Navigators Insurance Company Ltd v Atlasnavios-Navegacao: Supreme Court rules on definition of "malice" in a marine policy and proximate cause arguments

http://www.bailii.org/uk/cases/UKSC/2018/26.html

The earlier decisions in this case have been reported in Weekly Updates 12/12, 46/14 and 28/16. When the claimant's vessel was being loaded in Venezuela, an underwater inspection revealed that bags of cocaine had been strapped to its hull. The drugs had been affixed by persons unknown (presumably a drug cartel). The vessel was detained and the crew arrested. The vessel was abandoned by the owners 2 years later and eventually confiscated by the Venezuelan authorities following a court order. The claimant owners claimed under their war risks insurance policy. It was accepted that the vessel was a constructive total loss.

The policy covered the following perils:

"Capture, seizure, restraint or detainment, and the consequences thereof..." (Clause 1.2); and

"Any terrorist or any person acting maliciously..." (Clause 1.5).

It also contained an exclusion for loss arising from "arrest, restraint, detainment, confiscation or expropriation...by reason of infringement of any customs...regulations" (Exclusion 4.1.5).

The Court of Appeal had held that exclusion 4.1.5 applied where the infringement was brought about by the malicious acts of a third party and the owners appealed to the Supreme Court. It had been common ground between the parties that the attempted use by unknown third parties of the vessel for the purpose of smuggling had involved those third parties "acting maliciously", and so the focus in the lower courts had been on whether exclusion 4.1.5 applied (because if clause 1.2 applied instead, it would have been (in the words of the Supreme Court in this case) "thought impossible to argue that the present was not a case of "detainment...by reason of infringement of any customs...regulations" within clause 4.1.5".

However, during the course of the hearing before it, the Supreme Court concluded that it was necessary to re-examine that common ground in order "to avoid the risks attaching to any exercise of deriving conclusions from what might prove a false premise". The Supreme Court took into account the context of the policy wording: The Institute War and Strikes Clauses had been issued in 1983 as "part of a determined attempt by the London market to update its marine forms....While the clauses were freshly drafted, they did not abandon, but sought to bring fresh order and clarity to many of the time-honoured concepts used in the market". For that reason, prior caselaw on the meaning of persons acting maliciously was relevant. After reviewing that caselaw, the Supreme Court unanimously held that "What the context and authorities indicate is that an element of spite, ill-will or the like is required. But I would not limit the concept to conduct directed towards the insured interest. An act directed with the relevant mental element towards causing the loss of or damage or injury to other property or towards a person could lead to consequential loss of or damage to an insured interest within clause 1.5".

Accordingly, clause 1.5 did not apply and the owners were not entitled to be indemnified under the policy.

Although not required to decide the point, the Supreme Court went on to consider, obiter, what the situation would have been had it found that the attempted smugglers had been acting maliciously. It held that exclusion 4.1.5 could be reading as applying to clause 1.5. It went on to find that Flaux J, in an earlier decision, had been wrong to imply a limitation to the effect that exclusion 4.1.5 would not apply "where the only reason why there has been an infringement of the customs regulations by the vessel is because of the malicious acts of third parties". Although there could be situations where the exclusion would not apply (eg where a malicious third party plants drugs in order to blackmail the owners and then tells the authorities when the owners refuse to pay), that did not mean that any other malicious acts (such as the ones involved in this case) also fall outside of exclusion 4.1.5.

Here, the malicious act was the infringement of the customs regulations, but even if it wasn't, "it does not follow that this gives rise to a binary choice between two competing proximate, real or effective causes of the insured loss". The Supreme Court went on to hold that (applying the principle confirmed in Wayne Tank & Pump v Dumas [1924] that where an insured loss arises from the combination of two causes, one insured, the other excluded, the exclusion prevents recovery) "Here, the two potential causes were the malicious act and the seizure and detainment. The malicious act would not have caused the loss, without the seizure and detainment. It was the combination of the two that was fatal. The seizure and detainment arose from the excluded peril of infringement of customs regulations, and the owners' claim fails".

