AXA INSURANCE LTD V AKTHER & DARBY SOLICITORS

[2009] EWHC 635 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Flaux, 27 March 2009

Insurance (after the event) – Claims against solicitors by ATE insurers – Allegation of negligent selection of risks and of negligent conduct of cases – Limitation of actions – Applicable limitation period to tort claims – Limitation Act 1980, section 2

Axa’s predecessor in title, NIG, offered ATE insurance through the defendant solicitors. Policies were issued on behalf of NIG in those cases where the solicitors were satisfied that the prospects of success were at least 51 per cent and that the damages awardable would be at least £1,000. NIG was involved in the scheme from October 2000 to August 2003, and in that period issued about 40,000 ATE policies in respect of claims conducted by some 170 panel solicitors. The scheme proved to be a disaster for NIG. On 17 June 2008 Axa commenced proceedings against 89 firms of panel solicitors, alleging breach of contract and negligence in respect of some 26,000 claims, giving rise to losses of about £65 million. Axa’s assertions were that the solicitors had failed to adhere to the initial criteria of 51 per cent success rate and a minimum of £1,000 damages in accepting risks (vetting breaches), that they had failed to notify NIG of the need to withdraw indemnity where the prospects of success fell below 50 per cent or where it became clear that damages would not exceed £1,000 and that they had failed to conduct claims with reasonable care and diligence (conduct breaches). The losses constituted the amount of claims paid by NIG. The solicitors asserted that the claims in tort were time-barred by section 2 of the Limitation Act 1980. Flaux J held as follows. (1) As regards the vetting breaches, damage to NIG occurred as soon as a flawed risk was accepted, as the loss in such a case was not contingent but occurred immediately. (2) As regards conduct breaches, damage occurred: (a) in respect of non-notification, on the date at which a notification should have been made, as that was the point at which damage occurred by exposing NIG to a greater risk than it had intended; and (b) as far as failure to conduct a case properly was concerned, damage occurred when, as a consequence of the breach, there had been a material diminution in the prospects of successfully prosecuting the claim