AC Ward & Son Ltd v Caitlin (Five) Ltd and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FLAUX |
| Judgment Date | 03 December 2009 |
| Neutral Citation | [2009] EWHC 3122 (Comm) |
| Docket Number | Case No: 2008 Folio 106 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 December 2009 |
[2009] EWHC 3122 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: The Honourable Mr Justice Flaux
Case No: 2008 Folio 106
Miss Rebecca Sabben-Clare (instructed by Rosling King LLP) for the Claimant
Mr David Turner QC (instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 9 th to 12 th, 16 th, 18 th and 19 th November 2009
The Hon. Mr Justice Flaux :
Background and introduction
The claimant is a company in the Blueheath group of companies and is the owner and operator of a wholesale distribution warehouse at Victor House, Bay Manor Lane, Thurrock, Essex. The warehouse is occupied, with staff working in shifts from 22.00 hours on a Sunday to 22.00 hours on a Friday, but unoccupied from 22.00 hours on a Friday to 22.00 hours on a Sunday. On the weekend of 17/18 March 2007 whilst the warehouse was unoccupied, a gang of thieves broke into the warehouse and stole cigarettes and tobacco stored in a caged area on the mezzanine floor of the warehouse. The value of the goods stolen is agreed at £432,940.
The claimant now brings this claim for an indemnity in respect of that loss against its insurers, the defendants (to whom I will refer as “the insurers”) who insured it and the other companies in the Blueheath group, under a “Multiline” insurance policy covering material damage, business interruption, theft, loss of money, employer's liability, public liability, computers and social housing all risks.
The defendants have resisted liability on the grounds that: (i) before the time of the loss, the claimant was already in breach of the Protection Maintenance Warranty and Burglar Alarm Maintenance Warranty in the Policy, so that the insurers had been discharged from liability from the date of breach of warranty; and/or (ii) a variation to the policy made on 20 February 2007 to remove Endorsement 6 (which contained an exclusion of cover for theft of cigarettes and tobacco outside business hours unless they were stored in a secure store on the ground floor of the warehouse) could be avoided for material non-disclosure or misrepresentation with the effect that the exclusion in Endorsement 6 remained in place; and/or (iii) the theft took place with the collusion of one or more employees of the claimant and was therefore excluded under the policy.
The insurance was underwritten pursuant to a binding authority granted by the insurers to underwriting agents, AT Docherty General Underwriting Agency Limited (“ATD”), with offices in Manchester and Leeds. They underwrote considerable numbers of composite multiline policies like the one under consideration on behalf of the insurers. The risk was broked to ATD by Henderson Insurance Brokers Limited in Leeds (to whom I will refer as “the brokers”).
The terms of the contract of insurance
The policy provided so far as relevant, as follows:
The Policy Schedule
Insured: Blueheath Holdings Plc, Blueheath Direct Ltd, AC Ward & Son Ltd & CTM Wholesale Ltd.
Section C Theft Insurance
Warranties applicable (unless deleted): Protection Maintenance Warranty Burglar Alarm Maintenance Warranty
Make and type of Burglar Alarm System: Not provided
The endorsements attaching to the Policy
Endorsement 6-Cigarettes & Tobacco/Wines & Spirits Out of Business Hours
It is hereby noted and agreed that Theft cover in respect of Stock of Cigarettes & Tobacco … at Victor House … is not operative outside of Business Hours unless the Stock is kept within the special secure store on the ground floor.
Memoranda attaching to the Policy
Memorandum 16-Protection Maintenance and Burglar Alarm Maintenance Warranties
It is hereby declared and agreed that the Protection Maintenance Warranty and Burglar Alarm Maintenance Warranty as defined under Section C-Theft of the Policy Document shall be deemed to apply to the whole policy of insurance.
Further Memoranda
Warranties
Whenever and wherever it is stated hereafter that a particular Section of the Policy of Insurance is subject to a Warranty, it is hereby declared and agreed that the said Warranty shall be deemed to apply to the Whole Policy of Insurance and not just to the particular Section of the Policy, unless otherwise stated.
