Welcome to the twenty-second edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2014.
A summary of recent developments in insurance, reinsurance and litigation law.
This week's caselaw
- AB v Ministry of Justice
A case on legal advice privilege and the need to identify the "client". - Kruppa v Benedetti
A case on whether the parties had entered into an arbitration agreement. - Page v Champion
A decision on whether a default judgment is binding on the other defendants to an action? - Harb v HRH Prince Abdul Aziz
A case on whether sovereign immunity can be claimed after the death of the sovereign. - Scotland & Anor v British Credit Trust
The Court of Appeal decides whether misrepresentation is needed to establish an "unfair relationship" in a PPI mis-selling case.
AB v Ministry of Justice
Legal advice privilege and the need to identify the "client"
http://www.bailii.org/ew/cases/EWHC/QB/2014/1847.html
The claimant alleged that the defendant did not comply with his "subject access" request under the Data Protection Act 1998. One of the defences raised by the defendant was that the withheld material was exempt from disclosure on the grounds of legal professional privilege (in particular, legal advice privilege). The two relevant documents were:
- A document in which the head of the Coroners' Section of the Home Office sought legal advice from an in-house lawyer. The claimant argued that there was no evidence that the individual seeking legal advice was authorised to do so on behalf of the Home Office. He relied on the Court of Appeal's Three Rivers (No.5) decision in support of his argument that the Court of Appeal limited who could be regarded as a client for the purpose of legal advice privilege. However, Baker J said that the Court of Appeal had been "dealing with a markedly different set of circumstances". In Three Rivers the client organisation had itself created a separate entity which was specifically responsible for seeking legal advice. However, in this case there was no evidence of a separate entity having been created. Furthermore, as head of his department (and in the absence of contrary evidence), it was implicit that the individual in question had authority to seek advice from the in-house lawyer
- An annotated copy of the document referred to in (1) above, which was sent to a non-lawyer for her opinion. The judge noted that legal advice privilege is not lost just because a request for legal advice (or the advice itself) is shown to a third party. However, here, a copy of the original document was sent to the non-lawyer for her independent opinion (either prior to or separate from the legal advice received from the lawyer). As a result, the copy was not privileged from disclosure
However, the judge held that although the claimant had suffered some damage, this was a case in which an award of nominal damages (GBP 1) was appropriate under the Act. The claimant was also awarded GBP 2,250 for distress. The Act provides that an individual must have suffered "damage" before an award of compensation for distress can be made and the judge concluded that it was sufficient that the claimant had been awarded nominal damages.
The judge went on to find that a further document did not fall within the scope of "personal data" under the Act, because it had merely been a conduit for the provision of information contained in other documents.
COMMENT: The judge's comments regarding "who is a client" for the purpose of legal advice privilege are noteworthy. The Three Rivers decision is widely considered to be authority for the view that only communications between those individuals within the client organisation who are charged with obtaining legal advice are the "client" for legal advice privilege, and so those individuals should be clearly identified as the "client". However, here the judge is suggesting that it is only if the client organisation itself chooses to arrange its affairs in that manner that a separate group need be identified as the "client". It is submitted that that view is correct. There is little discussion in the Three Rivers decision itself on this important practical issue and it is difficult to see why any individual within a company who is authorised to communicate with the company's lawyers on a particular issue or claim should not fall within the definition of a "client". However, it should be borne in mind that this is a decision of the High Court only and the Court of Appeal's decision in Three Rivers remains binding.
Kruppa v Benedetti
Whether parties had entered into an arbitration agreement
http://www.bailii.org/ew/cases/EWHC/Comm/2014/1887.html
The defendant applied for a stay of English proceedings (pursuant to section 9 of the Arbitration Act 1996) on the basis that the parties had entered into an arbitration agreement. The clause in question read as follows: "In the event of any dispute between the parties pursuant to this Agreement, the parties will endeavour to first resolve the matter through Swiss arbitration. Should a resolution not be forthcoming, the courts of England shall have non-exclusive jurisdiction".
Cooke J held that this was not a binding arbitration agreement. He rejected the defendant's argument that the use of the word "arbitration" was sufficient for a finding that there was an arbitration agreement between the parties. He held that an agreement to "endeavour" to first resolve a matter through arbitration was not the same as an agreement to refer a dispute to arbitration.
Also, difficulties can arise where parties choose arbitration in Switzerland but fail to specify a particular cantonal seat, and the parties had not addressed that issue and further agreement between the parties on this point would have been required.
Furthermore, "it is logically not possible to have an effective multi-tier clause consisting of one binding tier (i.e. arbitration) followed by another binding tier (i.e. litigation)". If a dispute is to be referred to arbitration, any award arising out of that arbitration should be binding on the parties and ordinarily there should be no second stage thereafter.
