Genesis Housing Association Ltd v Liberty Syndicate Management Ltd for and on behalf of Syndicate 4472 at Lloyd's
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 08 November 2012 |
| Neutral Citation | [2012] EWHC 3105 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 08 November 2012 |
| Docket Number | Case No: HT-11-527 |
[2012] EWHC 3105 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case No: HT-11-527
James Leabeater (instructed by Winckworth Sherwood LLP) for the Claimant
Richard Sage (instructed by CMS Cameron McKenna LLP) for the Defendant
Hearing date: 29 October 2012
These proceedings raise interesting insurance issues, particularly in relation to "basis" clauses and warranties. There was little in issue between the parties on the evidence, and indeed neither of the single witnesses called by each party could add much at first hand to the contemporaneous documents.
The Facts and the Documents
Paddington Churches Housing Association ("Paddington") was a charitable Industrial and Provident Society and part of what was called the Genesis Housing Group which provided affordable or social housing. In April 2011 Paddington was by special resolution amalgamated together with Genesis Housing Association Ltd, the Claimant. The Defendant, Liberty Syndicate Management Ltd, is a corporate Lloyd's syndicate which until 2011 underwrote policies known as "Premier Guarantee for Social Housing" administered exclusively by a Reading based company, MD Insurance Services Ltd ("MD"). This guarantee provided decennial cover, amongst other things, against certain types of defects within the social housing to which it applied.
In March 2007, Bedford Properties Ltd secured planning permission for the renovation and redevelopment of an office block formerly known as BT Towers, 25–27, St John's Street, Bedford for residential use including affordable housing. The freehold was transferred to a company called Time and Tide (Bedford) Ltd ("TT Bedford") in May 2007 who, by prior arrangement, granted leases to Paddington for Floors 1 to 3 to be rented on a social rent basis and Floors 4 to 6 on a shared ownership basis; 51 flats were demised to Paddington. TT Bedford was a special purpose vehicle for this particular development and was part of a group of companies owned or at least run by two brothers, Graham and Perry Gamby.
By a written contract in standard JCT form dated 9 April 2007, Paddington as Employer engaged TT Bedford (wrongly named as Time and Tide Ltd) as the main contractor to design and carry out extensive alterations, refurbishments and fitting out for this development. The Contract Sum was £4.6m and the Employer's Agent was named as Woodeson Drury Ltd. The works were to start on 3 May 2007 and be completed by 1 December 2008. There was a Contract Sum Analysis which identified against 27 Heads various individual sums totalling £4.6m including an "Initial Payment" of £1.3m. £38,250 was identified as being for a "Building Warranty". Paragraph 730 of the contractual Employer's Requirements required TT Bedford to secure insurance cover with the NHBC which was to include cover for TT Bedford's insolvency and 12 years cover.
These arrangements had been the subject matter of discussion and negotiation for some months prior to the building contract being entered into. On 28 March 2007, Mr Galliers on behalf of Paddington wrote to TT Bedford saying that it would pay £4.6 million and would enter into a JCT contract with TT Bedford.
There clearly was some discussion between Mr Galliers and either or both of the Gamby brothers about the building warranty and it seems to have been understood between them that cover using the Premier Guarantee arrangements (including insurance against TT Bedford's insolvency) would suffice instead of the NHBC arrangement. There was clearly some understanding that TT Bedford would arrange for such cover to be provided. This is evidenced amongst other things by an e-mail dated 28 March 2007 from Mr Galliers.
To that end, one or other or both of the Gamby brothers approached MD to seek such cover. A Proposal form to that end was filled out largely by Mr Johnson of MD; there is no evidence as to whether this was largely done on the telephone or face to face although it is not an issue that Mr Graham Gamby signed the Proposal form, probably on 2 April 2007. Mr Johnson wrote in handwriting on the front page: Time and Tide Bedford Ltd" and "Genesis HSG Assoc". The form goes on to provide:
(a) "Genesis Housing Association" is named as the Housing Association.
(b) The Quotation is to go to Graham Gamby.
(c) The "Reconstruction Cost" is identified as £4.6m; the "Contract Cost" was filled out (correctly) as £4.6m in handwriting but that was scored out and £3.7m substituted. It is unclear when the scoring out took place and it is wholly unclear where the figure of £3.7 million came from. It has no obvious resonance for instance in the Contract Sum Analysis.
