England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL
		05/11/2013

Mr Justice Hamblen:

Introduction

1. In these proceedings the Claimant jeweller ("A&A") makes various claims against its insurers, the third Defendant ("Zurich"), in connection with the insurance of, amongst other things, stock and other items, including jewellery and watches at A&A's premises, against all risks, including theft, for the period 3 October 2006 to 2 October 2007. It also makes related claims against the insurance brokers involved in the placement of the insurance, the second Defendant ("Towergate"), and the individual Towergate broker involved, the first Defendant, Mr Richards.
2. The Defendants apply to strike out the claims made, alternatively summary judgment. If and to the extent that their applications are not successful, Towergate and Mr Richards seek security for their costs.

Factual/procedural background

3. A&A is a jeweller which at all material times carried on its business from 8 Blenheim Street, London ("the Premises").
4. On 31 May 2007 a robbery took place at the Premises. A&A sought to make a claim under its insurance contract with Zurich for losses claimed to have been suffered in the robbery. Zurich denied that it was entitled to do so by reason of breaches of certain conditions precedent and/or warranties contained in the insurance policy.
5. A&A commenced the arbitration by invoking clause 21 of the policy wording which required all disputes to be referred to arbitration under the ARIAS rules. In the Notice of Arbitration A&A asserted that the policy was dated 25 October 2006 with the policy number 831EJ015207b10. The Notice attached the policy wording and defined the dispute referred as follows: "...whether the Claimant is entitled to an indemnity under the Policy, and if so how much".
6. The First Partial Award of the sole Arbitrator, Colin Edelman QC, set out the Arbitrator's conclusions on the correct construction and effect of the conditions precedent and warranties in issue on the basis of assumed facts.
7. The Arbitrator's Second Partial Award dismissed A&A's claim under the policy on the basis that A&A had failed to satisfy the requirements of Condition Precedent 2 ("CP2") to which its right of indemnity under the policy was subject. CP2 required stock records to be kept and provided as follows:

"It is a condition precedent to the Underwriters liability under this Insurance that:

The Assured shall:

i. maintain and keep detailed records of all:

a) purchases, sales and other related transactions including purchase and sales invoices;

b) customers goods of others in the jewellery trade;

c) stock away from the premises, which shall be listed separately;

ii. maintain and keep all jewellers' memoranda and consignment agreements;

iii. take and record dated physical count inventories at not more than 12 (twelve) month intervals.

The records and documents required above shall be kept and maintained so that the Underwriters and/or their designated representatives can accurately determine therefrom for each item, ownership, acquisition date, the Assured's cost price, the sale price and date of sale, the estimated value of customers goods, the value of goods of others in the jewellery trade and the exact amount of any loss or damage without reference to the personal knowledge of the Assured or others and without reference to accounting calculations based upon information or materials other than a combination of the records required above."

8. Shortly prior to the hearing leading to the Second Partial Award (some ten months after the issue of the First Partial Award), A&A made a series of applications to the Arbitrator based on the contention that there was an issue as to whether there was a concluded contract between A&A and Zurich which incorporated the arbitration clause. The Arbitrator dismissed all of these applications for the reasons detailed in his Second Partial Award.
9. In the Arbitrator's Third Partial Award A&A was ordered to pay 90% of Zurich's costs and the Arbitrator's fees and expenses up to the date of the First Partial Award being issued and all costs, fees and expenses in the Arbitration thereafter. A&A has yet to pay Zurich's costs of the arbitration awarded against it. Zurich's total costs are said to be in the sum of £185,249.81.
10. The Claimant unsuccessfully sought to challenge the First and Second Partial Awards by way of Claim No 2012 Folio 1279. The application made under s.69 of the Arbitration Act 1996 ("the Act") was dismissed by Mr Justice Popplewell by Order dated 8 February 2013. He found that "there is no question of law on which the decisions are open to serious doubt". In relation to the applications made under s.67 and s.68 of the Act he observed that they appeared to have "no real prospect of success" and ordered that security for costs in the sum of £140,000 be provided, failing which they would be dismissed. No security was provided and the applications were dismissed by Order dated 8 March 2013.
11. At around the same time as it issued its arbitration applications A&A commenced the present proceedings. The "Brief details of claim" given were as follows:

"The Claimant's claim is for damages for breach of contract made between the Claimant and the 1^st and/or the 2^nd Defendant on about 14/9/06 and/or on the 2/10/06 and/or negligence arising out of or in connection with the aforesaid Defendants acting as insurance broker for the Claimant for the arrangement of insurance for his business and premises and interest thereon pursuant to Section 35A Senior Court Act 1981. Further the Claimant's claim is for damages for fraudulent representation and/or claim under Section 2 Misrepresentation Act 1967. Further the Claimant's case is for declaration that the 1^st and/or 2^nd Defendants were the agents of the 3^rd defendant and/or for damages for inducing breach of contract. See particulars of claim attached."

