A summary of recent developments in insurance, reinsurance and litigation law
Dring v Cape Distribution: Non-party entitled to access to documents filed at court in order to investigate whether asbestos-related claim can be brought
http://www.bailii.org/ew/cases/EWHC/QB/2017/2103.html
The background to this application can be found in Weekly Updates 14/12, 18/16, 26/16 and 30/17 (Chandler v Cape Plc and Cape Distribution v Cape International). A parent company was held to owe a direct duty of care to an employee of its subsidiary who contracted asbestosis. That decision was based in part on the fact that the group's medical adviser had carried out research and become an international authority on asbestos-related diseases. The subsidiary's employers' liability insurer had then sought to bring a subrogated claim against the parent company.
The applicant in this case is a non-profit unincorporated association representing 12 asbestos victims' support groups in the UK. It seeks to obtain copies of documents filed by the parties in the litigation described above.
CPR r5.4C allows non-parties to obtain certain documents from the court file without the permission of the court. However, the non-party needs the permission of the court to obtain copies of any other documents (as was the situation in this case). The applicant seeks documents which have been described as "crucial knowledge documents (ie in relation to what was known, by whom, and when, about the risks of asbestos exposure historically)". The classes sought were witness statements, expert reports, transcripts of evidence and all documents disclosed by the parties. Master McCloud has now held as follows:
- Documents "filed" on the record of the court which are read in court are subject to a default position in favour of the principle of open justice if the applicant has a legitimate interest. Documents on the records of the court which are not read in court are subject to a more stringent test, namely, there must be strong grounds for thinking that access is necessary in the interests of justice. (Served documents which are not on the records of the court may still be disclosed under the court's common law powers).
- The principle of open justice is engaged even if a case settles before judgment.
- In this case, bundles which were on paper and filed were records of the court. However, a bundle which was provided solely in electronic form via a document management system (and which contained disclosed documents) was not a bundle filed at court, and so did not fall within the scope of CPR r5.4C: "because 'filing' required delivery to the court office and in any event CPR 5.5 provided that a 'practice direction may make provision for documents to be filed or sent to the court' by electronic means and there was no provision for electronic filing of bundles".
- A legitimate interest can include academic interest or use by a pressure group. It was a legitimate aim that the applicant might use the documents to clarify the extent to which the employer might be responsible for product safety issues arising from the handling of asbestos and to assist court claims and the provision of advice to asbestos disease sufferers
- The balance was in favour of disclosure of the witness statements (including exhibits), expert reports and transcripts. Partial access to these documents would have led to "cherry picking". Nor had the application been too vague: "This application in strict point of form as issued is effectively an application for the entirety of the documents at court but nonetheless the classes of document were listed (but with a 'catch all' request at the end which meant that the net effect was to request all documents)".
- It did not matter that the parties themselves had agreed that a term of their settlement was confidentiality: "It would be very unattractive basis to conclude that the principle of openness should be ousted here so as to respect an agreement that documents freely deployed in open court without apparent concern at the time should cease to be available to public scrutiny merely because the parties so agree privately".
COMMENT: The last point above should be borne in mind when documents are filed at court. If documents other than statements of case have been filed at court (and filing does not include providing documents in electronic form, where no order for electronic filing has been made), they may be vulnerable to an order allowing access to non-parties even though they are later made the subject to confidentiality obligations as between the parties themselves (and even though they may not have been read in court).
Bailey v Glaxosmithkline: Court orders security for costs against litigation funders, taking into account an ATE policy taken out by the defendant
http://www.bailii.org/ew/cases/EWHC/QB/2017/3195.html
The court can order security for costs against litigation funders, and various issues arose in this case in relation to a funder who is "balance sheet insolvent" and would need to borrow capital in order to provide security:
- Could the funder be ordered to provide security above the level
of the "Arkin cap"?
The Arkin cap restricts the level of a costs order against a funder to the amount of funding which the funder has provided.
In Arkin, the court was considering whether to make a costs order against a non-party pursuant to section 51 of the Senior Courts Act 1981 at the end of a case. Here, the funder was in effect seeking an order that the Arkin cap will apply when the case is eventually concluded. Foskett J rejected that argument: the discretion to order security for costs is very wide and the possibility of the Arkin cap applying was only one factor to be taken into account when ordering security for costs. Security above the level of the cap could be ordered. It was held that there would be no injustice if security was ordered above the cap and then the cap is applied at the end of the case, because the excess would then be repaid to the funder. The judge also noted that "Whilst, of course, any trial judge would be obliged to consider with care the impact of Arkin in the situation that existed at the end of the trial, there would be various options open to a party who wanted to argue that the cap was not applicable in the particular case" (including a wholesale attack on the reasoning in Arkin, which may have to be resolved by the Court of Appeal). - Could the court taken into account an ATE insurance policy
taken out by the claimant in this case?
Reference was made to the recent case of Premier Motorauctions v PWC LLP (see Weekly Update 42/17), where the court took into account an ATE policy taken out by the claimant when deciding whether the claimant would be unable to pay an adverse costs order. Here, the issue was instead whether the security ordered against the claimant should be reduced to reflect the fact that it had the benefit of a policy. The judge refused to deduct the whole amount covered by the policy. Even though the insurers had not yet claimed to be entitled to avoid the policy, there was no anti-avoidance clause in the policy and there were various conditions precedent affording insurers a defence. The judge held that the risk of the policy being avoided could be reflected here by deducting two-thirds of the policy limit from the amount of security ordered.
Accordingly, security of £1.75 million (£550,000 more than the Arkin cap) was ordered. - Should the defendant be ordered to provide a cross-undertaking in damages, in order to compensate the funder if no costs order is ultimately made in the defendant's favour? Foskett J held that the defendant should provide a cross-undertaking, on the basis that the funder will have to borrow the funds to provide the security and thereby incur borrowing costs and/or will not be able to use those funds to pursue other funding opportunities.