Page v Champion
Is a default judgment binding on the other defendants to an action?
http://www.bailii.org/ew/cases/EWHC/QB/2014/1778.html
The principal issue in dispute in this case was phrased by the judge as follows: "Does a default judgment obtained against one defendant (defendant A) preclude another defendant in the same proceedings (defendant B) from advancing, by way of defence to a claim against it (defendant B), a case which is inconsistent with the default judgment which has been obtained (against defendant A)?" He concluded that it does not. Most importantly, the need to avoid inconsistency between judgments (especially when those judgments are within the same proceedings) is outweighed by the "overriding" need to ensure that a co-defendant (i.e. defendant B) is able to put forward the case which it wants to advance. Furthermore, there was no reason why defendant B should be bound by defendant A's decision not to acknowledge service of the proceedings and the effect of the default judgment should only affect defendant A.
Furthermore, CPR r12.8(2)(a) provides that where a claim can be dealt with separately, the court can continue proceedings against other defendants who are not the subject of a default judgment. That was the position here. Even if that was not correct, CPR r12.8(2)(b) would apply instead. This provides that where a claim cannot be dealt with separately (and here the court is looking at the claim against defendant A and not that against defendant B), the court will not enter default judgment but will instead "deal with the application [for default judgment] at the same time as it disposes of the claim against the other defendants".
One further point discussed in the case was an application to set aside a default judgment under CPR r13.3. In Mid-East Sales (see Weekly Update 18/14), Burton J disagreed with Silber J in an earlier decision and held that applications under CPR r13.3 (and CPR r3.9 - applications for relief from sanction)"may allow different or wider considerations to be taken into account, or more than trivial delays to be addressed". That approach was supported in this case. The judge also said that it would be wrong to apply CPR r3.9 in this case in any event, since defendant B was not the party in default.
Harb v HRH Prince Abdul Aziz
Whether sovereign immunity can be claimed after death of the sovereign
http://www.bailii.org/ew/cases/EWHC/Ch/2014/1807.html
The novel issue in dispute in this case is whether, where a sovereign ceases to be head of state on death, his immunity from suit continues to extend to everything which he did when he was head of state, whether of an official or private nature. There is no prior caselaw involving a claim made against the estate of a head of state who has died in office. It is, however, an established principle that when a head of state ceases to hold office during his lifetime, his on-going immunity from suit is thereafter limited to acts which constituted the performance of his official functions during his period in office.
Having reviewed prior caselaw, Rose J identified a principle that "a state is to be regarded as intolerably affronted by a foreign court asserting jurisdiction over the private affairs of its head of state on one day and then not so affronted if that court asserts jurisdiction the next day, the head of state having stood down or been deposed in the interim. This is not because the high esteem and affection in which that head of state is held by his subjects instantly evaporates the moment he steps down from office but rather because their esteem and affection is nothing to the point". Applying this principle to the present case, the judge did not accept that a sovereign who dies in office remains the embodiment of the state once deceased. A new head will take the sovereign's place and there is no room for two embodiments of the state to exist at the same time. Furthermore, there was no justification for treating a head of state who dies in office in a more favourable way than a former head of state who dies some time after leaving office.
Here, an agreement entered into between the head of state and the claimant was a private matter rather than an exercise of the head of state's official functions. Accordingly, the defendant was not entitled to immunity from suit to defeat the claimant's action.
Scotland & Anor v British Credit Trust
Court of Appeal decides whether misrepresentation is needed to establish "unfair relationship" in a PPI case
http://www.bailii.org/ew/cases/EWCA/Civ/2014/790.html
The claimants took out a loan with the defendant and were misled by the defendant's broker into believing that they needed to purchase payment protection insurance in order to secure a loan. At first instance, the judge held that that there had been a misrepresentation and breach of the ICOB rules which in turn created an "unfair relationship" under section 140 of the Consumer Credit Act 1974, entitling the claimants to compensation.
One of the issues considered in this appeal was whether the judge had been wrong to take into account the misrepresentation when deciding whether the relationship was unfair and whether a finding of misrepresentation and a breach of the ICOB rules should be determinative of the question whether there was an unfair relationship. The defendant sought to rely on the Harrison v Black Horse case (see Weekly Update 37/11) in which Tomlinson LJ had observed that a misrepresentation was ordinarily likely to be irrelevant to the question whether a relationship was unfair. Here, Kitchin LJ said that "I recognise that a misrepresentation may not create or even contribute to an unfair relationship but I do not understand Tomlinson LJ to have been suggesting that it can never do so. Indeed it seems to me that it plainly can".
He distinguished this case on the basis that, but for the misrepresentation and associated breaches of the ICOB rules, the claimants would not have taken out the loan (whereas in Harrison the ICOB rules then in force did not require the disclosure of the existence or amount of any commission). Furthermore, although the judge accepted that the ICOB rules did not apply to the defendant, they nevertheless provided a benchmark, or "touchstone", against which the conduct of the broker could be measured.
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