Daniel Makin v The Restaurant Muse Limited & Ors

The Claimant, who is now 37 years old, attended the Muse Bar and Restaurant in Uppermill, Oldham together with friends on the evening on 6 August 2017. He was in what the Particulars of Claim describe as “high spirits” when, shortly after 8.30pm, he threw a glass on to the floor. The door supervisors, Thierno Diallo (Footnote: ¹) and Gareth Coupe, ejected him and, outside of the premises, there was an altercation. In the course of this, Mr Diallo forced the Claimant to the ground and held him in a headlock. After the incident, the Claimant stood up and walked away (Footnote: ²), taking a taxi home (where he lived alone). It would seem that two days later, his mother went to visit him because he had not been in contact and found that he had suffered a stroke.

The Claimant has been left with serious neurological disability as a result of the stroke, said to include right-sided weakness, aphasia, left-sided ptosis, and right homonymous hemianopia. His case is that he is now unable to work, lacks capacity to litigate and has an ongoing and long-term significant need for care from others. It is common ground that the likely value of the claim is in excess of £1 million (Footnote: ³).

The Claimant contends that his stroke was caused by the headlock administered by Mr Diallo. He brought a claim for damages against the First Defendant, which was the operator of the Muse Bar and Restaurant, and the Second Defendant, which was alleged to be the employer of Messrs Diallo and Coupe. The claim against the First Defendant was discontinued. A preliminary issue trial before His Honour Judge Sephton KC on 11 July 2023 (which the Second Defendant did not attend, joint liquidators having been appointed over the company on the day preceding the trial) established that the Claimant had suffered stroke and consequent injury as a result of an assault by Mr Diallo (Footnote: ⁴) and that the Second Defendant is vicariously liable for that assault and consequent injury.

At the time of this incident, the Third Defendant was the Second Defendant’s public liability insurer under an insurance policy entitled “Security & Fire Protection,” numbered S42426004 for the period 28 February 2017 to 28 February 2018. Accordingly, the Third Claimant was joined to the action pursuant to the Third Parties (Rights Against Insurers Act) 2010 (Footnote: ⁵) by order of District Judge Rome dated 5 January 2024, on the basis that the Second Defendant is (or is potentially) subject to a liability to the Claimant which liability is insured under the contract of insurance with the Third Defendant.

The Third Defendant denies liability to indemnify the Second Defendant (and therefore any liability to the Claimant) for reasons set out hereafter.

Section 1 of the 2010 Act provides:

“Rights against insurer of insolvent person etc

Section 2 of the Act provides:

“Establishing liability in England and Wales and Northern Ireland

(1)

This section applies where a person (P)—

(a)

claims to have rights under a contract of insurance by virtue of a transfer under section 1, but

(b)

has not yet established the insured’s liability which is insured under that contract.

(2)

P may bring proceedings against the insurer for either or both of the following—

(a)

a declaration as to the insured’s liability to P;

(b)

a declaration as to the insurer’s potential liability to P.

(3)

In such proceedings P is entitled, subject to any defence on which the insurer may rely, to a declaration under subsection (2)(a) or (b) on proof of the insured’s liability to P or (as the case may be) the insurer’s potential liability to P.

(4)

Where proceedings are brought under subsection (2)(a) the insurer may rely on any defence on which the insured could rely if those proceedings were proceedings brought against the insured in respect of the insured’s liability to P.

(5)

Subsection (4) is subject to section 12(1).

(6)

Where the court makes a declaration under this section, the effect of which is that the insurer is liable to P, the court may give the appropriate judgment against the insurer.

(7)

Where a person applying for a declaration under subsection (2)(b) is entitled or required, by virtue of the contract of insurance, to do so in arbitral proceedings, that person may also apply in the same proceedings for a declaration under subsection (2)(a).

(8)

In the application of this section to arbitral proceedings, subsection (6) is to be read as if “tribunal” were substituted for “court” and “make the appropriate award” for “give the appropriate judgment”.

(9)

When bringing proceedings under subsection (2)(a), P may also make the insured a defendant to those proceedings.

(10)

If (but only if) the insured is a defendant to proceedings under this section (whether by virtue of subsection (9) or otherwise), a declaration under subsection (2) binds the insured as well as the insurer.

(11)

In this section, references to the insurer’s potential liability to P are insurer’s liability in respect of the insured’s liability to P, if established.”

The relevant terms of the Policy are:

“SECTION B PUBLIC AND PRODUCTS (including inefficacy) LIABILITY

DEFINITIONS to Section B

…

8 Liability

Liability means legal liability to pay damages including interest and claimant costs recoverable from you in respect of or as a result of:

8.1

accidental bodily injury to any person other than an employee

8.2

accidental damage caused by you or your employees or sub-contractors to property other than property belonging to you or in your custody, possession or control

8.3

accidental damage or bodily injury caused by deliberate acts of your employees or sub-contractors

8.4

accidental personal injury,

8.5

accidental advertising injury

8.6

accidental denial of access

occurring during the period of insurance in connection with any occurrence which is or may be the subject of indemnity under this Section.

…

19 Criminal acts

We will indemnify you for your liability to pay damages including interest and claimants costs recoverable from you as a result of bodily injury or damage in respect of criminal acts of arson, theft, malicious damage, assault, fraud, dishonesty or embezzlement by your employees provided that the events insured by this clause:

19.1

were committed during the period of insurance, and

19.2

arose in connection with a contract with a customer.

…

COVER

We will indemnify you up to the limit of indemnity against liability incurred by you during the period of insurance arising out of and in the course of business within the territorial limits.

…

CLAIMS CONDITIONS

The following Conditions 1-10 must be complied with after an incident that may give rise to a claim under your policy. Breach of these conditions will entitle us to refuse to deal with the relevant claim.

…

2

Writ, summons, etc

You must not respond to any letter, writ or summons or other document sent to you in connection with any accident, incident or occurrence that may relate to any claim under your policy or which may give rise to a claim under any Section of your policy. You must immediately send them to Sutton Specialist Risks Ltd unanswered by return of post, or to us or legal representatives as may otherwise be advised by us.

3

Notification of claims

You or any other party insured by your policy must inform Sutton Specialist Risks Ltd (Footnote: ⁶):

3.1

immediately you have knowledge of any impending prosecution, inquest or inquiry in connection with any accident or disease, which may be the subject of claim, give notice in writing and give us any further information and assistance we may require,

…

3.5

within as soon as practical but in any event within thirty (30) days in the case of any other damage, bodily injury, incident, accident or occurrence, that may give rise to a claim under any your policy but not separate specified above.”

The Third Defendant accepts that the Policy is capable of responding to this claim. It contends that it may be argued that the claim could not properly be brought pursuant to the definition of “liability” in clause 8.3 of the definitions to Section B of the policy, “accidental damage or bodily injury caused by deliberate acts of your employees or sub-contractors” (as argued at [17] in the Amended Particulars of Claim) on the ground that this definition only responds where some intention to injure is demonstrated (following Burnett v International Insurance [2022] UKSC 12), but that rather it is a claim falling within the meaning of a criminal act in clause 19 of the definition section. Given the terms of the judgment of HHJ Sephton KC as to the criminality of the acts of the door staff, the Third Defendant concedes that the policy responds under the concept of “criminal act” in clause 19. It is unnecessary to determine whether it might also respond under the definition of liability in clause 8.3, although in attractive submissions, Mr Bell advanced the argument that the policy would in addition respond under that clause.

The parties agree that the Claimant is a third party within the meaning of Section 1 of the 2010 Act; that the Second Defendant is a “relevant person” within the meaning of that Section; and that the Claimant is therefore in the class of persons entitled to bring a claim against the insurer under the Act. Equally, it is agreed that the Claimant’s rights against the Third Defendant are no better than those of the Second Defendant (in whose shoes he stands pursuant to the scheme of the Act). Accordingly, if the Third Defendant would have had a good defence to a claim for indemnity by the Second Defendant for its liability to the Claimant, it would equally have a good defence to the claim of the Claimant himself.

The Third Defendant argues that it is not liable to the Claimant because of a failure by the Second Defendant to notify the Third Defendant of the Claimant’s claim in accordance with the terms of the Policy, in particular clauses 2 and 3.5 in the section “Claims Conditions”. The Claimant disputes the contention that there was a breach of the policy condition about notification and in any event argues that, even if there was a breach of such a condition, that breach did not act as a condition precedent, automatically disentitling the insured to the relevant cover, but rather gave the Third Defendant a discretion to decline the claim. However the Claimant contends that there was no rational basis for the Third Defendant to exercise its discretion by declining cover.

A further issue arises as to the effect of the judgment of HHJ Sephton KC, in particular as to whether his findings on breach of duty, vicarious liability and/or causation are binding in these proceedings.

Accordingly the issues can be put as follows:

It should be noted that none of the matters upon which the Third Defendant relies in support of the contention that the Second Defendant was in breach of the Claims Conditions are the consequence of the actions of either the Claimant or those who act on his behalf – rather the defence of this claim involves extensive criticism of the inaction of the Second Defendant, the very party liable for the Claimant’s injuries. That irony is not lost on the court, though it is an inevitable consequence of the structure of the scheme by which the Second Defendant’s rights under the policy vest in the Claimant. As Mr Withington KC said in closing submissions, one must have considerable sympathy for the Claimant, but that cannot by itself mean that he has a good legal case.

