ABB Asea Brown Boveri Ltd & Ors v Hiscox Dedicated Corporate Member Ltd & Ors

I have before me an application to amend the pleadings in two related actions. The claimants in each action are ABB Asea Brown Boveri Ltd (“ABB”) & ABB Equity Ventures Inc (“Inc”). Inc was incorporated in Delaware. ABB is the parent company of a group of companies, most of which have “Asea Brown Boveri” or “ABB” in their names. The group has a business division known as “Equity Ventures” (previously “Energy Ventures”). That division utilised a number of entities with “Energy/Equity Ventures” in their name, including Inc, and ABB Equity Ventures BV (“BV”), a company incorporated in the Netherlands.

In 2005 Folio 862 the defendants are Hiscox Dedicated Corporate Member Ltd (“Hiscox”) and 8 other underwriters (“the insurers”). The insurers between them provided cover under the Primary and Excess layers of a programme of contract frustration indemnity insurance in favour of ABB and its subsidiary and/or associated companies. The claimants claim against the insurers in relation to a project called the Korba Project in respect of the policies under the programme incepting in 1999 (“the 1999 policies”), which replaced policies incepting in 1998 (“the 1998 policies”). The insurers’ defence to these claims includes the contentions (“the placement defences”) that the cover in respect of the Korba Project was never bound to the following market on the excess layers in respect of the 1998 policies, and that, in any event, it was not carried over into the 1999 policies.

In 2005 Folio 279 the defendants are Jardine Lloyd Thompson Limited (“JLT”), the brokers of the 1998 and 1999 policies. The claimants claim against them upon the basis that, if either or both of the placement defences are good, JLT were negligent.

The claimants’ application is threefold:

On 19^th April 2006 the claimants served Particulars of Claim which incorporated the substitution and addition of the parties referred to above. They issued an application for permission to effect this change on 14^th November 2006. They have now served draft Amended Particulars of Claim which incorporate those changes and the further amendments of the Particulars of Claim referred to above.

In order to address the issues raised by the application it is necessary to examine in some detail the somewhat complicated facts which give rise to it. The account that follows is either apparent from the base documents or derived from the Amended Particulars of Claim (“APOC”), a large proportion of which is admitted by the insurers. It should not, however, be assumed that none of it is in issue.

The ABB group of companies is engaged in engineering and construction projects all over the world. The programme of contract frustration indemnity insurance, arranged in various layers through JLT, was, so far as presently relevant, initially, in respect of losses occurring between 1^st January 1998 and 31^st December 2000. The Primary layer, subscribed as to 100% by Hiscox, was $5,000,000 first loss any one country and in the aggregate, subject to a deductible of 10% of the value of each and every loss up to $50,000. The 1^st Excess layer (there were five) was $40,000,000 in excess of $5,000,000 per country. The primary layer was fully reinsured by ABB Insurance, an ABB Group captive insurance company.

The 1998 policies included the following terms:

“1.

ASSURED ABB Asea Brown Boveri and/or their subsidiary and/or their Associate Companies (as per appendix 1) for their respective rights and interests.

The policies included a number of definitions:

“3.6.

COUNTER INDEMNITY

A binding agreement issued by the ASSURED or by a THIRD PARTY to pay to an ISSUING BANK or a COUNTER GUARANTEEING BANK in case of a CALLING of a BOND

3.7.

COUNTER GUARANTEE

A binding agreement issued by a COUNTER GUARANTEEING BANK to pay an ISSUING BANK in case of a CALLING OF a BOND

3.8.

BOND

Any guarantee, BOND or other payment undertaking however named or described by a bank, insurance company or other body or person issued in relation to a contract or a tender (BID BOND) in writing for the payment of money on presentation in conformity with the terms of the undertaking of a written demand for payment and such documents as may be specified in the BOND and where the duty of the issuer is not conditional on actual default of the ASSURED”

Appendix 1 contained, under the heading “ABB Asea Brown Boveri Bond Portfolio: Appendix 1 Participating Companies ….” a list of 18 companies and included the following paragraph:

“In all cases, admission of the above companies shall include all subsidiaries or associated companies (referred to as “contracting companies”) in which the above parent companies (referred to as “holding” or “regional” companies), directly or indirectly, have more than 50% of the voting rights or over which they exert decisive influence”.

Section 5 of the policies was headed “Mechanism of Policy Operation” and provided, inter alia, that the ASSURED should be obliged and entitled, subject to an exception, to admit to the policy for coverage any eligible BOND given to a BUYER where the ASSURED was ultimately at risk and which unconditionally permitted a BUYER or ISSUING BANK to call such BOND. Section 5.4. provided:

“Discretionary Admission of BONDS to the Policy

Subject to the Leading Underwriters’ approval and - if so approved – premium rating in each case, the ASSURED may admit to the Policy for coverage:

…

b.

BONDS issued by order of a subsidiary or minority owned or joint venture or associate company of the [ABB] Group of Companies or by order of a company acting as agent for an [ABB Group Company] where the ASSURED has issued a counter-indemnity and is ultimately at risk …”

Section 6 of the policies included definitions of the amount of loss:

“6.1.

AMOUNT OF LOSS for Tender, Performance, Retention and Warranty Bonds

Where loss occurs in respect of Tender, Performance, Retention or Warranty BONDS, the AMOUNT OF LOSS is calculated as the sum paid by the ASSURED under the COUNTER INDEMNITY less all recoveries and only up to the MAXIMUM LIABILTY

……………………

6.6.

Settlement of Claim

Underwriters will pay to the ASSURED the INSURED PERCENTAGE of the AMOUNT OF LOSS as soon as practicable after the AMOUNT OF LOSS has been calculated. The AMOUNT OF LOSS will not be calculated until after the respective WAITING PERIOD is completed”

In essence, so far as presently relevant, the policies contemplated that a Bond would be provided by way of performance guarantee in respect of either a concluded contract or a tender. The Bond (called in the case of a Tender a Bid Bond) would be provided by a Bank; the Assured would provide a counter indemnity to the Bank, and the amount of loss – see clause 6.1 - would be the sum paid by the Assured under the Counter Indemnity less recoveries and subject to policy limits and deductibles. The policies also contemplated that there could be more than one bank involved as where the Issuing Bank received a Counter-Guarantee from another Bank and the latter Bank received a Counter Indemnity from the Assured.

Accordingly the security and financing structure was to be:

In addition, one of the Insured Risks was the calling of a Bid Bond and a Bid Bond included a guarantee issued by the Assured in respect of a Tender, even though, under the 1998 policies, the definition of the “Amount of Loss” does not appear to contemplate a payment to a Buyer under the Bond by the Assured itself (but see the amendment in respect of the 1999 policies at paragraph 37 below).

Daewoo Power (India) Ltd (“DPIL”) was a joint venture company formed for the purpose of a project for the establishment and operation of a thermal power plant at Korba East, Madhya Pradesh, India (“the Korba Project”). The registered owner of DPIL’s shares was Daewoo Corporation, the joint venturer with the ABB group. But BV was (contingently) the beneficial owner of 50% of the shares since it had been agreed with Daewoo that 50% of DPIL’s shares would be transferred to BV when the project reached financial closure.

The Korba Project was being carried out for the Madhya Pradesh Electricity Board (“the Board”). On 15^th September 1995 DPIL had entered into a Power Purchase Agreement (“PPA”) with the Board for the sale of power to be produced by a coal-fired generating facility at Korba East, which DPIL was to finance, build, own and operate. Under that agreement the Board was to maintain an escrow account with its bank, on terms to be agreed, and to place in it a portion of the revenue generated by the Board from the sale of electricity to its customers each month, as security for payment due for power. Financial closure was defined in the PPA as “the signing of the Loan Agreements [between DPIL and its project finance lenders] and the fulfilment of all conditions precedent to the initial availability of funds thereunder”.

