Cathal Anthony Lyons v Fox Williams LLP
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice David Richards,Lady Justice Asplin |
| Judgment Date | 25 October 2018 |
| Neutral Citation | [2018] EWCA Civ 2347 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B3/2016/4254 and B3/2016/4254(A) |
| Date | 25 October 2018 |
[2018] EWCA Civ 2347
Lord Justice Patten
Lord Justice David Richards
and
Lady Justice Asplin
Case No: B3/2016/4254 and B3/2016/4254(A)
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Turner J
Royal Courts of Justice
Strand, London, WC2A 2LL
Dominic Chambers QC and Carl Troman (instructed by SGH Martineau LLP) for the Appellant
Colin Edelman QC and Ben Lynch (instructed by DAC Beachcroft LLP) for the Respondent
Hearing date: 3 October 2018
Judgment Approved
This is an appeal by the claimant, Mr Cathal Lyons, against the dismissal by Turner J of his claim against the defendant firm of solicitors for damages for negligence: see [2016] EWHC 2427 (QB). At the conclusion of the hearing we indicated that we proposed to dismiss the appeal for reasons which would be given later in writing. This judgment sets out my reasons for deciding to dismiss the appeal.
Mr Lyons was until 2009 the Chief Financial Officer and Managing Partner of Operations for Ernst and Young (CIS) BV (“EY”) in Moscow. On 17 June 2006 he was involved in a road traffic accident whilst riding his motorcycle and suffered serious injury. Most of his right foot required to be amputated and his right shoulder and humerus were replaced with a metal prosthetic. He had to undergo a series of operations and a long course of physiotherapy and we were told by Mr Chambers QC that the effect of his injuries has been severe and life-changing.
At the time of his accident the claimant was covered by insurance which had been taken out by EY for the benefit of its employees. This consisted of cover under both Accidental Death and Dismemberment (“AD&D”) policies and Long-Term Disability (“LTD”) policies provided by Colonial Medical Insurance Company Limited (“Colonial”) and AGF insurers (“AGF”). EY had AD&D and LTD cover for its employees with both insurers. As the names of the policies suggest, AD&D cover provides for the payment of a single lump sum in the event of injury and disability which is calculated as a percentage of a maximum benefit sum according to the severity of the category of injury. The amount payable does not depend on the degree of incapacity to work which the injury brings about. By contrast, LTD policies are designed to compensate the insured for the loss of income which he or she suffers as a result of being disabled by the accident. The scale of the payments varies as one would expect according to whether the employee's disability is short-term or long-term and on whether it is total or only partial. I shall come to this in a little more detail shortly.
It was obvious to EY that the claimant's injuries had occasioned permanent disability so as to trigger liability under the AD&D and potentially also the LTD policies. EY had therefore on 19 June 2006, only two days after the accident, requested their insurance brokers, Sherwood Solutions (“Sherwood”), to provide advice about possible AD&D and LTD claims.
Sherwood provided preliminary advice in October 2006. In relation to the AD&D cover, they were pessimistic. Colonial took the position that the loss of only part of his right foot meant that Mr Lyons did not qualify for payment under the terms of the polices relating to “loss of a foot”. Sherwood advised that it did not appear that Mr Lyons would qualify for a payment under either of the AD&D policies. In February 2007 the claimant was put in touch with Mr Tom Custance, a solicitor in the defendant firm, in order to obtain advice about his AD&D claims. By then Mr Lyons had undergone several operations and had returned to work part-time but on full salary.
The terms of the defendant's retainer were set out in a letter of engagement dated 15 February 2007. So far as material, the letter stated:
“ Re: insurance cover arranged for you by Ernst & Young (“E&Y”)
Following our telephone discussion earlier this week, I confirm that Fox Williams LLP will be very pleased to act for you in connection with the above matter.
The purpose of this letter is to set out the scope of our role …
Scope
You have explained that, following your accident in June 2006, it has become apparent that the insurance cover arranged on your behalf by E&Y does not provide the type or level of ‘accidental death and dismemberment’ (“ ADD”) cover which E&Y had previously represented to you was in place. I understand that the shortcomings in the cover in fact in place at the time of your accident can be demonstrated by comparing it with the cover which was arranged by E&Y when the insurance provider was changed with effect from 1 July 2006.