The following history can be seen from the Claimant’s witness statements and from documents within the trial Bundle:

For the purpose of the issues before the court, the relevant history as to notification is as follows:

None of these documents were passed on to the Third Defendant at the time they were sent to the Second Defendant, nor is it suggested that the Third Defendant had notice of a potential claim by any other means before July 2020. The first notice that the Third Defendant received was, according to Mr Jaques’ statement at TB/122, [24], an email from the Claimant’s solicitors dated 8 July 2020 at TB/126, enclosing the letter of claim from the Claimant’s solicitors to the Second Defendant dated 5 June 2020. This assertion was not challenged in cross examination.

Mr Jaques says that he then instructed solicitors (Plexus Law) who contacted the Second Defendant to enquire as to why the incident had not been reported earlier. In an email of 13 July 2020 from Mr Lucas to CC-Insure (Footnote: ¹¹) at TB/131, Mr Lucas stated:

“With reference to the claim we have had presented to us on behalf of Mr. Daniel Makin for an incident which occurred in August 2017, Muse Bar Oldham. The police fully investigated the incident at the time, and they were provided with all CCTV footage from 2 public houses, witness statements and statements from the two guards in question at the time of the incident, they were provided with the sign in book, all other relevant information and held all communications between Protec Security and the officers on duty.

The Police took all the evidence away at the time and after a full investigation they had declared that our guards operated correctly within the guidelines of their employment and the law, the claimant was reported to be under the influence of alcohol and drugs, but we cannot confirm this as this was in the police report. The police retained all the evidence and reported that there was no further action to be taken and the case was closed. No evidence has been returned to Protec Security and is still held with the Police with this in mind, we have no records kept with Protec Security.

As far as Protec Security was concerned with the conclusion of the police report we did not report this to the insurance as there was no case to answer, so no claim or further action was identified at the time.

We have not heard anything from the claimant in the last 3 years and the first we have been aware of anything following from the closed case was the letter from the claimant's solicitors June 2020. We have recently been informed that the claimant had tried to make a claim directly the Muse, but they hadn't responded so the claimant is now trying to proceed the claim with Protec Security.

The two guards in question have since left our employment as the incident occurred 3 years ago, we have tried to contact the two guards but they are refusing to co-operate with us, should you need to contact them, we have provided as much detail as possible below, please feel free to contact them directly should you need to.

…

Both guards had been instructed in their duties as door supervisors and had received adequate training via their SIA application in the delivery of their duties when on duty.

…”

Mr Jaques responded to the email enclosing the letter of claim in an email to the Claimant’s solicitors dated 20 July 2020 at TB/130, asserting that “this incident has not previously been notified to us by the Insured” and reserving the Third Defendant’s rights in terms of indemnity under the policy.

An email from Ms Hazel Slater to Plexus solicitors dated 31 August 2020 at TB/616 sets out the Second Defendant’s position further:

“Mr. Lucas was on annual leave at the time of the incident. The guards on Duty had called for the police to attend as Mr. Makin was the aggressor in the situation.

The Police who attended (crime reference and Police Numbers have already been supplied to you - crime reference number 110362E/17 and the Officers at the time of the incident were PC14019 Dawson and PC5630 Cullen) ceased all the evidence at the time of the incident to investigate. They closed the incident and acknowledged that our Officers on duty had acted according to their duties and no further action was to be taken. You can contact GMP to request this information to be provided to you.

We have not seen this form you have attached, this has not been sent from this office. This is a new format which was only released in May 2019, a copy of our old form format has been sent to you. The form has not been signed by our guards and the date is incorrect. The Manager that has signed the form "A.Toft" is not a member of our staff we have no knowledge of who this person is. Therefore we believe this has been filled in more recently by the venue in order to assist.

We have already provided all the information we have on file for Mr. Diallo and Mr. Coupe. We have tried to contact them but they are not being cooperative.

There was no Riddor reported as at the time there was no reason to believe this was a Riddor notification as Mr. Makin did not have any injuries of this nature at the time.

The original letter we received forwarded to us from the Muse - was addressed to the Muse and in no way was this in connection to our Company, therefore we had no reason to believe we had to send to our insurers, the information we provided to the Muse at the time was only to assist them. We had no further contact regarding this incident from the Muse after they had emailed us to say they were having a meeting with their insurers (copy of this has been sent to you), of which we were not privy to this meeting.

We did not know Mr. Makin before the incident and we were not aware of any injuries suffered at the time or subsequently after the incident. We have only been informed of this on receipt of the letter from Mr. Makins solicitors sent to us June 2020, three years after the incident.

As we have instructed previous all evidence at the time, including reports, CCTV footage etc was / and still is held by the Police. We have some information held with our solicitors in archive, due to the lockdown and limited staff they have not been able to retrieve this as yet, but we are working on this.

We are not trying to be difficult, obstructive or hide any information, but after 3 years and changes to staff we are trying our best to locate as much information as we can, and as we retrieve more we will forward this on to you.”

By email dated 1 September 2020 at TB/459, Plexus on behalf of the Third Defendant questioned the Second Defendant as to why the letter from the Claimant’s solicitors dated 5 June 2020 had not been forwarded to the brokers or insurers. In an email of 3 September 2020 at TB/460, Ms Hazel Slater replied on behalf of the Second Defendant, “We did not send the letter when we first received it as we had no recollection of the alleged incident at the time of receiving the letter and launched an investigation at our end as to what it was regarding, hence the delay.”

On 1 December 2020, the Third Defendant wrote to the Claimant’s solicitors, stating its determination to decline to provide indemnity under the policy. The letter appears at TB/140. Of the incident, the letter says this:

“The incident involving Mr Makin took place on 6 August 2017. From a redacted copy of the Police report which has been provided to QBE by Mr Makin's solicitors, it can be established that the matter was first reported to the police on 12 August 2017 and that the police investigation was finalised on 22 September 2017. Whilst we understand that Mr Elvin Lucas was on annual leave at the time of the incident, we understand that he was contacted by the police and provided incident reports to them, as well as witness statements, the sign in book and all communications between Protec and the officers on duty. It is not presently known the date or dates upon which this information was provided to the police by Protec but it is likely to have been towards the start of the investigation and before 17 August 2017 when we understand the first of the doormen was interviewed by the police.

It is plain that an incident which resulted in a complaint being made to the police as to the conduct of your employees and which was alleged to have caused a serious injury to Mr Makin was one which "may give rise to a claim" under the policy. In the circumstances, you had a duty to inform Sutton as soon as practical but in any event within 30 days from when you were informed of the police's investigation into the incident.”

It was not necessary for the Claimant to rely on witness evidence at the trial before me. Most of the factual issues were either admitted or were dealt with in the judgment of HHJ Sephton KC (Footnote: ¹²). The Third Defendant relied on the witness evidence of two employees, Mr Robert Jaques, a Claims Controller in Complex Claims, and Mr Stephen Field, its Head of Trading in European operations.

Mr Jaques’ evidence was relevant to the investigations of the incident on behalf of the Third Defendant and the argument that the delay in notification has caused it prejudice. In essence, his witness statement asserts that, had there been early notification of the incident, the Third Defendant could have taken the following action:

He added to this in oral evidence that his understanding was that the Second Defendant had tried to contact the door staff in 2020, but they were “refusing to co-operate” as recorded in Mr Lucas’ email of 14 July 2020 at TB/131.

Mr Jaques was cross examined about these matters. In particular he accepted that:

Mr Jaques accepted that in fact the only enquiry that Plexus had made once notified of the incident was to speak to a police officer. He also accepted that the letter dated 1 December 2020 at TB/559 confirming that indemnity was declined, whilst giving generic reasons as to why the Third Defendant might be prejudiced by late notification of a claim, did not say anything about the prejudice caused by the delay in notifying the incident in the particular case. However he asserted that the potential prejudice would have been a factor in the decision to decline indemnity and that this would have been discussed at senior claims and senior underwriter level and would be recorded in internal documentation, namely file notes and emails, albeit that this material was not before the court. He made the point that the Third Defendant’s position was that prejudice is irrelevant to its right to decline indemnity.

Finally, Mr Jaques accepted that any delay between service by the Claimant’s solicitors of the letter of claim on the Second Defendant dated 5 June 2020 at TB/513 and the email from the Claimant’s solicitors notifying the Third Defendant of the claim dated 8 July 2020 at TB/126 was unlikely to have caused any prejudice to the investigation or resolution of the claim.

Mr Field had no personal dealing with this case and in particular the decision to decline an indemnity. His evidence focussed on the benefit to the Third Defendant of the early notification of the circumstances of an incident that might lead to a claim. As he puts it in his statement on TB/146 at [20], “Early consideration of evidence also enables QBE to make commercial decisions vital to its business including in appropriate cases the consideration of the provision of rehabilitation to facilitate optimum recovery or the early settlement of claims either in full or in part so as to reduce liability for costs.”

In cross examination Mr Field confirmed that he could not confirm that rehabilitation would have been offered if there had been earlier notification of the claim, though he made the point that sometimes rehabilitation is offered without prejudice to any other arguments that the insurer may have in respect of the ambit of its indemnity.

