This Week's Caselaw

RBS Rights Issue Litigation: Judge considers ordering disclosure third party funders' details/insurance arrangements ahead of security for costs application

The defendants' costs in this case (which is the subject of a Group Litigation Order) have so far exceeded £100 million. They sought disclosure of the names of the claimants' commercial funders and details of any ATE insurance in advance of a threatened application for security for costs, when a trial is imminent. The claimants argued that the defendants should have a settled intention to apply for security for costs and have some realistic prospect of success in such application. Hildyard J held as follows:

(1) Information about the funders should be ordered.

There was no dispute that the claimants were being financed by commercial third party funders and those funders had a measure of control over and/or prospect of benefit from the proceedings. It is clear that the court has jurisdiction to order disclosure about third party funders. The judge rejected an argument that, in order to succeed, the defendants should have unequivocally determined to bring an application for security for costs once the details are revealed: "I agree, however, that the applicant must, at least, demonstrate that its putative application for security is a real possibility on realistic grounds, and not one simply posited as a possibility for some tactical purpose without any real intention of pursuing it".

The judge went on to hold that: "In my view, the critical question for present purposes is whether, even if in other circumstances security might be ordered, were an application to be made now, it is already clear beyond sensible argument that an order (a) would not provide any fair, real choice to the respondents to it; and (b) cannot properly be accommodated within the existing trial timetable without unjust disruption to the Claimants. This is a high hurdle". On the facts of the case, it could not be said that the funders would necessarily be confronted unfairly with "an unreal choice" (as to whether to put up security and continue with their action or withdraw the claim), notwithstanding the lateness of the application. In any event, it was only information, and not security, which was being sought at this stage.

(2) However, information about the ATE insurance policy should not be ordered.

Although there is conflicting prior caselaw on the point, the judge relied on XYZ v Various Claimants (PIP Breast Implant Litigation) (see Weekly update 43/13) to hold that the court does have power under CPR r3.1 (case management powers) to order disclosure of an ATE policy when that disclosure is necessary to enable the court proportionately and efficiently to exercise its case management function. Although there were various factors which made the ATE policy in this case potentially relevant in the context of case management (eg the claimants had previously relied on the ATE cover which they asserted was in place in order to encourage the court to make a GLO), the judge declined to exercise his discretion to order disclosure. That was because "the case management characterisation and rationale is still ancillary to enforcement; and the true or at least primary objective is demonstrated by the form of order sought, which is premised not on the documents being needed for case management purposes, but only that there are efficiencies in making the Claimants determine now their defence to an uncertain application for security which may not be pursued anyway and further or alternatively may be demonstrated (by reference, for example, to the position of the funders) to be unwarranted. I do not think it would be right to exercise case management powers to put the Claimants to an election in respect of a potential application for security for costs to which there may well be other answers, and to which the ATE policy may not be a complete answer anyway".

CPR r18 provides that the court may order a party to clarify "any matter which is in dispute in the proceedings". In XYZ, it was concluded that there was no jurisdiction under CPR r18 to order disclosure of a party's insurance arrangements ("The insurance position of the defendant is not a matter in dispute in these proceedings"). Here, Hildyard J agreed that an ATE policy is unlikely to be disclosable under CPR r18 but held the court's power to order disclosure is not excluded where that is expedient and necessary for the purposes of case management: "for example, where the ATE policy has been deployed in the course of the proceedings whereby to influence or impact on a decision (procedural or otherwise) such as it has been in the present case". However, for the reasons given above, the judge declined to exercise his discretion to grant the order.

Finally, the judge also rejected an argument that an ATE policy is privileged from disclosure because the policy is taken out for the dominant purpose of conducting litigation and/or it is likely to reflect legal advice given as to prospects and tactics: "In my view, it is unlikely that privilege attaches to an ATE policy as such on either ground (litigation or advice), except to the extent …. that parts of a policy (such as, possibly, the amount of premium..) may attract legal advice privilege and require redaction on the basis that the relevant part might allow the reader to work out what legal advice had been given".

