by Paul Durkin
This article was published in the ACAL(Association of Child Abuse Lawyers) Newsletter of September 2004
We are all familiar with the numerous hurdle obstacles to a successful claim for damages in a Child Abuse action. In addition to the problems of Limitation, Liability, Causation and Apportionment, we recently discovered a further obstacle in the Wessington Court Group Litigation in the form of avoidance of an Insurance Policy by the Insurance Company.
Background
The Wessington Court action involves a number of Claimants bringing claims for physical and sexual abuse suffered whilst pupils placed at Wessington Court School between 1965 and 1984. The school was a private school registered by the Secretary of State for Education & Employment. The school was described at the time as a school for maladjusted children. The pupils were placed at the school by Local Authorities and funded by the Local Authority.
The proprietor of the school for the purposes of registration was The Wessington Court School Ltd. The Directors of Wessington Court School were Mr Eagles, who was also the Headmaster of the school, and a Mr Whiting. Mr Eagles was the majority shareholder of the company. He was allotted 54 of the original 86 shares and he subsequently acquired additional shares so that in 1974 he held 70 of the 100 issued shares. Mr Eagles’ sister was the Company Secretary. Until 1978 he was the sole Director and another Director was appointed only for the purposes of ensuring that there were 2 Directors. The second Director was a friend of Mr Eagles who played no part in the running of the school.
The police following allegations of historic child abuse investigated the school. Mr Duggan, a Housefather and latterly Head of Care of the school, was charged with a number of offences including buggery and indecent assault. He pleaded guilty to some of the offences and was sentenced to 13 years’ imprisonment, reduced to 10 years on appeal. In 1999, Mr Eagles was convicted of 19 counts of indecent assault and buggery. He received a prison sentence of 13 years.
A number of men who gave evidence in the criminal trials against Duggan and Eagles commenced claims for damages for the injuries suffered as a result of the abuse. The Claimants had a number of potential claims against Wessington Court School Ltd. in negligence, vicarious liability for its employees’ acts of abuse, claims against Mr Eagles for deliberate acts of abuse and negligence in allowing others to abuse Claimants, negligence in running Wessington Court School as a Director and/or Headmaster and also claims against the Placing Authority in negligence for failing to ascertain the abuse the Claimants were suffering and the unsuitability of Wessington Court School for the Claimants. There was also a potential claim against the Department of Employment and Skills in respect of the management and supervision of Wessington Court School, which was registered under Section 70 of the Education Act (1944).
Clearly, the most straightforward claim was that against Wessington Court School and Wessington Court School Ltd. was named as the First Defendant. At the time proceedings were issued, Wessington Court School Ltd. had been dissolved and an application was made to restore the Company to the Register. The Court declared the dissolution void in April 2002. Extensive investigations were made as to the relevant insurers at the time. With some difficulty we were able to establish that the Phoenix Insurance were the relevant insurer for the period in question. The Phoenix Insurance had since been taken over by the Royal & Sun Alliance.
A successful application was made to join the Royal & Sun Alliance into the action as the 9th Defendant.
We applied for insurance to be tried as a Preliminary Issue. This was an unusual approach and was opposed by the Royal & Sun Alliance. In the event, an Order was made by the District Judge ordering that the insurance issue be dealt with as a Preliminary Issue. There were various Appeals and Directions following that Order but the matter was eventually brought before Mr Justice Stanley-Burnton in May 2004.
For the Claimants, we were anxious to establish that in the event of a claim being established against Wessington Court School Ltd., that there was an Insurance Policy that could satisfy any Judgement obtained against the school. We were mindful of saving costs. All the Claimants were publicly funded.
When we obtained the Defence of the 9th Defendants, the RSA, the Defence was a novel Defence being one of non-disclosure. The RSA said they had validly avoided the policy for material non-disclosure.
The Defendants said that the 1st Defendant of Wessington Court School was under a Common Law Duty of utmost good faith to disclose to the Insurance Company any facts which might reasonably be regarded as material by a prudent underwriter in assessing whether or not any insurance cover should be provided. They said that Dennis Eagles was the 1st Defendant’s “agent to know” in that he was the 1st Defendant’s alter ego and that he was the 1st Defendant’s agent and was concerned with the insurance transaction. As far as we are aware, this is the first time such a Defence had been run and in effect the Defendants were saying that Dennis Eagles had a duty to report to the insurers his own abuse. We considered the involvement of Dennis Eagles in the running of Wessington Court School Ltd. Dennis Eagles was sole Director, major shareholder and Head Teacher of Wessington Court Schools Ltd. and furthermore he was involved on an annual basis with the renewal of insurance. On those particular facts, prior to the Hearing and upon the advice of Leading Counsel, we conceded for specific purposes, including the trial of the preliminary issue, that the RSA were at all material times entitled to avoid the policies of insurance effected by the Phoenix. We made this concession because the 2nd Defendant, Dennis Eagles, was undoubtedly the alter ego of the 1st Defendant at least for the purposes of dealing with insurance. Accordingly, the knowledge of the 2nd Defendant was knowledge of the 1st Defendant for the purposes of disclosure. Furthermore, Dennis Eagles had knowledge of the conduct of other abusers at the school and as such they were matters which were material to any prudent Underwriter assessing whether or not insurance should be provided and, if so, on what terms. It was, of course, inconceivable that had there be disclosure by Eagles, that any Underwriter would have renewed the policy.
Accordingly, we were forced to accept that there had been material non-disclosure by Eagles, which would have entitled the 9th Defendants to avoid the contract.
It can be seen from the above that the issue of valid insurance should be carefully considered in bringing actions against limited companies when the abuser is the effective owner of the home and the alter ego of the company. Failure of the abuser to disclose his own abuse could lead to the insurance company being entitled to avoid the insurance policy. We feel that this defence has limited applicability and will only apply to homes where the abuser was either the owner of the home or the “alter ego” of the Limited Company.
A further interesting aspect of the Wessington Court School Litigation is that whilst we made admissions concerning the Defendant’s entitled to avoid the policy for non disclosure, we argue that the 9th Defendant affirmed the policy. Affirmation is a situation in which an insurer is said to waive a right to avoid a Contract of Insurance when, with knowledge of the facts entitling him to avoid it, he elects to continue it and so affirms it. Our argument in the broadest terms was that by the actions of the solicitors on behalf of the Royal & Sun Alliance they affirmed the policy. The arguments concerning affirmation were highly academic and particular to the Wessington Court School Litigation. The matter was fully argued before Mr Justice Stanley Burnton who, in a very considered Judgement, found for the Defendants and said the RSA were entitled to avoid the Public Liability Policies issued by the Phoenix to Wessington Court School Ltd.
St Georges Group Litigation Update
The Lord Chief Justice, and Mr Justice Leveson made a Group Litigation Order, on 1st March 2004. Directions were given by District Judge McGrath at the Manchester District Registry in April 2004 and a cut off date set for the 30th June 2004.
Directions were given for service of Particulars of Claim and medical evidence and individual disclosure.
The matter has now been listed for further Directions before Mr Justice Leveson at the Liverpool District Registry on the 5th October 2004. Directions will be given for the appointment of a trial Judge and Directions to move the Litigation forward.
Paul Durkin
12.08.04
