Cape Distribution Ltd v Cape Intermediate Holdings Plc [2016] EWHC 1786 (QB)

“The right to recover contribution in accordance with section 1 above supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Act in corresponding circumstances,; but nothing in this Act shall affect - (a) any express or implied contractual or other right to indemnity; or (b) any express contractual provision regulating or excluding contribution; which would be enforceable apart from this Act (or render enforceable any agreement for indemnity or contribution which would not be enforceable apart from this Act).”

“In light of the court’s conclusion on the trial of preliminary issues contained in a judgment handed down on 17 May 2016 that the claimant is entitled to an indemnity in respect of the claims which are the subject matter of the claims and counterclaims herein and by virtue of section 7(3)(a) of the 1978 Act the claimant denies that the defendant is entitled to contribution pursuant to section 1 of the 1978 Act alternatively any such counterclaims fail for circuity of action and/or it would not be just and equitable in the light of entitlement to such indemnity for the claimant to be required to make any contribution towards any claims paid in satisfaction of judgments entered or settlements agreed within two years prior to the date of service of the Counterclaim herein or at all where such claims were made by former employees of the claimant or their estates and dependents for damages for asbestos related illness due to asbestos exposure, or for any other any bodily injury or disease, arising out of employees’ employment by the Claimant at the Uxbridge works. The Claimant makes the same qualification to the submission as is made (mutatis mutandis) by the defendant in paragraph 23(d) of its Defence herein.”

“In relation to Clause 5 of the Agreement and it being admitted that by Clause 5 CDL and CIH agreed that CDL would account and be entitled to be indemnified against all debts, liabilities and obligations incurred carrying the business until the completion of the sale: (a) is CDL entitled to such indemnity in respect of CDL’s own breaches of duty as agent? (b) alternatively, is CIH entitled in principle to claim damages from CDL in respect of CDL’s own breaches of duty?”

“Where damage is suffered by any person as a result of a tort … - … (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.”

“no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought”

“For the purpose of considering Mr Dingemans’ fourth submission I shall assume that the bank and the brokers are liable in respect of the same damage despite Mr Dingemans’ primary submission that the brokers were not liable to Mr Moore at all. Section 7(3) of the 1978 Act says: ‘Nothing in this Act shall affect ... (a) any ... implied contractual right to indemnity.’ Whilst the principle in the Sheffield case stands, there can be no basis for a claim for contribution because the implied right to indemnity would be affected if the person liable to indemnify could claim contribution from the person entitled to the indemnity. …”

‘yes’ by which I mean: ‘(i) that CIH became an insured under the policy by virtue of the Endorsement; and (ii) CIH thereby obtained insurance cover under the Policy in respect of liability to an employee of CDL arising out of that employee’s employment with CDL’

‘no inasmuch as the claim concerns a period when there was co-insurance’

“On this issue, I prefer the submissions advanced by Mr Fenwick QC. I agree with him that, in the present case, the interests of CDL and CIH under the policy were coterminous. Put another way, the same damage that was visited upon CDL as a result of employees' claims is now sought to be visited upon CIH through the subrogated claims brought by Aviva in CDL's name. The policy responds to bodily injury suffered during the course of employment. The fact that the relevant employees were employed by CDL rather than by CIH seems to me to be immaterial. What matters is that the employees who were claiming compensation were doing so. Nothing else matters. It is that claim which the Policy covers. The position of CIH is, for relevant purposes, coterminous with that of CDL. Their interests are ‘inseparably connected’. They are ‘pervasive’. Mr Kent QC submitted that the respective interests of CDL and CIH were not the same if and insofar as the liability of CIH was anything other than a vicarious liability. I do not agree. The relevant question is not how the liability arises but what the underlying claim is in the sense of what the individual employee alleges is the bodily injury which has been suffered. This is the thing which matters as far as the Policy is concerned: the insurer (RPA) needs to know what the underlying claim is, and what it is, colloquially speaking, ‘on the hook for’. In my view, this is a clear case where the fact that both CDL and CIH, as I have decided, were the ‘Insured’ as a result of the Endorsement means that there was co-insurance and, as a result, the subrogated claim brought by Aviva in the name of CDL is not maintainable inasmuch as it is concerned with any period when that co-insurance existed.”

“10. In Fairchild, all the claimant employees had been exposed to asbestos dust during periods of employment with more than one employer. They contracted mesothelioma. This is an indivisible disease, i.e. one whose severity does not depend on the extent of the exposure to asbestos. In that sense, it is similar to lung cancer and differs from diseases such as pneumoconiosis and silicosis. But it was accepted that the risk of developing mesothelioma increased in proportion to the quantity of asbestos dust and fibres inhaled: the greater the quantity of dust and fibres inhaled, the greater the risk. There was no way of identifying, even on a balance of probabilities, the source of the fibre or fibres which initiated the genetic process which culminated in the malignant tumour. Lord Bingham referred to this at para 7 as the ‘rock of uncertainty’. 11. In order to surmount this difficulty, the House of Lords fashioned a modified approach to proof of causation: proof that a defendant employer had materially contributed to the risk of contracting the disease was sufficient to satisfy the causal requirements for his liability. This approach had been heralded earlier in McGhee v National Coal Board [1973] 1 WLR 1.”

“In Fairchild, the House of Lords did not address the question of apportionment between defendants. That issue was confronted squarely by the House in Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572. In that case, the deceased who died of mesothelioma had been exposed to asbestos during three periods of his working life: while working for a company which had become insolvent; while working for the defendant; and while he was self-employed. It was held that the defendant was liable only in proportion to his own contribution to the exposure to the asbestos and therefore to the risk that the deceased would contract mesothelioma. It was irrelevant whether the other exposure was tortious, non-tortious, by natural causes or caused by the employee himself.”

“(1) This section applies where – (a) a person (‘the responsible person’) has negligently or in breach of statutory duty caused or permitted another person (‘the victim’) to be exposed to asbestos, (b) the victim has contracted mesothelioma as a result of exposure to asbestos, (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure mentioned in paragraph (a) or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort, by virtue of the exposure mentioned in paragraph (a), in connection with damage caused to the victim by the disease (whether by reason of having materially increased a risk or for any other reason). (2) The responsible person shall be liable – (a) in respect of the whole of the damage caused to the victim by the disease (irrespective of whether the victim was also exposed to asbestos – (i) other than by the responsible person, whether or not in circumstances in which another person has liability in tort, or (ii) by the responsible person in circumstances in which he has no liability in tort), and (b) jointly and severally with any other responsible person. (3) Subsection (2) does not prevent – (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.”

“The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure. For reasons which I have set out, I regard this distinction as too simple. The liability arises only because of the incurring of the disease and is for the disease. A condition of such liability is that the employer (negligently) exposed the victim to asbestos. The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers’ activities during their insurance periods: …; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers' activities will not in practice be covered at all.”

“In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient ‘weak’ or ‘broad’ causal link for the disease to be regarded as ‘caused’ within the insurance period. It would, I think, have been anomalous and unjust if the law by ‘deeming’ there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result. As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk. The risk is no more than an element or condition necessary to establish liability for the mesothelioma. The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.”

“For this purpose, the law accepts a weak or broad causal link. The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease. But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond. The concept of a disease being ‘caused’ during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker. Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.”

“In the light of this drastic consequence, the majority of the court in ‘Trigger’ preferred a second response. It equated the concept of causation in an insurance context with the weaker or broader meaning which the courts have, to the benefit of victims, given it in tort. This was a choice rationalised in terms of the principle that a facultative liability insurance normally responds to whatever may prove to be the liability incurred by the insured. In ‘Trigger’ there was no consideration of a situation in which a relevant insurance covered only part of an overall period during which the insured employer had exposed the victim to asbestos dust. But in my view the reasoning in ‘Trigger’ binds this court to hold that the mesothelioma is caused - in the sense that it results from exposure which existed - in each and every period of any overall period of exposure. The fact that a victim or an insured only relies on one period of exposure does not alter the legal position, that it can equally be said to have been caused in every other period of exposure. This is because, as a matter of law, exposure connotes causation, in both tort and tort liability insurance law. It is the anomalies resulting from that conclusion which the court must now resolve, accepting but building on its own prior jurisprudence.”

