A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Spire Healthcare v RSA: Interpretation of an aggregation clause and arguments of redundancy


This case involved the interpretation of a clause in the policy which the insurer argued was an aggregation clause. The insured sought to argue that it was not an aggregation clause, because, although worded like an aggregation clause, it did not clearly set out the consequences of several claims being aggregated together. HHJ Waksman QC rejected that argument, on the basis that it was clear, when read with the policy schedule, that the clause was intended to treat linked claims as a single claim and "there is no real difficulty in deciding which financial limit applies because it is obviously the lower one than would otherwise be the case; this must follow, since the purpose of aggregation is to reduce cover in the case of linked claims and here the lower amount is specifically referenced to "one claim".

The judge made some general observations too. Since aggregation clauses benefit both insurers and insureds in different ways (depending on whether they apply to the policy limit or the payment of an excess), "one should approach any question of construction in relation to an aggregation clause without any preconceptions as to the result and to undertake it in a balanced way". Also, although arguments that a clause is redundant or otiose can be made to support an alternative interpretation, it should be borne in mind that sometimes this just reflects "linguistic overkill" by the draftsman: "the fact that a particular clause may be duplicative in other parts of the Policy does not necessarily mean that it is also merely duplicative in [the section where the clause appears]". The judge said that some of the policy wording in this case had been inelegant, but "in frequently used, modified and revised policies of insurance, neatness and elegance are often lost".

The judge concluded that the relevant clause operated as an aggregation clause, so that claims falling within it were subject to the lower limit of £10 million (rather than £20 million). Furthermore, the policy was drafted in such a way that the excess could not be aggregated. Although the judge saw force in the argument that it would be illogical for there to be aggregation of cover limits but not for the policy excess, it was necessary to look at the particular wording of the policy and "to achieve that result for claims would simply amount to rewriting this part of the Policy in a way which does too much violence to the language".

Owen v Watson: Whether witness owes duty of confidentiality to a party before trial


The defendants applied for an order allowing them to interview a prospective witness about certain topics. That witness was an employee of the claimant. It is the accepted position that a party can call any witness (including the employee or ex-employees of the other side) to give evidence at trial and that witness is obliged to answer questions puts to him or her. In doing so, the witness will not be in breach of his/her duty of confidentiality owed to his/her employer. It was equally accepted that the witness cannot reveal matters which are confidential before trial (on the basis that those answers would be relevant and admissible at trial). However, of issue in this case was whether the claimant had waived confidentiality in certain specific matters by pleading them.

The defendant sought to rely on prior caselaw concerning the waiver of privilege to draw an analogy with waiver of confidentiality.

Privilege can be waived expressly (which includes waiver by pleading), impliedly (where eg a party sues its solicitor, thus waiving the right to rely on legal professional privilege because the court is being asked to rule on issues arising from the client/solicitor relationship), or by collateral waiver (ie waiver of other privileged material that is part of the same "transaction").

In this case, the defendant claimed that there had been an express waiver because of the way the claimant had pleaded its case. The judge considered whether "If a claimant, in a case in which he is suing not his former solicitor but a third party, pleads a privileged document, does this amount to an express waiver of privilege in that document?" He answered this question ""Yes". Or, to be more precise, it amounts to an announced intention to rely on, and hence waive privilege in, the document at trial, and thus … he is put to an election either to abandon his reliance on the document, or to accept that privilege has been waived".

But did the same principles apply to waiver of confidentiality in a non-privileged document? The judge held that they did not. Confidential documents must be disclosed in the course of litigation if they are relevant to the pleaded issues. Where privilege is waived, all privileged documents relevant to the issue will have to be disclosed. But the same is not true for waiver of confidentiality: "though such confidential matters have been referred to in disclosed documents and thereby have come into the possession of the other party, that does not entail the further consequence that a potential witness who owes a duty of confidentiality to the disclosing party is now free to talk about such matters to anybody he wishes to" before trial.

Accordingly, the court had no discretion to allow the defendants to interview the witness before trial and the application was dismissed.

