“Was it necessary for the declaration to be presented by the Claimant or its agent Aon to each of the First to Ninth Defendants during the period of Open Cover or presented to the Leader alone during the period of the Open Cover, or was it not necessary for it to be presented to any of the Defendants during the period of the Open Cover?”
“Aon Risk Services will provide the services and responsibilities listed and described in Exhibit A to AMOCO as and when reasonably required by AMOCO (“Services”). Additionally, Aon Risk Services shall perform the Services in accordance with broker and risk management standards for companies similar to AMOCO.”
“Aon Risk Services agrees to hold Amoco and its affiliates harmless against all liabilities, demands, damages, expenses or losses arising from any third party claim related to the Services and Aon Risk Services performance of the Services. Aon Risk Services hereby agrees to indemnify AMOCO against all loss, damage, costs and other expenses of any nature whatsoever incurred or suffered by AMOCO, its directors, officers and employees or by a third party as a result of any and all representations, statements, tortuous (sic) acts or omissions including negligence or breaches of obligations arising under or in connection with this Agreement by Aon Risk Services to a maximum amount of Aon Risk Services remuneration noted in Clause 6 above except in the case of third parties where Aon Risk Services will be liable for all loss, damage, injury or death to the full extent of their negligence or fault.”
“Aon Risk Services shall effect and maintain in force public liability/workers’ compensation/professional liability insurance with reputable insurers throughout this Agreement to cover all claims that may at any time be made in respect of or arising out of the Services.”
“Furthermore, it is understood and agreed that all Underwriters subscribing hereto will be subject to all terms, clauses, credits, allowances and wording as agreed by the Leading Underwriters (AIG, Swiss Re and Aegis Insurance Services) and it is agreed to follow automatically all additions and/or deletions and/or amendments and/or alterations of any description whatsoever therein, Underwriters hereon waiving advice hereunder and also to follow all claim settlements made by the Leading Underwriters of this Policy (No. EL9801152) without exception.”
“Their Lordships do not believe that there is anything to the advantage of the law’s development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship.” which Lord Goff held not to represent the law, preferring the analysis of Oliver J. in Midland Bank Trust Co Ltd v. Hett, Stubbs & Kemp[1979] Ch 384 to the effect that a solicitor could be liable to his client for negligence in both contract and tort, there being no general principle in English law equivalent to the French doctrine of non comul. It is argued by BP that the flaw in Aon’s submissions is that they start from the contractual structure created by (i) the Service Agreement and (ii) its performance by Aon Texas through the medium of Aon London and then ask if there is any room for a parallel duty of care in tort. The correct application of the assumption of responsibility principle demands by contrast that one approaches the relationship between BP and Aon London in three stages. First, it is necessary to leave the contract structure entirely out of account, that is to proceed on the hypothesis that there is no binding Service Agreement and no binding implied contract between Aon Texas and Aon London, but merely Aon London’s conduct in affirming its willingness to carry out its broking functions and to investigate whether that conduct amounted to an assumption of responsibility for carrying out the relevant tasks. In the present case the relevant question was whether Aon London was saying to BP “you can rely on us to make whatever declarations are necessary for binding all the participating insurers under the Open Cover in respect of each project notified by BP”
“In my judgment, on ordinary principles the contract is only relevant to the claim in tort in so far as it does, on its true construction in accordance with the proper law of the contract, have the effect of excluding or restricting the tortious claim.”