“More specifically, Lord Sumption JSC suggests that the insurer ‘must still show that the occurrence fell within the chronological limits of the policy’: para 156. But that raises the question: what is here meant by the occurrence for which the employer is liable? It cannot be the disease itself, which can and does occur decades later. If it is the incident which causes the disease, then, as Lord Sumption JSC himself recognises (para 157), it is each and every, or any, negligent exposure to asbestos involving a contribution by the employer to the risk of the victim sustaining mesothelioma that constitutes causation for the purposes of a liability insurance like the present. Any such exposure can be relied on as causing the mesothelioma and making the employer fully liable for the victim’s loss, and any such exposure occurring during any policy period will on a like basis mean that the insurer incurs full liability.”

“In Durham v BAI (Run-Off) Ltd [2012] 1 WLR 867 (the ‘Trigger’ litigation), the Supreme Court held that, where an employer is insured against liability for a disease suffered by an employee which has been caused during the insurance period, the necessary causal requirement or link is satisfied in the case of mesothelioma by the employer's negligent exposure of the victim during such period to asbestos (and so to the risk of suffering mesothelioma), with the result that the insurer must indemnify the employer against the liability so incurred.”

“Guernsey has not passed any equivalent of the United Kingdom's Compensation Act 2006. The first main question on this appeal is whether, apart from that Act, the proportionate recovery rule in Barker [2006] 2 AC 572 still exists at common law. Guernsey common law is, as stated, to be taken to be the same as English common law. IEG's case is that Barker has ‘become past history’ after the 2006 Act and in the light of the Supreme Court’s decision in the ‘Trigger’ litigation.”

“If Barker no longer represents the common law, this question arises directly on this appeal. Zurich submits that it anyway also arises in respect of defence costs incurred by or on behalf of a person responsible for a particular exposure, where the overall exposure is greater. Most obviously, it is a question of general importance in the United Kingdom in relation to claims under the 2006 Act, though the present appeal concerns no such claim.”

“Not only because, in light of the indemnity, CDL would have no need to rely upon the 1978 Act but also because the ‘subrogation bar’ has in any event excluded such claims”

“…, if the common law during or even after the currency of an insurance develops in a manner which increases employers' liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period. Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyd’s Insurance and Reinsurance Reports 426, 429 (left). The declaratory theory ‘does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions. … But it does mean that, when judges state what the law is, their decisions do …. have a retrospective effect’ - in the sense that the law as stated ‘will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases’: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G-H, per Lord Goff. The declaratory theory is a pragmatic tool, essential when cases can only come before the court ‘some time, perhaps some years’ after the relevant events occurred, and when ‘the law [must] be applied equally to all, and yet be capable of organic change’ (p 379A). A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them. In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.”

“Once the insured has proved that the loss was caused by the general peril insured against, it is for the insurer to bring himself within any exception in the policy on which he relies. … A further complexity arises where an exception is itself subject to an exception, e.g. where it is in the form, ‘[t]his insurance does not cover [risk X] except [where Y applies]’. In Omega Proteins Ltd v Aspen Insurance UK Ltd [2011] Lloyd’s Rep. I. R. 183 at 197, Christopher Clarke J, citing this paragraph in the 11th edition of this work as identifying the problem of construction to be addressed, held that …, in the case of an ‘exclusion clause within an exception’, the insurer bore the burden of establishing the exclusion from cover, including the burden of proving that the exception to the exclusion did not apply.”

“It is contrary to principle for insurance to operate on a basis which allows an insured to select the period and policy to which a loss attaches. This is elementary. If insureds could select against insurers in this way, the risks undertaken by insurers would be entirely unpredictable.”

“So far as appears, during the overall period of 27 years during which it exposed Mr Carré to asbestos dust, GGLCL only had insurance for two periods, six years with Midland and two years with Excess. ... Zurich could not have any sort of subrogation right against Excess, since, if Zurich is liable for IEG’s full loss, IEG can have no further claim for indemnity against Excess.”

“The right of an underwriter who has indemnified the insured to claim contribution from the other underwriters cannot be founded upon the doctrine of subrogation, because an assignee can have no higher right than his cedant and a shipowner who has received full indemnity from one underwriter can never make a claim against another underwriter. The answer, therefore, to the claim of an underwriter who had paid, if made only in the right and as assignee of the assured, would be that the contract was one of indemnity, and that the insured had already been indemnified.”

“Sickness and Accident Assurance Association v General Accident Assurance Corporation Limited (1892) 19 R 977 dealt with the situation in which an insurance company, after paying to a tramway company a sum due under a policy insuring against loss by accident, raised an action in its own name against another insurance company for contribution on the ground that it had insured the same risk, which is the situation as it was presented in the contractor’s argument in the present case. Where there are co-ordinate indemnities for the same loss it is clear that the doctrine of subrogation cannot provide an answer, and that where one of the indemnifiers pays, the way their liabilities inter se are decided is by an action of relief. The principle of res inter alios acta will not be of relevance in that situation where the overriding principle is that a person cannot be indemnified twice over for the same loss, and therefore if one indemnifier has made good the loss to the indemnified the rights of the indemnified are no longer useful in deciding questions between the indemnifiers.”

“In the present case, an insured who insures for a limited period necessarily accepts that it is only liability incurred during that period for which he has cover. The unique feature of the present situation is that the whole substratum of the relevant insurance policies has changed fundamentally since they were underwritten, and the law has, for the first time ever, imposed liability on the basis of risk, rather than the probability, that negligence during the insurance period led or contributed to the illness complained of. The concomitant of insurance liability in this situation must be a recognition that the law can and should redress the unjust and wholly anomalous burden which would otherwise fall on any particular insurer with whom insurance was only taken out for part of the total period of exposure by the insured, by recognising an obligation on the part of the insured to contribute pro tanto to such liability as a self-insurer.”

“It is equally irrelevant that the law knows no such thing as a contract of self-insurance. It is of course true that, just as an insured cannot sue himself, so an insured cannot in law insure with himself. But the concept of ‘self-insurance’ is not unhelpful in identifying an important truth. A person who does not insure at all is well understood to be undertaking a risk for his own account, for which he should answer accordingly. A person who after insuring for a period with insurer A then goes for a period to insurer B is understood to be looking in relation to the later period to insurer B alone. Even courts are entitled to deploy a helpful phrase to point to such truths. The United States courts did so in Insurance Company of North America v Forty-Eight Insulations Inc 633 F.2d 1212 and Security Insurance Co of Hartford v Lumbermens Mutual Casualty Co (2003) 264 Conn 688, 826 A2d 107, when they held that, as between an insured and its insurers, liability for defence costs should be pro-rated across all periods of insurance and self-insurance during which exposure had occurred. In Lumbermens the insurer was thus held liable pro-rata by reference to the relationship between its insurance period, other periods of insurance with other insurers and periods of ‘self-insurance’.”

“The minority could see no basis for an insurer seeking to recover from the insured part of a payment contractually due to the assured, and indeed it may be noted that the law does not generally recognise apportionment of an insured loss between an insurer and its assured where there is underinsurance other than where the policy is subject to average, as is the case with marine policies. The minority regarded the term ‘self-insured’ as a euphemism for ‘uninsured’ and the authorities are clear that apportionment has no part to play in non-marine law where there is underinsurance.”

“… I agree with Mr Leggatt that not only is it clear from the authorities that the rationale underlying the principle of apportionment has no place in liability insurance, but also that it would in fact be irrational and unprincipled to attempt to introduce it. In liability insurance, the assured recovers his loss up to the policy limit. Thus where a liability policy has a limit of £100 million and liabilities are incurred of £200 million, it is not open to insurers to say that the insured is ‘his own insurer’ in excess of £100 million with the consequence that insurers’ liability in respect of the £200 million loss is limited to £50 million. The insured recovers the full £100 million. …”

“As Mr Leggatt also pointed out, the concept of underinsurance makes no sense in the context of liability insurance where the extent of the liabilities to be incurred is unknown when the policy is agreed. An insured may prove to be inadequately insured in the light of the liabilities to which he is potentially exposed and which ultimately eventuate, but that does not come about as a result of deliberately underestimating the extent of any known liability. By definition the liability will not have been incurred at the inception of the insurance.”

