Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) v Ford Motor Company

• Jurisdiction: Bermuda
• Judgment Date: 24 October 2017
• Neutral Citation: [2017] SC Bda 88 Civ
• Date: 24 October 2017
• Docket Number: CIVIL JURISDICTION 2015: No. 291
• Court: Supreme Court (Bermuda)

[2017] SC (Bda) 88 Civ

In The Supreme Court of Bermuda

CIVIL JURISDICTION 2015: No. 291

Between:-

Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd)

Plaintiff

and

Ford Motor Company

Defendant

Mr David Edwards QC and Mr Alexander Potts, Sedgwick Chudleigh Ltd, for the Plaintiff

Mr Jan Woloniecki and Mr Nathaniel Turner, ASW Law Limited, for the Defendant

Whether to lift stay for purposes of hearing injunction application — whether bill of costs and other material produced on taxation is subject to an implied undertaking — whether bill of costs produced on taxation is privileged — whether waiver of privilege — whether to grant injunctive and declaratory relief

RULING

(In Camera)

Issues

1 I am asked to rule on whether and to what extent: (i) a bill of costs and other material produced on taxation is subject to an implied undertaking which prohibits other parties from using it for purposes other than the taxation; (ii) a bill of costs produced on taxation is a privileged document; and (iii) whether a party producing privileged material on taxation waives privilege for the purposes of that taxation only or alternatively waives privilege generally. These questions, which fall to be considered in their particular factual context, are not addressed by any reported cases in Bermuda.

Background

2 The Plaintiff (“Chubb”) is an exempted insurance company incorporated in Bermuda. The Defendant (“Ford”) is a motor vehicle manufacturer headquartered in the United States.

3 Chubb provided excess liability cover to Ford. Ford made a claim under the policy but Chubb declined coverage. This gave rise to a dispute between them as to whether the policy covered the claim.

4 By an Originating Summons dated 14 ^th July 2015 Chubb sought to restrain Ford from litigating the dispute in the United States as Chubb claimed that this would breach an arbitration clause in the policy.

5 On 8 ^th March 2016 I made a consent order (“the Consent Order”) which: (i) made provision to protect the confidentiality of the proceedings, following a contested hearing as to which I gave a reserved ruling on 6 ^th January 2016 which is reported at [2016] Bda LR 1; (ii) stayed the Originating Summons generally on terms that Ford gave undertakings not to litigate the dispute in the United States; and (iii) awarded costs to Chubb, to be taxed forthwith on the standard basis, if not agreed.

6 The Consent Order provided that Chubb had liberty to restore the proceedings for further hearing in the event of any alleged non-compliance by Ford with its undertakings; or in the event of any threatened breaches by Ford of the arbitration agreement, which was acknowledged to be valid and binding, contained in the policy.

7 The parties were unable to agree costs. On 7 ^th September 2016, Chubb commenced taxation proceedings under RSC Order 62 by lodging a Bill of Costs at the Registry and sending a copy to Ford. On 25 ^th November 2016 Ford lodged its Objection to the Bill of Costs and on 16 ^th December 2016 Chubb filed its Reply.

8 On 7 ^th or 8 ^th March 2017, Ford's US attorneys, McGuire Woods LLP (“McGuire Woods”), emailed a letter to Chubb's US attorneys, Clyde & Co US LLP, which pointed out the hurdles which Ford suggested that Chubb would face in the arbitration. On 15 ^th April 2017 McGuire Woods emailed a revised version of the letter which contained additional information relevant to a possible resolution of the dispute. Both versions of the letter (“the McGuire Woods letter”) contained numerous references to information contained in Chubb's Bill of Costs and stated that Ford intended to use this information to support its claims in the arbitration. Ford filed affidavit evidence for the present hearing in which they confirmed this intention.

9 The taxation hearing commenced on 8 ^th March 2017. It was adjourned part heard to 26 ^th April 2017, when it was adjourned generally. This was to give the parties time to obtain a decision from the Court as to what, if any, use Ford could make in the arbitration of the material disclosed by Chubb on the taxation.

10 By a summons dated 29 ^th June 2017, Chubb sought orders: (i) that the summons be heard in camera, and other orders protecting confidential and privileged material disclosed in the hearing; (ii) that the stay of the Originating Summons be lifted to the extent necessary to enable Chubb to make the application contained in the summons; (iii) declaring that the Bill of Costs and any other material that Chubb might produce on taxation was privileged and confidential, save to the extent that privilege and confidentiality had been waived for the purposes of taxation; and (iv) prohibiting Ford from using any such material, including the references to it in the McGuire Woods letter, for any purposes other than that of the taxation.

