Source: https://abs.in.th/doc-fg-plain-4-or-5-num-single-spacing
Timestamp: 2017-08-23 21:30:05
Document Index: 502108100

Matched Legal Cases: ['ART 36', 'ART 20', 'art 11', 'art 11', 'ART 36', 'ART 20', 'arts 25', 'art 35', 'art 12', 'art 26', 'art 24', 'art 8', 'art 24', 'EWCA ', 'art 27', 'art 27', 'art 28']

MAY 2010 REED SMITH 1 ARBITRATION .................................................................................... 3 1.1 WHAT AMOUNTS TO TAKING A STEP IN PROCEEDINGS RS SHIPPING BULLETIN FOR THE PURPOSES OF SECTION (9)3 OF THE ARBITRATION ACT ...................................................................... 3 1.2 ICSID TRIBUNAL HAS JUSRISDICTION OVER INVESTMENTS RELATING TO A SHIP ............................................. 4 2 COSTS ............................................................................................. 6 2.1 CLAIMANT EXPOSED TO COSTS ORDER DUE TO FAILURE OF SOLICITOR TO OBTAIN ATE INSURANCE ...................... 6 2.2 APPROPRIATE ORDER AS TO COSTS WHERE CLAIMANT FAILING TO BEAT PART 36 OFFER BUT DEFENDANT WHOLLY UNSUCCESSFUL IN PART 20 PROCEEDINGS ...................... 7 3 EU ................................................................................................... 9 3.1 EUROPEAN COMMISSION CONVENES LEGAL EXPERT GROUP TO SEEK SOLUTIONS ON CONTRACT LAW ........................... 9 3.2 COMMITTEE ON LEGAL AFFAIRS' DRAFT REPORT REJECTS PROPOSED DELETION OF ARBITRATION EXCLUSION IN BRUSSELS REGULATION ........................................ 9 3.3 WHETHER COURT SEISED HAD JURISDICTION WHERE DEFENDANT ENTERED APPEARANCE BUT DID NOT CONTEST JURISDICTION ............................................................ 10 3.4 GUIDANCE ON WHEN COURT SEISED OF RELATED ACTIONS PURSUANT TO APPLICATION TO STAY PROCEEDINGS .......................................................................... 11 4 INSURANCE ..................................................................................... 13 4.1 INSURER APPLYING “BUT FOR” CAUSATION TEST .......................... 13 4.2 WHERE CLAIMANT OVERSTATED A CLAIM FOR DAMAGE FOLLOWING A FIRE IT WAS FATAL TO ENTIRE CLAIM ..................... 15 4.3 WHETHER ARBITRATORS PROPERLY DECIDING LOSSES ARISING OUT OF ONE EVENT ...................................................... 16 5 JURISDICTION .................................................................................. 18 5.1 WHETHER COURTS WHERE COMPANY HAD ITS SEAT HAD JURISDICTION .................................................................... 18 5.2 WHETHER LATER PROCEEDINGS COULD BE STAYED WHERE THERE WERE CROSS-CLAIMS........................................... 19 5.3 INTERACTION BETWEEN BRUSSELS REGULATION AND SPECIALISED CONVENTIONS ....................................................... 21 6 MISCELLANEOUS .............................................................................. 22 6.1 WHETHER DAMAGES COULD BE RECOVERED FOR LOSS OF USE OF FUNDS BY REASON OF FRAUD .................................... 22 EME_ACTIVE-551764505.1 MAY 2010 REED SMITH 6.2 WHETHER CONTRACTS SIGNED BY MUNICIPALITIES RS SHIPPING BULLETIN VOID DUE TO LACK OF CAPACITY ................................................ 23 7 PRACTICE........................................................................................ 25 7.1 GUIDANCE ON SERVICE OUT OF THE JURISDICTION AND STANDARD OF PROOF IN JURISDICTION ISSUES..................... 25 7.2 FISHING EXPEDITION UNACCEPTABLE IN PRE-ACTION DISCLOSURE APPLICATION ......................................................... 29 7.3 TEST FOR USUAL RESIDENCE FOR PURPOSES OF SERVICE .................................................................................. 31 7.4 FREEZING INJUNCTIONS: DETERMINING THE APPROPRIATE CROSS-UNDERTAKING........................................... 32 7.5 SUPREME COURT RULES ON EFFECT OF LIMITATION ON CHANGE OF CAPACITY AND ADDITION OF NEW PARTY ................... 33 7.6 SUBSTITUTION OF NEW PARTIES AFTER EXPIRY OF THE LIMITATION ............................................................................... 34 7.7 WHETHER REMAINING DEFENDANTS ENTITLED TO DISCLOSURE OF SETTLEMENT AGREEMENT BETWEEN CLAIMANT AND OTHER DEFENDANTS ........................................... 35 8 SHIPPING ........................................................................................ 37 8.1 WHETHER SUBCONTRACTOR ENTITLED TO CONTRIBUTION FROM CHARTERER WHERE SHIP DAMAGED BY SUBCONTRACTOR .................................................. 37 8.2 WHETHER SHIP MANAGERS ENTERING INTO CHARTERPARTIES AND DIVERTING DIFFERENCE IN HIRE AS PART OF FRAUDULENT SCHEME ..................................... 39 8.3 WHETHER ADVANCED PAYMENT BOND ISSUED BY BANK PROVIDING FOR REPAYMENT OF “ALL SUCH SUMS DUE TO YOU UNDER THE CONTRACT” INCLUDED PRE-PAID SUMS IN EVENT OF BUILDER’S INSOLVENCY................................. 41 8.4 WHETHER TITLE TO BUNKERS PASSED TO SHIPOWNERS ON REDELIVERY OF VESSEL ....................................................... 43 8.5 WHETHER OWNERS IN BREACH OF OBLIGATION TO DELIVER VESSEL READY TO RECEIVE CARGO WITH CLEAN SWEPT HOLDS ................................................................ 46 8.6 WHETHER OWNERS ENTITLED TO HIRE FOR EARLY AND REDELIVERY ............................................................................. 