High Court dismisses solicitor's indemnity claim due to reckless misrepresentation of partnership status on insurance proposal form.

Neutral Citation Number: [2010] IEHC 128

THE HIGH COURT

COMMERCIAL

2008 9658 P

2008 244 COM

BETWEEN

FIONA MCALEENAN

PLAINTIFF

AND

AIG (EUROPE) LIMITED

DEFENDANT

JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 6th day of May, 2010

1. The plaintiff is a solicitor. She worked in the solicitors’ practice of Michael Lynn & Co. from November 2004 until September 2007.

The plaintiff, in these proceedings, claims to be entitled to an indemnity from the defendant pursuant to a Professional Indemnity

Policy Number SPI36161, issued for the period 1st January, 2007, to 31st December, 2007 (“the Policy”). The Insured named in the

Schedule to the Policy are “Overseas Property Law/Michael Lynn & Co”.

2. On 20th December, 2007, the defendant purported to avoid the Policy by reason of alleged material non-disclosures at the time of

the proposal for insurance in April 2007, and an endorsement in May 2007. On 22nd September, 2009, by letter from its solicitors, the

defendant furnished additional justification for avoiding the Policy against the plaintiff. The defendant issued separate proceedings

[2009 No. 4137 P] against the plaintiff and Michael Lynn, in which it seeks a declaration that it was entitled to avoid the Policy.

Those proceedings have been stayed as against the plaintiff pending the determination of these proceedings.

3. The defendant asserts that there has been a valid avoidance by it of the Policy against the Insured named in the Schedule,

Overseas Property Law/Michael Lynn & Co. The avoidance against Overseas Property Law which is stated to be one of the trading

names of a limited liability company, Overseas Legal and Tax Services Ltd., is not directly relevant to these proceedings. Michael Lynn

& Co. is not a legal person. It was the name under which either Michael Lynn, as principal, carried on practice as a solicitor, or the

name under which Michael Lynn and the plaintiff, in partnership, carried on practice as solicitors. Insofar as the avoidance by the

defendant is against Michael Lynn, the plaintiff does not contest same: she does contest the defendant’s entitlement to avoid the

Policy as against her.

Factual background

4. The factual background to the present dispute may be relatively shortly stated. It will be necessary to consider certain facts in

greater detail in relation to specific issues.

5. The plaintiff qualified as a solicitor in 1992. In November 2004, she was employed by Michael Lynn & Co., solicitors. At that time, it

is undisputed that Michael Lynn & Co. was the professional or business name under which Michael Lynn practised as a solicitor. The

plaintiff was therefore an employee of Michael Lynn. The plaintiff was employed as a litigation solicitor with responsibility also for

family law. She was given a statement of the terms and conditions of her employment. These do not appear to have been signed. She

does not dispute that they are the terms on which she was employed. Those terms include one to the effect that if her employment

subsisted for three years, “it is agreed, in principle, that the matter of partnership will be discussed . . .”. The plaintiff’s case is that

whilst discussions took place, she never became a partner of Mr. Lynn prior to ceasing to work in the practice. One of the factual

issues in dispute is the plaintiff’s status in the practice in 2007. The facts relevant to that issue will be considered separately below.

6. The plaintiff continued to work as a litigation/family law solicitor until she left in 2007. For much of that period, apart from Mr.

Lynn, she was the only qualified solicitor in the practice. A solicitor, Ms. Deborah Leonard, was employed in the practice for

approximately three months in the summer of 2006. Mr. Peter McCarthy, who had been a trainee solicitor in the practice, qualified in

early 2007, and continued to work as a solicitor until he left the practice on 4th July, 2007.

7. In 2004, the practice was based in Blanchardstown. In adjoining offices, there were persons employed by Kendar Holdings Limited,

a property development company, owned by Mr. Lynn. In January 2006, Mr. Lynn incorporated another limited liability company,

Overseas Legal and Tax Services Ltd., which trades as Overseas Property Law and Overseas Property Tax. The plaintiff had no

involvement with that company. Its purpose was to furnish advices to purchasers of property abroad. It appears to have had three

employees who also worked out of Blanchardstown.

8. The practice, Michael Lynn & Co., and Overseas Property Law, moved to the Capel Building on 29th April, 2007. The name of the

practice was subsequently changed to ‘Capel Law’.

9. Mr. Lynn appears to have been regularly absent from the office. The conveyancing work in the practice was done for much of the

period by a Ms. Clair Cooper, who was employed as a legal executive and was also the office manager. She left in January/February

2007. Ms. Cooper was an experienced conveyancing legal executive and gave evidence before me. After she left, conveyancing was

done in part by Mr. Peter McCarthy and also by Mr. Daniel Hughes, a trainee solicitor. Mr. Hughes also gave evidence. The plaintiff

had little connection with the conveyancing side of the practice in the earlier years (save in relation to the giving of undertakings),

but in 2007 she does appear to have given some supervisory assistance to those doing conveyancing.

10. The plaintiff, at all material times, signed undertakings on behalf of the firm, for the purposes of conveyancing transactions.

11. Another employee of the practice, who featured significantly in the evidence but did not give evidence, was Ms. Liz Doyle. She

appears, initially, to have assisted the plaintiff in litigation as a legal executive, although it is stated she was not a qualified legal

executive. During this period, she also assisted Michael Lynn. However, in early 2006 she became the fulltime personal assistant to

Michael Lynn. The evidence of the plaintiff, and all other former employees of the practice who gave evidence, was to the effect that

in 2006 and 2007 Ms. Doyle was regarded as a senior member of the practice and the “eyes and ears” of Michael Lynn in the practice.

She was the person to whom they gave messages for Michael Lynn and who issued instructions on behalf of Michael Lynn. Michael

Lynn appears to have had a decreasing presence in the practice in 2007. I am satisfied on the evidence that there was a culture of

secrecy in the practice in relation to Mr. Lynn’s personal transactions and that Ms. Doyle was extremely protective of his position. A

significant portion of the conveyancing work appears to have related to property transactions in which Mr. Lynn was personally

involved, either directly or through Kendar Holdings.

12. The professional indemnity insurance for the practice of Michael Lynn & Co. was held with the Solicitors Mutual Defence Fund until

the end of 2006. It would not provide cover for work outside Ireland. The defendant was contacted through Marsh Ireland Limited,

insurance brokers, (“Marsh”) in December 2006 seeking cover for Overseas Property Law/Michael Lynn & Co. The plaintiff was not

involved in the initial instructions given for the proposal. A completed but unsigned proposal form was provided through Marsh. On 5th

February, 2007, the defendant indicated that it was prepared to note cover for Michael Lynn & Co. as a solicitors’ practice, but not

yet Overseas Property Law. On 26th February, 2007, the defendant noted Overseas Property Law in the title of the insured. On 12th

April, 2007, the plaintiff signed and dated the proposal form (“the Proposal Form”). On 14th May, 2007, the plaintiff signed a No Claims

Declaration Form for the purpose of a dishonesty extension which had been agreed on 9th May, 2007. The Policy document was not

issued until 12th October, 2007. Nothing turns on this date. The insurance cover ran from 1st January, 2007, to 31st December,

2007.

13. When Mr. Peter McCarthy left the practice in July 2007, Mr. Daniel Hughes, a trainee, was doing the conveyancing work. The

plaintiff gave evidence, which I accept, that she had no choice but to oversee his work. In addition, at this time, all incoming post

was brought to the plaintiff. In early July 2007, she became aware of a letter from O’Sullivan & Associates, solicitors, concerning

unpaid stamp duty on properties purchased by Michael Lynn & Co. for which finance had been obtained from Anglo Irish Bank and Bank

of Scotland. The plaintiff stated that this issue was then dealt with by Ms. Liz Doyle furnishing a cheque to O’Sullivan & Associates.

14. The plaintiff gave evidence that a letter dated 14th August, 2007, was received by fax from McKeever Rowan, solicitors, in

relation to legal mortgages which were to be given over eleven residential properties. The plaintiff stated she realised that certain of

the properties referred to had been the subject of the earlier correspondence with O’Sullivan & Associates. The plaintiff appears to

have made enquiries of Liz Doyle, Daniel Hughes and Peter McCarthy, and stated that she understood initially that whilst Michael Lynn

was proposing to obtain refinancing from Ulster Bank this may not have happened. On 5th September, 2007, a further fax was

received and, when Mr. Daniel Hughes contacted McKeever Rowan, it became apparent that there was a lending from Ulster Bank to

Michael Lynn on the properties referred to in the letter of 14th August, 2007. The plaintiff stated this is how she became aware that

Michael Lynn had also drawn down approximately €7m. from Ulster Bank. She further learnt, on enquiry from McKeever Rowan, that

they had a letter sent by Michael Lynn & Co. to Ulster Bank stating that charges had been registered, and on that letter was the

reference “LD” which was the reference used by Liz Doyle in the practice. The plaintiff then ascertained that the monies from Ulster

Bank were not recorded in Michael Lynn’s account in the practice in the month of September 2006, which was the date upon which it

was meant to have been obtained.

15. The plaintiff then took advice on Friday 7th September, 2007, from a solicitor in another practice and made contact with the Law

Society on Monday 10th September, 2007. She stated that she was advised by the Law Society to immediately leave the Michael

Lynn practice. She did so, and resigned on 10th September, 2007, leaving a resignation letter on her desk. She met with the Law

Society on 12th September, 2007, and they entered the practice of Michael Lynn & Co.

16. It became apparent that multiple undertakings had been given to many financial institutions on the same properties by Michael

Lynn & Co. and that, in many instances, the undertakings were not complied with, in that no fixed charges were registered over the

properties in respect of which loans were advanced and undertakings given.

17. A detailed examination was conducted of a sample of undertakings, both by the defendant and by the solicitors acting for Chubb

Insurance of Europe S.A. and W.B. Berkley Insurance (Europe) Limited, with whom excess layers of the professional indemnity

insurance were placed. A Schedule, setting out the results of that examination, was put into evidence by agreement of the parties

herein. Certain of the undertakings were signed by the plaintiff. On other undertakings, the plaintiff’s name appeared as a signature

but it is accepted by the defendant that she did not sign her name. Her name appears to have been forged by another person in the

practice. The following facts were agreed between the parties for the purpose of these proceedings:

(i) That not all of the multiple undertakings given to multiple financial institutions referred to in the Schedule put into

evidence in respect of the same properties by Michael Lynn & Co. were complied with, in that no first fixed charges were

registered over the said properties in respect of which loans were advanced and undertakings were given.

(ii) That Michael Lynn personally (and not the plaintiff) benefited financially from the above arrangements.

(iii) That Michael Lynn was found guilty of misconduct by the Solicitors Disciplinary Tribunal on 28th April, 2008, of, inter

alia, “engaging in conduct tending to bring the solicitors profession into disrepute by frequently giving multiple

undertakings to financial institutions in respect of the same property” (para. 81.4 of the Solicitors Disciplinary Tribunal

Report, 28th April, 2008 - ref. 7153/DT16/08).

(iv) That Michael Lynn has been struck off the Role of Solicitors by order of the High Court dated 23rd May, 2008.

18. On 20th December, 2007, the defendant wrote to the plaintiff, avoiding the Policy on the following basis:

“It is clear from the detailed investigations that have been carried out by us, and from the limited information we have

received from Mr. Lynn and Ms. McAleenan, concerning the proposal for insurance, that there have been material non-

disclosures made by the practices [sic] at the time of their proposal for insurance with us.

These material non-disclosures include, but are not limited to, the provision of multiple undertakings to multiple financial

institutions on the same properties owned by Mr Lynn prior to the proposal and indeed the inception of the policy. As a

result of these non-disclosures, we have now decided to void the policy of insurance ab initio.”

19. The defendant contends that Michael Lynn & Co. has not challenged the avoidance, either in correspondence or in litigation.

20. The plaintiff commenced these proceedings by plenary summons on 19th November, 2008.

21. On 11th May, 2009, the defendant issued proceedings [2009 No. 4137 P] against Michael Lynn and Fiona McAleenan, practicing

under the style and title of Michael Lynn & Company and Overseas Legal and Tax Services Limited t/a Overseas Property Law. A

declaration was sought in those proceedings to the effect that the defendant had lawfully avoided Policy No. SP13616 ab initio for

non-disclosure of material facts.

22. No appearance was entered either on behalf of Michael Lynn or Overseas Legal and Tax Services Limited. On 29th June, 2009, the

defendant herein brought a motion for judgment in default of appearance in those proceedings. At the hearing before me, I was

informed that Kelly J., having heard that motion, indicated that the defendant herein was entitled to judgment against Michael Lynn

(presumably, for the declaration sought) but that, on the application of counsel for the defendant herein, he would not make any

order in those proceedings until these proceedings brought by Ms. McAleenan had been heard and determined. The claim against Ms.

McAleenan in those proceedings is stayed until the determination of these proceedings.

23. The insurers for the excess layers also avoided their respective policies. They commenced proceedings against Michael Lynn and

Fiona McAleenan [2008 No. 4094 P] which were brought on and listed for hearing with the present proceedings. At the

commencement of the hearing, I was informed that a compromise had been reached between the excess layer insurers and Ms.

