Supreme Court allows appeal in solicitors’ aggregation case
Colin Edelman QC was successful in the Supreme Court on an appeal on behalf of AIG Europe Limited (‘the insurers’). The case involved actions against a firm of solicitors following the collapse of the property company, Midas International Property Development Plc (‘the developers’).
The solicitors devised a legal mechanism for the developers for the financing of foreign developments by private investors. In November 2009, the developers were wound up and the investors in two developments lost money. The investors’ brought an action against the solicitors on the basis that they failed properly to apply the cover test before releasing funds to the developers.
The solicitors had professional indemnity insurance with the insurers whose case was that the investors’ claims fell to be aggregated as they arose from “similar acts or omissions in a series of related matters or transactions” under the Law Society’s Minimum Terms and Conditions, thus limiting the overall indemnity. The investors asserted that there was a separate limit of indemnity for each investor. Both parties advanced an alternative case that that there should be aggregation in respect of each of the two developments respectively.
At first instance, Teare J concluded that in order to fall within the aggregation clause, the transactions by their terms had to be conditional or dependent on each other, which they were not. Whilst the Court of Appeal held that this was too restrictive, the Court firstly confined the “transactions” to the each release of funds to the developers and further held that for the aggregation clause to apply these “transactions” had to be “intrinsically” related.
The Supreme Court have allowed AIG’s appeal. The Court took a broader view of what constituted a “transaction” so as to encompass an investment in a particular development scheme rather than just the particular step in the process of releasing funds that the solicitors performed for the investors. Furthermore, the Court held that there is no implicit restriction on the ambit of the word “related”, with the result that all relevant facts, including facts extrinsic to the transactions themselves, can be taken into account.
For the full judgment, please click here.
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