Norman Hay Plc (in Members' Voluntary Liquidation) v Marsh Ltd

Hearing date: 29 April 2024.

Judgment provided in draft: 2 May 2024.

Introduction

This is an application by the Defendant, Marsh Ltd (‘Marsh’) to strike out the claim brought against it by the Claimant, Norman Hay PLC (‘Norman Hay’), pursuant to CPR r. 3.4, alternatively for summary judgment pursuant to CPR r. 24.

Norman Hay is a holding company, whose group companies were world leaders in specialist chemicals, sealants and surface coatings. Those companies were located in different jurisdictions throughout the world, and their employees frequently travelled for business purposes.

Marsh is a commercial insurance broker, specialising, inter alia, in advising upon and placing global programmes of insurance for groups of companies operating in different jurisdictions.

Marsh was retained by Norman Hay as the insurance broker to the companies within the Norman Hay group. In that capacity, Marsh placed cover on a country-by-country basis for policy year 2017/2018 and under a global liability programme for the policy years 2018/2019 and 2019/2020.

The claim brought in the present proceedings sees Norman Hay allege that Marsh failed to arrange worldwide (including US) non-owned auto cover under Norman Hay's group travel insurance policy. Non-owned auto cover is motor liability insurance cover in the event of cars being hired.

Specifically, the claim is brought following the sale of Norman Hay's subsidiaries to Quaker Specialty Chemicals Ltd (‘Quaker’) in October 2019. Under the terms of that sale, Norman Hay was required to indemnify Quaker in respect of liability relating to a claim brought by a Ms Heather Sage in respect of an accident which took place on 22 November 2018.

On 22 November 2018, the morning of Thanksgiving, Mr Nigel Kelsall, said by Norman Hay to be an employee of one of Norman Hay's subsidiaries, Internationale Metall IMPragneier GmbH (‘IMP’), a German company acquired by Norman Hay in August 2017, was involved in a road traffic accident in Ohio in the USA whilst driving a hire car without insurance, having decided not to take out the same.

Mr Kelsall was tragically killed and Ms Sage, the driver of the other car involved in the accident, was seriously injured.

On 22 November 2020, Ms Sage issued proceedings in the US District Court Southern District of Ohio against various defendants including Norman Hay and IMP, alleging that: the accident was caused entirely by Mr Kelsall's negligence; Mr Kelsall was operating the hire care that he was driving at the time of the Accident in furtherance of IMP's business, in the course and scope of his employment or as agent for IMP; IMP, together with two US corporate defendants, were wholly-owned subsidiaries of Norman Hay, that the business interests of the corporations were inextricably bound and that Mr Kelsall was acting as agent for and/or in furthering the business interests of the corporate defendants at the time of the accident; and, as a result, the doctrine of respondeat superior applied with the result that the corporate defendants, including Norman Hay and IMP, were jointly and severally liable for the negligence of Mr Kelsall and thus jointly and severally liable to Ms Sage.

On 9 March 2021, the parties to the US Proceedings entered into a binding settlement agreement. Norman Hay maintains that it did so in reliance upon legal advice from specialist personal injury litigation US counsel.

Pursuant to the settlement agreement, Ms Sage's claims (and those of her children) were settled on terms that she be paid the total sum of US$5,500,000. This was paid out of monies held in an escrow account which had been constituted as part of the sale to Quaker, so reducing the amount ultimately received by Norman Hay in that sale.

Before the settlement was entered into, Norman Hay was asked by Marsh how it could bring any claim given it was a holding company which was admittedly not Mr Kelsall's employer, and which did not appear to be legally liable to Ms Sage.

Marsh also made Norman Hay aware that, as far as Marsh was concerned, Norman Hay could have no claim against Marsh since a liability in law has to be established to obtain indemnity under a liability insurance policy. This included both when Norman Hay sent Marsh draft Particulars of Claim on 14 February 2020 (and so before the ssettlement with Ms Sage) and on 9 November 2021 (and so after the settlement). Both these drafts (like the Particulars of Claim which ultimately came to be served in the proceedings) pleaded Ms Sage's allegations but did not plead that Norman Hay or IMP were liable to Ms Sage.

