The Guide Dogs for the Blind Association & Ors v Box & Ors

Under the Third Party (Rights against Insurers) Act 1930, a third party obtains the insured’s contractual rights against the insurer only once the insured’s liability has been established. The Act does not itself confer a right to seek a pre-emptive declaration about insurance coverage. Nevertheless, the court retains an inherent jurisdiction to grant declaratory relief where there is a real dispute, the parties are affected by the determination, and a declaration would provide a just and useful means of resolving the issue. That jurisdiction may exist even without a present cause of action or established liability. The court may therefore determine a discrete insurance-aggregation issue before liability is established, although the declaration remains discretionary and must be justified on the evidence.

The claimants were charitable beneficiaries who alleged loss arising from the fraudulent administration of an estate by a solicitor. They sought a declaration against the professional indemnity insurer concerning whether claims could be aggregated under the policy. The insurer argued that, under the Third Party (Rights against Insurers) Act 1930, the claimants had no standing until the insured’s liability had been established by judgment, arbitration or agreement.

The claimants relied alternatively on the court’s inherent jurisdiction and CPR 40.20. The preliminary issue was whether the court had jurisdiction to entertain the proposed declaration before liability to the claimants had been established.

1. The preliminary issue was determined in favour of the claimants. The court held that it had jurisdiction to entertain and determine the proposed declaration concerning the aggregation of claims.
2. Under section 1 of the Third Party (Rights against Insurers) Act 1930, the statutory assignment transfers to the third party the insured’s rights under the policy. The third party takes those rights subject to the policy’s contractual conditions and limitations. Where the policy is one of indemnity, the insured’s right to indemnity does not arise until the insured’s liability to the third party has been established and quantified. The claimants therefore had no statutory entitlement under the 1930 Act to seek the declaration before liability was established.
3. The Third Parties (Rights against Insurers) Act 2010 was materially different. Its express provisions permitting a third party to seek declarations before the insured’s liability was established indicated that it changed, rather than merely codified, the earlier law.
4. That conclusion did not deprive the court of its inherent jurisdiction to grant declaratory relief. The principles summarised in Rolls-Royce plc v Unite the Union [2009] EWCA Civ 387 were satisfied: there was a real dispute; the claimants were directly affected; and early determination would be an effective means of resolving the issue. The absence of a present cause of action was not decisive.
5. The court also applied the question whether declaratory relief would be just and serve a useful purpose, identified in Pavledes v Hadjisavva [2013] EWHC 124 (Ch). The aggregation issue was sufficiently discrete and was not merely abstract. Its determination could materially affect the conduct and possible resolution of the litigation. A finding of liability was therefore not a prerequisite to considering the aggregation issue.
6. The court consequently declared that it had jurisdiction to make the proposed declaration. The merits of the aggregation point remained to be determined.