AXA SA v Genworth Financial International Holdings, Inc. & Ors

By a share purchase agreement dated 17 September 2015 (‘the SPA’), the claimant (‘AXA’) acquired a number of Companies (as defined in the SPA) from the first defendant. The first defendant’s payment obligations under the SPA were guaranteed by the second defendant. I shall refer to the defendants together as ‘Genworth’. There will be no need to differentiate between them in this judgment.

The acquisition of the Companies made AXA the ultimate parent of inter alia Financial Insurance Co Ltd (‘FICL’) and Financial Assurance Co Ltd (‘FACL’). Between 1988 and 2011, FICL and FACL underwrote payment protection insurance (‘PPI’) marketed and sold by companies now in the Santander Banking Group, Santander Cards UK Ltd and Santander Insurance Services UK Ltd. I shall refer to them together as ‘Santander’ as, again, there will be no need to differentiate between them for present purposes.

By these proceedings, AXA pursues Genworth for 90% of Relevant Distributor Mis-selling Losses, as defined in the SPA, pursuant to clause 10.8(a) thereof. Those Losses are defined by the SPA to include “any PPI Mis-selling Losses which arise out of or directly relate to PPI Selling Activity undertaken by [Santander] or its agents or its appointed representatives (as the case may be) prior to 1 January 2005”. In turn, PPI Mis-selling Losses are defined to include “all damages, losses, liabilities, penalties, fines, costs, interest and expenses, including for the avoidance of doubt costs and liabilities relating to FOS fees, claim administration, complaints handling, customer notifications and redress amounts” incurred by FICL/FACL in respect of PPI consumer complaints, and PPI Selling Activity is defined to include “any activity undertaken by [Santander] or their agents or appointed representatives (as the case may be) in relation to the sales, marketing or administration of PPI products underwritten by [FICL/FACL]”.

By a Part 20 Claim, Genworth sue all of AXA, FICL/FACL and Santander for declaratory relief. By Application Notices in the Part 20 Claim, all of the Part 20 defendants seek to have the Part 20 Claim struck out under CPR 3.4(2)(a)/(b) or dismissed by way of summary judgment under CPR 24.2, alternatively stayed pursuant to the court’s inherent jurisdiction.

Separate Application Notices were issued respectively by AXA, FICL/FACL and Santander, each of whom have separate solicitors of record in the Part 20 Claim. However, AXA and FICL/FACL made entirely common cause in their applications, and in particular AXA supported the striking out, dismissal or staying of the Part 20 Claim against FICL/FACL even if different considerations applied to it as claimant in the proceedings such that some or all of the Part 20 Claim against it might proceed. As a result, there have been three sets of representation before me, Mr Green QC leading a team for AXA and FICL/FACL, Mr Zellick QC leading a team for Santander, and Mr Nash QC leading a team for Genworth. I am very grateful to all of them for the efficiency and clarity of their arguments. As part of that, Mr Green QC took the lead in presenting the argument in support of the applications, allowing Mr Zellick QC in the main to adopt his arguments and focus on submissions of specific interest to Santander.

By its Claim Form and paragraphs 1 to 16 of its Particulars of Claim, AXA sets out the basis upon which, as it says, Genworth were liable under clause 10.8(a) of the SPA to pay c.£28.5m, demanded before proceedings were commenced in December 2017.

Paragraph 17 of the Particulars of Claim then asserts that FICL and FACL were incurring Relevant Distributor Mis-selling Losses on an ongoing basis, and would continue to do so, and states that further sums would therefore be demanded in due course under clause 10.8. It indicated that AXA would seek to amend the Particulars of Claim if such further demands were not met with payment by Genworth. No such amendment has yet been made, or provided by AXA in draft, although it was common ground on the evidence before me that a further £173.6m or so has been demanded pursuant to clause 10.8 and not paid since the date of the Particulars of Claim and that yet further, very substantial, demands are likely to be made as PPI customer complaints continue to flood in.

Finally, paragraph 18 of the Particulars of Claim threatens but does not make a possible claim, against the second defendant only, in respect of loss and damage it is suggested AXA may suffer as a result of non-payment by the first defendant under clause 10.8. I was told by Mr Green QC that this may well become an actual claim in the anticipated Amended Particulars of Claim and on that basis I do not pursue now the possibility of striking out paragraph 18 as a non-claim.

