CNA INSURANCE COMPANY (EUROPE) LIMITED v (1) SERVICO INTERNATIONAL LIMITED [2002] EWCA Civ 654

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice David Steel)
[2002] EWCA Civ 654Case No A3/2002/0092, A3/2002/0092/A, A3/2002/0092/BVenue Royal Courts of Justice, Strand, London WC2, Friday 26th April 2002
Between
CNA INSURANCE COMPANY (EUROPE) LIMITEDClaimant/Respondent(1) SERVICO INTERNATIONAL LIMITED(A company incorporated under the laws of Gibraltar)(2) SERVICO UK LIMITED(t/a Euronet and/or Motorcade and/or Roadsurferand/or Amberjack Fleet Services)(3) SERVICO (NI) LIMITED(t/a Euronet and/or Motorcade and/or Roadsurferand/or Amberjack Fleet Services)(4) SERVICO (ROI) LIMITED(t/a Euronet and/or Motorcade and/or Roadsurferand/or Amberjack Fleet Services)(5) BIKENET EUROPE LIMITED(6) CRASHNET (UK) LIMITED(7) 1st EASYDRIVE LIMITED(8) GM INSURANCE MANAGEMENT LIMITED(9) SERVICO GLOBAL LIMITED(10) SERVICO TRADE SERVICES LIMITED(11) ROADSURFER NETWORK LIMITED(12) WUNDERNET.CO.UK LIMITED(13) 1st EASYCORPORATE SERVICES(14) STEPHEN FREDERICK ARNOLD(born Stephen Thomas Mason and also known as Stephen Ashford)Defendants/Applicants
Before
Lord Justice TuckeyLord Justice RixMR S GEE QC and MISS M HEAL (Instructed by Messrs Elborne Mitchell, London EC3N 2PR) appeared on behalf of the ApplicantsLORD GRABINER QC and MISS L LAKE (Instructed by Messrs Lovells, London EC1A 2DY) appeared on behalf of the RespondentDate 26 April 2002

LORD JUSTICE TUCKEY:

There

[1]are no less than seven applications before us today in this case which, after its unexceptional progress to a Part 24 hearing before David Steel J on 12th December 2001, has become extremely acrimonious in recent weeks. The judge gave summary judgment for the claimant insurance company, CNA, for nearly £11 million against the 1st to 13th defendant companies, who are owned or controlled by the 14th defendant, Mr Arnold. For present purposes no distinction needs to be drawn between these companies and I will refer to them collectively as "Servico".[2]The first application, which is all we have heard so far, is a renewed application for permission to appeal on grounds rejected by my Lord, Lord Justice Rix, when he gave permission to appeal on paper on another ground earlier this year.[3]CNA's claim arises out of a contract which they made at the end of July 2000 with Servico which is evidenced by an insurance slip. Without descending into detail or intending to give it any label, the slip enabled Servico to provide motor insurance to their customers in the fleet management and used car business on behalf of and in the name of CNA. So CNA became the motor insurers of Servico's customers, but the agreement was that they would only retain liability in excess of £100,000 or £250,000 - depending upon the type of vehicle involved - of each and every loss, subject to an aggregate limit, and that the underlying layer would be reinsured into a Servico captive company set up by the brokers.[4]The slip specified the premium to be paid by Servico to CNA for the excess of loss and to their captive for reinsurance, based on usage days or vehicle units. The premium was to be paid by Servico within 14 days of the brokers' monthly declarations of risks bound under this arrangement by reference to the certificates of motor insurance issued to Servico's customers.[5]Servico accept that they were liable to pay the agreed premium, irrespective of whether they had collected premium from their customers. The contract was terminated by CNA with effect from 31st January 2001. Servico's defence, served the day before the hearing before the judge, admits that this termination was lawful because CNA were not told that Mr Arnold was an undischarged bankrupt. Mr Gee QC, however, in his skeleton argument and before us today has made it clear that Servico wish to resile from this admission and contend that the termination was unlawful.[6]In any event, by the time of termination premium well in excess of £10 million was owed by Servico to CNA. Investigations by accountants with a view to establishing the exact amount due followed. Allegations of inadequate record-keeping and misuse of the cover are made.[7]Following termination CNA have sought to collect premium directly from their insured, saying to the producing brokers involved that they will not treat payment to Servico as a proper discharge of the insured's liability. They have done this, they say, to mitigate their loss and accept that Servico are to be given credit for all sums recovered.[8]The pleadings raise issues of misrepresentation and other points of detail with which we are not concerned. The Part 24 judgment, however, was sought for the largely admitted amount of premium due by Servico. The judge was asked to resolve two issues. The first was whether the premium payable for usage days was for the period CNA were on risk or whether (as Servico contended) it was only payable for the time the vehicle in question was actually in use. The judge decided this issue of construction in CNA's favour, and my Lord has given Servico permission to appeal on this point.[9]The other issue the judge had to decide related to CNA's collection of premium after termination. Servico contended that this meant that they were no longer liable to pay CNA. At first sight this does not appear to be a very promising argument. No doubt that explains why the legal reasons advanced in support of it have undergone several changes. Before the judge the argument was that as a matter of construction of the contract Servico's obligation to pay was dependent upon their right to collect, and so when their right to collect was terminated so was their obligation to pay. The judge rejected that argument for reasons with which I agree.[10]Mr Gee QC, who now appears for Servico - and who, if I may say so, has lost none of his creativity - says the judge reached the wrong conclusion. He does not rely on the argument rejected by the judge or, as it seems to me, any of the other arguments advanced earlier on this aspect of the case. What he says is that the contract was subject to implied terms that CNA should co-operate with Servico to enable them to collect premium without delay or interference and would not prevent them from doing so. Breach of such terms give Servico a claim for damages, prevents CNA from requiring payment of the premium or exonerates Servico from paying it, depending upon the legal analysis, but in one way or another mean that CNA cannot now recover. By preventing Servico from collecting the premium, they have, he submits, deprived them of the means by which it was intended they would pay CNA.[11]Skilfully though those arguments were deployed in two skeleton arguments, and briefly summarised before us this morning by Mr Gee, I do not accept them. The slip says nothing about the collection of premium by Servico from its customers. But it is accepted that prior to termination Servico was entitled to collect the premium from its customers. Such an arrangement required no co-operation by CNA and there was, it seems to me, no necessity to imply a term of the kind contended for during the subsistence of the contract. Following termination, Servico remained liable to pay premium on the business they had done beforehand, but they were unable to pay. Following termination I can see no basis for the implication of terms which would prevent or inhibit CNA from collecting the premium which Servico has failed to pay. The plain fact is that all CNA are doing is collecting premium which is due to them under the terms of the insurance which they gave to Servico's customers, for which they have not received payment from Servico. If there is a difference between the premium recoverable from the customer and the premium payable to CNA, CNA will have to account for it. There is no need to imply post contractual terms to achieve this result as Mr Gee submitted this morning.[12]That deals with the arguments which feature as grounds five and six of Servico's notice of appeal which my Lord considered and rejected for much the same reasons as I have just given. But in his latest skeleton argument Mr Gee raises a further point. If CNA can revoke or have revoked Servico's authority to collect premium, there is nevertheless, he says, an implied term that CNA will collect the premium with reasonable diligence and provide information to Servico about the amounts which they have collected. Whilst CNA accept that they have a duty to mitigate by collecting premium, they do not accept any such implied term and have recently refused to provide any information to Servico about the collections which they have made. This was a point which was raised before the judge, and he rejected it by saying:
"Whilst the defendants seek to suggest that they have a case which should be taken account of at this stage, that the claimants had negligently failed to pursue what might be called their mitigation obligations or failed to ensure that reasonable recovery was made on account of the uncollected moneys, the plea that is contained in the defence, as I understand it, simply asserts that because there are uncollected moneys it follows that there has been negligence in seeking to pursue them. I regret I do not regard this as an appropriate case to, in a sense, run a res ipsa loquitur argument to the extent that one can infer that because moneys are outstanding there has been a failure properly to chase for them; to the contrary, the inference that I would readily draw is that it is difficult to pursue the outstanding moneys because the defendants have managed to recover the plums and have left the duff."
[13]It is clear therefore that by giving summary judgment for the amount he did, the judge made no allowance for this point. Servico are unable to say whether they should be credited with recent recoveries because they have been given no information, and complain that they have been precluded from any judicial consideration of their argument that CNA have failed to take reasonable steps to collect the premium.[14]In response to this point Lord Grabiner QC submitted that the judge's approach was right; that Servico's assertion is no more than that; it is fanciful and not supported by any credible material, not least for the reason that it is obviously in CNA's interests to do all that they can to recover the outstanding premium from their insured.[15]Whether Mr Gee's point is to be considered as an argument about mitigation or clothed with the mantle of implied term, it does go to the quantum of CNA's claim and I think that Servico should be permitted to argue in this court that the judge was wrong to reject it out of hand at the summary judgment stage. At the hearing before this court it will of course be open to CNA to argue that there is no implied term of the kind contended for, and nothing to support the allegation that they have failed to mitigate their loss in the way that Lord Grabiner outlined to us this morning; and of course, if those arguments are rejected, what the consequences should be, both in terms of the judgment which has been given and as to how the issues arising should be resolved.[16]So for these reasons, I would extend permission to appeal to enable Servico to argue the single further point which I have identified, which does not at the moment feature at all in the notice of appeal. Lord Justice Rix refused permission to appeal on grounds five and six and, for the reasons I have given, I would dismiss the renewed application on those grounds today.

LORD JUSTICE RIX: I agree.

[18]MR GEE: May I clarify something with your Lordships about the scope of the permission. It raises on a point which you have not mentioned so far and I have not mentioned, and it is paragraph 11 of the witness statement of Mr McGall, which of course lies at the centre of the permission that you have given me. It concerns Direct Car Finance. This is slightly different from failure to collect premium diligently. The point is that we say that CNA should have cancelled that policy for non-payment of premium - this is the DCF liability of premium accumulated monthly

LORD JUSTICE TUCKEY: Sorry, where do we find this?

