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Supreme Court rules on PII aggregation clauses

The eagerly awaited judgment in AIG Europe Limited (Appellant) v Woodman and others (Respondents) has been handed down by the Supreme Court.

The judgment provides guidance on the interpretation of the aggregation provision within the Solicitors’ Minimum Terms and Conditions (MTC). This is significant for insurers, who seek to bundle together claims in order to limit their level of liability, and for lenders, whose claims may be negatively impacted by a successful aggregation.

For the factual background to the underlying claims and the first instance decision of the Commercial Court, please see our earlier article by Peter Richards-Gaskin, Partner in TLT's London Financial Services Disputes, Investigations and Regulatory team.

The Court of Appeal's decision

The decision of the Judge at first instance, Mr Justice Teare, was considered by the Court of Appeal (the CoA) in March 2016 (AIG Europe Ltd v OC320301 LLP and others [2016] EWCA Civ 367).

As readers may recall, on appeal AIG argued there was no justification for Mr Justice Teare’s conclusion at first instance that transactions needed to be interdependent in order to constitute “a series of related matters or transactions" (as defined in clause 2.5 of the MTC). AIG further contended that all of the transactions formed one series of related transactions and, as such, they should be treated as one claim.  In contrast, the claimants, represented by the trustees of the two trusts (set up in relation to the developments in Turkey and Morocco), sought to uphold Mr Justice Teare's reasoning.

In addition, the SRA was given permission to intervene. It argued that the MTC clause did require some sort of relationship between the matters or transactions. The SRA contended that whilst the relationship did not need to be as narrow as interdependence, it did need to be based on an intrinsic connection rather than some common extrinsic factor such as geography or the identity of the solicitor.

The CoA held that Mr Justice Teare had been wrong to find that the transactions had to be 'dependent' on each other before aggregation could occur. However, he had been right to find that there had to be 'inter-connection' between the transactions. The CoA agreed with the submissions of the SRA that there must be an "intrinsic" rather than a "remote" relationship, describing this as a relationship between the transactions, rather than a relationship with an outside connecting factor.

The CoA remitted the entire case to the Commercial Court to determine the facts of the case in accordance with its decision on the aggregation clause. Before this determination took place however, the CoA's ruling was appealed to the Supreme Court.

The decision of the Supreme Court

The expedited appeal was heard in October 2016, and judgement was handed down last week. In the Supreme Court AIG criticised the CoA's introduction of the "intrinsic" qualification into the concept of "related matters or transactions".

The Supreme Court unanimously allowed AIG's appeal. Their Lordships were of the view that the use of the word "related" implies that there must be some interconnection between the matters or transactions. Nevertheless, the Law Society had not seen fit to qualify this limb by any particular criteria, such as “intrinsic”.

Their Lordships agreed that the transactions entered into in respect of the separate developments in the original case were connected in significant ways. It was found that: each set of investors invested in a common development, they were participants in a standard scheme and co-beneficiaries under a common trust. Consequently, the Supreme Court considered that the claims from each group of investors arose from acts or omissions in a series of related transactions and could therefore be aggregated.

In contrast, the case for aggregating the claims relating to the development in Turkey together with those relating to Morocco was weaker. It was found that they related to different sites, had different groups of investors and were protected by different deeds of trust over different assets. It was therefore held that the separate claims relating to the two separate developments in question should not be aggregated together.


This is useful guidance on the application of clause 2.5 of the MTC, particularly as coverage disputes are usually resolved via arbitration rather than proceeding to the Supreme Court.

Whilst claims will remain fact specific, this decision will come as a partial relief to insurers. The Supreme Court has overturned the narrower interpretation of "a series of related matters or transactions" adopted by the lower Courts. It will not be necessary for insurers to demonstrate an intrinsic relationship between the matters or transactions (involving different claimants) in order to aggregate claims. Nevertheless, the decision also illustrates that insurers do not have carte blanche to aggregate because of similar acts or omissions. Put simply, there must exist sufficient connections between matters or transactions in order to justify aggregation. Where there is not, it is considered that aggregation decisions may be successfully challenged by claimants and/or the insured. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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