Neutral Citation Number: [2017] EWHC 391 (Comm)
Case No: 2016-000009
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL

Date: 3 March 2017

Before :

Ms Sara Cockerill QC 
(sitting as a Deputy Judge of the High Court)
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Between :

	DENSO MANUFACTURING UK LIMITED	Claimant	
	
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	GREAT LAKES REINSURANCE (UK) PLC	Defendant	

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Mr Edward Brown (instructed by Baker McKenzie LLP) for the Claimant
Mr Aidan Christie QC (instructed by Clarke Willmott LLP) for the Defendant

Hearing dates: 23, 24 January 2017
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Judgment Approved

Ms Sara Cockerill QC : 
1.	In this case the Claimant (‘Denso’) sues the Defendant (‘Great Lakes’) as the statutory assignee of Mploy Group Limited (in liquidation) (‘Mploy’) under section 1 of the Third Parties (Rights Against Insurers) Act 1930 (‘the 1930 Act’). It seeks the sum of £319,696.59 plus interest and costs under an After the Event policy of insurance dated 18 March 2013 but incepting on 15 March 2013  (‘the Policy’) following the conclusion of litigation between Mploy and Denso in 2014.  
2.	The Policy was issued to Mploy, an employment agency which had brought substantial (and myriad) claims in the Commercial Court alleging breach of contract and fraud against Denso and claiming over £630,000. Mploy was represented by Debenhams Ottaway (‘DO’) and Denso was represented by Baker & McKenzie (‘BM’). Mploy had BTE insurance with another insurer and the present ATE insurance with Great Lakes. As explained further below Great Lakes denies liability under the ATE Policy, asserting that Mploy breached a number of conditions precedent to liability under the Policy.
3.	The claim was originally issued in the Mercantile Court under CPR Part 8 in early February 2016.  It was transferred into the Shorter Trials List at the CMC in July, and was transferred into the Commercial Court for the purposes of enabling me to hear it on the first morning of the trial.
4.	As the case was originally commenced under Part 8 it was addressed by witness statements of Benjamin Roe of BM and Alexander Jakubowski of Clarke Willmott, whose evidence was not challenged. Great Lakes also served a witness statement for the trial from Mr Philip Burbury, the Claims and Settlement Manager with Burford Capital, the policy administrator for Great Lakes. Mr Burbury attended the hearing and gave oral evidence.
The facts
5.	The Policy in this case was originally proposed on 19 February 2013.  A quotation was issued on 10 March 2013, and was accepted on 15 March 2013. The Policy was sent out to Mploy on 18 March 2013. It insured against an adverse order for costs in the litigation between Mploy and Denso and was for a deferred premium calculated at c.73% of Denso’s costs, payable in the event of Success, as defined in the Policy.
6.	At about this time Denso sought to protect itself with a Part 36 Offer made on 12 March 2013 in the amount of £110,000, which was not accepted by Mploy and expired on 3 April 2013. This offer was not disclosed to Great Lakes at the time. They first became aware of it in June 2013 and agreed to endorse the decision taken to reject the offer.   
7.	The existence of the ATE Policy was notified to Denso with the result that security for costs was not pursued at the CMC before HHJ Mackie QC on 5 July 2013. Mploy entered into a Creditors Voluntary Arrangement in January 2014. This would have permitted Great Lakes to withdraw support of the proceedings, but Great Lakes did not withdraw.
8.	Following a trial before Mr Christopher Butcher QC sitting as a Deputy High Court Judge in July 2014, the bulk of the claims were dismissed. A single breach of contract claim succeeded and damages in the amount of £34,410 were ordered. Denso were ordered to pay Mploy’s costs until 3 April 2013.  Mploy was ordered to pay Denso’s costs on the standard basis to be assessed if not agreed from the date of expiry of Denso’s Part 36 offer on 3 April 2013 (“the Costs Order”).  These amounted to over £300,000.
9.	Notwithstanding its own greater liability under the Costs Order, Mploy demanded payment of the judgment debt (£34,410). As a consequence, on the application of Denso, Eder J on 3 October 2014 ordered a stay of execution in respect of the judgment debt and the adverse costs order made against Denso in favour of Mploy. Mploy shortly thereafter entered liquidation proceedings and its solicitors came off the record on around 11 November 2014.  
10.	Denso has not so far recovered against Mploy in the liquidation. It appears unlikely that Denso will recover anything from Mploy. In any event the liquidation triggered a transfer of liability under the 1930 Act. 
11.	In early October Mr Burbury asked Mploy’s solicitors to request Denso’s actual costs. This was done, and Denso’s solicitors queried the reason why this was being sought. No response was ever sent by Mploy’s solicitors because they were in the process of coming off the record, and unwilling to incur further costs.
12.	In late October 2014 Denso’s solicitors contacted Burford and some correspondence dealing with a number of issues on the Policy continued until 7 January 2015.
13.	On 4 December 2014 Denso’s solicitors sent the solicitors for Mploy’s liquidators an offer to accept £210,341 net in respect of Denso’s costs. This was passed on to Great Lakes on 12 February 2015.
14.	A chaser was sent to the liquidators regarding this offer on 31 March 2015 stating that if no response was received by 15 April 2015 Denso would commence detailed assessment proceedings. No response was sent and on 13 July 2015 Denso sent a further email to the liquidators stating that it had instructed a costs lawyer to prepare a detailed bill of costs. These communications were not passed on to Great Lakes.
15.	Notice of commencement of detailed assessment proceedings was issued on 4 August 2015. A letter serving this document was dated 4 August 2015. Following some correspondence between the liquidators and Denso in late August 2015, Great Lakes received the Notice on 2 September 2015.
16.	On 3 September 2015 Denso obtained a Default Costs Certificate requiring Mploy to pay £319,696.59.  It is this sum which Denso seeks under the Policy.
17.	It is the operation of the 1930 Act and the Policy wording in question which is at the heart of this dispute.  
18.	Great Lakes denies any liability to indemnify Denso. It says that payment of the premium under the Policy was a condition precedent to its liability to make any payment under the Policy and that as the premium was not paid it is under no liability.
19.	It relies as well on the claims cooperation and associated clauses in the Policy, compliance with each of which was, it says, a condition precedent to its liability to make any payment.  Great Lakes says that Mploy was in repeated and wholesale breach of these provisions, with the result that Great Lakes is discharged from any liability to make any payment.
20.	In the event that it fails to establish that it is discharged from liability, Great Lakes also relies upon a number of policy exclusions. Finally it claims to be entitled to set off against any sum awarded to Denso the premium payable under the Policy.
21.	Logically the central issues concern the question of whether Great Lakes is discharged from liability under the Policy because of breaches by Mploy or their agents of conditions precedent under the Policy. If there is no liability, the issues relating to premium, exclusions and set off do not arise. It therefore makes sense to consider this issue – which is also the most fact sensitive issue – rely first.
Are the clauses on which Great Lakes rely conditions precedent and, if so, have they been breached?
22.	The starting point for any argument that a party is discharged from liability because a condition was a condition precedent is that the courts are careful to scrutinise arguments that a particular term is a condition precedent. One critical issue is whether the relevant terms are capable of being conditions precedent.  In Re Bradley and Essex and Suffolk Accident Indemnity Society [1912] 1 KB 415, 421 (Cozens-Hardy MR) said (in the context of whether the maintenance of a wages book was a condition precedent to liability):
“…there is a proviso in the following terms: ‘Provided always that the due observance and fulfilment of the conditions of this policy, which conditions are to be read as part of this policy, shall be a condition precedent to any liability of the society under this policy." Then follow eight conditions.
Now it is perfectly clear that some of these so-called conditions are not and cannot be conditions precedent, although some of - them may be and are conditions precedent.”
23.	At 432-3, Farwell LJ said:
“…I think that, reading the policy with the proposal form…and construing the policy most strongly against the society, in the interests of honesty and fair dealing this is the better construction: any other construction would convict the society of having issued a tricky policy calculated to deceive and entrap the unwary and of insisting on the success of their devices.”
24.	It was this case which appears to have led to the particular wording of clause 7 here, which largely replicates the term in Bradley but with a rider as to the nature of the terms.
25.	I was referred to a number of other authorities which give a sense of the position on this issue as it stands today. A review of these indicates that the hostility to conditions precedent manifested in Re Bradley has been somewhat moderated over the years.  