The Board decided that it wanted to change this escrow arrangement. By a letter of 24^th July 1998 it invited DPIL to submit a new tender in relation to the project. For this purpose DPIL was required by the Board to submit a deposit for 2% of the anticipated project cost. The deposit was to be kept as a fixed deposit for 6 months as security for achieving financial closure of the Korba Project. That would, I assume, require the new escrow arrangements to be acceptable (“bankable”) to the financiers. The letter stated that, if financial closure was not achieved within 6 months, the deposit would be returned with interest.

In August 1998 Asea Brown Boveri ABB Sweden (“ABB Sweden”) approached JLT with a view to obtaining cover for the deposit from the insurers under the programme.

So it was that Endorsement No 5, dated 18^th August 1998, was scratched by Mr Richardson of Hiscox for each layer of the programme. It reads (so far as material) as follows:

“It is hereby understood and agreed by Underwriters that the Rs 107456800 (Footnote: ¹) Demand Draft by [DPIL] in favour of [the Board] is eligible for cover hereunder”

The Endorsements recorded that DPIL was a special purpose company then owned by Daewoo, and that BV and Daewoo had agreed to own it 50/50 in the event that the Korba Project reached financial closing.

On 17^th August 1998 DPIL provided the Board with 2 demand drafts drawn on the State Bank of India Ltd (“SBI”) for a total sum of Rs1,074,568,000 (“the Korba Security Deposit”) (Footnote: ²). The terms upon which the Korba Security Deposit was proffered by DPIL included provision that the Board would not encash the drafts, which would remain valid until 16^th February 1999. The Board would provide DPIL with drafts of various documents, together defined as “the Bankable Escrow Agreement” (“BEA”), and would enter into negotiations with DPIL to execute the BEA. A BEA was needed (giving DPIL the right to receive payments from end buyers of electricity rather than from the Board by way of security for payments due to DPIL under the PPA) if the project’s bankers were to take the risk in the project. If the BEA should not be executed within 6 months of the submission of DPIL’s offer, the drafts would be returned. The Board could only encash the drafts in the event that financial closing was not achieved within 2 months after the date of execution of the BEA.

According to the APOC the Board did not accept the conditions put forward, but by letter of 4^th September stated that DPIL had been “granted escrow protection” and set out the conditions upon which the grant of escrow protection would be made, including that the Board would only be entitled to forfeit the drafts if financial closure was not achieved within 2 months of the provision of a BEA. The Board encashed the drafts and told DPIL that the money from the drafts would be paid into a separate bank account (under the control of the Board): para 23 of the APOC (Footnote: ³).

The money from the drafts was deposited by the Board into its own account with SBI. The insurers’ understanding is that the Board then drew on that account in order to obtain Term Deposit Receipts which were pledged to SBI by way of security for the Board’s overdraft. In any event it is common ground that the money deposited was pledged as security for the Board’s overdraft with SBI

JLT informed Mr Richardson of Hiscox that there had been a change in the arrangements. JLT provided the insurers with an underwriting memorandum obtained by Mr Osterman of ABB Sweden from an ABB company which indicated that the amount of the drafts was in a separate account of the Board with SBI and that the Board had to do some act by way of forfeiture of the security before it could consolidate the security into its own accounts.

JLT, on instructions from ABB Sweden, obtained a further Endorsement –

Neither Endorsement 5 nor 6 purported to alter the policy definition of “Amount of Loss” or “Assured”. They each provided that all other terms, clauses and conditions of the insurance were to remain unaltered.

The payment of the Korba Security Deposit (by way of encashment of the drafts) had to be financed. The way in which that was done is set out in Schedule 1 to the Amended POC.

On 13^th August 1998 Daewoo signed an agreement with BV and DPIL as to how the deposit would be financed. The agreement provided for DPIL to submit to the Board an SBI certified cheque for Rs 1,074,568,000 constituting 2 % of the Project cost. DPIL was to enter into a loan agreement with the Hong Kong and Shanghai Bank, New Delhi (“HSBC-ND”) to cover the cheque. The Loan was to be released into a separate new account of DPIL.

Daewoo and BV were each to “cover” 50% of DPIL’s exposure under the loan. Daewoo was to provide BV with $12,792,000 for deposit by BV in an offshore account. BV would then arrange for HSBC–ND to be guaranteed by some HSBC branch offshore from India.

On the same day Daewoo deposited US $12,792,000 with ABB Energy Ventures. That was about 50% of the deposit. On August 25^th 1998 Inc (sic) confirmed receipt of the deposit. The letter does not reveal which company actually received the money.

On 14^th August 1998 HSBC-ND lent DPIL Rs 1,200,000,000 to fund the deposit. This was guaranteed by Hong Kong and Shanghai Bank, Bahrain (“HSBC–B”). The original guarantee has not been located. A company called Sirius International Insurance Co (“Sirius”), the ABB Group’s captive insurer (Footnote: ⁴), provided a guarantee to HSBC–B. The Sirius guarantee was for the full amount of the loan because HSBC would not accept security from Daewoo. In September 1998, by way of an amendment to an Indemnity Agreement of 25^th June 1998, BV agreed to indemnify Sirius in respect of its guarantee of HSBC–B.

At some later stage Hong Kong and Shanghai Bank, Mauritius (“HSBC-M”) took the place of HSBC–B.

In essence, therefore, the chain of security, leading to the loan, was as follows:

The interest on the loan has been paid by DPIL with funds made available initially by BV and later by PII.

At the time when Endorsement 6 was scratched the security structure for the Korba Security Deposit was, accordingly, not wholly dissimilar to that originally planned (see paragraph 14 above), although it involved the interposition of DPIL and Sirius.

In 1999 there was a “cancel and rewrite” exercise. The 1998 policies were cancelled (by Endorsement 10) and the cover was re-written in the form of policies in respect of losses occurring during the period 1^st April 1999 to 31^st March 2002. The 1^st Excess layer became $50,000,000 per country and in the aggregate in excess of the Primary Layer. The terms of the policies remained the same save that Part B of the Insured Risks began:

“The CALLING of a BID BOND by the ISSUING BANK or by a COUNTER GUARANTEE BANK caused solely and directly by the calling of a BOND by a BUYER or a COUNTER-GUARANTEE by an ISSUING BANK where the ASSURED has submitted a TENDER to a BUYER..”

Endorsements 5 and 6 were not reissued as endorsements to the 1999 Policies: hence the issue as to whether they are applicable to the latter policies.

In June 1999, according to the Schedule to the APOC (and paragraph 10.h. of the statement of Mr Gregg Hutchison, one of the ABB Group’s legal counsel), responsibility for the development of the project, and the obligations of BV in respect thereof, was transferred to PII, i.e. ABB Power Investments (India) B.V, a fully owned subsidiary of BV. The Energy Ventures division does not appear to have addressed itself to considering what legal dispositions might need to be made or recorded to effect that change. In a fax from ABB Energy Ventures, Zurich of 5^th June 1999 confirmation was given to two directors of DPIL that “the appropriate investment vehicle for the Korba Project” was PII, and the directors were asked to initiate the process of replacing BV with PII. Thereafter, as Mr Dente explains in his witness statement of 16^th January 2007, what happened was that PII was treated as having responsibility for the Korba Project, including in particular the payment of interest and repayment of principal under the loan, and expenses in connection with the project were recorded as being borne by PII. According to Mr Hutchison’s statement, supported by that of Mr Dente, any loss suffered by BV or any other ABB entity would ultimately be borne by PII. But that position was, as it turns out, later to change.

