Following a Commercial Court trial, Dame Clare Moulder DBE found in the Claimant’s favour in a trial of preliminary issues concerning claims for indemnification of PPI liabilities and related costs and expenses under a Business Transfer Agreement and a Deed of Warranty and Indemnity.
The decision involved a number of points of interpretation of several contracts and insurance business transfer schemes under Part VII of FSMA.
The judge rejected the Defendant’s arguments on the construction of the relevant indemnities, including deciding that:
- The Defendant had put the matter too highly when describing the Canada Steamship principles as guidance and submitting that one should approach the question of contractual interpretation on the basis of what will in general be an “inherent improbability” that the parties should agree to allocate responsibility for one party’s wrongdoing to the other. In fact, the true principle – at least as far as negligence is concerned – is that the Court should bear in mind that a party is “unlikely to have agreed to give up a valuable right that it would otherwise have without clear words”. Moreover, there is no need for express words to have been used to exclude negligence.
- The PPI liabilities were within the scope of the relevant indemnities, save as regards the life element of the liabilities, on their proper interpretation. They well within the natural meaning of the clauses in question, and the Claimant’s construction was supported by the other provisions of the contract, the overall structure of the sale of the business as a going concern, the factual matrix, and business common sense.
- The indemnities extended to an actual liability and a reasonable acceptance of liability (including by way of a reasonable and bona fide settlement of claims/complaints), and extended to payment under the provisions of the DISP sourcebook in the FCA Handbook.
- The Claimant was not precluded from claiming under the indemnity because it was no longer a member of the relevant corporate group; the Claimant could nonetheless claim under the indemnity on its proper construction under the Contract (Rights of Third Parties) Act 1999.
Sonia Tolaney KC and Nehali Shah appeared for the Claimant, instructed by Herbert Smith Freehills.
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