UK: Insurance And Reinsurance Weekly Update - 9 July 2013

Last Updated: 17 July 2013
Article by Nigel Brook

Welcome to the twenty-fifth 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

Westshield Civil Engineering v Buckingham Group
A decision on when civil proceedings are "commenced" for the purpose of an ADR clause and tips on filling in the claim form.

A judge summarises freezing injunction principles.

Aeroflot Russian Airlines v Berezovsky
The Court of Appeal decides the proper approach to whether the parties have agreed a jurisdiction clause and an application to stay under the Arbitration Act.

Westshield Civil Engineering v Buckingham Group

When are civil proceedings "commenced" for purpose of an ADR clause/filling in the claim form

The alternative dispute resolution clause in issue in this case provided that either party could refer a dispute to legal proceedings if dissatisfied with the adjudicator's decision and that "if no such proceedings are commenced within 28 days then the Adjudicator's Decision shall be final and binding on the parties". Two issues arose:

(1) Did the clause require the claim form to be issued or served in order to "commence" proceedings? Akenhead J held there could be no doubt that under the CPR legal proceedings are commenced when the claim form is issued and "the issue is at least usually signified by the impressing of the court stamp with a date on and usually follows the payment of the requisite fee".

Nor was there any requirement to read "commenced" as meaning "served" by giving the clause a commercial or purposive interpretation. The word "commenced" is a "relatively simple English word" and since the law governing the contract was English law, the parties must be taken to have known the position under that law. Very clear and express wording would have been needed to equate commencement with service of the claim form. Nor was it unfair that a party could "conceal" the fact that it had prevented a decision becoming binding by issuing a claim form but not serving it for up to 4 months.

(2) It was accepted by the judge that in the claim form, the "Brief details of claim" section had been concise. However, this was still sufficient to "refer the dispute proceedings". CPR r16.2 is not particularly prescriptive in requiring a claimant to contain a "concise statement of the nature of the claim". The brief details provided in the claim form here complied with that requirement (and the general relief which was claimed ("declaratory" and "equitable"), together with the "catch-all" of "such further or other relief as the Court thinks fit" was sufficient to specify the remedy which the claimant was seeking).

COMMENT: In Elvanite Full Circle v AMEC (see Weekly Update 21/13, the court was required to interpret the meaning of the "filing" of a claim. That case and this one therefore demonstrate the importance of the careful drafting of dispute resolution clauses to ensure they meet the intention of the parties.)


Summary of freezing injunction principles

This case involved an application for a freezing injunction in divorce proceedings. Nevertheless, Mostyn J made some general comments about freezing orders (on the basis that the principles governing an application for a freezing order under section 37 of the Senior Courts Act 1981 do not differ materially from those for an application for a freezing order under the Matrimonial Causes Act 1973). Some of the observations he made were as follows:

(1) Proof of intention by the respondent is required under the 1981 Act. An unjustified dealing with assets will supply prima facie proof of an intention to dissipate: "In my opinion if someone is doing something unjustified with his assets then it surely follows as night follows day that he must (in a non-innocent way) be intending to do so". However, holding assets in off-shore structures will not, of itself, amount to an unjustified dealing of assets.

(2) An applicant must adduce evidence of objective facts and not "mere expressions of anxiety or suspicion". It is also vitally important that an affidavit indicate the source for any matters of information and belief, especially if the application is made ex parte.

(3) Reference was made to the case of O'Farrell v O'Farrell (see Weekly Update 04/12) in which Tugendhat J said that he was "shocked at the volume of spurious ex parte applications that are made in the Queens Bench Division". Except in cases where it is essential that the respondent not be informed of the application, the applicant should notify the respondent, at least informally.

Aeroflot Russian Airlines v Berezovsky

Court of Appeal decides the proper approach to whether the parties have agreed a jurisdiction clause/application to stay under the Arbitration Act

The Court of Appeal decided a number of issues in this case, including the following:

(1) Article 23 of the new Lugano Convention provides that if the parties have agreed a jurisdiction clause, the courts of the country which is chosen shall have jurisdiction (Article 23 of Regulation 44/2001 contains similar wording). Here, the claimant argued that the contract containing the relevant jurisdiction clause was void. The Court of Appeal held that:

(a) As a matter of English law (since the courts here were deciding the issue), the burden of proof was on the defendant to prove the validity of the jurisdiction clause;

(b) The standard of proof which the defendant must demonstrate was "a good arguable case". In Bols Distilleries v Superior Yacht [2007], this was said to mean a party had "much the better argument" than the other side. The Court of Appeal said that the only point of "much" in this context was to emphasise that if the two arguments are equal, the test would not be satisfied.

(c) The validity of the jurisdiction clause must be determined by an autonomous European law regime (ie that laid down by the Court of Justice of the EU - formerly the ECJ) and not the putative applicable law of the contract in which the jurisdiction clause is found (here, Swiss law).

The Court of Appeal found that the doctrine of separability was uncontroversial under EU law. Here, it had not been shown that the jurisdiction clause itself had been entered into as a result of bad faith by the defendant and hence the defendant could rely on this clause.

(2) Section 9(4) of the Arbitration Act 1996 provides that the court shall grant a stay of legal proceedings "unless satisfied that the arbitration agreement is null and void..." One contract entered into by another defendant with the claimant was said to contain an arbitration agreement (the applicable law of which was Swiss law). The Court of Appeal held that, where a non-English law arbitration agreement is said to be null and void, the English court must find out what the applicable law says and then "decide the effect of that applicable law, by reference to the relevant facts and the English law concepts of "null and void"".

Recently, in Golden Ocean v Humpuss Intermoda (see Weekly Update 19/13), Popplewell J held that the court could order a trial of this issue (ie whether the arbitration agreement is null and void), but is not bound to do so. Here, the Court of Appeal agreed, Aikens LJ saying that "In theory I suppose the court could order that there be a trial of an issue to determine whether the arbitration agreement was "null and void" ...But if the evidence and possible findings going to the issue of whether the arbitration agreement is "null and void" ... also impinge on the substantive rights and obligations of the parties the court is unlikely to do so unless such a trial can be confined to "a relatively circumscribed area of "investigation". Otherwise, in such a case, where the court is satisfied of the existence of the arbitration agreement and that the matters in dispute are within its scope,...the right course for the court to take is to grant a stay under section 9(4) and let the arbitral tribunal get on with determining the dispute".

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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