Frenkel v Lyampert: Judge discharges freezing injunction where application for an injunction in another jurisdiction was made on notice and changes to the standard form freezing injunction were not brought to attention of the court
http://www.bailii.org/ew/cases/EWHC/Ch/2017/3121.html
In this case, the judge discharged an earlier freezing injunction ordered by Kerr J on the ground of material non-disclosure. Those non-disclosures included the following issues:
- The freezing injunction was obtained in support of the applicant's claim to enforce a judgment obtained against the respondent in California. The applicant had failed to bring to the court's attention the fact that it had applied inter partes for an injunction in California. That application had been served on the respondent over three weeks before. The judge said that this was highly material because "it obviously goes to the issue as to whether, objectively, there was a real risk that [the respondent] would dissipate his assets". In fact, the respondent had not done anything after being served to dissipate assets. There had therefore been no justification for the application for the freezing injunction in England to have been made without notice. Nor did it matter that reference had been made to the respondent being served in California in an exhibit – it should have been drawn to the judge's attention. The applicant's English lawyers had failed to make proper inquiries ahead of the application for the freezing injunction.
- Modifications to the standard form freezing injunction were not all drawn to the judge's attention. The applicant had sought to argue that it had been obvious to the judge that the order was not a standard form freezing order, because this was an application to freeze only specific assets, rather than a "nuclear" freezing injunction covering all assets up to a specified sum. That argument was rejected by the judge, who held that the need to draw any and all departures from the standard wording to the attention of the judge applies to any application for a freezing injunction. The applicant should have provided either an order with tracked changes showing the modifications (together with annotations explaining the reasons for the changes) or a schedule to counsel's skeleton argument identifying each and every change, with reasons for each change.
COMMENT: In the recent decision of Ras Al Khaimah v Bestfort (see Weekly Update 27/17), in relation to a delay in applying for a freezing injunction, the Court of Appeal rejected an argument that delay is significant when deciding if there is a risk of dissipation because a defendant who is prone to dissipate will have already done so by the time the court is asked to intervene. The Court of Appeal commented that this "argument assumes that a defendant is already of dubious probity and it is a curious principle that would allow such a defendant to rely on his own dubious probity to avoid an order being made against him". However, here the issue was that the respondent had been fully aware of attempts in another jurisdiction to freeze his assets and so there had been no need to bring the application in England ex parte. The judge was confident that if the original judge had been aware of this, the applicant would have been told to bring the application on notice.
Stockman Interhold v Arricano: Court rules arbitrator had jurisdiction to take into account matters which occurred after the award when award remitted
http://www.bailii.org/ew/cases/EWHC/Comm/2017/2909.html
As the textbook Russell on Arbitration explains, "The remission of an award does not deprive it of legal effect. It continues to operate so as to make the tribunal "functus officio", unable to alter the award, on those matters which were not remitted". In this case, the arbitrator's jurisdiction was revived by virtue of a remission by the English court and an issue arose as to the extent of the revival of the arbitrator's jurisdiction. The defendant had made a claim for specific performance when it started the arbitration and had also indicated a claim for damages in lieu or, or in addition to, specific performance but had made no submissions as to quantum.
The judge said that "the arbitrator cannot, on the face of things, allow an amendment to enable a party to introduce a new dispute into the reference which has, by definition, ended at the time of the making of the Award. The scope of the reference must be judged, in my judgment, as at the date of the initial award, since it is only matters within that reference that jurisdiction can be revived in respect of. However, in the final analysis, everything must depend on the proper construction of the Order of remission, viewed against the relevant background".
In this case, it was held that the remission did include a remission in respect of the damages claim and the arbitrator had jurisdiction to award further damages arising out of conduct which had taken place after the date of the award: "prima facie, a limited remission would be to deal with the matters before the arbitrator on the pleadings before him at the date of the original Award. However, this can only be a prima facie rule, and, in an appropriate case and, depending on the breadth of the order of remission, it may be that the arbitrator has to deal with matters that have occurred since the date of the First Award". Here, the remission incorporated the necessity to consider the damages claim, and that allowed the arbitrator to take into account matters occurring after the date of the award which led to an increase (or decrease) in the quantum of that claim.
Lokhova v Longmuir: Defendant given its costs on the indemnity basis where Part 36 offer accepted after the relevant period
http://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/QB/2017/3152.html&query=(longmuir)
Where a Part 36 offer is accepted after expiry of the relevant period, the usual position is that the defendant will pay the claimant's costs of the proceedings up to the expiry date of the relevant period and the offeree will pay the offeror's costs from the expiry date of the relevant period to the date of acceptance on the standard basis. In this case, the defendant's Part 36 offer was accepted after the end of the relevant period and the usual allocation of costs was accepted by the parties. However, the defendant argued that it was entitled to its costs on the indemnity basis. Warby J agreed. He noted that although it is generally desirable for claimants to have confidence that acceptance of an offer will bring a close to matters, on the usual terms, the court "should be willing to examine the conduct of those who first refuse and then accept a Part 36 offer".
Prior caselaw has shown that a failure by the claimant to offer any explanation for late acceptance can be a proper basis for inferring unreasonable conduct (and hence for awarding indemnity costs). Here, there was an explanation by the claimant but it was "highly unreasonable": "the dominant reason for pressing on with her claim was in order to beat the Part 36 offer" and so avoid the risk of adverse costs consequences. Nor did it matter that she had acted on legal advice. The relevant issue is whether, as between the claimant and the defendant, the claimant's behaviour went outside the norm.
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.
