Timothy Crowden and Another v QBE Insurance (Europe) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Peter MacDonald Eggers QC |
| Judgment Date | 19 October 2017 |
| Neutral Citation | [2017] EWHC 2597 (Comm) |
| Docket Number | Case No: LM-2017-000052 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 19 October 2017 |
[2017] EWHC 2597 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
LONDON CIRCUIT COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Peter MacDonald Eggers QC
Case No: LM-2017-000052
Donald Lilly (instructed by Edwin Coe LLP) for the Claimants
Tony Singla (instructed by Plexus Law Ltd) for the Defendant
Hearing dates: 14th September 2017
Introduction
The Claimants are the trustees of a self-administered pension scheme, the Crowden Executive Pension Scheme, and are the sole beneficiaries thereunder. The Claimants engaged the services of a financial adviser, Target Financial Management Ltd ("Target"), to provide investment advice. The Claimants commenced legal proceedings and obtained judgment against Target in respect of negligent investment advice given in respect of two financial instruments arranged by Target: (a) the Keydata Secure Income Bond ("the Keydata Bond") issued by Keydata Investment Ltd ("Keydata"); and (b) the Meteor Prime Growth Plan 5 ("the Meteor Plan") operated by Meteor Assets Management Ltd ("Meteor").
The Defendant ("QBE") was Target's professional indemnity insurer and had issued a policy of professional liability insurance (no. 011972/01/2009 and dated 19th February 2009) in favour of Target ("the Policy").
On 3rd August 2016, the Claimants commenced these proceedings against QBE claiming an indemnity under the Policy in respect of Target's liability to the Claimants for negligent investment advice. The Claimants' title to sue arises from the operation of the Third Parties (Rights against Insurers) Act 1930, as Target entered into liquidation on 30th May 2013.
QBE applies for summary judgment dismissing the claim pursuant to CPR rule 24.2(a)(i) or an order striking out the claim on the ground that the Claim Form and the Particulars of Claim disclose no reasonable grounds for bringing the claim pursuant to CPR rule 3.4(2)(a). Other than the nature of the relief, Mr Tony Singla, acting on behalf of QBE, said that QBE's entitlement to either summary judgment or the striking out of the claim, if justified, arises on the same grounds.
The basis of QBE's application is that it is not liable to indemnify Target, and therefore the Claimants, under the Policy for two reasons. First, there is a policy exclusion — an Insolvency Exclusion — by which QBE bears no liability under the Policy in respect of Target's liability to the Claimants. Second, at the relevant times, the Claimants were not possessed of the rights of action against Target, because they had been assigned to the Financial Services Compensation Scheme ("FSCS"), which had paid the Claimants some compensation.
The Keydata Bond
In 2005, Target advised the Claimants to invest in the Keydata Bond. The Claimants invested £200,000 in the Keydata Bond. The Keydata Bond was issued by Keydata and gave the Claimants a direct, participating interest in an underlying bond issued by SLS Capital SA ("SLS").
On 2nd June 2009, Keydata defaulted and stopped paying the returns due. On 8th June 2009, Keydata entered into administration. As a result, the FSCS declared Keydata to be " in default". On 1st October 2009, the Luxembourg court ordered the liquidation and winding up of SLS.
The Claimants claim that they suffered losses in the approximate sum of £150,000. As a result of their losses associated with this investment, on 24th November 2009, the Claimants made a complaint and an application for compensation to the FSCS in respect of Keydata.
On 15th February 2011, the FSCS upheld the complaint in respect of Keydata and paid compensation to the Claimants in the sum of £84,642.92. The FSCS found that the total compensatable loss was £162,233.11, but paid the lesser sum because of limits on the compensation recoverable from the FSCS. In its letter informing the Claimants of its decision, the FSCS stated that " Please note that, by accepting this payment, you are accepting compensation in full and final settlement of your claim for compensation to FSCS, and in discharge of FSCS's obligations to you. You will also transfer to FSCS your legal rights against the Firm [and third parties] in accordance with Section K of the Application Form". I refer to section K of the application form below.
Accordingly, as a condition of the payment of such compensation, there was an assignment of the Claimant's rights against Target to the FSCS in respect of Keydata. However, the extent of such assignment is in issue.
On 16th August 2011, the FSCS and the Claimants concluded a reassignment agreement under which such rights against Target as were assigned to the FSCS were assigned back to the Claimants. Clause 1 of the Reassignment Agreement provided that " FSCS reassigns absolutely to the Claimant all rights claims and causes of action that it has against the party named in C above [Target] in respect of the Claim ("the Reassigned Rights")". Clause 5 of the Reassignment Agreement provided that " The Claimant agrees that in respect of the Reassigned Rights the proceeds of the claim shall first be applied to repay an amount equal to the Compensation Sum to FSCS together with interest on the Compensation Sum from the date of receipt of the proceeds by the Claimant to the date of payment by the Claimant to FSCS … The payment to FSCS shall be made after the deduction from the proceeds of the Claimant's reasonable legal costs incurred in pursuing a claim in respect of the Reassigned Rights". The phrase " Compensation Sum" is defined in the agreement to mean " the aggregate amount FSCS will pay or has paid to you in compensation in respect of your Claim".
In October 2011, the FSCS instituted proceedings against Target, and other defendants, including in respect of the Claimants' claim relating to Keydata. However, by a notice of discontinuance, the FSCS discontinued those proceedings.
The Meteor Plan
In 2008, Target advised the Claimants to invest in the Meteor Plan. The Claimants invested £150,000 in the Meteor Plan. Under the Meteor Plan, the Claimants acquired securities issued by Lehman Brothers Inc ("Lehman").
On 15th September 2008, Lehman entered into Chapter 11 protection in the United States, as a result of which the Claimants' interests were converted into unsecured participation in any distribution under the Chapter 11 process. Meteor was not involved in any insolvency process. The Claimants claim that they have suffered losses in the approximate sum of £50,000 in respect of this investment.
The Claimants lodged a complaint in respect of Meteor with the FSCS, but the complaint was not upheld and no compensation has been paid to the Claimants.
The claim against Target
At the end of 2011 or the beginning of 2012, Target entered into administration. On 30th May 2013, Target entered into liquidation.
On 22nd February 2012, the Claimants made their complaint and application for compensation in respect of Target to the FSCS. The application related to the Keydata Bond and the Meteor Plan. The Claimants completed an application form which included their agreement to the terms of payment set out in section K of the form (discussed below), although one page of section K was omitted from the copy of the application form before the Court.
On 13th June 2012, the FSCS declared Target to be " in default". On 23rd April 2013, the FSCS upheld the complaint in respect of Target with respect to its advice as to Keydata and paid compensation to the Claimants in the sum of approximately £77,598.11 (including interest of £14,779.53). In its letter informing the Claimants of its decision, the FSCS stated that " Please note that the compensation payment is in full and final settlement of your claim for compensation from FSCS, and in discharge of FSCS's obligations to you. Your rights against the firm and any relevant third parties are also transferred to FSCS".
On 24th April 2013, the First Claimant wrote to the FSCS enquiring whether the Claimants retained rights of action against Target. Later that day, the FSCS replied that " The rights against IFA were used when you made the negligence claim against [Target]. Now that we are paying the Keydata element, your rights in respect of this portion pass to FSCS".
The Claimants have not received compensation from the FSCS in respect of their complaint against Target relating to the Meteor Plan. This is confirmed by the witness statement of Mr David Greene dated 2nd August 2017, made on behalf of the Claimants, at paragraph 18. Exhibited to Mr Greene's statement is a letter from the FSCS indicating that a payment might be made at some future time.
In May 2014, the Claimants commenced proceedings against Target claiming damages for negligence in respect of the investment advice given in relation to the Keydata Bond and the Meteor Plan. The liquidators of Target decided not to defend the claim. On 27th June 2014, by a letter sent by the Claimants' solicitors to QBE's solicitors, QBE was informed of these proceedings. During a case management conference on 8th August 2014, provision was made for allowing QBE to intervene in the proceedings or to take over the conduct of the defence. This direction was not made on the application of QBE. Indeed, earlier, on 16th July 2014, by a letter sent by their solicitors to the Claimants' solicitors, QBE indicated that it declined to participate in the proceedings because it did not consider itself to be liable to indemnify Target under the Policy.
On 28th January 2015, the Claimants' solicitors wrote to the FSCS referring to the proceedings against Target, with the intention to pursue Target's insurers (QBE). The...
To continue reading
Request your trial
-
The Financial Conduct Authority v Arch Insurance (UK) Ltd
...was correctly summarised by Mr Peter MacDonald Eggers QC sitting as Deputy High Court Judge in Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm); [2018] Lloyd's Rep IR 83, at [65], where, after considering Impact Funding Solutions, he said: “65. In my judgment, applying this app......
-
Technip Saudi Arabia Ltd v The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company
...of Mr MacDonald Eggers, sitting as a Deputy High Court judge in the Commercial Court, in Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm) at [65]: “[65] In my judgment, applying this approach, the Court must adopt an approach to the interpretation of insurance exclusions which ......
-
Centriq Insurance Company Ltd v Oosthuizen and Another
...Ltd) [2017] Lloyd's Rep IR 60 (SC) ([2016] UKSC 57) para 7. [6] Crowden v QBE Insurance (Europe) Ltd [2018] Lloyd's Rep IR 83 (Q) ([2017] EWHC 2597 (Comm)) para [7] See generally Prof J Bird et al MacGillivray on Insurance Law 14 ed (2018) paras 11 – 007 to 11 – 008. [8] Above [4]. [9] Conc......
-
Centriq Insurance Company Ltd v Oosthuizen and Another
...and Another 2018 (2) SA 529 (FB): confirmed on appeal. England G Crowden v QBE Insurance (Europe) Ltd [2018] Lloyd's Rep IR 83 (Q) ([2017] EWHC 2597 (Comm)): dictum in para [65] Impact Funding Solutions Ltd v AIG Europe Insurance Ltd (formerly known as Chartis Insurance (UK) Ltd) H [2017] L......
-
Court Cases And Arbitration
...respect of an additional £150,000 which they had invested through Target in Lehman Bros. Inc. securities. Footnotes 1 Crowden v QBE [2017] EWHC 2597 (Comm) 2 The collapse of Keydata cost the FSCS hundreds of millions of pounds in compensation to investors who lost their life savings. The FS......
-
More News From The English Court On Business Interruption Insurance And COVID-19
..."correctly summarised" by Peter MacDonald Eggers QC sitting as a Deputy High Court Judge inCrowden v QBE Insurance (Europe) Limited [2017] EWHC 2597 (Comm). In that case the judge held "65. In my judgment, applying this approach [ie the Impact Funding approach], the Court must adopt an appr......
-
Insolvency Exclusions
...exclusion in a PIF policy and the insured or a third party is insolvent. This was the case in the 2017 case of Crowden v QBE [2017] EWHC 2597 (Comm). The insured financial adviser had provided investment advice to the claimants, after which the claimants invested £350,000 in bonds issued by......