Euro Pools Plc ((in Administration)) v Royal & Sun Alliance Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Dame Elizabeth Gloster DBE,Males LJ,Hamblen LJ |
| Judgment Date | 13 May 2019 |
| Neutral Citation | [2019] EWCA Civ 808 |
| Docket Number | Case No: A4/2018/0306 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 May 2019 |
[2019] EWCA Civ 808
Lord Justice Hamblen
Lord Justice Males
and
Dame Elizabeth Gloster DBE
Case No: A4/2018/0306
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MRS JUSTICE MOULDER
Royal Courts of Justice
Strand, London, WC2A 2LL
Ben Elkington QC and Josh Folkard (instructed by Edwin Coe LLP) for the Claimant/Respondent
Jonathan Hough QC and George Spalton (instructed by Kennedys Law LLP) for the Defendant/Appellant
Hearing dates: 23/24 January 2019
Approved Judgment
Introduction
This is an appeal from an order (“the order”) of Moulder J (“the judge”), sealed on 25 January 2018 following her judgment delivered on 19 January 2018 (“the judgment”). The judge gave judgment in favour of the claimant, Euro Pools PLC (in administration) (“Euro Pools”), against the defendant, Royal & Sun Alliance Insurance PLC (“RSA”), in the sum of £2,417,890 plus interest.
Euro Pools claimed to be entitled to indemnities under two policies of professional indemnity insurance, in operation for the years 2006–07 and 2007–08 respectively, in respect of costs incurred by Euro Pools in remedying various faults that had occurred in swimming pools it had installed for third parties. The issue that arises in the present appeal is whether expenses incurred in installing a new hydraulic system to power moveable ‘booms’ at several pools were incurred to mitigate potential claims arising from circumstances notified by Euro Pools under the first (2006–07) policy of insurance, such that the indemnity payable by RSA would be subject to that policy's limit of indemnity of £5 million; or whether the potential claims, in respect of which those expenses were incurred, arose from circumstances notified under the second policy of insurance (2007–08), such that the indemnity payable would be subject to the separate limit under that policy. The judge held, and Euro Pools submits, that the expenses attach to the second policy; RSA, as appellant, submits that they attach to the first policy.
Mr Jonathan Hough QC and Mr George Spalton appeared on behalf of RSA, the appellant, as they had below. Likewise, Mr Ben Elkington QC and Mr Josh Folkard appeared on behalf of Euro Pools, the respondent, as they had below.
Factual and procedural background
The parties
Euro Pools is a company, now in administration, that specialised in the installation and fitting out of swimming pools. For the purposes of this judgment, the relevant individual connected with Euro Pools was Mr David Wyllie, the founder, managing director and sole shareholder.
RSA is an insurance company. For the purposes of this judgment, the relevant individuals employed by RSA were Ms Rebecca Goddard, a claims manager and Ms Linda Moir, a Senior Claims Technician.
AON was engaged as Euro Pools' insurance broker in relation to the relevant insurance policies. For the purposes of this judgment, the relevant individual employed by AON was Ms Jill Gough.
The insurance policies
So far as is relevant to the present appeal, Euro Pools and RSA agreed two materially identical policies (“the Policies”) for professional indemnity insurance. In particular:
i) a policy which covered the period from 30 June 2006 to 29 June 2007 (the “First Policy”); and
ii) a policy which covered the period from 30 June 2007 to 29 June 2008 (the “Second Policy”).
The limit of indemnity set out in the Schedule to each policy was £5 million. Each Policy was written on a “claims made basis” and each provided cover both for liabilities to third parties and for the costs of remedial works intended to mitigate the risks of claims by third parties.
