01/TLQ/0304
Neutral Citation Number: [2002] EWHC 712 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
84 Fieldhouse
London

Date: Wednesday, 16th January 2002
 
B e f o r e :

HIS HONOUR JUDGE RICH QC

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WALTON
Claimant
‑ v ‑
AIRTOURS Plc
Defendant
‑ v‑
SUNLIFE ASSURANCE COMPANY OF CANADA
Part 20 Defendant
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(Tape Transcript by Smith Bernal Reporting Limited
180 Fleet Street, London EC4A 2HD
Telephone No: 0207‑404 1400 Fax No: 0207‑404 1424
Official Shorthand Writers to the Court)
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MISS R DOWNING (instructed by A J Hows & Co) appeared on behalf of the Claimant
MR N GRUNDY (instructed by Addleshaw Booth) appeared on behalf of the Defendant
MR J BELLAMY (instructed by Penningtons) appeared on behalf of the Part 20 Defendant

‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑
J U D G M E N T

  
HIS HONOUR JUDGE RICH QC:  I think it is fair to the claimant to say that I am about to deliver my reasons for judgment in favour of his claim.
      The claimant was employed by the defendant as an airline pilot.  In September 1995 he became ill and, as is common ground, became unable to continue his occupation as an airline pilot.  His illness has been diagnosed, and this again is common ground, as Chronic Fatigue Syndrome (CFS), which gives him the physical symptoms which a Dr Bowden, to whom I will return, summarised as including "general tiredness and weakness aggravated by physical activity, non‑restorative sleep and night sweats."  He has not worked since September 1995.  Fortunately, the terms of the claimant's employment included the benefit of a total disability insurance policy, which the defendant had negotiated with SunLife of Canada, to whom I will refer as "the insurer".  This entitled him to full benefit defined as 75 per cent of his assurable earnings, less State benefit, during any period of incapacity.  Incapacity is defined in relation to a member of the scheme such as the claimant, who is a flight deck employee, as follows:
"A condition whereby that member is totally unable, by reason of injury or illness, to follow the member's own occupation and is not following any other.  If incapacity should persist for 24 months, incapacity should be deemed to continue only if the member is unable to follow any occupation." 
    By clause 4.2 of the policy, benefit is to cease on whichever of the following events in respect of the member first occurs: (a) cessation of employment as the employee; or (b) cessation of incapacity; or (c) death; or (d) the occurrence of cessation age, which in the claimant's case was the age 60.  The claimant was born on 1st April 1949 and so is now 52 years old.
      Benefit was duly paid during the first two years of his becoming unable to work as an airline pilot, and indeed on a ex gratia basis until 31st December 1997. On 9th October 1997, however, he was examined at the insurer's request by Dr Bowden, who reported:
"Examining Mr Walton I can find no underlying physical cause for his persisting symptoms and disability.  He clearly does not have a motor, physical or psychiatric disorder.  I think his symptoms are genuine.  His condition is improved with little in the way of specific therapy.  However, I do not think he is yet fit for his previous occupation as an airline pilot.  Indeed, I am concerned about his fitness to return to this type of responsible work at any time in the future.  I would recommend careful psychological and psychiatric assessment before he is allowed to return to work.  His physical abilities do not concern me.  He is clearly not unfit for any type of work.  He would cope easily, both physically and mentally, with less demanding jobs." 
    Thus, Dr Bowden's advice was construed as meaning that he did not satisfy the test for incapacity applicable after 24 months, namely that it should be deemed to continue only if the member is unable to follow any occupation. 
      On 10th December 1997 the insurer, therefore, gave notice that payment of benefit would cease on 31st December, and on 11th December the defendants wrote informing the claimant that:
"Accordingly, your employment with Airtours International will cease with effect from 31st December 1997." 
    It is admitted that the claimant was properly entitled to three months' notice.  Accordingly, he is, in my judgment, entitled to damages in respect of that, no doubt inadvertent, breach of contract.  A claim, however, has been made to the Industrial Tribunal for wrongful dismissal, and no damages are claimed in respect of this in this court.
      It is further admitted that if the claimant was, on a true construction of the policy, entitled to be treated as still suffering from incapacity, the defendant was not entitled to terminate his contract of employment with the effect of bringing his entitlement to an end under paragraph (b) of clause 4.2 of the policy.  It is accepted that the question of whether his illness did amount to incapacity within the meaning of the policy is a matter for determination by this Court, and if I determined that it did, then the defendant was in breach also of such implied term of the claimant's contract of employment and is liable in damages for the  benefits that should have been paid under the policy.
      Nonetheless, it is clear that from the date when the claimant ceased to be an employee, the insurer is not liable on the contract of insurance.  In the event, however, that it is found that the claimant was properly entitled to benefit in respect of which the defendant must pay damages to him, the defendant in turn claims an indemnity from the insurer.  It is put in paragraph 3 of the reply to a Part 20 defence as follows:
"If, which is denied, the claimant was unfit for any occupation, as he alleged, the Part 20 defendant [that is the insurer] acted in breach of the contract when it determined that benefits were not due under the policy and is liable for damages for that breach, namely the damages claimed by the claimant in respect of the benefits due under the policy." 
    The claim so put has been obfuscated by argument as to whether the decision to give notice to the claimant was caused by the insurer's determination of entitlement.  Had the giving of notice preceded the insurer's determination, other issues might have arisen, but in my judgment, if I decide that the determination was wrong, then the defendant, as the insurer under the contract, is entitled by way of damages to any reasonably foreseeable loss which it may suffer.  That will be the amount which the defendant must pay as employer, being the benefits which under the contract of employment it was bound to pay to the claimant.  Those  damages are to be assessed as at the date of the insurer's breach.  Unless I am satisfied that irrespective of such breach the claimant's contract of employment would have been determined, wrongfully as it would necessarily be, the fact that it was as a matter of fact determined without, however, relieving the defendant of liability to the claimant, is in my judgment irrelevant.  Although the possibility of termination of the claimant's employment was undoubtedly discussed before 10th December 1997, no action was taken, and I am not satisfied that the contract would have been terminated irrespective of the insurer's determination.
