UK: Insurance And Reinsurance Weekly Update - 16 September 2014

Last Updated: 22 September 2014
Article by Nigel Brook

Welcome to the thirty-third 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

  • Burrett v Mencap
    A court decides whether the "relevant period" starts again if the terms of a Part 36 offer are changed.
  • Rochester Resources v Lebedev
    A case on whether a defendant to an anti-suit injunction application was bound by an arbitration agreement.
  • Premier Telecom v Webb
    The Court of Appeal decides whether an expert's determination can be set aside for any error of law.
  • Other News
    The Chancery Division has provided information on some important changes to practice as the court moves toward electronic filing in late 2015.

Burrett v Mencap

Whether relevant period starts again if the terms of a Part 36 offer are changed

A Part 36 offer remains open for acceptance until it is withdrawn. However, the rules also allow for a Part 36 offer to be changed, rather than withdrawn. The rules are silent, though, as to whether the "relevant period" (ie the amount of time the offeree has to accept an offer) starts to run again once an offer has been changed, or whether the relevant period set out in the original offer still applies. This is especially important where a defendant offer has been made. That is because Part 36 provides that (where an offer is accepted after the end of the relevant period) the defendant will pay the claimant's costs of the proceedings up to the expiry date of the relevant period and thereafter the claimant (as the offeree) will pay the costs of the defendant (as the offeror) from the expiry date of the relevant period to the date of acceptance (unless the court orders otherwise).

Here, a defendant offer was made in July and the relevant period was stated to be 21 days. The offer was neither accepted nor withdrawn. Six months later, the terms of the offer were changed by the defendant. Ackroyd DJ considered the purpose of allowing Part 36 offers to be changed. He saw "good sense" in allowing a claimant additional time to reflect on a changed Part 36 offer. However, he was ultimately guided by the fact that the rules were silent as to any extension of the time for acceptance, despite the draughtsmen having had an opportunity to specify this. He therefore concluded that that the relevant period did not renew following a change to the terms of a Part 36 offer and "the time that is given in that original offer is the one that applies".

COMMENT: This is an interesting decision for defendants. Had the defendant's original Part 36 offer been withdrawn and a new (and different) offer made 6 months later, the defendant would not have been entitled to its costs incurred over the intervening period between the two offers. Defendants might therefore consider that this case encourages them not to withdraw offers but instead to alter their terms, when their position in the underlying litigation changes. However, that is a potentially risky strategy, since if the defendant's position in the underlying litigation improves, it would be open for a claimant to still accept the original offer before it is withdrawn or changed.

Rochester Resources v Lebedev

Whether defendant to an anti-suit injunction application was bound by an arbitration agreement

The claimants applied for an anti-suit injunction under section 37 of the Senior Courts Act 1981, on the basis that the defendant was bound to arbitrate rather than pursue his claim before the New York courts. The arbitration agreement in question provided that: "The Parties agree that any dispute, controversy or claim arising between the Parties out of or in connection with this Agreement ... shall be finally settled by arbitration in accordance with the UNCITRAL Arbitration Rules". The defendant was not a party to the contract in which the arbitration agreement was found, but the contract did purport to bind one of the party's "Affiliates" and the judge, Jonathan Hirst QC, concluded that it was likely that the defendant did fall within the definition of an "Affiliate".

However, the judge said that the words "arising between the Parties" in the arbitration agreement was an important factor: "Had they not included these words, it might have been easier to conclude that the arbitration clause was intended to apply also to Affiliates". Although it would have been "much neater" had the arbitration agreement extended to include disputes involving the defendant, "there are limits as to what a Court can properly do to improve a carefully drafted and (at least in this respect) reasonably clear written agreement". It would have been easy enough to add the defendant to the arbitration agreement or to have concluded a side agreement, had that been the intention. Accordingly, the defendant was probably not bound by the arbitration clause and it had certainly not been established to a high degree of probability that he was bound.

The judge also dismissed an argument that the claimants could rely on section 44 of the Arbitration Act 1996. This section grants the court the power to grant an interim injunction in support of arbitral proceedings. In Starlight Shipping v Tai Ping (see Weekly Update 31/07), Cooke J held that he could grant an anti-suit injunction under both section 44 of the Act and section 37 of the 1981 Act. However, the Supreme Court in AES LLP v JSC (see Weekly Update 22/13) subsequently opined that "the better view" is that the source of the power to restrain foreign proceedings brought in breach of an arbitration agreement is to be found not in section 44 but in section 37 instead. The judge agreed with that view and said that the claimants had not been able to "offer any way round this clear statement of principle".

Premier Telecom v Webb

Whether an expert's determination can be set aside for any error of law

The parties had referred a dispute to expert determination and one of the parties sought to challenge the expert's decision. One of the issues considered by the Court of Appeal in this case was whether the judge had been correct to suggest that an error by the expert on any point of law arising in the course of implementing his instructions might justify setting aside the determination. The judge had treated this as an open question on the basis of certain comments made by Lord Neuberger MR in Barclays Bank v Nylon Capital (see Weekly Update 27/11). He had believed that there is a "powerful argument" for saying that (subject to the contract terms) a valuation by an expert (even where the valuation is agreed to be "final and binding") can be challenged in court if it can be shown to have been arrived at on the basis of "a mistake of law" (emphasis added).

The Court of Appeal said that these comments had been obiter only and that neither of the other Court of Appeal judges had expressed agreement with them. It was concluded that "it is possible that the parties might by their agreement define the terms of the expert's mandate in such a way that any error of law on his part rendered his decision invalid, but in many cases to do so would risk undermining the whole purpose of the reference. Ultimately, all comes down to the construction of the contract under which the expert was appointed to act. Only by construing the contract can one identify the matters that were referred for his decision, the meaning and effect of any special instructions and the extent to which his decisions on questions of law or mixed fact and law were intended to bind the parties".

On the facts of the case, the Court of Appeal held that the expert had not departed from his mandate.

Other News

Chancery Division changes to practice:

The Chancery Division has provided information detailing some important changes to practice as the court moves toward electronic filing in late 2015. These changes (which come into force from 1st October 2014) include the following:

  1. New style claim numbers will be given to all new claims issues after 1 October 2014 and to existing claims (replacing the current claim number) when a document is first filed after 30 September 2014
  2. Documents lodged with the court will be scanned to the electronic file (it is not yet possible to file documents electronically direct to the court file). Paper documents will be destroyed by the court after 6 months. Original documents will be retained provided they are clearly marked as such
  3. A hearing bundle is now required for every hearing, however short. This will be strictly enforced. The parties must cooperate and bundles must be lodged two clear days before a hearing – documents can be added to the bundle later on. For without notice applications in the afternoon, the applicant must bring a bundle if it has not been possible to lodge one in advance
  4. Exhibits to witness statements must generally not exceed 30 pages
  5. The parties will be required to provide draft orders in a form which may be approved without amendment. The presumption will be that the parties, rather than the court, will serve orders. New rules have also come in for consent order (including Tomlin orders)

Further details can be supplied upon request.

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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