UK: (Re)Insurance Weekly Update 43 - 2015

Last Updated: 2 December 2015
Article by Nigel Brook

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

This week's caselaw:

Property Alliance Group v RBS

Litigation privilege and the dominant purpose where a meeting was secretly recorded/use of a document inadvertently disclosed

http://www.bailii.org/ew/cases/EWHC/Ch/2015/3341.html

After litigation had commenced between the parties, the claimant's managing director arranged to meet two former employees of the defendant. The reason he gave for these meetings was said to be a "catch up" (the employees having worked with the managing director whilst employed by the defendant) and to discuss the possibility of working with the claimant in the future. However, the managing director surreptitiously (and unbeknownst to the former employees) made audio recordings of these meetings. The claimant subsequently claimed litigation privilege over the recordings. The issue discussed in this case was whether the recordings had been made "for the sole or dominant purpose of conducting the litigation".

Birss J held that a verbatim recording or transcript (as opposed to a private note) of a non-privileged conversation is not privileged even though it can be said that the reason the recording was made was for use in the litigation (and it makes no difference whether the conversation took place between the parties themselves or between one party and a potential witness or other third party). It was therefore necessary to determine whether the conversation itself had been covered by litigation privilege.

The judge noted that the dominant purpose here was not clear since the claimant held the meetings in order to gather evidence for the litigation, whereas the former employees attended for a catch up and possible future business. He held that the critical point was that the claimant had deceived the former employees, and induced them to speak freely by means of that deception. For that reason, this case differed from a solicitor arranging a meeting with a potential witness in order to take a proof of evidence (and the witness having a variety of reasons for agreeing to meet). Accordingly, the dominant purpose should be assessed from the point of view of the two former employees, and so litigation privilege did not apply.

Although not required to decide the point, the judge also noted that there is a debate amongst academics as to whether a conversation has to be confidential in order to attract privilege. He acknowledged that a solicitor taking a proof of evidence may share confidential information with a witness (who may then speak to the other side too) but that does not affect whether the proof itself is covered by litigation privilege.

The defendant had found out about the recordings because of an email which itself was privileged but which was inadvertently disclosed to the defendant's solicitors. CPR r31.20 provides that "where a party inadvertently allows a privileged document to be inspected, the party who has inspected the document may use it or its contents only with the permission of the court".

Here, it would have been obvious to any reasonable solicitor that the email was likely to be privileged because it was sent from the claimant to the claimant's solicitor. Despite that, the defendant's solicitors had made use of it by contacting the two former employees, without first seeking the permission of the court. The fact that the email indicated that there may have been serious non-disclosure by the claimant did not justify the conduct of the defendant's solicitor. Accordingly, the judge held that a costs sanction should be imposed.

COMMENT: Normally, the existence of the requisite dominant purpose will be assessed objectively. A further issue decided by the judge in this case was that that objective assessment ordinarily requires the court to decide the matter, taking into account all the evidence (including the parties' intentions), as opposed to seeking the viewpoint of a dispassionate observer who, for example, would have been unaware of the claimant's secret purpose. However, here, because of the deception, the fair approach was to instead look at the matter from the point of view of the two employees. This case is also a reminder that care should be taken if a document is inadvertently disclosed to you – any "use" of that document (or its contents) for the purpose of the litigation (even if only to carry out an investigation into the background circumstances), without the permission of the court, can result in a costs sanction against the party.

Ras Al Khaimah v Bestfort

Application for a freezing order in support of foreign proceedings/appointment of a receiver and a power of attorney

http://www.bailii.org/ew/cases/EWHC/Ch/2015/3383.html

The applicants (based in the UAE and Georgia) sought freezing orders against the respondents in support of proceedings taking place overseas. The respondents are LLPs registered in England and Wales and owned by a Georgian national.

The relevant test is whether the court would have granted a freezing order had the substantive claim been brought in England. One of the issues here was whether the respondents had assets which might be caught by the order. A v C [1981] is authority for the proposition that a claimant will only be entitled to a freezing order if he can at least give grounds for believing that the defendant has assets which will be caught by the order – the court will not make an order which is futile.

