Jones v Environcom Ltd and Another

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Rix,Lord Justice Hooper,Sir Anthony May,Lord Justice Gross
Judgment Date13 Oct 2011
Neutral Citation[2010] EWCA Civ 1166,[2011] EWCA Civ 1152
Docket NumberCase No: A3/2010/1065

[2010] EWCA Civ 1166

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION, COMMERCIAL COURT

(MR JUSTICE DAVID STEEL)

Before: LORD JUSTICE GROSS

Case No: A3/2010/1065

Between
Jones
Appellant
and
Environcom Ltd And Another
Respondents

Mr P Lawrence QC (instructed by Messrs Edwin Coe LLP) appeared on behalf of the Appellant.

The Respondents did not appear and were not represented.

Lord Justice Gross
1

Lord Justice Gross: Let me just say this to you. The judgment is careful and formidable and you may well fail, but I think it sufficiently arguable that I would not wish to shut you out from trying, but you are very much at risk and you should be aware of that. It is one of those cases.

2

Mr Lawrence: I know what your Lordship means; I am most grateful.

Lord Justice Gross
3

Lord Justice Gross: As far as the pleading point goes, it is a matter for the full court about whether to permit you to amend if you need to amend. And for that matter that is a point that you should draw to the attention of the respondent, so it too can consider its position as to pleadings.

4

Mr Lawrence: We have prepared a draft re-amendment and we will serve that on the respondent —

Lord Justice Gross
5

Lord Justice Gross: Draw my observations to their attention. Obviously what I have said about the merits and risk of the appeal is on the transcript anyway. There we are, I would not wish you to shut it out, but it is a formidable and careful judgment. I think the term is that you put up £50,000 security for costs.

6

Mr Lawrence: 28 days, my Lord? Perhaps with liberty to apply as to some alternative mode of supplying security that is satisfactory.

Lord Justice Gross
7

Lord Justice Gross: What about 14 days; do you think you can manage that? You prefer 28 —you want to get the appeal on, so…

8

Mr Lawrence: The state of the list is such that I do not think much work will be done in the next 28 days.

Lord Justice Gross
9

Lord Justice Gross: Very good. Thank you for your assistance.

Order: Application granted

[2011] EWCA Civ 1152

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION

COMMERCIAL COURT

MR JUSTICE DAVID STEEL

2008 FOLIO 177

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

President of the Queen's Bench Division

Sir Anthony May

Lord Justice Rix

and

Lord Justice Hooper

Case No: A3/2010/1065

Between:
Nicholas G Jones
Claimant
and
(1) Environcom Limited
Defendants/Appellants
(2) Environcom England Limited
and
MS PLC (Trading as Miles Smith Insurance Brokers)
Third party/Respondent

Mr Patrick Lawrence QC and Mr Neil Hext (instructed by Edwin Coe LLP) for the Appellants

Mr Alistair Schaff QC and Mr Andrew Hunter (instructed by CMS Cameron McKenna LLP) for the Respondent

Hearing dates : 25 th May 2011

Lord Justice Rix
1

On 16 September 2007 Environcom, as I shall call the two appellants – there is no need to distinguish between them, suffered a disastrous fire at their premises in Grantham, Lincolnshire, which were totally destroyed. This litigation arose because Environcom's insurers disputed liability, having avoided their policy for non-disclosure.

2

Environcom were in business as waste recyclers of electrical goods and equipment and in particular refrigerators. A dangerous working practice was the use of a hot tool called a plasma cutter or "gun" to remove bolts securing fridge compressors. This tool ionises gas to form a plasma at temperatures of over 15,000°C and high velocities. Some of the refrigerators contained pentane gas as a refrigerant and blowing agent. Pentane is highly inflammable. The combination of the plasma gun and the pentane was dangerous, and by the end of the trial the judge formed the view that this was probably the cause of the critical fire and at least some of the previous fires which Environcom had suffered.

3

The insurers, various syndicates at Lloyd's, described in the judgment below and here their underwriting agent by the name of as "Woodbrook", were the nominal claimants in these proceedings, for they commenced this action for a declaration of non-liability. Thus Environcom are the nominal defendants. They in turn commenced third party proceedings against their insurance brokers, MS plc trading as Miles Smith Insurance Brokers ("Miles Smith"), alleging that the negligence of their brokers had caused them to lose the security of their insurance by failing to advise them properly as to disclosure.

