UK: (Re)Insurance Weekly Update 6 - 2015

Last Updated: 20 February 2015
Article by Nigel Brook

Welcome to the sixth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2015.

These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.

The Insurance Act 2015 received Royal Assent on 12th February 2015 and so will come into force in August 2016

This week's caselaw

Shipowners' Mutual P&I Association v Containerships Denizcilik Nakliyat

A Clyde & Co case on whether a direct right of action against insurers under Turkish law could be heard by the English courts.

Recovery of Medical Costs for Asbestos Diseases (Wales) Bill

The Supreme Court rules that the Welsh legislature cannot make insurers retrospectively liable to cover NHS costs.

Freehold Estates v NatWest

A case on whether a claimant is liable to pay the costs of discontinuing where a settlement has been reached.

Shagang South-Asia v Daewoo

A decision on whether the seat of an arbitration was where it was "to be held".

Graham v Commercial Bodyworks

The Court of Appeal decides if there was vicarious liability following the intentional act of a co-employee.

The Insurance Act 2015 received Royal Assent on 12th February 2015 and so will come into force in August 2016. Below are links to our three updates on the Act.

This week's caselaw

Shipowners' Mutual P&I Association v Containerships Denizcilik Nakliyat

Whether direct right of action against insurers under Turkish law could be heard by the English courts

Clyde & Co for defendant

PD6B para 3.1(6)(c) provides that a claim form can be served out of the jurisdiction, with the court's permission, if "a claim is made in respect of a contract where the governed by English law" (emphasis added).

Following the loss of a vessel, the Turkish charterers commenced arbitration proceedings in London against the Turkish owners. However, under Turkish law, they also claimed to have a right of direct action against the owners' liability insurers, a P&I Club. They commenced proceedings in Turkey. However, the Club sought an anti-suit injunction to restrain the charterers from continuing those proceedings. In order to do so, they required the permission of the English court to serve out of the jurisdiction. The issue was therefore whether the charterers' claim was, in substance, a claim to enforce the contract between the Club and the owners (so that PD6B applied), or whether it was a claim to enforce an independent right of recovery.

Teare J concluded that the "essential content" of the right of direct action was the contract between the Club and its member. Although there were some "exceptions" which pointed to a different conclusion, these were not enough to change the essential nature of the right which had been created. Nor did it matter that the charterers were not a party to the contract between the Club and the owners (see Greene Wood v Templeton Insurance (Weekly Update 06/09)).

The cover granted by the Club provided for English law and London arbitration. CPR r62.5(1)(c) provides that the English courts may give permission to serve an arbitration claim form out of the jurisdiction where "the claimant (i) seeks some other remedy or requires a question to be decided by the court affecting an arbitration (whether started or not) ..; and (ii) the seat of the arbitration is or will be within the jurisdiction". Teare J rejected an argument that CPR r62.5 provided an exclusive code for service of an arbitration claim form and found that permission to serve out could be made under PD6B as well. In so doing, he relied on an observation by the Supreme Court in AES v Ust-Kamenogorsk (see Weekly Update 22/13) to that effect. He said that "I consider that a first instance judge should follow a unanimous observation of the Supreme Court".

In any event, he found that he also had jurisdiction under CPR r62.5 to give permission to serve out of the jurisdiction. Although there was no privity of contract between the charterers and the Club, he said that if they wish to enforce a contractual right which is itself subject to an arbitration clause, the charterers will be bound by that arbitration clause too.

Finally, in finding that the English court should grant an anti-suit injunction in this case, Teare J held that English law gives priority to the Club's contractual rights, rather than the right of direct action.

The charterers have been given leave to appeal against this decision.

Recovery of Medical Costs for Asbestos Diseases (Wales) Bill

Supreme Court rules that the Welsh legislature cannot make insurers retrospectively liable to cover NHS costs

In 2013, the Welsh Assembly passed the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill. This provided that those liable to the victims of asbestos-related diseases would be liable to reimburse Welsh Ministers for the costs of NHS services provided to such victims. It further provided that where liability to the victims was to any extent covered by an insurance policy, the policy would be treated as covering the liability for NHS charges too and such liability cannot be excluded or restricted. The bill therefore imposed new liabilities on compensators in respect of past conduct and on liability insurers under past insurance contracts.

Insurers argued that the Welsh Assembly did not have legislative competence to pass this Bill. The Supreme Court has now upheld that challenge. The Bill did not fall within the powers granted to the Welsh Assembly under the Government of Wales Act 2006. Furthermore, the Bill infringed article 1 of Protocol 1 of the Human Rights Act 1998, which provides that "Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law".

We understand that a similar bill is going to be put to the Scottish Parliament this summer.