McAleenan under which, by consent, the Court made an order that each of the insurers of the excess layers had validly avoided its

policy as against the plaintiff herein.

Claim and Defence

24. The claim and defence herein gives rise to a number of discrete and complex issues. Simply stated, the plaintiff’s claim is that she

was, at all material times, an employee of Michael Lynn, practicing as Michael Lynn & Co., solicitors. She contends that the Policy is a

composite, as distinct from a joint, policy; that she is one of the Insured as defined by Clause 3(a)(ii) of the Policy as a solicitor and

employee, and, that as such, she has a contractual right to be indemnified by the defendant. Further, insofar as the Proposal Form

signed by her on 12th April, 2007, may be construed as including a misleading or an untrue statement that she was then a partner of

the firm Michael Lynn & Co., she contends that Clause 4(j)(a) of the Policy precludes the defendant from exercising its right to avoid

the Policy against her.

25. The defendant disputes that the plaintiff was at all material times an employee and not a partner of Michael Lynn. In the

alternative, it contends that the plaintiff held herself out as a partner of the firm Michael Lynn & Co. to the defendant in the Proposal

Form and No Claims Declaration signed by her and is now estopped from denying that she is a partner, either by reason of the term of

the Policy, which states that the proposal “shall be the basis of this contract” and is “deemed to be incorporated herein”, or by

reason of s. 14(1) of the Partnership Act 1890 (53&54 Vict. c. 39) (“the Act of 1890”). The defendant also contends that the Policy

is a joint, and not a composite, policy. The defendant contends that any untrue statement in relation to the status of the plaintiff

and non-disclosure in the Proposal Form was neither innocent nor free of any fraudulent intent. The defendant also contends that it is

entitled to avoid the Policy as against the plaintiff by reason of non-disclosure, misrepresentation or untrue statements in relation to

circumstances giving rise to claims against the practice which were not innocent or free of any fraudulent intent.

26. The plaintiff denies any non-disclosure, misrepresentation or untrue statement in relation to circumstances which might give rise

to claims against the practice. She submits she was unaware of any such circumstances and made reasonable enquiries prior to

completing the Proposal Form and No Claims Declaration.

27. While certain of the issues arising from claim and defences are interconnected, it appears to me that it may be clearest to deal

with the issues in the following sequence:

(i) The status of the plaintiff in Michael Lynn & Co., solicitors, in 2007.

(ii) Whether the Policy is joint or composite.

(iii) Whether, even if the plaintiff was not a partner of Michael Lynn in 2007, and the Policy is composite, the defendant is

entitled to avoid the Policy against the plaintiff.

(iv) If the defendant is not entitled to avoid the Policy and the plaintiff was an employee of Michael Lynn is she estopped

from enforcing the policy against the defendant as an employee by reason of s.14(1) of the Act of 1890 or otherwise.

Status of plaintiff in 2007

28. In considering the issue as to whether the plaintiff, as she claims, was an employee of Michael Lynn, practicing under the style or

title of Michael Lynn & Co., or a partner of Michael Lynn, in a partnership under the name Michael Lynn & Co., it is necessary to recall

the essential nature of a partnership and the meaning of a partner. The Act of 1890 does not define a partner as such. Rather, it

defines a “partnership” as meaning “the relation which subsists between persons carrying on a business in common with a view of

profit” (s. 1(1) of the Act of 1890). Section 2 of the Act of 1890 sets out rules to which regard should be had “in determining whether

a partnership does or does not exist”.

29. On the facts herein, it is commoncase that when the plaintiff was employed in 2004 Michael Lynn was a self-employed solicitor

carrying on practice under the style or title Michael Lynn & Co. He was her employer. There was no partnership in existence. It is not

suggested that any other person became a partner of Michael Lynn in the intervening period. The plaintiff’s status in 2007 must

therefore be determined by resolving the question as to whether or not, by 2007, a partnership came into existence between the

plaintiff and Michael Lynn.

30. The plaintiff’s own evidence is that no partnership between herself and Mr. Lynn came into existence. At all times she remained an

employee of Mr. Lynn, subject to PAYE. There were discussions and a number of meetings in relation to a proposed partnership.

Evidence was given both by the plaintiff and Mr. John Kinsella, an accountant and partner in the firm of Kinsella Mitchell & Associates

who carried out accounting and auditing services on behalf of Michael Lynn & Co. and Kendar Holdings Limited and other related

companies. A meeting was held in April 2006, attended by the plaintiff, John Kinsella and Liz Doyle, on behalf of Michael Lynn, and

there were meetings in February 2007: one between Michael Lynn, David Gorman, his personal accountant, and Mr. Kinsella, and a

second meeting with the plaintiff. There was a further meeting in April 2007. Notwithstanding these meetings, I am satisfied that no

agreement was reached as to the terms upon which a partnership would come into existence between Michael Lynn and the plaintiff.

No agreement was reached, inter alia, as to the respective share of profits. In July 2007, there was a further meeting and the plaintiff

was given a partnership agreement which she refused to sign.

31. Mr. Kinsella’s evidence was that when Michael Lynn changed the name of the practice to ‘Capel Law’, he registered the business

name ‘Capel Law’ to himself as an individual and not to any partnership. This change appears to have occurred in the spring/summer

of 2007, after the practice moved to the Capel Building. Mr. Kinsella also gave evidence that when the plaintiff resigned in September

2007 she received a P45 from Michael Lynn as her employer. Further, that at all times, the practice bank account was in the name of

Michael Lynn, and he always dealt with Michael Lynn personally in relation to the accounts of the practice.

32. All of the above facts suggest that no partnership came into existence prior to the plaintiff’s resignation in September 2007.

However, there are some facts which give a contrary indication. First, by letter of 21st June, 2005, the plaintiff wrote to Ms. Keogh in

the Traineeship Section of the Law Society in relation to an application to act as training solicitor to a Katie O’Dea and stated, “I

hereby confirm that I have now been appointed Partner in the firm of Michael Lynn & Co. I would be obliged if you could amend your

records accordingly”. The plaintiff explains this letter on the basis that in the summer of 2005 Michael Lynn asked her to be “named as

a partner on the paperwork necessary to facilitate Katie O’Dea becoming a trainee in the practice”. It appears that Mr. Lynn was not

then entitled to take on any more trainees in his own name; he wished to take on Ms. O’Dea and that a solicitor then employed by

Kendar Holdings, who was intended to act as training solicitor, did not have the requisite years of practice. The plaintiff stated in

evidence that she was told by Mr. Lynn that only a partner could become a training solicitor; that he promised that terms of

partnership would be agreed between them in November 2005, and that in those circumstances she agreed to let her name be used

as a partner for the purposes of facilitating Ms. O’Dea as a trainee. The plaintiff further explained that she perceived her status in the

summer of 2005 as “an employee with the promise of a partnership”. She also stated that she was “a named partner” and explained

her understanding that this meant that she would, in the course of time, become a partner. She said she understood that she had

been given the title of named partner in the practice although remaining an employee. She stated she was aware of a similar

arrangement in another firm in which she worked where a solicitor who was an employee was ‘named’ as a partner to clients before

being made a partner and whilst remaining an employee. In her evidence, however, she accepted that her letter did not properly

describe her position to the Law Society. Whilst there is, undoubtedly, confusion about the status of persons described as partners

caused in part by the common use of the term “salaried partners” amongst solicitors, to which I refer in greater detail below, it is an

inescapable conclusion that what was stated by the plaintiff to the Law Society in June 2005 was not accurate. On the evidence now

adduced, she had not, by the date of the letter, “been appointed partner in the firm of Michael Lynn & Co.” as stated in the letter.

33. Secondly, in her applications for Practicing Certificates for the years 2006 and 2007, the plaintiff ticked the box in reply to a

query as to her current professional status as “partner in a solicitors’ practice”. Further, in the application for the year 2006, she

indicated that her status had changed in June 2005. Nevertheless, the 2006 application is possibly contradictory insofar as the

plaintiff deleted that part of section B (the accounts section) which had to be completed by a partner and completed the section

referable to an employed solicitor. However there is no evidence that the Law Society raised any query on this apparent

contradiction. The partner accounts section was completed in the 2007 application. The plaintiff’s evidence was that the accounts

section had been completed before she signed the form. In her evidence, the plaintiff also stated that she did not notice at the time

on the forms that she had the option of answering the query in relation to her status under a heading of “Other” and explaining that

she was an employee with a promise of partnership or an employee named as partner or with the title of partner.

34. Thirdly, the plaintiff signed the Proposal Form for the professional indemnity insurance with the defendant on 12th April, 2007,

under the description “Signature of partner/principal/director”. In that form, in response to the question as to the total number of

partners/principals/directors, the answer given was two, and qualified staff stated to be one. Further, in question 2 in the details of

“partners/principals and directors”, both Michael Lynn and the plaintiff are named. There is, however, a distinction in the way in which

it is done insofar as the word “partner” appears under the name of Michael Lynn and he is described as “solicitor with own legal

practice for 8 years” and it is indicated that he has eight years as partner/principal/director of the firm. The word “partner” does not

appear after the name of the plaintiff, but under years as partner/principal/director, she is stated to have two years experience. The

plaintiff’s evidence of the circumstances in which she signed the Proposal Form is set out later in this judgment.

35. Fourthly, there is evidence that in the summer of 2007, (i.e. after the proposal for insurance was accepted) the plaintiff agreed

that her name be put on the notepaper for the practice under the new name ‘Capel Law’. This notepaper was finalised in August

2007. The plaintiff’s evidence was that, as she believed partnership negotiations were nearly finalised, she agreed that her name

should be put on the notepaper as a partner.

36. The law of partnership distinguishes between true partners and apparent partners in the following sense. By true partners is

meant persons who are in fact and in law partners to each other in a partnership as defined by s. 1 of the Act of 1890. They have, as

between themselves, all the rights and liabilities of partners, and similarly in relation to third parties. By an apparent partner, is meant

a person who is not a true partner in the sense of being a partner in a partnership with others, but is held out, either by the true

partners of the partnership, or by himself, to be a partner in the partnership. By so holding himself out, or being held out, he may

become liable to third parties as a partner whilst not being a true partner, either by reason of s. 14(1) of the Act of 1890, or by

application of the doctrine of estoppel by representation. Twomey, Partnership Law, (2000) (Dublin, Butterworths) at para. 7.01,

explains:

“Like the expression ‘salaried partner’, the expression ‘partner by holding out’ is a contradiction in terms, since it is used to

describe someone who is not in fact a partner. Rather, this expression denotes a person who, because of his action or

inaction, is held to be liable to certain third parties as if he was a partner.”

37. I would respectfully agree with the above quotation insofar as it refers to a partner by holding out. The position in relation to the

term salaried partner is more complex, insofar as a person so described may, in fact, sometimes be a true partner and sometimes not

a true partner. The position in relation to salaried partners is, in my view, correctly set out in Lindley & Banks on Partnership, (17th

edition) (1995) (London, Sweet & Maxwell) at para. 5-65, by reference to what was stated by Megarry J. in Stekel v. Ellice [1973] 1

W.L.R. 191.

“Perhaps the most common case of a deliberate holding out which will be encountered today, particularly in the

professions, is that of the so called ‘salaried partner’. By this notoriously vague expression is usually meant a person who,

though in reality an employee of the firm remunerated by a fixed or variable salary, is nevertheless held out to clients and

the world as a partner. However, that is not to say that a salaried partner may not be a partner in the true sense, as was

made clear by Megarry J. in Stekel v. Ellice:

‘Certain aspects of a salaried partnership are not disputed. The term “salaried partner” is not a term of art, and to

some extent it may be said to be a contradiction in terms. However, it is a convenient expression which is widely

used to denote a person who is held out to the world as being a partner, with his name appearing as a partner on

the notepaper of the firm and so on. At the same time, he receives a salary as remuneration, rather than a share of

the profits, though he may, in addition to his salary, receive some bonus or other sum of money dependent upon

the profits. Quoad the outside world it often will matter little whether a man is a full partner or a salaried partner;

for a salaried partner is held out as being a partner, and the partners will be liable for his acts accordingly. But

within the partnership it may be important to know whether a salaried partner is truly to be classified as a mere

employee, or as a partner.

‘ . . . It seems to me impossible to say that as a matter of law a salaried partner is or is not necessarily a partner in

the true sense. He may or may not be a partner, depending on the facts. What must be done, I think, is to look at

the substance of the relationship between the parties; and there is ample authority for saying that the question

whether or not there is a partnership depends on what the true relationship is, and not on any mere label attached

to that relationship.’

Consistently with the views expressed in the above passage, few identifiable principles can be derived from the decided

cases . . .”.

