July 3, 2018

(Re)insurance Weekly Update 23- 2018

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

Tuson v Murphy: Court of Appeal rules that claimant entitled to her costs after accepting Part 36 offer, even though she withheld material information about her claim


Where a Part 36 offer is accepted within the relevant period, the claimant will get its costs from the defendant, as of right. However, where the offer is accepted outside the relevant period, the court will order that the defendant pays the claimant's costs of the proceedings up to the expiry date of the relevant period and the offeree pays the offeror's costs from the expiry date of the relevant period to the date of acceptance on the standard basis, "unless it considers it unjust to do so".

In this case, the claimant accepted the defendant's Part 36 offer outside of the relevant period and the judge at first instance ordered her to pay the claimant's costs from the date when she had begun to mislead the defendant about her claim. The defendant's claim was for personal injury and she sought damages on the basis that she would never work again, but she failed to disclose that she had begun to run playgroups almost 4 years after the accident. The defendant had made its Part 36 offer after it learnt of the claimant's playgroup activity.

The Court of Appeal has now held that it would not be unjust for the claimant to receive her costs up to the end of the relevant period. It held that her attempts to run a playgroup were material but did not mean that her disability was fabricated. Furthermore, "the Defendant's insurers, through their very experienced solicitors, made the unconditional Part 36 offer in full knowledge of the Claimant's material non-disclosure, and knowing that acceptance within 21 days would … give the Claimant her costs to date as of right". Referring to the Supreme Court decision of Summers v Fairclough (see Weekly Update 23/12), the Court of Appeal said that it had been open to the defendant and its insurers to make a Calderbank offer if it did not want to have to pay the claimant's costs if the offer is accepted.

The Court of Appeal also noted that a defendant faces a "formidable obstacle" in showing that it would be unjust for the claimant to get its costs up to the end of the relevant period.

COMMENT: Although there have been a number of recent cases in which the court has held that it would be unjust to award a claimant its costs up to the end of the relevant period where it accepted a defendant's offer outside the relevant period, in this case the Court of Appeal has re-affirmed that the "formidable obstacle" test applies. Accordingly, if defendants or their insurers wish to make an offer without having to pay the claimant's costs (perhaps in circumstances where they suspect, but cannot prove a fraudulent claim), a Calderbank offer should be considered instead.

Bruzas v Saxton: A case in which privileged documents were deliberately disclosed by a "whistle blower" employee


CPR r31.20 provides that where a party inadvertently allows a privileged document to be inspected, the other side can use it only with the permission of the court. However, in this case, disclosure was deliberate, rather than inadvertent: a paralegal in a firm of solicitors acting for one of the parties in this case sent prima facie privileged documents to the judge (it appears, because the paralegal was acting as a "whistle blower": the other party claims she has never met or communicated with this paralegal). The judge then forwarded copies of those documents to both parties.  Accordingly, the other party did not receive privileged documents "inadvertently", and she appears to be claiming that those documents have revealed "perjury and perverting the course of justice". The issue to be decided in this case is therefore whether the privileged documents could be used by the other party.

Holman J recognised that there are 2 conflicting principles in relation to this issue: "The whole edifice of legal professional privilege might rapidly crumble" if an employee of a firm of solicitors can disclose privileged documents, but, on the other hand, "fraud is fraud, and my current understanding is that legal professional privilege cannot, in the end, withstand the unravelling of fraud or similar malpractices if (I stress if) they have taken place".

The judge concluded that, given that this case raises "new and grave issues" in relation to legal professional privilege, the matter should be decided by the President of the Family Division (although any future decision will not be confined to family law).

COMMENT: Although this case raises an interesting point about non-inadvertent disclosure of privileged material, it may ultimately be decided on a fairly narrow point, given the allegation of fraud on the particular facts. In most cases, there will be no such allegation though, and the issue will solely be whether deliberately disclosed material can be used without the permission of the court.

