Denso Manufacturing UK Ltd v Great Lakes Reinsurance (UK) Plc
| Jurisdiction | England & Wales |
| Judge | Ms Sara Cockerill |
| Judgment Date | 03 March 2017 |
| Neutral Citation | [2017] EWHC 391 (Comm) |
| Docket Number | Case No: 2016-000009 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 March 2017 |
[2017] EWHC 391 (Comm)
Ms Sara Cockerill QC
(sitting as a Deputy Judge of the High Court)
Case No: 2016-000009
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Edward Brown (instructed by Baker McKenzie LLP) for the Claimant
Mr Aidan Christie QC (instructed by Clarke Willmott LLP) for the Defendant
Hearing dates: 23, 24 January 2017
Judgment Approved
Ms Sara Cockerill QC:
In this case the Claimant ('Denso') sues the Defendant ('Great Lakes') as the statutory assignee of Mploy Group Limited (in liquidation) ('Mploy') under section 1 of the Third Parties (Rights Against Insurers) Act 1930 ('the 1930 Act'). It seeks the sum of £319,696.59 plus interest and costs under an After the Event policy of insurance dated 18 March 2013 but incepting on 15 March 2013 ('the Policy') following the conclusion of litigation between Mploy and Denso in 2014.
The Policy was issued to Mploy, an employment agency which had brought substantial (and myriad) claims in the Commercial Court alleging breach of contract and fraud against Denso and claiming over £630,000. Mploy was represented by Debenhams Ottaway ('DO') and Denso was represented by Baker & McKenzie ('BM'). Mploy had BTE insurance with another insurer and the present ATE insurance with Great Lakes. As explained further below Great Lakes denies liability under the ATE Policy, asserting that Mploy breached a number of conditions precedent to liability under the Policy.
The claim was originally issued in the Mercantile Court under CPR Part 8 in early February 2016. It was transferred into the Shorter Trials List at the CMC in July, and was transferred into the Commercial Court for the purposes of enabling me to hear it on the first morning of the trial.
As the case was originally commenced under Part 8 it was addressed by witness statements of Benjamin Roe of BM and Alexander Jakubowski of Clarke Willmott, whose evidence was not challenged. Great Lakes also served a witness statement for the trial from Mr Philip Burbury, the Claims and Settlement Manager with Burford Capital, the policy administrator for Great Lakes. Mr Burbury attended the hearing and gave oral evidence.
The facts
The Policy in this case was originally proposed on 19 February 2013. A quotation was issued on 10 March 2013, and was accepted on 15 March 2013. The Policy was sent out to Mploy on 18 March 2013. It insured against an adverse order for costs in the litigation between Mploy and Denso and was for a deferred premium calculated at c.73% of Denso's costs, payable in the event of Success, as defined in the Policy.
At about this time Denso sought to protect itself with a Part 36 Offer made on 12 March 2013 in the amount of £110,000, which was not accepted by Mploy and expired on 3 April 2013. This offer was not disclosed to Great Lakes at the time. They first became aware of it in June 2013 and agreed to endorse the decision taken to reject the offer.
The existence of the ATE Policy was notified to Denso with the result that security for costs was not pursued at the CMC before HHJ Mackie QC on 5 July 2013. Mploy entered into a Creditors Voluntary Arrangement in January 2014. This would have permitted Great Lakes to withdraw support of the proceedings, but Great Lakes did not withdraw.
Following a trial before Mr Christopher Butcher QC sitting as a Deputy High Court Judge in July 2014, the bulk of the claims were dismissed. A single breach of contract claim succeeded and damages in the amount of £34,410 were ordered. Denso were ordered to pay Mploy's costs until 3 April 2013. Mploy was ordered to pay Denso's costs on the standard basis to be assessed if not agreed from the date of expiry of Denso's Part 36 offer on 3 April 2013 ("the Costs Order"). These amounted to over £300,000.
Notwithstanding its own greater liability under the Costs Order, Mploy demanded payment of the judgment debt (£34,410). As a consequence, on the application of Denso, Eder J on 3 October 2014 ordered a stay of execution in respect of the judgment debt and the adverse costs order made against Denso in favour of Mploy. Mploy shortly thereafter entered liquidation proceedings and its solicitors came off the record on around 11 November 2014.