By their Defence and Counterclaim, Genworth admit the provisions of the SPA pursuant to which AXA claims, and the original demand for c.£28.5m thereunder, but require AXA to prove whether that sum, or any sum, fell due for payment as demanded. A disguised positive defence is also raised, by paragraph 9(c) of the Defence which purportedly puts AXA to proof of whether in respect of each cost, payment or loss within the total sum claimed, AXA and/or FICL/FACL “has asserted all defences reasonably available to them so as to establish the necessary causative link between PPI Misselling Activity and the liability of AXA and/or [FICL/FACL] for the purposes of the indemnity” (the ‘indemnity’ being Genworth’s label, contentious between the parties, for their payment obligations).

The Defence and Counterclaim continues thus:

At paragraph 10, paragraph 17 of the Particulars of Claim is ‘noted’. Paragraph 10 then makes reference to aspects of the Part 20 Claim and states that Genworth seek thereby “the determination of all questions of liability arising in respect of the Relevant Distributor Misselling Losses and the PPI Misselling Losses as between AXA and FICL and FACL, [Genworth] and [Santander]”. None of that has any place in the Defence. It neither purports to nor does disclose any basis for defending AXA’s claims. The sentences in question should be struck out.

At paragraph 11, Genworth make further reference to the Part 20 Claim. A suggestion by Santander in correspondence, that it would not have responsibility to FICL/FACL in respect of PPI consumer complaints where the PPI products contained ‘fundamental flaws’, is mentioned. That suggestion is denied by Genworth who then plead that if, contrary to that denial, there is some such limit upon Santander’s responsibility, associated losses do not fall within clause 10.8 of the SPA. In my judgment, that likewise has no place in the Defence and does not disclose any basis for defending any of AXA’s claims. Paragraph 11 of the Defence should also be struck out.

At paragraph 14, Genworth refer to a Complaints Handling Agreement and Standstill Agreement concluded between FICL/FACL and Santander. (Strictly, the pleaded reference is contingent, Genworth not having known when the Defence and Counterclaim was settled whether those Agreements had been concluded. Nothing turns on that, however, as it is now clear and common ground that they had been.) Genworth then plead that concluding those Agreements prejudices the future pursuit by Genworth (by way of subrogation or otherwise) of claims against Santander in respect of losses for which AXA makes claim under clause 10.8. That premise, if established, is said to give rise to a partial defence or a claim by Genworth for breach of paragraph 7.2 of Schedule 5 to the SPA (a provision concerning the conduct by AXA or FICL/FACL of Third Party Claims, as defined by the SPA).

At paragraph 15, Genworth assert in hypothetical terms a suggested defence or claim under paragraph 7.2 of Schedule 5 to the SPA, “if and in so far as AXA and/or FICL and/or FACL has settled any claims made against them including, for the avoidance of doubt, claims for compensation made by purchasers of PPI”, on the basis that any such settlement will have been made without the prior written consent of Genworth.

The lines of defence or cross-claim suggested by paragraphs 14 and 15 are developed further in the Counterclaim.

In its Reply and Defence to Counterclaim:

As regards paragraph 9(c) of the Defence, AXA denies any burden of proving the assertion of all defences reasonably available to PPI complaints.

As regards paragraph 14 of the Defence, AXA asserts that Genworth could only acquire any rights to pursue claims against Santander by way of subrogation upon and to the extent of making payment under clause 10.8. Genworth join issue as to that in their Reply to Defence to Counterclaim, but Mr Nash QC conceded the point for the argument before me. Returning to AXA’s pleading, it disputes in any event that clause 10.8 gives rise to rights of subrogation exercisable on payment. It also pleads a detailed case disputing the suggestion that the conclusion of the Complaints Handling Agreement or Standstill Agreement gives Genworth any defence or Schedule 5 claim.

As regards paragraph 15 of the Defence, AXA asserts (at all events by reference to the initial amount claimed) that the premise of paragraph 15 does not arise. However, it also pleads a detailed case disputing the substance of Genworth’s defence or cross-claim logic under paragraph 15. One significant aspect of that will be the question whether underlying PPI purchaser complaints are Third Party Claims under Schedule 5 at all.

It was plain from the argument on the present applications that AXA regards the entirety of Genworth’s Defence, and especially the three lines of defence I have highlighted, with some scepticism. But I was not asked to assess on the merits any of the defences asserted.

