The Cultural Foundation & Anor v Beazley Furlonge Ltd & Anor [2018] EWHC 1083 (Comm)

“Prior to merger Hillier had produced architectural design drawings for the American School in connection with the construction of a new school campus, set in approximately 27 acres in Dubai. The contractor was initially mobilised on site in December 2007 but the project was delayed, for reasons not associated with the Hillier work product, and works did not commence in earnest until September 2008. The current Edinburgh based project team took over the job in July 2008, issuing the previously produced Hillier drawings for construction. As the works have progressed it has become apparent that many elements of such works have not been thoroughly coordinated between different disciplines and packages, leading to the contractor submitting multiple Requests for Information (RFI's) to the design team. In view of this RMJM has decided to review the documentation and amend any errors of coordination in order to avoid abortive works by the contractor. The project clerk of works has been advised and proposed changes are being presented for consideration. In response RMJM has received notice of potential claims in respect of any additional costs that may be incurred. At this stage it is not clear what costs might be involved and notification is being made as a precaution. No reserve is proposed for present purposes but the possible need for a reserve is being kept under review.”

“DM inspector Ghalib, during his site inspections had been nagging and mumbling over PT beams at sector A for some time now. Last week, he picked up all the drawings and details from the Contractor here for study. Today, early morning he called Haitham, the Structural Engineer of AAA for clarification. Just now I have received a call from Haitham. We have an emergency that Ghalib and Abib the DM structural engineer wants to meet RMJM's structural engineer for the PT beams at their office now. Their main concern is whether the columns will take the loads. Right now he's instructed AAA to re-prop all the PT beams, (which they had recently stressed and are 50% de-shuttered). He's also specifically asked for the PT beam calculations, column/wall calculations. I think Zuhair had done some work on this. I will try to arrange for the PT subcontractor, NASA-BBR's Structural Engineer Mr Pillai also to attend. I cannot confirm whether he will come because earlier he had specifically rejected to come to DM for clarifications because it was not their design. Pls arrange for someone to defend our design with all necessary calculations and documents. The meeting at DM tomorrow 25 August, 11 am with DM's structural engineer Abid and inspector Ghalib.”

“I am extremely sorry to say that nobody from the structural department attempted to help out or attend the emergency meeting that DM called yesterday regarding some structural stability concerns which the DM inspector picked out with sector A. However three of us from site, myself, Haitham, structural engineer from the contractor at AAA, and Pillai, senior structural engineer from NASA-BBR, PT specialist contractor, met DM's senior structural engineers, engineer Shadhy and engineer Abid. As expected, I could not clarify their technical queries and concerns and they were upset that no structural designer from RMJM attended such a serious concern. I showed them the copy of the calculations we had prepared earlier. They rejected it outright, saying it is wrong. No end moments, no loading, (moments from first floor was not considered deliberately)? The PT beam was okay and the footings seemed okay but the 600 by 600 columns critical and in their analysis were failing. They need clarification from the Designer ASAP. Till then all RMJM applications will be put on hold, all site DM inspections are on hold. We have until Wednesday to clear this off or DM will take stern actions. As discussed, column calculations and end moment loadings were discussed with NASA-BBR back in March. We may be able to defend our design or the worse scenario come with some proposals to strengthen/brace the existing columns. So please arrange for somebody to prepare the calculations and discuss with DM engineers tomorrow 9.30 am.”

“Today, we -- myself and Zuher Jassim met both the DM Structural Engineers, Eng Shadhy and Eng Abid at 10.30am. At the meeting, we conceded that the loadings were erroneous and 600 x 600 columns were critical and would fail. Now we have to propose how to strengthen the columns, either by bracing or increasing the size. This will have serious implications on the project, the completion dates and on our reputation at site and especially with the client all of which we will have to bear. Back in November last year Contractor had raised concerns with the Client over building this same structure at sector A, because of stability concerns. We responded to them with 'calculations' only in mid-February '09 when the Client threatened to close the site and somehow managed to pacify their concerns. I regret deeply that I did not correct it earlier when we had the chance And [now] it has come back to haunt us. Whatever we propose has to be in tandem Architects and MEP engineers, and with as-minimum-time impact as possible. I would request that this be done as soon as possible with the greatest urgency and we work out an ideal solution with the least time and design impact. All our implications will be on hold pending a resolution to this problem. Zuhair, many thanks for attempting to defend us today.”

“I am outraged at the current situation which has arisen with the DM regarding the remedial works to the columns supporting the post tensioning within Sector A. I asked for the calculations to support the column and beam sizes within Sector A and D in March 2008 and continuously through until January 2009 through site meetings and discussions but I was assured during the entire period that the calculations were accurate and that they have received DM approval. RMJM never submitted the calculations so that we could have a third party review and assurances were given that there are no problems with the design. In January I warned RMJM of the consequences of not having the calculations checked and that remedial works will be required if we proceed but again I was assured by RMJM that the calculations were sound and that there would be no need to change the design. Therefore it is totally unacceptable that they were not checked and double checked and now we face the situation that the work in this area will be delayed and that remedial works to thicken the columns is required. Please check whether the same situation will arise in Sector D. In my opinion the current problems are directly due to the gross negligence of RMJM and I will be issuing a claim in this regard in due course, when the costs of the changes have been evaluated.”

“I need to know when the submission of the revised calculations for the columns supporting the post tension beams will be submitted to the DM for their review. This needs to be considered as a matter of extreme urgency. Again, this submission and the subsequent remedial work will cause delay and disruption to the project and we need to take steps now to mitigate the delay and analyse the likely consequences for the completion of this project. It is imperative that you immediately check whether the same situation will arise in sector D as we are in the process of constructing the columns in this structure to mitigate the remedial works and delay to this sector.”

