UK: A Summary of Recent Developments in Insurance, Reinsurance and Litigation Law : 30 April 2010

Last Updated: 4 May 2010
Article by Nigel Brook

Michael Phillips Architects v Riklin & Anor

Security for Costs Application Where the Claimant has Taken out an ATE Insurance Policy

http://www.bailii.org/ew/cases/EWHC/TCC/2010/834.html

The defendants applied for security for costs on the basis that the claimant was a company and there was reason to believe that it will be unable to pay the defendants' costs if ordered to do so (CPR r 25.13(2)(c)). That threshold having been established, the court has a broad discretion as to whether to order security for costs. The issue in this case was that the claimant had taken out After the Event Insurance ("ATE insurance") covering the costs payable to the defendants should it lose. The claimant therefore argued that the defendants were already adequately protected in the event of a costs order in their favour. Akenhead J accepted that in principle, an ATE insurance policy could provide sufficient protection and although such a policy would rarely provide as good security as a payment into court or a bank bond or guarantee, the amount fixed by a security for costs might be reduced to take account of any realistic probability that the ATE insurance policy would cover a defendant's costs. However, in this case, the judge concluded that the "ATE Insurance provides no real security for the defendants' costs, let alone any real comfort for the Defendants". That was because of various conditions contained in the policy, including the following:

  • A condition that a failure to observe certain conditions in the policy (e.g. informing insurers immediately of anything that may materially alter the insurers' assessment of the claim) could result in cancellation of the policy or a refusal to indemnify. The judge said that it was foreseeable that the insurer could in the context of live litigation, readily avoid paying.
  • A condition which gave the insurer the right to cancel the policy if, for example, a CFA entered into by the claimant terminated for whatever reason or if the insurer believes the claim is unlikely to be successful.
  • A further condition had the effect that the indemnity cover available for the defendants' costs could be eroded by cover for the claimant's own costs and disbursements.

The claimant had provided a witness statement from the underwriting manager of the insurer. He offered to provide a further endorsement to the effect that the insurer would not refuse to pay on a claim which was found to be fraudulent or false. As for the other conditions in the policy, he said that it was not likely that they would be relied on by the insurer. Understandably, he would not give an assurance that the insurer would pay regardless of any conditions in the policy. As a result, the judge concluded that this did not provide any real comfort to the defendants (for example, the insurer could still cancel the policy should it form the view during the course of the litigation that the claimant's claim was unlikely to be successful).

Geofizika DD v MMB International & Anor

Failure to Arrange Insurance for a Shipment

http://www.bailii.org/ew/cases/EWCA/Civ/2010/459.html

A cargo of ambulances was lost on a voyage and the buyers sought to claim from cargo insurers. However, the insurers declined to pay because there had been a breach of warranty that the goods would be stored under deck. The warranty had been given by the freight forwarders, who in turn had relied on the fact that the bills of lading did not on their face show shipment on deck. The buyers then brought proceedings against the sellers for failing to procure effective insurance and the sellers joined the freight forwarders as Part 20 defendants. At first instance, the judge found in favour of the buyers and the sellers and freight forwarders appealed. In relation to the insurance issue, the Court of Appeal held as follows:

  • The freight forwarders were negligent in giving the warranty - it was incumbent on the freight forwarders "who were in no different position to insurance brokers, to check that the facts they were warranting were in fact true".
  • The sellers were under a contractual obligation to provide cover on the terms of the Institute Cargo clauses (C), which would not have covered the loss sustained in this case. (In fact, the insurance obtained provided cover on all risks (A) clauses, but subject to the warranty). The sellers argued that a valid insurance would not have covered the loss and so their breach had caused no loss. This argument was rejected by the judge at first instance for two reasons:
    • The sellers should have obtained a contract of insurance which precisely matched the contract of carriage (ie storage on deck). The Court of Appeal said that the judge had been wrong - here the contract had actually spelt out what cover the sellers had to obtain and a term cannot be implied into a contract if it is inconsistent with an express term in that contract.
    • Based on a witness statement from the buyers, the judge concluded that the buyers had "put themselves into the hands of the sellers who had then procured insurance on all risks (A) clauses as opposed to the more restricted (C) clauses" and so there had been an agreement to provide more than the minimum cover. The Court of Appeal held that it had been unsafe to rely on the statement when the witness had not been cross-examined on that particular part. The Court of Appeal therefore concluded that there had been no loss and so this part of the appeal was allowed.

Pilon v Breyer Group

Stay of Execution Where Claimant Would be Unable to Repay the Judgment Sum

http://www.bailii.org/ew/cases/EWHC/TCC/2010/837.html

The defendant disputed an enforcement application against it on various grounds. The judge accepted that there had been a failure of jurisdiction and breach of natural justice which was material and which had gone to the heart of the dispute, and so the adjudicator's decision was not enforceable at all. However, in case he was wrong on that point, he also considered whether the defendant was entitled to a stay of execution on the basis that the claimant would probably be unable to repay the judgment sum at the end of a substantive trial or arbitration hearing.

