QUEEN'S BENCH DIVISION
B e f o r e :
|J ROTHSCHILD ASSURANCE PLC|
|(ON ITS OWN BEHALF AND ON BEHALF OF ALL OTHER PARTIES INSURED PURSUANT TO INDEMNITY INSURANCE POLICIES 200492/AA, 200492X1/93 AND 200492X2/93)||Plaintiffs|
|- and -|
|JOHN ROBERT COLLYEAR|
|(on his own behalf and on behalf of all other Lloyd's Underwriters subscribing to insurance policy No. 200492/AA)|
Mr G Kealey QC and Mr J Nash, instructed by Messrs Hartfields, London, WC2A 1DU, appeared for the Defendants.
Crown Copyright ©
Mr Justice Rix:
First, there is an issue regarding notification. The policies, as I have already mentioned, are on a "claims made" basis. No claims, at any rate no claims with which this litigation is concerned, were made in the policy year. However, the policies required JRA to give notice of any circumstance of which JRA became aware which might give rise to a claim against them, whereupon any claim to which that circumstance gave rise, even though made after the policy year had expired, would be deemed to have been made within it. Following a report by KPMG Peat Marwick to the Securities and Investment Board (SIB) in December 1993 (the "KPMG report"), Lautro (the Life Assurance and Unit Trust Regulatory Organisation), the self regulating organisation (SRO) of which JRA were a member for the purpose of regulation under the Financial Services Act 1986 (the "Act"), wrote to their members to say that the KPMG report disclosed a "problem which needs to be tackled" regarding non-compliance in the selling of pensions in certain classes of cases, known as "transfers" and "opt-outs" (of which more below). On 27 January 1994, only a few days before the expiry of the policy year, JRA's solicitors, Messrs Titmuss Sainer & Webb, wrote to the underwriters' agents purporting to give notice by reference to the Lautro letter and the KPMG report of circumstances "which may give rise to a claim" against them (ie against JRA). The underwriters, however, disputed that that was a valid notice for the purpose of the clause, on the basis that no criticism had been levelled against JRA personally, and no cause for concern specific to any of JRA's investors had been identified. The clause in question is General Condition 2.
Secondly, there is a non-disclosure issue. The underwriters say that if, contrary to their primary case on the first issue, JRA's notice in January 1994 was a valid notice, then JRA ought also but previously to have disclosed to underwriters the contents of a Lautro document of 15 July 1992 called "Enforcement Bulletin No 16", in which reference is made to an "overall problem" regarding that particular category of pension sales known as "opt-outs", namely sales to investors who were opting out of their occupational pension scheme. Since JRA had not disclosed the circumstances described in that Bulletin, the underwriters say that in the case of investor claims arising out of opt-outs JRA are without cover by reason of Exclusion 2 to the policies which excludes inter alia any claim arising out of any circumstances "known" to JRA prior to inception. A question arises whether Exclusion 2 is inconsistent with the policies' Special Conditions, which both limit the underwriters' right to avoid for non-disclosure or misrepresentation to instances of fraudulent intent, and limit JRA's recovery, in the case of claims arising out of circumstances which were known and ought to have been notified under a preceding insurance, to the amount and extent afforded by that preceding insurance.
Thirdly, there is what is perhaps the most fundamental issue of all, and that is whether the cases of compensation come within the policies at all as "claims ... made" under Insuring Clause 1. What happened was that Lautro and its successor, the PIA (the Personal Investment Authority), required their members to set up a review to investigate the pensions mis-selling problem, and to offer redress to all those investors who, as a result of such review, were shown to have been mis-sold a pension in breach of the applicable self-regulatory rules and to have suffered loss as a result. Thus the initiative was taken by the members, JRA among them, rather than by the investors. In these circumstances the underwriters submit that, with rare exceptions, no claims have ever been asserted. This is the claims issue.
