UK: (Re)Insurance Weekly Update 21- 2018

Last Updated: 21 June 2018
Article by Nigel Brook
Most Read Contributor in UK, November 2018

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

Edwards v Hugh James Ford Simey: Court of Appeal rules on assessing damages in a professional negligence case

It was alleged that the defendant firm of solicitors had negligently advised the original claimant in this action to abandon an incremental claim under a scheme to compensate former miners suffering from a condition known as vibration white finger. The key issue in this case was whether the recorder had erred in taking into account evidence which had not (and could not have) been available at the time of the settlement in this case when assessing the claimant's loss (namely, a 2013 report of a jointly instructed expert who had assessed the severity of the deceased's condition as being lower than that reported in a medical assessment process report produced in 2003 (the year in which the claim settled)).

The Court of Appeal started from the basic principle that where negligence by lawyers has prevented a claim being brought (or has led to an under-settlement), the measure of loss is the difference between what the claimant got and what it would have got, absent the negligence. If the value of the original lost claim cannot be assessed as hopeless or cast-iron, the court must assess a percentage prospect of success as applied to what would have been recovered if the original claim had been recovered in full. The Court of Appeal pointed out that "the court is seeking to establish what was lost by the claimant, as at the date, often the notional date, of the original trial or settlement".

Where "relevant after-coming evidence" would and should have been available at the notional trial date, had the litigation been competently conducted, it can be taken into account when assessing loss. However, where, as here, the after-coming evidence would not have been available, it cannot be taken into account. It is possible to depart from that basic principle in exceptional circumstances though: "In my view there must be a requirement for a significant or serious scale to the consequences of the supervening event, before it should be permitted to establish an exception to the normal principle. Unless there is some such threshold, there will be a continuing pressure to admit fresh evidence which would not have been available at the original notional trial, on all aspects of such cases, dependent on the energy and resources of the parties to the professional negligence action and their insurers".

Accordingly, the recorder had erred and the case was remitted for a rehearing.

P v Q: A case on extending the time limit to commence arbitration

The parties in this case were parties to back-to-back voyage charters, and the arbitration clause in the charters provided that any claim "must be notified in writing to the other party and claimant's arbitrator appointed within 13 months of the final discharge of the cargo and where this provision is not complied with, the claim shall be deemed to be waived and absolutely barred".

Notice of a claim from a party higher up the chain was not received by one of the parties (P) until after the expiry of the 13 month period (although it was arguably sent to P just before the end of that deadline). P sought to claim in turn against Q, but Q argued that that notice of that claim (and the notice of commencement of arbitration) had been made too late and so the claim was deemed waived. The judge, Sir Richard Field QC, agreed that notice had been given too late and rejected an argument that the clause had to be read so as not to apply where it was impossible for a claim to be passed on within the stipulated time: "The parties desire the benefits that flow from a literal construction of the time bar because, whilst they also have an interest in passing on claims up or down the chain, that is only in so far as they are exposed to claims made in accordance with the time bar. The interest in passing on claims is no reason for giving the clear words of the clause a qualified meaning".

The judge did not decide the further question of whether, even if the court extended the time to commence arbitration (see below), notification of the claim was a step that was separate and distinct from the commencement of arbitration, and so the claim would have still been time-barred.

The judge also considered P's application under section 12 of the Arbitration Act 1996 for a sufficient extension of time for commencing arbitration to validate the notice of arbitration served on Q. The judge approved the observations of Hamblen J in SOS Corporacion v Inerco (see Weekly Update 06/10) that the court should start from the assumption that when the parties agreed the time bar, they must be taken to have contemplated that if there were any omission to comply with its provisions in "not unusual" circumstances, the claim would be time barred (unless the conduct of the other party made it unjust).

In this case, the judge held that the fact that P had only received notice of a claim after business hours on the last day of the time limit (and so could only serve its own notice to commence arbitration out of time) was outside the reasonable contemplation of the parties and was not something that was merely "not unusual". However, he also went on to consider if it would be just to give the extension and as P had not acted expeditiously after receiving the notice (it had not, for example contacted its legal department for urgent advice), he concluded that it would not be just to grant the application to extend time.