“Furthermore, for the reasons I have previously given, the Hedley Byrne [1964] A.C. 465 principle cannot, in the absence of special circumstances, give rise on ordinary principles to an assumption of responsibility by the testator's solicitor towards an intended beneficiary. Even so it seems to me that it is open to your Lordships' House, as in the Lenesta Sludge Case[1994] 1 A.C. 85, to fashion a remedy to fill a lacuna in the law and so prevent the injustice which would otherwise occur on the facts of cases such as the present. In the Lenesta Sludge Case supra, as I have said, the House made available a remedy as a matter of law to solve the problem of transferred loss in the case before them. The present case is, if anything, a fortiori, since the nature of the transaction was such that, if the solicitors were negligent and their negligence did not come to light until after the death of the testator, there would be no remedy for the ensuing loss unless the intended beneficiary could claim. In my opinion, therefore, your Lordships' House should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor. Such liability will not of course arise in cases in which the defect in the will comes to light before the death of the testator, and the testator either leaves the will as it is or otherwise continues to exclude the previously intended beneficiary from the relevant benefit. I only wish to add that, with the benefit of experience during the 15 years in which Ross v. Caunters has been regularly applied, we can say with some confidence that a direct remedy by the intended beneficiary against the solicitor appears to create no problems in practice. That is therefore the solution which I would recommend to your Lordships. As I see it, not only does this conclusion produce practical justice as far as all parties are concerned, but it also has the following beneficial consequences. (1) There is no unacceptable circumvention of established principles of the law of contract. (2) No problem arises by reason of the loss being of a purely economic character. (3) Such assumption of responsibility will of course be subject to any term of the contract between the solicitor and the testator which may exclude or restrict the solicitor's liability to the testator under the principle in Hedley Byrne. It is true that such a term would be most unlikely to exist in practice; but as a matter of principle it is right that this largely theoretical question should be addressed. (4) Since the Hedley Byrne principle is founded upon an assumption of responsibility, the solicitor may be liable for negligent omissions as well as negligent acts of commission: see the Midland Bank Trust Co. Case[1979] Ch. 384 , 416, per Oliver J. and Henderson v. Merrett Syndicates Ltd [1995] 2 A.C. 145, 182, per Lord Goff of Chieveley. This conclusion provides justification for the decision of the Court of Appeal to reverse the decision of Turner J. in the present case, although this point was not in fact raised below or before your Lordships.”
“Has the intended beneficiary a cause of action based on breach of a duty of care owed by the solicitor to the beneficiary? The answer to that question is dependent upon whether there is a special relationship between the solicitor and the intended beneficiary to which the law attaches a duty of care. In my judgment the case does not fall within either of the two categories of special relationships so far recognised. There is no fiduciary duty owed by the solicitor to the intended beneficiary. Although the solicitor has assumed to act in a matter closely touching the economic well-being of the intended beneficiary, the intended beneficiary will often be ignorant of that fact and cannot therefore have relied upon the solicitor.However, it is clear that the law in this area has not ossified. Both Viscount Haldane L.C. (in the passage I have quoted from Nocton v. Lord Ashburton [1914] A.C. 932, 948) and Lord Devlin (in the Hedley Byrne Case[1964] A.C. 465, 530-531) envisage that there might be other sets of circumstances in which it would be appropriate to find a special relationship giving rise to a duty of care. In Caparo Industries Plc. v. Dickman [1990] 2 A.C. 605, 618 Lord Bridge of Harwich recognised that the law will develop novel categories of negligence "incrementally and by analogy with established categories." In my judgment, this is a case where such development should take place since there is a close analogy with existing categories of special relationship giving rise to a duty of care to prevent economic loss. The solicitor who accepts instructions to draw a will knows that the future economic welfare of the intended beneficiary is dependent upon his careful execution of the task. It is true that the intended beneficiary (being ignorant of the instructions) may not rely on the particular solicitor's actions. But, as I have sought to demonstrate, in the case of a duty of care flowing from a fiduciary relationship liability is not dependent upon actual reliance by the plaintiff on the defendant's actions but on the fact that, as the fiduciary is well aware, the plaintiff's economic well-being is dependent upon the proper discharge by the fiduciary of his duty. Second, the solicitor by accepting the instructions has entered upon, and therefore assumed responsibility for, the task of procuring the execution of a skilfully drawn will knowing that the beneficiary is wholly dependent upon his carefully carrying out his function. That assumption of responsibility for the task is a feature of both the two categories of special relationship so far identified in the authorities. It is not to the point that the solicitor only entered on the task pursuant to a contract with the third party (i.e. the testator). There are therefore present many of the features which in the other categories of special relationship have been treated as sufficient to create a special relationship to which the law attaches a duty of care. In my judgment the analogy is close.”