That means in particular that, as things stand, AXA’s claims give rise, as between AXA and Genworth, to an issue whether clause 10.8 gives rise to rights of subrogation (that would be exercised upon payment thereunder) and possibly to at least some issues as to Santander’s liability to FICL/FACL in respect of individual losses in relation to which AXA claims under clause 10.8. The latter may possibly arise because even if clause 10.8 does give rise to rights of subrogation, whether and if so to what extent or with what consequence any such rights have been prejudiced by the Complaints Handling Agreement or Standstill Agreement may depend on an assessment of Santander’s prospective liabilities with or without those Agreements.

The nature and extent of the Part 20 Claim is for the time being defined by Genworth’s draft Amended Part 20 Particulars of Claim. Part 20 Defences have not been served pending the present applications. The Part 20 defendants do not oppose Genworth’s proposed amendments if with the benefit thereof the Part 20 Claim would be fit to withstand the attack presently made upon it. The argument therefore proceeded by reference to the draft Amended Part 20 Particulars of Claim.

Although not numbered in this way by Genworth, their Part 20 Claim seeks five declarations, together with unspecified “Further or other relief”:

a declaration that as between Santander, FICL and FACL, Santander is liable for PPI Mis-selling Losses for mis-selling whether before or after 14 January 2005 (i.e. each and every such Loss, even though in that regard AXA’s claim relates only to pre-1 January 2005 mis-selling);

a declaration that neither FICL nor FACL is liable to Santander as asserted by Santander in correspondence in July 2017;

a declaration that Genworth are not liable to AXA for breach of warranty under the SPA;

a declaration that if Genworth make any payment pursuant to clause 10.8 of the SPA, Genworth will be subrogated to FICL’s and/or FACL’s rights under an Agency Agreement of 1 December 2000 that governed or may have governed Santander’s marketing and selling of FICL and FACL PPI policies;

a declaration that if Genworth make any payment pursuant to clause 10.8 of the SPA, Genworth will be entitled to an indemnity, or damages amounting to an indemnity, from Santander in respect of all such payments.

As to the third of those, I have no doubt that the claim for negative declaratory relief to the effect that Genworth are not liable to AXA for breach of warranty under the SPA has no proper place in the Part 20 Claim. Any such claim concerns, and concerns only, AXA and Genworth as the parties to the SPA. Further, that claim is in my judgment hypothetical and premature in circumstances where no claim for breach of warranty has yet been made against Genworth and it is far from clear whether any such claim will be made. If and to the extent that any such claim is to be made in these proceedings, plainly that will be by amendment to AXA’s claim, to which Genworth can then respond. If and to the extent that any such claim is available to be made in these proceedings, but is not made by AXA, no doubt further considerations might arise if AXA were later to issue a further claim.

Even if I am wrong in those further views, and there is some proper room for a cross-claim now by Genworth against AXA for negative declaratory relief as to liability under the SPA warranties, it should be brought as such, i.e. as a cross-claim, against AXA only, by amendment to the Defence and Counterclaim.

As to the fourth of the declarations sought, I have already observed that whether clause 10.8 gives rise to subrogation rights is in issue between AXA and Genworth in the main claim. Whether it will ultimately fall for determination in that claim may be another matter, depending on what case management decisions or applications are made in due course. For present purposes, however, what matters is that to my mind Genworth may have (and for that matter AXA likewise may have) a legitimate interest in ensuring that if that issue is determined in the main claim, FICL and FACL at least are bound by the result. In that regard, it will be appreciated that the position in this case is somewhat unusual, AXA being the sole claimant for what Genworth as defendants characterise as an indemnity, but the rights of subrogation asserted being rights, upon payment of AXA’s claim, to step into the shoes of FICL and FACL rather than AXA.

Instinctively, I should have been minded to stop there but for Mr Zellick QC candidly making clear during argument that Santander might in the future seek to defend claims brought in the name of FICL or FACL, if and to the extent brought for the benefit of Genworth, on the basis that Genworth had no rights of subrogation. Given that indication, I have some sympathy with Mr Nash QC’s riposte that if FICL and FACL are properly to remain privy to these proceedings for the purpose of being bound by the result on this question, then so also Santander.