51 MAY 2010 REED SMITH 1 ARBITRATION RS SHIPPING BULLETIN 1.1 WHAT AMOUNTS TO TAKING A STEP IN PROCEEDINGS FOR THE PURPOSES OF SECTION (9)3 OF THE ARBITRATION ACT In the case of Bilta (UK) Ltd v Nazir - [2010] EWHC 1086 (Ch), Bilta asserted that the parties had entered into a Framework Agreement under which Bilta purchased European Emissions Trading Scheme Allowances from Jetivia, and that the Agreement contained an arbitration clause under which: "Any dispute arising under, out of or in connection with this Agreement or under, out of or in connection with sale and buy transactions shall be resolved by arbitration". Bilta asserted that two of its directors had diverted funds, and that Jetivia had knowingly assisted them in their breach of fiduciary duty. Proceedings were commenced by Bilta. By a letter dated 15 December 2009 Jetivia stated: "We expressly reserve Jetivia's position in respect of the jurisdiction of the English court. The remainder of this letter is without prejudice to Jetivia's right to contend that this matter must be dealt with by arbitration in accordance with the contract". Following further correspondence, on 20 January 2010 Jetivia issued an application for a consent order extending an extension of time for the filing of a defence. Subsequently, Jetivia sought a stay of Bilta's action under section 9 of the Arbitration Act 1996, in reliance on the arbitration clause in the Framework Agreement. Bilta argued that: (1) it had not entered into the Framework Agreement; (2) if there was an agreement, the arbitration clause did not apply to claims for knowing assistance or to a claim for misappropriation arising from a sale outside the Framework Agreement; and (3) Jetivia had taken a step in the proceedings by failing to apply to the court to contest the jurisdiction of the court within 14 days of the filing of its acknowledgment of service as required by CPR Part 11, or by applying for an extension of time for filing a defence, so that the right to seek a stay had been lost under section 9(3) of the Arbitration Act 1996. Sales J held as follows. (1) There was a triable issue as to the validity of the Framework Agreement. -3- MAY 2010 REED SMITH (2) The arbitration clause was wide enough to encompass claims arising out of contracts RS SHIPPING BULLETIN made under the Framework Agreement, and there was a triable issue as to whether the arbitration clause was wide enough to encompass non-contractual claims. (3) Jetivia had not taken a step in the proceedings: (a) CPR Part 11 did not apply to arbitration claims, so failure to apply to the court to contest its jurisdiction did not prevent reliance on section 9; (b) an application to the court for an extension of time did not amount to a step in the proceedings, given that Jetivia had expressly reserved its rights even though that reservation had been made in correspondence between the parties and not in communications with the court. Sales J, rather than staying the proceedings and allowing the arbitrators to determine the jurisdictional issues, gave directions for a hearing by the court on those issues. The court therefore held that, in certain circumstances, it may be reasonable for a defendant who considers he may have the right to rely on a contractual arbitration clause to engage in correspondence with the claimant and/or make an application such as one extending time for service of his defence, without waiving his right to later assert the proceedings should be stayed for arbitration. 1.2 ICSID TRIBUNAL HAS JURISDICTION OVER INVESTMENTS RELATING TO A SHIP In Inmaris Perestroika Sailing Maritime Services GMBH and others v Ukraine (ICSID Case No ARB/08/8) an ICSID tribunal ruled that it had jurisdiction over a claim, brought by a German company, Inmaris, and various related companies (Inmaris Companies), against the Ukraine in connection with multiple interrelated contracts concerning the use and operation of a Ukrainian ship. The Inmaris Companies claimed that the Ukrainian government had prevented them from operating the ship and commenced proceedings under the German-Ukraine bilateral investment treaty (BIT). -4- MAY 2010 REED SMITH The award discusses several interesting issues relating to the question of what amounts to an RS SHIPPING BULLETIN "investment" for the purposes of establishing jurisdiction: • Interrelated contracts and multiple claimants: The purported investments were all substantially derived from the contracts. The Inmaris Companies brought proceedings jointly and presented claims on behalf of all of them arising out of the interrelated contracts. The tribunal found that there was an investment in the transaction as a whole. It was not necessary to consider whether each component part of the overall transaction would satisfy the requirements of the BIT. The question was whether the arrangements could properly be considered to be "part of an integrated, unitary operation that comprises an investment over which the tribunal has jurisdiction". On the facts, the tribunal held that this requirement was satisfied. • Did payments made by the Inmaris Companies to the Ukraine constitute investments for the purposes of grounding jurisdiction? The tribunal concluded that it was necessary to identify an "asset" which constituted an investment protected by the BIT. The payment streams under the contracts did not necessarily constitute an investment for the purposes of founding jurisdiction. The investment was the asset acquired by the investor, typically as a result of such payments, and it could be tangible or intangible, such as a claim to money or claim to performance, as was the case here. • Were the alleged investments undertaken or invested in the territory of the Ukraine? Whether the BIT was treated as including a territoriality requirement as an overarching jurisdictional limit, or as including territorial limits among the elements of