In January 2003 the Sirius guarantee to HSBC–M was reduced to Rs 625,000,000, i.e. about 50% of the HSBC–ND loan to DPIL. Whether, and, if so, why, HSBC–M, the guarantor of HSBC–ND, remained unsecured for the balance is not apparent.

In February 2003 HSBC–M (Footnote: ⁵) indicated that it required a cash deposit in lieu of 50% of the HSBC–M guarantee. BV then gave HSBC–M a lien on cash balances in the sum of $ 6.25 million. The Sirius guarantee in favour of HSBC-M was further reduced to $ 6.25 million i.e. about 25% of the loan. So at this stage HSBC-M had $ 12.5 million security, 50% from BV by way of lien on cash deposits and 50% from Sirius, in respect of which BV provided an indemnity.

On 14^th May 2003 it was agreed that HSBC–M would provide a guarantee to HSBC-ND in the sum of $12,500,000 against the security of a lien on a deposit of BV in the same sum. In effect BV took over the remainder of the security given by Sirius.

On 4^th June 2003, as a consequence of the BV deposit referred to in the previous paragraph, HSBC–M returned the Sirius guarantee to Sirius, and on 11^th June 2003 Sirius released BV from the indemnity in its favour.

So by now the chain of security had become:

On 13^th February 2005 the BV deposit of $12.5 million plus interest was returned to BV. On 15^th February 2005 HSBC–Stockholm, on behalf of ABB Asea Brown Boveri Ltd, Zurich (“ABB Zurich”) provided a standby letter of credit to HSBC–ND as security for the loan to DPIL.

So by now the chain had become:

By his witness statement of 26^th March 2007 Mr Hutchison revealed that, retroactive to January 1^st 2007, PII no longer has any fiscal responsibility for the Korba Project which now rests again with BV.

The claimants’ case in respect of this is as follows. In September and October 1998 the Board provided drafts of documents that might produce a BEA. DPIL responded in September and November. No BEA was ever agreed. On 22^nd September 1999 the Board informed DPIL that interest on the Korba Security Deposit could not be returned at present but that the deposit could be returned with interest, if DPIL terminated the PPA.

By letters of 8^th April and 9^th August 2000 the Board indicated that it would not execute an escrow agreement until after financial closure. This was impossible for DPIL to accept because it could not obtain financial closure unless escrow cover was already in place. On 14^th August 2000 DPIL demanded the return of the deposit together with interest and gave notice to terminate the PPA, that termination to take effect upon return of the deposit plus interest on 19^th August 2000. The deposit was not returned.

In the original Particulars of Claim, dated 19^th May 2006, the claimants pleaded that the Board’s acts and/or omissions in paying the deposit into its own account with SBI and/or pledging it as security for its overdraft constituted an implied declaration of forfeiture within paragraph 1.1 of the Schedule of definitions attached to Endorsement 6. Since these acts took place in 1998 they fall outside the six year limitation period, the claim form having been issued against the insurers on 20^th October 2005.

By an amendment to paragraph 52 (for which permission is sought) the claimants seek to contend that the acts or omissions referred to in the previous paragraph taken together with the letter of 8^th April 2000 (see paragraph 49 above), or alternatively the Board’s statement in its letter of 22^nd September 1999 (see paragraph 48 above) constituted an implied declaration of forfeiture. Because the amendment, if allowed, would date back to the commencement of the suit, an amendment to add the letter of 8^th April 2000 as a component of the implied declaration would defeat a limitation defence. The limitation period would expire, at the earliest, six months and six years after 8^th April 2000 i.e. in October 2006 – well after the issue of the claim form, but well before today. An amendment to add the letter of 22^nd September 1999 would also defeat a limitation defence.

The claimants also seek to add an averment in paragraph 52A to the effect that the Board’s failure to return the deposit and interest within a reasonable time after DPIL’s letter of 14^th August 2000 accepting the Board’s offer, in its letter of 22^nd September 1999, to repay the deposit upon termination of the PPA, was an implied declaration of forfeiture. Whether or not the limitation period has expired in relation to that claim depends on what amounts to a reasonable time. Mr Richard Southern, QC, for the claimants suggested that a reasonable time was two months. If so (and that is debatable) then, allowing for the six month waiting period, the limitation period would expire on 14^th April 2007.

In October 2000 DPIL began proceedings against the Board and SBI in the High Court of Madhya Pradesh (“the High Court”). On 26^th September 2001 that Court ordered the Board to refund the deposit plus interest. On 21^st January 2003 the Indian Supreme Court ordered that the Board remained obliged to refund the deposit plus interest. On 25^th April 2003 the High Court rejected the Board’s appeal and affirmed its earlier judgment. Recently (since about May 2006) the Board has made some payments to DPIL.

The Board’s failure to return the deposit and interest notwithstanding the Indian Courts’ orders and judgments of 26^th September 2001 and/or 21^st January 2003 and/or 25^th April 2003 is also relied on as constituting an implied declaration of forfeiture.

On 31^st March 2002 Inc gave notification of a claim on the policies (in the sum of Rs 625,000,000) to JLT, and this notification was passed to insurers. A claim had been notified as likely in March 2001.

Inc appears never to have played any part in the security or financing chain. Nor does it appear now to exist. On 1^st January 2006 it was merged into a company called ABB Inc, another Delaware corporation. A witness statement from a representative of the claimants’ solicitors expresses her understanding that Inc has ceased to exist as a separate entity.

In his witness statement of 13^th November 2006 Mr Hutchison explains that Inc came to be named in the claim form in the following way. The business division of the ABB group named “Equity Ventures”, originally based in Switzerland, but now based in the USA, operates a number of companies, many with “Equity Ventures” in their name. The division operates globally, developing infra-structure projects in several countries.

Until late 2004 the claim was being handled by a Mr Ashok Joshi. When Mr Hutchison took over the handling of the claim he understood from discussions within Equity Ventures, in particular with Mr Joshi and Mr Malcolm Preece, the head of Equity Ventures, that it was Inc that had been responsible for the funding of the Korba Security Deposit. He was unaware of the complexities of the project’s financing which I have set out above. As the statement of Mr McPhun of Taylor Wessing, the claimants’ solicitors, shows, Mr Hutchison had seen the March 2002 notice of loss, but none of the other financing documents referred to in his (Mr Hutchison’s) statement. In particular he was unaware that DPIL was the borrower with Equity Ventures support: paragraph 19.a. He had thought that the financing was obtained by “the relevant Equity Ventures company”, which he thought was Inc. As Mr McPhun put it, Mr Hutchison’s “initial views were not detailed”.

In March 2005 a decision was taken within the Equity Ventures division to issue a claim form against JLT. Mr Hutchison instructed Taylor Wessing to include “Equity Ventures” as claimant. When Taylor Wessing requested details of which company was to be named Mr Hutchison told them that it should be Inc. Mr Hutchison’s understanding of the position remained the same when the claim form was issued against insurers in October 2005.

Mr Hutchison discovered the true position when, as part of the process of drafting the Particulars of Claim, he was asked to produce a chronology covering how the Korba Security Deposit was funded and called back from store various archived files.

There is an issue between the claimants and the insurers as to the date of the operation of any insured peril. To the extent that the insured peril occurred more than six years earlier than this judgment the claimants seek to rely on CPR 17.4. or CPR 19.5 to allow them to amend so as to make the second claimant B.V.; and on CPR 19.5 in respect of the addition of DPIL and PII.

So far as the brokers are concerned the limitation period has now expired. Endorsement 6 was bound on 6^th October 1998. The cancel and rewrite exercise took place no later than 6^th April 1999. The claim form in the brokers’ action was not issued until 5^th April 2005. Any claim by BV, DPIL or PII has yet to be made in this action. It has not been suggested that section 14A of the Limitation Act 1980 could assist any of them.

