UK: (Re)insurance Weekly Update 41- 2016

Last Updated: 23 November 2016
Article by Nigel Brook

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

Astex Therapeutics v Astrazeneca: Court considers who is the "client" for legal advice privilege

Legal advice privilege applies where communications between a client and lawyer are confidential and came into existence for the purpose of giving/seeking advice in a relevant legal context. In the case of Three Rivers (No. 5) [2003], the Court of Appeal ruled that not all officers and employees within a company should be treated as the "client" for the purposes of legal advice privilege. Only those employees within the organisation who are dealing with the matter on which the lawyer is giving advice will be the "client". No privilege will attach to communications passing between the lawyers and anyone else within the organisation outside the nominated group. This is of particular practical importance where in-house or external lawyers are seeking factual information about a problem from employees within the client organisation before litigation is in reasonable prospect.

In AB v Ministry of Justice (see Weekly Update 22/14) Baker J sought to distinguish Three Rivers (No.5) on the basis that in that case the client organisation itself had chosen to arrange its affairs so that only a separate group was specifically responsible for seeking legal advice. Baker J suggested that the position would be different where no separate entity had been established but instead an individual within the client organisation was authorised to seek and receive legal advice. However, that was only a High Court decision and the Court of Appeal's decision in Three Rivers remained binding.

The issue arose again in this case.

Chief Master Marsh approved textbook commentary to the effect that Three Rivers (No.5) is a decision which concentrates upon which officers or employees are authorised to communicate with the corporation's lawyers rather than upon who is the client: "As Mr Thanki QC notes, the fact of being an employee alone cannot be sufficient to give an employee authority to seek legal advice". As a result, he held that attendance notes made by in-house and external lawyers of conversations with employees (those employees not being part of a class of persons authorised to give instructions to the lawyers) could not be the subject of legal advice privilege.

Legal advice privilege is therefore "not apt to cover an information gathering exercise of the type which will normally be conducted in relation to litigation but undertaken before a dispute is in reasonable contemplation...In one sense this conclusion is a surprising one because it might be thought that the involvement of lawyers in the review clothes the review in privilege. But that is not the legal position if the lawyers are obtaining information from persons who are, for these purposes, third parties because they are not 'the client'". Accordingly, only interviews which took place with employees who could be said to be the "client" for the purposes of giving instructions (eg board members) would be covered by the privilege.

COMMENT: This decision therefore re-affirms the position established by Three Rivers (No.5), although it is interesting to note that no reference was made here to the earlier High Court decision of AB v Ministry of Justice.

Bird v Acorn Group: Fixed costs where claim taken out of the EL/PL Protocol

The personal injury claim in this case originated in the Employers' Liability and Public Liability ("EL/PL") Protocol. When the defendant, through its insurers, failed to respond, the claimant's solicitors withdrew the claim from the portal. Liability was then admitted and proceedings issued regarding quantum. Default judgment was obtained and the case was transferred to a county court for assessment of damages. The case then settled but an issue arose as to fixed costs. It was held at first instance that the listing of a case for a disposal hearing following judgment was a listing for trial within the meaning of that phrase in Table 6D (and so the third column of Part B applied).  That meant that fixed costs were recoverable at a higher rate than would otherwise have been the case where there is a settlement between the date of listing and the date fixed for the disposal hearing. As Briggs LJ put it: "The difference is, in absolute terms, a modest one, but the cumulative effect of its application to numerous cases is substantial".

The Court of Appeal has now rejected the defendant's appeal from the first instance decision. In so doing, it rejected an argument that, if the third column is triggered when a disposal hearing is listed for trial, there will be no incentive for insurers to settle: "Settlement saves the insurer its own costs of preparing for a contested hearing, and both its own and the claimant's advocacy fees".

Qader v Esure Services: No fixed costs where claim taken out of RTA Protocol and allocated to multi-track

The issue in this case was whether the fixed costs regime continues to apply to a case which no longer continues under the RTA Protocol, but is allocated to the multi-track after being issued under Part 7. A claim might leave the RTA Protocol for various reasons, such as where liability is not admitted. A claim might then be allocated to the multi-track, rather than the fast track, because, for example, it is re-valued to be worth more than £25,000, or the defendants allege that the claim has been dishonestly fabricated.