“Since IEG is solvent and has met the whole of Mr Carré’s loss, the present appeal concerns only the relationship between IEG and Zurich. In that context, the precise legal relationship between Zurich's right to look to IEG for contribution and IEG's policy claim against Zurich does not matter. In practice, even if Zurich's right to contribution does not give rise to a defence, a procedural order for a stay would ensure that the one claim could not be enforced without taking into account the other. But in cases where the person responsible is insolvent, and the use of the Third Parties (Rights against Insurers) Act 1930 (soon, it is to be hoped, to be replaced by the 2010 Act) is invoked, it may be important whether the right of contribution which Zurich enjoys constitutes a defence reducing the indemnity for which the insured can sue under that Act.”

“… Zurich positively submitted that it would have no right of set-off, legal or equitable. One objection to set-off is that a right to contribution only arises upon payment by the person seeking contribution: see eg Andrews & Millett's Law of Guarantees (6th ed) (2011), para 12-019, citing Ex p Gifford (1802) 6 Ves Jr 805 and In re Snowdon (1881) 17 Ch D 44; and see Davies v Humphreys (1840) 6 M & W 153, Stirling v Burdett [1911] 2 KB 418 and In re Beaven [1913] 2 KB 595, 600. On the face of it, that presents a real obstacle to any suggestion by any insurer in Zurich’s position of set-off, whether legal or equitable, against IEG’s claim for the full amount of its loss.”

“Accepting the fairness of the thinking behind this first instance authority without further examination, I doubt whether it could or should affect the application of the general principle mentioned in para 86 in the particular context of a claim by a victim under the 1930 or 2010 Act.”

“Considerations of justice and policy would also support the treatment of the insurance and the contribution positions as legally separate, when an opposite approach would be to the prejudice of the victim, in whose favour the insurance would otherwise operate and who is not concerned with the circumstances giving rise to any contribution claim.”

“… I consider that, in a context where any set-off arises from circumstances outside the insurance policy and would be to the prejudice of a third party victim, the considerations of policy and justice behind the rules developed in Fairchild and Trigger would probably mean that it was just (rather than ‘manifestly unjust’) for Zurich to have to fulfil its insurance policy obligations, before asserting against IEG any contribution claim based on circumstances outside the scope of the insurance to the prejudice of that victim. …”

“Here, any right of contribution is best analysed in my view as arising from circumstances outside the insurance policy, and on that basis as not capable of giving rise to a set-off at all.”

“The Company will in addition pay all costs and expenses incurred with its written consent”

“The situation may arise in which the claim made by the third party is partly in respect of insured liabilities and partly in respect of uninsured liabilities. If allocation is called for, it takes place after the trial and not beforehand. Three separate issues arise here. The first is where some of the claims made against the assured are covered by the policy and some are not. … In Structural Polymer Systems Ltd and Structural Polymer Technologies Ltd v Brown it was assumed by both parties that costs are generally apportionable as between insured and uninsured losses, so that the insurer is liable for only that proportion of the costs represented by the proportion of loss which was insured. Thus, in the absence of express wording, there has to be an allocation, however difficult that may be, although allocation is not required if the assured can show that the overall costs were not increased by the need to defend the fraud element of the claim. In John Wyeth & Brothers Ltd v Cigna Insurance Co of Europe SA/NV, product liability insurance had been procured by the assured, and losses were incurred over a number of years. Not all of the claims were within the time periods covered by the insurance. The policy provided that the insurers were to pay ‘all costs and expenses of litigation’ incurred with their written consent. The Court of Appeal ruled that the insurers were liable for the full amount of the defence costs even though the amount expended might have incidentally assisted the assured in fighting claims which were uninsured. The insurers’ remedy in such a case was to seek contribution from other insurers who were on risk during the uninsured periods. In McCarthy v St Paul International Insurance Co Ltd a number of claims were made against the assured, some in respect of fraud and some in respect of insured perils. The insurers asserted that the cause of defence costs being incurred was both insured and excluded perils, and in line with the general rule that an exception always trumps an insuring clause if there are concurrent proximate causes, there was no liability for defence costs. The court’s response was that the claims were separable so that defence costs were payable in respect of the insured claims and, further, that to the extent that there were common costs the insurers were liable for them. The court noted that it might be possible to devise wording which produced a different result, e.g. if the policy covered $X defence costs in any one year, excluding defence costs caused directly or indirectly by fraud: such wording might have the effect of preventing recovery of any defence costs even if the claims in question were not referable to fraud. Such language is not found in practice. … The second issue arises where there are both insured and uninsured defendants. … In New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd the assured company had procured directors’ and officers’ liability cover. The assured and one of its directors were successfully sued in California in respect of the breach of a joint venture agreement which had been entered into by the director on behalf of the assured. There were a number of co-defendants in the Californian proceedings, who were associated to the assured but were not parties to the insurance cover. The same lawyers were used by all of the defendants, and the Privy Council was asked to determine whether the policy required the costs to be notionally allocated between the defendants with the insurer being liable only for its share. The Privy Council held that, in the absence of clear wording, the policy was to be construed as covering all of the costs incurred in the defence of the claim, even though this might benefit the other defendants, provided only that the costs were reasonably related to the assured’s director’s own liability. The decision was based on the wording before the court, which referred to ‘costs, charges and expenses … incurred in the defence of legal actions’, and the Privy Council’s interpretation was that in the absence of clear wording severability was not intended. It follows that there is to be apportionment of costs only if uninsured claims or claims against third parties are separable from those relating to insured claims: this was, as noted above, the assumption in Structural Polymer Systems v Brown. ….”

“New Zealand Forest Products was applied in Thornton Springer v NEM Insurance Ltd. In that case defence costs were payable in respect of claims for insured perils whether or not the claims against the assured were successful. Claims were brought against two defendants, but the policy covered only the claims against one of them. The claims were ultimately dismissed. Colman J. held that the insurers were liable to meet the defence costs, and that it was not possible for insurers to reclaim any part the defence costs on the ground that the costs had been incurred for the mutual benefit of both defendants: if costs were incurred for a dual purpose, one of which was an insured purpose, the indemnity extended to the dual purpose work and was not to be apportioned. The trend in the US cases on this matter has been to adopt the ‘larger settlement’ rule, under which there is to be no allocation of defence costs between insured and uninsured defendants unless the settlement is larger as a result of the presence of the uninsured defendants, so that if liability is concurrent there is no apportionment. The third is where there are two or more insurers, each with a duty to defend. Ordinary contribution principles apply here. The court may order the insurers to share the defence costs equally, subject to a subsequent apportionment based on actual liability after the trial, and this remains the case even though one insurer asserts that it can be liable only for a small proportion of the loss. This, however, is subject to express clauses, e.g. rateable proportion provisions. Equally, if an insurer is on risk for only a limited period during which the losses occurred, the insurer only has to provide defence costs in the relevant proportion. … .”

“[Guardian Royal Exchange] will subject to … the conditions of this Policy indemnify the insured against all sums which the Insured becomes legally liable to pay as damages in respect of … bodily injury to any person … happening … during the Period of Insurance and caused by [pharmaceutical products] sold, supplied . . . in Great Britain … in connection with Wyeth’s business. [Guardian Royal Exchange] will also pay Legal Costs and Solicitors’ Fees.”

“The Company will in addition in respect of a claim for compensation to which the Indemnity expressed in this Policy applies, indemnify the insured against: (a) all costs and expenses of litigation recovered by any claimant from the Insured and (b) all costs and expenses of litigation incurred with the written consent of the Company.”