26.	In summary, the authors of MacGillivray on Insurance Law (13 ed) at paragraph 21-037 say:
“Little more can be said than that it is a matter of construing the policy as a whole.  Such clauses should not be treated as a mere formality which is to be evaded at the cost of a forced and unnatural construction of the words used in the policy but should be construed fairly to give effect to the object for which they were inserted, but at the same time so as to protect the insured from being trapped by obscure or ambiguous phraseology.”
27.	In Pilkington United Kingdom Ltd v CGU Insurance plc [2004] EWCA Civ 23, [2004] 1 Lloyd's Rep. 891 the court was considering a clause requiring notification as soon as possible in the context of a general observance clause utilising the words condition precedent and declined to follow Re Bradley, noting that it turned on very particular facts and instead endorsing the passage from MacGillvray as representing the modern law. On that basis the court found that the notification clause was a condition precedent to liability under the policy.
28.	In Aspen Insurance UK Ltd v Pectel Ltd [2009] Lloyd’s Rep IR 440  Teare J was considering a clause requiring immediate written notice of an occurrence which may give rise to indemnity together with an observance clause which did not mention the term condition precedent, but made the liability of underwriters conditional on observance of the terms and conditions of the insurance. He found that wording apt to make a conditional link and found sufficient commercial purpose to justify holding that the notification clause was a condition precedent. He did not, however, make a finding as to whether the second part of the clause, which required immediate forwarding of letters would also have sufficient commercial purpose underlying it to justify compliance as being regarded as a condition precedent to the underwriters’ liability.
29.	In Parker v NFU [2013] Lloyd’s Rep IR 253, Teare J was required to construe a General Condition (expressed to be a condition precedent) relating to the supply of information asked for by insurers. He held that the claim of Mrs Parker in that case was defeated solely on the basis of her failure to comply with the condition.
30.	On the subject of how these principles apply when the person on whom the obligation falls may be unable to comply because of lack of knowledge, I was referred to a passage at 21-038 of the thirteenth edition of McGillivray, which states:
“The fact that it may have been impossible for the claimant to give notice within the prescribed time – eg because he did not know the facts giving rise to his right to claim or because an injury only became apparent after the time for notice had expired will not prevent a court from denying the right to recover under the policy … there are however cases in which the courts have mitigated the harshness of this doctrine.”
31.	I was also referred to the very recent case of  Zurich Insurance Plc v Maccaferri Ltd [2016] EWCA Civ 1302 (Judgment of 12.01.2017), upon which Denso placed considerable reliance in the context of their case that the knowledge of Mploy was critical and that only material information needed to be supplied.  In that case Christopher Clarke LJ was considering the insurer’s contention that it was entitled to avoid an indemnity for failure to notify whether a claim was likely “as soon as possible”; a situation in which both knowledge and subjective assessment were intrinsic to the operation of the clause: 
“32. I do not accept Zurich’s construction of the condition. This is a condition introduced by Zurich into its policy which has the potential effect of completely excluding liability in respect of an otherwise valid claim for indemnity. If Zurich wished to exclude liability it was for it to ensure that clear wording was used to secure that result. It has not done so. It is possible to construe the use of the phrase “as soon as possible” as meaning that even if, when the event occurred, it was not likely to give rise to a claim, the obligation to notify would arise whenever thereafter the insured knew or should have known that an event which had occurred in the past was likely to give rise to a claim. But I regard this as a strained interpretation and erroneous. 
33. It is, in any event, far from clear that that is the right interpretation and given the nature of the clause the ambiguity must be resolved in favour of Maccaferri. Clauses such as these need to be clear if they are to have effect: Royal and Sun Alliance v Dornoch [2005] EWCA Civ 238. That is particularly so in circumstances where the context in which the clause was agreed was that Layher and Jacobs had been decided as they had. Although the wording in the present case is not identical to the wording in those cases, the two cases indicate that prima facie whether there is an obligation to notify an occurrence as one likely to give rise to a claim is to be determined by reference to the position immediately after it occurs. Further, Zurich’s construction imposes an obligation to carry out something of a rolling assessment as to whether a past event is likely to give rise to a claim (and possibly as to whether an event has happened at all) as circumstances develop. There are clauses which have that effect, particularly in claims made policies insuring against professional liability, but they are not in this form. If that was what was intended, the insurers could be expected to have spelt it out.”
32.	The conditions relied upon by Great Lakes are Conditions 7, 9(a), 9(b), 9(j), 11(a), 11(c) and 11(d). 
33.	Page 1 of the Policy states:
“The Conditions which appear in this Policy or any Endorsement are part of the contract and must be complied with. They are, where their nature permits, conditions precedent to liability; failure to comply with them may mean you will not be able to claim under this Policy. 
The Insurer will provide the insurance described in this Policy in consideration of the Insured’s promise to pay the Premium.” 
34.	Condition 7 provides as follows: 
“Due Observance
The due observance of and compliance with the terms provisions and conditions of the Policy in so far as they relate to anything to be done or complied with by the Insured or Solicitor shall be conditions precedent to any liability of the Insurer to make any payment hereunder. In addition the Insured and Solicitor is required to cooperate with Us and give Us the information We require at any stage in the case. In the event that the Policy is terminated the parties to this Policy shall continue to observe the conditions to the extent that they remain relevant.”
35.	The provisions of Condition 9 relied upon provide as follows:
“Provision of information
The Insured must give such instructions to the Solicitor so as to ensure that the Solicitor:
a)	provides to Us regular progress reports on the Legal Proceedings and associated costs and when specifically requested by Us
b)	advises Us in writing as soon as an offer to settle the Legal Proceedings or a payment into Court is made by the Opponent. The Solicitor and the Insured must not enter into any agreement to settle without Our prior written consent…
j)	immediately notifies Us of any challenge made to the Premium (whether made in detailed assessment proceedings or otherwise) and provide full details about the challenge made as We shall request”
(Legal proceedings are defined thus: “The legal action described in the Proposal and brought by the Insured to pursue money or damages in compensation or any other relief.”)
36.	The provisions of Condition 11 relied upon provide as follows:
“a) All information to be given to the Solicitor
The Insured must give all information and assistance required by the Solicitor. This must include a complete and truthful account of the facts of the case and all relevant documentary or other evidence in the Insured's possession. The Insured must obtain or execute all documents as may be necessary and attend any meetings or conferences when requested. The Insured must co-operate fully with the Solicitor and with Us.…
c) Bills to be submitted
All bills or other communications relating to fees or costs which may be payable under this Policy should be forwarded to Us without delay. We may require any bills submitted to be certified or assessed by the Court. 
d) Justification of the Premium
The Insured will ensure that any representations advised by Us are communicated to the Court and to the Opponent promptly and in the appropriate manner and in accordance with the Civil Procedure Rules; 
The Insured will appoint or instruct as the Solicitor's agent, where requested to do so by Us, such legal representatives as may be nominated by the Us to deal with the challenge to the Premium.”
37.	The first question is whether these conditions are capable by nature of being conditions precedent. Great Lakes submits that the position is straightforward.  It turns upon the effect of Condition 7 of the Policy.  It says that there is ample authority that such general clauses can create conditions precedent. It says that the clauses relied on here are plainly commercially vital, and apt to be conditions precedent; not least because on the facts of this case, given that Great Lakes’ potential liability to pay any Adverse Costs did not arise ‘until the Legal Proceedings are finally concluded’ and ‘Adverse Costs’ were defined as ‘The fully mitigated costs of the Opponent in the Legal Proceedings to the extent that the Insured is legally liable to discharge them’, the period and events which came after the conclusion of proceedings was central to the risk run.  
38.	It submits that there cannot really be any serious argument that the ‘objective commercial purpose underlying’ the claims cooperation conditions and the conditions requiring the provision of information in relation to the assessment of those costs were fundamental to the Policy and amply justified (indeed compelled) their being construed as conditions precedent to Great Lakes’ liability to make payment. It submits that it is difficult to see how insurers could have sufficient protection if these clauses were not conditions precedent – otherwise the insured would have little incentive once a case was lost. 
