Genesis Housing Association Ltd v Liberty Syndicate Management Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jackson,Lady Justice Gloster,The Master of the Rolls |
| Judgment Date | 04 October 2013 |
| Neutral Citation | [2013] EWCA Civ 1173 |
| Date | 04 October 2013 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A1/2012/3170 |
[2013] EWCA Civ 1173
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, TECHNOLOGY AND CONSTRUCTION
MR JUSTICE AKENHEAD
HT11527
Royal Courts of Justice
Strand, London, WC2A 2LL
The Master of the Rolls (Lord Dyson)
Lord Justice Jackson
and
Lady Justice Gloster
Case No: A1/2012/3170
Mr James Leabeater (instructed by Winckworth Sherwood LLP) for the Appellant
Mr Richard Sage (instructed by Norton Rose Fulbright LLP) for the Respondents
Hearing date: 24th July 2013
Approved Judgment
This judgment is in nine parts, namely:
Part 1. Introduction,
Part 2. The facts,
Part 3. The present proceedings,
Part 4. The appeal to the Court of Appeal,
Part 5. Did the statements in the proposal form become contractual warranties?
Part 6. Did Genesis warrant that TT Construction was to be the builder?
Part 7. Did condition 7 restrict the insurers' right to avoid for misstatement to circumstances where there was intent to defraud?
Part 8. Was Genesis' right to recover dependent upon TT Construction being the builder?
Part 9. Conclusion.
This is an appeal by a housing association against a decision of Mr Justice Akenhead that it cannot recover under an insurance policy, which provided cover in the event of a building contractor's insolvency.
The central issue in this appeal is whether an incorrect statement in the proposal form concerning the identity of the builder enables the insurers to escape liability. Allied to this issue, it will be necessary to consider the effect of a declaration that statements in the proposal form shall form the basis of the contract of insurance.
The housing association which took out the relevant insurance cover was Paddington Churches Housing Association. It was part of a group of housing associations called the Genesis Housing Group. In some of the contemporaneous documents that housing association was referred to as "Genesis Housing Association". More recently, as a result of an amalgamation, Paddington Churches Housing Association has now become Genesis Housing Association Ltd. That company is claimant in the action and appellant in this court. I shall refer to it at all stages, without regard to name changes, as "Genesis".
In 2007 Mr Kevin Galliers was employed by Genesis as its regional land and new business consultant. Mr Galliers was responsible for negotiating building contracts and making the associated insurance arrangements.
The insurers, who are defendants in the action and respondents in this court, are Liberty Syndicate Management Ltd for and on behalf of Syndicate 4472 at Lloyd's. I shall refer to them as "the insurers".
At the relevant time the insurers offered a form of insurance for social housing known as "Premier". Under the Premier scheme the insurers provided cover in respect of latent defects emerging during the first ten years after the construction of a housing unit. As an optional extra the insurers offered cover against the risk of the builder becoming insolvent during the construction period.
MD Insurance Services Ltd ("MD"), a company based in Reading, administered the Premier insurance scheme on behalf of the insurers. Mr Johnson was an employee of MD, who played an active part in arranging and issuing Premier insurance policies.
Prior to 2009 a group of companies, to which I shall refer as "the TT Group", was operating in the world of property development. Two brothers, Graham and Perry Gamby, owned and managed the TT Group. Mr Graham Gamby features in the narrative of this case. I shall refer to him as "Mr Gamby".
One company in the TT Group was a construction company called Time and Tide Construction Ltd ("TT Construction"). This company appears to have traded satisfactorily for a number of years. According to its accounts filed on 31 st March 2006, the net worth of the company was £366,669. Another company in the TT Group was Time and Tide (Bedford) Ltd. This was a special purpose vehicle, which features extensively in the narrative of this case. I shall refer to it as "TT Bedford".
After these introductory remarks, I must now turn to the facts.