[20]MR GEE: Paragraph 11.

LORD JUSTICE TUCKEY: Of what?

LORD JUSTICE RIX: This is tab 20.

[23]MR GEE: It is "Applications to adduce new evidence, issue witness summons and obtain disclosure" at tab 6, paragraph 11.

LORD JUSTICE RIX: This is McGall 2.

LORD JUSTICE TUCKEY:

[25]McGall 2. I am sorry. All my bundles are numbered with exactly the same number, which helps one to get through them speedily. McGall....?[26]MR GEE: McGall 2, paragraph 11.

LORD JUSTICE TUCKEY: Yes.

[28]MR GEE: What happened was that there was a meeting after termination and

LORD JUSTICE TUCKEY: Yes, I remember the point. DCF liability.

[30]MR GEE: The DCF liability. What we say is that they should have cancelled the DCF direct cover, that they failed to do so and that that has increased the bill for us on the premium clause. So it is very closely connected to the point which you have given leave for, which is non-due diligence in collection. But we say it is due diligence in relation to the cancellation of the DCF policy. What we say is that as prudent insurers acting commercially they should have cancelled, particularly when we requested them to do so and that it was unreasonable not to cancel and they have increased our (inaudible).

LORD JUSTICE TUCKEY: Yes.

[32]MR GEE: It is a short point, but it is so intimated related to the other point we respectfully ask for permission to appeal on that. But it seemed to me to be a slightly separate point and it is not covered, I think, by the permission that you have already granted. That is why

LORD JUSTICE RIX: The losses spoken to by Mr McGall, are, what, losses deriving from claims?

[34]MR GEE: What is spoken for on the Direct Car Finance matter is that these people were not paying premiums on the direct cover and they are losses resulting from non-payment of premium. So that they did not pay the premium. They had the benefit of the direct cover. We said, "Please cancel this", because they are the direct insurer and they are the only people who could do it, and they billed us for the

LORD JUSTICE TUCKEY: Loss is defined as being a continuing period of cover for which there has been no payment of premium.

[36]MR GEE: Correct. So that what they have done is, as far as we understand it, is that they did not cancel. We get the bill for the cover, but we say that it was unreasonably incurred.

LORD GRABINER: Well as to that point, first of all that witness statement - that my friend has yet to apply for leave to adduce that material, but put that on one side for the moment. The second point is that what you are now being invited to acknowledge is that the hearing in the Court of Appeal will go into the debate as to whether or not it was right for my clients - who because this is of course motor car, this raises the whole problem about whether it is right to cancel arrangements where you have got driving out there on the roads, people who would otherwise be uninsured - whether it was right for us to maintain those arrangements in place. That is presumably going to be made a major debate in the Court of Appeal on the summary judgment appeal. In my submission, what we are really concerned with here, the essential question is whether or not we have mitigated the loss properly and that this is not a proper item to come within that debate.

LORD JUSTICE RIX: If there is a proper issue of mitigation, it has to be resolved somehow.

LORD GRABINER: I would respectfully agree. But that is - as long as we all understand that that is a separate category of debate. My friend says, "Well it is just the same thing", but it is not. It is essentially a brand new debate.

LORD JUSTICE TUCKEY: It is another kind of mitigation.

LORD GRABINER: It is an element of mitigation, but it is a discrete issue: not whether or not we collected efficiently and so on, but as a matter of principle whether it would have been appropriate for us - not just appropriate, I mean it may be that different people can act in different ways, they are still not acting unreasonably. It is one thing to say, "You have not mitigated properly." It is another thing to say, "You were bound to do this", namely to cancel these arrangements. No doubt we could have the debate.

LORD JUSTICE RIX: How is that debate to be resolved if the summary judgment cannot be affected by the point?

LORD GRABINER: I can see what we are heading for here, or may be heading for here. But these are matters - this is a brand new matter and I do not think I can usefully add anything to what I have said. (Pause)

[44]Can I just ask this as well, if I may, and I apologise, and that is that the principles in Ladd v Marshall are applicable and this is a classic example of that principle in action.

LORD JUSTICE TUCKEY: I think that we will deal with it to accommodate that point. It may be sensible if I now give you our provisional views about the rest of these applications before we go any further.

LORD GRABINER: My Lord, yes, that would be helpful.

LORD JUSTICE TUCKEY: I will come back to directions which need to be given for sensible conduct of the appeal in the shape that it now is. But logically, the next application to consider is the one which I think the court has given the number 0092/E, which is Servico's application to admit the evidence of Mr Emmerson, which Servico says helps them on the usage days issues, but CNA says in fact it helps them. Unless the parties agree that this statement should be admitted, the usual practice of this court is to allow the court hearing the appeal to decide whether to admit further evidence or not. That is the order which we propose to make in the case of that application. The same will apply - although there is no application at the moment - to any other evidence from any witness who has signed a statement which either party wishes to rely on for the purposes of the appeal, including Mr McGall. If the court is prepared to admit Mr McGall's statement Servico to argue that the scope of the appeal should be enlarged to enable it to contend, not just that premium has not been recovered, but that CNA, who took over the business after termination, should have cancelled the insurance of Direct Car Finance.

