HLB Kidsons (a firm) v Lloyds Underwriters (Policy No 621/PKID00101) & Ors

A notification of circumstances under a professional indemnity policy must be construed objectively in its documentary and commercial context. A notice referring to examples of procedural defects may cover claims arising from that identified category of defect, but it does not extend to wider concerns merely because accompanying bordereaux use broader language.

Whether notice was given as soon as practicable depends on when sufficient information became available and whether there was any impediment to notification. In costs, the court should identify the real winner by reference to the litigation as a whole. A party’s failure to improve on a Part 36 offer does not, without additional exceptional conduct, justify indemnity costs.

This was a first-instance post-judgment ruling in a dispute under a professional indemnity policy. The court clarified its earlier decision on the scope and timing of notifications concerning tax products marketed by S@FI.

The issue was whether the April 2002 notification was confined to two Discounted Option Scheme transactions, or instead covered a wider class of claims. The parties also sought orders on costs, indemnity costs, interest, an interim payment, and the potential costs liability of the claimant’s brokers, Camerons and Millers.

1. Clarification of cover. The effective April 2002 notification was not confined to the two transactions considered by counsel. Properly read, it notified the possibility of claims arising from procedural defects involving trustees in the implementation of Discounted Option Schemes. It did not notify wider concerns about all tax-avoidance products marketed by S@FI. Bordereaux and claims data sheets were summaries or accompaniments to the underlying notification; they could not enlarge its scope.

2. Timing of notification. The relevant starting date for assessing whether notice was given as soon as practicable was 27 March 2002, when the relevant advice had been considered. Notice to the lead Lloyd’s underwriter and the company market was valid and timely. Notice to the following Lloyd’s market, first made in July 2002 after policy expiry and without impediment to earlier notification, was ineffective.

3. Costs. Underwriters were the real successful parties when the litigation was viewed as a whole. Under Civil Procedure Rules 1998, the appropriate order was that Kidsons pay their costs on the standard basis, subject to a £225,000 deduction for two discrete issues which Underwriters had pursued and then abandoned. Kidsons’ limited success on the notification issue did not justify a wider issue-based reduction.

4. Ancillary orders. The rejection of the Part 36 offer did not justify indemnity costs because Kidsons’ litigation conduct was not outside the ordinary range for complex commercial litigation. Interest on costs was ordered at one per cent above base rate from payment until judgment. Kidsons was ordered to pay £1.2 million on account of costs. Camerons and Millers could each be liable, if Kidsons failed to pay, only for additional costs caused by their respective participation, provisionally capped at £252,000 each and without prejudice to ultimate contribution rights.

This was a first-instance post-judgment ruling. The court recorded that permission to appeal had been granted, but no appellate decision or citation is stated.