Peel Port Shareholder Finance Company Ltd v Dornoch Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford |
| Judgment Date | 26 April 2017 |
| Neutral Citation | [2017] EWHC 876 (TCC) |
| Date | 26 April 2017 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000070 |
[2017] EWHC 876 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Jefford
Case No: HT-2017-000070
Mr Daniel Shapiro (instructed by DAC Beachcroft) for the Claimants
Mr James Medd (instructed by Kennedys) for the Defendants
Hearing date: 24 th March 2017
This is an application for pre-action disclosure made under rule 31.16 of the Civil Procedure Rules.
Background
Peel Port Shareholder Finance Company Ltd. ("Peel Port") are the owners of a warehouse at Sheerness Docks in Kent which was damaged by fire on 14 January 2013.
Peel Port's case is that that fire was caused by activities undertaken by a company called European Active Projects Ltd. ("EAPL"). These activities involved flame cutting work carried out in the vicinity of flammable insulation material. It is common ground that EAPL was insured and on the hearing of this application, Dornoch Ltd., were substituted as the respondent to this application on the basis that they were the correct insurers.
Peel Port's position put shortly is that EAPL has no defence to the claim against it and EAPL has not articulated any defence in open correspondence. It is therefore highly likely that any claim against EAPL will succeed. Peel Port's claim will be for sums in excess of £1m. EAPL is not insolvent and is trading but, Peel Port also say, if a judgment for this amount was enforced against EAPL it would not be able to meet that judgment and would be wound up.
As I have said, EAPL is insured. However, its insurers have denied that the claim is covered. They rely on a "hot working" endorsement to EAPL's public liability policy. That endorsement provides that it is a condition precedent to liability under the policy that certain precautions are taken when using any oxy-acetylene or similar spark emitting equipment or other specified equipment. Insurers have denied cover on the basis that EAPL did not comply with the conditions in this endorsement. They have set out the terms of the endorsement in correspondence with Peel Port and their insurers. They have not, however, disclosed the policy, so Peel Port suggest that there may be issues as to the incorporation of the endorsement or the effect of the endorsement when construed in the context of the policy as a whole.
The application
This application by Peel Port is for disclosure of a copy of the full insurance policy. The application is made under CPR Rule 31.16. That rule was made pursuant to s. 33(2) of the Senior Courts Act 1981.
CPR 31.16 provides as follows:
"(1) This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.
…
(3) The court may make an order under this rule only where –
(a) the respondent is likely to be a party to subsequent proceedings;
(b) the applicant is also likely to be a party to those proceedings;
(c) if proceedings had started the respondent's duty by way of standard disclosure, set out in rule 31.6, would extend to the documents or classes of documents of which the applicant seeks disclosure; and
(d) disclosure before proceedings have started is desirable in order to –
(i) dispose fairly of the anticipated proceedings;
(ii) assist the dispute to be resolved without proceedings; or
(iii) save costs."
Sub-paragraphs 3(a) and (b) were construed by the Court of Appeal in Black v Sumitomo Corpn [2001] EWCA Civ 1819 at [71] to mean not that the court had to consider the likelihood of there being proceedings but that the applicant and respondent were likely to be parties to proceedings if they were commenced. Whilst reserving the right to argue differently on any appeal, Dornoch accepts on this application both that that is the proper construction of the rules and that this test is fulfilled. It is fulfilled because if EAPL were put into liquidation, Peel Port would be entitled to sue Dornoch directly under the Third Parties (Rights against Insurers) Act 2010.
Dornoch also accepts that the test in sub-paragraph 3(c) is met because, in such proceedings, a key issue would be the effect of the endorsement, and the policy would be disclosable in those proceedings.
Discretion
So far as sub-paragraph 3(d) is concerned, Rix LJ in Black v Sumitomo observed at [79] that it is a difficult test to interpret "for it is framed both in terms of a jurisdictional threshold ("only where") and in terms of the exercise of a discretionary judgment ("desirable")." At [81] he concluded:
"In my judgment, for jurisdictional purposes the court is only permitted to consider the granting of pre-action disclosure where there is a real prospect in principle of such an order being fair to the parties if litigation is commenced, or of assisting the parties to avoid litigation, or of saving costs in any event. If there is such a real prospect, then the court should go on to consider the question of discretion, which has to be considered on all the facts and not merely in principle but in detail."
In the light of this approach, it was common ground before me that I had to take into account the three particular matters set out in sub-paragraph 3(d) as part of the threshold test but that my discretion as to whether to order pre-action disclosure was still an unfettered one both because of the use of "may" and because of the need to assess desirability.
Peel Port's submission is that the jurisdictional threshold is met, in particular because, if the policy were disclosed and Peel Port were then satisfied that the endorsement was effective, it would not pursue EAPL (so avoiding putting EAPL into liquidation) and it would not pursue insurers. That in itself would avoid litigation and wasted costs. Peel Port argue that it is then clearly desirable that disclosure should be ordered.
Dornoch does not take issue with these arguments but Dornoch argues that I should not exercise my discretion to order pre-action disclosure in particular because to do so would be to ignore the provisions of the Third Parties (Rights against Insurers) Act 2010.
In summary that argument runs as follows. Where a claimant (A) sues a defendant (B), and B is insured, the general position is that the insurance policy is not disclosable because it is not relevant to any issue in the case. It neither advances nor undermines any party's case — see for example West London Pipeline and Storage v Total UK Ltd. [2008] EWHC 1296. Where the insured B is insolvent, however, A may have a direct claim against B's insurers under the Third Parties (Rights against Insurers) Act 2010. That Act contains a specific regime for the provision of information about B's insurance position. There would have been no need for Parliament to have made such provision if disclosure of B's insurance policy could be obtained under CPR Rule 31.16 and/or the existence of this specific regime is a powerful reason why I should not, in the exercise of my discretion, order disclosure that does not fall within the Act.
The Third Parties (Rights against Insurers) Act 2010
This Act (which came into force in August 2016) is the successor to the Third Parties (Rights against Insurers) Act 1930. The effect of the 1930 Act and its 2010 successor is to transfer to a party to whom an insolvent insured is liable the insured's right to claim against its insurers.
Section 2 of the 1930 Act imposed a duty to give such information as might reasonably be required for the purpose of ascertaining whether any rights had been transferred under the Act and for the purpose of enforcing such rights. That duty was imposed on the insolvent person (s. 2(1)) and on the insurer (s. 2(2)) in the particular circumstances provided for by that subsection. The duty arose on an insolvency event. However, the Act was for some time construed to mean that the right to sue the insurer only arose once the liability of the insured was established and, without going into the detail of the reasoning, s.2 was similarly construed so that no duty to provide information was thought to arise until after the insured's liability was established. It was against that background that the Law Commission Consultation Paper and Report to which I refer below were drafted.
That reasoning was, in the event, rejected by the Court of Appeal in First National Trinity Finance Limited v OT Computers Ltd. (in administration) [2004] EWCA 653, the Court of Appeal concluding that section 2 would usually enable a third party to obtain disclosure of documentation following the insured's insolvency but before the establishment of the insured's...
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