Royal & Sun Alliance Insurance plc and others v Textainer Group Holdings and others  EWHC 2102 (Comm): Phillip Patterson takes a look at this case in which permission was granted to the insurer, Royal & Sun Alliance (RSA) to bring a representative claim on behalf of a number of other insurers exercising subrogated rights to recoveries from a shipping container leasing company. The claim was properly constituted despite the failure to join an insurer with a common interest in the claim.
What are the practical implications of this case?
This is a fairly rare authority in relation to CPR 19.3. That provision states that:
“where a claimant claims a remedy to which some other person is jointly entitled with him, all persons jointly entitled to the remedy must be parties unless the court orders otherwise.”
This decision has interpreted this provision narrowly as confined to entities who have a joint legal entitlement to a remedy. It does not extend to circumstances in which two or more persons are severally entitled to a remedy and, consequently, have a common interest in the outcome of proceedings. In this latter scenario, the existing claimants have an entitlement to represent the nonparticipant under CPR 19.6 but are not bound to do so. Where they elect not to do so, it is not open to the defendants to argue that the claim is improperly constituted by virtue of CPR 19.3.
What was the background?
The first defendant, (Textainer) and its subsidiaries (the second to eleventh defendants) are in the business of leasing intermodal containers. They entered into a range of insurance policies which represented an excess of loss insurance programme. That programme provided the defendants with indemnities against specified types of loss relating to marine containers. As a whole, it constituted the Primary Policy, issued by seven insurers led by RSA, subject to a sum insured of:
- US$5m in excess of the Assured’s Retention
- a First Excess Policy, issued by RSA and XL, subject to a sum insured of US$5m in excess of the limits of the Primary Policy
- a Second Excess Policy, issued by RSA and TT Club, subject to a sum insured of US$5m in excess of the limits of the First Excess Policy
- a Third Excess Policy, issued by IGI and HDI, subject to a sum insure of US$25m in excess of the limits of the Second Excess Policy a Fourth Excess Policy, issued by XL, subject to a sum insured of US$10m in excess of the limits of the Third Excess Policy, and
- a Fifth Excess Policy, issued by a number of insurers led by IGI, subject to a sum insured of US$30m in excess of the limits of the Fourth Excess Policy
Textainer leased a large number of containers to Hanjin Shipping Co Ltd (of South Korea) (Hanjin). In 2016, Hanjin entered an insolvency process and defaulted under its various leases with Textainer. Textainer alleges that it has suffered loss of approximately US$102m as a result. Textainer claimed under the insurance policies and obtained payment in full under the Primary Policy, the First, Second, Third and Fourth Excess Policies. Textainer then also claimed in Hanjin’s bankruptcy and obtained a settlement with its trustees.
The claimants’ claim is that, having paid an indemnity under the various policies, they are entitled to exercise rights of subrogation against the recoveries obtained in the Hanjin bankruptcy. RSA sought to represent other insurers associated with the programme pursuant to CPR 19.6, specifically those who participated as followers in the Primary Policy and also the only other insurer who participated in the First Excess Policy. The four insurers on the Primary Policy whom RSA sought to represent have consented to RSA representing them, along with the follower on the First Excess Policy.
What did the court decide?
The court concluded that RSA should be granted the permission it sought under CPR 19.6. Textainer did not object in principle to RSA representing those insurers and the court was satisfied that RSA had the same interest in the claim as those which it was seeking to represent. Textainer argued, however, that the action was not presently constituted, due to the fact that one following insurer on the Primary Policy, Westfälische Provinzial Versicherung AG (WPV), was not a party to the action and had not consented to RSA acting as its representative.
Textainer’s position was that the claim brought includes remedies to which the claimants are jointly entitled with WPV. Accordingly, it was said, CPR 19.3 required WPV to be a party unless the court otherwise ordered. Textainer was concerned about a potential injustice whereby at the conclusion of the extant proceedings, they might then face further claims from insurers who had not participated in these proceedings.
It was common ground that, although the interests of each of the subscribing insurers to a particular policy are the same, their indemnity obligations are several and not joint. Furthermore, Textainer accepted that where an insurer is entitled to by way of subrogation to recoveries which the insured has made against the loss, the fact that other insurers have subscribed to the same policy and have equivalent claims to their respective percentages does not mean that the insurers are pursuing a joint claim requiring all insurers on the same policy layer to be joined under CPR 19.3.
The issue raised by Textainer concerned the different layers of cover at issue here and the manner in which the claims had been pleaded in the Particulars of Claim. The cases advanced by RSA and Textainer led to differences both between the allocation of recoveries between the insurers and the insured and as to the allocation between different layers of insurance. The court reasoned that the participating insurers could be said to have a common interest with non-participating insurers. However, the position remained that those insurers were each suing for a several and not a joint entitlement. Accordingly, while there may be a compelling reason for Textainer to wish to join WPV to the action in the interests of finality and consistency, RSA’s failure to join and seek to represent them did not render the proceedings improperly constituted pursuant to CPR 19.3
- Court: Business and Property Courts of England and Wales, Queen’s Bench Division, Commercial Court, High Court of Justice
- Judge: Mr Justice Henshaw
- Date of judgment: 26 July 2021
Phillip Patterson, August 2021
This article was first published in Lexis Nexis.