A summary of recent developments in insurance, reinsurance and litigation law
Royal Petrol Trading v Total India: Court decides whether party was validly served with claim form in accordance with contractual provision
The parties entered into a settlement agreement which provided that "For the purposes of any...dispute arising from...the Settlement Agreement, the Parties confirm that they have instructed their respective legal representatives to accept service on their behalf of...any proceedings". Each party then named a firm of solicitors. After a dispute under the settlement agreement arose, a separate firm of solicitors (Firm A) wrote to the claimant's solicitors (Firm B), advising that they had taken over from the firm of solicitors named in the settlement agreement to accept service on behalf of the defendant (Firm C), and that they were instructed to accept service.
When the claimant subsequently terminated the settlement agreement for breach of contract, Firm A advised that it was no longer instructed to accept service (and argued that any agreement under the settlement agreement to accept service fell away as a result of the termination by the claimant).
Firm B then served the claim form on Firm A, and the defendant argued that there had been no valid service because service had not taken place in accordance with the prescribed contractual method (see CPR r6.11).
Cockerill J held that Firm A had replaced Firm C following notice to Firm B (and there was no requirement under the agreement for the defendant itself to notify Firm B). She then held that Firm A's authority had been irrevocable. It is possible for a contractual appointment to be revocable, if it plainly says so (although there is no "magic in the use of the word "irrevocable"", and the court will look at the clause in its context). However, she said that "the suggestion that the objective intention was not for the appointment to be irrevocable is in my judgment, somewhat startling – in the context of a legal representatives clause, contained within a settlement agreement which is drafted in really quite broad terms".
Furthermore, just as jurisdiction or arbitration clauses survive the termination of an agreement, because they are collateral or ancillary to the agreement, it was held that the same position applies to a legal representation clause: "A legal representation clause is in my judgment effectively ancillary....It is part of the mechanism which is in place for dealing with disputes....this is a clause which is in essence collateral or ancillary to a clause which is itself collateral or ancillary to the main subject matter of the contract – and one might therefore say that you cannot get much more collateral and ancillary than that".
Grindrod Shipping v Hyundai Marine: Court finds tribunal did not err in dismissing claim because of inordinate and inexcusable delay
The claimant commenced an arbitration against the defendant. Six years later, after the limitation period had expired, the defendant applied under section 41(3) of the Arbitration Act 1996 for an order from the arbitrators that the claim should be dismissed because there has been " inordinate and inexcusable delay" by the claimant. An order can only be made under section 41(3) if the tribunal is satisfied that delay gives rise to a substantial risk that it is not possible to have a fair resolution of the issues in that claim (section 41(3)(a)), or has caused, or is likely to cause, serious prejudice to the defendant (section 41(3)(b)).
Although the tribunal found that a fair resolution was still possible (because it was not anticipated that the merits of the case would turn on the factual witness evidence), it dismissed the claim on the basis that there could be "serious prejudice" to the defendant: namely, because the defendant had had to put up security for costs, and the case ought properly to have been decided 3 or 4 years earlier. The claimant challenged that finding on the basis that the point had not been raised by the defendant, but the judge was satisfied that the prejudice resulting from the security had been an issue raised by the defendant and so the claimant had had sufficient opportunity to meet the case because the "essential building blocks" of the tribunal's reasoning had been "in play" or "in the arena" in relation to the issue, even if the argument was not articulated in the way adopted by the tribunal. Accordingly, the challenge was dismissed.
The claimant had sought to argue that the arbitrators ought to have instead ordered it to pay the costs of putting up the security in any event, but the "experienced LMAA arbitrators" proceeded on the basis that those costs would not be recoverable as costs of the arbitration. Blair J commented on this issue as follows: "it was a matter for the tribunal what weight it gave to the costs issue in deciding on the appropriate remedy. It would in my view be a retrograde step in international arbitration for the court effectively to rule out the cost of delay as a ground for striking out a claim on the basis that it could always be compensated for in an order for costs at the end of the day".
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