Judge Interprets An Aggregation Clause And The Meaning Of 'Similar' Acts And 'Related' Matters

An insurer sought a declaration that certain claims brought against the insured firm of solicitors should be aggregated. The claims were brought by various investors who had invested in two holiday home developments to be undertaken by a UK development company (Midas) in Turkey and Morocco, which failed when the local Midas companies were unable to complete contracts for the purchase of the relevant land in Turkey or shares in the land-owning company in Morocco. The investors alleged, broadly, that the solicitors had wrongly released monies from an escrow account without adequate security being in place to protect their investment. The investors claimed to have lost over GBP 10 million, and the relevant policy provided cover of GBP 3 million for any one claim.

Clause 2.5 of the Solicitors Regulation Authority Minimum Terms and Conditions of Professional Indemnity Insurance for Solicitors applied and (in the relevant part) provided that claims "arising from ... similar acts or omissions in a series of related matters or transactions" would be regarded as one claim for the purposes of the application of policy limits. Teare J was therefore required to interpret the scope of that clause.

He considered that the phrase had to be interpreted in its context and, accordingly, prior caselaw involving a different context was of no real assistance in this case. He concluded that:

(1) "Similar acts or omissions" required a "real and substantial degree of similarity" and that that similarity should not be "fanciful nor insubstantial". That test was satisfied here since, common to all the individual claims (assuming the claims to have been made out), the local Midas company could not pay the vendor, there was a failure to provide effective security so that the relevant test for releasing the escrow monies had not been properly applied, and thus the investors had been exposed to loss in the event that the...