Legal Watch:Personal Injury23rd October 2014Issue: 037

Events

Plexus and Greenwoods hold a series of events which are open to interested clients. See below for those being held in the next few months:

The Major Bodily Injury Group (MBIG) | Spring Seminar | 28.04.15 | The Wellcome Collection, London

In This Issue:

• Mental capacity

• Civil procedure/‘without prejudice’

• Fraud/contempt proceedings

• Limitation/product liability

Mental capacitySince the introduction of the Mental Capacity Act 2005 there has been a presumption in favour of a claimant having mental capacity. The case of Ali (Protected Party) v Caton and another (2014) EWCA Civ 1313 serves to illustrate how hard it is for a defendant to assert that a claimant has capacity, once that presumption has been displaced.

When he was seventeen, the claimant/respondent, suffered a severe brain injury in a road traffic accident caused by the first defendant’s negligence. The first defendant was uninsured and the MIB (the appellant) had conducted the defence. Liability had been admitted, subject to a deduction for contributory negligence. The only issue at trial had therefore been quantum. Various experts had treated the claimant during the seven years between the accident and the trial. They all gave evidence that he suffered from significant cognitive disabilities. Shortly before the trial, the claimant had taken the UK Citizenship Test and passed it. The experts all agreed that it was surprising that he had passed the test and that his having done so appeared to be inconsistent with his apparent level of cognitive disability. The claimant claimed that he had passed the citizenship test with “improper assistance”, the nature of which was not identified. However, the judge found that he had passed the test without assistance, having learned answers by rote and having struck lucky in the questions that came up. He found that the claimant lacked mental capacity and had no residual earning capacity. Damages were assessed.

The MIB appealed and submitted that if the judge had attributed the correct weight to the citizenship test he would have found that the claimant had either been malingering or consciously exaggerating and that he did not suffer from significant cognitive deficits. He should have found that the claimant did not lack mental capacity and that the award of damages should be reduced accordingly.

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Rejecting the appeal, the Court of Appeal held that on the evidence before him, the judge had been entitled to make the finding that the claimant had passed the citizenship test unaided. The judge had been bound to take into account all the features of the evidence in the context of his finding that the claimant had somehow passed the citizenship test. He had been acutely aware of the need to factor the test success into the rest of the evidence. To focus upon the citizenship test almost to the exclusion of anything else would not have been the correct approach. There could be no doubt that the claimant had suffered a very severe brain injury. He was not a person who could have kept up a pretence of incapacity, capable of fooling so many people, for so long. The citizenship test had to be put into context with all of the other evidence. The judge had been entitled to conclude that the claimant lacked capacity, having regard to the sum total of the evidence, including the expert evidence and evidence from other quarters as to how he presented and functioned in his day-to-day life. he award of damages was upheld.

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Civil procedure/‘without prejudice’When is marking a communication ‘without prejudice’ ineffective when later claiming that its contents were privileged? This was the issue in Avonwick Holdings Ltd v Webinvest Ltd and another [Lawtel 21/10/2014].

The respondent/claimant company had made a loan of $100m to the appellant/first defendant, a company controlled by the second defendant, to enable the first defendant to make a loan to another company. The first defendant’s obligations were guaranteed by the second defendant. The first defendant defaulted and proposed a rescheduling. The claimant did not agree to the proposed terms and required the provision of security. The claimant then demanded repayment from the defendants, who alleged a collateral oral agreement that the first defendant’s obligation to repay was conditional on it being repaid in full by the third party company. That company had also defaulted and the first defendant had commenced arbitration proceedings against it which had been settled. Disclosure had been ordered of correspondence leading up to the settlement agreement between the first defendant and the third party company; it was accepted that the settlement itself was disclosable. The judge held that the second defendant had waived privilege in certain documents. The appellants appealed against that decision. A second judge directed that correspondence leading up to the unsuccessful rescheduling, which was marked “Without prejudice and subject to contract”, should be admissible. He found that the correspondence was not covered by the “without prejudice” privilege because there was at the relevant time no dispute about the first defendant’s liability under the loan or the second defendant’s liability under the guarantee. The appellants appealed on the without prejudice issue.

The Court of Appeal dismissed the appeal against the decision on the without prejudice issue. There were two bases for the operation of the without prejudice rule: public policy and contract. As a matter of public policy it was necessary for there to be a dispute in existence for the rule

to operate, but the operation of the rule could be limited or extended by agreement. The term “dispute” was of wide scope and could include the “opening shot”. Whether there was a dispute had to be determined on an objective basis. The judge was right that there had been no dispute in existence at the time of the correspondence in issue. Freedom of contract was a basic principle of English law and the courts recognised the efficacy of clauses such as non-reliance, confidentiality and entire agreement clauses. However, an agreement that documents could not be used in court proceedings could not be unilaterally imposed. The argument that there was such an agreement in the instant case was undermined by the fact that the documents were marked “subject to contract” as well as “without prejudice”. The appellants said that that related only to the “heads of terms” put forward for the rescheduling. In the circumstances it was clear that the words “without prejudice” were not intended to create an agreement that the documents would not be used in proceedings in court, but indicated that the lender’s rights were being reserved in relation to the proposed rescheduling. Therefore the documents were admissible.

