England and Wales High Court (Queen's Bench Division) Decisions

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

		Royal Courts of Justice Strand London WC2A 2LL
		10th May 2006

1. MR JUSTICE CRESSWELL: The defendant JLT Corporate Risks Limited ("JLT") by its amended application notice applies for an order that (i) summary judgment be entered for JLT against the claimant Great North Eastern Railway Limited ("GNER") pursuant to CPR Part 24.2 dismissing the claim in whole or in part; alternatively, that (ii) the claimant's claim be struck out in accordance with CPR 3.4 in whole or in part because:

"(a) all of the claimant's claims are time-barred pursuant to sections 2 and 5 of the Limitation Act 1980 since they arise out of the placing of a policy of insurance in February to March 1998 and, as such, are based on causes of action which all accrued more than six years prior to 10 June 2004 when these proceedings were issued; and

(b) that part of the claimant's claim pleaded at paragraphs 13.1 and 13.2 of the Particulars of Claim is an abuse of process because it amounts to a collateral attack on the decision of Gross J in Great North Eastern Railway Ltd v Railcare Ltd [2003] EWCH 1608 (Comm) which determined the quantum of the claimant's loss. The claimant has by way of that judgment been compensated for those losses in full.

Accordingly, the applicant believes that the claimant has no real prospect of succeeding in its claim and there is no other reason why the case should be disposed of at trial. Further, the applicant believes that it is appropriate for the court to exercise its power to strike out the claimant's statement of case because that statement of case discloses no reasonable grounds for bringing the claim and is an abuse of process."

2. It should be recorded that JLT does not seek to strike out or have summary dismissed under (b) any claim by GNER in respect of costs of the Railcare proceedings. (See paragraph  13.2 of the draft amended particulars of claim).

Background Facts

3. The parties have helpfully prepared a memorandum of background facts. The background to the present application is set out in some detail in the various witness statements. For the present purposes the background can be summarised as follows:

3.1 GNER is the operator of the InterCity East Coast rail service.

3.2 Prior to 1997 GNER retained Fenchurch as its insurance broker. In that capacity Fenchurch effected Breakdown Insurance (including Business Interruption cover) with Avon Insurance plc ("Avon") for the period 1 April 1996 to 31 March 1997. Such cover was on the terms of a standard wording used by Fenchurch ("the Fenchurch Wording"). This was subject to a wide exclusion in respect of:

"Damage of Consequential Loss caused by … faulty or defective design, materials or workmanship, inherent vice, latent defect, gradual deterioration, wear and tear or frost."

3.3 In about January/February 1997 GNER retained JLT as its insurance broker in place of Fenchurch.

3.4 In about March 1997 JLT arranged for the renewal of GNER's Breakdown and Business Interruption Insurance with Avon for the year 1 April 1997 to 31 March 1998 on the same terms as the expiring cover, i.e. as was later held (although GNER did not know it at the time) on the terms of the Fenchurch Wording and subject to the wide exclusion quoted above.

3.5 In October 1997 JLT provided Sea Containers with an Insurance Register in which it summarised the cover it said it had purchased for GNER. This Insurance Register contained the following statement:

"No cover is provided for damage or consequential loss caused by or consisting of: … faulty or defective workmanship, operational error or omission, on the part of Great North Eastern Railways or any employees other than drivers and guards."

3.6 By letters dated 9 and 31 December 1997 JLT asked Avon to agree various changes to the Fenchurch Wording in respect of insurance for the period 1 April 1997 to 31 March 1998 (those changes being unrelated to the disputed exclusion).

3.7 In about March 1998 JLT arranged for the further renewal of GNER's Breakdown and Business Interruption Insurance with Avon for the year 1 April 1998 to 31 March 1999. Prior to such renewal being agreed JLT had in February 1998 provided GNER with a document entitled "Request for Property Insurance Quotations" ("the Request"). This set out the cover sought and provided that that cover be subject to an exclusion mirroring that in the Insurance Register in respect of:

"Damage or consequential loss caused by or consisting of … faulty or defective workmanship, operational error or omission, on the part of GNER or any employees other than drivers or guards."

This exclusion was somewhat narrower than the exclusion in the Fenchurch Wording, in that it applied only to defective workmanship, et cetera, on the part of GNER's own employees.

3.8 On 20 February 1998 a renewal meeting took place between Avon and JLT at which (so HHJ Dean, QC, held) JLT failed specifically to draw to the attention of Avon's underwriter the proposed narrower exclusion set out in the Request.

3.9 By an exchange of faxes on 5 and 6 March 1998 Avon agreed with JLT to renew cover for the period 1 April 1998 to 31 March 1999. As was held in the subsequent Avon Proceedings (see below) that renewal was on the terms of the Fenchurch Wording, including the wide exclusion in respect of defective workmanship contained in that Wording rather than the narrower contained in the Request.

3.10 JLT wrote to GNER on 6 March 1998 confirming that Avon had agreed to the renewal.

3.11 On 12 March 1998 there was a telephone conversation between JLT and GNER in which JLT again confirmed the renewal and GNER requested certificates of insurance.

3.12 On 13 March 1998 JLT issued certificates of insurance and summaries of cover to GNER stating (incorrectly) that the business interruption cover placed included a faulty workmanship exclusion in the narrow form and not the wide exclusion which in fact applied.

3.13 On 16 March 1998 there was a telephone conversation between JLT and Avon confirming the agreed business interruption deductibles.

3.14 On 30 March/1 April 1998 the 1998 Material Damage/Business Interruption policy incepted.

3.15 On 3 April 1998 JLT wrote to GNER enclosing invoices for the renewal.

3.16 On 6 April 1998 JLT wrote to Avon chasing for a response to its earlier letters of 9 and 31 December 1997 suggesting various changes to the terms of cover.

3.17 On 22 April 1998 Mr Grace of Avon responded apologising for the delay, responding to some of the proposed changes but saying that others would need to be raised with Avon's underwriters.

3.18 On 28 May 1998 Mr Lord wrote to JLT stating that because of sickness and holidays he had been unable to resolve the outstanding queries.

3.19 On 16 June 1998 GNER's 17:30 service from King's Cross was derailed at Sandy in Bedfordshire, when the wheel of one of the coaches disintegrated. Railcare subsequently admitted that the derailment was caused by its negligence in failing properly to debur and chamfer the edges of a balance hole drilled by it in the web of the wheel of one of the coaches, when overhauling and balancing the wheel-set. This led to the initiation of a fatigue crack in that wheel, which then propagated to the rim of the wheel and caused the wheel to break up. Mercifully, no one was injured in the derailment. It did, however, result in substantial disruption to GNER's business.