12. The Particulars of Claim attached were amended and substituted by lengthy Particulars of Claim dated 21 December 2012. The body of these Particulars of Claim runs to 73 pages and it is accompanied by 4 lever arch files of attachments.
13. The Amended Particulars of Claim as drafted is prolix and opaque. The precise causes of actions asserted and the basis for them is far from clear. However, the essence of A&A's pleaded case was helpfully summarised in its skeleton argument for the hearing.
14. As stated in the skeleton argument, A&A relies on the fact that Zurich's loss adjusters, Cunningham Lindsey, initially took no issue as to liability, but that in early August 2007 Alistair Jupp of Cunningham Lindsey sent an email to Mr Richards drawing attention to CP2. This is alleged to have triggered a sequence of events:

"19 …. Prompted by that email, Mr Richards and Towergate appreciated for the first time that the terms of the policy agreed between it and A & A did not contain such a condition whereas Zurich believed it did. Rather than come clean with Zurich as to his mistake, Mr Richards set about producing ex post facto policy documents which contained CP2.

20 Between 20.9.07 and 25.10.07, Mr Richards met with Mr Jain and Mr Santi of A & A at the Premises. He represented to them that it was necessary for the Proposal Document to be signed if Zurich was to pay out and Mr Jain, in the presence of Mr Santi, signed a document purporting to be the original proposal form. Mr Richards then handed them a copy of what purported to be the relevant policy dated 25.10.06 advising them to "you keep this safe"…. What they did not appreciate was that unlike the version they had agreed to in October 2006, this version contained CP2 and a mandatory arbitration clause (clause 21)….

21 On 25.10.07, Zurich (through Cunningham Lindsey) avoided its liability to indemnify A & A.

23 Labouring under the belief that the September/October 2007 version was the correct one, A & A commenced the arbitration before Colin Edelman QC.

23 A & A's present claim is based on the following propositions:

23.1 If and insofar as the relevant policy contained CP2 they had not been properly advised to that effect at its inception in October 2006

23.2 If and insofar as the relevant policy did not contain CP2 they were misled in September/October 2007 to believe that it did and thereby induced to participate in a costly and, ultimately, pointless arbitration. What they ought to have been doing was challenging Zurich on the true terms of the underlying contract;

23.3 When properly analysed, Mr Richards and Towergate were not simply acting for themselves in relation to the events in October 2006 and September/October 2007 but were acting as agents for Zurich.

24 In simple terms, A & A's complaints are of professional negligence and false representations."

15. The Defendants contend that, aside from the negligence claim against Towergate, all the issues sought to be raised in these proceedings have already been decided against them by the Arbitrator. Zurich contends that A&A is issue estopped from raising those same issues in these proceedings; alternatively it is an abuse of process to do so; alternatively the claims have no real prospect of success. Towergate and Mr Richards contend that, although they were not party to the arbitration, it is an abuse of process for those issues to be raised as against them; further or alternatively, none of the claims have a real prospect of success.
16. The evidence at the hearing consisted of witness statements and extensive exhibits from Mr Cha of Mills & Reeve LLP (solicitors for Towergate and Mr Richards); from Mr Richards, and from Mr Santi and Mr Jain of A&A.

