UK: (Re)Insurance Weekly Update 24 - 2015

Last Updated: 7 July 2015
Article by Nigel Brook

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

This week's caselaw:

Gulati v MGN Ltd

Whether withdrawn Part 36 offer, which claimant beats, entitles the claimant to indemnity costs

http://www.bailii.org/ew/cases/EWHC/Ch/2015/1805.html

The claimant made a Part 36 offer which provided that "after 21 days, this offer is withdrawn". Following the recent change to the Part 36 rules, that had the effect of an automatic withdrawal of the offer. She went on to better the offer at trial and sought her costs on an indemnity basis. Although the Part 36 costs consequences are not available where a Part 36 offer has been withdrawn, the withdrawn offer can be taken into account under CPR r44 (which gives the court a general discretion as to costs). The claimant sought to rely on Stokes Pension Fund v Western Power [2005], in which the Court of Appeal held that a defendant who had made an offer which did not comply with Part 36 was nonetheless still entitled to the same costs consequences as if it had been a valid Part 36 offer.

Mann J held that other factors relating to the defendant's conduct in this case would not have justified an award of indemnity costs. As for the Part 36 offer, the claimant's argument would introduce the possibility of an award for indemnity costs for behaviour which was not necessarily unreasonable or unreasonable to a sufficient extent beyond the norm and that would be "novel": "of itself a failure to accept an offer has generally not been treated as the sort of undesirable behaviour justifying indemnity costs". Stokes did not help the claimant as it was decided under a former Part 36 regime. Nor did it matter that the claimant was not seeking all the costs consequences under Part 36 – the award of indemnity costs is a "very significant" consequence.

As a result the withdrawn Part 36 offer "loses much of its significance" and indemnity costs were not awarded.

COMMENT: Although indemnity costs were not awarded in this case, it is not impossible that such an award can be made where a Part 36 offer has been withdrawn. In Community Gateway Association v Beha (see Weekly Update 45/11), indemnity costs were awarded to a defendant. The judge's decision was based in part on the withdrawn Part 36 offer and in part on what should have been a growing perception by the claimant that its case was weak. He considered that the Part 36 offer allowed the court to not only make a costs award in favour of the defendant but also to take it into account when considering whether to do so on the indemnity basis.

Frontier Agriculture v Bratt Brothers

Whether right to object to arbitrator's jurisdiction had been lost/the meaning of "takes part"

http://www.bailii.org/ew/cases/EWCA/Civ/2015/611.html

The appellant applied to set aside an order to enforce an arbitration award against him. Section 73 of the Arbitration Act 1996 provides that a party may lose the right to object (eg on the ground that the arbitrator lacked jurisdiction) if he "takes part" in the proceedings without objection. In this case, the appellant had taken no part in the arbitration, but he had told the respondent that the proposed arbitrator was "in principle....acceptable to me". The Court of Appeal held that "a party who participates in the appointment of an arbitrator without qualification does take part in the arbitration proceedings for the purposes of section 73".

In this case, though, although the appellant had accepted the arbitrator as being independent and impartial, he had disputed his appointment under a contract (contract no. 2) on the ground that he had not entered into that contract (although he did accept that he had entered into a separate contract (contract no.1) in respect of which there was going to be arbitration). The appellant had therefore not lost his right to challenge the arbitrator's jurisdiction in relation to contract no.2.

The appellant still had to show that he had a real prospect of success in proving that there had been no agreement to arbitrate and he was able to do that on the facts.

COMMENT: This case might be compared with the recent decision in Sierra Fishing v Farran (see Weekly Update 05/15), where it was held that inactivity or silence does not amount to taking part within the meaning of section 73. In that case, the claimant had indicated that it would be appointing its own arbitrator, and that did not amount to taking part because the claimant did not recognise the tribunal as being properly constituted yet. By contrast, the party here had participated to some degree in the appointment of the arbitrator and that would normally amount to taking part (although for the reason explained above, it did not in this case).