3.20 On 30 June 1998 (after the derailment) Mr Lord wrote again to JLT to state that because of sickness he had been unable to take matters forward.

3.21 JLT sent a further chasing letter on 3 September 1998, following up Mr Lord's letter of 30 June, but no substantive response to that letter was ever received from Avon.

The Avon Proceedings

3.22 GNER initially sought to claim its losses from Avon under its Breakdown and Business Interruption Insurance.

3.23 On 30 September 1998 Avon wrote to JLT declining GNER's claim on the basis of the broad faulty workmanship exclusion.

3.24 On 27 August 1999 GNER commenced proceedings against Avon in the Commercial Court (Action 1999 Folio No. 1073). GNER contended that following the 1998 renewal its insurance cover was subject to the narrower exclusion set out in the Request and that its claim did not fall within that exclusion (because the derailment was not the result of any faulty workmanship on the part of an employee of GNER).

3.25 On 25 July 2000 HHJ Dean, QC held that the wide exclusion set out in the Fenchurch Wording applied to GNER's cover with Avon. He reached this conclusion on the basis that the difference between the exclusion in the Fenchurch Wording and that contained in the request had not been sufficiently brought to the attention of Avon's underwriter and that Avon had not agreed to any change in the terms of cover.

3.26 On 7 August 2000 GNER's then solicitors, DJ Freeman, wrote to Vyvienne Wade of JLT indicating that, in light of HHJ Dean's judgment, JLT was in breach of its duties in that it had failed to procure the insurance coverage it was engaged to obtain and had misled GNER by informing it that the required coverage had been placed.

3.27 On 8 August 2000 Ms Vyvienne Wade wrote to DJ Freeman requesting details of the claim.

3.28 On 14 August 2000 DJ Freeman wrote to Vyvienne Wade of JLT agreeing to provide information on quantum and details of the recovery action which GNER intended to bring against Railcare. DJ Freeman asserted that JLT was liable for the costs of the Avon action and would be severally liable, with Railcare, for the losses caused by the derailment.

3.29 The same day Ms Wade wrote to DJ Freeman explaining that GNER was obliged to mitigate its losses by first recovering from Railcare (in which event the claim against JLT would be limited to costs to be assessed) and offering to fund the costs of an application for permission to appeal the Avon judgment.

3.30 On 15 August 2000 DJ Freeman wrote to Ms Wade accepting JLT's offer to fund an application for permission to appeal.

3.31 On 23 May 2001 DJ Freeman wrote to Ms Wade indicating that in the event of an unfavourable decision from the Court of Appeal in the Avon proceedings, GNER would be issuing proceedings against JLT.

3.32 On 24 May 2001 the Court of Appeal dismissed an appeal by GNER against the decision of HHJ Dean QC. Longmore LJ, who gave the judgment of the court, held that:

"(a) Avon's agreement to renew was to be construed as an agreement to renew on existing terms; and

(b) Avon had not agreed to the narrower exclusion set out in the Request in circumstances where (as HHJ Dean QC had found) Avon's underwriter had not read the Request and the change to the terms of the exclusion set out in the Request had not been referred to at a renewal meeting between him and JLT on 20 February 1998 (it being the evidence of the JLT broker concerned that it was incumbent upon him specifically to draw any change to the terms of the exclusion to the attention of Avon's underwriter)."

3.33 In late 2001/early 2002 JLT paid to GNER the sum of £418,655.94 in respect of the costs of the Avon Proceedings.

The Railcare Proceedings

3.34 On 25 September 2000 GNER commenced proceedings against Railcare (Case No. 2000/762). As set out above, Railcare ultimately accepted that the derailment had been caused by its negligence. However, Railcare disputed the quantum of GNER's claim. It also asserted that GNER had been contributorily negligent in failing to detect the fatigue crack prior to the derailment.

3.35 On 5 June 2002 Ms Wade wrote to GNER setting out JLT's position in relation to GNER's claim, namely that although JLT was in breach of its duties to GNER, it was clear that recovery from Railcare and JLT's payment of both GNER's and Avon's costs of the Avon Proceedings would extinguish GNER's claim. Ms Wade ended by saying:

"We must reserve the right to rely upon this letter in the event that GNER commences proceedings against Jardines. Jardines' position is that it is inappropriate for proceedings to be commenced against it given its acceptance of a breach of duty and the payments in respect of costs."

3.36 The trial of the Railcare Proceedings took place before Gross J between 24 March and 10 April 2003. A total of seven witnesses of fact and ten experts were called to give evidence. The hearing occupied 11 court days.

3.37 On 15 July 2003 Gross J gave judgment. He dismissed Railcare's allegation of contributory negligence. So far as quantum was concerned, Gross J found for GNER on some issues but on other issues either found for Railcare or reached a decision which represented what was in effect a mid-point between the parties' respective contentions. He awarded GNER damages of £2,407,600 in total. He also ordered that Railcare pay 70 per cent of GNER's costs and that GNER pay 20% of Railcare's costs (to reflect the parties' respective degree of success on the issues argued at trial). Railcare has subsequently satisfied that judgment by paying to GNER the sum of £2,059,000 in respect of damages and interest and the sum of £700,000 in respect of costs.

The Present Proceedings

3.38 As set out above the Claim Form in the present proceedings was issued on 10 June 2004. On 6 October 2004 GNER obtained an order extending its time for service of that Claim Form from 4 to 5 months. This was on the basis that it was awaiting receipt of a report from Forensic Accounting LLP as to the quantum of its claim and that it was likely to wish to withdraw its claim if:

"Forensic Accounting advise that the value of the insurance recovery to which [GNER] would have been entitled had the insurance policy been placed in accordance with its instructions is equivalent or less than [GNER's] recovery under the Judgment [in the Railcare Proceedings]."

3.39 On 5 November 2004 Mr Trumper of Forensic Accounting issued his report. This quantified GNER's claim against JLT in respect of its uninsured losses in the sum of £2,974,000 after giving credit for the recoveries made from Railcare. This was on the basis that GNER's total losses as a result of the derailment amounted to £5,381,600 (£2,974,000 + £2,407,600 awarded by Gross J).

3.40 On 9 November 2004 GNER served JLT with the Claim Form together with the Particulars of Claim. The claim for damages set out in the Particulars of Claim was based on the figures given by Mr Trumper in his report.