All that said, as to the issue over rights of subrogation, it is also clear to me that the claim for declaratory relief in relation to that issue in the Part 20 Claim is in truth being used at present as a springboard to justify the far more wide-ranging relief sought concerning Santander’s possible liabilities to FICL and FACL, and the consequent much greater involvement of FICL, FACL and Santander in these proceedings sought to be forced upon them by the Part 20 Claim. Were Genworth’s legitimate interest in involving FICL, FACL and Santander in the proceedings limited to ensuring they would be bound by any determination of whether clause 10.8 gives rise to rights of subrogation, far and away the preferable procedural form for involving them would be to join them, expressly for that limited purpose, as additional defendants to Genworth’s Counterclaim.

If the wider aspects of the Part 20 Claim are to be allowed to be pursued, it is likely that I would pass over that procedural preference. If, however, those wider aspects are apt to be struck out or summarily dismissed, they being very much the heart of the Part 20 Claim and its raison d’etre, I would then agree with Mr Green QC’s submission that the Part 20 Claim, as brought, is an abuse of process and should be dismissed, leaving Genworth (if so advised) to seek permission to amend their Counterclaim as regards binding FICL/FACL and/or Santander to the outcome on the subrogation issue.

The wider aspects, then, of the Part 20 Claim, the claims for the first, second and fifth declarations as I have numbered them, are attacked as an abuse, or as claims for declarations there is no real prospect the court would ever grant to Genworth, primarily on the basis that Genworth seeks thereby officiously to intermeddle in the legal relationship between FICL/FACL and Santander. In the alternative, it is said it is clear now that the degree of any overlap between the main claim and the Part 20 Claim is so limited, and that what would be involved in trying the Part 20 Claim is so much more extensive than what will be required to try the main claim, that as a matter of case management the court can and should stay the Part 20 Claim so that it will follow (if pursued) the final resolution of the main claim.

I have some real sympathy, provisionally, with that alternative submission, if it were to arise. However, in that case, i.e. were I rejecting the primary basis of these applications, ex hypothesi I would be deciding that Genworth had a legitimate interest in pursuing as against AXA, FICL/FACL and Santander the wider declaratory relief sought by the Part 20 Claim, as a response to AXA’s claim. In those circumstances, and whilst anticipating provisionally that there might be much to be said for trying the main claim separately first, in my view it would be premature to take any final case management decision about that at this stage, with AXA’s claim set for what may be a substantial round of amendments and the Part 20 Claim not yet pleaded out at all.

In relation to the possible pleading out of the Part 20 Claim, the draft Amended Part 20 Particulars of Claim are squarely attacked as failing to disclose any reasonable grounds for the wider declaratory relief sought and as embarrassing to plead to. Mr Nash QC for Genworth acknowledged that Genworth could not, if required, do any better than that current pleading. On that basis, if indeed that pleading is apt to be struck out, there will be no further pleading out of the Part 20 Claim. But if I reach that position, in truth that will be because the inadequacy of the current pleading is a by-product of an illegitimacy to Genworth’s desire to embroil FICL/FACL and Santander in these proceedings in the manner that results from the Part 20 Claim.

Thus, the attack on the draft Amended Part 20 Particulars of Claim, if well-founded, is an attack on a symptom rather than on the underlying alleged flaw in the Part 20 Claim. A brief description of how that pleading seeks to set up the wider declaratory relief claims is nonetheless useful to introduce the primary argument in support of the present applications that the Part 20 Claim is indeed flawed, and fatally so.

The pleading briefly recites the general background of the parties (FICL/FACL and Santander), the Agency Agreement and Santander’s obligations owed to FICL/FACL (as Genworth would have them). It then pleads, again very briefly, some of the regulatory background and the fact that until about August 2017 Santander in fact took responsibility for, and made any payments or reimbursed FICL/FACL in respect of, complaints relating to the mis-selling of FICL/FACL PPI policies. The pleading next pleads the fact that by correspondence in July 2017 (as I mentioned above) Santander made a number of assertions about the extent of its legal liability in respect of such complaints.