39.	Denso does not take serious issue with the submission that the conditions are intrinsically capable of being conditions precedent. However it argues that none of the Conditions identified are conditions precedent at all. They are simply statements of expectation regarding co-operation. There is nothing akin to the limited category of cases (e.g. notification within 30 days) where the Courts have been prepared to construe the conditions as conditions precedent. They also (as I have indicated) rely on Maccaferri as denoting a stricter approach emerging and as encouraging a consideration both of subjective knowledge and the materiality of the information.
40.	On this issue it seems to me that Great Lakes is correct and that in the light of the wording and context of this ATE Policy the terms relied on are capable of being conditions precedent. Conditions 7, 9 and 11 are apt to be conditions precedent in circumstances where insurers are exposed to the risk of adverse costs as the central plank of their liability. In this context, particularly in relation to mitigating the costs risk at the centre of the insurance it is also very important that the insured assist by providing all relevant documents. The policy cannot work without the input of the insured because the insurer is not a party to the litigation, and is entirely reliant on the insured cooperating with it and giving it information. Once the litigation is over there are still important steps to be taken in minimising the quantum of recovery, which the assured may feel little incentive to do once the case is lost without such firm requirements. This is not a case like Bradley where the commercial purpose of making the clauses conditions precedent is non existent (in that case the wages book was simply used for premium calculation); here the commercial purpose of the conditions is obvious.
41.	So far as Maccaferri is concerned I agree with Great Lakes that that was a very  different case to the present.  What was important there was how one dealt with a clause which required a subjective assessment by the insured as to whether a claim was likely; there the state of the insured’s knowledge was indeed critical and intrinsic to operation of the clause. Unlike in that case, the present conditions all seek to exclude liability for an anterior obligation which had already arisen (that is, the Costs Order). They are not obligations that relate to whether cover is available in the first case. The clause here partakes much more of the nature of the clauses in Aspen  and Pilkington.
42.	However it obviously still remains for Great Lakes to prove breach of one or more of these conditions.
43.	Denso have made a number of criticisms of the way in which the case on this is pleaded, under paragraphs 30(a) to (u) of the Defence, which they say was done in a lengthy and descriptive fashion and without specifically tying in alleged breaches to particular clauses.
44.	There is some force in their criticisms; though it is fair to say that a pleading which addressed each condition separately would almost certainly have suffered from the defect of repetition of factual grounds.  Moreover it was apparent at trial that the case on breach effectively centred on a few discrete events, namely:
i)	The fact that Mploy or their agents (in the form of their solicitors or liquidators) did not pass on an offer dated 4 December 2014 to accept £210,341 net in respect of Denso’s costs until 12 February 2015;
ii)	The fact that Mploy/its agents did not notify Great Lakes of a chaser regarding this offer on 31 March 2015 which intimated an intention to commence detailed assessment proceedings in the absence of a response;
iii)	The fact that Mploy/its agents did not notify Great Lakes of a further chaser regarding this offer on 13 July 2015 which informed them that Denso had instructed a costs lawyer to prepare a detailed bill of costs;
iv)	The fact that Mploy/its agents did not notify Great Lakes that Denso had served notice of commencement of detailed assessment proceedings in relation to its (post April) costs  until September 2015.
45.	These events were said to breach multiple clauses.  Different considerations may apply to different clauses.  For example Condition 7 refers to an obligation to “co-operate with us and give us the information we require”.  Denso contends that this means that there is no obligation unless a request is made. Insofar as Great Lakes did nothing, it was not a failure to “co-operate” if  Mploy’s liquidators equally did nothing. This, it says, accords both with the bilateral nature of a co-operation obligation and with commercial common sense – the insured cannot reasonably be expected to have intuition of what information the insurer wants. 
46.	In support of this proposition they rely on the judgment of Mr Peter Leaver QC sitting as a Judge of the Mercantile Court in Widefree Ltd v Brit Insurance Ltd [2009] EWHC 3671 (QB). The Court held in considering a general co-operation provision at [90]:
“This General Condition is a co-operation provision, which excludes liability unless the condition precedent is satisfied. As such, the Insurers have the burden of proving that the Claimants failed to satisfy the condition precedent, and any doubt or ambiguity as to the meaning of the General Exclusion will be construed against them and in favour of the Claimants.”
47.	At [99] he held: 
“… It will be noted that the provision is drafted so that the Insurers’ request precedes the insured’s obligation. Thus, I conclude that the true construction of the condition precedent is that the insured is under an obligation to provide the Insurers with such information and evidence as to the circumstances of the loss as is in the insured’s power when the Insurers request that information or evidence.”
48.	This argument may be right as regards Condition 7. Although Great Lakes argued that the clause here should be read disjunctively, as a broad obligation of co-operation partnered with a separate obligation to give information required, I would incline to the approach which Denso advocated as more naturally conforming to the wording, and the fact that I should certainly not, in the circumstances of its being said to give rise to a condition precedent, tend to read such wording expansively.  
49.	However not all of the clauses relied upon refer to a request by the insurers.  Condition 11(c) for example, which is the natural fit for complaints regarding information on the costs liability which is the subject of the Policy, is not so qualified.  It seeks “All bills or other communications” about the costs liability “without delay”. Accordingly insofar as Great Lakes’ case is advanced in relation to that condition, no request by the insurer is necessary.
50.	In relation to these clauses, which do not refer to an insurer’s request, Denso advances a different argument: that the obligation to pass on information is limited to material information.   Again this seems to me to take too broad an approach.  In some contexts this might be right.  However in the context of Condition 11(c) the words are clear: “All” imports what it says.  For reasons which I shall explain below, however, my conclusion on this point does not impact the overall result I have reached.
51.	I therefore turn to consider the individual events which are said to amount to a breach of Condition 11(c).
52.	In relation to the 4 December 2014 letter Denso says there was no material delay. The offer was open when sent to Great Lakes so the date it was first made was immaterial. The Insurer declined to accept.  
53.	It also relies on the exchange of correspondence directly with Denso in January 2015. During the course of this exchange (which was predominantly concerned with whether Denso had a right to claim under the Policy and certain aspects of cover) Mr Burbury stated: 
“I do not intend to enter into further communication regarding aspects of the Policy cover, limits and exclusions about which we are confident you are wholly incorrect. 
Otherwise we leave you to proceed with your 1930 Act proceedings to obtain a Court Order in respect of the Insured’s liability. ..
Of course you are required to maintain contact with us and keep us informed of those activities in case Insurers consider it necessary to become a party to the proceedings at any point.”
54.	Denso relies on this email to say that Great Lakes elected not to require any co-operation or, alternatively, the only purported request in the letter was to make contact in relation to the court order (i.e. the costs certificate) and that occurred, as it was notified to Great Lakes when it was obtained. 
55.	As regards the offer to accept £210,341 in respect of Denso’s costs, received on 4 December 2014 and passed on on 12 February 2015, this it seems to me falls squarely within the ambit of Condition 11(c) and may also engage 9(b) (“advises Us in writing as soon as an offer to settle the Legal Proceedings or a payment into Court is made by the Opponent.” (subject to the question of what qualifies as “Legal Proceedings”)). As I have indicated above, I do not consider that this condition, which states in terms that “all bills and other communications” should be passed on, is limited to an obligation to pass on only those items which are material. But in any event this was plainly a material communication, containing as it did an offer to settle the costs liability which was the subject of the Policy.  
56.	Nor do I consider that it was passed on “without delay”. This is a form of wording which would denote passing on within days or at most well under a month (14 days used to be considered an acceptable turnaround time for business correspondence, but even this may be regarded as unacceptably slow in the modern world).  Quite where one draws the line is not of any moment as regards this item, as I consider that it would certainly be drawn earlier than two months. Denso pray in aid the fact that the offer remained open, but there was no guarantee it would remain so even for the period of the delay.  Nor does it matter that the insurers did not accept the offer; they were entitled to be in a position to assess it and enter discussions “without delay”. I therefore consider that Mploy breached Condition 11(c) as regards this communication.
57.	As regards the 31 March 2015 chaser/indication of intent to commence detailed assessment proceedings, again this falls within the terms of the condition as a piece of correspondence relating to the costs liability. Again I consider that even were there a requirement of materiality this communication would satisfy it. It contains an important indication that the time for early settlement was running out and that the costs of costs assessment would soon come into play. Absent the case on waiver/election there can be no doubt that there was a failure in regard to passing it on.  
