Worldwide: (Re)Insurance Weekly Update 44 - 2015

Last Updated: 9 December 2015
Article by Nigel Brook

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

This week's caselaw:

Marshall v MIB

Applicable law where accident involved a number of persons and vehicles

http://www.bailii.org/ew/cases/EWHC/QB/2015/3421.html

This case concerns an accident in France in which an Englishman was killed (and his colleague badly injured). An uninsured car driven by a French national hit one of the Englishmen's car (which was registered and insured in the UK) which then hit a recovery truck which was registered and insured in France. One of the issues was which law was applicable to the accident, which had involved a number of persons and vehicles. This issue fell to be determined under the Rome II Regulation (the accident having taken place after 11th January 2009).

Article 4(1) of the Regulation provides that the applicable law will be the country where the damage occurs (here, France). However, Article 4(2) provides that "where the person claimed to be liable and the person sustaining the damage both have their habitual residence in the same country...the law of that country shall apply". The argument was raised that, because of the use of the singular "person", Article 4(2) only applies where one person brings proceedings against another person and they are both habitually resident in the same EEA state. That argument was rejected by Dingemans J who opined that: "The proposition that a coach crash involving a number of different Claimants should be excluded from the effect of Article 4(2) simply because there is more than one injured person is not sustainable". Accordingly, English law might apply to the claim of the widow of one of the Englishmen against the other.

Article 4(3), though, can be used to return to a governing law that might have been required by either Article 4(1) or 4(2). It provides that, where it is clear from all the circumstances of the case that the tort is manifestly more closely connected with another country, the law of that country shall apply. The judge held that Article 4(3) could (and did) apply to return to French law in this case, even though Article 4(2) had excluded it, having taken into account all the circumstances of this case.

Gavin Edmondson Solicitors v Haven Insurance Company

Whether insurers liable to solicitors where portal claims were settled directly with claimants

http://www.bailii.org/ew/cases/EWCA/Civ/2015/1230.html

Several claimants were pursuing road traffic accident claims under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ("the Protocol"). The claimants entered into CFAs with their solicitors and their claims were entered on the Portal. The defendants' insurer knew that the claims had been notified under the Portal but it then settled the claims directly with the claimants (offering to pay the claimants more if they did not use solicitors), thereby depriving the claimants' solicitors of their costs. At first instance, the judge dismissed a claim brought by the claimants' solicitors against the insurer for their costs. The Court of Appeal has now allowed the appeal from that decision.

Reference was made to the earlier Court of Appeal decision in Khans Solicitors v Chifuntwe (see Weekly Update 17/13), in which the Court of Appeal held that there is no necessity to find collusion between the client and the payer, instead, there will be no proper discharge of a claim if the payer is "on notice" of the solicitors' legitimate interest in the payment.

In this case, the Court of Appeal confirmed that such notice can be implied. Here, however, it was held that the insurer had express notice because its "knowledge of and participation in the scheme established by the Protocol and the Portal meant that it was well aware of the interest of [the claimants' solicitor] in receiving its fixed costs and other sums due under the Protocol scheme. Furthermore, it has not been disputed that [the insurer]'s objective in entering into the compromise agreements was to defeat that interest".

Although the effect of a client care letter (which prevailed over the terms of the CFA, and which provided that, upon success, the solicitors would recover their fixed costs and other sums from the other side) was that the solicitors had no right to recover fees from their clients, an entitlement to recover costs arose under the Protocol (and, although it could have, the insurer had not exited the Protocol process at the time of the settlements). The principle of equitable intervention therefore required the insurer to pay the solicitors their fixed costs and other sums payable under the Protocol.

