Mayer Brown for appellant, Royds for respondents, Russell-Cooke for intervener

The first instance decision in this case was reported in Weekly Update 31/15. The case concerned two property developments by Midas in Turkey and Morocco, for which it had attracted more than 200 investors. The developments failed when the local Midas companies were unable to complete the land purchases. The investors brought proceedings against a firm of solicitors, alleging that it 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 £10 million. The solicitors were insured with the insurers under a policy subject to an indemnity limit of £3 million for any one claim. Insurers issued proceedings in the Commercial Court seeking a declaration that the underlying claims should be treated as "one claim" on the basis that all the claims arose from "similar acts or omissions in a series of related matters or transactions" pursuant to clause 2.5(a)(iv) of the Solicitors Regulation Authority Minimum Terms and Conditions.

Teare J interpreted "a series of related matters or transactions" as meaning that the transactions were conditional or dependent on each other. As a result, he held that there could be no aggregation of the claims.

The Court of Appeal has now give its judgment on matters of principle only (rather than making any findings of fact). It has concluded that Teare J went too far when he concluded that the transactions had to be "dependent on each other". Nevertheless, it found that there still had to be an "intrinsic" relationship of some kind between the matters or transactions, and an outside connecting factor would be insufficient, even if it was common to the matters or transactions.  

In reaching that conclusion, the Court of Appeal took into account the circumstances in which the aggregation clause wording in the Minimum Terms had been amended. Taking this background into account as part of the "matrix" against which it construed the clause, the Court of Appeal concluded that there was support in the history for the argument that "a series of related … transactions" was not intended to be interpreted in such a way that any relationship, however loose, would suffice; there had to be some restriction on the concept of relatedness and the most satisfactory approach would, the Court said, be an intrinsic relationship not an extrinsic one. Referring to the Lloyds TSB [2003] judgment, Longmore LJ also took note of the importance of interpreting the aggregation wording against the knowledge of different types of aggregation clauses in existence (for example, broad wording such as "original cause"). 

COMMENT: The Court of Appeal gave only a few hints as to factors which may or may not lead to the test being satisfied: it said, for example, that "transactions which all take place with reference to one large area of land in a particular country might be related transactions if they refer to or (perhaps) envisage one another", and that (on the facts of AIG) if there was a specific requirement that investors' funds were to be held in a separate designated account for each investor, that might militate against a finding of an intrinsic relationship.  However, aggregation decisions are notoriously fact-sensitive, and the Court of Appeal was careful not to fetter the decision of the Commercial Court on the facts.  As a result much remains to be seen about how "intrinsic relationship" will be interpreted.