“53. The only issue on the Home Policy that now remains relates to apportionment. As already indicated Cigna concede that Wyeth are entitled to recover costs which are reasonably related to the defence of a claim alleging that an injury, illness or disease occurred during the period of the Home policies. Wyeth concede in relation to these policies that if Cigna can demonstrate that the costs have been incurred in relation to a claim which is not covered by the Home policies, Cigna will not be liable for those costs. 54. Wyeth seek declaratory relief in relation to costs incurred which reasonably relate to claims alleging injury, illness or disease, but also reasonably relate to claims alleging a worsening of those injuries or illness or disease in uninsured years, or alleges a separate injury in uninsured years. Wyeth assert that provided the costs do reasonably relate to claims alleging injuries, illness or disease occurring within the period of the Home policies, they are entitled to recover the same, whereas Cigna argue that because the costs are bound to have been increased by virtue of the allegations of increased injury or further injury, the obligation on Cigna should be limited to paying only a portion of the costs. 55. We were not shown any practical examples of situations in which Cigna suggested that apportionment should take place, nor with any precision how it was suggested that the costs in such situations should in practice be apportioned. Furthermore, there is no evidence to support the assertion that costs, which on this hypothesis do reasonably relate to a claim falling within the policy period, must have been increased by the inclusion in the same pleading of allegations of injuries increasing over the years. 56. It seems to me that if the starting point is that the costs do reasonably relate to the defence of claims falling within the policy period, the contractual right of Wyeth is to be paid those costs. I do not see once that threshold has been reached that there is any room for saying that simply because the costs may also relate to an increase in the injury during some period outside the cover, the obligation on Cigna is cut down in some way. That is the view that the judge took. It is supported also by the Privy Council decision in New Zealand Products v New Zealand Insurance Company [1997] 1 WLR 1237.”

“If any person under a contract of service or apprenticeship with the Insured shall sustain any bodily injury or disease caused during any period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned, the Company will indemnify the Insured against all sums for which the Insured shall be liable in respect of any claim for damages for such injury or disease settled or defended with the consent of the Company. The Company will in addition pay the claimants’ costs and expenses and be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.”

“As regards defence costs, IEG relies upon reasoning adopted by the Privy Council in New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237. There proceedings were instituted on the basis of five causes of action against a company and its director, whose costs were both covered by an insurance policy, and in the case of one of the causes of action against a third person not so covered. All the defendants were represented by the same lawyers. It was common ground that costs not relating in any way to the insured director’s defence would not be covered, while costs exclusively related to the insured director’s defence would be covered. The issue which arose was as to defence costs which related at one and the same time to the defence both of the claim against the insured director and of the claim against the uninsured third person. The courts below took the view that there should be an apportionment. The Privy Council reached a different view, as a matter, it said, of construction of the relevant insurance. This covered ‘all loss … which such officer has become legally obligated to pay on account of any claim made against him … for a wrongful act’. As this wording would cover the whole costs incurred in the defence where the insured officer was the sole defendant, the Board saw no reason why it should not cover them all, where some of them related also to the defence of an uninsured co-defendant. There was no question of the costs relating to any period other than that insured, and, importantly, they arose on a conventional causative basis – because of a claim against the director for a wrongful act.”

“Two points are notable in relation to the defence costs which IEG seeks to recover from Zurich. First, there is nothing to suggest that these would have been any less had the claim against IEG been confined to the six-year period covered by the Midland policies. Second, and more significantly, the defence costs which IEG incurred were ‘incurred with the consent of the Company in defending any such claim for damages’ within the meaning of the second sentence of the main insuring clause set out in para 13 above. That is, they were incurred by IEG in defending a claim by a former employee for damages for injury or disease which he was caused to sustain while employed during the periods of insurance provided by Midland. The claim against IEG could, under the special rule in Fairchild, be pursued on the basis that GGLCL had done no more than expose Mr Carré to a risk of suffering mesothelioma. In the light of Trigger the first sentence of the main insuring clause set out in para 13 above covers liability arising on this basis. But IEG’s liability for and right to recover defence costs does not arise under the special rule, or on the basis that Mr Carré was exposed to any risk. It is not recoverable under the first, but under the second sentence of the main insuring clause. Under the second sentence, it is recoverable on the conventional basis that IEG can prove that it incurred (as a matter of fact or probability) actual financial loss in the circumstances covered by that sentence. This distinction is important. Once it is shown that an insured has on a conventional basis incurred defence costs which are covered on the face of the policy wording, there is, as the New Zealand Forest case shows, no reason to construe the wording as requiring some diminution in the insured’s recovery, merely because the defence costs so incurred also benefitted some other uninsured defendant.”

“… we would say that if anybody had been the officious bystander saying, ‘Well, what do you mean by this endorsement?’ the parties would say, … ‘Oh, it’s prospective only … But if then the officious bystander said, ‘But I have a crystal ball, and there is going to be something called Fairchild, which isn’t going to be a problem, but there is then going to be something called the Compensation Act and you are going to find that it’s all very well talking about things being prospective, but what does that mean if somebody has a claim which straddles – which is based upon allegations both before and after?’ … The answer would have been, well, we are not giving up our right to use our express subrogation clause if it’s proper otherwise to use it in relation to all claims that might be made against us by CDL, in the future merely because such claims include reference to the period after the endorsement.”

“(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in … (b) the High Court, … shall be in the discretion of the court.”

“(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.”

“In cases where the third party proceedings consist of a claim which is passed through to the third party, then depending on the outcome of the third party proceedings, if the third party is liable to a defendant and the defendant is liable to the claimant then the third party may have a liability to pay the defendant's costs which would include costs which the defendant had incurred in defending the claim by the claimant.”

“Section 51 of the Supreme Court Act, 1981 provides that ‘the costs of and incidental to’ proceedings in the High Court are in the discretion of the Court and the Court has ‘full power’ to determine by whom and to what extent costs are to be paid. There is no statutory definition of the word ‘costs’ or the expression ‘costs of or incidental to’. The rules about costs in the CPR part 43 et seq apply to all costs that the court has power under the statute to determine be paid, and do not define or indicate what expenses constitute ‘costs of or incidental to’ proceedings, save that CPR 44.3(6)(d) expressly recognises that costs may be incurred before proceedings have begun. The essential question, therefore, is whether the expense of providing and maintaining the RBS guarantee is covered by the statutory expression ‘costs of or incidental to’ the proceedings within the meaning of section 51.”

“As Megarry V-C pointed out in Re Gibson’s Settlement Trusts [1981] Ch 179, the costs ‘incidental to’ proceedings go beyond those ‘of’ the proceedings. I refer to four authorities of the Court of Appeal which provide some guidance as to the proper approach to the application of the expression and to deciding what may be recoverable as costs. They were decided before the introduction of the CPR, but, as Stanley Burnton J observed in Admiral Management Services Ltd. v Para-Protect Europe Ltd., [2002] EWCA 233 Ch at para 24, changes in the wording of the relevant costs rules subsequent to these decisions do not reflect a change of ‘principle or application’.”

“This approach is reflected in the decision of HHJ Peter Coulson QC in McGlinn v Waltham Contractors Limited, [2005] EWHC 1419 (TCC), in which he decided that the expense of complying with a pre-action protocol in respect of claims which were brought in subsequent proceedings is by way of costs ‘incidental to’ those proceedings, but ‘save in exceptional cases, costs incurred by a Defendant at the stage of a Pre-Action Protocol, in dealing with and responding to issues that are subsequently dropped from the action when proceedings are commenced, cannot be costs “incidental to” those proceedings’ (at para 11).”

“As part of the consideration for the said sale the Purchaser [CIH] shall undertake pay satisfy and discharge all the debts liabilities and obligations (including all income tax and profits tax assessable by reference to profits up to the Time of Sale) of the Vendor [CDL] whatsoever subsisting at the Time of Sale and shall adopt perform and fulfil all contracts and engagements binding on the Vendor [CDL] at the Time of Sale and shall at all times keep the Vendor [CDL] indemnified against the same and against all proceedings costs and demands in respect thereof.”

“Until the completion of the sale the Vendor [CDL] shall carry on the business of the Vendor [CDL] as heretofore and shall in so doing be deemed to be the agent of the Purchaser [CIH] and shall account and be entitled to be indemnified accordingly”

“The proper construction of any contract of indemnity must depend upon the terms of the individual contract, considered, where appropriate, in the objective matrix of facts in which the contract was entered into. There can be no rule of law that a particular form of words is necessary in order to conclude that the indemnity is to prevent the indemnified party from suffering loss rather than to compensate the indemnified party for loss he or she has suffered. In every case the proper meaning of a contract of indemnity must be taken from the words the parties have used and the context in which the agreement is made in order to ascertain objectively their intention.”