“3.2 Date you first became aware of circumstances/claim: Circumstances – 27th August 2009 Potential Claim – 8th September 2009 3.3 Please give a resume of the facts that have led to the current situation… The issue relates to the size of concrete columns supporting a large concrete beam. The local authority has raised concerns regarding the ability of these columns to support the beam in question. Timeline below: • Design of structure by RMJM ME between December 05 and March 06 • Drawings issued to Dubai Municipality (DM) for Approval during the above periods • DM approved drawings issued to Contractor 24/07/08 • Client raises concerns over structural stability of Sector A via 4nr letters between 23/12/08 and 27/01/09 • RMJM respond with structural calculations 10/02/09 • DM ad-hoc visit to site raised query on structural stability of Sector A and request meeting at DM Head Office 24/08/09 • DM state calculations issued during meeting not accepted and future project submissions to DM will be placed on hold until DM satisfied • 2nd meeting with DM on 27/08/09 to discuss options for resolution. • 3rd meeting with DM on 31/08/09 to discuss options for resolution • 4th meeting with DM on 01/09/09 to discuss options for resolution • 5th meeting with DM on 03/09/09 to discuss options for resolution. Confirmation from DM on preferred option • Submission of revised drawings, calculations to be submitted to DM 10/09/09”

“Please see attached PII Notification from Dubai regarding the design of Post Tension Beams. On the face of it the situation is serious and the letters from DG Jones dated 04/09/09 and 08/09/09 are particularly worrying with the mention of a claim and gross negligence. However I have subsequently talked to Dubai and received the attached e-mail which confirms that our design does work and we can defend the gross negligence claim BUT: • There has been a recent building collapse in Dubai and the Dubai Municipality ("DM") are "nervous" • The DM previously approved our design BUT when requested to submit more calculations earlier this year we failed to do so and this has aggravated the problem • The DM will not now accept our design and are insisting that we strengthen the columns AND have put any further approvals on hold until we do. • That particular sector of the building is now on hold but the rest of the project is progressing I think we need to post a reserve at least for Legal Advice at this time.”

“An issue has recently arisen in relation to the design of the post tension beams, culminating in a complaint from DG Jones, the client’s project managers. It has been suggested that the beams/supporting columns, as designed, are inadequate and require more urgent modification. Having checked their design RMJM consider that it works and that they should be able to defend any claims brought against them. However, there has been a recent building collapse in Dubai and the Dubai Municipality (“DM”) are “nervous”, despite having previously approved the RMJM design. Unfortunately when requested to submit more calculations earlier this year RMJM failed to do so and this has compounded the problem. The DM will not now accept the original RMJM design, are insisting that the columns are strengthened and have refused to give any further approvals until they do so. Consequently the affected sector of the building is now on hold, although the rest of the project is progressing. In order to prepare for what could, potentially, develop into a difficult dispute RMJM consider that it might be necessary for them to seek legal advice and we are waiting for an update. Pending further clarification we are suggesting a provisional reserve (ground up) of £50,000. Developments will be advised as they occur and the reserve recommendation is being kept under review.”

“As per our previous statements to which you refer, the structures in question are currently and always have been structurally safe. The structural calculations you refer to within your letter as not issued were sent to DG Jones on 10 February 2009 via a letter reference ... and signed as received by yourself. We issued these calculations at your request for your onward use if required. " It has become clearly apparent from internal discussions with RMJM project managers that since the building collapse in Abu Hall on 16th August DM's structural department have carried out spot checks on all projects under construction in Dubai. It was at this time that DM noticed the apparent design of the columns supporting the beams within Sector A. At the request of DM we reissued the previously approved structural drawings to which DM raised objections to the design of the columns. RMJM have had numerous meetings with DM to emphasise the structural calculations are approved to which DM have requested additional support. RMJM have tried numerous non-intrusive design options to limit both cost and programme implications and presented these to DM with supporting documentation. DM have rejected these options and requested increasing the thickness of the columns in question. The revised drawings will be submitted to DM on 14 September. We will inform DG Jones of the anticipated approval date once received. If you require a structural meeting with our ASD dedicated RMJM senior structural engineer, we are more than welcome to accommodate your queries. [sic] Once we obtain the revised approved drawings. Once again, we reiterate that the design has always been structurally sound, the structural design was approved by DM and any amendments to the design column are additional strengthening at the request of DM. We strongly deny the comment that the issue in question is due to gross negligence of RMJM as this is purely a DM additional requirement.”

“(i) The isolated foundation system supporting the shear walls have inadequate resistance for overturning moments resulting from seismic forces. (ii) Bearing pressure under some of the footing supporting columns (under dead and live load) exceeds allowable bearing capacity the increase over allowable bearing pressure under these columns is around 15 per cent above the 150 kpa allowable. (iii) Some of the columns are overstressed.”

“Please note that we have not made any allowance for acoustic treatment to the music rooms (including doors) and that recommendations will need to be sought from an Acoustic Specialist.”

“As a result of the above failures the completion of the Project was substantially delayed. By virtue of Variation Order 1 dated 30 December 2009 the Project was due to be completed on 31 August 2010. But on account of your numerous breaches, completion was substantially delayed until 10 April 2011 (in accordance with your recent determination) some 223 days.”

“… 4. As a result of delays in issuing the building permit the works were suspended. This suspension together with the consolidation of changes in the design resulted in Variation Order No. 1 being issued, and agreed, on 30 December 2009. Accordingly, the parties agreed a revised Contract Sum and Revised Final Date for Completion of the Works of 31 August 2010. This Variation Order took into account all claims and changes up to 20 October 2009 … 1.22 VO No. 1 and the new revised Completion Date were intended to reflect the events leading up to its signing and to draw a line under delays and changes up to 20 October 2009. However, there have since that date been some 431 No. Variations and considered here are 175 notified Delay Events which have completely changed the nature of and circumstances under which the Contract Works were to have been completed … 1.32 Section 2.0 of this Submission provides details of the contractual and other entitlement to the additional preliminary costs that the Contractor has incurred beyond 20 October 2009 …”

“… the Contractor’s Time Impact Analysis shows that the critical path initially ran through Sector A (Event 57). Thereafter it is demonstrated to have moved to Sector B (Event 65) for one three month Window before returning to Sector A (Event 94 and Event 144). This switch in the critical path is shown to take place, from Sector A to Sector B, because the Contractor was instructed to carry out additional acoustic works to Sector B in June 2010, at a time when the delays to Sector A (Event 57) had already fully crystallised and at a time when another delay event (Event 39) was shown to have already impacted Sector B. [footnote] Event 39 – Late Instruction of nominated Subcontractor for Acoustic Treatment Works Part. This event was shown (by the Contractor in its Time Impact Analysis) to use up an element of float on Sector B (relative to Sector A) before Event 65 occurred. Event 65, occurring later, was shown to use up the remaining float and hence shown to critically delay completion.”

