Standard Life Assurance Ltd v Oak Dedicated Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Tomlinson: |
| Judgment Date | 13 February 2008 |
| Neutral Citation | [2008] EWHC 222 (Comm) |
| Docket Number | Case No: 2006 Folio 863; 2007 Folio 1105; |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 13 February 2008 |
[2008] EWHC 222 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Hon. Mr Justice Tomlinson
Case No: 2006 Folio 863; 2007 Folio 1105;
2006 Folio 433
George Leggatt QC and Simon Birt (instructed by Messrs Ince & Co) for the Claimant
David Railton QC and Tim Lord (instructed by Messrs Kennedys) for the Insurer Defendants
Tom Weitzman QC and Peter Ratcliffe (instructed by Messrs Holman, Fenwick & Willan) for the (1) Defendants
Derek Holwill (instructed by Messrs Herbert Smith) for the (2) Defendants
Hearing dates: 19–22, 26–29 November, 3–6 December 2007
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
In these conjoined actions Standard Life Assurance Limited, formerly the Standard Life Assurance Company, sues its professional indemnity underwriters for the period 1998 to 200It also sues its erstwhile brokers Aon Limited, who placed the 1998 to 2001 cover on its behalf.
At all relevant times the Standard Life Assurance Company, to which I shall refer hereafter as SLAC, was a mutual society. It has recently demutualised and its business, including its rights of action in these proceedings, has been transferred to Standard Life Assurance Limited, to which I shall refer hereafter as SLAL, pursuant to an insurance business transfer scheme under Part VII of the Financial Services and Markets Act 2000. A point arises out of that transfer but save in dealing with that discrete point I shall refer to the claimant insured entity as SLAC, as indeed at all times material to the placement of the cover it was.
The Defendants in the action against insurers are, with three absentees, the underwriters who subscribed to an insurance policy which provided SLAC with liability cover of £75 million in excess of £25 million for claims made during the period of three years from 15 May 1998 to 14 May 2001. The most notable absentee underwriter not sued is The Independent Insurance Company (“The Independent”). Since July 2001 that company has been in provisional liquidation. As it happens The Independent led the 1998–2001 policy, but its subscription bound no other following underwriters. SLAC has concluded a settlement agreement with The Independent.
The background to the claims can be shortly stated. It is what is colloquially known as the mis-selling of mortgage endowment policies which were widely sold in the last 30 years or so of the twentieth century. As is well known these were financial products sold to prospective mortgage borrowers on the basis that their projected maturity value would be sufficient to discharge the mortgagor's outstanding debt to the mortgage lender at the conterminous final repayment date of an interest-only mortgage. As is equally well known many such policies have in the event on maturity realised less than was required for that purpose or are projected to fall short. As a result in large part of regulator driven market-wide enquiry and reassessment, mortgage endowment providers including SLAC have incurred substantial liabilities arising out of what has been determined to be the mis-selling of such policies. The claims underlying these proceedings alone have involved payment to date by SLAC of over £100 million in compensation to over 97,000 investors.
On 30 April 2001 SLAC gave notice to the underwriters on the 1998–2001 policy, to which I shall refer hereafter as “the policy”, of circumstances which might give rise to claims against it in respect of which SLAC would seek indemnity under the policy. SLAC now claims an indemnity under the policy for the full sum insured. Although the individual claims made by investors in relation to their endowment policies are relatively small, the average payment being well under £10,000, it is SLAC's case that they arise from a single originating cause or source. Summarising, that cause or source is said to be a systemic failure as to the approach on the part of SLAC (and more generally within the financial services industry within the UK) relating to the sale of endowment mortgages, and thus to the sale of mortgage endowment policies. There is said to have been a systemic failure as to the ascertainment and recording of the customer's attitude to risk. The relevance of this is that the policy, as is typical, contains a provision permitting the aggregation of claims arising from or in connection with or attributable to any one originating cause or source. Thus it is that SLAC contends that it may recover from underwriters the full policy limit, since these 97,000 small claims aggregate to produce a total loss of over £100 million, resulting in a claimed recovery of the full £75 million excess of £25 million.
