“Dental Protection provides advice and assistance to dentists and dental care professionals, including legal advice and assistance in all matters that challenge your professional integrity. This includes indemnity against costs and damages in dental negligence claims. We are not an insurance company – The benefits of Dental Protection membership are discretionary as set out in our Memorandum and Articles of Association. [Emphasis added] 20. The Defendant’s failure to indemnify the Claimant against costs and damages arising from negligent treatment is unfair, irrational and perverse and contrary to objectives of the membership scheme. 21. … 27. Had the Defendant been provided with the correct advice, and had the Defendant complied with the terms of the contract, the Claimant would not have corrected the negligent treatment at his own expense, thereby sustaining financial loss. 28. The Claimant has suffered the following loss: i) Cost of remedial treatment to date =£310,690.00 ii) Completed consultations =£18,000.00 iii) Minor remedial work =£14,700.00 Total =£343,390.00 ”
“It is very well established that the circumstances in which a court will interfere with the exercise by a party to a contract of a contractual discretion given to it by another party are extremely limited. We were referred to Weinberger v. Inglis[1919] AC 606 ; Dundee General Hospitals Board of Management v. Walker[1952] 1 All ER 896 ; Docker v. Hyams[1969] 1 Lloyd’s Rep 487 , and Abu Dhabi National Tanker Company v. Product Star Shipping Co. Ltd.[1993] 1 Lloyd’s Rep 397 (“The Product Star”). These cases show that provided that the discretion is exercised honestly and in good faith for the purposes for which it was conferred, and provided also that it was a true exercise of discretion in the sense that it was not capricious or arbitrary or so outrageous in its defiance of reason that it can properly be categorised as perverse, the courts will not intervene. 35. In Cantor Fitzgerald International v. Horkulak[2004] EWCA Civ 1287 .[2004] IRLR 942 , the Court of Appeal held that the court’s task is to put itself in the shoes of the decision-maker. Potter LJ said, at para 30: “While, in any such situation, the parties are likely to have conflicting interests and the provisions of the contract effectively place the resolution of that conflict in the hands of the party exercising the discretion, it is presumed to be the reasonable expectation and therefore the common intention of the parties that there should be a genuine and rational, as opposed to an empty or irrational, exercise of discretion.” 36. In Socimer International Bank Ltd. v. Standard Bank Ltd.[2008] EWCA Civ 116 , the Court of Appeal held that where a party to contract exercises a discretion then the discretion was subject to a limitation it described as “rationality”, i.e. that “a decision-maker’s discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality”. 37. At para 66, Rix LJ said: “It is plain from these authorities that a decision-maker’s discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time. In the latter class of case, the concept of reasonableness is intended to be entirely mutual and thus guided by objective criteria. Gloster J was therefore, in my judgment, right to put to Mr. Millett in the passage cited at para 57 above the question whether a distinction should be made between the duty to take reasonable care and the duty not to be unreasonable in a Wednesbury sense; and Mr. Millett was in my judgment wrong to submit that it made no difference which test you deployed. Laws LJ in the course of argument put the matter accurately, if I may respectfully agree, when he said that pursuant to the Wednesbury rationality test, the decision remains that of the decision-maker, whereas on entirely objective criteria of reasonableness the decision-maker becomes the court itself. A similar distinction was highlighted by Potter LJ in para 51 of his judgment in Cantor Fitzgerald. For the sake of convenience and clarity I will therefore use the expression “rationality” instead of Wednesbury-type reasonableness, and confine “reasonableness” to the situation where the arbiter on entirely objective criteria is the court itself. 38. In Hayes (FC) v. Willoughby[2013] UKSC 17 , Lord Sumption observed, at para 14, that: “… Rationality is a familiar concept in public law. It has also in recent years played an increasingly significant role in the law relating to contractual discretions, where the law’s object is also to limit the decision-maker to some relevant contractual purpose: see Ludgate Insurance Co. Ltd. v. Citibank NA [1998] Lloyd’s Rep IR 221, para 35, and Socimer International Bank Ltd. v. Standard Bank Ltd. [2008] Bus LR 1304, para 66.””
“There is a pot of money here. You can have some of it if you sue.”