“In this case the identification of the applicable principles is straightforward. It is clear, and accepted by counsel on both sides, that the governing principles are stated in the leading speech of Lord Goff of Chieveley in Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145. First, in Henderson's case it was settled that the assumption of responsibility principle enunciated in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 is not confined to statements but may apply to any assumption of responsibility for the provision of services. The extended Hedley Byrne principle is the rationalisation or technique adopted by English law to provide a remedy for the recovery of damages in respect of economic loss caused by the negligent performance of services. Secondly, it was established that once a case is identified as falling within the extended Hedley Byrne principle, there is no need to embark on any further inquiry whether it is "fair, just and reasonable" to impose liability for economic loss: p. 181. Thirdly, and applying Hedley Byrne, it was made clear that "reliance upon [the assumption of responsibility] by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect)..." (p. 180). Fourthly, it was held that the existence of a contractual duty of care between the parties does not preclude the concurrence of a tort duty in the same respect.”
“There might have been an interesting question as to whether [the Lloyd’s brokers] were true sub-agents, owing a duty to [the producing brokers] only; or whether they were agents of the plaintiffs, appointed as such by [the producing brokers] on the plaintiffs’ behalf. However, [the Lloyd’s brokers] accept that in the circumstances of this case, and in particular in view of the fact that they issued a brochure jointly with [the producing brokers], they owed a duty of care directly to the plaintiffs, both in contract and in tort. Nobody else has argued otherwise. I am the last to complain that an interesting academic issue does not need to be decided.”
“Nor do I consider that the circumstances of this case show the existence of a general duty of care owed by the third party to the plaintiff. Any responsibility assumed by the third party was confined to obtaining a quotation and communicating it accurately to the defendant acting on behalf of the plaintiff. This the third party did. On receiving instructions to approach underwriters to effect insurance in accordance with those terms, it did so, obtaining the signed and subscribed slip which it sent to the defendant. The slip was in accordance with the terms agreed on behalf of the plaintiff by the defendant. As is well known, the contract of insurance was then complete, and it included the auditorium warranty. There was, in my view, no assumption of responsibility by the third party to bring the terms of the auditorium warranty to the attention of the plaintiff. Nor can it reasonably be inferred that the plaintiff relied upon the third party to do so. The obvious inference from the facts is that the plaintiff relied upon the defendant. It was within the scope of the defendant’s authority to receive notice of the terms of the insurance for which it had sought a quotation and to accept them on the plaintiff’s behalf. The third party had no reason to suppose otherwise.”
“(3) There is no meaningful sense in which the plaintiffs can be said to have relied on the defendants. No doubt the plaintiffs hoped and expected that the defendants would supply good quality goods conforming with the contract specification. But the plaintiffs required Feal to buy these units from the defendants for one reason only, namely, that they were contractually obliged to do so and had no choice in the matter. There was no technical discussion of the product between the plaintiffs and the defendants. (4) Where a specialist sub-contractor is vetted, selected and nominated by a building owner it may be possible to conclude (as in the Junior Books Case [1983] 1 A.C. 520) that the nominated sub-contractor has assumed a direct responsibility to the building owner. On that reasoning it might be said that the defendants owed a duty to the Sheikh in tort as well as to Feal in contract. I do not, however, see any basis on which the defendants could be said to have assumed a direct responsibility for the quality of the goods to the plaintiffs: such a responsibility is, I think, inconsistent with the structure of the contract the parties have chosen to make.”
“However attractive it may theoretically be to postulate a single principle capable of embracing every kind of case, that is not how the law has developed. It would of course be unsatisfactory if (say) doctors and dentists owed their patients a different duty of care. I do not, however, think it unsatisfactory or surprising if, as I think, a banker's duty towards the recipient of a credit reference and an industrial glass manufacturer's duty towards a main contractor, in the absence of any contract between them, differ. Here, the plaintiffs' real (and understandable) complaint is that the defendants' failure to supply goods in conformity with the specification has rendered their main contract less profitable. This is a type of claim against which, if laid in tort, the law has consistently set its face. (8) I do not think it just and reasonable to impose on the defendants a duty of care towards the plaintiffs of the scope contended for. (a) Just as equity remedied the inadequacies of the common law, so has the law of torts filled gaps left by other causes of action where the interests of justice so required. I see no such gap here, because there is no reason why claims beginning with the Sheikh should not be pursued down the contractual chain, subject to any short-cut which may be agreed upon, ending up with a contractual claim against the defendants. That is the usual procedure. It must be what the parties contemplated when they made their contracts. I see no reason for departing from it. (b) Although the defendants did not sell subject to exempting conditions, I fully share the difficulty which others have envisaged where there were such conditions. Even as it is, the defendants' sale may well have been subject to terms and conditions imported by theSale of Goods Act 1979 . Some of those are beneficial to the seller. If such terms are to circumscribe a duty which would be otherwise owed to a party not a party to the contract and unaware of its terms, then that could be unfair to him. But if the duty is unaffected by the conditions on which the seller supplied the goods, it is in my view unfair to him and makes a mockery of contractual negotiation.”
