Clare Horwood & Others v Argos Ltd & 16 Others
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 18 March 2010 |
| Neutral Citation | [2010] EWHC 546 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: Claim No: 2009 folio 1472 |
| Date | 18 March 2010 |
[2010] EWHC 546 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr. Justice Teare
Case No: Claim No: 2009 folio 1472
Stephen Hofmeyr QC and N.G.Casey (instructed by Russell Jones & Walker) for the Claimants
Colin Edelman QC and Andrew Burns (instructed by Beachcroft LLP) for Zurich Insurance PLC
Hearing dates: 1–3 March 2010
Mr. Justice Teare:
The Claimants have alleged that they have suffered personal injury from the use of sofas purchased from a number of suppliers. One of those suppliers is Land of Leather which is now in administration. Land of Leather was insured in respect of product liability by Zurich. The Claimants therefore wish to claim against Zurich pursuant to the Third Parties (Rights against Insurers) Act 1930. Zurich say that they are not liable to indemnify Land of Leather and therefore are not liable to the Claimants. This is the trial of certain preliminary issues between the Claimants and Zurich which may be summarised as follows:
i) Whether Land of Leather agreed not to pursue any right of indemnity from its suppliers, Linkwise, in respect of any liability for personal injuries which Land of Leather had to the Claimants.
ii) Whether any such agreement is unenforceable on the grounds of lack of consideration.
iii) Whether any such agreement was a breach of condition 3 of the policy of insurance.
iv) If there was no breach of condition 3, whether there was in any event a breach of an implied term of the policy of insurance.
The Policy
Zurich insured Land of Leather in respect of products liability with a limit of £5m. The Policy contained a number of conditions which provided, so far as material as follows:
1 Observance of policy terms
The due observance of the terms, provisions, conditions and endorsements of this policy by the Insured in so far as they relate to anything to be done are complied with by the Insured and the truth of the statements and answers and information supplied on or in connection with the said proposal shall be a condition precedent to any liability of the Insurer to make any payment under this policy.
2 Notice of claims
The Insured shall give notice in writing to the Insurer as soon as possible after the occurrence of any event likely to give rise to a claim with full particulars thereof. The Insured shall also on receiving verbal or written notice of any claim intimate or send same or a copy thereof immediately to the Insurer, and shall give all necessary information and assistance to enable the Insurer to deal with, settle or resist any claim as the Insurer may think fit. Such information and assistance shall be given without any delay, and so far as reasonably practicable, no alteration or repair shall be made to any way, machinery, appliance, plant or fitting after an accident shall have occurred therewith until the Insurer shall have had an opportunity of examining the same.
3 Control of claims
The Insured shall not, except at his own cost, take any steps to compromise or settle any claim or admit liability without specific instructions in writing from the Insurer nor give any information or assistance to any person claiming against him, but the Insurer shall for so long as they shall so desire have 1 the absolute conduct and control of all proceedings (including arbitration's) in respect of any claims for which the Insurer may be liable under this policy, and may use the name of the Insured to enforce for the benefit of the Insurer any order made for costs or otherwise or to make or defend any claim for indemnity or damages against any third party or for any other purpose connected with this policy.
The facts
In September and October 2007, in response to complaints of skin allergy, Land of Leather decided to stop selling Linkwise products. Stock had to be returned, alternative products had to be provided and adverse media coverage had to be dealt with. This caused Land of Leather to suffer damage to its reputation and to incur expenditure. Land of Leather sought compensation from Linkwise.
In October/November 2007 Mr. Paul Briant, who was the Chief Executive Officer of Land of Leather, took part in discussions with Linkwise concerning Land of Leather's claim to compensation. He gave evidence before me. He was an honest witness though, unsurprisingly, he did not have a complete recollection of the discussions. His written statement dated 16 December 2009 did not give a detailed account of them. He merely stated that as a result of the discussions “it was agreed that Linkwise would compensate LOL by paying US$900,000 which would be treated as a credit against future orders at the rate of US$150,000 per month for six months.” However, his oral evidence did not suggest that an oral agreement in those terms had been made during his discussions.
