A summary of recent developments in insurance, reinsurance and litigation law
Single Buoy Moorings v Aspen: Judge considers whether an insured's documents were privileged
Clyde & Co (Tim Taylor, Angela Flaherty and James Nicholls) for the second (and only remaining) defendant
The defendant insurer made an application to rely upon inadvertently disclosed documents, pursuant to CPR 31.20, which provides that where a party has inadvertently allowed a privileged document to be inspected, the party who has inspected the document may use it only with the permission of the court. The defendant insurer also made an application for specific disclosure in relation to certain categories of documents which had not been seen but which were known to exist but over which the claimant had asserted privilege. Relevance was not in dispute.
The following issues regarding disclosure and privilege arose for consideration:
(1) Should the defendant be allowed to use privileged documents in circumstances where the claimant disclosed the documents multiple times, deployed them against the defendant by specifically referring to them in correspondence and then subsequently asserted privilege over the documents?
The Court of Appeal in Al Fayed v Commissioner of Police  laid down various principles in relation to the discretion given to the court under CPR 31.20, including that the court might refuse to allow the privileged documents to be used if they were made available as a result of an obvious mistake. An "obvious mistake" included where "the solicitor appreciates that a mistake has been made before making some use of the documents".
The claimant sought to argue that the second defendant had not used those documents, as they had not been tendered in witness evidence, and therefore permission should be refused on that basis. Teare J held that this was too narrow a meaning of "use". The claimant had deployed the documents in support of an argument which it wished to persuade the defendant was correct. When the defendant's solicitors had then read and evaluated those documents, this was enough to amount to "use" in this context.
(2) Although a solicitor's witness statement is normally conclusive on privilege, here the judge rejected the claim to litigation privilege in relation to certain documents for two reasons. Firstly, although there had been a reference to "legal options and strategies" in one of the alleged inadvertently disclosed documents, the judge concluded that "On an objective basis the purpose of all the options appears to have been to consider how costs could be reduced. That is not a purpose which would attract litigation privilege". Similarly, in relation to other documents, just because arbitration was in existence or anticipated, did not mean that an internal consideration of options to reduce expenditure was subject to litigation privilege. Secondly, even if that was one purpose, the judge stated that the claimant had made "no assertion... that the dominant purpose... was for use in the actual or anticipated proceedings or in settling the actual and anticipated disputes" and concluded that "in a claim for litigation privilege I find that omission striking". Teare J permitted use by the defendant insurer of the inadvertently disclosed documents and ordered the claimant to re-review all of the documents falling within a specified period (some 11,000 documents) over which it had asserted litigation privilege and provide a privilege log in respect of any documents in respect of which a claim to privilege is maintained.
(3) The usual application of "without prejudice" privilege is to deny the admissibility in evidence of an admission made in the course of without prejudice negotiations. But that is not the sole reason behind the rule and the fact that that was not the situation here (the insurer was instead seeking to prove an issue in dispute) did not mean that the privilege could not apply. Instead, a party wishing to rely on the document must show that it falls within an accepted exception (eg construction of a settlement agreement). No relevant exception applied here.
Cape Intermediate Holdings v Dring: Court of Appeal rules on access to court documents by asbestos victims' support groups
The first instance decision in this case was reported in Weekly Update 45/17. The applicant is a non-profit unincorporated association representing asbestos victims' support groups in the UK and it sought access to various documents produced in a case between a parent company and an employee of its subsidiary who contracted asbestosis.
CPR r5.4C provides that non-parties can obtain statements of case (which includes the claim form, particulars of claim, defence and reply - but not documents filed with them) but the court's permission is required to obtain "from the records of the court a copy of any other document filed by a party..." At first instance, it was held that the applicant was entitled (subject to the court's permission) to all documents filed at court, including trial bundles and skeleton arguments. The Court of Appeal has now allowed the appeal from that decision and held as follows:
(1) The "records of the court" are documents kept by the court office as a record of the proceedings, principally "communications between the court and a party or other person" so eg the list of documents but not the disclosed documents themselves. Similarly "The receipt document for the trial bundles may be a record of the court, but not the trial bundles themselves".
The following documents are also not "records of the court" (and so cannot be obtained by non-parties under CPR r5.4C): the trial witness statements, the trial expert reports, the trial skeleton arguments or opening or closing notes or submissions, and the trial transcripts.