COMMENT: In the Inerco case, the judge had also concluded that the fact the claim had not been reasonably discoverable before the expiry of the time limit was more than merely "not unusual" (although there could be exceptional cases where that situation was within the reasonable contemplation of the parties). However, he went on to find that delay after discovery of the loss/claim by the claimant meant that it would not be just to extend time under section 12. Accordingly, parties wishing to bring a section 12 application need to act quickly after discovering a loss or claim.

Liberty Mutual Insurance Europe Plc, Re: Court allows a merger between an English company and the Luxembourg company which it created, to create an SE

An English company underwriting (re)insurance from its office in London and its branches across Europe wished to prepare for Brexit by becoming a Societas Europaea (an "SE"). (An SE is a European public limited company which can be created in any EEA state. It must be treated as if it is a public limited company (some countries even require the head office and the registered office to be at the same address)).

The English company set up a new company, incorporated in Luxembourg, with the intention that it will merge with the Luxembourg company to become an SE (at which point the Luxembourg company will cease to exist under the relevant EU Regulation). In accordance with that Regulation, a notary public in Luxembourg has certified that the pre-merger acts and formalities in relation to the Luxembourg company have been completed.

The English court is therefore required under the Regulation to scrutinise the legality of the merger "as regards the part of the procedure concerning the completion of the merger and formation of the SE". Morgan J queried whether he should be concerned that the Luxembourg company had been specifically formed in order to allow the applicant to use the merger provisions and become an SE. He concluded that this did not present a problem: "I considered that even if the involvement of [the Luxembourg company] was merely a means to enable the Company to produce the intended result under the Regulation, the steps which had been taken and which would be taken came within the ambit and terms of the Regulation and did not infringe the principle of abuse of rights in accordance with the European jurisprudence".

Accordingly, he held that the English and Luxembourg companies are free to take steps to bring the proposed merger and creation of an SE into effect.

JSC BTA Bank v Ablyazov & Anor: Court orders respondent to worldwide freezing order to disclose how his legal expenses are being funded

The claimant bank obtained a worldwide freezing order ("WFO") against the first defendant (Mr Ablyazov) and the second defendant, in order to restrain dealings which would prevent the claimant from recovering assets to satisfy earlier judgments which it had obtained against Mr Ablyazov.

The WFO contained the usual provision that the second defendant could spend a certain amount on legal advice and representation, "But before spending any money the Respondent must tell the Applicant's legal representatives where the money is to come from". The second defendant has spent a substantial amount on legal expenses and told the claimant that his mother was funding those expenses. The bank suspected that his mother was in turn being funded by Mr Ablyazov (out of frozen assets) or that the second defendant was using his own concealed assets . It therefore applied for an order that the second defendant provide full and proper disclosure about how his legal expenses were being funded.

The judge held that the appropriate test for such an order is that that there are "adequate grounds" for making the order and that prior caselaw had required only a real (and not fanciful) risk of a breach of the WFO. She summarised that "Whilst, in principle, the Court will be alert to the need to police its own orders effectively, it must also be astute to prevent a WFO becoming an instrument of oppression".

In evaluating that risk, the court is entitled to take into account the substance of the underlying evidence as set out in prior judgments (although it cannot rely on a bare finding of a court in a matter to which the second defendant was not a party). She held that Okritie v Gersamia [2015] had not established a wider approach that the court can arrive at the same conclusions of an earlier court without exercising its own judgment.

On the facts, the judge concluded that it was not oppressive for the second defendant to be expected to provide the disclosure that was sought: "Whilst it may be that the response that will be obtained is that [the second defendant] does not know and his mother refuses to tell him from where she is sourcing the funds, if that is the answer it will be open to the [claimant] to test that answer in cross-examination".

On a more general note, in a case which is frequently before the courts, the judge cautioned against parties assuming "that successive judges can somehow magically acquire, as if by osmosis, the knowledge of the case which those judges who have dealt with it on previous occasions have acquired. Both sides need to remind themselves of the importance of encapsulating, in a manageable form, everything that is necessary to a given decision, by a given judge, on a given occasion".

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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