Brian Leighton (Garages) Ltd v Allianz Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Popplewell,Lord Justice Nugee,Lord Justice Males |
| Judgment Date | 11 January 2023 |
| Neutral Citation | [2023] EWCA Civ 8 |
| Docket Number | Case No: CA-2022-001148 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 8
Lord Justice Males
Lord Justice Popplewell
and
Lord Justice Nugee
Case No: CA-2022-001148
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND
AND WALES
LONDON CIRCUIT COMMERCIAL COURT (KBD)
Ms Clare Ambrose (sitting as a Deputy High Court Judge)
[2022] EWHC 1150 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Nicholas Davidson KC (instructed by Adie Pepperdine Ltd) for the Appellant
Jason Evans-Tovey (instructed by Clyde & Co Claims LLP) for the Respondent
Hearing date: 15 December 2022
Approved Judgment
This judgment was handed down remotely at 2:00pm on 11 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
This is an appeal by Brian Leighton (Garages) Ltd (‘BLG’) against a decision of Ms Clare Ambrose, sitting as a deputy judge of the High Court (‘the Judge’). Until June 2014 BLG ran a garage business in Goole, East Yorkshire, trading and repairing vehicles and operating a 24 hour petrol filling station. The Respondent (‘Allianz’) was its insurer under a Motor Trade Policy (‘the Policy’) covering various risks under 15 sections. BLG has brought a claim under Section 1 (material damage) and Section 8 (business interruption) arising out of a fuel leak in early June 2014, which resulted in the garage being shut down for health and safety reasons. Allianz has declined liability.
The Judge was determining various issues in a summary judgment application brought by Allianz. The decision under appeal was that damage to the forecourt and shop building was damage “caused by pollution or contamination” so as to be excluded from cover under Exclusion 9 of the Policy.
The facts
Because the issue arose in a summary judgment application by Allianz, and by reason of the procedural history, the issue of the construction and application of Exclusion 9 fell to be decided on the basis of facts which were disputed by Allianz but were to be assumed to be true for the purposes of the application. Those assumed facts are as follows.
A leak occurred from a section of pipe connecting one of the underground fuel tanks to six of the forecourt fuel pumps. It was caused by the pressure of an object such as a sharp stone on the pipe, under pressure and movement from the weight of the concrete slab under the forecourt. The fuel leak started shortly before 4 June 2014 and within a matter of days contaminated the forecourt, yard, paved area and forecourt pad and ducting (‘the forecourt’) and the lower parts of the floors, walls and skirtings of the adjacent shop building (‘the building’). The contamination reached the electrical conduits connecting the pumps to the building. The contamination was such that by 9 June 2014 those parts of the premises were at immediate risk of catching fire or exploding, and the business had to be closed. Allianz did not agree to indemnify BLG and it could not afford to effect the necessary repairs itself, with the result that the business never reopened and was ultimately sold.
The Policy
The Policy was a renewal for 12 months at 31 December 2013 of cover which Allianz had provided to BLG for a number of years on its “Headlight Motor Trade Policy Wording”. Section 1 covers Material Damage, Damage being defined as “accidental loss, destruction or damage to Property Insured”. It is common ground that the forecourt and building were Property Insured.
Section 1 is structured in five parts. The first part sets out definitions which are to apply to the Section, in addition to “Policy definitions” set out immediately before the Section which are applicable to all sections of the Policy. The second part comprises unnumbered sections addressing “Cover”. The third part comprises 26 numbered “Extensions”. The fourth part contains 15 numbered “Exclusions”. The fifth part contains 5 “Conditions”.
The first clause in the second part under the heading Cover provides:
“ Indemnity
We will pay You for damage to Property Insured at The Premises shown in the Schedule by any cause not excluded occurring during the Period of Insurance…”
In the third part, Extension 26 provides:
“ Trace and Access
In the event of Damage in consequence of escape of water or fuel oil from any tank, apparatus or pipe, or leakage of fuel from any fixed oil heating installation, We will pay costs necessarily and reasonably incurred by You in locating the source of such Damage, and in the subsequent making good of Damage caused as a consequence of locating such source, up to an amount of £10,000 any one claim.”