“If, however, foreseeability does not automatically lead to a duty of care, the duty in a Hedley Byrne type of case must depend on the voluntary assumption of responsibility towards a particular party giving rise to a special relationship, as Lord Keith held in Yuen Kun Yeu v. Attorney-General of Hong Kong [1988] A.C. 175, 196 (and see also his statement at p. 784 that the Hedley Byrne case [1964] A.C. 465 was concerned with the assumption of responsibility) and as Robert Goff L.J. had earlier held in Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507, 528 in a passage which would have been before Lord Keith in the Yuen Kun Yeu case.But in the present case I can see nothing whatever to justify a finding that the defendants had voluntarily assumed a direct responsibility to the plaintiffs for the colour and quality of the glass panels. On the contrary, all the indications are the other way and show that a chain of contractual relationships was deliberately arranged the way it was without any direct relationship between the plaintiffs and the defendants.”
“64. In the end it is necessary to decide whether this is one of those cases in which the contractual arrangements were intended by the parties to provide the only source of legal rights and obligations, as is usually the case where parties enter into sub-contracts in connection with construction projects, for example, or whether it is one of those cases in which a sub-contractor owes a duty of care under the general law to the person for whose benefit he has agreed to act concurrently with his contractual obligations under the sub-contract. In Henderson v Merrett Lord Goff recognised that in many cases where a person sub-contracts the performance of an obligation with the knowledge and consent of the person to whom he owes that obligation the resulting chain of contracts is intended to provide the sole means by which the sub-contractor can be held liable for any loss that he may cause to parties higher up the chain. In such cases the sub-contractor owes them no separate duty of care sounding in tort. It is also right to say that he seems to have regarded the situation created by the arrangements between Lloyd's Names and their members' and managing agents as unusual. However, in seeking to decide on which side of the line any case falls I think that Lord Goff's speech in Henderson v Merrett supports the conclusion that, although one should not approach the matter in a mechanical way, it is appropriate to ask whether the parties to the contractual chain can properly be taken to have intended to exclude any duty of care that would otherwise have arisen under the general law as a result of the relationship between them. That is likely to depend on the general nature of the contractual relationships, as well as their particular terms, and may also be influenced by established practices in the particular field of activity in which the parties are engaged.”
“66. Two factors may have had a significant bearing on the court's decision in that case. The first is that the province did not warrant the accuracy of the tender documents. That meant that although the design became incorporated into the contract, the contractor had no redress against the province for defects in design affecting the work. Since the terms of contract are an essential part of the tender materials, the engineers as well as the contractor must have been aware of that. Secondly, it appears that the engineers were not engaged to play any role in connection with the execution of the contract works; they were engaged merely to do the design work and to produce the tender documents. They were, therefore, in the position of third parties engaged solely to provide information on which the contractor would base his tender with no recourse to the province if the information were defective. In those circumstances the court held that neither the contractual structure nor the terms of the contract between the province and the contractor negated the existence of a duty of care. 67. The present problem appears to have troubled the courts mainly in the context of construction projects and operations of a similar nature in which the relationships between the employer, the main contractor and any sub-contractors are regulated by contract and the imposition of liability for purely economic loss through the imposition of common law duties of care is often seen as cutting across the established contractual relationships. In the present case the issue arises in an entirely different context and, moreover, in circumstances in which it was recognised from the outset that the whole purpose of UBK's involvement was to provide the specialist advice that the Fund required to operate effectively. In my view the nature and terms of the contracts governing the parties' relationships are not inconsistent with an assumption of responsibility by UBK to the Fund for the quality of the advice it provided. Moreover, the manner in which much of that advice was expected to be, and was, given, namely by the attendance of Mr Weist at meetings of the Fund's board, reinforces the conclusion that it did in fact assume such a responsibility.”