38. Megarry J., in the above extract, is referring to the practice as developed prior to 1973. The use of the term “salaried partners”

has continued, and I would agree with the current author of the 17th edition of Lindley & Banks that it is a “notoriously vague

expression” and one which may include a person who is a true partner and also one who is not a true partner. In my view, the law of

partnership in this jurisdiction is as stated by Megarry J., “‘salaried partner’ is not a term of art”. A person so described may or may

not be a true partner, depending on the facts. As observed by Megarry J., “the question whether or not there is a partnership

depends on what the true relationship is and not on any mere label attached to that relationship”. This is particularly so where, as in

this instance, there is no pre-existing partnership between Mr. Lynn and a third party which the plaintiff might have been joining.

39. Applying the above principles to the facts in this case, I am satisfied on the evidence before me that the true relationship

between the plaintiff and Mr. Lynn in 2007 was not one of partnership. No partnership came into existence. A proposed or promised

partnership remained under negotiation. Mr. Lynn remained her employer as the person carrying on practice as a solicitor under the

style or title ‘Michael Lynn & Co.’ and subsequently ‘Capel Law’. She was an employee of Mr. Lynn. Nevertheless, she had, on

occasion, held herself out as a partner of the solicitor’s practice with the name ‘Michael Lynn & Co.’ and ‘Capel law’. There was, in

fact, no ‘firm’ comprised of Mr Lynn and the plaintiff as that term is defined in s. 4(1) of the Act of 1890, for the purposes of the Act.

This provides:

“4(1) Persons who have entered into partnership with one another are for the purposes of this Act called collectively a

firm, and the name under which their business is carried on is called the firm-name.”

At all times material to these proceedings, Michael Lynn & Co. was the practice or business name under which Michael Lynn carried on

practice as a solicitor. It appears commonplace to refer to such a practice as a ‘firm’ as well as a ‘practice’. Similar to ‘salaried

partner’, ‘firm’ is a vague term which is used to describe different types of business or professional entities including a limited company

and a professional practice carried on by a sole principal who may employ other qualified individuals. For example, the Solicitors Acts

1954 to 2002 (Professional Indemnity Insurance) Regulations 2007 (S.I. 617 of 2007) defines a ‘firm’ in the latter sense for the

purposes of those Regulations. For reasons set out below, I have concluded it was so used on the Proposal Form signed by the

plaintiff. A title such as ‘Michael Lynn & Co., solicitors’ may contribute to this confusion as it implies more than one person is involved

in the firm or practice, but is commonly used for solicitors’ practices with a sole principal. Nevertheless, in the absence of a

partnership (as I have found) there was no firm within the meaning of the Partnership Act 1890. The parties agreed that the first

issue which had to be determined by the Court was whether or not the plaintiff was a partner of Mr. Lynn, and I have concluded that

she was not a partner of Mr. Lynn at any material time.

Construction of Policy

40. The parties are in substantial agreement as to the principles according to which the Court must construe the Policy. They are the

principles summarised in the Supreme Court judgment (Geoghegan J., with whom Denham J. and Hardiman J. agreed) in Analog Devices

B.V. v. Zurich Insurance Company [2005] 1 I.R. 274. That decision concerned the construction of exclusion clauses in what were

described as “all risks” policies of insurance. At p. 280 Geoghegan J. summarised what he referred to as the “ordinary principles” by

reference to earlier decisions:

“11. In general, ‘all risks’ policies of insurance cover all perils unless they have been unambiguously and clearly excluded.

In Rohan Construction v. I.C.I. [1988] I.L.R.M. 373 at p. 377 Griffin J. in a judgment, with which Finlay C.J. and Hederman

J. concurred, said the following:-

‘It is well settled that in construing the terms of a policy the cardinal rule is that the intention of the parties must

prevail, but the intention is to be looked for on the face of the policy, including any documents incorporated

therewith, in the words in which the parties have themselves chosen to express their meaning. The court must not

speculate as to their intention, apart from their words, but may, if necessary, interpret the words by reference to

the surrounding circumstances. The whole of the policy must be looked at, and not merely a particular clause’.

12. As is pointed out in the written submissions of the plaintiffs, Griffin J. goes on to expand on the meaning of

‘surrounding circumstances’ and he refers with approval to a passage from the speech of Lord Wilberforce in Reardon

Smith Line Ltd. v. Hansen-Tangen [1976] 1 W.L.R. 989, at p. 996:-

‘When one speaks of the intention of the parties to the contract, one is speaking objectively - the parties cannot

themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken

as the intention which reasonable people would have had if placed in the situation of the parties. Similarly, when

one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons

would have had in mind in the situation of the parties. … What the court must do must be to place itself in thought

in the same factual matrix as that in which the parties were’.

13. In modern times, these principles have received further expansion from the House of Lords. Lord Hoffman in I.C.S. v.

West Bromwich B.S. [1998] 1 W.L.R. 896 considered that quite a radical change had come about, the result of which,

‘subject to one important exception’, was to assimilate the way in which such documents are interpreted by judges to the

common sense principles by which any serious utterance would be interpreted in ordinary life. He then set out the modern

principles at p. 912 as he saw them and which I would accept:-

‘(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person

having all the background knowledge which would reasonably have been available to the parties in the situation in

which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact’ but this phrase is, if

anything, an understated description of what the background may include. Subject to the requirement that it should

have been reasonably available to the parties and to the exception to be next mentioned, it includes absolutely

anything which would have affected the way in which the language of the document would have been understood

by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations

of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for

reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret

utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the

occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same

thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of

the document is what the parties using those words against the relevant background would reasonably have been

understood to mean. The background may not merely enable the reasonable man to choose between the possible

meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the

parties must for whatever reason, have used the wrong words or syntax; see Mannai Ltd. v. Eagle Star Ass. Co.

Ltd. [1997] A.C. 749.

(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition

that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the

other hand, if one would nevertheless conclude from the background that something must have gone wrong with

the language, the law does not require judges to attribute to the parties an intention which they plainly could not

have had. Lord Diplock made this point more vigorously when he said in Antaios Compania S.A. v. Salen A.B. [1985]

A.C. 191, 201:

“If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion

that flouts business commonsense, it must be made to yield to business commonsense.” ’”

41. The application of the above principles to the construction of an insurance policy in the context of determining, inter alia,

whether a policy is a composite or joint policy, was restated by the Court of Appeal in New Hampshire Insurance Company v. MGN

Ltd. [1997] L.R.L.R. 24. This decision is referred to in greater detail below. On the general principles of interpretation Staughton L.J.

delivering the judgment of the Court of Appeal stated at p. 52:-

“We would reiterate the four principles which it proposed relating to the material that is relevant to the interpretation of a

written contract:

(1) Nothing is relevant unless it was known to, or reasonably capable of being known to, both parties at the time when

the contract was made. In particular, an undisclosed intention held in pectore by one of the parties is not admissible for

the purpose of interpretation.

(2) The Court looks first at the written document alone, and determines what it means from the ordinary meaning of the

language used, unless some customary meaning is pleaded and proved.

(3) However, the Court may also have regard to the surrounding circumstances, now commonly referred to as the matrix,

the genesis or aim, the market in which the parties are operating. But this evidence must qualify under principles (1) if it

is to be admitted.

(4) Evidence of negotiations is not admissible. This is subject to some exceptions, such as a case of rectification, or if it

is said that agreement was reached in negotiations as to the meaning of a particular term, or that the contract was made

by a continuous process of agreeing some terms and then turning to consider others.

The boundary of what may be considered surrounding circumstances, within principle (3), is unfortunately not easy to

draw. All too often a great deal of evidence is produced under that head which is of little or no help to interpretation. The

present case is no exception in that respect.”

42. The second general principle relied upon by counsel for the plaintiff is the principle of contra proferentem. The application of that

principle in the context of exempting provisions in a contract of insurance was also considered by Geoghegan J. in Analog Devices B.V.

In doing so he cited at p. 282 a passage from the judgment of Keane J. (as he then was) in the High Court in Rohan Construction v.

I.C.I. [1986] I.L.R.M. 419, where he stated at pp. 423-424:

“It is clear that policies of insurance, such as those under consideration in the present case, are to be construed like

other written instruments. In the present case, the primary task of the court is to ascertain their meaning by adopting

the ordinary rules of construction. It is also clear that, if there is any ambiguity in the language used, it is to be

construed more strongly against the party who prepared it, i.e. in most cases against the insurer. It is also clear that the

words used must not be construed with extreme literalism, but with reasonable latitude, keeping always in view the

principal object of the contract of insurance.”

As appears, the principle only applies if there is ambiguity in the terms of the Policy.

43. It is not in dispute that the Policy is a professional indemnity insurance policy for members of the Law Society, and is intended to

provide for the practising solicitors in the firm of Michael Lynn & Co. the minimum level of cover required by a solicitor to obtain a

practising certificate. The Solicitors Acts and Regulations form part of the background or matrix of fact against which the Policy must

be construed. In summary, and insofar as relevant, they provide as follows. Section 26 of the Solicitors (Amendment) Act 1994

authorises the Law Society to make indemnity regulations which, inter alia, would require solicitors to maintain a policy of indemnity

insurance with insurers approved of by the Society. In exercise of that power, the Society made the Solicitors Acts 1954 -1994

(Professional Indemnity Insurance) Regulations 1995 (S.I. No 312 of 1995) (“the 1995 Regulations”). Those Regulations (with certain

amendments) remained in force until 1st November, 2007, when they were revoked and replaced by the Solicitors Acts 1954-2002

(Professional Indemnity Insurance Regulations 2007) (S.I. No. 617 of 2007). The 1995 Regulations were, therefore, the applicable

Regulations when cover was agreed and when the Policy was issued. Insofar as the Policy also covered the period from 1st November,

2007, to 31st December, 2007, when the 2007 Regulations were in force, no submission was made by either party in reliance upon

those Regulations. They could not have formed part of the background to the issue of the Policy.

44. The scheme of the 1995 Regulations is that a solicitor will not be issued with a practising certificate unless he provides to the Law

Society written confirmation from a qualified insurer, as defined, “of there being in force relating to him the minimum level of cover for

the duration of the practice year to which such practicing certificate so applied for relates”. Article 4 provides:

“4.(a) Subject to clause (b) of this regulation, a solicitor who applies to the Society for a practising certificate in respect

of a practice year commencing after the 31st day of December, 1996 shall not be issued with such practising certificate

unless the solicitor has furnished (or caused to be furnished) to the Society written confirmation from a qualified insurer of

there being in force relating to him the minimum level of cover for the duration of the practice year to which such

practising certificate so applied for relates.

(b) A solicitor, who is employed full-time within the State to provide legal services (other than conveyancing services

only) to and for his employer (provided such employer is not a solicitor), may apply to the Society to be issued with a

practising certificate without being required to comply with clause (a) of this regulation, where the solicitor in making

such application certifies in writing to the Society that, for the duration of the practice year to which such practising

certificate so applied for relates, the solicitor will not engage in the provision of legal services to and for any person or

persons other than his employer.”

As appears, the exemption in para. (b) only applies to employed solicitors where the employer is not a solicitor. Therefore, it has no

application to the facts in this case.

45. Article 5 defines a “qualified insurer” as one designated by the PII Committee of the Law Society who has entered into an

Assigned Risks Pool Participation Agreement in the form set out in the Schedule to the Regulations which must include agreement to

provide at least the minimum level of cover, pursuant to a contract of insurance, and include at least certain approved indemnity

terms set out in the Appendix to the 1995 Regulations. In 2007, Article 6 of the Regulations (as amended by S.I. 122 of 2005)

specified the minimum level of cover to be €2,500,000.

46. The “approved indemnity terms” to be included in the contracts of insurance as set out in the Appendix to the 1995 Regulations

include, inter alia, the following:

“(1) The definition of ‘insured’ shall include the solicitor concerned, and any partner, clerk or servant (or former or

deceased partner, clerk or servant) of the solicitor concerned, in respect of the solicitor’s practice as a solicitor.

(2) The definition of ‘civil liability’ shall mean any description of civil liability incurred by the insured arising from his

practice as a solicitor; provided however that a qualified insurer may (at its option) exclude all and any liability to

indemnify in any way the insured in respect of any one or more of the following …

(k) any dishonest, fraudulent, criminal or malicious act or omission by the insured, or any acts or omissions which

were done by the insured knowing them to be wrongful, or any of the foregoing in which the insured has acquiesced

after obtaining personal knowledge thereof . . .

(7) (a) The approved indemnity terms shall not be subject to repudiation or recision by the qualified insurer, or the level of

cover shall not be subject to reduction below the minimum level of cover, on the grounds of innocent misrepresentation or

innocent non-disclosure on the part of the insured, and the onus of providing [sic] that a misrepresentation or a non-

disclosure was not innocent shall be on the qualified insurer.

(b) Without prejudice to the generality of sub-clause (a) of this clause, it shall be open to a qualified insurer to provide

(as between the qualified insurer and the insured only)—

(i) for the objective determination of the prejudice (if any) and financial loss (if any) suffered by the qualified

insurer as a result of an innocent misrepresentation or innocent non-disclosure on the part of the insured; and

(ii) for the recoupment by the qualified insurer from the insured of the amount of any financial loss so objectively

determined, whether by way of direct payment to the qualified insurer or by way of upward adjustment of the

premium payable by the insured.”

