Facts
The oil company Total, facing claims of over £700 million
arising from the Buncefield explosion, is pursuing a contribution
claim against TAV Engineering for any liability it might have to
the claimants.
Under the Civil Liability (Contribution) Act 1978, the court
decides what level of contribution is “just and equitable having
regard to the person's responsibility for the damage in
question".
Total’s case is that TAV designed, manufactured and supplied a
switch that failed to operate, causing an overflow of fuel which
led to the incident. TAV argues that its standard terms and
conditions limited liability to 5% of the contract price. Total’s
response is that the the limitation of liability is
unenforceable under the Unfair Contract Terms Act 1977.
TAV, however, is no longer trading and, according to its latest
financial statements, has assets of only £1,500. Even a 5%
contribution would amount to some £35 million. TAV's ability to
defend the litigation and its ability to pay any damages would be
wholly dependent on its liability insurance.
Additional information
It was clear such insurance existed and was likely to be
substantial. Total, however, wanted to know more and applied for
information under Part 18 of the Civil Procedure Rules.
Under Part 18, the court can order a party to "clarify any
matter which is in dispute in the proceedings… or give additional
information in relation to any such matter, whether or not the
matter is contained or referred to in a statement of case”.
Total argued that the nature and scope of TAV's liability
insurance was material to the issues and, in particular, to the
apportionment of liability. Alternatively, disclosure was necessary
and appropriate to determine whether there was any useful purpose
in continuing the litigation.
In this, Total relied on the High Court decision in Harcourt v FEF Griffin (June 2007). In that
case, the defendants to a personal injury claim of over £6 million
had limited assets but, it appeared, some insurance cover. The
claimant successfully applied under Part 18 for further details of
that insurance on the grounds that it would be a waste of time and
money to litigate over quantum if the cover proved to be less than
the claim.
In making the order, the judge said that disclosure of this kind
should only be ordered where a claimant can demonstrate that there
is some real basis for concern that a realistic award may not be
satisfied. Total argued this was a “paradigm example” of such a
situation.
TAV, like the defendants in Harcourt, argued that there is a
well-established rule of law, or at least a practice, that
information about insurance cover is not discloseable to the other
side in litigation. Disclosure would prejudice the insured and
insurers because the other side would know the "depth of the
pocket", whether for negotiation purposes or otherwise.
Judgment
Mr Justice David Steel refused to order disclosure on the
grounds that the court had no jurisdiction to do so.
The nature and content of the defendants' insurance cover was
not a “matter which is in dispute in the proceedings”, as Part 18
requires. The practice direction supplementing the rule states that
disclosure should be "strictly confined to matters which are
reasonably necessary and proportionate to enable the first party to
prepare his own case or to understand the case he has to
answer."
The insurance position had no impact on Total’s ability to
prepare the case, let alone understand any potential
defence. Nor was it relevant to the apportionment of
liability.
Commentary
The decision will be welcomed by liability insurers, but
the fact that there are now two conflicting High Court decisions
means the issue is still undecided.
The judge in this case noted that similar arguments for
disclosure failed under the old court rules in Cox v Bankside
Members Agency [1994], when Lloyd’s Names wanted to find out about
the liability insurance provided by underwriters and it was held
that disclosure had to relate to the matters in question in the
litigation. The funds available (or not) were relevant to whether
the Names could recover anything, but were not relevant to the
questions in dispute.
More recently, the Law Commission in its 2001 re-examination of
the Third Parties (Rights against Insurers Act) 1930 accepted that
details of insurance cover held by a solvent insured were a private
matter and that disclosure would encourage speculative "deep
pocket" litigation.
None of this material, however, was drawn to the attention of
the judge in the Harcourt case.