LORD JUSTICE RIX: Just to tease out that point, Mr Gee.

[49]MR GEE: Yes.

LORD JUSTICE RIX: Might it be affected by the argument that under the slip there was to be no return of premium?

[51]MR GEE: I need to look at that. Which particular provision...?

LORD GRABINER: It is paragraph 6 on page....

[53]MR GEE: Yes, the answer to that is that there are a number of answers that I have immediately thought of in answer to that. But I may not have thought of all the points, so I am answering it at very short notice. The first point is that this part is in the administration part of the slip and, as you have seen, paragraph 5, which is the paragraph immediately before it, says:
"Monthly declarations. Remittance of premium within 14 days of the close of the month."
[54]That is on the declarations that are made: "Any additional premiums generated as a result of mid-term adjustments" now the declarations have to be made month-by-month. So that if the contract had continued there would have been declarations after termination. But because it did not continue, you have no monthly declarations. The "no return of premiums" is to do with the mechanism, assuming that the contract continues. It has nothing to do with premiums post-termination.

LORD JUSTICE RIX: I do not think we need it argued now, but I did want just to flag that, on what is in effect an entirely new aspect of the matter, not that CNA have failed to obtain premium, but that they have failed, in breach of some obligation of mitigation - I do not think it has been put in implied terms yet - they have failed not to collect premium and failed to cancel it. It is subject to a possible argument that there were to be no return of premiums liable any way, and if the matter is to be presented on a very inchoate point to the full court, then the ramifications of it will have to be clarified.

[56]MR GEE: I have thought of two further answers.

LORD JUSTICE TUCKEY:

[57]I am sure, given another five minutes, you will have another 10. But I think we have, as my Lord says, teased out the point far enough.[58]Now I am going on to[59]MR GEE: I am not going to dissuade you from the course that you propose in relation to all of that.

LORD GRABINER: I am sorry, my Lord, I do apologise.

LORD JUSTICE TUCKEY: On what I have said so far, Mr Gee has just said, "I am not going to try and dissuade you to do anything else."

LORD GRABINER: This is on the Emmerson material?

LORD JUSTICE TUCKEY: Yes.

LORD GRABINER: I respectfully agree. That is, if I may say so, a sensible approach. There are many arguments we could deploy on that, but what is the point?

LORD JUSTICE TUCKEY: I see there is a very, very long - and I have to I say I almost despaired getting to the end of it - statement from your side dealing with the objections on this point.

LORD GRABINER: I think that was just a giving of expression of despair and exasperation.

LORD JUSTICE TUCKEY: That may be.

[68]If I can go on. Then we come to the highly contentious applications relating to Mr Richards. Firstly, the application by Servico, which is part of (I hope) what the court has labelled 0092/B, to introduce a letter sent to him by CNA's solicitors and what are apparently his handwritten notes on some of the paragraphs of the amended statement of case. Secondly, CNA's application for an injunction requiring the return of these documents and restraint against their further use (application 0092/C) on the grounds of litigation privilege.[69]Thirdly, Servico's application (0092/F) to dismiss that application because it should not be heard summarily by this court.[70]With the objective which I identified at the beginning of this hearing in mind, firstly, we do not think that either of the documents will help the Court of Appeal in any way to determine the appeal, and so they should not be admitted on the appeal.[71]Secondly, there is no point therefore in this court deciding the issues raised by CNA's application, which are by no means straightforward. If the parties wish to pursue what seems to us to be a tactical battle which, on further reflection, they may consider has been blown-up out of proportion, then they will have to do so by application to the Commercial Court (if that is procedurally possible) or fresh action (if it is not).[72]Closely allied to this is the remainder of Servico's application, 0092/B, which asks for permission to issue a witness summons against Mr Richards and an order for specific disclosure of Lovells (who are CNA's solicitors), file notes of conversations with Mr Richards and correspondence with him from the date they became CNA's solicitors to date.[73]We do not think it is appropriate for this court to make either of these orders. This court does not normally hear oral evidence and we have never heard of a case where a witness is summoned to this court to do so. This is an adversarial system in which CNA have obviously chosen not to put in evidence from Mr Richards in support of their Part 24 application because they say they do not need it. The usage days issue is a matter of construction of the slip. It will be open to Servico to argue, as they apparently did before the judge, that the absence of any evidence from Mr Richards means that the usage days issue should not have been decided against them summarily. But that is as far as it goes. The documents sought from the solicitors' file must, we should have thought, prima facie at least, be privileged and no order ought to be made in relation to those documents in any event.[74]Allied to the last application is Servico's application, 0092/D, against the brokers to produce their notes of a meeting with their solicitors, Stephenson Harwood, attended by Mr Emmerson and Mr Richards. As we do not think it is the role of this court to compel evidence from Mr Richards, we do not think we should make this order. If Servico are able to obtain these notes and wish to put them before the court, they can apply to the court hearing the appeal to do so in the usual way together with their other applications to admit further evidence.[75]This leaves application 0092/A, which asks for specific disclosure of documents sent to any brokers by the respondent and/or its legal advisers under the slip; a list giving full details of any and all premium collected by the respondent and/or its legal advisers under the slip to date, and the date such premium was collected; and any other relevant documents regarding efforts made by the respondent and/or its legal advisers to collect premium under the slip.[76]Some of these documents may be appropriate to be disclosed if and when a court of first instance has to consider the quantum argument which we have identified. None of it, in our view, is relevant to the limited issues which this court will have to consider on the appeal.[77]That deals with each of the applications and our provisional views about them. I think we have agreement on the further evidence point. Now what do either of you wish to say on the other points?[78]MR GEE: Can I just say that on the Stephenson Harwood matter

