Brit UW Ltd (on behalf of Brit Syndicate 2987 at Lloyd's in relation to policy number B1047FSJ130854) v F & B Trenchless Solutions Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mrs Justice Carr DBE |
| Judgment Date | 31 July 2015 |
| Neutral Citation | [2015] EWHC 2237 (Comm) |
| Docket Number | Case No: Claim No. 2014 Folio 264 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 31 July 2015 |
[2015] EWHC 2237 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mrs Justice Carr DBE
Case No: Claim No. 2014 Folio 264
Mr Neil Calver Q.C. and Mr Michael Bolding (instructed by Clyde & Co LLP) for the Claimant
Mr Daniel Shapiro and Mr James Sharpe (instructed by Darwin Law Limited) for the Defendant
Hearing dates: 6th, 7th, 8th, 10th and 13th July 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
A. Introduction
The Claimant, Brit UW Limited ("Brit"), acting on behalf of Brit Syndicate 2987 at Lloyd's, seeks a declaration that it has validly avoided a contractors' combined liability policy into which it entered with the Defendant, F&B Trenchless Solutions Ltd ("FBTS"), on 19th August 2013 ("the Policy"). FBTS is a specialist tunnelling contractor constructing micro-tunnels.
Brit maintains that it validly avoided the Policy on 21st January 2014 on the ground that FBTS failed to disclose material information to Brit prior to the conclusion of the Policy, namely substantial and progressive earth settlement and a void which occurred in July and early August 2013 at Stoke Lane in Gedling, Nottinghamshire ("the Site"). The void was in an area where FBTS had recently constructed a micro-tunnel beneath a railway line and a level crossing as a subcontractor of Morgan Sindall plc ("MS"). On 27 th August 2013 a freight train pulling wagons loaded with a cargo of diesel derailed when passing over the level crossing ("the derailment"). It is common ground that the immediate cause of the derailment was severe settlement of the railway tracks caused by a void in the ground underneath. The Rail Accident Investigation Board ("the RAIB") published a full report in April 2015 ("the RAIB report").
Brit also maintains that it validly avoided the Policy on the separate and independent basis that FBTS made a material misrepresentation to Brit prior to the conclusion of the Policy, namely that FBTS did not carry out (and would not in the future carry out) tunnelling works on railway lines which were active. Alternatively, FBTS failed to disclose to Brit the fact that the railway line crossing the Site had been active during FBTS' tunnelling works.
FBTS denies that Brit was or is entitled to avoid the Policy, and counterclaims for damages and various declarations which seek to secure an indemnity from Brit for claims arising out of the derailment, including a claim against it by MS for some £2.67 million in respect of remedial works, together with a claim for an indemnity against any claim by Network Rail ("NR") arising out of the derailment.
FBTS says that this claim has been brought only with the benefit of impermissible hindsight. Whilst, following the derailment, matters look both dramatic and clear, a proper understanding of events as they presented at the time shows that the earth movement and void were not material matters to disclose. No representation as alleged was made in relation to work on active railway lines. In addition to difficulties with causation and inducement, Brit in any event affirmed the policy, meaning that it cannot in any event avoid. FBTS brings a counterclaim for declaratory and other relief, including damages.
There are various potential disputes waiting in the wings of this claim, over and above the claim by MS against FBTS referred to above. They include a dispute between Novae Syndicates Limited ("Novae"), FBTS' public liability insurers for the period up to 14 th August 2013, and Brit, in the event that Brit is held not validly to have avoided the Policy. The issue would be whether any or all of the damage for which FBTS seeks an indemnity is covered by Novae's earlier policy in any event. Further, FBTS has issued a letter of claim to its broker, reserving its rights and indicating that in the event that Brit's claim succeeds, it will bring proceedings against it.
B. The facts
The broad facts are not in dispute. I set them out in full below, bearing in mind always that when it comes to the question of material non-disclosure in particular it will be necessary to identify and separate out what FBTS knew at any material time.
The construction of the micro-tunnel
Between 11th June and 9th July 2013, FBTS carried out work to install a concrete micro-tunnel at the Stoke Lane Site. The micro-tunnel has a diameter of 1000mm, lies at a depth of around 5.7m (measured to the top of the tunnel) and is 53m in length. FBTS based its scheme upon the ground conditions as demonstrated by a borehole, namely sandy gravel down to 7m and from 7–10m mudstone (with occasional siltstone and sandstone bands).
