A summary of recent developments in insurance, reinsurance and litigation law.
Yukos International v Merinson: Judge considers whether a jurisdiction agreement was made "after the dispute has arisen"
The recast Brussels Regulation 1215/2012 provides for special jurisdictional rules in the case of direct insurance contracts but Article 15(1) provides that those rules may be departed from where (inter alia) there is an agreement which is entered into "after the dispute has arisen".
This case involved an employment contract, but an identical provision to Article 15(1) applies to the special rules for such contracts, and the issue in this case was what is meant by "after the dispute has arisen" (the judge confirmed that the answer to that question would apply equally to insurance contracts). This issue has not previously been considered by the English courts.
Referring to the Jennard report (which is a commentary on the Brussels Convention, which contained a predecessor to Article 15(1)) and further textbook commentary, the judge concluded that the correct interpretation was as follows: "a dispute will have "arisen" if and only if: (a) the parties have disagreed upon a specific point, and (b) legal proceedings in relation to that specific point of disagreement are imminent or contemplated". There is no "dispute" just because the parties are aware of circumstances which could potentially give rise to a claim: "A dispute will not have arisen for these purposes unless and until the subject-matter of the claim has been communicated by one party to the other". Furthermore: "It seems to me that it is sufficient if the parties are positively choosing the forum in which their specific existing dispute may eventually have to be resolved, even if they are merely choosing it as a last resort after other methods – negotiation, mediation etc - have first been tried and failed".
COMMENT: As the judge noted, it is common for settlement agreements to settle not just the claim in dispute but also all potential claims (whether known or unknown at the time of the settlement). The effect of this judgment is that jurisdiction clauses in such settlement agreements (in an insurance, but not a reinsurance, context) will only apply to the specific contemplated or imminent claim in dispute between the parties, and not any other claims (which will still be governed by the special jurisdictional rules), no matter what the express wording of the agreement says.
Minera Las Bambas v Glencore: Judge decides whether litigation privilege can be asserted by a non-party who has controlled proceedings
The claimants challenged the defendants' right to assert litigation privilege over certain documents. These documents had been produced for proceedings in Peru. However, the defendants had not been a party to those proceedings – they had instead asserted a contractual right to assume control of those proceedings (which were brought in the name of the claimants). The following issues were considered in the judgment:
(1) Had the relevant documents been "disclosed"? The defendants sought to argue that they hadn't and so the claimants had erred in bringing an application for inspection, rather than specific disclosure. The basis for that argument was that the documents had been referred to by category rather than individually (by a numbered item) in the list. That argument was rejected by the judge, who noted that the rules allow for a large number of documents to be listed by category and "So far as describing documents in respect of which privilege is asserted, the authorities suggest that there is no need to describe the documents such that it would identify the document and thus thwart the assertion of privilege".
(2) Could the defendants claim litigation privilege when they had not been a party to the proceedings in Peru? The defendants sought to rely on the Court of Appeal decision in Guinness Peat Properties v Fitzroy Robinson . The judge said that in that case, the court had had to consider the dominant purpose for producing the relevant document (a notification of claim to insurers), and when taking into account the dominant purpose of both the insured and the insurer (who was going to take over the conduct of proceedings which had been brought against the insured), it was clear that the dominant purpose had been to seek legal advice (ie that the document was privileged). However, she said that Guiness Peat "is not authority for the proposition that a person controlling litigation can assert litigation privilege against the party which it is controlling and who is the party to the proceedings. I accept the Claimants' submission that it is an established principle that litigation privilege can only arise in favour of a person who is a party to the litigation in question".
The judge added that even if she was wrong on that point, there was no caselaw authority for a party to claim privilege where it had controlled not these proceedings, but other proceedings, in which it had not been a party (and for which the documents had been created).
(3) Could the claimants demand inspection of privileged documents on the basis of the parties' joint or common interest? As the judge had concluded that the documents were not privileged, this issue did not need to be decided. Accordingly, the judge was not required to decide the issue of whether common interest privilege can be asserted where the relevant documents were generated after the parties fell out.
(4) As the documents had been disclosed, were the claimants entitled to inspection? The defendants argued that, having re-reviewed the documents, they had concluded that they were not disclosable because they were not relevant. The judge accepted that a right to inspection does not arise automatically just because a document has been disclosed, but noted that "there is a general rule that a party to whom a document has been disclosed should be entitled to inspect that document … The question of whether inspection is necessary to dispose fairly of the proceedings is a relevant factor, but it is not "a free-standing hurdle to be considered and surmounted in isolation before inspection may be permitted"" (see NCA v Abacha, ). Nor did it matter that the claimants' application had been made 9 months after standard disclosure took place.
Accordingly, an order for inspection was made.
COMMENT: This was not an insurance case but it is, of course, not unusual for insurers to take over control of proceedings (for example, to defend an insured against a third party claim, or to pursue subrogation rights against a third party). The effect of this decision is that insurers will not be able to assert privilege as against the insured over documents which are privileged in those proceedings (in which the insurers are not a named party). It may be that such documents are covered by common interest privilege anyway (which can in certain circumstances be used as a "sword" as well as a "shield") but (as the judge alluded to but did not resolve) it is unclear whether common interest can be asserted where the relationship between the parties has broken down before the relevant documents were created.