LORD JUSTICE TUCKEY: On the...?

[80]MR GEE: Stephenson Harwood matter.

LORD JUSTICE TUCKEY: Well do you want it dealt with in an order? Does the Stephenson Harwood matter

[82]MR GEE: I am conscious that we are under limited time. You have indicated your provisional views and, being realistic

LORD JUSTICE TUCKEY: We have given this matter some thought. We have each been engaged in an incomprehensible patent case about pumps. But every minute that we have had outside that exercise we have spent keeping up with the increasing volume of documents that you have provided us with. So you can be assured that we have given the matter some careful thought.

LORD JUSTICE RIX: At times we have felt in need of pumps.

[85]MR GEE: I am sure you have.

LORD JUSTICE TUCKEY: As a bit of light relief.

[87]MR GEE: I may be cast in the role of predator here, but I assure you that sitting in my chambers - or actually very infrequently, because I am in a trial which is long-running on something wholly different to do with competition. In my moments, I also have had similar thoughts. But no doubt (inaudible) your Lordships about all this. But being realistic, we have only got a short time and I just wanted to say just a few words about the Stephenson Harwood notes. I am not going to go into the matters concerning Mr Richards. Despite the fact that, as your Lordships are aware, there is obviously very strong feelings about that, on the part of my client.

LORD JUSTICE TUCKEY: Each side are making serious allegations against one another.

[89]MR GEE: It cannot be gone into now, realistically.

LORD JUSTICE TUCKEY: That was your point in application number seven.

[91]MR GEE: I have to - it is not realistic.[92]On the Stephenson Harwood notes, can I just say this. We have had a letter from Stephenson Harwood. They are quite happy to give us the notes. As far as we are aware, they will not assert any privilege. But they cannot do so without a court order. The reason is because HSBC were both our brokers and also have acted as brokers for CNA. That is the reality of the situation.[93]Now if we could get an order for them to produce the notes, we would give those notes to CNA as well. The parties would be on an even playing field. All of that would be done without prejudice to whether the court hearing the appeal would be prepared to look at them.

LORD JUSTICE RIX: These are Mr Richards' notes?

[95]MR GEE: No, these are Stephenson Harwood's notes.

LORD JUSTICE TUCKEY: Stephenson Harwood's notes of a meeting between them and Mr Emmerson and Mr Richards.

[97]MR GEE: That is correct. Can I just hand up a letter of 25th April?

LORD JUSTICE TUCKEY: You tell us that they are happy to do it if there is a court order, and not happy without a court order.

[99]MR GEE: They are not prepared to do it unless compelled by a court order.

LORD JUSTICE TUCKEY: Do questions of confidentiality - I mean, privilege, maybe not. Privilege will be the privilege of Stephenson Harwood's clients.

[101]MR GEE: Correct.

LORD JUSTICE TUCKEY: But confidentiality?

[103]MR GEE: Confidentiality cannot arise because these are two witnesses of (inaudible). That is Mr Emmerson and Mr Richards, because they go to the surrounding circumstances and what was known to each. So there can be a confidentiality clause, we would respectfully submit. We have not seen the confidentiality clause, but even if you did have one which sought to block access to witnesses for the purposes of giving evidence for court proceedings, that would be invalid as a matter of public policy. Any ordinary confidentiality clause would be subject to an implied exception which would be enable you to get the material.

LORD JUSTICE RIX: Is there a problem of legal professional privilege which would be - I do not know whose privilege it would be, Mr Knight's, Mr Emmerson's

[105]MR GEE: HSBC's, that is the brokers.

LORD JUSTICE TUCKEY: Their problem is they say they were acting for two principals in this transaction.

[107]MR GEE: They have acted for two principals.

LORD JUSTICE TUCKEY: Because they acted for CNA in the outwards reinsurance. So would CNA have a say in whether the notes of their solicitors are

[109]MR GEE: It may be that we have to - we would invite you to make an order that, as it were, holds the ring pending the appeal. So that we at least get the notes, give them to CNA and then it is left to the court that hears the appeal to hear any objections and so on about whether they can look at the notes.

LORD JUSTICE TUCKEY: All right. Well I hear what you say.