58.	The case on waiver/election/estoppel is (as Mr Brown properly tacitly accepted) hopeless. Mr Burbury’s January letter could not begin to fulfil the requirements of these doctrines in circumstances where he clearly confined his unwillingness to continue correspondence to a particular field of dispute and (like the experienced insurance professional he is) explicitly invoked the insurer’s rights to be kept up to date as a clearly worded “last shot” in his letter. Waiver by election has no application in the context of breach of a procedural condition precedent: Kosmar Villa Holidays Plc v Trustees of Syndicate 1243 [2008] Lloyd’s Rep IR 489. Moreover it was directed to Denso (who owed no duty), not to Mploy (who did).  I therefore consider that Mploy breached Condition 11(c) as regards this communication.
59.	Very similar considerations arise as to the 13 July email. This was a communication relating to fees or costs which might be payable under the Policy.  Were materiality required (which I do not think it is) it is material, in that it indicates that costs assessment is imminent and that the costs of preparing a detailed bill of costs would from now form part of any negotiation to settle the costs liability. It was not passed on at all. Waiver cannot assist.  Again therefore I consider that Mploy breached Condition 11(c) as regards this communication.
60.	Perhaps the most important single communication gives rise to the most complex considerations.  The letter in question is dated 4 August 2015 and notifies the commencement of detailed assessment proceedings. The copy on the file of Mploy’s liquidators bears the date stamp 5 August 2015. It was sent on under cover of a letter dated 25 August 2015 referring to the letter having been received “recently”. However, owing to the fact that the liquidators’ solicitors were unaware that Great Lakes had moved offices it was sent to an old address and was not received until 4 September 2015. The notice had by then come to Great Lakes’ attention via a separate channel on 2 September 2015, the day before the default costs certificate was issued. 
61.	Denso here rely on the argument that Mploy’s agents could not be in breach by failing to forward a letter they did not know about, relying on the fact that the letter under cover of which the notification was sent speaks of being received recently.
62.	Denso urged me to conclude that I could not determine whether there had been delay without evidence as to what the date stamp denoted, and without evidence from the person who sent the letter.  They also argued that, to the extent that there was a delay in receipt by Mploy, Mploy’s failure to notify could not constitute a breach of any condition and that the delay caused by sending to the wrong address must lie at Great Lakes’ door.
63.	On this it seems to me that Denso are right to this extent: any delay caused by the sending to the wrong address lies at Great Lakes’ door. The question is whether the letter was despatched by the liquidators’ solicitors without delay.  On this I can plainly conclude that it was sent on to Burford on or about 25 August 2015 (the date of the letter received on 4 September) and the question becomes whether the date of its receipt on behalf of Mploy can be established.  
64.	I reject the submission that I cannot conclude that it was received on 5 August.  It appears that the copy of the document sent was this copy. The date stamp can only sensibly mean that it was received by the liquidators’ solicitors on 5 August. There was therefore a delay of 20 days before it was sent on to anyone. The question of lack of knowledge therefore does not arise.
65.	As to the significance of the delay, this is plainly a more marginal period of delay than the earlier one, and it of course coincides with normal holiday periods. However even in that context it seems to me that this does not constitute passing on “without delay”. If necessary I would hold that the requirement is affected by the fact that the N252 Notice of Assessment plainly on its face requires a response in the form of points of dispute by 27 August, and by the fact that it was received by solicitors. Without delay on the part of an individual with no understanding of legal processes may extend slightly longer than without delay for professionals with such understanding. I therefore consider that Mploy breached Condition 11(c) as regards this communication.
66.	In the light of the above paragraphs it will be apparent that I have concluded that (subject to a point about crystallisation of liability and the consequent temporal ambit of the conditions dealt with below) Great Lakes was discharged from liability under the Policy by four separate breaches of conditions precedent on the part of Mploy and their agents. This occurred without the involvement or fault of Denso, who did not themselves owe obligations, but that is nothing to the point. Claiming through Mploy, Denso take subject to the defences which are available to insurers as against Mploy and cannot be in any better position. 
67.	In the light of this conclusion it may not strictly be necessary to deal with the other breaches of condition alleged. However I would make the following observations:
i)	For the reasons I have given above I would not have found a breach of the Clause 7 duty of co-operation;
ii)	Similarly I would have been minded to construe the ambit of Condition 9(a) as requiring a request, to the extent that it applied to the period after the end of the litigation;
iii)	Both Conditions 9(a) and (b) are linked to “the Legal Proceedings” which is defined as “the legal action described in the Proposal and brought by the Insured …”.  Although cover ceases on the giving of judgment, the ambit of the legal proceedings plainly has a scope for embracing the later phase of the action which deals with costs – for example under Condition 11.  I would however, in the context of (i) a wording which seems best to encompass the active litigation phase and (ii) the existence of a separate condition expressly designed to deal with the latter phase, in the person of Condition 11(c), have been inclined to treat these clauses as directed to the earlier, liability, phase of the litigation.
68.	There was also a complaint that there was a breach of condition because Mploy took “no steps” to get its own bill of costs assessed and paid or to recover premium. To this Denso responded that this did not fall within the ambit of any of the conditions pleaded, that there was no free-standing obligation in the Conditions pleaded to get Mploy’s bill of costs assessed and no request made by Great Lakes to this effect.  I would accept this submission.
69.	A related complaint was also made of a failure by Mploy to take steps under the Abbey BTE policy. The relevance of this was, Great Lakes submitted, that if there had been a costs recovery against Denso, accounted to the BTE Policy, the BTE insurance would have reinstated to that extent, lessening the remaining liability under the Policy.  Again I would not have found a breach on this head.  The way in which this argument fits within the Conditions was never clearly made out.  Nor were the effects of the recovery for the Policy, in circumstances where the BTE Policy was not before the Court and the information about its workings were limited in the extreme. Mr Burbury gave some evidence which verged on expert opinion evidence on this topic. I do not consider that it would be appropriate to base a finding on this.
The Premium issues
70.	The context for this parcel of issues is that Great Lakes also relies upon the absence of payment of premium as a breach of a condition precedent under the Policy. Premium, it says, became payable when the proceedings were partially successful, and this was a condition precedent pursuant to the general provisions in the Schedule and Condition 7 rehearsed above.
71.	However there are a number of controversial questions embedded within this apparently simple point.  The first is whether premium ever became payable: whether on the true construction of the contract the proceedings were, as Great Lakes suggest, successful or partially successful or (as Denso say) unsuccessful.
72.	This is an ordinary question of construction of a commercial contract. The court looks to the meaning of the relevant words in their documentary, factual and commercial context: Rainy Sky SA v Kookmin Bank [2012] 1 Lloyd’s Rep 34; [2011] 1 WLR 2900, paragraph 21 per Lord Clarke of Stone-cum-Ebony; Arnold v Britton [2015] AC 1619, paragraph 15 per Lord Neuberger of Abbotsbury. Neither party adduced specific evidence going to factual matrix.
73.	Denso submits that as this is an insurance contract, where Great Lakes seeks to rely on an ambiguous term, the doctrine of construction contra proferentem  applies: Yorkshire Water Services Ltd v Sun Alliance and London Insurance plc [1997] CLC 213, 221 (Stuart-Smith LJ). 
74.	The Policy provides cover (insofar as material) as follows: 
“Where and to the extent that the Legal Proceedings … are Unsuccessful Great Lakes will indemnify the Insured in respect of the following…:
Adverse Costs 
provided that:
The Court makes an award of Adverse Costs against [the Insured Claimant]”
75.	The definition of Success in the Pursuit Schedule is as follows:
“The compromise of the matter in any form beneficial to the Insured under one or more heads of claim (excluding any counterclaim(s) against the insured), irrespective of whether a costs order is made in the Insured’s favour…”
(It is common ground that “compromise” in this context includes both a court decision and a settlement)
76.	The definition of Success/Unsuccess in the Policy wording is as follows:
“SUCCESS/SUCCESSFUL  
The outcome of the Legal Proceedings will fall into one of the three categories described below.  
Successful 
Legal Proceedings will be deemed Successful if the Insured is offered or obtains at any time a net entitlement to money and/or damages and/or costs which, taking into account any counter- or cross-claim in the Legal Proceedings, equals or exceeds the definition of Success as shown in the Schedule.  