Dealing first with the notification obligation under Claims Condition 3.5, Mr Bagot KC for the Claimant contends that no breach of the notification requirement arises because this incident was not notifiable under that condition. He accepts that the position of the insured must be looked at from the point of view of a reasonable person in the insured’s position. However, such a reasonable person here would not have thought that the happening of the incident on 6 August 2017, taken alone, might give rise to a claim. As is apparent from the video footage of the incident, was referred to in the police interviews of Messrs Diallo and Coupe and was accepted by HHJ Sephton KC in his judgment, at the end of the incident, the Claimant stood up and walked away, then took a taxi. Indeed, the Third Defendant itself, in its letter of 1 December 2020 does not state that the incident taken on its own was such that the Second Defendant was or should have been aware of facts that “may give rise to a claim.” Rather, it refers to the incident and the aftermath, including the serious injury to the Claimant and the complaint about the conduct of the door staff. This supports the conclusion that the obligation to notify under Clause 3.5 cannot have arisen at the time of the incident.

The Claimant contends that the argument that the Second Defendant may have come under an obligation at some later point to give notice of the incident to the Third Defendant (via SSR) is inconsistent with the proper interpretation of Claims Condition 3.5. He relies on the decision in Zurich Insurance plc v Maccaferri Ltd [2016] EWCA Civ 1302. The employee of a building company was injured when a so-called Spenax gun (Footnote: ¹³) accidentally discharged, hitting him in the face. The insured, the supplier of the gun, was informed that an incident had occurred involving a gun and that it should be recalled and kept for investigation. Several months later, it learned that the incident had involved someone suffering injury, but there was no indication that the injury was due to the gun being faulty or that a claim against the insured was intimated. The insured only notified its insurers of the incident the following year, upon being joined as a Part 20 defendant to the proceedings that the employee had brought against his employer.

The insurer argued that the insured was in breach of the obligation to give notification “as soon as possible after the occurrence of any event likely to give rise to a claim.” The Court of Appeal rejected this argument. Christopher Clarke LJ examined the insurer’s case:

“[17] An event may occur which gives rise to a claim which is brought against the insured well over a year or more later. The insured may know of the event at the time it occurs or in the immediate aftermath and that it is likely to give rise to a claim against him. If so, he must give notice to the insurer. But he may not know of the event, or the details of the event, until some considerable time after the event occurred; and when he knows about it, or something about it, he may or may not appreciate that it is likely to give rise to a claim against him. What then is his obligation under the clause? Mr Robert Moxon Browne QC for Zurich submitted to the judge, as he did to us, that the meaning of the words used in condition 2 is that, when the insured learns of the event and realises that it is likely to give rise to a claim he must, then, give notice to the insurer, even if this is well after the event occurred. He must also do so as soon as he could with reasonable diligence have discovered that an event which was likely to give rise to a claim had occurred. The judge rejected this submission….

[32] I do not accept Zurich’s construction of the condition. This is a condition introduced by Zurich into its policy which has the potential effect of completely excluding liability in respect of an otherwise valid claim for indemnity. If Zurich wished to exclude liability it was for it to ensure that clear wording was used to secure that result. It has not done so. It is possible to construe the use of the phrase ‘as soon as possible’ as meaning that even if, when the event occurred, it was not likely to give rise to a claim, the obligation to notify would arise whenever thereafter the insured knew or should have known that an event which had occurred in the past was likely to give rise to a claim. But I regard this as a strained interpretation and erroneous.

[33] It is, in any event, far from clear that that is the right interpretation and given the nature of the clause the ambiguity must be resolved in favour of Maccaferri. Clauses such as these need to be clear if they are to have effect: Royal and Sun Alliance Insurance plc v Dornoch Ltd [2005] EWCA Civ 238, [2005] 1 All ER (Comm) 590, [2005] Lloyd’s Rep IR 544. That is particularly so in circumstances where the context in which the clause was agreed was that Layher and Jacobs (Footnote: ¹⁴) had been decided as they had. Although the wording in the present case is not identical to the wording in those cases, the two cases indicate that prima facie whether there is an obligation to notify an occurrence as one likely to give rise to a claim is to be determined by reference to the position immediately after it occurs. Further, Zurich’s construction imposes an obligation to carry out something of a rolling assessment as to whether a past event is likely to give rise to a claim (and possibly as to whether an event has happened at all) as circumstances develop. There are clauses which have that effect, particularly in claims made policies insuring against professional liability, but they are not in this form. If that was what was intended, the insurers could be expected to have spelt it out.

[34] The question therefore is whether, when the event occurred (an occasion not limited to the exact moment) it was likely to give rise to a claim. That will depend on whether in the light of the actual knowledge that the insured then possessed a reasonable person in his position would have thought that it at least 50% likely that a claim would be made.”

The Claimant argues that, notwithstanding the difference between the obligation in Zurich v Maccaferri to give notification of circumstances which were “likely to give rise to a claim” as opposed to the obligation here to notify circumstances which “may give rise to a claim,” the same principle applies, namely that the chance of the claim being made is to be assessed on the basis of the incident itself (though not limited to the exact moment of its occurrence), without regard to matters that come to light subsequently.

Given the lack of awareness of circumstances that “may give rise to a claim” at the time of the incident, no obligation to notify under Claims Condition 3.5 arose at the time of the incident; since there was no indication of any prospect of a claim against the Second Defendant, given that the Claimant had got up and walked away from the incident. Accordingly the obligation to notify under Claims Clause 3.5 did not arise.

Turning to the obligation under Claims Condition 2, again the Claimant contends that there was no breach of the notification requirement by reason of the failure of the Second Defendant to forward to the Sutton Specialist Risks Ltd both the letter of claim against the First Defendant, forwarded by Mr Norbury of the First Defendant to the Second Defendant by the email of 29 December 2019 at TB/615, and the Letter of Claim against the Second Defendant itself dated 5 June 2020 at TB/513.

The Claimant contends that there is infelicity in the drafting of condition 2 in its phrasing that, “You must not respond to any letter, writ or summons or other document sent to you in connection with any accident, incident or occurrence that may relate to any claim under your policy or which may give rise to a claim under any Section of your policy.”

The Claimant puts his case thus:

In the alternative, the Claimant contends there is no breach of Claims Condition 2 because:

Dealing first with condition 3.5, the Third Defendant contends that the Second Defendant was under an obligation to inform it of the happening of the incident where there was, judged objectively, a real as opposed to a fanciful risk that that the incident might give rise to a claim under the policy (see the judgment of Teare J in Aspen v Pectel Ltd [2008] EWHC 2804 (Comm) at [9]).

Once Mr Lucas returned from leave (as referred to in his email of 9 January 2020) and was told both of the incident and the involvement of the police, it must have been apparent to a reasonable person in his position that a claim might be made against the Second Defendant arising from the incident and that such a claim might give rise to a claim under the Policy. The incident form produced in respect of the events and signed by Mr Diallo and the manager, Jake Daley, referred to the customer being “physically and verbally aggressive” and his being “restrained” (see TB/426). The police briefing for the interview of Mr Diallo refers to the customer having suffered a stroke (TB/429). It is inconceivable that Mr Lucas was not made aware that the Claimant had suffered some kind of injury alleged to be associated with the incident since if he had not, there would have been nothing for Mr Diallo and the manager to report in the form and nothing for the police to investigate. Further, on Mr Lucas’ case as set out in the email of 13 July 2020, it was the closing of the investigation by the police that led him to the conclusion that there was, in his words, “no case to answer.” That investigation was not closed until 22 September 2017 (see TB/369). Therefore there was, on his own account, a period following his return from leave when he knew that the police were involved in investigating an incident that involved an allegation of injury due to the assault of a member of door staff engaged by the Second Defendant. It follows that the obligation to inform SSR of the incident under Condition 3.5 of the Claims Conditions clearly arose.

In any event, the mere fact that the police had decided not to take any further action in respect of the incident did not mean that a civil claim arising out of the incident was not possible. The Second Defendant had prepared incident reports (see the reference to these at TB/610) and the door staff were told of the injuries (see for example Mr Diallo’s briefing before his police interview at TB/429 and the transcripts of interview at Mr Diallo and Mr Coupe that follow that briefing at TB/431ff).

In so far as the Claimant contends that the obligation to notify is to be judged in light of how the reasonable insured would view the likelihood of risk at the time of the relevant events, following the decision of the Court of Appeal in Zurich v Maccaferri, the Third Defendant responds that the policy terms in that case were materially different to those here. The obligation in Maccaferri was to notify circumstances that were “likely to give rise to a claim.” That was a clause of a kind that required “a subjective assessment by the insured as to whether a claim was likely…the state of the insured’s knowledge was indeed critical and intrinsic to the operation of the clause” as Sara Cockerill QC (as she then was) commented in Denso Manufacturing v Great Lakes Reinsurance [2017] EWHC 391 (Comm) at [41]. In contrast, the obligation here is to notify circumstances which “may give rise to a claim.” This is much closer to the terms of the policy considered by Teare J in Aspen v Pectel, where the obligation under condition 4, headed “Claims Procedure”, was to give “immediate written notice with full particulars of (i) any occurrence which may give rise to indemnity under the insurance.”