“This derivation from fiduciary duties of care of the principle of liability in negligence where a defendant has by his action assumed responsibility is illuminating in a number of ways. First, it demonstrates that the alternative claim put forward by the Names based on breach of fiduciary duty, although understandable, was misconceived. The liability of a fiduciary for the negligent transaction of his duties is not a separate head of liability but the paradigm of the general duty to act with care imposed by law on those who take it upon themselves to act for or advise others. Although the historical development of the rules of law and equity have, in the past, caused different labels to be stuck on different manifestations of the duty, in truth the duty of care imposed on bailees, carriers, trustees, directors, agents and others is the same duty: it arises from the circumstances in which the defendants were acting, not from their status or description. It is the fact that they have all assumed responsibility for the property or affairs of others which renders them liable for the careless performance of what they have undertaken to do, not the description of the trade or position which they hold. In my judgment, the duties which the managing agents have assumed to undertake in managing the insurance business of the Names brings them clearly into the category of those who are liable, whether fiduciaries or not, for any lack of care in the conduct of that management.”
“We have assembled an Aon account management team to respond to the commitment of time, skill and effort necessary to successfully achieve the objectives outlined in the previous sections. This team consists of our most talented US and London construction professionals along with an account management team with working ties to Amoco. In addition to insurance professionals, we include a team of information management professionals to assist in the design and implementation of the Aon Interactive product outlined previously.”
“As account directors, Bill Burke, Mike Cahill and Jim Helfert will have the responsibility to oversee all the insurance and risk management services provided by Aon. Bill will be responsible for strategic initiatives, Mike will be responsible for management of specific teams, and Jim Helfert will be responsible for coordinating the national resources. Working with the Account Directors, the construction team specialists will be responsible for program design, marketing placements, policy documentation, day-to-day service, loss control, and claims management. Team leaders, Kurt Tentinger (onshore), John Young (offshore) and Tim Walsh (OCIP) are industry leaders in their respective fields. The teams outlined above will be supported by a fully staffed administrative unit in Houston. This unit will be responsible for management of all documentation, including policies, certificates of insurance, auto ID cards, and premium invoicing.”
“Aon Risk Services, Inc. is authorised to negotiate directly with any insurance company or underwriter on matters covered by this appointment.”
“We expect each of the program leaders to continue to utilise whatever resources within Aon they feel would best serve Amoco’s needs for that particular program. An example would be the excellent services provided by Aon’s New York and London branches on the Global Construction Program.” 145. and concluded “We believe the knowledge and experience that you have of the current Aon programs coupled with the local service capabilities of Aon’s Chicago organisation makes your team the ideal choice to perform this task for Amoco.”
“This reasoning is instructive. The test is not simply reliance in fact. The test is whether the plaintiff could reasonably rely on an assumption of personal responsibility by the individual who performed the services on behalf of the company. To that extent I regard what La Forest J. said in Edgeworth’s case as consistent with English law.”
“Similarly, the liability of the actual employee who is himself involved in the commission of a tort when he is aware of all the facts which give rise to the duty of care owed to the relevant client and is himself the individual through whom the brokerage duties are being carried out likewise falls within established principles. The authority which discussed this point, Ministry of Housing v. Sharp (Sup) has been referred to without disapproval in the later cases. In so far as it will have to be reconsidered in the light of the later cases, this will derive from a possible need to reconsider the relationship between involuntary obligations imposed by statute and duties of care in tort, not from any need to adopt a different approach in relation to the position and liability of individuals who are careless in circumstances where an undoubted tortious duty of care is owed by their employer to an identified and known person.”
“It is not every employee of a firm or company providing professional services that owes a personal duty of care to the client; it depends what he is employed to do: see the judgment of Lord Justice Cross in Ministry of Housing and Local Government v. Sharp,[1970] 2 QB 233 at p291. But here Mr De Boinville and Mr Deere, whether in their employment with Wrights or with Fieldings, were evidently entrusted with the whole or nearly the whole of the task which their employers undertook. Mr Milligan argued that they were more remote from the bank than their employers. On the contrary, I think that in fact their proximity was greater. While they were employed by Wrights I hold that, as professional men, they owed a duty of care to the bank, since the bank was a client or the client of Wrights. While they were employed by Fieldings they owed a duty of care to the bank by justifiable increment of an existing category, until the bank became a client of Fieldings in July when their duty came within an existing category.”