“22. In December 2009, ASD and AAA agreed on Variation Order (“VO”) No. 1 and VO No. 2, which marked a fresh start and settlement to scheduling and compensation for the Project up to 20 October 2009, VO No. 1 and VO No. 2 provided an additional AED28,627,091 in compensation to AAA, and for the first time a definitive base construction program was agreed, which provided for a revised completion date of 31 August 2010. As Project Engineer, RMJM was closely involved in assessing and agreeing VO No. 1, VO No. 2, and the construction program … 24. VO No. 1 and VO No. 2 represented a resolution between ASD and AAA of all VOs, claims, and delays prior to 20 October 2009. Accordingly, ASD’s claim in this arbitration uses 20 October 2009 as its starting point for assessing liability for the delay in completion beyond the revised completion date of 31 August 2010. The revised contract amount of AED361,196,119 payable to AAA is also used as the baseline for determining the damages incurred by ASD … 52. The final sections of the new campus were officially handed over to ASD on 11 April 2011. AAA subsequently submitted a Final EOT claim, dated 13 February 2012, encompassing all delays and costs after VO No. 1 and VO No. 2 …”

“satisfied that: 14.15.1 the stop on the Sector A Field House must have had a material impact upon the progress of the works; 14.15.2 [RMJM’s] failure to advise [ASD] that it could not produce drawings in the absence of the requisite acoustic design will, on the balance of probabilities, have had an impact on the progress of the works; and 14.15.3 [RMJM’s] failure to provide drawings which properly included the details and the cross referencing to the other design documents will, on the balance of probabilities, have had an impact on the progress of the works.” 14.16 The Tribunal is satisfied that it was a natural consequence of the breaches set out in paragraph 14.15 above that AAA would be delayed in performing their works on the Project, causing a liability for the Claimant to pay prolongation costs. Further, the Tribunal is satisfied that the Claimant mitigated that loss by reaching a settlement with AAA.”

“It is therefore necessary to identify whether any of the claims which the Tribunal awards to the Claimant arise from “the same original cause or source”

“5.4 It is common ground between the Parties that the Project was affected by delays from the outset. The Claimant entered into renegotiations of its contract price with AAA, which culminated in the agreement of two Variation Orders (“VOs”). VO No. 1 and VO No. 2 were both agreed on 30 December 2009. This represented a resolution of liability for certain changes and claims raised by AAA up to 20 October 2009, and provided for a revised final date for completion of 31 August 2010. The matters addressed in VO No. 1 and VO No. 2 do not form part of the subject matter of this reference …”

“1.1 Insuring Clause In consideration of the Assured having agreed to pay the premium shown in the Schedule, Underwriters agree, subject to the terms, conditions and exclusions of this policy, to indemnify the Assured, up to the Limit of Indemnity, for any claim for compensation and/or damages (including claimant’s costs and expenses) first made against the Assured and notified to Underwriters during the Period of this Policy which the Assured may become legally liable to pay and which arises out of the exercise and conduct of the Assured’s Professional Business by the Assured and/or by others on behalf of the Assured. 1.2 Defence Costs in Addition Underwriters will also indemnify the Assured for Defence Costs (see 6.5) where such costs have been incurred with Underwriters’ consent. Such Defence Costs are payable in addition to the Limit of Indemnity shown in the Schedule. In the event that a settlement is made with any party in excess of the amount of the Limit of Indemnity, Underwriters’ liability in respect of Defence Costs shall be in the same proportion that the Limit of Indemnity bears to the sum which would be eligible for payment but for the restriction of the Limit of Indemnity … CLAIMS CONDITIONS The following claims conditions and the more general conditions listed under Section 5 apply to this policy:- 3.1 All conditions contained in Section 3 are deemed to be conditions precedent to liability. Discovery of a Claim or Circumstance 3.2 a) If during the Period of this Policy the Assured shall receive any claim, the Assured shall give notice (see 3.3) to Underwriters as soon as practicable, but in any event not later than expiry of the Period of this Policy. b) If during the Period of this Policy the Assured becomes aware of any Circumstance, the Assured shall give notice (see 3.3) to Underwriters of such Circumstance as soon as practicable but in any event not later than expiry of the Period of this Policy. Underwriters agree that any such Circumstance notified to them during the Period of this Policy and which subsequently gives rise to a claim after expiry of this Policy shall be deemed to be a claim first made during the Period of this Policy. Notice 3.3 Notice to Underwriters under Clause 3.2 shall be deemed to have been properly made if received in writing by: Integra Technical Services [contact details set out] and; Beazley Group plc [contact details set out] A bordereau shall be prepared by Integra Technical Services containing details of all claims notifications. The bordereau will be prepared at intervals of approximately five and ten months after inception of this Policy until such time as all notifications are closed and/or claims paid. Marsh Limited shall circulate the bordereau to Underwriters in accordance with requirements of the individual slip conditions. 3.4 Notwithstanding Clause 3.2. if the Assured becomes aware of a claim or discovers any Circumstances and is unable, due to any reasonable cause, to give notice during the Period of this Policy, Underwriters will accept such notice up to 15 days after expiry of this policy provided always that the matter which is being notified first came to the Assured’s attention during the Period of this Policy. … 4.6 Claim Settlements The Underwriters may at any time pay to the Assured in connection with any claims or series of claims under this Policy the Limit of Indemnity (less any sums already paid) or any lesser sum for which such claims can be settled and upon such payment the Underwriters shall not be under any further liability in respect of such claims except for costs and expenses incurred prior to such payment. If a payment exceeding the Limit of Indemnity has to be made to dispose of a claim the liability of the Underwriters to pay all costs fees and expenses in connection therewith shall be limited to such of the said costs and expenses as the Limit of Indemnity bears to the amount paid to dispose of a claim.” … SECTION 6 DEFINITIONS AND INTERPRETATIONS… 6.5 Limit of Indemnity Shall mean the sum shown in the Schedule which is available to indemnify the Assured in respect of each claim provided always that where more than one claim arises from the same original cause all such claims shall be deemed to be one claim and only one limit of indemnity shall be payable in respect of the aggregate of all such claims. 6.6 Defence Costs Shall mean all costs and expenses incurred in the investigation, defence or settlement of any claim or potential claim and/or the cost of representation at any enquiry or other proceedings which have a direct or indirect relevance to the investigation, defence or settlement of any matter notified under the terms of this policy. This shall include the Assured’s own costs, but excluding any profit element, incurred in the defence, investigation, design of remedial work, inspection and supervision of remedial works in respect of any claims notified under Claims Conditions 3.2 a) and b) of this Policy subject to Underwriters’ prior agreement and acceptance of Liability under this Policy. 6.12 Circumstance Shall mean information or circumstances of which the Assured is aware which suggests that a claim is likely to be made against the Assured which the Assured may become legally liable to pay and which arises out of the exercise and conduct of the Assured’s Professional Business …”

