Robin and Barbara Bache and Others v Zurich Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 18 July 2014 |
| Neutral Citation | [2014] EWHC 2430 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-13264 |
| Date | 18 July 2014 |
[2014] EWHC 2430 (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-13264
Terence Mowschenson QC and Nicholas Yell (instructed by Alison's Legal Practice) for the Claimants
Andrew Rigney QC and Rebecca Taylor (instructed by DAC Beachcroft Claims Ltd) for the Defendant
Hearing date: 14 July 2014
Between 2005 and 2007, Mr and Mrs Bache and 21 other purchasers ("the purchasers") entered into Agreements for Lease with JR Developments Ltd ("JRD") or Gold Homes (The Wave) Ltd ("Gold" or, collectively, the "vendors") in relation to flats in Block A yet to be built at the "Wave" development in Middlesbrough, Cleveland. Several of the purchasers bought two flats. The purchasers each paid a 10% deposit to the vendors. The vendors were required to construct and complete the flats and common parts. There was another block (B) being developed on the site. Although, I am told, Block B was constructed, no work was done by the vendors on Block A. By letter dated 16 February 2010, the purchasers' solicitors wrote to the vendors, it being believed that JRD had assigned to Gold, purporting to accept the vendors' failure to complete the construction as repudiation of the Agreements for Lease, and seeking the return of the deposits, totalling £357,800, and costs. In April 2011, Gold was placed in administration on 8 April 2011, being dissolved in early January 2013, albeit notice thereof was given on 24 September 2012; it seems likely that Gold and its associated companies were collectively in debt to a relatively massive scale. None of the deposits were ever repaid to the purchasers.
Zurich Insurance PLC ("Zurich") provide a competitive insurance product comparable to the NHBC cover which provided at least at one stage the only well known 10 year cover for new built dwellings. Zurich provided the cover at the behest of Gold. It was for the benefit of the purchasers. The Zurich cover related to two periods, first up to the time when the building in question had been acceptably completed and the second thereafter. For the first period, Zurich said in the Introduction to the policy that "the policy protects you if your developer goes into liquidation…against the loss of contract exchange deposit…"
Zurich has not paid out as against the claims made by the purchasers for sums represented by their lost deposits. Thus, the matter came to this Court via the General List of the Queen's Bench Division. There are a number of matters in dispute on the pleadings but some fundamental issues were identified by the parties to be dealt with as preliminary issues.
The Policy
The Introduction to the Policy, of which it forms part, states:
"By way of summary, and subject to the conditions and any endorsements printed on the certificates the policy protects you if your developer goes into liquidation or is made bankrupt against the loss of contract exchange deposit and the repair of certain types of damage caused by building defect in the first 2 years or one year if your new home include a conversion …
If the developer is not in liquidation, or has not been made bankrupt, but nonetheless unreasonably refuses to meet its repair obligations within a reasonable period, we will help to resolve a dispute between you and the developer by giving advice about the extent o cover available under the policy…"
The reference to certificates is firstly to the "building period certificate" defined (at Page 4) as:
"The certificate issued by us when the new home has been registered with us prior to completion. By issuing this certificate we are confirming that cover under Section 1 of the policy is in place…"
The "Insurance certificate" was to be issued by Zurich "to signify acceptance of the new home for insurance under this policy".
Section 1 of the Policy stated:
" What we will pay before the new home is completed:
1. We will pay where, due to the developer's bankruptcy, liquidation or fraud, the developer fails to complete the construction of the new home in accordance with the requirements and the buyer loses a deposit paid to the developer under the terms of the purchase contract for the new home, we will at our option
(a) Pay the reasonable cost of completing the home to the original specification; or
(b) Pay to the buyer the amount of any such lost deposit."
"Requirements" were defined as those "contained within the technical manual issued by us" (Page 6). The "new home" was the "new property or conversion described in the building period certificate and/or the insurance certificate" and included the common parts, amongst other things (Page 5).