COMMENT: The judge's comments about XYZ in relation to CPR r18 are interesting, especially given the difficulties of convincing a court to exercise its discretion under CPR r3.1. Prior to that decision, it had been held in Harcourt v Griffin (see Weekly Update 32/07), that CPR r18 was wide enough to cover the provision of information regarding the defendant's insurance cover, but the opposite view was reached in West London Pipeline v Total (see Weekly Update 24/08). The issue has not yet come before the Court of Appeal, though.

McBride v UK Insurance: Court of Appeal determines how to calculate the base hire rate for a car where the credit hire company provided a nil excess

This Court of Appeal decision is the latest in the long-running saga between the motor insurance market and credit hire companies. Earlier cases have established the following principles: (1) An innocent party must mitigate his loss eg by hiring a replacement vehicle; (2) He will be able to recover the cost of a replacement vehicle as damages; (3) In general, he can recover the cost of hiring the replacement vehicle on credit hire terms; (4) However, if his financial circumstances are such that he did not need to use credit, his damages will be only the basic hire rate of the vehicle. In Stevens v Equity Syndicate Management (see Weekly Update 09/15), the Court of Appeal held that a reasonable approximation of the basic hire rate will be the lowest reasonable rate quoted by a mainstream supplier for the hire of a vehicle of the kind actually hired by the claimant to a person such as the claimant.

In this case, the credit hire company provided a nil excess to the claimant (who, on the evidence, had a low excess on his own car insurance and always reduced the excess to nil when he hired a car), at a cost of £10 per day. However, none of the mainstream suppliers used to find the basic hire rate provided a nil excess (and those with the lowest daily hire rate had excesses of £2,000). The appellants argued that the judge ought to have allowed the claimant to recover the credit hire rate in full in such circumstances. That argument was rejected by the Court of Appeal.

The Court of Appeal rejected an argument that Stevens had been wrongly decided and held that it was correct to take the lowest reasonable rate of a mainstream supplier. It also rejected the argument that the full credit hire rate should have been recoverable here: "in my judgment, where a nil excess is not available from car hire companies, the correct approach is to treat the nil excess separately from the comparison exercise between the default credit hire rate and the basic hire rate with an excess. It will almost invariably be the case that it was reasonable for the claimant to seek a nil excess … and, on that hypothesis, the only question for the Court will be how much should be recoverable as the cost of purchasing a nil excess". On the facts of the case, the only viable nil excess cover on offer was that provided by the credit hire company and the Court of Appeal allowed an upwards adjustment of the damages recoverable to reflect the cost of the nil excess ie £10 per day plus VAT.

Car Giant v London Borough of Hammersmith: Whether defendant entitled to indemnity costs after beating its Part 36 offer because claimant slow to mediate

The claimant failed to better the defendant's Part 36 offer at trial. Unlike the position for claimant Part 36 offers, defendants are not presumed to be entitled to indemnity costs from the date of expiry of the relevant period for their Part 36 offers. However, the court does have a discretion to order indemnity costs under CPR r44. It has previously been held that it might be appropriate to order indemnity costs because of an unreasonable refusal to engage in mediation. In this case, it was argued that there had been an unreasonable delay by the claimant in agreeing to mediate or take part in some form of ADR. The delay was from May 2015 to October 2016.

Furst QC held that "a court should be slow to conclude that this delay is unreasonable or that, if it is, it would justify an order for indemnity costs". That was because it could not be said that mediation in May 2015 would have been successful. Furthermore, the courts "should be slow to criticise a party's behaviour where decisions such as when to mediate are matters of tactical importance where different views may legitimately be held. In this case [the claimant] took the view that mediation was more likely to succeed when the experts' views had been fully set out. That is a perfectly possible point of view". A failure to accept a defendant's Part 36 offer also cannot in itself justify indemnity costs.

Accordingly, the defendant's costs should be assessed on the standard basis.

Marathon Asset Management v Seddon: Court considers interest to be awarded after defendant bettered its Part 36 offer

The claimant in this case failed to better the defendant's Part 36 offer at trial. Under Part 36, the defendant is entitled to its costs from the date on which the relevant period expired and interest on those costs. Leggatt J rejected an argument that the defendant was entitled to an enhanced rate of interest and held that, in the absence of evidence supporting a different rate, the appropriate measure of a commercial rate of interest in current conditions was 2% above the Bank of England base rate. He also felt that the power to award interest under Part 36 was now "effectively otiose" because courts routinely use their general powers under CPR r44.2(6)(g) to order interest to be paid on costs "from or until a certain date, including a date before judgment", usually from the date on which those costs were incurred (ie payment to the winning party's solicitors).

