Harcourt v FEF Griffin & Ors

On 29 September 2004, the Claimant then aged 16, suffered severe spinal injuries in a gymnastic accident in the gymnasium of the First Defendants. The accident rendered him a C4 tetraplegic. The First Defendant was an unincorporated association, responsible for the provision of gymnastics coaching at the Pegasus Gymnastics Club. The Second and Third Defendants were gymnastic coaches employed by the First Defendant, in respect of whom the First Defendant owed vicarious liability.

Liability was originally denied by the Defendants and a split trial was ordered. However a settlement liability aspect of the case was reached on the basis of an apportionment, the day before trial was due to commence. As a result, a Consent Order was made by Ramsey J on 13 November 2006, giving judgment for the Claimant against the Defendants for damages to be assessed at 75% of the full liability value of the claim. The Defendants were ordered to pay the Claimants costs to date and to make an interim payment of £300,000 on account of costs by 1 December. The Defendants were ordered to make an interim payment of £1,000,000 in addition to satisfying a liability to repay benefits, by 1 December 2006.

On any view this case is going to bring a very significant award in damages. The Claimant is now 19 years of age. He is very severely disabled and has a long life expectancy. The Claimants suggest that his claim is likely to be worth between £8,000,000 -£10,000,000 on full liability, with a consequent net value after reduction by 25% of between £6,000,000 -£7,500,000. The Defendants have advanced no specific figure, although clearly they would suggest that the Claimant's total is too high.

In support of their general contention as to the likely value of the claim, the Claimants cite the recent decision in the comparable case of Sarwar -v−(1) Ali (2) MIB [2007] EWHC 1255. This case is not advanced as more than an illustrative example of the level of achievable award, but the case offers some quite close parallels with the instant case, since the claimant in Sarwar was a young man of 23 with comparable injuries and life expectancy. In that case the total gross equivalent lump sum award was in excess of £9.5 million which fell, by chance, to be discounted also by 25%. The net lump sum equivalent award was £7.158 million, excluding costs.

It should be noted that in addition to the very large potential award here, the case has already generated enormous costs. I was told in the course of the hearing that the Claimants' costs bill on liability incurred to date was in excess of £500,000 on a standard basis. That figure leaves out of account costs to be incurred during the quantum phase of the case but perhaps even more significantly leaves out success fees, this being a case subject to a conditional fee agreement. Counsel were reticent as to any details of the conditional fee agreement, but did emphasis to me that the prospective risks in a case such as this would have been very high. From this I infer that it is likely the success fee is a high percentage, very probably 100%, at least in respect of the liability phase of the case. Clearly, the costs bill may well be subject to reduction in the process of assessment if it is not agreed but it is certain to end as an extremely large liability in its own right, very possibly in excess of £1million, once success fees are taken into account.

I have already observed that the First Defendant is an unincorporated association. I was told in the course of the hearing that a limited number of individuals would be responsible for any liability on behalf of the First Defendant and that none are wealthy individuals. Nor are the Second or Third Defendants. Not surprisingly, those advising the Claimant are concerned as to how judgment in the sum likely to be the final result and satisfaction of any costs order may be met. This at the heart of the current application.

Initially on 28 November 2006 and then in an amended form dated 20 February 2007, the Claimant has made a Part 18 request for further information directed to establishing the nature and extent of the insurance cover enjoyed by the Defendants. The primary argument can be summarised very simply. If the combination of the insurance limit and any assets available to satisfy an award is bound to be exceeded by any reasonable outcome, then it would be wasteful and wrong to engage in a contested quantum phase generating cost, which, at best will not be recovered, and at worst from the point of view of the Claimant himself, may have to be satisfied from funds which could otherwise be used to his benefit. If, on the other hand, there were to be ample insurance cover, then it would be rational on the part of the Claimant and his lawyers to expend further time and costs seeking to maximise the award.

With such thoughts in mind, the Part 18 request is designed to elicit the overall extent of insurance cover; whether the limit applies to periodical payments − future recurring liabilities − arising in each year, or whether the limit is a once – for - all limit in respect of a given claim; whether the limit applies to the award of damages only or is also a limit affecting the total of damages and Claimants' costs or indeed the total of damages Claimants' costs and Defendants' costs.

