Associate Martin Cox considers the recent High Court decision of Peel Port Shareholder Finance Company Ltd v Dornoch Ltd, in which the court declined to exercise its discretion under the Civil Procedure Rules (“CPRs”) to order the pre-action disclosure of an insurance policy held by a solvent insured. The article considers the extent to which the outcome in this case is consistent with the overriding objective that courts dispose of cases justly and at proportionate cost.
In Peel Port Shareholder Finance Company Ltd v Dornoch Ltd  EWHC 876 (TCC), the Technology and Construction Court considered an application under CPR 31.16 by the owners of a warehouse destroyed by fire for pre-action disclosure of the solvent lessee’s full insurance policy from its insurers, who had been substituted as the respondent to the application.
Accepting that the jurisdictional threshold of CPR 31.16 was met by the claimant, the court held that it was therefore a matter of its “unfettered discretion” whether it should order the disclosure. In refusing the application and declining to order the respondent insurer to disclose the policy, the court exercised its discretion having regard to “the statutory and procedural landscape”, and in doing so set out a number of reasons for justifying its refusal:
- the Third Parties (Rights Against Insurers) Act 2010 is a legislative regime specifically enacted to, amongst other things, provide information rights in respect of insolvent insureds. “Parliament cannot have envisaged that CPR Rule 31.16 would or would commonly be used to obtain insurance policies from the insurers of insolvent insureds,” said Mrs Justice Jefford. (It was alleged by the claimant in this case that there was “strong evidence” the successful enforcement of any judgment against the wrongdoer would “likely” result in that company’s insolvency);
- there has never been an express statutory provision entitling a litigant to obtain the insurance policy of a solvent insured. As the judge noted, “a litigant takes his defendant as he finds him”;
- in proceedings against the insured, CPR 31.16 does not provide a route for the prospective claimant to obtain the insurance policy of a solvent insured because the policy does not meet the test for standard disclosure; and
- attempts to deploy other provisions of the CPR to obtain the insurance policy of a solvent company have failed in a number of other cases previously.
In the light of this background, the judge explained in her judgment that it would be “curious if a potential claimant … could say that because the solvent insured might become insolvent and that he … might then have a claim against insurers, he should have disclosure of the policy under rule 31.16”.
The court’s refusal to disclose the policy perhaps comes as no surprise, insofar as it is a restatement of a well-established historic position, namely, that the courts will not be quick to order the disclosure of a solvent defendant’s liability insurance information.
What is perhaps more surprising is that the court nevertheless chose to exercise its discretion in this way given the particular circumstances of this case, namely:
- it was said that the insured company had not articulated any defence to a potential claim against it in open correspondence;
- the enforcement of any judgment against the insured company would likely make that company insolvent; and
- if it was found that the insurance policy did not cover the liability, the prospective claimant indicated it would not pursue litigation against either the company or the insurer on the basis that to do so would undoubtedly ultimately be fruitless, as a waste of both time and cost.
Mrs Justice Jefford, however, took the view that these circumstances were not so “exceptional” that they warranted a different exercise of discretion. “These circumstances, whilst perhaps not common are equally not that uncommon and still depend on a series of hypotheses about what might happen,” she said.
In the circumstances, the result, at least on those facts, may seem at odds with other CPR requirements, and in particular the overriding objective that courts deal with cases “justly and at proportionate cost” (CPR 1.1(1)), which includes “saving expense” (CPR 1.1(2)(b)).
Without expressly referring to the overriding objective in the decision, the case raises a number of questions:
- How is it in line with the overriding objective for there to be a mystery around whether a defendant can meet a judgment?
- Why make directions and provide significant cost budgets relating to points of quantum issues that may prove irrelevant because the uninsured or under insured opponent cannot meet the judgment subsequently made?
- Why potentially allow that waste of costs and court time just to preserve the secrecy around insurance policies?
- What circumstances would be sufficiently “exceptional” for the court to exercise its discretion differently?
In conclusion this recent case reiterates that for the purpose of accessing solvent defendants’ liability insurance information, it is doubtful that the CPRs will be of much assistance. This is likely to be the case even in situations such as that in Peel Port where the prospective claimant was faced with a insured defendant on the brink of insolvency with no apparent defence to the claim, and where the overriding objective would otherwise seem to call for a more liberal exercise of the courts’ discretion in order to avoid ultimately futile, but expensive, litigation.
Martin Cox also wrote an in-depth article for The Commercial Litigation Journal March/April 2018 on the subject of the Peel Port Shareholder Finance Company Ltd v Dornoch Ltd.
You can view the original in pdf form here – Policing Policies: Martin Cox reports on pre-litigation access to insurers and their policies. You can also view it on The Commercial Litigation Journal website here (subscription required).