DDM v Al-Zahra Hospital: Court grants extension of time to serve claim form out of the jurisdiction
The claimant experienced delays in effecting service of the claim form on the defendants, including a hospital in the United Arab Emirates. The Foreign Process Section ("FPS") of at the Royal Courts of Justice advised the claimant that service in the UAE can take between 6 and 12 months, or more, and that an extension of time to serve should be sought (under CPR r7.6). Two extensions of time were granted but the second one was subsequently set aside. The claimant appealed against that decision and that appeal has now been allowed.
The defendant referred to Foran v Secret Surgery (see Weekly Update 17/16), in which the judge held that an extension of time in a service out of the jurisdiction case should not have been granted. The judge in that case said that the 6 month period for service out was generous, but in this case Foskett J commented that "I respectfully question whether the 6-month period allowed for service outside the jurisdiction does cater in all circumstances for the difficulties of effecting service through the FPS process". Furthermore, the claimant's solicitors in Foran had been criticised for not pursuing matters with the FPS to see how service could be expedited, but the judge in this case said that the FPS's website (at least now) makes it clear that such enquiries are "obviously discouraged and, frankly, futile". Furthermore, where, as in the UAE, alternative means of service are not ordinarily possible, there would be no point in making such enquiries.
A further issue taken into account in this case was the total lack of communication by the defendants. The judge commented that "in my view, the complete failure of the Defendants to respond at all to these various communications ought to weigh heavily against the otherwise important consideration of the expiry of the limitation period". The defendant's insurers had initially advised the defendant not to respond to the claimant and the judge noted that "it does appear that the hospital itself did react properly to the communications from the Claimant's solicitors and, perhaps, assumed that the insurers would acknowledge those communications. That would, of course, have been the anticipation of all parties if an insurer in the UK was the recipient of communications such as these from an insured". Accordingly, the defendant had not advised the claimant that a notarised power of attorney authorising the defendant's solicitors to act was first required under UAE law, before correspondence could be entered into. The judge was critical of that stance, saying that it had hampered the claimant in putting its case together: "True it is that the Claimant's solicitors did not obtain any advice about this, but it was not unreasonable, in my view, to have anticipated some kind of communication from the insurers and/or lawyers along the lines I have indicated. The insurers and/or lawyers only had to perform an Internet search and, had they not known it before, they would have realised that the Claimant's solicitors were a well-known firm of English lawyers".
COMMENT: Prior caselaw has established that defendants generally do not have to cooperate with a claimant to help with the service of the claim form. However, here, the issue was that the lack of cooperation prevented the claimant from formulating its case and drafting the claim form (which in turn impacted on its ability to serve before the expiry of the limitation period). It is a fairly generous decision for the claimant, but the judge may have been influenced to some degree by the nature of the claim, having stated that the prospect of the claimant having to apply to the court to exercise its discretion to allow the otherwise time-barred claim to proceed was not "an attractive proposition when the effective, lifetime interests of a seriously disabled child are in issue". This case might be contrasted with that of Euro-Asian Oil v Abilo (see Weekly Update 10/13), in which Burton J confirmed that "waiting, certainly waiting for so long as to take up all or the majority of the generous periods of time for service of the writ, in seeking to persuade the proposed Defendants to instruct solicitors or to put forward a substantive defence or to make an offer in settlement, is not to be regarded as a good reason, but it is indeed rather to be treated as a bad reason or as negligence or incompetence; and the obtaining of further information …. before finalising Particulars of Claim and/or service of the Claim Form would be regarded as a serious error of judgment" (although there had been no time bar issue in that case).
Almazeedi v Penner (Cayman Islands): Privy Council finds apparent bias of Cayman Island judge concurrently appointed as a judge in Qatar
The appellant alleged that there was apparent bias because the judge hearing its case in the Cayman Islands was also a supplementary judge in the Civil and Commercial Court of the Qatar Financial Centre (although he was not sworn in until a year after the Cayman Island case began). The case in the Cayman Islands involved parties with strong Qatari state connections.
The Privy Council noted that the circumstances of this case "arise from the modern development across the world of courts with an international element in their judiciary, designed to serve the business and financial community". The judge in question was a retired High Court judge with a distinguished record. Reference was made to the earlier Privy Council decision of Prince Jefri v State of Brunei , in which an allegation of apparent bias against the Chief Justice of Brunei Darussalam (on the basis that his prospects of further appointment depended on the goodwill of the country's Sultan) was dismissed. There the Privy Council had said that the fair-minded and informed observer "would dismiss as fanciful the notion that such a judge would break his judicial oath and jeopardise his reputation in order to curry favour with the Sultan".