CPR, r. 18.1 reads as follows:

The nature and extent of the Defendants' insurance cover is not in itself a ‘matter×.in dispute in the proceedings' between the Parties, in the sense that the proper quantum of damages payable to the Claimant could be determined without determining whether the Defendants can actually pay those damages. However, it appears to me that the wording of CPR. r. 18 requires to be interpreted reasonably liberally. The purpose of the jurisdiction must be taken to be to ensure that the Parties have all the information they need to deal efficiently and justly with the matters which are in dispute between them. Moreover, the wording need not be taken to imply that there must be a live disagreement about the relevant issue, since on very many occasions parties are properly required to furnish information pursuant to CPR r. 18 precisely to discover whether there is or is not a live disagreement between the parties on a given point. The whole thrust of the new approach to civil litigation enshrined in the Civil Procedure Rules is to avoid waste of time and cost and to ensure swift and, as far as possible, proportionate and economical litigation. Therefore, I have no hesitation in finding that if there is no rule of law or significant rule of practice to the contrary, then the wording of CPR r. 18 is broad enough to cover information of this kind.

This conclusion is supported by the logic in the decision in the Court of Appeal in Re OT Computers [2004] EWCA Civ 653, where the Court ordered a defendant to give pre−issue disclosure of insurance details in a case governed by a section 2(1) of the Third Parties (Rights Against Insurances Act 1930).

In addition to the straightforward argument I have summarised above, the Claimant relies upon the power of the Court to order periodical payments in a personal injury case, whether at the invitation of the parties or otherwise. By virtue of CPR 41.5 to 41.9 inclusive, and as a result of the amended and substituted provisions of the Damages Act 1996, in a personal injury case the Court must consider and indicate to the parties a view as to whether "periodical payments or a lump sum is likely to be more appropriate form for all or part of an award of damages" -CPR 41.6 , and in that regard "the court shall have regard to all the circumstances of the case and in particular the form of award which best meets the claimants needs" − CPR 41.7. Further, the court may not make an order for periodical payments unless satisfied the continuity of payment under the order is reasonably secured − section 2 (3) Damages Act 1996 and the Practice Direction, see also CPR 41.9.

These provisions taken together constitute what might be termed a paternalistic jurisdiction, giving rise to an obligation placed on the court to decide whether an order for periodical payments may be in the best interests of a claimant, even in respect of a claimant who wishes otherwise and even in respect of a claimant who has full capacity.

The Claimant submits that neither he nor the court can consider properly which form of award would be appropriate here, unless and until the information requested has been provided, since without the information, neither the court nor the Claimant can assess whether a periodical payment order would be satisfied by the Defendants' insurers, whether there is security within the meaning of Section 2 of the Damages Act 1996, whether in the absence of such security or in the case of incomplete security, the level of cover is sufficient to enable the Court to require the Defendants to purchase an alternative secure financial product. The Claimant concludes by arguing that this information is necessary to decide whether to develop fully any claim for periodical payments. This is really a variation of the principal argument I have summarised above. The Claimant might have added the further simple point that, if the insurance cover is limited to any sum which is likely to be exceeded by the overall capital value of the award, and the limit also applies to the cumulative total of the periodical payments, then even if the payments would be secure to that extent, there would arguably be a compelling argument for a lump sum award to the maximum extent of cover, giving immediate access to the largest possible sum for investment, rather than deferring some of those payments, already inadequate in their overall extent, by means of a stream of periodical payments.

Stripped to their essentials, the Defendants make five points in reply. Firstly, it is said that it is elementary that an outsider to a contract, in this case any contract of insurance between defendants and insurers, has no right to know any of the terms of that contract. Secondly, the statutory exceptions to that rule derived from the Third Party (Rights Against Insurers) Act 1930, the Contract (Rights of Third Parties) Act 1999 and/or the legislation relating to the Motor Insurers Bureau all constitute statutory exceptions which prove the rule. If Parliament had intended other exceptions, then further legislation would have followed. Thirdly, if such a request were granted it would hand an unfair advantage to a claimant in litigation such as this. Fourthly, it is said that were such a request to be granted, it would rapidly become standard practice in every case for a claimant to request such information and indeed for defendants to reply in kind, setting up undesirable and wasteful satellite litigation. Fifthly, the Defendants argue that the periodical payments regime and the various obligations of the parties and the court do, taken together, have an effect on what must be disclosed, but the effect is limited in scope, does not extend to disclosure of the actual figure of the limit of cover and in any event no such obligation can arise until the date (in the instant case, in January 2008) when the parties would otherwise be required to indicate a preference for periodical payments or otherwise.