There was a box opposite the Section 1 wording headed "What we will not pay" which included:
"Any sum exceeding 10% of the purchase price declared by us to the developer…
Any claim made after the legal completion of the purchase by the first buyer of the new home…"
Section 2 covered the two years from the effective date (the later of exchange of contracts with the first buyer or the effective date of cover on the insurance certificate) against broadly certain types of damage, poor sound insulation or danger to health and safety. Section 3 covered the period thereafter up to 10 years against "major physical damage" and danger to health and safety (in specified respects).
The insurance Conditions (Page 13) have relatively common clauses including subrogation rights. Clause 10 provided for termination of the policy when Zurich accepted a claim under Section 1 of the policy.
The Proceeedings
Gold did not accept that it was in breach of contract, for instance in its solicitor's letter of 25 August 2010 to the Claimants' solicitors. The latter first contacted Zurich in July 2011 following the appointment of Gold's administrators telling them that the agreements for lease "had been rescinded" and seeking payment of the lost deposits. Zurich's response on 5 July 2011 stated that it would only "consider loss of deposit claims due to the developer's bankruptcy, liquidation or fraud" and that "as the developer is currently only in administration, we are unable to consider your loss of deposit claim at this stage". Zurich instructed solicitors to address further letters from the claimants' solicitors who in their letter dated 15 July 2011 deployed the defences which broadly are mounted in these proceedings, saying that the policy would not engage until liquidation and that the loss of deposits were "triggered" by the "rescission of the contracts". Following some correspondence between the Claimants' solicitors and the administrators about whether Gold should be put into liquidation, Zurich confirmed by e-mail dated 20 February 2012 to the administrators' solicitors that "should the company enter dissolution, the policy will engage".
The Claim was issued by the Claimants on 22 March 2013 and the Particulars of Claim sought the recovery of the lost deposits. Paragraph 12 stated;
"The Defendant…argued that the Seller's administration (not being 'bankruptcy, liquidation or fraud') would not trigger payment under the wording of the Policy. However, without prejudice to the other defences the Defendant claims to have, the Defendant subsequently accepted that the Seller's dissolution would do so".
The Defence pleads a number of defences, with which this judgment is not concerned, but it does plead (at Paragraph 18) that "the construction of the development and/or the Claimants' loss of deposit was or were not due to [Gold's] liquidation" and that for the policy to respond the developer had to "be under a subsisting obligation to the purchaser to complete the new home, and it must be the developer's liquidation which prevents it from discharging such obligation"; even if administration was covered by the word "liquidation", Gold had no obligation at the time of the administration to complete the development. The failure by Gold to complete was due to the "purported acceptance of [Gold's] alleged repudiatory breach rather than as a result of [Gold's liquidation]". At Paragraph 12, Zurich denied that the e-mail dated 20 February 2012 amounted to an admission of the Claimants' claims, going on:
"The statement goes no further than stating that dissolution would fall within the meaning of "bankruptcy, liquidation or fraud". Further or alternatively and to the extent necessary, any admission in that email is hereby withdrawn…"
Issue was taken by the Claimants in their Reply with all the defences adumbrated in the Defence and an estoppel was raised in relation to the contents of the e-mail of 20 February 2012.
Thus, it was that at the first CMC in the TCC the Court was presented with agreement that there should be two preliminary issues:
1. Subject to (2) below, in order for the Defendant to be liable under the Policy, does the Developer have to enter into liquidation or is it sufficient that the Developer enters into insolvent administration?
2. If the answer to question 1 is no and it is sufficient that the Developer enters into insolvent administration, in order for the Policy to engage does the Developer have to be under a subsisting obligation to complete the Development at the time of the insolvent administration?
The Court accepted that this was a sensible course to take.
However, on 4 July 2014, notwithstanding the wording of Paragraph 12 of the Defence and the wording of the first preliminary issue, Zurich's solicitor indicated that on further reflection dissolution would in principle suffice to trigger cover under the policy and that the issue of whether insolvent administration was covered did not arise. Following some further...
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