Mandrake Holdings Ltd and Another v Countrywide Assured Group Ltd

JurisdictionEngland & Wales
CourtChancery Division
Judgment Date10 February 2006
Neutral Citation[2005] EWHC 311 (Ch),[2006] EWHC 354 (Ch)
Docket NumberClaim No: HC03 C02231,Case No: HC 03 C 02231
Date10 February 2006

[2005] EWHC 311 (Ch)



Royal Courts of Justice

Strand, London, WC2A 2LL


The Honourable Mr Justice Lightman

Case No: HC 03 C 02231

(1) Mandrake Holdings Limited
(2) Mandrake Associates Limited
Countrywide Assured Group Plc

Mr Tom Lowe (instructed by KSB Law, Elan House, 5–11 Fetter Lane, London EC4A 1QD) for the Claimant

Mr Michael Soole QC & Mr Richard Liddell (instructed by Reynolds Porter Chamberlain, 38 Leadenhall Street, London EC3A 1AT) for the Defendant

Hearing dates: 2 nd & 7 th March 2005

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.


Mr Justice Lightman



I have before me an opposed application for permission to amend the Particulars of Claim to add an additional head of damage ("the New Claim"). It is common ground that as a judge at first instance I am bound by authorities to hold that in law the New Claim is not maintainable. Only the Court of Appeal and the House of Lords can be free, and probably only the House of Lords is free, to uphold the New Claim. The principal issue before me is whether I am free nonetheless to give permission to amend and (if not and if I am bound to refuse permission to amend) whether I can and should give permission to appeal. There is also a further issue whether I should in any event refuse permission on conventional discretionary grounds.



In October 1994 the Securities and Investment Board ("the SIB") launched its pension mis-selling review which encompasses (with certain exceptions) all pension opt-outs and transfers executed between the 29 th April 1988 and the 30 th June 1994. As part of the review the SIB issued guidance to the front-line regulators directing them to require firms which had sold the pension products to participate in the review, identify the mis-selling cases and agree to compensation. The SIB review was carried out in two phases. Phase 1 related to the obvious and more important cases which had to be prioritised. Phase 2 commenced in 1998 and comprised a number of further categories which then had to be prioritised.


Before the 1 st March 1996, the second claimant Mandrake Associates Limited ("Mandrake") was a wholly owned subsidiary of the defendant Countrywide Assured Group Plc ("Countrywide"). Mandrake and Countrywide were in the business of providing advice to individuals on pension transfers and opt-outs.


By an Agreement made between Countrywide, Mandrake and the first claimant (formerly called and here for convenience called Plusnet) and dated the 1 st March 1996 Countrywide sold the issued share capital of Mandrake to Plusnet. At the time of the Agreement it was apprehended that Mandrake might be liable to pay compensation to investor clients in consequence of its pensions advice. Accordingly by a deed also dated the 1 st March 1996 ("the Deed") Countrywide covenanted with Plusnet to pay to Mandrake or the relevant investor any "Pension Liability" as there defined. There is a dispute between the parties whether the covenant in the Deed extends to liabilities incurred by Mandrake under Phase 2. In these proceedings commenced on the 18 th June 2003 the Claimants seek: (1) a declaration that the covenant does so extend; (2) in the alternative rectification of the Deed; (3) an account and inquiry; and (4) costs.


On the 25 th November 2004 this action was set down for hearing in a trial window starting the 11 th July 2005 with a time estimate of 10 days. It is apparent from the evidence that at this date the Claimants were actively considering the amendment now proposed to their pleading and indeed it is apparent from a letter dated the 22 nd December 2004 that it was considered in January and November 2002. But no mention was made of it at the time. The Claimants first revealed the proposed amendment on the 1st December 2004 and sought Countrywide's consent to an order giving the necessary permission to amend. The request was promptly refused.


The Particulars of Claim (as they stand) pleads in paragraph 14 that the Phase 2 liabilities are "Pension Liabilities" within the meaning of the Deed and that Countrywide is liable to pay the claimants a sum equivalent to those liabilities; in paragraph 15 that wrongfully and in breach of contract Countrywide has failed to make any payment in respect of such liabilities and has stated that it was not liable; and in paragraph 16 that by reason of the foregoing the Claimants have suffered the loss and damage there particularised. The two particulars given are a sum equivalent to the sum which Countrywide ought to have paid to the Claimants and any and all increased costs and liabilities occasioned by Countrywide's default.