3.41 On 22 December 2004 JLT served its Defence. In that Defence JLT admitted that it had been negligent in failing to obtain cover that was subject to the narrower exclusion set out in the Request but asserted that GNER's claim: (a) was time-barred under the Limitation Act 1980; and/or (b) had been extinguished by the recovery made by GNER in the Railcare Proceedings and the payment of £418,755.94 referred to above made by JLT in respect of the costs of the Avon Proceedings.

3.42 On 11 February 2005 GNER served its Reply. In that Reply it asserted that its claim had nonetheless not been extinguished and was not time-barred.

3.43 On 18 July 2005 the present application was issued by JLT.

Limitation

4. JLT's case is that all of the claimant's claims are time-barred pursuant to sections 2 and 5 of the Limitation Act 1980 since they arise out of the placing of a policy of insurance in February to March 1998 and, as such, are based on causes of action which all accrued more than six years prior to 10 June 2004 when these proceedings were issued.
5. The parties have prepared a helpful statement as to the issues in relation to limitation, to which I now refer. The only issue as regards limitation arising on this claim and which the parties cannot agree relates to GNER's claim (a) that JLT owed it a continuing duty of care in contract or in tort from the time of renewal in March 1998 and (b) that JLT was in breach of that continuing duty right up until the time of the derailment on 16 June 1998. If GNER is right about this, then commencement of proceedings on 10 June 2004 means that the proceedings are not time-barred to the extent set out below. If GNER is wrong about the existence of a continuing duty, the proceedings are time-barred subject to the reservation in respect of appeal (see below). The parties agree that if JLT did owe GNER a relevant continuing duty, the question of whether JLT was in breach of that duty is not capable of being summarily determined.

Common Ground

6. It is common ground that the relevant limitation period is six years (see section 2 of the 1980 Act as regards the claim in tort and section 5 of the Act as regards the contractual claim). Nor is there any issue, subject to the reservation referred to below, that the six-year limitation period as it applies to any breach of duty as regards the placement of the renewal itself (as opposed to any breach of a continuing duty) had expired by the time that the proceedings were commenced on 11 June 2004.
7. As to the claim in contract, the renewal took place not later than 1 April 1998 when the renewal came into effect, more than six years before proceedings were commenced. As to the tort claim, GNER's loss and damage was suffered at the same time when the renewal came into effect (1 April 1998), the time when GNER (in the words of Hobhouse LJ in Knapp v Ecclesiastical Insurance Group plc [1998] Lloyd's Rep IR 390 following Iron Trade Mutual Insurance Co Ltd v JK Buckenham Ltd [1990] 1 All ER 808) "did not get that to which they were entitled".
8. GNER reserves its position in respect of any appeal specifically (though not limited to) the argument that authorities such as Knapp and Iron Trade Mutual Insurance concern policies that were voidable rather than (as in the present case) subject to an exclusion that ought not to have been there. This reservation is, in circumstances, in particular, where judgment is awaited in Law Society v Sephton [2004] EWCA Civ 1627. It is agreed that this reservation need not affect the judgment on the present application.
9. In respect of GNER's claim for breach of a continuing duty, the parties are agreed as follows. The six-year limitation period in respect of the claim made by GNER in contract has expired save to the extent that such claim relates to a breach of duty by JLT occurring on or after 11 June 1998. The six-year limitation period in respect of the claim by GNER in tort has expired save to the extent that such claim relates to a breach of duty by JLT which first caused damage to GNER on or after 11 June 1998.
10. The parties are further agreed that this is not a case in which section 14A of the 1980 Act has any application.

JLT's Submissions

11. Mr Tom Weitzman, QC, for JLT submitted as follows.
12. What GNER is seeking to allege is that JLT was under a duty to review its own earlier actions and identify its own earlier breach of contract, in particular, that it had failed to secure Avon's agreement to the narrow exclusion contained in the request and had wrongly advised GNER that the cover was subject to that narrow exclusion rather than the wide exclusion set out in the Fenchurch Wording. JLT rely in particular on passages from the judgments in Bell v Peter Browne & Co. [1990] 2 QB 495, being in particular Nicholls LJ at page 500G to 501A and Mustill LJ at pages 513G to 514C.
13. While Bell v Peter Browne & Co. concerned a claim against a solicitor, JLT says the decision of the Court of Appeal is also applicable to claims against insurance brokers and, in particular, to the facts of the present case. JLT contends that it was not under any continuing duty of the kind contended for by GNER. JLT accepts it acted in breach of contract in obtaining cover on the wrong terms and advising GNER that it had obtained cover on the right terms. Having done so, JLT was not thereafter under a continuing duty to review its past actions and discover that it had not obtained the cover it thought it had obtained or to inform GNER that this was the case. JLT was not under a duty to identify or report to GNER its own earlier breaches of contract. Any claim by GNER against JLT for breach of contract in failing to take steps to agree a wording between 11 and 16 June 1998 has no real prospect of success and is bound to fail. At the relevant times it was reasonable for JLT to wait for Mr Lord to deal with the various outstanding queries as he had promised to do in his letter of 26 May 1998 before taking any further steps. Even if JLT had sent a further chasing letter to Mr Lord on, say, 11 June 1998, it is clear from Mr Lord's letter of 30 June 1998 that this would not have led to any substantive response from Avon or enabled the wording to be agreed prior to the derailment on 16 June 1998. JLT does not accept that even if it had advised GNER on 11 June 1998 that the cover obtained was subject to the wide exclusion contained in the Fenchurch Wording, it would have been possible for GNER to obtain cover subject to the narrow exclusion prior to the derailment on 16 June 1998 as Mr Everiss asserts in his first witness statement. JLT does, however, accept that this is not an issue which is suitable for summary determination.
14. In the course of his submissions, Mr Weitzman accepted for the purposes of this hearing only that it should be assumed that JLT owed a duty to use reasonable skill and care to obtain an agreed wording and provide it to GNER within a reasonable time. He submitted that if such a duty existed, a breach occurred at the date when JLT should have first sought Avon's agreement to the wording and that there was no continuing breach thereafter. It should be recorded, as Mr Weitzman pointed out, that until after the disaster both GNER and JLT believed that the cover was subject to the narrow exclusion.