The Privy Council distinguished this case on the facts, because in Prince Jefri the allegation had been that all judges were affected by the matters complained of, whereas here, the complaint was that the judge had an undisclosed involvement in Qatar. By a majority of 4:1, it found that the allegation of apparent bias has been proven. It said that it was "unable to accept that the relatively uncontroversial nature of the judge’s judicial activity prior to and after the winding-up order means that any flaw in his apparent independence can be ignored or overlooked". It went on to find that "The key to the resolution of this appeal is not simply that the proceedings in which the judge sat concerned issues arising between investors belonging or close to the Qatari state and the appellant. It is, in the Board’s view, that …. the disputes in which the appellant was engaged up to the date of the winding-up order took place against a background of personal threats, one of which … associated the appellant’s resistance to the winding-up order with a challenge to the state of Qatar itself; and that [two of the personalities involved in the proceedings] were closely concerned, to an extent which remains opaque, in at least some aspects of the arrangements by or under which the judge was in the process of becoming a new part-time judge of the relatively new Qatar Civil and Commercial Court". Furthermore, the Privy Council held that there was apparent bias not just (as the Court of Appeal had found) from the date the relevant person acquired a direct responsibility relating to judicial appointments in the Qatar Civil and Commercial Court: There was also apparent bias from an earlier date because it was held that the judge ought to have disclosed his involvement with Qatar before determining the winding up petition. The Privy Council noted that "The fact of disclosure can itself serve as the sign of transparency which dispels concern, and may mean that no objection is even raised. An alternative to disclosure might have been to ask the Chief Justice to deploy another member of the Grand Court, to which there would, so far as appears, have been no obstacle".
Ballard v Sussex Partnership: Effect of withdrawing a Part 36 offer
The defendant made a Part 36 offer which it subsequently withdrew and then a second, lower Part 36 offer which it beat at trial. Where a defendant beats its offer at trial, the usual costs consequence is that the court will order the claimant to pay the defendant’s costs from the date on which the "relevant period"("RP") in the offer expired and interest on those costs. In this case, the second Part 36 offer expressly provided that "For the avoidance of doubt, if the Claimant fails to obtain a Judgment more advantageous than the offer made in this letter then the Defendant will seek an Order that the Claimant should pay both Parties' costs from [the end of the RP of the second offer]".
The issue in this case was whether the claimant had to pay the defendant's costs from the end of the RP of the first or the second offer. The county court judge held from the date of the first offer, but that ruling has now been overturned by Foskett J.
After reviewing prior caselaw, the judge recognised that there is "tension between the proposition that an offeror who withdraws a Part 36 offer cannot "reap the benefits" of what is now r.36.17 …. and the proposition that such an offer is still "relevant" on the issue of costs". Although, with hindsight, the claimant should have accepted the first, higher, Part 36 offer, the sentence starting "Fort the avoidance of doubt" in the second offer meant that the defendant could no longer claim to be entitled to costs from the end of the RP of the first offer: "I do not consider that it is fair to the Claimant to send a detailed letter to her solicitors, apparently spelling out the consequences of failing to beat the Part 36 offer and then to argue that something different was intended, particularly where, as here, the consequence of the additional argument would probably diminish the Claimant's net return from the litigation very considerably".
COMMENT: It is possible to vary, rather than withdraw, a Part 36 offer. In the case of Burrett v Mencap (see Weekly Update 33/14), it was held that where an offer is changed, the relevant period did not start to run again and so the defendant was entitled to its costs from the end of the RP of the original offer. Although CPR r36.9(5) (introduced after Burrett) now provides that where a better offer for the offeree is made, that will amount to a new Part 36 offer, the rules are silent on the situation where a lower offer is made and so in this case it appears that the defendant would have been entitled to its costs from the end of the RP of the first offer if the offer had been changed rather than withdrawn.
Sarayiah v Williams: Judge refuses to enforce Norwich Pharmacal order following errors in order
The applicant obtained a Norwich Pharmacal order (NPO) against the respondents. He alleged that the NPO was breached by the respondents and he sought to enforce the NPO by committal proceedings. The sealed NPO had required the respondents to produce "The exact wording of any complaints made against the Claimant by any other person [and their identity]". The judge held that the presence of the square brackets was in itself enough to dispose of the committal application: "To my mind, the presence of the square brackets inevitably leads to ambiguity, as would be the case in any judgment or order. Are the identities to be revealed or not? Since the order is ambiguous as it stands, it is impossible for the Applicant to discharge the burden of proving a breach to the criminal standard".
Sberbank of Russia v Ramljak: Judge construes an undertaking by the parties to stay arbitration
The parties agreed a consent order which contained an undertaking that they would stay an LCIA arbitration "pending final determination" of a separate application to the courts. The issue in this case was whether there had been a "final determination" where the application had been determined but there is still an outstanding application for permission to appeal. The judge noted that this issue is context-specific and involves interpreting the undertaking which, as well as being an order of the court, is also a contract between the parties. Applying the principles of contractual interpretation, he concluded that "the word "final" in the phrase "final determination" must refer to a point in time when that determination can no longer be changed. In my judgment, it must therefore be referring either to the end of the possibility of any appeal or, if sooner, to a point at which the losing party at first instance acknowledges that there will be no appeal or no further appeal". Accordingly, the undertaking here had not yet come to an end.