UK: (Re)insurance Weekly Update 31- 2016

Last Updated: 14 September 2016
Article by Nigel Brook

A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Fiona Trust v Privalov: Judge explains approach to assessing damages where a freezing injunction should not have been granted

http://www.bailii.org/ew/cases/EWHC/Comm/2016/2163.html

The substantive claims brought by the claimant against the defendant failed (on the whole), despite the defendant having been found to have acted dishonestly. The claimant had obtained freezing orders against the defendant and he sought enforcement of the usual undertaking in damages which had been provided by the claimant. The main issue in the proceedings was whether the defendant was entitled to damages on the basis that he would have used the frozen funds to build new ships which would have resulted in a profit. The claimant argued that the funds would not have been used in that way and that, in any event, if they had, that might have resulted in a loss.

Males J noted that damages in this context should be assessed by reference to ordinary contractual principles (although some flexibility may be required). There is no need to show that the freezing order was the sole cause of the loss, but it must be an effective cause. The courts have recognised that, because a freezing order can ruin a thriving business, such orders are one of the law's "nuclear weapons". As a result a "realistic approach" will be taken to a submission that a defendant should have approached the claimant or made an application to the court for a variation of a freezing order. The judge rejected an argument that such strategies would have worked in this case.

He went on to comment that: "I consider that a liberal assessment of the defendants' damages should be adopted.... It does not mean that a defendant should be treated generously in the sense of being awarded damages which it has not suffered. It does mean, however, that the court must recognise that the assessment of damages suffered as a result of a freezing order will often be inherently imprecise, for example because the defendant cannot say precisely what it would have done with its funds but for the freezing order; that this problem has been created by the claimant's obtaining of an injunction to which it was not entitled; that in the light of these factors .. over eager scrutiny of a defendant's evidence and minute criticism of its methodology ... will not be appropriate; and that it is not an answer for a claimant to say that damages cannot be awarded because the defendant's business venture was to some extent speculative and might have resulted in a loss. Thus the defendant is not absolved from proving its damages, but these factors must be borne in mind in determining whether it has succeeded in doing so".

Accordingly, damages can be awarded for loss of profit, even if a claimant might have made a loss. The court must just be satisfied to a sufficient standard (which may be the balance of probabilities, or sometimes merely that there was a real and substantial chance), that the transaction would have been profitable.

On the facts of the case, there was no doubt that the defendant could have made a profit of USD 95 million, had the new vessels been sold at the relevant time (even though there was also a possibility that he would not have sold at that time). He was entitled to damages in that amount, minus amounts actually earned on the funds frozen in the solicitors' account.

The judge noted that it might seem odd that a defendant who had been found to have been dishonest in at least some of his business dealings should be entitled to damages running into tens of millions of dollars. However, "even serious and well-founded criticisms of a defendant's character do not mean that claimants can be less scrupulous in complying with their duties when applying for a freezing order. Nor do they provide a reason not to enforce an undertaking."

Taylor v Van Dutch Marine: Freezing orders and carrying out ordinary transactions

http://www.bailii.org/ew/cases/EWHC/Ch/2016/2201.html

In this case, the defendants were found to be in contempt of court for failing to comply with a disclosure order (and further order), and were sentenced to six months' imprisonment. One issue which arose in the case was the defendants alleged inability to attend the contempt hearing, or to repay the claimant, because of a freezing order which the claimant had obtained. That argument was rejected by Warren J. A freezing order allows a party to continue to carry out transactions which are in the ordinary course of business. The judge noted that if the defendants have been unable to effect ordinary business transactions because of the reaction of third parties, such as banks, to the freezing order, it would have been open to them to request confirmation from the claimant that such transactions are not prohibited. However, there had been no such request in this case.

Allen Tod Architecture v Capita Property: Disclosure of first expert's preliminary report ordered by the court where party changed experts

http://www.bailii.org/ew/cases/EWHC/TCC/2016/2171.html

The claimant obtained permission to adduce expert evidence by reference to discipline, rather than naming a particular expert. However, the order also required the claimant to apply for permission to call expert evidence orally at trial.

The claimant instructed an expert, who prepared a final report, but then sought to change experts (it said for practical reasons, rather than because it was dissatisfied with the expert's opinion (ie that this was not a case of "expert shopping")). The claimant agreed to provide copies of its instructions and the first expert's final report to the defendant. However, it objected to providing the first expert's preliminary report and other documents in which the expert had provided his views, and the defendant sought an order from the court for disclosure of these documents.

The judge referred to the recent decision of Coyne v Morgan (see Weekly Update 19/16), and confirmed that the court's power to exercise its discretion to impose terms when given permission to a party to adduce expert evidence arises irrespective of the occurrence of any "expert shopping". However, strong evidence of expert shopping will usually be required before other forms of document than a report by the expert (eg attendance notes by instructing solicitors of discussions with the expert) are ordered to be disclosed.

Earlier caselaw has confirmed that a party may be required to waive privilege in the first expert's report in order to obtain permission to rely on a substitute expert and the judge confirmed that the same principle applies to any earlier draft or provisional report or other relevant document produced by the first expert.

On the facts of the case, the judge held that it was reasonable to require disclosure of the first expert's preliminary report here. Even though this was either not a case of expert shopping or, if it was, this was only to a "faint degree", the court still had a discretion to order disclosure of material produced by the first expert in which he/she expressed his opinion, as a condition for allowing reliance on a new expert.

Howmet v Economy Devices: Court of Appeal considers negligence claim against manufacturer and constructive knowledge of the claimant

http://www.bailii.org/ew/cases/EWCA/Civ/2016/847.html

The owners of a factory sought to bring a claim for damages against the manufacturer of a device which, they claim, caused a fire at the factory. The claim failed at first instance, in part because the judge attributed to the claimant the knowledge of its relatively junior employees that the device had been defective. The Court of Appeal has now unanimously dismissed the appeal from that decision, although for differing reasons.

Jackson LJ concluded that the employees' knowledge should be attributed to the claimant in this case (on the basis that they had been entrusted by the directors to ensure the safety of the relevant equipment). He also referred to a comment by Lord Bridge in D&F Estates v Church Commissioners for England [1989], which he said placed a restriction on a manufacturer's liability to the end user, where a hidden defect is discovered by the end user before any damage is caused (however, Lady Arden interpreted that comment as referring only to economic loss and not damage to property). Jackson LJ said that if he was wrong on the attribution point, then he would have held that the claimant "knew" about the defect before the fire (because of the knowledge of the junior employees), and so the claim would fail on that basis too. In reaching this conclusion, he approved a principle identified by Baker J in Taylor v Rover [1966] (even though this case pre-dated the Supreme Court decision in Bilta v Nazir on attribution), that "If one person in the corporate hierarchy ... becomes aware of a dangerous situation in the workplace which in breach of duty he fails to report up the line, in subsequent litigation the company cannot rely upon the ignorance of its more senior managers. This may be a matter of constructive knowledge rather than attribution. I do not suggest that the principles of constructive knowledge can always be used to bypass the question of attribution. But those principles are of obvious relevance in a situation where junior management become aware that there is a source of danger within the workplace".

(Re)insurance Weekly Update 31- 2016

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
 
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.