X Y Z v Various
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Thirlwall DBE |
| Judgment Date | 22 November 2013 |
| Neutral Citation | [2013] EWHC 3643 (QB) |
| Court | Queen's Bench Division |
| Date | 22 November 2013 |
[2013] EWHC 3643 (QB)
Mrs Justice Thirlwall DBE
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE PIP BREAST IMPLANT LITIGATION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr H Preston QC (instructed by Hugh James Solicitors) For The Claimants
Mr J Waite QC & Ms Erica Power (instructed by Berrymans Lace Mawer LLP) For The Defendants
Hearing dates: 27 th, 30 th September 2013
In this group litigation nearly a thousand women seek damages from companies running private hospitals for supplying to them defective implants manufactured by the French company, PIP, for use in breast implant surgery. It is their case that the implants were of unsatisfactory quality in breach of S4(2) of the Supply of Goods and Services Act 1982 [SOGSA]. A significant number of claimants also bring actions against the providers of credit cards pursuant to the Consumer Credit Act 1974 (as amended by the 2006 Act). Some of those claims may soon be included in the Group pursuant to an order I made at the Case Management Conference in August of this year. Further claimants bring actions against the surgeons who carried out the surgery. Those claims are not within the GLO although that may change.
The estimated average value of each claim is £13,000. Thus the total value of the claims is in the region of £13m, plus costs on both sides. Over 670 claims are brought against the second defendant, Transform Medical Group (CS) Ltd (Transform). Another defendant, Harley Medical Group, which faced 1200 claims, went into liquidation at an early point in this litigation. Those claims were removed from the group and currently remain outside. I am told that negotiations are taking place between the claimants and the liquidators with a view to the claimants obtaining assignment of the Harley Group claim, if any, against the UK suppliers of the breast implants, Clover Leaf. Clover Leaf already face claims from other defendants under Section 14(2) of the Sale of Goods Act (SOGA) 1979 (as amended). Those Part 20 claims are being managed within the group litigation.
I have held a number of case management hearings. In early August after significant argument and discussion I gave comprehensive and detailed directions with a timetable leading to trial in October 2014. This will be a trial of three issues in four sample cases in which Transform is, effectively, the lead defendant. The issues are:
In the sample cases
i. Were the implants supplied in breach of the implied term as to satisfactory quality pursuant to S4(2) of SOGSA?
ii. Were the implants supplied by Clover Leaf to Transform in breach of the term as to satisfactory quality implied under S14(2) of SOGA (as amended)?
iii. What remedies shall be afforded by S11 (M) (P) of SOGSA insofar as such issues are raised in the sample cases?
The decisions I make in the trial should lead to the resolution of the whole of the group litigation. If the claimants succeed at trial, their cases and the others should be amenable to settlement. If not, there will be a need for some relatively short hearings on quantum. If the claimants fail it is most unlikely that there will be a need for further hearings.
By this application the claimants seek an order
"that Transform do provide information to the claimants as to the nature and extent of its liability insurance cover in respect of its potential liability in these proceedings to the relevant claimants on the group register and/or that it do serve a copy of the relevant insurance policy documents upon those said claimants, pursuant to CPR part 18 and/or part 3.1(2) (m) and the defendant do
pay the claimants' costs in any event".
In the course of his submissions, Mr Preston accepted that the claimants want to know whether:
Transform had sufficient insurance
i) To fund its participation in the litigation to the end of the trial
ii) To meet any order for damages
iii) To meet any order for costs.
The information is required, the claimants say, because they have serious concerns about the financial position of Transform. Mr Preston submits that unless Transform has adequate insurance cover it is likely that i) successful claims against Transform will not be met, nor will the costs incurred by their lawyers with whom they have Conditional Fee Agreements. ii) Transform will collapse before or at the time of trial, with the obvious consequences for the timetable and the resolution of all the cases.
