(1) Accident Exchange Ltd v (1) Colin McLean
| Jurisdiction | England & Wales |
| Judge | Sir Andrew Smith |
| Judgment Date | 11 January 2018 |
| Neutral Citation | [2018] EWHC 23 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2015-000573 |
| Date | 11 January 2018 |
[2018] EWHC 23 (Comm)
Sir Andrew Smith
(Sitting as a Deputy High Court Judge)
Case No: CL-2015-000573
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Robert Anderson QC, Anna DilnotandStuart Cribb (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimants
Tom Adam QC, Tim KenefickandOliver Jones (instructed by Herbert Smith Freehills LLP) for the Third, Fourth and Fifth Defendants
Hugh Norbury QC and Dan McCourt Fritz (instructed by Norton Rose Fulbright) for the Sixth, Seventh and Eighth Defendants
Miles Harris and Mark Cullen (instructed by Bond Dickinson LLP) for the Ninth and Tenth Defendants
Jonathan Hough QC (instructed by Berrrymans Lace Mawer LLP) for The Direct Line Group
Julian Kenny QC (instructed by RPC) for Royal & Sun Alliance Insurance Plc
Hearing dates: 7, 8 and 9 November 2017
Judgment Approved
Introduction
The claimants in this case (whom I need not distinguish and to whom together I refer as “AE”) are companies that provide what are described as accident management services, and in particular they provide replacement motor vehicles on credit terms to clients whose vehicles have been damaged in road accidents. Their plan is to recover the hire charge from another driver involved in, and alleged to be responsible for, the accident, or in reality from the insurers of the other driver. (For convenience, I shall refer to that other driver as the “defendant driver”.)
Damages can of course be recovered for loss of the use of a vehicle damaged as a result of negligence of another driver, and if the loss can be mitigated by hiring a replacement vehicle, the cost of hire is normally the measure of recoverable damages. But it was established in Dimond v Lovell, [2002] 1 AC 384 that, if a replacement vehicle is hired on credit terms by someone who does not need credit, generally the cost attributable to the provision of credit will not be an expense incurred by way of reasonable mitigation of the loss and so will not be recoverable. The cost of hire net of any such credit element has come to be called the “basic hire rate” or “BHR”. Prima facie, however, a claimant can recover the hire charge that he has agreed to pay, and it is for a defendant to show that the hire charge is excessive because it includes an unnecessary credit element, and to demonstrate that that is to be “stripped out” from what is recoverable: Dickinson v Tesco Plc, [2013] EWCA Civ 36.
This litigation concerns the activities of a company called Autofocus Limited (“AF”), which is now in liquidation. It used to provide forensic services, in particular for cases where a question arose about the hire recoverable by a claimant who had hired a replacement vehicle on credit terms. AF produced thousands of such reports: according to AE, between 2005 and 2010 AF's evidence was deployed in some 4,700 cases in which it (AE) was interested. The insurers of the defendant drivers would want to show that the credit hire rate was higher than the BHR, and AF produced reports for them about the BHR for a comparable vehicle. The reports reflected the result of research and surveys of rates charged in the market, or purported to do so. In 2009, in a case called Glossop v Salvesen Logistics Limited it became apparent that an employee of AF described as a “rates surveyor”, who had prepared a report for a hearing in the Chesterfield County Court, had falsely claimed to have based the evidence on information from car hire companies who had been contacted about their hire rates.
AE alleges that this case reflected the common practices of AF: that, in the years before AF went into liquidation on 29 July 2010, it was involved in the systemic and endemic fabrication and manipulation of evidence about rates and the research that it had conducted so as to deceive businesses such as AE and, if the claim was not settled, to deceive courts. I do not need to set out in detail the allegations against AF: the nature of them can be seen in the judgment of Supperstone J in Accident Exchange Ltd v Broom and ors, [2017] EWHC 1096 (Admin), in which, in so far as they were not admitted, he upheld complaints of contempt of court against seven persons whom AF had employed as “rates surveyors” and whose dishonesty had interfered in the due administration of justice. It is sufficient for me to refer to the six kinds of practice identified in his evidence by Mr Neil Bowker, then a member of DLA Piper UK LLP, who acted for AE. He gave undisputed evidence that:
i) AF adopted a dishonest system for producing false and misleading evidence, providing manuals and guidance about how evidence of rates should be manipulated to assist AF's clients.
