Travelers Insurance Company Ltd v XYZ
| Jurisdiction | England & Wales |
| Judge | Lord Briggs,Lady Black,Lord Kitchin,Lord Reed,Lord Sumption |
| Judgment Date | 30 October 2019 |
| Neutral Citation | [2019] UKSC 48 |
| Court | Supreme Court |
| Date | 30 October 2019 |
[2019] UKSC 48
Lord Reed, Deputy President
Lady Black
Lord Briggs
Lord Kitchin
Lord Sumption
Appellant
Colin Edelman QC
Ben Lynch
(Instructed by DWF LLP (London))
Respondents
Hugh Preston QC
Marcus Pilgerstorfer
(Instructed by Hugh James (Cardiff))
Heard on 11 June 2019
( with whom Lady Black and Lord Kitchin agree)
This appeal challenges the making of a non-party costs order under section 51 of the Senior Courts Act 1981 against the product liability insurer of one of the defendants in litigation being managed under a Group Litigation Order (“GLO”).
Although the particular circumstances which led to the making of the non-party costs order may fairly be described as unusual or even rare, they give rise to important questions about the principles upon which the exercise of the court's broad jurisdiction to make such orders should depend, where the non-party is a liability insurer, both funding and largely directing the conduct of its insured defendant's defence in the relevant litigation. The search for principle is particularly acute where, as here, some but not all the claims in the group litigation fall within the confines of the cover provided by the insurance.
In Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965, 975 Lord Goff of Chieveley said that it was for the rule-making authority making rules of court and for the appellate courts to establish principles upon which the broad discretionary power to make costs orders against non-parties should be exercised. As will appear, a series of authorities have sought to lay down some principles regulating the exercise of this discretion against non-party insurers. This appeal provides an opportunity to review that developing jurisprudence.
The group litigation which has generated this appeal concerns the supply of defective silicone implants for use in breast surgery, manufactured by the French company Poly Implant Prothèse (“PIP”). One of the defendants, Transform Medical Group (CS) Ltd (“Transform”) operated medical clinics which supplied and fitted implants manufactured by PIP to customers in England. The appellant Travelers Insurance Co Ltd (“Travelers”) provided product liability insurance to Transform which covered liability for bodily injury (or property damage) occurring during the period of insurance, which ran from 31 March 2007 to 30 March 2011. Many of those implants ruptured, causing bodily injury (as defined), principally in the form of leakage of their contents. Of the 1,000 or so women claimants joining in the group litigation, some 623 of their claims were brought against Transform, which was one of a number of similar clinics joined as defendants in the litigation. Of the 623 claiming against Transform, some 197 were later identified as having suffered bodily injury from defective PIP implants during the period covered by Travelers' insurance. Of the 426 remaining claimants against Transform, all of whose claims fell outside the cover provided by Travelers' insurance, some 194 (labelled in the proceedings the “worried well”) had not yet suffered bodily injury from a rupture of their implants, but were exposed to a risk that they would do in the future. The remainder had suffered bodily injury from a rupture of their implants outside the period covered by Travelers' insurance. Collectively, the 426 claimants within those two classes have been labelled the “uninsured claimants”. They are the respondents to this appeal.
Product liability cover was provided by Travelers to Transform under standard form policies which, broadly speaking, required Travelers to indemnify Transform in respect of the costs (and costs liability) incurred or arising in proceedings where the claims made fell within the cover provided and, in relation to such claims, conferred upon Travelers the right to control the conduct thereof on behalf of Transform. Further, Transform was prohibited from making admissions or offers to settle in relation to claims falling within the cover provided by the policies, without Travelers' consent. Transform was required to give Travelers all information and assistance which it might require in connection with any such claim.
