UK: (Re)insurance Weekly Update 37 - 2018

Last Updated: 13 November 2018
Article by Nigel Brook
Most Read Contributor in UK, November 2018

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

Glaxo Wellcome v Sandoz: Judge considers issues relating to legal advice privilege and disclosure of a document by mistake

Two issues arose to be decided in this case:

  1. Were the defendants entitled to claim legal advice privilege? Chief Master Marsh held that they were not, because communications were not made with the "client". In so doing, he followed the recent Court of Appeal decision of SFO v Eurasian Natural Resources Corpn (see Weekly Update 31/18), which in turn followed the earlier Court of Appeal decision in Three Rivers (No.5) which held that not all officers and employees (and ex-employees) within a company should be treated as the "client" for the purposes of legal advice privilege. The Court of Appeal had also expressed some dissatisfaction with the Three Rivers position in the SFO decision, but that was not referred to in this case.In deciding this issue, Chief Master Marsh also stated that "I can see that if more than one party is claiming privilege, it is convenient for the witness statement to be provided by the solicitor who acts for all the relevant parties. It is of note, however, that a disclosure statement must be signed by the party concerned – see paragraph 4 of Practice Direction 31A. It is not permissible for it to be signed by lawyers acting on behalf of that party."
  2. Were the defendants entitled to relief under CPR r31.19(20), preventing use of a document which was disclosed by mistake and was said to be subject to litigation privilege?

The key issue here was whether the defendants' mistake in providing the privileged document for inspection would have been obvious to the solicitor reviewing it. Even if it was, though, there is no automatic right to relief.

In this case, the name of the document in its metadata proved important: "It seems to me that the description of a document that is provided (whether in the metadata or in a more direct form) is of significance. Furthermore, a reasonable solicitor would, and should, when considering the Document, having been put on notice that it might be privileged, have undertaken a check of the metadata. The metadata in question is high level and easily accessible. One the metadata is revealed, the date of the document, 2015, and its description as a 'statement' would have spoken of privilege in clear terms".

Wheeldon Brothers v Millenium Insurance: Court of Appeal refuses permission to appeal a decision regarding coverage under a property insurance policy

The first instance decision in this case was reported in Weekly Update 14/18. Insurers appealed from the first instance decision that the insured was entitled to an indemnity under its property insurance policy following a fire at its waste processing plant.

The Court of Appeal noted that "Complaints about factual findings and expert evaluation...are surprisingly commonplace" and it therefore re-stated the following general principles:

  1. To be overturned on appeal, a finding of fact must be one that no reasonable judge could have reached. In practice, that will usually occur only where there was no evidence at all to support the finding that was made, or the judge plainly misunderstood the evidence in order to arrive at the disputed finding;
  2. A first instance judge's assessment of, or evaluations based upon, expert evidence adduced at trial must be approached by an appellate court with similar caution; and
  3. Because a judgment in the TCC is likely to involve detailed findings of fact in an area of specialist expertise, obtaining permission to appeal on such matters in a TCC case may be harder than in other, non-specialist types of case.

The Court of Appeal found that the appellant in this case had failed to surmount the high hurdle required to convince it to give permission to appeal. Most of the issues raised were factual and the judge had been entitled to reached the conclusions which he had.

One of the points considered by the Court of Appeal when reaching its decision was the meaning of "storage" in the policy. The policy required the insured "to store materials more than 6 metres from fixed plant and machinery".  The insurers argued that materials had to be "placed (kept)" 6 metres away, but the judge rejected that argument and instead found that the term "storage" imports "a degree of permanence and a deliberate decision to designate an area to place and keep material". The Court of Appeal agreed with the judge's finding, stating that the insurer's interpretation "would mean that any piece of waste placed less than 6m from the plant and machinery, no matter how small and no matter how it got there or how long it remained, would negate the insurance altogether. That is not a common sense reading of the policy. It substitutes the word "stored" for the word "kept" or "placed"". By contrast, it was said that the judge's interpretation "gives meaning and effect to the word "stored" as denoting a deliberate act of storage for at least a period of time".

FM Capital v Marino & Ors: Judge considers whether freezing order covered assets held by company of which the respondent was the sole director and shareholder

The claimant obtained a freezing order against the defendant which provided that it covered all the defendant's assets "whether or not they are in his own name and whether or not they are solely or jointly owned and whether the respondent is interested in them legally, beneficially or otherwise. For the purpose of this order the Respondent's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Respondent is to be regarded as having such power if a third party (which shall include a body corporate) holds or controls the asset in accordance with his direct or indirect instructions". This wording is known as "the Commercial Court words" and is intended to extend the operation of the freezing order to assets held by the respondent as a trustee or nominee for a third party in which the respondent has no beneficial interest. In this case, the defendant was the sole director and shareholder of the company which held the relevant asset.

Prior caselaw has held that this extended definition is not intended to include the assets of another person, even if controlled by the respondent (see the Court of Appeal's decision in Lakatamia Shipping v Su (Weekly Update 18/14)). However, the claimant argued that that position had been impliedly overturned in the Supreme Court decision of JSC BTA Bank v Ablyazov (see Weekly Update 38/15).

Peter MacDonald Eggers QC held that there was no rule of law prohibiting a High Court judge, as opposed to the Court of Appeal, from deciding that a Court of Appeal decision had been impliedly overruled by a later Supreme Court decision. However, he went on to find that Ablyazov had not overruled Lakatamia. Nevertheless, he held that there was an inconsistency between the two decisions and concluded that "the extended definition does apply to assets over which the respondent has control but which the respondent does not legally or beneficially own".

That said, he also noted that "the mere fact that the respondent was the sole shareholder and director of a company did not mean that the respondent had "control" over the company's assets for the purposes of the extended definition, because any decision taken by the respondent as to the disposition of or dealing with the company's assets was not taken by the respondent in his or her own right, but was taken in his or her capacity as an organ or agent of the company." Accordingly, the freezing order did not apply here to the assets of the companies in which the defendant had a direct or indirect shareholding.

Things might be different, though, where the defendant's conduct "may have the effect of diminishing the value of the respondent's shareholding in the company, and as that shareholding is an asset which is captured by the freezing order, such conduct may be enjoined by the freezing order", but only if that conduct was outside of the ordinary course of business of the company.

RJ & Anor v HB: Judge considers whether section 68 of the Arbitration Act 1996 allows the removal of an arbitrator

One of the issues in this case, which the judge did not need to decide in the end, was whether, if an award has to be set aside for serious irregularity by the tribunal and the claim has to be determined afresh, section 68 of the Arbitration Act 1996 ("the Act") empowers a court to replace the arbitral tribunal.

Baker J acknowledged that the issue of whether there is a power to remove under section 68, or only under section 24 of the Act, is an important question of principle which prior caselaw does not seem to have determined. He held that, had he had to consider the point, he would have concluded that "s.68 does not empower the court to remove an arbitral tribunal, that being reserved to s.24, and that a direction purportedly pursuant to s.68, as part of setting aside an award, in whole or part, that matters thus requiring fresh determination should go to a new tribunal, would amount to removal of the original tribunal and so would require a s.24 claim".

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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