DANEPOINT Ltd v ALLIED UNDERWRITING INSURANCE Ltd
| Jurisdiction | England & Wales |
| Judge | JUDGE PETER COULSON QC |
| Judgment Date | 20 October 2005 |
| Neutral Citation | [2005] EWHC 2318 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 20 October 2005 |
| Docket Number | No. HT-04–298 |
[2005] EWHC 2318 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
St. Dunstan's House
His Honour Judge Peter Coulson QC
No. HT-04–298
MR. O. RHYS (instructed by Trott & Gentry) appeared on behalf of the Claimant.
MR. P. SUTHERLAND (instructed by Harrison Drury & Co., Preston) appeared on behalf of the Defendant.
(As approved by the Judge)
A. INTRODUCTION
On the 13 th of June, 2001, there was a fire at 8, Craven Hill, London W2 ("the property"). At the time of the fire, the property was owned by Craven Hill Properties Ltd. ("Craven Hill") and managed by Starmax Services Ltd. It was divided up into 13 flats and entirely sub-let to tenants on assured short-hold tenancies with terms of 6 to 12 months.
Mr. Aron Shaya was the London manager of Craven Hill. Its ownership was complex, involving nominee shareholders and offshore companies which, during his cross-examination, Mr. Shaya was reluctant to identify. At least one director, a Mr. Bastable, was based in Jersey. Mr. Bader Masawi was the relevant director of Starmax, the company who managed Craven Hill's properties, collected rent and the like.
Craven Hill was insured by the defendant, Allied Underwriting Insurance Ltd. ("AUA"). The property itself was insured for a maximum of £650,000, and there was also cover for lost rent up to a figure of £130,000. Following the fire, Craven Hill made a claim to AUA under the policy for the cost of reinstatement/repair and for lost rent. The reinstatement/repair claim was agreed in August 2001 in the total sum of £83,000. AUA paid £25,000 on account. The loss of rent claim was first presented on 10 th October 2001 in the sum of £59,227.50, but this was later reduced in November to £53,487.40.
On 4 th December 2001, AUA's solicitors wrote to the solicitors acting for Craven Hill, notifying them that AUA regarded the insurance policy as void "and all claims thereunder shall be forfeited". They sought the return of the £25,000 already paid to Craven Hill. The letter alleged that there had been fraud on the part of Craven Hill.
Craven Hill denied fraud. They commenced these proceedings in the Chancery Division as long ago as April 2002. The proceedings were not transferred to the Technology and Construction Court until September 2004 and, by reason of an agreed stay imposed at the time of this transfer, the parties did not seek directions from this court until May of this year when the trial date was fixed.
It should also be noted at the outset that Craven Hill have assigned their claim against AUA in these proceedings to a company called Danepoint Ltd. No point is now taken on the efficacy of that assignment. However, Craven Hill remain a defendant to AUA's Part 20 claim for the return of the £25,000. For the purposes of this judgment, it is convenient to refer to the claimant and the Part 20 defendant simply as Craven Hill.
I set out below the background facts and the relevant narratives in respect of the reinstatement/repair claim and the loss of rent claim (paragraphs 8 to 42). I then identify the issues between the parties and the applicable principles of law (paragraphs 43 to 56 below). I then deal in detail with the claim for the cost of reinstatement/repair (paragraphs 57 to 76 below) and the claim for lost rent (paragraphs 77 to 141 below) before setting out my conclusions (paragraphs 142 to 147 below).
B. BACKGROUND
The insurance policy was effective from 29 th June 2000. It expressly covered damage by fire. General Condition 3 provided that:
"If the insured shall make any claim knowing the same to be false or fraudulent as regards amount or otherwise, this policy shall become void and all claims thereunder shall be forfeited."
The policy was itself based on a proposal form completed by Craven Hill. In answer to specific questions Craven Hill denied that the flats were let for periods of 12 months or less or let to referrals from the DSS or Local Authority.
Following the fire on 13 th June, Craven Hill appointed Mr. Stanley Balcombe of SB Insurance Loss Assessors Ltd. to act on their behalf in pursuing the claim against AUA. AUA themselves appointed Mr. Clive Ellis of Ellis May to act as the loss adjuster on their behalf. These two intermediaries dealt with and discussed both heads of loss, namely the reinstatement/repair claim and the loss of rent claim.