“USD 10,000,000 in the aggregate, plus unlimited reinstatements as in Endorsement No. 4 of Section A of the Wording, costs in addition.”

“The Liability of Underwriters hereon shall not exceed the Limit of Indemnity as set out in the schedule. However, in the event of partial or complete exhaustion of the Limit of Indemnity by payment of any claim or claims the Limit of Indemnity shall be correspondingly reinstated provided that the total liability of Underwriters in respect of any one claim shall not exceed the Limit of Indemnity. The reinstatement of the Limit of Indemnity will only apply where the additional reinsurance coverage provided by policy(ies) in excess of this policy (being at least USD50,000,000 in the aggregate) is exhausted by reason of the payment of a claim or claims and subject to the preceding paragraph shall be reinstated so that the Limit of Indemnity shall be applicable in respect of any one claim. In the event of reinstatement of the Limit of Indemnity the aggregate excess shall not be reinstated.”

“(d) The insured must be aware of the circumstances which it is notifying to the Underwriters. It would not be enough to say: “I think it is possible that there may be some unknown and unidentified design deficiencies in a particular building”

“In my view, Mrs Justice Gloster's dicta as set out above are germane, correct and applicable in this case.” (§ 95) “It is possible for the insured to give notice of a ‘hornets' nest’ or ‘can of worms’ type of circumstance.” (§ 99(c)) but held on the facts of Kajima that the circumstances notified were limited to specific matters and that it was not a ‘hornet's nest’ or ‘can of worms’ set of circumstances. The insured in Kajima had erected a block of flats consisting of pre-constructed pods, and notified insurers in 2001 of the fact that the pods were “settling and moving excessively causing adjoining roofing and balconies and walkways to distort under differential settlement”

“Broadly those cases are simply authority for the relatively obvious proposition that where an insurance clause relates to cover for something “arising out of” a particular contingency that expression may well be wider than an expression such as “caused by”

“Underwriters agree that any… Circumstance notified to them during the Period of this Policy and which subsequently gives rise to a claim after expiry of this Policy shall be deemed to be a claim first made during the Period of this Policy”

“What has to be decided in this case is whether on the evidence the unseaworthiness of the cruiser due to the design defects was such a dominant cause that a loss caused by the adverse sea could not fairly and on commonsense principles be considered a proximate cause at all. In my judgment, the evidence did not establish anything of the kind. What it did establish was that, but for a combination of unseaworthiness due to design defects and an adverse sea, the loss would not have been sustained. One without the other would not have caused the loss. In my judgment, both were proximate causes.”

“On a commonsense view of the facts both these two causes were, in my opinion, equal, or at least nearly equal, in their efficiency in bringing about the damage. In these circumstances, if the policy had contained a relevant express exception which related to loss caused by the unseaworthiness of the vessel, the plaintiffs' claim might well have been unsustainable. … Roskill L.J. summarised the legal position thus in Wayne Tank and Pump Co. Ltd. v. Employers Liability Assurance Corporation Ltd. (1974) 1 Q.B. 57 at p. 75: “I think the law in this respect is the same both for marine and non-marine, namely, that if the loss is caused by two causes effectively operating at the same time and one is wholly expressly excluded from the policy, the policy does not pay”

“It seems that there may be more than one proximate (in the sense of effective or direct) cause of a loss. If one of these causes is insured against under the policy and none of the others is expressly excluded from the policy, the assured will be entitled to recover”.”

“6.5 Limit of Indemnity Shall mean the sum shown in the Schedule which is available to indemnify the Assured in respect of each claim provided always that where more than one claim arises from the same original cause all such claims shall be deemed to be one claim and only one limit of indemnity shall be payable in respect of the aggregate of all such claims.”

“The current RMJM team took over the job in July 2008 issuing the previously tendered drawings for Construction. As the construction works are proceeding, it has become apparent that many works have not been thoroughly coordinated between the disciplines leading to the Contractor submitting numerous RFIs. RMJM has decided to review the documentation and correct any serious errors of coordination with the aim of avoiding larger abortive works by the Contractor. We have informed the Client’s Rep (DG Jones) of this and are presenting any proposed changes to them for their approval.”