47. Scheduled to the Appendix is the Draft Form of Agreement between the Law Society of Ireland and a qualified insurer. This

agreement contains a number of provisions, including, inter alia, the following:

“1. That the Qualified Insurer shall provide to solicitors acceptable to the Qualified Insurer at least the minimum level of

cover pursuant to a contract of insurance or pursuant to written terms of membership of a mutual fund, including at least

the approved indemnity terms, to enable the solicitors concerned to comply with Regulation 4 of the Indemnity

Regulations.

2. That the qualified Insurer shall when requested by the PII Committee to do so, furnish to the PII Committee and to the

Pool Manager, in respect of any practice year in which the Qualified Insurer is a qualified insurer, the name and address of

each [emphasis added] solicitor to whom the Qualified Insurer provides the minimum level of cover; provided that where

the minimum level of cover is provided to a practice comprising five or more solicitors (whether partners or employees)

there shall be sufficient compliance with this clause if the Qualified Insurer furnishes to the PII Committee and to the Pool

Manager written confirmation that each and every [emphasis added] solicitor who is or becomes a partner, or who is or

becomes an employee, of the practice during the practice year in question is covered by the minimum level of cover

provided to that practice.”

48. Whilst the agreement between the defendant and the Law Society was not put into evidence it was not in dispute that the

defendant was a qualified insurer for the purposes of the 1995 Regulations, and that the Policy was provided in accordance with the

terms of the Regulations for the purpose, inter alia, of the three solicitors in the practice of Michael Lynn & Co. having the mandatory

minimum professional indemnity insurance required to obtain their respective practicing certificates in accordance with the 1995

Regulations. A certificate was issued by Marsh, as brokers, in respect of the Policy, confirming cover in relation to three named

solicitors in accordance with the requirements of the Solicitors (Professional Indemnity) Regulations. It was sent by email to the

plaintiff on 12th April, 2007, for forwarding to the Law Society. The defendant correctly submits that the terms of the certificate

(which was issued by Marsh, as brokers after the contract of insurance came into being) should not be taken into account when

construing the Policy.

49. The above provisions of the Solicitors Regulations form part of the background against which the Policy must be construed.

50. As the parties are in dispute as to the facts stated in the Proposal Form in relation to the status of the plaintiff, I propose

ignoring her position in construing the Policy. Her status is not necessary to construe the policy for the following reason. It is not in

dispute that at the time of the proposal for insurance, and as expressly stated in the Proposal Form, there was one qualified solicitor

in the practice, in addition to the plaintiff and Mr. Lynn, a Mr. Peter McCarthy, who, indisputably was then an employee. Accordingly,

insofar as I am seeking to construe the Policy against the background of the Solicitors Regulations, I propose doing so in a context

where it is intended to provide cover, inter alia, for at least one employed solicitor.

51. A solicitor, employed by another solicitor, is required to take out a Practising Certificate by the Law Society and is considered to

be in practice as a solicitor, albeit as an employed solicitor. Such was the position of Mr. McCarthy. The 1995 Regulations, in

accordance with the provisions set out above, required there to be in force “relating to him” a Policy which provides to him the

minimum level of cover, i.e. €2,500,000, from a “qualified insurer”. Further, the qualified insurer must include in the Policy the

“approved indemnity terms”. The 1995 Regulations, and its appendices, make clear that the minimum level of cover must be provided

to “each” or “every” solicitor in a practice, whether a partner or employee, and that a qualified insurer must provide confirmation of

cover if required by the Society. The policy of the 1995 Regulations is obvious. The Law Society is seeking to provide, in the public

interest, that if a claim is made against a solicitor arising from his practice as a solicitor that, irrespective of his/her status in the

practice, the solicitor has in place insurance which will provide an indemnity up to the minimum level to meet the solicitor’s civil liability

to the third party.

Joint and composite policies

52. The general principles applicable for the determination of whether a policy is a joint or composite policy are not in dispute. There

is significant dispute about the application of those principles to the Policy. The concepts are succinctly explained in Colinvaux’s Law

of Insurance, (8th ed.) (2006) (London, Sweet & Maxwell) at par. 14-03

“Forms of co-insurance

Joint and composite policies. Where two or more persons are insured under a single policy, it is important to determine

whether the policy is joint or composite, in that the former is regarded as a single contract whereas the latter is a bundle

of contracts. The distinction is based on the nature of the interests of the assureds. If the assureds share a common

interest in the insured subject matter, e.g. where they are joint owners of property or partners, the policy is joint. By

contrast, if the parties have different interests, as in the case of a landlord and tenant or a mortgagor and mortgagee,

the policy is composite.”

It is commoncase that there are at least two persons insured under the Policy, namely, Overseas Legal and Tax Services Limited,

trading as Overseas Property Law, and either Michael Lynn, or Michael Lynn and the plaintiff, carrying on practice as Michael Lynn &

Co. The plaintiff contends that there are additional persons insured under the Policy in accordance with the definition of “Insured” in

Clause 3(a) of the Policy, and including, in particular, solicitors employed by Michael Lynn. The defendant, in its defence, pleaded that

if the plaintiff is an employee, that she is not a party to the contract of insurance and is not entitled to the benefit of same. The

defendant pursued a submission that the plaintiff, if an employee, was not a party to the contract of insurance and was not entitled

to enforce the Policy as against the defendant. It therefore appears necessary to consider, first, whether the employed solicitors in

Michael Lynn & Co. are an insured and a party to the contract of insurance.

53. What is meant by “the insured” in an insurance contract was considered by the Court of Appeal in England in New Hampshire

Insurance Company v. MGN Limited [1997] L.R.L.R. 24, in the context of considering whether certain fidelity insurance policies

relating to the Maxwell Group of companies were joint or composite policies. Staughton L.J., delivering the judgment of the Court,

stated at p. 56:

“At this point we feel that one should sit back and examine what we mean by ‘the insured’ in an insurance contract. The

expression in our view covers two aspects of the person described. First, he is the person with whom the insurer

contracts, the party who is bound as such. Secondly he is the person who is interested in the property or other event

covered by the insurance, and whose loss is to be made good if it occurs.”

Genesis of Policy

54. The genesis and nature of the Policy is unusual. It, and the Proposal Form, ultimately signed by the plaintiff, form part of the

matrix of fact, which must be taken into account in construing the Policy. Insofar as I propose taking into account the genesis, I do,

of course, propose excluding any negotiations between the parties in relation to the terms of the Policy. There do not, in fact, appear

to have been any such negotiations, save in relation to the cover to be afforded to Overseas Property Law. The only direct evidence

given by those involved in the request for cover and writing of the insurance were Mr. Simon Quinn, who was then the underwriter

with primary responsibility in the defendant, and Mr. Declan O’Rourke, his immediate superior. However, the parties had agreed that

documents discovered in the proceedings, including from Marsh, the brokers, who sought to place the Policy, would be admitted in

evidence without necessity of formal proof. No witness was called from Marsh. The primary person dealing with the placing of the

insurance in relation to Michael Lynn & Co. at the time appears to have been Ms. Catherine O’Sullivan who was not employed in the

solicitors practice but was a director of the limited company, Overseas Legal and Tax Services Limited. Ms. O’Sullivan did not give

evidence.

55. The evidence of Mr. Quinn is that the initial request came by email from Mr. Scott Diamond of Marsh on 22nd December, 2006. It

sought, as a matter of urgency, solicitors professional indemnity cover for Michael Lynn & Co. /Overseas Property Law, and separate

cover from Overseas Property Tax. Included amongst the documents sent was an unsigned and undated Miscellaneous Professional

Indemnity Insurance Proposal Form from Michael Lynn & Co., solicitors, and a covering letter which explained the relationship between

Overseas Property Law and Michael Lynn & Co.

56. It was explained that Overseas Property Law (“OPL”) was one of the trading names of a limited company, Overseas Legal and Tax

Services Limited. The other trading name of that company was Overseas Property Tax. It was further explained that OPL provided

marketing and administrative services to Michael Lynn & Co., solicitors, and, in association with Michael Lynn and Co., offered legal

services to Irish and UK purchasers of property abroad. The defendant was also informed that Michael Lynn & Co., solicitors, had

professional indemnity cover from the Solicitors Mutual Defence Fund.

57. The other unusual feature of the request to the defendant for cover was that it appears Mr. Quinn was informed that Michael

Lynn was a brother of a Ms. Breege Lynn, who was then the Finpro manager of Marsh Ireland and who was known to him. It appears

that the complicated element of the cover being sought related to OPL. Mr. Quinn was required to seek certain authorisation from a

superior in London, a Ms. Elizabeth Ilott, and by an email of 16th January, 2007, explained the position to her, as follows: “By way of

background, the Proposer, is the brother of the Finpro manager of Marsh Ireland and needed a favour . . .” The reference by Mr.

Quinn to the “the Proposer” is a clear reference to Mr. Lynn. There was a close working relationship between the defendant and

Marsh, with which it did significant work. I am satisfied that Mr. Quinn’s perception that he was being asked to do a favour for the

brother of the Finpro manager of Marsh may have affected, to some extent, the way in which this matter was dealt with, within the

defendant. Mr. Quinn made clear in evidence that if the risk was bad, regardless of who approached the defendant, it would not

provide cover. He indicated that the favour meant he prioritised this request for cover, put it at the top, and sought an underwriting

solution to bridge the gap, as the cover with the SMDF was going to expire. Nevertheless, it is part of the relevant background to the

issue of the Policy.

58. On 2nd January, 2007, Mr. Quinn provided a quote for Overseas Property Law/Michael Lynn & Co., and indicated that the Policy

wording would be “Irish solicitors policy”. The quote given was expressed to be subject to both signed and dated proposal forms. A

quote was also given, subject to the same condition, for Overseas Property Tax. Whilst the email sent by Mr. Quinn to Mr. Diamond

only makes the quote conditional upon signed and dated proposal forms, his evidence is that, having discussed the matter with Mr.

Declan O’Rourke, they agreed to provide quotation for the primary layer risk, subject both to a signed and dated proposal form and

the risk management questionnaire section of the solicitors proposal form being completed. It appears that the proposal form which

had been furnished was a miscellaneous professional indemnity form and not a solicitors one often used by the defendant. The

admitted discovery indicates that Mr. Diamond of Marsh furnished to Ms. Catherine O’Sullivan the risk management section of the

defendant’s solicitors professional indemnity insurance proposal form and that she returned it to him, completed, on 8th January,

2007.

59. The documents admitted do not evidence its onward transmission to the defendant. Neither Mr. Quinn nor Mr. O’Rourke recalls

receiving it. The formal quotation document of the defendant dated 29th December, 2006, addressed to Mr. Diamond of Marsh, in

relation to Overseas Property Law/Michael Lynn & Co., as Insured, identifies as subjectivities (prior to binding) both signed and dated

proposal form and risk management questionnaire/section of AIG solicitors proposal form. There is no record of the defendant formally

waiving this condition at any point in time. The importance of the issue as to whether I find, as a fact, that the defendant received

this form is that it identifies Mr. Lynn as being the principal of the firm, Michael Lynn & Co., and also refers to the firm as having “only

one Partner”(an indication of terminological confusion). The onus is on the plaintiff to establish the information communicated to the

defendant as part of the proposal seeking cover. Discovery has been made by the defendant of the relevant documentation. The risk

management questionnaire would be covered by the terms of the discovery and should have been listed if it existed amongst the

defendant’s papers. It has not been discovered. Further, there has been discovery from Marsh, by an affidavit from Mr. Kevin

Fingleton, and the discovered documentation does not include any document sending on to the defendant the completed risk

management form which Marsh appears to have received. On those facts, and in the absence of any evidence from Mr. Diamond of

Marsh, I cannot be satisfied, as a matter of probability that the completed risk management form was furnished to the defendant.

60. There were further discussions in relation, in particular, to Overseas Property Law prior to confirmation of cover. The defendant

was expressly informed by email from Mr. Diamond to Mr. Quinn on 5th February, 2007, prior to confirmation of cover, that “Michael

Lynn owns both Michael Lynn & Co. and Overseas Property Law (100% shareholder)”. Later in the day, on 5th February, 2007, Mr.

Quinn confirmed that the defendant would note cover from Michael Lynn & Co. as a solicitors practice, but could not yet agree cover

for OPL. On 8th February, 2007, the defendant, by email of Mr. Quinn, confirmed that they had noted, “Overseas Property Law as

part of the Insured’s title but only in relation to services provided to Michael Lynn & Co. arising from its as [sic] practice as solicitors”.

This cover was expressed to be subject to “satisfactory, clean proposal form, noting both entities in title of Insured”.

61. The next relevant event was the furnishing of the signed and dated Proposal Form on 12th April, 2007. Notwithstanding the

express stipulation that Overseas Property Law was to form part of the Proposal Form, it was not included. There is no evidence that

the defendant ever sought or obtained a proposal form from Overseas Legal and Tax Services Limited t/a Overseas Property Law for

the purposes of the Policy.