The 1,000 claimants pursued their claims arising out of allegedly defective PIP implants pursuant to a GLO made on 17 April 2012 by Wyn Williams J. The litigation was case managed by Thirlwall J (later LJ) at all material times after October 2012. As is reflected in para 5 of the GLO, it was appreciated from the outset that the claims were likely to give rise to common or related issues of fact and law. Paragraph 12 of the GLO made provision for sharing of common costs (that is all costs other than those which are purely personal to each claimant), on the basis of dividing common costs by the number of claimants pursuing their claims, and for each party's liability for, and entitlement to recover, costs to be several and not joint.
By case management orders made in 2013 Thirlwall J identified two common issues for early determination and selected four test claims to be fast-tracked for the purposes of their early determination ahead of the remainder, which were all stayed. In order to preserve the anonymity of the claimants I shall refer to them as claims A to D. Transform was the defendant clinic in all four of them. Claims A and B were made by two of the 197 claimants against Transform whose claims fell within the cover provided by the Travelers' policies (“insured claimants”). Claims C and D were by uninsured claimants. Claim C asserted bodily injury falling outside the period of insurance. Claim D was by a worried well claimant.
The selection of the test cases was not made by reference to any understanding on the part of the court, or the claimants, about the extent and terms of Transform's product liability insurance from Travelers. It was, therefore, mere happenstance that two of the test claims were insured, and two uninsured. Furthermore, the costs liability and entitlement arising from the litigation of the common issues in the four test claims was itself shared among all 1,000 claimants and, in particular, all 623 claimants against Transform, on a several-only basis pursuant to the GLO.
Transform had obtained the PIP breast implants supplied to its customers from a company called Cloverleaf Products Ltd (“Cloverleaf”), against which Transform made a Part 20 claim for an indemnity for any liability of its own to the claimants. Cloverleaf was itself insured by Amlin Corporate Solutions Ltd (“Amlin”) which provided cover to Cloverleaf in respect of the period 2004 to 2007, for which Transform was itself uninsured.
The claimants' legal team had from an early stage in the litigation been understandably concerned to discover, if they could, the nature and extent of Transform's insurance cover, all the more so when in about mid-2013 they became aware that Transform might be in financial difficulties. Inconclusive discussions took place between the claimants' legal team, the solicitors jointly retained by Transform and Travelers to conduct Transform's defence, and between Transform, Travelers and those solicitors, about what if any disclosure might voluntarily be made. Eventually the claimants made an application against Transform for disclosure of information about its insurance position in July 2013, which was heard by Thirlwall J in late September and dismissed (subject to one exception) in her reserved judgment on 22 November 2013: [2013] EWHC 3643 (QB). The exception was that she directed Transform to inform her, confidentially, as to whether it had the resources to fund its own defence up until trial. In the event however, the relevant limitations upon Transform's cover from Travelers, namely the temporal limits and the exclusion of worried well claims, were voluntarily disclosed to the claimants by June 2014. It was by then apparent that, without insurance, Transform would be unlikely to have the resources to pay compensation or costs to successful uninsured claimants.
The judge was later to find that, had the claimants' solicitors known from the outset about those limits on Transform's insurance cover, the uninsured claimants would not have commenced or at least continued their claims as registered members of the claimants' group under the GLO. But by June 2014 they had on a several-only basis participated in the cost of the prosecution of the common issues in the four test cases, upon which considerable outlay had been expended, including on the obtaining of vital expert evidence probative of the deficiencies in the quality of the PIP implants. They had done so on the basis of no win no fee contingency fee agreements, backed by after the event (“ATE”) insurance so that, although to that extent protected in their own pockets, the substantial recoveries (including success fees and ATE premium) which might be expected to be made after a successful claim against an insured defendant were threatened with being frustrated if the uninsured claimants' only recourse lay against the financially distressed Transform (which, incidentally, went into insolvent administration a year later).
It might be asked therefore why, after the disclosure of the limitations on Transform's insurance cover was made in June 2014, the uninsured claimants against Transform continued as members of the GLO, or the group as a whole continued to...
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