Welcome to the eighteenth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2012.
These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.
Contents
- Sucafina SA v Rotenberg
Court of Appeal considers the status of various arbitration awards and whether a provision in an arbitral institution's rules regarding payment of its costs invalidated a final and binding award. - Montpellier Estates v Leeds City Council
Court considers an application for disclosure of material on computers belonging to a party's advisers. - Societe Generale v Saad Trading
Court of Appeal considers whether a debtor should be ordered to pay the judgment debt in order to pursue its appeal and a security for costs application. - Joint Stock Asset Company v BNP Paribas
Court of Appeal case on whether an anti-suit injunction could be made against a non-party to an arbitration agreement. - Joyce v O'Brien
Insurers deny liability based on ex turpi causa principle. - Dorchester Property Management v BNP Paribas
The court interprets a non-disclosure clause in an agreement.
Sucafina SA v Rotenberg
Status of various arbitration awards/whether provision in arbitral institution's rules regarding payment of its costs invalidated final and binding award
http://www.bailii.org/ew/cases/EWCA/Civ/2012/637.html
Section 39 of the Arbitration Act 1996 allows the parties to agree that the tribunal may make a provisional award (which is subject to the tribunal's final award on the merits). Section 47 allows the tribunal to make awards on different issues ("partial awards") - such awards are final and binding on the parties.
In issue in this case was the status of certain "appeal interim awards" made by a Board of Appeal. The appellant sought to argue that these awards, although they represented the Board of Appeal's final decision on the matters with which they dealt (and it did not intend to revisit those matters), they remained conditional until a further award was made which operated to ratify them (pursuant to the arbitral institution's rules). The Court of Appeal rejected that argument for the following reasons:
- There was no express or implied agreement by the parties to exclude section 47 of the Act; and
- An award is either final and binding or it is not. It is unfortunate that the drafters of the Act used the term "interim" as it is capable of giving rise to confusion. Here, the appeal interim awards amounted to partial awards under section 47.
A further rule of the arbitral institution provided that if the an appeal award was not taken up (eg because fees and costs were not paid in time) "the original award of the arbitrator(s) or umpire shall become final and binding immediately". Despite that wording, the Court of Appeal held that "no arbitral body of standing in London would have drafted ...a provision that was intended to have the effect that a final and binding award on an issue would be rendered nugatory because a fee for a subsequent award was not paid, given powers to take security for its fees (see [relevant arbitral institution rule]) and the powers in s.56 of the 1996 Act. The construction contended for by [the appellant] would, far from making any commercial sense, be damaging to the standing of the arbitral body and inimical to the proper conduct of arbitration, in the light of the common practice to make partial awards existing at the time the rules were drafted and as is reflected in the 1996 DAC report. No one with any understanding of arbitration law and practice or commercial dealing could have intended such a result".
The rule in question could only be given effect by reading it as referring to that part of the umpire's award that remained extant after the appeal interim awards. The Court of Appeal went on to find that the umpire's award on costs did remain extant and so the appellant was entitled to enforce that part of the umpire's award.
COMMENT: Section 56 of the Act (which cannot be excluded by the parties) provides that the tribunal may refuse to deliver an award until its fees and expenses have been paid in full. Where an award has, however, been released prior to payment, this case confirms that the award itself will remain binding even if the fees are not subsequently paid (notwithstanding any contrary provision in the arbitral tribunal's rules). The only sanction that the arbitrators will have in such a situation will be to sue for their fees.
Montpellier Estates v Leeds City Council
Disclosure of material on advisers' computers
http://www.bailii.org/ew/cases/EWHC/QB/2012/1343.html
One of the issues in this case was whether the court should order the claimant to carry out a further electronic search of material stored on the servers, desktops and laptops of twelve named individuals who are the claimant's professional advisers in seven firms. That is an unusual application but the defendant argued it was necessary because claimant alleged the defendant had made deceitful statements at meetings at which the advisers were present.
The claimant argued (inter alia) that it had no legally enforceable right to search this material because a professional's own working papers belong to him and not his client. Beatson J said:
- Apart from the issue of "control", he would have been inclined to order a targeted and staged search of the servers and computers of the claimant's key advisers, provided that was not disproportionate: "A strong case would have to be made for what is likely to be a very large undertaking".
