Welcome to the forty-fifth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2014.
These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice. Please follow this link for further details of the following recent cases:
This week's caselaw
- XYZ v Various
A case on whether an insurer could be joined to proceedings against an insolvent insured. - Misland (Cyprus) v McKillen & Anor
Court decides whether there must be a genuine claim against an "anchor" defendant under Regulation 44/2001. - Hampshire Constabulary v Southampton City Council
When does time start to run for a contribution claim where a Part 36 offer is accepted? - Dufoo v Tolaini
The Court of Appeal comments on "near-miss" offers. - Bradbury v Paterson
A case on the position where the Official Solicitor ceases to act as a litigation friend.
XYZ v Various
Whether insurer could be joined to proceedings against insolvent insured
http://www.bailii.org/ew/cases/EWHC/QB/2014/4056.html
Weekly Update 43/13 reported an earlier decision in this group litigation. One of the defendant companies was technically insolvent and so the claimants had sought an order that the company provide information about the nature and extent of its insurance arrangements. The judge had ordered the company to provide a witness statement setting out whether it has adequate insurance to fund its participation in this litigation to the completion of the trial and the conclusion of any appeal.
In this case the insurers of one of the other defendant companies sought to join the insurers of the insolvent company to the proceedings in order to obtain a declaration against it. Their stance was that, sooner or later, the insolvent company's insurers would be brought into the litigation and it was sensible that that should happen now, as the more insurers who are involved in negotiations the greater the likelihood of an early resolution of these claims.
That argument was rejected by Mrs Justice Thirlwall DBE. CPR r19.2 did not apply because all the matters in dispute in the proceedings could be resolved without the addition of the insolvent company's insurers. Furthermore, the scope of insurance cover provided to the insolvent company was not "connected to" the group litigation. The insolvent' company's liability to the claimants was quite separate from its insurance position.
As the judge put it: "However attractively packaged this application may be it is an attempt by [the other defendant and its insurers] to establish in advance the depths of another insurer's pockets. If ....correct, CPR 19.2 (2)(b) would entitle a claimant in a personal injury case to join into proceedings a defendant's insurers, seeking a declaration as to the scope of the insurance available to meet the claim. This would cut across years of jurisprudence to the effect that a claimant must take the defendant as he finds him". The situation would have been the same had the other defendant's insurers sought to bring a Part 20 claim against the insolvent company's insurers (who might then have sought to sever the claim).
COMMENT: Had this application succeeded, it would have effectively bypassed the provisions of the Third Parties (Rights Against Insurers) Act 1930, which provides that an action may be brought against an insurer only after judgment is first obtained against the insolvent insured. However, as previously reported, it is expected that this position will change if and when the Insurance Act is passed next year and the 2010 Third Party (Rights Against Insurers) Act is brought into force later in 2015.
Misland (Cyprus) v McKillen & Anor
Whether there must be a genuine claim against an "anchor" defendant under Regulation 44/2001
http://www.bailii.org/ew/cases/EWHC/Ch/2014/3859.html
Article 6(1) of Regulation 44/2001 provides that a person may be sued, where he is one of a number of defendants, in the courts for the place where any one of them is domiciled (provided the claims are so closely connected that there would otherwise be a risk of irreconcilable judgments resulting from separate proceedings).
In this case, the "anchor defendant" is domiciled in England but an Irish defendant sought to argue that Article 6(1) did not apply because the anchor defendant was only a nominal defendant and there was no genuine claim against it. The claimant countered that under Article 6(1), the merits of the claim against the anchor defendant are irrelevant.
There is conflicting authority on this point. Two leading textbooks support the need for a genuine claim, as did Carr J in the case of Sabbagh v Khoury [2014]. However, the claimant argued that the earlier case of Joint Stock Company "Aeroflot Russian Airlines" v Berezovsky [2013] was authority for the position that the merits of the case against the anchor defendant are irrelevant.
In the event, Behrens HHJ was not required to decide the issue because he found that the anchor defendant was not a nominal defendant on the facts. However, he did opine that: "I am far from convinced that Carr J was wrong". Accordingly, his provisional view was that if he had not been satisfied as to the genuineness of the claim against the anchor defendant here, he would have held that Article 6(1) did not apply.