Van Oord v Allseas

Whether an offer was a claimant or defendant Part 36 offer

http://www.bailii.org/ew/cases/EWHC/TCC/2015/3385.html

CPR r36.2(3) provides that a Part 36 offer can be made in respect of a counterclaim and refers to CPR r20 which in turn provides that counterclaims are treated as claims. CPR r36.5 further provides that an offer must state whether it takes into account any counterclaim. The issue of whether a Part 36 offer made by a counterclaiming defendant is to be treated as a claimant or defendant offer is important because claimant offers which are not beaten entitle the offeror to better costs consequences than defendant offers.

In this case, the defendant had made a Part 36 offer to settle the claim against it and the offer was said to take account of any counterclaim which the defendant might have (although no separate, stand-alone counterclaim had been made by the defendant at the time of the offer). The defendant went on to get a better result at trial and argued that it was entitled to the enhanced costs consequences available to claimant Part 36 offers.

Coulson J held that the offer had been a defendant's offer. He stressed that it is vital that a party making a Part 36 offer spells out, in unequivocal terms, the nature of the offer being made and the consequences which will flow from non-acceptance: "the recipient needs to be in no doubt as to what may happen if the offer is turned down". Furthermore, an offer from a counterclaiming defendant will not automatically be treated as a claimant's offer – it is necessary to look at its terms. He also referred to the earlier decision of AF v BG (2010) – in which the Court of Appeal had held that an offer made by the defendant was to be construed as a claimant's offer – and drew various distinctions with the position in that case:

  1. The offer was not expressly stated to be a claimant's offer.
  2. There was no offer to accept an amount in settlement of both the claim and counterclaim – instead it just offered to pay an amount to the claimant.
  3. The offer had offered to pay the other side's costs.
  4. It did not spell out the enhanced consequences of non-acceptance of a claimant's offer.

Furthermore, even if this had have been a claimant's offer, the judge would only have imposed interest of 2.5% (even though up to 10% could have been awarded), because of the current low interest rates.

The judge went on to find that the defendant was entitled to indemnity interest because the claimant should have realised that its claim was hopeless from the outset. However, amounts paid by the defendant to claims consultants were excluded from the order for indemnity costs. That was because the consultants had not acted in any formal proceedings for the defendant and their involvement in the disclosure exercise was "somewhat surprising".

The RBS Rights Issue Litigation

Court considers whether expert evidence is necessary/adjourning trial to allow disclosure process more time

http://www.bailii.org/ew/cases/EWHC/Ch/2015/3433.html

Two procedural issues fell to be considered by Hildyard J and Chief Master Marsh in this case:

  1. Whether the defendants should be given permission to call an additional expert. Having reviewed the applicable test to be applied (which included referring to the three-stage test proposed by Warren J in British Airways v Spencer (see Weekly Update 31/15 for further details)), it was concluded that the defendants had not justified the admission of the disputed evidence. However, it was further held that the defendants should be permitted to renew their application if they wished to do so after having first given their existing experts a further list of questions on the relevant issue. Although it was appreciated that such an approach was not favoured by either party, it was also noted that this approach "is becoming a not unusual recourse in very complex litigation and before the contours of the case are more clearly defined and the other more undisputedly necessary expert evidence is available".
  2. Whether the trial date should be adjourned because of difficulties with the defendants' disclosure exercise (which they said had exceeded their expectations as to scale and the amount of time needed). Under the CPR, an exceptionally strong justification is required if the application will lead to the loss of a fixed trial date. The judge was also critical of the defendants' approach to disclosure. There had been no sufficiently early attempt to grasp what would be involved, "vast armies" had been used without any sufficient focus by senior members within the defendants' organisation and so there had been too much emphasis on a "bottom up" approach to disclosure. Furthermore, the defendants had left the process of identification and collation of its documentation to its solicitors and had not been sufficiently involved in assisting the process.

However, it was concluded (with reluctance) that there would be a risk of unfairness to the defendants if a short adjournment of three months was not allowed. It was stated that: "though the inevitability that costs rise the longer a case continues is also to be considered, in the end it is not the start but the end date which is of prime importance. A more compressed timetable may lead to a longer or disorganised trial".

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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