Out-Law Guide | 24 Jun 2008 | 12:13 pm | 3 min. read
West London Pipeline & Storage Limited v Total UK Limited
The oil company Total, facing claims of over £700 million arising from the Buncefield explosion, is pursuing a contribution claim against TAV Engineering for any liability it might have to the claimants.
Under the Civil Liability (Contribution) Act 1978, the court decides what level of contribution is “just and equitable having regard to the person's responsibility for the damage in question".
Total’s case is that TAV designed, manufactured and supplied a switch that failed to operate, causing an overflow of fuel which led to the incident. TAV argues that its standard terms and conditions limited liability to 5% of the contract price. Total’s response is that the the limitation of liability is unenforceable under the Unfair Contract Terms Act 1977.
TAV, however, is no longer trading and, according to its latest financial statements, has assets of only £1,500. Even a 5% contribution would amount to some £35 million. TAV's ability to defend the litigation and its ability to pay any damages would be wholly dependent on its liability insurance.
It was clear such insurance existed and was likely to be substantial. Total, however, wanted to know more and applied for information under Part 18 of the Civil Procedure Rules.
Under Part 18, the court can order a party to "clarify any matter which is in dispute in the proceedings… or give additional information in relation to any such matter, whether or not the matter is contained or referred to in a statement of case”.
Total argued that the nature and scope of TAV's liability insurance was material to the issues and, in particular, to the apportionment of liability. Alternatively, disclosure was necessary and appropriate to determine whether there was any useful purpose in continuing the litigation.
In this, Total relied on the High Court decision in Harcourt v FEF Griffin (June 2007). In that case, the defendants to a personal injury claim of over £6 million had limited assets but, it appeared, some insurance cover. The claimant successfully applied under Part 18 for further details of that insurance on the grounds that it would be a waste of time and money to litigate over quantum if the cover proved to be less than the claim.
In making the order, the judge said that disclosure of this kind should only be ordered where a claimant can demonstrate that there is some real basis for concern that a realistic award may not be satisfied. Total argued this was a “paradigm example” of such a situation.
TAV, like the defendants in Harcourt, argued that there is a well-established rule of law, or at least a practice, that information about insurance cover is not disclosable to the other side in litigation. Disclosure would prejudice the insured and insurers because the other side would know the "depth of the pocket", whether for negotiation purposes or otherwise.
Mr Justice David Steel refused to order disclosure on the grounds that the court had no jurisdiction to do so.
The nature and content of the defendants' insurance cover was not a “matter which is in dispute in the proceedings”, as Part 18 requires. The practice direction supplementing the rule states that disclosure should be "strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to answer."
The insurance position had no impact on Total’s ability to prepare the case, let alone understand any potential defence. Nor was it relevant to the apportionment of liability.
The decision will be welcomed by liability insurers, but the fact that there are now two conflicting High Court decisions means the issue is still undecided.
The judge in this case noted that similar arguments for disclosure failed under the old court rules in Cox v Bankside Members Agency , when Lloyd’s Names wanted to find out about the liability insurance provided by underwriters and it was held that disclosure had to relate to the matters in question in the litigation. The funds available (or not) were relevant to whether the Names could recover anything, but were not relevant to the questions in dispute.
More recently, the Law Commission in its 2001 re-examination of the Third Parties (Rights against Insurers Act) 1930 accepted that details of insurance cover held by a solvent insured were a private matter and that disclosure would encourage speculative "deep pocket" litigation.
None of this material, however, was drawn to the attention of the judge in the Harcourt case.