The financial position of Transform
In support of the application, the claimants rely on a witness statement (no.14) from the lead solicitor, Mark Harvey, of Messrs Hugh James. He exhibits to the statement a report dated 22 nd July 2013 from Hugh Gregory, a fellow of the Institute of Chartered Accountants, described by Mr Harvey as a forensic accountant. Mr Gregory has reviewed Companies' House files in respect of Transform, its parent company and other related companies. His researches reveal the following, which is not controversial. Transform is a wholly owned subsidiary of Health and Surgical Holdings Ltd. (H & S). It has guaranteed the liability of H & S under a substantial loan of which around £8 million is repayable in May 2015. The consolidated balance sheet for H & S for the year ending May 2012 shows it has insufficient assets to meet its debts ie it is technically insolvent. In the course of submissions Mr Waite said that "technically insolvent" was not understood by Transform. I reject that. It is quite plain from the statement of Mr Ainley, Chief Executive of Transform, that he understands the term. He says that technical solvency is not the issue. He says that the H & S accounts were signed off by its auditors (Ernst and Young) on a going concern basis. H & S can meet its liabilities as they fall due for the twelve months from May 2012. Those liabilities do not, I note, include any part of the £8m loan repayable no later than May 2015.
The profit and loss accounts of Transform show that a trading profit of £10 million in the year ending May 2008 has declined to a trading loss in the year to 2012 of £800,000. Net assets have reduced from £36,347 to £7,606. Considered in isolation, Transform currently has net assets of £8 million. On the information available to me, they will reduce by at least £800,000 this year to take account of the trading loss to which I have just referred. Mr Preston submits that there is no reason to suppose that the trend of the last 5 years will change. Mr Ainley describes in his statement the difficult trading conditions which have faced Transform and many other companies in recent years.
Mr Waite submits that the corporate structure is entirely normal in the modern world. My concern is not with the structure but with how the debts are to be paid. Mr Waite says that Mr Ainley is not in a position accurately to predict what the future will hold and how H & S will meet its liabilities. I cannot speculate. On the evidence before me the only way that H & S can meet its liabilities under the loan is by reliance on Transform's guarantee. Should Transform be called upon to honour the guarantee, payment of £8 million would erase its assets at a stroke. It follows therefore that the claimants' concerns are entirely justified.
Mr Waite accepted that on the evidence I was entitled to conclude that Transform may not be able to fund the litigation to trial, meet any award of damages or meet any award of costs. I so conclude.
Insurance
For many months the claimants' solicitors have sought reassurance from Transform and its advisers about the extent of its insurance policies. Transform's solicitors refer in correspondence to their "insurer clients". They are not however prepared to indicate (even on strict terms as to confidentiality) whether or not the insurance is adequate to cover the costs to Transform of running the litigation or to meet an award of damages and to meet costs. In his statement the Chief Executive refers to insurance policies in the plural. In the same paragraph (173) he deals with the Part 20 claims by Transform against Clover Leaf. The existence of the policies and the claims against Clover Leaf are included as part of the explanation as to why there is no provision in the accounts for the PIP claims. Thus Transform hints that it may be in a position to fund the litigation and pay the claims but refuses to make the position clear.
If Transform has adequate insurance then there is no need for concern. If they do not then the directions and timetable which have been fashioned with care and after significant expense are in jeopardy. Mr Waite submits that if it becomes clear (presumably at a moment of Transform's choosing) that Transform is not able to continue funding this litigation a few minor adjustments to the case management directions will be necessary. I do not share his relaxed approach. What will be required, as a minimum, will be new sample cases with different claimants, different defendants and (for the defendants) different legal teams. I would hope that the arrangements for experts would be amenable to rearrangement without the need for change of individuals but I do not know. Whether it would be possible to maintain the current trial date I rather doubt. To have any prospect of doing so I would need to revisit the case management directions now. Such a course would be unnecessary and wasteful were Transform ultimately to reveal it had adequate insurance after all.
Transform's position comes to this: we have insurance but we are not prepared to say how much. Transform claimants must take their chances. The court will have to cross its fingers, as will all the other litigants. If Transform collapses before the conclusion of the trial the court can rewrite the timetable. The other parties...
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