      In case the insurer's determination was right, the defendant had, at least arguably, to bring the contract of employment to an end in order to bring to an end their own liability to make payments under the contract.  I therefore find that if I do determine that the incapacity was deemed to continue, the defendant would be liable to the claimant in damages and the insurer be bound to indemnify the defendant in like measure.
      It is agreed that the total loss to date, including interest, as compared with what the claimant would have received under the policy, is £153,414.98,  which sum, of course, subsumes any loss arising from the inadequacy of the notice given.  It is further agreed that if I find for the claimant, the insurer will undertake to make further payments under deed as if the claimant had remained a member of the scheme, such deed to be settled by the Master if its terms are not agreed.
      For the purposes of these proceedings, the claimant was examined on 24th March 2000 by Professor Wesley(?), who is Professor of the Department of Psychological Medicine, Kings College of Medicine, and is Director of the Chronic Fatigue Syndrome Research Unit at that hospital.  His expertise in the subject and particularly in treatment of CFS is acknowledged by Professor Nearly(?), the Professor of Neurology at the University of Manchester, whose special expertise is to eliminate any neurological cause for the claimant's symptoms and to diagnosis the condition which is acknowledged in the joint statement that he has prepared with Dr Wesley.  I found the evidence of both of these gentlemen very helpful, fair and clear, and in agreement upon all relevant matters.  They agreed a statement in the following terms on 24th August 2001:
"Professor Wesley and Professor Nearly had the opportunity to discuss the case on 16th August 2001 and we are agreed on the following points.
 
We regard him as having suffered from a post‑battle fatigue syndrome, which is a genuine disorder causing  physical and mental fatigue.  We believe that these symptoms have prevented him from continuing his work as an airline pilot, and we believe that it is appropriate that he be medically retired in that capacity.
 
With regard to his future employability, we agree that, from the purely medical standpoint, he is fit for some form of occupation of a sedentary nature.  For reasons which we have illuminated before in our previous reports and correspondence, we no longer regard Captain Walton as an attractive prospective employee on the open job market." 
    Though that statement appears to be unequivocal as to the fitness "for some form of occupation of a sedentary nature", Miss Downing led evidence (and I, for my part, thought it proper to pursue a little further) as to what form of such occupation was intended in the joint statement.  On 14th September 2000 Professor Wesley had said that he agreed with Professor Nearly that the claimant "is of course capable of some light/part‑time work".  Professor Nearly, however, in writing on 10th July 2000 had said only that the claimant "ought to have been capable of work of a light, manual or sedentary nature" and had referred earlier in his letter to "part‑time or a full‑time basis".
      In cross‑examination, however, Professor Nearly made clear that any work would have to be introduced in a structured way and on a part‑time basis.  Both elements of the qualification are, as I understand it, agreed by both these experts.  Dr Bowden also accepted  that even in 1997 when he examined the claimant, it would have been unrealistic to expect him suddenly to return to full‑time work.  He added that:
"Any attempt to return to work should be gradual, preceded by rehabilitation, and accompanied by a programme of support." 
    I find that the claimant was at that date medically fit to undertake light sedentary work, but on a part‑time basis only, and I have come to the conclusion on the balance of probability that in order that the claimant should be able to follow an occupation involving such work it would be necessary that he should have a programme of rehabilitation involving psychiatric support and the help of his employer.  This I call structured support.
      Dr Vandenbroke(?), a neuropsychologist who prepared a report on the claimant's intellectual and cognitive skills, did say (at page 95):
"His cognitive limitations alone would not prevent him from coping with work in an alternative capacity, either on a part‑time or full‑time basis.  However, these limitations, coupled with his fatigue and the important issue of what may be acceptable and tolerable to Captain Walton as a suitable occupation, may make it difficult for him to cope with and adjust to work of an inferior nature." 
    The medical experts' view that part‑time work only could be undertaken is, however, because of the element of fatigue rather than cognitive limitations, and so his  opinion does not affect my conclusion.  He has, however, concentrated on a different factor, namely that the medical experts' judgment is exclusively from the medical standpoint.  In comment on the agreed statement between Professor Nearly and Professor Wesley, he says as follows:
"They state that Captain Walton should be employable from a purely medical point of view in some form of sedentary work.  While I believe that this may be true from a medical perspective, as I previously said, I think that menial work would be psychologically unacceptable to Captain Walton, and if he were obliged to accept such work, that would be deleterious to his mood." 
    The claimant himself gave evidence.  He denied that he would reject work on the ground that it was too menial.  He had undertaken jobs far less prestigious than airline pilot in the past.  He would do what was necessary to make ends meet.  His own evidence, however, was that he did not feel able to undertake employment because he did not know how he would feel from day to day.  Neither the doctors who have examined him nor I have any doubt as to his honesty or anything but sympathy for his illness and fears.  But as Professor Wesley observed, one of the results of CFS is to lead the sufferer to underestimate his own capacity.  The claimant gave evidence in this court for over three hours.  His answers were careful, clear and rational.  He told me, amongst other things, that he had, during his illness, taught himself basic computer skills, although he says his speed in using them is no greater than my own.
      I am satisfied that the kind of part‑time work of which he is capable is not restricted to what is envisaged in what has been referred to as the "car park attendant test".  I am not satisfied that his capacity for work in what is described in the joint statement as "some form of occupation of a sedentary nature" would be so psychologically injurious to his self‑esteem as to render him incapable of following it as an occupation.
      Thus, whilst accepting that there is a difference between being able to perform a particular task and being fit to follow an occupation involving performance of such task, and that the test of incapacity under the policy is rather by reference to the latter than to the former, I have concluded that the claimant was at the relevant date capable of following an occupation involving light sedentary work, provided that he was not required, at least initially, to work on more than a part‑time basis and that the initiation was appropriately supported.  I do not have evidence upon which I can define "part time" more precisely, but by this I mean less than a full working day, possibly less  than a full working work, and clearly a wholly different level of commitment than that of a full‑time air pilot. The essence of the qualification, however, is that the introduction to such work would need to be what the experts have called structured.