Both CPR 17.4 and CPR 19.5 must be read in the light of, and are not to be construed as going beyond, the rule making power contained in section 35 of the Limitation Act 1980 which provides:

“35.

New claims in pending actions: rules of court.

(1)

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—

(a)

in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and

(b)

in the case of any other new claim, on the same date as the original action.

(2)

In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either—

(a)

the addition or substitution of a new cause of action; or

(b)

the addition or substitution of a new party;

(3)

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.

……..

(4)

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, and subject to any further restrictions the rules may impose (Footnote: ⁶).

(5)

The conditions referred to in subsection (4) above are the following—

(a)

in the case of a claim involving a new cause of action, if the new cause of action 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; and

(b)

in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.

(6)

The addition or substitution of a new party shall not be regarded for the purposes of subsection (5) (b) above as necessary for the determination of the original action unless either

(a)

the new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party’s name; or

(b)

any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action.”

CPR 17.4. provides that

“17.4.

(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…

(3)

The court may allow an amendment to correct a mistake as to the name of a party, but only where the mistake was genuine and not one which would cause reasonable doubt as to the identity of the party in question”

CPR 19.5. provides:

CPR 17.4. is similar in terms to the previous Order 20, rule 5 (3) which provided that:

“An amendment to correct the name of a party may be allowed …. notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party if the Court is satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause any reasonable doubt as to the identity of the party intending to sue or, as the case may be, intended to be sued”.

That rule was made pursuant to the powers contained in section 99 (a) of the Supreme Court of Judicature (Consolidation) Act 1925.

The Courts have for some time grappled with the question – when is a mistake a mistake as to the name of a party and not one that would cause reasonable doubt as to the identity of the party intended to sue or be sued?

In “The Sardinia Sulcis” [1991] I Lloyd’s Rep 201 the Court of Appeal considered the meaning of RSC Order 20 r. 5(3). The Court, in that and prior cases, indicated that where it was possible to identify the intended plaintiff or defendant by a description which was more or less specific to the particular case, and the party seeking to amend had got that description right there was unlikely to be any doubt about the intended plaintiff or defendant. Paradigm cases are where it is plain from the writ/claim form or statement of claim/case that the claimant is suing his employer (Mitchell v Harris Engineering Co.Ltd [1967] 2 Q.B. 703), landlord (Evans Construction Co. Ltd. v Charrington & Co. Ltd, [1983] 1 Q.B. 810), defamer (Gregson v Channel Four Television Corporation [2000] C.P. Rep 60), or solicitor (Kesslar v Moore & Tibbits [2004] EWCA Civ 1551); or that the intended claimant is the owner of the relevant building (Thistle Hotels v McAlpine), or cargo (“The Joanna Borchard”) or ship (“The Sardinia Sulcis”), but that the relevant entity has been wrongly named. These cases fall within Order 20 r 5 (3) or CPR 17.4. On the other side of the line are cases where the promoter of the action intends to pursue a claim on behalf of or against a legal person whom he describes and names correctly, but who is not the right person to sue or be sued. In such cases the mistake is said to be one of identity.

In deciding whether or not a case falls into the wrong name/right description category the Courts have shown some liberality of approach. Thus the name may be corrected even though there is no similarity between the name pleaded and the name to be substituted (e.g. Evans v Charrington), and even where the proceedings had been commenced in the name of the original owner of a ship which had ceased to exist and been merged with another company, whose name was substituted “The Sardinia Sulcis”. A complete stranger to the litigation with no connection with the existing parties can find himself added under this rule: Horne- Roberts v SmithKline Beecham plc [2002] 1 WLR 1662.

But, as Lloyd, L.J. (as he then was), pointed out in “The Sardinia Sulcis”, the “identity of the person intending to sue” is not an easy concept to grasp. In one sense a plaintiff always intends that the correct plaintiff should sue and intends to sue the person who is liable for the wrong that he has suffered; but the test cannot be as wide as that.

In Morgan Est (Scotland) Ltd v Hanson Concrete Products Ltd [2005] 1 WLR 2557 the Court of Appeal also pointed out that the distinction between right description/ wrong name and wrong party is not easy to draw (Footnote: ⁷). The Court indicated that it was not generally appropriate to refer to authorities decided under the former rules to determine what the new rules mean or how they should be applied (para 16), although “The Sardinia Sulcis” was more relevant to Rule 17.4. than 19.5.

The difficulty of distinguishing between mistakes as to nomenclature and mistakes as to identity may in practice be alleviated by the fact that CPR 17.4 only applies “where the mistake was genuine and not one which would cause reasonable doubt as to the identity of the party in question”. If that identity is beyond reasonable doubt there is likely to be little room for a dispute as to whether the mistake is one of identity or name.

In the present case I do not doubt that Mr Hutchison made a genuine mistake. Whether his mistake in naming Inc was one that would cause reasonable doubt as to the identity of the claimant (other than ABB) intending to sue, has to be determined objectively having regard to what was said in the claim form in the light of what was known by the insurers and the context in which the claim came to be made.

In the claim form against the insurers the claimants claim:

“in respect of the unfair calling and/or capricious calling and/or non repayment and/or unfair forfeiture and/or implied declaration of forfeiture by [the Board] in the sum of Indian Rupees 1.074.568.000 deposited in [SBI] on or about 17^th August 1998 by or on behalf of [DPIL] and/or the First Claimant and/or the Second Claimant together with accrued interest thereon”.

The claimants contend that the insurers cannot have been in any reasonable doubt that the second claimant, i.e. Inc, was intended to be the ABB entity that had been responsible for funding (i.e. had given security for) the deposit, namely, as we now know, BV and who had suffered loss upon the forfeiture of the deposit.

I am not persuaded that the insurers, on the knowledge that they had, can have been in no reasonable doubt that, when the claim form referred to Inc, without description as to its role, the entity really intending to sue was either BV or a description of an entity which only BV satisfies.

The claim form puts forward four alternatives in respect of the deposit so far as ABB and Inc are concerned (the first contention being that the deposit was made by or on behalf of DPIL) viz:

These were all, prima facie, contentions that ABB or Inc actually made the deposit (and so had lost it) or that the deposit was made by someone acting as its agent (and thus entitled to an agent’s usual indemnity) as a result of which the loss of the deposit was a loss of the principal. It is not obvious that the wording was intended to cover a loss caused by the loss of a deposit by DPIL made possible by a loan from a third party, that loan being secured, ultimately, by the second claimant. Further, the expression “on behalf of” in the form might be intended to signify that the loss of the deposit was ultimately suffered by one or other of the claimants who had procured the making of the deposit or who stood ultimately to suffer loss on account of its forfeiture – that is indeed the claim put forward by Mr Hutchison in respect of ABB (Footnote: ⁸) – in which case the involvement of Inc could signify that Inc was said to have suffered loss by reason of its having been or become the owner, direct or indirect, of DPIL or, perhaps, because there had been a reorganisation, such as is said to have happened with PII, where it had become the entity that took the economic burden and benefit of the project.

Mr Hutchison points out that Endorsement No 5 referred to the fact that BV and Daewoo had agreed to own DPIL on a 50-50 basis in the event that the project reached financial closing and that a fax of 13^th August 1998 referred to in the Endorsement showed (diagrammatically) the following structure:

However, even if the claim form is taken together with the faxes of 13^th and 17^th August, it does not seem to me that it unequivocally indicates that the claim must have been intended to be made by the ABB EVE company at the beginning of the chain in its capacity as guarantor of Sirius. The claim form does not refer to Endorsement No 5. It refers to the deposit having been made by or on behalf of the first or second claimant – an averment which, in relation to the second claimant, does not fit readily into the diagram, unless an extended meaning is given to the words “on behalf of”, in which case it is possible that the words were intended to signify a claim of the type discussed in paragraph 78.