“Aon Risk Services agrees to hold AMOCO and its affiliates harmless against all liabilities, demands, damages, expenses or losses arising from any third party claim related to the Services and Aon Risk Services performance of the Services. Aon Risk Services hereby agrees to indemnify AMOCO against all loss, damage, costs and other expenses of any nature whatsoever incurred or suffered by AMOCO, its directors, officers and employees or by a third party as a result of any and all representations, statements, tortuous (sic) acts or omissions including negligence or breaches of obligations arising under or in connection with this Agreement by Aon Risk Services to a maximum amount of Aon Risk Services remuneration noted in Clause 6 above except in the case of third parties where Aon Risk Services will be liable for all loss, damage, injury or death to the full extent of their negligence or fault.”
“Principal Insured(s): 1. BP AMOCO PLC (hereafter referred to as BP AMOCO) and/or all subsidiary and/or affiliated and/or associated and/or interrelated companies of every tier as may now or hereafter be constituted and/or their shareholders, directors, officers and employees, but only with respect to their interest in service to and/or employment by such companies. 2. At the option of BP AMOCO, co-venturers and/or project managers and/or financiers as may now or hereafter exist and as may be declared each underlying declaration. Other Insured(s): Any other party as may be declared each underlying declaration, including but not limited to contractors, and/or their sub-contractors of every tier whether named hereunder or not, and/or architects, engineers and consultants, and/or suppliers and/or agents and/or manufacturers and/or vendors and/or licensors in connection with the subject matters of this insurance, and/or any works, activities preparations etc connected therewith shall have benefit of this insurance, but only to the extent, and fully limited to, the Principal Insured’s obligations to directly or indirectly assume the liability of, and/or provide insurance such as is afforded by this policy to, such parties.”
“Exculpatory contracts or clauses are also subject to the general contract rule that they are construed most strongly against their maker, ‘and especially so when printed upon the (maker’s) form.’ Despite these strict rules of construction, however, a specific reference to ‘negligence’ or its cognates is not required.”
“In other words, when properly analysed, the overall exercise which the Court must do is to consider whether the specified eventuality (in the case of an indemnity) or the breach of contract (in a case such as the present) has caused the loss incurred in satisfying the settlement. Unless the claim is of sufficient strength reasonably to justify a settlement and the amount paid in settlement is reasonable having regard to the strength of the claim, it cannot be shown that the loss has been caused by the relevant eventuality or breach of contract. That is not to say that unless it can be shown that the claim is likely to succeed it will be impossible to establish that it was reasonable to settle it. There may be many claims which appear to be intrinsically weak but which common prudence suggests should be settled in order to avoid the uncertainties and expenses of litigation. Even the successful defence of a claim in complex litigation is likely to involve substantial irrecoverable costs. It is thus an everyday event for shipowners or their P. & I. clubs to settle cargo damage claims based on allegations of bad stowage or unseaworthiness for well under 50 per cent. of the claim where the alternative explanation for the damage is the inherent condition of the goods or some other cause for which owners are not liable. Unless it appears on the evidence that the claim is so weak that no reasonable owner or club would take it sufficiently seriously to negotiate any settlement involving payment, it cannot be said that the loss attributable to a reasonable settlement was not caused by the breach by reason of which the goods are in a damaged condition.” 283. and at 693 “As a matter of principle, given that the purpose of the investigation of whether the settling party acted reasonably is to ascertain whether the settlement loss was caused by the breach or by the settling party's decision to enter into the settlement, it must be those facts upon which he could be expected to base his decision to settle rather than facts which later come to light which are material for this purpose. It is the facts available to him at the time by reference to which this question of causation has to be determined.”
“For information the partnership interests in the development are 50/50 BPA and Shell is the operator for the project phase. The project insurance is therefore only required for BPA’s 50% equity.”
“They have advised me that a final answer will be presented tomorrow on Shell’s participation in our insurance program for the Crosby, Nakika, and Holstein projects. As of now, they have stated that the project managers are leaning the following way: Crosby – No Nakika – Yes Holstein – Yes As soon as I hear the official word on each of these projects, I will pass that information along.”
