Markel International Insurance Company Ltd v Surety Guarantee Consultants Ltd & Ors

Where unauthorised transactions cause a claimant to lose premiums, the loss is recoverable even if no claim has yet been made under the relevant bond. A conspirator is liable for the net premium diverted by the conspiracy. A fiduciary is liable for the loss caused by the fiduciary breach, applying the ordinary but for test. Dishonest assistance need not concern a payment made in breach of fiduciary duty if the loss arises from assisting the breach itself.

Mitigation does not ordinarily require complicated and difficult litigation against third parties. Issues which could and should have been raised at trial may be excluded as an abuse of process, particularly where they would require evidence to be revisited and have no realistic prospect of success.

The judgment determined outstanding issues of law and principle in two connected actions after an earlier judgment on liability. The claimants sought damages, equitable compensation and related relief arising from unauthorised bonds, including settled claims, future losses and premiums diverted from them.

The court considered the recoverability of an indemnity for future reasonable settlements, the liability of a defendant who had signed only some bonds, the recoverability of premiums where no bond claim had been settled, dishonest assistance, alleged proprietary recoveries from third parties, mitigation, causation and attempts to reopen matters already determined. The central questions included whether the claimants had suffered loss in respect of unpaid premiums and whether newly raised defences could properly be advanced during the inquiry into quantum.

1. Future indemnity. The claimants were entitled to a declaration that they could recover an indemnity for reasonable settlements of future claims under unauthorised bonds. The court declined to declare in advance that settlements of up to 100 per cent would necessarily be reasonable, since the reasonableness of a settlement would depend on the circumstances.
2. Fiduciary breach and causation. The defendant who had not joined the conspiracy was liable in equitable compensation only for bonds which he had signed. The court applied the ordinary but for test for liability for breach of fiduciary duty, citing Target Holdings Ltd v Redferns [1996] AC 421. The earlier finding of breach could not be enlarged at the quantum inquiry to include additional failures to inform the claimants.
3. Premiums as loss. The conspirators caused loss by diverting premiums which would otherwise have been paid to the claimants. The net premium, namely the gross premium less commission, was recoverable as damages for conspiracy. The signing defendant was liable for the net premium on the unauthorised bonds which he signed. For dishonest assistance, it was sufficient that the loss arose from assisting a breach of fiduciary duty; assistance of a payment in breach was not required.
4. Mitigation and abuse of process. The duty to mitigate did not require the claimants to undertake complicated and difficult proprietary claims against third parties. The court applied the broad merits-based approach stated in Johnson v Gore Wood [2002] 2 AC 1, and treated the proposed issues as an abuse of process because they could have been raised at trial, would require witnesses and an expert to be recalled, and had no realistic prospect of success. The principle that mitigation does not require complicated and difficult third-party litigation, stated in Pilkington v Wood [1953] Ch 770, was applied.
5. Other issues. Arguments concerning employee negligence, third-party indemnities, contributory negligence and causation were rejected or could not be pursued because they were inconsistent with earlier findings, had not been raised at trial, or lacked merit. The parties were directed to agree an order for the monetary and other relief resulting from the decisions.

First-instance judgment determining outstanding legal and quantum-principle issues following the court’s earlier judgment on liability. No appellate history is stated.