“Where a contract of indemnity is to indemnify a person against liability to a third party (e.g. under a liability insurance policy), the general modern rule is that the limitation period starts to run when the indemnifying party's liability is established by judgment, arbitration or binding settlement. However, that general rule is subject to the construction of the contract of indemnity. This may mean that the indemnifying party is liable as soon as the indemnified party is liable (that is, even before any establishing of that liability by, for example, judgment). At the other extreme, the contract may on its true construction provide that the indemnity is conditional on actual payment by the indemnified party in which case the cause of action will accrue only when such payment has been made.”

“It seems to me that the plain meaning of the expression to indemnify against ‘all liabilities’ is that it imposes the obligation to indemnify against the incurring of a liability, not the discharge of that liability by payment or the determination of that liability by judicial process. Indemnity against liability seems to me to be different from reimbursement against sums paid in pursuance of a legal liability. The shipowner is damnified as soon as he comes under a liability. The damnification contemplated by the Clause is the incurring of the liability not the payment.”

“After all, an indemnity against a breach, or an act, or an omission, can only be an indemnity against the harmful consequences that may flow from it, and I take the law to be that the indemnity does not give rise to a cause of action until those consequences are ascertained.”

“It is common ground that the view taken by McNair J. is not reconcilable with the view taken by Swanwick J. I have referred, to assist me in resolving this, to certain other authorities, and in particular Post Office v. Norwich Union Fire Insurance Society Ltd. [1967] 2 Q.B. 363. That case, as it seems to me, indicates that, where there is an insurance against liability to third parties, while there may be rights as soon as events happen which may lead to a claim being made, there is no enforceable liability to sue the insurers until the liability has been established and ascertained. I refer in particular to the judgment of Harman L.J. where he also refers to the earlier decision of Tomlin J. and the Court of Appeal in Hood’s Trustees v. Southern Union General Insurance Co. of Australasia Ltd. [1928] Ch. 793. I think it follows from Swanwick J’s approach and the approach in Post Office v. Norwich Union Fire Insurance Society Ltd. [1967] 2 Q.B. 363 that, in the present case, time did not run against the defendant in favour of the first third party until the liability, if any, of the defendant to the plaintiff has been established and ascertained. The wording of clause 3 of the letter of agreement is very general: ‘You will be responsible for, and release and indemnify the board from and against, all liability for loss or damage to property and any other loss, damage, costs and expenses which may arise.’ That, as I read it, is a general indemnity within the general rule as enunciated by Swanwick J. Accordingly, on this preliminary issue, I prefer Swanwick J’s approach to McNair J's and I read the indemnity as being an indemnity not against liabilities arising so much as against the payment and determination of the liabilities. That leads to the consequence that the third party claim against Mr Kavanagh is not barred by the Act of 1939.”

“If the indemnity is an indemnity against liability, as it was held to be in Bosma v. Larsen [1966] 1 Lloyd's Rep. 22, the cause of action will come into existence when A incurs a liability to B. It may be that in certain circumstances a liability may be incurred for this purpose when the liability is still merely contingent: see Forster v. Outred & Co [1982] 1 W.L.R. 86. If, however, the indemnity is a general indemnity, as the relevant clause was held to be in R & H Green & Silley Weir Ltd v. British Railways Board (Note) [1985] 1 W.L.R. 570, then time will not begin to run against A for the purpose of pursuing his indemnity against C until A’s liability to B. has been established and ascertained: see below. One may notice in passing that, as the arbitrator pointed out in his reasons, McNair J. did not deal separately with the words ‘or consequences’ in the contractual indemnity in Bosma v. Larsen [1966] 1 Lloyd’s Rep. 22.”

“I must confess to being unclear as to the force and effect of the word ‘general’ in this context, but in so far as it suggests a wide range of matters within the scope of the indemnity the clause here is in my view of that nature. Mr McLaren submits that the inclusion of the word ‘liability’ in the list is decisive, even if others also appear, but in my view that cannot be the test.”

“The question being one of construction I consider it helpful, as a start, to look at the list of matters to be covered by the indemnity and the verbs which indicate how they arise in order to see whether they show any consistency, or at least preponderance, in one direction or the other. On that approach ‘loss’, ‘damages’ and ‘compensation’ all naturally fit with one or both of ‘suffer’ and ‘be obliged to pay’ and all these combinations look to the date of realisation. ‘Proceedings’ is not so obviously paired with either verb, but can clearly not be relevant until litigation has begun. That leaves ‘liability’ as the only word consistent with the date of inception, and it lacks the obviously appropriate verb ‘incur’. In my view the preponderance is heavily in favour of the date of realisation.”

“A promise to prevent the indemnified party from having to pay his debt might be capable of being achieved by means other than paying the debt owed by the indemnified party to the creditor. The indemnifying party might have any number of lawful means of persuading the creditor not to press its claim”

“It has been said that a contract of indemnity is only enforceable at common law after the indemnified party has paid his creditor (eg Re Richardson; ex parte Governors of St Thomas's Hospital [1911] 2 KB 705 at 712). If the claim at law was on the common money count for money paid, (as in the case of contribution at common law between co-sureties) that was certainly so. There is no reason in principle why it should be so on a claim for damages for breach of a contract of indemnity. A contract has the same meaning at law as in equity. If the contract was an indemnity to prevent the plaintiff suffering loss, as distinct from indemnifying the plaintiff against a loss paid, there is no reason in principle why substantial damages should not be payable in the event of a breach to put the plaintiff in the same position as if the contract had been performed. In BNP Paribas v Pacific Carriers Ltd [2005] NSWCA 72 at [112], Giles JA said: ‘… If BNP did not provide indemnity in accordance with its obligations, PCL could claim as damages the amount of the relevant loss. BNP was in breach of contract, and PCL was ‘so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed’ (Robinson v Harman (1848) 1 Ex 850 at 855 per Parke B; 154 ER 363 at 365). If PCL was yet to pay a claimant against it, and BNP's obligation was to relieve it from having to pay, it could obtain an order that BNP pay (McIntosh v Dalwood (No 4) (1930) 30 SR 415 at 418-9); and it could obtain a declaration of entitlement to indemnity (Post Office v Norwich Union Fire Insurance Society Ltd (1967) 2 QB 363 at 374).’”

“In Abigroup Ltd v Abignano the Full Court of the Federal Court observed (at 83) that: ‘It is well and long established in equity that a person entitled to an indemnity may obtain relief from the indemnifying party as soon as the person’s liability to the third person arises and before he has made payment himself, except where the contract otherwise provides or certain exceptional circumstances exist: see National Financial Co; Ex parte Oriental Commercial Bank (1868) LR 3 Ch App 791; Wooldridge v Norri (1868) LR 6 Eq 410; Wolmershausen v Gullic [1893] 2 Ch 514 and other cases conveniently collected in Halsbury's Laws of England, 4th ed, vol 20, para 315. The person may therefore, where appropriate, obtain an order to compel the person who has given the indemnity to set aside a fund from which liability may be met (Re Richardson; Ex parte Governors of St Thomas's Hospital [1911] 2 KB 705 per Cozens-Hardy MR at 709) or to pay the amount due directly to the third person (Ascherson v Tredegar Dry Dock and Wharf Co Ltd [1909] 2 Ch 401) or where the giver of the indemnity is under no liability to the third person, in some circumstances even to pay the amount to himself (ie the person entitled to the indemnity: Lacey v Hill, Crowley’s Claim (1874) LR 18 Eq 182 per Jessel MR at 191). But, as is noted correctly, in the passage mentioned above from Halsbury, the equitable right to enforce an indemnity does not constitute a debt (see the cases cited in Note 12 to para 315 of Halsbury which support the proposition for which they are cited).’”

