UK: Aggregation Rides Again: AIG V Woodman And The Requirement Of A "Real Connection"

On 22 March 2017, the Supreme Court of England and Wales handed down the eagerly anticipated judgment in AIG Europe Limited v Woodman and others1 (AIG v Woodman). The Supreme Court's decision provides useful guidance on the meaning of the phrase of "a series of related matters or transactions" when used in an aggregation clause.


AIG v Woodman concerned developments of two holiday resorts, one in Turkey and one in Marrakech, Morocco that were financed by private investors (the investors). The investors' funds were collected for each development and held in an escrow account by the developers' solicitors. The funds were not to be released to the developer unless the value of the assets held by the trust was sufficient to cover the investment to be protected. This was the "cover test" set out in the trust deed.

The developers entered into two purchase agreements, for the development site in Turkey and for shares in a local company which owned the site in Morocco. The solicitors released tranches of money to the developers for each development. Following a prohibition restricting the developers receiving any further investments, the respective purchases of the development sites could not be completed. The developers were subsequently wound up.


The investors brought two claims against the solicitors relating to each development. They alleged that the solicitors had failed to properly apply the "cover test" before releasing the funds to the developers, resulting in the funds being released without adequate security.

The solicitors had professional indemnity insurance with AIG, whose liability was limited to GBP 3 million in respect of each claim. The investors' claims totalled over GBP 10 million. AIG brought proceedings seeking a declaration that the investors' claims should be aggregated under the aggregation provision in its policy. AIG deemed the claims arose from "similar acts or omissions in a series of related matters or transactions" because all claims flowed from the improper releases of money held in escrow.


The Law Society of England and Wales' rules require solicitors to maintain professional indemnity insurance. The Rules specify certain Minimum Terms and Conditions for that insurance cover. The prescribed aggregation clause relevantly provides:

  1. all Claims against any one or more Insured arising from:

    1. similar acts or omissions in a series of related matters or transactions; and
  2. all Claims against one or more Insured arising fron one matter or transaction will be regarded a One Claim."

"...series of related matters or transactions"

There was no dispute that the claims arose from "similar acts or omissions". The key issue was how the phrase "series of related matters or transactions" should be interpreted.

First instance: High Court of Justice - Commercial Court

AIG's claim was rejected at first instance, on the basis that the investors' transactions were unrelated. Mr Justice Nigel Teare held that to be a series of related matters or transactions, the transactions between the developers and investors must be "dependent" or "conditional" upon each other. As they were not, the claims could not be aggregated into a single claim.

Court of Appeal

The Court of Appeal disagreed that the relevant part of the clause required transactions to be "dependent" on each other. The Court held that the matters or transactions in the series must have an "intrinsic" relationship with each other, rather than an extrinsic relationship with a third factor.2 The court held that the necessary relationship existed between the transactions here, and allowed AIG's appeal.

However, the court gave no clarification of the degree of connection required for there to be an "intrinsic relationship" between transactions, which would trigger the aggregation clause.

Supreme Court

The Supreme Court was unanimous in holding that the investors' claims be aggregated into two claims, the claim from the Turkey investors and the claim from the Marrakech investors.3

The Court of Appeal's requirement of an "intrinsic" relationship between the transactions was rejected, with the Supreme Court deciding instead that "a series of related transactions" requires some "real connection" between the transactions.4 Within each respective development, the transactions were connected and therefore "related": each set of investors invested in a common development and were co-beneficiaries under a common trust. However, the transactions across the two developments were not related. They were different sites, had different groups of investors and protected by different deeds of trust. The court adopted no particular criteria to interpret "connection", highlighting that whether transactions are related is an "acutely fact sensitive exercise".

"...matters or transactions"

The Court of Appeal was also criticised by the Supreme Court for taking too narrow a view of the term "transaction",5 having focused on the payment of money out of an escrow account. While that was the act that gave rise to the claim, the act occurred in the course of a wider series of transactions which was the investment in the development schemes of which the trust deed and escrow arrangement formed part.


This judgment was less than a total victory for the insurer, but did limit the insurer's liability to GBP 6 million, well below the GBP 10 million claimed. While the judgment largely turns on its own facts, it provides useful guidance on the interpretation of the phase "series of related matters or transactions" and reminds us that the application of any aggregation clause is a fact sensitive exercise. It is also interesting to note the disagreement between the Supreme Court and the Court of Appeal as to what constituted the relevant "transactions", which is a warning to insurers and practitioners to consider each element of an aggregation clause carefully when attempting to interpret it.


1 [2017] UKSC 18.

2 [2016] EWCA 367 at [19].

3 [2017] UKSC 18 at [21].

4 [2017] UKSC 18 at [18].

5 [2017] UKSC 18 at [23].

Aggregation Rides Again: AIG V Woodman And The Requirement Of A "Real Connection"

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