Libero Commodities v Augustin

Whether arbitration had been validly commenced

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Comm/2015/1815.html&query=libero&method=boolean

One of the issues in this case was whether an arbitration had been validly commenced. The relevant arbitral institution's rules provided as follows:

"1. Any party wishing to commence arbitration under these Bylaws ("the Claimant") shall send us a written request for arbitration...2. When sending the request, the Claimant shall also send [list of various requirements including the name of the nominated arbitrator and the application fee]".

The respondent to the arbitration (and claimant in this case) argued that arbitration was only validly commenced when both 1 and 2 were carried out.

Butcher J rejected that argument. A reasonable person would not conclude that it was a pre-requisite to the effective commencement of an arbitration that the "request for arbitration" should be accompanied by the relevant fee and there was nothing commercially absurd to find that payment of a fee is not a pre-condition to there being an effective arbitration. The judge also rejected an argument that Page v Hewetts (Weekly Update 34/13) applied here. That case had found that a claim form had not been validly issued because it was not accompanied by the appropriate fee. However, that was a case about the commencement of court proceedings and did not help in the construction of the institution's rules in this case.

COMMENT: Limitation periods apply to arbitration claims in the same way as they do for court actions. In court proceedings, this means that the claim form must be issued within the prescribed time period. However, there is no fixed rule for arbitration – the Arbitration Act 1996 ("the Act"), section 14(1) allows the parties to agree the required act. This case therefore contains some useful guidance as to how their agreement might be interpreted in the event of a dispute on the issue.

Lachaux v Independent Print

Without notice applications and whether time should be extended to serve particulars of claim

http://www.bailii.org/ew/cases/EWHC/QB/2015/1847.html

The defendants applied to set aside an order extending time for service of the particulars of claim. The claimant had made its application without notice and the defendants argued that the application should have been made on notice and that the extension should not have been granted.

Nicol J held as follows:

(1) CPR r23.9(3) provides that, where an order is made after a without notice application, "the order must contain a statement of the right to make an application to set aside". That was not done here, but the judge noted that the defendants' solicitors were extremely experienced and so did not need to be told that they had this right (and in fact an application to set aside had been made).

(2) The judge queried whether there had been the necessary "extreme urgency" to justify a without notice application. In any event, it was not clear why informal notification was not given to the defendants' solicitors. PD23A para 4.2 provides that "Where an application notice should be served but there is not sufficient time to do so, informal notification of the application should be given unless the circumstances of the application require secrecy". In addition, the claimant breached the requirement under CPR r23.9(2) that a party who applies without notice must serve the application notice and any evidence in support on the defendants. For all these reasons, the order was set aside.

(3) The judge then considered afresh whether an extension of time should be granted. This was not an application for relief from sanctions and hence the claimant only had to persuade the court to exercise its discretion under CPR r3.1(2) (ie the court's general case management powers). Here the claim form had been issued and served in time, and the defendants had been shown draft particulars of claim. Weighing all the relevant factors together, Nicol J concluded that it would be just to grant the extension.

Rio Tinto v Vale

Whether letter of request could compel the disclosure of confidential information

http://www.bailii.org/ew/cases/EWHC/QB/2015/1865.html

The claimant obtained an order from the English court following a Letter of Request from the New York court. The order required the production of certain documents and the examination of certain witnesses. The issue in this case was whether the defendant should be required to identify individuals who had provided it with information on a confidential basis.

It is a well-established principle that confidentiality, in and of itself, is not a reason for refusing to accede to a request from the foreign court. The court must undertake a balancing exercise, weighing up the public interest in preserving confidentiality and the public interest in the English court assisting the foreign court.

Whether or not the defendant would be able to recruit or engage individuals to give them information on which they depend in future was not a sufficient ground for refusing the request. However, the court was entitled to take account of the "truism" that even in a democratic society, "whistleblowers may be castigated for speaking out and suffer prejudice to themselves or their families". Of key importance in this case was the fact that the information being sought (ie the identities of the sources) was of only peripheral importance to the US proceedings. It would not be a sufficient answer, either, that the information being sought would be subject to a Protective Order: " It is only if the breach of confidence can be justified and disclosure should be ordered in principle, that the Court goes on to consider whether the information or documents should be disclosed to a limited class of people". Accordingly, the defendant was under no obligation to reveal any information that would identify the individual sources.

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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