62. On 12th April, 2007, Marsh issued the confirmation of minimum level of cover required by the Law Society, citing as Insured

solicitors Michael Lynn, Fiona McAneelan (sic) and Peter McCarthy. The evidence is that the form of certificate is dictated by the Law

Society and, in practice, is issued by the brokers or by the Insurer. There was some delay in the payment of the premium, but this

was paid.

63. On 9th May, 2007, Mr. Diamond appears to have raised the exclusion at Clause 5(c) of the Policy. Whilst the Policy had not

issued, the evidence is that it was to be in the wording of the then standard policy of the defendant for solicitors with which,

presumably, Mr. Diamond was familiar. The wording had been indicated in the quote of 2nd January. The initial response was that such

exclusion was standard, but on the same day, Mr. Quinn, on behalf of the defendant, agreed to a dishonesty extension at a nil

additional premium. The relevant No Claims Declaration Form was not signed by the plaintiff until 14th May, 2007. As appears in the

Policy, the endorsement is, nevertheless, effective from 9th May, 2007.

64. The Policy was issued on 12th October, 2007 (“date and signature of Policy”). In the Schedule to the Policy, the names of the

Insured are stated to be “Overseas Property Law/Michael Lynn & Co. Solicitors”. However, Clause 3 of the Policy defines “Insured” as

follows:

“(a) The Insured shall mean:

(i) the Firm(s) named in the Schedule … and/or

(ii) any past, present, or future partner, solicitor, director, officer or employee of, or under a contract of service or

for services with, the above

(iii) the estates and/or legal representatives of any of the persons noted in section 3(a) (ii) above in the event of

their death, incapacity, insolvency or bankruptcy in practice as solicitors . . . . ”

A solicitor employed with Michael Lynn & Co., prima facie, comes within the definition of “the Insured” in Clause 3(a)(ii). The definition

in Clause 3(a)(ii), in accordance with its express terms, does not seek in any way to limit the application of the definition of “the

Insured”. The defendant has not submitted that the Policy should be construed as confining the definition in Clause 3(a)(ii) to certain

purposes under the Policy. There is no textual justification for such a construction. However, the defendant did submit, in its closing

submissions, that persons included in the definition of Insured in Clause 3(a)(ii) are not persons to whom an indemnity is given by the

Policy, but rather, it is their activities which are covered under the terms of the Policy. It does not appear to me that the Policy may

be so construed, having regard to its express terms.

65. The Policy commences with a recital:

“Whereas the Insured has made to Insurers a proposal which shall be the basis of this contract, that proposal is deemed

to be incorporated herein, and in consideration of the payment of the premium Insurers will pay on behalf of the Insured

subject to Policy terms and conditions for any claim first made against the Insured and reported to Insurers during the

Period of Insurance arising out of the Insured’s business activities, as shown in the Schedule”.

There is in fact no definition of “the Insured’s business activities” in the Schedule.

66. The indemnity provided by the defendant, pursuant to the Policy, is set out in Clause 1, which, prior to 9th May, 2007, provides:

“Insurers shall indemnify the Insured in respect of all sums which the Insured shall become legally liable to pay resulting

from any claim or claims first made against the Insured and reported to Insurers in accordance with the General Conditions

during the Period of Insurance and arising out of the following:-

(a) Any civil liability incurred by the Insured arising from its practice as solicitors (including claimants’ costs).

(b) Other costs and expenses incurred by the Insured in the defence and/or settlement of any claims and/or losses

under section 1.(a).

(c) Expenses incurred by the Insured in replacing or restoring documents or computer records either owned by, the

responsibility of, or in the custody of the Insured, which are damaged, destroyed, lost or mislaid and which after

diligent search cannot be found.”

67. There is an endorsement effective 9th May, 2007, to the Policy in relation to a dishonesty extension which provides:

“It is hereby noted and agreed that section 1(a) is amended as follows:

Claims (including claimant’s costs) made against the Insured arising out of civil liability and losses incurred by the

Insured due to dishonesty of persons specified in section 3(a)(ii).”

68. The recital is not unambiguous but appears to indicate that the defendant has treated the proposal received by it as being one

made on behalf of the persons defined as the Insured in Clause 3(a). Insofar as ambiguous it must be construed against the

defendant. The Policy does not expressly record who are the parties to the contract of insurance, but the recital is consistent with it

being a contract between the Insurers (the defendant) and the Insured, as defined in the Policy. Further, the indemnity in Clause 1 is

expressly given to the Insured. There is nothing to suggest that the indemnity is not intended to be given to all persons within the

definition of Insured in Clause 3(a). The Policy must, I consider, be construed as providing that, inter alia, the persons set out at

Clause 3(a)(ii) (including an employed solicitor) are each an insured in the sense described by the Court of Appeal in New Hampshire

Insurance Company Ltd. v. MGN Ltd., i.e. a person with whom the insurer contracts and a person who is interested in an event

covered by the insurance.

69. Accordingly, I am satisfied that a solicitor in the practice of Michael Lynn & Co. is a person insured under the terms of the Policy,

and in that sense, a party to the contract of insurance, notwithstanding that such person has not been identified by name. The

Proposal Form asked for the number of “qualified staff” and the answer given was one. In the context of the solicitor’s practice, that

must have been intended to refer to persons employed in the practice as a qualified solicitor. The Insurer was then on notice, or

ought to have been aware, that there were employed solicitors in the practice.

70. The above construction of the Policy is also consistent with the requirements of the 1995 Regulations. A contrary construction

might not be so consistent. Article 4 of the Regulations requires there to be an insurance in force “relating to [the solicitor]” when a

solicitor is applying for a practising certificate. Further, Clause 1 of the approved indemnity terms set out in the Appendix requires

that the definition of “insured” include the solicitor concerned.

71. I now return to consider whether the Policy, insofar as it includes as co-insured Michael Lynn, as principal or a partner of the

practice Michael Lynn & Co., and a solicitor employed by him, is a joint policy or composite policies. This turns, primarily, on the

nature of their respective interests and the risks insured against. In a liability insurance policy, such as the present professional

indemnity policy, prima facie partners will have a joint interest, in the sense that partners will have joint and several liability for either

direct claims made against one partner, or in respect of their vicarious liability for claims made against employees. This is the

approach adopted by the Courts in the cases to which I have been referred, including, in particular, General Accident Fire and Life

Assurance Corporation Limited v. Midland Bank Limited [1940] 2 K.B. 388, New Hampshire Insurance Company Ltd. v. MGN Limited

[1997] L.R.L.R. 24, and Arab Bank plc. v. Zurich Insurance Company [1999] 1 Lloyd’s Rep. 262. The classic approach is that set out

by Sir Wilfrid Greene M.R. at pp. 404 - 405, in General Accident Fire and Life Assurance Corporation v. Midland Bank Limited:

“ . . . That there can be a joint insurance by persons having a joint interest is, of course, manifest. If Aand B are joint

owners of property - and I use that phrase in the strict sense - an undertaking to indemnify them jointly is a true

contract of indemnity in respect of a joint loss which they have jointly suffered. Again, there can be no objection to

combining in one insurance a number of persons having different interests in the subject-matter of the insurance, but I

find myself unable to see how an insurance of that character can be called a joint insurance. In such a case the interest

of each of the insured is different. The amount of his loss, if the subject-matter of the insurance is destroyed or

damaged, depends on the nature of his interest, and the covenant of indemnity which the policy gives must, in such a

case, necessarily operate as a covenant to indemnify in respect of each individual different loss which the various persons

named may suffer. In such a case there is no joint element at all.

...

[Where] [t]here is no joint risk; there is no joint interest; the measure of loss suffered by those two parties will be

different, calling for a different measure of indemnity, and, accordingly, it seems to me that there is no joint element

about the thing at all.

Such a policy, in my judgment, may be more accurately described as a composite policy, because it comprises, for

reasons of obvious convenience, in one piece of paper the interests of a number of persons whose connection with the

subject-matter of the insurance makes it natural and reasonable that the whole matter should be dealt with in one

policy.”

72. It is common case that employees are not liable for the acts or omissions of their employer (whether one person if a principal or

several partners if a partnership) or any other fellow employees or of other servants or agents of the practice. Hence, it appears to

me that irrespective of whether the practice of Michael Lynn & Co., solicitors, was a partnership or was the name under which

Michael Lynn, as principal, carried on practice as a solicitor, the interest of an employed solicitor is a separate interest to the interest

of his employer i.e. the solicitor or solicitors who constitute the practice either individually, as principal, or as a partnership, and

employ him. The employed solicitor’s only liability is in respect of claims made against him arising out of his practice as solicitor. The

employed solicitor has no liability in respect of any claim made against the practice or any principal, partner or other employee, arising

out of a matter with which he was not dealing. There is not joint and several liability between him and his employer in respect of

claims which may fall to be indemnified, pursuant to the Policy. There is no joint risk or joint interest between an employed solicitor

and principal or partners who employ him.

73. The Policy by its terms does not expressly provide that it is a joint or composite policy. There are certain provisions which favour

each construction. It is, in its terms, ambiguous and, as such, to be construed against the defendant in accordance with the contra

proferentum principle set out above. There are two terms of the Policy which applied from the inception of cover until 9th May, 2007,

which strongly favour the construction of the Policy as a composite Policy.

74. First, until 9th May, 2007, included amongst the exclusions in the Policy at Clause 5(c) was:

“any claim arising out of any dishonest, fraudulent, criminal or malicious act or omission by the Insured, or any acts or

omissions which were done by the Insured knowing them to be wrongful, or any of the foregoing in which the Insured has

acquiesced after obtaining personal knowledge thereof.”

In accordance with the general principles relating to joint policies, if this is a joint policy, then Clause 5(c) would exclude any claim

arising out of any dishonest, fraudulent, criminal or malicious act or omission by any Insured, which includes, inter alia, any partner,

solicitor or employee. No claim could be made by any insured under the Policy in such circumstances. If, however, the Policy is a

composite policy, then such dishonest or fraudulent acts or omissions of one insured would not preclude recovery by an innocent co-

insured.

75. However, the Policy at Clause 4(e) contains the following provisions in relation to subrogation:

“In the event of any payment under this Policy Insurers shall be subrogated to all the Insured’s rights or recovery and the

Insured will execute and deliver all instruments and papers and do whatever else is necessary to secure such rights. Any

amount recovered in excess of the Insurers total payment shall be restored to the Insured less the cost to Insurers of

recovery.

Insurers agree not to exercise any such rights of recovery against any director, partner, solicitor or employee that falls

within the definition of Insured unless the claim is brought about or contributed to by the dishonest, fraudulent, criminal or

malicious act or omission of the director, partner, solicitor or employee.”

The limitation on recovery agreed by the defendant in the second paragraph of Clause 4(e) makes no sense unless it is envisaged

that payment will be made to an insured under the Policy in respect of claims brought about or contributed to by the dishonest,

fraudulent, criminal or malicious act or omission of a director, partner, solicitor or employee who is a co-insured. This could only occur

having regard to the exclusion in Clause 5(c) if the Policy is construed as a composite Policy. Unless there is a payment under the

Policy, no right of subrogation arises.

76. Exclusion 5(c) of the Policy was deleted by Endorsement 1, effective from 9th May, 2007, and as already noted, the indemnity at

Clause 1(a) was amended to include the claims made against the Insured arising out of both civil liability and losses incurred by an

Insured due to dishonesty of persons specified in Section 3(a)(ii). Those persons expressly include, inter alia, any partner, solicitor or

employee. That amendment does not alter the nature of the Policy. It is consistent with a composite policy. It is not necessary to

consider what was intended by the dishonesty extension and, in particular, whether it was intended to provide an indemnity to a

person in respect of claims made in respect of his own dishonest acts or omissions.

77. The defendant submitted that a number of provisions favour construction as a joint policy. First, it relies on the fact that the

Policy does not stipulate that the indemnity given is for the “respective interests” of the insured, and there is no severability clause.

If such were included, then there would be no issue on the construction of the Policy, as it would be expressed to be a composite

policy. It is not so expressed to be. Nevertheless, it is neither expressed to be a joint policy. As the plaintiff points out, the case of

New Hampshire Insurance Company Ltd. v. MGN Ltd. [1997] L.R.L.R. 24, is authority for the proposition that words such as “for their

respective rights and interests” (which was so important in General Accident Fire and Life Assurance Corporation v. Midland Bank

Limited [1940] 2 K.B. 388) are not indispensable.

78. Secondly, the defendant sought to rely upon the single proposal form and the single premium paid. These do not appear to me to

be determinative of any issue. Rather, I respectfully agree with the approach of the British Columbia Court of Appeal in Fisher v.

Guardian Insurance Company of Canada (1995) 123 D.L.R. (4th) 336 that such is in accord with the realities of modern law practice,

both for law firms with multiple lawyers and insurers (at p. 350). The only practical means of taking out a professional indemnity

insurance is for a single proposal form to be completed by a responsible member of the firm and a single premium to be paid.

