Neutral Citation Number: [2004] EWHC 978 (Comm)

Case No: 2003/92
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 07/05/2004

Before :

THE HONOURABLE MR JUSTICE GROSS
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Between :

	College Credit Limited	Claimant	
	- and -		
	(1)The National Guarantee Corporation Ltd	Defendant	
			
	And		
			
	(2) Peter William Parker
(3) Sandra Elaine Parker
(trading as Hannington Bailey Associates)	Defendants/Part 20 Defendants	

David Mildon QC & Huw Davis QC (instructed by Maclay Murray Spens) for the Claimant
Tom Weitzman QC  & Peter MacDonald Eggers (instructed by Bryan Cave) for the 1st Defendant

John Ross QC & Angus Piper (instructed by Park Nelson) for the 2nd & 3rd Defendants/Part 20 Defendants

Hearing dates: 26 April – 27 April 2004
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Judgment

The Hon Mr Justice Gross : 
INTRODUCTION
1.	The Claimant (“CCL”) was established to provide finance to “sub-prime” customers who wished to acquire used motor vehicles. “Sub-prime” customers, as distinct from “prime” borrowers, are those whose credit standing is impaired. Plainly, such a business involved a risk of credit default. That risk was addressed by way of a credit default insurance policy (“the policy”) agreed with the Defendant (“NIG”); the policy incepted originally on the 3rd May, 1999 and was renewed at various stages up until the 31st December, 2002. 
2.	In broad and neutral terms, the policy was intended to provide cover to CCL in respect of loss it might sustain in the event that an Agreement (as defined) was terminated, inter alia, by reason of a Customer’s default. As will be seen, for an Agreement to be covered by the policy, CCL was required to comply with the “Underwriting Criteria” set out in Appendix 2 thereto (“the Underwriting Criteria/Criterion”, as appropriate).
3.	In the events which happened, disputes arose between CCL and NIG and these proceedings were commenced.  CCL, as insured, claimed an indemnity from NIG, as insurer, in respect of amounts allegedly due to it under the policy. For its part, NIG denied liability. In essence, NIG raised a number of coverage defences going to the Underwriting Criteria and in any event averred that it was entitled to avoid the 2001 and 2002 policy years on the ground(s) of misrepresentation and/or non-disclosure. Those were the battle lines drawn at the commencement of the trial.
4.	The Second and Third Defendants and Part 20 Defendants, more specifically Mr. Parker of Hannington Bailey Associates (“HBA”), stood in a somewhat different position.   On any view, HBA acted as an intermediary between CCL and NIG.   The  case was opened on the basis that HBA had nothing to do with the coverage defences. However, with regard to NIG’s avoidance defence, an issue appeared to arise as to HBA’s alleged failure to pass on to NIG certain documentation supplied to it by CCL.  Here, NIG contended that HBA was not its agent, at least for any relevant purpose. In response, CCL alleged that HBA was NIG’s agent but, if wrong about that, then CCL’s alternative case was that HBA was its (CCL’s) agent and (if need be) was in breach of duty to CCL.
5.	After the case had been opened, the hearing adjourned for me to undertake the reading required by the parties.  When the hearing resumed, I was informed (as courteously forewarned by counsel) that CCL and NIG had reached a partial settlement.  All matters save for one issue of construction relating to coverage had been resolved (“the construction issue”).  
6.	The construction issue concerned the question of whether CCL had complied with the Underwriting Criterion as to the “Maximum Advance”.  The short point which arose went to the meaning of “Advance” and, in particular, whether premiums for customer insurances, namely, Accidental Death Benefit (“ADB”) and Guaranteed Asset Protection insurance (“GAP”), for which credit was given by CCL, formed part of the “Advance” or not.  If yes, as contended by NIG, then, in respect of a considerable number of Agreements, CCL would have exceeded the Underwriting Criterion for “Maximum Advance” and, as was common ground, such Agreements would not be covered by the policy; conversely, if no, as CCL submitted, then this surviving NIG defence would fail.
7.	I was told that the construction issue was important and that a significant proportion of the sum in dispute hinged on its resolution.  I put the matter this way, because I was further told that there would be some embarrassment if I was shown the terms of the (partial) settlement between CCL and NIG; I confess to some puzzlement as to what that embarrassment might be but, as the detail of the settlement appeared irrelevant to the construction issue, I have been content not to press for it.