Denso has not so far recovered against Mploy in the liquidation. It appears unlikely that Denso will recover anything from Mploy. In any event the liquidation triggered a transfer of liability under the 1930 Act.
In early October Mr Burbury asked Mploy's solicitors to request Denso's actual costs. This was done, and Denso's solicitors queried the reason why this was being sought. No response was ever sent by Mploy's solicitors because they were in the process of coming off the record, and unwilling to incur further costs.
In late October 2014 Denso's solicitors contacted Burford and some correspondence dealing with a number of issues on the Policy continued until 7 January 2015.
On 4 December 2014 Denso's solicitors sent the solicitors for Mploy's liquidators an offer to accept £210,341 net in respect of Denso's costs. This was passed on to Great Lakes on 12 February 2015.
A chaser was sent to the liquidators regarding this offer on 31 March 2015 stating that if no response was received by 15 April 2015 Denso would commence detailed assessment proceedings. No response was sent and on 13 July 2015 Denso sent a further email to the liquidators stating that it had instructed a costs lawyer to prepare a detailed bill of costs. These communications were not passed on to Great Lakes.
Notice of commencement of detailed assessment proceedings was issued on 4 August 2015. A letter serving this document was dated 4 August 2017. Following some correspondence between the liquidators and Denso in late August 2015, Great Lakes received the Notice on 2 September 2015.
On 3 September 2015 Denso obtained a Default Costs Certificate requiring Mploy to pay £319,696.59. It is this sum which Denso seeks under the Policy.
It is the operation of the 1930 Act and the Policy wording in question which is at the heart of this dispute.
Great Lakes denies any liability to indemnify Denso. It says that payment of the premium under the Policy was a condition precedent to its liability to make any payment under the Policy and that as the premium was not paid it is under no liability.
It relies as well on the claims cooperation and associated clauses in the Policy, compliance with each of which was, it says, a condition precedent to its liability to make any payment. Great Lakes says that Mploy was in repeated and wholesale breach of these provisions, with the result that Great Lakes is discharged from any liability to make any payment.
In the event that it fails to establish that it is discharged from liability, Great Lakes also relies upon a number of policy exclusions. Finally it claims to be entitled to set off against any sum awarded to Denso the premium payable under the Policy.
Logically the central issues concern the question of whether Great Lakes is discharged from liability under the Policy because of breaches by Mploy or their agents of conditions precedent under the Policy. If there is no liability, the issues relating to premium, exclusions and set off do not arise. It therefore makes sense to consider this issue – which is also the most fact sensitive issue – rely first.
Are the clauses on which Great Lakes rely conditions precedent and, if so, have they been breached?
The starting point for any argument that a party is discharged from liability because a condition was a condition precedent is that the courts are careful to scrutinise arguments that a particular term is a condition precedent. One critical issue is whether the relevant terms are capable of being conditions precedent. In Re Bradley and Essex and Suffolk Accident Indemnity Society [1912] 1 KB 415, 421 (Cozens-Hardy MR) said (in the context of whether the maintenance of a wages book was a condition precedent to liability):
"…there is a proviso in the following terms: 'Provided always that the due observance and fulfilment of the conditions of this policy, which conditions are to be read as part of this policy, shall be a condition precedent to any liability of the society under this policy.' Then follow eight conditions.
Now it is perfectly clear that some of these so-called conditions are not and cannot be conditions precedent, although some of — them may be and are conditions precedent."
At 432–3, Farwell LJ said:
"…I think that, reading the policy with the proposal form…and construing the policy most strongly against the society, in the interests of honesty and fair dealing this is the better construction: any other construction would convict the society of having issued a tricky policy calculated to deceive and entrap the unwary and of insisting on the success of their devices."
It was this case which appears to have led to the particular wording of clause 7 here, which largely replicates the term in Bradley but with a rider as to the nature of the terms.
I was referred to a number of other authorities which give a sense of the position on this issue as it stands today. A review of these indicates that the hostility to conditions precedent manifested in Re Bradley has been somewhat moderated over the years.
In summary, the authors of MacGillivray on Insurance Law (13 ed) at paragraph 21–037 say:
"Little more can be said than that it is a matter of construing the policy as a whole. Such clauses should not be treated as a mere formality which is to be evaded at the cost of a forced and unnatural construction of the words used in...
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