Abstract

Legal Expenses Insurance and Funding - Construction - considerations - Construction - Limit to Businesslike Approach - Subjective Matters not relevant in construction - Conditions Precedent must be clear- Exclusive jurisdiction condition applied - Whether a variation of ontract extinguishes it - Elements of estoppel by convention - Proceedings cannot be brought against unknown defendant - Comparative force of Schedule

Article

Legal Expenses Insurance and Funding

In respect of an after the event Legal Expenses insurance policy covering liability for costs, a claim referred to in the cover cannot be said to have been concluded by a judgment dismissing it if the judgment is subsequently set aside on appeal, and the cover survives until the determination of any remitted proceedings, so that it continues for the same period as that provided for in the promise. If there is a variation of the cover, its mere assertion that the policy covered certain steps in the past does not necessarily mean that the parties agree that it does not cover future steps: Plevin  v DAS Legal Expenses Insurance Co 2019] EWHC 1339 (Comm).

The mere fact that it is becoming unlikely that solicitors will seek to recover their costs from an insured client does not mean that the client is not liable for them: HMRC v Gardiner [2018] EWHC 1716 (QB). Although the court’s reducing or disallowing an item of costs could be said to be an "ordering that the Claimant pay part or all of those costs" and that therefore the insurer must provide indemnity in respect of any shortfall between the insured’s disbursements and the amount of an order in his favour in respect of it, the insurer’s liability to indemnify arises only if there had been a court order. It does not arise if the shortfall is due to the insured's solicitors’ acceptance of a reduced amount. This may result in the solicitors’ obligation to refund to the funder under a funding agreement the full amount of costs which the client could havve obtained by court order rather than a reduced amount accepted by the solicitors: Plevin  (supra), where much depended on the complex terms of the funding and insurance agreements.

Construction

To identify the intention of the parties, the court focuses on the meaning of the relevant words in their documentary, factual and commercial context, assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of it, (iii) the overall purpose of the clause and the contract, (iv) the facts and circumstances known to or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101.

Construction - Limit to Businesslike Approach

While commercial common sense is very important, , even ignoring the benefit of wisdom of hindsight a court should be very slow to reject the natural meaning of a provision simply because it appears to be very imprudent for one of the parties. It is not the function of construction to relieve a party from the consequences of his imprudence or poor advice: Arnold v Britton [2015] UKSC 36,

Construction of a contracts is not a literalist exercise focused solely on a particular clause. The court must consider the contract as a whole and, depending on its nature, formality and quality of drafting, give more or less weight to elements of the wider context. It is a unitary exercise. Where there are rival meanings, the court can prefer that which is more consistent with business common sense. Each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. The court can use both textualism and contextualism. The extent to which each will assist will vary according to the circumstances of the particular agreement. The less clear the centrally relevant words or the worse their drafting, the more readily may their natural meaning be departed from. If there is genuine ambiguity in a policy, it is to be interpreted against the drafter: Wood v Capita [2017] UKSC 24; Arnold v Britton [2015] UKSC 36;  Plevin  v DAS Legal Expenses Insurance Co 2019] EWHC 1339 (Comm).

 

Schedule – Comparative Force

As to whether the Schedule should bear greater weight than the policy itself, the combined effect of the relevant provisions should be considered without giving greater weight to either: Standard Life Assurance v Oak Dedicated [2008] Lloyd's L Rep 552; Spire Healthcare v Sun Alliance [2018] EWCA Civ 317. But unless the contract otherwise provides, added special conditions to a standard form usually have greater weight. If they cannot be reconciled, the contra proferentem rule may apply. Inconsistencies need not necessarily be construed against the insurer. It may be reasonable to apply it if the inconsistency occurs in the one document, but this does not have the same value where there is reason to consider that one document has greater value in determining the true meaning of the contract than the other: Plevin  v DAS Legal Expenses Insurance Co 2019] EWHC 1339 (Comm).

Construction - Subjective Matters

Subjective matters, such as the basis on which the insurer calculated premium, is irrelevant to the proper interpretation of the policy: Plevin  v DAS Legal Expenses Insurance Co 2019] EWHC 1339 (Comm). Further, the subsequent conduct of parties are irrelevant (see Miller v Whitworth [1970] AC 583).

Exclusions - Construction

A clause which excludes cover that would otherwise be provided by an insurance policy should be construed in a manner which is consistent with the purposes of the contract, such that it may in an appropriate case be construed narrowly, but the principles of narrow construction relating to exemption clauses do not apply to such clauses. Words of exception may simply be a way of delineating the scope of the primary obligation: Impact Funding v Barrington Services [2017] AC 73.

Conditions Precedent

Terms such as conditions precedent are generally treated as onerous, so the insurer must clearly spell them out or the insured will not be bound: Pratt v Aigaion Insurance [2009] 1 LL Rep; Royal & Sun Alliance v Dornoch [2005] EWCA Civ 238; Wheeldon Bros Waste Ltd v Millenium Insce Co Ltd [2018] EWHC 834 (TCC).

Exclusive Jurisdiction Condition

 

In Airbus v Generalia Italia [2019] EWCA Civ 805, the coourt gave effect to an exclusive jurisdiction condition.

 

Inferred Collateral Contract

A collateral contract will not be lightly inferred, especially if the contract is set down in formal documents drafted by lawyers: Harry Wake, Eastgate Motor Company (Lincoln) Ltd v Renault (UK) Ltd, CH 1995-E-No. 6591, and a fortiori, if the person alleging it is a lawyer: Plevin  v DAS Legal Expenses Insurance Co 2019] EWHC 1339 (Comm).

Variation of Contract

Whether a variation amends the original contract or discharges and replace it is a matter of intention of the parties.the latter requires a manifestation of the intention that in any event there be complete extinction the subsisting terms, and not merely a desire for alteration: Morris v Baron & Co [1918] AC 1; Plevin v Paragon Personal Finance Ltd [2017] UKSC 23.

Estoppel by Convention

For estoppel by convention it is not enough that the common assumption is merely understood by the parties in the same way. It must be shared between them expressly or implicitly by words or conduct from which it can properly be inferred. Its expression by the party alleged to be estopped must be such as to show that he had assumed some element of responsibility for it by conveying to the other party an understanding that he expected him to rely on it. (iii) He must in fact have relied upon it rather than merely upon his own independent view. (iv) That reliance must have had a connection with the relevant mutual dealing between the parties. (v) As  a result, he must have suffered some detriment, or some benefit was conferred upon the person alleged to be estopped, so that it ould be unjust or unconscionable for the latter to assert the true position: HMRC v Benchdollar Ltd [2010] 1 AER 174; Stena Line v Merchant Navy [2010] EWHC 1805. It is a significant feature that the person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter: Plevin  v DAS Legal Expenses Insurance Co 2019] EWHC 1339 (Comm).

Proceedings Against an Unknown Defendant

In Cameron v Liverpool Vict Insce Co [2019] UKSC 6,  it was held that, legislation aside, a party cannot bring proceedings against an unknown defendant.