Dunlop Haywards (DHL) Ltd. & Anor v Erinaceous Insurance Services Ltd

For rectification, the court must identify the parties’ common intention when the relevant contractual instrument was made. In the London insurance market, the slip is the contract between insured and insurer. Where it records materially different terms from an earlier firm-order arrangement, it may constitute a fresh replacement contract. A rectification claim based on the earlier arrangement may therefore be weak.

Joinder is discretionary and may be refused where the claim is weak or can be determined more efficiently in separate proceedings. A sub-broker may owe independent contractual duties and a direct duty of care where it assumed responsibility for placing insurance and the insured reasonably relied on that assumption.

The claimants sued Erinaceous Insurance Services Ltd concerning an excess professional indemnity policy placed for the Erinaceous group. Erinaceous Insurance Services sought an indemnity or contribution from Lockton Companies International Ltd, the placing sub-broker.

The producing broker sought to join the excess insurers under CPR 19.2(2) so they would be bound by decisions on construction and rectification. The sub-broker sought summary judgment or strike-out. The central issues were whether joinder was desirable, whether rectification had a real prospect of success, and whether the sub-broker had arguable contractual and tortious duties.

1. The court had jurisdiction under CPR 19.2(2), although no existing party could then assert a claim against the excess insurers. Joinder was refused because the rectification claim was too weak and the construction issues could be determined separately.
2. Rectification required common intention, outward expression of accord, continuation of that intention until execution, clear evidence that the instrument was inaccurate, and proof that the proposed rectification would record the true agreement. The slip was the contract in the London market. Although an earlier FON arrangement might have created wider cover, the materially different slip constituted a fresh replacement contract. The contractual intention was therefore ascertained from the slip. The reasoning in The “Mata Hari”, cited as Pindos Shipping Corporation v Frederick Charles Raven, was applied.
3. The summary judgment and strike-out application was dismissed. The sub-broker had a good arguable case that its obligations arose independently under the relevant agreements, and that it had breached its instructions and failed to identify the discrepancy in the proposed cover.
4. The claimants also had a realistic prospect of establishing a direct duty of care based on assumption of responsibility and reasonable reliance. The contractual arrangements did not necessarily negate that duty. Approval of the proposed terms did not necessarily establish an estoppel against relying on rights arising from an earlier breach.