The defendant argued that the burden of proof fell on the claimant because the situation was analogous to a claimant resisting an order for security for costs. Coulson J rejected that argument. In a security for costs application, only the claimant will be privy to certain information (eg whether it can raise money from other sources). The judge said that "at issue here is a different point, unconnected with information to which only the claimant is privy. Here the issue as to whether or not the money could be repaid lies at the heart of Breyer's [the defendant's] application for a stay...and therefore the burden, ultimately, is on them to show, on the balance of probabilities, that the money is unlikely to be repaid".

In this case, the claimant's financial position had not always been parlous and the deterioration in its finances had not been caused by the defendant's failure to pay the sums awarded by the adjudicator. It was also unlikely that the claimant could repay any judgment sum. Accordingly, had the judge given judgment for the claimant, he would have considered it appropriate to grant a stay of execution.

BVG v JP Morgan

Jurisdiction Under Regulation 44/2001 Where One of the Issues in Proceedings Was Whether an Act of a Company's Board was Ultra Vires

http://www.bailii.org/ew/cases/EWCA/Civ/2010/390.html

Article 23 of Regulation 44/2001 ("the Regulation") provides, broadly, that a jurisdiction clause in favour of the courts of a Member State gives those courts exclusive jurisdiction. However, Article 22 provides (inter alia) that where the proceedings have as their object the validity of the decisions of the organs of a company, the courts of the Member State where the company has its seat will have exclusive jurisdiction. Article 25 provides that where a court of a Member State is seised of a claim "which is principally concerned" with a matter over which the courts of another Member State have exclusive jurisdiction by virtue of Article 22, it will declare of its own motion that it has no jurisdiction.

In this case, the appellant (a German company) argued that a decision by its management board to enter into a credit default swap arrangement with the respondent was ultra vires (i.e. beyond the powers granted to the board) and therefore void. The parties had agreed in their contractual arrangements that the English courts would have jurisdiction.

However, the appellant argued that the German courts had jurisdiction because the proceedings had as their object the validity of the decisions of its organs and its seat is in Germany. The Court of Appeal rejected that argument. This was a multi-issue case and only one of the issues fell within the scope of Article 22. There was nothing in the wording of the article to warrant a broad interpretation. The English court has to undertake an exercise in "overall classification" and make an "overall judgment" to see if the proceedings are "principally concerned" with one of the matters set out in Article 22. Just because a particular is matter is not merely "preliminary or incidental", that does not mean that it is "principally concerned" with Article 22 matters.

The Court of Appeal held that it could only interfere with the judge at first instance's decision if it was satisfied that the judge had erred in principle in making his "overall classification" or had gone outside the bounds within which reasonable disagreement is possible. There were no grounds here for holding that the judge had erred in rejecting the argument that the German courts had jurisdiction.

HMRC v Insurancewide

Court of Appeal Ruling on Whether Supplies by Insurance Broker Fell Outside VAT Exemption

http://www.lexisnexis.com/uk/legal/search/runRemoteLink.do?langcountry=GB&linkInfo=F%23GB%23EWCACIV%23year%252010%25page%25422%25sel1%252010%25&risb=21_T9167977374&bct=A&service=citation&A=0.6556843610256294

At first instance it was found that the provision of certain services by an insurance agent or broker were exempt from VAT because they amounted to the provision of services "by an insurance intermediary". The services in question were introductory services, whereby the taxpayers channelled would-be insureds to insurers by electronic means with a view to their making a contract of insurance, for which service the taxpayer received a commission from the insurer if the policy was placed. The Court of Appeal upheld this decision. There is no requirement for a direct legal relationship between the taxpayer and either the insurer or the insured - it is sufficient that the insurance agent or insurance broker is "carrying out a vital intermediary role in a chain of intermediaries". In this case, the taxpayers were providing more than simply a "click through" facility. They identified, and provided those looking for insurance with access to, insurers who provided a range of competitive insurance products.

Other News

The Arbitration (Scotland) Act 2010 contains the law and rules applicable to any arbitration (domestic or international) taking place in Scotland. Broadly, the Act brings Scotland into line with the modern framework set out in the Arbitration Act 1996 (which applies where the seat of the arbitration is in England, Wales or Northern Ireland). The Act has received the royal assent and is expected to come into force in around May 2010.

Click here for the full text of the Act: http://www.opsi.gov.uk/legislation/scotland/acts2010/asp_20100001_en_1

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Nigel Brook
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.