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

Reminder: Section 13A of the Insurance Act 2015 (late payment damages) comes into force on Thursday 4 May 2017. It applies to all insurance and reinsurance contracts entered into on or after that date.

This Week's Caselaw

Peel Port Shareholder Finance Co v Dornoch Ltd: Whether third party claimant entitled to pre-action disclosure of currently solvent insured's insurance policy

http://www.bailii.org/ew/cases/EWHC/TCC/2017/876.html

The owners of a warehouse which was damaged by fire alleged that the fire was caused by the activities of the insured. The insured is currently solvent but the warehouse owners allege that it would be unable to meet any judgment against it and so would be wound up. The owners therefore sought pre-action disclosure of the insured's public liability insurance policy from its insurers, in order to determine whether to pursue its claim. Those insurers allege that they are entitled to deny liability under the policy because of a breach by the insured of a "hot working" endorsement to the policy.

The insurers argued that the judge should not exercise his discretion under CPR r31.16 (the pre-action disclosure rule), because to do so would be to ignore the provisions of the Third Parties (Rights against Insurers) Act 2010. That Act contains a specific regime for the provision of information (but not documents) about an insolvent insured's insurance provision. It was argued that there would have been no need for Parliament to have introduced such a regime if disclosure of the policy could instead be obtained under CPR r31.16.

Jefford J accepted that argument and dismissed the application for pre-action disclosure.

She agreed that Parliament could not have envisaged that CPR r31.16 would (or would commonly) be used to obtain policies from the insurers of insolvent insureds. Furthermore, it has been accepted in prior caselaw that the CPR provisions cannot be used to obtain the insurance policy of a solvent insured (because the policy is not relevant to any issue in the case) and there has never been an express statutory provision entitling a litigant to obtain the policy of a solvent insured either (because a litigant takes his defendant as he finds him).

She concluded that: "It would, against this background, be curious if a potential claimant (A) could say that because the solvent insured might become insolvent and that he, A, might then have a claim against insurers, he should have disclosure of the policy under Rule 31.16. In my judgment, this militates strongly against my exercising my discretion to order disclosure in this case". Nor did it make any difference that it was highly probable that the insured would (if the litigation proceeded) be held liable, as it had not advanced any defence, and that it was highly probable that it would be put into liquidation because it could not meet any judgment against it.

Eastern European Engineering v Vijay Construction: Judge decides whether defendant resisting enforcement of an ICC award should be ordered to put up security

http://www.bailii.org/ew/cases/EWHC/Comm/2017/797.html

The claimant was granted leave to enforce an ICC arbitration award in England. The defendant applied to set aside that order. Flaux J ordered that that application be adjourned pending the final determination of the defendant's challenge to the award before the French courts. He also ordered the provision of security by the defendant. The defendant did not put up that security and the claimant subsequently sought the dismissal of the defendant's set aside application, because of its failure to comply with the order for security and the failure of its challenge to the award in the French courts. The defendant argued that Flaux J had been wrong to order security in the first place. It relied on the recent Supreme Court decision of IPCO v Nigerian National Petroleum Corpn (see Weekly Update 08/17).

Baker J acknowledged that the issue of whether Flaux J had been wrong to order security had to be decided by the Court of Appeal. He instead focused on what sanction, if any, should be imposed because of the defendant's non-compliance. The claimant argued that the order should be treated like any other court order and that the court should consider granting an unless order. That argument was rejected by the judge, who held that: "In the specific context of a challenge to the enforcement of a New York Convention award, an order requiring the party challenging the award to provide security for it is permissible (if at all) only where the enforcing court has judged that a challenge in the courts of the seat is to delay the enforcing court's determination of the challenge but that should in fairness be on the basis that security be provided. However, where that adjournment is not sought by the party resisting enforcement, there is no sense in which the security ordered can properly be regarded as the "price of relief sought as a matter of discretion or concession", as Lord Mance put it in IPCO v NNPC".

