ARC Capital Partners Ltd v Brit UW Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 29 January 2016 |
| Neutral Citation | [2016] EWHC 141 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2015000915 |
| Date | 29 January 2016 |
[2016] EWHC 141 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cooke
Case No: CL-2015000915
Mr G. Kealey QC and Mr C. Holroyd (instructed by Orrick) for the claimant
Mr J. Lockey QC (instructed by Norton Rose Fulbright) for the defendants
Hearing dates: 25th January 2016
Introduction
The Claimant, ARC Capital Partners Limited (the "Manager"), is a subsidiary of PAG Holdings Limited ("PAG"). PAG is a large alternative investment management firm managing a diverse array of funds in private equity, real estate and absolute return strategies.
Background
On 15th August 2014 ARC Capital Holdings Limited, a company incorporated under the laws of the Cayman Islands (the "Fund"), issued proceedings against the Manager in the Commercial Court for professional negligence. The Fund's claim is for the value of an allegedly negligent investment of RMB 480 million (c. US$75 million) made by the Manager on behalf of the Fund in December 2010 in relation to the property business of Orient Home Group ("OH") plus interest and costs.
The Fund's claim was notified to the Manager's insurers in January 2014. PAG and its subsidiaries (including the Manager) have the benefit of professional indemnity insurance for the period 23rd October 2013 to 23rd October 2014. This insurance is provided by five different insurers in various tranches, including the Defendants ("the Insurers") who insured the Second Excess Layer (the 2013/2014 Policy).
The same insurers entered into consecutive annual contracts of insurance on similar terms for periods prior to the relevant cover starting on 5th June 2009. The same insurers also entered into contracts of insurance on similar terms for the period 23rd October 2014 to 23rd October 2015. On each occasion, the Second Excess Policy incorporated the terms of the Primary Policy save as otherwise set out in the Second Excess Policy.
The Manager and the Fund have engaged in without prejudice discussions to settle the action. It is in the context of those discussions that the Defendants have raised issues as to whether the proposed settlement amount and the Manager's losses in respect of the actions against it (including defence costs) are covered by the Primary Policy and the endorsement to it and/or the Second Excess Policy. The position now reached is that settlement of the Fund's claim has been agreed in principle on the basis of the primary case as pleaded by it against the Manager and that the Insurers have consented to such settlement, subject, to coverage issues and the advice of Counsel.
The Defendants now take issue in relation to the coverage under the Second Excess Policy, which gives rise to three questions for decision by this court. These are set out in the Agreed List of Issues as:
i) Whether, on a true construction of the Retroactive Date Clause in the 2013/2014 Policy, the Fund's claim against the Manager is a claim " in any way involving any act, error or omissions committed or alleged to have been committed prior to 5th June 2009" within the meaning of this Clause.
ii) Whether the Letter from the Fund's solicitors dated 2nd April 2013 contained or constituted " a written demand for monetary damages or non-pecuniary relief" within the definition of "Professional Services Claim" in the primary policy, and was thus a "Claim" for the purposes of that policy.
iii) If the letter from the Fund's solicitor dated 2nd April 2013 did contain or constitute a "Claim" for the purposes of the primary policy, whether
a) (as the Manager says), cover is provided under policy extension 5j of the primary policy, which extends cover to Claims which should have been notified under the prior year's policy(ies) of which the 2013/14 policy(ies) was/were a renewal without interruption with the same insurer(s), or
b) (as the Insurers say), the Manager is not entitled to an indemnity under the 2013/14 Policy as a result of a breach of the condition precedent contained in Clause 14 of the primary policy, which requires notice of any Claim to be given as soon as practicable.