Partially Successful 
If, following a Rejected Offer to Settle, the Insured subsequently obtains at trial or by settlement or by further offer or by subsequent acceptance of the Rejected Offer, a net entitlement to money or damages or other relief sought and a costs order or other entitlement to costs, not being an interim costs order, in the Insured's favour in respect of part of the Legal Proceedings, the part of the Legal Proceedings to which the costs order or other entitlement to costs relates will be deemed Successful. 
If the Opponent has been awarded a costs order or other entitlement to costs, not being an interim order, in respect of another part of the Legal Proceedings, as a result of the same Rejected Offer, the part of the Legal Proceedings to which that costs order or other entitlement to costs relates will be deemed Unsuccessful.
Unsuccessful 
In addition to a failure of the Legal Proceedings to be Successful as defined above, Legal Proceedings will also be deemed Unsuccessful if:
1.	the Insured achieves a Successful outcome (as above) at trial and is required by Us to defend an appeal which results in a net entitlement to money, damages and costs which is lower than the definition of Success shown on the Schedule, or;
2.	following a Rejected Offer to Settle, the Insured subsequently fails to obtain at trial or by settlement or by further offer or by subsequent acceptance of the Rejected Offer a net entitlement to money or damages or other relief sought which equals the value of the Rejected Offer to Settle and does not obtain an order for costs, other than an interim costs order in its favour.”
77.	 “Legal Proceedings” are defined as: 
“The Legal action described in the Proposal and brought by the Insured to pursue money or damages in compensation or any other relief.”
78.	“Rejected Offer to Settle” is defined as: 
“An offer to settle the Legal Proceedings received from the Opponent which equals or exceeds the definition of Success, as shown on the Schedule, which We have given our written approval to reject”
79.	The Policy requires the outcome to fall into “one of the three categories described below”. 
80.	It is fair to say that the bulk of the argument was addressed to the distinction between partial success and unsuccess since it had always been Great Lakes’ case that this case was one of partial success. It was only in the course of the hearing that Great Lakes submitted that if it were necessary to do so they would say that in fact the proceedings fell within the definition of success.
81.	In looking first to that primary argument Denso’s approach is to say that proceedings are Unsuccessful if there is a “failure of the Legal Proceedings to be Successful.” If there is a failure to be successful “unsuccess” is the default setting, unless Great Lakes can show that the proceedings are “Partially Successful”. 
82.	Denso submitted that proceedings are only Partially Successful if: 
i)	There has been a “Rejected Offer to Settle”;
ii)	The Insured subsequently 
a)	fails to obtain at trial or by settlement or by further offer or by subsequent acceptance of the Rejected Offer a net entitlement to money or damages or other relief sought which equals the value of the Rejected Offer to Settle; and
b)	obtains an order for costs, other than an interim costs order in its favour,
In that event, the part of the Legal Proceedings to which the costs order or other entitlement to costs relates will be deemed Successful.
83.	It says that if the Opponent has been awarded a costs order, not being an interim order, or other entitlement in respect of another part of the Legal Proceedings, as a result of the same Rejected Offer, the part of the Legal Proceedings to which that costs order or other entitlement to costs relates will be deemed Unsuccessful.
84.	Denso submitted that Great Lakes cannot meet these hurdles because:
i)	There is no “net entitlement” in Mploy’s favour; 
ii)	There is no Court Order or judgment whereby certain “parts” have succeeded and no issue-based costs order, which they submit is what the Policy envisages; 
iii)	There was no Rejected Offer to Settle in respect of those parts in any event (or at all).  
85.	On the first point, Great Lakes submits that Mploy met the definition of ‘Success’ as set out in the Policy schedule. While the Judgment was not overall beneficial to Mploy because its liability to Denso for costs exceeded Denso’s liability to Mploy (liability and costs), the definition of ‘Success’ in the schedule requires one to ignore costs because it says ‘irrespective of whether a costs order is made in the Insured’s favour’. Great Lakes also pointed out that Denso’s submission that the net entitlement should exceed the amount of the rejected offer was not part of the clause wording. It could have, but did not, use this language here (though it did in relation to part of the definition of “unsuccess”).
86.	It was really on the second and third points that Denso concentrated most fire.  On the second point it submitted that the wording of the Policy envisages success and costs being attributable to the same “part” of the proceedings and that there be a “net entitlement” in the insured’s favour. The only sensible basis upon which this can be achieved, it says, is where the costs relates to the part: i.e. by an issue-based costs order. This of course is not what happened in this case.
87.	It says that it is artificial and unrealistic to say that Mploy were “successful” in the short period between issue and expiry of the Part 36 Offer (when nothing happened in the litigation).  Further, Mploy did not obtain a net entitlement to damages and costs in respect of a part. There was no such separation in the Order. The outcome was one indivisible whole. The “net” entitlement in relation to both liability and costs was in Denso’s favour, not Mploy’s.  
88.	Great Lakes says in response that this argument flies in the face of reality and ignores the facts. The fact that the Part 36 offer was not beaten is not relevant because the definition of ‘Partially Successful’ does not include any reference to a net entitlement equalling the value of the rejected offer. This they submit is consistent with a broad approach being adopted here. They submit that Mploy did make a net recovery in its claim and it was awarded costs up to 3 April 2013. They submit that the definition of ‘Partially Successful’ was plainly designed to deal with situations where both parties gain something; it is not a straightjacket, and the division could be issues or temporally based.
89.	Thirdly, Denso says that there was no Rejected Offer to Settle within the meaning of the Policy. This is because it predated the inception of the Policy and no written approval was given by Great Lakes to reject it. It also disputed that the offer was rejected given the actual course of events, in particular the fact that the offer actually expired and the fact that “rejection” of a Part 36 offer is meaningless. 
90.	Great Lakes respond that in real terms a non acceptance is a rejection and that given that they could have relied on the failure to disclose the offer as a basis for avoidance or as a breach of condition 9(b) of the Policy, and chose not to do so, the correct approach is to say that Great Lakes waived compliance with the requirements of the clause as regards written approval – a provision which could only be there for their protection. It is at this point that they pointed out that if the Part 36 Offer is not regarded as a “Rejected Offer to Settle”, logically the proceedings would actually have to be characterised as a Success  because Mploy did get a net entitlement, and therefore can be said to have met the definition of success.
91.	On this issue it seems to me that the arguments of Great Lakes are to be preferred. The correct approach to construction is one which holds a balance between purposiveness and literalism and which pays due attention to the background against which the contract arises.
92.	In this case it is the construction advanced by Great Lakes which is more natural and more in keeping with the overall reading of the clause. The approach advocated by Denso relies heavily on three things: first a slightly formalistic approach to construction, which requires “unsuccess” to be posited as a default setting from which Great Lakes need to escape. Secondly it relies heavily on a literal approach to the word “part” as connoting an issues based approach, rather than as being used in a broad sense. Thirdly it requires the court to read into the definition of “partial success” words which are not there as to the meaning of net recovery. Overall this produces a strained construction. 
93.	Furthermore I accept that while the offer did not technically fall within the ambit of a Rejected Offer to Settle, the requirement of written consent at the time was a requirement for Great Lakes’ benefit which Great Lakes could and did waive.  In effect they could have refused to acknowledge the Part 36 offer as an offer for the purposes of the Policy in which case the route to success would have been more problematic for Mploy; instead they agreed to treat it as an offer for the purposes of the Policy and endorsed its rejection.
94.	Against this, the approach advocated by Great Lakes takes account of the commercial and likely litigation background much more completely and (so far as a rather elaborate clause can) reads naturally and practically, without the requirement to ignore or interpose words. 
Crystallisation of rights – 1930 Act
95.	A slight side issue which arises is when Denso’s rights to payment under the Policy accrued.  Denso submits that its rights accrued on making of the costs order in the litigation on 5 September 2014, while Great Lakes say that it did not come under any obligation to pay until after the issue of the default costs certificate on 3 September 2015. The reason why this issue is relevant is that it is argued by Denso that the key alleged breaches of conditions precedent upon which Great Lakes rely occurred after its rights had accrued and are therefore irrelevant. The issue therefore is: does the right to payment under the Policy arise on the making of the Costs Order, or only on its quantification?