[111]MR GEE: That is what we would propose.

LORD JUSTICE TUCKEY: Is there anything else you want to say about what I have said?

[113]MR GEE: We will need, incidental to the appeals, a variation in the marevas for our legal costs of doing

LORD JUSTICE TUCKEY: That is something which we will not be dealing with. But what about the stay? We have put that on one side for a moment.

[115]MR GEE: Yes.

LORD JUSTICE TUCKEY: But it is a matter we need to think about, and I expect there will be an argument about costs. But subject to that, are you done on what I have said?

[117]MR GEE: Given the time constraints, there is no point in my raising.

LORD JUSTICE TUCKEY: You are reluctantly done.

[119]MR GEE: But appreciating what has fallen from your Lordships.

LORD GRABINER: Yes. So far as Hong Kong brokers is concerned, that is an attempt to - it is a fishing expedition, essentially, because there is no application to adduce that moment. They just want to get their hands on the material. I have not seen the material, I do not know what is in it. But it is the subject of legal professional privilege.

LORD JUSTICE TUCKEY: By whose legal

LORD GRABINER: I think Hong Kong Shanghai Bank brokers, for whom Stephenson Harwood were the solicitors.

LORD JUSTICE TUCKEY: They, we assume, have waived their privilege in this document. I do not know. Maybe they have not.

LORD GRABINER: I am not aware that they have.

LORD JUSTICE TUCKEY: If they have not, then Stephenson Harwood have got no business

LORD GRABINER: Also, to be fair to them, they are not here and they have not actually made their position plain to the court and I certainly do not represent them. If any order is to be made then it is essential, of course, that we are provided with all the documents.

LORD JUSTICE TUCKEY: Well you will be, that is promised.

LORD GRABINER: But it may be your Lordships will think it is not appropriate to deal with it without knowing what their position is.

LORD JUSTICE RIX: There is no one here from Stephenson Harwood?

LORD GRABINER: No.

[131]A SOLICITOR: I am here to take a note.

LORD JUSTICE TUCKEY: You are not here to address us on the intricacies of legal professional privilege or confidentiality?

LORD GRABINER: She could be sworn to give evidence, my Lord.

LORD JUSTICE TUCKEY: We do not do that, as I have said.

LORD GRABINER: My Lord, so far as the other matters are concerned, I think that we are entirely content with your Lordships' provisional conclusion in relation to the injunction. May I say - and I am sure the point is well understood on the Bench at least, even if it is not on my left - that this is driven exclusively by these scandalous allegations against my instructing solicitors and against my clients, and also by the tactic that was deployed in first of all having

LORD JUSTICE TUCKEY: Shall we not raise the temperature.

LORD GRABINER: I do not want to raise the temperature.

LORD JUSTICE TUCKEY: It is pretty high already. Mr Gee has said a few things

LORD GRABINER: Such (inaudible) as have come, have come from there, and in my submission have not been justified but they are relevant to the matters your Lordships will have to decide today. But the position is that these documents were available to them back in November, even before the hearing in front of David Steel J. They were returned by my friend's instructing solicitors.

LORD JUSTICE TUCKEY: I have seen the point.

LORD GRABINER: You have seen all that, and then an attempt to adduce them was done for the first time in the last week or so. Against that background our concern to protect the privilege through the injunction application, which realistically could not have been made to the first instance judge given the fact that the matter was already before this court.

LORD JUSTICE TUCKEY: It was intricately tied up with their application to ask us to allow them to be admitted on the appeal.

LORD JUSTICE RIX: But has it been established - because it is rather important for this whole nest of points - whether Mr Richards' notes, the manuscript notes, were taken for the purposes of a meeting with Lovells or were made by him, as is now floated as a possibility, in preparation for a meeting with Elborne Mitchell?

LORD GRABINER: In my submission the answer to that is "yes". The reason I say that is that when in November Elborne Mitchell looked at these bits of paper, they immediately appreciated their significance and they returned them to the witness and they said that they had asked their client to destroy any copies that they had retained. We know that either one or the other did not, which is why they have been produced now on these recent applications.

[145]Now it is put forward as a possibility - and I think that that is the word used in the witness statement we got the other night - that this may in fact have been Mr Richards' scribblings in anticipation of a meeting with the other side. But that is two quite conflicting approaches adopted by the same firm of solicitors for the same client. On the face of that material, the inference is

LORD JUSTICE TUCKEY: Only Mr Richards will know.

LORD GRABINER: Certainly Mr Richards will know, that is absolutely right.

LORD JUSTICE RIX: That is the point. Whichever it is ought to be capable of being easily established, and if at any time these points have got to be gone into that is the first question you want to know an answer to.

LORD JUSTICE TUCKEY: Well, speaking for myself, I am discouraging any attempt by either side to take this spat - well, I call it a spat, perhaps that is not - further serious allegations have been made on both sides. This sometimes happens in litigation of this kind. But interesting though the legal points may be which arise out of it, I would strongly urge everyone to step back and

LORD GRABINER: My Lord, I respectfully agree. I just want to make it clear that we are not making the allegations. They are making the allegations, all of which was repeated by Mr Gee at the outset this morning. I will say no more about it.

