UK: (Re)Insurance Weekly Update 41 - 2015

Last Updated: 24 November 2015
Article by Nigel Brook

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

This week's caselaw:

Property Alliance v RBS

Judge considers the scope of legal advice privilege

The underlying dispute in this matter relates to the manipulation of LIBOR. The defendant had set up a stand-alone committee, the Executive Steering Group ("ESG") to deal with this matter. The ESG had liaised with external lawyers and the defendant claimed legal advice privilege in respect of certain "High Level Documents" which had been prepared by the external lawyers (broadly, updates on the progress of regulatory investigations and summaries of discussions between the defendant and its lawyers at meetings). The claimant objected, arguing that not every communication between a lawyer and client is privileged, and Weekly Update 21/15 reported the decision by Birss J that the documents should be inspected by another judge in order to determine whether privilege could be claimed in respect of them. Snowden J has now completed that inspection and held as follows:

  1. The external lawyers had been engaged by the defendant in "a relevant legal context", since the defendant was facing regulatory investigations in a number of countries which could have led to damage to the defendant.
  2. The High Level Documents had formed part of "a continuum of communications and meetings" between the external lawyers and the defendant, the object of which was to give and receive legal advice. They kept the defendant informed of factual developments, so that advice could be sought and obtained, as required. Furthermore, and importantly, the lawyers had given their impressions and responded to questions/given suggestions. Even if the documents had not expressly referred to legal advice, they were nonetheless part of the ""necessary exchange of information of which the object is the giving of legal advice as and when appropriate". It is therefore quite clear that the communication of information between a lawyer and client can be privileged, provided that it is information that is communicated in confidence for the purposes of the client seeking, and the lawyer giving, legal advice. The test is one of relevance and purpose: the source of the information makes no difference".

The claimant sought to argue that it would be illogical to hold that eg meeting minutes prepared by an employee of the defendant would not be privileged, but those prepared by an external lawyer would be (relying on a comment by Richards J in FSCS v Abbey National (see Weekly Update 47/07) that board minutes are a "common example" of a document which is "clearly not privileged". Snowden J held that there could be situations where minutes prepared by a lawyer and sent to a client would not be privileged. Just as eg press cuttings sent from a law firm to the client are not being sent in the capacity of a lawyer being asked to provide legal advice, so minutes prepared by a lawyer solely for convenience reasons will not qualify for privilege. Furthermore, Richards J had been referring to the issue of whether redactions could be made to an internal document of the client so as to protect the privilege that attached to legal advice that had been contained in a different communication that had passed between the client and its lawyers.

Here the lawyers were not providing only administrative support – the meetings had a very substantial legal content and the lawyers took the lead in discussions and in preparing minutes as an integral part of advising on the investigations and claims against the defendant.

Finally, Snowden J commented on the policy which justifies legal advice privilege. This cannot be confined to allowing a client to make candid disclosure to his lawyer. Instead, "lawyers are often also given the task of investigating, or are in possession of, relevant information. The lawyer must be able freely to communicate that information to his client to enable the client to make a fully informed decision as to what further legal advice to obtain, and what to do. When legal advice is then given, the lawyer must also be able to provide the client with an accurate record of the discussions and the decisions taken as a consequence. If the lawyer was concerned that his communications might be disclosable to third parties without the client's consent, he would be most unlikely to commit such matters to paper, with the inevitable risk of misunderstandings as to the facts, the legal advice given, and the decisions taken".

Accordingly, the High Level Documents were privileged.

COMMENT: This case confirms that the communication by a lawyer to his client of purely factual information will be covered by legal advice privilege, provided that it is given in the context of the lawyer providing legal advice and is not just administrative support. As such, it is a highly practical decision, taking into account the general relationship between the lawyer and client, rather than focusing on the precise contents of each communication instead.

Ras Al Khaimah v Bestfort Development

Judge confirms the threshold test for security for costs applications

Of issue in this case was the threshold test for a security for costs application based on the condition in CPR r25.13 that the claimant is resident outside of the jurisdiction and not resident in a contracting state under the Brussels/Lugano Convention or EC Regulation 1215/2012 (condition 2(a)). The defendant argued that the Master had applied too high a test in determining whether it would encounter potential difficulties or burdens of enforcement in the relevant state. The Master held that the court must be satisfied that the defendant would be "likely" to face such difficulties or burdens, whereas the defendant argued that it was a lower test – namely, whether there is a "real, as opposed to a fanciful, risk" of such difficulties or burdens.

The defendant sought to rely on the Court of Appeal decision of De Beer v Kanaar [2003]. However, Richards J has held that there was no discussion in that case of the correct test. Instead, reliance should be placed on the decision of Mance LJ in Nasser v United Bank of Kuwait [2001] which provides for a threshold test of likelihood.

Furthermore, the Master had not been wrong to take into account an undertaking proffered by the claimants to meet any costs order made against them within 14 days and/or not to oppose recognition of any order obtained. The Master was entitled to assess what weight should be given to such undertakings. Richards J also found that it was of "very little significance" that security was being sought for only a short period.

IPCO v Nigerian National Petroleum Corpn

Whether security should be provided for amount of award being challenged in absence of an application

Section 103 of the Arbitration Act 1996 provides that, where an award is being challenged in the country in which it was made, the court where enforcement is being sought may adjourn a decision on enforcement and "may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security".

In Dardana v Yukos Oil [2002], the Court of Appeal held that that section gave the court the jurisdiction to make an order about security of its own motion. In this case, the Court of Appeal said that "It is not wholly clear to us how s 103 (5) was thought to provide jurisdiction to the Court to act of its own motion but, in any event, a court which is asked to adjourn, or continue an adjournment of, enforcement is entitled to impose conditions on the exercise of its discretion to do so: CPR 3.1 (3) (a); and may do so of its own initiative: CPR 3.3. Section 103 (5) cannot be treated as precluding the exercise of that right".

Purewal v Countrywide Residential Lettings

Application of insurance proceeds following receivership

The claimant mortgagor fell into arrears and the mortgagee appointed a receiver. The receiver took out building insurance over the property and advised the claimant to cancel his own policy. Following a leak at the property, the receiver failed to notify a claim in time. The claimant alleged that the receiver had breached its duty to him by failing to submit a timely claim.

The Court of Appeal has now upheld the trial judge's finding that the receiver owed no duty to the claimant: "any duties owed by the Receivers in relation to the insurance claim were owed exclusively to the trustee-in-bankruptcy". A further issue was whether, had a valid insurance claim been made, the receivers would have been obliged to spend the insurance monies on making good the water damage. The position is governed by the Law of Property Act 1925, which provides that the mortgagee can, if it wants, require the receiver to use the insurance proceeds to carry out repairs. However, on the facts, the judge concluded that: "There is no evidence to show that the Bank would necessarily have directed the Receivers to expend the money on repairs as opposed to the reduction of the mortgage liabilities and subsequent events strongly suggest that the Bank would have sought to reduce its exposure. In my view, the claimant has not produced the evidence necessary to establish his case on causation".

Blake v Stewart: Adding a third party to a claim

PD19A provides that "A new defendant does not become a party to the proceedings until the amended claim form has been served on him", and the case of Kettleman v Hansel Properties [1987] is cited as authority for that. However, in this case, the judge held that a claim form need only be served if directions are given to do so. Otherwise, it was held that only the order joining the new party must be served on all parties as well as the new party. Although the court may give directions for service of a claim form (pursuant to CPR r 19.4), it is not bound to do so.

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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