Rose J held that she was not satisfied that there were substantial assets held by the respondents anywhere in the world (or, at least, assets worth more than the legal costs of enforcing an order). The applicants had also failed to show that an order would be effective to freeze the assets (which might include sums held in bank accounts in Latvia). The evidence showed that the Latvian courts would not recognise an order from the English court freezing assets in Latvia to support substantive proceedings being brought outside of England. To overcome this problem, the applicants proposed the following:

  1. The appointment of a receiver over the respondents, pursuant to the power granted in section 37 of the Senior Courts Act 1981, to obtain payment of all sums standing to the credit of all bank accounts held anywhere in the world in the name of the respondents. The courts have been willing to grant this relief in the past – usually where the frozen asset (eg a property) needs some ongoing management and the freezing order is insufficient on its own. However, the applicants accepted that the appointment of a receiver alone would not be enough as the Latvian courts would not recognise such an order. In any event, Rose J referred to Recital 33 of Regulation 1215/2012, which provides that if protective measures are ordered by the court of a Member State which does not have jurisdiction to hear the substantive claim, the effect of those measures should be confined to that Member State.
  2. An order compelling the respondents to grant a power of attorney to the receivers to act on their behalf. However, the evidence was that the Latvian banks would still be unlikely to comply with the receiver's instructions, even if such an order was made. Rose J did, however, accept (despite little authority on the point) that it would be permissible in theory to grant a power of attorney. However, it would not have been ordered here "against Respondents most of whom who are not defendants to any claim brought by the Applicants; where the sole reason for making the order is to overcome the policy of Latvia not to enforce orders of this kind; where there are unlikely to be assets of sufficient value to justify the very considerable costs that will be incurred by the receivers in using the power of attorney and where there is no history of disobedience to court orders".

The judge also found that a risk of dissipation had not been proven here.

Although a transfer of assets by the owner of the respondents had looked suspicious, that was countered by the fact that neither the respondents nor their owner had failed to comply with any court order. The use of offshore companies was also not a factor in favour of finding a risk of dissipation: "there are many reasons why people working in politically uncertain countries choose to hold their assets in that way and this does not of itself give rise to an inference that [the owner] will try to defeat any judgment awarded against him". Furthermore, there had been considerable delay in bringing the application, and the explanation for that delay- that investigations were ongoing and new material was coming to light all the time - had been weak. This case therefore follows the earlier decision of Anglo Financial v Goldberg (see Weekly Update 37/14), where there had been significant delay to allow protracted negotiations to take place and the judge had held that the defendant would have had ample opportunity to dissipate assets during that time had he been so inclined, and so the risk of dissipation could not be proven.

Pearl Petroleum v Kurdistan Regional Government of Iraq

Enforcement of an arbitral peremptory order by the court

http://www.bailii.org/ew/cases/EWHC/Comm/2015/3361.html

Section 41(5) of the Arbitration Act 1996 provides that: "If without showing sufficient cause a party fails to comply with any order or directions of the tribunal, the tribunal may make a peremptory order to the same effect, prescribing such time for compliance with it as the tribunal considers appropriate". If the arbitrators make a peremptory order but cannot then enforce it, section 42 of the Act provides that (unless otherwise agreed by the parties), the court may make an order requiring a party to comply with a peremptory order made by the tribunal. One of the arguments raised by the respondents in this case was that section 41(5) only applies where a party fails to comply with an order to do something which is "necessary for the proper and expeditious conduct of the arbitration". This argument was based on section 41(1) of the Act which provides that the parties are free to agree on the powers of the tribunal if a party fails to do something necessary for the proper and expeditious conduct of the arbitral proceedings and so, it was submitted, those were the only powers which the parties are free to agree. It was therefore argued that since the peremptory order here – namely, to pay a sum of money to the claimant (which was not security for costs or an interim payment of costs)– did not fall within that definition, the court had no discretion to enforce it.

That argument was rejected by Burton J: "In this case the parties clothed the Arbitrators with a power to enforce their orders, if necessary by a peremptory order, and including an order for the payment of money. Although the proper and expeditious conduct of an arbitration would normally include the parties' compliance with any order which the tribunal may make, nevertheless it is clear that, although arbitrators will in fact be making orders which they consider necessary for the proper and expeditious conduct of the arbitral proceedings, not every breach of every order will lead to a peremptory order – there must clearly be room for de minimis. I do not however consider that it is a requirement for arbitrators in making every order to spell out either that the order they are making is so necessary, or, once the order is made and a party persists in not complying with it, that it is necessary for the proper and expeditious conduct of the arbitration that the party should so comply".

Here, the interim measures order had been necessary to maintain the parties' status quo, and when that order was not complied with, a further peremptory order was required for the proper and expeditious conduct of the arbitration. Accordingly, the court would exercise its discretion to enforce it.

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 Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Nigel Brook
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions