UK Acorn Finance Ltd v Markel (UK) Ltd

JurisdictionEngland & Wales
JudgePelling
Judgment Date21 April 2020
Neutral Citation[2020] EWHC 922 (Comm)
Docket NumberCase No: CL-2018-000236
Date21 April 2020
CourtQueen's Bench Division (Commercial Court)

[2020] EWHC 922 (Comm)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

HIS HONOUR JUDGE Pelling QC

SITTING AS A JUDGE OF THE HIGH COURT

Case No: CL-2018-000236

Between:
UK Acorn Finance Limited
Claimant
and
Markel (UK) Limited
Defendant

Mr Adam Kramer and Ms Sophia Dzwig (instructed by Rosling King LLP) for the Claimant

Mr Michael Pooles QC and Mr Jack Steer (instructed by DWF Law LLP) for the Defendant

Hearing dates: 9–12 and 16 December 2019

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.

HIS HONOUR JUDGE Pelling QC SITTING AS A JUDGE OF THE HIGH COURT

HH Judge Pelling QC:

Introduction

1

This is the trial of a claim by the claimant brought under section 1(1) and (4) of the Third Party (Rights Against Insurers) Act 1930 (“Act”) by which it seeks to recover an indemnity in respect of two judgments, being a judgment for £385,187.32 and a further judgment for £12,882,713.49, obtained by it against Westoe 19 Limited (formerly Colin Lilley Surveying Limited) (“CLS”), under professional indemnity policies underwritten by the defendant in 2013 and 2014 (collectively “Policies”, and respectively “2013 Policy” and “2014 Policy”).

2

The claimant is a bridging finance lender mainly to agricultural businesses. CLS was a limited company whose business was property valuation. The underlying judgments against CLS concerned a total of 11 agricultural property valuations undertaken between 11 June 2010 and 30 March 2012. In each case the claimant alleged that CLS had negligently overvalued the properties concerned. The defendant purported to avoid the policies in February 2016 and default judgments were entered thereafter in each of the claims against CLS.

3

The defendant maintains that it was entitled to avoid the Policies as a result of misrepresentations (which it is alleged took effect as warranties) and non-disclosures contained in or evidenced by risk profile documents generated by the defendant prior to the renewal of each of the Policies and approved on behalf of CLS. The Policies were each subject to an unintentional non-disclosure clause. It is common ground that the effect of this provision is that the defendant can avoid the Policies only if the misrepresentations relied on by the defendant were not innocent and free from any fraudulent conduct or intent to deceive. The defendant asserts that CLS could not satisfy it that the alleged misrepresentations and non-disclosures relied on were innocent or free from fraudulent conduct or intent to deceive. There is a dispute between the parties as to whether this issue should be judged by the court on the basis of the evidence led before it by the parties or whether the court's ability to intervene is confined to an investigation of the defendant's decision making processes. This is a question of law to which I turn in detail later in this judgment.

4

The trial took place between 9–12 and 16 December 2019. I heard oral evidence from the following witnesses called on behalf of the claimant:

(a) Mr Mark Saunders, a director of the claimant; and

(b) Mr David Linsley, formerly a director of CLS and the individual through whom it is alleged CLS made the misrepresentations on which the defendant relies and who was responsible for much of the business undertaken by CLS at the relevant time.

I heard oral evidence from the following witnesses called on behalf of the defendant:

(a) Mr Nicholas Burgess, one of the defendant's underwriters whose evidence was concerned principally with the underwriting of CLS's insurance policy for 2010 and 2011 and the 2014 Policy;

(b) Mr Timothy Spence, one of the defendant's underwriters whose evidence was concerned principally with the underwriting of CLS's insurance policy for 2012 and the 2013 Policy;

(c) Mr David McKechnie, a claims manager employed by the defendant at the time who was responsible for the avoidance of the Policies;

(d) Ms Sonja Wigglesworth, an underwriting manager employed by the defendant who was concerned with both the underwriting of CLS's Policies and the avoidance process; and

(e) Ms Hannah Purves, a claims director employed by the defendant who was ultimately responsible for the avoidance of the Policies.

