UK: (Re)Insurance Weekly Update 09-14

Last Updated: 17 March 2014
Article by Nigel Brook
Most Read Contributor in UK, December 2018

Co-operative Group v Birse & Ors

Limitation period where main contractor claims against sub-contractor for loss in the event that it is held liable to the employer

Clyde & Co (Neil Jamieson, Chris Georgiou and Siobain Creaney) for defendant

The defendant in this action was the main contractor employed by the claimant. The defendant sought to bring actions against its sub-contractors, alleging that breaches by the sub-contractors had placed it in breach of its own obligations to the claimant. The defendant claimed that it will suffer a loss (and time will start running in relation to this claim) only if and when it is held liable to the claimant (and its loss is ascertained) at a future trial.

Stuart-Smith J conducted a review of the caselaw on limitation in relation to contingent liabilities. He rejected the defendant's argument as "unprincipled and unacceptable". The present case fell within both the "damaged asset rule" and the "package of rights rule" (which are two categories of cases in which a possible future liability may cause time to start running– see Law Society v Sephton (Weekly Update 10/06)):

(1) "Damaged asset rule" (where a contingent liability is incurred but does not crystallise into an actual liability until a future date, but where damage occurs for the purposes of the commencement of the limitation period at the time when the transaction is entered into). The defendant's interest in the development and in the benefit of its contractual rights were "assets". Here, the defendant had suffered measurable financial detriment at the date of completion (at the latest) because it had a present liability at that date.

(2) "Package of rights rule" (where there was a bilateral transaction under which the claimant should have received certain benefits but, owing to the negligence of his professional adviser, did not do so). Here, too, it could be said that the defendant's legal position changed to its financial detriment at the time of completion because it became a contract-breaker whose rights under the main contract were devalued by its liability to the employer.

Accordingly, the defendant's claims against its sub-contractors were time-barred.

Bank St Petersburg & Anor v Arkhangelsky & Ors

Whether the surrender of a life insurance policy breached a freezing order

One of the issues which the judge considered in this case (although he did not, in the end, need to decide the point), was whether the surrender of a life insurance policy – in order to allow the respondent to pay her legal expenses – amounted to "dealing with an asset" within the terms of a freezing order made against the respondent. Hildyard J held that the policy was clearly an "asset": "A life insurance policy would ordinarily be assignable under English law, and available to be pledged as security; and, at least in the case of a policy with a surrender value (which the Policy here must have had), it would be liable to equitable execution, even if not legal process of attachment. ... Looking at the matter more broadly, and construing the Freezing Order as a whole and the word 'asset' more particularly in the way in which I would expect it "reasonably to be understood by a businessman to whom it was addressed in the light of the purpose which it was designed to serve" (see per Christopher Clarke J in JSC BTA Bank v Ablyazov and Others), I consider that at least the right of surrender would be understood to constitute an asset".

However, the surrender of the policy for value did not amount to dealing with, or disposing of, an asset. By exercising the right of surrender, the respondent had made assets available to creditors which would not otherwise have been available (i.e. the very opposite of a dissipation).

The judge also went on to find that monies held in the bank account of a company said to be owned by the respondent did not fall within the scope of the freezing order. The freezing order did not capture the assets of the company, unless those assets were, in reality and fact, within the beneficial ownership of the respondent.

It was also held in this case that, if a freezing order is breached, the remedy is for the claimant to establish contempt and seek committal; the "half-way house" of a declaration of a breach is not available.

Clarke v Barclays Bank & Anor

Whether claimant should be given permission to rely on a new expert where first expert retired

The claimant obtained permission to rely on the evidence of a certain named expert (Mr Dall). The claimant was told by Mr Dall in May 2013 that he was retiring and so was withdrawing from the case. The claimant did not inform the other parties of this fact for a further 7 months (it seems because negotiations between the parties were ongoing and the claimant did not want to undermine his negotiating position (expert evidence being critical to his case)). When a new expert had been found, the claimant sought and obtained permission from a Deputy Master to rely upon the second expert's report instead. An appeal was brought against that decision and Mr Hollington QC has now allowed that appeal.

The claimant had submitted that, unlike the situation where an expert changes his opinion (see PD 35 para 2.5) a party is under no duty to immediately notify the court or the other parties where an expert decides to withdraw from a case. That argument was rejected by the judge: " In my judgment, it was wholly improper for the information about Mr. Dall's withdrawal to be withheld beyond a reasonable period to allow the Claimant to decide whether he could persuade Mr Dall to change his mind or that some other arrangement could be made which would mean that the Claimant could still rely on Mr Dall. Once the Claimant had decided that he had to find a new expert to replace Mr Dall... then it is clear in my judgment that the Claimant should have disclosed the problem he faced to the court and the other side". The judge opined that the court would have been sympathetic had the claimant applied promptly for directions, because Mr Dall's withdrawal was outside his control.

However, here the delay was fatal to the claimant's application. It was held that the Deputy Master had erred in failing to appreciate that this delay amounted to a serious abuse of the process of the court (and had failed to apply the guidance in the Mitchell case). Despite the serious prejudice which the claimant faced if he was denied permission to rely on his new expert, it was held that the claimant "has only himself to blame for his predicament". The judge gave directions for the report of Mr Dall to be in evidence at trial (even though Mr Dall will not attend), leaving it for the trial judge to attach such weight to that report as is appropriate in all the circumstances.

MB Garden Buildings v Burton

Whether claim form has been validly served at the defendant's last known address/effect of no response pack

Various issues regarding service of a claim form arose in this case, including the following:

(1) What was the effect of the claimant's failure to serve a response pack? Relying on an observation by Longmore LJ in Rajval Construction v Bestville Properties [2010] (that a failure to serve a response pack did not absolve a defendant from filing an acknowledgment of service), Hacon J held that service of a claim form is accordingly not rendered bad by a failure to serve all or part of the response pack: "Not complying with CPR 7.8 may weigh in the balance when it comes to setting aside a judgment in default, but it goes no further".

(2) After the claimant's first attempt at service (the claim form being marked "return to sender"), it hired a private investigator who was told by the defendant's former neighbours that he had moved to a new address. It sought to argue that the new address was the defendant's "last known residence" (within the meaning of CPR r6.9(2)). However, the defendant argued that, had the claimant made further reasonable inquiries on the day the claim form was posted, it would have discovered that the defendant no longer lived at the new address either (following a marital breakdown). Was it correct to argue that reasonable inquiries must be made on the day the claim form is posted or dispatched? Hacon J held that it was not: "That seems to me to be an unnecessary burden.....I take the view that if a claimant has carried out inquiries with reasonable diligence as to the defendant's last known residence before that date and on that date it was objectively reasonable for the claimant to believe that the defendant's residence remained unchanged, then on that date it is still the defendant's last known residence for the purposes of service by that claimant. Of course the longer the delay between the inquiries and the date of the step required for service, the harder it will be for a claimant to establish that there was good service".

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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