UK: (Re)Insurance Weekly Update 27 - 2015

Last Updated: 28 July 2015
Article by Nigel Brook

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

This week's caselaw:

Coventry v Lawrence

Supreme Court holds that recoverability of success fees and ATE premiums does not breach the ECHR

When the claimants won in the Supreme Court, Lord Neuberger expressed concern at the level of costs incurred in this case. The claimants' costs amounted to more than Ł1m, including a success fee and ATE premium.  The Defendants (who were individuals rather than a corporate entity) argued that the requirement to pay the success fee and ATE premium was inconsistent with their rights under the European Convention on Human Rights ("ECHR") – specifically Article 6, the right to a fair trial.  In particular, the provisions of the Access to Justice Act 1999 ("the Act") - which meant that such costs were required to be paid if they were reasonable (but not necessarily proportionate) – were, in the Defendants' view, manifestly unfair.

The costs hearing was relisted to allow the Court to hear from interested parties, including the Government. By a majority of 5–2, the Supreme Court has now held that the Act's costs regime is compatible with the ECHR. Whilst acknowledging that there were flaws inherent in the regime (which has now been superseded by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO")), Lords Neuberger and Dyson (delivering the leading judgment) found that the regime was a proportionate, rational and coherent method of achieving a legitimate aim; namely widening access to justice, such that it was not incompatible with Article 6.

Clarke LJ and Baroness Hale gave strong dissenting judgment, though, asserting that the regime was disproportionate and discriminatory because it imposed liabilities, far beyond the bounds of what may be reasonable or proportionate, on defendants who happened to have been opposed by CFA/ATE-funded litigants.

COMMENT: The judgment will no doubt be welcomed by the Government, as the ruling means that a prospective flood of compensation claims from unsuccessful litigants who have paid out ATE premiums over the years will now no longer be forthcoming. Indeed, the potential sums at stake (some commentators estimated that recoveries could run into billions) had the Supreme Court found the Act to be incompatible with the ECHR may lead to the suggestion that this decision is a matter of public policy.

Salt v Stratstone Specialist

Court of Appeal considers the Misrepresentation Act 1967 and damages in lieu of rescission/avoidance

Section 2(2) of the Misrepresentation Act 1967 provides that, where a person has been induced to enter into a contract because of a negligent/innocent misrepresentation, "and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of the opinion that it would be equitable to do so..."

At first instance in this case, it was held that rescission was not possible, but that decision was reversed by Harris HHJ. If it was correct to say that rescission was impossible, though, would damages still be available under section 2(2)? That is an issue which has been discussed in various cases and on which there is conflicting prior authority. However, the point has not yet been decided by the Court of Appeal.

In this case, the Court of Appeal unanimously concluded that "the words "in lieu of rescission" must, in my view, carry with them the implication that rescission is available (or was available at the time the contract was rescinded). If it is not (or was not available in law) because e.g. the contract has been affirmed, third party rights have intervened, an excessive time has elapsed or restitution has become impossible, rescission is not available and damages cannot be said to be awarded "in lieu of rescission"". Accordingly, the discretion to award damages under section 2(2) is not available if restitution is no longer possible. On the facts here, though, rescission was still possible (and lapse of time on its own cannot be a bar to rescission).

COMMENT: Although not conclusively decided by the courts yet, it seems to be the case that the Misrepresentation Act 1967 applies to insurance contracts, although there is caselaw suggesting that section 2(2) does not apply to commercial contracts of insurance (on the basis that if a right to avoid exists, that remedy should not be denied by the courts). Even if section 2(2) does apply to insurance policies, it is unclear how the Insurance Act 2015 will impact on this issue when it comes into force. The 2015 Act will abolish any rule of law permitting a party to an insurance contract to avoid the contract on the ground of breach of the duty of utmost good faith (although insurers can still avoid in certain circumstances under the 2015 Act). Where avoidance is not available though (eg because a negligent misrepresentation was made by the insurer to the insured), it is arguable that, following this case, the discretion to award damages under section 2(2) instead will not arise (although possibly a separate claim in equity could be brought by the insured).

Watsons (Proposed Claimants): Justification for without notice application/need to issue a claim form

In the recent case of Lachaux v Independent Print (see Weekly Update 24/15), Nicol J queried whether there had been the necessary "extreme urgency" to justify a without notice application and said that in any event, it was not clear why informal notification had not been given to the defendants' solicitors. In this case, heard by another Queen's Bench judge, reference was made to the practice of issuing applications ex parte and before issue of a claim form "as if this were the normal way of proceeding". Edis J continued: "It is not. The default position is that interim remedies are granted within existing proceedings. The default position is that they are granted after notice has been given to the person against whom they are sought and after service of the claim form on that person. Those default positions can (and very often are) be varied where good cause is shown, but each variation needs to be justified and considered separately. Where, as here, the claimant comes without having issued proceedings, without serving proceedings, and without giving notice to the other party or parties there is a series of issues to be addressed before any order at all can be made:-

i) Why has no claim form been issued? Is it appropriate to consider granting an order on an undertaking to issue and serve proceedings forthwith? Is there sufficient urgency to justify this course, and what is the likelihood that a claim form will come into existence in such a form that it can lawfully be issued within that time frame?

ii) If the application is entertained before issue, why is it being pursued without notice? There must be a substantial justification for that before the application will be heard, still less granted".

Accordingly, practitioners should bear these considerations in mind when making an ex parte application before issue of a claim form.

Peak Hotels v Tarek Investments

Test for taking funds out of court following cross-undertaking as to damages

The claimant sought and obtained various interim injunctions against the defendants. It was required to provide a cross-undertaking as to damages and this was fortified by the payment into court of USD 10 million. The claimant subsequently applied for a payment out of court of USD 9 million from this amount. It was argued that there was no evidence to suggest the defendant would be caused any loss as a result of the injunctions and that the defendant wished to oppose the payment out in order to cut off a source of funding for the claimant's action.

Barling J therefore considered the appropriate test for the application. Prior caselaw has indicated the need for the claimant to demonstrate "some significant change of circumstances" which it could not have known about when the payment in or undertaking was given. The claimant had also referred to commentary in the White Book that "laxer principles" may apply where the order (as it did here) contains an express "liberty to apply". However, the judge held that the use of that phrase did not advance matters significantly, and the claimant had been right to describe that as a "small point".

On the facts, the judge concluded that there had not been a material change of circumstances to justify the claimant withdrawing part of the fortification which it had undertaken to provide. Nor was it relevant that the cross-undertaking might not be called upon (or not be called upon for the full amount paid into court). Although the claimant had expressed a wish to use the money paid in to fund the cost of the proceedings, it had not argued that tying up the funds created any hardship for it or stifled its claim. Accordingly, the application was refused.

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.