The Defendant in Aspen v Pectel was a sub-contactor engaged to work on a deep level tunnel facility in Manchester. A fire occurred in the tunnels in the early hours of the morning of Monday 29 March 2004. The Defendant’s knowledge was taken to be that of its Mr Murray, who was informed of the fire on the morning of 29 March 2004. He knew that the Defendant’s employees had been working in the vicinity of the fire and consented to witness statements being taken. He spoke to someone on site to ask whether the Defendant should be concerned about the fire though he concluded that the Defendant was not to blame for it. On 7 April 2004, he was contacted with a request to provide to forensic engineers a unit of a type that had been lost in the fire. He accepted that the purpose of providing the unit was to seek to rule it out as a cause of the fire. In the course of his evidence, he accepted that, in late March and early April, he could not rule out the possibility that the Defendant was involved in the cause of the fire.

Teare J held at [48] that the fire was “an occurrence which gave rise to a real risk that the defendant might claim an indemnity under its policy of insurance in respect of claims made against it in connection with the fire. Such a risk was one which would have been recognised by a reasonable man having the knowledge that Mr Murray possessed. A reasonable man would appreciate that BT and/or AMEC were likely to investigate the cause of a serious fire. Such an investigation would inevitably focus upon the work done in the crossover area by employees of the defendant in the week before the outbreak of the fire. The interviews being conducted of the defendant’s employees would suggest to the reasonable man that those investigating the fire were already focusing upon the work done by those employees. In circumstances where the reasonable man was not aware of a cause of the fire having been identified he would be unable to dismiss as fanciful the possibility that the cause of the fire was in some way connected with the work of the defendant’s employees, notwithstanding their good safety record. He would further apprehend that there was therefore a real possibility that a claim might be brought against the defendant and that, in order to protect itself from that claim, the defendant would seek an indemnity under its policy of insurance.”

As Teare J makes clear, this involves the identification of the objective risk of a claim being made, fixed not at the time of the incident itself but when the insured comes into possession of knowledge relevant to the incident. The obligation under Claims Condition 3.5 here to give notice “as soon as practical but in any event within thirty (30) days” of an incident is very similar to that in Aspen v Pectel and should for the sake of consistency be construed in the same fashion, looking at the objective circumstances as known to the policyholder or, where as here, the policyholder is a small company with a single director and shareholder, the director and shareholder in the company and to focus on when that person has relevant knowledge. Admittedly if the knowledge did not arise until more than 30 days after the incident, the obligation may not arise at all, but that does not excuse the failure to give notice where the relevant knowledge is acquired within the 30 day period.

Looking at the facts as known to Mr Lucas, he cannot be argued on the material before the court to have acquired relevant knowledge whilst on holiday, but on his return it is apparent that the incident had involved alleged injury to the Claimant and that police were investigating the incident. Taking this together, there can be no doubt that within the 30 day period specified in the policy, Mr Lucas had sufficient knowledge of an incident involving door staff in which a person was alleged to have suffered injury so as to trigger the obligation to report in accordance with Claims Condition 3.5. By reason of the failure to make this notification, the Second Defendant was in breach of its obligation under that clause, in that it failed to inform Sutton Specialist Risks Ltd “as soon as practical but in any event within thirty (30) days in the case of any other damage, bodily injury, incident, accident or occurrence, that may give rise to a claim under any your policy.”

In respect of Claims Condition 2, the Third Defendant starts by drawing my attention to the Letter of Claim of 29 October 2019 addressed to the First Defendant. Anyone reading that letter would realise that it was notifying a potential claim on behalf of the Claimant for damages for personal injuries against whoever was liable for the actions of the door staff on 6 August 2017 – the very heading, “Letter of Claim – Catastrophic Injury,” makes this clear; the body of the letter confirms its purpose; and the reference to passing the letter on to the recipient’s insurers further emphasises its status as a letter showing a potential claim that would be notifiable to an insurer.

Once the document came into the hands of the Second Defendant, by way of attachment to the email from Mr Norbury of the First Defendant to Mr Lucas of the Second Defendant dated 29 December 2019, it must have been clear to the Second Defendant, as the company that had engaged the door staff, that a potential claim arose against it. The suggestions by Mr Lucas in his email of 13 July 2020 that the police’s decision to take no action indicated that there was “no case to answer” and that the Second Defendant had heard nothing between the police investigating matters and the letter from the Claimant’s solicitors in June 2020 are plainly wrong.

Whilst that letter was of course addressed to the First Defendant, it was forwarded to the Second Defendant and clearly related to the conduct of the Second Defendant’s employees. When it is taken with the information that had been provided in 2017, it must have been apparent to someone in the position of Mr Lucas that the risk existed of there being a claim under the Policy and accordingly the obligation to forward it unanswered to SSR arose.

There is nothing in the language of the Policy to negate the obligation to forward the letter to the Third Defendant simply because the letter was addressed to someone other than the Second Defendant. If, on a fair reading, the objective recipient would consider it to relate to facts which gave rise of a risk of a claim under the Policy, that is sufficient to give effect to the obligation in the clause.

Even when the letter of claim at TB/513 was sent to the Second Defendant itself, the Second Defendant did not forward it to the Third Defendant. That letter was even more definitive that a claim was being intimated against the Second Defendant. In his Reply, the Claimant contends of this letter at [8(i)] that, “Upon receiving the letter, the Second Defendant had no recollection of the alleged incident, and so launched an investigation into the same. Pending the results of that investigation, the Second Defendant was not in a position to know whether the alleged incident was one that ‘may give rise to a claim’.” The Third Defendant accepts that this was the explanation given by the Second Defendant for failing to forward the letter, acknowledging the email from him dated 23 September 2020 but contends both that it is not plausible that Mr Lucas had forgotten about the incident when, in January 2020, Mr Lucas had emailed Mr Norbury setting out his recollection of the incident; and that in any event this was not a valid basis for failing to forward a document that had been received by the Second Defendant and that clearly gave notice of circumstances that might give rise to a claim under the policy.

In so far as the Claimant contends that there is an ambiguity of drafting, the Third Defendant rejects this argument. It accepts that the contra proferentem rule would apply to the insurer which drafted the policy, such that any clause which may be ambiguous or difficult such as to give rise to alternative constructions would need to be construed in the manner most favourable to the insured. However, there is no such ambiguity here. It is perfectly clear that the obligation created by Condition 2 is one not to respond to documents which either (a) are in connection with any accident etc. which might relate to an existing claim or (b) contain information relating to an incident which might give rise to a claim (essentially the third meaning suggested by the Claimant above). Neither the first nor the second readings suggested by the Claimant make sense and it cannot therefore be suggested that this is a case with an ambiguity as between competing readings. If neither of those two readings makes sense, one is left with the third reading proposed by the Claimant, which coincides with what the parties would be likely to have intended. It does no injustice to the language of condition 2 to read the text in this way.

As to the Claimant’s other two arguments:

As with the parties’ submissions, I shall deal with Claims Condition 3.5 first. I note as a preliminary matter that this clause does not expressly indicate what it is that SSR must be informed of to comply with this condition, but it appears common ground that the obligation is to inform of, at the very least, the happening of the incident. That would appear to accord with both the purpose of the condition and its common sense interpretation.

I accept the Claimant’s argument that, judged at the time of the incident or its immediate aftermath, no reasonable insured could be expected to have formed the view that it involved circumstances that “may give rise to a claim” under the policy, given that the Claimant was able to get up and walk away after being restrained. If those circumstances are judged from the point of view of the actual controlling mind of the company, Mr Lucas, there is no evidence that he even knew of the incident at the time and, given that there was no evidence of any after effect of the incident on the Claimant, one would not have expected him or any hypothetical controlling mind of the company to do so. However, as I have noted above, Mr Lucas stated in this witness statement that he became aware that Messrs Diallo and Coupe were going to be interviewed. It would be surprising if he had not been made aware of this, given that he was sole director and shareholder. Given that the police would not be likely to want to interview the Second Defendant’s employees unless something of note had happened, and given the clear recording of the incident by both the police and the door staff, I am satisfied that, well within the period of 30 days from the incident, Mr Lucas either was aware (or at the very least a reasonable insured in his position would have been aware) that this was an incident where the door staff of the Second Defendant were at least potentially being criticised for injuring a customer with whom they had had contact.

This case is far more akin to the situation in Aspen v Pectel than that in Zurich Insurance plc v Maccaferri Ltd both on legal and on factual grounds:

On the evidence here, the material that was known to Mr Lucas either whilst he was on holiday or on his return from leave, particularly that the police wished to interview his door staff about an incident, was clearly likely to lead someone to think that there may be a claim against the Second Defendant in respect of which the insurance policy provided cover. This conclusion does not involve the court engaging in some kind of roving review of what it was that Mr Lucas knew as matters developed; rather it causes me to conclude that there was a clear point in time where the matters known to Mr Lucas included the fact that police wanted to interview members of his staff in respect of an incident where a person had allegedly suffered injury and gave rise to the duty to notify under Claims Condition 3.5. Since he failed to do so, I conclude that, through his inaction, the Second Defendant was in breach of that condition.