Autonomy v Hussain: Whether master erred in refusing examination of English witness in aid of US proceedings


The defendants to US proceedings have also brought proceedings in England alleging fraud against a Mr Hussain (and others). Mr Hussain is not a party to the US proceedings. The defendants sought and obtained from the US courts a letter of request to examine Mr Hussain in England, in order to obtain evidence for the purposes of the US proceedings. However, the Senior Master refused the defendants' application to give effect to the letter of request, on the basis that such an examination would be oppressive (since he was also a defendant in English proceedings). She also found that he would not be able to achieve a fair trial in England (thus breaching his ECHR right to a fair trial), but dismissed an argument that an examination would be pointless because Mr Hussain could rely on his privilege against self-incrimination under the US Fifth Amendment. The defendants appealed and Morris J has now held as follows:

(1) It has been established that, where fraud is alleged, a letter of request is oppressive where allegations of fraud have been made against the witness but the witness has not been sued in respect of those allegations. However, the same is not true where a civil action for fraud has been commenced: "Where the applicant has already commenced proceedings against the witness making allegations of fraud, then the mere fact that such fraud allegations have been made does not render the letter of request as oppressive. Whether it is oppressive or not will depend upon the particular evidence sought in the context of the particular allegations pleaded against the witness".

(2) On the facts of the case, (including the view that the allegations of fraud had not been sufficiently particularised), it was concluded that the Senior Master had been entitled to conclude that an examination of Mr Hussain would be oppressive. However, the Senior Master had erred in concluding that the availability of the Fifth Amendment would not neutralise any possible oppression in relation to the use of incriminating evidence in civil proceedings: "if and in so far as the examination of Mr Hussain pursuant to the Letter of Request would be otherwise oppressive, his ability to rely upon the Fifth Amendment privilege will prevent any such oppression arising".

(3) The Senior Master was correct, though, that the mere assertion by Mr Hussain that he will invoke the Fifth Amendment was not sufficient to render the examination pointless, since it could not be ruled out that Mr Hussain will answer at least some of the questions put to him, notwithstanding his assertion that he would not.

(4) The examination of Mr Hussain did not breach his rights to a fair trial. He could rely on the Fifth Amendment to protect himself against any unfairness and "the overall fairness of the Chancery proceedings as a whole is a matter for the trial judge in those proceedings to monitor and control. It is not for this court to rule specifically on the unfairness of those proceedings and at this stage".

Accordingly, the appeal was allowed and the court's discretion was exercised to make an order for examination of the witness.

Deutsche Bank v Sebastian Holdings: Court refuses permission to serve out for committal application


The applicant contends that that the respondent failed to disclose documents and lied under oath (after he was served with an order to attend court under CPR r71.2). It therefore applied for permission to serve out of the jurisdiction an application for a suspended committal order (the respondent resides in Monaco). The respondent argued that the court only has power to make a suspended committal order under CPR r71.8 and that CPR r71 does not have extra-territorial effect.

Teare J held that:

(1) The power to commit to prison for contempt is a common law power. That power applies as much to the enforcement of a judgment as it does to enforcement of a procedural order (and a White Book note relating to CPR r71 on this point was incorrect).

(2) A party who alleges breach of an order made under CPR r71.2 does not have to proceed under CPR r71.8: he/she can elect to proceed with a committal application under CPR r81.

(3) There is no dispute that CPR r81 has extra-territorial effect. Although it did not therefore matter for this application, the judge agreed with the argument that a party cannot evade compliance with an order by leaving the jurisdiction and so an order for committal pursuant to CPR r71.8 can be sought notwithstanding that the respondent has left the jurisdiction.

(4) However, the applicant could not bring itself within one of the jurisdictional gateways of PD 6B. PD 6B para 3.1(10) provides that the court may grant permission to serve out where "a claim is made to enforce any judgment or arbitral award". A court's order under CPR r71.2 is not a "judgment" for these purposes.

Accordingly, the application failed. The judge did however leave open the issue (which was not pleaded before him) that the court may have an inherent jurisdiction to permit service out of the jurisdiction.