The micro-tunnel was installed with an AVN Herrenkenecht tunnel boring machine ("TBM") using a closed-face slurry system, which is designed to support the tunnel face using hydraulic pressure. The process involved the construction of a launch shaft and a reception shaft at either end of the tunnel, each supported by concrete caissons (watertight retaining structures). The TBM then drilled a tunnel in the sand and gravel between the two shafts. FBTS installed 2.5 m pre-cast concrete pipe segments as the TBM moved through the ground via hydraulic jacks. The excavated material was liquefied during this process and was pumped back behind the TBM to surface via the thrust shaft. The tunnel constructed by FBTS ran under a road (Stoke Lane) and passed underneath two twin sewer pipes and a level crossing.
On 21st September 2012, Mr Tom Anderson, a Senior Quantity Surveyor at MS ("Mr Anderson"), sent an email to FBTS (for the attention of Mr Paul Willis, FBTS' Operations Manager ("Mr Willis")) attaching an invitation to tender for the construction of a tunnel under the railway line (the Nottingham-Newark line) at the Site using an auger boring method. MS had been engaged by Western Power Distribution ( East Midlands) Plc ("Western Power") to construct a new substation at Stoke Bardolph and install power cables connecting the substation to the Nottingham electricity network (which involved crossing the railway line at the Site). A meeting took place on 1st October 2012 at MS' offices in Nottingham attended by, amongst others, Mr Liam Burke, FBTS' managing director ("Mr Burke"), and Mr Anderson to discuss the Stoke Lane project.
FBTS sent a proposal signed by Mr Burke to Mr Anderson on 12th October 2012, stating that FBTS could complete micro-tunnelling work (rather than auger boring) at the Site for a price of £168,250 using an AVN Herrenknecht machine. The covering letter signed by Mr Burke stated ;
" As we pointed out at our meeting last week, our proposals will guarantee the crossing, and the proposal is based on the experience we have had in this ground and under this Railway Line…" (emphasis added)
The proposal itself, again prepared by Mr Burke, stated as follows :
"… We have had considerable experience of the ground conditions here, having carried out microtunnelling on the Eltham Road Project for Severn Trent earlier this year.
Ground Conditions are very wet sands and gravels overlying mudstones and siltstones which are encountered at between 7 and 8 meters.
We have actually crossed under this railway line at Colwick in similar grounds…
When we tunnelled at Colwick in the sands and gravels the water pressure at the face was between 0.6 and 0.9 of a bar at 7 metres deep. This means that the soil is liquefied and anything other than a closed face system would not work." (emphases added)
The proposal went on to state :
" With 5–6m of cover I would estimate settlement to be 2–4mm based on the calculations for the Colwick crossing which is less than the 5mm requirement."
The reference in the proposal to " the 5mm requirement" was a reference to the fact that NR required all estimates for under-track crossings to show no more than 5 mm of track settlement, as set out in NR's " Guidelines for Design and Constructions of Undertrack Crossings under Network Rail infrastructure". This document was not published or disseminated to contractors outside NR, but FBTS was clearly aware of the requirement. The Guidelines contained the following entries :
" 5.8 The positioning of UTX beneath level crossings is strongly discouraged due to the problems of installing an effective monitoring system and the disruption to road and rail services should corrective action (packing of track) be required. This could be a very expensive operation as it would require rail and road closures and the removal of the crossing surface…
5.12 The maximum allowable calculated settlement/heave is 5mm. Certain exceptional circumstances will allow for slightly higher values i.e. line speed, track category etc. For large diameter or shall UTXs the design calculations shall also indicate the projected lateral movement of the track due to the UTX installation. On large diameter UTXs pipe ovalisation might also need to be considered within settlement calculations…"
Indeed, Mr Burke's evidence was that he was expressly asked by MS pre-proposal whether FBTS would " be able to get under the 5mm level of predicted settlement". If the 5mm requirement could not be met, the project would simply not have gone ahead in its current form.
A further meeting took place on 30th January 2013 at MS' offices in Nottingham at which Mr Burke and Mr Graham Gibson, FBTS' Commercial Manager ("Mr Gibson"), and also (it seems) Mr...
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