This is an aspect which, as explained by Mr Shapiro KC on behalf of Marsh, was further pursued through a Request for Further Information which Marsh sent to Norman Hay on 12 July 2023, which described the Particulars of Claim as being “inadequately particularised, defective, and are liable to be struck out” and which, by Requests 6, 9–14,18–22, 26–29 and 42–45, sought express confirmation as to whether Norman Hay was alleging that Norman Hay or IMP were legally liable to Ms Sage and, if so, on what basis.

The claim brought against Marsh

As to what, specifically, is alleged by Norman Hay against Marsh, Norman Hay alleges that Marsh acted in breach of contract and/or negligently when advising Norman Hay in relation to its worldwide insurance cover and when placing and renewing that cover. In particular, Norman Hay alleges that Marsh: failed to identify that Norman Hay's business was such that senior employees of both Norman Hay and companies in its group made frequent business trips on which they hired cars in respect of which adequate liability insurance was required; and failed to consider the terms and scope of a policy which IMP had (the ‘IMP Policy’) and which would have provided an indemnity to IMP in respect of any liability that IMP might have as Mr Kelsall's employer but which was cancelled on 30 June 2018 when the global policy was entered into adequately or at all, instead recommending that the IMP Policy be cancelled without identifying and/or advising Norman Hay that this would narrow the scope of cover available to IMP.

Norman Hay alleges that, but for Marsh's breach of duty: Norman Hay and/or IMP would have had in place valid and effective insurance cover that would have provided an indemnity in respect of liabilities to Ms Sage arising from the accident such that Norman Hay would not itself have had to fund the settlement of those liabilities via the Sage Settlement; alternatively, as a result of Norman Hay's breaches of duty, Norman Hay has lost the opportunity of obtaining insurance cover that would have responded to the liabilities arising out of the accident.

Accordingly, Norman Hay claims from Marsh in these proceedings an indemnity, alternatively damages in respect of the liabilities arising from and in relation to the accident, including the Sage Settlement Sum and the costs associated with the same.

Applicable principles

There is no issue concerning the correct approach to be taken to applications of this nature.

Particulars of Claim may be struck out if they disclose no reasonable grounds for bringing the claim (CPR r. 3.4(2)(a)). The Notes to the White Book at 3.4.1 explain:

“ Grounds (a) and (b) cover statements of case which are unreasonably vague, incoherent, vexatious, scurrilous or obviously ill-founded and other cases which do not amount to a legally recognisable claim or defence … .”

The Notes at 3.4.2 further provide:

“Paragraph 1.4 of the PD (Striking Out a Statement of Case), para.3APD.1, gives examples of cases where the court may conclude that particulars of claim disclose no reasonable grounds for bringing the claim: those claims which set out no facts indicating what the claim is about; those claims which are incoherent and make no sense; and those claims which contain a coherent set of facts but those facts even if true, do not disclose any legally recognisable claim against the defendant.”

An application to strike out should not be granted unless the Court is certain that the claim is bound to fail: Hughes v Colin Richards & Co[2004] PNLR 35.

As for CPR r.24.3 and whether the claim has a real prospect of success, principles set out by Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd[2009] EWHC 339 (Ch) at [15] are well-known and do not need to be restated. For practical purposes, as Mr Shapiro KC observed, in this case at least, there is probably little difference between the CPR r.3.4(2)(a) test and that for CPR r.24.3.

Marsh's position

Marsh's position is that the claim should be struck out, alternatively that summary judgment should be entered for Marsh, for three reasons: first, because the claim as put is defective as a matter of law (the ‘Liability Issue’); secondly, because Norman Hay has not suffered the loss for which it is claiming (the ‘Loss Issue’); and thirdly, because Norman Hay cannot, and will not be able to, prove that the amount of the settlement was reasonable, including that it was at least liable in law to such an amount (the ‘Evidence Issue’).

As to the Liability Issue, Mr Shapiro KC reminded the Court of the approach which is adopted in relation to liability insurance contracts. He did so by taking as an...