GNER's Submissions

15. Mr Julian Flaux, QC, for GNER submitted as follows.
16. In an appropriate case, of which this is one, a broker may be under a continuing duty after placement (1) to ensure that its clients' insurance requirements, whatever they are, are carried out; and/or (2) to warn the client promptly if for whatever reason those requirements have not been carried out. The existence of such a continuing duty after placement and, indeed, throughout the period of insurance was expressly recognised by Phillips J in Youell v Bland Welch (The "Superhulls Cover" case) (No. 2) [1990] 2 Lloyd's Rep 431 at 447-8. In that case the brokers had failed to obtain the insurance protection that their clients required. The judge held that they were under a continuing duty to take steps to protect the clients' position and warn the clients when the reinsurance protection was about to expire.
17. In HIH v JLT Risk Solutions [2006] EWHC 485 (Comm), Langley J followed and applied the Superhulls Cover case. A case where the broker has failed at placement to effect insurance in accordance with the client's requirements (as expressly admitted by JLT) is a paradigm case for a continuing duty after placement to "sort out the mess". The broker who is actively engaged post-placement in discussions with the insurer over the terms of cover (as JLT was here) is in a very different position from the solicitor who is negligent in failing to prepare a declaration of trust or mortgage and then, in fact, has no further involvement at all (as in Bell v Peter Browne & Co).
18. In the present case the brokers remained in regular communication and discussion with Avon after placement, right up until the derailment on 16 June 1998 and, indeed, thereafter, not least on the subject of the policy wording which had still, even then, not been agreed or signed by Avon. Thus, at any time before 16 June 1998 JLT could and should have raised with Avon the fact that GNER required full breakdown cover with the narrow exclusion, as had been set out in the Request for Property Insurance "Quotations produced by JLT.
19. In HIH v JLT Risk Solutions Langley J held that JLT was under a continuing duty. In so holding, he accepted the expert broking evidence given on behalf of HIH by Mr Julian Radcliffe. GNER has consulted Mr Radcliffe in the present case. Mr Radcliffe has confirmed that in his opinion JLT was clearly under the continuing duties for which GNER contends. JLT's contention that it was under no continuing duty is additionally at odds not only with the material it chooses to publish on its website and the draft Service Level Agreement to which Mr Girling refers, but also with what Mr Drewer (Sea Containers' Director of Risk Management) has to say in his witness statement concerning his dealings on behalf of GNER with JLT.
20. JLT's denial that there was a continuing duty is inconsistent with its undoubted continued involvement in the matter, with JLT personnel performing a number of tasks in relation to the cover after inception. These tasks were not limited to administration but included (as Mr Girling acknowledges) discussion with Avon regarding the policy wording. Reference is made to the matters listed at pages 14 to 16 of GNER's Part 18 Response, which point strongly to there being a continuing duty on the part of JLT. If JLT wishes to continue to contend that all brokers' duties in relation to policy terms cease upon placement notwithstanding the decisions of Phillips J and Langley J and the evidence of Mr Radcliffe and Mr Drewer, that will be its prerogative at trial. For present purposes, however, the existence of the continuing duties for which GNER contends is, at a minimum, highly arguable and, importantly in the present context, more than satisfies the threshold test under CPR Part 24.
21. Further, the court is not in a position to decide on this application whether, on the basis that there were continuing duties, JLT was in breach of those duties. If GNER does establish at trial those continuing duties and breach of them by JLT, there will be no question of the claim being time-barred. In those circumstances, the issue of limitation cannot and should not be determined at this summary stage but should go to trial (see the decision of Gloster J in Gaughan v McDonagh [2005] EWHC 739 (Comm)).
22. In his oral submissions, Mr Flaux summarised GNER's case as follows. In the circumstances of this case (1) where the brokers failed to obtain the insurance cover which they had said that they would obtain and which they represented they had obtained; (2) where they failed to get any wording agreed; (3) where the brokers continued to act for GNER after placement in relation to those very matters (negotiating the terms of the contract of insurance and agreeing or attempting to agree the wording with the insurers), the brokers were under a continuing duty after placement of the risk and at all material times until the incident made further performance of the duty futile.
23. The continuing duty had three elements: (1) to obtain the full cover which the brokers had represented they had obtained; (2) to agree or procure the agreement of the insurers to the policy wording; (3) in the event that such cover was not obtained or the wording was not agreed, to warn GNER that they had not obtained the cover or agreed the wording, in which event GNER could have obtained appropriate insurance protection at very short notice.

Limitation: Analysis and Conclusions

24. The only issue as regards limitation arising on this claim and which the parties cannot agree relates to GNER's claim (a) that JLT owed it a continuing duty of care in contract or in tort from the time of renewal in March 1998 and (b) that JLT was in breach of that continuing duty right up until the time of the derailment on 16 June 1998.
25. As to the relevant principles as to successive and continuing breaches, see Chitty on Contracts, 29th Edition, paragraph 28-035.
26. Part 24.2 of CPR provides:

"The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if:

(a) it considers (i) that the claimant has no real prospect of succeeding on the claim or issue ... and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial."

In my opinion there are compelling reasons why the limitation issue should be disposed of at a trial. Expert evidence as to the relevant practice of brokers is likely to inform and assist the court as to the extent and nature of any continuing duties of JLT in relation in particular (but without limitation) to the need to obtain an agreed policy wording and provide it to the claimant. The fact that the court has regard to the general practice of insurance brokers in appropriate circumstances is reflected in paragraph 14-034 of Jackson and Powell on Professional Negligence, 5th Edition.

27. Support for the contention that brokers owe continuing duties post-placement are found in the following text books:

Christopher Henley in The Law of Insurance Broking, 2nd Edition at paragraph 2-016 states under the heading "Post-Placement Obligations":

"In some cases the broker's obligations to the insured end shortly after the contract of insurance has been concluded, when the administrative requirements have been satisfied by the broker. These will usually include sending the policy document to the client and advising him of any unusual or onerous terms with which he must comply. Whether or not the broker has any continuing obligations to inform his clients of any impending insolvency in the selected market, or indeed any rumours concerning the ability of that market to pay, is rarely addressed by the parties. It is probably logical to say that where the broker has a continuing obligation to process claims through insurers on behalf of his clients, he should be under a concurrent duty to advise if he becomes aware that any of the market is or may become unable to pay, since there is, of course, no point in attempting to process a claim against a market that is effectively insolvent or simply refuses to pay. The insured is entitled to attempt to replace the insurance elsewhere.

There is no English authority for the proposition that the broker is obliged to monitor the security. Phillimore LJ said in Osman v J Ralph Moss Ltd that:

'It was the broker's duty in the circumstances to give Mr Osman a plain warning in the strongest terms and to tell him that they were ready to account to him for the premium that he had paid. If they had been concerned to do their duty by him, they would have taken further and urgent steps to ensure that he realised the position, but they did not.'