substantive protections underlying the claims, it was necessary to examine the territorial nexus of the Inmaris Companies' investments. The tribunal concluded on the facts that the investments met the former more exacting standard and, therefore, it did not need to decide the exact nature of the BIT's territorial requirement. -5- MAY 2010 REED SMITH 2 COSTS RS SHIPPING BULLETIN 2.1 CLAIMANT EXPOSED TO COSTS ORDER DUE TO FAILURE OF SOLICITOR TO OBTAIN ATE INSURANCE In the case of Adris and others v Royal Bank of Scotland (Cartel Client Review Ltd and others, additional parties) [2010] EWHC 941 (QB) the court considered applications for non-party costs orders. The applications were made after consumer credit claims were discontinued because of a ruling on section 78 of the Consumer Credit Act 1974 which went against the claimants. The claimants were ordered to pay costs and the defendant banks sought non-party costs orders against the solicitor representing many of the claimants and the sole shareholder and managing director of the claims management company that had referred them. The Mercantile Court held, in awarding a non-party costs order against a solicitor acting as a sole practitioner and declining to award a non-party costs order in favour of the director of a claims management company, that where a solicitor in sole practice or a firm of solicitors had failed in its obligation to take out ATE insurance in respect of their clients and had failed to inform them of that fact, a non-party costs order could be imposed on the solicitor or firm where it was shown that there was a sufficient causal link between the failure to obtain insurance and the costs generated by the case. The court should be slow to pierce the corporate veil to expose a director to a non-party costs order in circumstances where, although the director would benefit from the success of the litigation, it could not be said that he had promoted or funded the proceedings or that the proceedings were solely or substantially for his own financial benefit and where the company itself was a third party to the proceedings. The decision is another useful first instance decision on causation and non-party costs orders. The judge noted that the existence of a causal connection between the non-party and costs is sometimes, but not always, a necessary and sufficient condition for a non-party costs order. In this case, a causal connection could be shown against both non-parties but an order was only made against one of them. A non-party order was considered to be clearly justified against the solicitor because he had failed to obtain after-the-event (ATE) insurance for the -6- MAY 2010 REED SMITH claims and failed to inform the claimants of this. This had directly caused the claims to go RS SHIPPING BULLETIN ahead as, had the claimants been informed there was no protection on costs, they would not have allowed the claims to go ahead. It also meant that the solicitor was controlling the litigation. However, although the claims management company had loaned the solicitor the funds to bring the claims and directly caused them in that sense, this causal link was not sufficient to make an order against its shareholder or director in the absence of other factors. He was not the real party to the litigation and did not, unlike the solicitor, control the litigation. 2.2 APPROPRIATE ORDER WHERE CLAIMANT FAILING TO BEAT PART 36 OFFER BUT DEFENDANT WHOLLY UNSUCCESSFUL IN PART 20 PROCEEDINGS In the case of Fraser v Bolt Burdon (a firm) and others [2010] All ER (D) 211 (May) the Queen's Bench Division gave a ruling as to costs in proceedings where the defendant firm of solicitors had defeated the claimant's claim which had resulted in the defendant being wholly unsuccessful in Pt 20 proceedings against the Pt 20 defendants. Following judgment in the claimant's unsuccessful claim against the defendant firm of solicitors, the issue of costs fell to be determined. The claimant's claim was an action for damages against the defendant, a firm of solicitors, based upon a contention that she had been negligently advised to accept in settlement of a claim which she had against a previous firm of solicitors, Parlett Kent, in the amount of £200,000. In the litigation against Parlett Kent, the claimant was represented by leading and junior counsel, the Pt 20 defendants. The defendant brought a Pt 20 claim against the Pt 20 defendants. In the event, the claimant's claim was dismissed. The judge held that the sum of £200,000 which the claimant was advised to accept in settlement of the claim against Parlett Kent was a generous offer to settle the claim against Parlett Kent. It was not a figure which was capable of being criticised as negligent in the evaluation of those who had advised the claimant to accept it. The defendants had made a Pt 36 offer to the claimant. The outcome of the litigation was plainly that the claimant did not do as well as the Pt 36 offer. The consequence of the success of the -7- MAY 2010 REED SMITH defendants in defeating the claim of the claimant was that the defendants had been wholly RS SHIPPING BULLETIN unsuccessful in the Pt 20 proceedings against the Pt 20 defendants. The Pt 20 defendants sought an order against the defendants for payment of their costs. The defendants sought an order that it was the claimant who was directly liable to pay the costs of the successful third parties and not them. However, as an alternative, the defendant contended that, if they were ordered to pay the costs of the successful third parties, those costs should be added to the costs