HLB Kidsons (A Firm) v v Lloyds Underwriters (costs)
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE |
| Judgment Date | 22 November 2007 |
| Neutral Citation | [2007] EWHC 2699 (Comm) |
| Docket Number | Case No: 2005–459 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 November 2007 |
[2007] EWHC 2699 (Comm)
Mrs Justice Gloster, DBE
Case No: 2005–459
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
Nicholas Davidson Esq QC and William Godwin Esq (instructed by Holman Fenwick & Willan) for the Claimant
Gavin Kealey Esq, QC and Craig Orr Esq QC (instructed by Fishburns) for the 1 st to 5 th Defendants
Michael Harvey Esq, QC and John Greenbourne Esq (instructed by Herbert Smith) for the 6 th Defendant
Roger Stewart Esq, QC and Graeme McPherson Esq (instructed by Eversheds) for the 7 th Defendant
Hearing dates: 28 th September 2007;
Further written submissions: 1 st October 2007.
Judgment on post-judgment matters, including costs
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.
This is my ruling in relation to certain post-judgment matters following submissions made at a hearing on 28 September 2007.
Effect of paragraphs 206–222 of my judgment dated 9 August 2007 as to the extent of cover
In the post-judgment submissions the parties sought clarification of the effect of paragraphs 206–222 of my judgment. The issue was whether (as Underwriters contended) the effect of my decision was that Underwriters' indemnity covers only claims arising in respect of two particular cases (known as Janvrin Limited and Le Marais Limited) where Discounted Option Schemes (“DOS”) were utilised, or whether (as the other parties contended) the scope of the notification which I held to be effective covered the procedural difficulties exemplified by the two DOS cases which Mr. Tyre QC examined, and not merely claims in respect of those two cases themselves.
As I indicated in my oral ruling, delivered on 28 September, the conclusion that I reached in my written judgment was that the scope of the notification that I found to be effective covered not merely claims arising out of those two cases, Janvrin and Le Marais, but rather all claims arising out of the procedural difficulties exemplified by those DOS. That conclusion was consistent with the manner in which Mr. Gavin Kealey QC, on behalf of Underwriters, had argued the issue throughout the trial. For example, Underwriters had contended that the notification related to procedural difficulties in the field of DOS, but they had never contended that it related solely to the two particular DOS, Janvrin and Le Marais. Thus, for example, Underwriters pleaded:
“As a result, the 28 March letter was confined to the possible 'procedural difficulties' affecting the implementation of Discounted Option Schemes (by which Mr. Patten and/or Garner-Jones meant the question concerned the tax residency of the Isle of Man companies set up as part of the schemes) considered by Colin Tyre QC.”
In paragraph 101 of Underwriters' closing submissions, Mr. Kealey argued:
“The thrust of the letter was procedural difficulties in the field: i.e. in the execution and operation of the Discounted Option Schemes. The validity, or for that matter the marketing of the products was not in issue.”
Likewise, in Underwriters' closing submissions at paragraph 122(7), he contended:
“The next time when any insurer was seen was on 19 April 2002, when the leading Lloyd's syndicate 839 was presented with the Millers bordereau and claims file which, by this time, included the 28 March letter. That letter only gave notice of procedural difficulties affecting the implementation of Discounted Option Schemes. Thus it was consistent with the state of Kidsons' awareness.”
Mr. Kealey also put matters thus:
“In all this, my Lady, we accept that, if effective, in the sense that if those notifications between October and April 2001/2002 respectively, were effective, our primary case is that they were confined to the procedural problems relating to discounted option schemes because that was the state of awareness of Kidsons. But if that is wrong, my Lady, and the state of awareness was wider, then nevertheless that which was notified by reference to those documents were only procedural problems relating to the products of Kidsons. In other words, some procedures followed in certain cases, which we accept means procedures of implementation in contradistinction, my Lady, with the reassurance that we received which was that all the products had been validated by counsel, in some instances two opinions.” (Day 14, page 55)
That conclusion is also consistent with the fact that, at paragraphs 225 and 226 of my judgment, I accepted Underwriters' submissions that the Court should first decide the principal and substantive issues relating to notification, and then, if necessary, address the question of sample claims. Paragraph 226 of my judgment would have been redundant if indeed I had concluded that the notification only related to the cases of Janvrin and Le Marais, since the only DOS sample claim (Hale/Veeboard) related to the Isle of Man company, Telbark.