The proposed amendment adds as a third head of loss the New Claim which is for £15.5 million. The New Claim(so far as material) reads as follows:

"16.3 Loss of opportunity to develop and to realise the value of Mandrake.

As was either known or reasonably foreseeable to the parties at the date of the Deed: (1) the Claimants' intention was to expand Mandrake's business; (2) to do so, they would need to raise capital; and (3) the Defendant's refusal to meet its liabilities under the Deed made it impossible to raise the necessary capital and thereby caused the Claimants to lose the opportunity of such expansion. If the Claimants had been able to expand the business, they would have been able to realise, and would have realised, Mandrake's increased value by selling it (or its business and assets) to a product provider (for example, to one of the large life assurance companies)."



Countrywide raises three objections to the proposed amendment.

(a) "Bad in law"


The first and foremost is that the New Claim is bad in law. Countrywide's argument runs as follows:

i) the relevant provisions of the Deed are akin to those found in a professional indemnity policy of insurance;

ii) their effect is to impose on Countrywide a contractual obligation to indemnify Mandrake against "Pension Liability" as there defined;

iii) the essence of an indemnity is that it is '… simply a promise to hold the indemnified person harmless against a specified loss or event …': per Lord Goff in Firma C-Trade SA v. Newcastle P&I Association (" The Fanti") [1991] 2 AC at 35H;

iv) the primary obligation is therefore breached at the moment the loss occurs i.e. when the indemnifier has failed to prevent the indemnified from suffering the relevant loss;

v) where the indemnity is in respect of liabilities to third parties, this means that the primary obligation is breached when the indemnified incurs the relevant liability. At that point the indemnified has sustained the relevant loss: Post Office v. Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 and 374A;

vi) upon breach of the primary obligations, there arises a secondary obligation to pay damages for such breach. A claim for indemnity is therefore classified as a claim for damages: Sprung v. Royal Insurance [1999] 1 Lloyd's Rep IR 111 at 115: following The Fanti above at 35G and The Italia Express (No 2) [1992] 2 Lloyd's Rep 281;

vii) there is no such thing as a cause of action in damages for late payment of damages: per Lord Brandon in President of India v. Lips Maritime Corporation [1988] AC 395 at 425A per Lord Brandon cited in Sprung at p115;

viii) accordingly there can be no claim for consequential loss alleged to result from a failure to indemnify: Sprung.


The authorities cited and relied on by Countrywide support these propositions. Accordingly the New Claim is not maintainable unless or until the propositions are modified by the Court of Appeal or the House of Lords. There is a body of textbook opinion that a distinction should be drawn between claims of liability insurance and claims of property insurance; that the propositions stated are applicable only to claims of liability insurance; that the decision of the Court of Appeal in Sprung that there is no distinction and the propositions apply to both is weakened by the fact that the claimant in that case was not legally represented; and that Sprung is wrongly decided. (The Claimants drew to my attention the decision of the Court of Appeal in Virk v. Gan Life Holdings Plc [1999] EWCA Civ 2047 (30 th July 1999) which drew a clear distinction between policies of liability insurance and of property insurance in respect of accrual of the insured's cause of action.) The distinction between the two types of claim (as it appears to me) even if established, would not assist the Claimants in this case, where the claim is of liability insurance. In my view it is highly doubtful whether the established law can be changed or developed to allow the New Claim by any court below the House of Lords.


In these circumstances the first issue raised is whether I ought to refuse permission to amend or whether I can and should nonetheless give permission to amend. By giving permission to amend I would enable all the issues in the case to be determined at the trial together. Obviously the New Claim will be dismissed, but an appeal on this and all other issues could proceed together (if the necessary permissions are given) to the Court of Appeal and the House of Lords. The House of Lords would have the opportunity to decide the legal validity of the New Claim in the context of the full facts of this case. Viewed from a case management standpoint, there are advantages in taking this course.


The Claimants have argued that this approach found some support in the judgment of Waller LJ (with which Brooke LJ agreed) in Pride Valley Food Ltd v. Independent Insurance Co Ltd...

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