Almost every aspect of SLAC's claim is contentious, beginning with the suggestion that notification thereof was late. Underwriters also deny that SLAC has identified or can identify a permissible single aggregating cause or source of the claims. However for present purposes I am concerned with only two of underwriters' defences. Underwriters contend that even if the individual claims arise from a single originating cause or source, a separate excess of £25 million applies to each individual claim because they were made by different individual claimants. In support of this contention underwriters rely upon the fact that the excess is described in the Schedule to the policy as £25 million “each and every claim and/or claimant”. Insurers argue that the words “and/or claimant” in the Schedule have the effect that a separate excess of £25 million is applicable in respect of each one of the 97,000 claimants. Underwriters also put SLAL to proof that the Part VII transfer has been effective to vest in it a cause of action. By the end of the trial this had become a positive averment to the effect that the Part VII transfer had had the unintended consequence that neither SLAC nor SLAL enjoy any relevant rights of action against underwriters.
In the separate action against the brokers, Aon, SLAL claims damages from Aon in respect of any sums which SLAL is not able to recover from the underwriters under the policy. It is SLAL's case that, whatever the true construction of the policy, Aon was in breach of duty in arranging insurance cover which did not clearly and indisputably meet its client's requirements and which has provoked this litigation.
Aon claims damages in turn from Messrs Reynolds Porter Chamberlain, a firm of solicitors who in November 1999 were asked to review the policy wording and who advised thereon in December of that year. Although I am for present purposes not directly concerned with this further claim, it is only right that I should point out straightaway that it is not suggested that Messrs Reynolds Porter Chamberlain were specifically asked to advise on the wording in the schedule to the policy with the effect of which I am immediately concerned. However the advice of Messrs Reynolds Porter Chamberlain is relied upon indirectly in this action by Aon as being supportive of its contention that it was not itself negligent in the manner alleged.
Cresswell J directed that the “Insurer Action” and the “Broker Action” should be managed and tried together, with disclosure and evidence in each to stand as disclosure and evidence in the other and findings to be binding in both actions. He also directed that there should be a staged trial, with certain issues to be tried in Stage 1 and all other issues to be tried as Stage 2 after determination of Stage 1.
The Stage 1 issues which remain live and which I must determine are, broadly:
) The transfer issue (Issues 1 and 9)
) The construction issue, i.e. whether the policy permits aggregation of claims by different claimants against SLAC arising from or in connection with or attributable to any one act, error, omission or originating cause or source (Issue 3)
) The liability of Aon, (Issues 11–14, 17 and 18) specifically:
a) Whether Standard Life required cover against liability for claims which in their nature were individually likely to be well under the policy excess of £25 million but which together exceeded that figure, where such claims arose from or in connection with or were attributable to any one act, error, omission or originating cause;
b) Whether Aon understood that Standard Life required cover as set out above;
c) The nature and extent of the contractual and tortious duties owed by Aon to Standard Life;
d) Whether Aon was in breach of duty or negligent in and about the placement of the policy;
e) Causation: if Aon had not been in breach of duty, then:
i) Would Standard Life have instructed Aon to obtain cover of the kind it required (that is, without the words “and/or claimant” in item 4(iof the schedule to the policy)?
ii) Would Aon have been able to obtain such cover at a premium acceptable to Standard Life?
iii) Would Standard Life have been able to recover under such cover in respect of the sale of endowment policies?
f) Whether such liability as Aon may have to Standard Life is to be reduced by reason of the contributory negligence of Standard Life – (Issue 17);
g) Whether Standard Life's claim is time-barred.
When Cresswell J gave this direction there was, very significantly, a further Stage 1 issue which was whether, if the policy on its true construction permitted aggregation of claims by different claimants, SLAC was nonetheless estopped or otherwise precluded from so contending....
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