      I return, therefore, to the precise words of the policy in order to consider whether, on these findings of fact, the insurer was right to determine that the claimant's incapacity was deemed not to continue.  I have been referred to two authorities in which insurer's liability on other policies providing for disabled long‑term incapacity benefit has been considered: Peacock v Century Insurance, a decision of Mr Commissioner Moloney QC at Leeds Assizes [1962] Lloyds Reports 150, and Sergeant v GR (UK) Limited, an unreported decision of the Court of Appeal on 16th April 1997.  I do not find either of much assistance in my present task.
      I note that Mr Commissioner Moloney in the former case accepted that attending to business involved more than doing rather badly some minor part of the work involved in a particular business.  I would construe "following an occupation" similarly.  In the second case, Mummery LJ expressed the view that construction of such a policy as he was there considering, and as I am  also considering, should embrace consideration of the policy as a whole: its context, scheme and surrounding circumstances.  That, of course, I entirely accept.
      Miss Downing based herself on such approach to suggest that the Court should approach the construction of this policy on the basis that it is intended to replace the lost earnings of an airline pilot, and so ability to follow some menial occupation is not sufficient to bring entitlement to benefit to an end.  I wholly reject any such approach.  It is not consistent with what Mummery LJ was proposing.  The provision in the policy in relation to members who are flight deck or cabin crew employees must be read in the context of the provision in respect of other members in respect of whom incapacity is defined as "a condition whereby that member is totally unable, by reason of injury or illness, to follow the member's own occupation and is not following any other".  That is the same definition as applies to flight deck and cabin crew employees for the first two years of their incapacity.
      Definition of cessation age for cabin crew employees is age 40.  Flight deck employees continue their employment to age 60 but subject to six‑monthly medical inspection.  These categories of employee do not, therefore, have the same security of employment in  their own occupations as other members of the scheme. When, therefore, the deeming provision in the definition of incapacity for flight deck and cabin crew members operates after two years, the reference to any occupation is, in my judgment, clearly intended to mean what it literally says, any occupation without reference to choice by the member or comparability with his previous employment.
      The incapacity is, as in this case is admitted, the total inability to follow the member's own occupation of an airline pilot.  Such incapacity shall, however, be deemed to continue only if the member is unable to follow any occupation.  Although I must return again to the meaning of "following an occupation", there is, in my judgment, no limit upon the nature of relevant occupation by reference to its congeniality, acceptability or comparability.  The only limitation would be if the member's illness meant that, for psychological reasons, he was unable to follow a particular category of occupation; which, for the reasons I have already given, does not, in my judgment, arise in this case.  Following an occupation does, I accept, mean something more than undertaking a short‑term job.
      Mr Bellamy, for the insurer, whose submissions  have been particularly helpful to me, accepts that it must be a commercially undertaken occupation, not mere therapy or a pastime.  But subject to that test, any course of employment with some reasonable expectation of continuity would satisfy the requirement.  I agree and am content to approach my task with no further limitation.  It is not, in my judgment, necessary that the contemplated occupation should be full time.
      Mr Grundy, for the defendant, drew my attention to the definition of "partial benefit" in the policy, which reduces full benefit proportionately to any earnings by a member as compared with his previous assurable earnings.  Clause 4.3 of the policy gives the insurer a discretion to pay partial benefit, which no doubt can be exercised as an incentive to members who elect to follow another occupation when they are unable to follow their own.
      These provisions reinforce my construction of "occupation" in both parts of the definition of incapacity as including part‑time occupations.  I accept that partial benefit may be useful to encourage a member to take up a less well‑paid but full‑time occupation, but I do not think that it is reasonable, in the light of such special provision, to limit the meaning of "occupation", so that the discretion to pay partial  benefit would be unnecessary in case the occupation followed was less than full time.
      Miss Downing in her final submissions focused, I think it is fair to say for the first time, on the meaning of the word "unable".  It is possible, she points out, for a person to be capable, for example, of serving in a food shop but be unable to do so because he suffers from some infectious disease.  By the same token, she submits, the claimant, although in the words of the joint statement he is fit for some form of occupation of a sedentary nature, is, on the evidence to which I have referred, unable to follow such occupation without that support, which I have summarised in my finding that his introduction to work would need to be structured.
      Professor Wesley provided answers dated 23rd July 2001 to a question in the following form:
"What is/are the aspects of the claimant's medical condition that renders him unfit for such employment? Is it probable that the claimant will before the age of 60 and/or 65 become fit enough to undertake such employment?  If so, when?
 
      Answer:  It is little short of scandalous that he has still not been referred for some form of psychological rehabilitation, such as CVT, which is established now as the treatment of choice.  But it is not a cure that does offer hope of reducing symptoms, increasing confidence and control.  Given the role that anxiety plays worsening Captain Walton's condition, this really should be offered to him.  Unless and until he has tried the best forms of rehabilitation, it would be premature to offer anything more definite in terms of  prognosis."
    The evidence is that no such support has been available to him through the National Health Service and none has been offered to him otherwise.  Thus, he remains unable to follow such occupation as he would otherwise be fit for.  For this reason, in my judgment the claimant is entitled to succeed in his claim.  I do not wish in recording this conclusion to appear to be critical either of the defendant or the insurer, although Professor Wesley had, perhaps gratuitously, added to his answers observations which did not follow from any question, namely:
"Finally, this drawn‑out litigation must itself be worsening his condition.  I hope a common‑sense resolution can be found quickly." 
    As early as October 1995 the defendant company had apparently suggested some part‑time employment to the claimant.  He replied:
"Yesterday I spoke with my GP and said that as I had now spent several weeks away from the pressures of duty, I was considering helping out on a casual basis with the odd proofreading tasks in the office as a means of getting back into the working regime.  He pointed out to me that if I was 'signed off on a sick note' that implied no work was to be undertaken of any sort, and by my signing the declaration on the certificate I was affirming that I had carried out no work at all, either paid or unpaid.  Apparently, the significance of this is that the company claims back from the DSS a proportion of my salary for the period of my illness as certified by the sick note.  I was unaware of this, as I am sure you are, so to avoid false claims, perhaps it is best that I delay proofreading until it can be done legitimately." 