Fourthly, there is an issue regarding costs. Insuring Clause 4 provides that underwriters will also indemnify JRA in respect of all costs and expenses incurred "in defence or settlement of any claim" which falls to be dealt with under the policies. Since there are no such claims, submit the underwriters, there can be no such costs, and in any event such costs must be those incurred on specific claims, and not the whole expense of the review of JRA's investors.
Fifthly, there is an issue regarding excess limits. JRA's excess under the policies is £50,000 each and every claim, but only three cases of compensation so far identified are for more than that figure. However, the pensions in question were sold through JRA's salesforce of "appointed representatives" who have self-employed status but who enter into contracts for services to act as agents for JRA. JRA are responsible under section 44(6) of the Act for everything that their appointed representatives do in carrying on JRA's investment business. However, each appointed representative is also potentially liable for his own mis-selling. JRA's appointed representatives are also insured under the policies and are defined therein as "Joint-Assureds" with separate inner limits on the underwriters' liability in respect of each of them, and with separate excess limits. These excess limits depend on the representatives' commission income and rise from a minimum of £1,000 up to £10,000 (save where commission income is over £1 million in which case the excess is to be separately agreed). The underwriters submit that it is JRA's excess of £50,000 which applies to every claim which JRA makes against them, whereas JRA submit that in effect it is the excess of the individual appointed representative concerned which applies.
These five issues can be identified in the terms of five declarations which the parties invite me to decide whether or not to make, viz:
(1) Notification: A declaration that JRA's solicitors' letter dated 27 January 1994 was a valid notification under General Condition 2 of the policies in relation to sample claims 2, 3, 4, 6, 9 and 10.
(2) Non-disclosure: A declaration that JRA are not deprived by Exclusion 2 of the policies of an indemnity in respect of opt-out claims by reason of their knowledge prior to the inception of the policies of the terms of Lautro's Enforcement Bulletin No 16 dated 15 July 1992.
(3) Claims: A declaration that the indemnities sought by JRA against the underwriters in relation to sample claims 2, 3, 4, 6, 9 and 10 are in respect of "any claim or claims ... made against them ... in respect of any Civil Liability" within the meaning of Insuring Clause 1 of the policies.
(4) Costs: A declaration that JRA are entitled to be indemnified pursuant to Insuring Clause 4 of the policies in respect of such part of the costs incurred in reviewing and investigating those cases of pension mis-selling in respect of which the underwriters are liable to indemnify JRA in accordance with Insuring Clause 1.
(5) Excess: A declaration that on the true construction of Insuring Clause 5, the First Schedule and Special Memorandum 1 of the policies the appropriate excess to be applied where JRA are indemnified by underwriters in relation to claims under the policies arising out of the mis-selling of pensions by appointed representatives is the relevant excess of the appointed representative who sold the pension.
"1. To indemnify the ASSURED against any claim or claims first made against them during the period of insurance set forth in the First Schedule in respect of any Civil Liability whatsoever or whensoever arising (including liability for Claimants' costs) incurred in the course of the business carried on by or on behalf of THE ASSURED. With respect to any breach of Section 62 of the Financial Services Act 1986 no indemnity shall be afforded to any person committing or condoning any malicious or deliberate breach.
"2. To indemnity THE ASSURED against any loss or losses which, during the period specified in the First Schedule, they shall discover they have sustained by reason or any fraudulent act or omission of any past or present partner, director, principal or EMPLOYEE ...
"4. The liability of the Underwriters shall not exceed in all under this Policy the sum specified in the First Schedule but Underwriters shall in addition indemnify THE ASSURED in respect of all costs and expenses incurred with their written consent in the defence or settlement of any claim which falls to be dealt with under this Policy ...
"5. The amount specified as the Excess in the First Schedule shall be borne in respect of each and every claim by THE ASSURED at their own risk, and Underwriters' Liability shall only be in excess of this amount.