8.	At all events, I was invited by CCL and NIG now to determine the construction issue and I agreed to do so. This judgment is, in the event, solely concerned with that issue.
9.	Before proceeding further, it is first necessary to say something as to the position in which HBA now finds itself.  NIG has made it plain that it has no claim against HBA, regardless of the outcome of the construction issue. CCL, however, asserts that (1) should it fail on the construction issue, it will seek to recover commission allegedly overpaid and (2) should it succeed on the construction issue, it intends to pursue a Biggin v Permanite [1951] 2 KB 314 type claim. The matter cannot be more precisely summarised, not least because neither (1) nor (2) have yet been formulated in a pleading.  The upshot is that HBA has, at least at first blush, incurred substantial costs of preparation for this very expensive trial (originally scheduled to last for several weeks) in respect of a raft of issues with which it no longer has to deal and now potentially faces wholly new allegations.  Unsurprisingly, Mr. Ross QC, representing HBA, contends that any new claims should be pursued in new proceedings (if indeed CCL is minded to pursue them) subject to  such defences as HBA may have available, or, at the very least, an order should be made giving HBA its costs of these proceedings to date.
10.	As it seemed to me, HBA could not possibly be prejudiced by my proceeding to resolve the construction issue.   Thereafter it will be appropriate to revisit HBA’s position and, at that stage, to consider Mr. Ross’s submissions.
THE POLICY AND THE CONTEXT
11.	Though the issue is a short one, it is necessary to set out the provisions of the policy at some length.
“ 1. INSURING CLAUSE
For the purposes of this Policy “Agreement/s” shall mean a conditional sale, hire purchase or hire agreement (both regulated by the Consumer Credit Act 1974 and unregulated) substantially in the forms which are attached and form Appendix 3 to this document and which are outside the Insured’s guidelines for prime business but within the Underwriting Criteria comprised in and forming Appendix 2 to this document. The Underwriting Criteria Schedule for Customers and vehicles that are to be covered by this insurance are deemed to be incorporated in and forming part of this insurance policy. 
In consideration of the above and the Insured’s promise to pay the premium in respect of each Agreement due the Insurers agree as follows:
That this insurance shall apply solely in respect of losses sustained by the Insured as a result of the early termination of any Customer’s Agreement/s, such termination to be as a consequence of any act of default or breach of the terms of the Agreement/s by a Customer or insolvency of a Customer and then only for:-
In the case of any vehicle which is repossessed the difference between:-
(a) The Net Outstanding Balance under an Agreement and;
(b) The net sale proceeds … of any such repossessed vehicle realised at auction within 90 days of termination of an Agreement. Otherwise on day 91 after termination the value of the vehicle at the date of termination of an Agreement will be determined by reference to Glass’s Guide Trade Value, adjusted for mileage, or other similar point of reference agreed with the Insurers.
If the Vehicle is not repossessed within such 90 day period and provided the Insured confirms in writing that the Insured has made all reasonable efforts to recover the Vehicle then the Insured’s losses shall be a sum equal to (a) above….
2. CONDITIONS PRECEDENT TO THE LIABILITY OF THE INSURERS
The following are conditions precedent to the liability of the Insurers:
(a) The Insured fully and accurately declares to the Insurers all new Agreements incepted during the Period of this insurance.
(g) Only the Agreements as specified in Appendix 3 hereto or such other Agreements as may from time to time be approved in writing by the Insurer are to be used and the Underwriting Criteria Schedule as detailed in Appendix 2 attached must be complied with at inception to enable an Agreement to be covered by this insurance.
It is agreed that any failure by the Insured to observe the above conditions at any time shall entitle the Insurers to revoke coverage in respect of the relevant Agreement under this insurance at their sole option.
3. DEFINITIONS
CUSTOMER – means any private individual, sole trader or partnership who enters into an Agreement, as detailed in Appendix 3 …., for the purpose of obtaining credit to acquire the vehicle shown on an Agreement.
AGREEMENT/S – any Hire Purchase, Conditional Sale or Hire Agreement under which any Customer hires or purchases a vehicle which becomes the Customer’s property before or at the end of the Agreement and any such Agreement will be in a form similar in all material respects to the Agreements which have been agreed by the Insurers and are specified in Appendix 3 ….
NET OUTSTANDING BALANCE – means the balance outstanding representing the capital balance (excluding Payment Protection, GAP and any other insurance premiums) and all interest charges….at the date of termination of the Agreement less a rebate calculated …in accordance with the Consumer Credit (Rebate on Early Settlement) Regulations 1983….
