Niramax Group Ltd v Zurich Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Cockerill J |
| Judgment Date | 09 March 2020 |
| Neutral Citation | [2020] EWHC 535 (Comm) |
| Docket Number | Case No: CL-2017-000675 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 535 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice,
Rolls Building
Fetter Lane, London, EC4A 1NL
Mrs Justice Cockerill DBE
Case No: CL-2017-000675
Mr Ben Elkington Q.C. and Mr Ben Smiley (instructed by Edwin Coe LLP) for the Claimants
Mr Graham Eklund Q.C. and Mr Carl Troman (instructed by BLM Law LLP) for the Defendants
Hearing dates: 2 nd, 3 rd, 4 th, 5 th, 9 th, 10 th, 11 th, 12 th December 2019 Draft Judgment sent to parties: 27 February 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On the night of 4 December 2015 employees of the Claimant recycling company, Niramax Group Limited (“Niramax”), were working, as they often did, through the night. A fire started in the engine compartment of a grab which was in a building known as the “Rec Shed”. Later investigation suggested that a hydraulic hose had failed, releasing oil onto a hot pipe; a simple mishap. The staff took prompt action and thought they had put the fire out; but they had not. Burning embers remained and in unusually strong winds they were blown elsewhere. The fire thus spread into a new building which contained a brand new multi-million pound sorting machine. That machine, known as “the Eggersmann plant”, was destroyed, together with other items of plant. This case concerns a claim in the amount of a little over £4.5 million for that loss.
Niramax made a claim on the policy of insurance covering the Eggersmann plant, but the claim was not paid. Its insurers, Zurich, who had only recently and reluctantly added the Eggersmann plant to a policy of all risks contractors' mobile plant insurance, found a number of items which concerned them, and they reserved their rights to avoid the Policy. One thing which particularly concerned them was that it appeared to them that Niramax had as a “shadow director” one Mr Shaun Morfitt, who had been convicted of a machete attack.
So, after the insurance claim had remained unpaid for some time, Niramax sued Zurich in this Court. In its Defence Zurich said that it was entitled to avoid the policy of insurance because of Mr Morfitt's association with Niramax and because of a variety of other facts which it was not told, such as the fact that there had been a fire at an associated site in 2012.
Although Zurich no longer maintains that it is entitled to avoid because of Mr Morfitt's position, it contends that its avoidance is good for a variety of other reasons. In particular it is Zurich's case that a number of issues regarding Niramax's buildings insurance and safety precautions were not disclosed, and it is also argued that certain past issues relating to the company and its Directors were “moral hazards” which should have been and were not disclosed.
The Trial
I have heard this case over two weeks. Factual and expert evidence has been called for both sides.
The Claimant called two factual witnesses. The first, Mr Antropik, had been the Managing Director of Niramax between 2012 and 2017. He was a quiet and calm witness. Although his memory was not good, my impression was that he was at all times doing his best to assist the Court. He was absolutely scrupulous about making clear what he did and did not recall. Mr Betts, who worked on the financial side for Niramax, was understandably a little defensive given his involvement in the insurance proposals and the nature of some of the defences being run, but also gave me the impression that he was truthful.
For the Defendants, the first and main factual witness called was Mr Penny, who was the head of the Engineering Risks department at Zurich. It was he who was said to have been the person who would, if proper disclosure had been made, have considered the risk; and hence he whose inducement was key.
Mr Penny's post was a senior post with 40 underwriters from around the country reporting to him. At this time about 70% of his work was regulatory and managerial, but for about 30% of the time he was a referral point for complex risks from those underwriters.
I found Mr Penny to be an impressive witness. His expertise in his business was plain. He was clear, helpful and absolutely frank and straightforward. He thought carefully about the questions he was asked and gave the impression of trying to recall accurately. He did not shy away either from indicating where he thought that errors had been made (including on occasion by himself) or from indicating the limits of his recollection. While I have not on all occasions below accepted his evidence as accurate, that has been largely owing to the circumstances in which he has ended up giving evidence. I have no hesitation in accepting that he was doing his very best to assist the Court.