LORD JUSTICE TUCKEY: I follow that.

LORD GRABINER: As a result people on my side sitting behind me are extremely angry and upset.

LORD JUSTICE TUCKEY: I am sure that is right.

LORD GRABINER: That said, I take your Lordship's point and in particular I respectfully agree that these documents are utterly irrelevant to the issues that have to be determined on the appeal.

LORD JUSTICE TUCKEY: There we are. So what does that, do you think, leave us left to do in the time we have left available? Mr Gee raised the question of mareva. Speaking for myself, it does not seem to me, as this court has not been concerned at all with the mareva, that we should have to consider that. If it is necessary to release moneys under the mareva then that, I am afraid, has got to be done by an application to the judge or the court that has control of the mareva.

LORD GRABINER: The position is that in the normal form - and of course of all people in this room who knows what the normal form is, it is the gentleman on my left - is that the reasonable costs are available and that is, I think, the language of this order. What our concern has been is that until a few moments ago all of this additional cost was wholly unreasonable. So in those circumstances it is not necessary at the moment to have an amendment to the form of the order.

LORD JUSTICE TUCKEY: It ought to be resolvable.

[158]MR GEE: Obviously my instructing solicitors are concerned about that.

LORD JUSTICE TUCKEY: I have told you how they will have to ventilate their concern if it is necessary. Lord Grabiner has made the position clear. The order says "reasonable costs". There is now to be an appeal. I hope we have confined it within some acceptable limit, and with that in mind I have no doubt CNA's solicitors will consent to reasonable costs in connection with that appeal being made. But we do not judge it for ourselves at this stage.

[160]Right.[161]MR GEE: I will refrain from raising the temperature any higher.

LORD JUSTICE TUCKEY: Thank you.

[163]MR GEE: Except to say

LORD JUSTICE TUCKEY: What else are we going to need to deal with today?

[165]MR GEE: You need to deal with the Stephenson Harwood matter, which is we need an order for the Stephenson Harwood notes.

LORD JUSTICE TUCKEY: We have heard submissions on that. (Pause)

[167]I do not think we are going to make that order. I think there are potential complications in that. I think we stand by the position which we have already stated on that issue.[168]MR GEE: What I would propose about costs is that, again in an effort to lower the temperature, or at least not raise it, is that they are all left over to the Court of Appeal that hears the main appeal.

LORD JUSTICE TUCKEY: That will not be satisfactory for them because they will not want to get back into this murky water to decide the rights or wrongs of it. But if you are suggesting simply that the costs of today should be costs in the appeal

[170]MR GEE: Costs in the appeal.

LORD JUSTICE TUCKEY: then they will not have to.

[172]MR GEE: Then I will suggest that they are costs in the appeal.

LORD JUSTICE TUCKEY: Rather than that they should be reserved, because that would involve

[174]MR GEE: What I am very conscious of is that the people in this room who are angry are not just those on the other side of the court.

LORD JUSTICE TUCKEY: Mr Gee, that goes without saying.

[176]MR GEE: I am not going to say any more, but your Lordship knows that there is very strong sense of (inaudible).

LORD JUSTICE TUCKEY: Very good.

LORD GRABINER: All that I would respectfully suggest is that the proper order would be respondent's costs in the appeal and not be costs in the appeal. The reason that I say that is because essentially the one point that Mr Gee has succeeded on is a brand new point.

LORD JUSTICE TUCKEY: Yes, but in effect, although we were grateful for your assistance on it, that is something which would normally go ex parte .

LORD GRABINER: That is true as well.

LORD JUSTICE TUCKEY: You are here because of all these applications.

LORD GRABINER: My Lord, yes, absolutely.

LORD JUSTICE TUCKEY: Of course we are very pleased to see you.

LORD GRABINER: I am sure you mean that, my Lord!

LORD JUSTICE TUCKEY: As indeed we are pleased to see Mr Gee. (Pause)

[186]Without attempting to do anything other than go down the middle, we think that the order should be costs of today's hearing on each of these many applications should be costs in the appeal.[187]Now can we do some housekeeping because, as I said at the beginning, we are anxious that the appeal hearing should be conducted in a shapely and ordered way.[188]At the moment, Mr Gee, your notice of appeal does not take the point on which we have given leave.[189]MR GEE: We will need to amend that.

LORD JUSTICE TUCKEY: So you will have leave to amend your notice of appeal to take that point in the way that we have given permission on.

[191]MR GEE: I will put in also a draft notice to cover the DCF point and seek leave from the court that hears the appeal. That would be

LORD JUSTICE TUCKEY: What I suggest is there should be one bundle for the appeal. That, with the solicitors involved, ought not need to be said and I am sure the only reason we got 49 of them - or it seems like 49 of them - is because of the way this has developed. But the solicitors must co-operate to produce a bundle which contains the documents which are accepted to be admissible for the court hearing the appeal in one bundle. In a separate bundle there should be any applications for leave to adduce further evidence and included in that bundle, possibly, should be your draft amendment to reflect the point which we have left over about DCF. Right?