Accordingly, as the defendant here had resisted adjournment of the English proceedings, it would be wrong to impose "unless" terms on the order for security. Instead, the judge ordered that the adjournment should be terminated, the order for security discharged, and the set aside application should be heard as soon as possible.

Marex Financial v Garcia: Court rules it is an actionable tort to induce a company to violate a claimant's rights under a judgment (before freezing order granted)

http://www.bailii.org/ew/cases/EWHC/Comm/2017/918.html

The claimant obtained a judgment against two companies. It is alleged that, before it obtained a freezing order against the companies, but after a draft judgment was released, the ultimate beneficial owner of the companies dishonestly stripped assets out of the companies to make them judgment-proof. The issue in this case was whether there is any claim under English law against the owner.

Knowles J noted that non-payment of a judgment debt is an actionable wrong. Furthermore, although the Court of Appeal has held that a party does not commit an actionable wrong by making itself judgment-proof before it is enjoined (by a freezing order) from doing so (see the Court of Appeal's decision in Law Debenture Trust Corporation v Ural [1995]): "the Court of Appeal was there addressing the situation (as with a claim in damages, before judgment) where there was indeed no right of the claimant before a freezing order enjoined the conduct in question. The present case differs in that the claimant had a right before judgment to be paid a contract sum, and a right after judgment to be paid the judgment sum". Furthermore, there were sufficient facts in this case to allow an analysis that the owner had induced and procured the companies not to pay the judgment debt. Accordingly, the English court did have jurisdiction to hear the claim.

Kitcatt v MMS UK Holdings: Discretionary rate of interest for wealthy individuals

http://www.bailii.org/ew/cases/EWHC/Comm/2017/786.html

The claimants won at trial. They argued that they were entitled to pre-judgment interest at a rate of 5% above base rate. They sought to rely on the decision of Attrill v Dresdner Kleinwort (see Weekly Update 20/12) where that rate was ordered because it was said to reflect the cost of borrowing for a private individual from January 2009 onwards. Although the base rate fell significantly at the end of 2008, as a result of the global financial crisis, the cost of unsecured borrowing by individuals did not follow suit.

In Attrill, it was held that the case was not a commercial case or even akin to a commercial case (the claims were brought by the claimants as individuals against their former employer). In this case, though, the claimants were successful business people and the judge accepted that they might be able to achieve a better rate than some other claimants. In the absence of specific evidence on the point, he ordered 2% over base rate.

Falmouth House v Abou-Hamdan: Whether defendant had to attend trial in person

http://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Ch/2017/779.html&query=(falmouth)

It is a recognised feature of civil litigation that a litigant has a right to appear in person at trial but also has a right to appear by counsel. Furthermore, a party is generally entitled to form their own view whether to give evidence or not. Unusually in this case, though, the defendant was ordered to attend trial in person and was not allowed to give evidence by video-link (he is resident outside the country). That order was made because an earlier adjournment had been largely caused by the defendant and the judge wished to ensure that the trial should go ahead on the re-fixed date, and not go off a second time.

When he failed to appear at the trial, the defendant's defence was struck out and judgment entered in default.

The defendant appealed and Nugee J has now held that the order that the defendant attend "in person" at the trial meant that he had to attend himself and it was not enough to have counsel there representing him instead. That also meant that he had to be physically present and so an appearance on a screen via video-link would not suffice.

However, the judge said the breach was not serious or significant and so the defendant was entitled to relief from sanctions: "In truth it seems to me to have had no practical consequences for the conduct of the trial at all, save that if it were necessary for counsel to take instructions, it might be slightly less convenient to do so. Indeed, strictly speaking, all that [the defendant] had to do to comply with [the Order] was to appear on the first day of the trial and then disappear again. That illustrates that the purpose of the Order was not to ensure the presence of [the defendant] personally at the back of the court throughout the trial but to ensure that the trial went ahead as planned".