ii) Reports produced by AF's rates surveyors were changed by directors and senior employees, who removed unhelpful information and added misleading information.
iii) Reports included evidence of hire rates purportedly obtained over the telephone, but the information was either entirely false or was based on calls for different cases.
iv) Reports were routinely swapped between employees and presented in court by witnesses who had had no involvement with the investigation behind them.
v) AF employees were trained to give false evidence in court.
vi) AF employees in fact gave false evidence in court.
AF's purpose, it is argued, was to achieve favourable settlements or court decisions for those defending credit hire claims and correspondingly adverse to the interests of AE and others with such businesses, and so to attract business and so increase its profits.
The first defendant, Mr Colin McLean, and the second defendant, Ms Suzanna Forrest (the “AF defendants”), were directors of AF. The other eight defendants are solicitors who acted for defendant drivers facing claims by AE's clients to recover the hire charges for replacement vehicles. They fall into three groups:
i) The third and fourth defendants are a firm of solicitors who practised as Morgan Cole until 4 February 2010 and the successor limited liability partnership, and the fifth defendant was a solicitor employed by Morgan Cole. I refer to them together as the “Morgan Cole defendants”;
ii) The sixth and seventh defendants are a firm of solicitors who practised as Keoghs until 21 July 2007 and the successor limited liability partnership, and the eighth defendant was a partner at Keoghs. I refer to them as the “Keoghs defendants”; and
iii) The ninth defendant is a firm of solicitors who practised as Lyons Davidson and the tenth defendant was a partner in the firm. I refer to them together as the “Lyons Davidson defendants”.
In this action AE brings claims against all ten defendants for damages for conspiracy and deceit, alleging that between 2005 and July 2010 they were party to a scheme or schemes to produce false and misleading information and to deploy it in litigation against AE (and others carrying on a similar business) and in settlement negotiations. The case is listed for trial of specified issues in October 2018.
The applications
On 24 June 2016 it was ordered that the parties give standard disclosure, but that generally documents relating solely to the conduct and disposal of individual credit hire claims should be disclosed only in respect of a sample of cases. Disclosure lists have now been exchanged, and issues about disclosure have led to the applications that are before me.
First, AE has brought an application against the solicitor defendants in which it seeks inspection of documents over which the solicitor defendants assert privilege on behalf of their clients. The central issue on this application is whether the documents are protected by privilege or whether the so-called “iniquity exception” defeats any claim for privilege.
Secondly, the Morgan Cole defendants and the Lyons Davidson defendants apply for disclosure of documents held by solicitors who were instructed to pursue claims in the names of AE's clients to recover credit hire charges. Here the central issues are whether the documents are in the control of AE, and whether AE's clients have privilege in the documents that protects them from inspection by the solicitor defendants.
AE's application
The Morgan Cole defendants opposed AE's application, but they explained that they did so because, while they were for their own part content for the documents to be inspected, none of their clients was represented (and thus they were in a different position from the other solicitor defendants) and they considered that in these circumstances they should make submissions to protect their clients' interests. The Keoghs defendants' position was that they were unable to consent to the application because of the duties that they owe to their clients and former clients: they adopted a neutral position. The Lyons Davidson defendants made some observations about practical problems that might arise from the order sought by AE, but otherwise they too adopted a neutral position. I also heard submissions from two insurance companies who underwrote defendant drivers. Direct Line Group (“DLG”), who instructed (whether on its own behalf or for its insureds) both Lyons Davidson and Keoghs in relation to claims where AF provided evidence during the relevant period, adopted the submissions of the Morgan Cole defendants and made submissions of its own. Royal & Sun Alliance Insurance Plc (“RSA”), who or whose insureds instructed Lyons Davidson on...
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