The Second Partial Award

17. In order to address the issue estoppel/abuse of process arguments it is necessary to consider in some detail the findings made by the Arbitrator in the Second Partial Award. These were summarised by Zurich in its skeleton argument and were as follows:

i) It was not open to A&A to challenge the Arbitrator's jurisdiction in circumstances where it had commenced the Arbitration by invoking the very contract it belatedly sought to impugn. Further and in any event it was far too late for any such challenge to be sought to be made, nearly five years after it ought to have been raised when Zurich first sought to rely on CP2 (paragraphs 6 to 12).

ii) Further and in any event, there was no reasonable basis upon which it could be contended that Zurich's form of Jeweller's Policy was not the applicable policy wording even if there was any substance in what was suggested regarding the timing of the signature of the policy wording by A&A's broker, Towergate (paragraph 13).

iii) Towergate was quite clearly acting as A&A's broker for the purposes of placing the insurance (paragraph 14). In support of this the Arbitrator quoted from:

a) Towergate's letter to A&A dated 25 September 2006 which informed A&A that negotiation with insurers had been completed and recommended proceeding with Zurich.

b) Towergate's "Disclosure Information & Terms of Business": "We [Towergate] are an insurance intermediary acting on your behalf in arranging your insurance cover".

c) An email from Mr Jain to Towergate in which he stated: "…..you are FSA/Lloyd's regulated agents who acted for me…."

d) Paragraph 22 of Mr Santi's statement: "he was our broker at the time".

iv) The only dual role performed by Towergate was an administrative one of issuing the policy documentation. Cover had to be specifically quoted and bound by Zurich and this occurred on Zurich's standard wording. Towergate's role did not extend to acting as underwriting agents for Zurich and absent such authority, there could be nothing in the arrangements between Towergate and Zurich that could undermine Towergate's role as A&A's broker or negate the legal effect of Towergate performing such a role (paragraphs 15 to 17).

v) Zurich was entitled to rely on Towergate, as A&A's broker, to draw to A&A's attention and explain the requirements and effect of any onerous clauses in the policy wording. It was therefore not open to A&A to contend that the application of any such onerous clauses was subject to Zurich drawing them to the attention of A&A. Towergate's role as A&A's brokers precluded any argument that the policy wording was not applicable to the Claimant by reason of the Claimant not having had drawn to its attention the onerous requirements of CP2 (paragraph 18).

vi) Towergate's agreement with Zurich that the risk should be placed on the terms of Zurich's "Jeweller's Policy" would be sufficient to bind A&A regardless of whether or not A&A was aware of the existence or terms of the policy. In support of this he referred to Towergate's letter to A&A dated 25 September 2006 which expressly refers to the wording being "as per agreed Zurich wording" (paragraph 19).

vii) The most compelling evidence of the form of wording agreed between Towergate (as agent for A&A) and Zurich was the form of wording that was produced and ultimately signed by Towergate. Such a conclusion was also supported by the debit note enclosed with Towergate's letter to A&A dated 2 October 2006 which referred to the standard form of policy wording used in the present case (paragraph 20).

viii) However, even if there were to remain an issue as to which policy wording had been contemplated, it was still open to Zurich (through Towergate) to unilaterally to issue a policy wording and for that policy wording to become binding on A&A if accepted by it. In support of this the Arbitrator relied on New Hampshire v MGN Limited [1997] Lloyd's Rep IR 24 and Rust v Abbey Life Assurance Co Limited [1979] 2 Lloyd's Rep 334. On the basis of A&A's own evidence, it had had the form of policy wording now disputed as applying from 25 October 2007. Thereafter, A&A's conduct over a period of four and a half years (including commencing the Arbitration on the basis of the policy wording annexed to the Notice of Arbitration) amounted to the clearest possible acceptance of the policy wording proposed by Zurich. That form of policy included both CP2 and the arbitration clause.

ix) A&A was not now permitted to resile from that acceptance (paragraphs 21 to 23).

x) The circumstances in which the proposal form came to be signed did not have any legal relevance to the question of applicability of the form of the Policy upon which the Arbitration had to date been based (paragraph 24).

xi) Any discussions between Mr Richards of Towergate and A&A would have been in Mr Richards' role as A&A's broker and could not have been on Zurich's behalf (paragraph 25).

xii) There was no proper legal or factual basis for the allegation that the First Partial Award was vitiated by fraud. In any event any such application should have been made to the Court pursuant to section 68 of the Arbitration Act 1996 and not to the Arbitrator (paragraph 26).

xiii) In light of the findings already made by the Arbitrator in relation to construction made in the First Partial Award, the irresistible conclusion was that A&A had failed to comply with CP2 as a matter of fact and the claim should be dismissed (paragraphs 28 to 33).