Mr. Ellis visited the property in the company of Mr. Balcombe on 14 th June 2001. He produced a preliminary report dated 18 th June 2001 which contained some photographs. The report and the photographs made clear that there was extensive damage to flat 4, where the fire started, and damage to many other parts of the property, which are then listed in the report.
Mr. Ellis visited the property again on 18 th June and his colleague, Mr. Kent, inspected certain flats on 22 nd June. There is a written record of Mr. Kent's visit.
Mr. Ellis's first report of 29 th June 2001 referred to the proposal form (para.9 above) and demonstrated that many of the flats were let on six month tenancy agreements. He advised that:
"We therefore consider that when the proposal form was completed the facts given to you were inaccurate and therefore a misrepresentation has taken place on the part of your insured or his agent. If you had been aware that many of the flats were being occupied on rental agreements for less than six months you may have made a decision to decline cover. If you would make a decision to decline cover in the event that you were aware that approximately 50% of the properties were being occupied by tenants on six month rental agreements, we consider that you were entitled to void the policy ab initio."
AUA took some time considering whether or not to avoid the policy on this ground. During that period Mr. Balcombe and Mr. Ellis progressed the claim "without prejudice" to this possibility. Mr. Ellis did not, however, inform Mr. Balcombe in writing expressly of the problem until 19 th July when he said:
"At the time of writing, policy liability is in doubt as there has been a misrepresentation on the proposal form. The proposal form specifically states that none of the premises will be let out to tenants or sub-tenants for periods of 12 months or less. Underwriters agreed to insure the property on the basis that the information provided on the proposal form was accurate."
The problem was allegedly compounded when Mr. Shaya of Craven Hill approached AUA direct and was alleged to have said that "We will need to refer some of the DHSS tenants back to the Local Authority once the repairs have been completed". The occupation by DHSS tenants would also have been contrary to the proposal form. Mr. Shaya later said that he had not made any reference to DHSS tenants in the building.
On 8 th August Craven Hill's solicitors wrote a long letter explaining that, in essence, AUA had been told precisely who was occupying the property and on what terms at the time of the inception of the insurance policy. On that basis, on 10 th August 2002, AUA instructed Mr. Ellis to settle the claim. He told Mr. Balcombe this on the same day. On 14 th August Mr. Ellis wrote to Craven Hill's solicitors to confirm that "AUA have agreed to accept liability for your client's claims under the terms of the policy". Accordingly, the question of AUA's liability did not feature again in the correspondence. In these proceedings Craven Hill argued that this early dispute coloured Mr. Ellis's view of Craven Hill and the validity of their claim. I reject that suggestion. Whilst I accept that Mr. Ellis was perhaps tougher than some loss adjusters, I do not believe that these early events led him to be prejudiced against Craven Hill.
C. NARRATIVE—THE REINSTATEMENT/REPAIR CLAIM
On 26 th June 2001 Mr. Balcombe procured a quotation for the reinstatement/repair works from Titchfield Construction in the sum of £106,160. Two days later he passed it on to Mr. Ellis. Titchfield Construction were known to Mr. Balcombe and he had used them before.
On 11 th July Mr. Balcombe and Mr. Ellis met on site and went through the Titchfield Construction quotation. Mr. Ellis thought that the quotation was too high and noted down lower figures for the items of work which indicated a total value of £83,000. On 19 th July Titchfield produced a revised quotation in the sum of £86,000.
On 10 th August, following the indication from AUA that they would meet the claim in principle, Mr. Ellis offered to Mr. Balcombe that the reinstatement/ repair claim would be met on condition that the total figure was £83,000 and that Titchfield Construction carried out the work. This offer was accepted by Mr. Balcombe.
The settlement agreement was confirmed in writing by Mr. Ellis on 16 th August. He said:
"I am in a position to agree the building repairs in the sum of £83,000 plus VAT, which is based upon a fixed price estimate from Titchfield Construction. As discussed, no extras will be considered to these agreed costs. The claim for building repairs is subject to the works being completed by Titchfield Construction and we propose to conduct approximately three visits to the site to make sure that the work is being completed as per the estimate."
Mr. Balcombe did not respond to or challenge any part of that letter. For the avoidance of doubt, I consider that on all the evidence the agreed sum of £83,000 was a fair and reasonable figure for the work in the Titchfield specification.
The sum of £25,000 was paid on account by AUA...
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