UK: A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law

Last Updated: 11 March 2010
Article by Nigel Brook


  • In the Matter of Stanford International Bank Ltd
    An appeal from an order recognising Antiguan liquidators under the Cross Border Insolvency Regulations 2006
  • Webster & Ors v The Ridgeway Foundation School
    A case on indemnity costs involving arguments concerning ATE insurers
  • Shell UK Ltd & Ors v Total UK Ltd & Ors
    A case on whether a beneficial owner of property can bring an action for negligent loss/damage to property

This Week's Caselaw

In the Matter of Stanford International Bank Ltd

Appeal from order recognising Antiguan liquidators under the Cross Border Insolvency Regulations 2006

The first instance decision in this case was reported in Weekly Update 25/09. In the US, the US Securities Exchange Commission (SEC) obtained an order appointing a receiver over the worldwide assets of Stanford International Bank ("SIB") and other companies in the Stanford group. SIB was incorporated in Antigua. Two months later, an Antiguan court appointed two individuals as liquidators of SIB. Both the receiver and the liquidators applied in this case for recognition under the Cross Border Insolvency Regulations 2006 ("the Regulations"). The Regulations apply where assistance is sought in Great Britain by a foreign representative in connection with (inter alia) a "foreign main proceeding". A foreign proceeding is a "foreign main proceeding" if it takes place in a state where the debtor has the "centre of its main interests" ("COMI"). At first instance, Lewison J held that the powers and duties conferred on the receiver did not amount to a "foreign proceeding", but the liquidators were appointed to a law relating to insolvency and so were entitled to be recognised as foreign representatives of a foreign proceeding. As there were no factors to rebut the presumption that Antigua was the COMI of SIB, the liquidators were entitled to recognition as foreign representatives of a foreign main proceeding.

In this case, the Court of Appeal agreed with Lewison J's conclusions. The provisions relied on in the complaint filed by SEC in the US related to the protection of investors and could not be categorised as "a law relating to insolvency". As a result, the US receivership is not a "foreign proceeding". The Court of Appeal also agreed that the rebuttable presumption that Antigua was the COMI, as it is the country where the registered office of SIB is situated, had not in fact been rebutted.

Webster & Ors v The Ridgeway Foundation School

Indemnity costs and arguments concerning ATE insurers

After the claimants lost at trial, the defendant sought its costs on the indemnity basis (according to which, any doubt as to whether the costs are reasonable is resolved in favour of the receiving party and proportionality plays no part). The defendant had not made any Part 36 offer and so the court was asked to exercise its discretion under CPR r44.3. Nicol J concluded that although losing a case did not amount to unreasonable conduct, there does come a point at which a claim is so hopeless that its pursuit can be properly characterised as unreasonable conduct and so lead to an award of costs on an indemnity basis. In this case, the pursuit of one issue in this case had been hopeless. Although it is generally impractical to award the costs of different issues on a different basis, in this case, it was possible to separate out that discrete issue without practical difficulty and so costs in relation to that issue were ordered to be assessed on the indemnity basis. However, the judge rejected the defendant's arguments as to why the remaining costs should be assessed on an indemnity basis. Those arguments had included the following points:

  1. Had the claimants won, their Part 36 offer would have put them in a strong position to claim their costs on the indemnity basis. The judge said that that was irrelevant. Part 36 is intended to encourage settlements and if a party who made an offer was more vulnerable to an order for indemnity costs if he later failed at trial, the rules would have the opposite effect; and
  2. It is not unjust that the ATE insurers, who would have been entitled to a very high premium if the claimants had won, should pay indemnity costs if they do not. The judge noted that this is a matter which may be considered following the Jackson Review but said it did not, however, justify an award of costs on the indemnity basis.

The judge went on to hold that, as he was confident that the defendant's recoverable costs would be very substantial, an order for payment on account was justified. That was the case irrespective of an argument that the ATE insurer was minded to renege on its obligations.

Shell UK Ltd & Ors v Total UK Ltd & Ors

Can a beneficial owner bring action for negligent loss/damage to property?

This case involved claims for compensation following the Buncefield Oil Storage Terminal explosion. One of the issues in this case was whether Total (who had admittedly damaged the pipelines owned by UKOP Ltd and WLPS Ltd) owed any duty to Shell (which was the (co-) beneficial owner of the pipelines and had a contractual right to have its fuel loaded into, carried and discharged from the pipelines). It was argued by Shell that in The Aliakmon [1986], Lord Brandon had confined the right to sue for negligent loss/damage to property to the legal owner (or person with a possessory title to the property), but His Lordship had not intended to rule out the owner in equity, provided that the legal owner was also joined to the proceedings.

The Court of Appeal said that there was an absence of directly applicable authority on this issue. The starting point was the exclusionary rule that no duty is owed by a defendant who negligently damages property belonging to a third party, to a claimant who suffers loss because of a dependence on that property (or its owner). However, in this case, Shell was not a complete stranger and "on the face of things, it is legalistic to deny Shell a right to recovery by reference to the exclusionary rule". The Court of Appeal said that it was prepared to hold that a duty of care is owed to a beneficial owner of property by a defendant who can reasonably foresee that his negligent actions will damage the property. If such property is, in breach of duty, damaged, the defendant will be liable not just for the physical loss of that property but also for the foreseeable consequences of that loss, such as extra expenditure to which the beneficial owner is put or the loss of profit which he incurs: "Provided that the beneficial owner can join the legal owner in the proceedings, it does not matter that the beneficial owner is not himself in possession of the property".

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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