“in each case the extent and ambit of the notification and the claims that are covered by such notification will depend on the particular facts and terms of the notification”

“It is denied that the claims were notified to and/or fall within the 2008/09 Primary Policy. The only claims which could fall within the 2008/09 Primary Policy are any claims to which Circumstance 923 gave rise, whereas, as set out at paragraph 38.4 below, all or most of the claims made in the Arbitration arose from Circumstance 953 and/or Circumstance 963 and/or related to claims which were otherwise first made or Circumstances which were otherwise notified after the expiry of the 2008/09 Primary Policy.”

“In the further alternative, in the event that contrary to Beazley’s primary case but as contended by ASD: (i) the entirety of the ASD Claim is not to be treated as falling within the 2008/09 year of cover and/or the notification of 31 March 2009 did not encompass all claims in respect of “errors or changes in design which are as a result of a poor initial design by RMJM”; and (ii) there was no such agreement or estoppel as is alleged in paragraph 35 above, then the following claims advanced by ASD in the ASD Arbitration fell outside the scope of both the notification of 31 March 2009 and the notification of 10 September 2009 and, as a result, fall outside the cover provided under both the 2008/09 and the 2009/10 Primary Policies:- (1) ASD’s claim that RMJM failed to proceed with due speed following the imposition by the Dubai Municipality of a stop order on the Sector A works (paragraph 10.12 of the ASD Award). Any such delay on RMJM’s part occurred after 10 September 2009 and was not within the notification made on that date. (2) ASD’s claim in respect of the Acoustic Design of the Sector B theatre (paragraph 10.20 of the ASD Award). The matters giving rise to that claim were not the subject of any complaint by ASD prior to August 2009 and such matters did not fall within the scope of the 10 September 2009 Notification. (3) ASD’s claim as to the level of detail in RMJM’s drawings and designs leading to the issue of RFIs (paragraph 10.28 of the ASD Award). All issues in relation to RFIs issued prior to 20 October 2009 were resolved by VOs 1 and 2 and, to the extent that any issues in relation to RFIs did not form part of the ASD Claim, those issues arose after October 2009 and did not fall within the scope of the 10 September 2009 Notification.”

“Where the defendant denies an allegation— (a) he must state his reasons for doing so; and (b) if he intends to put forward a different version of events from that given by the claimant, he must state his own version.”

“36 An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment under CPR Part 24. Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or is not supported by contemporaneous documentation. … 38 Drawing these authorities together, the relevant principles can be stated simply as follows: a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted; b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission; c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept; d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done; e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation; f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay; g) a much stricter view is taken nowadays of non-compliance with the CPR and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.”

“Whether and to what extent the ASD Claim (or any part of it, and which part(s)) (a) arises out of circumstances notified during the 2009/2010 policy year and (b) falls within the period of cover provided by the 2009/2010 Primary Policy?”

“The current Edinburgh based project team took over the job in July 2008, issuing the previously produced Hillier drawings for construction. As the construction progressed it became apparent that many elements of work had not been thoroughly coordinated between different disciplines and packages, leading to the contractor submitting multiple Requests for Information (RFIs) to the design team. In view of this RMJM decided to review the documentation and amend any errors of coordination in order to avoid abortive works by the contractor. The project clerk of works was advised and proposed changes were presented to the client for consideration. In response RMJM received notice of potential claims in respect of any additional works that may be incurred. At the time of notification it was not clear precisely what costs might be involved and the notification was originally made as a precaution under bordereau notification number 923/08-09. Over the last two years there had been no material developments until RMJM recently received the attached letter from lawyers acting for the client, in which formal notice of a claim has been given. The letter of claim identifies a number of specific issues and aspects of the Insured’s involvement in the design and coordination of the project, but the overriding assertion is that their overall performance failed to meet the required professional duty of care, with the result that delays and additional costs have been incurred by both the client and the works contractor. … The current feeling is that the allegations may be, in large part, unjustified and that the level of losses suggested is significantly overstated, particularly in so far as the contractor loss and expense component is concerned. However, it is a matter of fact, and accepted by RMJM (although not admitted to the client), that the early coordination of the project was poor and [led] to the contractor issuing multiple RFI requests, with attendant cost implications. Consequently, there may be a valid claim(s) for some of those costs. RMJM is investigating the specific allegations in more detail to (a) enable them to compile a suitable response and (b) to ascertain if a need arises to make separate notification(s) on the current policy year. … Once RMJM’s further internal investigations are complete it should be possible to provide a more definitive assessment of likely exposures and, at that stage, consideration will be given to the need for a reserve to be posted against this notification.”

“Subject: RMJM – American School of Dubai – Project Delays – Bdx Notification No 923/08-09 This notification was originally made in March 2009, following a discovery that poor project coordination had resulted in the need for the contractor to issue multiple RFIs. In the absence of any developments since the notification was made no further action has been taken but RMJM has recently received a letter from lawyers acting for the client, as per the attached. I have also appended a letter to Insurers to bring them up to date. The client has made various allegations but the fundamental thrust is that RMJM’s coordination of the project, and dissemination of design information, failed to meet the required standard. For that reason it is considered that most of what is being contended falls within the scope of notification 923 but I will be writing to you separately to ensure that the current year underwriters are advised, on a precautionary basis, pending a response from the 2008-09 policy year Insurers.”

“The issues now being raised by the school appear broader than encompassed within 923 and 953 – what are RMJM’s views on this?”