This obligation can be qualified by the fact in this case that the brokers were aware that the insurer was financially unsound when the insurance was placed. The Australian case of Lewis v Tressider Andrews Associates considered various English authorities and concluded that the broker is obliged to inform the insured of any information which he receives which indicates that the insurer may not remain financially sound, even if the broker is personally satisfied that no real problem exists. The court stated that 'so long as the relationship of broker and client subsists there is a continuing duty of care'."

28. Jackson and Powell, supra, state at paragraph 14-074 under the heading "(h) Failing to keep the client properly informed as to the existence or terms of cover",

"Existence of cover":

"An insurance broker should keep the client properly informed as to the presence or absence of cover. If the insurance broker is unable to effect insurance at all or, alternatively, is unable to effect insurance on the specific terms required, he is under a duty to notify the client promptly. Where a broker receives information casting doubt on the reliability or solvency of an insurer of one of his clients, he should pass that information to his client even if he is personally satisfied with the insurer. Where, however, the insurance broker receives instructions from a trade union or association of which the insured is a member, his duties to keep the insured informed are necessarily more restricted."

29. At paragraph 14-077, Jackson and Powell state:

"Where client becomes uninsured. If the client becomes uninsured for any reason, the broker should notify him as a matter of urgency."

30. At 14-079 the following passage appears:

"Terms of cover. If any onerous term or restriction is included in the policy, this should be notified to the client either before the insurance is effected or as soon as possible thereafter. If necessary the broker should explain to his client the nature and effect of any significant or unusual restrictions or exclusions in the policy."

31. In Superhulls at page 446 Phillips J said:

"In the present case the brokers negotiated the terms of the Superhulls cover on behalf of the prospective reassured and drew up the slips and, subsequently, the formal contract wording to be embodied in the policy. The brokers were bound to exercise reasonable skill and care in drafting these documents so as to ensure that they gave clear expression to the terms that had been agreed. They failed to do so."

32. The decisions in the Superhulls Cover case and HIH Casualty were concerned with continuing duties of brokers in factual situations that differ from the circumstances of the present case. It is to be noted, however, that in both cases the court expressly referred to expert evidence in reaching its decision.
33. There is no satisfactory independent expert evidence as to relevant broking practice before the court, nor would I expect there to be such evidence on an interlocutory application of this nature. The second witness statement of Mr Mark Everiss of Kendall Freeman does not exhibit any report from Mr Julian Radcliffe but simply refers to what Mr Everiss says Mr Radcliffe will say in a report. To the extent that the defendant's witnesses refer to broking practice they are, of course, not independent.
34. I should record that if GNER established that JLT owed continuing duties, difficult issues as to causation may well arise. But again, such issues are not suitable for determination on an interlocutory application. I am minded to direct that there should be a trial of issues relating to liability first, to include limitation and causation issues, but I will hear further argument on future case management.
35. Last Thursday I sent an email to the parties which stated:

"I have only had time to read the skeleton arguments in outline. There is however one point I would invite the parties to consider. A central issue in relation to the limitation defence is whether the defendant owed any relevant continuing duty after about March 1998. In some cases this type of issue is illuminated or assisted by independent expert evidence. I have an entirely open mind as to whether this is such a case, but I would expect the point to be addressed in argument. IF this were such a case a possible procedural route would be to direct a trial of a preliminary issue (as to limitation) with provision for oral expert evidence."

Extinction, Collateral Attack, Abuse of Process

36. It is important to record that the application notice was amended in the course of the hearing. The application notice in its original form stated at (b):

"The claimant's claim is an abuse of process because it amounts to a collateral attack on the decision of Gross J ... which determined the quantum of the claimant's loss. The claimant has, by way of that judgment and the defendant's payment of its costs associated with the unsuccessful claim against insurers, been compensated for its losses in full."

37. Paragraph (b) in its amended form reads:

That part of the claimant's claim pleaded at paragraphs 13.1 and 13.2 of the Particulars of Claim is an abuse of process because it amounts to a collateral attack on the decision of Gross J … which determined the quantum of the claimant's loss. The claimant has, by way of that judgment, been compensated for those losses in full."

JLT's Submissions

38. Mr Weitzman for JLT submitted as follows.
39. GNER's claim has been extinguished by the Railcare proceedings and/or is a collateral attack on the judgment of Gross J and/or is an abuse of process. In Heaton v Axa Equity and Law [2002] 2 AC 329, the House of Lords considered the circumstances in which a cause of action might be extinguished. Lord Bingham explained the relevant principles as they applied in the case of a judgment by means of schematic examples. Lord Bingham also at paragraph 8 of his speech explained the House of Lords' earlier decision in Jameson v CEGB [2000] 1 AC 455.
40. Applying the above principles to the present case, JLT say that GNER's claim in respect of its uninsured losses has been extinguished by the Railcare proceedings. In his judgment Gross J found that GNER had suffered losses totalling £2,407,600 as a result of the derailment and the disruption to its business caused by the derailment. GNER has recovered that sum from Railcare. As a result GNER has been fully indemnified in respect of the loss suffered by it as a result of the derailment and has no surviving claim against JLT in respect of such loss.
41. The uninsured loss now claimed by GNER from JLT is in reality the same loss which it has previously claimed from Railcare; that is, the loss suffered by it as a result of the derailment. If GNER was now to seek to make a claim on its insurance and that insurance was subject to the narrow exclusion, Avon would have a complete defence to that claim on the basis that GNER had recovered its losses from Railcare and accordingly had suffered no loss for which it was entitled to be indemnified under the insurance. The position is the same in the present proceedings where JLT in effect stands in Avon's shoes.
42. If one looks at the relevant provisions of the Fenchurch Wording, leaving aside the provisions as to loss which GNER pleads would have applied but for the defendant's negligence, it is clear that cover is provided only in respect of loss actually suffered as a result of an insured event. That is on the same basis as the decision of Gross J.
43. The relevant insuring clause provides that:

"Insurers will pay to the Insured … the amount of loss resulting from the interruption of or interference with the Business carried on by the Insured at the Premises in consequence of the Damage …"

44. The indemnity provided in respect of lost revenue is stated to be:

"The amount by which the Gross Revenue during the Indemnity Period shall in consequence of the Damage fall short of the Standard Revenue ... less any sum saved …"

and the Standard Revenue is defined as being:

"The Gross Revenue during that period in the twelve months immediately before the date of the Damage which corresponds with the Indemnity Period to which such adjustments shall be made as may be necessary to provide for the trend of the Business and for variations in or other circumstances affecting the Business ... so that the figures thus adjusted shall represent as nearly as may be reasonably practicable the results which but for the Damage would have been obtained during the relative period after the Damage."