The excess shall not be applicable to:-
5.2 Costs and expenses incurred with Underwriters' consent."
". Underwriters will not exercise their right to avoid this Policy where it is alleged that there has been non-disclosure or misrepresentation of facts or untrue statements in the proposal form, provided always that THE ASSURED shall establish to Underwriters' satisfaction that such alleged non-disclosure, misrepresentation or untrue statement, was free of any fraudulent intent.
". However, in any case of a claim first made against THE ASSURED during the period of this insurance where (1) they had previous knowledge of the circumstances which could give rise to such claim and (2) they should have notified the same under any preceding insurance, then, where the indemnity or cover under this Policy is greater or wider in scope than that to which THE ASSURED would have been entitled under such preceding insurances (whether with other Underwriters or not), Underwriters shall only be liable to afford indemnity to such amount and extent as would have been afforded to THE ASSURED by such preceding insurance."
"The Policy shall not indemnify THE ASSURED against any claim or loss:-
2. Arising out of any circumstances or occurrence which has been notified under any other policy or certificate attaching prior to the inception of this Policy or which were known to THE ASSURED prior to the inception of this Policy."
"2. THE ASSUREDS shall as a CONDITION PRECEDENT to their right to be indemnified under this Policy give to the Underwriters notice as soon as possible during the period of this Policy as set forth in the Schedule:-
(a) of any circumstance of which THE ASSURED shall become aware which may give rise to a claim or loss against them or any of them;(b) of the receipt of notice from any person whether written or oral of an intention to make a claim against any of them; ...
Such notice having been given to Underwriters THE ASSURED shall give to the Underwriters as soon as possible full details in writing of the circumstances which may give rise to a claim or loss against them or any of them. Any claim or loss to which that circumstance has given rise which is subsequently made after the expiration of the period specified in the First Schedule shall be deemed for the purpose of this Policy to have been made during the subsistence hereof."
Special Memoranda set out the following further provisions:
"1. (a) The indemnity provided under this Policy to each and every APPOINTED REPRESENTATIVE shall be limited to either £250,000 ANY ONE CLAIM or £500,000 any one claim as specified by J Rothschild.
Each such indemnity shall be evidenced by the issue of an EVIDENCE of COVER DOCUMENT issued to each JOINT-ASSURED.
All such indemnities under the said ECD shall be subject to the Limit of Liability in aggregate of all claims ...
The excesses applicable in respect of each and every claim under the said ECD shall be in accordance with the following scale and shall be borne by the APPOINTED REPRESENTATIVE:-
|Up to £100,000||£1,000|
|£100,001 - £250,000||£2,500|
|£250,001 - £500,000||£5,000|
|£500,001 - £1,000,000||£10,000|
|Above £1,000,000||To be agreed|
The applicable excess shall be shown on each ECD ...
"(d) Fully retroactive cover may be provided by this Policy for any APPOINTED REPRESENTATIVE in respect of their activities prior to their engagement by J ROTHSCHILD subject to full disclosure of those activities and claim declaration being made in their proposal. There are some 7 appointed representatives who used to be independent financial advisers and who have retroactive cover under the policies.
"2. Subject otherwise to the terms, limitations and conditions of this Policy, Underwriters shall indemnify THE ASSURED against liability to meet any adjudication made by the Investment Referee or under the complaints procedures of LAUTRO or by the Insurance Ombudsman or similar scheme.
4. Subject to the deductible, terms limitations and conditions, of this Policy, Underwriters agree to indemnify J ROTHSCHILD for the net ascertained and identifiable costs and expenses of contacting, corresponding with or visiting its clients and policyholders with such urgency and by such means as J ROTHSCHILD deem necessary in order to limit and/or quantify loss in the event of their discovery of any fraud or dishonesty.
"LIMIT OF LIABILITY: [£5,000,000] with inner Limits of Liability to JOINT-ASSUREDS as provided by Special Memorandum No 1 of this Policy ...