The key terms of each policy were as follows:
i) Insurance Clause 1 provided cover in respect of third party claims against Euro Pools as follows:
“[RSA] will indemnify [Euro Pools] against liability at law for damages and claimant's costs and expenses in respect of Claims arising out of the conduct and execution of the Professional Activities and Duties first made against [Euro Pools] and notified to [RSA] during the Period of Insurance for – (A) Negligence… occurring or committed in good faith by [Euro Pools]”;
ii) Insurance Clause 5 provided cover in respect of sums expended by Euro Pools with a view to mitigating such third party Claims, as follows:
“[RSA] will indemnify [Euro Pools] against costs and expenses necessarily incurred in respect of any action taken to mitigate a loss or potential loss that otherwise would be the subject of a claim under this Insurance. The onus of proving a loss or potential loss under this Insurance shall be upon [Euro Pools] who will be obliged to give prior written notice to [RSA] during the Period of Insurance of the intention to take action that will incur such costs and expenses”;
it would appear that “the subject of a claim under this Insurance” with a lower case “c” in this clause is a reference to a claim by the Insured against RSA under the policy as opposed to a “Claim” by a third party against the Insured;
iii) Condition 2 imposed an obligation on Euro Pools to notify RSA of any circumstances that might give rise to a Claim, as follows –
“[Euro Pools] shall as a condition precedent to their right to be indemnified under the insurance give written notice to [RSA]… as soon as possible after becoming aware of circumstances… which might reasonably be expected to produce a Claim… for which there may be liability under this Insurance. Any Claim arising from such circumstances shall be deemed to have been made in the Period of Insurance in which such notice has been given”;
iv) Exclusion Clause 18 excluded RSA from liability in respect of –
“A) the consequence of any circumstance 1) notified under any insurance which was in force prior to the inception of this Insurance [or] 2) known to [Euro Pools] or which should have been known to [Euro Pools] at the inception of this Insurance which might reasonably be expected to produce a Claim”.
The relevant projects
The claim brought by Euro Pools is (primarily) for the payment by RSA of an indemnity in respect of expenses incurred by Euro Pools in carrying out mitigation works on swimming pools that it (or its predecessor) had installed for third parties.
Those mitigation works related to two different features installed by Euro Pools:
i) a system of movable ‘booms’ installed in several swimming pools; booms are vertical walls used to divide a pool into different swimming zones; Euro Pools' booms are designed to rise and sink in order that a pool can be used in different configurations; and
ii) a system of movable floors installed in several swimming pools; the floors installed by Euro Pools are platforms designed to rise or sink to vary the usable pool depth.
The present appeal relates only to mitigation works carried out in relation to the system of booms. Euro Pools has at different times employed three different mechanisms for raising and lowering the booms. These were:
i) an air drive system whereby air was pumped into and removed from stainless steel tanks installed within the booms in order to raise or lower the booms;
ii) an air drive system whereby air was pumped into and removed from inflatable bags inserted into the structure of the booms (the steel tanks having been abandoned); and
iii) a hydraulic system whereby hydraulic rams were connected to the bottom of the booms in order to lift up or pull down the booms.
February 2007: Problems encountered with Tank (Air Drive) System
By February 2007, Euro Pools had been informed of problems with the steel tank system installed at two sites. In particular, air was leaking out and water in, preventing the booms from rising properly.
On 23 February 2007, a meeting was held between Mr Wyllie (Euro Pools), Ms Moir (RSA) and representatives of AON. A record of the meeting was made by Ms Moir and Mr Garry Hill of AON. The judge found that, at that meeting:
i) Mr Wyllie mentioned the problems encountered with the steel tanks. This was mentioned as a notification of circumstances pursuant to Condition 2 of the First Policy, rather than as a mere ‘snagging’ item;
ii) the specific problem identified by Mr Wyllie was “a failure of original bracing”
in steel tanks at some but not all of the sites at which they had been installed. Mr Wyllie considered that the installation of inflatable bags might present a potential solution.
However, at page 13 of Ms Moir's notes, there was a subheading “Booms” after which was stated that at West Tallaght and at Crawley: “the bottom of the ballast tanks in the booms has failed” and that Euro Pools' plan was to cut a hole in the bottom and brace it:
“looks like failure is of original bracing. Other option is to install what looks like a balloon/bag into tanks”
the note continued:
“discussed [policy] response. Sep N/C [separate new claim]” but that the insured did not expect it to exceed the self-insured amount.
Minutes prepared by Mr Garry Hill of the same meeting contained a section at the end stating that Mr Hill phoned Mr Wyllie for his views on the remainder of the meeting as Mr Hill had left the meeting early. Mr Hill noted
“DW confirmed that a further circumstance was notified to LM/CD [Linda Moir/Chris Dunn] concerning a weakness in booms inherited on the Thermelek projects. LM has noted her file and will open a separate claim file. GH will notify JG of this matter….”
On 9 June 2007, Euro Pools, by Mr Wyllie, completed a proposal form to renew Euro Pools' insurance with RSA. Mr Wyllie responded to the question whether he was “aware of any circumstance which may give rise to a claim” by stating...
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