A Warranty is a fundamental Term or Condition of the Insurance the breach of which voids the Contract from the time of the breach. If circumstances change which affect the Risk to the extent that the Insured may not be able to comply with the Warranty the Insured has a strict duty to give immediate notice to the Insurers. Failure to do so may result in the voidance of the Contract.
Section C Theft Insurance
Exclusions
(a) loss or damage due to Theft or Attempted Theft or Robbery or Attempted Robbery by or in conspiracy or collusion with the Insured, the Insured's family, household, employees or agents; “employees” includes any director or other officer where the Insured is a company or corporation.
Special Conditions
1. The Insured…shall take all reasonable precautions for the safety of the Property Insured
Warranties applicable to Theft Insurance…applicable only if specified in the Policy Schedule
Protection Maintenance Warranty
It is warranted that:-
(a) the whole of the protections provided for the safety of the insured property shall be maintained in good order throughout the currency of this insurance and that they shall be in full and effective operation at all times when the Insured's premises are closed for business and at all other appropriate times, including when the said premises are left unattended, and that such protections shall not be withdrawn or varied to the detriment of the Insurers without their consent;
(b) …
All defects occurring in any protections must be promptly remedied.
Burglar Alarm Maintenance Warranty
It is warranted that:-
(a) the premises containing the Insured property are fitted with the burglar alarm stated in the Schedule, which has been approved by Insurers and that no withdrawal, alteration or variation of the system or any structural alteration which might affect the system shall be made without the consent of the Insurers,
(b) the burglar alarm system shall have been put into full and effective operation at all times when the Insured's premises are closed for business and at all other appropriate times, including when the said premises are left unattended,
(c) the burglar alarm system shall have been maintained in good order throughout the currency of this insurance under a maintenance contract with a competent specialist alarm company who are approved by the Insurers,
(d) the burglar alarm signalling system, where applicable, shall be maintained under British Telecom Total Care,
…
All defects occurring in any protections must be promptly remedied.
The issues in the case
The main issues in the case as they remained at the end of the trial can be summarised as follows:
(1) What has to be shown by insurers to establish collusion within the meaning of the exclusion clause in the Policy and was the theft carried out with the collusion of any employee of the claimant?
(2) Does the Protection Maintenance Warranty (“PMW”) only apply to such security devices as were notified to the insurers at the time of placement of the insurance or prior to the theft or does it apply to whatever security devices were in fact present on the premises at the time of the theft?
(3) On the true construction of the PMW what must the insurers establish for a defence of breach of warranty? Is it enough that the relevant security protections were not in “full and effective operation” (as the insurers contend) or must the insurers show that there was a defect in the protections which the claimant had failed to remedy as soon as reasonably practicable after it had discovered the defect (as the claimant contends)?
(4) Was the claimant in breach of the PMW because (a) the guardwire fitted to the walls of the mezzanine area (including the outer wall) had not been connected to the intruder alarm system; (b) five of the motion detectors on the mezzanine had been angled upwards; (c) the ADSL line was disconnected between 13 February 2007 and 16 March 2007 or (d) there was a fault on that ADSL line during the period of the burglary?
(5) Does the Burglar Alarm Maintenance Warranty (“BAMW”) only apply to burglar alarm systems which are specified in the Schedule to the Policy of Insurance and, if so, was the system at the warehouse so specified?
(6) On the true construction of the BAMW what must the insurers establish for a defence of breach of warranty? Is it enough that the relevant burglar alarm system was not in “full and effective operation” (as the insurers contend) or must the insurers show that there was a defect in the system which the claimant had failed to remedy as soon as reasonably practicable after it had discovered the defect (as the claimant contends)?
(7) Was the claimant in breach of the BAMW because (a) the guardwire fitted to the walls of the mezzanine area (including the outer wall) had not been connected to the intruder alarm system or (b) five of the motion detectors on the mezzanine had been angled upwards.
(8) What representations were made by or on behalf of the claimant prior to the variation to the contract of insurance by which the insurers removed the exclusion in Endorsement 6?
(9) Were the representations that were made material misrepresentations or, alternatively was there material non-disclosure by the claimant?
(10) If so, did such material non-disclosure induce the insurers to agree to the variation?
Assessment of the witnesses
Before going through the detailed chronology of events leading up to the theft, I shall set out my assessment of the various witnesses called on both sides, not least because...
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