The appeal against the decision of the first judge was allowed only in relation to the finding that the second defendant had waived privilege. It was doubtful whether the words relied on amounted to a waiver. They were only to the effect that an offer to settle had been received and his lawyers had advised that it was a good one. In any event the privilege was not the second defendant’s to waive. The third party had not consented to waiver. The claimant argued that it was not relying on the documents as admissions. The reasonableness of the settlement was in issue and the general rule applied. The documents remained privileged even after the settlement.

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Fraud/contempt proceedingsThe case of Royal & Sun Alliance Plc v Fahad [Lawtel 21/10/2014] sets out in some detail the grounds on which a court will allow an application for permission to bring contempt proceedings.

The applicant insurance company applied for permission to bring committal proceedings against the respondent for contempt of court. The respondent applied for relief from sanctions.

The respondent had brought a damages claim after an alleged road accident. The court found that the accident had been contrived and that the respondent had made false statements by asserting that the accident had been caused by another driver’s negligence and by stating that he did not know the other driver, when the evidence was that they were in a relationship. The respondent’s evidence that there had been no collusion was rejected. He failed to give seven days’ notice in writing of his intention to attend the instant hearing, or provide a written summary of his submissions as required by CPR 81.14(5). He thus lost his right to be heard. Nevertheless the court allowed him to make submissions. The day before the hearing the respondent applied for relief from sanctions.

The applicant submitted that there was ample evidence from which permission should be granted and that the false statements had been proved to be false at trial. It submitted that it was in the public interest to bring contempt proceedings as it was not a case of an exaggerated claim, but one that had been entirely fabricated, and that the respondent had also failed to pay costs orders made against him. The respondent submitted that he had faced language problems at trial, as English was not his first language. With regard to relief from sanctions, he submitted that he had not given seven days notice for good reason as he had been in Iraq and suffering from ill health.

The High Court judge held that a person was only guilty of contempt if a statement was false and he knew it to be so. Bringing proceedings had to be in the public interest, taking into account whether there was a strong case, whether the alleged false statements made were significant in the proceedings, whether the person understood the likely effect of the statements and considering the deterrent effect of contempt proceedings. Only limited weight should be attached to the likely penalty and contempt had to be proved to the criminal standard. The respondent’s arguments went to the merits of the application rather than whether permission should be granted. There was a strong prima facie case but it was not the job of the instant court to make findings. It was important to deter false claims. The public interest not only justified granting permission, but demanded it. There were different types of fraudulent claims; one where an accident had occurred but it had been exaggerated and one where there had been no accident at all. That latter category was far more serious. Permission to bring the committal application was granted.

Given that outcome and that the respondent’s submissions had been considered, it made no practical difference if he was granted relief from sanctions, but it was relevant to costs. The breach had been serious. The respondent’s medical notes showed that he was no longer unwell. He had been in the UK shortly before the deadline and in any event he could have emailed or telephoned from Iraq. The breach had not been an isolated occurrence. Relief from sanctions was refused.

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Limitation/product liabilityIn Unwalla v Spire Healthcare Ltd [Lawtel 22/10/2014] the claimant claimed damages for personal injury and other losses arising from alleged breach of contract in relation to the supply of a hip implant using the Birmingham Hip Resurfacing System (BHRS). The hip replacement surgery had been carried out in 2001. The claimant had suffered an adverse reaction to metal debris (ARMD) and had to have revision surgery in 2007. It was the claimant’s case that the implant was in breach of the statutory implied terms of satisfactory quality and fitness for purpose under the Supply of Goods and Services Act 1982 and that the services and/or advice given by the defendant were not supplied with reasonable skill and care. The defendant served a defence denying liability, but admitting the contract for supply of the implant and the implied terms. It denied that it was vicariously liable for the actions of the consultant and argued that the contract claim was statute-barred under S5 Limitation Act 1980 since proceedings had not been brought until 2013. The claimant applied to strike out the defence or for summary judgment on the basis that the vicarious liability issue was irrelevant, as was S5 which was disapplied by S11 of the 1980 Act in a personal injury claim. The claimant argued that the defence failed to deal with the core allegations in the particulars of claim, namely that BHRS was not fit for purpose, in particular because the claimant had hip dysplasia and that the claimant was not warned that BHRS had an unacceptably high risk of revision surgery within 10 years. The defendant applied for permission to amend its defence substantially.

The High Court judge held that the original defence was clearly defective, but the court, before striking it out, had to consider whether it could be amended. The claimant accepted that there was a triable issue on limitation under S11 and S14 of the 1980 Act, leading to the court being asked to exercise its discretion under S33 to exclude the limitation period. There were also triable issues of causation and the assessment of damages. The defendant relied on

the terms of S4(2A) of the 1982 Act which provided that “goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances”. It was said that relevant circumstances could include the defendant’s knowledge. Its case was that its defence sufficiently raised the issue as to whether the implant was appropriate for the claimant and that it was inevitable that expert evidence would be required on that and other issues. The claimant had not produced any incontrovertible evidence on what were described as the core issues. Permission was given to amend the defence, and on the defence as amended, which put the claimant to proof on the key issues, it could not be said that there were no reasonable grounds of defence or that the defence had no real prospect of success.

The information and opinions contained in this document are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. This document speaks as of its date and does not reflect any changes in law or practice after that date. Plexus Law and Greenwoods Solicitors are trading names of Parabis Law LLP, a Limited Liability Partnership incorporated in England & Wales. Reg No: OC315763. Registered office: 8 Bedford Park, Croydon, Surrey CR0 2AP. Parabis Law LLP is authorised and regulated by the SRA.

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