"EXCESS: £50,000 each and every claim however scale excesses in respect of JOINT-ASSUREDS are as provided for in Special Memorandum No 1 of the Policy ..."
Finally, I should mention Definition 4, the aggregation clause:
All claims resulting from the same act, error or omission or a series of acts, errors or omissions arising out of the same cause or the same acts, errors or omissions of one person or persons acting together or in which such person or persons is/are concerned or implicated are deemed to be one claim for all purposes of this Policy."
The regulatory framework
"(6) The principal of an appointed representative shall be responsible, to the same extent as if he had expressly authorised it, for anything said or done or omitted by the representative in carrying on the investment business for which he has accepted responsibility.
"(7) In determining whether an authorised person has complied with -
(a) any provision contained in or made under this Act;
(b) any rules of a recognised self-regulating organisation or recognised professional body,
anything which a person who at the material time is or was an appointed representative of the authorised person has said, done or omitted as respects investment business for which the authorised person has accepted responsibility shall be treated as having been said, done or omitted by the authorised person."
"2. A company representative shall exercise due skill, care and diligence in his business dealings and shall deal fairly with investors."
"6. A company representative who, in the course of any relevant investment business, has dealings with an investor -
(a) shall give the investor all information relevant to those dealings ...(aa) shall use his best endeavours to enable the investor to understand the nature of any risks involved;...(c) shall not make inaccurate or unfair criticism of other investment contracts or of any other method of saving or investment, or of any occupational pension scheme or the State earnings-related pension scheme ...
"8.(1) A company representative shall, in advising an investor as to the suitability for that investor of any investment contract, have regard, in particular, to the investor's financial position generally, to any rights he may have under an occupational pension scheme or the State earnings-related pension scheme (if such rights are relevant in the particular case), and to all other relevant circumstances; and he shall use his best endeavours to ensure -
(a) that he recommends only that contract or those contracts which are suited to the investor ..."
There is also the "general duty to make all relevant enquiries", sometimes known as the duty to know your customer, under para 12:
"12. A company representative shall so far as practicable ascertain all details relating to an investor and his particular circumstances as may be required for the purpose of complying with any duty in this Code or to enable the Member to comply with the requirement of these Rules."
Pension mis-selling and the SIB review
"For the first time, everyone will be able to choose whether to stay in his employer's pension scheme, or fully in the state earnings-related scheme; or to rely upon a personal pension to give him additional income in retirement. The government are determined that the choice should be as wide as possible ... To give people the maximum choice, the Government want to encourage as wide a range of financial bodies to provide group and personal pension schemes."
"Non-joiner: An individual who has declined or failed to join an occupational scheme for which he/she was or is eligible, while continuing in the relevant employment.
"Opt-out: The giving up of active membership of an occupational scheme while continuing in the relevant employment. This includes the situation where an individual remained in an occupational scheme for life insurance purposes, but left the scheme for pension purposes.
"Transfer: The payment into a personal pension of the cash value of accrued benefits under an occupational scheme for a member who has left active membership of that scheme. Transfers of all or part of accrued benefits by individuals who have opted out, as well as by former employees, are included."
"... the level of complaints received on this score may well understate the scale of the potential problem ...
"... following the Monitoring Committee's consideration of the case described above, a future Enforcement Bulletin will remind Members of the requirements of the rules in this area and the cost and complexity of restoring an investor's rights."
"The Bulletin does not form part of the Rules and members should bear in mind that any view or opinion contained herein is based on circumstances and facts arising in a particular case. Members should not, therefore, assume that any interpretation, view, or conclusion based on such a case is necessarily applicable to their circumstances."
Under the heading of "Opting out" the Bulletin introduced the subject with the comment that
"As described in Enforcement Bulletin 14, it is possible - given the public's understandable lack of expertise in the complexities of pensions - that the cases coming to Lautro's attention understate the size of the overall problem. It has therefore been decided to issue guidance to Members concerning both future sales and current investors."