The other witnesses for the Defendant, Ms Jones, then the assistant marketing underwriter, Mr Armstrong, the manager in charge of underwriting development, Mr Trinham, a senior underwriter in the engineering team and Mr Hutchinson, the other senior underwriter involved, were all in my judgment honest witnesses attempting to assist the Court. Mr Hutchinson in particular, who played a key role in the events which underpin this dispute, appeared to be a down to earth and knowledgeable underwriter of considerable experience.
As for the expert evidence there were two disciplines: underwriting and plant valuation. As regards the former, Mr McIlduff for Niramax was an experienced underwriter, in the market since 1965, having spent much of his career with RSA plc. Mr Coates, who was called by Zurich, had 36 years' experience as a commercial underwriter including as Head of UK Property and Casualty at Allianz Insurance plc.
As regards the Plant Valuers, Mr Correa and Professor Sheldon, it was essentially common ground that the task with which they were entrusted was difficult, in that they were trying to value property as of four years ago which, in the case of the Eggersmann, is unique and, in the case of the Liebherr machines, is specialist and examples are not currently on the market in the UK. Both had done their best to assist; indeed, it was positively useful to have two somewhat differing approaches.
One further point should be added here. Niramax submitted that I should draw adverse inferences against Zurich because Zurich did not call two witnesses (Mr Smith and Mr Long). This submission was made in reliance on the principle in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340. This submission hinges on the question of the identity of the underwriter (actual or hypothetical) of the risks in question, which is dealt with below.
The Facts
Niramax was incorporated in May 2001. Prior to February 2008 it was called Niramax Recycling & Manufacturing Limited.
Niramax's principal activities are waste collection and waste recycling. It is a substantial concern. In the last financial year before the fire (namely the year ended 31 March 2015) its turnover was £36m, its gross profit was £9.7m and its net pre-tax profit was £4.4m (up from £33m, £7.1m and £2.3m respectively in the previous year). Its balance sheet was £12.6m, up from £11m in the previous year.
Niramax's parent company is Niramax Holdings Limited (“NHL”) which, prior to June 2009, was called Niramax Waste Services Ltd. NHL has another subsidiary called SWS Limited (“SWS”). Part of the business now carried on by Niramax used to be carried on by SWS. Niramax purchased that business in 2007.
NHL is ultimately controlled by Mr Neil Elliott, who also has an interest in a company called Seneca Investments & Developments Limited (“Seneca”).
Niramax's main premises are at Thomlinson Road, Longhill Industrial Estate, Hartlepool TS25 1NS (“Thomlinson Road”) at which it carries out waste recycling. It began operating from Thomlinson Road in 2007.
Niramax also processes end of life tyres, which it shreds into tyre crumb and then sells. This part of its business takes place at 6 – 8 Tofts Road, Tofts Farm Industrial Estate, Brenda Road, Hartlepool TS25 2BQ (“Tofts Road West”). This site is about 3 miles from the main Thomlinson Road site.
About a mile from Tofts Road West is a site which in 2012 was owned and operated by Seneca called Tofts Road East. Niramax used to store tyre crumb on the Tofts Road East site.
In 2011 Niramax began operating a waste transfer station at Monument Park, Pattison Industrial Estate, Washington NE38 8QU (“the Washington Site”).
The insurance of Niramax's plant.
For many years SWS and then Niramax paid for a suite of insurance policies with Zurich designed to cover its plant and machinery. Those policies included the following:
i) A contractor's plant policy (policy number FL572863) which originally incepted in 2006 and was renewed thereafter. It is this policy, or to be more precise the renewed policy which incepted on 15 December 2014 (“the Policy”) which forms the basis of the claim in these proceedings.
ii) An inspection contract and plant protection policy (pursuant to which Zurich's engineers routinely inspected the plant at Thomlinson Road).
iii) A sudden and unforeseen damage policy.
iv) A second contractor's plant policy (AG618970) (“the AG Policy”) which provided cover for engineering plant.
v) SWS and Niramax also had fleet insurance with Zurich.
Original writing and renewal of the Policy
In 2006 SWS was represented by HSBC. On 30th August 2006 HSBC sent a presentation to Zurich seeking a quote for contractor's plant cover. The cover sought was for owned and hired-in plant, irrespective of where in the United Kingdom the plant...
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