79. Similarly, insofar as the defendant seeks to rely upon the fact that Clause 4(j)(a) of the Policy does not expressly preclude

avoidance of the Policy against innocent partners or insured, again, if it did so, it would be a clear indication that the Policy was a

composite policy. The absence of wording to indicate whether or not it is intended to prevent avoidance of the Policy against an

innocent insured is dependant upon its construction in the context of the entire Policy and in a context of the background of the

1995 Regulations, and the requirement, in Clause 7(a) of the Appendix to the 1995 Regulations, of the inclusion of such a clause.

80. The defendant also relied upon the cancellation clause at Clause 4(g) of the Policy as being inconsistent with a construction that

it is a composite policy, and as such, a bundle of separate contracts between the defendant and the insured. I recognise that there

are difficulties with the application of this clause to the Policy when construed as a composite policy. However, those difficulties do

not appear to me to outweigh the matters already referred to in favour of a construction as a composite policy. Further, the

enforceability of this clause appears doubtful in a policy issued, expressly, as professional indemnity insurance for members of the Law

Society by a qualified insurer. The clause, in its terms, appears to permit of cancellation both by the Insured and by the Insurer on

thirty days notice. As already pointed out, the 1995 Regulations require a solicitor seeking a Practicing Certificate to provide written

confirmation from the qualified insurer “of there being in force relating to him the minimum level of cover for the duration of the

practice year after which such practicing certificate so applied for relates”. The 1995 Regulations also contain the restriction on

repudiation or recission set out at clause 7(a) of the approved indemnity terms in the appendix thereto. A simple cancellation clause

on thirty days notice appears inconsistent with both of those provisions.

81. Hence, the Policy in its terms is at best, from the defendant’s perspective, ambiguous as to whether it is a joint or composite

policy. Applying the contra proferentam principles and having regard to the separate interests insured I have concluded that the

Policy, when construed in the context of the background of the 1995 Regulations, should be construed as, first, including an employed

solicitor in the practice as being an insured, both in the sense of one of the persons with whom the insurer contracts, and as a

person who will be indemnified in accordance with the terms of the Policy, and, secondly, as being a composite policy, rather than a

joint policy. As already stated, the fundamental requirement of the 1995 Regulations is that there be in force in relation to each

solicitor the minimum level of cover for the duration of the practice year. The clear purpose of that requirement is to ensure that each

and every solicitor to whom the Law Society grants a Practicing Certificate has in place insurance cover for the practice year to the

minimum specified in respect of any claim made against that solicitor arising out of his practice as a solicitor, subject to the permitted

exceptions. The requirement is personal to each solicitor. Each solicitor, in the event that a claim is made against him arising out of

his practice as a solicitor, which is not the subject of a permitted exception, must be able to turn to his insurance policy to meet the

claim. The Policy was intended to provide cover in accordance with the 1995 Regulations.

82. For all of the above reasons, I have concluded that the Policy issued by the defendant is a composite policy. It follows from that

conclusion, in accordance with the agreed principles in relation to such policies, that the Policy is considered to be a bundle of

separate contracts between the defendant and each of the Insureds. Accordingly, there exist separate policies of insurance between

the defendant and Mr. Lynn and between the defendant and the plaintiff.

Repudiation against plaintiff

83. The findings already made in this judgment that the plaintiff was not a partner of Mr. Lynn; that she is an Insured, including in the

sense of being a party to the contract of insurance; and that the Policy is a composite policy, i.e. a bundle of separate policies,

including one between the plaintiff and the defendant, leads to the question as to whether or not the defendant is entitled to

repudiate the Policy against the plaintiff. This question, of itself, gives rise to further complex issues, having regard to the somewhat

artificial concept of composite policies, particularly in circumstances such as the present, where there have been only one proposal

form and a single payment of premium. The next issues may, I think, be grouped as follows:

(i) Whether the defendant is entitled to repudiate against the plaintiff because of its admitted entitlement to repudiate

against Mr. Lynn, by reason of alleged fraudulent material non-disclosure by him of circumstances which may give rise to

a claim in relation to the provision of multiple undertakings to financial institutions, as set out in the letter of 20th

December, 2007, from the defendant.

(ii) Whether the statements in the Proposal Form constitute a warranty of the facts stated therein, such that the untrue

statement permits the defendant to repudiate the Policy, irrespective of whether or not the untrue statement was made

innocently and free of any fraudulent intent.

(iii) Whether the Proposal Form signed by the plaintiff contains a material misrepresentation of fact or untrue statement

that she was a partner of Michael Lynn, and if so has the defendant discharged the onus of establishing that it is not

innocent and not free of any fraudulent intent.

Non-disclosure by Mr. Lynn

84. The issue as to whether an insurer is entitled to repudiate as against all insureds in a composite policy where there has been

dishonest material non-disclosure by one of the insured in the proposal form was considered in great detail by Rix J. in Arab Bank plc.

v. Zurich Insurance Co. [1999] 1 Lloyd’s Rep. 262. The plaintiff relied upon that judgment and the analysis contained therein. There

are significant similarities and also distinctions between the policy and facts in those proceedings and those in the present. However,

the judgment is of considerable assistance and appears to me persuasive of the conclusion reached on the issue with which I am

concerned.

85. The facts in Arab Bank plc. concerned a managing director, Mr. Browne, of a company whose business was valuing and surveying.

Mr. Browne had completed a proposal form insuring the company and the directors against professional liability risks. The policy

removed the right of the insurers to avoid liability for misrepresentation or non-disclosure, which was innocent and free of any

attempt to deceive. Mr. Browne, as managing director, had been guilty of frauds which were not disclosed to the insurers and which

gave rise to claims against the company during the currency of the policy. Rix J. held that the policy was composite and insured

separately the interests of the company and of each director. Rix J. also concluded that the insurer was not entitled to repudiate

against the company and the innocent directors by reason of the fraudulent non-disclosure of the managing director.

86. Rix J. at p. 272, summarised the general principles in relation to dishonesty:

“Normally, a policy does not deal specifically with the dishonesty of an assured, save possibly to include an express term,

which would otherwise be implied, to say that fraud in the making of a claim would render the policy forfeit: Orakpo v.

Barclays Bank Insurance Services Co. Ltd., [1995] L.R.L.R. 443, Royal Boskalis Westminister N.V. v. Mountain, [1997]

L.R.L.R. 523 at p. 593. It is likewise implicit in the nature of insurance that a loss caused by the deliberate dishonesty of

an assured is not covered: this is reflected in s. 55(2)(a) of the Marine Insurance Act, 1906 which provides that the

insurer is not liable for any loss attributable to the wilful misconduct of the assured. Even so, it is implicit in the nature of

a composite policy that one assured is not prejudiced by the dishonesty of another, provided that the other is not a joint

assured: Samuel & Co. Ltd. v. Dumas, (1924) 18 Ll.L. Rep. 211; [1924] A.C. 431, General Accident Fire and Life

Assurance Corporation Ltd. v. Midland Bank Ltd., (1940) 67 Ll.L. Rep. 218; [1940] 2 K.B. 388, State of the Netherlands v.

Youell, [1997] 2 Lloyd’s Rep. 440.”

He then continued to deal with the specific terms of the policy at issue before him.

87. The policy at issue in Arab Bank plc. included at General Condition 2:

“The Company will not exercise its right to avoid the Certificate of Insurance where it is alleged that there has been non-

disclosure or misrepresentation of facts or untrue statements in the proposal and in conjunction with any subsequent

proposal form(s) provided always that the insured shall establish to the Company’s satisfaction that such alleged non-

disclosure, misrepresentation or untrue statement, was innocent and free of any fraudulent conduct or intent to deceive.”

This clause is similar to Clause 4(j)(a) of the Policy in these proceedings, save that the onus of establishing that the non-disclosure

was innocent and free of any fraudulent intent is reversed. In Arab Bank plc., notwithstanding the above clause, an express

submission was made, in reliance upon a passage from MacGillivray on Insurance Law (9th ed.), para. 17.28, that, “it is only where a

composite policy is in truth a bundle of entirely separate contracts that the right to avoid for one assured’s non-disclosure or

misrepresentation in the formation of the contract does not automatically bring the whole policy down with it” (at p. 276 of the

report). Counsel for the insurer submitted that the policy in that case, with its single premium for each section, was not such a

bundle of contracts. The submission, in substance, sought to distinguish between different types of composite policies. The

submission was rejected by Rix J., in part in reliance upon the decision of the Court of Appeal in New Hampshire Insurance Company

v. MGM Limited [1997] L.R.L.R. 24 in which it had been held that an innocent insured was entitled to recover, notwithstanding

fraudulent non-disclosure by a co-insured. In New Hampshire Staughton L.J. relied upon the decision of the House of Lords in P.

Samuel & Co. Limited v. Dumas [1924] A.C. 431, and stated at p. 58 that that case:

“was not a case of non-disclosure but of wilful misconduct by one of the two persons insured. But in our opinion the

principle that the innocent party can still recover if it is a separate insurance must equally apply.”

88. Whilst Rix J. may have considered himself bound by the judgment of the Court of Appeal in New Hampshire Insurance Company

Ltd. v. MGN Ltd., I am obviously not so bound. Nevertheless, it appears to me that it must follow from the slightly artificial concept of

a composite policy for several co-insureds that it is to be considered as a bundle of separate contracts between the insurer and each

insured that, subject to two caveats, the dishonest misrepresentation by a co-insured will not entitle an insurer to avoid against an

innocent co-insured. The first caveat is if the policy of insurance in its express terms provides that the policy is a composite policy

and that the insurer is entitled to repudiate against all co-insureds upon dishonest misrepresentation in the proposal by any one co-

insured. The Policy herein cannot, in my view, be so construed. The second caveat is one adverted to in the English High Court by

Potter J. in New Hampshire Insurance Company v. MGN Limited. It is that the relationship between the insured guilty of the dishonest

non-disclosure and the innocent co-insured is such that the knowledge of the former is attributed to the latter for the purposes of

the proposal form. That issue was expressly addressed by Rix J. in Arab Bank plc. and he found at p. 283 that the knowledge of the

managing director was not to be attributed either to the company or the innocent directors. On the facts found herein, Mr. Lynn was

the employer of the plaintiff and it does not appear to me that there are either any facts or principles which permit attribution of his

knowledge of the true state of affairs to her, as an employee.

89. Accordingly, I have concluded on the facts found herein that the admitted entitlement of the defendant to repudiate against Mr.

Lynn for dishonest material non-disclosure does not permit the defendant to also repudiate the Policy against the plaintiff.

Warranty - Basis of Contract

90. The defendant submits in reliance, principally, on the recital to the Policy, that the statements in the Proposal Form are the basis

of the contract and that the inaccuracy of any statement in the Proposal Form entitles the defendant to repudiate the Policy,

irrespective of whether or not it was innocently made. The principles upon which it relies to so contend are those stated by Gibbs C.J.

in a decision of the High Court of Australia in Yorkville Nominees Pty Ltd. v. Lissenden (1985-1986) 160 C.L.R. 475, at pp. 480-481:

“It was open to the parties to the contracts of insurance to contract upon the footing that the statements in the

proposal were the basis of the contract, and if they did so, and the statements were inaccurate, the insurers were

entitled to repudiate liability, whether or not the statements were material (although they were in fact conceded to be

material in the present case). The recital in the policy (as well as in the declaration) that the particulars and statements

in the proposal are the basis of the contract and ‘are considered to be incorporated therein’, unless cut down by some

other provision in the policy, amounted to a warranty (in the sense in which that expression is used in insurance law) and

made the contract conditional upon the accuracy of the statements in the proposal.”

91. The recital in the Policy at issue herein has already been set out in full and recites that the Insured had made a proposal “which

shall be the basis of this contract, that proposal is deemed to be incorporated herein . . .”

92. The fact that the statements in the Proposal Form is the basis of the Policy is repeated in Clause 4(j)(a) of the Policy:

“(j) Innocent Non-Disclosure and Breach of Condition Clause

(a) The statements in the proposal form(s) are the basis of this Policy. Insurers will not exercise their right to avoid

this Policy, or to modify it in any way whatsoever, where it is alleged that there has been non-disclosure or

misrepresentation of facts or untrue statements in the proposal form(s), if such alleged non-disclosure,

misrepresentation or untrue statement was innocent and free of any fraudulent intent. The onus of proving

otherwise shall be upon the Insurers.”

93. In my view, Clause 4(j)(a) of the Policy must be construed as an express agreement by the defendant to limit its contractual right

(which it might otherwise have) to avoid the Policy where there is an untrue statement in the Proposal Form,“. . if such alleged . .

.untrue statement was innocent and free of any fraudulent intent.” It does not appear to me that there is any other way in which

this clause can be construed. This restriction on avoidance is one of the approved terms expressly required to be included by the

1995 Regulations.

94. Accordingly, I have concluded that even if the statements in the Proposal Form are the basis of the contract the defendant is

only entitled to repudiate the Policy against the plaintiff by reason of any non-disclosure, misrepresentation of facts or untrue

statements in the Proposal Form, if it discharges the onus set out in Clause 4(j)(a) which is considered below. It is therefore

unnecessary for me to consider whether or not, on the facts herein, the statements in the Proposal Form are the basis of the

contract and, accordingly, warranties.