As for future sales, EB 16 stated the monitoring committee's view
"that the starting point for a company representative ... should be to assume that it would not constitute "best advice" to recommend opting out into a personal pension plan unless positive arguments in favour of such advice can be established."
As for future sales to prospective investors contemplating transfers, EB16 merely recommended that the terms of the preserved benefits needed to be examined. Otherwise members were reminded of the importance in all cases of proper documentation of the advice given, and that analysis would "by no means always" confirm clients as prospective investors.
"1. Leaving the scheme and remaining in serviceRarely will there be valid arguments for advising a client to opt out of their current employer's occupational scheme and the initial approach must be one of "stay where you are" ...
- "2. A transfer of accrued benefits and has left service
... a thorough examination of the preserved benefits must be made. Important factors to be considered include:-1. Any guarantees that will be foregone2. How the deferred benefits will increase between now and retirement3. The benefits on early death ...4. The rate of escalation on pensions in payment5. The amount of spouse's and/or dependants benefits on death both before and after retirement"
"Is the Proposer or any of its Partners or Directors, or Officers, AFTER INQUIRY, aware of any circumstance which may give rise to a claim against the Proposer or its predecessors in business?"
This question was answered by reference to an attached sheet which listed eleven clients who had complained. One of the eleven listed the "allegation" as "Client should have stayed in occupational scheme".
"There is no automatic connection between a client's file not evidencing compliance and the client suffering financial disadvantage..."
nevertheless, the letter dated 22 December 1993 which Lautro wrote to its members as a result stated that "there is a problem which needs to be tackled". Lautro indicated that that problem was likely to embrace opt-outs as well.
"Complaints of significance about transfers and opt-outs should be ring-fenced and handled under separate arrangements from the normal complaints system. This is to prevent the normal system from being overwhelmed and to permit special procedures to be adopted under guidance from SIB when this is available."
"The circumstances set out above may, in respect of each policy identified and to be identified, give rise to a claim by each client against any of the Assured.
"Furthermore, claims may arise against any of the Assured in relation to any advice concerning an "opt-out" from an existing or prospective occupational scheme. An exercise to identify "opt-out" advice is in hand."
"The SIB and Lautro have put in hand enquiries and other steps to lead to the establishment within the financial services industry of suitable mechanisms to ensure that all pension transfers and opt-outs are checked against the proper standards and the necessary remedial work undertaken by the relevant life office to ensure that proper advice is given to investors and, where appropriate, compensation paid to those who have suffered loss."
"Assuming that your clients intend to complete a review of the kind described by LAUTRO in their letter, when and if they identify particular client cases which give rise to concern and in respect of which a claim may be made against them, it would then be the appropriate point at which to notify the insurers concerned, to enable the latter to give consideration to those cases."
"We have notified our existing PII underwriters of circumstances that may give rise to a claim in respect of the transfer of Pension rights from Occupational Schemes to J Rothschild Personal Pension Plans: the fact that the Securities Investment Board has given notice of its intention to require all life companies to review all such business transacted by them. Accordingly details of all such cases transacted in 1992/93 have been supplied and reviews are currently underway."
"The Statement indicates how SIB expects the front line regulators, the SROs and the RPBs Recognised Professional Bodies, to ensure that their members who undertook such business review past cases, and make redress if it is due. SIB is satisfied from all the information it has that some of the business was done in a materially non-compliant way, and that some of the investors concerned will be found to have suffered loss as result of unsuitable advice."
"The aim of the redress programme is to offer recompense to investors who have been disadvantaged as a result of bad advice...Investment firms should provide the redress themselves...The relationship between the review and redress process and firms' obligations under their professional indemnity insurance is important: the proposals are intended to cause no risk to firms of jeopardising their PI cover..."
