UK: A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law: 19 April 2010

Last Updated: 23 April 2010
Article by Nigel Brook

Cecil & Ors v Bayat & Ors

Test for service out

The defendants applied to set aside service of proceedings. Three questions of law were disputed between the parties:

  • Whether the "Canada Trust gloss" should be applied. The claimant must show (1) that each cause of action in respect of which he claims stands a reasonable prospect of success and that (2) he has a "good arguable case" that the claim falls within the jurisdictional gateways now set out in Practice Direction 6B.

    In Canada Trust [1998], Waller LJ said that the test for "good arguable case" meant that one side had a "much better argument on the material available" (the so-called "Canada Trust gloss"). The use of the test in all circumstances has been doubted in subsequent cases. However, in this case, Hamblen J, whilst recognising the difficulties that the test posed, said he was nevertheless obliged to follow the Court of Appeal case of Sharab v Al Saud [2009] and apply the Canada Trust gloss. He said he considered that the test was who has the better argument (although in this case he applied the test of who has "much" the better of the argument). He did not rule on a further (novel) argument that the Canada Trust gloss should not be applied where there is no available alternative appropriate forum;
  • Can grounds of jurisdiction other than those clearly identified at the permission stage be relied upon? Hamblen J said they could not, but he was prepared to exercise his discretion to cure this defect because the gateway relied on was at least referred to in the claimants' evidence and the claimants' reliance upon different gateways turned on matters of argument rather than of evidence; and
  • The scope of claims "in respect of " a contract under PD 6B. The claimants tried to argue that all they needed to show was "a connection with" a contract falling within the criteria of PD 6B para 3.1(6) a) to d) (eg a contract governed by English law or which is made within the jurisdiction). This argument was rejected by the judge: "In my judgment, at least on respect of contractual claims, some relevant legal connection between the claim and the other contract is required. If that contract needs to be referred to and relied upon in order to assert the relevant cause of action then that requirement is likely to be satisfied since it will be a necessary part of the cause of action. However, a mere factual connection between the two contracts is not enough".

SAB Miller & Anor v East African Breweries

Whether parties had expanded section 44 of the Arbitration Act 1996 ("the Arbitration Act")

Section 44 of the Arbitration Act grants the English courts powers which are exercisable in support of arbitral proceedings (including the granting of interim injunctions). Section 44 is not mandatory and can be excluded by the parties. In this case, it was argued that the parties had not excluded section 44, but instead had agreed to confer wider powers than section 44 allowed (eg the parties could apply for interim or final injunctive relief). At first instance the judge granted an interim injunction and refused leave to appeal (section 44 provides that the leave of the judge (and not the Court of Appeal) is required for any appeal from the judge's decision). The appellant argued that section 44 did not apply and therefore the Court of Appeal could give leave to appeal. Two judges heard the appeal.

They both concluded that the Court of Appeal did not have power to grant permission to appeal but for differing reasons.

Laws LJ, although agreeing that the relevant clauses in the agreement between the parties appeared to refer to powers wider than those conferred by section 44 "they are not worded so as to confer power. They are worded so as to make it clear that existing powers are preserved". He said that although there is no reference to a final injunction in section 44, "there may be cases in which justice requires an order to be made under section 44 which has final dispositive effect even though in form it is an interim order".

Sir David Keene held that it was not in dispute that the application in the court below was made under section 44 and that the judge's order was made under that provision. Accordingly, only the judge could grant leave to appeal. Arguments about the exact scope of the provisions in the agreement were "less clear-cut" and he was inclined to the (not conclusive) view that they did confer wider substantive powers.

The judges also refused to comment on the "unresolved debate as to the co-existence of precise relationship" between section 44 and section 37 of the Senior Courts Act 1981 (which confers on the High Court a general power to grant an interim or final injunction).

Silvera v Bray Walker & Anor

Pre-2005 CFAs and the need to briefly specify reasons for the percentage increase

This case involved the interpretation of regulation 3(1)(a) of the 2000 Conditional Fee Agreements Regulations (now revoked but only with effect from 1 November 2005). This regulation provided that where a CFA provided for a success fee, it must "briefly specify" the reasons for setting the percentage increase at the level stated in the agreement. (This case was unusual in that the challenge to the CFA was being brought by the client himself and not the insurers of a party successfully sued by the client). The Court of Appeal ("by the narrowest margin") agreed with the judge that there had been no literal breach of the regulation: "I consider that there is a sufficient flexibility within the word "briefly" to allow the background features...to render the requisite specification extremely brief". The solicitors had relied on the terms of the Law Society's model agreement and had not inserted any other reasons - however general, these were nevertheless the reasons.

Even if there had have been a literal breach, there had been no material breach, as required by the Court of Appeal in Hollins v Russell [2003] (which had held that the CFA remains enforceable unless the breach would have "a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice".

Higgins v Ministry of Defence

Whether claimant reasonable to instruct London lawyers

The defendant appealed against an order of Master Campbell whereby it was ordered to pay the hourly rates applicable to a Central London firm of solicitors. It was argued that the claimant could have instructed local solicitors in Kent of equal competence and this would have attracted far lower hourly rates. The claimant was 82 and had incurable lung cancer and Master Campbell held that it was not reasonable to expect him to "undertake a trawl of local solicitors" when an experienced consultant had given him the name of the Central London solicitors who specialised in this field. The defendant argued that the age of the claimant and the urgency of the case were not factors referred to in previous cases.

Tugendhat J said that lists of factors set out in previous cases were not of general application (although they are useful). He saw no error in the exercise by Master Campbell of his own judgment. However, a reasonable litigant will normally be expected to investigate the hourly rates of solicitors whom he might instruct and to consider a number of factors such as the time and costs associated with geographical location. He must keep down the costs of litigation and so, if he instructs London solicitors for a case which has no obvious connection with London (and he does not require expertise which can only be found there) he may not be able to recover costs on the basis of those solicitors' hourly rates.

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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