Euro Pools Plc ((in Administration)) v Royal and Sun Alliance Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 19 January 2018 |
| Neutral Citation | [2018] EWHC 46 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2016-000064 |
| Date | 19 January 2018 |
[2018] EWHC 46 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mrs Justice Moulder
Case No: CL-2016-000064
Mr Ben Elkington QC and Mr Josh Folkard (instructed by Edwin Coe LLP) for the Claimant
Mr Jonathan Hough QC and Mr George Spalton (instructed by Kennedys Law LLP) for the Defendant
Hearing dates: 4–7 December and 11–14 December 2017
Judgment Approved
Introduction
This is a claim which arises out of two policies of professional indemnity insurance underwritten by the defendant (“RSA”) in favour of the claimant.
The claimant company was founded by Mr David Wyllie. He remains its managing director and sole shareholder. It is now in administration. The claimant specialised in the installation and outfitting of swimming pools.
The subject matter of the claim relates principally to mitigation works carried out by the claimant following problems encountered with its movable floors and its booms system (the “Floors Claim” and the “Booms Claim” respectively). Movable floors are horizontal platforms that move vertically through the water to vary the usable water depth for the various activities that take place in the pool. Booms are vertical walls that divide a pool into different swimming zones, with the walls designed to rise and fall so that a pool can be used in different configurations.
Separate issues arise in respect of the claim to be indemnified for third-party claims and mitigation works arising out of the failure of the diving pool floor at Leeds.
There is also a claim for costs incurred in respect of third-party litigation against White Young Green, the consultant engaged by the claimant to carry out design work for moveable floors (the “WYG litigation”).
The Policies
Although the claimant was insured with the defendant for many years prior to the matters which form the subject matter of this claim, the relevant policies for the purposes of this claim are the professional indemnity insurance policy which the claimant entered into in June 2006 (for the purposes of this judgment referred to as the “First Policy”) with the defendant which covered the period from 30 June 2006 to 29 June 2007 and the policy of insurance (referred to in this judgment as the “Second Policy”) which covered the period from 30 June 2007 to 29 June 2008. Apart from the amount of the Insured's Contribution, so far as material to the issues before this court, the First Policy and the Second Policy were on the same terms. The policies were professional indemnity insurance policies pursuant to which the defendant would indemnify the claimant against liability for damages in respect of third-party claims such as negligence arising out of its professional activities. The limit of indemnity for each policy was £5 million. The broker in relation to the policies of insurance was AON.
Condition 2 required the claimant to give notice to the insurer:
“as soon as possible after becoming aware of circumstances… which might reasonably be expected to produce a Claim… 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”
The claims in these proceedings, insofar as they relate to a claim for mitigation works carried out by the claimant, arose pursuant to insurance clause 5 of the policy:
“The Company will indemnify the Insured 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 the Insured who will be obliged to give prior written notice to the Company during the Period of Insurance of the intention to take action that will incur such costs and expenses.”
Issues for the court
The Floors Claim
It is common ground that the Floors Claim was validly notified to the First Policy and the issues which remain to be determined in relation to the Floors Claim are:
i) the application of the Insured's Contribution;
ii) the overhead rate in respect of quantum;
iii) limitation under the policy in respect of costs and expenses incurred prior to January 2010; and
iv) the alleged collateral contract.
The Booms Claim
In relation to the Booms Claim the issues that fall for determination can be expressed as follows:
i) Was there a valid notification in May 2008 under the Second Policy? What is the scope and effect of the notification in February 2007? Do the mitigation costs fall for cover under the First Policy or the Second Policy?
ii) Was there a collateral contract in respect of the Booms claim?