Turning to Claims Condition 2, for reasons that I deal with under issues 2 and 3 below, the argument in respect of this clause in respect of this letter is hypothetical and does not affect the outcome of the case even if I am wrong about the claims conditions being conditions precedent. However, for the sake of completeness, I deal with this clause as well as Claims Condition 3.5.

I deal first with the true construction of Claims Condition 2. Whilst it is possible to see how, applying the usual rules of grammar, the Claimant comes to the first and second suggested constructions referred to at [38] above, it is common ground that neither of those meanings in fact makes sense for exactly the reasons that the Claimant identifies – the first because it would suppose a circumstance in which a letter or similar document gave rise to a claim under the policy; the second because it would suppose that an accident etc. might relate to a claim under the policy.

The Claimant’s third suggested reading is a sensible construction of the first sentence of Claims Condition 2 in contending that was intended by the langauge may have been:

“You must not respond to any letter, writ or summons or other document sent to you

I accept that a court must be careful not to overstep the mark in using tools of construction to resolve genuine ambiguities in a contract. The difficulty here though lies in identifying what the ambiguity is. No other reading than that advanced as the Claimant’s third suggestion makes any sense of the words. Where there is no ambiguity, there is no role for the application of the contra proferentem principle to favour a differ reading – see the judgment of the Divisional Court in Financial Conduct Authority v Arch [2020] EWHC 2448 referred to at [87] below. The court must simply decide whether on the one hand the wording of the clause can properly be construed in a way that makes sense or alternatively whether it should disregard the clause as being so ambiguous as to be incapable of meaning.

In my judgment, this clause falls into the first of these two categories. In coming to this conclusion I bear in mind that, in so far as the parties have agreed terms in a contract, the court should so far as possible give meaning to those terms and that I have not been able to identify any other meaning of those words other than the Claimant’s third suggested reading.

I turn then to consider whether the Claimant was in breach of this term on this construction. There are two suggested breaches:

Dealing with the Claimant’s argument that the first of these could not give any obligation to forward it to SSR, regardless of the true construction of the first sentence of Claims Condition 2, the Claimant argues that a letter sent to someone other than the insured could not trigger an obligation to forward the letter to the insurer. I accept that the mere sending of the copy of a letter of claim to the insured would not, without more, trigger the notification obligation. But the notification obligation would be triggered if the letter were sent relating to the circumstances of an incident where the context of sending the letter (or some other material known to the insured) indicates a claim might be made under the policy in respect of those circumstances. In this case, it is clear from reading the letter of 29 October 2019 from the Claimant to the First Defendant that a claim might be made against someone. Further, the only sensible reading of Mr Norbury’s email of 29 December 2019, enclosing that letter and inviting the Second Defendant to refer the matters to its insurers, is that Mr Norbury considered that a claim might be made against the Second Defendant as well as or in addition to the claim against the First Defendant. The reasonable recipient of Mr Norbury’s email would undoubtedly suspect immediately that a claim might be made to which an insurance policy of this kind might respond. It follows that the Second Defendant was under a duty of notification under Claims Condition 2 in respect of the letter of 29 December 2019 enclosing the letter of 29 October 2019.

In respect of the letter of claim addressed to the Second Defendant and dated 5 June 2020, the Claimant limits his argument to the contention that:

I conclude as follows on the issue:

Both conditions referred to above are part of the section of the policy headed Claims Conditions. The Claimant contends that the wording of the heading to that section, that “Breach of these conditions will entitle us to refuse to deal with the relevant claim” is capable of being interpreted either as granting the Third Defendant an absolute right to reject the claim if the conditions are not met or alternatively as giving the Third Defendant a discretion to refuse cover. If the latter is the correct construction, the insurer must not exercise that discretion arbitrarily, irrationally or capriciously.

On the first issue, the Claimant cites the judgment of Phillips J as he then was in Cox v Bankside Members Agency Ltd [1995] CLC 180 at p.203, approving a passage from what is now MacGillivray on Insurance Law (15^th Edⁿ) (Footnote: ¹⁶) at [19-040]: (Footnote: ¹⁷):

“It is not always easy to decide whether clauses requiring notice of a claim are conditions precedent to the liability of the insurer under the policy, or merely terms of the policy for breach of which the insurer’s only remedy is to claim damages for the extra expense flowing from the insured’s failure to give notice within the proper time. Little more can be said than that it is a matter of construing the policy as a whole.”

The Claimant advances the following arguments in favour of its preferred construction:

In summary, the terms of the Claims Conditions lack the clarity that would be required to render them conditions precedent in the context of a policy that elsewhere makes terms a condition precedent to its liability. If the court is left in any doubt on the effect of a clause the effect of which is one interpretation that the Claimant’s claim, must fail, conventional principles of the construction of insurance policies, in particularly the obligation to construe the relevant clause contra proferentem should cause the court to favour the Claimant’s interpretation.

The Third Defendant agrees that the starting point in respect of the construction of a condition precedent is the statement of principle from MacGillivray at [19-040] cited above. The Defendant points to a further passage in MacGillivray at [10-011]:

“The modern drafting technique is to include a general clause which declares that the due observance and fulfilment by the insured of all the obligations cast upon him by the policy terms shall be conditions precedent to any liability of the insurers to make any payment under the policy. Breach by the insured of a term of the kind described above then provides the insurer with a defence to payment, regardless of whether it was either remedied before or causally connected with the loss.”

The Third Defendant concedes that the conditions relied on here are not labelled as conditions precedent. However, the relevant contractual condition does not need to be expressed as a condition precedent, as is apparent in the passage from MacGillivray at [19-040].

In this case, the statement under the heading “Claims Conditions” that “Breach of these conditions will entitle us to refuse to deal with the relevant claim” makes clear that there is conditionality between the obligation to give notice and the underwriters’ obligation to pay (see Aspen v Pectel at [62]). The clause is similar to that considered by Ritchie J in Cuckow v AXA Insurance UK Plc [2023] EWHC 701 (KB) who, having examined the authorities, analysed the conditions in the particular case at [103] and [104]:

“103.

The Conditions were written under the heading ‘Policy Conditions.’ MGL was warned that if it did not comply MGL “may lose all right to recover under your policy.” The Claims Notification Condition stated that MGL “must” do various things under the warning “if you do not comply with this condition we have (Footnote: ¹⁹) the right to refuse to pay your claim.” ... The same applied to the Claims Procedure Condition. On an objective construction of those words it is quite clear that AXA were intending to frame and write the Conditions as conditions precedent.

104.

In the context of this case and the requests for the C&S documents, the Conditions were not merely “labelled” as conditions precedent. The information in the documents requested was important and its loss would disadvantage AXA commercially so the labelling of the tin matched the contents of the tin.”

It is to be noted that the clauses to which Ritchie J was referring are set out in his judgment at [56] as follows (Footnote: ²⁰):

“Policy Conditions

“These are conditions of the cover and apply throughout your policy…. If you do not comply with a condition you may lose all right to cover under your policy or to receive payment for a claim.

…

Claims Notification Condition

You must

It is not entirely clear on what basis Ritchie J said the conditions were, as he put it in his judgment at [104], “labelled” as conditions precedent. It may be that there was some wording to that effect that has been excluded from the judgment. Alternatively it may be that this description flows from the reference to these conditions being “conditions of cover” coupled with the other wording within the conditions as to the consequence of non-compliance in terms of the insurer’s right to refuse to pay the claim. Either way, as I have noted, the Third Defendant does not argue that the clauses here are labelled as conditions precedent.

However, the Third Defendant points to the similarity of wording between the cover conditions in Cuckow and the wording here. As in that case, the wording here serves a commercial purpose of ensuring that the Third Defendant is notified of a claim at the earliest opportunity, thereby allowing it to take steps to investigate any liability to indemnify its insured and/or to take steps to minimise its potential liability.

The Third Defendant also points to the terms of the policy in Aspen v Pectel, cited above, contending that the conditionality in that case was such as to cause Teare J to hold compliance with the condition as to notification being a condition precedent of liability. The policy condition there was in these terms:

“13.

Observance

The liability of Underwriters shall be conditional on:

(i)

the Assured paying in full the premium demanded and observing the terms and conditions of this insurance …”

Teare J said of such clauses generally and of the clause in the particular case:

“[62] It is well established that a general clause in an insurance policy purporting to make compliance with obligations in the policy a condition precedent to the underwriters being liable in respect of a claim can indeed have that effect. The effect of such a general clause is that which the clause would have if it had been set out at the commencement of each particular clause which imposes an obligation upon the assured. This is the ‘modern drafting technique’ (see MacGillivray on Insurance Law (10th edn, 2003) pp 227–228 (para 10–11)). Whilst the words ‘condition precedent’ are often used in such clauses, other words can have the same effect so long as the clause is apt to make that effect the clear intention of the parties. What has to be found is a ‘conditional link’ between the assured’s obligation to give notice and the underwriters’ obligation to pay the claim.

