Equitas Ltd and Another v Horace Holman and Company Ltd and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE ANDREW SMITH |
| Judgment Date | 03 October 2008 |
| Neutral Citation | [2008] EWHC 2287 (Comm),[2007] EWHC 903 (Comm) |
| Docket Number | Case No: 2002–1103,Case No: 20021103 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 October 2008 |
[2007] EWHC 903 (Comm)
Mr Justice andrew Smith
Case No: 2002–1103
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
Neil Calver QC (instructed by Davies Arnold Cooper) for the Claimant
Robert Anderson QC and Adam Tolley (instructed by Messrs Farrer & Co) for the Defendant
Hearing dates: 29, 30, 31 January and 5 February 2007
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HON.
The proceedings
The main question that I have to decide is who should pay the costs of these proceedings, which have proved to be largely fruitless but which the claimants say they were justified in bringing and pursuing. There is also a claim for relatively small sums of money that the defendants are said to have received and be holding as agents.
The first claimants, Equitas Limited (“Equitas”), are the assignee of the rights of most of the members of Lloyd's syndicates for the years 1992 and earlier years in respect of their contracts of reinsurance and retrocessions for all their non-life business, having been assigned those rights in September 1996 as part of the settlement of much of the Lloyd's litigation. The second claimants, Additional Underwriters Agencies (No 9) Limited (“AUA”) were joined in the proceedings to represent Lloyd's Names who did not accept the settlement offer made in 1996. AUA took no active part on these proceedings and I need not make further reference to them. The defendants, Horace Holman & Company Limited (“Horace Holman”), are a Lloyd's broker, who have been in run off since about 27 January 2003. The claim arises from outwards contracts of reinsurance or retrocession which were written to protect Lloyd's Syndicates for 1992 and earlier years and which Horace Holman were administrating.
These proceedings were brought on 17 October 2002. Equitas sought damages for breach of contractual, tortious and fiduciary duties in that, it is alleged, Horace Holman had failed
i) to deliver to Equitas “hard copies of ledgers and other accounting documentation showing balances currently due from or to the Syndicates under the Outward Protections” (as the reinsurance and retrocessions placed through Horace Holman to protect the 1992 and earlier business of the Syndicates were called); and
ii) to provide to Equitas a detailed account of all funds currently held by Horace Holman that were due and payable to the Syndicates or to Equitas as the Syndicates' assignee under the Outwards Protections, including an account of when all such funds were first received by Horace Holman on behalf of the Syndicates or Equitas.
As well as damages Equitas claimed an order for delivery up of “all documentation held by [Horace Holman] relating to the placement and subsequent administration of the Outwards Protections including hard copies of ledgers or other accounting documents showing balances currently due per reinsurer from or to the Syndicates under the Outward Protections”; and an account and payment of money found to be due on taking an account.
On 30 January 2003 Langley J made an order by consent whereby Equitas were to return to Horace Holman claims files that Horace Holman had passed to them, and Horace Holman were to provide to Equitas by 28 February 2003 a detailed account as sought in the claim, that is to say a detailed account of all funds currently held by Horace Holman that were due and payable to the Syndicates or to Equitas as the Syndicates' assignee under the Outwards Protections, including an account of when all such funds were first received by Horace Holman on behalf of the Syndicates or Equitas. In the meantime, the proceedings were stayed.
On 28 February 2003, Horace Holman provided what they say is an account served in accordance with the order and their obligations to Equitas. This document has been referred to as the “composite account” and I shall adopt this term. It stated that Horace Holman had conducted “a thorough review of the claims files that were delivered to it by [Equitas]”, and on the basis of that review Horace Holman concluded that they were holding nothing by way of funds received from reinsurers that were due and payable to the Syndicates or the claimants. They called upon Equitas to provide “particulars of any funds they suspect or believe were or are so held”.
