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

Allianz Insurance v Tonicstar: Court of Appeal holds that a lawyer can be an arbitrator where requirement is for "not less than 10 years' experience of insurance or reinsurance"

http://www.bailii.org/ew/cases/EWCA/Civ/2018/434.html

The first instance decision in this case was reported in Weekly Update 40/17. The reinsurance contract entered into by the parties contained an arbitration agreement which provided that "unless the parties otherwise agree, the arbitration tribunal shall consist of persons with not less than ten years' experience of insurance or reinsurance". Following a dispute, the respondents wished to appoint Mr Alistair Schaff QC, but Teare J said that there was no very powerful reason for him not to follow the decision of Morison J in Company X v Company Y [2000] which held that this phrase meant only those working within the insurance and reinsurance industry could be appointed as an arbitrator (notwithstanding that the clause does not expressly say that).

The Court of Appeal has now unanimously allowed the appeal from that decision. The respondent had not sought to support Morison J's interpretation, given the lack of express wording in the phrase limiting arbitrators to "trade" arbitrators. Instead, it sought to argue that, although Mr Schaff QC had experience of insurance and reinsurance law, no evidence had been adduced to show that he had experience of insurance or reinsurance "itself". The Court of Appeal rejected that distinction, concluding that "first, that there is no such thing as insurance or reinsurance "itself" which is separate and distinct from the law of insurance and reinsurance and, second, that, unless the parties have some special reason for wishing to exclude lawyers from the pool of candidates eligible for appointment, a person who has practised as a barrister specialising in the field of insurance and reinsurance for more than 10 years would naturally be regarded as qualified for appointment as an arbitrator".

Furthermore, although later courts should generally adhere to the interpretation given by an earlier court to the meaning of a clause in a standard form agreement, that argument did not persuade the Court of Appeal that it should follow Morison J's decision: "In any case, while certainty is an important value in commerce, so too is the ability of the legal system to correct error, and contracting parties may be taken to know that a decision of a court of first instance is not immutable and is capable of being overruled. The value of certainty is greatest where the members of a trade can be expected to rely on the determination of a point which is otherwise unclear. ..But if a decision is not one on which significant reliance is likely to be placed or if the consequences of such reliance are unlikely to be significant, the importance of certainty is diminished. And if a decision is untenable, it should not in any case be allowed to stand".

COMMENT: The clause in this case was part of the JELC Clauses dated 1 January 1997. Those clauses have been amended to expressly provide that "The Arbitrators shall be persons (including those who have retired) with not less than 10 years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry". This decision therefore brings the interpretation of the arbitration clause in the former JELC Clauses in line with the current position.

Christofi v National Bank of Greece: Court of Appeal decides whether defendant can extend time to appeal against registration of a foreign judgment

http://www.bailii.org/ew/cases/EWCA/Civ/2018/413.html

A Cypriot judgment was registered for enforcement in England by a registration order made in May 2014. The Registration Order was served on the appellant/defendant in July 2014. Article 43(5) of Council Regulation No 44/2001 ("the Regulation") provides that "an appeal against the declaration of enforceability is to be lodged within one month of service thereof. If the party against whom enforcement is sought is domiciled in a Member State other than that in which the declaration of enforceability was given, the time for appealing shall be two months and shall run from the date of service, either on him in person or at his residence. No extension of time may be granted on account of distance." (The Recast Regulation No 1215/2012 does not contain any registration procedure so is neutral on this issue. However, the Court of Appeal noted that "the present dispute remains of some importance insofar as cases are still coming through the pipeline").

The appellant, who is domiciled in Cyprus, missed the two months' deadline for appealing by 22 days and sought an extension of time from the English courts to appeal. No extension was allowed at first instance and she appealed to the Court of Appeal.

The Court of Appeal first considered whether it had the power to extend time. It held that it did not. It recognised that a balance had to be struck between allowing a defendant to exercise an effective right of appeal and the Regulation's objective of simplicity and expedition in the recognition and enforcement of judgments. It concluded that "the existence of a general judicial power to extend time for appealing beyond that allowed for in Art. 43(5) in the case of [parties who are domiciled in a Regulation Member State], would undermine the policy of the Regulation and would not be compatible with it". The time limits set out in Article 43(5) are intended to be adequate. The reference to an extension "on account of distance" only does not imply that other grounds are not precluded (the Court of Appeal said that it would be wrong to apply such an interpretation to a non-domestic statute). The Court of Appeal also held that it was not discriminatory that parties who are not domiciled in a Regulation Member State may be treated marginally more generously in this respect (in that, under CPR r74.8(3), a prospective application for an extension of time by such parties made within the two months period is capable of producing an extension to a date outside that period).

The Court of Appeal went on to hold that even if it was wrong about jurisdiction, it would have refused to exercise its discretion to extend time. The appropriate test to apply would have been that laid down in Denton v TH White (see Weekly Update 26/14) and the Court of Appeal would have held that "In all the circumstances of this case, informed by the context and even assuming (without deciding, in the Appellant's favour) "no harm done", there is no warrant for granting a substantial extension of time, so cutting across the policy and principles of the Regulation".