“The Indemnifiers will indemnify, and pay to the Indemnified monies to compensate for, and be in respect of, any loss suffered by the Indemnified arising out of any claim connected to, or directly or indirectly related to, any act committed or omitted to be done by the Indemnified in his capacity as such a director, including such acts or omissions that are offences against any laws, including but limited to taxation laws. For the purposes of this clause ‘loss’ includes, any amount payable in respect of a claim against the Indemnified, and includes but is not limited to damages, Judgments, settlements, interest, costs and defence costs, and includes any fines or penalties imposed by law, punitive, exemplary or aggravated or multiple damages, income tax, customs duties, excise duty, transaction duty, Goods and Services Tax, or any other State or Federal tax or duty.”

“Whereas Clause 1 transfers all the benefits of the subsidiary (CDL) to the parent company (CIH), Clause 2 is concerned with the burdens or what might be described as the ‘flip side’…”. “the purpose of Clause 2 would obviously have been to transfer all liabilities, including potential liabilities that could only be described as contingent, as at the “Time of Sale”. “To have left contingent liabilities as the responsibility of CDL after completion would have run quite counter to what was clearly intended to be achieved”. (2) Preliminary Issues Judgment, [49]: “this was the obvious intention of the parties…borne out by the width of the language used in Clause 2 as well as the structure of the provision which is consistent with the object being to embrace as much as possible”. (3) Preliminary Issues Judgment, [57] and [58]: such liabilities did not have to have accrued by the Time of Sale in order for them to fall within the compass of Clause 2, and they included “cases where, although a cause of action in tort has not yet accrued because damage had not yet occurred at the “Time of Sale”, some of the ingredients of the cause of action nonetheless did exist as at this point. This would include employees claims in tort where the breach of duty occurred before 1 January 1964 even though damage came about later….The same applies to cases where the cause of action has accrued but the claim has not been crystallised by judgment or settlement, and where a cause of action exists and has been notified but the quantification of the claim is not possible or not known”. (4) Preliminary Issues Judgment, [60]: “…the commercial good sense which…lay behind Clause 2” was “that of drawing a line under CDL’s liabilities in circumstances where CIH was taking over the whole of CDL’s assets.” (5) Preliminary Issues Judgment, [68]: it was quite obvious that the words “against the same” in Clause 2 should be taken as applying to CIH’s undertaking to “discharge all the debts liabilities and obligations”. (6) Preliminary Issues Judgment, [93]: “…it is inherently unlikely to have been the parties’ intention to leave CDL, the subsidiary, with any liabilities which it could not pass on to its parent, CIH, bearing in mind that CIH was agreeing in the Sale Agreement to take over all of CDL’s ‘property, assets and rights’”. “It needs, importantly, to be borne in mind that…this is not a case where CIH and CDL were unassociated; on the contrary…the Sale Agreement represented an arrangement between closely related entities”

“Regardless of what ultimately results from the establishment or ascertainment of the liability of CDL in terms of loss, damages or settlement, it would be CIH’s responsibility (directly or indirectly). There would therefore be no point in either CDL or CIH waiting. From CDL’s perspective, it was important that any liability it incurred be assumed by CIH under the indemnity as soon as it was identified (whether potential, contingent or actual). As CDL’s parent, CIH shared this imperative but also because those liabilities could affect its enjoyment of the “undertaking, property, assets and rights” which it had acquired, particularly in light of CDL conducting the business until completion of the sale. Further, in the absence of claims control provisions in the agreement for indemnity, CIH would have wished to be able to take control of the claim and defend it as appropriate rather than risk default judgment being entered against CDL.”

“… if the obligation to indemnify were to arise on the occurrence of the casualty, payment might have to be made or accepted on the basis of a rough or inadequate estimate of the loss. Quite apart from the fact that many claims of various kinds are assessed on the basis of estimates, there is no good reason why [the action should not be commenced within the limitation period] even if when that is done the amount of the claim cannot yet be precisely quantified.”

“… still assuming the ineffectiveness of the prior payment condition, the fact that the parties have agreed that the right of indemnity shall be conditional on payment as well as liability is not irrelevant in deciding what the parties meant by liability, because payment involves proof (or agreement) of amount. Construing this contract, even without giving effect to the condition of payment, it seems to me inescapable that the parties must have intended establishment and ascertainment of liability to have been a pre-condition of the right to indemnity.”

“This expression, ‘cause of action’, has been repeatedly the subject of decision, and it has been held … that the cause of action arises at the time when the debt could first been recovered by action. The right to bring an action may arise in various events; but it is always been held that the statute runs from the earliest time at which an action could be brought.”

“The context supports this construction. If the indemnity only required PGO to compensate Mr Paterson for amounts he paid to the Commissioner, it would not achieve its intended purpose. The parties’ mutual concern, a matter of objective fact, was that Mr Paterson might be bankrupted by his exposure to the penalties. That concern would not be addressed if the indemnity applied only in respect of amounts Mr Paterson paid in respect of the penalties. To the knowledge of both parties he could not pay the amounts for which he was liable. His impecuniosity was the reason for his appointment as a director.”

“. . . Upon a contract to indemnify, the statute runs from the time when the plaintiff is actually damnified, not from the time when the event happens which causes the loss. . .” ; and (ii) Volume 18, Section 982: “. . . At law an action on the contract of indemnity normally does not lie until the promisee has been actually damnified by paying the third party's claim. . . .”.However, I am not convinced that it is appropriate to place much, if any, weight on this consideration. I can see the logic of the submission which is made, but I am nonetheless wary of the submission. That wariness finds support from the following passage in the judgment of Arden LJ in Lymington Marina Ltd v MacNamara [2007] EWCA Civ 151 at [33]: “In my judgment there can be no necessary implication that, where parties come to an agreement, that agreement must be interpreted on the basis of the law as it stood when the agreement was made as if it were in some time warp. It is part of the factual matrix known to both parties that both statute law and the common law develop over time. Developments in the common law apply retrospectively unless, exceptionally, the court makes an order for prospective overruling. … If the parties have been content to leave a matter to the general law, they must be taken to have agreed that their agreement should be interpreted in the light of the general law from time to time.”

“In order to arrive at the true interpretation of a document, a clause must not be considered in isolation, but must be considered in the context of the whole of the document.”

“Where the agency agreement is contractual, the agreement to reimburse and indemnify in return for what has been requested, if not express, can be regarded as an implied term of the contract that operates unless clearly excluded. There is thus no difficulty in such cases in holding that the principal is liable to reimburse and indemnify the agent for all payments made and liabilities incurred within the agent's express or implied authority. This would include not only payments that the principal is legally bound to make, but also payments which the agent is legally bound to make though the principal would not be liable for them, cases where the agent is bound by the usage of a market, cases where the agent makes an authorised but gratuitous payment on the principal's behalf, cases where the agent makes a payment which could not have been enforced but which there is a strong and legitimate pressure to make, cases where the agent, though under a liability, has as yet suffered no loss, and cases where a payment is reasonably but mistakenly made by the agent. Cases where the agent acts beyond his instructions, or interferes without request, would not however be included.”

“… it is said this is a liability as distinguished from an actual payment, and that the agent or person entitled to be indemnified has no remedy. Whatever may be the case at law … it is quite plain that in this Court any one having a right to be indemnified has a right to have a sufficient sum set apart for that indemnity. It is not very material to consider whether he is entitled to have that sum paid to him, or whether it must be paid direct over to the creditor. … he is certainly in equity liable to indemnify, and liable to indemnify to the extent of the liability incurred by the agent on his behalf, and that is quite sufficient to substantiate this proof against this estate.”

“…we note that you have issued proceedings in the case of Montgomery due to limitation. In order to avoid proceedings unnecessarily, pending the determination of this matter, we propose that there be a waiver of limitation in relation to the specific cases mentioned under cover of your letter of 4 July 2012.”

“we trust the waiver of limitation will also apply to these additional claims.”

“Although Cape plc have agreed to a waiver of limitation pending the appeal of Chandler v Cape plc [2012] EWCA Civ 525 to the Supreme Court this will not impact on the four month period for service of the claim form”

“In respect of any cases in which limitation had not expired by the 11 May 2012 which have been notified to our clients and contained in the schedule we are content to grant an extension of the limitation period and to extend time for service of the claim form. ...”