Comprehension would not have been assisted by the fact that the report of 3^rd January 2002 of Crawford & Co (“Crawford”), the loss adjusters, referred to “the specific Assured” as “ABB Equity Ventures”, without specifying which one. If one examines the terms of the report that could have been a reference to “ABB Equity Ventures, Zurich” (referred to in the report as the “holding company”), or ABB Equity Ventures (India), (referred to in the report as the “contracting company” as 50% shareholder in DPIL). This was presumably intended as a reference to PII i.e. ABB Power Investment (India) B.V., the subsidiary of BV, incorporated in the Netherlands, to which BV’s 50% shareholding in DPIL was transferred, and which, in June 1999, took over responsibility for the project: see paragraph 39 above. The report does not refer to BV.

The insurers also had Inc’s letter of 31^st March 2002. But that is not likely to have reduced any confusion since it refers to DPIL as being owned 50% by “ABB Equity Ventures (“AEV”)” but is written on the stationery of Inc.

In short it would not, in my judgment, have been clear beyond a reasonable doubt to someone in the position of the insurers what was the identity of the person (other than ABB) intending to sue: International Bulk Shipping and Services Ltd v Mineral and Metals Trading Corpn of India (1996) 1 AER 1017, 1027.

CPR 19.5 (3) is, however, wider in scope. It applies where “the new party is to be substituted for a party who was named in the claim form in mistake for the new party”. The party may be someone named as claimant or defendant. It is not necessary to show that the mistake would not have caused reasonable doubt as to the identity of the party in question. As Peter Gibson, L.J. put it in Gregson v Channel Four Television Corporation [2000] EWCA Civ 214:

“By comparison and contrast with r.17.4 (3) that mistake is not a mere mistake as to a name such as causes no reasonable doubt as to the identity of the party in question but is something more fundamental which can only be cured if a new party is substituted.”

Further, since Order 20 r. 5 was not intended to implement section 35 of the Limitation Act, “The Sardinia Sulcis” cannot be regarded as an authority on section 35 or CPR 19.5, which was so intended, and does not represent the limits of rule 19.5: Morgan Est, paragraph 27.

In Morgan Est Company A assigned its cause of action to Company B which assigned it to Company C. Proceedings were issued in the name of B. B applied, after the expiry of the limitation period, to add A and C. The Court of Appeal, upholding the first instance judge, held that A and C should be joined. It held that there was no reason to construe “in mistake” restrictively. The source of the rule was the 1980 Act which had the obvious intention of liberalising the position from that under the Limitation Act 1939. The rule should be construed in the light of the overriding objective which “is likely to be undermined if one gets finicky about different sorts of mistake. The jurisdiction is for putting things right”: paragraph 40.

As I have said I am satisfied that Inc was named in the claim form in mistake for BV. However, the defendants contend that I should not allow any amendment to substitute BV because:

I should not grant permission to substitute BV for Inc if, as the defendants contend, BV has no realistic claim under the insurance. As to that the defendants contend that until 13^th February 2005 BV might have suffered a loss - if its indemnity of Sirius had been called on, or if the Bank had exercised its lien on cash deposits. But, before the action was brought, Sirius had released BV from its indemnity and the Bank had returned BV’s deposit. The only entity that could thereafter suffer loss was ABB Zurich which procured the opening of the standby Letter of Credit. The only loss that BV appears to have suffered is that it has, for a while, paid interest on the HSBC loan, for which the pleadings make no claim (Footnote: ⁹), and which is not an insured loss caused by an insured event.

I can see no realistic answer to these contentions. In particular, under the insurance the “AMOUNT OF LOSS is calculated as the sum paid by the ASSURED under the COUNTER INDEMNITY”. But no sum has been paid by BV under any counter indemnity in consequence of an unfair forfeiture. Accordingly, on this ground alone, I would refuse permission to substitute BV in Folio 862.

Section 35 (6) (a) applies where

“(a)

the new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party’s name;”

The defendants contend that this section does not apply where the party seeking to amend is not simply seeking to substitute the correct name for the claimant in place of the name originally and mistakenly given, but is, also, seeking to put forward a different claim under the new name. They rely in this respect on Weston v Gribben [2006] EWCA 1425.

In that case Mr Weston sought compensation for the loss of property in Spain of which he claimed to have been deprived by a fraudulent scheme. The property in question in the appeal was known as the Dominion Beach property. Dominion Beach was owned by a Spanish company, Grass Inversiones SL (“Grass”). Mr Weston was its sole administrator or director. A fraudster forged his signature on a document. That document was notarised by a Mr John Gribben who was a notary authorised in Scotland, but not in England. That notarisation was confirmed by the issue of an apostille by the Foreign & Commonwealth Office (“FCO”). By the use of the notarised document the fraudsters took control of Grass and sold the Dominion Beach property. Mr Weston sued Mr Gribben and the FCO. As to the latter he alleged that, if they had spotted that Mr Gribben was not authorised to act as a notary in England, they would not have issued the apostille and the fraud would not have been carried through.

Mr Weston sought, after the expiry of the limitation period, to join Grass to the proceedings as an additional claimant. The judge allowed the addition of Grass but only for the limited purpose of enabling Mr Weston to maintain a claim based upon an alleged 2/3^rd beneficial interest in Dominion Beach, said to have been owned by him under a trust of which Grass is alleged to have been a trustee.

Lord Justice Lloyd observed that the terms of section 35 (6) (a) required attention to be focused, in relation to any proposed substitution or addition of a party:

“on the formulation of the claim made in the original action, and on the question whether a mistake has been made as regards one or another person who is named as a party to that claim. There may, therefore, be a limit to the extent to which the provisions of rules 19.5 (3) (a) and 17.4. (3) can have cumulative effect ”.

The Court allowed the FCO’s appeal against the judge’s order on the basis that, even if Mr Weston had a 2/3^rd beneficial interest in Dominion Beach, he had no claim. The only possible claim against the FCO was one on the part of Grass as legal owner. A claim based on Mr Weston’s alleged beneficial ownership did not exist.

In respect of Mr Weston’s application to amend to join Grass in order for it to sue as legal owner Lord Justice Lloyd held that:

“..the application of rule 19.5 (3) has to be viewed in the statutory context of section 35 (6) and of the overriding objective, and in the factual context of the nature of the claim made, the amendments sought to be made and the evidence as to the nature and the circumstances of the mistake which it is said was made in respect of the original claim”

He pointed out that in Morgan Est and “The Sardinia Sulcis” no change was necessary in the formulation of the claim on account of the substitution of the correct claimant; and that no such alteration would have been needed in Parsons v George [2004] EWCA Civ 912 and Horne-Roberts v Smith Kline Beecham PLC, where the name of the defendant was to be changed, other than, where relevant, to allege a transmission or devolution of title. He then expressed the view that that was:

“..a process which is consistent with the words of section 35 (6) which refer to the substitution of the new party “for a party whose name was given in any claim made in the original action”. Attention has therefore to be focussed on the “claim made in the original action” in relation to which the original party’s name is said to have been used by mistake for that of the party proposed to be substituted. As Sedley LJ suggested in the course of argument it may be a convenient working test to ask whether you can change the identity of the claimant or, as the case may be, the defendant without significantly altering the claim”.

The Court held that, on the facts, the amendments that would be necessary to the formulation of the Particulars of Claim would be too substantial to pass the Sedley LJ test. A different basis would have to be asserted for the duty of care owed by the FCO; and there would have to be a different formulation of the case in misfeasance. The effect would not be to substitute Grass as one party for an existing party in respect of “any claim made in the original action” but in respect of a materially different claim.

