UK: Insurance And Reinsurance Weekly Update - 10 March 2015

Last Updated: 18 March 2015
Article by Nigel Brook

Welcome to the ninth 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. Please follow this link for further details of the following recent cases:

This week's caselaw

Sea Shepherd UK v Fish & Fish Limited
Clyde & Co wins a Supreme Court case which determined the scope of the common design principle.

Stevens v Equity Syndicate Management
The Court of Appeal determines how to calculate the basic hire rate under a credit hire agreement for a replacement car.

JSC Mezhdunarodniy Bank v Pugachev
The Court of Appeal orders disclosure in relation to a freezing order and considers a cross-undertaking from a liquidator.

Davis Solicitors v Raja
A decision on the need to file an appeal bundle, even though a trial bundle contained the same documents.

Other news

Our employment team summarises a consultation paper on new whistleblowing rules.

New court fees come into effect.

Sea Shepherd UK v Fish & Fish Limited

Supreme Court finds that parties were not joint tortfeasors

Clyde & Co (Michelle Crorie, Erina Kawai and Wynne Lawrence) for the winning appellant. Summary kindly supplied by Wynne Lawrence.

In June 2010, Fish & Fish Limited, a fish farm operator based in Malta, was transporting live Bluefin tuna in the Mediterranean Sea. On 17 June 2010 divers from the vessel "STEVE IRWIN" entered the water and cut cages containing the tuna as part of a campaign known as Operation Blue Rage. The tuna escaped. Sea Shepherd UK ("SSUK") and two US-based defendants - Sea Shepherd Conservation Society ("SSCS") and Mr Paul Watson - were sued for the value of the tuna. Jurisdiction against all Defendants was sought based upon SSUK's alleged involvement.

There was a trial of a preliminary issue as to whether SSUK was liable for the acts of those involved in the incident on the basis of Paul Watson's role as both Master of the vessel at the relevant time and also director of SSUK, SSUK's legal ownership of the vessel involved and being joint tortfeasors pursuant to the doctrine of common design. At first instance, Hamblen J rejected all such arguments, accepting that Paul Watson was operating at all times on behalf of SSCS, that SSCS was the beneficial owner of the vessel and did not require SSUK's authority to use the vessel, and that the steps taken by SSUK in support of the campaign were minimal such that it was not liable under the doctrine of common design. The Court of Appeal reversed this judgment in part, holding that SSUK merely needed to take some steps pursuant to a common design and that this test had been met resulting in liability on the part of SSUK. The Court of Appeal overturned both the legal findings and also, in part, the factual findings of the Judge in this regard. The question of whether SSUK was liable on the basis of common design was the subject of the appeal to the Supreme Court.

In a majority of 3:2, the Supreme Court has now found that SSUK was not liable as joint tortfeasor.

All five justices agreed on the test for liability in tort by common design, resolving the ambiguity created in the Court of Appeal. Lord Toulson's leading judgment reasoned that a defendant will be jointly liable for the tortious acts of the principal if the defendant (i) acts in a way which furthers the commission of the tort by the principal to a level that is greater than de minimis; and (ii) does so in pursuance of a common design to do, or secure the doing of, the acts which constitute the tort. The judges disagreed as to the application of the facts to the case, but the majority found that Hamblen J's findings of fact were not so unreasonable as to be capable of being overturned by an appellant court and the acts of SSUK in furtherance of a common design (accepting GBP 1,730 in donations and sending two volunteers to work on the vessel) were de minimis.

Stevens v Equity Syndicate Management

Court of Appeal determines how to calculate the basic hire rate under credit hire agreement for a replacement car

The claimant's car was damaged by a negligent driver insured by the defendant. The claimant's insurers put him in touch with a credit hire company which hired him a replacement car and carried out the repairs on his own car. The issue in this case was the extent to which the credit hire charge incurred by the claimant is recoverable from the defendant.

This is an issue which the courts have tackled in a number of recent cases. Those earlier cases have established the following principles: (1) An innocent party must mitigate his loss eg by hiring a replacement vehicle; (2) He will be able to recover the cost of a replacement vehicle as damages; (3) In general, he can recover the cost or hiring the replacement vehicle on credit hire terms; (4) However, if his financial circumstances are such that he did not need to use credit, his damages will be only the basic hire rate of the vehicle; (5) If he is impecunious though, he will be able to recover the whole of the credit hire rate (provided it was a reasonable rate to pay in all the circumstances).