“Notification Bdx 923 was made in early 2009 by Integra on our behalf as a result of a "Notification of potential claims" letter (attached) received from D. G. Jones (Project Managers). This letter was general in its allegations but did put RMJM on notice of "potential claims that will be sought by the Main Contractor" arising from alleged "errors or changes in design" and further that "any costs associated with such claims" would be passed on to RMJM. The letter further highlighted that "checking the design and coordination of the designs is solely the responsibility of RMJM". For a period of over 2 years there were no material developments until December 2011 when we received a letter from lawyers acting for the Client alleging a number of specific issues in respect of our design and coordination of the project but with an overriding assertion that our overall performance did not meet the professional duty of care. This letter together with Integra's covering letter (attached) was forwarded to Marsh at that time to keep Dave up to date on developments. We now believe that this letter may not have been forwarded to Dave and as a result the recent correspondence is the first time he may have been aware of this letter and its contents. We can only apologise for this. At that time of the first notification we did not have precise details of what the claims might be or the affect they would have on the Main Contractor's works, the progress of these works or subsequent knock on effects of any delay in progress. This was clarified somewhat by the lawyer's letter in that first 6 bullet points specifically refer to design issues and the remaining 4 bullet points, although not explicitly referring to design issues, are in our view likely to a greater or lesser degree have resulted from the original "errors or changes in design" and "coordination of the designs". To date we have not received any substantiation of these allegations which might give further insight into their originating cause. However given the above and the general nature of the original "Notification of potential claims" we would request that Beazley provide cover for this claim. In respect of Notification Bdx 953 we believe this issue is the 2nd bullet point in the lawyer's letter which in our opinion was caused by a change in the statutory requirements after our design had been approved by the local authority.”

“we understand this position. However, we need to make it clear that the entity does not have the financial resources to meet any excess requirement under the policy and therefore if you wish to make this offer it is on the basis that Beazley will fully fund it. I would also be grateful to understand whether it is necessary to withdraw or reduce the Adnec at this time to reflect this.”

“You appear to suggest that, as a condition of this offer being made, Insurers should pay the policy excess in the ASD matter. The position remains that it is RMJM’s obligation to pay the policy excess and, accordingly, this condition cannot be met.”

“I am not at all trying to negotiate here and am very supportive of the initiative to settle. But I just want to be clear that someone will come ask the partnership for $250k and it is just not there. Either that will mean it cannot meet its obligations to Beazley or it will result in short payment to ASD (I am unclear from the settlement mechanism which it will be).”

“3.1 All conditions contained in Section 3 are deemed to be conditions precedent to liability. Discovery of a Claim or Circumstance 3.2 a) … b) If during the Period of this Policy the Assured becomes aware of any Circumstance, the Assured shall give notice … to Underwriters of such Circumstance as soon as practicable but in any event not later than the expiry of the Period of this Policy.”

“I am writing to inform you that the American School of Dubai will be making claims against RMJM for errors and omissions from the drawings issued to the contractor in Sector A. the drawings are being reviewed at present and upon the submission by the contractors of costs for the work to be carried and their delay and disruption claim a claim will be submitted by the ASD to RMJM for the re-imbursement of all associated costs.”

“74 Blair J considered this line of authority in Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311. In essence he held that a duty to speak, failure to fulfil which would give rise to estoppel by acquiescence, may arise on the particular facts where one party is proceeding on the assumption that something is agreed, whereas the other party knows that it is in dispute. In such a case the duty to speak may arise because a reasonable man would have the expectation referred to by Bingham J and set out in paragraph 72 above. 75 The reference to "acting honestly” did not, he held, mean that the party against whom the estoppel was asserted had to be guilty of actual dishonesty in the sense of acting fraudulently. He accepted [133] the submission that, absent a relationship of good faith or partnership or something akin to a joint enterprise the courts would not impose a duty to speak in the absence of impropriety of some description by the person alleged to be estopped. That impropriety might, however, come from the act of staying silent itself, as where a reasonable person would expect the person who is alleged to be estopped, acting honestly and responsibly, to bring the true facts to the attention of the other party known to him to be under a mistake as to their respective rights and obligations. Andrew Smith J adopted this statement in Kaupthing Singer & Friedlander Ltd v UBS AG [2014] EWHC 2450 (Comm) , where he held that a bank would not be acting honestly (in the sense explained by Blair J) or responsibly if it knew about or even seriously suspected a mistake of the kind then in question. 76 In the present case, which does involve a relationship of good faith, impropriety in the sense identified by Blair J is, a fortiori , sufficient to give rise to an estoppel. … … 82 … The authorities show that whether an estoppel arises is not wholly dependent on whether the person sought to be estopped has made some representation express or implied. It may arise if, in the light of the circumstances known to the parties, a reasonable person in the position of the person seeking to set up the estoppel (here TB) would expect the other party (here the insurers) acting honestly and responsibly to take steps to make his position plain. Such an estoppel is a form of estoppel by acquiescence arising out a failure to speak when under a duty to do so. 84 TB [the insured]'s failure to provide the Category 7 material did not occur in a vacuum but in circumstances where Mr Coonan [the insurer’s loss adjuster] was due to get back to TB with a response to its position after taking instructions on the two issues. It seems to me that, in the particular circumstances of this case, as known to the parties, someone in the position of TB would reasonably expect the insurers to say if they required the Category 7 material before Mr Coonan reported back, particularly if failure to provide the information was to be said to be fatal to the claim. ... … 87 In the light of what had passed between the parties, TB was, in my view, entitled to expect that if the insurers regarded the Category 7 material (alone) as outstanding, due, and unparked, then, acting honestly and responsibly, they should have told her. Not to do so was misleading. 88 An estoppel of this nature in a contract of this kind does not require dishonesty or an intention to mislead; nor any impropriety beyond that inherent in the conclusion that the insurers should have spoken but did not. In the circumstances to which I have referred the insurers were, in my view, under a duty to tell TB that the Category 7 material was indeed outstanding and was required before the upshot of any instructions was revealed. If they had done so the documents would no doubt have been supplied. Since they did not do so it would be unjust and unconscionable to allow them to escape any liability on the ground of non-compliance with a condition precedent in relation to the Category 7 material.”

