HT-2022-000022 - [2025] EWHC 1238 (TCC)

Clause 4(ii)(d) of the AAE says that the Insurer will not pay any claim under the Endorsement for “Incurred Adverse Costs incurred after the Litigation Funding Agreement has been terminated”. That Litigation Funding Agreement has not been disclosed. Accor therefore contends that it does not know in what circumstances it might be terminated, or what representations Lloyds or others might have made to induce a funder to enter into it. Whilst Clause 5.1 of the Policy requires Lloyds to give Accor 5 days prior notice if any notice of termination is issued “pursuant to the terms of the Litigation Funding Agreement”, Accor says that it has no rights if the clause is breached, and notice is not given, because Accor cannot enforce terms of the Policy, only the Endorsement. Accor therefore argues that it is not fanciful to suggest that the undisclosed Litigation Funding Agreement might come to be terminated without Accor’s knowledge but replaced by some other arrangement, whereby Lloyds could continue to pursue the claim but without Accor having the protection of the Policy/ Endorsement.

This concern is a justified one. The fact that the provision of security in the future may fail (provided it is not with retrospective effect) is not itself objectionable: as Mr Webb KC pointed out, it is no different in principle to the possibility that a party may fail to make a future payment in which has been ordered. The difficulty, however, is the potential lack of knowledge on the part of Accor that the ongoing security had ceased (which obviously does not apply if a future payment in is not made). One solution may have been for the Court to have ordered that the claim would be automatically stayed if the funding agreement was terminated, with an obligation on the part of Lloyds as part of the order to notify the Court (and Accor) in such circumstances. Ultimately, however, it has not been necessary to consider this in circumstances where (being ‘Lloyds’ best guess as to the clause which Accor may allege causes difficulties’, as it was put in submissions), Lloyds has procured a revised policy with Clause 4(ii)(d) of the AAE removed.