UNDERWRITING CRITERIA SCHEDULE – means the terms, as set out in Appendix 2, which must be complied with at inception of the Agreement by the Insured if an Agreement is to be covered by this insurance…..
MAXIMUM LOAN RATE – means 18% per annum flat …to be charged on the balance financed under any Agreement
5. CONDITIONS
(n) No legal action may be brought under this insurance in respect of any Agreement unless the Insured has complied with all the provisions of this insurance in relation to such Agreement….
APPENDIX 1
MANDATORY INSURANCE SCHEDULE
…..
Premium per Agreement will be 5.70% of the balance financed on an agreement inclusive of Insurance Premium Tax applicable at the prevailing rate.”
12.	Appendix 2 to the policy contained the “Underwriting Criteria Schedule”.  To begin with, the Schedule stipulated the “Minimum Deposit” and “Maximum Period”;  in broad terms the minimum deposit required from the Customer increased (from 20% to 33%) with the age of the vehicle, while the maximum period reduced with the age of the vehicle.  Next, the Schedule contained this provision, central to the issue now before the Court:
“ Maximum Advance   Glass’s Guide Trade Value (mileage adjusted)”
The remainder of the Schedule dealt with a variety of matters, which may be summarised as going to the Customer’s profile and characteristics (age, length of time on the Voters Role, occupation, credit history, Driving Licence status and so on).   From time to time, Appendix 2 was varied by agreement between CCL and NIG, broadly (the detail does not matter) in the direction of a relaxation of the criteria – no doubt with a view to encouraging more business to be written.   By way of example, the “Maximum Advance” came to be “110% Glass’s Guide Mileage Adjusted Trade Value”.  
13.	Appendix 3 contained the standard form for Agreements to be covered by the policy.   As will be appreciated, the documentation encompassed two back to back, principal to principal, sale agreements:  (1) the (outright) sale of the vehicle, for a cash price, by the Vendor (“the dealer”) to CCL;  (2) the Conditional Sale Agreement (“the CSA”), dealing with the sale of the vehicle by CCL to the Customer on credit terms and obviously involving an element of financing.
14.	The first page began with instructions to the dealer.  Amongst these was an instruction that where (inter alia) GAP insurance was to be included, the dealer must ensure that the Customer had received the appropriate leaflet.  On the same page, the “Vendor’s Invoice and Warranty” was plainly concerned with the cash sale of the vehicle by the dealer to CCL. It said this:
“ TO: COLLEGE CREDIT LTD
We offer to sell you the Goods described in the attached Conditional Sale Agreement (“the Agreement”) for the total cash price shown therein … and hereby warrant that:
(1) The total initial payment shown has in fact been paid to us …”
There then followed a number of other warranties of which at least some would have been relevant had not CCL and NIG reached the partial settlement already described.
15.	The standard form CSA comprised the balance of Appendix 3.  For present purposes, the most important provisions were a series of boxes on the front page.  These were as follows:
“ CUSTOMER INSURANCES
                                                                                  £                p
Initial Payment provided by Customer
Less: Accidental Death Benefit, if required
         GAP Insurance Premium, if required
Amount available for Deposit

FINANCIAL TERMS
Total Cash Price of Goods  (A)
Deduct Deposit
Balance Financed
Add: Interest on Balance Financed (B)
         Title Transfer Payment (C) …
Total Amount Payable by Instalments
Payable by
[      ] consecutive monthly instalments of
the first being due one month after the date of the Agreement
followed by [   ] monthly instalment of 
TOTAL CHARGE FOR CREDIT (B+C)
APR including (C)
TOTAL AMOUNT PAYABLE (A+B+C)”
16.	The terms of the Agreement were found overleaf. Cl. 1 provided that the Customer must have paid the deposit before signing the Agreement.   Cl. 14 provided that if ADB was included, then it would be provided by another insurer (Pinnacle). 