However, since the problem has arisen, I clarify paragraphs 206–222 of my judgment to remove any possible ambiguity about the point. I do so as follows:
“Presentation on 19 April 2002 to the lead Lloyd's syndicate 839 of the letter dated 28 March 2002 and accompanying documentation
206. Although in contact with Kidsons regularly in relation to other matters, nothing further was heard by Millers (or it appears by Camerons) in relation to the S@FI matter until late March 2002. On 28 March 2002, two days after the consultation with Mr. Tyre QC, and one day after the NEC meeting when Mr. Gwilliam had told the NEC that he believed:
'that there was now less risk from the Inland Revenue, but there was still a risk of claims from clients where [discounted option] schemes had failed because of procedural mistakes'
and the NEC had agreed that it was then appropriate for a 'report on the situation to be prepared for PII underwriters', Kidsons wrote to Camerons, with a copy to Millers in the following terms:
'S@FI Limited
Some months have passed since we last corresponded. We have put a lot of effort into a technical investigation of the sale of products with the intention of having a report prepared by the Independent Review Board under Ray Armstrong referred to in my letter of 31 August 2001.
This work has been slowed to a certain extent because of health problems suffered by Ray Armstrong and his ability to carry on leading the investigation is now in question. There is likely to be a further delay in the production of the report.
A meeting was held on Tuesday 26 March 2002 with Colin Tyre QC who had raised observations on two transactions concerning Discounted Option Schemes. The result of the meeting was a general view that the technical efficiency of the products was accepted but in some instances there might be procedural difficulties involving the Trustees for each scheme affecting the implementation of the scheme and this might lead to the possibility of criticism in the future.
Graham Garner-Jones, a tax partner in our Chester office and one of the Managing Partners for S@FI was present at this meeting and will very shortly be producing a report to summarise the results of the meeting and the general activity in this area over the last few months'.
Millers added the 28 March 2002 letter to its S@FI claims file.
207. Interestingly, although not relevant at this stage of the proceedings, on 4 April 2002, Ms Turnbull of Camerons replied to Mr. Patten's letter of 28 March 2002. She stated that until further information was available,
'it, of course, remains unclear whether this constitutes a circumstance/claim within the terms of the policy and, accordingly, we are not in a position to confirm whether cover will apply'.
Mr. Patten faxed a copy of Camerons' letter to Mr. Garner-Jones and Mr. Harris. Despite the warning in it that the information provided to Underwriters might not constitute a circumstance within the terms of the policy, neither of them responded to Mr. Patten on this point.
208. On 19 April 2002 the S@FI claims file, including the 28 March 2002 letter, and the Millers' 2001 bordereau were presented to Ms Constable on behalf of the Lloyd's Lead Underwriter, syndicate 839. By that time Millers' bordereau also included Camerons' bordereau for September – November 2001. This in turn included:
i) a 2001 Summary Report which identified as 'Claim No KI01–009' S@FI Ltd;
ii) the S@FI data sheet prepared by Camerons which read as follows:
'1. Miller Claim No: KI01–009
…
4. Policy Period: 12 months at 01/05/01
…
7. Date of claim made against K.I.: 31/08/01
8. Date of notification to CM: 31/08/01
9. Claimant: S@FI Ltd
…
13.(a) Policy Situation:- Annual aggregate excess £1 million – on exhaustion refer to wording
(b)Claim Situation:- Concern that tax products marketed by S@FI Ltd (manned entirely by staff and partners of Insured) could be criticised. Awaiting results of investigation being conducted by independent expert (retained by S@FI) to see if concerns founded.
Await update once investigations complete
(c) Liability:- Possible'
Again, the statements that purportedly recorded that S@FI was “the claimant” and that the date of claim made against Kidsons was 31 August 2001 were simply wrong. No claim had been made at all. However, the actual position, namely that S@FI was in fact marketing the products, and not the claimant, and that liability was 'possible' was discernible from the narrative. Ms Constable scratched the 28 March 2002 letter 'Await any relevant CMS [Camerons] comments'.
Conclusion in relation to the presentation on 19 April 2002
209. In my judgment, the presentation of the 28...
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