which they were able to recover against the claimant. The issue was the appropriate order as to costs as between the unsuccessful claimant and the successful defendant, and the successful Pt 20 defendants and the unsuccessful defendant. The court ruled: In the ordinary run of cases under the CPR, a successful Pt 20 defendant should not be deprived of his prima facie right to an order for costs against a Pt 20 claimant merely on the ground of the claimant's impecuniosity. In the instant case, the appropriate order would be for the defendant to pay the costs of the successful Pt 20 defendants to be assessed on the standard basis unless agreed, and that the claimant pay the costs of the successful defendant including in those costs the amount of the costs which the defendant had to pay to the successful Pt 20 defendants, again those costs to be assessed on the standard basis unless otherwise agreed. In principle, it was appropriate, having regard to the Pt 36 offer which had been made on behalf of the defendant, that the defendant should recover interest on the costs which it had been entitled to recover from the claimant and that those costs, insofar as they had been costs which the defendant had to pay to the Pt 20 defendants, should be reflected by a similar order in the Pt 20 proceedings, namely the Pt 20 defendants should recover interest on costs. -8- MAY 2010 REED SMITH RS SHIPPING BULLETIN 3 EU 3.1 EUROPEAN COMMISSION CONVENES LEGAL EXPERT GROUP TO SEEK SOLUTIONS ON CONTRACT LAW On 26 April 2010, the Commission set up an expert group on a Common Frame of Reference in the area of European contract law (Commission Decision 2010/233/EU). Until May 2011, this group will meet once a month. It brings together legal academics, people practising contract law on a daily basis like lawyers and notaries, as well as consumer and business representatives. Legal scholars, who were funded by the EU's overall research programme, have been working on this complex area of private law for many years. Their work resulted in a Draft Common Frame of Reference. The new group will prepare a user-friendly text in simple language. Their draft will follow the life cycle of a contract – from pre-contractual duties and the formation of a contract to remedies for the breach of a contract and the consequences of termination. The Commission will also issue a policy paper and launch a public consultation in the summer on the best way forward on contract law in Europe. The consultation will run until the end of January 2011 and will cover cross-border problems faced by consumers and businesses and how best to solve them. 3.2 EU DRAFT REPORT REJECTS PROPOSED DELETION OF ARBITRATION EXCLUSION IN BRUSSELS REGULATION The European Parliament's Committee on Legal Affairs (the Committee) is currently considering the European Commission's report and green paper on the functioning of Council Regulation (EC) No 44/2001 on Jurisdiction and the Recognition and Enforcement of Foreign Judgments (Brussels Regulation). The Committee has published a draft report on the European Commission's proposals for amendment of the Brussels Regulation, prepared by the Committee's rapporteur. -9- MAY 2010 REED SMITH The conclusions in the draft report essentially reflect the rapporteur's preliminary findings in RS SHIPPING BULLETIN his December 2009 working document. The key point of interest from an arbitration point of view is that the draft report strongly opposes the abolition (even partial) of the arbitration exclusion from the scope of the Brussels Regulation. Suggestions are also made to strengthen and clarify the arbitration exclusion. 3.3 WHETHER COURT SEISED HAD JURISDICTION WHERE DEFENDANT ENTERED APPEARANCE BUT DID NOT CONTEST JURISDICTION In the case of Ceska Podnikatelska Pojistovna AS, Vienna Insurance Group v Bilas C- 111/09 – [2010] All ER (D) 203 (May) the applicant insurance company, CPP brought an action against the respondent, B, before the referring court seeking an order for the payment by the latter of the sum of CZK 1,755, plus default interest, as the premium due under an insurance policy concluded between those parties on 30 May 2002. Having been called on by the district court to submit his observations, B challenged CPP's claim as to its substance without contesting the jurisdiction of the court seised. The district court observed that it followed from Council Regulation (EC) 44/2001 (on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters) that, where its jurisdiction had not been contested, that court could not conduct an examination as to its own jurisdiction since the dispute did not fall within the situations provided for in arts 25 and 26 of the Regulation. It also observed that, if it ruled on the substance without examining its jurisdiction, its judgment could not be recognised for the purpose of art 35 of Regulation 44/2001. That provision did not allow the recognition in a member state of a judgment which had not been given by a court with jurisdiction for the purposes of the provisions of ss 3, 4 and 6 of Ch II of that Regulation. According to the district court, insofar as it was seised in breach of art 12(1) of the Regulation, it would not be possible for its judgment to be recognised in another member state. The district court was accordingly uncertain as to whether that conclusion was correct. It considered that either it should have the possibility to examine its jurisdiction irrespective of art 26 of Regulation 44/2001, or it should be able to apply art 24 of that Regulation to its jurisdiction, even though art 8 of that