Neutral Citation Number: [2014] EWCA Civ 1545
A3/2013/2650 
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(MR PROSSER QC)  
Royal Courts of Justice 
Strand
London WC2A 2LL 

Tuesday, 14 October 2014
 
B e f o r e: 

LORD JUSTICE SULLIVAN 
LORD JUSTICE MCFARLANE
LORD JUSTICE LEWISON 
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Between: 
DOWLING 
 
Appellants 
v 

BENNETT GRIFFIN 
Respondent 
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Mr R Colbey (instructed by DPA) appeared on behalf of the Appellants  
Ms S Mirchandani (instructed by Bond Dickinson) appeared on behalf of the Respondent  
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J U D G M E N T
1.	LORD JUSTICE LEWISON:  In 2001 Alan Phillips Associates Limited (APAL), a limited company controlled by Alan Phillips, an architect, agreed to perform architectural and design services for the Dowlings in connection with a development project in Hove.  The terms of the contract included the following:
"We confirm that we maintain Professional Indemnity Insurance cover of £250,000.00 for any one occurrence ... arising out of one event and this will be the maximum of our liability arising out of this agreement." 
2.	Unfortunately the project did not go according to plan and the Dowlings fell out with Mr Phillips.
3.	In April 2003 a claim for unpaid fees was brought in the County Court against the Dowlings in the name of Alan Phillips Associates without the "Limited".  
4.	The Dowlings put in a homemade defence but that was struck out on 15 August 2003 and they were ordered to serve a defence and counter‑claim by 26 September.  The Dowlings then instructed Bennett Griffin to defend the claim and also to make a counter‑claim in respect of losses caused by the alleged negligence of the architect.
5.	The case was handled by Ms Lee, who was a legal executive at the time, under the supervision of Mr Laverick.
6.	The defence and counter‑claim were served on or shortly after 17 October 2003. 
7.	At a hearing on 9 July 2004 a successful application was made for the name of APAL to be substituted for that of Alan Phillips Associates as the claimant in the fees claim and, therefore, also as the defendant to the counter‑claim.
8.	At the trial in 2005 the Dowlings succeeded on the fees claim and also on liability and the counter‑claim.
9.	It was only after this, in early 2006, that Mr Phillips first notified APAL's professional indemnity insurers of the counter‑claim.  It transpired that in order to maintain his own position as an architect with a claims free record Mr Phillips had, in 2003, taken a deliberate decision not to notify APAL's insurers of the counter‑claim.
10.	The judge found at paragraph [57] that the reason why Mr Phillips did not inform insurers was that he was a very self‑confident man and was so sure of success that he did not consider that there was any real prospect of losing.  There was, therefore, no need to inform insurers and risk an increase in insurance premiums.
11.	The judge made similar findings in paragraph [93] of his judgment when considering the possibility of an application to join Mr Phillips personally in the proceedings.
12.	It was argued in front of him that if Mr Phillips had been joined it would probably have prompted him to notify his insurers but the judge did not agree.  Again, he repeated that Mr Phillips was so sure that he would succeed that he did not consider there to be any real prospect of losing and, therefore, there was no need to notify the insurers and risk an increase in insurance premium.  In the judge's view that would still have been the case even if he had been joined personally in the proceedings.
13.	The insurers subsequently avoided the contract of insurance on the grounds of non‑disclosure, misrepresentation and late notification.  APAL was put into insolvent liquidation.
14.	The third party costs order was made against Mr Phillips personally but the Dowlings have only managed to recover £95,000 from him.
15.	The Dowlings began this claim against Bennett Griffin by claim form issued on 18 November 2009.  
16.	In paragraph 21 of the particulars of claim dated 12 February 2010 it is pleaded that for the avoidance of doubt the Dowlings do not rely on any actions or omissions of Bennett Griffin that precede the six year period ending with the commencement of the action.  Thus at least in the first instance the period on which to concentrate is between 18 November 2003 and 18 November 2009.
17.	The Dowlings contended at trial they had suffered loss due to Bennett Griffin's negligent handling of the counter‑claim.  They contended, in particular, that Bennett Griffin were negligent in failing to ensure that APAL's insurance cover was in place, in allowing APAL to be substituted as defendant to the counter‑claim and in failing to warn the Dowlings that there were strong reasons to think that the counter‑claim had not been notified and that the Dowlings ran the risk that APAL would not satisfy judgment.
