This week's caselaw
Gardner v Lemma Europe: Court of Appeal considers whether a claim had been made against the insured
The claimant insured sought to lift an automatic stay of his proceedings against the defendant insurance company after the insurer (a Gibraltar company) went into liquidation. The judge refused to lift the stay on the basis that the insured's claim did not pass the threshold of genuine arguability. The Court of Appeal has now dismissed the appeal from that decision.
The liability policy taken out with the defendant in October 2009 provided cover in respect of a "claim" first made during the policy period (or arising from circumstances notified during the policy period). The policy provided that a claim meant "a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages".
In August 2010, the insured received a letter from a firm of solicitors which demanded certain information and provided that if that information was not received "we may issue protective proceedings in order to protect our client's position as regards limitation". It added that once the information was received, the solicitors would consider whether a claim for negligence could be brought.
The Court of Appeal agreed with the judge at first instance that the solicitors' letter did not amount to a "claim". It merely sought information in order to decide whether to bring a claim. Nor did it exhibit an already-formed intention even to issue a protective claim form (noting the use of the word "may"). Further, if the solicitors had had sufficient information to begin proceedings, they would not have needed to issue protective proceedings (or seek further information). Although the insured "might perhaps" have treated the letter as a "circumstance" (ie a matter which may give rise to a claim, which was the definition of "circumstances" in the policy), he had chosen not to do so.
The Court of Appeal also rejected an argument that the aggregation clause in the policy required a link to be made between this "claim" and separate disciplinary proceedings which were said to involve "similar acts or omissions in a series of related matters". The aggregation clause did not relate to any other part of the policy, including the part referring to which defence costs would be covered under the policy.
COMMENT: This case follows the line adopted in ARC v Brit (see Weekly Update 05/16). There, it may be recalled, the insured had received a letter from the claimant's solicitors reserving the claimant's rights and seeking an agreement of a protocol for a swift and effective recovery of sums. Cooke J had noted that "there is no formality required for such a demand so long as it is in writing but there must be a demand". He held that that letter had not amounted to a demand. Similarly here, there was no demand for damages, nor intimation of an intention to seek them.
In the absence of an express policy term though, the definition of a claim may be slightly more lax. In Robert Irving & Burns v. Stone Staughton, LJ said that "in the ordinary meaning of the English language the words "claims made" indicate that there has been a communication by the [third party] to the [insured] of some discontent which will, or may, result in a remedy expected from the [insured]".
Sino Channel v Dana Shipping: Whether arbitration notice had been validly served
The defendant appointed an arbitrator and emailed a notice of the arbitration to an individual (Mr Cai), who was not an employee of the other party to the purported arbitration (the claimant in this action). However, Mr Cai had been handling the contract in question (and was the main contract point for the claimant) and there was a close relationship between his company and the claimant. After an award was handed down in favour of the defendant, the claimant applied to court pursuant to section 72 of the Arbitration Act 1996 for a declaration that the tribunal had not been properly constituted. Eder J held as follows:
(1) An application under section 72 does not have to be brought before an award is made. As confirmed by Walker J in London Steam Ship Owners v Kingdom of Spain (see Weekly Update 34/13), there is no need to confine section 72 in this way, because a party who does not participate in the arbitral proceedings is entitled to wait until an application to enforce the award. For that reason, there is no time limit equivalent to that specified for an application/appeal under sections 67-69 (ie 28 days) for an application under section 72.
(2) As was confirmed by Gross J in Lantic Sugar v Baffin (see Weekly Update 01/10), although section 76 of the Act, which deals with the service of notices, operates more flexibly than the CPR court regime for service, that does not obviate the need for the party itself (or its agent with actual/ostensible authority to accept service) to be served properly. A party should also actually be served, rather than merely become aware that there has been purported service.
(3) Eder J highlighted that service of a notice to commence arbitration is an important step which has significant legal consequences. Accordingly, even where an employee or agent has a wide general authority to act on behalf of his employer/principal, such authority does not (without more) generally include an authority to accept service of a notice of arbitration. On the facts, Mr Cai did not have any implied actual authority to accept such service. Nor did he have ostensible authority, no express representation having been made by the defendant that Mr Cai had authority to accept service.
(4) Nor had there been any "silent ratification" by the defendant, even though it had done nothing whatsoever to disown Mr Cai's unauthorised actions for 4 months. Eder J held that: "where an arbitral tribunal is not properly constituted, I do not consider that a party who has not participated in the arbitration proceedings can, in effect, be taken to ratify an award by mere silence and inaction". Nor had there been any "unequivocal act" amounting to positive ratification.
Accordingly, the judge confirmed that the tribunal had not been validly constituted.