    At that stage, which was during the first two years of incapacity when the definition depended on whether the claimant actually followed, rather than was able to follow, another occupation, the problem might have been overcome if the insurer had been asked to pay partial benefit.  Certainly in December 1996 it appeared that the claimant was told that the insurer would encourage an early return to work by continuing limited financial benefit if the initial period of work was at a job‑share rate.  Unfortunately, the defendants were not then able to offer the claimant employment on that basis.
      I recite these matters, which appear from correspondence included in the secondary bundle that have been placed before the Court, because my construction of the policy may be material to other cases and remains material to the claimant's continuing entitlement to benefit under the deed which the insurer has undertaken to enter into.  If, as I hope they will, the insurer makes structured support available to the claimant, he will not, in my judgment, be able to say that he is unable to follow an occupation for which, subject to such support, he has been agreed to be fit. Benefit would therefore cease to be payable by reason of clause 4.2 of the policy upon cessation of the incapacity, even although the income from any  alternative occupation was less than the benefit.  It will be a matter of further medical judgment, however, whether structured support would, for psychological reasons, need to include such transitional and financial support as could be offered by the paying of partial benefit.
      These speculations are not, of course, part of the reasoning in support of my judgment.  I offer them in the hope that they may assist what Professor Wesley called a common‑sense resolution.
      Now, I suppose on that basis I enter judgment for the claimant and for the defendants, but in the sum of the £153,000 odd, but upon the defendant's undertaking. Is that right, or how do you suggest?
MISS DOWNING:  I am so sorry, my Lord.  I was debating something.  Perhaps your Lordship could repeat that.  I am so sorry.  If your Lordship could repeat the question where we go from here.
JUDGE RICH QC:  I think what I will do is enter judgment for the claimant in the sum of £153,000 odd upon the Part 20 claimant's undertaking in the form I have recited in my judgment, and I think nothing else is needed unless there is to be formally a judgment between the defendant and the Part 20 claimant.  I suppose it is possible the judgment should be against the defendant  and also against the ‑‑ and for the defendant against the Part 20.
MR GRUNDY:  My Lord, logically, the judge should give the defendant an indemnity in respect of that judgment given by the Part 20 defendant.
JUDGE RICH QC:  Is that right, Mr Bellamy?
MR BELLAMY:  Yes, I am content with that.
JUDGE RICH QC:  I will say upon Part 20 defendant's undertaking in respect of deed to be granted to claimant.
MR GRUNDY:  Yes.
JUDGE RICH QC:  And the defendant then drops out of that exercise.
      Costs?
MISS DOWNING:  Costs.  Again, I think this is rather a matter between the defence and the Part 20 defendant. Plainly the claimant is entitled to the costs of the action, but presumably that sum also will be passed down the line to the Part 20 defendant.
JUDGE RICH QC:  You are asking for the costs for the claimant?
MISS DOWNING:  Absolutely, against the defendant, and such subsidiary costs as have arisen, although they are not very great, but obviously there have been some costs involved in the introduction of the Part 20 defendant  because, he was, as it were, able to take some part in the action and therefore there was some ‑‑
JUDGE RICH QC:  You do not seek costs against the Part 20 defendant on that basis, do you?  You get your costs against the defendant.
MISS DOWNING:  Against the defendant, yes, which I am happy for that.
JUDGE RICH QC:  You cannot object to that, can you?
MR GRUNDY:  No.
JUDGE RICH QC:  So claimant to have ‑‑ or defendant to pay claimant's costs, to be subject to detailed assessment if not agreed, yes.
MR GRUNDY:  I ask the Part 20 defendant for the defendant's costs, those costs which we are liable to pay the claimant.
MR BELLAMY:  My Lord, the brief submissions on costs are as follows.  Your Lordship has, on my understanding, decided this case on a basis that ‑‑ a factual basis that was not argued in the general pleadings and the opening, the question of support and rehabilitation. Indeed, your Lordship's judgment has been very clear. You say in terms that absent that you concluded positively that there was culpability.  This is always a matter of ‑‑ you have heard the evidence for some days now. 
JUDGE RICH QC:  Not quite as long as that.
MR BELLAMY:  No.  It is a couple of days.  It is only as a result, in my submission, of additional questions orally achieved, as you noted in your judgment, successfully by Miss Downing bringing this evidence out and also questions from the Bench, that questions of rehabilitation and its relative importance back at 1st January 1998 or so have assumed the relevance they have, in my respectful submission.
      The point I make is that ‑‑ and I take by way of example the joint statement from Professor Nearly and Professor Wesley, which you expressly referred to in your judgment, and the way you have dealt with that by saying it must be dealt with in the context of the oral evidence.  And the reason I make these points is as follows.  In my submission, it would be quite proper to make an adjusted costs order to reflect the fact that the insurer's defence of this claim on the evidence disclosed was reasonable.
      It has been unsuccessful, and of course, as your Lordship observed once during the trial, there were other ways of dealing with these matters and the insurer decided not to do that.  But, my Lord, if one stands back, if one were permitted to put it that way, on the evidence before the Court when this trial started, in my  respectful submission on the basis of your judgment, it is a matter of course for you, but you would not have found that there was a requirement of rehabilitation in order (Inaudible) and it is as a result of that.
      Now, if you accept that submission, that there should be an adjustment, I do not contend that it should be an overwhelming adjustment.  I would ‑‑ you have, of course, under Part 44 a very general discretion, however, to make an adjustment to reflect that.  You may feel, as I would submit to you, that it would have been possible for that point to have been brought out before, and therefore I would say, with respect, that it would be possible to make an adjustment of, say, 10 per cent of the costs in this case.
JUDGE RICH QC:  You are, as I understand it, addressing me as to the order of costs to be made between the claimant and the defendant on the basis that you are accepting that you will have to indemnify the defendant?
MR BELLAMY:  I had a brief whisper to my friend just before he rose just then, and he said to me that he was content for me to address costs, so to speak, on his behalf because, of course, I am the indemnifier.  And I do that because of the way that it comes to rest with me in the chain of liability.
      My Lord, I hope Miss Downing will forgive me, but  if one looks, for example, at paragraphs 4 and 5.6 of her opening skeleton, it is ‑‑ I hope you will forgive me for this ‑‑ but the issues which are set out for your decision make no reference to the need and importance for rehabilitation.