45. The cover in respect of increase in cost of working is stated to be in respect of:

"…additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the loss of Gross Revenue which but for that expenditure would have taken place during the Indemnity Period in consequence of the Damage …."

Thus it is necessary to distinguish between lost revenue and increase in cost of working.

46. The present claim has two elements: (1) lost revenue assessed by Mr Trumper at £4.38 million; (2) increased cost of working assessed by Mr Trumper at £498,000. It is clear if one looks at Mr Trumper's report that what GNER is seeking to do is to re-argue various of the issues decided by Gross J. Thus:

(1) Gross J assessed GNER's loss on the basis that the derailment affected GNER's business for the periods P6, 7 and 8 (adopting the four-week period system used by the Rail industry). Mr Trumper contends that the derailment also affected GNER's business in P9. In this respect it is to be noted that GNER did not make any claim in respect of P9 in the Railcare proceedings, apparently because its preferred measure of the level of sales that would have been achieved, the forecast, did not show any disruption in period P9. In effect, therefore, GNER is now seeking to resile from a deliberate decision made by it in the Railcare proceedings, for what no doubt then seemed to be good tactical reasons, to continue its claim to periods P6, 7 and 8.

(2) Gross J assessed the level of sales which GNER would, but for the derailment, have achieved in periods P6, 7 and 8 by reference to what he described as "the Winspeare approach". Miss Winspeare was the forensic expert instructed by Railcare. That approach was based on the figures in the GNER budget, but uplifted to allow for GNER performing ahead of budget. In reaching this conclusion, Gross J rejected GNER's contention that the level of lost sales should be assessed by reference to the Forecast. Mr Trumper now argues for a yet further measure of lost sales, namely the Budget uplifted by a factor of 2.33 per cent. In effect, what has happened is that GNER has gone to a new forensic accountant, Mr Trumper, who has suggested a different measure of lost sales than that suggested by the forensic accountant who acted for GNER in the Railcare proceedings.

(3) Gross J held that various fees incurred by Railcare in respect of defects in wheels other than deburring and chamfering were not recoverable as a matter of causation. Mr Trumper expresses the view that such costs were incurred in consequence and/or as a result of the derailment. In effect, therefore, GNER seeks simply to ignore the finding of Gross J.

47. In the circumstances, GNER's claim in the present proceedings for its uninsured losses constitutes a collateral attack on the decision of Gross J. What GNER is, in effect, seeking to do is to re-argue a number of the issues decided by Gross J on the basis of different expert evidence and/or a different formulation of its case or simply on the basis that the judge had it wrong.
48. Having regard to the above, GNER's claim for uninsured losses is an abuse of the process of the court. JLT rely in this respect on the dicta in the speech of Lord Bingham in Johnson v Gore Wood & Co. [2002] 2 AC 1 at page 31. JLT say that GNER's conduct in relation to its claim for uninsured losses is, in all the circumstances, an abuse of process for the following reasons: (1) it amounts to a collateral attack on the decision of Gross J in the Railcare proceedings; (2) it requires the re-litigation of issues which have already been litigated at great length in the Railcare proceedings; (3) GNER could, if it had chosen to do so, have advanced its present case as to the proper measure of its loss in the Railcare proceedings. The differences between the case advanced by GNER in the Railcare proceedings and the case now advanced by GNER are the result of GNER having obtained different expert evidence from a different forensic accountant and, on the basis of that evidence, taken different tactical decisions as to how best to present its case.

(4) GNER could and should have joined JLT as a defendant to the Railcare proceedings if it wished to pursue its present claim for uninsured losses against JLT. In this respect, it is significant that JLT expressly informed GNER on 5 June 2002 that it considered that GNER's recovery from Railcare would:

"... entirely extinguish any claim for damages it has against JLT relating to the value of the lost insurance claim."

49. Because Gross J dismissed Railcare's allegation of contributory negligence, there was no shortfall. It may be that GNER is disappointed by Gross J's findings as to what is the true measure of its loss, but this does not mean that there has been a shortfall.

GNER's Submissions

50. Mr Flaux for GNER submitted as follows.
51. The contention that this claim against JLT is an abuse of the process of the court because it constitutes a collateral attack on the judgment of Gross J in the Railcare proceedings is misconceived. GNER's claim does not involve any such attack on Gross J's judgment, but even if it did, it would not constitute an abuse of process. The applicable legal principle was recently re-stated by Sir Andrew Morritt, Vice-Chancellor, in the Court of Appeal in Secretary of State for Trade & Industry v Bairstow [2004] Ch 1 at 17B-C. JLT cannot show that the criteria identified by Sir Andrew Morritt are satisfied here.
52. In circumstances where JLT was not a party to the earlier proceedings, there is no question of it being unfair for JLT to face litigation of the issue as to what indemnity GNER would have recovered under the Avon insurance had it not been for JLT's admitted negligence. On the contrary, given that the net recovery which GNER has made against Railcare (i.e. net of the costs GNER has incurred but not recovered from Railcare or was liable to pay Railcare) is not equivalent to the indemnity that GNER would have recovered under the Avon insurance but leaves GNER with a substantial shortfall, it would be manifestly unfair to GNER if JLT could escape liability for that shortfall, especially since JLT admits that the indemnity under the policy is not available because of its negligence.
53. Furthermore, there is no question of GNER seeking to recover twice. It has always made it clear that it will give credit in its claim against JLT for its net recoveries against Railcare. There is a shortfall between what it has recovered from Railcare and what it would have recovered under the Avon insurance, but for JLT's negligence. GNER must be entitled to claim in respect of that shortfall. It cannot conceivably bring the system of justice into disrepute for GNER to seek to do so from the party responsible for the shortfall, namely the brokers whose negligence deprived GNER of a right to indemnity under the Avon insurance.
54. In any event, the claim against JLT for damages in an amount equivalent to the indemnity which GNER would have recovered from Avon under the contract of insurance, less net recoveries already made, is not on analysis a collateral attack on the judgment of Gross J at all. Gross J only determined the extent of GNER's loss recoverable from Railcare for its negligence in the overhaul of the wheel-set which led to the derailment. He did not determine the completely separate question as to what sums GNER could have recovered by way of an indemnity under the Avon policy, and thus what damages JLT is liable for as a consequence of that indemnity not being available.
55. Another way of expressing the same point and demonstrating why, as a result, JLT's position on this application cannot be right, is that Railcare and JLT were not liable for the same damage. Gross J was not determining the extent of the damage which GNER had suffered as a consequence of JLT's breach of duty. Heaton v Axa Equity and Law and Jameson v CEGB are cases which are concerned with the position of joint tortfeasors, i.e. parties who are liable for the same damage. The question in the present case is what cover GNER would have had under the terms of a contract of insurance with no applicable exclusion. That requires consideration not of what GNER would have recovered in tort from the negligent wheel-set overhauler, but what GNER could have recovered in contract from an insurer who, but for JLT's negligence, would have provided GNER with an indemnity.
56. The claim in the present case is thus primarily for damages equivalent to the indemnity for business interruption losses to which GNER would have been entitled under the Avon insurance but for JLT's (admitted) negligence.
57. The claim has two principal elements, both of which would have been recoverable under the Avon insurance: loss of Gross Revenue and increased cost of working.