COMMENT: This case offers a stark reminder of the importance of getting the procedural steps right when commencing arbitration. Here, the party which participated in arbitral proceedings and obtained an award in its favour, wasted time and money pursuing an arbitration which was in fact never validly commenced by failing to serve the notice of arbitration on the correct party.
Coyne v Morgan: Whether draft report of first expert has to be disclosed
In Hajigeorgiou v Vasiliou , the Court of Appeal expressed the view that, where a party wished to switch experts, it was reasonable to infer that the first expert's "interim draft report" contained the substance of that expert's opinion and if permission was needed to rely on the evidence of the second expert, a pre-condition to the granting of such permission would be the disclosure of that draft interim report.
That view was aimed at preventing "expert shopping" (ie where a party changes experts after receiving an unfavourable report from the expert which it first instructed, or losing confidence in that expert). Of issue in this case is whether there is any general principle that the (draft) report of the first expert must be disclosed in all circumstances where a party changes experts, and even where there has been no expert shopping. (Here, the expert had decided that he no longer wished to act for the defendants, even though the defendants wanted him to continue acting for them).
The judge concluded that prior caselaw has not established that "expert shopping" must be proven before the court will exercise its general power or discretion to impose a condition of disclosing the first expert's report, when giving permission to rely on a second replacement expert. In this case, there were two factors which indicated that the court should order disclosure of the first expert's draft report (and either on its own was sufficient to impose the condition):
1) The first expert had already produced a draft report in the context of proceedings previously issued; and
(2) the first expert had discussed the expert issues in the case and subsequently met with the other side's expert.
The judge found no evidence of expert shopping in this case. Any reference to WP discussions between the first expert and the other side's expert was to be redacted from the draft report: "what is to be disclosed is the substance of the [first expert's] opinion on the expert issues in the case as set out in such draft report". The defendant was also not required to disclose attendance notes recording the substance of conversations between the expert and the instructing solicitors.
Rizan v Hayes: Court of Appeal holds trial judge should not have held there was a fraudulent claim against insurers
The trial judge dismissed the claimant's claim that his car had been damaged in an accident involving the van which was insured by the second defendant. At the end of the judgment, the judge added that, if had been necessary for him to do so, he would have found that this was a fraudulent claim. The claimant appealed, claiming that the judge's finding of fraud was unsupportable and that in the absence of a finding of fraud, the judge could not properly have dismissed the claim because on the basis of the evidence, there had either been a conspiracy between the claimant and van driver or there had been an accident.
The Court of Appeal agreed that, since the claimant had failed to satisfy the burden of proof concerning the alleged accident, it had been unnecessary for him to address the question of fraud. The Court of Appeal also set aside the finding that the claim was fraudulent.
Nevertheless, it did not follow that the alleged accident had occurred. Citing The Popi M , the Court of Appeal agreed that it is not the duty of judges to reach conclusions of fact, one way or the other, in every case. In some cases the court can say that the evidence adduced is too weak to prove anything to an appropriate standard, so the claim should fail. This was such a case.
Chodiev v Stein: Whether party to whom a document has been disclosed can apply to restrict its use in other proceedings
CPR r31.22 provides that a party to whom a document is disclosed may use the document only for the purposes of the proceedings in which it is disclosed, except where the court gives permission. The court can make an order restricting the use of a document even where the document has been read to or by the court on an application by "a party" or any person to whom the document belongs.
Unusually in this case, the party to whom a document was disclosed wished to restrict its use (and prevent the document being used in proceedings in Cyprus). Leggatt J rejected an argument that he had no jurisdiction to make an order restricting the use of the document in such circumstances: "there is nothing in the wording of the rule which circumscribes who may apply for an order restricting or prohibiting the use of a disclosed document. To the contrary, paragraph 3 expressly states that an application for such an order may be made "by a party". It does not limit the application to the party to whom the document has been disclosed, nor can I see any good reason to imply such a restriction into the rule. In particular, I can see no reason why an application should not be made in an appropriate case by a party to whom a document has been disclosed to seek to restrict the use of that document where the disclosing party has obtained it from a third party, as is the situation here".
Parke v Butler: Does the QOCS regime apply to appeal proceedings?
The short issue in this case was whether a claimant who has the benefit of Qualified One Way Costs Shifting at trial is subject to the ordinary rules as to costs on a first appeal to an appeal court. Edis J held not.
CPR r44.13 provides that QOCS is available for "proceedings" which include a claim for damages for personal injuries. The judge held that "proceedings" included any appeal: "to my mind there is no difference between the nature of the claimant at trial and the appellant on appeal. He is the same person, and the QOCS regime exists for his benefit as the best way to protect his access to justice to pursue a personal injury claim. To construe the word "proceedings" as excluding an appeal which was necessary if he were to succeed in establishing the claim which had earlier attracted costs protection would do nothing to serve the purpose of the QOCS regime".
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