(2) However, the court has an inherent jurisdiction to allow non-parties to obtain copies of skeleton arguments/written submissions used in lieu of oral submissions (see GIO v Liverpool & London Steamship P&I ) as well as witness statements of witnesses (including experts) whose evidence stands as evidence in chief and would have been available for inspection during the course of the trial (see CPR r32.13). There is no inherent jurisdiction, though, to allow non-parties to obtain access to trial bundles and trial documents even if they have been referred to in skeleton arguments/written submissions, witness statements, expert reports or in open court.
(3) As to the exercise of the court's discretion, Moore-Bick LJ in Dian v Davis Frankel & Mead  held that anyone with a legitimate interest should generally be given permission where documents were read by the court as part of the decision-making process (but not where documents have not been judicially considered at all). In this case, it was held that the same principle applies even if a case settles before judgment (provided that there has been an "effective hearing"), because the principle of open justice is engaged.
Where the principle of open justice is engaged and the applicant has a legitimate interest in inspecting the document(s), permission is likely to be given.
In this case, the respondent argued that the applicant did not intend to use the documents which it sought for its own research, but instead intended to publish them in the hope that someone else might make use of them, and so it did not have a legitimate interest. That argument was rejected: "As the authorities make clear, an entirely private or commercial interest in a document can qualify as a legitimate interest". Here, the applicant had a legitimate interest in helping asbestos victims and promoting asbestos knowledge and safety.
Chernukhin v Danilina: Court of Appeal rejects "sliding scale" test in assessing quantum of security for costs
The first instance decision in this case was reported in Weekly Update 06/18. The defendants sought security for costs against the claimant on the basis that she is an individual resident outside of the EU/EEA (CPR r25.13(2)(a)). The judge found that there was (just) a real risk of non-enforcement in Russia, but the greater probability was that enforcement would be possible but take longer and be more difficult. The judge held that in such circumstances, a "sliding scale" should be applied to the costs claimed. The Court of Appeal has now upheld the appeal from that decision.
Prior caselaw has held that where there is a risk of non-enforcement, the court may order security to cover the full likely recoverable amount of costs to date and then later to trial, but where the risk is limited to additional costs or delay, security should usually be ordered by reference to that extra burden of enforcement.
Hamblen LJ added that although a real risk of additional burdens of enforcement is enough to satisfy the threshold test, "Mere difficulty of enforcement in itself is not enough (save in so far as it results in additional costs and therefore an extra burden of enforcement)". He said it was therefore difficult to see how delay can be quantified in terms of security, unless that delay is also likely to result in some additional cost or interest burden.
Furthermore, a sliding scale approach was not appropriate because it would require a detailed evidentiary exercise, which the courts should avoid in security for costs cases. The Court of Appeal concluded that "once it has been established that there are "substantial obstacles" sufficient to create a real risk of non-enforcement, the starting point is that the defendant should have security for the entirety of the costs and there is no room for discounting the security figure by grading the risk using a sliding scale approach".
Hertel v Saunders: Court of Appeal holds that offer was not a valid Part 36 offer
The claimants commenced proceedings against the defendants and the defendants subsequently made an offer, purportedly in accordance with Part 36, to settle a new claim which the claimants intended to add but for which permission to amend the claim form had not yet been received by the court. The claimants accepted that offer and then abandoned the pleaded claims.
The issue in this case was whether the offer was indeed a Part 36 offer. CPR r36.2 provides that a Part 36 offer must, amongst other things, "state whether it relates to the whole or the claim or to part of it or to an issue that arises in it and if so which part or issue".
The Court of Appeal has now held that this was not a valid Part 36 offer. It was said that "In civil proceedings, claims/parts/issues can only properly be defined by reference to the pleadings" and so a claim which has not been pleaded does not fall within the definition of a Part 36 offer. Although Part 36 offers can be made before commencement of proceedings, once proceedings have been commenced, only pleaded claims fall within the definition.
Nor did it matter that the new claim had been the subject of a proposed amendment and the defendants' solicitors had indicated that they would not oppose the amendment. It was also not open for the parties to agree between themselves that this was a valid Part 36 offer: "the parties cannot agree that an offer or an acceptance is in accordance with Part 36 if, on analysis, it is not".
Hislop v Perde: Costs consequences of late acceptance of a Part 36 offer in EL/PL and RTA claims
These two appeals concerned the fixed costs regime which applies to low value road traffic accident claims and employers' liability/public liability claims. In both cases, the defendant accepted the claimant's Part 36 offer, but outside of the 21 day period for acceptance.
Where a Part 36 offer is accepted within the 21 day period, costs are governed by the fixed costs regime. Conversely, where the claimant beats its own Part 36 offer at trial, he/she is entitled to indemnity costs from the date that the offer became effective.