In his examination in chief Mr. Briant said that at the meeting Land of Leather was represented by himself, Steve Jenkins, the Managing Director, and Clive Hatchard, the Chief Finance Officer. Linkwise was represented by Mr. Mak (who spoke no English) and his interpreter Mr. Bailey. The meeting took place in Poole, Dorset, at the Land of Leather store. He said that Land of Leather was looking for compensation in the sum of $1m. but that agreement was reached in principle at $900,000. He said that mention was made of it being paid at a rate of $150,000 per month. In cross-examination he said that $150,000 had been discussed but not agreed. He said that he
did his best to get a credit note which was “more palatable” for Linkwise. However, it was “left in the air”.
On 8 November 2007 Land of Leather, through their brokers Willis, informed Zurich by email of an invoice to be sent to Linkwise by Land of Leather. Zurich was informed that the invoice was intended to make clear that any payment by Linkwise did not include compensation in respect of personal injury claims. Zurich was asked whether it would prejudice any action they may decide to take. Zurich responded that the invoice wording was “fine” and indicated that they would be redirecting any personal injury claims to Linkwise. Thereafter the invoice, dated 8 November 2007, was issued. It was addressed to Linkwise and read as follows:
“Compensation for damage to reputation, unsold stock, increased cost of working and cost of testing commissioned by the Company arising from reported allergic reactions to product supplied, as agreed. $900,000 “
It is to be noted that no mention was made of instalments of $150,000 per month.
The invoice was emailed to Richard Willan of Linkwise Solutions Marketing, the UK agents of Linkwise, on 9 November at 1210. In that e-mail Adrian Goodenough, the Company Secretary of Land of Leather, stated that the invoice was for “immediate settlement as agreed with Paul Briant and Steve Jenkins”.
At 1219 on the same day Richard Willan replied and copied his reply to Steve Jenkins of Land of Leather. He said that “Steve [Jenkins] agreed to summarise the terms of the settlement” and that the key points were:
“The payment of $900,000 was in final settlement of all matters relating to alleged allergic furniture problems.
Linkwise to issue a credit note for $900,000, payment to be made over 6 months at the rate of $150,000 per month starting December.
Land of Leather to guarantee $20,000,000 of purchases over the twelve months from 1 Dec 07.”
At 1650 on the same day Steve Jenkins replied to Richard Willan as follows:
“The terms of the settlement are on the invoice.
I am sure we will do $20m with Linkwise next year, however I cannot commit to that number in writing; not because I don't think we will do it, purely because if we have another situation with skin complaints we will have to stop selling Linkwise product. As ever, Mr. Mak and Mr. Briant will have to rely on each others integrity.”
On 16 November 2007 Steve Jenkins emailed Richard Willan and asked whether the credit note from Linkwise had been received. On 18 November 2007 Linkwise issued an credit note in these terms:
”Credit Note US$900,000
Nine Hundred Thousand US Dollars
In relation to agreement between Paul Briant CEO Land of Leather Holding PLC & Kris Mak Managing Director Link Wise Furniture Co. Ltd.”
Mr. Stephen Hofmeyr QC submitted, on behalf of the Claimants, that Land of Leather and Linkwise had reached an agreement that Linkwise would give credit in the total sum of $900,000 by means of 6 monthly credits of $150,000. In support of this submission he relied upon Mr. Briant's written statement and on the circumstances that Steve Jenkins did not dissent from Mr. Willan's assertion in the email of 9 November that that was one of the key terms. In the alternative he submitted that the agreement was for immediate payment of $900,000. In support of this he relied on the terms of the invoice and on Mr. Goodenough's email of 9 November which stated that the invoice was for immediate settlement. In the further alternative he submitted that it was an implied term of the settlement that the sum would be paid within a reasonable time.
Mr. Colin Edelman QC accepted, on behalf of Zurich, that a binding and enforceable agreement had been reached that the claims set out in the Invoice had been settled for the sum of $900,000 but submitted that no express agreement had been reached as to when or how that sum would be paid. In those circumstances there would be an implied term that the sum would be paid within a reasonable time.
The Court has limited evidence before it as to what was agreed in the meeting. There has been no evidence from Linkwise (from either Mr. Mak or Mr. Bailey) or from Steve Jenkins or Clive Hatchard who also...
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