Contracts

Legal costs insurance - Contract terms - Contribution - Implied terms

Greene Wood & McLean v Templeton Insurance Ltd (2009): CA (Civ Div) (Sir Anthony Clarke, Master of the Rolls, Lords Justice Longmore, Hooper): 12 February 2009

The appellant (T) appealed against a decision ([2008] EWHC 1593 (Comm)) permitting the respondent (G) to serve proceedings on it out of the jurisdiction. G cross-appealed against that part of the decision that set aside part of its proposed claim against T.

G was a firm of solicitors who had conduct of proceedings brought by miners against their unions and former solicitors in respect of the handling of their claims for personal injury compensation. T, which was incorporated in the Isle of Man, was the underwriter of after-the-event (ATE) insurance obtained for the miners by G. G had unsuccessfully applied for a group litigation order and had had to pay the costs of that application. The ATE insurance was available for the application and G sought to recover those costs from T, either on the basis that T had directly promised to meet valid claims under the policy, or that G was entitled to seek a contribution from it under the Civil Liability (Contribution) Act 1978. Service out of the jurisdiction was permitted on G’s assertion that T was liable under a contract governed by English law, or, for the purpose of the contribution claim, that T’s liability arose in connection with the ATE policy, which was governed by English law, and that the claim therefore came within rule 6.20(5)(c) of the Civil Procedure Rules. T’s application to set aside that order was refused. Although the judge set aside the claim relying on a direct contract between G and T, he held that the contribution claim was within rule 6.20(5)(c). The issues for determination were whether (i) there was a serious issue to be tried: whether the ATE policy term, that T would meet claims under the policy, should be implied into the contract made between G and T; (ii) the claim for a contribution was ‘a claim in respect of a contract’ for the purposes of rule 6.20(5)(c); and (iii) G and T were liable for the same damage.

Held: (1) There was a serious issue to be tried on G’s claim in contract. There was a bilateral contract between G and T that was intended in due course to create legal relations between T and the individual miners. T knew that G would be guaranteeing to the miners that, if they instructed them to pursue the application for a group litigation order, that would be free of risk as to costs and disbursements if they lost. In those circumstances, a trial judge could conclude that it was a necessary part of the arrangement that T had to agree with G that they would meet the miners’ valid claims. If such a term was not to be implied, and if T refused to indemnify the miners in respect of costs and disbursements, the miners would have recourse to their English solicitors under their guarantee rather than embark on proceedings against an Isle of Man insurance company. It was therefore at least arguable that it was necessary to imply a term in the agreement between G and T that T would meet valid claims. If the existence of subrogation rights was doubtful, as in the instant case, that in itself had to be a pointer to the necessity of the alleged implied term.

2) To say that, for a claim to be ‘in respect of a contract’, it had to be ‘in respect of a contract between the intended claimant and the intended defendant’ was to add words to the rule. The claim in the instant case clearly had a connection with a contract governed by English law, and that made it a claim in respect of that contract, even if it was not a claim brought under it. While some connections with contracts were more remote than others, the instant claim had a very close connection with T's contract with the miners. In any event, remoteness was something that could be dealt with when the court considered whether England was the proper place for a claim under rule 6.21(2A) of the Civil Procedure Rules.

(3) The damage for which G was liable was the miners’ liability to pay the costs of the respondents to the group litigation order application, plus any disbursements. That liability arose as a result of G’s undertaking to the miners that they would not be liable for such costs. The damage for which T was liable was the loss to the miners in consequence of T’s failure to honour the ATE policy, which covered them in respect of their liability to pay the costs of the successful respondents to the group litigation order application, plus any disbursements. Both were therefore liable for the same damage. Although T argued that G’s liability arose out of G’s negligence in having pursued a hopeless application, it was by no means clear that G was in breach of its duty of care to the miners. What was clear was that T’s failure to pay under the policy had rendered G in breach of its contractual obligation to the miners. In those circumstances, the damage was the same, Bovis Construction Ltd v Commercial Union Assurance Co Plc [2001] 1 Lloyd’s Rep 416 QBD (Comm), Wallace v Litwiniuk [2001] 92 Alta LR(3d) 249 and Royal Brompton Hospital NHS Trust v Hammond (No3) [2002] UKHL 14, [2002] 1 WLR 1397 distinguished.

Appeal dismissed, cross-appeal allowed.

Derek Sweeting QC (instructed by Manches) for the appellant; Ronald Walker QC (instructed by Cameron McKenna) for the respondent.