Regulation did not - 10 - MAY 2010 REED SMITH expressly provide for the possibility to apply that provision. In those circumstances, the RS SHIPPING BULLETIN district court decided to stay the proceedings and to refer a question to the Court of Justice of the European Union for a preliminary ruling. The question was whether art 24 of Regulation 44/2001 had to be interpreted as meaning that the court seised, where the rules in s 3 of Ch II of that Regulation were not complied with, had jurisdiction where the defendant entered an appearance and did not contest the court's jurisdiction. The Court ruled Article 24 of the Regulation had to be interpreted as meaning that the court seised, where the rules in s 3 of Ch II of that Regulation were not complied with, had to declare itself to have jurisdiction where the defendant entered an appearance and did not contest that court's jurisdiction, since entering an appearance in that way amounted to a tacit prorogation of jurisdiction. 3.4 GUIDANCE ON WHEN COURT SEISED OF RELATED ACTIONS PURSUANT TO APPLICATION TO STAY PROCEEDINGS In the case of FKI Engineering Ltd v Stribog Ltd - [2010] EWHC 1160 (Comm), FKI commenced proceedings in England against DWL as assignee of claims under a Business Transfer Agreement made in 2005 in respect of which DWL had failed to pay the purchase price. FKI had earlier commenced proceedings against DWL in Germany, seeking to overturn, under German law, transactions which had resulted in intellectual property and other assets being transferred to DWL. Purchase price claims did not form a part of the German action. DWL sought to have the English proceedings stayed under article 28 of the Brussels Regulation, Council Regulation (EC) No 44/2001, article 28(1), which provides that where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings, and for this purpose - under article 28(3) - "actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings". Burton J refused a stay. - 11 - MAY 2010 REED SMITH (1) The test under article 28 was a risk of irreconcilable judgments, and it was not enough RS SHIPPING BULLETIN that the same issue could arise in the two sets of proceedings. In the present case purchase price claims had been excluded by FKI from the German proceedings. (2) The introduction of a new case in the German proceedings by DWL so as to raise matters common to both sets of proceedings and which rendered them related did not operate to make the German court first seised of the new case under article 30 of the Regulation. Burton J held that, where a first action is subsequently amended to add a party or a cause of action which has, in the meanwhile, been raised in a second action, it was the court of the second action which was first seised. The English court was thus first seised of the matters raised by DWL in the German action and accordingly the English court had no jurisdiction to stay its own proceedings under article 28. The court therefore dismissed the defendant's application under Article 28 of the Brussels Regulation for a stay of the English proceedings, which had been made on the basis that earlier related proceedings were pending before the German courts. The decision follows the approach in Underwriting Members of Lloyds Syndicate 980 v Sinco SA [2009] Lloyd's Rep I & R 365, and clarifies the question of which court will be first seised in the context of related actions under Article 28, in circumstances where the first action is subsequently altered. The case also highlights the importance, in appropriate circumstances, of ensuring that an original claim is drafted as fully and completely as possible so as to encompass all appropriate claims and minimise the risk, with its inherent costs and delays, of an "unrelated" action being commenced in another jurisdiction. - 12 - MAY 2010 REED SMITH 4 INSURANCE RS SHIPPING BULLETIN 4.1 INSURER APPLYING “BUT FOR” CAUSATION TEST FOLLOWING DAMAGE BY HURRICANES In the case of Orient-Express Hotels Ltd v Assicurazioni General S.p.a. (UK) Trading as Generali Global Risk) [2010] EWHC 1186 (Comm) on the proper interpretation of a business interruption insurance policy it required a "but for" approach to causation so that the insured owner of a hotel in New Orleans which had been damaged by hurricanes could only recover in respect of loss which it could be shown would not have arisen had the damage to the hotel not occurred. The appellant insured (H) appealed against an arbitration award on questions of law concerning the correct interpretation of a combined property damage and business interruption insurance policy issued by the respondent insurer (G). H owned a hotel in New Orleans which was damaged by hurricanes in the autumn of 2005. The hotel was closed for two months and H sustained substantial business interruption losses. The surrounding area of New Orleans was also devastated by the hurricanes. A mandatory evacuation of the city was ordered. That meant that the city itself was in effect "closed" for part of the time when the hotel was closed. The policy covered "loss due to interruption or interference with the business directly arising from damage". A "trends clause" provided for revenue figures to be adjusted as necessary so as to "represent as nearly as may be reasonably practicable the results which but for the damage would have been obtained". The policy also provided cover for prevention of access and loss of attraction. H had recovered an indemnity under the latter clauses but that was subject to significantly lower limits than would be the case under the main insuring clause. The arbitral