Rathbone Brothers Plc and Another v Novae Corporate Underwriting and Others

JurisdictionEngland & Wales
JudgeMr Justice Burton
Judgment Date08 November 2013
Neutral Citation[2013] EWHC 3457 (Comm)
Docket NumberCase No: 2012 Folio 1002
CourtQueen's Bench Division (Commercial Court)
Date08 November 2013

[2013] EWHC 3457 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Burton

Case No: 2012 Folio 1002

Between:
(1) Rathbone Brothers Plc
(2) Mr Michael Paul Egerton-Vernon
Claimants
and
Novae Corporate Underwriting & Ors
Defendant

Dominic Kendrick QC and Richard Harrison (instructed by Addleshaw Goddard LLP) for the Claimants

Peter MacDonald Eggers QC and Alex Hall Taylor (instructed by Reynolds Porter Chamberlain LLP) for the Defendants

Hearing dates: 10, 14, 15, 16 and 17 October 2013

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 Burton Mr Justice Burton
1

Proceedings have been brought in Jersey against the Second Claimant (PEV), who was for many years a trustee of trusts and settlements established by the late Mr Jack Walker (the industrialist and chairman of Blackburn Rovers PLC) and in particular of the JW 1987 Settlement.

2

PEV, a solicitor since 1971 and, since his move to Jersey in 1984, a partner of a firm of Jersey Solicitors called Nigel Harris & Partners ("NH&P"), became a director, and, through the firm, a shareholder in Nigel Harris Trust Company Limited ("NHTC"), to which NH&P transferred its trust business on 1 November 1998. He has for many years carried on an international practice from Jersey, specialising in trusts, and has been a professional trustee of a substantial number of trusts, including the Walker Trusts.

3

On 31 March 2000, NHTC was acquired by the First Claimant ("Rathbone"), a substantial international group whose trust business included the management of family trusts for wealthy clients, and the PEV became, by an agreement dated 31 March 2000 ("the Employment Contract"), an employee of NHTC, which changed its name on 7 May 2002 to Rathbone Trust Company Jersey Limited ("RTCJ"). He ceased to work full time on 30 June 2007, whereafter he became a consultant of RTCJ by a number of consecutive agreements on materially the same terms, commencing with that of 3 August 2007 ("the Consultancy Agreement"). On 15 October 2008 RTCJ was acquired by Hawksford Holdings Limited ("Hawksford"), changing its name to Hawksford Trust Company Jersey Limited ("HTCJ"): I shall call the company which was variously NHTC, RTCJ and then HTCJ simply RTCJ. On 21 July 2009 PEV retired as trustee.

4

By a Settlement Deed dated 9 July 1987 ("the Walker Settlement"), Mr Walker appointed two trustees, PEV and Lex Nominees International Limited (a company supplied by NH&P), as personal and corporate trustee respectively. It is normal in Jersey to have such an arrangement, which thus ensures both continuation of succession and the involvement of an individual, and also the existence of a team of staff to assist the trustees. Subsequently on 10 July 1997 another such company Walker Representatives Limited ("WRL"), of which PEV and other NH&P or, subsequently, RTCJ, partners or directors, including Ms Anita Lovell, were directors, became the corporate trustee, and an associate of Mr Walker, a Mr Mark Chown, at his instance became an additional personal trustee on 1 February 2001. A company or entity run by another associate of Mr Walker, Worthy Trust Company Ltd, provided administrative services to the Walker Trusts until 1996, whereafter NH&P, and subsequently RTCJ, became the administrators. An Administration Agreement dated 31 December 2002 (the "Administration Agreement") was agreed between WRL and RTCJ, which set out the terms upon which RTCJ was administering the trust, to include (as set out in a Schedule of Services) procuring the services of its directors to act in their capacity as directors of WRL, the corporate trustee. A special 'Office' was set up in 2003 within RTCJ, called the Walker Family Office, of which PEV was non-executive Chairman and Ms Lovell managing director, dedicated to the administration of the various Walker Trusts. PEV retired as personal trustee on 21 July 2009.

5

NH&P and, subsequently, RTCJ submitted invoices at all times from 1996 to the Trust (approved until his death in August 2000 by Mr Walker, and thereafter by a close colleague of Mr Walker, a Mr Brown), for all the services provided to the Walker Trusts, and in particular the 1987 Settlement. Until 2002 a fixed annual ' responsibility fee' was charged, as well as time charges, but from then on such fee was no longer charged and the invoices were rendered with a full detailed backup account of the time spent variously by PEV, Ms Lovell and all other RTCJ employees, without differentiation as to whether the services were provided in respect of administration, corporate trusteeship or personal trusteeship. In particular PEV did not so differentiate when he notified his time spent to RTCJ for inclusion in their fee notes, and at no time was this basis of charging ever challenged.