“What is the available limit of cover under the 2008/2009 Primary Policy for the ASD Claim and/or the ADNEC Claim allowing for the amount of £62,500 (equivalent to US$ 107,181.25 using the rate of exchange on the date on which the payment was made) already paid by Beazley under the 2008/2009 Primary Policy in respect of an earlier claim against RMJM), and in particular: (a) Whether Beazley is entitled to set-off a pro rata share of the costs incurred in defending the ADNEC Claim against its liability under the 2008/2009 Primary Policy to ADNEC in relation to its Claim and (insofar as the pro rata share exceeds the amount available to be set off against ADNEC’s Claim) against its liability under the 2008/2009 Primary Policy to ASD in relation to its Claim; and/or (b) Whether Beazley is estopped from contending that it is entitled to set-off a pro rata share of the costs incurred in defending the ADNEC Claim in the manner alleged in issue 5.a. above.”

“1.2 Defence Costs in Addition Underwriters will also indemnify the Assured for Defence Costs (see 6.5) where such costs have been incurred with Underwriters’ consent. Such Defence Costs are payable in addition to the Limit of Indemnity shown in the Schedule. In the event that a settlement is made with any party in excess of the amount of the Limit of Indemnity, Underwriters’ liability in respect of Defence Costs shall be in the same proportion that the Limit of Indemnity bears to the sum which would be eligible for payment but for the restriction of the Limit of Indemnity.”

“4.6 Claim Settlements The Underwriters may at any time pay to the Assured in connection with any claims or series of claims under this Policy the Limit of Indemnity (less any sums already paid) or any lesser sum for which such claims can be settled and upon such payment the Underwriters shall not be under any further liability in respect of such claims except for costs and expenses incurred prior to such payment. If a payment exceeding the Limit of Indemnity has to be made to dispose of a claim the liability of the Underwriters to pay all costs fees and expenses in connection therewith shall be limited to such of the said costs and expenses as the Limit of Indemnity bears to the amount paid to dispose of a claim.”

“… in the event of a claim arising to which the Underwriters hereon may be liable to contribute, no costs shall be incurred on their behalf without their consent being first obtained (such consent not to be unreasonably withheld) and if they consent they shall contribute to the said costs in the proportion that their share of the claim, as finally settled, bears to the total sum paid to dispose of the claim. No settlement of a claim shall be effected by the Assured for such a sum as will involve this Policy without the consent of the Underwriters hereon.”

“(3) Where underwriters instruct a solicitor to conduct the defence, they thereby create the relationship of solicitor and client between the solicitor and the assured— Groom v Crocker [1939] 1 KB 194 at pp. 202–203. (4) The normal consequence of this is that the assured becomes liable to pay the solicitor's costs, even if underwriters were also liable for those costs: Adams London Improved Motor Coach Builders Ltd [1921] 1 KB 495 at pp. 501 and 504. (5) Those costs are properly deemed to be incurred by the assured, even if they are funded by underwriters: Davies v Taylor (No. 2) [1974] AC 225 at p. 230; Lewis v Averay (No. 2) [1973] 1 WLR 510 at p. 513. (6) If underwriters fund defence costs of an assured which fall within the excess, the assured will be under an obligation to reimburse underwriters. This obligation arises under the terms of general condition 1, or alternatively under principles of restitution. Conclusions 5 and 6 are necessarily premised, as Mr Sumption accepted that they must be, on the assumption that the assured is legally liable to pay the solicitors who are instructed to conduct the defence. This will depend upon the terms upon which those solicitors are instructed. Where a number of E & O underwriters join together to instruct a firm of solicitors to defend claims brought by an action group against a large number of agents, some solvent, some insolvent, the terms and circumstances under which the solicitors are instructed may require careful consideration in order to determine whether and to what extent individual assured are liable for defence costs.”

“Q: What is your understanding, looking at the matter first from a technical viewpoint, as to what happens in relation to the ADNEC defence costs which Beazley has funded which are proportionate to that part of the ADNEC Claim which exceeds the limit. … A: Okay, my understanding of how this would work is the defence costs would have been paid in the first instance by Beazley. You would look then at the amount of indemnity they paid in relation to the overall indemnity, and if they had paid too much they would be entitled to get that back from the insured, who would then go and seek from any other parties who they thought were responsible for it. Q. I asked you about how technically which I think you've answered, but how in practice does it work? A. In practice the broker would have coordinated that. So rather than Beazley, you know, get money back from RMJM and then RMJM go and have to collect money from somebody else, the broker would co-ordinate the different payments from the different parties and there would only be one set of transactions that would happen.”

“At least while I was at RMJM, RMJM conducted its business on the basis that it would not have to repay defence costs in order to avoid these kinds of problems. I suspect that if RMJM had been told about a possible need to reimburse defence costs, it would (at least during my time at RMJM) have tried to exercise some control over the costs incurred to prevent these becoming excessive.”

“1.— Rights of third parties against insurers on bankruptcy &c. of the insured. (1) Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then— (a) in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or (b) in the case of the insured being a company, in the event of a winding-up order being made, or a resolution for a voluntary winding-up being passed, with respect to the company, or of the company entering administration, or of a receiver or manager of the company's business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge or of a voluntary arrangement proposed for the purposes of Part I of the Insolvency Act 1986 being approved under that Part; if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred. … (4) Upon a transfer under subsection (1) or subsection (2) of this section, the insurer shall, subject to the provisions of section three of this Act, be under the same liability to the third party as he would have been under to the insured, but— (a) if the liability of the insurer to the insured exceeds the liability of the insured to the third party, nothing in this Act shall affect the rights of the insured against the insurer in respect of the excess; and (b) if the liability of the insurer to the insured is less than the liability of the insured to the third party, nothing in this Act shall affect the rights of the third party against the insured in respect of the balance. (5) For the purposes of this Act, the expression “liabilities to third parties,” in relation to a person insured under any contract of insurance, shall not include any liability of that person in the capacity of insurer under some other contract of insurance.”