PSJC Commercial Bank v Kolomoisky: Judge rules on what must be disclosed by the respondent following the grant of a freezing order

http://www.bailii.org/ew/cases/EWHC/Ch/2018/482.html

The worldwide freezing order ("WFO") granted against the respondents contained the standard disclosure obligation to inform the applicant in writing "of all his assets exceeding [here, £25,000] in value as at the date of this order, giving the value, location and detail of all such assets." The WFO defined the term "assets" as including a chose in action (broadly, a right to sue another party), although it did not give any guidance as to what had to be provided in relation to a chose in action. The respondents had made various loans and the applicant argued that full disclosure of these had not been given (in particular whether the debtors were likely to be able to repay).

The judge reviewed prior caselaw and noted that an asset disclosure order should only be made for the purpose of policing (or giving effect to) the WFO and should not go beyond information that is necessary for that purpose. Confidentiality does not entitle the respondent to withhold information. She accepted that the court has jurisdiction to make the order (which might include disclosure of documents), where "such an order is required to enable a claimant, first, to identify the nature and extent of a defendant's interest in assets, and second, to decide whether and, if so, what further steps it should take to protect its position, such steps being an important aspect of its ability to police the freezing order".

She refused to order disclosure of loan documents and drew an analogy with details of a bank account: "In such a case the court would require disclosure of the bank's name and location, the name or names in which the account is held, the account number and the balance in the account, which is the asset for these purposes. What the court will not do is order the provision of bank statements. They contain details about the asset but they are not details necessary to understand the nature of the interest in the asset or to enable the freezing order to be policed".

She did order disclosure of the date on which each contract was entered into and the nature of the goods sold or services provided under the contracts. Such basic information fell within the scope of "details" for the purposes of the WFO. The date of repayment was also a detail which is directly relevant to the value of the chose in action and so fall within "location, value or details". The applicant was further entitled to know whether the repayment of monies due was secured and the estimated value of any such security. However, although information about payments made to date had to be given to the applicant, the respondent was not required to provide details of future payments.

Frederick v Positive Solutions: Court of Appeal holds that company was not vicariously liable for agent who was acting "on a frolic of his own"

http://www.bailii.org/ew/cases/EWCA/Civ/2018/431.html

The appellants were persuaded by an acquaintance to invest in a property development scheme. The money needed for the investment was raised by way of re-mortgaging of the appellants' properties. This was arranged by the acquaintance's business partner ("W"), who was an IFA who had been appointed as the respondent's agent. W submitted the applications for loans through an online portal with a bank, to which he only had access because he was an agent of the respondent.

The appellants argued that the respondent was vicariously liable for W's actions. The Court of Appeal has now held that it was not.

The judge at first instance had correctly identified that the appropriate test is: "(1) was the harm wrongfully done by an individual who carried on activities as an integral part of the business activities of the defendant and for its i.e. the defendant's benefits, rather than his activities being entirely attributable to the conduct of a recognisably independent business of his own or that of a third party; and (2)… whether the commission of the wrongful act is a risk created by the defendant by assigning those activities to the individual in question, in which case liability will be imposed."

Here, W was essentially engaged on a "recognisably independent business" of his own (namely, the property investment scheme): W's "use of the portal was simply the means by which he was able to obtain funds from the appellants to invest in the scheme. To describe that activity as in any sense an integral part of the business activities of the respondent would be a complete distortion of the true position on the facts". Accordingly, W had been acting on a frolic of his own and the receipt of commission by the respondent did not alter that position because that commission had been generated automatically by the bank and had been held by the respondent in a suspense account (because the transaction to which it related did not appear on the respondent's books). Furthermore, it is well-established that merely providing the opportunity for wrongdoing is not sufficient, without more, to give rise to vicarious liability.

Bubbles & Wine v Lusha: Court of Appeal criticises trial judge but does not find allegation of apparent bias has been made out

http://www.bailii.org/ew/cases/EWCA/Civ/2018/468.html

The trial judge's daughter did a mini-pupillage at the chambers of Mr Varma, counsel for one of the parties in this case. Mr Varma told the barrister on the other side (Mr Modha) about this when a case he was working on was listed before the judge (and no objection was raised by Mr Modha). At the end of the hearing on the first day, the trial judge asked to speak to Mr Varma in private about a personal matter. During that meeting he discussed his daughter and then asked Mr Varma to pass on certain comments about the other side's case to Mr Modha.

Following judgment, the appellant alleged that the judge ought to have recused himself by reason of apparent bias.

The Court of Appeal was critical of the trial judge's conduct: when handling cases, judges need to bear in mind not just the hypothetical fair-minded observer, but actual litigants "who cannot be blamed for lacking objectivity". The trial judge should not have requested a private conversation and should not have expressed views to only one side about the merits of the parties' respective cases.

However, the Court of Appeal found that there was no apparent bias here. It was held that the mini-pupillage could not sensibly have been thought to give rise to any risk of bias. The request for a private conversation had been tactless but had taken place with the knowledge and consent of Mr Modha. Furthermore, it had been perfectly proper for the judge to express preliminary views about the merits of each party's case. He had been "misguided" in not expressing those views in open court but it was "of critical importance that the judge, in making the comments that he did (i) made it clear that his purpose was to assist both parties in preparing their closing submissions, and (ii) specifically asked Mr Varma to pass on the comments to his opponent (which Mr Varma did). This demonstrates that the trial judge was not giving or seeking to give one party a privileged insight into his thinking which was not being afforded to the other".