbitration Act 1996. That appeal was allowed by Flaux J who held that the contract was not frustrated. Flaux J also refused permission to appeal to the Court of Appeal.

The owners sought to rely on the Court of Appeal's residual jurisdiction to set aside a refusal of permission to appeal. They therefore needed to demonstrate that the decision to refuse permission had come about as a result of "unfair or improper process such that the decision to refuse permission cannot be categorised as a decision at all". Longmore LJ described this as an "extraordinarily high hurdle to surmount". There is no prior caselaw in which the residual jurisdiction has been exercised.

The Court of Appeal refused to exercise the residual jurisdiction in this case too. The arguments raised by the owners were, in essence, a criticism of the judge's reasons and not of the decision-making process.

The Northampton Regional Livestock Centre Co v Cowling & Anor

Security for costs application

The claimant appealed against an order that it give security for costs in the amount of GPB 240,000. Some of the grounds of the appeal were as follows:

  1. The Deputy Master's finding that the action "certainly looks as though it is more likely than not to succeed" should in itself have led to a dismissal of the application for security for costs. Stewart J rejected that argument. In Al-Koronky v Time Life (see Weekly Update 22/06) it was held that security for costs should not be ordered where a claimant "appears highly likely to succeed at trial". That test had not been satisfied here.
  2. The Deputy Master had been wrong to take account of the fact that the claimant had not applied for summary judgment. That argument was rejected - this had just been a reflection on the fact that he could not say more than that the claimant was more likely to succeed than not.
  3. The Deputy Master had held that the claimant could not prove the claim would be unfairly stifled. Stewart J agreed with commentary in the White Book that in considering whether a claim might be unfairly stifled, the court should consider not just whether a claimant can raise security out of its own resources, but also whether it could raise the amount needed from outside sources (eg directors or shareholders). The burden lies on the claimant to prove that alternative funding would not be available.
  4. The Deputy Master did not take into account the defendants' liability insurance. The judge was not persuaded that this was a material point (and in any event, there were "question marks" over the insurance).

The appeal was dismissed.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nigel Brook
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.