tribunal held that as a matter of construction the insuring clause provided cover only for losses caused by damage to the hotel itself but not, save for the prevention of access and loss of attraction extensions, losses caused by the damage to and devastation of the city; the policy wording required a "but for" approach to causation and it was thus necessary to assess the business interruption loss on the hypothesis that the hotel was undamaged but the city was devastated as in fact it was. The issues on appeal were whether on its true construction, the policy provided cover in - 13 - MAY 2010 REED SMITH respect of loss which was concurrently caused by physical damage to the property and RS SHIPPING BULLETIN damage to the surrounding area; and whether the trends clause should be interpreted as permitting an adjustment for the consequences of the very same insured peril which caused the insured damage which gave rise to the relevant business interruption loss. Appeal dismissed. (1) As a general rule the "but for" test was a necessary condition for establishing causation in fact. However, there might be cases in which fairness and reasonableness required that it should not be a necessary condition. Whether or not that was so would depend on all the circumstances of the particular case. In the instant case the tribunal had not erred in law in applying a "but for" causation approach under the policy on the facts as found by it. As the tribunal held, under the policy it had been agreed that a "but for" approach to causation should be adopted to the assessment of loss of revenue. Even if that consideration was not in itself conclusive, it was difficult to see how the tribunal could be said to have erred in law in adopting the causal approach laid down in the policy itself. On any view it was highly relevant to what fairness and reasonableness required. It had not been shown that fairness and reasonableness required that the "but for" test should not be applied. None of the suggested alternatives appeared to be more fair and reasonable than the "but for" test adopted by the tribunal, still less so clearly so as to require the discarding of that test. Furthermore, the "but for" test did not have the consequence that there was no cause and no recoverable loss on the facts, but rather a more limited recoverable loss. The answer to the question whether, on its true construction, the policy provided cover in respect of loss which was concurrently caused by physical damage to the property and damage to or consequent loss of attraction of the surrounding area was therefore "yes" unless the application of the "but for" test meant that the loss claimed was not caused in fact by physical damage to the insured property. (2) The tribunal was right to say that the trends clause was concerned only with the damage, not with the causes of the damage. What was covered were business interruption losses caused by damage, not business interruption losses caused by damage or "other damage - 14 - MAY 2010 REED SMITH which resulted from the same cause". Nowhere in the trends clause did it state that RS SHIPPING BULLETIN "variations or special circumstances affecting the business either before or after the damage or which would have affected the business had the damage not occurred" had to be something completely unconnected with the damage in the sense that it had an independent cause to the cause of the damage. The assumption required to be made under the trends clause was "had the damage not occurred", not "had the damage and whatever event caused the damage not occurred". H's construction effectively required words to be read into the clause or for it to be re-drafted. Further, such a re-drafting of the trends clause, which would allow H to recover for the loss in gross operating profit suffered as a result of the occurrence of the hurricanes as opposed to the loss suffered as a result of the damage to the hotel, was inconsistent with the causation requirement of the main insuring clause which required proof that the losses claimed were caused by damage to the hotel. Therefore the tribunal's construction and application of the trends clause was correct. 4.2 WHERE CLAIMANT OVERSTATED A CLAIM FOR DAMAGE FOLLOWING A FIRE IT WAS FATAL TO ENTIRE CLAIM In the case of Yeganeh v Zurich plc and another (unreported) the claimant (Y) claimed the benefit of a buildings and contents insurance policy as against the defendant insurers (Z) following damage to his home and its contents by fire. The property was covered by a policy of buildings and contents insurance which covered damage to property and contents caused by fire. The limit of cover under the policy for contents was £40,000. It was a further term of the policy that Z would not make any payment in respect of its cover if a claim was, in any way, found to be fraudulent or false. Z refused to pay out on the policy, claiming that Y, or a person acting on his behalf, had deliberately caused the fire and that Y had overstated his contents claim. The value of claims which Z accepted in respect of the damaged contents comprised some £38,788. Nevertheless, Z disputed claims by Y that numerous and expensive articles of clothing had also been damaged or destroyed in the fire. Y submitted that (1) it was inherently improbable that he would have caused the fire and that where a court was presented with one or more possible causes of a fire, the law did not permit or require a court to simply choose the one which it considered to be more likely; (2) his - 15 - MAY 2010 REED SMITH schedule of contents said to