Freehold Estates v NatWest

Whether claimant liable to pay costs of discontinuing where a settlement was reached

When a claim is discontinued, the normal position is that the claimant will be liable for the costs incurred by the defendant up to the date of discontinuance. In this case, the claimants commenced proceedings relating to 27 swap transactions entered into with the defendant bank. A full and final settlement was reached in relation to 7 of those transactions. The claimants subsequently served notice of discontinuance in relation to these 7 transactions and also in relation to a further 13 transactions.

The bank sought its costs of the discontinued proceedings in relation to the 20 transactions. Hamblen J has now held as follows:

  1. Where there has been a full and final settlement of a claim and the proceedings in respect of which the claim is made, a party cannot thereafter apply for its costs of the proceedings (unless that right is expressly preserved in the settlement agreement). If costs are not mentioned in the settlement, each side will bear its own costs. Taking steps to discontinue or stay the claim is for the benefit of the court rather than the parties. That analysis applies both where the settled claim is the only claim in the proceedings and where, as here, there has been a settlement of only part of the proceedings.

    The judge also noted that proceedings are usually discontinued where it is recognised that a claim is unlikely to succeed, and hence the defendant should usually receive his costs. However, here, "the effective reason for discontinuance of the 7 claims is the fact that the claimants have been paid over a million pounds in settlement of those claims, and in such circumstances it does appear unfair and unjust that they should have to pay costs in relation to claims so settled". Accordingly, in relation to the 7 settled claims, there should be no order as to costs.

  2. However, the usual rule should be followed in relation to the 13 other transactions which were not settled.

Shagang South-Asia v Daewoo

Whether the seat of an arbitration was where it was "to be held"

The parties entered into an agreement which provided for arbitration of their disputes and specified: "Arbitration to be held in Hong Kong. English law to be applied". The issue in this case was whether that meant the curial law of the arbitration agreement (ie the law of the seat of the arbitration) was English or Hong Kong law (and hence whether or not the Arbitration Act 1996 applied).

There is prior caselaw to the effect that the place of the arbitration will usually be the seat of the arbitration (and hence the curial law of that place will apply to the arbitration). For example, in Shashoua v Sharma (see Weekly Update 17/09) the parties agreed that the venue of the arbitration would be London and hence London was held to be the seat of the arbitration and English law was the curial law. The defendant tried to distinguish the position in this case by arguing that the arbitration agreement here had not referred to a "venue" or "place". Hamblen J rejected that argument: "An agreement that the arbitration is "to be held in Hong Kong" would ordinarily carry with it an implied choice of Hong Kong as the seat of the arbitration and of the application of Hong Kong law as the curial law. Clear words or "significant contrary indicia" are necessary to establish that some other seat or curial law has been agreed..... I do not consider that "English law to be applied" provides clear wording to that effect. Indeed, it is most naturally to be read as referring to the substantive law applicable". The fact that it might be convenient to hold the arbitration in Hong Kong (and hence, it was argued, it was only chosen as a convenient geographical location for hearings), was not a determining factor or a reason to distinguish this case from Shashoua. Hong Kong may have been convenient, but it is also a well-known and respected arbitration forum.

Graham v Commercial Bodyworks

Vicarious liability following intentional act of co-employee

The claimant was injured when his friend and co-employee used a cigarette lighter after having sprinkled the claimant's overalls with a highly inflammable thinning agent when they were both at work at a bodywork repair shop. There was no evidence that the friend had intended to cause any serious harm to the claimant but at trial his actions were described as "clearly reckless". The judge held that the claimant's employer was not vicariously liable and the claimant appealed.

The Court of Appeal has now dismissed that appeal. It noted that in most cases, the focus is on whether an employee's conduct "was so closely connected with acts which the defendants authorised that they may rightly be regarded as modes – though improper modes – of doing them". There was also reference to Canadian caselaw and an inquiry into whether there is a close connection between the creation or enhancement of a risk and the wrong. Here, the defendant employers did create a risk by requiring their employees to work with thinning agents but it was difficult to say that the creation of that risk was sufficiently closely connected with the wrongdoer's highly reckless acts. The wrongful acts did not further the employer's aims, there was no confrontation inherent in the employer's enterprise and the wrongdoer did not have any power in relation to the claimant.

It concluded that the UK authorities "tend to resolve themselves into two groups". On the one hand, there are cases where the use of reasonable force or the existence of friction is inherent in the nature of the employment (eg a bouncer at a nightclub). On the other hand, there are cases (into which category this case fell) where such force or friction is not inherent in the employment relationship. In such cases, intentional acts (whether horseplay or rather more serious conduct) do not usually give rise to vicarious liability.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nigel Brook
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.