Equity Syndicate Management Ltd v Glaxosmithkline Plc

Rectification of an insurance contract requires convincing proof that the parties had a continuing common intention, objectively manifested, which the written instrument failed to reflect by mistake. The intention may arise from discussions in general terms and may be established by the premium structure, policy context and subsequent conduct, although subsequent conduct cannot create an intention absent when the contract was made. Subjective evidence may be relevant where it illuminates an objectively manifested prior consensus. Rectification may be granted where it restores the parties’ agreement and does not prejudice the insured or injured third party.

Equity insured vehicles associated with GlaxoSmithKline’s Employee Car Ownership Scheme. The certificate described the insured vehicles more broadly, covering vehicles in GSK’s custody or control for which it was legally responsible. Janet Ball, who was outside the scheme, was injured while driving a hired vehicle provided by GSK. Axa, which insured the vehicle and settled the resulting claim, sought a 50 per cent contribution from Equity.

GSK and Equity agreed that the certificate should be rectified to exclude vehicles outside the scheme. Axa resisted rectification. The central issues were whether the parties had a continuing common intention to restrict cover to scheme vehicles, whether that intention was outwardly expressed, and whether it continued through the 2006 renewal.

1. Rectification requirements. The court applied the requirements stated in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, namely a common continuing intention concerning a particular matter, an outward expression of accord, continuation of the intention when the instrument was executed, and a mistaken failure of the instrument to reflect it.
2. The relevant intention was objective. Nevertheless, reliable evidence of what the parties understood could support the conclusion that an objective observer would have identified the same agreement. The witnesses’ unanimous evidence, the policy heading, the scheme-related definitions, the premium calculated by reference to scheme vehicles, and the separate insurance arrangements for other vehicles supplied convincing proof.
3. A prior consensus may arise from discussions in general terms about the intended extent of insurance cover: The Demetra K [2002] EWCA Civ 1070. Subsequent conduct could illuminate the parties’ original intention but could not create a common intention after the contract was concluded.
4. The common intention continued through the 2006 renewal. The renewal underwriter understood the cover to concern ECOS vehicles, and the premium information requested and supplied was calculated on that basis. The change of underwriter did not prevent rectification.
5. It was equitable to rectify the certificate. Refusal would make Equity contribute to a liability it had not agreed to insure and for which it had received no premium, while giving Axa a windfall. Rectification did not affect Ms Ball’s rights or the injured person’s compensation, and did not breach the Road Traffic Act 1988.

Equity’s rectification claim succeeded. Axa’s contribution claim was dismissed.