- As to the control issue, the defendant had sought to argue (relying on textbook commentary) that the CPR had "made inroads" on the concept of "control". Reference was made to CPR r35.9 (which allows the court to direct a party which has access to information which is not reasonably available to another party to provide the information). The judge held that that rule was not relevant here, though, because it is confined to information needed for instructing an expert (even though there is no express provision to that effect in the rule). Nor was CPR r18.1 (which gives the court power to order a party to "give additional information in relation to" any matter in dispute in the proceedings) relevant. Textbook commentary has only stated that "it may be that, by analogy with the old case law on interrogatories, a party can in effect be obliged to make reasonable inquiries, eg of servants or agents" (emphasis added). The judge concluded that he should not make the requested order. There was little evidence about the access the claimant had had to material on its advisers' servers.
However, the judge did note that the claimant appeared, in practice, to have had access and inspection rights to hard copies of notes taken by its advisers at meetings which they had attended and prior caselaw supports the argument that the court should adopt a broad view of the "right to possession" which could amount to "control" of a document. For that reason, he said that it would be "in the mutual interests" of the parties to enter into discussions about how the material sought by the defendant could be provided in a proportionate way.
Societe Generale v Saad Trading
Whether debtor should be ordered to pay judgment in order to pursue appeal/security for costs application
http://www.bailii.org/ew/cases/EWCA/Civ/2012/695.html
The respondent applied for an order that the appellants pay the amount of the judgment awarded against them as a condition of pursuing their appeal. The Court of Appeal reviewed the relevant caselaw and concluded that there were compelling reasons for imposing the condition (although the appellants were ordered to pay US$ 5 million and not the whole judgment debt of over US$ 50 million). One of the arguments considered by the Court of Appeal raised "difficult question of principle as to whether or not this court can legitimately impose a condition that a judgment debt (or part of it) be paid into court where, effectively, this will require an "owner", or others, such as a director, or shareholder, or backer or other interested person, to fund that condition. (I emphasise that I am not dealing here with security for costs)". It was concluded that, in the absence of exceptional circumstances, the court should not do so because this would potentially amount to an indirect way of obtaining enforcement with the funds of a third party (in the event that the appeal is lost). Alternatively, if the funds brought into court are to continue to be treated as belonging to the third party, there is no point in the exercise because it does not benefit the respondent/judgment creditor. However, there is no absolute bar. In this case, the facts were said to be exceptional - the third party owned 90% of an appellant's share capital and had provided a personal guarantee.
The Court of Appeal also found that it was not acceptable for the appellants to be able to pursue their appeals whilst, at the same time, continuing to disobey the orders of the court to pay the judgment debt). The respondents had also sought security for costs in the amount of £330,000 (the court having already ordered the appellants to pay £250,000 costs). The Court of Appeal held that the amount sought by the respondents was excessive. The appeal was set to last for 1 to 1.5 days and security in the amount of £90,000 was ordered.
Joint Stock Asset Company v BNP Paribas
Whether anti-suit injunction could be made against a non-party to an arbitration agreement
http://www.bailii.org/ew/cases/EWCA/Civ/2012/644.html
The first instance decision in this case was reported in Weekly Update 42/11. One of the issues on appeal was whether the claimant could obtain an anti-suit injunction against a non-party to an arbitration agreement (restraining that non-party from bringing proceedings in Russia challenging the validity of an agreement entered into between the claimant and the defendant to these proceedings). Burnton LJ recognised that "in the absence of a good collateral ground for restraint, an anti-suit injunction should not be granted against [the non-party] solely on the basis that the issue in the proposed suit is already the subject of arbitration proceedings involving an associated company". However, the Court of Appeal agreed that the claimant was entitled to an anti-suit injunction against the non-party in this case.