“As you have not at this stage formally served the claim form seeking contribution in the case of Montgomery, it seems to us that the most pragmatic solution to resolving this issue is for a schedule to be prepared annexed to the claim form initiating proceedings between Cape Distribution and Resilient Cape Holdings Plc. We would suggest you serve us with a schedule at the point when a new claim requires to be considered, this will negate the necessity for issuing separate proceedings and provide clarity to both sides.”

“The Claimant reserves the right to amend this schedule at a later date. Additional claims are in the process of being handled and will be added to the list once they have concluded.”

“if and insofar as there is any right of set off as alleged, the Claimant would also have such a right to set off against the Counterclaim herein not only the claims pursued in this action (which are limited to claims made against the Claimant settled within two years of the commencement of this action) but also all claims by or in respect of former employees for asbestos related disease paid by or on behalf of the Claimant whenever such claims were settled or paid. The Claimant attaches a short schedule to the Amended Reply, detailing a partial breakdown of the costs of past claims.”

“In accordance with Master McCloud’s Order dated 18 July 2014, the Claimant was provided with a copy of the disclosure ordered in parallel litigation to the current action, termed in the Order as the ‘Product Liability claim (HQ 14X02470)’. As a result of this disclosure, it has been discovered by way of an Agreement of Sale dated 1 January 1964, that the Defendant (Cape Asbestos Company as it was then known) provided an indemnity to the Claimant.”

“In light of the above, the Claimant avers they have the benefit of an indemnity provided by the Defendant in respect of all its liabilities and obligations subsisting prior to the time of sale and thereafter. Accordingly, the Claimant respectfully requests that it be given leave to amend the Claim Form and Particulars of Claim and rely upon their Amended Claim Form and Particulars of Claim in the form attached to this application, in order that they can seek a contractual indemnity. The Claimant avers that its application to amend is timeous and is a direct result of the recent disclosure provided by the Defendant.”

“On 1 January 1964 Cape Distribution Limited agreed to transfer its business and assets to its parent, Cape, on terms that pending completion it would carry on the business as before, in doing so it would be deemed to be the agent of Cape, and would hold its business and assets on trust for Cape.”

“The claimant seeks an indemnity or alternatively a contribution from the defendant in relation to the Claimant’s liability towards its former employees or their estates and dependants who have made claims against the Claimant for damages for asbestos related illnessthe sums paid to John Montgomery and the Department of Work and Pensions. The claimant also seeks interest on the sums. The claimant paid damages and costs in respect of a claim brought by John Montgomery for personal injuries, loss and expenses arising from his contracting mesothelioma. The Claimant will, as necessary, also seek indemnity under contract alternatively an order under section 51(3) of the Senior Courts Act 1981 in respect of its own costs and those of third parties which it has paid. The Claimant also seeks a Declaration that the Defendant is liable to indemnify alternatively to make contribution towards future liabilities of the Claimant (including its own costs related to the same) arising out of asbestos related illness attributable to tortious exposure to asbestos dust or fibre during employment by the Claimant between 1956 and the end of 1966.”

“i) Is it reasonably arguable that the opposed amendments are outside the applicable limitation period? ii) If so, do they seek to add or substitute a new cause of action? iii) If so, does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim?”

“The power of the court to give permission under this rule is subject to - … (1) rule 17.4 (amendments of statement of case after the end of a relevant limitation period).”

“(1) This rule applies where- (a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and (b) a period of limitation has expired under- (i) the Limitation Act 1980 … (2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in these proceedings.”

“Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection 1(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim … .” (3) Furthermore, section 35(4) provides that: “Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied… .” (4) Pursuant to section 35(5)(a), in the case of a claim involving a new cause of action, the Court may only allow the new claim: “if the new claim arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action.”

“A mandatory direction to a court dealing either with an application to amend a new claim or an application to strike out a new claim added without leave, by amendment… .”

“For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced – … (b) in the case of a new claim not made in or by way of third party proceedings, on the same date as the original action.”

“the effect of the sale agreement of 1 January 1964 …”

“MR KENT …….. The relevance of that then is that it would enable the claimant whom I represent to amend its particulars of claim. That has been done and there is no objection to our application for permission to amend and the amended particulars of claim are at tab 1, page 26 of our bundle. MR FENWICK: May I go to paragraph 2 which is the first one I am really concerned with. Essentially, the claimant wants to amend his case in order to plead reliance, in particular, on the agency agreement. I have no objection to that amendment being made subject to this caveat which it is important should be clear. I do not, in accepting that Aviva exercising their rights of subrogation by bringing a claim in the name of CDL which has been restored, they make that assertion and they are entitled to run on it. I do not accept that it is necessarily open to Aviva merely by the exercise of subrogated rights rather than the appointment of a liquidator who can of course do all such things as the company can, to bring claims not simply for 78 Act contribution against joint tort feesers [sic], but to rely on a separate contractual right which is a right of the company and which would not necessarily fall within the rights of subrogation because it is a right under an agreement. Quite a different tort agreement to interpret near some 50 years later. … THE DEPUTY JUDGE: If I understood that, Mr Fenwick, that is by way of a herald to the defence which you will probably file, but you are not objecting to the amendments. MR FENWICK: The reason I say it is because I do not want somebody to say that by agreeing that they can amend, I am accepting they have proper locus to bring the claim. THE DEPUTY JUDGE: Yes. MR FENWICK: It is important. There is quite a lot of shadow boxing in this case and in my submission it is important to make clear when one is taking a point so that others can respond to it, it is intended to be constructive rather than the reverse. I do not object to the amendment on the usual terms, nor do I object to the amendment to the Part 20 defendants’ statement of case. In other words, items 2.1, 2.2, 2.3, 2.4 are agreed. There will need to be a date for us to amend our defence.”

“The Claimant and the Part 20 Defendant have permission to amend their statements of case in accordance with the drafts attached to their proposed directions …”

“Our client is entitled to understand the extent of the potential liability to which it is exposed by subrogated claims being pursued by Aviva … Are the claims set out on schedules A and B the full extent of the claims that your clients intend to make, or do you anticipate adding additional claims? If further claims are to be added, we consider it to be necessary for there to be a formalised register of claims put before the Court and that provisions should be made for it to be regularly updated (subject of course to our client reserving all of its rights including those relating to limitation). It appears that there may be a number of limitation issues that we will need to raise with you. To the extent that it is necessary to do so, we will write to you in due course to set them out. In the meantime, all of our client’s rights and arguments are reserved in their entirety.”

“Please can you confirm by 17 April 2015 whether or not you have notified us of all the claims which CDL intends to bring against our client in the CDL claim which have been settled to date, and if not provide details of the same forthwith … Going forward, it will be necessary for the position regarding new claims and their notification to be formalised as (a) we are unclear on what basis it is permissible for CDL to add claims and (b) we consider the approach taken so far to be neither adequate nor robust especially given the need for our client to review and understand the limitation position … In this context, we are of the view that the content of schedules of CDL claims that you have provided to us to date are inadequate. They should set out the date on which the claim was settled … the date when the claim was added to the claim form/notified to us and the periods of the underlying claimants’ employment with CDL … In the meantime, all our client’s rights and arguments on the issue of notification and limitation are reserved in their entirety.”

“The amended Particulars of Claim now plead a primary case based upon a contractual indemnity under an Agreement for sale between CDL and CIH dated 1 January 1961 in reliance on clauses 2 and 5 of that agreement. The claims under the 1978 Act and the Senior Courts Act are now alternative claims. Declarations are sought in respect of the alleged right of indemnity under the Agreement for Sale in relation to future claims against CDL which Aviva Plc will have to satisfy.”

“If CIH is so entitled, is CDL entitled to set off against CIH’s counterclaim only claims settled within 2 years prior to the commencement of the action or all claims by or in respect of former employees for asbestos related disease whenever such claims were settled or paid?”

“… paragraph 27 of the Claimant’s Re-Amended Reply in the main CDL action dated 28 July 2015 indicates that the claims which are pursued in the CDL action are limited to claims made against CDL which settled within 2 years of the commencement of the action. The main CDL action was commenced on 11 May 2012. Schedule A, which sets out the Claimant’s primary claim, refers to information being used from as far back as 1997 and includes claims settled as long ago as 2002. Please clarify what limitation period you contend is applicable to these claims and whether you propose to make any amendments to Schedule A.”