18.	The trial judge, Mr Kevin Prosser QC, rejected these claims.  
19.	Rimer LJ granted the Dowlings permission to appeal on limited grounds.  At that stage they were presenting their own case as litigants in person.  They have since had the good fortune to be represented by Mr Richard Colbey, as a result of which the grounds of appeal have narrowed further.  The only ground of appeal which is now pursued is that Bennett Griffin ought to have applied to the court for a direction that evidence of insurance cover be provided to them and that that application ought to have been made on 9 July 2004 or earlier.  
20.	9 July 2004 was the date on which Mr Phillips was removed as a claimant and APAL substituted.  The difficulty with pinning the suggested application to that date, as the particulars of claim do, is the judge's finding about the insurance position.  The judge explained that APAL was covered by a series of claims‑made policies, meaning that the relevant policy would be that for the period in which the claim was notified.  Each policy contained the requirement promptly to notify the insurers if a claim was made.
21.	The judge said at [33] that: 
"... when the Counterclaim was brought against APAL in October 2003, Mr Phillips decided not to notify the insurers because he was sure of success and wanted to avoid an increase in premiums.  He did not notify until early 2006.  The insurers for the policy in force at that time, the 2005‑2006 policy, decided to avoid it on the grounds of non‑disclosure, misrepresentation and late notification because they were not satisfied that these failures were 'innocent'.  In my view, APAL's insurers were certainly entitled to avoid the policy on one or more of these grounds.  Moreover, the position would have been no different even if Mr Phillips had notified the insurers of the Counterclaim before 2006, unless he had done so during the currency of the 2003‑2004 policy.  It follows, in my view, that even if Mr Phillips had notified APAL's insurers of the Counterclaim following the 9 July 2004 hearing, the insurers would have been entitled to avoid the policy on one or more grounds."
22.	The judge went on to find that insurers would avoid the policy if they were entitled to do so.  It is that finding, combined with the last sentence from the quotation, that is fatal to the Dowlings' claim that Bennett Griffin were negligent in failing to ask for a direction about insurance as a condition of substituting APAL for Mr Phillips.  It would have made no difference so causation of loss could not be established.
23.	The judge went on to find at [95]:
"It may well be the case that the insurers would not have been entitled to avoid the policy on some ground if that notification had taken place before April 2004."
24.	The 2003‑2004 insurance year in fact ended on 23 April 2004; thus the argument is that an application to the court should have been made between 18 November 2003 and 23 April 2004.  
25.	Mr Colbey put the point in two ways.  First, the court has power to require a party to litigation to disclose his insurance cover under one or more of the court's powers under the CPR and, additionally or alternatively, there was a contractual obligation placed upon APAL to maintain insurance and, by necessary implication, to comply with the conditions of the policy about notifying claims which the court would have enforced by injunction.  Failure to do either meant that Bennett Griffin fell below the standard to be expected of a reasonably competent solicitor.  In oral argument it is fair to say that Mr Colbey stressed the second of the two ways in which he put the case, namely, the contractual obligation enforceable by injunction.
26.	In evaluating these arguments it is important to stress that APAL did have insurance cover at all material times in the sense that it had taken out policies of professional indemnity insurance.  The problem was that Mr Phillips had not notified insurers of the claim because he was so confident that he would be able to defeat it.
27.	The question of insurance was raised from time to time in correspondence between Bennett Griffin and Coole & Haddock, who were acting for APAL, and Mr Phillips.  
28.	Although much of it falls outside the critical period I should set out the narrative which I take largely from the judge's judgment.
29.	Almost as soon as they were instructed Bennett Griffin wrote to Coole & Haddock on 28 July 2003 to put then on notice that the Dowlings might make a claim of negligence against their client; and they asked Coole & Haddock to provide their client's insurance details and also requested then to put the insurance company on notice of the intended proceedings.
30.	Coole & Haddock did not reply to that letter, which Ms Lee noted in her attendance note of 12 August 2003.  
31.	On 28 August Bennett Griffin wrote again to Coole & Haddock, pointing out that they had not replied to the letter of 28 July; and asking them to confirm that they had notified their client's insurers of a potential professional negligence claim and to provide the insurance details by return.
32.	Coole & Haddock replied on 1 September, saying:
"The question of insurance is entirely a matter for our client and his advisers."