In Weston v Gribben the Court of Appeal had the advantage of having Particulars of Claim from which the nature of the original claim was apparent. Here there is only the claim form. The insurers submit that this makes no difference. The claimants cannot sidestep the proper application of the test by not serving Particulars of Claim in the name of Inc with, or shortly after, the claim form. The relevant task is to consider how the claim would have been formulated before Mr Hutchison discovered his mistake.

The claimants contend that the approach adopted by the insurers is “unreal” and not a proper application of the Sedley LJ test. This is because it illegitimately conflates, and seeks to exploit, not only Mr Hutchison’s mistaken belief that Inc was the proper claimant but also his understanding that the funding arrangements were simpler than they in fact where. The claimant’s claim was not one in respect of the simple funding arrangements that Mr Hutchison contemplated. If the Sedley LJ test is to be applied at all the hypothetical Particulars of Claim to which it should be applied are those that would have been served had the action proceeded to the stage of serving Particulars of Claim but with Inc taking the place of BV. On that basis the hypothetical and actual particulars would have been identical save for the difference in name.

In my judgment, the Court is entitled, and bound, to examine the nature of the original claim having regard to (a) the claim form; (b) the circumstances and context in which the claim was originally put forward; and (c) “the evidence as to the nature and the circumstances of the mistake which it is said was made in respect of the original claim”. The latter evidence will help to explain, as it is incumbent on the would-be amender to do, what the original claim was, in order that the Court may discover whether it is still dealing with the claim made in the original action. If the effect of that analysis shows a substantial difference between the original claim and the one put forward in the APOC (or the POC), then the substitution of BV for Inc is not simply a change of the name of the claimant under “the claim made in the original action”.

The original claim rested on the factual basis that DPIL was not a borrower and that the deposit was obtained by Inc – either because Inc borrowed the money, or more likely because it guaranteed, directly or indirectly, a loan made to some entity, not being DPIL.

The claim as now sought to be presented is that at the time of the alleged forfeiture of the deposit DPIL was a borrower of money from HSBC-ND, which was guaranteed by HSBC-M, which was guaranteed by Sirius, which was guaranteed by BV. The Sirius guarantee was first reduced and then returned. BV gave a lien on cash deposits, first in the sum of $6.25 million and then in the sum of $12.5 million. But the first lien was never enforced and the second was returned. The security provided for the deposit was then a standby credit procured by ABB Zurich. But, by reason of the internal arrangements of the group, BV, who had passed its responsibilities to PII in 1999, took them back again from January 2007. That seems to me to be too substantial a change either to pass Sedley, LJ’s test, or to mean that all that is happening is that the original claim is being put forward under a new name.

In the light of these conclusions it is not necessary to consider the question of discretion. Were it necessary to do so I would not have exercised my discretion in the claimants’ favour for the reason set out in paragraphs 125-7 below.

The brokers in their skeleton argument indicated that they did not oppose the substitution of BV for Inc on the usual terms as to costs. Mr Foss’ witness statement of 12^th December 2006 indicated that they consented to Inc being corrected to BV, subject to an appropriate order as to costs. Correspondence in 2006 had indicated that JLT would be prepared to consent to the substitution of BV on receipt of confirmation that the inclusion of Inc was by mistake, which was provided in Mr Hutchison’s statement.

However, when it came to oral submission, Mr John Lockey, QC, on behalf of the brokers indicated that they were not sure whether they could continue not opposing the substitution of BV given that, so it appeared, Inc had ceased to exist. At any rate that ought not to be done without the proved consent of ABB Inc.

I do not regard these concerns as well founded. As to the former, the plaintiffs in “The Sardinia Sulcis” had ceased to exist when the proceedings were commenced. That was no bar to the amendment; and I see no reason why the position should be any different in relation to a substitution.

As to the latter it seems to me that ABB Inc, who are Mr Hutchison’s employers, assent to, and seek, the amendments sought. If necessary it could be made a term of permission that their assent be formally recorded.

In view, however, of the conclusion that I have reached in respect of (a) BV’s claim against the insurers, namely that it is unsustainable, not because BV was never an Assured, but because the claimants so conducted themselves that BV would have no claim, even if the placement defences were bad; and (b) the non-applicability of Rule 19.5 (3), I do not propose to allow the amendment. As to (b) it seems to me that the claim sought to be made by BV against the brokers is not the same as the claim in the original action, since, for the reasons set out in paragraph 102, the basis of BV’s claim against insurers differs from Inc’s original claim and BV’s claim against JLT differs from its original claim correspondingly. The latter claim was founded on the basis of the Equity Ventures entity suffering a loss when the deposit was forfeit, by being called on to honour its guarantee or indemnity (or to pay back its loan). The presently contemplated BV claim is a new claim and section 35 (3) precludes the allowance of a new claim in the action.

The claimants seek to add DPIL upon the basis that it, at any rate, has suffered a loss, since it has borrowed money from the Bank which has been used to honour the drafts, the value of which has not been returned to it. Although the money went from it when the drafts were encashed, DPIL can be said to have lost the deposit (subject to recoveries) if and when the deposit was forfeited. They originally sought to add PII upon the footing that the arrangements made in 1999 meant that any loss suffered by BV or any other ABB entity would ultimately be borne by PII, the Equity Ventures entity responsible for the Korba Project, “per Equity Ventures’ internal policy” (Hutchison, paragraph 10.h), with “any losses not yet recorded for the Korba security Deposit passed “down the line” and noted in PII’s financial statements” (Hutchison para 19.b.). They contend that, since the action is brought to recover all of the loss sustained by reason of the non-return of ABB’s share of the Korba security deposit, it is realistic to analyse the current claim as including a loss sustained by DPIL or PII, if it should turn out that it is one or other or both of those entities which have suffered all or some of the loss claimed in the action.

The defendants take, in relation to each application, both a specific and a general point. The specific point in relation to DPIL is that it is not an Assured. It is not named in the Appendix to the policies and does not fall into the category of:“subsidiaries or associated companies (referred to as “contracting companies”) in which the above parent companies (referred to as “holding” or “regional” companies), directly or indirectly, have more than 50% of the voting rights or over which they exert decisive influence”. Further JLT was never instructed to act on behalf of DPIL and was not acting on its behalf when it placed cover. At the lowest, say the insurers, JLT did not understand themselves to be acting on DPIL’s behalf and did not present the Korba risk to the underwriters on that basis.

The specific point in relation to PII is that PII has never paid any money under a guarantee or indemnity and no longer has any fiscal responsibility for the Korba project.

The insurers’ general point is that the case is not one where “the claim cannot properly be carried on by the original party unless the new party is added or substituted as claimant”. The new claimants are, in truth, seeking to put forward new claims.

In Merrett v Babb [2001] QB 1174 the claimant and her mother jointly applied to the building society for a mortgage. The society instructed a firm of valuers to value the property. The defendant was a salaried employee of the firm (in fact a sole principal with a firm name). The building society supplied a copy of the report to the claimant and her mother omitting all reference to the defendant and the firm. The claimant and her mother exchanged contracts without obtaining a further report. The claimant successfully sued the defendant for negligence and was awarded the full amount of the diminution in the value of the property. On the appeal, which was (by a majority) dismissed, the Court of Appeal permitted the mother to be joined, notwithstanding the expiry of the limitation period.

The argument on behalf of the appellant was that “since the cause of action is vested personally both in the claimant and her mother, the claimant can recover only for herself, and not for her mother also”. In essence the contention was that the claim was an overstated personal claim by the daughter for her half share. In response the claimant said that the claim against the defendant was a joint claim; that it was necessary for her mother to be added if it was to succeed; and that the Court of Appeal should allow that to be done under section 35 and CPR 19.5.