Symbion Power v Venco: Judge warns against party-appointed arbitrator communicating only with the party which appointed him

The claimant unsuccessfully challenged an award under section 68 of the Arbitration Act 1996. Jefford J then considered whether, had she had accepted the challenge, she ought to have set aside the award (as the claimant sought), rather than have remitted it to the tribunal. The claimant argued that it would not be fair to remit in this case because, after the tribunal had been constituted, the claimant-appointed arbitrator had written a confidential email to the claimant's counsel complaining about the conduct of the chairman (who had been appointed by the two party-nominated arbitrators).

The judge rejected the argument that it would be inappropriate to remit the award after the email came to the chairman's notice. She said that although it would have created "a somewhat awkward working environment", that was something that experienced, professional people could deal with.

Although the argument was not pleaded, she went on to express her view that the email could have given rise to an appearance of bias and a breach of the arbitrator's duty to act fairly and impartially: "The party-appointed arbitrators patently do not represent the party that appointed them .. Any communication by one arbitrator with one party which concerns the arbitration may give rise to concerns that that arbitrator is not acting fairly or impartially for the simple reason that it creates the impression of a close relationship between the arbitrator and the party and raises the spectre of other such communications. Requiring the communication to be kept confidential does not remedy the problem: if anything, it highlights the arbitrator's awareness that this is communication he should not be having. Whether in any individual case there is the appearance of bias will, of course, turn on its particular facts but I have no doubt that such communications between one arbitrator and one party should be avoided".

Deutsche Bank v Sebastian Holdings: Judge rules permission to serve out not required where judgment debtor served with order under CPR r71

The defendant, a judgment debtor, breached an order made pursuant to CPR r71 to provide information. The claimant applied for a committal order and (as reported in Weekly Update 46/16) Teare J held that an order for committal pursuant to CPR r71.8 can be sought notwithstanding that the respondent has left the jurisdiction but that here the applicant could not bring itself within one of the jurisdictional gateways of PD 6B.

The claimant then argued that permission to serve out was not required. Teare J has now accepted that argument, on the basis that the English court already had substantive jurisdiction over the respondent because he had been personally served with the CPR r71 order. The order for committal was held to be incidental to the CPR r71 order: "As a matter of principle where jurisdiction in respect of a claim or an order is established over a person the jurisdiction which is established must include, in my judgment, jurisdiction in respect of matters which are incidental to that claim or order".

An application to commit for contempt must be served personally (in this case, in Monaco). The respondent refused to agree a time and place when he could be personally served. The judge accepted that he was not obliged to do but held that "That is some evidence that he is unwilling to be served personally and that he may well take steps to avoid service. When that evidence is considered against the background of his conduct in this litigation … I consider it very likely (notwithstanding that [the respondent] has paid the costs awarded against him and attended court pursuant to the Part 71 order) that he will take steps to avoid personal service in Monaco". Accordingly, there were special circumstances justifying an order for service by alternative means (namely, by service on his solicitors).

Hong Kong caselaw

Nokia v TCT Mobile: Hong Kong Court of Appeal accepts the principle of contractual estoppel for the first time

Contractual estoppel arises when contracting parties have, in their contract, agreed that a specified state of affairs is to form the basis on which they are contracting or is to be taken, for the purposes of the contract, to exist. The effect of “contractual estoppel” is that it precludes a party to the contract from alleging that the actual facts are inconsistent with the state of affairs so specified in the contract. Although the principle is well-established under English law, it had only been accepted obiter in Hong Kong (in the case of DBS Bank v San-Hot Industrial Co Ltd [2013]) prior to this case. The Court of Appeal has now accepted that "there are sound reasons for it to be adopted in Hong Kong, as it would promote certainty in contractual relationships, and reduce the scope for disagreement and disputes in the working out of the contract".