JUDGE RICH QC:  I am afraid to say that I think I have left the skeleton upstairs.
MR GRUNDY:  It may be ‑‑
JUDGE RICH QC:  I am very sorry.  It is careless of me. I just failed to scoop up all the ‑‑
MISS DOWNING:  Here is a clean, un‑marked copy.
MR GRUNDY:  My Lord, the reference is paragraph 4 at the (Inaudible) page.  4.1 you have the incapacity issue, and 5.6, several pages further on.  My Lord, I do no more than say this.  In my submission, on the construction arguments which lay before you, I say the insurers were successful.  The only aspect of the argument which they have been unsuccessful is your finding of fact as to the importance, the materiality, if you will, of rehabilitation and your conclusion that that is ‑‑ necessarily that was part of the admissible construction of ability to follow.
      And I simply put it this way.  That is something which, although it has been said and almost suggested has developed during the course of the trial, it is a  bit more than that.  It is something which, in my respectful submission, ensures we are perfectly entitled to defend this case before trial.  Your Lordship may, for example ‑‑ let me put it this way ‑‑ was perhaps even close to considering that this case could have been dealt with without oral evidence from medical experts. Indeed, I made some observations about that on the first day.  I ask rhetorically, what would have been the outcome in this case had that been done?
      And I merely make ‑‑ I will not say merely.  I recognise the reality of the overall victory of course, but I do say that that should be reflected in the reasonableness of the insurer's defence of the claim. Those are my submissions on costs.
JUDGE RICH QC:  I think I understand what you say, but what I am not quite certain of is how I should relate this to the claim for costs.  It has not been necessary to make any formal amendment of the pleadings.
MR BELLAMY:  No, I consider that point, and I do not take issue with that.
JUDGE RICH QC:  So I suppose you can say that the questions to experts were not sufficiently focussed. When the point did emerge ‑‑ of course it only emerged in final speech, and so I suppose I could say to you, well, you did not say again (Inaudible). 
MR BELLAMY:  Yes, my Lord.  I would give a percentage approach, but of course it is a matter for your discretion.  Your Lordship could, for example, take an approach costs up to a certain point, be it the start of the trial, the first day of the trial, the point at which evidence was called.  I am conscious ‑‑ I just merely submit that this should be reflected in the order.
JUDGE RICH QC:  Is there some guidance now as to matters to be taken into account in regard to ‑‑
MR BELLAMY:  Yes.
JUDGE RICH QC:  ‑‑ costs?
MR BELLAMY:  Yes.  It is ‑‑
JUDGE RICH QC:  Which I should ‑‑
MR BELLAMY:  Part 44.3 is, from memory, the ‑‑ it is at page 794 of the Autumn 2001.  And, for example, in part 4 ‑‑ the general rule, of course, is at 4.3(2).  The general rule applies ‑‑ excuse me, 4.2 ‑‑ that the winner generally takes all.  And then at sub‑paragraph (4), in deciding what order, if any, to make about costs, the court must have regard to all the circumstances, including the conduct of the parties, whether a party succeeded on part of his case, even if he has not been wholly successful.  That is something which I leave before you.  There is nothing else which  you need consider in there.  And these, of course, are part only of a general discretion.
      And sub‑paragraph (6), the orders which the court may make under this rule include an order that a party must pay a proportion of the other party's costs, costs from a certain date only, et cetera, et cetera.
      My Lord, I have not, because yesterday was difficult to anticipate the way your judgment would go, did not bring any authorities on costs.  But there is general guidance that ‑‑ certainly in the last year or two since Woolf day that the court should be more flexible about costs orders.  Perhaps it is unnecessary for me to provide you with authority on that.  And also that it is impossible to be too clever about this, one is not conducting an assessment exercise, and that percentages may be used.
      As I say, the burden of my song is that on the evidence disclosed, aside from the way the case was put, simply principally on the evidence that was disclosed, it would not have been reasonable for the insurers to have anticipated, with the greatest respect, this would be the result for this reason.
JUDGE RICH QC:  The two speculations which I have in mind which are ‑‑ I admit to saying you can tell me if they are relevant.  The first is as against you.  I  cannot help having some slight suspicion that if you had followed Dr Llywelyn's(?) recommendation and a psychiatrist had been called upon to report, he may well have raised this question at that stage and as to whether returning to work was practical without support, and quite a lot of trouble, if that had happened, could well have been avoided.
      The other thought that occurs to me, which I think is something for Mr Grundy to consider, is I did not record the fact that there was in fact, except for the possibility of some part‑time work, being engaged in at a very early stage, in 1995, and again perhaps without proper foundation in evidence, although I hope not unreasonable inference from what I have been told by the doctors, I cannot help thinking that if it had been possible at that stage to reintroduce the claimant to some work, then the course of events might have taken a different pattern.  That is a matter of blame attaching to the defendant but not to you.  Now, by all means tell me if those considerations are wholly irrelevant.
MR BELLAMY:  My Lord, briefly on those two particular points, your Lordship will of course in making your judgment consider all the evidence.  However, it would seem, with respect to me, that it was the Llywelyn letter and your Lordship's questions on it which started  this whole ball rolling about rehabilitation and its effect of it in January 1998.  And those questions were, I believe, put by yourself to each of the witnesses.
JUDGE RICH QC:  No.  I put it to the first one.
MR BELLAMY:  After the first one I was obliged to ‑‑ I was obliged to deal with it after the first.  And there was evidence before your Lordship about the experience of Dr Bowden and about his involvement with those with sleep problems and his experience in dealing with those and ‑‑ well, I made my submissions about that.  I acknowledge your Lordship's comments and I cannot take the evidence any further.  I do not have evidence to address you on that.
      On the second point, I take your Lordship's point that it is not, so to speak, directed at me, but I just observe, although (Inaudible) Mr Grundy would wish to observe it himself (Inaudible).  My recollection of the evidence is that it was Captain Walton who was saying in terms that he could not do any work and that the timing of that may ‑‑ it may be more subtle than that and it may depend upon the circumstances ‑‑
JUDGE RICH QC:  Well, I did read out what he actually did write, and I think the reason why it was not taken up was the impact upon him.