COMMENT: The Supreme Court's decision regarding the meaning of "malicious" is in line with non-marine caselaw, such as Mandalia v Beaufort Dedicated (see Weekly Update 46/14), where the judge held that maliciousness in a property policy required a desire to harm someone, and Dunnage v Randall and UK Insurance (see Weekly Update 25/15), where the Court of Appeal found that maliciousness in a liability policy required an intent to cause injury. In the lower courts in this case, reliance had been placed on Colman J's decision in "The Grecia Express" (2002) (another war risks policy case) that maliciousness "...did not require proof that the person concerned had the purpose of injuring [the assured]", but the Supreme Court said that Colman J had been intending to do no more than decide the narrow issue before him, which was whether spite, ill-will or the like required conduct targeted specifically at the insured property or its owner, rather than casual or random vandalism.

Atlas Power v National Transmission and Despatch Co: Court grants anti-suit injunction to restrain challenge to LCIA award

http://www.bailii.org/ew/cases/EWHC/Comm/2018/1052.html

The parties entered into agreements which were governed by Pakistani law but provided for LCIA arbitration (conducted in London if the dispute was over a certain amount). Following a dispute, arbitration was commenced and the parties then disagreed about whether London was the seat of the arbitration. Both the LCIA Court and the arbitrator decided that London was the seat of the arbitration by a Partial Final award (the decision of the LCIA Court is final and binding under the 1998 LCIA Rules).

The defendant then sought to challenge the Partial Final award by way of proceedings in Pakistan and the claimants sought a final anti-suit injunction from the English courts.

Reference was made by both parties to the Court of Appeal's decision in C v D (see Weekly Update 47/07), in which an anti-suit injunction was granted to restrain a US insurer from bringing proceedings in the US to challenge an LCIA award. The defendant argued that that case could be distinguished here on the basis that the agreements here were subject to Pakistani law, which provides that the parties to a contract which is subject to the law of Pakistan cannot exclude the supervisory jurisdiction of the Pakistan courts (and so the parties could not be presumed to have intended the English courts to have exclusive supervisory jurisdiction).

That argument was rejected by Phillips J. Contrary to the defendant's arguments, C v D had not decided that there is "merely a presumption" that by choosing London as the seat, the parties intended that proceedings on the award should be only those permitted by English law: "On the contrary, the Court of Appeal made it clear that such a result necessarily followed". Accordingly, it could not be the case that the Pakistani courts could have concurrent supervisory jurisdiction.

Nor did the court accept the defendant's alternative argument that the seat of the arbitration had been in Pakistan. Although it could not be said that just by challenging jurisdiction under the Arbitration Act 1996 the defendant had implicitly accepted that England was the seat of the arbitration, nevertheless the defendant was bound by the decision of the LCIA Court as to the seat of the arbitration, and by the further rulings of the arbitrator on this issue, none of which had been challenged: "There is no suggestion that such determinations are illegal or contrary to public policy as a matter of English law, nor that there is any other legitimate basis on which they should be disregarded by this court".

The anti-suit injunction was therefore granted.

COMMENT: This case follows a string of cases which have held that, where there is no express law of the arbitration agreement, the law of the seat of the arbitration governs the arbitration agreement. There was no reference in this case to the case of Arsanovia v Cruz City (see Weekly Update 02/13), which had bucked that trend, by holding that Indian law was the implied choice of law of the arbitration agreement where the contract provided for LCIA arbitration but the contract was governed by Indian law (and queried whether a choice of London as the seat of the arbitration was enough on its own to override that conclusion). The judge in that case had distinguished earlier cases (such as Sulamerica CIA v Enesa (see Weekly Update 17/12) and C v D) on the basis that they had involved insurance policies and so a reference to the governing law of a policy "might naturally be taken to connote to obligations and rights more directly relating to the insurance than the arbitration agreement". However, this case did not involve an insurance policy and the judge upheld the decision in C v D. Another distinguishing factor in Arsanovia, though, was that the arbitration agreement expressly excluded the application of certain parts of the Indian Arbitration and Conciliation Act and so the "natural inference is that [the parties] understood and intended that otherwise that law would apply".