11 I dealt with Chubb's application to protect confidential and privileged material at the start of the hearing and ruled inter alia that the hearing should take place in camera.

Stay

12 The Originating Summons was stayed generally. In my judgment the breadth of the wording of the stay means that in order for the Court to deal with the present application the stay would have to be lifted. But it need not be lifted generally: it could be lifted for the purpose of dealing with that application and no further.

13 The law on the test for a stay was summarised by Ward LJ, giving the judgment of the Court, in Wagstaff v Colls [2003] CP Rep 50; [2003] EWCA Civ 469 EWCA at para 52:

“ The test is established byCooper v Williams [1963] 2 Q.B. 567. I have already cited Lord Denning's judgment that the stay can be removed ‘if proper grounds are shown’. Danckwerts L.J. said at p. 582:-

‘I am quite satisfied that a stay of this kind is not equivalent to the position when a judgment has been given; but it is a process which can be removed for good cause. In my experience stays have often been removed when the facts required that step to be taken, and I would point out that it is also possible to set aside a consent order in proper conditions.’

Perhaps it goes without saying, but, as Fox L.J. held in Hollingsworth v Humphrey [Independent, 21 ^st December, 1987],

‘In deciding whether “proper grounds are shown” (or “good cause” is shown) for lifting the stay it is necessary to consider all the circumstances of the case.’”

14 In the present case, the circumstances include an allegation that Ford has breached and threatens to commit further breaches of an implied undertaking. An implied undertaking is an obligation which is owed to the Court and can therefore (only) be released or modified by the Court. See Bourns Inc v Raychem Corp [1999] 3 All ER 154per Aldous LJ, giving the judgment of the Court, at 169 d. A threatened breach of an implied undertaking can be restrained by an injunction and an actual breach can be punished by an order for committal. If Ford used documents at the arbitration hearing with the leave of the arbitral tribunal but without the leave of the Court then, if the Court subsequently found that the documents were subject to an implied undertaking, Ford would be guilty of contempt.

15 Moreover, the Consent Order contained a provision that costs were payable forthwith. The taxation should not await the outcome of the arbitration, which is likely to take some time as not all the arbitrators have yet been appointed. But unless it does await the outcome, then, if I do not rule on the merits of Chubb's application, Chubb will have to proceed without knowing whether any further material which it wishes to produce on taxation would be available to Ford to deploy in the arbitration. It would in my judgment be unfair to put Chubb in this invidious position.

16 As to Chubb's claim for privilege, it is common ground that pursuant to sections 19 and 20 of the Arbitration Act 1996 the arbitral tribunal would have jurisdiction to rule on this, as on the admissibility of evidence generally, even though it is not a question which has been referred to arbitration. However the questions raised by Chubb about privilege, and indeed implied undertakings, are relevant not only to this taxation but to taxations in general. They are in my judgment of general public importance.

17 Jan Woloniecki, who appeared for Ford, submitted that the test for a stay was not “ good cause” or “ proper grounds”, but whether there had been a material change of circumstances. He relied upon Digicel v Cellone and others [2012] Bda LR SC, which concerned a dispute between two cellphone providers. Against the wishes of the plaintiff, Ground CJ stayed the action to allow the disputes to be referred to the Telecommunications Commission under the Telecommunications Act 1986. The plaintiff applied to set aside the stay on the ground that circumstances had changed. Ground CJ accepted that this was the applicable test, stating at para 36:

“ whether it is regarded as strictly res judicata, as the defendants argue, or whether simply as matter of good practice, I take it to be established beyond argument that the courts will not reopen even an interlocutory decision unless there has been a material change of circumstances: see egLondon Underground Ltd v NUR [1989] IRLR 343.”

18 In Digicel v Cellone and others, the plaintiff sought a permanent lift of the stay whereas in the instant case Chubb seeks a limited lift of the stay for a specific purpose related to taxation which will not frustrate the purpose for which the stay was granted. That is sufficient to distinguish the cases. Cooper v Williams was not cited to Ground CJ and the case upon which he relied, London Underground Ltd v NUR, a decision of the Queen's Bench Division, was not concerned with a stay, but with the circumstances in which a party enjoined by an injunction made at an inter partes hearing could apply to discharge the injunction...