MR BELLAMY:  But, my Lord, as I say, the ‑‑ if I may be  permitted to put it this way.  During the course of trial and following on from your Lordship's questions about the absence of a specific psychiatric report at the start of this period, there then developed an area of evidence about rehabilitation and its importance back at the start, which it was at the very root of your Lordship's judgment.  Indeed, on my reading of it, absent that you would have decided in the insurer's favour.
      Those are my submissions on costs.
JUDGE RICH QC:  But you have been wholly successful except on the last point.
MR BELLAMY:  Indeed.
JUDGE RICH QC:  Is there anything you want to add?
MR GRUNDY:  Not on the issue of costs per se.  As my learned friend has accepted, the Part 20 defendant is liable for the claimant's costs.  It is principally a matter for him to argue.  As to the point which your Lordship has just raised in respect of the letter of 27th October 1995, page 14 of the slim bundle, that was a month into the illness.  At that time in effect what the claimant said was, although I was considering coming back and helping out on a part‑time basis, it was not practical to do so.
      At that stage the information which was being ‑‑  the medical advice which was being given at that time is you will be fit to return to the job as a pilot within a few months, and it was on that basis that the position proceeded.  And then if one looks at the bundle ‑‑
JUDGE RICH QC:  The criticism, such as it is ‑‑ I certainly do not want to make it sound too emphatic. But the criticism directed at the defendant in that respect is that had somebody looked at the insurance policy, they would have written back and said, look, we can ask the insurers to put you on partial benefit and everything will be all right.
MR GRUNDY:  Yes, albeit that is some defence to the defence at that stage.  But all I was talking about is coming back and doing some proofreading in the office, and it was only a month later ‑‑ in fact at that stage it was Airtours, because within the first six months of illness, Airtours would actually have to pay the sickness themselves.
JUDGE RICH QC:  So he would not have even needed to refer.
MR GRUNDY:  No.  So the matter could not go back to insurers at that stage.  It is only after six months.
JUDGE RICH QC:  If he needed to refer, they could have taken a more flexible attitude themselves.
MR GRUNDY:  Yes, but the attitude was, well, here is ‑‑  the position being presented to them was here is a man who is going to be fit within a couple of months to come back to his normal job.
JUDGE RICH QC:  Yes.  Well, subject to (Inaudible) to take that point and run with it, I think it was not something I should allow to affect judgment as to costs.
MR GRUNDY:  I say no more.
MISS DOWNING:  My Lord, can I just mention one matter with regard to costs, and that is this.  Although there is no formal nexus between my claim and the Part 20 defendant, because of the way in which the Part 20 defendants have really made the running of this case, there has been a great deal of correspondence which has passed directly from the claimant to the Part 20, so there undoubtedly are costs which have been incurred which in a sense leapfrog my learned's instructing solicitors.
      Now, I am content provided that when the bill is presented to the defendants, the defendants should understand at this point that it will include the costs of letters which in a sense they may never have seen, and those are costs properly incurred alternatively ‑‑
JUDGE RICH QC:  Miss Downing, I am presently addressing the question as to whether or not you should have limited costs against the defendant, and what has been  contended on behalf of the defendant, through the mouth of Mr Bellamy, is that because you have succeeded only on a point raised for the first time in your final speech, there should be some diminution in the totality of the costs.
MISS DOWNING:  Indeed.  Well, in a sense I wanted to mention this with the uncontentious point lest I should forget it in developing the more contentious point, which is ‑‑
JUDGE RICH QC:  Unless I am asked to make some special order, your entitlement as to costs is costs against the defendant.  It will be a matter for the judgment of whoever does the detailed assessment, if agreement cannot be reached, whether or not the costs that you mentioned have been properly and reasonably incurred.
MISS DOWNING:  My Lord, so far as the contentious issue is concerned, I say simply this, that the powers that the court now has are obviously wide, and the general point that been made now in the new Practice Rules is that it is not a question of necessarily winner takes all, and the ups and downs and the defaults of the parties can properly be reflected in a costs order.
      But if that means anything, it must reflect, as it were, the wasting of costs or the incurring of cost that might otherwise have been less as a result of something  that the parties have done.  With respect, it cannot in this case be said that any costs in addition to ‑‑ any additional costs have been incurred.  This case was listed for five days and has finished in under three. The issue of the rehabilitation was certainly started by Dr Bowden in his answer in the letter in the summer, and although it is absolutely right that I have not put it as a separate issue and did not put it as a separate issue in my skeleton argument, it cannot be right, and it is simply not the case, I submit, that if I had put in the skeleton argument last week, well, I am going to take the point that Dr Bowden says that in any event this man cannot go back to work because he needs rehabilitation, it is fanciful to suggest that this trial would have been aborted at that stage by any sort of settlement, because apart from anything else, it was obvious from the way in which Mr Bellamy dealt with your Lordship's questions that he continued to take the point or to make the point that all that was being said was that this man needed a bit of light part‑time work to get back in.
      So in a sense, with respect to my learned friend, he was not really addressing the issue that you were putting to him in questions yesterday afternoon, because he continued to read the evidence as if all that had  been said by Dr Bowden and the other doctors was that light part‑time work was what this man has needed.
      So in my respectful submission, this is perhaps a little disingenuous of the Part 20 defendants now to say, well, if Miss Downing had flagged up in her skeleton argument lodged Tuesday afternoon ‑‑ sorry, lodged last Tuesday that, in any event, the point would be taken that Mr Walton could not work because of the lack of rehabilitation facilities, they would have given up the case, is in my submission simply not right.
MR BELLAMY:  We are not saying that.  I have not said that and I am not saying that.  We would have still contested the case.  I am not saying that any particular aspect of the trial would have been limited.  I am asking for an alternative exercise of your discretion.
      Forgive me for interrupting, my Lord.
MISS DOWNING:  Very well.  But I make the point, I understand that the powers are wide to award costs, and that in many ways could reflect things other than the incurring of additional costs, but we are talking about costs as the instrument, and if costs mean anything they reflect the real costs of bringing and conducting litigation.