Avoidance of Policy against plaintiff

95. On 22nd September, 2009, by letter from its solicitors, the defendant provided additional justification for avoiding the Policy as

against the plaintiff. Those grounds included, in the penultimate paragraph:

“… material misrepresentation on the part of Ms. McAleenan in describing herself as a partner in completing the proposal

form and dealing with AIG in relation to the taking out of a contract of insurance.”

96. The first question is whether the defendant is now entitled to rely on this justification. It has been pleaded in the proceedings,

albeit in an amended defence. The justification was added after the commencement of the proceedings. The defendant relies upon

the decision of the Supreme Court in Superwood Holdings plc v. Sun Alliance & London Insurance plc [1995] 3 I.R. 303, where there

were two separate additions of justification for avoidance, and the Supreme Court dealt with the appeal in relation to a ground of

fraud raised in the two additional letters. It is conceded that no objection was taken before the Supreme Court to the fact that the

grounds were not specified in the original letter of avoidance.

97. As a matter of principle, it appears to me that the defendant is now entitled to rely upon the additional justification for avoidance

of the Policy. There is no limitation period, as such for avoidance. Equitable principles of delay and acquisition of rights by third parties

might come into play in determining whether an insurer should be entitled to avoid in reliance on a justification provided long after an

initial purported avoidance. The plaintiff has not relied on any such matter to prevent the defendant from now relying upon the

additional justification nor has she alleged any inability at this stage to deal with the matters raised by the justification. The plaintiff

has been aware since the letter of 20th December, 2007, that the defendant was avoiding the Policy, inter alia, against her.

98. The plaintiff signed the Proposal Form on behalf of Michael Lynn & Co., solicitors, on 12th April, 2007. The issues to be resolved

are:

(i) Did the plaintiff represent in the Proposal Form that she was a partner in the firm or practice of Michael Lynn & Co.;

and if so

(ii) was this a material misrepresentation; and if so

(iii) has the defendant discharged the onus of establishing that this misrepresentation is not innocent and free of any

fraudulent intent.

99. Any consideration of the disclosures made by the plaintiff in the Proposal Form must be in the context of the general obligation of

disclosure of a person seeking insurance. The defendant relies upon the following statement in MacGillivray on Insurance Law (11th

ed.) (2008) (London, Sweet & Maxwell) at p. 438, para. 17-008:

“Subject to certain qualifications considered below, the assured must disclose to the insurer all facts material to an

insurer’s appraisal of the risk which are known or deemed to be known by the assured but neither known nor deemed to

be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so

long as he can show that the non-disclosure induced the making of the contract on the relevant terms.”

100. The Supreme Court in Aro Road and Land Vehicles Limited v. Insurance Corporation of Ireland Limited [1986] I.R. 403 considered

the obligation to disclose and materiality. McCarthy J., at p. 412, stated:

“the insured is bound to disclose every matter which might reasonably be thought to be material to the risk against which

he is seeking indemnity; that test of reasonableness is an objective one not to be determined by the opinion of

underwriter, broker or insurance agent, but by, and only by, the tribunal determining the issue.”

101. In the same decision, the Supreme Court followed the earlier test for materiality laid down by Kenny J. in Chariot Inns Limited v.

Assicurazioni Generali S.p.a. [1981] I.R. 199 where, at p. 226, he stated:

“What is to be regarded as material to the risk against which the insurance is sought? It is not what the person seeking

insurance regards as material, nor is it what the insurance company regards as material. It is a matter or circumstance

which would reasonably influence the judgment of a prudent insurer in deciding whether he would take the risk, and, if so,

in determining the premium which he would demand. The standard by which materiality is to be determined is objective

and not subjective. In the last resort the matter has to be determined by the court: the parties to the litigation may call

experts in insurance matters as witnesses to give evidence of what they would have regarded as material, but the

question of materiality is not to be determined by such witnesses.”

102. In Aro Road and Land Vehicles Limited, Henchy J. set out the general principle as it applies where a person is required to fill out

a proposal form, at pp. 408-409, in the following terms:

“Generally speaking, contracts of insurance are contracts uberrimae fidei, which means that utmost good faith must be

shown by the person seeking the insurance. Not alone must that person answer to the best of his knowledge any

question put to him in a proposal form, but, even when there is no proposal form, he is bound to divulge all matters within

his knowledge which a reasonable and prudent insurer would consider material in deciding whether to underwrite the risk

or to underwrite it on special terms.”

103. The Proposal Form required to be completed on behalf of Michael Lynn & Co., solicitors, whilst not the defendant’s own solicitor’s

indemnity proposal form, was a form which it accepted for the purpose of determining whether it would write the insurance and also

for the purpose of determining the premium to be paid. Counsel for the plaintiff correctly submits that the terms used on the form lack

clarity. First, it is not clear what was intended by the word ‘Firm’. At the outset, the form states, “This proposal form must be

completed in ink by a partner, principal or director of the Firm”. Thus, ‘Firm’ appears to refer to an entity or entities, which could have

a partner, a principal or a director. Such entities would normally include a company (director), a partnership (partner), and a practice

under a business name such as ‘Michael Lynn & Co., solicitors’ with a sole principal. This latter inclusion is further confirmed by the

section of the Form dealing with sole practitioners, where it refers to arrangements made for “the running of the Firm in the event of

sickness or holidays”. However the use of ‘principals’ in the plural in questions 2 and 3 further confuses what is intended. Objectively,

it appears to me reasonable that a person might have understood the questions insofar as they related to the “Firm” to have related

to the practice of Michael Lynn & Co.Solicitors whatever its legal form. I propose considering the answers given to the questions on

the Form in that context.

104. The first question sought the “Name of individual or Firm and date established (including subsidiary firms requiring cover)”. The

answer given was “Michael Lynn & Co., solicitors, Est. 1998”. This question insofar as it related to a firm only sought the firm-name

and not the identity of the legal or natural persons who comprised the firm and with whom it was proposed to enter into a contract of

insurance. A ‘Firm’ is not normally and, even in the extended meaning used, not necessarily of itself either a natural or legal person.

105. There are three questions, the answers to which collectively form the representation of the plaintiff’s status in the ‘Firm’ Michael

Lynn & Co., solicitors, in addition to the signature clause. These are questions 2 a), 3 a) and b) and their answers:“2. a) Please

provide the following details for all partners, principals and directors:

Names Qualifications Date Years as If less than 5 years

Qualified Partner/principal/director experience in this

of the firm occupation give

details of previous

occupation

Michael Lynn Solicitor 1990 8 Solicitor with own

legal practice for:

Partner

8 years

Fiona Solicitor 1987 2

McAneelan

[sic]

3 Please state the total number of:

a) Partners/principals/directors

b) Qualified staff

1”

106. Counsel for the plaintiff submitted that the information given in response to the questions on the Poposal Form must also be

considered in the light of the actual knowledge of the defendant, through Mr. Simon Quinn, that Michael Lynn was the 100% owner of

both Michael Lynn and Co. and Overseas Property Law, as given in the email of 5th February, 2007. The defendant does not dispute

this knowledge, but submits that it is possible to have a partnership where one of the partners is the owner of 100% of the equity in

the partnership. This is theoretically correct, but I think it is fair to say that it would be unusual.

107. Ms. McAleenan also signed the Proposal Form under a description “Signature of partner/principal/director”, which Form contained

a representation that she was one of two partners/principals/directors of Michael Lynn & Co., solicitors. The Court must consider

objectively the information provided on the Form. The defendant submits that in the context of a solicitors practice, the

representations must objectively be construed as a representation that she was a partner in the practice of Michael Lynn & Co.,

solicitors. It submits that as there was no company involved it cannot be regarded as a representation that she was a director.

Further than a principal only applies to an individual owner of a practice which she was not.

108. The Court must also construe objectively the representations made in the context of the general duty of disclosure and

obligation of utmost good faith. As stated by Henchy J. in Aro Road and Land Vehicles Ltd, “. . . [a] person must answer to the best

of his knowledge any question put to him in a proposal form”. Despite the lack of clarity and inconsistencies on the Proposal Form, I

have concluded that answers given can only be construed objectively as including a representation that the plaintiff had the status

of partner or was a ‘true partner’ in the sense I have explained earlier in this judgment in the practice known as Michael Lynn & Co.,

solicitors. Any other construction of the completed Proposal Form would be inconsistent with the express representation that she was

a ‘partner/principal/director’ of a solicitor’s practice; the answers given to questions 3 a) that there were two

partners/principals/directors, naming her as one of these in 2 a); and stating in 2 b) that there was only one ‘qualified staff’ (which it

is admitted was not her). Objectively, neither the term ‘principal’ or ‘director’ could apply to her in relation to the solicitor’s practice.

However, that representation must be considered alongside the representation that Mr. Lynn was the owner of the practice for eight

years. I have further concluded that, objectively construing all the relevant answers given on the Proposal Form, that they must be

considered as a representation that Michael Lynn and the plaintiff were partners in the practice, but that the plaintiff had no equity

or ownership entitlement to the practice.

109. Nevertheless, as already found in this judgment, there was no partnership in existence and the plaintiff was not a partner of Mr.

Lynn in the practice known as Michael Lynn & Co. She was an employee of Mr Lynn who was the sole principal of the practice. The

completed Proposal Form, therefore, must be objectively construed as containing a misstatement as to the status of the plaintiff in

the practice.

110. Was this a material misstatement? In accordance with the principles set out above, a material fact is a matter or circumstance

which would reasonably influence the judgment of a prudent insurer in deciding whether he would take the risk, and, if so, in

determining the premium which he would demand. In accordance with the decisions cited, whilst the parties may adduce evidence on

the issue (which the defendant did from persons with underwriting experience), it is ultimately a matter for the Court. The Court must

have regard to the evidence before it in determining the matter. I have concluded that in relation to professional indemnity insurance

the question as to whether a solicitor’s practice for which insurance is sought is one owned by a sole principal or is a firm (in the

sense used in the Act of 1890) i.e. a partnership with at least two partners is material. I accept the submission that, objectively,

additional supervision, controls or checks may be expected in the running of a practice where there are at least two partners, as

compared to a practice with a sole principal who employs qualified solicitors, and that the existence or not of such additional

supervision, controls or checks must be considered relevant to the risk of claims against the practice. Hence, that this must be

objectively considered as a “matter or circumstance which would reasonably influence the judgment of a prudent insurer in deciding

whether he would take the risk, and, if so, in determining the premium which he would demand”. Further, the anticipated supervision,

controls or checks must be considered to derive from the presence of two persons with the status of partners, irrespective of their

relevant equity ownership. If there are two partners they may both be expected to participate in the management and accounts of

the firm. Hence, I have concluded that the misstatement of the plaintiff’s status in the Proposal Form was material.

111. Clause 4(j)(a) of the Policy only permits the defendant to avoid the Policy against the plaintiff if the material misrepresentation

was not innocent and not free of fraudulent intent. Whilst drafted in the negative, the defendant submits that this requires it to

establish that the plaintiff in the Proposal Form made a fraudulent misrepresentation in the sense used in an action for deceit. That

construction of the contractual requirement was not disputed on behalf of the plaintiff and appears correct.

112. The meaning of fraud in an action for deceit is well settled and derives from the decision of the House of Lords in Derry v. Peek

(1889) 14 App. Cas. 337, and in particular, the proposition stated by Lord Herschell in his speech at p. 374:

“First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice.

Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief

in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as

distinct cases, I think the third is but an instance of the second, for one who makes a statement under such

circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent,

there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who

knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the

person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the

statement was made.”

113. MacGillivray on Insurance Law (11th ed.) (2008) (London, Sweet & Maxwell) at p. 405, para. 16-001, summaries the position in

an insurance context and states:

“In order to constitute an actionable fraudulent misrepresentation the statement of which complaint is made must be:-

(1) false,

(2) made dishonestly, and

(3) acted upon by the recipient in the sense that it induced him to make the proposed contract.

…. Requirement (2) is the hallmark of fraudulent misrepresentation. It means that the false statement is made without an

honest belief on the part of its maker that it is true but with the intention nonetheless that the recipient shall act on it.

Either the maker knows that what he says is false or he makes the statement recklessly without caring whether it be true

or false.” (Citing Derry v. Peek (1889) 14 App. Cas. 337 and Akerhielm v. De Mare [1959] AC 789, 805-806).

114. In this judgment, I have already found that the statement that the plaintiff was a partner/principal/director of the practice,

Michael Lynn & Co., solicitors, was untrue. On the facts, I also find that the Proposal Form including that statement was acted upon

by the defendant. At all material times, it indicated that the insurance cover being granted was conditional upon the furnishing of a

signed and dated Proposal Form. The plaintiff’s evidence is that on 11th April, 2007, she contacted Mr. Diamond of Marsh and asked

him for a letter confirming that Mr. Peter McCarthy was covered by the professional indemnity policy as the Law Society needed

confirmation of the cover. The documents discovered by Marsh indicate that Marsh sent over to the plaintiff the Proposal Form which

had already been completed for signature and return to them. This was done on the next day, 12th April, 2007. Marsh then issued the

confirmation of cover of the three solicitors, Michael Lynn, the plaintiff and Mr. McCarthy, already referred to.