[63] Condition 13 states that the ‘liability of Underwriters shall be conditional on the Assured paying in full the premium demanded and observing the terms and conditions of this insurance’. In my judgment this provision, when read in conjunction with condition 4(a), is apt to make clear that the parties intended there to be a conditional link between the assured’s obligation to comply with condition 4(a) and the underwriters’ obligation to pay the claim in question. (Footnote: ²¹)”

The Third Defendant adds two points about the language of the clauses in the present case:

In so far as the phrase “condition precedent” is used in other parts of the policy but not in respect of the particular clauses which are in issue here, the Third Defendant contends that this does not exclude the clause having effect as if it were so described. In Aspen v Pectel, Teare J was faced with the same argument as to the use of the phrase “condition precedent” in respect of other clause of the contract, but not the particular clause which related to notification. Nevertheless he held at [68], “I do not consider that the use of the words ‘condition precedent’ in the endorsement and the absence of such words in condition 13 mean that condition 13 must be construed in a manner which removes a conditional link between compliance with condition 4(a) and the underwriter’s obligation to pay. The words used in condition 13 are clear, even though they do not use the term ‘condition precedent’.” This reflects the fact that there is no absolute rule of contractual construction that words used in the contract must at all points carry the same meaning (as Lord Warrington of Clyffe pointed out in the advice of the Privy Council in Watson v Haggott [1928] AC 1270). Such canons of construction may assist to give meaning where there is ambiguity but where the wording is clear (as the Third Defendant contends is the case here), there is no need to employ generalised rules to displace the clear and unambiguous wording of the actual language used.

The significance to an insurer of a potential liability for a personal injury claim of the early notification of a claim is obvious:

Whilst it may be difficult for an insurer to demonstrate what would have happened with earlier notification of any particular claim, the commercial benefits of early notification justify the court in leaning in favour of the construction of clauses such as this as conditions precedent to any liability on the part of the insurer.

Contractual provisions in an insurance contract imposing an obligation on the insured to give notification of circumstances that might give rise to a claim to the insurer are frequently held to be conditions precedent to the insurer’s liability. There are good policy reasons why an insurer should wish such notification to be a condition precedent to its liability. As well as the potential benefits that may come from dealing with a claim that is notified as soon as possible, there is a practical benefit to an insurer in avoiding the kind of arguments that were ventilated in this case as to whether late notification has in fact prejudiced the insurer. It may be difficult in any particular case to show prejudice, even if an insurer is able to show a commercial landscape in which early notification may have advantages to its business. Nevertheless, the desirability to an insurer of a notification clause being construed as a condition precedent is of course balanced by a potential prejudice to an insured or a third party such as the Claimant in this case if it enables the insurer to take notification points which are either unmeritorious or which relate to matters outside the control of the person who is harmed by the failure of notification. Sympathy for these competing positions cannot however alter the fundament of the argument which is whether on their true construction the clauses here are to be treated as conditions precedent to the insurer’s liability under the policy.

I have noted already the judgment of Ritchie J in Cuckow dealing with conditions which on their face look very similar to the Claims Conditions here. There is a merit to the court taking a consistent approach to the construction of clauses in similar terms, in particular in the context of commercial contracts such as this, where certainty is desirable. The authors of Colinvaux’s Law of on Insurance (Footnote: ²²) (13^th Edⁿ) put the point thus:

“Certainty is naturally considered to be of great importance in dealing with commercial documents such as insurance policies. Consequently, as a matter of principle, when once the meaning of a word has been established by judicial decision, later courts will follow that interpretation, even when not strictly bound to do so under the doctrine of precedent.”

The principle applies equally to phrases as individual words (see for example Ramco (UK) Limited v International Insurance Co of Hanover (2004) Lloyd’s Reep IR 606 cited in the same paragraph of Colinvaux. However the authors of the same work also point out that this principle has its limits:

“First, where the wording differs in important respects from that used in earlier formulations, it is dangerous to construe it by analogy with the earlier provisions, since it may well be that the wording has deliberately been altered for the purpose of overcoming the original decision. Secondly, the original decision is binding only as to the use of a particular word in a particular context – it should not be assumed that a word must mean the same in every insurance policy in which it appears if the surrounding circumstances are different.”

The similarities between the terms here and those with which the court was concerned in Cuckow is certainly a factor that points in the direction of them being interpreted similarly. I have however already expressed caution as to how far I should follow his lead. He was able on the material before him to describe the conditions as being “labelled” as conditions precedent. That would not have availed the insurer if the conditions had not also looked like conditions precedent – if the contents of the tin had not matched the labelling, it is unlikely that Ritchie J would have held the labelling to have been of much assistance.

In the present case it could be said that the contents of the tin are certainly capable of being construed as conditions precedent but, as the Third Defendant concedes, the label is not there. In the absence of any label, is the court able to conclude that these are necessarily to be treated as conditions precedent?; or alternatively is there sufficient ambiguity to lead to a position where, applying the contra proferentem principle of construction, the court should hold that the clauses do not have the force of conditions precedent?

In considering the proper application of the contra proferentem principle, I bear in mind the point made by the Divisional Court (comprising Flaux LJ and Butcher J in Financial Conduct Authority v Arch [2020] EWHC 2448 at [71]), cited with approval by Ritchie J in Cuckow:

“It is clear that the principle, if it still has any validity, can only apply if there is genuine ambiguity, which cannot otherwise be resolved by applying the ordinary principles of construction. In other words, it should not be relied on to create ambiguity where there is none.”

The most persuasive point advanced by the Claimant as to the existence of ambiguity in what is intended here is the fact that the term “condition precedent” is used in respect of other clauses in the policy but not in respect of this clause. Admittedly the same was true in Aspen v Pectel. However in that case, condition 13, stating that “The liability of Underwriters shall be conditional on … the Assured … observing the terms and conditions of this insurance” contained a clear statement of the conditionality upon which Teare J relied in finding the relevant notification terms to be conditions precedent.

In contrast, the relevant conditionality here is said to be found in the statement that breach of the Claims Conditions “will entitle us to refuse to deal with the relevant claim.” The Third Defendant points out that the term used by those who drafted the policy is “will” not “may.” But the fact that a breach of the condition leads not to automatic refusal of indemnity but rather to the insurer having a right to refuse indemnity might be taken to suggest that there is some further process interposed between the non-compliance with the Claims Conditions and the refusal of indemnity. The Third Defendant could have avoided this position by expressly stating that compliance with the Claims Conditions was a condition precedent. It did not do so, even though other clauses in the policy were so worded.

It will be noted that the two alternative consequences contended for here differ from what MacGillivray deals with at [19-040], namely constructing the relevant terms either as conditions precedent or as terms that merely give rise to a claim in damages. The construction advanced by the Claimant here avoids the arguably extreme consequence that a term consciously expressed to be a condition that at the very least may give rise to a right to the insurer not to indemnify under the contract is reduced to a term that merely gives the insurer the right to claim damages if it is breached. When the competing constructions are put in the way they are in this case, the consequence of rejecting the argument that a notification clause is a condition precedent is far less extreme from the insurer’s viewpoint. It is much less obvious that injustice is done to the wording of clauses such as this as conditions if, on its true construction, the clause is found to impose a contractual discretion rather than a mere right in the insurer to claim damages if it is breached. Further, if the correct construction of the clause is that the insurer has a contractual discretion to refuse indemnity, which is to be exercised on Braganza principles, is far more consistent with the commercial interest of the insurer than a construction which merely treats the words as creating a term of the policy for the breach of which the insurer is limited to a claim in damages.

However, notwithstanding the very different consequences that would flow from upholding the Claimant’s favoured construction of the policy in this case from the stark alternative consequences considered by MacGillivray at [19-040], I am not persuaded that there can truly be said to be ambiguity here given the use of the word “will” in the context of the insurer’s entitlement introductory section of the policy under the heading “Claims Conditions.” It still does an injustice to that language to conclude that non-compliance with the Claims Conditions gives the insurer merely a discretion to decline indemnity. Whilst the insurer may not always refuse indemnity, even where there is a breach of the Claims Condition (perhaps because the breach is not even arguably prejudicial to the insurer, a point explored in considering Issue 4 below), to say that a particular set of circumstances “will entitle” a party to act in a certain way does not contain within it the implication that there is some contractual limit on the party to take that action. Moreover that consequence is not undermined by the failure to label the Claims Conditions as conditions precedent – the true meaning of the language is clear even without that label.

Accordingly, in my judgment there is no true ambiguity here. Compliance with the Claims Conditions is a condition precedent to liability. The Second Defendant’s non- compliance with Claims Conditions 3.5 and 2 thus entitles the Third Defendant as of right to refuse indemnity under the policy.

It follows from my determination on Issue 2 that consideration of the third issue is academic. However, given that I have heard evidence on this issue, it is desirable that I determine what the consequences would have been of a finding that the Claims Conditions were not conditions precedent to the Third Defendant’s liability to the Claimant.

If the terms of the policy at Claims Conditions 2 and 3.5 give the Third Defendant only a power to decline cover on grounds of the lack of notification as opposed to providing a condition precedent for such cover at all, the Claimant contends that, applying conventional principles as to contractual discretion, that power must be exercised rationally, in good faith and consistently with its contractual purpose. In support of this proposition, the Claimant relies on the decision of the Supreme Court in Braganza v BP Shipping Ltd [2015] UKSC 17. As Lady Hale JSC stated in her judgment at [30], “… unless the court can imply a term that the outcome be objectively reasonable—for example, a reasonable price or a reasonable term—the court will only imply a term that the decision-making process be lawful and rational in the public law sense, that the decision is made rationally (as well as in good faith) and consistently with its contractual purpose.”