have been damaged by the fire was prepared as an estimate from RS SHIPPING BULLETIN recollection and may have included errors, but that was not fraud. Judgment for the defendants. (1) It was for Z to show that Y caused the fire and to do so clearly given the seriousness of the allegation, National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer) (No.1) [1995] 1 Lloyd's Rep. 455 and Continental Illinois National Bank & Trust Co of Chicago v Alliance Assurance Co Ltd (The Captain Panagos DP) [1989] 1 Lloyd's Rep. 33 considered. Y's reasons for not desiring to burn down his house were powerful. In light of the absence of a motive by Y for committing arson Z had not proven that arson had occurred, Rhesa Shipping Co SA v Edmunds (The Popi M) [1985] 1 W.L.R. 948 applied. (2) Y’s approach to his contents claim was, at best, careless. In the course of giving evidence, Y did not hesitate to be untruthful where it was in his financial interests to do so. Thus, it was difficult to accept the truth of his assurances that he was innocent in regard to making a fraudulent or untrue insurance claim. On the evidence, it was apparent that Y had falsely claimed for damaged clothing so as to bolster his contents claim as a whole. Accordingly, Y's claim fell in its entirety. 4.3 WHETHER ARBITRATORS PROPERLY DECIDING LOSSES ARISING OUT OF ONE EVENT In the case of IRB Brasil Resseguros SA v CX Reinsurance Company Ltd – [2010] EWHC 974 (Comm) the claimant reinsurers participated in an excess of loss reinsurance programme which protected the respondent reinsured's worldwide casualty book of business for the period 1976 to 1983. The reinsurance contained a qualified "follow the settlements" clause under which settlements were binding on the reinsurers "provided such settlements are within the conditions of the original policies and/or contracts and within the terms of this reinsurance ..." The reinsurance contained a period clause which stated: "This reinsurance covers all losses as herein defined occurring during the period commencing with ... and - 16 - MAY 2010 REED SMITH ending with ..., both days inclusive, local standard time at the place where the loss occurs". RS SHIPPING BULLETIN The ultimate net loss clause provided that there was a limit of liability for each and every loss, a term defined as "each and every loss ... arising out of one event". A variety of class actions were brought against different assureds, and three issues arose on appeal from arbitrators. (1) The follow the settlements clause allowed the reinsured to recover if the reinsured could prove its liability on the balance of probabilities. In circumstances where there had been global settlements of claims the reinsured had, following Equitas v R & Q [2009] EWHC 2787 (Comm), proved its loss even though it was likely that some of the claimants might not have had valid claims or might have been overcompensated. (2) In relation to asbestos claims against the assured, although the reinsured had only been on risk for about 63.6 per cent of the period of exposure, the reinsured had proved its loss under a settlement of 70 per cent of the loss, on the basis that the US courts would have applied the "triple trigger" theory of liability under which an insurer on risk at the date of exposure is liable for all losses up until manifestation. On that basis the reinsured potentially faced 100 per cent liability so that a 70 per cent settlement fell within the terms of the direct policy.(3) The term "event" was capable of meaning the determination of the assured each year to install asbestos in its premises, so that all asbestos claims against the assured in any one year could be aggregated and treated as a single claim within the aggregation clause. - 17 - MAY 2010 REED SMITH 5 JURISDICTION RS SHIPPING BULLETIN 5.1 WHETHER COURTS WHERE COMPANY HAD ITS SEAT HAD JURISDICTION In the case of Depfa Bank Plc V Provincia Di Pisa - [2010] EWHC 1148 (Comm) the claimant Banks asserted that the English courts had jurisdiction in respect of two interest rate swap agreements on the basis of English jurisdiction clauses contained in the swap agreements. The Italian defendant asserted that its decisions to enter into the swap contracts were invalid, and therefore the actions fell within the exclusive jurisdiction of the Italian courts under Article 22(2) of the Brussels Regulation. That provision allocates jurisdiction to the courts of the member state where a company has its seat, in proceedings which have as their object the validity of a company's decisions. The defendant argued that the actions were "principally concerned" with such matters. Hamblen J dismissed the defendant's jurisdictional challenge, adopting the approach of the Court of Appeal in its recent decision in Berliner Verkehrsbetriebe (BVG) and another v JP Morgan Chase Bank NA and another [2010] EWCA Civ 390. That approach requires the court to undertake an "overall classification" of the nature of the proceedings (particularly in multiple issue cases) and make an overall judgment of the issues to determine whether the proceedings are "principally concerned" with matters falling within Article 22. In the present case, although the "meat" of the proceedings would be the defendant's defence that its decisions were invalid (which would, if successful, dispose of the claim without further factual enquiry), there were further issues which arose. Looking at the case overall, there were likely to be issues raised by way of defence involving misrepresentation/non-disclosure and failure to advise/mis-selling. In all the circumstances, the