Welcome to the twenty-two edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2015
This Week's Caselaw
Mapfre Mutualidad Compania v Keefe
Court of Appeal considers whether English claimant could bring a claim against a Spanish insurer and Spanish insured in England
http://www.bailii.org/ew/cases/EWCA/Civ/2015/598.html
The English claimant was injured while staying at the second defendant's hotel in Spain. He claimed against the second defendant's Spanish insurer in English proceedings. The insurer did not challenge jurisdiction. However, the policy limit was lower than the level of damages being claimed and so the claimant joined the second defendant (a Spanish company) to the proceedings too. This issue was of importance to the claimant because damages will be higher if assessed under English, rather than Spanish, law.
The Rome II Regulation did not apply to this case, the accident having taken place before 11 January 2009.
The second defendant argued that the English court did not have jurisdiction to hear either the claim against it or the insurer. Jurisdiction was governed by Regulation 44/2001, Article 11 of which provides that an injured party can bring a direct action in his own country against an insurer domiciled in a Member State "where such direct actions are permitted" (Article 11(2)). It also provides that "if the law governing such direct action provides that the...insured may be joined as a party to the action, the same court shall have jurisdiction over them" (Article 11(3)).
In the CJEU decision of Odenbreit [2007], it was held that the direct action against the insurer had to be permitted in accordance with the law where the claimant (and not the insurer) is domiciled. That was thought to be important here because direct actions against insurers in the circumstances of this case are not permitted under English law. However, Odenbreit was a motor insurance case, and the relevant EU Directive provides that all Member States are obliged to ensure that an injured party in a motor accident has a direct action against the tortfeasor's insurer. The issue in this case was whether the same principle applies outside of motor insurance.
The Court of Appeal concluded that it does not. The relevant law under Article 11(2) which determines whether a direct action is allowed is the law of the court where the action is to be brought. Although that meant English law here, that was not limited to English procedural law but included the private international law rules in operation before Rome II. As a result, a direct action against the insurer was permitted under English law, because English law would regard that issue as one to be determined by reference to Spanish law (which does allow a direct action to be brought against an insurer).
Although not required to decide the point, the Court of Appeal also held that an insurer cannot force an insured tortfeasor to be sued in the victim's home court just by consenting to jurisdiction (where that court would not otherwise have had jurisdiction over the tortfeasor).
The Court of Appeal then went on to consider whether the English court also had jurisdiction over the insured.
The insured sought to argue that since the claimant's claim against it was "for the uninsured excess", it could not be characterised as being one made "in matters relating to insurance" and so Article 11 did not apply at all – instead the rules for tort claims should be applied. That argument was rejected by the Court of Appeal. The Regulation should be construed purposively and there was no requirement that there should be a policy dispute for Article 11 to apply. There was also no need for the claimant to satisfy a test that the claim against the insured is "closely connected" to the claim against the insurer.
Finally, the Court of Appeal also held that the English court, as the court seised of the direct action against the insurer, was bound to accept jurisdiction against the insured too if the claimant wished to join him, and had no discretion to decline jurisdiction under Article 11(3).
COMMENT: As noted by Gloster LJ in this decision, cases like these are likely to decline in future, given that Rome II will apply to accidents occurring on or after 11 January 2009. Rome II provides that the quantification of damage in a tort claim must be determined by the law of the country in which the damage occurs, and not the procedural law of the court hearing the dispute. Accordingly, in this case, there would have been no advantage to the claimant in bringing his claim in England, notwithstanding the jurisdictional rules under Regulation 44/2001 (now recast as Regulation 1215/2012).
Maharaj v Johnson
Privy Council considers time bar test for a negligence claim based on a "flawed transaction"
http://www.bailii.org/uk/cases/UKPC/2015/28.html
In cases of negligence resulting in economic loss, there is an actual loss (and hence time starts running) if there is a diminution in value/money for the claimant. It makes no difference if the loss has not crystallised yet. If the case is one of a "flawed transaction" (ie the claimant would still have entered into an analogous, flawless transaction, in the absence of the defendant's negligence), the question is whether the value to the claimant of that transaction is measurably less than what would have been the value to him of a flawless transaction. If, instead, the claimant would not have entered into the transaction at all (a "no transaction" case), the question is whether, and if so at what point, the transaction into which the claimant entered caused his financial position to be measurably worse than if he had not entered into it. Where the client has a purely contingent liability or loss, though, because of the professional's negligence, the cause of action accrues only when the contingency actually does occur and damage is suffered.