33.	On 4 September Bennett Griffin wrote again to Coole & Haddock, saying:
"We are considering bringing the insurers into this matter as a third party and consequently require their details.  Your client's correspondence to us clearly sets out an insurance indemnity of up to £250,000 and is a term of the contract.  We have put you on notice that a potential negligence claim exists and we require the insurers' details to ensure that any potential order for damages received in favour of our client will be met.  If you do not assist in this simple request we shall have no choice but to make an application for disclosure of this information and seek the costs incurred against yourselves."
34.	Mr Colbey accepts that the threat to join the insurers was an empty one as there was no ground on which they could have been joined.  An application to the court for information about insurance, if made at all, would be made either under the CPR or under the terms of the contract enforceable by injunction.
35.	Nevertheless on 10 September 2003 Coole & Haddock replied, saying:
"The question of our Client's insurers is, with the greatest respect, one for our Clients.  At the moment you have raised what the District Judge considered to be unspecified and vague allegations of negligence.  Absent these, we consider that your request is mischievous and simply designed to cause our Client problems with his insurers." 
36.	They went on to say that the application to the court had no legal basis, that they would resist it and that they would seek costs against the Dowlings.
37.	Following receipt of that letter on 16 September Ms Lee discussed the question of insurance disclosure with Mr Laverick, who advised her to contact Toby Barrett, another partner in Bennett Griffin, who specialised in personal injury and was regularly in contact with the insurers and so would be more knowledgeable about insurers' issues. 
38.	Mr Barrett advised her that unless it was a personal injury claim the claimant was under no obligation whatsoever to disclose his insurance details and he considered that an application, "May well fail".  As Mr Colbey points out, he did not say that an application would be hopeless.
39.	Ms Lee then discussed the matter again with Mr Laverick, who said:
"If that is Toby's advice it is probably the sensible approach to take."
40.	And they agreed that the claimants were not under any obligation to disclose their insurance details.
41.	On the same day Ms Lee spoke to Mr DeSoutter of Coole & Haddock who repeated that he would resist any application for information about the claimant's insurers.
42.	On 25 September 2003 there was a telephone conference between Ms Lee and counsel in the course of which counsel mentioned that he had found out from his papers that the fees claimant was insured with the Royal Institute of Architects with an indemnity policy of up to £500,000.  This was a certificate which appears to form part of the contract documents.  Ms Lee passed this information on to the Dowlings by letter of the same day, saying:
"You may wish to look into this."
43.	On 20 October, or thereabouts, the defence and counter‑claim were served, crystallising the Dowlings' claim against Alan Phillips.
44.	On 30 October 2003 Ms Lee had a conversation with Mr Kent, the expert advising the Dowlings.  The judge found that Ms Lee's attendance note captured the essence of the discussion and he quoted from it as follows:
"That it would seem that they are under no duty to disclose their insurers to us but [Mr Laverick] considered from the way he was behaving, ie, they have not appointed an expert, nor have any insurance company been in touch with us, that it would seem that perhaps he did not have an insurance policy.  I advised them that I had written to RIBA but I was none the wiser although we had notified them of the litigation.  I also consider that he might have been trying not to make a claim to avoid further liability on his premiums.  It was possible that now after the defence was served he may well notify his insurance company."
45.	The service of the defence and counter‑claim did provoke Coole & Haddock into making a Part 36 offer by letter dated 19 November.  The offer was a drop hands settlement with each party paying their own costs.  
46.	Ms Lee followed up her misgivings about insurance in a conversation with Mr DeSoutter on 21 December.  The judge found that she asked about his client's insurance and suggested that APAL was not insured.  Mr DeSoutter replied that the suggestion was groundless and that Ms Lee was being malicious.  Mr Colbey did mount an attack on the judge's finding of fact as to what Mr DeSoutter said but that is not a ground on which permission to appeal has been given and I reject it.
47.	That, however, is the first exchange that falls within the six year period on which the Dowlings rely.  
48.	The judge held that this was an equivocal assurance given by one solicitor to another that his client was insured.  HHJ Barratt QC had reached the same conclusion in the trial on liability which he heard.  In my judgment, that conclusion of fact is unassailable.
49.	On 21 November Ms Lee made a note in which she said that she did not know whether APAL was insured.  She also noted that the Dowlings did not have much money with which to fund the case.
