UK: (Re)Insurance Weekly Update 11-14

Last Updated: 31 March 2014
Article by Nigel Brook

Welcome to the eleventh 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

  • Hoyle v Rogers & Anor
    A Clyde & Co case in which the Court of Appeal rules that an independent accident report is admissible as evidence.
  • Watts v Watts
    A case on whether a judge should recuse himself if he is working with one party's counsel in a separate case.
  • Allen & Ors v Depuy
    A decision on Rome II and when do events giving rise to the damage occur.
  • Haynes v Dept for Business Innovation and Skills
    Costs consequences of a Part 36 offer which was made to, and accepted by, only one of several defendants.
  • Apex Global v FI Call Ltd & Ors
    A security for costs application where one respondent is a nominal claimant and where there are cross-claims.
  • Integral Petroleum v SCU-Finanz
    A case on whether time for service of a defence started running where particulars of claim were not served in accordance with the rules.
  • Energy Venture Partners v Malabu Oil & Gas
    A decision on whether a court can order judgment interest to run until a certain date.
  • LCIA: Arbitration Rules 2014
    The LCIA has produced a draft of its new Arbitration Rules 2014.

Hoyle v Rogers & Anor

Court of Appeal rules that an independent accident report is admissible as evidence

Clyde & Co (David Willcox and Andrew Krausz) for appellant

The first instance decision in this case was reported in Weekly Update 20/13. The judge held that a report produced by the accident investigation branch of the Department of Transport (containing a mix of fact and opinion) was admissible as evidence and the defendant appealed. The Court of Appeal has now dismissed the appeal, holding as follows:

  1. The rule in Hollington v Hewthorn [1943], that factual findings made by judges in civil cases are inadmissible in subsequent proceedings, does not apply to findings by expert witnesses: "Insofar as an expert gives evidence of fact (e.g. where he found the wreckage to be) his evidence is as admissible as that of any other person. Where his evidence is evidence of opinion it is admissible because it is the product of a special expertise which the trial judge is unlikely to possess and which, even if he did, it is not his function to apply". The authors of the report here were experts in their respective fields. Nor did it make any difference that the report was produced as part of a team effort.

    The Court of Appeal also held that: "Insofar as an expert's report does no more than opine on facts which require no expertise of his to evaluate, it is inadmissible and should be given no weight on that account. But, as the judge also observed, there is nothing to be gained, except in very clear cases, from excluding or excising opinions in this category".
  2. CPR r35 is not a comprehensive and exclusive code regulating the admission of expert evidence. Expert evidence can be received "outside the confines of CPR r35". Furthermore, since the report did not fall within CPR r35, the claimant had not needed the permission of the court to adduce it.
  3. The judge was entitled not to exercise his discretion to exclude the otherwise admissible report (pursuant to CPR r32). The report was of potential value because of the impartial nature of the investigation, which had not sought to apportion blame. Here, the claimants may have had no other way of gathering the relevant information regarding the air accident. Nor should the admissibility of the report impede or inhibit the investigators.

Watts v Watts

Whether judge should recuse himself if he is working with one party's counsel in a separate case

The issue in this case was whether a judge should recuse himself where he is acting with the counsel for one of the parties in an entirely separate case. The appropriate test to be applied is that laid down in Porter v Magill [2002]:"whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased". Two earlier decisions considered by the judge were distinguished on the basis that in both those cases, the relevant individual was someone who might exercise "some unusual degree of authority" over the judge (e.g. in one case, a witness had been the judge's supervisor years earlier). Here, the judge was the senior, and counsel was the junior in the other case: "in my judgment, there is no real possibility that a fair-minded and informed observer would think that a Judge, even a deputy, would be biased in favour of another barrister who, on a completely different case, works in a team as a junior to the Judge". In any event, she shared no common financial or other interest with counsel in the outcome of either of the two cases.

Allen & Ors v Depuy

Rome II and when do events giving rise to the damage occur

As from 11 January 2009, the rules governing the choice of law for non-contractual obligations (e.g. torts) have been contained in the Rome II Regulation. The Regulation applies where "the events giving rise to the damage" occur after 11th January 2009.

The defendant manufactured prosthetic hip implants which were used in operations prior to 11 January 2009 (and which led to problems which might have arisen either before or after that date – it was not possible to determine exactly when). Stewart J held that Rome II did not apply here. The dates of the events giving rise to the damage was not the same as the date of damage – here, they were the date the allegedly defective hip implants were manufactured/distributed (or, failing that, the date of implantation). Accordingly, the Private International Law (Miscellaneous Provisions) Act 1995 applied, with the result that the applicable law was the law of the country where the injury was sustained (which was not England). It did not make any difference that this was a generic liability allegation, not just a one-off.

Even if English law had applied, the claimants would not have been able to rely on the Consumer Protection Act 1987 because they were all non-EEA residents who suffered damage outside the EEA (in relation to products which had been supplied outside the EEA).