96.	The starting point is the famous judgment of Lord Denning in Post Office v Norwich Union Fire Insurance Society [1967] 1 All E.R. 577, where he stated: 
“The policy says that "the company will indemnify the insured against all sums which the insured shall become legally liable to pay as compensation in respect of loss of or damage to property." It seems to me that the insured only acquires a right to sue for the money when his liability to the injured person has been established so as to give rise to a right of indemnity. His liability to the injured person must be ascertained and determined to exist, either by judgment of the court or by an award in arbitration or by agreement. Until that is done, the right to an indemnity does not arise. I agree with the statement by Devlin J. in West Wake Price & Co. v. Ching. "The assured cannot recover anything under the main indemnity clause or make any claim against the underwriters until they have been found liable and so sustained a loss."
Under the section it is clear to me that the injured person cannot sue the insurance company except in such circumstances as the insured himself could have sued the insurance company. The insured could only have sued for an indemnity when his liability to the third person was established and the amount of the loss ascertained. In some circumstances the insured might sue earlier for a declaration, for example, if the insured company were repudiating the policy for some reason. But where the policy is admittedly good, the insured cannot sue for an indemnity until his own liability to the third person is ascertained.”
97.	This judgment is reflected in MacGillivray Insurance Law (13th ed) paragraph 30-002:
“ ‘… the insured’s right to be indemnified under a liability insurance policy arises only once the insured’s liability to the third party claimant is ascertained and determined by agreement, award or judgment, and not upon the occurrence of the event which gives rise to a lability on the part of the insured to the third party.’”
98.	The third relevant source is the judgment of Phillips J (as he then was) in Cox v Bankside [1995] CLC 180 whose judgment on the issue was upheld by the Court of Appeal and subsequently approved by the Supreme Court. At page 442 he said this:  
“The nature of the insurer's obligations
The contractual duty undertaken, by a liability insurer is to hold harmless the assured against third party liability. No obligation on the part of the insurer arises until the liability of the assured to a third party is established and quantified by judgment, arbitration award or settlement. At that moment the assured acquires a cause of action against the insurer for damages for breach of duty in failing to provide the indemnity. Lord Denning MR and Salmon LJ so held in Post Office v Norwich Union, and in Bradley Eagle Star [1989] AC 957 at p. 966, Lord Brandon, after referring to the relevant passages of those judgments, said: 
‘In my opinion the reasoning of Lord Denning MR and Salmon LJ contained in the passages from their respective judgments in the Post Office case set out above, on the basis of which they concluded that, under a policy of insurance against liability to third parties, the insured person cannot sue for an indemnity from the insurers unless and until the existence and amount of his liability to a third party has been established by action, arbitration or agreement, is unassailably correct.’
If an assured agent is covered by an E & O policy on terms of the forms with which I am concerned, and subject to an overall limit of liability, the insurer will be in cumulative breach of duty to the agent each time a quantified claim is established until the sum of the claims overtops the amount of the cover. Thereafter if further third party claims are established it does not seem to me that these can result in further liability on the part of the insurer.
The position is the same where an insurer grants E & O cover subject to an overall limit not to a single assured agent, but to a group of assured agents. Each time a quantified third party liability is established against one of the agents, that agent will acquire a cause of action against the insurer in respect of the liability in question, until the sum of the liabilities overtops the overall policy limit. Thereafter the establishment of further third party liabilities cannot give rise to further liability on the part of the insurer.”
99.	The problem in this case is that none of the cases deal with quite this situation.  In Post Office there was a dispute as to liability – in other words there was no determination of any liability to pay. Here, there is a judgment and a court order (in the form of the Costs Order). Denso accordingly says that it cannot be disputed that there is some liability.  In the context of costs-only liability, it says, the crystallisation occurs on the making of the costs order. They reserve their right to argue if necessary that Post Office is wrongly decided to the extent that it requires costs assessment to have concluded.  In Cox which tends to be looked to in support of the argument that quantification is necessary, the question was whether a preliminary quantification in the form of an interim payment.
100.	As Mr Brown tacitly conceded, while the point has not been grappled with squarely, the tide of opinion is against him.  Lord Mance in an article in 1995 Lloyd’s Maritime and Commercial Law Quarterly entitled “Insolvency at Sea” opined extra-judicially that quantification was necessary. This is also broadly in line with his judicial pronouncements in Teal Assurance Co Ltd v WR Berkley Insurance (Europe) Ltd [2014] Lloyd’s Rep IR 56 at paragraphs 13-15 and the judgment of Saville LJ (as he then was) in Cox at [1995] 2 Lloyd's Rep. 437 at p.467 col 2.  The point has been reiterated again since the hearing in this case completed in WR Berkeley Insurance (Europe) v Teal Assurance Co Ltd [2017] EWCA Civ 25 at [4] where Sir Stephen Tomlinson stated: “quantified here means ascertained as to its amount”. Unsurprisingly these opinions also reflect a practical approach, which asks the question: how can payment be sought until the amount of liability (at least part of the amount) is known? I therefore consider that the approach advocated by Great Lakes is correct; the right to payment did not accrue until 13 September 2015.  
101.	Accordingly the breaches of condition precedent which I have found above do “bite” and Great Lakes is indeed under no liability under the Policy. 
102.	I would add that even were this not the case I would have found that the conditions precedent still had effect, in circumstances where the Policy conditions themselves envisage that the insured remains under an obligation to cooperate after any judgment because it requires the insured to take steps which could arise only after judgment, the insured is required to comply with Policy conditions even after termination, to the extent that they are relevant and the subject of the indemnity is the costs liability which was ascertained on 3 September 2015.
Premium issues 
103.	The parties then disagree as to how premium is quantified, when it is due, and whether it has been demanded.
104.	The complications here are largely a consequence of the nature of ATE insurance, in that unlike almost all other contracts of insurance, ATE premium is not payable before the period of cover, but after and the process of quantification can often be complex. A detailed analysis of this is set out in Re RSA Pursuit Test Cases [2005] EWHC 90003 (Costs), per Senior Costs Judge Hurst.
105.	Denso submits as follows:
i)	There has been no valid calculation of or demand for Premium made by Great Lakes in accordance with the contractual machinery; 
ii)	There is no condition in the Policy that time is of the essence and Great Lakes’ purported repudiation was a nullity;  and
iii)	Payment of Premium by Mploy is not a condition precedent for payment under the ATE Policy. 
Quantification/demand
106.	On quantification Denso submits that the Policy contains contractual machinery for calculating Premium and that Great Lakes failed to operate that machinery. 
107.	The position is said to be analogous to the case of insurance “at a reasonable premium” such as Kirby v Consindit Societa per Azioni [1969] 1 Lloyd’s Rep 75. There, the insurer’s arguments that a payment on account of an unquantified premium could be made were dismissed and the Court held that no liability arose until quantification of the premium (in that case by the Court). 
108.	The Policy provides: 
“The Premium is calculated by:
 a)	determining the level of indemnity required to afford the Insured protection in the event of an Unsuccessful outcome at the conclusion of the Legal Proceedings. This shall be the sum of Expenses and Opponent's Costs;
b)	multiplying the level of indemnity referred to in (a) by the premium rate as stated in the Schedule;
c)	adding Insurance Premium Tax which is payable on the Premium at the rate prescribed at the date when the Premium is payable.”
109.	Opponent’s Costs is defined on p. 3.  
“The figures used for the calculation of the Premium in respect of the Opponent's Costs shall be the total costs the Opponent may have sought to recover under an order for costs or other entitlement to costs had the Opponent been successful, as certified by the Opponent's Solicitor if appropriate.…
In the event that the Opponent refuses to provide Us with the value of the Opponent's costs, then for the purposes of the calculation of the Premium, We reserve the right to make an approximation as to the quantum of the Opponent's costs using the best information available.”
110.	Denso submits that the Policy requires Great Lakes to calculate Premium by reference to Denso’s own costs.  However, in order to do so, it requires details of those costs, which the Policy envisages being provided by the Opponent’s solicitor. The only circumstance under the Policy when it is entitled to proceed without reference to actual details of the Opponent’s costs (and using the “best information available”) is where “the Opponent refuses to provide Us with the value of the Opponent’s costs.” 
111.	Great Lakes submits that there had been a refusal to provide costs details under this provision which made the use of an approximation appropriate. It asserts that Mr Burbury made his first demand for the Premium on 23 September 2014. That email states that a premium “in the region of £62,000” is “due” and that that is the estimated figure which should be used in any costs schedule. Denso says that is not a proper demand for premium, but simply a statement that a premium to be quantified is due. 
