Sharon's Bakers (Europe) Ltd v AXA Insurance UK Plc
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BLAIR |
| Judgment Date | 09 February 2011 |
| Neutral Citation | [2011] EWHC 210 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 February 2011 |
| Docket Number | Case No: 2009 FOLIO 1120 |
[2011] EWHC 210 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr Justice Blair
Case No: 2009 FOLIO 1120
Mr Adam Tolley (instructed by Perry Bailey LLP) for the Claimant
Mr Graham Eklund QC and Mr Carl Troman (instructed by Greenwoods) for the Defendants applies, the defendants submits
Hearing dates: 6 th, 7 th, 8 th, 9 th, 10 th and 13 th December 2010
MR JUSTICE BLAIR:
The claimant company, Sharon's Bakery (Europe) Ltd, seeks an indemnity from the defendant insurers in respect of loss and damage caused by a fire at their wholesale bakery in North London on 8 June 2008. Cover under the policy commenced on 15 February 2008. It is not in dispute that the fire was accidental. The disputes as to quantum are relatively minor. The insurers avoided the policy on 27 February 2009, and defend the claim on two grounds: (1) that there was a non-disclosure of material facts relating not to the insurance itself but to a financial leasing transaction entered into by the claimant with Lombard North Central Plc in March 2008; such conduct, the defendants say, constitutes a "moral hazard" which was material for insurers to know; and (2) that following the fire, the claimant submitted a document in support of the claim which amounted to "fraudulent means or devices" in aid of its claim, the submission of which, the defendants say, discharged them from liability. In respect of both defences, the case turns largely on certain documents which the defendants say were false. On their part, the claimant says that they and their directors acted honestly throughout, that they have been the subject of unsubstantiated and false allegations against them, and that there is no defence to the claim which the insurers are liable to pay.
The trial
The parties produced a helpful agreed chronology at the beginning of the trial indicating where they are in dispute, and many of the facts are in dispute. The claimant called five factual witnesses. The first were the main actors on the part of the claimant, who at the material time were directors of, or who ran the business, namely Mr Bension Nassim and Mr Eli Caplin. The other witnesses of fact were Mr David Smart of JD Smart Ltd which supplies equipment to the baking industry and who arranged the transfer of bakery equipment, Mr Alan Harris of Harris Balcombe LLP the loss assessor who dealt with the insurance claim which was made following the fire on behalf of the claimant, and Mr Freddie Takom a book-keeper employed by a firm called Chin & Co who kept the claimant's books at the material time.
The defendants served witness statements from seven witnesses, namely Mr Moshe Levy, Mr Martyn Freeman who was employed by Lombard at the time, Mr Mark Maskell the loss adjuster for the insurers, Ms Anna Broadhurst a forensic investigator employed by Hawkins, two underwriters from Primary General Insurance Ltd (cover holders for the defendants who underwrote the insurance) namely Ms Tina Atkins and Mr Tom Keefe, and Mr Upinder Singh (known as Michael) Rana. During the trial, the defendants said that five of these witnesses were not going to be called. In respect of Mr Maskell, Ms Broadhurst and Ms Atkins, this was to be expected, since their evidence was either duplicative or unnecessary in the light of the way the issues had developed. However Mr Levy and Mr Rana (particularly the former) were on the face of their statements potentially important witnesses, and the claimant (by way of further witness statements of Mr Nassim and Mr Caplin in particular) had been obliged to deal at length with the matters set out in the witness statements of Mr Levy and Mr Rana.
The parties called expert evidence as follows. The experts on the question of materiality for underwriting purposes were, for the claimant, Mr John Mott, and for the defendants, Mr Stephen Coates. The experts on the question of valuation of bakery machinery and equipment were, for the claimant, Mr David Dunne, and for the defendants, Mr Philip Davies. At the trial, the parties cooperated to ensure that the ambit of the expert evidence in dispute was as focused as possible, for which I am grateful. The quantum of the claimant's business interruption claim did not arise for determination at the trial, it having previously been ordered that this issue should be split to be determined, if appropriate, at a later assessment hearing.
It is necessary to keep in mind that, as the claimant submits, allegations of fraud by the defendants must be clearly substantiated, the burden of proof in this respect and generally (because of the nature of the defence) being on the defendants (see the principle stated in Re H [1996] AC 563 at 586D-H, Lord Nicholls).
