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

A superseding insurance slip or policy can still be rectified. A later document is not immune merely because its disputed term differs from an earlier quotation or binding firm order note. The question is whether the prior common intention continued to execution and whether clear evidence shows that the document fails to record the true agreement. Under the Civil Procedure Rules 1998, r 19.2(2), joinder is desirable where the proposed party’s evidence and disclosure materially concern issues already due for trial, and participation will produce a binding determination. Difficulty in proving rectification does not justify refusing joinder where the claim is not so weak as to make it undesirable.

DHL sued its producing insurance broker, HPC, in negligence and breach of contract for allegedly failing to obtain the instructed excess professional indemnity cover. HPC defended the claim on the basis that the policy, properly construed or rectified, provided the required cover and therefore caused no loss. It sought to join the excess insurers under Civil Procedure Rules 1998, r 19.2(2), so that they would provide disclosure and evidence and be bound by the result.

Field J refused joinder. He treated the rectification claim as too weak, assumed that the construction claims had a real prospect of success, but considered that they could be tried separately. HPC appealed. The central issues were whether the later slip could in principle be rectified despite an earlier quotation and firm order note, and whether joinder was desirable for the rectification and construction issues.

1. Appeal allowed. Rix LJ gave the leading judgment. Wilson LJ and Sir Peter Gibson agreed. The excess insurers were ordered to be joined for the issues of rectification and construction.
2. Rectification. The court adopted the established conditions identified in Joscelyne v Nissen [1970] QB 86, Agip SpA v Navigazione Alta Italia SpA (The Nai Genova and Nai Superba) [1984] 1 Lloyd’s Rep 353 and The Demetra K [2002] 2 Lloyd’s Rep 581. There must be a common intention concerning the relevant provision, an outward expression of accord, continuation of that intention until execution, clear evidence that the executed instrument does not record the true agreement, and a rectified instrument that would accurately record it. The civil standard applies, but convincing evidence is ordinarily required to overcome the instrument’s cogent evidence of intention. Objective manifestations of intention are required, as explained in The Olympic Pride [1980] 2 Lloyd’s Rep 67.
3. A later contract may still be rectified even where it supersedes an earlier contract, including a binding conditional firm order note. The judge had wrongly treated the difference between the firm order note and the slip as demonstrating a deliberate fresh contract. The Mata Hari [1983] 2 Lloyd’s Rep 449 concerned a fresh negotiation containing several material new terms. It did not justify rejecting rectification summarily where the essential terms may already have been agreed and the slip may have been largely administrative.
4. The rectification issue was fact-sensitive. The evidence was untested, the principal broker involved in the alleged mistake had given no evidence, and the documents and evidence presented a mixed picture. The claim was difficult but not so weak that it could properly be disposed of without trial.
5. Joinder was desirable under r 19.2(2). The rectification and construction issues remained for trial, overlapped with the evidence concerning HPC’s claim against Forbes, and would require the insurers’ disclosure and potentially their evidence. Their presence would ensure that the issues were fully litigated and that all concerned were bound by the result. The court also considered the construction claims sufficiently arguable. One substantially overlapped with rectification; the other might require evidence about the meaning of commercial property management activities.
6. The court did not decide whether a non-party defendant could invoke the insured’s personal equitable remedy of rectification. The point had not been advanced by the insurers, so the court proceeded on that assumption.

• Court of Appeal (Civil Division): Allowed HPC’s appeal and ordered joinder of the excess insurers for the rectification and construction issues.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Field J refused joinder under Civil Procedure Rules 1998, r 19.2(2), treating the rectification claim as too weak and the construction claims as suitable for separate proceedings.