Issue estoppel/abuse of process – relevant principles

18. The principles of law governing res judicata have recently been summarised by the Chancellor in Price v Nunn [2013] EWCA Civ 1002 in the light of the Supreme Court's decision in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited [2013] UKSC 46, [2013] 3 WLR 299. At [67] to [69] he stated as follows:

67 "Cause of action estoppel is a form of estoppel precluding a party from challenging the existence or non-existence of a cause of action where that has already been decided in earlier proceedings. It arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case, unless fraud or collusion is alleged such as to justify setting aside the earlier judgment, the bar is absolute in relation to all points which had to be and were decided in order to establish the existence or non-existence of the cause of action. Cause of action estoppel also bars the raising in subsequent proceedings of points essential to the existence or non-existence of a cause of action which were not decided because they were not raised in the earlier proceedings, if they could with reasonable diligence and should in all the circumstances have been raised.

68 Issue estoppel is a form of estoppel precluding a party from disputing the decision on an issue reached in earlier proceedings even though the cause of action in the subsequent proceedings is different. It may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties or their privies to which the same issue is relevant one of the parties seeks to re-open that issue. In such a situation, and except in special circumstances where this would cause injustice, issue estoppel bars the re-opening of the same issue in the subsequent proceedings. The estoppel also applies to points which were not raised if they could with reasonable diligence and should in all the circumstances have been raised, but again subject to special circumstances where injustice would otherwise be caused.

69 Res judicata operates as a substantive rule of law. It is to be distinguished from the court's exercise of its procedural powers to control the court's processes from being abused. They are juridically very different even though there are overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation. In the case of the exercise of the court's procedural powers to prevent abuse the court should take a broad, merits-based judgment taking account of the public and private interests involved and all the facts of the case, focusing on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."

19. In relation to abuse of process I was referred to the leading decision of the House of Lords in Johnson v Gore Wood & Co (A firm) [2002] AC 1 and the observations of Lord Bingham on abuse of process at [31] (with which the other members of the House agreed):

"But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should, in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."

20. It is apparent that abuse of process may be relied upon by a non-party to the earlier litigation said to give rise to the abuse. This is illustrated by the case of Taylor Walton (a firm) v David Eric Laing [2007] EWCA Civ 1146. That case concerned a negligence claim brought by Mr Laing against his solicitors. The claim made depended on Mr Laing proving that the agreements, about the drafting of which complaint was made, were in the terms alleged by Mr Laing. That issue had been decided against Mr Laing in proceedings between him and the other party to the agreement. That decision had not been appealed and the Court of Appeal held that it was an abuse of process to seek to relitigate that decision in the further proceedings brought.
21. The Court referred to Lord Diplock's speech concerning abuse of process in Hunter v Chief Constable of the West Midlands [1982] AC 529 at 536B:

"[abuse of process] concerns the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied … It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power."

22. The Court concluded that it would bring the administration of justice into disrepute if Mr Laing were to be permitted in the second claim to advance exactly the same case as was tried and rejected in the earlier trial by H.H. Judge Thornton. Buxton LJ stated at [25]:

"If H.H. Judge Thornton's judgment was to be disturbed, the proper course was to appeal, rather than seek to have it in effect reversed by a court not of superior but of concurrent jurisdiction hearing the second claim. That the second claim is in substance an attempt to reverse H.H. Judge Thornton is important in the context of wider principles of finality of judgments. In Hunter, at 545D, Lord Diplock said that the proper course to upset the decision of a court of first instance was by way of appeal. Where, wholly exceptionally, a collateral, first instance, action can be brought it has to be based on new evidence, that must be such as entirely changes the aspect of the case: see per Earl Cairns L.C. in Phosphate Sewage v Molleson (1879) 4 App Cas 801 at 814. The second claim in our case not merely falls short of that standard, but relies on no new evidence at all."

23. It is also apparent that abuse of process may be relied upon where the earlier decision was that of an arbitral tribunal rather than a court and that arbitration involved a different party – see Michael Wilson v Thomas Sinclair and others [2013] 1 All ER (Comm) 476. As Teare J stated at [49] to [50]:

"49 The first question is whether the doctrine of abuse of process can apply where the previous decision was that of an arbitral tribunal.