17.	Pulling the threads together, a number of salient features of the policy may be noted.  First, CCL was obliged to declare to NIG all new Agreements incepted during the period of the insurance (cl. 2(a) of the policy); cessions were obligatory and NIG was protected against the risk of adverse selection.  Secondly, the policy only covered Agreements which were (1) outside CCL’s guidelines for prime business (2) substantially in the form as provided for by Appendix 3 to the policy and (3) compliant with the Underwriting Criteria (cll. 1, 2(g), 3 and 5(n)).   Thirdly, as it seems to me, the policy, in Appendix 2, contained two separate but inter-related safeguards for NIG: the provision as to a minimum deposit was designed to obtain a meaningful commitment from the Customer while the provision as to a Maximum Advance would, on any view as to its true construction, require restraint on the part of CCL in its lending activities. Fourthly, by reason of the definition of “Net Outstanding Balance” excluding ADB and GAP premiums, any losses sustained by CCL in respect thereof were uninsured and could not be recovered from NIG (cll. 1 and 3).
18.	From the policy documentation and a statement of agreed facts provided to me, it is apparent that CCL and NIG must have entered into the policy with the following factual background in mind: (1) Subsequent to an inquiry by the Customer (metaphorically at least) on a dealer’s forecourt, CCL would receive proposals for finance from the dealer showing the total cash price for the vehicle in question.  (2)  The dealer would then need to know the maximum amount of finance which CCL would make available and the minimum deposit that the Customer would need to pay.   (3) For its part, CCL was then required to work out the  Maximum Advance which it was entitled to make in accordance with the Underwriting Criteria.  (4) At this stage, CCL would not have known whether the Customer would take out ADB or GAP insurance; the Customer would only make a decision as to ADB or GAP insurance after it was known whether CCL would proceed with the transaction.  (5) Before the Customer came to sign the CSA, he/she would have paid the deposit (i.e., the figure shown in the “Initial Payment provided by Customer” box) to the dealer.
19.	At the hearing, CCL indicated an intention to call Mr. Nelson, a director of CCL and CEO of its parent company, to give evidence as to the contractual matrix of the policy.  NIG objected on the ground that any evidence he could give would be irrelevant and inadmissible. I decided that Mr. Nelson’s evidence could be adduced de bene esse.  In the event, though Mr. Nelson was obviously seeking to assist the Court, I do not think that his evidence took the matter further than those aspects of the contractual setting already outlined above.  I should add that evidence (whether from Mr. Nelson or otherwise) as to how CCL and NIG chose to operate the policy, cannot, of course, assist as to its true construction. 
THE RIVAL CASES IN OUTLINE
20.	If I may say so, I was most grateful to Mr. Mildon QC and Mr. Weitzman QC for their respective submissions.   I summarise below their principal arguments (as they appeared to me).
21.	The CCL case: For CCL, Mr. Mildon submitted that there was no basis for including customer insurances, here, ADB and GAP, when determining whether there had been compliance with the Underwriting Criteria.   
22.	First, as a matter of language, that could only be done if “Maximum Advance” (in Appendix 2) was equated with “Balance Financed” (on the front page of the Conditional Sale Agreement in Appendix 3). But the language was different and so was the meaning.  Where the parties intended to refer to “Balance Financed”, the policy had said so: see the definition of “Maximum Loan Rate” in cl. 3 and the calculation of premium as a percentage of the “Balance Financed” in Appendix 1.  
23.	Secondly, moving from language to commercial purpose, it was implausible, at least in the context of these customer insurances and this policy, that the parties had intended compliance with the Underwriting Criteria (a condition precedent to recovery under the policy) to hinge on sums (the ADB and GAP insurance) as to which the credit risk was not insured by NIG at all. There was no question here of the uninsured credit in respect of ADB and GAP insurance diluting NIG’s indirect security interest in the motor vehicle; nor could it be suggested that these other credits were material to the risk.   Any claim on the policy would never include amounts in respect of ADB or GAP insurance.  As CCL’s skeleton argument put it:
“ The purpose of the ‘maximum advance’ criteria is to create a direct link between the amount of credit risk which NIG is agreeing to insure (namely the Net Outstanding Balance defined as excluding GAP and other customer insurance premiums) and the value of the security which is to be available to NIG, namely the car.”
24.	Moreover, it was striking that when the meaning of the Minimum Deposit requirement (Appendix 2) came to be clarified in 2000, the parties had been agreed that the deductions for ADB and GAP insurance premiums were to be left out of account; that being so, there was no rationale for bringing ADB and GAP insurance premiums into the Maximum Advance criterion.