“Q. On a Friday afternoon. Obviously this is a pretty urgent matter, the declaration has to be made in effect before close of business in the next three or four hours. I think, based on your evidence given just before the short adjournment, given the urgency of this communication, you would have wanted to include in an email a request that they confirm receipt and that they were acting upon it? A. I think that would be prudent. Q. In the absence of receiving such confirmation, you would have wanted to telephone to make sure that the matter was dealt with? A. Either that or, looking at the list of eight addresses there, I would have at least expected an acknowledgment, even absent – I would have expected an acknowledgment back from one of these people to say they had received it, even if I did not ask for it. If I had not received that within a couple of hours, I guess shortly before the market closed I think I might have just picked up the phone. I am a bit – I am one of those people who likes to do thinks that way, I would not sleep at night otherwise. Q. It is important, is it not, to be careful? A. That could be me. Other people may not take the same view. Q. Because, if the declaration is not made, then you are uninsured? This is an important matter? A. Yes, I think so.”
“that sum of money which will put the party who has been injured or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation.” ii) That which BP lost as a result of Aon’s negligence was the opportunity to be insured by the Frankona Defendants on the relatively favourable terms of the Open Cover. iii) That opportunity was lost at midnight on30 June 2000 , the moment when it was too late to make declarations. iv) Although the general rule is that damages in tort are to be assessed at the date when the breach of duty occurred, there may be cases where another point of time should be taken so as more accurately to reflect the overriding principle of compensation: see County Personnel Ltd v. Alan R Pulver & Co[1987] 1 WLR 916 per Bingham LJ. at p926A. v) In the present case it is necessary, in order to give effect to the overriding principle of compensation, to identify at what point of time BP ascertained that Aon were in breach of duty. Three possible dates are advanced by Aon as follows: a) The third quarter of 2000 when it first became apparent that the insurers challenged the validity of declarations 8 to 26. Thus as early as30 June 2000 Swiss Re in their fax to Aon London were calling in question the eligibility of “several” of the declarations submitted “on the eve of expiration” of the Open Cover, in particular since1 June 2000 . ACE and Frankona also challenged or reserved their rights in relation to the recent declarations on the grounds that they involved an aggregate exposure for them under the Open Cover which far exceeded that which had been indicated at the time of its placing. On30 June 2000 AIG rejected outright all 19 declarations made in the previous week on the grounds of ineligibility. b) The second and third quarters of 2001, at which point it had became clear that the Frankona Defendants would not follow the October 2000 settlement made between BP and Swiss Re and AIG. By a letter dated27 April 2001 Norton Rose informed Aon that it had been instructed by the Frankona Defendants other than QBE, Upton and Spinney and requested that Aon should enter into discussions directed to providing further and better information about the 19 projects declared at the end of June 2000 so that underwriters could review whether those projects were eligible to be declared. By his letter of30 April 2001 to Aon London Mr Wannell of BP rejected Norton Rose’s request as unacceptable and stated that BP must have contractual certainty and therefore had no alternatives but to explore its legal rights. BP therefore knew by this time that the validity of cover was likely to be challenged and that it would have to test its position by means of legal proceedings. c) The second quarter of 2002. BP issued the claim form in the Frankona action on21 September 2001 . The defence was served on10 December 2001 . In it the Frankona Defendants alleged that they were entitled to avoid the Open Cover and all declarations for misrepresentation and non-disclosure. They challenged the eligibility of declarations 8 to 26, but did not overtly raise the requirement that declarations had to be made to each underwriter and could not bind the following market if only made to the leaders. That argument first clearly emerged in the letter from Norton Rose to Herbert Smith dated18 April 2002 and then on the following day at the Case Management Conference at which counsel for the Frankona Defendants gave an undertaking to amend their defence to reflect that amongst other new points raised in his skeleton argument. It was on these foundations that I ordered a trial of preliminary issues covering the validity of the declarations. By this date, therefore, it is submitted that BP was well aware that its insurance under the Open Cover was strongly contested. vi) BP’s loss therefore crystallised on one of those three dates, Aon’s primary case being during the third quarter of 2000 when BP became aware for the first time that declarations were seriously disputed, with as alternative the other two dates. BP’s position by contrast is that its losses crystallised when protection under the Open Cover would have expired if it had been procured as it should have been. vii) As to causation, Aon submits that the relevant issue is whether there has been a break in the chain of causation between Aon London’s negligence and the losses claimed by BP. Further, it is Aon’s case that it is unnecessary for severance of the chain of causation that the intervening act should be reckless or