In the fourth part, Exclusion 9 provides:
“ Exclusions to Section 1
The General Exclusions of this Policy apply to this Section and in addition it does not cover:
…..
9. Pollution or Contamination
Damage caused by pollution or contamination, but We will pay for Damage to the Property Insured not otherwise excluded, caused by:
a pollution or contamination which itself results from a Specified Event
b any Specified Event which itself results from pollution or contamination.”
Specified Events are defined in definition 9 in the first part of the section as follows:
“9. Specified Events
Fire, lightning, explosion, aircraft or other aerial devices or articles dropped from them, riot, civil commotion, strikers, locked-out workers, persons taking part in labour disturbances, malicious persons other than thieves, earthquake, storm, flood, escape of water from any tank apparatus or pipe or impact by any road vehicle or animal.”
It is common ground that no Specified Event occurred in this case.
The indemnity clause in Section 8 covers gross profit lost for business interruption which is a consequence of damage insured under Sections 1, 2 and 3.
The Judgment
BLG argued before the Judge that the point was not suitable for summary determination and/or that the way in which it had been raised and argued by Allianz was procedurally unfair. It further argued that the effect of the leak may have been pollution or contamination, but that was merely to define the damage; the cause of the damage was the sharp object which punctured the pipe; and further that Exclusion 9 only applied to environmental pollution of groundwater and subsoils. Allianz argued that the damage was clearly caused by pollution and contamination by the fuel, and relied on Legg v Sterte Garage [2016] EWCA Civ 97 [2016] Lloyd's Rep I.R. 390.
The Judge recorded at paras [24] and [47] that the material damage for which BLG was claiming an indemnity (in the respect relevant to the issue under appeal) was the immediate contamination of the forecourt and building, making them susceptible to the immediate risk of fire and explosion. She recorded BLG's expert evidence as to the cause of the rupture of the pipe, and Allianz's willingness for its summary judgment application to proceed on the basis that the cause was accepted notwithstanding that the evidence was disputed. She rejected BLG's overarching submission that none of the issues which arose were suitable for summary determination.
When addressing the issue whether the cause of the damage (other than the damage to the leaking pipeline itself) was within Exclusion 9, she first concluded that the point was appropriate for summary determination, being a short point of construction on assumed facts which did not require any further factual investigation or expert evidence, and that there was no unfair prejudice to BLG in the way it had been raised or argued.
Paragraphs 57 to 63 contain her essential reasoning for concluding that the damage was within the exclusion, and can be summarised as follows.
Allianz's argument that the damage was caused by pollution and contamination better reflected the ordinary meaning of the clause and its likely scope within a policy covering a garage, since it was unlikely that any exclusion only applied to subsoils and groundwater rather than the property insured. Allianz's construction was also more consistent with the express terms of the carve out in Exclusion 9 and the Track and Trace Extension 26. The wording of Exclusion 9, by reference to the Specified Events, acknowledged that the damage caused by pollution or contamination would be caused by something else including, for example, fire, floods or leak of water from a pipe, but on its express terms the policy would not cover escape of fuel from a pipe. There was no support in the wording or context of the Policy for BLG's argument that the exclusion applied only to environmental contamination of subsoils and groundwaters, which was unworkable since BLG was unable to identify what “the environment” would mean. Although pollution is often associated with harmful substances being released into the natural environment, contamination is more commonly used outside that context and on its ordinary meaning would certainly cover leakage of harmful substances being absorbed within the fabric of a shop or forecourt. On its ordinary meaning pollution would cover leakage of oil from a pipe into something else, whether a beach, river, garage forecourt or shop, and that would extend to the mechanism by which the leak took place (including a pipe failing and leaking oil) rather than solely the condition of being polluted or saturated.
BLG's arguments were also inconsistent with the decision in Legg v Sterte Garage, in particular paragraph 28 of the judgment of David Richards LJ, which was consistent with Allianz's argument.
The skeleton arguments on appeal
Mr Davidson KC, who did not appear below, started from the proposition that the damage for which the claim was made, namely the effect of the...
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