      In my respectful submission, this case has not taken a minute longer than it would have taken if that  point had never been taken.  We have dealt with the matter expeditiously.  There have been sensible arrangements between, for example, myself and the defendant that we would not call certain evidence because it was otiose, and we have got on with the matter in a way which I think reflects actually some credit on all the parties in bringing a long piece of litigation in a sense to an efficient and expeditious end.
      In those circumstances, in the absence of the defendant being able to point to the fact that they would have aborted the trial and simply say, oh, well, it is a more general reflection that I want you to make, your Lordship, then I say that the proper order remains, that the claimant has succeeded.  The claimant has succeeded in showing that this man is entitled to benefit which will be paid by the Part 20 defendants.  I have argued the point about unfitness and I have won.
      In those circumstances, I say that the normal costs order should follow without reduction.
JUDGE RICH QC:  I think that Mr Bellamy is right, that the defendants have in effect succeeded on all grounds except that final basis that was properly crystallised for the first time in Miss Downing's final speech.  I do not think that this is in any sense a case where there  should be a penalty imposed upon the claimant because of any misconduct, but the reality is that the real issue in the case was not properly identified until a late stage in the trial.  Part of the reason for the courts assuming a more flexible approach to the rule of costs is, I think, in support of the policy of the court of persuading the parties to identify and crystallise issues at an early stage in litigation.
      The claimant's advisers, I think it is fair to say, were unsuccessful in doing that.  I am glad in the interests of justice that they were successful at the end, but in those circumstances I think that the costs which I will direct the defendant to pay will be 90 per cent of the claimant's costs, and the Part 20 party indemnify the defendants accordingly.
MISS DOWNING:  My Lord, can I ask only this.  Is that 90 per cent of the entire costs?
JUDGE RICH QC:  Yes.
MISS DOWNING:  Because, after all, there is a lot to be said for the fact that these issues, in any event, could not have been crystallised until such stage as medical evidence started to be gathered, which of course is a much later stage.
JUDGE RICH QC:  Yes.  That is why 90 per cent seems to me to be appropriate. 
MR GRUNDY:  My Lord, just to clarify that, the order on costs, the defendant to pay the claimant's costs ‑‑ 90 per cent of the claimant's costs to be assessed by way of detailed assessment.  The Part 20 defendant to pay the defendant's costs and to indemnify the defendant in respect of the costs order in favour of the claimant, again to be subject to detailed assess.  The exact wording can be by way of a draft.
JUDGE RICH QC:  The defendants pay 90 per cent of the claimant's costs, subject to detailed assessment if not agreed.  Part 20 party to indemnify the defendant as to the claimant's costs and to pay the costs of the Part 20 proceedings, to be assessed if not agreed.
MR GRUNDY:  My Lord, the order that I would ask is that the defendant's costs of both defending the indemnity which was sought at the outset, and it is why ‑‑ which is at page 88 ‑‑
JUDGE RICH QC:  Yes, I am so sorry.  That is quite right.  To indemnify the defendant as to the claimant's costs and costs of defending the action and to pay the costs of the Part 20 proceedings.  Yes, thank you very much.
MR GRUNDY:  My learned friend has a further application.
MISS DOWNING:  My Lord, I think formally I ought to ask that there be payment of the sum in ‑‑ I was going to  say 14 days.
JUDGE RICH QC:  Would you like me to make an interim assessment if I have the material to do so?
MISS DOWNING:  I am sorry.  Payment of the judgment.  I am so sorry, my Lord.
JUDGE RICH QC:  I do not think I need to.  I think if I make a judgment, it is payable in 14 days, is it not?
MR GRUNDY:  Yes.
MR BELLAMY:  I think it is 14 days.  My Lord, I have one other application, and that is ‑‑
JUDGE RICH QC:  I know what your application is going to be.  I think I ought to just be quite clear that you have not made an application for interim payment of the costs?
MISS DOWNING:  No, my Lord.  I am not making that application.
JUDGE RICH QC:  I am so sorry.
MR BELLAMY:  No, not at all.  My Lord, I can be brief. It is an application for permission to appeal.
JUDGE RICH QC:  Yes.  I am minded to give such permission, subject to what I might hear from anyone else.
MR BELLAMY:  My Lord, may I make it clear the two bases because of the requirement to fill in the form for the basis of the permission.  The first is, of course, the  question of capacity, the construction of rehabilitation and the importance of it.  The second is the question which lies ‑‑ in which you ruled against me as (Inaudible) employer, the question of foreseeability of the decision to dismiss.
      Now, clearly you have made certain findings of primary fact, and I recognise the reality of that and do not seek permission in relation to your findings of primary fact.  Your conclusion of course also was given the brief of contract analysis, which was not contested by me, was that it was reasonably foreseeable that that would take place.  That is, in my respectful submission a finding of secondary fact, and I leave before you briefly an application on that basis also.
JUDGE RICH QC:  I think as to that you might have to go to the Court of Appeal.
MR BELLAMY:  Very well.
JUDGE RICH QC:  My instinct is to give you permission, and I think it is proper that I should give you permission to appeal my judgment in favour of the claimant.  I am far from convinced what the ground of appeal in respect of what my judgment on the Part 20 would be.
MR BELLAMY:  Well, given that, subject ‑‑ if your Lordship retains that provisional view and I have  permission, then the reality of course would be that I would stand in the shoes of the defendant on any appeal.
JUDGE RICH QC:  Yes.  So subject to anything I may hear from anybody else, you would have permission to appeal the judgment against the defendant.
MR BELLAMY:  My Lord, indeed.
JUDGE RICH QC:  If you sought further permission as against the defendant, you would both have to join in if you attain it, but otherwise the defendant would take no part in the ‑‑
MR BELLAMY:  That is what I had in mind.
MR GRUNDY:  Yes.  I have already indicated that there has been agreement that the Part 20 defendant can stand in the defendant's shoes for the purposes of that appeal.
JUDGE RICH QC:  Anything you want to say, Miss Downing?
MISS DOWNING:  My Lord, only that it appears as if this is an appeal on a point of fact largely based on the evidence of the Part 20 and the defendant's own witness, Dr Bowden, and evidence apparently accepted by all the parties.  But I think beyond that, it is not for me to make any further representations.
