Welcome to the thirty-eighth 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.
Hussain v Hussain & Anor
Court of Appeal overturns trial judge's finding of insurance fraud
http://www.bailii.org/ew/cases/EWCA/Civ/2012/1367.html
At first instance, the judge held that this claim arose out of a road traffic accident which had been "staged" in order to submit a fraudulent insurance claim. The claimant appealed against that decision. The Court of Appeal has now unanimously allowed that appeal. Although it accepted that this case was of a kind "which depended entirely on the judge's assessment and evaluation of the evidence", it was satisfied that in this case the judge's conclusion had been wrong (there was no need to show that the judge had been "plainly" or "clearly" wrong). The judge had based his decision on two propositions:
- There is a general rule of "follow the money" which should be applied. The judge found that it was unlikely that a fraudster would engineer a collision with a stranger on the speculation that that stranger would share the insurance proceeds with him. Accordingly, there was a "powerful inference" that the two drivers had colluded in a fraudulent scheme. However, the Court of Appeal cast doubt on whether there was such a general rule and described it as a "flawed starting-point". The judge had gone too far in stating that "it only makes economic sense if the two are in concert" and failed to balance the various points in favour of the claimant (eg he was of previous good character and his two passengers did not make any claims). Moreover, the fraudster could have potentially claimed against his own insurance company (or colluded with a passenger in his car to make a claim) and so could have made a financial gain without collusion.
- The claimant's credibility was "seriously damaged" by the absence of reference in his medical records to a collision. The Court of Appeal held that this was "too slender a basis" for finding fraud. If anything, if he had been colluding in a fraudulent scheme he would have been careful to mention the accident to his doctor.
Finally, the judge had attached no particular weight to other factors which might have supported his finding – eg alleged discrepancies in the claimant's version of events.
Proctor & Gamble v SCA
Whether an offer was a Part 36 offer
http://www.bailii.org/ew/cases/EWHC/Ch/2012/2839.html
One of the issues in this case was whether an offer made by the claimant amounted to a Part 36 offer. It had stated that the claimant would pay the defendant's costs if the offer was accepted within 21 days. However, CPR r36.2(2) (c) provides that an offer must specify a period of at least 21 days "within which the defendant will be liable for the claimant's costs" if the offer is accepted. Hildyard J accepted that Part 36 "is a complete code" and approached the issue "with caution and not a little anxiety". Nevertheless, he went on to state that "I do not accept that it is impossible for a claimant to comply with Part 36 unless he requires to be paid his costs and such payment to be made within a period of not less than 21 days". A strict construction of Part 36 would, it was said, undermine a central objective - namely, to encourage claimants to make sensible offers (especially since the judge recognised that Part 36 is drafted "particularly to incentivise a claimant to make a Part 36 offer"). The judge added that: "That objective would be advanced, not undermined, by reading CPR36.2(2)(c) as requiring a claimant who seeks his costs to specify a period of not less than 21 days within which the defendant will be liable to pay them, but not as mandating that the claimant must seek costs and make payment of them a condition of his offer".
Thus the offer was held to be Part 36-compliant. However, he also held that on the facts of the case it would be unjust to order the normal costs consequences of Part 36 where a defendant fails to beat a claimant's offer.
COMMENT: This is a surprising decision. In London Tara Hotel v Kensington Close Hotel (see Weekly Update 03/11) Roth J held that a claimant must get its costs under Part 36 and that "this is not a matter of discretion but results by operation of the rules. The court has no power to disallow a proportion of those costs". The Court of Appeal in Howell v Lees-Millais agreed that the claimant must get all its costs and not just a proportion of them. Neither case was cited in this decision though.
PEC Ltd v Asia Golden Rice
Extending time for challenging a tribunal's jurisdiction
http://www.bailii.org/ew/cases/EWHC/Comm/2012/846.html
Clyde & Co for respondent
Section 70(3) of the Arbitration Act 1996 ("the Act") provides (in relation to challenging a tribunal's substantive jurisdiction following an award) that "any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the appellant was notified of that process". In UR Power v Kuok Oil (see Weekly Update 29/09), Gross J doubted whether section 70(3) applied to two-tier arbitration schemes (such as FOSFA and GAFTA) which do not allow an appeal from a decision that the first tier tribunal has jurisdiction.
Although not required to do so in this case, Hamblen J said that it was difficult to see how the GAFTA appeal procedure was not an "arbitral process or award". In any event, a party has 28 days from the date of the first tier award to make an application under section 67 of the Act (the section relating to challenges the tribunal's substantive jurisdiction). It makes no difference whether there is an appeal on other matters, or even overlapping matters, to GAFTA's Board of Appeal.
More generally, the judge added (agreeing with Gross J) that time limits should run from the date of an award rather than the date of notification of the outcome, but it might be possible to construe section 70(3) as meaning a party has 28 days from notification of the result of an appeal or review in cases where the appeal or review does not culminate in an award. However, he did not reach any final decision on that point.
Petrochemical Industries v Dow Chemical
Whether tribunal failed to deal with an "issue" put to it
http://www.bailii.org/ew/cases/EWHC/Comm/2012/2739.html
The claimant applied under section 68 of the Arbitration Act 1996 ("the Act") on the ground that an arbitral tribunal had failed to deal with all the issues put to it (section 68(2) (d)). In order for an entitlement to consequential losses for a breach of contract to arise, it must be demonstrated that 1) those losses are foreseeable and 2) the contract breaker assumed responsibility for losses of that kind. The claimant argued that the tribunal failed to deal with that second test. Smith J held as follows:
- He would not define what is an "issue" but he rejected three suggested tests: (1) something capable of being included in a case management list of issues; (2) the list of issues submitted by the parties to the tribunal; and (3) that sub-questions should be excluded. He held that the assumption of responsibility question was indeed an "issue", taking into account the ordinary and natural meaning of that word.
- When considering whether the tribunal had "dealt with" this issue, Smith J took into account the following points: a tribunal does not have to answer every question (eg a particular issue may simply not arise); a number of issues can be dealt with together; and the court should adopt a reasonable and commercial approach (eg it may take into account the parties' submissions). In this case, by holding that the claimant "should reasonably have been expected to be held liable" for consequential losses the tribunal had dealt with the issue of assumption of responsibility.
- If the matter had been free of authority, Smith J said that he would have found no breach of the duty in section 33 of the Act (to act fairly and give each party a reasonable opportunity to put his case) if the tribunal had overlooked evidence. However, that view was contrary to dicta in other first instance decisions and so he agreed to adopt the same approach. Nevertheless, he rejected the argument that the tribunal had in fact overlooked evidence in this case.
The challenge to the award was therefore rejected.
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.