Coversant Wireless v Huawei Technologies: Judge considers whether a stay should be ordered pending resolution of a jurisdiction appeal

http://www.bailii.org/ew/cases/EWHC/Ch/2018/1216.html

The defendants argued that, pending resolution of their appeal on jurisdiction, a stay in the proceedings brought here by the claimant should be ordered.

In Deutsche Bank v Petromena (see Weekly Update 11/15), the English court rejected the application for an order declaring that it did not have jurisdiction and also refused permission to appeal. An order was made permitting (but not requiring) the defendant to file a further acknowledgment of service. The defendant did file a second acknowledgment of service, only ticking the box indicating that it intended to defend the whole claim. The defendant subsequently obtained permission to appeal from the Court of Appeal, and it was held that the correct step for the defendant would have been to apply for a stay or an extension of time to file the acknowledgment of service in order to continue its challenge (and not to file a further acknowledgment of service).

In this case, Carr J noted that, as a result of Petromena, he ought not to make an order requiring the defendants to serve a second acknowledgment of service pending the resolution of their appeal on jurisdiction. However, he then went on to consider whether service of a defence should be ordered pending the resolution of the appeal (service of a defence (as well as other subsequent steps) does not require that an acknowledgment of service has been served).

He concluded that there is no need to imply that all other steps in the proceedings should be stayed: "In the present case, I do not consider that the Defendants will be irreparably harmed if the stay is refused, provided that the time to file a second acknowledgment of service is extended until after resolution of the appeal... the order should record that subsequent steps in the action do not constitute a submission to the jurisdiction and [the claimant]'s undertaking in this regard should also be recorded".

HJ v Burton Hospitals: Challenging the evidence of a single joint expert in a personal injury claim

http://www.bailii.org/ew/cases/EWHC/QB/2018/1227.html

The defendant in this personal injury claim appealed against a recorder's decision. It argued that the recorder had wrongly accepted the evidence of the claimant's occupational therapy ("OT") expert where it was in conflict with that of the jointly instructed orthopaedic expert.

Reviewing earlier caselaw, Turner J noted that earlier caselaw has held that the joint expert's evidence must be weighed in the balance with the other evidence in the case. As Clark LJ observed in Coopers Payen Ltd v Southampton Container Terminal Ltd [2004]: "All depends upon the circumstances of the particular case. For example, the joint expert may be the only witness on a particular topic". Turner J disagreed with the defendant that the single joint expert had been the only witness on a particular topic here. He noted that in modern serious and catastrophic personal injury litigation, there is likely to be a wide range of experts and that experts in different disciplines may often overlap. Here, the recorder had been entitled to prefer the evidence of the OT expert, even where it was inconsistent with that of the single joint expert "because it was an area in respect of which both had expertise but neither had a monopoly of wisdom". In the end, the "hands-on" experience of the OT expert was said to be a tipping factor.

Kafagi v JBW Group: Court of Appeal rules on vicarious liability issue

http://www.bailii.org/ew/cases/EWCA/Civ/2018/1157.html

The respondent is a judicial services company which subcontracted the collection of certain council tax debts. The appellant alleged that it was vicariously liable for various torts committed by two bailiffs against him. The Court of Appeal has now dismissed the appeal against the finding that the respondent was not vicariously liable.

In so doing, it agreed that the relationship between the respondent and the bailiffs was not "akin to employment". The bailiffs were free to turn down work or to share it with others, and were at liberty to conduct the collection of a debt in whatever legal manner they saw fit. It was also significant that the bailiffs had to provide a personal bond of £10,000 into court (to serve as security against which individuals who felt they have been wronged may recover) and also had to take out their own indemnity insurance. It was also significant that they might work for other clients too. Accordingly, there was not in this case even "that vestigial degree of control" which the Supreme Court had referred to in Cox v Ministry of Justice (see Weekly Update 09/16).

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