50.	On 2 December Bennett Griffin wrote to counsel enclosing a copy of the Part 36 offer and asking him to consider it.  They also said that they had contacted the Architects' Registration Board who had advised that the claimant was insured but were not able to give details.
51.	On 3 December Ms Lee telephoned Mr Dowling to discuss the case.  She asked him to confirm that he was happy to reject the Part 36 offer, as counsel had advised.  Mr Dowling replied that he wished to continue if that was what Bennett Griffin were advising him.  Ms Lee told Mr Dowling:
"Good news about the claimant's insurance.  Although I do not know who he is insured with the Registration of British Architects has advised me this morning that the claimant is insured."
52.	In accordance with counsel's advice the Part 36 offer was rejected.
53.	On 5 December 2003 the case was adjourned for mediation.  A case management conference was fixed for 2 April 2004 but mediation was still in prospect at that time so it was cancelled to allow for mediation.  The mediation never, in fact, took place because the parties were too far apart.  Instead the case came back to court on 9 July 2004, by which time the damage had been done.
54.	It was argued before the judge that an application for the disclosure of insurance arrangement would have had to have been made under CPR Part 31 or CPR Part 18.  The judge held that the court had no jurisdiction to make such an order and any application would have failed.
55.	At the time with which we are concerned there was little authority on the powers under the CPR but a case called Cox v Bankside Members Agency Ltd, referred to in one of the later authorities, suggested that the court would not order the disclosure of insurance arrangement because they did not relate to the matters in issue between the parties.  Since then the extent of the court's power to order the disclosure of insurance arrangements has been considered by Irwin J in Harcourt v FEF Griffin [2007] EWHC 1500 (QB) and by David Steel J in West London Pipeline and Storage Ltd v Total (UK) Ltd [2008] EWHC 1296 (Comm).
56.	Harcourt was a personal injury case and liability was conceded.  The claimant asserted that his claim, after a reduction for contributory negligence, would be in the region of £6 million to £7.5 million.  Substantial costs had also been incurred.  The claimant was concerned about the defendant's ability to meet the claim and applied under Part 18 of the CPR for information about the nature and extent of the defendant's insurance cover.  Irwin J held that Part 18 should be liberally interpreted and that it covered all the information that the parties needed to deal efficiently and justly with the matters in dispute between them.  He, therefore, made the order sought.  
57.	West London Pipeline was a claim arising out of the Buncefield explosion.  Total were seeking a contribution from a third party and were concerned about the level of that third party's insurance cover.  They applied under CPR Part 18 on the basis that the information was relevant to the issues in the case and/or that it was necessary from the perspective of efficient case management.  Their case was advanced by no less than two Queens Counsel and a junior.  David Steel J rejected the first way of putting the case in short order.  That is to say it was not relevant to the issues in the case.  In support of the second way of putting the case, namely, that it was necessary from the perspective of efficient case management, Total relied heavily on Irwin J's decision in Harcourt.  David Steel J referred to a number of authorities which Irwin J had not considered and came to the conclusion that the court had no jurisdiction to make the order sought.  He said at paragraph 30 that he did so with hesitation because of the contrary view of Irwin J but he did not agree that the CPR could be interpreted as Irwin J had done.  He also noted at paragraph 24 that it was not suggested that the court had power to order the production of the information otherwise under the CPR and, moreover, that CPR Part 18 provided what he called, "the only avenue", for Total to pursue.
58.	The ordinary rules of precedent are that where a judge has considered and refused to follow a previous decision of a judge of coordinate jurisdiction a third judge must follow the second judge unless clearly convinced that he was wrong.  Thus, in XYZ v Various [2013] EWHC 3643 (QB) Thirwall J followed the decision of David Steel J on the scope of Part 18 but, she held, the court has power to order disclosure of information about insurance under CPR Part 3.12(m) which enables the court to take any step or make any order for the purpose of managing the case and furthering the overriding objective.
59.	What the claimants wanted to know was whether the defendant in question had sufficient insurance; (1) to fund its participation in litigation to the end of the trial, (2) to meet any order for damages and (3) to meet any order for costs.  Thirwall J held that the first question related to case management because it might influence the case management directions that the court would make and made the order sought. However, she refused to order the second and third questions to be answered because they did not relate to case management.  This is a very limited extension to the position as it appeared in 2008 following the decision of David Steel J.