The facts
The facts as I find them are as follows. In 1992, Mr Bension Nassim established a Kosher bakery business, with both wholesale and retail customers. His company, Sharon's Bakery (Wholesale & Retail) Ltd was incorporated in 1999, and I shall refer to is as "it". It was based in premises in Tottenham at 3 Fountayne Road, London N15. Wholesale had insured the plant and machinery which it used at those premises for a total of £662,248 on a reinstatement basis, most of it having been purchased through or via Mr Smart's company. Mr Eli Caplin had a non-Kosher bakery business called Hollyland Bakery Ltd which operated from premises at 1 Bernard Road, Rangemoor Road Industrial Estate, London N15. There was no connection between the two businesses. Mr Caplin sold his business in early 2007, but the purchaser was permitted to continue to use the premises until November 2007. Later in the same year, Mr Nassim sold the 3 Fountayne Road premises. The result was that Mr Nassim had Kosher bakery equipment available, whilst Mr Caplin had a location available from which a bakery business could be carried on. The two men agreed to set up a new wholesale kosher bakery business, which would in due course be incorporated as the claimant company, Sharon's Bakery (Europe) Ltd.
The plan was that the new company would use Mr Nassim's equipment from 3 Fountayne Road which would be relocated at Mr Caplin's premises at 1 Bernard Road. What they agreed between them was that some of the equipment would be transferred to the new company in return for Mr Nassim having 50% of the shareholding, while the remainder of the equipment would be purchased from him by new company. The business was to be run by Mr Caplin, and as the claimant has put it, was not an entirely new business. Both men are very experienced in the bakery business, and there was nothing in any way unusual about their agreement.
I do not think that there is any relevant dispute as to that summary, but from now on in the narrative, there is little common ground. It is not easy (and not generally necessary) to give a precise chronological account of events. According to Mr Nassim and Mr Caplin, the latter wanted an independent valuation of the equipment to be obtained in respect of the equipment to be purchased by the claimant from Wholesale. Their evidence was supported in this respect by Mr Smart. He was knowledgeable about bakery equipment and its value, and as the defendants say, there appears little reason why Mr Smart could not have given a valuation himself. Mr Smart however explains that he recommended Mr Moshe Levy as a suitable candidate, and it was agreed that he should carry out the valuation. Mr Nassim had known Mr Levy for some time, though his evidence is that he knew little about him. He paid Mr Levy £2,000.
According to the evidence of Mr Nassim and Mr Caplin at trial, Mr Levy initially provided (as Mr Caplin put it) an informal handwritten or typed valuation around Christmas time in 2007. However, in that regard the defendants point out that in the claimant's Reply dated 3 October 2010 (bearing Statements of Truth of both Mr Caplin and Mr Nassim) an apparently different case is set out. It is pleaded that Mr Levy provided the valuation by providing the invoice addressed to Wholesale identified as document [1] in the defence. This is a reference to a document dated 15 November 2007 in the form of an invoice purportedly issued by Bakequip (UK) Ltd, described as bakery equipment suppliers, to Sharon's Bakery Wholesale and Retail Ltd, purporting to be an invoice for £156,000 plus VAT in respect of the supply of various named bakery items with serial numbers, description and amount stated for each. It has on it the words in manuscript, "Paid in full with thanks" and Mr Levy's signature (the signature was confirmed by Mr Nassim in evidence). It is common ground that there was no such transaction, and this is one of two documents on which the defendants base their defence. The claimant's case at trial was that the document was provided by Mr Levy in February 2008 (though there was no handwriting on it). For now, it is sufficient to note that the defendant points out that there is no reference in the pleading to any informal valuation prior to the document dated 15 November 2007. The claimant's response is that despite such absence, the pleading is not in any way inconsistent with the case advanced at trial. I shall come to my findings in due course.
The claimant's case is that following the agreement they had reached between them, Mr Nassim and Mr Caplin entered into a written agreement, the parties being Wholesale and the new company, Sharon's Bakery (Europe) Ltd. The document was prepared by Mr Nassim, with some informal assistance from a solicitor friend. It shows that Mr Nassim's contribution was to be equipment from Wholesale valued at £200,000, and that payment for the other equipment in the approximate sum of £150,000 was to be comprised of a...
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