In 2007 the TT Group of companies resolved to develop Telecom House, 25–27 St John's Street, Bedford, in order to create a large number of flats, offices and associated facilities. TT Bedford was formed as a special purpose vehicle to undertake this development.
It was a condition of the planning permission that floors one to six of Telecom House should be developed as social housing and affordable housing. Accordingly TT Bedford leased floors one to six to Genesis. Genesis then engaged TT Bedford as main contractor to construct 51 residential units on those six floors. The building contract was in the standard JCT form, with Contractor's Design, dated 9 th April 2007. The contract sum was £4.6 million, which was broken down as set out in the Contract Sum Analysis.
There was discussion between Mr Galliers of Genesis and Mr Gamby of TT Bedford concerning the insurance arrangements. Instead of using the standard NHBC scheme, Mr Galliers decided to take out Premier insurance. TT Bedford arranged this insurance, acting as agents for Genesis.
Mr Gamby of TT Bedford discussed Genesis' insurance requirements with Mr Johnson of MD. Mr Johnson prepared a proposal form setting out what he understood to be the relevant information and presented this to Mr Gamby for his consideration and signature. Mr Gamby approved the contents of the proposal form and signed it on 2 nd April 2007.
The proposal form stated that additional insurance was required to cover the risk of insolvency of the builder during construction. There was unfortunately one incorrect statement in the proposal form. The name of the builder was shown as TT Construction. That was wrong. The building contractor was, in fact, to be TT Bedford.
I should also mention that, on the copy of the proposal form before the court, the contract cost is shown as £4.6 million crossed out with £3.7 million substituted. The judge held that this amendment was made in MD's offices some time after Mr Gamby had signed the document. Therefore this apparent misstatement in respect of the contract cost is of no significance.
Immediately above Mr Gamby's signature, there is the following paragraph:
"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 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 this proposal and the statements made therein shall form the basis of the contract between me/us and the Insurer."
I shall refer to this paragraph in the proposal form as "the declaration".
Having received the signed proposal form, Mr Johnson made further investigations on behalf of the insurers. In particular, he obtained a Dunn & Bradstreet report on TT Construction, dated 13 th April 2007. This showed that the company was well established and represented a lower than average risk of business failure.
On 16 th April 2007 MD prepared and sent to TT Bedford a quotation for Premier insurance. By this quotation the insurers offered ten years cover in respect of latent defects together with cover against the risk of the builder's insolvency during construction, for a total premium of £26,550. The insured was shown as the housing association and/or the future owners of each housing unit. The builder was shown as TT Construction.
I shall refer to this document as "the quotation". The quotation stated that the total sum insured would be £4.6 million. The quotation was expressly subject to the wording of the policy which insurers proffered. The quotation stated that, in order to proceed, the housing association should send a cheque for the premium to MD. The insurers would then issue the policy and an initial certificate (as required by section 2I of the policy) which they would send to the housing association.
On the judge's findings of fact Mr Galliers received a copy of the quotation on or before 1 st May 2007. Genesis decided to accept the quotation. Accordingly TT Bedford acting on behalf of Genesis sent a cheque for the premium to MD.
On 8 th May 2007 the insurers issued the policy in respect of the development at Telecom House, together with the initial certificate. The initial certificate identified TT Construction as the builder.
Section 1 of the policy provides:
"1. INFORMATION
The Policyholder is requested to read the Policy and Certificates. These are important documents. If any information is not clear please contact the Scheme Administrator.
This Policy consists of:
1. INFORMATION on the Premier Guarantee for Social Housing;
2. DEFINITIONS detailing all Definitions applicable to the Policy;
3. INSURING AGREEMENT giving precise details of the cover, subject to variation by Endorsement;
4. ADDITIONAL EXTENSIONS detailing automatic extensions in cover to the Policy;
5. EXCLUSIONS detailing exclusions that apply to the whole Policy;
6. CONDITIONS defining the terms that apply to the whole Policy;
7. FINANCIAL LIMITS detailing the maximum the Underwriter will pay in the event of a claim under the Policy,...
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