I recognise that there may be force in many of these arguments. It is of course correct that there must be a very good reason before a court will enforce disclosure of the terms of a contract between a party to litigation and a third party. However, there are many circumstances where such disclosure may be compelled if it is relevant to an issue in the case. Numerous examples could be found in cases concerning agency, cases where tortious liability is sought to be limited, or cases where interlocking contractual and commercial rights are in question.

I further agree that there is no direct statutory authority or obligation under which the request is made in such a case as this. However, that does not mean in my judgment that there is a necessary implication that Parliament did not intend such a request as this to be met. This is not a case of the interpretation of a single statute, where the omission of a specific provision, in a context which might otherwise require it, conveys a necessary implication that the provision was intentionally omitted.

There may well be cases where revelation of the limit of insurance cover would bring a tactical advantage to the other party in litigation. It is not always possible to predict what such an advantage might be. Certainly, in any case where an application such as this is made, the court would no doubt attend to any argument proffered as to prejudice to be suffered. However, no argument was advanced to me as to any specific prejudice to these Defendants on the facts of this case, whether immediate or postponed, actual or potential.

I also agree that it would be highly regrettable if application and cross application for information of this kind became a standard piece of tactical manoeuvring in litigation, even in the case of personal injury litigation, where the periodical payment consideration comes into play. This is a valid argument against any general practice of ordering disclosure along these lines. It seems to me that, setting aside any other point, disclosure of this kind should only be ordered where a claimant (or where the situation arises, any other party) can demonstrate that there is some real basis for concern that a realistic award in the case may not be satisfied. I do not intend to attempt any general statement of principle as to the limits of such an obligation, applicable across all cases. I am however certain that the exercise of any jurisdiction to order disclosure of information such as this will be approached with caution. There must be some real basis for suggesting that the disclosure is necessary, in order to determine whether further litigation will be useful or simply a waste of time and money.

In relation to the arguments advanced by the Defendants to meet the periodical payments problem, I have somewhat less sympathy with the line taken. The Defendants concede that:

In my judgment, that is a weak argument. If it is inevitable that this information should be disclosed so as to enable the Claimant to take a view on periodical payments, it seems to me wrong to postpone the disclosure of the information for many months during which much cost and time will be expended, by reference to a time provision which has been set for other purposes. Perhaps it is a mark of the Defendants' real appreciation of the weakness of these arguments they have advanced that they are prepared to volunteer much of the information now.

The Defendants go on to argue, moreover, that even in January 2008:

The difficulty with all this is that, in my view, the Defendants are not able to advance a cogent reason why the Claimant should not know what X is. All of the other pieces of information are of very limited utility to a Claimant in deciding what to do about periodical payments. Without knowing (1) whether the appropriate level of periodical payments can be met (2) what is the nature and extent of the cover provided in relation to compensation by way of periodical payments, lump sum damages and costs, it seems to me neither the Claimant nor the Court can make a reasonably informed assessment of the relevant relative advantages and disadvantages as between a periodical payment award and a lump sum award. The complexity and obscurity of the Defendants' response on this point demonstrates the weakness of their position.

I have already set out above the very significant potential award and the very significant costs which arise on the facts of this case. Even allowing for the 25% deduction for the compensation on the lump sum basis and the costs taken together may very well exceed £7.5 million. It is entirely possible that the award may exceed that sum by a very considerable margin. Equally important is the fact that one can confidently predict a very considerable further costs bill in the preparation of this case through the quantum phase. A certificate of insurance has in fact been disclosed in this case, I was told by accident. On the face of it, that document would indicate that there is cover to £5m. Of course we do not know whether that is once for all, covers costs as well as damages, and we do not know whether that may only be part of the Defendants' insurance, rather than all of it. What that document does do is to raise the question that there may not be adequate cover here. If a firm platform were needed for a suggestion of such a problem, that document provides it.

For all those reasons, I order that the Defendants reply to the Part 18 request for information, as served and in full.