Nesbit Law Group LLP v Acasta European Insurance Company Ltd

An exclusion in an insurance policy must be construed with its defined terms and the commercial scheme in which it was made. An exclusion for non-compliance with the terms of a loan, including an agreement to repay a loan, did not extend to a later global refinancing agreement made after the original litigation-funding scheme had ended. It was confined to the individual funded loan arrangements and any replacement repayment agreement within that scheme.

A party seeking a late amendment bears a heavy burden. The court must balance the injustice of refusal against finality and prejudice. The burden is especially stringent after trial and on appeal. An unexcused amendment which would reopen the litigation and require a re-run should be refused.

Nesbit Law Group LLP participated in a litigation-funding scheme under which Clydesdale Financial Services Ltd advanced loans and Acasta European Insurance Company Ltd issued Financial Guarantee Indemnity policies for irrecoverable costs. After the scheme ended, Clydesdale and Nesbit entered into a refinancing agreement concerning outstanding liabilities.

The High Court held that the policy exclusion did not make breaches of the refinancing agreement relevant, and gave judgment for Nesbit for insured irrecoverable costs. Acasta appealed. It also sought, shortly before the appeal hearing, permission to amend its defence to allege breaches of the refinancing agreement. The central issues were the scope of the exclusion and whether that late amendment should be permitted.

1. Appeal dismissed. The exclusion did not cover alleged breaches of the later refinancing agreement. Acasta’s amendment was allowed only to plead the construction issue, which had already been determined by consent, and was refused insofar as it sought to plead breaches of the refinancing agreement.

2. The phrase concerning the terms and conditions of “the Loan” had to be read with the policy definitions. It therefore concerned the particular advance made to fund irrecoverable costs under the litigation-funding scheme. Its terms included the applicable individual loan agreement and the umbrella agreement governing that scheme.

3. The additional words referring to an agreement to repay “a Loan” were ambiguous. They could not be read in isolation or with hindsight. In the contractual and commercial context, they covered a replacement repayment agreement made within the continuing funding scheme in respect of the individual funded loan. They did not encompass a new global refinancing arrangement made nearly a year after the scheme had ended. Although the judge’s construction gave insufficient independent work to the second limb, the Court of Appeal upheld his conclusion.

4. Permission for a late amendment requires a balance under the overriding objective between the injustice to the applicant if refused and finality and prejudice if allowed. The applicant must justify delay and show the strength of the proposed case and why justice requires its pursuit. That burden is particularly heavy after trial and on appeal. Acasta gave no justification for its delay. Allowing the new breach case would have reopened the litigation and substantially delayed finality. Permission would therefore have been refused even if Acasta had succeeded on construction.

• Court of Appeal (Civil Division): In [2018] EWCA Civ 268, dismissed Acasta’s appeal. It upheld the construction of the exclusion clause and refused permission to amend to plead alleged breaches of the refinancing agreement.
• High Court, Queen’s Bench Division, Leeds District Registry, Mercantile Court: Mr Stuart Brown QC, sitting as a Deputy High Court Judge, held that the exclusion did not extend to the refinancing agreement and, on 19 September 2016, gave Nesbit judgment for £991,908.86 plus interest and costs.