UK: (Re)Insurance Weekly Update 26 - 2015

Last Updated: 21 July 2015
Article by Nigel Brook

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

This week's caselaw:

AMEC v Morgan Sindell

Court rules defendant must disclose documents from an arbitration in which the defendant was a party/pre-action protocols

English law recognises that documents which are prepared for the purpose of arbitrations and copied to the arbitrators and the other party, as well as the award itself, are protected by a duty of confidentiality. That duty can be overridden, though, by an order from the English courts (as well as in other ways). In this case, the claimant, a non-party to an arbitration, sought permission from the court for disclosure of documents and information obtained by the defendants in arbitrations in which the defendants had been involved.

The defendants raised a number of objections, including:

  1. The claimant had failed to comply with the TCC pre-action protocol because no without prejudice meeting had taken place (and hence this claim should be stayed to allow compliance with the protocol). That argument was rejected by the judge who held that the protocol did not apply to a Part 8 claim for production of documents. In any event, he said that the court is principally concerned to ensure that, as a result of the protocol stage, each party to any subsequent litigation has a clear understanding of the other side's case. Here, the defendants were fully aware and a without prejudice meeting would only have added further costs. Hence the claimant had complied with the protocol "in substance".
  2. They had no duty to provide the documents. That argument was also rejected by the judge: the defendants were the agents of the claimant and so had a duty to provide the documents, which related to the affairs of the principal.
  3. The documents were confidential to the other party to the arbitrations and they were not obliged to provide documents to their principal in breach of that confidentiality. That argument was also rejected: "It is for the defendants to show that their unequivocal obligation to provide all these documents to [the claimant] should in some way be tempered by questions of third party confidentiality. They have wholly failed to do that". Of importance here was the fact that the claimant was, on the facts of the case, likely to have to meet any shortfall to the relevant third party arising out of the defendants' impecuniosity.

Accordingly, disclosure was ordered.

Expofrut v Melville Services

Whether court should extend time to commence arbitration proceedings based on conduct of the defendants

Section 12 of the Arbitration Act 1996 provides (in relevant part) that " Where an arbitration agreement to refer future disputes to arbitration provides that a claim shall be barred...unless the claimant takes within a time fixed by the agreement some step...(a)to begin arbitral proceedings...the court may by order extend the time for taking that step...The court shall make an order only if satisfied....that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question". The issue in this case was whether there had been such conduct by the defendants.

The defendants had participated in proceedings in Belgium but it was common ground that they did not thereby waive their right to arbitrate and nor had they submitted to the jurisdiction of the Belgium courts. (When the Belgian courts held that the dispute ought to be arbitrated instead, the claimant sought this extension of time to commence such arbitration). The claimant argued that until the defendants had taken the point some 2 and a half years after the commencement of the Belgian proceedings, it had believed that there was no dispute as to the jurisdiction of the Belgian courts. However, Burton J held that that did not amount to the sort of conduct referred to in section 12. The defendants had been entitled to act as they did and had not been required by the Belgian courts to take the jurisdiction point any earlier. The claimant ought not to have assumed that the defendants had no issue with Belgian jurisdiction.

Accordingly, the claimant was not entitled to an extension of time to commence arbitral proceedings.

Orientfield v Bird & Bird

Failure to mediate and the duty to mitigate loss

Clyde & Co (Neil Jamieson and Tom White) acted for Mr and Mrs Plant in separate proceedings.

The claimant brought a claim for professional negligence against its solicitors (the defendant) following its purchase of a property from Mr and Mrs Plant. That claim succeeded and one issue in this case was whether the claimant had failed to mitigate its loss. Following the purchase, Mr and Mrs Plant had commenced proceedings (seeking a declaration that the claimant's deposit was forfeit) and the claimant had counterclaimed for the return of its profit plus damages. That action had settled but the defendant argued that the claimant was not entitled to recover the full costs of those proceedings from it because the claimant had failed to mitigate its loss by mediating the dispute with Mr and Mrs Plant at an earlier stage.

The duty to mitigate is a duty not to expose a contract breaker or tortfeasor to additional expense by reason of the claimant not doing what it ought reasonably to have done. Here, the counterclaim/defence run by the claimant were intended to reduce the amount of the claim eventually brought by the claimant against the defendant. The judge concluded that: "it is not open to the defendants then to second guess the judgment of the claimant's advisers after the event as to how they should have conducted the litigation other than perhaps in very clear and obvious circumstances. Had it been the case that [the claimant] was refusing to mediate in the face of advice from its solicitors that it should do, or perhaps if it could be shown that there was an outright refusal to mediate from an early stage in the litigation, then the failure to mediate might constitute a breach of the duty to mitigate. However, there is no evidence that [the claimant] was refusing to take the advice it was given from its' solicitors or that [the claimant's] solicitors were refusing outright to mediate. Notwithstanding that in the end the case was settled with relative ease, the correspondence after the exchange of witness statements did not suggest that this was likely".

Echoing caselaw on whether costs should be awarded because of a failure to mediate, the judge accepted that the fact that a party believes it has a strong case is not sufficient reason in itself to refuse to mediate. However, here, both parties had agreed to delay mediation and had agreed that the prospect of a mediation succeeding earlier on was too low to justify the cost of such a mediation.

Accordingly, there had been no failure to mitigate.

De Geneve v Polevent

Governing law in an unjust enrichment claim

The claimant Swiss bank was the victim of a fraud which caused it to pay money to a London bank, in favour of the defendant. It claimed for the tort of deceit and also for restitution of money paid by mistake. The issue in this case was whether the law governing the claim for restitution was Swiss or English law under the Rome II Regulation.

Teare J noted that unjust enrichment claims are dealt with under Article 10 of the Regulation. It provides that: "(1) If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship". The judge concluded that this relationship must exist before the facts which give rise to the claim and that this article is not intended to refer to the mere "relationship" of wrongdoer and victim, created by those facts. Accordingly, Article 10(1) did not apply. Instead, the position was governed by Article 10(3) which provides that: "Where the law applicable cannot be determined on the basis of paragraphs 1 .. it shall be the law of the country in which the unjust enrichment took place".

There was no dispute here that the unjust enrichment had taken place in England and so English law was the governing law for that claim.

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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