The Court of Appeal has now held that in cases "in the middle", ie where the claimant's Part 36 offer is accepted, but accepted late, the case remains within the fixed costs regime and the claimant cannot recover standard or indemnity costs instead.
One further point raised by one of the appeals was the construction of a letter sent by the claimant accepting the defendant's Part 36 offer. The claimant had later sought to argue that that had been a counter-offer rather than an acceptance, because of a reference to indemnity costs, when the defendant had not referred to the basis on which costs were to be assessed in its offer.
The Court of Appeal confirmed that it would be "wrong in principle to construe a letter which confirms "that my client has agreed to accept your Part 36 offer" as anything other than an unqualified acceptance. It would also be wrong, in claims of this sort, to complicate the process of offer and acceptance under Part 36, and to subject that process to convoluted legal arguments as to contract formation and the like".
Sodzawiczny v Ruhan: The meaning of "matters" in section 9 of the Arbitration Act 1996/arbitration agreements and third parties
The following two issues were considered by Popplewell J in this case:
(1) The interpretation of section 9 of the Arbitration Act 1996, which provides that "A party to an arbitration agreement against whom legal proceedings are brought ... in respect of a matter which under the agreement is to be referred to arbitration may... apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter". The issue in this case was whether "matter" in this context includes a defence, even if the claim to which it relates does not fall within the arbitration agreement. The judge concluded that it does and that "matter" means a dispute or difference and that the court should stay the proceedings to the extent of any issue which falls within the scope of the arbitration agreement: "The objection that this approach leads to fragmentation of proceedings is not a sufficient reason for departing from these principles".
The judge also noted that prior caselaw stood "as authority for the proposition that if A brings a claim against B, and B advances a counterclaim which amounts to a defence by way of transactional set-off, A cannot have B's counterclaim stayed in favour of arbitration under section 9. There is an obvious justice in that result, because A should not be allowed to obtain judgment on his claim whilst insisting that a defence be stayed for arbitration, so that the court is confined to the facts A has chosen to prove and prevented from examining related facts which may amount to a defence".
(2) A clause in the underlying agreement provided that "With the exception of Affiliates... the Parties agree that the terms of this Agreement are not enforceable under the Contracts (Rights of Third Parties) Act 1999" ("the 1999 Act"). Section 8(1) of the 1999 Act provides (broadly) that where a third party wishes to enforce a right under a contract (to which he/she is not a party), he/she is bound to arbitrate to enforce that right if there is an arbitration agreement in that contract. Section 8(2) deals with the situation where the third party has a right to arbitrate, but no right under the contract which it wishes to enforce.
The judge was asked to decide whether a claim against the affiliates should go to arbitration, given that the underlying agreement contained an arbitration agreement. The judge held that, since the agreement gave the affiliates a defence, they were not bound to arbitrate: "Section 8(1) is concerned with the situation where the third party seeks to enforce substantive rights under the contract, not where the contract gives him a defence". On the facts, however, section 8(2) applied instead here, and the affiliates were entitled to a stay of court proceedings in favour of arbitration.
DISCLOSURE: The Civil Procedure Rule Committee has approved the launch of a compulsory 2-year Disclosure Pilot Scheme starting on 1 January 2019 in the Business and Property Courts (which include the Commercial Court, the Admiralty Court and the TCC). The key changes being introduced by the scheme are as follows:
(1) Standard disclosure (now referred to as Model D) will no longer be the default form of disclosure.
(2) Known adverse documents must be disclosed in all cases, even if no order to do so has been made.
(3) "Initial Disclosure" (of no more than 200 documents or 1,000 pages) must be given with statements of case (unless the parties agree, or the court orders otherwise). The documents must be key documents, relied on by the disclosing party and necessary for the other side to understand the case. A search for these documents is not compulsory.
(4) After closure of statements of case, and before the CMC, the parties should meet and agree a joint "Disclosure Review Document" (which is intended to provide a mandatory framework for agreeing a proportionate and efficient approach to disclosure). The parties will be required to give estimates of the likely costs of disclosure in the document.
(5) At the CMC, the court will choose from 5 "Extended Disclosure" models for each issue in the case. These range from disclosure of known adverse documents only to disclosure of documents which may lead to a train of enquiry.
(6) The parties can apply for a "Disclosure Guidance Hearing", in order to try to informally resolve a problem before or after the CMC.
(7) The parties are under an express duty to cooperate and engage before the CMC.
Further details can be found in the link below:
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.