50 In answering this question it is necessary to bear in mind that the question is whether the process of this court is being abused by a claim being brought before it. The nature of the court or tribunal which has given the decision said to be under collateral attack will or may be important in deciding whether the proceedings in this court are an abuse of its process. For example, where the decision under collateral attack is the decision of a jury in a criminal trial, there may be particularly cogent reasons for saying that the collateral attack is an abuse of the process of this court; see Arthur JS Hall v Simons [2002] 1 AC 615 at p.702 per Lord Hoffmann. But there is high authority for saying that it is unwise to limit to fixed categories the circumstances in which it is the court's duty to prevent its processes from being abused; see Hunter v Chief Constable [1982] AC 529 at p.536 per Lord Diplock and Arthur JS Hall v Simons [2002] 1 AC 615 at p.702 per Lord Hoffmann. I have therefore concluded that there can be no rule that the court can have no such duty merely because the tribunal whose decision is under attack is an arbitral tribunal. However, it will probably be a rare case where an action in this court against a non-party to an arbitration can be said to be an abuse of the process of this court. Where a claimant has a claim against two or more persons and is obliged to bring one such claim in arbitration the defeat of that claim in arbitration will not usually prevent the claimant from pursuing his claim against the other persons in litigation. Arbitrations are private and consensual and non-parties cannot, in the absence of consent, be joined or be affected by the decisions of the arbitral tribunal."

24. In the circumstances of that case Teare J decided that it would be an abuse of process to allow a collateral attack on the decision of the arbitral tribunal to be made, even though the court proceedings were brought against a non-party to the arbitration.

Zurich's application

Issue estoppel

25. I am quite satisfied that an issue estoppel arises in respect of the Arbitrator's decision that the insurance contract was subject to a policy wording which contained CP2.
26. A&A's claim was for an indemnity under the insurance contract. Zurich's defence to that claim was non-compliance with CP2. In order to determine whether that was a good defence to the claim the Arbitrator necessarily had to decide whether the contract was subject to CP2. He concluded that it was and dismissed A&A's claim because of its breaches of CP2, a condition precedent to its right of indemnity.
27. There are no "special circumstances" which mean it would be unjust to recognise and give effect to the Arbitrator's decision, and none have been identified. It follows that A&A is issue estopped from asserting any cause of action in the present proceedings which depends on the assertion that the contract was not subject to CP2.
28. On the face of it, this precludes all causes of action covered by proposition 2, as set out in paragraph 23.2 of A&A's skeleton argument. In oral argument it was suggested by A&A that, contrary to what is stated in paragraph 23.2, its complaints about being misled may not depend on the policy not containing CP2. However, I consider that the analysis set out in paragraph 23.2 is correct. A&A complains that they were misled into believing that the policy contained CP2 and thereby induced to participate in a costly arbitration. But if, as the Arbitrator found, and by which finding A&A is bound, the policy did contain CP2 then they were not misled.
29. It is said that because of what Mr Richards said to them they were labouring under the belief that the September/October 2007 version of the policy was the correct one when they commenced the arbitration. As is explained, "what they did not appreciate was that unlike the version they had agreed to in October 2006" this September/October 2007 version contained CP2 and the arbitration clause. But the Arbitrator has found that the version they agreed to in October 2006 did contain these provisions.
30. It is then said that what they ought to have been doing is challenging Zurich on the true terms of the underlying contract, but the true terms of the underlying contract included CP2 and so this would have been to no avail and would have (and indeed did) lead to further fruitless cost being incurred.
31. I am not, however, satisfied that issue estoppel arises in relation to the issue of agency. This was a facet of the Arbitrator's decision, but it was not necessary to. It was not, to use the words of the Chancellor in Price v Nunn at [68] "a necessary ingredient in a cause of action (which) has been litigated and decided" – see also Arnold v National Westminster Bank plc [1991] 2 AC 93 at p105D-E (per Lord Keith).
32. As the Arbitrator explained, the issue of agency was relevant first because it meant that it was not open to A&A to contend that the application of CP2, being an onerous clause, was subject to Zurich drawing it to A&A's attention (paragraph 18). Secondly it was relevant to the Arbitrator's decision that A&A was bound by the policy regardless of whether A&A was aware of the terms or existence of the policy (paragraph 19). However, it was not necessary or fundamental to the Arbitrator's decision that A&A was bound by CP2 and that its claim accordingly failed. That decision would have been the same regardless of his findings on agency.