I heard expert evidence from Mr David Blackburn who was called on behalf of the claimant and Mr Philip Foley who was called on behalf of the defendant. The defendant also adduced evidence in the form of a written report from another expert Mr Mervyn Iles, who purported to give evidence as to the meaning of the phrase “ sub-prime lender”. His evidence was agreed and he did not give oral evidence.

5

This is a heavily documented commercial dispute relating to events that took place some years ago. In those circumstances, I have approached the factual issues between the parties that are material to this dispute by testing the oral evidence of each of the witnesses wherever possible against the contemporary documentation, admitted and inconvertible facts and inherent probabilities. This is an entirely conventional approach – see Onassis and Calogeropoulos v. Vergottis [1968] 2 Lloyds Rep 403 at 407 and 413. This is not to say that a judge can, or should attempt to, resolve factual disputes by referring only to contemporaneous documentation. It is necessary to consider all of the evidence – see Kogan v. Martin [2019] EWCA Civ 164 per Floyd LJ at paragraphs 88–89. There is nothing either in this authority or the requirement to consider all of the evidence that prevents the evaluation of oral evidence using the techniques I have referred to.

6

Mr Linsley was cross examined on the basis that he was responsible for the misrepresentations on which the defendant relies and that he caused or permitted the representations to be made knowing or believing them to be false or not to be true or on the basis that he was reckless, not caring whether they were true or false. Mr Linsley is not a party or representative of a party but was a witness called by the claimant. He is a chartered surveyor and valuer for whom such findings would by definition be very serious. As he observed in paragraph 7 of his first witness statement …In my 41 years of professional practice I have always been mindful of my ongoing RICS professional and regulatory obligations and prior to this insurance issue throughout my career I have never been accused of dishonesty.” In those circumstances, I remind myself at the outset that whilst the standard of proof in a civil case is always the balance of probabilities, the more serious the allegation, or the more serious the consequences of such an allegation being true, the more cogent must be the evidence if the civil standard of proof is to be discharged – see Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 per Lord Nicholls at 586, where he said:

“‘The balance of probabilities standard means that a court is satisfied that an event occurred if a court considers that on the evidence the occurrence of the event was more likely than not. In assessing the probabilities, the court will have in mind as a factor to whatever extent it is appropriate in the particular case that the more serious the allegation the less likely it is that the event occurred and hence the stronger should be the evidence before court concludes that the allegation is established on the balance of probabilities. Fraud is usually less likely than negligence…Built into the preponderance of probabilities standard is a generous degree of flexibility in respect of the seriousness of the allegation.’”

7

Finally, it is necessary to remember that it does not necessarily follow from the fact that a witness has been shown to be dishonest in one respect that his evidence in all other respects is to be rejected. Experience suggests that people may give dishonest answers for a variety of reasons including an entirely misplaced wish to strengthen a true case that is perceived to be evidentially weak as opposed to a desire to advance a dishonestly conceived case in a dishonest manner. What such conduct will usually mean however is that the evidence of such a witness will have to be treated with great caution save where it is corroborated, either by a witness whose evidence is accepted or by the contents of contemporaneous documentation or is against the witness's interests or is admitted.

The Facts

8

Although this dispute is concerned with the 2013 and the 2014 Policies, it is necessary to consider some of the earlier years in order to set in context the contents of the documents on which the defendant relies. It is common ground that the defendant provided CLS with professional indemnity insurance from 2003 to 2015, although neither party suggests it is necessary to consider any insurance period earlier that the January 2011—January 2012 period.

9

At all material times CLS's insurance brokers were Lycetts and the individual who acted for CLS at Lycetts was Mr White. It is trite law and is not in dispute that an insurance broker is the agent for the Insured not the Insurer.

The 2011 Renewal

10

The renewal process for the 2011–12 insurance period commenced in December 2010. On 15 December 2010, Mr White wrote to Mr Lilley of CLS in these terms:

Professional Indemnity Insurance

Renewal 2011

The above policy falls due for renewal on 28th January 2011.

To ensure that I receive renewal terms on the up to date basis, I would be grateful if...

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