I have suggested that the areas to be considered further are as follows: (1) to check the extent of the cover in fact provided by the insurance in place at the time of your accident to ensure there are no arguments available which E&Y have failed to take up with insurers on your behalf; (2) to compare that cover with the insurance put in place with effect from 1 July 2006; and (3) to obtain further details of the representations made to you by E&Y as to the ‘ ADD’ cover supposedly in place at the time of your accident.
In order to advise on these points, I will need to see the following: (a) copies of the relevant insurance policies; (b) all correspondence or emails between you and E&Y or insurers/brokers relating to the extent of the cover available for your accident, including in particular any emails/correspondence dealing with the meaning/interpretation of that cover; and (c) anything from E&Y which refers to the insurance benefits available to you in the event of death or serious accident. In relation to (c) you have explained that you were not provided with a copy of the presentation given to you by E&Y. However, you may have received at some stage at least a summary of the health / insurance benefits available to you.
Depending on the outcome of my review of this material, the intention would then be to draft a letter to be sent to you to E&Y, in order to put some pressure on them either to extract the fullest cover to which you are entitled under the insurance in place at the time of your accident, and/or to compensate you for the disparity between that cover and the insurance which they represented to you as being in place. …”.
By the time that Mr Custance was instructed the insurance position had been complicated by a change of insurers for both the AD&D and the LTD cover. The Colonial and the AGF AD&D policies terminated on 30 June 2006 and were replaced by AD&D cover with a new insurer, Ingosstrakh LMT Limited Liability Insurance Company (“Ingosstrakh”), a Russian company. In July 2006 the LTD cover provided by Colonial and AGF was replaced by LTD cover with a single insurer, Generali Worldwide Insurance Company Limited (“Generali”).
In respect of both the Colonial and the AGF LTD policies, Sherwood had confirmed in their report that Colonial was the primary insurer with a potential liability to pay up to $180,000 per annum. This would be supplemented by up to $120,000 per annum under the LTD policy with AGF. Both policies, however, provided for a waiting period of 52 weeks during which no benefits would be payable. At the end of this period, depending on the degree to which the claimant's injuries prevented him from performing his occupation and the likely duration of this condition, he would become entitled to either short-term or long-term disability benefits. But both insurance companies had indicated that no determination of the benefits payable would be made until after the expiry of the 52-week period.
Mr Lyons' more immediate concern therefore, as he accepted in his evidence to the judge, was to resolve the question of liability under the AD&D policies. By the time that Mr Custance came to be instructed Mr Lyons had begun to formulate a strategy under which he would seek compensation from EY for misrepresentation if it turned out that he was prevented from making a claim under the AD&D policies. His argument would be that EY had misled him into believing that the AD&D cover was more extensive than it in fact was. One can see this strategy reflected in the defendant's letter of engagement quoted above where Mr Custance sets out the areas which he would need to investigate as part of the retainer.
Although the dispute with the insurers about the scope of the AD&D cover continued for some years, it is not an issue on this appeal. Mr Custance, like the brokers, gave pessimistic advice to Mr Lyons about his claim under the policies but in fact neither he nor the brokers had bothered to read the policies themselves. Instead, they had relied on the summary of the cover contained in the Members' Booklet accompanying the policies which was either inaccurate or incomplete. The cover under the policies was wide enough to allow Mr Lyons's claim to succeed and ultimately he received a substantial sum under the AD&D policies. He then pursued a claim for damages against the defendant based on his unrecovered costs which has been settled, without any admission of liability, in the sum of £75,000.
The dispute about Mr Lyons's rights under the AD&D policies continued, however, for some time alongside his claims under the LTD policies. These claims eventually became entangled with the third aspect of the aftermath of the accident which is Mr Lyons's agreement in April 2009 to leave his current employment with EY and to continue as a consultant under a new contact. The negotiations which led up to the severance agreement signed on 17 April 2009 were, as the judge described, prolonged, tortuous and in many ways obscure. Under the terms of the agreement as eventually signed, Mr Lyons gave up his partnership status and his position as chief financial...
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