112.	Great Lakes also relied upon an email of 28 November 2014 to Mploy’s liquidators as a demand. In the email Mr Burbury makes enquiries regarding the extent of the parties’ costs and  states that costs cannot be quantified “until the costs of both parties in the litigation have been quantified by means of : (i) DO and Baker & McKenzie Solicitors compiling their Bill of Costs; (ii) costs negotiations are completed by way of a mutually acceptable compromise or (iii) if costs cannot be agreed, Detailed Assessment proceedings are concluded by way of a Detailed Assessment Hearing within which the Court has decided and made an Order in respect of what each sides’ costs entitlement is”. 
113.	He goes on to say: “Burford Capital (UK) Ltd, as Administrators of the ATE Insurance for Great Lakes Reinsurance (UK) plc, have a claim in the liquidation in respect of the ATE insurance premium of £47,775.69 +6% IPT of £2,866.54, total £50,642.23 (subject to the addition of 8% p.a. Judgments Act interest w.e.f 15/9/2014). Our completed and signed Creditor Questionnaire and Proof of Debt will follow next week.” This was an approximate calculation produced by reference to Denso’s costs budget.
114.	Denso argues that Mr Burbury was correct in his analysis of the Policy and this was not a demand, but simply an indication of an intent to lodge a claim in the liquidation. 
115.	Great Lakes submits, to justify its approach to calculation, that Denso’s solicitors had in October 2014 refused to provide any details of Denso’s costs to 3 April 2013 and that in the circumstances Great Lakes was entitled to use the Policy provisions to make an approximation as to quantum using the best information available. 
116.	On this issue I accept Denso’s submissions. On the face of the Policy there is a mechanism for calculating premium which hinges on the amount of the liability for costs.  In order to depart from this and approximate there needs to have been a refusal by the Opponent to provide costs information.  Here I can find no evidence of such a refusal.  It is true that Mr Burbury asked Mploy’s solicitors to obtain this information and they refused to do so, since they were about to come off the record as Mploy went into liquidation. This however cannot constitute a refusal by the Opponent. Nor is there evidence of a direct refusal by Denso prior to the documents relied upon by Great Lakes as demands.
117.	Further I also accept Denso’s submissions that the documents relied on by Great Lakes do not constitute demands. There is nothing which amounts to a request for payment; at most the documents demonstrate an indication of an intention to advance a claim of approximately a certain amount in Mploy’s liquidation. 
118.	In the circumstances, if it arose, Great Lakes’ case for breach of a condition precedent relating to premium would fail here.
No condition that time is of the essence/condition precedent
119.	Had it been necessary to do so, I would also have held that this argument failed at the later stage.
120.	There is no rule that Premium is payable at any point of time. The editors of Clarke: The Law of Insurance Contracts state at §13-1: 
“It is not in the nature of an insurance contract that premium should be payable at any particular point of time in relation to the period of cover. The time for payment is regulated by the terms of the particular contract. …”
121.	In Figre Ltd v Mander [1999] Lloyd’s Rep IR 193 Cresswell J held that a failure to pay premium on a due date amounted to a repudiatory breach entitling an insurer to terminate the contract in three cases: (a) where time was stipulated to be of the essence; (b) where the circumstances of the contract or nature of the subject-matter showed that time was impliedly of the essence; and (c) where time was neither expressly nor impliedly of the essence, but the insured had been guilty of unreasonable delay, and the insurer then gave a notice requiring the premium to be paid within a reasonable time. 
122.	As to the argument that payment of the Premium constituted a condition precedent, there is nothing in the language of Condition 1, which deals with premium, which suggests that payment of Premium should take effect as a “condition precedent”. The language of condition precedent is not used. There is no time limit stated by when Premium is payable. The Insurer could have used specific time language but did not. 
123.	Further, the relevant language at p.1 of the Policy envisages cover in exchange for a “promise to pay” Premium. This is, by definition, a promise to act in the future, not an obligation to pay first. There is no inconsistency between this and the fact that the Policy defines Premium as becoming payable on the Legal Proceedings becoming a success (i.e. at the time of judgment).  Premium remains payable and can, when quantified, be enforced against the party liable (Mploy).   
124.	This is consistent with the nature of the Policy as an ATE Policy, where premium is generally deferred and with the particular provisions for quantification of the premium in this case, which look to the final sum due to opponents as a key factor in quantification of the premium due. This approach is also supported by the existence of the contractual lien in Condition 1, second paragraph, the purpose of which is to enforce Great Lakes’ right to future payment of Premium.  
Exclusions 
125.	Next come the issues on the exclusions, which would have been relevant in the event that Denso had succeeded on liability. Great Lakes relies upon General Exclusions 6, 7, 8, 14, 15.  An issue as to exclusion 18 was conceded by Denso.
Exclusions 6 and 7
126.	This issue concerns the effect of Endorsement 1, which noted the existence of the BTE policy and its limit of cover of £100,000. It is akin to one of the condition precedent issues considered above, in that it refers to the same policy.
127.	Exclusion 6 refers to:
“Any payment arising from Legal Proceedings in respect of which the Insured is or but for the existence of this insurance would be entitled to indemnity under any other insurance policy”
128.	Exclusion 7 refers to: 
“Any Expenses or Opponent’s costs arising during a period when, for the purposes of the Legal Proceedings a CLS Public Funding Certificate was in force, or Before-the-Event insurance was in force.”

129.	Great Lakes submits that had steps been taken to recover Mploy’s costs pursuant to the costs order made on 15 September 2014, it is likely that Mploy would have recovered its own costs on the standard basis. The costs sought by Mploy would have been in the sum of £36,389.40 and it is likely that it would have recovered £28,975.40.  The BTE policy would then have been reinstated pro tanto and Great Lakes’ obligation to indemnify Mploy would have been reduced by that amount.
130.	The short point here is that the burden of proof on attracting the benefit of an exclusion is on Great Lakes. The evidence put forward by them was not sufficient to discharge that burden. The BTE Policy was not before the Court.  Nor was evidence obtained from Abbey (voluntarily or under compulsion). As a result I simply do not have before me the facts on the basis of which I could reach the conclusions sought.
Exclusion 8
131.	Exclusion 8 refers to: 
“Any amount which the Opponent is obliged to pay but fails to pay to the Insured or Solicitor for any reason.”
132.	Great Lakes’ position is that Denso was liable to pay Mploy the judgment sum of £34,410 as well as Mploy’s costs up to 3 April 2013. It is said that they would have been somewhere in the region of £28,975.40.  Mploy would also have had a claim for the premium payable under the Policy.
133.	I consider that this exclusion must be directed to excluding costs which the insured is seeking to recover and Denso, standing in the shoes of Mploy, is not seeking indemnity in respect of these sums.  
Exclusions 14 and 15 
134.	Exclusion 14 refers to: 
“Any costs incurred or increased as a result of a failure on the part of the Insured or the Insured’s Solicitor to mitigate a liability in respect of the Opponent’s Costs or Expenses.” 
135.	Exclusion 15 refers to: 
“Any costs or Expenses incurred as a result of the Insured failing to provide instructions or by otherwise failing to cooperate with the Solicitor or Us.”
136.	Great Lakes’ submission is that these provisions exclude costs which would not have been incurred the costs of Denso had been mitigated. The effect of Mploy’s failure to comply with the Policy conditions was that no steps were taken to mitigate that liability for costs by contesting the assessment. The result was that Denso obtained a certificate which gave them the entirety of their costs rather than the smaller sum which would have been recoverable on the standard basis.  
137.	Further, Great Lakes says that the indemnity which Great Lakes agreed to provide by the insuring clause was an indemnity against the ‘fully mitigated costs of [Denso]’. The costs payable pursuant to the Costs default certificate are, almost by definition, not the ‘fully mitigated costs of [Denso]’ but very much the reverse.
138.	Denso denies that this exclusion covers a failure to challenge Denso’s costs bill and argues that the natural language of both conditions is that it is directed at failures to mitigate costs incurred by Denso during the underlying legal proceedings (for example by taking steps in that litigation which causes costs to be incurred by Denso). Secondly Denso argues that Mploy’s liquidators could not mitigate unless Great Lakes put it in funds or exercised a right of subrogation. It deliberately chose not to do so. In those circumstances, there were no reasonable steps open to Mploy and hence no failure to take reasonable steps in mitigation. Alternatively the cause was Great Lakes decision to direct Denso to quantify its costs by way of assessment.