The principle holds equally good in respect of an insurance contract. In the Australian case of Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, Einstein J sitting in the New South Wales Supreme Court, stated the following principles under the heading “When exercising a discretion under an insurance policy” (Footnote: ²³):

“i.

In exercising a discretion under an insurance policy, an insurer is obliged to act towards the insured in the assessment and determination of its claim with the utmost good faith. The obligation is no different from that owed by a trustee to act in good faith in relation to the exercise of a discretion.

ii.

The obligation is, at least, to exercise the discretion in good faith, upon real and genuine considerations and in accordance with the purposes for which the discretion was conferred.

iii.

The obligation imposed on an insurer is consistent with the duty imposed upon a person who, by contract, is required to carry out a quasi judicial function: that person must “act honestly, bona fide and reasonably.”

iv.

An insurer is obliged to exercise its discretion upon “real and genuine consideration” and on sound reasons.

v.

Where a decision made by an insurer is essentially in the nature of a discretionary judgment, that decision may be attacked on the basis that it was unreasonable on the material then before the insurer.

vi.

In the absence of a reason put forward in support of the exercise of the discretion, the Court may infer that the discretion miscarried: see, for example, the evidentiary significance of a trustee to providing reasons for a decision in respect to the exercise of a discretion.

vii.

An insurer’s “power of restraining settlement by the insured must be exercised in good faith having regard to the interests of the insured as well as to its own interests and in the exercise of its power to withhold consent the insurer must not have regard to considerations extraneous to the policy of indemnity.”

Whilst the Claimant accepts that the Third Defendant might legitimately exercise its power to decline cover if a failure to notify impaired its ability to deal with a claim, he contends that it would be exercising its discretion outside of the ambit of that which is permitted by the clause if it did so out of “unbridled commercial self-interest.” That is what the Claimant argues is happening here.

In particular, the evidence of Mr Jaques as to the alleged prejudice suffered by the Third Defendant due to delay are, the Claimant contends, no more than speculation. Furthermore, the Claimant criticises Mr Jaques’ evidence, asserting that he acted as an advocate for the Third Defendant’s cause rather than as a witness who was trying to assist the court.

The Claimant argues that his speculative testimony does not suffice to make out a case of prejudice, for which positive evidence is needed – see the judgment of Saini J in Azam v University Hospital of Birmingham [2020] EWHC 3384, in which the judge said of an argument as to prejudice under Section 33 of the Limitation Act 1980 that, “A finding under section 33(3)(b) that having regard to the delay (underlining added), “the evidence adduced or likely to be adduced…is likely to be less cogent…”, cannot be made in reliance upon bare assertion in submissions. It requires at the very least some evidential or sound inferential basis upon which to make findings about what evidence was not just possible, but likely; and that it was not just possible that it would be less cogent, but “likely” so to be.” Whilst the Claimant accepts that the context of a defence of limitation is obviously different to that of a notification issue under the terms of an insurance policy, the same underlying principle applies – where an assertion is made that a particular event has caused or would cause prejudice, the court will not decide the issue on mere speculation, but rather an evidential foundation, or at least a sound inferential basis for the alleged prejudice must be laid.

As an example of impermissible speculation, the Claimant points to the Third Defendant’s argument that earlier notification might have led to the Third Defendant funding rehabilitation that would have altered the outcome for the Claimant. The medical evidence, which is contained in the Supplemental Bundle provides no support for this conclusion. The Claimant contends that this is a clear example of speculation which the court should disregard.

The Defendant relies on the commercial interest of the insurer in having earlier notification of claims in support of its contention that the decision to reject cover here does not fall out outside of any contractual discretion that may exist.

As is apparent both from Mr Field’s evidence and from the application of common sense, it is in an insurer’s interest to know the circumstances of any potential claim as soon as possible. As a matter of generality, the Claimant does not dispute this proposition.

As Mr Jaques’ evidence demonstrates, there was potential detriment to the Third Defendant in the delay in notification here in that:

It may be in an insurers’ commercial interest to invoke the benefit of a notification clause such as that in the present case as a basis for declining indemnity. But that does not mean that its decision is “unbridled” in the sense of being a mere opportunistic device to avoid paying out under a policy. Rather it reflects the commercial end of ensuring that claims are dealt with in an efficient and timely manner. One can make the same point another way – it is in the general interest of the class of people who may insure through the particular insurer that the latter is not forced to pay out on claims where its chance to investigate or to mitigate any loss (for example through funding rehabilitation in a personal injury claim) is prejudiced since increased liabilities of insurers will inevitably be reflected in increased premiums for policy holders.

The Third Defendant does not however argue that there is any detriment in the failure to notify it of the letter of claim sent by the Claimant in June 2020 – the letter was sent to the Third Defendant only one month later and it does not seek to argue that a short delay so distant in time from the underlying incident was capable of causing prejudice. Had it not made this concession, I would undoubtedly have come to the same conclusion.

Had I found the existence of a contractual discretion to decline to meet the claim, I accept the Claimant’s argument that whether the Third Defendant is entitled to exercise that discretion here is to be judged in accordance with the dictum of Lady Hale in Braganza, namely that the decision must be lawful and rational (in the public law sense) as well as made in good faith and consistent with its contractual purpose. I have no doubt that the contractual purpose of this clause was to avoid the Third Defendant having to meet claims where it was or may have been prejudiced by a delay in notification either because it has affected the insurer’s ability to deal with the insured’s liability to a third party or has adversely affected quantification of the claim for example by meaning that rehabilitation could not realistically have been attempted.

In addressing the material on this issue (both evidence in the strict sense and appropriate inferences from the circumstances), I agree with the Claimant’s argument as to the application of the principle set out by Saini J in Azam at [59] to the circumstances of the present case. It would be contrary to the underlying principles of a rational legal system to allow decisions to be made on the basis of suspicion without more.

Nevertheless, the mere fact that it may be difficult for the court to reach a concluded view on what would have happened had proper notification been given does not prevent it from reaching a sound conclusion on whether there was a real chance that the delay caused prejudice to the insurer. The court here is dealing with a counter factual set of considerations. By definition, such considerations are not capable of being subject to findings on the balance of probabilities in the same way as actual past factual events can be. These cannot be decided on the balance of probabilities, albeit that the court can seek to assess the chance of such counter factual circumstances in a manner which, like the balance of probabilities, might be seen as a percentage assessment of the chance.

But in my judgment, the rational exercise of a contractual discretion would not require the insurer considering the exercise of the power to consider what it is more likely than not would have happened but for the failure to notify. Rather, the insurer must evaluate all of the material and come to a rational conclusion on the issue.

The Claimant has, as I have noted, been critical of Mr Jaques for his tendency in evidence to act as an advocate for the Third Defendant. It is true to say that, in answering questions, he tended to take the part of the insurer. But since he was a party to the decision-making process, it is hardly surprising that, when asked to justify the decision that was made to refuse indemnity, he emphasised the reasons in favour of doing so. It is particularly difficult for a witness in his position to avoid being partisan when talking about the hypothetical because it is almost inevitable that this will involve speculation about matters where there is no hard evidence to rely on.

An example of this is his assertion of the tendency of memory to fade with the passage of time. It is generally accepted that memory tends to work in this way. Certainly Mr Jaques firmly asserted his belief that this was so. Mr Bagot KC challenged his basis for saying this. As Popplewell LJ discusses in his speech, “Judging Truth from Memory – The Science” (Footnote: ²⁴), there is some scientific support for the proposition that memory degrades with the passage of time, though the extent that the passage of time after an event causes memories to fade might often be exaggerated, with most of the “loss of retention”, or what one might call the forgetting, occurring in the first 6 months after the event. It may therefore be that, by early 2018, relevant memories were no more reliable than they would have been had the Third Defendant investigated the incident more extensively in 2020. But that is not to say that memories of witnesses would not have been better if the incident had been reported in September 2017, which the Third Defendant contends (and I accept) was the Second Defendant’s obligation under Claims Condition 3.5. In my judgment, memories would probably have been better then.

Another example of a hypothetical consideration relevant to the exercise of the putative discretion is whether earlier notification of the incident would have assisted the Third Defendant in contacting the door staff. The evidence before the court does not paint a very clear picture of what if any steps the Third Defendant took to make contact. But the email from Mr Lucas to CC-Insure dated 13 July 2020 states that, by then, the door staff were “refusing to cooperate.” As Ms Slater of the Second Defendant pointed out in an email to Plexus dated 31 August 2020, it was difficult to investigate matters more than 3 years after the incident. If the Third Defendant had been notified earlier (within the first month or so of the incident rather than 3 years later) it is at least possible that they would have had greater success in tracking down the door staff. Of course, those people may have been of no assistance to the Third Defendant. The Claimant makes the perfectly fair point that the incidents on the video largely speak for themselves and it is obviously the case that any attempt by the door staff to explain matters in a manner inconsistent with the video evidence would have been liable to be treated with considerable scepticism by the insurers themselves and, if litigation had ensued, by the court. Nevertheless, one cannot exclude the possibility of the door staff being able to provide relevant material about the circumstances of the incident and the lead up to it and that such information would have assisted in dealing with the Claimant’s claim and potentially in defending it.