Hampshire Constabulary v Southampton City Council
When does time start to run for a contribution claim where a Part 36 offer is accepted?
http://www.bailii.org/ew/cases/EWCA/Civ/2014/1541.html
A third party had brought a personal injury claim against the claimant. The claimant made a Part 36 offer and that was accepted on 4th November 2010. The claim was therefore automatically stayed and a consent order was made on 15th December 2010 (with costs to be agreed). A costs order was subsequently made in September 2011. In January 2012, the claimant's solicitors wrote to the defendant's insurers claiming contribution from the defendant. Proceedings were commenced by the claimant against the defendant on 3 December 2012.
The Civil Liability (Contribution) Act 1978 provides, broadly, that a contribution claim must be brought within 2 years of the date of a judgment in any civil proceedings (section 3 of the Act) or, in any case not falling within section 3, the date on which an amount to be paid is agreed (section 4 of the Act). At first instance it was held that the contribution claim was time-barred because time had started to run when the Part 36 offer was accepted. The claimant appealed and the Court of Appeal has now held as follows:
- This case fell under section 4, and not section 3, of the Act. There had been no "judgment" and the consent order did not constitute a "judgment". Indeed, it was noted that "one of the benefits for a defendant who settles is, at least in the normal run of cases, that he avoids any adverse judgment of the court".
- Section 4 is focused on the sum paid for the actual damage caused. It does not cover costs, which might be agreed (as they were here) later on. Accordingly, the judge had been correct to hold that time had started to run when the Part 36 offer had been accepted, and the contribution claim was time-barred.
Dufoo v Tolaini
Court of Appeal comments on "near-miss" offers
http://www.bailii.org/ew/cases/EWCA/Civ/2014/1536.html
Weekly Update 43/14 reported the decision in Sugar Hut v AJ Insurance, in which Eder J agreed that the courts should not re-introduce a "near miss" rule following the reversal of Carver v BAA (see Weekly Update 17/08), but went on to distinguish the case on its particular facts (the "near miss" rule stems from the decision of Multiplex Construction v Cleveland (see Weekly Update 40/08), in which Jackson J held that if a party makes a Part 36 offer, or an admissible offer within Part 44, which is "nearly but not quite sufficient" and the other party rejects the offer outright without any attempt to negotiate, then it might be appropriate to penalise the other party in costs).
In this Court of Appeal case (concerning the court's discretion under Part 44), Jackson LJ took the opportunity to comment on his decision in Multiplex. He noted that many recent judgments have taken his discussion of the principles governing the court's discretion under Part 44 as a starting point and he therefore emphasised that his comments regarding near miss offers "should now be disregarded".
Bradbury v Paterson
Position where Official Solicitor ceases to act as a litigation friend
http://www.bailii.org/ew/cases/EWHC/QB/2014/3992.html
The defendant is a consultant being sued by former patients. The Medical Defence Union is his defence organisation and it took out an insurance policy for its members to fund their defence costs. However, the policy in question in this case did not cover the defendant for the claims being made against him. The defendant's health deteriorated and a psychiatric report supported the view that he lacked capacity to give instructions in the litigation. Accordingly, the Official Solicitor was appointed as his litigation friend. However, the Official Solicitor applied to court for an order discharging him as the litigation friend because of the withdrawal of funding. An order was made staying the claim until such time as a new litigation friend has been appointed (hence effectively bringing the whole litigation to a stop) and an appeal was brought against that order.
Foskett J held that the court did have power to terminate a litigation friend's appointment without first identifying a suitable substitute. Furthermore, "the position of enforced continuation as a litigation friend would undoubtedly be unwelcome and uncomfortable". Nor is the consent of any person to act as a litigation friend irrevocable. It was also not possible to force the MDU to fund the Official Solicitor.
The judge went on to discuss potential avenues for securing the funding of the Official Solicitor and held that the case should be transferred to the Court of Protection (where it could then be decided if the defendant did indeed lack capacity), and he ordered payment to be made by the co-defendants in order to "kick start the process". The litigation itself remained stayed for 8 weeks (after which an application could be made to have it lifted).
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.
