Axis Speciality Europe SE v Discovery Land Company LLC & Ors
[2024] EWCA Civ 7
Discovery Land Company LLC & Ors v Axis Specialty Europe SE
3 April 2023
[2023] EWHC 779 (Comm)
High Court
A law firm's insurance company refused to pay out after a solicitor stole money. The court had to decide if another partner in the firm knew about the theft and was involved. They found that the second partner was a bit slack and dishonest, but didn't know about the exact thefts. So, the insurance had to pay.
Key Facts
- •AXIS Specialty Europe SE provided solicitor's professional indemnity insurance to Jirehouse Partners LLP and related companies.
- •Claims arose from dishonest acts by solicitor Stephen Jones.
- •Key issues: whether Mr. Prentice was also a director/member and if he condoned Jones' actions.
- •Two claims: Surplus Funds Claim (US$14,050,000) and Dragonfly Loan Claim (£4,980,470).
- •Jirehouse Entities were insolvent.
- •Policy based on SRA Minimum Terms and Conditions of Professional Indemnity Insurance 2013.
- •Clause 2.8 excluded liability for fraud or dishonesty unless condoned by all directors/members.
- •Several SRA investigations into Jirehouse's financial irregularities occurred before the main events.
Legal Principles
Professional indemnity policies are construed against the background of the Solicitors Act 1974, s.37, aiming to safeguard the public.
Impact Funding Solutions Ltd v Barrington Support Services Ltd [2017] UKSC 57
The word "condone" should be given its ordinary meaning: acceptance or approval.
Judgement of Mr Justice Robin Knowles CBE
Condonation under Clause 2.8 requires knowledge of the dishonest acts or a pattern of dishonest behaviour involving those acts.
Judgement of Mr Justice Robin Knowles CBE
For aggregation of claims under Clause 5.2, claims must arise from one series of related acts or omissions or similar acts in related matters.
Lord Bishop of Leeds v Dixon Coles & Gill [2021] EWCA Civ 1211
The requisite degree of similarity for aggregation must be real or substantial, not fanciful or insubstantial.
AIG Europe Ltd v OC320301 [2016] EWHC 2398 (Comm)
Outcomes
Mr. Prentice was a director and member of the Jirehouse Entities.
Companies House records and Mr. Prentice's testimony supported this.
Mr. Prentice did not condone Mr. Jones' dishonest acts.
While Mr. Prentice displayed unprofessional conduct and lied, he lacked knowledge of the specific fraudulent acts forming the claims. His inaction stemmed from lack of professional responsibility, not deliberate avoidance of knowledge.
The Surplus Funds Claim and Dragonfly Loan Claim are not aggregated.
The claims arose from separate, unrelated series of acts, despite both relating to Taymouth Castle. The thefts were distinct events.
The Claimants' application to strike out references to Mr. Prentice's 2019 interview was denied.
No legal professional privilege applied, and the process was fair.