Abuse of process

33. Although I am not satisfied that the Arbitrator's decision on agency gives rise to an issue estoppel, I do consider that it would be an abuse of process to allow the issue to be relitigated in these proceedings.
34. Agency was an issue which was fully argued before the Arbitrator and which he decided. This is reflected in the fact that A&A sought to challenge that decision by its s.67 and s.69 applications. Indeed the s.69 application referred to the Arbitrator's finding on agency as his "decision" and asserted that it was wrong in law.
35. This serves to illustrate that the proper way to seek to reverse that decision was by challenging it by issuing an arbitration application, which A&A did. That challenge having been made and dismissed, it would be oppressive and unfair to Zurich and bring the administration of justice into disrepute for A&A to be allowed to attack that decision collaterally and to seek to have that decision in effect reversed in these proceedings. Zurich have fought that issue through to a final and binding decision and should not be required to do so all over again and "be vexed twice in the same matter". This is all the more so in circumstances where substantial costs have been incurred by Zurich in its successful defence of the arbitration proceedings, all of which remain unpaid.
36. A&A suggested that there would be no unfairness in this case because new evidence has come forward since the arbitration and the agency issue in these proceedings is not precisely the same. In the Second Partial Award at paragraph 17 the Arbitrator referred to the fact that A&A had not seen the terms of the agreement between Zurich and Towergate pursuant to which Towergate was authorised to sign the policy wording. The applicable Binding Authority has now been produced. It confirms the understanding of the Arbitrator.
37. The Arbitrator found that:

"I have no doubt from the documents I have reviewed that Towergate's role did not extend to acting as underwriting agents for the Respondent and that absent such authority, there would be nothing in the arrangements between Towergate and Zurich that could undermine Towergate's role as the Claimant's broker or negate the legal effect of Towergate performing such a role."

38. The Binding Authority confirms that all business was on a "prior submit" basis and that Towergate had no authority to act as underwriting agents. That being so, as the Arbitrator found, there is nothing in the arrangements which could affect Towergate's role as A&A's broker.
39. It was also suggested that the agency alleged in these proceedings was a wider agency which extended to documentary matters and that Towergate had responsibility for such matters under the Binding Authority. However, its responsibility to Zurich was to ensure that the contract for which it signed was on Zurich's wording, which it did. Any complaint that A&A has in relation to how documentary matters were handled by Towergate relate to its role as A&A's broker.
40. For all these reasons I conclude that it would be an abuse of process for A&A to be allowed to contend that Towergate was acting as agent for Zurich as alleged. This covers all causes of action based on proposition 3 as set out A&A's skeleton at paragraph 23.3. If there is no agency case against Zurich, it also follows that there can also be no cause of action against it based on proposition 1 as set out in paragraph 23.1.
41. It follows that all causes of action asserted against Zurich as summarised in paragraph 23 of A&A's skeleton should be struck out either on the basis of issue estoppel or abuse of process. I should add that if I am wrong in finding that there is an issue estoppel in relation to whether the policy contained CP2 I would have found it to be an abuse of process to seek to relitigate that issue for all the reasons set out above.

Summary judgment

42. This only arises if I am wrong in my conclusions so far. I shall address the issue of whether there is a real prospect of establishing that the contract was not subject to CP2 when considering the other Defendants' application. In relation to the issue of agency I find that there is no reasonable prospect of establishing that Towergate was acting as Zurich's agent in any respect material to the claims brought. The issue of agency is addressed by the Arbitrator in paragraphs 14 to 17 of the Second Partial Award. I agree with his reasoning and conclusion. No further evidence has been identified which would throw doubt on that conclusion. On the contrary, as explained above, the Binding Authority confirms that the position was as he understood it to be. Popplewell J considered that the Arbitrator's conclusion on this issue was not open to serious doubt. I agree. If it was necessary, I would accordingly conclude that there is no reasonable prospect of A&A establishing any of its alleged causes of action against Zurich put forward on the basis that Towergate was acting as Zurich's agent.