[193]MR GEE: Yes.

LORD JUSTICE TUCKEY: In that way the court preparing this case -and bear in mind that this court only has one reading day a week and all the reading in this case took place after our reading day - will then have, I hope, two bundles, one which will contain the material which will be definitely before the court and a second upon which they will have to decide which (if any) of the evidence contained in it should be admitted.

[195]MR GEE: Yes. Can I also make a further proposal, which is that I would propose to do a single skeleton that just is limited to the points

LORD JUSTICE TUCKEY: I was going to say the skeletons at the moment deal with all sorts of points. We would expect your skeleton to deal with the two points upon which you have permission. Lord Grabiner has very helpfully provided us with the his skeleton on the usage days issue, and no doubt a supplemental skeleton is all that will be needed to deal with the additional point.

[197]MR GEE: We will provide our skeleton - I do not know if you have to fix a time limit, but we will do it as soon as we can.

LORD JUSTICE TUCKEY: Let us just take one step ahead. It seems to us, I think, that one day should be the estimate for this hearing. Do you both agree to that?

[199]MR GEE: Yes.

LORD GRABINER: Yes.

LORD JUSTICE TUCKEY: That means that I think the projected date for a half-day hearing will need to be put back. But obviously we cannot give you date now as to when that should be. But we better say your amended of notice of appeal should be within 14 days. I forget what the conventional timetable is for skeletons.

[202]MR GEE: I cannot remember either. If we could do it within 28 days I would be grateful. I doubt very much whether the court is going to find a day over the next 28 days.

LORD JUSTICE TUCKEY: No, well it will not for sure.

[204]MR GEE: I do not know.

LORD JUSTICE TUCKEY: It is important that it is with the court well before the projected day because that is how the system works.

[206]MR GEE: Part of the problem with the skeleton is that - and I think Lord Grabiner will have this problem as well - which is if we are dealing with two bundle which may have numbers on, bundle one and bundle two.

LORD JUSTICE TUCKEY: That would be a help for a start.

[208]MR GEE: He may want to do his skeleton so it is cross-referenced to the appeal bundles. So that he may want to do his skeleton in an amended way as well.

LORD JUSTICE RIX: I do not know whether the question of whether the termination of the slip contract was lawful or not is relevant at all to the limited points on which you have permission to appeal. I am inclined on the whole to think that it is not. But if there is any view on your part that it is in some way relevant, then the question of your pleadings has got to be addressed....

[210]MR GEE: Of course.

LORD JUSTICE RIX: ....because at the moment your pleadings admit that termination was lawful.

[212]MR GEE: Of course.

LORD JUSTICE TUCKEY: In more than one place.

LORD JUSTICE RIX: If your argument seeks to go behind that, you will need to get permission from the Court of Appeal to amend the pleadings.

[215]MR GEE: Or we may have to go back before the judge at first instance to do that.

LORD JUSTICE RIX: At any event you may have to look at that.

[217]MR GEE: The answer is that it is possible that it is relevant, because if this was repudiated by CNA we would say that as a matter of law they cannot be in a better position than if the contract had continued and that the court would deal with the obligations on that basis. They cannot take advantage of their own wrong so as to improve their position.

LORD JUSTICE TUCKEY: I cannot see how that could possibly be relevant on the limited point on which we have given leave.

[219]MR GEE: No, I understand.

LORD JUSTICE TUCKEY: I am conscious of the need to ensure that you do not introduce by the back door the point that I thought we had pretty firmly sat on earlier on in the day.

[221]MR GEE: I obviously cannot do that; that has been decided.

LORD GRABINER: Could I make a suggestion which would be constructive, I think, from the point of view of the parties - it may not be as well received by the court - but is there any prospect that this case could be retained by your Lordships, simply because the process of getting it up again in front of a different tribunal - not from our point of view, but from the tribunal's point of view- is no doubt lengthy and complicated. Your Lordships have a very good understanding of what the issues are and I suspect that it would be dealt with very much more quickly and speedily, both in terms of preparation and probably hearing time as well.

LORD JUSTICE TUCKEY: I have not really looked at the usage days, which is the main point.

LORD GRABINER: It is a nice short point.

LORD JUSTICE TUCKEY: All right, I better not say that - "at all". So I cannot claim to be up to speed with it, other than having got on board what it actually is. In the ordinary way, much though we would like to retain cases, we would be very unpopular if we attempted to do so. But we hear what you say and it is very nice of you to say it, Lord Grabiner.

LORD GRABINER: Not at all.

[227]MR GEE: Can I also say that and have that accolade?

LORD JUSTICE TUCKEY: Same to you, Mr Gee.

[229]MR GEE: I think there is nothing else to be dealt with. I think your Lordships have arrived at terminus five minutes early.

LORD JUSTICE TUCKEY: Good. Thank you all very much for managing to cope with the constraints of time which we have put on you, and dare I end by saying I hope things settle down.

Cited in 1 later judgment