UK: Insurance And Reinsurance Weekly Update - 18 February 2014

Last Updated: 7 March 2014
Article by Nigel Brook

Welcome to the sixth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2014.

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

This week's caselaw

  • Interprods v De La Rue
    A Clyde & Co case on whether there was apparent bias where an arbitrator was appointed by the same law firm in an earlier case.
  • SET Select v F&M Bunkering
    A case on whether an application for a stay in favour of foreign proceedings could be brought even though it was made late.
  • Waterdance v Kingstone Marine
    Assessment of damages where a claimant received a government grant.
  • Otkritie International v Urumov & Ors
    A judge considers the standard of proof required for allegations of fraud.
  • Greenwood & Ors v Goodwin & Ors
    A case on costs and group litigation orders.

Interprods v De La Rue

Whether there was apparent bias where an arbitrator was appointed by the same law firm in an earlier case

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Comm/2014/68.html&query=interprods&method=boolean

Clyde & Co (David Leckie and Nicholas Moule) for the respondent

The applicant sought to challenge an arbitration award under sections 67 and 68 of the Arbitration Act 1996. Having concluded that allegations of illegality in the performance of a contractual obligation did not deprive an arbitral tribunal of the jurisdiction to determine the contractual rights and obligations of the parties, Teare J went on to also find as follows:

  1. The arbitrator had not acted unfairly or partially by conducting a telephone hearing without the participation of the applicant. On the facts, the matter discussed during the call was "simple" and involved only the setting of the date of a preliminary issue hearing. Furthermore, the applicant had not given a clear reason as to why it had been unable to attend the conference call (and a change of legal representative was not a suitable reason)
  2. Teare J also rejected an argument that there had been irregularity because the arbitrator had been appointed in two other cases where one of the parties was represented by the same law firm representing the respondent in this case (Clyde & Co). The judge held that the LCIA had appointed the arbitrator in all three cases. In any event, there was no reason to find a real possibility of bias on the basis that the arbitrator "may have been unconsciously influenced by a hope of being appointed by [Clyde & Co] in other arbitrations in such a way as to lead him to regard their client's case with greater favour than he might otherwise have done." The judge said that: "In my judgment only the most suspicious of observers might conclude that there was a possibility of such bias. The fair-minded and informed observer is not unduly suspicious"

The arbitrator was highly qualified and had acted in over 60 cases during his career. The fact that Clyde & Co has a well-known presence in London arbitration would not be sufficient to cause the fair-minded and informed observer to conclude that there was a real possibility of bias.

SET Select v F&M Bunkering

Whether an application for a stay in favour of foreign proceedings could be brought even though it was made late

http://www.bailii.org/ew/cases/EWHC/Comm/2014/192.html

In Starlight Shipping v Allianz ("The Alexandros T") (reported in Weekly Update 40/13), the Supreme Court held that the 28 day time limit for applying to challenge the jurisdiction of the English courts under CPR r11 was not contrary to EU law and that accordingly a defendant who is late in applying may not be able to rely on Article 27 of Regulation 44/2001 (which provides that, where there are two European proceedings involving the same cause of action and parties, the court which is not first seised must stay its proceedings).

In this case, the defendant had commenced earlier proceedings in Cyprus but failed to make its challenge under CPR r11 in time.

Blair J agreed that he was bound by the decision in The Alexandros T, but that he had a discretion to find that the CPR r11 challenge could still be made. He noted that in The Alexandros T, the challenge was made years late, whereas in this case it was made only days late (arguably just one day late). He held that the recent decision in Mitchell (see Weekly Update 43/13) supported the view that where a party has only narrowly missed a deadline, the court should usually grant relief. Furthermore: "where there is a genuine dispute as to jurisdiction, one would normally expect an extension to be agreed".

Another factor which the judge took into account was that this was not a purely domestic case, but was instead concerned with the relationship between proceedings in different EU member states. He said that: "Though the CPR Pt 11(4) time limit is not objectionable under EU law (see The Alexandros T...]), the context may (in my view) operate as a factor when considering whether to extend time. This is because a case might be heard in England which might otherwise not have been had the jurisdiction application been on time".

The claimant argued that a CPR r3.9 application for relief from sanctions could not be made here because it had not been supported by evidence (as required by CPR r3.9(2)). Blair J said that, in any event, CPR r3.9 was not the sole route available to the defendant. It could instead rely on CPR r3.1(2)(a) (which allows a court to extend or shorten the time for compliance with any rule, practice direction or court order, unless the rules provide otherwise). He held that this was an appropriate case for extending time retrospectively pursuant to that rule – the main point being that "though the application was late, it was not very late".