The Insurances
The 2013/14 Policy, like its predecessors and its successor, provided for the incorporation of the LSW 055 wording and the underlying IMI wording as far as applicable. LSW 055 is the A.W.G.S. Excess Wording attached to the Policy which provides for indemnity "for claims first made against the Assured during the period of insurance" and for liability under the policy in question not to attach "unless and until the Underwriters of the underlying layers shall have paid or admitted liability or have been held liable to pay the full amount of their indemnity inclusive of costs and expenses".
i) The LSW wording also requires the immediate notification by the Assured of any claim or any circumstances known to the Assured which are likely to give rise to claims, but not as a condition precedent to recovery under the policy, in the following terms:
"5. Any claim(s) against the Assured or the discovery by the Assured of any loss(es) or any circumstances of which the Assured becomes aware during the subsistence hereof which are likely to give rise to such a claim or loss, shall, if it appears likely that such claim(s) plus costs and expenses incurred in the defence or settlement of such claim(s) or loss(es) may exceed the indemnity available under the Policy(ies) of the Primary and Underlying Excess Insurers, be notified immediately by the Assured in writing to the Underwriters hereon."
ii) It further provides:
"7. Except as otherwise provided herein this Policy is subject to the same terms, exclusions, conditions and definitions as the Policy of the Primary Insurers…"
iii) Condition 6:
"Retroactive Date.
This Broker Insurance Document shall not indemnify the Assured against any claim and or claims arising from or in any way involving any act, error or omission committed or alleged to have been committed prior to 5th June 2009."
The Retroactive Date of 5 June 2009 is the date of inception of the second excess layer professional indemnity policy which the Defendants first wrote in 2009: viz. the date of inception of the 2009/10 Policy.
The Primary Policy for the period 23rd October 2013 to 23rd October 2014 (to the terms of which the 2013/14 Policy was subject) and for the period 23rd October 2012 to 23rd October 2013 (to the terms of which the 2012/13 Policy was subject),
i) defined the Primary Insurers as "the Company"; and
ii) provided Asset Management Cover on the terms of the Asset Management Coverage Section;
The Asset Management Coverage Section contained (among others) the following terms (Insuring Clause 2):
"Professional Liability
The Company shall pay, on behalf of an Insured, Loss which such Insured becomes legally obligated to pay on account of any Professional Services Claim first made against an Insured during the Policy Period … for a Wrongful Act occurring before or during the Policy Period."
With respect to Insuring Clause 2, Claim was defined as meaning any Professional Services Claim; and Professional Services Claim was defined as meaning:
"(a) a written demand for monetary damages or non-pecuniary relief;
(b) a civil proceeding;
(c) an arbitration, mediation, conciliation or alternative dispute resolution proceeding;
(d) a criminal proceeding; or
(e) any investigation into possible violations of the law or regulation initiated by any governmental body or self-regulatory organisation, or any proceeding commenced by the filing of a notice of charges, or formal investigative order or similar document;
against an Insured for a Wrongful Act, including any appeal therefrom."
With respect to Insuring Clause 2, Wrongful Act was defined as meaning:
".. any act or omission, including but not limited to, any error, misstatement, misleading statement, neglect, breach of duty or breach of trust committed or attempted, by an Insured .. while performing or failing to perform Professional Services .."
Professional Services was defined as meaning:
"financial, economic or investment advice given or investment management services performed or required to be performed by an Organisation in respect of a Fund or a Mandate. In clarification and not in limitation of the foregoing, Professional Services shall include: the formation, capitalization, operation and management of any Fund; the marketing of any Fund and the solicitation of potential investors in any such Fund; portfolio management and asset allocation services; Professional Supervision; administration, custodial or registry services; trustee services; or publications prepared or written by any Insured for or on behalf of any Fund or any client. Professional Services shall include the failure to render services required to be performed as set forth above."
Extension Clause 5j, headed "Continuity of Cover" provided, as follows:
"Notwithstanding Exclusion 7(b), coverage is provided for Claims or circumstances which could or should have been notified under any policy or coverage section of which this Coverage Section is a renewal or replacement or which it may succeed in time provided always that:
a. The Claim or circumstance could and should have been notified after the Pending or Prior Date set forth in the Schedule [10 October 2008];
b. The Company has continued to be the insurer under such previous policy or coverage...
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