6

As an employee of RTCJ from 31 March 2000, PEV was remunerated on the basis of the Employment Contract by a fixed salary (together with certain benefits such as private medical insurance) specifically upon the basis that (by clause 3(E)) the sum paid was inclusive of any remuneration to which he might be entitled by way of holding office in any external body, such that he was to give credit to RTCJ in respect of any such remuneration. RTCJ and Rathbone entered into with him an Instrument of Release and Indemnity dated 31 July 2003 ("the Indemnity"), whereby, upon terms to which I shall refer further below, they gave him an indemnity (limited to £40,000,000 per event and excluding fraud or wilful misconduct by him) in respect of his provision of any services or conducting of any activity " at the request or in the service of" RTCJ, Rathbone or any group member including (by clause 1.3.2) " acting as a trustee", confirming by clause 4 that the indemnities extended to " all existing and future trusteeships…where the Employee is… acting…on behalf of [RTCJ]". By the Consultancy Agreement, his remuneration was provided for as follows:

" 5.1 [RTCJ] shall pay you by way of a consultancy fee one half of all time costed fees recorded by you and billed to Clients and paid…..

5.2 The consultancy fee will not include any fixed trustee or director's responsibility fees which shall accrue to [RTCJ] absolutely."

There was no mention of professional indemnity insurance in the Employment Contract, but in the Consultancy Agreement there was the following clause:-

" 5.3 [RTCJ] will provide you with Professional Indemnity Insurance (on a similar basis to that provided to [RTCJ's] staff) [f] or work done and services provided to Specified Clients and any Clients for which [RTCJ] receives appropriate fees."

7

Such cover was taken out by Rathbone, for itself and its subsidiaries (including RTCJ). The first layer of £5,000,000 is with AIG. The excess layer (limited to a maximum of £45,000,000) is placed with the Defendants. The Jersey proceedings are brought against PEV, WRL and Mr Chown in respect of alleged breaches from " the end of 1999" of their obligations as trustees. By a proposed amendment, permission for which is imminently being considered by the Jersey Court, the plaintiff beneficiaries of the 1987 settlement are seeking to join RTCJ as itself liable and as vicariously liable for PEV. In relation to the present proceedings against PEV, PEV and Rathbone now seek cover under the 2008 – 2009 Professional Liability Insurance: AIG as primary insurer has accepted cover (although placing a reservation in the light of these proceedings), but the Defendants as excess insurers have denied any cover, and these proceedings are now brought by the Claimants to establish such cover against continuing substantial defence costs and against liability in the Jersey proceedings, if such be established at the Jersey trial. The policy is a claims made policy and there is no issue before me that there has been timeous notification (28 July 2008). I am only asked to deal with the issue of cover since 31 March 2000, when PEV became a employee of RTCJ.

8

The trial of these proceedings relates in general terms to three issues, namely first a coverage issue, secondly whether, by virtue of an 'excess' clause, PEV must first exhaust his remedies otherwise than against the Defendants (in particular PEV's right of indemnity against his co-insured Rathbone and RTCJ), and whether the Defendants have a right of subrogation or contribution (again primarily as against Rathbone or RTCJ). There has been some short oral evidence, from PEV himself, but also from Mr Christopher Harris, Senior Partner in NH&P and fellow Director of RTCJ, and Mr Andrew Pomfret, the Chief Executive of Rathbone. This related primarily to explaining the practice of NH&P and RTCJ, and in Jersey generally, of appointing personal and corporate trustees, the degree of supervision and control under which PEV worked while employee and director of RTCJ and trustee of the Walker Trust, and the method of fee charging, to which I have referred: in particular it was not challenged that PEV never received any personal remuneration from the Walker Trusts for his position and work as trustee for more than 20 years.

9

As for the excess policy, it followed the form of the primary policy (expressly the copyright of AIG), and there was no dispute that insofar as the contra proferentem approach became relevant, it would be applied against the insurers. There was considerable discussion of the recent cases on principles of construction of contract, particularly of course by reference to Rainy Sky S.A v Kookmin Bank [2011] 1WLR 2900, and also Charter Re v Fagan 1997 AC 353 at 384, 388: but notwithstanding considerable reference to authorities it did not seem to be in dispute between the...

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