25.	Thirdly, as to practicality, when the dealer sought finance from CCL, it was unlikely that the parties contemplated CCL’s answer turning on these optional “add-ons”, on which the Customer had yet to decide.  The dealer wanted to know the maximum finance which CCL would provide, not a series of alternative answers depending on the add-ons; contingent answers were unworkable and would risk a loss of business, to the detriment of both CCL and NIG.  CCL needed to know that its simple calculation of the credit it was prepared to supply would not later fall foul of the Underwriting Criteria by reason of a subsequent decision by the Customer to purchase ADB and/or GAP insurance.
26.	Fourthly, the calculation of the premium with reference to the Balance Financed, was neither here nor there.  At most, NIG had received an unintended bonus.
27.	In summary and for all these reasons, “Advance” for the purposes of  the “Maximum Advance” criterion, meant the payment made by CCL to the dealer to complete the purchase; it was derived by deducting the deposit paid to the dealer by the Customer from the total cash price required by the dealer. There was no further deduction from that deposit of sums relating to the purchase of ADB and GAP insurance.  The advance was thus simple to calculate and must be known at the time when CCL, the dealer and the Customer agreed to proceed with the transaction. That advance either did or did not comply with the Underwriting Criteria.  If it did not, then the Agreement was not covered by the policy. If it did, so that CCL had not provided an advance in excess of the stipulated maximum, then cover under the policy was not thereafter lost because the Customer decided to purchase ADB and GAP insurance add-ons. 
28.	The NIG case:  For NIG, Mr. Weitzman contended that the “Maximum Advance” criterion was to be tested by reference to the “Balance Financed” figure.   Accordingly, if the Balance Financed figure exceeded the qualifying maximum, then the Agreement in question fell outside the policy and was not covered by NIG. 
29.	First, an identifiable figure was needed for the Maximum Advance but, on CCL’s case, a figure could only be obtained by calculation. That was improbable. It could instead be expected that the relevant figure would leap off the page.  Further, NIG was insuring the credit risk arising out of the CSA between CCL and the Customer; it was not insuring the agreement between CCL and the dealer;  accordingly, CCL’s approach focussed on the wrong agreement.  In these circumstances, the best candidate for the meaning of Maximum Advance was the figure set out in the documentation for Balance Financed.
30.	Secondly, having regard to the structure of the standard form Agreements, the Balance Financed figure did not include uninsured amounts.  With reference to the front page of the CSA, by the time the box for Balance Financed was reached, the ADB and GAP insurance premium had already been deducted. It followed, that the risk to the insurer increased with any increase in the Balance Financed figure.  Approached in this way, there was no anomaly in the calculation of premium as a percentage of the Balance Financed figure; to the contrary, there was good reason for doing so. 
31.	Thirdly, there was no practical difficulty in CCL giving the dealer the maximum sum which it would be prepared to supply by way of finance and which would comply with the Underwriting Criteria; by way of simple illustration, given the standard amounts of £100 and £150 respectively for ADB and GAP premium, that sum would be £X if neither ADB nor GAP was purchased and £X - £100/150/250, depending on the Customer’s decision as to the purchase of ADB and GAP insurance.   At worst, a dealer might be dissuaded from marketing the add-ons and that might be unattractive to CCL; but it was immaterial to NIG, which had no interest in the add-ons. 
32.	Fourthly, as to the exclusion of ADB and the GAP insurance premium when calculating the Minimum Deposit, that had been a matter of specific agreement, whether by way of clarification or variation.  No such agreement had been entered into in respect of the Maximum Advance criterion.
33.	Fifthly, it was true that relatively small sums for ADB and GAP insurance premium could “tip the matter over the edge”. But that was in the nature of a criterion going to a maximum sum to be advanced.  If the relevant criterion had not been complied with, there was no cover; strict compliance was required and no discretion was involved.
DISCUSSION
34.	To begin with, certain “non-points” can be disposed of.   First and notwithstanding an earlier review, NIG has only late in the day developed its case with regard to the construction issue; indeed, on day one of the trial, I gave leave for it to resile from certain admissions it had hitherto made as to compliance with the criterion in question.  Although the amendment came very late, the point raised was one of principle (whether the ADB and GAP insurance premium should be taken into account) and CCL was in a position to deal with it; in all the circumstances, it seemed to me appropriate, as a matter of discretion, to permit the amendment.  Now that it is part of the case, either NIG’s point is good or it is bad. To my mind, save that, if NIG was indeed concerned as to the customer insurances, it is curious that this point was missed previously, the fact of lateness is ultimately neither here nor there (at least leaving costs to one side).   