115. On the facts, cover had been confirmed by the defendant on the basis of the unsigned Proposal Form in February 2007. It is not

in dispute as a matter of fact that at all times the defendant required the Proposal Form to be dated and signed in substantially the

same form as the unsigned version previously given them. I find that the Policy would not have issued without this being done. In

making this finding I have taken into account the fact that the defendant had stated that cover of OPL was subject to a clean

proposal form “noting both entities in title of Insured” and this was not provided and yet the Policy issued with OPL named as Insured

in the Schedule. Whilst the fact that both entities were not included in the names on the Proposal Form as stipulated may have been

missed by the defendant, it appears to me improbable that the absence of any proposal form would have been missed. The evidence

is that when the plaintiff sought confirmation of cover in relation to Mr McCarthy, Marsh sought the signed Proposal Form prior to

giving confirmation. A signed proposal form is such a basic requirement to the issue of a policy of insurance that I have concluded

that, notwithstanding some of the unusual facts relating to the placing of this insurance, as a matter of probability, it would have

been insisted on prior to issue of the Policy and hence was relied upon.

116. The plaintiff was cross-examined in great detail as to the circumstances under which she came to sign and date the already

completed Proposal Form containing the statements as to her status in the answers to questions 2 a) and 3. Whilst certain of the

evidence is surprising from a solicitor, having observed the plaintiff, I accept her evidence. She states that the Form was presented

to her by Ms. Liz Doyle and it had already been completed. When asked, in particular, about the answers given to question 2 a), she

stated:

“I didn’t complete the form. I signed the form, yes. When it was presented to me for signature I looked at the form and I

saw that everything had been completed, but in my experience in other firms this type of form is often completed by the

office manager in a firm. I didn’t expect to have to go through the form and check every detail.”

When the plaintiff was asked whether she read the Form before she signed it, she stated:

“I went through the form to see that everything was completed. I glanced through it and I noted the section in relation

to making the query from other fee earners as to whether or not they knew of any existing or potential claims, and I

looked back over it and I was also asked to make an amendment in relation to the date of expiry of cover.”

The plaintiff made and initialled the date of expiry of previous cover and stated in evidence that she did so at the request of Ms.

Doyle.

117. When the plaintiff was asked about the listing of two partners on the form, she stated, “I don’t recall noting on the form that

detail that was completed . . .”.

She referred again to the fact that Ms. Doyle, who worked closely with Michael Lynn, had completed the Form and then stated, “I

didn’t see that it was necessary for me to check all the detail.”

118. When the plaintiff was again asked about the information given in answer to question 2 a), she stated:

“I didn’t register this section, what was completed in this section of the form. My name is spelled incorrectly on that and

had I scrutinised it in detail I would have noticed that and I would have noticed the fact that I was specified to have

qualified in ’87 when I qualified in ’92. Likewise, I would have noted that Michael Lynn hadn’t qualified in 1990 because I

was very aware that he had qualified after me.”

When it was suggested to her that these were the changes she would have made to question 2 a), she stated, “If I had noted those,

but I didn’t, I didn’t note those.”

119. The Proposal Form immediately above the signature of the plaintiff contains the typed words “Signature of

partner/principal/director”. When asked about the description under which she signed her name, and it being suggested that she was

not signing as principal, because Mr. Lynn was the principal, she stated:

“Mr. Lynn was the principal. I actually when this was presented to me by Liz Doyle, there was some sort of an urgency

about getting the form completed. When I signed the form, Ms. Doyle stood beside me and was anxious that the form be

signed very quickly and I didn’t actually register or pay attention to the description, but I did consider, given that Michael

Lynn was away and that I was the senior solicitor in the practice, that I didn’t have any difficulty in signing it.”

120. The plaintiff also gave evidence in relation to the signing of the Form that she did read and note the statement in relation to the

duty of disclosure immediately above the description under which she was required to sign, and also question 18 as to whether “any

of the partners, principals or directors, AFTER FULL ENQUIRY, are aware of any circumstances which may give rise to a claim against

the Firm . . .” Her evidence, which I accept, is that when she read this, she told Ms. Doyle that she could not sign the Form until she

got a response from Mr. Lynn, and that Ms. Doyle went off with the Form and emailed her a short time later and said, “no, Michael

Lynn is not aware of any circumstances”. Accepting, as I do, that evidence of the plaintiff, it must mean, though was not made clear

in her evidence, that Ms. Doyle returned a second time with the Form for the plaintiff’s signature notwithstanding her recollection that

it was required as a matter of urgency.

121. The plaintiff was aware that she was signing the Proposal Form for the professional indemnity insurance for the practice of

Michael Lynn & Co., solicitors. The plaintiff is a qualified solicitor. The plaintiff either was or ought to have been aware of the

obligations of full and accurate disclosure on a person seeking insurance. The Form included a disclosure statement which she said

she noted. As the person signing the Form on behalf of the practice, the plaintiff must have known that she had to take responsibility

for the accuracy of the statements made therein. Notwithstanding the factual evidence given in relation to the fact that the Form

had been completed, correctly, no submission was made on behalf of the plaintiff seeking to relieve her of the consequences of

signing the Form with untrue statements by reason of the fact that the Form had already been completed by someone else. The

plaintiff in signing the Proposal Form made the statements therein including the untrue ones to the defendant. Immediately above

where she signed, the Form states: “I/we certify that the above details are correct to the best of my/our knowledge and belief.”

122. Insofar as in this Form the plaintiff made an untrue statement that she was a partner in the practice of Michael Lynn & Co.,

solicitors, I find as fact that she did not do so knowingly. Her evidence is that she did not read the factual responses given to the

questions on the completed Form in relation to the partners/principals/directors nor paid attention to the description under which she

had to sign. Having regard, in particular, to the incorrect spelling of her own name in the answer to question 2a) and her evidence I

find she did not read the completed questions. It is more difficult to believe that she did not notice the description under which she

was asked to sign having regard to its proximity to her signature. Nevertheless, on her evidence, I find that she did not pay any

attention to it and signed the Form as requested as the solicitor running the practice on a day to day basis in Mr Lynn’s absence. I

also find, as a matter of fact, that the plaintiff had no intent to deceive the defendant as to her status in the Firm.

123. However, in accordance with the principles set out above, neither of the above findings precludes a finding of fraud in the

making of the false statement if the untrue statement was made “recklessly”, in the sense that the term was used in Derry v. Peek,

i.e. careless as to whether the statement be true or false. It is clear that “careless” for this purpose is not the same as when used in

relation to the tort of negligence. The carelessness must be something greater to constitute recklessness for the purposes of fraud.

As pointed out by Lord Herschell in the extract from his speech referred to above, a statement may be considered as made recklessly

where the circumstances are such that the Court considers the maker can have no real belief in the truth of what he states. It

appears to require an objective consideration by the Court as to whether the circumstances in which the plaintiff signed the Proposal

Form (and, by doing so, made the representations or statements contained therein) were so careless as to whether the statements

were true or false that the Court must conclude that she could have had no real belief in the truth of the statements contained in the

Proposal Form.

124. I have concluded that the plaintiff’s own evidence in relation to how she signed the Proposal Form inescapably leads to a finding

that the statements contained in the Proposal Form in relation to her status in the practice of Michael Lynn & Co. were made

recklessly, in the sense that they were made carelessly as to whether they were true or false. On her own evidence, notwithstanding

that the Form, when presented to her for signature, had been completed, she did not read the answers given in relation to her status

in the practice and was unaware of the type of person by whom the Form was required to be completed and signed, notwithstanding

the express statement at the start of the Form and the description immediately under which she signed. As already stated her actions

must be considered in the context of the obligations of ‘utmost good faith’ in relation to the completion of a proposal form for

insurance of which she was or ought to have been aware. Considering the matter from the plaintiff’s potential belief in the truth of

the statements made in the completed Proposal Form, as on her own evidence, she was unaware of what statements she was making

by signing the Form , –and was unaware of the status of the person expressly required to sign the Form, it is not possible for me to

conclude that she had any belief in the truth of the statements made. As stated by Lord Herschell, “[t]o prevent a false statement

being fraudulent, there must, I think, always be an honest belief in its truth”.

125. As the onus is on the defendant to establish that the untrue statements made by the plaintiff in the Proposal Form were not

innocent and not free of any fraudulent intent I have also considered whether if the plaintiff had read the answers given to the effect

that she was a partner in the practice but with no equity ownership could she have had any belief in their truth in April 2007. The

plaintiff had in December 2006 completed her application for her 2007 Practising Certificate by ticking a box indicating that her current

professional status was ‘partner in a solicitors practice’. Notwithstanding in her evidence to this Court which I have accepted she

made clear that she understood there to be a difference between what she perceived to be her status, namely that of an employee

with a title of ‘named partner’ (variously explained as an employee with the title or name of partner or with a promise of partnership),

and a person who is a salaried partner. The plaintiff explained in cross examination that she understood a salaried partner to be

“someone who did not have a share in the profits of the firm, but who was involved in the accounts of the firm and who would meet

with the accountants in relation to the accounts of the firm, sign off on accounts”. The plaintiff’s evidence was that she had no such

role in Michael Lynn & Co and to the effect that she did not become a salaried partner as she understood that term. She also of

course maintained that she did not become a partner of Mr. Lynn. Objectively the questions at 2a) and 3 on the Proposal Form in

relation to partners/principal/directors of Michael Lynn & Co. cannot be considered as asking about persons who were employees with

a right to use the name or title ‘partner’ particularly having regard to the separate question about ‘qualified staff’. They must be

considered as asking about persons who had the status of partner, including possibly ‘salaried partners’ in some of its uses including

that as understood by the plaintiff which appears to be that of a true partner participating in the accounts of the partnership but

whose remuneration is limited to a fixed salary. However, as her evidence is that she was never even a salaried partner as understood

by her, and in April 2007 was still in negotiation about the promised partnership even if she had read the answers given, I have

concluded that in April 2007 she could not have had any belief in their truth.

126. Accordingly, I have concluded that the defendant has discharged the onus of establishing that it is entitled to repudiate the

Policy against the plaintiff, pursuant to the terms of Clause 4(j)(a) of the Policy by reason of the material misstatement of her status

in the practice of Michael Lynn & Co., solicitors, on the Proposal Form which was made recklessly in the sense of careless as to

whether it be true or false and hence not innocent and not free of fraudulent intent.

127. As I have reached this conclusion, it is unnecessary for me to consider the further issues arising in relation to alleged non-

disclosure in the Proposal of circumstances which might give rise to a claim against the Firm, notwithstanding the enquiries which I am

satisfied the plaintiff did make directly of Mr. McCarthy and of Ms. Doyle in relation to Mr. Lynn’s knowledge. The evidence of Mr.

Gallagher and Mr. Carrigan as expert conveyancing solicitors only relates to that issue and it is therefore not necessary to refer to it.

It is also unnecessary to consider the signing of the No Claims Declaration by the plaintiff in May 2007.

128. It is also unnecessary for me to consider whether the plaintiff is now estopped from claiming an indemnity pursuant to the Policy

as an employee of Michael Lynn practising as Michael Lynn & Co. by reason of the representations made on the Proposal Form that

she was a partner of the practice by reason of s.14 (1) of the Act of 1890 or the general principles of estoppel by conduct. The

finding that no partnership came into existence may preclude the application of s.14(1) of the Act of 1890 (see Twomey, Partnership

Law, (2000) (Dublin, Butterworths) at para. 7.35).

Summary of Findings and Conclusions

129. (1) The plaintiff was not a partner of Michael Lynn and no partnership between them came into existence.

(2) Policy SP 136161 issued by the defendant was a composite policy.

(3) The defendant is not entitled to avoid the Policy against the plaintiff by reason of the alleged fraudulent non-

disclosure by Michael Lynn.

(4) The defendant is entitled to rely on the additional grounds of avoidance set out in the letter from its solicitors of 22nd

September 2009.

(5) The plaintiff in the Proposal Form signed by her on 12th April, 2007, misrepresented to the defendant that she had the

status of partner in the practice of Michael Lynn & Co., solicitors.

(6) The misrepresentation was a material misrepresentation and the defendant has discharged the onus of establishing

that the misstatement was made recklessly, in the sense of careless as to whether it be true or false, and hence was not

innocent and free of fraudulent intent within the meaning of Clause 4(j)(a) of the Policy. The defendant is therefore

entitled to avoid Policy SP 136161 against the plaintiff on this ground pursuant to Clause 4(j)(a) thereof.

(7) It is unnecessary to consider the remaining issues in the proceedings.

Order

130. There will be an Order dismissing the plaintiff’s claim.