139.	Against this Great Lakes argues firstly that on a close examination of the Policy it will be found that any costs arising from unreasonable costs are excluded by exclusion 4 (“where costs or any increased legal or other costs arising from any unreasonable delay or negligence [etc] … prejudicial to the conduct of the Legal Proceedings.”). It follows that exclusions 14 and 15 must be directed at something else, namely a failure to mitigate costs.
140.	Secondly Great Lakes says that the answer on mitigation lies firstly in the fact that Great Lakes had offered to fund the costs of assessing Denso’s costs – though not contractually obliged to do so – and secondly in the fact that Mr Burbury had made it clear that he wished to be kept informed about the progress of costs discussions.
141.	I consider that had it arisen, Great Lakes were right about this exclusion, which appears to have been designed to operate as a backstop to the Condition 11.  Had it been necessary to do so costs would have been assessed on the standard basis and I would have found that the recoverable costs were 70% of the claimed figure, that figure to be calculated once the £10,000 agreed for exclusion 18 had been deducted.
Set off 
142.	The final issue (again one which does not arise on the view I have taken on conditions precedent) is whether the liability to pay premium transferred from Mploy to Denso. 
143.	This concerns the extent of the 1930 Act scheme. It is not disputed that Mploy’s rights and Great Lakes’ liabilities transferred from Mploy to Denso with effect from the CVA on 31 October 2014 under s1 of the Act. The issue is the extent to which Mploy’s liabilities (ie. for the premium) also pass to Denso. 
144.	Section 1 of the 1930 Act provides:
“Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against his liabilities to third parties which he may incur, then – 
(a)	In the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or 
(b)	In the case of the insured being a company, in the event of a winding up order being made, or a resolution passed, with respect to the company, or of a receiver or manager of the company’s business or undertaking being duly appointed, or of possession being taken of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge
if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred.”
145.	Denso says that there is binding authority on this issue in their favour: Murray v Legal & General Assurance Society [1970] 2 QB 495. It submits that the issue in that case is on all fours with the present dispute in that: 
i)	The claim was in respect of liability insurance (employers’ liability); 
ii)	The insured employer went into liquidation and the claim transferred under the 1930 Act; 
iii)	The insured employer owed premium to the insurer (which the insurer in fact proved in the liquidation and received some payment); 
iv)	The Court held that there could not be no set-off of the remaining premium due against the insurer’s own liability to the claimant. 
146.	There, Cumming Bruce J held that at 502-503:
“Against this history, did the Act merely put the plaintiff into the shoes of the insured, so as to transfer to the third party the whole bundle of the rights of the insured, subject to the whole bundle of his liabilities under the contract of insurance, or did Parliament give to the third party the privileged position of asserting the rights of the insured in respect of his liability to the plaintiff and of disregarding the liabilities of the insured to the insurers, for example, in respect of unpaid premiums? What effect must be given to the words "in respect of the liability" which appear in the section? In my view, those words are of the utmost importance.
It is not all the rights and liabilities of the insured under the contract of insurance which are transferred to the third party, only the particular rights in respect of the liability incurred by the insured to the third party. When one looks at subsection (4) one finds the following language:
"Upon a transfer under subsection (1) or subsection (2) of this section the insurer shall, subject to the provisions of section 3 of this Act be under the same liability to the third party as he would have been under to the insured, but ..."
and then follows (a) and (b) which deal with the differences between the liability of the insurers to the insured and the liability of the insured to the third party; this shows that the draftsman in that subsection was addressing his mind to problems that arise in connection with the liability of the insurers to the insured in relation to the particular liability of the insured to the third party. In my view this section had a carefully limited intention. There is no express transfer of liabilities of the insured to the insurers, as for example, is to be found in section 5 of the Workmen's Compensation Act, 1906, but if there is, under the policy, a defence by way of condition available against the insured, that defence would be available against the third party.
In my view, in the words used to create the statutory subrogation, the draftsman did carefully limit the subrogation to the rights under the contract in respect of the liability incurred by the insured to the third party. Rights which are not referable to the particular liability of the insured to the particular third party are not transferred. Thus all the conditions in the policy which modify or control the obligations of the insurers to cover a given liability to a third party are the subject of transfer. See, for example, the judgment of Atkinson J. in Hassett v. Legal & General Assurance Co. (1939) 63 Ll.L.R. 278. The right to recovery of the premiums in this case was not a term of the policy which arose in respect of the liability of the insured to the third party. The defendants are in my view left in regard thereto with the same rights as the general body of creditors, namely, to prove in the bankruptcy. It follows that the plaintiff is entitled to judgment.”
147.	Accordingly, Denso says, the policy objective behind the 1930 Act is essentially to put the third party in a privileged position in the event of insolvency. The insurer can raise defences which “modify or control the obligations of the insurer”, i.e. by reference to Policy terms. 
148.	Denso have drawn my attention to the contrasting position in section 10 of the Third Parties (Rights Against Insurers) Act 2010 (in force from 1 August 2016) which specifically establishes a right of set-off in these circumstances.  It also compares section 136 of the Law of Property Act 1925, which provides that an assignee takes his rights “subject to equities having priority over the right of the assignee”. This indicates, it says, that where the Parliamentary draftsman intends the assignee or transferee to take rights subject to equities, he expressly says so. 
149.	Great Lakes urges me not to follow this authority and rely on the obiter dictum of Phillips J in Cox v Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437: 
“Can the insurers invoke a right of set-off that was available against an assured as against the Names who step into the shoes of the assured pursuant to the provisions of the 1930 Act? In my judgment they can. It seems to me that the rights transferred under the Act must be subject to any defences that would have been available had those rights been asserted by the assured from whom they are transferred. Insofar as the decision in Murray v. Legal and General Assurance Society Ltd., [1969] 2 Lloyd’s Rep. 405; [1970] 2 Q.B. 495 is inconsistent with this conclusion, I decline to follow it.”
150.	It says that this demonstrates that in the view of Phillips J, since insurers would have had a right to set off premium due from the insured if it had been the insured which asserted its claim for an indemnity under the policy, that defence must also be available to insurers as against a third party claiming under the 1930 Act.  It says that as a matter of the law of precedent this view should be followed as the most recent decision on point.
151.	However Denso argues that Cox case does not concern set-off of premium, but of the effect on a third party of a costs-inclusive excess. Accordingly, the court was faced with an entirely distinct issue. Further there was no consideration by the Court of the doctrine of stare decisis. Murray is binding as a matter of precedent. Phillips J did not consider whether he was fully satisfied that the previous decision was wrong. The conditions for following a more recent decision are therefore not in place.
152.	This is a very interesting point, although arising somewhat down the list of issues.  To the extent that it may ever become relevant I prefer the argument of Denso. There is a distinction between the two cases, as is apparent from the judgment of Phillips J. This tends to be reinforced by the facts that Phillips J would be expected to have made it clear if he considered that the previous decision was inconsistent with the course he proposed. This also explains the absence of the full consideration of the previous authority before departing from it.
153.	I take comfort in that conclusion from the decision of the Supreme Court in International Energy Group Ltd v Zurich Insurance plc [2016] AC 559 at [83]-[93]. The issue there was the slightly different one of the right to set-off contribution from the insured or third-parties. The Court considered the point though leaving this debate open on the basis that any right of contribution in that case was best seen as arising from circumstances outside the insurance policy, and on that basis as not capable of giving rise to a set-off at all. 
154.	However the Court opined that legal set-off is “probably” precluded under the statutory transfer under the 1930 Act: [89]. It further held that if equitable set off is available, it requires analysis of whether the claims are so closely connected that it would be “manifestly unjust” to permit the claim without taking account of the cross-claim: Geldof Metaalconstructie NV v Simon Carves Ltd (Note) [2010] 4 All ER 847, per Rix LJ. 
155.	This discussion does demonstrate that if a 1930 Act transferee takes subject to equities, the insurer (here Great Lakes) will need to plead and prove the inequitability of not setting off premium. It appears that this has not been done here, and so even if the argument might arise any claim for set off would fail at this point.
Conclusion
156.	For the reasons given I therefore find that the Claimant’s claim fails.