The Court of Appeal has now held that, although there is nothing in Part 45 which expressly limits the fixed costs regime applicable to cases started, but no longer continuing, under the relevant Protocol to fast track cases, the fixed costs regime "is automatically dis-applied in any case allocated to the multi-track, without the requirement for the claimant to have recourse to Part 45.29J, by demonstrating exceptional circumstances".

The Court of Appeal concluded that there has been a drafting mistake in Part 45, which the court has power to put right by way of interpretation, even though that required the addition of words, rather than giving the words actually used a different meaning from their natural and ordinary meaning.

WES Futures v Allen Wilson: Part 36 offers and ADR costs

The claimant's solicitors sent a letter to the defendant's solicitors advising that they were instructed to issue court proceedings. On the same day, they made a purported Part 36 offer, which advised that "if this offer is accepted at a point which is more than 21 days from the date of this offer, you will be liable for all our client's legal costs incurred in this case" (emphasis added). In a subsequent adjudication, the adjudicator found in favour of the claimant. The defendant subsequently accepted the Part 36 offer. The issue in this case was whether or not the defendant was liable to pay the costs of the adjudication (as well as the costs of an adjudication which had taken place before the Part 36 offer).

Coulson J held that the offer had been a valid Part 36 offer. He rejected the defendant's argument that the offer had purported to exclude the court's power under CPR r36.13.4(b) (which provides that, where an offer is accepted after the end of the relevant period, the liability for costs must be determined by the court unless the parties have agreed the costs). This was not the same situation as where, for example, an offer provides that each party will bear its own costs (such offer not being Part 36 compliant, because the claimant must get its costs up to the end of the relevant period).

He also held that, even if this had not been a valid Part 36 offer, it should be treated as if it was one (relying on the Court of Appeal's decision in Dutton v Minards [2015], in which it was stated by Lewison LJ that "If an offer is expressed to be a Part 36 offer, it should be interpreted if possible to make it effective as what it purports to be, rather than ineffective").

However, he further held that the "costs of the proceedings", as referred to in Part 36, meant the cost of the court proceedings and did not include the costs of the adjudications. That was not inconsistent with "costs incurred in this case", as used in the offer. Reference was also made to the case of Lobster Group v Heidelberg (see Weekly Update 11/08), in which it was held that the costs of a pre-action mediation could not be recovered as "costs of the proceedings", because the parties had agreed they would each bear their own costs of that mediation. Furthermore,  "costs of proceedings" (which is the relevant wording, whether or not this was an offer actually made under part 36 or simply an offer that referred to part 36) includes "recoverable pre-action costs" (CPR 36.13.1). Those will not normally include the costs of separate, stand-alone ADR proceedings".

Rupasinghe v West Herts Hospitals: Claim for loss of earnings under the Fatal Accidents Act fails

Damages are awarded under the Fatal Accidents Act 1976 to reflect the claimant's loss of dependency on the deceased. McGregor on Damages explains that damages are awarded "for the loss of pecuniary benefit arising from the relationship which would be derived from the continuance of the life". The Act therefore looks only at losses which flow from what the deceased did when alive (either by the making of a financial contribution or by providing childcare or similar services).

In this case, the widow of the deceased sought to claim for her own loss of earnings. She had been forced to give up a remunerative career as a doctor in the UK and return to Sri Lanka after her husband's death, in order to receive support from her family. She accepted that a free-standing claim for loss of earnings under the Act would fail. Instead, she sought to argue that this item formed part of the services dependency claim (her husband having been entitled to free childcare at his workplace). As Jay J summarised her claim "This is not a claim for loss of earnings in the strict sense; it is a claim for loss of services but using the surviving partner's earnings as a proxy or surrogate measure for the value of the services foregone".

It was a novel argument, but it failed. The services dependency claim (ie the loss of childcare) had already been valued, on the basis of commercial and gratuitous care. There was nothing left to value: "The disputed items do not constitute an attempt by the Claimant, applying some form of proxy measure, to value the loss of the Deceased's services, but rather a broader endeavour predicated on reasoning that the Claimant has lost her career because of her husband's untimely death. That is, of course, correct as a matter of fact, but it does not avail her as a matter of law. Seen in these terms, the claim is indeed one for loss of earnings, not one attributable to any need to replace a service that the Deceased had formerly been providing".

(Re)insurance Weekly Update 41- 2016

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