even negligent for it is submitted that in the context of a claim for economic loss the injured party may make decisions in its own economic interests which are neither reckless nor negligent but are such as to have such a substantial impact on the consequences of the other party’s breach of duty as to sever the link with the loss. In the present case, according to the evidence of Mr Siebenaler and Mr Wannell, BP had decided that due to the increase in market rates and the hardening of available terms by comparison with those of the Open Cover, it was to BP’s commercial advantage overall to self-insure rather than pay premium at current rates. If BP thereafter suffered losses that would have been insured under the Open Cover if the relevant projects had been effectively declared, such losses would have been caused by BP’s decision not to take out replacement cover in the face of its knowledge that it was uninsured. Were it otherwise, it would be as if Aon had guaranteed to BP that it was insured even if there were no protection under the Open Cover and even if BP decided that in its own commercial interests it would not replace that cover. viii) As to mitigation, Aon submits that with regard to the dicta of Lord Macmillan in Banco de Portugal v. Waterlow[1932] AC 452 , the relevant test is whether BP had acted reasonably in all the circumstances, but this test involves asking whether BP has acted reasonably to mitigate the loss as distinct from acting reasonably exclusively in its own commercial interests. Aon refers to the decision of the Courts of Appeal in Darbishire v. Warran[1963] 1 WLR 1067 in which Harman LJ. stated the principle as follows: “The judge here held that the plaintiff was reasonable in having the car repaired notwithstanding that the cost was more than twice the value. It may well be that the plaintiff, so far as he himself was concerned, did act reasonably and that what he got was of more value to him than the damages represented by the value of the car. The plaintiff, however, did not show that he had any special use for which this car alone was suitable, as, for instance, in his business, or anything more than that it was a sound car very well maintained and suited to his ordinary life. In my opinion the judge asked himself the wrong question. The true question was whether the plaintiff acted reasonably as between himself and the defendant and in view of his duty to mitigate the damages.”
“If Insurers continue to reject the declarations, the Insured could simply maintain that cover exists and proffer premium, which would be rejected. The insured could make claims on the basis that cover existed and be met with the argument that it did not. The risk of exposure on this is too great to bear and, in practice, if the Insurers maintain their position, they will be in repudiatory breach of a contract for insurance [the open cover] and will be liable in damages for the recoverable consequences of any breach. With a refusal to insure, the Insured, in mitigation would be expected to find alternative insurance, so that the measure of damages would be the cost of such alternative cover and any claim lost as a result of any difference in conditions where such part of the loss was reasonably uninsured. It may be possible to get alternative cover with the existing insurers on a basis that is without prejudice to the claim to be entitled to insurance under the open cover. Whether this is possible or wise, I cannot say, but it could have some advantages in helping to reach a commercial solution later, if none is possible now.”
“It would be surprising, and in my view uneconomic, for BP to have done so in response to an unresolved dispute as to whether the cover would respond. Indeed, in my experience, in cases where the solvency of an insurer is doubtful, the question of buying replacement cover only arises when the insurance company is in liquidation, not just when there is a risk that it might become insolvent. I would be surprised if any risk manager would consider buying alternative insurance when a settlement with insurers seemed likely.”
“In my opinion, the level of premiums (being 5-10 times higher than the Open Cover), higher deductibles and significantly restricted coverage terms (in particular the lack of cover for faulty parts) all made the purchase of CAR cover uneconomic as a general proposition. For a company in BP’s position – where an existing, inexpensive and broad form of coverage was already in place in the form of the Open Cover and it was simply unclear as to whether it would respond – it would, in my opinion, have been surprising for a risk manager to commit very substantial sums to the purchase of potentially redundant replacement insurance.”
“A. … by the fact that the projects were already partly completed, to achieve certainty in the mind of underwriters about the exact nature of risk they would be bearing would have been quite hard. Q. Underwriters would be resistant to take on risks that were part-way through? A. They certainly would have found it hard to make precise judgments about the nature of that risk, I agree with that. Q. Mr Wannell mentioned that he had, at least in his mind, that they might for example require IBNR executions; would that have been so? A. That would have been a fear, yes, and quite common to expect it. Q. It is also right to say, is it, that BP were pretty unpopular in the market at this time because they were perceived as not taking out operational insurance and only taking out insurance on business that was more likely to be loss-making? A. That was certainly one view. They actually had made a strategic decision in that respect some years before. Q. Yes, and that had made them not particularly popular in the market, had it not? A. That is right.”