Waterdance v Kingstone Marine

Assessment of damages where claimant received a government grant

http://www.bailii.org/ew/cases/EWHC/TCC/2014/224.html

The claimant's vessel, a trawler, was damaged (it was assumed, for the damages hearing, by the defendant's negligence). The vessel was worth around GBP 650,000 and the damage would have cost GBP 435,000 to repair (and it would have taken 15 weeks to carry out those repairs). The claimant accepted GBP 300,000 from the defendant's insurers. The claimant subsequently decommissioned the vessel, without carrying out the repairs, and then accepted a grant of GBP 1.1 million under a government scheme to reduce capacity in the trawler fleet fishing for sole in the South West. The issue in this case was whether, given the government scheme, the claimant had suffered any loss by diminution in value of the vessel.

It is well-established by prior caselaw that a claimant suffers an immediate and direct loss when his chattel is damaged and the measure of that loss is the reasonable cost of repairs required to put the chattel back into the condition in which it was before the damage occurred. Events occurring after the infliction of the damage are irrelevant to calculating the diminution in value measure of damages (see Coles v Hetherton, Weekly Updates 22/12 and 01/14).

In this case, Stuart-Smith J accepted the theoretical possibility that the existence of a governmental scheme could have the effect of fixing the value of a chattel so that physical damage did not cause it to diminish (i.e. matters other than open market value can influence the question of the extent of any loss of value to a chattel). In this case, it was well known that the decommissioning scheme was coming. However, that was not enough in itself to show that there was no diminution in value at the time of the accident: "neither the prospect nor the existence of the scheme when it had been introduced affected either the volume of market activity or the price of transactions".

Otkritie International v Urumov & Ors

Standard of proof for allegations of fraud

http://www.bailii.org/ew/cases/EWHC/Comm/2014/191.html

The claimant alleged various acts of fraud had been committed by the defendants. Eder J provided a useful summary of the law relating to deceit, bribery, dishonest assistance and knowing receipt. One noteworthy point in the case was the judge's comments regarding the standard of proof which the claimant had to meet. One of the defendants had argued that the standard of proof varied depending on the gravity of the misconduct alleged and that the more serious the allegation, the higher the standard of proof must be. Eder J agreed with the claimant that that suggestion was based upon "a common misconception arising in part from an erroneous interpretation of Lord Nicholl's judgment in Re H [1996]". Eder J held that the following has been "firmly established":

  1. There is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not
  2. The proposition that "the more serious the allegation, the more cogent the evidence needed to prove it" is wrong in law and must be rejected
  3. While inherent probabilities are relevant in considering whether it was more likely than not that an event had taken place, there is no necessary connection between seriousness and inherent probability. Therefore no assumption can be made that serious conduct is unlikely to have occurred. Instead, the court must look at all the circumstances of a case so that, e.g., if a defendant has acted fraudulently on one occasion in the past, it cannot necessarily be considered inherently improbable that such a defendant would have done so on another occasion

COMMENT: Although it is generally well understood that only one standard of proof applies in civil cases, several textbooks refer to the principle that "the more serious the allegation, the more cogent the evidence may be required to overcome the unlikelihood of what is alleged, in order to prove the allegation". This decision is therefore noteworthy in that it rejects that principle as being correct as a matter of law. However, the judge was prepared to accept "in a very broad general sense" that it is inherently improbable that a particular defendant will commit a fraud (although that position can be overridden by the particular circumstances of the case). Accordingly, this ruling is likely to have little practical effect on the evidence needed to prove fraud in a civil case.

Greenwood & Ors v Goodwin & Ors

Costs and group litigation orders

http://www.bailii.org/ew/cases/EWHC/Ch/2014/227.html

In this costs decision, Hildyard J made some general comments regarding Group Litigation Orders. One potential member of the group had proposed registering itself on the GLO register (and recognising that its claim would fall under the GLO regime) but then being able to "park" its claim and that, whilst "parked" it would not be liable to contribute to the claimants' common costs or incur liability for adverse costs (in other words it could wait on the sidelines to see whether the case has been won or lost: as the judge put it "It has the obvious attractions of a permitted bet on the 2.30 race at 4 o'clock").

Hildyard J's provisional views on the proposal were as follows:

  1. Given that GLOs are intended to corral claims in order to save costs and time, directions should be fashioned to encourage all claimants to co-operate together and pool resources
  2. Although courts can't prevent claimants seeking to litigate outside the GLO framework, they should minimise any comparative advantage of doing so
  3. It is not fair to allow privileged "observer status" without risk of adverse costs or contributing to the claimants' common costs. Costs-sharing is a fundamental feature and advantage of a GLO
  4. In this case there will only be a couple of months between the GLO cut-off date and the end of the limitation period and so prospective claimants should not suppose that the option of a stay will be available
  5. "Stragglers" will have to catch up and accept that they will have reduced involvement in the decisions as to the shape and progress of the litigation

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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