May LJ held that the defendant owed mother and daughter jointly a duty of care; that the expression “cannot properly be carried on” in rule 19 (3) (b) should be taken as meaning the same as “cannot be maintained” in section 35 (6) (b); and that the claim was a joint claim which could not properly be maintained or carried on unless the mother was a party. Accordingly she was a necessary party, the court had power to join her, and should do so. Wilson J agreed with May LJ. He took the view that the realistic analysis of the original action was that it included a claim for the loss sustained by the mother and that such part of it could not be maintained without her joinder as claimant. Aldous, L.J. dissented. He held that the causes of action of the daughter and the mother accrued when the contract to purchase was signed; but that the addition of the mother was not necessary for the determination of the daughter’s claim because both mother and daughter could have issued separate proceedings each of which would have been properly constituted without the addition of the other.

The question therefore, is whether the claim made by Inc or BV (depending on which of them is relevant for this purpose) cannot legally be maintained without the addition of DPIL or PII. The purpose of section 35 is to address the situation in which, the limitation period having expired, a claimant’s claim will fail because he has not joined a party without whose joinder his claim is unmaintainable. Examples of such situations are set out in the judgment of Brooke, LJ in Martin v Kaisary and the Royal Free Hospital Trust [2005] EWCA Civ 594. The section does not enable a claimant whose claim is worth £ x, but who has claimed £ 2x, to join another claimant who has another similar claim of his own, based on substantially the same facts, which is also worth £ x, in order that between them they may claim £ 2x. Nor is there any power under section 35 (6) to add a claimant or claimants because they, and not the original claimants, may have suffered the loss claimed. If that were so the FCO’s appeal in Weston v Gribben would have been dismissed. If there is no such power under section 35 (6), CPR 19.5 (3) (b) cannot be interpreted in some wider fashion so as to create one. The rule cannot have an ambit greater than the statutory framework from which it is derived. Nor is there any presumption in favour of a liberal construction of a provision which removes a limitation defence: Martin v Kaisary, paragraph 28.

Inc has no claim, whoever is joined. Accordingly, if BV is not substituted for Inc, as will be the consequence of my conclusion in paragraphs 103 and 108 above, there is, in my judgment, no jurisdiction to add DPIL or PII. They do not need to be added in order for Inc’s claim to be maintained, because Inc cannot maintain a claim even if they are.

But, even if BV is substituted for Inc, the addition of DPIL or PII is not necessary in order for BV to maintain its claims. BV’s claims against the defendants are based on the fact that it is an Assured and was the indemnifier of Sirius and that the ultimate responsibility for the project now rests with it. BV does not need to join either DPIL or PII in order to be able to maintain those claims. The joinder of either or both of them will not remove an impediment, which would otherwise bar the maintenance of BV’s claim.

If DPIL has any claim against the insurers, it is a claim separate from that of BV on the basis that it is covered by the insurance and has suffered a loss for which it is entitled to be indemnified because it paid the deposit, is liable under the loan, and has not got the deposit back. That is a different loss from that suffered by the parent company or BV.

If DPIL has any claim against the brokers, it is a claim separate from that of BV on the basis that but for the brokers’ breach of duty, it would have been covered under the insurance, in which case it would have recovered in the manner in which it claims to be able to recover from the insurers. Any duty of care owed to it, in contract or in tort, would be a separate duty to that owed to BV, and would rest on a different factual basis.

Similarly, if PII has a claim against the insurers, it is a claim separate from that of BV, upon the basis that, as a result of the ABB Group’s internal arrangements PII ended up, at some stage, as the company responsible for the Korba Project. If PII has any claim against the brokers, it is a claim separate from that of BV. Any duty of care would be separate from that owed to BV and would arise on a different factual basis.

It may be that the effect of the arrangements made in June 1999 was that PII became the assignee in equity of any claim that BV had, although no such contention has been pleaded. If so, BV could not maintain the claim without joining PII: Three Rivers District Council v Bank of England: [1996] Q.B. 292,313. But, if so, the arrangements in 2007 have, by the same token, reassigned the claim back to BV. PII is not now, if it ever was, a necessary party to BV’s claim. The basis of requiring the joinder of the equitable assignee is so that the person beneficially entitled may be bound (and entitled) by the result. The Court will not pronounce upon the claim without hearing from him. But where the assignee has re-assigned his claim to the original assignor there is no need for the former assignee to be joined.

In short I do not regard myself as having any jurisdiction to add DPIL or PII after the limitation period in respect of them has expired.

In those circumstances it is not strictly necessary to address the question of how I should exercise any jurisdiction. If I am wrong on that and I do have such jurisdiction, I decline to exercise my discretion in the claimants’ favour for the reasons set out in the following paragraphs.

The effect of joinder will be to deprive the defendants of a limitation defence. In Martin v Kaisary the Court of Appeal made clear that that potential for injustice must be borne in mind in exercising any discretion to allow addition.

I recognise that in Morgan Est the Court of Appeal allowed an amendment on the footing that there was no prejudice to the defendant and that being deprived of an unmeritorious defence arising solely from a blunder by the other side did not count as prejudice. I do not, however, accept that a Limitation Act defence is always, or even usually, to be regarded as one of which the defendants can be deprived without being relevantly prejudiced. The removal of such a defence (with, in the present case, the consequent need to investigate events that took place over 10 years ago) is, itself a form of prejudice. In Morgan Est the Court held that the case for substitution fell within both the Sardinia Sulcis test and Rule 19. 5. 3 (b). The claim had been made about a year before the expiry of the limitation period and the only amendment required was the substitution of A and the addition of C as original assignor and ultimate assignee. In the present case the claim against the brokers was issued very late in the day (just within 6 years of the cancel and rewrite endorsement) and the claim against the insurers was issued in October 2005 when the claim arose at the very latest in early 2001. Further the addition of DPIL and PII requires a significant reformulation of the claim.

The claimants are entirely the authors of their own misfortune. I recognise that that may be the case in most cases where an application such as this is made. That said, it is relevant to examine quite how the claimants, who are part of a very substantial organisation, lacking neither financial nor legal resources, find themselves in their current predicament. It is apparent that the Equity Ventures division had a series of companies at its disposition which it sought to use, as it wished, as the repository (sometimes temporary) of the economic benefit of different projects, without any precise regard to the legal route by which that result might be achieved. These proceedings were issued on the basis of scant and erroneous information, so far as the question of the proper claimant (and the true nature of the claim) was concerned, and without any sufficient research into the basis upon which Inc was put forward as an appropriate claimant or consideration of the underlying documentation. None of the relevant documents (with the exception of the notification of March 31^st 2002) were asked for or provided, although they were available to be found. The proceedings were started at or beyond the last moment, although a claim had been put forward since 2002 and solicitors had been involved since September of that year. Those considerations seem to me to weigh significantly in the balance when determining whether to deprive the defendants in this case of a limitation defence. Further such explanation as there is for the failure to join DPIL is unsatisfactory (see paragraphs 136-7 below).

PII would not appear to have any realistic prospect of success in relation to its claims against the insurers or the brokers. DPIL does not appear to have any realistic prospect of success against the insurers, nor, on the present state of the pleadings, against the brokers.