35.	Secondly, it is also the case that when making claims under the policy, CCL did not deduct from the amounts claimed sums representing ADB or GAP insurance premium.  Plainly, such a deduction should have been made.  The failure to do so is, however, in my judgment, of no moment; the sums in question are small and no inferences can be drawn from the failure to reduce the claims appropriately.
36.	Having, so to speak, “cleared the decks”, I turn to the real arguments.  Here, with respect to the submissions of NIG, I have reached a clear preference for those of CCL. As will be seen, that preference rests on the commercial purpose underlying the “Maximum Advance” criterion and the practical ramifications of the rival constructions.  My reasons follow. 
37.	Language: For my part, I am not persuaded that the solution lies in textual considerations, a matter which, if anything, gives rise to difficulties for both parties. While the policy stipulates that the “Maximum Advance” was not to exceed 100% or, as later amended, 110% of the specified trade value, the policy does not define what is meant by the “Advance” which was not to exceed that value.  No doubt if it had, the matter would have been beyond argument; but the term was not defined.  It is, admittedly, a disconcerting feature of CCL’s case that the relevant figure for compliance with the Underwriting Criteria can only be obtained by calculation, albeit of the most simple kind.  I readily appreciate the force of the point made by Mr. Weitzman in that regard.  Conversely, however, it is anything but self-evident that the question of compliance with the “Maximum Advance” criterion should be answered by the figure found in the “Balance Financed” box – a necessary ingredient in the NIG argument, involving the equation of two prima facie different terms, “Maximum Advance” and “Balance Financed”. Such a leap requires justification, not to be found in the policy wording.  On any view, therefore, the wording of the policy does not compel any particular resolution of the issue which I must decide.
38.	Commercial purpose: In addressing this topic, I bear very much in mind that it is not for the Court to rewrite the bargain made by the parties.  The Court’s task is to give effect to that bargain.  But, first, the Court must ascertain what that bargain is and, in choosing between rival constructions, it is relevant to have regard to how well each accords with the underlying commercial purpose or setting of the agreement or term in question. The answer to such an inquiry may well reveal how likely it is that the parties intended the construction contended for.
39.	To my mind, I regard it as improbable that the parties intended to agree that compliance with the “Maximum Advance” criterion should hinge on uninsured add-ons for ADB and GAP insurance premium.   That is not a conclusion to which I would wish to come, unless driven to it by the language of the policy (which, for the reasons already given, I am not).   
40.	The considerations telling against such a conclusion seem to me overwhelming.   (1)  Given the interest of both CCL and NIG in the volume of business transacted, it was to be contemplated that CCL would seek to provide finance up to the maximum permitted by the relevant criterion.  In the circumstances, small add-ons could be critical to coverage.   (2)  While there can be no general presumption that uninsured advances would not be relevant to underwriting criteria, in the present case it is difficult to see why uninsured credit in respect of ADB and GAP insurance premium should be at all relevant.  As Mr. Mildon submitted, such customer insurances do not dilute any security interest of NIG;  nor could it possibly be said that the size of these add-ons was in any way material to the risk.  (3) The reality is that these add-ons were irrelevant to NIG.   By reason of the definition of “Net Outstanding Balance”, no claim could properly be made in respect of them and (contrary to a further submission of NIG) there would be no difficulty whatsoever as to the application of recoveries from the resale of vehicles. If, for instance, the net proceeds of sale of a vehicle were £2,000 and the gross outstanding balance (including customer insurance premiums of £250 not yet repaid) was £2,250, there would be a nil claim; likewise, if, using the same example, the net sale proceeds were instead £1,000, by straightforward calculation the claim would amount to £1,000.  The customer insurance premiums are simply taken out of the calculation. (4)    I have not in all this lost sight of Mr. Weitzman’s submission that the Balance Financed figure did not include uninsured amounts, so that the risk to NIG increased with the size of that figure.  To my mind, elegantly as the submission was presented, this is to elevate structural form over substance. It may be that on the standard form, the Balance Financed figure did not “include” the customer insurance premiums; that far I can go with Mr. Weitzman.  But the Balance Financed figure was undoubtedly inflated by those premiums coming into the calculation. That said, when it came to considering the exposure of NIG or the proper calculation of any claims, the customer insurance premiums were to be excluded.  The submission that the risk to NIG increased with the size of the Balance Financed figure is, with respect, unsustainable.  (5)  I accept that on the approach which I favour the calculation of the premium by reference to the Balance Financed figured is, to a degree, anomalous. On no view, however, was or could NIG have been prejudiced by this drafting and I am content to conclude that this anomaly does no more than furnish a further example of imperfect drafting in the policy – a document which, as already noted, failed to define “Advance”.   (6) Assuming in favour of NIG that the “agreement” as to the Minimum Deposit was (a) post-contractual  (b) specific to the Minimum Deposit criterion and (c) did not as such extend to the Maximum Advance, nonetheless there could be no rationale for excluding customer insurance premiums from the calculation of the Minimum Deposit but including such premiums in the calculation of the Maximum Advance.  As already observed, while separate, those two safeguards were inter-related.  For completeness, I should not be taken as accepting that this “agreement” as to the meaning of Minimum Deposit constituted a variation; but even if it did, it would not affect the conclusions  so far expressed.