In this case, the claimant could have afforded to hire a replacement car without the need to use credit. The issue was therefore how to calculate the basic hire rate. That can be a difficult exercise for the courts because credit hire companies routinely provide additional services (such as conducting a claim on the injured party's behalf) which are irrecoverable as costs but difficult to quantify. Accordingly, the Court of Appeal held that the lowest reasonable rate quoted by a mainstream supplier for the hire of a vehicle of the kind actually hired by the claimant to a person such as the claimant will be a reasonable approximation of the basic hire rate: "It follows that a judge faced with a range of hire rates should try to identify the rate or rates for the hire, in the claimant's geographical area, of the type of car actually hired by the claimant on credit hire terms. If that exercise yields a single rate then that rate is likely to be a reasonable approximation for the BHR [basic hire rate]. If, on the other hand, it yields a range of rates then a reasonable estimate of the BHR may be obtained by identifying the lowest reasonable rate quoted by a mainstream supplier or, if there is no mainstream supplier, by a local reputable supplier".

JSC Mezhdunarodniy Bank v Pugachev

Court of Appeal orders disclosure in relation to freezing order and cross-undertaking from a liquidator

A liquidator of a bank obtained a freezing order against the Russian defendant, in aid of Russian proceedings. One of the assets frozen by the order was "any interest under any trust, including any interest which may arise by virtue of the exercise of any...discretion or otherwise". The defendant was subsequently ordered to disclose information about a discretionary trust in respect of which he was a member of a class of beneficiaries. He appealed against that order, arguing that the trust's assets were not his assets. The Court of Appeal has now held that the judge did have a discretion to make this order, since the freezing order was worded widely enough to encompass the defendant's interest in the trust. Having disclosed his interest in the trusts, should the defendant also be compelled to disclose details of the trust assets themselves?

The Court of Appeal held that he should. The jurisdiction to make a freezing order also allows a court to make ancillary orders which are necessary to make the order effective. The threshold test for ordering a defendant to provide information about assets which are, or may be, the subject of the freezing order is not the same as the threshold test for freezing assets: "An order for the provision of information is far less intrusive than an order which prevents someone from dealing with assets". Furthermore, information was only being sought from the defendant, and not a third party.

A further point in the case was whether the judge was wrong to order the bank's liquidator to provide an unlimited cross-undertaking. It had been argued that there is an exception to the requirement to give an unlimited cross-undertaking where the applicant for the freezing order has no personal interest in the litigation and is bringing the action on behalf of others. Lewison LJ said that "I do not consider that the mere fact that litigation is being brought by a liquidator of an insolvent company compels the conclusion that the cross-undertaking must be capped". Although judges do have a discretion to accept limited cross-undertakings, the judge in this case had been entitled to require an unlimited cross-undertaking and so the appeal against that decision was also dismissed.

COMMENT: The decision that an unlimited cross-undertaking can be required from a liquidator can be contrasted with the position established by the Supreme Court in FSA v Sinaloa Gold (see Weekly Update 08/13) that an unlimited crossundertaking cannot be required from law enforcement agencies enforcing the law in the public interest.

Davis Solicitors v Raja

Need to file an appeal bundle, even though a trial bundle contained the same documents

PD52B paras 6.3 and 6.4 provide that an appellant must file an appeal bundle (containing the documents listed in that direction) within 35 days after the filing of the appellant's notice. In this case, an unless order was also made by the court. However, the appellant's solicitors failed to comply, and argued that the court already had the relevant documents because the appeal bundle would have consisted of the papers which had already been included in the trial bundles. The appeal was struck out (the judge pointing out that an appeal bundle is required "to enable the court to pick up the case without having to rummage through the file and find individual documents"). The appellant sought relief from sanctions and that was refused.

An appeal against that decision has now been dismissed. Applying the principles established in Denton v TH White (Weekly Update 26/14), Supperstone J held that the breach was serious and significant and the appellant did not have a good reason for the default. The purpose of PD52B is "to assist the orderly conduct of appeals throughout the appeals process". The judge was also entitled to have regard to the merits of the appeal itself when considering "all the circumstances of the case". Other News

Other News

Our Employment Team summarises a consultation paper on newwhistleblowing rules

Our employment team have produced a summary of a FCA and PRA consultation paper on how they propose whistleblowing issues are going to be handled in future - a mix of legal/HR and compliance issues. It is going to make some very important and wide-reaching changes, including that an independent non-executive director will have to be appointed as a "whistleblowers' champion" and will have overall responsibility and specific regulatory accountability to ensure those making disclosures are not mistreated and will have to produce an annual report to the board.

Other headline changes include:

  • Making mandatory changes to employment contracts and settlement agreements
  • Widening the scope of what constitutes whistleblowing
  • Expanding the scope of those who will receive protection (via regulatory action if not covered under the existing legal framework)
  • Advising employees they can approach the regulators direct and how to do so
  • Mandatory reporting to the regulators if a whistleblowing case is lost
  • Measures put in place for anonymous reporting
  • A possible obligation on employees to report wrongdoing

Here is a link to the summary. Please contact Nick Elwell- Sutton for further information.

New court fees come into effect

Court fees increased significantly on 9th March 2015. Broadly, there is now a 5% fee for all claims valued over GBP 10,000, subject to a cap of GBP 10,000 for claims worth more than GBP 200,000

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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