DPIL is not an Assured, and, on that account any claim by them against the insurers must fail. The plain meaning of the definition in the policies is that the Assureds are the first claimant and its subsidiary and/or associate companies as set out in Appendix 1 (“as per appendix 1”). DPIL is not named in the Appendix, nor does it come within the generic description of “ all subsidiaries or associated companies (referred to as “contracting companies”) in which the above parent companies … directly or indirectly, have more than 50% of the voting rights or over which they exert decisive influence”. DPIL was legally owned by Daewoo with at best a 50% beneficial interest in BV. There is no averment that DPIL is a company in which any relevant ABB group company had more than 50% of the voting rights or over which any such company exercised a decisive influence. Endorsement No 5, which refers to DPIL, did not purport to make DPIL an Assured; nor did Endorsement No 6, which does not mention DPIL. Neither of those Endorsements needed to do so. The scheme of the policy contemplates that the Bond may be given by someone who is not an Assured, and (see section 5.4) by order of a joint venture company of the group, at any rate subject to the Leading Underwriters’ approval. BV, which undoubtedly was an Assured, would probably have been covered (subject to the placement defences) if it had been called on under its guarantee in respect of Sirius’ indemnity of HSBC-M (Footnote: ¹⁰).

As to DPIL’s claim against the brokers, neither the original nor the amended Particulars of Claim alleges that JLT, which took its instructions from ABB Sweden, was ever asked to make DPIL an assured under the policies, and there is positive evidence that it was not: Foss, 1^st witness statement paragraph 3.7; 2^nd witness statement, paragraph 9. Nor is there evidence that DPIL authorised JLT to make it an Assured or render it liable for the premium.

However, in paragraph 9 of his witness statement Mr McPhun states that it was always ABB’s understanding that the security deposit was “covered in respect of the parties involved in providing the deposit – which would mean that DPIL was insured under the policy”. On the assumption that “the parties involved” means all those involved the conclusion would follow from the premise (at any rate if “involved” is broadly construed). Another possibility is that the entity intended to be insured was the entity which would be responsible, either by way of guarantee or counterindemnity, for the loan – a position which would be broadly consistent with (a) the structure of the insurance; (b) the diagram in the fax of 13^th August 1998; and (c) the fax from Mr Osterman of ABB Sweden of 17^th August, all of which indicated that BV provided (ultimately) the security for the bank that issued the demand draft. There would be ample reason for Endorsement No 5 being drawn up so as to acknowledge that the draft opened by DPIL was eligible for cover, particularly in the light of section 5.4.

At paragraph 10 of his statement Mr McPhun asserts that, if the deposit could not, in fact, be insured, because DPIL was only owned 50% by ABB, JLT should have realised that point at the time and any failure to do so was negligent. But it was not the deposit that was to be insured; it was some entity or entities that were to be insured in respect of their loss from the forfeiture of the deposit. There would seem no reason why that entity had to be DPIL. On the structure set out in the diagram, and consistently with the structure of the project it could be the ABB EVE at one end of the chain. Neither the 13^th nor the 17^th August fax indicated that DPIL was intended to be the Assured.

Finally in paragraph 25 of his statement Mr McPhun claims that “it was agreed by the insurers that the Korba deposit… would be included for cover (and DPIL with it) even though DPIL was a 50/50 joint venture with Daewoo”.

The transition in these three paragraphs from ABB’s understanding to JLT’s alleged failure of perception to express agreement, parenthetically embracing DPIL, seems to me to cast considerable doubt on whether JLT was ever expressly instructed to add DPIL; if not, what exactly its alleged instructions are said to have been, and whether they impliedly extended to requiring JLT to cover DPIL (or entities of a description which DPIL satisfies). In addition the question arises as to the person who gave such instructions. Paragraph 62 of the APOC avers that JLT were retained by the ABB Group. But DPIL was not an ABB Group company (as Mr McPhun accepts in paragraph 15 of his statement) and it is not alleged that DPIL authorised ABB Sweden to procure cover for it.

Even if otherwise minded to do so, I would not, therefore, have been prepared to allow the addition of DPIL in Folio 862; and would have reserved for further consideration any amendment in Folio 279 to add DPIL pending (i) a proper pleading, supported by a statement of truth, dealing with the matters set out in paragraph 25 of Mr McPhun’s statement, and, in particular, the instructions given (by whom, to whom, and in what terms), and (ii) any further submissions made in consequence.

Inc’s letter of 31^st March 2002 made no suggestion that DPIL might have a claim on the policies. Instead it said that “cover was obtained by ABB/AEV”. Nor did Crawford’s report of 3^rd January 2002. It is clear that from 2002 onwards ABB and Taylor Wessing were aware that DPIL had provided the deposit. This appears from Crawford’s report and the letter of 31^st March 2002. Mr Hutchison’s witness statement indicates that he was not aware, when the claim form was issued, that DPIL had been a party to the loan agreement with HSBC-ND. Mr McPhun of Taylor Wessing states that, on the basis of Mr Hutchison’s instructions, he mistakenly understood that the financing of the deposit was entirely within the Equity Ventures division of ABB. I assume that that means that he thought that the monies used to make the deposit had been borrowed by, or on the faith of a guarantee from, some Equity Ventures company. Even so, DPIL would have suffered, (at least arguably) a loss of the deposit which it had provided and which had not been returned.

It is not immediately easy to understand how Mr Hutchison could have been unaware that DPIL had borrowed the monies for the deposit given that Crawford’s report of 3^rd January 2002 stated (on page 5) that DPIL had in September 1999 asked for the return of their deposit “which was costing then some INR 400,000 per day in interest to the lending bank”. If the reason for his ignorance is that he never saw that report that is another example of the remarkable absence of inquiry or proper consideration shown in the presentation of the claim.

As to PII, it appears that in June 1999 arrangements were made which would, as a matter of internal policy, have had the effect that PII would ultimately bear any loss on the project. For a time PII provided DPIL with the money to pay the interest on the HSBC loan. But Mr Hutchison’s statement of 24^th March 2007 reveals that as from January 1^st 2007 PII no longer has any financial responsibility for the project, which now rests with BV, and that, to the extent that financial responsibility for the Korba project and its losses and the beneficial ownership of ABB’s shares in DPIL had previously been transferred from BV to PII, the transfer has now been reversed. So the basis upon which PII was put forward as having a claim against either the insurers or the brokers has been removed. In those circumstances, and in any event, PII does not appear to have suffered or be likely to suffer any loss recoverable under the policies. The payment of interest under the bank loan does not qualify as such.

PII’s involvement in the financing of the deposit did not begin until June 1999. Endorsement No 6 was placed in October 1988 and the cancel and rewrite exercise occurred in April 1999. In the circumstances it is impossible to hold that between October 1988 and April 1999 the brokers owed any duty to see that PII was insured against any loss that it might suffer if, two months after the rewrite exercise, the Equity/Energy Ventures division decided, as a matter of internal policy, to treat the project as the responsibility of PII (Footnote: ¹¹). No allegation is made that ABB Sweden asked JLT to ensure that PII was insured in relation to the Korba project, or that JLT was advised of PII’s interest or potential interest in the Korba project, or that ABB Sweden had any authority from PII to procure insurance on its behalf. In any event because PII is a wholly owned subsidiary of BV, it is, in fact within the generic description in Appendix 1, at any rate if it existed when the 1999 policy was written (Footnote: ¹²). If it did not, no duty can have been owed to it when the 1998 and 1999 policies were broked.

The defendants object to the amendments in paragraph 52 and 52A on the grounds that the effect of allowing them is to introduce a new claim, and that, because the amendment will relate back, it will defeat a potential time bar defence. The claimants contend that the amendments do not introduce a new claim but are a refinement of a claim already pleaded, namely an implied declaration of forfeiture. Alternatively, any new claim arises out of the same facts as are already pleaded.

In my judgment the amendments do amount to the assertion of a new claim A claim based on a forfeiture in April 2000 or within a reasonable time after 14^th August 2000 differs from a claim based on a forfeiture in 1999 or 1998 or 2001 or 2003 (the original pleading). But they arise out of the same facts as are already pleaded – the letters of 8^th April and 14^th August 2000.

Accordingly I propose to allow these amendments.

I will hear Counsel as to what case management directions are appropriate in the light of this judgment.