41.	Practicalities:  In fairness to Mr. Weitzman’s submission, as a matter of theory it is not impossible to contemplate that the Agreements could have been operated in the manner he postulated; namely, that the amount of finance available would be £X or £X-£100/150/250, depending on whether the Customer chose to purchase the add-ons in question.  But, in practice, that seems to have been a most unlikely result for the parties to have intended; considerations of practicality point the other way.
42.	Agreements such as those contained in Appendix 3 to the policy are intended to operate, metaphorically and even literally on the dealer’s forecourt.  They are intended to facilitate the rapid and simple transaction of business in the interests of all concerned.  CCL could have had no interest in a construction which, in practice, would have exposed it to the risk of uncertainty as to whether an offer of finance would or would not comply with the Underwriting Criteria depending on a subsequent decision which the Customer may make, perhaps after a number of changes of mind. The dealer, anxious to complete his sale, would be looking to a single definite answer as to the maximum finance available – not a range of contingent alternatives.  As to NIG, its interest lay in CCL developing the business in compliance with straightforward, relevant criteria; at the time of contracting it had no interest in producing a trap for an unwary CCL by reference to extraneous uninsured add-ons.  
43.	Again, a caution is appropriate.  Save in the most extreme and exceptional cases, considerations of practicality could not outweigh the requirement for the Court to give effect to a plainly drafted agreement producing an unfortunate outcome; parties do make mistakes as to the effect of the wording upon which they have agreed. But there is no such plain language here and I am therefore entitled to take into account that considerations of practicality strongly favour the construction contended for by CCL.
44.	Overall conclusion: I am persuaded that the construction favoured by CCL best gives effect to the probable intentions of the parties: namely, that “Advance” for the purposes of the “Maximum Advance” criterion means the payment made by CCL to the dealer to complete the purchase, excluding any customer insurance premiums.  I accept that, at first blush, it is odd that the amount of the Advance in any individual case has to be determined by arithmetical calculation; but such calculation is of the most simple kind, based on figures (for the cash price and the Customer deposit) which will necessarily be both certain and available at the time dealer, Customer and CCL are deciding whether or not to proceed with the transaction.  Moreover, the parties to the policy (CCL and NIG) must have appreciated that such figures would then be available.   Those figures would not, thereafter, alter, save by contractual variation.  I am unable to accept that CCL, by approaching the matter in this way is focussing on the “wrong” agreement; the policy is to be read as a whole, together with Appendix 3 and the agreement between dealer and CCL is as much part of its scheme as is the CSA.  
45.	Plainly, the purpose of the Maximum Advance criterion was to protect NIG. By capping CCL’s lending for the purpose of coverage with reference to the value of the security, namely the vehicle in question, the Maximum Advance criterion was designed both to guard against rash lending and to reduce the size of claims should the insured risk materialise.  Thereby, it aimed to limit or manage NIG’s exposure. Its focus was accordingly the credit risk insured by NIG. It was not directed at the provision by CCL of immaterial uninsured credit. I therefore agree with CCL that the intention was to create a direct link between the amount of the credit risk insured by NIG and the value of the security. The construction proposed by CCL gives effect to this commercial purpose of the Underwriting Criterion and in a manner facilitating the practical conduct of business. By contrast, the construction proposed by NIG gives rise to practical difficulty and results, implausibly, in compliance with a critical Underwriting Criterion turning on uninsured optional add-ons. I decide the construction issue in favour of CCL. 
46.	I shall be grateful for the assistance of counsel in drawing up the order, as to the position of HBA and on all questions of costs.