Lisle-Mainwaring v Associated Newspapers: Court of Appeal holds judge was right to reject application for specific disclosure


The claimant's application for specific disclosure was dismissed by the judge at first instance and the claimant sought permission to appeal by writing to only the judge(and not the defendant as well) after the hearing. Applying the principles laid down by Warby J in Monroe v Hopkins (see Weekly Update 12/17), the Court of Appeal held that the permission to appeal given by the judge was not validly granted. The Court of Appeal then went on to consider whether it should give permission to appeal and concluded that it should not, since the appeal raised no issue of principle.

It held that the test for specific disclosure is clear: "The application for specific disclosure will usually arise because the applicant believes that the other party has not given adequate disclosure first time round. But that is not inevitable: sometimes, there may be documents (or a particular class of documents) which the applicant seeks by way of specific disclosure, regardless of whether or not they should have been disclosed by way of standard disclosure".

It was said to be clear from PD 31A para 5.5 makes it clear that the court can make an order for disclosure which extends to an old-fashioned "train of enquiry" exercise. However, this was not one of those "rare" cases where it was appropriate to make an order for specific disclosure which went beyond standard disclosure.

Military Mutual v Police Mutual Assurance Society: Passing off claim brought by a "mutual" insurance company fails


This was a passing off action brought by a mutual insurance company that provides insurance services to members of the armed forces against the defendants (subsidiaries of a friendly society), which set up a website offering insurance services under the trading name "Forces Mutual". Although all cases to date on passing off have concerned the name of a product, the judge saw no reason why the goodwill associated with the name of a type of service should not also be protected. However, the difficulty was that there are several definitions of "mutual" and the judge held that the meaning of the word in the mind of the "relevant public" (here, members of the armed forces) had only one broad meaning: "That meaning includes some understanding….that a mutual has no shareholders and is owned by stakeholders, who may be employees, customers or individuals of other kinds". The judge rejected the claimant's argument that there is also a second, distinct and narrower meaning for a financial mutual (namely, a financial organisation solely owned and controlled by some or all of its customers). Accordingly, the claimant's claim to collective goodwill held by such a class (and so its claim for passing off) failed because the public did not, at the relevant time, recognise any such class as being distinct.

Eastern European Engineering Ltd v Vijay Construction: Judge refuses to grant worldwide freezing injunction


The claimant was granted leave from the English courts to enforce an arbitral award in its favour. The seat of the arbitration had not been in England and Wales. It then sought a worldwide freezing order against the defendant, to restrain the defendant from removing assets from England and Wales and disposing of worldwide assets up to a certain monetary limit.

In deciding whether the English court has jurisdiction to grant a worldwide freezing order in these circumstances, Butcher J held that a claim for ancillary relief (such as a freezing order) did not need to be included in an arbitration claim form seeking recognition and enforcement of an arbitral award under section 101 of the Arbitration Act 1996. As the English court could make a domestic freezing order here, there were no grounds for denying a worldwide freezing order on the basis that it had not been claimed in the arbitration claim form.

However, when it came to exercising his discretion, the judge considered that this case was analogous to orders under section 44 of the 1996 Act (which allows the court to grant an interim injunction in support of arbitral proceedings). In Mobil Cerro Negro v Petroleos de Venezuela (see Weekly Update 13/08), the judge had held that it would be appropriate to grant a freezing order affecting assets not located in England and Wales under section 44 of the 1996 Act "only if the respondent or dispute had a sufficiently strong link to England, or where there was some other factor of sufficient strength, for example international fraud, to justify proceeding in the absence of such a link".

The judge concluded that, on the facts, this was not an appropriate case for the grant of a worldwide freezing order, in part because there was only a very limited link with this jurisdiction. There was also a danger here that there would be a risk of conflicting judgments with other jurisdictions and so an order would be contrary to the principles of comity. Nevertheless, it was held to be appropriate to grant the domestic freezing order since the evidence did not satisfy the judge that there were no assets in the jurisdiction.