The substance, then, of Genworth’s asserted claim for the first, second and fifth declarations (as I have numbered them) is (a) a blanket denial by Genworth of the correctness of Santander’s July 2017 assertions (said, bizarrely since Genworth is the Part 20 claimant, to be without prejudice to the burden of proof) and (b) an open letter from the Financial Services Authority to various industry bodies in August 2010 setting out a list of what the FSA had found to be common point of sale deficiencies in PPI sales giving rise to mis-selling complaints, leading to an allegation that since Santander, not FICL/FACL themselves, marketed and sold FICL/FACL PPI policies, Santander must be liable to FICL/FACL for all mis-selling complaints in relation to FICL/FACL PPI policies.

In my judgment, accepting the submissions of the Part 20 defendants but putting them in my own, perhaps old-fashioned, language, that pleading is either demurrable or embarrassing. The asserted conclusion that Santander is necessarily always liable as between itself and FICL/FACL does not arguably follow from the premises pleaded. If, however, perhaps generously to Genworth so as to avoid demurrability, the pleading is read not as an attempt to establish some absolute proposition, applicable whatever the facts, but as an assertion that, individual PPI complaint by individual PPI complaint, Santander is in fact so liable, then it is so utterly devoid of particulars as to be impossible to respond to.

That comes about because, to quote Mr Nash QC’s skeleton argument: “Given Genworth’s position as a Part 20 Claimant who is not a direct party to the dispute between FICL/FACL and Santander, it is necessarily reliant on those parties setting out their respective cases in further detail in due course.” The associated submission was that, “Clearly these matters are more appropriately dealt with by directions in due course regarding the management of the Part 20 Claim, including in respect of the statements of case to be submitted by the [Part 20 defendants].”

Thus, Genworth openly acknowledge that the purpose and effect of the wider aspects of their Part 20 claim is to require FICL/FACL and Santander to litigate in these proceedings over liability inter se in respect of mis-selling complaints relating to FICL/FACL PPI policies sold by Santander.

It was common ground that I could take as a useful and sufficient general statement of the principles nowadays applicable to the grant of declaratory relief the summary of Aikens LJ, dissenting but on the application of the principles to the facts, in Rolls-Royce plc v Unite the Union [2009] EWCA Civ 387, [2010] 1 WLR 318 at [120], subject to one qualification. That qualification is that Aikens LJ’s second general principle should not be taken to mean that, other things being equal, there is any special disinclination to resolve by the grant of declaratory relief a present dispute over a right or obligation that will arise upon a contingency that has not yet arisen.

Aikens LJ’s fourth general principle, namely that the claimant not being party to a contract in respect of which a declaration is sought is not fatal to the claim, provided the claimant is directly affected by the issue, was a particular focus of the decision of Federal-Mogul Asbestos Personal Injury Trust v Federal-Mogul Ltd et al. [2014] EWHC 2002 (Comm), [2014] Lloyd’s Rep IR 671. In that case, Eder J for the most part refused declarations sought by the claimant concerning the meaning, effect or proper operation of reinsurance contracts to which it was not privy. As Mr Nash QC emphasised, the claimant was in substance seeking to involve itself through its declaratory relief claims in what would be the claims consideration and claims handling process, as between primary insurers and their reinsurers, of possible future claims by the claimant against the primary insurers. It comes as no surprise that Eder J did not allow the jurisdiction to grant declaratory relief to be used to that end.

In his judgment, at [94], Eder J said, in particular, accepting the reinsurers’ submission, that “a person not a party to a contract generally has no locus, save perhaps in exceptional circumstances, to obtain a declaration in respect of rights of other parties to that particular contract at least where the contracting parties themselves are not in dispute as to their respective rights and obligations.” Mr Zellick QC sought to elevate that to a proposition that a declaration will not be granted, as to the rights and obligations arising under a contract to which the claimant for declaratory relief is not privy, unless (a) the parties to the contract are in dispute as to the rights and obligations that are the proposed subject matter of the declaratory relief sought and (b) there are exceptional circumstances. I am wary of elevating Eder J’s proposition to a principle of general application, or of adding any other gloss to Aikens LJ’s fourth general principle. In any event, Eder J’s proposition was not that (a) and (b) are required, but that (b) is required where (a) is not present.

The real issue in a case involving Aikens LJ’s fourth general proposition is whether the way in which the claimant is or may be affected by what is on the face of things a matter between the parties to the contract in question gives the claimant a legitimate interest in having the court determine the points he raises about it at his instance. In the present case, Genworth claim to be affected by the historic relationship between FICL/FACL and Santander, and its incidents in terms of their liabilities inter se, only in the contingent sense that if they are liable to AXA, as alleged in the main claim, and if (as they say) discharging that liability will give them rights of subrogation against Santander, then they will have an interest in pursuing recoveries from Santander.

