Discovery Land Company LLC & Ors v Axis Specialty Europe SE
[2023] EWHC 779 (Comm)
Axis Speciality Europe SE v Discovery Land Company LLC & Ors
15 January 2024
[2024] EWCA Civ 7
Court of Appeal
A company's insurance company (Axis) tried to avoid paying out on claims because their insured's lawyer was dishonest. They said another director knew about it (condonation) and that all the claims were one big claim (aggregation). The court decided the other director didn't know, and the claims were separate, so Axis had to pay.
Key Facts
- •Claimants were clients of a dishonest solicitor, Mr. Stephen Jones.
- •Axis was the insurer providing professional indemnity insurance to Jones' firm and associated companies.
- •Dispute concerns whether Axis can rely on an exclusion clause for dishonest acts and an aggregation clause.
- •Insured entities (Jirehouse Entities) were insolvent.
- •The key question is whether another director, Mr. Prentice, condoned Jones' dishonest behaviour.
- •Claims involved misappropriation of client funds (Surplus Funds) and an unauthorized loan secured by the clients' property (Dragonfly Loan).
- •Mr. Prentice's knowledge and actions regarding Jones' dishonesty were central to the case.
- •The policy required condonation by all directors for the exclusion clause to apply.
- •The aggregation clause required claims to arise from 'similar acts or omissions in a series of related matters or transactions'.
Legal Principles
Insurance policies must be interpreted in line with the principal purpose of protecting the public.
Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57
A person cannot insure themselves against the consequences of their own dishonesty.
Case Law Principle
Condonation means treating unlawful or blameworthy conduct as acceptable; it can be silent and by conduct.
Case Law Definition
To apply the exclusion clause, there must be a causal nexus between the condoned dishonest behaviour and the claim.
Clause 2.8 Interpretation
Blind-eye knowledge requires a suspicion of specific facts and a deliberate decision to avoid confirmation.
Group Seven Ltd v Nasir [2020] EWCA Civ 614
Appellate courts should only overturn fact-findings if they are 'plainly wrong'.
McGraddie v McGraddie [2013] UKSC 58; Volpi v Volpi [2022] EWCA Civ 464
Aggregation of claims requires 'similar acts or omissions in a series of related matters or transactions'. Similarity must be real or substantial.
AIG Europe Ltd v Woodman [2017] UKSC 18; [2015] EWHC 2398
Outcomes
Appeal dismissed on the condonation issue.
The judge's finding that Mr. Prentice did not condone Mr. Jones' dishonesty was not 'plainly wrong'. The court found the judge's evaluation of the evidence, including Mr. Prentice's lies, to be rational and supported by the evidence.
Appeal dismissed on the aggregation issue.
The judge correctly held that the claims did not arise from 'similar acts or omissions in a series of related matters or transactions'. The court found the two claims were substantively different, even though both involved theft of client funds.
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