Lost Revenue

58. The claim for loss of Gross Revenue has been formulated on the basis set out in the expert report of Mr Ian Trumper of Forensic Accounting dated 5 November 2004. As is apparent from that report, Mr Trumper has calculated the claim in accordance with the relevant provisions of what should have been in the Avon insurance. Although there is some overlap with the elements of loss of revenue in the claim against Railcare, this is not, whether as a matter of analysis or in fact, the same claim as was presented to the court in those proceedings. It is significant in the context of a strike-out application by JLT that Mr Trumper's evidence as to the calculation of the indemnity which would have been available under the Avon insurance is not challenged by any evidence put forward by JLT. The court has to proceed on the basis that the case supported by that evidence is, at the very least, sufficiently arguable to require a trial.
59. One obvious difference is that the Indemnity Period for the purposes of a claim under the contract of insurance (and thus against JLT) is defined as the period from the occurrence of the Damage until no later than 12 months thereafter, during which the results of the business are affected in consequence of the Damage. The maximum indemnity period thus ran from period 6 in 1998 (the incident having occurred in week 3 of that period) until the end of period 5 in 1999.
60. As is apparent from Mr Trumper's report, he considers that the actual indemnity period during which the revenue of GNER was affected detrimentally by the incident extends until at least period 9 of 1998 and possibly until towards the end of the maximum indemnity period. This is a consequence of the claim being put forward on a budget-adjusted basis rather than on a forecast basis (the basis contended for by GNER before Gross J but rejected by him). By contrast, in the Railcare proceedings, Gross J was only considering the loss of revenue in periods 6 to 8 of 1998. He did not have to consider whether Mr Trumper is right that GNER's revenue had been affected for a longer period of time for the purposes of an indemnity under the policy. That was not an issue in the proceedings before him.
61. In the circumstances, it is difficult to see how the lost revenue claim, based as it is on the amount of indemnity which would have been available under the policy but for JLT's breach of duty and amounting (on Mr Trumper's figures) to £2,476,000, can be said to be a collateral attack on Gross J's judgment, let alone one which would bring the administration of justice into disrepute.
62. The position would be different if GNER were now seeking to claim the extra period (period 9) from Railcare, since then there would almost certainly be an issue estoppel, but that is not the case. Since JLT was neither a party nor a privy to the Railcare proceedings, JLT cannot complain if GNER seeks to recover from it for losses or periods of loss which it did not claim or recover against Railcare.
63. In the circumstances, it is not open to JLT to complain about the earlier proceedings or to suggest that GNER should have joined JLT to the Railcare proceedings, let alone that the current claim against it is an abuse of process.

Interfleet Costs

64. As to the claim for the costs of continued testing of wheels and replacement of wheel-sets, in particular the costs paid to Interfleet Technology, the issue which arises in these proceedings (as against JLT) is not the same issue as the issue which arose in the Railcare proceedings (as against Railcare). There are similarities but that is not sufficient for the purposes of JLT's application and, in any event, the issue that arises in the current proceedings does not (for the reasons explained below) involve GNER having to say that the conclusion of Gross J was wrong.
65. Gross J disallowed recovery of costs which were not attributable to Railcare's negligence in failing to deburr and chamfer holes drilled in the wheels/wheel-sets, holding that Railcare's negligence and the derailment provided no more than the occasion for other defects in the wheels to be remedied. Gross J found (based on the evidence of Mr Lumb of GNER) that, had the only problems with the wheels related to a failure properly to deburr and chamfer there would have been no necessity for a "good hole" programme. Accordingly, costs arising from the taking of measures to deal with problems or potential problems that were revealed through the investigations which followed the derailment were disallowed if not the result of Railcare's failure properly to chamfer and deburr the wheel in question.
66. The judge did not address (nor was he asked to address) the question of whether the costs of the "good hole" programme could be recovered pursuant to the increased cost of working ("ICOW") clause of the contract of insurance which, but for JLT's negligence, would have been obtained. Under the ICOW provision, the costs claimed would be recoverable if they were:

"additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the loss of Gross Revenue which but for that expenditure would have taken place in the Indemnity Period in consequence of the Damage ..."

67. The question is, therefore, whether the steps taken, the costs of which it is now sought to recover, were necessarily taken for the sole purpose of reducing the loss of revenue, which would have taken place in consequence of the damage? The issue raised by the wording is thus as to the purpose for which the expenditure in question was incurred. If, as GNER will seek to establish at trial, the purpose of implementing the "good hole" programme was to avoid or diminish the loss of gross revenue which it would otherwise have suffered in consequence of the incident, then it would have been entitled to an indemnity under the insurance and hence can recover equivalent damages from JLT.
68. The issue which Gross J had to decide was whether the costs of the "good hole" programme were caused by the incident for which Railcare was liable in negligence. However, the issue raised in the present proceedings is a completely different one: were those costs incurred for the sole purpose of avoiding a loss of gross revenue, which would otherwise have occurred as a consequence of the incident? That issue was one which Gross J did not have to address since he was not concerned with the damages recoverable from JLT for negligently depriving GNER of the contractual indemnity to which it would otherwise have been entitled, but only with the damages recoverable from Railcare in tort.
69. In other words, for the purposes of the claim against JLT on the basis that GNER was deprived of cover available under the ICOW provision, the conclusion of Gross J that the incident was only the "occasion" for GNER incurring the additional costs of the "good hole" programme is nothing to the point. Even if that conclusion is correct, the learned judge does not address at all whether by virtue of the "good hole" programme, GNET avoided or reduced loss of gross revenue caused by the incident. Accordingly, GNER's case in these proceedings that it did avoid or reduce such a loss of revenue by engaging in the "good hole" programme and that such a loss of revenue would have been caused by the incident, thereby satisfying the ICOW provision, cannot be said to involve any collateral attack on the judgment of Gross J.