I should mention that there is provision in the SPA for AXA to make payments to Genworth if recoveries are made from, e.g., Santander such that, when added to payments by Genworth under clause 10.8, there has been an over-recovery. That provision may be part of the argument over whether clause 10.8 gives rise to rights of subrogation. But absent such rights, the presence of that provision could not justify Genworth involving itself in matters between FICL/FACL and Santander. The impact of that provision, in the absence of subrogation rights, would only ever be a matter for litigation between AXA and Genworth under the SPA.

Returning, then, to Genworth’s reliance on the possibility that clause 10.8 gives rise to rights of subrogation, it is of the essence of such rights that the indemnifior is not entitled to involve himself in the relationship between his indemnifiee and a third party allegedly liable to the indemnifiee unless and until the indemnity is paid. To entertain Genworth’s claims for declaratory relief is precisely to allow it to require FICL/FACL to litigate their possible claims against Santander without first requiring them to make the payment they concede is required, if clause 10.8 generates subrogation rights at all, before they may so require. Mr Nash QC’s only answer to that, when pressed, was to say that it made all the difference that Genworth sought only declaratory relief and not monetary relief against Santander. To my mind, that is in all but terms an acknowledgment that Genworth are abusing the availability in this court of a declaratory form of relief.

Mr Nash QC was unable to point to any precedent for the grant of declaratory relief in circumstances akin to those of the present case. The closest decided case drawn to my attention is a decision in the Supreme Court of South Australia, Santos Ltd et al. v American Home Assurance Company et al. (1987) 4 ANZ Ins Cas ¶60-795, in which the declaratory relief claims were rejected. Indeed, they were summarily dismissed much as I am asked summarily to dismiss Genworth’s claims here. Leaving aside aspects specific to the procedural law of South Australia concerning what claims could properly be brought by way of counterclaim, I find the reasoning of White J in Santos Ltd, with respect, clear and persuasive.

In the present case, there are two very significant further factors telling against the appropriateness of requiring FICL/FACL and Santander to litigate their PPI mis-selling liabilities inter se in these proceedings, at the instance of Genworth.

Firstly, Genworth’s asserted interest in so requiring, as reflected in its fourth proposed declaration, is their contingent entitlement (as claimed) to be subrogated to FICL/FACL’s rights under the Agency Agreement. However, by a Local Addendum Agreement dated 17 May 2006, numerous terms from a Framework Agreement between parent companies dated 28 April 2004 were incorporated into the Agency Agreement. The incorporated provisions included an arbitration agreement requiring resolution of disputes by arbitration in London before a sole arbitrator under LCIA Rules. Thus, not only do Genworth by their Part 20 Claim seek to use the declaratory form of relief to circumvent the established rules of subrogation, they use it to force into court that which the primary parties have bound themselves to arbitrate and which, were Genworth now in the shoes of FICL/FACL under rights of subrogation so as to pursue Santander directly (in the name of FICL/FACL), they would likewise be bound to arbitrate.

Secondly, although I agree with Mr Nash QC that on the correspondence between FICL/FACL and Santander since (at least) the Santander letter of July 2017 already mentioned, there is a dispute between FICL/FACL and Santander over the nature and extent of their liabilities inter se for PPI mis-selling complaints, I also agree with Mr Green QC and Mr Zellick QC that it is yet barely developed and far from suitable for litigation (or arbitration) and, more importantly, that FICL/FACL and Santander have a very strong, joint interest in prioritising the completion of the receipt and processing of PPI complaints over litigating (or arbitrating) between themselves over ultimate responsibility. In that regard, pursuant to the Complaints Handling Agreement and the Standstill Agreement, Santander continue to handle complaints even where the cost will be, in the first instance, for FICL/FACL to bear, subject in the future to any claim against Santander for reimbursement. Although the Complaints Handling Agreement is due to expire at the end of 2018, on the evidence it is the firm expectation on both sides (i.e. on the part of FICL/FACL and on the part of Santander) that it will be either amended or replaced so as to continue, broadly, the current complaints handling arrangements.

