UK: (Re)Insurance Weekly Update 16 - 2015

Last Updated: 13 May 2015
Article by Nigel Brook

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

This Week's Caselaw

Kazakhstan Kagazy v Zhunus

Court considers security for costs application

In the opening paragraphs of his judgment, Walker J set out some "suggested universal guiding principles" for practitioners. In particular, correspondence/advocacy should be conducted "in a way which will lower the temperature rather than raise it": "it is perfectly possible to be vigorous without being insulting". The parties should work together to agree a timetable and notification should be given if a party will not rely on a point which it might otherwise take.

This case involved an application for security for costs against the claimant. The ground relied upon was ground (c) of CPR r25.13 ie the claimant is a company (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so. The judge referred to the factors listed by Lord Denning in Sir Lindsay Parkinson v Triplan [1973] in deciding whether to exercise his discretion to order security once it has been established that there is an inability to pay. However, the claimant sought to rely on an additional factor – namely, that the claimant's shareholders and creditors would be prejudiced "if money which could otherwise be put to good use by the claimants is not available because it is held by the court as security". Unsurprisingly, that argument was rejected by the court. It was held that shareholders' and creditors' interests should stand or fall according to the court's conclusion as to the justice of the application, and they cannot expect any special treatment.

A further argument raised in this case was the application of the European Convention on Human Rights to ground (a) of CPR r25.13 ie the claimant is resident outside of the EEA. Walker J agreed that on its face, the residence pre-condition discriminates against claimants who reside outside the European legal market. However, Walker J summarised the position as follows: "In order to comply with the non-discrimination provisions in Article 14 as regards access to justice under Article 6, the grant of security when the residence pre-condition has been satisfied should not be either automatic or inflexible. Instead the court should consider whether residence out of the jurisdiction gives a basis for concluding that enforcement would face any substantial obstacle or extra burden meriting the protection of an order for security for costs and thus justifying the difference in treatment. Moreover, the court should consider tailoring the order to the particular circumstances: if there is likely to be no difficulty about enforcement, but simply an extra burden in the form of costs or moderate delay, the appropriate course could well be to limit the amount of the security ordered by reference to that potential burden".

Takhar v Gracefield Developments

Test for setting aside a judgment for fraud

The claimant alleged that the defendants had obtained an earlier judgment by fraud. Newey J considered the legal principles governing applications to set aside judgments for fraud. These are that: (1) There has to be a "conscious and deliberate dishonesty; (2) The relevant dishonesty must be "material"; and (3) Materiality is assessed by the impact the fresh evidence would have had on the original decision (rather than if the claim were to be retried).

The parties differed as to whether there was a further requirement – namely, that the new evidence could not reasonably have been obtained in time for the original trial. Following a review of the relevant caselaw, the judge concluded that there is no such requirement. That view is supported by Commonwealth caselaw and is based on the principle that "fraud unravels all" and there is no duty of due diligence on the innocent party. Accordingly, the case was allowed to proceed to trial (although the judge also found that there was a reasonably arguable case that the new claim for deceit was time-barred and so the claimant was refused permission to amend her particulars of claim).

JEB Recoveries v Binstock

Claim of champerty where cause of action has been assigned

An individual assigned his claim against the claimant to a company formed for that purpose, and in which he had an interest, in return for £1. The defendant argued that the claim should be struck out as an abuse of process because it is champertous. It is an established principle that the bare assignment of a cause of action is champertous and so invalid. However, the judge held that there were factors in this case which meant that the claim did not offend the public policy against champerty (eg the rights assigned were not just the cause of action but also included debts).

The judge opined that the claimant could and should instead apply for security for costs: "it seems to me that the law provides a procedure which, depending upon the court's view of all the circumstances of the case, affords a defendant confronted with maintained litigation adequate protection against such abuse of the legal process".

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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