(d) The name of the "Builder" was identified as "Time and Tide Construction Ltd" ("TT Construction") and a contact name was "Perry Gamby".
(e) Under the heading "Additional Cover", the box against "Insolvency of Builder during construction" has been ticked.
(f) The following words appear, typed as part of the form, under the heading "Declaration by the Insured":
"I/we declare that to the best of my/our knowledge and belief, the information I/we have given is correct and complete in every detail and I/we have not withheld any material fact.
I/we understanding [sic] that the signing of this form does not bind us to effecting insurance under the Premier Guarantee for Social Housing Scheme but agree that should a contract be completed for a New Development or Housing Unit that [sic] this proposal and the statements made therein shall form the basis of the contract between me/us and the Insurer."
(g) The form was signed by Mr Graham Gamby apparently on 2 April 2007 for and on behalf of "Time and Tide (Bedford) Ltd and Genesis Housing Association."
Apart from Mr Gamby's signature, the whole of the form had been filled in by Mr Johnson. It is unlikely that this document was ever shown to Paddington or to Mr Galliers at the time; indeed, it only emerged so far as the Claimant was concerned after a claim was notified some 2 to 3 years later.
At the same time, Mr Gamby and Mr Johnson were discussing Premier Guarantee cover for the remainder of the development above the seventh floor and forms were filled again by Mr Johnson; these described the Developer as TT Bedford and the Builder as TT Construction. Again these other forms were signed by Mr Graham Gamby for and on behalf of TT Bedford. There appears possibly to have been some confusion or doubt at about this time as to whether TT Bedford was going to be the developer, engaged by Paddington, with TT Construction being engaged in effect by TT Bedford as the builder; this is borne out by internal documents dated 11 April 2007 and entitled "PG [Premier Guarantee] New Homes" disclosed by the Defendant. It is likely that the premiums for the Housing Association units were worked out by reference to the overall sum of £4.6 million. MD obtained a Dunn and Bradstreet report on TT Construction on 13 April 2007 which suggested that this company had an established track record and a tangible net worth of some £366,000.
On 16 April 2007, MD submitted a quotation for "Genesis Housing Association" for Premier Guarantee cover for the proposed development. This clearly identified the Builder (in bold) as TT Construction and the Sum Insured as £4.6 million. It was prefaced with the following words:
"Please find below details of our quotation for your New Development. All terms highlighted in bold are policy definitions and you should refer to the policy wording for interpretation of their meaning."
The quotation identified that there would be an endorsement for "insolvency of the Builder during the Building Period" subject to payment of an additional premium of £2,415. Against the heading in bold "Conditions", the following was stated:
"This quotation is subject to:
1. A Certificate of Approval being issued by the Site Audit Surveyor:
2. Full rights of recourse being retained against all parties other than the Policyholder;
3. All other terms and conditions as per the policy wording."
Under the heading "Your responsibilities" the following was stated:
"You are responsible for providing the complete and accurate information, which the Underwriter requires in connection with any proposal for insurance cover. This is particularly important before taking out a policy but it also applies throughout the life of a policy. If you fail to disclose any material fact or other information material to the insurance this could invalidate the policy and mean that claims may not be paid. You should check all details on any proposal form or statement of facts and pay particular attention to any declaration you may be asked to sign."
In a box headed "Important Notice" the following was set out:
"This quotation sets out the basis on which an offer of insurance is made. It does not purport to give a comprehensive summary of the cover provided by the Premier Guarantee for Social Housing. Please refer to the policy wording for full information for the cover provided."
Over April 2007, there was negotiation between Paddington's solicitors and TT Bedford's solicitors about the granting of leases to Paddington and, as appears in a letter dated 30 April 2007 from the latter to the former, TT Bedford was undertaking to pay the premium for the Premier Guarantee upon completion of the lease transfer. By 1 May 2007, it was confirmed between them that the cover would include "contractor's insolvency cover". By 1 May 2007, Mr Galliers had a copy of the insurance quotation referred to above.
The construction works started in May 2007 and by mid-June 2007 the...
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