Mr Nash QC may well be correct to submit that Santander and FICL/FACL (with the support of AXA as parent) have the resources simultaneously to complete the PPI complaints handling process and to litigate (or arbitrate) between themselves, if forced to do so. If that were not the case, that might be a yet further powerful reason not to entertain the Part 20 Claim. But it is not just a matter of resources. The fact that the primary parties might have the resources to cope with the Part 20 Claim as well as their ongoing regulatory duties in handling PPI complaints does not touch the question whether they have a powerful, legitimate, common interest in prioritising the latter and for the time being parking the dispute that will be provoked by the former. In some of their evidence in response to these applications, Genworth seemed to be coming close to a suggestion that AXA/FICL/FACL and Santander were deliberately engineering things – colluding with each other – to harm or prejudice Genworth. No such submission was advanced, however, and I see no basis for it. Absent any such submission, in my judgment the primary parties do indeed have the powerful, legitimate, common interest I have described.

For those reasons, I have come to the conclusion that Genworth’s Part 20 Claim is an abuse of the declaratory form of relief, so far as it seeks to force into these proceedings, as it does, the general dispute between FICL/FACL and Santander as to their respective responsibilities or liabilities inter se for underlying PPI customer complaints. The demurrable and embarrassing nature of the draft Amended Part 20 Particulars of Claim is symptomatic of that abuse.

If the Part 20 defendants needed to rely on CPR Part 24, equally for the reasons given in this judgment I am clear that Genworth’s claims for the first, second and fifth declarations (as I have numbered them) have no real prospect of success. Genworth to my mind plainly do not have a legitimate interest to justify the grant in their favour of declaratory relief concerning the legal relationship between FICL/FACL and Santander, and the consequent liabilities of those parties inter se, relating to PPI mis-selling complaints.

In those circumstances, as I explained above, I agree with Mr Green QC that the proper course is to strike out the Part 20 Claim in its entirety. Genworth will be at liberty, if so advised, to seek to amend their Counterclaim either to add some claim against AXA for declaratory relief in relation to SPA warranty liabilities, or to add a claim for a declaration as to what, if any, rights of subrogation may become exercisable upon any payment under clause 10.8 of the SPA. If any such application is made in the latter respect, it may be Genworth will give consideration to whether to seek to join FICL/FACL and/or Santander as additional defendants for that limited purpose, although the same effect might be achieved by other means, for example a simple agreement by FICL/FACL and Santander to be bound by the result. If any such application is made in either respect, no doubt the precise scope of any declaration(s) sought, and the basis for it, will be given anxious scrutiny by AXA and (if relevant) the other parties. Nothing in this judgment should be taken to pre-judge the careful assessment the court would then make of any such application, if opposed, by reference to the precise terms of the proposed amendment.

Since the Part 20 Claim is to be struck out, and in any event, paragraphs 10 and 11 of the Defence and Counterclaim in the main claim, apart from the first sentence of paragraph 10, will also be struck out. I anticipate the first sentence of paragraph 10 will not live long either, but that is for a different reason, namely because I anticipate that paragraph 17 of the Particulars of Claim to which it responds will be replaced or radically rewritten when AXA updates and amends its claims. That process of updating and amendment must now occur with some urgency, so that after consequential amendments the main claim may proceed to a first, main case management conference in the relatively near future or such other applications (if any) as the parties may wish to make first. Indeed, it is somewhat to be regretted that at all events AXA’s relevant proposed amendments have not yet been brought forward; it is not obvious to me that the applications in the Part 20 Claim that I have determined by this judgment should have held up that process.

Finally, for completeness only, I should mention that a yet further alternative originally put forward by AXA and FICL/FACL was that the Part 20 Claim should be stayed pending a future arbitration between FICL/FACL and Santander over liabilities inter se. Mr Green QC realistically accepted that that did not stand up to scrutiny. If (as in the event I have concluded) the arbitration agreement between FICL/FACL and Santander, together with other features of the case, means that Genworth have no proper interest to justify the declaratory relief claims they bring, then those claims should be struck out or dismissed. If despite that arbitration agreement (and the other features of the case relied on by AXA and FICL/FACL), Genworth had a proper declaratory relief claim to bring, then it would be inappropriate to stay it pending an arbitration not yet commenced that for the foreseeable future neither FICL/FACL nor Santander intend or are likely to commence. The different, case management, decision that would then have arisen is the one I dealt with in paragraph 23 above.