The Privy Council concluded that this was a flawed transaction case. It then went on to consider whether it is correct to say that damage is always suffered at the time of entry into the flawed transaction. Although some Court of Appeal judges have held that a claimant suffers damage as soon as he receives something different to that which ought to have been received, the Privy Council unanimously disagreed with that view: "There is no substitute for attending to the particular facts and deciding whether such an inference is to be properly drawn from them". On the facts of this case, such an inference could be drawn".
The Board also rejected an argument that this was a case of breach of a continuing contractual duty (the defendant's fees having been paid and the file closed some 22 years ago). Lord Clarke dissented on this point, though. He felt it was arguable that, unbeknown to both sides, the defendants had owed a contractual duty to the claimant for more than 22 years.
COMMENT: This case approves the decision in Knapp v Ecclesiastical Group [1998], where an insurance policy was avoided after brokers failed to disclose material facts to the insurers. There, the Court of Appeal held that the claim against the brokers was time-barred because actual damage had been suffered by the insured at the time the policy was renewed (and that the renewal had been a flawed transaction). Hobhouse LJ had gone on, though, to find that it was possible to envisage other situations in which the fault could so easily be remedied that the damage would be no more than nominal.
Jsc Mezhdunarodniy v Pugachev
Judge confirms test for ordering the costs of a cross-examination hearing relating to a freezing order
http://www.bailii.org/ew/cases/EWHC/Ch/2015/1694.html
The claimants obtained a freezing order against the defendant in aid of Russian proceedings. The claimants sought their costs, on an indemnity basis, of a cross-examination hearing intended to assist the policing of the order by obtaining evidence from the defendant as to his assets. The claimants argued that they were entitled to these costs because the defendant had been evasive and dishonest. Hildyard J held that the court should take into account the following factors (amongst others) when deciding whether an order for costs against the defendant should be made in such circumstances:
- Whether the cross-examination elicits information which should previously have been disclosed;
- Whether the defendant has been cooperative or evasive;
- Whether the cross-examination has been proportionate;
- Whether overall the cross-examination has proved to be a profitable exercise.
On the facts of this case, the judge held that costs should be awarded in favour of the claimants on the standard basis. He rejected an argument that costs should be awarded on the indemnity basis though: the claimant was unable to meet the "particularly high" standard required ie that the defendant was not merely evasive but had actually intended to obstruct justice (ie by giving plainly and obviously false answers).
The judge also considered the test for whether further affidavit evidence should be ordered from the defendant. He said that the court must be persuaded that there is "practical utility" in requiring such evidence and it should prevent the abuse of seeking further evidence for some other purpose (eg unduly pressurising a defendant or seeking ammunition for a contempt application).
The claimants had sought to argue that it is implied into every disclosure order that the defendant must "make all reasonable enquiries". Hildyard J held that although the defendant must take reasonable steps to investigate the truth of his answers, there is no requirement that he make enquiries of persons in relation to assets in which he says he has no interest. As to whether the defendant's obligation of disclosure can be delegated (eg to his solicitors), it was held that: "In a complex case, where the process of disclosure involves detailed investigations of corporate and/or trust structures and interests of an indirect or derivative nature, as well as more obvious and easily ascertainable assets, a measure of delegation as regards the enquiries is almost inevitable. However, the obligation of disclosure remains personal; and a casual approach, even if honest, will not suffice".
COMMENT: Although it is helpful to have a list of factors that the court will take into account on such applications, it might be noted that some of these factors cannot be assessed by the claimant in advance and hence it will be difficult to predict whether its costs will be awarded.
Cole v Howlett
The test for varying a final order
http://www.bailii.org/ew/cases/EWHC/Ch/2015/1697.html
The claimant applied to vary an order. The defendant sought to argue that it is not possible to vary a final order. That argument was rejected by Smith J. The power to vary or revoke an order is contained in CPR r3.1(7) and there is no restriction in that rule on the type of order which can be varied or revoked. In any event, the judge found that the order in issue in this case had not been final.
The judge concluded that the court has a very wide discretion under CPR r3.1(7). Contrary to prior caselaw, he held that there is no essential requirement that the applicant establish some material change of circumstances since the order was made (although that might generally be required by the court). In general, though, the court will not allow a party to re-run a previous hearing on precisely the same material. Furthermore, a court will generally be less favourably inclined to consider a review of a final decision.
Taking into account all the circumstances of this case, the application was granted.
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