“89 A second sub-issue is that legal set-off is in any event confined to debts due and payable and either liquidated or capable of ascertainment without valuation or estimation: Stein v Blake [1996] AC 243 , 251, per Lord Hoffmann. On current authority, at Court of Appeal level, the right to recover under an insurance contract is classified not as a debt, but as a right in damages: see eg Ventouris v Mountain [1992] 2 Lloyd's Rep 281, 286, Sprung v Royal Insurance (UK) Ltd [1999] 1 Lloyd's Rep IR 111. Further, a right to claim proportionate contribution would not normally satisfy the test of legal set-off, although, on the agreed facts in this case, it might perhaps do so, since they lead to a definite percentage contribution of 22.08%. Regardless of the view taken on these two points, legal set-off is procedural, not substantive. When one comes to the second aspect, the statutory transfer probably therefore precludes legal set-off.”

“The reference to the insured's rights “under the contract” has the obvious consequence that one must read and construe the insurance contract between insurer and insured to see what the insured's rights are. There can be transferred only such rights as he has under that contract. The reference to rights “in respect of the liability” to the third party has been narrowly construed: Murray v. Legal and General Assurance Society Limited [1970] 2 Q.B. 495”

“151. However Denso argues that Cox case does not concern set-off of premium, but of the effect on a third party of a costs-inclusive excess. Accordingly, the court was faced with an entirely distinct issue. Further there was no consideration by the Court of the doctrine of stare decisis. Murray is binding as a matter of precedent. Phillips J did not consider whether he was fully satisfied that the previous decision was wrong. The conditions for following a more recent decision are therefore not in place. 152. This is a very interesting point, although arising somewhat down the list of issues. To the extent that it may ever become relevant I prefer the argument of Denso. There is a distinction between the two cases, as is apparent from the judgment of Phillips J. This tends to be reinforced by the facts that Phillips J would be expected to have made it clear if he considered that the previous decision was inconsistent with the course he proposed. This also explains the absence of the full consideration of the previous authority before departing from it. 153. I take comfort in that conclusion from the decision of the Supreme Court in International Energy Group Ltd v Zurich Insurance plc [2016] AC 559 at [83]-[93]. The issue there was the slightly different one of the right to set-off contribution from the insured or third parties. The Court considered the point though leaving this debate open on the basis that any right of contribution in that case was best seen as arising from circumstances outside the insurance policy, and on that basis as not capable of giving rise to a set-off at all. 154. However the Court opined that legal set-off is “probably” precluded under the statutory transfer under the 1930 Act: § 89. It further held that if equitable set off is available, it requires analysis of whether the claims are so closely connected that it would be “manifestly unjust” to permit the claim without taking account of the cross-claim: Geldof Metaalconstructie NV v Simon Carves Ltd [2010] 4 All ER 847, per Rix LJ. 155. This discussion does demonstrate that if a 1930 Act transferee takes subject to equities, the insurer (here Great Lakes) will need to plead and prove the inequitability of not setting off premium. It appears that this has not been done here, and so even if the argument might arise any claim for set off would fail at this point.”

“Whether, to the extent that the amount recoverable by ASD and/or ADNEC under the 2008/2009 Primary Policy falls to be reduced by reason of the matters addressed by issue 5.a., and on the assumption that the Excess Insurers consented to the incurring of the ADNEC defence costs, any shortfall in ASD’s and/or ADNEC’s recovery under the 2008/2009 Primary Policy or any amount set off by Beazley can be recovered by ASD and/or ADNEC under the Excess Policies, including: (a) whether a claim by ASD and/or ADNEC under the Excess Policies in respect of any shortfall in recovery under the 2008/2009 Primary Policy would be a claim in respect of ADNEC defence costs; and; (b) whether ASD and/or ADNEC has title to sue in respect of such defence costs.”

“Whether, to the extent that the answer to issue 5.a. is “No” and/or the answer to issue 5.b. is “Yes”, Beazley is entitled to recover a pro rata share of the ADNEC defence costs from the Excess Insurers under the 2008/2009 Excess Policies pursuant to the Third Parties (Rights Against Insurers) Act 1930 (it being assumed for this purpose that the Excess Insurers consented to the incurring of such defence costs in accordance with clause 4 of the WNM 1989 Professional Indemnity wording as incorporated into the 2008/2009 Excess Policies)”

“With the exception of costs incurred by the operation of 3(b) above, in the event of a claim arising to which the Underwriters hereon may be liable to contribute, no costs shall be incurred on their behalf without their consent being first obtained (such consent not to be unreasonably withheld) and if they so consent they shall contribute to the said costs in the proportion that their share of the claim, as finally settled, bears to the total sum paid to dispose of the claim. No settlement of a claim shall be effected by the Assured for such a sum as will involve this Policy without the consent of Underwriters hereon.”

“Whether ASD is entitled to recover an indemnity in respect of post-award interest under the Policies and in particular: (a) Whether such interest is compensation and/or damages; and/or (b) Whether any liability which RMJM has for such interest is an insured liability falling within the cover provided by clause 1.1 of the Primary Policies”

“Mr. Sumption suggested that the remedy of the assured, or of third parties in the shoes of an insolvent assured, for delay in receipt of an indemnity after the third parties have established a quantified claim is an award of interest under s.35A of the 1981 Act. No defendant seemed inclined to challenge this, perhaps not surprisingly, for it leaves it open to the Court to award interest which will match any Judgment Act interest to which the third parties are entitled without regard to the limit of cover.”

“Whether, in respect of any sums due to ASD in respect of which post-award interest was not awarded by the arbitral tribunal and/or if the answer to issues 8 and/or 9 is that ASD and/or ADNEC is not entitled to recover an indemnity in respect of post-award interest under the Policies, ASD and/or ADNEC is entitled to interest on sums found due pursuant to section 35A of the Senior Courts Act 1981 at such rate and for such period or periods as the Court may hereafter determine.”