60.	If two High Court judges have taken the view, after argument, that the court has no power to order disclosure of insurance information under CPR Part 18 it can scarcely be said that a solicitor was negligent in taking the same view.  Until the decision of Thirwall J no other route had been suggested.  If in the Total case two leading counsel and their junior had not thought of the point it seems to me to be difficult to say that a solicitor was negligent in not thinking of it either.  Moreover, the indications from Coole & Haddock were that if an application were made it would be contested.  Mr Colbey submitted in his written skeleton that if an application for disclosure had been made the overwhelming probability is that APAL would not have contested it but would have provided the information and informed their insurers.  
61.	The judge made no finding to that effect.  Indeed, his findings at paragraphs [57] and [93], to which I have already referred, point in the opposite direction and in the face of the letter from Coole & Haddock stating that any application would be contested I do not consider that it is open to this court to make that finding of fact in the Dowlings' favour.
62.	It follows, in my judgment, that the necessary element of causation of loss has not been established.
63.	That takes me to the second way in which Mr Colbey put the point and the one that he principally relied on, namely, that there was an implied term to the effect that APAL would promptly notify its insurers of any claim made against it which could and should have been enforced by injunction.
64.	The first difficulty with this way of putting the case was that although the particulars of claim were settled by counsel, as it happens by Mr Colbey himself, the point was not pleaded. Second, and no doubt in consequence, the point was never put to Ms Lee in cross‑examination. Third, it does not appear to have been argued before the judge. The point seems to have been one which occurred to him when he was writing his judgment.  But since it did not occur to the learned pleader who pleaded the particulars of claim against Bennett Griffin, again, it does not seem to me to be right to say that a solicitor who does not take the point is negligent.  In addition, production of the insurance policy itself would not have solved the problem.  There was, indeed, a policy for each of the relevant years.  The problem was, as I have said, that Mr Phillips had deliberately decided not to inform APAL's insurers of the claim.  Such behaviour is, in my view, both irrational and probably dishonest.  I do not think that it would have occurred to a reasonably competent solicitor that an insured professional being sued for negligence would deliberately decide not to notify his insurers of the claim.  Still less would it have occurred to him if he had recently been told by his opposite number that a suspicion that APAL was not insured was groundless and that the question itself was malicious.  
65.	In order to persuade the court that a mandatory injunction should be granted there would have to be placed before the court some evidence that the term in question had been breached but there was no such evidence.  The judge noted the absent of evidence of breach at paragraph [71] of his judgment.
66.	Again, Mr Colbey submits that if an application for an injunction had been made APAL would not have contested it but would have provided the information and informed their insurers.  Again, the judge was not asked to make and did not make any finding to that effect and in the face of the letter from Coole & Haddock stating that any application would be contested and the judge's findings at paragraph [57] and [93] I do not consider that it is open to this court to make that finding of fact in the Dowlings' favour.
67.	It would also have been necessary to consider precisely when such an application should have been made and how long, if contested, it would have taken to be determined.  
68.	Mr Colbey accepts that the application would have had to have been heard by a circuit judge rather than a district judge, before whom the hearing on 5 December 2003 had been listed, and we simply have no information about the availability of circuit judges' time in the Worthing County Court.  Only if it could have been heard and determined before 23 April 2004 would it have been of any utility.  
69.	In that connection one must also bear in mind that the proceedings had been adjourned for mediation on 5 December 2003 and again in early April, at a time when the combination of Bennett Griffin's own researches and what Ms Lee had been told by Mr DeSoutter had led her to believe that APAL were insured.  A hostile application for a mandatory injunction would not have been conducive to mediation, even though, as things turned out, the mediation in the end did not take place.
70.	The factual foundation for the investigation has not, in my judgment, been established by any findings made by the judge, no doubt because the point was neither pleaded nor argued.  Once again the necessary element of causation of loss has not been established.
71.	For these reasons I do not consider that the judge was wrong in holding that liability against Bennett Griffin had not been established and I would, therefore, dismiss the appeal.
72.	LORD JUSTICE McFARLANE:  I have a great deal of sympathy for the appellants in this action who have succeeded in their litigation against the architect and yet have failed to recover anything like the damages to which they consider they are entitled, however, I entirely agree with the judgment that my Lord has given, that this appeal fails and should be dismissed.
73.	LORD JUSTICE SULLIVAN:  I also agree that this appeal should be dismissed for the reasons given by my Lord, Lord Justice Lewison.