I am less convinced by the argument that earlier notification would have led either to the Second Defendant (specifically Mr Lucas) being more cooperative with the investigation or to the possibility of the Third Defendant funding rehabilitation for the Claimant. On the first point, the lack of engagement by Mr Lucas suggests that he would not have engaged even with earlier notification. In any event, I do not see that he would have had any material that could have assisted the Third Defendant’s investigations, beyond possibly providing contact details for witnesses which is part of the separate issue, dealt with below, as to what difference earlier notification may have had to the insurer’s ability to contact witnesses to the incident. On the second, the material before the court does not suggest that earlier treatment would have made a difference to the outcome. For the Third Defendant to have made good an argument for potential prejudice on this ground would have required at least some sound inferential basis for coming to that conclusion if not some medical evidence in support.

The Third Defendant does however demonstrate at least two grounds (the general fading of memories and the lack of cooperation of the door staff) where earlier notification, specially within the first month of the incident, may have put the Third Defendant in an appreciably better position to deal with the claim. I accept that it cannot clearly be said that, if earlier investigation had taken place, the potential liability of the Second Defendant would have been determined differently but I accept that there is a real chance that it would have been so. As Mr Withington KC put it in closing submissions, the Third Defendant did not need “to go into overdrive” to investigate a claim that by the time of it receiving notification was 3 years old. In my judgment, this is capable of founding a rational and lawful exercise of the contractual discretion (if such existed and needed to be relied on) to refuse to provide an indemnity.

However the difficulty for the Third Defendant in advancing the argument that its decision to decline indemnity was rational raises a separate issue. It is apparent from the Third Defendant’s defence, Mr Jaques’ witness statement and his evidence in cross examination that the Third Defendant declined to indemnify the Second Defendant because of the breach of Claims Conditions 2 and 3.5, not because it exercised a contractual discretion to do so. Given my finding on Issue 2, the Third Defendant was justified in taking this stance. However, I am not persuaded on the evidence before the court that the Third Defendant can be shown to have made a decision on the basis of the factors relevant to the exercise of a contractual discretion nor that its decision would necessarily have been the same had it done so. Mr Jaques says the decision to refuse indemnity would have been discussed at a senior level and he accepted that, if the discussion had been recorded, the record would have been a disclosable document in this action. However the lack of any disclosed evidence as to the decision making process prevents me from determining either that the decision was taken on rational Braganza grounds or concluding that, had the discretion been exercised, it inevitably would have led to the indemnity being refused (Footnote: ²⁵).

Had the Claimant succeeded in persuading me that the Claims Conditions were not conditions precedent but rather simply gave to the Third Defendant a contractual discretion to refuse to provide indemnity, I would not in any event have found that the delay in forwarding the letter of claim sent on behalf of the Claimant to the Second Defendant in June 2020 was capable of justifying the refusal of indemnity. This was a trivial breach, which can have had no meaningful consequence for the Third Defendant’s ability to deal with the Claimant’s claim. given that it was sent nearly three years after the incident and injury to which it related. On the assumption that I was right to treat the Claims Conditions as conditions precedent to its liability to indemnify, I suspect that the Third Defendant would not have exercised its power to refuse indemnity on this ground alone, but rather would have treated it as de minimis non compliance with the contractual obligation.

The Claimant contends that the 2010 Act provides several gateways to bringing a claim against an insurer. One is the joinder of the insurer as a party to a claim, seeking a declaration as to its liability pursuant to Section 2. But the routes for establishing a liability for the purpose of the Act within Section 1(4) include not only a declaration under section 2 but also amongst other things a judgment.

The interpretation of Section 1 was considered by the Court of Session, Inner House, First Division, in Scotland Gas Networks plc v QBE UK Ltd [2024] CSIH 36. The Inner House was concerned with exactly the same provision of the 2010 Act (which applies in Scotland as in England and Wales). The Inner House was there concerned with a judgment entered in default against the insured. Having analysed Section 1 of the 2010 Act, the Inner House concluded:

The Inner House noted the judgment of Christopher Clarke LJ in AstraZeneca Insurance Co Ltd v XL Insurance (Bermuda) Ltd [2013] 1 CLC 478, where he held:

That case, as the Inner House noted, did not involve the 2010 Act or its predecessor, the Third Parties (Rights against Insurers) Act 1930, but rather a dispute between an insurer and a reinsurer. Regardless of whether it was a correct statement of the law in the particular context of that dispute (which the Inner House did not doubt), it was not relevant to the different legislative regime established by the 2010 Act.

Accordingly the Claimant contends that the judgment of HHJ Sephton KC is binding on the Third Defendant as establishing the Second Defendant’s liability to the Claimant for injury caused by the negligence of the Second Defendant. Since the judgment of HHJ Sephton KC did not purport to determine the extent of any injury, that issue of course remains one that the Claimant would need to establish on the quantification of his claim, but it is not open to the Third Defendant to dispute that the Second Defendant has some liability to the Claimant for injury caused in the incident on 6 August 2017.

In response, the Defendant accepts that the Claimant has established the Second Defendant’s liability such as to enable this claim to be made. Further, as against the Second Defendant, the Claimant has a good judgment in respect of which he would need only an assessed figure for damages in order to enforce.

But the Third Defendant contends that the judgment of Christopher Clarke LJ in Astra Zeneca v XL remains good law. It relies on a passage to similar effect in Omega Proteins Ltd v Aspen Insurance UK Ltd [2010] EWHC 2280 at [49] (Footnote: ²⁷):

“…in liability insurance such as this the position, generally speaking, lies thus:

(1)

the insured must establish that it has suffered a loss which is covered by one of the perils insured against:

(2)

that may be done by showing a judgment or an arbitration award against the insured or an agreement to pay;

(3)

the loss must be within the scope of the cover provided by the policy;

(4)

as a matter of practicality, the judgment, award, or agreement may settle the question as to whether the loss is covered by the policy because the insurers will accept it as showing a basis of liability which is within the scope of the cover;

(5)

but neither the judgment nor the agreement are determinative of whether or not the loss is covered by the policy (assuming that the insurer is not a party to either and that there is no agreement by the insurer to be bound);

(6)

it is, therefore, open to the insurers to dispute that the insured was in fact liable, or that it was liable on the basis specified in the judgment; or to show that the true basis of his liability fell within an exception;

(7)

thus, an insured against whom a claim is made in negligence, which is the subject of a judgment, may find that his insurer seeks to show that in reality the claim was for fraud or for something else which was not covered, or excluded by, the policy;

(8)

similarly, an insured who is held liable in fraud (which the policy does not cover) may be able to establish, in a dispute with his insurers, that, whatever the judge found, he was not in fact fraudulent, but only negligent and that he was entitled to cover under the policy on that account.”

In the first instance, it is necessary to consider the nature of the judgment of HHJ Sephton KC. That judgment was given at a hearing which the Second Defendant did not attend (but was after the First Defendant had been removed from the action and before the Third Defendant was joined as party to the action). The Judge struck out the Defence of the Second Defendant. It follows that there was no Defendant before the court. The Judge heard evidence and entered judgment for the Claimant, for damages to be assessed.

His judgment appears in the bundle at TB/17. The Judge made findings of fact including that the doormen were guilty of assault, that the defence of self-defence was not available given that he had struck out the defence (though if it had been, he would have rejected it on the evidence) and that the assault caused the Claimant to suffer a stroke. The Judge made reference to the “interesting and difficult” argument advanced by the Second Defendant in its defence that one of the door staff was an independent contractor but not an employee. None of the witness statements dealt with this issue but there was material before the court including communications from the Second Defendant to its insurers which was capable of supporting a finding that both Mr Coupe and Mr Diallo were employees of the Second Defendant, even though the judge did not expressly make a finding on his issue, rather relying on the fact that the Defence had been struck out to reach the conclusion that he did not need to grapple with the issue.

Mr Withington KC rightly accepts that, notwithstanding any ambiguity in the findings of the Judge on his particular issue, the judgment is one following trial at which the Defendant was not present, rather than a judgment in default of defence following on from the strike out. In fact neither party contends that this issue is of significance to the matters that I have to decide, but in so far at it may be, I proceed on the concession of Mr Withington KC (which is the finding that I would have made had it been necessary to decide the issue) that the judgment of Judge Sephton KC was not a default judgment but rather a judgment after trial.

Whilst of course a decision of the Inner House is not binding open me, it is of considerable persuasive value. I am satisfied that I should follow that decision in finding the judgment of HHJ Sephton KC to be binding upon the issues that he determined, namely whether the Claimant had suffered personal injury as a result of the negligence of persons for which negligence the Second Defendant was vicariously liable. I say so for the following reasons:

Accordingly, the findings of HHJ Sephton KC as to breach of duty, vicarious liability and causation (in the sense of what is sometimes called “primary causation” – whether the breach of duty for which the Second Defendant is liable caused any injury to the Claimant) is determinative of those issues in a claim by the Claimant against the Third Defendant under the 2010 Act.

In conclusion:

It follows that the Third Defendant is not liable to the Claimant pursuant to the 2010 Act and to that extent this claim fails. I invite the parties to seek to agree an order consequent upon this judgment.