The applications of Towergate and Mr Richards

43. Towergate and Mr Richards contend that the claims brought against them on the basis that the contract did not contain CP2 involve an abuse of process and should be struck out.
44. Towergate and Mr Richards are in a different position to Zurich since they were not party (or privies) to the arbitration. There can therefore be no question of issue estoppel and the abuse of process argument is not as strong as that of Zurich since they have not already had to litigate the issue.
45. In support of their case Towergate and Mr Richards rely in particular on the Court of Appeal decision in Taylor Walton v Laing which they contend is analogous. That case also concerned the determination by another tribunal of what the contract was. The losing contracting party in those proceedings was not allowed to bring a claim against a third party predicated on the earlier decision to which he was party being wrongly decided. The proper way to challenge that earlier decision was by appeal, rather than by seeking to reverse it in further proceedings. That has been attempted in this case, but the attempt has emphatically failed.
46. I agree that the Taylor Walton v Laing decision supports a finding of abuse of process in this case. Aside from the fact that the earlier decision was in arbitration, the two cases are analogous. There is in this case no new evidence which casts doubt on the Arbitrator's decision. Indeed, for reasons set out below, such further evidence as there is confirms the correctness of his decision. That decision has sought to be challenged by appeal but the application has been dismissed on the basis that the decision is "not open to serious doubt". For the issue to be relitigated in this court involves a collateral attack on the Arbitrator's final and binding decision. Further, that decision relates to the terms of the contract as between A&A and Zurich, which have been determined in accordance with the agreed contractual machinery, namely by arbitration. In all the circumstances, I conclude that it would bring the administration of justice into disrepute, and would be oppressive and unfair on Towergate and Mr Richards, for A&A to be allowed to fight the issue of whether or not the contract contained CP2 all over again. It would accordingly be an abuse of process.
47. All causes of action in the present proceedings which depend on the assertion that the contract was not subject to CP2 should therefore be struck out. This precludes all causes of action covered by proposition 2, as set out in paragraph 23.2 of A&A's skeleton argument. This would include the allegations of forgery/fraud made against Mr Richards. If the contract did contain CP2, these allegations take A&A nowhere. The claims against Mr Richards should accordingly be struck out.

Summary judgment

48. The Arbitrator concluded that there "is no reasonable basis on which it could be contended that the (Zurich wording containing CP2) is not the applicable policy wording". I agree with his conclusion for the reasons given by him. In particular, the contract made was subject to "agreed Zurich wording", which included CP2. In any event A&A clearly accepted and adopted that wording by (amongst other things) bringing an arbitration claim expressly based upon it.
49. The short answer to A&A's case is that, as it acknowledges and avers, the contract was concluded on 2 October 2006 when Mr Richards sent A&A a Broker Proof of Cover. The contract contained in or evidenced by that Proof of Cover provides that Section A cover (that covering stock) was subject to "Wording in respect of section A, as per agreed Zurich wording". It was thereby agreed that the Section A cover was subject to Zurich's wording. Although there was some issue as to the precise version of Zurich's wording to which this referred, all Zurich's wordings contain CP2.
50. It was Towergate and Mr Richards' evidence that the wording had in fact been sent to A&A under cover of Mr Richards' letter of 25 September 2006. This letter asked A&A to check the adequacy of the "Specimen Policy attached hereto", which they said was a reference to the Section A Zurich wording. Although A&A denied receiving the wording, without the wording it would not have been able to check the adequacy of the policy, but no complaint about that was made at the time.
51. In any event, A&A had been insured with Zurich the previous year. On 26 September 2005 Mr Richards wrote to A&A. It was his evidence that this letter attached Zurich's proposed Section A wording. The covering letter stated that it was enclosing the "Schedule A Wording so that you can examine this and compare it to the expiring Wording". Although A&A had previously seemingly accepted that the 2005-06 contract was subject to the Zurich Section A wording (see paragraph 16 of Mr Santi's Fourth Witness Statement), it asserted at the hearing that it did not receive the wording then either, although there was no clear evidence to this effect. It did not complain at the time that it did not have the wording or that it was unable to examine and compare it as suggested. The contract issued for 2005-06 clearly contained the Schedule A wording. It was unclear whether A&A disputed receiving the contract as issued, but it is inherently unlikely that it would have been content to be insured with its new insurers in ignorance of the applicable contract wording.
52. Even if it really is A&A's case that it was content to be insured throughout 2005-06 and for cover to be incepted in 2006-07 without sight of any wording, the fact of the matter is that, as contained in or evidenced by the Proof of Cover, it objectively agreed to Section A cover being subject to "Zurich wording". That wording included CP2 and A&A is bound thereby whether or not it had seen that wording. In any event, as the Arbitrator found, its own broker was well aware of the wording which was thereby being agreed.
53. Since a contract was made including CP2 on 2 October 2006 A&A's various complaints as to what happened thereafter, and in particular in September/October 2007, cannot affect the matter. The contract as made included CP2.
54. For all these reasons I conclude that there is no real prospect of A&A establishing that the insurance contract did not contain CP2. It follows, that if I am wrong in concluding that the causes of action based thereon should be struck out, the Defendants would in any event be entitled to summary judgment in respect thereof.
55. That leaves A&A's claims against Towergate in negligence on the basis that it was not properly advised as to the effect of CP2. It was accepted that at no stage was A&A advised of the presence or potential effect of CP2. As a condition precedent it is an onerous clause. I accept that A&A has a real prospect of succeeding in its claims based on the proposition set out in paragraph 23.1 of its skeleton.
56. Towergate suggested that there was no evidence that A&A would have been able to obtain cover that did not include a term similar to CP2. However, there was evidence of A&A being held covered without such a term, and its previous cover included stock recording requirements, but not as a condition precedent.
57. Towergate also submitted that in the absence of proper stock records A&A would not have been able to prove its loss. However, I have little doubt that it would have been able to prove some loss.
58. Although I am satisfied that A&A has a real prospect of succeeding in its claims based on the proposition set out in paragraph 23.1 of its skeleton argument, that concerns its claims against Towergate, not Mr Richards. Further, the claim must first be properly pleaded. I accordingly propose to give A&A an opportunity to produce a proper pleading and to adjourn this aspect of Towergate's summary judgment application pending that being done. If, however, a pleading properly reflecting the proposition relied upon is produced then there should be no need for a resumed hearing.
59. I accordingly conclude that all claims against Mr Richards should be struck out, and that all claims against Towergate should be struck out other than those based on the proposition set out in paragraph 23.1 of its skeleton argument.