proceedings were not likely to be "principally concerned" with the validity of the defendant's decisions, and the invalidity issue was unlikely to be the only ground upon which the enforceability of the swap agreements was challenged. The case applies the approach set down in BVG, but illustrates the difficulties that flow from the relative imprecision of the "overall classification" test. It highlights the scope for jurisdictional battles in circumstances where the outcome of the application of that test is not - 18 - MAY 2010 REED SMITH sufficiently certain or predictable. In that context, it is also interesting to note Hamblen J's RS SHIPPING BULLETIN comment that the court must be alive to the fact, in such jurisdictional challenges, that applicants may display only part of their hand in order to "wrest jurisdiction away" from the contractually chosen forum in favour of their home court. 5.2 WHETHER LATER PROCEEDINGS COULD BE STAYED WHERE THERE WERE CROSS-CLAIMS In the case of Secret Hotels 2 Ltd v EA Traveller Ltd. [2010] EWHC 1023 (Ch) the claimant was a company registered and domiciled in England and Wales. At all material times, it provided holiday accommodation in Cyprus, amongst other countries. The defendant company was registered and domiciled in Cyprus. At all material times, it operated as the claimant's agent in Cyprus under two written agreements. The second agreement (the 2007 agreement) was to be performed in Cyprus, but contained a jurisdiction clause providing that it was to be governed and construed in accordance with English law, and that the parties submitted to the non-exclusive jurisdiction of the English courts. The contractual period of the 2007 agreement was May 2007 to April 2012. In February 2009, the claimant ceased to operate in Cyprus and no longer had any need for the defendant's services. The defendant issued proceedings in Cyprus (the Cyprus proceedings), claiming damages for breach of the terms of the 2007 agreement. In May, the claimant issued proceedings in England, claiming an account in respect of all sums held by the defendant on its behalf and the payment of the sums found to be due on the taking of the account. In June, the defendant applied for a stay of the English proceedings under art 27 of Council Regulation (EC) 44/2001 (on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters) (the Regulation), on the basis that those proceedings and the Cyprus proceedings involved the same cause of action. In the course of the hearing of that application, the defendant submitted, and the claimant accepted, that its claim in the Cyprus proceedings could, as a matter of law, be set off against the claimant's claim in the English proceedings, so that both sets of proceedings would necessarily involve the same cause of action for the purposes of art 27 of the Regulation. The court granted the defendant's application and stayed the proceedings. - 19 - MAY 2010 REED SMITH The claimant appealed. The claimant resiled from the position it had taken before the court RS SHIPPING BULLETIN below in respect of set off, and contended at the instant hearing that the defendant had no right of set off against its claim. It further submitted, inter alia, that the Cyprus proceedings would be dealt with by that court adjudicating on the defendant's claim for damages against the claimant, whereas the English court would simply address the question of the account of sums found due to the claimant from the defendant, so that the two sets of proceedings did not involve the same cause of action. Consideration was given to, inter alia, the decision of the European Court of Justice in Gantner Electronic GmbH v Basch Exploitatie Maatschappij BV: C-111/01 (Gantner), and in particular whether that decision, which had focused on the types of set off found in Austria and the Netherlands, applied in the instant case. The appeal was dismissed. (1) The domestic court had no control over the Cyprus proceedings, and nothing in the domestic jurisdiction could stop those proceedings continuing. Further, if not stayed, the English proceedings for an account would also continue. Even if neither party chose to raise defensively its claim in the proceedings brought against it, there would nevertheless be the need to address the fact that proceedings were taking place in parallel in different jurisdictions; if both parties did choose to raise their respective claims defensively, both sets of proceedings would be determining both claims. That would necessarily lead to the potential for conflict which the Regulation was designed to avoid. Even if that were not correct, it did not follow that there might not be differences in evidence that might lead to differing and contradictory conclusions. Finally, the parties would be forced to instruct lawyers in two jurisdictions; that was precisely the type of duplication that the Regulation was designed to avoid. As a matter of practicality, if the stay remained in place all the issues arising under the 2007 agreement would be litigated and determined in one court only. As to whether or not there was a close connection for the purpose of an equitable set off, on the facts, Gantner was not intended to have any application to the forms of set off in English law identified in the instant case. For those reasons, the appeal would be dismissed - 20 - MAY 2010 REED SMITH RS SHIPPING BULLETIN (2) There was sufficient material for the discretion under art 28 of the Regulation to be exercised, and the instant case fell precisely within that provision. It was inevitable that parallel proce…