JUDGE RICH QC:  I think I should make clear that it should not be an appeal on a matter of fact.  I think that what I would regard as an arguable ‑‑ an appeal  with a reasonable prospect of success is as to the construction of the phrase "unable to follow employment".
MISS DOWNING:  If that is how Mr Bellamy puts it, I certainly could not ‑‑ I do not think it would be proper for me to say more than that.
JUDGE RICH QC:  Mr Bellamy, am I right in thinking that you would not be seeking to overturn my findings of fact as set out in the judgment?
MR BELLAMY:  My Lord, it ‑‑ thinking of course on my feet, but if the permission that I ask for is on the construction of the phrase "unable to follow any occupation", that would deal of course with the construction point.  The hesitation in my voice is only that we would wish, I anticipate, to consider the transcript of the evidence, and in particular the evidence of Professor Wesley given in cross‑examination.  And I confess I have not ‑‑ we had a little interchange earlier today, and I cannot rule out ‑‑ although you may rule me out ‑‑ I cannot rule out inviting the Court to consider the weight and interpretation of Professor Wesley's evidence, and indeed that of any other, on the question of need as opposed to desirability of rehabilitation at that stage.
JUDGE RICH QC:  What I would be minded to do is to give  you permission limited, unless further application is made, to the construction of the phrase.  If it appears, when you have a transcript, that you wish to extend the permission, I think that I would be functus officio that no doubt you could make further application at the Court of Appeal.
MR BELLAMY:  I would be content with that approach, given the way in which it has developed.
JUDGE RICH QC:  Yes.  I think, unless anybody else has anything to say ‑‑
MR BELLAMY:  May I just finally raise the question of a stay.  This is always done by a defendant who has lost on a permission to appeal with some reluctance, but I am extremely conscious that your Lordship has heard evidence, indeed in answer to your question on day one, as to Captain Walton's financial situation.  I am not going to say more than that.  Captain Walton has always been accepted as a genuine man by us, and it is not suggested ‑‑ I do not suggest that he would do anything improper with the money, but I do recognise ‑‑
JUDGE RICH QC:  But it would not be improper to spend it.
MR BELLAMY:  But that, of course, is precisely the point.  We did not explore the circumstances in which his house sale is to complete.  I have no idea.  There  is no evidence as to whether this sum of money, if achieved, would affect that.  I just do not know.
      But in this case the evidence would appear to be that this sum of money will be the funds for Captain Walton, and the reality of the position would be very awkward if there was a successful appeal.  Of course, there is an intermediate step, that you may consider for that reason to stay only part of it and/or ordering ‑‑ I could not really apply for an expedited appeal.  I do not think that would be right.
      But you could stay a part of it on the grounds that, as a reputable man, he is only likely to spend part of this sum before the realistic hearing date in the Court of Appeal.
JUDGE RICH QC:  When is an appeal of this sort likely to be heard; do you know?
MR BELLAMY:  Well, I would anticipate ‑‑ of course the procedure for filing the documents is now very short indeed, as you know, under Part 53.  It is 14 days for the notice and really a matter of weeks only before the transcripts are obtained.  It is ‑‑ I would anticipate that it would come on within ‑‑ well, it would not be a long ‑‑ it would be a one‑day, probably in the short warned list.  It would probably take nine months, I anticipate, from today.  Something like that.  It would  certainly be a short warned list case, I think, with a time estimate of perhaps a day.  As I say, that is my application in addition to the permission.
JUDGE RICH QC:  Before I turn to the claimant, what I have in mind is that there be a stay till hearing, subject to him being paid in the interim the monthly sums which would otherwise be due.
MR BELLAMY:  Under the deed arrangement?
JUDGE RICH QC:  Yes.
MR BELLAMY:  Yes.  Well, may I just take a moment? If that affects you, I can certainly take some instructions on that.
      Yes, if that makes any difference to your determination, we limit our application in that way.
JUDGE RICH QC:  Yes, Miss Downing, it may well be that you would like to have some conversation with Mr Walton, but I have it in mind that in a sense he needs to protect himself.
MISS DOWNING:  Yes.
JUDGE RICH QC:  And he will be made aware that if my judgment is held to be wrong, he will have to pay back anything that he does receive so that he may be adding anxiety to himself by taking and spending any money and piling up future problems for himself.
      What I had in mind is that he should not be kept  out of the income benefit which would accrue but that he should not involve himself in the acceptance and expenditure of any capital sum until it is more secure than a judgment of my making.
MISS DOWNING:  Well, my Lord, I see the sense of ‑‑
JUDGE RICH QC:  I wonder if you will take some instructions as to the position that he would wish you to take up.
MISS DOWNING:  Very well.  If I could just have five minutes.
JUDGE RICH QC:  Do you wish me to rise?
MISS DOWNING:  Could you?  I would rather pop out.  I think when one is talking about money and matters like that, it is probably better to have a quiet word.
JUDGE RICH QC:  Yes.
      (Brief recess)
MISS DOWNING:  The claimant would be content with the position whereby he was receiving on a weekly or monthly basis, depending on how it is paid, the sums due under the scheme, and would be content to leave any capital sums to abide any appeal.  I have indicated to him, of course, it would attract quite a substantial judgment rate of interest, assuming he is successful on appeal.
      So in those circumstances, he is happy to take what your Lordship thinks is a sensible prudent course,  bearing in mind the length of the litigation.
JUDGE RICH QC:  It would probably be convenient, for purposes of the order, that the sum should actually be named in the order rather than ‑‑ is that practical?
MR BELLAMY:  We thought the satisfactory approach, given in particular the appeal, would be that we produce a minute of order between us to satisfy ourselves that that is all right, and submit it to your Lordship for his initialling.
JUDGE RICH QC:  Yes.  Well, may I suggest that the sum be worked out and incorporated.
MR BELLAMY:  Yes, the figure.
MISS DOWNING:  We are in agreement, yes.
JUDGE RICH QC:  I will just say stay on monthly payment.  Is it monthly?  Is that how he is paid?
MR BELLAMY:  Yes, it is.
MR GRUNDY:  I believe it is monthly.
JUDGE RICH QC:  Very well.  I am most grateful to all counsel for their assistance.