"Typically, PI policies require the insurers to be given immediate notice in writing of an occurrence which may subsequently give rise to a claim. Such notice may need to be given in the course of a case review, depending on what emerges. Firms would be wise to consult their PI insurers at the outset, and certainly before agreeing to pay any charges for obtaining information. When notice is given, the insurer can give the firm directions on the subsequent handling of the case..."
SIB indicated it was developing a model questionnaire to be used by firms to help them identify priority cases of opt-outs and non-joiners. This was issued in December 1994.
"7.2.2 (1) Where it appears to PIA that it is necessary or desirable in the interests of investors, PIA may require a Member (or a class of Members) to carry out a review of any aspect of its investment business with a view to determining whether redress should be offered to any investor who has suffered loss or damage as a result of a failure by the Member to comply with its relevant duties.
(2) PIA may prescribe the standards and a specification for the conduct of any such review.
(3) A Member to whom any such requirement applies shall take all reasonable steps to carry out a review of its investment business in accordance with such standards and specification as PIA may prescribe.
"7.2.3 Where a Member employs an appointed representative which has conducted investment business of a kind which is the subject of a requirement under Rule 7.2.2 above, the Member shall take all reasonable steps to ensure that the representative conducts a review of that business in accordance with any standards or specification as PIA may prescribe.
"Guidance: It is not PIA's intention that Members should under Rule 7.2.3 assume any legal responsibility in respect of any liabilities which appointed representative firms may have incurred toward customers in respect of investment business which they conducted prior to becoming a representative of a Member."
"As I expect you are aware, concern about investors, such as yourself, who have chosen to transfer deferred pension benefits from occupational pension schemes into personal pensions has led to the regulators of the financial services industry imposing an industry wide review of such cases.
"The aim of the review is to identify whether or not advice given to clients was right for them at the time it was given. If the advice was demonstrably not right and a financial loss has been suffered as a result of the advice, then some form of redress may be necessary.
"The Securities and Investments Board (SIB) have published detailed guidelines laying out exactly how this review is to be carried out.
"In fact we have already carried out extensive internal reviews and have satisfied ourselves that, in our view, the majority of our investors have been given "best advice". Nevertheless, you will appreciate that we are now following SIB guidelines...
"Your case falls into the top priority as defined by SIB. Consequently we hope to review your case as soon as possible. However, I should point out that it may be some time before we are able to contact you again.
"SIB have published a factsheet giving details of the review; I enclose a copy of this.
"Please be reassured that your case will be reviewed and that I will contact you again as soon as possible."
"REVIEW OF PERSONAL PENSIONS
"The investment watchdog which oversees investment firms, The Personal Investment Authority, is looking to see whether some people may have been badly advised to leave or not to join an employer's pension scheme, and take out a personal pension plan instead. Where that advice did not meet the relevant standards and has resulted in loss to the customer, compensation may be due.
"The Personal Investment Authority has asked all firms who sell personal pension plans to look at the pension arrangements of some of their customers. So that we can find out whether we need to look at your pension arrangement, we are asking you to complete the enclosed form.
"This may be important for you even if:
* you have now stopped your personal pension plan; or
* you feel you received good advice.
"Please could you fill in the form and return it in the prepaid envelope. We will write to you again to let you know whether or not there may be a problem at this stage. We cannot do this if you do not return your form."
Mrs Heafield (sample 3), returned her questionnaire very promptly, and Mr Lock (sample 9) after three months. In both cases offers of redress were made and accepted in 1997/8. I am not concerned here with the reasons for the delay.
"The aim of the review is to identify whether or not advice given to clients was right for them at the time it was given. If the advice was demonstrably not right and a financial loss has been suffered as a result of the advice, then some form of redress may be necessary."
"At the moment as far as I can see, the widow is unaware of this shortfall and Andy Cameron has yet to discuss this with her. This is despite the fact that death took place some three years ago on 23 August 1994."