Security for costs

60. In the light of that conclusion it is necessary to address the issue of security for costs. Towergate seeks security for its costs in relation to any continuing proceedings against it.
61. It is accepted that the court has jurisdiction to order security for costs as A&A is a limited company and there is reason to believe that it will be unable to pay Towergate's costs if ordered to do so. However, it is said that the Court should not exercise its discretion to order security because (i) Towergate is alleged to have been the substantial cause of A&A's impecuniosity and/or (ii) it will have the effect of stifling the claim.
62. Whilst I accept that A&A's negligence claim is a bona fide claim which has real prospects of success, I am not able to form any view on the materials before the court on its likely prospects of success, nor would it be appropriate for me to seek to do so. Further, even if Towergate was found to have been in breach of duty it would not follow that that was the cause of A&A's impecuniosity and there are numerous causation issues which would potentially arise. On the evidence before the court I am therefore unable to accept that alleged ground (i) is a factor of much, if any, weight.
63. As to ground (ii), the burden is on A&A to satisfy the court that there is no real prospect of funds being available and forthcoming from any outside sources, such as Mr Jain or his business, Watches and Jewellery, which provided a guarantee in the arbitration.
64. There is evidence before the court to the effect that Mr Jain has significant assets, including valuable property interests. There is also evidence that Watches and Jewellery is a profitable business. There is no evidence as to how and by whom A&A's own legal costs are being paid.
65. Mr Jain says that he sees no reason why what "limited funds" he has should be utilised to pay the Defendants' costs. That is an acknowledgment that there are funds available, but not funds that he is willing to use for this purpose. The same applies to Watches and Jewellery, in relation to which he says that he must put the interests of his trading companies in preference to those of his non-trading companies – i.e. A&A. This suggests that the asserted inability to pay costs is a matter of choice rather than necessity.
66. Having given careful consideration to the evidence before the court I am not satisfied that it has been shown that the claim will be stifled if security is ordered. Neither discretionary ground relied upon by A&A is therefore made out.
67. In all the circumstances, in the exercise of my discretion I consider that this is an appropriate case for security for costs. I shall, however, leave over the issue of the amount of security. This will need to be considered further in the light of such other costs orders as may be made as a consequence of my other rulings.

Conclusion

68. For the reasons outlined above I conclude that the claims against Zurich and Mr Richards should be struck out; that all claims against Towergate should be struck out other than those based the proposition set out in 23.1 of A&A's skeleton argument; that the Particulars of Claim need to be repleaded and that in principle Towergate is entitled to security for costs.