“For the avoidance of doubt CDL accept that a claim for indemnity under the Agreement is statute barred if the underlying claim was settled more than 6 years before the action was started (and if more than 2 years if recourse to the 1978 Act is needed). However, it remains CDL’s case that, if which is denied, there are rights of set-off in equity, no relevant limitation period applies to this equitable defence. It ought now to be sufficient for the parties to refer to the Register to see the claimed dates of settlement so that any issue about that may be raised in correspondence and proof required as appropriate.”

“As per the Parties agreement (Exhibit ES1), a Claim Form was issued in the matter of Montgomery alone, in order to avoid initiating proceedings in a number of claims for contribution. The details of such additional claims were included in the Schedule appended to the Particulars of Claim (Exhibit ES2). Therefore those parts of the amendments of the Claimant’s statement of case, which extends the subject of this action to numerous employee claims settled by the Claimant (as opposed to solely the claim of Montgomery) is intended to formalise the agreement between the Parties.”

“… what the judge failed to consider, no doubt because his attention was not drawn to the need to do so, was whether or not there was a clear unequivocal promise or representation or common assumption, call it what you will, that the defendants would forgo their right to plead the Limitation Act 1980. I find nothing in the correspondence which justifies finding that there was any promise to that effect or anything at all like that effect. To say that the door was open to further negotiations or even to point out that the proceedings could be stayed pending medical examination, did not in my judgment, carry any implication that a limitation defence would not be taken. As Lord Steyn observed in Republic of India, there was no duty on the defendant’s solicitor to warn of this impending fall of the guillotine. Furthermore, as the authorities make clear, silence or inaction are of their nature equivocal. …”

“65. If a claimant seeks to raise a new claim by amendment and the defendant objects that it is barred by limitation, the court must decide how to proceed. There are two options. First the court could deal with the matter as a conventional amendment application. Alternatively, the court could direct that the question of limitation be determined as a preliminary issue. 66. If, as is usually the case, the court adopts the first option, it will not descend into factual issues which are seriously in dispute. The court will limit itself to considering whether the defendant has a ‘reasonably arguable case on limitation’ …. If so, the court will refuse the claimant's application. If not, the court will have a discretion to allow the amendment if it sees fit in all the circumstances. 67. If the court refuses permission to amend, the claimant’s remedy will be to issue separate proceedings in respect of the new claim. The defendant can plead its limitation defence. The limitation issue will then be determined at trial and the defendant will not be prejudiced by the operation of relation back under section 35 (1) of the 1980 Act.”

“What that passage does not spell out is upon whom lies the burden of persuasion. Working from first principles however it is plain that, provided the defendant can show a prima facie defence of limitation, the burden must be on the claimant to show that the defence is not in fact reasonably arguable. The claimant is after all in effect inviting the court to make a summary determination that the defence of limitation is unavailable. If the availability of the defence of limitation depends upon the resolution of factual issues which are seriously in dispute, it cannot be determined summarily but must go to trial. Hence it can only be appropriate at the interlocutory stage to deprive a defendant of a prima facie defence of limitation if the claimant can demonstrate that the defence is not reasonably arguable.”

“The effect of that amendment is to substitute the allegation that there was a separate retainer of the solicitor by the plaintiff as an alternative to the joint retainer which had originally been alleged. The point at once emerges that, if a separate contract is alleged between the plaintiff and the solicitor, that is an entirely new contract, a different contract from that which was originally pleaded, and, having regard to the lapse of time, the defence of the Statute of Limitations is, on the face of it, available to the defendant if he so chooses.”

“He started by deciding that the correct approach was to assume that the amendments which he had already allowed to add the plea of breach of contract had been made. In this respect we are confident that he was correct, and indeed this is made clear by the fact that there has been no appeal in relation to his allowing the addition of the plea of breach of contract. Judge Hicks concluded, and again we agree, that ‘the cause of action is the same and accrued at the same time.’ It follows that it was his view that a claim in contract with regard to the 10 additional buildings was not ‘a new claim’ for the purposes of section 35.”

“When carrying out the analysis required by section 35 of the 1980 Act and CPR r. 17.4, the judge must treat as part of the original claim those amendments which he has already decided to allow.”

“A further point on which HMRC relies is that, in determining the questions under s.35 and CPR 17.4, it is entitled to take into account not only amendments already made, even outside the applicable limitation period, but also amendments which the court hearing the application will in any event allow. It was so held by the Court of Appeal in Welsh Development Agency v Redpath Dorman Long [1994] 1 WLR 1409 at 1416. Miss Newman accepted this proposition.”

“(viii) The approach of the court should differ according to the nature and effect of the proposed amendments. If the amendment adds a ‘new claim’ and the relevant limitation period expired between the date of the writ and the date of the amendment, section 35(1) will, after amendment, deprive the defendant of a limitation defence he would otherwise have had. In such a case the onus is on the plaintiff to show that he is within the statutory limits and to satisfy the conditions prescribed by the statute and the rules. (ix) If, however, the amendment, though clearly adding a new claim, alleges that at the date of the amendment either the primary limitation period or the section 14A limitation period has not expired, the amendment should be allowed, unless it is so clear on the facts that the relevant limitation period has expired or that if a fresh action were brought it would be struck out under R.S.C., Ord. 18, r. 19 as being an abuse of process: see Ronex Properties Ltd. v. John Laing Construction Ltd. [1983] Q.B. 398 per Donaldson L.J., at p. 405 and per Sir Sebag Shaw, at pp. 407–408. (x) Where issues of both kinds arise or may arise, the court's approach should be that set out in paragraph (viii) above. Any injustice to the defendants by depriving them of a limitation defence they would otherwise have would thus be avoided, while the plaintiffs can commence a fresh action to which, if they are correct, limitation will not be a defence.”

“I can detect no sound policy reason why the claimant should not add to her claim in the present action the alternative plea which she now proposes. No new facts are being introduced: she merely wants to say that if the defendant succeeds in establishing his version of the facts, she will still win because those facts, too, show that he was negligent and should pay her compensation.”

“If a party has amended his statement of case where permission of the court was not required, the court may disallow the amendment.”

“Because CPR 17.2 applies to amendments even when made with the consent of the other parties, a party may apply to have the amendment set aside notwithstanding that he has previously consented to the amendment …”

“Mr Lord, on behalf of the defendants, made written submissions and Mr Peirson made oral submissions by reference to what they submit the position would have been under the former Rules of the Supreme Court. In my judgment, these submissions are not in point. The Civil Procedure Rules are a new procedural code, and the question for this court in this case concerns the interpretation and application of the relevant provisions of the new procedural code as they stand untrammelled by weight of authority that accumulated under the former Rules … There is, in my judgment, no basis for supposing that rule 7.6 in particular was intended to replicate, or for that matter not to replicate, the provisions of former rules as they had been interpreted.”

“CPR 17 distinguishes between amendments that do not require the consent of the parties or court permission and amendments that are conditional on such consent or permission. A party may amend his statement of case at any time before it has been served on any other party (CPR l7.1(1)). The reason is obvious, before a statement of case has been communicated, the opponent has not had a chance to rely on it and therefore an amendment would in no way affect his position. Accordingly, a claimant may unilaterally amend the claim form and particulars of claim between the time of issue of and the time that these documents have been served on the defendant. Similarly, a defendant may amend his defence between the time it was filed and the time that it was served on the claimant. It follows that there is only a narrow window for unilateral amendment of statements of case, which closes once the statement of case has been served on the relevant party. However, the freedom to amend a statement of case prior to service is not absolute, since CPR 17.2 empowers the court to disallow even such amendment. It is difficult to imagine such a case other than those involving scurrilous or fraudulent allegations. Given that the discretion would only be exercised in an extreme case, one wonders whether CPR 17.2 is necessary seeing that the court has a general power under CPR 3.4(2)(b) to strike out a statement of case that ‘is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings’. An application under the latter provision has the added advantage that it is free of a time limit, whereas an application under CPR 17.2 has to be made within 14 days (CPR 17.2(2)).”