On 7 March 2003 Horace Holman provided details of the review that they had carried out, stating that they had reviewed the claims files returned by Equitas, had identified “every note relating to each claim … either from hard copy or from a LORS sheet” (LORS being Lloyd's Outward Reinsurance System, a system for giving notice of payments to be made through Lloyd's Policy Signing Office), and had examined the files for any correspondence indicating that they had pressed for payments that had not been received. They then set out on a spreadsheet the notes relating to each claim and any amounts outstanding from reinsurers, and provided schedules showing amounts that were not collected from reinsurers.
After Equitas raised certain enquiries about this information that I shall explain later in this judgment, Horace agreed to pay to Equitas US$91,058.67 and £1,419.07. (The parties agreed to write off a negligible sum in Canadian dollars.) These sums were paid on or about 25 June 2003, and I shall call them the “June payments”.
The proceedings remained stayed until 30 October 2003, and then Horace Holman served a Defence on 4 December 2003. They claimed, among other things, that all relevant accounting documentation “showing current balances due to or from the Syndicate” had been provided when they transferred their claims files to Equitas in November and that Equitas were not entitled to their “internal ledgers”. They also relied upon the composite account and pleaded that Equitas were not entitled to an order for an account because they had already taken an account on 28 February 2003, which showed no sum was due to Equitas.
Thereafter, the proceedings made little progress. In broad terms, an impasse was reached because Equitas wished to test the composite account which Horace Holman had provided and Horace Holman responded that that was neither practicable nor justified. Equitas incurred legal and accounting fees in trying to resolve the position, and Horace Holman incurred legal fees.
Eventually a Case Management Conference was held before Christopher Clarke J on 31 March 2006. He ordered that the parties meet “with a view to agreeing a sampling exercise which [Equitas] will carry out, and the assistance which [Horace Holman] will provide in this regard.” A meeting was held pursuant to this order on 26 April 2006 but no agreement was reached.
The Case Management Conference was restored before Langley J on 21 July 2006. Equitas applied to amend their Particulars of Claim to seek damages in respect of the legal and accounting fees that they had incurred. They made it clear that they were not pursuing their claim for an account, not because they no longer claimed to be entitled to one but because they took the view that Horace Holman's records were such that it was not practical to seek a meaningful account. Horace Holman resisted the proposed amendment on the basis that the fees were incurred by way of costs in the action and therefore are not recoverable as damages. Mr Adam Tolley, who represented Horace Holman, was asked this question by Langley J: “Assume that there might be some argument as to whether something falls outside costs or inside costs, if you looked at the detail, so far as your clients are concerned, it is your case, and you are happy, for all those items to be dealt with by way of the court exercising its normal power in relation to the costs of proceedings?” Mr Tolley replied that Horace Holman were content for the expenses to be viewed as costs, provided only, if or in so far as Equitas did not recover the legal and accounting fees by way of costs, they would then seek to claim them as damages.
In those circumstances, Equitas did not press their application to amend their claim. They were no longer pursuing their claim for damages or their claims for an account and documentation. The remaining dispute between the parties was about a claim for some relatively small sums that Equitas said were held by Horace Holman and due to them (“the money claim”) and about who was to pay the costs, that is to say the legal and accounting costs incurred in the action.
Langley J ordered that there should be a hearing about who should pay the costs and a trial of the money claim, and made directions for this purpose. Accordingly, the parties served pleadings about what order for costs should be made. In addition, Equitas served evidence from four witnesses of fact, Horace Holman served three witness statements, and both parties served reports from expert accountants.
The hearing took four days, and seven witnesses of fact were called and cross-examined. Equitas called (i) Mr. P J Murrin, a partner in Messrs Davis Arnold Cooper, Equitas's solicitors, (ii) Mr. S P Loughlane, a Reinsurance Manager in the firm of Castlewood (EU) Ltd. (“Castlewood”), (iii) Mr. D R S Lumsden, a consultant at Equitas and (iv) Mr. P N Howes, who is also a consultant with Equitas, having retired from full-time employment with Equitas as their Head of Insurance Operations in about July 2003. Horace Holman called (i) Mr. A M Powell, their managing director, (ii) Mr. D C Whittle, who has been employed by Horace Holman since 1992 and is their IBA Accounts Manager, and...
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