December 20, 2018

(Re)Insurance Weekly Update 43 - 2018

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

Midnight Marine v Thomas Miller Specialty Underwriting: Judge refuses permission to appeal against award which held insured's claim was time-barred

When insurers refused to accept liability under their policy, the insured commenced litigation in Canada, despite the policy providing for London arbitration. The insurers then commenced arbitration, seeking a declaration that they were not liable under the policy. The parties agreed that no further steps would be taken in the arbitration until an application for a stay was heard by the Canadian courts. The Canadian courts granted the stay but no further step was taken in the arbitration until the assured appointed an arbitrator 7 years later (by which time, insurers had closed their file).

The insurers claimed that the insured's claim was time-barred because it was outside the 6-year statutory period and the arbitrators agreed that it was. They held that the notice of arbitration had not stopped time running because the only matter referred to arbitration was the insurers' claim for a declaration of non-liability and no arbitration had been commenced in respect of the insured's claim. For completeness, they also held that they would have made an award dismissing the claim under section 41(3) of the Arbitration Act 1996 because of the "inordinate and inexcusable delay on the part of the claimant in pursuing his claim". The arbitrators concluded that it would be appropriate to treat the insured as the claimant or counter claimant for the purpose of section 41(3).

The insured challenged the award and lost and then sought to challenge that decision. Males J has now held as follows:

  1. The insured's challenge on the section 41(3) point was hopeless. Section 82(1) of the Act provides the following definition of “claimant”: "unless the context otherwise requires, includes a counterclaimant, and related expressions shall be construed accordingly". The insured's claim for an indemnity was either time-barred because it had not been referred to arbitration, or, if it had been referred to arbitration, the arbitrators had been entitled to find that there had been inordinate delay.
  2. In light of that finding, no permission to appeal under section 69 could be given as the determination of the question of law (on the time-bar point) could not affect the rights of the parties. Males J did, however, suggest that, had the issue stood alone, he might have been inclined to give permission to appeal because "I can see an argument that in the circumstances of the Canadian proceedings, one important purpose of the Underwriters' notice of arbitration was to enable it to submit to the Canadian court that the Assured's claim had been referred to arbitration in London. There would have been little benefit to the Underwriters in telling the Canadian court that its claim for a negative declaration had been referred to arbitration but that the Assured's claim for an indemnity had not".

Finally, the judge was critical that the application to set aside the dismissal on paper had been argued as fully as the section 68 application itself would have been: "If that were to become the standard procedure, the availability of a procedure for dismissal on paper would achieve nothing". The costs of the present application amounted to £150,000, when the claim itself was worth only CAD $625,000. The judge commented that "While commercial parties are free to spend their money as they wish, it cannot be in the interests of London arbitration generally for costs on that scale to be incurred for a hearing of this nature. There is after all such a thing as killing the golden goose".

Cunico Resources v Daskalakis: Judge considers whether default judgment can be ordered where acknowledgment of service is filed late

In this case, the defendant, who was served out of the jurisdiction in Switzerland, filed an acknowledgment of service ("AoS") late, but before an application for default judgment (an application (rather than a request) for default judgment was required in the circumstances of this case) was made by the claimant (and no application had been made to set aside the AoS). This issue turns on the construction of CPR r12.3(1), which provides that "The claimant may obtain judgment in default of an AoS only if (a) the defendant has not filed an AoS or a defence to the claim…; and (b) the relevant time for doing so has expired".

Prior caselaw has suggested three possible meanings for CPR r12.3(1):

  1. It only allows a court to grant default judgment if, at the time of judgment, there is no AoS and the time for filing the AoS has expired ("the first meaning");
  2. It only allows a court to grant default judgment if, at the time the request or application for default judgment is filed, there is no AoS and the time for filing the AoS has expired ("the second meaning"): or
  3. It allows a court to grant default judgment where a timely AoS was not filed, irrespective of any AoS later filed ("the third meaning").

Baker J rejected the view that an AoS is a nullity if filed late. He thought that the first meaning is the meaning naturally conveyed by the language of CPR r12.3(1) and there were "powerful reasons" to reject the second meaning and that prior caselaw supporting the third meaning was "unpersuasive and unsatisfactory".

Accordingly, the claimant was not entitled to default judgment (since only the third meaning supported its claim). Had it been necessary to decide the point, though, the judge said that he would not have adopted the first meaning (because "the preponderance of views previously expressed has been against the first meaning") and so "by default rather than by design" he would have upheld the second meaning. The judge also expressed the hope that this issue might reach the Court of Appeal for a definitive ruling.

Capital Alternative v Nabas: Judge holds defendant was not validly served when claim form left at her registered address

The claimants sought to serve a claim form on the first defendant (a Brazilian lawyer, resident in the UK), who is the founder and director of the second defendant, a legal practice which has now ceased to exist (the claimants argue that the third defendant is the successor practice to the second defendant).

The claimants purported to serve three copies of the claim form – one at the second defendant's address and two at the third defendant's address. In both cases, the claimant's couriers left envelopes at the addresses. Those envelopes had clear windows though which the name and address of the recipient could be seen. None of those letters were addressed to the first defendant, although the claim form itself identified the first defendant as one of the defendants to the claim (but it also gave the third defendant's address in the in the box on the final page in which there was required to be inserted the "Defendant's name and address for service including postcode" ("the Address Box")).

HHJ Klein has now held that the first defendant was not validly served.

The claimants could not rely on CPR r6.8 which provides that a defendant "may be served with the claim form at an address at which the defendant resides or carries on business within the UK or any other EEA state and which the defendant has given for the purpose of being served with the proceedings". Here, the second defendant's address is a "registered address" for the first defendant for the purpose of section 1140 of the Companies Act 2006 ( “registered address” in that section means any address for the time being shown as a current address in relation to that person in the part of the register available for public inspection).  The judge held that the first defendant's registered address was not an address which the first defendant had given for the purpose of CPR r6.8, since he held that the registration obligation is on the company, and so the first defendant has not "given" that address.

Section 1140 provides that "A document may be served on a person to whom this section applies by leaving it at, or sending it by post to, the person's registered address". Although section 1140 is a parallel code, outside of the CPR, the judge also held that the claimants had failed to demonstrate that the claim form was left for the first defendant at either address. The claimants could not rely on service on the second and third defendants: "I also reject the Claimants' contention that the two Service Packs left, by the Claimants' courier at [the third defendant's address], and later sent to [the second defendant's address, were left (for the purposes of section 1140 or CPR Part 6) at [the second defendant's address]. I do not believe that good service is effected, under section 1140 or CPR rr.6.3, 6.7-6.10, on their proper construction, by a claim form being left at a permitted place for service not by a claimant or someone on its behalf but by a third party including another defendant who is itself being served, perhaps entirely fortuitously (as might be the case in the present proceedings)".

It made no difference whether the first defendant appreciated that one of the service packs was left for her since "her own subjective thoughts are not relevant to whether, objectively, a claim form was left for her". If the defendant will obtain a windfall as a result of this decision, the judge said that that was because the claimant had not taken the "apparently simple step of serving the claim form on the First Defendant by leaving a Service Pack addressed to her and/or a claim form with the Address Box containing her details at [the second defendant's address] (or, indeed, at [the third defendant's address])".