UK: (Re)Insurance Weekly Update 06- 2016

Last Updated: 2 March 2017
Article by Nigel Brook
Most Read Contributor in UK, November 2017

This week's caselaw

Wheeldon Brothers Waste v Millenium Insurance: Whether insurer could instruct an expert whom the insured had also subsequently used

http://www.bailii.org/ew/cases/EWHC/TCC/2017/218.html

Following a fire at the insured's premises, insurers instructed an expert to investigate. The conclusions of that investigation led the insurer to decline liability. The insured then instructed the same expert (not as a CPR r35 expert and with the loss adjusters' permission) to investigate whether the insured could bring a claim against third parties.

When the insured subsequently commenced proceedings against insurers, insurers sought to instruct the expert under CPR r35 and the insured sought to prohibit that. The insured relied on the House of Lords case of Prince Jefri Bolkiah v KPMG [1999] (which did not concern the appointment of an expert), in which it was held that accountants who provide litigation support services have a duty to preserve confidentiality (including not acting for the other side). However, in Meat Corporation of Namibia v Dawn Meats (see Weekly Update 10/11) Mann J held that the strict test in Prince Jefri does not apply just because an expert has received privileged and confidential information.

Coulson J agreed with that reasoning and held there was no basis for preventing the insurer from relying on the expert here. That was because:

  1. The expert had undertaken a contemporaneous investigation and so was in "the best possible position" to assist the court;
  2. There had been no overlap between what the insurer and the insured has asked the expert to do. The insurer had had no interest in whether a claim could be brought against third parties;
  3. Experts owe an overriding duty to the court and "that duty trumps everything else... the existence of that overriding duty also modifies the strict application of the rule in Prince Jefri"; and
  4. Crucially, there was no evidence that confidential information had been passed to the expert here and "certainly no risk that it would be passed to the defendant". The insured's letter instructing the expert had included a confidentiality clause.

Dunn Motor Traction v National Express: Whether shareholder undertaking as good as ATE insurance in security for costs application

http://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2017/228.html&query=(dunn)

The defendants applied for a security for costs order on the basis that the claimant is a company and there "is reason to believe that it will be unable to pay the defendant's costs if ordered to do so" (CPR r25.13(2)(c)). The claimant sought to rely on recent caselaw in which it was held that the existence of an ATE insurance policy should be taken into account in deciding whether the claimant will be able to pay. It was recently held in Premier Motorauctions v PWC (see Weekly Update 38/16) that the question is simply whether there is reason to believe that the insurer will not pay.

In this case, there was no ATE policy, but the claimant's sole shareholder had irrevocably undertaken to indemnify the claimant in respect of its costs liability to the defendant. Teare J held that the approach towards ATE policies did not apply to an indemnity from the shareholder. That is for various reasons, including the fact that the counterparty to an ATE policy is a "responsible and reputable insurer", whereas the shareholder is, in a practical sense, the adversary of the defendant. Furthermore, "Whereas ATE policies are now "a central feature of the ability of parties to gain access to justice" indemnities provided to a company by its owner in respect of the company's liability to pay legal costs are not so regarded".

Accordingly, only in exceptional circumstances will the shareholder's indemnity be a sufficient asset to demonstrate that the claimant will be able to pay the defendant's costs.

DTEK Trading v Morozov: High Court again confirms that permission to serve claim form out of the jurisdiction cannot be given where the respondent is not a party to the arbitration

http://www.bailii.org/ew/cases/EWHC/Ch/2017/177.html

In Cruz City v Unitech (see Weekly Update 42/14), Males J held (obiter) that section 44 of the Arbitration Act 1996 ("the Act") does not include any power to grant a remedy against a non-party to the arbitration agreement or arbitration (and so permission to serve the claim form out of the jurisdiction on a non-party could not be given). Males J noted that section 44 is one of the few sections of the Act which applies even if the seat is outside England and Wales, and he doubted that Parliament intended to give the English court jurisdiction to make orders against non-parties in support of arbitrations happening anywhere in the world.

Cruz City had concerned an application under CPR r62.5(1)(c), where the claimant is seeking a remedy other than an order under section 44 of the Act (in that case, the freezing of assets belonging to a third party). In this case, the claimant sought an order under section 44 (namely, the preservation of evidence) and therefore sought to rely on CPR r62.5(1)(b). It sought to argue that Cruz City had been wrongly decided. That argument was rejected.

The judge, Cockerill QC, held that section 44 does not permit an order to be made against a non-party: "While some of the provisions may be not unsuited to third party orders, there is nothing in the wording which indicates that the sections are designed with applications against third parties in mind. On the contrary however, when reading them together and not separately I concur with Males J's conclusion that the wording is more suggestive of applications confined to the arbitration parties than otherwise".

Nor did it matter that this conclusion effectively creates a lacuna, whereby a non-party might be able to take steps to thwart the arbitration agreement because there is no right to obtain injunctive relief against a non-party: "the fact that there would be a lacuna is not a reason to find a jurisdiction which is not justified on the wording of the relevant sections against the relevant background".

Twin Benefits v Barker: An application for non-party disclosure and privilege issues

http://www.bailii.org/ew/cases/EWHC/Ch/2017/177.html

The applicant sought a non-party disclosure order under CPR r31.17. It was common ground that one class of document sought from the non-party (a solicitor) was covered by legal professional privilege ("LPP"). It was also common ground that the solicitor's client and the applicant had a common interest which meant they were jointly entitled to claim LPP. As a result, the applicant was entitled to inspection of the documents. However, the applicant had a duty to withhold inspection by the other parties to the proceedings (if it did not have the consent of the solicitor's client).

Given those circumstances, the issue was whether CPR r31.17(3)(a) was satisfied. That rule provides that the court can only order non-party disclosure where "the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings". It was submitted that this requirement had not been satisfied where the applicant could inspect the documents but could not deploy the documents as part of its case.

That argument was rejected by Arnold J. He accepted the argument that once the applicant has inspected the documents, it may be able to prove their contents in other ways "and hence the documents may support its case even though they cannot themselves be deployed as part of that case".

Roshan v Singh: Whether a non-party can set aside a judgment on the ground of fraud

http://www.bailii.org/ew/cases/EWHC/Ch/2017/176.html

One of the issues in this case was whether only a party to the original proceedings is entitled to set aside a judgment in those proceedings because it was fraudulently obtained. The judge held that there is no such general principle, and that a non-party can apply to have the judgment set aside: "It might well be that where a judgment is sought to be impeached it would be a rare case where a non-party can say to the court that because a judgment in a case to which he was not a party was obtained by fraud it should be set aside; it might be said that the non-party had no personal (as opposed to a more general public- spirited or general) interest in that happening. However, it seems to me that the present case is different. If [the non-party] is right .... then he... [has] been cheated out of [his] beneficial ownership of the Property because of a fraud, and the courts ought not to allow a judgment obtained by fraud to stand; it would deprive them of their rights". There was no need for the non-party to demonstrate that the original proceedings were part of a conspiracy to damage his interests. The non-party would have to show, though, that (inter alia) the evidence supporting the assertion of fraud could not, with reasonable diligence, have been obtained at the trial.

(Re)Insurance Weekly Update 06- 2016

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