"Following your advice, I visited Mrs S Harwood today and informed her that we have identified that she has a shortfall of pension income due to the decision to opt out of the C&G scheme, and that we are in the throws of sorting this out for her, and that it could take up to some months before she was recompensed. I did not enter into any specific details or apportion any blame.
"She was delighted to hear the news, but stated that she hoped that this would cause me no problems!"
"The above offer is made without any admission of liability on our part and represents full and final settlement in respect of [JRA's review of your PPP] ...
"If you decide to accept the Offer of Redress please complete and return the enclosed offer acceptance letter in the prepaid envelope. Completing and returning it prevents you from making any further claim against J Rothschild Assurance in respect of this matter."
The enclosed acceptance letter, which Mrs Heafield signed and returned, read:
"My acceptance of these terms is in full and final settlement of all claims that I have or may have against J Rothschild Assurance plc or any of its employees or appointed representatives in connection with ..." etc.
"Please proceed to act upon your offer, the terms of which are set out in your letter ..."
"Please confirm you would like us to go ahead with reinstating you into the National Health Pension Scheme by completing and returning the enclosed offer acceptance letter in the prepaid envelope. Completing this letter and returning it prevents you from making any further claim against J Rothschild Assurance in respect of this matter ...
"Finally, although J Rothschild Assurance agree to provide the redress offered, if you accept the offer in the manner specified, this offer does not constitute an admission of legal liability on the part of J Rothschild Assurance."
Her acceptance letter was in the same form as in the case of sample 3.
In the case of Mr Mowbray (sample 6) the offer letter simply said:
"Please confirm which option you would like by completing, signing and returning the enclosed attached copy of this letter ...
"Completing this letter and returning it prevents you from making any further claim against J Rothschild Assurance and/or our advisor apparently a reference to the appointed representative concerned. in respect of this matter."
"I would like to obtain your agreement to my proposal, which although made without any admission of liability, will then legally commit me to an agreed course of action ...
"In return for my commitment to this course of action, I will ask you to agree that the offer of redress made in this letter is made without admission of liability and that any redress given under this letter, when carried out, will be in full and final settlement of any claim that you may have against myself arising out of the advice given in respect of the above Plan."
Issue 1, the notification issue.
"Such notice may need to be given in the course of a case review, depending on what emerges ..."
"we have already carried out extensive internal reviews and have satisfied ourselves that, in our view, the majority of our investors have been given "best advice" ..."
Moreover, JRA were not moved to give notice by prior warnings, such as Lautro's Enforcement Bulletin 14, which spoke of "the potential problem", or EB16, which spoke to "the size of the overall problem". It was probable, therefore, that the notice of 27 January 1994, coming as it did more than a month after Lautro's letter of 22 December 1993, but only a few days before the end of the current period of insurance and only a few days after the completion of a proposal form for the next year's cover, was a tactical reaction to difficulties experienced in obtaining the next year's cover rather than a genuine reaction to the KPMG report and Lautro's letter. In this connection, it was significant that there had been no witness from JRA to speak to the origins of the TSW letter.
"Your letter appears to rely heavily upon a study undertaken by KPMG Peat Marwick in December 1993 as containing a finding that there was no "evidence of substantial compliance" with the LAUTRO Rules in 91% of cases considered. On what basis is it contended by your clients that such a finding is likely to give rise to a claim against them or any one of them?" [emphasis added]
And yet it seems to me that the fact that 91% of files examined by KPMG were found to be non-compliant did mean that it was at least possible that equivalent non-compliance would give rise to claims against JRA themselves. After all, the KPMG study was on a significant number of files, 735 of them, representing over 400 different occupational schemes, and so selected as, in the words of the report's executive summary -
"to cover a representative sample of firms undertaking transfer business ..."
