UK: (Re)insurance Weekly Update 25- 2017

Last Updated: 24 July 2017
Article by Nigel Brook
Most Read Contributor in UK, December 2017

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

Vilca v Xstrata: Judge considers whether report of first expert should be disclosed as a pre-condition for being allowed to call a second expert

The defendants' expert on Peruvian law withdrew shortly before trial because of ill-health. As the time for exchange of expert evidence had passed, the defendants sought an extension of time in order to instruct a new expert. The claimants accepted that the defendants should be able to instruct a new expert but asked the court to impose a pre-condition that all the reports produced by the first expert instructed by the defendants should be disclosed.

Stuart-Smith J noted that, as the defendants needed an extension of time, the court had power to impose a condition for the extension. He went on to hold that the pre-condition should not be imposed because "this is not a case where there is any sound basis for concern about undesirable expert shopping" or an abuse of process by the defendants. The expert had had the misfortune to become unwell. Nor was there a need to take steps to ensure that all useful material is made available to the claimants or the court. It was to be expected that there will be some differences of opinion between different experts: "It does not follow that the differences will necessarily or even probably assist the court or the opposing party in identifying the correct resolution of any issues that it has to decide. Second, there is equality of arms between the parties because the Claimants have their own expert, in whom they have confidence. There is no reason to suppose that the Defendants' new expert will omit relevant material that might have been included by [the first expert]: in other words, there is no reason to think that disclosure of [the first expert]'s draft report will add usefully to the information that is available to the court and the Claimants".

Nor was there any need to make an order to deter expert shopping in other cases: "anyone competent to conduct litigation knows that, if there is a hint of undesirable expert shopping or that significant relevant material is being withheld, the imposition of the condition will be the usual order".

COMMENT: The emphasis in this case was therefore on the reason for the change of an expert, and the judge found that there is no automatic right to have the pre-condition imposed just because a party wishes to change experts after permission has been given (and, in fact, permission will not be needed in the first place if the expert was not named in the original court order and the court order can be complied with on time with a new expert). However, other recent cases have adopted a different stance. In Coyne v Morgan (see Weekly Update 19/16), it was held that expert shopping need not be proven before the pre-condition can be imposed and that decision was followed shortly afterwards in Allen Tod Architecture v Capital Property (see Weekly Update 31/16), although the judge also commented there that strong evidence of expert shopping will usually be required before other forms of document than a report by the expert (eg attendance notes by solicitors) are ordered to be disclosed.

Russell v Stone: Judge interprets meaning of a standstill agreement

A standstill agreement can be drafted in either of two ways:

(1) It can suspend or "freeze" time for the purposes of limitation, in which case, if, for example, one month was remaining to issue proceedings when the standstill agreement was concluded, then the claimant still has one month to issue at the end of the limitation period; or

(2) It can extend time. In other words, if time runs out during the standstill agreement, the claimant can still commence proceedings up until the end of the standstill agreement (but not after the end of the standstill agreement).

In this case, the operative part of the standstill agreement provided for time to be suspended, and it also provided that neither party would issue or serve proceedings during the period of the standstill agreement. However, the recital to a second standstill agreement (entered into when the first one expired), provided that "the parties have agreed to further extend the period in which proceedings can be issued...." An issue therefore arose as to whether time had been suspended or extended.

Coulson J noted the increasing use of standstill agreements and said that although that might be regarded as a positive development, as they encouraged settlement, a "safer" option might be to issue proceedings and then seek a stay of eg 6 months to complete any Protocol process.

He further held that the parties here had agreed to suspend time, given the clause in the agreement which prevented either side from starting proceedings during the period of the standstill agreement: "It is an untenable construction of any agreement if it requires one party to breach its terms in order to make the agreement work in the way contended for".

Accordingly, the claimant had not had to commence proceedings on or before the very last day of the last standstill agreement (the judge rejected an argument that the use of the word "until" in the agreement meant up to and did not include the last day of the last standstill agreement). Accordingly, the "extension" referred to by the parties only meant that they were extending the time to issue proceedings. Even if that was wrong, it is an established principle that the operative part of an agreement always takes precedent over a recital.

COMMENT: Most standstill agreements are drafted to suspend time. This case makes it clear that if you wish to instead extend time to issue proceedings but not stop time running, you need to draft that agreement very clearly, by providing that the parties agree to extend the time to issue proceedings to X day, and by not including a term about the parties agreeing that they will not commence proceedings until the end of the standstill agreement.

Lakhani v Mahmud: District judge did not err in refusing relief from sanctions where costs budget filed a day late

The defendants filed their costs budget a day late. The automatic consequence under the rules is that they cannot recover any more than court costs if they win, unless relief from sanctions is permitted. The district judge refused to grant relief and so the defendants appealed. That appeal has now been dismissed.

The defendants argued that the breach had not been serious because the parties had still been able to engage in debate about the costs estimates and there was little dispute about the defendants' costs (which were estimated to be about half of the claimants' budget).

It was held that the district judge had not erred in finding that the breach was serious (the appeal from that decision was a review, and not a rehearing, by the appeal court). Whilst the actual impact on the ability to perform a task required by an order is very important, the authorities do not suggest that it is the overriding factor: "In my judgment, in evaluating the seriousness of breach, a court is entitled to consider the risk of difficulty that the failure to meet a deadline has created even if, in the event, it has been possible to perform the task required, notwithstanding the breach. That is particularly legitimate in the case of orders whose performance requires a degree of co-operation because, in such cases, even though it may be possible for the non-defaulting party still to do what is required as well, it may make it more inconvenient and costly, since extra time may need to be made available. That may be all the more so, if the number of effective working days to complete a co-operative task is limited, thereby reducing flexibility".

The judge was also entitled to take into account the distraction caused by a debate between the solicitors as to whether the time limit had been breached: "if a party in breach takes rapid and reasonable steps to minimise the impact of any default on the opposite party and the court, the court may conclude that a minor breach has been kept minor ... leading to it being treated as less serious".

Nor had there been any reasonable excuse for the default. The defendants' solicitors had miscalculated the time for filing the costs budget and: "while it is true that some judges may have taken a more charitable view as to the calculation of time and whether days had to be clear or not, I am unable to say that the judge's evaluation was clearly wrong in this case". Although an error by a legal representative can provide support for the grant of relief against sanctions, this factor did not have to be treated as of significance in this case.

BCS Corporate Acceptances v Terry: Court has no power to strike out for abuse after judgment

In Fairclough Homes v Summers (see Weekly Update 23/12), the Supreme Court held that a court does have jurisdiction to strike out a statement of case for abuse of process (eg because of a fraudulent claim) even after the trial of an action, in exceptional circumstances. In this case, the judge held that the principle in Fairclough cannot be applied after judgment has been given, though, because after judgment has been given, there is no longer a claim to be struck out: instead, the relevant cause of action (and thus the claim) has merged in the judgment. The judge held that the appropriate course for the defendant is to apply for permission to appeal out of time (if the defendant has fresh, credible evidence which could not have been obtained with reasonable diligence for use earlier on).

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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