Although the non-party was not the alter ego of the defendant, and it it did not suffice that it was in the defendant's financial interests to support the non-party's case in Russia, an allegation of collusion had been proven: "the common control of [the defendant] and the [non-party], the importance of the transactions, the arbitration and the Russian Proceedings, the timing of the [non-party]'s action in commencing those proceedings, and the improbability of the [non-party] acting alone, are in my judgment sufficient to give rise to a serious issue to be tried as to whether or not the proceedings are collusive, so that in fact the [non-party] is the stalking horse for [the defendant]".
The claimant had applied for permission to serve the non-party out of the jurisdiction pursuant to the gateway in PD 6B para 3.1(3) which covers the situation where: "A claim is made against a person ('the defendant') on whom the claim form has been or will be served...and the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim." The issue here was whether it had been possible to say that the claim form "will be" served on the defendant at the time of application for permission to serve out, since at that time, the claimant had mistakenly believed that service was covered by a service of process clause (which had, in fact, been repealed).
The Court of Appeal held that the criterion had been satisfied because, had the judge been asked at the time, he would have given permission to serve the defendant at its solicitors' address in London. That was because the evidence shows that it may have taken 2 years to serve in Russia under the Hague Convention. The error about the process clause went to the question of where service would be effected but not as to whether service would be effected. If service on the defendant were set aside, service on the non-party would also be set aside (since the non-party would no longer be a necessary or proper party to the claim against the defendant). However, service on the defendant's London solicitors had been retrospectively validated by the judge and that decision was not appealed by the defendant.
Joyce v O'Brien
Insurers deny liability based on ex turpi causa principle
http://www.bailii.org/ew/cases/EWHC/QB/2012/1324.html
The claimant claimed against the first defendant (his uncle) following a road accident and after his uncle had pleaded guilty to driving carelessly. The second defendant (the uncle's insurers) defended the claim on the basis that the claimant and his uncle had been engaged in a common criminal enterprise (escaping from a burglary) at the time of the accident.
Cooke J found, on the facts, that the insurers had proven their case. He also accepted the insurers' arguments that the principle of ex turpi causa manifested itself in two related principles: (a) the law will not recognise the existence of a duty of care owed by one participant in a crime to another participant in relation to an act done in connection with the commission of that crime; and (b) as a matter of public policy, a claimant cannot recover compensation for loss suffered in consequence of his own criminal act. Here, the claimant and his uncle where not just engaged in criminal activity which gave occasion for the tortious act of the uncle - the facts giving rise to the claim were inextricably linked with the criminal activity. Furthermore, risk and danger had been inherent in the enterprise itself: "it is not possible to set a standard of care as to how fast the van should be driven, in circumstances where speed is necessary to get away and there is a need for the other co-conspirator to hang on desperately to the stolen items and the back of the open van in order to effect their joint objective of a speedy escape".
Nor is there any principle of proportionality which comes into play - the court is not required to consider the injury as against the heinousness of the crime which was committed.
Dorchester Property Management v BNP Paribas
Court interprets non-disclosure clause in an agreement
An agreement between the parties provided (inter alia) that they would keep all Confidential Information (as defined in the agreement) secret but that the defendant could disclose such Confidential Information as is necessary to its advisers and any third party providing funding and to procure that those third parties are bound by similar obligations of non-disclosure "and they shall be responsible for unauthorised disclosure, whether by it or any third Party to whom disclosure is made" (clause 4.2.1). The agreement further provided that the obligation to keep the Confidential Information secret would not apply to any information which "subsequently comes into the public domain" (clause 4.2.2). It was held as follows:
- The defendant will only be liable for unauthorised disclosure by third parties to whom it has passed Confidential Information. It will not be responsible for disclosures by the third party of information which was not passed to it by the defendant. The judge declined to decide whether, if information was passed by the claimant to a third party at the defendant's express or implicit request, the defendant could be held liable if that information was misused by the third party (but he did opine that that "may be sufficient" to found liability on the defendant).
- Although not required to decide the point, the judge said that it would be surprising if information which was in the public domain at the date of disclosure (or at the date of the agreement) did not fall within the exception for information which "subsequently comes into the public domain" (emphasis added). The judge held that disclosure to a third party (interested in providing third party funding) was not information which had come into the "public domain". The third party in question would be expected to be party to non-disclosure undertakings and that "does not seem to have anything to do with public domain".
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.
