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

Fecha: 20-May-2025

Identity of the Policyholder

24.

The re-procured policy, provided under cover of a further witness statement from Ms Emerson served on 12 May 2025, however, identified that the policyholder was to be Omni Bridgeway (Fund 5) S2 LP, the litigation funder, rather than – as Accor had previously assumed to be the case – Lloyds. This has potential advantages, Lloyds says, in the context of the further issue raised by Accor, namely avoidance for fraud. However, Mr Blackett contended, orally, that this change gave rise to a new difficulty. Mr Webb KC responded, hearing the objection for the first time during the hearing. Whilst I plainly do not criticise Mr Blackett for not having been in a position to have raised this particular concern in advance, this change only having been introduced after the service of skeleton arguments, it is likely that had there been proper engagement in good time in advance, the re-procurement of the draft policy would have happened much sooner and the need for new points to be developed and responded to orally would have been avoided.

25.

Mr Blackett’s contention was that:

(1)

On a natural reading of Clause 2 of the AAE, a prerequisite for being paid Incurred Adverse Costs is the making of a ‘Security Claim’.

(2)

A ‘Security Claim’ is defined as one ‘which, if made by the Policyholder, would have been a claim under the Policy’.

(3)

The policy provides at Clause 9.1.3 that:

‘A claim can only arise where the Claimant and/or Policyholder has incurred an Insured Liability ….’

(4)

An ‘Insured Liability’ is defined as:

‘the obligation to pay Incurred Adverse Costs which are not the subject of clause 2, in respect of the Case which (i) the Policyholder has agreed to indemnify pursuant to the Litigation Funding Agreement or (ii) the Policyholder is ordered to pay or agrees to pay with the Insurer’s approval, up to the Limit.’

(5)

The Policyholder has changed from Lloyds, the Claimant, to the Litigation Funder. There is no transparency with regards to the likely satisfaction of (i), given that the Litigation Funding Agreement has not been disclosed. As to (ii) it is not inevitable that there would be an order by which ‘the Policyholder’ (the Litigation Funder, now) would be ordered to pay Incurred Adverse Costs. Indeed, any order is more likely to be against Lloyds, not the Litigation Funder. Thus, it is conceivable that the definition of ‘Insured Liability’ would not be satisfied, and that, in turn, no ‘Security Claim’ could be made by the Security Payee.

26.

In response to this argument, Mr Webb KC pointed out that Clause 2 of the AAE focussed on the direct payment of Incurred Adverse Costs to the Security Payee irrespective of rights between Insurer and Policyholder. He argued that the reference within the definition of Incurred Adverse Costs to include where ‘the Claimant is ordered by the Court to pay the Opponent’ and the reference in Clause 12 of the AAE to ‘a relevant court order’ make it clear that the definition of ‘Insured Liability’ was no longer relevant to the obligation to pay under the AAE.

27.

The short answer to this point is that the link between the obligation to pay to the Security Payee and an Insured Liability under the Policy has not, whether intentionally or otherwise, been fully severed in light of the definition of Security Claim. By failing to update the wording of ‘Insured Liability’ to take account of the fact that the Policyholder was not the Claimant, there exists, as Mr Blackett identifies, a lacuna in the drafting through which an Insurer could argue, realistically, that if there would not have been a claim under the Policy (because Insured Liability is unsatisfied), there can be no Security Claim.

28.

It may well be that this is an unintentional lacuna and one that is readily fixed: the suggestion that substituting the word ‘the Claimant’ for ‘the Policyholder’ (or adding it with ‘and/or’) was accepted, rightly, by Mr Blackett as something that would close the lacuna. Whilst therefore this is an insufficiency which means that I am not prepared to order that ATE Insurance in line with this draft policy may be an adequate alternative to paying into Court, for the reasons that I have already explained, I am prepared to give Lloyds some time to seek to deal with the point satisfactorily.