COMMENT: The case of Alliance Bank JSC v Aquanta Corp [2011], caused some uncertainty where the event giving rise to the damage and the damage itself occur at different times. Burton J suggested that the appropriate question was whether there was "damage occurring after 11 January 2009", rather than "events (giving rise to damage) occurring after 11 January 2009". However, here Stewart J said that he did not find Burton J's remarks to be of assistance (and in any event, both the parties here had agreed that his conclusion was erroneous).

Haynes v Dept for Business Innovation and Skills

Costs consequences of a Part 36 offer which was made to, and accepted by, only one of several defendants

The claimant in this case is the widow of an employee who was allegedly exposed to asbestos by ten employers (and the liability of those ten employers could only be several, and not joint and several). She issued proceedings against all ten and during those proceedings made separate Part 36 offers to each defendant, to settle the claim against that particular defendant. Only one (the Department for Business Innovation and Skills ("the Department")) accepted. The claims against the other nine defendants were then abandoned.

When a Part 36 offer is accepted (within the relevant period, as was the case here), the claimant is entitled to "the costs of the proceedings" up to the date of acceptance. Master Simons held that the Department was liable only for the costs directly attributable to the action against it and one-tenth of the common costs. The claimant appealed against that decision.

Jay J has now held that:

  1. The "costs of the proceedings" here were the costs of the proceedings against the particular defendant who accepted the offer – in a multi-party case, the defendant who accepts an offer should not have to pay all the costs, some of which might not have been caused by him.
  2. There were two types of common costs in issue in this case:

    1. Non-specific costs. These included court fees, medical records and travel expenses. They would have had to have been incurred in any event, regardless of the total number of defendants. Jay J held that the claimant would be entitled to 100% of these costs from the Department.
    2. Specific costs. These are common costs which are in principle capable of identification and division (e.g. a conference with Counsel concerning the liability of all ten defendants). It was held that here "evidence-based decisions are required, rather than an approach which simply identifies the number of defendants". In other words, there was no basis for simply ordering the Department to pay one-tenth of these costs.

Apex Global v FI Call Ltd & Ors

Security for costs application where one respondent is a nominal claimant and where there are cross-claims

Both the claimants and the defendants to this action sought orders for security for costs. Having determined that both parties had taken steps in relation to their assets which would make it difficult to enforce a costs order (CPR r25.13(2)(g)), Newey J considered the following two points:

  1. Was it right to order security for costs against one of the claimants who was a claimant in name only and was no longer asserting any claim in his own right? Although CPR r25.14 deals with security for costs against non-parties there is nothing in the rules to cover the situation where a party is named in the action. The judge held that it would not be appropriate to make a security for costs order against the claimant here if the conditions set out in CPR r25.14 were not met (which they weren't). That was because the defendants could not be incurring any costs in meeting a claim by this claimant.
  2. Should security be ordered where cross-claims were being made? Newey J referred to the case of Crabtree v GPT [1990], where the court did not order security for costs where there were cross-claims because the rival claims "raise essentially the same issues" and the grant of an order would result in the risk of "one-sided litigation" (i.e. the claimant cannot pursue its claim but the defendants are free to pursue their counterclaim). Although the judge also observed that in a case involving a claim and a cross-claim it can be right to order security in respect of both the claim and cross-claim, this case did not fall into that category. He said that " I cannot see how the issues to which [the defendant]'s petition gives rise can be satisfactorily disentangled from those arising from [the claimant]'s petition". Accordingly, no order for security for costs was made.

Integral Petroleum v SCU-Finanz

Whether time for service of a defence started running where particulars of claim were not served in accordance with the rules

The defendant applied to set aside judgment which the claimant obtained after it failed to file a defence in time. Under the rules, a defendant has 28 days after service of the particulars of claim to file a defence (if an acknowledgment of service has been filed).

The defendant sought to argue that time for filing its defence had not started running when the particulars of claim were emailed to the defendant's French lawyer, because the claimant had failed to comply with PD 6A (because neither the defendant nor the lawyer had indicated a willingness to accept service by email). The claimant sought to rely on CPR r3.10 (which provides that an error of procedure does not invalidate any step taken in the proceedings (in the absence of a court order to that effect) and the court may remedy any error). Having reviewed the decision in Phillips v Nussberger (see Weekly Update 04/08), in which the House of Lords decided that the court did have power to dispense with service under CPR r.6.9 (in order to validate retrospectively what would otherwise have been ineffective service), Popplewell J held that the error of procedure here (the failure to serve the particulars of claim in accordance with the rules) did fall within the scope of CPR r3.10 and service should be treated as valid (so as to have started the time running for service of the defence). He reached that conclusion for the following reasons:

  1. The House of Lords established in Phillips v Nussberger that CPR r3.10 was to be construed as having a wide effect. It should be given even wider effect where a document other than the claim form is being served: "What the rules are concerned with in relation to the service of such subsequent documents is simply bringing them to the attention of the other party in circumstances in which that other party knows or should realise that a step has been taken which may have procedural consequences. This contrasts with the service of originating process which fulfils other functions".
  2. The substantive defect here involved using a method allowed under the English procedural rules but without complying with the necessary formalities. The judge observed that "I can envisage circumstances in which purported "service" by a method which is not permitted by the rules at all is sufficiently distant from what is required by the rules as arguably to fall outside CPR 3.10. ... But I would not accept ... that any defect in the method of service is outside CPR 3.10. The method of service applied in this case, namely service by e-mail, is one which in the 21st century is a common and effective way of transmitting a document and one which the Rules envisage may be used, albeit with certain conditions which are set out in the practice directions".

Energy Venture Partners v Malabu Oil & Gas

Whether a court can order judgment interest to run until a certain date

One of the issues in this case was whether a court has the power to stop post-judgment interest (at a rate of 8%) running after a certain date (rather than the date of payment of the judgment debt). Although s17(2) of the Judgments Act 1838 specifies that rules of court may provide that interest otherwise payable under s17(1) may be disallowed by the Court, there is nothing in CPR 40.8(1)(b), or otherwise in the rules of court, which permit the imposition of an "end-date". Eder J decided that it was unnecessary to decide this issue, though, and he instead said that he was prepared to assume that the court did have such a power. However, he found no reason, on the fact of the case, to stop judgment interest running from a date when (the defendant alleged) the claimant had refused to implement the judgment order.

LCIA: Arbitration Rules 2014

The LCIA has produced a draft of its new Arbitration Rules 2014. Some of the changes being proposed are as follows:

  1. The claimant must now include in its Request for Arbitration the estimated monetary amount or value of its claim and must also include confirmation that the registration fee has been or is being paid to the LCIA;
  2. Throughout the rules, 30 day deadlines have generally been replaced with a 28 day deadline. So, for example, the respondent's response must now be delivered within 28 days of the date of receipt by the Registrar of the Request (rather than the current requirement of 30 days from service of the Request on the respondent).
  3. Documentary proof of actual delivery of the Request and Response must be given (or, if actual delivery is proven to be impossible, sufficient information as to any other effective form of notification must be given). A party's last known place of business/residence has been replaced as a valid address for service with an address which has been regularly used in the parties' previous dealings.
  4. A potential arbitrator must now sign a written declaration that he/she is "ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious conduct of the arbitration".
  5. If no Response is received, the LCIA Court shall appoint the arbitral tribunal within 35 days from the date of receipt by the Registrar of the Request.
  6. In exceptional urgency, a party may (as an alternative to an application for the urgent formation of a tribunal) apply for the appointment of a temporary sole arbitrator pending the formation of the tribunal. There also new rules for the expedited appointment of a replacement arbitrator.
  7. Where a party is challenging an arbitrator, the other parties and the challenged arbitrator will now have a reasonable opportunity to comment on the challenging party's written statement. Other rules regarding the procedure for challenging an arbitrator are also being introduced.
  8. It will be confirmed that no party may unilaterally contact any member of the arbitral tribunal or the LCIA Court during the arbitration. Prior to the tribunal's formation, an arbitrator can consult the parties as to their views on the suitability of a potential presiding arbitrator.
  9. The parties will be able to elect in writing to have their Request/Response treated as their Statement of Case.
  10. Once the tribunal has been informed, any change of a party's legal representative must be notified promptly to the other parties and the tribunal and the registrar. The tribunal will have the power to withhold approval of any intended change where that might compromise the composition of the tribunal or the finality of any award (eg because of a potential conflict). The draft Rules also contain a new Annex with general conduct guidelines that apply to all legal representatives appearing by name before the tribunal.
  11. One of the key changes is that whereas the current Rules are silent on the issue of consolidation of various arbitrations into one single arbitration, the new Rules will make express provision for this where the same arbitration agreement, or any compatible arbitration agreement between the same disputing parties, covers different arbitrations (provided that no tribunal has already been formed before by the LCIA Court for such other arbitrations). Any consolidation will have to be approved by the LCIA Court.
  12. Where deposits are paid to the LCIA, they will attract interest at the rate from time to time credited to an overnight deposit with a bank.
  13. Awards will be able to be transmitted by electronic means (in addition to paper form). If there is any disparity between electronic and paper forms, the paper form will prevail.
  14. When assessing costs, the tribunal will be able to take account of the parties' conduct in the arbitration, including any failure to co-operate.
  15. The reference to the ability of the parties to agree not to keep awards and materials confidential will be removed.
  16. If the tribunal or a court finds any part of the arbitration agreement to be invalid or unenforceable, that will not adversely affect the award or appointment of the tribunal.

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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