Extinction, Collateral Attack, Abuse of Process: Analysis and Conclusions

70. Abuse of Process. The relationship between the rule in Henderson and Henderson and the court's inherent jurisdiction to protect its processes from abuse was examined in Johnson v Gore Wood & Co. (A Firm), supra. Lord Bingham said at page 30:

"It may very well be, as has been convincingly argued (Watt, 'The Danger and Deceit of the Rule in Henderson v Henderson: A new approach to successive civil actions arising from the same factual matter' [2000] 19 CLJ 287), that what is now taken to be the rule in Henderson v Henderson has diverged from the ruling which Wigram V-C made, which was addressed to res judicata. 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 of 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. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice."

71. Claims for successive breaches against two defendants. In Heaton & Ors v Axa Equity & Law Life Assurance Society plc & Anr, supra, the issue which the House of Lords was called upon to decide was expressed by Lord Bingham as follows:

"… if A, having sued B for damages for breach of contract, enters into a settlement with B expressed to be in full and final settlement of all its claims against B, is A thereafter precluded from pursuing against C a claim for damages for breach of another contract to the extent that this claim is for damages which formed part of A's claim against B?"

72. Lord Bingham provided schematic examples at paragraphs 3 and 4 to which I refer. These related to concurrent tortfeasors liable in respect of the same damage. At paragraph 10 Bingham LJ said:

"For reasons given by … Lord Mackay of Clashfern I do not conclude, on construing the compromise agreement made in this case, that it is to be taken as representing the full measure of the respondents' loss agreed between the parties to the compromise."

73. Lord Mackay recorded at paragraph 45 of his speech that:

"… counsel for the respondents was content to accept that the claims for money in respect of those matters in both actions were the same."

No such concession is made in the present case. On the contrary. The claimant says that the claim in the present proceedings far exceeds the sums awarded by Gross J.

74. At paragraph 52, Lord Mackay continued:

"I consider that the action should proceed and in the ordinary way an assessment should be made of the various claims and a value put upon them at the trial. If the total amount awarded in respect of the heads of damage that are dealt with in the Target settlement exceed the amount of approximately £5 million appropriated to them in the Target settlement the award to the respondents would be the difference allocated between Inter City and the individual respondents in proportion to their claims. If the amount awarded is less than £5 million this case will have been shown to be unnecessary so far as these heads of claim are concerned and no doubt this would be appropriately reflected in the awards of costs."

75. As to collateral attack on an earlier decision, in Secretary of State for Trade and Industry v Bairstow supra, the Court of Appeal held that a collateral attack on an earlier decision of a court of competent jurisdiction might be, but was not necessarily, an abuse of process. If the earlier decision was that of a court exercising a civil jurisdiction then it was binding on the parties to that action and their privies in any later civil proceedings. But if the parties to later civil proceedings had not been party to the earlier action it would only be an abuse of process to challenge that decision if re-litigation of the same issues would be manifestly unfair or would bring the administration of justice into disrepute. At paragraph 38 the Vice-Chancellor said:

"In my view these cases establish the following propositions.

(a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the court ….

(c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings.

(d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute."

76. I analyse the position as follows:

(1) There is no cause of action estoppel or issue estoppel which prevents GNER from pursuing its claim against JLT in the present case;

(2) In the Railcare proceedings, Railcare v Lining admitted that its negligence in failing to deburr and chamfer the wheelset caused the derailment. Gross J assessed the appropriate measure of damages in tort payable by Railcare v Lining to GNER in respect of this admitted negligence. In the present case (subject to the defence of limitation) JLT is liable in contract and tort to GNER for the loss suffered by GNER as a result of its insurance being subject to the wide exclusion as opposed to the narrow exclusion set out in the Request. Thus the claim made in the present proceedings is against a different defendant and on a different basis to that made in the Railcare proceedings.

(3) JLT were not concurrent tortfeasors liable in respect of the same damage.

(4) The present claim does not in all the circumstances constitute an abuse of the process. I refer to the background set out above, to the contents of the witness statements and the correspondence exhibited thereto. There is no unjust harassment of JLT. JLT has not been vexed twice in the same matter.

(5) The principles relating to "collateral attack" are a species or subset of abuse of process. The present proceedings do not involve a collateral attack on the judgment of Gross J. It would not be manifestly unfair to JLT to allow the claims in paragraphs 13.1 and 13.2 of the Particulars of Claim to be litigated. Nor is there any question of the administration of justice being brought into disrepute.

(6) (Subject to the defence limitation), it is common ground that GNER's claims in respect of outstanding costs in relation to the Avon proceedings and the Railcare proceedings must go ahead in any event. (See paragraph (b) of the amended application notice). Thus (subject to the defence limitation), part of the claim for damages must go ahead in any event.

(7) I do not consider that GNER are precluded from making a claim in the present proceedings in relation to period 9 simply because they did not make such a claim in the Railcare proceedings. Nor do I consider it appropriate to attempt to determine in the course of this interlocutory application whether the Interfleet costs (not recovered in the Railcare proceedings) would be recoverable by virtue of the relevant ICOW provision.

(8) I consider that Mr Flaux is correct in his submission that Gross J only determined the extent of GNER's loss recoverable from Railcare for its negligence in the overhaul of the wheelset which led to the derailment. He did not determine the separate question as to what sums GNER could have recovered by way of an indemnity under the Avon policy and, thus, what damage JLT is liable for as a consequence of that indemnity not being available.

(9) If, in relation to the claimant's claim as pleaded in paragraphs 13.1 and 13.2, the subject of the present application, in the event GNER do not recover any sums in addition to those sums recovered in the Railcare proceedings, no doubt this will be appropriately reflected in the award of costs - see Lord Mackay in Heaton v Axa Equity and Law supra at paragraph 52. Thus if at the conclusion of the trial (assuming that GNER overcomes the limitation defence), GNER does not recover in respect the claims in paragraphs 13.1 and 13.2 referred to in paragraph (b) of the amended application notice, any sum above that awarded by Gross J, it may well be that costs will be awarded against GNER on the indemnity basis in respect of such claims.

77. For these reasons, these applications are dismissed.
78. The order for costs will be as follows. Subject to any order the court may make hereafter, JLT shall pay to GNER the costs of these applications in any event.