4

The losses claimed by Environcom are difficult to establish from the documents before us, but are said to amount to "something in the region of £6 million" (para 5 of the judgment of David Steel J [2010] EWHC 759 (Comm)). The claim comprises both material damage and business interruption losses. By an agreement dated 6 November 2009 Environcom and the insurers compromised their dispute for £950,000, and Environcom thereafter continued the proceedings against Miles Smith alone, for the balance of their losses, having withdrawn their claim against the insurers. It is therefore natural to regard Environcom as the claimants and Miles Smith as the defendant. In this court they are appellants and respondent respectively.

5

At trial Environcom succeeded in proving that Miles Smith had breached their duty to advise their client about proper disclosure to the insurers, but they failed to prove that they had suffered any loss thereby. The judge found that, in the light of their unfortunate history of fires and in the light of their risk profile, Environcom were, upon the basis of proper disclosure, simply uninsurable, whether by Woodbrook or anyone else. As it was, Woodbrook had only been persuaded against their initial reluctance to renew the policy in May 2007 by Environcom's willingness to agree a greatly enhanced premium (£104,000) and a 25% co-insurance clause. If they had known the full story of the history of Environcom's fires (one of them, in March 2007, shortly before renewal, was undisclosed) and, in particular, of the dangers inherent in Environcom's business practices, they would have been unwilling to insure Environcom on any terms, and so would anyone else. Even if some form of insurance had been available, it would have included warranties against the use of plasma guns and pentane fridges.

6

One of the issues at trial was Environcom's allegation that, if they had been properly advised, they would have reacted by agreeing any warranties or conditions regarding the use of plasma guns or the scrapping of pentane refrigerators, or by seeking to improve their risk profile. However, while acquitting Environcom of any deliberate bad faith in their approach to risk, the judge found that this allegation was unrealistic. As it was, their case developed during the trial (it might be said was compelled by the structure of the argument to develop) from putting forward a merely reactive approach in relation to the problem of renewal of their insurance to suggesting a strongly proactive one, and one that could be successfully accomplished in time to renew the cover and/or achieve insurance before the September 2007 fire occurred. However, the judge concluded, after setting out his detailed reasons, at para 95:

"In short I do not regard it as made out that there was any realistic chance of the fire risk improvements that Environcom asserts might have been offered to underwriters would in fact have been proposed to underwriters let alone in due time."

7

Environcom's challenge to this finding is ground 1 of their grounds of appeal. It is, as they themselves accept, the necessary first hurdle which they would have to surmount in order to get any appeal on its feet.

8

Environcom's other grounds of appeal include grounds 3, 4 and 5 which respectively challenge the judge's conclusions on insurability, viz that there was no realistic chance that Woodbrook would have quoted (ground 3), that there was no realistic chance that some other underwriter would have quoted (ground 4), and that Environcom would in any event not have been willing to accept quoted terms (ground 5). All these grounds are essentially issues of fact, or factual analysis.

9

However, as Mr Patrick Lawrence QC, on behalf of Environcom, made clear to us albeit only in the course of his oral submissions, those grounds on the issue of insurability (grounds 3, 4 and 5) have been abandoned. They have been abandoned in favour of what even in Environcom's skeleton argument had been promoted to be their primary case on appeal, viz ground 2: namely the submission that, if Environcom could establish their proactive cleansing of their risk profile, by eliminating use of plasma guns and handling of pentane refrigerators (ground 1), then the fire of 16 September 2007 would not have occurred at all: moreover, and this is critical, the fact that it did occur was due to and caused by, and within the scope of the duty to advise (presumably on disclosure) which Miles Smith had breached. So that Miles Smith were directly liable for the fire loss, because without their negligence it would not have occurred. It is no longer contended that they were liable for failing to obtain unimpeachable cover for a loss which otherwise it has been contended would in any event have occurred, even with the proactive risk profile improvements which it was accepted already at trial were necessary for the obtaining of cover.

10

Thus Miles...

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