The Leeds diving pool floor claim
In relation to the Leeds diving pool floor (“LDPF”) claim the issues that fall for determination are as follows:
i) Was there a valid notification under the Second Policy in November 2007?
ii) Do the mitigation costs and expenses incurred by the claimant and the third-party claims from Leeds Council and Sir Robert McAlpine (“SRM”) fall for the cover under the First Policy or the Second Policy?
iii) If the amounts claimed attached to the First Policy and exceed the £5 million limit of indemnity, are they recoverable in any event on the basis that the defendant is estopped from denying the LDPF claim attaches to the Second Policy?
iv) Was there a collateral contract in respect of the LDPF claim?
Booms claim/LDPF claim- Common issues
The issues referred to above under the Floors Claim in relation to the Insured's Contribution, the overhead rate and limitation are equally applicable to the Booms claim and the LDPF claim.
WYG litigation
In relation to the WYG litigation, the pleaded case of the claimant is that it was an implied term that if the defendant decided to bring proceedings against third parties in the name of the claimant then the defendant:
i) would indemnify the claimant for any costs and expenses the claimant incurred in relation to such proceedings; and
ii) would indemnify the claimant in respect of any adverse costs orders made against the claimant in such proceedings.
Evidence
For the claimant I heard evidence from Mr Wyllie and expert evidence, as set out below.
For the defendant I heard evidence from Mr Douglas Murphy, Mr Chris Dunn, Ms Linda Moir, Ms Rebecca (formerly Trevor) Goddard. Mr Murphy originally worked for Crawford and Co., loss adjusters, instructed by the defendant. Mr Dunn, Ms Moir and Ms Goddard worked for the defendant at the material time. Ms Goddard headed up the team but no longer works for the defendant. Mr Ward (who did not give evidence) reported directly to Ms Goddard. Mr Dunn and Ms Moir were below Mr Ward in the hierarchy.
There were two witness statements before the court from Mr Murphy, one of which was unsigned and prepared by the claimant's solicitors. In relation to the unsigned statement Mr Murphy confirmed that he had had an opportunity to read the unsigned statement and he approved it at the time and the contents of that statement were true (subject to a correction he made).
Jill Gough was the account manager at AON who dealt with the 2006/2007 renewal but did not give evidence.
The court also had the benefit of expert reports from quantity surveyors: Mr Champion instructed by the claimant and Mr Hunter instructed by the defendant. These reports are detailed below. The court also had reports from engineering experts: Dr Kirby instructed by the claimant and Mr Cotterill for the defendant. Mr Cotterill produced a report dated 28 September 2017 and Dr Kirby a report dated 1 November 2017. A joint statement was dated 15 November 2017 and Mr Cotterill produced a supplemental report dated 24 November 2017. All the experts gave oral evidence and were cross-examined.
The documentary evidence (other than the pleadings, witness statements and expert reports) before the court was voluminous but had been helpfully reduced to 2 core bundles. A daily transcript was also produced. It is neither practicable nor necessary in my view to recite all the evidence on which a party relies in support of a specific issue and it should not be inferred that evidence has not been taken into consideration in reaching a conclusion merely because it has not been expressly referred to.
The Booms Claim
I deal first with the Booms Claim. The claimant is seeking to recover the costs of mitigation works carried out by it in relation to booms. In summary, on the evidence before the court, the first time the defendant was told of a problem with booms was at a meeting in February 2007 when a problem was identified with the stainless steel tanks which, when filled with air, raised the booms. The evidence established that, having been told of the problem with tanks at the meeting in February 2007 (and after a further communication of June 2007), Ms Moir opened a claim file in June 2007. The claimant replaced the tanks in some of the pools with inflatable bags but the claimant encountered problems with the inflatable bags and in May 2008 told the defendant, through its broker, that it wanted to change to a hydraulic system. It is the claimant's case that the notification in May 2008 amounted to a notification under the Second Policy. At the time (August 2008) the defendant accepted the proposed change to hydraulics but took the view that the claim had been notified to the First Policy.
Claimant's submissions
Counsel for the claimant submitted that there was a valid notification of circumstances in May 2008 and it is not necessary to consider whether there...
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