UK: (Re)insurance Weekly Update 11- 2016

Last Updated: 29 March 2016
Article by Nigel Brook

A summary of recent developments in insurance, reinsurance and litigation law.

This week's caselaw:

British Gas Trading v Oak Cash & Carry: Relief from sanctions: Court of Appeal decides earlier breach can be taken into account where an unless order has been breached

http://www.bailii.org/ew/cases/EWCA/Civ/2016/153.html

The defendant failed to comply with an order to file a pre-trial checklist and listing questionnaire. An unless order was made and the document was filed 2 days late. The defence was therefore automatically struck out and judgment in default ordered. Relief from sanction was then granted to the defendant but this was overturned on appeal. A further appeal was then made to the Court of Appeal.

The Court of Appeal has now unanimously refused relief from sanction. Jackson LJ (the author of the original reforms requiring stricter compliance with the CPR and court orders) delivered the leading judgment. Referring to the test laid down in Denton v TH White (see Weekly Update 26/14), he explained that the breach here was serious. Although no reference should be made to "unrelated failures" (such as earlier breaches of orders unrelated to the unless order), "it is not possible to look at an unless order in isolation". It was added that "The very fact that X has failed to comply with an unless order (as opposed to an 'ordinary' order) is undoubtedly a pointer towards seriousness and significance", although not every breach of an unless order will be serious (eg where an unless order is breached by only a few minutes). Here, although the document was filed only 2 days later than the unless order deadline, the defendant had originally had three months to comply with the original order.

Nor was there a good reason for the delay. The wife of the solicitor conducting the matter had been ill, and illness was given as an example of a good reason in the Mitchell decision (see Weekly Update 43/13). However, that was countered here by the facts that the illness was not sudden and that the solicitor's firm was of a "significant size", with over 40 solicitors, and so appropriate cover should have been arranged (the solicitor had also attended the office and reviewed the file before the unless order was breached).

Finally, Jackson LJ confirmed that he was bound by the majority decision in Denton that, when considering all the circumstances of the case, the two factors set out in CPR r3.9 (that litigation must be conducted efficiently and at proportionate cost and that compliance with rules and orders must be enforced) must be given greater weight than other considerations. Here, the lack of promptness by the defendant in bringing the application for relief was the critical factor, as it had disrupted the progress of the action.

Littlestone v Macleish: Court of Appeal decides whether a Part 36 offer was beaten when an admission and payment was made during the relevant period

http://www.bailii.org/ew/cases/EWCA/Civ/2016/127.html

The defendants made a Part 36 offer to pay the claimants £35,000, in full and final settlement. Before the expiry of the relevant period they admitted liability for part of the claim and paid £17,500. The claimant was eventually awarded £48,400 in damages at trial. Allowing for interest at the end of the relevant period, the claimants would not have beaten the defendants' offer if the offer plus the payment on account are aggregated.

The defendants argued that there should be aggregation, because of the provision in the rules which provides that a defendant's offer which is accepted must be paid within 14 days. Since there was no agreement to the contrary, it was argued that the defendant would have been obliged to pay the full £35,000 if the claimant had accepted the offer after being paid £17,500.

That argument was rejected by the Court of Appeal. The Part 36 offer had been an offer to settle the entirety of the claim for £35,000. Nothing in the correspondence about the admissions payment made any reference to the Part 36 offer. Accordingly, the £17,500 was a part payment in advance of the £35,000: "an admitted payment on account of a claim, following a Part 36 offer in a higher amount must, in the absence of any agreement to the contrary, be taken as being made as much on account of the Part 36 offer to settle the claim as it is made on account of the claim itself".

Accordingly, the claimants had beaten the defendants' offer.

The Court of Appeal acknowledged that this decision conflicts with an earlier Court of Appeal case, Gibbon v Manchester City Council (see Weekly Update 25/10). It was held that comments by Moore-Bick LJ in that case were only obiter and the case is not authority for a general principle as to the relationship between a Part 36 offer and a subsequent payment following admission. It was also a debt, not a damages, claim (and it was said that there may be other distinguishing features in the case which were not reported). However, should it be necessary to do so, the Court of Appeal held that it would differ from Moore-Bick LJ's views.

ABC v Barts Health NHS Trust: Whether it would be unjust to award the usual costs consequences where a defendant's Part 36 offer was accepted

http://www.bailii.org/ew/cases/EWHC/QB/2016/500.html

Where a Part 36 offer is accepted after the end of the relevant period, the usual costs consequences are that the claimant gets its costs up to the end of the relevant period and the offeror then gets its costs up to the date of acceptance. However, if the court considers that this position would be "unjust", it can depart from it.

Here, the defendant's offer to settle the whole claim was accepted a couple of weeks before trial and some 8 months after the end of the relevant period. The defendant argued that it would be unjust to apply the usual costs consequences because it had admitted liability for certain issues but the claimant had failed in relation to the vast majority of his pleaded claim. That argument was rejected by McKenna HHJ. He commented that: "the court's discretion to depart from the usual order is constrained by the precondition that its full enforcement would be unjust. It follows, it seems to me, that the discretion is more circumscribed than the broad discretion under CPR 44.2. Moreover, the specific considerations identified in CPR 36.17(5) have this common feature that they focus analysis on the circumstances of the making of the offer, the provision or otherwise of the relevant information in relation to it rather than more general issues as to conduct although I remind myself that the requirement to take into account all the circumstances does enable the court to take a broader view and to consider the various matters relied upon by the Defendant". 

He added that the defendant should have protected himself by making its offer in relation to only one of the pleaded issues, rather than the whole claim. Furthermore, although the claimant had been unreasonable in initially rejecting the offer and then pursuing the claim up to shortly before trial, the rules provide a remedy for that situation, in that the claimant will have to pay all the defendant's costs incurred after the end of the relevant period on the indemnity basis.

Integral Petroleum v Melars: Court of Appeal considers scope of court's discretion under section 67 of the Arbitration Act 1996

https://www.lawtel.com/UK/FullText/AC0149540CA(CivDiv).pdf

The applicant challenged an arbitral award on the basis that the tribunal was in error in finding that it lacked substantive jurisdiction (pursuant to section 67 of the Arbitration Act 1996). Section 67(3) provides that the court may confirm the award, vary it or set it aside (in whole or in part). In this case, the judge had found that the tribunal's jurisdiction award was wrong but he declined to grant any relief (on the basis that it was clear that the tribunal would have rejected the claim anyway, and so the jurisdiction error was inconsequential).

The judge refused permission to appeal and the applicant applied for permission to appeal to the Court of Appeal. The Court of Appeal has now refused that application.

It was held that section 67(3) does not prevent a judge from making no order on an application (although cases of no relief being granted following a well-founded application are rare). Longmore LJ commented that: "It would be absurd to suppose that if the arbitrator had expressly held that, if he had had jurisdiction, he would still have dismissed the claim, the court still had to either confirm or set aside the award".

In any event, an appeal can only be brought if the judge himself has given permission to appeal. Section 67(4) makes it clear that the Court of Appeal cannot give permission to appeal.

(Re)insurance Weekly Update 11- 2016

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