"The question must be considered at the trial as it had to be considered by the parties, when they came to know of the cause and the probabilities of the delay and had to decide what to do. On this the judgments in the above cases substantially agree. Rights ought not to be left in suspense or to hang on the chances of subsequent events. The contract binds or it does not bind, and the law ought to be that the parties can gather their fate then and there. What happens afterwards may assist in showing what the probabilities really were, if they had been reasonably forecasted, but when the causes of frustration have operated so long or under such circumstances as to raise a presumption of inordinate delay, the time has come at which the fate of the contract falls to be decided."
Issue 2, the non-disclosure issue.
Issue 3, the claims issue.
"Clearly the expression "claim made" is broader than "suit brought" since a claim can be made in any of a number of ways without the institution of an action. My brother Goodman accepts that this is so but answers that, where an action has been commenced by the issue of a writ, the consequence in law of the writ's issue is that the claim must be taken as having been made at that time, on the common law principle that the defendant must be deemed to have notice of it at that time.
"With great respect I am unable to agree that this is a correct statement of the law as it applies in this province ...
At 355 Thorson JA continued:
"Until such time as the write is served on, or the existence of the claim is otherwise brought to the attention of, the other party, what does it avail to say that as a matter of law he has "made a claim" against the other party of which the latter must be deemed to have notice? How does it accord with any reality to view him, as a matter of law, as having made such a claim at the time the writ was issued, even though that time has passed, the writ has been put away unserved in a file in his solicitor's office, its very existence is unknown to the other party and he himself has not decided whether the matter should go any further?"
It is to be noted that even Goodman JA founded his minority holding of "claim made" on the basis that notice had been given to the world at large. He also said (at 349):
"A claim, other than one made by way of the institution of legal proceedings, can only be made by notifying the person against whom the claim is being asserted of such claim. Prior to the giving of such notice, there can only be an intention to make a claim."
"more accurately to be regarded as notice of an intention to make a claim at a later date by serving the writ" (at 12).
"I think that the primary meaning of the word "claim" - whether used in a popular sense or in a strict legal sense - is such as to attach itself to the object that is claimed; it is not the same thing as a cause of action by which the claim may be supported or as the grounds on which it may be based. In the Oxford Dictionary "claim" is defined as, first, "A demand for something as due; an assertion of a right to something" ..."
Stocker LJ went on, however, to say:
"For my part, these appear to me to be definitions which can be accepted without further refinement. They do not, however, solve the question since the application of the definition may vary according to the circumstances in which it falls to be construed ..."
"Completing this letter and returning it prevents you from making any further claim against J Rothschild Assurance in respect of this matter";
and also the language of full and final settlement. He argued that it could hardly have made any difference whether or not JRA, in writing to their investors, had said: "Do you want to make a claim for redress?" and received the answer "Yes". It therefore did not matter, could not and should not matter, whether an investor was more or less assertive.
"that I will soon receive the amount due to me."
"As you are aware, we are reviewing the advice given to you to take out the PPP PRP was the acronym given by JRA to a JRA PPP.
in November 1993. If our review shows that you were not given "best advice" and that you have suffered a financial loss as a result, then we will offer you some form of compensation."
"my letter answered your queries, but if it raises any further questions, please do not hesitate to contact me."
Mrs Heafield appears to have been satisfied with JRA's explanation, for there is no further letter on file from her until her reply dated 3 July 1997 to JRA's offer of redress dated 20 June 1997.
Issue 4, the costs issue.
Issue 5, the excess issue.
"Failure to comply with the requirements of this Contract, including the SIB Principles and Rules, Lautro Rules and Code of Conduct and the Act will constitute a breach of your Contract and possible sanctions against you.
"You will be responsible for and indemnify J Rothschild Assurance against all loss, damages, costs, expenses or liabilities incurred by it directly or indirectly in consequence of any breach of your obligations expressed or implied under this Contract. This provision shall survive termination of this Contract and remain in force in respect of all liabilities incurred both before and after such termination.
"Due to your responsibilities outlined above, it is important that you maintain your Professional Indemnity Insurance to afford you as much protection as possible."