UK: Insurance And Reinsurance Weekly Update - 13 August 2013

Last Updated: 18 August 2013
Article by Nigel Brook

Welcome to the thirtieth edition of Clyde & Co's (Re)insurance and litigation case law weekly updates for 2013.

A summary of recent developments in insurance, reinsurance and litigation law.

This week's case law

Stylianou v Toyoshima & Anor
Court determines the applicable law/jurisdiction in a personal injury case.

Vernon Knight Associates v Cornwall Council
A case on the liability of a landowner for flooding and the relevance of the availability of insurance.

Jetivia & Anor v Bilta (UK) Ltd & Ors
Whether the liquidators of a company are prevented from bringing a claim against the company's directors because of the ex turpi causa defence.

Stylianou v Toyoshima & Anor

Court determines the applicable law/jurisdiction in a personal injury case

The English claimant was injured in a car accident in Australia, caused by the negligence of a Japanese driver who was insured by an Australian insurer. After commencing proceedings in Australia, she then commenced proceedings in England and obtained permission to serve out of the jurisdiction. The Australian insurer applied to have the action struck out. Nelson J decided the following issues:

(1) Jurisdiction. PD 6B para 3.1(9) provides that a party may serve a claim form out of the jurisdiction (with permission) if "a claim is made in tort where...damage was sustained within the jurisdiction". The issue in this case was the meaning of "damage". There is prior caselaw to the effect that "damage" in this context is wide enough to cover any kind of damage, direct or indirect. Accordingly, economic loss, such as loss of earnings sustained in England is damage sustained within the jurisdiction, even though the initial injury causing direct physical harm occurred elsewhere.

The insurer sought to argue that this caselaw had now been overridden by Rome II. That argument was rejected by the judge. Rome II determines the applicable law, but does not determine whether a court has jurisdiction under EC Regulation 44/2001. It therefore does not override the provisions in the CPR. Furthermore, England was the forum in which the case could suitably be tried in the interests of all the parties and for the ends of justice.

(2) Applicable law. The claimant sought to argue that the normal rule under Rome II was displaced by Article 4(3) ie the case is manifestly more closely connected with England rather than Australia. The judge agreed that Article 4(3) required the court to look at all relevant material and not just where the direct damage occurred. Although there were "powerful reasons" for saying the claimant's condition and the English evidential connection with any trial provided strong connecting factors with England, the tort was not manifestly more closely connected with English law. Furthermore, the assessment of damages is governed by the applicable law and not the law of the forum. The applicable law was therefore that of Western Australia.

Vernon Knight Associates v Cornwall Council

A case on the liability of a landowner for flooding and the relevance of the availability of insurance

The defendant council appealed against a decision that it was liable to the claimant holiday village owner for damage caused by floodwater escaping from one of the roads in the county. Jackson LJ reviewed the relevant caselaw and summarised the position as follows:

(1) A landowner owes a "measured duty" in both negligence and nuisance to take reasonable steps to prevent natural occurrences on his land from causing damage to neighbouring properties.

(2) The court should take into account all the circumstances including the extent of the foreseeable risk, the available preventative measures, the costs of such measures and the resources of both parties.

(3) One issue raised in the case was the relevance of whether the claimant was able to and did insure against the damage suffered. Reference was made to the earlier Court of Appeal case of Lambert v Barratt Homes [2010] and doubt was cast on the decision there that this was a relevant factor. Jackson LJ said he preferred to leave the issue open for future consideration and Burton LJ added that "if an occupier or landowner's claim is rejected on the ground that he had insurance, the insurer may well exclude cover in respect of flood damage for the future: indeed, doubts as to the extent of the measured duty may itself lead to an exclusion of cover. I cannot think that it would be appropriate for the Court to have to inquire as to the insurance market in any case in which the question arises".

(4) Where a defendant is a public authority with substantial resources, the court must take into account the competing demands on those resources.

The Court of Appeal held that the trial judge had not applied too high a standard of care in this case.

Jetivia & Anor v Bilta (UK) Ltd & Ors

Whether the liquidators of a company are prevented from bringing a claim against the company's directors because of the ex turpi causa defence

The liquidators of a company brought a claim in the company's name against its former directors (the only directors of the company), for an alleged conspiracy. The company's case was that the alleged conspiracy deprived it of money needed to meet its VAT liabilities. The directors tried to have the case struck out on the ground of ex turpi causa (a public policy principle that prevents a claimant from using the court to benefit from his own illegal conduct). When their application failed, they appealed to the Court of Appeal. The Court of Appeal has now dismissed that appeal. It held that:

(1) The attribution of the conduct of the directors so as to create a personal liability on the part of the company "depends very much on the context in which the issue arises". Where the company itself is the victim of the directors' conduct, it will be able to bring a claim against the directors and the law will not attribute the directors' fraud to the company

(2) It did not matter whether the alleged conspiracy had as its objective a VAT fraud on the HMRC or was limited to depriving the company of money to meet its VAT liabilities: "In both cases the directors ...will have committed or aided a breach of fiduciary duty and other wrongs against the company for which [the company] can sue

(3) Nothing in the case of Moore Stephens v Stone Rolls (see Weekly Update 28/09) prevented the Court of Appeal from finding that a director even of a one-man company can be held liable to account for breaches of fiduciary duty which he commits against the company. In the context of a claim by a company against its fraudulent directors, the "sole actor" exception has no place in English law

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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