AIG Europe Ltd v Oc320301 LLP & Ors

An aggregation clause is construed according to its precise language. A reference to similar acts or omissions in a series of related matters or transactions requires an intrinsic relationship between the matters or transactions. A remote relationship with an external common factor is insufficient. The relationship need not amount to dependence, but an interpretation which permits any loose connection would make the clause almost meaningless. The court must respect the parties’ choice where wider aggregation wording was available but not used. Construction is approached neutrally, without assumptions favouring insurers or insureds. Where the issue depends on facts not determined below, the case should be remitted for findings applying that guidance.

An insurer sought a declaration that 214 underlying investor claims against a solicitors’ firm constituted “One Claim” under clause 2.5 of the Minimum Terms and Conditions incorporated into the firm’s compulsory professional indemnity policy. The underlying claims arose from payments made from escrow accounts connected with two failed overseas property developments.

Teare J refused the declaration on 14 August 2015, treating the relevant transactions as requiring dependence on one another before they could be aggregated. The insurer appealed. The respondents obtained permission to argue that the claims might instead comprise two aggregated claims, and to challenge the finding that the relevant acts or omissions were similar. The central issue was the meaning of “similar acts or omissions in a series of related matters or transactions” and the factual inquiry required by that wording.

1. Appeal allowed in part and remitted. The appeal was allowed to the extent indicated. The order of Teare J was set aside and the action was remitted to the Commercial Court for retrial. The respondents could argue at retrial that the relevant acts or omissions were not similar.
2. Clause 2.5 of the Minimum Terms and Conditions had to be construed neutrally. The phrase “a series of related matters or transactions” required an intrinsic relationship between the transactions relied on. A relationship with an outside connecting factor, such as geography or the involvement of the same solicitor, was too remote. The precise content of the relationship depended on the circumstances.
3. The requirement of an intrinsic relationship was less demanding than dependence. The judge therefore went too far in treating dependence as necessary, although he was right that the transactions had to be interconnected. The court rejected an interpretation under which any degree of relatedness would suffice, since that would make the aggregation clause almost meaningless.
4. The wording had to be construed against the background that wider formulations were available by reference to a single source, original cause or originating cause. The parties had chosen wording which did not have that breadth. The published history of the clause in the Law Society Gazette was a legitimate aid to construction as part of the relevant matrix.
5. The Court of Appeal could not make the necessary factual findings. The contracts and escrow arrangements might reveal an intrinsic relationship if they referred to or contemplated one another. Conversely, separate designated accounts might militate against aggregation. Those matters had to be investigated at retrial without the fact-finder being bound by the Court of Appeal’s observations on similarity.
6. The interim costs payment was to be repaid, 50 per cent of the insurer’s appeal costs was payable by the fifth and sixth respondents, and trial costs were remitted for determination after retrial.

• Court of Appeal (Civil Division): [2016] EWCA Civ 367. Allowed the appeal to the extent indicated, set aside the order below and remitted the action to the Commercial Court for retrial under the guidance in the judgment.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Teare J refused the insurer’s declaration on 14 August 2015.